Financial Performance - Total revenue for the year ended December 31, 2024, was RMB 21,387,000, an increase of 6.5% compared to RMB 20,085,000 in 2023[4] - The net loss before tax for the year was RMB 168,235,000, a reduction of 32.5% from RMB 249,350,000 in the previous year[4] - The company's total equity as of December 31, 2024, was RMB 853,591,000, a decrease from RMB 1,020,628,000 in 2023[10] - The company's cash and cash equivalents decreased to RMB 140,126,000 from RMB 264,982,000 in the previous year[9] - The company's other income increased by approximately 6.5% from RMB 20.1 million for the year ended December 31, 2023, to approximately RMB 21.4 million for the year ended December 31, 2024, mainly due to government subsidies related to R&D activities amounting to RMB 6.4 million[73] - The company's administrative expenses decreased by approximately 25.5% from RMB 87.0 million for the year ended December 31, 2023, to approximately RMB 64.8 million for the year ended December 31, 2024[79] Research and Development - Research and development expenses decreased by 21.7% to RMB 135,134,000 from RMB 172,685,000 in 2023[4] - The company has initiated the development of two new recombinant vaccines targeting HSV-1 and HSV-2, increasing its pipeline to six preclinical products as of December 31, 2024[5] - The company completed the enrollment of 26,000 healthy participants aged 40 and above for the Phase III clinical trial of LZ901 in January 2024[5] - The LZ901 vaccine, a recombinant shingles vaccine, is the first globally with a tetravalent molecular structure, showing high immunogenicity and safety in clinical trials[60] - A Phase III clinical trial for LZ901 commenced in September 2023, aiming to enroll 26,000 healthy participants aged 40 and above by January 2024[61] - The company is developing two new vaccines targeting HSV-1 and HSV-2, currently in preclinical stages, addressing unmet medical needs globally[64] - The company has six clinical-stage products in its pipeline, including the core product LZ901, and six preclinical-stage products as of December 31, 2024[57] Assets and Liabilities - Total assets less current liabilities as of December 31, 2024, were RMB 951,606,000, down from RMB 1,070,382,000 in 2023[9] - The total value of property, plant, and equipment is RMB 517,786,000, an increase from RMB 422,831,000 as of December 31, 2023, representing a growth of approximately 22.4%[35] - The total amount of prepaid expenses and other receivables decreased to RMB 25,627,000 as of December 31, 2024, from RMB 62,267,000 as of December 31, 2023, a decline of approximately 58.8%[42] - The company's bank borrowings increased significantly from approximately RMB 7.0 million as of December 31, 2023, to approximately RMB 54.9 million as of December 31, 2024[88] - The debt-to-asset ratio rose to 18.7% as of December 31, 2024, compared to 12.5% as of December 31, 2023[92] Clinical Trials and Regulatory Approvals - The Biologics License Application (BLA) for LZ901 was submitted to the National Medical Products Administration in January 2025 and accepted in February 2025[5] - The company plans to submit a Biologics License Application (BLA) for LZ901 in January 2025, with commercialization expected in mid-2026 in China[61] - K3, a biosimilar to Humira®, is in development for autoimmune diseases, with a Phase I trial completed in December 2019, and a Phase III trial anticipated to start in mid-2026[62] - K193, a bispecific antibody for treating B-cell leukemia and lymphoma, is in Phase I trials, with completion expected in the second half of 2025[63] Employee and Corporate Governance - The group employed 164 full-time employees as of December 31, 2024, with a competitive salary and bonus structure[104] - The company's board of directors includes key figures such as Mr. Kong Jian and Ms. Zhang Yanping, who are also major shareholders[126] - The company has established an innovative precision protein engineering platform, enabling the development of human vaccines, monoclonal antibodies, and bispecific antibodies[58] - The company emphasizes compliance with the regulations set forth by the National Medical Products Administration of China[123] Financial Strategy and Future Outlook - The company has a total bank borrowing of RMB 54,914,000 as of December 31, 2024, compared to RMB 7,000,000 in 2023, indicating a significant increase[51] - The company anticipates that the net proceeds from the global offering will be fully utilized by the end of 2027[103] - The company does not recommend a final dividend for the year ended December 31, 2024, consistent with the previous year[116] - The company is actively expanding its market presence and exploring potential mergers and acquisitions[123]

Investment Strategy and Policies - The company prioritizes redeemable wealth management products in its investment strategy to maintain capital preservation and liquidity[3] - The company implements treasury policies, internal control policies, and rules for wealth management product investments to ensure sufficient working capital for business operations, R&D, and capital needs[3] - Investment decisions are made on a case-by-case basis after considering factors such as investment duration and expected returns[3] China Construction Bank Structured Product - The company holds a China Construction Bank structured product with an original principal amount of RMB 111,826 thousand and a fair value of RMB 113,440 thousand as of December 31, 2023, representing 9.72% of the group's total assets[2] - The China Construction Bank product generated an unrealized gain of RMB 1,614 thousand for the year ended December 31, 2023[2] - The China Construction Bank product is a low-risk, non-principal-guaranteed floating income fixed-income product without regular interest income distribution[2]

证券研究报告 | 2024年09月13日 绿竹生物-B（02480.HK） 优于大市 候选重组带状疱疹疫苗国内 Ph3 临床进行中 加大研发投入，LZ901 国内 Ph3 临床进行中。2024H1，公司经调整亏损 1.10 亿元，上年同期为亏损 0.79 亿元。2024H1，研发开支为 0.80 亿元（同 比+142.4%），主要由于在中国开展 LZ901 的 Ph3 临床试验；行政开支为 0.45 亿元（同比+9.0%），主要由于部分建设项目完成导致物业、厂房及设 备折旧增加。 LZ901：重组带状疱疹候选疫苗，是公司核心管线之一，有望成为全球首款 具有四聚体分子结构的带状疱疹疫苗，用于预防 50 岁及以上成人由水痘－ 带状疱疹病毒（VZV）引起的带状疱疹。公司于2023年9月在中国启动LZ901 的多中心、随机、双盲、安慰剂对照 Ph3 临床研究，并于 2024 年 1 月在江 苏、山东、湖北及山西四省完成共计 2.6 万名 40 岁及以上健康受试者入组。 公司预计不晚于2025年1 月提交BLA申请，并于2025Q4 实现产品商业化。 K3：重组人抗肿瘤坏死因子（TNF）-α单克隆抗体注射剂在研产品，也 ...

证券研究报告 | 2024年09月13日 绿竹生物-B（02480.HK） 优于大市 候选重组带状疱疹疫苗国内 Ph3 临床进行中 加大研发投入，LZ901 国内 Ph3 临床进行中。2024H1，公司经调整亏损 1.10 亿元，上年同期为亏损 0.79 亿元。2024H1，研发开支为 0.80 亿元（同 比+142.4%），主要由于在中国开展 LZ901 的 Ph3 临床试验；行政开支为 0.45 亿元（同比+9.0%），主要由于部分建设项目完成导致物业、厂房及设 备折旧增加。 LZ901：重组带状疱疹候选疫苗，是公司核心管线之一，有望成为全球首款 具有四聚体分子结构的带状疱疹疫苗，用于预防 50 岁及以上成人由水痘－ 带状疱疹病毒（VZV）引起的带状疱疹。公司于2023年9月在中国启动LZ901 的多中心、随机、双盲、安慰剂对照 Ph3 临床研究，并于 2024 年 1 月在江 苏、山东、湖北及山西四省完成共计 2.6 万名 40 岁及以上健康受试者入组。 公司预计不晚于2025年1 月提交BLA申请，并于2025Q4 实现产品商业化。 K3：重组人抗肿瘤坏死因子（TNF）-α单克隆抗体注射剂在研产品，也 ...

