Luye Pharma : DISCLOSEABLE AND CONNECTED TRANSACTION IN RELATION TO THE ACQUISITION OF EQUITY INTEREST IN SHANDONG BOAN

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

LUYE PHARMA GROUP LTD.

綠 葉 製 藥 集 團 有 限 公 司

(Incorporated in Bermuda with limited liability)

(Stock Code: 02186)

DISCLOSEABLE AND CONNECTED TRANSACTION

IN RELATION TO

THE ACQUISITION OF EQUITY INTEREST IN SHANDONG BOAN

Financial Adviser to the Company

THE ACQUISITION

On 1 December 2019, Shandong Luye, a wholly-owned subsidiary of the Company, and LIG entered into the Sale and Purchase Agreement pursuant to which Shandong Luye has conditionally agreed to purchase and LIG has conditionally agreed to sell its 98.0% equity interest in Shandong Boan for a total purchase price of up to RMB1,446.7 million (approximately US$205.8 million).

The total purchase price for the Acquisition comprises an initial payment of RMB723.4 million (approximately US$102.90 million), which is payable by the Group in cash upon Completion or closely thereafter and two subsequent payments of RMB361.7 million (approximately US$51.45 million) each payable only upon the grant by the competent authority in China of the marketing authorisation for LY01008 and LY06006, respectively. LY01008 and LY06006 are two biosimilar products under research and development by Shandong Boan and each of them is currently undergoing Phase III clinical trials in China. The Purchase Price is expected to be settled in RMB in the PRC.

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Shandong Boan is a biotechnology company that develops biopharmaceutical products (including biosimilar and innovative drugs) with a focus on oncology, central nervous system (CNS), diabetes and immune diseases. Through the strategic acquisition of Shandong Boan, a company with a proven track record in the R&D of biosimilars and innovative drugs, the Group hopes to not only further expand and diversify its pipeline portfolio, but also further accelerate its growth and penetration in the fast-growing biopharmaceutical sub-segment.

The Board believes that Shandong Boan's portfolio of biosimilar and innovative products is highly complementary to the Group's existing core strengths and this acquisition will assist the Group in maintaining its position as a leading pharmaceutical player in China. In addition, Shandong Boan's novel antibody products have the potential to provide the Group with numerous excellent growth opportunities in the longer term.

LISTING RULES IMPLICATIONS

LIG is owned by Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian, each an executive Director. Accordingly, LIG is a connected person of the Company and the Acquisition constitutes a connected transaction of the Company under the Listing Rules. As one or more of the applicable percentage ratios as calculated under Rule 14.07 of the Listing Rules in respect of the Acquisition exceeds 5%, the Acquisition constitutes a connected transaction of the Company subject to the reporting, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios in respect of the Acquisition exceeds 5% but all applicable percentage ratios are less than 25%, the Acquisition also constitutes a discloseable transaction subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian, each being an executive Director of the Company, have abstained from voting on the resolutions of the Board approving the Sale and Purchase Agreement and the transactions contemplated thereunder.

SGM AND CIRCULAR

The SGM will be convened and held by the Company to consider and, if thought fit, to approve, the Sale and Purchase Agreement and the transactions contemplated thereunder.

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A circular containing, among other things: (1) details of the Sale and Purchase Agreement and the Acquisition; (2) a letter of recommendation from the Independent Board Committee to the Independent Shareholders on the terms of the Sale and Purchase Agreement; (3) a letter of advice from the Independent Financial Adviser to the Independent Board Committee and the Independent Shareholders; and (4) a notice convening the SGM, will be dispatched to the Shareholders in due course. The circular is expected to be despatched to the Shareholders on or before 20 December 2019.

Shareholders and potential investors should note that the Acquisition is subject to the fulfilment of a number of conditions, and accordingly, the transactions contemplated under the Sale and Purchase Agreement may or may not proceed. Shareholders and potential investors should exercise caution when dealing in the securities of the Company.

THE ACQUISITION

On 1 December 2019, Shandong Luye, a wholly-owned subsidiary of the Company, and LIG entered into the Sale and Purchase Agreement pursuant to which Shandong Luye has conditionally agreed to purchase and LIG has conditionally agreed to sell its 98.0% equity interest in Shandong Boan. The principal terms of the Sale and Purchase Agreement are summarised below:

Date

1 December 2019

Parties

1. Shandong Luye, as the buyer; and
2. LIG, as the seller.

LIG is owned by Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian, each an executive Director. Accordingly, LIG is a connected person of the Company.

Assets being acquired

Pursuant to the Sale and Purchase Agreement, Shandong Luye has agreed to acquire, and LIG has agreed to sell to Shandong Luye, 98.0% of the equity interest in Shandong Boan. The remaining 2.0% equity interest in Shandong Boan is being transferred by LIG to a foreign party, which is an Independent Third Party, pending

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completion of the registration with the relevant PRC government authority. Upon completion of such registration, Shandong Boan will become a sino-foreign joint venture company.

Consideration

The total Purchase Price for the Acquisition comprises the following payments:

(i)	the Initial Payment, which is payable by the Group in cash	RMB723,366,420
	upon Completion	(approximately
		US$102.90 million)
(ii)	the LY01008 Payment, which is contingent and only	RMB361,683,210
	payable by the Group in cash upon the grant by the	(approximately
	competent authority in China of the marketing authorisation	US$51.45 million)
	for LY01008
(iii) The LY06006 Payment, which is contingent and only	RMB361,683,210
	payable by the Group in cash upon the grant by the	(approximately
	competent authority in China of the marketing authorisation	US$51.45 million)
	for LY06006

At present, Shandong Boan expects the marketing authorisation in China for LY01008 and LY06006 will be obtained around 2021 and 2022, respectively. See ''Information of Shandong Boan - Historical transactions'' for further information on LY01008 and LY06006. The Purchase Price is expected to be settled in RMB in the PRC.

