TOT BIOPHARM International Company Limited

(Incorporated in Hong Kong with limited liability)

Stock Code: 1875

IN T ERIM REP ORT

2020

CONTENTS

  • Corporate information
  • Management discussion and analysis Financial review
  • Report on review of interim financial information

Consolidated financial information:

  1. Interim condensed consolidated statement of comprehensive loss
  2. Interim condensed consolidated balance sheet
  1. Interim condensed consolidated statement of changes in equity
  2. Interim condensed consolidated statement of cash flows
  3. Notes to the interim condensed consolidated financial information

38 Other information

45 Definitions

2 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

CORPORATE INFORMATION

EXECUTIVE DIRECTORS

AUTHORIZED REPRESENTATIVES

Ms. Yeh-Huang,Chun-Ying(General Manager)

Ms. Yeh-Huang,Chun-Ying

Dr. Liu, Jun

Mr. Lui, Wing Yat Christopher

NON-EXECUTIVE DIRECTORS

SHARE REGISTRAR

Mr. Fu, Shan (Chairman)

Tricor Investor Services Limited

Dr. Kung, Frank Fang-Chien

Mr. Kang, Pei

REGISTERED OFFICE

Mr. Qiu, Yu Min

Level 54, Hopewell Centre,

183 Queen's Road East,

INDEPENDENT NON-EXECUTIVE DIRECTORS

Hong Kong

Ms. Hu, Lan

Dr. Sun, Lijun Richard

HEADQUARTERS AND PRINCIPAL PLACE

Mr. Chang, Hong-Jen

OF BUSINESS IN THE PRC

120 Changyang Street,

AUDIT AND CONNECTED TRANSACTIONS

Suzhou Industrial Park,

REVIEW COMMITTEE

Suzhou, PRC

Ms. Hu, Lan (Chairlady)

Mr. Qiu, Yu Min

COMPANY WEBSITE

Mr. Chang, Hong-Jen

www.totbiopharm.com.cn

REMUNERATION COMMITTEE

PLACE OF LISTING AND STOCK CODE

Mr. Chang, Hong-Jen(Chairman)

The Stock Exchange of Hong Kong Limited

Mr. Kang, Pei

1875

Dr. Sun, Lijun Richard

PRINCIPAL BANKS

NOMINATION COMMITTEE

Shanghai Pudong Development Bank

Mr. Fu, Shan (Chairman)

Bank of China

Ms. Hu, Lan

Dr. Sun, Lijun Richard

AUDITOR

PricewaterhouseCoopers

STRATEGY COMMITTEE

Certified Public Accountants and Registered Public Interest

Mr. Fu, Shan (Chairman)

Entity Auditor

Ms. Yeh-Huang,Chun-Ying

Dr. Liu, Jun

LEGAL ADVISER

Mr. Chang, Hong-Jen

Sullivan & Cromwell (Hong Kong) LLP

Dr. Sun, Lijun Richard

INVESTORS AND MEDIA RELATIONS

JOINT COMPANY SECRETARIES

CONSULTANT

Mr. Yao, Jau-Chang

Strategic Financial Relations (China) Limited

Mr. Lui, Wing Yat Christopher (Associate member of the

Hong Kong Institute of Chartered Secretaries and the

COMPLIANCE ADVISER

Chartered Governance Institute in the United Kingdom)

Somerley Capital Limited

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 3

MANAGEMENT DISCUSSION AND ANALYSIS

INDUSTRY AND COMPANY PROFILE

As the incidence of cancer in China has been rising in recent years, the potential market demand for oncology drugs has grown. According to a report by Frost & Sullivan, the overall five-year survival rate of oncology patients in China between 2012 and 2015 was 40.5%, while that in the United States between 2009 and 2015 was 67.1%. With a series of national supportive policies introduced, China's oncology drug development capability has grown rapidly, and the affordability of oncology drugs and the survival rate of oncology patients are expected to improve. Given the enormous market for oncology drugs in China, opportunities always come with competition.

The Company was incorporated in 2009 with its headquarters in Suzhou Industrial Park, Jiangsu Province, China. We are dedicated to developing and commercializing innovative oncology drugs and therapies and are striving to build a leading brand name in oncology treatments that is trusted by patients and their families as well as medical professionals. We have a comprehensive product pipeline of oncology drug candidates and technology development platforms, comprising biological drugs, ADCs and chemical drugs targeting various types of cancers.

The Company has established a "two-chainfour-platform" system, where the two chains refer to a complete industry value chain as well as a high-level and extensive product chain, and the four platforms refer to an innovative technology platform, a clinical research platform, an upscale commercial production platform as well as a marketing and business platform. The integrated and independent operation of all value chains and platforms penetrates all the key aspects of the oncology drug industry value chain.

BUSINESS REVIEW

I n l i g h t o f t h e r o b u s t d e v e l o p m e n t o f C h i n a ' s pharmaceutical industry and the intense competition in the biopharmaceutical market, we have accelerated our pace of strategic development, focused our resources on areas of strength, enhanced our innovation capabilities and also strengthened our competitiveness in the field of ADC products, thereby aspiring to be the leader in China's ADC market. As the Company continued to hone

its independent innovation capabilities in developing oncology drugs, we have established a comprehensive ADC technology and development platform. Among the drugs being developed, the self-developed TAA013, an HER2-targeted ADC candidate, has successfully entered Phase III clinical trial, which is the first ADC product under the generic name (INN) of T-DM1 entering Phase III clinical trial in China's market.

In the first half of 2020, we had been proactively promoting the clinical trials and new drug launch processes of key products; optimizing the product pipeline and enhancing the level of innovation; improving the ADC commercial production platform and opening up the technology platform; and advancing the collaboration in the areas of CDMO and CMO as well as innovative drugs to prepare ourselves for a new stage of commercial development.

PRODUCT DEVELOPMENT STRATEGIES

In the first half of 2020, the Group actively promoted strategic development and upgrade, thereby converging resources, manifesting strengths and developing core competencies:

  • Accelerating the launch processes of 5 clinical-stage products, including mAb drugs TAB008 and TAB014, ADC drug TAA013 and chemical drugs TOZ309 and TOM312.
  • Focusing on core strengths and optimizing the pipeline of early-stage products.
  • Strengthening the ADC platform and diversifying the pipeline of ADC products to continuously enhance the level of innovation.
  • Actively expanding CDMO and CMO businesses and strengthening project-based collaboration to create new sources of revenue growth.
  • Fully opening up the R&D technology platform to foster collaboration among strong market players, thereby reducing the costs and risks of new drug development and accelerating the launch processes of new drugs.
  • Intensifying the recruitment and motivation of talents.

4 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Management discussion and analysis

In line with the Company's strategic plan, we have analyzed and sorted out our 12 pipeline products, with our core products and key products strengthened:

Drug Candidates

Indication(s)

Pre-

Phase I

Phase II

Phase III

NDA(1)

Clinical

TAB008(2) (anti-VEGF mAb)

nsNSCLC

mAb

TAA013 (anti-HER2 ADC)

HER2+ breast cancer

ADC

TAB014(3) (anti-VEGF mAb)

wAMD

mAb

TAY018 (anti-CD47 mAb)

Non-Hodgkin's lymphoma, myelodysplastic

syndrome, acute myelogenous leukemia,

mAb

solid tumors

Small molecular chemical drugs

TOZ309 (temozolomide)

Small molecule generics

Submission of ANDA(4)

TOM312 (megestrol acetate)

Cancer- and HIV-associated cachexia

BE study

Epithelial-derived ovarian cancer, small-cell lung

TIC318 (carboplatin)

cancer, head and neck squamous cell carcinoma,

CMC

testicular tumors, malignant lymphoma, cervical

cancer, bladder cancer, NSCLC

Optimized and platformized products

TAD011 (anti-EGFR mAb)

Nasopharyngeal cancer, esophageal cancer,

Phase I

mAb product

pancreatic cancer

TEP118 (modified version of

Biliary cancer, gallbladder tumors, metastatic

Pre-clinical

Recombinant protein

hyaluronidase)

cancer, NSCLC, gastric cancer

TVP211 (genetically modified

Solid tumors

Pre-clinical

Oncolytic virus product

vaccinia virus)

TID214 (liposomal docetaxel)

Solid tumors

Pre-clinical

Liposome chemical drug

TIO (liposomal oxaliplatin)

Gastrointestinal tumors

Pre-clinical

Liposome chemical drug

Key product

Optimized and platformized product

Notes: (1) NDA is applicable to the application of new drugs and Category 5.1 imported drugs

  1. TAB008 is a bevacizumab biosimilar. Bevacizumab has been approved for the treatment of NSCLC and metastatic colorectal cancer (mCRC) in China. Additional indications of bevacizumab approved in the United States or the European Union include glioblastoma, renal cell carcinoma, cervical cancer, ovarian cancer, breast cancer and hepatocellular carcinoma
  2. TAB014 is an ophthalmic formulation of bevacizumab, with the right of commercialization in Mainland China, Hong Kong and Macau licensed out
  3. ANDA is applicable to the application of generic drugs or Category 5.2 imported drugs

Cautionary statement required by Rule 18A.05 of the Listing Rules: The Company cannot guarantee that it will be able to develop, or ultimately market, TAB008 and TAA013 successfully. Shareholders and potential investors of the Company are advised to exercise due care when dealing in the securities of the Company.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 5

Management discussion and analysis

KEY MILESTONES AND BUSINESS PROGRESS

In the first half of 2020, the Company achieved the following key milestones and business progress:

  • Clinical Trial Progress
    • TAB008 (anti-VEGF mAb) (nsNSCLC): As the Company's most advanced biological drug candidate and core product, TAB008 has met the primary endpoints of its Phase III clinical trial. The new version of the Administrative Measures for Drug Registration has been actively adopted and the NDA is soon to be filed.
    • TAA013 (anti-HER2 ADC) (HER2+ breast cancer): We have successfully commenced the Phase III clinical trial of this key clinical-stage product of the Company, and in July 2020 we completed the dosing in the first patient for the clinical trial.
    • TAB014 (anti-VEGF mAb) (wAMD): In early 2020, the Phase III proposal was approved by the German medical regulatory body Paul Ehrlich Institute (PEI). We have also submitted our request for consultation on China's regulations in relation to pivotal clinical trials to the National Center for Drug Evaluation (CDE).
  • Commercialization and Production Progress
    • Successfully produced multiple batches of medicine for the Phase III clinical trial of TAA013, an ADC product.
    • Completed the infrastructure construction of the ADC drug substance production facility which will be put into operation in the second half of 2020.

KEY PRODUCTS IN CLINICAL TRIAL

  • TAB008: Our soon-to-be-commercialized product
    - meeting the enormous market demand for bevacizumab in China
    TAB008 is our first to-be-commercialized product. It is an anti-VEGF mAb and a bevacizumab biosimilar for the treatment of nsNSCLC.