Investment Rating - The report assigns a "Buy - A" investment rating to the company with a 6-month target price of HKD 32.77 [3][5]. Core Insights - The company, Green Bamboo Bio, has been deeply engaged in the biotechnology sector for over 20 years, focusing on the development of innovative human vaccines and therapeutic biological agents. It has successfully developed six vaccine products, with five already commercialized [1][10]. - The core product, LZ901, is a recombinant shingles vaccine that is expected to become the first of its kind approved for sale in China. The market for shingles vaccines in China is largely untapped, with a penetration rate of only 0.4% among individuals over 40, compared to over 40% in the U.S. [1][2][10]. - The company has a robust pipeline with seven products under development, including LZ901, K3 (a biosimilar to Humira), and K193 (a bispecific antibody) [1][5][10]. Summary by Sections Company Overview - Green Bamboo Bio was established in November 2001 and has a strong foundation in vaccine research and development. The founder, Kong Jian, has over 30 years of experience in the biopharmaceutical industry [1][10]. - The company has transitioned to a public company and is exploring new opportunities for growth through financing and partnerships [10]. Shingles Vaccine (LZ901) - LZ901 is positioned to capture a significant share of the domestic shingles vaccine market, which is projected to be a multi-billion market. The vaccine has shown excellent immunogenicity and low incidence of adverse reactions in clinical trials [1][2][10]. - The Phase III clinical trial for LZ901 commenced in September 2023, with plans to submit a Biologics License Application (BLA) to the National Medical Products Administration by January 2025 [1][2][10]. Other Products in Development - K3, a biosimilar to Humira, has completed Phase I clinical trials and is expected to enter Phase III trials in 2025. The company plans to price K3 significantly lower than existing biosimilars, enhancing its competitive edge [2][5][10]. - K193, a bispecific antibody for treating B-cell leukemia and lymphoma, is also in clinical development, with expectations to complete Phase I trials by 2025 [2][5][10]. Financial Projections and Valuation - The company anticipates revenues of HKD 0.02 billion in 2024, HKD 0.02 billion in 2025, and HKD 5.87 billion in 2026, with net profits projected to turn positive in 2026 [5][6][10]. - The report utilizes a Discounted Cash Flow (DCF) model for valuation, leading to the target price of HKD 32.77 [5][6][10]. Research and Development - The company maintains a high level of R&D expenditure, with approximately HKD 173 million in 2023, reflecting an 88.9% increase from 2022 due to the advancement of LZ901 [42][10]. - The R&D team is experienced, having previously developed several successful vaccines, and the company has established advanced technology platforms to support its product development [18][10].

公司深度分析 2024 年 09 月 09 日 绿竹生物-B(02480.HK) 证券研究报告 生物技术(HS) 投资评级 买入-A 首次评级 6 个月目标价 32.77 港元 股价 (2024-09-05) 21.50 港元 交易数据 总市值(百万港元) 4,352.65 流通市值(百万港元) 4,352.65 总股本(百万股) 202.45 流通股本(百万股) 202.45 12 个月价格区间 17.22/39.0 港元 LZ901 三期进行时，剑指百亿蓝海市场 绿竹生物：深耕行业二十余年，以创新驱动发展。绿竹生物成立于 2001 年 11 月，是一家致力于开发创新型人用疫苗和治疗性生物制剂 的生物技术公司。公司创始人孔健先生曾供职于卫生部北京生物制品 研究所，拥有 30 多年的生物制药行业经验，作为首席科学家带领公 司研究团队实现多项突破，自成立以来成功研发了 6 款疫苗产品，其 中液体 AC 流脑结合疫苗、AC-Hib 三联疫苗为全球首款，Hib 结合疫 苗（磷酸铝佐剂）、ACYW135 流脑多糖疫苗为中国首款，6 款疫苗均已 转让给智飞生物，其中 5 款疫苗已实现商业化。目前，公司共布局了 7 款在 ...

Financial Performance - Total revenue for the six months ended June 30, 2024, was RMB 9,732,000, representing an increase of 82.3% compared to RMB 5,339,000 for the same period in 2023[17]. - The group reported a pre-tax loss of RMB 109,938,000 for the six months ended June 30, 2024, a 38.5% increase from RMB 79,352,000 in 2023[30]. - Other income increased by approximately 82.3% from RMB 5.3 million for the six months ended June 30, 2023, to RMB 9.7 million for the six months ended June 30, 2024, primarily due to unconditional government subsidies[31]. - The company reported a net loss attributable to shareholders of RMB 109,938,000 for the six months ended June 30, 2024, compared to a loss of RMB 79,352,000 for the same period in 2023, representing an increase in loss of approximately 38.7%[92]. - Basic and diluted loss per share for the six months ended June 30, 2024, was RMB 0.54, compared to RMB 0.41 for the same period in 2023, representing a 31.7% increase in loss per share[75]. Research and Development - R&D expenses surged by 142.4% to RMB 80,376,000 from RMB 33,157,000 year-over-year[17]. - The company has developed an innovative antigen delivery technology aimed at enhancing the immunogenicity of vaccine candidates[19]. - The core product LZ901 is part of a pipeline that includes three clinical-stage products and four preclinical-stage products as of June 30, 2024[18]. - The group aims to expand its product pipeline through independent development and collaborations, focusing on clinical development of LZ901, K3, and K193[29]. - The company is focused on the development of its core product LZ901, a recombinant varicella-zoster virus vaccine, which is currently in the research phase[113]. Clinical Trials and Product Pipeline - A Phase III clinical trial for LZ901 has been initiated in China with 26,000 participants aged 40 and above, expected to complete enrollment by January 2024[20]. - K3, a biosimilar to Humira, has completed Phase I trials in China and is set to initiate Phase III trials in 2025[22]. - K193, a bispecific antibody for B-cell leukemia and lymphoma, is in Phase I trials, expected to complete by 2025[23]. - As of June 30, 2024, the group has four products in preclinical stages, including recombinant vaccines for chickenpox and RSV[24]. Financial Position - The total non-current assets as of June 30, 2024, were RMB 536,879,000, a slight decrease from RMB 545,722,000 at the end of 2023[17]. - Cash and bank balances decreased by approximately RMB 77.3 million from RMB 265.0 million as of June 30, 2023, to RMB 187.7 million as of June 30, 2024, primarily due to increased R&D expenditures[41]. - The total assets as of June 30, 2024, were RMB 1,007,513,000, down from RMB 1,070,382,000 as of December 31, 2023, indicating a decrease of 5.9%[76]. - The company's net assets decreased to RMB 944,193,000 as of June 30, 2024, from RMB 1,020,628,000 at the end of 2023, a reduction of 7.5%[76]. - The debt-to-asset ratio was 14.3% as of June 30, 2024, compared to 12.5% as of December 31, 2023[44]. Corporate Governance and Shareholder Information - The company is committed to maintaining high standards of corporate governance to protect shareholder interests[65]. - The company has a significant ownership structure, with Mr. Kong holding a beneficial interest of 28.79% in the company[55]. - The major shareholder, Hengqin Green Bamboo Limited Partnership, holds 12,307,500 shares, representing 6.08% of the total issued share capital[59]. - The company has no directors or senior management with interests in the company's shares or related securities as of June 30, 2024[57]. - The company is focused on enhancing its operational efficiency and financial performance through strategic initiatives and investments[112]. Employee and Operational Insights - As of June 30, 2024, the company employed 148 full-time employees, with 58.8% in R&D roles[51][52]. - Total employee costs increased to RMB 48,752,000 in the first half of 2024, up from RMB 47,410,000 in the same period of 2023, reflecting a rise of about 2.8%[90]. - The company emphasizes employee training to enhance technical and product knowledge across various positions[51]. Future Outlook and Strategic Initiatives - The company plans to submit a Biologics License Application (BLA) for LZ901 to the National Medical Products Administration by January 2025, with commercialization targeted for Q4 2025[20]. - The company is exploring potential mergers and acquisitions to strengthen its competitive position in the industry[112]. - The company plans to continue its research and development efforts to innovate and introduce new products to the market[113].