The Purchase Price and payment schedule was determined after arm's length negotiations between Shandong Luye and LIG taking into account, among other factors, the entire equity interest value of 100% of Shandong Boan as at 30 June 2019 as appraised by CHFT Advisory and Appraisal Ltd., an independent valuer, of RMB1,491 million, the overall valuation, payment terms and structure of the Group's acquisition of the 4 Boan Biosimilars as announced by the Company on 4 August 2017 and 21 December 2018, respectively, the business nature and financial position of Shandong Boan, the current market value of comparable listed biotech companies, the product pipeline, business prospects of Shandong Boan and the general market conditions of the biopharmaceutical industry in the PRC.

When determining the payment terms of the Purchase Price, Shandong Luye and LIG have agreed to a payment schedule by stages, with the Initial Payment of RMB723,366,420 (approximately US$102.90 million) payable upon Completion or shortly thereafter and the Subsequent Payments being contingent in nature and payable in the future. The Subsequent Payments are further divided into the LY01008 Payment of RMB361,683,210 (approximately US$51.45 million) which is payable upon the

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grant by the competent authority in China of the marketing authorisation for LY01008, and the LY06006 Payment of RMB361,683,210 (approximately US$51.45 million) which is payable upon the grant by the competent authority in China of the marketing authorisation for LY06006. If Shandong Boan were not to be successful in obtaining the relevant marketing authorisation approvals for LY01008 or LY06006, the Group is not liable to pay the relevant Subsequent Payment.

The Group has previously announced the acquisition of the 4 Boan Biosimilars (which include LY01008 and LY06006) from Shandong Boan for a total purchase price of RMB950 million (approximately US$135.1 million) which is payable in stages upon achievement of certain milestones. Further, a royalty is payable to Shandong Boan in respect of LY01008 and LY06006 should such products eventually obtain marketing authorisation and sale therefor commence. As at the date of this announcement, all 4 Boan Biosimilars are still under development and the Group has so far paid a total of RMB390 million (approximately US$55.5 million) to Shandong Boan as part payment of the purchase price. The outstanding amount of the purchase price for the 4 Boan Biosimilars of RMB560 million (approximately US$79.7 million) is payable upon the successes of all three phases of the clinical trials for the respective 4 Boan Biosimilars. Following Completion, Shandong Boan will become a subsidiary of the Company and the outstanding amount of the purchase price will no longer be payable. The amount of the Purchase Price takes into account the outstanding amount and timing of the purchase price payable by the Group for the 4 Boan Biosimilars, as well as the deferred and contingent nature of such payments. See ''Information on Shandong Boan

• Historical transactions'' below for further information on the Group's acquisition of the 4 Boan Biosimilars.

The Group intends to finance the payment of the Purchase Price by internal resources and/or external financing.

Completion

Completion is conditional upon:

1. Shandong Boan having completed the filing with the relevant authority in respect of the transfer of the Equity Interest contemplated under the Sale and Purchase Agreement;
2. Shandong Boan having obtained all its internal approvals for the transactions contemplated under the Sale and Purchase Agreement;
3. the minority shareholder of Shandong Boan holding 2.0% equity interest having provided its written consent waiving its pre-emptive rights in respect of the Equity Interest; and

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1. the Sale and Purchase Agreement and the transactions contemplated thereunder having been approved by the Independent Shareholders at the SGM.

If any of the conditions above is not satisfied or waived on or before 31 March 2020, the Sale and Purchase Agreement will lapse automatically, without prejudice to the rights and liabilities of any party accrued prior to such lapse. As at the date of this announcement, none of the conditions set out above has been satisfied or waived.

Completion will take place following LIG notifying Shandong Luye that all of the above conditions have been satisfied. Upon Completion, Shandong Boan will become a 98%-owned subsidiary of the Company.

INFORMATION OF THE GROUP AND LIG

The Group focuses on developing, producing, marketing and selling innovative pharmaceutical products in four of the largest and fast growing therapeutic areas in China, the United States, Europe and other countries or jurisdictions, namely oncology, central nervous system (CNS), cardiovascular system, alimentary tract and metabolism. The Group's product portfolio consists of more than 30 products and centres around seven key products, five of which have patent protection and are indicated for the treatment or prevention of high prevalence medical conditions, including cancer, cardiovascular diseases, diabetes and CNS diseases.

LIG is an investment holding company established in the PRC.

INFORMATION OF SHANDONG BOAN

Background

Shandong Boan is a fully integrated biopharmaceutical company established in 2013. It specialises in therapeutic antibody development with a focus on oncology, central nervous system (CNS), diabetes and immune diseases. At present, Shandong Boan is engaged in biologic product development in China, the United States and the European Union markets. Over the last several years, Shandong Boan has developed expertise in antibody generation and lead optimisation, cell line development and process development, pilot scale production and commercial manufacturing. Shandong Boan's antibody discovery activities are organised around three platforms, namely Human Antibody Transgenic Mouse Technology, Phage Display Technology and Nanobody Platform. Through efficient and innovative in-house capabilities, Shandong Boan has developed a diversified and high-quality drug pipeline, which includes biosimilar and innovative biologic products.