The Phase III clinical trial of the drug was completed in April 2020 and the primary endpoints were met. The clinical study compares TAB008 and bevacizumab c o m b i n e d w i t h p a c l i t a x e l a n d c a r b o p l a t i n chemotherapy for the first-line treatment of advanced or recurrent nsNSCLC. The endpoint compares the efficacy of TAB008 and Avastin by evaluating the objective response rate (ORR) of two groups of patients within the first 18 weeks of treatment (i.e. six three-week cycles).

  • TAA013: Entering Phase III clinical trial
    TAA013 is currently the first ADC product under the generic name (INN) of T-DM1 entering Phase III clinical trial in China's market. It is an ADC candidate containing trastuzumab and an emtansine derivative (Trastuzumab-MCC-DM1), aiming to become an affordable alternative drug to Kadcyla for the treatment of HER2+ breast cancer. In July 2020, the drug was successfully dosed in the first patient in the Phase III clinical trial.
  • TAB014: Open for collaboration
    TAB014 is an antibody developed based on

b e v a c i z u m a b f o r t h e t r e a t m e n t o f r e t i n a l neovascularization (such as wAMD). Under the strategic collaboration with Lee's Pharmaceutical Holdings Limited, we granted the rights to its non- wholly-owned subsidiary, Zhaoke (Guangzhou) Ophthalmology Pharmaceutical Limited, for clinical trials and commercial development activities in relation to TAB014 in the China region (including Mainland China, Hong Kong and Macau). The collaboration enables us to receive milestone payments and to share the profits from future sales after the launch of the drug. According to a report by Frost & Sullivan, China's market size for anti-VEGF mAbs for the treatment of wAMD is expected to reach approximately RMB8 billion in 2024.

6 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Management discussion and analysis

  • TOM312: An innovative oral suspension with bioequivalence (BE) tests completed
    TOM312 is a generic drug candidate for Megace (megestrol acetate oral suspension) for the treatment of cancer- and HIV-associated cachexia. The bioequivalence (BE) tests were completed in January 2020, and we have completed the development of key processes and technologies and achieved large- scale batch commercial production capacity with the relevant patent application filed. The process validation was also completed in July 2020.
  • TOZ309: ANDA and patent application for the prescription process submitted
    TOZ309, a generic drug candidate for temozolomide capsule, is currently used as a first-line medication for the treatment of newly diagnosed and recurrent brain gliomas. In the first half of 2020, we focused on work related to process validation to advance the launch of TOZ309.
    On the basis of the above clinical-stage products, we will continue to converge our resources as we place greater efforts on the following key clinical milestones and business developments in the second half of 2020:
    1. For TAB008, the NDA will be submitted to ensure the product progresses as planned.
    2. For TAA013, Phase III clinical trial has been launched as planned and the enrollment of patients for Phase III clinical trial will continue.
    3. In preparation for future clinical trials and commercial production of ADC product TAA013, the equipment in the ADC drug substance production facility will be tested as planned and put into operation soon.
    4. Leveraging the resources of our commercial production platforms and the strengths in our technology platforms, we will strengthen our collaboration in CDMO and CMO and enrich our ADC product pipeline.

BUSINESS HIGHLIGHTS

Since the inception of TOT BIOPHARM in 2009, our vision has been to improve the quality of life of cancer patients around the world with innovative technologies. Committed to the oncology field, we have established ourselves as a high-tech corporation integrating product R&D, production and marketing capabilities. Our products encompass mAb drugs, ADC drugs and small molecule drugs. Equipped with three integrated technology platforms, we possess commercial production capacity for mAbs and ADCs, a comprehensive quality management system in compliance with international standards and a professional team responsible for drug registration, enabling us to effectively conduct R&D and devise innovative solutions.

  • Our three integrated technology platforms
    The Company is fully opening up its independent technology platforms to seek more extensive collaboration, accelerate the R&D process of drugs and enhance the level of innovation, which can in turn create diversified cash flow and more collaboration opportunities for the Company. At present, the Group has established three integrated technology platforms, including:
    1. Therapeutic mAb and ADC Technology Platform: This platform is capable of performing a wide range of functions, from screening cell clones and building cell banks to chemistry, manufacturing and controls (CMC) development, pilot - scale study, scale - up production, purification as well as filling and packaging. To maximize the synergy of the development of antibody drugs, in addition to mAbs, we also further develop ADCs by linking the antibody to the cytotoxic agent. We are one of the few biopharmaceutical companies in China with ADC production capabilities. We are building a dedicated ADC production plant that meets GMP and international standards, which will lay the foundation for the commercial production of more ADC drugs in the future. Currently, we have developed on this platform three mAb or ADC drug candidates, namely TAB008, TAA013 and TAB014.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 7

Management discussion and analysis

(2)

Gene Engineering Based Therapeutic •

Advanced clinical progress of ADC drugs

Technology Platform: This platform integrates

TAA013, the Company's independently developed

anti-tumor immunotherapy, gene therapy

ADC drug candidate, has successfully entered Phase

and viral therapy. It functions as an R&D and

III clinical trial. As the first ADC product under the

manufacturing platform for the tumor-targeted

generic name (INN) of T-DM1 entering Phase III

recombinant oncolytic virus vector system. We

clinical trial in China's market, TAA013 demonstrates

have a dedicated R&D team in Zhangjiang Hi-

a competitive edge in the market. This is also an

Tech Park, Shanghai focusing on early discovery

important direction for the long-term strategic

and enhancing our capability to collaborate with

development of TOT BIOPHARM.

other innovative oncology drug companies. With

integrated R&D capabilities, patents and state-

Unlike traditional chemotherapeutic drugs and

of-the-art laboratories for molecular biology,

biological drugs, ADC drugs are designed to utilize

cytology and virology as well as our first-class

cytotoxicity to target cancer cells and eliminate

facilities, R&D and production of oncolytic virus

them. Along with the targeting ability of antibodies,

products will continue to be conducted.

ADCs are integrated with specific antigens on tumor

cell membranes, thereby inducing endocytosis and

(3)

Innovative Drug Delivery Technology

allowing antibodies and small cytotoxic molecules

Platform: An advanced targeted liposome

attached to them to enter cells. After lysosomal

drug delivery system is developed on this

degradation, small molecule drugs are released

platform. Liposomes are increasingly used as

into cells and induce cell apoptosis. Based on their

a delivery system due to their biocompatibility,

mechanism of action, ADCs possess both the high

biodegradability, low toxicity, and aptitude to

cancer cell killing ability of chemical drugs and the

trap both hydrophilic and lipophilic drugs and

targeting ability of biological drugs.

simplify site-specific drug delivery to tumor

tissues. Commercial-scale production of

We have achieved technical breakthroughs in the

liposomes as a drug delivery system is difficult

regulation of glycoforms, enabling precise control

due to the sophistication of the technologies

of the composition of each glycoform to make them

involved, and so far only around 10 liposome

similar to the original drug candidate Kadcyla and

drug products have been launched globally.

freely regulable, such as up-regulation (G0F to G1F/

We have developed commercial-scale, GMP-

G2F conversion) or down-regulation (G1F/G2F to G0F

compliant manufacturing capabilities for

conversion).

liposome drugs. Our production lines utilize

aseptic isolators and are capable of producing

In terms of safety, the clinical Phase I had no drug-

OEL-5 chemical injections with consistency in

related serious adverse effect or persistent adverse

quality. Through developing drugs like TIO217,

effect. Five dosage groups, namely 0.6mg/kg, 1.2mg/

we have accumulated extensive practical

kg, 2.4mg/kg, 3.6mg/kg and 4.8mg/kg, were set up

experience. In the future, we will focus on

in Phase I clinical trial, with 3.6mg/kg as the final

the research and technology development

recommended dosage adopted for Phase III clinical

of liposome drug delivery systems for small

trial.

molecule chemical and nucleic acid drugs with

special preparations and complex formulations.

8 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Management discussion and analysis

•

Sharp competitive edge in commercial production of •

Quality management system and drug registration

biological drugs and ADC drugs

team with an international reach

Our biopharmaceutical mAb production base has

TOT BIOPHARM has established a comprehensive

a gross floor area of approximately 13,000 m2 with

quality management system that complies with

a total designed production capacity of 16,000L, in

the required standards of the International Council

which the construction of two 2,000L production lines

for Harmonisation of Technical Requirements for

for one-off production has been completed.

Pharmaceuticals for Human Use (ICH). The system

is implemented throughout the entire product life

We already possess pilot and commercial-scale ADC

cycle from R&D to process development, clinical drug

product production capabilities and have completed

production, commercial drug production, material

multiple batches of medicine for Phase III clinical trial.

and product supplier management, as well as post-

In the first half of 2020, the infrastructure construction

marketing tracking.

of the ADC drug substance production facility was

completed, and the facility is scheduled to be put into

We have a professional quality control team which

operation in September 2020.

has completed a series of quality-related work in drug

R&D, investigational new drug (IND) applications and

TOT BIOPHARM adopts its self-developed innovative

clinical sample production. We have submitted the

cell expansion technology (PB-Hybrid Technology),

ANDA for TOZ309, and possess practical experience in

marking the first domestic application of such

new drug research and clinical application for TAA013

technology to Phase III clinical trials or commercial

and TAB008. In February 2020, we communicated

production. This method is mainly characterized by

with the German medical regulatory body Paul Ehrlich

the introduction of the perfusion culture process

Institute (PEI) on the clinical implementation strategy

into cell expansion to generate cells of high density

of TAB014. The NDA of TAB008 bevacizumab injection

and high viability, enabling seed expansion in 25L

will be submitted in accordance with the new

WAVE bioreactors and a direct scale-up to 2,000L

requirements under the Administrative Measures for

bioreactors and bypassing 10L, 50L, 200L and 500L

Drug Registration. The timeframe for drug review and

bioreactors. It has the cost advantages of reducing

approval will be effectively shortened, and drug R&D

capital expenditures and enhancing space utilization,

and launching will be further accelerated.

shortening production cycles and improving

equipment utilization, and streamlining process flows

At the same time, we pay attention to patent

and reducing potential risks as well as costs of raw

protection. The proprietary nature of and protection

materials and labor.

afforded to our drug candidates and prescription

processes are an important part of the strategy of

new drug development and commercialization. We

have been licensed 20 domestic or foreign invention

patents, and have filed patent applications for certain

drugs and drug candidates such as TAB014 and

TAA013 while proactively seeking additional patent

protection overseas.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 9

Management discussion and analysis

  • Construction of marketing and business platforms TOT BIOPHARM focuses on the marketing of oncology drugs. Our core marketing team is experienced in the sale of oncology drugs with a coverage of over 450 hospitals across more than 20 provinces, cities and autonomous regions in China. We will gradually expand our marketing team to cater for future marketing needs after the launch of our products and carry out market coverage and promotion concentrating on our own sales initiatives and collaboration with linked sales agents in order to create profits for the Company and its shareholders.
  • CDMO and CMO strategic collaboration
    In line with the reform trend of deepening drug review and approval, we pioneer the launch of CDMO business under the Marketing Authorization Holder (MAH) system framework, cooperating with Suzhou Kintor Pharmaceuticals, Inc. in the R&D and production of a Category 1.1 targeted new drug product. We are also actively exploring and implementing the pilot work of the MAH system.
    In terms of biological drugs, TOT BIOPHARM has the capabilities of upstream R&D, pilot production, clinical trial drug administration and commercial production. While maintaining adequate production capacity for our own products, we also provide high-standard and high-quality CDMO and CMO services to domestic and international pharmaceutical companies. Leveraging our edges in platform and commercial production capability, we will continuously enhance external collaboration and heighten our CDMO and CMO businesses to create diversified revenue.

