UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from to
OR
For the fiscal year ended December 31, 2019
OR
☒
☐
☐
Date of event requiring this shell company report
Commission file number 001-38475
ASLAN Pharmaceuticals Limited
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant’s name into English)
Cayman Islands
(Jurisdiction of incorporation)
83 Clemenceau Avenue #12-03 UE Square
Singapore 239920
(address of principal executive offices)
Carl Firth
Chief Executive Officer
ASLAN Pharmaceuticals Limited
83 Clemenceau Avenue #12-03 UE Square
Singapore 239920
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered, pursuant to Section 12(b) of the Act:
Title of each class
American Depositary Shares (ADSs), each representing five ordinary shares, par
value NT$10 per ordinary share
Ordinary shares, par value NT$10 per share *
* Not for trading, but only in connection with the registration of the American Depositary Shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
Trading Symbol
ASLN
6497
None
None
Name of each exchange on which registered
The Nasdaq Global Market
The Nasdaq Global Market *
Indicate the number of outstanding shares of each of the issuer’s classes of capital stock or common stock as of the close of business covered by the annual report.
Ordinary shares, par value NT$10 per share: 189,954,970 as of December 31, 2019
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Non-accelerated filer
Accelerated filer
Emerging growth company
☐
☒
☐
☒
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new
or revised financial accounting standards † provided pursuant to Section 13(a) of the Exchange Act. ☐
† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards as issued
by the International Accounting Standards Board ☒
Other ☐
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow. Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Presentation of Financial and Other Information
Cautionary Statement Regarding Forward-Looking Statements
TABLE OF CONTENTS
Page
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
OFFER STATISTICS AND EXPECTED TIMETABLE
KEY INFORMATION
A. Selected financial data
B. Capitalization and indebtedness
C. Reasons for the offer and use of proceeds
D. Risk factors
INFORMATION ON THE COMPANY
A. History and development of the company
B. Business overview
C. Organizational structure
D. Property, plant and equipment
ITEM 4A.
UNRESOLVED STAFF COMMENTS
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 8.
ITEM 9.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
A. Operating results
B. Liquidity and capital resources
C. Research and development, patents and licenses, etc.
D. Trend information
E. Off-balance sheet arrangements
F. Tabular disclosure of contractual obligations
G. Safe Harbor
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and senior management
B. Compensation
C. Board practices
D. Employees
E. Share ownership
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major shareholders
B. Related party transactions
C. Interests of experts and counsel
FINANCIAL INFORMATION
A. Consolidated statements and other financial information
B. Significant Changes
THE OFFER AND LISTING
A. Offer and listing details
B. Plan of distribution
C. Markets
D. Selling shareholders
E. Dilution
F. Expense of the issue
1
3
4
6
6
6
7
7
8
8
8
59
59
60
104
105
105
105
105
116
123
123
123
123
124
125
125
128
133
137
138
138
138
140
141
141
141
141
142
142
142
142
142
142
142
ITEM 10.
ITEM 11.
ITEM 12.
PART II
ADDITIONAL INFORMATION
A. Share capital
B. Memorandum and articles of association
C. Material contracts
D. Exchange controls
E. Taxation
F. Dividends and paying agents
G. Statement by experts
H. Documents on display
I. Subsidiary information
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A. Foreign Exchange Risk
B. Interest rate risk
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
B. Warrants and Rights
C. Other Securities
D. American Depositary Shares
ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
ITEM 15.
CONTROLS AND PROCEDURES
ITEM 16
A. Audit committee financial expert
B. Code of Ethics
C. Principal Accountant Fees and Services
D. Exemptions from the Listing Standards for Audit Committees
E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
F. Changes in Registrant’s Certifying Accountant
G. Corporate Governance
H. Mine Safety Disclosure
PART III
ITEM 17.
FINANCIAL STATEMENTS
ITEM 18.
FINANCIAL STATEMENTS
ITEM 19.
EXHIBITS
2
142
142
142
162
163
163
170
170
170
170
171
171
172
172
172
172
173
173
177
177
177
177
178
178
178
179
179
179
179
180
181
181
181
181
GENERAL INFORMATION
Unless otherwise indicated or the context otherwise requires, all references in this Annual Report to the terms “ASLAN,” “ASLAN
Pharmaceuticals,” “the company,” “we,” “us” and “our” refer to ASLAN Pharmaceuticals Limited and its subsidiaries.
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Our consolidated financial statements have been prepared in accordance with International Financial Reporting Standards, or IFRS, as issued
by the International Accounting Standard Board, or IASB, which may differ in material respects from generally accepted accounting
principles in other jurisdictions, including the United States.
Our functional currency is the U.S. dollar. Unless otherwise specified, all monetary amounts presented are in U.S. dollars. All references in
this Annual Report to “$” mean U.S. dollars, all references in this Annual Report to “NT$” mean New Taiwan dollars, the legal currency of
the Republic of China (ROC), and all references in this Annual Report to “SG$” mean Singapore dollars, the legal currency of Singapore. No
representation is made that the New Taiwan dollar amounts referred to herein could have been or could be converted into U.S. dollars at any
particular rate or at all. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding.
We have made rounding adjustments to some of the figures included in this Annual Report. Accordingly, numerical figures shown as totals in
some tables may not be an arithmetic aggregation of the figures that preceded them.
3
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), that involve substantial risks and uncertainties. In some
cases, you can identify forward-looking statements by the words “may,” “might,” “will,” “could,” “would,” “should,” “expect,” “intend,”
“plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” and “ongoing,” or the negative of these terms, or
other comparable terminology intended to identify statements about the future. These statements involve known and unknown risks,
uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially
different from the information expressed or implied by these forward-looking statements. The forward-looking statements and opinions
contained in this Annual Report on Form 20-F are based upon information available to us as of the date of this Annual Report and, while we
believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements
should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information.
Forward-looking statements include statements about:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
The outcome, cost and timing of our product development activities and clinical trials;
Our plans and expected timing with respect to regulatory filings and approvals;
Our ability to fund our operations;
Our plans to develop and commercialize our product candidates and expand our development pipeline;
Our ability to enter into a transaction with respect to commercialization of our products and product candidates;
The size and growth potential of the markets for our product candidates, and our ability to serve those markets;
Our sales and marketing strategies and plans;
Potential market acceptance of our product candidates;
Potential regulatory developments in the United States and foreign countries;
The performance of our third party suppliers and manufacturers;
Our ability to compete with other therapies that are or become available;
Our expectations regarding the period during which we qualify as an emerging growth company (EGC) under the Jumpstart Our
Business Startups Act (JOBS Act);
Our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; and
Our expectations regarding the terms of our patents and ability to obtain and maintain intellectual property protection for our
product candidates.
4
You should refer to the section titled “Item 3.D. Risk Factors” for a discussion of important factors that may cause our actual results to differ
materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the
forward-looking statements in this Annual Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be
inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard
these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time
frame, or at all. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law. We claim the protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995 for all forward-looking statements.
You should read this Annual Report and the documents that we reference in this Annual Report, completely and with the understanding that
our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these
cautionary statements.
Unless otherwise indicated, information contained in this Annual Report on Form 20-F concerning our industry and the markets in which we
operate, including our general expectations and market position, market opportunity and market size estimates, is based on information from
independent industry analysts, third-party sources and management estimates. Management estimates are derived from publicly available
information released by independent industry analysts and third-party sources, as well as data from our internal research, and are based on
assumptions made by us based on such data and our knowledge of such industry and market, which we believe to be reasonable. In addition,
while we believe the market opportunity information included in this Annual Report on Form 20-F is generally reliable and is based on
reasonable assumptions, such data involve risks and uncertainties and are subject to change based on various factors, including those
discussed under the section of this Annual Report on Form 20-F titled “Item 3.D—Risk Factors.”
5
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not applicable.
Item 2. Offer Statistics and Expected Timetable
Not applicable.
6
Item 3. Key Information
A.
Selected financial data.
The following selected consolidated statement of comprehensive loss data for the years ended December 31, 2017, 2018 and 2019 and the
selected consolidated balance sheet data as of December 31, 2018 and 2019 have been derived from our audited consolidated financial
statements included elsewhere in this Annual Report on Form 20-F. The following selected consolidated statement of comprehensive loss
data for the years ended December 31, 2016 and the selected consolidated balance sheet data as of December 31, 2016 and 2017 have been
derived from financial statements not included in this Annual Report on Form 20-F. Our historical results for any period are not necessarily
indicative of results to be expected for any future period. The selected consolidated financial data should be read in conjunction with, and are
qualified in their entirety by reference to, our audited consolidated financial statements and related notes and “Item 5. Operating and
Financial Review and Prospects” below.
Selected Consolidated Statement of
Comprehensive Loss Data:
Net revenues
Cost of revenues
Operating expenses
General and administrative expenses
Research and development expenses
Total operating expenses
Other operating income and
expenses
Loss from operations
Non-operating income and expenses
Interest income
Other income
Other gains and losses
Finance costs
Total non-operating income and
expenses
Loss before income tax
Income tax expense
Net loss
Other comprehensive loss
Items that will not be reclassified
subsequently to profit or loss:
Unrealized loss on investments in
equity instruments at fair value
through other comprehensive
income
Total comprehensive loss
Net loss attributable to:
Stockholders of the parent
Non-controlling interests
Total comprehensive loss attributable to:
Stockholders of the parent
Non-controlling interests
Weighted-Average shares used in
calculating net loss per ordinary
shares, basic
Net loss per share, basic
2016
2017
2018
2019
(in thousands, except share and per share data)
Year ended December 31,
11,547
(125)
(6,956)
(13,165)
(20,121)
—
(8,699)
47
—
127
(524)
(350)
(9,049)
—
(9,049)
—
(9,049)
(9,049)
—
(9,049)
(9,049)
—
(9,049)
—
—
(8,759)
(30,381)
(39,140)
—
(39,140)
363
—
(698)
(417)
(752)
(39,892)
—
(39,892)
—
(39,892)
(39,892)
—
(39,892)
(39,892)
—
(39,892)
—
—
(10,514)
(31,834)
(42,348)
—
(42,348)
268
187
213
(492)
177
(42,171)
(14)
(42,186)
—
(42,186)
(42,186)
—
(42,186)
(42,186)
—
(42,186)
3,000
(407)
(8,512)
(16,587)
(25,099)
(23,073)
(45,579)
151
—
(328)
(902)
(1,079)
(46,658)
(408)
(47,066)
(55)
(47,121)
(47,016)
(50)
(47,066)
(47,071)
(50)
(47,121)
105,027,040
(0.09)
124,424,960
(0.32)
149,739,242
(0.28)
162,392,602
(0.29)
7
2016
2017
2018
2019
As of December 31,
(in thousands)
$
51,737 $
53,715
3,804
8,336
36,710
41,575
115,670,940
50,573 $
51,334
5,979
9,841
41,514
35,513
130,128,940
28,909 $
52,881
7,998
14,264
51,627
30,618
160,248,940
22,203
23,350
5,383
18,570
61,367
(603)
189,954,970
Selected Consolidated Balance Sheet
Data:
Cash and cash equivalents
Total assets
Total current liabilities
Total non-current liabilities
Capital stock - Ordinary shares
Total equity
Number of shares issued
B.
Capitalization and indebtedness.
Not applicable
C.
Reasons for the offer and use of proceeds.
Not applicable
D.
Risk factors.
An investment in our American Depositary Shares (ADSs) involves a high degree of risk. You should carefully consider the following
information about these risks, together with the other information appearing elsewhere in this Annual Report, before deciding to invest in our
ADSs. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of
operations and future growth prospects. In these circumstances, the market price of our ADSs could decline, and you could lose all or part of
your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our
business operations and price of our ADSs.
Risks Related to Our Financial Condition and Need for Additional Capital
We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable
future.
We are a clinical-stage immunology and oncology focused biopharmaceutical company developing innovative treatments to transform the
lives of patients. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital
expenditures and significant risk that any potential product candidate will not demonstrate adequate effectiveness in the targeted indication or
an acceptable safety profile, gain regulatory approval or become commercially viable. All of our product candidates will require substantial
additional development time and resources before we would be able to apply for or receive regulatory approvals and begin generating
revenue from product sales. We are not profitable and have incurred significant net losses in each year since our inception, including net
losses of $39.9 million, $42.2 million and $47.1 million for fiscal years 2017, 2018 and 2019, respectively. As of December 31, 2019, we had
an accumulated deficit of $179.5 million.
8
We have devoted substantially all our financial resources to developing our product candidates and targeted discovery work, including
preclinical development activities and clinical trials. We expect to continue to incur substantial expenses, losses and negative cash flows as
we expand our development activities and advance our clinical programs, particularly with respect to our planned clinical development for
ASLAN004. If our product candidates are not successfully developed or commercialized, including because of a lack of capital, or if we do
not generate enough revenue following marketing approval, we will not achieve profitability and our business may fail. Even if we
successfully obtain regulatory approval to market our product candidates in the United States and Europe, our revenue will also be heavily
dependent upon the size of the markets outside of the United States and Europe, in particular China and Japan, as well as our ability to obtain
market approval and achieve commercial success in those markets.
We currently do not generate any revenue from product sales, have generated only limited revenue since inception, and may never be
profitable.
We do not anticipate generating revenue from sales of our proprietary product candidates for the foreseeable future. Our ability to generate
future revenue from product sales depends on our success in completing clinical development of, obtaining regulatory approval for, and
launching and successfully commercializing any product candidates.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict the timing or
amount of increased expenses, when, or if, we will begin to generate revenue from product sales, or when, or if, we will be able to achieve or
maintain profitability. In addition, our expenses could increase beyond planned levels if we are required by the U.S. FDA to perform studies
in addition to those that we currently anticipate or if such studies are larger, take longer or are otherwise more expensive to conduct than we
expect.
Even if one or more of our product candidates is approved for commercial sale, to the extent we do not engage a third-party collaborator, we
anticipate incurring significant costs associated with commercializing any approved product candidate. Even if we are able to generate
revenue from the sale of any approved products, we may not become profitable and may need to obtain additional funding to continue
operations.
We will need to obtain substantial additional financing for our operations, and if we fail to obtain additional financing, we may be forced
to delay, reduce or eliminate our product development programs or commercialization efforts.
Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is expensive and we have consumed
substantial amounts of capital since inception. To date, we have financed our operations through government subsidies and grants,
collaboration payments and the sale of equity securities and convertible debt. We will need substantial additional financing to continue our
operations and do not expect revenues from product sales or potential licensing transactions to be sufficient to offset our development
expenses as we advance our clinical programs.
9
As of December 31, 2019, we had cash and cash equivalents of $22.2 million. As we are in the clinical research and development phase, we
will be seeking future funding based on the requirements of our business operations. We intend to explore various means of fundraising to
meet our funding requirements to carry out our business operations, such as offerings of ADSs, follow-on offerings of ordinary shares,
venture debt and shareholder loans. We may also use other means of financing such as out-licensing to generate revenue and cash. We have
the ability to exercise discretion and flexibility to deploy our capital resources used in research and development activities according to the
amount and timing of our financing activities. Accordingly, we believe that our existing cash and cash equivalents will enable us to fund our
operating expenses and capital expenditure requirements and meet our obligations for at least the next twelve months from December 31,
2019. However, our future viability depends on our ability to raise additional capital to finance our operations. Regardless of our expectations
as to how long our existing cash and cash equivalents will fund our operations, changing circumstances beyond our control may cause us to
consume capital more rapidly than we currently anticipate. For example, our clinical trials may encounter technical, enrollment or other
difficulties that could increase our development costs more than we expect. We may also incur expenses as we create additional infrastructure
to support our planned commercialization efforts and our operations as a U.S. public company. In any event, we will require additional
capital prior to completing pivotal studies of, filing for regulatory approval for, or commercializing ASLAN004 or ASLAN003, or any of our
other preclinical product candidates.
We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. If we are unable to
raise additional capital when required or on acceptable terms, we may be required to:
•
•
•
•
Significantly delay, scale back or discontinue the development or commercialization of our product candidates;
Seek corporate partners for our product candidates when we would otherwise develop our product candidates on our own, or at an
earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available;
Relinquish or license on unfavorable terms, our rights to technologies or product candidates that we otherwise would seek to
develop or commercialize ourselves; or
Significantly curtail or cease operations.
If we are unable to raise additional capital in sufficient amounts or on terms acceptable to us, we will be prevented from pursuing
development and commercialization efforts, which will have an adverse effect on our business, operating results and prospects.
Risks Related to Clinical Development and Regulatory Approval
We are heavily dependent on the success of ASLAN004 and our other product candidates. We cannot give any assurance that any of our
product candidates will successfully complete clinical development or receive regulatory approval, which is necessary before they can be
commercialized.
Our business and future success is substantially dependent on our ability to successfully develop, obtain regulatory approval for, and
successfully commercialize our product candidates. Any delay or setback in the development of any of our product candidates, could
adversely affect our business and cause the price of our ADSs or ordinary shares to decline. Should our planned clinical development of our
more advanced product candidates fail to be completed in a timely manner or at all, we will need to rely on our other product candidates,
which will require additional time and resources to obtain regulatory approval and proceed with commercialization. We cannot assure you
that our planned clinical development for our
10
product candidates will be completed in a timely manner in our planned indications, or at all, or that we will be able to obtain approval for
any of our product candidates from the U.S. FDA, the Chinese National Medical Products Administration, or NMPA (formerly China Food
and Drug Administration), or any comparable foreign regulatory authority.
Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be
predictive of future trial results. Failure can occur at any stage of clinical development. We have never completed a pivotal clinical trial
for our product candidates or submitted a New Drug Application (NDA) or a Biologics License Application (BLA) to the U.S. FDA or
similar drug approval filings to comparable foreign authorities.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time
during the clinical trial process. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of
the results of subsequent clinical trials. We have a limited operating history and to date have not demonstrated our ability to complete large
scale pivotal clinical trials.
Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through
preclinical studies and initial clinical trials. In addition to the safety and efficacy traits of any product candidate, clinical trial failures may
result from a multitude of factors including flaws in trial design, dose selection, placebo effect and patient enrollment criteria. A number of
companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse
safety profiles, notwithstanding promising results in earlier trials. Based upon negative or inconclusive results, we or any potential future
collaborator may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained
from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may
delay, limit or prevent regulatory approval. Our future clinical trials may not be successful.
If any product candidate is found to be unsafe or lack efficacy, we will not be able to obtain regulatory approval for it and our business may
be materially harmed. For example, if the results of our ongoing Phase 1 clinical trial of ASLAN004 in atopic dermatitis, or any other clinical
trials for our product candidates, demonstrate unexpected safety findings or do not achieve the primary efficacy endpoints, the prospects for
approval of these product candidates, as well the price of our ADSs and ordinary shares and our ability to create shareholder value would be
materially and adversely affected.
In some instances, there can be significant variability in safety and/or efficacy results between different trials of the same product candidate
due to numerous factors, including changes in trial protocols, differences in composition of the patient populations, adherence to the dosing
regimen and other trial protocols and the dropout rate among clinical trial participants. For example, we could be required to use a primary
endpoint in our pivotal trials that is different from endpoints in our Phase 2 clinical trials, which could result in negative or less compelling
efficacy results in pivotal trials despite promising results in Phase 2 clinical trials. We do not know whether any future clinical trials we may
conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates. If we are
unable to bring any of our current or future product candidates to market, our ability to create long-term shareholder value will be limited.
11
Delays in clinical trials are common and have many causes, and any delay could result in increased costs to us and jeopardize or delay
our ability to obtain regulatory approval and commence product sales.
We may experience delays in clinical trials of our product candidates. Our planned clinical trials may not begin on time, have an effective
design, enroll a sufficient number of patients, or be completed on schedule, if at all. Our clinical trials can be delayed for a variety of reasons,
including:
•
•
•
•
•
•
•
•
•
•
•
•
Inability to raise funding necessary to initiate or continue a trial;
Delays in obtaining regulatory approval to commence a trial;
Delays in reaching agreement with the U.S. FDA, NMPA or other regulatory authorities on final trial design;
Imposition of a clinical hold for safety reasons or following an inspection of our clinical trial operations or trial or manufacturing
sites by the U.S. FDA, NMPA or other regulatory authorities;
Delays in reaching agreement on acceptable terms with prospective contract research organizations (CROs) and clinical trial sites;
Delays in obtaining required institutional review board, or IRB, approval at each site;
Delays in recruiting suitable patients to participate in a trial;
Delays in having patients complete participation in a trial or return for post-treatment follow-up;
Clinical sites dropping out of a trial to the detriment of enrollment;
Time required to add new clinical sites;
Delays by our contract manufacturers to produce and deliver sufficient supply of clinical trial materials; or
Disruptions caused by man-made or natural disasters or public health pandemics or epidemics or other business interruptions,
including, for example, the recent outbreak of COVID-19.
For example, we recently announced that recruitment of new patients into our multiple ascending dose (MAD) clinical trial of ASLAN004 in
moderate-to-severe atopic dermatitis has been paused in light of recently imposed government restrictions in Singapore to contain the spread
of COVID-19. We intend to resume screening as soon as government restrictions are lifted and we are taking steps to open sites in Australia
to accelerate recruitment.
We could also experience delays if physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our
product candidates in lieu of prescribing existing treatments that have established safety and efficacy profiles. Further, a clinical trial may be
suspended or terminated by us, the IRBs for the institutions in which such trials are being conducted, any data monitoring committee for such
trial, or by the U.S. FDA, NMPA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in
accordance with regulatory requirements or our clinical protocols, inspection of clinical trial or manufacturing sites by the U.S. FDA, NMPA
or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to
demonstrate a benefit from using a product candidate, changes in governmental regulations or administrative actions or lack of adequate
funding to continue the clinical trial. Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our
clinical trials and while we have agreements governing their committed activities, we have limited influence over their actual performance. If
we experience termination of, or delays in the completion of, any clinical trial of our product candidates, the commercial prospects for our
product candidates will be harmed, and our ability to generate product revenues will be delayed. In addition, any delays in completing our
clinical trials will increase our costs and slow down our product development and approval process. Any of these occurrences may harm our
business, prospects, financial condition and results of operations significantly. Many of the factors that cause, or lead to, a delay in the
commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval for our product candidates.
12
Because we have multiple product candidates in our clinical pipeline and are considering a variety of target indications, we may expend
our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications
that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we must focus our research and development efforts on those product
candidates and specific indications that we believe are the most promising. As a result, we may forego or delay pursuit of opportunities with
other product candidates or other indications that later prove to have greater commercial potential. Our resource allocation decisions may
cause us to fail to capitalize on viable commercial products or profitable market opportunities.
We may in the future spend our resources on other research programs and product candidates for specific indications that ultimately do not
yield any commercially viable products. Furthermore, if we do not accurately evaluate the commercial potential or target market for a
particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty
arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.
Our product candidates may cause adverse events or have other properties that could delay or prevent their regulatory approval or limit
the scope of any approved label or market acceptance.
Adverse events (AEs) caused by our product candidates or other potentially harmful characteristics of our product candidates could cause us,
other reviewing entities, clinical trial sites or regulatory authorities to interrupt, delay or halt clinical trials and could result in the denial of
regulatory approval.
Serious adverse events observed in any of our clinical trials may adversely impact our ability to obtain regulatory approval for our product
candidates. Further, if any of our approved products cause serious or unexpected side effects after receiving market approval, a number of
potentially significant negative consequences could result, including:
•
•
Regulatory authorities may withdraw their approval of the product or impose restrictions on its distribution;
Regulatory authorities may require the addition of labeling statements, such as warnings or contraindications;
• We may be required to change the way the product is administered or conduct additional clinical studies;
• We could be sued and held liable for harm caused to patients; or
•
Our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of the affected product candidate and could
substantially increase the costs of commercializing our product candidates.
The regulatory approval processes of the U.S. FDA, NMPA and comparable foreign authorities are lengthy, time consuming and
inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will
be substantially harmed.
The time required to obtain approval by the U.S. FDA, NMPA and comparable foreign authorities is unpredictable but typically takes many
years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the
regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may
13
change during the course of a product candidate’s clinical development and may vary among jurisdictions. For example, we cannot guarantee
that our Phase 1 clinical trials of ASLAN004 in atopic dermatitis will be sufficient to allow subsequent development or that the U.S. FDA or
comparable foreign regulatory authorities will not require additional or different clinical trials prior to subsequent development of
ASLAN004 or that the required primary endpoints in subsequent pivotal trials or other clinical trials will not be different than those in Phase
2 clinical trials.
Our product candidates could fail to receive regulatory approval for many reasons, including the following:
•
The U.S. FDA or comparable foreign regulatory authorities may disagree with the design, scope or implementation of our clinical
trials;
• We may be unable to demonstrate to the satisfaction of the U.S. FDA or comparable foreign regulatory authorities that a product
candidate is safe and effective for its proposed indication;
•
The results of clinical trials may not meet the level of statistical significance required by the U.S. FDA or comparable foreign
regulatory authorities for approval;
• We may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;
•
•
•
•
The U.S. FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or
clinical trials;
The data collected from clinical trials of our product candidates may not be sufficient to support the submission of an NDA, BLA
or other submission or to obtain regulatory approval in the United States or elsewhere;
The U.S. FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-
party manufacturers with which we contract for clinical and commercial supplies; and
The approval policies or regulations of the U.S. FDA or comparable foreign regulatory authorities may change significantly in a
manner rendering our clinical data insufficient for approval.
This lengthy approval process, as well as the unpredictability of future clinical trial results, may result in our failing to obtain regulatory
approval to market our product candidates, which would harm our business, results of operations and prospects significantly.
In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited
indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the
performance of costly post-marketing clinical trials, or may approve a product candidate with a label that does not include the labeling claims
necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could harm the
commercial prospects for our product candidates.
14
We have not previously submitted an NDA, BLA or any similar drug approval filing to the U.S. FDA or any comparable foreign authority for
any product candidate, and we cannot be certain that any of our product candidates will be successful in clinical trials or receive regulatory
approval. Further, our product candidates may not receive regulatory approval even if they are successful in clinical trials. If we do not
receive regulatory approvals for our product candidates, we may not be able to continue our operations. Even if we successfully obtain
regulatory approvals to market one or more of our product candidates, our revenue will be dependent, to a significant extent, upon the size of
the markets in the territories for which we gain regulatory approval. If the markets for patients or indications that we are targeting are not as
significant as we estimate, we may not generate significant revenue from sales of such products, if approved.
Pharmaceutical companies in China are required to comply with extensive regulations and hold a number of permits and licenses to
carry on their business. Our ability to obtain and maintain these regulatory approvals is uncertain, and future government regulation
may place additional burdens on our efforts to commercialize our product candidates.
The pharmaceutical industry in China is subject to extensive government regulation and supervision. The regulatory framework addresses all
aspects of operating in the pharmaceutical industry, including approval, registration, production, distribution, packaging, labelling, storage
and shipment, advertising, licensing and certification requirements and procedures, periodic renewal and reassessment processes, registration
of new drugs and environmental protection. In order to commercialize our product candidates and manufacture and distribute pharmaceutical
products in China, we are required to:
•
•
•
•
Obtain a pharmaceutical manufacturing permit and good manufacturing practices (cGMP) certificate for each production facility
from the NMPA and its relevant branches for trading and distribution of drugs not manufactured by the drug registration certificate
holder;
Obtain a drug registration certificate, which includes a drug approval number, from the NMPA for each drug manufactured by us;
Obtain a pharmaceutical distribution permit and good supply practice (GSP) certificate from the NMPA and its relevant branches;
and
Renew the pharmaceutical manufacturing permits, the pharmaceutical distribution permits, drug registration certificates, cGMP
certificates and GSP certificates every five years, among other requirements.
If we are unable to obtain or renew such permits or any other permits or licenses required for our operations, will not be able to engage in the
commercialization, manufacture and distribution of our product candidates and our business may be adversely affected.
The regulatory framework governing the pharmaceutical industry in China is subject to change and amendment from time to time. The
Chinese government has introduced various reforms to the Chinese healthcare system in recent years and may continue to do so, with an
overall objective to expand basic medical insurance coverage and improve the quality and reliability of healthcare services. The specific
regulatory changes under the reform still remain uncertain. The measures may not be sufficiently effective to achieve the stated goals, and as
a result, we may not be able to benefit from such reform to the level we expect, if at all. Moreover, the reform could give rise to regulatory
developments, such as more burdensome administrative procedures, which may have an adverse effect on our business and prospects.
15
Although we have obtained orphan drug designation for ASLAN003 in acute myeloid leukaemia (AML), and for varlitinib in gastric
cancer and cholangiocarcinoma, a form of biliary tract cancer, in the United States, we may not be able to obtain or maintain the benefits
associated with orphan drug status, including market exclusivity.
Regulatory authorities in some jurisdictions, including the United States and the European Union, may designate drugs for relatively small
patient populations as orphan drugs. Under the Orphan Drug Act, the U.S. FDA may designate a drug as an orphan drug if it is intended to
treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United
States. We have obtained orphan drug designation from the U.S. FDA for ASLAN003 in AML. We have also obtained orphan drug
designation for varlitinib in gastric cancer and cholangiocarcinoma from the U.S. FDA, as well as for varlitinib in biliary tract cancer from
the Ministry of Food and Drug Safety in South Korea. Generally, if a drug with an orphan drug designation subsequently receives the first
marketing approval for the indication for which it has such designation, the drug may be entitled to a period of marketing exclusivity, which
precludes the U.S. FDA from approving another marketing application for the same molecule for the same indication for that time period. We
can provide no assurance that another drug will not receive marketing approval prior to our product candidates. The applicable period is
seven years in the United States and ten years in Japan and the European Union. The exclusivity period in the European Union can be
reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market
exclusivity is no longer justified. Orphan drug exclusivity may be lost if the U.S. FDA determines that the request for designation was
materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare
disease or condition. In addition, even after a drug is granted orphan exclusivity and approved, the U.S. FDA can subsequently approve
another drug for the same condition before the expiration of the seven year exclusivity period if the U.S. FDA, concludes that the later drug is
clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
Even if we obtain regulatory approval for our product candidates, we will still face extensive regulatory requirements and our products
may face future development and regulatory difficulties.
Even if we obtain regulatory approval in the United States, China or other markets, the U.S. FDA, NMPA or other regulatory authorities, as
applicable, may still impose significant restrictions on the indicated uses or marketing of our product candidates, or impose ongoing
requirements for potentially costly post-approval studies or post-market surveillance. Our product candidates, if approved, will also be
subject to ongoing U.S. FDA, NMPA and/ or other applicable regulatory requirements governing the labeling, packaging, storage,
distribution, safety surveillance, advertising, promotion, record-keeping and reporting of safety and other post-market information. The
holder of an approved NDA or BLA is obligated to monitor and report AEs and any failure of a product to meet the specifications in the
NDA or BLA, as applicable. The holder of an approved NDA or BLA must also submit new or supplemental applications and obtain U.S.
FDA approval for certain changes to the approved product, product labeling or manufacturing process. Advertising and promotional
materials must comply with U.S. FDA rules and are subject to U.S. FDA review, in addition to other potentially applicable federal and state
laws.
In addition, manufacturers of drug products and their facilities are subject to payment of user fees and continual review and periodic
inspections by the U.S. FDA, NMPA and other regulatory authorities for compliance with current good manufacturing practices, or cGMP,
and adherence to commitments made in the NDA. If we or a regulatory agency discovers previously unknown problems with a product, such
as AEs of unanticipated severity or frequency, or problems with the facility where the product is manufactured, a regulatory agency may
impose restrictions relative to that product or the manufacturing facility, including requiring recall or withdrawal of the product from the
market or suspension of manufacturing.
16
If we fail to comply with applicable regulatory requirements following approval of a product candidate, a regulatory agency may:
•
•
•
•
•
•
•
Issue a warning letter asserting that we are in violation of the law;
Seek an injunction or impose civil or criminal penalties or monetary fines;
Suspend or withdraw regulatory approval;
Suspend any ongoing clinical trials;
Refuse to approve a pending NDA or supplements to an NDA submitted by us;
Seize product; or
Refuse to allow us to enter into supply contracts, including government contracts.
In particular, we may seek accelerated approval from the U.S. FDA for our product candidates which will likely require a further
confirmatory trial. If this confirmatory trial is not successful, we will be required to withdraw our product candidate from the U.S. market and
potentially other markets.
Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could
generate negative publicity. The occurrence of any event or penalty described above may inhibit our ability to commercialize our products
and generate revenue.
In addition, if any of our product candidates are approved and we are found to have improperly promoted off-label uses of those products, we
may become subject to significant liability. The U.S. FDA and other regulatory agencies strictly regulate the promotional claims that may be
made about prescription products, such as our product candidates, if approved. In particular, a product may not be promoted for uses that are
not approved by the U.S. FDA or such other regulatory agencies as reflected in the product’s approved labeling. However, companies may
share truthful and not misleading information that is otherwise consistent with the product’s FDA approved labeling. If we are found to have
promoted such off-label uses, we may become subject to significant liability, which would materially adversely affect our business and
financial condition.
Even if we obtain U.S. FDA approval for our product candidates in the United States, we may never obtain approval to commercialize our
product candidates outside of the United States, which would limit our ability to realize their full market potential.
In order to market any products outside of the United States, we must establish and comply with numerous and varying regulatory
requirements of other countries regarding safety and efficacy. Clinical trials conducted in one country may not be accepted by regulatory
authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other
country. Approval processes vary among countries and can involve additional product testing and validation and additional administrative
review periods.
Seeking foreign regulatory approval could result in difficulties and costs for us and require additional non-clinical studies or clinical trials
which could be costly and time consuming. Regulatory requirements can vary widely from country to country and could delay or prevent the
introduction of our products in those countries. We do not have any product candidates approved for sale in any jurisdiction, including
international markets, and we do not have experience in obtaining regulatory approval in international markets. If we fail to comply with
regulatory requirements in international markets or to obtain and maintain required approvals, or if regulatory approvals in international
markets are delayed, our target market will be reduced and our ability to realize the full market potential of our products will be harmed.
17
If we fail to develop, acquire or in-license other product candidates or products, or other necessary intellectual property, our business and
prospects will be limited.
Our long-term growth strategy is to develop, acquire or in-license and commercialize a portfolio of product candidates, including any related
intellectual property, in addition to ASLAN004 and our other existing product candidates. Identifying, selecting and acquiring or licensing
promising product candidates requires substantial technical, financial and human resources expertise. Efforts to do so may not result in the
actual development, acquisition or license of a particular product candidate, potentially resulting in a diversion of our management’s time and
the expenditure of our resources with no resulting benefit. If we are unable to obtain a license to any third-party intellectual property that is
necessary to develop and commercialize any of our product candidates, we may have to abandon development or commercialization of such
product candidates. Even if we are able to obtain such license, we cannot guarantee that such license will be available on commercially
reasonable terms or exclusive. If we are unable to add additional product candidates to our pipeline, our long-term business and prospects
will be limited.
Licensing assets from third parties involves technical and scientific due diligence to assess the opportunity, the strength of the intellectual
property protection for the asset and the ability to commercialize the asset. This due diligence is usually conducted over a relatively short
period of time. It can be difficult to identify all the issues relevant to the assessment. Failure to identify all the relevant issues can impact
negatively on the value of the asset. If we are not able to adequately assess the value of an asset that we license from third parties, our ability
to realize the full value of our products may be harmed.
We rely on third parties to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their
contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize our product
candidates and our business could be substantially harmed.
We have relied upon and plan to continue to rely upon third-party CROs to conduct our preclinical studies and clinical trials, including
investigator-initiated studies sponsored by the investigator’s institution, and control only certain aspects of their activities. Nevertheless, we
are responsible for ensuring that each of our trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific
standards and our reliance on the CROs does not relieve us of our regulatory responsibilities. We and our CROs are required to comply with
U.S. FDA laws and regulations regarding current good clinical practice (cGCP) which are also required by the Competent Authorities of the
Member States of the European Economic Area and comparable foreign regulatory authorities in the form of International Council for
Harmonization (ICH) guidelines for all of our products in clinical development. Regulatory authorities enforce cGCP through periodic
inspections of trial sponsors, principal investigators and trial sites. If we or any of our CROs fail to comply with applicable cGCP, the clinical
data generated in our clinical trials may be deemed unreliable and the U.S. FDA or comparable foreign regulatory authorities may require us
to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given
regulatory authority, such regulatory authority will determine that any of our clinical trials comply with cGCP regulations. In addition, our
U.S. clinical trials must be conducted with product produced under cGMP regulations. While we have agreements governing activities of our
CROs, we have limited influence over their actual performance. In addition, portions of the clinical trials for our product candidates are
expected to be conducted at various locations great distances from where our principal operations are located in Singapore, which will make
it more difficult for us to monitor CROs and perform visits of our clinical trial sites and will force us to rely heavily on CROs to ensure the
proper and timely conduct of our clinical trials and compliance with applicable regulations, including cGCP. Failure to comply with
applicable regulations in the conduct of the clinical trials for our product candidates may require us to repeat clinical trials, which would
delay the regulatory approval process.
18
Some of our CROs have an ability to terminate their respective agreements with us if, among other reasons, it can be reasonably
demonstrated that the safety of the subjects participating in our clinical trials warrants such termination, if we make a general assignment for
the benefit of our creditors or if we are liquidated. If any of our relationships with these third-party CROs terminate, we may not be able to
enter into arrangements with alternative CROs or to do so on commercially reasonable terms. In addition, our CROs are not our employees,
and except for remedies available to us under our agreements with such CROs, we cannot control whether or not they devote sufficient time
and resources to our preclinical and clinical programs. If CROs do not successfully carry out their contractual duties or obligations or meet
expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure
to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated
and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. Consequently, our results of
operations and the commercial prospects for our product candidates would be harmed, our costs could increase substantially and our ability
to generate revenue could be delayed significantly.
Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural
transition period when a new CRO commences work. As a result, delays occur, which can materially impact our ability to meet our desired
clinical development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not
encounter challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business,
financial condition and prospects.
Risks Related to Our Business Operations and Industry
Our future success depends on our ability to retain key executives and to attract, retain and motivate qualified personnel.
We are highly dependent on the principal members of our executive team listed under “Management” located elsewhere in this Annual
Report, the loss of whose services may adversely impact the achievement of our objectives. While we have entered into employment
agreements with each of our executive officers, any of them could leave our employment at any time, subject to any applicable notice
requirements. Recruiting and retaining other qualified employees for our business, including scientific and technical personnel, will also be
critical to our success. Competition for skilled personnel is intense and the turnover rate can be high. We may not be able to attract and retain
personnel on acceptable terms given the competition among numerous pharmaceutical companies for individuals with similar skill sets. In
addition, failure to succeed in clinical studies may make it more challenging to recruit and retain qualified personnel. The inability to recruit
or loss of the services of any executive or key employee might impede the progress of our development and commercialization objectives.
We will need to expand our organization, and we may experience difficulties in managing this growth, which could disrupt our
operations.
As of December 31, 2019, we had 23 full-time employees. In the future we may expand our employee base to increase our managerial,
scientific, clinical, operational, financial and other resources, to add a sales and marketing function and to hire more consultants and
contractors. Future growth would impose significant additional responsibilities on our management, including the need to identify, recruit,
maintain, motivate and integrate additional employees, consultants and contractors. Also, our management may need to divert a
disproportionate amount of its attention away from our day-to-day activities and devote a substantial amount of time to managing these
growth activities. We may not be able to effectively manage the expansion of our operations, which may result in weaknesses in our
infrastructure, give rise to operational mistakes, loss of business opportunities, loss of employees and reduced productivity among
19
remaining employees. Future growth could require significant capital expenditures and may divert financial resources from other projects,
such as the development of our existing or future product candidates. If our management is unable to effectively manage our growth, our
expenses may increase more than expected, our ability to generate and grow revenue could be reduced, and we may not be able to implement
our business strategy. Our future financial performance and our ability to commercialize our product candidates, if approved, and compete
effectively will depend, in part, on our ability to effectively manage any future growth.
We may undertake internal restructuring activities in the future that could result in disruptions to our business or otherwise materially
harm our results of operations or financial condition.
From time to time we may undertake internal restructuring activities as we continue to evaluate and attempt to optimize our cost and
operating structure in light of developments in our business strategy and long-term operating plans. For example, we initiated a corporate
restructuring in January 2019 that resulted in a reduction in our workforce. Any such restructuring activities may result in write-offs or other
restructuring charges. There can be no assurance that any restructuring activities that we have undertaken or undertake in the future will
achieve the cost savings, operating efficiencies or other benefits that we may initially expect. Restructuring activities may also result in a loss
of continuity, accumulated knowledge and inefficiency during transitional periods and thereafter. In addition, internal restructurings can
require a significant amount of time and focus from management and other employees, which may divert attention from commercial
operations. If any internal restructuring activities we have undertaken or undertake in the future fail to achieve some or all of the expected
benefits therefrom, our business, results of operations and financial condition could be materially and adversely affected.
The terms of our loan agreements place restrictions on our operating and financial flexibility. If we raise additional capital through debt
financing, the terms of any new debt could further restrict our ability to operate our business.
In connection with the license agreement with CSL Limited (CSL) related to ASLAN004, in May 2014 we entered into a loan agreement
with CSL Finance Pty Ltd (CSL Finance) pursuant to which CSL Finance agreed to provide a ten-year facility for $4.5 million (CSL
Facility). Borrowings under the CSL Facility are unsecured and can be used to reimburse a portion of eligible invoices for certain research
and development costs or expenses incurred by us in connection with developing ASLAN004 and approved by CSL Finance at each
drawdown period. In addition, we are required to mandatorily prepay amounts outstanding if we receive any income or revenue in connection
with the commercialization or out-licensing of any intellectual property rights (other than under the license agreement with CSL Limited
related to ASLAN004), in which case we are required to apply at least a low double digit percentage of such income or revenue against any
amounts then-outstanding under the CSL Facility. Under the CSL Facility, we are subject to customary reporting and restrictive covenants. If
an event of default occurs, CSL Finance can terminate the commitment under the CSL Facility and accelerate all amounts outstanding.
In September, October and November 2019, we entered into a series of loan facilities with certain of our directors, existing stockholders or
affiliates thereof, and others, for an aggregate loan amount of $3.25 million (the September 2019 facility referred to herein as the Convertible
Loan Facility and the remaining facilities referred to herein collectively as the October/November 2019 Loan Facility). Each loan facility has
a two-year term with a 10% interest rate per annum, commencing upon the date we draw down on such facility. Under the
October/November 2019 Loan Facility, in the event that we raise net proceeds of more than $22.5 million in a financing transaction during
the loan term, we will be obligated to repay any unpaid portion of the principal amount and accrued interest thereunder within 30 days of the
receipt of the proceeds from such financing transaction. The October/November 2019 Loan Facility further provides that, during
20
the time that any amount is outstanding thereunder, we will not (i) incur any finance debt which is secured by a security interest or (ii) carry
out or implement any merger, consolidation, reorganization (other than our solvent reorganization), recapitalization, reincorporation, share
dividend or other changes in our capital structure which may have a material adverse effect on the rights of the lenders, in each case except
with the prior written consent of the lenders. In addition, upon an event of default, the lenders may declare the principal amounts then
outstanding and all interest thereon accrued and unpaid to be immediately due and payable to the lenders.
If we are liquidated, the rights of our lenders to repayment would be senior to the rights of the holders of our ordinary shares to receive any
proceeds from the liquidation. Any declaration by our lenders of an event of default could significantly harm our business and prospects and
could cause the price of our ordinary shares to decline. If we raise any additional debt financing, the terms of such additional debt could
further restrict our operating and financial flexibility.
We may face potential product liability, and, if successful claims are brought against us, we may incur substantial liability.
The use of our product candidates in clinical trials and the sale of any products for which we obtain marketing approval exposes us to the risk
of product liability claims. Product liability claims might be brought against us by consumers, healthcare providers, pharmaceutical
companies or others selling or otherwise coming into contact with our products and product candidates. If we cannot successfully defend
against product liability claims, we could incur substantial liability and costs. In addition, regardless of merit or eventual outcome, product
liability claims may result in:
•
Impairment of our business reputation;
• Withdrawal of clinical trial participants;
•
•
•
•
•
Costs due to related litigation;
Distraction of management’s attention from our primary business;
Substantial monetary awards to patients or other claimants;
The inability to commercialize our product candidates; and
Decreased demand for our product candidates, if approved for commercial sale.
Our current clinical trial liability insurance coverage may not be sufficient to reimburse us for any expenses or losses we may suffer.
Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a
reasonable cost or in sufficient amounts to protect us against losses due to liability. If and when we obtain marketing approval for our product
candidates, we intend to expand our insurance coverage to include the sale of commercial products; however, we may be unable to obtain
product liability insurance on commercially reasonable terms or in adequate amounts. On occasion, large judgments have been awarded in
class action lawsuits based on drugs that had unanticipated adverse effects. A successful product liability claim or series of claims brought
against us could cause the price of our ADSs or ordinary shares to decline and, if judgments exceed our insurance coverage, could adversely
affect our results of operations and business.
21
Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which
could result in a material disruption of our operations.
Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants
are vulnerable to damage from computer viruses, unauthorized access, natural disasters, public health pandemics or epidemics (including, for
example, the recent outbreak of COVID-19), terrorism, war and telecommunication and electrical failures. Such events could cause
interruptions of our operations. Furthermore, we do not have formal internal disaster recovery procedures. If our systems experience a
disaster or are otherwise unavailable, we may not be able to operate our business, which could have a material adverse effect on our financial
conditions, reputation or business prospects. For instance, the loss of preclinical study or clinical trial data involving our product candidates
could result in delays in our development and regulatory filing efforts and significantly increase our costs. In addition, theft or other exposure
of data may interfere with our ability to protect our intellectual property, trade secrets, and other information critical to our operations. We
can provide no assurances that certain sensitive and proprietary information relating to one or more of our product candidates has not been, or
will not in the future be, compromised. There can be no assurances we will not experience unauthorized intrusions into our computer
systems, or those of our CROs and other contractors and consultants, that we will successfully detect future unauthorized intrusions in a
timely manner, or that future unauthorized intrusions will not result in material adverse effects on our financial condition, reputation, or
business prospects.
Certain data breaches must also be reported to affected individuals and the government, and in some cases to the media, under provisions of
the U.S. Health Insurance Portability and Accountability Act of 1996 (HIPAA) as amended by the Health Information Technology for
Economic and Clinical Health Act (HITECH), other U.S. federal and state law, and requirements of non-U.S. jurisdictions, including the
European Union General Data Protection Regulation, and financial penalties may also apply.
Our insurance policies may not be adequate to compensate us for the potential losses arising from breaches, failures or disruptions of our
infrastructure, catastrophic events and disasters or otherwise. In addition, such insurance may not be available to us in the future on
economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and defending a suit, regardless of
its merit, could be costly and divert management’s attention.
Furthermore, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and
significantly increase our costs to recover or reproduce the data. Likewise, we rely on other third parties for the manufacture of our product
candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our
business.
In addition to in-licensing or acquiring product candidates, we may engage in future business acquisitions that could disrupt our
business, cause dilution to our ADS holders and harm our financial condition and operating results.
While we currently have no specific plans to acquire any other businesses, we have, from time to time, evaluated acquisition opportunities
and may, in the future, make acquisitions of, or investments in, companies that we believe have products or capabilities that are a strategic or
commercial fit with our current product candidates and business or otherwise offer opportunities for our company. In connection with these
acquisitions or investments, we may:
•
•
•
Issue shares that would dilute our ADS holders’ percentage of ownership;
Incur debt and assume liabilities; and
Incur amortization expenses related to intangible assets or incur large write-offs.
22
We also may be unable to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms, if at all. If
we do complete an acquisition, we cannot assure you that it will ultimately strengthen our competitive position or that it will not be viewed
negatively by customers, financial markets or investors. Further, future acquisitions could also pose numerous additional risks to our
operations, including:
•
•
•
•
•
•
•
Problems integrating the purchased business, products or technologies;
Increases to our expenses;
The failure to have discovered undisclosed liabilities of the acquired asset or company;
Diversion of management’s attention from their day-to-day responsibilities;
Harm to our operating results or financial condition;
Entrance into markets in which we have limited or no prior experience; and
Potential loss of key employees, particularly those of the acquired entity.
We may not be able to complete one or more acquisitions or effectively integrate the operations, products or personnel gained through any
such acquisition without a material adverse effect on our business, financial condition and results of operations.
Our operations could be subject to natural disasters, health pandemics or epidemics and other business disruptions, which could have a
material adverse effect on our business, results of operation and financial condition.
Our operations, and in particular our clinical trials, are being conducted across areas of Asia that may be prone to natural disasters, such as
earthquakes, cyclones, monsoons and floods, which could cause interruptions to our operations.
Any occurrence of these natural disasters or pandemic diseases or other adverse public health developments in the areas in which we operate
our clinical trials could disrupt or delay our business operations or clinical development, which could materially adversely affect our
business.
Our business could be adversely affected by the effects of health pandemics or epidemics, including the recent outbreak of COVID-19, in
regions where we or third parties on which we rely have significant manufacturing facilities, concentrations of clinical trial sites or other
business operations, or materially affect our operations globally and at our clinical trial sites, as well as the business or operations of our
manufacturers, CROs or other third parties with whom we conduct business.
Our business could be adversely affected by the effects of health pandemics or epidemics, including the recent outbreak of COVID-19,
influenza A (H1N1), avian influenza (H7N9), severe acute respiratory syndrome (SARS). COVID-19 was recently declared by the World
Health Organization as a global pandemic, and is resulting in travel and other restrictions to reduce the spread of the disease. As a result of
these recent developments, we have implemented work-from-home policies for most of our employees. The effects of local shelter-in-place
orders, government-imposed quarantines and our work-from-home policies may negatively impact productivity, disrupt our business and
delay our clinical programs and timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other
limitations on our ability to conduct our business in the ordinary course. These and similar, and perhaps more severe, disruptions in our
operations could negatively impact our business, operating results and financial condition.
23
Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the
conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party
manufacturing facilities in Asia, or the availability or cost of materials, which would disrupt our supply chain. In particular, some of our
contract manufacturers or other third-party manufacturers that we use to supply our product candidates are located in China, where the
COVID-19 outbreak was first reported and where there have been government-imposed quarantines. While many of these materials may be
obtained by more than one supplier, including suppliers outside of China, port closures and other restrictions resulting from the coronavirus
outbreak in the region may disrupt our supply chain or limit our ability to obtain sufficient materials for our product candidates.
In addition, our clinical trials are likely to be affected by the recent COVID-19 outbreak. Site initiation and patient enrollment may be
delayed due to prioritization of hospital resources toward the COVID-19 outbreak, and some patients may not be able to comply with clinical
trial protocols if quarantines impede patient movement or interrupt healthcare services. Similarly, our ability to recruit and retain patients and
principal investigators and site staff who, as healthcare providers, may have heightened exposure to COVID-19, could be delayed or
disrupted, which would adversely impact our clinical trial operations. For example, we recently announced that recruitment of new patients
into our MAD clinical trial of ASLAN004 in moderate-to-severe atopic dermatitis has been paused in light of recently imposed government
restrictions in Singapore to contain the spread of COVID-19. We intend to resume screening as soon as government restrictions are lifted and
we are taking steps to open sites in Australia to accelerate recruitment.
The spread of COVID-19, which has caused a broad impact globally, may materially affect us economically. While the potential economic
impact brought by, and the duration of, the COVID-19 pandemic, may be difficult to assess or predict, it is currently resulting in significant
disruption of global financial markets. This disruption, if sustained or recurrent, could make it more difficult for us to access capital, which
could in the future negatively affect our liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could
materially affect our business and the value of our common stock.
The global pandemic of COVID-19 continues to rapidly evolve. The ultimate impact of the recent COVID-19 outbreak or a similar health
pandemic or epidemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our
business, our clinical trials, healthcare systems or the global economy as a whole. These effects could have a material impact on our
operations, and we will continue to monitor the COVID-19 situation closely.
Our business is subject to economic, political, regulatory and other risks associated with international operations.
As a company based in Singapore with an Asia based development platform, our business is subject to risks associated with conducting
business outside of the United States. Many of our suppliers and collaborative and clinical trial relationships are located outside the United
States. Accordingly, our future results could be harmed by a variety of factors, including:
•
•
•
Economic weakness, including inflation, or political instability;
Differing and changing regulatory requirements for drug approvals;
Differing jurisdictions could present different issues for securing, maintaining or obtaining freedom to operate in such
jurisdictions;
24
•
•
•
•
•
•
•
•
•
•
Potentially reduced protection for intellectual property rights;
Difficulties in compliance with local laws and regulations;
Changes in local regulations and customs, tariffs and trade barriers;
Changes in currency exchange rates, including the Singapore dollar, and currency controls;
Changes in a specific country’s or region’s political or economic environment;
The relationship between Singapore and other countries, including China;
Trade protection measures, import or export licensing requirements or other restrictive actions;
Differing reimbursement regimes and price controls;
Negative consequences from changes in tax laws;
Compliance with tax, employment, immigration and labor laws for employees;
• Workforce uncertainty in countries where labor unrest is more common than in the United States;
•
•
•
•
Difficulties associated with staffing and managing international operations, including differing labor relations;
Production shortages resulting from any events affecting raw material supply or manufacturing capabilities;
Disruptions on us or our strategic partners, third-party manufacturers, suppliers and other third parties upon which we rely
resulting from the impact of public health epidemics or pandemics (including, for example, the recent outbreak of COVID-19);
and
Business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters including typhoons,
floods and fires.
More specifically, the economy in Asia differs from most developed markets in many respects, including the level of government
involvement, level of development, growth rate, control of foreign exchange, government policy on public order and allocation of resources.
In some of the Asian markets, governments continue to play a significant role in regulating industry development by imposing industrial
policies. Moreover, some local governments also exercise significant control over the economic growth and public order in their respective
jurisdictions through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policies, and
providing preferential treatment to particular industries or companies. In addition, some Asian markets have experienced, and may in the
future experience, political instability, including strikes, demonstrations, protests, marches, coups d’état, guerilla activity or other types of
civil disorder. These instabilities and any adverse changes in the political environment could increase our costs, increase our exposure to legal
and business risks, or disrupt our clinical operations.
We are subject to stringent privacy laws, information security policies and contractual obligations governing the use, processing, and
cross-border transfer of personal information and our data privacy and security practices.
We receive, generate and store significant and increasing volumes of sensitive information, such as employee, personal and patient data. We
are subject to a variety of local, state, national and international laws, directives and regulations that apply to the collection, use, retention,
protection, disclosure, transfer and other processing of personal data in the different jurisdictions in which we operate, including
comprehensive regulatory systems in the U.S. and Europe. Legal requirements relating to the collection, storage, handling, and transfer of
personal information and personal data continue to evolve and may result in ever-increasing public scrutiny and escalating levels of
enforcement, sanctions and increased costs of compliance.
25
Compliance with U.S. and international data protection laws and regulations could cause us to incur substantial costs or require us to change
our business practices and compliance procedures in a manner adverse to our business. Moreover, complying with these various laws could
require us to take on more onerous obligations in our contracts, restrict our ability to collect, use and disclose data, or in some cases, impact
our ability to operate in certain jurisdictions. Failure to comply with U.S. and international data protection laws and regulations could result
in government enforcement actions (which could include civil or criminal penalties), private litigation and/or adverse publicity and could
negatively affect our operating results and business. Claims that we have violated individuals’ privacy rights, failed to comply with data
protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time consuming to defend,
could result in adverse publicity and could have a material adverse effect on our business, financial condition and results of operations.
The collection and use of personal data in the European Union are governed by the General Data Protection Regulation (GDPR). The GDPR
imposes stringent requirements for controllers and processors of personal data, including, for example, more robust disclosures to individuals
and a strengthened individual data rights regime, shortened timelines for data breach notifications, limitations on retention of information,
increased requirements pertaining to special categories of data, such as health data, and additional obligations when we contract with third-
party processors in connection with the processing of the personal data. The GDPR also imposes strict rules on the transfer of personal data
out of the European Union to the United States and other third countries. In addition, the GDPR provides that European Union member states
may make their own further laws and regulations limiting the processing of personal data, including genetic, biometric or health data.
The GDPR applies extraterritorially, and we may be subject to the GDPR because of our data processing activities that involve the personal
data of individuals located in the European Union, such as in connection with any European Union clinical trials. GDPR regulations may
impose additional responsibility and liability in relation to the personal data that we process and we may be required to put in place additional
mechanisms to ensure compliance with the new data protection rules. This may be onerous and may interrupt or delay our development
activities, and adversely affect our business, financial condition, results of operations and prospects.
Other jurisdictions outside the European Union are similarly introducing or enhancing privacy and data security laws, rules, and regulations,
which could increase our compliance costs and the risks associated with non-compliance. We cannot guarantee that we may be in compliance
with all applicable international regulations as they are enforced now or as they evolve. For example, our privacy policies may be insufficient
to protect any personal information we collect, or may not comply with applicable laws, in which case we may be subject to regulatory
enforcement actions, lawsuits or reputational damage, all of which may adversely affect our business. If we fail to comply with the GDPR
and the applicable national data protection laws of the European Union member states, or if regulators assert we have failed to comply with
these laws, it may lead to regulatory enforcement actions, which can result in monetary penalties of up to €20,000,000 or up to 4% of the
total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative penalties. If any of these events
were to occur, our business and financial results could be significantly disrupted and adversely affected.
Although we take measures to protect sensitive data from unauthorized access, use or disclosure, our information technology and
infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other malicious or
inadvertent disruptions. Any such breach or interruption could compromise our networks and the information stored there could be accessed
by unauthorized parties, manipulated, publicly disclosed, lost or stolen. Any such access, breach or other loss of information could result in
legal claims or proceedings, and liability under federal or state laws that protect the privacy of personal information, and regulatory penalties.
In the United States, notice of breaches must be made to affected individuals, the U.S. Secretary of the Department of Health and Human
Services (HHS) and for extensive breaches, notice may need to be made to the media or U.S. state attorneys
26
general. Such a notice could harm our reputation and our ability to compete. The HHS has the discretion to impose penalties without
attempting to resolve violations through informal means. In addition, U.S. state attorneys general are authorized to bring civil actions seeking
either injunctions or damages in response to violations that threaten the privacy of state residents. Although we have implemented security
measures to prevent unauthorized access to patient data, such data is currently accessible through multiple channels, and there is no guarantee
we can protect our data from breach. Unauthorized access, loss or dissemination could also damage our reputation or disrupt our operations,
including our ability to conduct our analyses, deliver test results, process claims and appeals, provide customer assistance, conduct research
and development activities, collect, process and prepare company financial information, provide information about our tests and other patient
and physician education and outreach efforts through our website, and manage the administrative aspects of our business.
Risks Related to Our Intellectual Property
If we are unable to obtain or protect intellectual property rights related to our current product candidates or any future product
candidates which we may develop, we may not be able to compete effectively in our market.
We rely upon a combination of patents, trade secret protection, confidentiality agreements and proprietary know-how, and intend to seek
marketing exclusivity for any approved product, in order to protect the intellectual property related to product candidates. The patent
prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all
necessary or desirable patent applications at a reasonable cost or in a timely manner. The strength of patents in the biotechnology and
pharmaceutical field involves complex legal and scientific questions, is highly uncertain, and has, in the recent years, been the subject of
much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patent rights are highly uncertain. The
patent applications that we own or in-license may fail to result in issued patents with claims that cover our product candidates in the United
States or in other foreign countries for a number of reasons, including because of a finding of lack of novelty or that the claimed inventions
are already in the public domain. If this were to occur, early competition from third parties could be expected against our product candidates.
Even if patents do successfully issue, third parties may challenge their validity, enforceability or scope, which may result in such patents
being invalidated, rendered unenforceable, narrowed or deemed as not infringing. Also, a third party may challenge our ownership of patents
and patent applications assigned to us, or may challenge our exclusive rights to patents and patent applications that we license from third
parties. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property
or prevent others from circumventing our patents by developing products similar to or competing with our product candidates. If the patent
applications we hold with respect to our other product candidates fail to issue or if their breadth or strength of protection is threatened, it
could dissuade companies from collaborating with us to develop them, and threaten our ability to commercialize any resulting products. We
cannot offer any assurances about which, if any, applications will issue as patents or whether any issued patents will be found not invalid and
not unenforceable or will go unthreatened by third parties. In addition, due to the amount of time required for the development, testing and
regulatory review of new product candidates, patents protecting such candidates might expire before or shortly after such candidates are
commercialized. Furthermore, patent applications by third parties can result in an interference proceeding in the United States being invoked
by a third party or instituted by us to determine who was the first to invent any of the subject matter covered by the patent claims of our
applications or patents.
Because patent applications in the United States, Europe and many other jurisdictions are typically not published until 18 months after filing,
and because publications of discoveries in scientific literature lag behind actual discoveries, we cannot be certain that we were the first to
make the inventions claimed in our issued patents or pending patent applications, or that we were the first to file for protection of the
inventions
27
set forth in our patents or patent applications. As a result, we may not be able to obtain or maintain protection for certain inventions.
Therefore, the enforceability and scope of our patents in the United States, Europe and in many other jurisdictions cannot be predicted with
certainty and, as a result, any patents that we own or license may not provide sufficient protection against competitors. We may not be able to
obtain or maintain patent protection from our pending patent applications, from those we may file in the future, or from those we may license
from third parties. Moreover, even if we are able to obtain patent protection, such patent protection may be of insufficient scope to achieve
our business objectives.
Moreover, some of our owned patents and patent applications are, and may in the future be, co-owned with third parties. For example, under
our license agreement with CSL, we and CSL co-own certain intellectual property that we jointly developed prior to the completion of the
recent single ascending dose clinical trial. While we currently have an exclusive license to CSL’s rights under such co-owned intellectual
property, if we are unable to maintain such exclusive license, or if we are unable to obtain and maintain an exclusive license to any of our
other third-party co-owners’ rights under any intellectual property that we co-own, such co-owners may be able to license their rights to other
third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the
cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be
provided to us. Any of the foregoing could have a material adverse effect on our competitive position, business, financial conditions, results
of operations, and prospects.
Our inability to protect our confidential information and trade secrets would harm our business and competitive position.
In addition to the protection afforded by patents, we rely on trade secret protection and confidentiality agreements to protect proprietary
know-how that is not patentable, processes for which patents are difficult to enforce and any other elements of our drug development process
that involve proprietary know-how, information or technology that is not covered by patents. Trade secrets can be difficult to protect. We
seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to
them, such as our employees, corporate collaborators, outside scientific collaborators, contract research organizations, contract
manufacturers, consultants, advisors, and other third parties. We cannot guarantee that we have entered into such agreements with each party
that may have or have had access to our trade secrets or proprietary technology and processes. Despite these efforts, any of these parties may
breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate
remedies for such breaches Furthermore, we cannot guarantee that our trade secrets and other confidential proprietary information will not be
disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information
and techniques. If we are unable to prevent material disclosure of the non-patented intellectual property related to our technologies to third
parties, and there is no guarantee that we will have any such enforceable trade secret protection, we may not be able to establish or maintain a
competitive advantage in our market, which could materially adversely affect our business, results of operations and financial condition.
We may not be able to protect our intellectual property and proprietary rights throughout the world.
Filing, prosecuting, and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and
the laws of foreign countries may not protect our rights to the same extent as the laws of the United States. Consequently, we may not be able
to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made
using our inventions in and into the United States or other jurisdictions.
28
Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and,
further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as that in the
United States. These products may compete with our products, and our patents or other intellectual property rights may not be effective or
sufficient to prevent them from competing. If we are unable to block the commercialization of these products, these products may erode our
commercial position in the market place.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The
legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets, and other
intellectual property protection, which could make it difficult for us to stop the infringement of our patents or marketing of competing
products in violation of our intellectual property and proprietary rights generally. Proceedings to enforce our intellectual property and
proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our
business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and
could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies
awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights
around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
Several countries have compulsory licensing laws under which, in certain circumstances, a patent owner may be compelled to grant licenses
to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In
these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our
licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be
impaired, and our business, financial condition, results of operations, and prospects may be adversely affected.
In China, the validity, enforceability and scope of protection available under the relevant intellectual property laws are uncertain and still
evolving. Implementation and enforcement of Chinese intellectual property-related laws have historically been inconsistent. Accordingly,
intellectual property and confidentiality legal regimes in China may not afford protection to the same extent as in the United States or other
countries. Policing unauthorized use of proprietary technology is difficult and expensive, and we may need to resort to litigation to enforce or
defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. The experience
and capabilities of Chinese courts in handling intellectual property litigation varies, and outcomes are unpredictable. Further, such litigation
may require a significant expenditure of cash and may divert management’s attention from our operations, which could harm our business,
financial condition and results of operations. An adverse determination in any such litigation could materially impair our intellectual property
rights and may harm our business, prospects and reputation in China.
If we fail to comply with our obligations in the agreements under which we license rights to technology from third parties, or if the license
agreements are terminated for other reasons, we could lose license rights that are important to our business.
We are heavily reliant upon licenses to certain patent rights and proprietary technology from third parties that are important or necessary to
the development of our product candidates. Accordingly, we are party to a number of technology licenses that are important to our business
and expect to enter into additional licenses in the future. For example, our rights to ASLAN004 are the subject of an exclusive license
agreement with CSL. If we fail to comply with our obligations under our agreement with CSL (including, among other things, if we fail to
develop and commercialize ASLAN004 in a proper, efficient, skillful, diligent and competent manner) or our other license agreements, or we
are subject to insolvency or liquidation, our licensors may have the right to terminate the license.
29
In addition, under our agreement with CSL, in the event of a change of control, we are required to receive CSL’s prior consent to engage in
such a transaction if the change of control, in CSL’s reasonable opinion, adversely affects our ability to carry out the development of
ASLAN004 or would damage CSL’s reputation. A breach of this obligation may result in termination of the license. In the event that any of
our important technology licenses were to be terminated by the licensor, we may need to negotiate new or reinstated agreements, which may
not be available to us on equally favorable terms, or at all, or we could lose our rights under these agreements, including our rights to
intellectual property or technology important to our development programs, which would likely cause us to cease further development of the
related program, including ASLAN004. Furthermore, under certain of our collaboration agreements, our licensors may retain the right to
grant non-exclusive licenses to the licensed patents and technology to other academic or research institutions for non-commercial research
purposes, in which case we would not have exclusive rights to such licensed patents and technologies.
Our technology agreements under which we currently license intellectual property or technology to and from third parties are complex and
certain provisions in such agreements may be susceptible to multiple interpretations. The resolution of any contract interpretation
disagreement that may arise could narrow what we believe to be the scope of our rights to the relevant intellectual property or technology,
increase what we believe to be our financial or other obligations under the relevant agreement or decrease the third party’s financial or other
obligations under the relevant agreement, any of which could have a material adverse effect on our business, financial condition, results of
operations and prospects.
In addition, disputes may arise regarding intellectual property subject to a licensing agreement, including:
•
•
•
•
•
•
The scope of rights granted under the license agreement and other interpretation-related issues;
The extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the
licensing agreement;
The sublicensing of patent and other rights under our existing collaborative development relationships and any collaboration
relationships we might enter into in the future;
Our diligence obligations under the license agreement and what activities satisfy those diligence obligations;
The inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our
current and future licensors and us; and
The priority of invention of patented technology.
We are generally also subject to all of the same risks with respect to protection of intellectual property that we license, as we are for
intellectual property that we own, which are described elsewhere under “Risks Related to Our Intellectual Property.” If we or our licensors
fail to adequately protect this intellectual property, our ability to commercialize products could suffer. Moreover, if disputes over intellectual
property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on commercially acceptable
terms, we may be unable to successfully develop and commercialize the affected product candidates, which could have a material adverse
effect on our business, financial conditions, results of operations, and prospects.
30
Third-party claims of intellectual property infringement may prevent or delay our development and commercialization efforts.
Our commercial success depends in part on our avoiding infringement of the patents and proprietary rights of third parties. There is a
substantial amount of litigation, both within and outside the United States, involving patent and other intellectual property rights in the
biotechnology and pharmaceutical industries, including patent infringement lawsuits, interferences, oppositions, reexamination, post-grant
review, inter partes review, and derivation proceedings before the U.S. Patent and Trademark Office (USPTO) and equivalent proceedings in
foreign jurisdictions (e.g., opposition proceedings). Numerous U.S. and foreign issued patents and pending patent applications which are
owned by third parties, exist in the fields in which we and our collaborators are developing product candidates. As the biotechnology and
pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may be subject to claims of
infringement of the patent rights of third parties.
Third parties may assert that we or our product candidates are infringing, misappropriating or otherwise violating their intellectual property
without authorization. There may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture
or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to
issue, there may be currently pending patent applications which may later result in issued patents that our product candidates may infringe.
In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents. If any third-
party patents were held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any drug
substance formed during the manufacturing process or any final product itself, the holders of any such patents may be able to block our
ability to commercialize such product candidate unless we obtain a license under the applicable patents, which may not be available on
commercially reasonable terms or at all, or until such patents are invalidated or expire. Similarly, if any third-party patent were held by a
court of competent jurisdiction to cover aspects of our formulations or methods of use, the holders of any such patent may be able to block
our ability to develop and commercialize the applicable product candidate formulation or use unless we obtain a license, which may not be
available on commercially reasonable terms or at all, or until such patent expires. In either case, such a license may not be available on
commercially reasonable terms or at all.
Parties making intellectual property claims against us may request and/or obtain injunctive or other equitable relief, which could effectively
block our ability to further develop and commercialize one or more of our product candidates. Defense of these claims, regardless of their
merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business. Even if we
believe any third-party intellectual property claims are without merit, there is no assurance that a court would find in our favor on questions
of validity, enforceability, priority, or non-infringement. In the event of a successful claim of infringement against us, we may have to pay
substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties,
pay royalties or redesign our infringing products or manufacturing processes, which may be impossible or require substantial time and
monetary expenditure. We cannot predict whether any such license would be available at all or whether it would be available on
commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance
our research, manufacture clinical trial supplies or allow commercialization of our product candidates. The licensing or acquisition of third-
party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire
third-party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive
advantage over us due to their size, capital resources and greater clinical development or commercialization capabilities. In addition,
companies that
31
perceive us to be a competitor may be unwilling to assign or license rights to us. We may fail to obtain any of these licenses at a reasonable
cost or on reasonable terms, if at all. In that event, we would be unable to further develop and commercialize one or more of our product
candidates, which could harm our business significantly. We cannot provide any assurances that third-party patents do not exist which might
be enforced against our products, resulting in either an injunction prohibiting our sales, or, with respect to our sales, an obligation on our part
to pay royalties and/or other forms of compensation to third parties.
We may be involved in lawsuits to protect or enforce our patents or the patents of our licensors, which could be expensive, time
consuming and unsuccessful.
Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file
infringement claims, which can be expensive and time-consuming. If we or one of our licensors were to initiate legal proceedings against a
third party to enforce a patent covering one of our products, the defendant could counterclaim that such patent is invalid or unenforceable. In
patent litigation in the United States or in Europe, defendant counterclaims alleging invalidity or unenforceability are commonplace. In
addition, in an infringement proceeding, a court may decide that a patent of ours or our licensors is not valid or is unenforceable, may narrow
the scope of our or our licensor’s patents, or may refuse to stop the defendant from using the technology at issue on the grounds that our
patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our
patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.
Interference proceedings provoked by third parties or brought by us may be necessary to determine the priority of inventions with respect to
our patents or patent applications or those of our collaborators or licensors. An unfavorable outcome could require us to cease using the
related technology or to attempt to license rights to it from the prevailing party. Our business could be harmed if the prevailing party does not
offer us a license on commercially reasonable terms. Our defense of litigation or interference proceedings may fail and, even if successful,
may result in substantial costs and distract our management and other employees. We may not be able to prevent, alone or with our licensors,
misappropriation of our intellectual property rights, particularly in countries where the laws may not protect those rights as fully as in the
United States.
Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that
some of our confidential information could be compromised by disclosure during this type of litigation. There could also be public
announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive
these results to be negative, it could have a material adverse effect on the price of our ADSs.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our product
candidates.
Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly,
time-consuming and inherently uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States could
increase the uncertainties and costs surrounding the prosecution of patent applications and the enforcement or defense of issued patents.
Recent patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act (Leahy-Smith Act),
could increase those uncertainties and costs. The Leahy-Smith Act includes provisions that affect the way patent applications are prosecuted,
redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents, and may also
affect patent litigation. These include allowing third-party submission of prior art to the USPTO during patent
32
prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant
review, inter partes review and derivation proceedings. In addition, assuming that other requirements for patentability are met, prior to March
15, 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to
file a patent application was entitled to the patent. After March 15, 2013, under the Leahy-Smith Act, the United States transitioned to a first
inventor to file system in which, assuming that the other statutory requirements are met, the first inventor to file a patent application will be
entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. However, the Leahy-
Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the
enforcement or defense of our issued patents, all of which could have a material adverse effect on our business, financial condition, results of
operations and prospects.
In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection
available in certain circumstances or weakening the rights of patent owners in certain situations. This combination of events has created
uncertainty with respect to the validity and enforceability of patents, once obtained. Depending on future actions by the U.S. Congress, the
U.S. courts, the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in
unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in
the future.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment
and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-
compliance with these requirements.
Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the
lifetime of the patent. The USPTO and various foreign governmental patent agencies require compliance with a number of procedural,
documentary, fee payment and other similar provisions during the patent application process. While an inadvertent lapse can in many cases
be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which non-compliance can
(i) result in abandonment or lapse of, or (ii) otherwise affect the patentability of, the patent or patent application, resulting in partial or
complete loss of patent rights in the relevant jurisdiction. Non-compliance events that could result in abandonment or lapse of a patent or
patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and
failure to properly legalize and submit formal documents. If we or our licensors that control the prosecution and maintenance of our licensed
patents fail to maintain the patents and patent applications covering our product candidates, our competitors might be able to enter the
market, which would have a material adverse effect on our business.
In addition, as licensees we may not be responsible for or have control over the prosecution or enforceability of our licensed patents. In such
cases, we have to rely on the licensor to comply with the requisite obligations of the patent offices, including the duty of disclosure, filing
assignments, etc. We cannot guarantee that our licensed patents and patent applications will be prosecuted, maintained and enforced in a
manner consistent with the best interests of our business. As licensees, we may not be in a position to assess if these duties have been
complied with or have the ability to complete these duties on behalf of the licensor. Failure by our licensors to comply with such duties may
affect the enforceability of the patent rights, narrow the scope of our patent protection and, more generally, could affect the value of our
patent rights. If our patent protection is reduced or eliminated, we may not be able to prevent our competitors or other third parties from
developing or commercializing products similar to ours and may be required to cease development of our product candidates, which could
have a material adverse effect on our business.
33
If we do not obtain patent term extension for any product candidates we may develop, our business may be materially harmed.
Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may develop, one or more
of our owned or in-licensed U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term
Restoration Act of 1984 (Hatch-Waxman Amendments). The Hatch-Waxman Amendments permit a patent term extension of up to five years
as compensation for the patent term lost during the FDA regulatory review process. A patent term extension cannot extend the remaining
term of a patent beyond a total of 14 years from the date of product approval, only one patent may be extended and only those claims
covering the approved drug, a method for using it or a method for manufacturing it may be extended. However, we may not be granted an
extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply
within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements.
Moreover, the applicable time period or the scope of patent protection afforded could be less than we request. Similar issues apply in the
patent legal systems of other key markets such as the European Union. If we are unable to obtain patent term extension or the term of any
such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration, and our
business, financial condition, results of operations and prospects could be materially harmed.
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential
information of third parties.
We employ individuals, and work with consultants or independent contractors, who were previously employed at other biotechnology or
pharmaceutical companies, including our competitors or potential competitors. We may be subject to claims that we or our employees,
consultants or independent contractors have inadvertently or otherwise used or disclosed confidential information, including trade secrets, of
any such individual’s former employers or other third parties. We may also be subject to claims that former employers or other third parties
have an ownership interest in our patents. Litigation may be necessary to defend against these claims. If we fail in defending any such claims,
in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. There is no guarantee of success in
defending these claims, and even if we are successful, litigation could result in substantial cost and be a distraction to our management and
other employees.
In addition, while it is our policy to require our employees, consultants and independent contractors who may be involved in the conception
or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing
such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of
intellectual property rights may not be self-executing (and may require further action), or the assignment agreements may be breached, and
we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what
we regard as our intellectual property. Such claims could have a material adverse effect on our business, financial condition, results of
operations, and prospects.
34
If our trademarks and tradenames are not adequately protected, then we may not be able to build name recognition in our markets and
our business may be adversely affected.
We have registered or applied to register certain trademarks to protect our company name and plan to apply to register trademarks to cover
product names in the future once our product candidates are closer to commercialization. We cannot assure you that our trademark
applications will be approved or that we will seek registered trademark protection for each of our product names in each jurisdiction in which
we operate. During trademark registration proceedings, we may receive rejections. Although we are given an opportunity to respond to those
rejections, we may be unable to overcome such rejections. In addition, in proceedings before the USPTO and in proceedings before
comparable agencies in many foreign jurisdictions, third parties are given an opportunity to oppose pending trademark applications and to
seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may
not survive such proceedings. In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which
could result in loss of brand recognition and could require us to devote resources toward advertising and marketing new brands. Further, we
cannot assure you that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks.
Intellectual property rights do not necessarily address all potential threats.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations
and may not adequately protect our business or permit us to maintain our competitive advantage. For example:
•
Others may be able to make products that are similar to any product candidates we may develop or utilize similar technology but
that are not covered by the claims of the patents that we license or may own in the future;
• We, or our license partners or current or future collaborators, might not have been the first to make the inventions covered by the
issued patent or pending patent application that we license or may own in the future;
• We, or our license partners or current or future collaborators, might not have been the first to file patent applications covering
certain of our or their inventions;
•
•
•
•
Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our
owned or licensed intellectual property rights;
It is possible that our pending licensed patent applications or those that we may own in the future will not lead to issued patents;
Issued patents that we hold rights to may be held invalid or unenforceable, including as a result of legal challenges by our
competitors;
Our competitors might conduct research and development activities in countries where we do not have patent rights and then use
the information learned from such activities to develop competitive products for sale in our major commercial markets;
• We may not develop additional proprietary technologies that are patentable;
•
The patents of others may harm our business; and
• We may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a
patent covering such intellectual property.
Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations, and
prospects.
35
Risks Related to Commercialization of Our Product Candidates
Our commercial success depends upon attaining significant market acceptance of our product candidates, if approved, among physicians,
healthcare payors, patients and the medical community.
Even if we obtain regulatory approval for our product candidates, the product may not gain market acceptance among physicians, healthcare
payors, patients and the medical community, which is critical to commercial success. Market acceptance of any product candidate for which
we receive approval depends on a number of factors, including:
•
•
•
•
•
•
•
•
•
•
•
The efficacy and safety as demonstrated in clinical trials;
The timing of market introduction of the product candidate as well as competitive products;
The clinical indications for which the product candidate is approved;
Acceptance by physicians, the medical community and patients of the product candidate as a safe and effective treatment and also
the willingness of physicians to prescribe a drug based on an active pharmaceutical ingredient (API) that is less familiar to them
than other drug APIs;
The convenience of prescribing and initiating patients on the product candidate;
The potential and perceived advantages of such product candidate over alternative treatments;
The cost of treatment in relation to alternative treatments, including any similar generic treatments;
Favorable pricing and the availability of coverage and adequate reimbursement by third-party payors, such as government
authorities;
Relative convenience and ease of administration;
The prevalence and severity of adverse side effects; and
The effectiveness of sales and marketing efforts.
If our product candidates are approved but fail to achieve an adequate level of acceptance by physicians, healthcare payors, patients and the
medical community, we will not be able to generate significant revenue, and we may not become or remain profitable. In addition, even if
any of our product candidates gain acceptance, the markets for the treatment of patients with our target indications may not be as significant
as we estimate.
Our organization has no prior sales and marketing experience and resources.
We have never, as an organization, commercialized a product and there is no guarantee that we will be able to do so successfully. We will
need to establish a commercial team and hire sales forces in the geographies where we are permitted and intend to market our drugs. We will
also need to develop a marketing team and strategy in order to successfully market and sell our product candidates, which will require
significant time and resources and the development of our ability to market and sell our product and generate revenues from our product
candidates may be delayed or limited. We cannot assure you that our sales efforts will be effective or produce the results we expect. We will
be competing with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.
Further, we may face difficulties or delays in obtaining and maintaining the required licenses and permits to sell our product candidates in
individual states and jurisdictions. If the commercialization of any of our product candidates is unsuccessful or perceived as disappointing,
the price of our ADSs could decline significantly and the long-term success of the product and our company could be harmed.
36
We may also seek to establish collaborations with pharmaceutical companies to maximize the potential of our products in other markets. For
example, we are conducting a Phase 1 clinical trial to develop ASLAN004 as a treatment for atopic dermatitis, and, in the future, we may
seek a global partner to support Phase 3 clinical trials and potential commercialization. We may not be successful in establishing
development and commercialization collaborations which could adversely affect, and potentially prohibit, our ability to develop our product
candidates.
If our planned targeted commercial organization in the United States and selected Asian markets is not as successful as we anticipate, we
may be unable to generate any revenue.
Although we have started building a targeted commercial organization, we currently have a very limited commercial organization and
capability, and the cost of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. In order to
market any products that may be approved, we must build sales, marketing, managerial and other non-technical capabilities or make
arrangements with third parties to perform these services. We may enter into strategic partnerships with third parties to commercialize our
product candidates.
Part of our business strategy is to establish collaborative relationships to commercialize and fund development and approval of certain of
our product candidates. We may not succeed in establishing and maintaining collaborative relationships, which may significantly limit
our ability to develop and commercialize products, for which we pursue this commercialization strategy.
We will need to establish and maintain successful collaborative relationships to obtain sales, marketing and distribution capabilities for the
product candidates we do not intend to commercialize ourselves. The process of establishing and maintaining collaborative relationships is
difficult, time-consuming and involves significant uncertainty, including:
• We may have limited control over the decisions of any partners and they may change the priority of any programs in a manner that
would result in termination or significant delays to a partnered program;
•
•
•
•
Our ability to generate future payments and royalties from any partners will depend upon the ability of a partner to obtain
regulatory approvals and achieve market acceptance of products developed from our product candidates;
A partner may fail to properly initiate, maintain or defend our intellectual property rights, where applicable, or a party may use our
proprietary information in such a way as to invite litigation that could jeopardize or potentially invalidate our proprietary
information or expose us to potential liability;
A partner may not devote sufficient capital or resources towards our product candidates; and,
A partner may not comply with applicable government regulatory requirements necessary to successfully market and sell our
products.
If any collaborator fails to fulfill its responsibilities in a timely manner, or at all, any clinical development, manufacturing or
commercialization efforts pursuant to that collaboration could be delayed or terminated, or it may be necessary for us to assume
responsibility for expenses or activities that would otherwise have been the responsibility of our collaborator. If we are unable to establish
and maintain collaborative relationships on acceptable terms or to successfully and timely transition terminated collaborative agreements, we
may have to delay or discontinue further development of one or more of our product candidates, undertake development and
commercialization activities at our own expense or find alternative sources of capital.
37
Attempting to secure additional financing for a product candidate may also lead to the risks discussed under the risk factor titled “We will
need to obtain substantial amounts of financing for our operations, and if we fail to obtain additional financing, we may be forced to delay,
reduce or eliminate our product development programs or commercialization efforts” described above.
We rely completely on third parties to manufacture our preclinical and clinical drug supplies and we intend to rely on third parties to
produce commercial supplies of any approved product candidate.
If we were to experience an unexpected loss of supply of our product candidates for any reason, whether as a result of manufacturing, supply
or storage issues or otherwise (including, for example, any disruptions caused by the recent outbreak of COVID-19), we could experience
delays, disruptions, suspensions or terminations of, or be required to restart or repeat, clinical trials. We do not currently have nor do we plan
to acquire the infrastructure or capability internally to manufacture our preclinical and clinical drug supplies and we lack the resources and
the capability to manufacture any of our product candidates on a clinical or commercial scale. The facilities used by our contract
manufacturers or other third-party manufacturers to manufacture our product candidates must be approved by the U.S. FDA, NMPA or other
regulators pursuant to inspections. While we work closely with our third-party manufacturers on the manufacturing process for our product
candidates, including quality audits, we generally do not control the implementation of the manufacturing process of, and are completely
dependent on, our contract manufacturers or other third-party manufacturers for compliance with cGMP regulatory requirements and for
manufacture of both active drug substances and finished drug products. If our contract manufacturers or other third-party manufacturers
cannot successfully manufacture material that conforms to applicable specifications and the strict regulatory requirements of the U.S. FDA,
NMPA or other regulators, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition,
we have no control over the ability of our contract manufacturers or other third-party manufacturers to maintain adequate quality control,
quality assurance and qualified personnel. If the U.S. FDA, NMPA or other regulators do not approve these facilities for the manufacture of
our product candidates or if they withdraw any such approval in the future, we may need to find alternative manufacturing facilities, which
could take several years and would significantly impact our ability to develop, obtain regulatory approval for or market our product
candidates, if approved.
We rely on our manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our
clinical trials. There are a limited number of suppliers for raw materials that we use to manufacture our product candidates and there may be
a need to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product
candidates for our clinical trials, and if approved, for commercial sale. We do not have any control over the process or timing of the
acquisition of these raw materials by our manufacturers. Although we generally do not begin a clinical trial unless we believe we have a
sufficient supply of a product candidate to complete the clinical trial, any significant delay in the supply of a product candidate, or the raw
material components thereof, for an ongoing clinical trial due to the need to replace a contract manufacturer or other third-party manufacturer
could considerably delay completion of our clinical trials, product testing and potential regulatory approval of our product candidates. If our
manufacturers or we are unable to purchase these raw materials after regulatory approval has been obtained for our product candidates, the
commercial launch of our product candidates would be delayed or there would be a shortage in supply, which would impair our ability to
generate revenue from the sale of our product candidates.
38
We expect to continue to depend on contract manufacturers or other third-party manufacturers for the foreseeable future, and our
requirements for and dependence upon these third-party manufacturers will increase when and if one or more of our product candidates is
approved and commercialized. We have not entered into any long-term commercial supply agreements with our current contract
manufacturers or with any alternate contract manufacturers. Although we intend to do so prior to any commercial launch of our product
candidates, if approved by the U.S. FDA, in order to ensure that we maintain adequate supplies of finished drug product, we may be unable
to enter into such an agreement or do so on commercially reasonable terms, which could have a material adverse impact upon our business,
including delaying a product launch or subjecting our commercialization efforts to significant supply risk. Even if we are able to enter into
long-term agreements with manufacturers for commercial supply on reasonable terms, we may be unable to do so with sufficient time prior to
the launch of our product candidates, which would expose us to substantial supply risk and potentially jeopardize our launch.
Manufacturing issues may arise that could increase product and regulatory approval costs or delay commercialization.
As we scale up manufacturing of our product candidates and conduct required stability testing, product, packaging, equipment and process-
related issues may require refinement or resolution in order to proceed with our planned clinical trials and obtain regulatory approval for
commercial marketing. In the future, we may identify impurities, which could result in increased scrutiny by the regulatory agencies, delays
in our clinical program and regulatory approval, increases in our operating expenses, or failure to obtain or maintain approval for our product
candidates.
Guidelines and recommendations published by various organizations can reduce the use of our product candidates.
Government agencies promulgate regulations and guidelines directly applicable to us and to our product candidates. In addition, professional
societies, such as practice management groups, private health and science foundations and organizations involved in various diseases from
time to time may also publish guidelines or recommendations to the healthcare and patient communities. Recommendations of government
agencies or these other groups or organizations may relate to such matters as usage, dosage, route of administration and use of concomitant
therapies. Recommendations or guidelines suggesting the reduced use of our product candidates or the use of competitive or alternative
products as the standard of care to be followed by patients and healthcare providers could result in decreased use of our product candidates.
We face significant competition from other biopharmaceutical companies, and our operating results will suffer if we fail to compete
effectively.
Our industry is intensely competitive and subject to rapid and significant technological change. While we believe that our Asia based
development platform, knowledge, experience and scientific resources provide us with competitive advantages, we face substantial
competition from multinational pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies, universities
and other research institutions worldwide. For example, there are several therapies currently in clinical development for atopic dermatitis,
including lebrikizumab being developed by Dermira, Inc./Eli Lilly and Company, and tralokinumab being developed by Leo Pharma A/S. In
addition, dupilumab, developed by Sanofi S.A. and Regeneron Pharmaceuticals, Inc., is approved for the treatment of moderate-to-severe atopic
dermatitis and moderate-to-severe asthma.
39
Many of our competitors have significantly greater financial, clinical and human resources. Additionally, small and early-stage companies
may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. As a
result, our competitors may discover, develop, license or commercialize products before or more successfully than we do. Competition may
increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in
these industries. Our competitors may succeed in developing, acquiring or licensing on an exclusive basis drug products or drug delivery
technologies that are more effective or less costly than our product candidates that we are currently developing or that we may develop.
We believe that our ability to successfully compete will depend on, among other things:
•
•
•
•
The efficacy and safety of our product candidates, especially as compared to marketed products and product candidates in
development by third parties;
The time it takes for our product candidates to complete clinical development and receive marketing approval;
The ability to commercialize and market any of our product candidates that receive regulatory approval;
The price of our products;
• Whether coverage and adequate levels of reimbursement are available from third-party payors, such as private and governmental
health insurance plans, including Medicare;
The ability to protect intellectual property rights related to our product candidates;
The ability to manufacture on a cost-effective basis and sell commercial quantities of any of our product candidates that receive
regulatory approval; and
Acceptance of any of our product candidates that receive regulatory approval by physicians and other healthcare providers.
•
•
•
If our competitors market products that are more effective, safer or less expensive than our future products, if any, or that reach the market
sooner than our future products, if any, we may not achieve commercial success. Because we have limited research and development
capabilities, it may be difficult for us to stay abreast of the rapid changes in technology. If we fail to stay at the forefront of technological
change, we may be unable to compete effectively. Technological advances or products developed by our competitors may render our
technologies or product candidates obsolete, less competitive or not economical.
Price controls may adversely affect our future profitability.
In certain countries, prescription drug pricing and reimbursement is subject to governmental control. In those countries that impose price
controls, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product.
To obtain reimbursement or pricing approval in some countries, we or our strategic partners may be required to conduct a clinical trial that
compares the cost-effectiveness of our product candidates to other available therapies.
40
Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins
after marketing or product licensing approval is granted. In certain markets, prescription pharmaceutical pricing remains subject to
continuing governmental control even after initial approval is granted. As a result, we or our strategic partners might obtain marketing
approval for a product candidate in a particular country, but then be subject to price regulations that delay commercial launch of the product
candidate, possibly for lengthy time periods, and negatively impact the revenue that we generate from the sale of the product in that country.
If reimbursement of such product candidates is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, or if
there is competition from lower priced cross-border sales, our profitability will be negatively affected.
Legislative or regulatory healthcare reforms may make it more difficult and costly for us to obtain regulatory clearance or approval of
our product candidates and to produce, market and distribute our products after clearance or approval is obtained.
From time to time, legislation is drafted and introduced that could significantly change the statutory provisions governing the regulatory
clearance or approval, manufacture and marketing of regulated products or the reimbursement thereof. In addition, U.S. FDA regulations and
guidance are often revised or reinterpreted by the U.S. FDA in ways that may significantly affect our business and our products. Any new
regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our product
candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated,
enacted or adopted may have on our business in the future. Such changes could, among other things, require:
•
•
•
•
Changes to manufacturing methods;
Change in clinical trial design, including additional treatment arm (control);
Recall, replacement or discontinuance of one or more of our products; and
Additional recordkeeping.
Each of these would likely entail substantial time and cost and could harm our business and our financial results.
In addition, in the United States, there have been a number of legislative and regulatory proposals to change the health care system in ways
that could affect our ability to sell our products profitably. The pharmaceutical industry in the United States, as an example, has been affected
by the passage of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010,
collectively PPACA, which, among other things, imposed new fees on entities that manufacture or import certain branded prescription drugs
and expanded pharmaceutical manufacturer obligations to provide discounts and rebates to certain government programs. There remain
judicial and Congressional challenges to certain aspects of PPACA, as well as efforts by the Trump administration to repeal or replace certain
aspects of PPACA. Since January 2017, President Trump has signed Executive Orders and other directives designed to delay the
implementation of certain provisions of PPACA or otherwise circumvent some of the requirements for health insurance mandated by
PPACA. In addition, The Centers for Medicare & Medicaid Services (CMS), an agency within the U.S. Department of Health and Human
Services (HHS), published a final rule to give states greater flexibility in setting benchmarks for insurers in the individual and small group
marketplaces, which may have the effect of relaxing the essential health benefits required under the PPACA marketplaces. Further, Congress
has considered legislation that would repeal or repeal and replace all or part of the PPACA. While Congress has not passed comprehensive
repeal legislation, several bills affecting the implementation of certain taxes under the PPACA have been signed into law. The Tax Cuts and
Jobs Act of 2017 (Tax Act) includes a provision that repealed, effective January 1, 2019, the tax-based shared responsibility payment
imposed by the
41
PPACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the
“individual mandate”. In addition, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the PPACA-
mandated “Cadillac” tax on high-cost employer-sponsored health coverage and medical device tax and, effective January 1, 2021, also
eliminates the health insurer tax. The Bipartisan Budget Act of 2018 (BBA) among other things, amended the PPACA, effective January 1,
2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in
Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” In December 2018,
CMS published a new final rule permitting further collections and payments to and from certain PPACA qualified health plans and health
insurance issuers under the PPACA risk adjustment program in response to the outcome of federal district court litigation regarding the
method CMS uses to determine this risk adjustment. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texasr
(Texas District Court Judge) ruled that the individual mandate is a critical and inseverable feature of the PPACA, and therefore, because it
was repealed as part of the Tax Act, the remaining provisions of the PPACA are invalid as well. Additionally, on December 18, 2019, the
U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the
case back to the District Court to determine whether the remaining provisions of the PPACA are invalid as well. On March 2, 2020, the
United States Supreme Court granted the petitions for writs of certiorari to review this case, and has allotted one hour for oral arguments,
which are expected to occur in the fall. It is unclear how such litigation and other efforts to repeal and replace the PPACA will impact the
PPACA and our business.
Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. For example, in August 2011,
the Budget Control Act of 2011, among other things, created measures for spending reductions by U.S. Congress. A Joint Select Committee
on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was
unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes
aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and, due to
subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2029 unless additional Congressional
action is taken. In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare payments to
certain providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five
years.
Further, there has been particular and increasing legislative and enforcement interest in the United States with respect to drug pricing
practices in recent years, particularly with respect to drugs that have been subject to relatively large price increases over relatively short time
periods. There have been several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among
other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, and reform
government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for the year
2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-
pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. Additionally, the Trump administration
previously released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contained additional proposals to increase
manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list
price of their products and reduce the out of pocket costs of drug products paid by consumers. HHS has solicited feedback on some of these
measures and has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare
Advantage plans the option to use step therapy for Part B drugs beginning January 1, 2020. This final rule codified CMS’s policy change that
was effective January 1, 2019.
42
Although a number of these and other measures may require additional authorization to become effective, Congress and the Trump
administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. At the
state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological
product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost
disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.
In the future, there will likely continue to be proposals relating to the reform of the U.S. healthcare system, some of which could further limit
coverage and reimbursement of drug products, including our product candidates.
Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private
payors. Our results of operations could be adversely affected by PPACA and by other health care reforms that may be enacted or adopted in
the future.
It may be difficult for us to profitably sell any future products that may be approved if coverage and reimbursement for these products is
limited by government authorities and/or third-party payor policies.
In addition to any healthcare reform measures which may affect reimbursement, market acceptance and sales of our product candidates, if
approved, will depend on, in part, the extent to which our products, and the procedures which utilize our products, will be covered by third-
party payors, such as government health care programs, commercial insurance and managed care organizations. These third-party payors
determine the extent to which new drugs, and the procedures which utilize new drugs, will be covered as a benefit under their plans and the
level of reimbursement for any covered product and procedures utilizing such products. It is difficult to predict at this time what third-party
payors will decide with respect to the coverage and reimbursement for our product candidates, and the procedures which utilize our product
candidates.
A primary trend in the healthcare industry has been cost containment, including price controls, restrictions on coverage and reimbursement
and requirements for substitution of generic products and/or biosimilars. Third-party payors decide which drugs, and procedures using such
drugs, they will pay for and establish reimbursement and co-payment levels. Government and other third-party payors are increasingly
challenging the prices charged for health care products and services, examining the cost effectiveness of drugs in addition to their safety and
efficacy, and limiting or attempting to limit both coverage and the level of reimbursement for prescription drugs and the procedures which
utilize prescription drugs. We cannot be sure that coverage will be available for our product candidates, and the procedures which utilize our
product candidates, if approved, or, if coverage is available, the level of reimbursement.
There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products, and the procedures which
utilize such products. In the United States, the principal decisions about reimbursement for new medicines, and the procedures which utilize
new medicines, are typically made by CMS, as CMS decides whether and to what extent a new medicine, and procedures which utilize a new
medicine, will be covered and reimbursed under Medicare. Private payors may follow CMS, but have their own methods and approval
processes for determining reimbursement for new medicines, and the procedures that utilize new medicines. It is difficult to predict what
CMS or other payors will decide with respect to reimbursement for fundamentally novel products such as ours, as there is no body of
established practices and precedents for these new products.
43
Reimbursement may impact the demand for, and/or the price of, any product for which we obtain marketing approval. Assuming we obtain
coverage for a given product, or a procedure which utilizes a given product, by a third-party payor, the resulting reimbursement payment
rates may not be adequate or may require co-payments that patients find unacceptably high. Patients who are prescribed medications and
procedures for the treatment of their conditions, and their prescribing physicians, generally rely on third-party payors to reimburse all or part
of the costs associated with those prescription drugs and procedures. Patients are unlikely to use our products, or agree to procedures utilizing
our products, unless coverage is provided and reimbursement is adequate to cover all or a significant portion of the associated costs.
Therefore, coverage and adequate reimbursement is critical to new product acceptance. Coverage decisions may depend upon clinical and
economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or
subsequently become available. There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and the
procedures which utilize newly approved drugs, and coverage may be more limited than the purposes for which such drug is approved by the
U.S. FDA or comparable foreign regulatory authorities.
Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs,
including research, development, manufacture, sale and distribution.
We expect to experience pricing pressures in connection with the sale of any of our product candidates due to the trend toward managed
healthcare, the increasing influence of health maintenance organizations, and additional legislative changes. The downward pressure on
healthcare costs in general, particularly prescription drugs, medical devices and surgical procedures and other treatments, has become very
intense. As a result, increasingly high barriers are being erected to the successful commercialization of new products. Further, the adoption
and implementation of any future governmental cost containment or other health reform initiative may result in additional downward
pressure on the price that we may receive for any approved product. Reimbursement by a third-party payor may depend upon a number of
factors including the third-party payor’s determination that use of a product is:
•
•
•
•
•
A covered benefit under its health plan;
Safe, effective and medically necessary;
Appropriate for the specific patient;
Cost-effective; and
Neither experimental nor investigational.
Obtaining coverage and reimbursement approval for a product, or a procedure which utilizes a product, from a government or other third-
party payor is a time-consuming and costly process that could require us to provide supporting scientific, clinical and cost effectiveness data
for the use of our products, and the procedures which utilize our products, to the payor. Further, no uniform policy requirement for coverage
and reimbursement for drug products, and procedures which utilize drug products, exists among third-party payors in the United States.
Therefore, coverage and reimbursement for drug products, and the procedures which utilize drug products, can differ significantly from payor
to payor. As a result, the coverage determination process may require us to provide scientific and clinical support for the use of our products
to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first
instance. We may not be able to provide data sufficient to gain acceptance with respect to coverage and/or sufficient reimbursement levels.
We cannot be sure that coverage or adequate reimbursement will be available for our product candidates, or the procedures which utilize our
product candidates, if approved. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our
future products. If reimbursement is not available, or is available only to limited levels, we may not be able to commercialize our product
candidates, or achieve profitably at all, even if approved.
44
Reimbursement may not be immediately available for our product candidates in China, which could diminish our sales or affect our
profitability.
In China, the Ministry of Human Resources and Social Security of China or provincial or local human resources and social security
authorities, together with other government authorities, review the inclusion or removal of drugs from China’s National Drug Catalog for
Basic Medical Insurance, Work-related Injury Insurance and Maternity Insurance, or the National Reimbursement Drug List (NRDL), or
provincial or local medical insurance catalogues for the National Medical Insurance Program regularly, and the tier under which a drug will
be classified, both of which affect the amounts reimbursable to program participants for their purchases of those drugs. These determinations
are made based on a number of factors, including price and efficacy.
We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws and health information
privacy and security laws. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Our current and future operations may be directly or indirectly through our relationships with healthcare providers, patients and other persons
and entities, subject to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or
financial arrangements and relationships through which we research, market, sell and distribute our products. In addition, we may be subject
to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our
ability to operate include:
The U.S. Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully offering, paying, soliciting,
receiving or providing any remuneration, directly or indirectly, overtly or covertly, to induce or in return for purchasing, leasing, ordering or
arranging for or recommending the purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare,
Medicaid or other U.S. federal healthcare programs. The U.S. Anti-Kickback Statute has been interpreted to apply to arrangements between
pharmaceutical manufacturers on the one hand and prescribers, purchasers, and formulary managers, among others, on the other. There are a
number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution.
The U.S. federal false claims laws, including the False Claims Act (FCA) and civil monetary penalties laws, which prohibit any person or
entity from, among other things, knowingly presenting, or causing to be presented, a false, fictitious or fraudulent claim for payment to, or
approval by, the U.S. federal government or knowingly making, using or causing to be made or used a false record or statement material to a
false or fraudulent claim to the U.S. federal government. As a result of a modification made by the Fraud Enforcement and Recovery Act of
2009, a claim includes “any request or demand” for money or property presented to the U.S. government. In addition, manufacturers can be
held liable under the FCA even when they do not submit claims directly to government third-party payors if they are deemed to “cause” the
submission of false or fraudulent claims. The FCA also permits a private individual acting as a “whistleblower” to bring actions on behalf of
the federal government alleging violations of the FCA and to share in any monetary recovery. FCA liability is potentially significant in the
healthcare industry because the statute provides for treble damages and mandatory penalties per false claim or statement. Government
enforcement agencies and private whistleblowers have investigated pharmaceutical companies for or asserted liability under the FCA for a
variety of alleged promotional and marketing activities, such as providing free product to customers with the expectation that the customers
would bill federal programs for the product; providing consulting fees and other benefits to physicians to induce them to prescribe products;
engaging in promotion for “off-label” uses; and submitting inflated best price information to the Medicaid Rebate Program.
45
HIPAA prohibits, among other actions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare
benefit program, including private third-party payors, knowingly and willfully embezzling or stealing from a healthcare benefit program,
willfully obstructing a criminal investigation of a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a
material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare
benefits, items or services.
The Physician Payments Sunshine Act, enacted as part of PPACA, imposes, among other things, annual reporting requirements for covered
manufacturers for certain payments and “transfers of value” provided to physicians, as defined by such law, and teaching hospitals, as well as
ownership and investment interests held by physicians and their immediate family members.
HIPAA, as amended by HITECH, and their respective implementing regulations, impose, among other things, specified requirements relating
to the privacy, security and transmission of individually identifiable health information held by covered entities, which include certain
healthcare providers, health plans and healthcare clearinghouses, and their business associates, which include individuals or entities that
perform services for covered entities that involve the creation, use, maintenance or disclosure of, individually identifiable health information.
HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to
business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to
enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions. In addition, state laws
govern the privacy and security of health information in specified circumstances, many of which differ from each other in significant ways
and may not have the same effect, thus complicating compliance efforts.
Many U.S. states and other foreign jurisdictions have analogous laws and regulations, such as state anti-kickback and false claims laws, that
may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party
payors, including private insurers. In addition, certain states require drug manufacturers to report information related to payments and other
transfers of value to physicians and other healthcare providers or marketing expenditures and certain states and local jurisdictions require the
registration of pharmaceutical sales representatives.
Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that
some of our business activities could be subject to challenge under one or more of such laws. In addition, recent health care reform
legislation has strengthened these laws. For example, recent health care reform legislation, has among other things, amended the intent
requirement of the U.S. Anti-Kickback Statute and criminal healthcare fraud statutes. A person or entity no longer needs to have actual
knowledge of this statute or specific intent to violate it in order to have committed a violation. Moreover, recent health care reform legislation
provides that the government may assert that a claim including items or services resulting from a violation of the U.S. Anti-Kickback Statute
constitutes a false or fraudulent claim for purposes of the FCA.
46
Ensuring that our business arrangements with third parties comply with applicable healthcare laws and regulations will likely be costly. It is
possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or
case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations were found to be in violation of any
of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative
penalties, damages, fines, disgorgement, imprisonment, possible exclusion from government funded healthcare programs, contractual
damages, reputational harm, diminished profits and future earnings, additional reporting obligations and oversight if we become subject to a
corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and curtailment of our operations,
any of which could substantially disrupt our operations. If the physicians or other providers or entities with whom we expect to do business
are found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including
exclusions from government funded healthcare programs.
We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to our operations and non-compliance
with such laws can subject us to criminal and/or civil liability and harm our business.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (FCPA), the U.S. domestic bribery statute contained in 18
U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money laundering laws
in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents,
third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly,
improper payments or benefits to recipients in the public or private sector. We engage third-party investigators, CROs, and other consultants
to design and perform preclinical studies of our product candidates, and will do the same for any clinical trials. Also, once a product
candidate has been approved and commercialized, we may engage third-party intermediaries to promote and sell our products abroad and/ or
to obtain necessary permits, licenses, and other regulatory approvals. We or our third-party intermediaries may have direct or indirect
interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or
other illegal activities of these third-party intermediaries, our employees, representatives, contractors, collaborators, partners, and agents,
even if we do not explicitly authorize or have actual knowledge of such activities.
Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions,
settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or
injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse
media coverage, and other collateral consequences. If any subpoenas, investigations, or other enforcement actions are launched, or
governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of
operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially
significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In
certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor which can result in added costs and
administrative burdens.
47
The incidence and prevalence for target patient populations of our product candidates are based on estimates and third-party sources. If
the market opportunities for our product candidates are smaller than we estimate or if any approval that we obtain is based on a narrower
definition of the patient population, our revenue and ability to achieve profitability might be materially and adversely affected.
Periodically, we make estimates regarding the incidence and prevalence of target patient populations for particular diseases based on various
third-party sources and internally generated analysis and use such estimates in making decisions regarding our drug development strategy,
including acquiring or in-licensing product candidates and determining indications on which to focus in preclinical or clinical trials.
These estimates may be inaccurate or based on imprecise data. For example, the total addressable market opportunity will depend on, among
other things, acceptance of our drugs by the medical community and patient access, drug pricing and reimbursement. The number of patients
in the addressable markets may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our drugs, or
new patients may become increasingly difficult to identify or gain access to, all of which may significantly harm our business, financial
condition, results of operations and prospects.
Risks Related to our ADSs
The price of our ADSs may be volatile and may fluctuate due to factors beyond our control.
The trading market for publicly traded emerging biopharmaceutical and drug discovery and development companies has been highly volatile
and is likely to remain highly volatile in the future. The stock market in general and the market for biopharmaceutical and drug discovery and
development companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of
particular companies. The recent outbreak of COVID-19, for example, has negatively affected the stock market and investor sentiment and
has resulted in significant volatility. The market price of our ADSs may fluctuate significantly due to a variety of factors, including:
•
•
•
•
•
•
•
•
•
•
•
•
•
Positive or negative results from, or delays in, testing and clinical trials by us, collaborators or competitors;
Technological innovations or commercial product introductions by us or competitors;
Changes in government regulations;
Changes in the structure of healthcare payment systems;
Developments concerning proprietary rights, including patents and litigation matters;
Public concern relating to the commercial value or safety of our product candidates;
Financing, collaborations or other corporate transactions;
Publication of research reports or comments by securities or industry analysts;
General market conditions in the pharmaceutical industry or in the economy as a whole;
The loss of any of our key scientific or senior management personnel;
The perceived values of our ordinary shares trading on the Taipei Exchange (TPEx) and our ADSs trading on Nasdaq relative to
one another;
Sales of our ADSs or ordinary shares by us, our senior management and board members or holders of our ADSs or our ordinary
shares in the future; or
Other events and factors, many of which are beyond our control.
48
These and other market and industry factors may cause the market price and demand for our ADSs to fluctuate substantially, regardless of
our actual operating performance, which may limit or prevent investors from readily selling their ADSs and may otherwise negatively affect
the liquidity of our ADSs. In addition, the stock market in general, and biopharmaceutical companies in particular, have experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. In the past,
when the market price of a security has been volatile, holders of that security have sometimes instituted securities class action litigation
against the issuer. If any of the holders of our ADSs were to bring such a lawsuit against us, we could incur substantial costs defending the
lawsuit and the attention of our senior management would be diverted from the operation of our business. Any adverse determination in
litigation could also subject us to significant liabilities.
Restrictions on the ability to deposit our ordinary shares into our American depositary receipt facility may adversely affect the liquidity of
our ADSs.
The ability to deposit our ordinary shares into our American depositary receipt facility for the issuance of ADSs is restricted by Republic of
China (ROC) law, which may adversely affect the liquidity of our ADSs. Under current ROC law and the Deposit Agreement, no person or
entity, including the holders of ADSs and us, may deposit our ordinary shares in our American depositary receipt facility for the issuance of
ADRs without specific approval of the Financial Supervisory Commission (FSC) unless:
(i) We pay stock dividends on, or make a free distribution of, our ordinary shares;
(ii) The ADS holder exercises pre-emptive rights in the event of capital increases for cash; or
(iii)
Investors purchase our ordinary shares, directly or through the depositary, on the TPEx, and deliver our ordinary shares to the
custodian for deposit into our American depositary receipt facility, or our existing shareholders deliver our ordinary shares to the
custodian for deposit into our American depositary receipt facility.
With respect to (iii) above, the depositary may issue ADSs against the deposit of those shares only if the total number of ADSs outstanding
following the deposit will not exceed the number of ADSs previously approved by the FSC, plus any ADSs issued pursuant to the events
described in items (i) and (ii) above. Issuance of additional ADSs under item (iii) above will be permitted to the extent that a corresponding
number of previous ADSs have been cancelled.
The price of our ADSs may be limited by the trading price of our ordinary shares on the TPEx.
Our ordinary shares have been listed on the TPEx since June 1, 2017 under the code “6497.” From May 4, 2018 through April 10, 2020, the
closing price of our ordinary shares on the TPEx ranged from NT$3.14 per share to NT$49.85 per share (which would be approximately
$0.10 per share to $1.66 per share, based on the exchange rate in effect as of April 10, 2020). During the same period, the closing price of our
ADSs on The Nasdaq Global Market ranged from $0.37 per ADS to $10.24 per ADS. The TPEx sets certain limitations on the trading
volatility of our ordinary shares and applicable ROC law requires the price at which our ADSs are issued in an offering to not be lower than
90% of the closing price of our ordinary shares on the pricing date of the offering or an average of closing prices a certain number of days
prior to the pricing date of the offering. In addition, there is currently a ten percent limit on the daily price movement on the TPEx. As a
result of these limitations, the potential increase in trading price of any ADSs that you may purchase in an offering may be materially limited
based on the perceived value of our ordinary shares on the TPEx. Similarly, decreases in the trading price of our ordinary shares on the TPEx
due to the perceptions of investors in that market, which may be different from your own, may impact the value of your investment.
49
The cross listing of our ordinary shares and our ADSs may adversely affect the liquidity and value of our ADSs.
The cross listing of our ordinary shares and our ADSs may dilute the liquidity of these securities in one or both markets and may adversely
affect the development of an active trading market for our ADSs in the United States. The price of our ADSs could also be adversely affected
by trading in our ordinary shares on the TPEx. In addition, currency fluctuations as between the New Taiwan dollar and U.S. dollar may have
an adverse impact on the value of our ADSs.
We have incurred and will incur increased costs as a result of operating as a public company in the United States, and our senior
management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
Our ADSs began trading on The Nasdaq Global Market on May 4, 2018 under the trading symbol “ASLN.” As a U.S. public company, we
have incurred significant legal, accounting and other expenses that we did not incur previously, and we will incur additional expenses after
we no longer qualify as an emerging growth company (EGC). The Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and
Consumer Protection Act, the listing requirements of The Nasdaq Stock Market LLC (Nasdaq) and other applicable securities rules and
regulations impose various requirements on non-U.S. reporting public companies, including the establishment and maintenance of effective
disclosure and financial controls and corporate governance practices. Our senior management and other personnel will need to devote a
substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial
compliance costs and will make some activities more time-consuming and costly. For example, we expect that these rules and regulations
may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it more
difficult for us to attract and retain qualified senior management personnel or members for our board of directors.
However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a
result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result
in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance
practices.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404), we will be required to furnish a report by our senior management
on our internal control over financial reporting and an attestation report on internal control over financial reporting issued by our independent
registered public accounting firm. However, while we remain an EGC we will not be required to include an attestation report on internal
control over financial reporting issued by our independent registered public accounting firm. To achieve compliance with Section 404 within
the prescribed period, we will be engaged in a process to document and evaluate our internal control over financial reporting, which is both
costly and challenging. In this regard, we will need to continue to dedicate internal resources, potentially engage outside consultants, adopt a
detailed work plan to assess and document the adequacy of internal control over financial reporting, continue steps to improve control
processes as appropriate, validate through testing that controls are functioning as documented, and implement a continuous reporting and
improvement process for internal control over financial reporting. Despite our efforts, there is a risk that we will not be able to conclude,
within the prescribed timeframe or at all, that our internal control over financial reporting is effective as required by Section 404. If we
identify one or more material weaknesses, it could result in an adverse reaction in the financial markets due to a loss of confidence in the
reliability of our financial statements.
50
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because
we are incorporated under Cayman Islands law, we conduct substantially all of our operations and all of our directors and executive
officers reside outside of the United States.
We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our Seventh
Amended and Restated Memorandum and Articles of Association (Articles), the Companies Law (2020 Revision) of the Cayman Islands and
the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and
the fiduciary duties of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman
Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as
well as from the common law of England and Wales, the decisions of whose courts are of persuasive authority, but are not binding, on a court
in the Cayman Islands. Similarly, the rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as
clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman
Islands has a less developed body of securities laws than the United States, and some U.S. states, such as Delaware, have more fully
developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies do not have
standing to sue before the federal court of the United States.
Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records
or to obtain copies of lists of shareholders of these companies. Although our shareholders are permitted by our Articles to request access to
our books and records, our directors have discretion under our Articles to determine whether or not, and under what conditions, our corporate
records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more
difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other
shareholders in connection with a proxy contest.
Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies
incorporated in other jurisdictions such as the United States. To the extent we choose to follow home country practice with respect to corporate
governance matters, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S.
domestic issuers.
As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by
management, members of the board of directors or controlling shareholders than they would as public shareholders of a company
incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Law of the Cayman
Islands and the laws applicable to companies incorporated in the United States and their shareholders, see “Item 10. Additional Information
—B. Memorandum and articles of association—Material Differences in Corporate Law.”
Future sales, or the possibility of future sales, of a substantial number of our ADSs or ordinary shares could adversely affect the price of
our ADSs.
Future sales of a substantial number of our ADSs or ordinary shares, or the perception that such sales will occur, could cause a decline in the
market price of our ADSs. If any of our large shareholders or members of our management team sell substantial amounts of our securities in
the public markets, or the market perceives that such sales may occur, the market price of our ADSs and our ability to raise capital through an
issue of equity securities in the future could be adversely affected.
51
We may sell additional equity or debt securities or enter into other financing arrangements to fund our operations, which may result in
dilution to our shareholders and holders of our ADSs and impose restrictions on our business.
In order to raise additional funds to support our operations, we may sell additional equity or debt securities, which could adversely impact our
existing shareholders and new investors, as well as our business. The sale of additional equity or debt securities, or a combination of both,
would result in the issuance of additional shares capital and dilution to our shareholders and holders of our ADSs.
The incurrence of indebtedness would result in increased fixed payment obligations and could also result in certain restrictive covenants,
such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and
other operating restrictions that could adversely impact our ability to conduct our business. In the event that we enter into collaborations or
licensing arrangements to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party
on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves or
potentially reserve for future potential arrangements when we might be able to achieve more favorable terms.
Because we do not anticipate paying any cash dividends on our ADSs or ordinary shares in the foreseeable future, capital appreciation, if
any, will be your sole source of potential gains and you may never receive a return on your investment.
We have not paid cash dividends in the past on our ordinary shares. We intend to retain earnings, if any, for use in our business and do not
anticipate paying any cash dividends in the foreseeable future. As a result, capital appreciation, if any, on our ADSs or ordinary shares will be
your sole source of potential gains for the foreseeable future, and you will suffer a loss on your investment if you are unable to sell your
ADSs or the underlying ordinary shares at or above the price you pay for our ADSs or ordinary shares. Investors seeking cash dividends
should not purchase our ADSs.
Purchasers of our ADSs may not have the same voting rights as the holders of our ordinary shares and may not receive voting materials
in time to be able to exercise their right to vote.
As a holder of our ADSs, you will only be able to exercise the voting rights with respect to the underlying ordinary shares in accordance with
the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon
receipt of your voting instructions, the depositary will try to vote the underlying ordinary shares in accordance with these instructions. You
will not be able to directly exercise your right to vote with respect to the underlying shares unless you withdraw the shares. When a general
meeting is convened, you may not receive sufficient advance notice to withdraw the shares underlying your ADSs to allow you to vote with
respect to any specific matter. After we notify the depositary of the agenda for the shareholders’ meeting, the depositary will notify you of the
upcoming vote and will arrange to deliver our voting materials to you once they are available. We have agreed to give the depositary at least
30 days’ prior notice of shareholder meetings. Nevertheless, we cannot assure you that you will receive the voting materials in time to ensure
that you can instruct the depositary to vote your shares. In addition, the depositary and its agents are not responsible for failing to carry out
voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to
vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.
52
Except in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote our ordinary shares underlying
your ADSs if you do not vote at shareholders’ meetings, which could adversely affect your interests.
Under the deposit agreement for our ADSs, to the extent we have provided the depositary with at least 45 days’ notice of a proposed meeting,
if voting instructions are not timely received by the depositary from you, you shall be deemed to have instructed the depositary to give a
discretionary proxy to a person designated by us to vote the shares represented by your ADSs as desired. However, no such instruction shall
be deemed given and no discretionary proxy shall be given (a) if we inform the depositary in writing that (i) we do not wish such proxy to be
given, (ii) substantial opposition exists with respect to any agenda item for which the proxy would be given or (iii) the agenda item in
question, if approved, would materially or adversely affect the rights of holders of shares and (b) unless we have provided the depositary with
an opinion of our counsel to the effect that (a) the granting of such discretionary proxy does not subject the depositary to any reporting
obligations in the Cayman Islands or the ROC, or by the ROC FSC, or TPEx, (b) the granting of such proxy will not result in a violation of
the laws, rules, regulations or permits of the Cayman Islands, the ROC, the ROC FSC or TPEx, (c) the voting arrangement and deemed
instruction will be given effect under the laws, rules, regulations and permits of the Cayman Islands, the ROC, the ROC FSC and TPEx and
(d) the granting of such proxy will not under any circumstances result in the depositary being treated as the beneficial owner of ADSs under
the laws, rules, regulations or permits of the Cayman Islands, the ROC, the ROC FSC and TPEx.
The effect of this discretionary proxy is that, if you fail to give voting instructions to the depositary as to how to vote the ordinary shares
underlying your ADSs at any particular shareholders’ meeting, you cannot prevent our ordinary shares underlying your ADSs from being
voted at that meeting, absent the situations described above, and it may make it more difficult for shareholders to influence our management.
Holders of our ordinary shares are not subject to this discretionary proxy.
You may not be able to withdraw the underlying ordinary shares of our ADSs.
Pursuant to ROC law, an ADS holder who is a non-ROC person wishing to withdraw and hold deposited ordinary shares from the ADS facility
is required to appoint an eligible agent in the ROC for filing tax returns and making tax payments, or a Tax Guarantor. Such Tax Guarantor will
be required to meet the qualifications set by the Ministry of Finance of the ROC and will act as the guarantor of the withdrawing ADS
holder’s tax payment obligations. In addition, subject to certain limited exceptions, under current ROC law, repatriation of profits by a non-
ROC withdrawing ADS holder is subject to the submission of evidence by the withdrawing ADS holder of the appointment of a Tax Guarantor
to, and approval thereof by, the ROC tax authority and of tax clearance certificates or evidentiary documents issued by the Tax Guarantor. We
cannot provide any assurances that a withdrawing ADS holder will be able to appoint and obtain approval from the tax authority in a timely
manner or at all.
Pursuant to ROC law, an ADS holder who is not an ROC person or ROC entity wishing to present ADSs to the depositary for cancellation
and withdrawal and holding of the Deposited Securities from the depositary receipt facility is required to register as a foreign investor with
the Taiwan Stock Exchange (TWSE) if the ADS holder has never been registered as foreign investor with the TWSE previously, for making
investments in the ROC securities market prior to withdrawing and holding the underlying ordinary shares from the depositary receipts
facility.
53
Additionally, pursuant to ROC law, such withdrawing ADS holder is required to appoint a local agent in the ROC to, on such ADS holder’s
behalf, open a securities trading account with prior approval granted by the TWSE with a local securities brokerage firm (with qualification
set by the FSC) and a bank account, pay ROC taxes, remit funds, exercise shareholder rights and perform such other functions as the ADS
holder may designate upon such withdrawal. In addition, such withdrawing ADS holder is also required to appoint a custodian bank and open
a custodian account to hold the securities and cash in safekeeping, make confirmations, settle trades and report all relevant information.
Without making such appointment and the opening of such custodian account, the withdrawing ADS holder would be unable to hold or
subsequently sell the deposited ordinary shares withdrawn from the ADR facility on the TPEx. The laws of the ROC applicable to the
withdrawal of the underlying ordinary shares may change from time to time. We cannot provide any assurances that current law will remain
in effect or that future changes of ROC law will not adversely affect the ability of ADS holders to withdraw deposited ordinary shares.
Purchasers of our ADSs may not receive distributions on our ordinary shares in the form of ADSs or any value for them if it is illegal or
impractical to make them available to holders of ADSs.
The depositary for our ADSs has agreed to pay to purchasers of our ADSs the cash dividends or other distributions it or the custodian
receives on our ordinary shares or other deposited securities after deducting its fees and expenses and certain taxes. Purchasers of our ADSs
will receive these distributions in proportion to the number of our ordinary shares their ADSs represent. However, in accordance with the
limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution available to holders of ADSs. We have
no obligation to take any other action to permit the distribution of our ADSs, ordinary shares, rights or anything else to holders of our ADSs.
This means that purchasers of our ADSs may not receive the distributions we make on our ordinary shares or any value from them if it is
unlawful or impractical to make them available to ADS holders. These restrictions may have a negative impact on the market value of our
ADSs.
Purchasers of our ADSs may be subject to limitations on transfer of their ADSs.
ADSs are transferable on the books of the depositary. However, the depositary may close its transfer books at any time or from time to time
when it deems expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or
register transfers of ADSs generally when our books or the books of the depositary are closed, or at any time if we or the depositary deems it
advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit
agreement, or for any other reason in accordance with the terms of the deposit agreement. The rights of our shareholders may differ from the
rights typically offered to shareholders of a U.S. corporation.
54
Our corporate affairs are governed by our Articles and by the laws governing Cayman Islands corporations and companies engaging in drug
development, marketing and sales businesses, as well as by the common law of the Cayman Islands. Certain rights and responsibilities of our
shareholders, ADS holders and members of our board of directors under Cayman law are different from those that apply to a Delaware
corporation. For example, Directors of Cayman Islands exempted companies are required to observe certain fiduciary duties. These duties are
owed to the Cayman Islands company and include the duty to act in the best interests of the company and the shareholders as a whole. However,
the fiduciary duties of a director of a Cayman Islands exempted company may not be the same as the fiduciary duty of a director of a U.S.
corporation. In addition, controlling shareholders of U.S. corporations owe fiduciary duties to minority shareholders, while shareholders
(including controlling shareholders) of Cayman Islands companies owe no fiduciary duties to either to the company or to other shareholders.
Further, the rights of our shareholders to bring shareholders’ suits against us or our board of directors under Cayman Islands law are much
more limited than those of shareholders of a U.S. corporation. For example, under Cayman Islands law, a shareholder who wishes to bring a
claim against a director would generally need to obtain permission from the courts to bring a derivative action, in the name of the company,
against the director. This is because the director of a Cayman Islands exempted company owes duties to the company and not to individual
shareholders. As a result, our shareholders may have more difficulty protecting their rights in connection with actions taken by our directors
than they would as shareholders of a U.S. corporation. In addition, minority shareholders in a Cayman Islands exempted company have more
limited rights than minority shareholders in a U.S. corporation in relation to mergers and similar transactions that the company may carry out.
For example, if a merger under the Companies Law involving a Cayman Islands exempted company is approved by the requisite majority of
shareholders, a dissenting minority shareholder would have the right to be paid the fair value of their shares (which, if not agreed between the
parties, will be determined by the Cayman Islands court) if they follow the required procedures, subject to certain exceptions. Such dissenter
rights differ substantially from the appraisal rights, which would ordinarily be available to dissenting shareholders of Delaware corporations.
Further, if a takeover offer is made to the shareholders of a Cayman Islands exempted company and accepted by holders of 90% of the shares
affected, the offeror may require the holders of the remaining shares to transfer such shares on the terms of the offer. An objection can be made
to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is
evidence of fraud, bad faith or collusion. A minority shareholder in this scenario would have no rights comparable to the appraisal rights
which would generally be available to a dissenting shareholder of a U.S. corporation in similar circumstances. See the section of this Annual
Report titled “Item 10. Additional Information—B. Memorandum and articles of association—Material Differences in Corporate Law” for a
description of the principal differences between the provisions of Cayman law applicable to us and the U.S. Delaware General Corporate Law
relating to shareholders’ rights and protections.
55
We qualify as a foreign private issuer and, as a result, we are not subject to U.S. proxy rules and are subject to Exchange Act reporting
obligations that permit less detailed and less frequent reporting than that of a U.S. domestic public company.
We report under the Exchange Act as a non-U.S. company with foreign private issuer status. Because we qualify as a foreign private issuer
under the Exchange Act, we are exempt from certain provisions of the Exchange Act that are applicable to U.S. domestic public companies,
including (i) the sections of the Exchange Act regulating the solicitation of proxies, consents or authorizations in respect of a security registered
under the Exchange Act; (ii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading
activities and liability for insiders who profit from trades made in a short period of time; and (iii) the rules under the Exchange Act requiring the
filing with the SEC of quarterly reports on Form 10-Q containing unaudited financial and other specified information, or current reports on
Form 8-K upon the occurrence of specified significant events. In addition, our officers, directors and principal shareholders are exempt from the
reporting and “short-swing” profit recovery provisions of Section 16 of the Exchange Act and the rules thereunder. Therefore, our
shareholders may not know on a timely basis when our officers, directors and principal shareholders purchase or sell our ordinary shares or
ADSs. In addition, foreign private issuers are not required to file their annual report on Form 20-F until the date that is four months after the end
of each fiscal year, while U.S. domestic issuers that are accelerated filers are required to file their annual report on Form 10-K within 75 days
after the end of each fiscal year. Foreign private issuers also are exempt from Regulation Fair Disclosure, aimed at preventing issuers from
making selective disclosures of material information. As a result of the above, you may not have the same protections afforded to shareholders
of companies that are not foreign private issuers.
As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that
differ significantly from Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than
they would enjoy if we complied fully with corporate governance listing standards.
As a foreign private issuer, we are permitted to take advantage of certain provisions in the Nasdaq listing rules that allow us to follow ROC
law for certain governance matters. Certain corporate governance practices in the ROC may differ significantly from corporate governance
listing standards. We intend to continue to follow ROC corporate governance practices in lieu of certain corporate governance requirements
of Nasdaq. Therefore, our shareholders may be afforded less protection than they otherwise would have under corporate governance listing
standards applicable to U.S. domestic issuers.
56
We may lose our foreign private issuer status in the future, which could result in significant additional costs and expenses.
As discussed above, we are a foreign private issuer, and therefore, we are not required to comply with all of the periodic disclosure and
current reporting requirements of the Exchange Act. The determination of foreign private issuer status is made annually on the last business
day of an issuer’s most recently completed second fiscal quarter. We would lose our foreign private issuer status if, for example, more than
50% of our ordinary shares are directly or indirectly held by residents of the United States and we fail to meet additional requirements
necessary to maintain our foreign private issuer status. If we lose our foreign private issuer status on this date, we will be required to file with
the SEC periodic reports and registration statements on U.S. domestic issuer forms, which are more detailed and extensive than the forms
available to a foreign private issuer. We will also have to mandatorily comply with U.S. federal proxy requirements, and our officers,
directors and principal shareholders will become subject to the short-swing profit disclosure and recovery provisions of Section 16 of the
Exchange Act. In addition, we will lose our ability to rely upon exemptions from certain corporate governance requirements under the
Nasdaq listing rules. As a U.S. listed public company that is not a foreign private issuer, we will incur significant additional legal, accounting
and other expenses that we will not incur as a foreign private issuer, and accounting, reporting and other expenses in order to maintain a
listing on a U.S. securities exchange. These rules and regulations could also make it more difficult for us to attract and retain qualified
members of our board of directors and more expensive to procure director and officer liability insurance.
We are an EGC and we cannot be certain if the reduced reporting requirements applicable to “emerging growth companies” will make
our ADSs less attractive to investors.
We are an EGC as defined in the JOBS Act. For as long as we continue to be an EGC, we may take advantage of exemptions from various
reporting requirements that are applicable to other public companies that are not EGCs, including not being required to comply with the
auditor attestation requirements of Section 404, exemptions from the requirements of holding a nonbinding advisory vote on executive
compensation and shareholder approval of any golden parachute payments not previously approved. We may take advantage of these
exemptions until we are no longer an EGC. We could be an EGC until December 31, 2023, although circumstances could cause us to lose
that status earlier, including if the aggregate market value of our ADSs and ordinary shares held by non-affiliates exceeds $700 million as of
the end of our second fiscal quarter before that time, in which case we would no longer be an EGC as of the following December 31st (the
last day of our fiscal year). We cannot predict if investors will find our ADSs less attractive because we may rely on these exemptions. If
some investors find our ADSs less attractive as a result, there may be a less active trading market for our ADSs and the price of our ADSs
may be more volatile.
57
If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our
financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which
would harm our business and the trading price of our ADSs.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate
disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties
encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in
connection with Section 404, or any subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our
internal controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to
our financial statements or identify other areas for further attention or improvement. Inadequate internal controls could also cause investors to
lose confidence in our reported financial information, which could have a negative effect on the trading price of our ADSs.
Management is required to assess the effectiveness of our internal controls annually. However, for as long as we are an EGC under the JOBS
Act, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal controls over financial
reporting pursuant to Section 404. An independent assessment of the effectiveness of our internal controls could detect problems that our
management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements
requiring us to incur the expense of remediation and could also result in an adverse reaction in the financial markets due to a loss of
confidence in the reliability of our financial statements.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of
our ADSs and our trading volume could decline.
The trading market for our ADSs depends in part on the research and reports that securities or industry analysts publish about us or our
business. If no or too few securities or industry analysts provide coverage or if one or more of the analysts who cover us downgrade our
ADSs or publish inaccurate or unfavorable research about our business, the price of our ADSs would likely decline. If one or more of these
analysts cease coverage of us or fail to publish reports on us regularly, demand for our ADSs could decrease, which might cause the price of
our ADSs and trading volume to decline.
Our U.S. ADS Holders may suffer adverse tax consequences if we are characterized as a passive foreign investment company.
Generally, if for any taxable year (i) 75% or more of our gross income is passive income, or (ii) at least 50% of the average quarterly value of
our assets are held for the production of, or produce, passive income, we would be characterized as a passive foreign investment company
(PFIC) for U.S. federal income tax purposes. For purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns
at least 25% by value of the shares of another corporation is treated as if it held its proportionate share of the assets of the other corporation
and received directly its proportionate share of the income of the other corporation. Passive income generally includes dividends, interest,
rents, royalties and capital gains. Based on estimates of our gross income and gross assets (including tangible assets and intangible assets
based on the anticipated market value of our ordinary shares), and the nature of our business, we believe we were a PFIC for the taxable year
ended December 31, 2019 and we expect to be a PFIC for the current year and in future taxable years. There can be no assurance, however,
regarding our PFIC status for any taxable year. If we are characterized as a PFIC, our U.S. shareholders may suffer
58
adverse tax consequences, including having gains realized on the sale of our ordinary shares treated as ordinary income, rather than as capital
gain, the loss of the preferential rate applicable to dividends received on our ordinary shares by individuals who are U.S. Holders (as defined
in “Material Income Tax Considerations—Material U.S. Federal Income Tax Considerations for U.S. Holders”), and having interest charges
apply to distributions by us and the proceeds of share sales and having to comply with certain reporting requirements. Certain elections exist
that may alleviate some of the adverse consequences of PFIC status and would result in an alternative treatment (such as mark-to-market
treatment) of our ordinary shares; however, we do not intend to provide the information necessary for U.S. holders to make qualified electing
fund elections if we are classified as a PFIC.
Item 4. Information on the Company
A. History and development of the company.
ASLAN Pharmaceuticals Pte. Ltd. was incorporated in Singapore in April 2010 and ASLAN Pharmaceuticals Limited was incorporated in
Cayman Islands in June 2014 as the listing vehicle for our initial public offering and listing on the TPEx. Our subsidiaries, ASLAN
Pharmaceuticals Taiwan Limited, ASLAN Pharmaceuticals Australia Pty Ltd., ASLAN Pharmaceuticals Hong Kong Limited, ASLAN
Pharmaceuticals (Shanghai) Co. Ltd. and ASLAN Pharmaceuticals (USA) Inc., were incorporated in the Republic of China, Australia, Hong
Kong, China and the United States in November 2013, July 2014, July 2015, May 2016 and October 2018, respectively.
Our principal executive offices are located at 83 Clemenceau Avenue, #12-03 UE Square, Singapore 239920. Our telephone number at that
address is +65 6222 4235. Our registered office in the Cayman Islands is at the offices of Intertrust Corporate Services (Cayman) Limited at
190 Elgin Avenue, George Town, Grand Cayman KY1-9005, Cayman Islands. Our agent for service of process in the United States is
Cogency Global Inc. 10 East 40th Street 10th Floor, New York, New York 10016, and the telephone number is +1 212 947 7200. The SEC
maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file
electronically with the SEC at http://www.sec.gov. We also maintain a corporate website at www.aslanpharma.com. Information contained in,
or that can be accessed through, our website is not a part of, and shall not be incorporated by reference into, this document. We have included
our website address in this document solely as an inactive textual reference.
Since our inception in 2010, we have devoted substantially all of our resources to acquiring rights to, and developing our product candidates,
including preclinical studies and clinical trials and providing general and administrative support for our operations. We have not generated
any revenue from product sales and we do not currently have any products approved for commercialization. We have financed our operations
through a combination of debt and equity financings and government grants.
Our actual capital expenditures for the years ended December 31, 2017, 2018 and 2019 amounted to $291,432, $80,262 and $2,992,
respectively. These capital expenditures primarily consisted of our continued investment in construction of additional facilities to support the
development of our products and technologies. We anticipate our capital expenditures in 2020 to be financed from our existing cash and cash
equivalents, including the net proceeds from our public offering of American Depositary Shares on the Nasdaq Global Market.
59
B. Business overview.
We are a clinical-stage immunology and oncology focused biopharmaceutical company developing innovative treatments to transform the
lives of patients.
Our portfolio is led by ASLAN004, a fully human monoclonal antibody that binds to the IL-13 receptor α1 subunit (IL-13Rα1), blocking
signaling of two pro-inflammatory cytokines, IL-4 and IL-13, which are central to triggering symptoms of atopic dermatitis, such as redness
and itching of the skin. ASLAN004 has the potential to be best-in-disease for atopic dermatitis and asthma. We are conducting a Phase 1
clinical trial investigating ASLAN004 as a therapeutic antibody for moderate-to-severe atopic dermatitis and preliminary results from the
first set of patients that have completed one month of dosing in our multiple ascending dose (MAD) trial showed early signs of efficacy in the
low dose cohort. The MAD clinical trial is expected to complete in the fourth quarter of 2020.
We are also developing ASLAN003, an orally active, potent inhibitor of human dihydroorotate dehydrogenase (DHODH) that has the
potential to be first-in-class therapy in AML.
Our Product Candidates
The following table summarizes our product candidate pipeline and discovery programs:
We hold global rights to all of our product candidates with the exception of varlitinib and ASLAN003, for both of which BioGenetics Co.,
Ltd. (BioGenetics), acquired rights for the Republic of Korea, or South Korea.
60
ASLAN004. ASLAN004 is a fully human monoclonal antibody that binds to the IL-13 receptor a1 subunit (IL-13Ra1), blocking signaling of
two pro-inflammatory cytokines, IL-4 and IL-13, which are central to triggering symptoms of atopic dermatitis, such as redness and itching
of the skin. We have initiated a Phase 1 clinical trial investigating ASLAN004 as a therapeutic antibody for atopic dermatitis. A single
ascending dose (SAD) clinical trial in healthy volunteers was completed in the second quarter of 2019. In October 2019, we initiated a
multiple ascending dose (MAD) clinical trial in moderate-to-severe atopic dermatitis patients. In December 2019, we reported preliminary
results from the first set of patients that had completed one month of dosing, which showed early signs of efficacy in the low dose cohort. We
recently announced that recruitment of new patients into our MAD clinical trial has been paused in light of recently imposed government
restrictions in Singapore to contain the spread of COVID-19. We intend to resume screening as soon as government restrictions are lifted and
we are taking steps to open sites in Australia to accelerate recruitment. The MAD clinical trial is expected to complete in the fourth quarter of
2020.
ASLAN003. We are developing ASLAN003, an inhibitor of DHODH, in acute myeloid leukemia (AML) and are exploring development in
other tumors where this mechanism has been shown to be relevant. ASLAN003 has the potential to induce differentiation in leukemic blast
cells and our observed signs of clinical activity and tolerance leads us to believe that ASLAN003 could be applicable in a broad range of
AML patients. In AML, we have completed a dose escalation trial testing ASLAN003 as a monotherapy in refractory patients. Early signs of
efficacy were observed, with a significant reduction in peripheral blood blast cell counts in several patients. However, a material reduction in
bone marrow blast cell counts has been confirmed in only one patient. To increase the efficacy of ASLAN003 in the bone marrow, we intend
to combine ASLAN003 with azacitidine in relapsed refractory AML patients. Recently published preclinical data also support ASLAN003’s
potential as a potent DHODH inhibitor and novel target for differentiation therapy.
Additional Pipeline Programs. Varlitinib is a highly potent, oral, reversible small molecule pan-HER. We recently announced that a Phase 2
clinical trial of varlitinib failed to meet its primary endpoints. In addition, we have established a joint venture with Bukwang Pharmaceutical
Co., Ltd. (Bukwang), a leading research and development focused Korean pharmaceutical company, to develop antagonists of the aryl
hydrocarbon receptor (AhR), an immune checkpoint inhibitor.
Our Product Candidates
ASLAN004
ASLAN004 is a fully human monoclonal antibody that targets the IL-13 receptor α1 subunit (IL-13Rα1). ASLAN004 is currently in clinical
development, and we are not aware of any other antibodies in clinical development targeting IL-13Rα1. By targeting IL-13Rα1, which forms
the Type II receptor complex with IL-4Rα, ASLAN004 potently inhibits signaling of both interleukin 4 (IL-4) and interleukin 13 (IL-13). IL-
4 and IL-13 are central to triggering symptoms of allergy in atopic dermatitis, such as redness and itching of the skin, as well as asthma
symptoms such as shortness of breath, wheeze and cough. Dupilumab is marketed for both moderate-to-severe atopic dermatitis and
moderate-to-severe asthma. As we target the same pathways as dupilumab, we believe ASLAN004 can follow a similar regulatory path. We
believe ASLAN004 has the potential to become a first-in-class inhibitor of the IL-13 receptor and best-in-disease for atopic dermatitis and
asthma. By targeting IL-13Rα1, rather than IL-4Rα, we believe ASLAN004 has the potential to offer a differentiated profile, including
competitive efficacy, lower dosing frequency and a favorable side effect profile.
61
We have initiated a Phase 1 clinical trial investigating ASLAN004 as a therapeutic antibody for atopic dermatitis. A single ascending dose
(SAD) clinical trial in healthy volunteers was completed in the second quarter of 2019. In October 2019, we initiated a multiple ascending
dose (MAD) clinical trial in moderate-to-severe atopic dermatitis patients. In December 2019, we reported preliminary results from the first
set of patients that had completed one month of dosing, which showed early signs of efficacy in the low dose cohort. We recently announced
that recruitment of new patients into our MAD clinical trial has been paused in light of recently imposed government restrictions in
Singapore to contain the spread of COVID-19. We intend to resume screening as soon as government restrictions are lifted and are taking
steps to open sites in Australia to accelerate recruitment. The MAD clinical trial is expected to complete in the fourth quarter of 2020. In the
future, we may also develop ASLAN004 in other inflammatory indications, such as asthma, nasal polyps, scleroderma and chronic
obstructive pulmonary disorder (COPD). We licensed worldwide rights for ASLAN004 from CSL Limited, or CSL, in May 2014.
Mechanism of Action
ASLAN004 is a fully human monoclonal antibody with high affinity binding that inhibits both IL-4 and IL-13 signaling by binding to IL-
13Rα1. The cytokines IL-4 and IL-13 are the main drivers of allergic inflammation and have mutually redundant functions. They selectively
bind and stimulate the Type II receptor, which is a complex composed of IL-4Rα and IL-13Rα1. Stimulation of the common receptor for IL-4
or IL-13 triggers a signaling cascade, which releases inflammatory mediators that can result in atopic dermatitis or asthma. The pivotal role
for this pathway in these disease indications has been exemplified by the monoclonal antibody dupilumab which binds to IL-4Rα to block
signaling by IL-4 and IL-13. We are not aware of any other distinct monoclonal antibody in development that can inhibit both IL-4 and IL-13
signaling by targeting IL-13Rα1.
ASLAN004 binds more strongly to the receptor than dupilumab relative to its respective ligand. ASLAN004 has a 60-fold higher affinity for
the IL-13Rα1 than IL-13, whereas dupilumab has only a three-fold higher affinity for the IL-4Rα than IL-4. This means that the
concentration of ASLAN004 required to block the Type II receptor is significantly lower than the concentration of dupilumab required to do
the same.
62
Unlike dupilumab, ASLAN004 does not bind to the Type I receptor, which contains the IL-4Rα but not IL-13Rα1. We believe that by
avoiding inhibition of the Type I receptor, ASLAN004 may have fewer side effects than dupilumab, which does bind the Type I receptor.
Advantages
We believe that ASLAN004 has the potential to be a best-in-disease therapy:
•
•
•
•
•
Validated mechanism with the potential for greater efficacy than IL-13 selective and IL-4 selective inhibitors. IL-13
selective inhibitors, such as lebrikizumab and tralokinumab, have shown mixed efficacy in treating allergic inflammation. We
believe that agents that can block the activity of both IL-4 and IL-13 will be more efficacious as redundancy in signaling is
removed by blocking Type II receptor signaling. Dupilumab was shown to be effective in treating moderate-to-severe atopic
dermatitis. ASLAN004 and dupilumab share the same mechanism of action through blocking IL-4 and IL-13 signaling through the
Type II receptor.
Potential for less frequent dosing. Dupilumab requires significantly higher steady state concentrations than ASLAN004 for full
target inhibition, which may allow for less frequent dosing. Dupilumab is dosed once every two weeks via subcutaneous injection.
ASLAN004 may offer the potential for monthly dosing and this will be fully investigated in clinical development. A reduced
injection frequency would provide patients with greater convenience.
Potential for faster onset of action. In the clinic, ASLAN004 delivered intravenously demonstrated a rapid onset of action with
full receptor occupancy and complete inhibition of a key downstream biomarker of IL-13 and IL-4 signaling, STAT6, within one
hour of dosing, closely reflecting the data obtained in the cynomolgus monkey.
Potential for improved safety profile. ASLAN004 targets the IL-13Rα1 subunit of the Type II receptor, whereas dupilumab
binds to IL-4Rα. As a result, both ASLAN004 and dupilumab block the Type II receptor, which contains IL-4Rα and IL-13Rα1,
however only dupilumab blocks the Type I receptor, which contains IL-4Rα only, and is expressed on naïve T-cells and B-cells. In
published clinical studies in atopic dermatitis, dupilumab demonstrated severe, persistent conjunctivitis in 5-28% of patients,
requiring topical ocular treatment with tacrolimus or steroids. In contrast, lebrikizumab targets only the IL-13 ligand via the Type
II receptor shows a far lower incidence of conjunctivitis in atopic dermatitis patients, suggesting that inhibition of the Type I
receptor, rather than the Type II receptor, is responsible for driving conjunctivitis.
Fewer injection site reactions. Injection site reactions, such as reddening and pain, have been reported in approximately 10% of
patients using dupilumab. By contrast, only three patients to date have experienced a mild injection site reaction with ASLAN004,
which resolved quickly and did not recur with repeated dosing.
63
•
Potential for increased drug stability. Dupilumab can be stored for a maximum of 14 days at room temperature (2°C or 77°F)
and cannot be stored above room temperature. As this drug can be self-administered, it may require special storage and handling
when travelling. ASLAN004 has much greater storage flexibility, with more than 9 months stability at room temperature.
Market Opportunity
Market Opportunity in Severe Atopic Dermatitis
Atopic dermatitis is the most common form of eczema, affecting over 200 million patients worldwide, characterized by red inflamed skin and
severe daytime and nighttime itching, which can severely impact patients’ quality of life. Up to 50% of atopic dermatitis patients are
considered moderate-to-severe, for which currently available therapeutics are limited and management is challenging in the majority of cases.
Treatment options have focused on topical therapies. In December 2016, the U.S. FDA granted approval for Eucrisa (developed by Pfizer
Inc.), a topical treatment for mild to moderate atopic dermatitis. More recently in March 2017, the U.S. FDA granted approval for dupilumab
(developed by Sanofi S.A. and Regeneron Pharmaceuticals, Inc.) for adults with moderate-to-severe atopic dermatitis. Dupilumab is the only
approved biologic therapy available and has been driving significant growth in the market, which is expected to exceed $20 billion by 2027.
However there remains a significant unmet need, with only 35% of patients treated with dupilumab achieving an optimal response and
conjunctivitis reported in 25-50% to patients in clinical practice.
Two therapeutics are in clinical development that target the ligand, IL-13: lebrikizumab (Dermira/Eli Lilly) and tralokinumab (Leo Pharma
A/S). Both therapies previously failed in phase 3 studies in allergic asthma and are now being developed in atopic dermatitis.
Market Opportunity in Asthma
Asthma affects approximately 300 million patients worldwide. Chronic inflammation of the airway, combined with bronchial hyper-reactivity
causes shortness of breath, wheezing and coughing, potentially leading to exacerbations that may result in hospitalization or death. Over 4.5
million severe asthmatics have symptoms which cannot be controlled with conventional therapies, such as bronchodilators or inhaled
corticosteroids.
Xolair (anti-IgE) and Nucala (anti-IL5) are the two leading biological therapies by sales. Novel therapies like dupilumab are anticipated to
compete with biological therapies and inhaled therapies.
Preclinical and Clinical Development
ASLAN004 is a fully human IgG4 monoclonal antibody that specifically binds to the human IL-13Rα1 protein and was originally made
using the Medarex mouse technology. The antibody was isolated and optimized to have picomolar binding affinity by CSL Behring, a
member of the CSL group of companies.
ASLAN004 is a potent inhibitor of both IL-4 and IL-13 signaling with a binding affinity in the picomolar range for human IL-13Rα1. In in
vitro assays, ASLAN004 inhibits the release of key allergic mediators, such as thymus and activation regulated chemokine (TARC) that
maintain and amplify allergic reactions initiated by IL-4 and IL-13.
64
ASLAN004 potently inhibits TARC release from human cells
We have constructed high quality manufacturing cell lines that have delivered a yield of 2-3 grams per liter of therapeutic antibody.
ASLAN004 has been successfully manufactured at the 500-liter production scale in accordance with current good manufacturing practices
(cGMP). Two 500L batches of ASLAN004 have been manufactured to date. The manufacturing process is robust with high levels of
comparability between batches. ASLAN004 has been tested in 4 week and 13 week GLP, toxicology studies in primates, which showed that
ASLAN004 was well-tolerated, even at high doses.
Single Ascending Dose Clinical Trial in Healthy Volunteers
In June 2019, we announced the successful completion of a SAD clinical trial testing intravenous and subcutaneous administration of
ASLAN004 in healthy volunteers. The first subject was enrolled in October 2018 and the last subject was dosed in March 2019. The single
ascending dose clinical trial explored the safety, tolerability, pharmacokinetic profile and pharmacodynamic profile of ASLAN004 when
dosed via both intravenous and subcutaneous routes of administration. The clinical trial consisted of 10 cohorts with up to six patients per
cohort.
65
Phase 1 ASLAN004 Single Ascending Dose Trial Design (completed)
ASLAN004 was well tolerated at all dose levels via both intravenous and subcutaneous routes of administration. No conjunctivitis was noted
in any subjects dosed with ASLAN004 and there were no adverse events that led to discontinuation at any dose level.
Drug-related adverse event
N = 44
Decreased appetite
Alanine aminotransferase increased
Diarrhoea
Pyrexia
Blood lactate dehydrogenase increase
Weight decrease
Lymphocyte count decrease
Headache
C-reactive protein increase
Injection site pruritus (mild)
Any grade
(%)
Mild
Severity
Moderate
Severe
5
2
2
2
2
2
2
2
2
2
1
1
1
1
1
1
1
0
1
1
1
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
N
2
1
1
1
1
1
1
1
1
1
The SAD clinical trial also measured the pharmacokinetic profile of ASLAN004 and pharmacodynamic markers of inhibiting IL-4 and IL-13
binding to the IL-13Rα1, such as IL-13α1 receptor occupancy and inhibition of phosphorylation of STAT6 (pSTAT6), a key marker of the
signal transduction in allergic inflammation immediately downstream of IL-4 and IL-13 binding to the type II receptor. In mouse models of
allergic inflammation, the knockout of STAT6 completely abolished allergic inflammation.
When greater than or equal to 600mg ASLAN004 was administered intravenously (10mg/kg) it demonstrated 100% receptor occupancy and
complete inhibition of STAT6 phosphorylation in less than 1 hour after dosing. These effects were maintained for over 29 days following a
single dose of ASLAN004, suggesting monthly dosing may be achievable. The rapid inhibition of IL-4 and IL-13 signaling by ASLAN004
could also lead to a fast onset of symptom relief in atopic dermatitis and allergic asthma patients.
66
Both intravenous and subcutaneous dosing gave exposures of ASLAN004 that were well above the trough drug levels necessary for complete
inhibition of STAT6 phosphorylation. Based on the ASLAN004 pharmacokinetic profile in humans, we believe that with appropriate loading
doses, ASLAN004 has the potential to achieve once monthly subcutaneous dosing. In addition, dosing via the intravenous route could deliver
a dose regimen of once every 2 to 3 months. We are currently progressing ASLAN004 to launch via the subcutaneous route in moderate-to-
severe atopic dermatitis.
Multiple Ascending Dose Clinical Trial in Moderate-to-Severe Atopic Dermatitis
In October 2019, we announced the enrolment of the first patient in our MAD clinical trial testing the first-in-class therapeutic antibody
ASLAN004 in moderate-to-severe atopic dermatitis patients. The randomized, double-blind, placebo-controlled clinical trial will evaluate
three doses of ASLAN004 delivered subcutaneously and will be followed by an expansion cohort at the most efficacious dose. Each dose
cohort will contain up to six patients on ASLAN004 and two patients on placebo, and the expansion cohort will contain 12 patients on
ASLAN004 and six patients on placebo. Patients are dosed weekly for eight weeks to determine safety and the maximum efficacy of
ASLAN004. The primary end point of the MAD clinical trial is safety and tolerability, and the secondary endpoints will be percentage
change in Eczema Area and Severity Index (EASI) score, percentage of patients achieving EASI50, EASI75, pruritus score, IgA, and the
biomarkers of allergic inflammation, TARC and IgE. The trial will recruit up to 50 moderate-to-severe atopic dermatitis patients. We recently
announced that recruitment of new patients into our MAD clinical trial has been paused in light of recently imposed government restrictions
in Singapore to contain the spread of COVID-19. We intend to resume screening as soon as government restrictions are lifted and are taking
steps to open sites in Australia to accelerate recruitment. The trial completion is expected in the fourth quarter of 2020. The trial has 80%
power to detect a 39% improvement in the percentage change in EASI score from baseline based on a one-sided 5% significance level. After
completion of the MAD trial, we plan to initiate a phase 2b dose-range finding trial in atopic dermatitis patients.
ASLAN004 MAD Design in Moderate-to-Severe Atopic Dermatitis
On December 2, 2019, we reported preliminary unclean blinded data from the first three patients in Cohort 1 that had completed at least one
month of dosing. ASLAN004 was well-tolerated and there had been no serious adverse events or treatment discontinuations. The EASI
scores of the three patients were reduced by 85%, 70% and 59% and the EASI score continued to fall at four weeks with maximal efficacy
expected at six to eight weeks. Corresponding changes were seen in other measures of efficacy.
67
Preliminary Data from ASLAN004 MAD Clinical Trial
ASLAN003
ASLAN003 is an orally active, potent inhibitor of DHODH that has the potential to be first-in-class in AML. AML is a cancer of the myeloid
line of blood cells, characterized primarily by the rapid growth of abnormal white blood cells that build up in the bone marrow and interfere
with the production of normal blood cells. We have conducted a Phase 2 clinical trial testing ASLAN003 monotherapy in AML patients and
plan to continue the development of ASLAN003 in combination with chemotherapy, such as azacitadine. We are also exploring other tumor
types where DHODH may be relevant, such as myelodysplastic syndrome.
We licensed ASLAN003 from Almirall in 2012 after Almirall’s completion of a Phase 1 single ascending dose clinical trial, in which the
drug was well-tolerated in healthy volunteers. We then conducted two additional Phase 1 clinical trials, exploring multiple ascending doses
and fed/fasted comparison in healthy volunteers. These trials demonstrated that the drug was well-tolerated and plasma concentrations
following dosing were similar in Caucasians and Asians. In August 2018, we obtained orphan drug designation from the U.S. FDA for
ASLAN003 in AML.
Mechanism of Action
In cancer, increased levels of adenosine triphosphate (ATP) and pyrimidines are required for tumor growth and survival. ASLAN003 is an
inhibitor of DHODH, which is the enzyme controlling the rate limiting step in the de novo synthesis of pyrimidines. Pyrimidines are
nucleotides and are essential building blocks for the production of DNA and RNA in mammalian cells. DHODH is located in the
mitochondria and during manufacture of nucleotides it also contributes to the production of ATP. Inhibition of DHODH depletes the
intracellular pool of pyrimidines and contributes to lower levels of ATP. This leads to the induction of the tumor suppressor p53, which at
high levels of induction triggers apoptosis, or programmed cell death.
68
In AML, cancerous blast cells are unable to differentiate and form granulocytes, such as neutrophils and eosinophils, causing depletion of
white blood cells. All-trans retinoic acid (ATRA), which is approved to treat certain types of AML representing up to 15% of all AML
patients, is able to differentiate these AML blast cells. Over 90% of patients with these types of AML experience a complete response and
have a five-year survival of 75% when treated with ATRA. In other subsets of AML, DHODH inhibitors have been shown to promote
differentiation of these blast cells in vitro, allowing them to turn into granulocytes, which potentially may reverse the condition.
Teriflunomide and leflunomide, which is a prodrug of teriflunomide, are first generation DHODH inhibitors, approved in the United States,
Europe and Asia for the treatment of rheumatoid arthritis and multiple sclerosis, respectively. These molecules are less potent inhibitors of
DHODH as compared to ASLAN003 and are sufficient to slow the proliferation of inflammatory cells and therefore adequate in chronic
inflammatory disorders. However, these molecules have limited use in oncology because the inhibition of tumor growth requires more potent
and sustained inhibition of DHODH. Previous efforts to develop high potency DHODH inhibitors for oncology indications were
unsuccessful. Candidate drugs had unacceptable levels of toxicity due to off-target binding and would accumulate in the body, requiring up to
two years to clear below pharmacologically active levels after dosing was stopped. As a result, development of these inhibitors did not
progress. In contrast, ASLAN003 is not chemically related to first generation DHODH inhibitors. ASLAN003 is up to two orders of
magnitude more potent at inhibiting DHODH than leflunomide and teriflunomide, and has a half-life of 18 hours. We assessed the potency of
ASLAN003 using three standard assays: cell free, human primary cell and human whole blood. The table below shows that ASLAN003 is
more potent than teriflunomide. The IC50 value is the concentration of the drug required to produce 50% inhibition of response in the assay.
ASLAN003 Cellular and Biochemical Potency
69
Advantages
We believe that ASLAN003 has the potential to be a first-in-class DHODH inhibitor in oncology due to the following competitive
advantages:
•
•
•
Potent inhibition of DHODH. The binding affinity of ASLAN003 to DHODH is up to two orders of magnitude stronger than first
generation DHODH inhibitors, such as leflunomide and teriflunomide. This highly specific and potent inhibition of human
DHODH has the potential to reach the levels required to be efficacious in oncology.
Lack of toxicities associated with first generation inhibitors and other novel AML therapies. Existing DHODH inhibitors,
such as leflunomide and teriflunomide, are associated with significant liver toxicity. Both of these drugs take between three and
four weeks to build to therapeutic levels and two years to clear completely after dosing is stopped. In contrast, ASLAN003 reaches
full exposure in 24 hours with a half-life of 18 hours allowing rapid clearance following cessation of treatment. Furthermore,
recently launched AML therapies, such as midostaurin and enasidenib, are associated with significant hematological and liver
toxicities. Many AML patients are elderly or cannot otherwise tolerate significant toxicities. As a result, we believe the safety
profile of ASLAN003 could allow its use in these patients.
Enables AML blast cells to differentiate into granulocytes and may be applicable in a broad range of AML patients.
ASLAN003 has demonstrated the ability to differentiate AML blast cells into granulocytes in a variety of AML cell lines that do
not respond to ATRA. ASLAN003 may have applicability in patients that do not respond to ATRA, which represent approximately
85% of AML patients.
Market Opportunity
AML patients that have failed on standard of care chemotherapy in AML or do not respond to chemotherapy are termed relapsed/refractory,
and represent the majority of the total AML population. In 2016, the annual incidence of relapsed/refractory patients is approximately 13,000
patients in the United States, 8,000 in Europe, 5,000 in Japan and 24,000 in China. Survival is age-dependent and survival rates are extremely
poor for the elderly. The five-year relative survival rate for AML patients aged 19 years and below is 65%, but declines to 50% for patients
aged 20 to 49 years, and the survival rate for patients aged 65 years or older is only 6%.
The first-line treatment for patients with AML is a combination of aggressive chemotherapies. However, elderly patients with AML typically
are ineligible for aggressive treatment regimens due to the significant toxicity associated with these therapies. The survival of these patients
is usually less than one year. Over the past two decades, many compounds have been evaluated in AML patients, however the prognosis
remains poor, with approved drugs targeting relatively small subsets of patients and disease relapse common.
Preclinical and Clinical Development
Our Phase 1 single and multiple ascending dose clinical trials of ASLAN003, which were conducted with 95 healthy subjects, demonstrated
dose proportional pharmacokinetics and no accumulation in the body. The exposure profile of the drug was highly similar in Asian and
Caucasian subjects, and demonstrated stable drug levels in plasma at multiple doses. We predict the exposure of ASLAN003 with 400mg
taken once daily would result in approximately 90% inhibition of DHODH.
70
ASLAN003 in AML
In AML, cancerous blast cells fail to differentiate into mature blood cells and do not follow normal processes controlling cell death due to
genetic mutations. As a result, the number of blast cells increases to very high levels, crowding out normal red and white blood cell
production in the bone marrow, which can eventually result in patient death. Normal differentiated blast cells express specific cell surface
markers, such as CD11b, and contain granules, which are active compartments inside the cell that store molecules for killing invading
pathogens.
ASLAN003 has demonstrated the ability to cause differentiation of AML blast cells leading to mature cells that correctly express CD11b and
contain active granules.
Data published in 2016 identified inhibition of DHODH as a key mechanism that can trigger differentiation of blast cells in AML. Inhibition
of DHODH and the resultant depletion of the pyrimidine pool in AML resulted in extensive differentiation in in vitro and in vivo mouse bone
marrow transplant models. In preclinical studies, we have demonstrated that ASLAN003 can differentiate AML blast cells in vitro and in vivo
in a variety of AML cell lines and primary AML cells.
Differentiation of AML Cell Lines with ASLAN003
The human AML blast cell line, THP-1, demonstrated differentiation when exposed to low doses of ASLAN003 characterized by expression
of cell surface markers of normal immune cells, such as CD11b, condensation of the nuclei and formation of active granules that are
indicative of normal human white blood cells. Low concentrations of ASLAN003, approximately equivalent to a 50mg once daily dose in
patients, led to over 95% upregulation of CD11b which is indicative of differentiation of AML blast cells to granulocytes. ASLAN003
exposure also resulted in blast cells developing condensed, lobed nuclei, characteristic of normal human granulocytes, and in the appearance
of active granules in the cytoplasm, as demonstrated by the reduction of Nitro Blue Tetrazolium (NBT), a standard assay for granulocytes. In
addition to THP-1, the differentiation effect of ASLAN003 has also been demonstrated in other AML cell lines, namely KG-1 and MOLM-
14 with similar nanomolar potency.
In 2019, we also demonstrated that ASLAN003 leads to a reduction in leukemic burden and prolongs survival in vivo in mice bearing AML
cell lines THP-1 and MOLM-14. ASLAN003 also reduced leukemic burden in an AML PDX model.
71
AML Phase 2 Clinical Trial
We have completed a Phase 2 clinical trial with ASLAN003 in patients with advanced relapsed/refractory AML in Australia and Singapore.
We recruited 24 patients with AML that were ineligible for standard treatment, including relapsed, refractory and treatment naïve patients,
and tested four doses of ASLAN003 (100mg QD, 200mg QD, 100mg BID and 200mg BID) as monotherapy for 28 days or until progression.
The primary endpoints were rates of complete remission (CR) and complete remission with incomplete bone marrow recovery (CRi).
Phase 2 AML Trial Design
Only ten patients were dosed with ASLAN003 for more than two months and were evaluable for efficacy. All evaluable patients showed a
reduction in peripheral blood blast cells with a median reduction of over 50%. In the 100mg BID cohort, only one patient received
ASLAN003 for more than one cycle. This patient demonstrated a reduction in peripheral blood blast cells from 46% at cycle 1/day 1 (C1D1)
to 0.9% at cycle 5/day 1 (C5D1) which represents a 98% reduction in blast cells. In addition, this patient achieved a partial response as
demonstrated by a reduction in their bone marrow blast cells from 54% at baseline to 24% by cycle 4/day 1 (C4D1).
Evidence of differentiation syndrome was seen in several patients. One AML patient that entered suspected differentiation syndrome
demonstrated a reduction in peripheral blood blast cells from 66% to 6% with a concomitant increase in neutrophils. Despite this significant
reduction in blood blast cells, we were unable to confirm whether this patient had a complete remission (which would require bone marrow
blast cells to be 5% or less) because the patient had bone marrow fibrosis and it was therefore not possible to take a viable bone marrow
biopsy.
ASLAN003 was well-tolerated. The most commonly occurring side-effects were leukocytosis (two patients with grade 3 or higher), nausea,
abdominal pain and rash.
Varlitinib (ASLAN001)
Varlitinib is a highly potent, oral, reversible, small molecule inhibitor of the human epidermal growth factor receptor (HER) family of
receptor tyrosine kinases (RTKs). We believe it may be effective in a broader range of tumor types and effective in patients that have
progressed on prior HER1-selective or HER2-selective therapies. We completed a randomized global pivotal clinical trial testing varlitinib in
second-line biliary tract cancer and reported topline data from this trial in November 2019.
72
We licensed varlitinib from Array BioPharma Inc. (Array) in 2011 after successful completion of five Phase 1 clinical trials in a range of
solid tumors, which showed activity in breast cancer. To date, we have completed four additional Phase 1b clinical trials and three Phase 2
clinical trials for this product candidate.
We have obtained orphan drug designation from the U.S. FDA for varlitinib in gastric cancer and cholangiocarcinoma, which represents
approximately 60% of biliary tract cancer cases.
Although we are not conducting any ongoing clinical trials of varlitinib nor are there current plans to allocate any future funding for the
development of varlitinib, we are analyzing existing data of the pivitol clinical trial to determine whether potential biomarkers could be used
to prospectively identify patients that might respond to varlitinib.
Completed Clinical Development of Varlitinib
TREETOPP Trial in Second-Line Biliary Tract Cancer
TREETOPP (TREatmEnT OPPortunity) is a randomized, double-blind, placebo-controlled clinical trial in second-line biliary tract cancer
(BTC) comparing varlitinib and capecitabine to placebo and capecitabine. We completed recruitment of 127 patients in December 2018. The
median progression free survival, or PFS, was 2.83 months for varlitinib in combination with capecitabine versus 2.79 months in the control
arm. Objective response rate (ORR) was 9.4% in the varlitinib arm versus 4.8% in the control arm. Varlitinib did not meet the primary
endpoints of PFS and ORR as assessed by ICR according to RECIST. The safety findings were consistent with the known profile of
varlitinib.
Although the trial did not reach statistical significance, pre-planned exploratory analyses did identify two sub-groups in which varlitinib
appeared to show improved efficacy. This finding has been supported by retrospective review of the JADETREE trial which tested varlitinib
in combination with capecitabine in second-line BTC patients in China.
JADETREE China Trial in Second-Line Biliary Tract Cancer
In September 2019, we presented data from our JADETREE trial at the 2019 Chinese Society of Clinical Oncology (CSCO) in Xiamen,
China. The Phase 2 trial enrolled 62 patients in mainland China that had progressed on gemcitabine-based chemotherapy. The objective
response rate in evaluable patients was 11% (including two patients with complete responses), the median PFS was 2.7 months and overall
survival, or OS, was 5.8 months. 45% of patients were alive at 6 months and 35% at 12 months. Overall survival data was based on 31 events
and was still maturing at the time of publication. The varlitinib plus capecitabine combination was well tolerated in this difficult to treat
patient population.
Discovery Pipeline
Joint Venture to Develop Novel Pre-clinical AhR Antagonists
In September 2019, we announced that we had established a new joint venture with Bukwang to develop preclinical AhR antagonists from
our early stage pipeline. The joint venture, JAGUAHR Therapeutics Pte. Ltd. (JAGUAHR), will focus on developing new immuno-oncology
therapeutics for global markets targeting the AhR pathway.
73
AhR is a druggable transcription factor that acts as a master regulator of the immune system. The enzymes IDO1, IDO2 and TDO are
frequently overexpressed in numerous tumor types and convert tryptophan into kynurenine (KYN) in the tumor microenvironment. KYN is
then actively transported into dendritic cells and effector T-cells that are mobilized to detect and kill tumor cells. KYN signaling via AhR in
these cell types converts them into regulatory T-cells, suppressing the immune system and preventing it from attacking tumor cells. Research
has demonstrated that the unique advantages of AhR antagonists include broadly inhibiting the signaling of all AhR ligands produced by any
enzyme that metabolizes tryptophan, and robust activation of the immune response to kill cancer cells.
Pursuant to the terms of the joint venture agreement, we transferred the global rights to all of the assets related to AhR technology, originally
discovered and developed by ASLAN and its collaborators, into JAGUAHR. Subject to the fulfilment of certain conditions, Bukwang agreed
to invest $5.0 million in JAGUAHR in two tranches to fund the development of the assets, identify a lead development compound and file an
Investigational New Drug (IND) application. The first tranche of $2.5 million was received by JAGUAHR from Bukwang in October 2019.
The second tranche of $2.5 million will be payable to JAGUAHR upon the nomination of a candidate drug after which our expected
ownership will be diluted from a majority to 30 to 40%. Until the IND application is filed, we retain the rights to buy back the assets related
to AhR technology at a price equal to three times the amount invested by Bukwang. We expect that the IND will be filed in 2021 and that the
joint venture will be fully funded by the investment from Bukwang.
Competition
Our industry is intensely competitive and subject to rapid and significant technological change. While we believe that our knowledge,
experience and scientific resources provide us with competitive advantages, we face substantial competition from major pharmaceutical
companies, specialty pharmaceutical companies and biotechnology companies worldwide. Many of our competitors have significantly
greater financial, technical and human resources. Small and early-stage companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies. As a result, our competitors may discover, develop, license or
commercialize products before or more successfully than we do.
We face competition with respect to our current product candidates, and will face competition with respect to future product candidates, from
segments of the pharmaceutical, biotechnology and other related sectors, as well as from academic institutions.
The acquisition or licensing of pharmaceutical products is also very competitive. If we seek to acquire or license products, we will face
substantial competition from a number of more established companies, some of which have acknowledged strategies to license or acquire
products and many of which are bigger than us and have more institutional experience and greater cash flows than we have. These more
established companies may have competitive advantages over us, as may other emerging companies taking similar or different approaches to
product licenses or acquisitions. In addition, a number of established research-based pharmaceutical and biotechnology companies may
acquire products in late stages of development to augment their internal product lines, which may provide those companies with an even
greater competitive advantage.
If our product candidates are approved, they may compete with currently marketed drugs and therapies used for treatment of the same
indications, and potentially with drug candidates currently in development. The key competitive factors affecting the success of any approved
product include its efficacy, safety profile, price, method of administration and level of promotional activity.
74
ASLAN004
• We are not aware of any other drugs targeting IL-13Rα1 and we believe our intellectual property would preclude such
development.
•
•
Dupilumab from Sanofi S.A. and Regeneron Pharmaceuticals, Inc. is approved to treat both moderate-to-severe atopic dermatitis
and moderate-to-severe asthma.
There are several IL-13 selective inhibitors in development, including lebrikizumab being developed by Dermira, Inc./Eli Lilly, and
tralokinumab being developed by Leo Pharma A/S. Both of these drugs have recently failed in Phase 3 clinical trials in asthma, however
they may be successful in other indications, such as atopic dermatitis.
ASLAN003
• We do not consider chemotherapy to be a competitor as we expect ASLAN003 to be used either in patients that are not eligible for
chemotherapy or in combination with chemotherapy.
•
•
•
Varlitinib
•
Enasidenib is approved to treat adults with AML whose tumors have mutations in IDH2, which represents around 10-15% of
AML patients. In the single-arm registration study, 40% of patients responded to enasidenib.
Midostaurin is approved to treat newly diagnosed AML patients with a FLT3 mutation, which represents around 30% of AML
patients.
There are a large number of drugs currently in development for AML. Most of these target specific subsets of disease.
There are no approved targeted therapies for biliary tract cancer; however, there are several targeted therapies currently in clinical
development targeting specific subsets of biliary tract cancer, including ivosidenib being developed by Agios Pharmaceuticals,
Inc., ARQ087 being developed by Arqule, Inc. and lenvatinib being developed by Eisai Inc.
Manufacturing
All of our clinical supplies are manufactured in accordance with cGMP using high quality contract manufacturing organizations, and we plan
to continue to rely on contract manufacturing organizations for our production needs for the foreseeable future. We do not have internal
manufacturing capabilities for small molecules or biological drugs and we do not intend to build or acquire infrastructure for manufacturing
our product candidates for clinical or commercial supply.
License and Collaboration Agreements
License Agreement with CSL
On May 12, 2014, we entered into a license agreement with CSL, which was subsequently amended and restated on May 31, 2019, pursuant
to which we obtained an exclusive, worldwide license to certain intellectual property owned or licensed by CSL, including patents and know-
how, to develop, manufacture for clinical trials and commercialize ASLAN004 for the treatment, diagnosis or prevention of diseases or
conditions in humans. Our development under such agreement is currently focused on the treatment of respiratory and inflammatory
conditions, and in particular, atopic dermatitis.
75
Under the amended agreement, we are generally obligated to use diligent efforts to develop ASLAN004 products in accordance with the
development plan, to obtain marketing approvals for ASLAN004 products worldwide and to commercialize ASLAN004 products, either by
ourselves or through sublicensees. In consideration of the rights granted to us under the amended agreement, we will make a first payment of
$30 million to CSL upon commencement of a Phase 3 clinical trial of ASLAN004. We will also be required to pay up to an aggregate of $95
million to CSL if certain regulatory milestones are achieved, up to an aggregate of $655 million if certain sales milestones are achieved and
tiered royalties on net sales of ASLAN004 products ranging between a mid-single digit percentage and 10%. We are also responsible for all
payments to third-party licensors to CSL, to the extent such obligations relate to our exploitation of the rights licensed under CSL’s
agreement with those parties and sublicensed to us under the amended agreement.
The amended agreement continues, unless terminated earlier in accordance with its terms, until the last to occur, in the relevant country, on a
country-by-country and product-by-product basis, of: (a) expiry of the last valid CSL patent covering such product in such country, (b) 12
years from first commercial sale of such product in such country or (c) lapse of data or market exclusivity for such product in such country.
In addition to certain other customary termination bases, either party may terminate the amended agreement (i) in the event of the other
party’s material breach of the agreement that remains uncured for a specified period of time, (ii) under certain circumstances related to the
safety of ASLAN004 or (iii) if the other party becomes insolvent. In addition, we may terminate the agreement under certain circumstances
related to the development and commercialization of ASLAN004.
If the agreement is terminated in certain circumstances and CSL subsequently commercializes ASLAN004 products or grants third-party
rights to commercialize ASLAN004 products, then CSL will pay us royalties on the net sales of ASLAN004 products or share a low double
digit percentage of license revenue with us (whichever is applicable). To the extent that CSL is required to pay us royalties following the
termination of the agreement, such royalties will range from a mid-single digit percentage to mid-double digit percentage of net sales of
ASLAN004 products, depending on the cause of termination and the stage of development of the ASLAN004 products at the time of
termination.
Development and License Agreement with Almirall
On May 16, 2012, we entered into a development and license agreement with Almirall, pursuant to which we obtained an exclusive,
worldwide license to certain patents, know-how and other intellectual property controlled by Almirall to a DHODH inhibitor, LAS186323,
which we refer to as ASLAN003. The licensed field covered by this agreement was limited to the treatment or prevention of rheumatoid
arthritis, excluding any topical formulation.
On December 21, 2015, we entered into an amended development and license agreement with Almirall which replaced the previous
agreement, further amended by an amendment agreement entered into on March 16, 2018. Under the agreement as so amended, we obtained
from Almirall an expanded exclusive, worldwide license to develop, manufacture and commercialize ASLAN003 products for all human
diseases with primary focus on oncology diseases, excluding topically-administered products embodying the compound for keratinocyte
hyperproliferative disorders, and the non-melanoma skin cancers basal cell carcinoma, squamous cell carcinomas and Gorlin Syndrome, or
collectively, the KHD/NMSC products. We generally have the right to sublicense our rights under the agreement. If Almirall wishes to use a
third party to develop KHD/NMSC products, we have a right of first negotiation to obtain a license from Almirall to carry out those
developments.
76
Under the amended agreement, we are generally obligated to use commercially reasonable efforts to develop ASLAN003 products in
accordance with the development plan, and to commercialize ASLAN003 products, either by ourselves or through sublicensees. We agreed not
to develop or commercialize any competing product that has the same mechanism of action as ASLAN003 while the intellectual property
licensed from Almirall remains in force or for ten years after the launch of ASLAN003 products on a country-by-country basis, whichever is
longer. In addition, we granted to Almirall the right to use certain developed know-how for Almirall’s internal and commercial programs for
KHD/NMSC products, and Almirall granted us the right to use certain know-how developed by or on behalf of Almirall in the course of its
programs for KHD/NMSC products in the field licensed to ASLAN.
In consideration of the rights granted to us under the amended agreement, we will be required to pay an aggregate of up to $30 million if certain
development milestones are achieved and an aggregate of up to $50 million if certain regulatory milestones are achieved, in each case across
different indications. If we commercialize any ASLAN003 products, we will be required to pay Almirall tiered royalties in the mid single-
digit range on net sales of ASLAN003 products, subject to adjustments in certain circumstances. In the event we sublicense any of our rights
under the agreement relating to the ASLAN003 technology, we will be obligated to pay Almirall 10% of sublicensee income we may receive
under such sublicenses.
Unless earlier terminated, the amended agreement continues indefinitely. Either party may terminate the agreement (i) in the event of the
other party’s material breach of the agreement that remains uncured for a specified period of time, (ii) if significant safety issues arise which
make development or commercialization of the product unlawful or in violation of standard industry practices, (iii) if the other party becomes
insolvent or (iv) if the continuation of the agreement is no longer commercially viable, as proven by us based on supporting objective data
reasonably acceptable to Almirall and us. Almirall may terminate the agreement (i) if we fail to provide evidence of having used
commercially reasonable efforts to pursue development or commercialization, (ii) if we challenge or assist third parties in challenging any
intellectual property rights licensed from Almirall under the amended agreement, (iii) if there is a general withdrawal or recall of ASLAN003
products from any country, on a product-by-product and/or country-by-country basis or (iv) upon a change of control of ASLAN if such
change of control could reasonably be expected to lead to an impairment to Almirall, subject to certain conditions. Under the agreement, an
impairment in connection with a change of control will only be deemed to occur if Almirall can demonstrate that (i) a competitor of Almirall
will control us, (ii) the commercial value of ASLAN003 products may be damaged, (iii) the commercial value of Almirall’s KHD/NMSC
products may be adversely affected, (iv) Almirall’s reputation or the reputation of any of Almirall’s products or compounds in the
marketplace may be damaged and/or (v) the party that will control us lacks the resources to maximize commercial sales of ASLAN003
products.
License Agreement with Array
On January 3, 2018, we entered into a new license agreement with Array pursuant to which we obtained an exclusive, worldwide license to
develop, manufacture and commercialize varlitinib for all human and animal therapeutic, diagnostic and prophylactic uses. This new license
agreement replaces and supersedes our previous collaboration and license agreement with Array dated July 12, 2011.
Under the new license agreement, we agreed to use commercially reasonable efforts to obtain approval by the U.S. FDA or the applicable
health regulatory authority and commercialize varlitinib.
77
In consideration of the rights granted to us under the agreement, we made an initial upfront payment to Array of $12 million and an
additional upfront payment of $11 million in July 2018. In addition, we will be required to pay up to $30 million if certain development
milestones are achieved, $20 million if certain regulatory milestones are achieved, and up to $55 million if certain commercial milestones are
achieved. We are also required to pay Array tiered royalties in the low tens on net sales of varlitinib. Our royalty obligations will continue on
a country-by-country basis through the later of the expiration of the last valid patent claim for varlitinib or ten years after the first commercial
sale of varlitinib in a given country.
In the event that the base royalty under a sublicense agreement is 20% or less, we will only be required to share with Array one-half of the
amount actually received by us under such sublicense agreement in lieu of the tiered royalties described above, provided that the royalty paid
in such case shall in no event be less than a royalty in the high single digit range. If we undergo a change in control during a defined period
following execution of the new license agreement, Array will also be entitled to receive a low to mid single-digit percentage of the proceeds
resulting from the change in control. Unless earlier terminated, the agreement will continue on a country-by-country basis until the expiration of
the respective royalty obligations in such country. Upon such expiration in such country, Array will grant to us a perpetual, royalty-free, non-
terminable, non-revocable, non-exclusive license to exploit certain know-how in connection with the development, manufacturing and/or
commercialization of varlitinib for all human and animal therapeutic, diagnostic and prophylactic uses in such country. Either party may
terminate the agreement (i) in the event of the other party’s material breach of the agreement that remains uncured for a specified period of time
or (ii) the insolvency of the other party. We may also terminate the agreement without cause at any time upon 180 days advance notice to
Array.
Collaboration and License Agreements with BioGenetics
License of ASLAN003 for South Korea
On March 11, 2019, we entered into a collaboration and license agreement with BioGenetics, pursuant to which we granted BioGenetics the
exclusive right under certain of our intellectual property and intellectual property that we have licensed from Almirall, to commercialize, and
if agreed, manufacture, ASLAN003 for the treatment of all indications in South Korea, excluding topically administered products for the
treatment of keratinocyte hyperproliferative disorders and certain non-melanoma skin cancers. Under the agreement, BioGenetics will be
responsible for obtaining initial and all subsequent regulatory approvals of ASLAN003 in South Korea, and we are obligated to use
commercially reasonable efforts to provide information and cooperation as needed for these regulatory approvals. We may provide clinical
drug supplies to BioGenetics required for regulatory filings and for commercialization of products, pursuant to a separate manufacturing and
supply agreement which the parties shall use commercially reasonable efforts to enter into no later than June 30, 2020.
In consideration of the rights granted to BioGenetics under the agreement, we received an upfront payment of $1.0 million from BioGenetics
and are eligible to receive up to $8.0 million in certain one-time sales and development milestones, the thresholds for payment of such sales
milestones being the aggregate of sales of varlitinib under the license summarized above and sales of ASLAN003 products. We are also
eligible to receive tiered double-digit royalties on the aggregate net sales of ASLAN003 products, ranging from a percentage in the mid-teens
up to a percentage within the mid-twenties. BioGenetics is obligated to pay such royalties on a product-by-product basis until the expiration
of the license period described below. BioGenetics agreed to contribute a low single-digit percentage of certain clinical trial costs we incur in
the clinical development of ASLAN003 products for the treatment of acute myeloid leukemia.
78
Under the agreement, we reserve the right to revoke the rights granted to BioGenetics under this agreement at any time until the date of a
certain regulatory milestone. If we exercise our right to revoke the rights granted to BioGenetics, we will be obligated to pay BioGenetics a
sum of (i) a low single-digit multiple of certain sums paid by BioGenetics under this license agreement and, if we have agreed upon an
international licensing deal for ASLAN003, (ii) a low single-digit percentage of the upfront payment, royalties and sales milestones received
by us in any such deal.
During the license period and for one year thereafter, neither BioGenetics, nor any of its affiliates, will participate in or fund, directly or
indirectly, the development, manufacture or commercialization of a product which competes with ASLAN003. The license period
commences on the effective date of the agreement and, unless terminated earlier pursuant to the terms of the agreement, expires on the tenth
anniversary of first commercial sale, subject to an automatic renewal for a further year, which may be cancelled upon either party’s notice.
Either party may terminate the agreement in the event of an uncured material breach by, or insolvency of, the other party, or in the event of a
material safety risk associated with the product. On any termination of the agreement, the license granted to BioGenetics will terminate,
subject to certain transitional provisions.
License of varlitinib for South Korea
On February 27, 2019, we entered into a collaboration and license agreement with BioGenetics pursuant to which we granted BioGenetics
the exclusive right under certain of our intellectual property that we have licensed from Array to commercialize, and if agreed, manufacture,
varlitinib for the diagnosis and treatment of all indications in South Korea. Under the agreement, BioGenetics will be responsible for
obtaining initial and all subsequent regulatory approvals of varlitinib in South Korea. In addition to certain other obligations, we are
obligated to use commercially reasonable efforts to provide information and cooperation as needed for these regulatory approvals. We may
provide clinical drug supplies to BioGenetics required for regulatory filings and for commercialization of products, pursuant to a separate
manufacturing and supply agreement which the parties shall use commercially reasonable efforts to enter into no later than June 30, 2020.
In consideration of the rights granted to BioGenetics under the agreement, we received an upfront payment of $2 million from BioGenetics
and are eligible to receive up to $11 million in certain one-time sales and development milestones, where the thresholds for payment of such
sales milestones depend on the aggregate of net sales of varlitinib and ASLAN003 products under our agreements with BioGenetics. We are
also eligible to receive tiered double-digit royalties on net sales of varlitinib products ranging from a percentage in the mid-teens up to a
percentage within the mid-twenties. BioGenetics is obligated to pay such royalties on a product-by-product basis until the expiration of the
license period described below.
During the license period and for one year thereafter, it was agreed that neither BioGenetics, nor any of its affiliates, will participate in or
fund, directly or indirectly, the development, manufacture or commercialization of a product which competes with varlitinib. The license
period commences on the effective date of the agreement and, unless terminated earlier pursuant to the terms of the agreement, expires on the
tenth anniversary of first commercial sale, subject to an automatic renewal for a further year, which may be cancelled upon either party’s
notice. Either party may terminate the agreement in the event of an uncured material breach by, or insolvency of, the other party, or in the
event of a material safety risk associated with the product. On any termination of the agreement, the license granted to BioGenetics will
terminate, subject to certain transitional provisions.
79
Intellectual Property
Patents
Our commercial success depends in part on our ability to identify, obtain and seek protection for our products, drug candidates and our core
technologies employing a combination of patent rights, trade secrets, confidentiality agreements and contractual obligations, and to operate
without infringing, misappropriating or otherwise violating the proprietary rights of third parties. It is also important we prevent others from
infringing, misappropriating or otherwise violating our proprietary or intellectual property rights.
Our intellectual property strategy is, where appropriate, to file new patent applications on inventions, including improvements to existing
products/candidates and processes to improve our competitive edge or to improve business opportunities. We continually assess and refine
our intellectual property strategy to endeavor to ensure it is fit for purpose.
Our strategy requires us to license assets from third parties with suitable protection and to identify and seek patent protection for our
inventions, when possible. This process is expensive and time consuming and we may not be able to file and prosecute all necessary or
desirable patent applications at a reasonable cost, in a timely manner or in all jurisdictions where protection may be commercially
advantageous, or we may financially not be able to protect our proprietary rights at all. Despite our efforts to protect our proprietary rights,
unauthorized parties may be able to obtain and use information we regard as proprietary. Generally, many therapeutic indications currently
being pursued have a focus in Asia markets. Where possible, we seek to file in at least major commercial jurisdictions relevant to the product
or technology, however, this is assessed on a case by case basis.
Licensing assets from third parties involves technical and scientific due diligence to assess the opportunity, the strength of the intellectual
property protection for the asset and the ability to commercialize the asset. This due diligence is usually conducted over a relatively short
period of time. It can be difficult to identify all the issues relevant to the assessment. Failure to identify all the relevant issues can impact
negatively on the value of the asset.