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Historical transactions

Previously, the Group has announced the acquisition from Shandong Boan the following 4 Boan Biosimilars and their respective technologies, data and all rights attaching to such products including but not limited to the clinical trials approval:

LY01008LY06006

LY01011

LY09004

Market comparable	Biosimilar to Avastin
Description	recombinant anti-VEGF
	humanized monoclonal
	antibody injection
	(dosage 100mg/bottle)
	(重組抗VEGF人源化單
	克隆抗體注射液(規格
	為100mg/瓶))

Biosimilar to Prolia

recombinant anti- RANKL whole human monoclonal antibody injection (dosage 60 mg/bottle) (重組抗RANKL全人單 克隆抗體注射液 (規格為60mg/瓶))

Biosimilar to Xgeva

Recombinant anti- RANKL full-bodymonoclonal antibody injection (dosage 120mg/bottle) (重組抗RANKL全人單 克隆抗體注射液 (規格為120mg/瓶))

Biosimilar to Eylea

Recombinant Human Vascular Endothelial Growth Factor Receptor Antibody Fusion Protein Ophthalmic Injection (dosage 11.12mg/bottle) (重組人血管內皮生長因數 受體-抗體融合蛋白眼用 注射液(規格為11.12mg/ 瓶))

Indication	Colorectal cancer and	Osteoporosis among	Multiple Myeloma and	Neovascular (Wet) Age-
	non-small cell lung	postmenopausal women;	Bone Metastasis from	Related Macular
	cancer	reducing the risk of	Solid Tumors; Giant	Degeneration (AMD);
		vertebral, non-vertebral	cell tumor of bone;
		and hip fractures;	Hypercalcemia	Macular Edema Following
		Treatment to increase		Retinal Vein Occlusion
		bone mass in men at		(RVO); Diabetic Macular
		high risk for fracture		Edema (DME) and Diabetic
		receiving androgen		Retinopathy (DR) in
		deprivation therapy for		Patients with Diabetic
		nonmetastatic prostate		Macular Edema
		cancer
Status	Phase III clinical trials	Phase III clinical trials	Phase I clinical trials	Phase I clinical trials
Targeted launch date	Around 2021	Around 2022	Around 2023	Around 2023

For further details of the acquisition, please refer to the announcements of the Company dated 4 August 2017, 20 November 2017 and 21 December 2018 respectively and the shareholders' circular dated 10 December 2017.

Financial information of Shandong Boan

The net liabilities of Shandong Boan as at 31 December 2018 was approximately RMB363.1 million. For the financial years ended 31 December 2017 and 2018, Shandong Boan recorded net loss of RMB135.8 million and RMB176.4 million both before and after tax and extraordinary items, respectively, according to its financial statements prepared under the accounting principles generally accepted in the PRC.

Shandong Boan was established by 山東國際生物科技園發展有限公司 (Shandong International Biotech Park Development Co., Ltd.), a company owned as to 67.0% indirectly by Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian and as to the remaining 33.0% by an Independent Third Party in 2013 with a registered capital of RMB10 million. In July 2019, Shandong International Biotech Park Development

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Co., Ltd. transferred the entire equity interest in Shandong Boan to 煙台綠創生物科技 有限公司 (Yantai Luchuang Biotech Co., Ltd.), a company owned by Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian, for RMB20 million. In October 2019, as part of the group reorganisation, Yantai Luchuang Biotech Co., Ltd. transferred the entire equity interest in Shandong Boan to LIG.

VALUATION OF SHANDONG BOAN

The Company commissioned CHFT Advisory and Appraisal Ltd., an independent valuer, to prepare the Valuation Report which provides for a valuation of the entire equity interest of Shandong Boan. The appraised value of the entire equity interest of Shandong Boan as at 30 June 2019 under the Valuation Report is RMB1,491 million, and was prepared using the income approach for Shandong Boan's biosimilar products based on the discounted cash flow method (the ''Forecast'') and the cost approach for Shandong Boan's novel antibody products. As a result, the Forecast constitutes a profit forecast under Rule 14.61 of the Listing Rules and this announcement is subject to the requirements under Rules 14.60A and 14.62 of the Listing Rules in relation to profit forecast.

Details of the key assumptions underlying the Forecast are set out below:

1. Shandong Boan has sufficient funds and capabilities to support the continued R&D of its pipeline products.
2. Shandong Boan will continue to conduct R&D, clinical trials and apply for and obtain the relevant approvals as planned and on schedule for drug candidates forecasted in the Valuation Report.
3. Successful results in earlier studies in the pre-clinical/clinical development process are predictive of favourable future trial results, and applying a suitable and appropriate risk-weighting that reflects the probability of success to a product is adequate to capture the potential risks in products currently still undergoing clinical trials.
4. Shandong Boan's sales, marketing and commercialisation infrastructure and workforce can be reasonably established internally or via external partners as and when drug candidates obtain marketing approval.
5. The various prices, costs, tax, working capital and capital expenditure assumptions relied on in the Forecast are based on Shandong Boan's best estimates that reflect the business model of a typical clinical biopharmaceutical company.

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1. There will be no material changes to the existing laws, regulations, guidelines and industry practices in relation to the clinical trial, marketing authorisation approval and sales and marketing process for Shandong Boan's products in the markets which Shandong Boan currently operates and in the markets that Shandong Boan is projected to expand into.
2. There will be no material unforeseeable factors and/or events that cause global demographics and prevalence of certain conditions to change materially, that will in turn affect the total addressable market and overall efficacy of Shandong Boan's products.
3. There will be no material unforeseeable changes to the overall political, economic or social environment that would cause an adverse change in industry demand and/ or market conditions.
4. The projected sales of Shandong Boan's biosimilar pipeline products are derived from (a) direct sales revenues from Shandong Boan's biosimilar pipeline portfolio outside of the 4 Boan Biosimilars, as well as (b) royalty income and (c) rights transfer income as per the previous acquisition agreements in relation to the 4 Boan Biosimilars.
5. Shandong Boan's novel antibody drug candidates currently in pre-clinical trials will not be valued through the income approach and will instead be valued at R&D and investment cost.