OUR RESPONSE TO COVID-19

In the face of the global outbreak of COVID-19, TOT BIOPHARM plays an active role in fulfilling its social responsibilities. We donated RMB1 million to the Hubei Charity Federation on 27 January 2020 for the procurement of much-needed medical supplies and personal protective equipment in Wuhan, and donated protective gears to the Fifth People's Hospital of Suzhou. Furthermore, we successively donated nutritional supplements to the Hubei Charity Federation and Beijing Love Book Cancer Foundation to support anti-cancer personnel at the front line.

The Group resumed full operation on 10 February 2020, and has since adopted measures for epidemic prevention and control to minimize infection risks and safeguard the health of our personnel. At the same time, in view of the continued spread of COVID-19 across the world, during the period we evaluated the operational risk factors that may arise in the future and mitigated the risks of prolonged procurement periods and rising prices of raw materials and equipment. To ensure stable business operations, the Company has taken various measures in advance, including the proactive procurement of raw materials and equipment.

OUTLOOK AND STRATEGIES

Aiming to consolidate our leading position in ADC drug R&D and production in China, we, along with the Company's strategic development and upgrade and R&D capability enhancement, strive to keep abreast of the latest development in the international market, accelerate the R&D and commercialization of ADC drugs, and continue to diversify the product pipeline in that segment. At the same time, we will open up our commercial production platform even further to develop it into an advanced and GMP-compliant international production base for the commercialization of ADC drugs. The efforts will lay a solid foundation for our development in the ADC field and seize market opportunities as a first-mover.

In the future, we will continue to focus on anti-tumor drugs and give full play to our competitive edge. To prepare ourselves for the future launch of our products in terms of production capacity, we will increase the investment of resources in key fields, accelerate the R&D of ADC drugs and the Phase III clinical trial of existing drug candidate TAA013, focus on the commercialization of TAB008, TOZ309 and TOM312, speed up the construction of production facilities for ADC drug substance and agents, and step up the construction of platforms for oncolytic virus products and liposome drugs. While maintaining adequate production capacity for our current products, we will promote collaborative CDMO and CMO projects by leveraging our technology platform strengths and commercial production capabilities in small molecule chemical drugs, mAbs and ADCs, thereby generating diversified revenue and enriching our product portfolio of drug candidates.

10 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

FINANCIAL REVIEW

OVERVIEW

For the first half of 2020, the Group recorded a revenue of RMB13,030,000, as compared to RMB24,606,000 for the same period in 2019; and a net loss of RMB129,183,000, as compared to a net loss of RMB115,686,000 for the same period in 2019. The Group's research and development expenses for the first half of 2020 were RMB99,325,000, as compared to RMB75,804,000 for the same period in 2019. The Group's general and administrative expenses for the first half of 2020 were RMB24,118,000, as compared to RMB35,055,000 for the same period in 2019. The Group's selling expenses for the first half of 2020 were RMB13,726,000, as compared to RMB16,848,000 for the same period in 2019.

OPERATING REVENUE AND COST OF REVENUE

The Group's diversified revenue mainly derives from our strategic business partners, including commissions for marketing services in connection with the commercialization of brand-name drug S-1 and revenue for providing CDMO and CMO services to other biotechnology companies, etc.

The Group's commission revenue for the first half of 2020 was RMB10,111,000, representing a decrease of RMB4,892,000 from RMB15,003,000 for the same period in 2019, primarily attributable to the impact of the national volume-based procurement policy on the sales derived from the distribution of brand-name drug S-1.

The Group's revenue from CDMO and CMO services for the first half of 2020 was RMB2,715,000, representing a decrease of RMB6,700,000 from RMB9,415,000 for the same period in 2019, primarily attributable to the alignment with our customers' planned R&D schedules. The materials, labor and expenses, etc. necessary for the CDMO and CMO services also decreased along with the variation in business activities.

RESEARCH AND DEVELOPMENT EXPENSES

The Group's research and development expenses primarily consist of expenses for clinical trials, salaries and benefits for research and development staff, depreciation and amortization expenses, research and development materials and consumables, and third-party contracting costs for clinical and non-clinical research, etc.

INTERIM REPORT 2020

The Group's research and development expenses for the first half of 2020 were RMB99,325,000, as compared to RMB75,804,000 for the same period in 2019, which was mainly attributable to the Company's commencement of Phase III clinical trial for the TAA013 ADC project during the first half of 2020 soon after the completion of Phase I clinical trial that resulted in an increase in demand for active pharmaceutical ingredients (APIs), excipients and consumables by related contract research organizations (CROs) and for the preparation of clinical drugs.

The following table sets forth a breakdown of the Group's research and development expenses by nature for the periods indicated:

For the six months ended

30 June

2020

2019

RMB'000

RMB'000

Clinical trials (exclude employee

benefit expenses)

23,880

17,620

Employee benefit expenses

29,915

22,737

R&D materials and consumables

17,252

9,772

Amortization and depreciation

13,988

10,796

Others

14,290

14,879

Total

99,325

75,804

SELLING EXPENSES

The Group's selling expenses primarily consist of salaries and benefits for marketing staff, conference fees, marketing and promotion expenses, and travelling expenses, etc.

The Group's selling expenses for the first half of 2020 were RMB13,726,000, representing a decrease of RMB3,122,000 from RMB16,848,000 for the same period in 2019. Such decrease was mainly attributable to the overall economic slowdown as a result of the outbreak of COVID-19 during the first half of 2020 which led to the suspension or postponement of various marketing events.

GENERAL AND ADMINISTRATIVE EXPENSES

The Group's general and administrative expenses primarily consist of salaries and benefits for management and administrative staff, listing expenses, legal advisory fees, and expenses for professional services related to audit and tax.

INTERIM REPORT 2020

Financial review

The Group's general and administrative expenses for the first half of 2020 were RMB24,118,000, representing a decrease of RMB10,937,000 from RMB35,055,000 for the same period in 2019, mainly attributable to the IPO related expenses incurred during the same period in 2019.

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 11

LOSS FOR THE PERIOD

In view of the abovementioned factors, the Group recorded a loss of RMB129,183,000 for the first half of 2020, representing an increase of RMB13,497,000 from RMB115,686,000 for the same period in 2019.

FINANCE INCOME

The Group's finance income is primarily interest income on bank deposits. The finance income for the first half of 2020 was RMB698,000, representing a decrease of RMB900,000 from RMB1,598,000 for the same period in 2019, which was attributable to the placement of principal-guaranteed structured deposits with licensed commercial banks during the period, the interest income on which was recorded as other income instead of finance income.

FINANCE COSTS

The Group's finance costs are primarily interest expenses on bank borrowings for operational purposes.

The Group's interest expenses on bank borrowings for the first half of 2020 were RMB1,518,000, representing an increase of RMB1,105,000 from RMB413,000 for the same period in 2019. Such increase was mainly attributable to a higher amount of banking facilities being utilized for research and development as well as operating activities since mid-2019, and a higher level of borrowings recorded for the period as compared to the same period in 2019.

F A I R V A L U E C H A N G E I N F I N A N C I A L INSTRUMENTS ISSUED TO INVESTORS

The Group's financial instruments issued to investors were convertible preferred shares issued in 2018, which were automatically converted into ordinary shares of the Company upon the IPO on 8 November 2019.

The fair value change in the financial instruments issued to investors was determined mainly with reference to the total equity value of the Group as determined by an independent valuer. During the first half of 2020, the Group had no financial instruments issued to investors, while the fair value loss in financial instruments issued to investors amounted to RMB5,894,000 for the same period in 2019.

INCOME TAX EXPENSE

For the first half of 2020 and the same period in 2019, the Group did not incur any income tax expense because the Group did not generate any taxable income during these periods.

NET ASSETS

The Group's net assets as at 30 June 2020 were R M B 7 4 4 , 0 8 9 , 0 0 0 , r e p r e s e n t i n g a d e c r e a s e o f RMB114,188,000 from RMB858,277,000 as at the end of 2019, which was primarily attributable to the net loss and the increase in share-based compensation reserve during the period.

LIQUIDITY, FINANCIAL RESOURCES, CASH MOVEMENT AND SOURCE OF FUNDS

As at 30 June 2020, the Group's cash and cash equivalents were RMB113,509,000, representing a decrease of RMB425,671,000 from RMB539,180,000 as at the end of 2019. Such change was mainly attributable to the cash outflows related to operating loss, capital expenditures, the placement of principal-guaranteed structured deposits with licensed commercial banks, and the repayment of bank borrowings.

As at 30 June 2020, the Group's financial assets at fair value through profit or loss were RMB241,051,000, representing an increase of RMB208,912,000 from RMB32,139,000 as at the end of 2019. Such change was mainly attributable to the placement of principal- guaranteed structured deposits with licensed commercial banks during the period. For further details, please refer to note 11 to the interim condensed consolidated financial information.

During the first half of 2020, the Group's net cash outflows for operating activities were RMB106,948,000, representing a decrease of RMB17,018,000 from RMB123,966,000 for the same period in 2019, due to a higher amount of prepayments recorded during the same period in 2019. The Group's net cash outflows for investing activities for the period were RMB235,791,000, representing an increase of RMB207,944,000 from RMB27,847,000 for the same period in 2019, which was mainly attributable to the placement of principal-guaranteed structured deposits with licensed commercial banks and higher capital expenditures. The Group's net cash outflows for financing activities were RMB79,399,000, representing a decrease of RMB133,210,000 from the net cash inflows from financing activities of RMB53,811,000 for the same period in 2019, which was mainly attributable to the repayment of bank borrowings which were drawn down in 2019.

12 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

Financial review

INDEBTEDNESS AND KEY LIQUIDITY RATIO

As at 30 June 2020, the Group had no outstanding bank borrowings (31 December 2019: RMB60,000,000) and had unutilised bank facilities of RMB250,000,000 (31 December 2019: RMB122,000,000). For further details, please refer to note 13 to the interim condensed consolidated financial information.

