Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES
EXCHANGE ACT OF 1934
OR
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021.
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
OR
☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Date of event requiring this shell company report
For the transition period from to
Commission file number: 001-39173
I-MAB
(Exact Name of Registrant as Specified in Its Charter)
N/A
(Translation of Registrant’s Name Into English)
Cayman Islands
(Jurisdiction of Incorporation or Organization)
55th – 56th Floor, New Bund Center, 555 West Haiyang Road, Pudong District
Shanghai, 200124
People’s Republic of China
(Address of Principal Executive Offices)
John Long, Chief Financial Officer
55th – 56th Floor, New Bund Center, 555 West Haiyang Road, Pudong District
Shanghai, 200124
People’s Republic of China
Phone: +86 21-6057-8000
Email: john.long@i-mabbiopharma.com
(Name, Telephone, Email 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
Trading
Symbol
Name of Each Exchange
On Which Registered
American depositary shares, each ten
(10) American depositary shares representing
twenty-three (23) ordinary shares
Ordinary shares, par value US$0.0001 per
share*
IMAB
The Nasdaq Stock Market LLC
(The Nasdaq Global Market)
The Nasdaq Stock Market LLC
(The Nasdaq Global Market)
*
Not for trading, but only in connection with the listing on the Nasdaq Global Market of American depositary shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual
report:
183,826,753 ordinary shares outstanding, par value of US$0.0001 per share, excluding 1,223,839 ordinary shares issued to our depositary bank for bulk
issuance of ADSs reserved for future issuances upon the exercising or vesting of awards granted under our share incentive plans, as of December 31,
2021.
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
Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 from their obligations under those Sections 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 and posted pursuant to
Rule 405 of Regulation S-T (§232.405 of this chapter) 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 definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☒
Accelerated filer ☐
Non-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 whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accountant firm that
prepared or issued its audit report. ☒
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
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No
Table of Contents
TABLE OF CONTENTS
INTRODUCTION
FORWARD-LOOKING STATEMENTS
PART I
ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE
ITEM 3. KEY INFORMATION
ITEM 4. INFORMATION ON THE COMPANY
ITEM 4A. UNRESOLVED STAFF COMMENTS
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
ITEM 8. FINANCIAL INFORMATION
ITEM 9. THE OFFER AND LISTING
ITEM 10. ADDITIONAL INFORMATION
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
PART II.
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 16A. AUDIT COMMITTEE FINANCIAL EXPERT
ITEM 16B. CODE OF ETHICS
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
ITEM 16G. CORPORATE GOVERNANCE
ITEM 16H. MINE SAFETY DISCLOSURE
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
PART III.
ITEM 17. FINANCIAL STATEMENTS
ITEM 18. FINANCIAL STATEMENTS
ITEM 19. EXHIBITS
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Unless otherwise indicated and except where the context otherwise requires, references in this annual report on Form 20-F to:
INTRODUCTION
•
•
•
•
•
•
•
•
•
“ADRs” refer to the American depositary receipts that evidence our ADSs;
“ADSs” refer to our American depositary shares, each ten (10) ADSs represent twenty-three (23) ordinary shares;
“China” or “the PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau
and Taiwan, and “Greater China” does not exclude Hong Kong, Macau and Taiwan;
“China Portfolio” refers to our investigational drugs of which we in-license Greater China rights from reputable global biopharmaceutical
companies and rely on our own research and development capabilities to advance into pivotal clinical trials and commercialize in Greater
China with an aim for near-term product launch;
“Global Portfolio” refers to our own proprietary novel or differentiated drug candidates that we are advancing towards clinical validation in
the United States;
“I-Mab,” “we,” “us,” “our company” and “our” refer to I-Mab, a Cayman Islands exempted company, and its subsidiaries;
“RMB” refers to the legal currency of China;
“shares” or “ordinary shares” refer to our ordinary shares, par value US$0.0001 per share; and
“US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States.
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FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F contains forward-looking statements that relate to our current expectations and views of future events. These
statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be
materially different from those expressed or implied by the forward-looking statements. These statements are made under the “safe harbor” provisions of
the U.S. Private Securities Litigations Reform Act of 1995.
You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,”
“intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements
largely on our current expectations and projections about future events that we believe may affect our financial condition, results of operations, business
strategy and financial needs. These forward-looking statements include statements relating to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
the timing of initiation and completion, and the progress of our drug discovery and research programs;
the timing and likelihood of regulatory filings and approvals;
our ability to advance our drug candidates into drugs, and the successful completion of clinical trials;
the approval, pricing and reimbursement of our drug candidates;
the commercialization of our drug candidates;
the market opportunities and competitive landscape of our drug candidates;
the payment, receipt and timing of any milestone payments in relation to the licensing agreements;
estimates of our costs, expenses, future revenues, capital expenditures and our needs for additional financing;
our ability to attract and retain senior management and key employees;
our future business development, financial condition and results of operations;
future developments, trends, conditions and competitive landscape in the industry and markets in which we operate;
our strategies, plans, objectives and goals and our ability to successfully implement these strategies, plans, objectives and goals;
our ability to consummate the listings of our securities on other stock exchanges;
our ability to continue to maintain our market position in China’s biopharmaceutical and biotechnology industries;
our ability to identify and integrate suitable acquisition targets;
changes to regulatory and operating conditions in our industry and markets; and
potential impact of COVID-19 pandemic on our current and future business development, financial condition and results of operations.
You should read this annual report and the documents that we refer to in this annual report and have filed as exhibits to this annual report
completely and with the understanding that our actual future results may be materially different from what we expect. Other sections of this annual
report discuss factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New
risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on
our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any
forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annual report
relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no
obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date
on which the statements are made or to reflect the occurrence of unanticipated events.
Our reporting currency is Renminbi, or RMB. Unless otherwise noted, all translations from RMB to U.S. dollars and from U.S. dollars to RMB in
this annual report are made at a rate of RMB6.3726 to US$1.00, the exchange rate in effect as of December 30, 2021 as set forth in the H.10 statistical
release of The Board of Governors of the Federal Reserve System. We make no representation that any RMB or U.S. dollar amounts could have been, or
could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all.
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ITEM 1.
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2.
OFFER STATISTICS AND EXPECTED TIMETABLE
PART I
Not applicable.
ITEM 3.
KEY INFORMATION
Our Holding Company Structure
I-Mab is not an operating company but a Cayman Islands holding company with operations primarily conducted by its subsidiaries based in China
and the United States. We and our subsidiaries face various legal and operational risks and uncertainties related to doing business in mainland China. A
significant part of our business operations in China are conducted through our subsidiaries in the PRC, and we and our subsidiaries are subject to
complex and evolving PRC laws and regulations. For example, we and our subsidiaries in the PRC face risks associated with regulatory approvals on
offshore offerings and the lack of inspection on our auditors by the Public Company Accounting Oversight Board (United States), or PCAOB, which
may impact our ability to conduct certain businesses, accept foreign investments, or list on a United States or other foreign exchange. These risks could
result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to offer or continue
to offer securities to investors, or cause such securities to significantly decline in value. For a detailed description of risks related to doing business in
China, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China.”
PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and
foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors.
Implementation of industry-wide regulations, including data security or anti-monopoly related regulations, in this nature may cause the value of such
securities to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The
PRC government’s significant oversight and discretion over our business operations could result in a material adverse change in our operations and the
value of our ADSs.”
Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly
evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For more details, see
“Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties with respect to the PRC legal system could
materially and adversely affect us.”
Permissions Required from the PRC Authorities
We conduct our business in China primarily through our subsidiaries in China. Our operations in China are governed by PRC laws and
regulations. As of the date of this annual report, our PRC subsidiaries have obtained the requisite licenses and permits from the PRC government
authorities that are material for their business operations in China. Given the uncertainties of interpretation and implementation of relevant laws and
regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or
approvals for the functions and services of our platform in the future.
Furthermore, in connection with our historical issuance of securities to foreign investors, under the current PRC laws, regulations and regulatory
rules, as of the date of this annual report, we and our PRC subsidiaries, (i) are not required to obtain permissions from the China Securities Regulatory
Commission, or the CSRC, (ii) are not required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and
(iii) have not received or were denied such permissions by the CSRC or the CAC.
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However, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas
and/or foreign investment in China-based issuers. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to
Doing Business in China—The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our
offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such
filing.”
The Holding Foreign Companies Accountable Act
The Holding Foreign Companies Accountable Act, or HFCAA, was signed into law on December 18, 2020. The HFCAA states if the SEC
determines that an issuer has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB, the
issuer will be identified as a “Commission-Identified Issuer” under the HFCAA after the filing of its annual report. In March 2022, the SEC published
its first list of “Commission-Identified Issuers.” We expect to be included on this list after our annual report on Form 20-F for the fiscal year ended
December 31, 2021 is filed. However, the inclusion on this list will not immediately result in the delisting of our shares or ADS from the securities
exchange. Delisting pursuant to the HFCAA will only occur if the registered public accounting firm that issues audit reports cannot be fully inspected by
the PCAOB for three years, or pending legislation to be shorten to two consecutive years.
There have been dialogues between the relevant regulators in China and the United States to resolve the underlying issue. In April 2022, the
CSRC, Ministry of Finance of the People’s Republic of China, or the MoF, National Administration of State Secrets Protection, and National Archives
Administration of China jointly circulated the proposed revisions to the currently effective Provisions on Strengthening Confidentiality and Archives
Administration for Overseas Securities Offering and Listing, or the Confidentiality and Archives Administration Provisions. The proposed revisions are
intended to be a step forward in potentially facilitating inspections by the PCAOB. CSRC stated that China stays committed to supporting eligible
China-based companies of all types to list or offer securities in overseas markets, and the revised Confidentiality and Archives Administration
Provisions would further strengthen the compliance of such companies and promote healthy and orderly overseas securities offering and listing.
Although no agreement has been reached between the U.S. and China regulatory authorities, we will continue to actively monitor the latest regulatory
developments.
Nevertheless, we have initiated action plans, in response to the delisting risk, to engage a U.S.-based independent registered public accounting
firm as our principal auditor that is subject to the inspection by the PCAOB. This firm would also need to comply with the applicable rules and
regulations concerning information confidentiality and archives administration for compliance purposes in China. At the earliest, such change may take
place for our annual report for the year ended December 31, 2022, which is ahead of the deadline currently contemplated under the HFCAA.
For more details and risks regarding the HFCAA, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—
The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the
PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections” and “Item 3. Key Information—D. Risk
Factors—Risks Related to Doing Business in China—Our ADSs will be prohibited from trading in the United States under the Holding Foreign
Companies Accountable Act, or the HFCAA, in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if
proposed changes to the law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value
of your investment.”
Cash and Asset Flows through Our Organization
Although other means are available for us to obtain financing at the holding company level, our ability to pay dividends to the shareholders and to
service any debt it may incur may depend upon dividends paid by our PRC subsidiaries. If any of our subsidiaries incurs debt on its own behalf in the
future, the instruments governing such debt may restrict its ability to pay dividends to I-Mab. In addition, our PRC subsidiaries are permitted to pay
dividends to I-Mab only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Further, our
PRC subsidiaries are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which
are not distributable as cash dividends except in the event of a solvent liquidation of the companies. For more details, see “Item 5. Operating and
Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.”
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Under PRC laws and regulations, our PRC subsidiaries are subject to certain restrictions with respect to paying dividends or otherwise transferring
any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks
designated by SAFE. The amounts restricted include the paid-up capital and the statutory reserve funds of our PRC subsidiaries, totaling
RMB455.0 million, RMB455.0 million and RMB486.9 million (US$76.4 million) as of December 31, 2019, 2020 and 2021, respectively. Furthermore,
cash transfers from our PRC subsidiaries to entities outside of China are subject to PRC government control of currency conversion. Shortages in the
availability of foreign currency may temporarily delay the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other
payments to us, or otherwise satisfy their foreign currency denominated obligations. For the years ended December 31, 2019, 2020 and 2021, no
dividends or distributions were made to I-Mab by our subsidiaries. For risks relating to the fund flows of our operations in China, see “Item 3. Key
Information—D. Risk Factors—Risks Related to Doing Business in China—We may rely on dividends and other distributions on equity paid by our
PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments
to us could have a material and adverse effect on our ability to conduct our business.”
Under PRC law, I-Mab may provide funding to our PRC subsidiaries only through capital contributions or loans, subject to satisfaction of
applicable government registration and approval requirements. In the years ended December 31, 2019, 2020 and 2021, I-Mab extended loans with
outstanding principal amount of RMB6.3 million, RMB776.2 million and RMB1,079.6 million (US$169.4 million), respectively, to our intermediate
holding companies and subsidiaries.
I-Mab has not declared or paid any cash dividends, nor does it have any present plan to pay any cash dividends on our ordinary shares in the
foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. See
“Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal
income tax considerations of an investment in our ADSs, see “Item 10. Additional Information—E. Taxation.”
Selected Financial Data
As of December 31, 2021, we had cash, cash equivalents, and short-term investments of RMB4.3 billion (US$671.1 million), compared with
RMB4.8 billion as of December 31, 2020. Our cash balance provides us with adequate funding to support our key business for at least the next three
years based on our current estimation, taking our current cash position together with the expected upcoming milestone payments from the previous
out-licensing deals and collaborations.
The following selected consolidated statements of comprehensive income (loss) data for the years ended December 31, 2019, 2020 and 2021,
selected consolidated balance sheet data as of December 31, 2020 and 2021 and selected consolidated statements of cash flow data for the years ended
December 31, 2019, 2020 and 2021 have been derived from our audited consolidated financial statements included elsewhere in this annual report. The
selected consolidated statements of comprehensive loss data for the years ended December 31, 2017 and 2018, selected consolidated balance sheet data
as of December 31, 2017, 2018 and 2019, and selected consolidated statements of cash flow data for the years ended December 31, 2017 and 2018 have
been derived from our audited consolidated financial statements that are not included in this annual report. Our consolidated financial statements are
prepared and presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP.
Our historical results do not necessarily indicate results expected for any future periods. 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.
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Selected Consolidated Statements of Comprehensive
Income (Loss) Data:
Revenues
Licensing and collaboration revenue
Supply of investigational products
Total revenues
Cost of revenues
Expenses
Research and development expenses(1)
Administrative expenses(1)
Income (loss) from operations
Interest income
Interest expense
Other income (expenses), net
Equity in loss of affiliates(1)
Fair value change of warrants
Income (loss) before income tax expense
Income tax benefit (expense)
Net income (loss) attributable to I-Mab
Deemed dividend to Series C-1 preferred shareholders
at extinguishment of Series C-1 Preferred Shares
Deemed dividend to Series B-1, B-2 and C preferred
shareholders at modification of Series B-1, B-2 and
C Preferred Shares
Net income (loss) attributable to ordinary shareholders
Other comprehensive income (loss)
For the Year Ended December 31,
2017
RMB
2018
RMB
2019
RMB
2020
RMB
2021
RMB
US$
(in thousands, except for share and per share data)
11,556
—
11,556
—
53,781
—
53,781
—
30,000
—
30,000
—
1,542,668
—
1,542,668
—
40,115
47,911
88,026
(46,432)
(25,436)
(267,075) (426,028)
(66,391)
(840,415)
(654,553)
(280,955) (438,638) (1,464,968)
30,570
(2,991)
(20,205)
—
5,644
(298,240) (401,111) (1,451,950)
—
(298,240) (402,833) (1,451,950)
858
(5,643)
1,527
—
(14,027)
4,597
(11,695)
(16,780)
—
61,405
(1,722)
—
(984,689)
(402,409)
155,570
24,228
(957)
412,892
(108,587)
—
483,146
(12,231)
470,915
(1,212,958)
(899,943)
(2,071,307)
21,333
—
83,162
(367,883)
—
(2,334,695)
3,154
(2,331,541)
6,295
7,518
13,813
(7,286)
(190,340)
(141,221)
(325,034)
3,348
—
13,050
(57,729)
—
(366,365)
495
(365,870)
—
—
(5,283)
—
—
—
Foreign currency translation adjustments, net of nil tax
10,747
Total comprehensive income (loss) attributable to I-Mab (292,322) (349,144) (1,441,203)
Net income (loss) attributable to ordinary share-holders (298,240) (402,833) (1,485,001)
Weighted-average number of ordinary shares used in
53,689
5,918
—
(27,768)
(298,240) (402,833) (1,485,001)
—
—
470,915
—
(2,331,541)
—
(365,870)
(120,920)
349,995
470,915
(135,717)
(2,467,258)
(2,331,541)
(21,297)
(387,167)
(365,870)
calculating net income (loss) per share
Basic
Diluted
Net income (loss) per share attributable to ordinary
shareholders
Basic
Diluted
Net income (loss) per ADS attributable to ordinary
shareholders
Basic
Diluted
Note:
5,742,669 6,529,092 7,381,230 134,158,824 174,707,055 174,707,055
5,742,669 6,529,092 7,381,230 157,231,652 174,707,055 174,707,055
(51.93)
(51.93)
(61.70)
(61.70)
(201.19)
(201.19)
3.51
3.00
(13.35)
(13.35)
(2.09)
(2.09)
(119.44)
(119.44)
(141.91)
(141.91)
(462.74)
(462.74)
8.07
6.90
(30.71)
(30.71)
(4.82)
(4.82)
(1)
Share-based compensation expenses were allocated as follows:
Research and development expenses
Administrative expenses
Equity in loss of affiliates
Total
2017
RMB
2018
RMB
2019
RMB
2020
RMB
2021
RMB
US$
For the Year Ended December 31,
1,056
2,464
—
3,520
(in thousands)
470
514,733
—
515,203
284,431
209,033
32,707
526,171
201,926
406,683
13,267
621,876
31,687
63,817
2,082
97,586
2,112
4,927
—
7,039
6
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The following table presents our selected consolidated statements of balance sheet data as of the dates indicated:
2017
RMB
2018
RMB
As of December 31,
2019
RMB
2020
RMB
(in thousands)
2021
RMB
US$
Selected Consolidated Statements of Balance Sheet Data:
Current assets:
Cash and cash equivalents
Restricted cash
Accounts receivable
Contract assets
Short-term investments
Inventories
Prepayments and other receivables
Other financial assets
Total current assets
Property, equipment and software
Operating lease right-of-use assets
Intangible assets
Goodwill
Investment accounted for using the equity method
Other non-current assets
Total assets
Total liabilities
Total mezzanine equity
Shareholders’ deficit
Ordinary shares (US$0.0001 par value, 800,000,000 shares
authorized as of December 31, 2020 and 2021,
respectively; 164,888,519 shares issued and outstanding as
of December 31, 2020, and 183,826,753 shares issued and
outstanding as of December 31, 2021, respectively)
Treasury stock
Additional paid-in capital
Accumulated other comprehensive income (loss)
Accumulated deficit
Total shareholders’ equity/(deficit)
Total liabilities, mezzanine equity and shareholders’
92,653
—
11,000
—
—
88,972
255,958
—
130,498
227,391
31,530
—
195,467
—
307,930 1,588,278 1,137,473 4,758,778 3,523,632 552,935
55,810
104,783
—
—
—
5,191
—
33,081
—
253,780
—
39,824
32,000
753,164 118,188
—
—
4,274
—
29,944
136,036
12,633
266,245
—
—
691,591 2,036,861 1,361,319 5,343,664 4,781,718 750,356
7,174
17,698
18,778
25,511
55,253
4,179
1,025,345 2,375,938 1,737,572 6,333,793 5,601,195 878,949
706,648 1,041,635 163,454
309,151
668,090
—
1,015,989 2,915,358 3,104,177
22,336
—
148,844
162,574
—
—
30,069
16,435
148,844
162,574
—
18,331
27,659
—
148,844
162,574
—
—
25,272
14,997
120,444
162,574
664,832
2,010
45,716
112,781
119,666
162,574
352,106
26,634
27,237
190,824
—
415,684
—
—
6
(1)
52,369
5,691
20
—
389,379 7,701,116 9,100,777 1,428,110
(29,267)
(357,860) (1,014,489) (2,494,207) (2,023,292) (4,354,833) (683,368)
(955,104) (2,034,695) 5,627,145 4,559,560 715,495
(299,795)
6
(1)
—
59,380
6
—
114
—
126
—
(186,510)
(50,793)
70,127
equity/(deficit)
1,025,345 2,375,938 1,737,572 6,333,793 5,601,195 878,949
The following table presents our selected consolidated statements of cash flow data for the years indicated:
Selected Consolidated Statements of Cash Flow Data:
Net cash (used in) generated from operating activities
Net cash (used in) generated from investing activities
Net cash generated from financing activities
Effect of exchange rate changes on cash and cash equivalents and
restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of the year
Cash, cash equivalents and restricted cash, end of the year
2017
RMB
2018
RMB
2019
RMB
2020
RMB
2021
RMB
US$
For the Year Ended December 31,
(in thousands)
(252,157) (280,705) (867,982) 433,558
(157,665)
9,500 212,462 (201,901)
758,585 1,479,669 152,709 3,440,481
(973,093) (152,700)
(727,206) (114,114)
593,924 93,200
(132)
59,754
(128,771) (20,207)
348,631 1,268,218 (487,648) 3,565,495 (1,235,146) (193,821)
64,082 412,713 1,680,931 1,193,283 4,758,778 746,756
412,713 1,680,931 1,193,283 4,758,778 3,523,632 552,935
15,163 (106,643)
7
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A. Reserved
B. Capitalization and Indebtedness
Not applicable.
C. Reasons for the Offer and Use of Proceeds
Not applicable.
D. Risk Factors
Summary of Risk Factors
An investment in our ADSs or ordinary shares involves significant risks. Below is a summary of material risks we face, organized under relevant
headings. These risks are discussed more fully in “Item 3. Key Information—D. Risk Factors.”
Risks Related to Our Financial Position and Need for Additional Capital
•
•
•
We have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.
We have incurred net losses in the past and we may not be able to maintain profitability in the future.
We recorded net cash outflow from operating activities in the past. We may need to obtain additional financing to fund our operations. If
we are unable to obtain such financing, we may be unable to complete the development and commercialization of our major drug
candidates.
Risks Related to Clinical Development of Our Drug Candidates
•
•
Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not
be predictive of future trial results.
We depend substantially on the success of our drug candidates, all of which are in pre-clinical or clinical development, and our ability to
identify additional drug candidates. If we are unable to successfully identify new drug candidates, complete clinical development, obtain
regulatory approval and commercialize our drug candidates, or experience significant delays in doing so, our business will be materially
harmed.
•
We may not be able to identify, discover or in-license new drug candidates, and may allocate our limited resources to pursue a particular
drug candidate or indication and fail to capitalize on drug candidates or indications that may later prove to be more profitable, or for which
there is a greater likelihood of success.
Risks Related to Obtaining Regulatory Approval for Our Drug Candidates
•
•
All material aspects of the research, development and commercialization of pharmaceutical products are heavily regulated.
The regulatory approval processes of the NMPA, the FDA and other comparable regulatory authorities are time-consuming and may
evolve over time, and if we are ultimately unable to obtain regulatory approval for our drug candidates, our business will be substantially
harmed.
8
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•
The failure to obtain patent term extension and data exclusivity for approved pharmaceutical products could increase the risk of generic
competition with our products.
Risks Related to Commercialization of Our Drug Candidates
•
•
•
Our drug candidates may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the
medical community necessary for commercial success.
We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are similar,
more advanced, or more effective than ours, which may adversely affect our financial condition and our ability to successfully
commercialize our drug candidates.
The manufacture of biopharmaceutical products is a complex process which requires significant expertise and capital investment, and if we
encounter problems in sourcing manufacturing capabilities or manufacturing our future products, our business could suffer.
Risks Related to Our Reliance on Third Parties
•
•
As we rely on third parties to conduct our pre-clinical studies and clinical trials, if we lose our relationships with these third parties or if
they 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 drug candidates and our business could be substantially harmed.
We expect to rely on third parties to manufacture at least a portion of our drug candidate supplies, and we intend to rely on third parties for
at least a portion of the manufacturing process of our drug candidates, if approved. Our business could be harmed if those third parties fail
to provide us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.
Risks Related to Our Intellectual Property
•
•
•
If we are unable to obtain and maintain patent and other intellectual property protection for our drug candidates, or if the scope of such
intellectual property rights obtained is not sufficiently broad, third parties could develop and commercialize products and technologies
similar or identical to ours and compete directly against us, and our ability to successfully commercialize any product or technology may
be adversely affected.
We enjoy only limited geographical protection with respect to certain patents and may not be able to protect our intellectual property rights
throughout the world, including in the PRC.
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.
Risks Related to Our Industry, Business and Operations
•
•
•
Our future success depends on our ability to attract, retain and motivate senior management and qualified scientific employees.
We will need to increase the size and capabilities of our organization, and we may experience difficulties in managing our growth.
The data and information that we gather in our research and development process could be inaccurate or incomplete, which could harm our
business, reputation, financial condition and results of operations.
Risks Related to Doing Business in China
•
The PRC government’s significant oversight and discretion over our business operations could result in a material adverse change in our
operations and the value of our ADSs.
9
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•
•
•
The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the
inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections.
Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in
2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are
enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.
The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings
under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such
filing.
General Risks Related to Our ADSs
•
•
The trading price of our ADSs may be volatile, which could result in substantial losses to you.
We may face an increased risk of securities class action litigation.
Risks Related to Our Financial Position and Need for Additional Capital
We have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.
We are a clinical stage biopharmaceutical company with a limited operating history. Our operations to date have focused on organizing and
staffing our operations, business planning, raising capital, establishing our intellectual property portfolio and conducting pre-clinical and clinical trials of
our drug candidates. We have not yet demonstrated an ability to successfully manufacture, obtain marketing approvals for or commercialize our drug
candidates. We have no products approved for commercial sale and have not generated any revenue from the sales of our commercial products.
Consequently, any predictions about our future success or viability may not be as accurate as they could be if we had a longer operating history.
We are focused on the discovery and development of innovative drugs for the treatment of various immuno-oncological and immuno-
inflammatory diseases. Our limited operating history, particularly in light of the rapidly evolving drug research and development industry in which we
operate and the changing regulatory and market environments we encounter, may make it difficult to evaluate our prospects for future performance. As a
result, any assessment of our future performance or viability is subject to significant uncertainty. We will encounter risks and difficulties frequently
experienced by early-stage companies in rapidly evolving fields as we seek to transition to a company capable of supporting commercial activities. If we
do not address these risks and difficulties successfully, our business will suffer.
We have incurred net losses in the past and we may not be able to maintain profitability in the future.
Investment in the development of biopharmaceutical products is highly speculative as it entails substantial upfront capital expenditures and
significant risks that a drug candidate may fail to demonstrate efficacy and/or safety to gain regulatory or marketing approvals or become commercially
viable. To date, we have financed our activities primarily through public and private placements. While we have generated revenue from licensing and
collaboration deals, we have only started to generate revenue from supply of investigational products since 2021, and we may continue to incur
significant research and development expenses and other expenses related to our ongoing operations. As a result, we had incurred a net loss of
RMB1,452.0 million in 2019, a net income of RMB470.9 million in 2020 and a net loss of RMB2,331.5 million (US$365.9 million) in 2021,
respectively. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from
general and administrative costs associated with our operations.
10
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We cannot assure you that we will be able to generate net profits in the future. Our ability to achieve and maintain profitability depends in large
part on our ability to out-license some of our commercialization rights and execute our product commercialization strategies as our business further
grows in scale. Accordingly, we intend to continue to invest for the foreseeable future in certain activities relating to our development, including, but not
limited to, the following:
•
•
•
•
•
•
•
•
•
•
•
conducting clinical trials of our drug candidates;
manufacturing clinical trial materials through contract manufacturing organizations, or CMOs, in and out of China;
seeking regulatory approvals for our drug candidates;
commercializing our drug candidates for which we have obtained marketing approval;
completing the construction of and maintaining our manufacturing facilities;
hiring additional clinical, operational, financial, quality control and scientific personnel;
establishing a sales, marketing and commercialization team for any future products that have obtained regulatory approval;
seeking to identify additional drug candidates;
obtaining, maintaining, expanding and protecting our intellectual property portfolio;
enforcing and defending any intellectual property-related claims; and
acquiring or in-licensing other drug candidates, intellectual property and technologies.
Typically, it takes many years to develop one new drug from the time it is discovered to when it becomes available for treating patients. During the
process, we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business.
The size of our future net losses will depend partially on the rate of the future growth of our expenses, our ability to generate revenues and the timing
and amount of milestone payments and other payments that we receive from or pay to third parties. If any of our drug candidates fails during clinical
trials or does not gain regulatory approval, or, even if approved, fails to achieve market acceptance, our business may not become profitable. Even if we
achieve profitability in the future, we may not be able to sustain profitability in subsequent periods thereafter. Our prior losses and expected future losses
have had, and will continue to have, an adverse effect on our working capital and shareholders’ equity.
We recorded net cash outflow from operating activities in the past. We may need to obtain additional financing to fund our operations. If we
are unable to obtain such financing, we may be unable to complete the development and commercialization of our major drug candidates.
Since our inception, our operations have consumed substantial amounts of cash. We had raised over US$400 million in pre-IPO financing in the
past and received total net proceeds of approximately US$105.3 million from our initial public offering. We spent RMB868.0 million in net cash to
finance our operations in 2019, generated RMB433.6 million in net cash from our operations in 2020, and spent RMB973.1 million (US$152.7 million)
in net cash to finance our operations in 2021.
We expect our expenses to increase significantly in connection with our ongoing activities, particularly as we advance the clinical development of
our clinical-stage drug candidates, continue the research and development of our pre-clinical stage drug candidates and initiate additional clinical trials
of, and seek regulatory approval for, these and other future drug candidates.
In addition, if we obtain regulatory approvals for any of our drug candidates, we expect to incur significant commercialization expenses relating to
product manufacturing, marketing, sales and distribution and post-approval commitments to continue monitoring the efficacy and safety data of our
future products on the market. In particular, costs that may be required for the manufacture of any drug candidate that has received regulatory approval
may be substantial as we may need to modify or increase our production capacity in the future at manufacturing facilities. We have incurred and may
continue to incur expenses as we create additional infrastructure to support our operations as a public company. Accordingly, we will need to obtain
substantial additional funding in connection with our continuing operations through public or private equity offerings, debt financing, collaborations or
licensing arrangements or other sources. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, limit, reduce
or terminate our research and development programs or any future commercialization efforts.
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COVID-19 has spread globally and the World Health Organization (WHO) has declared it a pandemic. While still evolving, the COVID-19
pandemic has brought uncertainties and interruptions to global economy and caused significant volatility across the financial markets, which had a
cooling effect on the financing and investing activities in general. We believe that our current cash and cash equivalents, together with our cash
generated from operating activities, financing activities, our initial public offering and private placement, will be sufficient to meet our present
anticipated working capital requirements and capital expenditures. However, if the impact of the COVID-19 and volatility in the financial markets
continue, our financing activities in future to raise additional capital may be materially and adversely affected, which may in turn have an adverse effect
on our ability to meet our working capital requirement and our liquidity. For other risks related to the COVID-19, see “—Our business and results of
operations could be adversely affected by public health crisis (including the COVID-19 global pandemic) and natural catastrophes or other disasters
outside of our control in the locations in which we, our suppliers, CROs, CMOs and other contractors operate.”
Raising additional capital may cause dilution to the interests to the holders of our ADSs and our shareholders, restrict our operations or
require us to relinquish rights to our technologies or drug candidates.
We may seek additional funding through a combination of equity offerings, debt financings, collaborations, licensing arrangements, strategic
alliances or partnerships and government grants or subsidies. To the extent that we raise additional capital through the sale of equity or convertible debt
securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder
of our ADSs. The incurrence of additional indebtedness or the issuance of certain equity securities could give rise to increased fixed payment
obligations and also result in certain additional restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity,
limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to
conduct our business. In addition, the issuance of additional equity securities, or the possibility of such issuance, may cause the market price of our
ADSs to decline.
In the event we enter into collaborations or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms,
including relinquishing or licensing to a third party our rights to technologies or drug candidates on unfavorable terms, which we would have otherwise
sought to develop or commercialize on our own or reserve for future potential arrangements when we are more likely to achieve more favorable terms.
Risks Related to Clinical Development of Our Drug Candidates
Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be
predictive of future trial results.
Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. While our exclusive focus is to develop
drug candidates with potential to become novel or highly differentiated drugs in China and globally, we cannot guarantee that we are able to achieve this
for any of our drug candidates. Failure can occur at any time during the clinical development process. The results of pre-clinical studies and early
clinical trials of our drug candidates may not be predictive of the results of later-stage clinical trials. Drug candidates during later stages of clinical trials
may fail to show the desired results in safety and efficacy despite having progressed through pre-clinical studies and initial clinical trials and despite the
level of scientific rigor in the study, design and adequacy of execution. In some instances, there can be significant variability in safety and/or efficacy
results among different trials of the same drug candidate due to numerous factors, including, but not limited to, differences in individual patient
conditions, including genetic differences, and other compounding factors, such as other medications or pre-existing medical conditions.
In the case of any trials we conduct, results may differ from earlier trials due to the larger number of clinical trial sites and additional countries and
languages involved in such trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials
due to a lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. We cannot guarantee that our future clinical trial
results will be favorable based on currently available clinical and pre-clinical data.
12
Table of Contents
We depend substantially on the success of our drug candidates, all of which are in pre-clinical or clinical development, and our ability to
identify additional drug candidates. If we are unable to successfully identify new drug candidates, complete clinical development, obtain regulatory
approval and commercialize our drug candidates, or experience significant delays in doing so, our business will be materially harmed.
Our business will depend on the successful development, regulatory approval and commercialization of our drug candidates for the treatment of
patients with our targeted indications, all of which are still in pre-clinical or clinical development, and other new drug candidates that we may identify
and develop. As of the date of this annual report, we have obtained investigational new drug (IND) approvals from the NMPA for ten of our drug
candidates, felzartamab, olamkicept, efineptakin alfa, lemzoparlimab, uliledlimab, plonmarlimab, eftansomatropin alfa, enoblituzumab, TJ210 and
TJ-CD4B. In addition, we have obtained IND approvals from the FDA for six of our drug candidates, lemzoparlimab, uliledlimab, plonmarlimab,
TJ210, TJ-L14B and TJ-CD4B; from the Taiwan Food and Drug Administration (the “TFDA”) for two of our drug candidates, felzartamab and
olamkicept; and from the Korea Ministry of Food and Drug Safety (the “MFDS”) for olamkicept. However, we cannot guarantee that we are able to
obtain regulatory approvals for our other existing drug candidates in a timely manner, or at all. In addition, none of our drug candidates has been
approved for marketing in China or any other jurisdiction. Each of our drug candidates will require additional pre-clinical and/ or clinical development,
regulatory approvals in multiple jurisdictions, development of manufacturing supply and capacity, substantial investment and significant marketing
efforts before we generate any revenue from product sales.
The success of our drug candidates will depend on several factors, including, but not limited to, the successful completion of pre-clinical and/or
clinical trials or studies, receipt of regulatory approvals from applicable regulatory authorities for planned clinical trials, future clinical trials or drug
registrations, establishing adequate manufacturing capabilities and capacities, commercialization of our existing drug candidates, hiring sufficient
technical experts to oversee all development and regulatory activities and license renewal and meeting of the safety requirements.
If we do not achieve one or more of these in a timely manner or at all, we could experience significant delays in our ability to obtain approval for
our drug candidates, which would materially harm our business and we may not be able to generate sufficient revenues and cash flows to continue our
operations. As a result, our financial condition, results of operations and prospects will be materially and adversely harmed.
We may not be able to identify, discover or in-license new drug candidates, and may allocate our limited resources to pursue a particular drug
candidate or indication and fail to capitalize on drug candidates or indications that may later prove to be more profitable, or for which there is a
greater likelihood of success.
Although a substantial amount of our effort will focus on the continued clinical testing, potential approval, and commercialization of our existing
drug candidates, the success of our business depends in part upon our ability to identify, license, discover, develop, or commercialize additional drug
candidates. Research programs to identify new drug candidates require substantial technical, financial, and human resources. We may focus our efforts
and resources on potential programs or drug candidates that ultimately prove to be unsuccessful. Our research programs or licensing efforts may fail to
identify, discover or in-license new drug candidates for clinical development and commercialization for a number of reasons, including, without
limitation, the following:
•
•
•
our research or business development methodology or search criteria and process may be unsuccessful in identifying potential drug
candidates;
our potential drug candidates may be shown to have harmful side effects or may have other characteristics that may make the products
unmarketable or unlikely to receive marketing approval; and
it may take greater human and financial resources to identify additional therapeutic opportunities for our drug candidates or to develop
suitable potential drug candidates through internal research programs than we possess, thereby limiting our ability to diversify and expand
our drug portfolio.
13
Table of Contents
Because we have limited financial and managerial resources, we focus on research programs and drug candidates for specific indications. As a
result, we may forgo or delay pursuit of opportunities with other drug candidates or for other indications that later may prove to have greater commercial
potential or a greater likelihood of success. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or
profitable market opportunities.
Accordingly, there can be no assurance that we will ever be able to identify additional therapeutic opportunities for our drug candidates or to
develop suitable potential drug candidates through internal research programs, which could materially adversely affect our future growth and prospects.
If we encounter delays or difficulties enrolling patients in our clinical trials, our clinical development progress could be delayed or otherwise
adversely affected.
We may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number of eligible
patients to participate in these trials as required by the NMPA, the FDA, or similar regulatory authorities, or if there are delays in the enrollment of
eligible patients as a result of the competitive clinical enrollment environment. The inability to enroll a sufficient number of patients who meet the
applicable criteria for our clinical trials would result in significant delays. As of the date of this annual report, we have initiated clinical trials for
olamkicept in South Korea and Greater China, for efineptakin alfa and eftansomatropin alfa and enoblituzumab in China, for felzartamab in Greater
China, for TJ210 and TJ-L14B in the United States, for lemzoparlimab, plonmarlimab, uliledlimab and TJ-CD4B in China and the United States.
In addition, some of our competitors have ongoing clinical trials for drug candidates that treat the same indications as our drug candidates, and
patients who would otherwise be eligible for our clinical trials may instead enroll in the clinical trials of our competitors’ drug candidates, which may
further delay our clinical trial enrollments.
Patient enrollment for our clinical trials may be affected by other factors, including, but not limited to, the following:
•
•
•
•
•
•
•
•
•
severity of the disease under investigation;
total size and nature of the relevant patient population;
design and eligibility criteria for the clinical trial in question;
perceived risks and benefits of the drug candidate under study;
our resources to facilitate timely enrollment in clinical trials;
patient referral practices of physicians;
availability of competing therapies also undergoing clinical trials;
our investigators’ or clinical trial sites’ efforts to screen and recruit eligible patients; and
proximity and availability of clinical trial sites for prospective patients.
Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may
affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the
development of our drug candidates.
If clinical trials of our drug candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise
produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and
commercialization of our drug candidates.
Before obtaining regulatory approval for the sale of our drug candidates, we must conduct extensive clinical trials to demonstrate the safety and
efficacy of our drug candidates in humans. We may experience numerous unexpected events during, or as a result of, clinical trials that could delay or
prevent our ability to receive regulatory approval or commercialize our drug candidates, including, without limitation:
14
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•
•
•
•
•
•
•
•
•
•
regulators, institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trial
or conduct a clinical trial at a prospective trial site;
our inability to reach agreements on acceptable terms with prospective CROs and trial sites, the terms of which can be subject to extensive
negotiation and may vary significantly among different CROs and trial sites;
manufacturing issues, including problems with manufacturing, supply quality, compliance with good manufacturing practice, or GMP, or
obtaining sufficient quantities of a drug candidate from third parties for use in a clinical trial;
clinical trials of our drug candidates may produce negative or inconclusive results, and we may decide to conduct additional clinical trials
or abandon drug development programs, or regulators may require us to do so;
the number of patients required for clinical trials of our drug candidates may be larger than we anticipate, enrollment may be insufficient or
slower than we anticipate or patients may drop out at a higher rate than we anticipate;
our third-party contractors, including clinical investigators, may fail to comply with regulatory requirements or meet their contractual
obligations to us in a timely manner, or at all;
we might have to suspend or terminate clinical trials of our drug candidates for various reasons, including a finding of a lack of clinical
response or other unexpected characteristics or a finding that participants are being exposed to unacceptable health risks;
regulators, IRBs or ethics committees may require that we or our investigators suspend or terminate clinical research or not rely on the
results of clinical research for various reasons, including non-compliance with regulatory requirements;
the cost of clinical trials of our drug candidates may be greater than we anticipate; and
the supply or quality of our drug candidates, companion diagnostics or other materials necessary to conduct clinical trials of our drug
candidates may be insufficient or inadequate.
If we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently plan, if we are unable
to successfully complete clinical trials of our drug candidates or other testing, if the results of these trials or tests are not positive or are only modestly
positive or if they raise safety concerns, we may (i) be delayed in obtaining regulatory approval for our drug candidates; (ii) obtain approval for
indications that are not as broad as intended; (iii) not obtain regulatory approval at all; (iv) have the drug removed from the market after obtaining
regulatory approval; (v) be subject to additional post-marketing testing requirements; (vi) be subject to restrictions on how the drug is distributed or
used; or (vii) be unable to obtain reimbursement for use of the drug.
Significant clinical trial delays may also increase our development costs and could shorten any periods during which we have the exclusive right
to commercialize our drug candidates or allow our competitors to bring drugs to market before we do. This could impair our ability to commercialize
our drug candidates and may harm our business and results of operations.
Risks Related to Obtaining Regulatory Approval for Our Drug Candidates
All material aspects of the research, development and commercialization of pharmaceutical products are heavily regulated.
All jurisdictions in which we intend to conduct our pharmaceutical-industry activities regulate these activities in great depth and detail. We intend
to focus our activities in the major markets of China and the United States. These jurisdictions strictly regulate the pharmaceutical industry, and in doing
so they employ broadly similar regulatory strategies, including regulation of product development and approval, manufacturing, and marketing, sales
and distribution of products. However, there are differences in the regulatory regimes that make for a more complex and costly regulatory compliance
burden for a company like us that plans to operate in these regions.
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The process of obtaining regulatory approvals and compliance with appropriate laws and regulations requires the expenditure of substantial time
and financial resources. Failure to comply with the applicable requirements at any time during the product development process and approval process, or
after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include: refusal to approve pending applications;
withdrawal of an approval; license revocation; clinical hold; voluntary or mandatory product recalls; product seizures; total or partial suspension of
production or distribution; injunctions; fines; refusals of government contracts; providing restitution; undergoing disgorgement; or other civil or criminal
penalties. Failure to comply with these regulations could have a material adverse effect on our business.
The regulatory approval processes of the NMPA, the FDA and other comparable regulatory authorities are time-consuming and may evolve
over time, and if we are ultimately unable to obtain regulatory approval for our drug candidates, our business will be substantially harmed.
The time required to obtain the approval of the NMPA, the FDA and other comparable regulatory authorities is inherently uncertain and depends
on numerous factors, including the substantial discretion of the regulatory authorities. Generally, such approvals take many years to obtain following the
commencement of pre-clinical studies and clinical trials, although they are typically provided within 12 to 18 months after clinical trials are completed.
In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a drug
candidate’s clinical development and may vary among jurisdictions. As of the date of this annual report, we have obtained IND approvals from the
NMPA for ten of our drug candidates, felzartamab, olamkicept, efineptakin alfa, lemzoparlimab, uliledlimab, plonmarlimab, eftansomatropin alfa,
enoblituzumab, TJ210 and TJ-CD4B. In addition, we have obtained IND approvals from the FDA for six of our drug candidates, lemzoparlimab,
uliledlimab, plonmarlimab, TJ210, TJ-L14B and TJ-CD4B; from the TFDA for two of our drug candidates, felzartamab and olamkicept; and from the
MFDS for olamkicept. However, we cannot guarantee that we are able to obtain regulatory approvals for our other existing drug candidates or any drug
candidates we may discover, in-license or acquire and seek to develop in the future.
Our drug candidates could fail to receive the regulatory approval of the NMPA, the FDA or a comparable regulatory authority for many reasons,
including, without limitation:
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disagreement with the design or implementation of our clinical trials;
failure to demonstrate that a drug candidate is safe and effective and potent for its proposed indication;
failure of our clinical trial results to meet the level of statistical significance required for approval;
failure of our clinical trial process to pass relevant good clinical practice (“GCP”) inspections;
failure to demonstrate that a drug candidate’s clinical and other benefits outweigh its safety risks;
disagreement with our interpretation of data from pre-clinical studies or clinical trials;
insufficient data collected from the clinical trials of our drug candidates to support the submission and filing of a new drug application, or
NDA, or other submissions or to obtain regulatory approval;
failure of our drug candidates to pass current Good Manufacturing Practice (“cGMP”), inspections during the regulatory review process or
across the production cycle of our drug;
failure of our clinical sites to pass audits carried out by the NMPA, the FDA or comparable regulatory authorities, resulting in a potential
invalidation of our research data;
findings by the NMPA, the FDA or comparable regulatory authorities of deficiencies related to our manufacturing processes or the
facilities of third-party manufacturers with whom we contract for clinical and commercial supplies;
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changes in approval policies or regulations that render our pre-clinical and clinical data insufficient for approval; and
failure of our clinical trial process to keep up with any scientific or technological advancements required by approval policies or
regulations.
The NMPA, the FDA or a comparable regulatory authority may require more information, including additional pre-clinical or clinical data, to
support approval, which may delay or prevent approval and our commercialization plans. Even if we were to obtain approval, regulatory authorities may
approve any of our drug candidates for fewer or more limited indications than we request, grant approval contingent on the performance of costly post-
marketing clinical trials, or approve a drug candidate with an indication that is not desirable for the successful commercialization of that drug candidate.
Any of the foregoing scenarios could materially harm the commercial prospects of our drug candidates.
The failure to obtain patent term extension and data exclusivity for approved pharmaceutical products could increase the risk of generic
competition with our products.
In the United States, the Federal Food, Drug and Cosmetic Act, as amended by the law generally referred to as “Hatch-Waxman,” provides the
opportunity for patent-term restoration, meaning a patent term extension of up to five years to reflect patent term lost during certain portions of product
development and the FDA regulatory review process. Hatch-Waxman also has a process for patent linkage, pursuant to which the FDA will stay
approval of certain follow-on applications during the pendency of litigation between the follow-on applicant and the patent holder or licensee, generally
for a period of 30 months. Finally, Hatch-Waxman provides for statutory exclusivities that can prevent submission or approval of certain follow-on
marketing applications. For example, federal law provides a five-year period of exclusivity within the United States to the first applicant to obtain
approval of a new chemical entity and three years of exclusivity protecting certain innovations to previously approved active ingredients where the
applicant was required to conduct new clinical investigations to obtain approval for the modification. Similarly, the United States Orphan Drug Act
provides seven years of market exclusivity for certain drugs to treat rare diseases, where the FDA designates the drug candidate as an orphan drug and
the drug is approved for the designated orphan indication. These provisions, designed to promote innovation, can prevent competing products from
entering the market for a certain period of time after the FDA grants marketing approval for the innovative product.
Depending upon the timing, duration and specifics of any FDA marketing approval process for any drug candidates we may develop, one or more
of our U.S. patents, if issued, may be eligible for limited patent term extension under Hatch-Waxman. Hatch-Waxman permits a patent extension term of
up to five years as compensation for patent term lost during clinical trials and 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 drug 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. Furthermore, the applicable time
period or the scope of patent protection afforded could be less than we request.
In China, the PRC Patent Law, which was most recently amended by the Standing Committee of the National People’s Congress on October 17,
2020, and became effective on June 1, 2021, for the first time, generally provides for patent term compensation and patent linkage system. Under the
PRC Patent Law, patent term compensation can be obtained for regulatory delays in the review and approval of new drugs but are limited to no more
than five years and the total post-marketing patent term of the new drug cannot exceed 14 years, which is similar to the provisions of Hatch-Waxman.
However, to be implemented, the patent term compensation requires further promulgation of detailed implementation measures. Depending upon the
timing, duration and specifics of any NMPA marketing approval process for any drug candidates we may develop, one or more of our China patents, if
issued, may not be eligible for or only be eligible for limited patent term compensation. The PRC Patent Law, for the first time, introduces a system for
the early resolution of patent disputes concerning generic drug applications, which is similar to the U.S. patent linkage system. On July 4, 2021, the
NMPA and the China National Intellectual Property Administration jointly issued the Implementation Measures for Early Resolution Mechanism of
Pharmaceutical Patent Disputes (for Trial Implementation) which sets forth, for the first time, details of how such patent linkage system would be
implemented. As the China trial version of patent linkage system was just implemented commencing from July 4, 2021, substantial uncertainties remain
as to whether this trial system can effectively block early generic competition with our products. Although the Regulations for Implementation of the
Drug Administration Law of the People’s Republic of China has provided six-year data exclusivity for a new chemical entity, and Chinese regulators
have proposed a framework for integrating data exclusivity into the Chinese regulatory regime in 2018, the system of data exclusivity was not really
implemented in practice. Consequently, the absence of currently implemented data exclusivity may result in weaker protection for us against generic
competition in China than could be available to us in the United States. 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.
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Our drug candidates may cause undesirable adverse events or have other properties that could delay or prevent their regulatory approval, limit
the commercial profile of an approved label, or result in significant negative consequences following regulatory approval.
Undesirable adverse events caused by our drug candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and may
result in a more restrictive label, a delay or denial of regulatory approval by the NMPA, the FDA or other comparable regulatory authorities, or a
significant change in our clinical protocol or even our development plan. In particular, as is the case with drugs treating cancers and auto-immune
diseases, it is likely that there may be side effects, such as nausea, fatigue and infusion-related reactions, associated with the use of certain of our drug
candidates. Results of our trials could reveal a high and unacceptable severity or prevalence of certain adverse events. In such an event, our trials could
be suspended or terminated and the NMPA, the FDA or other comparable regulatory authorities could order us to cease further development of, or deny
approval of, our drug candidates for any or all targeted indications. Adverse events related to our drug candidates may affect patient recruitment or the
ability of enrolled subjects to complete the trial, and could result in potential liability claims. Any of these occurrences may significantly harm our
reputation, business, financial condition and prospects.
Additionally, if we or others identify undesirable side effects caused by those of our existing drug candidates that have received regulatory
approval, or our other drug candidates after having received regulatory approval, this may lead to potentially significant negative consequences which
include, but are not limited to, the following:
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we may suspend marketing of the drug candidate;
regulatory authorities may withdraw their approvals of or revoke the licenses for the drug candidate;
regulatory authorities may require additional warnings on the label;
the FDA may require the establishment of a Risk Evaluation and Mitigation Strategy, or REMS, or the NMPA or a comparable regulatory
authority may require the establishment of a similar strategy that may, for instance, restrict distribution of our drugs and impose
burdensome implementation requirements on us;
we may be required to conduct specific post-marketing studies;
we could be subjected to litigation proceedings and held liable for harm caused to subjects or patients; and
our reputation may suffer.
Any of these events could prevent us from achieving or maintaining market acceptance of any particular drug candidate that is approved and could
significantly harm our business, results of operations and prospects.
Further, combination therapy, such as using our wholly-owned drug candidates as well as third-party agents, may involve unique adverse events
that could be exacerbated compared with adverse events from monotherapies. Results of our trials could reveal a high and unacceptable severity or
prevalence of adverse events. These types of adverse events could be caused by our drug candidates and could cause us or regulatory authorities to
interrupt, delay or halt clinical trials and may result in a more restrictive indication or the delay or denial of regulatory approval by the NMPA, the FDA
or other comparable regulatory authority.
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If we are unable to obtain the NMPA approval for our drug candidates to be eligible for an expedited registration pathway as innovative drug
candidates, the time and cost we incur to obtain regulatory approvals may increase.
The NMPA has mechanisms in place for expedited review and approval for drug candidates that are innovative drug applications, provided such
drug or drug candidate has a new and clearly defined structure, pharmacological property and apparent clinical value and has not been marketed
anywhere in the world. However, there is no assurance that an innovative drug designation will be granted by the NMPA for any of our drug candidates.
Moreover, an innovative drug designation, which is typically granted only towards the end of a drug’s developmental stage, does not increase the
likelihood that our drug candidates will receive regulatory approval on a fast-track basis, or at all.
Further, there have been recent regulatory initiatives in China in relation to clinical trial approvals, the evaluation and approval of certain drugs
and medical devices and the simplification and acceleration of the clinical trial process.
As a result, the regulatory process in China is evolving and subject to change. Any future policies, or changes to current polices might require us
to change our planned clinical study design or otherwise spend additional resources and effort to obtain approval of our drug candidates. In addition,
policy changes may contain significant limitations related to use restrictions for certain age groups, warnings, precautions or contraindications, or may
be subject to burdensome post-approval study or risk management requirements. If we are unable to obtain regulatory approval for our drug candidates
in the PRC, or any approval contains significant limitations, we may not be able to obtain sufficient funding or generate sufficient revenue to continue
the development of our drug candidates or any other drug candidate that we may in-license, acquire or develop in the future.
Even if we receive regulatory approval for our drug candidates, we will be subject to ongoing regulatory obligations and continued regulatory
review, which may result in significant additional expenses and we may be subject to penalties if we fail to comply with regulatory requirements or
experience unanticipated problems with our drug candidates.
If the NMPA, the FDA or a comparable regulatory authority approves any of our drug candidates, the manufacturing processes, labeling,
packaging, distribution, adverse event reporting, storage, advertising, promotion and recordkeeping for the drug will be subject to extensive and ongoing
regulatory requirements on pharmacovigilance. These requirements include submissions of safety and other post-marketing information and reports,
registration, random quality control testing, adherence to any chemistry, manufacturing, and controls (“CMC”), variations, continued compliance with
current GMPs, and GCPs and potential post-approval studies for the purposes of license renewal.
Any regulatory approvals that we receive for our drug candidates may also be subject to limitations on the approved indicated uses for which the
drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing studies, including Phase 4 studies
for the surveillance and monitoring of the safety and efficacy of the drug.
In addition, once a drug is approved by the NMPA, the FDA or a comparable regulatory authority for marketing, it is possible that there could be a
subsequent discovery of previously unknown problems with the drug, including problems with third-party manufacturers or manufacturing processes, or
failure to comply with regulatory requirements. If any of the foregoing occurs with respect to our drug products, it may result in, among other things:
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restrictions on the marketing or manufacturing of the drug, withdrawal of the drug from the market, or voluntary or mandatory drug
recalls;
fines, warning letters or holds on our clinical trials;
refusal by the NMPA, the FDA or comparable regulatory authorities to approve pending applications or supplements to approved
applications filed by us, or suspension or revocation of drug license approvals;
refusal by the NMPA, the FDA or comparable regulatory authorities to accept any of our other IND approvals, NDAs or BLAs;
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drug seizure or detention, or refusal to permit the import or export of drugs; and
injunctions or the imposition of civil, administrative or criminal penalties.
Any government investigation of alleged violations of law could require us to expend significant time and resources and could generate negative
publicity. Moreover, regulatory policies may change or additional government regulations may be enacted that could prevent, limit or delay regulatory
approval of our drug candidates. If we are not able to maintain regulatory compliance, we may lose the regulatory approvals that we have already
obtained and may not achieve or sustain profitability, which in turn could significantly harm our business, financial condition and prospects.
Illegal and/or parallel imports and counterfeit pharmaceutical products may reduce demand for our future approved drug candidates and
could have a negative impact on our reputation and business.
The illegal importation of competing products from countries where government price controls or other market dynamics result in lower prices
may adversely affect the demand for our future approved drug candidates and, in turn, may adversely affect our sales and profitability in China and other
countries where we commercialize our products. Unapproved foreign imports of prescription drugs are illegal under the current laws of China. However,
illegal imports may continue to occur or even increase as the ability of patients and other customers to obtain these lower priced imports continues to
grow. Furthermore, cross-border imports from lower-priced markets (which are known as parallel imports) into higher-priced markets could harm sales
of our future drug products and exert commercial pressure on pricing within one or more markets. In addition, competent government authorities may
expand consumers’ ability to import lower priced versions of our future approved products or competing products from outside China or other countries
where we operate. Any future legislation or regulations that increase consumer access to lower priced medicines from outside China or other countries
where we operate could have a material adverse effect on our business.
Certain products distributed or sold in the pharmaceutical market may be manufactured without proper licenses or approvals, or be fraudulently
mislabeled with respect to their content or manufacturers. These products are generally referred to as counterfeit pharmaceutical products. The
counterfeit pharmaceutical product control and enforcement system, particularly in developing markets such as China, may be inadequate to discourage
or eliminate the manufacturing and sale of counterfeit pharmaceutical products imitating our products. Since counterfeit pharmaceutical products in
many cases have very similar appearances compared with the authentic pharmaceutical products but are generally sold at lower prices, counterfeits of
our products could quickly erode the demand for our future approved drug candidates.
In addition, counterfeit pharmaceutical products are not expected to meet our or our collaborators’ rigorous manufacturing and testing standards.
A patient who receives a counterfeit pharmaceutical product may be at risk for a number of dangerous health consequences. Our reputation and business
could suffer harm as a result of counterfeit pharmaceutical products sold under our or our collaborators’ brand name(s). In addition, thefts of inventory
at warehouses, plants or while in-transit, which are not properly stored and which are sold through unauthorized channels, could adversely impact
patient safety, our reputation and our business.
Risks Related to Commercialization of Our Drug Candidates
Our drug candidates may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical
community necessary for commercial success.
Even if our drug candidates receive regulatory approval, they may nonetheless fail to gain sufficient market acceptance by physicians and patients
and others in the medical community. Physicians and patients may prefer other drugs or drug candidates to ours. If our drug candidates do not achieve an
adequate level of acceptance, we may not generate significant revenue from sales of our drugs or drug candidates and may not become profitable.
The degree of market acceptance of our drug candidates, if and only when they are approved for commercial sale, will depend on a number of
factors, including, but not limited to:
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physicians, hospitals and patients considering our drug candidates as a safe and effective treatment;
whether our drug candidates have achieved the perceived advantages of our drug candidates over alternative treatments;
the prevalence and severity of any side effects;
product labeling or package insert requirements of the NMPA, the FDA or other comparable regulatory authorities;
limitations or warnings contained in the labeling approved by the NMPA, the FDA or other comparable regulatory authorities;
timing of market introduction of our drug candidates as well as competitive drugs;
cost of treatment in relation to alternative treatments;
availability of adequate coverage and reimbursement under the national and provincial reimbursement drug lists in the PRC, or from third-
party payors and government authorities in the United States or any other jurisdictions;
willingness of patients to pay any out-of-pocket expenses in the absence of coverage and reimbursement by third-party payors and
government authorities;
relative convenience and ease of administration, including as compared with alternative treatments and competitive therapies; and
the effectiveness of our sales and marketing efforts.
If our drug candidates are approved but fail to achieve market acceptance among physicians, patients, hospitals or others in the medical
community, we will not be able to generate significant revenue or become profitable. Even if our drugs achieve market acceptance, we may not be able
to maintain such market acceptance over time if new products or technologies are introduced which are more favorably received than our drugs, are
more cost effective or render our drugs obsolete.
We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are similar,
more advanced, or more effective than ours, which may adversely affect our financial condition and our ability to successfully commercialize our
drug candidates.
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. While our
exclusive focus is to develop drug candidates with potential to become novel or highly differentiated drugs, we continue to face competition with respect
to our current drug candidates, and will face competition with respect to any drug candidates that we may seek to develop or commercialize in the
future. Our competitors include major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. We are
developing our drug candidates for the treatment of cancer in competition with a number of large biopharmaceutical companies that currently market
and sell drugs or are pursuing the development of drugs also for the treatment of cancer. Some of these competitive drugs and therapies are based on
scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. For details, see “Item 4.
Information on the Company—B. Business Overview—Our Drug Pipeline.” Potential competitors further include academic institutions, government
agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborative arrangements for
research, development, manufacturing and commercialization.
Many of our competitors have substantially greater financial, technical, and other resources, such as larger research and development staff and
experienced marketing and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may
result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approval from the NMPA, the
FDA or other comparable regulatory authorities more rapidly than we are able to and may be more effective in selling and marketing their products as
well. For example, the NMPA has recently accelerated market approval of drugs for diseases with high unmet medical need. In particular, the NMPA
may review and approve drugs that have gained regulatory market approval in the United States, the European Union or Japan in the recent ten years
without requiring further clinical trials in China. This may lead to potential increased competition from drugs which have already obtained approval in
other jurisdictions.
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Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large,
established companies. 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, products that are
more effective or less costly than any drug candidate that we may develop, or achieve earlier patent protection, regulatory approval, product
commercialization, and market penetration than we do. Additionally, technologies developed by our competitors may render our potential drug
candidates uneconomical or obsolete, and we may not be successful in marketing our drug candidates against competitors.
The manufacture of biopharmaceutical products is a complex process which requires significant expertise and capital investment, and if we
encounter problems in sourcing manufacturing capabilities or manufacturing our future products, our business could suffer.
We have limited experience in managing the manufacturing process. The manufacture of biopharmaceutical products is a complex process, in part
due to strict regulatory requirements. We have invested in a comprehensive biologics manufacturing facility in Hangzhou, China (the “Hangzhou
Facility”) as part of our strategic plan to become a specialty biopharma company. We have taken concrete steps to execute this plan. These steps include
detailed operational planning for the facility, actions taken to secure an appropriate site, and negotiations with external financing providers. The
construction of the Hangzhou Facility commenced in April 2021. The Hangzhou Facility targets to have a pilot capacity of two production lines (one
line configured with 2 x 2,000L and the other line with 1 x 2,000L) around the middle of 2022 and commercially progressive capacity up to 8 x 4,000L
to begin operation by the end of 2023 or early 2024. However, the investment for building this new biologics manufacturing facility that is compliant
with cGMP regulations will be a significant upfront cost for us. In turn, this could materially harm our commercialization plans.
In addition, problems may arise during the manufacturing process for a variety of reasons, including equipment malfunction, failure to follow
specific protocols and procedures, problems with raw materials, delays related to the construction of new facilities or expansion of any future
manufacturing facilities, including changes in manufacturing production sites and limits to manufacturing capacity due to regulatory requirements,
changes in the types of products produced, increases in the prices of raw materials, physical limitations that could inhibit continuous supply, man-made
or natural disasters and environmental factors. If problems arise during the production of a batch of future products, that batch of future products may
have to be discarded and we may experience product shortages or incur added expenses. This could, among other things, lead to increased costs, lost
revenue, damage to customer relationships, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to
other batches or products. If problems are not discovered before such product is released to the market, recall and product liability costs may also be
incurred.
We have no experience in launching and marketing drug candidates. We may not be able to effectively build and manage our sales network, or
benefit from third-party collaborators’ sales network.
We currently have no sales, marketing or commercial product distribution capabilities and have no experience in marketing drugs. We intend to
develop an in-house marketing organization and sales force, which will require significant capital expenditures, management resources and time. We
will have to compete with other biopharmaceutical companies to recruit, hire, train and retain marketing and sales personnel.
If we are unable or decide not to establish internal sales, marketing and commercial distribution capabilities for any or all of the drugs we develop,
we will likely pursue collaborative arrangements regarding the sales and marketing of our drugs. However, there can be no assurance that we will be
able to establish or maintain such collaborative arrangements, or, if we are able to do so, that they will have effective sales forces. Any revenue we
receive will depend on the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales
efforts of such third parties, and our revenue from product sales may be lower than if we had commercialized our drug candidates ourselves. We will
also face competition in our search for third parties to assist us with the sales and marketing efforts of our drug candidates.
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There can be no assurance that we will be able to develop in-house sales and commercial distribution capabilities or establish or maintain
relationships with third-party collaborators to successfully commercialize any product, and as a result, we may not be able to generate product sales
revenue.
Even if we are able to commercialize any approved drug candidates, reimbursement may be limited or unavailable in certain market segments
for our drug candidates, and we may be subject to unfavorable pricing regulations, which could harm our business.
The regulations that govern regulatory approvals, pricing and reimbursement for new therapeutic products vary widely from country to country.
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 licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental
control even after initial approval is granted. As a result, we might obtain regulatory approval for a drug in a particular country, but then be subject to
price regulations that delay our commercial launch of the drug and negatively impact the revenues we are able to generate from the sale of the drug in
that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more drug candidates, even if our drug candidates
obtain regulatory approval. For example, according to a statement, Opinions on Reforming the Review and Approval Process for Pharmaceutical
Products and Medical Devices, issued by the PRC State Council in August 2015, the enterprises applying for new drug approval will be required to
undertake that the selling price of new drug on PRC mainland market will not be higher than the comparable market prices of the product in its country
of origin or PRC’s neighboring markets, as applicable.
Our ability to commercialize any drugs successfully also will depend in part on the extent to which reimbursement for these drugs and related
treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities
and third-party payors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish
reimbursement levels. A primary trend in the global healthcare industry is cost containment. Government authorities and these third-party payors have
attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. Increasingly, third-party payors are
requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. We
cannot be sure that reimbursement will be available for any drug that we commercialize and, if reimbursement is available, what the level of
reimbursement will be. Reimbursement may impact the demand for, or the price of, any drug for which we obtain regulatory approval. Obtaining
reimbursement for our drugs may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of
a physician. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any drug
candidate that we successfully develop.
There may be significant delays in obtaining reimbursement for approved drug candidates, and coverage may be more limited than the purposes
for which the drug candidates are approved by the NMPA, the FDA or other comparable regulatory authorities. Moreover, eligibility for reimbursement
does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and
distribution. Interim payments for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates
may vary according to the use of the drug and the clinical setting in which it is used, may be based on payments allowed for lower cost drugs that are
already reimbursed, and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or
rebates required by government healthcare programs or private payors and by any future weakening of laws that presently restrict imports of drugs from
countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and profitable payment rates from
both government-funded and private payors for any future approved drug candidates and any new drugs that we develop could have a material adverse
effect on our business, our operating results, and our overall financial condition.
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Current and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our drug
candidates and affect the prices we may obtain.
In the United States and certain other jurisdictions, there have been a number of legislative and regulatory changes and proposed changes
regarding the healthcare system that could prevent or delay marketing approval of our drug candidates, restrict post-approval activities and affect our
ability to sell profitably any drug candidates for which we obtain marketing approval.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the
ACA, became law. The ACA is a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of healthcare spending,
enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and
fees on the health industry and impose additional health policy reforms. The following sets forth the major provisions of the ACA that may affect our
drug candidates:
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an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic products;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
expansion of healthcare fraud and abuse laws, including the False Claims Act and the Anti-Kickback Statute, new government
investigative powers, and enhanced penalties for noncompliance;
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off
negotiated prices;
extension of manufacturers’ Medicaid rebate liability;
expansion of eligibility criteria for Medicaid programs;
expansion of the entities eligible for discounts under the Public Health Service Act’s pharmaceutical pricing program;
new requirements to report to CMS financial arrangements with physicians and teaching hospitals;
a new requirement to annually report to the FDA drug samples that manufacturers and distributors provide to physicians; and
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness
research, along with funding for such research.
Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for
pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or
interpretations will be changed, or what the impact of such changes on the marketing approvals, if any, of our drug candidates may be. In addition,
increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to
more stringent product labeling and post-marketing conditions and other requirements.
As we out-license some of our commercialization rights and engage in other forms of collaboration worldwide, including conducting clinical
trials abroad, we may be exposed to specific risks of conducting our business and operations in international markets.
Markets outside of China form an important component of our growth strategy, as we out-license some of our commercialization rights to third
parties outside the PRC and conduct certain of our clinical trials abroad. If we fail to obtain applicable licenses or fail to enter into strategic collaboration
arrangements with third parties in these markets, or if these collaboration arrangements turn out unsuccessful, our revenue-generating growth potential
will be adversely affected.
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Moreover, international business relationships subject us to additional risks that may materially adversely affect our ability to attain or sustain
profitable operations, including:
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efforts to enter into collaboration or licensing arrangements with third parties in connection with our international sales, marketing and
distribution efforts may increase our expenses or divert our management’s attention from the acquisition or development of drug
candidates;
changes in a specific country’s or region’s political and cultural climate or economic condition;
differing regulatory requirements for drug approvals and marketing internationally;
difficulty of effective enforcement of contractual provisions in local jurisdictions;
potentially reduced protection for intellectual property rights;
potential third-party patent rights;
unexpected changes in tariffs, trade barriers and regulatory requirements;
economic weakness, including inflation or political instability;
compliance with tax, employment, immigration and labor laws for employees traveling abroad;
the effects of applicable non-PRC tax structures and potentially adverse tax consequences;
currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incidental to doing
business in another country;
workforce uncertainty and labor unrest;
the potential for so-called parallel importing, which is what happens when a local seller, faced with high or higher local prices, opts to
import goods from an international market with low or lower prices rather than buying them locally;
failure of our employees and contracted third parties to comply with Office of Foreign Assets Control rules and regulations and the Foreign
Corrupt Practices Act of the United States, and other applicable rules and regulations;
production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and
business interruptions resulting from geo-political actions, including war and terrorism, or natural disasters, including earthquakes,
volcanoes, typhoons, floods, hurricanes and fires.
These and other risks may materially adversely affect our ability to attain or sustain revenue from international markets.
If safety, efficacy, or other issues arise with any medical product that is used in combination with our drug candidates, we may be unable to
market such drug candidate or may experience significant regulatory delays or supply shortages, and our business could be materially harmed.
We plan to develop certain of our drug candidates for use as a combination therapy. If the NMPA, the FDA or another comparable regulatory
agency revokes its approval of another therapeutic we use in combination with our drug candidates, we will not be able to market our drug candidates in
combination with such revoked therapeutic. If safety or efficacy issues arise with these or other therapeutics that we seek to combine with our drug
candidates in the future, we may experience significant regulatory delays, and we may be required to redesign or terminate the applicable clinical trials.
In addition, if manufacturing or other issues result in a supply shortage of any component of our combination drug candidates or if we cannot secure
supply of any component of our drug candidates at commercially reasonable or acceptable prices, we may not be able to complete clinical development
of our drug candidates on our current timeline or within our current budget, or at all.
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Lack of third-party combination drugs may materially and adversely affect demand for our drugs.
Our drug candidates may be administered in combination with drugs of other pharmaceutical companies as one regimen. In addition, we often use
such third-party drugs in our development and clinical trials as controls for our studies. As a result, both the results of our clinical trials and the sales of
our drugs may be affected by the availability of these third-party drugs. If other pharmaceutical companies discontinue these combination drugs,
regimens that use these combination drugs may no longer be prescribed, and we may not be able to introduce or find an alternative drug to be used in
combination with our drugs at all or in a timely manner and on a cost-effective basis. As a result, demand for our drugs may be lowered, which would in
turn materially and adversely affect our business and results of operations.
Risks Related to Our Reliance on Third Parties
As we rely on third parties to conduct our pre-clinical studies and clinical trials, if we lose our relationships with these third parties or if they
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 drug candidates and our business could be substantially harmed.
We have relied on and plan to continue to rely on third-party contract research organization (“CROs”) to monitor and manage data for some of our
ongoing pre-clinical and clinical programs. We rely on these parties for the execution of our pre-clinical and clinical trials, and control only certain
aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol
and legal, regulatory and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.
We also rely on third parties to assist in conducting our pre-clinical studies in accordance with Good Laboratory Practices (“GLP”). We and our
CROs are required to comply with GCP, GLP and other regulatory regulations and guidelines enforced by the NMPA, the FDA and comparable foreign
regulatory authorities for all of our drug candidates in clinical development. Regulatory authorities enforce these GCP, GLP or other regulatory
requirements through periodic inspections of trial sponsors, investigators and trial sites. If we or any of our CROs fail to comply with applicable GCP,
GLP or other regulatory requirements, the relevant data generated in our clinical trials may be deemed unreliable and the NMPA, the FDA or other
comparable regulatory authorities may require us to perform additional clinical studies before approving our marketing applications. There can be no
assurance that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCP
requirements. In addition, our clinical trials must be conducted with drug candidates or products produced under cGMP requirements. Failure to comply
with these regulations may require us to repeat pre-clinical and clinical trials, which would delay the regulatory approval process.
Our CROs have the right to terminate their agreements with us in the event of an unrectified material breach. If any of our relationships with our
third-party CROs is terminated, we may not be able to (i) enter into arrangements with alternative CROs or do so on commercially reasonable terms or
(ii) meet our desired clinical development timelines. In addition, there is a natural transition period when a new CRO commences work, and the new
CRO may not provide the same type or level of services as the original provider and data from our clinical trials may be compromised as a result. There
is also a need for relevant technology to be transferred to the new CRO, which may take time and further delay our development timelines.
Except for remedies available to us under our agreements with our CROs, we cannot control whether or not our CROs devote sufficient time and
resources to our ongoing clinical, nonclinical and pre-clinical programs. If our CROs do not successfully carry out their contractual duties or obligations
or meet expected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to their 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 drug candidates. As a result, our results of operations and the commercial prospects for our
drug candidates would be harmed and our costs could increase. In turn, our ability to generate revenues could be delayed or compromised.
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Because we rely on third parties, our internal capacity to perform these functions is limited. Outsourcing these functions involves certain risks that
third parties may not perform to our standards, may not produce results in a timely manner or may fail to perform at all. In addition, the use of third-
party service providers requires us to disclose our proprietary information to these third parties, which could increase the risk that such information will
be misappropriated. We currently have a small number of employees, which limits the internal resources we have available to identify and monitor our
third-party service providers. To the extent we are unable to identify and successfully manage the performance of third-party service providers in the
future, our business may be adversely affected. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not
encounter similar 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.
We expect to rely on third parties to manufacture at least a portion of our drug candidate supplies, and we intend to rely on third parties for at
least a portion of the manufacturing process of our drug candidates, if approved. Our business could be harmed if those third parties fail to provide
us with sufficient quantities of product or fail to do so at acceptable quality levels or prices.
Although we plan to secure a facility that we can control for clinical-scale manufacturing and processing of our drug candidates, we intend to also
partially rely on third-party vendors to manufacture supplies and process our drug candidates. We have not yet manufactured or processed our drug
candidates on a commercial scale and may not be able to do so for any of our drug candidates. We have limited experience in managing the
manufacturing process, and our process may be more difficult or expensive than the approaches currently in use.
Our anticipated reliance on third-party manufacturers exposes us to certain risks, including, but not limited to, the following:
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we may be unable to identify manufacturers on acceptable terms or at all because the number of potential manufacturers is limited and the
NMPA, the FDA or other comparable regulatory authorities must approve any manufacturers as part of their regulatory oversight of our
drug candidates. This approval would require new testing and cGMP-compliance inspections by the NMPA, the FDA or other comparable
regulatory authorities. In addition, a new manufacturer would have to be educated in, or develop substantially equivalent processes for,
production of our drugs;
our contract manufacturers may have little or no experience with manufacturing our drug candidates, and therefore may require a
significant amount of support from us in order to implement and maintain the infrastructure and processes required to manufacture our
drug candidates;
our contract manufacturers may have limited capacity or limited manufacturing slots, which may affect the timeline for the production of
our drugs;
our contract manufacturers might be unable to timely manufacture our drug candidates or produce the quantity and quality required to meet
our clinical and commercial needs, if any;
contract manufacturers may not be able to execute our manufacturing procedures and other logistical support requirements appropriately;
our future contract manufacturers may not perform as agreed, may not devote sufficient resources to our drugs, or may not remain in the
contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our drugs;
our contract manufacturers are subject to ongoing periodic unannounced inspections by the NMPA and the FDA to ensure strict
compliance with cGMP and other government regulations in the PRC and the United States, respectively, and by other comparable
regulatory authorities for corresponding regulatory requirements. We do not have control over third-party manufacturers’ compliance with
these regulations and requirements;
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we may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the
manufacturing process for our drugs;
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our contract manufacturers could breach or terminate their agreements with us;
our contract manufacturers may be unable to sustain their business and become bankrupt as a result;
raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier, may
not be available or may not be suitable or acceptable for use due to material or component defects;
products and components from our third-party manufacturers may be subject to additional customs and import charges, which may cause
us to incur delays or additional costs as a result;
our contract manufacturers and critical reagent suppliers may be subject to inclement weather, as well as natural or man-made disasters;
and
our contract manufacturers may have unacceptable or inconsistent product quality success rates and yields.
Each of these risks could delay or prevent the completion of our clinical trials or the approval of any of our drug candidates by the NMPA, the
FDA or other comparable regulatory authorities, result in higher costs or adversely impact the commercialization of our drug candidates. In addition, we
will rely on third parties to perform certain specification tests on our drug candidates prior to delivery to patients. If these tests are not appropriately
done and test data is not reliable, patients could be put at risk of serious harm and the NMPA, the FDA or other comparable regulatory authorities could
place significant restrictions on our company until deficiencies are remedied.
The manufacture of biopharmaceutical products is complex and requires significant expertise and capital investment, including the development
of advanced manufacturing techniques and process controls. Currently, our drug raw materials for our manufacturing activities are supplied by multiple
source suppliers. We have agreements for the supply of drug materials with manufacturers or suppliers that we believe have sufficient capacity to meet
our demands. In addition, we believe that adequate alternative sources for such supplies exist. However, there is a risk that, if supplies are interrupted,
our business would be materially harmed.
Manufacturers of biopharmaceutical products often encounter difficulties in production, particularly in scaling up or out, validating the production
process, and assuring high reliability of the manufacturing process, including the absence of contamination. These problems include logistics and
shipping, difficulties with production costs and yields, quality control, including stability of the product, product testing, operator error and availability
of qualified personnel, as well as compliance with strictly enforced regulations in the PRC, the United States and other applicable jurisdictions. Further,
if contaminants are discovered in the supply of our drug candidates or in the manufacturing facilities, such manufacturing facilities may need to be
closed for an extended period of time for us to investigate and remedy the contamination. There can be no assurance that any stability failures or other
issues relating to the manufacture of our drug candidates will not occur in the future. Additionally, our contract manufacturers may experience
manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environment. If our contract manufacturers
were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our drug candidate to
patients in clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of our clinical
trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to begin new clinical
trials at additional expense or terminate clinical trials completely.
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We have entered into collaborations and may form or seek collaborations or strategic alliances or enter into additional licensing arrangements
in the future, and we may not realize the benefits of such alliances or licensing arrangements.
We may form or seek strategic alliances, create joint ventures or collaborations, or enter into additional licensing arrangements with third parties
that we believe will complement or augment our development and commercialization efforts with respect to our drug candidates and any future drug
candidates that we may develop. Any of these relationships may require us to incur recurring or non-recurring expenses and other charges, increase our
near and long-term expenditures, issue securities that dilute the value of our ADSs, or disrupt our management and business. For example, we have
entered into a license and collaboration agreement with MorphoSys AG (“MorphoSys”), pursuant to which we in-licensed from MorphoSys the
development and commercialization rights of felzartamab in Greater China. Another example is our collaboration with AbbVie. In September 2020, we
granted AbbVie a global license, excluding mainland China, Hong Kong and Macau, to develop and commercialize lemzoparlimab (as well as certain
other compounds directed against CD47), and we will retain all rights to develop and commercialize lemzoparlimab in mainland China, Hong Kong and
Macau.
The effectiveness of the contract with AbbVie is subject to our performance of certain contractual obligations and regulatory approval; such
approval may not be obtained or may be delayed, which could result in a detrimental effect on our collaboration. For a more detailed discussion, please
see “Item 4. Information on the Company—B. Business—Licensing and Collaboration Arrangements—B. Out-Licensing Arrangements—License and
Collaboration Agreement with AbbVie.” In addition, we face significant competition in seeking appropriate strategic partners and the negotiation
process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative
arrangements for our drug candidates because they may be deemed to be at too early a stage of development for collaborative effort and third parties
may not view our drug candidates as having the requisite potential to demonstrate safety and efficacy. If and when we collaborate with a third party for
the development and commercialization of a drug candidate, we can expect to relinquish some or all of the control over the future success of that drug
candidate to the third party.
Further, collaborations involving our drug candidates are subject to specific risks, which include, but are not limited to, the following:
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collaborators have significant discretion in determining the efforts and resources that they will apply to a collaboration;
collaborators may not pursue the development and commercialization of our drug candidates or may elect not to continue or renew the
development or commercialization programs based on clinical trial results, change in their strategic focus due to the acquisition of
competitive drugs, availability of funding, or other external factors, such as a business combination that diverts resources or creates
competing priorities;
collaborators may delay clinical trials, provide insufficient funding for a clinical trial, discontinue a clinical trial, repeat or conduct new
clinical trials, or require a new formulation of a drug candidate for clinical testing;
collaborators could independently develop, or develop with third parties, drugs that compete directly or indirectly with our drug candidates
or future drugs;
collaborators with marketing and distribution rights to one or more of our drug candidates or future drugs may not commit sufficient
resources to their marketing and distribution;
collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary
information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or
proprietary information or expose us to potential liability;
collaborators may not always be cooperative or responsive in providing their services in a clinical trial;
disputes may arise between us and a collaborator that cause a delay or termination of the research, development or commercialization of
our drug candidates, or that result in costly litigation or arbitration that diverts management attention and resources;
collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or
commercialization of the applicable drug candidates; and
collaborators may own or co-own intellectual property covering our drug candidates or future drugs that results from our collaborating
with them, and in such cases, we would not have the exclusive right to commercialize such intellectual property.
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As a result, if we enter into collaboration agreements and strategic partnerships or license our drugs, we may not be able to realize the benefit of
such transactions if we are unable to address the risks mentioned above and successfully integrate these agreements or partnerships with our existing
operations and company culture, which could delay our timelines or otherwise adversely affect our business. For example, disputes have arisen between
Tracon Pharmaceuticals, Inc. (“Tracon”) and us in relation to the collaboration agreements to co-develop our proprietary CD73 antibody, TJD5 (the
“TJD5 Agreement”) and to co-develop up to five bispecific antibodies (the “BsAbs Agreement”). See “Item 8. Financial Information—A. Consolidated
Statements and Other Financial Information—Legal Proceedings” for details. The disputes relating to the TJD5 Agreement and the BsAbs Agreement
are the subject of a binding arbitration proceeding under the Rules of Arbitration of the International Chamber of Commerce before an arbitration
tribunal. The arbitration tribunal held a hearing on the merits in February 2022. As of the date of this annual report, the disputes have not been resolved
and we expect that the decision from the arbitration tribunal may be available in late 2022. We are not able to predict the likely outcome of such
disputes. Any adverse outcome as a result of the arbitration tribunal’s decision, or any further disputes in connection thereof, could have an adverse
effect on our business prospects, financial condition, results of operation and reputation.
Neither can we be certain that, following a strategic transaction or license, we will be able to achieve the revenue or specific net income that
justifies such transaction. If we are unable to reach agreements with suitable collaborators on a timely basis, on acceptable terms, or at all, we may have
to curtail the development of a drug candidate, reduce or delay its development program or one or more of our other development programs, delay its
potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or
commercialization activities at our own expense. If we elect to fund and undertake development or commercialization activities on our own, we may
need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all. If we fail to enter into
collaborations and do not have sufficient funds or expertise to undertake the necessary development and commercialization activities, we may not be
able to further develop our drug candidates or bring them to market and generate product sales revenue, which would harm our business, financial
condition, results of operations and prospects.
Risks Related to Our Intellectual Property
If we are unable to obtain and maintain patent and other intellectual property protection for our drug candidates, or if the scope of such
intellectual property rights obtained is not sufficiently broad, third parties could develop and commercialize products and technologies similar or
identical to ours and compete directly against us, and our ability to successfully commercialize any product or technology may be adversely affected.
Our success depends in large part on our ability to protect our proprietary technology and drug candidates from competition by obtaining,
maintaining, defending and enforcing our intellectual property rights, including patent rights. As of December 31, 2021, our owned patent portfolio
consisted of 47 issued patents and 250 patent applications primarily in connection with the drug candidates in our Global Portfolio, including 21 Patent
Cooperation Treaty (“PCT”) patent applications, 15 U.S. patent applications, 16 PRC patent applications and 198 patent applications in other
jurisdictions. In addition, as of December 31, 2021, we in-licensed the Greater China and Korea rights relating to 28 issued patents and 39 pending
patent applications primarily in connection with felzartamab, eftansomatropin alfa, olamkicept, enoblituzumab, efineptakin alfa and TJ210. We seek to
protect the drug candidates and technology that we consider commercially important by filing patent applications in China, the United States and other
countries or regions, relying on trade secrets or pharmaceutical regulatory protection or employing a combination of these methods. This process is
expensive and time-consuming, and we or our licensors may not be able to file and prosecute all necessary or desirable patent applications in all
jurisdictions at a reasonable cost or in a timely manner. It is also possible that we or our licensors will fail to identify patentable aspects of our research
and development output before it is too late to obtain patent protection.
The patent position of biotechnology and pharmaceutical companies generally is highly uncertain, involves complex legal and factual questions
and has in 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. Our pending and future patent applications may not result in patents being issued which protect our technology or drug
candidates or which effectively prevent others from commercializing competitive technologies and drug candidates. The patent examination process
may require us or our licensors to narrow the scope of the claims of our or our licensors’ pending and future patent applications, which may limit the
scope of patent protection that may be obtained. We cannot assure that all of the potentially relevant prior art relating to our patents and patent
applications has been found. If such prior art exists, it can invalidate a patent or prevent a patent application from being issued as a patent.
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Even if patents do issue on any of these applications, there can be no assurance that a third party will not challenge their validity, enforceability, or
scope, which may result in the patent claims being narrowed or invalidated, or that we will obtain sufficient claim scope in those patents to prevent a
third party from competing successfully with our drug candidates. We may become involved in interference, inter partes review, post grant review, ex
parte reexamination, derivation, opposition or similar other proceedings challenging our patent rights or the patent rights of others. An adverse
determination in any such proceeding could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or
drug candidates and compete directly with us, or result in our inability to manufacture or commercialize drug candidates without infringing third-party
patent rights. Thus, even if our patent applications issue as patents, they may not issue in a form that will provide us with any meaningful protection,
prevent competitors from competing with us or otherwise provide us with any competitive advantage.
Our competitors may be able to circumvent our patents by developing similar or alternative technologies or drug candidates in a non-infringing
manner. The issuance of a patent is not conclusive as to its scope, validity or enforceability, and our owned and licensed patents may be challenged in
the courts or patent offices in the United States and other countries. Such challenges may result in patent claims being narrowed, invalidated or held
unenforceable, which could limit our ability to stop or prevent us from stopping others from using or commercializing similar or identical technology
and drug candidates, or limit the duration of the patent protection of our technology and drug candidates. Given the amount of time required for the
development, testing and regulatory review of new drug candidates, patents protecting such assets might expire before or shortly after such assets are
commercialized. As a result, our patent portfolio may not provide us with sufficient rights to exclude others from commercializing drug candidates
similar or identical to ours.
Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our patents
or narrow the scope of our patent protection. Under the America Invents Act (“AIA”) enacted in 2011, the United States moved to this first-to-file
system in early 2013 from the previous system under which the first to make the claimed invention was entitled to the patent. Assuming the other
requirements for patentability are met, the first to file a patent application is entitled to the patent. Publications of discoveries in the scientific literature
often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months
after filing, or in some cases not at all. Therefore, we cannot be certain that we were the first to make the inventions claimed in our patents or pending
patent applications, or that we were the first to file for patent protection of such inventions.
We enjoy only limited geographical protection with respect to certain patents and may not be able to protect our intellectual property rights
throughout the world, including in the PRC.
Filing and prosecuting patent applications and defending patents covering our drug candidates in all countries throughout the world could be
prohibitively expensive. Competitors may use our and our licensors’ technologies in jurisdictions where we have not obtained patent protection to
develop their own drug candidates and, further, may export otherwise infringing drug candidates to territories, including the PRC, where we and our
licensors have patent protection, but enforcement rights are not as strong as that in the United States or Europe. These drug candidates may compete
with our drug candidates, and our and our licensors’ patents or other intellectual property rights may not be effective or sufficient to prevent them from
competing.
The laws of some jurisdictions, including the PRC, do not protect intellectual property rights to the same extent as the laws or rules and
regulations in the United States and Europe, and many companies have encountered significant difficulties in protecting and defending such rights in
such 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 drug
candidates in violation of our proprietary rights generally. Proceedings to enforce our patent rights in other jurisdictions, whether or not successful,
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 and our patent applications at risk of not issuing as patents, 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 rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual
property that we develop or license. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we
cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market our drug candidates.
Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability
to successfully commercialize our drug candidates in all of our expected significant foreign markets. If we or our licensors encounter difficulties in
protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the
value of these rights may be diminished and we may face additional competition from others in those jurisdictions.
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Some countries also have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition,
some countries limit the enforceability of patents against government agencies or government contractors. In those countries, the patent owner may have
limited remedies, which could materially diminish the value of such patents. 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.
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 and annuity fees on any issued patent are due to be paid to the United States Patent and Trademark Office (“USPTO”) and
foreign patent agencies over the lifetime of a patent. In addition, the USPTO and other foreign patent agencies require compliance with a number of
procedural, documentary, fee payment, and other similar provisions during the patent application process. While an inadvertent failure to make payment
of such fees or to comply with such provisions 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 such non-compliance will result in the abandonment or lapse of the patent or patent application, and the 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 failure to respond to official actions
within prescribed time limits, and non-payment of fees and failure to properly legalize and submit formal documents within prescribed time limits. If we
or our licensors fail to maintain the patents and patent applications covering our drug candidates or if we or our licensors otherwise allow our patents or
patent applications to be abandoned or lapse, our competitors might be able to enter the market, which would hurt our competitive position and could
impair our ability to successfully commercialize our drug candidates in any indication for which they are approved.
Our owned and in-licensed patents and other intellectual property may be subject to further priority disputes or to inventorship disputes and
similar proceedings. If we or our licensors are unsuccessful in any of these proceedings, we may be required to obtain licenses from third parties,
which may not be available on commercially reasonable terms or at all, or to modify or cease the development, manufacture and commercialization
of one or more of the drug candidates we may develop, which could have a material adverse impact on our business.
We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or
in-licensed patents or other intellectual property as an inventor or co-inventor. If we or our licensors are unsuccessful in any interference proceedings or
other priority or validity disputes (including any patent oppositions) to which we or they are subject, we may lose valuable intellectual property rights
through the loss of one or more patents owned or licensed or our owned or licensed patent claims may be narrowed, invalidated, or held unenforceable.
In addition, if we or our licensors are unsuccessful in any inventorship disputes to which we or they are subject, we may lose valuable intellectual
property rights, such as exclusive ownership of, or the exclusive right to use, our owned or in-licensed patents. If we or our licensors are unsuccessful in
any interference proceeding or other priority or inventorship dispute, we may be required to obtain and maintain licenses from third parties, including
parties involved in any such interference proceedings or other priority or inventorship disputes. Such licenses may not be available on commercially
reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to modify or cease the
development, manufacture, and commercialization of one or more of our drug candidates. The loss of exclusivity or the narrowing of our owned and
licensed patent claims could limit our ability to stop others from using or commercializing similar or identical drug products. Any of the foregoing could
result in a material adverse effect on our business, financial condition, results of operations, or prospects. Even if we are successful in an interference
proceeding or other similar priority or inventorship disputes, it could result in substantial costs and be a distraction to our management and other
employees.
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Claims that our drug candidates or the sale or use of our future products infringe, misappropriate or otherwise violate the patents or other
intellectual property rights of third parties could result in costly litigation or could require substantial time and money to resolve, even if litigation is
avoided.
We cannot guarantee that our drug candidates or the sale or use of our future products do not and will not in the future infringe, misappropriate or
otherwise violate third-party patents or other intellectual property rights. Third parties might allege that we are infringing their patent rights or that we
have misappropriated their trade secrets, or that we are otherwise violating their intellectual property rights, whether with respect to the manner in which
we have conducted our research, or with respect to the use or manufacture of the compounds we have developed or are developing. Litigation relating to
patents and other intellectual property rights in the biopharmaceutical and pharmaceutical industries is common, including patent infringement lawsuits.
The various markets in which we plan to operate are subject to frequent and extensive litigation regarding patents and other intellectual property rights.
Some claimants may have substantially greater resources than we have and may be able to sustain the costs of complex intellectual property litigation to
a greater degree and for longer periods of time than we could. Third parties might resort to litigation against us or other parties we have agreed to
indemnify, which litigation could be based on either existing intellectual property or intellectual property that arises in the future. For example, we are
aware of a third-party U.S. patent and its counterpart European patents that relate to the use of antibodies having specificity to PD-L1 to treat cancer.
It is also possible that we failed to identify, or may in the future fail to identify, relevant patents or patent applications held by third parties that
cover our drug candidates. Publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Therefore, we cannot be
certain that we were the first to invent, or the first to file patent applications on, our drug candidates or for their uses, or that our drug candidates will not
infringe patents that are currently issued or that are issued in the future. In the event that a third party has also filed a patent application covering one of
our drug candidates or a similar invention, our patent application may be regarded as a competing application and may not be approved in the end.
Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our
products or their use.
If a third party were to assert claims of patent infringement against us, even if we believe such third-party claims are without merit, a court of
competent jurisdiction could hold that these third-party patents are valid, enforceable and infringed, and the holders of any such patents may be able to
block our ability to commercialize the applicable product unless we obtained a license under the applicable patents, or until such patents expire or are
finally determined to be invalid or unenforceable. Similarly, if any third-party patents were held by a court of competent jurisdiction to cover aspects of
our compositions, formulations, or methods of treatment, prevention, or use, the holders of any such patents may be able to block our ability to develop
and commercialize the applicable product unless we obtained a license or until such patent expires or is finally determined to be invalid or
unenforceable. In addition, defending such claims would cause us to incur substantial expenses and could cause us to pay substantial damages, if we are
found to be infringing a third party’s patent rights. These damages potentially include increased damages and attorneys’ fees if we are found to have
infringed such rights willfully. In order to avoid or settle potential claims with respect to any patent or other intellectual property rights of third parties,
we may choose or be required to seek a license from a third party and be required to pay license fees or royalties or both, which could be substantial.
These licenses may not be available on acceptable terms, or at all. Even if we were able to obtain a license, the rights may be nonexclusive, which could
result in our competitors gaining access to the same intellectual property. Ultimately, we could be prevented from commercializing a drug candidate, or
be forced, by court order or otherwise, to modify or cease some or all aspects of our business operations, if, as a result of actual or threatened patent or
other intellectual property claims, we are unable to enter into licenses on acceptable terms. Further, we could be found liable for significant monetary
damages as a result of claims of intellectual property infringement.
Defending against claims of patent infringement, misappropriation of trade secrets or other violations of intellectual property rights could be
costly and time-consuming, regardless of the outcome. 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.
Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated costs.
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Issued patents covering one or more of our drug candidates could be found invalid or unenforceable if challenged in court.
Despite measures we take to obtain and maintain patent and other intellectual property rights with respect to our drug candidates, our intellectual
property rights could be challenged or invalidated. For example, if we were to initiate legal proceedings against a third party to enforce a patent covering
one of our drug candidates, the defendant could counterclaim that our patent is invalid and/or unenforceable. Grounds for a validity challenge could be
an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an
unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO,
SIPO, or the applicable foreign counterpart, or made a misleading statement, during prosecution. Although we believe that we have conducted our
patent prosecution in accordance with a duty of candor and in good faith, the outcome following legal assertions of invalidity and unenforceability
during patent litigation is unpredictable. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, we would lose at least
part, and perhaps all, of the patent protection on a drug candidate. Even if a defendant does not prevail on a legal assertion of invalidity and/or
unenforceability, our patent claims may be construed in a manner that would limit our ability to enforce such claims against the defendant and others.
Even if we establish infringement, the court may decide not to grant an injunction against further infringing activity and instead award only monetary
damages, which may not be an adequate remedy. In addition, if the breadth or strength of protection provided by our patents is threatened, it could
dissuade companies from collaborating with us to license, develop, or commercialize our current or future drug candidates. Any loss of patent protection
could have a material adverse impact on one or more of our drug candidates and our business.
Enforcing our intellectual property rights against third parties may also cause such third parties to file other counterclaims against us, which could
be costly to defend and could require us to pay substantial damages, cease the sale of certain drugs or enter into a license agreement and pay royalties
(which may not be possible on commercially reasonable terms or at all).
Intellectual property litigation may lead to unfavorable publicity which may harm our reputation and cause the market price of our ADSs to
decline, and any unfavorable outcome from such litigation could limit our research and development activities and/or our ability to commercialize
our drug candidates.
During the course of any intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and
other interim proceedings in the litigation. If securities analysts or investors regard these announcements as negative, the perceived value of our drug
candidates, future drugs, programs or intellectual property could be diminished. Accordingly, the market price of our ADSs may decline. Such
announcements could also harm our reputation or the market for our drug candidates, which could have a material adverse effect on our business.
In the event of intellectual property litigation, there can be no assurance that we would prevail, even if the case against us is weak or flawed. If
third parties successfully assert their intellectual property rights against us, prohibitions against using certain technologies, or prohibitions against
commercializing our drug candidates, could be imposed by a court or by a settlement agreement between us and a plaintiff. In addition, if we are
unsuccessful in defending against allegations that we have infringed, misappropriated or otherwise violated the patent or other intellectual property
rights of others, we may be forced to pay substantial damage awards to the plaintiff. Additionally, we may be required to obtain a license from the
intellectual property owner in order to continue our research and development programs or to commercialize any resulting product. It is possible that the
necessary license will not be available to us on commercially acceptable terms, or at all. This may not be technically or commercially feasible, may
render our products less competitive, or may delay or prevent the launch of our products to the market. Any of the foregoing could limit our research
and development activities, our ability to commercialize one or more drug candidates, or both.
Most of our competitors are larger than we are and have substantially greater resources. They are, therefore, likely to be able to sustain the costs of
complex intellectual property litigation longer than we could. In addition, the uncertainties associated with litigation could have a material adverse effect
on our ability to raise the funds necessary to conduct our clinical trials, continue our internal research programs, in-license needed technology, or enter
into strategic partnerships that would help us bring our drug candidates to market.
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In addition, any future intellectual property litigation, interference or other administrative proceedings will result in additional expense and
distraction of our personnel. An adverse outcome in such litigation or proceedings may expose us or any future strategic partners to loss of our
proprietary position, expose us to significant liabilities, or require us to seek licenses that may not be available on commercially acceptable terms, if at
all, each of which could have a material adverse effect on our business.
Changes in patent law could diminish the value of patents in general, thereby impairing our ability to protect our drug candidates.
As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patent rights.
Obtaining and enforcing patents in the biopharmaceutical industry involves both technological and legal complexity, and is therefore costly, time-
consuming, and inherently uncertain. In addition, the United States has recently enacted and is implementing wide-ranging patent reform legislation.
Recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent
owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, this combination of events has
created uncertainty with respect to the value of patents once obtained, if any. Depending on decisions by the U.S. Congress, the federal courts and the
USPTO, 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. For example, in a recent case, Assoc. for Molecular Pathology v. Myriad
Genetics, Inc., the U.S. Supreme Court held that certain claims to naturally-occurring substances are not patentable. Although we do not believe that our
currently issued patents and any patents that may issue from our pending patent applications directed to our drug candidates if issued in their currently
pending forms, as well as patent rights licensed by us, will be found invalid based on this decision, we cannot predict how future decisions by the courts,
the U.S. Congress or the USPTO may impact the value of our patent rights. There could be similar changes in the laws of foreign jurisdictions that may
impact the value of our patent rights or our other intellectual property rights.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed. We also may be
subject to claims that our employees, consultants, or advisers have wrongfully used or disclosed alleged trade secrets of their former employers or
claims asserting ownership of what we regard as our own intellectual property.
In addition to our issued patents and pending patent applications, we rely on trade secret and confidential information, including unpatented
know-how, technology and other proprietary information, to maintain our competitive position and to protect our drug candidates. We seek to protect
this trade secret and confidential information, in part, by entering into non-disclosure and confidentiality agreements with parties that have access to
them, such as our employees, corporate collaborators, outside scientific collaborators, sponsored researchers, contract manufacturers, consultants,
advisers and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants.
However, any of these parties may breach such agreements and disclose our proprietary information, and we may not be able to obtain adequate
remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time-
consuming, and the outcome is unpredictable. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor or
other third party, we would have no right to prevent them from using that technology or information to compete with us and our competitive position
would be harmed.
Furthermore, many of our employees, consultants, and advisers, including our senior management, were previously employed at other
biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees, consultants, and advisers,
including members of our senior management, executed proprietary rights, non-disclosure and non-competition agreements in connection with such
previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us,
we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secrets or other proprietary
information, of any such individual’s former employer. We are not aware of any threatened or pending claims related to these matters or concerning the
agreements with our senior management, but in the future litigation may be necessary to defend against such claims. If we fail in defending any such
claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending
against such claims, litigation could result in substantial costs and be a distraction to management. In addition, while we typically require our
employees, consultants and contractors who may be involved in the 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 develops intellectual property that we
regard as our own, and furthermore, the assignment of intellectual property rights may not be self-executing, or the assignment agreements may be
breached, each of which may result in claims by or against us related to the ownership of such intellectual property. If we fail in prosecuting or
defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in
prosecuting or defending against such claims, litigation could result in substantial costs, be a distraction to our management and scientific personnel and
have a material adverse effect on our business, financial condition, results of operations and prospects.
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We may not be successful in obtaining or maintaining necessary rights for our development pipeline through acquisitions and in-licenses.
Because our programs may involve additional drug candidates that may require the use of proprietary rights held by third parties, the growth of
our business may depend in part on our ability to acquire and maintain licenses or other rights to use these proprietary rights. We may be unable to
acquire or in-license any compositions, methods of use, or other intellectual property rights from third parties that we identify. The licensing and
acquisition of third-party intellectual property rights is a competitive area, and a number of more established companies are also pursuing 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, cash resources and greater clinical development and commercialization capabilities. In addition,
companies that perceive us to be a competitor may be unwilling to assign or license rights to us. We also may be unable to license or acquire third-party
intellectual property rights on terms that would allow us to make an appropriate return on our investment or at all. If we are unable to successfully obtain
rights to required third-party intellectual property rights or maintain the existing intellectual property rights we have, we may have to abandon
development of the relevant program or drug candidate, which could have a material adverse effect on our business, financial condition, results of
operations and prospects for growth.
Our rights to develop and commercialize our drug candidates are subject, in part, to the terms and conditions of licenses granted to us by
others.