Ernst & Young, acting as the reporting accountants of the Company, has examined the calculations of the discounted future cash flow forecast in which the Valuation Report is based, which do not involve the adoption of accounting policies in its preparation. The Directors confirm that the Forecast used in the Valuation Report has been made after due and careful enquiry. A letter from Ernst & Young is set out in Appendix I to this announcement for the purpose of Rule 14.60A of the Listing Rules.

UBS, the financial adviser of the Company with respect of the Acquisition, has reviewed the Valuation Report and has discussed with the Directors about the principal assumptions upon which the Forecast is based. UBS has also considered the letter from Ernst & Young regarding the calculations of the discounted cash flow forecast. On the basis of the foregoing, UBS has confirmed that it is satisfied that the Forecast has been made by the Directors after due and careful enquiry. A letter from UBS is set out in Appendix II to this announcement for the purpose of Rule 14.60A of the Listing Rules.

Each of Ernst & Young and UBS has given and has not withdrawn its written consent to the publication of this announcement with the inclusion of its letter and all references to its name in the form and context in which it is included.

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REASONS FOR AND BENEFITS OF THE ACQUISITION

As the Group looks towards its next stage of development and evolves into a global innovative pharmaceutical company, the Group believes that continued investment in innovative and advanced technologies is imperative to the Group's long-term success. Through the strategic acquisition of Shandong Boan, a company with a proven track record in the R&D of biosimilars and innovative drugs, the Group hopes to not only further expand and diversify its pipeline portfolio, but also further accelerate its growth and penetration in the fast-growing biopharmaceutical sub-segment.

Biopharmaceuticals represent one of the fastest growing and most innovative subsegments in the pharmaceutical sector today. According to public sources, the size of the global biopharmaceutical market is estimated to be at US$228 billion in 2019, and is expected to further increase to US$323 billion by 2023E, representing a CAGR of 7% during this period. In part due to its growth potential, the biopharmaceuticals subsegment has been considered one of the most valuable areas of investment in the pharmaceutical sector in recent years. As such, the Group has identified the biopharmaceuticals sub-segment as a key, untapped opportunity for further growth in the coming years, and views the acquisition of Shandong Boan, including its product pipeline and R&D platform, to help the Group further accelerate its growth and evolution into a leading global pharmaceutical company.

Shandong Boan possesses a strong product pipeline that covers several research and development stages, including a combination of biosimilars, which have relatively less clinical risks due to its proven targets and mechanism, and innovative drugs, which have the potential to be first-in-class and/or best-in-class in their respective product and/or indication categories.

Product pipeline: Biosimilars

Therapy		Projects	Indications	Region	PC	IND	Phase I/II	Phase III	BLA	Expected Launch for
	Products in Clinic1
	LY01008: Avastin Biosimilar2	CC, NSCLC	CN						2021
			Bone metastases from	CN						2023
	LY01011: Xgeva Biosimilar3	US
	solid tumors
Oncology				EU
	LY01012: Zaltrap Biosimilar	Metastatic colorectal cancer	CN						2026
			NSCLC, liver cancer, gastric cancer,
	LY01015: Opdivo Biosimilar	HDC, melanoma, RCC, bladder	CN
			cancer, glioblastoma, etc.
				CN						2022
Orthopedics	LY06006: Prolia Biosimilar2	Osteoporosis	US
EU
				JP
Metabolic	LY05008: Trulicity Biosimilar	Type 2 Diabetes	CN
			wAMD, RVO, DME,	CN						2023
Ophthlmology	LY09004: Eylea Biosimilar3	US
			DR, mCNV
			EU
Immunology	TS1808: Cosentyx Biosimilar	Psoriasis, AS, PA	Global

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Notes:

1. The expected launch for products in clinic reflects the best estimates of Shandong Boan based on its current clinical progress, and may be affected by various unforeseen events that could otherwise influence the anticipated timeline of these products.
2. LY01008 and LY06006 were acquired by the Group in December 2017 for a total consideration of RMB450 million to be paid in installments based on milestones. As of the date of this announcement, RMB360 million remains outstanding and will be paid within 5 days after the completion of Phase III clinical trials (RMB225 million), within 5 days of submitting the marketing approval application to the CDE (RMB90 million) and within 5 days following CDE's grant of the marketing authorisation of the products (RMB45 million). Shandong Boan will also receive a royalty fee equivalent to 10% of the sales revenues of the products. Following Completion, these outstanding amounts will no longer be payable.
3. LY01011 and LY09004 were acquired by the Group in December 2018 for a total consideration of RMB500 million to be paid in installments based on milestones. As of the date of this announcement, RMB200 million remains outstanding and will be paid within 5 days after the completion of Phase III clinical trials (RMB100 million) and within 5 days following CDE's grant of the marketing authorisation of the products (RMB100 million). Following Completion, these outstanding amounts will no longer be payable.