As at 30 June 2020, the Group's total liabilities to total assets ratio was 0.1 (31 December 2019: 0.2). The decrease was mainly attributable to the repayment of bank borrowings which were drawn down in 2019.

MAJOR INVESTMENT

During the first half of 2020, the Group did not make any major investment.

Following the IPO on 8 November 2019, the Group came into possession of a significant amount of cash. As part of the Group's treasury management, to more effectively utilize the surplus cash reserves and achieve better interest return, the Group placed some of its cash as principal-guaranteed structured deposits with licensed commercial banks during the first half of 2020. Given the principal-guaranteed nature of these deposits and the reputation of the banks concerned, the related risk exposure of the Group is extremely low.

For further details, please refer to the paragraph headed "Liquidity, Financial Resources, Cash Movement and Source of Funds" above and note 11 to the interim condensed consolidated financial information.

MAJOR ACQUISITIONS AND DISPOSALS

During the first half of 2020, the Group did not have any major acquisitions and disposals of subsidiaries, consolidated affiliated entity or associates.

PLEDGE OF ASSETS

As at 30 June 2020, the Group had no pledge of assets.

CONTINGENT LIABILITIES

As at 30 June 2020, the Group had no significant contingent liabilities.

INTERIM REPORT 2020

FOREIGN EXCHANGE RISK

Certain bank balances and cash, trade receivables and other receivables, contract assets and other payables are denominated in foreign currencies of respective group entities which are exposed to foreign exchange risk. Foreign exchange risk also arises from future commercial transactions and recognized assets and liabilities denominated in a currency other than the functional currency of the relevant group entity. The Group has entities operating in USD, NTD and RMB, and the Group will constantly review the economic situation and its foreign exchange risk profile, and will consider appropriate hedging measures in the future when necessary.

EMPLOYEES AND REMUNERATION

As at 30 June 2020, the Group had a total of 332 employees. The following table sets forth the total number of employees by function as of 30 June 2020:

Number of

Function

employees

% of total

Research and development

188

56.6%

Sales and marketing

62

18.7%

General and administration

41

12.3%

Manufacturing

41

12.3%

Total

332

100%

In the first half of 2020, the Group incurred employee benefit expenses of RMB54,927,000, as compared to RMB46,599,000 in the first half of 2019. The employee benefit expenses of the Group includes salaries, wages, bonuses, contributions to employee provident fund and social security funds, payments for other benefits and share-based compensation expenses, etc. In accordance with applicable PRC laws, the Group has made contributions to social security insurance funds, including basic pension insurance, medical insurance, work-related injury insurance, unemployment insurance and maternity insurance, and housing provident funds for its employees. In accordance with applicable Taiwan laws, the Group has made contributions to social security insurance funds.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 13

REPORT ON REVIEW OF INTERIM

FINANCIAL INFORMATION

To the Board of Directors of TOT BIOPHARM International Company Limited

(incorporated in Hong Kong with limited liability)

INTRODUCTION

We have reviewed the interim financial information set out on pages 14 to 37, which comprises the interim condensed consolidated balance sheet of TOT BIOPHARM International Company Limited (the "Company") and its subsidiaries (together, the "Group") as at 30 June 2020 and the interim condensed consolidated statement of comprehensive loss, the interim condensed consolidated statement of changes in equity and the interim condensed consolidated statement of cash flows for the six-month period then ended, and a summary of significant accounting policies and other explanatory notes. The Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited require the preparation of a report on interim financial information to be in compliance with the relevant provisions thereof and Hong Kong Accounting Standard 34 "Interim Financial Reporting" issued by the Hong Kong Institute of Certified Public Accountants. The directors of the Company are responsible for the preparation and presentation of this interim financial information in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting". Our responsibility is to express a conclusion on this interim financial information based on our review and to report our conclusion solely to you, as a body, in accordance with our agreed terms of engagement and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report.

SCOPE OF REVIEW

We conducted our review in accordance with Hong Kong Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Hong Kong Institute of Certified Public Accountants. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Hong Kong Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the interim financial information of the Group is not prepared, in all material respects, in accordance with Hong Kong Accounting Standard 34 "Interim Financial Reporting".

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 13 August 2020

14 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

INTERIM CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

Unaudited

Six months ended 30 June

2020

2019

Note

RMB'000

RMB'000

Revenue

5

13,030

24,606

Cost of revenue

(3,141)

(7,352)

Research and development expenses

(99,325)

(75,804)

Selling expenses

(13,726)

(16,848)

General and administrative expenses

(24,118)

(35,055)

Other losses - net

(1,083)

(524)

Operating loss

(128,363)

(110,977)

Finance income

698

1,598

Finance costs

(1,518)

(413)

Finance (costs)/income - net

(820)

1,185

Fair value change in financial instruments issued to investors

-

(5,894)

Loss before income tax

6

(129,183)

(115,686)

Income tax expense

7

-

-

Loss for the period and attributable to the

equity holders of the Company

(129,183)

(115,686)

Other comprehensive income/(loss):

Items that will not be reclassified to profit or loss

Changes in the fair value of equity instruments at fair

value through other comprehensive income

1,363

(136)

Items that may be reclassified to profit or loss

Exchange differences on translation

2,858

(956)

Other comprehensive income/(loss)

for the period, net of tax

4,221

(1,092)

Total comprehensive loss for the period and

attributable to the equity holders of the Company

(124,962)

(116,778)

Loss per share for the six months ended 30 June and

attributable to the equity holders of the Company

- Basic and diluted loss per share (RMB)

8

(0.23)

(0.39)

The above condensed consolidated statement of comprehensive loss should be read in conjunction with the accompanying notes.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 15

INTERIM CONDENSED CONSOLIDATED

BALANCE SHEET

Unaudited

Audited

30 June 2020

31 December 2019

Note

RMB'000

RMB'000

ASSETS

Non-current assets

Property, plant and equipment

9

310,820

300,230

Prepayments for property, plant and equipment

677

9,244

Right-of-use assets

9

21,247

28,435

Intangible assets

9

2,839

2,391

Financial assets at fair value through other

comprehensive income

9,354

7,991

Other non-current assets

61,568

54,708

406,505

402,999

Current assets

Inventories

11,070

15,250

Trade and other receivables

10

11,500

14,406

Prepayments

26,152

10,938

Contract assets

4,145

2,450

Financial assets at fair value through profit or loss

11

241,051

32,139

Cash and cash equivalents

113,509

539,180

407,427

614,363

Total assets

813,932

1,017,362

EQUITY

Share capital

12

1,874,438

1,874,438

Other reserves

51,920

36,925

Accumulated losses

(1,182,269)

(1,053,086)

Capital and reserves attributable to the equity

holders of the Company

744,089

858,277

Total equity

744,089

858,277

16 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Interim condensed consolidated balance sheet

Unaudited

Audited

30 June 2020

31 December 2019

Note

RMB'000

RMB'000

LIABILITIES

Non-current liabilities

Lease liabilities

6,197

12,299

Current liabilities

Borrowings

13

-

60,000

Accruals and other payables

14

57,532

81,418

Contract liabilities

4,469

2,593

Lease liabilities

1,645

2,775

63,646

146,786

Total liabilities

69,843

159,085

Total equity and liabilities

813,932

1,017,362

Net current assets

343,781

467,577

Total assets less current liabilities

750,286

870,576

Ms. Yeh-Huang,Chun-Ying

Mr. Liu, Jun

Director

Director

The above condensed consolidated balance sheet should be read in conjunction with the accompanying notes.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 17

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Unaudited

Attributable to equity holders of the Company

Share

Other

Accumulated

Total

capital

reserves

losses

equity/(deficit)

RMB'000

RMB'000

RMB'000

RMB'000

Balance at 1 January 2020

1,874,438

36,925

(1,053,086)

858,277

Loss for the period

-

-

(129,183)

(129,183)

Other comprehensive income

-

4,221

-

4,221

Total comprehensive loss

-

4,221

(129,183)

(124,962)

Transactions with owners

Share-based compensation expense

-

10,774

-

10,774

Total transactions with owners

-

10,774

-

10,774

Balance at 30 June 2020

1,874,438

51,920

(1,182,269)

744,089

Balance at 1 January 2019

537,859

31,449

(753,786)

(184,478)

Loss for the period

-

-

(115,686)

(115,686)

Other comprehensive loss

-

(1,092)

-

(1,092)

Total comprehensive loss

-

(1,092)

(115,686)

(116,778)

Transactions with owners

Share-based compensation expense

-

9,343

-

9,343

Total transactions with owners

-

9,343

-

9,343

Balance at 30 June 2019

537,859

39,700

(869,472)

(291,913)

The above condensed consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

18 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Unaudited

Six months ended 30 June

2020

2019

RMB'000

RMB'000

Cash used in operating activities

Net cash used in operations

(106,312)

(125,349)

Interest received

698

1,598

Interest paid

(1,334)

(215)

Net cash used in operating activities

(106,948)

(123,966)

Cash flow used in investing activities

Purchase and prepayment of property, plant and equipment

(27,177)

(17,011)

Purchase of intangible assets

(835)

(213)

Proceeds from disposal of property, plant and equipment

5

-

Investment in financial assets at fair value through profit or loss

(343,000)

(17,000)

Proceeds from disposal of financial assets at fair value

through profit or loss

135,216

6,377

Net cash used in investing activities

(235,791)

(27,847)

Cash flows (used in)/generated

from financing activities

Proceeds from bank borrowings

-

60,000

Payment for listing expenses

(18,219)

(4,615)

Repayment of bank borrowings

(60,000)

(500)

Payment of lease liabilities

(1,180)

(1,074)

Net cash (used in)/generated from financing activities

(79,399)

53,811

Net decrease in cash and cash equivalents

(422,138)

(98,002)

Cash and cash equivalents at beginning of the period

539,180

256,751

Exchange losses on cash and cash equivalents

(3,533)

(1,615)

Cash and cash equivalents at end of the period

113,509

157,134

The above condensed consolidated statement of cash flows should be read in conjunction with the accompanying notes.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 19

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

  • GENERAL INFORMATION
    TOT BIOPHARM International Company Limited (the "Company") was incorporated in Hong Kong on 4 December 2009 as a company with limited liability under the Hong Kong Law. The address of its registered office is Level 54, Hopewell Centre, 183 Queen's Road East, Hong Kong.
    The Company is an investment holding company. The Company and its subsidiaries (together, the "Group") are primarily engaged in research and development ("R&D"), manufacturing, and marketing of anti-tumor drugs in the People's Republic of China (the "PRC").
    The Company's shares are listed on the Main Board of The Stock Exchange of Hong Kong Limited (the "Stock Exchange").
    These financial statements are presented in thousands of Renminbi ("RMB'000"), unless otherwise stated. This condensed consolidated interim financial information was approved for issue by the Board of Directors on 13 August 2020.
  • SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    The principal accounting policies applied in the preparation of the consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
    2.1 Basis of preparation
    This condensed consolidated interim financial report for the half-year reporting period ended 30 June 2020 has been prepared in accordance with Accounting Standard HKAS 34 Interim Financial Reporting.
    The interim report does not include all the notes of the type normally included in an annual financial report. Accordingly, this report is to be read in conjunction with the annual report for the year ended 31 December 2019 and any public announcements made by the Company during the interim reporting period.
    The financial information relating to the year ended 31 December 2019 that is included in the condensed consolidated interim financial information for the six months ended 30 June 2020 as comparative information does not constitute the Company's statutory annual consolidated financial statements for that year but is derived from those financial statements. Further information relating to these statutory financial statements required to be disclosed in accordance with section 436 of the Hong Kong Companies Ordinance (Cap. 622) is as follows:
    The Company has delivered the financial statements for the year ended 31 December 2019 to the Registrar of Companies as required by section 662(3) of, and Part 3 of Schedule 6 to, the Hong Kong Companies Ordinance (Cap. 622).

