YiChang HEC ChangJiang Pharmaceutical : SUPPLEMENTAL ANNOUNCEMENT (1) DISCLOSEABLE TRANSACTION AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF THE TARGET ASSETS FROM SUNSHINE LAKE PHARMA; AND (2) THE SUPPLEMENTAL NOTICE TO THE REVISED NOTICE OF 2019 4TH EGM AND THE SUPPLEMENTAL FORM OF PROXY TO THE REVISED FORM OF PROXY

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YiChang HEC ChangJiang Pharmaceutical Co., Ltd.

宜 昌 東 陽 光 長 江 藥 業 股 份 有 限 公 司

(A joint stock company incorporated in the People's Republic of China with limited liability)

(Stock Code: 01558)

SUPPLEMENTAL ANNOUNCEMENT

1. DISCLOSEABLE TRANSACTION AND CONNECTED TRANSACTION IN RELATION TO THE PROPOSED ACQUISITION OF

THE TARGET ASSETS FROM SUNSHINE LAKE PHARMA; AND

1. THE SUPPLEMENTAL NOTICE TO THE REVISED NOTICE OF 2019 4TH EGM AND THE SUPPLEMENTAL FORM OF
2. 
   PROXY TO THE REVISED FORM OF PROXY

Reference is made to the announcement of YiChang HEC ChangJiang Pharmaceutical Co., Ltd. 宜昌東陽光長江藥業股份有限公司 (the "Company") dated 13 November 2019 in relation to, among others, the proposed acquisition of the Target Assets from Sunshine Lake Pharma, the announcement of the Company dated 12 December 2019 in relation to, amoung others, the postponement of the 2019 4th EGM, revised notice of the 2019 4th EGM and Revised Form of Proxy (the "Previous Announcements") . Unless otherwise defined herein, the terms used in this announcement shall have the same meaning as those defined in the Previous Announcements.

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SUPPLEMENTAL AGREEMENT

Terms of the Supplemental Agreement

On 26 December 2019, the Company and Sunshine Lake Pharm entered into a supplemental agreement to the Sale and Purchase Agreement (the "Supplemental Agreement"), pursuant to which the terms of the Sale and Purchase Agreement were amended as follows:

Original Terms	Proposed Amendment to the Terms
The total consideration for the Target	The total consideration for the Target
Assets is RMB2,057,000,000 (i.e. the total	Assets is RMB2,057,000,0001,645,600,000
valuation of the Target Assets reached by the	(i . e . 80% ofthe total valuation of the
Asset Valuation Report), which shall be paid	T a r g e t A s s e t s r e a c h e d b y t h e A s s e t
by the Company to Sunshine Lake Pharma in	Valuation Report) and the consideration of
the following manners:	Rongliflozin and Liraglutide representing
	80% of the valuation of Single Products
	reached by the Asset Valuation Report are
	RMB1,532,000,000 and RMB113,600,000,
	respectively,which shall be paid by the
	Company to Sunshine Lake Pharma in the
	following manners:
First Instalment: The Company shall pay	F i r s t I n s t a l m e n t : R M B1 , 0 2 8 , 5 0 0 , 0 0 0
RMB1,028,500,000 (representing 50% of the	550,000,000(representing 50% of the total
total value of Single Products reached by the	value of Single Products reached by the
Asset Valuation Report) to Sunshine Lake	Asset Valuation Report(the consideration
Pharma on a one-off basis within thirty (30)	for a Single Product under each instalment
business days after the effective date of the	shall be calculated in proportion to the
Sale and Purchase Agreement.	consideration of the Single Products as a
	percentage of the transaction, the same is
	applicable to the below and please see the
	annex below for the value of Single Products
	reached by the Asset Valuation Report and
	the transaction prices thereof)shall be paid
	by the Company to Sunshine Lake Pharma
	on a one-off basis within thirty (30) business
	days after the effective date of the Sale and
	Purchase Agreement. The payment time shall
	be subject to the time of bank remittance.