Within Shandong Boan's pipeline of eight biosimilar drugs, five biosimilar drug candidates have reached clinical stages, including two currently undergoing Phase III clinical trials (LY01008 and LY06006) and three currently undergoing Phase I/II clinical trials (LY01011, LY09004 and LY01012). Should the clinical stages proceed as the Group and Shandong Boan anticipate, these products are expected to receive market approval in the coming years. Provided that the relevant marketing authorisations are obtained, LY01008 and LY06006 are expected to be used for the treatment of Colorectal Cancer/Non-Small Cell Lung Cancer and Osteoporosis respectively, while LY01011, LY09004 and LY01012 are expected to be used for Bone Metastasis from Solid Tumors, Neovascular (Wet) Age-Related Macular Degeneration (AMD) and other indications and Metastatic Colorectal Cancer, respectively. Shandong Boan's three other pre-clinical biosimilar candidates are expected to be indicated for various tumour/oncological indications (LY01015), type II diabetes (LY05008) and psoriasis (TS1808), provided that the relevant marketing authorisations are obtained in the future. Strategically chosen to address currently unmet medical needs and indications with large addressable markets in both China and across the world, these products, as previously disclosed, will enhance the Group's expansion efforts into different strategic therapeutic areas, including orthopedics and ophthalmology. These biosimilar product candidates also utilise therapeutic targets and mechanisms that have already been proven to be effective and widely used around the world through their respective comparable, originator drugs. The Board believes that Shandong Boan's portfolio of biosimilar and innovative products is highly

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complementary to the Group's existing core strengths in the central nervous system, oncology, cardiovascular and metabolism sub-segments, and its acquisition will assist the Group in maintaining its position as a leading pharmaceutical player in China.

Product pipeline: Novel antibodies

Therapy	Projects ID	Drug	Indication	Lead Identity	PoC Pre-Clinical Clinical Trial1 BLA
	TS1804	Anti-4-1BB antibody	Hematoma, Solid tumor		2020 Q4 IND
	TS1901	Anti-Claudin18.2 antibody	Gastric / Pancreatic /		2021 Q1 IND
	Esophageal cancer
Cancer	TS1905	Anti-PDL1/TGF-β	NSCLC, HPV+ cancer,		2021 Q1 IND
bifunctional fusion protein	Cholangiocarcinoma, Gastric cancer
	TS1904	Anti-CD25 antibody	Solid tumor		2021 Q2 IND
	TS0001 (15)	Anti-B7H4 antibody	Hepatocellular carcinoma,
	Breast cancer, Endometrial
			cancer, Ovarian cancer
Hyperlipidemia	TS0001 (17)	Anti-ANGPTL3 antibody	Hypercholesterolemia		2021 Q4 IND
Allergic disease	TS0001 (3)	Anti-IL4R antibody	Asthma, Atopic dermatitis, Sinusitis,
Food allergies
	TS1903	Anti-CGRP antibody	Migraine		2021 Q2 IND
Chronic Pain	TS1502	Anti-β-NGF antibody	Osteoarthritis, Chronic back pain,		2021 Q2 IND
	Cancer pain

Note:

1. The expected IND timetable reflects the best estimates of Shandong Boan based on its current developmental progress, and may be affected by various unforeseen events that could otherwise influence the anticipated timeline of these products.

In addition to Shandong Boan's biosimilar product candidates, Shandong Boan currently has over 10 innovative biologic product candidates in its novel antibody pipeline. These products have the potential to be best-in-class and/or first-in-class products in their respective product and/or indication categories. Provided that the relevant marketing authorisations are obtained, Shandong Boan's novel antibody product portfolio is expected to further broaden the Group's portfolio by acquiring a diversified set of product candidates with indications ranging from solid tumours to asthma. The Board believes that these novel antibody products have the potential to provide the Group with numerous excellent growth opportunities in the longer term.

Beyond Shandong Boan's pipeline, the Board believes that the Acquisition will further bolster the Group's R&D and manufacturing capabilities following the integration of Shandong Boan's proprietary technological platforms into the Group. Shandong Boan has intellectual property patents in human antibody transgenic mouse technology, phage display technology and nanobody platform, all of which the Group views to be highly complementary to the Group's existing technological capabilities, particularly in the R&D of future potential new antibody drug candidates. In total, as of the date of this announcement, Shandong Boan has submitted three patent applications in the PRC for the protection of the preparation process in respect of its biosimilar products LY01008 and LY09004, 22 patent applications in the PRC in respect of its innovative

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products and jointly owned one patent with 山東國際生物科技園有限公司 (Shandong International Biotech Park Development Co., Ltd.) in relation to the preparation method of transgenic animal capable of expressing human antibody. Furthermore, the Board believes that the integration of Shandong Boan's team of research scientists and academics, as well as its end-to-end manufacturing platform will further strengthen the Group's existing R&D and manufacturing capabilities. As Shandong Boan's manufacturing facility is currently able to meet the capacity requirements for both Shandong Boan's clinical manufacturing and future commercialisation needs, the Group believes that the acquisition of Shandong Boan's manufacturing platform will improve the Group's manufacturing capabilities and efficiency, and as a whole, provide a multitude of benefits in supply chain integration. In addition to leading the development of Shandong Boan's existing pipeline products, the Group believes that Shandong Boan's R&D platforms have the capabilities to potentially discover and develop the next generation of pharmaceutical products in conjunction with the Group.

The Board views the Acquisition as consistent with the Group's stated strategy of accelerating the growth of the Group's business and product portfolio through acquisitions, with the ultimate objective to become a leading pharmaceutical company globally. In recent years, a number of Chinese pharmaceutical companies have announced their development or investment in antibody products, including applications for marketing authorisation and commencement of relevant clinical trials. As such, in order to maintain the Group's leading position in this sub-segment and ensure long-term sustainable growth, the Group previously acquired LY01008, LY06006, LY01011 and LY09004 in order to continue building up its pipeline of biological antibodies, and is now pursuing an acquisition to both further broaden its portfolio of innovative biological antibody candidates and enhance its existing R&D and manufacturing capabilities within the sub-segment. Given the complementary nature of Shandong Boan's products and technologies with the Group, the Board also believes that there are a number of areas in which the two companies are able to collaborate and achieve a substantial level of synergies, including but not limited to sales and marketing of drugs with similar or common indications and R&D. As a whole, the Board views the Acquisition as being in line with the Group's historical growth strategy, and the Board believes that the Acquisition will provide value to the Company and its Shareholders.