20 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Notes to the interim condensed consolidated fi nancial information

  • SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
    2.1 Basis of preparation (cont'd)
    The Company's auditor has reported on those financial statements. The auditor's report was unqualified; did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying its report; and did not contain a statement under sections 406(2), 407(2) or (3) of the Hong Kong Companies Ordinance (Cap. 622).
    The accounting policies adopted are consistent with those of the previous financial year and corresponding interim reporting period, except for the adoption of new and amended standards as set out below. Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
    1. New and amended standards adopted by the group
      A number of new or amended standards became applicable for the current reporting period. The group did not have to change its accounting policies or make retrospective adjustments as a result of adopting these standards.
    2. Impact of standards issued but not yet applied by the entity
      Standards and amendments to standards that have been issued but not yet effective and not been early adopted by the Group during the period are as follows:

Effective for

annual periods

beginning on or

after

HKFRS 17

Insurance Contracts

1 January 2021

Amendments to HKAS 37

Provisions, Contingent Liabilities and

1 January 2022

Contingent Assets

Amendments to HKAS 16

Property, Plant and Equipment

1 January 2022

Amendments to HKFRS 3

Business Combinations

1 January 2022

Amendments to HKFRS 1

Classification of Liabilities as

1 January 2022

Current or Non-current

Amendments to HKFRS 10 and

Sale or Contribution of Assets

To be determined

HKAS 28

between an Investor and its

Associate or Joint Venture

The Group has already commenced an assessment of the related impact of the above standards and amendments to standards which are relevant to the Group's operation.

There are no other standards that are not yet effective and that are expected to have a material impact on the Group's financial performance and position.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 21

Notes to the interim condensed consolidated fi nancial information

  • FINANCIAL RISK MANAGEMENT
    1. Financial risk factors
      The Group's activities expose it to a variety of financial risks: market risk (including foreign exchange risk, price risk and cash flow and fair value interest rate risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the Group's financial position and financial performance.
      The interim condensed consolidated financial information do not include all financial risk management information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's annual financial statements as at 31 December 2019.
      There have been no changes in the risk management mechanism since year ended 31 December 2019 or in any risk management policies since the year end.
    2. Liquidity risk
      The Group aims to maintain sufficient cash and cash equivalents. Due to the dynamic nature of the underlying businesses, the policy of the Group is to regularly monitor the Group's liquidity risk and to maintain adequate cash and cash equivalents to meet the Group's liquidity requirements.
      The table below analyses the Group's non-derivative financial liabilities that will be settled into relevant maturity grouping based on the remaining period at each balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
      As at 30 June 2020

Less than

Between

Between

Over

1 year

1 and 2 years

2 and 5 years

5 years

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Accruals and other payables

(Note 14)

48,217

-

-

-

48,217

Lease liabilities

(including interest payables)

1,676

1,149

3,193

3,377

9,395

49,893

1,149

3,193

3,377

57,612

22 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Notes to the interim condensed consolidated fi nancial information

  • FINANCIAL RISK MANAGEMENT (cont'd)
    3.2 Liquidity risk (cont'd)
    As at 31 December 2019

Less than

Between

Between

Over

1 year

1 and 2 years

2 and 5 years

5 years

Total

RMB'000

RMB'000

RMB'000

RMB'000

RMB'000

Accruals and other payables

(Note 14)

71,310

-

-

-

71,310

Borrowings

(including interest payables)

61,436

-

-

-

61,436

Lease liabilities

(including interest payables)

2,849

2,238

5,919

7,380

18,386

135,595

2,238

5,919

7,380

151,132

3.3 Fair value estimation

The carrying amounts of the Group's financial instruments not measured at fair value (including cash and cash equivalents, trade and other receivables (excluding prepayments), contract assets, borrowings and accruals and other payables) approximate their fair values.

The Group applies HKFRS 13 for financial instruments that are measured in the consolidated balance sheet at fair value, which requires disclosure of fair value measurements by levels of the following fair value measurement hierarchy:

Level 1: The fair value of financial instruments traded in active markets (such as publicly traded derivatives, and trading and available-for-sale 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.

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 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.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 23

Notes to the interim condensed consolidated fi nancial information

  • FINANCIAL RISK MANAGEMENT (cont'd)
    3.3 Fair value estimation (cont'd)
    The following table presents the Group's assets hat were measured at fair value at 30 June 2020:

Level 1

Level 2

Level 3

Total

RMB'000

RMB'000

RMB'000

RMB'000

Assets:

Financial assets at fair value

through profit or loss

-

-

241,051

241,051

Financial assets at fair value

through other comprehensive

income

9,354

-

-

9,354

9,354

-

241,051

250,405

The following table presents the Group's assets that were measured at fair value at 31 December 2019:

Level 1

Level 2

Level 3

Total

RMB'000

RMB'000

RMB'000

RMB'000

Assets:

Financial assets at fair value

through profit or loss

-

-

32,139

32,139

Financial assets at fair value

through other comprehensive

income

7,991

-

-

7,991

7,991

-

32,139

40,130

24 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Notes to the interim condensed consolidated fi nancial information

  • FINANCIAL RISK MANAGEMENT (cont'd)
    3.3 Fair value estimation (cont'd)
    Specific valuation techniques used to value financial instruments include:
    • Quoted market prices or dealer quotes for similar instruments; and
    • Other techniques, such as discounted cash flow analysis, are used to determine fair value for the remaining financial instruments.

There were no changes in valuation techniques during the six months ended 30 June 2020 (For the six months ended 30 June 2019: same).

There were no transfers between levels 1, 2 and 3 for recurring fair value measurements during the period for the six months ended 30 June 2020 (For the six months ended 30 June 2019: same).

The following table summarizes the quantitative information about the significant unobservable inputs used in level 3 fair value measurements:

Fair value at

Range of inputs

Relationship of

30 June

Unobservable

(probability-weighted

unobservable

Description

2020

Valuation Technique

Inputs

average)

inputs to fair value

RMB'000

Financial products

241,051

Discounted cash flow

Rate of return

1.30%-5.70%

The higher the rate of

method

(2.88%)

return, the higher

the fair value

Fair value at

Range of inputs

Relationship of

31 December

Unobservable

(probability-weighted

unobservable

Description

2019

Valuation Technique

inputs

average)

inputs to fair value

RMB'000

Financial products

32,139

Discounted cash flow

Rate of return

2.00%-3.57%

The higher the rate of

method

(2.29%)

return, the higher

the fair value

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 25

Notes to the interim condensed consolidated fi nancial information

  • FINANCIAL RISK MANAGEMENT (cont'd)
    3.3 Fair value estimation (cont'd)
    If the rate of return of financial products held by the Group had been 1% higher/lower, the loss before income tax for the six months ended 30 June 2019 and 2020 would have been approximately RMB279,000 lower/higher and RMB2,400,700 lower/higher.
  • CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
    The preparation of interim condensed consolidated financial information requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
    In preparing this condensed consolidated interim financial information, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the six months ended 30 June 2020.
  • SEGMENT AND REVENUE INFORMATION
    1. Description of segments and principal activities
      The Group is engaged in the research, development and licensing of self-developed biological drug. The outcome of the Group's research and development activities will be given preference to be used by the Group for its own commercialization. There is one team managing and operating all revenue streams. Accordingly, management considers there is only one segment and hence no segment information is presented.
    2. License agreement with a customer
      In January 2017, the Group entered into an agreement with pharmaceutical company for licensing one of its bio-pharmaceuticalknow-how to the customer for development and commercialization for a period of 10 years. The agreement includes non-refundable upfront payment, milestone payments and sales-based royalty upon commercialization of the know-how. For the six months ended 30 June 2020, no milestone was achieved and therefore, no revenue was recognized during the six months ended 30 June 2020 (For the six months ended 30 June 2019: same).

26 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Notes to the interim condensed consolidated fi nancial information

  • SEGMENT AND REVENUE INFORMATION (cont'd)
    1. The amount of each category of revenue is as follows:

Six months ended 30 June

2020

2019

RMB'000

RMB'000

Timing of revenue recognition

At a point in time:

- Commission revenue

10,111

15,003

- Sales of goods

204

179

- CMO

-

6,465

Over time:

- CDMO

2,715

2,950

- Others

-

9

13,030

24,606

  1. The following table presents the analysis of contract assets and contract liabilities related to the above- mentioned arrangements.

30 June

31 December

2020

2019

RMB'000

RMB'000

Contract assets - Consideration for commission

4,145

2,450

Contract liabilities - CDMO

(4,469)

(2,593)

(324)

(143)

  1. Contract liabilities arise from CDMO and CMO which are recognized when the payments are received before the services are rendered to customers and will be recorded as revenue within one year.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 27

Notes to the interim condensed consolidated fi nancial information

  • SEGMENT AND REVENUE INFORMATION (cont'd)
    1. Revenue recognized in relation to contract liabilities
      The following table shows how much of the revenue recognized in the current reporting period relates to carried-forward contract liabilities.