[Financial Highlights](index=2&type=section&id=Financial%20Highlights) The company's financial performance for the six months ended June 30, 2024, shows increased other income but a significant rise in R&D expenses, leading to a larger loss before tax Financial Highlights for the Six Months Ended June 30, 2024 | Indicator | 2024 (Thousand RMB) | 2023 (Thousand RMB) | Change (%) | | :--- | :--- | :--- | :--- | | Other income | 9,732 | 5,339 | 82.3 | | Other expenses | (189) | (280) | (32.5) | | Net other gains and losses | 6,255 | 16,830 | (62.8) | | Administrative expenses | (44,962) | (41,239) | 9.0 | | Research and development expenses | (80,376) | (33,157) | 142.4 | | Finance costs | (398) | (386) | 3.1 | | Listing expenses | – | (26,459) | (100.0) | | Loss before tax | (109,938) | (79,352) | 38.5 | | Loss and total comprehensive expenses for the period | (109,938) | (79,352) | 38.5 | [Business Highlights](index=2&type=section&id=Business%20Highlights) The group has made significant progress in clinical trials for its core product LZ901, secured invention patents, and completed construction of a second-phase production facility - The multi-center, randomized, double-blind, placebo-controlled Phase III clinical trial for core product LZ901 has completed enrollment of **26,000 healthy subjects aged 40 and above**[2](index=2&type=chunk) - The Group was granted invention patents for its core product LZ901 in the United States and Australia in April 2024[2](index=2&type=chunk) - The Group completed the construction of its second-phase production facility in Zhuhai, Guangdong Province, with a planned construction area of approximately **120,000 square meters**, in April 2024[3](index=3&type=chunk) [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section presents the company's financial position and performance through its condensed consolidated statements of profit or loss and financial position [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2024, the company's other income grew 82.3%, but R&D expenses surged 142.4%, expanding the loss for the period by 38.5% to **RMB 109,938 thousand** Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the six months ended June 30) | Indicator | 2024 (Thousand RMB) | 2023 (Thousand RMB) | | :--- | :--- | :--- | | Other income | 9,732 | 5,339 | | Other expenses | (189) | (280) | | Net other gains and losses | 6,255 | 16,830 | | Administrative expenses | (44,962) | (41,239) | | Research and development expenses | (80,376) | (33,157) | | Finance costs | (398) | (386) | | Listing expenses | – | (26,459) | | Loss before tax | (109,938) | (79,352) | | Income tax expense | – | – | | Loss and total comprehensive expenses for the period | (109,938) | (79,352) | | Loss per share (RMB) Basic | (0.54) | (0.41) | | Loss per share (RMB) Diluted | (0.54) | (0.41) | [Condensed Consolidated Statement of Financial Position](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2024, total assets slightly decreased, with an increase in property, plant and equipment under non-current assets and a decrease in cash and cash equivalents under current assets, while total liabilities slightly rose and net assets decreased Condensed Consolidated Statement of Financial Position (As of June 30, 2024) | Indicator | June 30, 2024 (Thousand RMB) | December 31, 2023 (Thousand RMB) | | :--- | :--- | :--- | | **Non-current assets** | | | | Right-of-use assets | 101,874 | 104,591 | | Property, plant and equipment | 422,985 | 383,905 | | Intangible assets | 4,571 | 4,127 | | Prepayments, deposits and other receivables | 7,449 | 53,099 | | **Total non-current assets** | 536,879 | 545,722 | | **Current assets** | | | | Materials | 5,935 | 3,477 | | Prepayments, deposits and other receivables | 20,025 | 9,168 | | Financial assets at fair value through profit or loss | 351,700 | 343,345 | | Cash and cash equivalents | 187,691 | 264,982 | | **Total current assets** | 565,351 | 620,972 | | **Current liabilities** | | | | Receipts in advance and other payables | 94,141 | 89,183 | | Lease liabilities | – | 129 | | Bank borrowings | 576 | 7,000 | | **Total current liabilities** | 94,717 | 96,312 | | **Net current assets** | 470,634 | 524,660 | | **Total assets less current liabilities** | 1,007,513 | 1,070,382 | | **Non-current liabilities** | | | | Lease liabilities | 12,251 | 12,087 | | Deferred government grants | 35,065 | 37,667 | | Bank borrowings | 16,004 | – | | **Total non-current liabilities** | 63,320 | 49,754 | | **Net assets** | 944,193 | 1,020,628 | | **Total equity** | 944,193 | 1,020,628 | [Notes to the Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the figures presented in the condensed consolidated financial statements [1. General Information](index=6&type=section&id=1.%20General%20Information) Luzhu Biotechnology Co., Ltd. and its subsidiaries primarily engage in the research, development, and production of vaccines and therapeutic biologics in China, with financial statements presented in RMB - The Group is principally engaged in the research, development and production of vaccines and therapeutic biologics in the People's Republic of China[7](index=7&type=chunk) - The condensed consolidated financial statements are presented in RMB, which is also the functional currency of the Company[7](index=7&type=chunk) [2. Basis of Preparation](index=6&type=section&id=2.%20Basis%20of%20Preparation) The condensed consolidated financial statements are prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" and the disclosure requirements of the Hong Kong Stock Exchange Listing Rules - The condensed consolidated financial statements have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" issued by the International Accounting Standards Board and the applicable disclosure requirements of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited[8](index=8&type=chunk) [3. Principal Accounting Policies](index=6&type=section&id=3.%20Principal%20Accounting%20Policies) The condensed consolidated financial statements are primarily prepared on a historical cost basis, following the accounting policies used in the Group's annual consolidated financial statements as of December 31, 2023, with minor additions/changes due to the application of IFRS amendments - The condensed consolidated financial statements have been prepared on the historical cost basis[9](index=9&type=chunk) - The accounting policies and methods of computation used are the same as those presented in the annual consolidated financial statements for the year ended December 31, 2023, except for the additions/changes in accounting policies due to the application of amendments to IFRSs[9](index=9&type=chunk) [Application of Amendments to International Financial Reporting Standards](index=6&type=section&id=Application%20of%20Amendments%20to%20International%20Financial%20Reporting%20Standards) During the interim period, the Group first applied amendments to IFRS 16, IAS 1, and IAS 7, which had no significant impact on its financial position or performance - During the current interim period, the Group has applied, for the first time, the amendments to IFRS 16, IAS 1 and IAS 7 for the preparation of its condensed consolidated financial statements[10](index=10&type=chunk)[11](index=11&type=chunk) - The application of the amendments to IFRSs has had no material impact on the Group's financial position and performance for the current and prior periods and/or on the disclosures set out in these condensed consolidated financial statements[11](index=11&type=chunk) [4. Segment Information](index=7&type=section&id=4.%20Segment%20Information) The Group operates in a single operating and reportable segment, with no revenue recorded during the reporting period, and all non-current assets located in mainland China - The Group has only one operating and reportable segment, and no further analysis of this single segment is presented[12](index=12&type=chunk) - The Group did not record any revenue for the six months ended June 30, 2024[12](index=12&type=chunk) - As of June 30, 2024, all of the Group's non-current assets (excluding financial instruments) are located in mainland China[12](index=12&type=chunk) [5. Other Income](index=7&type=section&id=5.%20Other%20Income) Other income increased by 82.3% year-on-year to **RMB 9,732 thousand**, primarily due to a significant increase in unconditional government grants Components of Other Income (For the six months ended June 30) | Item | 2024 (Thousand RMB) | 2023 (Thousand RMB) | | :--- | :--- | :--- | | Sales income from immunoassay reagent kits | 650 | 1,023 | | Government grants - property, plant and equipment | 1,267 | 1,118 | | Government grants - right-of-use assets | 1,335 | 1,467 | | Government grants - others | 4,718 | 71 | | Interest income from bank balances | 1,752 | 1,651 | | Interest income from lease deposits | 10 | 9 | | **Total** | **9,732** | **5,339** | - The increase in other income was mainly due to unconditional government grants received by the Group[13](index=13&type=chunk) [6. Net Other Gains and Losses](index=7&type=section&id=6.