The Directors (including the independent non-executive Directors) have considered that the terms of the Sale and Purchase Agreement, including the basis of the Purchase Price, are fair and reasonable, on normal commercial terms and conducted in the ordinary and usual course of business of the Group; and the Acquisition is in the interests of the Company and the Shareholders as a whole.

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LISTING RULES IMPLICATIONS

LIG is owned by Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian, each an executive Director. Accordingly, LIG is a connected person of the Company and the Acquisition constitutes a connected transaction of the Company under the Listing Rules. As one or more of the applicable percentage ratios as calculated under Rule

14.07 of the Listing Rules in respect of the Acquisition exceeds 5%, the Acquisition constitutes a connected transaction of the Company subject to the reporting, announcement and independent shareholders' approval requirements under Chapter 14A of the Listing Rules.

As one or more of the applicable percentage ratios in respect of the Acquisition exceeds 5% but all applicable percentage ratios are less than 25%, the Acquisition also constitutes a discloseable transaction subject to the reporting and announcement requirements under Chapter 14 of the Listing Rules.

Mr. Liu Dian Bo, Mr. Yang Rong Bing and Mr. Yuan Hui Xian, each being an executive Director of the Company, have abstained from voting on the resolutions of the Board approving the Sale and Purchase Agreement and the transactions contemplated thereunder.

INDEPENDENT BOARD COMMITTEE AND INDEPENDENT FINANCIAL ADVISER

The Independent Board Committee, comprising all independent non-executive Directors, for the purpose of making a recommendation to the Independent Shareholders in respect of the Sale and Purchase Agreement and the transactions contemplated thereunder, has been established in compliance with Rule 14A.41 of the Listing Rules.

Gram Capital has been appointed as the Independent Financial Adviser of the Company to advise the Independent Board Committee and the Independent Shareholders on the terms of the Sale and Purchase Agreement and the transactions contemplated thereunder.

SGM AND CIRCULAR

The SGM will be convened and held by the Company to consider and, if thought fit, to approve, the Sale and Purchase Agreement and the transactions contemplated thereunder.

A circular containing, among other things: (1) details of the Sale and Purchase Agreement and the Acquisition; (2) a letter of recommendation from the Independent Board Committee to the Independent Shareholders on the terms of the Sale and Purchase Agreement; (3) a letter of advice from the Independent Financial Adviser to

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the Independent Board Committee and the Independent Shareholders; and (4) a notice convening the SGM, will be dispatched to the Shareholders in due course. The circular is expected to be despatched to the Shareholders on or before 20 December 2019.

Shareholders and potential investors should note that the Acquisition is subject to the fulfilment of a number of conditions, and accordingly, the transactions contemplated under the Sale and Purchase Agreement may or may not proceed. Shareholders and potential investors should exercise caution when dealing in the securities of the Company.

DEFINITIONS

In this announcement, the following expressions have the following meanings unless the context requires otherwise:

''4 Boan Biosimilars''	LY01008, LY06006 and two other biosimilar products
	of Shandong Boan, being LY01011 and LY09004
''Acquisition''	the proposed acquisition by Shandong Luye of the
	Equity Interest held by LIG in accordance with the
	terms of the Sale and Purchase Agreement
''Board''	the board of Directors
''CAGR''	compounded annual growth rate
''CDE''	中國國家藥品監督管理局藥品審評中心 (China Centre
	For Drug Evaluation of National Medical Products
	Administration)
''Company''	Luye Pharma Group Ltd., a company incorporated in
	Bermuda with limited liability, the shares of which are
	listed on the Main Board of the Stock Exchange

''Completion'' ''Director(s)'' ''Equity Interest''

''Group''

''Hong Kong''

completion of the Acquisition

the directors of the Company

98.0% equity interest in Shandong Boan held by LIG to be sold to Shandong Luye pursuant to the Sale and Purchase Agreement

the Company and its subsidiaries

the Hong Kong Special Administrative Region of the People's Republic of China

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''Independent Board	an independent board committee of the Company
Committee''	comprising all the independent non-executive
	Directors, formed for the purpose of advising the
	Independent Shareholders in respect of the Acquisition
''Independent Financial	Gram Capital Limited, a licensed corporation to carry
Adviser'' or	out Type 6 (advising on corporate finance) regulated
''Gram Capital''	activity under the SFO and being the independent
	financial adviser appointed by the Company to advise
	the Independent Board Committee and the Independent
	Shareholders in respect of the Acquisition
''Independent Shareholders''	Shareholders other than Mr. Liu Dian Bo, Mr. Yang
	Rong Bing and Mr. Yuan Hui Xian, and their
	respective associates
''Independent Third Party''	a third party independent of the Company and its
	connected persons
''Initial Payment''	the initial payment of the Purchase Price, being
	RMB723,366,420 (approximately US$102.9 million)
''LIG''	綠葉投資集團有限公司 (Luye Investment Group Co.
	Ltd.), a limited liability company established in the
	PRC and owned by Mr. Liu Dian Bo, Mr. Yang Rong
	Bing and Mr. Yuan Hui Xian, who are executive
	Directors
''Listing Rules''	the Rules Governing the Listing of Securities on The
	Stock Exchange of Hong Kong Limited
''LY01008''	a biosimilar product under research and development
	by Shandong Boan. See ''Information of Shandong
	Boan - Historical transactions'' for further
	information
''LY01008 Payment''	RMB361,683,210 (approximately US$51.45 million),
	being one of the Subsequent Payments of the Purchase
	Price
''LY06006''	a biosimilar product under research and development
	by Shandong Boan. ''Information of Shandong Boan
	- Historical transactions'' for further information