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Original Terms	Proposed Amendment to the Terms
S e c o n d i n s t a l m e n t : T h e a m o u n t i s	S e c o n d i n s t a l m e n t : T h e a m o u n t i s
RMB514,250,000 subject to payment	RMB514,250,000246,840,000subject to
conditions provided herein and the terms	payment conditions provided herein and the
o f l i a b i l i t i e s f o r b r e a c h a n d s p e c i a l	terms of liabilities for breach and special
compensation. The Company shall pay the	compensation. The Company shall pay the
corresponding consideration to Sunshine	corresponding consideration to Sunshine
Lake Pharma when any Single Product	Lake Pharma when any Single Product
reaches a milestone in the clinical trial,	reaches a milestone in the clinical trial,
details of which are as follows:	details of which are as follows:
(1) The Company shall pay an amount	(1) The Company shall pay an amount
equivalent to 7.5% of the value of a	equivalent to 7.5% of the value of
Single Product reached by the Asset	a S i n g l e P r o d u c t r e a c h e d b y t h e
Valuation Report to Sunshine Lake	Asset Valuation Report5% of the
Pharma after said Single Product has	consideration of a Single Product
completed Phase III clinical trial (or	to Sunshine Lake Pharma after said
a trial stage equivalent to Phase III	Single Product has completed Phase III
clinical trial) and acquired the clinical	clinical trial (or a trial stage equivalent
trial data necessary for the application	to Phase III clinical trial) and acquired
for drug license;	the clinical trial data necessary for the
	application for drug license;

1. The Company shall pay an amount
   equivalent to 7.5% of the value of a (2) The Company shall pay an amount

Single Product reached by the Asset		equivalent to 7.5% of the value of
Valuation Report to Sunshine Lake		a S i n g l e P r o d u c t r e a c h e d b y t h e
Pharma after the application for drug		Asset Valuation Report5% of the
license in respect of said Single Product		consideration of a Single Product
has been submitted to NMPA;		to Sunshine Lake Pharma after the
		application for drug license in respect of
(3) The Company shall pay an amount		said Single Product has been submitted
equivalent to 10% of the value of a		to NMPA;
Single Product reached by the Asset	(3)	The Company shall pay an amount
Valuation Report to Sunshine Lake
Pharma after the Company (or any		equivalent to 10% of the value of
entity designated by the Company) has		a S i n g l e P r o d u c t r e a c h e d b y t h e
been registered as the holder of drug		Asset Valuation Report5% of the
marketing license in respect of said		consideration of a Single Product
Single Product.		to Sunshine Lake Pharma after the
		Company (or any entity designated by
The Company shall pay the corresponding		the Company) has been registered as
consideration to Sunshine Lake Pharma		the holder of drug marketing license in
within thirty (30) business days after the		respect of said Single Product.
foregoing conditions are fulfilled and	F o r	d e t a i l e d c o n s i d e r a t i o n o f S i n g l e
Sunshine Lake Pharma having delivered the
notice in accordance with (iv) below.	Products, please refer to the annex.The
	Company shall pay the corresponding
	consideration to Sunshine Lake Pharma
	within thirty (30) business days after the
	foregoing conditions are fulfilled and
	Sunshine Lake Pharma having delivered the
	notice in accordance with (iv) below. The
	payment time shall be subject to the time of
	bank remittance.

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Original Terms	Proposed Amendment to the Terms
Final instalment: Subject to payment	F i n a l i n s t a l m e n t a n d c o m p e n s a t i o n
conditions herein and the terms of liabilities	arrangement: Subject to payment conditions
for breach and special compensation, the	herein and the terms of liabilities for breach
Company shall pay the final instalment of	and special compensation, the Company
RMB514,250,000 (representing 25% of the	shall pay the final instalment of up to
total value of Single Products reached by	RMB514,250,000848,760,000(representing
the Asset Valuation Report) in three batches	25% of the total value of Single Products
to Sunshine Lake Pharma. The specific	reached by the Asset Valuation Report)
payment conditions, timing and amounts	in three batchesto Sunshine Lake Pharma
shall follow the principles below:	depending on the accumulated operating
	income of the Target Assets for the three