%20Net%20Other%20Gains%20and%20Losses) Net other gains and losses decreased by 62.8% year-on-year to **RMB 6,255 thousand**, mainly due to reduced fair value gains from financial assets at fair value through profit or loss and lower net foreign exchange gains Components of Net Other Gains and Losses (For the six months ended June 30) | Item | 2024 (Thousand RMB) | 2023 (Thousand RMB) | | :--- | :--- | :--- | | Fair value gains from financial assets at fair value through profit or loss | 5,309 | 10,226 | | Net foreign exchange gains | 975 | 6,579 | | Loss on early termination of leases | (29) | – | | Others | – | 25 | | **Total** | **6,255** | **16,830** | - The decrease in net other gains was mainly due to a decrease in fair value gains from financial assets at fair value through profit or loss and a decrease in net foreign exchange gains[14](index=14&type=chunk) [7. Income Tax Expense](index=8&type=section&id=7.%20Income%20Tax%20Expense) No income tax provision was made as the company and its Chinese subsidiaries incurred tax losses, and the Hong Kong subsidiary had no taxable profits; the Group holds substantial unused tax losses for future profit offset - No provision for PRC income tax has been made as the Company and its PRC subsidiaries incurred tax losses for both periods[15](index=15&type=chunk) - As of June 30, 2024, the Group had estimated unused tax losses of approximately **RMB 647,602,000** available to offset against future profits[15](index=15&type=chunk) [8. Loss for the Period](index=8&type=section&id=8.%20Loss%20for%20the%20Period) The loss for the period was primarily impacted by increased staff costs, depreciation and amortization, and higher material and subcontracting costs within R&D expenses Items Deducted in Loss for the Period (For the six months ended June 30) | Item | 2024 (Thousand RMB) | 2023 (Thousand RMB) | | :--- | :--- | :--- | | Total staff costs | 48,752 | 47,410 | | Total depreciation and amortization | 12,379 | 7,750 | | Short-term lease expenses | 32 | 85 | | Material costs included in R&D expenses | 3,729 | 1,180 | | Subcontracting costs included in R&D expenses | 51,290 | 12,907 | [9. Dividends](index=9&type=section&id=9.%20Dividends) The Board of Directors decided not to declare an interim dividend for the six months ended June 30, 2024 - No dividends were paid, declared or proposed during the interim period[17](index=17&type=chunk) [10. Loss Per Share](index=9&type=section&id=10.%20Loss%20Per%20Share) For the six months ended June 30, 2024, basic and diluted loss per share was **RMB 0.54**, higher than **RMB 0.41** in the prior year, reflecting an expanded loss Loss Per Share (For the six months ended June 30) | Indicator | 2024 (Thousand RMB) | 2023 (Thousand RMB) | | :--- | :--- | :--- | | Loss for the period attributable to owners of the Company | (109,938) | (79,352) | | Weighted average number of ordinary shares for basic and diluted loss per share (thousand shares) | 202,450 | 195,162 | | Loss per share (RMB) Basic and Diluted | (0.54) | (0.41) | [11. Property, Plant and Equipment](index=9&type=section&id=11.%20Property%2C%20Plant%20and%20Equipment) During the reporting period, construction in progress for the Group's facilities in Beijing and Zhuhai increased by **RMB 46,995 thousand** and **RMB 1,896 thousand**, respectively - Construction in progress for the Group's R&D and commercial production facilities in Beijing increased by **RMB 46,995,000**[19](index=19&type=chunk) - Construction in progress for the Group's commercial production facilities in Zhuhai increased by **RMB 1,896,000**[19](index=19&type=chunk) [12. Prepayments, Deposits and Other Receivables](index=10&type=section&id=12.%20Prepayments%2C%20Deposits%20and%20Other%20Receivables) As of June 30, 2024, total prepayments, deposits, and other receivables significantly decreased to **RMB 27,474 thousand** from **RMB 62,267 thousand** at the end of 2023, mainly due to reduced recoverable VAT and prepayments for property, plant and equipment purchases Prepayments, Deposits and Other Receivables (As of June 30, 2024) | Item | June 30, 2024 (Thousand RMB) | December 31, 2023 (Thousand RMB) | | :--- | :--- | :--- | | Recoverable VAT | 14,971 | 39,762 | | Prepayments for purchase of property, plant and equipment | 5,837 | 13,499 | | Prepayments to suppliers and service providers | 4,551 | 7,930 | | Prepayments for intangible assets | 954 | – | | Lease deposits | 341 | 371 | | Others | 820 | 705 | | **Total** | **27,474** | **62,267** | | **Analyzed as follows:** | | | | Non-current | 7,449 | 53,099 | | Current | 20,025 | 9,168 | [13. Receipts in Advance and Other Payables](index=10&type=section&id=13.%20Receipts%20in%20Advance%20and%20Other%20Payables) As of June 30, 2024, total receipts in advance and other payables increased to **RMB 94,141 thousand** from **RMB 89,183 thousand** at the end of 2023, mainly due to higher payables for property, plant and equipment acquisition and R&D activities Receipts in Advance and Other Payables (As of June 30, 2024) | Item | June 30, 2024 (Thousand RMB) | December 31, 2023 (Thousand RMB) | | :--- | :--- | :--- | | Payables for acquisition of property, plant and equipment | 53,494 | 51,247 | | Payables for R&D activities | 37,993 | 32,416 | | Payables for intangible assets | – | 904 | | Accrued salaries and other allowances | 2,122 | 4,070 | | Other tax payables | 111 | 222 | | Others | 421 | 324 | | **Total** | **94,141** | **89,183** | | **Denominated in the following currencies:** | | | | RMB | 91,929 | 87,685 | | USD | 1,896 | 496 | | HKD | 316 | 98 | | GBP | – | 904 | [14. Bank Borrowings](index=11&type=section&id=14.%20Bank%20Borrowings) As of June 30, 2024, total bank borrowings increased to **RMB 16,580 thousand**, primarily due to new bank borrowings for the Beijing R&D and production facility construction, partially offset by repayments Analysis of Bank Borrowings (As of June 30, 2024) | Item | June 30, 2024 (Thousand RMB) | December 31, 2023 (Thousand RMB) | | :--- | :--- | :--- | | Non-current | 16,004 | – | | Current | 576 | 7,000 | | **Total** | **16,580** | **7,000** | - A subsidiary of the Group entered into a bank borrowing agreement for a principal amount of **RMB 200,000,000** for the construction of R&D and commercial production facilities in Beijing[21](index=21&type=chunk) - In April and May 2024, the Group drew down bank borrowings of **RMB 16,564,000**, maturing from April 2027 to January 2029[21](index=21&type=chunk) [15. Capital Commitments](index=11&type=section&id=15.%20Capital%20Commitments) As of June 30, 2024, capital commitments decreased to **RMB 25,559 thousand**, mainly due to the completion of certain construction projects Capital Commitments (As of June 30, 2024) | Item | June 30, 2024 (Thousand RMB) | December 31, 2023 (Thousand RMB) | | :--- | :--- | :--- | | Capital expenditure contracted but not provided for in the condensed consolidated financial statements relating to the acquisition of equipment and machinery and construction projects | 25,559 | 49,768 | [Management Discussion and Analysis](index=12&type=section&id=Management%20Discussion%20and%20Analysis) This section provides an overview of the Group's operational and financial performance, including business developments, financial results, liquidity, and future outlook [Business Review](index=12&type=section&id=Business%20Review) The Group continued to advance its pipeline products' R&D, with core product LZ901 clinical trials progressing well, while establishing innovative R&D platforms and a quality system, and outlining clear future development strategies [R&D of Pipeline Products](index=12&type=section&id=R%26D%20of%20Pipeline%20Products) The Group has established an innovative precision protein engineering platform and a diversified product pipeline, including human vaccines, monoclonal antibodies, and bispecific antibodies - The Group has established an innovative precision protein engineering platform to empower the full lifecycle of drug development[24](index=24&type=chunk) - The Group's internally developed next-generation bispecific antibody development platform, Fabite®, possesses independent intellectual property rights and offers a competitive advantage in developing bispecific antibody products for recurrent/refractory hematological malignancies[24](index=24&type=chunk) - The Group has established a diversified and advanced product pipeline, covering human vaccines, monoclonal antibody pipeline products, and bispecific antibody pipeline products under development[24](index=24&type=chunk) [LZ901](index=12&type=section&id=LZ901) LZ901, the Group's self-developed recombinant herpes zoster vaccine, is the world's first herpes zoster vaccine with a tetramer molecular structure, with Phase III clinical trials completed and BLA submission expected by January 2025 - LZ901 is the Group's self-developed recombinant herpes zoster vaccine and core product, becoming the world's first herpes zoster vaccine with a tetramer molecular structure[25](index=25&type=chunk) - The Group initiated the multi-center, randomized, double-blind, placebo-controlled Phase III clinical trial for LZ901 in China in September 2023 and completed