We rely on licenses to certain patent rights and other intellectual property from third parties that are important or necessary to the development of
our drug candidates. These and other licenses may not provide exclusive rights to use such intellectual property in all relevant fields of use and in all
territories in which we may wish to develop or commercialize our drug products. As a result, we may not be able to prevent competitors from
developing and commercializing competitive drug products in territories included in all of our licenses.
We may not have the right to control the preparation, filing, prosecution, maintenance, enforcement, and defense of patents and patent applications
covering the drug candidates that we license from third parties. Moreover, we have not had and do not have primary control over these activities for
certain of our patents or patent applications and other intellectual property rights that we jointly own with certain of our licensors and sub-licensors.
Therefore, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, enforced, and defended in a
manner consistent with the best interests of our business. If our licensors fail to prosecute, maintain, enforce and defend such patents, or lose rights to
those patents or patent applications, the rights we have licensed may be reduced or eliminated, and our right to develop and commercialize any of our
drugs that are subject of such licensed rights could be adversely affected.
Pursuant to the terms of the license agreements with some of our licensors, the licensors may have the right to control enforcement of our licensed
patents or defense of any claims asserting the invalidity or unenforceability of these patents. Even if we are permitted to pursue the enforcement or
defense of our licensed patents, we will require the cooperation of our licensors and any applicable patent owners and such cooperation may not be
provided to us. We cannot be certain that our licensors will allocate sufficient resources or prioritize their or our enforcement of such patents or defense
of such claims to protect our interests in the licensed patents. Even if we are not a party to these legal actions, an adverse outcome could harm our
business because it might prevent us from continuing to license intellectual property that we may need to operate our business. If we lose any of our
licensed intellectual property, our right to develop and commercialize any of our drug candidates that are subject of such licensed rights could be
adversely affected.
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In addition, our licensors may have relied on third-party consultants or collaborators or on funds from third parties such that our licensors are not
the sole and exclusive owners of the patents we in-license. This could have a material adverse effect on our competitive position, business, financial
conditions, results of operations, and prospects.
In spite of our best efforts, our licensors might conclude that we have materially breached our license agreements and might therefore terminate
the license agreements, thereby removing our ability to develop and commercialize drug products covered by these license agreements. If such licenses
are terminated, we may be required seek alternative in-license arrangements, which may not be available on commercially reasonable terms or at all, or
may be non-exclusive. If these in-licenses are terminated, or if the underlying patents fail to provide the intended exclusivity, we may need to modify or
cease the development, manufacture, and commercialization of one or more of our drug candidates and competitors would have the freedom to seek
regulatory approval of, and to market, products identical to ours. In addition, we may seek to obtain additional licenses from our licensors and, in
connection with obtaining such licenses, we may agree to amend our existing licenses in a manner that may be more favorable to the licensors, including
by agreeing to terms that could enable third parties (potentially including our competitors) to receive licenses to a portion of the intellectual property that
is subject to our existing licenses. Any of these events could have a material adverse effect on our competitive position, business, financial conditions,
results of operations, and prospects.
If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise
experience disruptions to our business relationships with our licensors, we could be required to pay monetary damages or could lose license rights
that are important to our business.
Our business relies, in large part, on our ability to develop and commercialize drug candidates we have licensed from third parties, and we have
entered into license agreements with third parties providing us with rights to various third-party intellectual property, including rights in patents and
patent applications. Our licenses may not encumber all intellectual property rights owned or controlled by the affiliates of our licensors and relevant to
our drug candidates, and we may need to obtain additional licenses from our existing licensors and others to advance our research or allow
commercialization of drug candidates we may develop. In such case, we may need to obtain additional licenses which may not be available on an
exclusive basis, on commercially reasonable terms or at a reasonable cost, if at all. In that event, we may be required to expend significant time and
resources to redesign our drug candidates or the methods for manufacturing them or to develop or license replacement technology, all of which may not
be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected drug candidates,
which could harm our business, financial condition, results of operations, and prospects significantly.
In addition, if our licensors breach the license agreements, we may not be able to enforce such agreements against our licensors’ parent entity or
affiliates. Under each of our license and intellectual property-related agreements, in exchange for licensing or sublicensing us the right to develop and
commercialize the applicable drug candidates, our licensors will be eligible to receive from us milestone payments, tiered royalties from commercial
sales of such drug candidates, assuming relevant approvals from government authorities are obtained, or other payments. Our license and intellectual
property-related agreements also require us to comply with other obligations including development and diligence obligations, providing certain
information regarding our activities with respect to such drug candidates and/or maintaining the confidentiality of information we receive from our
licensors.
If we fail to comply with our obligations under our current or future license agreements, our counterparties may have the right to terminate these
agreements and, upon the effective date of such termination, have the right to re-obtain the licensed and sub-licensed technology and intellectual
property. If any of our licensors terminate any of our licenses, we might not be able to develop, manufacture or market any drug or drug candidate that is
covered by the licenses provided for under these agreements and other third parties may be able to market drug candidates similar or identical to ours. In
such case, we may have to negotiate new or reinstated agreements with less favorable terms, and may be required to provide a grant back license to the
licensors under our own intellectual property with respect to the terminated products. We may also face claims for monetary damages or other penalties
under these agreements. While we would expect to exercise all rights and remedies available to us, including seeking to cure any breach by us, and
otherwise seek to preserve our rights under the intellectual property rights licensed and sublicensed to us, we may not be able to do so in a timely
manner, at an acceptable cost or at all. In particular, some of the milestone payments are payable upon our drug candidates reaching development
milestones before we have commercialized, or received any revenue from, sales of such drug candidate, and we cannot guarantee that we will have
sufficient resources to make such milestone payments. Any uncured, material breach under the license agreements could result in our loss of exclusive
rights and may lead to a complete termination of our rights to the applicable drug candidate. Any of the foregoing could have a material adverse effect
on our business, financial conditions, results of operations, and prospects.
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It is possible that we may be unable to obtain any additional licenses at a reasonable cost or on reasonable terms, if at all. Certain of our license
agreements also require us to meet development thresholds to maintain the license, including establishing a set timeline for developing and
commercializing products. Disputes may arise regarding intellectual property subject to a license 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, misappropriate or violate intellectual property of the licensor that is not subject
to the license agreement;
the sublicensing of patent and other rights under our collaborative development relationships;
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
licensors and us and our partners; and
the priority of invention of patented technology.
In addition, the agreements under which we license intellectual property or technology 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, or increase what we believe to be our financial or other
obligations under the relevant agreement, either of which could have a material adverse effect on our business, financial condition, results of operations,
and prospects. 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 drug candidates, which
could have a material adverse effect on our business, financial condition, results of operations and prospects.
Intellectual property rights do not necessarily protect us from all potential threats to our competitive advantage.
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. The following examples are illustrative:
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•
•
•
•
•
others may be able to make compounds that are similar to our drug candidates but that are not covered by the claims of the patents that we
own or have exclusively licensed;
we might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or may in
the future exclusively license, which could result in the patents applied for not being issued or being invalidated after issuing;
we might not have been the first to file patent applications covering certain of our inventions, which could result in the patents applied for
not being issued or being invalidated after issuing;
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our
intellectual property rights;
it is possible that our pending patent applications will not lead to issued patents;
issued patents that we own or have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or
unenforceable, as a result of legal challenges by our competitors or other third parties;
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•
•
•
•
•
•
we may obtain patents for certain compounds many years before we receive regulatory approval for drugs containing such compounds, and
because patents have a limited life, which may begin to run prior to the commercial sale of the related drugs, the commercial value of our
patents may be limited;
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 drugs for commercialization in our major markets;
we may fail to develop additional proprietary technologies that are patentable;
we may fail to apply for or obtain adequate intellectual property protection in all the jurisdictions in which we operate;
third parties may gain unauthorized access to our intellectual property due to potential lapses in our information systems; and
the patents of others may have an adverse effect on our business, for example by preventing us from commercializing one or more of our
drug candidates for one or more indications.
Any of the aforementioned threats to our competitive advantage could have a material adverse effect on our business and future prospects.
If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest and
our competitive position may be adversely affected.
We own registered trademarks. We may not be able to obtain trademark protection in territories that we consider of significant importance to us. In
addition, any of our trademarks or trade names, whether registered or unregistered, may be challenged, opposed, infringed, cancelled, circumvented or
declared generic, or determined to be infringing on other marks, as applicable. We may not be able to protect our rights to these trademarks and trade
names, which we will need to build name recognition by potential collaborators or customers in our markets of interest. Over the long term, if we are
unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be
adversely affected.
Terms of our future patents may not be sufficient to effectively protect our drug candidates and business.
In many countries where we file applications for patents, the term of an issued patent is generally 20 years from the earliest claimed filing date of
a non-provisional patent application in the applicable country. Although various extensions may be available, the life of a patent and the protection it
affords are limited. Even if we obtain patents covering our drug candidates, we may still be open to competition from other companies, as well as
generic medications once the patent life has expired for a drug.
Although patent regulations in respect of patent term compensation and patent linkage system have been introduced by the PRC Patent Law taking
effective on June 1, 2021, the patent term compensation requires further promulgation of detailed implementation measures to be implemented. Thus,
patents that we expect to obtain in China may not be eligible for or only be eligible for limited patent term compensation. In the meantime, the PRC
Patent Law, for the first time, introduces a system for the early resolution of patent disputes concerning generic drug applications. On July 4, 2021, the
NMPA and the China National Intellectual Property Administration jointly issued the Implementation Measures for Early Resolution Mechanism of
Pharmaceutical Patent Disputes (for Trial Implementation) which sets forth, for the first time, details of how such patent linkage system would be
implemented. Since the China trial version of patent linkage system was just implemented commencing from July 4, 2021, substantial uncertainties
remain as to whether this trial system can effectively block early generic competition with our products. Although the Regulations for Implementation of
the Drug Administration Law of the People’s Republic of China has provided six-year data exclusivity for a new chemical entity, and the Chinese
regulators have proposed a framework for integrating data exclusivity into the Chinese regulatory regime in 2018, the system of data exclusivity was not
really implemented in practice. Consequently, these factors may result in weaker protection for us against generic competition in China than could be
available to us in some jurisdictions such as the United States.
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If we are unable to obtain patent term extensions or if such extensions are less than requested for, our competitors may obtain approval of
competing products following our patent expirations and our business, financial condition, results of operations and prospects could be materially
harmed as a result.
If we do not obtain additional protection under the Hatch-Waxman Amendments and similar legislation in other countries extending the terms
of our patents, if issued, relating to our drug candidates, our business may be materially harmed.
Depending upon the timing, duration and specifics of FDA regulatory approval for our drug candidates, one or more of our U.S. patents, if issued,
may be eligible for limited patent term restoration under the Drug Price Competition and Patent Term Restoration Act of 1984 (the “Hatch-Waxman
Amendments”). The Hatch-Waxman Amendments permit a patent term extension of up to five years as compensation for patent term lost during drug
development and the FDA regulatory review process. Patent term extensions, however, cannot extend the remaining term of a patent beyond a total of
14 years from the date of drug approval by the FDA, and only one patent can be extended for a particular drug.
The application for patent term extension is subject to approval by the USPTO, in conjunction with the FDA. We may not be granted an extension
because of, for example, 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. If we are unable
to obtain a patent term extension for a given patent or the term of any such extension is less than we request, the period during which we will have the
right to exclusively market our drug will be shortened and our competitors may obtain earlier approval of competing drugs, and our ability to generate
revenues could be materially adversely affected.
Risks Related to Our Industry, Business and Operations
Our future success depends on our ability to attract, retain and motivate senior management and qualified scientific employees.
We are highly dependent on the expertise of the members of our research and development team, as well as the principal members of our
management. We have entered into employment agreements with our executive officers, but each of them may terminate their employment with us at
any time with prior written notice. In addition, we currently do not have “key-man” insurance for any of our executive officers or other key personnel.
Recruiting, retaining and motivating qualified management, scientific, clinical, manufacturing and sales and marketing personnel will also be
critical to our success. The loss of the services of our executive officers or other key employees could impede the achievement of our research,
development and commercialization objectives and seriously harm our ability to successfully implement our business strategy. Further, replacing
executive officers and key employees may be difficult and may take an extended period of time because of the limited number of individuals in our
industry with the breadth of skills and experience required to successfully develop, gain regulatory approval of and commercialize drugs. Competition to
hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these key personnel on acceptable terms given the
competition among numerous biopharmaceutical companies for similar personnel. We also experience competition for the hiring of scientific and
clinical personnel from universities and research institutions. In addition, our management will be required to devote significant time to new compliance
initiatives from our status as a public company, which may require us to recruit more management personnel.
We will need to increase the size and capabilities of our organization, and we may experience difficulties in managing our growth.
We expect to experience significant growth in the number of our employees and consultants and the scope of our operations, particularly in the
areas of clinical development, regulatory affairs and business development. To manage our anticipated future growth, we must continue to implement
and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel.
Due to our limited financial resources, we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified
personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any
inability to manage growth could delay the execution of our business plans or disrupt our operations, and have a material adverse effect on our business.
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The data and information that we gather in our research and development process could be inaccurate or incomplete, which could harm our
business, reputation, financial condition and results of operations.
We collect, aggregate, process, and analyze data and information from our pre-clinical studies, manufacturing technology development programs
and clinical programs. We also engage in substantial information gathering following the identification of a promising drug candidate. Because data in
the healthcare industry is fragmented in origin, inconsistent in format, and often incomplete, the overall quality of data collected or accessed in the
healthcare industry is often subject to challenge, the degree or amount of data which is knowingly or unknowingly absent or omitted can be material,
and we often discover data issues and errors when monitoring and auditing the quality of our data. If we make mistakes in the capture, input, or analysis
of these data, our ability to advance the development of our drug candidates may be materially harmed and our business, prospects and reputation may
suffer.
We also engage in the procurement of regulatory approvals necessary for the development and commercialization of our products under
development, for which we manage and submit data to governmental entities. These processes and submissions are governed by complex data
processing and validation policies and regulations. Notwithstanding such policies and regulations, interim, top-line or preliminary data from our clinical
trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification
procedures that could result in material changes in the final data, in which case we may be exposed to liability to a customer, court or government
agency that concludes that our storage, handling, submission, delivery, or display of health information or other data was wrongful or erroneous.
Although we maintain insurance coverage for clinical trials, this coverage may prove to be inadequate or could cease to be available to us on
acceptable terms, if at all. Even unsuccessful claims could result in substantial costs and diversion of management time, attention, and resources. A
claim brought against us that is uninsured or under-insured could harm our business, financial condition and results of operations.
In addition, we rely on CROs, our partners and other third parties to monitor and manage data for some of our ongoing pre-clinical and clinical
programs and control only certain aspects of their activities. If any of our CROs, our partners or other third parties do not perform to our standards in
terms of data accuracy or completeness, data from those pre-clinical and clinical trials may be compromised as a result, and our reliance on these parties
does not relieve us of our regulatory responsibilities. For a detailed discussion, see “—Risks Related to Our Reliance on Third Parties—As we rely on
third parties to conduct our pre-clinical studies and clinical trials, if we lose our relationships with these third parties or if they 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 drug candidates and
our business could be substantially harmed” above.
We may be subject to liability lawsuits arising from our clinical trials.
We currently carry liability insurance covering our clinical trials. Although we maintain such insurance, any claim that may be brought against us
could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or which is in excess of the limits of
our insurance coverage. Our insurance policies also contain various exclusions, and we may be subject to particular liability claims for which we have
no coverage. We will have to pay any amount awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not
covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. In addition, if we cannot successfully
defend ourselves against such claims, we may incur substantial liabilities and be required to suspend or delay our ongoing clinical trials. Even a
successful defense would require significant financial and management resources.
Regardless of the merits or eventual outcome, liability claims may result in significant negative consequences to our business and prospects,
including, but not limited to:
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decreased demand for our drug candidates or any resulting products;
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injury to our reputation;
withdrawal of other clinical trial participants;
costs to defend the related litigation;
a diversion of our management’s time and resources;
substantial monetary awards to trial participants or patients;
inability to commercialize our drug candidates; and
a decline in the market price of our ADSs.
We have limited insurance coverage, and any claims beyond our insurance coverage may result in our incurring substantial costs and a
diversion of resources.
We maintain insurance policies that are required under PRC laws and regulations as well as insurance based on our assessment of our operational
needs and industry practice. We also maintain liability insurance covering our clinical trials. In line with industry practice in the PRC, we have elected
not to maintain certain types of insurances, such as business interruption insurance or key-man insurance. Our insurance coverage may be insufficient to
cover any claim for product liability, damage to our fixed assets or employee injuries. Any liability or damage to, or caused by, our facilities or our
personnel beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources.
Disruptions in the financial markets and economic conditions could affect our ability to raise capital.
Global economies could suffer dramatic downturns as the result of a deterioration in the credit markets and related financial crisis as well as a
variety of other factors including, extreme volatility in security prices, severely diminished liquidity and credit availability, ratings downgrades of
certain investments and declining valuations of others. In the past, governments have taken unprecedented actions in an attempt to address and rectify
these extreme market and economic conditions by providing liquidity and stability to the financial markets. If these actions are not successful, the return
of adverse economic conditions may cause a significant impact on our ability to raise capital, if needed, on a timely basis and on acceptable terms or at
all.
In addition, there is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central
banks and financial authorities of some of the world’s leading economies, including the United States and China. There have been concerns over unrest
and terrorist threats in the Middle East, Europe and Africa and over the conflicts involving Ukraine, Syria and North Korea. There have also been
concerns on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes
or the trade related disputes between the United States and China. In addition, the impact of the decision by the United Kingdom to withdraw from the
European Union, commonly referred to as “Brexit,” and the resulting effect on the political and economic future of the U.K. and the European Union is
uncertain. Brexit could adversely affect European and worldwide economic and market conditions and could contribute to instability in global financial
and foreign exchange markets. It is unclear whether these challenges and uncertainties will be contained or resolved, and what effects they may have on
the global political and economic conditions in the long term. It is unclear whether these challenges and uncertainties will be contained or resolved, and
what effects they may have on the global political and economic conditions in the long term.
Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper
activities, including non-compliance with regulatory standards and requirements.
We are exposed to the risk of fraud, misconduct or other illegal activities by our employees, independent contractors, consultants, commercial
partners and vendors. Misconduct by these parties could include intentional, reckless and negligent conduct that fails to:
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comply with the laws of the NMPA, the FDA and other comparable regulatory authorities;
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provide true, complete and accurate information to the NMPA, the FDA and other comparable regulatory authorities;
comply with manufacturing standards we have established;
comply with healthcare fraud and abuse laws in the PRC, the United States and similar fraudulent misconduct laws in other applicable
jurisdictions; or
report financial information or data accurately or to disclose unauthorized activities to us.
If we obtain approval of any of our drug candidates and begin commercializing those drugs in the PRC, the United States or other applicable
jurisdictions, our potential exposure under the laws of such jurisdictions will increase significantly and our costs associated with compliance with such
laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as
well as future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as
certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other
abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and
commission(s), certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the
improper use of information obtained in the course of patient recruitment for clinical trials, which could result in regulatory sanctions and cause serious
harm to our reputation.
It is not always possible to identify and deter misconduct by employees and other parties, and the precautions we take to detect and prevent this
activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions
or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in
defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or
other sanctions.
If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute the value of your investment in
our ADSs, cause us to incur debt or assume contingent liabilities, and subject us to other risks.
We may evaluate various acquisitions and strategic partnerships, including licensing or acquiring complementary products, intellectual property
rights, technologies or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including, but not limited to:
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increased operating expenses and cash requirements;
the assumption of additional indebtedness or contingent liabilities;
the issuance of our equity securities;
assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating
new personnel;
the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger or
acquisition;
retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;
risks and uncertainties associated with the assimilation of operations, corporate culture and personnel of the acquired business;
risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and its existing drugs or
drug candidates and regulatory approvals;
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our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition
or even to offset the associated acquisition and maintenance costs; and
changes in accounting principles relating to recognition and measurement of our investments that may have a significant impact on our
financial results.
In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses and
acquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisition
opportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the development of
our business.
If we fail to comply with applicable anti-bribery laws, our reputation may be harmed and we could be subject to penalties and significant
expenses that have a material adverse effect on our business, financial condition and results of operations.
We are subject to anti-bribery laws in China that generally prohibit companies and their intermediaries from making payments to government
officials for the purpose of obtaining or retaining business or securing any other improper advantage. In addition, although currently our primary
operating business is in China, we are subject to the Foreign Corrupt Practices Act (the “FCPA”). The FCPA generally prohibits us from making
improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Although we have policies and procedures designed to
ensure that we, our employees and our agents comply with anti-bribery laws, there is no assurance that such policies or procedures will prevent our
agents, employees and intermediaries from engaging in bribery activities. Failure to comply with anti-bribery laws could disrupt our business and lead to
severe criminal and civil penalties, including imprisonment, criminal and civil fines, loss of our export licenses, suspension of our ability to do business
with the government, denial of government reimbursement for our products and/or exclusion from participation in government healthcare programs.
Other remedial measures could include further changes or enhancements to our procedures, policies, and controls and potential personnel changes
and/or disciplinary actions, any of which could have a material adverse effect on our business, financial condition, results of operations and liquidity. We
could also be adversely affected by any allegation that we violated such laws.
Any failure to comply with applicable regulations and industry standards or obtain various licenses and permits could harm our reputation
and our business, results of operations and prospects.
A number of governmental agencies or industry regulatory bodies in the PRC, the United States and other applicable jurisdictions impose strict
rules, regulations and industry standards governing biopharmaceutical research and development activities, which apply to us. Our or our CROs’ failure
to comply with such regulations could result in the termination of ongoing research, administrative penalties imposed by regulatory bodies or the
disqualification of data for submission to regulatory authorities. This could harm our business, reputation, prospects for future work and results of
operations. For example, if we or our CROs were to treat research animals inhumanely or in violation of international standards set out by the
Association for Assessment and Accreditation of Laboratory Animal Care, it could revoke any such accreditation and the accuracy of our animal
research data could be questioned.
If we or our CROs or other contractors or consultants fail to comply with environmental, health and safety laws and regulations, we could
become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.
We and third parties, such as our CROs or other contractors or consultants, are subject to numerous environmental, health and safety laws and
regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes.
Our operations involve the use of hazardous and flammable materials, including chemicals and radioactive and biological materials. Our operations also
produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk
of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held
liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal
fines and penalties.
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Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees
resulting from the use of or exposure to hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not
maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage, use or disposal of
biological, hazardous or radioactive materials.
In addition, we may be required to incur substantial costs to comply with current or future environmental, health and safety laws and regulations.
These current or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and
regulations also may result in substantial fines, penalties or other sanctions.
If we face allegations of non-compliance with laws and encounter sanctions, our reputation, revenues and liquidity may suffer, and our drug
candidates and future drugs could be subject to restrictions or withdrawal from the market.
Any government investigation of alleged violations of laws could require us to expend significant time and resources in response, and could
generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to
commercialize and generate revenues from our drugs. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our
company and our operating results will be adversely affected. Additionally, if we are unable to generate revenues from our product sales, our potential
for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.
Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches.
Although to our knowledge we have not experienced any material system failure or security breach to date, if such an event were to occur and
cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, 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 partially rely on our third-party research institution collaborators for research and development of
our drug candidates and other third parties for the manufacture of our drug candidates and to conduct clinical trials, and similar events relating to their
computer systems could also have a material adverse effect on our business.
To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of
confidential or proprietary information, we could incur liability and the further development and commercialization of our drug candidates could be
delayed.
Any failure to comply with the various applicable laws and regulations related to data security, cybersecurity and personal information and
privacy protection could affect our offshore offerings and lead to liabilities, penalties or other regulatory actions, which could have a material and
adverse effect on our business, financial condition and results of operations.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of personal information worldwide is
rapidly evolving and is likely to remain uncertain for the foreseeable future. Regulatory authorities in virtually every jurisdiction in which we operate
have implemented and are considering a number of legislative and regulatory proposals concerning personal data protection.
In China, regulatory authorities have implemented and are considering a number of legislative and regulatory proposals concerning data
protection. For example, China’s Cyber Security Law, which became effective in June 2017, created China’s first national-level data protection for
“network operators,” which may include all organizations in China that provide services over the internet or another information network. Numerous
regulations, guidelines and other measures are expected to be adopted under the umbrella of the Cyber Security Law. Drafts of some of these measures
have now been published, including the draft rules on cross-border transfers published by the China Cyberspace Administration in 2017, which may,
upon enactment, require security review before transferring human health-related data out of China. In addition, certain industry-specific laws and
regulations affect the collection and transfer of personal data in China. For example, the PRC State Council promulgated Regulations on the
Administration of Human Genetic Resources (effective in July 2019), which require approval from the Science and Technology Administration
Department of the State Council where human genetic resources, or HGR, are involved in any international collaborative project and additional approval
for any export or cross-border transfer of the HGR samples or associated data. It is possible that these laws may be interpreted and applied in a manner
that is inconsistent with our practices, potentially resulting in confiscation of HGR samples and associated data, administrative fines and criminal
liabilities. In addition, the interpretation and application of data protection laws in China and elsewhere are often uncertain and in flux.
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On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which took effect on
September 1, 2021. The Data Security Law, among other things, provides for a security review procedure for the data activities that may affect national
security. In addition, the Civil Code of the PRC (“the Civil Code”), which took effective on January 1, 2021, expressly provides the right of privacy and
personal information protection. The PRC Cyber Security Law, the Data Security Law and Civil Code are relatively new and subject to interpretation by
the regulators. Although we only gain access to user information that is necessary for, and relevant to, the businesses conducted, the data we obtain and
use may include information that is deemed as “personal information” or “important data” under the PRC Cyber Security Law, the Civil Code and
related data privacy and protection laws and regulations.
Furthermore, on August 20, 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection
Law, which took effect on November 1, 2021. The Personal Information Protection Law requires, among others, that the processing of personal
information should have a specific and reasonable purpose, and must be conducted in a way that has the least impact on personal rights and interests,
and should be limited to the minimum scope necessary to achieve the processing purpose. Moreover, in December 2021, the CAC and several other
authorities jointly promulgated the revised Cybersecurity Review Measures, which took effect in February 2022. Pursuant to the Cybersecurity Review
Measures, where the relevant activity affects or may affect national security, a critical information infrastructure operator, or a CIIO, that purchases
network products and services, or an internet platform operator that conducts data processing activities, shall be subject to the cybersecurity review. In
addition, internet platform operators processing personal information of more than one million users seeking to be listed on foreign stock markets must
apply for a cybersecurity review. As of the date of this annual report, (i) no detailed rules or implementation relating to the Cybersecurity Review
Measures has been issued by any PRC regulatory authorities, (ii) we have not been informed of being identified as a CIIO or an internet platform
operator, nor have we been required to go through the cybersecurity review procedures, by any PRC governmental authorities, and (iii) we have not been
involved in any investigations on cybersecurity review on such basis, nor have we received any inquiry, notice, warning, or sanctions in such respect, by
any PRC governmental authorities. Taking into consideration the above and that (i) the preclinical and clinical data processed or handled by us in our
business operations, either by its nature or in scale, do not and will not directly or indirectly affect or potentially affect national security in any respect,
and (ii) we have not possessed, and do not anticipate to possess, in the foreseeable future, personal information of more than one million users or
persons, based on our understanding of the Cybersecurity Review Measures, we do not expect that we will be subject to cybersecurity review by the
CAC in connection with our offering of securities to foreign investors and listing on the Nasdaq. Nevertheless, the exact scope of CIIO and “internet
platform operator” under the current regulatory regime remains unclear, and the PRC governmental authorities may have wide discretion in the
interpretation and enforcement of the Cybersecurity Review Measures and the relevant laws, regulations, implementation rules etc. Therefore, it is
uncertain whether we would be deemed as a CIIO or an internet platform operator thereunder.
The PRC laws and regulations concerning these subject matters are continually evolving and not always clear, and the measures we take to
comply with these laws, regulations and industry standards may not always be effective. We cannot assure you that we will comply with such laws and
regulations regarding cybersecurity, information security, privacy and data protection in all respects and any failure or perceived failure to comply with
these laws, regulations or policy may result in inquiries, penalties and other proceedings or actions against us by governmental authorities, customers or
others, such as warnings, fines, making certain required rectification, service suspension and/or other sanctions, as well as negative publicity and
damage to our reputation. It also remains uncertain whether the future regulatory changes would impose additional restrictions on companies like us. We
cannot predict the impact of the future regulatory changes, including impact of any draft measures, at this stage, and we will closely monitor and assess
any development in the rule-making process. If additional requirements are imposed to companies like us, such as the clearance of cybersecurity review,
we face uncertainties as to whether we can fulfill those requirements in a timely manner, or at all. If we are not able to comply with the cybersecurity
and data privacy requirements in a timely manner, or at all, we may be subject to government enforcement actions and investigations, fines, penalties or
suspension of our non-compliant operations, which could materially and adversely affect our business and results of operations.
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In the United States, we are subject to laws and regulations that address privacy, personal information protection and data security at both the
federal and state levels. Numerous laws and regulations, including security breach notification laws, health information privacy laws, and consumer
protection laws, govern the collection, use, disclosure and protection of health-related and other personal information. Given the variability and evolving
state of these laws, we face uncertainty as to the exact interpretation of the new requirements, and we may be unsuccessful in implementing all measures
required by regulators or courts in their interpretation.
In Europe, regulatory authorities have implemented and are considering a number of legislative and regulatory proposals concerning data
protection. For example, the General Data Protection Regulation (EU) 2016/679, or GDPR, which became effective in May 2018, imposes a broad range
of strict requirements on companies subject to the GDPR, such as us, including, but not limited to, requirements relating to having legal bases for
processing personal information relating to identifiable individuals and transferring such information outside the European Economic Area (including to
the United States), providing details to those individuals regarding the processing of their personal information, keeping personal information secure,
having data processing agreements with third parties who process personal information, responding to individuals’ requests to exercise their rights in
respect of their personal information, reporting security breaches involving personal data to the competent national data protection authority and affected
individuals, and recordkeeping. The GDPR substantially increases the penalties to which we could be subject in the event of any non-compliance,
including fines of up to 10,000,000 Euros or up to 2% of our total worldwide annual turnover for certain comparatively minor offenses, or up to
20,000,000 Euros or up to 4% of our total worldwide annual turnover for more serious offenses. Given the new law, we face uncertainty as to the exact
interpretation of the new requirements, and we may be unsuccessful in implementing all measures required by data protection authorities or courts in
interpretation of the new law. National laws of member states of the European Union are in the process of being adapted to the requirements under the
GDPR. Because the GDPR specifically gives member states flexibility with respect to certain matters, national laws may partially deviate from the
GDPR and impose different obligations from country to country, leading to additional complexity and uncertainty.
We expect that we will continue to face uncertainty as to whether our efforts to comply with evolving obligations under global data protection,
privacy and security laws will be sufficient. Any failure or perceived failure by us to comply with applicable laws and regulations could result in
reputational damage or proceedings or actions against us by governmental entities, individuals or others. These proceedings or actions could subject us
to significant civil or criminal penalties and negative publicity, result in the delayed or halted transfer or confiscation of certain personal information,
require us to change our business practices, increase our costs and materially harm our business, prospects, financial condition and results of operations.
In addition, our current and future relationships with customers, vendors, pharmaceutical partners and other third parties could be negatively affected by
any proceedings or actions against us or current or future data protection obligations imposed on them under applicable laws, including the GDPR. In
addition, a data breach affecting personal information, including health information, could result in significant legal and financial exposure and
reputational damage that could potentially have an adverse effect on our business.
Our operating results, our China operations and our worldwide operations could be adversely affected by the outbreak of and response to the
coronavirus or other health crises.
Our business, financial condition and results of operations could be adversely affected by the COVID-19 pandemic. The global pandemic of
COVID-19, the disease caused by a novel strain of coronavirus, has created significant business disruption which could materially and adversely affect
our business and operations. The pandemic has resulted in governments implementing numerous measures to contain COVID-19, such as travel bans
and restrictions, quarantines, shelter-in-place, temporary shutdown of factories, business limitations, or total lock-down orders. In early 2022, the
Omicron variant of COVID-19 made its presence felt in China, especially in Jilin Province, Shenzhen and Shanghai where strict lockdowns were
imposed for a certain period of time. These containment measures are subject to change and may be further tightened. This pandemic has led to
temporary closure of our offices in the first quarter of 2020 and April 2022, causing cancellation of physical participation in meetings, restrictions on
employee travels, and a significant portion of our employees working from home, which resulted in lower work efficiency and productivity, and the
disruption to our business operations and clinical trials.
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The pandemic of COVID-19 and the resulting government measures may materially and adversely impact our planned and ongoing clinical trials
and development. Clinical site initiation, including recruiting clinical site investigators and clinical site staff, and patient enrollment may be delayed due
to prioritization of hospital resources toward the COVID-19 pandemic. The diversion of healthcare resources away from the conduct of clinical trials to
focus on pandemic concerns, including the attention of physicians serving as our clinical trial investigators and hospitals serving as our clinical trial
sites, or other staff supporting the conduct of our clinical trials may significantly disrupt our research activities. Hospitals have also had reduced patient
flow in general during the pandemic period. As a result, the expected timeline for data readouts of our clinical trials and potential submission and filings
will likely be negatively impacted, which would adversely affect and delay our ability to obtain certain regulatory approvals, increase our operating
expenses and have a material adverse effect on our financial condition. Furthermore, we could face the interruption of key clinical activities such as trial
site data monitoring, which may impact the integrity of clinical data. 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, may be impeded, which would also materially and adversely
impact our clinical trial operations. As a result of disruptions caused by the COVID-19 pandemic, we may require additional capital to continue our
research activities, which we may be unable to secure on favorable terms, if at all. In addition, we believe that our business partners, such as our
licensing partners, CROs, CMOs or suppliers, have also experienced and may continue to experience similar or more severe disruptions to their business
operations. Any disruption to the business operations of us and our business partners could materially and adversely affect the development of our drug
candidates, our business, financial condition and results of operations. To the extent the COVID-19 pandemic adversely affects our business and
financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section. See also “Item 5. Operating
and Financial Review and Prospects—A. Operating Results—Impact of the COVID-19 Pandemic” for a detailed description of the impact of the
COVID-19 pandemic on our business.
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.
Natural disasters, acts of war or terrorism, health epidemics, or other factors beyond our control may adversely affect the economy, infrastructure
and livelihood of the people in the regions where we conduct our business. Our operations may be under the threat of floods, earthquakes, sandstorms,
snowstorms, fire or drought, power, water or fuel shortages, failures, malfunction and breakdown of information management systems, unexpected
maintenance or technical problems, or may be susceptible to potential wars or terrorist attacks. Serious natural disasters may result in loss of lives,
injury, destruction of assets and disruption of our business and operations. Acts of war or terrorism may also injure our employees, cause loss of lives,
disrupt our business network and destroy our markets. Any of these factors and other factors beyond our control could have an adverse effect on the
overall business sentiment and environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we
cannot predict and materially and adversely impact our business, financial conditions and results of operations.
Our business and results of operations could be adversely affected by public health crisis (including the COVID-19 global pandemic) and
natural catastrophes or other disasters outside of our control in the locations in which we, our suppliers, CROs, CMOs and other contractors
operate.
Our business could be adversely affected by the effects of epidemics, including COVID-19, avian influenza, severe acute respiratory syndrome,
(SARS), influenza A (H1N1), Ebola or another epidemic. Any such occurrences could cause severe disruption to our daily operations and may even
require a temporary closure of our offices and laboratories. For example, in early 2020, in response to intensifying efforts to contain the spread of
COVID-19, the Chinese government took a number of actions, which included extending the Chinese New Year holiday, quarantining individuals
infected with or suspected of having COVID-19, prohibiting residents from free travel, encouraging employees of enterprises to work remotely from
home and cancelling public activities, among others. The COVID-19 pandemic has also resulted in temporary closure of many corporate offices, retail
stores, manufacturing facilities and factories. As research hospitals and government agencies focus clinical resources on the pandemic, we believe that
there could be some delay in regulatory interactions and inspections and patient recruitment and participation. Meanwhile, the pandemic of COVID-19
continues in the United States and other countries, and related government and private sector responsive actions may cause some delay in our ongoing
clinical trials in the United States. We have taken a series of measures in response to the pandemic, including, among others, remote working
arrangement for our employees. These measures could reduce the capacity and efficiency of our operations, which in turn could negatively affect our
results of operations. The extent to which COVID-19 impacts our results of operations will depend on the future developments of the pandemic,
including new information concerning the global severity of and actions taken to contain the pandemic, which are highly uncertain and unpredictable.
These uncertain and unpredictable factors include, but are not limited to, potential adverse effects of the pandemic on the economy, our suppliers, CROs,
CMOs and other contractors. In addition, our results of operations could be adversely affected to the extent that the pandemic harms the Chinese
economy in general. To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of
heightening many of the other risks described in this annual report, including those relating to our ability to initiate or continue clinical trials for our
drug candidates.
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If we fail to implement and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report
our results of operations, meet our reporting obligations or prevent fraud.
We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Pursuant to Section 404 of the Sarbanes-Oxley Act, we
are required to include a report by our management on our internal control over financial reporting and our independent registered public accounting
firm must include an attestation report on internal control over financial reporting in our annual reports. Our management may conclude that our internal
control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is
effective, our independent registered public accounting firm, after conducting its own independent testing, may issue an adverse report if it is not
satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant
requirements differently from us. In addition, as a public company, our reporting obligations may place a significant strain on our management,
operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required
remediation. Our management, with the participation of our chief executive officer and principal financial officer, and our independent registered public
accounting firm evaluated the effectiveness of our internal control over financial reporting and concluded that our internal control over financial
reporting was effective as of December 31, 2021. See also “Item 15. Controls and Procedures” for a detailed description.
If we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended
from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance
with Section 404. If we fail to establish and maintain adequate internal controls, we could suffer material misstatements in our financial statements and
fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could limit our
access to capital markets, adversely affect our results of operations and lead to a decline in the trading price of the ADSs. Additionally, ineffective
internal controls could expose us to an increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange
on which we list or to other regulatory investigations and civil or criminal sanctions. We could also be required to restate our historical financial
statements.
Our reputation is important to our business success. Negative publicity may adversely affect our reputation and business prospects.
Any negative publicity concerning us, our affiliates or any entity that shares the “I-Mab” name, even if untrue, could adversely affect our
reputation and business prospects. There can be no assurance that negative publicity about us or any of our affiliates or any entity that shares the
“I-Mab” name would not damage our brand image or have a material adverse effect on our business, results of operations and financial condition.
We may be subject to material litigation and regulatory proceedings.
We may be subject to litigation in China and outside China relating to securities law class actions, third-party and principal intellectual property
infringement claims, claims relating to data and privacy protection, employment related cases and other matters in the ordinary course of our business.
Laws, rules and regulations may vary in their scope and overseas laws and regulations may impose requirements that are more stringent than, or which
conflict with, those in China. We have acquired and may acquire companies that may become subject to litigation, as well as regulatory proceedings. In
addition, in connection with litigation or regulatory proceedings we may be subject to in various jurisdictions, we may be prohibited by laws, regulations
or government authorities in one jurisdiction from complying with subpoenas, orders or other requests from courts or regulators of other jurisdictions,
including those relating to data held in or with respect to persons in these jurisdictions. Our failure or inability to comply with the subpoenas, orders or
requests could subject us to fines, penalties or other legal liability, which could have a material adverse effect on our reputation, business, results of
operations and the trading price of our ADSs.
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As a publicly-listed company, we and certain of our subsidiaries face additional exposure to claims and lawsuits inside and outside China. We will
need to defend against these lawsuits, including any appeals should our initial defense be successful. The litigation process may utilize a material portion
of our cash resources and divert management’s attention away from the day-to-day operations of our company, all of which could harm our business.
There can be no assurance that we will prevail in any of these cases, and any adverse outcome of these cases could have a material adverse effect on our
reputation, business and results of operations. In addition, although we have obtained directors’ and officers’ liability insurance, the insurance coverage
may not be adequate to cover our obligations to indemnify our directors and officers, fund a settlement of litigation in excess of insurance coverage or
pay an adverse judgment in litigation.
The existence of litigation, claims, investigations and proceedings may harm our reputation, limit our ability to conduct our business in the
affected areas and adversely affect the trading price of our ADSs. The outcome of any claims, investigations and proceedings is inherently uncertain,
and in any event defending against these claims could be both costly and time-consuming, and could significantly divert the efforts and resources of our
management and other personnel. An adverse determination in any litigation, investigation or proceeding could cause us to pay damages, incur legal and
other costs, limit our ability to conduct business or require us to change the manner in which we operate.
Negative publicity with respect to us, our management, employees, business partners, affiliates, or our industry, may materially and adversely
affect our reputation, business, results of operations and prospect.
Our reputation is vulnerable to many threats that can be difficult or impossible to control, and costly or impossible to remediate. Negative
publicity about us, such as alleged misconduct or improper activities, or negative rumors relating to us, our management, employees, business partners
or affiliates, can harm our business and results of operations, even if they are unsubstantiated or are satisfactorily addressed. Any regulatory inquiries or
investigations or other actions against our management, any perceived unethical, fraudulent, or inappropriate business conduct by us or perceived wrong
doing by any key member of our management team or other employees, our business partners or our affiliates, could harm our reputation and materially
adversely affect our business. Regardless of the merits or final outcome of any such regulatory inquiries or investigations or other actions, our reputation
may be substantially damaged, which may impede our ability to attract and retain talents and business partners and grow our business.
Moreover, any negative media publicity about the biopharmaceutical industry in general or product or service quality problems of other companies
in the industry, including our peers, may also negatively impact our reputation. If we are unable to maintain a good reputation, our ability to attract and
retain key employees and business partners could be harmed which in turn may materially and adversely affect our business, results of operations and
prospect.
Change in business prospects of acquisitions may result in impairment to our goodwill, which could negatively affect our reported results of
operations.
We acquired a controlling interest in I-Mab Bio-tech (Tianjin) Co., Ltd (“I-Mab Tianjin”) in July 2017 and the remaining interest in I-Mab Tianjin
in May 2018. In connection with our acquisition of I-Mab Tianjin, we identified RMB148.8 million of intangible assets and RMB162.6 million of
goodwill of I-Mab Tianjin attributable to core technology and synergy effects expected from combining the operations of the discovery and development
of innovative biologics and the development of clinical stage biologics. We are required to test our goodwill annually, or more frequently if events or
changes in circumstances indicate that it might be impaired. Goodwill is allocated to the reporting units for the purpose of impairment testing. An
impairment loss of goodwill is recognized for the amount by which the carrying amount of the reporting unit exceeds its fair value, and we would be
required to write down the carrying value of our goodwill during the period in which it is determined to be impaired, which would materially and
adversely affect our results of operations.
We are subject to changing law and regulations regarding regulatory matters, corporate governance and public disclosure that have increased
both our costs and the risk of non-compliance.
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We are or will be subject to rules and regulations by various governing bodies, including, for example, the SEC, which is charged with the
protection of investors and the oversight of companies whose securities are publicly traded, and the various regulatory authorities in China and the
Cayman Islands, and to new and evolving regulatory measures under applicable law. Our efforts to comply with new and changing laws and regulations
have resulted in and are likely to continue to result in, increased general and administrative expenses and a diversion of management time and attention
from revenue-generating activities to compliance activities.
Moreover, because these laws, regulations and standards are subject to varying interpretations, their application in practice may evolve over time
as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated
by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes,
we may be subject to penalty and our business may be harmed.
Risks Related to Doing Business in China
The PRC government’s significant oversight and discretion over our business operations could result in a material adverse change in our
operations and the value of our ADSs.
We conduct our businesses primarily through our PRC subsidiaries in China. Our operations in China are governed by PRC laws and regulations.
The PRC government has significant oversight and discretion over the conduct of our business and may intervene or influence our operations as the
government deems appropriate to advance regulatory and societal goals and policy positions. The PRC government has recently published new policies
that significantly affected certain industries and we cannot rule out the possibility that it will in the future release regulations or policies that directly or
indirectly affect our industry or require us to seek additional permission to continue our operations, which could result in a material adverse change in
our operation and/or the value of our ADSs. Therefore, investors of our company and our business face potential uncertainty from actions taken by the
PRC government affecting our business.
The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability
of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections.
Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of
companies that are traded publicly in the United States and a firm registered with the PCAOB, is subject to laws in the United States pursuant to which
the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in China, a
jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the PRC authorities, our auditor is not currently inspected
by the PCAOB.
This lack of the PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our independent
registered public accounting firm. As a result, we and investors in our ADSs are deprived of the benefits of such PCAOB inspections. The inability of
the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public
accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections,
which could cause investors and potential investors in our ADSs to lose confidence in our audit procedures and reported financial information and the
quality of our financial statements.
Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in
2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The
delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.
The HFCAA was signed into law on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a
registered public accounting firm that has not been subject to inspection for the PCAOB for three consecutive years beginning in 2021, the SEC will
prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On
December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements of the HFCAA, pursuant to which the
SEC will identify an issuer as a “Commission Identified Issuer” if the issuer has filed an annual report containing an audit report issued by a registered
public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely, and will then impose a trading prohibition on an
issuer after it is identified as a Commission-Identified Issuer for three consecutive years. On December 16, 2021, the PCAOB issued a report to notify
the SEC of its determination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in
mainland China and Hong Kong. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to
inspect or investigate completely. Therefore, we expect to be identified as a “Commission Identified Issuer” shortly after the filing of this annual report
on Form 20-F.
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Whether the PCAOB will be able to conduct inspections of our auditor before the issuance of our financial statements on Form 20-F for the year
ending December 31, 2023 which is due by April 30, 2024, or at all, is subject to substantial uncertainty and depends on a number of factors out of our,
and our auditor’s, control. If our shares and ADSs are prohibited from trading in the United States, there is no certainty that we will be able to list on a
non-U.S. exchange or that a market for our shares will develop outside of the United States. Such a prohibition would substantially impair your ability to
sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of
our ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material
adverse impact on our business, financial condition, and prospects.
On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required for triggering the
prohibitions under the HFCAA from three years to two. On February 4, 2022, the U.S. House of Representatives passed a bill which contained, among
other things, an identical provision. If this provision is enacted into law and the number of consecutive non-inspection years required for triggering the
prohibitions under the HFCAA is reduced from three years to two, then our shares and ADSs could be prohibited from trading in the United States in
2023.
The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings
under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory
agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic
companies and controlled by PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s
securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and our offshore offerings may ultimately
require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and,
even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our
offshore offerings, or a rescission of such approval if obtained by us, may subject us to sanctions imposed by the CSRC or other PRC regulatory
authorities, which may include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China,
and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.
On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance
with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas
listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal
with the risks and incidents faced by China-based overseas-listed companies. As a follow-up, the CSRC, together with the relevant departments of the
State Council, drafted the Draft Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic
Companies (for public comments), or the Draft Provisions, for public comments from December 24, 2021 until January 23, 2022. Furthermore, based on
the Draft Provisions, the CSRC drafted the Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies
(for public comments), or the Draft Administration Measures, for public comments from December 24, 2021 until January 23, 2022.
The Draft Provisions and the Draft Administration Measures propose to establish a new filing-based regime to regulate overseas offerings and
listings by domestic companies. According to the Draft Provisions and the Draft Administration Measures, an overseas offering and listing by a
domestic company, whether directly or indirectly, must be filed with the CSRC. Specifically, the examination and determination of an indirect offering
and listing will be conducted on a substance-over-form basis, and an offering and listing will be considered as an indirect overseas offering and listing
by a domestic company if the issuer meets the following conditions: (i) the operating income, gross profit, total assets, or net assets of the domestic
enterprise in the most recent fiscal year was more than 50% of the relevant line items in the issuer’s audited consolidated financial statement for that
year; and (ii) senior management personnel responsible for business operations and management are mostly PRC citizens or are ordinarily resident in
the PRC, and the main place of business is in the PRC or carried out in the PRC. According to the Draft Administration Measures, the issuer or its
affiliated domestic company, as the case may be, is obligated to file with the CSRC for its initial public offering, follow-on offering and other equivalent
offering activities. Particularly, the issuer must submit the filing with respect to its initial public offering and listing within three business days after its
initial filing of the listing application, and submit the filing with respect to its follow-on offering within three business days after completion of the
follow-on offering. Failure to comply with the filing requirements may result in fines to the relevant domestic companies, suspension of their businesses,
revocation of their business licenses and operation permits and fines on the controlling shareholder and other responsible persons. The Draft
Administration Measures also sets forth certain regulatory red lines for overseas offerings and listings by domestic enterprises. For more details of the
Draft Provisions and the Draft Administration Measures, please refer to “Regulation – Regulations Relating to Overseas Listing and M&A.”
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As of the date of this annual report, the Draft Provisions and the Draft Administration Measures were released for public comment only. There are
uncertainties as to whether the Draft Provisions and the Draft Administration Measures would be further amended, revised or updated. Substantial
uncertainties exist with respect to the enactment timetable and final content of the Draft Provisions and the Draft Administration Measures. As the
CSRC may formulate and publish guidelines for filings in the future, the Draft Administration Measures does not provide for detailed requirements of
the substance and form of the filing documents. In a Q&A released on its official website, the respondent CSRC official indicated that the proposed new
filing requirement will start with new companies and the existing companies seeking to carry out activities like follow-on financing. As for the filings
for the existing companies, the regulator will grant adequate transition period and apply separate arrangements. Given the substantial uncertainties
surrounding the latest CSRC filing requirements at this stage, we cannot assure you that we will be able to complete the filings and fully comply with
the relevant new rules on a timely basis, if at all.
In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is
determined in the future that approval or filing from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review
under the enacted version of the revised Measures for Cybersecurity Review and the draft of Regulations on the Network Data Security, are required for
our offshore offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such
approval or filing could be rescinded or rejected. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for our
offshore offerings, or a rescission of any such approval or filing if obtained by us, may subject us to sanctions by the CSRC or other PRC regulatory
authorities. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China,
limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that
could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our listed
securities. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings
before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to
settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later
promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our
prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a
waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects,
financial condition, reputation, and the trading price of our listed securities.
Uncertainties with respect to the PRC legal system could materially and adversely affect us.
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The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law
system may be cited for reference but have limited precedential value. The overall effect of legislation over the past four decades has significantly
enhanced the protections afforded to various forms of foreign investments in China. However, China has not developed a fully integrated legal system,
and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. Since these laws and regulations are
relatively new and may be amended from time to time, and the PRC legal system continues to rapidly evolve, and because of the limited number of
published decisions and the nonbinding nature of such decisions, and because the laws and regulations often give the relevant regulator significant
discretion in how to enforce them, the interpretations of many laws, regulations and rules may not be uniform and enforcement of these laws, regulations
and rules involves uncertainties. These uncertainties may affect our judgment on the relevance of legal requirements and our ability to enforce our
contractual rights or tort claims. Besides, the PRC is geographically large and divided into various provinces and municipalities and, as such, different
laws, rules, regulations and policies may have different and varying applications and interpretations in different parts of the PRC. Legislation or
regulations, particularly in local applications, may be enacted without sufficient prior notice or announcement to the public. In addition, the regulatory
uncertainties may be exploited through unmerited or frivolous legal actions or threats in attempts to extract payments or benefits from us. Furthermore,
the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis, or at all, and may
have a retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation.
Agreements that are governed by PRC laws may be more difficult to enforce by legal or arbitral proceedings in the PRC than that in other countries with
different legal systems. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of
resources and management attention.
The ability of U.S. authorities to bring actions for violations of U.S. securities law and regulations against us, our directors or executive
officers may be limited. Therefore, you may not be afforded the same protection as provided to investors in U.S. domestic companies.
The SEC, the U.S. Department of Justice, or the DOJ, and other U.S. authorities often have substantial difficulties in bringing and enforcing
actions against non-U.S. companies and non-U.S. persons. Due to jurisdictional limitations, matters of comity and various other factors, the SEC, the
DOJ and other U.S. authorities may be limited in their ability to pursue bad actors, including in instances of fraud, in emerging markets such as China.
We conduct our operations mainly in China and our assets are mainly located in China. In addition, a majority of our directors and executive officers
reside within China. There are significant legal and other obstacles for U.S. authorities to obtain information needed for investigations or litigation
against us or our directors or executive officers in case we or any of these individuals engage in fraud or other wrongdoing. In addition, local authorities
in China may be constrained in their ability to assist U.S. authorities and overseas investors in connection with legal proceedings. As a result, if we, our
directors or executive officers commit any securities law violation, fraud or other financial misconduct, the U.S. authorities may not be able to conduct
effective investigations or bring and enforce actions against us, our directors, executive officers or other gatekeepers. Therefore, you may not be able to
enjoy the same protection provided by various U.S. authorities as it is provided to investors in U.S. domestic companies.
The pharmaceutical industry in China is highly regulated and such regulations are subject to change which may affect approval and
commercialization of our drugs.
Our research and development operations and manufacturing facilities are mainly in China, which we believe confers clinical, commercial and
regulatory advantages. The pharmaceutical industry in China is subject to comprehensive government regulation and supervision, encompassing the
approval, registration, manufacturing, packaging, licensing and marketing of new drugs. See “Item 4. Information on the Company—B. Business
Overview—Regulation” for a discussion of the regulatory requirements that are applicable to our current and planned business activities in China. In
recent years, the regulatory framework in China regarding the pharmaceutical industry has undergone significant changes, and we expect that it will
continue to undergo significant changes. Any such changes or amendments may result in increased compliance costs on our business or cause delays in
or prevent the successful development or commercialization of our drug candidates in China and reduce the current benefits we believe are available to
us from developing and manufacturing drugs in China. PRC authorities have become increasingly vigilant in enforcing laws in the pharmaceutical
industry and any failure by us or our partners to maintain compliance with applicable laws and regulations or obtain and maintain required licenses and
permits may result in the suspension or termination of our business activities in China. We believe our strategy and approach are aligned with the PRC
government’s regulatory policies, but we cannot ensure that our strategy and approach will continue to be aligned.
Changes in China’s economic, political or social conditions or government policies could have a material and adverse effect on our business,
financial condition and results of operations.
A significant portion of our operations are in China. Our financial condition and results of operations are affected to a large extent by economic,
political, social and legal developments in China.
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The PRC economy differs from the economies of most developed countries in many respects, including the extent of government involvement,
level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures
emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of
improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition,
the PRC government continues to play a significant role in regulating industrial development by imposing industrial policies. The PRC government also
exercises significant control over China’s economic growth by allocating resources, controlling payment of foreign currency-denominated obligations,
setting monetary policy, regulating financial services and institutions and providing preferential treatment to particular industries or companies.
While the PRC economy has experienced significant growth in the past four decades, growth has been uneven, both geographically and among
various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of
resources. Some of these measures may benefit the overall PRC economy, but may also have a negative effect on us. Our business, financial condition
and results of operations could be materially and adversely affected by government control over capital investments or changes in tax regulations that
are applicable to us.
In addition, the PRC government had, in the past, implemented certain measures, including interest rate increases, to control the pace of economic
growth. These measures may cause decreased economic activity in China, which may adversely affect our business and results of operations. More
generally, if the business environment in China deteriorates from the perspective of domestic or international investment, our business in China may also
be adversely affected.
There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations.
Our primary business is governed by PRC laws and regulations. Our primary business operation is supervised by relevant regulatory authorities in
China. The PRC legal system is a civil law system based on written statutes and, unlike the common law system, prior court decisions can only be cited
as reference and have limited precedential value. Additionally, written statutes in the PRC are often principle-oriented and require detailed
interpretations by the enforcement bodies to further apply and enforce such laws. Since 1979, the PRC government has developed a comprehensive
system of laws, rules and regulations in relation to economic matters, such as foreign investment, corporate organization and governance, commerce,
taxation and trade. However, the interpretation and enforcement of these laws, rules and regulations involve uncertainties and may not be as consistent
or predictable as in other more developed jurisdictions. As these laws and regulations are continually evolving in response to changing economic and
other conditions, and because of the limited volume of published cases and their non-binding nature, any particular interpretation of PRC laws and
regulations may not be definitive. Moreover, we cannot predict the effect of future developments in the PRC legal system and regulatory structure. Such
unpredictability towards our contractual, property and procedural rights as well as our rights licensed, approved or granted by the competent regulatory
authority could adversely affect our business and impede our ability to continue our operations. In addition, the PRC legal system is based in part on
government policies and internal rules, some of which are not published on a timely basis, if at all, and which may have a retroactive effect. Hence, we
may not be aware of violation of these policies and rules until after such violation has occurred. Further, the legal protections available to us and our
investors under these laws, rules and regulations may be limited.
In addition, any administrative or court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and
management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and
contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy
than in more developed legal systems. These uncertainties may impede our ability to enforce various contracts we have entered into and could materially
and adversely affect our business, financial condition and results of operations.
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You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or
our management named in this annual report based on foreign laws.
We are a company incorporated under the laws of the Cayman Islands, we conduct substantially all of our operations in China and substantially all
of our assets are located in China. In addition, all our senior executive officers reside within China for a significant portion of the time and some of them
are PRC nationals. As a result, it may be difficult for you to effect service of process upon us or those persons inside China. It may also be difficult for
you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and
our officers and directors as none of them currently resides in the United States or has substantial assets located in the United States. In addition, there is
uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons
predicated upon the civil liability provisions of the securities laws of the United States or any state.
The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and
enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country
where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement
with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil
Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the
basic principles of PRC laws or national sovereignty, security or the public interest. As a result, it is uncertain whether and on what basis a PRC court
would enforce a judgment rendered by a court in the United States.
It may be difficult for overseas regulators to conduct investigation or collect evidence within China.
Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or
practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations
or litigations initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory
authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory
authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism. Furthermore, according to Article
177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or
evidence collection activities within the PRC territory. While detailed interpretation of or implementation rules under Article 177 have yet to be
promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further
increase the difficulties you face in protecting your interests. See also “—General Risks Related to Our ADSs— 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.” for
risks associated with investing in us as a Cayman Islands company.
We may be restricted from transferring our scientific data abroad.
On March 17, 2018, the General Office of the PRC State Council promulgated the Measures for the Management of Scientific Data, or the
Scientific Data Measures, which provide a broad definition of scientific data and relevant rules for the management of scientific data. According to the
Scientific Data Measures, enterprises in China must seek governmental approval before any scientific data involving a state secret may be transferred
abroad or to foreign parties. Further, any researcher conducting research funded, at least in part, by the PRC government is required to submit relevant
scientific data for management by the entity to which such researcher is affiliated before such data may be published in any foreign academic journal.
Currently, as the term “state secret” is not clearly defined, there is no assurance that we can always obtain relevant approvals for sending scientific data
(such as the results of our pre-clinical studies or clinical trials conducted within China) abroad, or to our foreign partners in China.
If we are unable to obtain the necessary approvals in a timely manner, or at all, our research and development of drug candidates may be hindered,
which may materially and adversely affect our business, results of operations, financial conditions and prospects. If relevant government authorities
consider the transmission of our scientific data to be in violation of the requirements under the Scientific Data Measures, we may be subject to specific
administrative penalties imposed by those government authorities.
Changes in international trade policies and rising political tensions, particularly between the U.S. and China, may adversely impact our
business and operating results.
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The U.S. government has made statements and taken certain actions that may lead to potential changes to U.S. and international trade policies
towards China. While the “Phase One” agreement was signed between the United States and China on trade matters, it remains unclear what additional
actions, if any, will be taken by the U.S. or other governments with respect to international trade, tax policy related to international commerce, or other
trade matters. The situation is further complicated by the political tensions between the United States and China that escalated during the COVID-19
pandemic and in the wake of the PRC National People’s Congress’ decision on Hong Kong national security legislation, sanctions imposed by the U.S.
Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the central government of the PRC and the executive
orders issued by the then U.S. President in August 2020 that prohibit certain transactions with certain China-based companies and their respective
subsidiaries. Rising trade and political tensions could reduce levels of trades, investments, technological exchanges and other economic activities
between China and other countries, which would have an adverse effect on global economic conditions, the stability of global financial markets, and
international trade policies.
While we have not started commercialization of drug candidates, any rising trade and political tensions or unfavorable government policies on
international trade, such as capital controls or tariffs, may affect the demand for our drug products, the competitive position of our drug products, the
hiring of scientists and other research and development personnel, and import or export of raw materials in relation to drug development, or prevent us
from selling our drug products in certain countries. In particular, if any new tariffs, legislation and/or regulations are implemented, or if existing trade
agreements are renegotiated or, especially, if the U.S. government takes retaliatory trade actions due to the recent U.S.-China trade and political tension,
such changes could have an adverse effect on our business, financial condition and results of operations. In addition, our results of operations could be
adversely affected if any such tensions or unfavorable government trade policies harm the Chinese economy or the global economy in general.
If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax
consequences to us and our non-PRC shareholders or ADS holders.
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de facto management
body” within China is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The
implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over
the business, productions, personnel, accounts and properties of an enterprise. In 2009, the SAT issued the Circular of the State Administration of
Taxation on Issues Relating to Identification of PRC-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance With the De
Facto Standards of Organizational Management, or Circular 82, which provides certain specific criteria for determining whether the “de facto
management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this Circular only applies to offshore
enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the
circular may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of
all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be
regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its
global income if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in China; (ii) decisions
relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in China; (iii) the
enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in China;
and (iv) at least 50% of voting board members or senior executives habitually reside in China.
Our PRC counsel, JunHe LLP, has advised us that, based on its understanding of the current PRC Laws and Regulations, I-Mab should not be
considered as a PRC resident enterprise for PRC tax income purposes. However, the tax resident status of an enterprise is subject to determination by the
PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities
determine that we are a PRC resident enterprise for enterprise income tax purposes, we could be subject to PRC tax at a rate of 25% on our worldwide
income, which could materially reduce our net income, and we may be required to withhold a 10% withholding tax from dividends we pay to our
shareholders that are non-resident enterprises (including the holders of our ADSs). In addition, non-resident enterprise shareholders (including our ADS
holders) may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or ordinary shares, if such income is
treated as sourced from within China. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual
shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders may be subject to PRC
tax at a rate of 20% in the case of non-PRC individuals (which in the case of dividends may be withheld at source) unless a reduced rate is available
under an applicable tax treaty. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties
between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on
your investment in the ADSs or ordinary shares.
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Failure to renew our current leases or locate desirable alternatives for our leased properties could materially and adversely affect our
business.
We lease properties for our offices and laboratories. We may not be able to successfully extend or renew such leases upon expiration of the current
term on commercially reasonable terms or at all, and may therefore be forced to relocate our affected operations. This could disrupt our operations and
result in significant relocation expenses, which could adversely affect our business, financial condition and results of operations. In addition, we
compete with other businesses for premises at certain locations or of desirable sizes. As a result, even though we could extend or renew our leases, rental
payments may significantly increase as a result of the high demand for the leased properties. In addition, we may not be able to locate desirable
alternative sites for our current leased properties as our business continues to grow and failure in relocating our affected operations could adversely
affect our business and operations.
Certain of our leasehold interests in leased properties have not been registered with the relevant PRC governmental authorities as required by
relevant PRC laws. The failure to register leasehold interests may expose us to potential fines.
We have not registered certain of our lease agreements with the relevant government authorities. Under the relevant PRC laws and regulations, we
may be required to register and file with the relevant government authority executed leases. The failure to register the lease agreements for our leased
properties will not affect the validity of these lease agreements, but the competent housing authorities may order us to register the lease agreements in a
prescribed period of time and impose a fine ranging from RMB1,000 to RMB10,000 for each non-registered lease if we fail to complete the registration
within the prescribed timeframe.
We have granted, and may continue to grant, options and other types of awards under our share incentive plans, which may result in increased
share-based compensation expenses.
We have adopted the Second Amended and Restated 2017 Employee Stock Option Plan (the “2017 Plan”), the Second Amended and Restated
2018 Employee Stock Option Plan (the “2018 Plan”), the 2019 Share Incentive Plan (the “2019 Plan”), the 2020 Share Incentive Plan (the “2020 Plan”),
and the 2021 Share Incentive Plan (the “2021 Plan”) for the purpose of granting share-based compensation awards to employees, directors and
consultants to incentivize their performance and align their interests with ours. We recognize expenses in our consolidated financial statements in
accordance with U.S. GAAP. As of March 31, 2022, the awards that had been granted to our directors, officers, employees and consultants and remained
outstanding included (i) options to purchase an aggregate of 2,207,863 ordinary shares, 1,825,091 ordinary shares, 72,000 ordinary shares, 2,968,998
ordinary shares, 5,066,693 ordinary shares under the 2017 Plan, the 2018 Plan, the 2019 Plan, the 2020 Plan and the 2021 Plan, respectively, excluding
options that were forfeited, cancelled, or exercised after the relevant grant date; and (ii) restricted share units to receive an aggregate of 2,054,792
ordinary shares under the 2020 Plan and an aggregate of 2,426,615 ordinary shares under the 2021 Plan, excluding restricted share units that were
forfeited, cancelled, or vested after the relevant grant date. See “Item 6. Directors, Senior Management and Employees—B. Compensation—Share
Incentive Plans.”
We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees,
and we will continue to grant share-based compensation to employees in the future. As a result, our expenses associated with share-based compensation
may increase, which may have an adverse effect on our results of operations. We may re-evaluate the vesting schedules, lock-up period, exercise price or
other key terms applicable to the grants under our currently effective share incentive plans from time to time. If we choose to do so, we may experience
substantial change in our share-based compensation charges.
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Fluctuations in exchange rates could have a material and adverse effect on our results of operations and the value of your investment.
The conversion of RMB into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The RMB has
fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of RMB against the U.S. dollar and other currencies is affected by
changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. We cannot assure you that RMB
will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S.
government policy may impact the exchange rate between RMB and the U.S. dollar in the future.
Any significant appreciation or depreciation of RMB may materially and adversely affect our revenues, earnings and financial position, and the
value of, and any dividends payable on, our ADSs in U.S. dollars. For example, to the extent that we need to convert U.S. dollars we receive into RMB
to pay our operating expenses, appreciation of RMB against the U.S. dollar would have an adverse effect on the RMB amount we would receive from
the conversion. Conversely, a significant depreciation of RMB against the U.S. dollar may significantly reduce the U.S. dollar equivalent of our
earnings, which in turn could adversely affect the price of our ADSs.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any
hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in
the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In
addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign
currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.
Certain PRC regulations may make it more difficult for us to pursue growth through acquisitions.
The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory
agencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign
investors more time-consuming and complex. Such regulation requires, among other things, that the Ministry of Commerce, or MOFCOM, be notified
in advance of any change of control transaction in which a foreign investor acquires control of a PRC domestic enterprise and involves any of the
following circumstances: (i) any important industry is concerned; (ii) such transaction involves factors that impact or may impact national economic
security; or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand.
Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of National People’s Congress which became effective in 2008 requires
that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by State Administration for
Market Regulation (the “SAMR”), the successive authority of MOFCOM, before they can be completed.
We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may
have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to
conduct our business.
We are a Cayman Islands holding company and we may rely on dividends and other distributions on equity paid by our PRC subsidiaries for our
cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt
we may incur. If any of our PRC subsidiaries incur debt on its own behalf in the future, the instruments governing the debt may restrict their ability to
pay dividends or make other distributions to us. Under PRC laws and regulations, our PRC subsidiaries, each of which is a wholly foreign-owned
enterprise may pay dividends only out of its respective accumulated profits as determined in accordance with PRC accounting standards and regulations.
In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its after-tax profits each year, if any, to fund a certain statutory
reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may
allocate a portion of its after-tax profits based on PRC accounting standards to a staff welfare and bonus fund. The reserve fund and staff welfare and
bonus fund cannot be distributed to us as dividends.
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Our PRC subsidiaries generate primarily all of their revenue in RMB, which is not freely convertible into other currencies. As result, any
restriction on currency exchange may limit the ability of our PRC subsidiaries to use their RMB revenues to pay dividends to us.
The PRC government may continue to strengthen its capital controls, and more restrictions and a substantial vetting process may be put forward
by SAFE for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our PRC
subsidiaries to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or
acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
In addition, the PRC Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable
to dividends payable by PRC companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements
between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.
PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiaries’ ability to change their registered
capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC laws.
In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore
Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 requires PRC residents
(including PRC individuals and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for foreign exchange
administration purpose) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE
Circular 37 further requires amendment to the SAFE registrations in the event of any changes with respect to the basic information of the offshore
special purpose vehicle, such as changes of a PRC individual shareholder, name and operation term, or any significant changes with respect to the
offshore special purpose vehicle, such as increase or decrease of capital contribution, share transfer or exchange, or mergers or divisions. SAFE Circular
37 is applicable to our shareholders who are PRC residents. If our shareholders who are PRC residents fail to make the required registration or to update
the previously filed registration, our PRC subsidiaries may be prohibited from distributing their profits or the proceeds from any capital reduction, share
transfer or liquidation to us, and we may also be prohibited from making additional capital contributions into our PRC subsidiaries.
In February 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct
Investment, or SAFE Notice 13, effective June 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct
investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of
SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.
All of our shareholders who we are aware of being subject to the SAFE regulations have completed the initial registrations with the local SAFE
branch or qualified banks as required by SAFE Circular 37. However, we may not be informed of the identities of all the PRC residents holding direct or
indirect interests in our company, and we cannot provide any assurance that these PRC residents will comply with our request to make or obtain any
applicable registrations or continuously comply with all requirements under SAFE Circular 37 or other related rules. The failure or inability of the
relevant shareholders to comply with the registration procedures set forth in these regulations may subject us to fines and legal sanctions, such as
restrictions on our cross-border investment activities, on the ability of our wholly foreign-owned subsidiaries in China to distribute dividends and the
proceeds from any reduction in capital, share transfer or liquidation to us. Moreover, failure to comply with the various foreign exchange registration
requirements described above could result in liability under PRC law for circumventing applicable foreign exchange restrictions. As a result, our
business operations and our ability to distribute profits could be materially and adversely affected.
Any failure to comply with PRC regulations regarding our employee equity incentive plans may subject the PRC plan participants or us to
fines and other legal or administrative sanctions.
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We and our directors, executive officers and other employees who are PRC citizens or who have resided in China for a continuous period of not
less than one year and who will be granted restricted shares or options are subject to the Notice on Issues Concerning the Foreign Exchange
Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, issued by SAFE in February 2012,
according to which, employees, directors, supervisors and other management members participating in any share incentive plan of an overseas publicly
listed company who are PRC citizens or who are non-PRC citizens residing in China for a continuous period of not less than one year, subject to limited
exceptions, are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company,
and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise
or sale of stock options and the purchase or sale of shares and interests. Failure to complete the SAFE registrations may subject them to fines and legal
sanctions and may also limit our ability to make payments under our equity incentive plans or receive dividends or sales proceeds related thereto, or our
ability to contribute additional capital into our wholly foreign-owned enterprises in China and limit our wholly foreign-owned enterprises’ ability to
distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional equity incentive plans for our directors
and employees under PRC law.
In addition, the SAT has issued circulars concerning employee share options or restricted shares. Under these circulars, employees working in
China who exercise share options, or whose restricted shares vest, will be subject to PRC individual income tax. The PRC subsidiaries of an overseas
listed company have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold
individual income taxes of those employees related to their share options or restricted shares. If the employees fail to pay, or the PRC subsidiaries fail to
withhold applicable income taxes, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC government authorities.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency
conversion may delay or prevent us from making loans to our PRC subsidiaries or making additional capital contributions to our wholly foreign-
owned subsidiaries in China, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
We are an offshore holding company conducting our operations in China through our PRC subsidiaries. We may make loans to our PRC
subsidiaries subject to the approval from governmental authorities and limitation on the available loan amount, or we may make additional capital
contributions to our wholly foreign-owned subsidiaries in China.
Any loans to our wholly foreign-owned subsidiaries in China, which are treated as foreign-invested enterprises under PRC law, are subject to PRC
regulations and foreign exchange loan registrations. For example, loans by us to our wholly foreign-owned subsidiaries in China to finance their
activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE. In addition, a foreign-invested enterprise can only
use its capital pursuant to the principle of authenticity and self-use within its business scope. The capital of a foreign-invested enterprise cannot be used
for the following purposes: (i) directly or indirectly used for payment beyond the business scope of the enterprises or the payment prohibited by relevant
laws and regulations; (ii) directly or indirectly used for investment in securities or investments other than banks’ principal-secured products unless
otherwise provided by relevant laws and regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly permitted in the
business license; and (iv) paying the expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate
enterprises).
SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement
of Capital of Foreign-invested Enterprises, or SAFE Circular 19, effective June 2015, in replacement of the Circular on the Relevant Operating Issues
Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, the
Notice from the State Administration of Foreign Exchange on Relevant Issues Concerning Strengthening the Administration of Foreign Exchange
Businesses, and the Circular on Further Clarification and Regulation of the Issues Concerning the Administration of Certain Capital Account Foreign
Exchange Businesses. According to SAFE Circular 19, the flow and use of RMB capital converted from foreign currency-denominated registered
capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of
inter-enterprise loans or the repayment of banks loans that have been transferred to a third party. Although SAFE Circular 19 allows RMB capital
converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within China, it also
reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or
indirectly used for purposes beyond its business scope. Thus, it is unclear whether SAFE will permit such capital to be used for equity investments in
China in actual practice. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign
Exchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective on June 9, 2016, which reiterates some of the rules set
forth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a
foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises unless
expressly permitted in the business license. Violations of SAFE Circular 19 and SAFE Circular 16 could result in administrative penalties. SAFE
Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from our initial
public offering, to our PRC subsidiaries, which may adversely affect our liquidity and our ability to fund and expand our business in China.
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In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies,
we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely
basis, if at all, with respect to future loans to our PRC subsidiaries or future capital contributions by us to our wholly foreign-owned subsidiaries in
China. As a result, uncertainties exist as to our ability to provide prompt financial support to our PRC subsidiaries when needed. If we fail to complete
such registrations or obtain such approvals, our ability to use foreign currency, including the proceeds we received from our initial public offering, to
capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to
fund and expand our business.
We and our shareholders face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises or other assets
attributable to a PRC establishment of a non-PRC company.
On February 3, 2015, the SAT issued the Bulletin on Issues of Enterprise Income Tax and Indirect Transfers of Assets by Non-PRC Resident
Enterprises, or Bulletin 7. Pursuant to this Bulletin, an “indirect transfer” of “PRC taxable assets,” including equity interests in a PRC resident
enterprise, by non-PRC resident enterprises may be recharacterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not
have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains
derived from such indirect transfer may be subject to PRC enterprise income tax. When determining whether there is a “reasonable commercial
purpose” of the transaction arrangement, factors to be taken into consideration include: whether the main value of the equity interest of the relevant
offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprise mainly consist of direct or indirect investment
in China or if its income mainly derives from China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets
have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the shareholders, business model
and organizational structure of the overseas enterprise; income tax payable overseas for the transaction of indirect transfer of PRC taxable assets; the
replicability of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar
arrangements. On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding
of Non-resident Enterprise Income Tax at Source, or Bulletin 37, which came into effect on December 1, 2017. Bulletin 37 further clarifies the practice
and procedure of the withholding of non-resident enterprise income tax.
Late payment of applicable tax will subject the transferor to default interest. Gains derived from the sale of shares by investors are not subject to
the PRC enterprise income tax pursuant to Bulletin 7 where such shares were acquired in a transaction through a public stock exchange. However, the
sale of ADSs or ordinary shares by a non-PRC resident enterprise outside a public stock exchange may be subject to PRC enterprise income tax under
Bulletin 7.
There are uncertainties as to the application of Bulletin 7. Bulletin 7 may be determined by the tax authorities to be applicable to the sale of the
shares of our offshore subsidiaries or investments where PRC taxable assets are involved. The transferors and transferees may be subject to the tax filing
and withholding or tax payment obligation, while our PRC subsidiaries may be requested to assist in the filing. Furthermore, we, our non-resident
enterprises and PRC subsidiaries may be required to spend valuable resources to comply with Bulletin 7 or to establish that we and our non-resident
enterprises should not be taxed under Bulletin 7, for our previous and future restructuring or disposal of shares of our offshore subsidiaries, which may
have a material adverse effect on our financial condition and results of operations.
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The PRC tax authorities have the discretion under Bulletin 7 to make adjustments to the taxable capital gains based on the difference between the
fair value of the taxable assets transferred and the cost of investment. If the PRC tax authorities make adjustments to the taxable income of the
transactions under Bulletin 7 / Bulletin 37, our income tax costs associated with such potential acquisitions or disposals will increase, which may have
an adverse effect on our financial condition and results of operations.
Recent litigation and negative publicity surrounding China-based companies listed in the U.S. may result in increased regulatory scrutiny of
us and negatively impact the trading price of the ADSs and could have a material adverse effect upon our business, including our results of
operations, financial condition, cash flows and prospects.
We believe that litigation and negative publicity surrounding companies with operations in China that are listed in the U.S. have negatively
impacted stock prices for such companies. Various equity-based research organizations have published reports on China-based companies after
examining, among other things, their corporate governance practices, related party transactions, sales practices and financial statements that have led to
special investigations and stock suspensions on national exchanges. Any similar scrutiny of us, regardless of its lack of merit, could result in a diversion
of management resources and energy, potential costs to defend ourselves against rumors, decreases and volatility in the ADS trading price, and increased
directors and officers insurance premiums and could have a material adverse effect upon our business, including our results of operations, financial
condition, cash flows and prospects.
General Risks Related to Our ADSs
The trading price of our ADSs may be volatile, which could result in substantial losses to you.
For the period from January 1, 2021 to the date of this annual report, the trading price of our ADSs ranged from US$11.70 to US$85.40 per ADS.
The trading price of our ADSs can be volatile and fluctuate widely in response to a variety of factors, many of which are beyond our control. In addition,
the performance and fluctuation of the market prices of other companies with business operations located mainly in the PRC that have listed their
securities in the United States may affect the volatility in the price of and trading volumes for our ADSs. Some of these companies have experienced
significant volatility. The trading performances of these PRC companies’ securities may affect the overall investor sentiment towards other PRC
companies listed in the United States and consequently may impact the trading performance of our ADSs.
In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for specific business reasons,
including:
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announcements of regulatory approval or a complete response letter, or specific label indications or patient populations for a drug’s use, or
changes or delays in the regulatory review process;
announcements of therapeutic innovations, new products, acquisitions, strategic relationships, joint ventures or capital commitments by us
or our competitors;
adverse actions taken by regulatory agencies with respect to our clinical trials, manufacturing supply chain or sales and marketing
activities;
any adverse changes to our relationship with manufacturers or suppliers;
the results of our testing and clinical trials;
the results of our efforts to acquire or license additional drug candidates;
variations in the level of expenses related to our existing drugs and drug candidates or pre-clinical, clinical development and
commercialization programs;
any intellectual property infringement actions in which we may become involved;
announcements concerning our competitors or the pharmaceutical industry in general;
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fluctuations in product revenue, sales and marketing expenses and profitability; manufacture, supply or distribution shortages;
variations in our results of operations;
announcements about our results of operations that are not in line with analyst expectations, the risk of which is enhanced because it is our
policy not to give guidance on results of operations;
publication of operating or industry metrics by third parties, including government statistical agencies, that differ from expectations of
industry or financial analysts;
changes in financial estimates by securities research analysts;
media reports, whether or not true, about our business, our competitors or our industry;
additions to or departures of our management;
fluctuations of exchange rates between the RMB and the U.S. dollar;
release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares or ADSs;
sales or perceived potential sales of additional ordinary shares or ADSs by us, our executive officers and directors or our shareholders;
any share repurchase program;
general economic and market conditions and overall fluctuations in the U.S. equity markets;
changes in accounting principles; and
changes or developments in the PRC or global regulatory environment.
In addition, the stock market, in general, and pharmaceutical and biotechnology companies have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors may
negatively affect the market price of our ADSs, regardless of our actual operating performance. Further, the current volatility in the financial markets
and related factors beyond our control may cause the market price of our ADSs to decline rapidly and unexpectedly.
We may face an increased risk of securities class action litigation.
Historically, securities class action litigation has often been brought against a company following a significant decline in the market price of its
securities. This risk is especially relevant for us because biotechnology and biopharmaceutical companies have experienced significant share price
volatilities in recent years. If we were to face lawsuits, it could lead to substantial costs and a distraction of management’s attention and resources, which
could harm our business.
We cannot guarantee that any share repurchase program will be fully consummated or that any share repurchase program will enhance long-
term shareholder value, and share repurchases could increase the volatility of the price of our ADSs and could diminish our cash reserves.
On July 15, 2020, we announced that our board of directors has authorized a share repurchase program, pursuant to which we were authorized to
repurchase our own ordinary shares, in the form of ADSs, with an aggregate value of up to US$20.0 million during a twelve-month period effective
upon and from the date on which a formal stock repurchase plan engagement agreement is signed with a qualified broker-dealer(s). In July 2021, our
board of directors has authorized a new stock repurchase program. With our board’s authorization, we may repurchase up to US$40 million of its
ordinary shares in the form of ADS over the next 12 months. From July 15, 2020 to the date of this annual report, we did not repurchase any ADSs
under the share repurchase programs that we adopted. Our share repurchase program could affect the price of our ADSs and increase volatility and may
be suspended or terminated at any time. In addition, certain senior management members and executive personnel also executed share purchases from
the open market in the first quarter of 2022. Nevertheless, there can be no assurance that any of our share repurchase program will be fully
consummated or that such share repurchase program could enhance long-term shareholder value.
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If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, or if they
adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline.
The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our
business. If research analysts do not establish and maintain adequate research coverage or if one or more of the analysts who covers us downgrades our
ADSs or publishes inaccurate or unfavorable research about our business, the market price for our ADSs would likely decline. If one or more of these
analysts cease coverage of our company or fail to publish reports on us regularly, we could lose visibility in the financial markets, which, in turn, could
cause the market price or trading volume for our ADSs to decline.
Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ADSs for return on your
investment.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business.
As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a
source for any future dividend income.
Our board of directors has complete discretion as to whether to distribute dividends, subject to our memorandum and articles of association and
certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed
the amount recommended by our directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend out of either profit or share
premium account of the company, provided that in no circumstances may a dividend be paid out of share premium if this would result in the company
being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to declare and pay dividends, the
timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus,
the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed
relevant by our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation
of our ADSs. There is no guarantee that our ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not
realize a return on your investment in our ADSs and you may even lose your entire investment in our ADSs.
Substantial future sales or perceived potential sales of our ADSs in the public market could cause the price of our ADSs to decline.
Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur, could adversely affect the market
price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. On December 14, 2020, the SEC
declared effective a registration statement on Form F-1, under which the selling shareholders identified therein may offer, from time to time, up to
25,123,751 ordinary shares, including ordinary shares represented by ADSs of our company. On March 23, 2021, the SEC declared effective a post-
effective amendment to this registration statement on Form F-1 that terminates the effectiveness of this registration statement and removes from
registration all securities registered but not sold under this registration statement. On March 19, 2021, we filed a prospectus supplement as part of a
registration statement on Form F-3 (File No. 333-252793), under which the selling shareholders identified therein may offer, from time to time, up to
19,050,555 ordinary shares, including ordinary shares represented by ADSs of our company. On March 31, 2022, we filed another prospectus
supplement as part of a registration statement on Form F-3 (File No. 333-252793), under which the selling shareholders identified therein may offer,
from time to time, up to 37,749,951 ordinary shares, including ordinary shares represented by ADSs of our company. Remaining ordinary shares issued
and outstanding will be available for sale in the public market subject to volume and other restrictions as applicable under Rules 144 and 701 under the
Securities Act. Certain holders of our ordinary shares may cause us to register under the Securities Act the sale of their shares. Registration of these
shares under the Securities Act would result in ADSs representing these shares becoming freely tradable without restriction under the Securities Act
immediately upon the effectiveness of the registration. Sales of these registered shares in the form of ADSs in the public market, or sales of securities
held by our significant shareholders or any other shareholder or the availability of these securities for future sale could cause the price of our ADSs to
decline.
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The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise the same rights as
our shareholders.
Holders of ADSs do not have the same rights as our shareholders. As a holder of our ADSs, you will not have any direct right to attend general
meetings of our shareholders or to cast any votes at such meetings. As an ADS holder, you will only be able to exercise the voting rights carried by the
underlying ordinary shares indirectly by giving voting instructions to the depositary in accordance with the provisions of the deposit agreement. Under
the deposit agreement, you may vote only by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will
try, as far as is practicable, to vote the ordinary shares underlying your ADSs in accordance with your instructions. If we ask for your instructions, then
upon receipt of your voting instructions, the depositary will try to vote the underlying ordinary shares in accordance with these instructions. If we do not
instruct the depositary to ask for your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so.
You will not be able to directly exercise your right to vote with respect to the underlying ordinary shares unless you withdraw the shares, and become
the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened, you may not receive sufficient
advance notice of the meeting to withdraw the shares underlying your ADSs and become the registered holder of such shares to allow you to attend the
general meeting and to vote directly with respect to any specific matter or resolution to be considered and voted upon at the general meeting. In addition,
under our memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general
meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of
members or the setting of such a record date may prevent you from withdrawing the ordinary shares underlying your ADSs and becoming the registered
holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. If we ask for your
instructions, the depositary will notify you of the upcoming vote and will arrange to deliver our voting materials to you. We have agreed to give the
depositary notice of shareholder meetings sufficiently in advance of such 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 the underlying ordinary shares represented by your ADSs. 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 direct how the shares underlying your ADSs are voted, and you may have no legal remedy if
the shares underlying your ADSs are not voted as you requested. In addition, in your capacity as an ADS holder, you will not be able to call a
shareholders’ meeting. Except in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote the ordinary shares
underlying your ADSs if you do not vote at shareholders’ meetings, which could adversely affect your interests.
Under the deposit agreement for the ADSs, if you do not vote, the depositary will give us a discretionary proxy to vote the ordinary shares
underlying your ADSs at shareholders’ meetings unless:
•
•
•
•
we have instructed the depositary that we do not wish a discretionary proxy to be given;
we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;
a matter to be voted on at the meeting would have an adverse impact on shareholders; or
the voting at the meeting is to be made on a show of hands.
The effect of this discretionary proxy is that you cannot prevent our ordinary shares underlying your ADSs from being voted, except under the
circumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders of our ordinary
shares are not subject to this discretionary proxy.
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Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights
available to you in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an
exemption from the registration requirements is available. Under the deposit agreement, the depositary will not make rights available to you unless both
the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under
the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a
registration statement to be declared effective and we may not be able to establish a necessary exemption from registration under the Securities Act.
Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.
You may not receive cash dividends if the depositary decides it is impractical to make them available to you.
The depositary will pay cash dividends on the ADSs only to the extent that we decide to distribute dividends on our ordinary shares or other
deposited securities, and we do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. To the extent that
there is a distribution, the depositary of our ADSs has agreed to pay to you 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 pursuant to the deposit agreement. You will receive these distributions
in proportion to the number of ordinary shares your ADSs represent. However, the depositary may, at its discretion, decide that it is inequitable or
impractical to make a distribution available to any holders of ADSs. For example, the depositary may determine that it is not practicable to distribute
certain property through the mail, or that the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may
decide not to distribute such property to you.
You may be subject to limitations on transfer of your ADSs.
Your 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. The depositary may close its books from time to time for a number of reasons,
including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS
holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. 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.
Certain judgments obtained against us by our shareholders may not be enforceable.
We are an exempted company incorporated under the laws of the Cayman Islands. We conduct our operations in China and substantially all of our
assets are located in China. In addition, our directors and executive officers, and some of the experts named in this annual report, reside within China,
and most of the assets of these persons are located within China. As a result, it may be difficult or impossible for you to bring an action against us or
against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or
otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of the PRC may render you unable to
enforce a judgment against our assets or the assets of our directors and officers.
ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable
outcomes to the plaintiff(s) in any such action.
The deposit agreement governing the ADSs representing our ordinary shares provides that, subject to the depositary’s right to require a claim to be
submitted to the federal or state courts in the City of New York have jurisdiction to hear and determine claims arising under the deposit agreement and in
that regard, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary
arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws. Also, we may
amend or terminate the deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you
agree to be bound by the deposit agreement as amended.
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If we or the depositary were to oppose a jury trial demand based on such waiver, the court would determine whether the waiver was enforceable in
the facts and circumstances of that case in accordance with applicable state and federal law, including whether a party knowingly, intelligently and
voluntarily waived the right to a jury trial. The waiver to right to a jury trial of the deposit agreement is not intended to be deemed a waiver by any
holder or beneficial owner of ADSs of our or the depositary’s compliance with the U.S. federal securities laws and the rules and regulations promulgated
thereunder.
If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the
deposit agreement or the ADSs, including claims under U.S. federal securities laws, you or such other holder or beneficial owner may not be entitled to
a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is
brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, in which the
trial would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including
results that could be less favorable to the plaintiff(s) in any such action.
Nevertheless, if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the
deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or
beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and
regulations promulgated thereunder.
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 are an exempted company incorporated under the laws of the Cayman Islands with limited liability. Our corporate affairs are governed by our
memorandum and articles of association, the Companies Act, Cap. 22 (Act 3 of 1961, as consolidated and revised) of the Cayman Islands, which we
refer to as the Companies Act, and the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our
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, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands.
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. 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 may not have standing to initiate a shareholder derivative action in a 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. Our directors have discretion under our articles of association 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.
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.
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Our memorandum and articles of association contains anti-takeover provisions that could discourage a third party from acquiring us and
adversely affect the rights of holders of our ordinary shares and the ADSs.
Our memorandum and articles of association contains provisions to limit the ability of others to acquire control of our company or cause us to
engage in change of control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a
premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar
transaction. Our board of directors has the authority to issue preferred shares in one or more series and to fix their designations, powers, preferences,
privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion
rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our ordinary
shares, in the form of ADS or otherwise. Preferred shares could be issued with terms calculated to delay or prevent a change in control of our company
or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our ADSs may fall and the voting
and other rights of the holders of our ordinary shares and ADSs may be materially and adversely affected.
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to U.S. domestic public companies.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and
regulations in the United States that are applicable to U.S. domestic issuers, including:
•
•
•
•
the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;
the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under
the Exchange Act;
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
the selective disclosure rules by issuers of material nonpublic information under Regulation FD promulgated by SEC.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our
results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the Nasdaq Stock Market. Press releases relating to
financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to
the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be
afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to
corporate governance matters that differ significantly from the Nasdaq Stock Market’s corporate governance requirements; these practices may
afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq Stock Market’s corporate governance
requirements.
As a Cayman Islands company listed on the Nasdaq Stock Market, we are subject to the Nasdaq Stock Market’s corporate governance
requirements. However, the Nasdaq Stock Market rules permit a foreign private issuer like us to follow the corporate governance practices of its home
country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq Stock
Market’s corporate governance requirements. For example, neither the Companies Act nor our memorandum and articles of association requires a
majority of our directors to be independent and we could include non-independent directors as members of our compensation committee and nominating
committee, and our independent directors would not necessarily hold regularly scheduled meetings at which only independent directors are present.
Additionally, our home country practices provide that shareholder approval may not be required when a plan or other equity compensation arrangement
is established or materially amended. As we have chosen, or may from time to time to choose, to follow home country practice exemptions with respect
to certain corporate matters, such as the ones mentioned above, our shareholders may be afforded less protection than they otherwise would under the
Nasdaq Stock Market’s corporate governance requirements applicable to U.S. domestic issuers. See also “Item 16G. Corporate Governance.”
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There can be no assurance that we will not be classified as a passive foreign investment company, or PFIC, for U.S. federal income tax
purposes for any taxable year, which could subject U.S. investors in our ADSs or ordinary shares to significant adverse U.S. income tax
consequences.
We will be classified as a passive foreign investment company, or PFIC, for any taxable year if either (i) 75% or more of our gross income for
such year consists of certain types of “passive” income or (ii) 50% or more of the value of our assets (generally determined on the basis of quarterly
average) during such year produce or are held for the production of passive income. We do not believe that we were a PFIC for the taxable year ended
December 31, 2021. Although we do not believe we were a PFIC for the taxable year ended December 31, 2021, no assurance can be given with respect
to our PFIC status for the current taxable year or any future taxable year. The determination of whether we are or will become a PFIC is uncertain,
because it is a fact-intensive inquiry made on an annual basis that depends, in part, on the composition of our income and assets. Fluctuations in the
market price of our ADSs may cause us to become a PFIC for the current or subsequent taxable years because the value of our assets for the purpose of
the asset test may be determined by reference to the market price of our ADSs from time to time (which may be volatile for biopharmaceutical
companies, such as ours, that have not yet achieved commercialization with respect to any of their products). In particular, recent declines in the market
price of our ADSs significantly increased our risk of becoming a PFIC. The market price of our ADSs may continue to fluctuate considerably and,
consequently, we cannot assure you of our PFIC status for any taxable year. The composition of our income and assets may also be affected by how, and
how quickly, we use our liquid assets. Under circumstances where our revenue from activities that produce passive income increases relative to our
revenue from activities that produce non-passive income, or where we determine not to deploy cash for active purposes, our risk of becoming classified
as a PFIC will substantially increase. Furthermore, prior to the commercialization of any of our drug candidates, interest and other passive income could
constitute more than 75% of gross income for any taxable year. In addition, because there are uncertainties in the application of the relevant rules, it is
possible that the IRS may challenge our classification of certain income and assets as non-passive or our valuation of our tangible and intangible assets,
each of which may result in our being or becoming a PFIC for the current or subsequent taxable years.
If we are a PFIC in any taxable year, a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—United States Federal Income
Tax Considerations”) may incur significantly increased U.S. income tax on gain recognized on the sale or other disposition of the ADSs or ordinary
shares and on the receipt of distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess distribution”
under the U.S. federal income tax rules and such holder may be subject to burdensome reporting requirements. Further, if we are a PFIC for any year
during which a U.S. Holder holds our ADSs or ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which
such U.S. Holder holds our ADSs or ordinary shares. For more information see “Item 10. Additional Information––E. Taxation—United States Federal
Income Tax Considerations—Passive Foreign Investment Company Considerations.”
We expect to incur increased costs and become subject to additional rules and regulations as a result of being a public company, particularly
after we ceased to qualify as an “emerging growth company.”
As a public company, we expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The
Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq Global Market, impose various requirements on the
corporate governance practices of public companies. We were an “emerging growth company” as defined in the U.S. Jumpstart Our Business Startups
Act of 2012, or the JOBS Act, and we historically took advantage of certain exemptions from various requirements applicable to other public companies
that are not emerging growth companies including, most significantly, exemption from the auditor attestation requirement under Section 404 of the
Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting.
As we no longer qualify as an emerging growth company, we are no longer able to take advantage of any reduced disclosure and other
requirements that are available to emerging growth companies. We expect to incur significant expenses and devote substantial management effort
toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. We
also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance,
and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In
addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified
persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules
and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.
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In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the
market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention
and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend
the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition,
if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial
condition and results of operations.
ITEM 4.
INFORMATION ON THE COMPANY
A. History and Development of the Company
We commenced our operations in November 2014, when our predecessor Third Venture Biopharma (Nanjing) Co., Ltd (“Third Venture”) was
established.
I-Mab was established in June 2016 under the laws of the Cayman Islands as our offshore holding company. In July 2016, I-Mab established
I-Mab Biopharma Hong Kong Limited (“I-Mab Hong Kong”), as its intermediary holding company. In August 2016, I-Mab Hong Kong established a
wholly-owned PRC subsidiary, I-Mab Biopharma Co., Ltd. (“I-Mab Shanghai”). In September 2016, the assets and operations of Third Venture were
consolidated into I-Mab Shanghai.
In July 2017, I-Mab Hong Kong acquired a controlling interest in I-Mab Bio-tech (Tianjin) Co., Ltd. (“I-Mab Tianjin”), formerly known as Tasgen
Bio-tech (Tianjin) Co., Ltd., a company focused on CMC management of biologics in China. Through an internal corporate restructuring, I-Mab Tianjin
became the 100% owner of I-Mab Shanghai in September 2017 and I-Mab Hong Kong acquired the remaining interest in I-Mab Tianjin in May 2018,
becoming the 100% owner of I-Mab Tianjin.
In February 2018, I-Mab Hong Kong established in Maryland, United States, a wholly-owned subsidiary I-Mab Biopharma US Limited (“I-Mab
US”), as the hub for the discovery and development of the drug candidates in our Global Portfolio.
On January 17, 2020, our ADSs commenced trading on the Nasdaq Global Market under the symbol “IMAB.” We raised from our initial public
offering approximately US$103.7 million in net proceeds, after the underwriters exercise in part their over-allotment option to purchase additional
ADSs.
In 2020, we have taken concrete steps to execute our plan to invest in a comprehensive biologics manufacturing facility in Hangzhou, China (the
“Hangzhou Facility”) as part of our strategic plan to become a specialty biopharma company. The construction of the Hangzhou Facility commenced in
April 2021. The Hangzhou Facility targets to have a pilot capacity of two production lines (one line configured with 2 x 2,000L and the other line with 1
x 2,000L) around the middle of 2022 and commercially progressive capacity up to 8 x 4,000L to begin operation by the end of 2023 or early 2024. The
project will be financed by a combination of internal and external sources. In September 2020, a group of domestic investors in China invested a total of
US$120 million (in RMB equivalent) in cash. Upon closing, we, through our wholly-owned subsidiary and parties acting in concert, remain the majority
shareholder of I-Mab Biopharma (Hangzhou) Limited (“I-Mab Hangzhou”), the entity holding the Hangzhou Facility. I-Mab Hangzhou became an
affiliate of our company on the closing date. See Note 10 to the Consolidated Financial Statements for additional information of our investment in I-Mab
Hangzhou.
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In September 2020, we, through I-Mab Biopharma Co., Ltd. and I-Mab Biopharma US Limited, each a wholly-owned subsidiary of our company,
entered into a broad global collaboration with AbbVie Ireland Unlimited Company (“AbbVie”), a leading global, research-based biopharmaceutical
company. Pursuant to this collaboration, we grant AbbVie a global license, excluding mainland China, Hong Kong and Macau, to develop and
commercialize lemzoparlimab. We retain the rights to develop and commercialize lemzoparlimab (as well as certain other compounds directed against
CD47) in mainland China, Hong Kong and Macau. AbbVie will conduct further global clinical trials (which we may elect to co-fund) to evaluate
lemzoparlimab in multiple cancers. This deal also allows for potential collaboration on future CD47-related therapeutic agents, including CD47-based
bispecific antibodies and combination therapies with lemzoparlimab and AbbVie’s venetoclax (Venclexta®). Each party will have the opportunity,
subject to rights of first negotiation to further licenses, to explore certain of each other’s related CD47-antibody programs in their respective territories.
In addition, we and AbbVie will share manufacturing responsibilities, with AbbVie being the primary manufacturer for supply outside of mainland
China, Hong Kong and Macau and us being the primary manufacturer for supply in mainland China, Hong Kong and Macau. We believe that this
collaboration will accelerate the establishment of our commercial production operations in China. Pursuant to this collaboration, AbbVie has paid us an
upfront payment of US$180 million and milestone payment of US$20 million. We will also be eligible to receive up to US$1.74 billion in further
success-based development, regulatory and sales milestone payments for lemzoparlimab, of which US$840 million are based on clinical development
and regulatory approval milestones, with the remainder based on commercial milestones. Upon commercialization of lemzoparlimab, AbbVie will also
pay tiered royalties from low-to-mid teen percentages on global net sales outside of mainland China, Hong Kong and Macau. In addition, AbbVie has a
license and right of first negotiation to further develop and commercialize two additional lemzoparlimab-based bispecific antibodies discovered and
currently being developed by us and we cannot commercialize products containing these two additional lemzoparlimab-based bispecific antibodies
outside of mainland China, Hong Kong and Macau even if AbbVie does not exercise its right of first negotiation or we are unable to come to financial
terms on such products. The potential value of each such license is minimum US$500 million in upfront and milestone payments, for a combined total
of no less than US$1 billion.
In September 2020, we entered into definitive subscription agreements (collectively, the “Subscription Agreements,” and each, a “Subscription
Agreement”) with a consortium of institutional investors, pursuant to which we agree to issue and sell to these investors (i) a total of 29,133,502
ordinary shares of our company for an aggregate purchase price of approximately US$418 million (equivalent to a price of US$33 per ADS); and
(ii) warrants (the “Investor Warrants”) to subscribe for up to 5,341,267 ordinary shares of our company at an exercise price of US$45 per ADS, subject
to the closing conditions set forth in the Subscription Agreements. On September 11, 2020, we issued 20,421,378 ordinary shares to these investors
pursuant to the Subscription Agreements. The Subscription Agreement with the Hillhouse Entities contemplates two closings. The first closing occurred
in September 2020 and the second closing occurred in December 2020. The closings of the Subscription Agreements with investors other than the
Hillhouse Entities have occurred in September 2020.
On December 14, 2020, the SEC declared effective a registration statement on Form F-1, under which the selling shareholders identified therein
may offer, from time to time, up to 25,123,751 ordinary shares, including ordinary shares represented by ADSs of our company. On March 23, 2021, the
SEC declared effective a post-effective amendment to this registration statement on Form F-1 that terminates the effectiveness of this registration
statement and removes from registration all securities registered but not sold under this registration statement. On March 19, 2021, we filed a prospectus
supplement as part of a registration statement on Form F-3 (File No. 333-252793), under which the selling shareholders identified therein may offer,
from time to time, up to 19,050,555 ordinary shares, including ordinary shares represented by ADSs of our company. On March 31, 2022, we filed
another prospectus supplement as part of a registration statement on Form F-3 (File No. 333-252793), under which the selling shareholders identified
therein may offer, from time to time, up to 37,749,951 ordinary shares, including ordinary shares represented by ADSs of our company. We will not
receive any of the proceeds from the sale of the ordinary shares or ADSs by the selling shareholders.
On July 27, 2021, our board of directors approved a preliminary proposal for the potential dual listing of our newly issued shares on the Science
and Technology Innovation Board of the Shanghai Stock Exchange (the “STAR Board”). Our board also authorized certain officers to execute the
Listing Tutoring Agreement between us and the Sponsor China International Capital Corporation Limited (the “Tutoring Agreement”). The completion
of the proposed dual listing on the STAR Board is conditional upon and subject to, among other things, market conditions, further approval of our board
of directors and potentially of our shareholders at a general meeting of our company, and the obtaining of the necessary regulatory approvals. Upon the
signing of the Tutoring Agreement, we will proceed to make a filing with the Shanghai Branch of China Securities Regulatory Commission for entering
the IPO tutoring program, as required by the relevant rules and regulations.