Six months ended 30 June

2020

2019

RMB'000

RMB'000

Revenue recognized that was included in the balance of

contract liabilities at the beginning of the period

- Service revenue - CDMO

2,128

1,729

- Service revenue - CMO

-

1,293

2,128

3,022

  1. Unfulfilled long-term contracts
    The license contract includes an upfront fee of RMB8,400,000 (including tax) and development milestone payments of RMB48,100,000 (including tax) in aggregate. The contract also includes sales-based royalty. No revenue was recognized during the six months ended 30 June 2020 (For the six months ended 30 June 2019: nil) as no milestone was achieved. The remaining development milestones and sales-based royalty are not included in the transaction price based on the most likely amount and the application of the variable consideration constraint. As a result, as at 30 June 2020 after considering the constraint, there is no transaction price that would be allocated to unsatisfied performance obligations (As at 31 December 2019: same).
    Except for the above-mentioned contracts, all other CDMO revenue contracts are for periods of one year or less and are billed based on time incurred. As permitted under HKFRS 15, the transaction price allocated to these unsatisfied contracts is not disclosed.
  2. Geographical information
    Geographical information of revenue and non-current assets other than financial assets for the six months ended 30 June 2020 and 2019 is as follows:

Six months ended 30 June

2020

2019

Non-current

Non-current

Revenue

assets

Revenue

assets

RMB'000

RMB'000

RMB'000

RMB'000

China

13,030

396,352

24,606

378,465

Others

-

799

-

1,373

13,030

397,151

24,606

379,838

28 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Notes to the interim condensed consolidated fi nancial information

6 LOSS BEFORE INCOME TAX

Six months ended 30 June

2020

2019

RMB'000

RMB'000

Loss before taxation has been arrived at after charging:

- Employee benefit expenses

54,927

46,599

- Clinical trials (exclude employee benefit expenses)

23,880

17,620

- R&D materials and consumables

17,355

10,586

- Depreciation and amortisation charge (Note 9)

15,940

13,089

  • INCOME TAX EXPENSE
    Income tax expenses is recognised based on the management's estimate of the annual income tax rate expected for the full financial year.
    The amounts of income tax expenses charged to the consolidated income statements represent:

Six months ended 30 June

2020

2019

RMB'000

RMB'000

Current income tax

-

-

Deferred income tax

-

-

-

-

No provision for profits tax has been provided for as the Group has no estimated assessable profit.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 29

Notes to the interim condensed consolidated fi nancial information

  • LOSS PER SHARE
    1. Basic loss per share
      Basic loss per share is calculated by dividing the loss of the Group attributable to owners of the Company by weighted average number of ordinary shares issued during the period.

Six months ended 30 June

2020

2019

Loss attributable to equity holders of the Company (RMB'000)

(129,183)

(115,686)

Weighted average number of ordinary shares in issue

(thousand) (Note)

570,000

293,359

Basic loss per share (RMB)

(0.23)

(0.39)

Note: The weighted average number of ordinary shares for the purpose of basic and diluted loss per share for the six months ended 30 June 2020 and 2019 has been retrospectively adjusted for the capitalization issue.

  1. Diluted loss per share
    Diluted loss per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. For the six months ended 30 June 2020, the Company had one category of potential ordinary shares: the stock options granted to employees (For the six months ended 30 June 2019, the Company had two categories of potential ordinary shares: Convertible preferred shares and the stock options granted to employees). As the Group incurred losses for the six months ended 30 June 2020 and 2019, the potential ordinary shares were not included in the calculation of diluted loss per share as their inclusion would be anti-dilutive. Accordingly, diluted loss per share for the six months ended 30 June 2020 and 2019 is the same as basic loss per share of the respective years.

30 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Notes to the interim condensed consolidated fi nancial information

  • PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE ASSETS AND RIGHT OF USE ASSETS

Property,

plant and

Intangible

Right-of-

equipment

assets

use assets

RMB'000

RMB'000

RMB'000

Six months ended 30 June 2020

Opening net book amount as at 1 January 2020

300,230

2,391

28,435

Additions

24,985

835

-

Depreciation and amortisation charge (Note 6)

(14,262)

(387)

(1,291)

Disposals

(133)

-

(5,913)

Net exchange differences

-

-

16

Closing net book amount as at 30 June 2020

310,820

2,839

21,247

Property,

plant and

Intangible

Right-of-

equipment

assets

use assets

RMB'000

RMB'000

RMB'000

Six months ended 30 June 2019

Opening net book amount as at 1 January 2019

294,420

1,901

29,324

Additions

8,445

213

1,636

Depreciation and amortisation charge (Note 6)

(11,569)

(272)

(1,248)

Net exchange differences

-

-

(22)

Closing net book amount as at 30 June 2019

291,296

1,842

29,690

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 31

Notes to the interim condensed consolidated fi nancial information

10 TRADE AND OTHER RECEIVABLES

30 June

31 December

2020

2019

RMB'000

RMB'000

Trade receivables from contracts with customers

3,816

6,741

Other receivables

7,684

7,665

Trade and other receivables

11,500

14,406

30 June

31 December

2020

2019

RMB'000

RMB'000

Trade receivables from contracts with customers

3,816

6,741

Customers are generally granted with credit terms ranging from 15 to 60 days.

As of 30 June 2020 and 31 December 2019, the ageing analysis of the trade receivables based on invoice date is as follows:

30 June

31 December

2020

2019

RMB'000

RMB'000

Within 30 days

1,849

4,727

31 days to 90 days

1,967

2,014

3,816

6,741

The carrying amounts of the Group's trade receivables are denominated in RMB and USD and approximate their fair values.

The maximum exposure to credit risk at the reporting date is the carrying value of trade receivables mentioned above.

32 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Notes to the interim condensed consolidated fi nancial information

10 TRADE AND OTHER RECEIVABLES (cont'd)

  1. Other receivables

30 June

31 December

2020

2019

RMB'000

RMB'000

Advances to a supplier (Note (i))

2,690

2,600

Advances to employees (Note (ii))

1,787

1,393

Other receivables

3,207

3,672

Other receivables

7,684

7,665

Note (i) The party is a supplier of TOT Taipei. According to the purchase contract, the amount of the advance will be used to offset the purchase amount. In the scenario where the relevant purchase contract is early terminated and the advance has not been fully utilised, the supplier will repay the remaining amount within 60 days on an interest-free basis. The amount is unsecured.

Note (ii) The advances to employees are unsecured, interest bearing at 6% (2019: 6%) per annum, and repayable within one year.

The carrying amounts of the Group's trade and other receivables are denominated in the following currencies:

30 June

31 December

2020

2019

RMB'000

RMB'000

RMB

3,969

4,310

USD

7,484

10,093

NTD

47

-

HKD

-

3

11,500

14,406

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above.

The carrying amounts of the Group's other receivables approximate their fair values.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 33

Notes to the interim condensed consolidated fi nancial information

11 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR LOSS

Six months ended 30 June

2020

2019

RMB'000

RMB'000

Opening balance

32,139

17,332

Change in fair value

1,128

155

Additions

343,000

17,000

Disposals

(135,216)

(6,377)

Closing balance

241,051

28,110

The Group entered into contracts in respect of wealth management products (being principal-guaranteed structured deposits) from licensed commercial banks with an expected but not guaranteed rates of return ranging from 1.30%- 5.70% per annum for the six months ended 30 June 2020 (For the six months ended 30 June 2019: ranging from 2.00% to 3.57%). According to the contract terms, the Group should hold the financial products for at least 7 days. The Group managed and evaluated the performance of investments on a fair value basis, in accordance with the Group's risk management and investment strategy and hence are designated as financial assets at fair value through profit or loss as at 30 June 2020 (As at 30 June 2019: same).

12 SHARE CAPITAL

Issued and fully paid:

Number of

ordinary shares

Share capital

RMB'000

As at 1 January 2020, 31 December 2019 and 30 June 2020

570,000,000

1,874,438

34 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Notes to the interim condensed consolidated fi nancial information

13 BORROWINGS

30 June

31 December

2020

2019

RMB'000

RMB'000

Current

- Unsecured bank borrowings

-

60,000

As at 30 June 2020 and 31 December 2019, the Group's bank borrowings were repayable as follows:

30 June

31 December

2020

2019

RMB'000

RMB'000

Within 1 year

-

60,000

The weighted average effective interest rates at each balance sheet date were as follows:

30 June

31 December

2020

2019

Bank borrowings - RMB

-

4.788%

The fair values of borrowings equal to their carrying amounts as the discounting impact is not significant.

As at 30 June 2020, the Group has unutilised bank facilities of RMB250,000,000 (As at 31 December 2019: RMB122,000,000).

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 35

Notes to the interim condensed consolidated fi nancial information

14 ACCRUALS AND OTHER PAYABLES

30 June

31 December

2020

2019

RMB'000

RMB'000

Accrued costs for research and development

24,886

20,200

Payables for purchase of property, plant and equipment

5,120

15,879

Staff salaries and welfare payables

9,315

10,108

Accrued listing expenses

2,410

20,629

Accrued promotion and advertisement fee

-

1,017

Payables due to related parties (Note 17)

-

520

Accrued office expenses and others

15,801

13,065

57,532

81,418

The Group's accruals and other payables are denominated in the following currencies:

30 June

31 December

2020

2019

RMB'000

RMB'000

- RMB

51,740

52,519

- HKD

1,800

12,969

- USD

2,797

11,937

- NTD

1,195

1,934

- GBP

-

1,493

- EUR

-

566

57,532

81,418

15 DIVIDEND

No dividend has been paid or declared by the Company during the six months ended 30 June 2020 (Year ended 31 December 2019: Nil).

36 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Notes to the interim condensed consolidated fi nancial information

16 CAPITAL COMMITMENTS

Capital expenditures contracted for at each balance sheet date, but not yet incurred are as follows:

30 June

31 December

2020

2019

RMB'000

RMB'000

Property, plant and equipment

6,086

27,944

17 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 operation decisions. Parties are also considered to be related if they are subject to common control.

The following is a summary of the significant transactions carried out between the Group and its related parties in the ordinary course of business during the six months ended 30 June 2020 and 2019, and balances arising from related party transactions as at 30 June 2020 and 31 December 2019.

(a) Name and relationship with related parties

Name of related party

Nature of relationship

Center Laboratories Inc. ("Centerlab")

Entity having significant influence over the Company

BioEngine Technology Development Inc.

Controlled by Centerlab

(b) Transactions with related parties

Continuing transactions

(i) Research contracting costs

Six months ended 30 June

2020

2019

RMB'000

RMB'000

Centerlab

-

274

The related party transactions above were carried out on terms mutually agreed between the parties. In the opinion of the directors of the Company, these transactions are in the ordinary courses of business of the Group and in accordance with the terms of underlying agreements.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 37

Notes to the interim condensed consolidated fi nancial information

17 RELATED PARTY TRANSACTIONS (cont'd)

(c) Balances with related parties - trade

(i) Payables on conference fee

30 June

31 December

2020

2019

RMB'000

RMB'000

BioEngine Technology Development Inc.

-

14

(ii) Payables on contracting costs

30 June

31 December

2020

2019

RMB'000

RMB'000

Centerlab

-

506

The balances due to related parties were unsecured, non-interest bearing and had no fixed repayment term as at 30 June 2020 and 31 December 2019.