enrollment of **26,000 healthy subjects aged 40 and above** in January 2024[26](index=26&type=chunk) - The Group expects to submit the Biologics License Application (BLA) for LZ901 to the NMPA no later than January 2025 and achieve commercialization in the fourth quarter of 2025[26](index=26&type=chunk) [K3](index=13&type=section&id=K3) K3, a recombinant human anti-tumor necrosis factor-α monoclonal antibody, is a biosimilar to Humira® (adalimumab), with Phase I clinical trials completed and Phase III trials planned for 2025 in China - K3 is the Group's self-developed recombinant human anti-tumor necrosis factor-α monoclonal antibody injection pipeline product, a biosimilar to Humira® (adalimumab)[27](index=27&type=chunk) - The Group initiated Phase I clinical trials in China in September 2018 and completed them in December 2019[27](index=27&type=chunk) - The Group plans to initiate Phase III clinical trials for K3 in China in 2025[27](index=27&type=chunk) [K193](index=14&type=section&id=K193) K193, a bispecific antibody injection for B-cell leukemia and lymphoma, is the world's first CD19/CD3 bispecific antibody with an asymmetric structure, showing high anti-tumor activity in preclinical studies, with Phase I trials ongoing - K193 is the Group's self-developed bispecific antibody injection for the treatment of B-cell leukemia and lymphoma, and is the world's first CD19/CD3 bispecific antibody with an asymmetric structure[28](index=28&type=chunk) - In preclinical studies, K193 demonstrated high in vivo and in vitro anti-tumor activity[28](index=28&type=chunk) - In December 2019, the Group initiated Phase I clinical trials for K193 in China, with completion expected in 2025[28](index=28&type=chunk) [Updates on Other Preclinical Pipeline Products](index=14&type=section&id=Updates%20on%20Other%20Preclinical%20Pipeline%20Products) As of June 30, 2024, the Group has four preclinical pipeline products, including recombinant varicella vaccine, recombinant RSV vaccine, K333 bispecific antibody, and K1932 bispecific antibody - As of June 30, 2024, the Group has a total of four preclinical pipeline products, namely recombinant varicella vaccine, recombinant RSV vaccine, K333 bispecific antibody for myeloid leukemia, and K1932 bispecific antibody for lymphoma[29](index=29&type=chunk) Status of the Group's Product Pipeline (As of June 30, 2024) | Product Type | Product Pipeline | Indication | Preclinical | Phase I | Clinical Trial Phase II | Phase III | BLA | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Vaccine Pipeline** | | | | | | | | | Recombinant Vaccine | LZ901(1) | Herpes Zoster | | | | China | | | Recombinant Vaccine | LZ901(1) | Herpes Zoster | | US | | | | | Recombinant Vaccine | Recombinant Varicella Vaccine | Varicella | China | | | | | | Recombinant Vaccine | Recombinant RSV Vaccine | RSV-induced lower respiratory tract disease | China | | | | | | **Antibody Pipeline** | | | | | | | | | Monoclonal Antibody | K3(2) | Ankylosing Spondylitis, Rheumatoid Arthritis, Plaque Psoriasis | | China | | | | | Bispecific Antibody | K193 | Recurrent/Refractory B-cell Lymphoma, Leukemia | | China | | | | | Bispecific Antibody | K333 | Myeloid Leukemia | China | | | | | | Bispecific Antibody | K1932 | Recurrent/Refractory B-cell Lymphoma | China | | | | | [Research and Development](index=15&type=section&id=Research%20and%20Development) The Group's internal R&D team is involved in all stages of novel vaccine and biotherapeutic drug development, establishing comprehensive in-house product discovery capabilities and a diversified product pipeline - The Group's internal R&D team is involved in all stages of novel vaccine and biotherapeutic drug development, establishing comprehensive in-house product discovery capabilities[32](index=32&type=chunk) - The Group now possesses a diversified and advanced product pipeline, covering human vaccines, monoclonal antibody pipeline products, and bispecific antibody pipeline products under development[32](index=32&type=chunk) [Production and Quality Assurance](index=15&type=section&id=Production%20and%20Quality%20Assurance) The Group has R&D and production facilities in Beijing and Zhuhai, with plans for future expansion, and maintains a quality management system compliant with national GMP standards - The Group has R&D and production facilities in both Beijing and Zhuhai, and plans to further expand the scale of its R&D and production facilities as it develops its business in the future[33](index=33&type=chunk) - The Group has a quality management system designed to comply with national standards, including GMP standards, covering every aspect of its operations[33](index=33&type=chunk) - As of June 30, 2024, the Group's production team comprised **38 personnel**, and the quality management team consisted of **32 personnel**[33](index=33&type=chunk) [Future and Outlook](index=15&type=section&id=Future%20and%20Outlook) The Group aims to actively promote the clinical development of its pipeline drugs, accelerate preclinical product development, formulate commercialization strategies, and expand its product pipeline through independent development and/or collaborations - Actively promote the clinical development of the Group's pipeline drugs, including LZ901, K3, and K193[34](index=34&type=chunk) - Rapidly advance the development of the Group's other preclinical pipeline products, including recombinant varicella vaccine, recombinant RSV vaccine, K333, and K1932[34](index=34&type=chunk) - Formulate strategic plans to promote commercialization processes both domestically and internationally; and expand the Group's product pipeline through independent development and/or collaborations[34](index=34&type=chunk) [Financial Review](index=16&type=section&id=Financial%20Review) This section provides a detailed analysis of changes in various financial indicators and their primary causes during the reporting period, including income, expenses, losses, and taxes, offering in-depth insights into the Group's financial performance [Other Income](index=16&type=section&id=Other%20Income) The Group's other income increased by approximately **82.3%** from **RMB 5.3 million** for the six months ended June 30, 2023, to approximately **RMB 9.7 million** for the six months ended June 30, 2024 - The Group's other income increased by approximately **82.3%** from approximately **RMB 5.3 million** for the six months ended June 30, 2023, to approximately **RMB 9.7 million** for the six months ended June 30, 2024[35](index=35&type=chunk) - This was primarily due to the unconditional government grants received by the Group[35](index=35&type=chunk) [Other Expenses](index=16&type=section&id=Other%20Expenses) The Group's other expenses decreased by approximately **32.5%** from approximately **RMB 0.3 million** for the six months ended June 30, 2023, to approximately **RMB 0.2 million** for the six months ended June 30, 2024 - The Group's other expenses decreased by approximately **32.5%** from approximately **RMB 0.3 million** for the six months ended June 30, 2023, to approximately **RMB 0.2 million** for the six months ended June 30, 2024[37](index=37&type=chunk) - This reflects a decrease in the cost of immunoassay reagent kits sold[37](index=37&type=chunk) [Net Other Gains and Losses](index=17&type=section&id=Net%20Other%20Gains%20and%20Losses) The Group's net other gains decreased by approximately **62.8%** from approximately **RMB 16.8 million** for the six months ended June 30, 2023, to approximately **RMB 6.3 million** for the six months ended June 30, 2024 - The Group's net other gains decreased by approximately **62.8%** from approximately **RMB 16.8 million** for the six months ended June 30, 2023, to approximately **RMB 6.3 million** for the six months ended June 30, 2024[38](index=38&type=chunk) - This was primarily due to a decrease in fair value gains from financial assets at fair value through profit or loss and a decrease in net foreign exchange gains[38](index=38&type=chunk) [Administrative Expenses](index=18&type=section&id=Administrative%20Expenses) The Group's administrative expenses increased by approximately **9.0%** from approximately **RMB 41.2 million** for the six months ended June 30, 2023, to approximately **RMB 45.0 million** for the six months ended June 30, 2024 - The Group's administrative expenses increased by approximately **9.0%** from approximately **RMB 41.2 million** for the six months ended June 30, 2023, to approximately **RMB 45.0 million** for the six months ended June 30, 2024[40](index=40&type=chunk) - This was mainly due to increased depreciation of property, plant and equipment resulting from the completion of construction projects[40](index=40&type=chunk) [Research and Development Expenses](index=18&type=section&id=Research%20and%20Development%20Expenses) The Group's R&D expenses increased by approximately **142.4%** from approximately **RMB 33.2 million** for the six months ended June 30, 2023, to approximately **RMB 80.4 million** for the six months ended June 30, 2024 - The Group's research and development expenses increased by approximately **142.4%** from approximately **RMB 33.2 million** for the six months ended June 30, 2023, to approximately **RMB 80.4 million** for the six months ended June 30, 2024[40](index=40&type=chunk) - This was primarily due to the ongoing Phase III clinical trial for LZ901 in China for the six months ended June 30, 2024[40](index=40&type=chunk) [Finance Costs](index=18&type=section&id=Finance%20Costs) The Group's finance costs remained stable at approximately **RMB 0.4 million** for both the six months ended June 30, 2023, and June 30, 2024 - The Group's finance costs remained stable at approximately **RMB 0.4 million** for both the six months ended June 30, 2023, and the six months ended June 30, 2024[41](index=41&type=chunk) [Listing Expenses](index=18&type=section&id=Listing%20Expenses) The Group's listing expenses decreased from approximately **RMB 26.5 million** for the six months ended June 30, 2023, to zero for the six months ended June 30, 2024 - The Group's listing expenses decreased from approximately **RMB 26.5 million** for the six months ended June 30, 2023, to zero for the six months ended June 30, 2024[41](index=41&type=chunk) - This was due to the listing of the Company's H shares on the Stock Exchange in May 2023[41](index=41&type=chunk) [Loss Before Tax](index=18&type=section&id=Loss%20Before%20Tax) The Group's loss before tax increased by approximately **38.5%** from approximately **RMB 79.4 million** for the six months ended June 30, 2023, to approximately **RMB 109.9 million** for the six months ended June 30, 2024 - The Group's loss before tax increased by approximately **38.5%** from approximately **RMB 79.4 million** for the six months ended June 30, 2023, to approximately **RMB 109.9 million** for the six months ended June 30, 2024[42](index=42&type=chunk) [Income Tax Expense](index=18&type=section&id=Income%20Tax%20Expense) No income tax expense was incurred as the Group recorded losses for both the six months ended June 30, 2023, and June 30, 2024 - No income tax expense was incurred as the Group recorded losses for the six months ended June 30, 2023, and 2024[43](index=43&type=chunk) [Liquidity and Capital Resources](index=19&type=section&id=Liquidity%20and%20Capital%20Resources) The Group's bank balances and cash decreased due to increased R&D expenses but new bank financing was secured; the gearing ratio slightly rose, capital commitments decreased, and foreign exchange risk is present but not hedged [Bank Balances and Cash](index=19&type=section&id=Bank%20Balances%20and%20Cash) Bank balances and cash decreased by approximately **RMB 77.3 million** from approximately **RMB 265.0 million** as of June 30, 2023, to approximately **RMB 187.7 million** as of June 30, 2024 - Bank balances and cash decreased by approximately **RMB 77.3 million** from approximately **RMB 265.0 million** as of June 30, 2023, to approximately **RMB 187.7 million** as of June 30, 2024[44](index=44&type=chunk) - This was primarily due to increased research and development expenses[44](index=44&type=chunk) - For the six months ended June 30, 2024, the Group obtained bank financing with a principal amount of **RMB 200.0 million** for the construction of R&D and production facilities in Beijing, of which approximately **RMB 16.6 million** has been utilized[44](index=44&type=chunk) [Pledge of Assets](index=19&type=section&id=Pledge%20of%20Assets) On February 5, 2024, the Group pledged property with a gross floor area of approximately **21,185 square meters** as collateral for bank financing of **RMB 200.0 million** - On February 5, 2024, the Group pledged property with a gross floor area of approximately **21,185 square meters** as security for bank financing with a principal amount of **RMB 200.0 million**[45](index=45&type=chunk) [Contingent Liabilities](index=19&type=section&id=Contingent%20Liabilities) As of June 30, 2024, the Group had no significant contingent liabilities - As of June 30, 2024, the Group did not have any significant contingent liabilities[45](index=45&type=chunk) [Gearing Ratio](index=20&type=section&id=Gearing%20Ratio) As of June 30, 2024, the Group's gearing ratio was **14.3%** (December 31, 2023: **12.5%**) - As of June 30, 2024, the Group's gearing ratio was **14.3%** (December 31, 2023: **12.5%**)[46](index=46&type=chunk) [Capital Expenditure](index=20&type=section&id=Capital%20Expenditure) The Group's capital commitments decreased from approximately **RMB 49.8 million** as of December 31, 2023, to approximately **RMB 25.6 million** as of June 30, 2024 - The Group's capital commitments decreased from approximately **RMB 49.8 million** as of December 31, 2023, to approximately **RMB 25.6 million** as of June 30, 2024[47](index=47&type=chunk) - This was primarily due to the completion of certain construction projects for the six months ended June 30, 2024[47](index=47&type=chunk) [Foreign Exchange](index=20&type=section&id=Foreign%20Exchange) The Group primarily operates in China and faces foreign exchange risk mainly related to HKD, with no currency hedging transactions entered into during the reporting period - The Group primarily operates in China and is exposed to foreign exchange risk arising from various currencies (mainly related to HKD)[48](index=48&type=chunk) - For the six months ended June 30, 2024, the Group did not enter into any currency hedging transactions[48](index=48&type=chunk) [Material Investments, Acquisitions and Disposals](index=21&type=section&id=Material%20Investments%2C%20Acquisitions%20and%20Disposals) For the six months ended June 30, 2024, the Group had no material investments, acquisitions, or disposals of subsidiaries, associates, and joint ventures - For the six months ended June 30, 2024, the Group had no material investments, acquisitions and disposals of subsidiaries, associates and joint ventures[49](index=49&type=chunk) [Future Plans for Material Investments or Capital Assets](index=21&type=section&id=Future%20Plans%20for%20Material%20Investments%20or%20Capital%20Assets) As of June 30, 2024, the Group had no specific future plans for material capital expenditures, investments, or capital assets, which would be announced in accordance with Listing Rules if any arise - As of June 30, 2024, the Group had no specific plans for material capital expenditures, investments or capital assets[50](index=50&type=chunk) [Other Information](index=21&type=section&id=Other%20Information) This section covers the interim dividend policy, use of global offering proceeds and timetable adjustments, employee and remuneration policies, employee incentive plans, compliance with corporate governance and securities dealing codes, and share repurchases after the reporting period [Interim Dividend](index=21&type=section&id=Interim%20Dividend) The Board of Directors does not recommend the payment of an interim dividend for the six months ended June 30, 2024 - The Board does not recommend the payment of an interim dividend for the six months ended June 30, 2024[50](index=50&type=chunk) [Use of Net Proceeds from Global Offering](index=21&type=section&id=Use%20of%20Net%20Proceeds%20from%20Global%20Offering) The Company received total net proceeds of approximately **HKD 241.6 million** from its H-share global offering, with adjustments to the expected utilization timetable for certain funds - The Company received total net proceeds of approximately **HKD 241.6 million** from its H-share global offering[50](index=50&type=chunk) - The proceeds allocated for funding K3's clinical trials will not be fully utilized by the end of 2024 and are expected to be fully utilized by the end of 2026[53](index=53&type=chunk) Use of Net Proceeds from Global Offering (As of June 30, 2024) | Intended Use of Proceeds | Total Net Proceeds Allocated (Million HKD) | Percentage (%) | Unutilized Amount as of December 31, 2023 (Million HKD) | Amount Utilized for the Six Months Ended June 30, 2024 (Million HKD) | Unutilized Amount as of June 30, 2024 (Million HKD) | Expected Timeline for Full Utilization of Remaining Global Offering Proceeds | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | For clinical development, manufacturing and commercialization of core product LZ901 | 140.7 | 58.2 | 107.9 | 45.4 | 62.5 | By end of 2026 | | To fund ongoing and planned clinical trials for LZ901 in China and the US | 97.0 | 40.2 | 64.2 | 45.4 | 18.8 | By end of 2026 | | To fund commercial manufacturing of LZ901 | 14.6 | 6.0 | 14.6 | – | 14.6 | By end of 2026 | | To fund marketing and sales activities | 29.1 | 12.0 | 29.1 | – | 29.1 | By end of 2026 | | For clinical development and manufacturing of K3 | 53.4 | 22.1 | 53.4 | – | 53.4 | By end of 2026 | | To fund planned clinical trials for K3 | 38.8 | 16.1 | 38.8 | – | 38.8 | By end of 2026(2) | | To fund commercial manufacturing of K3 | 14.6 | 6.0 | 14.6 | – | 14.6 | By end of 2026 | | For construction of Zhuhai Phase II commercial production facility | 38.8 | 16.1 | 21.0 | 20.9 | 0.1 | By end of 2026 | | For working capital and other general corporate purposes | 8.7 | 3.6 | 8.7 | 1.4 | 7.3 | By end of 2026 | | **Total** | **241.6** | **100.0** | **191.0** | **67.7** | **123.3** | | [Employees