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In December 2021, our board of directors approved a motion to pursue the listing of our ordinary shares on The Main Board of The Stock
Exchange of Hong Kong Limited (the “Hong Kong Dual Listing”). The board also authorized our senior management to proceed with the relevant
preparatory work and undertake the necessary procedures to complete the Hong Kong Dual Listing. The Hong Kong Dual Listing is conditional upon
and subject to, among other things, market conditions, further approval of the Board, and the obtaining of the necessary regulatory approvals.
Our principal executive offices are located at 55th – 56th Floor, New Bund Center, 555 West Haiyang Road, Pudong District, Shanghai, People’s
Republic of China. Our telephone number at this address is +86 21-6057-8000.
Our registered office in the Cayman Islands is located at Vistra (Cayman) Limited, P.O. Box 31119 Grand Pavilion, Hibiscus Way, 802 West Bay
Road, Grand Cayman, KY1-1205, Cayman Islands.
B. Business Overview
Executive Summary
I-Mab’s differentiation as an innovative global biotech company and its value creation towards a global specialty biopharma are mainly driven by
three growth engines. Firstly, our focus and proven track record in innovation. Lemzoparlimab and uliledlimab are among the global front-runners with
best-in-class potential in the field of immuno-oncology, highlighting our commitment and unique strength in drug innovation. Our innovation comes in
three waves. The first wave is characterized by novel or highly differentiated monoclonal antibodies with best-in-class potential, such as lemzoparlimab
and uliledlimab in Phase 2 or soon to be in Phase 3 clinical trials. The second wave is comprised of a panel of novel bi-specific antibodies designed to
address the significant unmet medical needs where the majority of cancer patients do not respond or poorly respond to standard PD-1 or PD-L1
therapies. The third wave of innovation represents unconventional antibody molecules enabled by transformative technologies such as mRNA
technology, cell-penetrating antibody platform, etc. The current pipeline of 20 clinical and preclinical assets demonstrates our innovation.
Secondly, our global capability in R&D and business partnerships. We develop innovative drug candidates and conduct clinical validation of the
assets worldwide. With globally generated data, we have accomplished a series of global and regional partnerships, including a landmark
US$1.94 billion deal with AbbVie for lemzoparlimab. As a result, we have built a sizable cash flow from upfront and milestone payments of partnered
assets ahead of their sales revenue.
Thirdly, our near-term commercialization and revenue generation. We expect to achieve three NDA submissions or product launches between
2023 and 2025, which is expected to generate additional revenue for us.
Innovative Pipeline and its Progression. We have made significant progress in our pipeline development and achieved the critical clinical
milestones set in early 2021, including critical positive data readout events for lemzoparlimab (TJC4), uliledlimab (TJD5), and felzartamab (TJ202). As
a result, our pipeline today is composed of ten clinical-stage assets and ten preclinical assets, among which seven assets have moved to Phase 2 or Phase
3 clinical trial stage. Importantly, the pipeline is expected to yield three near-term NDA filings and/or product launches between 2023 and 2025 in
China, including felzartamab for multiple myeloma (MM), eftansomatropin alfa for pediatric growth hormone deficiency (PGHD), and potentially
lemzoparlimab for myelodysplastic syndromes (MDS) and later for acute myeloid leukemia (AML) and non-Hodgkin’s lymphoma (NHL). In addition,
negotiations are underway to acquire another potential pre-NDA product to further enrich this near-term product portfolio by providing broader
coverage of major hematologic malignancies.
We have set our goals to deliver a new series of key clinical milestones in 2022 and further advance the pipeline to include three registrational
trials, 11 Phase 2 clinical trials, and three Phase 1 clinical trials by the end of 2022.
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Five key clinical stage assets are considered as the current pipeline value drivers. The clinical development of the assets has been prioritized and
the recent progress is highlighted as follows. Lemzoparlimab: A novel CD47 antibody with best-in-class potential. It is among the global front-runners
after magrolimab by Gilead. The potential first-line (1L) AML/MDS combination trial in China is at the end of Phase 2, with a data readout earliest in
June 2022. More importantly, a Phase 3 registrational clinical trial for potential 1L MDS is expected to start in 2022, aiming for registration in 2024, at
the earliest. The NHL combination trial is ongoing and with a potential data readout by the end of 2022. Two Phase 1b/2 clinical trials are on track for
solid tumors. Uliledlimab: A highly differentiated CD73 antibody with best-in-class potential. It is among the global front-runners after oleclumab by
AstraZeneca. Two Phase 2 clinical trials are ongoing. The China Phase 2 trial is more advanced and is focused on non-small cell lung cancer (NSCLC),
with data readout expected in mid-2022. Felzartamab: A differentiated CD38 antibody for r/r MM. The 3L MM NDA submission is expected in 2022;
the second-line (2L) MM Phase 3 trial is on track with matured clinical data expected. A new IND is planned for the clinical development for potential
1L MM. Eftansomatropin alfa: A differentiated long-acting growth hormone for PGHD. The Phase 3 trial is on track, with the completion of patient
recruitment (165 patients) expected in the second quarter of 2022. TJ-CD4B: A novel bi-specific antibody with Claudin 18.2 and 4-1BB. It is designed
to target gastric cancer and pancreatic cancers, with the 4-1BB component acting only on tumor engagement (conditional activation to avoid systemic
toxicity). The Phase 1 clinical trial is on track.
Two other clinical stage assets with potential to become the next value drivers are: Efineptakin alfa: A novel long-acting IL-7 with first-in-class
potential. Two Phase 2 clinical trials are ongoing. Interim analysis of the Phase 2 trial in glioblastoma multiforme (GBM) is expected in 2022.
Enoblituzumab: A leading B7-H3 antibody. Phase 2 clinical trial is expected to start in 2022.
R&D partnerships and Business Development. At I-Mab, our business development is geared toward enriching and facilitating our pipeline
development and realizing the value of our global assets at given development stages. The deals are strategically focused on the following key business
areas: (1) research partnerships are aimed to build the next wave of innovative assets that are enabled by transformative technologies; (2) commercial
partnerships are designed to enhance our commercialization capability for upcoming product launches and co-commercialization of selected products;
(3) in-licensing and out-licensing deals are part of our pipeline strategy to either enrich the late-stage and near-term product portfolio through selective
in-licensing or co-development or partner with big pharmaceutical companies on the ex-China rights of selected global assets, as demonstrated in the
AbbVie deal in 2020. In 2021, we completed seven partnership deals across commercial, discovery, and biomarker research areas.
Research partnerships. Five active partnerships allow us to work with our partners to generate novel molecules that are enabled by self-replicating
mRNA technology, cell-penetrating alphabody technology, tumor-site activation probody technology, artificial intelligence design technology, and camel
nanobody 4-1BB technology. The first set of lead molecules has begun to form an emerging portfolio of novel drug candidates that are being tested at
preclinical stage and are expected to move to the clinic in 2023.
Commercial partnerships. In November 2021, we completed a commercial partnership deal for eftansomatropin alfa with Jumpcan for a total of
US$315 million in upfront and potential milestone payments, including approximately US$35 million in an upfront payment representing one of the
largest deals in the China biopharma market. We will hold MAH and share profits generated from the commercialization of the product in mainland
China on a 50/50 basis, pursuant to which we will be entitled to receive tiered low double-digit royalties on net sales. This commercial partnership
provides us a great opportunity to work with a commercial leader specializing in pediatric products for eftansomatropin alfa. In November 2021, we
entered into a strategic collaboration with Roche Diagnostics, a global leader in in vitro diagnostics, to co-develop companion diagnostics (CDx)
solutions for our innovative pipeline at the Fourth China International Import Expo (CIIE) in Shanghai.
In-licensing and out-licensing deals. In this regard, we are in the process of seeking a global partnership deal for uliledlimab and other pipeline
assets with potential global partners and are working on an in-licensing or co-development deal for a pre-NDA hematologic oncology product that is
expected to have an NDA submission in 2022. We are making every effort to bring the ongoing negotiations to a successful close in 2022 as well as seek
new opportunities for additional deals.
Near-Term Product Portfolio and Commercialization. Under rapid development, our most advanced assets, including felzartamab,
eftansomatropin alfa, and lemzoparlimab, are expected to achieve NDA submission and market launch in China in the next three years between 2023
and 2025. With the potential addition of another pre-NDA product for a hematologic malignancy indication, we anticipate our near-term product
portfolio to include three products that effectively cover the three major disease entities of hematologic malignancies, i.e., AML, MDS, and NHL, by
lemzoparlimab in various combinations with AZA, venetoclax, rituximab, and r/r MM by felzartamab in combination with lenalidomide. The fourth
product, eftansomatropin alfa for PGHD, is also expected to achieve NDA submission and market launch within the same timeframe.
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Our commercialization strategy is to rapidly build up our market position in China as a leader in the therapeutic area of hematologic malignancies
with the three key products leveraging various combinations for front-line treatments and to become a major player in the growth hormone market with
eftansomatropin alfa in China. This fast-to-market portfolio will be backed by a longer-term portfolio that focuses primarily on solid tumors between
2026 and 2028. Uliledlimab, efineptakin alfa, enoblituzumab, and lemzoparlimab are among the potential candidate products for solid tumors.
The near-term product portfolio has significant commercial potential. For the hematologic oncology portfolio, the total annual incidences for the
three disease entities, i.e., MM, leukemia (AML/MDS), and lymphoma, are estimated to be approximately 173,000 (Globocan, 2020) in China. For
eftansomatropin alfa, more than 3.4 million children are estimated to suffer from growth hormone deficiency in China. By leveraging first-mover
advantages and validated clinical differentiation by design, cost advantages by local manufacturing, and a focused commercialization strategy and cross-
portfolio synergies, each product in the near-term portfolio has the potential to become a market leader or a major player in its respective therapeutic
area.
We have taken concrete steps to prepare for our commercialization of the near-term product portfolio. A core commercialization team has been
formed under the leadership of Mr. Yifei Zhu during the reporting period to cover all key commercialization functions, including market research,
market access, medical affairs, pricing, etc. This initial commercialization capability will be expanded based on the schedule of NDA approvals of the
near-term products. Efforts are taken to carry out the commercialization strategy of “preparing the organization,” “preparing the market,” and “preparing
the product” for felzartamab. In October 2021, we entered into a strategic partnership with Sinopharm Group Co. Ltd. (“Sinopharm”) to expand our
commercialization capabilities. We will authorize more than 300 of Sinopharm’s subsidiaries as distributors across China to support distribution and
retail allocation to terminal markets while we lead overall commercial activities.
Revenue generation. Ahead of product commercialization, we have established cash flow through multiple global and regional out-licensing
deals such as the AbbVie partnership (approximately US$2 billion, with upfront payment of US$180 million and the first milestone payment of
US$20 million received) and the Jumpcan partnership (approximately US$315 million), along with three other deals. We expect to continue to receive
the pre-determined milestone payments from these deals and any other partnership deals that we may establish in the future. The licensing and
collaboration revenue will converge with the revenue to be generated from the initial sales of our commercialized products between 2023 and 2025.
Upon the successful implementation of the above, we believe we will have adequate cash position to fund our business operations for at least three
years.
Steps Toward Becoming a Global Specialty Biopharma. We have achieved the expected corporate milestones toward our goal to become a
global specialty biopharma.
•
Global footprint. We have been expanding our global R&D and corporate footprint. We are now globally connected with six sites or
offices across Greater China (Shanghai, Beijing, Hangzhou, Guangzhou, Lishui, and Hong Kong) and two sites in the U.S. (Gaithersburg
and San Diego). (1) The newly established R&D facility is now operational in San Diego, California, a rapidly growing biotech hub in the
U.S., to focus on translational medicine and biomarker research to support the clinical development of our pipeline assets in the U.S. and
China. The center will also host the CMC formulation research and global alliance management. The state-of-the-art, integrated laboratory
and office space will strengthen our worldwide development capabilities, further reinforcing our ability to conduct global clinical studies
across the U.S. and China. The San Diego site will serve as one of the strategic sites for our global drug development efforts with a
comprehensive biomarker platform to support all of our clinical trials. (2) In September 2021, we established our sales and distribution hub
in Lishui, China. As integral to our commercialization commitment, our Lishui operation hub is designed in compliance with the Good
Supply Practice (GSP) standards in China to ensure the quality control of our innovative products in the future drug distribution process.
(3) In December 2021, we set up a new office in Guangzhou, China, as a regional hub for clinical development and commercialization
activities to leverage new opportunities in the Greater Bay Area (GBA) initiative in China.
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•
Manufacturing facility. To support the manufacturing needs of the rapidly growing and maturing pipeline, substantial progress has been
made in the construction of a state-of-the-art GMP manufacturing facility in Hangzhou, China. The Phase One GMP manufacturing facility
includes a process development laboratory that is already operational to handle our CMC project needs, and 3 x 2,000L production lines
will become operational around June 2022 to produce clinical trial material for our clinical studies worldwide and to prepare for local
commercial production of felzartamab. The Phase Two commercial production facility is being constructed to accommodate up to 8 x
4,000L commercial production lines and is on track to be completed by 2024. The Hangzhou facility has been designed in compliance with
Good Manufacturing Practice (GMP) standards adopted by the U.S. Food & Drug Administration (FDA), the China National Medical
Products Administration (NMPA), and European Medicines Agency (EMA). We have also entered into a partnership agreement with the
Hangzhou Qiantang Government to manufacture our innovative drugs locally and accelerate the transition to commercialization.
•
Dual listing. We are accelerating our effort to pursue a dual listing to complement our NASDAQ investor base. The Hong Kong dual
listing is conditional upon and subject to, among other things, market conditions and obtaining the necessary regulatory approvals.
Our Drug Pipeline
Our drug pipeline has a number of critical features: (1) The pipeline is innovative and globally competitive, focusing on first-in-class and
best-in-class potential. This is exemplified by the first wave of novel or highly differentiated monoclonal antibody assets, such as lemzoparlimab and
uliledlimab, which are in Phase 2 and soon Phase 3 clinical trials, as well as the second wave of even more innovative bi-specific antibody assets that are
in Phase 1 clinical trials, such as TJ-CD4B and TJ-L14B, followed by additional bi-specific antibody assets that are currently in the preclinical stage.
The new discovery initiative for the third wave of innovation is on the way for high-risk and high-value drug candidates enabled by transformative
technologies, such as mRNA technology, cell-penetrating antibody platform, etc. (2) The pipeline is focused on immuno-oncology and biologics,
leveraging our unique R&D and CMC strengths. (3) The pipeline is advanced and well developed. Out of 20 pipeline assets, ten are in the clinical stage,
with seven programs in Phase 2 or Phase 3 clinical trials. We expect to achieve three NDA submissions or market launches between 2023 and 2025.
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The chart below summarizes the development status of our drug pipeline:
Notes:
(1)
(2)
Taiwan is excluded.
Plonmarlimab (TJM2, excluding cytokine release syndrome indications) is managed by I-Mab Biopharma (Hangzhou) Limited.
Core Assets
Lemzoparlimab (TJC4): A Novel CD47 Antibody for Immuno-Oncology
Summary
Lemzoparlimab is a fully human CD47 monoclonal antibody discovered and developed internally by us for cancer immunotherapy. CD47 has
emerged as one of the most promising immuno-oncology targets in recent years. Lemzoparlimab is among the global front-runners after magrolimab. As
one of the most promising drug classes in immuno-oncology, the development of CD47 antibodies is primarily hampered by their on-target binding to
red blood cells (RBCs). Therefore, various CD47 antibodies in their clinical development are found to be susceptible to severe anemia and other
hematologic side effects. As a result, many CD47 antibody programs have been either terminated in early clinical trials or faced drug safety challenges
in clinical trials. For example, in January 2022, Gilead announced that the U.S. FDA had placed a partial clinical hold on studies evaluating the
combination of magrolimab plus azacitidine due to an apparent imbalance in investigator-reported suspected unexpected serious adverse reactions
(SUSARs) between study arms, which was recently lifted for the study in AML/MDS but remained in diffuse large B cell lymphoma (DLBCL) and
multiple myeloma (MM).
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Lemzoparlimab is a novel CD47 antibody by design. It was originally selected from antibody screen campaigns designed to identify CD47
antibody leads with minimal binding to RBCs while maintaining strong binding to tumor cells. In terms of its differentiation in drug safety, the
preclinical, Phase 1, and Phase 2 clinical studies we conducted so far have supported a good safety profile without the need for a priming dosing
regimen. In terms of treatment efficacy, our Phase 1 and Phase 2 clinical trials have demonstrated encouraging efficacy signals, mostly in hematologic
malignancies. Our clinical development plan is aimed to prioritize the potential first-line (1L) MDS combination therapy with azacitidine (AZA) to
initiate a Phase 3 registrational trial in 2022 in China for potential NDA submission in 2024. In addition to the planned 1L MDS study, we are currently
progressing towards the end of a Phase 2 AML trial in combination with AZA, an ongoing trial in combination with rituximab in patients with NHL,
and two Phase 1b/2 clinical studies in patients with selected solid tumors. There will be multiple data readout events expected in 2022.
Molecular Differentiation of Lemzoparlimab
Lemzoparlimab exhibits high-affinity binding to human CD47 protein and CD47-expressing tumor cells at the nanomolar level and effectively
blocks the interaction of CD47 with its receptor SIRPα. As compared with other CD47 antibodies currently under clinical development, lemzoparlimab
(TJC4) demonstrated comparable potency in the enhanced macrophage-mediated phagocytosis of Raji tumor cells (see Figure A below) and anti-tumor
activity in the HL-60 cell line in leukemia and Raji xenograft models (see Figure B below). Moreover, when combined with rituximab, lemzoparlimab
exhibited a markedly enhanced inhibition of tumor growth in a diffuse large B cell lymphoma (DLBCL) animal model through the synergistic effect of
both agents (see Figure C below).
Figure:
In vitro and in vivo anti-tumor activity of lemzoparlimab (TJC4). (A) In vitro phagocytosis of Raji cells by primary human macrophages in the
presence of different doses of lemzoparlimab or comparator CD47 antibodies. (B) In vivo anti-tumor activity of lemzoparlimab mono-
treatment in Raji xenograft model. (C) In vivo anti-tumor activity of lemzoparlimab (5 mg/kg, BIW) in combination with Rituximab (5 mg/kg,
BIW) in the DLBCL model.
The key differentiation of lemzoparlimab is its minimal binding to RBCs which is highlighted in a series of preclinical studies, thus potentially
avoiding or minimizing inherent hematologic adverse effects typically seen in other CD47 antibodies in clinical trials. Firstly, in a representative flow
cytometric analysis (see Figure A below), lemzoparlimab showed minimal binding to human RBCs compared to comparator CD47 antibodies used at
the same concentration. The minimal binding of lemzoparlimab to RBCs was confirmed when compared with other CD47 antibodies across multiple
concentrations in another experiment (see Figure B below).
Figure:
Binding of CD47 monoclonal antibodies to RBCs. (A) Representative graph of the staining of human RBCs with CD47 monoclonal antibodies
or control IgG (1 µg/ml); (B) Dose dependent binding of CD47 monoclonal antibodies with human RBCs from different healthy donors (n =
3). MFI: mean fluorescence intensity.
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Secondly, as CD47 is expressed on normal RBCs, binding of CD47 antibodies to the surface of RBCs could cross-link the RBCs into lattices and
prevent them from precipitating into compact pellets, which is a phenomenon termed hemagglutination. Our results showed that lemzoparlimab did not
induce RBC agglutination across a wide range of antibody concentrations. In contrast, a comparator antibody caused significant hemagglutination
starting at a concentration of 0.3 µg/ml.
Figure: Hemagglutination by CD47 monoclonal antibodies. Left: representative graph of hemagglutination (haze appearance) or lack thereof
(precipitate) by different concentrations of control IgG, lemzoparlimab (TJC4), and comparator antibodies. Right: quantification through an
index determined by the area of RBC occupation in the presence of the test antibodies, normalized to that of IgG control.
Thirdly, in vivo safety studies were performed in cynomolgus monkeys to assess the effects of lemzoparlimab on the hematology parameters.
Whereas a single bolus IV injection of the comparator antibody caused a significant drop in the number of RBCs and hemoglobin (HGB) levels,
treatment with lemzoparlimab at a dose of 10 mg/kg did not significantly affect the number of RBCs, HGB levels or reticulocyte or platelet counts (see
figure below). A following four-week GLP toxicology study further confirmed that lemzoparlimab treatment did not induce significant overall
toxicologic changes. Only mild decreases in the number of RBCs, HGB, and hematocrit were found, which reached a nadir on Day 4 post-first
administration and then gradually recovered to the normal range following administration. Compared with the placebo control, the average decrease of
RBCs in the treated animals was approximately 6% to 9%, with only one animal showing an 18% drop at a dose of 30 mg/kg. No RBC-associated
changes were noted in histopathologic examinations or in bone marrow smears (including erythrocytic series).
Figure: Hematological parameters in non-human primates treated with a single dose of CD47 antibodies. On Day 0, naive cynomolgus monkeys were
IV injected with PBS control (n=2), lemzoparlimab (TJC4) (n=2, 10 mg/kg) or a comparator antibody (n=2, 10 mg/kg). Blood cells were
counted twice before drug injection (baseline) and at 3, 6, 10, 14, and 21 days post-injection.
The Underlying Mechanism for Lemzoparlimab’s Differentiation
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We set forth to investigate the molecular mechanism underlying the minimal binding of lemzoparlimab to RBCs. The crystal structure of the
CD47 antibody binding complex revealed that lemzoparlimab binds to a unique epitope of CD47 situated in a heavily glycosylated site on RBCs. More
specifically, the results of crystal structure analysis identified an N-glycosylation site located near the epitope residues. Additional experiments were
carried out to address the hypothesis of whether this glycosylation site near the epitope may hinder lemzoparlimab from fully binding to its epitope on
RBCs. The data showed that PNGase treatment of RBCs to remove the N-linked oligosaccharides from glycoproteins significantly increased the binding
of lemzoparlimab as compared with a control antibody, providing the evidence that removal of glycosylation site(s) on RBC effectively restores binding
of lemzoparlimab to RBCs.
Figure:
The left. Crystal structure of the complex of the Fab of lemzoparlimab (TJC4, Cyan) binding with the extracellular domain (ECD) of human
CD47 (Green). The right. In a representative experiment, human RBCs were treated with PNGase for 1 hr, followed by the addition of
lemzoparlimab (TJC4) or a comparator CD47 antibody that binds strongly to RBC at the indicated concentrations. The binding of CD47
antibodies to the treated (de-glycosylated) or untreated RBCs was analyzed by flow cytometry.
In summary, the underlying mechanism is attributable to a unique binding site of lemzoparlimab or so-called glyco-epitope on RBCs. That is, the
unique glycosylation integrated with the binding site of lemzoparlimab serves as a natural molecular barrier to prevent lemzoparlimab from engaging
RBCs. Therefore, RBCs are only minimally accessible by lemzoparlimab. In contrast, the binding site on tumor cells does not have the same
glycosylation pattern and is fully exposed to and accessible by lemzoparlimab. Therefore, lemzoparlimab can uniquely distinguish tumor cells from
RBCs to avoid severe anemia that is commonly seen with other CD47 antibodies while retaining strong anti-tumor activity.
Global Partnership with AbbVie
In September 2020, to facilitate and accelerate the global development and commercialization of lemzoparlimab, we granted AbbVie a global
license valued at US$1.94 billion, including an upfront payment of US$180 million combined with the first milestone payment of US$20 million based
on Phase 1 clinical results. We retain the rights to develop and commercialize lemzoparlimab in mainland China, Hong Kong, and Macau. We believe
that this global partnership with AbbVie will significantly facilitate the clinical development, manufacturing, and commercialization of lemzoparlimab
globally and in China.
Summary of Clinical Results
Drug Safety
In terms of lemzoparlimab’s safety profile, after the announcement of magrolimab’s partial clinical hold, we conducted a systemic review of the
safety data collected from more than 180 patients, including solid tumors and hematologic malignancies treated in various combinations. The safety data
from both the U.S. and China studies are consistent with our expected safety profile without the need of a priming dose regimen. As a result, there is no
change in our strategy and plans for the development of lemzoparlimab. In fact, we strive to speed up our clinical development with the development
plan in place.
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For the studies in solid tumors and NHL in the U.S., lemzoparlimab was well tolerated up to 30 mg/kg on a weekly infusion schedule without
priming dosing either in mono- or combination therapy. A maximal tolerable dose (MTD) was not reached. All treatment-related adverse events
(TRAEs) were either Grade 1 or Grade 2, except that one Grade 3 lipase increase was reported in the single-agent dose-escalation study in solid tumors
and one Grade 3 TRAEs from the same patient, including pleural effusion, tachycardia, cough, pruritis, fatigue, rash, and dyspnea, at 20 mg/kg dose in a
combination study with rituximab in NHL. No clinical or laboratory evidence of hemolytic anemia was observed throughout. The hematological data
from both studies in solid tumors and NHL showed a transient reduction in the hemoglobin levels during the first cycle. The average drop was
approximately 10% and was not dose-dependent. This finding is consistent with the results of preclinical GLP toxicity studies. None of the drug-related
anemia reported was considered to be severe or hemolytic in nature.
For the Phase 2 clinical trial in AML/MDS, over 70 patients were dosed with lemzoparlimab at 30 mg/kg in combination with AZA. The safety
data are being analyzed for a subsequent topline data release.
Figure:
Time course of hemoglobulin level following lemzoparlimab treatment in phase 1 single-agent dose escalation study across all the cohorts
(n=20) and phase 1b combination study with rituximab in NHL (n=9). Each cycle (C) is 21 days (D) for monotherapy and 28 days (D) for
combination therapy. Mean±SD is shown.
Clinical Efficacy
Across multiple completed and ongoing clinical trials, encouraging efficacy signals were observed and described below.
For lemzoparlimab monotherapy in patients with solid tumors, one confirmed Partial Response (PR) was observed in the 30 mg/kg monotherapy
cohort (1/3). The patient who had metastatic melanoma had failed prior systemic treatment of nivolumab and ipilimumab. In addition, three patients
achieved Stable Disease (SD) with SD duration longer than 16 weeks at dose cohorts of 1 mg/kg, 10 mg/kg, and 30 mg/kg. Two patients with squamous
cell carcinoma of the head and neck (SCCHN) and renal cell carcinoma (RCC), respectively, failed nivolumab and the other with ovarian cancer
received no prior PD-(L)1 inhibitor treatment.
For lemzoparlimab combination therapy with rituximab in patients with NHL, we presented interim dose escalation data of lemzoparlimab in
combination with rituximab in relapsed and refractory (r/r) NHL at the 2021 American Society of Hematology (ASH) Annual Meeting. The preliminary
data were generated from nine patients with r/r NHL who received at least two prior lines of therapies, with a median of four lines. Safety findings of
lemzoparlimab at doses of 20 mg/kg and 30 mg/kg weekly, without a priming dose, are consistent with what was observed at lower doses, and no dose-
limiting toxicity (DLT) was observed. Positive clinical activity was observed in heavily pretreated patients who had progressed on prior anti-CD20
therapies. Among seven efficacy-evaluable patients, four achieved complete responses (CR) (1 transformed FL-DLBCL +3 FL), one partial response
(PR) of FL were observed (ORR = 71%); two reported stable disease (SD), and the disease control rate (DCR) was 100%. Tumor shrinkage was
observed in all evaluable patients. The median time to response was 50 days, and the response lasted from 61 to 236 days. A high level (80% and 90%)
of intra-tumoral distribution measured by IHC of tumor biopsy was reached at 20 mg/kg and 30mg/kg weekly. The dose expansion trial is ongoing to
enroll more patients in the U.S. and at additional clinical sites in China. We expect to report additional data in the second half of 2022 and, pending
approval by the NMPA, potentially initiate a pivotal trial in patients with NHL in China.
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For Phase 2 lemzoparlimab combination therapy with AZA in patients with MDS, over 70 patients with newly diagnosed MDS and AML have
been dosed with lemzoparlimab at 30 mg/kg in combination with AZA. An interim analysis was conducted recently in 47 MDS patients on treatment for
various treatment durations. The preliminary results showed that the overall response including complete response rates in 22 MDS patients with a
median treatment duration ≥ four months are encouraging, though not conclusive. The full data analysis is expected in June 2022, when all data are
matured. We plan to present the complete study at a selected scientific conference in the second half of 2022. Based on the safety and efficacy results, a
registrational trial in patients with MDS is being planned to start in 2022, pending approval by the NMPA.
Table: Clinical efficacy data summary of lemzoparlimab. (Sources of data in solid tumors and NHL: Society for Immunotherapy of Cancer (SITC)
annual meeting 2020 and American Society of Hematology (ASH) annual meeting 2021.)
Clinical Development Plan
(1) Leukemia. MDS potential 1L combination therapy with AZA and AML potential 1L combination therapy with AZA and venetoclax. MDS
potential 1L combination therapy is the most prioritized to aim for the start of a Phase 3 registrational trial in 2022 and NDA submission in 2024. We are
currently in the process of analyzing the China Phase 2 MDS trial data. At the recent earnings call in March 2022, we discussed the preliminary data,
indicating that the efficacy signals are encouraging. We expect to share topline data around June 2022 and will present the full dataset at either ESMO or
ASH 2022. More importantly, we plan to initiate a registrational Phase 3 trial in 2022 based on the current dataset. For AML potential 1L
lemzoparlimab-AZA combination and a triplet combination with AZA and venetoclax, we plan to participate in a potential global Phase 3 study led by
AbbVie. The study has the potential to lead to a global registration by AbbVie and China registration by I-Mab.
(2) Lymphoma. NHL combination therapy with rituximab. We presented the encouraging clinical data at the 2021 American Society of
Hematology (ASH) annual meeting. The NHL study has expanded to enroll additional patients with relapsed or refractory CD20+ diffuse large B cell
lymphoma (DLBCL) and follicular lymphoma in both the U.S. and China. We expect to report additional data in the second half of 2022, which may
potentially lead to a registrational trial in patients with NHL in China, pending approval by the NMPA by the end of 2022 or early 2023.
(3) Solid tumors. Lemzoparlimab and PD-1 combination therapy in selected solid tumors. Two Phase 1b/2 clinical trials of lemzoparlimab and
PD-1 combination therapy are ongoing in the U.S. and China in patients with solid tumors. The studies are designed as “basket” trials to include selected
tumor types. More data will be reported as the studies progress.
(4) Lemzoparlimab global clinical trials by AbbVie, including combination therapy with AZA and venetoclax, in patients with AML or MDS and
another combination therapy with a CD38 antibody in patients with refractory and relapsing multiple myeloma (r/r MM), are being conducted globally.
The AML/MDS trial has the potential to lead to a global pivotal clinical trial where we will participate for the purpose of simultaneous registration for
the AML indication in China.
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Uliledlimab (TJD5): A Highly Differentiated CD73 Antibody for Solid Tumors
Summary
Uliledlimab is an internally discovered, highly differentiated CD73 neutralizing antibody. CD73 is a homodimeric enzyme widely expressed in
multiple tumors and plays a critical role in the generation of adenosine to contribute to an immuno-suppressive tumor microenvironment. The key
differentiation of uliledlimab, when compared to some of the other clinical-stage CD73 antibodies, is related to its novel epitope, which works through a
unique intra-dimer binding mode, resulting in complete inhibition of the enzymatic activity and avoiding the aberrant pharmacological property known
as the “hook effect.” In addition, uliledlimab has a non-competitive inhibitory effect that is not blunted by high levels of CD73 enzyme substrates, which
would be expected for small-molecule competitive blockers. Preclinical studies have shown that uliledlimab could completely reverse the AMP-or
tumor cell-mediated suppression of T cells in vitro. When combined with a PD-(L)1 antibody in vivo, uliledlimab exhibited a superior and synergistic
inhibitory effect on tumor growth compared to PD-(L)1 monotherapy.
Uliledlimab is globally competitive and is among the front-runners after oleclumab, with significant progress made in its global clinical
development. In the U.S., we have completed the initial assessment of a Phase 1 clinical study where uliledlimab was evaluated as a monotherapy
lead-in and followed by combining with atezolizumab (Tecentriq®) in patients with solid tumors. Topline results from this study showed that uliledlimab
is safe and well-tolerated across all the dose cohorts evaluated. The data demonstrated a favorable linear PK and steep PK/PD relationship with
complete receptor occupancy as expected based upon the normal dose-response property of uliledlimab without the hook effect. Furthermore,
encouraging clinical efficacy signals from this study were observed in NSCLC and ovarian patients with higher CD73 and PD-L1 co-expression in the
tumor, indicating a potential correlation between the clinical activity of uliledlimab and tumor CD73 expression as a potential predictive biomarker that
warrants further investigation.
Based on the results of the Phase 1 study, we were able to determine the recommended phase 2 dose (RP2D) and currently conducting two Phase 2
clinical trials. The U.S. Phase 2 study is an uliledlimab and atezolizumab (Tecentriq®) combination therapy in patients with ovarian cancer and other
selected advanced or metastatic solid tumors. The China Phase 2 study of uliledlimab and toripalimab (TUOYI®) combination therapy is more advanced
and focused on patients with NSCLC. We expect to report the China Phase 2 data in 2022.
Competitive Landscape
The most advanced CD73 antibody is currently oleclumab (MEDI-9447) from Medimmune/AstraZeneca, which recently initiated a Phase 3,
double-blinded, placebo-controlled, randomized study of durvalumab plus oleclumab in patients with locally advanced (Stage III), unresectable NSCLC
who have not progressed following definitive, platinum-based concurrent chemoradiation therapy. The results from the COAST Phase 2 trial in NSCLC
presented at the ESMO Congress 2021 showed oleclumab in combination with durvalumab improved progression-free survival (PFS) and objective
response rate (ORR) compared to durvalulmab alone. NZV-930 (from Novartis) and AK119 (from AkesoBio) were in Phase 1 clinical development for
solid tumors. Arcus Biosciences had also reported promising results in their Phase 1b/2 trial of quemliclustat, a small molecule CD73 inhibitor, in
combination with zimberelimab plus chemotherapy in patients with pancreatic cancer.
Molecular Differentiation of Uliledlimab
Extracellular AMP can be generated from ATP, cyclic AMP, and nicotinamide adenine dinucleotide (NAD) through separate biochemical
pathways, all of which converge to CD73 as a rate-limiting enzyme to generate adenosine. Thus, the CD73 antibody is expected to block adenosine
generation more completely than other related targets. The key advantages of uliledlimab when compared with other CD73 antibodies or small molecule
inhibitors can be summarized as follows: (1) uliledlimab exhibits a typical dose-response curve without the “hook effect” to achieve the complete
inhibition of both soluble and surface-bound CD73; and (2) uliledlimab has a non-competitive inhibitory effect that is not blunted by high levels of
CD73 enzyme substrates, which would be expected for small-molecule competitive blockers. These pharmacological properties may translate into
efficient target inhibition in tumors and superior anti-tumor activity, especially in an adenosine-rich micro-environment.
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Biochemically, uliledlimab displayed complete inhibition of soluble CD73 enzymatic activity (IC50 = 0.22 n M) without the “hook effect” in
contrast to the comparator molecule, which at higher concentrations caused a paradoxical rebound of enzymatic activity presumably due to its inter-
dimer binding mode. The recent structural data revealed by cryo-EM showed that uliledlimab binds to a unique epitope located at the C-terminus of
CD73 dimer distinct from other CD73 antibodies, including oleclumab, all of which bind to the N-terminus of CD73. With this unique epitope,
uliledlimab adopts a differentiated intra-dimer binding mode to prevent the conformational change of CD73 from inactive to the active form, resulting in
the complete inhibition of CD73 enzymatic activity without causing a “hook effect.”
Figure:
Inhibition of soluble CD73 enzymatic activity and the binding epitope of CD73 antibodies.
Immunologically, AMP inhibited interferon-gamma (IFN-g) production by CD4 or CD8 T cells through adenosine generation, mimicking the
suppressive tumor micro-environment where AMP is abundantly produced. However, this suppression could be reversed by uliledlimab in a
concentration-dependent manner. Moreover, in an experimental system where CD73 high human ovarian cell line SK-OV-3 and human T cells were
co-cultured, the addition of uliledlimab restored T cell activity as measured by IFN-g production in a concentration-dependent manner. In addition to the
restoration of AMP-mediated T cell suppression, we found that uliledlimab treatment could activate human B cells, as evidenced by the up-regulation of
activation markers CD69 and CD83, as well as antigen presentation markers CD86 and HLA-DR. Compared with T cells, the effects of uliledlimab on
B cells were adenosine independent.
Consistent with the in vitro results, in vivo monotherapy of uliledlimab dose-dependently inhibited in situ tumor-derived CD73 activity, leading to
the anti-tumor effect in a mouse xenograft model bearing A375 melanoma cells. To examine whether uliledlimab could enhance the anti-tumor activity
of PD-1 or PD-L1 antibodies, we evaluated the therapeutic effects of uliledlimab in combination with a PD-1 antibody in the MC38 model using CD73
humanized mouse and PD-L1 antibody in the A375 xenograft model, respectively. The combination treatments resulted in more potent inhibition of
tumor growth than monotherapy of PD-(L)1 antibody or uliledlimab.
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Figure:
Inhibition of tumor growth and in situ CD73 activity by uliledlimab alone or in combination with a PD-1 or PD-L1 antibody.
Summary of Clinical Results
Data from the U.S. Phase 1 dose-escalation study of uliledlimab in combination with atezolizumab, which were presented at the 2021 ASCO
annual meeting, showed that uliledlimab is safe and well-tolerated with no dose-limiting toxicity across all the dose cohorts in combination with
atezolizumab. All treatment-related adverse events were either Grade 1 or Grade 2. Uliledlimab demonstrated a linear PK profile and reached full
receptor occupancy on B cells at the middle and high dose levels with no “hook effect,” confirming a normal PK/PD relationship and sigmoid dose-
activity response.
Patients who participated in the study had advanced cancers and had exhausted other cancer therapies. Among the 13 efficacy-evaluable patients
dosed at 10 mg/kg or higher, three patients had complete or partial responses (ORR = 23%) and three had stable disease (DCR = 46%). The range of
time on treatment for the six patients with a response and SD was from 187 to 485 days. The clinical activity was observed in both PD-(L)1 treatment
naïve and refractory cancer patients, including one partial response patient who previously failed nivolumab. More importantly, all three responders
were identified to exhibit higher co-expression of tumor CD73 and PD-L1 as compared to non-responders, indicating a correlation between higher
CD73 expression and clinical activity of uliledlimab and a potential role of CD73 as a predictive biomarker to warrant further investigation.
Figure:
Treatment duration for the combination therapy of uliledlimab and atezolizumab. Baseline expression of PD-L1 and CD73 in the tumor as
measured by immunohistochemistry (IHC) in responders (n=3) and non-responders (n=10).
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Clinical Development Plan
In the U.S., based on the results of the Phase 1 study, a Phase 2 study of uliledlimab in combination with atezolizumab (Tecentriq®) in patients
with ovarian cancer and other selected advanced or metastatic solid tumors is on track. This clinical study will include a dose expansion cohort of
patients with ovarian cancer resistant to platinum therapy and a biomarker-driven “basket” cohort of patients with selected cancers with PD-L1
expression ≥ 1%. In this cohort, mandatory pre-and post-treatment biopsies were implemented in an attempt to gain further insights into the correlation
between the CD73 expression, target engagement in vivo, and efficacy and its potential future application as a predictive biomarker.
In China, a multi-center, open-label Phase 2 clinical trial of uliledlimab in combination with toripalimab (TUOYI®) in patients with advanced or
metastatic solid tumors has progressed to the point that sufficient data are being analyzed. We expect to report the data in 2022. In parallel, we are in the
process of exploring a potential global partnership deal.
Felzartamab (TJ202): A Differentiated CD38 Antibody for Multiple Myeloma
Summary
Felzartamab is a differentiated CD38 antibody for the treatment of relapsing and refractory multiple myeloma (MM) and potentially autoantibody-
mediated autoimmune diseases. We obtained the rights from MorphoSys to develop, manufacture, and commercialize felzartamab in Greater China.
Clinical data available from MorphoSys and I-Mab confirmed the advantages of felzartamab in its lower infusion-related reaction rates and a shorter
infusion time, making felzartamab’s use in an out-patient clinic setting possible, along with other potential benefits. Felzartamab required only a short
infusion time of 30 minutes (as subsequent infusions) to two hours (as an initial infusion), compared with 3.5 to 6.5 hours for the currently marketed
CD38 antibody. Moreover, the IRR of felzartamab was 7%, compared with 48% for the currently marketed CD38 antibody.
The third-line MM registrational trial has been completed, and the topline data have met the preset primary and secondary endpoints. In January
2022, we signed a partnership agreement with the Hangzhou Qiantang Government in China to manufacture felzartamab locally to accelerate our
commercialization. The local manufacturing plan is expected to significantly reduce the cost of goods and render felzartamab more commercially
competitive. Having integrated our new local manufacturing plan, we are making every effort to submit an NDA package in 2022. Further, we have
assembled a commercialization team to prepare for the launch of felzartamab in China.
In addition, in September 2021, we completed patient enrollment for another registrational trial of felzartamab in combination with lenalidomide
as a second-line MM treatment. The topline data package, when fully matured, is expected to support our NDA submission. Finally, we plan to submit a
new IND application for the combination therapy of felzartamab with another I-Mab clinical asset to explore the possibility of felzartamab as a potential
first-line treatment for MM in 2022. The preclinical studies we have conducted and others’ reported data suggest that this novel combination therapy can
potentially achieve better efficacy.
Mechanism of Action
Felzartamab binds to CD38 overexpressed on the surface of target cells and kills them by inducing antibody-dependent cellular cytotoxicity
(ADCC) and antibody-dependent cellular phagocytosis (ADCP). The target cells are the malignant plasma cells in MM and a group of dysregulated
CD38 high B cells and plasma cells that produce pathogenic antibodies in autoimmune conditions such as SLE.
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Figure:
Felzartamab kills CD38-bearing tumor cells by inducing ADCC and ADCP.
Advantages of Felzartamab
We believe that felzartamab has the following advantages compared with the currently marketed CD38 antibody: (1) felzartamab demonstrated a
lower infusion-related reaction rate and shorter infusion time, which could make it possible for use in an out-patient clinic setting; (2) felzartamab
treatment does not down-regulate CD38 expression on the surface of bone marrow myeloma cells in vitro, maintaining the sensitivity of malignant
myeloma cells to repeated felzartamab treatments; and (3) in January 2022, we signed a partnership agreement with the Hangzhou Qiantang
Government in China to locally manufacture felzartamab to accelerate our commercialization efforts. The local manufacturing plant is expected to
significantly reduce the cost of goods and render felzartamab more commercially competitive.
Summary of Clinical Results
Phase 1/2a Trial in patients with r/r MM by MorphoSys
A Phase 1/2a, open-label, multicenter, dose-escalation study in adult patients with relapsed or refractory MM was conducted by MorphoSys in
Austria and Germany. The results concluded that felzartamab was well-tolerated as a single agent and in combination with dexamethasone (DEX),
pomalidomide (POM)/DEX, or lenalidomide (LEN)/DEX. Felzartamab was administered as a two-hour IV infusion at the first dose, and infusion time
could be reduced to as short as 30 minutes at subsequent doses without obvious safety concerns. The MTD of felzartamab was not reached.
Preliminary efficacy results were based on 56 patients from three groups treated with felzartamab combination therapies. Felzartamab, in
combination with low dose DEX, POM/DEX, or LEN/DEX, demonstrated an overall response rate (ORR) of 28%, 48% and 65%, respectively. Durable
responses were observed as median progression-free survival (PFS) was 8.4 months and 17.5 months for the DEX and the POM/DEX combination
groups, respectively, and PFS levels were not reached for the LEN/DEX combination group, as there were not sufficient events of progression recorded.
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Figure:
Best overall response and ORR. Patients were treated with felzartamab in combination with a low dose of DEX (40 mg for 75 years old and
younger, or 20 mg for patients over 75 years old), POM (4 mg)/Dex, or LEN (25 mg)/Dex. Dex: dexamethasone; POM: pomalidomide; LEN:
lenalidomide; ITT: intent to treat; NE: not evaluable; PD: progressive disease; SD: stable disease; MR: minimal response; PR: partial
response; VGPR: very good partial response; CR: complete response; sCR: stringent complete response; ORR: overall response rate.
(Source: MorphoSys)
Phase 1b/2a Trial in Patients with Membranous Nephropathy (MN) by MorphoSys
In November 2021, MorphoSys released interim data from a Phase 1b/2a study of felzartamab in patients with anti-PLA2R antibody-positive MN
at the 2021 American Society of Nephrology (ASN) annual meeting. As of August 2021, 31 patients were enrolled (Cohort 1A, n=15; Cohort 1B, n=3;
Cohort 2: n=13). The median age was 57.5 years (range from 28 to 77 years), 77.4% were male, and the median baseline anti-PLA2R antibody titer was
247.1 U/mL (10 to 1075 U/mL). Of the 27 evaluable patients, 24 showed an initial reduction of anti-PLA2R antibody levels after one week of treatment.
After four weeks of treatment, the overall effect was sustained; after 12 weeks of treatment, most patients showed a substantial reduction in
autoantibody levels. The observed reduction of anti-PLA2R antibody titers was independent of the cohort and suggested a successful depletion of
CD38-positive plasma cells.
The M-PLACE proof-of-concept study has so far shown that felzartamab rapidly and substantially reduces anti-PLA2R antibody titers in patients
with anti-PLA2R-positive MN. Further biomarker-driven data will be evaluated to identify patients who will benefit most from treatment with
felzartamab.
Registrational Trials by I-Mab and Clinical Development Plan
The third-line MM registrational trial has been completed, and the topline data have met the preset primary and secondary endpoints. More
importantly, the clinical data have confirmed the clinical advantages of felzartamab in terms of lower infusion-related reaction rate and shorter infusion
time, which makes it possible for its use in an out-patient clinic setting. In addition, we signed a partnership agreement with the Hangzhou Qiantang
Government in China to manufacture felzartamab locally to accelerate our commercialization. With the new local manufacturing plan integrated, we are
making every effort to submit the NDA package in 2022.
For the registrational trial of felzartamab and lenalidomide as a second-line MM treatment for MM, we completed patient enrollment in
September 2021. The topline data package, when fully matured, is expected to support the NDA submission. Finally, we plan to submit a new IND
application with preclinical data and trial design for combination therapy of felzartamab with another I-Mab clinical asset to explore the possibility as a
potential first-line treatment for MM in 2022.
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Eftansomatropin alfa (TJ101): A Differentiated Long-Acting Growth Hormone for Pediatric Growth Hormone Deficiency
Summary
Eftansomatropin alfa is a differentiated long-acting recombinant human growth hormone (rhGH) developed for pediatric growth hormone
deficiency (PGHD), being the only rhGH in its proprietary fusion protein format and is not chemically linked with PEG or other linkers. Its safety,
tolerability, and efficacy have been well demonstrated in Phase 1 and Phase 2 clinical trials. We are currently running a Phase 3 registrational trial
(“TALLER”) of eftansomatropin alfa as a weekly treatment for PGHD patients in China, with plans to submit an NDA in 2023 or 2024. We obtained the
rights from Genexine for the development, manufacturing and commercialization of eftansomatropin alfa in China. In November 2021, we entered into
a strategic commercial partnership with Jumpcan, a leading domestic pharmaceutical company specializing in and committed to pediatric medicines, to
accelerate the commercialization of eftansomatropin alfa.
Mechanism of Action
Like endogenous growth hormone, eftansomatropin alfa stimulates the production of insulin-like growth factor 1 (“IGF-1”) in the liver, which has
growth-stimulating effects on a variety of tissues, including osteoblast and chondrocyte activities that stimulate bone growth. Thus, IGF-1 is a reliable
pharmacodynamic marker and, more importantly, the key mediator of eftansomatropin alfa’s growth-promoting activity. Eftansomatropin alfa is based
on Genexine’s patented hyFc technology. The hyFc part consists of a portion of human immunoglobulin D (“IgD”) and G4 (“IgG4”). The former
contains a flexible hinge, and the latter is responsible for half-life extension through neonatal Fc receptor (“FcRn”)-mediated recycling. Additionally,
eftansomatropin alfa’s increased molecular weight (103 kilodaltons) is expected to reduce renal clearance.
Figure:
Schematic presentation of the structure of eftansomatropin alfa. CH2 & CH3: Constant regions 2 & 3 of antibody heavy chains, respectively;
hGH: human growth hormone. (Source: Genexine)
Advantages of Eftansomatropin alfa
We believe that eftansomatropin alfa has the following advantages: (1) when compared with the daily regimen of rhGH, eftansomatropin alfa is
proven to be a more convenient therapy with better patient compliance due to its weekly dosing frequency (potentially twice-monthly administration)
while maintaining similar efficacy; and (2) eftansomatropin alfa has no safety concerns typically associated with pegylated drugs, such as potential renal
toxicity, pre-existing or treatment-induced anti-PEG antibodies, and cellular vacuolation in macrophages, renal tubule cells and the choroid plexus
epithelial cells.
Summary of Clinical Results
Genexine has completed three clinical trials with eftansomatropin alfa, including one Phase 1 trial in healthy adult volunteers, one Phase 1b/2
multi-regional trial in adults with GHD, and one Phase 2 multi-regional trial in PGHD in Europe, altogether involving 32 healthy subjects and 99
patients with GHD and PGHD. Overall, eftansomatropin alfa was shown to be well-tolerated, and the clinical efficacy endpoint achieved by weekly or
twice-monthly eftansomatropin alfa administration was comparable to that of daily administration of Genotropin.
Phase 1 Clinical Trial in Healthy Adult Subjects
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The first-in-human trial of eftansomatropin alfa was a randomized, double-blind, placebo-controlled single dose-ascending study in four groups of
healthy subjects. A total of 32 subjects were enrolled, and 31 completed the study. Eftansomatropin alfa was shown to be well-tolerated at all dose levels
studied (0.2–1.6 mg/kg). Eftansomatropin alfa was detectable in the blood until Day 7 for the 0.2 mg/kg dose group, Day 14 for the 0.4 and 0.8 mg/kg
dose groups, and Day 21 for the 1.6 mg/kg dose group. A single subcutaneous (“SC”) injection of eftansomatropin alfa at dose levels of 0.4 mg/kg and
higher increased IGF-1 and IGF-binding protein-3 (“IGFBP-3”) levels for at least one week. No safety concerns were identified. Eftansomatropin alfa
showed a half-life ranging from 69.2 to 138 hours.
Phase 2 Clinical Trial in PGHD
The Phase 2 trial in PGHD was a randomized, open-label, active-controlled study to assess the safety, tolerability, efficacy, pharmacokinetics and
pharmacodynamics of weekly and twice-monthly doses of eftansomatropin alfa, as compared with a daily injection of Genotropin, the current standard
of care for PGHD. The primary clinical endpoint was annualized height velocity (aHV) in centimeters (cm) per year (equivalent to annual growth rate),
measured at six months. A total of 56 subjects were randomized at 27 centers in nine European countries and South Korea.
Data from the trial showed that subcutaneous administration of eftansomatropin alfa over the dose range of 0.8 mg/kg/ week–2.4 mg/kg/twice
monthly resulted in an increase in aHV over the six-month study period. Subjects who received eftansomatropin alfa at 0.8 mg/kg weekly, 1.2 mg/kg
weekly, and 2.4 mg/kg twice-monthly showed growth rates of 11.50, 11.54, and 11.86 cm/year, respectively, while the growth rate in the control group
treated with Genotropin was approximately 11.24 cm/year. In an extension study, greater than two-digit growth velocity remained until 12 months in all
eftansomatropin alfa cohorts, while the Genotropin cohort showed 9.14 cm/year at 12 months. Moreover, no remarkable slow-down of the growth
velocity was observed in the second year in either the patients who received eftansomatropin alfa throughout or in subjects who switched from the
Genotropin cohort. The tolerability of eftansomatropin alfa was consistent with the known properties of marketed products.
Figure:
The aHV at six months indicated comparable growth rates between all doses of eftansomatropin alfa (both weekly and twice-monthly
treatment) and the active comparator, Genotropin. (Source: Genexine)
Registrational Phase 3 Clinical Trial
The registrational Phase 3 trial of eftansomatropin alfa in PGHD is on track in China. This Phase 3 trial (“TALLER”) is a multi-center,
randomized, open-label, active-controlled clinical study designed to assess the efficacy, safety, and pharmacokinetics of eftansomatropin alfa in PGHD.
The primary objective is to demonstrate non-inferiority of 1.2 mg/kg/week of eftansomatropin alfa administered SC, compared with the active control
Norditropin, a daily rhGH marketed in China. Completion of patient enrollment (N=165) is expected in the second quarter of 2022 to enable a planned
NDA submission in 2023 or 2024.
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In November 2021, we announced a strategic commercial partnership with Jumpcan, a leading domestic pharmaceutical company specializing in
and committed to pediatric medicines, to accelerate the commercialization of eftansomatropin alfa. We will be the marketing authorization holder
(MAH) of the product and supply the product at an agreed upon cost to Jumpcan. Jumpcan will be responsible for commercializing the product and
developing new indications in collaboration with us in mainland China. Jumpcan has made an upfront payment to us of RMB224 million. Upon
achievement of development, registration, and sales milestones, certain milestone payments of up to RMB1.79 billion will be made, with total
non-royalty payments up to RMB2.02 billion. In addition, I-Mab and Jumpcan will share profits generated from the commercialization of the product in
mainland China on a 50/50 basis, pursuant to which we will be entitled to receive tiered low double-digit royalties on net sales. This partnership deal
represents one of the largest in China’s biopharma market.
Efineptakin alfa (TJ107): The World’s First and Only Long-acting Recombinant Human IL-7 for Cancer Treatment-related Lymphopenia and
Cancer Immunotherapy
Summary
Efineptakin alfa is the world’s first and only long-acting recombinant human interleukin-7 (“rhIL-7”), which is being developed as a T
lymphocyte-booster for cancer-related immunotherapy. This Phase 2 clinical-stage asset is positioned as a monotherapy for the treatment of cancer
patients with lymphopenia because of its unique properties of increasing anti-tumor T cell numbers and as combination immunotherapy with a PD-1 or
PD-L1 antibody because of its potential synergism with PD-1/PD-L1 therapy. We obtained the rights from Genexine for the development,
manufacturing and commercialization of efineptakin alfa in Greater China.
Efineptakin alfa has an advantage over other T lymphocyte cytokines with its therapeutic potential in oncology. Preclinical and clinical results
generated so far indicate that efineptakin alfa has a selective and favorable immune function profile over recombinant human interleukin-2 (rhIL-2) in
that efineptakin alfa activates and expands tumor-attacking CD4, CD8, and natural killer T cells, but spares tumor-protecting Treg cells.
We are accelerating the clinical development of efineptakin alfa in China by advancing two Phase 2 clinical trials. One Phase 2 clinical trial is
designed by leveraging accumulative clinical data from previous studies either as a monotherapy, or in combination with checkpoint inhibitors in cancer
patients, as conducted by I-Mab in China and Genexine and NeoImmuneTech in South Korea and the U.S., respectively. The other Phase 2 trial is on
track in patients with newly diagnosed glioblastoma multiforme (GBM) with standard concurrent chemoradiotherapy.
Mechanism of Action
IL-7 is a cytokine essential for the survival and homeostatic proliferation of naive and memory T cells (see figure below). IL-7 is critically
involved in restoring T cells to normal levels in the event of lymphopenia by stimulating T cell proliferation. It exerts its functions by binding to and
activating the IL-7 receptor, which is expressed primarily on lymphocytes, including the lymphoid precursors, developing T and B cells, naive T cells,
and memory T cells, but not on tumor-protecting Tregs. Efineptakin alfa as a monotherapy may enhance anti-tumor immunity by augmenting the
number and functionality of T cells. Moreover, efineptakin alfa in combination with an immune checkpoint inhibitor, cancer vaccine, or CAR-T may
improve the anti-tumor response by restoring T cell numbers, reconstituting T cell pools, and reinvigorating exhausted T cells.
Figure:
Role of IL-7 in T cell maintenance and proliferation.
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Therapeutic Indications
One of the target therapeutic indications of efineptakin alfa is cancer treatment-related lymphopenia. Cancer patients who undergo chemotherapy
and/or radiation therapy often develop cancer treatment-related lymphopenia, further damaging their already compromised immune systems and ability
to fight against cancers. Advanced solid tumors are another indication for efineptakin alfa as a combination therapy with PD-1 therapy. As more than
60% of cancer patients either do not respond or respond poorly to current PD-1/PD-L1 therapies, there are intense attempts to identify an effective agent
that can work synergistically with PD-1/PD-L1 therapies to increase the probability of treatment success. Efineptakin alfa is believed to provide such a
treatment option, which is supported by preclinical reports that IL-7 exhibits a synergistic effect with PD-1/PD-L1 therapies in the treatment of cancers
and by the clinical data reported by Genexine/NeoImmuneTech (see elsewhere in this section).
Advantages of Efineptakin alfa
Efineptakin alfa has an advantage over other T lymphocyte cytokines with therapeutic potential in oncology. Preclinical and clinical results
generated so far indicate that efineptakin alfa has a favorable immune function profile over recombinant human interleukin-2 (“rhIL-2”) in that
efineptakin alfa activates and expands tumor-attacking CD4, CD8, and natural killer T cells, but spares tumor-protecting Treg cells. Owing to its
preferred immune function and molecular profiles demonstrated in preclinical and Phase 1/2 clinical trials, we believe that efineptakin alfa is a superior
T cell cytokine investigational drug for cancer treatment-related lymphopenia and cancer immunotherapy.
Efineptakin alfa, as an engineered rhIL-7, has the advantages of improved stability and half-life extension through Genexine’s proprietary hybrid
fragment crystallizable region (“hyFc”). Introducing a few hydrophilic amino acid residues to the N-terminus of IL-7 overcomes stability issues that
hampered the development of previous rhIL-7 drug candidates. Furthermore, the application of the hyFc technology enhances IL-7’s function, increases
its half-life (from 48 to 112 hours after a single subcutaneous dose in clinical studies), and allows for a robust purification process. The hyFc in
efineptakin alfa is also non-cytolytic, so it will not damage the T cells to which it binds.
Summary of Clinical Results
Phase 1b/2a Trial in cancer patients in China by I-Mab
We have completed a Phase 1 clinical trial in China in patients with advanced solid tumors and presented the topline safety and PK/PD data at the
2021 Chinese Society of Clinical Oncology (CSCO) annual meeting in September.
As of August 27, 2021, a total of 32 patients (17 colorectal cancer, 5 gastric cancer, 5 lung cancer, 3 head and neck cancer, 1 liver cancer, and 1
breast cancer) were enrolled and received efineptakin alfa treatment at five dose levels, including 240 µg/kg (n = 3), 480 µg/kg (n = 3), 720 µg/kg (n =
4), 960 µg/kg (n = 11) and 1200 µg/kg (n = 11). No DLTs were reported, and MTD was not reached. The most common TEAEs were Grade 1 or 2
injection site reactions (ISRs), occurring in 22 of 32 patients (68.8%), which showed local symptoms including injection-site pain (31.3%), injection-site
swelling (28.1%), injection-site pruritus (28.1%) and injection-site erythema (25.0%). The ISRs were able to be controlled after topical or antihistamines
treatment. Efineptakin alfa exposure (Cmax and AUClast) tended to increase the dose proportionally in the 240-1200 µg/kg range. Mean T1/2 ranged from
45 to 187 hours, with no accumulation observed. Dose-dependent increases in ALC and CD3+ T cells, including naive and memory subsets, were
observed on Day 21 post the first dose in both lymphopenia (ALC<1000/µL) and normal (ALC>1000/µL) patients, while Treg cells were not
significantly affected and CD8/Treg ratio was improved at 1200 µg/kg cohorts. More importantly, IFN-g secreting T cells were amplified, and TCR
diversity was significantly increased, suggesting enhanced anti-tumor potential after treatment.
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Clinical Trials Conducted in the U.S. by Genexine/NeoImmuneTech
Efineptakin alfa and pembrolizumab combination therapy for solid tumors. Our partner Genexine presented the data from a Phase 1b/2 study
(Keynote-899) of efineptakin alfa in combination with pembrolizumab (Keytruda®) in patients with relapsed or refractory triple-negative breast cancer
(TNBC) at the 2020 Society for Immunotherapy of Cancer (SITC) annual meeting. A total of 60 patients were enrolled and treated with efineptakin alfa
in combination with pembrolizumab with or without cyclophosphamide (“CPA”) chemotherapy. The median follow-up period of all treated patients
(n=60) was 4.32 months (range 0.9–15.3 months), including 16 ongoing patients. The combination treatment of efineptakin alfa and pembrolizumab,
with or without CPA, was safe and well-tolerated. Combination (simultaneous treatment) of efineptakin alfa and pembrolizumab induced higher ORR
(7/36, 19.4%) than sequential treatment of efineptakin alfa and pembrolizumab with CPA (2/24, 8.3%). In particular, the cohort (n=18) receiving
1,200µg/kg efineptakin alfa with pembrolizumab without CPA showed the highest ORR (27.8%, 5 PRs) with a disease control rate (DCR) of 44.4% (5
PRs and 3 SDs). Of note, pembrolizumab monotherapy showed 5.3% ORR in a Phase 2 study (Keynote-086) and failed to improve OS as ≥ 2L
treatment for mTNBC compared with the standard chemotherapy.
The data from NeoImmuneTech dose-escalation trial (NCT04332653) presented at ASCO 2021 showed that MTD was not reached and
efineptakin alfa was tolerable and safe in combination therapy with pembrolizumab in patients with advanced solid tumors. Of the 11 evaluated patients,
6 patients showed controlled progression (DCR = 55%), and increased median progression-free survival (mPFS) can be estimated. It also significantly
increased T cell numbers in both tumor specimens and the peripheral blood in patients treated with efineptakin alfa.
Efineptakin alfa therapy for high-grade gliomas. Interim results from a Phase 1 trial (NCT03687957) in newly diagnosed patients with that had
undergone chemoradiotherapy showed that absolute lymphocyte count (ALC) increased by 1.3–4.1 fold at week 4 in a dose-dependent manner and
lasted up to 12 weeks after injection, with a one-year survival rate of 83.3%.
Clinical Development Plan by I-Mab
By leveraging the clinical results generated by Genexine/NeoImmuneTech so far, we aim to rapidly advance the clinical development of
efineptakin alfa for approvals in Greater China. Our clinical development plan is focused on evaluating the safety and efficacy of efineptakin alfa in
cancer patients (1) as a broader oncology care treatment for those who suffer from lymphopenia commonly induced by chemotherapy and radiation
therapy and (2) as a combination therapy with PD-1 therapy to achieve better clinical response and efficacy.
Cancers with lymphopenia. A Phase 2 clinical trial (NCT04600817) in patients with newly diagnosed GBM with standard concurrent
chemoradiotherapy is on track. The primary outcome of the study is the percentage of patients with an increase in the absolute lymphocyte counts and
associated clinical response in relation to the treatment with efineptakin alfa. An interim data readout is expected in the second half of 2022.
Combination therapy with a PD-1 antibody. By leveraging accumulative clinical data and experience with efineptakin alfa in the treatment of
cancer patients in the U.S. and South Korea, including relapsed or refractory triple- negative breast cancer (TNBC), glioblastoma and high-risk skin
cancer, we initiated a Phase 2 combination study in China of efineptakin alfa with pembrolizumab (Keytruda®) in patients with advanced solid tumors,
including TNBC and squamous cell carcinoma of the head and neck (SCCHN). The study is on track and patient enrollment and treatment is ongoing.
Enoblituzumab (TJ271): An Fc-optimized B7-H3 Antibody for Immuno-oncology Treatment
Summary
Enoblituzumab is an investigational, humanized, Fc-optimized monoclonal antibody directed at B7-H3, a member of the B7 family of immune
regulators. B7-H3 is a promising immuno-oncology target as it is widely expressed across multiple tumor types, minimally expressed on normal tissues,
and is believed to play a vital role in regulating immune response against cancers. Preclinical and clinical evidence suggests that B7-H3 antibody and
PD-1 antibody may work in concert to elicit an optimal T cell activation for the treatment of a variety of cancers. The expression of B7-H3 has been
shown to be associated with adverse clinical features and negative outcomes in various solid tumors. Together, these observations suggest that
enoblituzumab has a wide potential range of cancer applications as either a monotherapy or in combination with PD-1 therapies or small molecule
drugs. We obtained the rights from MacroGenics to develop, manufacture and commercialize enoblituzumab in Greater China.
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At the molecular level, enoblituzumab is engineered to possess an enhanced anti-tumor ADCC function. Originally developed by MacroGenics,
enoblituzumab has been, or is currently, being evaluated in clinical trials as a monotherapy or in combination with CTLA-4 or PD-1-based therapies in
patients with B7-H3-expressing cancers. Enoblituzumab has also been evaluated in a neoadjuvant Phase 2 study as a single agent in patients with
intermediate and high-risk localized prostate cancer. To date, clinical studies have shown that enoblituzumab is well-tolerated, with enoblituzumab
monotherapy treatment demonstrating increased CD8 T-cell infiltration in tumors with more focused T-cell repertoires. Clinical studies conducted by
MacroGenics indicate that combination therapy with enoblituzumab and pembrolizumab (Keytruda®) resulted in anti-tumor activity on recurrent or
metastatic squamous cell carcinoma of the head and neck (SCCHN) and non-small cell lung cancer (NSCLC).
Mechanism of Action
Enoblituzumab (MGA271) is an investigational humanized immunoglobulin (IgG1/kappa monoclonal antibody) that binds to B7 homolog 3
(B7-H3). This antibody consists of an engineered human IgG1 fragment crystallizable (Fc) domain that imparts increased affinity for the human
activating Fc gamma receptor FcgRIIIA (CD16A) and decreased affinity for the human inhibitory FcgRIIB (CD32B). In preclinical studies, the
engineered Fc domain confers enoblituzumab with enhanced target-specific antibody-dependent cellular cytotoxicity (ADCC) in vitro and anti-tumor
activity. Therefore, enhanced cytolysis of B7-H3-expressing tumor cells is a mechanism that supports the development of this molecule as an
antineoplastic agent.
In addition, data suggest that enoblituzumab exerts immune regulatory function in vitro and in vivo. Enoblituzumab treatment could not only
restore the B7-H3-mediated T cell suppression but also activate macrophages and NK cells, which was published in the 2022 American Association of
Cancer Research (AACR) annual meeting. Moreover, enhanced local T-cell infiltration has been observed in prostate cancer patients treated with
enoblituzumab. These data are consistent with the notion that enoblituzumab can engage both innate and adaptive immunity as mediators of its anti-
tumor activity.
Figure:
Enoblituzumab contributes to the coordination and engagement of innate and adaptive immunity to mediate tumor regression. Enoblituzumab
binds to tumor cells and activates innate immune cells such as natural killer cells (NK cells) to kill cancer cells through ADCC. The released
tumor antigens may then be presented by antigen-presenting cells, such as macrophages, which can promote tumor-specific T-cell immunity
in concert with a PD-1 blockade. (Source: MacroGenics)
Therapeutic Indications
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Squamous cell carcinoma of the head and neck (SCCHN) is among the initial cancer indications we will focus on. Head and neck cancers occur in
various parts of the head and neck, including the mouth, nose, throat, and salivary glands. More than 90% of head and neck cancers are classified as
SCCHN, which begin in the squamous cells that line the moist, mucosal surfaces inside the head and neck. The treatment principles and regimens for
head and neck cancer in China are similar to those in the rest of the world. Treatment strategies often depend on the location and stage of cancer, the
patient’s physical status, and response to prior treatments. Early-stage disease is primarily treated with surgical resection, while patients with locally
advanced, recurrent, or metastatic disease are typically treated with drug therapy. With or without radiation therapy, the combination of surgery and drug
therapy is the current standard of care for Stage 3 SCCHN patients with locally advanced disease. Platinum-based chemotherapy regimens are widely
used as first-line therapies for Stage 4 and distant relapse patients. Erbitux (cetuximab from Eli Lilly and Merck KGaA) was approved in 2006 as a first-
line treatment for locally advanced SCCHN in combination with radiation therapy. Regimens containing Erbitux, platinum-based chemotherapy, and
5-fluorouracil, known as EXTREME, are often considered the standard of care for first-line treatment of distant relapse SCCHN. However, only about
35% of patients respond to EXTREME, and the resulting overall median survival is only 10.1 months. In 2019, Keytruda® (pembrolizumab from
Merck & Co), used as a single agent or in combination with chemotherapy, was approved by the FDA as a first-line therapy for patients with metastatic
or unresectable recurrent SCCHN.
Advantages of Enoblituzumab
Enoblituzumab is a potential differentiated humanized B7-H3 antibody for immuno-oncology treatment. The preceding statement applies only to
conventional therapeutic B7-H3 antibodies and does not include radio-labeled B7-H3 antibodies in development by Y-mabs Therapeutics. Targeting
B7-H3 offers several advantages over other target options within the class of T cell checkpoint molecules. First, B7-H3 is a tumor-associated antigen
that is over-expressed in a variety of solid tumors. At the same time, its expression in normal tissues is rather limited, enabling the tumor-killing
mechanism of enoblituzumab. Second, B7-H3 is a unique checkpoint whose expression in tumors is associated with disease prognosis. For example,
biomarker analysis of more than 400 NSCLC patients revealed that among all the elevated immune checkpoint inhibitors, including PD-1/PD-L1,
PD-L2, B7-H3, TIM-3, BTLA, and CTLA-4, only B7-H3 is negatively correlated with clinical efficacies of neoadjuvant treatments (Lou et al., Clinical
Cancer Research, 2016). Furthermore, studies have shown that when combined with a PD-1 therapy, a blockade of B7-H3 results in superior treatment
effects in relevant cancer animal models, while another study indicates that B7-H3 expression correlates with a lack of anti-PD-1 response (Yonesaka et
al., Clinical Cancer Research, 2018). The advantages summarized above make B7-H3 a favorable tumor target for immunotherapeutic intervention.
Clinical Updates
Clinical Data Generated by MacroGenics
An open-label, dose-escalation, cohort expansion, and efficacy follow-up study of enoblituzumab in combination with pembrolizumab was
conducted by MacroGenics. The dose-escalation phase is designed to characterize the safety and tolerability of the combination and to define the
maximum tolerated or maximum administered dose. A total of 133 patients with B7-H3-expressing melanoma, squamous cell carcinoma of the head and
neck (SCCHN), non-small cell lung cancer (“NSCLC”), and urothelial cancer have been treated in the study. Data from Phase 1 cohort expansion trial
were presented at the 2018 Society for Immunotherapy of Cancer (SITC) annual meeting, which showed an ORR (overall response rate) that compared
favorably with historical experience with PD-1 monotherapy in PD-1/PD-L1 naive patients.
Safety. The combination of enoblituzumab and pembrolizumab demonstrated acceptable tolerability in patients treated to date. Grade 3 or higher
AEs, assessed based on Common Terminology Criteria for Adverse Events (CTCAE) criteria version 4.0, occurred in 27.1% of all patients. Drug-related
AEs of all grades included infusion-related reactions (n=73, 54.9%), fatigue (n=37, 27.8%), rash (n=14, 10.5%), and nausea (n=12, 9.0%). The
incidence of immune-related AEs in the study was comparable to that observed in patients who received PD-1 monotherapy. Nine patients experienced
drug-related AEs leading to treatment discontinuation.
Clinical Efficacy. Preliminary results indicated that among the 18 response-evaluable SCCHN patients who had not previously received
PD-1/PD-L1 therapies, six patients (33.3%) had confirmed partial responses (“PRs”). Among the subset of patients with 10% or higher B7-H3 tumor
expression, six out of 15 (40.0%) had confirmed PRs compared to previously reported SCCHN patients treated with PD-1 monotherapy, which achieved
ORRs ranging from 13% to 16%. Among 14 response-evaluable NSCLC patients who had not previously received PD-1/PD-L1 therapies and were
PD-L1 negative, i.e., PD-L1 less or equal to 1%, five patients (35.7%) had confirmed PRs. Objective response rates ranging from 8% to 17% were
reported in PD-L1 negative NSCLC patients treated with PD-1 monotherapy.
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To further explore the therapeutic role of this molecule, MacroGenics has initiated a multi-regional Phase 2 study of enoblituzumab in
combination with retifanlimab (a PD-1 antibody) in PD-L1 positive patients and with tebotelimab (a PD-1 x LAG-3 bispecific DART® molecule) in
PD-L1 negative patients as chemotherapy-free regimens in front-line recurrent and metastatic SCCHN. This study is on track, and the preliminary data
is expected to be published in late 2022.
Clinical Development Plan by I-Mab
We will soon initiate a Phase 2 clinical trial of enoblituzumab and pembrolizumab in patients with selected cancers, including non-small cell lung
cancer (NSCLC), urothelial carcinoma (UC), and other selected cancers. In December 2021, we obtained the NMPA’s approval for this study and expect
to initiate this Phase 2 clinical trial in China in the second quarter of 2022. Furthermore, we plan to evaluate the therapeutic role of enoblituzumab in
combination with small molecule therapies for selected cancers.
TJ-CD4B: A Novel, Tumor-Dependent T Cell Engager for Gastric and Other Cancers
Summary
TJ-CD4B is a bi-specific antibody targeting both Claudin 18.2 (CLDN18.2), a tumor antigen preferentially expressed in gastric and pancreatic
cancers, and 4-1BB, a co-stimulatory molecule on T cells. CLDN18.2 is a tight junction molecule whose expression is normally restricted to epithelial
cells of the gastric mucosa, but becomes widely expressed in select tumors (such as gastric and pancreatic cancers), making it a highly attractive tumor
target.
In collaboration with ABL Bio, we developed TJ-CD4B, also known as ABL111, which provides two key advantages over current CLDN18.2
antibodies and 4-1BB agonistic antibodies. First, TJ-CD4B (also known as TJ033721) can bind to tumor cells even with low levels of CLDN18.2
expression, making it more suitable for a broader patient population. Second, only upon tumor cell engagement by TJ-CD4B are T cells stimulated by
the 4-1BB antibody moiety, making the 4-1BB antibody only active at the tumor site. This localized T cell activation conditional upon tumor
engagement is expected to exert strong anti-tumor activity while dramatically reducing systemic side effects such as liver toxicity seen in clinical
studies.
In November 2021, we and ABL Bio jointly announced the pharmacodynamic data and safety of TJ-CD4B/ABL111 in animal models and cell
cultures at the 2021 SITC annual meeting. Analysis of the data found: (1) Potent anti-tumor activity was observed with the proliferation of immune cells
in the tumor microenvironment (TME) as well as an increase in memory T cells in the peripheral blood, suggesting long-term immunity against the
tumor; (2) TJ-CD4B was well tolerated in non-human primates and did not induce a systemic immune response or liver toxicity up to levels of
100mg/kg; and (3) Activation of immune pathways by TJ-CD4B was demonstrated by a pro-inflammatory profile and increased gamma interferon-
regulated gene expression in primary human CD8+ T cells co-cultured with CLDN18.2 expressing cells. In March 2022, we announced that the U.S.
FDA granted TJ-CD4B Orphan Drug Designation (ODD) for the treatment of gastric cancer, including gastroesophageal junction carcinoma.
Therapeutic Indications
Gastric cancer (GC) is one of the leading causes of cancer-related deaths worldwide. Treatment for advanced gastric or gastro-esophageal junction
(GEJ) adenocarcinoma involves a combination of chemotherapy, targeted therapies, and now, immune therapies. However, the clinical benefit remains
modest. Therefore, there is a significant unmet medical need for GC treatment. CLDN18.2 has been identified as a new GC tumor marker. Clinical data
showed that over 70% of GC patients in Asia and Europe are CLDN18.2 positive. The monoclonal antibody zolbetuximab can bind to CLDN18.2 on the
tumor surface and stimulate tumor-killing through ADCC and CDC. It has demonstrated clinical efficacy (and thus target validation) and was well
tolerated when combined with standard chemotherapy in early clinical trials. However, the efficacy was still limited to CLDN18.2 high-expressing
tumors. Apart from monoclonal antibodies, such as the most advanced asset, zolbetuximab, which is in Phase 3, there are several CLDN18.2 antibody-
based treatment modalities being developed with the hope of increased efficacy. These modalities include antibody-drug conjugates, CAR-Ts, and
CD3-based bispecific T cell engagers, most of which are still at the preclinical stage. However, despite their anticipated high efficacy, these treatment
approaches are associated with significant safety concerns stemming from drug toxicity or immunotoxicity. CAR-Ts also face other challenges, such as
limited tissue penetration and lack of persistence.
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Advantages of TJ-CD4B
We believe that a carefully designed 4-1BB-based bi-specific T cell engager such as TJ-CD4B can strike a proper balance between high efficacy
and overall safety. First, TJ-CD4B is a more potent CLDN18.2 binder than zolbetuximab and binds to tumor cells with a wider spectrum of CLDN18.2
expression allowing it to target even the low expressors. Second, TJ-CD4B is equipped with a 4-1BB agonistic antibody moiety that strongly stimulates
activated T cells and NK cells. Studies have shown that 4-1BB and CD28 are the strongest co-stimulatory molecules for anti-tumor activity, but CD28
stimulation can lead to T cell exhaustion while 4-1BB prevents it, making 4-1BB the most desirable T cell co-stimulator.
Moreover, unlike previous generations of 4-1BB agonist antibodies with hepatotoxicity issues, TJ-CD4B binds to a distinct 4-1BB epitope that
only triggers 4-1BB signaling upon CLDN18.2 but not Fc receptor interaction. This unique tumor-associated antigen (TAA)-dependent property is
expected to drastically reduce peripheral T cell activation and hepatic and systemic immunotoxicity without compromising anti-tumor activity. If proven
in the clinic, these properties enable TJ-CD4B to be highly differentiated from other CLDN18.2-based compounds.
Figure:
Schematic diagram of the overall structure of TJ-CD4B and its components. The 4-1BB agonistic antibody is a single-chain Fv (scFv)
connected to the C-terminus of a disabled Fc in a full anti-CLDN18.2 antibody via a flexible linker. The design allows the molecule to fit in
the immune synapse (left) and trans-activate T cells only upon tumor cell binding.
Molecular Differentiation of TJ-CD4B
Broad and potent binding to CLDN18.2-positive cells by TJ-CD4B. As shown in the figure below, TJ-CD4B consistently exhibited stronger
binding than the reference antibody zolbetuximab in cells with high, moderate, and even low levels of CLDN18.2.
Figure: More potent binding by TJ-CD4B than zolbetuximab to cells expressing various levels of CLDN18.2.
CLDN18.2-dependent 4-1BB Activation and T Cell Activity by TJ-CD4B. The ability of TJ-CD4B to ligate 4-1BB and activate downstream
signaling was tested in a co-culture of CLDN18.2-positive or negative target cells with T cells as effectors. The results in the figure show that TJ-CD4B
elicited by far the strongest 4-1BB-mediated NF-kB reporter activity, only in the presence of CLDN18.2+ cells but not CLDN18.2-cells. In contrast,
urelumab (first generation 4-1BB antibody) induced NF-kB reporter activity regardless of target cell CLDN18.2 expression. In a further experiment
where human PBMCs were co-cultured with gastric cancer cells derived from patient biopsies, TJ-CD4B was found to increase IL-2 production in a
dose-dependent and CLDN18.2 expression-dependent manner.
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Figure: Dose-dependent CLDN18.2-restricted T cell activity by TJ-CD4B but not urelumab in T cell and target cell co-culture system. Left, co-culture
scheme; Middle, NF-kB reporter activity; Right, IL-2 production.
Superior in vivo Anti-tumor Efficacy of TJ-CD4B. In mice grafted with tumor cells expressing human CLDN18.2, TJ-CD4B treatment twice a
week for three weeks completely suppressed tumor cell growth in 6 out of 7 mice, delivering far better efficacy than equimolar doses of single agents
alone or in combination. Remarkably, when these tumor-free mice were re-challenged with a second tumor implant a month after drug cessation, they
remained totally protected, indicating that TJ-CD4B produced a durable anti-tumor response. Immune cell analysis revealed a significant increase in
CD45+ and CD8+ T cells that infiltrated the tumor tissue after TJ-CD4B treatment, but there were no changes in the periphery, suggesting that
TJ-CD4B could turn a cold tumor into a hot tumor, and the effect was localized. The anti-tumor efficacy of TJ-CD4B was dose-dependent, with a
minimal efficacious dose of 0.4 mg/kg.
Figure:
Potent in vivo anti-tumor activity of TJ-CD4B in a mouse tumor model. Mice transgenic for humanized 4-1BB were grafted with MC38 cells
expressing human CLDN18.2. Mice were treated with IgG or zolbetuximab as control, or with parental CLDN18.2 mAb, parental 4-1BB mAb,
or both, and with TJ-CD4B (4 mg/kg) twice a week for 3 weeks. All mAbs were dosed at the molar equivalent of 3 mg/kg.
Preclinical Pharmacodynamics and Safety. The pharmacodynamic data and safety of TJ-CD4B in animal models and cell cultures were jointly
announced by I-Mab and ABL Bio, Inc. at the 2021 SITC annual meeting. Analysis of the data found: (1) Potent anti-tumor activity was observed with
the proliferation of immune cells in the tumor microenvironment (TME) as well as an increase in memory T cells in the peripheral blood, suggesting
long-term immunity against the tumor; (2) TJ-CD4B was well tolerated in non-human primates and did not induce a systemic immune response or liver
toxicity up to levels of 100mg/kg; and (3) Activation of immune pathways by TJ-CD4B/ABL111 was demonstrated by a pro-inflammatory profile and
increased gamma interferon-regulated gene expression in primary human CD8+ T cells co-cultured with CLDN18.2 expressing cells. In the four-week
GLP monkey toxicity study, TJ-CD4B was well tolerated with no major findings. There was no liver toxicity noted, nor was there evidence of systemic
immune activation. There were mild stomach changes that were considered on-target but non-adverse and were reversible. NOAEL was determined to
be 100 mg/kg with a sufficient therapeutic window.
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Clinical Development Plan
We have a comprehensive clinical development plan in execution to develop TJ-CD4B in the United States and China in parallel. In March 2021,
we obtained an IND approval with the U.S. FDA for a monotherapy Phase 1 clinical trial in patients with advanced solid tumors, including gastric
cancer, to assess safety, tolerability, PK, PD, and preliminary efficacy. In June 2021, the first patient was dosed in this Phase 1 clinical trial. The dose-
escalation part of the study reached 3mg/kg without dose limited toxicity. More data are being generated as the trial progresses.
To accelerate its clinical development, China sites will join the dose-expansion part of the study. In December 2021, as scheduled, we obtained an
IND approval for a Phase 1 clinical study of TJ-CD4B in patients with solid tumors, including advanced gastric cancer (GC), gastroesophageal junction
carcinoma (GEJ), esophageal adenocarcinoma (EAC) and pancreatic ductal adenocarcinoma (PDAC) in China. We expect to initiate this study in the
second quarter of 2022.
Other Clinical Assets
Plonmarlimab (TJM2): A GM-CSF Monoclonal Antibody for Inflammation and CRS-related Therapies
Summary
Plonmarlimab is an internally discovered neutralizing antibody against human granulocyte-macrophage colony-stimulating factor (GM-CSF), an
important cytokine that plays a critical role in chronic inflammation and cytokine release syndrome (CRS) associated with CAR-T and severe
COVID-19. Plonmarlimab specifically binds to human GM-CSF with high affinity and can block GM-CSF from binding to its receptor, thereby
preventing downstream signaling and target cell activation. As a result, it can effectively inhibit inflammatory responses mediated by macrophages,
neutrophils, and dendritic cells, leading to reduced tissue inflammation and damage. Plonmarlimab also plays a critical therapeutic role in CRS through
the inhibition of GM-CSF that acts at upstream of the pathologic inflammatory cascade and is expected to be more efficacious in preventing and treating
CRS.
Mechanism of Action
GM-CSF is a central driver cytokine in orchestrating an innate immune response during inflammation. It is responsible for myeloid cell
proliferation and functions, such as chemotaxis, adhesion, phagocytosis, and microbial killing. Importantly, GM-CSF can polarize macrophages into a
pro-inflammatory M1 phenotype and is known to induce an inflammatory cascade involving other pro-inflammatory cytokines such as TNF, IL-1, IL-6,
IL-12, and IL-23. It is evident that GM-CSF plays a crucial role in the pathogenesis and disease progression of multiple autoimmune conditions. The
action of GM-CSF is mediated by the binding of its cognate receptor on target cells and subsequent phosphorylation of signal transducer and activator of
transcription 5 (STAT5).
Plonmarlimab specifically binds to human GM-CSF with high affinity and can block GM-CSF from binding to its receptor, preventing
downstream signaling and target cell activation. As a result, it can effectively inhibit inflammatory responses mediated by macrophages, neutrophils, and
dendritic cells, leading to reduced tissue inflammation and damage.
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Figure:
Role of GM-CSF in orchestrating coordinated immune response.
Therapeutic Indications
In addition to plonmarlimab’s therapeutic role in immune and inflammatory reactions, recent studies indicated that GM-CSF plays a critical role in
serious side effects associated with chimeric antigen receptor (CAR)-T therapy, such as cytokine release syndrome (CRS) and neurotoxicity. As CAR-T
therapy has become an effective treatment option for certain cancer types, finding a treatment solution for CAR-T-related toxicities that occur frequently
and can turn into a serious and potentially fatal condition becomes an urgent need. These severe toxicities add to the morbidity and mortality of CAR-T
therapy. CRS is caused by a massive release of circulating cytokines by expanding CAR-T cells, and GM-CSF is one of the key driver cytokines of
CRS. Currently, there are no effective therapies to prevent CRS or associated neurotoxicity. Tocilizumab, an IL-6 receptor antagonist, is approved for
severe CRS with limited therapeutic coverage. Recent studies indicate that neutralizing GM-CSF in vivo may ameliorate and potentially prevent CRS
and neuroinflammation without affecting CAR-T cell activity. Humanigen has teamed up with Kite to evaluate lenzilumab, a GM-CSF antibody, as a
preventive or treatment agent in association with Yescarta, an approved CD19-directed CAR-T therapy.
Clinical Updates
Study of Plonmarlimab to Treat COVID-19 Patients with CRS
In August 2021, we reported a positive interim analysis from the Phase 2/3 trial of plonmarlimab to treat patients with severe COVID-19.
Plonmarlimab treatment resulted in a higher mechanical ventilation free (MVF) rate (83.6% vs. 76.7%) by day 30, a lower mortality rate (4.9% vs.
13.3%) by day 30, higher recovery rates (68.9% vs. 56.7% at day 14 and 80.3% vs. 70.0% at day 30), as well as reduced time to recovery and
hospitalization duration compared with placebo. Biomarker results were consistent with the observed clinical outcome and indicated patients treated
with plonmarlimab had a reduction in plasma levels of pro-inflammatory cytokines and chemokines critically involved in CRS, including TARC, IP10,
GCSF, IL10, IL6, MCP1, IL1RA, and TNF-α, but not IFN-g. A transient increase in Neutrophil to Lymphocyte Ratio (NLR) commonly associated with
disease exacerbation was only observed in placebo. Plonmarlimab was well-tolerated in all patients with no significant safety concerns.
Clinical Development Plan
The clinical data obtained so far have validated the effect of plonmarlimab on CRS, paving the way to continue exploring the therapeutic
indications where CRS is a critical element of the diseases. Additional clinical data are being analyzed to determine the next steps in our development
plan.
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TJ210: A Novel C5aR1 Antibody for Cancers
Summary
TJ210 is a fully human, high-affinity antibody against human C5aR1 for the treatment of cancers. Certain tumors produce large amounts of
complement factor C5a to attract C5aR1-expressing myeloid-derived suppressor cells (“MDSCs”), M2 macrophages, and neutrophils. These myeloid
cells critically contribute to an immunosuppressive microenvironment as part of the evading mechanism of tumors and are associated with poor
prognosis and resistance to PD-1/PD-L1 therapies in many cancers. TJ210 is designed to block the interaction between C5a and its receptor, thereby
potentially neutralizing the immune suppressive function of C5a and enabling immune cells to attack the tumor.
Preclinical studies have shown that targeting the C5aR-C5a axis exerts anti-tumor activity with immune checkpoint inhibitors. Furthermore, in
vitro activity was observed to block the C5a/C5aR pathway at very high C5a concentrations, leading to a long duration of action. TJ210 demonstrated a
good safety profile with no observed adverse effects up to the highest dose tested in non-clinical safety studies. We obtained the rights from MorphoSys
for the development, manufacturing and commercialization of TJ210 in Greater China and South Korea, and are co-developing the asset globally with
MorphoSys.
Mechanism of Action
TJ210 is a C5aR-directed antagonist monoclonal antibody. C5aR (also known as C5aR1 or CD88) is a GPCR and is one of the two high-affinity
receptors for its ligand, C5a. An extensive investigation of the TME has uncovered molecular mechanisms linking imbalanced complement activation
and cancer progression. Upon activation, complement components, including C5a, are released into the TME, inducing the recruitment of
immunosuppressive cells, including TAMs, TANs, MDSCs, Tregs, and DCs, thus inhibiting cytotoxic T-cell attack on the tumor. Immunosuppressive
cytokines, such as Arg-1, IL-10, and TGF-ß, are also released. In addition, C5a can interact with its receptors to promote angiogenesis through
upregulation of growth factors and enhancement of endothelial cell proliferation. C5a generation through an autocrine manner or intracellular protease
from cleavage of C5 produced by tumor cells can act on the surface receptors and induce signaling pathways such as PI3K-AKT, leading to the
promotion of tumor cell adhesion, proliferation, migration, and stemness.
Figure:
Role of C5a/C5aR axis in the tumor micro-environment.
Therapeutic Indications
Traditionally regarded as the critical innate immune response, complement components, especially C5a/C5aR axis, have been demonstrated to be
major contributors to immune suppression in the tumor micro-environment (“TME”), thereby disabling T cell function and promoting tumor
progression. Correspondingly, blockade of C5a/C5aR signaling bears great potential for cancer immunotherapy in combination with immune check
pointers or T cell engagers. High expression of C5aR in TME is correlated with poor diagnostic outcomes in various tumors, including colorectal
carcinoma, renal cancer, gastric cancer, and a number of squamous carcinomas. In addition, activation of the complement cascade in those tumors either
plays a critical role in cancer development or correlates with tumor grade and metastatic status.
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Advantages of TJ210
TJ210 is a human IgG1 subclass monoclonal antibody that specifically binds to the C5aR and thereby blocks interaction with its ligand, the
complement component 5a (“C5a”). Mutation introduced in the Fc region of IgG1 silent the Fc-mediated-effector function. C5aR1 blocking plays an
important role in the development and/or progression of various cancers and potentially autoimmune diseases. TJ210 exerts strong antitumor activity by
blocking the activation and migration of C5aR1-expressing myeloid cells and has a differentiated potential if approved, as it binds to a novel epitope and
possesses superior functional properties. Compared to the competitor antibody IPH5401 from Innate Pharma, TJ210 shows a more potent functional
response, especially when C5a concentrations are high, indicating a stronger potential for TJ210 at pathologic concentrations. Key results from
preclinical studies show that TJ210 selectively binds to the N-terminus of C5aR1 with high affinity and is not cross-reactive to other related
G-protein-coupled receptors (GPCRs). TJ210 also demonstrated a good safety profile of a four-week repeat dose GLP toxicity study in cynomolgus
monkeys, with no observed adverse effects up to the highest dose tested at 200mg/kg and no impact on neutrophils.
Summary of Preclinical Results
TJ210 exerts strong anti-tumor activity by blocking the activation and migration of C5aR1-expressing myeloid cells and has the potential to be a
differentiated agent as it binds to a novel epitope and possesses superior functional properties. Compared to the competitor antibody IPH5401 from
Innate Pharma, TJ210 shows a more potent functional response, especially when C5a concentrations are high, indicating TJ210’s potential at pathologic
concentrations.
Figure:
Inhibition of C5a-induced CD11b upregulation by C5aR mAb in human whole blood assay. Briefly, heparinized blood was incubated with
serial dilutions of TJ210 (MOR210) or IPH5401, and then human C5a was added (15 or 150 nM) and further incubated. Fluorescence was
measured by FACS Array. The median fluorescence intensity (MFI) of the gated granulocytes or monocytes in the CD11b-PE channel was
calculated. The inhibition curves were generated using GraphPad Prism via the nonlinear regression function.
In the four-week GLP toxicity study of TJ210, cynomolgus monkeys tolerated TJ210 up to 200 mg/kg, which is the
no-observed-adverse-effect-level (NOAEL) in that study, without impact on neutrophils. TJ210 showed a linear PK profile in monkeys, with a half-life
over 100 hours, consistent with a typical IgG1 monoclonal antibody.
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Figure: Cynomolgus monkeys were administered a single IV injection of TJ210 at 10, 25, and 75 mg/kg. Blood samples were collected at multiple
time slots for concentration-time analysis using a validated MSD method.
Clinical Development Plan
In September 2020, the U.S. FDA approved our IND to initiate a Phase 1 clinical trial to evaluate the safety, tolerability, MTD or maximum
administered dose (MAD), PK and PD of TJ210. In January 2021, we announced the dosing of the first patient in this trial, and we expect to complete
patient enrollment in the dose-escalation portion of the study by the second quarter of 2022. A separate IND application with the NMPA in China for a
Phase 1 clinical trial of TJ210 in patients with advanced solid tumors was also approved in January 2021. The trial is on track to commence in the
second quarter of 2022 as scheduled.
The development program will evolve into further clinical combination studies of TJ210 with checkpoint inhibitors. We plan to submit an IND
application to the NMPA in China for a combination study of TJ210 with toripalimab (TUOYI®) in the second quarter of 2022.
TJ-L14B: A PD-L1-Based Tumor-Dependent T-Cell Engager for Solid Tumors
Summary
TJ-L14B, also known as ABL503, is a bi-specific antibody targeting both PD-L1 and 4-1BB and was developed in collaboration with ABL Bio. It
was designed to overcome the limited efficacy of anti-PD-(L)1 and anti-4-1BB-related toxicity. Similar to TJ-CD4B, 4-1BB-stimulated T cell activity
only occurs upon tumor cell binding by the anti-PD-L1 part of TJ-L14B. This localized T cell activation is expected to exert strong anti-tumor activity
while reducing systemic side effects such as liver toxicity. In a humanized mouse tumor model, a short course of TJ-L14B treatment displayed greater
anti-tumor efficacy than anti-PD-L1 or anti-4-1BB alone or in combination and showed evidence of immunological memory response that resisted
tumor re-challenge. GMP material at 1000-L scale was successfully produced. In January 2021, we received IND approval from the U.S. FDA for a
Phase 1 study of TJ-L14B and dosed the first patient in April 2021. We share the global rights with ABL Bio for TJ-L14B, except for in Greater China
and South Korea where ABL Bio has sole rights.
Therapeutic Indications
As previously stated, new therapeutic options are urgently needed for PD-(L)1 relapsed or refractory cancer patients. One strategy is to maximize
T cell activity by simultaneously turning off co-inhibitory pathways such as PD-1/PD-L1 and turning on co-stimulatory pathways such as 4-1BB, which
is one of the most potent potentiators, as indicated earlier in this document. Several companies have been developing PD-L1 x 4-1BB bi-specific
antibodies, with the most advanced being developed by Genmab and Inhibrx, which are both currently in Phase 2 trials.
Advantages of TJ-L14B
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We believe that based on publicly available information and preclinical studies, TJ-L14B has the potential to be a highly differentiated PD-L1 and
4-1BB bispecific antibody. In terms of format, some of the leading compounds are monovalent heterodimers which may affect the potency of each arm
and may increase CMC complexity. In addition, as detailed earlier, the anti-4-1BB moiety of TJ-L14B binds to a novel epitope that only triggers 4-1BB
signaling upon tumor binding leading to reduced cytokine release and hepatic and systemic immunotoxicity without compromising anti-tumor activity.
TJ-L14B is also more specific than certain competitor molecules in terms of 4-1BB binding relative to other TNFR families of co-stimulatory
molecules. If proven in clinical trials, these potential advantages could enable TJ-L14B to be highly differentiated from other competitors’ compounds.
Summary of Preclinical Results
PD-L1 level-dependent 4-1BB Agonism and T Cell Activity. The ability of TJ-L14B to ligate 4-1BB and activate downstream signaling was tested
in a co-culture of PD-L1+ target cells with T cells as effectors. The results in the figure show that the level of NF-kB reporter activity elicited by
TJ-L14B correlated with the level of PD-L1 expression on the target cells. In contrast, urelumab induced NF-kB reporter activity regardless of target cell
PD-L1 expression. Importantly, TJ-L14B promoted the proliferation of CD8+ tumor-infiltrating lymphocytes obtained from human tumor samples in a
similar extent to urelumab, while the parental anti-PD-L1 and anti-4-1BB antibodies, either alone or in combination, had no effect, confirming a strict
PD-L1-dependence on T cell stimulation by TJ-L14B.
Figure: Dose-dependent PD-L1-restricted T cell activity by TJ-L14B/ABL503 but not urelumab in a co-culture system of T cells and target cells
expressing different levels of PD-L1 (as represented by mean fluorescent intensity (MFI) values).
Superior in vivo Anti-tumor Efficacy of TJ-L14B. In mice grafted with tumor cells expressing human PD-L1, TJ-L14B treatment every three days
for four times suppressed tumor cell growth in a dose-dependent manner, delivering far better efficacy than equimolar doses of single agents alone or in
combination. Remarkably, when the treated tumor-free mice were re-challenged with a second tumor graft after drug cessation, they remained protected,
indicating that TJ-L14B produced a durable anti-tumor response.
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Figure:
Potent in vivo anti-tumor activity of TJ-L14B in a mouse tumor model. Mice transgenic for humanized 4-1BB were grafted with MC38 cells
expressing human PD-L1. Mice were treated with the indicated antibodies every three days for four times. Tumor-free animals were
re-challenged with a second dose of the tumor on day 40 with treatment-naïve animals as a control. TJ-L14B is also known as ABL503.
At the 2021 SITC annual meeting in November 2021, alongside ABL Bio, we jointly presented preclinical study data, which confirms the
mechanism of action of TJ-L14B/ABL503 and its potential to treat patients with resistance to PD-L1 therapies. Analysis of the data found:
(1) PD-L1-dependent stimulation of the 4-1BB signaling pathway was demonstrated in 4-1BB bioassays with PD-L1 expressing tumor cells; (2) More
potent 4-1BB activation by TJ-L14B was observed at higher PD-L1 expression confirming the requirement of PD-L1 on either tumor or immune cells
for optimal activity. Cytokine release assays have also demonstrated minimal peripheral toxicity with TJ-L14B; (3) The in vivo efficacy of TJ-L14B was
demonstrated in animal models with tumors expressing different levels of PD-L1. TJ-L14B showed anti-tumor efficacy across the PD-L1 levels. In
particular, TJ-L14B demonstrated superior anti-tumor efficacy than atezolizumab in tumors with low PD-L1 expression; (4) In vitro tumor-killing
activity of TJ-L14B was superior compared to atezolizumab when tested in organoid system, even in organoids from atezolizumab non-responders;
(5) Pharmacodynamic changes in TILs and blood were evaluated in animal models. An increase in 4-1BB+ cells, CD8+ T cells, and effector memory T
cells was observed in the TME and blood, indicating a strong and long-lasting anti-tumor immune response; and (6) Treatment with TJ-L14B increased
MIG/CXCL9, MIP-1b/CCL4, and s4-1BB in the serum, and can potentially be used as pharmacodynamic markers in clinical trials.
Preclinical Safety. In contrast to certain competitor PD-L1 x 4-1BB bispecific antibodies, TJ-L14B did not induce cytokine release (including IL-6
and TNF-α) up to 0.83 mg/ml, which corresponded to a human equivalent dose of 15 mg/kg. Animal PK and toxicity studies have also been completed.
Results of these studies indicate that the NOAEL was 15 mg/kg/dose. This dose was also considered the highest non-severely toxic dose. A starting dose
of 0.7 mg is proposed for the first-in-human (FIH) study. There is a >3000-fold safety margin between the proposed FIH dose and the nonclinical safety
assessment studies including in vitro cytokine release assays and GLP toxicology studies.
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Clinical Development Plan
TJ-L14B is being developed first for oncology indications in the U.S. An IND approval has been obtained from the U.S. FDA for an FIH, open-
label, multicenter, multidose, dose-escalation, and expansion monotherapy study, which will assess safety, tolerability, PK, PD and preliminary efficacy
in adult patients with any progressive locally advanced (unresectable) or metastatic solid tumors. The dose-escalation trial is being conducted by our
partner ABL Bio. More data are being generated as the trial progresses.
Other Novel Bi-specific Antibodies
We have been working on generating bi-functional or bi-specific antibody molecules with tumor-targeted immune-activating properties. The
overarching goal behind these bi-specific molecules is to stimulate the immune responses within the tumor environment to convert immunologically
non-responsive “cold” tumors into responsive “hot” tumors. We have made steady progress in the past year culminating in the successful candidate
selection of two bi-specific molecules.
TJ-L1IF: A Next-generation PD-L1/IFN-α Antibody-cytokine Fusion Protein for Solid Tumors
TJ-L1IF is a next-generation PD-L1/IFN-α antibody-cytokine fusion protein, which is specifically designed for the treatment of solid tumors,
especially for PD-1/PD-L1 resistant tumors, through the addition of a strong immune adjuvant IFN-α to convert “cold” tumor to “hot” tumor on top of a
PD-L1 antibody to achieve superior anti-tumor activity than PD-(L)1 antibody monotherapy. IFN-α was the first cytokine approved for cancer treatment,
but its use has been limited due to considerable systemic toxicity. TJ-L1IF is composed of a PD-L1 VHH nanobody linked with the Fc of human IgG
with an engineered IFN-α2b fused at the C-terminus. It is a prodrug in that the IFN-α2b moiety is masked by a PEG group through a protease-cleavable
linker rendering the drug inactive in the systemic circulation, thus strongly reducing systemic toxicity. Once the drug reaches the tumor by PD-L1
antibody targeting, the linker can be removed by tumor-associated proteases to achieve tumor-site specific activation. This unique property of TJ-L1IF
has been confirmed in a series of in vitro and in vivo studies, in which TJ-L1IF demonstrated plasma stability, good safety in cynomolgus monkeys, and
superior activity against solid tumors in mouse models, particularly for the PD-1/PD-L1 resistant tumors, than what could be achieved by PD-L1
antibody or IFN-α used either alone or in combination. TJ-L1IF was developed using Affinity’s tumor microenvironment activated (TMEA) platform
and is now under preclinical development.