  1. Leasing arrangements
    In February 2016, the Group signed a five-year office rental contract with Centerlab, which has an option for automatic extension upon expiry of the contract. The lease terms and prices were determined in accordance with mutual agreement, and rental payments are made on a monthly basis.
    Lease liabilities:
    - Outstanding balance:

30 June

31 December

2020

2019

RMB'000

RMB'000

Centerlab

367

697

- Interest expense:

Six months ended 30 June

20202019

RMB'000RMB'000

Centerlab

13

47

38 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

OTHER INFORMATION

DIRECTORS' AND CHIEF EXECUTIVES' INTERESTS AND SHORT POSITIONS IN SHARES AND UNDERLYING SHARES AND DEBENTURES OF THE COMPANY OR ANY OF ITS ASSOCIATED CORPORATIONS

As at 30 June 2020, the interests or short positions of the Directors or chief executives of the Company in any of the Shares, underlying Shares and debentures of the Company or its associated corporation (within the meaning of Part XV of the SFO), as notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or as recorded in the register required to be kept by the Company pursuant to section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code were as follows:

Interests in shares or underlying shares of the Company

Approximate

Number of

percentage of

Name of Director

Shares

interest in the

or chief executive

Nature of interest

interested(1)

Company(2)

Ms. Yeh-Huang,Chun-Ying

Beneficial owner

7,115,700 (L)

1.25%

Interest through equity derivatives(3)(4)

1,162,500 (L)

0.20%

Dr. Liu, Jun

Interest through equity derivatives(3)(4)

1,100,000 (L)

0.19%

Notes:

  1. The letter "L" denotes the person's long position in the Shares.
  2. The calculation is based on the total number of 570,000,000 Shares in issue as at 30 June 2020 and rounded off to two decimal places.
  3. These interests represent the interests in Shares underlying the Pre-IPO Share Options (being unlisted physically-settled equity derivatives) held by Ms. Yeh-Huang,Chun-Ying and Dr. Liu, Jun, respectively.
  4. These interests do not include the Restricted Award Shares granted to Ms. Yeh-Huang,Chun-Ying and Dr. Liu, Jun under the Restricted Share Award Scheme, which had not been allotted and issued as at 30 June 2020.

Save as disclosed above, as at 30 June 2020, so far as it was known to the Directors or chief executives of the Company, none of the Directors or chief executives of the Company had or was deemed to have any interests or short positions in the Shares, underlying Shares or debentures of the Company or its associated corporations as notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO, or as recorded in the register required to be kept by the Company pursuant to section 352 of the SFO, or as otherwise notified to the Company and the Stock Exchange pursuant to the Model Code.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 39

Other information

SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY

As at 30 June 2020, so far as it was known to the Directors or chief executives of the Company, the following persons (other than the Directors and chief executives of the Company) had interests or short positions in the Shares or underlying Shares of the Company as disclosed to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO, or as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO:

Interests in shares or underlying shares of the Company

Approximate

Number of

percentage of

Shares

interest in the

Name of Shareholder

Nature of interest

interested(1)

Company(2)

Center Laboratories Inc.

Beneficial owner

179,561,700

(L)

31.50%

Mr. Pang Kee Chan Hebert(3)

Interest in controlled corporation

49,136,800

(L)

8.62%

Advantech Capital Partners II

Limited(3)

Interest in controlled corporation

49,136,800

(L)

8.62%

Advantech Capital II L.P.(3)

Interest in controlled corporation

49,136,800

(L)

8.62%

Advantech Capital II Master

Investment Limited(3)

Interest in controlled corporation

49,136,800

(L)

8.62%

Advantech Capital Investment V

Limited(3)

Beneficial owner

49,136,800

(L)

8.62%

Chengwei Evergreen

Management, LLC(4)

Interest in controlled corporation

56,573,500

(L)

9.93%

Chengwei Evergreen Capital,

L.P.(4)

Interest in controlled corporation

56,573,500

(L)

9.93%

Prime Success International

Limited(4)

Beneficial owner

56,573,500

(L)

9.93%

Vivo Capital LLC(5)

Interest in controlled corporation

103,245,000

(L)

18.11%

Vivo Capital VIII, LLC(5)

Interest in controlled corporation

103,245,000

(L)

18.11%

Vivo Capital Fund VIII, L.P.(5)

Beneficial owner

90,718,100

(L)

15.92%

40 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

Other information

SUBSTANTIAL SHAREHOLDERS' INTERESTS AND SHORT POSITIONS IN THE SHARES AND UNDERLYING SHARES OF THE COMPANY

(cont'd)

Notes:

  1. The letter "L" denotes the person's long position in the Shares.
  2. The calculation is based on the total number of 570,000,000 Shares in issue as at 30 June 2020 and rounded off to two decimal places.
  3. Advantech Capital Investment V Limited, an exempted company with limited liability incorporated under the laws of Cayman Islands, directly held 49,136,800 Shares. Advantech Capital Investment V Limited is wholly owned by Advantech Capital II Master Investment Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands, which is in turn wholly owned by Advantech Capital II L.P., a private equity fund incorporated under the laws of the Cayman Islands. The general partner of Advantech Capital II L.P. is Advantech Capital Partners II Limited, an exempted company with limited liability incorporated under the laws of the Cayman Islands. Advantech Capital Partners II Limited is wholly owned by Mr. Pang Kee Chan Hebert. For the purpose of the SFO, Advantech Capital II Master Investment Limited, Advantech Capital II L.P., Advantech Capital Partners II Limited and Mr. Pang Kee Chan Hebert are deemed to have an interest in the Shares held by Advantech Capital Investment V Limited.
  4. Prime Success International Limited directly held 56,573,500 Shares. Prime Success International Limited is a company with limited liability incorporated under the laws of Hong Kong, which is wholly owned by Chengwei Evergreen Capital, L.P., a venture capital fund incorporated under the laws of the Cayman Islands. The general partner of Chengwei Evergreen Capital, L.P. is Chengwei Evergreen Management, LLC, a limited liability company incorporated under the laws of the Cayman Islands. For the purpose of the SFO, Chengwei Evergreen Capital, L.P. and Chengwei Evergreen Management, LLC are deemed to have an interest in the Shares held by Prime Success International Limited.

INTERIM REPORT 2020

  1. Vivo Capital Fund VIII, L.P. directly held 90,718,100 Shares, and Vivo Capital Surplus Fund VIII, L.P. directly held 12,526,900 Shares. Both Vivo Capital Fund VIII, L.P. and Vivo Capital Surplus Fund VIII, L.P. (referred to collectively as Vivo Capital) are limited partnerships organized under the laws of the State of Delaware of the United States. The general partner of Vivo Capital is Vivo Capital VIII, LLC, which is registered in the State of Delaware of the United States. Vivo Capital LLC, registered in the State of California of the United States, serves as the management company of Vivo Capital and has a form of advisory agreement with Vivo Capital VIII, LLC. For the purpose of the SFO, Vivo Capital VIII, LLC and Vivo Capital LLC are deemed to have an interest in the Shares held by Vivo Capital.

Save as disclosed above, as at 30 June 2020, no person, other than the Directors or chief executives of the Company whose interests are set out in the paragraph headed "Directors' and Chief Executives' Interests and Short Positions in Shares and Underlying Shares and Debentures of the Company or Any of its Associated Corporations" above, had any interests or short positions in the Shares or underlying Shares as disclosed to the Company pursuant to Divisions 2 and 3 of Part XV of the SFO, or as recorded in the register required to be kept by the Company pursuant to section 336 of the SFO.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 41

Other information

PRE-IPO SHARE OPTION SCHEME

Details of the movements of the options granted under the Pre-IPO Share Option Scheme during the six months ended 30 June 2020 are as follows:

Number of Shares underlying the Pre-IPO Share Options

Outstanding

Cancelled/

Granted

Exercised

Lapsed

Outstanding

as of

Exercise price

31 December

(during the period between

as of 30 June

Date of grant

Date of vesting

Exercise period

(per Share)

2019

1 January 2020 and 30 June 2020)

2020

1. Ms. Yeh-Huang,Chun-Ying (Director)

20

February 2013

All vested

Till 19 February

Approximately US$0.286

0

-

-

-

0

2023

14

December 2017

To be vested

From the date of

Approximately US$0.286

1,162,500

-

-

-

1,162,500

in four equal

vesting till

installments at each

13 December

of the first four

2027

anniversaries of the

date of grant

2. Dr. Liu, Jun (Director)

25 December 2017

To be vested

in four equal

installments on

1 January 2019,

2020, 2021 and 2022

From the date of Approximately US$0.286 1,000,000 - - - 1,000,000 vesting till 24

December 2027

21 January 2019

To be vested in five equal

From the date of

Approximately US$0.286

100,000

-

-

-

100,000

installments at the

vesting till

fulfillment of certain

20 January 2029

R&D targets and the second, third, fourth and fifth anniversaries thereof

3. Senior management and other grantees (being employees of and consultants to the Group)

Between 20

Either vested or to

Generally, from the Approximately US$0.286

10,361,500

-

-

20,000

10,341,500

February 2013 and

be vested from

date of vesting

18 June 2019

one to six years

till the date

from the date of

which is one

grant or to be

day preceding

vested from zero

the tenth

to five years from

anniversary of

the fulfillment of

the date of grant

certain R&D targets

Total

12,624,000

-

-

20,000

12,604,000

The Pre-IPO Share Option Scheme is not subject to the provisions of Chapter 17 of the Listing Rules. For further details of the Pre-IPO Share Option Scheme, please refer to pages V-36 to V-47 of the Prospectus.

42 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

Other information

RESTRICTED SHARE AWARD SCHEME

On 29 May 2020, the Company adopted the Restricted Share Award Scheme, and entered into two trust deeds with the respective trustees to constitute the trusts in connection with the Restricted Share Award Scheme for the purpose of the grant of Restricted Award Shares to selected participants from time to time. The Restricted Share Award Scheme does not constitute a share option scheme or an arrangement analogous to a share option scheme for the purpose of Chapter 17 of the Listing Rules, and is a discretionary scheme of the Company. The Restricted Share Award Scheme was subsequently amended on 29 July 2020.

On 29 May 2020, following the adoption of the Restricted Share Award Scheme, the Board also resolved to make a grant of 31,413,796 Restricted Award Shares to 84 grantees (including two Directors) under the Restricted Share Award Scheme, including (i) 2,897,383 Restricted Award Shares granted to Ms. Yeh-Huang,Chun-Ying, a Director; (ii) 2,741,609 Restricted Award Shares granted to Dr. Liu, Jun, a Director; and (iii) 25,774,804 Restricted Award Shares granted to 82 non-Director grantees, being employees of and consultants to the Group.

As of 30 June 2020, the allotment and issue of the aforesaid 31,413,796 Restricted Award Shares had not taken place as it was subject to (i) the Shareholders having approved such allotment and issue at the Company's extraordinary general meeting to be held on 21 August 2020; and (ii) the Listing Committee of the Stock Exchange having granted the approval for the listing of, and permission to deal in, such Restricted Award Shares.