1. When the annual total sales revenue years of 2027, 2028 and 2029 or any threegenerated by Target Assets reaches consecutive years prior to 2029 or SunshineRMB1,500 million (value-added tax Lake Pharma shall return relevant payments

exclusive) or more for the first time	to the Company in a lump sum. The specific
in a full financial year (the "First	payment conditions, timing and amounts
Up-to-expectation Financial Year"),	shall follow the principles below:
the Company shall pay a total of
RMB102,850,000 (representing 5%	(1) When the annual total sales revenue
of the total value of Single Products	generated by Target Assets reaches
reached by the Asset Valuation Report)	RMB1,500 million (value-added tax
to Sunshine Lake Pharma within thirty	exclusive) or more for the first time
(30) business days after the issuing of	in a full financial year (the "First Up-
audited financial statements in respect of	to - expectation Financial Year")If
that financial year and the receiving of	the accumulated operating income of
the notice which Sunshine Lake Pharma	the Target Assets for the three years
has delivered in accordance with (iv)	of 2027, 2028 and 2029 or any three
below;	consecutive years prior to 2029 reaches
(2) Subject to the fulfilment of the payment	RMB10,097,000,000 or above (subject
to the audited financial statements),
condition as set out in (1) above,	the Company shall pay a total of
when the annual total sales revenue	RMB102,850,000 (representing 5%
generated by Target Assets reaches	of the total value of Single Products
RMB2,500 million (value-added tax	reached by the Asset Valuation Report)
exclusive) or more for a full financial	the final instalment of RMB848,760,000
year after the end of the First Up-	to Sunshine Lake Pharma in a lump sum.
to - expectation Financial Year (the	The Company shall pay the relevant
"Second Up-to-expectation Financial	amountto Sunshine Lake Pharma within
Year"), the Company shall pay a total	thirty (30) business days after the issuing
of RMB205,700,000 (representing 10%	of audited financial statements in respect
of the total value of Single Products	of that financial yearand the receiving
reached by the Asset Valuation Report)	of the notice which Sunshine Lake
to Sunshine Lake Pharma within thirty	Pharma has delivered in accordance with
(30) business days after the issuing of	(iv) below. The payment time shall be
audited financial statements in respect of	subject to the time of bank remittance;
that financial year and the receiving of
the notice which Sunshine Lake Pharma
has delivered in accordance with (iv)
below;

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Original Terms

Proposed Amendment to the Terms

1. Subject to the fulfilment of the payment condition as set out in (1) above, when the annual total sales revenue generated by Target Assets reaches RMB2,500 million (value-added tax exclusive) or more for a full financial year after the end of the First Up- to - expectation Financial Year (the "Second Up-to-expectation Financial Year"), the Company shall pay a total of RMB205,700,000 (representing 10% of the total value of Single Products reached by the Asset Valuation Report) to Sunshine Lake Pharma within thirty
2. 1. business days after the issuing of audited financial statements in respect of that financial year and the receiving of the notice which Sunshine Lake Pharma has delivered in accordance with (iv) below.

Subject to the fulfilment of the payment conditions as set out in (1) and (2) above, when the annual total sales revenue generated by Target Assets reaches RMB3,500 million (value- added tax exclusive) or more for a full financial year after the end of the Second Up-to-expectation Financial Year, the Company shall pay a total of RMB205,700,000 (representing 10% of the total value of Single Products reached by the Asset Valuation Report) to Sunshine Lake Pharma within thirty (30) business days after the issuing of audited financial statements in respect of that financial year and the receiving of the notice which Sunshine Lake Pharma has delivered in accordance with (iv) below.