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''LY06006 Payment''	RMB361,683,210 (approximately US$51.45 million),
	being one of the Subsequent Payments of the Purchase
	Price
''PRC''	the People's Republic of China (for the purpose of this
	announcement, excluding Hong Kong, the Macao
	Special Administrative Region of the PRC and
	Taiwan)
''Purchase Price''	the purchase price for the Equity Interest, comprising
	the Initial Payment and the Subsequent Payments
''RMB''	Renminbi, the lawful currency of the PRC
''Sale and Purchase	the Sale and Purchase agreement dated 1 December
Agreement''	2019 entered into between Shandong Luye and LIG in
	relation to the sale and purchase of the Equity Interest
''SFO''	the Securities and Futures Ordinance (Chapter 571 of
	the Laws of Hong Kong)
''SGM''	a special general meeting to be held by the Company
	to consider and, if thought fit, approve, the Sale and
	Purchase Agreement and the transactions contemplated
	thereunder
''Shandong Boan''	山東博安生物技術有限公司	(Shandong	Boan
	Biological Technology Co. Ltd.)
''Shandong Luye''	山東綠葉製藥有限公司 (Shandong Luye Pharmaceutical
	Co. Ltd.), a company with limited liability established in
	the PRC, and a wholly-owned subsidiary of the
	Company
''Shareholders''	holders of the Shares
''Shares''	ordinary shares of US$0.02 each in the issued share
	capital of the Company
''Stock Exchange''	The Stock Exchange of Hong Kong Limited
''Subsequent Payments''	the LY01008 Payment and the LY06006 Payment

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''UBS''	UBS AG Hong Kong Branch, a registered institution
	under the SFO to carry out Type 1 (dealing in
	securities), Type 4 (advising on securities), Type 6
	(advising on corporate finance), Type 7 (providing
	automated trading services) and Type 9 (asset
	management) regulated activities under the SFO, the
	financial adviser to the Company in relation to the
	Acquisition. UBS AG is incorporated in Switzerland
	with limited liability
''United States''	the United States of America
''USD'' or ''US$''	United States dollars, the lawful currency of the
	United States
''Valuation Report''	the valuation report dated 16 November 2019 prepared
	by CHFT Advisory and Appraisal Ltd. and
	commissioned by the Company in respect of Shandong
	Boan

In this announcement, the terms ''associate'', ''connected person'', ''controlling shareholder'', ''percentage ratios'' and '''subsidiary'' have the meanings given to such terms in the Listing Rules, unless the context otherwise requires.

English translations for the Chinese names of the PRC entities, authorities or facilities in this announcement are for reference only. In the event of any discrepancies between the Chinese names of these PRC entities, authorities or facilities and their respective English translations, the Chinese version shall prevail.

Unless otherwise specified, this announcement contains certain translations for the convenience of the reader at the exchange rate of US$1 to RMB7.0298. These translations are provided for reference and convenience only, and no representation is made, and no representation should be construed as being made, that any amounts in RMB or US$ can be converted at the above rate or any other rates or at all.

By Order of the Board

LUYE PHARMA GROUP LTD.

Liu Dian Bo

Chairman

Hong Kong, 1 December 2019

As at the date of this announcement, the executive Directors of the Company are Mr. LIU Dian Bo, Mr. YANG Rong Bing, Mr. YUAN Hui Xian and Ms. ZHU Yuan Yuan; the non-executive Director of the Company is Mr. SONG Rui Lin; and the independent non-executive Directors of the Company are Mr. ZHANG Hua Qiao, Professor LO Yuk Lam, Mr. LEUNG Man Kit and Mr. CHOY Sze Chung Jojo.

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In compliance with Rule 14.60A of the Listing Rules, the text of each of the letters from Ernst & Young to the Directors confirming it has examined the calculations of the Forecast used in the Valuation Report, and the letter from UBS confirming that the Forecast in the Valuation Report has been made by the Directors after due and careful enquiry, both dated 1 December 2019, for the purpose of, among other things, inclusion in this announcement are reproduced below:

APPENDIX I - LETTER FROM ERNST & YOUNG

The following is the text of a report received from the Company's reporting accountants, Ernst & Young, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this announcement.

REPORT FROM REPORTING ACCOUNTANTS ON THE DISCOUNTED CASH FLOW FORECAST IN CONNECTION WITH THE VALUATION OF EQUITY INTEREST IN SHANDONG BOAN BIOLOGICAL TECHNOLOGY CO. LTD.

22/F, CITIC Tower

1 Tim Mei Avenue

Central, Hong Kong

To the Directors of Luye Pharma Group Ltd.

We have been engaged to report on the arithmetical accuracy of the calculations of the discounted cash flow forecast (the ''Forecast'') on which the valuation dated 16 November 2019 prepared by CHFT Advisory and Appraisal Ltd. in respect of Shandong Boan Biological Technology Co. Ltd. (the ''Target'') as at 30 June 2019 is based. The valuation is set out in the announcement of Luye Pharma Group Ltd. (the ''Company'') dated 1 December 2019 (the ''Announcement'') in connection with the acquisition of the Target. The valuation based on the Forecast is regarded by The Stock Exchange of Hong Kong Limited as a profit forecast under paragraph 14.61 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the ''Listing Rules'').