TJ-C64B: A Novel, Tumor-Dependent T-Cell Engager for Ovarian and Other Cancers
TJ-C64B is the third bispecific molecule developed leveraging our conditional 4-1BB platform, which has the advantage of systemic safety and
minimizing liver toxicity. It is specifically designed to simultaneously target tumor-associated antigen Claudin 6 (CLDN6) and 4-1BB for CLDN6+
solid tumor treatment. CLDN6 is regarded as an attractive cancer target due to its tumor-specific expression pattern: it is aberrantly expressed in a
variety of tumor types, especially those with limited response to PD-1/PD-L1 immunotherapy, such as ovarian cancer, but is hardly detectable in normal
adult tissues. We have demonstrated that TJ-C64B activates T cells through 4-1BB stimulation only upon CLDN6 engagement, providing a more
localized activation of the immune system with good efficacy and reduced systemic toxicity. Owing to a competent Fc, TJ-C64B has an added
advantage of specifically depleting CLDN6-expressing tumor cells and intratumor regulatory T cells, which are typically 4-1BB high, which
differentiates it from other 4-1BB bispecific antibodies under clinical development. Compelling immune activation and tumor inhibition have been
observed in vitro and in vivo in cancer cell lines with different CLDN6 expression levels. Importantly, no significant changes in liver enzymes following
repeated administrations in mice and cynomolgus monkeys, suggesting the minor risk of liver toxicity commonly seen by other 4-1BB agonist
antibodies. TJ-C64B is currently under preclinical development, and some of the preclinical data was published at AACR 2022.
Other Preclinical Programs
On the discovery front, the “super antibody” partnership initiatives we recently launched are progressing well, especially in the masked antibody
and AI-guided cytokine drug design areas. Together with internal discovery, focusing on novel targets for macrophage phagocytosis and T cell
activation, they form the discovery engine that drives our future pipeline growth. This expanding new portfolio of novel drug candidates represents our
firm commitment to sustaining a globally competitive pipeline through continued innovation, and complements our existing clinical programs.
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Business Development and Partnership Deals
During the reporting period, we have completed seven research, biomarker, and commercial partnership deals. The deals are strategically focused
on the following business areas. (1) Research partnerships were aimed to build the next wave of innovative assets that are enabled by transformative
technologies. The five active partnerships allow us to work with the partners to generate novel molecules that are enabled by self-replicating mRNA
technology, cell-penetrating alphabody technology, tumor-site activation probody technology, artificial intelligence design technology, and camel
nanobody 4-1BB technology. The first set of lead molecules have begun to form an emerging portfolio of novel drug candidates that are being tested at
the preclinical stage and are expected to move into the clinic in 2023.
(2) Commercial partnerships are designed to enhance our commercialization capability for upcoming product launches and co-commercialization
of selected products. In November 2021, we completed a commercial partnership deal for eftansomatropin alfa with Jumpcan for a total of
US$315 million in upfront and potential milestone payments, including approximately US$35 million in an upfront payment, representing one of the
largest deals in the China biopharma market. We will hold MAH and share profits generated from the commercialization of the product in mainland
China on a 50/50 basis, pursuant to which we will be entitled to receive tiered low double-digit royalties on net sales. This commercial partnership
provides us a great commercial opportunity to work with a commercial leader specializing in pediatric products for eftansomatropin alfa. At the Fourth
China International Import Expo (CIIE) in Shanghai held in November 2021, we entered into a strategic collaboration with Roche Diagnostics, a global
leader in in vitro diagnostics, to co-develop companion diagnostics (CDx) solutions for our innovative pipeline. In addition, we are in the process of
working on acquiring a pre-NDA product to enrich our near-term product portfolio focusing on hematologic malignancies.
(3) In-licensing and out-licensing deals are part of our pipeline strategy to either enrich our late-stage and near-term product portfolio through
selective in-licensing or co-development or partner the ex-China rights of selected global assets with big pharma companies, as demonstrated in the
AbbVie deal in 2020. In this regard, we are in the process of seeking a global partnership deal for uliledlimab and other pipeline assets with potential
global partners and is working on an in-licensing or co-development deal for a pre-NDA hematologic oncology product that is expected for NDA
submission in 2022. We are making every effort to bring the ongoing negotiations to a successful close in 2022, as well as seek new opportunities for
additional deals.
Our Near-Term Commercialization Plan
Our commercialization strategy is to rapidly build up our market position in China between 2023 and 2025 to become a leader in the therapeutic
area of hematologic malignancies with near-term assets including felzartamab, lemzoparlimab, and the potential addition of another pre-NDA product,
and become a major player in China’s growth hormone market with eftansomatropin alfa. This fast-to-market portfolio will be backed by a longer-term
portfolio focusing primarily on solid tumors between 2026 and 2028. Uliledlimab, efineptakin alfa, enoblituzumab and lemzoparlimab are among our
current therapeutic candidates for solid tumors.
We believe that our near-term product portfolio has significant commercial potential. For our hematologic oncology portfolio, the total annual
incidences are estimated to be approximately 173,000 (Globocan, 2020) in China for the three disease entities we intend to address, i.e., MM, leukemia
(AML/MDS) and lymphoma. For eftansomatropin alfa, more than 3.4 million children are estimated to suffer from growth hormone deficiency in China.
We believe each of our highly differentiated products has the potential to become a market leader, or a major player, in its respective therapeutic area.
The following table illustrates the epidemiological survey for the hematologic malignancy therapeutic area in China.
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Table:
Epidemiological survey results for MDS, AML, NHL, and MM incidences and deaths in 2020 in China, according to Globocan 2020, HLT
report, EvaluatePharma 2020 estimates, and management estimates.
Our commercialization roadmap is pillared by five strategic initiatives: (1) establishing a solid commercialization foundation through organization
preparedness, infrastructure preparedness, and outreaching business partnership with distributors, top-tier hospitals, direct-to-patient (DTP) and specialty
pharmacies, and research institutions; (2) accelerating the go-to-market timeline, by optimizing clinical development strategies and increasing disease
awareness and diagnosis capability of stakeholders on the commercial value chain; (3) paving the way for the commercial launch and National
Reimbursement Drug List (NRDL) inclusion by forming up the marketing shape for core assets; (4) manufacturing locally in the Hangzhou Facility to
establish cost advantages; (5) maximizing business development strategies to wrap up late-stage assets for pipeline enrichment.
We have taken concrete steps to prepare for the commercialization of our near-term product portfolio. Under the leadership of Mr. Yifei Zhu, we
formed a core commercialization team during the reporting period to cover all key commercialization functions, including market research, market
access, medical affairs, pricing, etc. Our commercialization capability will be continually expanded based on the schedule of NDA approvals of the
near-term products. Efforts are already underway to work toward the commercialization strategy of “preparing the organization,” “preparing the
market,” and “preparing the product” for our near-term portfolio. In October 2021, we entered a strategic partnership with Sinopharm Group Co. Ltd.
(“Sinopharm”) to expand our commercialization capabilities. We will authorize more than 300 of Sinopharm’s subsidiaries as distributors across China
to support distribution and retail allocation to terminal markets while we lead overall commercial activities.
How I-Mab Differentiates Itself in the Competitive Local Market
Notably, our key differentiation lies on our first-mover advantage, as well as our validated differentiation through innovation. For example, we
aim to launch lemzoparlimab as the first CD47 drug in China with a potentially superior safety and efficacy profile. In addition, the innovative products
in our near-term portfolio are designed for front-line treatments to benefit more patients and become a market leader in their respective therapeutic areas.
Secondly, on the back of the unique payor system in China, we plan to get our products into the National Reimbursement Drug List (NRDL) with
competitive pricing. In preparation for this, we have invested in local manufacturing capability in Hangzhou, China. The local manufacturing plant is
expected to significantly reduce the cost of goods and render our products more commercially competitive.
Thirdly, our commercialization plan is designed to focus on strategic priorities: (1) our near-term product portfolio is focused on hematologic
malignancies, in which our commercialization team is dedicated to building up significant long-term presence. To maximize the market potential for
eftansomatropin alfa, we have entered into a strategic partnership with Jumpcan, a leading pediatric pharmaceutical company in China; and, (2) our core
commercialization team focuses on a network of major hospitals in first-tier and second-tier cities in China, and adopts a hybrid model to work closely
with carefully selected partners in the broader market.
With the above-mentioned disciplines, we continue to actively look for highly synergistic partnerships to further enhance our late-stage portfolio
and commercialization presence in oncology. Leveraging these strategies, we believe our franchise will be able to achieve optimal and sustainable
commercialization efficiency with a high degree of compliance.
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Lemzoparlimab (TJC4) Market and Commercialization Strategy
Lemzoparlimab, our potential best-in-class CD47 antibody drug, targets to treat patients with myelodysplastic syndromes (MDS), acute myeloid
leukemia (AML) and non-Hodgkin’s lymphoma (NHL) among hematologic malignancies in the near-term between 2023 and 2025. We aim to develop
lemzoparlimab as a backbone product for hematologic malignancies, including: (1) potential first-line (1L) treatment in combination with azacitidine
(AZA) for patients with MDS, if approved; (2) potential 1L treatment in combination with AZA and venetoclax for patients with AML, pending the
progress of the study to be led by AbbVie; and (3) potential late line of treatment in combination with rituximab for patients with NHL in China, if
approved. Lemzoparlimab has the potential first-mover advantage, if approved, according to our development schedule in China.
In China, the incidences of MDS, AML and NHL reached approximately 21,000, 37,578 and 92,834 in 2020, respectively (Source: Globocan
2020, HLT report, market research and estimates). MDS is a group of diverse bone marrow disorders in which the bone marrow does not produce
enough healthy blood cells and is primarily a disease of the elderly. Currently, treatment options for patients with high-risk MDS are limited, including
allogeneic hematopoietic stem cell transplantation, large dose chemotherapy, hypomethylating agents (HMAs), and supportive therapy. Large dose
chemotherapy has usually seen a low response rate in patients with high-risk MDS and the efficacy is not long-lasting. HMAs can improve the overall
survival of high-risk MDS patients; however, there are no approved therapies for patients who have progressed after HMA treatment. Therefore, there
are significant unmet medical needs for innovative therapies in this therapeutic area.
AML is a type of cancer that starts in the bone marrow and blood that progresses rapidly without proper treatment. About 30% of the patients
diagnosed with MDS progress to AML. NHL is a type of blood cancer that caused by abnormal or malignant proliferation of lymphocytes. There are
many different subtypes of NHL categorized by abnormal lymphocyte characteristics, among which diffuse large B-cell lymphoma (DLBCL) and
follicular lymphoma (FL) are the most common subtypes. With the increased incidences and lower overall survival rate, both AML and NHL patients
have significant unmet medical needs in China.
CD47 has emerged as one of the most promising immuno-oncology targets, especially as potential front-line treatment, as well as a new therapy
for relapsed and refractory (r/r) patients with hematologic malignancies. The development of CD47 antibodies is primarily hampered by its on-target
binding to red blood cells (RBCs), resulting in severe anemia and other hematologic side effects commonly seen with other clinical stage CD47
antibodies.
As a global front-runner CD47 antibody, lemzoparlimab is being developed to potentially achieve the earliest registration as the first CD47
antibody drug in China. We aim to rapidly establish a leading position with our other core hematologic oncology franchise, backed by: (1) First-mover
advantages. A Phase 3 registrational clinical trial for 1L MDS is expected to start in 2022, aiming for the potential registration in 2024; (2) Clinical
differentiation validated through multiple clinical trials. Lemzoparlimab is a highly differentiated CD47 antibody by design. Its safety data from both
the U.S. and China studies are consistent with our expected safety profile without the need of a priming dose regimen. More importantly, lemzoparlimab
has also demonstrated encouraging efficacy signals in multiple clinical trials; (3) Increased disease awareness and diagnosis. Our commercial team has
taken initiatives to increase the disease awareness and diagnosis of MDS/AML in hematologic oncology specialty hospitals, by leveraging our network
in the accelerated clinical trials and physician education campaigns; and (4) Broad coverage of hematologic indications and cross-asset synergies. We
are exploring lemzoparlimab in various combinations with AZA, venetoclax, rituximab for the treatment of 1L MDS/AML and NHL to offer an
effective treatment coverage for its addressable market. In addition, we expect to receive tiered royalties from AbbVie in the low-to-mid teens as a
percentage of lemzoparlimab’s global net sales upon its global registration.
Felzartamab (TJ202) Market and Commercialization Strategy
Multiple myeloma (MM) is a type of blood cancer that starts in the bone marrow and is characterized by the excessive proliferation of malignant
plasma cells that accumulate in the bone marrow, where they displace and suppress healthy blood progenitor cell populations. The prognosis factors for
MM include host factors, tumor characteristics, and response to treatment. There is a consensus that disease prognosis in MM is significantly impacted
by treatment response and micro-residual disease (MRD) level.
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In China, MM is one of the most common hematologic malignancies, accounting for approximately 10% of the malignant tumors in the blood
system. MM is primarily a disease of the elderly. The incidence rate of MM in China is about 1.5 per 100,000, with new cases of approximately 21,116
in 2020 (Source: Globocan 2020), and is increasing year by year due to the rapidly growing 65-years and older population. According to a report by
Frost & Sullivan, new cases of MM are expected to increase to approximately 27,700 in China by 2030, representing a compound annual growth rate
(CAGR) of 2.8%.
CD38 antibody therapy represents a novel mechanism of action among the current therapeutic classes for MM. We believe that there is rapidly
increasing clinical adoption of CD38 antibody therapy in China. Currently, clinical outcomes for r/r MM patients who had received multiple lines of
interventions remain unsatisfactory. MM is still an incurable disease, and the extension of PFS and OS remains a significant unmet medical need. CD38
antibody therapy has demonstrated synergetic cellular and molecular effects in eliminating CD38+ tumor cells with proven clinical efficacy in
significantly prolonged PFS and OS, compared with the baseline survival status of other treatment options.
Our plan is to rapidly gain a sizable market share for felzartamab through unique positioning in the following aspects. (1) Clinical advantages.
Felzartamab demonstrated a lower infusion-related reaction rate and shorter infusion time, which has made it possible for its administration in an
out-patient clinic setting; (2) Strong synergy with our differentiated pipeline. We are exploring novel combination therapies of felzartamab with other
assets in our pipeline. If approved, these novel therapies will provide more treatment options for the patients and drive a rapid market share growth for
our hematologic oncology product portfolio; and (3) Competitive pricing upon NRDL inclusion. Leveraging the localized manufacturing facility in
Hangzhou, we expect to compete with flexible pricing as a domestically manufactured product to be included in NRDL and are not constrained by
higher global pricing.
Eftansomatropin Alfa (TJ101) Market and Commercialization Strategy
PGHD is a pituitary disorder that occurs when the production of growth hormone, typically secreted by the pituitary gland, is disrupted. Since
growth hormones play a critical role in stimulating body growth and development and are involved in the production of muscle protein and the
breakdown of fats, a decrease in growth hormone affects numerous physiological processes, including short stature in children and other physical
ailments in both children (“PGHD”) and adults (“AGHD”). Both globally and in China, the widely adopted treatment for PGHD is patient-specific
growth hormone replacement therapy, which is given in a calculated weight-based dosing regimen.
According to the Frost & Sullivan Report, only 5.7% of all estimated PGHD patients in China received growth hormone replacement therapy
injections in 2020. Therefore, China’s PGHD patients’ clinical needs remain largely untapped. As a result of clinical/patient education, affordability, and
increasing demand, the PGHD market in China is forecasted to maintain rapid growth.
Short-acting (daily) rhGH is commonly used for the long-term treatment of children and adults with inadequate endogenous growth hormone
secretion. Currently, there is only one pegylated long-acting (weekly) rhGH (Jintrolong) for PGHD in China. As there are certain safety concerns related
to the long-term use of pegylated drugs, such as potential renal toxicity, cellular vacuolation, and formation of anti-polyethylene glycol antibodies, the
product in pure protein format is considered clinically advantageous.
We believe that eftansomatropin alfa has the following advantages to rapidly gain meaningful market share upon product launch: (1) Convenience
and better compliance. When compared to the daily regimen of rhGH, eftansomatropin alfa is proven to be a more convenient therapy with better
patient compliance due to its weekly dosing frequency (potentially twice-monthly administration) while maintaining similar efficacy. In addition, we are
developing a more convenient injection device to improve patient adherence and product competitiveness; (2) Enhanced safety profile. Eftansomatropin
alfa is the only pure protein format product in development and has no observed safety concerns typically associated with pegylated drugs, such as
potential renal toxicity, pre-existing or treatment-induced anti-PEG antibodies, and cellular vacuolation in macrophages, renal tubule cells and the
choroid plexus epithelial cells; and (3) Access to the high-grow China broad market through a strategic partnership with a leading pediatric
pharmaceutical company in China.
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In November 2021, we entered into a strategic collaboration agreement with Jumpcan, a leading domestic pharmaceutical company specializing in
and committed to pediatric medicines, for the development, manufacturing, and commercialization of eftansomatropin alfa in mainland China. The
collaboration brings together our leadership in drug innovation and manufacturing with Jumpcan’s commercial leadership in pediatric medicines in
China with proven market access and retail channels capabilities. Jumpcan is a leader in the pediatrics space in China, with over 3,500 medical
representatives and retail specialists and access to over 23,000 hospitals in 30 provinces and cities in China, including 220 children’s hospitals. This
allows rapid access to a broad market once eftansomatropin alfa achieves commercialization in mainland China. Together with the commercial strategy
mentioned above and the demonstrated product advantages of eftansomatropin alfa, we expect to rapidly build a strong market position for
eftansomatropin alfa and become a leading player in the long-acting rhGH market space in China by 2028.
Licensing and Collaboration Arrangements
A. In-Licensing Arrangements
Licensing Agreement with MorphoSys (Felzartamab)
In November 2017, we entered into a license and collaboration agreement with MorphoSys AG (“MorphoSys”) with respect to the development
and commercialization of felzartamab (MOR202/TJ202), MorphoSys’s proprietary investigational antibody against CD38 (the “CD38 product”).
Under this agreement, MorphoSys granted to us an exclusive, royalty-bearing, sublicensable license to exploit MOR202/TJ202 for any human
therapeutic or diagnostic purpose in the licensed territory, namely Greater China.
Pursuant to this agreement, we granted to MorphoSys an exclusive license to our rights in any inventions that we make while exploiting
MOR202/TJ202 under this agreement, solely to exploit MOR202/TJ202 outside of Greater China.
We also received the right to sublicense to affiliates and third parties acting as contract manufacturers, contract research organizations, distributors
or wholesalers without prior written consent, as well as the right to sublicense to other third parties with the prior written consent of MorphoSys, not to
be unreasonably withheld, delayed or conditioned.
We are solely responsible for the development and commercialization of MOR202/TJ202 in Greater China, and must use commercially reasonable
efforts as we develop and commercialize MOR202/TJ202.
Pursuant to this agreement, we paid to MorphoSys an upfront license fee of US$20.0 million. We also agreed to make milestone payments to
MorphoSys, conditioned upon the achievement of certain development, regulatory and commercial milestones, in the aggregate amount of
US$98.5 million. Such milestones include first patient dosed in human clinical trials, marketing approval, and first annual net sales of CD38 products
covered by the agreement in excess of a certain amount. As of the date of this annual report, we have made milestone payments of US$8.0 million to
MorphoSys.
In addition, we are required to pay tiered low-teens royalties to MorphoSys on a country-by-country and product-by-product basis during the term,
commencing with the first commercial sale of a relevant licensed product in Greater China. The end of the royalty term is linked to (i) the expiration,
invalidation or abandonment of relevant patent claims, (ii) 10 years from the date of first commercial sale of such CD38 product, and (iii) marketing
exclusivity for such relevant licensed product. To date, we have not paid any royalties to MorphoSys. Unless terminated earlier in accordance with the
terms thereof, this agreement will remain in effect until the expiration of our last payment obligation under the agreement. This agreement may be
terminated by either party for the other party’s uncured material breach, bankruptcy or insolvency. In addition, we have the right to terminate the
agreement for convenience at any time after a certain specified time period upon a notice period that varies based upon the stage of development.
MorphoSys has the right to terminate the agreement if we challenge its patents. To the extent that we terminate for convenience or MorphoSys
terminates for our material breach, bankruptcy, insolvency or patent challenge, among other things, all licenses and rights granted by MorphoSys to us
will automatically terminate and the licenses and rights granted by us to MorphoSys will survive. In the event of such termination, we must also grant to
MorphoSys an exclusive, royalty-bearing, sublicensable license under certain of our intellectual property relating to the licensed product to exploit
MOR202/TJ202 for any human therapeutic or diagnostic purpose in Greater China.
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Assignment and License Agreement with Genexine
In October 2015, I-Mab Bio-tech Tianjin Co., Ltd., known as Tasgen Bio-tech (Tianjin) Co., Ltd. at the time (which subsequently became our
subsidiary following the Acquisition) (“I-Mab Tianjin”), entered into an intellectual property assignment and license agreement with Genexine, Inc.
(“Genexine”), further amended in December 2017, with respect to four licensed products, namely GX-H9 (TJ101), GX-G3 (TJ102), GX-G8 and GX-P2
and one assigned product, GX-G6 (TJ103). Under this agreement, Genexine (i) granted to I-Mab Tianjin an exclusive, non-transferable, sublicensable
license to use and otherwise exploit certain intellectual property to engage in pre-clinical and clinical development, manufacturing, sale and distribution
of the above-mentioned licensed products for (A) the treatment of any disease with respect to GX-H9 and GX-G3 in China (which, for clarity excludes,
Hong Kong, Macau and Taiwan), (B) the treatment of chemically induced diarrhea, with respect to GX-G8 anywhere in the world and (C) the treatment
of rheumatoid arthritis and lupus (not including psoriasis) with respect to GX-P2 anywhere in the world and further (ii) assigned to I-Mab Tianjin a
certain Chinese patent and related know-how related to the assigned product (TJ103) and granted I-Mab Tianjin an exclusive license to exploit the
assigned intellectual property to engage in pre-clinical and clinical development, manufacturing, sale and distribution of the assigned product (TJ103)
for the treatment of any disease in China (which, for clarity, excludes Hong Kong, Macau and Taiwan). I-Mab Tianjin will also receive an exclusive
license to any improvements that Genexine develops or acquires related to any of the aforementioned products.
Under this agreement, I-Mab Tianjin paid an aggregate upfront license fee of US$13.0 million in relation to the patents, patent applications,
know-how, data and information in connection with the four licensed products and a purchase fee of US$7.0 million in connection with the assigned
product (TJ103). I-Mab Tianjin also agreed to make certain milestone payments, including milestone payments in the aggregate amount of
US$40.0 million for GX-H9, US$25.0 million for TJ103 and US$15.0 million for GX-G3, conditioned upon the achievement of certain net sales targets.
The term of this agreement is 30 years unless terminated earlier in accordance with the terms thereof. This agreement may be terminated by either
party for the other party’s uncured material breach, bankruptcy or insolvency, in the event of force majeure or a PRC regulatory requirement to make
material alteration or modification to the contractual rights or obligations of this agreement which has the effect of preventing the parties from achieving
their business objectives, or upon the termination of a certain subscription agreement or a certain joint venture agreement entered into by I-Mab Tianjin
and Genexine in October 2015 (provided that the termination of such subscription agreement or joint venture agreement was not due to the material
breach of the party electing to terminate this agreement). Genexine has the right to terminate the agreement if we fail to use commercially reasonable
efforts to obtain regulatory approvals for commercializing the licensed product in the agreed period due to our own fault or if we cease to pursue clinical
development or product registration or to conduct licensed activities on a reasonable scale as approved by our board of directors. During the term of this
agreement, if I-Mab Tianjin develops or acquires any improvement, modification or alteration to the licensed products, I-Mab Tianjin will become the
sole legal owner of such improvements, modifications and alterations and has full power, right and authority to grant licenses or transfer ownership of
the same. I-Mab Tianjin is required to promptly notify Genexine in writing giving details of any such improvements, modifications or alterations and
provide Genexine with such explanations or trainings to enable Genexine to legally and effectively use the same. Additionally, I-Mab Tianjin should
grant to Genexine a fully paid up, royalty-free, exclusive license to use any such improvements, modifications and alterations anywhere outside of the
territory for which I-Mab Tianjin is licensed under this agreement.
In November 2018, we entered into an intellectual property license agreement with Genexine with respect to GX-G3 (TJ102). Under this
agreement, Genexine granted to us an exclusive, non-transferable, sublicensable license to use and otherwise exploit certain intellectual property to
engage in pre-clinical and clinical development, manufacturing, sale and distribution of GX-G3 for the treatment of any disease in Taiwan and Hong
Kong. We will also receive an exclusive license to use any improvements related to GX-G3 that Genexine develops or acquires free of charge in Taiwan
and Hong Kong. Under this agreement, the scope of improvements is limited to GX-G3 and does not include the hyFc platform. We paid an upfront
license fee of US$0.1 million and milestone payments of US$0.9 million to Genexine. No other milestone payments are due under this agreement.
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Licensing Agreement with Genexine (Efineptakin alfa)
In December 2017, we entered into an intellectual property license agreement with Genexine with respect to GX-I7, a long-acting IL-7 cytokine.
Under this agreement, Genexine granted to us an exclusive, sublicensable and transferable license to use and otherwise exploit certain intellectual
property (including improvements subsequently developed or acquired by Genexine) in connection with the pre-clinical and clinical development,
manufacturing, sale and distribution of GX-I7 to treat cancers in the field of oncology in China, Hong Kong, Macau and Taiwan.
Under this agreement, we paid an upfront license fee of US$12.0 million to Genexine. We also agreed to make milestone payments in the
aggregate amount of US$23.0 million, conditioned upon the achievement of certain development milestones, including completion of Phase 2 and Phase
3 clinical studies and NDA or BLA approval in any of China, Hong Kong, Macau or Taiwan.
Further, we agreed to make milestone payments in the aggregate amount of US$525.0 million, conditioned upon the achievement of certain
cumulative net sales of GX-I7 up to US$2,000 million. We also are required to pay Genexine a low-single-digit percentage royalty in respect of the total
annual net sales of GX-I7. The aforesaid milestones and royalties (other than the upfront payment) will be reduced by 50% following the entry of a
generic version of GX-I7 in China, Hong Kong, Macau and Taiwan without the consent or authorization of us or any of our sublicensees. As of the date
of this annual report, no milestone payments or royalties are due under this agreement.
Unless terminated earlier in accordance with the terms thereof, this agreement will remain in effect until the later of (i) the expiry of the last to
expire patent of the licensed intellectual property that includes a valid claim for China, Hong Kong, Macau or Taiwan and that covers the composition of
GX-I7; and (ii) 15 years from the date of the first commercial sale of GX-I7. This agreement may be terminated by either party for the other party’s
uncured material breach, bankruptcy or insolvency, in the event of force majeure or regulatory requirement to make material alteration or modification
to the contractual rights or obligations of this agreement which has the effect of preventing the parties from achieving their business objectives, or by
mutual agreement of both parties. Genexine has the right to terminate the agreement if we fail to use commercially reasonable efforts to obtain
regulatory approvals or other registrations necessary for commercializing the licensed product in the agreed period due to our fault or if we cease to
pursue clinical development or product registration or to conduct licensed activities on a reasonable scale as agreed (“Development and
Commercialization Termination Events”). Such Development and Commercialization Termination Events expressly include our failure to reach certain
development milestones or commercially launch the licensed product in the agreed period. To the extent that we terminate as a result of a regulatory
requirement to make material alteration or modification to the contractual rights or obligations of this agreement or Genexine terminates for our material
breach, bankruptcy or insolvency, force majeure, or the Development and Commercialization Termination Events, we cannot develop, manufacture,
market, promote, sell, offer for sale, distribute or otherwise make available any competing product for a certain period after such termination.
During the term of this agreement, if we develop or acquire any improvement, modification or alteration to the licensed product, we will own such
improvements, modifications or alterations and provide Genexine details thereof, whether patentable or not. Additionally, we should grant to Genexine a
fully paid up, royalty-free, exclusive license (with a right to sublicense) to use any such improvements, modifications or alterations anywhere outside of
China, Hong Kong, Macau and Taiwan.
In May 2020, we and Genexine entered into an amendment to this agreement, whereby both parties desire to establish a collaboration on TJ107
GBM Study in Greater China. Under the terms of the expanded collaboration, we will be mainly responsible for using commercially reasonable efforts
to conduct the Phase 2 GBM clinical trial in Greater China, and Genexine will share the development strategies, data and costs for success of this
clinical trial. As of December 31, 2021, the costs incurred for the development of this new indication was RMB13.2 million (US$2.1 million) and thus
RMB8.8 million (US$1.4 million) was recorded in our audited consolidated financial statements for the year ended December 31, 2021.
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Licensing Agreement with Ferring (Olamkicept)
In November 2016, we entered into a license and sublicense agreement with Ferring International Center SA (“Ferring”) with respect to (i) FE301,
an interleukin-6 inhibitor, and (ii) all pharmaceutical formulations in finished packaged form containing FE301 covered by certain patents or patent
applications. Under this agreement, Ferring granted to us an exclusive, sublicensable license (excluding any non-exclusive license that Ferring granted
to Conaris Research Institute AG under a licensing agreement entered into in November 2008) under certain Ferring intellectual property to research,
develop, make, have made, import, use, sell and offer to sell FE301 (and the licensed products containing FE301) in China, Hong Kong, Macau, Taiwan
and South Korea. We also have an option to receive an exclusive, sublicensable license under certain Ferring intellectual property to research, develop,
make, have made, import, use, sell and offer to sell FE301 (and the licensed products containing FE301) in the countries in North America, the
European Union and Japan that are mutually agreed upon by the parties.
We are required to use commercially reasonable efforts to obtain approval of FE301 and to promote, market, distribute and sell it in China, Hong
Kong, Macau, Taiwan, and South Korea. Such activities are to be at our own cost and expense.
Under this agreement, we paid to Ferring an upfront license fee of US$2.0 million. We also agreed to make milestone payments to Ferring, in the
aggregate amount of US$14.5 million, conditioned on the achievement of certain development milestones in the licensed territory, including completion
of Phase 1b and Phase 2a clinical studies and the submission and approval of the new drug application. Further, if we exercise our option to receive a
license in any of the mutually agreed upon countries in North America, the European Union and Japan, we are required to pay to Ferring an additional
US$3.0 million as an upfront license fee (upon the exercise of the option), and milestone fees up to the aggregate amount of US$30.0 million,
conditioned upon the licensed product achieving certain development milestones in certain countries in the option territory.
In addition, we agreed to pay Ferring tiered royalties ranging from the mid-single-digit to high-single-digit percentages of annual net sales for
countries in China, Hong Kong, Macau, Taiwan, and South Korea, and from the high-single-digits to 10% of annual net sales for the mutually agreed
upon countries in North America, the European Union and Japan. To date, we have not paid any royalties to Ferring.
The royalty term commences with the first commercial sale of the licensed product in the relevant country and ends upon the later of (i) 15 years
from the date of launch, and (ii) the expiry of the last to expire patent of Ferring that includes a valid claim covering the development, making, using or
selling of the licensed compound or licensed product in the licensed territory and/or option territory. Unless terminated earlier in accordance with the
terms thereof, this agreement will remain in effect until the later of the expiry of the royalty term, and the first date on which we are not conducting any
necessary and outstanding clinical study with respect to the licensed product or seeking to obtain any necessary and pending regulatory approval for the
licensed product, if applicable. This agreement may be terminated by either party for the other party’s uncured material breach, bankruptcy or
insolvency. In addition, in the event that the original licensor terminates its license to Ferring governing any of the intellectual property sublicensed to us
under this agreement, Ferring has the right to terminate this agreement with respect to such sublicenses in which case both parties will discuss in good
faith how to resolve and mitigate to mutual satisfaction. To the extent that Ferring terminates for our material breach, bankruptcy or insolvency, among
other things, all licenses and rights granted by Ferring to us will automatically terminate and the licenses and rights we granted to Ferring will survive
and automatically become irrevocable with the right to sublicense.
During the term of the licensing agreement, if we develop or acquire any improvement, modification, enhancement or addition to the licensed
product, we will own and retain all rights, title and interest therein, and grant to Ferring a non-exclusive, fully paid, royalty-free, worldwide license
thereto.
In September 2020, we entered into a sublicense agreement with I-Mab Hangzhou, under which we sublicensed to I-Mab Hangzhou an exclusive,
sublicensable license to develop, manufacture and commercialize olamkicept in mainland China, Hong Kong, Macau, Taiwan and South Korea.
License and Collaboration Agreement with MacroGenics (enoblituzumab)
In July 2019, we entered into a license and collaboration agreement with MacroGenics, Inc. for development and commercialization of an
Fc-optimized antibody known as enoblituzumab that targets B7-H3, including in combination with other agents, such as the anti-PD-1 antibody known
as retifanlimab (formerly MGA012), in the People’s Republic of China, Hong Kong, Macau and Taiwan.
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Under this agreement, MacroGenics granted to us an exclusive, sublicensable, royalty-bearing license to MacroGenics’ patents and know-how to
develop and commercialize the enoblituzumab product, and a combination regimen of enoblituzumab and retifanlimab, in Greater China during the term
of the agreement.
In exchange for these rights, in addition to certain financial consideration, we grant to MacroGenics a royalty-free, sublicensable, license outside
of Greater China, to our patents and know-how that are related to the enoblituzumab product or useful or necessary for MacroGenics to develop or
commercialize the enoblituzumab product or a product containing retifanlimab, and combinations thereof. The license is (i) non-exclusive with respect
to the enoblituzumab product, and (ii) exclusive with regard to retifanlimab.
Unless prohibited by applicable laws and regulations, which include all international, national, federal, state, regional, provincial, municipal and
local government laws, rules, and regulations that apply to either us or MacroGenics or to the conduct of the collaboration under this agreement
(including Good Manufacturing Practice, Good Clinical Practices, General Biological Products Standards, and the laws, rules and regulations of the
International Conference on Harmonisation, the United States, China, Hong Kong, Macau, and Taiwan, each as may be then in effect, as applicable and
amended from time to time), we will co-own all clinical data generated pursuant to this agreement in any clinical trial conducted solely in Greater China,
and, to the extent that such joint ownership is not legally permitted, MacroGenics will be the sole and exclusive owner of such clinical data.
MacroGenics will solely and exclusively own all other clinical data generated pursuant to this agreement. We are not aware of any applicable laws or
regulations that would prohibit us from jointly owning such clinical data and, to our knowledge, we currently qualify for such joint ownership with
MacroGenics under this agreement.
Pursuant to this agreement, we paid MacroGenics an upfront payment of US$15.0 million. We also agreed to pay MacroGenics development and
regulatory milestone fees of up to US$135.0 million and tiered double-digit royalties (ranging from mid-teens to twenty percent) based on annual net
sales in the territories. As of the date of this annual report, we have made a milestone payment of US$4.5 million to MacroGenics.
We are responsible for, and must use commercially reasonable efforts, to develop and commercialize the enoblituzumab product (which includes
the enoblituzumab product in combination with retifanlimab) in Greater China. This includes conducting all clinical studies required for approval,
participating in a planned, global Phase 3 trial (or another mutually agreeable global clinical trial) of the enoblituzumab combination product, the
conduct of at least two Phase 2 or Phase 3 trials each targeting B7-H3 expressing patient populations, and submissions to regulatory authorities in
Greater China. MacroGenics is responsible for, and must use commercially reasonable efforts to undertake certain development activities regarding the
enoblituzumab product.
We are responsible for all development costs in Greater China. MacroGenics is responsible for all development costs in the rest of the world,
except that we are responsible for 20% of the costs incurred in (i) activities supporting global clinical trials in which we participate, (ii) certain CMC
activities for material intended to be used in clinical trials in Greater China, and (iii) companion diagnostic development and validation for indications
being studied in Greater China.
Unless terminated earlier in accordance with the terms thereof, this agreement will remain in effect, on a country-by-country and region-by-region
basis, until the later of (i) the twelfth (12th) anniversary of the first commercial sale of an enoblituzumab product in such country or region, (ii) the
expiration of the last-to-expire MacroGenics patent licensed under this agreement, which will occur in October 2036, and (iii) the expiration of the latest
data exclusivity period for the enoblituzumab product in such country or region. Since there is currently no data exclusivity protection period in China,
Hong Kong, Macau or Taiwan, this agreement will remain in effect until the later of clauses (i) and (ii). This agreement may be terminated by either
party for the other party’s uncured material breach, safety reasons or force majeure. In addition, we have the right to terminate the agreement for
convenience at any time after a certain specified time period upon advance notice to MacroGenics. MacroGenics has the right to terminate the
agreement if we challenge its patents. To the extent that we terminate for convenience or MacroGenics terminates for our material breach, patent
challenge or safety reasons, all licenses and rights granted by MacroGenics to us will automatically terminate and the licenses and rights granted by us
to MacroGenics will survive and automatically become exclusive and worldwide. To the extent that we terminate for MacroGenics’ material breach or
safety reasons, among other things, all licenses and rights granted by MacroGenics to us will automatically terminate. The licenses and rights granted by
us to MacroGenics will also automatically terminate to the extent we terminate for MacroGenics’ material breach. To the extent we terminate for safety
reasons, such licenses and rights will terminate only with respect to the licensed territory and will otherwise survive outside the licensed territory.
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Other In-Licensing Arrangements
In November 2018, we entered into a license and collaboration agreement with MorphoSys for MorphoSys’s proprietary antibody
(MOR210/TJ210) directed against C5aR (the “C5aR Agreement”). Under this agreement, MorphoSys granted to us an exclusive, royalty-bearing license
to explore, develop and commercialize MOR210/TJ210 in Greater China and South Korea. I-Mab will perform and fund all global development
activities related to the development of MOR210/TJ210 in Greater China and South Korea, including all relevant clinical trials (including in the U.S.
and China) and all development activities required for IND filing in the U.S. as well as CMC development of manufacturing processes. As of the date of
this annual report, we have made an upfront payment of US$3.5 million and milestone payment of US$2.5 million to MorphoSys. No other milestone
payments or royalties are due under this agreement in the reporting period. MorphoSys retains rights in respect of development and commercialization
of MOR210/TJ210 in the rest of the world. Additionally, MorphoSys maintains the right to conduct activities in Greater China and South Korea that
enable MorphoSys to exploit MOR210/TJ210 outside of those countries. Pursuant to the C5aR Agreement, we are required to use commercially
reasonable efforts as we develop and commercialize MOR210/TJ210 in Greater China and South Korea. This agreement may be terminated by either
party for the other party’s uncured material breach, bankruptcy or insolvency. In addition, we have the right to terminate the agreement for convenience
at any time after a certain specified time period upon a notice period that varies based upon the stage of development and for safety reasons. MorphoSys
has the right to terminate the agreement if we challenge its patents. To the extent that we terminate for convenience or MorphoSys terminates for our
material breach, bankruptcy, insolvency or patent challenge, among other things, all licenses and rights granted by MorphoSys to us will automatically
terminate and the licenses and rights granted by us to MorphoSys will survive. In the event of such termination, in addition to other obligations, we must
grant to MorphoSys an exclusive, royalty-bearing, sublicensable license under certain of our intellectual property relating to the licensed product to
exploit MOR210/TJ210 in Greater China and South Korea.
B. Out-Licensing Arrangements
License and Collaboration Agreement with AbbVie
In September 2020, we, through our subsidiaries I-Mab Biopharma Co., Ltd. and I-Mab Biopharma US Limited, entered into a license and
collaboration agreement with AbbVie Ireland Unlimited Company (“AbbVie”) for the development and commercialization of certain compounds and
products that target CD47, including lemzoparlimab (which targets a unique epitope of CD47).
Under this agreement, we grant AbbVie an exclusive, royalty-bearing, sublicensable license to develop, manufacture and commercialize the
licensed compounds and products (but excluding products that are directed to both a CD47 epitope that is not the same or substantially similar to the
epitope targeted by lemzoparlimab and a non-CD47 target) anywhere in the world outside of mainland China, Hong Kong and Macau, and to conduct
development and manufacturing activities in mainland China, Hong Kong and Macau to further AbbVie’s commercialization of the licensed products
outside of mainland China, Hong Kong and Macau, except that, with respect to products containing either our preclinical CD47-PDL1 compound or our
preclinical CD47-GMCSF compound, AbbVie will not develop, manufacture or commercialize such products until the parties come to financial terms
on such products following AbbVie’s exercise of its rights of first negotiation. We have granted AbbVie a license and cannot commercialize products
containing our preclinical CD47-PDL1 compound or our preclinical CD47-GMCSF compound outside of mainland China, Hong Kong and Macau even
if AbbVie does not exercise its right of first negotiation or we are unable to come to financial terms on such products. We also grant AbbVie a
co-exclusive, royalty-bearing, sublicensable license to develop, manufacture and commercialize licensed compounds and products that are directed to
both a CD47 epitope that is not the same or substantially similar to the epitope targeted by lemzoparlimab and a non-CD47 target (excluding such
compounds and products that have been developed by us) anywhere in the world.
Under this agreement, AbbVie grants us an exclusive, royalty-free, sublicensable license under its technology and any joint technology developed
under this agreement to clinically develop and commercialize in mainland China, Hong Kong and Macau certain of the licensed compounds and
products that (1) only target CD47, including lemzoparlimab, and (2) to the extent AbbVie exercises its rights of first negotiation for such licensed
compounds and products, consist of our preclinical CD47-PDL1 compound or our preclinical CD47-GMCSF compound.
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We are responsible for conducting certain initial development activities, at our cost and expense, following which AbbVie assumes the
responsibility and costs for all development, manufacture and commercialization activities of the licensed compounds and products outside of mainland
China, Hong Kong and Macau. Under this agreement, AbbVie is required to use commercially reasonable efforts to develop, seek and obtain approval
of, and commercialize at least one licensed product in at least two indications in the United States and at least three of the United Kingdom, France,
Germany, Italy and Spain.
We are responsible for the development and commercialization of the licensed compounds and products in mainland China, Hong Kong and
Macau. We are required to use commercially reasonable efforts to develop, seek and obtain approval of, and commercialize at least one licensed product
in at least two indications in mainland China.
During the term of the Agreement, we are not permitted to develop, manufacture or commercialize a compound or product that is directed
(1) solely to CD47 or (2) to an epitope that is the same or substantially similar to the epitope targeted by lemzoparlimab, and AbbVie is not permitted to
market a monoclonal antibody that is solely directed to a CD47 epitope that is the same or substantially similar to the epitope targeted by lemzoparlimab
for an indication in any country where the licensed product has received regulatory approval for such indication. Additionally, during the first five
(5) years after the first commercial sale of a licensed product outside of mainland China, Hong Kong and Macau, AbbVie will not market any
monoclonal antibody solely directed to CD47 for an indication in any country where the licensed product has received regulatory approval for such
indication in such country. AbbVie’s exclusivity restrictions will not prevent it from marketing an antibody that demonstrates additive or synergistic
effects in combination with a licensed product, or an improvement on a licensed product based on improved efficacy or safety data.
Under this agreement, we and AbbVie formed a joint governance committee that consists of three representatives from each of us. The joint
governance committee will oversee and coordinate the development of the licensed compounds and products in both of our territories, including the
review and approval of each of our respective development plans, the review and approval of clinical trials and commercialization in mainland China,
Hong Kong and Macau, and discussing commercialization strategies in each of our territories. The joint governance committee may create working
groups as it deems appropriate.
Under this agreement, AbbVie has paid us an upfront payment of US$180 million and milestone payment of US$20 million. Based on the
achievement of certain clinical development and regulatory milestones, including first commercial sales in various markets, we may earn additional
milestone payments of up to US$840 million. Further, based on the achievement of certain sales-related milestones, we may earn additional milestone
payments. In addition to the upfront and milestone payments that we may earn, we may also earn tiered royalties consisting of low-to-mid teen
percentages of global net sales.
We will not owe any milestone payments for our development or commercialization in mainland China, Hong Kong and Macau, but we are
required to pay AbbVie tiered royalties in the mid-to-high single-digit percentages of net sales of licensed products in those countries.
Under this agreement, we grant AbbVie several rights of first negotiation with respect to our products, including a right of first negotiation to
exercise its right to products containing either our preclinical CD47-PDL1 compound or our preclinical CD47-GMCSF compound outside of mainland
China, Hong Kong and Macau. This right of first negotiation is exercisable following completion of preclinical activities sufficient to initiate
IND-enabling, GLP-conforming animal toxicology studies, and if AbbVie exercises this right, the parties shall negotiate an amendment to allow AbbVie
to develop, manufacture and commercialize that product in exchange for additional regulatory and sales milestones that could equal or exceed
US$500 million plus royalty payments.
We also grant AbbVie other rights of first negotiation for rights to commercialize: (1) our preclinical CD47-PDL1 compound or our preclinical
CD47-GMCSF compound in mainland China, Hong Kong and Macau; (2) our multi-specific or bi-specific licensed compounds that contain a targeting
moiety that is directed to both an epitope on CD47 that is not the same or substantially similar to the epitope targeted by lemzoparlimab and a non-CD47
target, as well as any products containing such compounds anywhere in the world; and (3) each licensed product that contains a licensed compound as
its sole active ingredient that is directed solely to CD47 in mainland China, Hong Kong and Macau.
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AbbVie grants us a right of first negotiation for rights to: (1) commercialize its multi-specific or bi-specific compounds that contain a targeting
moiety that is directed to both an epitope on CD47 that is not the same or substantially similar to the epitope targeted by lemzoparlimab and a non-CD47
target, as well as any products containing such compounds in mainland China, Hong Kong and Macau; and (2) develop and commercialize licensed
compounds as part of combination products (other than products that contain a licensed compound directed against both an epitope on CD47 that is not
the same or substantially similar to the epitope targeted by lemzoparlimab and a non-CD47 target) in mainland China, Hong Kong and Macau.
This agreement may be terminated by either party in the event of an uncured material breach. If the material breach and failure to cure is by
AbbVie with respect to some countries, but not others, we have the right to terminate this agreement solely with respect to the countries to which the
breach relates. If the material breach and failure to cure is by us with respect to our obligations in mainland China, Hong Kong and Macau, AbbVie will
have the right to reduce payments to us by a certain percentage.
AbbVie has certain termination rights if it determines not to continue development and commercialization based on documented safety concerns.
AbbVie may also terminate this agreement in part or in whole for convenience following prior written notice of a certain period. AbbVie may also
terminate this agreement immediately following certain breaches by us of anti-bribery and anti-corruption laws. AbbVie also has termination rights
related to the approval process under the Hart-Scott-Rodino Antitrust Improvements Act. If we stop material clinical development and
commercialization activities in mainland China, Hong Kong and Macau without justification, AbbVie may reduce any royalties that would have been
due to us by a certain percentage.
If AbbVie stops material clinical development and commercialization activities without justification, we may terminate this agreement. We also
have certain termination rights if AbbVie or its affiliates challenge our valid patents related to the licensed products.
Licensing Agreement with ABL Bio
In July 2018, we entered into a license and collaboration agreement with ABL Bio (the “ABL Bio License”), as amended from time to time.
Under the ABL Bio License, we granted to ABL Bio exclusive, worldwide (excluding Greater China), royalty-bearing rights to develop and
commercialize a bispecific antibody (the “BsAb”) using certain of our monoclonal antibody sequences. ABL Bio has developed expertise in the area of
bispecific antibodies for all indications and has developed proprietary intellectual property around the BsAb technology, and the license allows ABL Bio
to further develop and commercialize the BsAb based on monoclonal antibodies licensed from us under the ABL Bio License. ABL Bio granted to us an
exclusive, royalty-free, sublicensable license under its interest in the BsAb and related know-how (including improvements thereto) to exploit the
licensed BsAb in Greater China.
Under the ABL Bio License, we and ABL Bio each are responsible for using commercially reasonable efforts to develop the licensed products
through the completion of in vivo studies, and ABL Bio is responsible for using commercially reasonable efforts thereafter. We agreed to split costs
fifty-fifty (50:50) with ABL Bio through the completion of in vivo studies, with ABL Bio responsible for all costs and activities following that time.
ABL Bio is responsible for all development and commercialization activities in its own territories, subject to our input through a joint committee
comprised of an equal number of our and ABL Bio’s representatives (though ABL Bio has final decision-making authority).
In consideration of the license, ABL Bio paid us an upfront fee of US$2.5 million and agrees to make milestone payments in the aggregate amount
of US$97.5 million conditioned upon achieving certain clinical development and sales milestones. Further, ABL Bio agreed to pay us royalties at
mid-single-digit percentages in respect of the total annual net sales of the licensed BsAb product.
In addition, ABL Bio granted to us an exclusive, royalty-free, sublicensable license to use its BsAb technology solely to exploit the licensed BsAb
product for all indications in Greater China.
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We also agreed that, during the term of the ABL Bio License, neither we nor ABL Bio would develop independently from the other a bispecific
antibody that uses the same pair of antibodies as the bispecific antibody molecules created under the ABL Bio License.
The ABL Bio License will continue to be in effect until expiration of the last payment obligation thereunder, unless earlier terminated according to
its terms. The ABL Bio License may be terminated by either party for the other party’s uncured material breach or in the event that the other party
challenges its patents. In addition, after a certain specified time period, ABL Bio may terminate the ABL Bio License upon a notice period that varies
based upon the stage of development.
Upon expiration (but not termination) of the ABL Bio License, we and ABL Bio will each retain our respective licenses granted under the ABL
Bio License. If the ABL Bio License is terminated pursuant to ABL Bio’s right to terminate at will or due to ABL Bio’s material breach, all rights and
obligations (including all licenses granted) shall terminate and upon our request, we and ABL Bio will negotiate in good faith regarding our takeover of
the exploitation of the BsAb product outside of Greater China in exchange for reasonable compensation. Such negotiation will include, among other
things, ABL Bio’s assignment of assets related to the licensed BsAb product and the continuation of the licenses granted to us under the ABL Bio
License.
Licensing Agreement with CSPC Entity
In December 2018, we entered into a product development agreement (the “CSPC Agreement”) with an entity controlled by CSPC Pharmaceutical
Group Limited (01093.HK) (“CSPC entity”). Under the CSPC Agreement, we granted to CSPC entity exclusive, non-transferable, non-irrevocable and
sublicensable rights under our patent rights in China to develop and commercialize TJ103 for treating type 2 diabetes mellitus and any other potential
therapeutic applications. CSPC entity’s right to sublicense is conditioned on our prior written consent, which we cannot unreasonably withhold, other
than sublicense to CSPC entity’s affiliates. CSPC entity is a comprehensive pharmaceutical and drug manufacturing company, with an increasing focus
on its research and development of new products focusing the therapeutic area of oncology, among others.
Under the CSPC Agreement, CSPC entity is responsible for using commercially reasonable efforts to develop, obtain market approval and
commercialize the licensed products, while we are responsible for using commercially reasonable efforts to transfer the manufacturing technology of the
licensed products to CSPC entity and assist or guide CSPC entity in the continued optimization of such manufacturing technology thereafter. CSPC
entity has final decision-making authority with respect to product development (though the research plan should be jointly developed by both parties and
any changes to the plan should be discussed and approved by the joint development committee) and commercialization.
We also agreed that, during the term of the CSPC Agreement, we should not develop, either for ourselves or for third parties, any other hyFc
platform technology-based long-acting recombinant GLP-1 Fc fusion proteins that may be in a competitive position with TJ103.
In consideration of the license, CSPC entity paid us an upfront fee of RMB15.0 million and milestone payment of RMB15.0 million. Further,
CSPC agreed to make milestone payments in an aggregate amount of RMB118.5 million conditioned upon achieving certain clinical development and
regulatory approval milestones, including completion of Phase 2 and Phase 3 clinical studies and obtaining NDA approval or market approval. Further,
we will also be entitled to tiered royalties ranging from mid-single-digit percentages to 10 percent in respect of the total annual net sales of the products
after their commercialization in China. The royalty term will terminate at the later of: (i) the expiry date of the underlying patents of the licensed
products with application numbers 201410851771.1 and 201580071643.8 (final grant of rights requested relating to GLP-1) in China, whichever is later;
and (ii) the ten-year anniversary of the initial commercialization of the product developed under the CSPC Agreement. We expect any patents that may
issue under the aforementioned patent application numbers 201410851771.1 and 201580071643.8 will expire between 2034 and 2035, before taking
into account any extension that may be obtained through patent term extensions or adjustments, or term reduction due to filing of terminal disclaimers.
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Unless terminated earlier in accordance with the terms thereof, the CSPC Agreement will remain in effect until the termination of the royalty term.
This agreement may be terminated by either party for the other party’s uncured material breach, bankruptcy or insolvency or force majeure. We have the
right to terminate the agreement if CSPC entity fails to use commercially reasonable efforts to obtain regulatory approvals for commercializing the
licensed product in the period stipulated by its board of directors due to its own fault or if CSPC entity ceases to pursue clinical development or product
registration as determined by its board of directors. CSPC entity has the right to terminate the agreement if we fail to resolve certain intellectual property
disputes relating to TJ103 within six months after signing.
During the term of the CSPC Agreement, CSPC entity will have exclusive, royalty-free rights in China to any work product generated by us, and
be responsible for any patent application and maintenance costs of such work product. CSPC entity will have all rights to any work product generated by
itself under the CSPC Agreement.
Other Out-Licensing Arrangements
In April 2017, our subsidiary I-Mab Shanghai entered into a technology transfer agreement (the “HDYM License”) with Ningbo Hou De Yi Min
Information Technology Co., Ltd. (“HDYM”) and Hangzhou HealSun Biopharm Co., Ltd. (“HealSun”) with respect to PD-L1 humanized monoclonal
antibodies. HealSun is a portfolio company of Lepu Biotech (乐普生物). Under the HDYM License, I-Mab Shanghai agreed to grant to HDYM
exclusive (even to I-Mab Shanghai itself), worldwide and sublicensable rights to develop, manufacture, have manufactured, use, sell, have sold, import,
or otherwise exploit certain PD-L1 related patents, patent applications, know-hows, data and information of I-Mab Shanghai, relevant cell lines as well
as any PD-L1 monoclonal antibody arising from such cell lines for the treatment of diseases. Further, I-Mab Shanghai and its cooperative party HealSun
agreed to provide subsequent research and development services on such intellectual property to HDYM, including the selection and examination of
innovative PD-L1 humanized monoclonal antibodies, cultivation and selection of stable cell lines, establishment of cell bank, research and development
of manufacturing processes and preparation of samples, toxicological and pharmacological testing, pre-clinical pharmaceutical experiment report
drafting, and application for and registration of clinical trials. If any party breaches the agreement and fails to cure, the non-breaching parties may
terminate this agreement. In addition, in the event that the development of the licensed product encounters insurmountable technical difficulties, this
agreement may be terminated by mutual agreement of all parties. To the extent that the agreement is terminated for HDYM’s breach, all licenses and
rights granted by us to HDYM will automatically terminate and be re-assigned to us. To the extent that the agreement is terminated due to material
difficulty, HDYM will have all rights to dispose of any development data and technology held by HealSun and us under this agreement and neither
HealSun or us may use such development data and technology without HDYM’s consent.
In March 2020, we entered into a strategic partnership with Kalbe Genexine Biologics (“KG”), a joint venture of Kalbe Farma Tbk (“Kalbe”) and
Genexine. Under the terms of the agreement, KG will receive a right of first negotiation for an exclusive license for the commercialization of two
I-Mab-discovered product candidates: uliledlimab, a differentiated anti-CD73 antibody in Phase 1 development for advanced solid tumors, and an I-Mab
product candidate to be agreed upon by both parties. With the agreement, KG will have a right of first negotiation for exclusive rights to commercialize
these two product candidates in the ASEAN (Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and
Vietnam) and MENA (Algeria, Bahrain, Djibouti, Egypt, Israel, Jordan, Kuwait, Lebanon, Malta, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, United
Arab Emirates, and Palestine) regions, as well as Sri Lanka. If and when we and KG enter into the definitive licensing agreement for uliledlimab, we
will be eligible to receive from KG an aggregate amount of up to approximately US$340 million, including an upfront payment and subsequent
payments conditional upon achieving certain development and commercial milestones. KG will pay us tiered royalties in the low to mid-teen
percentages on net sales from the ASEAN and MENA regions, as well as Sri Lanka.
C. Collaboration Arrangements
In July 2018, we entered into a collaboration agreement with ABL Bio, further amended in November 2018, May 2019, December 2019, June
2020, September 2021, respectively, whereby both parties agreed to collaborate to develop two bispecific antibodies by using ABL Bio’s proprietary
BsAb technology and commercialize them in their respective territories, which, collectively, include Greater China and South Korea, and other
territories throughout the rest of the world if both parties agree to do so in such other territories during the performance of the agreement. This
agreement may be terminated by either party for the other party’s uncured material breach or in the event that the other party challenges its patents.
Also, if a party encounters insurmountable technical difficulties and risks, which cannot be resolved by such party within a certain period thereafter
despite all reasonable efforts, such party will have the right to terminate this agreement and will no longer have the right to develop the licensed product.
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In September 2018, we entered into a collaboration and platform technology license agreement with WuXi Biologics Ireland Limited (“WuXi
Biologics”), whereby both parties agreed to collaborate in the research and development of at least three bispecific antibodies for our company to
commercialize them worldwide. Such bispecific antibodies will be created using our proprietary monoclonal antibodies and WuXi Biologics’
proprietary WuXiBody platform technology for generating bispecific antibodies, will be developed and manufactured through the exclusive service of
WuXi Biologics. This agreement may be terminated by either party for the other party’s uncured material breach, bankruptcy or insolvency. WuXi
Biologics has the right to terminate this agreement if we challenge its patents. We have the right to terminate this agreement if we decide to end the
development and commercialization of the licensed product in the licensed territory due to scientific, technical, or commercial reasons. As of the date of
this annual report, we have made an up-front payment of US$1.0 million to Wuxi Biologics and no milestone payments or royalties are due under this
agreement. In April 2019, we extended our existing partnership with WuXi Biologics (Shanghai) Co., Ltd. (“WuXi Biologics Shanghai”). We entered
into a long-term, strategic collaboration agreement with WuXi Biologics Shanghai to facilitate the CMC development and GMP manufacturing of both
clinical and commercial supplies of certain of our monoclonal and bispecific antibodies and fusion products, leveraging WuXi Biologics’ and its
affiliates’ expertise in this area and supporting our pre-existing collaboration and platform technology license agreement with WuXi Biologics.
In November 2018, we entered into collaboration agreements with Tracon Pharmaceuticals, Inc. (“Tracon”), whereby we and Tracon agreed to
(i) co-develop our proprietary CD73 antibody, TJD5 (the “TJD5 Agreement”) and (ii) collaborate to co-develop up to five bispecific antibodies (the
“BsAbs Agreement”). Both agreements may be terminated by either party for the other party’s uncured material breach, bankruptcy or insolvency or for
other reasons. In April 2020, Tracon issued a notice of disputes with respect to the TJD5 Agreement and the BsAbs Agreement. In February 2021, we
sent Tracon a notice to terminate the TJD5 Agreement, which would result in a prespecified termination fee of US$9.0 million owing to Tracon. The
disputes relating to the TJD5 Agreement and the BsAbs Agreement are the subject of a binding arbitration proceeding under the Rules of Arbitration of
the International Chamber of Commerce before an arbitration tribunal. The arbitration tribunal held a hearing on the merits in February 2022. As of the
date of this annual report, the disputes have not been resolved and we are not able to predict the likely outcome. We expect that the decision from the
arbitration tribunal may be available in late 2022.
In March 2021, we entered into two collaboration agreements with Complix, an EU-based biotech company (the “Complix Agreement”), and
Affinity, a Shanghai-based biotech company (the “Affinity Agreement”), respectively, allowing us to access cutting-edge technology platforms to create
next generation of novel and highly differentiated drug candidates, including Cell Penetrating Alphabodies (“CPAB”) for otherwise intractable
intracellular drug targets and masked antibodies for targeted tumor-site activation. Under the Complix Agreement, both parties will collaborate to
discover, develop and commercialize novel therapeutics for mutually agreed targets based on the Complix’s proprietary technology. Under the Affinity
Agreement, both parties will collaborate to develop lead compounds for mutually agreed targets based on Affinity’s Tumor MicroEnvironment
Activated body (“TMEAbody”) platform technology.
In July 2021, we entered into a collaboration agreement with Immorna, an mRNA biotech company, to discover and develop self-replicating
mRNA for in vivo synthesized therapeutic biologics. In the same month, we entered into a collaboration agreement with neoX Biotech, an AI-enabled
R&D biotech company, to accelerate the R&D process of novel targets and modalities.
In October 2021, we entered into a strategic partnership with Sinopharm to strengthen our commercial capabilities and support our
commercialization transformation. We will authorize more than 300 of Sinopharm’s subsidiaries as distributors across China to support distribution and
retail allocation to terminal markets while we lead the overall commercial activities. The partnership will also include alliance on key projects, to jointly
support the commercialization and go-to-market process of our differentiated and novel products.
In November 2021, we entered into a strategic collaboration agreement with Jumpcan, a leading China pharmaceutical company specialized in
and committed to pediatric medicines, for the development, manufacturing and commercialization of our highly differentiated long-acting recombinant
human growth hormone, eftansomatropin alfa (TJ101) in mainland China. Under the collaboration agreement, we will continue to lead the ongoing
registrational Phase 3 clinical trial of eftansomatropin alfa in pediatric growth hormone deficiency (PGHD). The two companies will share costs of
manufacturing tech transfer, process optimization and new formulation development. We will be the marketing authorization holder (MAH) of the
product and supply the product at agreed cost to Jumpcan. Jumpcan will be responsible for commercializing the product and developing new indications
in collaboration with us in mainland China. We will provide clinical, manufacturing and academic support. According to the terms of the collaboration
agreement, Jumpcan will make an upfront payment of RMB224 million to I-Mab and, upon achievement of development, registration and sales
milestones, certain milestone payments of up to RMB1.792 billion, making the non-royalty payments a total of up to RMB2.016 billion. In addition, we
and Jumpcan will share profits generated from commercialization of the product in mainland China on a 50/50 basis, pursuant to which we will be
entitled to receive tiered low double-digit royalties on net sales.
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In November 2021, we also entered into a strategic collaboration with Roche Diagnostics, a global leader in in vitro diagnostics industry, to
co-develop companion diagnostics (CDx) solutions for our innovative pipeline, at the Fourth China International Import Expo (CIIE) in Shanghai.
Under this collaboration, we and Roche Diagnostics will jointly develop companion diagnostics solutions for the innovative assets under development
by us to accelerate the research and development process of innovative biologics with cutting-edge diagnosis and treatment technologies.
Competition
Our industry is highly competitive and subject to rapid and significant change. While we believe that our management’s research, development
and commercialization experience provide us with competitive advantages, we face competition from global and China-based biopharmaceutical
companies, including specialty pharmaceutical companies, generic drug companies, biologics drug companies, academic institutions, government
agencies and research institutions.
For our Global Portfolio drug candidates, we expect to face competition from a broad range of global and local pharmaceutical companies. Many
of our competitors have significantly greater financial, technical and human resources than we have, and mergers and acquisitions in the
biopharmaceutical industry may result in even more resources being concentrated among a smaller number of our competitors. Our commercial
opportunity could be reduced or eliminated if our competitors develop or market products or other novel therapies that are more effective, safer or less
costly than our current or future drug candidates, or obtain regulatory approval for their products more rapidly than we may obtain approval for our drug
candidates.
Intellectual Property
Our success will depend significantly on our ability to obtain and maintain patent and other proprietary protection for our drug candidates and
other commercially important products, technologies, inventions and know-how, as well as on our ability to defend and enforce our patents including
any patent that we have or may issue from our patent applications, preserve the confidentiality of our trade secrets and operate without infringing the
valid and enforceable patents and proprietary rights of other parties.
As of December 31, 2021, our owned patent portfolio consists of (i) 47 issued patents, including seven issued in the U.S., 14 issued in the PRC,
four issued in Korea and 22 issued in other jurisdictions; and (ii) 250 pending patent applications, including 21 PCT patent applications, 15 U.S. patent
applications, 16 PRC patent applications and 198 patent applications in other jurisdictions. Our owned patents and patent applications primarily relate to
the drug candidates in our Global Portfolio. Furthermore, as of December 31, 2021, we in-licensed the Greater China and Korea rights relating to (i) 28
issued patents, including 15 issued in the PRC, one issued in Korea, nine issued in Hong Kong, one issued in Macau and two issued in Taiwan; and (ii)
39 pending patent applications, including six PCT patent applications, 13 PRC patent applications, eight Hong Kong patent applications, four Taiwan
patent applications, three Korean patent applications and five Macau patent application. The in-licensed patents and patent applications primarily relate
to felzartamab, eftansomatropin alfa, enoblituzumab, efineptakin alfa and TJ210.
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Felzartamab
Eftansomatropin alfa
Enoblituzumab
Efineptakin alfa
Lemzoparlimab
Uliledlimab
TJ210
TJ-CD4B
TJ-L14B
As of December 31, 2021, we exclusively licensed from MorphoSys 13 issued patents (including six issued in the PRC, five
issued in Hong Kong, one issued in Taiwan and one issued in Macau) and 18 pending patent applications (including four PCT
applications, four in the PRC and four in Hong Kong, two in Taiwan and four in Macau) relating to felzartamab. The licensed
patents include composition of matter patents in China, Hong Kong, Taiwan and Macau. The patents (including patent
applications if issued) in this portfolio are expected to expire between 2025 and 2042, before taking into account any
extension that may be obtained through patent term extension or adjustment, or term reduction due to filing of terminal
disclaimers.
As of December 31, 2021, we (i) exclusively licensed from Genexine two pending PRC patent applications and 1 PCT
application directly relating to eftansomatropin alfa and (ii) non-exclusively licensed from Genexine 3 issued patents in the
PRC relating to a hyFc platform that develops eftansomatropin alfa. The licensed patents include composition of matter
patents in China. The patents (including patent applications if issued) in this portfolio are expected to expire between 2028 and
2041, before taking into account any extension that may be obtained through patent term extension or adjustment, or term
reduction due to filing of terminal disclaimers.
As of December 31, 2021, we exclusively licensed from MacroGenics seven issued patents (including two issued in the PRC,
four issued in Hong Kong and one issued in Taiwan) and three pending patent applications (including one in the PRC, one in
Hong Kong and one in Taiwan) relating to enoblituzumab. The patents (including patent applications if issued) in this
portfolio are expected to expire between 2024 and 2036, before taking into account any extension that may be obtained
through patent term extension or adjustment, or term reduction due to filing of terminal disclaimers.
As of December 31, 2021, we (i) exclusively licensed from Genexine three pending PRC patent applications and one PCT
patent application directly relating to efineptakin alfa and (ii) non-exclusively license from Genexine three issued patents in
the PRC relating to a hyFc platform that develops efineptakin alfa. The patents (including patent applications if issued) in this
portfolio are expected to expire between 2028 and 2040, before taking into account any extension that may be obtained
through patent term extension or adjustment, or term reduction due to filing of terminal disclaimers.
As of December 31, 2021, we owned six PCT patent application, two of which has entered national phases including in the
PRC, the United States and additional jurisdictions. We expect that any patents that may issue under these applications will
expire between 2037 and 2041, before taking into account any extension that may be obtained through patent term extension
or adjustment, or term reduction due to filing of terminal disclaimers.
As of December 31, 2021, we owned three PCT patent applications and one of which has entered national phases including in
the PRC, the United States, and additional jurisdictions. We expect that any patent that may issue under these applications will
expire in 2038 and 2041, before taking into account any extension that may be obtained through patent term extension or
adjustment, or term reduction due to filing of terminal disclaimers.
As of December 31, 2021, we exclusively licensed from MorphoSys five pending patent applications (including one in the
PRC, one in Hong Kong, one in Taiwan, one in Macau and one in Korea) relating to TJ210. We owned two PCT patent
applications and co-owned one PCT application with Morphosys relating to TJ210. We expect that any patent that may issue
under these applications will expire in 2040 and 2041, before taking into account any extension that may be obtained through
patent term extension or adjustment, or term reduction due to filing of terminal disclaimers.
As of December 31, 2021, we co-owned one PCT patent application with ABL Bio Inc., which has entered national phases
including in the PRC, the United States, and additional jurisdictions. We expect that any patent that may issue under this
application will expire 2040, before taking into account any extension that may be obtained through patent term extension or
adjustment, or term reduction due to filing of terminal disclaimers.
As of December 31, 2021, we co-owned one PCT patent application with ABL Bio Inc., which has entered national phases
including in the PRC, the Europe, and additional jurisdictions. We expect that any patent that may issue under this application
will expire 2039, before taking into account any extension that may be obtained through patent term extension or adjustment,
or term reduction due to filing of terminal disclaimers.
The term of a patent depends upon the laws of the country in which it is issued. In most jurisdictions, a patent term is 20 years from the earliest
filing date of a non-provisional patent application. Under the PRC Patent Law, the term of patent protection starts from the date of application. Patents
relating to inventions are effective for twenty years, utility models are effective for ten years and designs are effective for fifteen years from the date of
application. There are patent term adjustments and patent term extensions available in the PRC for issued patents relating to inventions.
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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 with our consultants and employees. We have also executed agreements requiring assignment of inventions with selected
scientific advisors and collaborators. 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 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.
Additionally, as of December 31, 2021, we had (i) 18 registered trademarks in Hong Kong, 90 registered trademarks in the PRC, two registered
trademarks in the United States, 17 registered trademarks in Macau, 16 registered trademarks in Taiwan, three registered trademarks in other
jurisdictions, 17 trademark applications in the PRC, and four trademark applications in the United States; (ii) nine domain names in the PRC, including
www.i-mabbiopharma.com, four domain names in Hong Kong and two domain names in the United States and (iii) 12 software copyrights and one
copyright of works of art in the PRC.
For more information on these and other risks related to intellectual property, see “Risk Factors—Risks Related to Our Intellectual Property.”
Environmental, Health and Safety (EHS) Matters
In July 2021, we were granted a BBB rating, the highest newly initiated rating among China-based biotech companies, by the MSCI
Environmental, Social and Governance (ESG) assessment. In August 2021, we established an ESG Committee. The committee consists of Mr. John
Long, executive director of the Board and Chief Financial Officer, and two independent directors, Mr. Chun Kwok Alan Au and Dr. Rong Shao.
Mr. Chun Kwok Alan Au also chairs the committee to ensure impartiality. As the oversight body for our ESG practices, the committee is responsible for
supervising our ESG strategies, policies, long-term sustainability objectives and risks. In addition, we also set up an ESG working group to address daily
ESG workflows.
We are transitioning from a clinical stage biotech into a global specialty biopharma, with the current state of business operations having no
significant environmental impact due to no large-scale manufacturing operations. We abide by local laws and regulations on environmental protection
and only discharge a small amount of waste gas and wastewater after proper treatment. A small amount of hazardous wastewater produced during the
research and development process is carefully collected and handed over to qualified third-party professionals for proper treatment before discharged to
the sewage treatment plant. A small amount of harmless waste gas is emitted at a high altitude after filtration by activated carbon. Any hazardous waste
generated during the research and development process is carefully collected by laboratory technicians daily and placed in a temporary storage facility,
and transported to qualified professionals once a month, in accordance with strict local environmental guidelines. We also provided employee trainings,
set up SOPs and contingency plans for of potential EHS accidents.
At present, energy and resources consumed in our daily operations are mainly municipal electricity and domestic water. We assigned a dedicated
team to regularly inspect and maintain the equipment, measure total consumption, and train employees on water and energy saving measures.
Safety and health are the foundation of our operational activities. We have created a comprehensive internal safety management system to ensure
compliance, strengthen risk assessment and management. In addition, we provide employees with annual physical check-ups to ensure the health of the
employees. We offered SOPs to ensure relevant employees are aware of any potential hazards, including providing emergency training, treatment
facilities, and Personal Protection Equipment (PPE) to all employees.
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Enterprise Social Responsibility
As an integral part of our business and as a core value, we strive to make a positive impact around the world through the transformational
medicines that we research, develop, manufacture and deliver. We are committed to reflecting ethical, social and environmental responsibilities in our
business decisions, ensuring that our products improve people’s lives and maintaining the sustainability of our business.
In August 2021, we established an Environmental, Social and Governance (“ESG”) committee, consisting of Mr. John Long, Mr. Chun Kwok
Alan Au and Dr. Rong Shao, to supervise the ESG strategies, policies, long-term sustainability objectives and risks of the company. Our commitment to
ESG can be summarized into three “P”s: patients, philanthropy, people.
Patients. Since our inception, we have been focusing on delivering immuno-oncology biologics with best-in-class and first-in-class potential, with
the mission to bring transformative medicines to patients through innovation. We have built an innovative and advanced pipeline of 20 highly
differentiated, novel biologics with potential to address the significant unmet medical needs in cancer.
In 2020, there were 19.29 million new cancer cases worldwide, of which 4.57 million were newly diagnosed in China. This figure accounts for
23.7% of the world’s cancer burden and far exceeds the number of new cancer cases of any other country in the world. In fact, one out of every three
patients who die from cancer in the world is from China. We are committed to addressing this significant global disease burden and answering unmet
needs of patients through our innovation.
Philanthropy. At the peak of the COVID-19 outbreak, we donated personal protective equipment and funds worth a total of RMB800 thousand to
support medical personnel and hospitals in Wuhan. We also donated US$50 thousand to BayHelix, a non-profit organization focused on global life
sciences and healthcare community, for the purpose of supporting relief of COVID-19 in the United States.
In July 2021, we donated RMB1 million to Henan Charity General Federation for the rescue and reconstruction of flood-hit regions in Henan
Province in China. We are committed to philanthropic giving which can help build stronger communities.
People. We have been on the forefront of promoting diversity and inclusiveness in the workplace. Women account for about two-thirds of our
employees, 56% of them hold a master’s degree or above, and over 30% of our board of directors are female. In 2020, we launched the Women’s
Leadership Council (“WLC”) globally to support our future female leaders to accelerate their career and personal development. We organized our global
WLC ambassador program and selected eight outstanding female employees to champion our mission of elevating women in scientific leadership. To
support employees’ personal and career development, we have built up a systematic talent development system, including an online learning center,
advanced leadership program and other tailor-made training courses.
International Recognition and Awards
The remarkable achievements made by us are well recognized by the international community of pharma industry. We received numerous
international awards and citations in 2021 for our achievements in drug innovation, industry leadership, cross-border collaboration and business
leadership. We were honored with the T+ Excellent Employer award based on an assessment of best practices in areas such as technological leadership,
organization and talent, and commitment to creating a diversified workplace. We were also ranked as “2021 Top 50 Enterprises of Technology Power”
by Frost & Sullivan and LeadLeo and among the top companies by the leading global financial publication Institutional Investor in both the “Honored
Companies” and “Best CFO” categories, according to its 2021 All-Asia Executive Team survey. In July 2021, we were granted a BBB rating, the highest
newly initiated rating among China-based biotech companies, by the MSCI ESG assessment. In November 2021, we were honored with the Inclusion
Award by Leading Diversity, Equity and Inclusion (“DEI”). Our Founder, Chairman of the Board of Directors and Acting CEO, Dr. Jingwu Zhang Zang,
was named Medical Innovation Pioneer among the 50 leaders in listed companies by 2020 Global Founders Summit. In December 2021, Dr. Jingwu
Zhang Zang received the EY Entrepreneur of the Year award and the Executive of the Year award for companies with a market cap of less than US$5
billion in the 2021 Scrip Awards. These awards reflect the impact we have made on the innovation development of the healthcare industry as well as the
leadership we have demonstrated throughout the year.
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Regulation
We are subject to a variety of PRC laws, rules and regulations affecting many aspects of our business. This section summarizes the principal PRC
laws, rules and regulations that we believe are relevant to our business and operations.
PRC Regulation
We are subject to a variety of PRC laws, rules and regulations affecting many aspects of our business. This section summarizes the principal PRC
laws, rules and regulations that we believe are relevant to our business and operations.
Regulations on Company Establishment and Foreign Investment
Company Law
The establishment, operation and management of companies in China is governed by the PRC Company Law, which was passed by the Standing
Committee of the National People’s Congress (the “NPC”), on December 29, 1993 and came into effect on July 1, 1994 and was latest revised or
amended on October 26, 2018, respectively. In light of the PRC Company Law, companies established in the PRC are either in the form of a limited
liability company or a joint stock company. The PRC Company Law applies to both PRC domestic companies and foreign-invested companies, unless
otherwise provided in the relevant foreign investment laws and regulations.
Foreign Investment Law
On March 15, 2019, the NPC approved the PRC Foreign Investment Law, which became effective on January 1, 2020 and replaced the three old
rules on foreign investment in China, namely, the PRC Equity Joint Venture Law, the PRC Cooperation Joint Venture Law and the Wholly Foreign-
Owned Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law establishes the basic framework
for the access to, and the promotion, protection and administration of foreign investments in view of investment protection and fair competition.
According to the Foreign Investment Law, “foreign investment” refer to investment activities directly or indirectly conducted by one or more natural
persons, business entities, or other organizations of a foreign country (collectively referred to as “foreign investor”) within China, and “investment
activities” include the following activities: (i) a foreign investor, individually or together with other investors, establishes a foreign-invested enterprise
within China; (ii) a foreign investor acquires stock shares, equity shares, shares in assets, or other similar rights and interests of an enterprise within
China; (iii) a foreign investor, individually or together with other investors, invests in a new construction project within China; and (iv) investments in
other means as provided by the laws, administrative regulations or the State Council.
Regulations Relating to Foreign Investment
On December 26, 2019, the State Council promulgated the Implementation Rules to the Foreign Investment Law, which became effective on
January 1, 2020. The implementation rules further clarified that the state encourages and promotes foreign investment, protects the lawful rights and
interests of foreign investors, regulates foreign investment administration, continues to optimize foreign investment environment, and advances a higher-
level opening.
Furthermore, PRC-based investments by foreign investors have historically been regulated by the Catalogue for the Guidance of Foreign
Investment Industries (2017 Revision) issued on June 28, 2017 and effective from July 28, 2017, the Special Management Measures (Negative List) for
the Access of Foreign Investment (2018) issued on June 28, 2018 and effective from July 28, 2018, the Special Management Measures (Negative List)
for the Access of Foreign Investment (2019) issued on June 30, 2019 and effective from July 30, 2019, and the Special Management Measures
(Negative List) for the Access of Foreign Investment (2020) issued on June 23, 2020 and effective from July 23, 2020. According to the aforesaid
catalogue and management measures, foreign-invested industries fall into four categories, namely, “encouraged” “permitted” “restricted” and
“prohibited” and certain ownership requirements, requirements for senior executives and other special management measures should apply to foreign
investors with regard to the access of foreign investments in certain categories. Currently, the Catalogue for the Guidance of Foreign Investment
Industries (2017 Revision), the Special Management Measures (Negative List) for the Access of Foreign Investment (2018), the Special Management
Measures (Negative List) for the Access of Foreign Investment (2019) and the Special Management Measures (Negative List) for the Access of Foreign
Investment (2020) have all been replaced. The currently effective industry entry clearance requirements governing investment activities in the PRC by
foreign investors are set out in two categories, namely the Special Management Measures (Negative List) for the Access of Foreign Investment (2021),
and the Catalogue of Industries for Encouraging Foreign Investment (2020 Version), which were promulgated by the National Development and Reform
Commission (the “NDRC”), and the MOFCOM, and took effect on January 1, 2022 and on January 27, 2021, respectively. The Catalogue of Industries
for Encouraging Foreign Investment (2020 Version) and the Special Management Measures (Negative List) for the Access of Foreign Investment
(2021) further reduce restrictions on the foreign investment and expand the scope of industries in which foreign investments are encouraged. Industries
not listed in these two catalogues are generally deemed “permitted” for foreign investment unless specifically restricted by other PRC laws.
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On December 30, 2019, the MOFCOM and SAMR jointly promulgated Measures for Information Reporting on Foreign Investment, which
became effective on January 1, 2020. Pursuant to the Measures for Information Reporting on Foreign Investment, where a foreign investor carries out
investment activities in China directly or indirectly, the foreign investor or the foreign-invested enterprise should submit the investment information to
the competent commerce department.
M&A Rules
According to the Provisions on the Merger or Acquisition of Domestic Enterprises by Foreign Investors jointly issued by the MOFCOM, the State
Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation (the “SAT”), the State Administration for
Industry and Commerce (now known as the State Administration for Market Regulation), the China Securities Regulatory Commission and the State
Administration of Foreign Exchange (the “SAFE”), on August 8, 2006 and amended by the MOFCOM on June 22, 2009, among other things, (i) the
purchase of an equity interest or subscription to the increase in the registered capital of non-foreign-invested enterprises, (ii) the establishment of
foreign-invested enterprises to purchase and operate the assets of non-foreign-invested enterprises, or (iii) the purchase of the assets of
non-foreign-invested enterprises and the use of such assets to establish foreign-invested enterprises to operate such assets, in each case, by foreign
investors is subject to the Provisions on the Merger or Acquisition of Domestic Enterprises by Foreign Investors. Particularly, application should be
made for examination and approval of the acquisition of any company in China affiliating to a domestic company, enterprise or natural person, which is
made in the name of an oversea company established or controlled by such domestic company, enterprise or natural person.
PRC Drug Regulation
The Drug Administration Law of the PRC promulgated by the Standing Committee of the NPC on September 20, 1984 and effective from July 1,
1985 and amended on February 28, 2001, December 28, 2013, April 24, 2015 and August 26, 2019, respectively, and the Implementing Measures of the
Drug Administration Law promulgated by the State Council on August 4, 2002 and effective from September 15, 2002 and amended on February 6,
2016 and March 2, 2019, respectively, have jointly established the legal framework for the administration of pharmaceutical products in China,
including the research, development and manufacturing of new drugs. The Drug Administration Law applies to entities and individuals engaged in the
development, production, trade, application, supervision and administration of pharmaceutical products, which regulates and provides for a framework
for the administration of pharmaceutical manufacturers, pharmaceutical trading companies and medicinal preparations of medical institutions, and the
development, research, manufacturing, distribution, packaging, pricing and advertisements of pharmaceutical products. The Implementing Measures of
the Drug Administration Law, on the other hand, provides detailed implementation regulations for the Drug Administration Law.
The newly amended Drug Administration Law, which became effective on December 1, 2019, brought a series of changes to the drug supervision
and administration system, including, but not limited to, the clarification of the drug marketing authorization holder system, pursuant to which the
marketing authorization holder should assume responsibilities for non-clinical studies, clinical trials, manufacturing and marketing, post-marketing
studies, monitoring, reporting and handling of adverse reactions of the drug. The amendment also stipulates that the State supports the innovation of
drugs with clinical value and specific or special effects on human diseases, encourages the development of drugs with new therapeutic mechanisms and
have multi-targeted, systematic regulatory and intervention functions on human body and promotes the technological advancement of drugs.
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We are required to follow the above-mentioned regulations in respect of our non-clinical research, clinical trials and production of new drugs.
Regulatory Authorities and Recent Government Reorganization
Pharmaceutical products and medical devices and equipment in China are monitored and supervised on a national scale by the NMPA (formerly
known as the China Food and Drug Administration, or the “CFDA”), while the local provincial medical products administrative authorities are
responsible for the supervision and administration of drugs within their respective administrative regions. Pursuant to the Decision of the First Session
of the Thirteenth National People’s Congress on the State Council Institutional Reform Proposal made by the NPC on March 17, 2018, the NMPA is no
longer an independent agency and its duties should be performed by the newly established State Administration for Market Regulation, into which the
various agencies responsible for, among other areas, consumer protection, advertising, anticorruption, pricing, fair competition and intellectual property,
have been merged.
The NMPA is still the chief drug regulatory agency and implements the same laws, regulations, rules, and guidelines as the CFDA, and the NMPA
regulates almost all of the key stages of the life cycle of pharmaceutical products, including non-clinical studies, clinical trials, marketing approvals,
manufacturing, advertising and promotion, distribution, and pharmacovigilance (i.e., post-marketing safety reporting obligations). The Center for Drug
Evaluation (the “CDE”), which remains under the NMPA, conducts the technical evaluation of each drug and biologic application for safety and
effectiveness.
Formed on March 2018, the National Health Commission (the “NHC”) (formerly known as the Ministry of Health (“MOH”) and the National
Health and Family Planning Commission (“NHFPC”)) is China’s chief healthcare regulator. It is primarily responsible for overseeing the operation of
medical institutions, which also serve as clinical trial sites, and regulating the licensure of hospitals and medical personnel. The NHC plays a significant
role in drug reimbursement. Furthermore, the NHC and its local counterparts at or below provincial-level local governments also oversee and organize
public medical institutions’ centralized bidding and procurement process for pharmaceutical products, which is the chief means through which public
hospitals and their internal pharmacies acquire drugs.
Also, as part of its 2018 reorganization, the PRC government formed a new National Healthcare Security Administration, which focuses on
regulating reimbursement under the state-sponsored insurance plans.
Non-Clinical Research
On August 6, 2003, the NMPA promulgated the Administrative Measures for Good Laboratories Practice of Non-clinical Laboratory, which was
revised on July 27, 2017, to improve the quality of non-clinical research, and began to conduct the Good Laboratories Practice. Pursuant to the Circular
on Administrative Measures for Certification of Good Laboratory Practice for Non-clinical Laboratory issued by the NMPA on April 16, 2007, the
NMPA is responsible for the certification of non-clinical research institutions nationwide and local provincial medical products administrative
authorities is in charge of the daily supervision of non-clinical research institution. The NMPA decides whether an institution is qualified for undertaking
pharmaceutical non-clinical research by evaluating such institution’s organizational administration, its research personnel, its equipment and facilities,
and its operation and management of non-clinical pharmaceutical projects. A Good Laboratory Practice Certification will be issued by the NMPA if all
the relevant requirements are satisfied, which will also be published on the NMPA’s website.
Pursuant to the Regulations for the Administration of Affairs Concerning Experimental Animals promulgated by the State Science and
Technology Commission on November 14, 1988 and amended on January 8, 2011, July 18, 2013 and March 1, 2017, respectively, by the State Council,
the Administrative Measures on Good Practice of Experimental Animals jointly promulgated by the State Science and Technology Commission and the
State Bureau of Quality and Technical Supervision on December 11, 1997, and the Administrative Measures on the Certificate for Experimental
Animals (Trial) promulgated by the State Science and Technology Commission and other regulatory authorities on December 5, 2001, a Certificate for
Use of Laboratory Animals is required for performing experimentation on animals. Applicants must satisfy the following conditions:
•
Laboratory animals must be qualified and sourced from institutions that have Certificates for Production of Laboratory Animals;
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•
•
•
•
•
The environment and facilities for the animals’ living and propagating must meet national requirements;
The animals’ feed and water must meet national requirements;
The animals’ feeding and experimentation must be conducted by professionals, specialized and skilled workers, or other trained personnel;
The management systems must be effective and efficient; and
The applicable entity must follow other requirements as stipulated by Chinese laws and regulations.
Pre-clinical and Clinical Development
The NMPA requires supporting pre-clinical data for the registration applications for imported and domestic drugs. Pre-clinical work, including
pharmacology and toxicology studies, must satisfy the requirements of the Administrative Measures for Good Laboratories Practice of Non-clinical
Laboratory. No approval is required from the NMPA to conduct pre-clinical studies.
Clinical Trials and Registration of New Drugs
Categories—
Pursuant to the Administrative Measures for Drug Registration promulgated by the NMPA on July 10, 2007 and effective from October 1, 2007,
which provides the standards and requirements for clinical trials and drug registration applications, drug registration applications are divided into three
different types, namely, New Drug Application, Generic Drug Application, and Imported Drug Application. Drugs are categorized based on their
working mechanism, including chemical medicine, biological product or traditional Chinese or natural medicine. On January 22, 2020, the SAMR
promulgated the new Administrative Measures for Drug Registration (the “New Measures for Registration”), which became effective from July 1, 2020.
According to the New Measures for Registration, drug registration applications are divided into three different types, namely, traditional Chinese
medicine, chemical medicine, and biological products, and each type is further divided into several sub-types.
The category and corresponding application requirements will be promulgated by the NMPA based on a drug’s working mechanism, degree of
innovation, and the need of review management. As provided in the New Administrative Measures for Registration, the Drug Administration Law and
Implementing Measures of the Drug Administration Law, upon completion of non-clinical research, clinical trials should be conducted for the
application of new drug registration.
Clinical Trial Approval—
All clinical trials conducted in China for new drug development must be approved and conducted at pharmaceutical clinical trial institution which
should be under filing administration. For imported drugs, proof of foreign approval is required prior to the trial, unless the drug has never been
approved anywhere in the world. In addition to a standalone trial in China, imported drug applicants may establish a site in China as part of an
international multi-center trial (the “IMCT”) at the outset of the global trial. Domestically manufactured drugs are not subject to foreign approval
requirements, and by contrast to prior practice, the NMPA has recently decided to also permit such drugs to be tested and developed through an IMCT.
In addition, the NMPA has adopted a notification system for clinical trials of new drugs. Pursuant to the newly amended Drug Administration Law
and the New Measures for Registration, effective from July 1, 2020, clinical trials may be commenced as long as the applicant has not received any
objections from the CDE within 60 business days of application filing after acceptance of the application, and such application will be deemed as
approved. Bioequivalence test may only be conducted after the completion of record-filing on the website of the CDE. All clinical trials that have been
approved but not initiated within three years since the execution of the Informed Consent Forms will become invalid. As provided in the New Measures
for Registration, a new application of clinical trial must be submitted if an applicant of an approved clinical trial decides to add new indications or drug
combinations into the trial.
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Drug Clinical Trial Registration
Pursuant to the Administrative Measures for Drug Registration, upon obtaining the clinical trial approval and before commencing a clinical trial,
the applicant should file a registration with the NMPA containing various details of the clinical trial, including the clinical study protocol, the name of
the principal researcher of the leading institution, names of participating institutions and researchers, an approval letter from the ethics committee, and a
sample of the Informed Consent Form, with a copy sent to the competent provincial administration departments where the trial institutions will be
located. On September 6, 2013, the NMPA released the Announcement on Drug Clinical Trial Information Platform, providing that for all clinical trials
approved by the NMPA and conducted in China, instead of the aforementioned registration filed with the NMPA, clinical trial registration should be
completed and trial information should be published through the Drug Clinical Trial Information Platform. The applicant should complete trial
pre-registration within one month after obtaining the clinical trial approval to obtain the trial’s unique registration number and should complete
registration of certain follow-up information before the first subject’s enrollment in the trial. If approval of the foregoing pre-registration and registration
is not obtained within one year after obtaining the clinical trial approval, the applicant should submit an explanation, and if the procedure is not
completed within three years, the clinical trial approval will automatically expire.
Pursuant to the New Measures for Registration, during the period of clinical trial, the applicant must continuously update the registration
information and the trial results after completion of each clinical trial on the Drug Clinical Trial Information Platform. Applicants are responsible for the
authenticity of the registration information.
Human Genetic Resources Approval—
On June 10, 1998, the Ministry of Science and Technology and the MOH jointly established the rules for protecting and utilizing human genetic
resources in China. On July 2, 2015, the Ministry of Science and Technology issued the Service Guide for Administrative Licensing Items concerning
Examination and Approval of Sampling, Collecting, Trading, Exporting Human Genetic Resources, or Taking Such Resources out of the PRC, which
provides that foreign-invested sponsors that sample and collect human genetic resources in clinical trials are required to file with the China Human
Genetic Resources Management Office through its online system. On October 26, 2017, the Ministry of Science and Technology issued the Circular on
Optimizing the Administrative Examination and Approval of Human Genetic Resources, which simplified the approval for sampling and collecting
human genetic resources for the purpose of commercializing a drug in the PRC.
On May 28, 2019, the State Council of the PRC issued the PRC Administrational Rules on the Management of Human Genetic Resources
(effective from July 1, 2019) (“Genetic Rules”), which formalized the approval requirements pertinent to research collaborations between Chinese and
foreign-owned entities. Pursuant to this new rule, a new notification system (as opposed to the advance approval approach originally in place) is put in
place for clinical trials using China’s human genetic resources at clinical institutions without involving the export of human genetic resources outside of
China.
On October 17, 2020, the Standing Committee of the NPC promulgated the Biosecurity Law of the PRC, which became effective from April 15,
2021. The new law restates the approval and notification requirements of human genetic resources sampling, collecting, utilizing and exporting, as
provided in the Genetic Rules. Moreover, the promulgation of the new law, which takes the form of national law, further demonstrates the commitments
of protecting China’s human genetic resources and safeguarding state biosecurity by the PRC government.
Trial Exemptions and Acceptance of Foreign Data—
The NMPA may reduce its requirements for clinical trials and data, depending on the drug and the existing data. The NMPA has granted waivers
for all or part of trials and has stated that it will accept data generated abroad (even if not as part of a global study), including early phase data, that
meets its requirements. On July 6, 2018, the NMPA issued the Technical Guidance Principles on Accepting Foreign Drug Clinical Trial Data (the
“Guidance Principles”) as one of the implementing rules for the Innovation Opinion. According to the Guidance Principles, the data of foreign clinical
trials must meet the authenticity, completeness, accuracy and traceability requirements, and such data must be obtained in consistency with the relevant
requirements under the Good Clinical Trial Practice (GCP) of the International Conference on Harmonization of Technical Requirements for
Registration of Pharmaceuticals for Human Use (the “ICH”). Clinical trial sponsors must be attentive to potentially meaningful ethnic differences in the
subject population.
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The NMPA now officially permits, and its predecessor agencies have permitted on a case-by-case basis in the past, drugs approved outside of
China to be approved in China on a conditional basis without pre-approval clinical trials being conducted in China. Specifically, in 2018, the NMPA
issued the Procedures for Reviewing and Approval of Clinical Urgently Needed Overseas New Drugs, permitting drugs that have been approved within
the last ten years in the United States, the European Union or Japan and that prevent or treat orphan diseases or prevent or treat serious life-threatening
illnesses for which there is either no effective therapy in China or for which the foreign-approved drug would have clear clinical advantages. Applicants
will be required to establish a risk mitigation plan and may be required to complete trials in China after the drug has been marketed. The CDE has
developed a list of qualifying drugs that meet the foregoing criteria.
Clinical Trial Process and Good Clinical Practices—
Typically, drug clinical trials in China have four phases. Phase 1 refers to the initial clinical pharmacology and human safety evaluation studies.
Phase 2 refers to the preliminary evaluation of a drug candidate’s therapeutic efficacy and safety for target indication(s) in patients. Phase 3 (often the
pivotal study) refers to clinical trials that further verify the drug candidate’s therapeutic efficacy and safety on patients with target indication(s) and
ultimately provide sufficient evidence for the review of a drug registration application. Phase 4 refers to a new drug’s post-marketing study to assess
therapeutic effectiveness and adverse reactions when the drug is widely used, to evaluate overall benefit-risk relationships of the drug when used among
the general population or specific groups and to adjust the administration dose, etc.
On August 6, 2003, the NMPA promulgated the Administration of Quality of Drug Clinical Practice (the “GCP”) to improve the quality of clinical
trials. Pursuant to the newly amended Drug Administrative Law, and the Regulations on the Administration of Drug Clinical Trial Institution jointly
promulgated by NMPA and NHC on November 29, 2019 and effective from December 1, 2019, drug clinical trial institutions should be under filing
administration. Clinical trial institutions that only conduct analysis of biological samples related to clinical trials of drugs do not need to be filed.
Pursuant to the Circular on Measures for Certification of Good Laboratory Practice for Non-clinical Laboratory, a Good Laboratory Practice
Certification will be issued by the NMPA if all the relevant requirements are satisfied, which will also be published on the NMPA’s website. Pursuant to
the Opinions on Deepening the Reform of the Evaluation and Approval System and Inspiring Innovation of Drugs and Medical Devices and Equipment,
the accreditation of the institutions for drug clinical trials should be subject to record-filing administration. The conduct of clinical trials must adhere to
the Good Laboratory Practice, and the protocols must be approved by the ethics committees of each study site. On April 23, 2020, the NMPA and NHC
jointly issued the amended Administration of Quality of Drug Clinical Practice (the “new GCP”), effective from July 1, 2020. The new GCP was highly
consistent with ICH E6 (R2) in its structure and content, and highly emphasized the protection of subjects, in particular, the protection of vulnerable
subjects was provided through reinforcing the ethics committee’s responsibilities. Furthermore, the new GCP clarified the investigator’s responsibilities
for medical decisions relevant to the clinical trials and overseeing the clinical trials to ensure the accuracy and completeness of the source data, it also
included the sponsor’s responsibilities for implementing and maintaining the quality management system, requiring that the electronic data management
system used by the sponsor should be verifiable, equipped with grant of modification authority and data security measures, to ensure the data
modification process is completely recorded and tracked. The new GCP also prohibited the conduct of biological sample testing irrelevant to the study
protocol approved by the ethics committee.
Reform of Evaluation and Approval System for Drugs
On August 9, 2015, the State Council promulgated the Opinions on the Reform of Evaluation and Approval System for Drugs and Medical
Devices and Equipment, which establishes the reform framework of the evaluation and approval system for drugs, medical devices and equipment,
indicating the enhancement of the standard of approval for drug registration and accelerating the evaluation and approval process for innovative drugs.
On November 11, 2015, the NMPA issued the Circular Concerning Several Policies on Drug Registration Review and Approval, which further
clarifies the measures and policies with regard to the simplification and acceleration of the approval process for drugs.
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According to the Decision of the NMPA on Adjusting the Approval Procedures under the Administrative Approval Items for Certain Drugs made
on March 17, 2017 and effective from May 1, 2017, the approval for a clinical trial application can be directly issued by the CDE under the NMPA on
behalf of the NMPA.
On October 8, 2017, the General Office of the State Council promulgated the Innovation Opinions, which further promotes the structural
adjustment to and technical innovations of drugs, medical devices and equipment.
On May 17, 2018, the NMPA and the NHC jointly issued the Circular on Issues Concerning Optimizing Drug Registration Review and Approval,
which further simplifies and accelerates the clinical trial approval process.
On January 22, 2020, the SAMR promulgated the New Measures for Registration, effective from July 1, 2020, which deploys several mechanisms
to simplify and accelerate the drug registration process, including the Priority Review Procedure and the Special Review Procedure.
On July 7, 2020, the NMPA promulgated the Evaluation and Approval Working Process for Revolutionary Therapeutic Drugs (Trial), the
Evaluation and Approval Working Process for the Conditional Approval Application of Drugs (Trial) and the Priority Evaluation and Approval Working
Process for Drugs (Trial), repealing the Opinions on Encouraging the Prioritized Evaluation and Approval for Drug Innovations, which provide for fast
track clinical trial approval, drug registration pathway or conditional approval to innovative drugs or drugs with revolutionary therapeutic effects.
On November 19, 2020, CDE promulgated the Clinical Technical Guidelines for Conditional Approval of Drugs (Tentative), which became
effective on the same day, to accelerate the marketing of clinically urgent drugs with outstanding clinical value in China. According to such guidelines,
during the period of drug clinical trials, a drug may be applied for conditional approval if it meets the following conditions: (i) for the treatment of
seriously life-threatening diseases with no existing effective treatment available, as well as medicines urgently needed for public health, whose clinical
trials have shown efficacy and whose clinical value can be predicted; (ii) vaccines that are urgently needed in response to major public health
emergencies or other vaccines that are identified as being urgently needed by the NHC, and whose benefits are assessed to outweigh the risks.
Special Examination and Fast Track Approval for Innovative Drugs under Current Reform Frame
Pursuant to the Provisions on the Administration of Special Examination and Approval of Registration of New Drugs promulgated by the NMPA
on January 7, 2009, the NMPA conducts special examination and approval for new drug registration applications when, among others, (1) the effective
constituent of a drug extracted from plants, animals, minerals, etc., as well as the preparations thereof, have never been marketed in China, or the
material medicines and the preparations thereof are newly discovered; (2) the chemical raw material medicines as well as the preparations thereof and
the biological product have not been approved for marketing anywhere in the world; (3) the new drugs are for treating AIDS, malignant tumors and rare
diseases, etc., and have obvious advantages in clinical treatment; or (4) the new drugs are for treating diseases with no effective methods of treatment.
The Provisions on the Administration of Special Examination and Approval of Registration of New Drugs provides that the applicant may file for
special examination and approval at the clinical trial application stage if the drug candidate falls within items (1) or (2). The provisions provide that for
drug candidates that fall within items (3) or (4), the application for special examination and approval cannot be made until filing for production.
The Circular Concerning Several Policies on Drug Registration Review and Approval issued on November 11, 2015 further clarifies the above-
mentioned policy, potentially simplifying and accelerating the approval process of clinical trials: (x) a one-time umbrella approval procedure allowing
the overall approval of all phases of a new drug’s clinical trials, replacing the current phase-by-phase application and approval procedure, will be
adopted for new drugs’ clinical trial applications; and (y) a fast track drug registration or clinical trial approval pathway for the following applications:
(i) registration of innovative new drugs treating AIDS, malignant tumors, serious infectious diseases and rare diseases; (ii) registration of pediatric
drugs; (iii) registration of drugs treating specific or prevalent diseases in elders; (iv) registration of drugs listed in national major science and technology
projects or national key research and development plan; (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 United States or the European Union or concurrent drug registration
applications for drugs which have applied to the competent drug approval authorities for marketing authorization and passed such authorities’ onsite
inspections in the United States or European Union and are manufactured using the same production line in China; and (viii) clinical trial approval for
drugs with urgent clinical need and patent expiry within three years, and manufacturing authorization applications for drugs with urgent clinical need
and patent expiry within one year.
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On July 7, 2020, the NMPA promulgated the Evaluation and Approval Working Process for Revolutionary Therapeutic Drugs (Trial), the
Evaluation and Approval Working Process for the Conditional Approval Application of Drugs (Trial) and the Priority Evaluation and Approval Working
Process for Drugs (Trial), which provide for fast track clinical trial approval, drug registration pathway or conditional approval to innovative drugs or
drugs with revolutionary therapeutic effects.