The issuance of a patent does not ensure that it is valid or enforceable. Therefore, even if we are issued a patent, it may not be valid or
enforceable against third parties. Issued patents may be challenged, narrowed, invalidated or circumvented. In addition, court decisions may
introduce uncertainty in the enforceability or scope of patents owned by pharmaceutical and biotechnology companies. Thus, any of our
patents, including patents that we may rely on to protect our market for approved drugs, may be held invalid or unenforceable by a court of
final jurisdiction.
Because patent applications in the United States, Europe and many other jurisdictions are typically not published until 18 months after filing,
and because publications of discoveries in scientific literature lag behind actual discoveries, we cannot be certain that we were the first to
make the inventions claimed in our issued patents or pending patent applications, or that we were the first to file for protection of the
inventions set forth in our patents or patent applications. As a result, we may not be able to obtain or maintain protection for certain
inventions. Therefore, the enforceability and scope of our patents in the United States, Europe and in many other jurisdictions cannot be
predicted with certainty and, as a result, any patents that we own or license may not provide sufficient protection against competitors. We
may not be able to obtain or maintain patent protection from our pending patent applications, from those we may file in the future, or from
those we may license from third parties. Moreover, even if we are able to obtain patent protection, such patent protection may be of
insufficient scope to achieve our business objectives.
In addition, the issuance of a patent does not give us the right to practice the patented invention. Third parties may have blocking patents that
prevent marketing of our products or working our own technology. We endeavor to identify early third party patents and patent applications
which may be blocking to a product or technology, to minimize this risk. However, relevant documents may be overlooked or missed, which
may in turn impact of the freedom to commercialize the relevant asset.
80
The term of a patent depends upon the laws of the country in which it is issued. In most jurisdictions, including the United States, Europe,
China and Japan, the basic patent term is 20 years from the earliest filing date of a non-provisional patent application. In the United States,
Europe and Japan, patents relating to inventions are effective for 20 years, subject to the payment of renewal fees. Some jurisdictions, such as
the United States, Europe and Japan provide for up to an additional five years patent term extension for therapeutics products that require
marketing approval. The requirements for this supplementary protection are set by the relevant authorities in the given jurisdiction. Products
approved before the expiry of the basic patent term may benefit from such a patent term extension. It is our strategy to apply for such
supplementary protection, where possible.
In addition to patent protection, statutory provisions in the United States, Europe and other countries may provide a period of clinical data
exclusivity which may be followed by an additional period of market exclusivity to compensate for the time required for regulatory approval
of our drug products. Once the relevant criteria are satisfied, the protection applies automatically. The length of protection depends on the
jurisdiction and may also depend on the type of therapy.
Third parties may seek to market “similar” versions of our approved products. Alternatively, third parties may seek approval to market their
own products, similar or otherwise, competitive with our products. We may not be able to block the commercialization of these products,
which may erode our commercial position in the marketplace.
If disputes over intellectual property and other rights that we have licensed or co-own prevent or impair our ability to maintain our current
licensing or exclusivity arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected product
candidates. In addition, under certain of our collaboration agreements, our licensors may retain the right to grant non-exclusive licenses to the
licensed patents and technology to other academic or research institutions for non-commercial research purposes.
Certain provisions in the agreements under which we currently license intellectual property or technology to and from third parties may be
susceptible to multiple interpretations. The resolution of any contract interpretation disagreement that may arise could narrow what we
believe to be the scope of our rights to the relevant intellectual property or technology, increase what we believe to be our financial or other
obligations under the relevant agreement or decrease the third party’s financial or other obligations under the relevant agreement, any of
which could have a material adverse effect on our business, financial condition, results of operations and prospects.
ASLAN004
On May 12, 2014, we entered into a license agreement with CSL, which was subsequently amended and restated on May 31, 2019, pursuant
to which we obtained an exclusive, worldwide license to certain patents, know-how and other intellectual property owned or controlled by
CSL related to CSL’s anti-IL13 receptor monoclonal antibody, CSL334, which we refer to as ASLAN004, and antigen binding fragments
thereof, to develop, manufacture for clinical trials and commercialize ASLAN004 for the treatment, diagnosis or prevention of diseases or
conditions in humans. Our development under such agreement is currently focused on the treatment of respiratory and inflammatory
conditions, and in particular, atopic dermatitis.
With respect to ASLAN004, we exclusively licensed from CSL a family of patents which includes species (specific sequence) composition
of matter patents, derived from WO2008/060813, filed October 19, 2007.
81
As of February 5, 2020, this family of patents included five issued patents in the United States and issued patents in a number of foreign
countries and jurisdictions, including Australia, Canada, China, Europe, Hong Kong, India, and Japan. The scope of the claims may differ in
the various countries. The issued patents in this family are expected to expire in October 2027, subject to the payment of renewal fees,
excluding any additional term for patent term adjustments or patent term extensions.
Owned by Us
We are co-applicants together with CSL on a number of pending patents mostly relating to medical uses or combination therapies. These
include the following pending patent applications:
• WO2019/004943 filed June 29, 2018 relates to use of ASLAN004 in the treatment of Sézary Syndrome. As of February 5, 2020,
this family of patents includes patent applications filed in China, Europe, Japan and the United States. The normal expiry of these
patents is 2038, subject to the payment of renewal fees.
These cases are at an early stage and it is unclear what claims may be granted, if any.
There are also 2 unpublished Singaporean priority patent applications relating to an optimised dosage regimen for ASLAN004 and a
formulation of ASLAN004. These cases are at an early stage and it is not clear what claims may be granted, if any.
ASLAN003
Licensed from Almirall
On May 16, 2012, we entered into a development and license agreement with Almirall, pursuant to which we obtained an exclusive,
worldwide license to certain patents, know-how and other intellectual property controlled by Almirall to a DHODH inhibitor, LAS186323,
which we refer to as ASLAN003. On December 21, 2015, we entered into an amended development and license agreement with Almirall
which replaced the previous agreement. This was further amended by an amendment agreement entered into on March 16, 2018. Under the
amended agreement as so amended, we obtained from Almirall an expanded exclusive, worldwide license to develop, manufacture and
commercialize ASLAN003 products for all human diseases with primary focus on oncology diseases, excluding topically-administered
products embodying the compound for keratinocyte hyperproliferative disorders, and the non-melanoma skin cancers basal cell carcinoma,
squamous cell carcinomas and Gorlin Syndrome.
The basic compound protection for ASLAN003 is provided by the composition of matter family of patents derived from WO2008/077639.
As of February 5, 2020, this family of patents included patents issued in Australia, Canada, China, Europe, Hong Kong, Israel, Japan,
Mexico, New Zealand, Nigeria, Norway, Peru, Russia, Singapore, South Africa, South Korea, Taiwan, and the United States (two patents). In
addition, as of February 5, 2020, this family of patents included patent applications filed in Argentina, Bolivia, Chile, Colombia, Ecuador,
Egypt, Malaysia, Pakistan, Philippines, Thailand, Ukraine, Uruguay, Venezuela and Vietnam. The scope of the claims may differ in different
countries. The normal expiration of this family of patents is December 2027, subject to the payment of renewal fees.
82
Owned by Us
We are the applicant on a number of pending patents mostly relating to medical uses or combination therapies. These include the following
pending patent applications:
• WO2018/160138 filed Mar 1, 2018 relates to use of ASLAN003 in treatment of hematological cancers. As of February 5, 2020,
this family of patents includes patent applications filed in China, Europe, Hong Kong, Japan, Taiwan and the United States. The
normal expiration of this family of patents is Mar 2038, subject to the payment of renewal fees.
These cases are at an early stage and it is unclear what claims may be granted, if any.
Varlitinib
Licensed from Array
On July 12, 2011, we entered into a collaboration and license agreement with Array, relating to Array’s pan-HER inhibitor, ARRY-334543,
which we refer to as ASLAN001 or varlitinib, pursuant to which we obtained an exclusive, worldwide license to develop products
incorporating varlitinib as an active ingredient for the treatment or prevention of any diseases or conditions in humans, pursuant to an agreed
development plan, and an exclusive, worldwide license to pursue a commercial licensing program in relation to such products. On January 3,
2018, we entered into a new license agreement with Array, which replaces and supersedes our previous collaboration and license agreement,
pursuant to which we obtained an exclusive, worldwide license to develop, manufacture and commercialize varlitinib for all human and
animal therapeutic, diagnostic and prophylactic uses.
The basic protection for varlitinib is provided by a family of composition of matter patents. These patents disclose a genus and also explicitly
discloses varlitinib (example number 52 in WO2005/016346).
As of February 5, 2020, this family of patents included patents issued in the United States (at least three patents, some relating to
intermediates and processes), Argentina, Australia, Brazil, Canada, China (at least three patents), Chile, Colombia, Europe, Hong Kong,
Indonesia, India, Iceland, Israel, Japan, South Korea, Macau, Mexico, Norway, New Zealand, Philippines, Russia, Singapore, Ukraine, South
Africa, and Taiwan. In addition, as of February 5, 2020, this family of patents included patent applications filed in Egypt and Venezuela. The
scope of the claims may differ in the various countries. The normal expiration of this family of patents is November 2024 in the United States
and August 2024 outside the United States, subject to the payment of renewal fees.
The first patent application filed in China was not granted based on a technicality of Chinese practice. Subsequently filed divisional patent
applications were granted. If the validity of one or more of the granted divisional patents is challenged then one or more of these patents may
ultimately be considered invalid. In China typically branded medicines may still grow their market share, even after patent expiration. This
trend along with subsequently filed patent applications and the Chinese data exclusivity provisions may minimize the impact of negative
decisions that may be received in respect of one or more of the divisional patents.
Protection for the synthetic process of making varlitinib and a key intermediate in that process may be provided from the family of patents
derived from WO2007/059257, filed November 15, 2006. As of February 5, 2020, this family of patents includes issued patents in Australia,
Canada, China, Colombia, Europe, Hong Kong, Iceland, India, Israel, Japan, South Korea, Mexico, Norway, Philippines, Russia, Singapore,
South Africa, Taiwan, Ukraine and the United States. In addition, as of February 5, 2020, this family of patents includes a patent application
filed in Brazil. The scope of the claims may differ in the various countries. The normal expiration of this family of patents is November 2026.
83
Owned by Us
We are the applicant on a number of pending patents mostly relating to medical uses or combination therapies. These include the following
pending patent applications:
• WO2017/037298 filed September 5, 2016 relates to use of varlitinib in sensitizing a patient to chemotherapy. As of February 5,
2020, this family of patents includes an issued patent in the United States and patent applications filed in China, Europe, Hong
Kong, Japan, South Korea, Singapore and the United States;
• WO2017/037299 filed September 5, 2016 relates to use of varlitinib in the treatment of biliary tract cancer. As of February 5,
2020, this family of patents includes an allowed patent application filed in Europe;
• WO2017/037300 filed September 5, 2016 relates to use of varlitinib in treatment of resistant cancers. As of February 5, 2020, this
family of patents includes an allowed patent application in Europe and patent applications filed in China, Hong Kong, Japan and
the United States; and
• WO2018/004465 filed June 30, 2017, related to use of varlitinib as a maintenance therapy. As of February 5, 2020, this family of
patents includes patent applications filed in Australia, China, Europe, Japan, South Korea, Singapore, Thailand, Taiwan and the
United States.
Normal expiration of these patents, if granted, is 2036 or 2037 subject to the payment of renewal fees. It is not clear what claims may be
granted, if any, since most of these cases are at an early stage.
There are four published PCT applications:
• WO2019/083455 filed October 25, 2018 relates to treatment of patients with activated HER2/HER3;
• WO2019/083456 filed October 25, 2018 relates to use of varlitinib to normalize angiogenesis;
• WO2019/083457 filed October 25, 2018 relates to treatment of patients with mutated beta-catenin; and
• WO2019/083458 filed October 25, 2018 relates to use of varlitinib to reduce hypoxia.
Normal expiration of these patents, if granted, is 2038, subject to the payment of renewal fees.
There is also an unpublished PCT application which relates to a salt of varlitinib. The normal expiration of this patent, if granted, is 2039,
subject to payment of renewal fees.
It is not clear what claims may be granted, if any, when the cases are progressed in the national and regional phase.
Trade Secrets
In addition to patents, we rely upon unpatented trade secrets and know-how and continuing technological innovation to develop and maintain
our competitive position. However, trade secrets and know-how can be difficult to protect. We seek to protect our proprietary information, in
part, by executing confidentiality agreements with our partners, collaborators, scientific advisors, employees, consultants and other third
parties, and invention assignment agreements which are included in the engagement and employment contracts we have with our consultants
and employees. The confidentiality agreements we enter into are designed to protect our proprietary information and the agreements or
clauses requiring assignment of inventions to us are designed to grant us ownership of technologies that are developed through our
relationship with the respective counterparty. We cannot guarantee that we have entered into such agreements with each party that may have
or have had access to our trade secrets or proprietary
84
technology and processes or that these agreements will afford us adequate protection of our intellectual property and proprietary information
rights. If any of the partners, collaborators, scientific advisors, employees and consultants who are parties to these agreements breaches or
violates the terms of any of these agreements or otherwise discloses our proprietary information, we may not have adequate remedies for any
such breach or violation, and we could lose our trade secrets as a result. If we are unable to maintain the confidentiality of our trade secrets,
our business and competitive position may be harmed.
Trademarks and Domain Names
We conduct our business using the trademark “ASLAN,” “ASLAN PHARMACEUTICALS” and our lion logo, as well as domain names
incorporating either or both of these trademarks. “ASLAN PHARMACEUTICALS” has been registered in Singapore. In terms of Chinese
character versions of our trademarks, in Taiwan, we have a trademark registration for: “
”. In China, we have a trademark
registration for “
”. We also have a trademark registration in China to protect the following Chinese character version of the
word varlitinib: “(cid:0) (cid:0) (cid:0) (cid:0) ” (wei li ti ni). We have a portfolio of 16 domain names, which includes: aslanpharma.com, aslanpharma.com.sg,
aslanpharma.com.tw, aslanpharma.asia, aslanpharma.org, and aslanpharma.biz.
Government Regulation
The U.S. FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements
upon the clinical development, manufacture and marketing of pharmaceutical products. These agencies and other federal, state and local
entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage,
packaging, recordkeeping, tracking, approval, import, export, distribution, advertising and promotion of our products.
U.S. Government Regulation of Drug and Biologic Products
In the United States, the U.S. FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (FFDCA) and biologics such as
ASLAN004 additionally under the Public Health Service Act (PHSA), as well as the implementing regulations for these laws. The process of
obtaining regulatory approvals and the subsequent compliance with applicable federal, state, local and foreign statutes and regulations
requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. requirements at any time
during the product development process, approval process or after approval, may subject an applicant to a variety of administrative or judicial
sanctions, such as the U.S. FDA’s refusal to approve pending NDAs or BLAs, withdrawal of an approval, imposition of a clinical hold,
issuance of warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines,
refusals of government contracts, restitution, disgorgement or civil or criminal penalties.
The process required by the U.S. FDA before product candidates may be marketed in the United States generally involves the following:
•
•
•
Nonclinical laboratory and animal tests that must be conducted in accordance with GLP;
Submission of an IND, which must become effective before clinical trials may begin;
Approval by an independent institutional review board (IRB) for each clinical site or centrally before each trial may be initiated;
85
•
•
•
•
•
•
•
Adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug product for its intended
use or the safety, purity and potency of a biologic for its intended use, performed in accordance with current clinical practices
(cGCP);
Submission to the U.S. FDA of an NDA or BLA and payment of user fees;
Satisfactory completion of a U.S. FDA advisory committee review, if applicable;
Pre-Approval inspection of manufacturing facilities for their compliance with cGMP;
Satisfactory completion of U.S. FDA audits of clinical trial sites to assure compliance with cGCP and the integrity of the clinical
data;
FDA approval of an NDA or BLA to permit commercial marketing for particular indications for use; and
Compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and
Mitigation Strategy (REMS) and the potential requirement to conduct post-approval studies.
The testing and approval process requires substantial time, effort and financial resources. Preclinical studies include laboratory evaluation of
drug substance chemistry, pharmacology, toxicity and drug product formulation, as well as animal studies to assess potential safety and
efficacy. Prior to commencing the first clinical trial with a product candidate, we must submit the results of the preclinical tests and
preclinical literature, together with manufacturing information, analytical data and any available clinical data or literature, among other
things, to the U.S. FDA as part of an IND. Some preclinical studies may continue even after the IND is submitted. The IND automatically
becomes effective 30 days after receipt by the U.S. FDA, unless the U.S. FDA, within the 30-day time period, raises safety concerns or
questions about the conduct of the clinical trial by imposing a clinical hold. In such a case, the IND sponsor and the U.S. FDA must resolve
any outstanding concerns before the clinical trial can begin. Submission of an IND may not result in U.S. FDA authorization to commence a
clinical trial.
Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators in
accordance with cGCP requirements. A separate submission to the existing IND must be made for each successive clinical trial conducted
during product development, as well as amendments to previously submitted clinical trials. Further, an independent IRB for each study site
proposing to conduct the clinical trial must review and approve the plan for any clinical trial, its informed consent form and other
communications to study subjects before the clinical trial commences at that site. The IRB must continue to oversee the clinical trial while it
is being conducted, including any changes to the study plans.
Regulatory authorities, an IRB or the sponsor may suspend or discontinue a clinical trial at any time on various grounds, including a finding
that the subjects are being exposed to an unacceptable health risk, the clinical trial is not being conducted in accordance with the U.S. FDA’s
or the IRB’s requirements, if the drug has been associated with unexpected serious harm to subjects, or based on evolving business objectives
or competitive climate. Some studies also include a data safety monitoring board, which receives special access to unblinded data during the
clinical trial and may advise us to halt the clinical trial if it determines that there is an unacceptable safety risk for subjects or other grounds,
such as no demonstration of efficacy.
In general, for purposes of NDA or BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.
86
Phase 1—Studies are initially conducted to test the product candidate for safety, dosage tolerance, structure-activity relationships, mechanism
of action, absorption, metabolism, distribution and excretion in healthy volunteers or subjects with the target disease or condition. If possible,
Phase 1 trials may also be used to gain an initial indication of product effectiveness.
Phase 2—Controlled studies are conducted with groups of subjects with a specified disease or condition to provide enough data to evaluate
the preliminary efficacy, optimal dosages and dosing schedule and expanded evidence of safety. Multiple Phase 2 clinical trials may be
conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
Phase 3—These clinical trials are undertaken in larger subject populations to provide statistically significant evidence of clinical efficacy and
to further test for safety in an expanded subject population at multiple clinical trial sites. These clinical trials are intended to establish the
overall risk/benefit ratio of the product and provide an adequate basis for product labeling. These trials may be done globally to support
global registrations so long as the global sites are also representative of the U.S. population and the conduct of the study at global sites
comports with U.S. FDA regulations and guidance, such as compliance with cGCP.
The U.S. FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 studies
may be made a condition to be satisfied after approval. The results of Phase 4 studies can confirm the effectiveness of a product candidate
and can provide important safety information.
Clinical trials must be conducted under the supervision of qualified investigators in accordance with cGCP requirements, which includes the
requirements that all research subjects provide their informed consent in writing for their participation in any clinical trial, and the review and
approval of the study by an IRB. Investigators must also provide information to the clinical trial sponsors to allow the sponsors to make
specified financial disclosures to the U.S. FDA. Clinical trials are conducted under protocols detailing, among other things, the objectives of
the trial, the trial procedures, the parameters to be used in monitoring safety and the efficacy criteria to be evaluated and a statistical analysis
plan. Information about some clinical trials, including a description of the trial and trial results, must be submitted within specific timeframes
to the National Institutes of Health (NIH) for public dissemination on their ClinicalTrials.gov website.
The manufacture of investigational drugs for the conduct of human clinical trials is subject to cGMP requirements. Investigational drugs and
active pharmaceutical ingredients imported into the United States are also subject to regulation by the U.S. FDA relating to their labeling and
distribution. Further, the export of investigational drug products outside of the United States is subject to regulatory requirements of the
receiving country as well as U.S. export requirements under the FFDCA. Progress reports detailing the results of the clinical trials must be
submitted at least annually to the U.S. FDA and the IRB and more frequently if serious adverse events occur.
Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional information about the
chemistry and physical characteristics of the product candidate as well as finalize a process for manufacturing the product in commercial
quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of
the product candidate and, among other things, must develop methods for testing the identity, strength, quality and purity of the final product.
Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted to demonstrate that the product
candidate does not undergo unacceptable deterioration over its shelf life.
87
Orphan Drug Designation
Under the Orphan Drug Act, the U.S. FDA may designate a drug as an orphan drug if it is intended to treat a rare disease or condition
(generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable
expectation that the cost of developing and making a drug available in the United States for treatment of the disease or condition will be
recovered from sales of the product). Orphan product designation must be requested before submitting an NDA or BLA. After the U.S. FDA
grants orphan product designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the U.S. FDA.
Orphan product designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process.
If a product with orphan status receives the first U.S. FDA approval for the disease or condition for which it has such designation, the product
is entitled to orphan product exclusivity, meaning that the U.S. FDA may not approve any other applications to market the same drug for the
same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan
exclusivity or if the party holding the exclusivity fails to assure the availability of sufficient quantities of the drug to meet the needs of
patients with the disease or condition for which the drug was designated. Competitors, however, may receive approval of different products
for the same indication for which the orphan product has exclusivity or obtain approval for the same product but for a different indication for
which the orphan product has exclusivity. Orphan medicinal product status in the European Union has similar, but not identical, benefits. For
example, the European Union grants ten years of product exclusivity for orphan medicinal products.
Special U.S. FDA Expedited Review and Approval Programs
The U.S. FDA has various programs, including fast track designation, breakthrough therapy designation, accelerated approval, and priority
review, which are intended to expedite or simplify the process for the development and U.S. FDA review of drugs that are intended for the
treatment of serious or life threatening diseases or conditions and demonstrate the potential to address unmet medical needs. The purpose of
these programs is to provide important new drugs to patients earlier than under standard U.S. FDA review procedures.
Under the fast track program, the sponsor of a new drug candidate may request that U.S. FDA designate the drug candidate for a specific
indication as a fast track drug concurrent with, or after, the filing of the IND for the drug candidate. To be eligible for a fast track designation,
the U.S. FDA must determine, based on the request of a sponsor, that a product is intended to treat a serious or life threatening disease or
condition and demonstrates the potential to address an unmet medical need. The U.S. FDA will determine that a product will fill an unmet
medical need if it will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on
efficacy or safety factors. Fast track designation provides additional opportunities for interaction with the U.S. FDA’s review team and may
allow for rolling review of NDA or BLA components before the completed application is submitted, if the sponsor provides a schedule for
the submission of the sections of the application, the U.S. FDA agrees to accept sections and determines that the schedule is acceptable, and
the sponsor pays any required user fees upon submission of the first section of the application. However, U.S. FDA’s time period goal for
reviewing an application does not begin until the last section of the application is submitted. The U.S. FDA may decide to rescind the fast
track designation if it determines that the qualifying criteria no longer apply.
88
In addition, a sponsor can request breakthrough therapy designation for a drug if it is intended, alone or in combination with one or more
other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drug may
demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment
effects observed early in clinical development. Drugs designated as breakthrough therapies are eligible for intensive guidance from U.S. FDA
on an efficient drug development program, organizational commitment to the development and review of the product including involvement
of senior managers, and, like fast track products, are also eligible for rolling review of the NDA. Both fast track and breakthrough therapy
products are also eligible for accelerated approval and/or priority review, if relevant criteria are met.
Under the U.S. FDA’s accelerated approval regulations, the U.S. FDA may approve a drug for a serious or life threatening illness that
provides meaningful therapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to
predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely
to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the
condition and the availability or lack of alternative treatments. A drug candidate approved on this basis is subject to rigorous post marketing
compliance requirements, including the completion of Phase 4 or post approval clinical trials to confirm the effect on the clinical endpoint.
Failure to conduct required post approval studies, or confirm a clinical benefit during post marketing studies, will allow U.S. FDA to
withdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated approval
regulations are subject to prior review by U.S. FDA.
Once an NDA or BLA is submitted for a product intended to treat a serious condition, the U.S. FDA may assign a priority review designation
if U.S. FDA determines that the product, if approved, would provide a significant improvement in safety or effectiveness. A priority review
means that the goal for the U.S. FDA to review an application is six months, rather than the standard review of ten months under current
Prescription Drug User Fee Act (PDUFA) guidelines. Under the current PDUFA agreement, these six and ten month review periods are
measured from the 60-day filing date rather than the receipt date for applications for new molecular entities, which typically adds
approximately two months to the timeline for review from the date of submission. Most products that are eligible for fast track breakthrough
therapy designation are also likely to be considered appropriate to receive a priority review.
Even if a product qualifies for one or more of these programs, the U.S. FDA may later decide that the product no longer meets the conditions
for qualification or decide that the time period for U.S. FDA review or approval will not be shortened. In addition, the manufacturer of an
investigational drug for a serious or life threatening disease is required to make available, such as by posting on its website, its policy on
responding to requests for expanded access. Furthermore, fast track designation, breakthrough therapy designation, accelerated approval and
priority review do not change the standards for approval and may not ultimately expedite the development or approval process.
89
NDA or BLA Submission and Review by the U.S. FDA
Assuming successful completion of the required clinical and preclinical testing, among other items, the results of product development,
including chemistry, manufacture and controls, nonclinical studies and clinical trials are submitted to the U.S. FDA, along with proposed
labeling, as part of an NDA or BLA. The submission of an NDA or BLA requires payment of a substantial user fee to the U.S. FDA. These
user fees must be filed at the time of the first submission of the application, even if the application is being submitted on a rolling basis. Fee
waivers or reductions are available in some circumstances. One basis for a waiver of the application user fee is if the applicant employs fewer
than 500 employees, including employees of affiliates, the applicant does not have an approved marketing application for a product that has
been introduced or delivered for introduction into interstate commerce, and the applicant, including its affiliates, is submitting its first
marketing application.
In addition, under the Pediatric Research Equity Act (PREA), an NDA or BLA or supplement thereto for a new active ingredient, indication,
dosage form, dosage regimen or route of administration must contain data that are adequate to assess the safety and efficacy of the drug for
the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for
which the product is safe and effective.
The U.S. FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until
after approval of the product for use in adults or full or partial waivers from the pediatric data requirements.
The U.S. FDA must refer applications for drugs that contain active ingredients, including any ester or salt of the active ingredients, which
have not previously been approved by the U.S. FDA to an advisory committee or provide in an action letter a summary of the reasons for not
referring it to an advisory committee. The U.S. FDA may also refer drugs which present difficult questions of safety, purity or potency to an
advisory committee. An advisory committee is typically a panel that includes clinicians and other experts who review, evaluate and make a
recommendation as to whether the application should be approved and under what conditions. The U.S. FDA is not bound by the
recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
The U.S. FDA reviews applications to determine, among other things, whether a product is safe and effective for its intended use and whether
the manufacturing controls are adequate to assure and preserve the product’s identity, strength, quality and purity. Before approving an NDA
or BLA, the U.S. FDA will inspect the facility or facilities where the product is manufactured. The U.S. FDA will not approve an application
unless it determines that the manufacturing processes and facilities, including contract manufacturers and subcontracts, are in compliance
with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before
approving an NDA or BLA, the U.S. FDA will typically inspect one or more clinical trial sites to assure compliance with cGCP.
90
Once the U.S. FDA receives an application, it has 60 days to review and determine if it is substantially complete to permit a substantive
review, before it accepts the application for filing. Once the submission is accepted for filing, the U.S. FDA begins an in-depth review. The
U.S. FDA’s review times may differ based on whether the application is a standard review or priority review application. The U.S. FDA may
give a priority review designation to drugs that are intended to treat serious conditions and provide significant improvements in the safety or
effectiveness of the treatment, diagnosis, or prevention of serious conditions. Under the goals and policies agreed to by the U.S. FDA under
the PDUFA, the U.S. FDA has set the review goal of 10 months from the 60-day filing date to complete its initial review of a standard NDA
or BLA for a new molecular entity (NME) and make a decision on the application. For non-NME standard applications, the U.S. FDA has set
the review goal of 10 months from the submission date to complete its initial review and to make a decision on the application. For priority
review applications, the U.S. FDA has set the review goal of reviewing NME NDAs within six months of the 60-day filing date and non-
NME applications within six months of the submission date. Such deadlines are referred to as the PDUFA date. The PDUFA date is only a
goal and the U.S. FDA does not always meet its PDUFA dates. The review process and the PDUFA date may also be extended if the U.S.
FDA requests or the NDA sponsor otherwise provides additional information or clarification regarding the submission.
Once the U.S. FDA’s review of the application is complete, the U.S. FDA will issue either a Complete Response Letter (CRL) or approval
letter. A CRL indicates that the review cycle of the application is complete and the application is not ready for approval. A CRL generally
contains a statement of specific conditions that must be met in order to secure final approval of the NDA or BLA and may require additional
clinical or preclinical testing, or other information or analyses in order for the U.S. FDA to reconsider the application. Even with the
submission of additional information, the U.S. FDA ultimately may decide that the application does not satisfy the regulatory criteria for
approval. If and when those conditions have been met to the U.S. FDA’s satisfaction, the U.S. FDA may issue an approval letter. An approval
letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. The U.S. FDA may delay or
refuse approval of an NDA if applicable regulatory criteria are not satisfied, require additional testing or information and/or require post-
marketing testing and surveillance to monitor safety or efficacy of a product, or impose other conditions, including distribution restrictions or
other risk management mechanisms. For example, the U.S. FDA may require a REMS as a condition of approval or following approval to
mitigate any identified or suspected serious risks and ensure safe use of the drug. The U.S. FDA may prevent or limit further marketing of a
product, or impose additional post-marketing requirements, based on the results of post-marketing studies or surveillance programs. After
approval, some types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling
claims, are subject to further testing requirements, U.S. FDA notification and U.S. FDA review and approval. Further, should new safety
information arise, additional testing, product labeling or U.S. FDA notification may be required.
If regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product may be
marketed or may include contraindications, warnings or precautions in the product labeling, which has resulted in a Black Box warning. The
U.S. FDA also may not approve the inclusion of labeling claims necessary for successful marketing. Once approved, the U.S. FDA may
withdraw the product approval if compliance with pre- and post-marketing regulatory standards is not maintained or if problems occur after
the product reaches the marketplace. In addition, the U.S. FDA may require Phase 4 post-marketing studies to monitor the effect of approved
products, and may limit further marketing of the product based on the results of these post-marketing studies.
91
Post-Approval Requirements
Any products manufactured or distributed by us pursuant to U.S. FDA approvals are subject to continuing regulation by the U.S. FDA,
including manufacturing, periodic reporting, product sampling and distribution, advertising, promotion, drug shortage reporting, compliance
with any post-approval requirements imposed as a conditional of approval such as Phase 4 clinical trials, REMS and surveillance,
recordkeeping and reporting requirements, including adverse experiences.
After approval, most changes to the approved product, such as adding new indications or other labeling claims are subject to prior U.S. FDA
review and approval. There also are continuing, annual user fee requirements for any approved products and the establishments at which such
products are manufactured, as well as new application fees for supplemental applications with clinical data. Drug manufacturers and their
subcontractors are required to register their establishments with the U.S. FDA and certain state agencies and to list their drug products, and
are subject to periodic announced and unannounced inspections by the U.S. FDA and these state agencies for compliance with cGMP and
other requirements, which impose procedural and documentation requirements upon us and our third-party manufacturers.
Changes to the manufacturing process are strictly regulated and often require prior U.S. FDA approval before being implemented, or U.S.
FDA notification. U.S. FDA regulations also require investigation and correction of any deviations from cGMP and specifications, and
impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use.
Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain cGMP
compliance.
Later discovery of previously unknown problems with a product, including AEs of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory requirements, may result in withdrawal of marketing approval, mandatory
revisions to the approved labeling to add new safety information or other limitations, imposition of post-market studies or clinical trials to
assess new safety risks, or imposition of distribution or other restrictions under a REMS program, among other consequences.
The U.S. FDA closely regulates the marketing and promotion of drugs. A company can make only those claims relating to safety and
efficacy, purity and potency that are approved by the U.S. FDA. Physicians, in their independent professional medical judgement, may
prescribe legally available products for uses that are not described in the product’s labeling and that differ from those tested by us and
approved by the U.S. FDA. We, however, are prohibited from marketing or promoting drugs for uses outside of the approved labeling.
In addition, the distribution of prescription pharmaceutical products, including samples, is subject to the Prescription Drug Marketing Act
(PDMA) which regulates the distribution of drugs and drug samples at the federal level, and sets minimum standards for the registration and
regulation of drug distributors by the states. Both the PDMA and state laws limit the distribution of prescription pharmaceutical product
samples and impose requirements to ensure accountability in distribution. The Drug Supply Chain Security Act also imposes obligations on
manufacturers of pharmaceutical products related to product and tracking and tracing.
Failure to comply with any of the U.S. FDA’s requirements could result in significant adverse enforcement actions. These include a variety of
administrative or judicial sanctions, such as refusal to approve pending applications, license suspension or revocation, withdrawal of an
approval, imposition of a clinical hold or termination of clinical trials, warning letters, untitled letters, cyber letters, modification of
promotional materials or labeling, product recalls, product seizures or detentions, refusal to allow imports or exports, total or partial
suspension of production or distribution, debarment, injunctions, fines,
92
consent decrees, corporate integrity agreements, refusals of government contracts and new orders under existing contracts, exclusion from
participation in federal and state healthcare programs, restitution, disgorgement or civil or criminal penalties, including fines and
imprisonment. It is also possible that failure to comply with the U.S. FDA’s requirements relating to the promotion of prescription drugs may
lead to investigations alleging violations of federal and state healthcare fraud and abuse and other laws, as well as state consumer protection
laws. Any of these sanctions could result in adverse publicity, among other adverse consequences.
Other U.S. Healthcare Laws and Regulations
Healthcare providers, physicians and third-party payors play a primary role in the recommendation and use of medical products and drug
formulations that are granted marketing approval. Arrangements with third-party payors, existing or potential customers and referral sources,
including healthcare providers, are subject to broadly applicable fraud and abuse and other healthcare laws and regulations, and these laws
and regulations may constrain the business or financial arrangements and relationships through which manufacturers conduct clinical
research, market, sell and distribute the products for which they obtain marketing approval. Such restrictions under applicable federal and
state healthcare laws and regulations include the following:
•
•
The U.S. Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting,
receiving, offering or paying remuneration, directly or indirectly, in cash or kind, in exchange for, or to induce, either the referral
of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under
federal healthcare programs such as the Medicare and Medicaid programs. This statute has been interpreted to apply to
arrangements between pharmaceutical manufacturers, on the one hand, and prescribers, purchasers and formulary managers,
among others, on the other hand. The Patient Protection and Affordable Care Act, as amended by the Health Care and Education
Reconciliation Act of 2010 (PPACA), amended the intent requirement of the U.S. Anti-Kickback Statute. A person or entity no
longer needs to have actual knowledge of this statute or specific intent to violate it in order to commit a violation. There are a
number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution;
The federal false claims laws, including the False Claims Act (FCA) and civil monetary penalties laws which prohibit, among
other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare,
Medicaid or other third-party payors that are false or fraudulent, or making a false statement to avoid, decrease, or conceal an
obligation to pay money to the federal government. As a result of a modification made by the Fraud Enforcement and Recovery
Act of 2009, a claim includes “any request or demand” for money or property presented to the U.S. government. In addition,
manufacturers can be held liable under the FCA even when they do not submit claims directly to government payors if they are
deemed to “cause” the submission of false or fraudulent claims. The FCA also permits a private individual acting as a
“whistleblower” to bring actions on behalf of the federal government alleging violations of the FCA and to share in any monetary
recovery. Government enforcement agencies and private whistleblowers have investigated pharmaceutical companies for or
asserted liability under the FCA for a variety of alleged promotional and marketing activities, such as providing free product to
customers with the expectation that the customers would bill federal programs for the product; providing consulting fees and other
benefits to physicians to induce them to prescribe products; engaging in promotion for “off-label” uses; and submitting inflated
best price information to the Medicaid Rebate Program. In addition, the PPACA codified case law that a claim including items or
services resulting from a violation of the U.S. Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the
FCA.
93
•
•
•
•
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) prohibits, among other actions, knowingly and willfully
executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-party payors,
knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of
a healthcare offense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially
false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services;
The federal Physician Payments Sunshine Act, which requires certain manufacturers of drugs, devices, biologics and medical
supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific
exceptions, to report annually to the Centers for Medicare & Medicaid Services (CMS), information related to payments and other
transfers of value to physicians, as defined by such law, and teaching hospitals, and ownership and investment interests held by
physicians and other healthcare providers and their immediate family members;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (HITECH), and their respective
implementing regulations, imposes, among other things, specified requirements relating to the security, privacy and transmission
of individually identifiable health information held by entities subject to HIPAA, such as health plans, health care clearinghouses
and certain healthcare providers, known as covered entities, and their respective business associates, persons or entities that create,
use, maintain or disclose individually identifiable health information on behalf of covered entities. HITECH also created new tiers
of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and
gave state attorneys general new authority to file civil actions for damages or injunctions in U.S. federal courts to enforce the federal
HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions; and
State and foreign law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to
items or services reimbursed by any third-party payor, including commercial insurers; state laws that require pharmaceutical
companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance
promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers and other potential
referral sources; state laws that require drug manufacturers to report information related to payments and other transfers of value to
physicians and other healthcare providers or marketing expenditures; state and local laws that require the registration of
pharmaceutical sales representatives; and state laws governing the privacy and security of health information in certain
circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating
compliance efforts.
Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available, it is possible that
certain business activities can be subject to challenge under one or more of such laws. In addition, recent health care reform legislation has
strengthened these laws.
Violation of the laws described above or any other governmental laws and regulations may result in significant civil, criminal and
administrative penalties, damages, fines, the curtailment or restructuring of operations, the exclusion from participation in federal and state
healthcare programs, disgorgement, contractual damages, reputational harm, diminished profits and future earnings, imprisonment, and
additional reporting requirements and oversight if a manufacturer becomes subject to a corporate integrity agreement or similar agreement to
resolve allegations of non-compliance with these laws. Furthermore, efforts to ensure that business activities and business arrangements
comply with applicable healthcare laws and regulations can be costly for manufacturers of branded prescription products.
94
Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any products, for which we may obtain regulatory approval, and
the procedures utilizing such products. In the United States, sales of any product candidates for which regulatory approval for commercial
sale is obtained will depend in part on the availability of coverage and adequate reimbursement from third-party payors for the approved
products, and procedures which utilize such products. Third-party payors include government authorities and health programs in the United
States such as Medicare and Medicaid, managed care providers, private health insurers and other organizations. These third-party payors are
increasingly reducing reimbursements for medical products and services. The process for determining whether a payor will provide coverage
for a product, or procedures which utilizes such product, may be separate from the process for setting the reimbursement rate that the payor
will pay for the product, or procedures which utilize such product. Third-party payors may limit coverage to specific products on an approved
list, or formulary, which might not include all of U.S. FDA-approved products for a particular indication.
Additionally, the containment of healthcare costs has become a priority of federal and state governments. The U.S. government, state
legislatures and foreign governments have shown significant interest in implementing cost-containment programs, including price controls,
restrictions on coverage and reimbursement and requirements for substitution of less expensive products and procedures. Adoption of price
controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could
further limit our net revenue and results.
A payor’s decision to provide coverage for a product, or procedures which utilize such product, does not imply that an adequate
reimbursement rate will be approved. Further, coverage and reimbursement for products, and procedure which utilize such products, can
differ significantly from payor to payor. Private payors may follow CMS, but have their own methods and approval processes for determining
reimbursement for new medicines, and the procedures that utilize new medicines. As a result, the coverage determination process is often a
time-consuming and costly process that will require us to provide scientific and clinical support for the use of our products to each payor
separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
Third-party payors are increasingly challenging the price and examining the medical necessity and cost-effectiveness of medical products and
services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product that might be approved for
sale, or any procedure which utilizes such product, it may be necessary to conduct expensive pharmacoeconomic studies in order to
demonstrate the medical necessity and cost-effectiveness of the products, and procedures which utilize such products, in addition to the costs
required to obtain regulatory approvals. If third-party payors do not consider a product, or procedures which utilize such product, to be cost-
effective compared to other available therapies, they may not cover the product, or procedures which utilize such product, after approval as a
benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit.
The marketability of any product candidates for which we or our collaborators receive regulatory approval for commercial sale may suffer if
the government and third-party payors fail to provide adequate coverage and reimbursement for the product, or any procedure which utilizes
such product. In addition, emphasis on managed care in the United States has increased and we expect will continue to increase the pressure
on medical products and services pricing. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable
coverage and reimbursement status is attained for one or more products for which we or our collaborators receive regulatory approval, less
favorable coverage policies and reimbursement rates may be implemented in the future.
95
In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may
be marketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare
the cost-effectiveness of a particular product candidate to currently available therapies. European Union Member States may approve a
specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the
product on the market. Other member states allow companies to fix their own prices for products, but monitor and control company profits.
The downward pressure on health care costs has become intense. As a result, increasingly high barriers are being erected to the entry of new
products. In addition, in some countries, cross-border imports from low-priced markets exert competitive pressure that may reduce pricing
within a country. Any country that has price controls or reimbursement limitations may not allow favorable reimbursement and pricing
arrangements.
Health Reform
The United States and some foreign jurisdictions are considering or have enacted a number of reform proposals to change the healthcare
system. There is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs,
improving quality or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has
been significantly affected by federal and state legislative initiatives, including those designed to limit the pricing, coverage, and
reimbursement of pharmaceutical and biopharmaceutical products as well as the procedures which utilize such products, especially under
government-funded health care programs, and increased governmental control of health care costs.
By way of example, in March 2010, the PPACA was signed into law, which is intended to broaden access to health insurance, reduce or
constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add transparency requirements for the healthcare and
health insurance industries, impose taxes and fees on the healthcare industry and impose additional health policy reforms. Among the
provisions of the PPACA of importance to our business are:
•
•
•
•
•
•
•
An annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents,
apportioned among these entities according to their market share in certain government healthcare programs;
An increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and
13.0% of the average manufacturer price for branded and generic drugs, respectively;
A new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs
that are inhaled, infused, instilled, implanted or injected;
Expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to
certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s
Medicaid rebate liability;
Expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
A new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical
effectiveness research, along with funding for such research;
A new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% (and 70% as of January
1, 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap
period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D;
96
•
•
Establishment of a Center for Medicare and Medicaid Innovation at CMS to test innovative payment and service delivery models
to lower Medicare and Medicaid spending, potentially including prescription drug spending; and
A licensure framework for follow on biologic products.
There remain judicial and Congressional challenges to certain aspects of the PPACA, as well as efforts by the Trump administration to repeal
or replace certain aspects of the PPACA. Since January 2017, President Trump has signed Executive Orders and other directives designed to
delay the implementation of certain provisions of the PPACA or otherwise circumvent some of the requirements for health insurance
mandated by the PPACA. In addition, CMS recently published a final rule to give states greater flexibility in setting benchmarks for insurers
in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the PPACA
for plans sold through such marketplaces. Further, Congress has considered legislation that would repeal or repeal and replace all or part of
the PPACA. While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes
under the PPACA have been signed into law. The Tax Cuts and Jobs Act of 2017 (Tax Act) includes a provision that repealed, effective
January 1, 2019, the tax-based shared responsibility payment imposed by the PPACA on certain individuals who fail to maintain qualifying
health coverage for all or part of a year that is commonly referred to as the “individual mandate”. In addition, the 2020 federal spending
package permanently eliminated, effective January 1, 2020, the PPACA-mandated “Cadillac” tax on high-cost employer-sponsored health
coverage and medical device tax and, effective January 1, 2021, also eliminates the health insurer tax. The Bipartisan Budget Act of 2018
(BBA) among other things, amended the PPACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans,
commonly referred to as the “donut hole.” In December 2018, CMS published a new final rule permitting further collections and payments to
and from certain PPACA qualified health plans and health insurance issuers under the PPACA risk adjustment program in response to the
outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a U.S.
District Court Judge in the Northern District of Texas (Texas District Court Judge) ruled that the individual mandate is a critical and
inseverable feature of the PPACA, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the PPACA are
invalid as well. Additionally, on December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court ruling that the
individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of
the PPACA are invalid as well. On March 2, 2020, the United States Supreme Court granted the petitions for writs of certiorari to review this
case, and has allotted one hour for oral arguments, which are expected to occur in the fall. It is unclear how such litigation and other efforts to
repeal and replace the PPACA will impact the PPACA.
Other legislative changes have been proposed and adopted in the United States since the PPACA was enacted. For example, in August 2011,
the Budget Control Act of 2011, among other things, created measures for spending reductions by U.S. Congress. A Joint Select Committee
on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2012 through 2021, was
unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs.
This includes aggregate reductions of Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and,
due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2029 unless additional
Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, among other things, further reduced Medicare
payments to certain providers, and increased the statute of limitations period for the government to recover overpayments to providers from
three to five years.
97
Additionally, there have been several recent Congressional inquiries and proposed and enacted federal and state legislation designed to,
among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship
between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal
level, the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals
seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost
generic and biosimilar drugs. Additionally, the Trump administration previously released a “Blueprint” to lower drug prices and reduce out of
pocket costs of drugs that contained additional proposals to increase manufacturer competition, increase the negotiating power of certain
federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costs of drug
products paid by consumers. HHS has solicited feedback on some of these measures and has implemented others under its existing authority.
For example, in May 2019, CMS issued a final rule to allow Medicare Advantage plans the option to use step therapy for Part B drugs
beginning January 1, 2020. This final rule codified CMS’s policy change that was effective January 1, 2019. Although a number of these and
other measures may require additional authorization to become effective, Congress and the Trump administration have each indicated that it
will continue to seek new legislative and/or administrative measures to control drug costs. At the state level, legislatures have increasingly
passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient
reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in
some cases, designed to encourage importation from other countries and bulk purchasing.
Additional Regulation
In addition to the foregoing, state and federal laws regarding environmental protection and hazardous substances, including the Occupational
Safety and Health Act, the Resource Conservation and Recovery Act and the Toxic Substances Control Act, affect our business. These and
other laws govern the use, handling and disposal of various biologic, chemical and radioactive substances used in, and wastes generated by,
operations. If our operations result in contamination of the environment or expose individuals to hazardous substances, we could be liable for
damages and governmental fines. Equivalent laws have been adopted in other countries that impose similar obligations.
U.S. Foreign Corrupt Practices Act
The U.S. Foreign Corrupt Practices Act of 1977, as amended (FCPA), prohibits corporations and individuals from engaging in certain
activities to obtain or retain business or secure any improper advantage, or to influence a person working in an official capacity. It is illegal to
pay, offer to pay or authorize the payment of anything of value to any employee or official of a foreign government or public international
organization, or political party, political party official, or political candidate in an attempt to obtain or retain business or to otherwise
influence a person working in an official capacity. The scope of the FCPA also includes employees and official of state-owned or controlled
enterprises, which may include healthcare professionals in many countries. Equivalent laws have been adopted in other foreign countries that
impose similar obligations.
98
European Union General Data Protection Regulation
In addition to European Union regulations related to the approval and commercialization of our products, we may be subject to the European
Union’s General Data Protection Regulation (GDPR). The GDPR imposes stringent requirements for controllers and processors of personal
data of persons in the European Union, including, for example, more robust disclosures to individuals and a strengthened individual data
rights regime, shortened timelines for data breach notifications, limitations on retention of information, increased requirements pertaining to
special categories of data, such as health data, and additional obligations when we contract with third-party processors in connection with the
processing of the personal data. The GDPR also imposes strict rules on the transfer of personal data out of the European Union to the United
States and other third countries. In addition, the GDPR provides that European Union member states may make their own further laws and
regulations limiting the processing of personal data, including genetic, biometric or health data.
The GDPR applies extraterritorially, and we may be subject to the GDPR because of our data processing activities that involve the personal
data of individuals located in the European Union, such as in connection with any European Union clinical trials. Failure to comply with the
requirements of the GDPR and the applicable national data protection laws of the European Union member states may result in fines of up to
€20,000,000 or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, and other administrative
penalties. GDPR regulations may impose additional responsibility and liability in relation to the personal data that we process and we may be
required to put in place additional mechanisms to ensure compliance with the new data protection rules.
China Government Regulation of Drug Products
In China, we operate in an increasingly complex legal and regulatory environment. We are subject to a variety of Chinese laws, rules and
regulations affecting many aspects of our business. This section summarizes the principal Chinese laws, rules and regulations relevant to our
business and operations.
Foreign Investment in the Pharmaceutical Industry
Investment activities in China by foreign investors are principally governed by the Guidance Catalogue of Industries for Foreign Investment,
or the Catalogue, which was promulgated and is amended from time to time by the Ministry of Commerce (MOFCOM) and the National
Development and Reform Commission (NRDC). Pursuant to the latest Catalogue, amended and issued on June 28, 2017 and effective on
July 28, 2017, or the 2017 Catalogue, industries listed therein are divided into two categories: encouraged industries and the industries within
the catalogue of special entry administrative measures, or the Negative List, amended and issued separately on June 28, 2018 and effective on
July 28, 2018. Establishment of wholly foreign-owned enterprises is generally allowed in industries outside of the Negative List. Foreign
investors are not allowed to invest in industries that are expressly prohibited in the Negative List. The industries that are not expressly
prohibited in the Negative List are subject to government approvals and certain special requirements. For instance, some are limited to equity
or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures. Industries
not listed in the Catalogue are generally open to foreign investment unless specifically restricted by other People’s Republic of China (PRC)
regulations.
Pursuant to the Negative List updated in June 2018, the manufacture of pharmaceutical products mostly falls outside of the Negative List.
99
Under Chinese law, the establishment of a wholly foreign-owned enterprise is subject to the approval of, or the requirement for record filing
with, MOFCOM or its local counterparts and the wholly foreign owned enterprise must register with the competent administrative bureau of
market regulation. We have completed the record filing with MOFCOM or its local counterparts for our interest in our wholly-owned PRC
subsidiary and completed the registration of our PRC subsidiary with the competent administrative bureau of market regulation.
In October 2016, MOFCOM issued the Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-
invested Enterprises (FIE Record-filing Interim Measures). Pursuant to FIE Record-filing Interim Measures, the establishment and change of
foreign-invested enterprises are subject to record-filing procedures, instead of prior approval requirements, provided that the establishment or
change does not involve special entry administrative measures. If the establishment or change of FIE matters involve the special entry
administrative measures, the approval of MOFCOM or its local counterparts is still required.
General Regulations of the NMPA
In China, the NMPA monitors and supervises the administration of pharmaceutical products, as well as medical devices and equipment. The
NMPA’s primary responsibility includes evaluating, registering and approving new drugs, generic drugs, imported drugs and traditional
Chinese medicines; approving and issuing permits for the manufacture, export and import of pharmaceutical products and medical
appliances; approving the establishment of enterprises for pharmaceutical manufacture and distribution; formulating administrative rules and
policies concerning the supervision and administration of food, cosmetics and pharmaceuticals; and handling significant accidents involving
these products. Local provincial drug administrative authorities are responsible for supervision and administration of drugs within their
respective administrative regions.
The Drug Administration Law of China promulgated by the Standing Committee of the National People’s Congress in 1984 and the
Implementing Measures of the Drug Administration Law of China promulgated by the Ministry of Health (MOH) in 1989 set forth the legal
framework for the administration of pharmaceutical products, including the research, development and manufacturing of drugs.
The Drug Administration Law of China went through several revisions and was last revised in April 2015. The purpose of the revisions was
to strengthen the supervision and administration of pharmaceutical products and to ensure the quality and safety of those products for human
use. The Drug Administration Law of China regulates and prescribes a framework for the administration of pharmaceutical preparations of
medical institutions and for the development, research, manufacturing, distribution, packaging, pricing and advertisement of pharmaceutical
products. The Implementing Measures of the Drug Administration Law of China promulgated by the State Council and most recently revised
in February 2016 provide detailed implementing regulations for the revised Drug Administration Law of China.
Approval for Clinical Trials and Production of New Drugs
According to the Provisions for Drug Registration promulgated by the CFDA (now the NMPA) in 2007, the Drug Administration Law of
China, the Provisions on the Administration of Special Examination and Approval of Registration of New Drugs, the Special Examination
and Approval Provisions issued by the CFDA in 2009, and the Circular on Information Publish Platform for Pharmaceutical Clinical Trials
issued by the CFDA in 2013, we must comply with the following procedures and obtain several approvals for clinical trials and production of
new drugs.
100
New Drug Application
When clinical trials have been completed, an applicant shall apply to the NMPA for approval of a new drug application. The NMPA, the
Center for Drug Evaluation (CDE) and the Drug Inspection Institution will conduct reviews and on-site inspections. The NMPA determines
whether to approve the application according to the comprehensive evaluation opinions produced by the reviews and on-site inspections. We
must obtain approval of our new drug applications before our drugs can be manufactured and sold in the Chinese market.
According to the Provisions for Drug Registration, drug registration applications are divided into three different types, namely Domestic New
Drug Application, Domestic Generic Drug Application, and Imported Drug Application.
Drug Registration Classification
In March 2016, the CFDA (now NMPA) promulgated the Work Plan for Reforming the Chemical Medicines Registration Classification
System, under which, the registrations of chemical medicines are divided into five categories as follows:
•
•
•
•
•
Category 1: Innovative drugs that are not marketed anywhere in the world. These drugs contain new compounds with clear
structures and pharmacological effects and they have clinical value.
Category 2: Modified new drugs that are not marketed anywhere in the world. With known active components, the drug’s
structure, phase, prescription manufacturing process, administration route and indication are optimized and it has obvious clinical
advantage.
Category 3: Generic drugs that have equivalent quality and efficacy to the originator’s drugs have been marketed abroad, but not
yet in China.
Category 4: Generic drugs that have equivalent quality and efficacy to the originator’s drugs and have been marketed in China.
Category 5: Drugs that have been marketed abroad are applied to be marketed domestically in China.
The registration of Category 1 or Category 2 drugs above will be subject to the requirements of the Domestic New Drug Application,
Category 3 or Category 4 drugs will be subject to the Domestic Generic Drug Application, and Category 5 drugs will be subject to the
Imported Drug Application.
Special Examination and Approval Procedures for Innovative Drugs
According to the Special Examination and Approval Provisions, the NMPA will conduct special examination and approval for new drugs
registration application when:
(1) The effective constituent of drug extracted from plants, animals, minerals, etc. as well as the preparations thereof have never been
marketed in China, and the material medicines and the preparations thereof are newly discovered;
(2) The chemical raw material medicines as well as the preparations and biological products thereof haven’t been approved for
marketing home and abroad;
(3) The new drugs are for treating AIDS, malignant tumors and rare diseases, etc., and have obvious advantages in clinic treatment; or
(4) The new drugs are for treating diseases with no effective methods of treatment.
101
The Special Examination and Approval Provisions provide that the applicant may file for special examination and approval at the stage of
Clinical Trial Application if the drug candidate falls within items (1) or (2). For drug candidates that fall within items (3) or (4), the
application for special examination and approval must be made when filing for production.
In addition, under the Special Examination and Approval Provisions, where a special examination and approval treatment is granted, the
application for clinical trial and manufacturing will be handled with priority and with enhanced communication with the CDE of the NMPA,
which will establish a working mechanism for communicating with the applicants. If it becomes necessary to revise the clinical trial scheme
or make other major alterations during the clinical trial, the applicant may file an application for communication. When an application for
communication is approved, the CDE will arrange the communication with the applicant within one month.
We believe that certain of our products fall within items (2) and (3) above. Therefore, we may file an application for special examination and
approval at the Clinical Trial Application stage, which may enable us to pursue a more expedited path to approval in China and bring
therapies to patients more quickly.
Reform of the Review and Approval Process for Drug Registration
In order to address a number of issues relating to the current drug registration system, in particular, long registration time, significant
application backlog, low-quality drug application clinical data, and a difficult registration system for innovative drugs, the State Council and
the NMPA have issued and implemented a numbers of opinions and orders.
In November 2015, the CFDA (now NMPA) released the Circular Concerning Several Policies on Drug Registration Review and Approval,
which further clarified the following policies potentially simplifying and accelerating the approval process of clinical trials:
•
•
A one-time umbrella approval procedure allowing approval of all phases of a new drug’s clinical trials at once, rather than the
current phase-by-phase approval procedure, will be adopted for new drugs’ clinical trial applications.
A fast track drug registration or clinical trial approval pathway will be available for the following applications: (i) registration of
innovative new drugs treating HIV, cancer, serious infectious diseases and orphan diseases; (ii) registration of pediatric drugs; (iii)
registration of geriatric drugs and drugs treating China-prevalent diseases; (iv) registration of drugs sponsored by national science
and technology grants; (v) registration of innovative drugs using advanced technology, using innovative treatment methods, or
having distinctive clinical benefits; (vi) registration of foreign innovative drugs to be manufactured locally in China; (vii)
concurrent applications for new drug clinical trials which are already approved in the U.S. or European Union, or concurrent drug
registration applications for drugs which have applied for marketing authorization and passed onsite inspections in the U.S. or
European Union and are manufactured using the same production line in China; and (viii) clinical trial applications for drugs with
urgent clinical need and patent expiry within three years, and marketing authorization applications for drugs with urgent clinical
need and patent expiry within one year.
In March 2016, the CFDA (now NMPA) issued the Interim Provisions on the Procedures for Drug Clinical Trial Data Verification that
provides procedural rules for NMPA’s on-site verification of clinical data before drug approvals.
102
In December 2017, the NMPA published the Opinions on Encouraging the Prioritized Evaluation and Approval for Drug Innovations, which
introduces a prioritized review and approval pathway to clinical trial applications and registration applications of certain drugs as part of
NMPA’s ongoing reform of its current drug review and approval system.
Recent Regulatory Changes for Foreign New Drugs
Recent regulatory developments in late 2017 have evolved new drug applications for foreign new drugs in China. According to the Decision
on Adjusting Relevant Matters Concerning the Administration of Imported Drug Registration issued by NMPA on October 10, 2017, for
foreign new drugs that have never been marketed both domestically in China and abroad that fall into Category 1 and Category 2 drugs, an
application for clinical trials and new drug registration may be submitted directly to the NMPA without a market approval issued in their
home countries. Whereas in the past, overseas applicants had to wait until the new drug was first approved in an overseas country before it
could file for new drug registration in China. Second, for those new drugs that have applied to conduct a Multi-Regional Clinical Trial, or
MRCT, in China, Phase 1 clinical trials as required by NMPA may be conducted concurrently. Whereas in the past, MRCTs conducted in
China could only be conducted after the drugs had obtained a market approval or passed Phase 2 or Phase 3 in an overseas country.
Third, after such MRCTs have been completed in China, a new drug application may be submitted to the NMPA directly for their review with
no additional waiver of local clinical trial requirements is required. This may effectively shorten the registration period for Category 5 new
drugs in China.
According to the Opinions on Deepening the Reform of the Evaluation and Approval System and Inspiring Innovation of Drugs and Medical
Devices issued by the State Council on October 9, 2017, the clinical trial data obtained from foreign clinical trial institutions may be
acceptable if they meet the relevant requirements in new drug applications in China, for which the supplement of clinical trial data on racial
difference may be necessary. However, the relevant implementation guidelines have not been issued by the NMPA.
Last, the three-year pilot program of marketing authorization holders system that otherwise would expire on November 4, 2018, has been
extended for one additional year. The marketing authorization holders system allows drug research and development institutions to obtain
and hold the marketing authorization and have the ability to outsource manufacturing and distribution to third parties.
Good Manufacturing Practice
All facilities and techniques used in the manufacture of products for clinical use or for sale in China must be operated in conformity with
good manufacturing practice guidelines as established by the NMPA. Failure to comply with applicable requirements could result in the
termination of manufacturing and significant fines.
103
C. Organizational structure.
Name
Place of Incorporation
Date of
Incorporation
ASLAN Pharmaceuticals Limited
ASLAN Pharmaceuticals Pte. Ltd.
Cayman Islands
Singapore
June 2014
April 2010
Main Business
Investment holding
New drug research and
development
ASLAN Pharmaceuticals Taiwan Limited
Taiwan
November 2013
New drug research and
ASLAN Pharmaceuticals Australia Pty Ltd. Australia
July 2014
New drug research and
ASLAN Pharmaceuticals Hong Kong
Limited
ASLAN Pharmaceuticals (Shanghai) Co.
Ltd.
ASLAN Pharmaceuticals (USA) Inc.
Hong Kong
July 2015
New drug research and
development
China
May 2016
New drug research and
development
United States of America
October 2018
New drug research and
development
JAGUAHR Therapeutics Pte. Ltd.
Singapore
August 2019
New drug research and
development
development
development
104
D. Property, plants and equipment.
Our corporate headquarters are located in Singapore, where we occupy approximately 4,500 square feet of office space, the lease for which
expires in 2022. We also have an office in Taipei, Taiwan. We lease all of our facilities and believe that our facilities are adequate to meet our
needs for the immediate future, and that, should it be needed, suitable additional space will be available on commercially reasonable terms to
accommodate any such expansion of our operations.
Item 4A. Unresolved Staff Comments
Not Applicable.
Item 5. Operating and Financial Review and Prospects
The following discussion and analysis of our financial condition and results of operations should be read together with Item 3.A. “Selected
financial data” and our consolidated financial statements and related notes appearing elsewhere in this Annual Report. Some of the
information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our
plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a
result of many factors, including those set forth in the Item 3.D. “Risk Factors” section of this Annual Report, our actual results could differ
materially from the results described in or implied by these forward-looking statements. Please also see the section titled “Cautionary
Statement Regarding Forward-Looking Statements.”
A.
Operating results.
Overview
We are a clinical-stage immunology and oncology focused biopharmaceutical company developing innovative treatments to transform the
lives of patients.
Our portfolio is led by ASLAN004, a fully human monoclonal antibody that binds to the IL-13 receptor α1 subunit (IL-13Rα1), blocking
signaling of two pro-inflammatory cytokines, IL-4 and IL-13, which are central to triggering symptoms of atopic dermatitis, such as redness
and itching of the skin. ASLAN004 has the potential to be best-in-disease for atopic dermatitis and asthma. We are conducting a Phase 1
clinical trial investigating ASLAN004 as a therapeutic antibody for moderate-to-severe atopic dermatitis and preliminary results from the
first set of patients that have completed one month of dosing in our multiple ascending dose (MAD) study showed early signs of efficacy in
the low dose cohort. We recently announced that recruitment of new patients into our MAD clinical trial has been paused in light of recently
imposed government restrictions in Singapore to contain the spread of COVID-19. We intend to resume screening as soon as government
restrictions are lifted and are taking steps to open sites in Australia to accelerate recruitment. The MAD clinical trial is expected to complete
in the fourth quarter of 2020.
We are also developing ASLAN003, an orally active, potent inhibitor of DHODH that has the potential to be first-in-class in AML.
105
Since our inception in 2010, we have devoted substantially all of our resources to acquiring rights to, and developing our product candidates,
including preclinical studies and clinical trials and providing general and administrative support for our operations. We have not generated
any revenue from product sales and we do not currently have any products approved for commercialization. We have financed our operations
through a combination of debt and equity financings and government grants. Since inception we have raised $181.9 million from the sale of
our ordinary shares including $33.0 million in a public offering conducted in Taiwan on June 1, 2017, $42.2 million in a public offering
conducted in the United Stated on May 4, 2018 and $14.7 million in a public offering conducted in the United Stated on December 5, 2019.
Our ordinary shares are listed on the TPEx and our ADSs are listed on The Nasdaq Global Market. We did not generate revenue for the years
ended December 31, 2017 and 2018. We recorded $3.0 million of revenue for the year ended December 31, 2019, which was related to out-
licensing activities. To date we have outsourced our manufacturing and clinical operations to third parties. We do not intend to operate our
own clinical trials or build or acquire infrastructure for manufacturing our drugs for clinical or commercial supply. All of our clinical supplies
are manufactured in accordance with cGMP using high quality contract manufacturing organizations based in the United States, Europe and
Asia.
As of December 31, 2019, we had cash and cash equivalents of $22.2 million. We have never been profitable and have incurred significant
net losses in each period since our inception. Our consolidated net loss attributable to ordinary shareholders for the year ended December 31,
2017, 2018 and 2019 was $39.9 million, $42.2 million and $47.0 million, respectively. As of December 31, 2019, we had an accumulated
deficit of $179.5 million. Our primary use of cash is to fund research and development costs. Our operating activities used $34.1 million,
$39.5 million and $25.8 million of cash flows during the years ended December 31, 2017, 2018 and 2019, respectively. We expect to
continue to incur significant expenses and operating losses for the foreseeable future.
We expect expenses to be incurred in connection with our ongoing activities as we:
•
•
Continue to invest in the clinical development of our product candidates, including in connection with the following planned and
ongoing clinical trials:
o
o
ASLAN004 Phase 1 clinical trials in atopic dermatitis; and
Any additional clinical trials that we may conduct for product candidates;
Engage third parties to manufacture product candidates for clinical trials and, if any product candidates are approved, for
commercialization;
• Maintain, expand and protect our intellectual property portfolio; and
•
Incur additional costs with operating as a U.S. public company.
We will continue to require additional capital to support our operating activities as we advance our product candidates through clinical
development, regulatory approval and, if any of our product candidates are approved, commercialization. The amount and timing of our
future funding requirements will depend on many factors, including the pace and results of our product development efforts.
106
Out-licensing Agreements
To date, we have out-licensing agreements with BMS and BioGenetics.
BMS
On November 2, 2011, we entered into a license agreement with BMS, pursuant to which we received exclusive rights to develop and
commercialize ASLAN002 in China, Australia, South Korea, Taiwan and other selected Asian countries, and BMS retained exclusive rights
in the rest of the world. On July 19, 2016, BMS initiated their rights pursuant to the agreement to buy back the exclusive rights from us to
develop and commercialize ASLAN002. In connection with the buy-back, we received an upfront payment of $10.0 million in 2016, and are
eligible to receive additional payments upon BMS’s achievement of development and regulatory milestones in the future. Furthermore, we
are eligible to receive royalty payments on future worldwide sales generated by BMS. BMS also purchased from us research materials,
supplies, research documentation and clinical trial results related to ASLAN002 for $1.2 million, which was paid in 2016. As BMS has
assumed the responsibility for all development and commercialization activities and expenses and we have no further obligations under the
license agreement, we have recognized $11.2 million in revenue for the year ended December 31, 2016. Since the conditions enabling
capitalization of research and development costs related to ASLAN002 as an asset were not met and the research supplies related to
ASLAN002 had no alternative future uses if the project is abandoned, all research and development expenditures were recognized in profit or
loss when incurred. As a result, no cost of revenue was recorded in connection with the revenue recognized for the year ended December 31,
2016.
BioGenetics – License of varlitinib for South Korea
On February 27, 2019, we entered into a collaboration and license agreement with BioGenetics, pursuant to which we granted BioGenetics
the exclusive right to commercialize, and if agreed, manufacture, varlitinib for the treatment of all indications in South Korea. In
consideration of the rights granted to BioGenetics under the agreement, we received an upfront payment of $2 million as revenue from
BioGenetics and are eligible to receive up to $11 million in sales and development milestones where the thresholds for payment of such sales
milestones depend on the aggregate of net sales of varlitinib and ASLAN003 products under our agreements with BioGenetics. We are also
eligible to receive tiered double-digit royalties on net sales up to a percentage within the mid-twenties. BioGenetics will be responsible for
obtaining initial and all subsequent regulatory approvals of varlitinib in South Korea. We may provide clinical drug supplies to BioGenetics
required for regulatory filings and for commercialization of products, pursuant to a separate manufacturing and supply agreement which the
parties shall use commercially reasonable efforts to enter into no later than June 30, 2020.
BioGenetics – License of ASLAN003 for South Korea
On March 11, 2019, we entered into a collaboration and license agreement with BioGenetics, pursuant to which we granted BioGenetics the
exclusive right to commercialize, and if agreed, manufacture, ASLAN003 for the treatment of all indications in South Korea, excluding
topically administered products for the treatment of keratinocyte hyperproliferative disorders and certain non-melanoma skin cancers. In
consideration of the rights granted to BioGenetics under the agreement, we received an upfront payment of $1 million as revenue from
BioGenetics and are eligible to receive up to $8 million in sales and development milestones, the thresholds for payment of such sales
milestones being the aggregate of sales of varlitinib under the license summarized above and sales of ASLAN003 products. We are also
eligible to receive tiered double-digit royalties on net sales up to a percentage within the mid-twenties. BioGenetics
107
agreed to contribute to the global R&D costs incurred by ASLAN in the clinical development of ASLAN003 in acute myeloid leukemia.
BioGenetics will be responsible for obtaining initial and all subsequent regulatory approvals of ASLAN003 in South Korea. We may provide
clinical drug supplies to BioGenetics required for regulatory filings and for commercialization of products, pursuant to a separate
manufacturing and supply agreement which the parties shall use commercially reasonable efforts to enter into no later than June 30, 2020.
Hyundai
On October 30, 2015, we entered into a collaboration and license agreement with Hyundai Pharm Co., Ltd. (Hyundai), pursuant to which we
granted Hyundai the right to develop and an option to commercialize varlitinib for the treatment of cholangiocarcinoma (subsequently
amended to be for the treatment of BTC) in South Korea. In consideration of the rights granted to Hyundai under the agreement, we received
an upfront payment of $0.3 million from Hyundai in 2016. On February 26, 2019, prior to executing the broader agreement for varlitinib with
BioGenetics above, we made a payment of $0.325 million to Hyundai to buy back the rights to varlitinib in BTC in South Korea and
terminated the out-license to Hyundai.
In-licensing Agreements
We are required to make milestone payments upon the achievement of certain development, regulatory and commercial milestones and
royalties based on the net sales of the licensed products and therefore, we expect our results of operations will continue to be affected by
these agreements. In 2016, we made a payment of less than $0.1 million to Exploit Technologies Pte Ltd to acquire their license that was
capitalized as intangible assets. In 2018, we paid an aggregate of $23.0 million to Array Biopharma Inc. to acquire an exclusive, worldwide
license to develop, manufacture and commercialize varlitinib, which was capitalized as intangible assets. In June 2018, we paid $0.5 million
to CSL Limited upon the filing of our clinical trial authorization submission with the Singapore Health Sciences Authority, as required under
the terms of our license agreement with CSL Limited. In December 2019, we paid Almirall S.A the sum of $82,259, being 10% of the
amount received from BioGenetics in respect of the out-licence of ASLAN003 to BioGenetics dated March 11, 2019, as required under the
terms of our license agreement with Almirall S.A. For the year ended December 31, 2019, we have not made any other payments related to
the in-license agreements. See “Item 4.B. Information on the Company - Business overview—License and Collaboration Agreements” for a
description of our license agreements, which includes a description of the termination provisions of these agreements.
Key Components of Results of Operations
Revenues
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from product sales until our
product candidates receive regulatory approval. We did not generate revenue for the years ended December 31, 2017 and 2018. For the year
ended December 31, 2019, revenues consisted primarily of upfront payments received under out-licensing arrangements, as described above.
108
Cost of Revenue
We did not recognize costs of revenue for the years ended December 31, 2017 and 2018. For the year ended December 31, 2019, under the
in-license agreement to develop ASLAN003 with Almirall, Almirall is eligible to receive a payment of 10% of the proceeds from the out-
licensing of ASLAN003. The related cost of revenue in the amount of $82,259 payable to Almirall was recognized as operating costs
accordingly. Additionally, we made a payment of $325,000 to Hyundai in order to buy back the rights to commercialize varlitinib in
cholangiocarcinoma (CCA) and recorded as operating costs in February 2019.
Research and Development Expenses
The largest component of our operating expenses since inception has been research and development activities, including the preclinical and
clinical development of our product candidates. Research and development costs are expensed as incurred. Our research and development
expenses primarily consist of:
•
•
•
•
•
•
Costs incurred under agreements with contract research organizations and investigative sites that conduct preclinical studies and
clinical trials;
Costs related to manufacturing pharmaceutical active ingredients and product candidates for preclinical studies and clinical trials;
Salaries and personnel-related costs, including bonuses, related benefits and share-based compensation expense for our scientific
personnel performing or managing out-sourced research and development activities;
Fees paid to consultants and other third parties who support our product candidate development;
Other costs incurred in seeking regulatory approval of our product candidates; and
Allocated facility-related costs and overhead.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical
development, primarily due to the increased size and duration of later-stage clinical trials. Accordingly, we expect research and development
costs to increase significantly for the foreseeable future as our programs progress. However, we do not believe that it is possible at this time
to accurately project total program-specific expenses through commercialization. Our expenditures on current and future preclinical and
clinical development programs are subject to numerous uncertainties in timing and cost to completion. In addition, we may enter into
additional collaboration arrangements for our product candidates, which could affect our development plans or capital requirements.
We allocate direct costs to product candidates when they enter into clinical development. For product candidates in clinical development, we
allocate development and manufacturing costs to our product candidates on a program-specific basis, and we include these costs in the
program-specific expenses. Our direct research and development expenses tracked by program consist primarily of external costs, such as
fees paid to outside consultants, CROs, and contract manufacturing organizations in connection with our preclinical development,
manufacturing and clinical development activities. We do not allocate employee costs or facility expenses, including other indirect costs, to
specific programs because these costs are deployed across multiple programs and, as such, are not separately presented. We use internal
resources primarily to oversee research and discovery as well as for managing our preclinical development, process development,
manufacturing and clinical development activities. These employees work across multiple programs and, therefore, we do not track their
costs by program.
109
The table below summarizes our research and development expenses incurred by program for the periods presented:
Direct research and development expense by product:
Varlitinib
ASLAN003
ASLAN004
Other
Indirect research and development expense:
Employee benefit and travel expense
Other indirect research and development expense
Total research and development expense
General and Administrative Expenses
2017
Year ended December 31,
2018
(in thousands)
2019
$
$
19,578 $
778
3,265
1,368
4,381
1,011
30,381 $
17,474 $
1,623
5,897
2,241
4,320
279
31,834 $
9,873
760
3,078
134
1,908
834
16,587
General and administrative expenses consist of personnel costs, allocated expenses and other expenses for outside professional services,
including legal, audit and accounting services. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation. Other
general and administrative expenses include facility-related costs not otherwise allocated to research and development expense, professional
fees, expenses associated with obtaining and maintaining patents and costs of our information systems. We anticipate that our general and
administrative expenses will decrease in the future as we decrease our headcount and focus on our ongoing research and development.
Non-Operating Income and Expenses
Other Income
Other income is the gain recognized on the disposal of the licensed intellectual property and other rights arising from a third-party license
agreement.
Other Gains and Losses, Net
Other gains and losses are primarily net gains and losses from realized and unrealized currency exchange differences incurred during the
period.
Finance Costs
Finance costs are interest expenses primarily from the Singapore Economic Development Board (EDB) repayable grant, the CSL Facility, the
Convertible Loan Facility and the October/November 2019 Loan Facility. For the year ended December 31, 2017, 2018 and 2019, the finance
costs were $0.42 million, $0.49 million and $0.91 million, respectively.
Results of Operations
110
The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read
together with our consolidated financial statements and related notes included elsewhere in this Form 20-F. Our operating results in any
period are not necessarily indicative of the results that may be expected for any future period.
Net revenues
Cost of revenues
Operating expenses
General and administrative expenses
Research and development expenses
Total operating expenses
Other operating income and expenses
Loss from operations
Non-operating income and expenses
Interest income
Other income
Other gains and losses
Finance costs
Total non-operating income and expenses
Loss before income tax
Income tax expense
Net loss
Other comprehensive loss
Items that will not be reclassified subsequently to profit or loss:
Unrealized loss on investments in equity instruments at fair value through
other
comprehensive income
Total comprehensive loss
Net loss attributable to:
Stockholders of the Company
Non-controlling interests
Total comprehensive loss attributable to:
Stockholders of the Company
Non-controlling interests
Weighted-Average shares used in calculating
net loss per ordinary shares, basic
Net loss per share, basic and diluted
2017
Year Ended December 31,
2018
(in thousands)
2019
—
—
(8,759)
(30,381)
(39,140)
—
(39,140)
363
—
(698)
(417)
(752)
(39,892)
—
(39,892)
—
(39,892)
(39,892)
—
(39,892)
(39,892)
—
(39,892)
—
—
(10,514)
(31,834)
(42,348)
—
(42,348)
268
187
213
(492)
177
(42,171)
(14)
(42,186)
—
(42,186)
(42,186)
—
(42,186)
(42,186)
—
(42,186)
3,000
(407)
(8,512)
(16,587)
(25,099)
(23,073)
(45,579)
151
—
(328)
(902)
(1,079)
(46,658)
(408)
(47,066)
(55)
(47,121)
(47,016)
(50)
(47,066)
(47,071)
(50)
(47,121)
124,424,960
(0.32)
149,739,242
(0.28)
162,392,602
(0.29)
111
Comparison of the Years Ended December 31, 2018 and 2019
Revenue
We did not generate revenue for the years ended December 31, 2018. For the year ended December 31, 2019, revenues consisted of upfront
payments received under out-licensing arrangements.
General and Administrative Expenses
The following table sets forth the components of our general and administrative expenses for the years indicated.
(In thousands)
General and administrative expenses
Employee benefit and travel expenses
Professional fees
Rent relating to operating leases
Other costs
Total general and administrative expense
Year Ended December 31,
2018
%
2019
%
6,527
2,263
1,045
679
10,514
62%
22%
10%
6%
100%
4,847
2,544
259
862
8,512
57%
30%
3%
10%
100%
General and administrative expenses decreased by $2.0 million from $10.5 million for the year ended December 31, 2018 to $8.5 million for
the year ended December 31, 2019. The decrease in general and administrative expenses was primarily due to the restructuring that occurred
in the beginning of 2019, which caused a decrease in employee benefit and travel expenses, including a decrease in headcount and staffing
costs and office administration costs. The decrease in rent relating to operating leases in 2019 was primarily due to the application of IFRS16.
Research and Development Expenses
The following table sets forth the components of our research and development expenses for the years indicated.
(In thousands)
Research and development expenses
Preclinical and clinical development expenses
Manufacturing expenses
Employee benefit and travel expenses
Total research and development expenses
Year Ended December 31,
2018
%
2019
%
21,361
6,153
4,320
31,834
67%
19%
14%
100%
13,519
1,160
1,908
16,587
81%
7%
12%
100%
Research and development expenses decreased by $15.2 million from $31.8 million for the year ended December 31, 2018 to $16.6 million
for the year ended December 31, 2019. The decrease in research and development expenses was primarily due to a decrease in preclinical and
clinical development work, as well as manufacturing expenses.
112
Other Operating Income and Expenses
No other operating income and expenses were incurred for the year ended December 31, 2018. Other operating expenses for the year ended
December 31, 2019 was $23.1 million. This was related to the write-off of intangible assets, consisting of an impairment loss of $23.0
million related to varlitinib, and $0.1 million related to ASLAN005.
Other Gains and Losses, Net
Other net gains for the year ended December 31, 2018 were $0.2 million and other net losses for the year ended December 31, 2019 were
$0.3 million. The decrease in net gains was primarily attributable to foreign currency translation losses as a result of the translation of our
assets, liabilities and results of operations into U.S. dollars using the relevant foreign currency exchange rates. This was caused by the
weakening of the U.S. dollar against the Singapore dollar during those years.
Interest Income
Interest income for the years ended December 31, 2018 and 2019 was $0.3 million and $0.2 million, respectively. The decrease was primarily
due to a decrease in deposits in banks in 2019.
Other Income
Other income for the years ended December 31, 2018 and 2019 was $0.2 million and $0.0, respectively. The decrease was primarily due to a
gain on the disposal of intellectual property in 2018, with no such occurrence in 2019.
Net Loss Attributable to Ordinary Shareholders
For the years ended December 31, 2018 and 2019, net loss attributable to stockholders of the Company was $42.2 million and $47.0 million,
respectively. The increased net losses were mostly driven by the one-off impairment loss on intangible assets.
113
Comparison of the Years Ended December 31, 2017 and 2018
The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read
together with our consolidated financial statements and related notes included elsewhere in this Form 20-F. Our operating results in any
period are not necessarily indicative of the results that may be expected for any future period.
Net revenue
Cost of revenue
Operating expenses
General and administrative expenses
Research and development expenses
Loss from operations
Non-operating income and expenses
Other income
Other gains and losses, net
Finance costs
Interest income
Total non-operating income (expenses)
Loss before income tax
Income tax expense
Net loss
Total comprehensive loss
Year ended December 31,
2018
2017
$
(in thousands)
— $
—
(8,759)
(30,381)
(39,140)
—
(698)
(417)
363
(752)
(39,892)
—
(39,892)
(39,892)
—
—
(10,514)
(31,834)
(42,348)
187
213
(492)
268
177
(42,171)
(14)
(42,186)
(42,186)
Revenue
We did not generate revenue for the years ended December 31, 2017 and 2018.
General and Administrative
The following table sets forth a summary of our general and administrative expenses for the periods indicated.
General and administrative expense
Employee benefit and travel expenses
Professional fees
Rent expense related to operating leases
Other costs
Total general and administrative expense
114
Year ended December 31,
2018
2017
(in thousands)
$
$
5,044 $
2,103
882
730
8,759 $
6,527
2,263
1,045
679
10,514
General and administrative expenses for the years ended December 31, 2017 and 2018 were $8.8 million and $10.5 million, respectively. The
increase in general and administrative expenses was primarily due to an increase in employee benefit and travel expenses, including an
increase in headcount and staffing costs, and office administration costs.
Research and Development
The following table sets forth a summary of our research and development expenses for the periods indicated.
Research and development expense
Preclinical and clinical development expense
Manufacturing expense
Employee benefit and travel expenses
Total research and development expense
Year ended December 31,
2018
2017
(in thousands)
$
$
19,459 $
6,541
4,381
30,381 $
21,361
6,153
4,320
31,834
Research and development expenses for the years ended December 31, 2017 and 2018 were $30.4 million and $31.8 million, respectively.
The increase was primarily due to an increase in preclinical and clinical development work as we advanced our drug candidate pipeline.
Other Gains and Losses, Net
Other net losses for the year ended December 31, 2017 were $0.7 million and other net gains for the year ended December 31, 2018 were
$0.2 million, consisting primarily of realized and unrealized foreign exchange losses. The increase in net gains was primarily attributable to
foreign currency translation gains as a result of the translation of our assets, liabilities and results of operations into U.S. dollars using the
relevant foreign currency exchange rates. This was caused by the strengthening of the U.S. dollar against the Singapore dollar during those
years.
Finance Costs
Finance costs for the years ended December 31, 2017 and 2018 were $0.4 million and $0.5 million, respectively, consisting primarily of
interest expense related to interest accrued on long-term borrowings. The increase was primarily due to the drawdown of the CSL Facility in
2018 that resulted in higher interest expenditure in 2018.
Interest Income
Interest income for the years ended December 31, 2017 and 2018 were $0.4 million and $0.3 million, respectively. The decrease was
primarily due to a decrease in deposits in banks in 2018 that resulted in lower interest income in 2018.
115
Net Loss Attributable to Ordinary Shareholders
For the years ended December 31, 2017 and 2018, we had a net loss attributable to ordinary shareholders of $39.9 million and $42.2 million,
respectively. The increases in general and administrative expenses, and research and development expenses were the key drivers of the higher
net losses in 2018.
B.
Liquidity and Capital Resources.
Since inception, we have invested most of our resources in the development of our product candidates, building our intellectual property
portfolio, developing our supply chain, conducting business planning, raising capital and providing support for our operations. To date we
have funded our operations through public and private placements of equity securities, upfront and milestone payments received from our
collaborators, funding from governmental bodies and interest income from banks. In December 2019, we raised net proceeds of
approximately $14.7 million in a follow on public offering of ADSs in the United States. Through December 31, 2019, we had raised
aggregate gross proceeds of $181.9 million from private and public offerings, we had received aggregate gross upfront payments of $13.3
million from our collaborators and received an aggregate of $7.5 million in grants from government bodies. Since our inception, we have
incurred net losses and negative cash flows from our operations. Substantially all of our losses have resulted from funding our research and
development programs and general and administrative costs associated with our operations. We incurred net losses of $39.9 million, $42.2
million and $47.1 million for the years ended December 31, 2017, 2018 and 2019, respectively. As of December 31, 2019, we had an
accumulated deficit of $179.5 million. Our operating activities used $34.1 million, $39.5 million and $25.8 million of cash outflows during
the years ended December 31, 2017, 2018 and 2019, respectively. As of December 31, 2019, we had cash and cash equivalents of $22.2
million.
We have not achieved profitability since our inception and we expect to continue to incur net losses for the foreseeable future. In January
2019, we implemented a corporate restructuring plan to focus our resources on its lead clinical programs: varlitinib in biliary tract cancer
(BTC), ASLAN003 in acute myeloid leukaemia (AML) and ASLAN004 in atopic dermatitis. As part of the corporate restructuring plan, we
substantially reduced research and development costs and administrative expenses by closing certain studies and reducing our workforce.
Based on our current operating plan, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses and
capital requirements for at least the next 12 months from December 31, 2019. We have based this estimate on assumptions that may prove to
be wrong, and we could use our available capital resources sooner than we currently expect. If our planned preclinical and clinical trials are
successful, or our other product candidates enter clinical trials or advance beyond the discovery stage, we will need to raise substantial
additional financing in the future to fund our operations. In order to meet these additional cash requirements, we may incur debt, out-license
certain intellectual property and seek to sell additional equity or convertible securities that may result in dilution to our stockholders. If we
raise additional funds through the issuance of equity or convertible securities, these securities could have rights or preferences senior to those
of our ADSs and ordinary shares and any indebtedness could contain covenants that restrict our operations. There can be no assurance that
we will be able to obtain additional equity or debt financing on terms acceptable to us, if at all.
116
CSL Loan Facility
In connection with the license agreement with CSL Limited related to ASLAN004, in May 2014 we entered into the CSL Facility with CSL
Finance, pursuant to which CSL Finance agreed to provide a ten-year facility for $4.5 million. Borrowings under the CSL Facility are
unsecured and can be used to reimburse a portion of eligible invoices for certain research and development costs or expenses incurred by us
in connection with developing ASLAN004 and approved by CSL Finance at each drawdown period. Interest on the loan is computed at 6%
plus LIBOR and is payable on a quarterly basis. Any outstanding principal on the loan must be repaid 10 years from the date of the CSL
Facility. Amounts outstanding can be voluntarily prepaid. In addition, we are required to mandatorily prepay amounts outstanding if we
receive any income or revenue in connection with the commercialization or out-licensing of any intellectual property rights (other than under
the license agreement with CSL Limited related to ASLAN004), in which case we are required to apply at least a low double digit percentage
of such income or revenue against any amounts then-outstanding under the CSL Facility.
Under the CSL Facility, we are subject to customary reporting and restrictive covenants. In addition, if Carl Firth, our Chief Executive
Officer, were to resign or be removed, we are obligated to find and hire within 12 months a replacement with the same level of experience,
seniority and expertise commensurate with that of a CEO of a company in the same field of activity and similar size and resources as ours. If
an event of default occurs, CSL Finance can terminate the commitment under the CSL Facility and accelerate all amounts outstanding.
As of December 31, 2017, there were no amounts outstanding under the CSL Facility, and $4.1 million and $4.5 million in principal and
accrued interest outstanding under the CSL Facility as of December 31, 2018 and 2019, respectively.
Convertible Loan Facility
On September 30, 2019, we entered into a convertible loan facility with Bukwang Pharmaceutical Co., Ltd., for an amount of $1.0 million.
The Convertible Loan Facility has a two-year term with a 10% interest rate per annum, commencing upon the date we draw down on such
facility. We have the option to repay the amounts owed under the Convertible Loan Facility at any time, subject to certain conditions.
The lender will have the right to convert, at its option, any outstanding principal amount plus accrued and unpaid interest under the loan into
that number of our newly issued ADSs which is calculated by dividing (a) such outstanding principal amount and accrued and unpaid interest
by (b) 90% of the volume-weighted average price of our ADSs on the date of the conversion exercise notice. Each ADS represents five of
our ordinary shares. The ability to convert is subject to certain conditions, including that our ordinary shares will have been delisted from the
TPEx, and expires at the expiry of the term of the loan.
In October 2019, we drew down on $1.0 million under the Convertible Loan Facility.
October/November 2019 Loan Facility
On October 25, 2019, we entered into a loan facility with certain existing stockholders/directors, or affiliates thereof, and on November 11,
2019 we entered into a related loan facility with the affiliate of another existing stockholder, for an aggregate amount of $2.25 million
(collectively, the October/November 2019 Loan Facility). The October/November 2019 Loan Facility has a two-year term with a 10%
interest rate per annum, commencing upon the date we draw down the facility, which must be drawn down in full. We have the option to
repay not less than $1.0 million of the amounts owed under the October/November 2019 Loan Facility at any time, subject to certain
conditions. In the event that we in a
117
single re-financing transaction raise more than ten times the aggregate loan amount prior to expiry of the term, we will be obligated to repay
any unpaid portion of the principal amount and accrued interest thereunder within 30 days of the receipt of the proceeds from such re-
financing transaction.
The October/November 2019 Loan Facility provides that, during the time that any amount is outstanding thereunder, we will not (i) incur any
finance debt which is secured by a security interest or conferring repayment rights which rank in priority over those of the lenders, or (ii)
carry out or implement any merger, consolidation, reorganization (other than our solvent reorganization), recapitalization, reincorporation,
share dividend or other changes in our capital structure which may have a material adverse effect on the rights of the lenders, in each case
except with the prior written consent of the lenders. In addition, upon an event of default (as defined in the October/November 2019 Loan
Facility), the lenders may declare the principal amounts then outstanding and all interest thereon accrued and unpaid to be immediately due
and payable to the lenders.
In October 2019, we drew down on an initial $1.95 million under the October/November 2019 Loan Facility. In connection with this initial
draw down, we issued warrants to purchase 483,448 ADSs (representing 2,417,240 ordinary shares) to certain of the lenders, at an exercise
price of $2.02 per ADS. In November 2019, we drew down on the remaining $0.3 million under the October/November 2019 Loan Facility.
In connection with the second draw down, we issued warrants to purchase 74,377 ADSs (representing 371,885 ordinary shares) to the lender
at an exercise price of $2.02 per ADS.
The warrants are exercisable only after our ordinary shares have been delisted from TPEx, and will expire on the earlier of (i) the first
anniversary of such TPEx delisting or (ii) expiry of the term of the October/November 2019 Loan Facility. If, by expiry of the term of the
October/November 2019 Loan Facility, (i) our shares have not been delisted from TPEx and (ii) the warrants have not been exercised, the
lenders shall be entitled to receive a further sum equal to 5% of the principal amount per annum, by way of additional interest, payable by us
upon expiry of the loan term.
As of December 31, 2019, the aggregate carrying amount including principal and accrued interest outstanding under the Convertible Loan
Facility and the October/November 2019 Loan Facility was $3.1 million.
Cash Flows
The following table provides information regarding our cash flows for the years ended December 31, 2017, 2018 and 2019:
(In thousands)
Net cash used in operating activities
Net cash (used in) provided by investing activities
Net cash provided by financing activities
Net decrease in cash and cash equivalents
Year Ended December 31,
2018
2019
2017
(34,117)
(336)
33,289
(1,164)
(39,470)
(23,094)
40,899
(21,665)
(25,803)
5
19,092
(6,706)
118
Net cash used in operating activities
The use of cash resulted primarily from our net losses adjusted for non-cash charges and changes in components of our operating assets and
liabilities. The primary cash inflow was generated from the consideration received for the out-licensing of experimental drugs. The primary
use of our cash was to fund the development of our research and development activities, regulatory and other clinical trial costs, and related
supporting administration. Our prepayments and other current assets, accounts payable and other payables balances were affected by the
timing of vendor invoicing and payments.
Net cash used in operating activities was $39.5 million and $25.8 million for the years ended December 31, 2018 and 2019, respectively. The
decrease of net cash used in operating activities for 2019 was primarily due to a decrease of $2.0 million related to general and administrative
expenses, and a decrease of $15.2 million related to research and development expenses from 2018 to 2019, as we implemented a corporate
restructuring plan to focus our resources on our lead clinical programs.
Net cash used in operating activities was $34.1 million and $39.5 million for the years ended December 31, 2017 and 2018, respectively. The
increase of net cash used in operating activities for 2018 was primarily due to an increase of $1.7 million related to general and
administrative expenses, and an increase of $1.4 million related to research and development expenses from 2017 to 2018, as we incurred
more expenditures for our clinical trial activities.
Net cash used in investing activities
Net cash used in investing activities was $23.1 million and provided by investing activities was $5,380 for the years ended December 31,
2018 and 2019, respectively. The decrease in cash used in investing activities for 2019 was primarily due to the purchase of the worldwide
commercial rights for varlitinib in 2018, with no such occurrence in 2019.
Net cash used in investing activities was $0.3 million and $23.1 million for the years ended December 31, 2017 and 2018, respectively. The
increase in cash used in investing activities for 2018 was primarily due to the purchase of the worldwide commercial rights for varlitinib.
Net cash provided by financing activities
Net cash provided by financing activities was $33.3 million, $40.9 million and $19.1 million for the years ended December 31, 2017, 2018
and 2019, respectively, which consisted primarily of the net proceeds from our initial public offering in Taiwan in 2017, net proceeds from
our issuance of ADSs in our initial public offering in the United States in 2018, and net proceeds from our issuance of ADSs in our public
offering in the United States in 2019.