and Remuneration Policy](index=23&type=section&id=Employees%20and%20Remuneration%20Policy) As of June 30, 2024, the Group employed **148 full-time employees**, with a performance-based evaluation system for remuneration and contributions to social insurance and housing provident fund in China - As of June 30, 2024, the Group employed **148 full-time employees**[54](index=54&type=chunk) - The Group has designed an evaluation system to regularly assess employee performance to determine salary increases, bonuses, or promotions[54](index=54&type=chunk) - The Group contributes to social insurance and housing provident fund for all employees in China[54](index=54&type=chunk) [Employee Incentive Scheme](index=23&type=section&id=Employee%20Incentive%20Scheme) The Company adopted an employee incentive scheme on December 15, 2021, prior to its listing, which involves granting interests in the Group's employee incentive platform rather than new shares - The Company adopted an employee incentive scheme on December 15, 2021, prior to its listing[55](index=55&type=chunk) - The employee incentive scheme does not involve the grant of new shares, but rather eligible participants are granted interests in Hengqin Luzhu Limited Partnership, the Group's employee incentive platform[55](index=55&type=chunk) [Compliance with Corporate Governance Code](index=23&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) The Company's corporate governance practices are based on the principles and code provisions of the Corporate Governance Code, with a deviation regarding the Chairman and General Manager roles, which the Board believes does not affect the balance of power - The Company's corporate governance practices are based on the principles and code provisions set out in Appendix C1 to the Listing Rules, the Corporate Governance Code[56](index=56&type=chunk) - Mr. Kong currently serves as both the Chairman of the Board and the General Manager of the Company, which deviates from code provision C.2.1 of the Corporate Governance Code[57](index=57&type=chunk) - The Board believes that this structure does not affect the balance of responsibilities, given the Board's composition includes three independent non-executive directors, and Mr. Kong's dual role helps maintain policy continuity and operational stability of the Company[57](index=57&type=chunk) [Compliance with Model Code for Securities Transactions](index=24&type=section&id=Compliance%20with%20Model%20Code%20for%20Securities%20Transactions) The Company has adopted the Model Code for Securities Transactions by Directors of Listed Issuers, and all directors and supervisors confirmed compliance as of June 30, 2024 - The Company has adopted the Model Code set out in Appendix C3 to the Listing Rules to regulate all dealings in the Company's securities by directors, supervisors and relevant employees[57](index=57&type=chunk) - All Directors and Supervisors have confirmed that they have complied with the applicable standards set out in the Model Code up to June 30, 2024[57](index=57&type=chunk) [Purchase, Sale or Redemption of the Company's Listed Securities](index=24&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company%27s%20Listed%20Securities) As of June 30, 2024, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities, though the Company repurchased **1,436,000 H shares** after the reporting period - Up to June 30, 2024, neither the Company nor any of its subsidiaries purchased, sold or redeemed any of the Company's listed securities[58](index=58&type=chunk) - After June 30, 2024, and up to the date of this announcement, the Company repurchased a total of **1,436,000 H shares** (representing approximately **0.71%** of the Company's total issued share capital as of the date of this announcement)[58](index=58&type=chunk) [Events After Reporting Period](index=24&type=section&id=Events%20After%20Reporting%20Period) No material events affecting the Group occurred after June 30, 2024, up to the date of this announcement, other than those disclosed herein - Save as disclosed in this announcement, there were no material events affecting the Group that occurred after June 30, 2024, and up to the date of this announcement[59](index=59&type=chunk) [Review of Interim Results](index=25&type=section&id=Review%20of%20Interim%20Results) The Audit Committee and independent auditor have reviewed the Group's interim results for the period, confirming their preparation in accordance with applicable accounting standards, rules, and regulations, with no objections to the accounting treatment - The Audit Committee, together with the Company's management, has considered and reviewed the Group's interim results for the reporting period and is of the opinion that the Group's interim results have been prepared in accordance with applicable accounting standards, rules and regulations[60](index=60&type=chunk) - The Company's independent auditor, Deloitte Touche Tohmatsu, has also reviewed the Group's interim financial information for the six months ended June 30, 2024, in accordance with Hong Kong Standard on Review Engagements 2410 issued by the Hong Kong Institute of Certified Public Accountants[60](index=60&type=chunk) - Neither the Audit Committee nor the Company's independent auditor has raised any objections to the accounting treatment adopted by the Company[60](index=60&type=chunk) [Publication of Interim Results and Interim Report](index=25&type=section&id=Publication%20of%20Interim%20Results%20and%20Interim%20Report) This announcement is published on the HKEXnews and Company websites, and the interim report for the six months ended June 30, 2024, will be dispatched to shareholders and published online in due course - This announcement is published on the HKEXnews website (www.hkexnews.hk) and the Company's website (http://www.luzhubiotech.com/)[61](index=61&type=chunk) - The Company's interim report for the six months ended June 30, 2024, will be dispatched to shareholders (if requested) and published on the aforesaid HKEXnews website and the Company's website in due course in accordance with the Articles of Association, the Listing Rules and applicable laws and regulations[61](index=61&type=chunk) [Definitions](index=25&type=section&id=Definitions) This section provides definitions of key terms used in the announcement to ensure readers' accurate understanding of the report content - This section provides definitions of key terms used in the announcement to ensure readers' accurate understanding of the report content[61](index=61&type=chunk)[62](index=62&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk)[65](index=65&type=chunk) [Board of Directors](index=28&type=section&id=Board%20of%20Directors) As of the announcement date, the Board of Directors comprises executive directors Mr. Kong Jian, Ms. Jiang Xianmin, and Ms. Zhang Yanping; non-executive directors Mr. Ma Biao and Mr. Kong Shuangquan; and independent non-executive directors Mr. Leung Wai Yip, Mr. Leung Yit She, and Ms. Hou Aijun - As of the date of this announcement, the Board comprises executive directors Mr. Kong Jian, Ms. Jiang Xianmin and Ms. Zhang Yanping; non-executive directors Mr. Ma Biao and Mr. Kong Shuangquan; and independent non-executive directors Mr. Leung Wai Yip, Mr. Leung Yit She and Ms. Hou Aijun[65](index=65&type=chunk)

Investment Rating - The investment rating for the company is "Buy" [2][8]. Core Viewpoints - The company is increasing its R&D investment, with a focus on advancing its pipeline. In 2023, the adjusted loss was 223 million yuan, compared to a loss of 152 million yuan in the previous year. R&D expenses for 2023 were 173 million yuan, an increase of 88.9% year-on-year, primarily due to the Phase 3 clinical trial of LZ901 in China [2][5]. - The core product, LZ901, is a recombinant shingles vaccine that has entered Phase 3 clinical trials in China, with 26,000 participants enrolled. The BLA application is expected to be submitted in Q4 2024, with commercialization anticipated in Q4 2025 [2][8]. - The company has adjusted its net profit forecasts for 2024 and 2025 to -300 million yuan and -356 million yuan, respectively, with a new forecast for 2026 at -341 million yuan [2][8]. Financial Forecasts and Metrics - Revenue projections show a significant increase from 1.9 million yuan in 2024 to 244.6 million yuan in 2026, reflecting a growth rate of 1336.0% and 800.4% respectively [1]. - The company is expected to maintain a negative net profit margin, with projected losses continuing through 2026 [1][2]. - The price-to-earnings (P/E) ratio is projected to improve from -15.2 in 2024 to -12.8 in 2025, indicating a potential recovery in earnings [1][2]. Pipeline Progress - The company has multiple products in its pipeline, including K3, a biosimilar to Humira, which is set to enter Phase 3 trials in H2 2024, and K193, a bispecific antibody for treating B-cell leukemia and lymphoma, which is expected to complete Phase 1 trials in H2 2024 [2][5][8]. - As of December 31, 2023, the company has four products in preclinical stages, including a recombinant varicella vaccine and a recombinant RSV vaccine [3][6].