The Opinions on the Reform of Evaluation and Approval System for Drugs and Medical Devices and Equipment promulgated on August 9, 2015
provides that the composition of the examiner team of the CDE should be strengthened by, among other actions, (1) recruiting professional evaluation
talent from the public, (2) engaging relevant experts to participate in technological examination and evaluation, and (3) establishing a system of chief
professional positions. Additionally, the Opinions on Encouraging the Prioritized Evaluation and Approval for Drug Innovations emphasizes the
improvement of the examination and evaluation system, which requires the establishment of a new drug examination and evaluation team comprising
professionals specialized in clinical medicine, pharmaceutical sciences, pharmacology, toxicology and statistics. As a result, since 2015, the NMPA and
the CDE have started a large-scale expansion of examiners, which could greatly accelerate the new drug approval process in China.
Pursuant to the New Measures for Registration, at the stage of clinical trial application, depending on the characteristics of the drug and the
corresponding conditions, applicants may apply for adoption of the Breakthrough Drug Procedure or the Conditioned Approval Procedure. Such
procedures may be applied for eligible drugs, including drugs for fatal diseases without any effective treatment and breakthrough drugs, and extra policy
support, including communication with the CDE at the critical stage of clinical trials and suggestions from the CDE may be given to applicants in such
special procedures.
Manufacturing and Distribution
According to the Drug Administration Law, all facilities that manufacture drugs in China must receive a drug manufacturing license from the local
drug regulatory authority. Each drug manufacturing license issued to a pharmaceutical manufacturing enterprise is effective for a period of five years.
Any enterprise holding a drug manufacturing license is subject to review by the relevant regulatory authorities on an annual basis.
Similarly, to conduct sales, importation, shipping and storage (collectively, the “distribution activities”), a company must obtain a Drug
Distribution License from the local drug regulatory authority, subject to renewal every five years.
China has implemented a “Two-Invoice System” to control the distribution of prescription drugs. The “Two-Invoice System” generally requires
that no more than two invoices be issued throughout the distribution chain: one from the manufacturer to a distributor and another from the distributor to
the end-user hospital. This excludes the sale of products invoiced from the manufacturer to its wholly-owned or controlled distributors, or for imported
drugs, to its exclusive distributor, or from a distributor to its wholly-owned or controlled subsidiary (or between its wholly-owned or controlled
subsidiaries). However, the system still significantly limits the options for companies to use multiple distributors to reach a larger geographic area in
China. Compliance with the Two-Invoice System is a prerequisite for pharmaceutical companies to participate in the procurement processes of public
hospitals, which currently provide most of China’s healthcare services. Manufacturers and distributors that fail to implement the Two-Invoice System
may lose their qualifications to participate in the bidding process. Non-compliant manufacturers may also be blacklisted from engaging in drug sales to
public hospitals in a locality.
The Two-Invoice System was first implemented in 11 provinces involved in pilot comprehensive medical reforms, and the program has been
expanded to nearly all provinces, each with its own individual rules for the program.
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New Drug Application
Pursuant to the Administrative Measures for Drug Registration, when Phases 1, 2 and 3 clinical trials have been completed, the applicant may
apply to the NMPA for approval of a new drug application. The NMPA will then determine whether to approve the application according to the
comprehensive evaluation opinion provided by the CDE of the NMPA.
Pursuant to the New Measures for Registration, at the stage of new drug application, depending on the characteristics of the drug and the
corresponding conditions, applicants may apply for adoption of special procedures, including the Priority Review Procedure and the Special Review
Procedure. Such procedures may be applied for innovative drugs for severe infectious diseases or rare diseases, breakthrough drugs and other eligible
drugs stipulated in the New Measures for Registration. Extra policy support, including less review period, may be given to applicants in such special
procedures.
International Multi-center Clinical Trials Regulations
On January 30, 2015, the NMPA promulgated the Notice on Issuing the International Multi-Center Clinical Trial Guidelines (Trial), effective as of
March 1, 2015, to provide guidance on the regulation of the application, implementation and administration of international multi-center clinical trials in
China. Pursuant to the Notice on Issuing the International Multi-Center Clinical Trial Guidelines (Trial), international multi-center clinical trial
applicants may simultaneously perform clinical trials in different centers using the same clinical trial protocol. Where the applicant plans to make use of
the data derived from the international multi-center clinical trials for its application to the NMPA for approval of a new drug application, such
international multi-center clinical trials should satisfy, in addition to the requirements set forth in the Drug Administration Law and its implementation
measures, the Administrative Measures for Drug Registration and other relevant laws and regulations, the following requirements:
•
•
•
The applicant should first conduct an overall evaluation on the global clinical trial data and further make trend analysis of the Asian and
Chinese clinical trial data. In the analysis of Chinese clinical trial data, the applicant should consider the representativeness of the research
subjects, i.e., the participating patients;
The applicant should analyze whether the amount of Chinese research subjects is sufficient to assess and adjudicate the safety and
effectiveness of the drug under clinical trial, and satisfy the statistical and relevant legal requirements; and
The onshore and offshore international multi-center clinical trial research centers should be subject to on-site inspections by competent
PRC governmental agencies.
International multi-center clinical trials should follow international prevailing GCP principles and ethics requirements. Applications should ensure
the truthfulness, reliability and trustworthiness of clinical trials results; the researchers should have the qualification and capability to perform relevant
clinical trials; and an ethics committee should continuously review the trials and protect the subjects’ interests, benefits and safety. Before the
performance of the international multi-center clinical trial, applicants should obtain clinical trial approvals or complete filings pursuant to requirements
under the local regulations where clinical trials are conducted, and register and disclose the information of all major researchers and clinical trial
organizations on the NMPA Drug Clinical Trial Information Platform.
Pursuant to the Opinions on Deepening the Reform of the Evaluation and Approval System and Inspiring Innovation of Drugs and Medical
Devices and Equipment, clinical trial data obtained from foreign centers may be used to apply for registration in China as long as such data meet the
relevant requirements for the registration of drugs and medical devices in China. When using international multi-center clinical trial data to support new
drug applications in China, applicants should submit the completed global clinical trial report, statistical analysis report and database, along with
relevant supporting data in accordance with ICH-CTD (International Conference on Harmonization-Common Technical Document) content and format
requirements; subgroup research results summary and comparative analysis should also be conducted concurrently.
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Marketing Authorization Holder System
Pursuant to the Opinions on the Reform of Evaluation and Approval System for Drugs and Medical Devices and Equipment promulgated on
August 9, 2015, the State Council published the policy for carrying out a pilot plan for the drug marketing authorization holder mechanism.
Pursuant to the newly amended Drug Administrative Law, under the drug marketing authorization holder mechanism, an enterprise or a research
and development institution, which has obtained a drug registration certificate is eligible to be a pharmaceutical marketing authorization holder and the
drug marketing authorization holder should be responsible for nonclinical laboratory studies, clinical trials, production and distribution, post-market
studies, and the monitoring, reporting, and handling of adverse reactions in connection with pharmaceuticals in accordance with the provisions of the
Drug Administrative Law. The pharmaceutical marketing authorization holder may engage contract manufacturers for manufacturing, provided that the
contract manufacturers are licensed and may engage pharmaceutical distribution enterprises with drug distribution license for the distribution activities.
Upon the approval of the medical products administrative department under the State Council, a drug marketing authorization holder may transfer the
drug marketing license and the transferee should have the capability of quality management, risk prevention and control, and liability compensation to
ensure the safety, effectiveness and quality controllability of drugs, and fulfill the obligations of the drug marketing license holder.
Administrative Observation Periods for New Drugs
According to the Implementing Measures of the Drug Administration Law, the NMPA may, for the purposes of protecting public health, set an
administrative observation period of not more than five years for a new drug produced by a drug manufacturer. During the administrative observation
period, no approval will be given to any other manufacturer to produce or import the said drug.
Non-Inferiority Standard
In China, a drug may receive regulatory approval without showing superiority in its primary endpoint. Rather, a drug may be approved for use if it
shows non-inferiority in its primary endpoint and superiority in one of its secondary endpoints.
Packaging of Pharmaceutical Products
Pursuant to the Administration of Quality of Drug Clinical Practice, the applicant should be responsible for proper packaging and labeling of
drugs for clinical trials, and in double-blinded clinical trials, the test drug should be consistent with the control drug or placebo in appearance, odor,
packaging, labeling, and certain other features. According to the Measures for the Administration of Pharmaceutical Packaging promulgated on
February 12, 1988 and effective from September 1, 1988, pharmaceutical packaging must comply with national and professional standards. If there is no
national or professional standard available, an applicant may formulate and implement its own standards after obtaining the approval of the provincial
administration or bureau of standards. The applicant must reapply if it needs to change its own packaging standards. Drugs that have not been developed
and approved for packaging standards must not be sold or marketed in the PRC (except for drugs for the military).
National List of Essential Drugs
On August 18, 2009, the MOH and eight other ministries and commissions in the PRC issued the Provisional Measures on the Administration of
the National List of Essential Drugs which was revised on February 13, 2015 aim to promote essential medicines sold to consumers at fair prices in the
PRC and ensure that the general public in the PRC has equal access to the drugs contained in the National List of Essential Drugs. The MOH
promulgated the National List of Essential Drugs on March 13, 2013 and on September 30, 2018. According to these regulations, basic healthcare
institutions funded by the government should store up and use drugs listed in the National List of Essential Drugs. The drugs listed in the National List
of Essential Drugs should be purchased by centralized tender process and should be subject to the price control by the National Development and
Reform Commission (the “NDRC”). Remedial drugs in the National List of Essential Drugs are all listed in the NRDL and the purchase price of such
drugs is entitled to reimbursement.
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Government Price Controls
The Chinese government has abolished the 15-year-old government-led pricing system for drugs. On May 4, 2015, the NDRC and six other
ministries and commissions in the PRC issued the Opinion on Promoting Drug Pricing Reform, which lifted the government-prescribed maximum retail
price for most drugs, except for narcotic drugs and Class I psychotropic drugs. The government regulates drug prices mainly by establishing a
consolidated procurement mechanism, restructuring medical insurance reimbursement standards and strengthening the regulation of medical and pricing
practices as discussed below.
Centralized Procurement and Tenders
Under the current regulations, public medical institutions owned by the government or owned by State-owned or controlled enterprises are
required to purchase pharmaceutical products through centralized online procurement processes. There are exceptions for drugs on the National List of
Essential Drugs, which have their own procurement rules, and for certain drugs subject to the central government’s special control, such as toxic,
radioactive and narcotic drugs and traditional Chinese medicines.
The centralized procurement process takes the form of public tenders operated by provincial or municipal-level government agencies. The
centralized tender process is typically conducted once every year. The bids are assessed by a committee randomly selected from a database of experts.
The committee members assess the bids based on a number of factors, including, but not limited to, bid price, product quality, clinical effectiveness,
product safety, level of technology, qualifications and reputation of the manufacturer, after-sale services and innovation.
The State Council approved state-run centralized medicine procurement and 11 pilot cities for the program in a circular issued on January 17,
2019. It is an effort to deepen reform of the medical and health sector and optimize the pricing system of drugs. According to the circular, in the 11 pilot
cities drugs will be selected from generic brands for centralized medicine procurement. The selected drugs must pass the consistency evaluation on
quality and effectiveness. The policy is aimed at lowering drug costs for patients, reducing transaction costs for enterprises, regulating drug use of
institutions, and improving the centralized medicine procurement and pricing system. The centralized procurement is open to all approved enterprises
that can produce drugs on the procurement list in China. Clinical effects, adverse reactions, and batch stability of the drugs will be considered, and their
consistency will be the main criteria for evaluation, while production capacity and stability of the supplier will also be considered.
Commercial Insurance
On October 25, 2016, the State Council issued the Plan for Healthy China 2030. According to the Plan, the country will establish a multi-level
medical security system built around basic medical insurance, with other forms of insurance supplementing the basic medical insurance, including
serious illness insurance for urban and rural residents, commercial health insurance and medical assistance. Furthermore, the Plan encourages
enterprises and individuals to participate in commercial health insurance and various forms of supplementary insurance. The evolving medical insurance
system makes innovative drugs more affordable and universally available to the Chinese population, which renders greater opportunities to drug
manufacturers that focus on the research and development of innovative drugs, such as high-cost cancer therapeutics.
Healthcare System Reform
The PRC government recently promulgated several healthcare reform policies and regulations to reform the healthcare system. On March 17,
2009, the State Council issued the Guidelines on Strengthening the Reform of Healthcare System. On December 27, 2016, the State Council issued the
Notice on the Issuance of the 13th Five-year Plan on Strengthening the Reform of Healthcare System. On May 23, 2019, the General Office of the State
Council issued the Notice on the Main Tasks of Strengthening the Reform of Healthcare System in 2019, which specified the key legislative work of the
national medical and health system and the key tasks to promote its implementation. Twenty-one specific tasks have been proposed to address the
difficulty and high cost of getting medical services and to strengthen hospital management.
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Chronic Diseases Prevention and Treatment
Pursuant to the Guiding Opinion of the General Office of the State Council on Promoting the Construction of the Hierarchical Healthcare System
issued by the General Office of the State Council on September 8, 2015 and the Notice on Promoting Pilot Work for Hierarchical Healthcare System
jointly promulgated by the NHFPC and the State Administration of Traditional Chinese Medicine on August 19, 2016, the hierarchical healthcare
system is expected to be gradually improved, and the framework for division and coordination among medical and health institutions should be
substantially established by 2017, and a diagnosis and treatment model featuring objectives, such as initial diagnosis of common diseases and frequent
diseases at primary hospitals and separate treatment of acute and chronic diseases, are expected to be gradually established. According to the Guiding
Opinion of the General Office of the State Council on Promoting the Construction of the Hierarchical Healthcare System, several chronic diseases,
including hypertension, diabetes, cancer and cardiovascular and cerebrovascular diseases, are pilot diseases under the hierarchical healthcare system.
Primary healthcare institutions, rehabilitation hospitals and nursing institutions may provide treatment, rehabilitation and nursing services for patients
with chronic diseases, patients in stable conditions, elderly patients, and advanced cancer patients who have clear diagnosis and stable disease
conditions.
On January 22, 2017, the General Office of the State Council issued the Notice on the Medium and Long-Term Plan for Chronic Disease
Prevention and Treatment in China (2017-2025), which sets up the objectives of the management of diabetes patients, targeting the involvement of
35 million diabetic patients by 2020 and 40 million by 2025 in chronic disease management. The Notice on the Medium and Long-Term Plan for
Chronic Disease Prevention and Treatment in China (2017-2025) reaffirms that the hierarchical healthcare system of chronic diseases such as diabetes
should be promoted and encourages the initial diagnosis of common diseases and frequent diseases at primary hospitals. In addition, social participation
in regional medical services, health management and chronic disease prevention services, as well as investments in the field of chronic disease
prevention by social capital, are encouraged.
Intellectual Property Rights
China became a member of the World Trade Organization and a party to the Agreement on Trade-Related Aspects of Intellectual Property Rights
on December 11, 2001. China has also entered into several international conventions on intellectual property rights, including, but not limited to, the
Paris Convention for the Protection of Industrial Property, the Madrid Agreement Concerning the International Registration of Marks, and the Patent
Cooperation Treaty.
Patents
Pursuant to the PRC Patent Law promulgated by the Standing Committee of the NPC on March 12, 1984 and amended on September 4, 1992,
August 25, 2000 and December 27, 2008, respectively, and effective from October 1, 2009, and the Implementation Rules of the Patent Law of the PRC
promulgated by the State Council on June 15, 2001 and amended on December 28, 2002 and January 9, 2010, respectively, patents in China fall into
three categories: invention, utility model and design. An invention patent is granted to a new technical solution proposed in respect of a product or
method or an improvement of a product or method. A utility model is granted to a new technical solution that is practicable for application and proposed
in respect of the shape, structure or a combination of both of a product. A design patent is granted to the new design of a certain product in shape,
pattern or a combination of both and in color, shape and pattern combinations aesthetically suitable for industrial application. Under the PRC Patent
Law, the term of patent protection starts from the date of application. Patents relating to invention are effective for twenty years, and utility models and
designs are effective for ten years from the date of application. The PRC Patent Law adopts the principle of “first-to-file” system, which provides that
where more than one person files a patent application for the same invention, a patent will be granted to the person who files the application first.
Existing patents can become narrowed, invalid or unenforceable due to a variety of grounds, including lack of novelty, creativity, and deficiencies
in patent application. In China, a patent must have novelty, creativity and practical applicability. Under the PRC Patent Law, novelty means that before a
patent application is filed, no identical invention or utility model has been publicly disclosed in any publication in China or overseas or has been
publicly used or made known to the public by any other means, whether in or outside of China, nor has any other person filed with the patent authority
an application that describes an identical invention or utility model and is recorded in patent application documents or patent documents published after
the filing date. Creativity means that, compared with existing technology, an invention has prominent substantial features and represents notable
progress, and a utility model has substantial features and represents any progress. Practical applicability means an invention or utility model can be
manufactured or used and may produce positive results. Patents in China are filed with the State Intellectual Property Office (the “SIPO”). Normally, the
SIPO publishes an application for an invention patent within 18 months after the filing date, which may be shortened at the request of applicant. The
applicant must apply to the SIPO for a substantive examination within three years from the date of application.
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Article 20 of the PRC Patent Law provides that, for an invention or utility model completed in China, any applicant (not just Chinese companies
and individuals), before filing a patent application outside of China, must first submit it to the SIPO for a confidential examination. Failure to comply
with this requirement will result in the denial of any Chinese patent for the relevant invention. This added requirement of confidential examination by
the SIPO has raised concerns by foreign companies who conduct research and development activities in China or outsource research and development
activities to service providers in China.
On October 17, 2020, the Standing Committee of the NPC promulgated the Amendment to the Patent Law. The Amendment to the Patent Law,
which became effective on June 1, 2021, extends the validity period for design and the time limitation of actions for infringement of patent rights, and
increases the maximum amount of infringement compensation. Meanwhile, the Amendment to the Patent Law implements a “compensation for patent
term” (the “Term Compensation”) measure. In the event that an invention patent is granted after the forth (4th) anniversary of the date of application and
the third (3rd) anniversary of the date of the request for substantive examination, the Patent Administration Department of the State Council should, at
the request of the patentee, provide the Term Compensation for the unreasonable delay in the process of granting the patent, except for the unreasonable
delay caused by the applicant. In particular, in order to compensate the time taken for the review and approval of new drugs, if the new drug-related
invention patents are approved for marketing in China, the Patent Administration Department of the State Council should provide the Term
Compensation to the patentee, for the duration of patent rights at the request of the patentee. The Term Compensation should not exceed five (5) years,
and the total effective patent right period after the new drug is approved for marketing should not exceed fourteen (14) years.
Patent Enforcement
Unauthorized use of patents without consent from owners of patents, forgery of the patents belonging to other persons, or engagement in other
patent infringement acts, will subject the infringers to infringement liability. Serious offenses such as forgery of patents may be subject to criminal
penalties.
When a dispute arises out of infringement of the patent owner’s patent right, Chinese law requires that the parties first attempt to settle the dispute
through mutual consultation. However, if the dispute cannot be settled through mutual consultation, the patent owner, or an interested party who believes
the patent is being infringed, may either file a civil legal suit or file an administrative complaint with the relevant patent administration authority. A
Chinese court may issue a preliminary injunction upon the patent owner’s or an interested party’s request before instituting any legal proceedings or
during the proceedings. Damages for infringement are calculated as the loss suffered by the patent holder arising from the infringement, and if the loss
suffered by the patent holder arising from the infringement cannot be determined, the damages for infringement should be calculated as the benefit
gained by the infringer from the infringement. If it is difficult to ascertain damages in this manner, damages may be determined by using a reasonable
multiple of the license fee under a contractual license. Statutory damages may be awarded in the circumstances where the damages cannot be determined
by the above-mentioned calculation standards. The damage calculation methods should be applied in the aforementioned order. Generally, the patent
owner has the burden of proving that the patent is being infringed. However, if the owner of an invention patent for manufacturing process of a new
product alleges infringement of its patent, the alleged infringer has the burden of proof.
Medical Patent Compulsory License
According to the PRC Patent Law, for the purpose of public health, the SIPO may grant a compulsory license for manufacturing patented drugs
and exporting them to countries or regions covered under relevant international treaties to which the PRC has acceded.
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Trade Secrets
Pursuant to the PRC Anti-Unfair Competition Law promulgated by the Standing Committee of the NPC on September 2, 1993 and amended on
November 4, 2017 and April 23, 2019, respectively, the term “trade secrets” refers to technical and business information that is unknown to the public,
has utility, may create business interests or profits for its legal owners or holders, and is maintained as a secret by its legal owners or holders. Under the
PRC Anti-Unfair Competition Law, business persons are prohibited from infringing others’ trade secrets by (1) obtaining the trade secrets from the legal
owners or holders by any unfair methods, such as theft, bribery, fraud, coercion, electronic intrusion, or any other illicit means; (2) disclosing, using or
permitting others to use the trade secrets obtained illegally under item (1) above; (3) disclosing, using or permitting others to use the trade secrets, in
violation of any contractual agreements or any requirements of the legal owners or holders to keep such trade secrets in confidence; or (4) instigating,
inducing or assisting others to disclose, use or permit others to use the trade secrets, in violation of any contractual agreements or any requirement of the
legal owners or holders to keep such trade secret in confidence. If a third party knows or should have known of the above-mentioned illegal conduct but
nevertheless obtains, uses or discloses trade secrets of others, the third party may be deemed to have committed a misappropriation of the others’ trade
secrets. The parties whose trade secrets are being misappropriated may petition for administrative corrections, and regulatory authorities may terminate
any illegal activities and impose fines on the infringing parties.
Trademarks
Pursuant to the Trademark Law of the PRC promulgated by the Standing Committee of the NPC on August 23, 1982 and amended on
February 22, 1993, October 27, 2001 and August 30, 2013, respectively, and effective from May 1, 2014, which has been amended on April 23, 2019
and became effective from November 1, 2019, the period of validity for a registered trademark is ten years, commencing from the date of registration.
The registrant should go through the formalities for renewal within twelve months prior to the expiry date of the trademark if continued use is intended.
Where the registrant fails to do so, a grace period of six months may be granted. The validity period for each renewal of registration is ten years,
commencing from the day immediately after the expiry of the preceding period of validity for the trademark. In the absence of a renewal upon expiry,
the registered trademark will be cancelled. Industrial and commercial administrative authorities have the authority to investigate any behavior in
infringement of the exclusive right under a registered trademark in accordance with the law. In case of a suspected criminal offense, the case will be
timely referred to a judicial authority and decided according to the law.
Domain Names
Domain names are historically protected under the Measures on Administration of Domain Names for the Chinese Internet promulgated by the
Ministry of Industry and Information Technology, on November 5, 2004 and effective from December 20, 2004, which was replaced by the
Administrative Measures on the Internet Domain Names issued by the Ministry of Industry and Information Technology on August 24, 2017 and
effective from November 1, 2017, and the Implementing Rules on Registration of Domain Names issued by China Internet Network Information Center
on May 28, 2012, which became effective on May 29, 2012. On June 18, 2019, China Internet Network Information Center issued the Implementing
Rules of China Country Code Top-level Domain Names Registration, repealing the Implementing Rules on Registration of Domain Names. The
Ministry of Industry and Information Technology is the main regulatory body responsible for the administration of PRC internet domain names. Domain
name registrations are handled through domain name service agencies established under the relevant regulations, and the applicants become domain
name holders upon successful registration.
Product Liability
The Product Quality Law of the PRC promulgated by the Standing Committee of the NPC on February 22, 1993 and amended on July 8, 2000,
August 27, 2009 and December 29, 2018, respectively, is the principal governing law relating to the supervision and administration of product quality.
According to the Product Quality Law, manufacturers should be liable for the quality of products produced by them, and sellers should take measures to
ensure the quality of the products sold by them. A manufacturer should be liable for compensating for any bodily injuries or property damages, other
than the defective product itself, resulting from the defects in the product, unless the manufacturer is able to prove that: (1) the product has never been
distributed; (2) the defects causing injuries or damages did not exist at the time when the product was distributed; or (3) the science and technology at
the time when the product was distributed was at a level incapable of detecting the defects. A seller should be liable for compensating for any bodily
injuries or property damages of others caused by the defects in the product if such defects are attributable to the seller. A seller should pay compensation
if it fails to indicate either the manufacturer or the supplier of the defective product. A person who is injured or whose property is damaged by the
defects in the product may claim for compensation from the manufacturer or the seller.
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Pursuant to the General Principles of the Civil Law of the PRC promulgated by the NPC on April 12, 1986 and amended on August 27, 2009, both
manufacturers and sellers should be held liable where the defective products result in property damages or bodily injuries to others. Pursuant to the Tort
Liability Law of the PRC promulgated by the Standing Committee of the NPC on December 26, 2009 and effective from July 1, 2010, manufacturers
should assume tort liabilities where the defects in products cause damages to others. Sellers should assume tort liabilities where the defects in products
that have caused damages to others are attributable to the sellers. The aggrieved party may claim for compensation from the manufacturer or the seller of
the defected product that has caused damage. On May 28, 2020, the NPC approved the Civil Code of the People’s Republic of China (the “Civil Code”),
which took effect on January 1, 2021 and replaced the General Principles of the Civil Law of the PRC and Tort Liability Law of the PRC. According to
the Civil Code, patients have the right to claim compensation from the drug marketing authorization holder, medical institution or manufacturer for
damage caused by drug defects.
Regulation of Commercial Bribery
Pharmaceutical companies involved in a criminal investigation or administrative proceedings related to bribery are listed in the Adverse Records
of Commercial Briberies by their respective provincial health and family planning administrative department. Pursuant to the Provisions on the
Establishment of Adverse Records of Commercial Briberies in the Medicine Purchase and Sales Industry which became effective on March 1, 2014,
provincial health and family planning administrative departments formulate the implementing measures for establishment of Adverse Records of
Commercial Briberies. Where a pharmaceutical company or its agent is listed in the Adverse Records of Commercial Briberies on one occasion, it will
be prohibited from participating in the procurement bidding process or selling its products to public medical institutions located in the local provincial-
level region for two years from the publication of the adverse records. The evaluation points of such pharmaceutical company or agent in respect of the
procurement bidding process and procurement by public medical institutions must be credited by public medical institutions in the other provincial-level
regions for two years from the publication of the adverse records. Where a pharmaceutical company or its agent is listed in the Adverse Records of
Commercial Briberies on two or more occasions within five years, it will be prohibited from participating in the procurement bidding process or selling
its products to all public medical institutions in the PRC for two years from the publication of these adverse records.
Regulations Relating to Employee Stock Incentive Plan
In February 2012, the SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals
Participating in Stock Incentive Plans of Overseas Publicly Listed Companies (the “Stock Option Rules”), which replaced the Application Procedures of
Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas
Publicly Listed Companies issued by the SAFE on March 28, 2007. In accordance with the Stock Option Rules and relevant rules and regulations, PRC
citizens or non-PRC citizens residing in China for a continuous period of not less than one year, who participate in any stock incentive plan of an
overseas publicly listed company, subject to a few exceptions, are required to register with the SAFE through a domestic qualified agent, which could be
a PRC subsidiary of such overseas listed company, and complete certain procedures. We and our employees who are PRC citizens or who reside in
China for a continuous period of not less than one year and who participate in our stock incentive plan will be subject to such regulation. In addition, the
SAT has issued circulars concerning employee share options or restricted shares. Under these circulars, employees working in the PRC who exercise
share options, or whose restricted shares vest, will be subject to PRC individual income tax (the “IIT”). The PRC subsidiaries of an overseas listed
company have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold IIT of
those employees related to their share options or restricted shares. If the employees fail to pay, or the PRC subsidiaries fail to withhold, their IIT
according to relevant laws, rules and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC government
authorities.
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Regulations Relating to Foreign Exchange and the Dividend Distribution
Foreign Exchange Control
The State Council promulgated the PRC Regulation for the Foreign Exchange on January 29, 1996, which was amended on January 14, 1997 and
August 5, 2008, respectively. On June 20, 1996, the People’s Bank of China promulgated the Regulation on the Administration of the Foreign Exchange
Settlement, Sales and Payment, which came into effect on July 1, 1996. Pursuant to the above-mentioned regulations, foreign exchanges required for
distribution of profits and payment of dividends may be purchased from designated foreign exchange banks in the PRC upon presentation of a board
resolution authorizing the distribution of profits or payment of dividends. The Regulation on the Administration of the Foreign Exchange Settlement,
Sales and Payment removed the previous restrictions on convertibility of foreign exchange in respect of current account items, including the distribution
of dividends, interest and royalty payments, trade and service-related foreign exchange transactions, while foreign exchange transactions in respect of
capital account items, such as direct investment, loan, securities investment and repatriation of investment, remain subject to the approval of the SAFE.
On November 19, 2012, the SAFE issued the Operating Rules for Foreign Exchange Issues with Regard to Direct Investment under Capital
Account as an appendix to the Circular of the SAFE on Further Improving and Adjusting the Foreign Exchange Policies on Direct Investment, which
was issued on November 19, 2012 and amended on May 4, 2015. According to the Circular of the SAFE on Further Improving and Adjusting the
Foreign Exchange Policies on Direct Investment, (i) the opening of and payment into foreign exchange accounts under direct investment accounts are no
longer subject to approval by the SAFE; (ii) reinvestment with the legal income of foreign investors in China is no longer subject to approval by the
SAFE; (iii) the procedures for capital verification and confirmation that foreign-funded enterprises need to go through are simplified; (iv) the purchase
and external payment of foreign exchange under direct investment accounts are no longer subject to approval by the SAFE; (v) domestic transfer of
foreign exchange under direct investment accounts is no longer subject to approval by the SAFE; and (vi) the administration over the conversion of
foreign exchange capital of foreign-funded enterprises is improved. On February 13, 2015, the SAFE issued the Circular on Further Simplifying and
Improving Foreign Exchange Administration Policies in Respect of Direct Investment, which came into effect on June 1, 2015, providing that the banks,
instead of the SAFE, can directly handle the foreign exchange registration and approval under foreign direct investment, while the SAFE and its
branches indirectly supervise the foreign exchange registration and approval under foreign direct investment through the banks.
On May 10, 2013, the SAFE promulgated the Provisions on the Administration of Foreign Exchange in Foreign Direct Investments by Foreign
Investors, which became effective on May 13, 2013, and relevant supporting documents that regulate and clarify the administration over foreign
exchange administration in foreign direct investments.
On March 30, 2015, the SAFE released the Circular on the Reform of the Management Method for the Settlement of Foreign Exchange Capital of
Foreign-invested Enterprises, which came into effect on June 1, 2015 and superseded the Notice on the Relevant Operating Issues Concerning the
Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-funded Enterprises issued by the SAFE on
August 29, 2008. The Circular on the Reform of the Management Method for the Settlement of Foreign Exchange Capital of Foreign-invested
Enterprises has made certain adjustments to some regulatory requirements on the settlement of foreign exchange capital of foreign-invested enterprises,
and some foreign exchange restrictions provided in the Notice on the Relevant Operating Issues Concerning the Improvement of the Administration of
Payment and Settlement of Foreign Currency Capital of Foreign-funded Enterprises. On June 9, 2016, the SAFE issued the Circular on the Reform and
Standardization of the Management Policy of the Settlement of Capital Projects. Under the Circular on the Reform and Standardization of the
Management Policy of the Settlement of Capital Projects and the Circular on the Reform of the Management Method for the Settlement of Foreign
Exchange Capital of Foreign-invested Enterprises, the settlement of foreign exchange by foreign-invested enterprises should be governed by the policy
of foreign exchange settlement on a discretionary basis. However, the aforementioned circulars also reiterate that the settlement of foreign exchange
should only be used for its own operation purposes within the business scope of the foreign-invested enterprises and following the principles of
authenticity. Considering that these circulars are relatively new, it is unclear how they will be implemented, and there exist great uncertainties with
respect to their interpretation and implementation by the authorities.
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The SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and
Financing and Roundtrip Investment through Special Purpose Vehicles on July 4, 2014, which requires PRC residents to register with local branches of
the SAFE in connection with their direct establishment or indirect control of an offshore entity for the purpose of overseas investment and financing,
with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests as a “special purpose vehicle” as
defined therein. The aforesaid circular further requires amendment to the registration in the event of any significant changes with respect to the special
purpose vehicle. Failure to comply with the SAFE registration requirements under the Circular on Relevant Issues Concerning Foreign Exchange
Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles could result in
liabilities under PRC law for evasion of foreign exchange controls. The Circular on Further Simplifying and Improving Foreign Exchange
Administration Policies in Respect of Direct Investment, provides that local banks, instead of the SAFE, can directly handle the initial foreign exchange
registration and amendment registration under the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore
Investment and Financing and Roundtrip Investment through Special Purpose Vehicles.
On April 10, 2020, SAFE promulgated the Circular on Optimizing Administration of Foreign Exchange to Support the Development of Foreign-
related Business, which allows eligible enterprises to make domestic payments using their capital funds, foreign credits and the income under capital
accounts of overseas listing, without providing evidentiary materials concerning authenticity of such capital for banks in advance, provided that their
capital use should be authentic and in line with provisions, and conform to the prevailing administrative regulations on the use of income under capital
accounts. The administering bank should perform ex-post sampling in accordance with the relevant requirements.
Dividend Distribution
Pursuant to the PRC Company Law and Foreign Investment Law of the PRC, foreign-invested enterprises in the PRC may pay dividends only out
of their accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise is
required to set aside at least 10% of its accumulated profits each year to fund certain reserve funds, until the accumulative amount of such fund reaches
50% of its registered capital.
On January 26, 2017, the SAFE issued the Notice on Improving the Check of Authenticity and Compliance to Further Promote Foreign Exchange
Control, which stipulates several capital control measures with respect to outbound remittance of profits from domestic entities to offshore entities,
including the following: (i) under the principle of genuine transaction, banks should check board resolutions regarding profit distribution, the original
version of tax filing records and audited financial statements; and (ii) domestic entities should hold income to account for previous years’ losses before
remitting the profits. Moreover, domestic entities should provide detailed explanations of the sources of capital and the utilization arrangements and
board resolutions, contracts and other proof when completing the registration procedures in connection with an outbound investment.
Regulations Relating to Labor
Labor Law and Labor Contract Law
Pursuant to the PRC Labor Law promulgated by the Standing Committee of the NPC on July 5, 1994 and effective from January 1, 1995 and
amended on August 27, 2009 and December 29, 2018, respectively, the PRC Labor Contract Law promulgated by the Standing Committee of the NPC
on June 29, 2007 and effective from January 1, 2008 and amended on December 28, 2012 and effective from July 1, 2013, and the Implementing
Regulations of the Employment Contracts Law of the PRC promulgated by the State Council on September 18, 2008, labor contracts in written form
should be executed to establish labor relationships between employers and employees. Wages cannot be lower than the local minimum wage. The
employer must establish a system for labor safety and sanitation, strictly abide by the state rules and standards, provide education regarding labor safety
and sanitation to its employees, provide employees with labor safety and sanitary conditions and necessary protection materials in compliance with the
state rules and standards, and carry out regular health examinations for employees engaged in work involving occupational hazards.
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Social Insurance and Housing Provident Funds
Under applicable PRC laws, including the Social Insurance Law of the PRC which became effective on July 1, 2011 and was amended on
December 19, 2018, the Interim Regulations on the Collection and Payment of Social Security Funds promulgated by the State Council on January 22,
1999 and amended on March 24, 2019, and the Regulations on the Administration of Housing Provident Funds promulgated by the State Council on
April 3, 1999 and amended on March 24, 2002 and March 24, 2019, respectively, employers are required to contribute, on behalf of their employees, to
a number of social security funds, including funds for basic pension insurance, unemployment insurance, basic medical insurance, occupational injury
insurance, maternity insurance and housing provident funds. These payments are made to local administrative authorities, and any employer who fails to
contribute may be fined and ordered to pay the deficit amount within a stipulated time limit.
Regulations Relating to Enterprise Income Tax
Pursuant to the Enterprise Income Tax Law of the PRC effective as of January 1, 2008 and as amended on February 24, 2017 and December 29,
2018, respectively, the income tax rate for both domestic and foreign-invested enterprises is 25% with certain exceptions. To clarify certain provisions in
the Enterprise Income Tax Law, the State Council promulgated the Implementation Rules of the Enterprise Income Tax Law on December 6, 2007,
which was amended and became effective on April 23, 2019. Under the Enterprise Income Tax Law and the Implementation Rules of the Enterprise
Income Tax Law, enterprises are classified as either “resident enterprises” or “non-resident enterprises.” Besides enterprises established within the PRC,
enterprises established outside of China whose “de facto management bodies” are located in China are considered “resident enterprises” and subject to
the uniform 25% enterprise income tax rate for their global income. In addition, the Enterprise Income Tax Law provides that a non-resident enterprise
refers to an entity established under foreign law whose “de facto management bodies” are not within the PRC, but has an establishment or place of
business in the PRC, or does not have an establishment or place of business in the PRC but has income sourced within the PRC.
The Implementation Rules of the Enterprise Income Tax Law provide that since January 1, 2008, an income tax rate of 10% should normally be
applicable to dividends declared to non-PRC resident enterprise investors that do not have an establishment or place of business in the PRC, or have
such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business, to the extent
such dividends are derived from sources within the PRC. The income tax on the dividends may be reduced pursuant to a tax treaty between China and
the jurisdictions in which the non-PRC shareholders reside.
Other PRC National- and Provincial-Level Laws and Regulations
We are subject to changing regulations under many other laws and regulations administered by governmental authorities at the national, provincial
and municipal levels, some of which are or may become applicable to our business. For example, regulations control the confidentiality of patients’
medical information and the circumstances under which patient medical information may be released for inclusion in our databases, or released by us to
third parties. These laws and regulations governing both the disclosure and the use of confidential patient medical information may become more
restrictive in the future.
We also comply with numerous additional national and provincial laws relating to matters such as safe working conditions, manufacturing
practices, environmental protection and fire hazard control. We believe that we are currently in compliance with these laws and regulations; however, we
may be required to incur significant costs to comply with these laws and regulations in the future. Unanticipated changes in existing regulatory
requirements or adoption of new requirements could therefore have a material adverse effect on our business, results of operations and financial
condition.
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U.S. Regulation
Government Regulation and Product Approval in the United States
The FDA and other regulatory authorities in the United States at federal, state and local levels, as well as in foreign countries, extensively
regulate, among other things, the research, development, testing, manufacture, quality control, import, export, safety, effectiveness, labeling, packaging,
storage, distribution, recordkeeping, approval, advertising, promotion, marketing, post-approval monitoring and post-approval reporting of biological
products. Along with third-party contractors, we will be required to navigate the various pre-clinical, clinical and commercial approval requirements of
the governing regulatory agencies of the countries in which we wish to conduct studies or seek approval or licensure of our drug candidates. The
processes for obtaining regulatory approvals in the United States and in foreign jurisdictions, along with subsequent compliance with applicable laws
and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
Government policies may change and additional government regulations may be enacted that could prevent or delay further development or
regulatory approval of any of our drug candidates, or anticipated manufacturing processes, disease indications, or labeling. We cannot predict the
likelihood, nature or extent of government regulation that might arise from future legislative or administrative action.
Review and Approval for Licensing Biologics in the United States
In the United States, the FDA regulates our current drug candidates as biological products, or biologics, under the Federal Food, Drug, and
Cosmetic Act (the “FDCA”), the Public Health Service Act and associated implementing regulations. Biologics, like other drugs, are used for the
treatment, prevention or cure of disease in humans. In contrast to chemically synthesized small molecular weight drugs, which have a well-defined
structure and can be thoroughly characterized, biologics are generally derived from living material (human, animal, or microorganism) and are complex
in structure, and thus are usually not fully characterized. Biologics include immunomedicines for cancer and other diseases.
Biologics are also subject to other federal, state and local statutes and regulations. The failure to comply with applicable statutory and regulatory
requirements at any time during the product development process, approval process or after approval may subject a sponsor or applicant to
administrative or judicial enforcement actions. These actions could include the suspension or termination of clinical trials by the FDA, the FDA’s refusal
to approve pending applications or supplemental applications, withdrawal of an approval, “Warning Letters” (official messages from the FDA to a
manufacturer or other organization that it has violated some rule in a federally regulated activity) or “Untitled Letters” (initial correspondences from the
FDA with a regulated industry that cite violations that do not meet the threshold of regulatory significance for a Warning Letter and request correction of
the violation), product recalls, product seizures, total or partial suspension of production or distribution, import detention, injunctions, fines, refusals of
government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA, the Department of
Justice (the “DOJ”), or other governmental entities.
An applicant seeking approval to market and distribute a biologic in the United States typically must undertake the following:
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completion of non-clinical laboratory tests and animal studies performed in accordance with the FDA’s good laboratory practice (the
“GLP”), regulations;
submission to the FDA of an application for an Investigational New Drug (“IND”), which must become effective before clinical trials may
begin and must be updated annually or when significant changes are made;
manufacture, labeling and distribution of an investigational drug in compliance with current good manufacturing practice (the “cGMP”);
approval by an independent institutional review board (the “IRB”), or ethics committee at each clinical site before each clinical trial may
be initiated;
performance of adequate and well-controlled human clinical trials in accordance with the FDA’s current Good Clinical Practices
requirements (the “cGCP”), to establish the safety, purity and potency of the proposed biological drug candidate for its intended purpose;
preparation of and submission to the FDA of a biologics license application (“BLA”), after completion of all pivotal clinical trials
requesting marketing approval for one or more proposed indications;
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satisfactory completion of an FDA Advisory Committee review, where appropriate or if applicable, as may be requested by the FDA to
assist with its review;
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the proposed product, or
components thereof, are produced to assess compliance with cGMP and data integrity requirements to assure that the facilities, methods
and controls are adequate to preserve the biologic’s identity, safety, quality, purity and potency;
satisfactory completion of FDA audits of selected clinical investigation sites to assure compliance with cGCP requirements and the
integrity of the clinical data;
payment of user fees under the Prescription Drug User Fee Act (the “PDUFA”), for the relevant year;
obtaining FDA review and approval of the BLA to permit commercial marketing of the licensed biologic for particular indications for use
in the United States; and
compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation
Strategy (the “REMS”), and the potential requirement to conduct post-approval studies.
The testing and approval process requires substantial time, effort and financial resources and we cannot be certain that any approvals for our drug
candidates will be granted on a timely basis, if at all.
From time to time, legislation is drafted, introduced and passed in the Congress of the United States that could significantly change the statutory
provisions governing the testing, approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, FDA
regulations and policies are often revised or interpreted by the agency in ways that may significantly affect our business and our drug candidates. It is
impossible to predict whether further legislative changes will be enacted or whether FDA regulations, guidance, policies or interpretations will be
changed or what the effect of such changes, if any, may be.
Preclinical and Clinical Development in the United States
Before a BLA applicant can begin testing the potential asset in human subjects, the applicant must first conduct pre-clinical studies. Pre-clinical
studies include laboratory evaluations of product chemistry, toxicity and formulation, as well as in vitro and animal studies to assess the potential safety
and activity of the biologic for initial testing in humans and to establish a rationale for therapeutic use. Pre-clinical studies are subject to federal
regulations and requirements, including GLP regulations. The results of an applicant’s pre-clinical studies are submitted to the FDA as part of an IND.
An IND is a request for authorization from the FDA to administer an investigational new drug product to humans. An IND is an exemption from
the FDCA that allows an unapproved drug to be shipped in interstate commerce for use in an investigational clinical trial. Such authorization must be
secured prior to interstate shipment. In support of a request for an IND, applicants must submit a range of information, including pre-clinical data,
manufacturing information and a detailed protocol for each clinical trial. Any subsequent protocol amendments must be submitted to the FDA as part of
the IND.
Human clinical trials may not begin until an IND is effective. The IND automatically becomes effective 30 days after receipt by the FDA, unless
the FDA raises safety concerns or questions about the proposed clinical trial within the 30-day time period. In such a case, the IND may be placed on
clinical hold and the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Submission of an
IND therefore may or may not result in FDA authorization to begin a clinical trial.
The FDA may also place a clinical hold or partial clinical hold on such trial following commencement of a clinical trial under an IND. A clinical
hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical
hold is a delay or suspension of only part of the clinical work requested under the IND. For example, a specific protocol or part of a protocol is not
allowed to proceed, while other protocols may do so. No more than 30 days after the imposition of a clinical hold or partial clinical hold, the FDA will
provide the sponsor with a written explanation of the basis for the hold. Following issuance of a clinical hold or partial clinical hold, an investigation
may only resume after the FDA has notified the sponsor that the investigation may proceed. The FDA will base that determination on information
provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.
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Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in
accordance with cGCP regulations, which include the requirement that all research subjects provide their informed consent for their participation in any
clinical study. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters to be used in
monitoring safety and the effectiveness criteria to be evaluated. A separate submission to the existing IND must be made for each successive clinical
trial conducted during product development and for any subsequent protocol amendments.
A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is conducted under an
IND, all FDA IND requirements must be met unless waived. When the foreign clinical study is not conducted under an IND, the sponsor must ensure
that the study complies with cGCP regulations in order to use the study as support for an IND or application for marketing approval, including review
and approval by an independent ethics committee and informed consent from subjects.
Furthermore, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinical trial and its
informed consent form before the clinical trial begins at that site, and must monitor the study until completed. Regulatory authorities, the IRB or the
sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects are being exposed to an unacceptable health
risk or that the trial is unlikely to meet its stated objectives.
Some trials also include oversight by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety
monitoring board (the “DSMB”). DSMBs provide authorization for whether or not a trial may move forward at designated check points based on access
to certain data from the trial and may halt the clinical trial if a DSMB determines that there is an unacceptable safety risk for subjects or based on other
grounds, such as no demonstration of efficacy. Other grounds for suspension or termination may be made based on evolving business objectives and/or
competitive climate. There are also requirements governing the reporting of ongoing clinical trials and clinical trial results to public registries.
Clinical Trials
For purposes of BLA approval, clinical trials are typically conducted in the following sequential phases that may overlap or be combined:
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Phase 1: The investigational product is initially introduced into a small number of healthy human subjects or patients with the target
disease or condition. These trials are designed to test the safety, dosage tolerance, absorption, metabolism and distribution of the
investigational product in humans and the side effects associated with increasing doses. These trials may also yield early evidence of
effectiveness. In the case of some products for severe or life-threatening diseases, especially when the product is suspected or known to be
unavoidably toxic, the initial human testing may be conducted in patients.
Phase 2: The investigational product is administered to a limited patient population with a specified disease or condition to evaluate the
preliminary efficacy, optimal dosages and dosing schedule and to identify possible adverse side effects and safety risks. Multiple Phase 2
clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.
Phase 3: The investigational product is administered to an expanded patient population generally at multiple geographically dispersed
clinical trial sites to further evaluate dosage, to provide statistically significant evidence of clinical efficacy and to further test for safety.
These clinical trials are intended to generate sufficient data to statistically evaluate the efficacy and safety of the product for approval, to
establish the overall risk/benefit ratio of the investigational product and to provide an adequate basis for product approval by the FDA.
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In some cases, the FDA may require, or companies may voluntarily pursue, additional clinical trials after a product is approved to gain more
information about the product, referred to as Phase 4 trials. Such post-approval trials, when applicable, are conducted following initial approval,
typically to develop additional data and information relating to the biological characteristics of the product and treatment of patients in the intended
therapeutic indication.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse
events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: suspected serious and unexpected adverse
reactions; findings from epidemiological studies, pooled analysis of multiple studies, animal or in vitro testing, or other clinical studies, whether or not
conducted under an IND, and whether or not conducted by the sponsor, that suggest a significant risk in humans exposed to the drug; and any clinically
important increase in the rate of a serious suspected adverse reaction over such rate listed in the protocol or investigator brochure, which is a
comprehensive document summarizing the body of information about an investigational product obtained during clinical and non-clinical trials.
Each of Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the
FDA or the sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research patients are being
exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it
represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected
serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with cGCP and the integrity of the clinical data
submitted.
During clinical development, the sponsor often refines the indication and endpoints on which the BLA will be based. For endpoints based on
patient-reported outcomes (the “PROs”), and observer-reported outcomes (the “OROs”), the process typically is an iterative one. The FDA has issued
guidance on the framework it uses to evaluate PRO instruments. Although the agency may offer advice on optimizing PRO and ORO instruments during
the clinical development process, the FDA usually reserves final judgment until it reviews the BLA.
Concurrent with clinical trials, companies often complete additional animal studies, and develop additional information about the chemistry and
physical characteristics of the drug and 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 drug candidate and, among other things, must
develop methods for testing the identity, strength, quality, purity and potency of the final drug. Additionally, appropriate packaging must be selected and
tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
BLA Submission and Review
Assuming successful completion of all required clinical testing in accordance with all applicable regulatory requirements, an applicant may submit
a BLA requesting licensing to market the biologic for one or more indications in the United States. The BLA must include the results of product
development, non-clinical studies and clinical trials; detailed information on the product’s chemistry, manufacture and controls; and proposed labeling.
Under the Prescription Drug User Fee Amendments, a BLA submission is subject to an application user fee, unless a waiver or exemption applies.
The FDA will initially review the BLA for completeness before accepting it for filing. Under the FDA’s procedures, the agency has 60 days from
its receipt of a BLA to determine whether the application will be accepted for filing and substantive review. If the agency determines that the application
does not meet this initial threshold standard, the FDA may refuse to file the application and request additional information, in which case the application
must be resubmitted with the requested information and review of the application delayed.
With certain exceptions, BLAs must include a pediatric assessment, generally based on clinical trial data, of the safety and effectiveness of the
biologic in relevant pediatric populations. Under certain circumstances, the FDA may waive or defer the requirement for a pediatric assessment, either at
the sponsor’s request or by the agency’s initiative.
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After the BLA is accepted for filing, the FDA reviews the BLA to determine, among other things, whether a product is safe, pure and potent and if
the facility in which it is manufactured, processed, packed or held meets standards designed to assure the product’s continued identity, strength, quality,
safety, purity and potency. The FDA may convene an advisory committee to provide clinical insight on application review questions. Before approving a
BLA, the FDA will typically inspect the facility or facilities where the product is manufactured. The FDA will not approve an application unless it
determines that the manufacturing processes and facilities comply with cGMP and are adequate to assure consistent production of the product within
required specifications. In addition, the FDA expects that all data be reliable and accurate, and requires sponsors to implement meaningful and effective
strategies to manage data integrity risks. Data integrity is an important component of the sponsor’s responsibility to ensure the safety, efficacy and
quality of its product or products.
The FDA will typically inspect one or more clinical sites to assure compliance with cGCP regulations before approving a BLA. If the FDA
determines that the application, manufacturing process or manufacturing facilities are not acceptable, it will outline the deficiencies in the submission
and often will request additional testing or information. Notwithstanding the submission of any requested additional information, the FDA ultimately
may decide that the application does not satisfy the regulatory criteria for approval.
FDA performance goals generally provide for action on a BLA within ten months of filing, which (as discussed above) typically occurs within 60
days of submission, but that deadline is extended in certain circumstances. Furthermore, the review process is often significantly extended by FDA
requests for additional information or clarification.
The FDA may refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee.
Typically, an advisory committee consists of a panel that includes clinicians and other experts who will review, evaluate and provide a recommendation
as to whether the application should be approved and, if so, under what conditions. The FDA is not bound by the recommendations of an advisory
committee, but it considers such recommendations carefully when making decisions and usually has followed such recommendations.
After the FDA evaluates a BLA and conducts inspections of manufacturing facilities where the investigational product and/or its components will
be produced, the FDA may issue an approval letter or a Complete Response Letter (the “CRL”). An approval letter authorizes commercial marketing of
the biologic with specific prescribing information for specific indications. A CRL will describe all of the deficiencies that the FDA has identified in the
BLA, except that where the FDA determines that the data supporting the application are inadequate to support approval, the FDA may issue the CRL
without first conducting required inspections, testing submitted product lots and/or reviewing proposed labeling. If and when the deficiencies have been
addressed to the FDA’s satisfaction in a resubmission of the BLA, the FDA will issue an approval letter. In issuing the CRL, the FDA may recommend
actions that the applicant might take to place the BLA in condition for approval, including requests for additional data, information or clarification. The
FDA may delay or refuse approval of a BLA if applicable regulatory criteria are not satisfied, and may require additional testing or information and/or
require post-marketing studies and clinical trials. Even with submission of this additional information, the FDA ultimately may decide that the
application does not satisfy the regulatory criteria for approval.
During the approval process, the FDA will determine whether a REMS is necessary to assure the safe use of the biologic. A REMS is a safety
strategy to manage a known or potential serious risk associated with a product and to enable patients to have continued access to such medicines by
managing their safe use, and could include medication guides, physician communication plans or elements to assure safe use, such as restricted
distribution methods, patient registries and other risk minimization tools. If the FDA concludes that a REMS is needed, the BLA sponsor must submit a
proposed REMS and the FDA will not approve the BLA without a REMS that the agency has determined is acceptable.
In addition, under the Pediatric Research Equity Act of 2003 (the “PREA”), as amended and reauthorized, certain applications or supplements
must contain data that are adequate to assess the safety and effectiveness 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 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.
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If the FDA approves a product, it may limit the approved indications for use for the product, or require that contraindications, warnings or
precautions be included in the product labeling. The FDA may also require that post-approval studies, including Phase 4 clinical trials, be conducted to
further assess the drug’s safety after approval. The FDA may prevent or limit further marketing of a product based on the results of post-marketing
studies or surveillance programs.
The FDA may also require testing and surveillance programs to monitor the product after commercialization. For biologics, such testing may
include official lot release, which requires the manufacturer to perform certain tests on each lot of the product before it is released for distribution. The
manufacturer then typically must submit samples of each lot of product to the FDA, together with a release protocol showing a summary of the history
of manufacture of the lot and the results of all of the manufacturer’s tests performed on the lot. The FDA may also perform certain confirmatory tests on
lots of some products itself, before releasing the lots for distribution by the manufacturer.
After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling
claims, are often subject to further testing requirements and FDA review and approval, depending on the nature of the post-approval change. The FDA
may withdraw the product approval if compliance with pre- and post-marketing requirements is not maintained or if problems occur after the product
reaches the marketplace.
Post-Approval Requirements
Any products manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including,
among other things, requirements relating to recordkeeping, periodic reporting, reporting of certain deviations and adverse experiences, product
sampling and distribution and advertising and promotion of the product. After approval, most changes to the approved product, such as adding new
indications or other labeling claims, are subject to FDA review and approval. There also are continuing user fee requirements, under which the FDA
assesses an annual program fee for each product identified in an approved BLA. Biologic manufacturers and their third-party contractors are required to
register their establishments with the FDA and certain state agencies. These establishments are subject to routine and periodic unannounced inspections
by the FDA and certain state agencies for compliance with cGMP and data integrity requirements, which impose certain procedural and documentation
requirements to assure quality of manufacturing and product. The FDA has increasingly observed cGMP violations involving data integrity during site
inspections and investigating compliance with data integrity requirements is a significant focus of its oversight. Requirements with respect to data
integrity include, among other things, controls to ensure data are complete and secure; activities documented at the time of performance; audit trail
functionality; authorized access and limitations; validated computer systems; and review of records for accuracy, completeness and compliance with
established standards.
Post-approval changes to the manufacturing process are strictly regulated, and, depending on the significance of the change, may require FDA
approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting
requirements upon us and any third-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money
and effort in the area of production and quality control to maintain compliance with cGMP, data integrity, pharmacovigilance (i.e., post-marketing safety
reporting obligations) and other aspects of regulatory compliance.
The FDA may withdraw a product approval if compliance with regulatory requirements and standards is not maintained or if problems occur after
the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or
frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to the approved labeling to add
new safety information; imposition of post-approval studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions
under a REMS. Other potential consequences include:
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restrictions on the marketing or manufacturing of a product, complete withdrawal of the product from the market or product recalls;
fines, Warning Letters, Untitled Letters or holds on post-approval clinical studies;
refusal of the FDA to approve pending applications or supplements to approved applications, or suspension or revocation of existing
product approvals;
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•
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product seizure or detention, or refusal of the FDA to permit the import or export of products that it believes present safety problems by
issuing an Import Alert;
permanent injunctions and consent decrees, including the imposition of civil or criminal penalties; or
voluntary product recall.
The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed on the market. A company can
make only those claims relating to safety and efficacy, purity and potency that are approved by the FDA and in accordance with the provisions of the
approved label. The FDA’s regulation includes, among other things, standards and regulations for direct-to-consumer advertising, communications
regarding unapproved uses, industry-sponsored scientific and educational activities and promotional activities involving the Internet and social media.
Promotional claims relating to a product’s safety or effectiveness are prohibited before the drug is approved. After approval, a product generally may not
be promoted for uses that are not approved by the FDA, as reflected in the product’s prescribing information. In the United States, healthcare
professionals are generally permitted to prescribe drugs for such uses not described in the drug’s labeling, known as off-label uses, because the FDA
does not regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’ communications, prohibiting the
promotion of off-label uses. It may be permissible, under very specific, narrow conditions, for a manufacturer to engage in non-promotional,
non-misleading communication regarding off-label information, such as distributing scientific or medical journal information.
If a company is found to have promoted off-label uses, it may become subject to adverse public relations and administrative and judicial
enforcement by the FDA, the DOJ or the Office of the Inspector General of the Department of Health and Human Services, as well as other federal and
state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines
and agreements that materially restrict the manner in which a company promotes or distributes products. The federal government has levied large civil
and criminal fines against companies for alleged improper promotion, and has also requested that companies enter into consent decrees and permanent
injunctions under which specified promotional conduct is changed or curtailed.
The distribution of prescription drugs and biologics are subject to the Drug Supply Chain Security Act (the “DSCSA”), which requires
manufacturers and other stakeholders to comply with product identification, tracing, verification, detection and response, notification and licensing
requirements. In addition, the Prescription Drug Marketing Act (the “PDMA”), and its implementing regulations, and state laws limit the distribution of
prescription pharmaceutical product samples, and the DSCSA imposes requirements to ensure accountability in distribution and to identify and remove
prescription drug and biological products that may be counterfeit, stolen, contaminated, or otherwise harmful from the market.
Patent Term Restoration and Marketing Exclusivity
After approval, owners of relevant drug or biological product patents may apply for up to a five-year patent extension to restore a portion of patent
term lost during product development and FDA review of a BLA if approval of the application is the first permitted commercial marketing or use of a
biologic containing the active ingredient under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman
Act. The allowable patent term extension is calculated as one-half of the product’s testing phase, which is the time between IND and BLA submission,
and all of the review phase, which is the time between BLA submission and approval, up to a maximum of five years. The time can be shortened if the
FDA determines that the applicant did not pursue approval with due diligence. The total patent term after the extension may not exceed more than 14
years from the date of FDA approval of the product. Only one patent claiming each approved product is eligible for restoration and the patent holder
must apply for restoration within 60 days of approval. The United States Patent and Trademark Office (the “USPTO”), in consultation with the FDA,
reviews and approves the application for patent term restoration.
For patents that might expire during the application phase, the patent owner may request an interim patent extension. An interim patent extension
increases the patent term by one year and may be renewed up to four times. For each interim patent extension granted, the post-approval patent
extension is reduced by one year. The director of the USPTO must determine that approval of the drug candidate covered by the patent for which a
patent extension is being sought is likely. Interim patent extensions are not available for a drug candidate for which a BLA has not been submitted.
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Expedited Development and Review Programs
The FDA is required to facilitate the development and expedite the review of pharmaceutical products that are intended for the treatment of a
serious or life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical need for the
condition. Under the fast track program, the sponsor of a new drug candidate may request the FDA to designate the product for a specific indication as a
fast track product concurrent with or after the filing of the IND for the drug candidate. The FDA must determine if the drug candidate qualifies for fast
track designation within 60 days after receipt of the sponsor’s request.
In addition to other benefits, such as the ability to have more frequent interactions with the FDA, the agency may initiate review of sections of a
fast track product’s BLA before the application is complete. This rolling review is available if the applicant provides and the FDA approves a schedule
for the submission of the remaining information and the applicant pays applicable user fees. However, the FDA’s PDUFA review period for a fast track
application does not begin until the last section of the BLA is submitted. In addition, the fast track designation may be withdrawn by the FDA if the
agency believes that the designation is no longer supported by data emerging in the clinical trial process.
Healthcare Regulation
Pharmaceutical Coverage and Reimbursement
Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. In the
United States, sales of any products for which we may receive regulatory approval for commercial sale will depend in part on the availability of
coverage and reimbursement from third-party payors. Third-party payors include government authorities, managed care providers, private health
insurers and other organizations. Third-party payors establish the coverage and reimbursement policies for pharmaceutical products, and the
marketability of any products for which we may receive regulatory approval for commercial sale depends on those payors’ coverage policies and
reimbursement rates. Third-party payors may limit coverage to specific products on an approved list, or formulary, which might not include one or more
of our drug candidates, if approved. Third-party payors, together with regulators and others, are increasingly challenging the prices charged for
pharmaceutical products and health services, in addition to their cost-effectiveness, safety and efficacy.
In addition, no uniform policy for coverage and reimbursement exists in the United States. Third-party payors often rely upon Medicare coverage
policy and payment limitations in setting their own coverage and reimbursement policies, but also have their own methods and approval process apart
from Medicare determinations. Therefore, coverage and reimbursement rates can vary significantly from payor to payor.
Moreover, obtaining coverage and adequate reimbursement is a time-consuming and costly process. We may be required to provide scientific and
clinical support for the use of any product to each third-party payor separately with no assurance that approval will be obtained, and we may need to
conduct expensive pharmacoeconomic studies in order to demonstrate the cost-effectiveness of our products. We cannot be certain that our drug
candidates will be considered cost-effective by third-party payors. This process could delay the market acceptance of any drug candidates for which we
may receive approval and could have a negative effect on our future revenues and operating results.
Other U.S. Healthcare Laws and Compliance Requirements
In the United States, our business may be subject to healthcare fraud and abuse regulation and enforcement by both the federal government and
the states in which we conduct our business, particularly once third-party reimbursement becomes available for one or more of our products. The
healthcare fraud and abuse laws and regulations that may affect our ability to operate include, but are not limited to:
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The federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying
any remuneration (including any kickback, bribe or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in
return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for
which payment may be made, in whole or in part, under the Medicare and Medicaid programs, or other federal healthcare programs;
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The federal civil and criminal false claims laws and civil monetary penalty laws, including the civil False Claims Act, or FCA, which
prohibits, among other things, knowingly presenting, or causing to be presented, claims for payment of government funds that are false or
fraudulent, or knowingly making, or using or causing to be made or used, a false record or statement material to a false or fraudulent claim
to avoid, decrease, or conceal an obligation to pay money to the federal government;
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The federal Health Insurance Portability and Accountability Act of 1996 (the “HIPAA”), which, among other things, prohibits executing a
scheme to defraud any healthcare benefit program, including private third-party payors, and prohibits (i) knowingly and willfully
falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation and
(ii) making or using any false writing or document knowing the same to contain any materially false, fictitious or fraudulent statement or
entry in connection with the delivery of or payment for healthcare benefits, items or services;
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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (the “HITECH”), and their
respective implementing regulations, which impose requirements relating to the privacy, security and transmission of individually
identifiable health information held by covered entities, including health plans, healthcare clearinghouses and certain healthcare providers,
and their business associates, individuals or entities that perform certain services on behalf of a covered entity that involve the use 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 federal courts to enforce HIPAA and seek attorneys’ fees and costs associated with pursuing federal
civil actions;
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The federal Physician Payments Sunshine Act, being implemented as the Open Payments Program, which requires manufacturers of drugs,
devices, biologics and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance
Program (with certain exceptions) to report annually to the Centers for Medicare and Medicaid Services (the “CMS”), information related
to direct or indirect payments and other transfers of value to physicians and teaching hospitals, as well as ownership and investment
interests held in a company by physicians and their immediate family members. Beginning in 2022, applicable manufacturers will also be
required to report information regarding payments and transfers of value provided to physician assistants, nurse practitioners, clinical nurse
specialists, certified nurse anesthetists and certified nurse-midwives; and
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U.S. state and local laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing
arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private
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; state laws that restrict the ability of manufacturers to offer co-pay support to patients for certain prescription drugs;
state laws that require drug manufacturers to report information related to clinical trials, or information related to payments and other
transfers of value to physicians and other healthcare providers or marketing expenditures; state laws that require drug manufacturers to
report information on the pricing of certain drugs; state laws and local ordinances that require identification or licensing of 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 often are not preempted by HIPAA, thus complicating compliance efforts.
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We will be required to spend substantial time and money to ensure that our business arrangements with third parties comply with applicable
healthcare laws and regulations. Even then, governmental authorities may 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 governmental authorities find that our
operations violate 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, individual imprisonment, exclusion from government funded healthcare programs, such as
Medicare and Medicaid, and 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 we may be required to curtail or restructure our operations. Moreover, we expect that there
will continue to be federal and state laws and regulations, proposed and implemented, that could impact our operations and business. In addition, the
approval and commercialization of any drug candidate we develop outside the United States will also likely subject us to foreign equivalents of the
healthcare laws mentioned above, among other foreign laws. The extent to which future legislation or regulations, if any, relating to health care fraud
and abuse laws or enforcement, may be enacted or what effect such legislation or regulation would have on our business remains uncertain.
Healthcare Reform
In the United States there have been, and continue to be, several legislative and regulatory changes and proposed reforms of the healthcare system
to contain costs, improve quality and expand access to care. In the United States, there have been and continue to be a number of healthcare-related
legislative initiatives that have significantly affected the pharmaceutical industry. For example, the Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the “ACA”), was passed in March 2010, substantially changing the
way healthcare is financed by both governmental and private insurers and significantly impacting the U.S. pharmaceutical industry. Among other things,
the ACA subjects biologics to potential competition by lower-cost biosimilars; addresses 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; increases the minimum
Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extends the rebate program to individuals enrolled in Medicaid
managed care organizations; establishes annual fees and taxes on manufacturers of certain branded prescription drugs; and creates a new Medicare Part
D coverage gap discount program in which, as a condition of coverage of its products under Medicare Part D, manufacturers must now agree to offer
70% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period.
Some of the provisions of the ACA have yet to be fully implemented, while certain provisions have been subject to judicial and Congressional
challenges. In addition, there have been efforts by the Trump Administration to repeal or replace certain aspects of the ACA and to alter the
implementation of the ACA and related laws. For example, Congress has considered legislation that would repeal or repeal and replace all or part of the
ACA. While Congress has not passed comprehensive repeal legislation, bills affecting the implementation of certain taxes under the ACA have been
signed into law. The Tax Cuts and Jobs Act of 2017 (the “Tax Act”), includes a provision repealing, effective January 1, 2019, the tax-based shared
responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year commonly
referred to as the “individual mandate.” On January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that
delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance
plans, the annual fee imposed on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers
based on market share and the medical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of 2018 (the “BBA”), among other
things, amends the ACA, effective January 1, 2019, to reduce the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.”
In addition, in July 2018, the CMS issued a final rule permitting further collections and payments to and from certain ACA qualified health plans and
health insurance issuers under the ACA risk adjustment program in response to the outcome of federal district court litigation regarding the method
CMS uses to determine this risk adjustment. Additional legislative changes or regulatory changes related to the ACA remain possible. In December
2018, a United States District Court Judge for the Northern District of Texas ruled that the entire ACA is unconstitutional because the tax penalty
associated with the “individual mandate” was repealed by Congress as part of the Tax Act. This ruling is under appeal and stayed pending appeal. While
the United States District Court Judge for the Northern District of Texas, as well as the Trump Administration and the CMS, have stated that the ruling
will have no effect while this appeal is pending, it is unclear how this decision, subsequent appeals and other efforts to invalidate the ACA, regulations
promulgated under the ACA or portions thereof, will impact the ACA and its implementation.
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Additionally, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices.
Specifically, there have been several recent U.S. 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. For example, the Trump Administration
released a “Blueprint” to lower drug prices and reduce out-of-pocket costs of drugs that contains 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. On January 31, 2019, Office of the Inspector General of the Department of Health
and Human Services proposed modifications to the federal Anti-Kickback Statute discount safe harbor for the purpose of reducing the cost of drug
products to consumers which, among other things, if finalized, will remove safe harbor protection from rebates paid by manufacturers to Medicare Part
D plans, Medicaid managed care organizations and pharmacy benefit managers working with these organizations. Although a number of these, and other
proposed measures may require additional authorization to become effective, Congress and the Trump Administration have each indicated that they will
continue to seek new legislative and/or administrative measures to control drug costs. Individual states in the United States have also increasingly passed
legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement
limitations, 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 addition, regional healthcare authorities and individual hospitals are increasingly
using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare
programs.
Moreover, on May 30, 2018, the Right to Try Act was signed into law. The law, among other things, provides a federal framework for certain
patients to access certain investigational new drug products that have completed a Phase 1 clinical trial and that are undergoing investigation for FDA
approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission
under the FDA expanded access program. There is no obligation for a pharmaceutical manufacturer to make its drug products available to eligible
patients as a result of the Right to Try Act.
Manufacturing and Supply
Our manufacturing strategy for our drug candidates consists of two progressive steps, involving (i) using contract development and manufacturing
organizations (CDMOs) and (ii) establishing our own capabilities and infrastructure, including a manufacturing facility. We believe that development of
our own manufacturing facility will provide us with enhanced control of material supply for both clinical trials and the commercial market, enable the
more rapid implementation of process changes and help us achieve better long-term margins.
We currently outsource the manufacturing of clinical trial material for our internally developed, IND enabling projects to leading CDMOs in
China such as WuXi Biologics, and the manufacturing of clinical trial material for clinical stage projects which were in-licensed from our global
partners to reputable global CDMOs, which have established track records for both clinical trial material supply and commercial material supply. We
have assembled a seasoned internal team with deep experience in this area to drive and monitor this process. For contingency planning purposes, we
have also established relationships with other CDMOs. We expect to continue our outsourcing relationships with contract manufacturers to meet the
ongoing needs for the development of our drug candidates. We have framework agreements with these external service providers, under which they
provide services to us on a project-by-project basis. We also monitor the manufacturing activities of clinical trial material at CDMO to ensure the
compliance with local and international cGMP and applicable regulations. Currently, our contract manufacturers obtain raw materials and supplies for
the manufacturing activities from multiple suppliers who we believe have sufficient capacity to meet our demands. We typically order materials and
services on a purchase order basis. We also enter into long-term capacity or minimum supply arrangements with them.
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We believe it is strategically important and advantageous to leverage the GMP manufacturing process managed by I-Mab Biopharma (Hangzhou)
Limited (“I-Mab Hangzhou”), in order to ensure quality, secure production slots and maximize cost-effectiveness for clinical trial materials and
commercial supplies. We have taken concrete steps to execute our strategic plan. These steps include detailed operational planning for the facility,
actions taken to secure an appropriate site, and negotiations with external financing providers. The construction of the Hangzhou Facility commenced in
April 2021. The Hangzhou Facility targets to have a pilot capacity of two production lines (one line configured with 2 x 2,000L and the other line with 1
x 2,000L) around the middle of 2022 and commercially progressive capacity up to 8 x 4,000L to begin operation by the end of 2023 or early 2024. The
project will be financed by a combination of internal and external sources. In September 2020, a group of domestic investors in China invested a total of
US$120 million (in RMB equivalent) in cash. Upon closing, we, through our wholly-owned subsidiary, and parties acting in concert, remain the
majority shareholder of I-Mab Hangzhou, the entity holding the Hangzhou Facility. I-Mab Hangzhou is an affiliate of our company and is positioned to
provide manufacturing capabilities for us, as well as the continued development of selected biologics assets that are unessential to our immuno-oncology
focus, i.e., olamkicept, plonmarlimab (excluding cytokine release syndrome indications) and a few preclinical CMC-stage programs. We believe that
this strategic alignment is necessary to maximize the pipeline value and balance the development risk for us.
R&D Governance
We have established robust governance regime for all stages of our research and development activities, through our internal discovery, CMC,
pre-clinical and clinical development programs, and through product acquisition and in-licensing strategies. The research and development governance
regime has enabled our senior management to continuously oversee and monitor our company’s research and development activities for complying with
applicable laws, regulations, rules, guidelines and internal policies.
We have established various governance and decision-making committees, composed of senior representatives from the respective functional units
to review, discuss and determine, for instance, whether a drug candidate molecule is qualified to move forward into the next stage or not, what data
package is considered appropriate and compliant to be submitted to regulatory agencies and how clinical safety of our investigational drugs will be
monitored and reported. These committees make decisions over the critical “checkpoints” of our research and development activities and include our
(i) Science Committee, (ii) IND Scientific Advisory Committee, (iii) R&D Project/Program/Portfolio Governance, (iv) Medical Safety Council,
(v) Safety Management Team, and (vi) Quality Committees.
Science Committee for Early Stage Research of Drug Candidates
Our Science Committee is composed of selected functional heads and members of the leadership, including Dr. Jerry Wang, Dr. Zheru Zhang,
Dr. Jane Meng, Isaac Meng, Dr. Weimin Tang, Dr. Lan Shi and Dr. Xi Chen, chaired by Dr. Jerry Wang. The Science Committee will collaborate with
the management team to enhance our company’s research practices and assist management in evaluating scientific aspects of potential in-licensing
opportunities, collaborations and new technologies that may bolster our pipeline and research and development capabilities. The Science Committee’s
responsibilities include:
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approving the target review package submitted by our discovery group;
providing governance on the quality and integrity of drug candidates, before entering into CMC process development;
examining the experimental data and scientific evidence supporting the drug candidate;
reviewing and making recommendations on our company’s resource allocation in further development; and
setting the direction for scientific and technical review of potential in-licensing opportunities.
Furthermore, our Corporate Compliance Function led by Mr. Thomas Song has taken a number of steps to review the integrity and reliability of
the experimental data submitted with the selected drug candidate. The design, operation and monitoring of this data integrity program is integral to our
quality control and assurance system, and is independent with respect to our research and development unit and Science Committee, to ensure the
compliance with the principles of scientific data integrity, including controls over changes to, and deletions of source of data.
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IND Scientific Advisory Committee for Drug Candidates Entering into Clinical Development Stage
Our IND Scientific Advisory Committee is composed of Dr. Andrew Zhu, Dr. Zheru Zhang, Dr. Jane Meng, Dr. Claire Xu and Mary Sun. The
IND Scientific Advisory Committee is accountable for our IND application strategy and the data quality of our IND registration dossier before
submission to the FDA, the NMPA and other comparable authorities. Our IND Scientific Advisory Committee advises the project team on policy
matters and provides overall direction of new drug studies, and to that extent serves as a standing modality committee.
R&D Project/Program/Portfolio Governance (“IP3 Governance”)
Our IP3 Governance is composed of Dr. Andrew Zhu, Dr. Zheru Zhang, Dr. Weimin Tang, Isaac Meng, Dr. Jane Meng and Dr. Lan Shi, with
Dr. Andrew Zhu serving as the chair. Our IP3 Governance is a decision-making body that assesses and approves research and development portfolio
strategy and execution proposals from a multi-discipline perspective, with an integrated approach incorporating scientific, clinical and commercial
considerations. Our IP3 Governance aims to ensure that the project, program and/or portfolio-related decisions are logical, robust and repeatable and
that our investments in research and development activities is aligned with our vision and strategy. The IP3 Governance responsibilities include:
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reviewing and determining the in-licensing and out-licensing strategic plan;
performing reviews on critical research and development stage gates, including clinical asset selection, GLP pharmacology and toxicology
studies, FIH studies, clinical development and regulatory submission; and
reviewing product development strategy and monitoring project timeline and costs.
Medical Safety Council (“MSC”)
Our MSC is composed of selected research and development functional heads and Subject Matter Experts, including Isaac Meng, Dr. Andrew
Zhu, Michelle Yang, Dr. Jerry Wang, Dr. Jane Meng, Dr. Claire Xu and Richard Cheng Li, chaired by Isaac Meng, Head of Medical Office. Our MSC is
the highest medical safety governance body engaged in setting standards for protecting the medical safety of patients and users of our products, and
providing strategic direction in product vigilance and patient or user safety. The MSC’s responsibilities include:
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establishing standards and policies, and identifying best practices related to medical safety;
providing oversight of all medical safety relevant activities, and overseeing the implementation of our company’s medical safety standard,
as well as the outcomes of the periodic audits;
addressing safety information that could result in a significant change in the benefit-risk profile of our products; and
reviewing and approving FIH studies and any other issues with respect to the safety of human exposure during early development stage.
Safety Management Teams (“SMT”) for Product-Related Safety System
Our SMT is composed of representatives from each research and development function, including Isaac Meng, program lead, clinical physician
(on program level), representatives of regulatory affairs (on program level), representatives of project management (on project level), external business
partner (if applicable) and representatives of medical affairs (if applicable), chaired by Isaac Meng. The SMT is a product-based, cross-functional
collaborative team responsible for the review and evaluation of medical safety data arising from any source throughout the product lifecycle. Our SMT
performs assessments to identify changes in safety profiles or potential safety signals. Based on these safety evaluations, the SMT will determine the
appropriate safety-related actions to be taken with respect to the product based on its benefit-risk profile for subjects in clinical trials and for patients
treated with the marketed product.
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Our SMT works closely with and escalates safety issues, as appropriate, to the MSC to fulfill our medical safety obligations. Our SMT is
responsible for reviewing available safety information from multiple sources on a regular basis and make final decisions on safety in a timely manner
with appropriate cross-functional input.
Quality Committees
We have formed two Quality Committees, namely, I-Mab Biopharma Quality Management Review and R&D Quality Management Committee.
I-Mab Biopharma Quality Management Review (“I-Mab QMR”) is composed of Dr. Andrew Zhu, Dr. Zheru Zhang, Isaac Meng, Jack Qin and
Thomas Song, co-chaired by R&D Quality Assurance officer Isaac Meng and CMC Quality Assurance officer Jack Qin. I-Mab QMR is responsible for
supervising our overall quality management system (“QMS”), including R&D, production and manufacturing, and our other functional departments, to
set up a comprehensively risk control system and ensure that our operations are in accordance with the requirements of laws and regulations, industry
Good X Practices (GXP) and our internal regulations and systems. The QMS covers all business activities such as the selection of outsourcing service
vendors, daily management and audit, research, development, and production, and we also have signed quality agreements with CDMO, CMO, CRO,
and other vendors.
Under QMR, we have established an R&D Quality Management Committee composed of representatives of various R&D functional departments,
including Dr. Andrew Zhu, Isaac Meng, Michelle Yang, Dr. Claire Xu, Dr. Jane Meng and heads of therapeutic areas (in China and the United States),
chaired by Dr. Andrew Zhu. Our R&D Quality Management Committee is responsible for supervising the operation of the R&D QMS and making final
decisions on important quality issues such as patient safety, data integrity and regulatory compliance in the R&D process.
An audit team consisting of experts who are responsible for R&D, CMC, and quality assurance within I-Mab will conduct an annual audit of all
sites of our key vendors. Other vendors will be audited as required at least once every three years.
Code of Conduct
We have formulated a Code of Conduct that covers business ethics, responsible research and development activities, public relations, intellectual
property and data protection, workplace, assets, corporate governance, concerns reporting and other behaviors, and serves as a guide for all employees
and third parties to take compliance actions in business activities. We have arranged compliance training courses for newly hired employee to help them
understand the business code of conduct that falls in line with industry and our standards. In addition, we have adopted an employee handbook which
describes the compliance management system implemented at I-Mab to ensure compliance with applicable legal and regulatory requirements.
Quality Control and Assurance
In addition to the research and development governance regime described above, we have established an independent quality control and
assurance system and devote significant attention to quality control for the designing, manufacturing and testing of our drug candidates. Our Assurance
Board is composed of Dr. Andrew Zhu, Dr. Zheru Zhang and Thomas Song. Our senior management is firmly committed to delivering our quality
performance, actively involved in allocating sufficient resources to quality management system and setting quality governance mechanism.
For pre-clinical and clinical trials, the overall quality management outlines the implementation of our business policies and procedures in order to
consistently comply with the regulatory requirements, including Good Laboratory Practices, or GLP; Good Clinical Practices, or GCP; Good
Pharmacovigilance Practice, or GVP and other applicable regulatory requirements in the performance of the trials. This includes:
•
•
•
predefined policies and procedures to manage pre-clinical and clinical studies;
dedicated resources and personnel with well delineated roles and responsibilities;
quality risk management across the product lifecycle;
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•
•
•
•
continuous quality management system improvement;
non-conformance management via quality issue management process;
development and execution of quality audit program; and
regulatory inspection readiness.
For CMC, we have established a quality management system to oversee the process development and API and drug production at the CDMOs.
This system takes a holistic approach bringing senior management, quality assurance team and company policies together to create an efficient and agile
quality culture. Our CMC quality commitment includes, but not limited to:
•
•
•
•
•
ensure that the product manufacturing, releasing, packaging, storage, and shipment meets all specifications and the requirements of the
FDA and/or NMPA’s quality system regulations, cGMP or other applicable laws and regulations;
review of process deviations and changes, root cause analysis, impact assessment, corrective and preventative actions, and validation;
ensure the consistency of key quality practices with our CDMOs;
proactive quality system review based on audits, process data analysis, equipment condition, and periodic review of internal and external
sources of data; and
assessment of regulatory guidance and ensure readiness for regulatory inspections.
C. Organizational Structure
The following chart illustrates our company’s organizational structure, including our principal subsidiaries, as of the date of this annual report:
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D. Property, Plant and Equipment
Our headquarter is located in Shanghai, China, where we lease and occupy approximately 8,883 square meters as office space and 1,270 square
meters as laboratories. We currently lease approximately 839 square meters of office space in Beijing, approximately 54 square meters of office space in
Tianjin, approximately 187 square meters of office space in Hong Kong, approximately 2,468 square meters of warehouse space and office space in
Lishui, approximately 492 square meters of office space in Guangzhou, approximately 441 square meters of office space in Gaithersburg and
approximately 1,081 square meters of office space and laboratories in San Diego. The terms of these leases range from one year to five years.
ITEM 4A.
UNRESOLVED STAFF COMMENTS
None.
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated
financial statements and the related notes included elsewhere in this annual report on Form 20-F.
This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results
may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3.
Key Information—D. Risk Factors” or in other parts of this annual report on Form 20-F.
A. Operating Results
Overview
We are a clinical stage biopharmaceutical company committed to the discovery, development and commercialization of novel or highly
differentiated biologics to treat diseases with significant unmet medical needs, particularly cancers and autoimmune disorders. To date, we have
developed an innovative pipeline of more than 15 clinical and preclinical stage assets through our internal research and development efforts and
in-licensing arrangements with global pharmaceutical and biotech companies.
Our research and development capabilities encompass discovery, translational medicine, biologics CMC development, pre-clinical development
and clinical development with footprints in Shanghai, Beijing and the United States. We are now at a critical juncture to transition from a clinical stage
biotech company into an end-to-end global specialty biopharmaceutical company in the next few years.
Since the commencement of our operation in 2014, we have devoted most of our efforts and financial resources to organize and staff our
operations, business planning, raise capital, establish our intellectual property portfolio and conduct pre-clinical and clinical trials of our drug
candidates.
We have not generated any revenue from the sales of our commercial products, and as a result, we had incurred net losses since the
commencement to the end of 2019 of our operations. In 2019, our net losses were RMB1,452.0 million. In 2020, we achieved corporate profitability
with net income of RMB470.9 million, which was primarily attributable to the revenues recognized in connection with the strategic collaboration with
AbbVie of RMB1,542.7 million. In 2021, our net losses were RMB2,331.5 million (US$365.9 million). We do not expect to generate product revenue
unless and until we obtain marketing approval for and commercialize a drug candidate, and we cannot assure you that we will ever generate significant
revenue or profits.
Key Factors Affecting Our Results of Operations
Our results of operations, financial condition, and the year-to-year comparability of our financial results have been, and are expected to continue
to be, principally affected by the below factors:
Cost and Expenses Structure
Our results of operations are significantly affected by our cost structure, which primarily consists of research and development expenses and
administrative expenses.
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Research and development activities are central to our business model. We believe our ability to successfully develop drug candidates will be the
primary factor affecting our long-term competitiveness, as well as our future growth and development. Developing high-quality drug candidates requires
a significant investment of resources over a prolonged period of time, and a core part of our strategy is to continue making sustained investments in this
area. Since our inception, we have focused our resources on our research and development activities, including conducting pre-clinical studies and
clinical trials, and activities related to regulatory filings for our drug candidates. Our research and development expenses primarily include the
following:
•
•
•
costs related to development of our pipeline assets under all stages including discovery, pre-clinical testing or clinical trials;
patent license fees and other fees under the licensing, collaboration and development agreements with respect to our in-licensed drug
candidates; and
employee salaries and related benefit costs, including share-based compensation expenses, for research and development personnel and
key management.
At this time, we are unable to predict when, if ever, we will be able to achieve profitability. Even if we achieve profitability in the future, we may
not be able to sustain profitability in subsequent periods thereafter. This is due to the numerous risks and uncertainties associated with developing such
drug candidates, including the uncertainty of:
•
•
•
•
•
•
•
•
successful enrollment in and completion of clinical trials;
establishing an appropriate safety profile;
establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers;
receipt of marketing approvals from applicable regulatory authorities;
commercializing the drug candidates, if and when approved, whether alone or in collaboration with others;
obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our drug candidates;
continued acceptable safety profiles of the products following approval; and
retention of key research and development personnel.
Any change in the outcome of any of these variables with respect to the development of any of our drug candidates would significantly change the
costs, timing and viability associated with the development of that drug candidate. We expect research and development costs to continue to increase for
the foreseeable future as we expand our operations and our development programs progress, including as we continue to support and advance the
clinical trials of our drug candidates.
Our administrative expenses consist primarily of employee salaries and related benefit costs. Other administrative expenses include professional
fees for consulting and auditing as well as other direct and allocated expenses for rental expenses for our facilities, travel costs and other supplies used in
administrative activities. We expect our administrative expenses to increase in the future to support our pipeline assets and research and development
efforts, and the commercialization of our drug candidates once approval is obtained. We also anticipate that our administrative expenses will increase as
we operate as a public company.
Revenue from Out-Licensing Agreements
We continue to seek out-licensing opportunities for our drug assets through our strengthened and expanded network of global partnerships and
alliances. In 2019, 2020 and 2021, our revenue consisted primarily of payments from granting licenses to use and otherwise exploit certain of our
intellectual properties linked to our drug assets. See “Item 4. Information on the Company—B. Business Overview—Licensing and Collaboration
Arrangements” for more information on the existing out-licensing arrangements. In addition, after validating clinical safety and preliminary efficacy of a
drug candidate in our Global Portfolio in clinical trials in the United States, we may elect to out-license the global rights (excluding Greater China) of
such drug candidate, while retaining the Greater China rights for further development and commercialization. But we may also choose to retain these
rights for the United States or other countries or regions as we may deem fit. Before the commercialization of one or more of our drug candidates, we
expect that the majority of our revenue will continue to be generated from out-licensing our intellectual properties.
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Funding for Our Operations
During the periods presented, we funded our operations primarily from financing through the issuance and sale of preferred shares and convertible
promissory notes in private placement transactions. Going forward, in the event of successful commercialization of one or more of our drug candidates,
we expect to fund our operations in part with revenue generated from sales of our commercialized drug products. However, with the continuing
expansion of our business and our product pipeline, we may require further funding through public or private offerings, debt financing, collaboration,
and licensing arrangements or other sources. Any fluctuation in our ability to fund our operations will impact our cash flow plan and our results of
operations.
Our Ability to Commercialize Our Drug Candidates
Our business and results of operations depend on our ability to commercialize our drug candidates, once and if those candidates are approved for
marketing by the respective health authority. Currently, our pipeline consists of more than fifteen drug candidates ranging in development status from
pre-clinical to late-stage clinical programs. Although we currently do not have any product approved for commercial sale and have not generated any
revenue from product sales, we expect to generate revenue from sales of drug candidates after we complete the clinical development, obtain regulatory
approval, and successfully commercialize such drug candidates. Our late-stage investigational drugs at or potentially near registrational trials are
felzartamab, eftansomatropin alfa, and lemzoparlimab. We expect to submit an NDA for felzartamab as a 3L therapy for MM to the NMPA in 2022. See
“Item 4. Information on the Company—B. Business Overview—Our Drug Pipeline” for more information on the development status of our various drug
candidates.
The Effect of Our Acquisition of I-Mab Tianjin
We acquired a controlling interest in I-Mab Tianjin on July 15, 2017 and the remaining interest in I-Mab Tianjin in May 2018. Since our
acquisition of the controlling interest in I-Mab Tianjin on July 15, 2017, I-Mab Tianjin has been consolidated into our results of operations. Shortly after
we acquired the controlling interest in I-Mab Tianjin, we integrated the operations of I-Mab Tianjin into our operations. I-Mab Tianjin did not generate
any external revenue from July 15, 2017 to December 31, 2021. In connection with our acquisition of I-Mab Tianjin, we identified RMB148.8 million of
intangible assets and RMB162.6 million of goodwill of I-Mab Tianjin. Goodwill is not amortized, but impairment of goodwill assessment is performed
on at least an annual basis on December 31 or whenever events or changes in circumstances indicate that the carrying value of the assets may not be
recoverable. No impairment was identified as of December 31, 2019, 2020 and 2021. Impairment charges could substantially affect our results of
operations in the periods of such charges. In addition, impairment charges would negatively impact our financial ratios and could limit our ability to
obtain financing in the future. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Industry, Business and Operations—Change in
business prospects of acquisitions may result in impairment to our goodwill, which could negatively affect our reported results of operations.”
Impact of the COVID-19 Pandemic
As of the date of this annual report, the impact of the ongoing global coronavirus-19 (COVID-19) pandemic to our business has been limited. To
date, although COVID-19 has caused some delays in the initiation of the ongoing trials of certain clinical-stage drug candidates in early 2020, the
COVID-19 pandemic has not had a material impact on our ongoing clinical activities, in particular, clinical activities related to our late-stage drug
candidates, such as felzartamab, lemzoparlimab and eftansomatropin alfa. See “Item 4. Information on the Company—B. Business Overview—Our
Drug Pipeline” for the clinical development plans of our drug candidates. As of the date of this annual report, the outbreak of COVID-19 has not caused
any early termination of our clinical trials or necessitated removal of any enrolled patients. We have employed various measures to mitigate impacts of
the COVID-19 pandemic on our currently ongoing trials in Greater China and the United States. We worked closely with our CROs to monitor the
situation and manage the process of our clinical trials. We maintained contact with our patients to ensure that they remain on the trials and that any
information they need will be readily available. In addition, we believe the COVID-19 pandemic has not significantly impacted our ability to carry out
our obligations under existing contracts or disrupted any supply chains that we rely upon.
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To prevent any spread of COVID-19 in our offices and research facilities, we have adopted a thorough disease prevention scheme to protect our
employees from contracting COVID-19. The measures we have implemented include, among others, regularly sterilizing and ventilating our offices,
checking the body temperature of our employees, keeping track of the travel history and health conditions of employees and their immediate family
members, providing face masks to employees attending the office, minimizing in-person meetings to the extent possible and encouraging employees to
wear masks when needed. In 2021 and up to the date of this annual report, the COVID-19 pandemic had not resulted in a major disruption to our
operations.
Taking into account our past and prospective cash burn rate, including, but not limited to, future clinical development and administrative expenses,
lease payment, capital expenditure and current financial position, our ability to control the speed and breadth of our clinical development and business
development activities and our expansion in headcount, as well as our current internal resources, we estimate that our financial resources can support our
research and development activities and business operations for at least the next 12 months.
Although we believe we have implemented strategies to potentially minimize the impact of the COVID-19 pandemic to our business, we expect
that we may experience delays with respect to the initiation and patient enrollment of certain additional trials. The extent to which the COVID-19
pandemic impacts the timing of these additional trials will depend on future developments, which are highly uncertain and cannot be predicted with
confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, any restrictions on the ability of hospitals and trial sites
to conduct trials that are not designed to address the COVID-19 pandemic and the perceived effectiveness of actions taken in China and the United
States to contain and treat the disease. We will continue to evaluate the impact of the COVID-19 pandemic to our business.
In addition, there are still uncertainties with regard to the continued development of COVID-19 and its implications, and we will continue to
assess the situation and seek to put in place relevant mitigating measures where necessary. The above analyses are made by our management based on
currently available information concerning COVID-19. We cannot guarantee that the outbreak of COVID- 19 will not further escalate or have a material
adverse effect on our business operations. Please also see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Industry, Business and
Operations—Our operating results, our China operations and our worldwide operations could be adversely affected by the outbreak of and response to
the coronavirus or other health crises.” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Industry, Business and Operations—
Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.”
Key Components of Results of Operations
Revenues
For the year ended December 31, 2021, we generated revenue from (i) licensing and collaboration, primarily through granting licenses to use and
otherwise exploiting certain of our intellectual properties in connection with our drug assets, and (ii) supply of investigational products to AbbVie. For
the years ended December 31, 2019 and 2020, we generated substantially all of our revenues from granting licenses to use and otherwise exploit certain
of our intellectual properties in connection with our drug assets.
Research and Development Expenses
Research and development expenses primarily consist of: (i) payroll and other related expenses of research and development personnel, (ii) fees
associated with the exclusive development rights of our in-licensed drug candidates, (iii) fees for services provided by contract research organizations,
investigators and clinical trial sites that conduct our clinical studies, and (iv) expenses relating to the development of our drug candidates, including raw
materials and supplies, product testing, depreciation, and facility related expenses.
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Our current research and development activities primarily relate to the clinical development of the following investigational drugs:
•
•
•
•
•
•
•
•
•
•
Lemzoparlimab, a novel CD47 antibody for immuno-oncology, if approved;
Uliledlimab, a highly differentiated CD73 antibody for solid tumors, if approved;
Felzartamab, a differentiated CD38 antibody for multiple myeloma and potentially autoimmune diseases, if approved;
Eftansomatropin alfa, a differentiated long-acting growth hormone for pediatric growth hormone deficiency, if approved;
Efineptakin alfa, the world’s first and only long-acting recombinant human IL-7 for cancer treatment-related lymphopenia and cancer
immunotherapy, if approved;
Enoblituzumab, a Fc-optimized B7-H3 antibody for immuno-oncology treatment, if approved;
TJ-CD4B, a novel, tumor-dependent T-cell engager for gastric and other cancers, if approved;
Plonmarlimab, a GM-CSF antibody for inflammation and CRS-related therapies, if approved;
TJ210, a novel C5aR1 antibody for cancers, if approved; and
TJ-L14B, a PD-L1-based tumor-dependent T-cell engager for solid tumors, if approved.
We incurred research and development expenses of RMB840.4 million, RMB984.7 million and RMB1,213.0 million (US$190.3 million) for the
years ended December 31, 2019, 2020 and 2021, respectively, representing 56.2%, 71.0% and 57.4% of our total research and development and
administrative expenses for the corresponding periods. We expect our research and development expenses to continue to increase for the foreseeable
future, as we continue to expand our operations and to advance our pipeline and our drug candidates toward later stages.
Administrative Expenses
Administrative expenses primarily consist of salaries and related benefit costs, including share-based compensation, for employees engaged in
managerial and administrative positions or involved in general corporate functions, professional fees for consulting and auditing as well as other direct
and allocated expenses for rental expenses for our facilities, travel costs and other supplies used in administrative activities. For the years ended
December 31, 2019, 2020 and 2021, our administrative expenses amounted to RMB654.6 million, RMB402.4 million and RMB899.9 million
(US$141.2 million), respectively.
Interest Expense
Interest expense consist primarily of interest expenses on our (i) short-term bank borrowings and (ii) convertible promissory notes issued to
certain investors.
Interest Income
Interest income consists primarily of interest income derived from our term deposit and restricted cash pledged as collateral for a working capital
loan.
Other Income (Expenses), Net
Other income consists primarily of income from the equity transfer of I-Mab Hangzhou and other financial assets, fair value change of short-term
investments and subsidy income.
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Other expenses consist primarily of the net loss resulting from the conversion of a portion of our convertible promissory notes, loss on the
termination agreement with Everest Medicines Limited, or Everest, and net foreign exchange losses.
Fair Value Change of Warrants
Fair value change of warrants consists primarily of the non-cash items incurred in connection with changes in the fair value of our warrant
liabilities that we issued to certain investors.
Taxation
Cayman Islands
I-Mab, our holding entity, is incorporated in the Cayman Islands. According to Harney Westwood & Riegels, our Cayman Islands counsel, the
Cayman Islands currently has no income, corporation or capital gains tax and no estate duty, inheritance tax or gift tax. Additionally, the Cayman Islands
does not impose a withholding tax on payments of dividends to shareholders.
Hong Kong
I-Mab, our holding entity, did its business registration in Hong Kong and had a Hong Kong tax file number. I-Mab Biopharma Hong Kong
Limited is incorporated in Hong Kong. Companies registered in Hong Kong are subject to Hong Kong profits tax on the taxable income as reported in
their respective statutory financial statements adjusted in accordance with the relevant Hong Kong tax laws. Under the current Hong Kong Inland
Revenue Ordinance, from the year of assessment 2018/2019 onwards, companies registered in Hong Kong are subject to profits tax at the rate of 8.25%
on assessable profits up to HK$2,000,000; and 16.5% on any part of assessable profits over HK$2,000,000. For the years ended December 31, 2019,
2020 and 2021, I-Mab and I-Mab Biopharma Hong Kong Limited did not make any provisions for Hong Kong profit tax as there were no assessable
profits derived from or earnings in Hong Kong for any of the periods presented. Under the Hong Kong tax law, I-Mab and I-Mab Biopharma Hong
Kong Limited is exempted from income tax on its foreign-derived income and there are no withholding taxes in Hong Kong on remittance of dividends.
United States
I-Mab Biopharma US Ltd. is incorporated in Maryland and is subject to U.S. federal corporate income tax at a rate of 21%. It is also subject to
state income tax in Maryland at a rate of 8.25%. I-Mab Biopharma US Ltd. has no taxable income for all periods presented and therefore no provision
for income taxes is required.
China
On March 16, 2007, the National People’s Congress of PRC enacted a new Corporate Income Tax Law (“new CIT law”) (as amended in 2017 and
2018), under which Foreign Investment Enterprises (“FIEs”) and domestic companies would be subject to corporate income tax at a uniform rate of
25%. The new CIT law became effective on January 1, 2008. Under the new CIT law, preferential tax treatments will continue to be granted to entities
which conduct businesses in certain encouraged sectors and to entities otherwise classified as “High and New Technology Enterprises.”
I-Mab Shanghai has been qualified as a “High and New Technology Enterprise” and enjoys a preferential income tax rate of 15% from 2021 to
2023. Our company’s other PRC subsidiaries are subject to the statutory income tax rate of 25%. No provision for income taxes has been accrued
because all of our PRC subsidiaries are in cumulative loss positions for all the periods presented.
A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion or all of the
deferred tax assets will not be realized in the foreseeable future. In making such determination, we evaluate a variety of positive and negative factors
including our operating history, accumulated deficit, the existence of taxable temporary differences and reversal periods.
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We have incurred net accumulated operating losses for income tax purposes since our inception. We believe that it is more likely than not that
these net accumulated operating losses will not be utilized in the future based on the assessment as of December 31, 2021. Therefore, we have provided
full valuation allowances for the deferred tax assets as of December 31, 2019, 2020 and 2021.
We evaluate each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure
the unrecognized benefits associated with the tax positions. As of December 31, 2019, 2020 and 2021, we did not have any significant unrecognized
uncertain tax positions.
Results of Operations
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 annual report. The operating results in any period are not
necessarily indicative of the results that may be expected for any future period.
Summary Consolidated Statements of Comprehensive Income (Loss)
Data:
Revenues
Licensing and collaboration revenue
Supply of investigational products
Total revenues
Cost of revenues
Expenses
Research and development expenses(1)
Administrative expenses(1)
Income (loss) from operations
Interest income
Interest expense
Other income (expenses), net
Equity in loss of affiliates(1)
Fair value change of warrants
Income (loss) before income tax expense
Income tax benefit (expense)
Net income (loss) attributable to I-Mab
For the Year Ended December 31,
2019
RMB
2020
RMB
2021
RMB
US$
(in thousands, except for per share data)
30,000
—
30,000
—
1,542,668
—
1,542,668
—
40,115
47,911
88,026
(46,432)
(840,415)
(654,553)
(1,464,968)
30,570
(2,991)
(20,205)
—
5,644
(1,451,950)
—
(1,451,950)
(984,689)
(402,409)
155,570
24,228
(957)
412,892
(108,587)
—
483,146
(12,231)
470,915
(1,212,958)
(899,943)
(2,071,307)
21,333
—
83,162
(367,883)
—
(2,334,695)
3,154
(2,331,541)
6,295
7,518
13,813
(7,286)
(190,340)
(141,221)
(325,034)
3,348
—
13,050
(57,729)
—
(366,365)
495
(365,870)
Deemed dividend to Series C-1 preferred shareholders extinguishment
of Series C-1 Preferred Shares
(5,283)
—
—
—
Deemed dividend to Series B-1, B-2 and C preferred shareholders at
modification of Series B-1, B-2 and C Preferred Shares
Net income (loss) attributable to ordinary shareholders
Other comprehensive income (loss)
Foreign currency translation adjustments, net of nil tax
Total comprehensive income (loss) attributable to I-Mab
Net income (loss) attributable to ordinary shareholders
Weighted-average number of ordinary shares used in calculating net
income (loss) per share
Basic
Diluted
Net loss per share attributable to ordinary shareholders
Basic
Diluted
Net income (loss) per ADS attributable to ordinary shareholders
—Basic
—Diluted
Note:
(1)
Share-based compensation expenses were allocated as follows:
165
(27,768)
(1,485,001)
—
470,915
—
(2,331,541)
—
(365,870)
10,747
(1,441,203)
(120,920)
349,995
(135,717)
(2,467,258)
(21,297)
(387,167)
(1,485,001)
470,915
(2,331,541)
(365,870)
7,381,230 134,158,824 174,707,055 174,707,055
7,381,230 157,231,652 174,707,055 174,707,055
(201.19)
(201.19)
(462.74)
(462.74)
3.51
3.00
8.07
6.90
(13.35)
(13.35)
(30.71)
(30.71)
(2.09)
(2.09)
(4.82)
(4.82)
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For the Year Ended December 31,
2021
2019
RMB
2020
RMB
RMB
US$
Research and development expenses
Administrative expenses
Equity in loss of affiliates
Total
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Revenues
(in thousands)
470
514,733
—
515,203
284,431
209,033
32,707
526,171
201,926
406,683
13,267
621,876
31,687
63,817
2,082
97,586
Our revenues generated for the year ended December 31, 2021 consisted of (i) revenue generated from licensing and collaboration, which
primarily includes revenue recognized in connection with the strategic collaboration with AbbVie, and milestone payments from CSPC Pharmaceutical
Group Limited pursuant to our licensing agreement, and (ii) revenue generated from supply of investigational products to AbbVie under the strategic
collaboration agreement. In comparison, the revenues generated for the year ended December 31, 2020 solely consisted of the revenues recognized in
connection with the strategic collaboration with AbbVie.