119
Critical Accounting Policies and Significant Judgments and Estimates
Critical Accounting Policies
Summarized below are our accounting policies that we believe are important to the portrayal of our financial results and also involve the need
for management to make estimates about the effect of matters that are uncertain in nature. Actual results may differ from these estimates,
judgments and assumptions. Certain accounting policies are particularly critical because of their significance to our reported financial results
and the possibility that future events may differ significantly from the conditions and assumptions underlying the estimates used and
judgments made by our management in preparing our financial statements. The following discussion should be read in conjunction with our
consolidated financial statements and related notes, which are included in this Annual Report.
Revenue Recognition
Revenue comprises the fair value of the consideration received or receivable for the out-licensing of experimental drugs that have reached
‘proof of concept’ to business partners for ongoing global development and launch, in the ordinary course of our activities. Revenue is
presented, net of goods and services tax, rebates and discounts.
We recognize revenue when we have completed the out-licensing of the experimental drug to business partners, such partners have accepted
the products, and collectability of the related receivables is reasonably assured.
Typically the consideration received from out-licensing may take the form of upfront payments, option payments, milestone payments, and
royalty payments on licensed products. To determine revenue recognition for contracts with customers, we perform the following five steps:
(i) identify the contracts with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv)
allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the
performance obligations. At contract inception, we assess the goods or services promised within each contract, assess whether each promised
good or service is distinct and identify those that are performance obligations. We recognize as revenue the amount of the transaction price
that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
Upfront License Fees
If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we
recognize revenues from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee
is able to use and benefit from the license. For licenses that are bundled with other performance obligations, we use judgment to assess the
nature of the combined performance obligation to determine whether it is satisfied over time or at a point in time and, if over time, the
appropriate method of measuring progress for purposes of recognizing revenue. We evaluate the measure of progress each reporting period
and, if necessary, adjust the measure of performance and related revenue recognition.
120
Milestone Payments
At the inception of each contract with customers that includes development or regulatory milestone payments (i.e., the variable
consideration), we include some or all of an amount of variable consideration in the transaction price estimated only to the extent that it is
highly probable that a significant reversal in the amount of cumulative revenue recognized would not occur when the uncertainty related to
the variable consideration is subsequently resolved. Milestone payments that are contingent upon the achievement of events that are uncertain
or not controllable, such as regulatory approvals, are generally not considered highly probable of being achieved until those approvals are
received, and therefore not included in the transaction price. At the end of each reporting period, we evaluate the probability of achievement
of such milestones and any related constraints, and if necessary, may adjust our estimate of the overall transaction price.
Royalties
For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and for which the
license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the subsequent sales
occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
To date, we have not recognized any royalty revenue resulting from any of out-licensing arrangements.
Acquired in-process research and development product candidate
In January 2018, we entered into a new license agreement with Array Biopharma Inc. to acquire an exclusive, worldwide license to develop,
manufacture and commercialize varlitinib for all human and animal therapeutic, diagnostic and prophylactic uses. Since varlitinib is still
under development and not yet approved for commercialization, the acquired in-process research and development costs related to varlitinib
are capitalized as an indefinite-lived intangible asset until the completion or abandonment of the related research and development activities.
When the related research and development is completed or a change in circumstance occurs that defines the useful life, the asset is
reclassified to a definite-lived intangible asset and amortized over its estimated useful life.
Indefinite-lived intangible asset is not subject to amortization, but is tested annually for impairment or more frequently if there are indicators
of impairment. In respect of the impairment indicators, we consider both internal and external sources of information to determine whether an
asset may be impaired, which may include significant underperformance of the business in relation to expectations, significant negative
industry or economic trends, and significant changes or planned changes with adverse effects in the use of the assets, as well as the internal
reporting which indicates the economic performance of an asset is worse than expected. If any such indicators exist, we will estimate the
recoverable amount of such indefinite-lived intangible asset and compare it with its carrying amount. Following the same method as used in
the annual impairment testing, if the recoverable amount is less than its carrying amount, an impairment charge is recognized in the
consolidated statements of comprehensive income accordingly. For the year ended December 31, 2019, in connection with varlitinib, we
announced on November 11, 2019 that the global pivotal clinical trial in second-line biliary tract cancer did not meet its primary endpoints.
Due to the results of this trial, management decided to terminate the further development of varlitinib and the estimated future cash flows
expected to arise from the drug decreased. Management carried out a review of the recoverable amount of varlitinib and determined that the
carrying amount exceeded the recoverable amount. The review led to the recognition of an impairment loss of $23.0 million, which was
recognized in research and development expenses for the year ended December 31, 2019, since the drug would have no foreseeable future
alternative use without further clinical trials. We do plan on performing some exploratory work, but there are no current plans to allocate any
future funding for the development of varlitinib, nor is there any guarantee we will do so in the future.
121
Realization of Deferred Income Tax Assets
When we have net operating loss carry forwards or temporary differences in the amount of tax recorded for tax purposes and accounting
purposes, we may be able to reduce the amount of tax that we would otherwise be required to pay in future periods. We generally recognize
deferred tax assets to the extent that it is probable that sufficient taxable benefits will be available to utilize. The income tax benefit or
expense is recorded when there is a net change in our total deferred tax assets and liabilities in a period. The ultimate realization of the
deferred tax assets depends upon the generation of future taxable income during the periods in which the net operating losses and temporary
differences become deductible may be utilized. Since the determination of the amount of realization of the deferred tax assets is based, in
part, on our forecast of future profitability, it is inherently uncertain and subjective. In cases where the actual profits generated are less than
expected, a material adjustment of deferred tax assets may arise, which would be recognized in profit or loss for the period in which such
adjustment takes place. As of December 31, 2018 and December 31, 2019, no deferred tax asset has been recognized on tax losses due to the
unpredictability of future profit streams.
Research and Development Expenses
Elements of research and development expenses primarily include: (i) payroll and other related costs of personnel engaged in research and
development activities, (ii) costs related to preclinical testing of our technologies under development and clinical trials, such as payments to
contract research organizations (CROs), investigators and clinical trial sites that conduct our clinical studies, (iii) costs to develop the product
candidates, including raw materials, supplies and product testing related expenses; and (iv) other research and development expenses.
Research and development expenses are expensed as incurred when these expenditures relate to our research and development services and
have no alternative future uses. The conditions enabling the capitalization of development costs as an asset have not yet been met and,
therefore, all development expenditures are recognized in profit or loss when incurred.
JOBS Act
Subject to certain conditions set forth in the JOBS Act, we are entitled to rely on certain exemptions and reduced reporting requirements as
an EGC. We are not required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over
financial reporting pursuant to Section 404(b), (ii) provide all of the compensation disclosure that may be required of non-emerging growth
public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be
adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report
providing additional information about the audit and the financial statements (including critical audit matters), and (iv) disclose certain
executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief
executive officer’s compensation to median employee compensation. These exemptions will apply until December 31, 2023 or until we no
longer meet the requirements of being an EGC, whichever is earlier.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is
disclosed in Note 3, “Application of new standards, amendments and interpretations,” to our consolidated financial statements and related
notes appearing elsewhere in this Annual Report.
122
C.
Research and Development, Patents and Licenses, etc.
Full details of our research and development activities and expenditures are given in “Item 4.B. Information on the Company - Business
overview” and “Item 5.A. Operating Results” within this Annual Report.
D.
Trend Information.
See “Item 5.A. Operating Results” and “Item 5.B. Liquidity and Capital Resources” within this Annual Report.
E.
Off-balance Sheet Arrangements.
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and
regulations of the SEC.
F.
Tabular Disclosure of Contractual Obligations.
The following table sets forth our contractual obligations as of December 31, 2019 (in thousands). Amounts we pay in future periods may
vary from those reflected in the table.
Total
Less than
1 year
2 – 3 years
4 – 5 years
More than
5 years
CSL loan facility(1)
Convertible Loan Facility(2)
October/November
Facility(3)
Lease obligations(4)
2019
Loan
$
$
4,060 $
1,000
2,250
904
8,214 $
— $
—
—
377
377 $
— $
1,000
2,250
527
3,777 $
— $
—
—
—
— $
4,060
—
—
—
4,060
(1) Reflects the principal amount outstanding under the CSL Facility as of December 31, 2019. Any outstanding principal on the loan must
be repaid 10 years from the date of the CSL Facility. In addition, we are required to mandatorily prepay amounts outstanding if we
receive any income or revenue in connection with the commercialization or out-licensing of any intellectual property rights (other than
under the license agreement with CSL Limited related to ASLAN004), in which case we are required to apply at least a low double digit
percentage of such income or revenue against any amounts then-outstanding under the CSL Facility.
(2) Reflects the principal amount outstanding under the Convertible Loan Facility as of December 31, 2019. Any outstanding principal on
the loan must be repaid two years from the drawdown date of the Convertible Loan Facility.
(3) Reflects the principal amount outstanding under the October/November 2019 Loan Facility as of December 31, 2019. Any outstanding
principal on the loan must be repaid two years from the drawdown date of the October/November 2019 Loan Facility. In addition, upon
an event of default, the lenders may declare the principal amounts then outstanding and all interest thereon accrued and unpaid to be
immediately due and payable to the lenders.
(4) Lease obligations reflect lease payments for our office space in Singapore, Taipei, Taiwan and Shanghai, China.
123
The table above does not include:
•
Our repayment obligations under the loan from EDB, which are contingent on future events, and which as of December 31, 2019
was approximately $10.5 million; and
• We also have obligations to make future payments to third party licensors that become due and payable on the achievement of
certain development, regulatory and commercial milestones as well as tiered royalties on net sales. We have not included these
commitments on our balance sheet or in the table above because the commitments are cancellable if the milestones are not
complete and achievement and timing of these obligations are not fixed or determinable.
G.
Safe Harbor.
This Annual Report on Form 20-F contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act and as defined in the Private Securities Litigation Reform Act of 1995. See the section titled “Cautionary Statement
Regarding Forward-Looking Statements” at the beginning of this Annual Report.
124
Item 6. Directors, Senior Management and Employees
A.
Directors and senior management.
The following table sets forth information regarding our executive officers and directors, including their ages, as of March 31, 2020.
Name
Executive Officers:
Carl Firth, Ph.D.
Mark McHale, Ph.D.
Ben Goodger
Kiran Asarpota
Stephen Doyle
Age
Position(s)
47 Chief Executive Officer and Director
Chief Development Officer and Head
of R&D
55
57 General Counsel
41 Vice President Finance
47 Chief Business Officer
Non-Executive Directors:
Andrew Howden
Jun Wu, Ph.D. (representing Alnair Investment)
Lim Chin Hwee Damien (representing BV Healthcare II
Pte Ltd.)
Kelvin Sun
Robert E. Hoffman
60 Chairman
53 Director
57 Director
57 Director
54 Director
Executive Officers
Carl Firth, Ph.D. Dr. Firth founded our company in 2010 and served as our Chairman of the board of directors from June 2014 to July 2019,
as our Chief Executive Officer since January 2011 and as a director since July 2010. Prior to founding our company, Dr. Firth was Head of
Asia Healthcare at Bank of America Merrill Lynch, supporting public and private financing of healthcare companies and advising on M&A
transactions, from January 2008 to June 2010. Prior to joining the banking industry, Dr. Firth worked for AstraZeneca from October 1998 to
December 2007 in various commercial and R&D roles, including Regional Business Development Director, Asia Pacific, and Director of
New Product Development, China. Dr. Firth is currently a member of Singapore’s Health and Biomedical Sciences International Advisory
Council, where he has served in such capacity since September 2017, and an independent director at Singapore’s Exploit Technologies, a
commercialization arm of A*STAR, which supports A*STAR in its efforts to transform the economy by driving innovation and
commercializing its research outcomes, where he has served in such capacity since April 2014. Previously, Dr. Firth was an independent
director of Hong Kong listed Uni-Bio Sciences, a leading Chinese biopharmaceutical company engaged in the research, development,
production and commercialization of biopharmaceuticals for the Chinese healthcare market, where he served in such capacity from April
2014 to November 2017. Dr. Firth is an Adjunct Professor at Duke-NUS Medical School, a position he has held since June 2014. He holds a
Ph.D. in Molecular Biology from Cambridge University (Trinity College), an Executive M.B.A. from London Business School, and a B.A. in
Molecular Biology from Cambridge University.
125
Mark McHale, Ph.D. Dr. McHale helped found our company in 2010 and is currently serving as Chief Development Officer and Head of
R&D. He previously served as our Chief Scientific Officer and Chief Operating Officer. Prior to joining us, Dr. McHale was the Head of
Molecular Sciences at AstraZeneca, Respiratory & Inflammation, from 1997 to 2010. Dr. McHale was a core member of the respiratory
strategy research team for half a decade where he led all new target identifications in asthma. Dr. McHale also previously worked from 1991
to 1997 at SmithKline Beecham (now GlaxoSmithKline Plc.), where he supported lead optimization projects in serotonin and dopamine
receptors. Dr. McHale has a Ph.D. in Molecular Biology from the University of East Anglia in the United Kingdom, and a B.Sc. in Genetics
from the University of London.
Ben Goodger. Mr. Goodger has served as our General Counsel since November 2016. Prior to joining us, Mr. Goodger was the Partner and
Head of Intellectual Property (IP) Licensing and Transactions with Osborne Clarke in the United Kingdom, a multinational law firm, from
November 2014 to October 2016. Mr. Goodger also previously served as Partner, Head of IP Commercialization, at Edwards Wildman in the
United Kingdom, a multinational law firm, from November 2010 to October 2014, as Executive, Head of IP Commercial, at Rouse & Co.
International in London, Oxford, and Shanghai, a multinational law firm, from December 1997 to October 2010, and as the President of
Licensing Executives Society, a not for profit, non-political, umbrella organization, from 1998 to 1999. Mr. Goodger received his M.A. in
English Literature & Language from Oxford University (Exhibitioner, Keble College) and he is a Solicitor of England & Wales, enrolled
October 1986.
Kiran Asarpota. Mr. Asarpota has served as our Vice President Finance since November 2010. Prior to joining us, Mr. Asarpota was Group
Finance Director at Global Brands Group Holding Limited, a public branded apparel company, from 2006 to 2010, where he was responsible
for the group’s corporate and commercial finance functions. Mr. Asarpota received his M.B.A. from London South Bank University in the
United Kingdom, and a B.B.M. from Oxford Brookes.
Stephen Doyle. Mr. Doyle has served as our Vice President Commercial and Head of China since February 2018, and was appointed Chief
Business Officer in January 2019. Prior to joining us, Mr. Doyle was the Vice President and Head of Specialty Care for China at Boehringer
Ingelheim GmbH, a global pharmaceutical company, from January 2014 to February 2018. Mr. Doyle also previously served as the Vice
President of Oncology, Haematology and Transplantation Business Unit with Sanofi S.A. in Shanghai, a global pharmaceutical company,
from October 2010 to October 2013, as Regional Commercial Director for Oncology for Asia Pacific, Russia and India with Sanofi-aventis in
Singapore, from 2007 to 2010, and as Director and Head of Scientific Communications, Global Marketing, Oncology Franchise with Sanofi-
aventis in Paris from 2005 to 2007. Mr. Doyle holds a B.S. in Pharmacy from The Robert Gordon University in the United Kingdom and an
M.S. in Clinical Pharmacy from the University of Derby in the United Kingdom.
Non-Executive Directors
Andrew Howden. Mr. Howden has served as our Chairman of the board of directors since July 2019 and a member of our board of directors
since April 2016. He currently serves as Executive Chairman of First Pharma P/L, an Australian pharmaceutical company, a position he has
held since September 2016. He was previously Chairman of the True Origins Company P/L, an Australian company involved in the
marketing of infant formula in China and Asia from 2016 to 2019. He previously served as the Chief Executive Officer of iNova
Pharmaceuticals, an Asia Pacific pharmaceutical company developing and commercializing drugs across a range of therapeutic areas, from
August 2008 to February 2015. Previously, he was the President of IMS Health, Asia Pacific, a provider of information, services and
technology for the healthcare industry, from 2007 to 2008, Regional Vice President of Asia Pacific for AstraZeneca, a multinational
pharmaceutical and biopharmaceutical company, from 2002 to 2006, and he has held senior executive roles at Quintiles Transnational Inc., a
clinical research company, from 1998 to 2002. Mr. Howden has also previously served on the board of directors of over 20 companies within
the pharmaceutical and healthcare industries. He received a B.Sc. from the University of New England (Australia), and an M.Com. from the
University of New South Wales, Australia.
126
Jun Wu, Ph.D. Dr. Wu has served as a member of our board of directors and representative for Alnair Investment since April 2016. Dr. Wu is
currently the Chairman and Managing Partner at Cenova Ventures, a principal investment firm for healthcare venture funds, a position he has
held since May 2009. Previously, Dr. Wu served as the Co-founder and Chief Executive Officer of Shanghai Genomics, a biotech company,
from September 2001 to May 2005, and as an Executive Managing Director of GNI Limited, a Tokyo Exchange Listed biotech company,
from June 2005 to April 2009. Dr. Wu has previously served as a director of over 20 companies and investment funds in the pharmaceutical
industry. Dr. Wu holds a Ph.D. in Microbiology and Immunology from the University of California at San Francisco and a B.S. in Biology
from San Jose State University.
Lim Chin Hwee Damien. Mr. Lim has served as a member of our board of directors and representative for BV Healthcare II Pte Ltd. since
April 2016. He is the founder and currently serves as the General Partner of BioVeda Capital, a life science venture capital fund, a position he
has held since 2000. He currently serves as a non-executive director of companies in a variety of industries. He has previously held senior
positions in PrimePartners and Vickers Ballas Asset Management, both private equity asset management companies, and Morgan Grenfell
Asia, a merchant bank now owned by Deutsche Bank. He received his B.B.A. from the University of Houston.
Kelvin Sun. Mr. Sun has served as a member of our board of directors since April 2016. Mr. Sun has served as founder and president of Saga-
Unitek Ventures, a venture capital and private equity fund management company, specializing in investing in middle-market, growth-oriented
companies, as well as those funds under its management, since 1998. He currently serves as an independent director of Wonderful Hi-Tech
Co. Ltd., a public Taiwanese electrical wire and cable manufacturing company, a position he has held since June 2010, and as an independent
director of Tah Tong Textile Co., Ltd., a Taiwanese textile manufacturing company, a position he has held since June 2015. Mr. Sun also
currently serves as a board member of Pixon Technologies, a Taiwanese optical light sources manufacturing company, a position he has held
since June 2011, Newmax Technology Co., Ltd., a Taiwanese optical lens manufacturing company, a position he has held since December
2017 and the Taiwan Venture Capital Association, a position he has held since 2008. He previously served as the senior officer at Chengxin
VC Group, a Taiwanese venture capital firm, from 1997 to 1998, as the Director for the Asian Engineering Center of Emerson Electric, a
U.S. publicly listed industrial company, from 1995 to 1997, and as the R&D Section Leader at Prime Optical Fiber Corporation, a Taiwanese
fiber optics manufacturing company, from 1992 to 1993. He holds an M.B.A. from the University of Michigan at Ann Arbor and an M.S. in
Materials Science from Wayne State University.
Robert E. Hoffman. Mr. Hoffman has served a member of our board of directors since October 2018. Currently, Mr. Hoffman serves as Chief
Financial Officer and Senior Vice President, Finance of Heron Therapeutics, Inc., a Nasdaq-listed company. In addition, Mr. Hoffman serves
as a board member of the following Nasdaq-listed companies: Kura Oncology, Inc. (also serves as the chair of the audit committee), DelMar
Pharmaceuticals, Inc. (as the chairman of the board), Aravive, Inc. (also serves as the chair of the audit committee). Prior to joining Heron
Therapeutics, Mr. Hoffman served as Executive Vice President and Chief Financial Officer of Innovus Pharmaceuticals, Inc., a public
pharmaceutical company, from September 2016 to April 2017. From July 2015 to September 2016, Mr. Hoffman served as Chief Financial
Officer of AnaptysBio, Inc., a public biotechnology company. From June 2012 to July 2015, Mr. Hoffman served as the Senior Vice
President, Finance and Chief Financial Officer and part of the founding management team of Arena Pharmaceuticals, Inc. (Arena), a public
biopharmaceutical company. From August 2011 to June 2012 and previously from December 2005 to March 2011, he served as Arena’s Vice
President, Finance and Chief Financial Officer and in a number of various roles of increasing responsibility from 1997 to December 2005.
From March 2011 to August 2011, Mr. Hoffman served as Chief Financial Officer for Polaris Group, a biopharmaceutical drug company. Mr.
Hoffman formerly served as a member of the board of directors of CombiMatrix Corporation, a molecular diagnostics company, and MabVax
Therapeutics Holdings, Inc., a biopharmaceutical company. Mr. Hoffman serves as an advisory committee member of the Financial
Accounting Standards Board (FASB). Mr. Hoffman formerly served as a director and President of the San Diego Chapter of Financial
Executives International. Mr. Hoffman holds a B.B.A. from St. Bonaventure University, and is licensed as a C.P.A. (inactive) in the State of
California.
127
Family Relationships
There are no family relationships among any of our executive officers or directors.
B.
Compensation.
Compensation of Executive Officers and Directors
Incentive Compensation
For the year ended December 31, 2019, the aggregate compensation accrued or paid to the members of our board of directors and our
executive officers for services in all capacities was $3,052,805.
We did not set aside or accrue any amounts for pension, retirement or similar benefits to members of our board of directors or executive
officers in the year ended December 31, 2019.
We do not maintain any cash incentive or bonus programs. During the year ended December 31, 2019, we had no performance based
compensation programs other than the SMT Long Term Incentive Plan for the years 2017, 2018 and 2019. For more information on our Long
Term Incentive Plans, see the discussion below under “—Compensation Plans—2017, 2018 and 2019 SMT Long Term Incentive Plans.”
Executive Officer Compensation
Equity Awards
We did not grant any share options to our executive officers during the fiscal year ended December 31, 2019.
Employment Agreements with Executive Officers
We have entered into employment agreements with our executive officers. Each of our executive officers is employed for a continuous term
unless either we or the executive officer gives prior notice to terminate such employment. We may terminate the employment for just cause,
at any time, without notice or remuneration, for certain acts of the executive officer. An executive officer may terminate his or her
employment at any time with six months’ prior written notice.
Each executive officer has agreed to maintain the confidentiality of any confidential information, both during and after the employment
agreement expires or is earlier terminated. In addition, all executive officers have agreed to be bound by a non-solicitation covenant that
prohibits each executive officer from contacting or communicating with our customers, members, partners, suppliers or any other persons or
entities with whom we do business or soliciting or hiring any of our employees during his or her employment and for one year after the
termination of his or her employment and by a non-compete covenant that prohibits each executive officer from competing with us, directly
or indirectly, during his or her employment and for six months after the termination of his or her employment.
128
Option Grants
We have made grants of options to our employees pursuant to our 2014 Employee Share Option Scheme Plan, or the 2014 Plan, and our 2017
Employee Share Option Plan 1, or the 2017 Plan. Options granted pursuant to the 2014 Plan are either vested in full as of the date of grant or
are 25% vested as of the date of grant, with the remaining 75% vesting in equal annual installments over the three years following the date of
grant. Options granted pursuant to the 2017 Plan vest in full upon the two year anniversary of the date of grant. Vested options may be
exercised during their term and for varying periods following termination of service, depending on the reason for termination. Options will be
adjusted to account for any changes in capitalization or certain other corporate events and are not transferable (but may be exercised by the
individual’s heirs in the case of death, to the extent vested at the time of death).
LTIP
On August 23, 2017 and February 1, 2018, we granted 1,462,000 and 104,000 bonus entitlement units to our executive officers pursuant to
the 2017 LTIP, respectively. 1,160,001 bonus entitlement units granted under the 2017 LTIP remained outstanding as of December 31, 2019.
On July 30, 2018, we granted 241,142 bonus entitlement units to our executive officers pursuant to the 2018 LTIP, and 168,089 units
remained outstanding as of December 31, 2019.
Upon vesting and redemption, each unit award is converted into a cash payment equal to the number of units multiplied by the per-share fair
market value of our ordinary shares on the day following our receipt of a redemption notice. The 1,462,000 bonus entitlement units granted
under the 2017 LTIP will be one-third vested each year after the first, second, and third anniversary of the award. The 104,000 bonus
entitlement units granted under the 2017 LTIP will be one-half vested each year after the second and third anniversary of the award. The
241,142 bonus entitlement units granted under the 2018 LTIP will be one-third vested each year after the first, second, and third anniversary
of the award.
As of December 31, 2019, we granted 491,020 bonus entitlement units under the 2019 LTIP. For the 491,020 units under the 2019 LTIP, they
will be vested one-third each year after the first, second, and third anniversary of the award. All of the 2019 LTIP granted bonus entitlement
units remained outstanding as of December 31, 2019.
Regarding the Company’s 2017, 2018 and 2019 LTIPs, the respective quoted fair value of the awards on the grant date was NT$33.45 (or
$1.10), $7.90 and $2.92, based on the Taiwan share price on August 23, 2017, the closing price per ADS on July 30, 2018, and the closing
price per ADS on July 30, 2019 respectively. The quoted fair value on the reporting date is based on the closing price of Taiwan share price
of NT$33.20 (or $1.12) as of December 31, 2017, the closing price per ADS of $3.60 as of December 31, 2018, and the closing price per
ADS of $2.03 as of December 31, 2019 respectively.
We recognized total expenses of $1,272 with respect to the LTIPs for the year ended December 31, 2019.
Other Programs
ASLAN Pharmaceuticals Pte. Ltd. has adopted defined contribution plans which are post-employment benefit plans under which we pay
fixed contributions into the Singapore Central Provident Fund on a mandatory basis. ASLAN Pharmaceuticals Pte. Ltd. has no further
payment obligations once the contributions have been paid. The contributions are recognized as employee compensation expense when they
are due.
129
ASLAN Pharmaceuticals Taiwan Limited adopted a pension plan under the Labor Pension Act, or the LPA, which is a state-managed defined
contribution plan. Under the LPA, ASLAN Pharmaceuticals Taiwan Limited makes monthly contributions to its Taiwan-based employees’
individual pension accounts at 6% of monthly salaries and wages.
ASLAN Pharmaceuticals (Shanghai) Co. Ltd. makes monthly contributions at a certain percentage of its Shanghai-based employees’ payroll
expenses to pension accounts, which are operated by the Chinese government.
Director Compensation
We provide only cash compensation to each of our non-executive directors not serving as a representative of a shareholder for the time and
effort necessary to serve as a member of our board of directors. The compensation of the non-executive directors complies with our Articles
and is determined by our remuneration committee and board of directors as a whole, based on a review of individual contributions to our
operations and current practices in other companies.
2019 Director Compensation Table
The following table sets forth information regarding the compensation earned by our non-executive directors for service on our board of
directors during the year ended December 31, 2019.
Name
Abel Ang (representing Advanced MedTech Technologies
Pte Ltd.)(1)
Jun Wu, Ph.D. (representing Alnair Investment)
Lim Chin Hwee Damien (representing BV Healthcare II
Pte Ltd.)
Andrew Howden
Kelvin Sun
Robert E. Hoffman
Fees
Earned in
Cash
All Other
Compensation
Total
$
$
$
$
$
$
— $
— $
— $
48,750 $
29,176 $
75,000 $
— $
— $
— $
— $
— $
— $
—
—
—
48,750
29,176
75,000
(1) Mr. Ang resigned from our board of directors on April 26, 2019.
We have not granted any options or issued any shares of restricted stock to our non-executive directors.
130
Grants of Share Options to Executive Officers
The following table summarizes, as of the date of this Annual Report, outstanding share options to purchase ordinary shares granted to our
executive officers. We have not granted any share options to our non-executive directors.
Carl Firth, Ph.D.
Name
Mark McHale, Ph.D
Ben Goodger
Kiran Asarpota
Number of
Shares
Underlying
Stock
Option
Exercise
Price per
Share
300,000 $
150,000 $
180,000 $
225,000 $
295,500 $
4,500 $
300,000 $
300,000 $
150,000 $
1,050,000 $
300,000 $
120,000 $
60,000 $
180,000 $
240,000 $
240,000 $
240,000 $
120,000 $
840,000 $
240,000 $
276,000 $
60,000 $
60,000 $
60,000 $
60,000 $
60,000 $
40,000 $
40,000 $
120,000 $
0.10
0.40
0.10
0.40
0.40
0.40
0.68
0.68
0.68
0.94
1.13
0.40
0.10
0.40
0.40
0.68
0.68
0.68
0.94
1.13
1.13
0.40
0.40
0.40
0.68
0.68
0.68
0.94
1.13
Stock Option
Expiration
Date
July 1, 2020
July 1, 2020
July 1, 2021
July 1, 2021
July 1, 2022
July 1, 2023
July 1, 2023
July 1, 2024
July 1, 2025
July 1, 2025
July 1, 2026
July 1, 2020
July 1, 2021
July 1, 2021
July 1, 2022
July 1, 2023
July 1, 2024
July 1, 2025
July 1, 2025
July 1, 2026
July 1, 2026
July 1, 2020
July 1, 2021
July 1, 2022
July 1, 2023
July 1, 2024
July 1, 2025
July 1, 2025
July 1, 2026
Grant Date
July 1, 2010
July 1, 2010
July 1, 2011
July 1, 2011
July 1, 2012
July 1, 2013
July 1, 2013
July 1, 2014
July 1, 2015
July 1, 2015
July 1, 2016
July 1, 2010
July 1, 2011
July 1, 2011
July 1, 2012
July 1, 2013
July 1, 2014
July 1, 2015
July 1, 2015
July 1, 2016
July 1, 2016
July 1, 2010
July 1, 2011
July 1, 2012
July 1, 2013
July 1, 2014
July 1, 2015
July 1, 2015
July 1, 2016
Compensation Plans
2014 Employee Share Option Scheme Plan
We maintain the 2014 Plan, pursuant to which we have granted share options to our employees, directors and consultants. The 2014 Plan
became effective on August 26, 2014, and has a term of ten years. After the effective date of the 2017 Plan, no additional awards were
granted, and no future awards are allowed to be granted, under the 2014 Plan.
131
The 2014 Plan may be administered by our board of directors or a committee thereof, which administrator has the authority to: determine the
individuals to whom awards may be granted and the terms of such awards; amend the terms of any outstanding award, provided that the
consent of the grantee is required where the grantee’s rights would be adversely affected; construe and interpret the terms of the 2014 Plan
and awards granted thereunder; and take such other action, not inconsistent with the terms of the 2014 Plan, as it deems appropriate.
The number of shares under the 2014 Plan and under outstanding awards, and the exercise price of outstanding awards, will be adjusted to
reflect certain changes in capitalization. In the event of a corporate transaction (as defined in the 2014 Plan), awards will terminate if not
assumed. If they are assumed, the awards will fully vest if the holder’s employment is terminated without cause or the holder resigns for
good reason, in either case within 12 months thereafter.
2017 Employee Share Option Plan
We maintain the 2017 Plan, pursuant to which we may grant share options. The 2017 Plan became effective on September 13, 2017, and has
a term of ten years. Awards under the 2017 Plan may be granted to our employees. The maximum aggregate number of shares that may be
issued under the plan is 1,000,000 shares.
The 2017 Plan is administered by our board of directors, which has the authority to determine the individuals to whom awards may be
granted and the terms of such awards; and to construe and interpret the terms of the 2017 Plan and awards granted thereunder.
The number of shares under the 2017 Plan and under outstanding awards, and the exercise price of outstanding awards, will be adjusted to
reflect certain changes in capitalization. In the event of a corporate transaction (as defined in the 2017 Plan), awards will terminate if not
assumed. If they are assumed, the awards will vest if the holder’s employment is terminated without cause or the holder resigns, in either case
within 12 months thereafter. In the event of a change in control (as defined in the 2017 Plan) that is not a corporate transaction, awards will
fully vest if the holder’s employment is terminated without cause or the holder resigns, in either case within 12 months thereafter.
2017, 2018 and 2019 SMT Long Term Incentive Plans
We maintain the 2017, 2018 and 2019 LTIPs, pursuant to which we may grant bonus entitlement unit awards. The 2017 LTIP, 2018 LTIP and
2019 LTIP became effective on August 23, 2017, July 30, 2018, and July 30, 2019, respectively, and each has a term of ten years. Awards
under each LTIP may be granted to our employees. All of the awards granted in 2017, 2018 and 2019 were granted to our executive officers.
Each LTIP is administered by the members of the remuneration committee, which committee has the authority to: determine the individuals
to whom unit awards may be granted and the terms of such unit awards; amend the terms of any outstanding unit award, provided that the
consent of the grantee is required where the grantee’s rights would be adversely affected; construe and interpret the terms of each LTIP and
unit awards granted thereunder; and take such other action, not inconsistent with the terms of each LTIP, as it deems appropriate.
Upon vesting and redemption, each unit award is converted into a cash payment equal to the number of units multiplied by the per-share fair
market value of our ordinary shares on the day following our receipt of a redemption notice, up to a cap of five times the base value of the
unit as set forth in the grantee’s award agreement. Redemption occurs automatically upon termination of employment and upon the per-
share fair market value exceeding five times the base value of the unit award, to the extent not previously redeemed.
132
The terms of awards will be adjusted to reflect certain changes in capitalization. In the event of a corporate transaction (as defined in each
LTIP), awards will terminate if not assumed. If they are assumed, the awards will vest and be redeemed if the holder’s employment is
terminated without cause or the holder resigns for good reason, in either case within 12 months thereafter. In the event of a change in control
(as defined in each LTIP) that is not a corporate transaction, awards will fully vest if the holder’s employment is terminated without cause or
the holder resigns for good reason, in either case within 12 months thereafter.
Insurance and Indemnification
We are empowered by our Articles to indemnify our directors against any liability they incur by reason of their directorship. We maintain
directors’ and officers’ insurance to insure such persons against certain liabilities. In addition, our employment agreements with our
executive officers provide for indemnification. We have entered into an indemnification agreement with each of our directors and executive
officers.
In addition to such indemnification, we provide our directors and executive officers with directors’ and officers’ liability insurance as
permitted by our Articles.
Insofar as indemnification of liabilities arising under the Securities Act may be permitted to our board, executive officers, or persons
controlling us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
C.
Board practices.
Composition of our Board of Directors
Our board of directors is currently composed of seven members. Our board of directors has determined that, of our seven directors, three do
not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of director and that
each of these directors is “independent” as that term is defined under the Taiwan Securities and Exchange Act (Taiwan Act). According to the
Taiwan Act, during the two years before being elected and during the term of office, none of our independent directors may have been or be
any of the following, which we refer to as a Restricted Person:
1. An employee of ours or any of our affiliates;
2. Our statutory auditor or of our affiliates;
3. A director of our affiliates, unless he or she was an independent director of our subsidiary;
4. A natural-person shareholder who holds in the aggregate, together with his or her spouse, minor children, and his or her nominees,
one percent or more of our ordinary shares outstanding or ranks among the top ten in our shareholdings;
5. A spouse, relative within the second degree of kinship, or lineal relative within the third degree of kinship, of any of the persons in
the preceding four items;
6. A director, statutory auditor, or employee of a corporate shareholder that directly holds five percent or more of our total number of
shares outstanding or of a corporate shareholder that ranks among the top five in our shareholdings;
7. A director, statutory auditor, officer, or shareholder holding five percent or more of the shares of a company or institution that
meets certain statutorily specified criteria and has a financial or business relationship with us; or
133
8. A professional individual who, or an owner, partner, director, statutory auditor, or officer of a sole proprietorship, partnership,
company, or institution that, provides commercial, legal, financial, accounting services or consultation to us or to any of our
affiliates, or a spouse thereof; provided that this restriction does not apply to a member of the remuneration committee, public
tender offer review committee, or special committee for merger/consolidation and acquisition, who exercises powers pursuant to
the Taiwan Act or to the Taiwan Business Mergers and Acquisitions Act or related laws or regulations.
The “during the two years before being elected” requirement does not apply when an independent director of ours has served as an
independent director of our or any of our affiliates, or of a specific company or institution that has a financial or business relationship with us,
as stated in items 3 or 7 above, but is currently no longer in that position.
In accordance with our Articles, our directors serve for a term of three years and, at the expiration of such term, are eligible for reelection by
our shareholders. If a new director is not elected after the expiration of the tenure of an existing director, the tenure of such out-going director
shall be extended until a new director has been elected.
Duties of Directors
Under Cayman Islands law, all of our directors owe us fiduciary duties, including a duty of loyalty, a duty to act honestly and a duty to act in
good faith and in a manner they believe to be in our best interests. Our directors also have a duty to exercise the skill they actually possess
and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to
us, our directors must ensure compliance with our Articles, as amended and restated from time to time. We have the right to seek damages if
we suffer loss as a consequence of a duty owed by any of our directors being breached.
Committees of our Board of Directors
Our board of directors has three standing committees: an audit committee, a remuneration committee and a nomination committee.
Audit Committee
The audit committee, which consists of Mr. Howden, Mr. Hoffman and Mr. Sun, assists the board of directors in overseeing our accounting
and financial reporting processes and the audits of our financial statements. Mr. Sun serves as chairman of the audit committee. The audit
committee consists exclusively of independent members of our board. Our board of directors has determined that Mr. Sun qualifies as an
“audit committee financial expert” as defined by applicable SEC rules and has the requisite financial sophistication as defined under the
applicable Nasdaq rules and regulations. Our board has determined that all of the members of the audit committee satisfy the “independence”
requirements set forth in Rule 10A-3 under the Exchange Act. The audit committee will be governed by a charter that complies with Nasdaq
rules.
The audit committee’s responsibilities will include:
•
•
The adoption of or amendments to the internal control system;
Assessment of the effectiveness of the internal control system;
134
•
The adoption or amendment, of the procedures for handling financial or business activities of a material nature such as acquisition
or disposal of assets, derivatives trading, lending of funds to others and endorsements or guarantees for others;
• Matters in which a director is an interested party;
•
•
•
•
•
•
•
Asset transactions or derivatives trading of a material nature;
Loans of funds, endorsements or provision of guarantees of a material nature;
The offering, issuance or private placement of equity-type securities;
The hiring or dismissal of a certified public accountant or their compensation;
The appointment or discharge of a financial, accounting or internal audit officer;
Annual and semi-annual financial reports; and
Other material matters as may be required by us or by the competent authority.
The audit committee will meet as often as one or more members of the audit committee deem necessary, but in any event will meet at least
four times per year according to the Taiwan Act.
Remuneration Committee
The remuneration committee, which consists of Mr. Howden, Mr. Hoffman and Mr. Sun, assists the board of directors in determining
executive officer compensation. Mr. Howden serves as chairman of the remuneration committee. Under the Taiwan Act, our remuneration
committee shall be comprised of at least three members, and at least one of them shall be an independent member of the board as defined
under the Taiwan Act. All members of our remuneration committee are independent members of the board as defined by the Taiwan Act. In
addition, during the two years before being appointed to his or her term of office, none of our remuneration committee members may have
been or be a Restricted Person. This “during the two years before being appointed” requirement does not apply where a remuneration
committee member has served as an independent director of ours or any of our affiliates, or of a specified company or institution that has a
financial or business relationship with us, as stated in items 3 or 7 of the definition of Restricted Person above, but is currently no longer in
that position. Under SEC and Nasdaq rules, there are heightened independence standards for members of the remuneration committee,
including a prohibition against the receipt of any compensation from us other than standard board member fees. Although foreign private
issuers are not required to meet this heightened standard, all of our remuneration committee members meet this heightened standard.
The remuneration committee’s responsibilities include:
•
•
•
•
Professionally and objectively evaluate the policies and systems for compensation of the directors, supervisors, and managerial
officers of us, and submit recommendations to the board of directors for its reference in decision making;
Establishing and periodically reviewing the annual and long-term performance goals for the directors and managerial officers of us
and the policies, systems, standards, and structure for their compensation;
Periodically assessing the degree to which performance goals for the directors and managerial officers of us have been achieved,
and setting the types and amounts of their individual compensation; and
Periodically review the charter and propose suggestion for amendments.
135
When performing these responsibilities, the remuneration committee shall follow the following principles:
•
•
•
•
•
Ensuring that the compensation arrangements of us comply with applicable laws and regulations and are sufficient to recruit
outstanding talent;
Performance assessments and compensation levels of the directors and managerial officers shall take into account the general pay
levels in the industry, the time spent by the individual and their responsibilities, the extent of goal achievement, their performance
in other positions, and the compensation paid to employees holding equivalent positions in recent years. Also to be evaluated are
the reasonableness of the correlation between the individual’s performance and our operational performance and future risk
exposure, with respect to the achievement of our short-term and long-term business goals and the financial position;
There shall be no incentive for the directors or managerial officers to pursue compensation by engaging in activities that exceed
the our tolerable risk level;
For directors and senior managerial officers, the percentage of bonuses to be distributed based on their short-term performance and
the time for payment of any variable compensation shall be decided with regard to the characteristics of the industry and the nature
of our business; and
No member of the committee may participate in discussion and voting when the committee is deciding on that member’s
individual compensation.
The remuneration committee shall submit its recommendations regarding the above for deliberation to the board. When deliberating the
recommendation of the remuneration committee, the board shall give comprehensive consideration to matters including the amounts of
remuneration, payment methods, and the potential future risk facing our company. If the board would like to decline to adopt, or would like
to modify, a recommendation of the remuneration committee, the consent of a majority of the directors in attendance at a meeting attended
by two-thirds or more of the entire board is required, and the board in its resolution shall provide its comprehensive consideration and shall
specifically explain whether the remuneration passed by it exceeds in any way the remuneration recommended by the remuneration
committee.
Nomination Committee
The nomination committee, which consists of Mr. Howden, Mr. Sun, Mr. Ang and Dr. Firth, assists the board of directors in selecting and
approving director candidates to serve on the board. Under the Taiwan Act, all companies listed on the TPEx are required to adopt a director
candidate nomination mechanism for the election of directors, although there is no requirement that a listed company form a nomination
committee. Under SEC and Nasdaq rules, director nominees must either be selected, or recommended for the board’s selection, either by
independent directors constituting a majority of the board’s independent directors in a vote in which only independent directors participate,
or by a nomination committee comprised solely of independent directors. Foreign private issuers are not required to have independent
director oversight of director nominations, and out of those currently serving on our nomination committee, only Mr. Howden and Mr. Sun
are independent members of our board.
The nomination committee’s responsibilities include:
•
•
•
Reviewing and assessing the composition of the board of directors;
Identifying appropriate director candidates and independent director candidates;
Reviewing the qualifications and suitability of each director candidate and independent director candidate identified by the
committee;
136
•
•
Submitting director and independent director recommendations to the board of directors for consideration; and
Conducting all other necessary actions to facilitate the selection and approval of director candidates and independent director
candidates by the board.
The nomination committee shall submit its recommendations regarding the above for deliberation to the board. When deliberating with
respect to the recommendation of the nomination committee, the board shall give comprehensive consideration to matters including the
current composition of the board, the qualifications of director candidates, the overall diversity of the board and the need for refreshing. The
nomination committee will meet as often as one or more members of the nomination committee deem necessary.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics that covers a broad range of matters including the handling of conflicts of interest,
compliance issues and other corporate policies. Our Code of Business Conduct is applicable to both our directors and employees.
Other Corporate Governance Matters
The Sarbanes-Oxley Act of 2002, as well as related rules subsequently implemented by the SEC, requires foreign private issuers, including
our company, to comply with various corporate governance practices. In addition, Nasdaq rules provide that foreign private issuers may
follow home country practice in lieu of the Nasdaq corporate governance standards, subject to certain exceptions and except to the extent that
such exemptions would be contrary to U.S. federal securities laws.
Because we are a foreign private issuer, our members of our board of directors, executive board members and senior management are not
subject to short-swing profit and insider trading reporting obligations under section 16 of the Exchange Act. They will, however, be subject
to the obligations to report changes in share ownership under section 13 of the Exchange Act and related SEC rules.
D.
Employees.
As of December 31, 2019, we had 23 full-time employees. Of these, six were engaged in full-time research and development and 17 were
engaged in full-time general and administrative functions. By geography, 18 of our employees are located in Singapore, four are located in
Taiwan, and one is located in China.
We have also engaged and may continue to engage independent contractors to assist us with our operations. None of our employees are
represented by a labor union or covered by a collective bargaining agreement. We have never experienced any employment related work
stoppages, and we consider our relations with our employees to be good.
Function:
Research and development
General and administrative
Total
2017
As of December 31,
2018
2019
23
24
47
28
28
56
6
17
23
137
E.
Share ownership.
For information regarding the share ownership of our directors and executive officers, see “Item 6.B-Compensation” and “Item 7.A-Major
Shareholders.”
Item 7. Major Shareholders and Related Party Transactions
A.
Major Shareholders
The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of February 29, 2020 for:
•
•
•
Each beneficial owner of 5% or more of our outstanding ordinary shares determined as of January 30, 2020, which was the most
recent record date of our ordinary shares under applicable procedures in Taiwan (upon which basis we are able to ascertain
whether or not a holder otherwise not affiliated with us may be above the 5% threshold);
Each of our executive officers and directors; and
All of our executive officers and directors as a group.
Beneficial ownership is determined in accordance with the rules of the SEC. These rules generally attribute beneficial ownership of securities
to persons who possess sole or shared voting power or investment power with respect to those securities and include ordinary shares issuable
upon the exercise of options that are immediately exercisable or exercisable within 60 days of February 29, 2020. Percentage ownership
calculations are based on 189,954,970 ordinary shares outstanding as of February 29, 2020.
As of January 30, 2020, to the best of our knowledge, approximately 60,249,887 ordinary shares (including ordinary shares in the form of
ADSs), or 31.72% of our outstanding ordinary shares as of such date, were held by nine shareholders of record in the United States. The
actual number of holders is greater than these numbers of record holders and includes beneficial owners whose ordinary shares or ADSs are
held in street name by brokers and other nominees. This number of holders of record also does not include holders whose shares may be held
in trust by other entities.
Except as otherwise indicated, all of the shares reflected in the table are ordinary shares and all persons listed below have sole voting and
investment power with respect to the shares beneficially owned by them, subject to applicable community property laws. The information is
not necessarily indicative of beneficial ownership for any other purpose. None of our major shareholders have different voting rights with
respect to their ordinary shares. We have set forth below information known to us regarding any significant change in the percentage
ownership of our ordinary shares by any major shareholders during the past three years.
138
Except as otherwise indicated in the table below, addresses of the directors, executive officers and named beneficial owners are in care of
ASLAN Pharmaceuticals Limited, 83 Clemenceau Avenue #12-03 UE Square, Singapore 239920 and our telephone number is +65 6222
4235.
Name of Beneficial Owner
5% or Greater Shareholders:
Alnair Investment(1)
Executive Officers and Directors:
Carl Firth, Ph.D.(2)
Mark McHale, Ph.D.(3)
Ben Goodger(4)
Kiran Asarpota(5)
Stephen Doyle(6)
Alnair Investment (represented by Jun Wu, Ph.D.)(7)
BV Healthcare II Pte Ltd. (represented by Lim Chin
Hwee Damien)(8)
Robert E. Hoffman(9)
Andrew Howden(10)
Kelvin Sun
All current executive officers and directors as a group
(10 persons)(11)
Number of
Shares
Beneficially
Owned
Percentage
of Shares
Beneficially
Owned
9,887,358
6,599,340
3,711,915
408,000
586,996
—
9,887,358
7,542,112
—
439,510
—
5.2%
3.5%
2.0%
*
*
—
5.2%
4.0%
—
*
—
29,175,231
15.4%
Represents beneficial ownership of less than one percent.
*
(1) Consists of (A) 8,823,528 ordinary shares held by Alnair Investment (Alnair) and (B) 1,063,830 ordinary shares held by Shanghai
Cenova Innovation Venture Fund L.P. (Shanghai Cenova). Alnair is wholly owned and controlled by Shanghai Cenova. Shanghai
Cenova Bioventure Equity Investment Fund Management Enterprise L.P. (Shanghai Cenova Bioventure) is the general partner of
Shanghai Cenova. Shanghai Cenova Bioventure is owned and controlled by Dr. Wu, a member of our board of directors. As such,
Dr. Wu may be deemed to have sole voting and dispositive power with respect to the shares held by Alnair and Shanghai Cenova. The
addresses for Alnair and Shanghai Cenova are P.O. Box 2075, George Town, Grand Cayman KY1-1105, Cayman Islands and No. 53
Gao You Road, Shanghai, China 200031, respectively.
(2) Consists of (A) 3,344,340 ordinary shares held by Dr. Firth, and (B) 3,255,000 ordinary shares issuable upon the exercise of share
options granted to Dr. Firth that are exercisable.
(3) Consists of (A) 1,431,915 ordinary shares held by Dr. McHale and (B) 2,280,000 ordinary shares issuable upon the exercise of share
options granted to Dr. McHale that are exercisable.
(4) Consists of (A) 128,000 ordinary shares and (B) ADSs representing 4,000 ordinary shares and (C) 276,000 ordinary shares issuable
upon the exercise of share options granted to Mr. Goodger that are exercisable.
(5) Consists of (A) 86,996 ordinary shares held by Mr. Asarpota and (B) 500,000 ordinary shares issuable upon the exercise of share options
granted to Mr. Asarpota that are exercisable.
(6) Mr. Doyle joined our senior management team as of February 1, 2018 and does not beneficially own any of our ordinary shares as of
February 29, 2020.
139
(7) Consists of the shares described in footnote (1) above. Dr. Wu is a member of our board of directors and serves in such capacity as a
representative of Alnair. Dr. Wu is also a director of Alnair, general manager of Shanghai Cenova and owns and controls Shanghai
Cenova Bioventure, the general partner of Shanghai Cenova. As such, Dr. Wu may be deemed to be a beneficial owner of shares held by
Alnair and Shanghai Cenova.
(8) Consists of 7,542,112 ordinary shares held by BV Healthcare II Pte Ltd. (BV Healthcare). BioVeda Capital Singapore Pte Ltd (BioVeda)
is the investment manager of BV Healthcare. An investment committee of BV Healthcare, which includes Mr. Lim, or the BV
Investment Committee, reviews and approves investment and divestment proposals submitted by BioVeda. As such, the BV Investment
Committee may be deemed to have voting and dispositive power with respect to the shares held by BV Healthcare. The address for BV
Healthcare is 50 Cuscaden Road #08-01 HPL House, Singapore 249724. Mr. Lim is a member of our board of directors and serves in
such capacity as a representative of BV Healthcare. Mr. Lim is also a director of BV Healthcare and on the BV Investment Committee.
As such, Mr. Lim may be deemed to be a beneficial owner of shares held by BV Healthcare.
(9) Mr. Hoffman joined our board of directors as of October 30, 2018 and does not beneficially own any of our ordinary shares as of
February 29, 2020.
(10) Consists of 439,510 ordinary shares held by Mr. Howden.
(11) Consists of the shares referenced in footnotes (2) — (10) above.
B.
Related party transactions.
Since January 1, 2019, we have engaged in the following transactions with our directors, executive officers or holders of more than 5% of our
outstanding share capital and their affiliates, which we refer to as our related parties.
Loan Agreements with Related Parties
In 2019, we entered into loan transactions with certain related parties. See footnotes 14 and 26 to the consolidated financial statements
included elsewhere in this Annual Report for further details.
Agreements with Our Executive Officers and Directors
We have entered into employment agreements with our executive officers and director compensation agreements with our non-
executive directors. These agreements contain customary provisions and representations, including confidentiality, non-competition and non-
solicitation undertakings by the executive officers. However, the enforceability of the non-competition provisions may be limited under
applicable law.
Related Party Transaction Policy
We have adopted a related party transaction policy, which requires that certain related party transactions be approved by our board of
directors and audit committee. We intend to afford ourselves of the Nasdaq foreign private issuer exemption from the requirement that our
audit committee have review and oversight over all “related party transactions,” as defined in Item 7.B of Form 20-F. The definition of
“related party transactions” per our related party transaction policy and ROC law is not as broad as the definition in Item 7.B of Form 20-F.
140
Indemnification Agreements
We have entered into, and intend to continue to enter into, separate indemnification agreements with our directors and executive officers.
These indemnification agreements provide our directors and executive officers with contractual rights to indemnification and, in some cases,
expense advancement in any action or proceeding arising out of their services as one of our directors or executive officers or as a director or
executive officer of any other company or enterprise to which the person provides services at our request.
C.
Interests of experts and counsel.
Not applicable.
Item 8. Financial Information
The purpose of this standard is to specify which financial statements must be included in the document, as well as the periods to be covered,
the age of the financial statements and other information of a financial nature.
A.
Consolidated Statements and Other Financial Information.
Our consolidated financial statements are appended at the end of this Annual Report, starting at page F-1, and are incorporated herein by
reference.
Dividend Policy
The holders of our ordinary shares are entitled to receive such dividends as may be declared by an ordinary resolution and subject to our
Articles and the Companies Law. Under Cayman Islands law, dividends may be paid only out of profits, which include net earnings and
retained earnings undistributed in prior years, and out of share premium, a concept analogous to paid-in surplus in the United States. No
dividend may be declared and paid unless our directors determine that immediately after the payment, we will be able to satisfy our liabilities
as they become due in the ordinary course of business and we have funds lawfully available for such purpose. We are not permitted to pay
any dividends or bonuses if (i) we do not have earnings or (ii) we have not yet covered our losses. Our Articles set out further detailed
provisions dealing with how we may fund, create reserves for and pay dividends.
Any dividends will be paid to the custodian of the ADSs that were issued in our public offering and shall be subject to further distribution to
you as a beneficial owner of the underlying ordinary shares by the custodian.
Legal Proceedings
From time to time, we may be involved in legal proceedings or be subject to claims arising out of our operations. We are not currently a party
to any legal proceedings that in the opinion of our management, would have a material adverse effect on our business.
B.
Significant Changes.
Not applicable.
141
Item 9. The Offer and Listing.
A.
Offer and listing details.
Our ADSs began trading on The Nasdaq Global Market on May 4, 2018 under the trading symbol “ASLN”. Prior to that date, there was no
public trading market for our ADSs. Our ordinary shares have been trading on the TPEx under “6497” since June 1, 2017. Prior to that date,
there was no public trading market for our ordinary shares.
B.
Plan of distribution.
Not applicable.
C.
Markets.
Our ADSs began trading on The Nasdaq Global Market on May 4, 2018 under the trading symbol “ASLN”. Our ordinary shares have been
trading on the TPEx under “6497” since June 1, 2017.
D.
Selling shareholders
Not applicable.
E.
Dilution.
Not applicable.
F.
Expenses of the issue.
Not applicable.
Item 10. Additional Information.
A.
Share capital.
Not applicable.
B.
Memorandum and articles of association.
Seventh Amended and Restated Memorandum and Articles of Association
Subject to other provisions in our Articles, our shareholders may by ordinary resolution increase our authorized share capital or by special
resolution reduce the share capital and may also by special resolution amend our Articles.
142
Ordinary Shares
General
All of our outstanding ordinary shares are fully paid and non-assessable. No certificates representing the ordinary shares have been issued.
The ordinary shares are not entitled to any preemptive conversion or redemption rights at the sole option of the holder of ordinary shares. Our
shareholders may freely hold and vote their shares (subject to certain restrictions such as the number of proxies that may be held by a
shareholder at a general meeting).
Pre-emptive Rights
When we issue new shares for cash consideration, our board of directors may reserve 10% to 15% of the new shares for subscription by our
employees or of any of our subordinate companies, as determined by our board of directors in its reasonable discretion. Subject to several
statutory exceptions, our shareholders are entitled to subscribe for the remainder of the new shares in proportion to their existing
shareholdings. New shares not so subscribed by our employees and shareholders may be offered by us to the public or to specific persons
designated by the board.
Since our shares are publicly traded on the TPEx, in the event of offering new shares for cash, we are also mandatorily required to offer 10%
of the shares to the public at the market price, subject to a higher public offering percentage adopted by our shareholders at a shareholders’
meeting.
Repurchase Rights
For so long as the shares are registered in Taiwan, the repurchase of our own shares by us shall be approved by our board of directors in
compliance with Regulations Governing Share Repurchase by Exchange-Listed and OTC-Listed Companies and relevant laws of the
Cayman Islands. We may with the sanction of an ordinary resolution of the shareholders’ meeting purchase and cancel our own shares out of
our share capital. The number of shares to be repurchased and cancelled pursuant to our Articles shall be pro rata among our shareholders in
proportion to the number of shares held by each such shareholder. The number of shares purchased by us pursuant to our Articles shall not
exceed 10% of the total number of our issued shares. The total price of the shares so purchased shall not exceed the sum of retained earnings
plus the premium paid on the issuance of any share and income from endowments received by us.
The amount payable to the shareholders in connection with a repurchase of shares out of our share capital may be paid in cash or by way of
delivery of assets in specie. The assets to be delivered and the amount of such substitutive share capital in connection with a repurchase of
shares out of our share capital shall be approved by the shareholders at the general meeting and shall be subject to consent by the shareholder
receiving such assets. Prior to the aforementioned general meeting considering such repurchase, our board of directors shall have the value of
assets to be delivered and the amount of such substitutive share capital in respect of repurchase of the shares audited and certified by a
Taiwan certified public accountant.
Voting Rights
Each ordinary share is entitled to one vote. Voting at any meeting of shareholders is by a poll. Our Articles list a number of matters that must
be approved by the shareholders by Supermajority Resolution (as defined below). Other matters to be approved by shareholders will be
decided either by special resolution (where required by law) or by ordinary resolution. Written resolutions of shareholders in lieu of a
meeting are not permitted by our Articles.
143
A quorum required for a meeting of shareholders consists of at least a number of shareholders present in person or by proxy and entitled to
vote representing the holders of more than one-half of all of our issued voting share capital. Shareholders’ meetings are held annually and
may otherwise be convened by our board of directors on its own initiative. Shareholders’ meetings shall also be convened on the requisition:
(i) in writing of any shareholder or shareholders holding at least three percent of the issued voting share capital for one year or longer; or (ii)
of one or more shareholders holding more than half of the paid up capital of the Company having the right of voting at general meetings for a
period of at least three consecutive months at the date of the book closure period commences, subject to certain procedural requirements.
Advance notice of at least 30 calendar days is required for convening the annual general meeting and at least 15 calendar days’ notice is
required for convening extraordinary general meetings.
Any ordinary resolution to be passed by our shareholders requires the affirmative vote of a simple majority of the votes attaching to the
ordinary shares cast in person or by proxy at a meeting of our shareholders. A special resolution requires the affirmative vote of not less than
two-thirds of the votes cast in person or by proxy at a meeting of our shareholders. A special resolution is required for certain matters
specified in the Companies Law as requiring approval by special resolution, including appointing a voluntary liquidator, changing our name,
reducing our authorized share capital and amending our Articles and for other matters such as issuing preferred shares, transferring treasury
shares at a discount to employees or subordinate companies and approving the redemption terms of any preferred shares.
A “Supermajority Resolution” is defined in our Articles as a resolution adopted by a majority vote of the shareholders at a general meeting
attended by shareholders who represent two-thirds or more of our total outstanding shares or, if the total number of shares represented by the
shareholders present at the general meeting is less than two-thirds of our total outstanding shares, but more than one-half of our total
outstanding shares, means instead, a resolution adopted at such general meeting by the shareholders who represent two-thirds or more of the
total number of shares entitled to vote on such resolution at such general meeting. Among other things, approval by Supermajority Resolution
is required for us to: (i) enter into, amend, or terminate any contract for lease of its business in whole, or for entrusting business, or for
regular joint operation with others, (ii) transfer the whole or any material part of its business or assets (iii) take over the transfer of another’s
whole business or assets, which will have a material effect on our business operation, (iv) effect any merger (subject to certain structural
exceptions) or spin-off of the company in accordance with applicable listing rules, (v) grant waiver to a director engaging in any business
within the scope of our business, (vi) discharge or remove a director, (vii) capitalize an amount standing to the credit of reserves or authorize
the payment of dividends out of a reserve fund and (viii) issue any employee share options at a discount. In addition, any merger, transfer of
business and assets, share swap or other transaction that results in our shares ceasing to be listed on the TWSE or TPEx must be approved by
the shareholders representing at least two-thirds of our issued shares.
Subject to certain exceptions specified in our Articles, when a person who acts as the proxy for two or more shareholders at a general
meeting, the number of votes represented by him shall not exceed three percent of the total number of votes of the company and the portion
of excessive votes represented by such proxy will not be counted.
144
Dividends
The holders of our ordinary shares are entitled to receive such dividends as may be declared by an ordinary resolution and subject to our
Articles and the Companies Law. Under Cayman Islands law, dividends may be paid only out of profits, which include net earnings and
retained earnings undistributed in prior years, and out of share premium, a concept analogous to paid-in surplus in the United States. No
dividend may be declared and paid unless our directors determine that immediately after the payment, we will be able to satisfy our liabilities
as they become due in the ordinary course of business and we have funds lawfully available for such purpose. We are not permitted to pay
any dividends or bonuses if (i) we do not have earnings or (ii) we have not yet covered our losses. Our Articles set out further detailed
provisions dealing with how we may fund, create reserves for and pay dividends.
Any dividends will be paid to the custodian of the ADSs being issued in an offering and shall be subject to further distribution to you as a
beneficial owner of the underlying ordinary shares by the custodian. See “Description of American Depositary Shares—Dividends and Other
Distributions.”
Liquidation
If we were to be liquidated and the assets available for distribution among our shareholders are insufficient to repay the whole of the share
capital, such assets shall be distributed so that, as nearly as may be, the losses shall be borne by our shareholders in proportion to the number
of the ordinary shares held by them. If in a winding up the assets available for distribution among our shareholders shall be more than
sufficient to repay the whole of the share capital at the commencement of the liquidation, the surplus shall be distributed among our
shareholders in proportion to the number of the ordinary shares held by them at the commencement of the liquidation, subject to a deduction
from those ordinary shares in respect of which there are monies due, of all monies payable to us, without prejudice to the rights of the holders
of ordinary shares issued upon special terms and conditions.
If we were to be liquidated, the liquidator may, with the approval by a special resolution of our shareholders (and any other approvals as may
be required by applicable listing rules), divide among our shareholders in specie or in kind the whole or any part of our assets (whether they
shall consist of property of the same kind or not) and may, for such purpose set such value as he/she deems fair upon any property to be
divided and may determine how such division shall be carried out as between the shareholders or different classes of shareholders. The
liquidator may, with the approval by an ordinary resolution of our shareholders, vest the whole or any part of such assets in trustees upon
such trusts for the benefit of the contributories as the liquidator, with the approval by an ordinary resolution of our shareholders shall think
fit, but so that no shareholder shall be compelled to accept any shares or other securities whereon there is any liability.
Transfer of Shares
Subject to the restrictions of our Articles and applicable ROC laws, as applicable, any of our shareholders may transfer all or any of his or her
ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board, provided that certain
transfer restrictions apply to shares issued to our employees and subordinate companies. Subject to the requirements of applicable laws of the
Cayman Islands, transfers of uncertificated shares which are registered on the TPEx may be effected by any method of transferring or dealing
in securities introduced by the TPEx or operated in accordance with the applicable listing rules, as defined in our Articles, as appropriate.
145
Our board of directors may decline to register any transfer of shares unless (i) the instrument of transfer is lodged with us, accompanied by
the certificate (if any) for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to
show the right of the transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument
of transfer is duly and properly stamped (if required); or (iv) in the case of a transfer to joint holders, the number of joint holders to whom the
share is to be transferred does not exceed four.
The registration of transfers of shares may be suspended when our register of members is closed in accordance with our Articles for the
purpose of determining those shareholders that are entitled to receive notice of, attend or vote at any meeting of shareholders or any
adjournment thereof, or those shareholders that are entitled to receive payment of any dividend, or in order to make a determination as to who
is a shareholder for any other purpose.
Variation of Rights of Shares
Whenever our share capital is divided into different classes the rights attached to any class of our shares may (unless otherwise provided by
the terms of issue of the shares of that class) only be materially adversely varied or abrogated with the approval by special resolution passed
at a separate meeting of the holders of the shares of that class, but not otherwise. The necessary quorum shall be one or more persons at least
holding or representing by proxy one-half in nominal or par value amount of the issued shares of the relevant class.
Inspection of Books and Records
Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or
our corporate records. Our board of directors is required to keep at the office of our service agent in Taiwan copies of our Articles, the
minutes of every meeting of the shareholders and the financial statements, the register of members and the counterfoil of corporate bonds
issued by us. Any shareholder may at any time request, by submitting evidentiary documents to show his or her interest, indicating the scope
of such interest and specifying the document(s) he/she/it wishes to inspect or make copies of, access to inspect and to make copies of such
documents, and the Company shall procure its service agent in Taiwan to arrange accordingly. In the event that a general meeting is convened
by the board of directors or any other person having a right to convene the general meeting in accordance with our Articles, such convener(s)
may request that the Company or its service agent in Taiwan provide them with a copy of the register of members.
Without prejudice to the rights of shareholders set out in our Articles, no shareholder is entitled to require discovery of any information in
respect of any detail of our trading or any information which is or may be in the nature of a trade secret or secret process which may relate to
the conduct of our business and which in the opinion of our board of directors would not be in the interests of the shareholders to
communicate to the public.
Borrowing Power
Subject to our Articles and the ROC Regulations Governing Loaning of Funds and Making Endorsement/Guarantee by Public Companies,
our board of directors may exercise its power to borrow money and to mortgage or charge our undertaking and property, to issue debentures,
debenture stock and other securities whenever money is borrowed or as security for any debt, liability or obligation of us or of any third
party.
We, however, cannot borrow money or loan funds to any person except in accordance with the requirements stipulated in our internal policies
and the ROC Regulations Governing Loaning of Funds and Making Endorsement/Guarantee by Public Companies.
146
Listing Rules
As a listed company on the TPEx, we are required to comply with the relevant ROC laws, regulations, rules and code as amended, from time
to time, applicable as a result of the original and continued trading or listing of any shares on any Taiwan stock exchange or securities
market, including, without limitation the relevant provisions of the Taiwan Securities and Exchange Act, the Acts Governing Relations
Between Peoples of the Taiwan Area and the Mainland Area, or any similar statute and the rules and regulations of the Taiwan authorities
thereunder, and the rules and regulations promulgated by the ROC FSC, the TPEx or the TWSE. This body of rules is referred to in our
Articles as “Applicable Listing Rules” and a number of the provisions of our Articles are subject to the Applicable Listing Rules. In
particular, provisions relating to the issue of shares generally by us, the issue of shares to employees, the recording of shareholdings and the
issue of share certificates, the issue of fractional shares, the transfer of shares, carrying out mergers and spin-offs, independent directors,
board powers and procedure, quorum requirements for shareholder meetings and general meeting procedure, the redemption and purchase of
our shares, dealing with treasury shares, borrowing powers, the payment of dividends and other distributions, the preparation of reports and
financial statements and the winding up of the company are all matters expressed to be subject to, and should be read in conjunction with, the
Applicable Listing Rules. In addition to the Applicable Listing Rules, our Articles are required to be in compliance with the Shareholders’
Rights Protection Checklist, or the Checklist promulgated by the TPEx or TWSE from time to time. On March 22, 2019, our board of
directors approved the Seventh Amended and Restated Memorandum and Articles of Association, which incorporated the requirements
provided in the checklist promulgated by TPEx in December 2018, or the Checklist. The Seventh Amended and Restated Memorandum and
Articles of Association were approved and adopted by special resolution at our annual general meeting held on June 21, 2019. On March 18,
2020, our board of directors approved the Eighth Amended and Restated Memorandum and Articles of Association (8th AR M&A), which incorporated the
requirements provided in the checklist promulgated by TPEx on January 8, 2020 and is expected to be approved and adopted by special resolution at our
annual general meeting to be held on June 29, 2020. Except for the requirement that non-resident or foreign investors are obligated to open certain
accounts and appoint a tax guarantor in Taiwan and the restrictions described herein, there are no other restrictions on holding or exercising
voting rights on our ordinary shares.
Currently, a party who is a PRC person may not hold our ordinary shares unless it is a qualified domestic institutional investor (QDII) in
PRC. In addition, we have committed to the TPEx that at no time will 30% or more of our shares be held by PRC persons. Therefore, at any
time when 30% of our shares are held by PRC persons, you will not be entitled to withdraw and hold the underlying ordinary shares, even if
you are a QDII in PRC. Under current ROC law, a PRC person means an individual having residence in PRC (but not including a special
administrative region of China such as Hong Kong or Macau, if so excluded by applicable laws of the ROC), any legal person, group, or
other institutions of China and any corporation and other entity organized in countries outside of the ROC or PRC, but is directly or indirectly
controlled by or directly or indirectly has more than 30% of its capital beneficially owned by any PRC person described above.
We cannot exercise any voting rights attached to the treasury shares held by us.
No vote may be exercised with respect to any of the following shares and such shares shall not be counted in determining the number of
issued shares: (i) the shares held by any of our subsidiaries, where the total voting shares held by us in such a subsidiary represents more than
one half of the total number of voting shares of the total share equity of such a subsidiary; or (ii) the shares held by another company, where
the total number of the shares or total shares equity of that company held by us and our subsidiaries directly or indirectly represents more
than one half of the total number of voting shares or the total share equity of such a company. If a director gives security over more than 50%
of the number of shares the director held at the time such director was elected as a director of us, no vote may be exercised with respect to the
shares representing the difference between the pledged shares and 50% of the initial shares, and such shares representing the difference
between the pledged shares and 50% of the initial shares shall not be counted in the number of the votes cast by the shareholders present at
the general meeting.
147
In the case of joint holders, the joint holders shall select among them a representative for the exercise of their shareholder’s rights and the
vote of their representative who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other
joint holders.
A shareholder of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in mental illness, may vote
by his committee, or other person in the nature of a committee appointed by that court, and any such committee or other person, may vote by
proxy.
A shareholder cannot exercise his or her own vote or by vote by proxy on behalf of another shareholder in respect of any contract or
proposed contract or arrangement if he may be interested therein. Such shares shall not be counted in determining the number of votes of the
shareholders present at the meeting with regard to such resolution, but such shares may be counted in determining the number of shares
represented at the meeting for the purposes of determining the quorum.
If an ADS holder will receive more than 10% of the issued shares of the company after withdrawal of their deposited securities, then such
holder will be required to (i) make a filing with the ROC FSC of the required reporting in accordance with Article 43-1 of the Taiwan Act
upon the acquisition of more than 10% of shares of the company, (ii) make a filing with the ROC FSC in accordance with Article 25 of the
Taiwan Act of notification of any changes of the shareholding of a director, supervisor, manager or shareholder (together with his or her
spouse, minor children and nominee) holding more than 10% of the shares of the company, and (iii) apply for the prior approval of the
Investment Commission, Ministry of Economic Affairs, Executive Yuan of the ROC for acquiring 10% or more of shares of the company.
Convertible Loan and Warrants
In September, October and November 2019, we entered into a series of loan facilities with certain of our directors, existing stockholders or
affiliates thereof, and others, for an aggregate loan amount of $3.25 million. The two types of loan facilities are described below:
Convertible Loan Facility
On September 30, 2019, we entered into a loan facility with Bukwang Pharmaceutical Co., Ltd., for an amount of $1.0 million. The
Convertible Loan Facility has a two-year term with a 10% interest rate per annum, commencing upon the date we draw down on such
facility. We have the option to repay the amounts owed under the Convertible Loan Facility at any time, subject to certain conditions.
The lender will have the right to convert, at its option, any outstanding principal amount plus accrued and unpaid interest under the loan into
that number of our newly issued ADSs which is calculated by dividing (a) such outstanding principal amount and accrued and unpaid interest
by (b) 90% of the volume-weighted average price of our ADSs on the date of the conversion notice. Each ADS represents five of our
ordinary shares. The ability to convert is subject to certain conditions, including that our ordinary shares will have been delisted from the
TPEx, and expires at the expiry of the term of the loan.
148
October/November 2019 Loan Facility
On October 25, 2019, we entered into a loan facility with certain existing stockholders/directors, or affiliates thereof, and on November 11,
2019, we entered into a related loan facility with the affiliate of another existing stockholder, for an aggregate amount of $2.25 million. The
October/November 2019 Loan Facility has a two-year term with a 10% interest rate per annum, commencing upon the date we draw down
the facility, which must be drawn down in full. We have the option to repay not less than $1.0 million of the amounts owed under the
October/November 2019 Loan Facility at any time, subject to certain conditions. In the event that we raise net proceeds of more than ten
times the aggregate loan amount in a single financing transaction during the loan term, we will be obligated to repay any unpaid portion of
the principal amount and accrued interest thereunder within 30 days of the receipt of the proceeds from such re-financing transaction.
The October/November 2019 Loan Facility provides that, during the time that any amount is outstanding thereunder, we will not (i) incur any
finance debt which is secured by a security interest or conferring repayment rights which rank in priority over those of the lenders, or (ii)
carry out or implement any merger, consolidation, reorganization (other than our solvent reorganization), recapitalization, reincorporation,
share dividend or other changes in our capital structure which may have a material adverse effect on the rights of the lenders, in each case
except with the prior written consent of the lenders. In addition, upon an event of default (as defined in the October/November 2019 Loan
Facility), the lenders may declare the principal amounts then outstanding and all interest thereon accrued and unpaid to be immediately due
and payable to the lenders.
In October 2019, we drew down on an initial $1.95 million under the October/November 2019 Loan Facility. In connection with this initial
draw down, we issued warrants to purchase 483,448 ADSs (representing 2,417,240 ordinary shares) to certain of the lenders, at an exercise
price of $2.02 per ADS. In November 2019, we drew down on the remaining $0.3 million under the October/November 2019 Loan Facility.
In connection with the second draw down, we issued warrants to purchase 74,377 ADSs (representing 371,885 ordinary shares) to the lenders
at an exercise price of $2.02 per ADS.
The warrants are exercisable only after our ordinary shares have been delisted from TPEx, and will expire on the earlier of (i) the first
anniversary of such TPEx delisting or (ii) expiry of the term of the October/November 2019 Loan Facility. If, by expiry of the term of the
October/November 2019 Loan Facility, (i) our shares have not been delisted from TPEx and (ii) the warrants have not been exercised, the
lenders shall be entitled to receive a further sum equal to 5% of the principal amount per annum, by way of additional interest, payable by us
upon expiry of the loan term.
Preference Shares
Pursuant to our Articles, we may issue shares with rights which are preferential to those of ordinary shares issued by us with the approval of a
majority of our board of directors present at a meeting attended by two-thirds or more of the total number of directors and with the approval
of a special resolution. Our Articles must be amended by special resolution to provide for such preference shares.
149
Material Differences in Corporate Law
The Companies Law is modeled after the corporate legislation of the United Kingdom but does not follow recent United Kingdom statutory
enactments, and differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the
significant differences between the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in
Delaware and their shareholders. In addition, because our Articles require us to comply with the Checklist, the below comparison also
includes a brief summary of the requirements we must follow to maintain such compliance with the TPEx or the TWSE.
Title of Organizational
Documents
Duties of Directors
Delaware
Cayman Islands
Certificate of Incorporation Bylaws
Memorandum of Association Articles of
Under Delaware law, the business and affairs of a
corporation are managed by or under the direction
of its board of directors. In exercising their powers,
directors are charged with a fiduciary duty of care to
protect the interests of the corporation and a
fiduciary duty of loyalty to act in the best interests
of its shareholders. The duty of care requires that
directors act in an informed and deliberative manner
and inform themselves, prior to making a business
decision, of all material information reasonably
available to them. The duty of care also requires that
directors exercise care in overseeing and
investigating the conduct of the corporation’s
employees. The duty of loyalty may be summarized
as the duty to act in good faith, not out of self-
interest, and in a manner which the director
reasonably believes to be in the best interests of the
shareholders.
Association
As a matter of Cayman Islands law, directors of
Cayman Islands companies owe fiduciary duties to
their respective companies to, amongst other things,
act in good faith in their dealings with or on behalf
of the company and exercise their powers and
fulfill the duties of their office honestly. Five core
duties are:
•
•
•
•
•
a duty to act in good faith in what the
directors bona fide consider to be the best
interests of the company (and in this regard, it
should be noted that the duty is owed to the
company and not to associate companies,
subsidiaries or holding companies);
a duty not to personally profit from
opportunities that arise from the office of
director;
a duty of trusteeship of the company’s assets;
a duty to avoid conflicts of interest; and
a duty to exercise powers for the purpose for
which such powers were conferred.
A director of a Cayman Islands company also owes
the company a duty to act with skill, care and
diligence. A director need not exhibit in the
performance of his or her duties a greater degree of
skill than may reasonably be expected from a
person of his or her knowledge and experience.
150
Limitations on Personal
Liability of Directors
Subject to the limitations described below, a
certificate of incorporation may provide for the
elimination or limitation of the personal liability of a
director to the corporation or its shareholders for
monetary damages for a breach of fiduciary duty as
a director.
Such provision cannot limit liability for breach of
loyalty, bad faith, intentional misconduct, unlawful
payment of dividends or unlawful share purchase or
redemption. In addition, the certificate of
incorporation cannot limit liability for any act or
omission occurring prior to the date when such
provision becomes effective.
The Companies Law has no equivalent provision to
Delaware law regarding the limitation of director’s
liability. However, as a matter of public policy,
Cayman Islands law will not allow the limitation of
a director’s liability to the extent that the liability is
a consequence of the director committing a crime or
of the director’s own fraud, dishonesty or willful
default.
Indemnification of Directors,
Officers, Agents, and
Others
A corporation has the power to indemnify any
director, officer, employee, or agent of the
corporation who was, is, or is threatened to be made
a party who acted in good faith and in a manner he
believed to be in the best interests of the
corporation, and if with respect to a criminal
proceeding, had no reasonable cause to believe his
conduct would be unlawful, against amounts
actually and reasonably incurred.
Cayman Islands law does not limit the extent to
which a company’s articles of association may
provide for indemnification of directors and
officers, except to the extent any such provision
may be held by the Cayman Islands courts to be
contrary to public policy, such as to provide
indemnification against the consequences of
committing a crime, or against the indemnified
person’s own fraud or dishonesty.
Interested Directors
Under Delaware law, a transaction in which a
Our Articles contain a provision that prohibits a
director from voting (or voting on behalf of another
director) in respect of any transaction in which he
or she is interested.
Our Articles also provide that, where the spouse of
a director, a person with a kinship to a director
within the second degree, or a company controlled
by or controlling a director has a direct or indirect
interest in any matter, such director will be deemed
to have an interest in such matter.
director who has an interest is not void or voidable
solely because such interested director is present at
or participates in the meeting that authorizes the
transaction if: (i) the material facts as to such
interested director’s relationship or interests are
disclosed or are known to the board of directors and
the board in good faith authorizes the transaction by
the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors are
less than a quorum, (ii) such material facts are
disclosed or are known to the shareholders entitled
to vote on such transaction and the transaction is
specifically approved in good faith by vote of the
shareholders, or (iii) the transaction is fair as to the
corporation as of the time it is authorized, approved
or ratified. Under Delaware law, a director could be
held liable for any transaction in which such director
derived an improper personal benefit.
151
Voting Requirements
The certificate of incorporation may include a
provision requiring supermajority approval by the
directors or shareholders for any corporate action.
In addition, under Delaware law, certain business
combinations involving interested shareholders
require approval by a supermajority of the non-
interested shareholders.
Voting for Directors
Under Delaware law, unless otherwise specified in
the certificate of incorporation or bylaws of the
corporation, directors shall be elected by a plurality
of the votes of the shares present in person or
represented by proxy at the meeting and entitled to
vote on the election of directors.
152
For the protection of shareholders, certain matters
must be approved by special resolution of the
shareholders as a matter of Cayman Islands law,
including alteration of the memorandum or articles
of association, appointment of inspectors to
examine company affairs, reduction of share capital
(subject, in relevant circumstances, to court
approval), change of name, authorization of a plan
of merger or transfer by way of continuation to
another jurisdiction or consolidation or voluntary
winding up of the company.
The Companies Law requires that a special
resolution be passed by a super majority of at least
two-thirds or such higher percentage as set forth in
the articles of association, of shareholders being
entitled to vote and do vote in person or by proxy at
a general meeting, or by unanimous written consent
of shareholders entitled to vote at a general
meeting. However, our Articles do not permit
resolutions of shareholders to be passed in writing
in lieu of a general meeting.
The Companies Law defines “special resolutions”
only. A company’s articles of association can
therefore tailor the definition of “ordinary
resolutions” as a whole, or with respect to specific
provisions. Our Articles provide that the election of
directors shall be subject to applicable listing rules.
At a general meeting of election of directors, the
number of votes exercisable in respect of one share
shall be the same as the number of directors to be
elected, and the total number of votes per share
may be consolidated for election of one candidate
or may be split for election of two or more
candidates. A candidate to whom the ballots cast
represent a prevailing number of votes shall be
deemed a director so elected.
Cumulative Voting
No cumulative voting for the election of directors
unless so provided in the certificate of
incorporation.
No cumulative voting for the election of directors
unless so provided in the articles of association.
Our Articles expressly provide for cumulative
voting on the election of directors as described
above.
Directors’ Powers Regarding
Bylaws
The certificate of incorporation may grant the
directors the power to adopt, amend or repeal
bylaws.
The memorandum and articles of association may
only be amended by a special resolution of the
shareholders.
Nomination and Removal of
Directors and Filling
Vacancies on Board
Mergers and Similar
Arrangements
Shareholders may generally nominate directors if
they comply with advance notice provisions and
other procedural requirements in company bylaws.
Holders of a majority of the shares may remove a
director with or without cause, except in certain
cases involving a classified board or if the company
uses cumulative voting. Unless otherwise provided
for in the certificate of incorporation, directorship
vacancies are filled by a majority of the directors
elected or then in office.
Nomination and removal of directors and filling of
board vacancies are governed by the terms of the
articles of association. Our Articles provide that
only shareholders may elect directors by
cumulative voting and may remove directors by
Supermajority Resolution.
Under Delaware law, with certain exceptions, a
merger, consolidation, exchange or sale of all or
substantially all the assets of a corporation must be
approved by the board of directors and a majority of
the outstanding shares entitled to vote thereon.
Under Delaware law, a shareholder of a corporation
participating in certain major corporate transactions
may, under certain circumstances, be entitled to
appraisal rights pursuant to which such shareholder
may receive cash in the amount of the fair value of
the shares held by such shareholder (as
The Companies Law provides for the merger or
consolidation of two or more companies into a
single entity. The legislation makes a distinction
between a “consolidation” and a “merger.” In a
consolidation, a new entity is formed from the
combination of each participating company, and the
separate consolidating parties, as a consequence,
cease to exist and are each stricken by the Registrar
of Companies. In a merger, one company remains
as the surviving entity, having in effect absorbed
the other merging party that then ceases to exist.
determined by a court) in lieu of the consideration
such shareholder would otherwise receive in the
transaction. Delaware law also provides that a
parent corporation, by resolution of its board of
directors, may merge with any subsidiary, of which
it owns at least
Two or more Cayman Islands companies may
merge or consolidate. Cayman Islands companies
may also merge or consolidate with foreign
companies provided that the laws of the foreign
jurisdiction permit such merger or consolidation.
153
90% of each class of capital stock without a vote by
shareholders of such subsidiary. Upon any such
merger, dissenting shareholders of the subsidiary
would have appraisal rights.
Under the Companies Law, a plan of merger or
consolidation shall be authorized by each
constituent company by way of (i) a special
resolution of the members of each such constituent
company; and (ii) such other authorization, if any,
as may be specified in such constituent company’s
articles of association.
Shareholder approval is not required where a parent
company registered in the Cayman Islands seeks to
merge with one or more of its subsidiaries
registered in the Cayman Islands and a copy of the
plan of merger is given to every member of each
subsidiary company to be merged unless that
member agrees otherwise.
Secured creditors must consent to the merger
although application can be made to the Grand
Court of the Cayman Islands for such requirement
to be waived if such secured creditor does not grant
its consent to the merger. Where a foreign company
wishes to merge with a Cayman company, consent
or approval to the transfer of any security interest
granted by the foreign company to the resulting
Cayman entity in the transaction is required, unless
otherwise released or waived by the secured party.
If the merger plan is approved, it is then filed with
the Cayman Islands Registrar of Companies along
with a declaration by a director of each company.
The Registrar of Companies will then issue a
certificate of merger which shall be prima facie
evidence of compliance with all requirements of the
Companies Law in respect of the merger or
consolidation.
154
The surviving or consolidated entity remains or
becomes active while the other company or
companies are automatically dissolved. Unless the
shares of such shareholder are publicly listed or
quoted, dissenting shareholders in a merger or
consolidation of this type are entitled to payment of
the fair value of their shares if such shareholder
provides a written objection before the vote on such
merger or consolidation. With respect to shares that
are listed or quoted, a shareholder shall have similar
rights only if it is required by the terms of the
merger or consolidation to accept for such shares
property other than (i) shares (or depositary receipts
in respect thereof) in the surviving or consolidated
company; (ii) listed or quoted shares (or depositary
receipts in respect thereof) of another company;
(iii) cash in lieu of any fractions of shares or
depositary receipts described at (i) and (ii); or (iv)
any combination of shares, depositary receipts or
cash described in (i)—(iii).
155
Cayman companies may also be restructured or
amalgamated under supervision of the Grand Court
of the Cayman Islands by way of a court-sanctioned
“scheme of arrangement.” A scheme of
arrangement is one of several transactional
mechanisms available in the Cayman Islands for
achieving a restructuring. Others include share
capital exchange, merger (as described above),
asset acquisition or control, through contractual
arrangements, of an operating business. A scheme
of arrangement must not be beyond the powers of
the company, as stated in the constitutional
documents of the company and also requires the
approval of a majority, in number, of each class of
shareholders and creditors with whom the
arrangement is to be made and who must in
addition represent three-fourths in value of each
such class of shareholders or creditors, as the case
may be, that are present and voting either in person
or by proxy at the meeting summoned for that
purpose. The convening of the meetings and
subsequently the terms of the arrangement must be
sanctioned by the Grand Court of the Cayman
Islands. While a dissenting shareholder would have
the right to express to the Court its view that the
transaction ought not be approved, the Court can be
expected to approve the scheme of arrangement if it
is satisfied that:
156
• the classes which are required to approve the
scheme of arrangement have been properly
constituted, so that the members of such classes are
properly represented;
• the meetings held by the company in relation to
the approval of the scheme of arrangement by such
classes have been convened and held in accordance
with any directions given by the Court;
• the scheme of arrangement has been properly
explained to the shareholders or creditors so that
they have been able to exercise an informed vote in
respect of the scheme; the scheme of arrangement is
one which an intelligent and honest man, who is a
member of the relevant class and properly acting
might approve.
When a takeover offer is made and accepted by
holders of 90% of the shares within four months,
the offeror may, within a two-month period, require
the holders of the remaining shares to transfer such
shares on the terms of the offer. An objection may
be made to the Grand Court of the Cayman Islands
but is unlikely to succeed unless there is evidence
of fraud, bad faith or collusion. If the arrangement
and reconstruction are thus approved, any
dissenting shareholders would have no rights
comparable to appraisal rights, which would
otherwise ordinarily be available to dissenting
shareholders of United States corporations,
providing rights to receive payment in cash for the
judicially determined value of the shares.
157
Our Articles provide that in the event the
resolutions with respect to a merger are approved in
accordance with the laws of the Cayman Islands,
any shareholder who has notified us in writing of
his objection to such proposal prior to such meeting
and subsequently raised his objection at the meeting
may request us to purchase all of his shares at the
then prevailing fair price. In the event any part of
the company’s business is spun off or involved in
any merger, the shareholder, who has forfeited his
right to vote on such matter and expressed his
dissent therefor, in writing or verbally (with a
record) before or during the general meeting, may
request us to buy back all of his shares at the then
prevailing fair price. In the event that we fail to
reach such agreement with the shareholder within
60 days after the resolution date, the shareholder
may, within 30 days after such 60-day period, file a
petition to any competent court of ROC for a ruling
on the appraisal price, and to the extent that the
ruling is capable of enforcement and recognition in
the relevant jurisdiction, such ruling by such ROC
court shall be binding and conclusive as between us
and requested shareholder solely with respect to the
appraisal price. Our 8th AR M&A if approved and
adopted by special resolution at our annual general
meeting to be held on June 29, 2020, provides that
in the event that we fail to reach such agreement
with the shareholder within 60 days after the
resolution date, we shall, within 30 days after such
60 -day period, file a petition to any competent
court of Taiwan for a ruling on the appraisal price
against all the dissenting shareholders as the
opposing party, and to the extent that the ruling is
capable of enforcement and recognition in the
relevant jurisdiction, such ruling by such Taiwan
court shall be binding and conclusive between us
and requested shareholder solely with respect to the
appraisal price.
158
Our Articles provide that, if we propose to effect
any merger, transfer and assumption of our business
or assets, share swap or spin-off, as a result of
which we would cease to be a TPEx-listed
company and the surviving company, transferee
company, existing company or newly set-up
company (depending on the circumstances) is not a
company listed on TWSE or TPEx, such
transaction must be approved by the shareholders
representing two thirds of the issued and
outstanding shares of us.
The mergers and acquisitions of the Company shall
also be subject to the procedural requirements
under the Applicable Listing Rules.
Our 8th AR M&A if approved and adopted by
special resolution at our annual general meeting to
be held on June 29, 2020, provides that, before any
resolution of merger/consolidation and/or
acquisition made by the board of directors, the audit
committee shall review the fairness and
reasonableness of the plan and transaction of the
merger/consolidation and/or acquisition, and then to
report the review results to the board of directors
and the general meeting. When the audit committee
reviews matters, it shall seek opinions from an
independent expert on the justification of the share
exchange ratio or distribution of cash or other
assets. The review results of the audit committee
and the opinions from the independent experts shall
be delivered to each shareholder together with the
notice of the general meeting. If we announced the
same content as in aforesaid documents that shall
be sent to shareholders on a website designated by
the competent securities authority and those
documents are prepared in our place and at the
venue of the general meeting by us, those
documents shall be deemed as having been sent to
shareholders.
159
Shareholder Suits
Class actions and derivative actions generally are
available to shareholders under Delaware law for,
among other things, breach of fiduciary duty,
corporate waste and actions not taken in accordance
with applicable law. In such actions, the court
generally has discretion to permit the winning party
to recover attorneys’ fees incurred in connection
with such action.
The rights of shareholders under Cayman Islands
law are not as extensive as those under Delaware
law. Class actions are generally not available to
shareholders under Cayman Islands laws;
historically, there have not been any reported
instances of such class actions having been
successfully brought before the Cayman Islands
courts. In principle, we will normally be the proper
plaintiff and a derivative action may be brought by
a minority shareholder in only limited
circumstances. In this regard, the Cayman Islands
courts would ordinarily be expected to follow
English case law precedent, which would permit a
shareholder to commence an action in the
company’s name to remedy a wrong done to the
company where the act complained of cannot be
ratified by the shareholders and where control of
the company by the wrongdoer results in the
company not pursuing a remedy itself. The case law
shows that derivative actions have been permitted
in respect of acts that are beyond the company’s
corporate power, illegal, where the individual rights
of the plaintiff shareholder have been infringed or
are about to be infringed and acts that are alleged to
constitute a “fraud on the minority.” The winning
party in such an action generally would be able to
recover a portion of attorney’s fees incurred in
connection with such action.
Our Articles provide that, subject to the laws of the
Cayman Islands, any shareholder(s) holding one
percent or more of the total number of our issued
shares for a period of six months or a longer time
shall have the right to submit a petition for and on
behalf of us against our director(s), and Taipei
District Court, ROC, may have jurisdiction over
such petition.
160
Inspection of Corporate
Records
Under Delaware law, shareholders of a Delaware
corporation have the right during normal business
hours to inspect for any proper purpose, and to
obtain copies of list(s) of shareholders and other
books and records of the corporation and its
subsidiaries, if any, to the extent the books and
records of such subsidiaries are available to the
corporation.
Shareholder Proposals
Unless provided in the corporation’s certificate of
incorporation or bylaws, Delaware law does not
include a provision restricting the manner in which
shareholders may bring business before a meeting.
Shareholders of a Cayman Islands exempted
company have no general right under Cayman
Islands law to inspect or obtain copies of a list of
shareholders or other corporate records (other than
the register of mortgages or charges) of the
company. However, these rights may be provided in
the company’s articles of association.
Our Articles provide that, in the event that a general
meeting is convened by the board of directors or
any other person having a right to convene the
general meeting, such convener(s) may request us
or our shareholders’ service agent to provide the
register of members.
The Companies Law does not provide shareholders
any right to bring business before a meeting or
requisition a general meeting. However, these rights
may be provided in the company’s articles of
association. Our Articles do provide for these
rights.
Approval of Corporate
Matters by Written Consent
Delaware law permits shareholders to take action by
written consent signed by the holders of outstanding
shares having not less than the minimum number of
votes that would be necessary to authorize or take
such action at a meeting of shareholders.
The Companies Law allows a special resolution to
be passed in writing if signed by all the voting
shareholders (if authorized by the articles of
association).
Our Articles do not authorize such written consents.
161
Calling of Special
Shareholders Meetings
Delaware law permits the board of directors or any
person who is authorized under a corporation’s
certificate of incorporation or bylaws to call a
special meeting of shareholders.
The Companies Law does not have provisions
governing the proceedings of shareholders meetings
which are usually provided in the articles of
association.
Our Articles allow for shareholders’ meetings to be
convened on the requisition (i) in writing of any
shareholder or shareholders holding at least three
percent of the issued share capital for one year or
longer or; (ii) of one or more shareholders holding
more than half of the paid up capital of the
Company having the right of voting at general
meetings for a period of at least three consecutive
months at the date the book closure period
commences, subject to certain procedural
requirements.