• 1. If the accumulated operating income of the Target Assets for the three years of 2027, 2028 and 2029 or any three consecutive years prior to 2029 fails to reach RMB10,097,000,000 (subject to the audited financial statements), the amount of final instalment that shall be paid by the Company to Sunshine Lake Pharma or (as the case may be) the relevant amount that shall be returned by Sunshine Lake Pharma to the Company is as follows:
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Original Terms	Proposed Amendment to the Terms
(3) Subject to the fulfilment of the payment	Final instalment that shall be paid by
conditions as set out in (1) and (2)	the Company to Sunshine Lake Pharma
above, when the annual total sales	= RMB1,645,600,000 × accumulated
revenue generated by Target Assets	operating income for years of 2027,
reaches RMB3,500 million (value-	2028 and 2029 ÷ RMB10,097,000,000 -
added tax exclusive) or more for a	RMB796,840,000
full financial year after the end of the
Second Upto-expectation Financial	(a) If the value arrived at using the
Year, the Company shall pay a total of	above formula is positive, the
RMB205,700,000 (representing 10%	C o m p a n y s h a l l p a y t h e	f i n a l
of the total value of Single Products	i n s t a l m e n t t o S u n s h i n e	L a k e
reached by the Asset Valuation Report)	Pharma within thirty (30) business
to Sunshine Lake Pharma within thirty	days after the issuing of relevant
(30) business days after the issuing of	audited financial statements and
audited financial statements in respect of	the receiving of the notice which
that financial year and the receiving of	Sunshine Lake Pharma has delivered
the notice which Sunshine Lake Pharma	in accordance with (iv) below. The
has delivered in accordance with (iv)	payment time shall be subject to the
below.	time of bank remittance;

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Original Terms

Proposed Amendment to the Terms

1. If the value arrived at using the above formula is negative, the Company is not required to pay the final instalment to Sunshine Lake Pharma, and Sunshine Lake Pharma shall return payments to the Company within thirty (30) business days after the issuing of relevant audited financial statements and the receiving of the written notice from the Company. The amount to be returned by Sunshine Lake Pharma to the Company equals to the absolute value of the value arrived at using the above formula and it is required to pay the Company a sum of interest for the period of taking possession of such amounts, which is based on the latest loan prime rate (LPR) announced by National Interbank Funding Center on the date when the Sale and Purchase Agreement was signed. The payment time shall be subject to the time of bank remittance. In case of the circumstances under this clause in which it is required to return payments, the Company is not required to return any Target Assets to Sunshine Lake Pharma (regardless of whether the Sale and Purchase Agreement is terminated) and the Company (or the entity designated by the Company) is entitled to further enjoy all the interests of all the Target Assets within the scope under the Sale and Purchase Agreement.

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Original Terms			Proposed Amendment to the Terms
		Annex
					Appraised	Transaction
		No.		Drug name	value	price
					(RMB)	(RMB)
		1		Rongliflozin	1,915,000,000	1,532,000,000
				L-Pyroglutamic
				Acid
		2		Liraglutide	142,000,000	113,600,000
				Total	2,057,000,000	1,645,600,000
The consideration was determined after		The consideration was determined after
arm's length negotiation between the		arm's length negotiation between the
Company and Sunshine Lake Pharma, after		Company and Sunshine Lake Pharma,	after
considering the total valuation of Target		consideringwith reference to the result
Assets of RMB2,057,000,000 reached by the		ofthe total valuation of Target Assets of
Asset Valuation Report.		RMB2,057,000,000 reached by the Asset
		Valuation Report. Upon full negotiation
		by both parties, the transaction price of the
		Target Assets held by Sunshine Lake Pharma
		shall be RMB1,645,600,000, i.e. 80% of the
		valuation of the Target Assets.

Save as disclosed above, all the other terms of the Sale and Purchase Agreement shall remain unchanged and fully valid.