Our revenues decreased from RMB1,542.7 million for the year ended December 31, 2020 to RMB88.0 million (US$13.8 million) for the year
ended December 31, 2021, primarily attributable to the decrease in our revenue generated from licensing and collaboration from RMB1,542.7 million
for the year ended December 31, 2020 to RMB40.1 million (US$6.3 million) for the year ended December 31, 2021, offset by the revenue we generated
from supply of investigational products of RMB47.9 million (US$7.5 million) for the year ended December 31, 2021.
Research and Development Expenses
The following table sets forth a breakdown of the major components of our research and development expenses in absolute amounts and as a
percentage of our total research and development expenses for the periods indicated:
CRO service fees
In-licensed patent right fees
Employee benefit expenses
Material costs for drug candidates
Other expenses
Total
2020
RMB
439,537
28,266
460,149
15,610
41,127
984,689
166
For the Year Ended December 31,
2021
%
US$
RMB
(in thousands, except percentages)
727,573
44.6
66,344
2.9
347,571
46.7
23,141
1.6
48,329
4.2
1,212,958
100.0
114,172
10,411
54,541
3,631
7,585
190,340
%
60.0
5.5
28.7
1.9
3.9
100.0
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Our research and development expenses increased by 23.2% from RMB984.7 million for the year ended December 31, 2020 to
RMB1,213.0 million (US$190.3 million) for the year ended December 31, 2021, primarily attributable to (i) an increase in CRO service fees from
RMB439.5 million for the year ended December 31, 2020 to RMB727.6 million (US$114.2 million) for the year ended December 31, 2021, to advance
our clinical and preclinical pipelines, especially for lemzoparlimab (TJC4), uliledlimab (TJD5), and eftansomatropin alfa (TJ101); (ii) an increase in
in-licensed patent right fees from RMB28.3 million for the year ended December 31, 2020 to RMB66.3 million (US$10.4 million) for the year ended
December 31, 2021, (iii) partially offset by a decrease in employee benefit expenses of employees involved in research and development from
RMB460.1 million for the year ended December 31, 2020 to RMB347.6 million (US$54.5 million) for the year ended December 31, 2021, mainly due
to the decrease of share-based compensation expense by RMB82.5 million (US$12.9 million).
In 2021, 94.3% and 5.7% of our total research and development expenses were attributable to clinical programs and preclinical programs,
respectively. In 2020, 77.6% and 22.4% of our total research and development expenses were attributable to clinical programs and preclinical programs,
respectively. In 2021, felzartamab and lemzoparlimab accounted for approximately 26.4% and 34.8% of our external research and development
expenses, which primarily included licensing fees and payments to CROs and CMOs. In 2020, felzartamab and lemzoparlimab accounted for
approximately 36.9% and 13.4% of our external research and development expenses, which primarily included payments to CROs and CMOs. No other
programs accounted for a significant portion of our research and development expenses in 2021 and 2020. Though we manage our external research and
development expenses by program, we do not allocate our internal research and development expenses by program because our employees and internal
resources may be engaged in projects for multiple programs at any time.
Administrative Expenses
Our administrative expenses increased from RMB402.4 million for the year ended December 31, 2020 to RMB899.9 million (US$141.2 million),
primarily attributable to (i) an increase in employee benefit expenses by RMB291.7 million (US$45.8 million) due to an increase of share-based
compensation expenses by RMB197.7 million (US$31.0 million); (ii) an increase in accrued termination fee to Tracon of US$9.0 million; (iii) an
increase in professional service expenses by RMB145.2 million (US$22.8 million) due to the increase in attorneys’ fees occurred during our arbitration
with Tracon.
Interest Income
We recorded interest income of RMB24.2 million and RMB21.3 million (US$3.3 million) for the years ended December 31, 2020 and 2021,
respectively. The change was primarily attributable to interest income derived from bank deposits and the fluctuation of bank balance.
Interest Expense
We recorded interest expenses of nil for the year ended December 31, 2021, as compared to an interest expense of RMB1.0 million for the year
ended December 31, 2020. The change was primarily attributable to the interest expense related to our short-term borrowings, which were repaid in June
2020.
Other Income (Expenses), Net
We recorded other income of RMB412.9 million and RMB83.2 million (US$13.1 million) for the years ended December 31, 2020 and 2021,
respectively. The change was primarily attributable to the decrease in gains on deconsolidation of a subsidiary from RMB407.6 million in 2020 to nil in
2021, as the equity transfer of I-Mab Hangzhou to a group of domestic investors was completed on September 15, 2020.
Equity in Loss of Affiliates
We recorded equity in loss of affiliates of RMB108.6 million and RMB367.9 million (US$57.7 million) for the years ended December 31, 2020
and 2021, respectively. The change was primarily due to that I-Mab Hangzhou became an unconsolidated affiliate of our company since September 15,
2020.
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Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Revenues
Our revenues generated from licensing and collaboration increased from RMB30.0 million for the year ended December 31, 2019 to
RMB1,542.7 million for the year ended December 31, 2020. Our revenues generated for the year ended December 31, 2020 solely consisted of the
revenue recognized in connection with the strategic collaboration with AbbVie.
Research and Development Expenses
The following table sets forth a breakdown of the major components of our research and development expenses in absolute amounts and as a
percentage of our total research and development expenses for the periods indicated:
CRO service fees
In-licensed patent right fees
Employee benefit expenses
Material costs for drug candidates
Other expenses
Total
For the Year Ended December 31,
2019
RMB
%
2020
RMB
%
(in thousands, except percentages)
521,920
166,844
106,313
6,117
39,221
840,415
62.1
19.9
12.7
0.7
4.6
100.0
439,537
28,266
460,149
15,610
41,127
984,689
44.6
2.9
46.7
1.6
4.2
100.0
Our research and development expenses increased by 17.2% from RMB840.4 million for the year ended December 31, 2019 to RMB984.7 million
for the year ended December 31, 2020, primarily attributable to (i) an increase in employee benefit expenses of employees involved in research and
development from RMB106.3 million for the year ended December 31, 2019 to RMB460.1 million for the year ended December 31, 2020, mainly due
to an increase in share-based compensation by RMB284.0 million; (ii) partially offset by the decreases in CRO service fees and in-licensed patent right
fees from RMB521.9 million and RMB166.8 million for the year ended December 31, 2019 to RMB439.5 million and RMB28.3 million for the year
ended December 31, 2020, respectively. The decrease of CRO service fees was mainly due to the evolution of our outsourcing model in 2020 through
hiring more dedicated headcounts on our clinical programs to replace CRO services. The decrease of in-licensed patent right fees was mainly due to that
we paid the upfront fee of US$15.0 million to MacroGenics in 2019.
In 2020, 77.6% and 22.4% of our total research and development expenses were attributable to clinical programs and preclinical programs,
respectively. In 2019, 87.3% and 12.7% of our total research and development expenses were attributable to clinical programs and preclinical programs,
respectively. In 2020, felzartamab and lemzoparlimab represented approximately 36.9% and 13.4% of our external research and development expenses,
which primarily included payments to CROs and CMOs. In 2019, felzartamab represented approximately 41.4% of our external research and
development expenses, which primarily included licensing fees and payments to CROs and CMOs. No other programs represented a significant amount
of research and development expenses in 2020 and 2019. Though we manage our external research and development expenses by program, we do not
allocate our internal research and development expenses by program because our employees and internal resources may be engaged in projects for
multiple programs at any time.
Administrative Expenses
Our administrative expenses decreased from RMB654.6 million for the year ended December 31, 2019 to RMB402.4 million for the year ended
December 31, 2020, primarily attributable to the decrease in employee benefit expenses by RMB305.7 million due to decrease of share-based
compensation expenses.
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Interest Income
We recorded RMB30.6 million of interest income for the year ended December 31, 2019 and RMB24.2 million of interest income for the year
ended December 31, 2020. The change was primarily attributable to the interest income derived from bank deposits and an increase in bank balance.
Interest Expense
We recorded RMB3.0 million of interest expense for the year ended December 31, 2019 and RMB1.0 million of interest expense for the year
ended December 31, 2020. The change was primarily attributable to the interest expense related to our short-term borrowings, of which
RMB80.0 million was borrowed in July 2018 and repaid in June 2019, RMB50.0 million was borrowed in June 2019 and repaid in June 2020,
respectively.
Other Income (Expenses), Net
We recorded RMB20.2 million of other income for the year ended December 31, 2019 and RMB412.9 million of other income for the year ended
December 31, 2020. The change was primarily attributable to RMB407.6 million gain recognized as a result of transfer of equity of I-Mab Hangzhou
from I-Mab Hong Kong to a group of domestic investors. The equity transfer realized the fair value appreciation in the pipeline assets as well as the
employment of a team of designated management and workforce.
Equity in Loss of Affiliates
We recorded equity in loss of an affiliate of nil for the year ended December 31, 2019 and RMB108.6 million for the year ended December 31,
2020. The change was primarily due to that I-Mab Hangzhou became an unconsolidated affiliate of our company since September 15, 2020.
Fair Value Change of Warrants
We recorded a gain from change in the fair value of warrant liability of RMB5.6 million for the year ended December 31, 2019 and nil for the year
ended December 31, 2020. The change was primarily attributable to the fact that the holders of Series B Warrants have unconditionally and irrevocably
waived and cancelled the Tranche II of Series B Warrants in July 2019.
Critical Accounting Policies and Significant Judgments and Estimates
Our reported results are impacted by the application of certain accounting policies that require us to make subjective or complex judgments. These
judgments involve estimations of the effect of matters that are inherently uncertain and may significantly impact our quarterly or annual results of
operations or financial condition. Changes in the estimates and judgments could significantly affect our results of operations, financial condition and
cash flows in future years. A description of what we consider to be our most significant critical accounting policies and estimates follows.
Revenue Recognition
We adopted Accounting Standard Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) for all periods
presented. Consistent with the criteria of Topic 606, we recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the
consideration that the entity expects to receive in exchange for those goods or services. The entity performs the following five steps to account for the
arrangements that an entity determines are within the scope of ASC 606: (i) identify the contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
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Currently, the majority of our revenues come from the collaboration revenue arrangements. Once a contract is determined to be within the scope
of ASC 606 at contract inception, we evaluate the contract to determine which performance obligations it must deliver and which of these performance
obligations are distinct. We recognize as revenue the amount of the transaction price that is allocated to each performance obligation when that
performance obligation is satisfied or as it is satisfied.
Variable consideration in collaboration revenue arrangements
If the consideration promised in a contract includes a variable amount, we will estimate the amount of consideration to which we will be entitled
in exchange for transferring the promised goods or services to a customer. An amount of consideration can vary because of discounts, rebates, refunds,
credits, price concessions, incentives, performance bonuses, penalties, or other similar items. The promised consideration also can vary if an entity’s
entitlement to the consideration is contingent on the occurrence or nonoccurrence of a future event. We estimate an amount of variable consideration by
using either of the following methods, depending on which method we expect to better predict the amount of consideration to which it will be entitled:
a. The expected value—The expected value is the sum of probability-weighted amounts in a range of possible consideration amounts. An expected
value may be an appropriate estimate of the amount of variable consideration if an entity has a large number of contracts with similar
characteristics.
b. The most likely amount—The most likely amount is the single most likely amount in a range of possible consideration amounts (that is, the
single most likely outcome of the contract). The most likely amount may be an appropriate estimate of the amount of variable consideration if the
contract has only two possible outcomes (for example, an entity either achieves a performance bonus or does not).
We include in the transaction price some or all of an amount of variable consideration estimated in accordance with above only to the extent that it
is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable
consideration is subsequently resolved.
Determination of the standalone selling price of each performance obligation
Our collaborative arrangements may contain more than one unit of account, or performance obligation, including grants of licenses to intellectual
property rights, agreement to provide research and development services and other deliverables. The collaborative arrangements do not include a right of
return for any deliverable. As part of the accounting for these arrangements, we must develop assumptions that require judgment to determine the stand-
alone selling price for each performance obligation identified in the contract. In developing the stand-alone selling price for a performance obligation,
we consider competitor pricing for a similar or identical product, market awareness of and perception of the product, expected product life and current
market trends. In general, the consideration allocated to each performance obligation is recognized when the respective obligation is satisfied either by
delivering a good or providing a service, limited to the consideration that is not constrained.
Cost-to-cost measure of progress for over time performance obligations
Under our certain licensing and collaboration arrangement entered into with a business partner, we recognized revenue using the cost-to-cost
measure of progress for its over time performance obligations as we believe this recognition best depicts the transfer of benefits to its business partner as
costs are incurred under the licensing and collaboration arrangement. Under the cost-to-cost measure of progress method, the extent of progress towards
completion is measured based on the ratio of costs incurred to-date to the total estimated costs for completion of the performance obligations. We
applied significant judgment in estimating the total estimated costs for completion of performance obligations under such licensing and collaboration
arrangement.
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See Note 18 of the Consolidated Financial Statements for a further discussion of our licensing and collaboration revenues.
Fair value measurement of put right liabilities
Put right written by us to third party investors in our affiliate was recorded as a freestanding equity-linked instrument and classified as a put right
liability. We determined the fair value of the put right with the assistance of an independent third-party valuation firm. We used the option pricing model
(finnerty model) to estimate the fair value of the put right. The model requires the input of key assumptions including the expected terms, estimated
volatility, spot price and probability of triggering event for redemption option. The significant unobservable inputs used in the option pricing model
included spot price, estimated volatility and probability of triggering event for redemption option. Expected terms is estimated based on the timing of a
hypothetical redemption event which is assumed to be the earlier of expected redemption date or expected public offering date. Expected volatility is
estimated based on daily stock prices of the comparable company for a period with length commensurate to the expected terms of redemption event. The
spot price was determined using the income approach with assistance from an independent third-party valuation firm. The significant unobservable
inputs used in the income approach include revenue growth rates and discount rates.
Research and Development Expenses
Elements of research and development expenses primarily include (1) payroll and other related expenses of personnel engaged in research and
development activities, (2) in-licensed patent rights fee of exclusive development rights of drugs granted to us, (3) expenses related to preclinical testing
of the Group’s technologies under development and clinical trials such as payments to CRO, investigators and clinical trial sites that conduct the clinical
studies, (4) expenses to develop the product candidates, including raw materials and supplies, product testing, depreciation, and facility related expenses,
and (5) other research and development expenses. Research and development expenses are charged to expenses as incurred when these expenditures are
used for our research and development activities and have no alternative future uses.
We applied significant judgment in estimating the progress of our research and development activities and completion of or likelihood of
achieving milestone events per underlying agreements when estimating the research and development costs to be accrued at each reporting period end.
The process of estimating our research and development expenses involves reviewing open contracts and purchase orders, communicating with
personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for
the services when we have not yet been invoiced or otherwise notified of the actual costs.
Recent Accounting Pronouncements
A list of recently issued accounting pronouncements that are relevant to us is included in Note 2 “Principal Accounting Policies—2.27 Recent
Accounting Pronouncements” of our consolidated financial statements included elsewhere in this annual report.
B. Liquidity and Capital Resources
Cash Flows and Working Capital
We have incurred net losses and negative cash flows from our operations for the years ended December 31, 2019 and 2021. We generated net
income and positive cash flow from our operations for the year ended December 31, 2020, which was primarily attributable to the collection of the
upfront payment from AbbVie. Substantially all of our losses have resulted from funding our research and development programs and administrative
costs associated with our operations. We incurred net losses of RMB1,452.0 million for the year ended December 31, 2019, net income of
RMB470.9 million for the year ended December 31, 2020, and net losses of RMB2,331.5 million (US$365.9 million) for the year ended December 31,
2021. Our primary use of cash is to fund our research and development activities. We used RMB868.0 million in cash for our operating activities for the
year ended December 31, 2019, generated RMB433.6 million in cash from our operating activities for the year ended December 31, 2020, and used
RMB973.1 million (US$152.7 million) in cash for our operating activities for the year ended December 31, 2021. As of December 31, 2021, we had
cash and cash equivalents of RMB3,523.6 million (US$552.9 million). Our cash, cash equivalents and restricted cash consist primarily of cash in bank
and on hand. Historically, we have financed our operations principally through proceeds from the issuance and sale of preferred shares and convertible
promissory notes in private placement transactions, and we also received total net proceeds of approximately US$105.3 million from our initial public
offering. In September 2020, we entered into definitive subscription agreements with a consortium of institutional investors to raise approximately
US$418 million through a private placement. The private placement consists of (i) the sale to the institutional investors of approximately
US$418 million of our 29,133,502 ordinary shares (equivalent to 12,666,740 ADSs) at a purchase price equivalent to US$33 per ADS, representing a
2.9% premium to the 30-day volume weighted average price; and (ii) warrants to subscribe for an aggregate of 5,341,267 ordinary shares (equivalent to
2,322,290 ADSs) at an exercise price equivalent to US$45 per ADS, representing a 40.3% premium to the 30-day volume weighted average price,
which may further increase the proceeds of approximately US$104.5 million if the warrants are fully exercised. The warrants were fully exercised in the
year ended December 31, 2021.
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The following table sets forth a summary of our cash flows for the periods presented:
Summary Consolidated Statements of Cash Flow Data:
Net cash (used in)/generated from operating activities
Net cash (used in)/generated from investing activities
Net cash generated from financing activities
Effect of exchange rate changes on cash and cash equivalents and restricted cash
Net increase/(decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of the year
Cash, cash equivalents and restricted cash, end of the year
For the Year Ended December 31,
2019
RMB
2020
RMB
2021
RMB
US$
(in thousands)
(867,982) 433,558
212,462 (201,901)
152,709 3,440,481
15,163 (106,643)
(973,093) (152,700)
(727,206) (114,114)
593,924 93,200
(128,771) (20,207)
(487,648) 3,565,495 (1,235,146) (193,821)
1,680,931 1,193,283 4,758,778 746,756
1,193,283 4,758,778 3,523,632 552,935
We do not expect to generate any revenue from the sales of our commercial products unless and until we obtain regulatory approval of and
commercialize one of our current or future drug candidates. We anticipate that we will continue to generate losses for the foreseeable future, and we
expect the losses to increase as we continue the development of, and seek regulatory approvals for, our drug candidates and begin to commercialize any
approved products. We also expect to incur additional costs associated with operating as a public company. In addition, subject to obtaining regulatory
approval of any of our drug candidates, we expect to incur significant commercialization expenses for product sales, marketing and manufacturing.
Accordingly, we anticipate that we will need substantial additional funding in connection with our continuing operations.
Based on our current operating plan, we believe that our current cash and cash equivalents will be sufficient to meet our current and anticipated
working capital requirements and capital expenditures for at least the next 12 months. In that time, we expect that our expenses will increase
substantially as we fund new and ongoing research and development activities and working capital needs. We have based our estimates on assumptions
that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Because of the numerous risks and
uncertainties associated with the development and commercialization of our drug candidates, we are unable to estimate the amounts of increased capital
outlays and operating expenditures necessary to complete the development and commercialization of our drug candidates.
We may decide to enhance our liquidity position or increase our cash reserve for future operations and investments through additional financing.
The issuance and sale of additional equity would result in further dilution to our shareholders and ADS holders, and the terms of these securities may
include liquidation or other preferences that adversely affect your rights as an ADS holder. The incurrence of indebtedness would result in increased
fixed obligations and could result in operating covenants that would restrict our operations, which could potentially dilute your interest. If we raise
additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our
technologies, future revenue streams or research programs or to grant licenses on terms that may not be favorable to us. If we are unable to raise
additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or
future commercialization efforts or grant rights to develop and market products or drug candidates that we would otherwise prefer to develop and market
ourselves.
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As of December 31, 2021, 12.0% of our cash and cash equivalents were denominated in RMB and held in China. We may make additional capital
contributions to our PRC subsidiaries, establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, make loans to our
PRC subsidiaries, or acquire offshore entities with business operations in China in offshore transactions. However, most of these uses are subject to PRC
regulations and approvals. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans to and
direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from making
loans to our PRC subsidiaries or making additional capital contributions to our wholly foreign-owned subsidiaries in China, which could materially and
adversely affect our liquidity and our ability to fund and expand our business.” In addition, the COVID-19 pandemic may materially and adversely
affect our ability to raise additional capital in future and our liquidity. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business
and Our Industry—Our business and results of operations could be adversely affected by public health crisis (including the COVID-19 global pandemic)
and natural catastrophes or other disasters outside of our control in the locations in which we, our suppliers, CROs, CMOs and other contractors
operate.”
We expect that the majority of our future revenues will be denominated in RMB. Under existing PRC foreign exchange regulations, payments of
current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in
foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our PRC subsidiaries are
allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However,
approval from or registration with competent government authorities is required where RMB is to be converted into foreign currency and remitted out of
China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict
access to foreign currencies for current account transactions in the future.
Operating Activities
Net cash used in operating activities for the year ended December 31, 2021 was RMB973.1 million (US$152.7 million). Our net loss was
RMB2,331.5 million (US$365.9 million) for the same period. The difference between our net loss and our net cash used in operating activities was
primarily attributable to certain non-cash expenses, including share-based compensation of RMB608.6 million (US$95.5 million) and equity in loss of
affiliates of RMB367.9 million (US$57.7 million), and changes in certain working capital items, including an increase in the contract liabilities of
RMB224.0 million (US$35.2 million) and an increase in accruals and other payables of RMB152.1 million (US$23.9 million), partially offset by an
increase of inventories of RMB27.2 million (US$4.3 million) and an increase of contract assets of RMB26.4 million (US$4.1 million). The change in
share-based compensation was attributable to the grant of stock options to certain directors and employees of our company under the 2017 Plan, 2018
Plan, 2019 Plan, 2020 Plan and 2021 Plan.
Net cash generated from operating activities for the year ended December 31, 2020 was RMB433.6 million. Our net income was
RMB470.9 million for the same period. The difference between our net income and our net cash generated from operating activities was primarily
attributable to certain non-cash expenses, including share-based compensation of RMB493.5 million, equity in loss of an affiliate of RMB108.6 million,
non-cash gains on deconsolidation of a subsidiary of RMB407.6 million and changes in certain working capital items, including an increase in the
accounts receivable of RMB130.5 million, an increase in the contract assets of RMB227.4 million, an increase in the prepayments and other receivables
of RMB58.7 million, partially offset by an increase in the accruals and other payables of RMB173.7 million. The change in share-based compensation
was attributable to the grant of stock options to certain directors and employees of our company under the 2017 Plan, 2018 Plan, 2019 Plan and 2020
Plan.
Net cash used in operating activities for the year ended December 31, 2019 was RMB868.0 million. Our net loss was RMB1,452.0 million for the
same period. The difference between our net loss and our net cash used in operating activities was primarily attributable to certain non-cash expenses,
including share-based compensation of RMB366.9 million and loss on the termination agreement with Everest of RMB23.0 million, and changes in
certain working capital items, including an increase in the research and development funding of RMB53.1 million, an increase in the accruals and other
payables of RMB188.4 million, partially offset by a decrease in advance from customers of RMB14.2 million and an increase in prepayments and other
receivables of RMB48.8 million. The change in share-based compensation was attributable to the grant of stock options to a director of our company
under the 2018 Plan.
Investing Activities
Net cash used in investing activities for the year ended December 31, 2021 was RMB727.2 million (US$114.1 million). The net cash decrease was
primarily attributable to RMB10,173.3 million (US$1,596.4 million) of purchase of short-term investments, partially offset by RMB9,482.0 million
(US$1,487.9 million) of proceeds from disposal of short-term investments.
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Net cash used in investing activities for the year ended December 31, 2020 was RMB201.9 million. The net cash decrease was primarily
attributable to RMB2,503.7 million of the cash received from proceeds from disposal of short-term investments, partially offset by RMB2,492.0 million
of purchase of short-term investments, and cash disposed of resulting from deconsolidation of a subsidiary, I-Mab Hangzhou of RMB257.7 million.
Net cash generated from investing activities for the year ended December 31, 2019 was RMB212.5 million. The net cash increase was primarily
attributable to RMB256.0 million of the cash received from disposal of other financial assets and RMB102.7 million of proceeds from disposal of short-
term investments, partially offset by RMB134.0 million of purchase of short-term investments.
Financing Activities
Net cash generated from financing activities for the year ended December 31, 2021 was RMB593.9 million (US$93.2 million), primarily
attributable to the proceeds from exercise of warrants of RMB672.7 million (US$105.6 million), partially offset by payments of the issuance cost in
relation to private placement of RMB128.8 million (US$20.2 million).
Net cash generated from financing activities for the year ended December 31, 2020 was RMB3,440.5 million, primarily attributable to the
proceeds from the initial public offering of our company, net of payment of offering issuance cost of RMB698.7 million, the proceeds from private
placement, net of payment of issuance cost of RMB2,782.5 million, partially offset by the repayment of bank borrowings of RMB50.0 million.
Net cash generated from financing activities for the year ended December 31, 2019 was RMB152.7 million, primarily attributable to the proceeds
from issuance of convertible preferred shares, net of issuance cost of RMB183.5 million and the proceeds of bank borrowings of RMB50.0 million,
partially offset by the repayment of bank borrowings of RMB80.0 million.
Material Cash Requirements
Contractual Obligation
Our material cash requirements as of December 31, 2021 and any subsequent interim period primarily include our capital expenditures and
operating lease obligations.
Our capital expenditures were incurred for purposes of purchasing property, equipment and software. Our capital expenditures were
RMB12.2 million, RMB8.0 million and RMB29.9 million (US$4.7 million) in the years ended December 31, 2019, 2020 and 2021, respectively.
Our operating lease commitments relate to leases for our office premises pursuant to non-cancellable operating lease agreements. Other than as
shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2021.
The following table sets forth our contractual obligations as of December 31, 2021:
Operating lease commitments
Capital commitments
Total
Less Than
1 Year
1-3 Years
3-5 Years
More Than
5 Years
RMB US$
RMB US$ RMB US$
RMB US$ RMB US$
(in thousands)
122,633 19,243 35,359 5,549 71,425 11,208 10,900 1,710 4,949 776
83 — — — —
24,426 3,833 23,899 3,750
527
We entered into certain unconditional purchase obligations and other commitments in the normal course of business. There have been no changes
to these commitments that would have a material impact on our ability to meet either short-term or long-term future cash requirements.
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We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we
have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our
consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that
serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing,
liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of
December 31, 2021.
Collaborations, Licensing and Other Arrangements
We entered into collaborative, licensing, and other arrangements with third parties that may require future milestone payments to third parties
contingent upon the achievement of certain development, regulatory, or commercial milestones. Individually, these arrangements are insignificant in any
one annual reporting period. However, if milestones for multiple products covered by these arrangements would happen to be reached in the same
reporting period, the aggregate charge to expense could be material to the results of operations in that period. From a business perspective, the payments
are viewed as positive because they signify that the product is successfully moving through development and is now generating or is more likely to
generate future cash flows from product sales. It is not possible to predict with reasonable certainty whether these milestones will be achieved or the
timing for achievement. See Note 18 to the Consolidated Financial Statements for additional information on these collaboration arrangements.
Holding Company Structure
We are a holding company with no material operations of its own. We currently conduct our operations primarily through our PRC subsidiaries.
As a result, our ability to pay dividends depends upon dividends paid by our PRC subsidiaries. If our existing PRC subsidiaries or any newly formed
ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our
wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance
with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries and their subsidiaries in China is required to set aside at least
10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital. In
addition, our wholly foreign-owned subsidiaries in China may allocate a portion of their after-tax profits based on PRC accounting standards to
enterprise expansion funds and staff bonus and welfare funds at their discretion, and their subsidiaries may allocate a portion of their after-tax profits
based on PRC accounting standards to a surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as
cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE.
Our PRC subsidiaries have not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements
for statutory reserve funds.
C. Research and Development, Patents and Licenses, Etc.
See “Item 4. Information on the Company—B. Business Overview—Intellectual Property” and “—R&D Governance.”
D. Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events since
January 1, 2021 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or
that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.
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E. Critical Accounting Estimates
For our critical accounting estimates, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Critical Accounting
Policies and Significant Judgments and Estimates.”
ITEM 6.
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A. Directors and Senior Management.
The following table sets forth information regarding our directors and executive officers as of the date of this annual report.
DIRECTORS AND EXECUTIVE OFFICERS
AGE
POSITION/TITLE
Jingwu Zhang Zang, M.D., Ph.D.
66 Founder, Chairman of the Board of Directors, and Acting Chief Executive Officer
Zheru Zhang, Ph.D.
Andrew Zhu, M.D., Ph.D.
John Long
Richard Yeh
Wei Fu
Lan Kang
Xi (Lindsay) Liu, Ph.D.
Ruyi He, M.D.
Rong Shao, Ph.D.
Chun Kwok Alan Au
Conor Chia-hung Yang
Pamela M. Klein, M.D.
Weimin Tang, Ph.D.
Ivan Yifei Zhu
Gigi Qi Feng
Richard Cheng Li
Yunhan Lin, Ph.D.
59 Director and President
62 Director and President
50 Director and Chief Financial Officer
54 Director and Chief Operating Officer
40 Director
53 Director
38
Independent Director
61
Independent Director
60
Independent Director
49
Independent Director
59
Independent Director
60
Independent Director
56 Chief Business Officer
53 Chief Commercial Officer
40 Chief Communications Officer
38 Chief Legal Officer
44 Vice President of Corporate Development
Jingwu Zhang Zang, M.D., Ph.D., is our founder and chairman of the board of directors and as our acting chief executive officer since December
2021. Our board of directors appointed Dr. Zang as the chairman of the board in March 2021. Prior to this appointment, Dr. Zang served as our director
and honorary chairman from October 2019 to March 2021, and chief executive officer from our inception to October 2019. Prior to founding our
company, Dr. Zang served as the chief scientific officer and president of Simcere Pharmaceutical Group and Bioscikin Co., Ltd. from September 2013 to
April 2016. Dr. Zang held senior management positions at GlaxoSmithKline (GSK), as the global senior vice president and head of GSK’s Research and
Development in China from April 2007 to June 2013. The academic career of Dr. Zang started in Dr. Willems Institute and University of Limburg in
Belgium. Dr. Zang became a professor at Baylor College of Medicine in Houston and later joined the Chinese Academy of Sciences as the founding
director of the Institute of Health Sciences and as a co-director of Institute Pasteur Shanghai, an independent non-profit life science institute to address
public health problems in China, where he served as its director from October 2004 to September 2006. Dr. Zang also served as a director of Shanghai
Institute of Immunology from June 2002 to April 2007. Dr. Zang received his M.D. from Shanghai Second Medical University (now part of Shanghai
Jiaotong University) in 1984, and his Ph.D. in neuroimmunology from the University of Brussels in 1990. Dr. Zang conducted his post-doctoral work at
Harvard Medical School in 1992, and obtained his U.S. medical license from the Texas Medical Board through a clinical residency at Baylor College of
Medicine in Houston.
Zheru Zhang, Ph.D., has served as our director and president since September 2017. Prior to joining our company, Dr. Zhang served as the
president at Tasgen Bio-tech (Tianjin) Co., Ltd. from November 2015 to April 2017, as the chief executive officer at Shanghai JMT-Bio Co., Ltd. from
October 2012 to October 2015, as a vice president, research and development at Celltrion Inc. from March 2008 to October 2012, as a group leader for
the development of analytics and drug products at Johnson & Johnson (NYSE: JNJ) from January 2006 to March 2008, and as a research investigator at
Bristol-Myers Squibb Company from May 2000 to January 2006, focusing on bioanalytical development and protein therapeutics development,
respectively. Dr. Zhang received his master’s degree in chemistry from Suzhou University in 1991, and his Ph.D. in chemistry from University of
Alberta in Canada in 2000.
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Andrew Zhu, M.D., Ph.D., has served on our scientific advisory board since August 2021 and as our director and president since December 2021.
Dr. Zhu is an internationally renowned oncologist. He was Professor of Medicine at Harvard Medical School and served as Director of Liver Cancer
Research at Massachusetts General Hospital (MGH) Cancer Center. In collaboration with his colleagues, Dr. Zhu established and led the
multidisciplinary liver cancer clinic at the MGH and created one of the most productive clinical and translational research programs in hepatobiliary
cancers in the U.S. Prior to joining us, Dr. Zhu was Director of Jiahui International Cancer Center of the Jiahui International Hospital in Shanghai, China
and subsequently served as Chief Scientific Officer of Jiahui Health. Dr. Zhu has an excellent track record in clinical development of innovative
oncology drugs. He has led early-stage development of numerous targeted therapy and immuno-oncology drugs for liver cancer and several pivotal
studies that led to regulatory approval by the FDA, including the development of pembrolizumab (KEYNOTE-224) and ramucirumab (REACH-2) for
advanced liver cancer, and the successful development of the first IDH-1 inhibitor (Ivosidenib) for cholangiocarcinoma. Dr. Zhu also served on the
Steering Committee of several phase III trials in the development of combination immunotherapies for liver cancer, including atezolizumab combined
with bevacizumab. He has also served on the committee for the establishment of many global HCC Clinical Trial Design and Practice Guidelines,
including the NCCN Guidelines for Hepatobiliary Cancers, AASLD Guidelines for the Treatment of Hepatocellular Carcinoma, and ASCO Guidelines
on Systemic Therapy for Advanced Hepatocellular Carcinoma. Dr. Zhu received his M.D. degree from Peking University Health Science Center in
1982, and Ph.D. in Microbiology from Columbia University in 1990. Following his postdoctoral research training at Harvard Medical School, Dr. Zhu
completed his clinical training in internal medicine at Yale New Heaven Hospital, Yale School of Medicine, and a fellowship in Hematology-Oncology
at Memorial Sloan-Kettering Cancer Center. Dr. Zhu has published more than 300 scientific papers and reviews in top international journals such as
New England Journal of Medicine, Lancet, JAMA, Nature Medicine, Lancet Oncology, Journal of Clinical Oncology and Cancer Discovery.
John Long has served as our chief financial officer since November 2021 and as our director since December 2021. Mr. Long has more than 20
years of leadership experiences and strong track record in financial management, strategic planning, fundraising and capital market transactions. Prior to
joining us, Mr. Long served as chief financial officer or senior vice president of finance for a wide range of healthcare companies, including the WuXi
AppTec Group, WuXi NextCODE Genomics Inc., Genecast Biotechnology Co., Inc., and StemiRNA Therapeutics Co., Ltd. In addition, Mr. Long also
took on senior financial management positions at large multi-national corporations, including Willis International, Tyco (Asia and China), as well as
Lucent Technologies. In his previous roles, Mr. Long had gained deep experience in leading go-private transaction, the global restructuring and pre-IPO
private placement process as well as preparations for A-share IPO. Mr. Long received his bachelor’s degree from the University of International
Business and Economics in 1994 and a master’s degree in business administration from the Wharton School of the University of Pennsylvania in 2001.
Richard Yeh has served as our director and chief operating officer since April 2022. Mr. Yeh has over 20 years of experience working for
investment banks and multinational biopharmaceutical companies. Prior to joining us, Mr. Yeh served as director, chief financial officer and head of
strategic of operations in Abbisko Cayman Limited, a company listed on the Hong Kong Stock Exchange from November, 2020 to April 2022. From
July 2018 to April 2020, Mr. Yeh served as the chief financial officer of CStone Pharmaceuticals, a Hong Kong Stock Exchange listed company. Prior to
joining CStone Pharmaceuticals, Mr. Yeh was a managing director and the business unit leader of Asia Pacific healthcare equity research at Goldman
Sachs (Asia) L.L.C. in Hong Kong. Before that, Mr. Yeh served as the head of China healthcare research team at Citigroup Capital Markets Asia
Limited. In October 1995, Mr. Yeh joined Amgen Inc., a leading global biotechnology company traded on the Nasdaq, as a research associate
conducting drug research. Mr. Yeh obtained an MBA from Cornell University in the United States in May 2002 and a Master of Science from the
University of Toronto in Canada in November 1995. He graduated from the University of Manitoba in Canada with a bachelor of science in May 1993.
Wei Fu has served as our director since June 2018. Mr. Fu was appointed by the C-Bridge entities pursuant to our shareholders agreement dated
July 6, 2018. Mr. Fu has served as the chief executive officer and a managing partner of C-Bridge Capital Investment Management, Ltd. since April
2014. Mr. Fu currently also serves on the board of Everest Medicines Limited (HKEX: 1952) and several private companies. From August 2011 to
December 2013, Mr. Fu served as the general manager of the investment department at Far East Horizon International, a financial services organization.
Mr. Fu served as a partner and the head of the Beijing office of Themes Investment Management Ltd, a private equity firm specializing in healthcare and
environmental businesses, from July 2010 to July 2011. From March 2008 to April 2010, Mr. Fu worked as an associate director of the private equity
department at Standard Chartered Business Consulting (Beijing) Co., Ltd, where he was mainly responsible for private equity investment in relation to
infrastructure projects. Mr. Fu received his bachelor’s degree in electrical engineering and business administration from Nanyang Technological
University in Singapore in February 2005.
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Lan Kang has served as our director since August 2021. Ms. Kang is currently a managing director at CBC Group, where she is responsible for
managing all the portfolio companies of the Group. Prior to CBC Group, she was an Executive Board Director and SVP of Fosun International and led
Fosun’s insurance business globally. She was also on the board of Fosun Pharma and Fosun United Health Insurance. Prior to joining Fosun, Ms. Kang
was a Senior Client Partner at Korn/Ferry (KF) International. She successfully developed the Life Sciences practice for KF in mainland China,
providing executive search and leadership assessment and human resources consulting to both multinational and local Chinese clients. Prior to that,
Ms. Kang was a management consultant at McKinsey & Company, also focusing on the healthcare practice in China. Ms. Kang also serves as a director
of Everest Medicines Limited (HKEX: 1952), Avantor, Inc. (NYSE: AVTR) and several private companies.
Xi (Lindsay) Liu, Ph.D., has served as our director since December 2021. Dr, Liu joined Hony Capital in August 2011, with current position as the
Partner of Hony Life Sciences Ventures. Dr, Liu has over 10 years of experiences in the private market, with a focus on biopharma, biotech and
diagnostics. Dr. Liu received her bachelor’s degree in biological sciences from China Agricultural University in 2006, and her Ph.D. in biomedicine
from University of Pittsburgh School of Medicine in 2011.
Ruyi He, M.D., has served as our director since June 2021. Dr. He is the Chief Medical Officer (CMO) of RemeGen Inc and Venture Partner of
SDIC Fund Management Co., the former Chief Scientist at the Center for Drug Evaluation at the National Medical Products Administration (NMPA).
He joined the NMPA in 2016, after having worked at the U.S. Food and Drug Administration (FDA) for almost two decades. As the first overseas expert
hired by NMPA as the Chief Scientist, Dr. He organized and led many NMPA reforms on the drug evaluation system. In addition to establishing
guidance for drug evaluation and approvals in China, Dr. He has also introduced multiple international policies into the NMPA, including conditional
approval and acceptance of clinical data from abroad. Dr. He received his medical degree from China Medical University. Dr. He received his bachelor’s
degree and master’s degree in medical from China Medical University in 1983 and 1986, respectively, and his M.D. in Internal Medicine from Howard
University in 1999. He completed his residency training in Internal Medicine at Howard University Hospital in Washington DC and received his clinical
and research training at the National Institute of Diabetes and Digestive and Kidney Diseases (NIDDK) at the National Institutes of Health (NIH) in
Bethesda, Maryland. Dr. He is a licensed, board-certified physician in Internal Medicine in the United States.
Rong Shao, Ph.D., has served as our director since June 2021. Dr. Shao is a professor of drug administration policies and regulations, the
Executive Deputy Director of the Research Center of National Drug Policy & Ecosystem (NDPE) and the Director of the NMPA Key Laboratory of
Drug Regulatory Innovation and Evaluation, at China Pharmaceutical University. Dr. Shao has been engaged in the research and education of drug
policies and regulations for more than three decades and has contributed to the development of China’s drug regulatory innovation and reform, including
serving as an expert committee member for NMPA in the revision of Drug Administration Law (2019). Dr. Shao is currently a board member and the
committee chair in academic associations, such as the China Pharmaceutical Association and the China Society for Drug Regulation. She is also an
editorial board member of China Pharmacy, Chinese Journal of New Drugs, and Chinese Journal of Health Policy. Dr. Shao holds a Ph.D. in Pharmacy
Administration from Shenyang Pharmaceutical University, bachelor’s degree in Medicinal Chemistry from China Pharmaceutical University, and
bachelor’s degree in Law from Nanjing University. Dr. Shao is also a Chinese practicing lawyer.
Chun Kwok Alan Au has served as our director since January 2020. Mr. Au is the founder of GT Healthcare, a private equity fund focusing on
cross border healthcare investments, and has served as the managing partner of GT Healthcare since September 2015. Mr. Au has served as a member of
the board, and the chairman of the audit committee of CSPC Pharmaceutical Group (HKEX: 1093), a leading pharmaceutical group in China, since
January 2021. Mr. Au also has served as a panel member for the Entrepreneur Support Scheme (ESS Program) of the Innovation and Technology Fund
of the Hong Kong SAR Government since 2014. Mr. Au was an advisor to Simcere Pharmaceutical Group, a leading pharmaceutical company in China
(previously listed on NYSE: SCR, privatized in December 2013, when Mr. Au served as chairman of the special committee on the board of directors).
Mr. Au was also a member of the board of China Nepstar Chain Drugstore Ltd. (NYSE: NPD, privatized in September 2016) from March 2013 to
August 2016. He was also a member of the board of Cellular BioMedicine Group (Nasdaq: CBMG, privatized in February 2021), a clinical-stage
biopharmaceutical firm engaged in the development of immunotherapies for cancer and stem cell therapies from November 2014 to February 2021.
Prior to these, Mr. Au served as the head of the Asia Healthcare Investment Banking of Deutsche Bank Group, advising healthcare IPOs and M&A in
the region from April 2011 to December 2012. Prior to that, Mr. Au served as the executive director at JAFCO Asia Investment Group, responsible for
healthcare investments in China from 2008 to 2010. Mr. Au worked at Morningside Group as a director in charge of healthcare investments in Asia from
2000 to 2005. Mr. Au also worked at KPMG and KPMG Corporate Finance from 1995 to 1999. Mr. Au received his bachelor’s degree in psychology
from Chinese University of Hong Kong in 1995 and his master’s degree in management from Columbia Business School in New York in 2007. Mr. Au
is a certified public accountant (CPA) in the U.S. and a chartered financial analyst (CFA). He is a member of the Hong Kong Institute of Financial
Analysts and member of the American Institute of Certified Public Accountants.
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Conor Chia-hung Yang has served as our director since January 2020. Mr. Yang has also served as the chief financial officer of TalkingData, a
third-party data intelligence provider in China since December 2021. Prior to joining TalkingData, Mr. Yang was a co-founder of Black Fish Group
Limited and has served as the president of Black Fish Group Limited since November 2017 to February 2021. Prior to that, Mr. Yang was the chief
financial officer of Tuniu Corporation (Nasdaq: TOUR) from January 2013 to November 2017, the chief financial officer of E-Commerce China
Dangdang Inc. from March 2010 to July 2012 and the chief financial officer of AirMedia Group Inc., currently known as AirNet Technology Inc.,
(Nasdaq: ANTE) from March 2007 to March 2010. Mr. Yang was the chief executive officer of Rock Mobile Corporation from 2004 to February 2007.
From 1999 to 2004, Mr. Yang served as the chief financial officer of the Asia Pacific region for CellStar Asia Corporation. Mr. Yang was an executive
director of Goldman Sachs (Asia) L.L.C. from 1997 to 1999. Prior to that, Mr. Yang was a vice president of Lehman Brothers Asia Limited from 1994 to
1996 and an associate at Morgan Stanley Asia Limited from 1992 to 1994. Mr. Yang currently also serves as an independent director of Ehang Holdings
Limited (Nasdaq: EH) and iQIYI, Inc. (Nasdaq: IQ). Mr. Yang received a master’s degree of business administration from University of California, Los
Angeles in 1992.
Pamela M. Klein, M.D., has served as our director since January 2020. Dr. Klein currently serves a director of Spring Bank Pharmaceuticals, Inc.
(Nasdaq: SBPH) since July 2019, a director of argenx SE (Nasdaq: ARGX) since April 2016, a director of Jiya Acquisition Corp (Nasdaq: JYAC) since
January 2021 and a director of Patrys Limited (ASX: PAB) since October 2019. In addition, Dr. Klein has served as the president at PMK BioResearch
since 2008, offering consultancy in Oncology Drug Development to Biotech, Pharma and the Investment Community. Dr. Klein has also served as the
consulting chief medical officer at Olema Oncology since 2018. Previously, Dr. Klein served as Chief Medical Officer for successful biotech start-ups
and prior to that, Vice President, Genentech, Development. Dr. Klein received her bachelor’s degree in cell and molecular biology from California State
University in 1985 and an M.D. from Stritch School of Medicine, Loyola University Chicago in 1992 followed by an internal medicine residency at
Cedars Sinai, Los Angeles. Dr. Klein spent seven years at the National Cancer Institute of the NIH in Bethesda, Maryland in medical oncology.
Weimin Tang, Ph.D., has served as our executive vice president of global business development since April 2018 and as our chief business officer
since July 2021. Prior to joining our company, Dr. Tang served as an executive director and a business director at Hengrui Therapeutics, Inc. from July
2015 to March 2018. Dr. Tang served as the vice president and a business director at Crown Bioscience Inc., a pre-clinical contract research
organization, from July 2011 to July 2015. Prior to that, Dr. Tang served as the vice president and a business director at ShanghaiBio Corporation
Shanghai Biotechnology Cooperation, a biotech company based in Shanghai, from October 2010 to July 2011. Dr. Tang received his bachelor’s degree
in plant pathology from Zhejiang University in 1986, master’s degree in microbiology from Chinese Academy of Sciences in 1989, and Ph.D. in
biochemistry from Rutgers University, New Jersey in 1997.
Ivan Yifei Zhu has served as our chief commercial officer since August 2020. Mr. Zhu has more than 20 years of successful commercialization
experience at global and domestic pharma and biotech companies. Prior to joining us, Mr. Zhu served as vice president and general manager of the sales
division of Qilu Pharmaceutical Group where he managed the company’s sales and marketing team. From April 2018 to March 2019, Mr. Zhu served as
the chief commercial officer of BeiGene (HKEX: 6160) where he played an instrumental role in the expansion of BeiGene’s commercialization team
and the implementation of its commercialization strategies. Mr. Zhu also worked for Xi’an Janssen for more than 20 years where he held various senior
management positions. During this period, he built and managed numerous business units, covering a wide range of therapeutic areas including
oncology, immunotherapy, skin diseases, infectious diseases and the central nervous system. Mr. Zhu received his bachelor’s degree in medicine from
Zhejiang University in 1992.
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Gigi Qi Feng has served as our chief communications officer since October 2020 and served as our vice president and global head of corporate
communications from April 2020 to October 2020. Prior to joining us, Ms. Feng served as Amgen’s Japan Asia Pacific regional head of corporate affairs
from March 2018 to March 2020, where she led communications efforts including executive communications, media relations, employee engagement
and philanthropy to build the Amgen brand across 14 markets in the Asia Pacific region. Prior to joining Amgen, Ms. Feng held progressive China, Asia
Pacific and global communications leadership roles at Sanofi from November 2013 to March 2018, positioning the company as a scientific partner of
choice. Prior to that, Ms. Feng led the strategic communications group at an international public affairs consultancy from December 2009 to November
2013 with a focus on the healthcare industry. She also worked at the U.S. Consulate General in Shanghai from 2005 to 2009, where she managed
consulate-wide communications and large-scale events. Ms. Feng received her bachelor’s degree in Government and Asian studies from Cornell
University in 2003 and completed an EMBA program in business strategy from Harvard Business School in 2015.
Richard Cheng Li has served as our chief legal officer since March 2021. From December 2013 to May 2018 and from April 2020 to March 2021,
Mr. Li worked at the Shanghai office of Covington & Burling LLP, a U.S. law firm, with his last position being an of counsel, leading the firm’s China
life sciences transaction practice. From May 2018 to March 2020, Mr. Li served as the legal director of 6 Dimensions Capital, a life sciences venture
capital firm, in charge of all the legal matters relating to 6 Dimensions’ global investments. From August 2008 to June 2012 and from September 2013
to December 2013, Mr. Li worked in the corporate practice group in the Shanghai office of Hogan Lovells International LLP, an international law firm.
Mr. Li received his bachelor’s degree in law in 2006 and master’s degree in international law in 2008 from Sun Yat-sen University, and his LL.M.
degree from Columbia Law School in 2013. Mr. Li has been admitted to the New York State bar and passed the PRC bar exam.
Yunhan Lin, Ph.D., has served as our vice president of corporate development since September 2017. Prior to joining our company, Dr. Lin served
as the head of business development at Mycenax Biotech Inc., a Taiwan-based public pharmaceutical company, from January 2016 to September 2017.
Prior to that, Dr. Lin served as the head of business development at SynCore Biotechnology Co., Ltd, a Taiwan-based public biopharmaceutical
company, from February 2012 to December 2015. Dr. Lin worked as a science project deputy manager at Sinphar Pharmaceutical Co, Ltd., a Taiwan-
based pharmaceutical company, from September 2001 to January 2012. Dr. Lin received his bachelor’s degree in applied chemistry from Providence
University, Taiwan in 2000, master’s degree in chemistry from Fu Jen Catholic University, Taiwan in 2003, and Ph.D. in chemistry from Tamkang
University, Taiwan in 2008.
Our Scientific Advisory Board
The members of our scientific advisory board provide scientific, portfolio and project strategy advice to us, including the evaluation of research
and development strategies. The members of our scientific advisory board receive cash compensation for their services.
Howard Weiner, M.D., has served on our scientific advisory board since July 2019. Dr. Weiner is the Robert L. Kroc Professor of Neurology at the
Harvard Medical School, Director of the Partners Multiple Sclerosis (“MS”) Center and Co-Director of Center for Neurologic Diseases at Brigham &
Women’s Hospital in Boston. The Partners MS Center is the first integrated MS Center that combines clinical care, MRI imaging and immune
monitoring to the MS patient as part of the 2000 patient CLIMB cohort study. Dr. Weiner has pioneered immunotherapy in MS and has investigated
immune mechanisms in nervous system diseases including MS, Alzheimer’s disease, amyotrophic lateral sclerosis, stroke and brain tumors. Dr. Weiner
has also pioneered the investigation of the mucosal immune system for the treatment of autoimmune and other diseases and the use of anti-CD3 to
induce regulatory T cells for the treatment of these diseases.
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Eric K. Rowinsky, M.D., has served on our scientific advisory board since June 2019. Dr. Rowinsky is an independent consultant and/or board
member of various public and private companies and not-for-profit efforts. Since 2017, Dr. Rowinsky has served as an advisor to C-Bridge Capital and
the U.S. Chief Medical Officer for Everest Medicines, Inc. Since 2015, Dr. Rowinsky has served as an Executive Director and President at Rgenix Inc.
and as the Chief Scientific Officer of Clearpath Development Co. From 2005 to 2015, Dr. Rowinsky held various positions with various biotechnology
companies. At ImClone Systems (now a wholly-owned subsidiary of Eli Lilly), Dr. Rowinsky and his team developed and registered cetuximab
(Erbitux) and ramucirumab in five indications and two other monoclonal antibodies in North America and elsewhere. Dr. Rowinsky has been an Adjunct
Professor of Medicine at New York University School of Medicine since 2005. From 1987 to 2005, Dr. Rowinsky held various academic and research
positions with various universities and research institutions including the Institute for Drug Development of the Cancer Therapy and Research Center in
San Antonio, where he held the SBC Endowed Chair for Early Drug Development, and the Johns Hopkins University School of Medicine.
Dr. Rowinsky received his B.A. degree from New York University and his M.D. from the Vanderbilt University School of Medicine and completed
fellowship training at the Johns Hopkins University School of Medicine. Dr. Rowinsky received the career development award of the American Cancer
Society and the 6th Annual Emil J. Freireich Award. He has also served on the Board of Scientific Counselors of the NCI. Dr. Rowinsky is the
Editor-in-Chief of Investigational New Drugs, an Editorial Board Member of Cancer Research and several other oncology journals.
Patricia LoRusso, D.O., M.A., Ph.D., has served on our scientific advisory board since July 2019. Dr. LoRusso is currently a professor of
medicine and a clinical scholar in medical oncology and Associate Director of Innovative Medicine at Yale Cancer Center in New Haven, Connecticut,
USA, where she is also Director of Early Therapeutics Disease-Aligned Team. Dr. LoRusso’s expertise is in testing new treatments on patient volunteers
with advanced-stage cancer. She heads the early clinical trials program at Yale Cancer Center. She has served as the co-leader of the Stand Up To
Cancer/Melanoma Research Alliance–funded Melanoma Dream Team, a Komen Promise grant co-Principal Investigator, and has been a Principal
Investigator of the National Cancer Institute Phase 1/early phase clinical trials program grant in excess of 20 years. She is currently primary investigator
or co-investigator of numerous clinical trials. Prior to joining Yale in August 2014, Dr. LoRusso served in numerous leadership roles at Wayne State
University’s Barbara Karmanos Cancer Institute for more than 25 years, most recently as director of the Phase 1 Clinical Trials Program and of the
Eisenberg Center for Experimental Therapeutics. Dr. LoRusso also worked as a director in Karmanos Cancer Institute, a cancer research and provider
network, from 1997 to 2014. Dr. LoRusso received her B.A. degree of science in religion/religious studies and biology, her master’s degree at Yale
University, her D.O. and Ph.D. from Michigan State University, and completed fellowship training at Wayne State University. Dr. LoRusso served as
co-chair of the National Cancer Institute Cancer Therapy Evaluation Program (NCI CTEP) Investigational Drug Steering Committee, a prior parent
member of the NCI’s Quick Trials Clinical Subcommittee, and has served as either an ad hoc or an appointed member on multiple study sections and
has reviewed for Komen Promise grants, numerous SPORE and P01 study sections, and translational research grants. She has served on the education
and scientific committees of the American Society of Clinical Oncology, the Scientific Committee of the American Association for Cancer Research as
well as a Vice-Chair for the 2019 AACR annual meeting. She is a member of the NCI Board of Scientific Council and has served on the Board of
Directors for the American Association for Cancer Research.
Yi-Long Wu, M.D., FACS, has served on our scientific advisory board since August 2019. Yi-Long Wu is a tenured professor of Guangdong
General Hospital, Guangdong Academy of Medical Sciences and Guangdong Lung Cancer Institute. He is the former President of Chinese Society of
Clinical Oncology (CSCO), the Chief of the WUJIEPING Oncology Medical Foundation, the vice-director of the Precision Medicine of the Chinese
Medical Doctor Association, the President of Chinese Thoracic Oncology Group (C-TONG), the President of International Chinese Society of Thoracic
Surgery (ICSTS), a Fellow of the American College of Surgeons, a Member of Board of Directors of the International Association Study of Lung
Cancer (IASLC), the Chairman of European Society for Medical Oncology (ESMO) in China, the Chairman of Federation of Asia Clinical Oncology
(FACO), a past Member of the International Affairs Committee of American Society of Clinical Oncology (ASCO), and a former Member of staging
committee of the IASLC. He graduated from Sun Yat-sen University of Medical Sciences in 1982 and completed his thoracic surgery training in
Germany in 1989. His main research interests are the multidisciplinary synthetic therapy on lung cancer in translation medicine and evidence-based
medicine in oncology. He is leading the Chinese lung cancer research field and has been the Principal Investigator or Co-PI of more than 120
international or national multicenter clinical trials. He has contributed 20 books on cancer and has published more than 300 articles in peer-reviewed
journals including J Clin Oncol, Lancet Oncol, New Engl J Med, Cancer Cell and J Thorac Oncol. He also serves on the editorial boards of Cancer
Letters, Annals of Surgical Oncology, Lung Cancer Management, International Journal of Biological Marker and General Thoracic and Cardiovascular
Surgery. He is Editor-in-Chief of Journal of Evidence-based Medicine, Journal of Thoracic Oncology (Chinese Edition), and The Oncologist (Chinese
Edition) etc.
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Timothy Yap, M.D., Ph.D., has served on our scientific advisory board since August 2019. Dr. Yap is a medical oncologist and physician-scientist
based at the University of Texas MD Anderson Cancer Center. He is an Associate Professor in the Department for Investigational Cancer Therapeutics
(Phase I Program), and the Department of Thoracic/Head and Neck Medical Oncology. Dr. Yap is the Medical Director of the Institute for Applied
Cancer Science, a drug discovery biopharmaceutical unit where drug discovery and clinical translation are seamlessly integrated. He is also the
Associate Director of Translational Research in the Institute for Personalized Cancer Therapy, which is an integrated research and clinical trials program
aimed at implementing personalized cancer therapy and improving patient outcomes. Prior to his current position, Dr. Yap was a Consultant Medical
Oncologist at The Royal Marsden Hospital in London, UK and National Institute for Health Research BRC Clinician Scientist at The Institute of Cancer
Research, London, UK. Dr. Yap gained his BSc degree with First Class Honors in Immunology and Infectious Diseases at Imperial College London,
UK, and was awarded the Huggett Memorial Prize. His BSc laboratory research involved an immunogenetics study under the supervision of Professor
Charles Bangham. He subsequently went on to attain his Medical degree from Imperial College London, UK, before completing general medical
training in Oxford. Dr. Yap’s main research focuses on the first-in-human and combinatorial development of molecularly targeted agents and
immunotherapies, and their acceleration through clinical studies using novel predictive and pharmacodynamic biomarkers. Dr. Yap leads immuno-
oncology clinical and associated translational studies, including novel agents targeting PD-1/PD-L1, ICOS, IDO, LAG3, TIM3, STING, TGFbeta,
adenosine A2A receptor and fucosylation. He was previously the UK Chief Investigator for the CheckMate 331 Phase III trial in relapsed small cell lung
cancer and the KEYNOTE-158 Phase II biomarker study in advanced solid tumors and multiple novel immunotherapy combination phase I trials.
Roy S. Herbst, M.D., Ph.D., has served on our scientific advisory board since July 2019. Dr. Roy S. Herbst is an Ensign Professor of Medicine
(Medical Oncology) and Professor of Pharmacology, the Chief of Medical Oncology at Yale Cancer Center and Smilow Cancer Hospital, and an
Associate Cancer Center Director for Translational Research, Yale Cancer Center in New Haven, CT. Dr. Herbst is nationally recognized for his
leadership and expertise in lung cancer treatment and research. He is best known for his work in developmental therapeutics and the personalized
therapy of non-small cell lung cancer, in particular the process of linking genetic abnormalities of cancer cells to novel therapies. Prior to his
appointment at Yale, Dr. Herbst was the Barnhart Distinguished Professor and Chief of the Section of Thoracic Medical Oncology in the Department of
Thoracic/Head and Neck Medical Oncology, at The University of Texas M.D. Anderson Cancer Center (UT-MDACC) in Houston, Texas. He also
served as Professor in the Department of Cancer Biology and Co-Director of the Phase I Clinical Trials Program. He has led the Phase I development of
several of the new generation of targeted agents for non-small cell lung cancer (NSCLC), including gefitinib, erlotinib, cetuximab, and bevacizumab.
More recently, he participated in the successful registration of pembrolizumab for the treatment of advanced non-small cell lung cancer, following the
successful Yale-led KEYNOTE 10 study of the immune therapy drug commonly used to treat other cancers. He was co-leader for the BATTLE-1
clinical trial program, co-leads the subsequent BATTLE-2 clinical trial program, and served as a Co-program Leader of the Developmental Therapeutics
Program for the YCC Support Grant. Dr. Herbst’s laboratory work is focused on immunotherapy angiogenesis; dual epidermal growth factor receptor
(EGFR)/vascular endothelial growth factor receptor (VEGFR) inhibition in NSCLC, and targeting KRAS-activated pathways. More recently, he has
explored predictive biomarkers for the use of immunotherapy agents. This work has been translated from the preclinical to clinical setting in multiple
Phase II and III studies which he has led. After earning a B.S. and M.S. degree from Yale University, Dr. Herbst earned his M.D. at Cornell University
Medical College and his Ph.D. in molecular cell biology at The Rockefeller University in New York City, New York. His postgraduate training included
an internship and residency in medicine at Brigham and Women’s Hospital in Boston, Massachusetts. His clinical fellowships in medicine and
hematology were completed at the Dana-Farber Cancer Institute and Brigham and Women’s Hospital, respectively. Subsequently, Dr. Herbst completed
a M.S. degree in clinical translational research at Harvard University in Cambridge, Massachusetts. Dr. Herbst is an author or co-author of more than
275 publications, including peer-reviewed journal articles, abstracts, and book chapters. His work has been published in many prominent journals, such
as the Journal of Clinical Oncology, Clinical Cancer Research, Lancet, the New England Journal of Medicine, and Nature. Dr. Herbst was a member of
the National Cancer Policy Forum (1998-2014) for which he organized an Institute of Medicine meeting focused on policy issues in personalized
medicine. He is a member of ASCO and, as a member of AACR, he chairs the Tobacco Task Force. He is a fellow of the American College of
Physicians and an elected member of the Association of American Physicians. Dr. Herbst is also a member of the medical advisory committee for the
Lung Cancer Research Foundation and chair of the communications committee for ASCO and the International Association for the Study of Lung
Cancer. He is currently the Vice Chair for Developmental Therapeutics for the Southwestern Oncology Group (SWOG) Lung Committee, Principal
Investigator of the SWOG 0819 trial, and steering committee chair for the Lung Master Protocol (Lung MAP).
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Chen Dong, Ph.D., has served on our scientific advisory board since September 2020. Dr. Dong is a professor and the director of the Institute for
Immunology at Tsinghua University. Prior to joining Tsinghua University in 2013, Dr. Dong served as a professor of immunology and the director of the
Center for inflammation and Cancer at the University of Texas MD Anderson Cancer Center from 2004 to 2013. Dr. Dong’s research focuses on
understanding the molecular mechanisms whereby immune and inflammatory responses are normally regulated, and applying this knowledge to the
understanding and treatment of autoimmunity and allergy disorders as well as cancer. The work from Dr. Dong’s group has led to the discoveries of
Th17 and T follicular helper (Tfh) cell subsets in the immune system and elucidation of their biological and pathological functions. Dr. Dong has over
200 publications and was rated highly cited researcher for six years from 2014 to 2019. The honors he has received include the 2009 American
Association of Immunologists-BD Bioscience Investigator Award and 2019 International Cytokine and Interferon Society Biolegend-William E. Paul
Award. He is a fellow of the American Association for the advancement of Science and a member of the Chinese Academy of Sciences. Dr. Dong is
currently an Editor for Immunity, Editor-in-chief for Frontiers in Immunology- T Cell Biology and Associate Editor for China Sciences- Life Sciences.
Jun Ma, has served on our scientific advisory board since December 2020. Dr. Ma is Chief Physician, Professor, Doctoral Supervisor, Director of
Harbin Institute of Hematology & Oncology, Chief Supervisor of Supervisory Committee, Chinese Society of Clinical Oncology (CSCO), Vice
Chairman of ACOS, Chairman of Union for China Leukemia Investigators of CSCO, Past-Vice Chairman of Chinese Society of Hematology, Vice
Chairman of CMDA for Hematologist Committee, Vice Chairman of CMDA for Oncology Committee and Past-Chairman of Union for China
Lymphoma Investigators of CSCO. Dr. Ma studied in the University of Tokyo Hospital since 1979. He was devoted to giving the treatment for benign
and malignant diseases of hematological system. He earns the fame for treating Leukemia and lymphoma. In 1982, he built the very first multiple
hematopoietic progenitor cells culture system in vitro in China. Since 1983, he used the sequential therapy of ATRA and ATO to treat APL for 1200
cases or so. And disease free survival (DFS) were 85% in 10 years, which achieved international advanced level. He has published about 200 articles in
Journals from home and abroad, with over 40 monographs and has earned 20 national, provincial and municipal Science & Technology awards. He has
taken 8 programs from National R&D Program (863 Program) and 25 projects from provincial, municipal scientific research project.
B. Compensation.
For the fiscal year ended December 31, 2021, we paid an aggregate of approximately US$10.2 million for salaries and benefits in cash to our
executive officers. We did not pay any compensation to our directors who are not our executive officers. We have not set aside or accrued any amount to
provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries are required by law to make
contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and
other statutory benefits and a housing provident fund.
Employment Agreements and Indemnification Agreements
We have entered into employment agreements with all of our executive officers. Under these agreements, each of our executive officers is
employed for a specified time period. We may terminate employment for cause, at any time, for certain acts of the executive officer, such as continued
failure to satisfactorily perform, willful misconduct or gross negligence in the performance of agreed duties, conviction or nolo contendere plea of guilty
to any felony or any misdemeanor involving moral turpitude, or dishonest act that result in material harm to our detriment, or material breach by the
executive officer of the employment agreement. We may also terminate an executive officer’s employment without cause upon a 60-day prior written
notice. In such case of termination by us, we will provide severance payments to the executive officer as may be agreed between the executive officer
and us. The executive officer may resign at any time with a 60-day prior written notice.
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Under these agreements, each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment
agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant
to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients,
or the confidential or proprietary information of any third party received by us and for which we have confidential obligations. The executive officers
have also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during the
executive officer’s employment with us and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents,
copyrights and other legal rights for these inventions, designs and trade secrets.
In addition, under these agreements, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the
term of his or her employment and typically for one year following the last date of employment. Specifically, each executive officer has agreed not to
(i) approach our suppliers, clients, direct or end customers or contacts or other persons or entities introduced to the executive officer in his or her
capacity as a representative of us for the purpose of doing business with such persons or entities that will harm our business relationships with these
persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or
otherwise, any of our competitors, without our express consent; or (iii) seek directly or indirectly, to solicit the services of any of our employees who is
employed by us on or after the date of the executive officer’s termination, or in the year preceding such termination, without our express consent.
We have also entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree to
indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by
reason of their being a director or officer of our company.
Share Incentive Plans
Second Amended and Restated 2017 Employee Stock Option Plan
In October 2017, we adopted an equity incentive plan (as last amended and restated in December 2019), which we refer to as the 2017 Plan, to
secure and retain the services of valuable employees, directors or consultants, and provide incentives for such persons to exert their best efforts for the
success of our business. The maximum aggregate number of ordinary shares which may be issued pursuant to all awards under the 2017 Plan is
9,609,084, subject to certain adjustments. As of March 31, 2022, options to purchase an aggregate of 2,207,863 ordinary shares under the 2017 Plan had
been granted and remained outstanding, excluding options that were forfeited, cancelled or exercised after the relevant grant date.
The following paragraphs describe the principal terms of the 2017 Plan.
Types of awards.
The 2017 Plan permits the awards of options.
Plan administration.
Our board of directors will administer the 2017 Plan. The board of directors will determine, among other things, the participants to receive
options, the number and subscription price of options to be granted to each participant, and the terms and conditions of each option granted.
Offer letter.
Options granted under the 2017 Plan are evidenced by an offer letter that sets forth terms, conditions and limitations for each option, which may
include the term of the option, and the provisions applicable in the event that the grantee’s employment or service terminates.
Eligible participants.
We may grant awards to employees, officers, directors, contractors, advisors and consultants of our company.
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Vesting schedule.
Unless otherwise approved by the board of directors and set forth in an offer letter, the vesting schedule is a three-year vesting schedule consisting
of a cliff vesting 50% on the second anniversary of the applicable vesting commencement date, and a vesting of the remaining 50% on the third
anniversary of the applicable vesting commencement date. Except as otherwise approved by the board of directors, vested portion of option becomes
exercisable upon the earlier of a listing or the occurrence of a change in control.
Exercise of options.
The board of directors determines the subscription price for each option, which is stated in the offer letter. The vested portion of each option will
expire if not exercised prior to the time as the board of directors determines at the time of its grant. However, the maximum exercisable term is ten years
from the applicable vesting commencement date or such shorter period specified in the award agreement. Further, an option will lapse upon the earliest
of, among other circumstances, two years after the date when the option becomes exercisable upon the listing or the occurrence of a change in control,
and a violation in transfer restrictions.
Transfer restrictions.
Options may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the 2017 Plan or the
relevant offer letter or otherwise determined by the board of directors, such as transfers by will or the laws of descent and distribution.
Termination and amendment of the 2017 Plan.
Unless terminated earlier, the 2017 Plan has a term of ten years. The board of directors has the authority to amend, suspend or terminate the plan,
subject to the limitations of applicable laws. No amendment, suspension or termination may adversely affect in any material way any awards previously
granted pursuant to the 2017 Plan unless agreed to by the participant.
The following table summarizes, as of March 31, 2022, the number of ordinary shares underlying outstanding options that we granted under the
2017 Plan, excluding options that were forfeited, cancelled or exercised after the relevant grant date.
Name
Zheru Zhang
Weimin Tang
Yunhan Lin
Other grantees
Total
Note:
Ordinary
Shares
Underlying
Outstanding Options
*
*
*
2,092,505
2,207,863
Exercise
Price
(US$/Share)
1.00
1.00
1.00
1.00
Date of Grant
October 1, 2017
April 2, 2018
October 1, 2017
October 1, 2017
to December 28, 2018
Date of
Expiration
October 1, 2027
October 1, 2027
October 1, 2027
October 1, 2027
*
Less than 1% of our total outstanding shares.
Second Amended and Restated 2018 Employee Stock Option Plan
In February 2019, we adopted an equity incentive plan (as last amended and restated in December 2019), which we refer to as the 2018 Plan, to
secure and retain the services of valuable employees, directors or consultants, and provide incentives for such persons to exert their best efforts for the
success of our business. The maximum aggregate number of ordinary shares which may be issued pursuant to all awards under the 2018 Plan is
11,005,888, subject to certain adjustments. As of March 31, 2022, awards to purchase an aggregate of 1,825,091 ordinary shares under the 2018 Plan
had been granted and remained outstanding, excluding options that were forfeited, cancelled or exercised after the relevant grant date.
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The following paragraphs describe the principal terms of the 2018 Plan.
Types of awards.
The 2018 Plan permits the awards of options.
Plan administration.
Our board of directors will administer the 2018 Plan. The board of directors will determine, among other things, the participants to receive
options, the number and subscription price of options to be granted to each participant, and the terms and conditions of each option granted.
Offer letter.
Options granted under the 2018 Plan are evidenced by an offer letter that sets forth terms, conditions and limitations for each option, which may
include the term of the option, and the provisions applicable in the event that the grantee’s employment or service terminates.
Eligible participants.
We may grant awards to employees or if approved by the board, designee of any employee.
Vesting schedule.
Unless otherwise approved by the board of directors and set forth in an offer letter, the vesting schedule is a two-year vesting schedule consisting
of a cliff vesting 50% on the first anniversary of the applicable vesting commencement date, and a vesting of the remaining 50% on the second
anniversary of the applicable vesting commencement date. Notwithstanding the foregoing, if a listing occurs at any time prior to any option granted
under the 2018 Plan becoming full vested, and to the extent such option has been granted and outstanding, any such option will vest in full with
immediate effect upon the listing. Except as otherwise approved by the board of directors, vested portion of option becomes exercisable upon the earlier
of six months after a listing or the occurrence of a change in control; provided, however that in each case, no option of an employee will become
exercisable until the third anniversary of such employee’s employment commencement date.
Exercise of options.
The board of directors determines the subscription price for each option, which is stated in the offer letter. The vested portion of each option will
expire if not exercised prior to the time as the board of directors determines at the time of its grant. However, the maximum exercisable term is ten years
from the applicable vesting commencement date or such shorter period specified in the award agreement. Further, an option will lapse upon the earliest
of, among other circumstances, two years after the date when the option becomes exercisable upon the listing or the occurrence of a change in control,
and a violation in transfer restrictions.
Transfer restrictions.
Options may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the 2018 Plan or the
relevant offer letter or otherwise determined by the board of directors, such as transfers by will or the laws of descent and distribution.
Termination and amendment of the 2018 Plan.
Unless terminated earlier, the 2018 Plan has a term of ten years. The board of directors has the authority to amend, suspend or terminate the plan,
subject to the limitations of applicable laws. No amendment, suspension or termination may adversely affect in any material way any awards previously
granted pursuant to the 2018 Plan unless agreed to by the participant.
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The following table summarizes, as of March 31, 2022, the number of ordinary shares underlying our outstanding options that we granted under
the 2018 Plan, excluding options that were forfeited, cancelled or exercised after the relevant grant date.
Name
Weimin Tang
Yunhan Lin
Other grantees
Total
Note:
*
Less than 1% of our total outstanding shares.
2019 Share Incentive Plan
Ordinary
Shares
Underlying
Outstanding
Options
*
*
*
1,825,091
Exercise
Price
(US$/
Share)
1.00
1.00
1.00
Date of Grant
July 25, 2019
July 25, 2019
July 25, 2019
Date of
Expiration
February 22, 2029
February 22, 2029
February 22, 2029
In October 2019, we adopted an equity incentive plan, which we refer to as 2019 Plan, to promote the success and enhance the value of our
company. Under the 2019 Plan, the maximum aggregate number of ordinary shares available for issuance is 100,000. As of March 31, 2022, options to
purchase an aggregate of 72,000 ordinary shares under the 2019 Plan had been granted and remained outstanding, excluding options that were forfeited,
cancelled or exercised after the relevant grant date.
The following paragraphs describe the principal terms of the 2019 Plan:
Type of Awards.
The plan permits the awards of options, restricted shares, restricted share units or other types of awards approved by the board of directors or a
committee of one or more members of the board of directors.
Plan Administration.
Our board of directors or a committee of one or more members of the board of directors will administer the plan. The committee or the board of
directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms
and conditions of each grant.
Award Agreement.
Awards granted under the plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for each award, which
may include the term of the award, the provisions applicable in the event that the grantee’s employment or service terminates, and our authority to
unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility.
We may grant awards to our independent directors, as determined by a committee of one or more members of the board of directors. Vesting
Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.
Exercise of Options.
The plan administrator determines the exercise price for each award, which is stated in the relevant award agreement. Options that are vested and
exercisable will terminate if they are not exercised prior to the time as the plan administrator determines at the time of grant. However, the maximum
exercisable term is ten years from the date of grant.
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Transfer Restrictions.
Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in the plan or the relevant
award agreement or otherwise determined by the plan administrator, such as transfers by will or the laws of descent and distribution.
Termination and Amendment of the Plan.
Our board of directors has the authority to terminate, amend, suspend or modify the plan in accordance with our articles of association. However,
without the prior written consent of the participant, no such action may adversely affect in any material way any award previously granted pursuant to
the plan.
The following table summarizes, as of March 31, 2022, the number of ordinary shares underlying outstanding options that we granted under the
2019 Plan, excluding options that were forfeited, cancelled or exercised after the relevant grant date.
Name
Chun Kwok Alan Au
Conor Chia-hung Yang
Pamela M. Klein
Total
Note:
*
Less than 1% of our total outstanding shares.
2020 Share Incentive Plan
Ordinary
Shares
Underlying
Outstanding
Options
*
*
*
72,000
Exercise
Price
(US$/Share)
6.09
6.09
6.09
Date of Grant
April 30, 2020
April 30, 2020
April 30, 2020
Date of Expiration
April 30, 2030
April 30, 2030
April 30, 2030
In July 2020, we adopted 2020 Share Incentive Plan, which we refer to as the 2020 Plan, to promote the success and enhance the value of our
company. Under the 2020 Plan, the maximum aggregate number of ordinary shares which may be issued pursuant to all awards is 10,760,513 ordinary
shares; provided that the maximum number of ordinary shares may be issued pursuant to awards in the form of restricted share units under the 2020 Plan
should not exceed 7,686,081 ordinary shares. As of March 31, 2022, options to purchase an aggregate of 2,968,998 ordinary shares and restricted share
units to receive an aggregate of 2,054,792 ordinary shares under the 2020 Plan had been granted and remained outstanding, excluding awards that were
forfeited, cancelled, exercised or vested after the relevant grant date.
The following paragraphs describe the principal terms of the 2020 Plan:
Type of Awards. The plan permits the awards of options, restricted shares, restricted share units or other share-based awards.
Plan Administration. Our board of directors or one or more committees or subcommittees of the board of directors, or the Committee, will
administer the plan. The Committee or the board of directors, as applicable, will determine the participants to receive awards, the type and number of
awards to be granted to each participant, and the terms and conditions of each grant.
Award Agreement. Awards granted under the plan are evidenced by an award agreement that sets forth the terms, conditions and restrictions for
each award, which may include the term of the award, the provisions applicable in the event that the grantee’s employment or service terminates, and
our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility. We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended to
qualify as incentive share options only to our employees and employees of our subsidiaries.
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Vesting Schedule. The options and restricted share units will vest according to the schedules specified in the plan, unless otherwise determined by
the plan administrator. The vesting schedule of other share-based awards should be determined by the plan administrator, which is specified in the
relevant award agreement.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the relevant award agreement. Options
that are vested and exercisable will terminate if they are not exercised prior to the time as the plan administrator determines at the time of grant.
However, the maximum exercisable term is ten years from the date of grant.
Transfer Restrictions. Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in
the plan or the relevant award agreement or otherwise determined by the plan administrator, such as transfers by will or the laws of descent and
distribution.
Termination and Amendment of the Plan. Our board of directors has the authority to terminate, amend or modify the plan in accordance with our
articles of association.
The following table summarizes, as of March 31, 2022, the number of ordinary shares underlying outstanding options and restricted share units
that we granted under the 2020 Plan, excluding awards that were forfeited, cancelled, exercised or vested after the relevant grant date.
Name
Jingwu Zhang Zang
Zheru Zhang
Weimin Tang
Gigi Qi Feng
Ivan Yifei Zhu
Richard Cheng Li
Yunhan Lin
Other grantees
Ordinary Shares
Underlying Options
and Restricted Share
Units
*(1)
*
*(1)
*
*(1)
*
*(1)
*
*(1)
*
*(1)
*(1)
*
*
*
*
*
*(1)
Exercise Price
(US$/Share)
N/A
9.20
N/A
9.20
N/A
9.20
N/A
9.20
N/A
19.67
N/A
N/A
5.91
9.20
5.91
19.67
9.20
N/A
Date of Grant
September 4, 2020 to March 4, 2022
March 4, 2022
September 4, 2020 to March 4, 2022
March 4, 2022
September 4, 2020 to March 4, 2022
March 4, 2022
September 4, 2020 to March 4, 2022
March 4, 2022
April 1, 2021 to March 4, 2022
April 1, 2021
March 4, 2022
August 14, 2020 to March 4, 2022
August 14, 2020
March 4, 2022
August 14, 2020 to January 11, 2021
April 1, 2021
March 4, 2022
August 14, 2020 to March 4, 2022
Date of Expiration
—
March 4, 2032
—
March 4, 2032
—
March 4, 2032
—
March 4, 2032
—
April 1, 2031
—
—
August 14, 2030
March 4, 2032
January 11, 2031
April 1, 2031
March 4, 2032
—
Total
Note:
5,023,790
*
Less than 1% of our total outstanding shares.
(1) Represents restricted share units.
2021 Share Incentive Plan
In May 2021, we adopted 2021 Share Incentive Plan, which we refer to as the 2021 Plan, to promote the success and enhance the value of our
company. Under the 2021 Plan, the maximum aggregate number of ordinary shares which may be issued pursuant to all awards is 12,023,618 ordinary
shares; provided that the maximum number of ordinary shares may be issued pursuant to awards in the form of restricted share units under the 2021 Plan
should not exceed 6,011,809 ordinary shares. As of March 31, 2022, options to purchase an aggregate of 5,066,693 ordinary shares and restricted share
units to receive an aggregate of 2,426,615 ordinary shares under the 2021 Plan had been granted and remained outstanding, excluding awards that were
forfeited, cancelled, exercised or vested after the relevant grant date.
The following paragraphs describe the principal terms of the 2021 Plan:
Type of Awards. The plan permits the awards of options, restricted shares, restricted share units or other share-based awards.
Plan Administration. Our board of directors or one or more committees or subcommittees of the board of directors, or the Committee, will
administer the plan. The Committee or the board of directors, as applicable, will determine the participants to receive awards, the type and number of
awards to be granted to each participant, and the terms and conditions of each grant.
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Award Agreement. Awards granted under the plan are evidenced by an award agreement that sets forth the terms, conditions and restrictions for
each award, which may include the term of the award, the provisions applicable in the event that the grantee’s employment or service terminates, and
our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.
Eligibility. We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended to
qualify as incentive share options only to our employees and employees of our subsidiaries.
Vesting Schedule. The options and restricted share units will vest according to the schedules specified in the plan, unless otherwise determined by
the plan administrator. The vesting schedule of other share-based awards should be determined by the plan administrator, which is specified in the
relevant award agreement.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the relevant award agreement. Options
that are vested and exercisable will terminate if they are not exercised prior to the time as the plan administrator determines at the time of grant.
However, the maximum exercisable term is ten years from the date of grant.
Transfer Restrictions. Awards may not be transferred in any manner by the participant other than in accordance with the exceptions provided in
the plan or the relevant award agreement or otherwise determined by the plan administrator, such as transfers by will or the laws of descent and
distribution.
Termination and Amendment of the Plan. Our board of directors has the authority to terminate, amend or modify the plan in accordance with our
articles of association.
The following table summarizes, as of March 31, 2022, the number of ordinary shares underlying outstanding options and restricted share units
that we granted under the 2021 Plan, excluding awards that were forfeited, cancelled, exercised or vested after the relevant grant date.
Name
Jingwu Zhang Zang
Zheru Zhang
Weimin Tang
Gigi Qi Feng
Ivan Yifei Zhu
Richard Cheng Li
John Long
Andrew Zhu
Ruiyi He
Rong Shao
Yunhan Lin
Other Grantees
Total
Ordinary Shares
Underlying Options
and Restricted Share
Units
*(1)
*
*(1)
*
*(1)
*
*(1)
*
*(1)
*
*
*(1)
*
*
*(1)
*
*(1)
*
*(1)
*
*(1)
*
*(1)
*
*(1)
*
2,199,145
7,493,308
Note:
*
Less than 1% of our total outstanding shares.
(1) Represents restricted share units.
Date of Grant
July 27, 2021
July 27, 2021
July 27, 2021
July 27, 2021
July 27, 2021
July 27, 2021
July 27, 2021
July 27, 2021
July 27, 2021
July 27, 2021
March 4, 2022
July 27, 2021
July 27, 2021
March 4, 2022
March 4, 2022
March 4, 2022
March 4, 2022
March 4, 2022
June 11, 2021
June 11, 2021
June 11, 2021
June 11, 2021
July 27, 2021
July 27, 2021
July 27, 2021 to March 4, 2022
July 27, 2021
March 4, 2022
Date of
Expiration
—
July 27, 2031
—
July 27, 2031
—
July 27, 2031
—
July 27, 2031
—
July 27, 2031
March 4, 2032
—
July 27, 2031
March 4, 2032
—
March 4, 2032
—
March 4, 2032
—
June 11, 2031
—
June 11, 2031
—
July 27, 2031
—
July 27, 2031
March 4, 2032
Exercise Price
(US$/Share)
N/A
26.39
N/A
26.39
N/A
26.39
N/A
26.39
N/A
26.39
9.20
N/A
26.39
9.20
N/A
9.20
N/A
9.20
N/A
31.23
N/A
31.23
N/A
26.39
N/A
26.39
9.20
190
Table of Contents
Biomaster Trust
Biomaster Trust was established under the trust deed dated October 23, 2019, between us and TMF Trust (HK) Limited, or TMF Trust, as the
trustee of the Biomaster Trust. As of March 31, 2022, all participants in Biomaster Trust are our employees or former employees.
Participants in Biomaster Trust transfer their equity awards granted under the 2017 Plan and the 2018 Plan to TMF Trust for their benefit. Upon
satisfaction of vesting conditions, TMF Trust will exercise the equity awards and transfer the relevant ordinary shares and other rights and interests
under the equity awards to the relevant grant recipients with the consent of the advisory committee. TMF Trust will not exercise the voting rights
attached to such ordinary shares unless otherwise directed by the advisory committee, whose members should be appointed by our company.
C. Board Practices.
Our board of directors consists of 13 directors. On April 29, 2022, Mr. Richard Yeh, our Chief Operating Officer, was appointed as our board
director to fill the seat voluntarily vacated by Mr. Jielun Zhu, our Chief Strategy Officer, on the same day. A director is not required to hold any shares in
our company by way of qualification. Subject to the Nasdaq Global Market rules and disqualification by the chairman of the relevant board meeting, a
director may vote with respect to any contract, proposed contract or arrangement in which he is interested. A director who is interested in a contract,
proposed contract or arrangement should declare the nature of his or her interest at the earliest meeting of the board at which it is practicable for him or
her to do so, either specifically or by way of a general notice. The directors may exercise all the powers of our company to borrow money, mortgage its
undertaking, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of our
company or of any third party. None of our directors who are not our executive officers has a service contract with us that provides for benefits upon
termination of service.
Committees of the Board of Directors
We have established four committees under the board of directors: an audit committee, a compensation committee, a nominating and corporate
governance committee, and an environmental, social and governance (ESG) committee. We have adopted a charter for each of the four committees.
Each committee’s members and functions are described below.
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Audit Committee. Our audit committee consists of Mr. Conor Chia-hung Yang, Mr. Chun Kwok Alan Au and Ms. Xi Liu. Mr. Conor Chia-hung
Yang is the chairperson of our audit committee. We have determined that each of Mr. Conor Chia-hung Yang, Mr. Chun Kwok Alan Au and Ms. Xi Liu
satisfies the “independence” requirements of Rule 5605(c)(2) of the Nasdaq Stock Market Rules and meets the independence standards under Rule
10A-3 under the Exchange Act. We have determined that Mr. Conor Chia-hung Yang qualifies as an “audit committee financial expert.” The audit
committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee
is responsible for, among other things:
•
•
•
•
•
•
•
appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the
independent auditors;
reviewing with the independent auditors any audit problems or difficulties and management’s response;
discussing the annual audited financial statements with management and the independent auditors;
reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor
and control major financial risk exposures;
reviewing and approving all proposed related party transactions;
meeting separately and periodically with management and the independent auditors; and
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our
procedures to ensure proper compliance.
Compensation Committee. Our compensation committee consists of Dr. Jingwu Zhang Zang, Mr. Chun Kwok Alan Au, Dr. Pamela M. Klein, and
Dr. Ruyi He. Dr. Jingwu Zhang Zang is the chairperson of our compensation committee. We have determined that each of Mr. Chun Kwok Alan Au,
Dr. Pamela M. Klein and Dr. Ruyi He satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The
compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to
our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is
deliberated. The compensation committee is responsible for, among other things:
•
•
•
•
reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other
executive officers;
reviewing and recommending to the board for determination with respect to the compensation of our directors who are not our employees;
reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and
selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s
independence from management.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Mr. Wei Fu, Mr. Chun Kwok
Alan Au, Mr. Conor Chia-hung Yang and Dr. Rong Shao. Mr. Wei Fu is the chairperson of our nominating and corporate governance committee. We
have determined that each of Mr. Chun Kwok Alan Au, Mr. Conor Chia-hung Yang and Dr. Rong Shao satisfies the “independence” requirements of
Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The nominating and corporate governance committee will assist the board of directors in selecting
individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate
governance committee is responsible for, among other things:
•
•
•
•
selecting and recommending to the board nominees for election by the shareholders or appointment by the board;
reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge,
skills, experience and diversity;
making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board;
and
advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our
compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on
any corrective action to be taken.
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Environmental, Social and Governance Committee. Our environmental, social and governance committee consists of Mr. John Long, Mr. Chun
Kwok Alan Au and Dr. Rong Shao. Mr. Chun Kwok Alan Au is the chairman of our environmental, social and governance committee. We have
determined that each of Mr. Chun Kwok Alan Au and Dr. Rong Shao satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock
Market Rules. In addition, we will also establish an ESG working group to address daily ESG workflows. The environmental, social and governance
committee is responsible for, among other things:
•
supervising the ESG strategies, policies, long-term sustainability objectives and risks.
Duties of Directors
Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly, and a duty to act
in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. A director must
exercise the skill and care of a reasonably diligent person having both – (a) the general knowledge, skill and experience that may reasonably be expected
of a person in the same position (an objective test), and (b) if greater, the general knowledge, skill and experience that that director actually possesses (a
subjective test). In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association, as amended
from time to time, and the class rights vested thereunder in the holders of the shares. Our company has the right to seek damages if a duty owed by our
directors is breached. A shareholder may in certain limited circumstances have the right to seek damages in our name if a duty owed by the directors is
breached.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and
powers of our board of directors include:
•
•
•
•
•
convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;
declaring dividends and other distributions;
appointing officers and determining the term of office of the officers;
exercising the borrowing powers of our company and mortgaging the property of our company; and
approving the transfer of shares in our company, including the registration of such shares in our share register.
Terms of Directors and Officers
Our directors may be elected by an ordinary resolution of our shareholders. Alternatively, our board of directors may, by the affirmative vote of a
simple majority of the directors present and voting at a board meeting appoint any person as a director to fill a casual vacancy on our board or as an
addition to the existing board. Our directors (other than independent directors) are not automatically subject to a term of office and hold office until such
time as they are removed from office by an ordinary resolution of our shareholders. Our independent directors hold office until the earlier of (i) the date
on which the independent director ceases to be a member of the board for any reason; (ii) the date of termination of an independent director’s director
agreement, which may be terminated by either the independent director or by us with a 30-day advance written notice or such other shorter period as
mutually agreed; or (iii) three years from the effective date of the director agreement, subject to the terms of our current memorandum and articles of
association of our company. In addition, a director will cease to be a director if he or she (i) becomes bankrupt or makes any arrangement or composition
with his or her creditors; (ii) dies or is found to be or becomes of unsound mind; (iii) resigns his or her office by notice in writing; (iv) without special
leave of absence from our board, is absent from meetings of our board for three consecutive meetings and our board resolves that his or her office be
vacated; or (v) is removed from office pursuant to any other provision of our articles of association.
Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors. Under our
articles of association, the board of directors may appoint one or more of their number to the office of managing director upon like terms, but any such
appointment should ipso facto terminate if any managing director ceases for any cause to be a director, or if our company by ordinary resolution of
shareholders resolves that his tenure of office be terminated. In addition, the board of directors may appoint any natural person or corporation to be a
secretary (and if need be an assistant secretary or assistant secretaries) who should hold office for such term, at such remuneration and upon such
conditions and with such powers as they think fit. Any secretary or assistant secretary so appointed by the board of directors may be removed by the
board of directors or by ordinary resolution of shareholders.
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Board Diversity
Country of Principal Executive Offices:
Foreign Private Issuer
Disclosure Prohibited Under Home Country Law
Total Number of Directors
Part I: Gender Identity
Directors
Board Diversity Matrix (As of March 31, 2022)
People’s Republic of China
Yes
No
13
Female
Male
Non-Binary
Did Not
Disclose Gender
4
9
—
—
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction
LGBTQ+
Did Not Disclose Demographic Background
D. Employees.
—
—
—
We had 185, 228 and 378 employees as of December 31, 2019, 2020 and 2021, respectively. As of December 31, 2021, 325 employees were
located in China and 53 were located outside China. The table below sets forth our employees by function as of December 31, 2021:
Management
Research and development
Chemistry, manufacturing and controls
General and administrative
Business and corporate development
Commercial
Total
Number
12
212
36
80
7
31
378
We recruit our employees primarily through recruitment websites, recruiters, internal referrals and job fairs. Approximately 30% of total
employees were hired through internal referrals. We recruit our employees based on their qualification and potential. We promote culture diversity, and
our employees come from the United States, Taiwan and South Korea, in addition to China. We prohibit any form of discrimination (including, but not
limited to, employment, career development, salary, and benefits) on the basis of an employees’ gender, race, age, physical condition, sexual orientation,
marital status, or disability, so as to ensure a diverse and fair corporate culture. We aim to be a role model in promoting female business leadership in the
biotech industry. We have undertaken multiple initiatives to encourage female leadership, including launching the I-Mab Women’s Leadership Council
(WLC) in July 2020. Approximately two-thirds of our employees are female, of which 57% hold a master’s degree or above, while over 30% of our
board of directors are female. We are carrying out a series of female leadership development programs committed to women’s career and personal
development.
We offer competitive salaries, benefits, and additional incentive to its employees. Employee compensation and benefits include position-specific
salary, bonus and allowance, statutory insurance, and housing employee benefit funds (for those in China), statutory holidays, benefits and vacations,
etc. In addition, we purchase additional commercial insurance for employees’ underaged children, as well as a series of internal morale boosting
incentive programs. We work to reward employees for exceptional performance. Our employee awards include Project Awards, Quarterly Stars,
Management Awards, etc., with the goal of creating a culture of recognition.
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We provide new hire training to our employees and periodic on-the-job training to enhance the skills and knowledge of our employees. We invest
in employees’ career development and provide them opportunities to keep updating their skills and knowledge. Our training system includes induction
training for new employees, training on general knowledge, professional skills training, and leadership training, among which, leadership training
focuses on improving employees’ knowledge and ability in compliance management, drug quality control, business audit, financial standard procedures,
as well as female leadership development. We encourage our employees to develop various training courses, and grade the content setting, applicability,
practicability, and lecturer quality of the courses, to continuously improve them through collecting and addressing feedbacks. We have not established a
labor union. We have not experienced any material labor disputes or strikes that may have a material and adverse effect on our business, financial
condition or results of operations.
We enter into standard confidentiality and employment agreements with all of our key management and research staff. The contracts with our key
personnel typically include a standard non-compete agreement that prohibits the employee from competing with us, directly or indirectly, during his or
her employment and for one year after the termination of his or her employment. The contracts also typically include undertakings regarding assignment
of innovations and discoveries made during the course of his or her employment. For further details regarding the terms of confidentiality and
employment agreements with our key management, see “Item 6. Directors, Senior Management and Employees.”
E. Share Ownership.
The following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2022 by:
•
•
each of our directors and executive officers; and
each person known to us to own beneficially more than 5% of our total outstanding shares.
Percentage of beneficial ownership is based on 190,086,040 total outstanding ordinary shares as of March 31, 2022 (excluding 692,687 ordinary
shares issued to our depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercising or vesting of awards granted under our
share incentive plans).
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially
owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days,
including through the exercise of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in
the computation of the percentage ownership of any other person.
Ordinary Shares
Beneficially Owned
Number
%
Directors and Executive Officers:**
Jingwu Zhang Zang (1)
Zheru Zhang
Andrew Zhu
John Long
Richard Yeh
Wei Fu (2)
Lan Kang
Xi (Lindsay) Liu
Ruyi He
Rong Shao
Chun Kwok Alan Au
Conor Chia-hung Yang
Pamela M. Klein
Weimin Tang
Ivan Yifei Zhu
Gigi Qi Feng
Richard Cheng Li
Yunhan Lin
All Directors and Executive Officers as a Group
195
9,712,894 5.1%
2,005,926 1.0%
— —
— —
— —
29,448,395 15.5%
— —
— —
— —
— —
*
*
*
*
*
*
— —
*
41,976,555 22.1%
*
*
*
*
*
*
*
Table of Contents
Notes:
Other Principal Shareholders:
C-Bridge entities (2)
T.ROWE PRICE ASSOCIATES, INC.(3)
Hillhouse entities (4)
GIC Private Limited (5)
Ordinary Shares
Beneficially Owned
Number
%
29,448,395
16,902,176
16,520,560
10,832,501
15.5%
8.9%
8.7%
5.7%
*
**
Less than 1% of our total ordinary shares on an as-converted basis outstanding as of March 31, 2022.
Except as otherwise indicated below, the business address of our directors and executive officers is 55th – 56th Floor, New Bund Center, 555 West
Haiyang Road, Pudong District, Shanghai, China. The business address of Wei Fu is Suite 3306-3307, Two Exchange Square, 8 Connaught Place,
Central, Hong Kong. The business address of Lan Kang is Floor 62, Plaza 66, Tower 1, 1266 West Nanjing Road, Shanghai, China. The business
address of Xi (Lindsay) Liu is 6F, South Tower C, Raycom InfoTech Park, No. 2, Kexueyuan South Road, Haidian District, Beijing, China. The
business address of Ruiyi He is Unit 1506, Central Tower, China Overseas Plaza, No.8 Guanghua Dongli, Chaoyang District, Beijing, China. The
business address of Rong Shao is No. 24 Tongjiaxiang, Gulou District, Nanjing, Jiangsu Province, China. The business address of Chun Kwok
Alan Au is 22 Pottinger Street, Central, Hong Kong. The business address of Conor Chia-hung Yang is 2/F, East Tower, Qihao Beijing, No. 8
Xinyuan South Road, Chaoyang District, Beijing, China. The business address of Pamela M. Klein is 231 Fort Mason, San Francisco, California
94123, the United States.
(1) Represents (i) 3,235,161 ordinary shares directly held by Mabcore Limited, a British Virgin Islands company, (ii) 142,274 ordinary shares held by
Dr. Zang through The 2019 Hasselt Revocable Trust, and (iii) 5,981,025 ordinary shares held by Dr. Zang through The Doctor Zang 2020 Dynasty
Trust, and (iv) 230,000 ordinary shares and 124,434 ordinary shares issuable upon the vesting of restricted share units within 60 days after
March 31, 2022 held by Dr. Zang. Dr. Zang, through himself and The Jingwu Zhang Zang 2018 Irrevocable Family Trust, owns a 55.6% equity
interest in Mabcore Limited. Dr. Lili Qian and two other individuals own the remaining equity interest in Mabcore Limited. Dr. Zang is the sole
director of Mabcore Limited. The Jingwu Zhang Zang 2018 Irrevocable Family Trust was established under the laws of New York and is
co-managed by Ms. Zang (Dr. Zang’s spouse), as the trustee, and by Dr. Zang, as the settlor. Pursuant to the currently effective memorandum and
articles of association of Mabcore Limited, Dr. Zang, as the sole director, has the power to direct the actions of Mabcore Limited, including the
voting and disposal of Mabcore Limited’s shares in I-Mab. Accordingly, Dr. Zang is deemed to indirectly own all of the 3,235,161 ordinary shares
held by Mabcore Limited, while Dr. Qian and the other two individuals are only entitled to their respective pro-rata economic interest in Mabcore
Limited. The registered address of Mabcore Limited is Trinity Chambers, P.O. Box 4301, Road Town, Tortola, British Virgin Islands. The 2019
Hasselt Revocable Trust was established under the laws of the State California and is co-managed by Dr. Zang and Ms. Zang, each as a settlor and
a trustee. The Doctor Zang 2020 Dynasty Trust was established under the laws of the State of California and is co-managed by Dr. Zang, as the
settlor and the investment trustee, and by Ms. Zang, as the trustee.
(2) Represents (i) 3,641,554 ordinary shares directly held by IBC Investment Seven Limited, a Hong Kong limited liability company, (ii) 5,574,560
ordinary shares directly held by CBC SPVII LIMITED, a Hong Kong limited liability company, (iii) 11,784,164 ordinary shares directly held by
CBC Investment I-Mab Limited, a British Virgin Islands limited liability company, (iv) 2,369,546 ordinary shares directly held by C-Bridge II
Investment Ten Limited, a British Virgin Islands limited liability company, and (v) 6,078,571 ordinary shares directly held by Everest. IBC
Investment Seven Limited, CBC SPVII LIMITED, CBC Investment I-Mab Limited, C-Bridge II Investment Ten Limited, Everest are collectively
referred to as the C-Bridge entities. CBC Investment I-Mab Limited, C-Bridge II Investment Ten Limited and C-Bridge II Investment Thirteen
Limited are controlled by C-Bridge Healthcare Fund II, L.P., whose general partner is C-Bridge Healthcare Fund GP II, L.P., and its general
partner is C-Bridge Capital GP, Ltd. CBC SPVII Limited and IBC Investment Seven Limited are controlled by I-Bridge Healthcare Fund, L.P.,
whose general partner is I-Bridge Healthcare GP, L.P., and its general partner is I-Bridge Capital GP, Ltd., which is indirectly controlled by
C-Bridge Capital GP, Ltd. Mr. Wei Fu is the sole director of C-Bridge Capital GP, Ltd. Everest is a public company listed on the Hong Kong Stock
Exchange and controlled by funds which are under common control of the C-Bridge group, which, in turn, is controlled by Mr. Wei Fu.
Information regarding beneficial ownership is reported as of December 31, 2021, based on the information contained in the Schedule 13G/A filed
by the C-Bridge entities on January 25, 2022. Please see the Schedule 13G/A filed by the C-Bridge entities with SEC on January 25, 2022 for
information relating to the C-Bridge entities. The business address of each of C-Bridge entities is Suite 3306-3307, Two Exchange Square, 8
Connaught Place, Central, Hong Kong.
(3) Represents 7,348,772 ADSs held by T.ROWE PRICE ASSOCIATES, INC. Information regarding beneficial ownership is reported as of
December 31, 2021, based on the information contained in the Schedule 13G filed by T.ROWE PRICE ASSOCIATES, INC. with the SEC on
February 14, 2022. Please see the Schedule 13G filed by T.ROWE PRICE ASSOCIATES, INC. with SEC on February 14, 2022 for information
relating to T.ROWE PRICE ASSOCIATES, INC. The business address of T.ROWE PRICE ASSOCIATES, INC. is 100 E. Pratt Street, Baltimore,
Maryland 21202, the United States.
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(4) Represents (i) 7,182,850 ADSs (representing 16,520,555 ordinary shares) held by funds managed by HHLR Advisors, Ltd., or HHLR, an
exempted Cayman Islands company, and (ii) 5 ordinary shares held by a fund managed by Hillhouse Investment Management, Ltd., or HIM, an
exempted Cayman Islands company. HHLR acts as the sole investment manager of YHG Investment, L.P., or YHG, and the sole management
company of HHLR Fund, L.P., or HHLR Fund. HHLR is hereby deemed to be the beneficial owner of, and to control the voting and investment
power of, the voting ordinary shares held by YHG and HHLR Fund. HIM acts as the sole management company of Hillhouse Fund IV, L.P., or
Fund IV. Fund IV owns HH IMB Holdings Limited, or HH IMB. HIM is hereby deemed to be the beneficial owner of, and to control the voting
and investment power of, the voting ordinary shares held by HH IMB. HH IMB, YHG and HHLR Fund are collectively referred to as the
Hillhouse entities. Information regarding beneficial ownership is reported as of September 23, 2021, based on the information contained in the
Schedule 13D/A jointly filed by HHLR and HIM on September 27, 2021. Please see the Schedule 13D/A jointly filed by HHLR and HIM with
SEC on September 27, 2021 for information relating to the Hillhouse entities, HHLR and HIM. The business address of each of HHLR and HIM
is Office #122, Windward 3 Building, Regatta Office Park, West Bay Road, Grand Cayman, Cayman Islands, KY1-9006.