Our Articles also provide that, in the event that our
board of directors does not or cannot convene a
general meeting, or an independent director
member of audit committee otherwise finds it
necessary for the interests of shareholders, the
independent director may convene a general
meeting.
C.
Material contracts.
Except as otherwise disclosed in this Annual Report (including the exhibits thereto), we are not currently, and have not been in the last two
years, party to any material contract, other than contracts entered into in the ordinary course of our business.
2018 Underwriting Agreement
We entered into an underwriting agreement among Leerink Partners LLC and Piper Jaffray & Co. as representatives of the underwriters, on
May 4, 2018, with respect to the ADSs sold in our Initial Public Offering (IPO). We have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the U.S. Securities Act of 1933, as amended, and to contribute to payments the underwriters may
be required to make in respect of such liabilities.
2019 Underwriting Agreement
We entered into an underwriting agreement with H.C. Wainwright & Co., LLC. as representative of the underwriters, on December 2, 2019,
with respect to certain ADSs sold in our public offering. We have agreed to indemnify the underwriters against certain liabilities, including
liabilities under the U.S. Securities Act of 1933, as amended, and to contribute to payments the underwriters may be required to make in
respect of such liabilities.
162
D.
Exchange controls.
There are no governmental laws, decrees, regulations or other legislation in the Cayman Islands that may affect the import or export of
capital, including the availability of cash and cash equivalents for use by us, or that may affect the remittance of dividends, interest, or other
payments by us to non-resident holders of our ordinary shares or ADSs.
Approval by the Investment Commission, the Ministry of Economic Affairs, is required for all foreign investments into Taiwanese entities
regardless of the remittance amount, which does not relate to foreign exchange control but may be relevant to the import of capital. The
Republic of China (ROC) has foreign exchange controls over the import and export of capital relating to ASLAN Pharmaceuticals Taiwan
Limited, or ASLAN Taiwan. As long as ASLAN Taiwan receives the relevant governmental approval for the inward and outward
remittances, or the accumulated remittances in a year do not exceed the annual quota (which is currently $50 million for inward remittances
and $50 million for outward remittances), ASLAN Taiwan may import (subject to the foreign investment approval from the Investment
Commission) or export capital without foreign exchange controls, provided that it has submitted a foreign exchange report form, and in the
case of a remittance in excess of $1 million, has provided for review the necessary documents to prove the purpose of the remittances.
There are no governmental laws, decrees, regulations or other legislation in the ROC that may affect the remittance of dividends, interest, or
other payments by us to non-resident holders of our ordinary shares or ADSs.
E.
Taxation.
The following is a discussion of the material Cayman Islands, ROC and U.S. federal income tax considerations that may be relevant to an
investment decision by a potential investor with respect to our ADSs. This summary should not be considered a comprehensive description of
all the tax considerations that may be relevant to the decisions to acquire ADSs.
Material U.S. Federal Income Tax Considerations for U.S. Holders
The following discussion describes the material U.S. federal income tax consequences relating to the ownership and disposition of our
ordinary shares or ADSs by U.S. Holders (as defined below). This discussion applies to U.S. Holders that purchase our ADSs and hold such
ADSs as capital assets (generally, property held for investment). This discussion is based on the U.S. Internal Revenue Code of 1986, as
amended, or the Code, U.S. Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as in
effect on the date hereof and all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the
U.S. federal income tax consequences that may be relevant to specific U.S. Holders in light of their particular circumstances or to U.S.
Holders subject to special treatment under U.S. federal income tax law (such as certain banks, financial institutions, insurance companies,
brokers, dealers or traders in securities, commodities, currencies or notional principal contracts or other persons that generally mark their
securities to market for U.S. federal income tax purposes, tax-exempt entities or governmental organizations, retirement plans, regulated
investment companies, real estate investment trusts, grantor trusts, certain former citizens or long-term residents of the United States, persons
who hold our ordinary shares or ADSs as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security,” “wash sale” or other
integrated investment, persons that have a “functional currency” other than the U.S. dollar, persons that own directly, indirectly or through
attribution 10% or more of the voting power or value of our ordinary shares, corporations that accumulate earnings to avoid U.S. federal
income tax, persons subject to Section 451(b) of the Code, entities or arrangements classified as partnerships or S corporations for U.S.
federal income tax purposes or other pass-through entities, including hybrid entities and disregarded entities, and investors in such entities).
In addition, this discussion does not address any U.S. state or local or non-U.S. tax consequences or any U.S. federal estate, gift or alternative
minimum tax consequences.
163
As used in this discussion, the term “U.S. Holder” means a beneficial owner of our ordinary shares or ADSs who is, for U.S. federal income
tax purposes, (1) an individual who is a citizen or resident of the United States, (2) a corporation (or entity treated as a corporation for U.S.
federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia, (3)
an estate the income of which is subject to U.S. federal income tax regardless of its source or (4) a trust (x) with respect to which a court
within the United States is able to exercise primary supervision over its administration and one or more United States persons have the
authority to control all of its substantial decisions or (y) that has elected under applicable U.S. Treasury regulations to be treated as a
domestic trust for U.S. federal income tax purposes.
If an entity or arrangement classified as a partnership for U.S. federal income tax purposes holds our ordinary shares or ADSs, the U.S.
federal income tax consequences to a partner relating to an investment in such ordinary shares or ADSs will depend in part upon the activities
of such entity and the status of the particular partner. Partnerships holding our ordinary shares and partners in such partnership should consult
their own tax advisors regarding the U.S. federal income tax consequences of the purchase, ownership and disposition of our ordinary shares
or ADSs.
Persons considering an investment in our ADSs should consult their own tax advisors as to the particular tax consequences applicable to
them relating to the purchase, ownership and disposition of our ADSs, including the applicability of U.S. federal, state and local tax laws and
non-U.S. tax laws.
The discussion below assumes that the representations contained in the deposit agreement are true and that the obligations in the deposit
agreement and any related agreement will be complied with in accordance with their terms. Generally, a holder of an ADS should be treated
for U.S. federal income tax purposes as holding the ordinary shares represented by the ADS. Accordingly, no gain or loss will be recognized
upon an exchange of ADSs for the underlying ordinary shares represented by such ADSs. The U.S. Treasury has expressed concerns that
intermediaries in the chain of ownership between the holder of an ADS and the issuer of the security underlying the ADS may be taking
actions that are inconsistent with the beneficial ownership of the underlying security. Accordingly, the creditability of foreign taxes, if any, as
described below, could be affected by actions taken by intermediaries in the chain of ownership between the holders of ADSs and our
company if as a result of such actions the holders of ADSs are not properly treated as beneficial owners of the underlying ordinary shares.
Passive Foreign Investment Company Consequences
In general, a corporation organized outside the United States will be treated as a passive foreign investment company (PFIC) for any taxable
year in which either (1) at least 75% of its gross income is “passive income” (the “PFIC income test”), or (2) on average at least 50% of its
assets, determined on a quarterly basis, are assets that produce passive income or are held for the production of passive income (PFIC asset
test). Passive income for this purpose generally includes, among other things, dividends, interest, royalties, rents, and gains from the sale or
exchange of property that gives rise to passive income.
Assets that produce or are held for the production of passive income generally include cash, even if held as working capital or raised in a
public offering, marketable securities, and other assets that may produce passive income. Generally, in determining whether a non-U.S.
corporation is a PFIC, a proportionate share of the income and assets of each corporation in which it owns, directly or indirectly, at least a
25% interest (by value) is taken into account.
164
Although PFIC status is determined on an annual basis and generally cannot be determined until the end of the taxable year, based on the
nature of our current and expected income and the current and expected value and composition of our assets, we believe we were a PFIC for
the taxable years ended December 31, 2018 and December 2019, and we may be a PFIC for the current taxable year. Because our income for
the next several taxable years is expected to consist principally of interest from cash and cash equivalents received from recent offerings, we
believe that we likely will be a PFIC under the PFIC income test in future taxable years as well. In part, because we may hold a substantial
amount of cash and cash equivalents following recent offering, and because the calculation of the value of our assets after recent offering
may be based in part on the value of our ordinary shares or ADSs, which may fluctuate considerably, we believe we may also be a PFIC in
future taxable years under the PFIC asset test. Even if we determine that we are not a PFIC for a taxable year, there can be no assurance that
the Internal Revenue Service (IRS) will agree with our conclusion and that the IRS would not successfully challenge our position.
If we are a PFIC in any taxable year during which a U.S. Holder owns our ordinary shares or ADSs, the U.S. Holder could be liable for
additional taxes and interest charges under the “PFIC excess distribution regime” upon (1) a distribution paid during a taxable year that is
greater than 125% of the average annual distributions paid in the three preceding taxable years, or, if shorter, the U.S. Holder’s holding
period for our ordinary shares or ADSs, and (2) any gain recognized on a sale, exchange or other disposition, including a pledge, of our
ordinary shares or ADSs, whether or not we continue to be a PFIC. Under the PFIC excess distribution regime, the tax on such distribution or
gain would be determined by allocating the distribution or gain ratably over the U.S. Holder’s holding period for our ordinary shares or
ADSs. The amount allocated to the current taxable year (i.e., the year in which the distribution occurs or the gain is recognized) and any year
prior to the first taxable year in which we are a PFIC will be taxed as ordinary income earned in the current taxable year. The amount
allocated to other taxable years will be taxed at the highest marginal rates in effect for individuals or corporations, as applicable, to ordinary
income for each such taxable year, and an interest charge, generally applicable to underpayments of tax, will be added to the tax.
If we are a PFIC for any year during which a U.S. Holder holds our ordinary shares or ADSs, we must generally continue to be treated as a
PFIC by that holder for all succeeding years during which the U.S. Holder holds such ordinary shares or ADSs, unless we cease to meet the
requirements for PFIC status and the U.S. Holder makes a “deemed sale” election with respect to our ordinary shares or ADSs. If the election
is made, the U.S. Holder will be deemed to sell our ordinary shares or ADSs it holds at their fair market value on the last day of the last
taxable year in which we qualified as a PFIC, and any gain recognized from such deemed sale would be taxed under the PFIC excess
distribution regime, but any loss would not be recognized. After the deemed sale election, the U.S. Holder’s ordinary shares or ADSs would
not be treated as shares of a PFIC unless we subsequently become a PFIC.
If we are a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares or ADSs and one of our non-United States
subsidiaries is also a PFIC (i.e., a lower-tier PFIC), such U.S. Holder would be treated as owning a proportionate amount (by value) of the
shares of the lower-tier PFIC and would be taxed under the PFIC excess distribution regime on distributions by the lower-tier PFIC and on
gain from the disposition of shares of the lower-tier PFIC even though such U.S. Holder would not receive the proceeds of those distributions
or dispositions. Any of our non-United States subsidiaries that have elected to be disregarded as entities separate from us or as partnerships
for U.S. federal income tax purposes would not be corporations under U.S. federal income tax law and accordingly, cannot be classified as
lower-tier PFICs. However, non-United States subsidiaries that have not made the election may be classified as a lower-tier PFIC if we are a
PFIC during your holding period and the subsidiary meets the PFIC income test or PFIC asset test. Each U.S. Holder is advised to consult its
tax advisors regarding the application of the PFIC rules to any of our non-United States subsidiaries.
165
If we are a PFIC, a U.S. Holder will not be subject to tax under the PFIC excess distribution regime on distributions or gain recognized on
our ordinary shares or ADSs if a valid “mark-to-market” election is made by the U.S. Holder for our ordinary shares or ADSs. An electing
U.S. Holder generally would take into account as ordinary income each year, the excess of the fair market value of our ordinary shares or
ADSs held at the end of such taxable year over the adjusted tax basis of such ordinary shares or ADSs. The U.S. Holder would also take into
account, as an ordinary loss each year, the excess of the adjusted tax basis of such ordinary shares or ADSs over their fair market value at the
end of the taxable year, but only to the extent of the excess of amounts previously included in income over ordinary losses deducted as a
result of the mark-to-market election. The U.S. Holder’s tax basis in our ordinary shares or ADSs would be adjusted to reflect any income or
loss recognized as a result of the mark-to-market election. Any gain from a sale, exchange or other disposition of our ordinary shares or
ADSs in any taxable year in which we are a PFIC would be treated as ordinary income and any loss from such sale, exchange or other
disposition would be treated first as ordinary loss (to the extent of any net mark-to-market gains previously included in income) and
thereafter as capital loss. If, after having been a PFIC for a taxable year, we cease to be classified as a PFIC because we no longer meet the
PFIC income or PFIC asset test, the U.S. Holder would not be required to take into account any latent gain or loss in the manner described
above and any gain or loss recognized on the sale or exchange of the ordinary shares or ADSs would be classified as a capital gain or loss.
A mark-to-market election is available to a U.S. Holder only for “marketable stock.” Generally, stock will be considered marketable stock if
it is “regularly traded” on a “qualified exchange” within the meaning of applicable U.S. Treasury regulations. A class of stock is regularly
traded during any calendar year during which such class of stock is traded, other than in de minimis quantities, on at least 15 days during
each calendar quarter.
In general, a U.S. Holder makes a mark-to-market election by attaching a properly executed IRS Form 8621 to its U.S. federal income tax
return for the first taxable year to which it wishes the election to apply.
Our ADSs will be marketable stock as long as they remain listed on The Nasdaq Global Market and are regularly traded. A mark-to-market
election will not apply to the ordinary shares or ADSs for any taxable year during which we are not a PFIC, but will remain in effect with
respect to any subsequent taxable year in which we become a PFIC. Such election will not apply to any of our non-U.S. subsidiaries.
Accordingly, a U.S. Holder may continue to be subject to tax under the PFIC excess distribution regime with respect to any lower-tier PFICs
notwithstanding the U.S. Holder’s mark-to-market election for the ordinary shares or ADSs.
The tax consequences that would apply if we are a PFIC would also be different from those described above if a U.S. Holder were able to
make a valid qualified electing fund (QEF) election. As we do not expect to provide U.S. Holders with the information necessary for a U.S.
Holder to make a QEF election, prospective investors should assume that a QEF election will not be available.
166
The U.S. federal income tax rules relating to PFICs are very complex. Prospective U.S. investors are strongly urged to consult their
own tax advisors with respect to the impact of PFIC status on the purchase, ownership and disposition of our ADSs, the
consequences to them of an investment in a PFIC, any elections available with respect to the ADSs and the IRS information reporting
obligations with respect to the purchase, ownership and disposition of ADSs of a PFIC.
Distributions
Subject to the discussion above under “—Passive Foreign Investment Company Consequences,” a U.S. Holder that receives a distribution
with respect to our ordinary shares or ADSs generally will be required to include the gross amount of such distribution in gross income as a
dividend when actually or constructively received to the extent of the U.S. Holder’s pro rata share of our current and/or accumulated earnings
and profits (as determined under U.S. federal income tax principles). To the extent a distribution received by a U.S. Holder is not a dividend
because it exceeds the U.S. Holder’s pro rata share of our current and accumulated earnings and profits, it will be treated first as a tax-free
return of capital and reduce (but not below zero) the adjusted tax basis of the U.S. Holder’s ordinary shares or ADSs. To the extent the
distribution exceeds the adjusted tax basis of the U.S. Holder’s ordinary shares or ADSs, the remainder will be taxed as capital gain. Because
we may not account for our earnings and profits in accordance with U.S. federal income tax principles, U.S. Holders should expect all
distributions to be reported to them as dividends.
Distributions on our ordinary shares or ADSs that are treated as dividends generally will constitute income from sources outside the United
States for foreign tax credit purposes and generally will constitute passive category income. Such dividends will not be eligible for the
“dividends received” deduction generally allowed to corporate shareholders with respect to dividends received from U.S. corporations.
Dividends paid by a “qualified foreign corporation” to certain non-corporate U.S. Holders may be eligible for taxation at a reduced capital
gains rate if certain requirements are met. Each U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax
rate on dividends to its particular circumstances. However, if we are a PFIC for the taxable year in which the dividend is paid or the
preceding taxable year (see discussion above under “—Passive Foreign Investment Company Consequences”), we will not be treated as a
qualified foreign corporation, and therefore the reduced capital gains tax rate described above will not apply.
Dividends will be included in a U.S. Holder’s income on the date of the Depositary’s receipt of the dividend. The amount of any dividend
income paid in NT dollars will be the U.S. dollar amount calculated by reference to the exchange rate in effect on the date of receipt,
regardless of whether the payment is in fact converted into U.S. dollars. If the dividend is converted into U.S. dollars on the date of receipt, a
U.S. Holder should not be required to recognize foreign currency gain or loss in respect to the dividend income. A U.S. Holder may have
foreign currency gain or loss if the dividend is converted into U.S. dollars after the date of receipt.
Sale, Exchange or Other Disposition of Our Ordinary Shares or ADSs
Subject to the discussion above under “—Passive Foreign Investment Company Consequences,” a U.S. Holder generally will recognize
capital gain or loss for U.S. federal income tax purposes upon the sale, exchange or other disposition of our ordinary shares or ADSs in an
amount equal to the difference, if any, between the amount realized (i.e., the amount of cash plus the fair market value of any property
received) on the sale, exchange or other disposition and such U.S. Holder’s adjusted tax basis in the ordinary shares or ADSs. Such capital
gain or loss generally will be long-term capital gain taxable at a reduced rate for non-corporate U.S. Holders or long-term capital loss if, on
the date of sale, exchange or other disposition, the ordinary shares or ADSs were held by the U.S. Holder for more than one year. Any capital
gain of a non-corporate U.S. Holder that is not long-term capital gain is taxed at ordinary income rates. The deductibility of capital losses is
subject to limitations. Any gain or loss recognized from the sale or other disposition of our ordinary shares or ADSs will generally be gain or
loss from sources within the United States for U.S. foreign tax credit purposes.
167
Medicare Tax
Certain U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally are subject to a 3.8% tax on
all or a portion of their net investment income, which may include their gross dividend income and net gains from the disposition of our
ordinary shares or ADSs. If you are a United States person that is an individual, estate or trust, you are encouraged to consult your tax
advisors regarding the applicability of this Medicare tax to your income and gains in respect of your investment in our ordinary shares or
ADSs.
Information Reporting and Backup Withholding
U.S. Holders may be required to file certain U.S. information reporting returns with the IRS with respect to an investment in our ordinary
shares or ADSs, including, among others, IRS Form 8938 (Statement of Specified Foreign Financial Assets). Each U.S. Holder who is a
shareholder of a PFIC must file an annual report on IRS Form 8621 (or any successor form) containing certain information, generally with
the U.S. Holder’s U.S. federal income tax return for the relevant year. Substantial penalties may be imposed upon a U.S. Holder that fails to
comply with the required information reporting.
Unless otherwise provided by the U.S. Treasury, each U.S. shareholder of a PFIC is required to file an annual report containing such
information as the U.S. Treasury may require. A U.S. Holder’s failure to file the annual report will cause the statute of limitations for such
U.S. Holder’s U.S. federal income tax return to remain open with regard to the items required to be included in such report until three years
after the U.S. Holder files the annual report, and, unless such failure is due to reasonable cause and not willful neglect, the statute of
limitations for the U.S. Holder’s entire U.S. federal income tax return will remain open during such period.
Dividends on and proceeds from the sale or other disposition of our ADSs may be reported to the IRS unless the U.S. Holder establishes a
basis for exemption. Backup withholding may apply to amounts subject to reporting if the holder (1) fails to provide an accurate U.S.
taxpayer identification number or otherwise establish a basis for exemption, or (2) is described in certain other categories of persons.
However, U.S. Holders that are corporations generally are excluded from these information reporting and backup withholding tax rules.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund
or a credit against a U.S. Holder’s U.S. federal income tax liability if the required information is furnished by the U.S. Holder on a timely
basis to the IRS.
U.S. Holders should consult their own tax advisors regarding the backup withholding tax and information reporting rules.
EACH PROSPECTIVE INVESTOR IS URGED TO CONSULT ITS OWN TAX ADVISOR ABOUT THE TAX CONSEQUENCES
TO IT OF AN INVESTMENT IN OUR ADSs OR ORDINARY SHARES IN LIGHT OF THE INVESTOR’S OWN
CIRCUMSTANCES.
Cayman Taxation
Prospective investors should consult their professional advisers on the possible tax consequences of buying, holding or selling any ADSs or
ordinary shares under the laws of their country of citizenship, residence or domicile.
168
The following is a discussion on certain Cayman Islands income tax consequences of an investment in the ADSs or ordinary shares. The
discussion is a general summary of present law, which is subject to prospective and retroactive change. It is not intended as tax advice, does
not consider any investor’s particular circumstances, and does not consider tax consequences other than those arising under Cayman Islands
law.
No stamp duty, capital duty, registration or other issue or documentary taxes are payable in the Cayman Islands on the creation, issuance or
delivery of the ADSs or ordinary shares. The Cayman Islands currently have no form of income, corporate or capital gains tax and no estate
duty, inheritance tax or gift tax. There are currently no Cayman Islands’ taxes or duties of any nature on gains realized on a sale, exchange,
conversion, transfer or redemption of the ADSs or ordinary shares. Payments of dividends and capital in respect of the ADSs or ordinary
shares will not be subject to taxation in the Cayman Islands and no withholding will be required on the payment of interest and principal or a
dividend or capital to any holder of the ADSs or ordinary shares, nor will gains derived from the disposal of the ADSs or ordinary shares be
subject to Cayman Islands income or corporation tax as the Cayman Islands currently have no form of income or corporation taxes.
We are incorporated under the laws of the Cayman Islands as an exempted company with limited liability and, as such, have applied for and
have received an undertaking from the Governor of the Cayman Islands that no law enacted in the Cayman Islands during the period of 30
years from 3 January 2018, being the date of the undertaking imposing any tax to be levied on profits, income, gains or appreciation shall
apply to us or our operations and no such tax or any tax in the nature of estate duty or inheritance tax shall be payable (directly or by way of
withholding) on the ADSs or ordinary shares, debentures or other obligations of ours.
ROC Taxation
The following is a summary under present law of the principal ROC tax consequences of the ownership and disposition of ADSs and shares
to a Non-Resident Individual or a Non-Resident Entity that owns ADS or shares (each a Non-ROC Holder). As used in this section, a “Non-
Resident individual” is a foreign national individual who is not physically present in the ROC for 183 days or more during any calendar year;
and a “Non-Resident Entity” is a corporation or a non-corporate body that is organized under the laws of a jurisdiction other than the ROC
and has no fixed place of business or other permanent establishment or business agent in the ROC. Prospective purchasers of the ADSs
should consult their tax advisors concerning the ROC tax consequences of owning the ADSs or shares and the laws of any other relevant
taxing jurisdiction to which they are subject.
Sale
There is no ROC tax on (i) the purchase of the ADSs, (ii) the sale of the ADSs or (iii) conversion of the ADSs into their underlying shares.
However, securities transaction tax will be withheld at the rate of 0.3% of the transaction price upon a sale of the underlying shares in the
ROC.
Under current ROC law, capital gains on transactions in securities issued by Cayman Islands companies and held by a Non-ROC Holder are
exempt from income tax. This exemption applies to capital gains derived from the sale of the said shares.
169
Tax Guarantor
If a holder of non-ROC nationality converts the ADSs held by the holder into the underlying shares, such holder is required under current
ROC law and regulations to appoint a tax agent in the ROC. Such agent must meet certain qualifications set by the Ministry of Finance of the
ROC and, upon appointment, become a guarantor of such holder’s ROC tax obligations. Evidence of the appointment of such agent and the
approval for such appointment by the ROC tax authorities would be required as conditions to such holder’s repatriation of the profit derived
from the sale of shares. There can be no assurance that a foreign holder will be able to appoint and obtain approval for the required agent in a
timely manner.
Subject to certain exceptions, under current ROC law, upon the repatriation of profits of shares sold within the ROC, the tax agent so
appointed is required to submit evidence of the appointment of the tax agent to, and approval thereof by, the tax authority, or to submit tax
clearance certificates issued by the tax authority. Notwithstanding the above requirements for the appointment of a tax agent or submission of
tax clearance certificates as provided in the ROC regulations, the Central Bank of the ROC has not required submission of such evidence or
tax clearance certificates as condition to repatriation of sale proceeds of shares from sales that take place within the ROC. However, there can
be no assurance that the Central Bank of the ROC will not require submission of such evidence or tax clearance certificates in the future.
F.
Dividends and paying agents.
Not applicable.
G.
Statement by experts.
Not applicable.
H.
Documents on display.
We are subject to the informational requirements of the Exchange Act and are required to file reports and other information with the SEC.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding
registrants that make electronic filings with SEC using its EDGAR system.
We are a “foreign private issuer” as such term is defined in Rule 405 under the Securities Act, and are not subject to the same requirements
that are imposed upon U.S. domestic issuers by the SEC. Under the Exchange Act, we are subject to reporting obligations that, in certain
respects, are less detailed and less frequent than those of U.S. domestic reporting companies. As a result, we do not file the same reports that
a U.S. domestic issuer would file with the SEC. We also make available on our website’s investor relations page, free of charge, our annual
report and the text of our reports on Form 6-K, including any amendments to these reports, as well as certain other SEC filings, as soon as
reasonably practicable after they are electronically filed with or furnished to the SEC. The address for our investor relations page is
www.aslanpharma.com. The information contained on our website is not incorporated by reference in this annual report.
I.
Subsidiary Information.
Not applicable.
170
Item 11.
Quantitative and Qualitative Disclosures about Market Risk.
Our financial risk management objective is to monitor and manage the financial risks relating to our operations. These risks include risks in
financial markets (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. In order to minimize the effect
of financial risks, we devote time and resources to identifying and evaluating the uncertainty of the financial market to mitigate risk
exposures.
Our activities expose us primarily to risks of changes in foreign currency exchange rates, interest rates and other price risks.
A.
Foreign Exchange Risk
We have foreign currency transactions, which expose us to foreign currency risks. The significant financial assets and liabilities denominated
in foreign currencies as of December 31, 2018 were as follows:
Financial assets
Monetary items
Financial liabilities
Monetary items
Foreign
Currencies
December 31, 2018
Exchange
Rate
Carrying
Amount
SG$
2,297,231
0.7335 US$
1,685,019
A hypothetical rate change of 5% is used when reporting foreign currency risk internally to key management personnel and represents
management’s assessment of the reasonably possible change in foreign exchange rates. Based on outstanding foreign currency-denominated
monetary items, a 5% weakening of the U.S. dollar against the Singapore dollar would result in a $0.4 million increase to net loss and
decrease to equity for the year ended December 31, 2018.
SG$
13,515,737
0.7335 US$
9,914,437
171
The significant financial assets and liabilities denominated in foreign currencies as of December 31, 2019 were as follows:
Financial assets
Monetary items
Financial liabilities
Monetary items
Foreign
Currencies
December 31, 2019
Exchange
Rate
Carrying
Amount
SG$
GBP
2,538,168
999,471
0.7431 US$
1.3187 US$
1,886,160
1,318,000
A hypothetical rate change of 5% is used when reporting foreign currency risk internally to key management personnel and represents
management’s assessment of the reasonably possible change in foreign exchange rates. Based on outstanding foreign currency-denominated
monetary items, a 5% weakening of the U.S. dollar against the Singapore dollar would result in a $0.5 million increase to net loss and
decrease to equity and a 5% weakening of the U.S. dollar against the British Pound would result in a $0.07 million decrease to net loss and
increase to equity for the year ended December 31, 2019.
SG$
15,126,578
0.7431 US$
11,240,843
B.
Interest Rate Risk
We are exposed to interest rate risk because entities in the Company borrowed funds at both fixed and floating interest rates. The risk is
managed by the Company by maintaining an appropriate mix of fixed and floating rate borrowings.
The sensitivity analysis below is determined based on the Company’s exposure to interest rates for fixed rate borrowings at the end of the
reporting period, and is prepared assuming that the amounts of liabilities outstanding at the end of the reporting period are outstanding for the
whole year. A 100-basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the reasonably possible change in interest rates.
If interest rates had been 100 basis points higher/lower and all other variables were held constant, our pre-tax loss for the years ended
December 31, 2018 and 2019 would have decreased/increased around by $0.10 million and $0.15 million, respectively.
Item 12. Description of Securities Other than Equity Securities.
A.
Debt Securities.
Not applicable.
B. Warrants and Rights.
Not applicable.
172
C.
Other Securities
Not applicable.
D.
American Depositary Shares.
JPMorgan Chase Bank, N.A. (JPMorgan) as depositary bank, registers and delivers our American Depositary Shares, also referred to as
ADSs. Each ADS will represent an ownership interest in a designated number of our ordinary shares which we will deposit with the
depositary or the custodian, as agent of the depositary, under the deposit agreement among ourselves, the depositary and yourself as an ADR
holder. In the future, each ADS will also represent any securities, cash or other property deposited with the depositary but which have not
distributed directly to you. Unless certificated ADRs are specifically requested by you, all ADSs will be issued on the books of our
depositary in book-entry form and periodic statements will be mailed to you which reflect your ownership interest in such ADSs. In our
description, references to American depositary receipts or ADRs shall include the statements you will receive which reflect your ownership
of ADSs. The depositary’s office is located at 4 New York Plaza, Floor 12, New York, NY, 10004. A form of the deposit agreement is
incorporated by reference as an exhibit to this Annual Report.
Fees and Expenses
The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of ordinary
shares, issuances in respect of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared
by us or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities,
and each person surrendering ADSs for withdrawal of deposited securities or whose ADRs are cancelled or reduced for any other reason,
$5.00 for each 100 ADSs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may be. The depositary
may sell (by public or private sale) sufficient securities and property received in respect of a share distribution, rights and/or other
distributions prior to such deposit to pay such charge.
The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party
surrendering ADSs and/or to whom ADSs are issued (including, without limitation, issuances pursuant to a stock dividend or stock split
declared by us or an exchange of stock regarding the ADSs or the deposited securities or a distribution of ADSs), whichever is applicable:
•
•
•
A fee of up to $0.05 per ADS for any cash distribution made pursuant to the deposit agreement;
An aggregate fee of $0.05 per ADS per calendar year (or portion thereof) for services performed by the depositary in administering
the ADRs (which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs
as of the record date or record dates set by the depositary during each calendar year and shall be payable in the manner described in
the next succeeding provision);
A fee for the reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of its agents
(including, without limitation, the custodian and expenses incurred on behalf of ADR holders in connection with compliance with
foreign exchange control regulations or any law or regulation relating to foreign investment) in connection with the servicing of the
ordinary shares or other deposited securities, the sale of securities (including, without limitation, deposited securities), the delivery
of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law, rule or
regulation (which fees and charges shall be assessed on a proportionate basis against ADR holders as of the record date or dates set
by the depositary and shall be payable at the sole discretion of the depositary by billing such ADR holders or by deducting such
charge from one or more cash dividends or other cash distributions);
173
•
•
•
•
•
•
•
A fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal
to the $0.05 per ADS issuance fee for the execution and delivery of ADSs which would have been charged as a result of the deposit
of such securities (treating all such securities as if they were ordinary shares) but which securities or the net cash proceeds from the
sale thereof are instead distributed by the depositary to those ADR holders entitled thereto;
Stock transfer or other taxes and other governmental charges;
SWIFT, cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or
delivery of shares, ADRs or deposited securities;
Transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the
deposit or withdrawal of deposited securities;
Expenses of the depositary in connection with the sale of shares to pay ROC withholdings taxes on stock dividends pursuant to the
deposit agreement (which are paid out of such foreign currency);
In connection with the conversion of foreign currency into U.S. dollars, JPMorgan shall deduct out of such foreign currency the
fees, expenses and other charges charged by it and/or its agent (which may be a division, branch or affiliate) so appointed in
connection with such conversion; and
Fees of any division, branch or affiliate of JPMorgan utilized to direct, manage and/or execute any public and/or private sale of
securities under the deposit agreement.
Certain of the depositary fees and charges described above may become payable immediately after the closing of the initial issuance of ADRs
at or following the date of the deposit agreement. In connection therewith, it is anticipated that the $0.05 per ADS administrative servicing
fee per calendar year described in the second bullet above will be charged to, and payable by, those ADS holders on a record date occurring
during the period immediately after the initial issuance of ADRs following the date of the deposit agreement and prior to the listing approval
from the TPEx with respect to such issuance.
As an ADR holder, you will also be responsible to pay any required charges to the Taiwan tax authority, which are subject to change. As of
the date hereof, the charges may include:
Service
Fee
Issuance of ADSs upon a deposit of ordinary shares
0.3% of the aggregate price of ADS issued
Withdrawal of ordinary shares upon cancellation of ADSs
0.3% of the aggregate price of ADS canceled
Sale of ordinary shares on the Taiwan Exchange
3% of the aggregate price of ordinary shares sold
JPMorgan and/or its agent may act as principal for any conversion of foreign currency. For further details see https://www.adr.com.
We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements
from time to time between us and the depositary. The charges described above may be amended from time to time by agreement between us
and the depositary. The right of the depositary to receive payment of fees, charges and expenses as provided above shall survive the
termination of the deposit agreement.
174
The depositary anticipates reimbursing us for certain expenses incurred by us that are related to the establishment and maintenance of the
ADR program upon such terms and conditions as we and the depositary may agree from time to time. The depositary may make available to
us a set amount or a portion of the depositary fees charged in respect of the ADR program or otherwise upon such terms and conditions as we
and the depositary may agree from time to time. The depositary collects its fees for issuance and cancellation of ADSs directly from investors
depositing shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for
making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay
the fees. The depositary may collect its annual fee for depositary services by deduction from cash distributions, or by directly billing
investors, or by charging the book-entry system accounts of participants acting for them. The depositary will generally set off the amounts
owing from distributions made to holders of ADSs. If, however, no distribution exists and payment owing is not timely received by the
depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and expenses owing until such
fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing under the deposit agreement are due in
advance and/or when declared owing by the depositary.
Payment of Taxes
If any taxes or other governmental charges (including any penalties and/or interest) shall become payable by or on behalf of the custodian or
the depositary with respect to any ADR, any deposited securities represented by the ADSs evidenced thereby or any distribution thereon,
such tax or other governmental charge shall be paid by the ADR holders to the depositary and by holding or having held an ADR the holder
thereof and all prior holders thereof, jointly and severally, agree to indemnify, defend and save harmless each of the depositary and its agents
in respect thereof. If an ADR holder owes any tax or other governmental charge, the depositary may (i) deduct the amount thereof from any
distributions, or (ii) sell deposited securities (by public or private sale) and deduct the amount owing from the net proceeds of such sale. In
either case the ADR holder remains liable for any shortfall. If any tax or governmental charge is unpaid, the depositary may also refuse to
effect any registration, registration of transfer, split-up or combination of ADRs or withdrawal of deposited securities until such payment is
made. If any tax or governmental charge is required to be withheld on any cash distribution, the depositary may deduct the amount required
to be withheld from any cash distribution or, in the case of a non-cash distribution, sell the distributed property or securities (by public or
private sale) in such amounts and in such manner as the depositary deems necessary and practicable to pay such taxes and shall distribute any
remaining net proceeds or the balance of any such property after deduction of such taxes to the ADR holders entitled thereto.
Notwithstanding the above, we will pay all stamp duties and other similar duties or taxes payable in the Cayman Islands, the ROC, the United
States of America and any other jurisdiction, on or in connection with the constitution and issue of the ADSs and the execution or other event
concerning the deposit agreement. If any legal proceedings are taken to enforce our obligations under the deposit agreement or the ADSs and
for the purpose of such proceedings any of them are required to be taken into or enforced in any jurisdiction and stamp duties or other similar
duties or taxes become payable in connection with such proceedings in such jurisdiction, the ADR holders will pay (or reimburse the person
making a valid payment of) all such stamp duties and other similar duties and taxes, including any penalties and interest, unless otherwise
ordered by a court of competent jurisdiction in such proceedings. The depositary may sell any deposited securities and cancel ADSs with
respect thereof in order to pay any such stamp duties or other similar duties or taxes owed under the deposit agreement by ADR holders
without the depositary being required to request payment thereof from the ADR holders.
175
By holding an ADR or an interest therein, you will be agreeing to indemnify us, the depositary, its custodian and any of our or their
respective officers, directors, employees, agents and affiliates against, and hold each of them harmless from, any claims by any governmental
authority with respect to taxes, additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source
or other tax benefit obtained, and such obligations shall survive the transfer or surrender of ADSs or the termination of the deposit agreement.
Reclassifications, Recapitalizations and Mergers
If we take certain actions that affect the deposited securities, including (i) any change in par value, split-up, consolidation, cancellation or
other reclassification of deposited securities or (ii) any distributions of ordinary shares or other property not made to holders of ADRs or (iii)
any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our
assets, then the depositary may choose to, and shall if reasonably requested by us:
(1) Amend the form of ADR;
(2) Distribute additional or amended ADRs;
(3) Distribute cash, securities or other property it has received in connection with such actions;
(4) Sell by public or private sale any securities or property received; or
(5) None of the above.
If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part of the
deposited securities and each ADS will then represent a proportionate interest in such property.
176
PART II
Item 13. Defaults, Dividend Arrearages and Delinquencies.
Not applicable.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
Not applicable.
Item 15. Controls and Procedures.
A.
Disclosure Controls and Procedures.
Our management, with the participation of our Chief Executive Officer and Vice President of Finance, has evaluated the effectiveness of our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of December 31, 2019. Based on such
evaluation, our Chief Executive Officer and Vice President of Finance have concluded that, as of December 31, 2019, our disclosure controls
and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and is
accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to
allow timely decisions regarding required disclosure.
B.
Management’s annual report on internal control over financial reporting.
Our management is responsible for establishing and maintaining adequate internal controls over financial reporting (as defined in Rules 13a-
15(f) and 15d-15(f) under the Exchange Act) and for the assessment of the effectiveness of our internal control over financial reporting.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or
that the degree of compliance with the policies or procedures may deteriorate.
Our management has assessed the effectiveness of our internal control over financial reporting based on the framework set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework).
Based on our evaluation, management has concluded that our internal control over financial reporting was effective as of December 31, 2019.
C.
Attestation report of the registered public accounting firm.
This annual report does not include an attestation report of the company’s registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public companies.
177
D.
Changes in internal control over financial reporting.
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred
during the period covered by this Annual Report that has materially affected, or is reasonably likely to materially affect, our internal control
over financial reporting.
Item 16A. Audit committee financial expert.
Our Audit Committee is comprised of three of our non-executive directors, Mr. Howden, Mr. Hoffman and Mr. Sun. The audit committee
consists exclusively of “independent directors” as such term is defined in Rule 10A-3 under the Exchange Act and under the listing standards
of the Nasdaq Stock Market. Mr. Sun serves as chair of this committee. Our Board has determined that Mr. Sun is an “audit committee
financial expert” as defined in Item 16A of Form 20-F.
Item 16B. Code of Ethics.
We have adopted a Code of Business Conduct that covers a broad range of matters including the handling of conflicts of interest, compliance
issues and other corporate policies. Our Code of Business Conduct is applicable to all of our employees, officers and directors, including our
principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. We
have posted a copy of our Code of Business Conduct on our website at http://ir.aslanpharma.com/corporate-governance/highlights. We expect
that any amendment to this code, or any waivers of its requirements, will be disclosed on our website and approve by board of directors.
Information contained on, or that can be accessed through, our website is not incorporated by reference into this annual report. See “Item 6.C.
Directors, Senior Management and Employees— Code of Business Conduct and Ethics” for more information.
Item 16C. Principal Accountant Fees and Services.
The table below summarizes the fees that we paid for services provided by Deloitte & Touche and its affiliated firms (Deloitte Entities) for
the years ended December 31, 2018 and 2019. All audit and non-audit services provided by Deloitte & Touche were pre-approved by our
audit committee paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, entitled “Audit Committee Administration of the Engagement”.
Fee Category
Audit fees
Total
Year Ended December 31,
2019
2018
$
$
(in thousands)
404 $
404 $
417
417
Audit Fees. This category includes the audit of our annual financial statements, review of quarterly financial statements and services that are
normally provided by the independent auditors in connection with statutory and regulatory filings or engagements for those fiscal years. This
category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of quarterly financial
statements and statutory audits required by U.S. jurisdictions and non-U.S. jurisdictions and also IPO service fees occurred in the fiscal year
if applicable.
178
Audit Committee Pre-Approval Policies and Procedures
Our audit committee reviews and pre-approves the scope and the cost of audit services related to us and permissible non-audit services
performed by the independent auditors, other than those for de minimis services which are approved by the audit committee prior to the
completion of the audit. All of the services related to our company provided by Deloitte & Touche during the last fiscal year have been
approved by the audit committee.
Item 16D. Exemptions from the Listing Standards for Audit Committees.
Not applicable.
Item 16E Purchases of Equity Securities by the Issuer and Affiliated Purchasers.
Not applicable.
Item 16F. Change in Registrant’s Certifying Accountant.
Not applicable.
Item 16G. Corporate Governance
We are a “foreign private issuer,” as defined by the SEC. As a result, in accordance with the rules and regulations of The Nasdaq Stock
Market LLC (Nasdaq), we comply with home country governance requirements and certain exemptions thereunder rather than complying
with Nasdaq corporate governance standards. While we voluntarily follow most Nasdaq corporate governance rules, we may choose to take
advantage of the following exemptions afforded to foreign private issuers:
•
•
•
•
•
•
Exemption from the requirement that a majority of our board of directors consists of independent directors.
Exemption from the requirement that our audit committee have a written charter addressing the audit committee’s responsibilities
and authority as set forth in Nasdaq Rule 5605(c)(1).
Exemption from the requirement that our remuneration committee have a written charter addressing the remuneration committee’s
responsibilities and authority as set forth in Nasdaq Rule 5605(d).
Exemption from the requirement to have independent director oversight of director nominations and a formal written charter or
board resolution addressing the nominations process as set forth in Nasdaq Rule 5605(e).
Exemption from the requirement that we have a code of conduct applicable to all directors, officers and employees and from any
requirement that we have a code of conduct in compliance with Section 406 of the Sarbanes-Oxley Act of 2002.
Exemption from the Nasdaq rules applicable to domestic issuers requiring disclosure within four business days of any
determination to grant a waiver of the code of business conduct and ethics to directors and officers. Although we will require board
approval of any such waiver, we may choose not to disclose the waiver in the manner set forth in the Nasdaq rules, as permitted by
the foreign private issuer exemption.
179
•
•
•
Exemption from the requirement to obtain shareholder approval for certain issuances of securities, including shareholder approval
of stock option plans.
Exemption from the requirements governing the review and oversight of all “related party transactions,” as defined in Item 7.B of
Form 20-F.
Exemption from the requirement that our board of directors shall have regularly scheduled meetings at which only independent
directors are present as set forth in Nasdaq Rule 5605(b)(2).
We intend to follow our home country practices in lieu of the foregoing requirements. Although we may rely on home country corporate
governance practices in lieu of certain of the rules in the Nasdaq Rule 5600 Series and Rule 5250(d), we must comply with Nasdaq’s
Notification of Noncompliance requirement (Rule 5625), the Voting Rights requirement (Rule 5640) and have an audit committee that
satisfies Rule 5605(c)(3), consisting of committee members that meet the independence requirements of Rule 5605(c)(2)(A)(ii). Although we
currently intend to comply with the Nasdaq corporate governance rules applicable other than as noted above, we may in the future decide to
use the foreign private issuer exemption with respect to some or all the other Nasdaq corporate governance rules.
In addition, as a foreign private issuer, we take advantage of the following exemptions from SEC reporting obligations:
•
•
Exemption from filing quarterly reports on Form 10-Q or provide current reports on Form 8-K, disclosing significant events within
four days of their occurrence.
Exemption from Section 16 rules regarding sales of common shares by insiders, which will provide less data in this regard than
shareholders of U.S. companies that are subject to the Exchange Act.
Accordingly, our shareholders will not have the same protections afforded to shareholders of companies that are subject to all of the corporate
governance requirements of Nasdaq and the domestic reporting requirements of the SEC. We may utilize these exemptions for as long as we
continue to qualify as a foreign private issuer.
Item 16H. Mine Safety Disclosure
Not applicable.
180
PART III
Item 17. Financial Statements.
See pages F-1 through F-53 of this Annual Report on Form 20-F.
Item 18. Financial Statements.
The financial statements are filed as part of this Annual Report beginning on page F-1.
Item 19. Exhibits.
List all exhibits filed as part of the registration statement or annual report, including exhibits incorporated by reference.
181
EXHIBIT INDEX
Exhibit
Description
1.1
2.1
2.2
2.3
2.4*
4.1†
4.2†
4.3†
4.4#
4.5#
4.6#
4.7#
Seventh Amended and Restated Memorandum and Articles of
Association of the Registrant, as currently in effect.
Form of Deposit Agreement (incorporated by reference to
Exhibit A to the Registrant’s Form F-6 filed with the Securities
and Exchange Commission on April 13, 2018).
Form of American Depositary Receipt (included in Exhibit
2.1)
Form of Warrant to purchase American Depositary Shares to
be issued to October 2019 Loan Facility lenders.
Description Of Securities Registered Under Section 12 of the
Exchange Act.
ASLAN Pharmaceuticals Limited 2014 Employee Share
Option Scheme Plan.
ASLAN Pharmaceuticals Limited 2017 Employee Share
Option Plan 1.
ASLAN Pharmaceuticals Pte. Ltd. 2017 SMT Long Term
Incentive Plan.
License Agreement, dated January 3, 2018, by and between
ASLAN Pharmaceuticals Pte. Ltd. and Array BioPharma Inc.
Amended Development and License Agreement, dated
December 21, 2015, by and between ASLAN Pharmaceuticals
Pte. Ltd. and Almirall, S.A., as amended.
License Agreement, dated May 12, 2014, by and between
ASLAN Pharmaceuticals Pte. Ltd. and CSL Limited, as
amended.
Agreement Amendment No. 1 to License Agreement, dated
September 18, 2018, by and between ASLAN Pharmaceuticals
PTE. Ltd. and CSL Limited.
182
Incorporated by Reference
Schedule/
Form
File
Number
Exhibit
File
Date
6-K
001-38475
99.2
10/31/2019
F-6
333-224273
EX-99.A 04/13/2018
F-6
6-K
F-1
F-1
F-1
F-1
333-224273
EX-99.A 04/13/2018
001-38475
99.5
10/31/2019
333-223920
10.1
03/26/2018
333-223920
10.2
03/26/2018
333-223920
10.3
03/26/2018
333-223920
10.4
03/26/2018
F-1
333-223920
10.5
03/26/2018
F-1
333-223920
10.6
03/26/2018
6-K
001-38475
10.1
01/09/2019
F-1/A
333-223920
10.9
04/16/2018
20-F
001-38475
4.10
04/29/2019
20-F
001-38475
4.11
04/29/2019
6-K
6-K
6-K
001-38475
10.1
06/17/2019
001-38475
001-38475
99.3
99.4
10/31/2019
10/31/2019
4.8*
4.9†
4.10+
4.11+
4.12+
4.13
4.14
8.1*
12.1*
12.2*
13.1**
13.2**
Tenancy Agreement in Respect of Unit #12-03 83,
Clemenceau Avenue, UE Square, Singapore 239920, dated
May 28, 2019, by and between ASLAN Pharmaceuticals Pte.
Ltd. and United Engineers Limited, as amended.
Form of Indemnity Agreement by and between ASLAN
Pharmaceuticals Limited and each director and executive
officer.
License Agreement, dated February 27, 2019, by and between
ASLAN Pharmaceuticals Pte. Ltd. and BioGenetics Co., Ltd.
License Agreement, dated March 11, 2019, by and between
ASLAN Pharmaceuticals Pte. Ltd. and BioGenetics Co., Ltd.
Deed of Amendment and Restatement, dated May 31, 2019, by
and between ASLAN Pharmaceuticals Pte. Ltd. and CSL
Limited.
Loan Facility dated September 30, 2019.
Loan Facility dated October 25, 2019.
Subsidiaries of the registrant.
Certification by the Principal Executive Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification by the Principal Financial Officer pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a) as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002
Certification by the Principal Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Certification by the Principal Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
101.INS*
XBRL Instance Document
101.SCH*
XBRL Taxonomy Extension Schema Document
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document
183
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document
*
Filed herewith.
** Furnished herewith.
†
#
+
Indicates a management contract or any compensatory plan, contract or arrangement.
Confidential treatment has been granted from the Securities and Exchange Commission as to certain portions of this document.
Certain portions of this exhibit (indicated by “[***]”) have been omitted as the Company has determined (i) the omitted information is
not material and (ii) the omitted information would likely cause harm to the Company if publicly disclosed.
184
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the
undersigned to sign this registration statement Annual Report on its behalf.
SIGNATURES
Date: April 16, 2020
By:
/s/ Carl Firth, Ph.D.
Carl Firth, Ph.D.
Chief Executive Officer
ASLAN PHARMACEUTICALS LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 2018 and 2019
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2017, 2018, and 2019
Consolidated Statements of Changes in Equity for the Years Ended December 31, 2017, 2018, and 2019
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2018, and 2019
Notes to Consolidated Financial Statements for the Years Ended December 31, 2017, 2018, and 2019
F-2
F-3
F-4
F-5
F-6
F-7
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
ASLAN Pharmaceuticals Limited
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of ASLAN Pharmaceuticals Limited (the “ASLAN Cayman”) and its
subsidiaries (collectively referred to as the “Company”) as of December 31, 2018 and 2019, and the related consolidated statements of
comprehensive loss, changes in equity and cash flows for each of the three years in the period ended December 31, 2019 and the related notes
(collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
financial position of the Company as of December 31, 2018 and 2019, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2019, in conformity with International Financial Reporting Standards as issued by the International
Accounting Standards Board.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting
Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our
audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the
amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Deloitte & Touche
Taipei, Taiwan
Republic of China
April 16, 2020
We have served as the Company’s auditor since 2014.
F-2
ASLAN PHARMACEUTICALS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2018 AND 2019
(In U.S. Dollars, other than shares or share data, or otherwise noted)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Notes 4 and 6)
Prepayments
Total current assets
NON-CURRENT ASSETS
Financial assets at fair value through profit or loss (Notes 4,7 and 17)
Financial assets at fair value through other comprehensive income
(Notes 4, 8 and 17)
Property, plant and equipment (Notes 4 and 10)
Right-of-use assets(Notes 3, 4 and 11)
Intangible assets (Notes 4, 12 and 17)
Refundable deposits
Total non-current assets
TOTAL ASSETS
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables
Other payables (Notes 13 and 21)
Lease Liabilities - current (Notes 3, 4 and 11)
Total current liabilities
NON-CURRENT LIABILITIES
Financial liabilities at fair value through profit or loss
(Note 4, 7)
Long-term borrowings (Note 14, 26)
Long-term borrowings from related parties (Note 14, 26)
Lease Liabilities - non-current (Notes 3, 4 and 11)
Other non-current liabilities (Note 21)
Total non-current liabilities
Total liabilities
EQUITY (DEFICIT) ATTRIBUTABLE TO STOCKHOLDERS OF THE
COMPANY (Note 16)
Ordinary shares
Capital surplus
Accumulated deficits
Other reserves
Total equity (deficit) attributable to stockholders of the Company
NON-CONTROLLING INTERESTS
Total equity (deficit)
TOTAL LIABILITIES AND EQUITY
The accompanying notes are an integral part of the consolidated financial statements.
F-3
2018
2019
$
28,908,901 $
183,599
29,092,500
22,203,031
68,923
22,271,954
60,004
68,256
$
$
187,244
288,418
—
23,080,592
172,080
23,788,338
52,880,838 $
5,315,737 $
2,682,661
—
7,998,398
—
13,974,794
—
—
289,613
14,264,407
22,262,805
132,160
38,333
727,866
2,845
108,076
1,077,536
23,349,490
1,871,843
3,246,842
264,543
5,383,228
262,350
17,065,305
566,176
490,835
184,870
18,569,536
23,952,764
51,627,219
111,459,672
(132,468,858)
—
30,618,033
—
30,618,033
52,880,838 $
61,366,844
116,495,710
(179,484,825)
(55,084)
(1,677,355)
1,074,081
(603,274)
23,349,490
$
ASLAN PHARMACEUTICALS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(In U.S. Dollars, other than shares or share data, or otherwise noted)
NET REVENUE (Note 17)
COST OF REVENUE (Note 17)
GROSS PROFIT
OPERATING EXPENSES (Notes 15, 18 and 21)
General and administrative expenses
Research and development expenses
Total operating expenses
OTHER OPERATING INCOME AND EXPENSES
(Notes 12 and 18)
LOSS FROM OPERATIONS
NON-OPERATING INCOME AND EXPENSES
Interest income
Other income (Note 17)
Other gains and losses (Note 18)
Finance costs (Note 4 and 18)
Total non-operating income and expenses
LOSS BEFORE INCOME TAX
INCOME TAX EXPENSE (Notes 4 and 19)
NET LOSS FOR THE YEAR
OTHER COMPREHENSIVE LOSS (Note 16)
Items that will not be reclassified subsequently to
profit or loss:
Unrealized loss on investments in equity
instruments at fair value through other
comprehensive income
TOTAL COMPREHENSIVE LOSS FOR THE YEAR
NET LOSS ATTRIBUTABLE TO:
Stockholders of the Company
Non-controlling interests
TOTAL COMPREHENSIVE LOSS ATTRIBUTABLE TO:
Stockholders of the Company
Non-controlling interests
LOSS PER SHARE (Note 20)
Basic and diluted
The accompanying notes are an integral part of the consolidated financial statements.
F-4
2017
2018
2019
$
$
—
—
—
— $
—
—
3,000,000
(407,259)
2,592,741
(8,758,710)
(30,381,016)
(39,139,726)
—
(39,139,726)
363,137
—
(698,691)
(416,698)
(752,252)
(39,891,978)
—
(39,891,978)
(10,513,707)
(31,834,364)
(42,348,071)
(8,511,699)
(16,586,617)
(25,098,316)
—
(42,348,071)
(23,073,400)
(45,578,975)
268,330
187,244
213,243
(491,904)
176,913
(42,171,158)
(14,439)
(42,185,597)
150,610
—
(327,558)
(901,612)
(1,078,560)
(46,657,535)
(408,002)
(47,065,537)
—
(39,891,978)
(39,891,978)
—
(39,891,978)
(39,891,978)
—
(39,891,978)
$
$
$
$
$
—
(42,185,597) $
(55,084)
(47,120,621)
(42,185,597) $
—
(42,185,597) $
(47,015,967)
(49,570)
(47,065,537)
(42,185,597) $
—
(42,185,597) $
(47,071,051)
(49,570)
(47,120,621)
(0.32)
$
(0.28) $
(0.29)
$
$
$
$
$
$
ASLAN PHARMACEUTICALS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(In U.S. Dollars, other than shares or share data, or otherwise noted)
Equity Attributable to Stockholders of the Company
Ordinary Shares (Note
16)
Amount
Shares
Ordinary
Shares
Share
Options
Reserve Other
Capital Surplus (Note 16)
Unrealized
Valuation
Loss on
Financial
Assets at
Fair Value
Through
Other
Comprehensive
Income
(Note 16)
Non-
controlling
Interests
(Note 22)
Total
Equity
Accumulated
Deficits
Total
115,670,940 $36,710,066 $ 50,119,257 $ 5,136,828 $
— $ 55,256,085 $ (50,391,283) $
— $
— $ 41,574,868
14,458,000 4,803,950 28,265,033
(8,032)
— 28,257,001
—
—
— 33,060,951
—
—
—
769,595
—
769,595
—
—
—
769,595
—
—
—
—
—
—
(39,891,978)
—
— (39,891,978)
BALANCE
AT JANUARY
1, 2017
of
Issuance
new
share
capital (Notes
16 and 21)
Recognition of
employee
share options
by
Company
(Note 21)
Net
for
loss
the year ended
December 31,
2017
Total
comprehensive
loss for
the
the year
—
—
—
—
—
—
(39,891,978)
—
— (39,891,978)
130,128,940 41,514,016 78,384,290 5,898,391
— 84,282,681
(90,283,261)
—
— 35,513,436
30,000,000 10,073,977 32,106,023
—
— 32,106,023
—
—
— 42,180,000
—
—
(5,388,866)
—
—
(5,388,866)
—
—
—
(5,388,866)
120,000
39,226
41,915
(33,141)
—
8,774
—
—
—
48,000
the
Company
(Note 21)
Net
for
loss
the year ended
December 31,
2018
Total
comprehensive
loss
the
for
year
—
—
—
451,060
—
451,060
—
—
—
451,060
—
—
—
—
—
—
—
—
—
—
—
—
(42,185,597)
(42,185,597)
—
—
— (42,185,597)
— (42,185,597)
of
share
(Note
ended
December 31,
2017
BALANCE
AT
DECEMBER
31, 2017
Issuance
new
capital
16)
Transaction
costs
attributable to
the issuance
of
ordinary
shares
Issuance
ordinary
shares under
employee
share
option
plan (Note 21)
Recognition of
employee
share options
by
of
of
share
(Note
ended
December 31,
2018
BALANCE
AT
DECEMBER
31, 2018
Issuance
new
capital
16)
Transaction
costs
attributable to
the issuance
of ordinary
shares
Issuance
ordinary
shares under
employee
share option
plan (Note 21)
Recognition of
employee
share options
by
of
the
Company
(Note 21)
Changes
in
percentage of
ownership
interests
in
subsidiaries
(Note 22)
Equity
component of
long-term debt
borrowed by
the Company
(Note 16)
Net
for
loss
the year ended
December 31,
2019
Other
comprehensive
income for the
year
ended
December 31,
2019, net of
income tax
Total
comprehensive
loss
the
for
year ended
December
31, 2019
Net increase in
non-
controlling
interests
BALANCE
AT
DECEMBER
31, 2019
160,248,940 51,627,219 105,143,362 6,316,310
— 111,459,672 (132,468,858)
—
— 30,618,033
29,466,030 9,660,993
5,072,022
—
—
5,072,022
—
—
— 14,733,015
—
—
(1,444,791)
—
—
(1,444,791)
—
—
—
(1,444,791)
240,000
78,632
29,598
(84,230)
—
(54,632)
—
—
—
24,000
—
—
—
42,511
—
42,511
—
—
—
42,511
—
—
—
— 1,376,349
1,376,349
—
— (1,376,349)
—
—
—
—
—
44,579
44,579
—
—
—
44,579
—
—
—
—
—
—
(47,015,967)
—
(49,570) (47,065,537)
—
—
—
—
—
—
—
(55,084)
—
(55,084)
—
—
—
—
—
—
(47,015,967)
(55,084)
(49,570) (47,120,621)
2,500,000
2,500,000
189,954,970 $61,366,844 $108,800,191 $ 6,274,591 $ 1,420,928 $ 116,495,710 $ (179,484,825) $
(55,084) $ 1,074,081 $
(603,274)
The accompanying notes are an integral part of the consolidated financial statements.
F-5
ASLAN PHARMACEUTICALS LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(In U.S. Dollars, other than shares or share data, or otherwise noted)
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before income tax
Adjustments for:
Depreciation expenses
Amortization expenses
Net (gain) loss on fair value changes of financial
assets at fair value through profit or loss
Finance costs
Interest income
Compensation costs of share-based payment transactions
Loss on disposal of property, plant and equipment
Unrealized (gain) loss on foreign exchange, net
Impairment loss recognized on intangible assets
Loss on lease modification
Gain on disposal of licensed rights
Changes in operating assets and liabilities
Decrease in accounts receivable
(Increase) decrease in prepayments
Increase (decrease) in trade payables
Increase (decrease) in other payables
Cash used in operations
Interest received
Interest paid
Income tax paid
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment
Proceeds from disposal of property, plant and equipment
Payments for intangible assets
(Increase) decrease in refundable deposits
Net cash (used in) generated from investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long-term borrowings
Repayment of the principal portion of lease liabilities
Proceeds from new share capital
Proceeds from exercise of employee share options
Payments for transaction costs attributable to the issuance of
ordinary shares
Proceeds from non-controlling interests
Net cash generated from financing activities
NET DECREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF
THE YEAR
CASH AND CASH EQUIVALENTS AT THE END OF
THE YEAR
2017
2018
2019
$
(39,891,978) $
(42,171,158) $
(46,657,535)
200,918
9,058
—
416,698
(363,137)
1,126,595
31,337
698,608
—
—
—
1,294,034
17,636
1,621,449
358,787
(34,479,995)
363,137
—
—
(34,116,858)
(291,432)
—
(8,844)
(36,168)
(336,444)
228,514
—
33,060,951
—
235,410
6,355
(60,004)
491,904
(268,330)
1,289,737
—
(256,918)
—
—
(187,244)
—
(111,653)
1,417,446
(108,947)
(39,723,402)
268,330
—
(14,439)
(39,469,511)
(80,262)
—
(23,002,895)
(11,133)
(23,094,290)
4,060,357
—
42,180,000
48,000
—
—
33,289,465
(1,163,837) $
(5,388,866)
—
40,899,491
(21,664,310) $
$
441,004
4,347
46,985
901,612
(150,610)
43,783
74,195
135,344
23,073,400
64,287
—
—
114,676
(3,443,894)
(156,874)
(25,509,280)
150,610
(36,037)
(408,002)
(25,802,709)
(2,992)
5,826
—
2,546
5,380
3,250,000
(243,265)
14,733,015
24,000
(1,172,291)
2,500,000
19,091,459
(6,705,870)
51,737,048
50,573,211
28,908,901
$
50,573,211 $
28,908,901 $
22,203,031
The accompanying notes are an integral part of the consolidated financial statements.
F-6
ASLAN PHARMACEUTICALS LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017, 2018 AND 2019
(In U.S. Dollars, Unless Stated Otherwise)
1.
GENERAL INFORMATION
ASLAN Pharmaceuticals Limited (“ASLAN Cayman”) was incorporated in the Cayman Islands in June 2014 as the listing vehicle for
the initial public offering and listing on both the Taipei Exchange (“TPEx”) in Taiwan and the Nasdaq Global Market in the United
States. ASLAN Cayman and its subsidiaries (collectively referred to as the “Company”) are principally engaged in the development of
novel drugs for Asia prevalent cancers.
ASLAN Cayman’s shares have been listed on the TPEx since June 1, 2017. In addition, ASLAN Cayman also increased capital
through a new share issuance by a depositary institution in order to sponsor its issuance of American Depositary Shares (ADSs), which
have been listed on the Nasdaq Global Market, on May 4, 2018.
The reporting currency of the Company is the U.S. dollar. The functional currency of the Company is the U.S. dollar.
2.
APPROVAL OF FINANCIAL STATEMENTS
The consolidated financial statements were approved by the Company’s board of directors on April 14, 2020.
3.
APPLICATION OF NEW, AMENDED AND REVISED STANDARDS AND INTERPRETATIONS
a. Amendments to the International Financial Reporting Standards (“IFRS”) issued by the International Accounting Standards Board
(“IASB”) mandatorily effective for the current year.
The Company has applied the amendments to IFRSs included in Annual Improvements to IFRSs 2015-2017 Cycle, Amendments
to IFRS 9 “Prepayment Features with Negative Compensation”, IFRS 16 “Leases”, Amendments to IAS 19 “Plan Amendment,
Curtailment or Settlement”, Amendments to IAS 28 “Long-term Interests in Associates and Joint Ventures”, and IFRIC 23
“Uncertainty over Income Tax Treatments” for the annual period that began on or after January 1, 2019.
The adoption and impact of these standards from January 1, 2019 are described as below and the new accounting policies are
disclosed in Note 4. The other standards did not have material impact on the Company’s accounting policies.
IFRS 16 “Leases”
IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial
statements of both lessee and lessor. It supersedes IAS 17 “Leases”, IFRIC 4 “Determining whether an Arrangement contains a
Lease”, and a number of related interpretations. Refer to Note 4 for information relating to the relevant accounting policies.
F-7
Definition of a lease
A lease is defined as a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of
time in exchange for consideration under IFRS 16.
The Company elects to apply the guidance of IFRS 16 in determining whether contracts are, or contain, a lease only to contracts
entered into (or changed) on or after January 1, 2019. Contracts identified as containing a lease under IAS 17 and IFRIC 4 are not
reassessed and are accounted for in accordance with the transitional provisions under IFRS 16.
The Company as lessee
The Company recognizes right-of-use assets and lease liabilities for all leases on the consolidated balance sheets except for those
whose payments under low-value asset and short-term leases are recognized as expenses on a straight-line basis. The lease
liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (using the effective
interest method) and by reducing the carrying amount to reflect the lease payments made. On the consolidated statements of cash
flows, cash payments for the principal portion of lease liabilities are classified within financing activities; cash payments for the
interest portion are classified within operating activities. Prior to the application of IFRS 16, payments under operating lease
contracts were recognized as expenses on a straight-line basis. Cash flows for operating leases were classified within operating
activities on the consolidated statements of cash flows.
The Company elects to apply IFRS 16 retrospectively with the cumulative effect of the initial application of this standard
recognized in retained earnings on January 1, 2019. Comparative information is not restated.
Lease liabilities were recognized on January 1, 2019 for leases previously classified as operating leases under IAS 17. Lease
liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental
borrowing rate on January 1, 2019. Right-of-use assets are measured at an amount equal to the lease liabilities. The Company
applies IAS 36 to all right-of-use assets.
The Company also applies the following practical expedients:
1)
2)
3)
The Company accounts for those leases for which the lease term ends on or before December 31, 2019 as short-term leases.
The Company excludes initial direct costs from the measurement of right-of-use assets on January 1, 2019.
The Company uses hindsight, such as in determining lease terms, to measure lease liabilities.
F-8
The weighted average lessee’s incremental borrowing rate applied to lease liabilities recognized on January 1, 2019 is 6%. The
difference between the (i) lease liabilities recognized and (ii) operating lease commitments disclosed under IAS 17 on December
31, 2018 is explained as follows:
The future minimum lease payments of non-cancellable operating lease
commitments on December 31, 2018
Less: Recognition exemption for short-term leases
Less: Recognition exemption for leases of low-value assets
Undiscounted amounts on January 1, 2019
Discounted amounts using the incremental borrowing rate on January 1,
2019
Lease liabilities recognized on January 1, 2019
$
$
$
$
599,393
(261,622)
(1,097)
336,674
323,850
323,850
The impact on assets, liabilities and equity as of January 1, 2019 from the initial application of IFRS 16 is set out as follows:
Total effect on assets (right-of-use assets)
Lease liabilities - current
Lease liabilities - non-current
Total effect on liabilities
b. New and revised IFRSs issued but not yet effective
Carrying
Amount as of
January 1,
2019
Adjustments
Arising from
Initial
Application
$
$
$
— $
— $
—
$
323,850 $
219,039 $
104,811 $
323,850
Adjusted
Carrying
Amount as of
January 1,
2019
323,850
219,039
104,811
Of the new, amended and revised standards and interpretations (collectively the “New IFRSs”) that have been issued but are not
yet effective, the Company has not applied the following.
New, Amended or Revised Standards and Interpretations
Effective Date
Announced by
IASB (Note 1)
Amendments to IFRS 3 “Definition of a Business”
Amendments to IFRS 9, IAS 39 and IFRS 7 “Interest Rate Benchmark Reform”
Amendments to IFRS 10 and IAS 28 “Sale or Contribution of Assets between An Investor
and Its Associate or Joint Venture”
IFRS 17 “Insurance Contracts”
Amendments to IAS 1 “Classification of Liabilities as Current or Non-Current”
Amendments to IAS 1 and IAS 8 “Definition of Material”
January 1, 2020 (Note 2)
January 1, 2020
To be determined by IASB
January 1, 2021
January 1, 2022
January 1, 2020 (Note 3)
Note 1:
Unless stated otherwise, the above New IFRSs are effective for annual periods beginning on or after their respective
effective dates.
F-9
Note 2:
The Company shall apply these amendments to business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after January 1, 2020 and to asset acquisitions that occur
on or after the beginning of that period.
Note 3:
The Company shall apply these amendments prospectively for annual reporting periods beginning on or after January
1, 2020.
As of the date the consolidated financial statements were authorized for issue, the Company is continuously assessing the possible
impact that the application of other standards and interpretations will have on the Company’s financial position and financial
performance and will disclose the relevant impact when the assessment is completed.
4.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a.
Statement of compliance
The accompanying consolidated financial statements have been prepared in conformity with IFRSs issued by the IASB.
b.
Basis of preparation
The consolidated financial statements have been prepared on the historical cost basis except for financial instruments and trade
payable arising from cash-settled share-based payment arrangements which are measured at fair value.
c.
Classification of current and non-current assets and liabilities
Current assets include:
1)
2)
3)
Assets held primarily for the purpose of trading;
Assets expected to be realized within 12 months after the reporting period; and
Cash and cash equivalents unless the asset is restricted from being exchanged or used to settle a liability for at least 12
months after the reporting period.
Current liabilities include:
1)
2)
3)
Liabilities held primarily for the purpose of trading;
Liabilities due to be settled within 12 months after the reporting period; and
Liabilities for which the Company does not have an unconditional right to defer settlement for at least 12 months after
the reporting period. Terms of a liability that could, at the option of the counterparty, result in its settlement by the
issue of equity instruments do not affect its classification.
Assets and liabilities that are not classified as current are classified as non-current.
d.
Basis of consolidation
The consolidated financial statements include the financial statements of ASLAN Cayman and entities controlled by ASLAN
Cayman (its subsidiaries). When necessary, adjustments are made to the financial statements of subsidiaries to bring their
accounting policies into line with those used by the Company.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the
Company are eliminated on consolidation.
F-10
Non-controlling interests in subsidiaries are identified separately from the Company’s equity therein. Those interests of non-
controlling shareholders that are present ownership interests entitling their holders to a proportionate share of net assets upon
liquidation may initially be measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the
acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other non-
controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling
interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in
equity.
Profit or loss and each component of other comprehensive income are attributed to the stockholders of the Company and to the
non-controlling interests. Total comprehensive income of the subsidiaries is attributed to the stockholders of the Company and to
the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
Changes in the Company’s ownership interests in subsidiaries that do not result in the Companylosing control over the
subsidiaries are accounted for as equity transactions. The carrying amounts of the interests of the Company and the non-
controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the
amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized
directly in equity and attributed to stockholders of the Company.
See Note 9 for detailed information on subsidiaries (including percentages of ownership and main businesses).
e.
Foreign currencies
The reporting currency of the Company is the U.S. dollar. The functional currency of the majority of the Company’s entities is the
U.S. dollar.
Monetary assets and liabilities denominated in currencies other than the applicable functional currencies are translated into the
functional currencies at the prevailing rates of exchange at the balance sheet date. Nonmonetary assets and liabilities are
remeasured into the applicable functional currencies at historical exchange rates. Transactions in currencies other than the
applicable functional currencies during the year are converted into the functional currencies at the applicable rates of exchange
prevailing at the dates of the transactions. Exchange differences are recognized in “other gains and losses, net” in the consolidated
statement of comprehensive loss.
f.
Property, plant and equipment
Property, plant and equipment are stated at cost, less recognized accumulated depreciation and accumulated impairment loss.
Depreciation is recognized using the straight-line method. Each significant part is depreciated separately. The estimated useful
lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in
estimates accounted for on a prospective basis.
Any gain or loss arising on the disposal or retirement of an item of property, plant and equipment is determined as the difference
between the sales proceeds and the carrying amount of the respective asset and is recognized in profit or loss.
F-11
g.
Intangible assets
1)
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are initially measured at cost and subsequently
measured at cost, less accumulated amortization and accumulated impairment loss. Amortization is recognized on a straight-
line basis. The estimated useful lives, residual values, and amortization methods are reviewed at the end of each reporting
period, with the effect of any changes in estimates accounted for on a prospective basis. Intangible assets with indefinite
useful lives that are acquired separately are measured at cost, less accumulated impairment loss.
2)
Internally-generated intangible assets - research and development expenditures
Expenditure on research activities is recognized as an expense in the period in which it is incurred.
An internally-generated intangible asset arising from the development phase of an internal project is recognized only if all of
the following have been demonstrated:
a)
b)
c)
d)
e)
f)
The technical feasibility of completing the intangible asset so that it will be available for use or sale;
The intention to complete the intangible asset and use or sell it;
The ability to use or sell the intangible asset;
The manner in which intangible asset will generate probable future economic benefits;
The availability of adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset; and
The ability to measure reliably the expenditure attributable to the intangible asset during its development.
The amount initially recognized for internally-generated intangible assets is the sum of the expenditure incurred from the
date when an intangible asset first meets the recognition criteria listed above. Subsequent to initial recognition, they are
measured on the same basis as intangible assets that are acquired separately.
3)
Derecognition of intangible assets
On derecognition of an intangible asset, the difference between the net disposal proceeds and the carrying amount of the
asset is recognized in profit or loss.
h.
Impairment of tangible and intangible assets
At the end of each reporting period, the Company reviews the carrying amounts of its tangible and intangible assets in order to
determine whether there is any indication that those assets have suffered any impairment loss. If any such indication exists, the
recoverable amount of an asset is estimated in order to determine the extent of the impairment loss. When it is not possible to
estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating
unit to which the asset belongs.
F-12
Intangible assets with indefinite useful lives and intangible assets not yet available are not subject to amortization, but are tested
annually for impairment or more frequently if there are indicators of impairment. In respect of the impairment indicators, the
Company considers both internal and external sources of information to determine whether an asset may be impaired, which may
include the significant underperformance of the business in relation to expectations, significant negative industry or economic
trends, and significant changes or planned changes with adverse effects in the use of the assets, as well as the internal reporting
which indicates the economic performance of an asset is worse than expected. If any such indicators exist, the Company will
estimate the recoverable amount of such indefinite-lived intangible asset and compare it with its carrying amount.
The recoverable amount is the higher of fair value, less costs to sell and value in use. If the recoverable amount of an asset or
cash-generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash-generating unit is
reduced to its recoverable amount, with the resulting impairment loss recognized in profit or loss.
When an impairment loss is subsequently reversed, the carrying amount of the corresponding asset or cash-generating unit is
increased to the revised estimate of its recoverable amount, but only to the extent of the carrying amount that would have been
determined had no impairment loss been recognized on the asset or cash-generating unit in prior years. A reversal of an
impairment loss is recognized in profit or loss.
i.
Financial instruments
Financial assets and financial liabilities are recognized when a group entity becomes a party to the contractual provisions of the
instruments.
Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the
acquisition or issuance of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value
through profit or loss (i.e., FVTPL)) are added to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at FVTPL are recognized immediately in profit or loss.
1)
Financial assets
All regular way purchases or sales of financial assets are recognized and derecognized on a trade date basis.
a) Measurement categories
Financial assets are classified into the following categories: Financial assets at FVTPL, financial assets at amortized
cost and equity instruments at fair value through other comprehensive income (i.e., FVTOCI).
i.
Financial assets at FVTPL
Derivative financial assets are classified as at FVTPL when such a financial asset is mandatorily classified as at
FVTPL.
Financial assets at FVTPL are subsequently measured at fair value, with any gains or losses arising on
remeasurement recognized in other gains or losses. Fair value is determined in the manner described in Note 25.
F-13
ii.
Financial assets at amortized cost
A financial asset shall be measured at amortized cost if both of the following conditions are met:
i)
ii)
The financial asset is held within a business model whose objective is to hold financial assets in order to
collect contractual cash flows; and
The contractual terms of the financial asset give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
For the financial assets measured at amortized cost (including cash and cash equivalents and refundable
deposits), the Company applies the effective interest method to the gross carrying amount at amortized cost less
any impairment from initial recognition. Any foreign exchange gains and losses are recognized in profit or loss.
Interest income is calculated by applying the effective interest rate to the gross carrying amount of such a
financial asset.
Cash equivalents include time deposits, which are highly liquid, readily convertible to a known amount of cash
and are subject to an insignificant risk of changes in value. These cash equivalents are held for the purpose of
meeting short-term cash commitments.
iii.
Investments in equity instruments at FVTOCI
On initial recognition, the Company may make an irrevocable election to designate investments in equity
instruments as at FVTOCI. Designation as at FVTOCI is not permitted if the equity investment is held for
trading or if it is contingent consideration recognized by an acquirer in a business combination.
Investments in equity instruments at FVTOCI are subsequently measured at fair value with gains and losses
arising from changes in fair value recognized in other comprehensive income and accumulated in other equity.
The cumulative gain or loss will not be reclassified to profit or loss on disposal of the equity investments;
instead, it will be transferred to retained earnings.
Dividends on these investments in equity instruments are recognized in profit or loss when the Company’s right
to receive the dividends is established, unless the dividends clearly represent a recovery of part of the cost of the
investment.
b)
Impairment of financial assets
The Company recognizes a loss allowance for expected credit losses on financial assets at amortized cost.
For financial instruments, the Company recognizes lifetime expected credit losses (i.e., ECLs) when there has been a
significant increase in credit risk since initial recognition. If, on the other hand, the credit risk on a financial instrument
has not increased significantly since initial recognition, the Company measures the loss allowance for that financial
instrument at an amount equal to 12-month ECLs.
F-14
Expected credit losses reflect the weighted average of credit losses with the respective risks of default occurring as the
weights. Lifetime ECLs represent the expected credit losses that will result from all possible default events over the
expected life of a financial instrument. In contrast, 12-month ECLs represent the portion of lifetime ECLs that is
expected to result from default events on a financial instrument that are possible within 12 months after the reporting
date.
The Company recognizes an impairment gain or loss in profit or loss for all financial instruments with a corresponding
adjustment to their carrying amount through a loss allowance account.
c)
Derecognition of financial assets
The Company derecognizes a financial asset only when the contractual rights to the cash flows from the asset expire or
when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another
party.
Before 2018, on derecognition of a financial asset in its entirety, the difference between the asset’s carrying amount and
the sum of the consideration received and receivable and the cumulative gain or loss which had been recognized in
other comprehensive income is recognized in profit or loss. Starting from 2018, on derecognition of a financial asset at
amortized cost in its entirety, the difference between the asset’s carrying amount and the sum of the consideration
received and receivable is recognized in profit or loss. On derecognition of an investment in an equity instrument at
FVTOCI, the difference between the asset’s carrying amount and the sum of the consideration received and receivable
is recognized in profit or loss, and the cumulative gain or loss which had been recognized in other comprehensive
income is transferred directly to retained earnings, without recycling through profit or loss.
2)
Equity instruments
Equity instruments issued by the Company entity are classified as either financial liabilities or as equity in accordance with
the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.
Equity instruments issued by the Company entity are recognized at the proceeds received, net of direct issue costs.
No gain or loss is recognized in profit or loss on the issuance of the Company’s own equity instruments.
3)
Financial liabilities
a)
Subsequent measurement
Except the following situations, all financial liabilities are measured at amortized cost using the effective interest
method:
1)
Financial liabilities at FVTPL
Financial liabilities are classified as at FVTPL when such financial liabilities are either held for trading or are
designated as at FVTPL.
F-15
Financial liabilities held for trading are stated at fair value, and any gains or losses on such financial liabilities are
recognized in other gains or losses.
Fair value is determined in the manner described in Note 25.
b)
Derecognition of financial liabilities
The difference between the carrying amount of a financial liability derecognized and the consideration paid, including
any non-cash assets transferred or liabilities assumed, is recognized in profit or loss.
4)
Compound instruments
The component parts of compound instruments issued by the Company are classified separately as financial liabilities and
equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an
equity instrument.
On initial recognition, the fair value of the liability component is estimated using the prevailing market interest rate for
similar non-convertible instruments. This amount is recorded as a liability on an amortized cost basis using the effective
interest method until extinguished upon conversion or upon the instrument’s maturity date. Any embedded derivative
liability is bifurcated and measured at fair value.
5)
Derivative financial instruments
Derivatives embedded in hybrid contracts that contain financial asset hosts that is within the scope of IFRS 9 are not
separated; instead, the classification is determined in accordance with the entire hybrid contract. Derivatives embedded in
non-derivative host contracts that are not financial assets that is within the scope of IFRS 9 (e.g. financial liabilities) are
treated as separate derivatives when they meet the definition of a derivative; their risks and characteristics are not closely
related to those of the host contracts; and the host contracts are not measured at FVTPL.
j.
Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the out-licensing of experimental drugs that have
reached ‘proof of concept’ to business partners for ongoing global development and launch, in the ordinary course of the
Company’s activities. Revenue is presented, net of goods and services tax, rebates and discounts. See Note 15 for details of the
Company’s licensing agreements.
The Company recognizes revenue when it has completed the out-licensing of the experimental drug to business partners, and such
partners have accepted the products. Thus, the collectability of the related receivables is reasonably assured.
Typically the consideration received from out-licensing may take the form of upfront payments, option payments, milestone
payments, and royalty payments on licensed products. To determine revenue recognition for contracts with customers, the
Company performs the following five steps:
1)
2)
3)
4)
5)
Identify the contract with a customer;
Identify the performance obligations in the contract;
Determine the transaction price;
Allocate the transaction price to the performance obligations in the contract; and
Recognize revenue when (or as) the Company satisfies the performance obligations.
F-16
At the inception of a contract, the Company assesses the goods or services promised within each contract to determine whether
each promised good or service is distinct and identify those that are performance obligations. The Company recognizes as
revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the
performance obligation is satisfied.
Upfront License Fees
If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified
in the arrangement, the Company will recognize revenues from non-refundable, upfront fees allocated to the license when the
license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with
other performance obligations, the Company uses judgment to assess the nature of the combined performance obligation to
determine whether it is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for
purposes of recognizing revenue. The Company evaluates the measure of progress at the end of each reporting period and, if
necessary, adjusts the measure of performance and related revenue recognition.
Milestone Payments
At the inception of each contract with customers that includes development or regulatory milestone payments (i.e., the variable
consideration), the Company includes some or all amount of variable consideration in the transaction price estimated only to the
extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized would not occur when
the uncertainty related to the variable consideration is subsequently resolved. Milestone payments that are contingent upon the
achievement of events that are uncertain or not controllable, such as regulatory approvals, are generally not considered highly
probable of being achieved until those approvals are received. Therefore, they are not included in the transaction price. At the end
of each reporting period, the Company evaluates the probability of achievement of such milestone payments and any related
constraints and, if necessary, adjusts the Company’s estimate of the overall transaction price.
Royalties
For arrangements that include sales-based royalties, including commercial milestone payments based on the level of sales, and for
which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later
of the following:
1)
2)
when the subsequent sales occur, or
when the performance obligation, to which some or all of the royalty has been allocated, has been satisfied (or partially
satisfied).
To date, the Company has not recognized any royalty revenue resulting from any of out-licensing arrangements.
k.
Research and development expenses
Elements of research and development expenses primarily include:
1)
2)
payroll and other related costs of personnel engaged in research and development activities;
costs related to preclinical testing of the Company’s technologies under development and clinical trials, such as payments to
contract research organizations (“CROs”), investigators and clinical trial sites that conduct the Company’s clinical studies;
F-17
3)
4)
costs to develop the product candidates, including raw materials, supplies and product testing related expenses; and
other research and development expenses.
Research and development expenses are expensed as incurred when these expenditures relate to the Company’s research and
development services and have no alternative future uses. The conditions enabling the capitalization of development costs as an
asset have not yet been met and, therefore, all development expenditures are recognized in profit or loss when incurred.
l.
Leasing
2019
At the inception of a contract, the Company assesses whether the contract is, or contains, a lease.
The Company as lessee
The Company recognizes right-of-use assets and lease liabilities for all leases at the commencement date of a lease, except for
short-term leases and low-value asset leases accounted for applying a recognition exemption where lease payments are
recognized as expenses on a straight-line basis over the lease terms.
Right-of-use assets are initially measured at cost, which comprises the initial measurement of lease liabilities adjusted for lease
payments made at or before the commencement date. Right-of-use assets are subsequently measured at cost less accumulated
depreciation and impairment losses and adjusted for any remeasurement of the lease liabilities. Right-of-use assets are presented
on a separate line in the consolidated balance sheets.
Right-of-use assets are depreciated using the straight-line method from the commencement dates to the earlier of the end of the
useful lives of the right-of-use assets or the end of the lease terms.
Lease liabilities are initially measured at the present value of the lease payments, which comprise fixed payments and the default
fine arises from lease termination. The lease payments are discounted using the interest rate implicit in a lease, if that rate can be
readily determined. If that rate cannot be readily determined, the Company uses the incremental borrowing rate.
Subsequently, lease liabilities are measured at amortized cost using the effective interest method, with interest expense recognized
over the lease terms. When there is a change in a lease term, the Company remeasures the lease liabilities with a corresponding
adjustment to the right-of-use-assets. However, if the carrying amount of the right-of-use assets is reduced to zero, any remaining
amount of the remeasurement is recognized in profit or loss. Lease liabilities are presented on a separate line in the consolidated
balance sheets.
If a change in the scope of the lease, or the consideration of a lease, that was no part of the original terms and conditions of the
lease takes place, and both the modification increases the scope of the lease by adding the right to use one or more underlying
assets and the consideration for the lease increases by an amount commensurate with the stand-alone price for the increase in
scope and any appropriate adjustments to that stand-alone price to reflect the circumstances of the particular contract, the
Company shall account for a lease modification as a separate lease. For a lease modification that is not accounted for as a separate
lease, at the effective date of the lease modification, the Company shall remeasure the lease liability by discounting the revised
lease payments using a revised discount rate.
F-18
The Company shall account for the remeasurement of the lease liability by decreasing the carrying amount of the right-of-use
asset to reflect the partial or full termination of the lease for lease modifications that decrease the scope of the lease, shall
recognize in profit or loss any gain or loss relating to the partial or full termination of the lease, and shall make a corresponding
adjustment to the right-of-use asset for all other lease modification.
2018
Leases are classified as finance leases whenever the terms of a lease transfer substantially all the risks and rewards of ownership
to the lessee. All other leases are classified as operating leases.
The Company as lessee
Operating lease payments are recognized as expenses on a straight-line basis over the lease term.
m.
Retirement benefits
Payments to defined contribution retirement benefit plans are recognized as expenses when employees have rendered services
entitling them to the contributions.
n.
Share-based payment arrangements
Equity-settled share-based payments to employees are measured at the fair value of the equity instruments at the grant date.
The fair value determined at the grant date of the employee share options is expensed on a straight-line basis over the vesting
period, based on the Company’s estimate of the number of employee share options that will eventually vest, with a corresponding
increase in “capital surplus - employee share options”. The fair value determined at the grant date of the employee share options
is recognized as an expense in full at the grant date when the share options granted vest immediately.
At the end of each reporting period, the Company revises its estimate of the number of employee share options expected to vest.
The impact of the revision of the original estimates is recognized in profit or loss such that the cumulative expense reflects the
revised estimate, with a corresponding adjustment to the capital surplus.
The fair value of the amount payable to beneficiaries in respect of bonus entitlement unit grants, which are settled in cash, is
recognized as an expense with a corresponding increase in liabilities, over the period during which the beneficiaries become
unconditionally entitled to payment. The amount is remeasured at each reporting date and at settlement based on the fair value of
the bonus entitlement units. Any changes in the liability are recognized in profit or loss.
o.
Taxation
The provision for income tax recognized in profit or loss comprises current and deferred tax. Current tax is income tax paid and
payable for the current year based on the taxable profit of the year and any adjustments to tax payable (or receivable) in respect of
prior years. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from
differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used
in the computation of taxable profit or loss. Deferred tax assets are recognized to the extent that it is probable that future
F-19
taxable profits will be available against which the temporary differences can be utilized. The carrying amount is reviewed at the
end of each reporting period on the same basis. Deferred tax is measured at the tax rates that are expected to apply in the period in
which the asset or liability is settled, based on tax rates that have been enacted or substantively enacted by the end of the reporting
period.
5.
CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Company’s accounting policies, management is required to make judgments, estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the
period in which the estimates are revised if the revisions affect only that period or in the period of the revisions and future periods if the
revisions affect both current and future periods.
Impairment of intangible assets
Intangible assets with indefinite useful lives are tested for impairment annually and whenever an indicator of impairment exists.
The Company assesses whether there is an indication of impairment based on internal and external information, including the
progress of research and development project and the prospect of such technology. Determining whether an intangible asset is
impaired requires an estimation of the recoverable amount and a comparison with the carrying amount. The calculation of the
recoverable amount requires management to estimate the future cash flows that are expected to arise from the intangible asset and
a suitable discount rate in order to calculate the present value. Any change of estimation arising from economic environment
changes or the Company’s strategies may lead to significant impairment loss in the future.
6.
CASH AND CASH EQUIVALENTS
Cash on hand
Deposits in banks
December 31
2018
2,318 $
28,906,583
28,908,901 $
2019
1,723
22,201,308
22,203,031
$
$
Deposits in banks consisted of highly liquid time deposits that were readily convertible to known amounts of cash and were subject to
an insignificant risk or change in value.
The market rate intervals of time deposits at the end of the reporting period were as follows:
Fixed deposits
F-20
December 31
2018
2019
2.57%
—
7.
FINANCIAL INSTRUMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
Financial assets at fair value through profit or loss
(FVTPL) - Non-current
Financial assets mandatorily classified as at FVTPL
Derivative financial assets – warrants (a)
Derivative financial assets - pre-redemption right (b)
Financial liabilities at fair value through profit or loss
(FVTPL) - Non-current
Financial liabilities designated as at FVTPL (c)
Derivative financial liabilities - conversion right
December 31
2018
2019
$
$
$
60,004 $
—
60,004 $
13,019
55,237
68,256
— $
262,350
a.
In July 2018, the Company acquired warrants to subscribe for ordinary shares of DotBio Pte. Ltd., as detailed in Note 17 (under
the heading of “Nanyang Technological University”).
b. On October 25, 2019, the Company entered into a loan facility agreement with warrants and was entitled to repay at any time
prior to expiry of the term, as detailed in Note 14 (under the heading of “October / November 2019 Loan Facility”).
c. On September 30, 2019, the Company entered into a convertible loan facility, as detailed in Note 14 (under the heading of
“Convertible Loan Facility”).
8.
FINANCIAL ASSETS AT FAIR VALUE THROUGH OTHER COMPREHENSIVE INCOME
Non-current
Investments in equity instruments at FVTOCI
Foreign unlisted ordinary shares
December 31
2018
2019
$
187,244 $
132,160
In July 2018, the Company acquired ordinary shares of DotBio Pte. Ltd., as detailed in Note 17 (under the heading of Nanyang
Technological University), which were not held for trading. The management believes that to recognize short-term fluctuations in the
investments’ fair value in profit or loss would not be consistent with the Company’s purpose of holding the investments. As a result,
the Company elected to designate the investments in equity instruments as at FVTOCI.
F-21
9.
SUBSIDIARIES
a.
Subsidiaries included in the consolidated financial statements
Investor
ASLAN Pharmaceuticals
Limited
ASLAN Pharmaceuticals
Pte. Ltd.
ASLAN Pharmaceuticals
Pte. Ltd.
ASLAN Pharmaceuticals
Pte. Ltd.
ASLAN Pharmaceuticals
Hong Kong Limited
ASLAN Pharmaceuticals
Pte. Ltd.
ASLAN Pharmaceuticals
Pte. Ltd.
Pharmaceuticals
Pharmaceuticals
Investment holding
Nature of Activities
Investee
ASLAN Pharmaceuticals Pte.
Ltd.
ASLAN
Taiwan Limited
ASLAN
Australia Pty Ltd
ASLAN Pharmaceuticals Hong
Kong Limited
ASLAN
(Shanghai) Co. Ltd.
ASLAN
(USA) Inc.
Jaguahr Therapeutics Pte. Ltd. New drug research and
New drug research and
development
New drug research and
development
New drug research and
development
New drug research and
development
New drug research and
development
Pharmaceuticals
Pharmaceuticals
development
F-22
Proportion of
Ownership (%)
December 31
2018
2019
Remark
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
—
55%
1
Remarks:
1)
Jaguahr Therapeutics Pte. Ltd. is a subsidiary that has material non-controlling interests. On October 15, 2019 the Company
established a joint venture with Bukwang Pharmaceutical Co., Ltd., a leading research and development focused Korean
pharmaceutical company, to develop antagonists of the aryl hydrocarbon receptor (AhR). The joint venture company, in which
the Company currently owns a controlling stake, is called Jaguahr Therapeutics Pte. Ltd.
b.
Details of subsidiaries that have material non-controlling interests
Name of Subsidiary
Jaguahr Therapeutics Pte. Ltd.
Principal Place of Business
Singapore
Proportion of Ownership and
Voting Rights Held by
Non-controlling Interests
December 31
2019
45%
Name of Subsidiary
Profit (Loss) Allocated to
Non-controlling Interests
For the Year Ended
December 31
2019
Accumulated Non-
controlling Interests
December 31
2019
Jaguahr Therapeutics Pte. Ltd.
$
(49,570) $
1,074,081
The summarized Jaguahr Therapeutics Pte. Ltd. financial information below represents amounts before intragroup eliminations.
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Equity attributable to:
Stockholders of the Company
Non-controlling interests
F-23
December 31
2019
2,463,003
—
(76,155)
—
2,386,848
1,312,767
1,074,081
2,386,848
$
$
$
$
Revenue
Loss for the year
Other comprehensive income (loss) for the year
Total comprehensive loss for the year
Loss attributable to:
Stockholders of the Company
Non-controlling interests
Total comprehensive loss attributable to:
Stockholders of the Company
Non-controlling interests
Net cash inflow/(outflow) from:
Operating activities
Investing activities
Financing activities
Net cash inflow
10.