Directors' responsibilities

The directors of the Company (the ''Directors'') are solely responsible for the Forecast. The Forecast has been prepared using a set of bases and assumptions (the ''Assumptions''), the completeness, reasonableness and validity of which are the sole responsibility of the Directors. The Assumptions are set out in the section headed ''VALUATION OF SHANDONG BOAN'' of the Announcement.

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Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public Accountants (''HKICPA''), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies Hong Kong Standard on Quality Control 1 Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other Assurance and Related Services Engagements, and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountants' responsibilities

Our responsibility is to express an opinion on the arithmetical accuracy of the calculations of the Forecast based on our work. The Forecast does not involve the adoption of accounting policies.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3000 (Revised) Assurance Engagements Other Than Audits or Reviews of Historical Financial Information issued by the HKICPA. This standard requires that we plan and perform our work to obtain reasonable assurance as to whether, so far as the arithmetical accuracy of the calculations are concerned, the Directors have properly compiled the Forecast in accordance with the Assumptions adopted by the Directors. Our work consisted primarily of checking the arithmetical accuracy of the calculations of the Forecast prepared based on the Assumptions made by the Directors. Our work is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the HKICPA. Accordingly, we do not express an audit opinion.

We are not reporting on the appropriateness and validity of the Assumptions on which the Forecast are based and thus express no opinion whatsoever thereon. Our work does not constitute any valuation of the Target. The Assumptions used in the preparation of the Forecast include hypothetical assumptions about future events and management actions that may or may not occur. Even if the events and actions anticipated do occur, actual results are still likely to be different from the Forecast and the variation may be material. Our work has been undertaken for the purpose of reporting solely to you under paragraph 14.62(2) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of our work, or arising out of or in connection with our work.

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Opinion

Based on the foregoing, in our opinion, so far as the arithmetical accuracy of the calculations of the Forecast is concerned, the Forecast has been properly compiled in all material respects in accordance with the Assumptions adopted by the Directors.

Yours faithfully,

Ernst & Young

Certified Public Accountants

Hong Kong

1 December 2019

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APPENDIX II - LETTER FROM UBS

The following is the text of a report received from the Company's financial adviser to the Acquisition, UBS AG Hong Kong Branch, for the purpose of incorporation in this announcement.

1 December 2019

The Board of Directors

Luye Pharma Group Ltd.

Clarendon House

2 Church Street

Hamilton HM 11

Bermuda

Dear Sirs,

Luye Pharma Group Ltd. (the ''Company'')

Discloseable and Connected Transaction

We refer to the discounted future cash flows of Shandong Boan Biological Technology Co. Ltd. (the ''Forecast'') underlying the valuation report prepared by CHFT Advisory and Appraisal Ltd. (the ''Independent Valuer'') in relation to the valuation of the entire equity interest of 山東博安生物技術有限公司 (Shandong Boan Biological Technology Co. Ltd.) (''Shandong Boan'') (the ''Valuation Report''), the valuation of which constitutes a profit forecast under Rule 14.61 of the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited (the ''Listing Rules'').

We have reviewed the Forecast upon which the Valuation Report has been made, for which you as the directors of the Company are solely responsible. We have also considered the report from Ernst & Young (the ''Auditor'') dated 1 December 2019 addressed solely to and for the sole benefit of the directors of the Company regarding the calculations upon which the Forecast have been made as set out in Appendix I to the announcement of the Company dated 1 December 2019 (the ''Announcement'') regarding the Forecast.

The Forecast has been prepared using a set of assumptions that include hypothetical assumptions about future events and other assumptions that may or may not necessarily be expected to occur and, as such, the Forecast may not be appropriate for purposes other than for deriving the Valuation Report. Even if the events anticipated under the

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hypothetical assumptions occur, actual results are still likely to differ from the Forecast since such anticipated events frequently may or may not occur as expected and the variation may be material.

We have not independently verified the computations leading to the Independent Valuer's determination of the market value of Shandong Boan. We have had no role or involvement and have not provided and will not provide any assessment of the market value of Shandong Boan and, accordingly, we take no responsibility and express no views therefor. We have assumed, without independent verification, that all information, materials and representations so supplied, including all information, materials and representations referred to or contained in the Announcement, for which you as directors of the Company are wholly responsible, were true, accurate, complete and not misleading at the time they were supplied or made and that no material fact or information has been omitted from the information and materials supplied. No representation or warranty, expressed or implied, is made by us on the accuracy, truth or completeness of such information, materials, opinions and/or representations referred to or contained in the Announcement, and we have not assumed any responsibility or liability therefor. Circumstances could have developed or could develop in the future that, if known to us at the time of this letter, would have altered our assessment and review.

On the basis of the foregoing and without giving any opinion on the reasonableness of the valuation methods, bases and assumptions selected by the Independent Valuer and the Company for which the Independent Valuer and the Company are responsible, we are of the opinion that the Forecast has been made by you after due and careful enquiry in accordance with the bases and assumptions as set out in the Valuation Report.

The work undertaken by us in giving the above opinion has been undertaken for the purpose of reporting solely to you under Rule 14.62(3) of the Listing Rules and for no other purpose. We accept no responsibility to any other person in respect of, arising out of or in connection with our work.

Yours faithfully,

For and on behalf of

UBS AG Hong Kong Branch

Patrick Tsang	Yao Chong
Managing Director	Managing Director

UBS AG is incorporated in Switzerland with limited liability.

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