For the year ended 31 December 2018, the Group achieved a consolidated turnover of approximately HK$1,176.5 million, representing an increase of 30.8% over previous year. Correspondingly, the Group’s consolidated profits for the year rose to approximately HK$231.1 million for the year ended 31 December 2018 from approximately HK$167.3 million last year, representing an increase of 38.1%. We are pleased with the results amid Chinese regulators’ initiative to drive overall health costs down in recent years.
Turnover from the Group’s two flagship product series – Beifushu series for ocular surface treatment and Beifuji series for surface wounds healing and treatment, accounted for 30.2% and 53.5% of the Group’s total turnover, respectively. The combined turnover of the two product series represented 83.7% of the Group’s total turnover for the year ended 31 December 2018. Turnover from the Group’s third party products, inclusive of Xalatan® Eye Drops, Xalacom® Eye Drops,適麗順(Iodized Lecithin Capsules*) 伊血安顆粒(Yi Xue An Granules*), collectively accounted for 16.3% of the Group’s total turnover.
MAJOR ACHIEVEMENTS IN 2018
New Products Obtained Approval for Commercialisation
During the year under review, the Group was granted with the approval for registration and commercialization of preservative-free single-dose Sodium Hyaluronate Eye Drops and Levofloxacin Eye Drops in the People’s Republic of China (the “PRC”).
The Group has also obtained a藥品GMP證書 (Certificate of Good Manufacturing Practices for Pharmaceutical Products) in respect of the preservative-free single-dose Tobramycin Eye Drops in 2018.
SIGNIFICANT BUSINESS DEVELOPMENT ACTIVITIES
Extended Further 3 Years Import and Service Agreement with Pfizer
The Group has secured extension of the import and service agreement with Pfizer International Trading (Shanghai) Limited for Xalatan® Eye Drops and Xalacom® Eye Drops in the PRC for a further 3 years, expiring in 2021.
Pursuing the Enrichment Programme
The Group initiated an enrichment programme (the “Enrichment Programme”) in 2015 for enhancing its research and development (“R&D”) pipeline and expanding its products portfolio. During the year under review, the Group successfully made several strategic investments and secured distribution rights for certain products. These include:
The Group has entered into a co-development agreement with Mitotech S.A. (“Mitotech”) and Mitotech LLC on 16 July 2018. Under the agreement, the Group will invest not more than US$16.5 million for a clinical development in the United States (“US”) Food and Drug Administration first phase 3 clinical trial (the “Clinical Trial”) of an ophthalmic solution containing SkQ1 as its sole active pharmaceutical ingredient (the “SkQ1 Product”) which shall be provided as a pharmaceutical product in the field of dry eye disease, in return for a share of certain income received by Mitotech in respect of the SkQ1 Product. The Clinical Trial has been started in November 2018 and is expected to have the first data read out in the second or third quarter of 2019.
The investment in DB Therapeutics, Inc. (“DBT”), a US company, was in the form of a series of convertible notes in an aggregate principal amount not to exceed US$4.5 million, bearing an interest rate of 5% per annum and maturing on 31 July 2022. DBT is an early stage medical device company focusing on the development of radio-therapeutic bandages for the treatment of non-melanoma skin cancer (the “DBT Product”). If successfully developed, the DBT Product will provide a convenient and cost-effective way to treat localised skin cancer in patients, as compared to surgical interventions, external beam radiation therapy and electronic brachytherapy. Assuming the convertible notes of US$4.5 million are fully converted into equity interest of DBT, the DBT stocks to be issued shall represent 45% of the DBT stocks on a fullydiluted basis. As at the date of this report, the Group has paid US$0.6 million for the subscription of the first convertible note issued by DBT.
MeiraGTx Limited (“MeiraGTx”), a company incorporated and registered in England and Wales, is a clinicalstage biotech company developing novel gene therapy treatments for a wide range of inherited and acquired disorders for which there are no effective treatments available. MeiraGTx focuses on developing therapies for ocular diseases, including inherited blindness as well as Xerostomia following radiation treatment for head and neck cancers and neurodegenerative diseases such as amyotrophic lateral sclerosis. The Group invested around US$5.0 million in MeiraGTx to subscribe for approximately 7.7% of the issued preferred C shares of MeiraGTx as enlarged by the Group’s subscription. MeiraGTx was successfully listed on the NASDAQ Stock Market of the US on 8 June 2018 (Stock code: MGTX) and the preferred C shares were converted into 1.76% of the fully enlarged share capital of MeiraGTx upon listing.
The Group also invested in 成都上工醫信科技有限公司(Chengdu Shanggong Medical Technology Co., Ltd.*) (“Shanggong”) which was the first step to develop the big data business.