(5) Represents 4,709,783 ADSs (representing 10,832,501 ordinary shares) held by GIC Private Limited, a Singapore fund manager. Information
regarding beneficial ownership is reported as of December 31, 2021, based on the information contained in the Schedule 13G/A filed by GIC
Private Limited on February 14, 2022. Please see the Schedule 13G/A filed by GIC Private Limited with SEC on February 14, 2022 for
information relating to GIC Private Limited. The business address of GIC Private Limited is 168 Robinson Road, #37-01 Capital Tower,
Singapore 068912.
To our knowledge, as of March 31, 2022, 124,670,216 of our ordinary shares were held by three record holders in the United States (including
692,687 ordinary shares issued to our depositary bank for bulk issuance of ADSs reserved for future issuances upon the exercising or vesting of awards
granted under our share incentive plans), representing approximately 65.6% of our total outstanding shares. One of the U.S. holders is Citibank, N.A.,
the depositary of our ADS program. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of
record holders of our ordinary shares in the United States.
ITEM 7.
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A. Major Shareholders
Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”
B. Related Party Transactions
Shareholders Agreement
In July 2019, we entered into our fourth amended and restated shareholders agreement with our shareholders.
The shareholders agreement provides for certain special rights, including right of first refusal, co-sale rights, preemptive rights and contains
provisions governing the board of directors and other corporate governance matters. Those special rights, as well as the corporate governance
provisions, automatically terminated upon the completion of our initial public offering.
Pursuant to our shareholders agreement, we have granted certain registration rights to our shareholders. Set forth below is a description of the
registration rights granted under the agreement.
Demand Registration Rights. At any time after the earlier of (i) December 31, 2020, or (ii) six months following the effectiveness of a registration
statement for a firm underwritten public offering of our ordinary shares on The Stock Exchange of Hong Kong Limited, the New York Stock Exchange,
the Nasdaq Stock Market or other internationally recognized securities exchange, with an offering price (exclusive of underwriting commissions and
expenses) that reflects a market capitalization (immediately prior to the public offering) of not less than US$1.0 billion, the holders of a majority of the
registrable securities then issued and outstanding may request in writing that we file a registration statement covering the registration of at least 20% of
the registrable securities (or any lesser percentage if the anticipated gross receipts from the offering are to exceed US$5.0 million). Upon such a request,
we should, within ten business days of the receipt of such written request, give written notice of such request to all holders, and use our best efforts to
effect, as soon as practicable, the registration of all registrable securities that the holders request to be registered and included in such registration by
written notice given by such holders to us within 20 days after receipt of the request notice. We have the right to defer filing of a registration statement
for a period of not more than 90 days after receipt of the request of the initiating holders if our board of directors determines in good faith that filing of
such registration statement at such time will be materially detrimental to us or our shareholders, but we cannot exercise the deferral right more than once
during any twelve-month period and cannot register any other securities during such twelve-month period. We are not obligated to effect any such
registration if we have, within the six-month period preceding the date of such request, already effected a registration. We are not obligated to effect
more than three demand registrations. This demand registration right is subject to the customary exclusion right of the underwriters.
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Registration on Form F-3. If we qualify for registration on Form F-3, any holder or holders of a majority of all registrable securities then issued
and outstanding may request in writing that we effect a registration on Form F-3 (or an equivalent registration in a jurisdiction outside of the U.S.). We
should promptly give written notice of the proposed registration and as soon as practicable, effect such registration within 20 days after we provide the
aforesaid written notice. The holders are entitled to an unlimited number of registrations on Form F-3 so long as such registration offerings are in excess
of US$500,000. We are not obligated to effect any such registration if we have, within the six-month period preceding the date of such request, already
effected a registration other than a registration from which registrable securities of the holders have been excluded, or if we would be required to qualify
to do business or to execute a general consent to service of process in effecting such registration in any particular jurisdiction.
Piggyback Registration Rights. If we propose to register for a public offering of our securities (other than registration statements relating to
demand registration, Form F-3 registration, any employee benefit plan or a corporate reorganization), we should give written notice of such registration
to all holders of registrable securities at least 30 days prior to filing any registration statement and afford each such holder an opportunity to be included
in such registration. If a holder decides not to include all of its registrable securities in any registration statement thereafter filed by us, such holder will
nevertheless continue to have the right to include any registrable securities in any subsequent registration statement or registration statements as may be
filed by us, subject to certain limitations. This piggyback registration right is subject to the customary exclusion right of the underwriters.
Expenses of Registration.
We will bear all registration expenses. Each holder, however, should bear its proportionate share of all of the underwriting discounts and selling
commissions applicable to the sale of registrable securities or other amounts payable to underwriter(s) or brokers in connection with such offering by the
holders.
Termination of Obligations.
Our obligations to effect any demand, Form F-3 or piggyback registration will terminate upon the earlier of (i) the tenth anniversary of the initial
public offering (ii) after the initial public offering, the date on which such shareholder is eligible to sell all of the registrable securities held by it under
Rule 144 within any 90-day period without volume limitations.
Deed of Undertaking
In December 2019, a deed of undertaking was made by our company and a few shareholders of our company, each as a warrantor, to the other
shareholders of our company (other than the shareholder warrantors), each as a warrantee, pursuant to which each warrantor represents and warrants to
each warrantee that it has provided each warrantee with all information and documents in connection with the initial public offering of our company that
has the effect of establishing rights or otherwise benefiting any shareholder in a manner more favorable than the corresponding terms applicable to the
relevant warrantee in relation to the initial public offering of our company (collectively, the “More Favorable Arrangements”). Pursuant to the deed of
undertaking, until the fifth anniversary of the completion of our initial public offering, we will not directly or indirectly enter into any agreements or
arrangements or modify, amend or waive any existing agreements or arrangements of any kind that would have the effect of establishing the More
Favorable Arrangements; provided that it will be allowed to adopt or modify any employee incentive plans and grant options to the management or any
employee of our company after our initial public offering pursuant to such plans and in accordance with the then effective memorandum and articles of
association and the applicable listing rules for the purpose of rewarding their bona fide services.
Subscription Agreement with Hillhouse Entities
In September 2020, we entered into a Subscription Agreement with the Hillhouse Entities, as amended by an amendment to Subscription
Agreement entered into between Hillhouse Entities and our company in December 2020. The Subscription Agreement, as amended, provides for
(i) certain investors’ rights, such as registration rights, board representation rights and anti-dilution rights and (ii) lock-up and other transfer restrictions.
Set forth below is a description of certain rights and restrictions thereof.
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Mandatory Registration after Initial Closing (September 11, 2020). We agree to file with the SEC a registration statement to register the resale of
Hillhouse Entities’ registrable securities, which include ordinary shares issued and issuable upon exercise of Investor Warrants under the Subscription
Agreement, on Form F-3 or Form F-1, as applicable. We should have the relevant registration statement declared effective by the SEC no later than
ninety (90) calendar days after September 11, 2020, which period could be extended to one hundred and twenty (120) calendar days if the SEC reviews
and comments on the registration statement. However, if the SEC prevents inclusion of the registrable securities in the registration statement pursuant to
limitations under Rule 415 of the Securities Act, the number of registrable securities to be registered for each selling shareholder named in the
registration statement should be reduced pro rata among all such selling shareholders. We should maintain the continuous effectiveness of the
registration statement for a period of ninety (90) days after its effectiveness or such shorter period upon which the Hillhouse Entities have notified us
that their registrable securities have actually been sold.
Mandatory Registration after Subsequent Closing (December 17, 2020). With respect to the registrable securities then held by the Hillhouse
Entities which have not been previously registered and sold, we agree to file a prospectus supplement or a registration statement to register the resale of
such registrable securities on a Form F-3 or Form F-3ASR registration statement (or, if Form F-3 or Form F-3ASR is not then available to us, on Form
F-1 or such other form of registration statement as is then available to effect a registration for resale of such registrable securities), and have such
registration statement declared effective by the SEC no later than (a) the ten (10) business days after the later of (i) the first date when we become
eligible to use registration statement on F-3, or (ii) the expiration of the lock-up period with respect to the subsequent closing, or forty-five (45) calendar
days after such lock-up period expiration date if the SEC reviews and comments on the registration statement. We should maintain the effectiveness of
such registration statement for a period ending on the date the registrable securities registered thereon have ceased to be registrable securities.
Demand Registration Rights. Upon written request from the Hillhouse Entities at any time after we have effected two registration statements
abovementioned, with respect to the registrable securities then held by the Hillhouse Entities, and in no event later than the forty-five (45) calendar days
following the delivery of such request, we should file a prospectus supplement or a registration statement to register the resale of such registrable
securities on a Form F-3 or Form F-3ASR registration statement (or, if Form F-3 or Form F-3ASR is not then available to us, on Form F-1 or such other
form of registration statement as is then available to effect a registration for resale of such registrable securities), have such registration statement
declared effective, and maintain the effectiveness of such registration statement for a period ending on the date the registrable securities registered
thereon have ceased to be registrable securities. If the registrable securities are offered by means of an underwritten offering, and we or the underwriters
determine that marketing factors require a limitation of the number of securities to be underwritten, the number of registrable securities that may be
included in the underwriting should be reduced and allocated (i) first, to us and each holder in accordance with the terms of the Shareholders
Agreement; (ii) second, to investors in the private placements entered into in September 2020 (including the Hillhouse Entities) requesting inclusion of
their registrable securities in such registration statement on a pro rata basis based on the total number of registrable securities then held by each such
investor; and (iii) third, to other holders of registrable securities, if any.
Suspension of Registration. We may suspend the use of any registration statement for a period not exceeding thirty (30) consecutive trading days,
if we (i) determine that we would be required to make disclosure of material information in the registration statement that we have a bona fide business
purpose for preserving as confidential; (ii) determine that we must amend or supplement the registration statement so that it does not include an untrue
statement of a material fact or omit to state a material fact; or (iii) have experienced or are experiencing some other material non-public event, the
disclosure of which at such time would adversely affect us. However, we cannot exercise the suspension right more than once in any twelve (12) month
period and may not register any other securities during such suspension period.
Expenses. We will bear all registration expenses, except any (i) portions of fees and disbursements of counsel for the Hillhouse Entities exceeding
US$30,000, (ii) underwriting discounts and selling commissions applicable to sale of registrable securities, and (iii) fees payable pursuant to the deposit
agreement.
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Ranking of Registration Rights. Registration rights granted to the Hillhouse Entities should not be senior to, or on a parity with, those granted to
holders under the Shareholders Agreement.
Board Representation Rights. As long as the Hillhouse Entities continue to jointly beneficially own at least five percent (5.0%) of our total issued
and outstanding share capital, it is entitled to nominate and maintain one representative to our board of directors. We should cause an individual jointly
designated by the Hillhouse Entities to be appointed as the investor director with immediate effect no later than the fifteenth (15th) business day after
receiving written notice from Hillhouse Entities or such later date on which we receive necessary shareholder approval.
Lock-up. The Hillhouse Entities should not dispose of any of the ordinary shares purchased by Hillhouse Entities on the applicable initial or
subsequent closing date within a 90-day period following September 11, 2020 or a subsequent closing date set forth in the subscription agreement to any
person other than affiliates of the Hillhouse Entities, who should be bound by the Hillhouse Entities’ lock-up obligations for the balance of each
applicable lock-up period. Each of the Hillhouse Entities and their affiliates may directly or indirectly, place any charge, mortgage, lien, pledge,
restrictions, security interest or other encumbrance in respect of the lock-up securities in connection with such Hillhouse Entity’s (or any of its
affiliates’) margin loans, collars, derivative transactions or other such downside protection transactions to be entered into on or after the date of the
subscription agreement.
Anti-dilution rights. We agree not to issue, offer, sell, or grant any option or right to purchase any new securities, without the prior written consent
of the Hillhouse Entities, (i) during the 90-day period following each closing date; or (ii) at an effective purchase price per share lower than the purchase
price under the Subscription Agreement with Hillhouse Entities during the 90-day period commencing from the expiration of each lock-up period.
Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management — Employment Agreements and
Indemnification Agreements.”
Share Option Grants
See “Item 6. Directors, Senior Management and Employees—B. Compensation—Share Incentive Plans.”
Other Transactions with Related Parties
In October 2015, I-Mab Bio-tech Tianjin Co., Ltd., known as Tasgen Bio-tech (Tianjin) Co., Ltd. at the time (which subsequently became our
subsidiary following the Acquisition) (“I-Mab Tianjin”), entered into an intellectual property assignment and license agreement with Genexine, Inc.
(“Genexine”), further amended in December 2017, with respect to four licensed products, namely GX-H9 (TJ101), GX-G3 (TJ102), GX-G8 and GX-P2
and one assigned product, GX-G6 (TJ103). For a detailed description of this assignment and license agreement, see “Item 4. Information on the
Company—B. Business Overview—Licensing and Collaboration Arrangements—A. In-Licensing Arrangements.”
In September 2016, I-Mab Tianjin entered into a CRO agreement with Tasly Pharmaceutical Group Co., Ltd. (“Tasly”) and three ancillary
agreements to this CRO agreement in November 2016, May 2017 and June 2017, respectively. Pursuant to these agreements, Tasly Pharmaceutical
Group Co., Ltd. will provide I-Mab Tianjin with CRO services in connection with pre-clinical studies for G-CSF-HyFc fusion protein. All of these
agreements were terminated on December 10, 2018. We had paid Tasly RMB5.6 million, nil and nil for the year ended December 31, 2019, 2020 and
2021, respectively. As of December 31, 2021, Tasly, together with its affiliates, were no longer related parties of us.
In August 2017, we entered into a two-way master service agreement with Genexine, further amended in October 2019, whereby both parties
agreed that we or Genexine will be engaged by the other party in the business of providing contract research and manufacturing services for
biopharmaceutical in this agreement or following work statements. We had paid US$0.8 million, US$0.7 million and US$3.2 million to Genexine for
their CMC relevant services for the year ended December 31, 2019, 2020 and 2021, respectively. As of May 31, 2021, Genexine was no longer a related
party of us.
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On September 25, 2017, I-Mab Tianjin and I-Mab Shanghai entered into a loan agreement with each of Qianhai Equity Investment Fund (Limited
Partnership) (“Qianhai Fund”), Shanghai Tasly Pharmaceutical Co., Ltd. (“Shanghai Tasly”), and Tianjin Kangshijing Biopharmaceutical Technology
Partnership (Limited Partnership) (“CBC RMB Fund”), pursuant to which each of Qianhai Fund, Shanghai Tasly and CBC RMB Fund made a loan to
I-Mab Tianjin to fund its business operations in an aggregate principal amount in RMB equivalent to US$1.3 million, US$5.1 million and
US$1.6 million, respectively. Each of these loans bears an annual compound interest rate of 8%. Pursuant to these loan agreements, each of Qianhai
Fund, Shanghai Tasly and CBC RMB Fund has the right to contribute its interest in the respective loan to I-Mab Tianjin in exchange for I-Mab Tianjin’s
equity interests. We fully repaid the loans made by Qianhai Fund and Shanghai Tasly in 2018, and neither of these lenders exercised such right. The loan
agreement with CBC RMB Fund was not performed by CBC RMB Fund and was mutually terminated on September 25, 2017.
In June 2018, we entered into a biologics master services agreement with CMAB Biopharma (Suzhou) Inc. (“CMAB”), an affiliate of Bridge
Capital Partners LLC. In July 2018, we entered into Service Proposal: CMC Development of A Monoclonal Antibody with CMAB, this agreement was
further amended in November 2019, with respect to the change of work scope of the original Service Proposal. Pursuant to these three agreements,
CMAB will provide us with CMC services in connection with the preparation of the IND filings to the FDA and the NMPA in a period of 18 to 22
months for US$3.6 million. We had paid CMAB RMB2.8 million, RMB0.7 million and nil for the year ended December 31, 2019, 2020 and 2021,
respectively. As of June 30, 2021, CMAB was no longer an affiliate of Bridge Capital Partners LLC and therefore not a related party of us.
In January 2018, we entered into a collaboration agreement with Everest, an affiliate of C-Bridge Capital Investment Management, Ltd., whereby
both parties agreed to collaborate on programs to co-develop MorphoSys’ proprietary CD38 antibody for all indications in hematologic oncology and
commercialize the CD38 product in China, Hong Kong, Macau and Taiwan. Everest had paid us prepayments of RMB53.1 million, nil and nil for the
year ended December 31, 2019, 2020 and 2021, respectively.
On November 4, 2019, we and Everest Medicines Limited, or Everest, terminated the collaboration agreement (including all the supplements and
amendments thereto) with respect to the co-development and commercialization of felzartamab in Greater China. Upon the termination, Everest will not
retain any rights or entitlements to develop or commercialize felzartamab or any economic interest in its commercialization. All intellectual property
rights in respect of felzartamab arising from its development under the collaboration agreement are vested and owned by us, and we hold all intellectual
property rights and have maximum flexibility to further develop, manufacture and commercialize felzartamab in Greater China. In consideration of the
above arrangements, we issued a total value of US$37.0 million of ordinary shares (the “CPP Shares”) to Everest, representing Everest’s historical
contribution to our collaboration and the associated time cost. The CPP Shares were issued concurrently with the completion of our initial public
offering, at a per share price equal to the initial public offering price adjusted to reflect the ADS-to-ordinary share ratio. The total value of
US$37.0 million was calculated based on the sum of (1) US$33.7 million, which equals cumulative paid-in contributions historically made by Everest
under the collaboration agreement; and (2) a negotiated US$3.3 million time cost of the foregoing historical contribution in light of our exclusive rights
over the commercialization of felzartamab after this termination.
Based on the initial public offering price of US$14.00 per ADS (or US$6.09 per ordinary share), Everest was issued 6,078,571 ordinary shares and
became a minority shareholder of our company upon the completion of our initial public offering. Our issuance of ordinary shares to Everest is being
made pursuant to an exemption from registration with the U.S. Securities and Exchange Commission under Regulation S of the U.S. Securities Act of
1933, as amended, or the Securities Act. Everest has agreed not to, directly or indirectly, sell, transfer or dispose of any CPP Shares for a period of 180
days after the date of the prospectus of our initial public offering.
In November 2020, we entered into a product development and supply agreement with Jiangsu Taslydiyi Pharmaceutical Co., Ltd. (“Jiangsu
Taslydiyi”), an affiliate of Tasly. Both parties agreed that Jiangsu Taslydiyi will supply temozolomide capsules to us free of charge in our efineptakin
alfa (TJ107) Phase 2 and future Phase 3 clinical trials in GBM treatment. We agreed that when reaching the commercialization stage, we will grant the
Right of First Negotiation (ROFN) to Jiangsu Taslydiyi for the commercialization of efineptakin alfa in mainland China. We incurred RMB2.4 million
and RMB2.7 million (US$0.4 million) in research and development expenses for the aforementioned drug supply services for the year ended
December 31, 2020 and 2021, respectively. As of December 31, 2021, Jiangsu Taslydiyi was no longer a related party of us.
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In July 2019, we entered into a loan agreement with I-Mab Hangzhou, pursuant to which I-Mab Hangzhou borrowed RMB2 million (US$0.3
million) from us for a term of 12 months with a free interest. In July 2020, we entered into another loan agreement with I-Mab Hangzhou, pursuant to
which I-Mab Hangzhou borrowed RMB50 million (US$7.7 million) from us for a term of four months with a free interest. Under the terms of these two
agreements, we provided loans to I-Mab Hangzhou to finance their daily operations. These loans were repaid to us in November 2020.
In August 2021, we entered into a project development service agreement with I-Mab Hangzhou, for the product development services we
rendered for selected pipeline sub-licensed or assigned to I-Mab Hangzhou, including TJ301, TJM2 (excluding cytokine release syndrome indications)
and a few pre-clinical programs that are unessential to our immune-oncology focus. In 2021, I-Mab Hangzhou paid us RMB52.4 million (US$8.2
million) for the product development services we offered. In July 2021, we entered into a biologics master services agreement with I-Mab Hangzhou.
Under the framework of this biologics master services agreement, we entered into series of work orders with respect to process development and
manufacturing service for our drug assets from August to October 2021. Pursuant to these work orders, I-Mab Hangzhou will provide us with CMC
development and manufacturing services for a total of RMB63.2 million (US$9.9 million). We paid I-Mab Hangzhou RMB10.7 million (US$1.7
million) for the year ended December 31, 2021.
In December 2021, we entered into a supplementary sublicensing agreement with I-Mab Hangzhou, pursuant to which I-Mab Hangzhou, as a
sub-licensee of olamkicept (TJ301) in Greater China and Korea, agreed to pay US$3 million to us for the completion of olamkicept (TJ301) Phase 2a
study report. As of December 31, 2021, I-Mab Hangzhou paid us the milestone payment of RMB19.1 million (US$3.0 million), which will be ultimately
due to Ferring.
C. Interests of Experts and Counsel
Not applicable.
ITEM 8.
FINANCIAL INFORMATION
A. Consolidated Statements and Other Financial Information
We have appended consolidated financial statements filed as part of this annual report.
Legal Proceedings
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not
presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our
business, results of operations, financial condition or cash flows. In April 2020, Tracon issued a notice of disputes with respect to the TJD5 Agreement
and the BsAbs Agreement. In February 2021, we sent Tracon a notice to terminate the TJD5 Agreement, which would result in a prespecified
termination fee of US$9.0 million owing to Tracon. The disputes relating to the TJD5 Agreement and the BsAbs Agreement are the subject of a binding
arbitration proceeding under the Rules of Arbitration of the International Chamber of Commerce before an arbitration tribunal. The arbitration tribunal
held a hearing on the merits in February 2022. As of the date of this annual report, the disputes have not been resolved and we are not able to predict the
likely outcome. We expect that the decision from the arbitration tribunal may be available in late 2022. Regardless of the outcome, litigations or
arbitrations can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Dividend Policy
Our board of directors has complete discretion on whether to pay dividends, subject to certain requirements of Cayman Islands law. Even if our
board of directors decides to pay dividends on our ordinary shares, the form, frequency and amount will depend upon our future operations and earnings,
capital requirements and surplus, general financial condition, contractual restrictions and other factors that our board of directors may deem relevant.
We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if
not all, of our available funds and any future earnings to operate and expand our business.
We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash
requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends
to us. See “Item 4. Information on the Company—B. Business Overview—Regulation—PRC Regulation—Regulations Relating to Foreign Exchange
and the Dividend Distribution.”
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If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the ordinary shares underlying our
ADSs to the depositary, as the registered holder of such ordinary shares, and the depositary then will pay such amounts to our ADS holders in proportion
to the ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses
payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.
B. Significant Changes
We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.
ITEM 9.
THE OFFER AND LISTING
A. Offering and Listing Details
Our ADSs, each ten (10) ADSs representing twenty-three (23) ordinary shares of ours, have been listed on the Nasdaq Global Market since
January 17, 2020. Our ADSs trade under the symbol “IMAB.”
B. Plan of Distribution
Not applicable.
C. Markets
Our ADSs, each ten (10) ADSs representing twenty-three (23) ordinary shares of ours, have been listed on the Nasdaq Global Market since
January 17, 2020. Our ADSs trade under the symbol “IMAB.”
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
The following is a summary of the material provisions of the sixth memorandum and articles of association of our company and of the Companies
Act, insofar as they relate to the material terms of our ordinary shares.
Objects of Our Company. Under our current memorandum and articles of association, the objects of our company are unrestricted and we have the
full power and authority to carry out any object not prohibited by the Companies Act or any other law of the Cayman Islands.
Ordinary Shares. Certificates representing the ordinary shares are issued in registered form and our ordinary shares are issued when registered in
our register of members. We may not issue shares to bearers. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote
their shares.
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Dividends. Our directors may from time to time declare dividends (including interim dividends) and other distributions on our shares in issue and
authorize payment of the same out of the funds of our company lawfully available therefor. In addition, our company may declare dividends by ordinary
resolution, but no dividend should exceed the amount recommended by our directors. Our current memorandum and articles of association provide that
dividends may be declared and paid out of the funds of our company lawfully available therefor. Under the laws of the Cayman Islands, our company
may pay a dividend out of either profit or the credit standing in our share premium account; provided that in no circumstances may a dividend be paid
out of the share premium account if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.
Voting Rights. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of
such meeting or any one shareholder or shareholders collectively holding not less than 5% of the votes attaching to the shares present in person or by
proxy.
An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the
ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of not less than two-thirds of the votes attaching to the ordinary
shares cast at a meeting. A special resolution will be required for important matters such as a change of name or making changes to our current
memorandum and articles of association.
Alteration of Share Capital
We may from time to time by ordinary resolution:
•
•
•
•
increase our share capital by such sum, to be divided into shares of such classes and amount, as the resolution prescribes;
consolidate and divide all or any of our share capital into shares of a larger amount than its existing shares;
subdivide our shares, or any of them, into shares of an amount smaller than that fixed by the memorandum of association, provided that in
the subdivision the proportion between the amount paid and the amount, if any, unpaid on each reduced share should be the same as it was
in case of the share from which the reduced share is derived; and
cancel any shares that, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person and diminish
the amount of its share capital by the amount of the shares so cancelled.
We may by special resolution, subject to any confirmation or consent required by the Companies Act, reduce our share capital and any capital
redemption reserve in any manner authorized by law.
General Meetings of Shareholders. As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’
annual general meetings. Our current memorandum and articles of association provide that we may (but are not obliged to) in each year hold a general
meeting as our annual general meeting in which case we should specify the meeting as such in the notices calling it, and the annual general meeting will
be held at such time and place as may be determined by our directors.
Shareholders’ general meetings may be convened by our directors (acting by a resolution of our board). Advance notice of at least 14 calendar
days is required for any general shareholders’ meeting. A quorum required for any general meeting of shareholders consists of, at the time when the
meeting proceeds to business, one or more of our shareholders holding shares which carry in aggregate (or representing by proxy) not less than one-third
of all votes attaching to all of our shares in issue and entitled to vote at such general meeting.
The Companies Act does not provide shareholders with any right to requisition a general meeting, nor any right to put any proposal before a
general meeting. However, these rights may be provided in a company’s articles of association. Our current articles of association allow our shareholders
holding in aggregate not less than one-tenth of all votes attaching to all issued and outstanding shares of our company that as at the date of the deposit
carry the right to vote at general meetings of the company to requisition an extraordinary general meeting of our shareholders, in which case our board is
obliged to convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting. However, our current
memorandum and articles of association do not provide our shareholders with any right to put any proposals before annual general meetings or
extraordinary general meetings not called by such shareholders.
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Transfer of Ordinary Shares. Subject to the restrictions set out below, 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 of directors.
Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which
we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:
•
•
•
•
•
the instrument of transfer is lodged with us, accompanied by the certificate 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;
the instrument of transfer is in respect of only one class of shares;
the instrument of transfer is properly stamped, if required;
in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four;
and
a fee of such maximum sum as the Nasdaq Global Market may determine to be payable or such lesser sum as our directors may from time
to time require is paid to us in respect thereof.
If our directors refuse to register a transfer, they should, within three calendar months after the date on which the instrument of transfer was lodged
with our company, send to each of the transferor and the transferee notice of such refusal.
The registration of transfers may, on ten calendar days’ notice being given by advertisement in such one or more newspapers, by electronic means
or by any other means in accordance with the rules of the Nasdaq Global Market be suspended and the register closed at such times and for such periods
as our board of directors may from time to time determine; provided, however, that the registration of transfers should not be suspended nor the register
closed for more than 30 calendar days in any year.
Liquidation. On the winding up of our company, if the assets available for distribution amongst our shareholders are more than sufficient to repay
the whole of the share capital at the commencement of the winding up, the surplus should be distributed amongst our shareholders in proportion to the
par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of which there are
monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay the
whole of the share capital, such assets will be distributed so that, as nearly as may be, the losses are borne by our shareholders in proportion to the par
value of the shares held by them.
Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders in respect of any moneys
unpaid on their shares in a notice served to such shareholders at least 14 calendar days prior to the specified time or times of payment. The shares that
have been called upon and remain unpaid are subject to forfeiture.
Redemption, Repurchase and Surrender of Shares. We may issue shares on terms that such shares are subject to redemption, at our option or at the
option of the holders of these shares, on such terms and in such manner as may be determined, before the issue of such shares, by our board of directors
or by our shareholders by a special resolution. Our company may also repurchase any of our shares on such terms and in such manner as have been
approved by our board of directors or by an ordinary resolution of our shareholders or are otherwise authorized by the articles of association. Under
Cayman Islands law, any redemption or repurchase of shares by our company may be made out of profits of our company, out of our company’s share
premium account or out of the proceeds of a fresh issue of shares made for the purpose of the repurchase or, if so authorized by the articles of
association and subject to provisions of the Companies Act, out of capital. Any premium payable on a redemption or repurchase over the par value of
the shares to be repurchased or redeemed must be provided for out of profits of our company or from sums standing to the credit of the share premium
account of our company or, if authorized by the articles of association and subject to the provisions of the Companies Act, out of capital. At no time may
a company redeem or repurchase its shares unless they are fully paid. A company may not redeem or repurchase any of its shares if, as a result of the
redemption or repurchase, there would no longer be any issued shares of the company other than shares held as treasury shares. In addition, our
company may accept the surrender of any fully paid share for no consideration.
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Variations of Rights of Shares. Whenever the capital of our company is divided into different classes the rights attached to any such class may,
subject to any rights or restrictions for the time being attached to any class, only be varied with the consent in writing of the holders of all of the issued
shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of that class. The rights conferred
upon the holders of the shares of any class issued with preferred or other rights should not, subject to any rights or restrictions for the time being
attached to the shares of that class, be deemed to be varied by the creation, allotment or issue of further shares ranking pari passu with or subsequent to
them or the redemption or purchase of any shares of any class by our company. The rights of the holders of shares should not be deemed to be varied by
the creation or issue of shares with preferred or other rights, including, without limitation, the creation of shares with enhanced or weighted voting
rights.
Issuance of Additional Shares. Our current memorandum and articles of association authorize our board of directors to issue additional ordinary
shares from time to time as our board of directors determines.
Our current memorandum and articles of association also authorize our board of directors to issue from time to time one or more series of
preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including:
•
•
•
•
the designation of the series;
the number of preferred shares to constitute such series;
the dividend rights, dividend rates, conversion rights, voting rights; and
the rights and terms of redemption and liquidation preferences.
Issuance of these shares may dilute the voting power of holders of ordinary shares.
Inspection of Books and Records. The notice of registered office is a matter of public record. A list of the names of the current directors and
alternate directors (if applicable) are made available by the Registrar of Companies of the Cayman Islands for inspection by any person on payment of a
fee. Shareholders have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records (save
for our memorandum and articles of association and our register of mortgages and charges). However, we intend to provide our shareholders with annual
audited financial statements.
Anti-Takeover Provisions. Some provisions of our current memorandum and articles of association may discourage, delay or prevent a change of
control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue
preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares.
However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our current memorandum and
articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
Exempted Company. We are an exempted company with limited liability incorporated under the Companies Act. The Companies Act distinguishes
between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly
outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same
as for an ordinary company except that an exempted company:
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does not have to file an annual return of its shareholders with the Registrar of Companies;
is not required to open its register of members for inspection;
does not have to hold an annual general meeting;
may issue shares with no par value;
may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first
instance);
may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;
may register as a limited duration company; and
may register as a segregated portfolio company.
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“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company.
C. Material Contracts
We have not entered into any material contracts other than in the ordinary course of business and other than those described under this item, in
“Item 4. Information on the Company,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions,” “Item 10.
Additional Information—C. Material Contracts” or elsewhere in this annual report on Form 20-F.
Subscription Agreements with Certain Investors Other Than Hillhouse Entities
In September 2020, we entered into subscription agreements with various investors other than HillHouse Entities. The subscription agreements are
of the same form and provide for certain investors’ rights, such as registration rights and anti-dilution right. Set forth below is a description of certain
rights and restrictions thereof.
Mandatory Registration. We agree to file with the SEC a registration statement to register the resale of such investors’ registrable securities, which
include ordinary shares issued and issuable upon exercise of Investor Warrants under the Subscription Agreement, on Form F-3 or Form F-1, as
applicable. We should have the relevant registration statement declared effective by the SEC no later than ninety (90) calendar days after the initial
closing date, which period could be extended to one hundred and twenty (120) calendar days if the SEC reviews and comments on the registration
statement. However, if the SEC prevents inclusion of the registrable securities in the registration statement pursuant to limitations under Rule 415 of the
Securities Act, the number of registrable securities to be registered for each selling shareholder named in the registration statement should be reduced
pro rata among all such selling shareholders. We should maintain the continuous effectiveness of the registration statement for a period of ninety
(90) days after its effectiveness or such shorter period upon which such investors have notified us that their registrable securities have actually been sold.
Piggyback Registration. We agree to notify such investors at least thirty (30) days prior to filing any registration statement for purposes of
effecting a public offering of ADSs (excluding registration statements relating to the mandatory registration described above). The Private Placement
Investors has 20 days after receiving notice from us to notify us in writing of their desire to include their registrable securities in the registration
statement. However, if the registrable securities in such registration statement are offered by means of an underwritten offering, and we or the
underwriters determine that marketing factors require a limitation of the number of securities to be underwritten, the number of registrable securities that
may be included in the underwriting should be reduced and allocated (i) first, to us and each holder in accordance with the terms of the Shareholders
Agreement; (ii) second, to investors in the private placements entered into in September 2020 requesting inclusion of their registrable securities in such
registration statement on a pro rata basis based on the total number of registrable securities then held by each such investor; and (iii) third, to other
holders of registrable securities, if any.
Suspension of Registration. We may suspend the use of any registration statement for a period not exceeding thirty (30) consecutive trading days,
if we (i) determine that we would be required to make disclosure of material information in the registration statement that we have a bona fide business
purpose for preserving as confidential; (ii) determine that we must amend or supplement the registration statement so that it does not include an untrue
statement of a material fact or omit to state a material fact; or (iii) have experienced or are experiencing some other material non-public event, the
disclosure of which at such time would adversely affect us. However, we cannot exercise the suspension right more than once in any twelve (12) month
period and may not register any other securities during such suspension period.
Expenses. We will bear all registration expenses, except any (i) portions of fees and disbursements of counsel for such investors, and
(ii) underwriting discounts and selling commissions applicable to sale of registrable securities.
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Ranking of Registration Rights. Registration rights granted to such investors should not be senior to, or on a parity with, those granted to holders
under the Shareholders Agreement.
D. Exchange Controls
See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Exchange and the Dividend
Distribution.”
E. Taxation
The following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in the ADSs or ordinary
shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This
summary does not deal with all possible tax consequences relating to an investment in the ADSs or ordinary shares, such as the tax consequences under
U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, China and the United States.
Cayman Islands Taxation
According to Harney Westwood & Riegels, our Cayman Islands counsel, the Cayman Islands currently levies no taxes on individuals or
corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty. There are no other
taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable on instruments
executed in, or brought to, or produced before a court of the Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the
United Kingdom in 2010 but otherwise is not party to any double tax treaties. There are no exchange control regulations or currency restrictions in the
Cayman Islands.
Payments of dividends and capital in respect of our shares will not be subject to taxation in the Cayman Islands and no withholding will be
required on the payment of a dividend or capital to any holder of the shares, nor will gains derived from the disposal of our shares be subject to Cayman
Islands income or corporation tax.
No stamp duty is payable in respect of the issue of shares by our company and no stamp duty is payable on transfers of shares of our company
provided our company does not hold any interest in land in the Cayman Islands and save that stamp duties may be applicable on instruments executed
in, or brought to, or produced before a court of the Cayman Islands.
PRC Taxation
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside China with “de facto management
body” within China is considered as a Tax Resident Enterprise for PRC enterprise income tax purposes and is generally subject to a uniform 25%
enterprise income tax rate on its worldwide income. The implementation rules define the term “de facto management body” as the body that exercises
full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In April 2009,
the State Administration of Taxation issued Circular 82, which provides certain specific criteria for determining whether the “de facto management
body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises
controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may
reflect the State Administration of Taxation’s general position on how the “de facto management body” text should be applied in determining the tax
resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC
enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China if all of the following conditions
are met: (i) the primary location of the day-to-day operational management is in China; (ii) decisions relating to the enterprise’s financial and human
resource matters are made or are subject to approval by organizations or personnel located in China; (iii) the enterprise’s primary assets, accounting
books and records, company seals, and board and shareholder resolutions, are located or maintained in China; and (iv) at least 50% of voting board
members or senior executives habitually reside in China.
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Our PRC counsel, JunHe LLP, is of the opinion that, based on its understanding of the current PRC Laws and Regulations, as I-Mab does not meet
all of the above conditions and given that neither I-Mab nor any of its PRC Subsidiaries has received any notice from the PRC tax authorities
confirming, directly or indirectly, I-Mab to be a PRC resident enterprise for PRC tax income purposes as of the date of this annual report, I-Mab should
not be considered as a PRC resident enterprise for PRC income tax purposes.
I-Mab is incorporated outside of China and it is not controlled by a PRC enterprise or PRC enterprise group. We have structured a clear
management guideline in place to segregate the policy set up and business operating execution responsibilities in order to differentiate the effective
control from our headquarter office and subsidiaries including record keeping and offshore work location plan.
I-Mab is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key
assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside
China. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to
the interpretation of the term “de facto management body.” However, we cannot guarantee you that PRC tax authorities will not take a different view.
If the PRC tax authorities determine that I-Mab is a PRC resident enterprise for enterprise income tax purposes, our worldwide income could be
subject to 25% enterprise income tax; and any dividends payable to non-resident enterprise holders of our common shares or ADSs may be treated as
income derived from sources within China and therefore, subject to a 10% withholding tax (or 20% in the case of non-resident individual holders) unless
an applicable income tax treaty provides otherwise. In addition, capital gains realized by non-resident enterprise shareholders (including our ADS
holders) upon the disposition of our common shares or ADSs may be treated as income derived from sources within PRC and therefore, subject to 10%
income tax (or 20% in the case of non-resident individual shareholders or ADS holders) unless an applicable income tax treaty provides otherwise. It is
unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and
the PRC in the event that we are treated as a PRC resident enterprise. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business
in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax
consequences to us and our non-PRC shareholders or ADS holders.”
United States Federal Income Tax Considerations
The following discussion is a summary of U.S. federal income tax considerations relating to the ownership and disposition of our ADSs or
ordinary shares by a U.S. Holder (as defined below) that acquires our ADSs or ordinary shares and holds our ADSs or ordinary shares as “capital assets”
(generally, property held for investment) under the U.S. Internal Revenue Code of 1986, as amended, or the Code. This discussion is based upon
existing U.S. federal tax law, which is subject to differing interpretations or change, possibly with retroactive effect. There can be no assurance that the
Internal Revenue Service, or the IRS, or a court will not take a contrary position. This discussion does not address the U.S. federal estate, gift, Medicare,
and alternative minimum tax considerations, or any state, local, and non-U.S. tax considerations, relating to the ownership or disposition of our ADSs or
ordinary shares. This discussion, moreover, does not discuss all aspects of U.S. federal income taxation that may be important to particular investors in
light of their individual investment circumstances or to investors subject to special tax situations such as:
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banks and other financial institutions;
insurance companies;
pension plans;
cooperatives;
regulated investment companies;
real estate investment trusts;
broker-dealers;
traders in securities that elect to use a mark-to-market method of accounting;
certain former U.S. citizens or long-term residents;
tax-exempt entities (including private foundations);
investors who are not U.S. Holders;
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investors who own (directly, indirectly or constructively) 10% or more of our stock (by vote or value);
investors who acquire their ADSs or ordinary shares pursuant to any employee share option or otherwise as compensation;
investors that will hold their ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated
transaction for U.S. federal income tax purposes; or
investors that have a functional currency other than the U.S. dollar;
all of whom may be subject to tax rules that differ significantly from those discussed below. Each U.S. Holder is urged to consult its tax advisor
regarding the U.S. federal, state, local and non-U.S. income and other tax considerations of an investment in our ADSs or ordinary shares.
General
For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ADSs or ordinary shares that is, for U.S. federal income tax purposes,
(i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax
purposes) created in, or organized under the law of, the United States or any state thereof or the District of Columbia, (iii) an estate the income of which
is includible in gross income for U.S. federal income tax purposes regardless of its source, or (iv) a trust (A) the administration of which is subject to the
primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or
(B) that has otherwise validly elected to be treated as a U.S. person under the Code.
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ADSs or ordinary shares,
the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partner and the partnership.
Partnerships holding our ADSs or ordinary shares and their partners are urged to consult their tax advisors regarding an investment in our ADSs or
ordinary shares.
For U.S. federal income tax purposes, it is generally expected that a U.S. Holder of ADSs will be treated as the beneficial owner of the underlying
shares represented by the ADSs. The remainder of this discussion assumes that a U.S. Holder of our ADSs will be treated as the beneficial owner of the
underlying shares represented by the ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will generally not be subject to U.S.
federal income tax.
Passive Foreign Investment Company Considerations
A non-U.S. corporation, such as our company, will be classified as a passive foreign investment company, or, or PFIC, for U.S. federal income tax
purposes for any taxable year if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or
more of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are
held for the production of passive income. For this purpose, cash and assets readily convertible into cash are each categorized as a passive asset and the
company’s goodwill and other unbooked intangibles are taken into account. Passive income generally includes, among other things, dividends, interest,
rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a
proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.
We do not believe that we were a PFIC for the taxable year ended December 31, 2021 and do not expect to be a PFIC for the current taxable year
or the foreseeable future. Although we do not believe we were a PFIC for the taxable year ended December 31, 2021, no assurance can be given with
respect to our PFIC status for the current taxable year or any future taxable year. The determination of whether we are or will become a PFIC is
uncertain, because it is a fact-intensive inquiry made on an annual basis that depends, in part, on the composition of our income and assets. Fluctuations
in the market price of our ADSs may cause us to become a PFIC for the current or subsequent taxable years because the value of our assets for the
purpose of the asset test may be determined by reference to the market price of our ADSs from time to time (which may be volatile for
biopharmaceutical companies, such as ours, that have not yet achieved commercialization with respect to any of their products). In particular, recent
decline in the market price of our ADSs significantly increased our risk of becoming a PFIC. The market price of our ADSs may continue to fluctuate
considerably and, consequently, we cannot assure you of our PFIC status for any taxable year. The composition of our income and assets may also be
affected by how, and how quickly, we use our liquid assets. Under circumstances where our revenue from activities that produce passive income
increases relative to our revenue from activities that produce non-passive income, or where we determine not to deploy cash for active purposes, our risk
of becoming classified as a PFIC will substantially increase. Furthermore, prior to the commercialization of any of our drug candidates, interest and
other passive income could constitute more than 75% of gross income for any taxable year. In addition, because there are uncertainties in the application
of the relevant rules, it is possible that the IRS may challenge our classification of certain income and assets as non-passive or our valuation of our
tangible and intangible assets, each of which may result in our being or becoming a PFIC for the current or subsequent taxable years.
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The discussion below under “—Dividends” and “—Sale or Other Disposition of ADSs or Ordinary Shares” is written on the basis that we will not
be classified as a PFIC for U.S. federal income tax purposes. The U.S. federal income tax rules that apply if we are treated as a PFIC are generally
discussed below under “—Passive Foreign Investment Company Rules.”
Dividends
Subject to the discussion below under “—Passive Foreign Investment Company Rules,” any cash distributions (including the amount of any tax
withheld) paid on our ADSs or ordinary shares out of our current or accumulated earnings and profits, as determined under U.S. federal income tax
principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the
U.S. Holder. Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, any distribution we pay
will generally be reported as a “dividend” for U.S. federal income tax purposes. Dividends received on our ADSs or ordinary shares will not be eligible
for the dividends received deduction allowed to corporations in respect of dividends received from U.S. corporations.
A non-corporate U.S. Holder will generally be subject to tax on dividend income from a “qualified foreign corporation” at a lower applicable
capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain conditions are satisfied, including that
(1) our ADSs or ordinary shares on which the dividends are paid are readily tradable on an established securities market in the United States, or in the
event that we are deemed to be a PRC resident enterprise under the PRC tax law, we are eligible for the benefits of the United States-PRC income tax
treaty (the “Treaty”); (2) we are neither a PFIC nor treated as such with respect to a U.S. Holder for the taxable year in which the dividend is paid and
the preceding taxable year, and (3) certain holding period requirements are met. Our ADSs (but not our ordinary shares) are listed on the Nasdaq Global
Market and is considered readily tradable on an established securities market in the United States. Since we do not expect that our ordinary shares will
be listed on an established securities market, we do not believe that dividends that we pay on our ordinary shares that are not represented by ADSs will
meet the conditions required for the reduced tax rate. There can be no assurance, however, that our ADSs will continue to be considered readily tradable
on an established securities market in later years.
In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law, we may be eligible for the benefits of
Treaty and in that case we would be treated as a qualified foreign corporation with respect to dividends paid on our ordinary shares or ADSs. Each
non-corporate U.S. Holder is advised to consult its tax advisors regarding the availability of the reduced tax rate applicable to qualified dividend income
for any dividends we pay with respect to our ADSs or ordinary shares.
Dividends will generally be treated as income from foreign sources for U.S. foreign tax credit purposes and will generally constitute passive
category income. In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law, a U.S. Holder may be
subject to PRC withholding taxes on dividends paid on our ADSs or ordinary shares. See “—PRC Taxation” above. In that case, depending on the U.S.
Holder’s individual facts and circumstances, a U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit not
in excess of any applicable treaty rate in respect of any foreign withholding taxes imposed on dividends received on our ADSs or ordinary shares. A
U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction, for U.S. federal income tax
purposes, in respect of such withholding, but only for a year in which such holder elects to do so for all creditable foreign income taxes. The rules
governing the foreign tax credit are complex and their outcome depends in large part on the U.S. Holder’s individual facts and circumstances.
Accordingly, U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.
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Sale or Other Disposition of ADSs or Ordinary Shares
Subject to the discussion below under “––Passive Foreign Investment Company Rules,” a U.S. Holder will generally recognize capital gain or loss
upon the sale or other disposition of ADSs or ordinary shares in an amount equal to the difference between the amount realized upon the disposition and
the holder’s adjusted tax basis in such ADSs or ordinary shares. Any capital gain or loss will be long-term if the ADSs or ordinary shares have been held
for more than one year and will generally be U.S. source gain or loss for U.S. foreign tax credit purposes. Long-term capital gain of non-corporate U.S.
Holders is generally eligible for a reduced rate of taxation. The deductibility of a capital loss may be subject to limitations. In the event that we are
treated as a PRC resident enterprise under the Enterprise Income Tax Law and gain from the disposition of the ADSs or ordinary shares is subject to tax
in China, a U.S. Holder that is eligible for the benefits of the Treaty may elect to treat the gain as PRC source income. Pursuant to recently issued
Regulations, however, if a U.S. Holder is not eligible for the benefits of the Treaty or does not elect to apply the Treaty, then such holder may not be able
to claim a foreign tax credit arising from any PRC tax imposed on the disposition of ADSs or ordinary shares. The rules regarding foreign tax credits
and deduction of foreign taxes are complex. U.S. Holders should consult their tax advisors regarding the availability of a foreign tax credit or deduction
in light of their particular circumstances, including their eligibility for benefits under the Treaty and the potential impact of the recently issued
Regulations.
Passive Foreign Investment Company Rules
If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinary shares, and unless the U.S. Holder
makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules that have a penalizing effect,
regardless of whether we remain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid
during a taxable year to a U.S. Holder that is greater than 125 percent of the average annual distributions paid in the three preceding taxable years or, if
shorter, the U.S. Holder’s holding period for the ADSs or ordinary shares), and (ii) any gain realized on the sale or other disposition (including, under
certain circumstances, a pledge) of ADSs or ordinary shares. Under the PFIC rules:
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the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or ordinary shares;
the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in
which we are classified as a PFIC (each, a “pre-PFIC year”), will be taxable as ordinary income; and
the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for
individuals or corporations, as appropriate, for that year, increased by an additional tax equal to the interest on the resulting tax deemed
deferred with respect to each such taxable year.
If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinary shares and any of our subsidiaries is also a PFIC,
such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of
these rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.
As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election
with respect to such stock, provided that such stock is regularly traded on a qualified exchange or other market, as defined in the applicable United
States Treasury regulations. For those purposes, our ADSs, but not our ordinary shares, are listed on the Nasdaq Global Market, which is a qualified
exchange. We anticipate that our ADSs should qualify as being regularly traded, but no assurances may be given in this regard. If a U.S. Holder makes
this election, the holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value
of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, if any, of the adjusted
tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but such deduction will only be allowed to the extent
of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the ADSs would be
adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of a
corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the holder will not be required to take into account the gain or
loss described above during any period that such corporation is not classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gain
such U.S. Holder recognizes upon the sale or other disposition of our ADSs in a year when we are a PFIC will be treated as ordinary income and any
loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a
result of the mark-to-market election. If a U.S. Holder makes a mark-to-market election it will be effective for the taxable year for which the election is
made and all subsequent taxable years unless the ADSs are no longer treated as marketable stock or the IRS consents to the revocation of the election.
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Because a mark-to-market election cannot technically be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be
subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC
for U.S. federal income tax purposes.
We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result in
tax treatment different from the general tax treatment for PFICs described above.
If a U.S. Holder owns our ADSs or ordinary shares during any taxable year that we are a PFIC, the holder must generally file an annual IRS Form
8621. Each U.S. Holder is urged to consult its tax advisor concerning the U.S. federal income tax consequences of purchasing, holding and disposing
ADSs or ordinary shares if we are or become a PFIC, including the possibility of making a mark-to-market election.
F. Dividends and Paying Agents
Not applicable.
G. Statement by Experts
Not applicable.
H. Documents on Display
We are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers, and are
required to file reports and other information with the SEC. Specifically, we are required to file annually an annual report on Form 20-F within four
months after the end of each fiscal year, which is December 31. All information filed with the SEC can be obtained over the internet at the SEC’s
website at www.sec.gov. You can request copies of documents, upon payment of a duplicating fee, by writing to the SEC. As a foreign private issuer, we
are exempt from the rules under the Exchange Act prescribing the furnishing and content of quarterly reports and proxy statements, and officers,
directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange
Act.
We will furnish Citibank, N.A., the depositary of our ADSs, with our annual reports, which will include a review of operations and annual audited
consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and
communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to
holders of ADSs and, upon our request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting
received by the depositary from us.
I. Subsidiary Information
Not applicable.
ITEM 11.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inflation
To date, inflation in China has not materially impacted our results of operations. According to the National Bureau of Statistics of China, the year-
over-year percent changes in the consumer price index for December 2019, 2020 and 2021 were increases of 4.5%, 0.2% and 1.5%, respectively.
Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected by higher rates of
inflation in China in the future.
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Market Risks
Interest and Credit Risk
We had cash, cash equivalents and restricted cash of RMB1,193.3 million, RMB4,758.8 million and RMB3,523.6 million (US$552.9 million) as
of December 31, 2019, 2020 and 2021, respectively.
Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank
deposits. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes in interest rates, and
we have not used any derivative financial instruments to manage our interest risk exposure.
Our credit risk is primarily attributable to the carrying amounts of cash and cash equivalents. The carrying amounts of cash and cash equivalents
represent the maximum amount of loss due to credit risk. We mainly place or invest cash and cash equivalents with state-owned or reputable financial
institutions in the PRC, and reputable financial institutions outside of the PRC. We do not believe that our cash and cash equivalents have significant
risk of default or illiquidity, and we will continually monitor the credit worthiness of these financial institutions. While we believe our cash and cash
equivalents do not contain excessive risk, future investments may be subject to adverse changes in market value.
Foreign Exchange Risk
Most of our revenues and expenses are denominated in RMB. We do not believe that we currently have any significant direct foreign exchange
risk and have not used any derivative financial instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be
limited in general, the value of your investment in our ADSs will be affected by the exchange rate between U.S. dollar and RMB because the value of
our business is effectively denominated in RMB, while our ADSs will be traded in U.S. dollars.
The conversion of RMB into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The RMB has
fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S. government policy
may impact the exchange rate between RMB and the U.S. dollar in the future.
To the extent that we need to convert U.S. dollars into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an
adverse effect on the RMB amount we receive from the conversion. Conversely, if we decide to convert RMB into U.S. dollars for the purpose of
making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would
have a negative effect on the U.S. dollar amounts available to us.
As of December 31, 2021, we had RMB-denominated cash and cash equivalents, restricted cash and short-term investments of
RMB1,175.3 million (US$184.4 million). A 10% depreciation of RMB against U.S. dollar based on the foreign exchange rate on December 31, 2021
would result in a decrease of US$18.4 million in cash and cash equivalents. A 10% appreciation of RMB against U.S. dollar based on the foreign
exchange rate on December 31, 2021 would result in an increase of US$18.4 million in cash and cash equivalents.
ITEM 12.
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A. Debt Securities
Not applicable.
B. Warrants and Rights
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Pursuant to the Subscription Agreements, we agree to issue and sell to the investors thereunder the Investor Warrants, exercisable at the election of
the applicable investors within 12 months after the initial or subsequent closing dates set forth in the applicable Subscription Agreements. On
September 11, 2020 and December 17, 2020, we issued and sold a portion of the Investor Warrants, allowing the applicable investors to purchase
3,744,032 ordinary shares and 1,597,235 ordinary shares, respectively. As of December 31, 2021, all of the Investor Warrants has been exercised.
C. Other Securities
Not applicable.
D. American Depositary Shares
Charges Our ADS Holders May Have to Pay
The depositary of our ADS facility, Citibank, N.A., charges the following fees for the services performed under the terms of the deposit
agreement:
ADS Fees
The following ADS fees are payable under the terms of the Deposit Agreement:
Service
Rate
By Whom Paid
(1) Issuance of ADSs (e.g., an issuance upon a
deposit of Shares, upon a change in the
ADS(s)-to-Share(s) ratio, or for any other reason),
excluding issuances as a result of distributions
described in paragraph (4) below.
(2) Cancellation of ADSs (e.g., a cancellation of
ADSs for Delivery of deposited Shares, upon a
change in the ADS(s)-to-Share(s) ratio, or for any
other reason).
(3) Distribution of cash dividends or other cash
distributions (e.g., upon a sale of rights and other
entitlements).
(4) Distribution of ADSs pursuant to (i) stock
dividends or other free stock distributions, or (ii) an
exercise of rights to purchase additional ADSs.
(5) Distribution of securities other than ADSs or
rights to purchase additional ADSs (e.g., spin-off
shares).
(6) ADS Services.
(7) Registration of ADS Transfers (e.g., upon a
registration of the transfer of registered ownership of
ADSs, upon a transfer of ADSs into DTC and vice
versa, or for any other reason).
(8) Conversion of ADSs of one series for ADSs of
another series (e.g., upon conversion of Partial
Entitlement ADSs for Full Entitlement ADSs, or
upon conversion of Restricted ADSs into freely
transferable ADSs, and vice versa).
Up to US$5.00 per 100 ADSs (or fraction
thereof) issued.
Person for whom ADSs are issued.
Up to US$5.00 per 100 ADSs (or fraction
thereof) cancelled.
Person for whom ADSs are being cancelled.
Up to US$5.00 per 100 ADSs (or fraction
thereof) held.
Person to whom the distribution is made.
Up to US$5.00 per 100 ADSs (or fraction
thereof) held.
Person to whom the distribution is made.
Up to US$5.00 per 100 ADSs (or fraction
thereof) held.
Person to whom the distribution is made.
Up to US$5.00 per 100 ADSs (or fraction
thereof) held on the applicable record date(s)
established by the Depositary.
Person holding ADSs on the applicable record
date(s) established by the Depositary.
Up to US$5.00 per 100 ADSs (or fraction
thereof) transferred.
Person for whom or to whom ADSs are
transferred.
Up to US$5.00 per 100 ADSs (or fraction
thereof) converted.
Person for whom ADSs are converted or to
whom the converted ADSs are delivered.
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Charges
An ADS holder will also be responsible for the following ADS charges:
(i)
(ii)
(iii)
(iv)
(v)
taxes (including applicable interest and penalties) and other governmental charges;
such registration fees as may from time to time be in effect for the registration of Shares or other Deposited Securities on the share register
and applicable to transfers of Shares or other Deposited Securities to or from the name of the Custodian, the Depositary or any nominees
upon the making of deposits and withdrawals, respectively;
such cable, telex and facsimile transmission and delivery expenses as are expressly provided in the Deposit Agreement to be at the expense
of the person depositing Shares or withdrawing Deposited Property or of the Holders and Beneficial Owners of ADSs;
in connection with the conversion of Foreign Currency, the fees, expenses, spreads, taxes and other charges of the Depositary and/or
conversion service providers (which may be a division, branch or Affiliate of the Depositary). Such fees, expenses, spreads, taxes, and
other charges should be deducted from the Foreign Currency;
any reasonable and customary out-of-pocket expenses incurred in such conversion and/or on behalf of the Holders and Beneficial Owners
in complying with currency exchange control or other governmental requirements; and
(vi)
the fees, charges, costs and expenses incurred by the Depositary, the Custodian, or any nominee in connection with the ADR program.
The above fees and charges may at any time and from time to time be changed by agreement between the Depositary and us.
Fees and Other Payments Made by the Depositary to Us
Our depositary anticipates to reimburse us for certain expenses we incur in respect of the ADR program established pursuant to the Deposit
Agreement, by making available a portion of the ADS fees charged in respect of the ADR program or otherwise, upon such terms and conditions as the
Depositary agrees with us from time to time. As of the date of this annual report, we have received approximately US$1.9 million from the depositary.
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ITEM 13.
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
PART II.
ITEM 14.
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
Material Modifications to the Rights of Security Holders
See “Item 10. Additional Information—B. Memorandum and Articles of Association” for a description of the rights of securities holders, which
remain unchanged.
Use of Proceeds
The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number 333-234363) (the “F-1
Registration Statement”) in relation to our initial public offering of 7,407,400 ADSs representing 17,037,020 ordinary shares, at an initial offering price
of US$14.00 per ADS. Our initial public offering closed in February 2020. Jefferies LLC and China International Capital Corporation Hong Kong
Securities Limited were the representatives of the underwriters for our initial public offering. Counting in the ADSs sold upon the exercise of the over-
allotment option by our underwriters, we offered and sold 8,175,750 ADSs and received net proceeds of approximately US$105.3 million.
The F-1 Registration Statement was declared effective by the SEC on January 16, 2020. The total expenses incurred for our company’s account in
connection with our initial public offering was approximately US$14.1 million, which included US$9.1 million in underwriting discounts and
commissions for the initial public offering and approximately US$5.0 million in other costs and expenses for our initial public offering. None of the
transaction expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity
securities or our affiliates. None of the net proceeds from the initial public offering were paid, directly or indirectly, to any of our directors or officers or
their associates, persons owning 10% or more of our equity securities or our affiliates. As of December 31, 2021, we used up the proceeds from our
initial public offering. Set forth below is a summary of the use of proceeds from our initial public offering for the period from January 16, 2020, the date
that the Form F-1 was declared effective by the SEC, to December 31, 2021:
•
•
•
approximately US$64.2 million for research and development of our existing drug candidates;
approximately US$18.4 million for potential investments in the establishment of our own manufacturing capacities, including the
construction of our manufacturing facility in China and for expanding our U.S. presence by building research facilities, including a
translational medicine laboratory, in the United States; and
approximately US$22.7 million for general corporate purposes (including working capital needs).
ITEM 15.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our chief executive officer and chief financial officer, has performed an evaluation of the effectiveness
of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as
required by Rule 13a-15(b) under the Exchange Act.
Based upon that evaluation, our management has concluded that, as of December 31, 2021, our disclosure controls and procedures were effective
in ensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and
chief financial officer, to allow timely decisions regarding required disclosure.
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Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f)
and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance
with Generally Accepted Accounting Principles (GAAP) in the United States of America and includes those policies and procedures that (1) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of our company;
(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance
with GAAP, and that receipts and expenditures of our company are being made only in accordance with authorizations of our management and directors;
and (3) provide reasonable assurance regarding prevention or timely detection of the unauthorized acquisition, use or disposition of our company’s
assets that could have a material effect on the consolidated financial statements.
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 risks that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
As required by Section 404 of the Sarbanes-Oxley Act of 2002 and related rules as promulgated by the Securities and Exchange Commission, our
management including our Chief Executive Officer and Chief Financial Officer assessed the effectiveness of internal control over financial reporting as
of December 31, 2021 using the criteria set forth in the report “Internal Control—Integrated Framework (2013)” published by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial
reporting was effective as of December 31, 2021.
Attestation Report of the Registered Public Accounting Firm
The effectiveness of internal control over financial reporting as of December 31, 2021 has been audited by PricewaterhouseCoopers Zhong Tian
LLP, an independent registered public accounting firm, who has also audited our consolidated financial statements for the year ended December 31,
2021.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report on Form 20-F
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Conor Chia-hung Yang, a member of our audit committee and independent director (under the
standards under Rule 5605(c)(2) of the Nasdaq Stock Market Rules and Rule 10A-3 under the Securities Exchange Act of 1934), is an audit committee
financial expert.
ITEM 16B. CODE OF ETHICS
Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees in November 2019. We
have posted a copy of our code of business conduct and ethics on our website at http://ir.i-mabbiopharma.com/.
ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by
PricewaterhouseCoopers Zhong Tian LLP, our principal external auditors, for the periods indicated. We did not pay any other fees to our auditors during
the periods indicated below.
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Audit fees (1)
Tax fees (2)
All other fees
For the Year Ended
December 31,
2021
2020
(in thousands of RMB)
7,730
75
—
8,631
580
—
Notes:
(1)
“Audit fees” means the aggregate fees billed for professional services rendered by our principal auditors for the audit of our annual financial
statements and the review of our comparative interim financial statements, including audit fees relating to our initial public offering in 2020 and
audit fees relating to our planned dual listing.
(2)
“Tax fees” includes fees billed for tax consultations.
The policy of our audit committee is to pre-approve all audit and other service provided by PricewaterhouseCoopers Zhong Tian LLP as described
above, other than those for de minimis services which are approved by the audit committee prior to the completion of the audit.
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
None.
ITEM 16E.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
On July 15, 2020, we announced a share repurchase program, pursuant to which we were authorized to repurchase our own ordinary shares, in the
form of ADSs, with an aggregate value of up to US$20.0 million during a twelve-month period effective upon and from the date on which a formal
stock repurchase plan engagement agreement is signed with a qualified broker-dealer(s). On July 29, 2021, we announced that our board of directors has
authorized a new stock repurchase program, under which we may repurchase up to US$40 million of its ordinary shares in the form of ADS over the
next 12 months. The currently outstanding repurchase program became effective upon and from the date on which a formal stock repurchase plan
engagement agreement was signed with a qualified broker-dealer(s), and terminates over a twelve-month period depending upon market and economic
conditions, and other factors including price, legal and regulatory requirements and capital availability. The program does not obligate I-Mab to acquire
any particular number of its ADSs, and the program may be modified or suspended at any time at the management’s discretion. From July 15, 2020 to
the date of this annual report, we did not repurchase any ADSs under the share repurchase programs that we adopted.
On January 6, 2022, we announced a share purchase plan that our senior management intended to use personal funds to purchase our ADSs on the
open market. As of March 31, 2022, the senior management team of our company had purchased over 78,000 of our ADSs in an aggregate amount of
approximately US$3 million ADSs under the share purchase plan.
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G. CORPORATE GOVERNANCE
As a Cayman Islands company listed on Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules
permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the
Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards.
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In lieu of (i) the requirements of Rule 5605(b) of the Nasdaq Rules that a majority of a Nasdaq-listed company’s board of directors be independent
directors as defined in Rule 5605(a)(2), (ii) the requirements of Rule 5605(d) that a compensation committee be comprised solely of independent
directors, (iii) the requirements of Rule 5605(e) that a nominating committee be comprised solely of independent directors, (iv) the requirements of Rule
5620(a) that each Nasdaq-listed company should hold an annual general meeting of shareholders no later than one year after the end of its fiscal
year-end, and (v) the requirements of Rule 5635(c) of the Nasdaq Rules that shareholder approval be required prior to the issuance of securities when a
stock option or purchase plan is to be established or materially amended or other equity compensation arrangement made or materially amended,
pursuant to which stock may be acquired by officers, directors, employees, or consultants, we have followed and intend to continue to follow our home
country practices with respect to the composition of our board of directors and board committees, annual shareholders meeting as well as the approval
for adoption and material amendment to our equity-based compensation plans. If we choose to follow any other home country practice in the future, our
shareholders may be afforded less protection than they otherwise would under the Nasdaq corporate governance listing standards applicable to U.S.
domestic issuers. See “Item 3. Key Information—D. Risk Factors—General Risks Related to Our ADSs—We are a foreign private issuer within the
meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.”
ITEM 16H. MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
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ITEM 17.
FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to Item 18.
ITEM 18.
FINANCIAL STATEMENTS
PART III.
The consolidated financial statements of I-Mab are included at the end of this annual report.
ITEM 19.
EXHIBITS
Exhibit
Number
1.1
2.1
2.2
2.3
2.4
2.5
2.6
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9†
Sixth Amended and Restated Memorandum and Articles of Association of the Registrant (incorporated herein by reference to
Exhibit 3.2 to the registration statement on Form F-1 (File No. 333-234363), as amended, initially filed with the SEC on
October 29, 2019)
Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.3)
Description of Document
Registrant’s Specimen Certificate for Ordinary Shares (incorporated herein by reference to Exhibit 4.2 to the registration
statement on Form F-1 (File No. 333-234363), as amended, initially filed with the SEC on October 29, 2019)
Deposit Agreement, dated as of January 22, 2020, among the Registrant, the depositary and holder of the American Depositary
Receipt (incorporated herein by reference to Exhibit 4.3 to the registration statement on Form S-8 (File No. 333-239871), as
amended, initially filed with the SEC on July 15, 2020)
Fourth Amended and Restated Shareholders Agreement, dated as of July 25, 2019, between the Registrant and other parties
thereto (incorporated herein by reference to Exhibit 4.4 to the registration statement on Form F-1 (File No. 333-234363), as
amended, initially filed with the SEC on October 29, 2019)
Description of American Depositary Shares of the Registrant (incorporated herein by reference to Exhibit 2.5 to the annual
report on Form 20-F (File No. 001-39173), as amended, initially filed with the SEC on April 29, 2020)
Description of Ordinary Shares of the Registrant (incorporated herein by reference to Exhibit 2.6 to the annual report on Form
20-F (File No. 001-39173), as amended, initially filed with the SEC on April 29, 2020)
Second Amended and Restated 2017 Employee Stock Option Plan (incorporated herein by reference to Exhibit 10.1 to the
registration statement on Form F-1 (File No. 333-234363), as amended, initially filed with the SEC on October 29, 2019)
Second Amended and Restated 2018 Employee Stock Option Plan (incorporated herein by reference to Exhibit 10.2 to the
registration statement on Form F-1 (File No. 333-234363), as amended, initially filed with the SEC on October 29, 2019)
2019 Share Incentive Plan (incorporated herein by reference to Exhibit 10.22 to the registration statement on Form F-1 (File
No. 333-234363), as amended, initially filed with the SEC on October 29, 2019)
2020 Share Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the registration statement on Form S-8 (File
No. 333-239871), as amended, initially filed with the SEC on July 15, 2020)
2021 Share Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the registration statement on Form S-8 (File
No. 333-256603), as amended, initially filed with the SEC on May 28, 2021)
Form of Indemnification Agreement, between the Registrant and its directors and executive officers (incorporated herein by
reference to Exhibit 10.3 to the registration statement on Form F-1 (File No. 333-234363), as amended, initially filed with the
SEC on October 29, 2019)
Form of Employment Agreement, between the Registrant and its executive officers (incorporated herein by reference to Exhibit
10.4 to the registration statement on Form F-1 (File No. 333-234363), as amended, initially filed with the SEC on October 29,
2019)
Framework Agreement, dated as of May 26, 2017, among the Registrant and the other parties thereto (incorporated herein by
reference to Exhibit 10.8 to the registration statement on Form F-1 (File No. 333-234363), as amended, initially filed with the
SEC on October 29, 2019)
License and Collaboration Agreement, dated as of November 30, 2017, between the Registrant and MorphoSys AG
(incorporated herein by reference to Exhibit 10.13 to the registration statement on Form F-1 (File No. 333-234363), as
amended, initially filed with the SEC on October 29, 2019)
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Exhibit
Number
4.10
4.11
4.12
4.13†
4.14†
4.15
4.16
4.17
4.18
4.19
4.20
4.21†
4.22†
4.23†
4.24*†
8.1*
11.1
Description of Document
Intellectual Property Assignment and License Agreement, dated as of October 16, 2015, between Tasgen Bio-tech (Tianjin) Co.,
Ltd. and Genexine, Inc. (incorporated herein by reference to Exhibit 10.14 to the registration statement on Form F-1 (File
No. 333-234363), as amended, initially filed with the SEC on October 29, 2019)
Intellectual Property License Agreement, dated as of December 22, 2017, between the Registrant and Genexine, Inc.
(incorporated herein by reference to Exhibit 10.15 to the registration statement on Form F-1 (File No. 333-234363), as
amended, initially filed with the SEC on October 29, 2019)
License and Sublicense Agreement, dated as of November 4, 2016, between the Registrant and Ferring International Center SA
(incorporated herein by reference to Exhibit 10.16 to the registration statement on Form F-1 (File No. 333-234363), as
amended, initially filed with the SEC on October 29, 2019)
Collaboration Agreement, dated as of July 9, 2019, between I-Mab US and MacroGenics, Inc. (incorporated herein by reference
to Exhibit 10.17 to the registration statement on Form F-1 (File No. 333-234363), as amended, initially filed with the SEC on
October 29, 2019)
License and Collaboration Agreement, dated as of July 26, 2018, between the Registrant and ABL Bio (incorporated herein by
reference to Exhibit 4.12 to the annual report on Form 20-F (File No. 001-39173), as amended, initially filed with the SEC on
April 29, 2020)
English translation of Product Development Agreement, dated as of December 10, 2018, between I-Mab Shanghai and CSPC
Baike (Shandong) Biopharmaceutical Co., Ltd. (incorporated herein by reference to Exhibit 10.19 to the registration statement
on Form F-1 (File No. 333-234363), as amended, initially filed with the SEC on October 29, 2019)
Subscription Agreement, dated as of September 3, 2020, among the Registrant and certain affiliates of Hillhouse (incorporated
herein by reference to Exhibit 2 of the Schedule 13D (File No. 005-91674) jointly filed by Hillhouse Capital Advisors, Ltd. and
Hillhouse Capital Management, Ltd. with the SEC on September 14, 2020)
Amendment to Subscription Agreement, dated as of December 17, 2020, among the Registrant and certain affiliates of
Hillhouse (incorporated herein by reference to Exhibit 5 of the Schedule 13D/A (File No. 005-91674) jointly filed by Hillhouse
Capital Advisors, Ltd. and Hillhouse Capital Management, Ltd. with the SEC on December 21, 2020)
Form of Call Option granted to affiliates of Hillhouse (incorporated herein by reference to Exhibit 4 of the Schedule 13D (File
No. 005-91674) jointly filed by Hillhouse Capital Advisors, Ltd. and Hillhouse Capital Management, Ltd. with the SEC on
September 14, 2020)
Form of Subscription Agreement, dated as of September 3, 2020, between the Registrant and certain investors (other than
Hillhouse) (incorporated herein by reference to Exhibit 10.17 to the registration statement on Form F-1 (File No. 333- 251050),
as amended, initially filed with the SEC on December 1, 2020)
Form of Warrants to Purchase Ordinary Shares of the Registrant, between the Registrant and certain investors (incorporated
herein by reference to Exhibit 10.18 to the registration statement on Form F-1 (File No. 333- 251050), as amended, initially
filed with the SEC on December 1, 2020)
License and Collaboration Agreement, dated as of September 3, 2020, among I-Mab Shanghai, I-Mab US and AbbVie Ireland
Unlimited Company (incorporated herein by reference to Exhibit 10.19 to the registration statement on Form F-1 (File No. 333-
251050), as amended, initially filed with the SEC on December 1, 2020)
English translation of Equity Transfer and Investment Agreement, dated as of September 15, 2020, among I-Mab Biopharma
(Hangzhou) Co., Ltd. and the other parties thereto (incorporated herein by reference to Exhibit 10.20 to the registration
statement on Form F-1 (File No. 333- 251050), as amended, initially filed with the SEC on December 1, 2020)
English translation of Shareholders Agreement, dated as of September 15, 2020, among I-Mab Biopharma (Hangzhou) Co., Ltd.
and other parties thereto (incorporated herein by reference to Exhibit 10.21 to the registration statement on Form F-1 (File
No. 333- 251050), as amended, initially filed with the SEC on December 1, 2020)
English translation of Exclusive Development, Manufacture, and Sales Collaboration Agreement, dated as of November 10,
2021, among I-Mab Biopharma Hong Kong Limited, I-Mab Biopharma Co., Ltd., Jumpcan Pharmaceutical Group Co., Ltd. and
Jiangsu Jiyuan Medicine Co., Ltd.
Principal Subsidiaries of the Registrant
Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the registration
statement on Form F-1 (File No. 333-234363), as amended, initially filed with the SEC on October 29, 2019)
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Exhibit
Number
12.1*
12.2*
13.1**
13.2**
15.1*
15.2*
15.3*
101.INS*
101.SCH*
101.CAL*
101.DEF*
101.LAB*
101.PRE*
Description of Document
Certification by Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Certification by Principal Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Consent of JunHe LLP
Consent of PricewaterhouseCoopers Zhong Tian LLP
Consent of Harney Westwood & Riegels
Inline XBRL Instance Document—this instance document does not appear in the Interactive Data File because its XBRL tags
are embedded within the Inline XBRL document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Label Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104
*
**
†
Cover Page Interactive Data File (embedded within the Inline XBRL document)
Filed herewith.
Furnished herewith.
Portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K.
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SIGNATURES
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 annual report on its behalf.
I-MAB
/s/ John Long
By:
Name: John Long
Title:
Director and Chief Financial Officer
Date: April 29, 2022
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I-Mab
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
(PricewaterhouseCoopers Zhong Tian LLP, Shanghai, China, Auditor Firm ID:1424)
Consolidated Balance Sheets as of December 31, 2020 and 2021
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2019, 2020 and 2021
Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the Years Ended December 31, 2019, 2020 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2020 and 2021
Notes to the Consolidated Financial Statements
F-1
Page
F-2
F-6
F-7
F-8
F-11
F-14
Table of Contents
To the Board of Directors and Shareholders of I-Mab
Report of Independent Registered Public Accounting Firm
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of I-Mab and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and
the related consolidated statements of comprehensive income (loss), of changes in shareholders’ equity (deficit) and of cash flows for each of the three
years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also
have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of
December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated
Framework (2013) issued by the COSO.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial
reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal
Control over Financial Reporting appearing under Item 15. Our responsibility is to express opinions on the Company’s consolidated financial statements
and on the Company’s internal control over financial reporting 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 audits to obtain
reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated
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 consolidated 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 consolidated financial statements.
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk
that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our
audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.
F-2
Table of Contents
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s
internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
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.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were
communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated
financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does
not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters
below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Accrued Research and Development Expenses
As described in Notes 2 and 11 to the consolidated financial statements, the Company has entered into various research and development contracts with
research organizations and other companies. Total research and development costs incurred during the year ended December 31, 2021 were
RMB1,213 million and research and development costs accrued were RMB368 million as of December 31, 2021. Management applied significant
judgment in estimating the progress of its research and development activities and completion of or likelihood of achieving milestone events per
underlying agreements when estimating the research and development costs to accrue at each reporting period end.
The principal considerations for our determination that performing procedures relating to accrued research and development expenses is a critical audit
matter are the significant judgment made by management in estimating the accrued research and development expenses, including the estimation of the
progress of its research and development activities and completion of or likelihood of achieving milestone events per underlying agreements. This in
turn led to a relatively high degree of auditor judgement, subjectivity, and effort in performing procedures and evaluating audit evidence obtained
relating to management’s estimation of accrued research and development costs.
F-3
Table of Contents
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to the estimation of accrued research and
development costs. These procedures also included, among others, (i) testing management’s process for estimating accrued research and development
costs; (ii) evaluating the appropriateness of the method used by management to develop the estimates; (iii) evaluating the reasonableness of the
estimates related to the progress of research and development activities and completion of or likelihood of achieving milestone events per underlying
agreements; and (iv) testing the completeness and accuracy underlying data used to estimate accrued research and development expenses.
Revenue Recognition—cost-to-cost measure of progress for over time performance obligations
As described in Notes 2 and 18 to the consolidated financial statements, the Company recognizes revenue in relation to certain of its licensing and
collaboration arrangements entered into with business partners. The Company’s revenues for the year ended December 31, 2021 were RMB88 million,
of which approximately RMB32 million were recognized using the cost-to-cost measure of progress for its over time performance obligations as
management believes this recognition best depicts the transfer of benefits to its business partner as costs are incurred under the licensing and
collaboration arrangement. Under the cost-to-cost measure of progress method, the extent of progress towards completion is measured based on the ratio
of costs incurred to-date to the total estimated costs for completion of the performance obligations. Management applied significant judgment in
estimating the total estimated costs for completion of performance obligations under such licensing and collaboration arrangement.
The principal considerations for our determination that performing procedures relating to revenue recognition—cost-to-cost measure of progress for
over time performance obligations is a critical audit matter are the significant judgment by management when determining the total estimated costs for
completion of performance obligations under such licensing and collaboration arrangement, which in turn led to a high degree of auditor judgment,
subjectivity, and effort in performing procedures and in evaluating the audit evidence relating to management’s determination of total estimated costs for
completion of performance obligations under the licensing and collaboration arrangement.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including
controls over determining the estimated costs of completion of performance obligations under certain of the Company’s licensing and collaboration
arrangements. These procedures also included, among others, (i) testing management’s process for determining the estimated costs of completion of
performance obligations under the respective licensing and collaboration arrangement; (ii) evaluating the reasonableness of management’s basis and
obtaining evidence and underlying support for estimated cost of completion of performance obligations under such licensing and collaboration
arrangement; (iii) evaluating the circumstances which may warrant a modification to a previous estimate; and (iv) performing retrospective reviews of
costs incurred to evaluate management’s ability to estimate future costs to complete performance obligations.
F-4
Table of Contents
Valuation of put right liability
As described in Notes 2 and 10 to the consolidated financial statements, the put right written by the Group to third party investors in its affiliate was
recorded as a freestanding equity-linked instrument and classified as a put right liability. The fair value of the put right liability was determined by
management using an option pricing model. The significant unobservable inputs used in the option pricing model included spot price, estimated
volatility and probability of triggering event for redemption option, among which the spot price was determined by management using the income
approach. The significant unobservable inputs used in the income approach include revenue growth rates and discount rates. The Group recognized the
put right liability of RMB97 million as of December 31, 2021 and the decrease in fair value of the put right liability of RMB17 million during the year
ended December 31, 2021.
The principal considerations for our determination that performing procedures relating to the valuation of put right liability is a critical audit matter are
the significant judgment by management in determining the fair value of the put right liability including revenue growth rates, discount rates, estimated
volatility and probability of triggering event for redemption option, which in turn led to a high degree of auditor judgment, subjectivity, and effort in
performing procedures relating to the fair value measurement of the put right liability and evaluating related audit evidence; and the audit effort involved
the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the
consolidated financial statements. These procedures included testing of the effectiveness of controls relating to management’s valuation of the put right
liability. These procedures also included, among others, testing management’s process for estimating the fair value of the put right liability, which
included (i) evaluating the appropriateness of the valuation techniques, (ii) testing the completeness, mathematical accuracy and relevance of the
underlying data used in the option pricing model and income approach, and (iii) evaluating the reasonableness of significant assumptions related to
revenue growth rates, discount rates, estimated volatility and probability of triggering event for redemption option. Evaluating the reasonableness of the
revenue growth rates involved considering the past performance of the affiliate, economic and industry forecasts and the cost of capital of comparable
businesses and other industry factors. The estimated volatility was evaluated by considering the relevance and appropriateness of the comparable
company selection for the volatility calculation. The probability of triggering event for redemption option was evaluated by considering the business
development status and plan of the affiliate. Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of
the Company’s valuation methods and the reasonableness of the significant assumptions related to the discount rate and estimated volatility applied.
/s/PricewaterhouseCoopers Zhong Tian LLP
Shanghai, the People’s Republic of China
April 29, 2022
We have served as the Company’s auditor since 2018.
F-5
Table of Contents
I-MAB
Consolidated Balance Sheets
As of December 31, 2020 and 2021
(All amounts in thousands, except for share and per share data, unless otherwise noted)
Notes
2020
RMB
As of December 31,
2021
RMB
US$ (Note 2.5)
Assets
Current assets
Cash and cash equivalents
Accounts receivable
Contract assets
Short-term investments
Inventories
Prepayments and other receivables
Total current assets
Property, equipment and software
Operating lease right-of-use assets
Intangible assets
Goodwill
Investments accounted for using the equity method
Other non-current assets
Total assets
Liabilities and shareholders’ equity
Current liabilities
Accruals and other payables
Operating lease liabilities, current
Deferred subsidy income
Total current liabilities
Put right liabilities
Contract liabilities
Operating lease liabilities, non-current
Other non-current liabilities
Total liabilities
Commitments and contingencies
Shareholders’ equity
Ordinary shares (US$0.0001 par value, 800,000,000 shares authorized as of December 31,
2020 and 2021; 164,888,519 and 183,826,753 shares issued and outstanding as of
December 31, 2020 and 2021, respectively)
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total shareholders’ equity
Total liabilities and shareholders’ equity
3, 18
3, 18
2.4, 2.8
4
5
6
7
8
9
10
130,498
227,391
31,530
—
195,467
4,758,778 3,523,632
33,081
253,780
753,164
27,237
190,824
5,343,664 4,781,718
45,716
112,781
119,666
162,574
352,106
26,634
6,333,793 5,601,195
25,272
14,997
120,444
162,574
664,832
2,010
11
7
2.15
2.4, 10
18
7
11
560,558
8,058
7,509
576,125
116,006
—
5,542
8,975
593,335
30,669
—
624,004
96,911
224,000
81,786
14,934
706,648 1,041,635
552,935
5,191
39,824
118,188
4,274
29,944
750,356
7,174
17,698
18,778
25,511
55,253
4,179
878,949
93,107
4,813
—
97,920
15,207
35,150
12,834
2,343
163,454
22
13
114
126
(50,793)
20
7,701,116 9,100,777 1,428,110
(29,267)
(683,368)
715,495
878,949
(186,510)
(2,023,292) (4,354,833)
5,627,145 4,559,560
6,333,793 5,601,195
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
I-MAB
Consolidated Statements of Comprehensive Income (Loss)
For the Years Ended December 31, 2019, 2020 and 2021
(All amounts in thousands, except for share and per share data, unless otherwise noted)
Revenues
Licensing and collaboration revenue
Supply of investigational products
Total revenues
Cost of revenues
Expenses
Research and development expenses
Administrative expenses
Income (loss) from operations
Interest income
Interest expense
Other income (expenses), net
Equity in loss of an affiliate
Fair value change of warrants
Income (loss) before income tax expense
Income tax benefit (expense)
Net income (loss) attributable to I-MAB
Net income (loss) attributable to ordinary shareholders
Net income (loss) attributable to I-MAB
Other comprehensive income (loss):
Foreign currency translation adjustments, net of nil tax
Total comprehensive income (loss) attributable to I-MAB
Net income (loss) attributable to ordinary shareholders
Weighted-average number of ordinary shares used in calculating net income
Notes
2019
RMB
Year Ended December 31,
2020
RMB
RMB
2021
18
4
30,000
—
30,000
—
1,542,668
—
1,542,668
—
40,115
47,911
88,026
(46,432)
2.18
19
10
2.4
12
(840,415)
(654,553)
(1,464,968)
30,570
(2,991)
(20,205)
—
5,644
(1,451,950)
—
(1,451,950)
(1,485,001)
(984,689)
(402,409)
155,570
24,228
(957)
412,892
(108,587)
—
483,146
(12,231)
470,915
470,915
(1,212,958)
(899,943)
(2,071,307)
21,333
—
83,162
(367,883)
—
(2,334,695)
3,154
(2,331,541)
(2,331,541)
US$
(Note 2.5)
6,295
7,518
13,813
(7,286)
(190,340)
(141,221)
(325,034)
3,348
—
13,050
(57,729)
—
(366,365)
495
(365,870)
(365,870)
(1,451,950)
470,915
(2,331,541)
(365,870)
10,747
(1,441,203)
(120,920)
349,995
(135,717)
(2,467,258)
(21,297)
(387,167)
(1,485,001)
470,915
(2,331,541)
(365,870)
(loss) per share - basic
20 7,381,230 134,158,824 174,707,055 174,707,055
Weighted-average number of ordinary shares used in calculating net income
(loss) per share - diluted
20 7,381,230 157,231,652 174,707,055 174,707,055
Net income (loss) per share attributable to ordinary shareholders
—Basic
—Diluted
Net income (loss) per ADS attributable to ordinary shareholders
—Basic
—Diluted
20
20
(201.19)
(201.19)
(462.74)
(462.74)
3.51
3.00
8.07
6.90
(13.35)
(13.35)
(30.71)
(30.71)
(2.09)
(2.09)
(4.82)
(4.82)
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
I-MAB
Consolidated Statements of Changes in Shareholders’ Equity (Deficit)
For the Years Ended December 31, 2019, 2020 and 2021
(All amounts in thousands, except for share and per share data, unless otherwise noted)
Balance as of December 31, 2018
Foreign currency translation adjustments
Net loss
Share-based compensation of I-Mab
Deemed dividend to Series C-1 preferred
shareholders at extinguishment of Series C-1
Preferred Shares
Deemed dividend to Series B-1, B-2 and C
preferred shareholders at modification of Series
B-1, B-2 and C Preferred Shares
Balance as of December 31, 2019
Ordinary share
(Note 13)
(US$0.001 par value)
Number of
shares
Amount
RMB
6
—
—
—
8,363,719
—
—
—
Treasury
stock
RMB
(1)
—
—
1
Additional
paid-in
capital
RMB
—
—
—
366,894
Accumulated
other
comprehensive
income
(loss)
RMB
59,380
10,747
—
—
Accumulated
deficit
RMB
(1,014,489)
—
(1,451,950)
—
Total
shareholders’
equity
(deficit)
RMB
(955,104)
10,747
(1,451,950)
366,895
—
—
—
(5,283)
—
—
(5,283)
—
8,363,719
—
6
—
—
27,768
389,379
—
70,127
(27,768)
(2,494,207)
—
(2,034,695)
F-8
Table of Contents
I-MAB
Consolidated Statements of Changes in Shareholders’ Equity (Deficit) (Continued)
For the Years Ended December 31, 2019, 2020 and 2021
(All amounts in thousands, except for share and per share data, unless otherwise noted)
Balance as of December 31, 2019
Foreign currency translation adjustments
Net income
Share-based compensation of I-Mab
Exercise of stock options
Issuance of ordinary shares for restricted share
Ordinary share
(Note 13)
(US$0.001 par value)
Number of
shares
Amount
RMB
6
—
—
—
3
8,363,719
—
—
—
1,841,373
Treasury
stock
RMB
—
—
—
—
—
Additional
paid-in
capital
RMB
389,379
—
—
402,413
7,771
Accumulated
other
comprehensive
income
(loss)
RMB
70,127
(120,920)
—
—
—
Accumulated
deficit
RMB
(2,494,207)
—
470,915
—
—
Total
shareholders’
equity
(deficit)
RMB
(2,034,695)
(120,920)
470,915
402,413
7,774
units (Note 17)
7,000
—
—
46
Conversion from convertible promissory notes
(Note 15)
900,000
1
—
58,825
Capital contribution from stock option
surrender (Note 17)
Conversion of preferred shares to ordinary
shares upon the completion of initial public
offering (“IPO”)
Issuance of ordinary shares to Everest
Issuance of ordinary shares upon IPO and
over-allotment, net of issuance cost
Issuance of ordinary shares upon private
placement, net of issuance cost
Proportionate share of share-based
compensation expenses recorded in an
equity method affiliate (Note 10 (a))
Issuance of warrants
—
—
—
91,051
99,760,129
6,078,571
69
4
—
—
3,104,108
254,844
18,804,225
13
—
697,865
29,133,502
18
—
2,543,908
—
—
—
—
—
—
41,163
109,743
—
—
—
—
—
—
—
—
—
—
46
—
58,826
—
91,051
—
—
3,104,177
254,848
—
697,878
—
2,543,926
—
—
41,163
109,743
Balance as of December 31, 2020
164,888,519
114
—
7,701,116
(50,793)
(2,023,292)
5,627,145
F-9
Table of Contents
I-MAB
Consolidated Statements of Changes in Shareholders’ Equity (Deficit) (Continued)
For the Years Ended December 31, 2019, 2020 and 2021
(All amounts in thousands, except for share and per share data, unless otherwise noted)
Balance as of December 31, 2020
Foreign currency translation adjustments
Net loss
Share-based compensation of I-Mab
Exercise of stock options
Issuance of ordinary shares for
restricted share units (Note 17 (f))
Exercise of warrants (Note 16 (b))
Ordinary shares surrendered by a shareholder
Proportionate share of share-based
compensation expenses recorded in an
equity method affiliate (Note 10 (a))
Balance as of December 31, 2021
Ordinary share (Note 13)
(US$0.001 par value)
Number of
shares
Amount
164,888,519
—
—
—
8,227,843
RMB
114
—
—
—
5
Treasury
stock
RMB
—
—
—
—
—
Additional
paid-in
capital
RMB
7,701,116
—
—
608,609
51,310
Accumulated
other
comprehensive
income (loss)
RMB
(50,793)
(135,717)
—
—
—
Accumulated
deficit
RMB
(2,023,292)
—
(2,331,541)
—
—
Total
shareholders’
equity
RMB
5,627,145
(135,717)
(2,331,541)
608,609
51,315
5,369,140
5,341,267
(16)
4
3
—
—
—
—
8,547
672,661
—
—
—
—
—
—
—
8,551
672,664
—
—
183,826,753
—
126
—
—
58,534
9,100,777
—
(186,510)
—
(4,354,833)
58,534
4,559,560
The accompanying notes are an integral part of these consolidated financial statements.
F-10
Table of Contents
I-MAB
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2019, 2020 and 2021
(All amounts in thousands, except for share and per share data, unless otherwise noted)
Cash flows from operating activities
Net income (loss)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation of property, equipment and software
Amortization of intangible assets
Loss on disposal of property, equipment and operating lease right-of-use asset
Fair value change of warrants
Fair value change of put right liabilities
Fair value change of other financial assets
Equity in loss of affiliates
Share-based compensation
Loss on termination agreement with Everest
Amortization of right-of use assets and interest of lease liabilities
Gains on deconsolidation of a subsidiary
Fair value change of short-term investments
Changes in operating assets and liabilities
Accounts receivable
Contract assets
Prepayments and other receivables
Inventories
Accruals and other payables
Contract liabilities
Advance from customers
Research and development funding received
Other non-current liabilities
Deferred subsidy income
Lease liabilities
Net cash generated from (used in) operating activities
Cash flows from investing activities
Purchase of property, equipment and software
Capital injection in an affiliate
Proceeds from disposal of short-term investments
Purchase of short-term investments
Cash disposed of resulting from deconsolidation of a subsidiary
Cash received from disposal of other financial assets
Cash received from repayment of loans due from an affiliate
Net cash generated from (used in) investing activities
F-11
Year Ended December 31,
2019
RMB
2020
RMB
2021
RMB
US$
(Note 2.5)
(1,451,950)
470,915 (2,331,541)
(365,870)
9,831
—
—
(5,644)
—
(42)
—
366,895
23,039
5,803
—
(703)
—
11,000
(48,831)
—
188,375
—
(14,151)
53,148
—
1,420
(6,172)
(867,982)
12,743
1,556
8
—
(3,024)
—
108,587
493,464
—
8,837
(407,598)
(11,288)
(130,498)
(227,391)
(58,692)
—
173,713
—
—
—
7,474
3,589
(8,837)
433,558
13,776
778
288
—
(16,628)
—
367,883
608,609
—
19,582
—
(30,360)
2,162
122
45
—
(2,609)
—
57,729
95,504
—
3,073
—
(4,764)
97,417
(26,389)
(5,155)
(27,237)
152,101
224,000
—
—
5,959
(7,509)
(18,667)
(973,093)
15,287
(4,141)
(810)
(4,274)
23,868
35,150
—
—
935
(1,178)
(2,929)
(152,700)
(8,008)
—
(12,241)
—
(29,932)
(6,000)
(4,697)
(942)
102,703 2,503,749 9,482,040 1,487,939
(134,000) (2,491,991) (10,173,314) (1,596,414)
—
—
—
(114,114)
(257,651)
—
52,000
(201,901)
—
—
—
(727,206)
—
256,000
—
212,462
Table of Contents
I-MAB
Consolidated Statements of Cash Flows (Continued)
For the Years ended December 31, 2019, 2020 and 2021
(All amounts in thousands, except for share and per share data, unless otherwise noted)
Cash flows from financing activities
Proceeds from issuance of convertible preferred shares, net of issuance cost
Proceeds from initial public offering and over-allotment, net of underwriting discounts and
183,536
—
—
—
Year Ended December 31,
2019
RMB
2020
RMB
2021
RMB
US$
(Note 2.5)
commissions
Payment of issuance cost for initial public offering and over-allotment
Proceeds from private placement
Payments of the issuance cost in relation to private placement
Payments of cost in relation to planned dual listing
Proceeds from exercise of warrants
Proceeds from exercise of stock options
Proceeds from issuance of ordinary shares for restricted share units
Proceeds from bank borrowings
Repayment of bank borrowings
Prepayment for stock repurchase program
Cash received from collection of prepayment for stock repurchase program
Net cash generated from financing activities
Effect of exchange rate changes on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash, beginning of year
Cash, cash equivalents and restricted cash, end of the year
F-12
(9,820)
—
—
—
— 726,300
(827)
(27,595)
— 2,789,699
(7,244)
—
—
—
—
—
9,275
—
46
—
50,000
—
(50,000)
(80,000)
(34,859)
—
34,859
—
152,709 3,440,481
15,163 (106,643)
—
—
—
(128,786) (20,209)
(1,541)
672,664 105,556
8,052
1,342
—
—
—
—
593,924 93,200
(128,771) (20,207)
(487,648) 3,565,495 (1,235,146) (193,821)
1,680,931 1,193,283 4,758,778 746,756
1,193,283 4,758,778 3,523,632 552,935
51,315
8,551
—
—
—
—
Table of Contents
I-MAB
Consolidated Statements of Cash Flows (Continued)
For the Years ended December 31, 2019, 2020 and 2021
(All amounts in thousands, except for share and per share data, unless otherwise noted)
Additional ASC 842 supplemental disclosures
Cash paid for fixed operating lease costs included in the measurement of lease obligations in operating
activities
Right-of-use assets obtained in exchange for operating lease obligations
Other supplemental cash flow disclosures
Interest paid
Non-cash activities
Payables for purchase of property, equipment and software
Accrued initial public offering costs payable
Accrued planned dual listing costs payable
Deemed dividend to Series C-1 preferred shareholders at extinguishment of Series C-1 Preferred
Shares
Deemed dividend to Series B-1, B-2 and C preferred shareholders at modification of Series B-1, B-2
and C Preferred Shares
Accrued private placement offering costs payable
Ordinary shares issued to Everest
Conversion of preferred shares to ordinary shares
Conversion of convertible promissory notes to ordinary shares
Year Ended December 31,
2019
RMB
2020
RMB
2021
RMB
US$
(Note 2.5)
6,172
8,595
8,837 18,667 2,929
7,459 118,436 18,585
2,991
957 — —
—
17,504
—
—
6,679 1,048
— — —
752
4,793
—
5,283
— — —
— — —
27,768
— 128,786 — —
— 254,848 — —
— 3,104,177 — —
58,826 — —
—
The accompanying notes are an integral part of these consolidated financial statements.
F-13
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
1. PRINCIPAL ACTIVITIES AND ORGANIZATION
I-Mab (the “Company”) was incorporated in the Cayman Islands on June 30, 2016 as an exempted company with limited liability under the Companies
Act of the Cayman Islands. The Company and its subsidiaries (together the “Group”) are principally engaged in discovering and developing
transformational biologics in the fields of immuno-oncology and immuno-inflammation diseases in the People’s Republic of China (the “PRC”) and
other countries and regions.
On January 17, 2020, the Company consummated its IPO on the Nasdaq Global Market, where 7,407,400 American Depositary Shares (“ADSs”) were
issued at the price of US$14.00 per ADS for total gross proceeds of US$103.7 million. On February 10, 2020, the underwriters of the IPO have
exercised their over-allotment option to purchase an additional 768,350 ADSs of the Company at the IPO price of US$14.00 per ADS. After giving
effect to the exercise of the over-allotment option, the Company has issued and sold a total of 8,175,750 ADSs in the IPO, for total gross proceeds of
US$114.5 million. Each ten ADSs represents twenty-three ordinary shares of the Company.
As of December 31, 2021, the Company’s principal subsidiaries are as follows:
Subsidiaries
I-Mab Biopharma Hong Kong Limited
(“I-Mab Hong Kong”)
I-Mab Shanghai
I-Mab Bio-tech (Tianjin) Co., Ltd.
(“I-Mab Tianjin”)
Place of
incorporation
Hong Kong
Date of
incorporation or
acquisition
July 8, 2016
PRC
August 24, 2016
Percentage
of direct
or indirect
ownership
by the
Company
100%
100%
PRC
July 15, 2017
100%
I-Mab Biopharma US Ltd.
U.S.
February 28, 2018
100%
Zhejiang Tianli Pharmaceutical Sales Co., Ltd.
PRC
September 29, 2021
100%
F-14
Principal activities
Investment holding
Research and
development of
innovative medicines
Research and
development of
innovative medicines
Research and
development of
innovative medicines
Sales and
distribution of
medicine products
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES
2.1 Basis of presentation
The accompanying consolidated financial statements of the Group have been prepared in accordance with the accounting principles generally accepted
in the United States of America (“U.S. GAAP”).
Significant accounting policies followed by the Group in the preparation of the accompanying consolidated financial statements are summarized below.
2.2 Basis of consolidation
The accompanying consolidated financial statements reflect the accounts of the Company and all of its subsidiaries in which a controlling interest is
maintained. All inter-company balances and transactions have been eliminated in consolidation.
The Group consolidates entities in which it has a controlling financial interest based on either the variable interest entity (VIE) or voting interest model.
The Group is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If
the Group determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Group
consolidates an entity when it holds a majority voting interest in an entity.
The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of
accounting (see Note 10).
VIE Model
An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to
finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct
or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to
absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are
disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s
activities either involve or are conducted on behalf of an investor with disproportionately few voting rights.
Under the VIE model, limited partnerships are considered VIE unless the limited partners hold substantive kick-out or participating rights over the
general partner. The Group consolidates entities that are VIEs when the Group determines it is the primary beneficiary. Generally, the primary
beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and
(b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.
As of December 31, 2021, the Group determined that the one entity subject to the consolidation guidance is a VIE for which the Group is not the
primary beneficiary.
F-15
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.3 Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenues and expenses during the reporting period. Estimates are used when accounting for amounts recorded in
connection with acquisitions, including initial fair value determinations of assets and liabilities and other intangible assets as well as subsequent fair
value measurements. Additionally, estimates are used in determining items such as fair value measurements of short-term investments, warrants and put
right liabilities, impairment of accounts receivables, contract assets, other receivables, long-lived assets, intangible assets and goodwill, useful lives of
property, equipment and software, recognition of right-of-use assets and lease liabilities, variable consideration in collaboration revenue arrangements,
determination of the standalone selling price of each performance obligation in the Company’s revenue arrangements, valuation of share-based
compensation arrangements, deferred tax assets valuation allowances and provision for ongoing litigation. Management bases the estimates on historical
experience, known trends and various other assumptions that are believed to be reasonable, the results of which form the basis for making judgments
about the carrying values of assets and liabilities. Actual results could differ from those estimates.
2.4 Fair value measurements
Financial assets and liabilities of the Group primarily comprise of cash and cash equivalents, restricted cash, short-term investments, accounts
receivable, contract assets, other receivables, short-term borrowings, accruals and other payables, and put right liabilities. As of December 31, 2020 and
2021, except for short-term investments and put right liabilities, the carrying values of these financial assets and liabilities approximated their fair values
because of their generally short maturities. The Group reports short-term investments and put right liabilities at fair value at each balance sheet date and
changes in fair value are reflected in the consolidated statements of comprehensive income (loss).
F-16
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.4 Fair value measurements (continued)
The Group measures its financial assets and liabilities using inputs from the following three levels of the fair value hierarchy. The three levels are as
follows:
Level 1 inputs are unadjusted quoted prices in active markets for identical assets that the management has the ability to access at the measurement date.
Level 2 inputs include quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, inputs
other than quoted prices that are observable for the asset (i.e., interest rates, yield curves, etc.), and inputs that are derived principally from or
corroborated by observable market data by correlation or other means (market corroborated inputs).
Level 3 includes unobservable inputs that reflect the management’s assumptions about the assumptions that market participants would use in pricing the
asset. The management develops these inputs based on the best information available, including the own data.
Assets and liabilities measured at fair value on a recurring basis
The Group measures its short-term investments and put right liabilities at fair value on a recurring basis. As the Group’s short-term investments and put
right liabilities are not traded in an active market with readily observable prices, the Group uses significant unobservable inputs to measure the fair value
of short-term investments and put right liabilities. These instruments are categorized in the Level 3 valuation hierarchy based on the significance of
unobservable factors in the overall fair value measurement.