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REASONS FOR ENTERING INTO THE SUPPLEMENTAL AGREEMENT

The revised terms of the Supplemental Agreement are mainly in relation to adjustments to the consideration and payment methods. The Company has engaged China Alliance Appraisal Co., Ltd.* (北京中同華資產評估有限公司), which is qualified to engaged in securities and futures related businesses, to conduct valuation on the Target Assets, and issue a valuation report with 31 July 2019 as the benchmark date. Since the marketable products similar to the Target Assets have passed the Negotiation for Natural Medical Insurance with relevant national authorities on 28 November 2019, resulting in a substantial decrease in the price as compared with that before the Negotiation for Natural Medical Insurance, considering the effects of price reduction arising from the Negotiation for Natural Medical Insurance and in order to further ensure the interests of the Company and public shareholders, the consideration of the Target Assets was adjusted to 80% of the valuation of the Target Assets reached by the Asset Valuation Report after negotiation by the parties to the transaction and the proportion of down payment and the second instalment of payment (related to the progress of clinical research and development and approval of products) was adjusted downward. Meanwhile, the proportion of payment related to performance was raised and corresponding valuation adjustment terms were set. In accordance with the corresponding valuation adjustment terms, the final instalment can only be made when the accumulated sales for the three years of 2027, 2028 and 2029 reaches or exceeds the corresponding accumulated sales as predicted in the Asset Valuation Report for the said three years. If the agreed conditions on sales cannot be met, the overall consideration (including the down payment and the second instalment) will be further adjusted downward in accordance with the valuation adjustment terms in order to ensure the interests of the Company and public shareholders.

After comprehensive consideration of (1) the changes in the quantity and sales price of similar marketable products in the PRC, the pattern of generic drugs and the impact of new drug research and development on the Target Assets, (2) the quality and advantages of the Target Assets, (3) the risk of price fall of the Target Assets, (4) the competitive environment in the market and other factors, and (5) the impact of past price reduction due to the Negotiation for Natural Medical Insurance on the sales of relevant drugs, the Company is of the view that the said adjustments are reasonable.

Due to his position as a director and general manager of Shenzhen HEC Industrial (being the controlling shareholder of the Parent Company), Mr. TANG Xinfa, a non-executive Director, is regarded as having a material interest in the Supplemental Agreement and has abstained from voting on the Board resolution approving the same.

The Directors (excluding the independent non-executive Directors, who will give their opinion after taking into account the advice of Gram Capital, details of which will be included in the circular of the 2020 1st EGM) have confirmed that the Supplemental Agreement is on normal commercial terms, which are fair and reasonable, and the entering into of the Supplemental Agreement in the interests of the Company and its Shareholders as a whole.

• For identification purposes only

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2020 1st EGM

The Supplemental Agreement and the transactions contemplated thereunder shall be subject to approval by the Shareholders of the Company at the 2020 1st EGM by way of special resolution.

A circular containing, among other things, details of the Proposed Acquisition and Supplemental Agreement and the transactions contemplated thereunder will be despatched to the Shareholders in due course.

SUPPLEMENTAL NOTICE TO THE REVISED NOTICE OF 2019 4TH EGM AND SUPPLEMENTAL FORM OF PROXY TO THE REVISED FORM OF PROXY

A supplemental notice to the revised notice of the 2019 4th EGM setting out the Supplemental Agreement and the transactions contemplated thereunder, together with a supplemental form of proxy to the Revised Form of Proxy applicable to the 2020 1st EGM (the "Supplemental Form of Proxy"), will also be despatched to the Shareholders of the Company in due course.

The Supplemental Form of Proxy will not affect the validity of any form of proxy duly completed by you in respect of the resolution set out in the revised notice of the 2019 4th EGM (the "Revised Notice"). If you have validly appointed a proxy to attend and act for you at the 2020 1st EGM but do not complete and deliver the Supplemental Form of Proxy, your proxy will be entitled to vote at his/her discretion on the special resolution as set out therein. If you do not duly complete and deliver the form of proxy despatched to the Shareholders on 13 November 2019 and/or the Revised Form of Proxy but have duly completed and delivered the Supplemental Form of Proxy and validly appointed a proxy to attend and act for you at the 2020 1st EGM, your proxy will be entitled to vote at his/her discretion on the special resolution set out in the Revised Notice.

On behalf of the Board

YiChang HEC ChangJiang Pharmaceutical Co., Ltd.

TANG Xinfa

Chairman

Hubei, the PRC

27 December 2019

As of the date of this announcement, the Board of the Company consists of Mr. JIANG Juncai, Mr. WANG Danjin, Mr. CHEN Yangui and Mr. LI Shuang as executive directors; Mr. TANG Xinfa and Mr. Eddy HUANG as non-executive directors; and Mr. TANG Jianxin, Mr. FU Hailiang and Mr. ZHAO Dayao as independent non-executive directors.

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