Financial Performance - Total revenue for the year ended December 31, 2023, was RMB 20,085,000, an increase of 44.3% compared to RMB 13,923,000 in 2022[5]. - The company reported a pre-tax loss of RMB 249,350,000, a significant reduction of 65.6% from a loss of RMB 725,180,000 in 2022[5]. - Other income increased by approximately 44.3% from RMB 13.9 million in 2022 to RMB 20.1 million in 2023, primarily due to increased interest income from bank deposits[27]. - The company reported a significant reduction in other expenses, decreasing approximately 80.8% from RMB 3.1 million in 2022 to RMB 0.6 million in 2023[29]. - The net other income increased by approximately 20.3% from RMB 15.1 million in 2022 to RMB 18.2 million in 2023, mainly due to an increase in foreign exchange gains[31]. - The group's pre-tax loss decreased by approximately 65.6% to RMB 249,400,000 for the year ended December 31, 2023, compared to RMB 725,200,000 in 2022[38]. - The liquidity position improved with cash and bank balances increasing from approximately RMB 69,000,000 in 2022 to approximately RMB 265,000,000 in 2023, primarily due to net proceeds from the global offering[43]. - The group incurred listing expenses of approximately RMB 26,500,000 for the year ended December 31, 2023, an increase of approximately 22.8% from RMB 21,500,000 in 2022[37]. Research and Development - Research and development expenses rose to RMB 172,685,000, an increase of 88.9% from RMB 91,426,000 in the previous year[5]. - The company has three clinical-stage products in its pipeline, including the core product LZ901, and four preclinical-stage products[8]. - The company achieved a significant milestone in its R&D pipeline with advancements in multiple products during 2023[9]. - The company plans to actively promote the clinical development of its pipeline drugs, including LZ901, K3, and K193, and accelerate the development of other preclinical products[25]. - The company has established comprehensive internal product discovery capabilities, covering all stages of drug development from preclinical research to manufacturing[22]. - The company is focused on developing innovative human vaccines and therapeutic biological products to prevent and control infectious diseases and treat cancer and autoimmune diseases[76]. - The company is committed to research and development in the field of immunology and protein engineering[76]. - The company has initiated preclinical research for a recombinant RSV vaccine targeting lower respiratory diseases[197]. Clinical Trials and Product Development - The company completed the Phase II clinical trial of LZ901 in China in May 2023 and initiated the Phase III trial in September 2023, involving approximately 26,000 participants, with the first dose expected to be administered by December 2023[10]. - K3, a biosimilar to Humira®, is expected to enter Phase III clinical trials in China in the second half of 2024, with commercialization anticipated in 2026[17]. - K193, a bispecific antibody for treating B-cell leukemia and lymphoma, is expected to complete its Phase I clinical trial by the second quarter of 2024[18]. - The Phase II clinical trial of LZ901 showed significant immunogenicity, with the geometric mean concentration (GMC) and geometric mean titer (GMT) of the high-dose group significantly higher than the low-dose group and the placebo group[15]. - The company has decided to suspend the development of the recombinant rabies vaccine and reallocate resources to the recombinant RSV vaccine, which is currently in the preclinical stage[19]. Production and Facilities - The new production facility in Guangdong covers an area of approximately 120,000 square meters, with 72,000 square meters of production space completed, and is expected to provide an annual capacity of no less than 20 million doses of biological products[11]. - The company received the Drug Production License from the Guangdong Provincial Drug Administration in January 2023, ensuring future commercialization of human vaccines[11]. - The group reported a debt-to-asset ratio of 12.5% as of December 31, 2023, slightly up from 12.4% in 2022[44]. - The group has entered into a construction contract for a new R&D and manufacturing facility with a total construction area of approximately 45,072.87 square meters, expected to enhance its operational capacity[47]. Corporate Governance and Management - The company is led by experienced executives, including Mr. Kong Jian, who has over 35 years in the biopharmaceutical industry and has developed five commercialized vaccines[58]. - The board consists of three executive directors, two non-executive directors, and three independent non-executive directors, ensuring a balanced composition for independent judgment[136]. - The company has established mechanisms to ensure the board receives independent viewpoints, enhancing its ability to protect shareholder interests[139]. - The company has implemented effective procedures for the appointment and re-election of directors, with a term of three years[143]. - The company has established a remuneration committee to determine the remuneration policy for directors and senior management[100]. - The company has adopted a standard code of conduct for securities trading by its directors and supervisors, confirming compliance for the year ended December 31, 2023[154]. - The company emphasizes compliance with legal and regulatory policies as part of its corporate governance responsibilities[156]. Shareholder Information - The total issued share capital of the company as of December 31, 2023, is 202,449,032 shares, comprising 142,719,736 H shares and 59,729,296 non-listed shares[113]. - The company has a significant shareholder, Yitang Saiying, holding approximately 26.60% of the H shares, which equates to 37,969,696 shares[110]. - The employee incentive plan was adopted on December 15, 2021, and all rights under this plan were granted prior to the company's listing[115]. - The company has a diverse shareholder base, with multiple entities holding substantial percentages of H shares, indicating strong institutional interest[110]. - The company has confirmed that there are no other disclosures required under the Securities and Futures Ordinance regarding interests or short positions in shares or related securities[108]. Risks and Challenges - The company has faced major risks and uncertainties, which are discussed in the management discussion and analysis section of the report[78]. - The company anticipates that a majority of its future vaccine products will be sold to China's CDC, exposing it to uncertainties related to government funding and budget processes[81]. - The company may require additional financing to support its R&D and operational expansion, which it may not be able to secure[87]. - The company faces potential liability during the R&D process, particularly from product liability claims or lawsuits[80]. - The company is subject to strict regulations regarding the R&D, manufacturing, and commercialization of its products, which may impact its approval processes[85]. Environmental, Social, and Governance (ESG) - The first Environmental, Social, and Governance (ESG) report was published, detailing the company's management, practices, and performance in ESG matters[189]. - The company aims to maintain transparency and effective communication with investors through various channels, including regular reports and announcements[186]. - The company emphasizes the integration of ESG factors into its operations and decision-making processes[193]. - The company will continue to uphold gender diversity within its workforce[179].