For further details of the Restricted Share Award Scheme and the grant of the aforesaid 31,413,796 Restricted Award Shares, please refer to pages 8 to 21 of the Company's circular dated 3 August 2020.

INTERIM REPORT 2020

DIRECTORS' RIGHTS TO ACQUIRE SHARES OR DEBENTURES

Save as disclosed in this interim report, at no time during the six months ended 30 June 2020 was the Company or any of its subsidiaries a party to any arrangements to enable the Directors to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate; and none of the Directors, or any of their spouse or children under the age of 18, had any right to subscribe for equity or debt securities of the Company, or had exercised any such right.

R E V I E W B Y A U D I T A N D C O N N E C T E D TRANSACTIONS REVIEW COMMITTEE

The Audit and Connected Transactions Review Committee of the Company has reviewed the financial reporting processes, risk management and internal control systems of the Group and the condensed consolidated interim financial statements of the Group for the six months ended 30 June 2020, and is of the opinion that these statements have complied with the applicable accounting standards, the Listing Rules and legal requirements, and that adequate disclosure has been made.

DIVIDEND

The Board has resolved not to declare an interim dividend for the six months ended 30 June 2020.

COMPLIANCE WITH THE CODE PROVISIONS OF THE CORPORATE GOVERNANCE CODE

The Company has adopted the principles and code provisions of the CG Code contained in Appendix 14 to the Listing Rules as the basis of the Company's corporate governance practices.

The Board is of the view that during the six months ended 30 June 2020, the Company has complied with all the applicable code provisions as set out in the CG Code.

COMPLIANCE WITH THE MODEL CODE FOR SECURITIES TRANSACTIONS BY DIRECTORS

The Company has adopted the Model Code contained in Appendix 10 to the Listing Rules.

The Company has made specific enquiry of all the Directors and the Directors have confirmed that they have complied with the Model Code during the six months ended 30 June 2020 and up to the date of this report.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 43

Other information

USE OF NET PROCEEDS FROM THE GLOBAL OFFERING

On 8 November 2019, the Company issued 90,000,000 Shares at a price of HK$6.55 per Share in connection with the Global Offering. The net proceeds raised from the Global Offering were approximately RMB448,615,000 after deduction of the underwriting fees and commissions and expenses payable by the Company in connection with the Global Offering.

As at 30 June 2020, the Company's unused amount of the net proceeds raised from the Global Offering amounted to approximately RMB321,656,000, and were being kept as bank deposits as well as principal-guaranteed structured deposits with licensed commercial banks.

The net proceeds raised from the Global Offering had not been utilized from 8 November 2019 to 31 December 2019, and were utilized in accordance with the proposed applications as set out in the section headed "Future Plans and Use of Proceeds" in the Prospectus during the six months ended 30 June 2020. A breakdown of the use of the aforesaid net proceeds during the six months ended 30 June 2020 and an expected timeline as at the date of this report for the use of the unused amount are set forth as follows:

Expected timing

Unused

Used between

Unused

for the full

Allocated

amount as at 1 January 2020 and

amount as at

utilization of

Purpose

percentage

31 December 2019

30 June 2020

30 June 2020 the unused amount

(RMB'000)

(RMB'000)

(RMB'000)

For ongoing and planned clinical trials, preparation for registration filings, planned

22.5%

100,939

46,447

54,492

On or before

commercial launches (including sales and marketing) of TAB008

31 December 2020

For further R&D on various combination therapies involving TAB008 and other

7.5%

33,646

0

33,646

On or before

oncology treatment to cover a wider variety of indications

31 March 2021

For ongoing and planned clinical trials, expansion of facilities, registration filings and

20.0%

89,723

40,005

49,718

On or before

potential commercial launch (including sales and marketing) of TAA013

31 December 2020

For ongoing and planned pre-clinical and clinical trials, expansion of facilities,

30.0%

134,585

32,155

102,430

On or before

preparation for registration filings and potential commercial launches (including

31 March 2021

sales and marketing) of the other drug candidates in our pipeline, including but

not limited to TOZ309, TOM312, TAB014 and TAD011

For non-project specific capital expenditure

15.0%

67,292

8,352

58,940

On or before

31 March 2021

For continued expansion of our product portfolio in cancer and potentially other

2.0%

8,972

0

8,972

On or before

therapeutic areas through internal research and external licenses and business

31 March 2021

development collaborations

For our working capital and other general corporate purposes

3.0%

13,458

0

13,458

On or before

31 March 2021

Total

100%

448,615

126,959

321,656

44 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Other information

PURCHASE, SALE OR REDEMPTION OF THE COMPANY'S LISTED SECURITIES

Neither the Company nor any of its subsidiaries purchased, sold or redeemed any listed securities of the Company during the six months ended 30 June 2020.

CHANGES IN DIRECTORS' EMOLUMENTS AND DIRECTORS' AND SENIOR MANAGEMENT'S BIOGRAPHICAL DETAILS

With effect from March 2020, the emoluments of Ms. Yeh-Huang,Chun-Ying and Dr. Liu, Jun pursuant to their respective service contracts with members of the Group were adjusted as follows:

Member of

Remuneration before

Remuneration

Director

the Group

March 2020

from March 2020

Ms. Yeh-Huang,Chun-Ying

The Company

Annual Director's fee of HK$1 and

Unchanged

attendance fee of RMB500 for

each Board meeting or Board

committee meeting

TOT BIOPHARM Co., Ltd.

Monthly salary of RMB32,000 plus

Monthly salary of RMB63,000

(東曜藥業有限公司)

subsidies and bonuses (if any)

plus subsidies and

as the general manager

bonuses (if any) as the

general manager

TOT BIOPHARM Company

Monthly salary of NTD320,000

Unchanged

Limited (東源國際醫藥

plus bonuses (if any) as the

股份有限公司)

general manager

Dr. Liu, Jun

The Company

Annual Director's fee of HK$1 and

Unchanged

attendance fee of RMB500 for

each Board meeting or Board

committee meeting

The Company

Monthly salary of RMB15,000 plus

Monthly salary of RMB16,000

bonuses (if any) as the vice

plus bonuses (if any) as

general manager

the vice general manager

TOT BIOPHARM Co., Ltd.

Monthly salary of RMB58,000 plus

Monthly salary of RMB74,000

(東曜藥業有限公司)

subsidies and bonuses (if any)

plus subsidies and

as the vice general manager

bonuses (if any) as the vice

general manager

Dr. Liu, Jun was appointed as the chief operating officer of the Company with effect from 21 April 2020.

Save as disclosed above, there is no change in the emoluments of the Directors or the biographical details of the Directors and the senior management of the Company since the date of the 2019 Annual Report (being 17 March 2020) which is required to be disclosed pursuant to Rule 13.51B(1) of the Listing Rules.

DISCLOSURE OF FINANCIAL INFORMATION

Pursuant to paragraph 40(2) of Appendix 16 to the Listing Rules headed "Disclosure of Financial Information", save as disclosed in this interim report, the Company confirms that as at the date of this report, the Group's current information in relation to those matters set out in paragraph 32 of Appendix 16 to the Listing Rules has not changed materially from the information disclosed in the 2019 Annual Report.

INTERIM REPORT 2020

TOT BIOPHARM INTERNATIONAL COMPANY LIMITED 45

DEFINITIONS

"2019 Annual Report"

the 2019 annual report published by the Company on 29 April 2020

"ADC"

antibody drug conjugate

"ANDA"

abbreviated new drug application

"Board"

the board of Directors of the Company

"CDMO"

contract development and manufacturing organization, which is a

pharmaceutical company that develops and manufactures drugs for other

pharmaceutical companies on a contractual basis

"CG Code"

the Corporate Governance Code contained in Appendix 14 to the Listing Rules

"CMO"

contract manufacturing organization, which is a pharmaceutical company that

manufactures drugs for other pharmaceutical companies on a contractual

basis

"Company"

TOT BIOPHARM International Company Limited (東曜藥業股份有限公司)

(formerly known as TOT BIOPHARM International Company Limited (東源國

際醫藥股份有限公司)), a company incorporated in Hong Kong with limited

liability on 4 December 2009 whose Shares are listed on the Stock Exchange

(stock code: 1875)

"date of this report"

13 August 2020, being the latest practicable date for the purpose of

ascertaining certain information contained in this interim report prior to its

publication

"Director(s)"

the director(s) of the Company

"Group", "we", "us" or

the Company and its subsidiaries

"TOT BIOPHARM"

"HK$"

Hong Kong dollar(s), the lawful currency of Hong Kong

"Hong Kong"

the Hong Kong Special Administrative Region of the PRC

"IPO" or "Global Offering"

the initial public offering of the Company which was completed on 8

November 2019

"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

"mAb"

monoclonal antibody

46 TOT BIOPHARM INTERNATIONAL COMPANY LIMITED

INTERIM REPORT 2020

Definitions

"Model Code"

the Model Code for Securities Transactions by Directors of Listed Issuers

contained in Appendix 10 to the Listing Rules

"NDA"

new drug application

"NSCLC"

non-small-cell lung cancer

"nsNSCLC"

non-squamous NSCLC

"NTD"

New Taiwan dollar(s), the lawful currency of Taiwan

"PRC" or "China"

the People's Republic of China, excluding, for the purpose of this interim

report, Hong Kong, Macau Special Administrative Region and Taiwan

"Pre-IPO Share Option(s)"

the share option(s) granted under the Pre-IPO Share Option Scheme

"Pre-IPO Share Option Scheme"

the pre-IPO share option scheme adopted by the Company on 20 February

2013 and subsequently amended on 11 December 2017, 20 December 2018,

12 March 2019, 16 April 2019 and 22 July 2019, details of which are disclosed

on pages V-36 to V-47 of the Prospectus

"Prospectus"

the prospectus dated 29 October 2019 published by the Company

"RMB"

Renminbi, the lawful currency of the PRC

"R&D"

research and development

"Restricted Award Share(s)"

the Share(s) granted under the Restricted Share Award Scheme and allotted

and issued (or to be allotted and issued) to the trustees thereunder

"Restricted Share Award Scheme"

the restricted share award scheme adopted by the Company on 29 May 2020

and subsequently amended on 29 July 2020, details of which are disclosed on

pages 8 to 14 of the Company's circular dated 3 August 2020

"SFO"

the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong),

as amended, supplemented or otherwise modified from time to time

"Share(s)"

ordinary share(s) of the Company

"Shareholder(s)"

holder(s) of Share(s)

"Stock Exchange"

The Stock Exchange of Hong Kong Limited

"US$" or "USD"

United States dollar(s), the lawful currency of the United States of America

"wAMD"

wet age-related macular degeneration

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TOT BIOPHARM International Co. Ltd. published this content on 21 September 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 21 September 2020 09:14:09 UTC