PROPERTY, PLANT AND EQUIPMENT
The carrying amounts of each class of property, plant and equipment were as follows:
Office equipment
Other equipment
Leasehold improvements
F-24
For the Year Ended
December 31
2019
—
(113,923)
—
(113,923)
(64,353)
(49,570)
(113,923)
(64,353)
(49,570)
(113,923)
(1,355,768)
—
2,500,771
1,145,003
$
$
$
$
$
$
$
$
$
December 31
2018
2019
$
$
98,820 $
11,052
178,546
288,418 $
31,105
1,938
5,290
38,333
For the year ended December 31, 2018
Cost
Balance at January 1, 2018
Additions
Balance at December 31, 2018
Accumulated depreciation
Balance at January 1, 2018
Depreciation expenses
Balance at December 31, 2018
Carrying amounts at December 31,
2018, net
For the year ended December 31, 2019
Cost
Balance at January 1, 2019
Additions
Disposals
Balance at December 31, 2019
Accumulated depreciation
Balance at January 1, 2019
Depreciation expenses
Disposals
Balance at December 31, 2019
Carrying amounts at December 31,
2019, net
Office
Equipment
Other
Equipment
Leasehold
Improvements
Total
211,302 $
65,633
276,935 $
115,436 $
62,679
178,115 $
35,153 $
1,027
36,180 $
14,344 $
10,784
25,128 $
474,504 $
13,602
488,106 $
147,613 $
161,947
309,560 $
720,959
80,262
801,221
277,393
235,410
512,803
98,820 $
11,052 $
178,546 $
288,418
Office
Equipment
Other
Equipment
Leasehold
Improvements
Total
276,935 $
2,992
(68,612)
211,315 $
178,115 $
52,388
(50,293)
180,210 $
36,180 $
—
(889)
35,291 $
25,128 $
8,742
(517)
33,353 $
488,106 $
—
(219,733)
268,373 $
309,560 $
111,926
(158,403)
263,083 $
801,221
2,992
(289,234)
514,979
512,803
173,056
(209,213)
476,646
31,105 $
1,938 $
5,290 $
38,333
$
$
$
$
$
$
$
$
$
$
No impairment assessment was performed for the year ended December 31, 2018 and 2019 as there was no indication of impairment.
The above items of property, plant and equipment used by the Company are depreciated on a straight-line basis over the estimated
useful life of 3 years.
11. LEASE ARRANGEMENTS
a.
Right-of-use assets - 2019
Carrying amounts
Buildings
December 31,
2019
$
727,866
F-25
Additions to right-of-use assets
Depreciation charge for right-of-use assets
Buildings
b.
Lease liabilities - 2019
Carrying amounts
Current
Non-current
Discount rate for lease liabilities was as follows:
Buildings
c. Material lease-in activities and terms
$
$
$
For the Year Ended
December 31
2019
882,670
(267,948)
264,543
490,835
755,378
December 31,
2019
December 31,
2019
6%
The Company leases office buildings with lease terms of 3 years. These arrangements do not contain purchase options at the end
of the lease terms.
Certain of the office buildings leases across the Company contain extension options. These terms are used to maximize
operational flexibility in terms of managing contracts. In cases in which the Company is not reasonably certain to use an optional
extended lease term, payments associated with the optional period are not included within lease liabilities. If the payments
associated with the optional period are included within lease liabilities, there will be an increase in lease liabilities of $715,365 as
of December 31, 2019.
d. Other lease information
2019
Expenses relating to short-term leases
Expenses relating to low-value asset leases
Total cash outflow for leases
For the Year Ended
December 31,
2019
$
$
$
251,549
7,385
538,236
The Company leases certain office buildings which qualify as short-term leases and certain office equipment which qualify as
low-value asset leases. The Company has elected to apply the recognition exemption and, thus, did not recognize right-of-use
assets and lease liabilities for these leases.
F-26
All lease commitments with lease terms commencing after the balance sheet dates are as follows:
Lease commitments
2018
December 31,
2019
$
67,935
The future minimum lease payments of non-cancellable operating lease commitments are as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
12.
INTANGIBLE ASSETS
The carrying amounts of each class of intangible assets were as follows:
Licenses
Computer software
For the year ended December 31, 2018
Cost
Balance at January 1, 2018
Additions
Balance at December 31, 2018
Accumulated amortization
Balance at January 1, 2018
Amortization expenses
Balance at December 31, 2018
Carrying amounts at December 31, 2018, net
F-27
December 31,
2018
$
$
493,534
105,859
599,393
December 31
2018
23,073,400 $
7,192
23,080,592 $
$
$
2019
—
2,845
2,845
Licenses
Computer
Software
Total
$
$
$
$
$
73,400 $
23,000,000
23,073,400 $
40,175 $
2,895
43,070 $
113,575
23,002,895
23,116,470
— $
—
— $
29,523 $
6,355
35,878 $
29,523
6,355
35,878
23,073,400 $
7,192 $
23,080,592
For the year ended December 31, 2019
Cost
Balance at January 1, 2019
Additions
Balance at December 31, 2019
Accumulated amortization
Balance at January 1, 2019
Amortization expenses
Impairment losses recognized
Balance at December 31, 2019
Carrying amounts at December 31, 2019, net
Licenses
Computer
Software
Total
$
$
$
$
$
23,073,400 $
—
23,073,400 $
— $
—
23,073,400
23,073,400 $
— $
43,070 $
—
43,070 $
23,116,470
—
23,116,470
35,878 $
4,347
—
40,225 $
2,845 $
35,878
4,347
23,073,400
23,113,625
2,845
The intangible assets, namely licenses, include the acquisitions in August 2016 of ASLAN005 from Exploit Technologies Pte Ltd. and
in January 2018 of exclusive and worldwide rights to develop, manufacture and commercialize varlitinib from Array Biopharma Inc.,
respectively. The information related to these license agreements is further disclosed in Note 17.
As of December 31, 2018 and 2019, the aforementioned intangible assets were not amortized since they were not yet available for use.
Instead they would be tested for impairment, by comparing the recoverable amounts with the carrying amounts, annually and whenever
there is an indication that they may be impaired.
On July 5, 2019, the Company decided no further development plan on the licensed IP ASLAN005 from Exploit Technologies Pte Ltd.
with written termination notice of Agreement for Research and Collaboration. As a result, the Company carried out a review of the
recoverable amount of ASLAN005 and determined that the carrying amount $73,400 was fully impaired.
On November 11, 2019, the Company announced that the global pivotal clinical trial testing varlitinib in biliary tract cancer did not
meet its primary endpoints. As a result, the Company decided to stop investing in the further development of varlitinib at this time and
the estimated future cash flows expected to arise from the drug decreased. The Company carried out a review of the recoverable
amount of varlitinib and determined that the carrying amount US$23 million was not recoverable.
The review led to the recognition of an impairment loss of $23 million. Though the Company may decide to conduct exploratory
research in the future, no resources have been allocated for its development and there is no guarantee that resources will be allocated in
the future.
The Company’s intangible assets have been tested for impairment at the end of the annual reporting period and the recoverable amount
is determined based on the value in use. The value in use was calculated based on the cash flow forecast. For the years ended
December 31, 2018, the Company did not recognize any impairment loss on intangible assets. For the year ended December 31, 2019,
the Company assessed intangible assets impairment and recognized an impairment loss of $23,073,400, and the recoverable amount of
intangible assets was nil. Such impairment loss was recognized in other operating income and expenses.
Computer software is amortized on a straight-line basis over the estimated useful life of 3 years.
F-28
13. OTHER PAYABLES
Payables for salaries and bonuses
Payables for professional fees
Payables for cash-settled share-based payment transactions
(Note 21)
Interest payables
Others
14. LONG-TERM BORROWINGS
Unsecured borrowings
Loans from government
Other long-term borrowings
Interest payables
Loans from shareholders
Unsecured borrowings from related parties
Loans from related parties
Interest payables
a.
Loans from government
December 31
2018
2019
1,153,048 $
680,708
669,042
50,430
129,433
2,682,661 $
1,037,213
923,726
755,787
392,970
137,146
3,246,842
December 31
2018
2019
7,266,315 $
4,060,357
2,648,122
—
13,974,794 $
— $
—
— $
7,361,124
4,813,176
3,183,507
1,707,498
17,065,305
552,426
13,750
566,176
$
$
$
$
$
$
On April 27, 2011, the Singapore Economic Development Board (EDB) awarded the Company a repayable grant (the “Grant”) not
exceeding SGD10 million to support the Company’s drug development activities over a five-year qualifying period commencing
February 24, 2011 (the “Project”). The Project was successfully implemented, resulting in substantially the full amount of the Grant
being disbursed to the Company.
In the event any of the Company’s clinical product candidates achieve commercial approval after Phase 3 clinical trials, the Company
will be required to repay the funds disbursed to the Company under the Grant plus interest of 6%. Until the Company has fulfilled its
repayment obligations under the Grant, the Company has ongoing update and reporting obligations to the EDB. In the event the
Company breaches any of its ongoing obligations under the Grant, EDB can revoke the Grant and demand that the Company repay the
funds disbursed to the Company under the Grant.
As of December 31, 2018 and 2019, the amounts of the funds disbursed to the Company plus accrued interest were $9,914,437 and
$10,485,464, respectively.
b.
Other long-term borrowings
CSL Finance Pty Ltd.
On May 12, 2014, ASLAN Pharmaceuticals Pte. Ltd. obtained a loan facility of $4.5 million from CSL Finance Pty Ltd. The amount
was based on 75% of research and development costs approved by CSL Finance Pty Ltd. at each drawdown period. The loan is
repayable within 10 years from the date of the facility agreement. Interest on the loan is computed at 6% plus LIBOR and is payable on
a quarterly basis.
F-29
Mandatory prepayment of the loan is required upon a successful product launch occurring before maturity of the loan.
As of December 31, 2018 and 2019, the aggregate carrying amount including principal and accrued interest outstanding under CSL
Loan Facility were $4,110,787 and $4,453,327, respectively.
Convertible Loan Facility
On September 30, 2019, the Company entered into a loan facility with Bukwang Pharmaceutical Co., Ltd., for an amount of $1.0
million (the “September 2019 Loan Facility”). The September 2019 Loan Facility has a two-year term with a 10% interest rate per
annum, commencing upon the date the Company draws down on such facility. The Company has the option to repay the amounts owed
at any time, subject to certain conditions.
The lender will have the right to convert, at their option, any outstanding principal amount plus accrued and unpaid interest under the
loan into that number of the Company’s newly issued ADSs calculated by dividing (a) such outstanding principal amount and accrued
and unpaid interest under the loan by (b) 90% of the volume-weighted average price of the Company’s ADSs on the date of the
conversion notice. Each ADS represents five ordinary shares of the Company. The ability to convert is subject to certain conditions,
including that the Company’s ordinary shares will have been delisted from the TPEx, and expires at the expiry of the term of the loan.
In October 2019, we drew down on $1.0 million under the Convertible Loan Facility.
October / November 2019 Loan Facility
On October 25, 2019, the Company entered into a loan facility with certain existing stockholders/directors, or affiliates thereof, and on
November 11 2019 we entered into a related loan facility with the affiliate of another existing stockholder, for an aggregate amount of
$2.25 million (collectively, the “October/November 2019 Loan Facility”). The October/November 2019 Loan Facility has a two-year
term with a 10% interest rate per annum, commencing upon the date the Company draws down the facility, which must be drawn down
in full. The Company has the option to repay not less than $1.0 million of the amounts owed under the October/November 2019 Loan
Facilities at any time, subject to certain conditions. In the event that the Company in a single re-financing transaction raises more than
ten times the aggregate loan amount prior to expiry of the term, the Company will be obligated to repay any unpaid portion of the
principal amount and accrued interest thereunder within 30 days of the receipt of the proceeds from such re-financing transaction.
The October/November 2019 Loan Facility provides that, during the time that any amount is outstanding thereunder, the Company will
not (i) incur any finance debt which is secured by a security interest or conferring repayment rights which rank in priority over those of
the lenders, or (ii) carry out or implement any merger, consolidation, reorganization (other than the solvent reorganization of the
Company), recapitalization, reincorporation, share dividend or other changes in the capital structure of the Company which may have a
material adverse effect on the rights of the lenders, in each case except with the prior written consent of the lenders. In addition, upon
an event of default (as defined in the October/November 2019 Loan Facility), the lenders may declare the principal amounts then
outstanding and all interest thereon accrued and unpaid to be immediately due and payable to the lenders.
F-30
In October 2019, we drew down on $1.95 million under the loan facilities. In connection with this initial draw down, we issued
warrants to purchase 483,448 ADSs (representing 2,417,240 ordinary shares) to certain of the lenders, at an exercise price of $2.02 per
ADS. In November 2019, we drew down on the remaining $0.3 million under the loan facilities. In connection with the second draw
down, we have committed to issue warrants to purchase 74,377 ADSs (representing 371,885 ordinary shares) to the lender at an
exercise price of $2.02 per ADS.
The Warrants are exercisable only after the Company ordinary shares have been delisted from TPEx, and will expire on the earlier of
(i) the first anniversary of such TPEx delisting or (ii) expiry of the term of the October/November 2019 Loan Facility. If, by expiry of
the term of the October/November 2019 Loan Facility, (i) the Company shares have not been delisted from TPEx and (ii) the Warrants
have not been exercised, the lenders shall be entitled to receive a further sum equal to 5% of the principal amount per annum, by way
of additional interest, payable by the Company upon expiry of the loan term.
As of December 31, 2019, the aggregate carrying amount including principal and accrued interest outstanding under the Convertible
Loan Facility and the October/November 2019 Loan Facility was $3,085,660.
15. RETIREMENT BENEFIT PLANS
Defined Contribution Plans
ASLAN Pharmaceuticals Pte. Ltd. adopted a defined contribution plan, which is a post-employment benefit plan, under which ASLAN
Pharmaceuticals Pte. Ltd. pays fixed contributions into the Singapore Central Provident Fund on a mandatory basis. ASLAN
Pharmaceuticals Pte. Ltd. has no further payment obligations once the contributions have been paid. The contributions are recognized
as “employee compensation expenses” when they are due.
ASLAN Pharmaceuticals Taiwan Limited adopted a pension plan under the Labor Pension Act (LPA) of the ROC, which is a state-
managed defined contribution plan. Under the LPA, ASLAN Pharmaceuticals Taiwan Limited makes monthly contributions to its
Taiwan-based employees’ individual pension accounts at 6% of monthly salaries and wages.
For the years ended December 31, 2017, 2018 and 2019, the total expense for such employee benefits in the amount of $329,455,
$424,157 and $325,059 were recognized, respectively.
16. EQUITY
a.
Ordinary shares
Number of shares authorized
Amount of shares authorized (NT$ thousand)
Number of shares issued and fully paid
Amount of shares issued and fully paid
2017
200,000,000
December 31
2018
500,000,000
$
2,000,000 $
5,000,000 $
130,128,940
160,248,940
$
41,514,016 $
51,627,219 $
2019
500,000,000
5,000,000
189,954,970
61,366,844
The issued ordinary shares with a par value of NT$10 entitle holders with the rights to vote and receive dividends.
F-31
On January 22, 2018, ASLAN Cayman received the official letter from the FSC of approval of the issuance of ordinary shares for
the purpose of sponsoring the issuance of American Depository Receipts. On March 27, 2018, ASLAN Cayman filed the
registration statement, form F-1, with the U.S. Securities and Exchange Commission (SEC) for the initial public offering in the
United States of its American Depositary Shares (ADSs) representing shares of ordinary shares. The registration statement for
listing its ADSs in the Nasdaq Global Market was declared effective by the SEC, and ASLAN Cayman held the initial public
offering of its ADSs on May 4, 2018.
The actual units of ADSs for this offering were 6,000,000, and each ADS represents five of ASLAN Cayman’s ordinary shares,
which in total represents 30,000,000 ordinary shares. The offering price per ADS was $7.03, equivalent to a price per ordinary
share of NT$41.72. The payment of this fundraising was fully collected as of May 8, 2018, and the record date for this capital
increase was May 8, 2018.
On September 10, 2018, ASLAN Cayman’s board of directors resolved to increase authorized shares to $5 million which were
approved in the interim shareholders’ meetings on October 30, 2018.
On November 7, 2018, the board of directors resolved to issue ordinary shares ranging from 15,000,000 to 40,000,000 shares for
cash sponsoring the issuance of American Depository Receipts. On December 5, 2018, ASLAN Cayman received the approval
letter No.1070344286 from the FSC for issuing ordinary shares for sponsoring the issuance of American Depository Receipts.
On November 5, 2019, ASLAN Cayman received the official letter No. 1080334435 from the FSC of approval of the issuance of
ordinary shares for the purpose of sponsoring the issuance of American Depository Receipts. On November 8, 2019, the
Company filed the registration statement, form F-3, with the U.S. Securities and Exchange Commission (SEC) for the follow on
offering in the United States of its American Depositary Shares (ADS) representing shares of ordinary shares. The registration
statement for listing its ADSs in the Nasdaq Global Market was declared effective by the SEC on November 8, 2019, and the
Company held the follow on offering of its ADSs on December 3, 2019.
The actual units of ADSs for this offering were 5,893,206, and each ADS represents five of ASLAN Cayman’s ordinary shares,
which in total represents 29,466,030 ordinary shares. The offering price per ADS was $2.5, equivalent to a price per ordinary
share of NT$15.24. The payment of this fundraising was fully collected as of December 6, 2019, and the record date for this
capital increase was December 6, 2019.
b.
Capital surplus
Arising from issuance of new share capital
Arising from employee share options
Changes in percentage of ownership interests
in subsidiary
Equity component of long-term debt
(Note 14)
$
$
F-32
December 31
2018
2017
78,384,290 $ 105,143,362 $ 108,800,191
6,274,591
6,316,310
5,898,391
2019
—
—
1,376,349
—
44,579
84,282,681 $ 111,459,672 $ 116,495,710
—
c.
Retained earnings and dividends policy
Under the ASLAN Cayman’s Articles of Incorporation, ASLAN Cayman may declare dividends by ordinary resolution of
ASLAN Cayman’s board of directors, but no dividends shall exceed the amount recommended by the directors of ASLAN
Cayman.
ASLAN Cayman may set aside out of the funds legally available for distribution, for equalizing dividends or for any other
purpose to which those funds may be properly applied, either employed in the business of ASLAN Cayman or invested in such
investments as the directors of ASLAN Cayman may from time to time think fit.
The accumulated deficits for 2017 and 2018 approved in the shareholders’ meetings on June 15, 2018 and June 20, 2019,
respectively, were as follows:
Accumulated deficits at the beginning of the year
Net loss for the year
For the Year Ended
December 31
$
2017
(50,391,283) $
(39,891,978)
2018
(90,283,261)
(42,185,597)
Accumulated deficits at the end of the year
$
(90,283,261) $
(132,468,858)
The accumulated deficits for 2019 which had been proposed by ASLAN Cayman’s board of directors on March 18, 2020 were as
follows:
Accumulated deficits at the beginning of the year
Net loss for the year
Accumulated deficits at the end of the year
For the Year Ended
December 31
2019
$
$
(132,468,858)
(47,015,967)
(179,484,825)
The accumulated deficits for 2019 are subject to the resolution of the shareholders’ meeting to be held on June 22, 2020.
d.
Others reserves items
Unrealized gain (loss) on financial assets at fair value through other comprehensive income:
Balance at January 1
Unrealized loss
Equity instruments
Balance at December 31
F-33
For the Years Ended
December 31
2018
2019
$
$
— $
—
— $
—
(55,084)
(55,084)
e.
Non-controlling interests
Balance at January 1
Share in profit for the year
Proceeds from non-controlling interest
Adjustments relating to changes in capital surplus of associates
accounted for using the equity method
Balance at December 31
17. LICENSE AGREEMENTS
Array Biopharma
For the Year Ended
December 31
2018
2019
— $
—
—
(49,570)
2,500,000
—
— $
(1,376,349)
1,074,081
$
$
On January 3, 2018, the Company entered into a new license agreement with Array pursuant to which the Company obtained an
exclusive, worldwide license to develop, manufacture and commercialize Array’s pan-HER inhibitor, ARRY-543 (which the Company
refers to as ASLAN001 or varlitinib) varlitinib for all human and animal therapeutic, diagnostic and prophylactic uses. This new
license agreement replaces and supersedes the previous collaboration and license agreement with Array dated July 12, 2011.
Under the new license agreement, the Company agreed to use commercially reasonable efforts to obtain approval by the U.S. FDA or
the applicable health regulatory authority and commercialize varlitinib.
In consideration of the rights granted under the agreement, the Company made an initial upfront payment to Array of $12 million in
January 2018 and an additional payment $11 million in June 2018, respectively, that were capitalized as a separately acquired
intangible asset. In addition, the Company will be required to pay up to $30 million if certain development milestones are achieved,
$20 million if certain regulatory milestones are achieved, and up to $55 million if certain commercial milestones are achieved. The
Company is also required to pay Array tiered royalties in the low tens on net sales of varlitinib. The royalty obligations will continue
on a country-by-country basis through the later of the expiration of the last valid patent claim for varlitinib or ten years after the first
commercial sale of varlitinib in a given country. As of December 31, 2019, the Company did not accrue for the above contingent
payments since the milestones are not achieved.
If the Company undergoes a change in control during a defined period following execution of the new license agreement, Array will
also be entitled to receive a low to mid single-digit percentage of the proceeds resulting from the change in control. Unless earlier
terminated, the agreement will continue on a country-by-country basis until the expiration of the respective royalty obligations in such
country. Upon such expiration in such country, Array will grant to the Company a perpetual, royalty-free, non-terminable, non-
revocable, non-exclusive license to exploit certain know-how in connection with the development, manufacturing and/or
commercialization of varlitinib for all human and animal therapeutic, diagnostic and prophylactic uses in such country. Either party
may terminate the agreement (i) in the event of the other party’s material breach of the agreement that remains uncured for a specified
period of time or (ii) the insolvency of the other party. In addition, if there is a change in control, the Company may also terminate the
agreement without cause at any time upon 180 days advance notice to Array.
F-34
Bristol-Myers Squibb
The Company entered into a license agreement with Bristol-Myers Squibb in 2011, and the Company received exclusive rights to
develop and commercialize BMS-777607 (which the Company refers to as ASLAN002) in China, Australia, Korea, Taiwan and other
selected Asian countries, without upfront payments. Bristol-Myers Squibb retains the exclusive rights in the rest of the world. Under
the license agreement, the Company would fund and develop ASLAN002 through proof of concept under a development plan that
would initially target gastric cancer and lung cancer.
After the Company completed the phase 1 clinical trial, Bristol-Myers Squibb licensed the exclusive rights from the Company to
further the development and commercialization of ASLAN002 worldwide. Under the terms of the license agreement, the Company has
received an upfront payment of $10 million in 2016. The Company is eligible to receive additional payments upon Bristol-Myers
Squibb’s achievement of development and regulatory milestones in the future. Furthermore, the Company is eligible to receive royalty
payments on future worldwide sales generated by Bristol-Myers Squibb. Bristol-Myers Squibb also purchased the related research
materials, supplies, research documentation and clinical trial results that are used for further developing ASLAN002 from the
Company in the amount of $1,294,034 which was delivered in 2016. As Bristol-Myers Squibb assumes the responsibility for all
development and commercialization activities and expenses, and the Company currently has no further obligations under the license
agreement. Accordingly, the Company recognized the upfront payment from out-licensing and other payment from the sale of research
materials, supplies, research documentation and clinical trial results, totaling $11,294,034, in revenue for the year ended December 31,
2016.
Almirall
In 2012, the Company originally entered into a global licensing agreement with Almirall to develop DHODH inhibitor, LAS186323,
which the Company refers to as ASLAN003, for rheumatoid arthritis (excluding any topical formulation), without upfront payments.
Under the license agreement, the Company agreed to fund and develop ASLAN003 to the end of Phase 2 through a development
program conducted in the Asia-Pacific region.
The original license agreement was replaced by a new agreement, executed in December 2015 and amended in March 2018, granting
an exclusive, worldwide license to develop, manufacture and commercialize ASLAN003 products for all human diseases with primary
focus on oncology diseases, excluding topically-administered products embodying the compound for keratinocyte hyperproliferative
disorders, and the non-melanoma skin cancers basal cell carcinoma, squamous cell carcinomas and Gorlin Syndrome. Under the
license agreement, Almirall is eligible to receive milestone payments and royalties based on the sales generated by the Company and/or
sublicensees.
CSL
The Company entered into a global license agreement with CSL Limited (“CSL”), in May 2014, to develop the anti-IL13 receptor
monoclonal antibody, CSL334 (which the Company refers to as ASLAN004) and antigen binding fragments thereof, for the treatment,
diagnosis or prevention of diseases or conditions in humans, without upfront payments. This license agreement was amended in May
31, 2019, pursuant to which the Company obtained an exclusive, worldwide license to certain intellectual property owned or licensed
by CSL, including patents and know-how, to develop, manufacture for clinical trials and commercialize ASLAN004 for the treatment,
diagnosis or prevention of diseases or conditions in humans. The Company’s development under such agreement is currently focused
on the treatment of respiratory and inflammatory conditions, and in particular, atopic dermatitis.
F-35
Under the amended agreement, the Company is generally obligated to use diligent efforts to develop ASLAN004 products in
accordance with the development plan, to obtain marketing approvals for ASLAN004 products worldwide and to commercialize
ASLAN004 products, either by itself or through sublicensees.
In consideration of the rights granted to the Company under the amended agreement, the Company will make a first payment of $30
million to CSL upon commencement of a Phase 3 clinical trial of ASLAN004. The Company will also be required to pay up to an
aggregate of $95 million to CSL if certain regulatory milestones are achieved and as of December 31, 2019, milestone has not been
met, up to an aggregate of $655 million if certain sales milestones are achieved and tiered royalties on net sales of ASLAN004
products ranging between a mid-single digit percentage and 10%.
Hyundai Pharm Co., Ltd.
In October 2015, the Company entered into a license agreement with Hyundai Pharm Co., Ltd. (“Hyundai”). Under the terms of the
license agreement, the Company granted Hyundai options to acquire the rights to use its intellectual property to develop and
commercialize varlitinib for the treatment of cholangiocarcinoma (i.e., CCA) in South Korea, and the Company has received an option
payment of $250,000 from Hyundai in 2016. As there was no performance obligation required for the Company, the payment was
recognized as revenue, and the related cost of revenue in the amount of $125,000 paid to one of the third parties with whom the
Company has a licensing agreement as part of the payment for the proceeds from out-licensing was recognized as cost of revenue, for
the year ended December 31, 2016. The Company was eligible for additional regulatory and commercial milestones payments as well
as royalties on product sales.
In February 2019, the Company made a payment of $325,000 to Hyundai in order to buy back the rights to commercialize varlitinib in
CCA.
Exploit Technologies Pte Ltd. (“ETPL”)/P53 Laboratory
The Company entered into a licensing agreement with ETPL, in August 2016, to license Intellectual Property (IP) arising from a
research collaboration with ETPL’s P53 Laboratory. The IP focuses on generation of novel immuno-oncology antibodies targeting
recepteur d’origine nantais (“RON”) and such antibodies are referred to by the Company collectively as ASLAN005. The license fee
of SG$100,000 (or $73,400) was capitalized as a separately acquired intangible asset. Under the license agreement, the Company has
the exclusive rights to develop and commercialize ASLAN005 worldwide. ETPL is eligible to receive up to an aggregate of SG$12
million (or $8,978,951) in milestone payments if certain development and commercial milestones are achieved, as well as royalties
calculated based on any sales generated by the Company.
In August 2016, the Company and ETPL’s P53 Laboratory entered into a three-year research collaboration agreement. Under the terms
of the agreement, the Company will be responsible for the design of innovative clinical development programs, in collaboration with
P53 Laboratory, which will continue to be responsible for the preclinical development of the antibody assets.
The agreement reacting to the research collaboration with ETPL’s P53 Laboratory was terminated with effect from 3rd September
2019, but this does not affect the above license. See Note 12.
F-36
Nanyang Technological University / DotBio Pte. Ltd
The Company entered into a licensing and research collaboration agreement with Nanyang Technological University (NTU) in October
2016, for the development of modybodies against three targets of the Company’s choice. The agreement expired in April 2018, but the
Company retained continuing rights: a half share ownership in the resulting IP, together with an exclusive option to obtain global rights
to develop and commercialize the modybodies, with such option exercisable until October 2018. In July 2018, the technology for
modybodies was separated from NTU and licensed to a new company, DotBio Pte. Ltd. In exchange for the Company’s giving up its
residual rights and options in respect to the technology, the Company received 599,445 shares of DotBio Pte. Ltd. equivalent to
SG$255,000 ($187,244) (see Note 8), together with 599,445 units of warrant to subscribe for the same number of shares at a
subscription price of $0.32 which was the same value per share as applied to other new investors in this round (see Note 7); in addition,
the Company also retained a right of first refusal to take an exclusive license for any modybodies produced by DotBio Pte. Ltd. that are
based on the work generated from the collaborative agreement between NTU and the Company. However, as the right of first refusal
did not limit DotBio Pte. Ltd.’s ability to direct the use of the asset, or to obtain substantially all the remaining benefits from the asset,
this would not prevent DotBio Pte. Ltd. from obtaining control of the asset. Accordingly, the Company recognized the non-cash gain
arising from the derecognition and recorded it as other income of $187,244 for the year ended December 31, 2019, because it was not a
good or service that was an output of the Company’s ordinary activities.
BioGenetics Co., Ltd.
In February 2019, the Company entered into a licensing agreement with BioGenetics to grant exclusive rights to commercialize
varlitinib in South Korea in exchange for an upfront payment of $2 million and up to $11 million in sales and development milestone
payments. The Company is also eligible to receive tiered double digit royalties on net sales up to the mid-twenties. The Company has
no other performance obligation in addition to the license, and BioGenetics will be responsible for obtaining initial and all subsequent
regulatory approvals of varlitinib in South Korea. Since the Company has no other performance obligation in addition to the license,
the Company recognized the upfront payment as revenue in February 2019.
In March 2019, the Company entered into another licensing agreement with BioGenetics to grant exclusive rights to commercialize
ASLAN003 in South Korea in exchange for an upfront payment of $1 million and up to $8 million in sales and development milestone
payments. The Company is also eligible to receive tiered double digit royalties on net sales from the high-teens to the mid-twenties
range. The Company has no other performance obligation in addition to the license, and BioGenetics will be responsible for obtaining
initial and all subsequent regulatory approvals of ASLAN003 in South Korea. Since the Company has no other performance obligation
in addition to the license, the Company recognized the upfront payment as revenue in March 2019. Under the in-license agreement to
develop ASLAN003 with Almirall, Almirall is eligible to receive a payment of 10% (ten per cent) of the proceeds from the out-
licensing of ASLAN003. The related cost of revenue in the amount of $82,259 payment to Almirall was recognized as operating costs
accordingly.
18. LOSS BEFORE INCOME TAX
a.
Other operating income and expenses
Impairment loss recognized on intangible
assets (Note 12)
For the Year Ended December 31
2018
2019
2017
$
— $
— $
(23,073,400)
F-37
b.
Other gains and losses
Net foreign exchange (losses) gains
Loss on disposal of property, plant and equipment
Loss on lease modification
Fair value changes of financial assets mandatorily
classified as at FVTPL
Others
c.
Finance costs
Interest on government loans
Other interest expenses
Interest on loans from shareholders
Interest on lease liabilities
d.
Depreciation and amortization
Right-of-use assets
Property, plant and equipment
Computer software
For the Year Ended December 31
2018
2019
2017
$
$
(667,130) $
(31,298)
—
—
(263)
(698,691) $
95,894 $
—
—
60,004
57,345
213,243 $
(135,413)
(74,195)
(64,287)
(46,985)
(6,678)
(327,558)
For the Year Ended December 31
2018
2019
2017
$
416,698 $
—
—
—
$
416,698 $
441,474 $
50,430
—
—
491,904 $
435,684
374,376
55,515
36,037
901,612
For the Year Ended December 31
2018
2019
2017
$
$
— $
200,918
9,058
209,976 $
— $
235,410
6,355
241,765 $
267,948
173,056
4,347
445,351
All depreciation and amortization expenses were recognized as general and administrative expenses for the years ended
December 31, 2017, 2018 and 2019.
e.
Employee benefits expense
Short-term benefits
Post-employment benefits (Note 15)
Share-based payments (Note 21)
Equity-settled
Cash-settled
Total employee benefits expense
Employee benefits expense by function
General and administrative expenses
Research and development expenses
For the Year Ended December 31
2018
2019
2017
7,062,311 $
329,455
8,002,069 $
424,157
5,628,025
325,059
769,595
357,000
8,518,361 $
451,060
838,677
9,715,963 $
4,664,285 $
3,854,076
8,518,361 $
6,294,470 $
3,421,493
9,715,963 $
42,511
1,272
5,996,867
4,210,477
1,786,390
5,996,867
$
$
$
$
F-38
f.
Employees’ compensation and remuneration of directors
Under the ASLAN Cayman’s Articles of Incorporation, ASLAN Cayman shall accrue employees’ compensation and
remuneration of directors at the rates of no less than 0.1% and no higher than 1%, respectively, of profit before income tax, net of
employees’ compensation and remuneration of directors.
ASLAN Cayman had accumulated deficits for the years ended December 31, 2017, 2018 and 2019; therefore, no compensation
for employees and remuneration of directors was accrued.
19.
INCOME TAXES
Income Tax Recognized in Profit or Loss
Current tax
In respect of the current period
Adjustments for prior periods
A reconciliation of accounting profit and income tax expense was as follows:
For the Year Ended December 31
2018
2017
$
$
— $
—
— $
— $
14,439
14,439 $
2019
462,713
(54,711)
408,002
For the Year Ended December 31
2018
2019
2017
Loss before income tax
Income tax benefit calculated at the statutory rate
Nondeductible expenses in determining taxable
income
Tax credits for research and development
expenditures
Unrecognized loss carryforward
Effect of different tax rates of group entities
operating in other jurisdictions
Withholding tax
Adjustments for prior years’ tax
$
$
(39,891,978) $
(6,781,636) $
(42,171,158) $
(7,169,097) $
(46,657,534)
(7,931,781)
4,288,090
112,263
4,115,850
(2,224,348)
4,519,942
(2,312,251)
9,261,996
(2,474,280)
5,980,036
197,952
—
—
107,089
—
14,439
322,888
450,000
(54,711)
Income tax expense recognized in profit or loss
$
— $
14,439 $
408,002
a.
Cayman Islands
ASLAN Cayman is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, the Company is not
subject to tax on income or capital gains. Additionally, the Cayman Islands does not impose a withholding tax on payments of
dividends to shareholders.
F-39
b.
Singapore
ASLAN Pharmaceuticals Pte. Ltd. and Jaguahr Therapeutics Pte. Ltd., incorporated in Singapore, are subject to the statutory
corporate income tax rate of 17%. In connection with the licensing agreements with BioGenetics in February and March 2019, the
Company collected upfront payments totaled $3,000,000 from BioGenetics in total, which was subject to withholding taxes of
15% in compliance with local regulations in South Korea. The Company therefore recognized income tax expense at an amount
of $450,000. Except for the above, ASLAN Pharmaceuticals Pte. Ltd. and Jaguahr Therapeutics Pte. Ltd. have no taxable income
for the years ended December 31, 2018 and 2019, and therefore, no other provision for income tax is required.
c.
Taiwan
ASLAN Pharmaceuticals Taiwan Limited, incorporated in Taiwan. The Income Tax Act in the ROC was amended in 2018, and
the corporate income tax rate was adjusted from 17% to 20%. In addition, the rate of the corporate surtax applicable to the 2018
unappropriated earnings will be reduced from 10% to 5%.
The income tax returns through 2017 have been assessed by the tax authorities.
d. Australia
ASLAN Pharmaceuticals Australia Pty Ltd., incorporated in Australia, is subject to the statutory corporate income tax of 30%.
ASLAN Pharmaceuticals Australia Pty Ltd. has no taxable income for the years ended December 31, 2017, 2018 and 2019, and
therefore, no provision for income tax is required. A tax incentive was obtained from the Australian government on August 23,
2019 for $79,710 due to research and development activities carried out in Australia.
e. Hong Kong
ASLAN Pharmaceuticals Hong Kong Limited, incorporated in Hong Kong, is subject to the statutory corporate income tax of
16.5%. Under the Hong Kong tax law, ASLAN Pharmaceuticals Hong Kong Limited is exempted from income tax on its foreign
derived income and there are no withholding taxes in Hong Kong on the remittance of dividends. ASLAN Pharmaceuticals Hong
Kong Limited has no taxable income for the years ended December 31, 2017, 2018 and 2019, and therefore, no provision for
income tax is required.
f.
China
ASLAN Pharmaceuticals (Shanghai) Co. Ltd., incorporated in China, is subject to the statutory corporate income tax rate of 25%.
ASLAN Pharmaceuticals (Shanghai) Co. Ltd. has no taxable income for the years ended December 31, 2017, 2018 and 2019, and
therefore, no provision for income tax is required.
g. United States of America
ASLAN Pharmaceuticals (USA) Inc., incorporated in Delaware, USA in October 2018, is subject to the statutory federal income
tax rate of 21% and state income tax rate of 8.7%. ASLAN Pharmaceuticals (USA) Inc. has no taxable income for the year ended
December 31, 2019, and therefore, no provision for income tax is required.
F-40
20. LOSS PER SHARE
Basic and diluted loss per share
$
(0.32) $
(0.28) $
(0.29)
The loss and weighted-average number of ordinary shares outstanding used in the computation of loss per share are as follows:
For the Year Ended December 31
2018
2019
2017
For the Year Ended December 31
2018
2019
2017
Loss used in the computation of basic
and diluted loss per share
Weighted-average number of ordinary shares in the
computation of basic loss per share
$
(39,891,978) $
(42,185,597) $
(47,015,967)
124,424,960
149,739,242
162,392,602
If the outstanding employee share options issued by ASLAN Cayman are converted to ordinary shares, they are anti-dilutive and
excluded from the computation of diluted earnings per share. Potential ordinary shares arising from the aforementioned anti-dilutive
outstanding employee share options are 7,224,123, 6,664,244 and 10,367,441 shares for the years end 2017, 2018 and 2019,
respectively.
21.
SHARE-BASED PAYMENT ARRANGEMENTS
Employee Share Option Plan
Under the Company’s employee share option plan, qualified employees of the Company were granted 661,000 options in July 2010,
910,000 options in July 2011, 669,750 options in July 2012, 619,250 options in July 2013, 680,625 options in July 2014, 2,477,336
options in July 2015, 1,032,250 options in July 2016 and 825,833 options in September 2017. Each option entitles the holder to
subscribe for one ordinary share of the Company. The options granted are valid for 10 years and exercisable at certain percentages once
they have vested. No performance conditions were attached to the plan. The Company has no legal constructive obligation to
repurchase or settle the options in cash.
The board of directors of the Company, as of July 26, 2016, resolved to double the number of shares underlying each outstanding
award granted previously to reflect the subdivision ratio of the share split made in connection with the corporate restructuring of May
27, 2016. The exercise price for each award previously granted was correspondingly adjusted by a decrease of 50%. The modification
did not cause any incremental adjustments to the fair value of the granted awards.
As of December 31, 2019, there are 13,841,879 ordinary shares issuable on the exercise of share options outstanding under the
Company’s equity incentive plans.
F-41
Information on employee share options granted from July 2010 to 2016 is as follows:
Balance at January 1
Options forfeited
Options exercised
Balance at December 31
Options exercisable,
end of period
Weighted-average fair
value of options
granted
2017
For the Year Ended December 31
2018
2019
Weighted-
average
Exercise
Price
Number of
Options
Number of
Options
Weighted-
average
Exercise
Price
Number of
Options
Weighted-
average
Exercise
Price
6,958,461 $
(70,938)
—
6,887,523
1.42 6,887,523 $
(5,000)
1.95
(60,000)
—
1.41 6,822,523
1.41 6,822,523 $
(32,167)
2.13
0.80
(120,000)
1.41 6,670,356
1.41
2.26
0.20
1.43
5,825,816
1.30 6,595,294
1.38 6,670,356
1.43
$
—
$
—
$
—
F-42
Information on employee share options granted in September 2017 is as follows:
For the Year Ended December 31
Balance at January 1
Options forfeited
Balance at December 31
Options exercisable, end of period
Weighted-average fair value of
options granted
Number
of Options
2018
Weighted-
average
755,833 $
(57,666)
698,167
—
Exercise Price
1.28
1.28
1.28
—
2019
Number of
Options
Weighted-
average
Exercise Price
1.28
1.28
1.28
1.28
698,167 $
(197,000)
501,167
501,167
$
—
$
—
Information on outstanding options as of December 31, 2019 is as follows:
F-43
July 2010
July 2011
July 2012
July 2013
July 2014
July 2015
July 2017
September
2018
Weighted-
average
Remaining
Contractual
Life
(Years)
Weighted-
average
Remaining
Contractual
Life
(Years)
Weighted-
average
Remaining
Contractual
Life
(Years)
Range of
Exercise
Price
Weighted-
average
Remaining
Contractual
Life
(Years)
Range of
Exercise
Price
Range of
Exercise
Price
Weighted-
average
Remaining
Contractual
Life
(Years)
Range of
Exercise
Price
1.36
Range of
Exercise
Price
4.5 $1.36-$1.88
Weighted-
average
Remaining
Contractual
Life
(Years)
Weighted-
average
Remaining
Contractual
Life
(Years)
Range of
Exercise
Price
Weighted-
average
Remaining
Contractual
Life
(Years)
7.7
Range of
Exercise
Price
1.28
0.5 $0.20-$0.80
1.5 $
0.80
2.5 $0.80-$1.36
3.5 $
5.5 $
2.26
6.5
$
Range of
Exercise
Price
$0.20-$0.80
Options granted in July of 2010, 2011, 2012, 2013, 2014, 2015, 2016 and September 2017 were priced using the binomial option
pricing model, and the inputs to the model were as follows:
July
2010
July
2011
July
2012
July
2013
July
2014
July
2015
July
2016
September
2017
Grant-date share price
Exercise price
Expected volatility
Expected life (years)
Expected dividend yield
Risk-free interest rate
$
0.80
$0.20-$0.80
$
59.16%
10
—
2.954%
0.80 $
$0.20-$0.80 $
54.26%-54.44%
10
—
2.96%-3.22%
$
1.25
0.80
52.25%
10
—
1.61%
1.36
$0.80-$1.36
$
$
50.58%
10
—
2.5%
$
1.36
1.36
50.86%
10
—
2.58%
1.88
$1.36-$1.88
$
$
36.37%
10
—
2.43%
$
2.26
2.26
$
39.34%
10
—
1.46%
1.28
1.28
38.33%
10
—
1.1027%
Expected volatility was based on the average annualized historical share price volatility of comparable companies before the grant
date.
Compensation costs recognized for the years ended December 31, 2017, 2018 and 2019 were $769,595, $451,060 and $42,511,
respectively.
F-44
Long Term Incentive Plan
On August 23, 2017 , July 30, 2018 and July 26, 2019 the Company’s board of directors approved the 2017 , 2018 and 2019 Senior
Management Team (SMT) Long Term Incentive Plans (the “2017 LTIP” , “2018 LTIP” and “2019 LTIP” , and collectively, the
“LTIPs”), respectively, which outlines awards that may be granted to qualified employees of the Company. These plans are applicable
to the SMT of the Company and are used for long-term retention of key management. The LTIPs are each valid for ten years, and
grantees of the bonus entitlement units can exercise their rights once they have vested. The Company shall pay the intrinsic value of
the units awarded to the employees at the date of exercise of their awards, if redeemed by an employee.
As of December 31, 2019, the Company has granted 1,566,000 bonus entitlement units under the 2017 LTIP. Of which, 1,462,000 units
granted in 2017, will vest in thirds each year after the first, second, and third anniversary of the award and 104,000 units granted in
2018, will vest in halves each year after the second and third anniversary of the award.
The value of the 2017 LTIP award is measured based on the quoted share price. On July 30, 2018, the board of directors approved the
modification of the 2018 LTIP which retrospectively changes the share price Taiwan share price to ADS price at a 5:1 conversion ratio.
The LTIP are consider cash-settled awards and are measured at fair value. The change in fair value from the modification was
insignificant and was recognized immediately in profit or loss.
The Company’s 2017 LTIP is described as follows:
Balance at January 1
Awards granted
Awards forfeited
Balance at December 31
Balance exercisable, end of period
For the Year Ended December 31
2018
2019
1,462,000
104,000
(86,666)
1,479,334
400,667
1,479,334
—
(319,333)
1,160,001
815,000
As of December 31, 2019, there are 241,142 bonus entitlement units which have been granted under the 2018 LTIP by the Company.
For the 241,142 units under the 2018 LTIP, they will vest in thirds each year after the first, second, and third anniversary of the award.
The Company’s 2018 LTIP is described as follows:
Balance at January 1
Awards granted
Awards forfeited
Balance at December 31
Balance exercisable, end of period
For the Year Ended December 31
2018
2019
—
241,142
—
241,142
—
241,142
—
(73,053)
168,089
56,030
As of December 31, 2019, there are 491,020 bonus entitlement units which have been granted under the 2019 LTIP by the Company.
For the 491,020 units under the 2019 LTIP, they will vest in thirds each year after the first, second, and third anniversary of the award.
All of the 2019 LTIP granted bonus entitlement units remained outstanding as of December 31, 2019.
F-45
The Company’s 2019 LTIP is described as follows:
Balance at January 1
Awards granted
Balance at December 31
Balance exercisable, end of period
For the Year Ended
December 31,
2019
—
491,020
491,020
—
Each bonus entitlement unit grants the holders of the LTIPs a conditional right to receive an amount of cash equal to the per-unit fair
market value of the Company’s ordinary shares and ADSs, respectively, on the settlement date. The LTIPs qualify as cash-settled
share-based payment transactions. The Company recognizes the liabilities in respect of its obligations under the LTIPs, which are
measured based on the Company’s quoted market price of its ADSs at the reporting date, and takes into account the extent to which the
services have been rendered to date.
Regarding the Company’s 2017, 2018 and 2019 LTIPs, the respective quoted fair value of the awards on the grant date was NT$33.45
(or $1.10) , $7.90 and $2.92, based on the Taiwan share price on August 23, 2017 , the closing price per ADS on July 30, 2018 and the
closing price per ADS on July 30, 2019, respectively. The quoted fair value on the reporting date is based on the closing price per ADS
of $3.60 and $2.03 as of December 31, 2018 and December 31, 2019, respectively.
The Company recognized total expenses of $838,677 and $1,272 in respect of the LTIPs for the years ended December 31, 2018 and
2019, respectively. As of December 31, 2018 and 2019, the Company recognized compensation liabilities of $669,042 and $755,787 as
current (classified as other payables), respectively, and $289,613 and $184,870 as non-current, respectively.
22.
EQUITY TRANSACTIONS WITH NON-CONTROLLING INTERESTS
On October 15, 2019, the subsidiary, Jaguahr Therapeutics Pte. Ltd., issued new shares to raise more capital, and the Company did not
participate in the capital increase of this round, reducing its continuing interest from 100% to 55%.
The above transaction were accounted for as equity transactions, since the Company did not cease to have control over the subsidiary.
Cash consideration received
The proportionate share of the carrying amount of the net assets of
the subsidiary transferred from non-controlling interests
Difference recognized from equity transaction
Line item adjusted for equity transaction
Capital surplus - changes in percentage of
ownership interests in subsidiary
F-46
For the Year Ended
December 31
2019
2,500,000
(1,123,651)
1,376,349
For the Year Ended
December 31
2019
1,376,349
$
$
$
23. CHANGES IN LIABILITIES ARISING FROM FINANCING ACTIVITIES
For the year ended December 31, 2019
Lease liabilities
$
323,850 $
(243,265) $
882,670 $
(207,877) $
755,378
Opening
Balance
Financing
Cash Flows
New
Finance
Leases
Other
Changes
Closing
Balance
Non-cash Changes
24. CAPITAL MANAGEMENT
The Company manages its capital to ensure that entities in the Company will be able to safeguard cash as well as maintain financial
liquidity and flexibility to support the development of its product candidates and programs as a going concern through the optimization
of the debt and equity balance.
The Company’s financial strategy is designed to maintain a flexible capital structure consistent with the objectives stated above and to
respond to business growth opportunities and changes in economic conditions. The capital structure of the Company mainly consists of
borrowings and equity of the Company. Key management personnel of the Company review the capital structure periodically. In order
to maintain or balance the overall capital structure, the Company may adjust the amounts of long-term borrowings, or the issuance of
new shares capital or other equity instruments.
As of December 31, 2019, there were no changes in the Company’s capital management policy, and the Company is not subject to any
externally imposed capital requirements.
25. FINANCIAL INSTRUMENTS
a.
Fair value of financial instruments not measured at fair value
The Company believes that the carrying amounts of financial assets and financial liabilities not measured at fair value
approximate their fair values.
b.
Fair value of financial instruments measured at fair value on a recurring basis
1)
Fair value hierarchy
The fair value measurements, which are grouped into Levels 1 to 3 based on the degree to which the fair value measurement
inputs are observable and based on the significance of the inputs to the fair value measurement in its entirety, are described as
follows:
1)
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for an asset or
2)
liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and
3)
Level 3 inputs are unobservable inputs for an asset or liability.
F-47
December 31, 2018
Financial assets at FVTPL
Derivative financial assets
Financial assets at FVTOCI
Investments in equity instruments at
FVTOCI of unlisted companies
December 31, 2019
Financial assets at FVTPL
Derivative financial assets
Financial assets at FVTOCI
Investments in equity instruments at
FVTOCI of unlisted companies
Financial liabilities at FVTPL
Derivative financial liabilities
Level 1
Level 2
Level 3
Total
$
— $
— $
60,004 $
60,004
$
— $
187,244 $
— $
187,244
Level 1
Level 2
Level 3
Total
$
— $
— $
68,256 $
68,256
$
$
— $
— $
132,160 $
132,160
— $
$
262,350 $
262,350
There were no transfers between Levels 1 and 2 in the current and prior periods.
2) Reconciliation of Level 3 fair value measurements of financial assets
For financial assets measured at Level 3, there is no other reconciliation item for the year ended December 31, 2019, except
for the change in fair value that is recognized in the consolidated statements of comprehensive income and the transfers into
Level 3 due to significant unobservable inputs applied for the financial assets at fair value through other comprehensive
income.
Transfers between Level 2 and Level 3 occur when an investment’s recent investment becomes more than twelve months
old, with the price being deemed unobservable. For the year ended December 31, 2019, transfers of this nature amounted to
$187,244.
3) Valuation techniques and inputs applied for Level 2 fair value measurement
The fair values of unlisted equity investments are measured on the basis of the prices of recent investment by third parties
with the consideration of other factors that market participants would take into account.
4) Valuation techniques and inputs applied for Level 3 fair value measurement
a) The fair values of warrants are determined using option pricing models where the significant unobservable input is
historical volatility. An increase in the historical volatility used in isolation would result in an increase in the fair value.
As of December 31, 2018 and 2019, respectively, the historical volatility used were 42.33% and 41.87%.
F-48
b) The fair values of non-listed foreign equity investments were Level 3 fair value assets, and determined using the
market approach by reference the Price-to-Book ratios (P/B ratios) of peer companies that traded in active market. At
December 31, 2019, the Company used significant unobservable inputs, including discount for lack of marketability of
10%, and discounts for lack of control of 10%. At December 31, 2019, assuming all other inputs remain equal, if
discount for lack of marketability increases by 1%, the fair value would decrease by $1,652; if discount for lack of
control increases by 1%, the fair value would decrease by $1,652.
c) The fair value of derivative financial instrument with warrants and convertibility right are determined using binomial
evaluation method with discount rate 13.19% to 14.12% assessing by market bond yield curve and risk-free rate
premium. As of December 31, 2019, the historical volatility used was 92.6% during the past 1 year.
c.
Categories of financial instruments
Financial assets
Financial assets at FVTPL
Mandatorily classified as at FVTPL
Loans and receivables (1)
Financial assets at amortized cost (2)
Financial assets at FVTOCI
Equity instruments
Financial liabilities
Financial liabilities at FVTPL
Designated as at FVTPL
Financial liabilities at amortized cost (3)
2017
December 31
2018
2019
$
— $
50,734,158
—
60,004 $
—
29,080,981
68,256
—
22,311,107
—
187,244
132,160
—
15,463,286
—
21,304,150
262,350
21,963,089
1)
2)
3)
The balances include loans and receivables measured at amortized cost, which comprise cash and cash equivalents and
refundable deposits.
The balances included financial assets at amortized cost, which comprise of cash and cash equivalents and refundable
deposits.
The balances include financial liabilities at amortized cost, which comprise of trade payables, partial other payables and
long-term borrowings.
d.
Financial risk management objectives and policies
The Company’s financial risk management objective is to monitor and manage the financial risks relating to the operations of the
Company. These risks include market risk (including foreign currency risk and interest rate risk), credit risk and liquidity risk. In
order to minimize the effect of financial risks, the Company devoted time and resources to identify and evaluate the uncertainty of
the market to mitigate risk exposures.
F-49
1) Market risk
The Company’s activities exposed it primarily to the financial risks of changes in foreign currency exchange rates (see (a)
below) and interest rates (see (b) below).
a)
Foreign currency risk
The Company had foreign currency transactions, which exposed the Company to foreign currency risk.
The Company’s significant financial assets and liabilities denominated in foreign currencies were as follows:
Financial assets
Monetary items
SGD
Financial liabilities
Monetary items
SGD
Financial assets
Monetary items
SGD
GBP
Financial liabilities
Monetary items
SGD
Foreign
Currencies
December 31, 2018
Exchange
Rate
Carrying
Amount
$
2,297,231
0.7335 $
1,685,019
13,515,737
0.7335
9,914,437
Foreign
Currencies
December 31, 2019
Exchange
Rate
Carrying
Amount
$
2,538,168
999,471
0.7431 $
1.3187
1,886,160
1,318,000
15,126,578
0.7431
11,240,843
Sensitivity analysis
The Company is mainly exposed to the Singapore Dollar and Great British Pound.
F-50
The following table details the Company’s sensitivity to a 5% increase and decrease in the US dollar against the
relevant foreign currency. The rate of 5% is the sensitivity rate used when reporting foreign currency risk internally to
key management personnel and represents management’s assessment of the reasonably possible change in foreign
exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items. A
positive number below indicates a decrease in pre-tax loss where the US dollar strengthens 5% against the relevant
currency. For a 5% weakening of the US dollar against the relevant currency, there would be an equal and opposite
impact on pre-tax loss, and the balances below would be negative.
For the Year Ended December 31
2018
2017
2019
Profit or loss*
SGD
GBP
$
(417,443) $
—
(411,471) $
—
(467,734)
65,900
*
This is mainly attributable to the exposure to outstanding deposits in banks and loans in foreign currency at the
end of the reporting period.
b)
Interest rate risk
The Company is exposed to interest rate risk because entities in the Company borrowed funds at both fixed and
floating interest rates. The risk is managed by the Company by maintaining an appropriate mix of fixed and floating
rate borrowings.
The sensitivity analysis below is determined based on the Company’s exposure to interest rates for fixed rate
borrowings at the end of the reporting period, and is prepared assuming that the amounts of liabilities outstanding at
the end of the reporting period are outstanding for the whole year. A 100-basis point increase or decrease is used when
reporting interest rate risk internally to key management personnel and represents management’s assessment of the
reasonably possible change in interest rates.
If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Company’s pre-
tax loss for the years ended December 31, 2017, 2018 and 2019 would have decreased/increased by $96,795, $99,144
and $151,896, respectively.
2) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss to the
Company. The Company adopted a policy of only dealing with creditworthy counterparties and financial institutions, where
appropriate, as a means of mitigating the risk of financial loss from defaults.
3)
Liquidity risk
The Company manages liquidity risk by monitoring and maintaining a level of cash and cash equivalents that are deemed
adequate to finance the Company’s operations and mitigate the effects of fluctuations in cash flows. In addition,
management monitors the utilization of long-term borrowings and ensures compliance with repayment conditions.
F-51
As the Company is in the research and development phase, the Company will be seeking future funding based on the
requirements of its business operations. The Company is able to exercise discretion and flexibility to deploy its capital
resources in the process of the research and development activities according to the schedule of fund raising. The Company
intends to explore various means of fundraising to meet its funding requirements to carry out the business operations, such
as the issuance of its ordinary shares sponsoring ADSs, domestic follow-on offering of ordinary shares offering, venture
debt and shareholder loans. The Company may also use other means of financing such as out licensing to generate revenue
and cash. Management believes that it currently has plans and opportunities in place which will allow to fund and meet its
operating expenses and capital expenditure requirements and meet its obligations for at least the next twelve months from
December 31, 2019. However, the future viability of the Company depends on its ability to raise additional capital to finance
its operations.
26. TRANSACTIONS WITH RELATED PARTIES
Balances and transactions between the Company which are related parties of the Company, have been eliminated on consolidation and
are not disclosed in this note. Besides information disclosed elsewhere in the other notes, details of transactions between the Company
and other related parties are disclosed as follows.
a.
Related party name and category
Related Party Name
Related Party Category
JANK Howden Pty Ltd
Others
b.
Loans from related parties
Related party in substance
Key Management Personnel
Related party in substance / JANK Howden Pty Ltd
Key Management Personnel / Others
Related Party Category/Name
Interest payable
Related party in substance / JANK Howden Pty Ltd
Key Management Personnel / Others
Related Party Category/Name
Interest expense
Related party in substance / JANK Howden Pty Ltd
Key Management Personnel / Others
Related Party Category/Name
F-52
December 31
2018
2019
— $
—
— $
502,205
50,221
552,426
December 31
2018
2019
— $
—
— $
12,500
1,250
13,750
For the Year Ended December 31
2018
2019
— $
—
— $
12,337
1,234
13,571
$
$
$
$
$
$
The loans from the related parties are unsecured.
c.
Compensation of Key Management Personnel
Short-term employee benefits
Post-employment benefits
Share-based payments
$
$
For the Year Ended December 31
2018
2017
3,203,745
125,237
801,701
4,130,683
$
$
2,833,520 $
140,474
791,310
3,765,304 $
2019
2,918,180
105,449
29,176
3,052,805
The remuneration of directors and key executives was determined by the remuneration committee based on the performance of
individuals and market trends.
27.
SEGMENT INFORMATION
The Company’s chief operating decision maker, the chief executive officer, reviews the Company’s consolidated results when making
decisions about the allocation of resources and when assessing performance of the Company as a whole, and therefore, the Company
has only one reportable segment. The Company does not distinguish between markets or segments for the purpose of internal
reporting. The basis of information reported to the chief operating decision maker is the same as the Company’s consolidated financial
statements. As the Company’s long-lived assets are substantially located in and derived from Asia, no geographical segments are
presented.
The Company’s revenue from its major products and services.
Out-licensing
$
— $
— $
For the Year Ended December 31
2018
2017
2019
3,000,000
For the year ended December 31, 2019, there was revenue generated from out-licensing of commercialization rights in South Korea to
Biogenetics for varlitinib and ASLAN003 in the amount of $3 million. See Note 17 for details.
F-53
DESCRIPTION OF SECURITIES
REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT
Exhibit 2.4
As of December 31, 2019, ASLAN PHARMACEUTICALS LIMITED. (“we,” “us,” and “our”) had the following series of securities registered pursuant to Section
12(b) of the Securities Exchange Act, as amended (“Exchange Act”):
Title of each class
American Depositary Shares (ADSs), each
representing two ordinary shares, par
value NT$10 per ordinary share
Ordinary shares, par value NT$10 per
share *
* Not for trading, but only in connection with
the registration of the American Depositary
Shares.
Trading symbol
ASLN
6497
Name of each exchange on which registered
The Nasdaq Global Market
The Nasdaq Global Market *
Our ordinary shares have been listed in Taiwan on the Taipei Exchange (“TPEx”) since June 1, 2017. Our American Depositary Shares (“ADSs”), each
representing two ordinary shares, par value NT$10 per ordinary share (the “shares” or “ordinary shares”), have been available in the U.S. through an
American Depositary Receipt (“ADR”) program since May 4, 2018. This program was established pursuant to the deposit agreement that we entered into
with JPMorgan Chase Bank, N.A. (“JPMorgan”), as depositary (“Deposit Agreement”). Our ADRs have been listed on the Nasdaq Global Market
(“Nasdaq”) since May 2018 and are traded under the symbol “ASLN”. In connection with this listing (but not for trading), the shares are registered under
Section 12(b) of the Exchange Act. This exhibit contains a description of the rights of (i) the holders of ordinary shares and (ii) ADR holders. Shares
underlying the ADSs are held by JPMorgan, the depositary, and holders of ADSs will not be treated as holders of the shares.
The following summary is subject to and qualified in its entirety by our Memorandum and Articles of Association (“Articles”), by the law of the Republic
of China, Taiwan (“ROC”), by the Companies Law of the Cayman Islands (“Companies Law”), and by the common law of the Cayman Islands. This is not
a summary of all the significant provisions of the Articles, ROC law, Companies Law or the common law of the Cayman Islands and does not purport to be
complete. Capitalized terms used but not defined herein have the meanings given to them in our annual report on Form 20-F for the fiscal year ended
December 31, 2019 and in the Deposit Agreement, which is an exhibit to our registration statement on Form F-6 filed with the Securities and Exchange
Commission (the “SEC”) on April 13, 2018.
General
DESCRIPTION OF ORDINARY SHARES
Our authorized capital set forth in our Articles is NT$5,000,000,000 divided into 500,000,000 ordinary shares, with a par value of NT$10.00 per ordinary
share. We currently do not have preferred shares or other classes of shares.
Ordinary Shares
General
All of our outstanding ordinary shares are fully paid and non-assessable. No certificates representing the ordinary shares have been issued. The ordinary
shares are not entitled to any preemptive conversion or redemption rights at the sole option of the holder of ordinary shares. Our shareholders may freely
hold and vote their shares (subject to certain restrictions such as the number of proxies that may be held by a shareholder at a general meeting).
1
Pre-emptive Rights
When we issue new shares for cash consideration, our board of directors may reserve 10% to 15% of the new shares for subscription by our employees or
of any of our subordinate companies, as determined by our board of directors in its reasonable discretion. Subject to several statutory exceptions, our
shareholders are entitled to subscribe for the remainder of the new shares in proportion to their existing shareholdings. New shares not so subscribed by our
employees and shareholders may be offered by us to the public or to specific persons designated by the board.
Since our shares are publicly traded on the TPEx, in the event of offering new shares for cash, we are also mandatorily required to offer 10% of the shares
to the public at the market price, subject to a higher public offering percentage adopted by our shareholders at a shareholders’ meeting.
Repurchase Rights
For so long as the shares are registered in Taiwan, the repurchase of our own shares by us shall be approved by our board of directors in compliance with
Regulations Governing Share Repurchase by Exchange-Listed and OTC-Listed Companies and relevant laws of the Cayman Islands. We may with the
sanction of an ordinary resolution of the shareholders’ meeting purchase and cancel our own shares out of our share capital. The number of shares to be
repurchased and cancelled pursuant to our Articles shall be pro rata among our shareholders in proportion to the number of shares held by each such
shareholder. The number of shares purchased by us pursuant to our Articles shall not exceed 10% of the total number of our issued shares. The total price
of the shares so purchased shall not exceed the sum of retained earnings plus the premium paid on the issuance of any share and income from endowments
received by us.
The amount payable to the shareholders in connection with a repurchase of shares out of our share capital may be paid in cash or by way of delivery of
assets in specie. The assets to be delivered and the amount of such substitutive share capital in connection with a repurchase of shares out of our share
capital shall be approved by the shareholders at the general meeting and shall be subject to consent by the shareholder receiving such assets. Prior to the
aforementioned general meeting considering such repurchase, our board of directors shall have the value of assets to be delivered and the amount of such
substitutive share capital in respect of repurchase of the shares audited and certified by a Taiwan certified public accountant.
Voting Rights
Each ordinary share is entitled to one vote. Voting at any meeting of shareholders is by a poll. Our Articles list a number of matters that must be approved
by the shareholders by Supermajority Resolution (as defined below). Other matters to be approved by shareholders will be decided either by special
resolution (where required by law) or by ordinary resolution. Written resolutions of shareholders in lieu of a meeting are not permitted by our Articles.
A quorum required for a meeting of shareholders consists of at least a number of shareholders present in person or by proxy and entitled to vote
representing the holders of more than one-half of all of our issued voting share capital. Shareholders’ meetings are held annually and may otherwise be
convened by our board of directors on its own initiative. Shareholders’ meetings shall also be convened on the requisition: (i) in writing of any shareholder
or shareholders holding at least three percent of the issued voting share capital for one year or longer; or (ii) of one or more shareholders holding more than
half of the paid up capital of the Company having the right of voting at general meetings for a period of at least three consecutive months at the date of the
book closure period commences, subject to certain procedural requirements. Advance notice of at least 30 calendar days is required for convening the
annual general meeting and at least 15 calendar days’ notice is required for convening extraordinary general meetings.
Any ordinary resolution to be passed by our shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast
in person or by proxy at a meeting of our shareholders. A special resolution requires the affirmative vote of not less than two-thirds of the votes cast in
person or by proxy at a meeting of our shareholders. A special resolution is required for certain matters specified in the Companies Law as requiring
approval by special resolution, including appointing a voluntary liquidator, changing our name, reducing our authorized share capital and amending our
Articles and for other matters such as issuing preferred shares, transferring treasury shares at a discount to employees or subordinate companies and
approving the redemption terms of any preferred shares.
A “Supermajority Resolution” is defined in our Articles as a resolution adopted by a majority vote of the shareholders at a general meeting attended by
shareholders who represent two-thirds or more of our total outstanding shares or, if the total number of shares represented by the shareholders present at the
general meeting is less than two-thirds of our total
2
outstanding shares, but more than one-half of our total outstanding shares, means instead, a resolution adopted at such general meeting by the shareholders
who represent two-thirds or more of the total number of shares entitled to vote on such resolution at such general meeting. Among other things, approval by
Supermajority Resolution is required for us to: (i) enter into, amend, or terminate any contract for lease of its business in whole, or for entrusting business,
or for regular joint operation with others, (ii) transfer the whole or any material part of its business or assets (iii) take over the transfer of another’s whole
business or assets, which will have a material effect on our business operation, (iv) effect any merger (subject to certain structural exceptions) or spin-off of
the company in accordance with applicable listing rules, (v) grant waiver to a director engaging in any business within the scope of our business, (vi)
discharge or remove a director, (vii) capitalize an amount standing to the credit of reserves or authorize the payment of dividends out of a reserve fund and
(viii) issue any employee share options at a discount. In addition, any merger, transfer of business and assets, share swap or other transaction that results in
our shares ceasing to be listed on the Taiwan Stock Exchange (TWSE) or TPEx must be approved by the shareholders representing at least two-thirds of
our issued shares.
Subject to certain exceptions specified in our Articles, when a person who acts as the proxy for two or more shareholders at a general meeting, the number
of votes represented by him shall not exceed three percent of the total number of votes of the company and the portion of excessive votes represented by
such proxy will not be counted.
Dividends
The holders of our ordinary shares are entitled to receive such dividends as may be declared by an ordinary resolution and subject to our Articles and the
Companies Law. Under Cayman Islands law, dividends may be paid only out of profits, which include net earnings and retained earnings undistributed in
prior years, and out of share premium, a concept analogous to paid-in surplus in the United States. No dividend may be declared and paid unless our
directors determine that immediately after the payment, we will be able to satisfy our liabilities as they become due in the ordinary course of business and
we have funds lawfully available for such purpose. We are not permitted to pay any dividends or bonuses if (i) we do not have earnings or (ii) we have not
yet covered our losses. Our Articles set out further detailed provisions dealing with how we may fund, create reserves for and pay dividends.
Any dividends will be paid to the custodian of the ADSs being issued in an offering and shall be subject to further distribution to you as a beneficial owner
of the underlying ordinary shares by the custodian. See “Description of American Depositary Shares—Dividends and Other Distributions.”
Liquidation
If we were to be liquidated and the assets available for distribution among our shareholders are insufficient to repay the whole of the share capital, such
assets shall be distributed so that, as nearly as may be, the losses shall be borne by our shareholders in proportion to the number of the ordinary shares held
by them. If in a winding up the assets available for distribution among our shareholders shall be more than sufficient to repay the whole of the share capital
at the commencement of the liquidation, the surplus shall be distributed among our shareholders in proportion to the number of the ordinary shares held by
them at the commencement of the liquidation, subject to a deduction from those ordinary shares in respect of which there are monies due, of all monies
payable to us, without prejudice to the rights of the holders of ordinary shares issued upon special terms and conditions.
If we were to be liquidated, the liquidator may, with the approval by a special resolution of our shareholders (and any other approvals as may be required
by applicable listing rules), divide among our shareholders in specie or in kind the whole or any part of our assets (whether they shall consist of property of
the same kind or not) and may, for such purpose set such value as he/she deems fair upon any property to be divided and may determine how such division
shall be carried out as between the shareholders or different classes of shareholders. The liquidator may, with the approval by an ordinary resolution of our
shareholders, vest the whole or any part of such assets in trustees upon such trusts for the benefit of the contributories as the liquidator, with the approval by
an ordinary resolution of our shareholders shall think fit, but so that no shareholder shall be compelled to accept any shares or other securities whereon
there is any liability.
Transfer of Shares
Subject to the restrictions of our Articles and applicable ROC laws, as applicable, any of our shareholders may transfer all or any of his or her ordinary
shares by an instrument of transfer in the usual or common form or any other form approved by our
3
board, provided that certain transfer restrictions apply to shares issued to our employees and subordinate companies. Subject to the requirements of
applicable laws of the Cayman Islands, transfers of uncertificated shares which are registered on the TPEx may be effected by any method of transferring
or dealing in securities introduced by the TPEx or operated in accordance with the applicable listing rules, as defined in our Articles, as appropriate.
Our board of directors may decline to register any transfer of shares unless (i) the instrument of transfer is lodged with us, accompanied by the certificate
(if any) for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the
transferor to make the transfer; (ii) the instrument of transfer is in respect of only one class of shares; (iii) the instrument of transfer is duly and properly
stamped (if required); or (iv) in the case of a transfer to joint holders, the number of joint holders to whom the share is to be transferred does not exceed
four.
The registration of transfers of shares may be suspended when our register of members is closed in accordance with our Articles for the purpose of
determining those shareholders that are entitled to receive notice of, attend or vote at any meeting of shareholders or any adjournment thereof, or those
shareholders that are entitled to receive payment of any dividend, or in order to make a determination as to who is a shareholder for any other purpose.
Variation of Rights of Shares
Whenever our share capital is divided into different classes the rights attached to any class of our shares may (unless otherwise provided by the terms of
issue of the shares of that class) only be materially adversely varied or abrogated with the approval by special resolution passed at a separate meeting of the
holders of the shares of that class, but not otherwise. The necessary quorum shall be one or more persons at least holding or representing by proxy one-half
in nominal or par value amount of the issued shares of the relevant class.
Inspection of Books and Records
Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate
records. Our board of directors is required to keep at the office of our service agent in Taiwan copies of our Articles, the minutes of every meeting of the
shareholders and the financial statements, the register of members and the counterfoil of corporate bonds issued by us. Any shareholder may at any time
request, by submitting evidentiary documents to show his or her interest, indicating the scope of such interest and specifying the document(s) he/she/it
wishes to inspect or make copies of, access to inspect and to make copies of such documents, and the Company shall procure its service agent in Taiwan to
arrange accordingly. In the event that a general meeting is convened by the board of directors or any other person having a right to convene the general
meeting in accordance with our Articles, such convener(s) may request that the Company or its service agent in Taiwan provide them with a copy of the
register of members.
Without prejudice to the rights of shareholders set out in our Articles, no shareholder is entitled to require discovery of any information in respect of any
detail of our trading or any information which is or may be in the nature of a trade secret or secret process which may relate to the conduct of our business
and which in the opinion of our board of directors would not be in the interests of the shareholders to communicate to the public.
Borrowing Power
Subject to our Articles and the ROC Regulations Governing Loaning of Funds and Making Endorsement/Guarantee by Public Companies, our board of
directors may exercise its power to borrow money and to mortgage or charge our undertaking and property, to issue debentures, debenture stock and other
securities whenever money is borrowed or as security for any debt, liability or obligation of us or of any third party.
We, however, cannot borrow money or loan funds to any person except in accordance with the requirements stipulated in our internal policies and the ROC
Regulations Governing Loaning of Funds and Making Endorsement/Guarantee by Public Companies.
Listing Rules
As a listed company on the TPEx, we are required to comply with the relevant ROC laws, regulations, rules and code as amended, from time to time,
applicable as a result of the original and continued trading or listing of any shares on any Taiwan stock exchange or securities market, including, without
limitation the relevant provisions of the Taiwan Securities
4
and Exchange Act, the Acts Governing Relations Between Peoples of the Taiwan Area and the Mainland Area, or any similar statute and the rules and
regulations of the Taiwan authorities thereunder, and the rules and regulations promulgated by the ROC FSC, the TPEx or the TWSE. This body of rules is
referred to in our Articles as “Applicable Listing Rules” and a number of the provisions of our Articles are subject to the Applicable Listing Rules. In
particular, provisions relating to the issue of shares generally by us, the issue of shares to employees, the recording of shareholdings and the issue of share
certificates, the issue of fractional shares, the transfer of shares, carrying out mergers and spin-offs, independent directors, board powers and procedure,
quorum requirements for shareholder meetings and general meeting procedure, the redemption and purchase of our shares, dealing with treasury shares,
borrowing powers, the payment of dividends and other distributions, the preparation of reports and financial statements and the winding up of the company
are all matters expressed to be subject to, and should be read in conjunction with, the Applicable Listing Rules. In addition to the Applicable Listing Rules,
our Articles are required to be in compliance with the Shareholders’ Rights Protection Checklist, or the Checklist promulgated by the TPEx or TWSE from
time to time. On March 22, 2019, our board of directors approved the Seventh Amended and Restated Memorandum and Articles of Association, which
incorporated the requirements provided in the checklist promulgated by TPEx in December 2018, or the Checklist. The Seventh Amended and Restated
Memorandum and Articles of Association were approved and adopted by special resolution at our annual general meeting held on June 21, 2019. On March
18, 2020, our board of directors approved the Eighth Amended and Restated Memorandum and Articles of Association (8th AR M&A), which incorporated
the requirements provided in the checklist promulgated by TPEx on January 8, 2020 and is expected to be approved and adopted by special resolution at
our annual general meeting to be held on June 29, 2020. Except for the requirement that non-resident or foreign investors are obligated to open certain
accounts and appoint a tax guarantor in Taiwan and the restrictions described herein, there are no other restrictions on holding or exercising voting rights on
our ordinary shares.
Currently, a party who is a PRC person may not hold our ordinary shares unless it is a qualified domestic institutional investor (QDII) in PRC. In addition,
we have committed to the TPEx that at no time will 30% or more of our shares be held by PRC persons. Therefore, at any time when 30% of our shares are
held by PRC persons, you will not be entitled to withdraw and hold the underlying ordinary shares, even if you are a QDII in PRC. Under current ROC law,
a PRC person means an individual having residence in PRC (but not including a special administrative region of China such as Hong Kong or Macau, if so
excluded by applicable laws of the ROC), any legal person, group, or other institutions of China and any corporation and other entity organized in countries
outside of the ROC or PRC, but is directly or indirectly controlled by or directly or indirectly has more than 30% of its capital beneficially owned by any
PRC person described above.
We cannot exercise any voting rights attached to the treasury shares held by us.
No vote may be exercised with respect to any of the following shares and such shares shall not be counted in determining the number of issued shares: (i)
the shares held by any of our subsidiaries, where the total voting shares held by us in such a subsidiary represents more than one half of the total number of
voting shares of the total share equity of such a subsidiary; or (ii) the shares held by another company, where the total number of the shares or total shares
equity of that company held by us and our subsidiaries directly or indirectly represents more than one half of the total number of voting shares or the total
share equity of such a company. If a director gives security over more than 50% of the number of shares the director held at the time such director was
elected as a director of us, no vote may be exercised with respect to the shares representing the difference between the pledged shares and 50% of the initial
shares, and such shares representing the difference between the pledged shares and 50% of the initial shares shall not be counted in the number of the votes
cast by the shareholders present at the general meeting.
In the case of joint holders, the joint holders shall select among them a representative for the exercise of their shareholder’s rights and the vote of their
representative who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders.
A shareholder of unsound mind, or in respect of whom an order has been made by any court having jurisdiction in mental illness, may vote by his
committee, or other person in the nature of a committee appointed by that court, and any such committee or other person, may vote by proxy.
A shareholder cannot exercise his or her own vote or by vote by proxy on behalf of another shareholder in respect of any contract or proposed contract or
arrangement if he may be interested therein. Such shares shall not be counted in determining the number of votes of the shareholders present at the meeting
with regard to such resolution, but such shares may be counted in determining the number of shares represented at the meeting for the purposes of
determining the quorum.
If an ADS holder will receive more than 10% of the issued shares of the company after withdrawal of their deposited securities, then such holder will be
required to (i) make a filing with the ROC FSC of the required reporting in accordance with Article
5
43-1 of the Taiwan Act upon the acquisition of more than 10% of shares of the company, (ii) make a filing with the ROC FSC in accordance with Article
25 of the Taiwan Act of notification of any changes of the shareholding of a director, supervisor, manager or shareholder (together with his or her spouse,
minor children and nominee) holding more than 10% of the shares of the company, and (iii) apply for the prior approval of the Investment Commission,
Ministry of Economic Affairs, Executive Yuan of the ROC for acquiring 10% or more of shares of the company.
Convertible Loan and Warrants
In September, October and November 2019, we entered into a series of loan facilities with certain of our directors, existing stockholders or affiliates
thereof, and others, for an aggregate loan amount of $3.25 million. The two types of loan facility are described below:
Convertible Loan Facility
On September 30, 2019, we entered into a loan facility with Bukwang Pharmaceutical Co., Ltd., for an amount of $1.0 million. The Convertible Loan
Facility has a two-year term with a 10% interest rate per annum, commencing upon the date we draw down on such facility. We have the option to repay
the amounts owed under the Convertible Loan Facility at any time, subject to certain conditions.
The lender will have the right to convert, at its option, any outstanding principal amount plus accrued and unpaid interest under the loan into that number of
our newly issued ADSs which is calculated by dividing (a) such outstanding principal amount and accrued and unpaid interest by (b) 90% of the volume-
weighted average price of our ADSs on the date of the conversion notice. Each ADS represents five of our ordinary shares. The ability to convert is subject
to certain conditions, including that our ordinary shares will have been delisted from the TPEx, and expires at the expiry of the term of the loan.
October/November 2019 Loan Facility
On October 25 2019, we entered into a loan facility with certain existing stockholders/directors, or affiliates thereof, and on November 11 2019, we entered
into a related loan facility with the affiliate of another existing stockholder, for an aggregate amount of $2.25 million. The October/November 2019 Loan
Facility has a two-year term with a 10% interest rate per annum, commencing upon the date we draw down the facility, which must be drawn down in full.
We have the option to repay not less than $1.0 million of the amounts owed under the October/November 2019 Loan Facility at any time, subject to certain
conditions. In the event that we raise net proceeds of more than ten times the aggregate loan amount in a single financing transaction during the loan term,
we will be obligated to repay any unpaid portion of the principal amount and accrued interest thereunder within 30 days of the receipt of the proceeds from
such re-financing transaction.
The October/November 2019 Loan Facility provides that, during the time that any amount is outstanding thereunder, we will not (i) incur any finance debt
which is secured by a security interest or conferring repayment rights which rank in priority over those of the lenders, or (ii) carry out or implement any
merger, consolidation, reorganization (other than our solvent reorganization), recapitalization, reincorporation, share dividend or other changes in our
capital structure which may have a material adverse effect on the rights of the lenders, in each case except with the prior written consent of the lenders. In
addition, upon an event of default (as defined in the October/November 2019 Loan Facility), the lenders may declare the principal amounts then
outstanding and all interest thereon accrued and unpaid to be immediately due and payable to the lenders.
In October 2019, we drew down on an initial $1.95 million under the October/November 2019 Loan Facility. In connection with this initial draw down, we
issued warrants to purchase 483,448 ADSs (representing 2,417,240 ordinary shares) to certain of the lenders, at an exercise price of $2.02 per ADS. In
November 2019, we drew down on the remaining $0.3 million under the October/November 2019 Loan Facility. In connection with the second draw down,
we issued warrants to purchase 74,377 ADSs (representing 371,885 ordinary shares) to the lenders at an exercise price of $2.02 per ADS.
The warrants are exercisable only after our ordinary shares have been delisted from TPEx, and will expire on the earlier of (i) the first anniversary of such
TPEx delisting or (ii) expiry of the term of the October/November 2019 Loan Facility. If, by expiry of the term of the October/November 2019 Loan
Facility, (i) our shares have not been delisted from TPEx and (ii) the warrants have not been exercised, the lenders shall be entitled to receive a further sum
equal to 5% of the principal amount per annum, by way of additional interest, payable by us upon expiry of the loan term.
Preference Shares
Pursuant to our Articles, we may issue shares with rights which are preferential to those of ordinary shares issued by us with the approval of a majority of
our board of directors present at a meeting attended by two-thirds or more of the total number of
6
directors and with the approval of a special resolution. Our Articles must be amended by special resolution to provide for such preference shares.
Material Differences in Corporate Law
The Companies Law is modeled after the corporate legislation of the United Kingdom but does not follow recent United Kingdom statutory enactments,
and differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between
the provisions of the Companies Law applicable to us and the laws applicable to companies incorporated in Delaware and their shareholders. In addition,
because our Articles require us to comply with the Checklist, the below comparison also includes a brief summary of the requirements we must follow to
maintain such compliance with the TPEx or the TWSE.
Title of Organizational
Documents
Bylaws
Delaware
Cayman Islands
Certificate of Incorporation
Memorandum of Association
Duties of Directors
Under Delaware law, the business and affairs of a
corporation are managed by or under the direction of its
board of directors. In exercising their powers, directors
are charged with a fiduciary duty of care to protect the
interests of the corporation and a fiduciary duty of loyalty
to act in the best interests of its shareholders. The duty of
care requires that directors act in an informed and
deliberative manner and inform themselves, prior to
making a business decision, of all material information
reasonably available to them. The duty of care also
requires that directors exercise care in overseeing and
investigating the conduct of the corporation’s employees.
The duty of loyalty may be summarized as the duty to act
in good faith, not out of self-interest, and in a manner
which the director reasonably believes to be in the best
interests of the shareholders.
7
Articles of Association
As a matter of Cayman Islands law, directors of Cayman
Islands companies owe fiduciary duties to their
respective companies to, amongst other things, act in
good faith in their dealings with or on behalf of the
company and exercise their powers and fulfill the duties
of their office honestly. Five core duties are:
•
•
•
•
•
a duty to act in good faith in what the directors
bona fide consider to be the best interests of the
company (and in this regard, it should be noted that
the duty is owed to the company and not to
associate companies, subsidiaries or holding
companies);
a duty not to personally profit from opportunities
that arise from the office of director;
a duty of trusteeship of the company’s assets;
a duty to avoid conflicts of interest; and
a duty to exercise powers for the purpose for
which such powers were conferred.
A director of a Cayman Islands company also owes the
company a duty to act with skill, care and diligence. A
director need not exhibit in the performance of his or her
duties a greater degree of skill than may reasonably be
expected from a person of his or her knowledge and
experience.
The Companies Law has no equivalent provision to
Delaware law regarding the limitation of director’s
liability. However, as a matter of public policy, Cayman
Islands law will not allow the limitation of a director’s
liability to the extent that the liability is a consequence
of the director committing a crime or of the director’s
own fraud, dishonesty or willful default.
Cayman Islands law does not limit the extent to which a
company’s articles of association may provide for
indemnification of directors and officers, except to the
extent any such provision may be held by the Cayman
Islands courts to be contrary to public policy, such as to
provide indemnification against the consequences of
committing a crime, or against the indemnified person’s
own fraud or dishonesty.
Our Articles contain a provision that prohibits a director
from voting (or voting on behalf of another director) in
respect of any transaction in which he or she is
interested.
Our Articles also provide that, where the spouse of a
director, a person with a kinship to a director within the
second degree, or a company controlled by or
controlling a director has a direct or indirect interest in
any matter, such director will be deemed to have an
interest in such matter.
Limitations on Personal Liability
Subject to the limitations described below, a certificate of
of Directors
Indemnification of Directors,
Officers, Agents, and Others
incorporation may provide for the elimination or
limitation of the personal liability of a director to the
corporation or its shareholders for monetary damages for
a breach of fiduciary duty as a director.
Such provision cannot limit liability for breach of loyalty,
bad faith, intentional misconduct, unlawful payment of
dividends or unlawful share purchase or redemption. In
addition, the certificate of incorporation cannot limit
liability for any act or omission occurring prior to the
date when such provision becomes effective.
A corporation has the power to indemnify any director,
officer, employee, or agent of the corporation who was,
is, or is threatened to be made a party who acted in good
faith and in a manner he believed to be in the best
interests of the corporation, and if with respect to a
criminal proceeding, had no reasonable cause to believe
his conduct would be unlawful, against amounts actually
and reasonably incurred.
Interested Directors
Under Delaware law, a transaction in which a director
who has an interest is not void or voidable solely because
such interested director is present at or participates in the
meeting that authorizes the transaction if: (i) the material
facts as to such interested director’s relationship or
interests are disclosed or are known to the board of
directors and the board in good faith authorizes the
transaction by the affirmative vote of a majority of the
disinterested directors, even though the disinterested
directors are less than a quorum, (ii) such material facts
are disclosed or are known to the shareholders entitled to
vote on such transaction and the transaction is
specifically approved in good faith by vote of the
shareholders, or (iii) the transaction is fair as to the
corporation as of the time it is authorized, approved or
ratified. Under Delaware law, a director could be held
liable for any transaction in which such director derived
an improper personal benefit.
8
Voting Requirements
The certificate of incorporation may include a provision
requiring supermajority approval by the directors or
shareholders for any corporate action.
In addition, under Delaware law, certain business
combinations involving interested shareholders require
approval by a supermajority of the non-interested
shareholders.
Voting for Directors
Under Delaware law, unless otherwise specified in the
certificate of incorporation or bylaws of the corporation,
directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the
meeting and entitled to vote on the election of directors.
Cumulative Voting
No cumulative voting for the election of directors unless
so provided in the certificate of incorporation.
For the protection of shareholders, certain matters must
be approved by special resolution of the shareholders as
a matter of Cayman Islands law, including alteration of
the memorandum or articles of association, appointment
of inspectors to examine company affairs, reduction of
share capital (subject, in relevant circumstances, to court
approval), change of name, authorization of a plan of
merger or transfer by way of continuation to another
jurisdiction or consolidation or voluntary winding up of
the company.
The Companies Law requires that a special resolution be
passed by a super majority of at
least two-thirds or such higher percentage as set forth in
the articles of association, of shareholders being entitled
to vote and do vote in person or by proxy at a general
meeting, or by unanimous written consent of
shareholders entitled to vote at a general meeting.
However, our Articles do not permit resolutions of
shareholders to be passed in writing in lieu of a general
meeting.
The Companies Law defines “special resolutions” only.
A company’s articles of association can therefore tailor
the definition of “ordinary resolutions” as a whole, or
with respect to specific provisions. Our Articles provide
that the election of directors shall be subject to
applicable listing rules. At a general meeting of election
of directors, the number of votes exercisable in respect
of one share shall be the same as the number of directors
to be elected, and the total number of votes per share
may be consolidated for election of one candidate or
may be split for election of two or more candidates. A
candidate to whom the ballots cast represent a prevailing
number of votes shall be deemed a director so elected.
No cumulative voting for the election of directors unless
so provided in the articles of association. Our Articles
expressly provide for cumulative voting on the election
of directors as described above.
Directors’ Powers Regarding
The certificate of incorporation may grant the directors
Bylaws
the power to adopt, amend or repeal bylaws.
The memorandum and articles of association may only
be amended by a special resolution of the shareholders.
Nomination and Removal of
Directors and Filling
Vacancies on Board
Shareholders may generally nominate directors if they
comply with advance notice provisions and other
procedural requirements in company bylaws. Holders of a
majority of the shares may remove a director with or
without cause, except in certain cases involving a
classified board or if the company uses cumulative
voting. Unless otherwise provided for in the certificate of
incorporation, directorship vacancies are filled by a
majority of the directors elected or then in office.
9
Nomination and removal of directors and filling of board
vacancies are governed by the terms of the articles of
association. Our Articles provide that only shareholders
may elect directors by cumulative voting and may
remove directors by Supermajority Resolution.
Mergers and Similar
Arrangements
Under Delaware law, with certain exceptions, a merger,
consolidation, exchange or sale of all or substantially all
the assets of a corporation must be approved by the board
of directors and a majority of the outstanding shares
entitled to vote thereon. Under Delaware law, a
shareholder of a corporation participating in certain major
corporate transactions may, under certain circumstances,
be entitled to appraisal rights pursuant to
which such shareholder may receive cash in the amount
of the fair value of the shares held by such shareholder
(as
determined by a court) in lieu of the consideration such
shareholder would otherwise receive in the transaction.
Delaware law also provides that a parent corporation, by
resolution of its board of directors, may merge with any
subsidiary, of which it owns at least
90% of each class of capital stock without a vote by
shareholders of such subsidiary. Upon any such merger,
dissenting shareholders of the subsidiary would have
appraisal rights.
The Companies Law provides for the merger or
consolidation of two or more companies into a single
entity. The legislation makes a distinction between a
“consolidation” and a “merger.” In a consolidation, a
new entity is formed from the combination of each
participating company, and the separate consolidating
parties, as a consequence, cease to exist and are each
stricken by the Registrar of Companies. In a merger, one
company remains as the surviving entity, having in effect
absorbed the other merging party that then ceases to
exist.
Two or more Cayman Islands companies may merge or
consolidate. Cayman Islands companies may also merge
or consolidate with foreign companies provided that the
laws of the foreign jurisdiction permit such merger or
consolidation.
Under the Companies Law, a plan of merger or
consolidation shall be authorized by each constituent
company by way of (i) a special resolution of the
members of each such constituent company; and (ii)
such other authorization, if any, as may be specified in
such constituent company’s articles of association.
Shareholder approval is not required where a parent
company registered in the Cayman Islands seeks to
merge with one or more of its subsidiaries registered in
the Cayman Islands and a copy of the plan of merger is
given to every member of each subsidiary company to
be merged unless that member agrees otherwise.
Secured creditors must consent to the merger although
application can be made to the Grand Court of the
Cayman Islands for such requirement to be waived if
such secured creditor does not grant its consent to the
merger. Where a foreign company wishes to merge with
a Cayman company, consent or approval to the transfer
of any security interest granted by the foreign company
to the resulting Cayman entity in the transaction is
required, unless otherwise released or waived by the
secured party. If the merger plan is approved, it is then
filed with the Cayman Islands Registrar of Companies
along with a declaration by a director of each company.
The Registrar of Companies will then issue a certificate
of merger which shall be prima facie evidence of
compliance with all requirements of the Companies Law
in respect of the merger or consolidation.
10
The surviving or consolidated entity remains or becomes
active while the other company or companies are
automatically dissolved. Unless the shares of such
shareholder are publicly listed or quoted, dissenting
shareholders in a merger or consolidation of this type are
entitled to payment of the fair value of their shares if
such shareholder provides a written objection before the
vote on such merger or consolidation. With respect to
shares that are listed or quoted, a
shareholder shall have similar rights only if it is required
by the terms of the merger or consolidation to accept for
such shares property other than (i) shares (or depositary
receipts in respect thereof) in the surviving or
consolidated company; (ii) listed or quoted shares (or
depositary receipts in respect thereof) of another
company; (iii) cash in lieu of any fractions of shares or
depositary receipts described at (i) and (ii); or (iv) any
combination of shares, depositary receipts or cash
described in (i)—(iii).
Cayman companies may also be restructured or
amalgamated under supervision of the Grand Court of
the Cayman Islands by way of a court-sanctioned
“scheme of arrangement.” A scheme of arrangement is
one of several transactional mechanisms available in the
Cayman Islands for achieving a restructuring. Others
include share capital exchange, merger (as described
above), asset acquisition or control, through contractual
arrangements, of an operating business. A scheme of
arrangement must not be beyond the powers of the
company, as stated in the constitutional documents of the
company and also requires the approval of a majority, in
number, of each class of shareholders and creditors with
whom the arrangement is to be made and who must in
addition represent three-fourths in value of each such
class of shareholders or creditors, as the case may be,
that are present and voting either in person or by proxy
at the meeting summoned for that purpose. The
convening of the meetings and subsequently the terms of
the arrangement must be sanctioned by the Grand Court
of the Cayman Islands. While a dissenting shareholder
would have the right to express to the Court its view that
the transaction ought not be approved, the Court can be
expected to approve the scheme of arrangement if it is
satisfied that:
11
• the classes which are required to approve the
scheme of arrangement have been properly
constituted, so that the members of such classes are
properly represented;
• the meetings held by the company in relation to the
approval of the scheme of arrangement by such
classes have been convened and held in accordance
with any directions given by the Court;
• the scheme of arrangement has been properly
explained to the shareholders or creditors so that
they have been able
to exercise an informed vote in respect of the
scheme; the scheme of arrangement is one which
an intelligent and honest man, who is a member of
the relevant class and properly acting might
approve.
When a takeover offer is made and accepted by holders
of 90% of the shares within four months, the offeror
may, within a two-month period, require the holders of
the remaining shares to transfer such shares on the terms
of the offer. An objection may be made to the Grand
Court of the Cayman Islands but is unlikely to succeed
unless there is evidence of fraud, bad faith or collusion.