The Group invested an amount of RMB20.0 million as capital contribution in Shanggong to hold around 8% of equity interests in Shanggong. Shanggong is a medical data analytics (AI Algorithm) company in the medical service industry in China, having fully curated, quality controlled approximately 700,000 retinal images of diabetic patents in China, which forms a retinopathy big data that enables AI Algorithm to perform its diagnosis. The AI Algorithm can screen retinal images of patients and detect diabetic retinopathy, which affects almost a third of diabetes patients that would otherwise be examined by highly trained ophthalmologists. The investment in Shanggong is a strategic consideration for enhancing the Group’s market positioning in the ophthalmology business and Shanggong can leverage on the Group’s sales resources for penetrating into more hospitals of its AI Algorithm.
Total investments committed under the Enrichment Programme amounted to approximately US$53.9 million in 12 entities/projects, out of which approximately US$43.4 million has been invested by the Group as at the date of this report.
Acquisition of a Piece of Land in the PRC
To cope with the rapid expansion of the Group, a piece of land of about 15,000 square metres located at 珠海高新區科技創新海岸(Zhuhai Hi-Tech Industrial Park*) was acquired in 2018. The land is within walking distance from our existing factory. The plan is to construct the Group’s second factory with a gross floor area (GFA) of about 45,000 square metres to house the Group’s R&D centre, additional manufacturing facility, administrative office and staff hostel. Construction work is expected to start in the fourth quarter of 2019.
Strengthening and Renewal of Management Team
During the year under review, several key management members of the Group have been recruited, promoted and/or reshuffled. The renewal exercise was carried out to strengthen the core management’s capability and capacity for new challenges ahead and leading the Group to scale further heights.
Background profiles of the key management members are shown in the Profiles of Directors and Senior Management in this report.
Upgrading of Business Process Management Systems
The Group’s current enterprise resources planning (ERP) and customer relationship management (CRM) systems are no longer adequate to support the requirements of the Group’s business processes and information management in the near future. With the aim to implement a highly robust, seamless integration of company-wide operations digitally with ready data analysis, the Group has extensively evaluated and decided to migrate its business process management systems to a solution of Systems of Applications and Products in Data Processing (SAP). The migration and implementation of a solution of SAP started in the fourth quarter of 2018 and will be implemented in phases within the next two years.
To meet with new challenges in sales amid recent significant regulatory changes on how drugs are priced and prescribed, during the year under review, the Group made significant changes to its sales and marketing organisation and strategies to enable its products to remain relevant with wider market reach for sustainable growth traction. We are investing significantly in:
- Clinical observation programmes on the drugs’ clinical indications;
- Reaching out to lower-tier cities;
- Cultivating pharmaceutical stores, where possible, as complementary sales channel;
- Upgrading our sales staff on products knowledge proficiency and professionalism; and
- Using e-channel for training and imparting knowledge purposes.
As at 31 December 2018, the Group maintains 42 regional sales offices and a total number of about 1,320 sales and marketing representatives, out of which approximately 730 people are full-time staff and approximately 590 people are on contract basis or from appointed agents.
During the year under review, the Group’s pharmaceutical products are being prescribed in around 6,300 hospitals and medical organisations and approximately 1,000 pharmaceutical stores, which are mainly located in the major cities, provinces and county cities in the PRC.
RESEARCH AND DEVELOPMENT
The Group’s key R&D platforms comprise growth factor, novel antibody, drug formulation and Blow-Fill-Seal (“BFS”) platform. Growth factor, novel antibody, and drug formulation are technology platforms for the development of therapeutic drugs, whereas BFS platform is state-of-the-art manufacturing plant for producing preservative-free single-dose drugs, in particular for the ophthalmic drugs.
During the year under review, the Group was granted with the approval for registration and commercialization of preservative-free single-dose Sodium Hyaluronate Eye Drops and Levofloxacin Eye Drops in the PRC.
The Group has also obtained a 藥品GMP證書 (Certificate of Good Manufacturing Practices for Pharmaceutical Products) in respect of the preservative-free single-dose Tobramycin Eye Drops in 2018.
As at the date of this report, the Group has obtained a total of fifteen patent certificates or authorization letters: twelve發明專利(invention patents) and three實用新型專利 (utility model patents).
OUTLOOK AND PROSPECTS
Barring unforeseen circumstances, the Group is optimistic that its traction for growth in both the ophthalmology and surgical segments of business remains intact in 2019.
The Group will continue to implement its Enrichment Programme to seek further investment opportunities in the PRC and overseas, while fostering closer development and business relationship with existing investees
The Directors have declared during the year an interim dividend of HK$0.03 (2017: HK$0.025) per ordinary share, totalling HK$17,155,200 (2017: HK$14,055,525), which was paid on 21 September 2018. To reward our valued shareholders, the Board is proposing a final dividend of HK$0.033 (2017: HK$0.025) per ordinary share to be approved at the upcoming annual general meeting of the Company.
I would like to take this opportunity to express my sincere gratitude to all stakeholders, business associates, valued customers and each and every member of the Group for the trust, support and cooperation accorded to us in developing the Company as a leading pharmaceutical company.
Ngiam Mia Je Patrick
11 March 2019
* For identification purpose only