If the arrangement and reconstruction are thus approved,
any dissenting shareholders would have no rights
comparable to appraisal rights, which would otherwise
ordinarily be available to dissenting shareholders of
United States corporations, providing rights to receive
payment in cash for the judicially determined value of
the shares.
12
Our Articles provide that in the event the resolutions
with respect to a merger are approved in accordance
with the laws of the Cayman Islands, any shareholder
who has notified us in writing of his objection to such
proposal prior to such meeting and subsequently raised
his objection at the meeting may request us to purchase
all of his shares at the then prevailing fair price. In the
event any part of the company’s business is spun off or
involved in any merger, the shareholder, who has
forfeited his right to vote on such matter and expressed
his dissent therefor, in writing or verbally (with a record)
before or during the general meeting, may request us to
buy back all of his shares at the then prevailing fair
price. In the event that we fail to reach such agreement
with the shareholder within 60 days after the resolution
date, the shareholder may, within 30 days after such 60-
day period, file a petition to any competent court of
ROC for a ruling on the appraisal price, and to the extent
that the ruling is capable of enforcement and recognition
in the relevant jurisdiction, such ruling by such ROC
court shall be binding and conclusive as between us and
requested shareholder solely with respect to the appraisal
price. Our 8th AR M&A if approved and adopted by
special resolution at our annual general meeting to be
held on June 29, 2020, provides that in the event that we
fail to reach such agreement with the
shareholder within 60 days after the resolution date, we
shall, within 30 days after such 60 -day period, file a
petition to any competent court of Taiwan for a ruling on
the appraisal price against all the dissenting shareholders
as the opposing party, and to the extent that the ruling is
capable of enforcement and recognition in the relevant
jurisdiction, such ruling by such Taiwan court shall be
binding and conclusive between us and requested
shareholder solely with respect to the appraisal price.
Our Articles provide that, if we propose to effect any
merger, transfer and assumption of our business or
assets, share swap or spin-off, as a result of which we
would cease to be a TPEx-listed company and the
surviving company, transferee company, existing
company or newly set-up company (depending on the
circumstances) is not a company listed on TWSE or
TPEx, such transaction must be approved by the
shareholders representing two thirds of the issued and
outstanding shares of us.
The mergers and acquisitions of the Company shall also
be subject to the procedural requirements under the
Applicable Listing Rules.
Our 8th AR M&A if approved and adopted by special
resolution at our annual general meeting to be held on
June 29, 2020, provides that, before any resolution of
merger/consolidation and/or acquisition made by the
board of directors, the audit committee shall review the
fairness and reasonableness of the plan and transaction
of the merger/consolidation and/or acquisition, and then
to report the review results to the board of directors and
the general meeting. When the audit committee reviews
matters, it shall seek opinions from an independent
expert on the justification of the share exchange ratio or
distribution of cash or other assets. The review results of
the audit committee and the opinions from the
independent experts shall be delivered to each
shareholder together with the notice of the general
meeting. If we announced the same content as in
aforesaid documents that shall be sent to shareholders on
a website designated by the competent securities
authority and those documents are prepared in our place
and at the venue of the general meeting by us, those
documents shall be deemed as having been sent to
shareholders.
13
Shareholder Suits
Class actions and derivative actions generally are
available to shareholders under Delaware law for, among
other things, breach of fiduciary duty, corporate waste
and actions not taken in accordance with applicable law.
In such actions, the court generally has discretion to
permit the winning party to recover attorneys’ fees
incurred in connection with such action.
Inspection of Corporate Records Under Delaware law, shareholders of a Delaware
corporation have the right during normal business hours
to inspect for any proper purpose, and to obtain copies of
list(s) of shareholders and other books and records of the
corporation and its subsidiaries, if any, to the extent the
books and records of such subsidiaries are available to the
corporation.
14
The rights of shareholders under Cayman Islands law are
not as extensive as those under Delaware law. Class
actions are generally not available to shareholders under
Cayman Islands laws; historically, there have not been
any reported instances of such class actions having been
successfully brought before the Cayman Islands courts.
In principle, we will normally be the proper plaintiff and
a derivative action may be brought by a minority
shareholder in only limited circumstances. In this regard,
the Cayman Islands courts would ordinarily be expected
to follow English case law precedent, which would
permit a shareholder to commence an action in the
company’s name to remedy a wrong done to the
company where the act complained of cannot be ratified
by the shareholders and where control of the company
by the wrongdoer results in the company not pursuing a
remedy itself. The case law shows that derivative actions
have been permitted in respect of acts that are beyond
the company’s corporate power, illegal, where the
individual rights of the plaintiff shareholder have been
infringed or are about to be infringed and acts that are
alleged to constitute a “fraud on the minority.” The
winning party in such an action generally would be able
to recover a portion of attorney’s fees incurred in
connection with such action.
Our Articles provide that, subject to the laws of the
Cayman Islands, any shareholder(s) holding one percent
or more of the total number of our issued shares for a
period of six months or a longer time shall have the right
to submit a petition for and on behalf of us against our
director(s), and Taipei District Court, ROC, may have
jurisdiction over such petition.
Shareholders of a Cayman Islands exempted company
have no general right under Cayman Islands law to
inspect or obtain copies of a list of shareholders or other
corporate records (other than the register of mortgages or
charges) of the company. However, these rights may be
provided in the company’s articles of association.
Our Articles provide that, in the event that a general
meeting is convened by the board of directors or any
other person having a right to convene the general
meeting, such convener(s) may request us or our
shareholders’ service agent to provide the register of
members.
Shareholder Proposals
Unless provided in the corporation’s certificate of
incorporation or bylaws, Delaware law does not include a
provision restricting the manner in which shareholders
may bring business before a meeting.
Approval of Corporate Matters
by Written Consent
Delaware law permits shareholders to take action by
written consent signed by the holders of outstanding
shares having not less than the minimum number of votes
that would be necessary to authorize or take such action
at a meeting of shareholders.
Calling of Special Shareholders
Delaware law permits the board of directors or any
Meetings
person who is authorized under a corporation’s certificate
of incorporation or bylaws to call a special meeting of
shareholders.
The Companies Law does not provide shareholders any
right to bring business before a meeting or requisition a
general meeting. However, these rights may be provided
in the company’s articles of association. Our Articles do
provide for these rights.
The Companies Law allows a special resolution to be
passed in writing if signed by all the voting shareholders
(if authorized by the articles of association).
Our Articles do not authorize such written consents.
The Companies Law does not have provisions governing
the proceedings of shareholders meetings which are
usually provided in the articles of association.
Our Articles allow for shareholders’ meetings to be
convened on the requisition (i) in writing of any
shareholder or shareholders holding at least three percent
of the issued share capital for one year or longer or; (ii)
of one or more shareholders holding more than half of
the paid up capital of the Company having the right of
voting at general meetings for a period of at least three
consecutive months at the date the book closure period
commences, subject to certain procedural requirements.
Our Articles also provide that, in the event that our
board of directors does not or cannot convene a general
meeting, or an independent director member of audit
committee otherwise finds it necessary for the interests
of shareholders, the independent director may convene a
general meeting.
15
DESCRIPTION OF AMERICAN DEPOSITARY SHARES
American Depositary Receipts
JPMorgan Chase Bank, N.A. (JPMorgan) as depositary bank, registers and delivers our American Depositary Shares, also referred to as ADSs. Each ADS
will represent an ownership interest in a designated number of our ordinary shares which we will deposit with the depositary or the custodian, as agent of
the depositary, under the deposit agreement among ourselves, the depositary and yourself as an ADR holder. In the future, each ADS will also represent any
securities, cash or other property deposited with the depositary but which have not distributed directly to you. Unless certificated ADRs are specifically
requested by you, all ADSs will be issued on the books of our depositary in book-entry form and periodic statements will be mailed to you which reflect
your ownership interest in such ADSs. In our description, references to American depositary receipts or ADRs shall include the statements you will receive
which reflect your ownership of ADSs. The depositary’s office is located at 4 New York Plaza, Floor 12, New York, NY, 10004. A form of the deposit
agreement is incorporated by reference as an exhibit to our annual report on Form 20-F for the fiscal year ended December 31, 2019.
You may hold ADSs either directly or indirectly through your broker or other financial institution. If you hold ADSs directly, by having an ADS registered
in your name on the books of the depositary, you are an ADR holder. This description assumes you hold your ADSs directly. If you hold the ADSs through
your broker or financial institution nominee, you must rely on the procedures of such broker or financial institution to assert the rights of an ADR holder
described in this section. You should consult with your broker or financial institution to find out what those procedures are.
As an ADR holder, we will not treat you as a shareholder of ours and you will not have any direct shareholder rights. Because the depositary or its nominee
will be the shareholder of record for the ordinary shares represented by all outstanding ADSs, shareholder rights rest with such record holder. Your rights
are those of an ADR holder. Such rights derive from the terms of the deposit agreement to be entered into among us, the depositary and all holders from
time to time of ADRs issued under the deposit agreement. The obligations of the depositary and its agents are also set out in the deposit agreement.
Because the depositary or its nominee will actually be the registered owner of the ordinary shares, you must rely on it to exercise the rights of a shareholder
on your behalf. The deposit agreement and the ADSs are governed by New York law. However, our obligations to the holders of ordinary shares will
continue to be governed by the laws of Taiwan and the Cayman Islands, which may be different from the laws of the United States. Under the deposit
agreement, as an ADR holder, you agree that any legal suit, action or proceeding against or involving us or the depositary, arising out of or based upon the
deposit agreement, the ADSs, the ADRs or the transactions contemplated thereby, may only be instituted in a state or federal court in New York, New York,
and you irrevocably waive any objection which you may have to the laying of venue of any such proceeding and irrevocably submit to the exclusive
jurisdiction of such courts in any such suit, action or proceeding.
The following is a summary of what we believe to be the material terms of the deposit agreement. Notwithstanding this, because it is a summary, it may not
contain all the information that you may otherwise deem important. For more complete information, you should read the entire deposit agreement and the
form of ADR which contains the terms of your ADSs. You can read a copy of the deposit agreement which is filed as an exhibit to our annual report on
Form 20-F for the fiscal year ended December 31, 2019.
Share Dividends and Other Distributions
How will I receive dividends and other distributions on the ordinary shares underlying my ADSs?
We may make various types of distributions with respect to our securities. The depositary has agreed that, to the extent practicable, it will distribute to you
the cash dividends or other distributions it or the custodian receives on ordinary shares or other deposited securities, after converting any cash received into
U.S. dollars (if it determines such conversion may be made on a reasonable basis) and, in all cases, making any necessary deductions provided for in the
deposit agreement. The depositary may utilize a division, branch or affiliate of JPMorgan to direct, manage and/or execute any public and/or private sale of
securities under the deposit agreement. Such division, branch and/or affiliate may charge the depositary a fee in connection with such sales, which fee is
considered an expense of the depositary. You will receive these distributions in proportion to the number of underlying securities that your ADSs represent.
Except as stated below, the depositary will deliver such distributions to ADR holders in proportion to their interests in the following manner:
16
•
Cash. The depositary will distribute any U.S. dollars available to it resulting from a cash dividend or other cash distribution or the net
proceeds of sales of any other distribution or portion thereof (to the extent applicable), on
an averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or
impracticable with respect to certain registered ADR holders, and (iii) deduction of the depositary’s and/or its agents’ fees and expenses in (1)
converting any foreign currency to U.S. dollars to the extent that it determines that such conversion may be made on a reasonable basis, (2)
transferring foreign currency or U.S. dollars to the United States by such means as the depositary may determine to the extent that it
determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority
required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by
public or private means in any commercially reasonable manner. If exchange rates fluctuate during a time when the depositary cannot convert
a foreign currency, you may lose some or all of the value of the distribution.
•
•
Shares. In the case of a dividend or free distribution in ordinary shares, the depositary will issue additional ADRs to evidence the number of
ADSs representing such ordinary shares. Only whole ADSs will be issued. Any ordinary shares which would result in fractional ADSs will be
sold and the net proceeds will be distributed in the same manner as cash to the ADR holders entitled thereto.
Rights to receive additional ordinary shares. In the case of a distribution of rights to subscribe for additional ordinary shares or other rights, if
we timely provide evidence satisfactory to the depositary that it may lawfully distribute such rights, the depositary will distribute warrants or
other instruments in the discretion of the depositary representing such rights. However, if we do not timely furnish such evidence, the
depositary may:
(i)
(ii)
sell such rights if practicable and distribute the net proceeds in the same manner as cash to the ADR holders entitled thereto; or
if it is not practicable to sell such rights by reason of the non-transferability of the rights, limited markets therefor, their short
duration or otherwise, do nothing, in which case ADR holders will receive nothing and the rights may lapse.
•
Other Distributions. In the case of a distribution of securities or property other than those described above, the depositary may either (i)
distribute such securities or property in any manner it deems equitable and practicable or (ii) to the extent the depositary deems distribution of
such securities or property not to be equitable and practicable, sell such securities or property and distribute any net proceeds in the same way
it distributes cash.
If the depositary determines in its discretion that any distribution described above is not practicable with respect to any specific registered ADR holder, the
depositary may choose any method of distribution that it deems practicable, including the distribution of foreign currency, securities or property, or it may
retain such items, without paying interest on or investing them, on behalf of the ADR holder as deposited securities, in which case the ADSs will also
represent the retained items.
Any U.S. dollars will be distributed by checks drawn on a bank in the United States for whole dollars and cents. Fractional cents will be withheld without
liability and dealt with by the depositary in accordance with its then current practices.
The depositary is not responsible if it fails to determine that any distribution or action is lawful or reasonably practicable.
There can be no assurance that the depositary will be able to convert any currency at a specified exchange rate or sell any property, rights, shares or other
securities at a specified price, nor that any of such transactions can be completed within a specified time period. All purchases and sales of securities will
be handled by the Depositary in accordance with its then current policies, which are currently set forth in the “Depositary Receipt Sale and Purchase of
Security” section of https://www.adr.com/Investors/FindOutAboutDRs, the location and contents of which are not incorporated into this exhibit and which
the Depositary shall be solely responsible for.
Deposit, Withdrawal and Cancellation
How does the depositary issue ADSs?
Subject to any restrictions on deposit provided for under the laws of the Cayman Islands or the ROC and the deposit agreement, the depositary will issue
ADSs against the deposit of: (i) ordinary shares in registered form, validly issued and outstanding; (ii) rights to receive ordinary shares from us or any
registrar, transfer agent, clearing agent or other entity recording share ownership or transactions, subject in each case to payment of the fees and expenses
owing to the depositary in connection with such issuance.
Under current ROC law, no deposit of ordinary shares may be made under the deposit agreement, and no additional ADSs may be issued in respect thereof,
without specific ROC regulatory approval, except in connection with: (a) stock dividends on, or free distributions of, ordinary shares; (b) the exercise by
ADR holders of their pre-emptive rights in connection with
17
capital increases for cash or (c) the purchase directly by any person or through the depositary or its agent of shares on the TPEx for delivery of ordinary
shares to the custodian or the delivery of ordinary shares already held to the custodian for deposit; provided that the total number of ADSs outstanding
hereunder does not exceed the number of issued ADSs previously approved by the ROC Financial Supervisory Commission (plus any ADSs created
pursuant to (a) and (b) above). Under current ROC law, issuances under (c) above will be permitted only to the extent that previously issued ADSs have
been cancelled and as permitted hereunder. At its discretion, the depositary may refuse to accept ordinary shares for deposit under (c) above unless it
receives satisfactory evidence or notification from us to the effect that the ordinary shares may be lawfully deposited.
Ordinary shares deposited in the future with the custodian must be accompanied by certain documents, including proper endorsements or duly executed
instruments of transfer in respect of such deposited shares, a delivery order directing the depositary to issue ADSs to, or upon the written order of, the
person designated in such order, instruments assigning to the custodian, the depositary or the nominee of either of them any distribution on the ordinary
shares so deposited or indemnity therefor, and proxies entitling the custodian to vote the deposited ordinary shares.
The custodian will hold all deposited ordinary shares for the account and to the order of the depositary for the benefit of holders of ADRs. ADR holders
thus have no direct ownership interest in the ordinary shares and only have such rights as are contained in the deposit agreement. The custodian will also
hold any additional securities, property and cash received on or in substitution for the deposited ordinary shares. The deposited ordinary shares and any
such additional items are referred to as “deposited securities.”
Upon each deposit of ordinary shares, receipt of related delivery documentation and compliance with the other provisions of the deposit agreement,
including the payment of the fees and charges of the depositary and any taxes or other fees or charges owing, the depositary will issue an ADR or ADRs in
the name or upon the order of the person entitled thereto evidencing the number of ADSs to which such person is entitled. All of the ADSs issued will,
unless specifically requested to the contrary, be part of the depositary’s direct registration system, and a registered holder will receive periodic statements
from the depositary which will show the number of ADSs registered in such holder’s name. An ADR holder can request that the ADSs not be held through
the depositary’s direct registration system and that a certificated ADR be issued.
How do ADR holders cancel an ADS and obtain deposited securities?
Beginning on the fifth ROC business day following the date of initial issuance of the ADSs or such later date as the depositary may announce, subject to
the approval of TPEx, any necessary ROC approvals and the provisions under the deposit agreement, ADR holders are entitled to withdraw and sell the
underlying ordinary shares.
In accordance with the deposit agreement and subject to the requirements of the laws of the Cayman Islands and the ROC, an ADR holder may request the
depositary to withdraw from the depositary receipt facility created by the deposit agreement the ordinary shares represented by such holder’s ADRs and
transfer such ordinary shares to such holder or, upon the written order of any person designated in such ADR holder’s written order, or a Withdrawal Order,
upon surrender of (a) a certificated ADR in a form satisfactory to the depositary or (b) proper instructions and documentation in the case of an ADR issued
through the depositary’s direct registration system, as the case may be, in each case upon payment of any fees, expenses, taxes or governmental charges as
provided in the deposit agreement, delivery to the depositary of any documentation, certifications or information which may be required in order to comply
with the laws, rule or regulations of the Cayman Islands and the ROC, and subject to the terms of the deposit agreement, provided that we have delivered to
the custodian the ordinary shares in physical certificate form or scripless form to be sold or so delivered.
Under current ROC law, an ADR holder who is a non-ROC person wishing to withdraw and hold deposited securities from the ADR facility is required to
appoint an eligible agent in the ROC for filing tax returns and making tax payments, or a Tax Guarantor. Such Tax Guarantor will be required to meet the
qualifications set by the Ministry of Finance of the ROC and will act as the guarantor of the withdrawing ADR holder’s tax payment obligations. In
addition, subject to certain limited exceptions, under current ROC law, repatriation of profits by a non-ROC withdrawing ADR holder is subject to the
submission of evidence by the withdrawing ADR holder of the appointment of a Tax Guarantor to, and approval thereof by, the tax authority and tax
clearance certificates or evidentiary document issued by the Tax Guarantor. There can be no assurance that a withdrawing ADR holder will be able to
appoint and obtain approval for such agent in a timely manner or at all.
Under current ROC law, an ADR holder who is not an ROC resident or ROC company wishing to present ADSs to the depositary for cancellation and
withdrawal and holding of the deposited securities from the depositary receipt facility is
18
required to register as a foreign investor with the TWSE, if the ADR holder has never registered as foreign investor with the TWSE previously, for making
investments in the ROC securities market prior to withdrawing and holding the deposited securities from the depositary receipts facility.
Under current ROC law, such withdrawing ADR holder is required to appoint a local agent in the ROC to, among other things, open a securities trading
account with prior approval granted by the TWSE with a local securities brokerage firm (with qualification set by the ROC FSC) and a bank account, pay
ROC taxes, remit funds, exercise shareholder rights and perform such other functions as the ADR holder may designate upon such withdrawal. In addition,
such withdrawing ADR holder is also required to appoint a custodian bank and open a custodian account to hold the securities and cash in safekeeping,
make confirmations, settle trades and report all relevant information. Without making such appointment and the opening of such custodian account, the
withdrawing ADR holder would be unable to hold or subsequently sell the deposited securities withdrawn from the ADR facility on the TPEx. The laws of
the ROC applicable to the withdrawal of deposited securities may change from time to time. There can be no assurances that current law will remain in
effect or that future changes of ROC law will not adversely affect the ability of ADR holders to withdraw deposited ordinary shares under the deposit
agreement.
Currently, a party who is a PRC person may not withdraw and hold the underlying ordinary shares unless it is a qualified domestic institutional investor, or
a QDII, in the PRC or has obtained the investment approval from the Investment Commission, Ministry of Economic Affairs, Executive Yuan of the ROC.
However, it is unclear whether a QDII may freely withdraw and hold the underlying ordinary shares if the business of the issuer of the underlying ordinary
shares is not within the list of industries open to PRC investment as promulgated by the ROC government. Further, there is no assurance that in the future,
there will not be further restrictions or prohibitions imposed on PRC persons (including QDIIs) from investing in certain industries in the ROC, which
might accordingly cause a party who is a PRC person to be unable to withdraw and hold the underlying ordinary shares. Under current ROC law, a PRC
person means an individual holding a passport issued by the PRC, a resident of any area of China under the effective control or jurisdiction of the PRC (but
not including a special administrative region of the PRC such as Hong Kong or Macau, if so excluded by applicable laws of the ROC), any legal person,
group, or other institutions of the PRC and any corporation and other entity organized in countries outside of ROC or PRC that is directly or indirectly
controlled by or directly or indirectly having more than 30% of its capital beneficially owned by any PRC person described above.
In connection with any surrender of an ADR for withdrawal and the delivery of the deposited securities represented by the ADSs evidenced thereby, the
depositary may require proper endorsement in blank of such ADR (or duly executed instruments of transfer thereof in blank) and the Withdrawal Order
directing the depositary to cause the deposited securities represented by the ADSs evidenced by such ADR to be withdrawn and delivered to, or upon the
written order of, any person designated in such order.
In the case of an ADR holder requesting the delivery of the deposited securities represented by the ADSs evidenced by the holder’s ADRs so surrendered,
subject to applicable ROC law and to the other provisions of the deposit agreement, at the request, risk and expense of the ADR holder, the depositary may
deliver such deposited securities at such other place as may have been requested by the ADR holder. Delivery of deposited securities may be made by the
delivery of certificates or by such other means as the depositary may deem practicable.
The depositary may only restrict the withdrawal of deposited securities in connection with:
•
•
•
temporary delays caused by closing our transfer books or those of the depositary or the deposit of ordinary shares in connection with voting
at a shareholders’ meeting, or the payment of dividends;
the payment of fees, taxes and similar charges; or
compliance with any U.S. or foreign laws or governmental regulations relating to the ADRs or to the withdrawal of deposited securities.
Form and ROC Share Issuance Procedure
No later than the second business day in Taiwan following the close of any offering, we will make a filing with the TPEx for listing of underlying ordinary
shares. It is expected that the listing of the underlying ordinary shares will take place around the fifth business day in Taiwan following the application for
listing of underlying ordinary shares. Immediately upon such listing, the number of ordinary shares will be credited into the depositary’s account with the
custodian through the book-entry system maintained by the Taiwan Depository & Clearing Corporation, or the TDCC.
19
Record Dates
The depositary may, after consultation with us if practicable, fix record dates (which, to the extent applicable, shall be as near as practicable to any
corresponding record dates set by us) for the determination of the registered ADR holders who will be entitled (or obligated, as the case may be):
•
•
•
•
to receive any distribution on or in respect of deposited securities,
to give instructions for the exercise of voting rights,
to pay the fee assessed by the depositary for administration of the ADR program and for any expenses as provided for in the deposit
agreement, or
to receive any notice or to act in respect of other matters,
all subject to the provisions of the deposit agreement.
Voting Rights
How do I vote?
If you are an ADR holder and the depositary asks you to provide it with voting instructions, you may instruct the depositary how to exercise the voting
rights for the shares which underlie your ADSs. Subject to the next sentence, as soon as practicable after receipt from us of notice of any meeting at which
the holders of shares are entitled to vote, or of our solicitation of consents or proxies from holders of shares, the depositary shall fix the ADS record date in
accordance with the provisions of the deposit agreement in respect of such meeting or solicitation of consent or proxy. The depositary shall, if we request in
writing in a timely manner (the depositary having no obligation to take any further action if our request shall not have been received by the depositary at
least 30 days prior to the date of such vote or meeting) and at our expense and provided no legal prohibitions exist, distribute to the registered ADR holders
a notice stating such information as is contained in the voting materials received by the depositary and describing how you may instruct, or, subject to the
next paragraph, will be deemed to instruct, the depositary to exercise the voting rights for the shares which underlie your ADSs, including instructions for
giving a discretionary proxy to a person designated by us. Each ADR holder that provides voting instructions shall be deemed to confirm, represent and
warrant that such holder has no interest in any contract or proposed contract or arrangement to be considered at the relevant meeting. In accordance with
our memorandum and articles of association, a shareholder may not exercise its own vote or by proxy on behalf of another shareholder of the company in
respect of any contract or proposed contract or arrangement if such shareholder may be interested therein. Accordingly, no ADR holder shall instruct the
depositary to vote on its behalf on any matter to be considered at the relevant meeting in respect of which such holder is interested.
To the extent we have provided the depositary with at least 45 days’ notice of a proposed meeting, if voting instructions are not timely received by the
depositary from any holder, such holder shall be deemed, and in the deposit agreement the depositary is instructed to deem such holder, to have instructed
the depositary to give a discretionary proxy to a person designated by us to vote the shares represented by their ADSs as desired, provided that no such
instruction shall be deemed given and no discretionary proxy shall be given (a) if we inform the depositary in writing that (i) we do not wish such proxy to
be given, (ii) substantial opposition exists with respect to any agenda item for which the proxy would be given or (iii) the agenda item in question, if
approved, would materially or adversely affect the rights of holders of shares and (b) unless, with respect to such meeting, we have provided the depositary
with an opinion of our counsel, in form and substance satisfactory to the depositary, to the effect that (a) the granting of such discretionary proxy does not
subject the depositary to any reporting obligations in the Cayman Islands or the ROC, or by the ROC FSC or TPEx, (b) the granting of such proxy will not
result in a violation of the laws, rules, regulations or permits of the Cayman Islands, the ROC, the ROC FSC or TPEx, (c) the voting arrangement and
deemed instruction as contemplated herein will be given effect under the laws, rules, regulations and permits of the Cayman Islands, the ROC, the ROC
FSC and TPEx and (d) the granting of such proxy will not under any circumstances result in the depositary being treated as the beneficial owner of ADSs
under the laws, rules, regulations or permits of the Cayman Islands, the ROC, the ROC FSC and TPEx.
Holders are strongly encouraged to forward their voting instructions to the depositary as soon as possible. For instructions to be valid, the ADR department
of the depositary that is responsible for proxies and voting must receive them in the manner and on or before the time specified, notwithstanding that such
instructions may have been physically received by the depositary prior to such time. The depositary will not itself exercise any voting discretion.
Furthermore, neither the depositary nor its agents are responsible for any failure to carry out any voting instructions, for the manner in which any vote is
cast or for the effect of any vote. Notwithstanding anything contained in the deposit agreement or any ADR, the depositary may, to the extent not prohibited
by law or regulations, or by the requirements of the stock exchange on which the ADSs are
20
listed, in lieu of distribution of the materials provided to the depositary in connection with any meeting of, or solicitation of consents or proxies from,
holders of deposited securities, distribute to the registered holders of ADRs a notice that provides such holders with, or otherwise publicizes to such
holders, instructions on how to retrieve such materials or receive such materials upon request (i.e., by reference to a website containing the materials for
retrieval or a contact for requesting copies of the materials).
There is no guarantee that you will receive voting materials in time to instruct the depositary to vote and it is possible that you, or persons who hold their
ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote.
Reports and Other Communications
Will ADR holders be able to view our reports?
The depositary will make available for inspection by ADR holders at the offices of the depositary and the custodian, or upon request made to the depositary
(which request may be refused by the depositary at its discretion), the deposit agreement, the provisions of or governing deposited securities, and any
written communications from us which are both received by the custodian or its nominee as a holder of deposited securities and made generally available to
the holders of deposited securities.
Additionally, if we make any written communications generally available to holders of our ordinary shares, and we furnish copies thereof (or English
translations or summaries) to the depositary, it will distribute the same to registered ADR holders.
Fees and Expenses
What fees and expenses will I be responsible for paying?
The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of ordinary shares, issuances in
respect of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a
merger, exchange of securities or any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for
withdrawal of deposited securities or whose ADRs are cancelled or reduced for any other reason, $5.00 for each 100 ADSs (or any portion thereof) issued,
delivered, reduced, cancelled or surrendered, as the case may be. The depositary may sell (by public or private sale) sufficient securities and property
received in respect of a share distribution, rights and/or other distributions prior to such deposit to pay such charge.
The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party surrendering ADSs
and/or to whom ADSs are issued (including, without limitation, issuances pursuant to a stock dividend or stock split declared by us or an exchange of stock
regarding the ADSs or the deposited securities or a distribution of ADSs), whichever is applicable:
•
•
•
•
a fee of up to $0.05 per ADS for any cash distribution made pursuant to the deposit agreement;
an aggregate fee of $0.05 per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs
(which fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or
record dates set by the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision);
a fee for the reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of its agents (including, without
limitation, the custodian and expenses incurred on behalf of ADR holders in connection with compliance with foreign exchange control
regulations or any law or regulation relating to foreign investment) in connection with the servicing of the ordinary shares or other deposited
securities, the sale of securities (including, without limitation, deposited securities), the delivery of deposited securities or otherwise in
connection with the depositary’s or its custodian’s compliance with applicable law, rule or regulation (which fees and charges shall be assessed
on a proportionate basis against ADR holders as of the record date or dates set by the depositary and shall be payable at the sole discretion of the
depositary by billing such ADR holders or by deducting such charge from one or more cash dividends or other cash distributions);
a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the $0.05
per ADS issuance fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities
(treating all such securities as if they were ordinary shares) but which securities or the net cash proceeds from the sale thereof are instead
distributed by the depositary to those
21
•
•
•
•
•
•
ADR holders entitled thereto;
stock transfer or other taxes and other governmental charges;
SWIFT, cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of
shares, ADRs or deposited securities;
transfer or registration fees for the registration or transfer of deposited securities on any applicable register in connection with the deposit or
withdrawal of deposited securities;
expenses of the depositary in connection with the sale of shares to pay ROC withholdings taxes on stock dividends pursuant to the deposit
agreement (which are paid out of such foreign currency);
in connection with the conversion of foreign currency into U.S. dollars, JPMorgan shall deduct out of such foreign currency the fees, expenses
and other charges charged by it and/or its agent (which may be a division, branch or affiliate) so appointed in connection with such conversion;
and
fees of any division, branch or affiliate of JPMorgan utilized to direct, manage and/or execute any public and/or private sale of securities under
the deposit agreement.
Certain of the depositary fees and charges described above may become payable immediately after the closing of the initial issuance of ADRs at or
following the date of the deposit agreement. In connection therewith, it is anticipated that the $0.05 per ADS administrative servicing fee per calendar year
described in the second bullet above will be charged to, and payable by, those ADS holders on a record date occurring during the period immediately after
the initial issuance of ADRs following the date of the deposit agreement and prior to the listing approval from the TPEx with respect to such issuance.
As an ADR holder, you will also be responsible to pay any required charges to the Taiwan tax authority, which are subject to change. As of the date hereof,
the charges may include:
Service
Issuance of ADSs upon a deposit of ordinary shares
Withdrawal of ordinary shares upon cancellation of ADSs
Sale of ordinary shares on the Taiwan Exchange
0.3% of the aggregate price of ADS issued
0.3% of the aggregate price of ADS canceled
3% of the aggregate price of ordinary shares sold
Fee
JPMorgan and/or its agent may act as principal for any conversion of foreign currency. For further details see https://www.adr.com.
We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to
time between us and the depositary. The charges described above may be amended from time to time by agreement between us and the depositary. The
right of the depositary to receive payment of fees, charges and expenses as provided above shall survive the termination of the deposit agreement.
The depositary anticipates reimbursing us for certain expenses incurred by us that are related to the establishment and maintenance of the ADR program
upon such terms and conditions as we and the depositary may agree from time to time. The depositary may make available to us a set amount or a portion
of the depositary fees charged in respect of the ADR program or otherwise upon such terms and conditions as we and the depositary may agree from time
to time. The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing shares or surrendering ADSs for the
purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by deducting those fees
from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary
services by deduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for
them. The depositary will generally set off the amounts owing from distributions made to holders of ADSs. If, however, no distribution exists and payment
owing is not timely received by the depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and
expenses owing until such fees and expenses have been paid. At the discretion of the depositary, all fees and charges owing under the deposit agreement are
due in advance and/or when declared owing by the depositary.
Payment of Taxes
If any taxes or other governmental charges (including any penalties and/or interest) shall become payable by or on behalf of the custodian or the depositary
with respect to any ADR, any deposited securities represented by the ADSs evidenced thereby or any distribution thereon, such tax or other governmental
charge shall be paid by the ADR holders to the depositary and by holding or having held an ADR the holder thereof and all prior holders thereof, jointly
and severally, agree to indemnify, defend and save harmless each of the depositary and its agents in respect thereof. If an ADR holder owes any tax or other
governmental charge, the depositary may (i) deduct the amount thereof from any distributions, or (ii) sell deposited securities (by public or private sale) and
deduct the amount owing from the net proceeds of such sale. In either case the ADR holder
22
remains liable for any shortfall. If any tax or governmental charge is unpaid, the depositary may also refuse to effect any registration, registration of
transfer, split-up or combination of ADRs or withdrawal of deposited securities until such payment is made. If any tax or governmental charge is required
to be withheld on any cash distribution, the depositary may deduct the amount required to be withheld from any cash distribution or, in the case of a non-
cash distribution, sell the distributed property or securities (by public or private sale) in such amounts and in such manner as the depositary deems
necessary and practicable to pay such taxes and shall distribute any remaining net proceeds or the balance of any such property after deduction of such
taxes to the ADR holders entitled thereto.
Notwithstanding the above, we will pay all stamp duties and other similar duties or taxes payable in the Cayman Islands, the ROC, the United States of
America and any other jurisdiction, on or in connection with the constitution and issue of the ADSs and the execution or other event concerning the deposit
agreement. If any legal proceedings are taken to enforce our obligations under the deposit agreement or the ADSs and for the purpose of such proceedings
any of them are required to be taken into or enforced in any jurisdiction and stamp duties or other similar duties or taxes become payable in connection
with such proceedings in such jurisdiction, the ADR holders will pay (or reimburse the person making a valid payment of) all such stamp duties and other
similar duties and taxes, including any penalties and interest, unless otherwise ordered by a court of competent jurisdiction in such proceedings. The
depositary may sell any deposited securities and cancel ADSs with respect thereof in order to pay any such stamp duties or other similar duties or taxes
owed under the deposit agreement by ADR holders without the depositary being required to request payment thereof from the ADR holders.
By holding an ADR or an interest therein, you will be agreeing to indemnify us, the depositary, its custodian and any of our or their respective officers,
directors, employees, agents and affiliates against, and hold each of them harmless from, any claims by any governmental authority with respect to taxes,
additions to tax, penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtained, and such
obligations shall survive the transfer or surrender of ADSs or the termination of the deposit agreement.
Reclassifications, Recapitalizations and Mergers
If we take certain actions that affect the deposited securities, including (i) any change in par value, split-up, consolidation, cancellation or other
reclassification of deposited securities or (ii) any distributions of ordinary shares or other property not made to holders of ADRs or (iii) any
recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all of our assets, then the
depositary may choose to, and shall if reasonably requested by us:
(1)
(2)
(3)
(4)
(5)
amend the form of ADR;
distribute additional or amended ADRs;
distribute cash, securities or other property it has received in connection with such actions;
sell by public or private sale any securities or property received; or
none of the above.
If the depositary does not choose any of the above options, any of the cash, securities or other property it receives will constitute part of the deposited
securities and each ADS will then represent a proportionate interest in such property.
Amendment and Termination
How may the deposit agreement be amended?
We may agree with the depositary to amend the deposit agreement and the ADSs without your consent for any reason. ADR holders must be given at least
30 days’ notice of any amendment that imposes or increases any fees or charges (other than stock transfer or other taxes and other governmental charges,
transfer or registration fees, SWIFT, cable, telex or facsimile transmission costs, delivery costs or other such expenses), or that otherwise prejudices any
substantial existing right of ADR holders. Such notice need not describe in detail the specific amendments effectuated thereby, but must identify to ADR
holders a means to access the text of such amendment. If an ADR holder continues to hold an ADR or ADRs after being so notified, such ADR holder is
deemed to agree to such amendment and to be bound by the deposit agreement as so amended. Any amendments or supplements which (i) are reasonably
necessary (as agreed by us and the depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act of 1933, as amended, or (b)
the ADSs or shares to be traded solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne
by ADR holders, shall be deemed not to prejudice any substantial rights of ADR holders. Notwithstanding the foregoing, if any governmental body or
regulatory body should adopt new laws, rules or regulations which would require amendment or supplement of the deposit agreement or the form of ADR
to ensure compliance therewith, we and the depositary may amend
23
or supplement the deposit agreement and the ADR at any time in accordance with such changed laws, rules or regulations, which amendment or
supplement may take effect before a notice is given or within any other period of time as required for compliance. No amendment, however, will impair
your right to surrender your ADSs and receive the underlying securities, except in order to comply with mandatory provisions of applicable law.
How may the deposit agreement be terminated?
The depositary may, and shall at our written direction, terminate the deposit agreement and the ADRs by mailing notice of such termination to the
registered holders of ADRs at least 30 days prior to the date fixed in such notice for such termination; provided, however, if the depositary shall have (i)
resigned as depositary under the deposit agreement, notice of such termination by the depositary shall not be provided to registered holders unless a
successor depositary shall not be operating under the deposit agreement within 60 days of the date of such resignation, and (ii) been removed as depositary
under the deposit agreement, notice of such termination by the depositary shall not be provided to registered holders of ADRs unless a successor depositary
shall not be operating under the deposit agreement on the 60th day after our notice of removal was first provided to the depositary. Notwithstanding
anything to the contrary in the deposit agreement, the depositary may terminate the deposit agreement without notice to us, but subject to giving 30 days’
notice to the ADR holders, if: (i) we become bankrupt or insolvent, (ii) our ordinary shares are de-listed, (iii) we effect (or will effect) a redemption of all or
substantially all of the deposited securities, or a cash or share distribution representing a return of all or substantially all of the value of the deposited
securities, or (iv) there occurs a merger, consolidation, sale of assets or other transaction as a result of which securities or other property are delivered in
exchange for or in lieu of deposited securities.
After termination, the depositary’s only responsibility will be (i) to deliver deposited securities to ADR holders who surrender their ADRs, and (ii) to hold
or sell distributions received on deposited securities. As soon as practicable after the termination date, the depositary will use its reasonable efforts to sell
the deposited securities which remain and hold the net proceeds of such sales, together with any other cash then held by it under the deposit agreement (as
long as it may lawfully do so), without liability for interest, in trust for the pro rata benefit of the ADR holders who have not yet surrendered their ADRs.
After making such sale, the depositary shall have no obligations except to account for such net proceeds and other cash.
Limitations on Obligations and Liability to ADR holders
Limits on our obligations and the obligations of the depositary; limits on liability to ADR holders and holders of ADSs
Prior to the issue, registration, registration of transfer, split-up, combination, or withdrawal of any ADRs, or the delivery of any distribution in respect
thereof, and from time to time in the case of the production of proofs as described below, we or the depositary or its custodian may require:
•
•
payment with respect thereto of (i) any stock transfer or other tax or other governmental charge, (ii) any stock transfer or registration fees in
effect for the registration of transfers of ordinary shares or other deposited securities upon any applicable register and (iii) any applicable fees
and expenses described in the deposit agreement;
the production of proof satisfactory to it of (i) the identity of any signatory and genuineness of any signature and (ii) such other information,
including without limitation, information as to citizenship, residence, exchange control approval, beneficial ownership of any securities,
payment of applicable taxes or governmental charges, information relating to the registration of the ordinary shares on the books maintained
by us or on our behalf for the transfer and registration of ordinary shares, compliance with applicable law, regulations, provisions of or
governing deposited securities and terms of the deposit agreement and the ADRs, as it may deem necessary or proper; and
•
compliance with such regulations as the depositary may establish consistent with the deposit agreement.
The issuance of ADRs, the acceptance of deposits of ordinary shares, the registration, registration of transfer, split-up or combination of ADRs or the
withdrawal of shares, may be suspended, generally or in particular instances, when the ADR register or any register for deposited securities is closed or
when any such action is deemed advisable by the depositary; provided that the ability to withdraw shares may only be limited under the following
circumstances: (i) temporary delays caused by closing transfer books of the depositary or our transfer books or the deposit of ordinary shares in connection
with voting at a shareholders’ meeting, or the payment of dividends, (ii) the payment of fees, taxes, and similar charges, and (iii) compliance with any laws
or governmental regulations relating to ADRs or to the withdrawal of deposited securities.
The deposit agreement expressly limits the obligations and liability of the depositary, ourselves and our respective directors,
24
officers, employees, agents and affiliates, provided, however, that no disclaimer of liability under the Securities Act of 1933, as amended, is intended by
any of the limitations of liabilities provisions of the deposit agreement. In the deposit agreement it provides that neither we nor the depositary nor any such
other party will be liable to holders or beneficial owners of ADSs if:
•
any present or future law, rule, regulation, fiat, order or decree of the United States, the Cayman Islands, the ROC or any other country or
jurisdiction, or of any governmental or regulatory authority or securities exchange or market or automated quotation system, the provisions of
or governing any deposited securities, any present or future provision of our charter, any act of God, war, terrorism, nationalization,
expropriation, currency restrictions, work stoppage, strike, civil unrest, revolutions, rebellions, explosions, computer failure or circumstance
beyond our, the depositary’s or any such other party’s direct and immediate control shall prevent or delay, or shall cause any of them to be
subject to any civil or criminal penalty in connection with, any act which the deposit agreement or the ADRs provide shall be done or
performed by us, the depositary or such other party (including, without limitation, voting);
it exercises or fails to exercise discretion under the deposit agreement or the ADRs including, without limitation, any failure to determine that
any distribution or action may be lawful or reasonably practicable;
it performs its obligations under the deposit agreement and ADRs without gross negligence or willful misconduct; or
it takes any action or refrains from taking any action in reliance upon the advice of or information from legal counsel, accountants, any
person presenting ordinary shares for deposit, any registered holder of ADRs, or any other person believed by it to be competent to give such
advice or information.
•
•
•
We and the depositary and its agents may rely and shall be protected in acting upon any written notice, request, direction, instruction or document believed
by it to be genuine and to have been signed, presented or given by the proper party or parties.
Neither we, the depositary nor our respective agents have any obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of
any deposited securities or the ADRs which in its opinion may involve it in expense or liability, if indemnity satisfactory to it against all expense (including
fees and disbursements of counsel) and liability is furnished as often as may be required. The depositary and its agents may fully respond to any and all
demands or requests for information maintained by or on its behalf in connection with the deposit agreement, any registered holder or holders of ADRs,
any ADRs or otherwise related to the deposit agreement or ADRs to the extent such information is requested or required by or pursuant to any lawful
authority, including without limitation laws, rules, regulations, administrative or judicial process, banking, securities or other regulators. The depositary
shall not be liable for the acts or omissions made by, or the insolvency of, any securities depository, clearing agency or settlement system. Furthermore, the
depositary shall not be responsible for, and shall incur no liability in connection with or arising from, the insolvency of any custodian that is not a branch or
affiliate of JPMorgan. Notwithstanding anything to the contrary contained in the deposit agreement or any ADRs, the depositary shall not be responsible
for, and shall incur no liability in connection with or arising from, any act or omission to act on the part of the custodian except to the extent that the
custodian has (i) committed fraud or willful misconduct in the provision of custodial services to the depositary or (ii) failed to use reasonable care in the
provision of custodial services to the depositary as determined in accordance with the standards prevailing in the jurisdiction in which the custodian is
located. The depositary shall not have any liability for the price received in connection with any sale of securities, the timing thereof or any delay in action
or omission to act nor shall it be responsible for any error or delay in action, omission to act, default or negligence on the part of the party so retained in
connection with any such sale or proposed sale.
The depositary has no obligation to inform ADR holders or other holders of an interest in any ADSs about the requirements of the laws, rules or regulations
of any country or jurisdiction or of any governmental or regulatory authority or any securities exchange or market or automated quotation system, or any
changes therein or thereto.
Additionally, none of us, the depositary or the custodian shall be liable for the failure by any registered holder or beneficial owner of ADRs to obtain the
benefits of credits on the basis of non-U.S. tax paid against such holder’s or beneficial owner’s income tax liability. Neither we nor the depositary shall
incur any liability for any tax consequences that may be incurred by registered holders or beneficial owners on account of their ownership of ADRs or
ADSs.
Neither the depositary nor its agents will be responsible, when acting in good faith, for any failure to carry out any instructions to vote any of the deposited
securities, for the manner in which any such vote is cast or for the effect of any such vote. The depositary may rely upon instructions from us or our counsel
in respect of any approval or license required for any currency conversion, transfer or distribution. The depositary shall not incur any liability for the
content of any information submitted to it by us or on our behalf for distribution to ADR holders or for any inaccuracy of any translation thereof, for any
investment risk associated with acquiring an interest in the deposited securities, for the validity or worth of the deposited securities, for the credit-
worthiness of any third party, for allowing any rights to lapse upon the terms of the deposit
25
agreement or for the failure or timeliness of any notice from us. The depositary shall not be liable for any acts or omissions made by a successor depositary
whether in connection with a previous act or omission of the depositary or in connection with any matter arising wholly after the removal or resignation of
the depositary.
Neither we, the depositary nor any of our respective directors, officers, employees, agents or affiliates, nor our company’s supervisors, shall be liable to
registered holders or beneficial owners of interests in ADSs for any indirect, special, punitive or consequential damages (including, without limitation,
legal fees and expenses) or lost profits, in each case of any form incurred by any person or entity, whether or not foreseeable and regardless of the type of
action in which such a claim may be brought.
In the deposit agreement each party thereto (including, for avoidance of doubt, each holder and beneficial owner and/or holder of interests in ADRs)
irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any suit, action or proceeding against the
depositary and/or us directly or indirectly arising out of or relating to the ordinary shares or other deposited securities, the ADSs or the ADRs, the deposit
agreement or any transaction contemplated therein, or the breach thereof (whether based on contract, tort, common law or any other theory).
The depositary and its agents may own and deal in any class of securities of our company and our affiliates and in ADRs.
Disclosure of Interest in ADSs
To the extent that the provisions of or governing any deposited securities, ROC law, the rules and regulations of the TPEx or our memorandum and articles
of association may require disclosure of or impose limits on beneficial or other ownership of, or interest in, deposited securities, other ordinary shares and
other securities and may provide for blocking transfer, voting or other rights to enforce such disclosure or limits, you agree to comply with all such
disclosure requirements and ownership limitations and to comply with any reasonable instructions we may provide in respect thereof. Pursuant to Taiwan
regulations, within ten days of the closing of an offering, we must make a filing with the FSC in order to: (i) file the prospectus, deposit agreement and
potentially other related agreements with the FSC and (ii) disclose a list of the persons who purchased 10% or more of the ADSs sold in the offering, in
addition to the quantities purchased by each such person and such person’s purchase price paid for such ADSs, which is the public offering price.
We may have certain disclosure obligations and reporting obligations under ROC laws and regulations if (a) the person to be registered as a shareholder is a
“related party” of our company under regulations governing the preparation of its financial reports and the International Financial Reporting Standards and
such person beneficially owns shares withdrawn under the deposit agreement; or (b) the person to be registered as a shareholder owns shares withdrawn
under the deposit agreement and the shares withdrawn by this shareholder exceed 10% of the ordinary shares represented by the ADSs originally issued
under the deposit agreement. Due to these obligations, the depositary may ask the withdrawing ADR holder to disclose the name of the beneficial owner of
the ADSs delivered for cancellation and to provide proof of identity and genuineness of any signature and other information and documents before the
withdrawing ADR holder may cancel its ADSs. The withdrawal of shares may be delayed until the depositary receives such information, the proof so
requested and satisfactory evidence of the withdrawing ADR holder’s compliance with all laws and regulations. The information that a withdrawing ADR
holder is required to provide may include the name and nationality of the beneficial owner, the number of ordinary shares or individual certificates of
payment the beneficial owner is withdrawing or has withdrawn in the past and whether certain affiliations exist between the beneficial owner and our
company.
Each ADR holder agrees to comply with requests from us pursuant to the laws, rules and regulations of the Cayman Islands and the ROC as well as the
rules and regulations of any stock exchange on which the ordinary shares are, or will be, registered, traded or listed to provide information, inter alia, as to
the capacity in which such ADR holder owns ADRs (and ordinary shares as the case may be) and regarding the identity of any other person interested in
such ADRs and the nature of such interest.
Books of Depositary
The depositary or its agent will maintain a register for the registration, registration of transfer, combination and split-up of ADRs, which register shall
include the depositary’s direct registration system. Registered holders of ADRs may inspect such register at the depositary’s office at all reasonable times,
but for the purpose of communicating with other ADR holders in the interest of the business of our company or a matter relating to the deposit agreement.
Such register may be closed at any time or from time to time, when deemed expedient by the depositary.
The depositary will maintain facilities for the delivery and receipt of ADRs.
26
Appointment
In the deposit agreement, each registered holder of ADRs and each person holding an interest in ADSs or ADRs, upon acceptance of any ADSs or ADRs
(or any interest therein) issued in accordance with the terms and conditions of the deposit agreement will be deemed for all purposes to:
•
•
be a party to and bound by the terms of the deposit agreement and the applicable ADR or ADRs, and
appoint the depositary its attorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in the
deposit agreement and the applicable ADR or ADRs, to adopt any and all procedures necessary to comply with applicable laws and to take such
action as the depositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the deposit agreement and the
applicable ADR or ADRs, the taking of such actions to be the conclusive determinant of the necessity and appropriateness thereof.
Governing Law, Submission to Jurisdiction and Arbitration
The deposit agreement, the ADSs and the ADRs are governed by and construed in accordance with the laws of the State of New York. In the deposit
agreement, we have submitted to the jurisdiction of the state and federal courts of the State of New York and appointed an agent for service of process on
our behalf. Notwithstanding the foregoing, subject to the terms described below, including the federal securities law carve-out set forth at the end of this
sentence, (i) the depositary may refer any such suit, action or proceedings to arbitration in accordance with the provisions of the deposit agreement, and,
upon such referral, any such suit, action or proceeding instituted by us shall be finally decided in such arbitration rather than in such court, (ii) the
depositary may, in its sole discretion, elect to institute any dispute, suit, action, controversy, claim or proceeding directly or indirectly based on, arising out
of or relating to the deposit agreement or the ADRs or the transactions contemplated thereby, including without limitation any question regarding its or
their existence, validity, interpretation, performance or termination, against any other party or parties to the deposit agreement (including, without
limitation, against ADR holders and owners of interests in ADSs), by having the matter referred to and finally resolved by an arbitration conducted under
the terms described below, and (iii) the depositary may in its sole discretion require that any dispute, suit, action, controversy, claim, or proceeding of the
type described in clause (ii) above, brought against the depositary by any party or parties to the deposit agreement (including, without limitation, by ADR
holders and owners of interests in ADSs), shall be referred to and finally settled by an arbitration conducted under the terms described below; provided
however, that to the extent there are specific federal securities law violation aspects to any claims against us and/or the depositary brought by any ADR
holder, the federal securities law violation aspects of such claims brought by an ADR holder against us and/or the depositary may, at the option of such
holder, remain in state or federal court in New York, New York and all other aspects, claims, disputes, legal suits, actions and/or proceedings brought by
such holder against us and/or the depositary, including those brought along with, or in addition to, federal securities law violation claims, would be referred
to arbitration in accordance with the provisions of the deposit agreement. Any such arbitration shall be conducted in the English language in New York,
New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association.
Notwithstanding the foregoing, any suit, action or proceeding based on the deposit agreement, the ADSs or the ADRs or the transactions contemplated
thereby may be instituted by the depositary in any competent court in the Cayman Islands, the ROC, Singapore and/or the United States.
By holding an ADS or an interest therein, registered holders of ADRs and owners of interests in ADSs each irrevocably agree that (i) any legal suit, action
or proceeding against or involving holders of ADRs or owners of interests in ADSs brought by us or the depositary, arising out of or based upon the
Deposit Agreement, the ADSs, the ADRs or the transactions contemplated herein, may be instituted in a state or federal court in New York, New York, and
each irrevocably waives any objection which it may have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive
jurisdiction of such courts in any such suit, action or proceeding and (ii) any legal suit, action or proceeding against or involving us or the depositary
brought by holders of ADRs or owners of interests in ADSs, arising out of or based upon the deposit agreement, the ADSs, the ADRs or the transactions
contemplated thereby, may only be instituted in a state or federal court in New York, New York, and each irrevocably waives any objection which it may
have to the laying of venue of any such proceeding, and irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or
proceeding.
27
Exhibit 4.8
BY COURIER
Ref: OFF/LOO/#12-03/ASLAN//CT
14 June 2019
ASLAN PHARMACEUTICALS PTE.LTD.
83 Clemenceau Avenue
#12-03/04 UE Square
Singapore 239920
Attention : Mr Carl Aslan Jason Morton Firth
Chief Executive Officer
Dear Sirs,
LETTER OF RENEWAL FOR 83 CLEMENCEAU AVENUE #12-03 UE SQUARE SINGAPORE 239920
We are pleased to forward the following for your retention:
•
1 set of engrossed Letter of Renewal dated 28 May 2019 executed by both parties with stamp duty certificate.
Please contact the undersigned at 6818 8033 for any clarifications.
Thank you.
Yours faithfully
UNITED ENGINEERS LIMITED
/s/ Corinne Tan
Ms Corinne Tan
Assistant Manager, Corporate Leasing
Original
Certificate of Stamp Duty
Stamp Certificate Reference
Stamp Certificate Issued Date
Applicant’s Reference
Document Reference Number
Document Description
Date of Document
: 213013-01LA3-1-589141319
: 04/06/2019
: CWC.TJY.YUN.KW00800.0273
: 2019053001 004 ver. 1.0
: Acceptance to Offer of Lease (Ad valorem)
: 28/05/2019
Property
Lessor/ Landlord
Lessee/ Tenant
Stamp Duty
Total Amount
: 83 CLEMENCEAU AVENUE, #12-03, SINGAPORE 239920
83 CLEMENCEAU AVENUE, #12-04, SINGAPORE 239920
: UNITED ENGINEERS LIMITED (UEN-LOCALCO -191200018G)
: ASLAN PHARMACEUTICALS PTE. LTD. (UEN-LOCALCO - 201007695N)
: S$ 4,989.00
: S$ 4,989.00
To confirm if this Stamp Certificate is genuine, you may do an online check at https:llestamping.iras.gov.sg. Under Stamp Duty Resource, select Verify
Stamp Certificate Authenticity.
SXXXX416J - 04/06/2019
2019053001004
9d439f3ff091f02ffa402f0a 7b293c9c
213013-01LA3-1-589141319
Page 1 of 1
Ref: OFF/L00/#12-03/ASLAN/CT
17 April 2019
ASLAN PHARMACEUTICALS PTE.LTD.
83 Clemenceau Avenue
#12-03/04 UE Square
Singapore 239920
Attention : Mr Carl Aslan Jason Morton Firth
Chief Executive Officer
Dear Sir/Mdm,
BY COURIER
UE SQUARE - OFFICE: LETTER OF RENEWAL FOR 83 CLEMENCEAU AVENUE #12-03/04 SINGAPORE 239920 (THE DEMISED
PREMISES)
We refer to the existing tenancy agreement dated 25 July 2016 (referred to as the "existing Tenancy Agreement") in respect of the lease of the Demised
Premises. The term under the existing Tenancy Agreement will be expiring on 30 September 2019.
United Engineers Limited (the "Landlord") is pleased to offer to you, M/s Aslan Pharmaceuticals Pte. Ltd. (the "Tenant"), a renewal of lease for the
abovementioned premises pursuant to Schedule 16 of the existing Tenancy Agreement for the Demised Premises based on the same terms and conditions as
stipulated therein excluding the option to renew clause and provisions on renewal and save for the following which together with your acceptance shall
form the "Renewal Tenancy Agreement":-
1.
2.
Demised Premises
83 Clemenceau Avenue, #12-03/04
Floor Area
4,500 square feet
A copy of the floor plan which shows the Demises Premised edged red is attached hereto as Attachment I (for identification purposes only).
3.
Term
The term of the Tenancy (the "Term") for the Demised Premises shall be for three (3) years commencing on 1 October 2019 (the
"Commencement Date") and expiring on 30 September 2022 (the "Expiry Date").
Rent and Service Charge
Rent @ S$6.65 psf per month
Service Charge @ S$1.05 psf per month
Total Rent and Service Charge@ S$ 7.70 psf per month
S$ 29,925.00
S$ 4,725.00
S$ 34,650.00
per month
per month
per month
Page 2
UE SQUARE: LETTER OF RENEWAL FOR#12-03/04
•
•
Gross Rent shall be payable monthly in advance, the first of such payment to be made on the date of commencement of the Term
of the Tenancy, and thereafter on the first day of each subsequent month.
The above Service Charge rate is a current estimation and is subject to change from time to time by serving one (1) month's written
notice on the Tenant. The Tenant shall pay the increased Service Charge as from the date specified in the said notice.
Goods and Services Tax
All goods and services tax in relation to the Gross Rent and other sums payable by the Tenant under the tenancy documentation shall be paid
by the Tenant.
Security Deposit
(a)
(b)
(c)
(d)
The Landlord requires a Security Deposit equivalent to three (3) months' Gross Rent in the sum of S$ 103,950.00 payable by way of
cash or banker's guarantee, Provided That any security deposit held by the Landlord (in cash) under an existing tenancy with the Tenant
will be transferred to account for the Security Deposit required under the Term, on the Commencement Date.
In the event that the security deposit held by the Landlord is insufficient, the Tenant shall pay the difference upon receipt of written
notice from the Landlord, before the Commencement Date. In the event that the Tenant fails to make up the difference within one (1)
week of the Landlord's notice, the Landlord may terminate the Tenancy by giving notice in writing to the Tenant.
In the event the Tenant wishes to provide the Security Deposit in the form of a Banker's Guarantee, such Banker's Guarantee shall be in
the Landlord's prescribed format and must be provided on or before the Commencement Date.
The Security Deposit shall be returned to the Tenant, free of interest, within one (1) month from the date the Demised Premises are
returned to the Landlord duly repaired, cleaned, decorated and reinstated in accordance with the Tenant's covenants in the Tenancy
Agreement.
In the event that after acceptance of this offer, the Tenant fails to observe or perform (or threatens to commit a breach of or not to
perform) the Tenant's obligations under this offer, or the Tenant fails to execute the Tenancy Agreement within the time period specified
in paragraph (13), or bankruptcy/winding-up proceedings are commenced against the Tenant, then without prejudice to any other rights
or remedies available to the Landlord, at law or in equity, the Landlord may terminate this agreement by written notice to the Tenant,
whereupon the Landlord shall have the absolute right to deduct from the Security Deposit all costs incurred and losses suffered by the
Landlord occasioned by such breach. If the costs incurred and losses suffered by the Landlord exceed the amount of the Security
Deposit, the Landlord shall have the right to recover from us such additional costs and losses accordingly.
Permitted Use
The Premises shall only be used as an office.
Tenant's Works (where applicable)
Subject to the prior written approval of the Landlord and to all approvals being obtained by the Tenant from the relevant authorities the Tenant
may in accordance with the provisions of the existing Tenancy Agreement carry out within the Demised Premises at the Tenant's own cost and
expense all fitting out works.
4.
5.
6.
7.
Page 3
UE SQUARE: LETTER OF RENEWAL FOR #12-03/04
The Tenant shall deposit with the Landlord a renovation deposit (the amount to be
notified by the Landlord to the Tenant at that time) as security for carrying out the Tenant's Works. The Tenant shall comply with the
provisions set out in the Tenant's Fitting Out Brief attached hereto as Attachment II.
8.
Landlord's Right to Renovate
The Landlord shall be entitled to terminate the Tenancy by giving six (6) months' notice in writing to the Tenant in the event that the Landlord
requires any major renovation, overhaul, refurbishment, rebuilding or alterations or any other works to be carried out in the Building, the
Demises Premises, or any part thereof.
9.
Legal Fees, Stamp Duty and Administrative Fee
The Landlord's administrative fee, legal fees and expenses in connection with the preparation of the Renewal Tenancy Agreement, including
stamp duty thereon shall be borne by the Tenant.
10.
11.
12.
13
14.
14.1
Definitions
Expressions which are not expressly defined herein shall have the same meanings ascribed to them in the existing Tenancy Agreement.
Non-Merger Clause
The provisions of this Letter of Renewal shall remain in full force and effect after the execution of the Tenancy Agreement, in so far as they are
still required to be observed and performed and are not provided for in the Tenancy Agreement.
Contracts (Rights of Third Parties) Act, Chapter 53B
A person who is not a party to the Renewal Tenancy Agreement has no right under the Contracts (Rights of Third Parties) Act, Chapter 53B to
enforce any term of the Renewal Tenancy Agreement.
Confidentiality
The Tenant shall keep confidential and shall not at any time disclose or permit to be disclosed any terms, conditions and/or provisions of the
Renewal Tenancy Agreement, or any negotiations or discussions or agreement for a renewal of the Tenancy or any matter in relation to
the Renewal Tenancy Agreement, except with the prior written consent of the Landlord or as required by law or to the extent that such
information has become public knowledge not due to the Tenant's breach of this undertaking.
Special Conditions
Rent Holiday
Subject always to there being no existing breach or non-observance of any of the terms, conditions, stipulations, obligations on the part of the
Tenant to be observed or performed under the Renewal Tenancy Agreement at the relevant time, the Landlord shall grant to the Tenant a rent-
free period (free of Gross Rent) of two (2) weeks (the "Rent Holiday") for the following period:
(a)
2 Weeks from 15 September 2022 to 30 September 2022.
In the event that the Tenant commits a material breach of the provisions of the Tenancy or if the Term of Tenancy is prematurely terminated by
the Tenant for any reason whatsoever or the same is determined by the Landlord in consequence of the Tenant's breach of the terms and
conditions applicable thereto, then in addition to and without prejudice to any other rights and remedies of the Landlord, the Rent Holiday shall
be deemed withdrawn by the Landlord and the Tenant shall pay to the Landlord on demand the Gross Rent and/or other monies which would
have been payable if the Rent Holiday had constituted part of the Term.
14.2
Tenant's Minimum Paid-Up Share Capital
Page 4
UE SQUARE: LETTER OF RENEWAL FOR #12-03/04
(i)
(ii)
(iii)
The Tenant shall achieve or maintain a minimum paid-up capital of S$100,000 (the "Minimum Paid-Up Share Capital") and shall
provide the Landlord documentary evidence thereof upon acceptance of this letter , failing which the Tenant shall pay an additional
security deposit equivalent to three (3) months Total Gross Rent (the "Additional Security Deposit") in the form of cash or banker's
guarantee issued in the form and by a bank with full banking licence in Singapore acceptable to the Landlord providing for
multiple drawings and valid for the duration of the Term plus three (3) months thereafter as claims period. The Landlord shall not
be required to return to the Tenant the banker's guarantee upon the expiry of the claims period mentioned in the banker's guarantee.
The Tenant shall pay the Additional Security Deposit to the Landlord within one (1) month from the date of acceptance of this
letter or such other date as may be determined by the Landlord, and shall be maintained for the duration of the Term. The
Additional Security Deposit shall be refunded to the Tenant, free of interest, within one (1) month of the Tenant submitting to the
Landlord documentary evidence (satisfactory to the Landlord) of the increase in the Tenant's paid-up capital that meets the
Minimum Paid-Up Share Capital.
In the event that the Tenant (aa) fails to pay the Additional Security Deposit within the period specified in Clause 12 (ii) above or
(bb) at any time during the Term shall fail to maintain the Minimum Paid-Up Share Capital, the Landlord shall be entitled by
notice in writing to the Tenant to terminate the Renewal Tenancy Agreement.
(iv)
Upon such termination:-
(aa) the Tenant's interest in and the rights in relation to the Demised Premises shall cease and determine;
(bb) (if the Tenant shall have taken possession of the Demised Premises) the Tenant shall at its own cost and expense reinstate and
restore the Demised Premises to its bare and original condition and if the Tenant fails to do so, the Landlord may effect the same at
the Tenant's cost and expense. All cost and expense incurred by the Landlord shall be paid by the Tenant to the Landlord within
seven (7) days of demand from the Landlord and in this connection, a certificate of the Landlord as to the amount of cost and
expense shall be conclusive and binding on the Tenant;
(cc) the Tenant shall pay the Landlord compensation and damages for the loss of the relevant Rent and Service Charge suffered by
the Landlord consequential upon such termination and the Landlord shall retain all rights and remedies against the Tenant;
(dd) the Tenant shall also pay to the Landlord compensation and damages for any antecedent breach, non-observance or
non performance of the Tenant's obligation under the Tenancy;
(ee) without prejudice to any other remedy which the Landlord may be entitled, the Landlord shall have the absolute right to have
the Security Deposit forfeited to the Landlord.
Page 5
UE SQUARE: LETTER OF RENEWAL FOR #12-03/04
15.
Terms of the Existing Tenancy Agreement
All terms and references used in this Letter of Renewal which are defined or construed in the existing Tenancy Agreement, but are not defined
or construed in this Letter of Renewal, shall have the same meaning and construction in this Letter of Renewal.
Save as specifically provided herein, the terms and conditions of the existing Tenancy Agreement are deemed incorporated in this Letter of
Renewal. Further, the terms and conditions of the existing Tenancy Agreement shall not be affected by nor shall both our respective rights and
liabilities thereunder be discharged, diminished or nullified in any way whatsoever by the contents of this Letter of Renewal. If there is any
inconsistency between the terms and conditions of the existing Tenancy Agreement and this Letter of Renewal, the contents of this Letter of
Renewal shall prevail.
Page 6
UE SQUARE: LETTER OF RENEWAL FOR #12-03/04
To accept this offer, please proceed with the following: -
(a) signify your acceptance by signing and returning to us the duplicate copy of this letter;
(a)enclose a cheque of S$4,989.00 being the stamp duty payable for the renewal Tenancy Agreement, issued in favour of “WITHERS
KHATTARWONG LLP”; and
(b)enclose a cheque of S$594.00 being the legal fee payable, issued in favour of “WITHERS KHATTARWONG LLP" (Ref: Attached Tax
Invoice for legal fees).
(c)enclose a cheque of S$ 9,450.00 being the difference in Security Deposit issued in favour of "United Engineers Limited".
Please note that post-dated cheques are not accepted.
This offer shall lapse if not accepted within 7 calendar days from the date of this Letter of Offer.
Yours faithfully,
UNITED ENGINEERS LIMITED
/s/ Quek Jing Yi
MS QUEK JING YI
HEAD, CORPORATE LEASING
Page 7
UE SQUARE: LETTER OF RENEWAL FOR #12-03/04
ACCEPTANCE
I/We, Aslan Pharmaceuticals Pte.Ltd. (“the Tenant”), hereby confirm our acceptance of the above principal terms and conditions. Enclosed are (i) a
cheque of S$4,989.00 being the stamp duty payable and• (ii) a cheque of S$ 594.00 being the legal fee payable. (iii) a cheque of S$ 9,450.00 being
difference in the Security Deposit .
I/We also agree that after acceptance of this offer, any withdrawal or cancellation of the acceptance of this offer resulting from our failure to fulfil any of
the above terms and conditions shall give the Landlord the absolute right to have the full deposit paid forfeited to the Landlord and also to recover from us
all costs incurred and losses suffered by the Landlord as result of the withdrawal or cancellation.
/s/ Carl Aslan Jason Morton Firth
Authorised Signatory / Company’s Stamp
For and on behalf of
M/s Aslan Pharmaceuticals Pte.Ltd.
Name: Carl Firth
Designation: CEO
Date: 28 May 2019
Page 8
UE SQUARE: LETTER OF RENEWAL FOR #12-03/04
ATTACHMENT I
PLAN OF THE DEMISED PREMISES
Page 9
UE SQUARE: LETTER OF RENEWAL FOR #12-03/04
ATTACHMENT II
FITTING OUT BRIEF
Stamp Certificate Reference
Stamp Certificate Issued Date
Applicant’s Reference
Document Reference Number
Document Description
Date of Document
Property
Lessor/ Landlord
Lessee/ Tenant
Stamp Duty
Total Amount
Original
Certificate of Stamp Duty
: 213013-01LA3-1-343962116
: 20/07/2016
: SES.NSA.KW00800.0159
: 2016062801095 ver. 1.0
: Acceptance to Offer of Lease (Ad valorem)
: 15/07/2016
: 83 CLEMENCEAU AVENUE, #12-03, SINGAPORE 239920
: UNITED ENGINEERS LIMITED (UEN-LOCALCO -191200018G)
: ASLAN PHARMACEUTICALS PTE. LTD. (UEN-LOCALCO - 201007695N)
: S$ 4,536.00
: S$ 4,536.00
To confirm if this Stamp Certificate is genuine, you may do an online check at https:llestamping.iras.gov.sg. Under Stamp Duty Resource, select Verify
Stamp Certificate Authenticity.
KP2L514L - 20/07/2016
2016062801095
1a6a69f37d8a0f6b641102921231704f
213013-01LA3-1-343962116
Page 1 of 1
Ref: OFF/LOO/#12-03/ASLAN//GC
16 June 2016
ASLAN PHARMACEUTICALS PTE.LTD.
10A Bukit Pasoh Road
Singapore 089824
Attention : Mr Carl Aslan Jason Morton Firth
Chief Executive Officer
Dear Sirs,
BY COURIER
LETTER OF OFFER FOR 83 CLEMENCEAU AVENUE #12-03 UE SQUARE SINGAPORE 239920
United Engineers Limited (the “Landlord”) is pleased to offer to you, M/s Aslan Pharmaceuticals Pte.Ltd. (the “Tenant”), a tenancy (the “Tenancy”) of
the above unit on the following principal terms and conditions:-
1.
2.
Premises
#12-03, 83 Clemenceau Ave
Floor Area
4,500.00 square feet approximately
A copy of the floor plan edged red is attached (for identification purposes only). The floor area shall be subject to final site measurement and
relevant authority’s approval.
3.
Lease Term
Three (03) years
4.
5.
Term of Tenancy
1 October 2016—30 September 2019 (both dates inclusive)
Option to Renew
Further option to renew for 3 years at the then prevailing market rent.
6.
Rent and Service Charge
Rent @ S$5.95 psf per month
Service Charge @ S$1.05 psf per month
Total Monthly Gross Rent @S$7.00 psf per month
12 Ang Mo Kio Street 64
#034A-01 UE Biz Hub CENTRAL
Singapore 569088
S$26,775.00 per month
S$ 4,725.00 per month
S$31,500.00 per month
T : (65) 6818 8383
F : (65) 6818 8398
United Engineers Limited
www.uel.com.sg
Page 2
UE SQUARE OFFICE: LETTER OF OFFER FOR #12-03
•
•
•
Rent and Service Charge shall be payable monthly in advance from date of commencement of the Term of the Tenancy.
The above Service Charge rate is a current estimation and is subject to change from time to time.
In the event that after acceptance of this offer, the Tenant fails to observe or perform (or threatens to commit a breach of or not to perform) the
Tenant obligations under this letter, or to take possession of the Demised Premises in accordance with the terms and conditions of this Letter of
Offer, or bankruptcy/winding-up proceedings are commenced against the Tenant, then without prejudice to any other rights or remedies
available to the Landlord, at law or in equity, the Landlord may terminate this agreement by written notice to the Tenant, whereupon the
Landlord shall have the absolute right to forfeit the security deposit.
7.
Taking Possession
The Tenant shall take possession of the Premises on 1 September 2016 in its bare and original condition subject to the Tenant having paid to
the Landlord prior to the taking possession (i) 3 months’ Security Deposit; (ii) 1 month’s advance Gross Rent; (iii) the Fitting-Out Deposit of
$3,000.00; and (iv) the Landlord’s legal fees, stamp duty and disbursements.
Any delay in the Tenant taking possession of the Premises shall not be a ground for postponing the rental commencement date.
8.
Goods and Services Tax
All goods and services tax in relation to the Rent, Service Charge and other sums payable by the Tenant under this Letter of Renewal shall be
paid by the Tenant.
9.
Security Deposit
(a)
The Tenant shall deposit an amount of S$94,500.00 equivalent to three (03) months’ Rent and Service Charge by way of Cash or Banker’s
Guarantee to the Landlord upon acceptance of this letter of offer. Such deposit shall be refunded to the Tenant, free of interest, on the
expiration of the lease term, subject to the due performance and observance by the Tenant of all the principal covenants, conditions stipulated
in the Tenancy Agreement.
(b)
In the event that after acceptance of this offer,
(i)
(ii)
(iii)
the Tenant fails to observe or perform (or threatens to commit a breach of or not to perform) the Tenant obligations under this letter; or
the Tenant fails to execute the Tenancy Agreement within two (02) weeks of receipt of the same; or
bankruptcy/winding-up proceedings are commenced against the Tenant, then without prejudice to any other rights or remedies available
to the Landlord, at law or in equity, the Landlord may terminate this agreement by written notice to the Tenant, whereupon the
Landlord shall have the absolute right to forfeit the entire security deposit.
Page 3
UE SQUARE OFFICE: LETTER OF OFFER FOR #12-03
10.
Permitted Use
The Premises shall only be used as an office.
11.
Fitting-Out Period / Rent-free Period
The Landlord shall grant to the Tenant a Fitting-Out Period (free of Rent and Service Charge) of One month commencing 1 September 2016
till 30 September 2016 (both dates inclusive) for the Tenant to carry out the Tenant’s Works.
In the event that the Term of the Tenancy is prematurely terminated by the Tenant for any reason whatsoever or the same is determined by the
Landlord in consequence of the Tenant’s breach of the terms and conditions applicable thereto, the Tenant shall compensate and pay to the
Landlord on demand an amount calculated at the monthly rate equivalent to the Rent and Service Charge which would have been applicable if
the Fitting out period constituted part of the term of the Lease; and for the entire duration of the Rent -free Period.
12.
Tenant’s Works
Subject to the prior written approval of the Landlord and to all approvals being obtained by the Tenant from the relevant authorities the Tenant
may in accordance with the provisions of the Tenancy Agreement carry out within the Premises at the Tenant’s own cost and expense all
fitting out works which are not provided by the Landlord.
The Tenant shall comply with the guidelines, terms and conditions set out in the Tenant’s Fitting-Out Brief).
13. Utilities
The Tenant shall at its own cost and expense arrange for the installation and testing of the meter and any equipment or appliances required to
separately measure the services supplied to the Demised Premises and for licensed electrical contractors to make the necessary applications to
Landlord’s Designated Supplier. All charges in respect of the supply of electricity and any other services supplied to the Premises and any
taxes thereon shall be paid by the Tenant.
14. Car Parks
The Landlord will allocate to the Tenant two (02) season car parking lots at prevailing parking charges, payable in advance.
15. Reinstatement
Upon the expiration or sooner determination of the Term of the Tenancy, the Tenant shall reinstate the Premises to a bare original condition.
16. Air-conditioning Hours
The Landlord will provide air-conditioning to the Demised Premises daily from 8:00am to 6:00pm on Mondays through Fridays, and from
8:00 am to 1:30pm on Saturdays, save for Sundays and gazetted public holidays or during such other times as the parties may mutually agree
to in writing, provided always that the Tenant bear the payment for extension of any air-conditioning hours at the prevailing charges.
Page 4
UE SQUARE OFFICE: LETTER OF OFFER FOR #12-03
17. Rent free Period
The Landlord shall grant to the Tenant a Rent Free Period (free of Gross Rent) of 0.5 month for the period from 15 September 2019 to
30 September 2019.
In the event the Tenancy is prematurely terminated by the Tenant for any reason whatsoever or the same is determined by the Landlord in
consequences of the Tenant’s breach of the terms and conditions applicable hereto, the Tenant shall compensate and pay to the Landlord on
demand an amount calculated at the monthly rate equivalent to the Rent and Service Charge which could have been applicable if the rent free
period constituted part of the Term of the tenancy; and for the entire duration of the Rent Free Period. This right is only enforceable in the
event of non performance under the Tenancy Agreement whereby the Landlord is, per the Tenancy Agreement, permitted to terminate the
Tenancy.
18. Documentation
Tenant’s acceptance of this offer is deemed acceptance of the terms in the Tenancy Agreement. A specimen copy of the Tenancy Agreement
has been forwarded to the Tenant. The Tenant shall execute the Tenancy Agreement within two (2) weeks upon receipt of the document.
The Tenant shall upon the Tenant’s execution of the Tenancy Agreement, furnish to the Landlord:
•
•
a certified true copy of the Tenant’s Memorandum and Articles of Association certified by a director or company secretary of the Tenant; and
a certified extract of the Tenant’s director’s resolutions approving the entry into the Tenancy and authorising a signatory to execute the Tenancy
Agreement for and on the Tenant’s behalf, certified by a director or company secretary of the Tenant.
19.
Terms and Conditions of Tenancy
The Tenancy shall be subject to and in accordance with all conditions, covenants, terms and provisions contained in the specimen Tenancy
Agreement, as modified by the specific terms set out in this letter and in the Tenant’s Fitting-Out Brief (collectively referred to as the
‘Documents’) .
Until the execution of the Tenancy Agreement: -
•
•
•
the provisions contained in the Documents shall apply and be binding on the Tenant and the Landlord as though such provisions had been
incorporated in this letter;
the Tenant and the Landlord shall be liable to observe and perform the same obligations as are imposed by the covenants on the part of the
Tenant and on the part of the Landlord respectively and the conditions contained in the Documents in so far as they are not inconsistent with
the provisions of this offer; and
the Landlord shall have and be entitled to all remedies by distress, action or otherwise for recovering any monies or for breach of any
obligation on the part of the Tenant as if the Tenancy Agreement had then been executed.
Page 5
UE SQUARE OFFICE: LETTER OF OFFER FOR #12-03
20.
Legal Fees and Stamp Duty
The Landlord’s legal fees and expenses in connection with the preparation of the above documentation, including stamp duty thereon shall be
borne by the Tenant.
21. Non-merger Clause
The provisions of this letter shall remain in full force and effect after the execution of the Tenancy Agreement, in so far as they are still
required to be observed and performed and are not provided for in the Tenancy Agreement.
22. Definitions
Expressions which are not expressly defined herein shall have the same meanings ascribed to them in the attached form of the specimen
Tenancy Agreement.
23. Contracts (Rights of Third Parties) Act, Chapter 53B
A person who is not a party to this Letter of Offer has no right under the Contracts (Rights of Third Parties) Act, Chapter 53B to enforce any
term of this letter.
24. Confidentiality
The Tenant shall keep confidential and shall not at any time disclose or permit to be disclosed any terms, conditions and/or provisions of the
Tenancy Agreement, or any negotiations or discussions or agreement for a renewal of the Tenancy or any matter in relation to the Tenancy
Agreement, except with the prior written consent of the Landlord or as required by law or to the extent that such information has become
public knowledge not due to the Tenant’s breach of this undertaking.
All terms and references used in this Letter of Offer which are defined or construed in the Tenancy Agreement, but are not defined or construed in this
Letter of Offer, shall have the same meaning and construction in this Letter of Offer.
Save as specifically provided herein, the terms and conditions under the Tenancy Agreement are deemed incorporated in this Letter of Offer. Further, the
terms and conditions under the Tenancy Agreement shall not be affected by nor shall our respective rights and liabilities thereunder be discharged,
diminished or nullified in any way whatsoever by the contents of this Letter of Offer. If there is any inconsistency between the terms and conditions under
the Tenancy Agreement and this Letter of Offer, the contents of this Letter of Offer shall prevail.
Page 6
UE SQUARE OFFICE: LETTER OF OFFER FOR #12-03
To accept this offer, please proceed with the following: -
(a)
(b)
(c)
(d)
signify your acceptance by signing and returning to us the duplicate copy of this letter;
enclose a cheque or Banker’s Guarantee of S$94,500.00 being the 3 months’ Security Deposit, issued in favour of “UNITED ENGINEERS
LIMITED”;
enclose a cheque of S$33,705.00 being 1 month’s advance Gross Rent (inclusive of GST), issued in favour of “UNITED ENGINEERS
LIMITED”;
enclose a cheque of S$4,536.00 being the stamp duty payable for this document, issued in favour of “COMMISSIONER OF STAMP DUTIES”;
and
(e)
enclose a cheque of S$3,376.39 being the legal fee payable payable for this document, issued in favour of “KHATTARWONG LLP”.
Please note that post-dated cheques are not accepted.
This offer shall lapse if not accepted within 7 calendar days from the date of this Letter of Offer.
Yours faithfully,
UNITED ENGINEERS LIMITED
/s/ Quek Jing Yi
MS QUEK JING YI
HEAD, CORPORATE LEASING
Page 7
UE SQUARE OFFICE: LETTER OF OFFER FOR #12-03
ACCEPTANCE
I/We, Aslan Pharmaceuticals Pte.Ltd. (“the Tenant”), hereby confirm our acceptance of the above principal terms and conditions. Enclosed are (i) a
cheque or Banker’s Guarantee of S$94,500.00 being the 3 months’ Security Deposit, (ii) a cheque of S$33,705.00 being the 1 month’s advance rent
(inclusive of GST); (iii) a cheque of S$4,536.00 being the stamp duty payable; and (iv)a cheque of S$3,376.39 being the legal fee payable. We agree that
the Security Deposit is non-refundable in the event we fail to execute the Tenancy Agreement within 14 days upon receipt of the same.
/s/ Carl Aslan Jason Morton Firth
Authorised Signatory / Company’s Stamp
For and on behalf of
M/s Aslan Pharmaceuticals Pte.Ltd.
Name: Mr. Carl Aslan Jason Morton Firth
Designation: Chief Executive officer
Date:15 July 2016
Dated
25 July 2016
UNITED ENGINEERS LIMITED
and
ASLAN PHARMACEUTICALS PTE. LTD.
TENANCY AGREEMENT
in respect of Unit #12-03
83, Clemenceau Avenue
UE SQUARE
SINGAPORE 239920
KHATTARWONG LLP
ADVOCATES & SOLICITORS
SINGAPORE
Our Ref: SES nsa KW00800.0159
TABLE OF CONTENTS
INTERPRETATION
TENANT’S COVENANTS
Interpretation of restrictions on the Tenant
THE DEMISE, POSSESSION AND FITTING-OUT
Contents
1.
1.1 Definitions
1.2
1.3 Schedules and Annexures
1.4 Clause and paragraph headings
1.5 Singular and plural meanings
1.6 Statutes and statutory instruments
1.7 Gender
1.8 Joint and several obligations
2.
2.1 The Demise
2.2 Possession
2.3 Fitting Out Period
2.4 Tenant’s Works
3.
3.1 Rent, Service Charge, Interest and Taxes
3.2 Utilities
3.3 Security Deposit
3.4
Insurance
3.5 Repair
3.6 Alterations
3.7 Landlord’s right of inspection and right of repair
3.8 Landlord’s right of entry for repairs etc
3.9 Yield up in repair at the end of the Term
3.10 User
3.11 Covenants affecting use of Demised Premises and Building
3.12 Advertisements and signs
3.13 Car parks
3.14 Compliance with statutes etc
3.15 Notices ‘to let’
3.16
Indemnity by Tenant
3.17 Assignment and subletting
3.18 No registration of tenancy
3.19 Confidentiality
3.20 Personal Data Protection
Page
1
1
3
3
3
3
3
3
3
4
4
4
4
4
5
5
5
5
5
6
6
6
6
6
6
7
7
7
8
8
8
9
9
10
10
i
PROVISOS
LANDLORD’S COVENANTS
4.
4.1 Quiet enjoyment
4.2 Property tax
4.3 Management of the Building
5.
LANDLORD NOT LIABLE
5.1 No claim by Tenant
5.2 Transfer to Management Corporation
5.3 Accidents
6.
6.1 Proviso for re-entry
6.2 Power for Landlord to deal with adjoining property and the Demised Premises
6.3 Removal of property after determination of Term
6.4 Notices, consents and approvals
6.5 Payments
6.6 Determination of Floor Area
6.7 Costs and expenses
6.8 Untenantability
6.9 No waiver
6.10 No representations
6.11 Name of UE Square
6.12 Rules and regulations
6.13 Holding over
6.14 Changes to Plans
6.15 Landlord’s right to assign
6.16 Severance
6.17 Governing law and submission to jurisdiction
6.18 Provisions for Renewal
6.19 Contracts (Rights of Third Parties) Act (Cap 53B)
Appendix A
Schedule 1
Schedule 2
Schedule 3
Schedule 4
Schedule 5
Schedule 6
Schedule 7
Schedule 8
ii
10
11
11
11
12
12
13
13
13
13
14
15
15
16
16
16
16
17
17
17
17
18
18
18
19
19
19
19
20
22
23
24
27
28
32
35
37
Schedule 9
Schedule 10
Schedule 11
Schedule 12
Schedule 13
Schedule 14
Schedule 15
Schedule 16
Annexure A
iii
38
39
40
42
43
45
47
51
52
This Agreement is made on between:
(1) UNITED ENGINEERS LIMITED, a company incorporated in Singapore and having its registered office at 12 Ang Mo Kio Street 64 #01-01 UE
BizHub CENTRAL Singapore 569088 (the “Landlord” ); and
(2)
the party named in paragraph 1 of Appendix A (the “Tenant”).
NOW THIS TENANCY AGREEMENT WITNESSETH as follows:
1.
INTERPRETATION
1.1 Definitions
In this Tenancy Agreement the following words and expressions shall where the context so admits have the following meanings:
“Bare and Original Condition” means the state and condition of the Demised Premises as at the Possession Date (hereinafter defined).
“Building” means all that portion of UE Square comprising the integrated office and retail premises known as 83 Clemenceau Avenue (of
which the Demised Premises forms part).
“Common Property” means all the parts of UE Square as are not comprised in any strata lot shown on the strata title plan lodged with the
Registrar of Titles in respect of UE Square and includes all apparatus and installations and other areas within the definition of common
property as defined in the Land Titles (Strata) Act (Cap 158).
“Conducting Media” means drains, sewers, conduits flues, gutters, gullies, channels, ducts, shafts, watercourses, pipes, cables, wires and
mains or any of them.
“Demised Premises” means the premises described in paragraph 2 of Appendix A; the boundaries and location of which are edged in red in
the attached plan(s) marked Annexure A, excluding the exterior faces of external walls, the exterior faces of boundary walls and the roof.
“Fitting Out Deposit” means the sum deposited by the Tenant with the Landlord pursuant to Clause 2.4.2 and specified in paragraph 6 of
Appendix A.
“Fitting Out Period” means the period referred to in Clause 2.3.1 and specified in paragraph 5(b) of Appendix A.
“Floor Area” means the area of the floor of the Demised Premises measured to include (i) half the thickness of the walls/partitions/glass (as
the case may be) which form the external boundary of the Demised Premises and (ii) the area occupied by all pillars, columns, mullions,
internal partitions and projections within the Demised Premises and shall be accepted by the parties as the area specified in paragraph 3 of
Appendix A.
“Interest” means interest at the rate as determined by the Landlord to be 4% above the prime lending rate of Oversea-Chinese Banking
Corporation Limited prevailing from time to time, calculated on a daily basis and on the basis of a three hundred and sixty-five (365) days
year (as well after as before judgment).
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-1-
“Landlord” includes its successors, assigns and all persons entitled to the reversion immediately expectant upon the determination of this
tenancy.
“Management Corporation” means the management corporation established for UE Square under the Land Titles (Strata) Act (Cap 158).
“Payment Date” means the date(s) as defined in paragraph 1.1 of Schedule 4.
“permitted occupier” means any person on the Demised Premises expressly or by implication with the Tenant’s authority.
“person” includes any individual, company, corporation, firm, partnership, joint venture, association, organisation, trust, state or agency of a
state (in each case, whether or not having separate legal personality).
“Possession Date” means the date referred to in Clause 2.2.1 and specified in paragraph 5(a) of Appendix A.
“Project Consultants” means the architect, mechanical and electrical engineer, structural engineer and other professional consultants engaged
by the Landlord for UE Square.
“Rent” means the rent payable by the Tenant in accordance with Schedule 4.
“Requisite Consents” means those permissions, consents, approvals, licences, certificates and permits in legally effectual form as may be
necessary to lawfully commence, carry out and complete the Tenant’s Works.
“Security Deposit” means the sum deposited by the Tenant with the Landlord pursuant to Clause 3.3 and specified in paragraph 7 of
Appendix A.
“Service Charge” means the charges payable by the Tenant to the Landlord in accordance with Schedule 5.
“Tenancy Agreement” includes any instruments supplemental to it.
“Tenant” includes, if the Tenant is an individual, his personal representatives and permitted assigns, or if the Tenant is a company, its
successors in title.
“Tenant’s Fitting Out Brief” means the printed guidelines prepared by the Landlord and furnished to the Tenant, including any amendments
or modifications thereto from time to time.
“Tenant’s Works” means such fitting out or other works as the Tenant may require to carry out in connection with the use and enjoyment of
the Demised Premises as office premises.
“Term” means the tenancy term granted by this Tenancy Agreement and specified in paragraph 4 of Appendix A.
“UE Square” means the complex known or to be known as UE SQUARE, or such other name as may be decided by the Landlord in its
absolute discretion with the approval of the relevant authority comprising office commercial and residential premises erected on Government
Resurvey Lots 109 and 172, all Town Subdivision 9 and bounded by Clemenceau Avenue, River Valley Road and Mohammed Sultan Road, of
which the Demised Premises forms part and refers to each and every part of UE Square and the car parks, service, loading and any other areas
the use and enjoyment of which is appurtenant to UE Square.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-2-
1.2
Interpretation of restrictions on the Tenant
In any case where the Tenant is placed under a restriction by reason of the covenants and conditions contained in this Tenancy Agreement, the
restriction shall be deemed to include the obligation on the Tenant not to permit or allow the infringement of the restriction by any person
claiming rights to use, enjoy or visit the Demised Premises through, under or in trust for the Tenant.
1.3
Schedules and Annexures
The Schedules and Annexures hereto shall be taken, read and construed as parts of this Tenancy Agreement and the provisions thereof shall
have the same force and effect as if expressly set out in the body of this Tenancy Agreement.
1.4 Clause and paragraph headings
1.4.1 The clause and paragraph headings in this Tenancy Agreement are for ease of reference only and shall not be taken into account in the
construction or interpretation of any covenant, condition or proviso to which they refer.
1.4.2 References in this Tenancy Agreement to a clause, Appendix, Schedule or Annexure are references where the context so admits to a clause,
Appendix, Schedule or Annexure in this Tenancy Agreement. References in a clause to a paragraph are (unless the context otherwise
requires) references to a paragraph of that clause, and references in a Schedule to a paragraph are (unless the context otherwise requires)
references to a paragraph of that Schedule.
1.5
Singular and plural meanings
Words in this Tenancy Agreement importing the singular meaning shall where the context so admits include the plural meaning and vice versa.
1.6
Statutes and statutory instruments
References in this Tenancy Agreement to any statutes or statutory instruments shall include and refer to any statute or statutory instrument
amending, consolidating or replacing them respectively from time to time and for the time being in force.
1.7 Gender
Words in this Tenancy Agreement for the masculine gender shall include the feminine and neuter genders and vice versa and words denoting
natural persons shall include corporations and firms and all such words shall be construed interchangeably in that manner.
1.8
Joint and several obligations
Where two or more persons are included in the term “Tenant” all covenants, agreements, terms, conditions and restrictions shall be binding on
and applicable to them jointly and each of them severally, and shall also be binding on and applicable to their personal representatives and
permitted assigns respectively jointly and severally.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-3-
2.
THE DEMISE, POSSESSION AND FITTING-OUT
2.1 The Demise
2.1.1
In consideration of the Rent, Service Charge and the covenants reserved by and contained in this Tenancy Agreement, the Landlord
HEREBY LETS to the Tenant ALL the Demised Premises TOGETHER WITH the rights set out in Schedule 1 but EXCEPTING AND
RESERVING to the Landlord the rights as stated in Schedule 2, TO HOLD the Demised Premises unto the Tenant for the Term specified
in paragraph 4 of Appendix A, the Tenant paying to the Landlord during the Term the Rent in accordance with the provisions in Schedule
4 and the Service Charge in accordance with the provisions in Schedule 5.
2.2
Possession
2.2.1 The Landlord shall give and the Tenant shall take possession of the Demised Premises on the date specified in paragraph 5(a) of Appendix
A (the “Possession Date” ), subject to the Tenant having paid to the Landlord prior to the taking of possession, the following sums: (i) the
Security Deposit, (ii) the Fitting Out Deposit, (iii) one (1) month’s Rent and Service Charge in advance, (iv) the Landlord’s legal fees in
connection with the preparation and completion of this Tenancy Agreement and all stamp duty and all other disbursements and out-
of- pocket expenses in respect thereof.
2.2.2 Any delay in the Tenant taking possession of the Demised Premises shall not be a ground for postponing the commencement of the Fitting
Out Period.
2.3
Fitting Out Period
2.3.1 The Landlord agrees to grant the Tenant a fitting out period (free of Rent and Service Charge) for the duration specified in paragraph 5(b)
of Appendix A (the “Fitting Out Period” ) commencing from the Possession Date, for the Tenant to carry out the Tenant’s Work which
shall be completed by the Tenant within the Fitting Out Period.
2.3.2
In the event that the Term of the tenancy is prematurely terminated by the Tenant for any reason whatsoever or the same is determined by
the Landlord in consequence of the Tenant’s breach of the terms and conditions applicable thereto, then without prejudice to any other rights
and remedies of the Landlord, the Tenant shall compensate and pay to the Landlord, on demand, an amount for the entire duration of the
Fitting Out Period equivalent to the Rent and Service Charge which would have been payable if the Fitting Out Period constituted part of
the Term of the tenancy.
2.4 Tenant’s Works
2.4.1 Subject always to and in accordance with the provisions set out in Schedule 3, the Tenant shall carry out at the Tenant’s own costs and
expense all works required by the Tenant for purpose of fitting out the Demised Premises and shall comply with and observe the guidelines,
terms and conditions set out in the Tenant’s Fitting Out Brief.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-4-
2.4.2 The Tenant shall deposit with the Landlord the sum specified in paragraph 6 of Appendix A (the “Fitting Out Deposit”) at the time and in
the manner and in accordance with the provisions set out in paragraph 6 in Schedule 3.
3.
TENANT’S COVENANTS
The Tenant covenants with the Landlord as follows:
3.1 Rent, Service Charge, Interest and Taxes
3.1.1 To pay the Rent at the times and in the manner specified in Schedule 4 and the Service Charge at the times and in the manner specified
in Schedule 5.
3.1.2 To pay such Interest as may become due on the Rent, Service Charge and other monies due under this Tenancy Agreement in accordance
with the provisions set out in paragraph 1 in Schedule 6.
3.1.3 To pay any applicable goods and services tax, imposition, duty and levy whatsoever (hereinafter collectively called “Taxes”) which may be
imposed on the Rent, Service Charge and other sums payable under this Tenancy Agreement or to reimburse the Landlord for the payment
of such Taxes in accordance with the provisions set out in paragraph 2 of Schedule 6.
3.1.4 To pay any increase in property tax attributable to the Demised Premises in accordance with the provisions set out in paragraph 3 of
Schedule 6.
3.2 Utilities
To pay all charges including any taxes now or in the future imposed by the supplier designated by the Landlord (“Designated Supplier”) or
other appropriate authority in respect of electricity and/or chilled water supplied to all air-conditioning fan coil units and any other services
supplied and metered separately to the Demised Premises which shall be consumed or supplied on or to the Demised Premises, and to pay all
necessary hire charges for any equipment or appliances supplied to the Tenant irrespective of whether the same was installed by the Landlord
or the Tenant and whether the electricity and/or chilled water is supplied during or beyond the operating hours of the Building and whether
invoiced by a Designated Supplier, other supplier or by the Landlord, and all transmission and transportation charges payable in connection
with the supply of such electricity and/or chilled water supplied to all air-conditioning fan coil units and any other services supplied to the
Demised Premises in accordance with the provisions set out in Schedule 7.
3.3
Security Deposit
To deposit with the Landlord the sum specified in paragraph 7 of Appendix A equivalent to three (3) months’ Rent and Service Charge for
the Demised Premises (the “Security Deposit”) in accordance with the provisions set out in Schedule 8.
3.4
Insurance
To take out and keep in force a comprehensive public liability insurance policy of an adequate amount in accordance with the provisions set
out in Schedule 9.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-5-
3.5 Repair
At all times to repair and to keep the Demised Premises in a clean and good state of tenantable repair and condition (fair wear and tear
excepted) in accordance with the provisions set out in Schedule 10.
3.6 Alterations
Not to make any alterations or additions to or affecting the structure or exterior of the Demised Premises or the appearance of the Demised
Premises as seen from the exterior except in accordance with the provisions set out in Schedule 11.
3.7 Landlord’s right of inspection and right of repair
Subject always to and in accordance with the provisions set out in Schedule 12, to permit the Landlord and its servants or agents at all
reasonable times and by prior appointment with the Tenant to enter into, inspect and view the Demised Premises and examine their
condition and also to take a schedule of fixtures in the Demised Premises.
3.8 Landlord’s right of entry for repairs etc
3.8.1 Subject always to and in accordance with the provisions set out in Schedule 13, to permit the Landlord and the agents, workmen and others
employed by the Landlord or by the Management Corporation or by the other tenants or occupiers of the Building to enter upon the
Demised Premises for the purposes set out in Schedule 13.
3.8.2 To furnish to the Landlord the names, addresses and contact telephone numbers of at least two management staff (“Designated
Employees”) who are in the employ of the Tenant and who would retain possession of the keys to the Demised Premises on a twenty-four
(24) hour basis, for the purposes and in accordance with the provisions of Schedule 13.
3.9 Yield up in repair at the end of the Term
At the expiration or earlier determination of the Term to quietly yield up the Demised Premises in the Bare and Original Condition (fair
wear and tear excepted) in accordance with the provisions set out in Schedule 14.
3.10 User
3.10.1 Not to use the Demised Premises otherwise than as office premises.
3.10.2 The Tenant shall not use or permit the use of the Demised Premises or any part thereof:
(i)
(ii)
(iii)
otherwise than for the purposes specified in Clause 3.10.1;
for any purpose otherwise than in accordance with the permitted use approved by the relevant government authorities; and
for the purposes specified in Clause 3.10.1, until and unless all necessary approvals, consents, licences and permits shall have been
obtained from the relevant government authorities and such approvals, consents, licences and permits remain valid and subsisting.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-6-
3.11 Covenants affecting use of Demised Premises and Building
The Tenant hereby covenants to perform and observe at all times the covenants affecting the use of the Demised Premises and the Building set
out in Schedule 15.
3.12 Advertisements and signs
3.12.1 Not without the Landlord’s prior written consent (which approval shall not be unreasonably withheld) to place or display on the exterior
of the Demised Premises or on the windows or inside the Demised Premises so as to be visible from the exterior of the Demised Premises
any name, writing, notice, sign, illuminated sign, display of lights, placard, poster, sticker or advertisement other than:
(i)
the name of the Tenant signwritten on the entrance doors of the Demised Premises in a style and manner previously approved in
writing by the Landlord; and
(ii)
the name of the Tenant displayed on the indicator board in the entrance lobby in the Building.
3.12.2 If any name, writing, notice, sign, placard, poster, sticker or advertisement shall be placed or displayed in breach of these provisions, to
permit the Landlord to enter the Demised Premises and remove such name, writing, notice, sign, placard, poster, sticker or advertisement
and to pay to the Landlord on demand the expense of so doing.
3.13 Car parks
3.13.1 The Landlord may prohibit the Tenant and its officers and employees from parking in UE Square other than in designated parking areas and
the Tenant shall at all times notify the Landlord of the vehicle registration numbers of all vehicles currently owned or used by the Tenant, its
officers and employees, such notification to be made initially within fourteen (14) days after the Tenant takes possession of the Demised
Premises and thereafter within fourteen (14) days after a change occurs.
3.13.2 The Tenant shall pay parking charges as may be levied or revised from time to time by the Landlord or the Management Corporation, for the
use of car park lots in UE Square.
3.13.3 The Tenant, its officers and employees shall comply with all rules and regulations imposed from time to time by the Landlord or the
Management Corporation for the management and operation of the car parks within UE Square.
3.13.4 Subject to availability, the Landlord shall allocate to the Tenant two (2) season car park lots (not in specifically designated location) at
prevailing charges payable monthly in advance for the use by the Tenant, its officer and employees and the Landlord reserves the right to
revise the allocation of number of carpark lots from time to time.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-7-
3.14 Compliance with statutes etc
3.14.1 Except where such liability may be expressly within the Landlord’s covenants contained in this Tenancy Agreement, to comply in all
respects with the provisions of all statutes and regulations for the time being in force and requirements of any competent authority relating
to the Demised Premises or anything done in or upon the Demised Premises by the Tenant and to indemnify the Landlord against all actions,
proceedings, claims or demands which may be brought or made by reason of such statutes, regulations or requirements or any default in
compliance with them.
3.14.2 In particular but without prejudice to the generality of Clause 3.14.1:
(i)
(ii)
(iii)
to comply with all requirements under any present or future Act of Parliament, order, by-law or regulation as to the use or
occupation of or otherwise concerning the Demised Premises;
to execute with all due diligence all works to the Demised Premises for which the Tenant is liable in accordance with Clauses
3.14.1 and 3.14.2 and of which the Landlord has given notice to the Tenant; and
if the Tenant shall not comply with Clause 3.14.2(i) and (ii) to permit the Landlord to enter the Demised Premises to carry out such
works and to pay to the Landlord on demand the expense of so doing (including surveyors’ and other professional advisers’ fees)
together with Interest from the date of expenditure until payment by the Tenant to the Landlord (such monies to be recoverable as
if they were rent in arrears).
3.15 Notices ‘to let’
Within six (6) months before the expiration or earlier determination of the Term:
3.15.1 to permit the Landlord or its agents to fix upon the Demised Premises a notice board for reletting the Demised Premises; and
3.15.2 to permit all persons authorised by the Landlord or its agents to view without interruption the Demised Premises at reasonable hours and by
prior appointment with the Tenant in connection with any such reletting.
3.16 Indemnity by Tenant
To indemnify and keep indemnified the Landlord from and against:
3.16.1 all claims, demands, writs, summonses, actions, suits, proceedings, judgements, orders, decrees, damages, costs, losses and expenses of any
nature whatsoever which the Landlord may suffer or incur in connection with loss of life, personal injury and/or damage to property arising
from or out of any occurrences in, upon or at the Demised Premises or the use of the Demised Premises or any part thereof by the Tenant or
by any of the Tenant’s employees, independent contractors, agents or any permitted occupier; and
3.16.2 all loss and damage to the Demised Premises, the Building or UE Square and to all property therein caused directly or indirectly by the
Tenant or the Tenant’s employees, independent contractors, agents or any permitted occupier and in particular but without limiting the
generality of the foregoing caused directly or indirectly by the use or misuse, waste or abuse of water, gas or electricity or faulty fittings or
fixtures.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-8-
3.17 Assignment and subletting
3.17.1 Not to transfer, assign, sublet, mortgage or encumber this tenancy or the Demised Premises or any part thereof.
3.17.2 Not to licence, part with or share possession or occupation of the whole or any part of the Demised Premises or grant to third parties any
rights over the Demised Premises.
3.17.3 For the purposes hereof where the Tenant is a company, any amalgamation and/or reconstruction effected by the Tenant or any change in the
majority or controlling shareholders of the Tenant shall be deemed an assignment of this tenancy.
3.17.4 In the event the Tenant makes a request to transfer, assign, sublet, mortgage or encumber this tenancy or the Demised Premises or any part
thereof or to licence, part with or share possession or occupation of the whole or any part of the Demised Premises or grant to third parties
any rights over the Demised Premises, such request shall be accompanied by a sum of Dollard Five Hundred $500.00 in payment of the
Landlord’s administrative costs in processing every application made by the Tenant whether or not such consent or approval shall be granted
or given.
3.17.5 The Landlord shall be entitled at its absolute discretion to impose such terms and conditions as it may think fit, as a condition of its consent,
including but not limited to the requirement for the Tenant to pay to the Landlord such amount or amounts as may be stipulated by the
Landlord, whether such amount is calculated by reference to the difference between:
(i)
(ii)
the amounts payable to the Tenant by its sub-tenant in respect of the premises proposed to be sublet; and
the Rent and Service Charge payable to the Landlord by the Tenant apportioned to the premises proposed to be sublet,
or otherwise, and payment of any legal costs and fees, stamp duty and all other disbursements and out-of-pocket expenses
that may be incurred. The provisions of Section 17 of the Conveyancing And Law of Property Act (Cap 61) shall not apply
to this Tenancy Agreement.
3.17.6 A consent granted by the Landlord shall not constitute a waiver of the requirement for the Landlord’s consent to any subsequent transfer,
assignment, subletting, licensing, grant of possession, mortgage or encumbrance of this tenancy or the Demised Premises or any part
thereof.
3.18 No registration of tenancy
Not to register this tenancy at the Singapore Land Authority, whether before or during the continuance of the Term. The Tenant shall not be
entitled to require the Landlord to subdivide the Building or any part thereof or to do any act or thing which could result in the Landlord being
required to subdivide the Building or any part thereof.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-9-
3.19 Confidentiality
3.19.1 The Tenant undertakes to the Landlord that it shall not (and shall procure its advisers, agents, officers and employees not to), without prior
written consent of the Landlord, disclose to any person any of the terms or conditions of this Tenancy Agreement at any time during or after
the Term unless:
(i)
(ii)
any such disclosure is required pursuant to (i) any applicable laws or any requirement of any competent governmental or statutory
authority, or (ii) rules or regulations of any relevant regulatory, administrative or supervisory body (including without limitation,
any relevant stock exchange or securities council), or (iii) any legal process issued by any court or tribunal whether in Singapore or
elsewhere; or
the Tenant can reasonably demonstrate that information relating to such term or conditions of this Tenancy Agreement is, in whole
or in part in the public domain, other than by reason of any wilful or negligent act or omission of the Tenant, whereupon, to the
extent that it is public, this obligation shall cease.
3.20 Personal Data Protection
3.20.1 Without prejudice to Clause 3.19, the Landlord or any of its authorised persons may at any time during the course of the Term collect, use
and disclose, as the Landlord reasonably regards to be necessary, such information or personal data about the Tenant to current or future
related corporations of the Landlord or legal and financial institutions in connection with the purposes set out in the Landlord’s Data
Protection Policy as of the date of this Tenancy Agreement (available at: www.uel.com.sg/UELDPP.pdf) (“UEL DPP”) or in accordance
with applicable law.
3.20.2 Where the information collected relates to personal data of the Tenant or any of its authorised representatives, the Tenant agrees, represents,
warrants and undertakes that it has consented to the collection, use, disclosure and/or processing of its personal data by the Landlord and the
Landlord’s authorised persons in connection with the purposes set out in the UEL DPP or in accordance with applicable law.
3.20.3 The Landlord undertakes that it shall take all reasonable measures to ensure that any personal data of the Tenant which is held by the
Landlord pursuant to this Tenancy Agreement is protected against loss, unauthorised access, use, modification, disclosure or other misuse in
accordance with the procedures set out in Schedule 1 of the Personal Data Protection Act 2012 (the “PDPA”), and that only authorised
personnel will have access to the personal data.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-10-
4.
LANDLORD’S COVENANTS
The Landlord covenants with the Tenant as follows:
4.1 Quiet enjoyment
That the Tenant paying the Rent and Service Charge and performing the Tenant’s covenants reserved by and contained in this Tenancy
Agreement may lawfully and peaceably hold and enjoy the Demised Premises throughout the Term without any interruption by the Landlord
or by any person lawfully claiming through, under or in trust for the Landlord.
4.2
Property tax
To pay the property tax levied or charged upon the Demised Premises subject to the Tenant’s payment of its portion of the property tax as
provided in Clause 3.1.4 of this Tenancy Agreement.
4.3 Management of the Building
4.3.1 Subject always to the provisions of Clauses 5.1 and 5.2 hereof and (in the event the Building is at anytime hereafter strata subdivided, then)
until the management and operation of the Building is transferred to the Management Corporation:
(i)
to keep the roof and the main drains and main pipes (which serve two or more units in the Building), all external walls and all
common parts of the Building including entrances, car parks, staircases, pavements, landings, corridors and passages, sewers,
cables and lifts in good and tenantable condition and repair (fair wear and tear excepted);
(ii)
to provide:
(a)
(b)
(c)
(d)
air-conditioning services during the hours of 8.00 a.m. to 6.00 p.m. on weekdays and 8.00 a.m. to 1.30 p.m. on Saturdays
(Sundays and public holidays excepted) Provided Always that air-conditioning services may at the request of the Tenant be
extended by the Landlord (but without any obligation so to do) beyond the hours hereinbefore defined and in such an event
the Tenant shall bear and pay to the Landlord on demand the prevailing charges charged by the Landlord for such
extension;
lift services during the hours of 7.00 a.m. to 7.00 p.m. on weekdays and 7.00 a.m. to 1.30 p.m. on Saturdays (Sundays and
public holidays excepted) Provided Always that at least one lift servicing each band of the Building will remain
operational on a twenty-four (24) hour basis;
electricity for the lighting of the passages, corridors, staircases, water-closets and other common parts of the Building; and
water for the common water-closets and toilet facilities in the Building.
(iii)
to keep the stairs, passages, corridors, common water-closets, lifts and other common parts of the Building well and sufficiently
cleaned and lighted and to engage security services for the Building (but not so as to render the Landlord liable for any loss
sustained by the Tenant through the neglect, default, negligence or misconduct of any watchman or watchmen employed by the
Landlord in connection with the provision of the said security services); and
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-11-
(iv)
to insure and keep insured the Building (excluding fittings and fixtures installed by the Tenant) against damage by fire and such
other risks as the Landlord may deem fit.
4.3.2 Maintenance of toilets and common areas
Notwithstanding anything herein contained, in the event that the Demised Premises consists of one whole wing of the floor,
the Tenant shall be responsible at its own costs and expenses for the maintenance and repair of the toilets and common
areas (including but not limited to the pantry areas) serving exclusively the Demised Premises (hereinafter referred to as
“Exclusive Use Common Areas”).
5.
LANDLORD NOT LIABLE
5.1 No claim by Tenant
Notwithstanding anything herein contained the Landlord shall not be liable to the Tenant, nor shall the Tenant have any claim against the
Landlord in respect of:
5.1.1
5.1.2
5.1.3
any failure or inability of or delay by the Landlord in fulfilling any of its obligations under this Tenancy Agreement or any interruption in
any of the services mentioned in Clause 4.3.1 by reason of necessary repair or maintenance of any installations or apparatus or damage
thereto or destruction thereof or by reason of mechanical or other defect or breakdown or by reason of any circumstances beyond the
Landlord’s control (including but not limited to fire, flood, act of God, escape of water, riot, civil commotion, curfew, emergency, labour
disputes or shortage of manpower, fuel, materials, electricity or water); or
any act, omission, default, misconduct or negligence of any porter, attendant or other servant or employee, independent contractor or agent
of the Landlord in or about the performance or purported performance of any duty relating to the provision of the services or any of them as
mentioned in Clause 4.3.1; or
any act, omission, default, misconduct or negligence of any contractor nominated or approved by the Landlord pursuant to paragraph 5 of
Schedule 11 and paragraph 4 of Schedule 14, and any such contractor appointed by the Tenant shall not be deemed to be an agent or
employee of the Landlord; or
5.1.4
any damage, injury or loss arising out of the leakage, breakage or defect of the piping, wiring, sprinkler system or other apparatus of the
Landlord in or about UE Square and/or the structure of UE Square; or
5.1.5
any damage, injury or loss caused by other tenants or persons in UE Square; or
5.1.6
any damage, injury or loss arising from or in connection with the use of the car parks in UE Square.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-12-
Clauses 5.1.1, 5.1.4, 5.1.5 and 5.1.6 of this Clause 5.1 shall apply for a case of negligence as well as to any other cause(s) howsoever arising.
5.2 Transfer to Management Corporation
In the event UE Square is at any time hereafter strata subdivided, then after the transfer of the management and operation of UE Square to the
Management Corporation, the provision of services mentioned in Clause 4.3.1 (insofar as those services which are hereafter provided by the
Management Corporation) shall cease to be the obligation or responsibility of the Landlord.
5.3 Accidents
5.3.1 The Landlord shall not be responsible to the Tenant or to the Tenant’s employees, independent contractors, agents, invitees, licensees nor to
any other persons for any:
(i)
(ii)
(iii)
accident, happening or injury suffered in the Demised Premises or UE Square; or
damage to or loss of any goods or property sustained in UE Square (whether or not due to the negligence or misconduct of any
security guards or the failure of any security system for which the Landlord is in any way responsible); or
act, omission, default, misconduct or negligence of any employee of the Landlord or any person acting under such employee in
respect of the Demised Premises, the Building or UE Square,
howsoever occurring.
6.
PROVISOS
The parties agree to the following provisos:
6.1
Proviso for re-entry
6.1.1
If and whenever during the Term:
(i)
(ii)
(iii)
(iv)
any or any part of the Rent or Service Charge payable under this Tenancy Agreement shall be unpaid for fourteen (14) days after
any of the days when they become due for payment (whether or not they shall have been formally demanded); or
the Tenant shall at any time fail or neglect to perform or observe any of the covenants, conditions or provisions contained in this
Tenancy Agreement to be performed or observed by the Tenant and (where such breach is capable of remedy) fail to remedy such
breach within fourteen (14) days after receipt of written notice from the Landlord; or
any distress or execution is levied on the Tenant’s goods and is not discharged within seven (7) days of such levy; or
an event of insolvency shall occur in relation to the Tenant,
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-13-
it shall be lawful for the Landlord or any person or persons duly authorised by the Landlord for that purpose to re-enter the
Demised Premises (or any part thereof in the name of the whole) at any time (and even if any previous right of re-entry has
been waived) and to repossess the Demised Premises and the Term hereby created and this Tenancy Agreement shall
absolutely cease and determine.
6.1.2 Re-entry in exercise of the rights contained in Clause 6.1.1 shall be without prejudice to any rights or remedies of the Landlord in respect of
any breach of any of the covenants by the Tenant contained in this Tenancy Agreement (including the breach in respect of which the re-
entry is made).
6.1.3 Without prejudice to any other rights or remedies of the Landlord, the Tenant shall indemnify the Landlord from and against all costs, loss
and damages, including but not limited to the loss of Rent and Service Charge (payable by the Tenant had the Term been completed) and all
costs and expenses incurred in any re-letting or attempted re-letting of the Demised Premises, suffered by the Landlord consequential upon
the Landlord exercising its rights of re-entry.
6.1.4 The expression “an event of insolvency” in Clause 6.1.1 includes (in relation to a company or other corporation which is the Tenant)
inability of the company to pay its debts, entry into liquidation either compulsory or voluntary (except for the purpose of amalgamation or
reconstruction which has been previously approved by the Landlord), the passing of a resolution for winding up, the making of a proposal to
the company and its creditors for a composition in satisfaction of its debts or a scheme of arrangement of its affairs, the application to the
court for the appointment of a judicial manager or the appointment of a receiver or judicial manager and (in relation to an individual who is
the Tenant) insolvency or inability to pay or having no reasonable prospect of being able to pay his debts as they fall due, any step being
taken or the presentation of a bankruptcy petition for the bankruptcy of the Tenant, the making of a proposal to his creditors for a
composition in satisfaction of his debts or a scheme of arrangement of his affairs or the appointment of a receiver in respect of his property.
6.2
Power for Landlord to deal with adjoining property and the Demised Premises
6.2.1 The Landlord may deal as it may think fit with other property belonging to the Landlord adjoining or nearby and to erect or suffer to be
erected on such property any buildings whatsoever whether or not such buildings shall affect or diminish the light or air which may now or
at any time be enjoyed by the Tenant in respect of the Demised Premises.
6.2.2 The Landlord shall have the right at all times without obtaining any consent from or making any arrangement with the Tenant to alter,
reconstruct or modify in any way whatsoever or change the use of the parts of UE Square (including all fixtures, fittings, machinery and
apparatus therein and thereto), which are defined to be common property under the Land Titles (Strata) Act (Cap 158) or if UE Square is not
subdivided and registered under the Land Titles (Strata) Act (Cap 158), those parts of UE Square which would reasonably be deemed to be
common property if UE Square had been subdivided and registered under that Act, so long as proper means of access to and egress from the
Demised Premises are afforded and essential services are maintained at all times.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-14-
6.2.3 Nothing contained in this Tenancy Agreement shall confer on the Tenant any right to enforce any covenant or agreement relating to other
parts of UE Square demised by the Landlord to others, or limit or affect the right of the Landlord in respect of any such other premises to
deal with the same and impose and vary such terms and conditions in respect thereof in any manner as the Landlord may think fit.
6.3 Removal of property after determination of Term
6.3.1
If at such time as the Tenant has vacated the Demised Premises after the determination of this Tenancy Agreement, any property of the
Tenant shall remain in or on the Demised Premises and the Tenant shall fail to remove the same within seven (7) days after being requested
by the Landlord so to do by a notice to that effect then the Landlord may as the agent of the Tenant sell such property and shall then apply
the proceeds of sale after deducting the costs and expenses of removal, storage and sale reasonably and properly incurred by the Landlord
towards discharging any sum due from the Tenant to the Landlord under the provisions of this Tenancy Agreement and shall hold the
balance thereof (if any) to the order of the Tenant.
6.3.2 The Tenant shall indemnify the Landlord against any liability incurred by it to any third party whose property shall have been sold by the
Landlord in the bona fide mistaken belief (which shall be presumed unless the contrary be proved) that such property belonged to the Tenant
and was liable to be dealt with as such pursuant to this clause.
6.4 Notices, consents and approvals
6.4.1 All notices, demands or other communications required or permitted to be given or made hereunder shall be in writing and shall be
sufficiently served on the Tenant if the same is addressed to the Tenant and sent by telefax to the Tenant’s-telefax number at the Demised
Premises or delivered personally or sent by registered post to the Demised Premises. All notices, demands or other communications shall be
sufficiently served on the Landlord if the same is addressed to the Landlord and sent by registered post to the registered office for the time
being of the Landlord. Any such notice, demand or communication shall be deemed to have been duly served immediately (if given or made
by facsimile or delivered by hand) or (if given or made by letter) twenty-four (24) hours after posting and in proving the same it shall be
sufficient to show that the envelope containing the same was duly addressed, stamped and posted.
6.4.2 Any consent or approval under this Tenancy Agreement shall be required to be obtained before the act or event to which it applies is carried
out or done and shall be effective only when the consent or approval is given in writing.
6.4.3
In any case where pursuant to this Tenancy Agreement or to any rule or regulation made hereunder, the doing or executing of any act, matter
or thing by the Tenant is dependent upon the consent or approval of the Landlord, such consent or approval may be given or withheld by the
Landlord in its absolute discretion
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-15-
(unless otherwise herein provided) and upon or subject to such terms, conditions, requirements or stipulations as the Landlord may think fit.
The Tenant shall pay to the Landlord upon demand any reasonable fees payable by the Landlord to consultants engaged by the Landlord to
examine or advise upon application made by the Tenant (including any plans, specifications or material submitted therewith) for any
consent or approval of the Landlord required pursuant to this Tenancy Agreement or any rule or regulation made hereunder, and also any
other moneys or expenses properly incurred in connection therewith.
6.5
Payments
6.5.1 The Tenant covenants to pay to the Landlord promptly as and when due without demand, deduction, set-off, or counterclaim whatsoever all
sums due and payable by the Tenant to the Landlord pursuant to the provisions of this Tenancy Agreement, and covenants not to exercise or
seek to exercise any right or claim to withhold rent or any right or claim to legal or equitable set-off.
6.6 Determination of Floor Area
The Landlord and the Tenant agree that the Floor Area specified in paragraph 3 of Appendix A shall be final, conclusive and binding upon the
parties.
6.7 Costs and expenses
The Tenant agrees to pay the Landlord (on a full indemnity basis):
6.7.1
6.7.2
6.7.3
all the Landlord’s legal costs and fees incurred in connection with the preparation and completion of this Tenancy Agreement, the stamp
duty and all other disbursements and out-of-pocket expenses in respect thereof;
all the Landlord’s legal costs and expenses incurred in enforcing any provision of this Tenancy Agreement in the event of a breach by the
Tenant;
all the Landlord’s costs and expenses (including solicitors’ costs and costs of the Landlord’s architect, engineer or surveyor where
applicable) incurred in connection with every application made by the Tenant for any consent or approval required under this Tenancy
Agreement whether or not such consent or approval shall be granted or given; and
6.7.4
all goods and services, value added and other duties or taxes payable on the costs, fees and expenses referred to in Clauses 6.7.1, 6.7.2 and
6.7.3 above.
6.8 Untenantability
If the Demised Premises or any part thereof shall at any time be damaged or destroyed by fire so as to render the Demised Premises unfit for
occupation and use (except where such damage or destruction has been caused by, or the policy or policies of insurance in relation to the
Demised Premises shall have been vitiated or payment of the policy monies withheld in whole or in part in consequence of, some act or
default of the Tenant, its servants, independent contractors, agents or any permitted occupier) the Rent and Service Charge reserved by this
Tenancy Agreement or a fair and just proportion thereof according to the nature and extent of the damage sustained shall be suspended until
the Demised Premises shall again be rendered fit for occupation and use, and any dispute
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-16-
concerning this clause shall be determined by a single arbitrator in accordance with the Arbitration Act (Cap 10) Provided Always that the
Landlord may in its absolute discretion decide that the Demised Premises are so badly damaged that it will demolish and rebuild the Demised
Premises instead of repairing the same and in any such event either party may within ninety (90) days after such damage has been sustained
give written notice to the other terminating this tenancy and thereupon this Tenancy Agreement shall terminate and the Tenant shall (if still in
occupation) vacate the Demised Premises without compensation from the Landlord, but without prejudice to any right of action of the
Landlord in respect of any antecedent breaches of any covenant contained in this Tenancy Agreement on the part of the Tenant to be observed
or performed.
6.9 No waiver
Knowledge or acquiescence by the Landlord of any breach by the Tenant of any of the covenants, conditions or obligations herein contained
shall not operate or be deemed to operate as a waiver of such covenants, conditions or obligations and any consent or waiver of the Landlord
shall only be effective if given in writing. No consent or waiver expressed or implied by the Landlord to or of any breach of any covenant,
condition or obligation of the Tenant shall be construed as a consent or waiver to or of any other breach of the same or any other covenant,
condition or obligation and shall not prejudice in any way the rights, powers and remedies of the Landlord herein contained. Any acceptance
by the Landlord of Rent or Service Charge reserved by this Tenancy Agreement or any other sum payable under this Tenancy Agreement shall
not be deemed to operate as a waiver by the Landlord of any right to proceed against the Tenant in respect of a breach by the Tenant of any of
the Tenant’s obligations hereunder.
6.10 No representations
The Landlord shall not be bound by any representations or promises with respect to the Building and its appurtenances, or in respect of the
Demised Premises, except as expressly set forth in this Tenancy Agreement with the object and intention that the whole of the agreement
between the Landlord and the Tenant shall be set forth herein, and shall in no way be modified by any discussions which may have preceded
the signing of this Tenancy Agreement.
6.11 Name of UE Square
6.11.1 The Landlord shall have the right at all times without obtaining any consent from the Tenant, to change the name or number by which UE
Square is known.
6.11.2 The Tenant shall not use the name of UE Square as part of its trade or business name, other than as its address and place of business. The
Tenant shall not use a name, trade mark or service mark which includes the name of UE Square or any derivative name sounding similar
thereto for any purpose whatsoever.
6.12 Rules and regulations
6.12.1 The Landlord shall have the right at any time and from time to time to make, add to, amend, cancel or suspend such rules and regulations in
respect of UE Square as in the judgment of the Landlord may from time to time be required for the management, safety, care or cleanliness
of UE Square or for the preservation of
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-17-
good order therein or for the convenience of tenants and all such rules and regulations shall bind the Tenant, the Tenant’s employees,
independent contractors, agents, visitors, invitees, licensees and permitted occupiers upon and from the date on which notice in writing
thereof is given to the Tenant by the Landlord Provided Always that the Landlord shall not be liable to the Tenant in any way for violation
of the rules and regulations by any person including other tenants of UE Square or the employees, independent contractors, agents, visitors,
invitees or licensees of any such persons. If there shall be any inconsistency between the provisions of this Tenancy Agreement and the
provisions of such rules and regulations then the provisions of this Tenancy Agreement shall prevail.
6.13 Holding over
6.13.1 If the Tenant continues to occupy the Demised Premises beyond the expiration or determination of the Term or fails to deliver vacant
possession thereof to the Landlord after the expiration or determination of the Term, with the Landlord’s acquiescence and without any
express agreement between the Landlord and the Tenant, the Tenant shall do so as a monthly tenant and shall pay to the Landlord for every
month of such holding over double the amount of Rent and Service Charge or prevailing market rent whichever is higher and such
holding over shall not constitute a renewal of this tenancy and there shall be no renewal of this tenancy by operation of law or pursuant to
the provisions of this Tenancy Agreement. During the period of any such holding over all other provisions of this Tenancy Agreement shall
be and remain in effect. Such tenancy shall be determinable at any time by either the Landlord or the Tenant giving to the other one month’s
notice in writing. The provisions herein shall not be construed as the Landlord’s consent for the Tenant to hold over after the expiration or
determination of the Term.
6.14 Changes to Plans
6.14.1 The Landlord may from time to time amend the development plans and/or the building plans for the Building and UE Square, such
amendment may include but is not limited to, altering the floor plans of the Building and UE Square changing the arrangement, location or
converting the use of entrances, passageways, doors, doorways, partitions, corridors, landings, staircases, lobbies, lifts, toilets, car parks or
other public parts of the Building and UE Square, changing any services, apparatus and other common facilities serving the Building and
UE Square, increasing the total net floor area approved for office• or other use within the Building and UE Square, or enlarging, varying or
reducing the size of the units in the Building and UE Square provided that any such amendment shall be approved by the relevant
government authorities.
6.15 Landlord’s right to assign
6.15.1 The Landlord shall be entitled to assign all its rights and interest and obligations under this Tenancy Agreement.
6.15.2 The Tenant hereby expressly acknowledges and undertakes to the Landlord that where the Landlord assigns its rights and interest in under
or arising out of this Tenancy Agreement (including the transfer of the Security Deposit), the Tenant
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-18-
shall be deemed to have consented to such assignment and shall accept any assignee of the Landlord as its new landlord and the Tenant shall
release the Landlord from all its obligations under the provisions of this Tenancy Agreement and in particular the obligation of the Landlord
to refund the Security Deposit and any other sums pursuant to the terms of this Tenancy Agreement. Where required by the Landlord, the
Tenant shall enter into and execute any novation agreement or assignment entered into or to be entered into by the Landlord and its
assignee, such novation agreement or assignment to be prepared by and at the expense of the Landlord.
6.16 Severance
6.16.1 The illegality, invalidity or unenforceability of any provision of this Tenancy Agreement under the law of any jurisdiction shall not affect its
legality, validity or enforceability under the law of any other jurisdiction nor the legality, validity or enforceability of any other provision.
6.17 Governing law and submission to jurisdiction
6.17.1 This Tenancy Agreement shall be construed and governed by the laws of Singapore.
6.17.2 In relation to any legal action or proceeding arising out of or in connection with this Tenancy Agreement (“Proceedings”), the parties
hereby irrevocably submit to the jurisdiction of the courts of Singapore and waive any objection to Proceedings in any such court on the
grounds of venue or on the grounds that the Proceedings have been brought in an inconvenient forum. Such submission shall not affect the
right of any party to take Proceedings in any other jurisdiction nor shall the taking of Proceedings in any jurisdiction preclude any party
from taking Proceedings in any other jurisdiction.
6.17.3 The Tenant hereby irrevocably agrees and accepts that any writ, statement of claim or other legal process in relation to any Proceedings
against the Tenant, shall be sufficiently served on the Tenant if sent by registered post to the Demised Premises.
6.17.4 Nothing shall affect the right to serve process in any other manner permitted by law.
6.18 Provisions for Renewal
If the Tenant wishes to be granted a further tenancy term for the Demised Premises, the provisions set out in Schedule 16 shall apply.
6.19 Contracts (Rights of Third Parties) Act (Cap 53B)
A person who is not a party to this Tenancy Agreement has no right under the Contracts (Rights of Third Parties) Act (Cap 53B) to enforce
any term of this Tenancy Agreement.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-19-
1.
Tenant
Name
Appendix A
: Aslan Pharmaceuticals Pte. Ltd.
Company registration no.
: 201007695N
Country of incorporation
: Singapore
Address of registered office
Telefax number
Telephone number
2.
Demised Premises
10A Bukit Pasoh Road
Singapore 08924
:
:
:
All the premises on the 12th storey of the Building known as 83 Clemenceau Avenue, UE Square, Singapore and numbered #12-03.
3.
Floor Area
4,500 square feet
4.
Term of tenancy
Three (3) years from 1 October 2016 to 30 September 2019
5.
Possession Date
1 September 2016
6.
Fitting Out Deposit
$3,000.00
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-20-
7.
Security Deposit
$94,500.00
8. Monthly Rent rate
$5.95 per square foot
9.
Initial monthly Rent
$26,775.00 per month
10. Monthly Service Charge rate
(subject to increase)
$1.05 per square foot
11.
Initial monthly Service Charge
$4,725.00 per month
12. Renewed Term
Three (3) years
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-21-
TOGETHER WITH (but to the exclusion of all other liberties, easements, rights or advantages):
Schedule 1
FIRSTLY
SECONDLY
THIRDLY
the right for the Tenant and others duly authorised by the Tenant of ingress to and egress from the Demised Premises in over and along
all the usual entrances, landings, lifts, lobbies and corridors leading thereto in common with the Landlord and all others so authorised
by the Landlord and all other persons entitled thereto, such right being only so far as is necessary and as the Landlord can lawfully
grant; and
the right for the Tenant and others duly authorised by the Tenant to use such sufficient toilet facilities in the Building as shall be
designated from time to time in writing by the Landlord but such user shall be in common with the Landlord and all others so
authorised by the Landlord and all other persons entitled thereto.
the right for the Tenant and all others authorised by the Tenant to enjoy the benefit of the air-conditioning system installed in the
Building (subject to the obligation of the Tenant to connect the same to the air-conditioning distributing ducts installed or to be
installed by the Tenant in the Demised Premises) in common with the Landlord and all other persons entitled thereto.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-22-
EXCEPTING AND RESERVING unto the Landlord:
Schedule 2
1.
the right to the free and uninterrupted passage and running of water, gas, sewage, electricity, air-conditioning services, telephone and other services
or supplies from and to other parts of the Building and/or UE Square in and through the Conducting Media and ancillary apparatus which now are or
may during the Term be in, on, under or over the Demised Premises.
2.
all rights of entry upon the Demised Premises referred to in Clause 3 of this Tenancy Agreement.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-23-
Schedule 3
Tenant’s Works
(referred to in Clause 2.4)
1.
2.
3.
4.
5.
The Tenant shall accept the Demised Premises in its existing state and condition with full knowledge of all structural, mechanical and electrical
specifications of the Demised Premises as set out in the Tenant’s Fitting Out Brief. The Tenant shall carry out at the Tenant’s own costs and expenses
all works required by the Tenant for purpose of fitting out the Demised Premises and shall comply with and observe the guidelines, terms and
conditions set out in the Tenant’s Fitting Out Brief.
Prior to the commencement of the Tenant’s Works, the Tenant shall at its own costs and expense engage consultants approved by the Landlord, to
consider and approve the layout and specifications for the Tenant’s Works and to assist the Tenant in the submission of plans and the supervision of
all works to be carried out by the Tenant. The fees and expenses of such consultants shall be borne by the Tenant and forthwith paid by the Tenant
when they fall due. Such consultants shall not be deemed to be agents or employees of the Landlord and the Tenant shall not have any claim
whatsoever against the Landlord in respect of any act, omission, default, misconduct or negligence of any such consultants.
Prior to the commencement of the Tenant’s Works, the Tenant shall at its own costs and expense submit to the Landlord for approval all plans,
layouts, designs, drawings and specifications for the Tenant’s Works (including details of proposed materials to be used for the Tenant’s Works)
before the Tenant submits the same to any relevant government authority for the approval. The Landlord shall be entitled to engage its architect,
engineer or other consultant(s) for the purpose of considering the plans, specifications and materials relating to the Tenant’s Works, the fees and
expenses of such architect, engineer and consultant(s) incurred in connection therewith shall be borne by the Tenant and forthwith paid by the Tenant
to the Landlord on demand. If the Tenant fails to make payment on demand, the Landlord may effect payment of the same and all expenses so
incurred by the Landlord together with Interest from the date of expenditure until the date they are paid by the Tenant to the Landlord, shall be
recoverable from the Tenant as if they were rent in arrears. All drawings and plans in respect of the Tenant’s Works (including drawings and plans in
respect of mechanical and electrical and structural works) which have been submitted to and approved by the Landlord, shall be endorsed by the
Project Consultants, for purpose of submission to the relevant government authorities for approval.
The Tenant shall apply for and obtain the Requisite Consents in relation to the Tenant’s Works.
Prior to the commencement of the Tenant’s Works, the Tenant shall effect and maintain at the Tenant’s cost and expense, a comprehensive public
liability policy, covering the period from the date of commencement of the Tenant’s Works to the date of completion of the Tenant’s Works for an
adequate amount or such higher amounts as the Landlord may from time to time prescribe with a reputable insurance company naming the Landlord,
the Landlord’s main contractor and the Tenant’s fitting out contractor as the co-insured parties for their respective rights and interests.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-24-
6.
Prior to the Tenant taking possession of the Demised Premises, the Tenant shall deposit with the Landlord the Fitting Out Deposit as security for
(i) the Tenant making good to the satisfaction of the Landlord all damage to the Demised Premises and the Building resulting from the execution of
the Tenant’s Works, (ii) the Tenant removing all waste materials and debris arising from non-structural addition and alteration works relating to the
Tenant’s Works and (iii) the due compliance by the Tenant of the provisions of the Tenant’s Fitting Out Brief.
If the Tenant fails to comply with the provisions of (i), (ii) and (iii) above, the Landlord may effect the necessary works, and apply the Fitting
Out Deposit in meeting the costs and expenses so incurred by the Landlord, and the Fitting Out Deposit subject to any deductions to be made
by the Landlord pursuant to the provisions herein, shall be repaid to the Tenant, without interest, within one (1) month after the proper
completion of the Tenant’s Works (in compliance with the provisions of this Schedule 3 and the making good of the damage (if any) to the
Demised Premises and the Building as aforesaid.
If the Fitting Out Deposit shall be insufficient, the Tenant shall pay to the Landlord on demand all expenses so incurred with Interest from the
date of expenditure until the date they are paid by the Tenant to the Landlord (such expenses and Interest to be recoverable as if they were rent
in arrears).
7.
Following the approval of the Landlord and the obtaining of the Requisite Consents, the Tenant shall proceed to carry out and complete the Tenant’s
Works to the Landlord’s reasonable satisfaction:
(a)
in accordance with the plans, layouts, designs, drawings, specifications and other details approved by the Landlord;
(b) with good and suitable materials of a type, quality, colour and standard approved by the Landlord;
(c)
(d)
(e)
(f)
(g)
in a good and workmanlike manner in accordance with good building practice and in compliance with the reasonable requirements of the
Landlord’s architect;
so as not to cause any obstruction or interference with the works of other tenants or occupiers of the Building;
in accordance with the Requisite Consents in relation to the Tenant’s Works;
in accordance with the guidelines, terms and conditions set out in the Tenant’s Fitting Out Brief;
in compliance with all statutes, orders and regulations made under codes of practice of local authorities and competent authorities affecting the
Tenant’s Works and/or the Demised Premises; and
(h) with due diligence.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-25-
8.
The Tenant’s Works shall only be carried out:
(a)
in the case of any installation works in respect of the airconditioning and mechanical ventilation system, fire-fighting and alarm system,
telecommunication, security and closed-circuit television system and building automation system and any electrical engineering works, by
specialist contractors nominated by the Landlord and separately employed by the Tenant in relation to the Tenant’s Works; and
(b)
in all other cases by engineers or contractors appointed by the Tenant with the approval of the Landlord.
A contractor or engineer nominated or approved by the Landlord pursuant to this paragraph shall not be deemed to be an agent or employee of
the Landlord and the Tenant shall not have any claim whatsoever against the Landlord in respect of any act, omission, default, misconduct or
negligence of any such contractor.
9.
The Tenant shall permit the Landlord and its servants or agents at all reasonable times to enter into and inspect and view the Demised Premises to
ascertain if the Tenant’s Works are or have been carried out in accordance with the provisions of this Schedule 3. If any breach of the provisions of
this Schedule 3 shall be found upon such inspection, the Tenant shall upon notice by the Landlord take all necessary steps for the rectification of
such breach.
10.
The Tenant shall indemnify and keep the Landlord indemnified against:
(a)
(b)
the breach, non-observance or non-performance of any Requisite Consents in relation to the Tenant’s Works; and
any claims, demands or proceedings brought by any adjoining owner, tenant, occupier or member of the public arising out of or incidental to
the execution of the Tenant’s Works.
11. Any delay in carrying out or completing the Tenant’s Works shall not be a ground for postponing the commencement of the Term or payment of
Rent, Service Charge and other moneys reserved by this Tenancy Agreement, or relieve in any way the Tenant from the performance and observance
of the obligations, covenants, conditions and provisions on the Tenant’s part to be performed and observed.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-26-
Schedule 4
Rent Provisions
1.
1.1
Tenant’s liability to pay Rent
The Tenant shall pay to the Landlord the monthly Rent by equal monthly payments in advance on the first day of each month (each a “Payment
Date”).
1.2 On or before the date of commencement of the Term, the Tenant shall pay to the Landlord the pro-rated Rent calculated from the date of
commencement of the Term up to and including the day immediately preceding the next Payment Date, and thereafter the Rent shall be paid on each
succeeding Payment Date.
2.
2.1
Calculation of Rent
The Rent payable in respect of the Demised Premises shall be calculated at the monthly rate set out in paragraph 8 of Appendix A, on the basis of
the Floor Area of the Demised Premises. The initial monthly Rent payable by the Tenant calculated on the Floor Area set out in paragraph 3 of
Appendix A shall be the sum set out in paragraph 9 of Appendix A.
3.
Rent Free Period
The Landlord shall grant the Tenant a Rent Free Period (free of Gross Rent) of 0.5 month for the period from 15 September 2019 to
30 September 2019.
3.2
In the event that the Term of the Tenancy is prematurely terminated by the Tenant for any reason whatsoever or the same is determined by
the Landlord in consequence of the Tenant’s breach of the terms and conditions applicable thereto, the Tenant shall compensate and pay to
the Landlord on demand an amount calculated at the monthly rate equivalent to the Rent and Service Charge which could have been
applicable if the rent free period constituted part of the Term of the Tenancy and for the entire duration of the Rent Free Period. This right
is only enforceable in the event of non performance under the Tenancy Agreement whereby the Landlord is, per the Tenancy Agreement,
permitted to terminate the Tenancy.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-27-
Schedule 5
Service Charge Provisions
1.
1.1
1.2
1.3
1.4
Tenant’s liability to pay Service Charge
The Tenant shall pay to the Landlord during the Term, a monthly Service Charge based on the monthly Service Charge rate set out in paragraph 10
of Appendix A (subject to increase as hereinafter provided) calculated on the Floor Area of the Demised Premises, such Service Charge shall be paid
on the same days upon which Rent is payable under this Tenancy Agreement. The monthly Service Charge payable by the Tenant in respect of the
Demised Premises calculated on the Floor Area set out in paragraph 3 of Appendix A shall be the sum set out in paragraph 11 of Appendix A.
The Service Charge shall be calculated on the basis of the Apportioned Outgoings (as defined in paragraph 2).
The Landlord shall be entitled at any time and from time to time to increase the Service Charge by written notice in that behalf subject to the
provisions hereinafter contained.
If (i) the actual amount of Total Outgoings (as defined in paragraph 2) incurred during the first year of the Term exceeds the amount of Total
Outgoings on which the monthly Service Charge rate set out in paragraph 10 of Appendix A was calculated or (ii) in respect of any subsequent
period of the Term, there is any increase in the Total Outgoings, the Tenant shall be liable to pay an increased amount of Service Charge in each and
every month. A written notice by the Landlord (the “Landlord’s Notice”) stating the amount of the increase in the Service Charge on a per square
foot basis and the effective date of such increase shall be accepted by the Tenant as conclusive and binding of the matters so stated. The increase in
Service Charge shall be chargeable and payable with effect from the date specified in the Landlord’s Notice. If there shall be any additional Service
Charge payable from a date prior to the issuance of the Landlord’s Notice, the aggregate amount of such additional Service Charge shall be payable
by the Tenant forthwith upon the issuance of the Landlord’s Notice. Additional Service Charge for the period after the issuance of the Landlord’s
Notice shall be added to the prevailing Service Charge and such aggregate sum shall be and remain the Service Charge until further increased by the
Landlord under this paragraph 1.
1.5
The provisions of this Schedule 5 shall continue to apply notwithstanding the expiry or earlier determination of the Term but only in respect of the
tenancy period down to the expiry or earlier determination of this Tenancy Agreement.
2.
Definitions
For purpose of this Schedule 5:
“Apportioned Outgoings” means the portion of Total Outgoings as shall be Attributable to the Demised Premises.
“Attributable to the Demised Premises” means the proportion of the Total Outgoings determined by the Landlord by reference to the
proportion which the Floor Area of the Demised Premises bears towards the Net Area of the Office Premises.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-28-
“Net Area of the Office Premises” means the total area of rentable floor space designated from time to time for use as office space (including
any floor space occupied by the Landlord) in the Building as determined by the Landlord.
“Office Premises” means all that portion of the Building comprising the strata lot areas approved for use as office and other approved uses
situate on the 2nd storey to the 18th storey (both inclusive) of the Building.
“Office Premises Common Area” means those parts of the Office Premises which the Landlord provides or designates from time to time for
the general use by or for the benefit of the Tenant and its permitted occupiers in common with other tenants, occupiers and users of the Office
Premises, including but not limited to common passages, corridors, staircases, waterclosets and the areas used to contain or for the
maintenance of the plant, equipment and installations necessary for the provision of the Office Premises Common Facilities.
“Office Premises Common Facilities” means the mechanical and electrical services and other amenities, facilities and services provided by
the Landlord from time to time to serve the Demised Premises and the Office Premises and for general use by or for the benefit of the Tenant
and its permitted occupiers in common with other tenants, occupiers and users of the Office Premises.
“Total Outgoings” means the total sum of all outgoings, costs and expenses of the Landlord assessed or assessable, charged or chargeable,
paid or payable or otherwise incurred by the Landlord in relation to the following matters:
The expenses paid or payable by the Landlord as contributions towards the costs of services and maintenance for the Common Property of UE
Square and attributable to the Office Premises, such contributions to include all amounts paid or payable to the Management Corporation in
respect of amounts levied from time to time by Management Corporation on the Office Premises;
all amounts payable in respect of insurances (including but not limited to fire, public liability, theft/ burglary, workmen’s compensation,
common law liability insurance) relating to the Office Premises Common Area and Office Premises Common Facilities and all the plant,
machinery, equipment, installations, appliances and all Conducting Media in relation thereto, and for the personnel engaged in the operation
and maintenance of the Office Premises Common Area and Office Premises Common Facilities;
all costs in relation to the management, control and administration of the Office Premises Common Area and Office Premises Common
Facilities including without limitation the employment or engagement of engineers, maintenance staff, security staff and other personnel
engaged in the operation and maintenance of the Office Premises Common Area and Office Premises Common Facilities;
the cost of uniforms, salaries, wages, bonuses, allowances and other emoluments, remuneration and benefits of all personnel engaged in the
operation and maintenance of the Office Premises Common Area and Office Premises Common Facilities as well as payroll tax and Central
Provident Fund and other statutory contributions or charges in respect thereof;
(a)
(b)
(c)
(d)
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-29-
(e)
(f)
(g)
(h)
(i)
(j)
(k)
(I)
all costs of operating and maintaining the Office Premises Common Area and Office Premises Common Facilities and supplying all services
from time to time provided for tenants and occupiers of the Office Premises including but without limiting the generality of the foregoing,
repairs and replacements, repainting and redecorating of the Office Premises Common Area and Office Premises Common Facilities and the
maintenance, repair, renovation, renewal, replacement and amortization of all lifts, escalators, air-conditioning plant, fire and security alarm
systems, fire-fighting equipment and other plant and equipment required in connection with any of such services, and all Conducting Media in
relation thereto;
all costs and charges (including taxes thereon) for lighting, power, air-conditioning and ventilation incurred in connection with the Office
Premises Common Area and Office Premises Common Facilities;
all charges for and costs in relation to the supply of water to and removal of all sewerage, waste and other garbage from the Office Premises
Common Area and the Office Premises Common Facilities;
all costs and charges for the cleaning of the Office Premises Common Area;
all expenses of supplying toilet paper, soap and other toilet requisites in the water-closets, washrooms and lavatories of the Office Premises
Common Area;
all fees and charges of managing agents employed for the carrying out and provision of services for the Office Premises Common Area and
Office Premises Common Facilities;
all fees and charges of auditors, accountants and other professional consultants engaged in connection with the provision of services for the
Office Premises Common Area and Office Premises Common Facilities;
all sums in each year as may be set aside as a fund to cover repairs, renovations, painting, replacements and maintenance of a substantial but
infrequent or irregular nature of the Office Premises Common Area and Office Premises Common Facilities and the plant machinery and
electrical and other apparatus therein including lifts, air-conditioning plant, fire fighting, security, alarm equipment and all Conducting Media
in relation thereto; and
(m)
all items of expenditure incurred in carrying out all other works, acts, matters or things or in providing all such other services or amenities of
any kind whatsoever in relation to the Office Premises Common Area and Office Premises Common Facilities.
3.
No objection by Tenant
The Tenant shall not be entitled to object to any item of costs comprised in the Total Outgoings or otherwise on any of the following grounds:
3.1
3.2
the inclusion in a subsequent accounting period of any item of expenditure or liability omitted from the computation of the Total Outgoings for any
preceding accounting period; or
the exclusion in a subsequent accounting period of any item of expenditure or liability included in the computation of the Total Outgoings for any
preceding accounting period; or
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-30-
3.3
3.4
3.5
an item of charge included at a proper cost might have been provided or performed at a lower cost; or
disagreement with any estimate of future expenditure for which the Landlord requires to make provision so long as the Landlord has acted in good
faith and in the absence of manifest error; or
the manner in which the Landlord exercises its discretion in providing services so long as the Landlord acts in good faith and in accordance with the
principles of good estate management; or
3.6
the employment of managing agents to carry out and provide on the Landlord’s behalf services under this Schedule 5.
4.
After taking over by Management Corporation
4.1 After the taking over by the Management Corporation of the maintenance and management of the Building and UE Square, the Service Charge
payable by the Tenant shall be all such contributions (and any revisions thereof) as may from time to time be levied in respect of the Demised
Premises by the Management Corporation for the purpose of the Management Corporation meeting actual or expected liabilities referred to in section
48(1)(m) and (n) of the Land Titles (Strata) Act (Cap 158) and for the establishment of the management fund and sinking fund referred to in section
48(1)(o) and (p) of the said Act. If the Demised Premises comprise part of a subsidiary strata lot, the aforesaid contributions levied by the
Management Corporation in respect of that subsidiary strata lot, shall be pro-rated according to the strata title area of the relevant subsidiary strata
lot, and the Tenant shall pay a proportionate part of such contributions attributable to the Demised Premises, the Landlord’s statement of such
apportionment to be conclusive as to the amount thereof.
4.2
The Service Charge referred to in paragraph 4.1, shall be paid to the Landlord on the same days upon which Rent is payable under this Tenancy
Agreement.
4.3
The provisions of this paragraph 4 shall continue to apply notwithstanding the expiry or earlier determination of this tenancy.
5. Maintenance and cleaning of toilets and common areas (only applicable for full wing Tenant)
Notwithstanding anything herein contained, in the event that the Demised Premises consists of one (1) whole wing of the floor, the Tenant
shall be responsible at its own costs and expenses for the maintenance and cleaning of the Exclusive Use Common Areas.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-31-
Schedule 6
(referred to in Clauses 3.1.2, 3.1.3 and 3.1.4)
Interest and Taxes
The Tenant hereby covenants with the Landlord as follows:
1.
2.
If the whole or any part of the Rent, Service Charge and other monies due under this Tenancy Agreement shall remain unpaid fourteen (14) days after
they shall have become due (whether such Rent, Service Charge or other monies be formally demanded or not) or if the Landlord shall refuse to
accept the tender of Rent, Service Charge or other monies because of a breach of covenant on the part of the Tenant, then to pay Interest on such Rent
(or part thereof), Service Charge (or part thereof) and other monies, as from the date they became due until they are paid to (or accepted by) the
Landlord and such Interest shall be recoverable from the Tenant as if they were rent in arrears. Nothing in this paragraph 1 shall entitle the Tenant to
withhold or delay any payment of the Rent or Service Charge or any other sum due under this Tenancy Agreement after the date upon which they fall
due or in any way prejudice affect or derogate from the rights of the Landlord in relation to such non-payment including (but without prejudice to the
generality of the above) under the proviso for re-entry contained in this Tenancy Agreement.
It is hereby agreed that the Rent, Service Charge and other sums payable by the Tenant under this Tenancy Agreement (hereinafter collectively called
“the Agreed Sum”) shall, as between the Landlord and the Tenant be exclusive of any applicable goods and services tax, imposition, duty and levy
whatsoever (hereinafter collectively called “Taxes”) which may from time to time be imposed or charged before, on or after the commencement of
this tenancy (including any subsequent revisions thereto) by any government, quasi-government, statutory or tax authority (hereinafter called “the
Authorities”) on or calculated by reference to the amount of the Agreed Sum (or any part thereof) and the Tenant shall pay all such Taxes or
reimburse the Landlord for the payment of such Taxes, as the case may be, in such manner and within such period as to comply or enable the
Landlord to comply with any applicable orders or directives of the Authorities and the relevant laws and regulations.
If the Landlord or the Tenant (or any person on their behalf) is required by law to make any deduction or withholding or to make any payment,
on account of such Taxes, from or calculated by reference to the Agreed Sum (or any part thereof):
(a)
The Tenant shall pay, without requiring any notice from the Landlord all such Taxes for its own account (if the liability to pay is imposed on
the Tenant), or on behalf of and in the name of the Landlord (if the liability to pay is imposed on the Landlord) on receipt of written notice
from the Landlord, and without prejudice to the foregoing, if the law requires the Landlord to collect and to account for such Taxes, the Tenant
shall pay such Taxes to the Landlord (which shall be in addition to the Tenant’s liability to pay the Agreed Sum) on receipt of written notice
from the Landlord; and
(b)
the sum payable by the Tenant in respect of which the relevant deduction, withholding or payment is required on account of such Taxes, shall
be increased
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-32-
to the extent necessary to ensure that after the making of the aforesaid deduction, withholding or payment, the Landlord or any person or
persons to whom such sum is to be paid, receives on due date and retains (free from any liability in respect of any such deduction, withholding
or Taxes) a net sum equal to what would have been received and retained had no such deduction, withholding or payment been required or
made.
The rights of the Landlord under this paragraph 2 shall be in addition and without prejudice to any other rights or powers of the Landlord
under any applicable order or directive of the Authorities or any relevant law or regulation, to recover from the Tenant the amount of such
Taxes which may be or is to be paid or borne by the Landlord.
The Tenant shall indemnify and hold harmless the Landlord from any losses, damages, claims, demands, proceedings, actions, costs, expenses,
interests and penalties suffered or incurred by the Landlord arising from any claim, demand, proceeding or action that may be made or
instituted by the Authorities in respect of such Taxes and resulting from any failure or delay on the part of the Tenant in the payment and
discharge of any such Taxes. Without prejudice to any of the foregoing provisions, the Tenant shall pay and reimburse the Landlord for all
goods and services tax which may from time to time be imposed or charged before, on or after the commencement of this tenancy in respect of
any supply which may be determined by the Comptroller of Goods and Services Tax under or in connection with the occupation and tenancy
of the Demised Premises and the Tenant shall indemnify and hold harmless the Landlord from any losses, damages, claims, demands,
proceedings, actions, costs, expenses, interests and penalties suffered or incurred by the Landlord in respect of any such goods and services
tax.
3.
Property tax imposed or levied by the relevant government authority on the Demised Premises or on the Building or on UE Square (or any part
thereof) and as may be apportioned by the Landlord or attributable to the Demised Premises shall be paid as follows:
(a)
The Landlord shall for the duration of the Term pay property tax levied on or attributable to the Demised Premises but such payment by the
Landlord in respect of the Demised Premises shall not exceed property tax calculated (i) on the basis of an annual value equivalent to the
annual Rent payable under this Tenancy Agreement; and (ii) at the property tax rate applicable on first assessment of property tax. In the event
that any additional property tax levied by the relevant authority on or apportioned by the Landlord as attributable to the Demised Premises is
payable on account of (i) the annual value assessed by the relevant government authority or apportioned by the Landlord as attributable to the
Demised Premises (whether on first assessment by the relevant government authority or as increased from time to time whether retrospective
or otherwise) which is in excess of the annual value calculated as aforesaid by reference to the annual Rent; and/or (ii) an increase in the
property tax rate above the rate applicable on first assessment, such additional property tax shall be borne and paid by the Tenant to the
Landlord on demand.
(b)
In the event that the Landlord grants to the Tenant rent free periods or rent rebates during the Term, the provisions of this paragraph 3(b) shall
apply in
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-33-
substitution of the provisions of paragraph 3(a). The Landlord shall for the duration of the Term pay property tax levied on or attributable to the
Demised Premises but such payment by the Landlord in respect of the Demised Premises shall not exceed property tax calculated (i) on the
basis of an annual value equivalent to the annual Effective Rent payable by the Tenant under this Tenancy Agreement; and (ii) at the property
tax rate applicable on first assessment of property tax. In the event that any additional property tax levied by the relevant authority on or
apportioned by the Landlord as attributable to the Demised Premises is payable on account of (i) the annual value assessed by the relevant
government authority or apportioned by the Landlord as attributable to the Demised Premises (whether on first assessment by the relevant
government authority or as increased from time to time whether retrospective or otherwise) which is in excess of the annual value calculated as
aforesaid by reference to the annual Effective Rent; and/or (ii) an increase in the property tax rate above the rate applicable on first assessment,
such additional property tax shall be borne and paid by the Tenant to the Landlord on demand.
For purpose of this paragraph, the annual “Effective Rent” is calculated by using the following formula:
annual
Effective Rent = A × 12
B
where
A :
refers to the total aggregate amount of Rent payable by the Tenant for the entire duration of the Term, taking into account the rent free
periods and rent rebates.
B :
the number of months comprising the entire duration of the Term.
(c)
The Tenant’s liability in respect of any additional property tax referable to the Term of this tenancy, pursuant to the provisions of
this paragraph 3 of Schedule 6 shall not be affected by the expiry or earlier determination of this tenancy.
(d) Objection to any assessment of annual value or imposition of property tax on the Demised Premises during the Term may be made only by the
Landlord in its sole discretion.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-34-
Schedule 7
(referred to in Clause 3.2)
Utilities
The Tenant hereby covenants with the Landlord as follows:
1. (a)
To pay all charges including any taxes now or in the future imposed by the Designated Supplier or other appropriate authority in respect of
electricity and/or chilled water supplied to all air-conditioning fan coil units and any other services supplied and metered separately to the
Demised Premises which shall be consumed or supplied on or to the Demised Premises, and to pay all necessary hire charges for any
equipment or appliances supplied to the Tenant irrespective of whether the same was installed by the Landlord or the Tenant and whether the
electricity and/or chilled water is supplied during or beyond the operating hours of the Building and whether invoiced by a Designated
Supplier, other supplier or by the Landlord, and all transmission and transportation charges payable in connection with the supply of such
electricity and/or chilled water supplied to all air-conditioning fan coil units and any other services supplied.
(b)
To arrange at its own costs and expenses for the installation and testing of the meter and any equipment or appliances required to separately
measure the services supplied to the Demised Premises and for licensed electrical contractors to apply to the Designated Supplier for such
installations and testing.
(c) Without prejudice to the foregoing, in the event of such electricity or other services not being supplied and metered separately to the Demised
Premises, to pay to the Landlord a proportionate part of the cost thereof, such cost to be calculated by the Landlord and notified to the Tenant
by a statement from the Landlord in writing, such statement to be conclusive as to the amount thereof, and in the event of the Designated
Supplier or other equivalent authority responsible for the supply of electricity and any other services supplied and used in the Building
increasing the charges therefor, the Tenant shall pay to the Landlord a proportionate part of the increased costs thereof, such costs to be
calculated by the Landlord and notified to the Tenant by a statement from the Landlord in writing, such statement to be conclusive as to the
amount thereof.
(d) Where any agreement for the purchase of electricity and/or chilled water supplied to all air-conditioning fan coil units and any other services
supplied (whether entered into by the Landlord or the Tenant) Is terminated for reasons not due to the default of the Landlord, the Landlord
shall not be liable to compensate the Tenant for any loss or damage occurring to the Tenant as a result of such termination, including any
economic loss and/or loss of revenue, profits, business and/or custom.
2.
Not to object to any Designated Supplier.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-35-
3. Without affecting the provisions of Clause 1 of Schedule 7 above, the Landlord may, at its discretion and on behalf of the tenants of the Building,
arrange for the purchase of bulk electricity for the Building from an electricity retailer, in which case, the Tenant must accept the Landlord’s choice
of electricity retailer, and sign all relevant agreements, consents and/or authorisation forms as may be required by the Landlord for the purpose. If at
any time thereafter, the Landlord’s arrangement for the purchase of bulk electricity for the Building is terminated for any reason whatsoever, the
Landlord shall notify the Tenant in writing of such termination and;
(a)
(b)
The Tenant must arrange for and procure its own supply of electricity to the Premises; and
The Landlord shall not be liable to compensate the Tenant for any loss or damage occurring to the Tenant as a result of such termination,
including any economic loss and/or loss of revenue, profits, business and/or customers.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-36-
Schedule 8
(referred to in Clause 3.3)
Security Deposit
The Tenant hereby covenants with the Landlord as follows:
1.
2.
3.
The Tenant shall deposit with the Landlord the sum equivalent to three (3) months’ Rent and Service Charge for the Demised Premises (the
“Security Deposit”), which Security Deposit shall be maintained at an amount equivalent to three (3) months’ Rent and Service Charge during the
Term.
The Security Deposit shall be held by the Landlord as security for the due performance and observance by the Tenant of all the covenants and
provisions contained in this Tenancy Agreement and as security for any claim by the Landlord at any time against the Tenant in relation to any matter
in connection with the Demised Premises whether the tenancy is subsisting or not, and subject to any deductions to be made by the Landlord
pursuant to the provisions of this Tenancy Agreement, shall be repaid to the Tenant without interest within one (1) month from the date the Demised
Premises duly repaired, cleaned, decorated and reinstated in accordance with the Tenant’s covenants in this Tenancy Agreement, are returned to the
Landlord.
If the Tenant shall commit a breach of any of the provisions of this Tenancy Agreement, the Landlord shall be entitled but not obliged to apply the
Security Deposit or any part thereof in or towards payment of moneys outstanding or making good any breach by the Tenant or to deduct from the
Security Deposit the loss or expense to the Landlord occasioned by such breach but without prejudice to any other rights or remedies which the
Landlord may be entitled. If any part of the Security Deposit shall be applied by the Landlord in accordance herewith, the Tenant shall on demand by
the Landlord forthwith deposit with the Landlord the amount set-off by the Landlord from the Security Deposit. Provided Always that no part of the
Security Deposit shall without the written consent of the Landlord be set-off by the Tenant against any Rent, Service Charge or other sums owing to
the Landlord.
4.
If from time to time during the Term, the Rent or Service Charge is increased, the Security Deposit paid by the Tenant to the Landlord shall likewise
be increased and the difference shall be paid within fourteen (14) days of the Landlord’s notice requiring payment.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-37-
Schedule 9
(referred to in Clause 3.4)
Insurance
The Tenant hereby covenants with the Landlord as follows:
1.
2.
3.
At the Tenant’s own cost and expense at all times during the Term to take out and keep in force in the joint names of the Landlord and the Tenant for
their respective rights and interest a comprehensive public liability insurance policy in an adequate amount or in such higher amounts as the Landlord
may from time to time prescribe, in respect of any one occurrence, such policy shall be extended to include the Tenant’s legal liability for loss of or
damage to the Demised Premises (including all fixtures and fittings therein) and in this regard, the Tenant shall ensure that the relevant exclusion in
the said public liability policy relating to the property in the care, custody or control of the Tenant or any servant of the Tenant, be deleted entirely.
All policies of insurance required to be effected by the Tenant shall be taken out with a reputable insurance company approved by the Landlord.
On written demand at any time by the Landlord, to produce forthwith to the Landlord any policy of insurance which the Tenant is required to effect
hereunder and the receipt for the last premium payable in respect of such policy. Provided Always that nothing herein shall render the Landlord liable
for the correctness or adequacy of such policies or for ensuring that they comply with all relevant legislation pertaining to insurance.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-38-
Schedule 10
(referred to in Clause 3.5)
Repair of Demised Premises
The Tenant hereby covenants with the Landlord as follows:
1.
2.
3.
At all times to repair and to keep in a clean and good state of tenantable repair and condition (fair wear and tear excepted), the Demised Premises
including the interior thereof, the flooring, interior plaster or other surface material or rendering on walls and ceilings, fixtures therein, all doors,
windows, glass, locks, fastenings, installations and fittings for light and power, the Conducting Media within and serving the Demised Premises, and
to make good to the satisfaction of the Landlord any damage or breakage caused to any part of the Demised Premises or to the Landlord’s fixtures
and fittings therein by the bringing in or removal of the Tenant’s goods or effects or resulting from any action or omission of the Tenant, its
employees, independent contractors, agents or any permitted occupier.
The obligations in this Schedule 10 extend to all improvements and additions to the Demised Premises and all Landlord’s fixtures, fittings and
appurtenances of whatever nature affixed or fastened to the Demised Premises.
If any damage or injury is caused to the Landlord or to any person whomsoever directly or indirectly on account of the condition of any part of the
interior of the Demised Premises (including flooring, walls, ceiling, doors, windows, curtain wall and its related parts including fluorocarbon coating
thereon and other fixtures), to be wholly responsible therefor and to fully indemnify the Landlord against all claims, demands, actions and legal
proceedings whatsoever made upon the Landlord by any person in respect thereof. In the interpretation and application of the provisions of
this Schedule 10 the decision of the surveyor or architect of the Landlord shall be final and binding upon the Tenant.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-39-
Schedule 11
(referred to in Clause 3.6)
Alterations and Additions
The Tenant hereby covenants with the Landlord as follows:
1.
2.
3.
Not to make any alterations or additions to or affecting the structure or exterior of the Demised Premises or the appearance of the Demised Premises
as seen from the exterior.
Not to paint or make any additions or alterations or exert any force or load on the frame structure and all its related parts or to place or affix any
structures or articles or materials thereon which would otherwise render the warranty granted in favour of the Landlord in respect of such roof, walls,
floor and structure null and void.
Not without the prior written consent of the Landlord to make any other alterations or additions to the Demised Premises. For purpose of seeking the
Landlord’s consent herein, the Tenant shall submit to the Landlord all plans, layouts, designs, drawings, specifications and details of proposed
materials to be used for any proposed alterations and additions. Alterations and additions for purpose of this Schedule 11 shall include but shall not
be limited to works relating to:
(a)
(b)
(c)
(d)
(e)
(f)
internal partitions, floors and ceilings within the Demised Premises;
electrical wiring, conduits, light fittings and fixtures;
air-conditioning installations ducts and vents;
fire protection devices;
all plumbing and gas installations, pipes, apparatus, fittings and fixtures; and
all mechanical and electrical engineering works.
4.
The Landlord shall be entitled to engage its architect, engineer or other consultant(s) for the purpose of:
(i)
considering the plans, specifications and materials relating to the proposed alterations or additions; and
(ii)
supervising all works carried out by the Tenant.
The fees and expenses of such architect, engineer and consultant(s) incurred in connection therewith shall be borne by the Tenant and
forthwith paid by the Tenant to the Landlord on demand. If the Tenant fails to make payment on demand, the Landlord may effect payment of
the same and all expenses so incurred by the Landlord together with Interest from the date of expenditure until the date they are paid by the
Tenant to the Landlord, shall be recoverable from the Tenant as if they were rent in arrears.
5.
All alterations and additions to the Demised Premises shall only be carried out:
(a)
in the case of any installation works in respect of the air-conditioning and mechanical ventilation system, fire-fighting and alarm system,
telecommunication, security and closed-circuit television system and building automation system and any electrical engineering works, by
specialist contractors nominated by the Landlord and separately employed by the Tenant in relation to the Tenant’s Works; and
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-40-
(b)
in all other cases by engineers or contractors appointed by the Tenant with the approval of the Landlord.
6.
7.
8.
All planning and other consents necessary or required pursuant to the provisions of any statute, rule, order, regulation or by-law for any alteration or
addition to the Demised Premises or any part thereof, shall be applied for and obtained by the Tenant at its own cost and expense.
The Tenant shall carry out and complete all alterations and additions to the Demised Premises in accordance with plans, layouts, designs, drawings,
specifications and using materials approved by the Landlord, in a good and workmanlike manner in accordance with all planning and other consents
referred to in paragraph 6, and in compliance with the reasonable requirements of the Landlord’s architect.
The Tenant shall not install or erect any exterior lighting, shade, canopy or awning or other structure in front of or elsewhere outside the Demised
Premises.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-41-
Schedule 12
(referred to in Clause 3.7)
Landlord’s right of inspection and right of repair
The Tenant hereby covenants with the Landlord as follows:
1.
2.
3.
4.
To permit the Landlord and its servants or agents at all reasonable times and by prior appointment with the Tenant to enter into, inspect and view
the Demised Premises and examine their condition and also to take a schedule of fixtures in the Demised Premises.
If any breach of covenant, defects, disrepair, removal of fixtures or unauthorised alterations or additions shall be found upon such inspection for
which the Tenant is liable then upon notice by the Landlord to the Tenant, to execute all repairs, works, replacements or removals required within one
(1) month (or sooner if required by the Landlord) after the receipt of such notice, to the reasonable satisfaction of the Landlord or its surveyor.
In case of default by the Tenant, it shall be lawful for workmen or agents of the Landlord to enter into the Demised Premises and execute such
repairs, works, replacements or removals.
To pay to the Landlord on demand all expenses so incurred with Interest from the date of expenditure until the date they are paid by the Tenant to the
Landlord (such expenses and Interest to be recoverable as if they were rent in arrears).
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-42-
Schedule 13
(referred to in Clause 3.8)
Landlord’s right of entry for repairs etc
The Tenant hereby covenants with the Landlord as follows:
1.
To permit the Landlord and the agents, workmen and others employed by the Landlord or by the Management Corporation or by the other tenants or
occupiers of the Building at all reasonable times during and after normal office hours on weekdays and Saturdays, after giving to the Tenant prior
notice (but at anytime in any case which the Landlord or Management Corporation considers an emergency) to enter upon or gain access through the
Demised Premises:
(a)
(b)
(c)
(d)
(e)
(f)
to inspect, cleanse, repair, remove, replace, alter or execute any works whatsoever to or in connection with the Conducting Media and ancillary
apparatus, easements or services referred to in paragraph 1 of Schedule 2; or
to effect or carry out any maintenance, repairs, alterations or additions or other works which the Landlord or the Management Corporation may
consider necessary or desirable to any part of the Building or to the water, electrical, air-conditioning and other facilities and services of the
Building or to the Common Property or any fixtures, fittings or installations comprised in the Common Property; or
for the purpose of exercising any of the powers and authorities of the Landlord under this Tenancy Agreement; or
to comply with any obligation of repair, maintenance or renewal affecting the Demised Premises, the Building or the Common Property; or
to construct, alter, maintain, repair or fix anything or additional thing serving the Building or the adjoining premises or property of the
Landlord, and running through or on the Demised Premises; or
in connection with the development of the remainder of the Building or any adjoining or neighbouring land or premises, including the right to
build on or onto or in prolongation of any boundary wall of the Demised Premises;
without payment of compensation for any nuisance, annoyance, inconvenience or damage caused to the Tenant subject to the
Landlord (or other person so entering) exercising such right in a reasonable manner.
2.
To furnish to the Landlord the names, addresses and contact telephone numbers of at least two (2) management staff (“Designated Employees”) who
are in the employ of the Tenant and who would retain possession of the keys to the Demised Premises on a twenty-four (24) hour basis, to enable the
Landlord to contact such Designated Employees at any time in case of emergency where the Landlord of the Management Corporation requires entry
upon or access through the Demised Premises for any of the purposes mentioned in paragraph 1. Such Designated Employees shall forthwith on
request of the
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-43-
Landlord open up the Demised Premises to permit the Landlord or the Management Corporation and their agents and workmen entry upon or access
through the Demised Premises for the above mentioned purposes. The Tenant shall ensure that if any of the Designated Employees will be away from
Singapore or leaves the employ of the Tenant or will in any circumstances be out of reach, the Tenant shall furnish to the Landlord the name, address
and contact telephone number of another employee of the Tenant who will fulfil the role of such Designated Employee. The Tenant shall immediately
inform the Landlord of any change of telephone numbers and other particulars of each Designated Employee. In the event that after reasonable
attempt, the Landlord is unable to contact the Designated Employees at the telephone numbers furnished to the Landlord, and in any case which the
Landlord or the Management Corporation considers an emergency, the Tenant hereby authorises the Landlord to use all reasonable means necessary
to force an entry into the Demised Premises, such forceful entry to be conducted under the supervision of the chief security officer or building
manager employed for the Building, and the Tenant hereby agrees that the Landlord shall not be liable to the Tenant, nor shall the Tenant have any
claim whatsoever against the Landlord in respect of any damage to the Demised Premises to the contents therein or any consequential loss arising
from such forceful entry to the Demised Premises.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-44-
Schedule 14
(referred to in Clause 3.9)
Yield up in repair at the end of the Term
The Tenant hereby covenants with the Landlord as follows:
At the expiration or earlier determination of the Term:
1.
2.
3.
To surrender to the Landlord all keys giving access to all parts of the Demised Premises irrespective of whether or not the same have been supplied
by the Landlord.
Quietly to yield up the Demised Premises in the Bare and Original Condition (fair wear and tear excepted) to the satisfaction of the Landlord (after
removal of all additions and improvements made by the Tenant to the Demised Premises and all fixtures which may be fixed or fastened to or upon
the Demised Premises by the Tenant), repaired, cleaned, decorated and kept in accordance with the Tenant’s covenants contained in this Tenancy
Agreement.
To remove from the Demised Premises all additions, improvements, fixtures and fittings installed by the Tenant and all notices, notice boards and
signs bearing the name of or otherwise relating to the Tenant (including in this context any persons deriving title to the Demised Premises under the
Tenant) or its business.
4. Without prejudice to the generality of the provisions of paragraphs 2 and 3, to reinstate all air-conditioning installations, sprinkler systems and other
electrical and electronic installations therein to their bare and original state as at the date the Tenant took possession of the Demised Premises to the
satisfaction of the Landlord, such reinstatement to be carried out by a specialist contractor nominated by the Landlord and appointed by the Tenant,
under the supervision of the Landlord’s architect, engineer or consultant and the Tenant shall pay for all fees of such architect, engineer or consultant.
In all other cases, the removal and reinstatement works in respect of the Demised Premises shall be carried out to the satisfaction of the Landlord.
5.
6.
To redecorate the Demised Premises to the satisfaction of the Landlord, with two coats of good quality emulsion paint and other appropriate
treatment of all internal parts of the Demised Premises including the ceiling and floor in a good workmanlike manner using suitable and appropriate
materials as the Landlord may reasonably and properly require.
To make good to the satisfaction of the Landlord all damage to the Demised Premises and the Building resulting from the removal of the Tenant’s
belongings, reinstatement or redecoration of the Demised Premises.
7. Where clause 4.3.2 is applicable, quietly to yield up the Exclusive Use Common Areas in the Bare and Original Condition (fair wear and tear
excepted) to the satisfaction of the Landlord (after removal of all additions and improvements made by the Tenant to the Exclusive Use Common
Areas and all fixtures which may be fixed or fastened to or upon the Exclusive Use Common Areas by the Tenant), repaired, cleaned, decorated and
kept in accordance with the Tenant’s covenants contained in this Tenancy Agreement.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-45-
8.
If the Tenant fails to remove the fixtures and fittings, reinstate, redecorate or make good any damage to the Demised Premises and Exclusive Use
Common Areas in accordance with the provisions of this Schedule 14, the Landlord may effect the same at the Tenant’s cost and expense Provided
that the Landlord shall carry out such works within a reasonable period and all costs and expenses incurred by the Landlord together with the Rent
and Service Charge which the Landlord shall be entitled to receive had the period within which such works effected by the Landlord been added to
the Term, shall be paid by the Tenant within seven (7) days of demand from the Landlord, and in this connection, a certificate of the Landlord as to
the amount of cost and expenses incurred shall be conclusive and binding on the Tenant.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-46-
Schedule 15
(referred to in Clause 3.11)
Covenants affecting use of Demised Premises and Building
The Tenant hereby covenants with the Landlord as follows:
1.
2.
3.
4.
5.
6.
7.
8.
9.
Not to erect nor install in the Demised Premises any machinery which causes noise, fumes or vibration which can be heard, smelled or felt outside
the Demised Premises.
Not to store in the Demised Premises any petrol or other specially inflammable, explosive or combustible substance.
Not to use the Demised Premises for any noxious, noisy or offensive trade or business nor for any illegal or immoral act or purpose.
Not to hold any sales by auction on the Demised Premises.
Not to hold in or on the Demised Premises any exhibition, public meeting or public entertainment.
Not to permit any vocal or instrumental music in the Demised Premises so that it can be heard outside the Demised Premises.
Not to permit livestock of any kind to be kept on the Demised Premises.
Not to do in or upon the Demised Premises anything which may be or may become or cause a nuisance, annoyance, disturbance, inconvenience or
damage to the Landlord or its other tenants of the Building or to the owners, tenants and occupiers of adjoining and neighbouring properties.
Not to load, paint or make alterations or additions to or use the floors, walls, ceilings, claddings, curtain wall, its frame structure and its related parts
including the fluorocarbon coating thereon or the structure of the Demised Premises in any manner which will cause strain, damage or interference
with the structural parts, loadbearing framework, roof, foundations, joists, curtain wall and its related parts and external walls of the Demised
Premises or in any manner which will render any related warranties granted in favour of the Landlord null and void and without prejudice to the
generality of the foregoing, not to load or permit or suffer to be loaded on any part of the floors of the Building or the Demised Premises to a weight
greater than 4.5 KN/m2 (or such other weight as may be prescribed by the Landlord as being applicable to the Demised Premises) and, when required
by the Landlord, to distribute the load on any part of the floor of the Demised Premises in accordance with the directions and requirements of the
Landlord and in the interpretation and application of the provisions of this paragraph 9, the decision of the surveyor, architect or engineer of the
Landlord shall be final and binding on the Tenant.
10.
To obtain the prior written consent of the Landlord before bringing upon the Demised Premises any heavy machinery or other plant, equipment or
goods with an imposed load in excess of 4.5 KN/m2 (or such other weight as may be prescribed by the Landlord as being applicable to the Demised
Premises). The Landlord may direct the routing, installation and location of all such machinery, plant, equipment and goods and the Tenant shall
comply with all such directions, and shall make good and indemnify the Landlord in respect of any damage to the Building caused by the bringing in
of such machinery, plant, equipment or goods.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-47-
11. Not to overload the lifts, electrical installation or Conducting Media in the Demised Premises and/or the Building.
12. Not to do or omit to do anything which interferes with or which imposes an additional loading on any ventilation, air-conditioning or other plant or
machinery serving the Building.
13. Not to do anything whereby any policy of insurance on including or in any way relating to the Demised Premises taken out by the Landlord or the
Management Corporation may become void or voidable or whereby the rate of premium thereon or on the remainder of the Building may be
increased, but to provide one or more efficient fire extinguishers of a type approved by the Landlord and to take such other precautions against fire as
may be deemed necessary by the Landlord or its insurers.
14. Not to allow any person to sleep in the Demised Premises nor to use the Demised Premises for residential purposes.
15. Not without the prior written consent of the Landlord to permit the vendors of food or drink or the servants or agents of such vendors to bring to or
onto the Demised Premises or any part thereof or onto the Building or any part thereof food or drink for consumption by the occupiers or others in
the Demised Premises save and except in the case of the contractor who has been given the right by the Landlord to provide a food and drink service
for the occupiers of the Building.
16.
17.
18.
19.
To keep the Demised Premises and every part thereof clean and in the fullest possible hygienic condition and to keep all pipes, drains, basins, sinks
and water-closets in the Demised Premises clean and unblocked. The Tenant shall not employ in or about the Demised Premises any cleaner other
than the cleaning contractor approved by the Landlord to carry out the cleaning work for the Building and the Tenant shall not have any claim against
the Landlord in respect of any act, omission or negligence of such cleaner in or about the performance or purported performance of his duties.
To keep the Demised Premises free of pests, rodents, vermin and insects.
To keep the windows of the Demised Premises closed at all times and not to erect or install any sign, device, furnishing, ornament or object which is
visible from the street or from any other building and which, in the opinion of the Landlord, is incongruous or unsightly or may detract from the
general appearance of the Building.
To ensure that the decor and design of the exterior of the Demised Premises are in accordance with plans and specifications previously submitted to
and approved by the Landlord, and not to make any changes to such external parts without the prior written consent of the Landlord.
20.
To ensure that all doors of the Demised Premises are safely and properly locked and secured when the Demised Premises are not occupied.
21. Not to cover or obstruct or permit to be covered or obstructed in any manner or by any other article or thing (other than window blinds approved by
the Landlord), the windows, sky-lights or ventilating shafts or air inlets or outlets which reflect or admit light or enable air to flow into or out of the
Demised Premises or any part of the Building.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-48-
22. Not to throw, place or allow to fall or cause or permit to be thrown or placed in the lift shafts, water-closets or other conveniences in the Building any
sweepings, rubbish, waste paper or other similar substances, and the Tenant shall on demand pay to the Landlord the costs of repairing any damage to
such lift shafts, water-closets or other conveniences arising therefrom.
23. Not to permit or cause to be permitted the placing or parking of bicycles, motor cycles or scooters, trolleys and other wheeled vehicles and/or the
stocking or storage or littering of goods or things in the common parts of the Building, the corridors, passageways, pavements and the car-
parking areas and to keep all such internal and external parts of the Building clear and free of all obstruction at all times.
24. Not to place or take into the passenger lifts any baggage, furniture, parcels, sacks, bags, heavy articles or other goods or other merchandise save only
such light articles as brief-cases, attache cases and handbags and to use only the service lift prescribed by the Landlord for the transportation of
furniture, goods and other heavy equipment.
25. Not to permit or allow food trays and tiffin carriers to be brought into or carried in any passenger lift and the Tenant shall ensure that such items are
conveyed in the service lift only.
26. Not to permit or allow the contractors, workmen or cleaners (with or without equipment and tools) engaged by the Tenant to use the passenger lifts of
the Building and to ensure that they use only the service lift prescribed by the Landlord.
27. Not to solicit business, display or distribute advertising material in the car parks or other common areas of the Building.
28. Not to employ or otherwise engage any foreigner unless he or she holds a valid work permit or employment pass permitting him or her to work at the
Demised Premises and without prejudice to the generality of Clause 3.14, not to use, permit or suffer the Demised Premises to be kept or used as a
place or premises in which any person is employed in contravention of Section 57(1)(e) of the Immigration Act (Cap 133) or any statutory
modification or re-enactment thereof for the time being in force and to indemnify the Landlord against all costs, claims, liabilities, fines or expenses
whatsoever which may fall upon the Landlord by reason of any non-compliance thereof.
29.
To observe and perform or cause to be observed and performed the rules and regulations from time to time made by the Landlord or the Management
Corporation in connection with the orderly and proper use of the lobbies, corridors, staircases, lifts, hoists, lavatories and other parts in common use
in the Building and access ways and service areas to the Building and also in connection with the security of the Building.
30. Maintenance and cleaning of toilets and common areas
(only applicable to full wing Tenant)
Notwithstanding Clause 4.3.1 (iii), in the event that the Demised Premises consists of one (1) whole wing of the floor, the Tenant shall be
responsible at its own costs and expenses for the maintenance and cleaning of the toilets and common areas (including but not limited to the
pantry areas) serving the Demised Premises exclusively.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-49-
Schedule 16
Provisions of Renewal
1.
2.
3.
4.
5.
The Landlord shall at the written request of the Tenant between six (6) to nine (9) months before the expiration of the Term and if there shall not at
the time of such request be any existing breach or non-observance of any of the covenants on the part of the Tenant herein contained and at the
Tenant’s expense grant to the Tenant a further term (“Renewed Term”) of the Demised Premises.
The Renewed Term shall be for a term specified in paragraph 12 of Appendix A and upon the same terms and conditions as are contained in this
Agreement save that this option to renew clause shall be excluded and at a revised rent to be mutually agreed provided that :-
(i)
(ii)
the Tenant shall have strictly and faithfully performed and observed all and singular the several stipulations contained in this Agreement during
the Term and there is no existing breach of this Agreement as at the time of the Lessee’s notice of renewal; and
the Tenant gives the Landlord notice in writing made not less than six (6) months prior to the expiry of the said Term (“the Renewal Notice”)
of the Tenant’s intent to exercise this Option to Renew and signs and delivers the lease agreement for the Renewed Term to the Landlord not
less than six (6) months prior to the expiry of the said Term.
Provided Always that within two (2) weeks of the receipt of the Landlord’s proposal for the revised rent and the proposed covenants and provisions,
the Tenant shall in writing inform the Landlord whether the revised rent, covenants and provisions is or are acceptable or otherwise.
In the event that the revised rent or the proposed covenants and provisions is or are not acceptable to the Tenant or if the Tenant fails to give any
written unconditional acceptance to the Landlord within the aforesaid two week period, then it shall be deemed that the Tenant is no longer interested
in renewing the tenancy and the Landlord shall be free to terminate all negotiations with the Tenant for the renewal of the tenancy.
If the Landlord’s proposal for the revised rent, covenants and provisions has been accepted by the Tenant within the aforesaid two week period, the
Tenant shall sign the new tenancy within two weeks of receipt of the new tenancy documents.
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
-50-
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
Annexure A
Plan of Demised Premises
-51-
IN WITNESS WHEREOF the parties have entered into this Tenancy Agreement the day and year first above written.
Landlord
SIGNED BY
for and on behalf of UNITED
ENGINEERS LIMITED in the presence of:
/s/ Quek Jing Yi
Name of Witness: Ms Quek Jing Yi
Designation: Head, Corporate Leasing
Tenant
SIGNED BY
for and on behalf of ASLAN
PHARMACEUTICALS PTE LTD
in the presence of:
/s/ Nishi Singh
Name of Witness: Nishi Singh
NRIC No:
Occupation: Legal Manager
Tenant: M/s Aslan Pharmaceuticals Pte Ltd
/s/ Goh Yiow Kuang
Name: Mr Goh Yiow Kuang
Designation: General Manager
/s/ Carl Firth
Name: Carl Firth
CEO
Designation: ASLAN Pharmaceuticals
Tenant’s company stamp:
-52-
Subsidiaries of ASLAN Pharmaceuticals Limited
Exhibit 8.1
Name of Subsidiary
ASLAN Pharmaceuticals Pte. Ltd.*
ASLAN Pharmaceuticals Taiwan Limited
((cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0))**
ASLAN Pharmaceuticals Australia Pty Ltd**
ASLAN Pharmaceuticals Hong Kong Limited
((cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0))**
ASLAN Pharmaceuticals (Shanghai) Co. Ltd.
((cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0)(cid:0) ((cid:0)(cid:0)) (cid:0)(cid:0)(cid:0)(cid:0))***
ASLAN Pharmaceuticals (USA) Inc.**
JAGUAHR Therapeutics Pte. Ltd.****
*
Wholly owned by ASLAN Pharmaceuticals Limited
** Wholly owned by ASLAN Pharmaceuticals Pte. Ltd.
*** Wholly owned by ASLAN Pharmaceuticals Hong Kong Limited
**** Majority owned by ASLAN Pharmaceuticals Pte. Ltd.
Jurisdiction of Incorporation or Organization
Singapore
Taiwan
Australia
Hong Kong
People’s Republic of China
United States
Singapore
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Carl Firth, certify that:
Exhibit 12.1
1.
2.
3.
4.
I have reviewed this annual report on Form 20-F of ASLAN Pharmaceuticals Limited (the “Company”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting; and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal
control over financial reporting.
Date: April 14, 2020
By:
/s/ Carl Firth, Ph.D.
Carl Firth, Ph.D.
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kiran Asarpota, certify that:
Exhibit 12.2
1.
2.
3.
4.
I have reviewed this annual report on Form 20-F of ASLAN Pharmaceuticals Limited (the “Company”);
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by
this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects
the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;
The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and
15d-15(f)) for the Company and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by
the annual report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial
reporting; and
5.
The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal
control over financial reporting.
Date: April 14, 2020
By:
/s/ Kiran Asarpota
Kiran Asarpota
Vice President of Finance
(Principal Financial Officer and Principal
Accounting Officer)
Exhibit 13.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), Carl Firth,
Ph.D., Chief Executive Officer of ASLAN Pharmaceuticals Limited (the “Company”), hereby certifies that, to the best of his knowledge:
1.
2.
The Company’s Annual Report on Form 20-F for the year ended December 31, 2019, to which this Certification is attached as Exhibit 13.1 (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: April 14, 2020
By:
/s/ Carl Firth, Ph.D.
Carl Firth, Ph.D.
Chief Executive Officer
(Principal Executive Officer)
Exhibit 13.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), Kiran
Asarpota, Vice President of Finance of ASLAN Pharmaceuticals Limited (the “Company”), hereby certifies that, to the best of his knowledge:
1.
2.
The Company’s Annual Report on Form 20-F for the year ended December 31, 2019, to which this Certification is attached as Exhibit 13.1 (the
“Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
Date: April 14, 2020
By:
/s/ Kiran Asarpota
Kiran Asarpota
Vice President of Finance
(Principal Financial Officer and Principal
Accounting Officer)