The following table summarizes the Group’s financial assets and liabilities measured and recorded at fair value on a recurring basis as of December 31,
2020 and 2021:
Assets:
Short-term investments
Liabilities
Put right liabilities
Assets:
Short-term investments
Liabilities
Put right liabilities
As of December 31, 2020
Active market
(Level 1)
RMB
Observable input
(Level 2)
RMB
Non-
observable input
(Level 3)
RMB
Total
RMB
—
—
—
—
31,530
31,530
116,006
116,006
As of December 31, 2021
Active market
(Level 1)
RMB
Observable input
(Level 2)
RMB
Non-
observable input
(Level 3)
RMB
Total
RMB
—
—
F-17
—
—
753,164
753,164
96,911
96,911
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.4 Fair value measurements (continued)
The roll forward of major Level 3 financial assets and financial liabilities are as follows:
Fair value of Level 3 financial assets and liabilities as of December 31, 2019
Purchase of short-term investments
Disposal of short-term investments
Grant of put right liabilities
Fair value changes
Currency translation differences
Fair value of Level 3 financial assets and liabilities as of December 31, 2020
Purchase of short-term investments
Disposal of short-term investments
Fair value changes
Currency translation differences
Fair value of Level 3 financial assets and liabilities as of December 31, 2021
Short-term
investments
Put right
liabilities
32,000 —
2,491,991 —
(2,503,749) —
— 124,321
(3,024)
(5,291)
31,530 116,006
11,288
—
10,173,314 —
(9,482,040) —
30,360 (16,628)
(2,467)
753,164 96,911
—
See Note 10 for additional information about Level 3 put right liabilities measured at fair value on a recurring basis for the year ended December 31,
2020 and 2021.
F-18
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.5 Foreign currency translation
The Group uses Chinese Renminbi (“RMB”) as its reporting currency. The United States Dollar (“US$”) is the functional currency of the Group’s
entities incorporated in the Cayman Islands, the United States of America (“U.S.”) and Hong Kong, and the RMB is the functional currency of the
Company’s PRC subsidiaries.
Transactions denominated in other than the functional currencies are translated into the functional currency of the entity at the exchange rates prevailing
on the transaction dates. Assets and liabilities denominated in other than the functional currencies are translated at the balance sheet date exchange rate.
The resulting exchange differences are recorded in the consolidated statements of comprehensive income (loss).
The consolidated financial statements of the Group are translated from the functional currency to the reporting currency, RMB. Assets and liabilities of
the subsidiaries are translated into RMB using the exchange rate in effect at each balance sheet date. Income and expenses are translated at the average
exchange rates prevailing for the year. Foreign currency translation adjustments arising from these are reflected in the accumulated other comprehensive
income (loss). The exchange rates used for translation on December 31, 2020 and 2021 were US$1.00 = RMB6.5249 and RMB6.3757 respectively,
representing the index rates stipulated by the People’s Bank of China.
Translations of balances in the consolidated balance sheets, consolidated statements of comprehensive income (loss), consolidated statements of changes
in shareholders’ equity (deficit) and consolidated statements of cash flows from RMB into US$ as of and for the year ended December 31, 2021 are
solely for the convenience of the readers and were calculated at the rate of US$1.00=RMB6.3726, representing the noon buying rate in The City of New
York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on December 30, 2021. No representation
is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 31, 2021, or at any other
rate. The US$ convenience translation is not required under U.S. GAAP and all US$ convenience translation amounts in the accompanying consolidated
financial statements are unaudited.
2.6 Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and bank deposits, which are unrestricted as to withdrawal and use. The Group considers all highly
liquid investments with an original maturity date of three months or less at the date of purchase to be cash equivalents.
F-19
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.7 Accounts receivable
Accounts receivable are stated at amortized cost less allowance for credit losses. The allowance for credit losses reflects the best estimate of future
losses over the contractual life of outstanding accounts receivable and is determined on the basis of historical experience, specific allowances for known
troubled accounts, other currently available information including customer financial condition, and both current and forecasted economic conditions.
2.8 Short-term investments
Short-term investments represent the investments issued by commercial banks or other financial institutions with a variable interest rate indexed to the
performance of underlying assets within one year. These investments are stated at fair value. Changes in the fair value are reflected in the consolidated
statements of comprehensive income (loss).
2.9 Inventories
Prior to the regulatory approval of product candidates, the Company may incur expenses for the manufacture of drug product to support the commercial
launch of those products. Until the date at which regulatory approval has been received or is otherwise considered probable, all such costs are recorded
as research and development expenses as incurred.
Investigational products for external supply are capitalized as inventories with probable future economic benefit. Inventories are stated at the lower of
cost and net realizable value, with cost determined in a manner that approximates the first-in, first-out method. The Company periodically analyzes its
inventory levels, and writes down inventory that has become obsolete, inventory that has a cost basis in excess of its estimated realizable value and
inventory in excess of expected sales requirements as cost of product sales. The determination of whether inventory costs will be realizable requires
estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be
required, which would be recorded in the consolidated statements of comprehensive income (loss).
2.10 Property, equipment and software
Property, equipment and software are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using
the straight-line method over the following estimated useful lives, taking into account of any estimated residual value:
Laboratory equipment
Software
Office furniture and equipment
Leasehold improvements
3 to 10 years
1 to 5 years
5 years
Lesser of useful life or lease term
The Group recognizes the gain or loss on the disposal of property, equipment and software in the consolidated statements of comprehensive income
(loss).
F-20
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.11 Intangible assets
Intangible assets acquired in a business combination that are used in research and development activities, or in-process research and development
(IPR&D) intangible assets, are considered indefinite lived until the completion or abandonment of the associated research and development efforts.
During the period that those assets are considered indefinite lived, they are not amortized but are tested for impairment annually and more frequently if
events or changes in circumstances indicate that it is more likely than not that the asset is impaired. If after assessing the totality of events and
circumstances and their potential effect on significant inputs to the fair value determination the Group determines that it is not more likely than not that
the indefinite-lived intangible is impaired, then the entity shall calculate the fair value of the intangible asset and perform the quantitative impairment
test by comparing the fair value of the asset with its carrying amount. If the carrying amount exceeds its fair value, an impairment loss is recognized in
an amount equal to that excess. For IPR&D assets, the impairment loss is recognized in research and development expenses in the consolidated
statements of comprehensive income (loss).
Intangible assets with finite useful lives are amortized over their useful lives. The useful life of an intangible asset is the period over which the asset is
expected to contribute directly or indirectly to the future cash flows of the Group. The Group uses the straight-line amortization method when the
economic benefits of the intangible assets are consumed or otherwise used up cannot be reliably determined. In particular, the Group amortizes the
contract related intangible assets with finite useful lives over 10 to 20 years on a straight-line basis in accordance with the economic life of the out-
licensed patent. Intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount of an intangible asset may not be recoverable. If circumstances require an intangible asset be tested for possible impairment, the Group
first compares undiscounted cash flows expected to be generated by that asset to its carrying amount. If the carrying amount is not recoverable on an
undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. For intangible assets with finite
useful life, the impairment loss is recognized in cost of revenues in the consolidated statements of comprehensive income (loss).
2.12 Impairment of long-lived assets
Long-lived assets, such as property, plant, and software, and intangible assets subject to amortization, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group
be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its
carrying amount. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is
recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including
discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. For the years ended December 31,
2019, 2020 and 2021, there was no impairment of the value of the Group’s long-lived assets.
F-21
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.13 Goodwill
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually
identified and separately recognized. The Group allocates the cost of an acquired entity to the assets acquired and liabilities assumed based on their
estimated fair values at the date of acquisition. The excess of the purchase price for acquisitions over the fair value of the net assets acquired, including
other intangible assets, is recorded as goodwill. Goodwill is not amortized, but impairment of goodwill is tested on at least an annual basis or whenever
events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.
The Group first assesses qualitative factors to determine whether it is more likely than not that the fair value of the Group’s reporting unit is less than its
carrying amount, including goodwill. The qualitative assessment includes the Group’s evaluation of relevant events and circumstances affecting the
Group’s single reporting unit, including macroeconomic, industry, market conditions and the Group’s overall financial performance. If qualitative factors
indicate that it is more likely than not that the Group’s reporting unit’s fair value is less than its carrying amount, then the Group will perform the
quantitative impairment test by comparing the reporting unit’s carrying amount, including goodwill, to its fair value. If the carrying amount of the
reporting unit exceeds its fair value, an impairment loss will be recognized in an amount equal to that excess. For the years ended December 31, 2019,
2020 and 2021, the Group determined that there were no indicators of impairment of the goodwill.
2.14 Long-term investments
The Group’s long-term investments include equity investments in an affiliate in which it does not have a controlling financial interest, but has the ability
to exercise significant influence over the operating and financial policies of the investee. The investment is accounted for using the equity method of
accounting in accordance with ASC topic 323, Investments—Equity Method and Joint Ventures (“ASC 323”). Under the equity method, the Group
initially records its investments at fair value. The Group subsequently adjusts the carrying amount of the investment to recognize the Group’s
proportionate share of the equity investee’s net income or loss after the date of investment. When the liquidation rights and priorities as defined by an
equity investment agreement differ from what is reflected by the underlying percentage ownership interests, applying the percentage ownership interest
to U.S. GAAP net income in order to determine earnings or losses does not accurately represent the income allocation and cash flow distributions that
will ultimately be received by the investors. As such, for this type of investments, the Group uses the Hypothetical Liquidation at Book Value (“HLBV”)
method for allocating earnings or losses of the equity method investee. The HLBV method is considered as a balance sheet approach. Specifically, a
calculation is prepared at each balance sheet date to determine the amount that the Group would receive if an equity investment entity were to liquidate
all of its assets (as valued in accordance with U.S. GAAP) and distribute that cash to the investors based on the contractually defined liquidation
priorities. The difference between the calculated liquidation distribution amounts at the beginning and the end of the reporting period, after adjusting for
capital contributions and distributions, is the Group’s share of the earnings or losses from the equity investment for the period.
As it relates to the share-based compensation awarded by an equity method investee to its own employees, the Group recognizes its proportionate share
of the compensation expense over the vesting period, included in the equity in loss of affiliate in the consolidated statements of comprehensive income
(loss). As it relates to the share-based compensation awarded by the Group to the equity method investee employees that are based on the Group’s stock,
when the other investors do not provide proportionate value to the investee or the Group does not receive any consideration, the Group expenses the
entire cost associated with the award in the same period the costs are recognized by the investee, to the extent that the Group’s claim on the investee’s
book value has not been increased. The expenses recognized by the Group is included in the equity in loss of affiliate in the consolidated statements of
comprehensive income (loss).
The Group evaluates the equity method investment for impairment under ASC 323. An impairment loss on the equity method investments is recognized
in losses when the decline in value is determined to be other-than-temporary. No impairment charge was recognized for the years ended December 31,
2019, 2020 and 2021.
F-22
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.15 Deferred subsidy income
Deferred subsidy income consists of deferred income from government grants. Government grants mainly consist of cash subsidies received by the
Group’s subsidiaries in the PRC from local governments as support on expenses relating to certain projects. Grants received with government specified
performance obligations are recognized as other income when all the obligations have been satisfied. If such obligations are not satisfied, the Group may
be required to refund the subsidy. The Group recorded cash grants of RMB7,509 and nil and in deferred subsidy income as of December 31, 2020 and
2021 respectively.
2.16 Revenue recognition
The Group adopted Accounting Standard Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) for all periods
presented. Consistent with the criteria of Topic 606, the Group recognizes revenue to depict the transfer of promised goods or services to customers in
an amount that reflects the consideration to which the entity expects to receive in exchange for those goods or services.
Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the
consideration that the entity expects to receive in exchange for those goods or services. An the entity performs the following five steps to account for the
arrangements that an entity determines are within the scope of ASC 606: (i) identify the contract(s) with a customer; (ii) identify the performance
obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation.
Once a contract is determined to be within the scope of ASC 606 at contract inception, the Group audits the contract to determine which performance
obligations it must deliver and which of these performance obligations are distinct. The Group recognizes as revenue the amount of the transaction price
that is allocated to each performance obligation when that performance obligation is satisfied or as it is satisfied.
Collaboration revenue
At contract inception, we analyze its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements
(“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the
activities and exposed to significant risks and rewards dependent on the commercial success of such activities. For collaboration arrangements within
the scope of ASC 808 that contain multiple elements, we first determine if the collaboration is deemed to be within the scope of ASC 808. For any units
of account that are reflective of a vendor-customer relationship those units of account are accounted for within the scope of ASC 606. For any units of
account that are not accounted for under ASC 606 and therefore accounted for pursuant to ASC 808, an appropriate recognition method is determined
and applied consistently.
F-23
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.16 Revenue recognition (continued)
Collaboration revenue (continued)
The Group’s collaborative arrangements may contain more than one unit of account, or performance obligation, such as grant of licenses of intellectual
property rights, promises to provide research and development services and other deliverables. The collaborative arrangements do not include a right of
return for any deliverable. When multiple units of account or performance obligations are identified within the arrangements, the Group must develop
assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. In developing
the stand-alone selling price for a performance obligation, the Group considers competitor pricing for a similar or identical product, market awareness of
and perception of the product, expected product life and current market trends. In general, the consideration allocated to each performance obligation is
recognized when the respective obligation is satisfied either by delivering a good or providing a service, limited to the consideration that is not
constrained.
Licenses of Intellectual Property: Upfront non-refundable payments for licensing the Group’s intellectual property are evaluated to determine if the
license is distinct from the other performance obligations identified in the arrangement. For the license that is determined to be distinct, the Group
recognizes revenues in the amount of non-refundable, up-front fees allocated to the license at a point in time, upon which the license is transferred to the
licensee and the licensee is able to use and benefit from the license.
Research and Development Services: The portion of the transaction price allocated to research and development services performance obligations is
deferred and recognized as revenue over time as delivery or performance of such services provided to the Group’s customers occurs.
Milestone Payments: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Group
evaluates whether the milestones are considered probable of being reached and to the extent that a significant reversal of cumulative revenue would not
occur in future periods, estimates the amount to be included in the transaction price using the most likely amount method. The transaction price is then
allocated to each performance obligation on a relative stand-alone selling price basis, for which the Group recognizes revenue as or when the
performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Group re-evaluates the probability of
achieving such development milestones and any related constraint, and if necessary, adjust the estimate of the overall transaction price. Any resulting
adjustment is recorded on a cumulative catch-up basis, which would affect the Group’s reported revenues and earnings in the period of the adjustment.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be
the predominant item to which the sales-based royalties or milestone payments relate, the Group recognizes revenue at the later of (i) when the related
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).
F-24
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.16 Revenue recognition (continued)
Supply of investigational products
Revenue from supply of investigational products is recognized when there is a transfer of control from the Group to the customer. The Group determines
transfer of control based on when the product is delivered, and title passed to the customer. Sales are generally made with a limited right of return under
certain conditions. Revenues are recorded net of provisions for sales discounts and returns.
Contract assets and liabilities
Contract assets primarily represent revenue earnings over time that are not yet billable based on the terms of the contracts. The Group does not have
impairment losses associated with contracts with customers for the years ended December 31, 2019, 2020 and 2021.
Contract liabilities consist of fees invoiced or paid by the Group’s customers for which the associated performance obligations have not been satisfied
and revenue has not been recognized based on the Group’s revenue recognition criteria described above.
Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets
are classified as current in the consolidated balance sheet when the Group expects to complete the related performance obligations and invoice the
customers within one year of the balance sheet date, and as long-term when the Group expects to complete the related performance obligations and
invoice the customers more than one year out from the balance sheet date. Contract liabilities are classified as current in the consolidated balance sheet
when the revenue recognition associated with the related customer payments and invoicing is expected to occur within one year of the balance sheet date
and as long-term when the revenue recognition associated with the related customer payments and invoicing is expected to occur in more than one year
from the balance sheet date.
Cost-to-cost measure of progress for over time performance obligations
Under the Group’s certain licensing and collaboration arrangement entered into with a business partner, the Group recognized revenue using the cost-to-
cost measure of progress for its over time performance obligations as this recognition best depicts the transfer of benefits to its business partner as costs
are incurred under the licensing and collaboration arrangement. Under the cost-to-cost measure of progress method, the extent of progress towards
completion is measured based on the ratio of costs incurred to-date to the total estimated costs for completion of the performance obligations. The Group
applied significant judgment in estimating the total estimated costs for completion of performance obligations under such licensing and collaboration
arrangement.
2.17 Value-added-tax (“VAT”) recoverable and surcharges
Value added tax recoverable represent amounts paid by the Group for purchases. The surcharges (i.e., Urban construction and maintenance tax,
educational surtax, local educational surtax), vary from 6% to 12% of the value-added-tax depending on the tax-payer’s location. The deductible input
VAT balance is included in the prepayments and other receivables in the consolidated balance sheets, and VAT payable balance is recorded in the
accruals and other payables in the consolidated balance sheets.
F-25
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.18 Research and development expenses
Elements of research and development expenses primarily include (1) payroll and other related expenses of personnel engaged in research and
development activities, (2) in-licensed patent rights fee of exclusive development rights of drugs granted to the Group, (3) expenses related to preclinical
testing of the Group’s technologies under development and clinical trials such as payments to contract research organizations (“CRO”), investigators and
clinical trial sites that conduct the clinical studies, (4) expenses to develop the product candidates, including raw materials and supplies, product testing,
depreciation, and facility related expenses, and (5) other research and development expenses. Research and development expenses are charged to
expenses as incurred when these expenditures are used for the Group’s research and development activities and have no alternative future uses.
The Group applied significant judgment in estimating the progress of its research and development activities and completion of or likelihood of
achieving milestone events per underlying agreements when estimating the research and development costs to be accrued at each reporting period end.
The process of estimating its research and development expenses involves reviewing open contracts and purchase orders, communicating with personnel
to identify services that have been performed on its behalf and estimating the level of service performed and the associated costs incurred for the
services when the Group has not yet been invoiced or otherwise notified of the actual costs.
The Group has acquired rights to develop and commercialize product candidates. Upfront payments that relate to the acquisition of a new drug
compound, as well as pre-commercial milestone payments, are immediately expensed as acquired in-process research and development in the period in
which they are incurred, provided that the new drug compound does not also include processes or activities that would constitute a “business” as defined
under U.S. GAAP, the drug has not achieved regulatory approval for marketing and, absent obtaining such approval, has no established alternative future
use. Milestone payments made to third parties subsequent to regulatory approval are capitalized as intangible assets and amortized over the estimated
remaining useful life of the related product. All development expenditures are recognized in profit or loss when incurred, as long as the conditions
enabling capitalization of development expenses as an asset have not yet been met.
2.19 Leases
In accordance with ASC 842 adopted on January 1, 2019, the Group determines if an arrangement is a lease at inception. Operating leases are included
in operating lease right-of-use (“ROU”) assets, operating lease liability, and operating lease liability, non-current in the Group’s consolidated balance
sheets. The Group does not have any finance leases since the adoption date.
ROU assets represent the Group’s right to use an underlying asset for the lease term and lease liabilities represent the Group’s obligation to make lease
payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease
payments over the lease term. When determining the lease term, the Group includes options to extend or terminate the lease when it is reasonably certain
that it will exercise that option, if any. As the Group’s leases do not provide an implicit rate, the Group uses its incremental borrowing rate, which it
calculates based on the credit quality of the Group and by comparing interest rates available in the market for similar borrowings, and adjusting this
amount based on the impact of collateral over the term of each lease.
The Group has elected to adopt the following lease policies in conjunction with the adoption of ASU 2016-02: (i) elect for each lease not to separate
non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with
that lease component as a single lease component; (ii) for leases that have lease terms of 12 months or less and does not include a purchase option that is
reasonably certain to exercise, the Group elected not to apply ASC 842 recognition requirements; and (iii) the Group elected to apply the package of
practical expedients for existing arrangements entered into prior to January 1, 2019 to not reassess (a) whether an arrangement is or contains a lease,
(b) the lease classification applied to existing leases, and (c) initial direct costs.
In connection with the adoption of ASC 842, on January 1, 2019, the Group recorded an impact of RMB13,100 on its assets and RMB11,333 on its
liabilities for the recognition of operating lease right-of-use-assets and operating lease liabilities, respectively, which are primarily related to the lease of
the Group’s offices and warehouses. The adoption of ASC 842 did not have a material impact on the Group’s results of operations or cash flows.
F-26
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.20 Comprehensive income (loss)
Comprehensive income (loss) is defined as the changes in equity of the Group during a period from transactions and other events and circumstances
excluding transactions resulting from investments by owners and distributions to owners. Among other disclosures, ASC 220, Comprehensive Income,
requires that all items that are required to be recognized under current accounting standards as components of comprehensive income (loss) be reported
in a financial statement that is displayed with the same prominence as other financial statements. For each of the periods presented, the Group’s
comprehensive income (loss) includes net income (loss) and foreign currency translation adjustments, which are presented in the consolidated
statements of comprehensive income (loss).
2.21 Share-based compensation
The Group grants restricted shares and stock options to eligible employees and accounts for share-based compensation in accordance with ASC 718,
Compensation—Stock Compensation.
Employees’ share-based compensation awards, if equity-classified, are measured at the grant date fair value of the awards and are recognized as
expenses over the requisite period of the award, which is generally the vesting term of share-based payment awards.
A change in any of the terms or conditions of share-based awards is accounted for as a modification of the awards. The Group calculates incremental
compensation expense of a modification as the excess of the fair value of the modified awards over the fair value of the original awards immediately
before its terms are modified at the modification date. For vested awards, the Group recognizes incremental compensation cost in the period when the
modification occurs. For awards not being fully vested, the Group recognizes the sum of the incremental compensation expense and the remaining
unrecognized compensation expense for the original awards over the remaining requisite service period after modification.
Share-based compensation in relation to the restricted shares is measured based on the fair market value of the Group’s ordinary shares at the grant date
of the award. Prior to the listing, estimation of the fair value of the Group’s ordinary shares involves significant assumptions that might not be
observable in the market, and a number of complex and subjective variables, including discount rate, and subjective judgments regarding the Group’s
projected financial and operating results, its unique business risks, the liquidity of its ordinary shares and its operating history and prospects at the time
the grants are made. Share-based compensation in relation to the share options is estimated using the Binominal Option Pricing Model. The
determination of the fair value of share options is affected by the share price of the Group’s ordinary shares as well as the assumptions regarding a
number of complex and subjective variables, including the expected share price volatility, risk-free interest rate, exercise multiple and expected dividend
yield. In addition, the forfeiture rate is estimated based on an analysis of the Group’s actual forfeitures and the appropriateness of the forfeiture rate will
continue to be evaluated based on the actual forfeiture experience, analysis of employee turnover and other factors. The fair value of these awards was
determined with the assistance from an independent third-party valuation firm.
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.22 Income taxes
The Group accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using the enacted tax rates
that expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is
recorded if it is more likely than not that some portion or all of the deferred income tax assets will not be utilized in the foreseeable future.
The Group evaluates its uncertain tax positions using the provisions of ASC 740-10, Income Taxes, which prescribes a recognition threshold that a tax
position is required to meet before being recognized in the financial statements. The Group recognizes in the financial statements the benefit of a tax
position which is ‘‘more likely than not’’ to be sustained under examination based solely on the technical merits of the position assuming a review by tax
authorities having all relevant information. Tax positions that meet the recognition threshold are measured using a cumulative probability approach, at
the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. It is the Group’s policy to recognize
interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.
2.23 Business combination
The Group accounts for its business combinations using the acquisition method of accounting in accordance with ASC topic 805, Business
Combinations (“ASC 805”). The acquisition method of accounting requires all of the following steps: (i) identifying the acquirer, (ii) determining the
acquisition date, (iii) recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree,
and (iv) recognizing and measuring goodwill or a gain from a bargain purchase. The consideration transferred in a business combination is measured as
the aggregate of the fair values at the date of exchange of the assets given, liabilities incurred, and equity instruments issued as well as the contingent
considerations and all contractual contingencies as of the acquisition date.
The Group allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed and intangible assets acquired based on
their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is
recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets.
Significant estimates in valuing certain intangible assets may include, but are not limited to, future expected cash flows from acquired assets, timing and
probability of success of clinical events and regulatory approvals, and assumptions on useful lives of the patents and discount rates. Management’s
estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result,
actual results may differ from estimates. Additional information, such as that related to income tax and other contingencies, existing as of the acquisition
date but unknown to us may become known during the remainder of the measurement period, not to exceed one year from the acquisition date, which
may result in changes to the amounts and allocations recorded.
Acquisitions that do not meet the accounting definition of a business combination are accounted for as asset acquisitions. For transactions determined to
be asset acquisitions, the Group allocates the total cost of the acquisition, including transaction costs, to the net assets acquired based on their relative
fair values.
F-28
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.24 Segment information
In accordance with ASC 280, Segment Reporting, the Group’s chief operating decision maker, the Chief Executive Officer, reviews the consolidated
results when making decisions about allocating resources and assessing performance of the Group as a whole and hence, the Group has only one
reportable segment. The Group does not distinguish between markets or segments for the purpose of internal reporting. As the Group’s long-lived assets
are substantially located in and derived from the PRC, no geographical segments are presented.
2.25 Income (loss) per share
Basic income (loss) per share is computed by dividing net income (loss) attributable to ordinary shareholders by the weighted average number of
ordinary shares outstanding during the period. Diluted income (loss) per share is calculated by dividing net income (loss) attributable to ordinary
shareholders by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent
shares consist of shares issuable upon the conversion of the preferred shares using the if-converted method, shares issuable upon the issuance of
ordinary shares to be issued to Everest using the if-converted method, shares issuable upon the conversion of the convertible promissory notes using
the if-converted method, shares issuable upon the exercise of share options using the treasury stock method, shares issuable upon the issuance of
ordinary shares for restricted shares units using the treasury stock method, and shares issuable upon the exercise of warrants using the treasury stock
method. Ordinary equivalent shares are not included in the denominator of the diluted income (loss) per share calculation when inclusion of such shares
would be anti-dilutive.
2.26 Adopted accounting pronouncements
In December 2019, the FASB issued ASU 2019-12 — Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This ASU provides an
exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.
This update also (1) requires an entity to recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account
for any incremental amount incurred as a non-income-based tax, (2) requires an entity to evaluate when a step-up in the tax basis of goodwill should be
considered part of the business combination in which goodwill was originally recognized for accounting purposes and when it should be considered a
separate transaction, and (3) requires that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation
in the interim period that includes the enactment date. The Group adopted ASU No. 2019-12 from January 1, 2021, which did not have a material
impact on the Group’s consolidated financial statements.
In January 2020, the FASB issued Accounting Standards Update No. 2020-01, Investments — Equity Securities (Topic 321), Investments — Equity
Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic
815. The amendments clarified that an entity should consider observable transactions that require it to either apply or discontinue the equity method of
accounting for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing
the equity method. The amendments also clarified that for the purpose of applying paragraph 815-10-15-141(a) an entity should not consider whether,
upon the settlement of the forward contract or exercise of the purchased option, individually or with existing investments, the underlying securities
would be accounted for under the equity method in Topic 323 or the fair value option in accordance with the financial instruments guidance in Topic
825. An entity also would evaluate the remaining characteristics in paragraph 815-10-15-141 to determine the accounting for those forward contracts
and purchased options. The Company adopted ASU No. 2020-01 from January 1, 2021, which did not have a material impact on the Group’s
consolidated financial statements.
F-29
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
2. PRINCIPAL ACCOUNTING POLICIES (CONTINUED)
2.27 Recent accounting pronouncements
In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial
Reporting”, which provides optional expedients and exceptions for applying U.S. GAAP on contract modifications and hedge accounting to contracts,
hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate
reform, if certain criteria are met. These optional expedients and exceptions provided in ASU 2020-04 are effective for the Company as of March 12,
2020 through December 31, 2022. The Company will evaluate transactions or contract modifications occurring as a result of reference rate reform and
determine whether to apply the optional guidance on an ongoing basis. The ASU is currently not expected to have a material impact on the Group’s
consolidated financial statements.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt — Modifications and Extinguishments (Subtopic 470-50),
Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40) to clarify and
reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants)
that remain equity classified after modification or exchange. The amendments in this update are effective for all entities for fiscal years beginning after
December 15, 2021, including interim periods within those fiscal years. An entity should apply the amendments prospectively to modifications or
exchanges occurring on or after the effective date of the amendments. The Group is currently evaluating the impact of ASU 2021-04 on its consolidated
financial statements.
In July 2021, the FASB issued ASU 2021-05, Lessors—Certain Leases with Variable Lease (“ASU 2021-05”). It requires lessors to classify leases as
operating leases if they have variable lease payments that do not depend on an index or rate and would have selling losses if they were classified as
sales-type or direct financing leases. The Group will adopt this standard in 2022, and do not expect the adoption of this standard will have a material
impact on the Group’s consolidated financial statements.
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805) — Accounting for Contract Assets and Contract Liabilities from
Contracts with Customers (“ASU 2021-08”). It requires issuers to apply ASC 606 Revenue from Contracts with Customers to recognize and measure
contract assets and contract liabilities from contracts with customers acquired in a business combination. ASU 2021-08 is effective for the Company
from January 1, 2023, with early adoption permitted. The ASU is currently not expected to have a material impact on the Group’s consolidated financial
statements.
F-30
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
3. ACCOUNTS RECEIVABLE AND CONTRACT ASSETS
Accounts receivable and contract assets, net of allowance for credit losses, consisted of the following:
Accounts receivable, gross
Allowance for credit losses
Accounts receivable, net
Contract assets, gross
Allowance for credit losses
Contract assets, net
No allowance for credit losses was recorded as of December 31, 2020 and 2021.
4. Inventories
Inventories consist of the following:
Investigational products
2020
RMB
130,498
—
130,498
As of December 31,
2021
RMB
33,081
—
33,081
US$ (Note 2.5)
5,191
—
5,191
2020
RMB
227,391
—
227,391
As of December 31,
2021
RMB
253,780
—
253,780
US$ (Note 2.5)
39,824
—
39,824
2020
RMB
—
As of December 31,
2021
RMB
27,237
US$ (Note 2.5)
4,274
In April 2021, the Group entered into a master clinical supply agreement with AbbVie. Inc for the supply of investigational products for use in the
clinical trials. For the year ended December 31, 2021, the Group recognized revenue of RMB47,911 for the products delivered to AbbVie. Inc. The
inventories balance as of December 31, 2021 represented the investigational products that have been produced by the contract manufacturer and
transferred control to the Group.
F-31
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
5. PREPAYMENTS AND OTHER RECEIVABLES
Prepayments:
- Prepayments to CRO vendors
- Prepayments for other services
- Prepayments to an affiliate (Note 23)
Receivables due from an affiliate (Note 23)
Value-added tax recoverable
Rental deposits
Interest receivables
Others
6. PROPERTY, EQUIPMENT AND SOFTWARE
Property, equipment and software consist of the following:
2020
RMB
83,140
2,550
—
21,212
63,664
1,766
236
22,899
195,467
As of December 31,
2021
RMB
US$ (Note 2.5)
79,568
906
8,079
—
89,578
616
—
12,077
190,824
12,486
142
1,268
—
14,057
97
—
1,894
29,944
Cost
Laboratory equipment
Leasehold improvement
Software
Office furniture and equipment
Total property, equipment and software
Less: accumulated depreciation and amortization
Net book value
Construction in progress
Total net book value of property, equipment and software
As of December 31,
2020
RMB
As of December 31,
2021
RMB
US$ (Note 2.5)
30,808
13,842
9,990
1,531
56,171
(30,899)
25,272
—
25,272
36,295
18,945
11,071
2,468
68,779
(44,162)
24,617
21,099
45,716
5,696
2,973
1,737
387
10,793
(6,930)
3,863
3,311
7,174
The total amounts charged to the consolidated statements of comprehensive income/(loss) for depreciation and amortization expenses amounted to
approximately RMB9.8 million, RMB12.7 million and RMB13.8 million, for the years ended December 31, 2019, 2020 and 2021, respectively.
F-32
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7. LEASES
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
As of December 31, 2021, the Company has operating leases recorded on its balance sheet for certain office spaces and facilities that expire on various
dates through 2028. The Group does not plan to cancel the existing lease agreements for its existing facilities prior to their respective expiration dates.
When determining the lease term, the Group includes options to extend or terminate the lease when it is reasonably certain that it will exercise that
option, if any. All of the Group’s leases qualify as operating leases.
Information related to operating leases as of December 31, 2020 and 2021 is as follows (in thousands, except for percentages and years).
Assets
Operating lease right-of-use assets
Liabilities
Operating lease liabilities, current
Operating lease liabilities, non-current
Weighted average remaining lease term (years)
Weighted average discount rate
2020
RMB
As of December 31,
2021
RMB
US$ (Note 2.5)
14,997
112,781
8,058
5,542
1.7
30,669
81,786
3.6
17,698
4,813
12,834
3.6
5%
5%
5%
Information related to operating lease activity during the years ended December 31, 2020 and 2021 is as follows:
Operating lease rental expense
Amortization of right-of-use assets
Expense for short-term leases within 12 months
Interest of lease liabilities
F-33
For the Year Ended
2019
RMB
2020
RMB
2021
RMB US$ (Note 2.5)
5,260
592
543
6,395
8,158
—
679
8,837
16,997
16
2,585
19,598
2,667
3
406
3,076
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
7. LEASES (CONTINUED)
Maturities of lease liabilities were as follows:
2022
2023
2024
2025
2026
Thereafter
Total undiscounted lease payments
Less: imputed interest
Total lease liabilities
F-34
As of December 31,
2021
RMB
35,359
38,120
33,305
5,399
5,501
4,949
122,633
(10,178)
112,455
US$ (Note 2.5)
5,549
5,982
5,226
847
863
776
19,243
(1,596)
17,647
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
8. INTANGIBLE ASSETS
Intangible assets as of December 31, 2020 and 2021 are summarized as follows:
Intangible assets
TJ103
IPR&D TJ101
Total intangible assets
Intangible assets
TJ103
IPR&D TJ101
Total intangible assets
Gross carrying amount
RMB
As of December 31, 2020
Accumulated
amortization
RMB
Net carrying amount
RMB
11,670
110,330
122,000
(1,556)
—
(1,556)
10,114
110,330
120,444
Gross carrying amount
RMB
As of December 31, 2021
Accumulated
amortization
RMB
Net carrying amount
RMB
11,670
110,330
122,000
(2,334)
—
(2,334)
9,336
110,330
119,666
The three IPR&D assets (TJ103, TJ101, and TJ102) were acquired from the business combination of I-Mab Tianjin and its subsidiaries including
Chengdu Tasgen Bio-Tech Co., Ltd. and Shanghai Tianyunjian Bio-Tech Co., Ltd. (together the “Tasgen Group”) in 2017. The licensor of these IPR&D
assets was Genexine, Inc. The gross carrying amounts represent the fair value assigned to the respective research and development assets. At the date of
acquisition, all three assets had not reached technological feasibility. They were considered indefinite lived.
IPR&D related to TJ103 was subsequently determined to have a finite useful life as a result of an out-licensing arrangement. Consequently, the Group
uses the straight-line method to amortize the asset. The amortization for the years ended December 31, 2019, 2020 and 2021 was nil, 1,556, and
RMB778 respectively. The estimated amortization expense for each of the five succeeding fiscal years is RMB778.
On September 15, 2020, I-Mab Hong Kong and Genexine, Inc. entered into amendments to Intellectual Property License Agreement with I-Mab
Hangzhou to assign and transfer all the rights and obligations related to TJ102 to I-Mab Biopharma (Hangzhou) Limited (“I-Mab Hangzhou”), pursuant
to an equity transfer and investment agreement entered into between I-Mab Hong Kong and various parties (see Note 10).
As of December 31, 2020 and 2021, there was no impairment of the value of the Group’s intangible assets.
F-35
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9. GOODWILL
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
On July 15, 2017, the Group acquired 66.67% of the equity interests in the Tasgen Group by issuing convertible preferred shares, and controlled the
board of directors and business of I-Mab Tianjin since then. Tasgen Group is principally engaged in the research and development of innovative
medicines and the Group acquired Tasgen Group for its research team, technical experience, and IPR&D pipeline assets (see Note 8). As of
December 31, 2020 and 2021, the goodwill of RMB162,574 represented the goodwill generated from the aforementioned acquisition of Tasgen Group
and the business of Tasgen Group was fully integrated into the Company after the acquisition.
As of December 31, 2020 and 2021, the Group performed a qualitative assessment by evaluating relevant events and circumstances that would affect the
Group’s single reporting unit and did not note any indicator that it is more likely than not that the fair value of the Group’s reporting unit is less than its
carrying amount and therefore the Group’s goodwill was not impaired.
10. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD AND PUT RIGHT LIABILITIES
(a)
Investments accounted for using the equity method
Investment in I-Mab Hangzhou
I-Mab Hangzhou, incorporated on June 16, 2019, was a wholly owned subsidiary of I-Mab Hong Kong with registered capital of US$30 million, which
was paid up by I-Mab Hong Kong on September 14, 2020.
On September 15, 2020 (the “Closing Date”), I-Mab Hong Kong entered into an equity transfer and investment agreement (the “SPA”) with (i) a limited
partnership jointly established by the management of I-Mab Hangzhou to hold restricted equity of I-Mab Hangzhou issued to the management
(“Management Holdco”), (ii) a limited partnership established to hold the shares of I-Mab Hangzhou for future equity incentive plan (“ESOP Holdco”)
and (iii) a group of domestic investors in China (“Domestic Investors”).
In accordance with the terms of the SPA,
(i)
(ii)
(iii)
(iv)
I-Mab Hong Kong agreed to assign all rights and obligations/ownership of certain drug candidates in different stages of development (“Target
Pipelines”) to I-Mab Hangzhou as of the Closing Date as well as to transfer employment of a team of designated management/workforce to
I-Mab Hangzhou. The Target Pipelines were evaluated by an independent valuer, with a total value of US$105 million as of the Closing Date;
Management Holdco would acquire 10% of the equity of I-Mab Hangzhou from I-Mab Hong Kong with no consideration. The 10% equity is
represented by I-Mab Hangzhou’s registered capital of US$3 million, and that after acquiring such equity, Management Holdco is committed to
pay US$3 million in cash to I-Mab Hangzhou to fulfil its capital contribution obligations in a period of four years starting from the Closing Date;
ESOP Holdco would acquire 5% of the equity of I-Mab Hangzhou from I-Mab Hong Kong with no consideration. The 5% equity is represented
by I-Mab Hangzhou’s registered capital of US$1.5 million. All of such equity would be used for I-Mab Hangzhou’s future equity incentive plan.
Domestic Investors would acquire a total of 40% of the equity of I-Mab Hangzhou from I-Mab Hong Kong with no consideration. The 40%
equity is represented by I-Mab Hangzhou’s registered capital of US$12 million, and after acquiring such equity of I-Mab Hangzhou, Domestic
Investors would pay US$120 million collectively in cash to I-Mab Hangzhou to fulfil its capital contribution obligations.
F-36
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
10. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD AND PUT RIGHT LIABILITIES
(a)
Investments accounted for using the equity method (continued)
Investment in I-Mab Hangzhou (continued)
Upon closing of the SPA, the registered capital of I-Mab Hangzhou remained to be US$30 million. As of December 31, 2020, among the total
25,500,000 outstanding shares of I-Mab Hangzhou, 13,500,000 shares were held by I-Mab Hong Kong while the remaining 12,000,000 shares was held
by Domestic Investors. Shares subscribed by Management Holdco and ESOP Holdco, in the total number of 4,500,000, have not yet been purchased by
or issued to Management Holdco and ESOP Holdco as of December 31, 2020. Once all these 4,500,000 subscribed shares of I-Mab Hangzhou are
purchased by or issued to Management Holdco and ESOP Holdco, the equity interest in I-Mab Hangzhou held by I-Mab Hong Kong, Domestic
Investors, Management Holdco and ESOP Holdco would be 45%, 40%, 10% and 5% respectively. For the year ended December 31, 2021, 750,000
shares were issued to Management Holdco.
On the same day, I-Mab Hong Kong also entered into a shareholders agreement with the aforementioned investors (the “SHA”). According to the SHA
and I-Mab Hangzhou’s articles of association, the board of directors of I-Mab Hangzhou shall be composed of seven directors. The directors shall be
elected in the following ways: I-Mab Hong Kong is entitled to appoint three directors, including the chairman of the board of directors, as well as
nominate one independent director; the Management Holdco is entitled to appoint one director; two non-related entities of the Domestic Investors are
entitled to appoint one director respectively (“Investors Directors”). Each director of the board of directors shall have one vote. I-Mab Hong Kong,
Management Holdco and ESOP Holdco agree to act in concert, as long as each of Management Holdco and ESOP Holdco respectively holds equity in
I-Mab Hangzhou, when exercising the rights as a shareholder.
As a result of the above transactions, I-Mab Hangzhou became an affiliate of the Group on the Closing Date in accordance with ASC 810 since I-Mab
Hangzhou meets the definition of a business under ASC 805. Pipeline candidate related matters are considered to be the activities that most significantly
impact the economic performance of I-Mab Hangzhou at the current stage, and these matters cannot be acted without the consent from Investors
Directors. In accordance with ASC 810-10, I-Mab Hangzhou is a variable interest entity, and no shareholder shall consolidate I-Mab Hangzhou under
VIE model as neither party have the power to direct all the activities that most significantly impact the economic performance of I-Mab Hangzhou.
Therefore, the Group deconsolidated I-Mab Hangzhou and retained significant influence in I-Mab Hangzhou. The investment was accounted for using
the equity method. The retained investment in the common stock of I-Mab Hangzhou was initially measured at fair value in accordance with ASC
810-10-40.
The Group determined the fair value of its retained equity interest with the assistance of an independent third-party valuation firm. The Group used
equity allocation model to estimate the fair value of the investment. The fair value as of the Closing Date was US$112,039 (equivalent to approximately
RMB764,352), which reflected the fact that the shares subscribed by Management Holdco and ESOP Holdco were not issued and outstanding as of the
Closing Date.
A gain of RMB407,598 was recognized as a result of the deconsolidation in September 2020. The gain represented the difference between:
i)
ii)
The fair value of the retained noncontrolling investment in I-Mab Hangzhou at the Closing Date; and
The aggregate of all of the following:
a)
b)
c)
the carrying amount of transferred intellectual property related to TJ102 at the Closing Date (see Note 7);
the fair value of the put right liabilities written by I-Mab Hong Kong to Domestic Investors;
the carrying amount of I-Mab Hangzhou’s net assets at the Closing Date.
F-37
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
10. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD AND PUT RIGHT LIABILITIES
(a)
Investments accounted for using the equity method (continued)
Investment in I-Mab Hangzhou (continued)
Subsequently, pursuant to the I-Mab Hangzhou’s articles of association, the Group applies the HLBV method to allocate earnings or losses of I-Mab
Hangzhou because the liquidation rights and priorities sufficiently differ from what is reflected by the underlying percentage ownership interests. The
Group recognized RMB67,425 in equity in loss of an affiliate in the consolidated statements of comprehensive income for the period from
September 15, 2020 to December 31, 2020, and in investment accounted for using the equity method in the consolidated balance sheet as of
December 31, 2020. The Group recognized RMB309,208 in equity in loss of an affiliate in the consolidated statements of comprehensive loss for the
year ended December 31, 2021, and in investment accounted for using the equity method in the consolidated balance sheet as of December 31, 2021.
The purchase price of US$3 million committed by Management Holdco under SPA, representing 10% of the equity of I-Mab Hangzhou, is significantly
lower than the fair value of the corresponding subscribed shares as of the Closing Date. The excess is considered as share-based compensation to the
I-Mab Hangzhou’s management for the services to be used or consumed in the I-Mab Hangzhou’s own operations. The share-based compensation is
considered granted upon the Closing Date and cliff vests after five years of service since the Closing Date. Consequently, the Group recognizes its
proportionate share of the compensation expense recorded by I-Mab Hangzhou. For the period from September 15, 2020 to December 31, 2020, the
Group recognized RMB8,456 in equity in loss of affiliates in the Group’s consolidated statements of comprehensive income. For the year ended
December 31, 2021, the Group recognized RMB28,236 in equity in loss of affiliates in the consolidated financial statements of comprehensive loss.
Along with the equity transfer transaction, the team of designated management/workforce transferred from the Group to I-Mab Hangzhou consists of
several grantees under the Group’s 2020 Share Incentive Plan (“2020 Plan”, see Note 17(f)). These individuals continued to qualify the definition of the
eligible participants under the 2020 Plan after the Closing Date. Meanwhile, there has been no change to any of the award terms. The equity transfer
transaction did not trigger the modification accounting to the share-based compensation. Additionally, given that I-Mab Hangzhou became an affiliate to
the Group upon deconsolidation, and that the other shareholders of I-Mab Hangzhou are not providing proportionate value to sponsor the 2020 Plan nor
is the Group receiving any consideration for the awards granted to employees of I-Mab Hangzhou, the Group is required, under Topic 323, to expense
the full costs of share-based compensation as incurred at the same period as the costs are recognized by I-Mab Hangzhou. For the year ended
December 31, 2020 and 2021, such expenses of RMB32,707 and RMB13,267 were recorded in the equity in loss of affiliates in the consolidated
statements of comprehensive income (loss), respectively.
In March 2021, I-Mab Hangzhou granted stock options to its employees and recognized share-based compensation expenses of RMB17,031 for the year
ended December 31, 2021. Pursuant to the I-Mab Hangzhou’s articles of association, the Group applies the HLBV method to allocate earnings or losses
of I-Mab Hangzhou because the liquidation rights and priorities sufficiently differ from what is reflected by the underlying percentage ownership
interests. Accordingly, the Group recorded RMB17,031 in the equity in loss of affiliates in the consolidated financial statements of comprehensive loss
for the year ended December 31, 2021 and in additional paid-in capital in the consolidated balance sheet as of December 31, 2021.
F-38
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
10. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD AND PUT RIGHT LIABILITIES
(a) Investments accounted for using the equity method (continued)
Investment in I-Mab Hangzhou (continued)
As of December 31, 2020 and 2021, the carrying value of the Group’s long-term investment in I-Mab Hangzhou RMB664,832 and RMB346,247,
respectively.
Other long-term investment measured under equity method
In July 2021, the Group, as a limited partner, entered into a partnership agreement with other investors and subscribed RMB20,000 for a 4% equity
interest in a partnership located in Hangzhou. In August 2021, the Group paid the initial investment of RMB6,000 to the partnership. Pursuant to the
partnership agreement, the Group, as a limited partner, shall not participate in any activities in relation to management of the investment business. In
addition, members of the investment committee shall only be appointed by the general partner. For the year ended December 31, 2021, the Group
recorded RMB141 in the equity in loss of affiliates in the consolidated financial statements of comprehensive loss. As of December 31, 2021, the
carrying value of the Group’s long-term investment in this affiliate was RMB5,859.
The Group presented the summarized financial information of the Group’s long-term investment measured under equity method below in accordance
with Rule 4-08 of Regulation S-X (RMB in thousands).
Operating data:
Revenue
Loss from operations
Net Loss
Balance sheet data:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Non-controlling interests
For the period from
September 15, 2020 to
December 31, 2020
I-Mab
Hangzhou
For the year ended
December 31, 2021
I-Mab
Hangzhou
Other equity
investments
271
(85,945)
(85,945)
5,660
(295,186)
(290,586)
—
(3,513)
(3,513)
As of December 31,
2020
I-Mab
Hangzhou
As of December 31,
2021
I-Mab
Hangzhou
Other equity
investments
923,010
810,623
31,519
10,933
—
602,047
1,207,132
168,763
176,436
—
20,037
40,000
50
—
—
F-39
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
10. INVESTMENTS ACCOUNTED FOR USING THE EQUITY METHOD AND PUT RIGHT LIABILITIES (CONTINUED)
(b) Put right liabilities
Pursuant to the SHA, if I-Mab Hangzhou fails to close a public offering of I-Mab Hangzhou’s shares on the China Stock Exchange’s Science and
Technology Innovation Board, Main Board, Small and Medium-Sized Enterprise Board, Growth Enterprise Board, or Hong Kong Stock Exchange, U.S.
Stock Exchange, or other stock exchanges approved by the shareholders of I-Mab Hangzhou in accordance with provisions of the SHA within 4 years
after September 15, 2020, I-Mab Hong Kong is obligated to repurchase the equity held by Domestic Investors in cash or in I-Mab’s stock (subject to the
approval procedures of I-Mab) within 3 years from the expiration of the 4-year period after the Closing Date of September 15, 2020.
The put right written by I-Mab Hong Kong to Domestic Investors is a freestanding equity-linked instrument, which is classified as a put right liability
and is initially measured at fair value. Subsequent changes in fair value are recorded in other income (loss) in the consolidated statements of
comprehensive income (loss).
The Group determined the fair value of the put right with the assistance of an independent third-party valuation firm. The Group used the option pricing
model (finnerty model) to estimate the fair value of the put right using the following assumptions:
Expected terms (Year)
Estimated volatility
Spot price
Probability of triggering event for redemption option
As of
December 31,
2020
3.7
55.9%
As of
December 31,
2021
2.7
34.5%
US$143,804
US$171,134
65%
70%
The model requires the input of key assumptions including the expected terms, estimated volatility, spot price and probability of triggering event for
redemption option. The significant unobservable inputs used in the option pricing model included spot price, estimated volatility and probability of
triggering event for redemption option. Expected terms is estimated based on the timing of a hypothetical redemption event which is assumed to be the
earlier of expected redemption date or expected public offering date. Expected volatility is estimated based on daily stock prices of the comparable
company for a period with length commensurate to the expected terms of redemption event. The spot price was determined using the income approach
with assistance from an independent third-party valuation firm. The significant unobservable inputs used in the income approach include revenue growth
rates and discount rates. The Group’s management is ultimately responsible for the determination of the spot price and probability of triggering event for
redemption option.
Significant decreases in interval between valuation date and maturity date, estimated volatility, spot price and probability of triggering event for
redemption option would result in a significantly lower fair value measurement.
F-40
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
11. ACCRUALS AND OTHER PAYABLES
Current:
Staff salaries and welfare payables
Accrued external research and development activities related
expenses
Accrued cost in relation to planned dual listing
Accrued private placement offering costs payable
Termination fee (Note 18)
Non-refundable incentive payment from depositary bank (1)
Accrued traveling expenses, office expenses and others
Non-current:
Non-refundable incentive payment from depositary bank (1)
Non-refundable payment received in relation to the exclusive
promotion right granted to a third party (2)
Advance payment received from an employee for exercise of stock
options
Total
As of December 31,
2020
RMB
As of December 31,
2021
RMB
US$ (Note 2.5)
94,133
52,526
218,583
2,010
128,786
—
2,424
114,622
560,558
367,976
4,793
—
57,381
2,369
108,290
593,335
7,474
4,934
—
10,000
1,501
8,975
569,533
—
14,934
608,269
8,242
57,743
752
—
9,004
372
16,994
93,107
774
1,569
—
2,343
95,450
(1)
(2)
The Group received a non-refundable incentive payment of US$1,857 (equivalent to approximately RMB12,982) from depositary bank in April
2020. The amount was recorded ratably as other gains over a five-year arrangement period. For the years ended December 31, 2020 and 2021, the
Group has recorded RMB2,348 and RMB2,395 as other income in the consolidated statements of comprehensive income (loss) respectively.
In November 2021, the Group entered into a collaboration agreement with a third party located in China to grant the third party an exclusive right
to conduct promotion activities for the TJ202 drug products in designated hospitals after the commercialization of TJ202 in future years. In
November 2021, the Group received a non-refundable payment of RMB10,000 from the third party and recorded it as the non-current liabilities in
the consolidated balance sheet as of December 31, 2021. This amount will be recorded as the deduction of the selling expenses after the
commercialization of TJ202 products.
F-41
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12. INCOME TAXES
Cayman Islands
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
I-Mab is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, I-Mab is not subject to tax on income or capital gain.
Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders. I-Mab did business registration in Hong
Kong and has a Hong Kong tax file number.
Hong Kong
I-Mab Biopharma Hong Kong Limited is incorporated in Hong Kong. Companies registered in Hong Kong are subject to Hong Kong profits tax on the
taxable income as reported in their respective statutory financial statements adjusted in accordance with the relevant Hong Kong tax laws. The
applicable tax rate in Hong Kong is 16.5%. For the years ended December 31, 2019, 2020 and 2021, I-Mab Biopharma Hong Kong Limited did not
make any provisions for Hong Kong profit tax as there were no assessable profits derived from or earnings in Hong Kong for any of the periods
presented. Under the Hong Kong tax law, I-Mab Biopharma Hong Kong Limited is exempted from income tax on its foreign-derived income and there
are no withholding taxes in Hong Kong on remittance of dividends.
United States
I-Mab Biopharma US Ltd. is incorporated in U.S. and is subject to U.S. federal corporate income tax at a rate of 21%. I-Mab Biopharma US Ltd. is also
subject to state income tax in Maryland of 8.25%. I-Mab Biopharma US Ltd. has no taxable income for all periods presented, therefore, no provision for
income taxes is required.
China
On March 16, 2007, the National People’s Congress of PRC enacted a new Enterprise Income Tax Law (“new EIT law”), under which Foreign
Investment Enterprises (“FIEs”) and domestic companies would be subject to corporate income tax at a uniform rate of 25%. The new EIT law became
effective on January 1, 2008. Under the new EIT law, preferential tax treatments will continue to be granted to entities which conduct businesses in
certain encouraged sectors and to entities otherwise classified as “High and New Technology Enterprises”.
I-Mab Shanghai has been qualified as “High and New Technology Enterprise” and enjoys a preferential income tax rate of 15% from 2021 to 2023.
The Company’s other PRC subsidiaries are subject to the statutory income tax rate of 25%.
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
12. INCOME TAXES (CONTINUED)
China (continued)
No provision for corporate income taxes for corresponding tax residents has been made because the Group are in cumulative loss positions for all the
periods presented. During the year ended December 31, 2020, the Group accrued withholding taxes with the amount of RMB12,231 in relation to
research and development service and other supporting service charges made by its non-PRC tax resident subsidiaries to its PRC tax resident
subsidiaries. As the actual withholding taxes paid to local tax bureau was RMB9,077, the Group reversed the tax expenses of RMB3,154 in the year
ended December 31, 2021.
Reconciliations of the differences between the PRC statutory income tax rate and the Group’s effective income tax rate for the years ended
December 31, 2019, 2020 and 2021 are as follows:
Year Ended December 31,
Income (loss) before income tax
Income tax computed at respective applicable tax rate
Non-deductible expenses
Research and development expenses plus deduction
True up of withholding tax expenses
Changes in valuation allowance
2021
2019
RMB
2020
RMB
RMB
US$
(Note 2.5)
(1,451,950) 483,146 (2,334,695) (366,365)
(410,899) (64,479)
68,400 10,733
(7,929)
(50,530)
(495)
(3,154)
393,029 61,675
(495)
(148,871) 66,044
87,021 72,256
(9,254) (60,776)
— —
71,104 (65,293)
— 12,231
(3,154)
Effect of tax holidays entitled by the PRC subsidiaries on basic income (loss) per
share
9.55
0.34
(0.84)
(0.13)
The principal components of the deferred tax assets and liabilities are as follows:
As of December 31,
2021
2020
RMB
RMB
US$
(Note 2.5)
Deferred tax assets:
Net operating loss carryforward
Depreciation and amortization of property, equipment, software and intangible asset, net
Share-based compensation expenses
Accrual expense
Less: valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Acquired intangible assets
Contract assets
Total deferred tax liabilities
Deferred tax assets, net
F-43
107,344
30,417
—
10,568
(100,204)
48,125
380,695
41,020
59,296
30,172
(493,233)
17,950
59,739
6,437
9,305
4,735
(77,399)
2,817
18,067
30,058
48,125
—
17,950
—
17,950
—
2,817
—
2,817
—
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
12. INCOME TAXES (CONTINUED)
Movement of the valuation allowance is as follows:
Balance as of January 1
Additions
Utilization and reversal of valuation allowances
Decrease due to the change of tax rate
Balance as of December 31
2019
RMB
Year Ended December 31
2020
RMB
2021
RMB
(94,511)
(71,104)
—
118
(165,497)
(165,497)
(36,061)
89,154
12,200
(100,204)
(100,204)
(393,029)
—
—
(493,233)
US$
(Note 2.5)
(15,724)
(61,675)
—
—
(77,399)
As of December 31, 2021, the Group had a majority of net operating losses of approximately RMB1,891,099 which arose from the subsidiaries
established in the PRC. The tax losses carried forward various in the PRC will expire during the period beginning from 2022 to 2031 based on entity’s
preferential tax status.
A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered as more likely than not that some portion or all of the
deferred tax assets will not be realized in the foreseeable future. In making such determination, the Group evaluates a variety of positive and negative
factors including the Group’s operating history, accumulated deficit, the existence of taxable temporary differences and reversal periods.
The Group has incurred net accumulated operating losses for income tax purposes since its inception. The Group believes that it is more likely than not
that these net accumulated operating losses together with other deferred tax assets will not be utilized in the foreseeable future. Therefore, the Group has
provided full valuation allowances for the deferred tax assets as of December 31, 2020 and 2021.
The Group evaluates each uncertain tax position (including the potential application of interest and penalties) based on the technical merits, and measure
the unrecognized benefits associated with the tax positions. As of December 31, 2020 and 2021, the Group did not have any significant unrecognized
uncertain tax positions.
13. ORDINARY SHARES
As of December 31, 2018 and 2019, 500,000,000 ordinary shares had been authorized by the Company. Each ordinary share is entitled to one vote. The
holders of ordinary shares are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors of the
Company.
On October 29, 2019, the Company’s shareholders and board of directors approved that immediately prior to the completion of initial public offering,
the Company’s authorized share capital will be changed into US$80,000 divided into 800,000,000 ordinary shares of a par value of US$0.0001 each.
On January 17, 2020, the Company completed its IPO and became listed on the Nasdaq Global Market by issuing 7,407,400 American Depositary
Shares (“ADSs”) at the price of US$14.00 per ADS for total gross proceeds of US$103.7 million. On February 10, 2020, the underwriters of the IPO
have exercised their over-allotment option to purchase an additional 768,350 ADSs of the Company at the IPO price of US$14.00 per ADS. After giving
effect to the exercise of the over-allotment option, the Company has issued and sold a total of 8,175,750 ADSs in the IPO, for total net proceeds of
US$101.3 million (equivalent to RMB697,788), netting of issuance cost from total gross proceeds of US$114.5 million. Each ten ADSs represent
twenty-three ordinary shares of the Company.
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
13. ORDINARY SHARES (CONTINUED)
On January 17, 2020, the Company also issued 6,078,571 ordinary shares to Everest (see Note 18 for details).
Upon the completion of the IPO, the Company’s then outstanding 30,227,056 Series A Preferred Shares, 23,288,783 Series B Preferred Shares,
3,714,580 Series B-1 Preferred Shares, 3,301,849 Series B-2 Preferred Shares, 31,046,360 Series C Preferred Shares and 3,857,143 Series C-1 Preferred
Shares were converted into 30,227,056, 23,288,783, 3,714,580, 3,571,427, 34,420,469 and 4,537,814 ordinary shares, respectively.
On July 15, 2020, the Company’s Board of Directors approved a share repurchase program to repurchase in the open market up to US$20 million worth
of outstanding ADSs of the Group. The Company made a total prepayment of US$5,000 (equivalent to RMB34,051) for the share repurchase. The
prepayment was collected subsequently in October 2020. No repurchase activity was taken place for the year ended December 31, 2021.
On September 3, 2020, the Company entered into definitive subscription agreements with a consortium of institutional investors (the “Investors”) to
raise approximately US$418 million through a private placement. The consortium is led by Hillhouse Capital Group (“Hillhouse”), with significant
participation by GIC Private Limited, and also includes certain other leading Asian and U.S. biotech investment funds, Hillhouse is entitled to nominate
one representative to I-Mab’s Board of Directors.
The private placement comprises (1) the sale to the Investors of the Group’s 29,133,502 ordinary shares (equivalent to 12,666,740 ADSs) at a purchase
price equivalent to US$33 per ADS amounting to approximately US$418 million; and (2) warrants (the “Investor Warrants”, see Note 16(b)) to
subscribe for an aggregate of 5,341,267 ordinary shares (equivalent to 2,322,290 ADSs) at an exercise price equivalent to US$45 per ADS, which may
further increase the proceeds of approximately US$104.5 million if the Investor Warrants are fully exercised. The Investor Warrants will remain
exercisable at the election of the Investors within 12 months after the closing of the private placement. All of the warrants were exercised by the
Investors during the year ended December 31, 2021.
The subscription agreement with the Hillhouse entities contemplates two closings. The first closing occurred on September 11, 2020, and the second
closing is conditioned upon an existing director of the Company having resigned to enable the Hillhouse entities to appoint a director to replace such
director and the lemzoparlimab out-licensing agreement with AbbVie Ireland Unlimited Group (“AbbVie”) (see Note 18) being or remaining effective.
Upon the first closing, 20,421,378 ordinary shares and 3,744,032 Investor Warrants were issued to the Investors for total gross proceeds of
approximately US$293.0 million. On December 17, 2020, the Group entered into a written amendment made to the subscription agreement with the
Hillhouse entities, which removed one of the two conditions for the second closing that an existing director of the Company having resigned to enable
the Hillhouse entities to appoint a director to replace such director. The second closing occurred as the other condition was satisfied and 8,712,124
ordinary shares as well as 1,597,235 Investor Warrants were issued to the Hillhouse entities for total gross proceeds of approximately US$125.0 million.
The total net proceeds, netting of issuance cost, from the private placement was US$397.2 million (equivalent to RMB2,653,669).
As of December 31, 2021, 10,069,216 stock options were exercised, and 5,376,140 restricted share units were issued as ordinary shares.
F-45
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
14. CONVERTIBLE PREFERRED SHARES
On October 18, 2016, the Company issued 5,141,587 shares of Series A-1 and A-2 Preferred Shares with a consideration of US$11,282 (equivalent to
approximately RMB74,742). In connection with the Series A-1 and A-2 Preferred Shares issuance, the Company also issued 2,246,744 warrant to
purchase its Series A-3 Preferred Shares (“Series A-3 Warrants”).
On September 6, 2017, in connection with the Group’s acquisition of Tasgen Group, the Company issued 16,723,646 shares of Series A-3 Preferred
Shares at a price of US$2.55 per share with a total consideration of US$42,645 (equivalent to approximately RMB289,024).
Series A-1 Preferred Shares, Series A-2 Preferred Shares and Series A-3 Preferred Shares are also referred to as Series A Preferred Shares.
On September 22, 2017, the Company issued 15,894,594 shares of Series B Preferred Shares with a consideration of US$52,546 (equivalent to
approximately RMB346,515). In connection with the Series B Preferred Shares issuance, the Company also issued convertible promissory notes that are
convertible into Series B-1 Preferred Shares (“2017 Notes” and see Note 15) and 5,633,780 warrants to purchase its Series B-2 Preferred Shares (“Series
B Warrant” and see Note 16).
Concurrently with the Company’s issuance of Series B Preferred Shares, the Company also completed a round of onshore financing with respect to the
Group’s subsidiary I-MAB Tianjin (“Series B Onshore Financing”). Series B Onshore Financing comprised 1) capital injection to I-Mab Tianjin by a
number of investors (“Series B Onshore Investors”) (see Note 15), 2) I-Mab Tianjin’s issuance of convertible loans (“Onshore Convertible Loans” and
see Note 15), and 3) the Company’s issuance of 2,620,842 warrants to purchase its Series B-2 Preferred Shares (“Series B Warrants” and see Note 16).
On June 29, 2018, the Company issued total 8,361,823 shares of Series A-3 Preferred Shares upon exercise of Series A-3 Option held by its holder.
On June 29, 2018, the Company issued 2,535,201 shares of Series B-1 Preferred Shares upon conversion of 2017 Notes and issued 2,253,512 shares of
Series B-2 Preferred Shares upon exercise of Series B Warrant by Series B preferred shareholders.
On June 29, 2018, the Company issued 5,938,640 shares of Series B Preferred Shares upon exercise of the Series B Option held by a Series B Onshore
Investor and issued 947,218 shares of Series B-1 Preferred Shares upon conversion of Onshore Convertible Loans by a Series B Onshore Investor (see
Note 15), respectively.
On July 6, 2018, the Company issued 1,455,549 shares of Series B Preferred Shares upon exercise of the Series B Option held by a Series B Onshore
Investor, issued 232,161 shares of Series B-1 Preferred Shares upon conversion of Onshore Convertible Loans by a Series B Onshore Investor (see Note
15) and issued 1,048,337 shares of Series B-2 Preferred Shares upon exercise of Series B Warrant by Series B Onshore Investors, respectively.
F-46
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
14. CONVERTIBLE PREFERRED SHARES (CONTINUED)
Series B Preferred Shares, Series B-1 Preferred Shares and Series B-2 Preferred Shares are also referred to as Series B Preferred Shares.
On July 6, 2018, the Company issued 31,046,360 shares of Series C Preferred Shares at a price of US$6.4419 per share with a total consideration of
US$200,000 (equivalent to approximately RMB1,323,363). In connection with the offering of the Series C Preferred Shares, the Company incurred
issuance costs of RMB16,730.
On July 25, 2019, the Group entered into a share purchase agreement with certain third party investors, under which these investors will subscribe for an
aggregate of 3,857,143 Series C-1 convertible preferred shares of the Company for an aggregate purchase price of US$27.0 million. Out of the
aforementioned subscription of 3,857,143 Series C-1 convertible preferred shares by certain third party investors, 1,428,571 Series C-1 convertible
preferred shares were issued to an investor on October 17, 2019, and the Group also received the cash consideration of US$10,000 (equivalent to
approximately RMB70,036). On November 6, 2019, the Group received cash consideration of US$17,000 (equivalent to approximately RMB119,387)
for the remaining 2,428,572 Series C-1 convertible preferred shares from the investors and the issuance of such 2,428,572 Series C-1 convertible
preferred shares was consummated on that day. In connection with the offering of the Series C-1 convertible preferred shares, the Company incurred
issuance costs of approximately US$840 (equivalent to approximately RMB5,887).
Series A Preferred Shares, Series B Preferred Shares, Series C Preferred Shares and Series C-1 Preferred Shares are collectively referred to as Preferred
Shares.
Key terms of the Preferred Shares are summarized as follows:
Dividends
The holders of Preferred Shares are entitled to receive dividends, out of any assets legally available therefore, prior and in preference to any declaration
or payment of any dividend on the ordinary shares or any other class or series of shares of the Group at the rate of eight percent (8%) of the original
issue price per share per annum on each Preferred Share, payable in US$ and annually when, as and if declared by the Board of Directors. Such
distributions shall not be cumulative. No dividend, whether in cash, in property or in shares of the capital of the Group, shall be paid on or declared and
set aside for any ordinary shares or any other class or series of shares of the Group unless and until all dividends have been paid in full on the Preferred
Shares (on an as-converted basis).
Conversion
Each Preferred Share may be converted at any time into ordinary shares at the option of the preferred shares holders at the then applicable conversion
price. The initial conversion ratio is 1:1, subject to adjustment in the event of (i) share splits, share combinations, share dividends or distribution, other
dividends, recapitalizations and similar events, or (ii) issuance of ordinary shares (excluding certain events such as issuance of ordinary shares pursuant
to a public offering) at a price per share less than the conversion price in effect on the date of or immediately prior to such issuance.
F-47
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
14. CONVERTIBLE PREFERRED SHARES (CONTINUED)
Conversion (continued)
The Preferred Shares shall be automatically converted into ordinary shares immediately upon the closing of a public offering of the Company’s shares
with an offering price (exclusive of underwriting commissions and expenses) that reflects a market capitalization (immediately prior to the public
offering) of not less than US$1,000,000,000 or otherwise approved by all directors and certain preferred shareholders as specified in the Company’s
memorandum and articles of association (the “Qualified Public Offering”).
The Group determined that there were no beneficial conversion features (“BCF”) identified for any of the Preferred Shares during any of the periods. In
making this determination, the Company compared the fair value of the ordinary shares into which the Preferred Shares are convertible with the
respective effective conversion price at the issuance date. In all instances, the effective conversion price was greater than the fair value of the ordinary
shares. To the extent a conversion price adjustment occurs, as described above, the Group will reevaluate whether or not a beneficial conversion feature
should be recognized.
Liquidation
In the event of any liquidation (unless waived by the preferred shareholders) including deemed liquidation, dissolution or winding up of the Company,
holders of the Preferred Shares shall be entitled to receive a per share amount equal to one hundred percent (100%) of the original issue price on each
Preferred Share, plus an amount representing an internal rate of return of twelve percent (12%) per annum on the original issue price as adjusted for
share dividends, share splits, combinations, recapitalizations or similar events, plus all accrued and declared but unpaid dividends thereon, in the
sequence of Series C Preferred Shares, Series B Preferred Shares and Series A Preferred Shares. After such liquidation amounts have been paid in full,
any remaining funds or assets of the Company legally available for distribution to shareholders shall be distributed on a pro rata basis among the holders
of the Preferred Shares, on an as-converted basis, together with the holders of the ordinary shares.
Accounting of preferred shares
The Preferred Shares are redeemable by the holders upon a liquidation event, including a deemed liquidation event (e.g., change in control), and as such
are presented as mezzanine equity on the consolidated balance sheets. In accordance with ASC 480-10-S99, each issuance of the convertible preferred
shares should be recognized at the date of issuance after deducting fair value allocated to the detachable warrants and issuance costs.
Modification of preferred shares
The Company assesses whether an amendment to the terms of its convertible preferred shares is an extinguishment or a modification using the fair value
model.
When convertible redeemable preferred shares are extinguished, the difference between the fair value of the consideration transferred to the convertible
redeemable Preferred Shareholders and the carrying amount of such preferred shares (net of issuance costs) is treated as a deemed dividend to the
Preferred Shareholders. When convertible redeemable preferred shares are modified and such modification results in value transfer between Preferred
Shareholders and ordinary shareholders, the change in fair value resulted from the amendment is treated as a deemed dividend to or from the Preferred
Shareholders.
F-48
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
14. CONVERTIBLE PREFERRED SHARES (CONTINUED)
Modification of preferred shares (continued)
On December 25, 2019, the Company’s shareholders and board of directors approved that, where the final offering price of a Qualified Public Offering
is no less than US$4.176 per ordinary share, the agreed provisions related to the number of shares to be converted into the Company’s ordinary shares
shall apply with respect to the Series C-1 Preferred Shares, Series C Preferred Shares, Series B-2 Preferred Shares and Series B-1 Preferred Shares,
which will generally give rise to a one to multiple conversion of the such rounds of Preferred Shares, provided that unanimous consent of the directors
on the final offering price needs to be obtained in the event that the final offering price per ordinary share of such IPO is fixed at a price equal to or
higher than US$4.176 per ordinary share but lower than US$5.22 per ordinary share.
The Company evaluated the aforementioned modifications and concluded that they represented modifications, rather than extinguishment, to Series B-1,
B-2 and C Preferred Shares, which resulted in a transfer of value from ordinary shareholders to preferred shareholders. The combined change in fair
value of Series B-1, B-2 and C Preferred Shares immediately before and after the modification was US$4.0 million (equivalent to approximately
RMB27.8 million) on December 25, 2019. This decrease in fair value of the ordinary shares of US$4.0 million (equivalent to approximately RMB27.8
million) on December 25, 2019 was, in substance, a transfer of wealth mostly from ordinary shareholders to preferred shareholders, and therefore was
recorded as a deemed dividend to the preferred shareholders.
The Company evaluated the aforementioned modifications and concluded that they represented extinguishment to Series C-1 Preferred Shares. The
difference between the fair value of the modified Series C-1 Preferred Shares and the carrying value of the original Series C-1 Preferred Shares was
amounting US$0.8 million on December 25, 2019 and represented the fair value of the consideration transferred, and therefore was recognized as a
deemed dividend to the preferred shareholders and adjustment to the carrying amount of Series C-1 Preferred Shares.
F-49
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
14. CONVERTIBLE PREFERRED SHARES (CONTINUED)
The Company’s convertible preferred shares activities for the years ended December 31, 2019 and 2020 are summarized below:
Series A Preferred Shares
Series B Preferred Shares
Series C Preferred Shares
Series C-1 Preferred Shares
Number of
shares
Amount Amount
RMB
US$
Number of
shares
Amount Amount
RMB
US$
Number of
shares
Amount Amount
US$
RMB
Number of
shares
Amount Amount
US$ RMB
30,227,056 102,852 687,482 30,305,212 139,407 921,243 31,046,360 197,478 1,306,633
— —
—
Balance as of
January 1,
2019
Issuance of
Series C-1
Preferred
Shares, net of
issuance costs
—
—
—
—
—
—
—
—
— 3,857,143 26,160 183,536
Adjustment at
extinguishment
of Series C-1
Preferred
Shares
Balance as of
December 31,
2019
Conversion to
ordinary shares
upon IPO
Balance as of
December 31,
2020
—
—
—
—
—
—
—
—
—
—
754
5,283
30,227,056 102,852 687,482 30,305,212 139,407 921,243 31,046,360 197,478 1,306,633 3,857,143 26,914 188,819
(30,227,056) (102,852) (687,482) (30,305,212) (139,407) (921,243) (31,046,360) (197,478) (1,306,633) (3,857,143) (26,914) (188,819)
—
—
—
—
—
—
—
—
—
— —
—
F-50
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
15. CONVERTIBLE PROMISSORY NOTES AND ONSHORE CONVERTIBLE LOANS
2018 Notes
On February 3, 2018, the Company issued US$9,000 (equivalent to approximately RMB59,704) convertible promissory notes (“2018 Notes”) to
Genexine, Inc. of Series A-3 Preferred Shares at an annual interest rate of 0%, maturing on 36 months after the issuance date. Under the agreement, the
holder of the 2018 Notes may convert the 2018 Notes outstanding principal amount into Series B-1 Preferred Shares at the conversion price being lower
of US$10 per share and fair market value at any time prior to the maturity date. Alternatively, the 2018 Notes shall be automatically converted into the
Company’s Series B Preferred Shares upon the maturity. As the fair value of the Company’s ordinary shares on February 3, 2018 of US$3.96 was equal
to the effective conversion price (being lower of US$10 per share and fair market value), the Company did not record a BCF. On December 17, 2020,
the Group issued 900,000 ordinary shares to Genexine, Inc. upon the full conversion of the 2018 Notes with the conversion price of US$10 per share.
F-51
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
16. WARRANTS
(a) Warrants to purchase preferred shares
In connection with the issuance of the Series B Preferred Shares on September 22, 2017, 5,633,780 Series B Warrants were issued to Series B preferred
shareholders, which provided the holders the right to purchase Series B-2 Preferred Shares.
In connection with the Company’s Series B Onshore Financing that took place on September 25, 2017, 2,620,842 Series B Warrants were issued to
Series B Onshore Investors, which provided the holders the right to purchase Series B-2 Preferred Shares.
During the period from June 29, 2018 to July 6, 2018, 3,301,849 Series B Warrants (representing Tranche I of Series B Warrants) were exercised to
purchase 3,301,849 Series B-2 Preferred Shares with proceeds of US$20,000 (equivalent to approximately RMB132,332).
On July 6, 2018, the Series B Warrants holders agreed that the Series B Warrants shall be divided into two tranches and exercisable in accordance with
different time schedules, such that: (i) the holders have exercised part of the Series B Warrants in the total consideration of US$20,000 (“Tranche I of
Series B Warrants”) and 3,301,849 Series B-2 Preferred Shares of the Company in aggregate have been newly issued to such holders on a pro rata basis;
(ii) only when the Company fails to submit a Qualified Public Offering application at an internationally recognized securities exchange by March 31,
2019, the Warrant Holders may exercise the remaining part of Series B Warrants, in the total consideration of US$30,000 (“Tranche II of Series B
Warrants”) and 4,952,773 Series B-2 Preferred Shares of the Company in aggregate will be issued to such holders on a pro rata basis; (iii) provided that
the Company successfully submits a Qualified Public Offering application at an internationally recognized securities exchange by March 31, 2019, the
holders shall unconditionally and irrevocably waive and cancel Tranche II of Series B Warrants; and (iv) the Tranche II of Series B Warrants may only
be concurrently exercised by all the Warrant Holders in one lump. This is considered to be a modification to Series B Warrants.
According to the confirmations issued by the Company’s Series B Warrants holders in July 2019, the holders of Series B Warrants has unconditionally
and irrevocably waived and cancelled the Tranche II of Series B Warrants. The fair value gain of warrants for the years ended December 31, 2019 and
2020 was amounting to RMB5,644 and nil, respectively.
Accounting of warrants for purchase preferred shares
The warrant is a freestanding instrument and is recorded as liability in accordance with ASC 480, Distinguishing Liabilities from Equity.
As the Company’s issuance of warrants were bundled with other instruments (such as convertible preferred shares, convertible promissory notes, etc.),
out of total considerations, the warrants are initially recognized at fair value and the remaining were allocated to other instruments on a relative fair
value basis (if applicable). The fair value changes of the warrants (including the fair value changes arising from modification of warrants) up to the time
of exercise or termination were recognized in earnings. Upon exercise, the total carrying value of the associated warrant liabilities was reclassified into
the carrying value of the Preferred Shares into which it was converted.
The Company determined the fair value of the warrants with the assistance of an independent third-party valuation firm.
(b) Warrants to purchase ordinary shares
As mentioned in Note 13, on September 3, 2020, the Group entered into definitive subscription agreements with the Investors to raise approximately
US$418 million through a private placement, which comprises the Investor Warrants to subscribe for an aggregate of 5,341,267 ordinary shares
(equivalent to 2,322,290 ADSs) at an exercise price equivalent to US$45 per ADS.
F-52
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
16. WARRANTS (CONTINUED)
(b) Warrants to purchase ordinary shares (Continued)
The Subscription Agreement with the Hillhouse entities contemplates two closings. In the first closing occurred on September 11, 2020 and second
closing occurred on December 17, 2020, the Investor Warrants were issued with fixed exercise prices of US$45.00 per ADS (equivalent to US$19.57
per share). The Investor Warrants will remain exercisable at the election of the Investors within 12 months after the closing of the private placement.
The number of common share purchasable upon exercise of the Investor Warrants shall be proportionally adjusted to reflect any share dividend, share
split, combination of shares or reverse share split, or other similar event affecting the number of outstanding common shares. All of the warrants were
exercised by the Investors during the year ended December 31, 2021.
Accounting for warrants to purchase ordinary shares
The Investor Warrants are regarded as indexed to the Company’s own stock and were classified as equity and initially measured at fair value and
subsequent changes in fair value are not recognized as long as the Investor Warrants continue to be classified as equity. The estimated fair value of the
Investor Warrants was shown below, which were used to determine the allocation of the total proceeds for the sale of ordinary shares between the
Investor Warrants and ordinary shares.
Warrants to purchase ordinary shares (first closing on September 11, 2020)
Warrants to purchase ordinary shares (second closing on December 17, 2020)
Exercise
Price per
share
US$
19.57
19.57
Terms
12 months
12 months
Outstanding
Units
3,744,032
1,597,235
Fair value at
the closing
date
RMB’000
71,874
37,869
The Group determined the fair value of the warrants with the assistance of an independent third-party valuation firm. The Group used the binomial
model to estimate the fair value of the warrant on September 11, 2020 and December 17, 2020 when the Investor Warrants were issued using the
following assumptions:
Risk-free rate of return
Maturity date
Estimated volatility rate
Exercise price
As of September 11,
2020
As of December 17,
2020
0.12%
0.08%
September 11, 2021
December 17, 2021
60.72%
US$19.57
59.56%
US$19.57
The model requires the input of assumptions including the risk-free rate of return, maturity date and estimated volatility rate. The risk-free rate for
periods within the contractual life is based on the US treasury strip bond with maturity similar to the maturity of the warrants as of valuation dates plus a
China country risk premium. For expected volatilities, the Group has made reference to the historical daily stock prices volatilities of ordinary shares of
several comparable companies in the same industry as the Group.
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION
(a) Restricted shares
In October 2016, the Founders entered into an arrangement with other investors of the Company, and the 87,441 ordinary shares issued to the Founders
in June 2016 were canceled and out of the remaining 3,932,113 ordinary shares held by the Founders, 70% became restricted and subject to service
vesting conditions, that will vest 20%, 20% and 30% over the next three years, respectively. There shall be no acceleration of the vesting schedule
except that, in case of a change of control of the Company or a Qualified Public Offering, or the termination of the Founder’s employment with the
Group without cause.
Deferred share-based compensation was measured for the restricted shares using the estimated fair value of the Company’s ordinary shares of US$0.77
at the date of imposition of the restriction in October 2016, and was amortized to the consolidated statements of comprehensive loss by using graded
vesting method over the vesting term of 3 years. As of December 31, 2019, all the restricted shares were fully vested.
Share-based compensation expenses related to restricted shares were included in:
Research and development expenses
Administrative expenses
2019
RMB
470
1,096
1,566
2021
Year Ended December 31,
2020
RMB
—
—
—
RMB
—
—
—
US$ (Note 2.5)
—
—
—
(b) 2017 Employee Stock Option Plan (“2017 Plan”)
In October 2017, the Company adopted the 2017 Plan. Under the 2017 Plan, a maximum aggregate number of 13,376,865 shares that may be issued
pursuant to all awards granted was approved. Stock options granted to an employee under the 2017 Plan will be exercisable upon the Company
completes a listing and the employee renders service to the Company in accordance with a stipulated service schedule starting from the employee’s date
of employment. Employees are generally subject to a three-year service schedule, under which an employee earns an entitlement to vest in 50% of the
option grants on the second anniversary of the grant date, a vesting of the remaining 50% on the third anniversary of the applicable grant date. The stock
option under 2017 Plan, to the extent then vested, shall become exercisable only upon the earlier of (i) a listing, and (ii) occurrence of a change in
control.
F-54
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(b) 2017 Employee Stock Option Plan (“2017 Plan”) (continued)
On December 25, 2019, the Second Amended and Restated 2017 Plan was approved by the shareholders and board of directors of the Company,
pursuant to which, in connection with the Company’s IPO, the maximum aggregate number of shares that may be granted pursuant to all awards under
2017 Plan shall be adjusted in accordance with a formula pre-approved by the shareholders. In connection with above amendments to 2017 Plan, each of
the Company’s founders, namely Zheru Zhang, Lili Qian, Zhengyi Wang and Lei Fang, is willing to irrevocably surrender by him or her, for no
consideration, a portion of the unvested options granted to him or her, which, if vested, would entitle him or her to acquire up to 130,000 ordinary shares
of the Company, par value US$0.0001 per share, at an exercise price of US$1.0, respectively, under the Second Amended and Restated 2017 Plan (in
respect of each individual, the “Founder’s Surrendered Options”). On December 25, 2019, the board of directors of the Company approved that the
Company accepts all Founder’s Surrendered Options from each of the founders, Zheru Zhang, Lili Qian, Zhengyi Wang and Lei Fang, for no
consideration, with effect immediately prior to the completion of the IPO and such surrendered options be cancelled with effect immediately prior to the
completion of the IPO.
Prior to the Company completes a listing, all stock options granted to an employee shall be forfeited at the time the employee terminates his
employment with the Group. After the Company completes a listing, vested options not exercised by an employee shall be exercised until later of: (i) 90
days after the date when the options become exercisable, or (ii) 30 days after the date of cessation of employment or directorship, or such longer period
as the Board of Directors may otherwise determine.
For the year ended December 31, 2019, the Group granted 640,000 stock options to its employees (all with an exercise price of US$1). The Group did
not grant any stock options to employees for the years ended December 31, 2020 and 2021. 6,790,924 and 2,569,017 stock options were exercisable as
of December 31, 2020 and 2021, respectively.
The following table sets forth the stock options activities of 2017 Plan for the periods presented:
Outstanding as of December 31, 2018
Granted
Forfeited
Repurchased (Note 17(d))
Outstanding as of December 31 ,2019
Forfeited
Exercised
Surrendered (Note 17(h))
Outstanding as of December 31 ,2020
Exercised
Forfeited
Outstanding as of December 31 ,2021
Exercisable as of December 31, 2021
Weighted
average
exercise
price
US$
0.95
1.00
1.00
1.00
0.93
1.00
0.72
1.00
0.97
0.96
1.00
1.00
1.00
Weighted
average
remaining
contractual
term
8.61
—
—
—
7.76
—
—
—
6.75
—
—
5.79
5.79
Aggregate
intrinsic
value
US$
70,129
—
—
—
47,671
—
—
—
150,415
—
—
50,361
50,361
Number of
shares
13,005,596
640,000
(397,500)
(3,435,215)
9,812,881
(338,876)
(1,439,373)
(332,566)
7,702,066
(5,122,549)
(10,500)
2,569,017
2,569,017
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(b) 2017 Employee Stock Option Plan (“2017 Plan”) (continued)
Stock options granted to the employees were measured at fair value on the dates of grant using the Binomial Option Pricing Model with the following
assumptions:
Expected volatility
Risk-free interest rate (per annum)
Exercise multiple
Expected dividend yield
Time to maturity (in years)
Year ended December 31,
2019
54.64%
2.15%
2.80
—
10
The expected volatility was estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expected
term of the Group’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in US$ for a
term consistent with the expected term of the Group’s options in effect at the option valuation date. The expected exercise multiple was estimated as the
average ratio of the stock price to the exercise price when employees would decide to voluntarily exercise their vested options. As the Group did not
have sufficient information of past employee exercise history, it was estimated by referencing to a widely-accepted academic research publication.
Expected dividend yield is zero as the Group has never declared or paid any cash dividends on its shares, and the Group does not anticipate any dividend
payments in the foreseeable future. Time to maturity equals to the contract life of the option.
A summary of non-vested stock option activities for the year ended December 31, 2021 is presented below:
Non-vested at December 31, 2020
Vested
Forfeited
Non-vested at December 31, 2021
Number of shares
911,142
(900,642)
(10,500)
—
Weighted average
Grant date fair value
US$
4.96
4.96
5.65
—
Since the exercisability was dependent upon the listing, and it was not probable that this performance condition could be achieved until a listing, no
share-based compensation expense relating to the 2017 Plan was recorded prior to the Company’s IPO in 2020.
F-56
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(b) 2017 Employee Stock Option Plan (“2017 Plan”) (continued)
On January 17, 2020, the Group completed its IPO. After achieving this performance condition, the options continue to vest based only on service
period completed according to the graded vesting schedule. The Group has begun recognizing share-based compensation expense for the options granted
using the graded vesting method with a cumulative catch-up for the service period completed to date during the year ended December 31, 2020 and
recognized RMB52,802, RMB69,214 and RMB4,277 share-based compensation expenses in administrative expenses, research and development
expenses and equity in loss of an affiliate, respectively relating to options vested cumulatively. According to the amendments to 2017 Plan, the
maximum aggregate number of shares which may be granted pursuant to all awards under 2017 Plan was changed to 9,609,084. Each of the Group’s
founders, namely Zheru Zhang, Lili Qian, Zhengyi Wang and Lei Fang surrendered 83,142 unvested stock options that were granted to him or her under
2017 Plan before, totalling 332,566 unvested options, for no consideration, and these stock options were cancelled immediately.
Share-based compensation expenses related to the stock options of 2017 Plan are included in:
Research and development expenses
Administrative expenses
Equity in loss of affiliates
2019
RMB
—
—
—
—
Year Ended December 31,
2020
RMB
69,214
52,802
4,277
126,293
RMB
(225)
2,835
516
3,126
2021
US$ (Note 2.5)
(35)
445
81
491
(c) 2018 Employee Stock Option Plan (“2018 Plan”)
On February 22, 2019, the Group adopted the 2018 Plan, which was subsequently amended on July 22, 2019.Under the amended and restated 2018 Plan,
the maximum aggregate number of ordinary shares which may be issued pursuant to all awards is 14,005,745, and if the Group successfully lists on an
internationally recognized securities exchange for a Qualified Public Offering by December 31, 2019, the maximum aggregate number of ordinary
shares which may be issued shall be 15,452,620.
On December 25, 2019, the Second Amended and Restated 2018 Plan were approved by the shareholders and board of directors of the Company,
pursuant to which, in connection with the Company’s IPO, the maximum aggregate number of shares that may be granted pursuant to all awards under
2018 Plan shall be adjusted in accordance with a formula pre-approved by the shareholders. In connection with above amendments to 2018 Plan, the
director of the Company, Dr. Jingwu Zhang Zang is willing to irrevocably surrender by him, for no consideration, of the right to acquire a certain
amount of ordinary shares of the Company, par value US$0.0001 per share, at an exercise price of US$1.0 pursuant to the options granted to him under
the Second Amended and Restated 2018 Plan (the “Dr. Zang’s Surrendered Options”). On December 25, 2019, the board of directors of the Company
approved that the Company accepts the irrevocable surrender of Dr. Zang’s Surrendered Options for no consideration, with effect immediately prior to
the completion of the IPO and such surrendered options be cancelled with effect immediately prior to the completion of the IPO.
F-57
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(c) 2018 Employee Stock Option Plan (“2018 Plan”) (continued)
Stock options granted to an employee under the 2018 Plan will be generally exercisable when the Company completes a listing and the employee
renders service to the Company in accordance with a stipulated service schedule starting from the employee’s date of employment. The vesting schedule
shall generally be a two-year vesting schedule consisting of a cliff vesting 50% on the first anniversary of the applicable vesting commencement date,
and a vesting of the remaining 50% on the second anniversary of the applicable vesting commencement date. If a listing occurs at anytime prior to any
option granted under the 2018 Plan becoming full vested, and to the extent such option has been granted and outstanding, any such option shall vest in
full with immediate effect upon the listing. Except as otherwise approved by the board of directors, vested portion of option shall become exercisable
upon the earlier of six months after a listing or the occurrence of a change in control; provided, however that in each case, no option of an employee
shall become exercisable until the third anniversary of such employee’s employment commencement date.
Pursuant to the Board of Director’s approval of 2018 Plan on February 22, 2019, the 10,893,028 stock options granted to a director of the Group under
2018 Plan were fully vested and exercisable upon the adoption of 2018 Plan. Out of aforementioned total 10,893,028 stock options, 454,940 stock
options were repurchased by the Group (see Note 17 (d) for further details).
The amounts of shared-based compensation expense in relation to the aforementioned grant of stock options to a director of the Group (except for those
repurchased by the Group as described in Note 17 (d)) recognized in the year ended December 31, 2019 was RMB365,329 included in administrative
expenses.
The following table sets forth the stock options activities of 2018 Plan for the periods presented:
Outstanding as of January 1, 2019
Granted
Repurchased (Note 17 (d))
Outstanding as of December 31, 2019
Exercised
Surrendered (Note 17 (h))
Outstanding as of December 31, 2020
Exercised
Outstanding as of December 31, 2021
Exercisable as of December 31, 2021
Weighted
average
exercise
price
US$
—
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
1.00
Weighted
average
remaining
contractual
term
—
—
—
8.86
—
—
8.15
—
7.15
7.15
Aggregate
intrinsic
value
US$
—
—
—
64,840
—
—
206,499
—
148,076
148,076
Number of
shares
—
13,991,528
(454,940)
13,536,588
)
(402,000
(2,544,917
)
10,589,671
(3,036,435)
7,553,236
7,553,236
F-58
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(c) 2018 Employee Stock Option Plan (“2018 Plan”) (continued)
Stock options granted to certain directors and employees of the Group were measured at fair value on the dates of grant using the Binomial Option
Pricing Model with the following assumptions:
Expected volatility
Risk-free interest rate (per annum)
Exercise multiple
Expected dividend yield
Time to maturity (in years)
Year ended December 31, 2019
54.64%-56.31%
2.15%-2.75%
2.80
—
10
The expected volatility was estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expected
term of the Group’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in US$ for a
term consistent with the expected term of the Group’s options in effect at the option valuation date. The expected exercise multiple was estimated as the
average ratio of the stock price to the exercise price when employees would decide to voluntarily exercise their vested options. As the Group did not
have sufficient information of past employee exercise history, it was estimated by referencing to a widely-accepted academic research publication.
Expected dividend yield is zero as the Group has never declared or paid any cash dividends on its shares, and the Group does not anticipate any dividend
payments in the foreseeable future. Time to maturity equals to the contract life of the option.
A summary of non-vested stock option activities for the year ended December 31, 2021 is presented below:
Non-vested at December 31, 2020
Vested
Non-vested at December 31, 2021
Number of shares
825,000
(825,000)
—
Weighted average
grant-date fair value
US$
5.57
5.57
—
F-59
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(c) 2018 Employee Stock Option Plan (“2018 Plan”) (continued)
Except for the aforementioned grant of stock options to a director of the Group under 2018 Plan, since the exercisability is dependent upon the listing,
and it is not probable that this performance condition can be achieved until a listing, no share-based compensation expense related to the 2018 Plan was
recorded for the year ended December 31, 2019.
On January 17, 2020, the Group completed its IPO. After achieving this performance condition, the options continue to vest based only on service
period completed according to the graded vesting schedule. The Group has begun recognizing share-based compensation expense for the options granted
using the graded vesting method with a cumulative catch-up for the service period completed to date during the year ended December 31, 2020 and
recognized RMB48,055, RMB65,656 and RMB226 share-based compensation expense in administrative expenses and research, development expenses
and equity in loss of an affiliate, respectively relating to options vested cumulatively. According to the amendments to 2018 Plan, the maximum
aggregate number of shares which may be granted pursuant to all awards under 2018 Plan was changed to 11,005,888. The director of the Company,
Dr. Jingwu Zhang Zang surrendered 2,544,917 unvested options that were granted to him under 2018 Plan, for no consideration, and these stock options
were cancelled immediately.
Share-based compensation expenses related to the stock options of 2018 Plan are included in:
Research and development expenses
Administrative expenses
Equity in loss of affiliates
2019
RMB
—
365,329
—
365,329
Year Ended December 31,
2020
RMB
65,656
48,055
226
113,937
RMB
55
4,478
257
4,790
2021
US$ (Note 2.5)
9
703
40
752
F-60
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(d) Repurchase of share awards held by a director
On February 22, 2019, the amendment and restated 2017 equity incentive plan was approved by the Board of Directors of the Group, pursuant to which
only the 3,435,215 stock options held by the director (see Note 17(c)) under the 2017 equity incentive plan became fully vested and exercisable on
February 22, 2019. As a result of the performance condition being waived, the stock options held by the director of the Group were accounted for as a
Type III modification where a condition that the Group expects will not be satisfied is changed to a condition that the Group expects will be satisfied.
Additionally, on the same day, the Group repurchased such 3,435,215 stock options under the amendment and restated 2017 equity incentive plan that
was held by the director of the Group along with 454,940 of his stock options under the 2018 equity incentive plan for which the share awards also
became fully vested and exercisable, at a total consideration of US$21,902 (equivalent to approximately RMB148,308) at an average share price of
US$5.63 per share.
For the year ended December 31, 2019, the Group recorded the total payment of US$21,902 (equivalent to approximately RMB148,308) as share-based
compensation costs (included in administrative expenses) in the consolidated statement of comprehensive loss. There was no impact to the overall
stockholder’s equity balance as the amended shares vested immediately and were repurchased.
(e) 2019 Share Incentive Plan (“2019 Plan”)
On October 29, 2019, the Group adopted 2019 Share Incentive Plan (the “2019 Plan”), which will become effective immediately prior to the completion
of the Company’s initial public offering. Under the 2019 Plan, the maximum aggregate number of ordinary shares available for issuance shall initially be
100,000.
The options shall vest when the Group completes a listing and the employee renders service to the Group in accordance with a stipulated service
schedule starting from the employee’s date of employment. Stock options granted to 3 independent directors under the 2019 Plan will be generally
exercisable under the following terms:(a) a cliff vesting of 1/3 of the option on the first anniversary of the vesting commencement date (January 17,
2020); (b) a cliff vesting of 1/3 of the option on the second anniversary of the vesting commencement date (January 17, 2020); (c) a vesting of the
remaining 1/3 of the option on the third anniversary of the vesting commencement date. In the last year of the grantee’s service, the options shall vest on
a prorated basis to reflect the portion of the year during which the grantee provided services to the Group.
For the year ended December 31, 2020, the Group granted 72,000 stock options to 3 independent directors (all with an exercise price of US$6.09) and
recognized RMB1,171 share-based compensation expenses in administrative expenses according to the options’ vesting schedule. No options were
exercisable as of December 31, 2020 and 24,000 options were exercisable as of December 31, 2021.
F-61
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(e) 2019 Share Incentive Plan (“2019 Plan”) (continued)
The following table sets forth the stock options activities of 2019 Plan for periods presented:
Outstanding as of December 31, 2019
Granted
Outstanding as of December 31, 2020
Granted
Outstanding as of December 31, 2021
Exercisable as of December 31, 2021
Weighted
average
exercise
price
US$
—
6.09
6.09
—
6.09
6.09
Weighted
average
remaining
contractual
term
—
—
9.33
—
8.05
8.05
Aggregate
intrinsic
value
US$
—
—
1,038
—
1,045
348
Number of
shares
—
72,000
72,000
—
72,000
24,000
A summary of non-vested stock options activity for the year ended December 31, 2021 is presented below:
Non-vested at December 31, 2020
Vested
Non-vested at December 31, 2021
Number of shares
72,000
(24,000)
48,000
Weighted average
grant-date fair value
US$
4.50
4.50
4.50
Stock options granted to the 3 independent directors were measured at fair value on the dates of grant using the Binomial Option Pricing Model with the
following assumptions:
Expected volatility
Risk-free interest rate (per annum)
Exercise multiple
Expected dividend yield
Time to maturity (in years)
Year Ended December 31,
2020
54.88%
0.79%
2.80
—
10
The expected volatility was estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expected
term of the Group’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in US$ for a
term consistent with the expected term of the Group’s options in effect at the option valuation date. The expected exercise multiple was estimated as the
average ratio of the stock price to the exercise price when employees would decide to voluntarily exercise their vested options. As the Group did not
have sufficient information of past employee exercise history, it was estimated by referencing to a widely-accepted academic research publication.
Expected dividend yield is zero as the Group has never declared or paid any cash dividends on its shares, and the Group does not anticipate any dividend
payments in the foreseeable future. Time to maturity equals to the contract life of the option.
F-62
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(e) 2019 Share Incentive Plan (“2019 Plan”) (Continued)
Share-based compensation expenses related to the stock options of 2019 Plan are included in:
Research and development expenses
Administrative expenses
Equity in loss of affiliates
(f) 2020 Plan
2019
RMB
—
—
—
—
2021
Year Ended December 31,
2020
RMB
—
1,171
—
1,171
RMB
—
707
—
707
US$ (Note 2.5)
—
111
—
111
On July 15, 2020, the Group adopted 2020 Plan. Under the 2020 Plan, the maximum aggregate number of shares authorized to be issued is 10,760,513
ordinary shares, provided that the maximum number of shares to be issued in the form of restricted share units shall not exceed 7,686,081 ordinary
shares.
Stock options granted to employees under the 2020 Plan are graded vesting in four years with 25% vesting each year.
For the year ended December 31, 2020 and 2021, the Group granted 1,068,733 and 133,913 stock options to its employees, respectively. No option
became exercisable as of December 31, 2020.
The following table sets forth the stock options activities of 2020 Plan for the periods presented:
Outstanding as of December 31, 2019
Granted
Forfeited
Outstanding as of December 31, 2020
Granted
Exercised
Expired
Forfeited
Outstanding as of December 31, 2021
Exercisable as of December 31, 2021
Weighted
average
exercise
price
US$
—
5.91
5.91
5.91
18.85
5.91
5.91
6.23
7.61
5.91
Weighted
average
remaining
contractual
term
—
—
—
9.62
—
—
—
—
8.68
8.53
Aggregate
intrinsic
value
US$
—
—
—
15,237
—
—
—
—
12,967
2,826
Number of
shares
—
1,068,733
(24,365)
1,044,368
133,913
(68,859)
(154)
(111,495)
997,773
192,340
F-63
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(f) 2020 Plan (Continued)
A summary of non-vested stock option activities for the year ended December 31, 2021 is presented below:
Non-vested at December 31, 2020
Granted
Vested
Forfeited
Non-vested at December 31, 2021
Number of shares
1,044,368
133,913
(261,353)
(111,495)
805,433
Weighted average
grant-date fair value
US$
8.71
13.33
9.03
8.65
9.44
Stock options granted to the employees were measured at fair value on the dates of grant using the Binomial Option Pricing Model with the following
assumptions:
Expected volatility
Risk-free interest rate (per annum)
Exercise multiple
Expected dividend yield
Time to maturity (in years)
Year Ended December 31,
2020
56.51%
0.86%
2.20-2.80
—
10
The expected volatility was estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expected
term of the Group’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in US$ for a
term consistent with the expected term of the Group’s options in effect at the option valuation date. The expected exercise multiple was estimated as the
average ratio of the stock price to the exercise price when employees would decide to voluntarily exercise their vested options. As the Group did not
have sufficient information of past employee exercise history, it was estimated by referencing to a widely-accepted academic research publication.
Expected dividend yield is zero as the Group has never declared or paid any cash dividends on its shares, and the Group does not anticipate any dividend
payments in the foreseeable future. Time to maturity equals to the contract life of the option.
Share-based compensation expenses related to the stock options of 2020 Plan are included in:
Research and development expenses
Administrative expenses
Equity in loss of affiliates
Year Ended December 31,
2019
RMB
—
—
—
—
2020
RMB
10,435
4,357
1,619
16,411
2021
RMB
14,915
8,702
3,262
26,879
US$ (Note 2.5)
2,340
1,366
512
4,218
F-64
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(f) 2020 Plan (Continued)
Restricted share units granted to employees under the 2020 Plan will be exercisable under the following items:
(a) 1/3 of the awarded restricted share units shall vest based on the following time attribution:(i) a vesting of 25% of the time attribution based restricted
share units on the first anniversary of the applicable adoption date;(ii) a vesting of 25% of the time attribution based restricted share units on the second
anniversary of the applicable adoption date;(iii) a vesting of 25% of the time attribution based restricted share units on the third anniversary of the
applicable adoption date;(iv) a vesting of 25% of the time attribution based restricted share units on the fourth anniversary of the applicable adoption
date.
(b) 1/3 of the awarded restricted share units shall vest based on the Group’s weighted average market value during the last 30 days prior to the initial
vesting date, the terms and conditions of which are set forth in the executed award agreements. In the event that dilution of additional share issuance
occurs, the market value targets herein shall be adjusted accordingly with the proportion of additional share issuance. In the event that the average
market value of Standard & Poor’s 500 index falls by more than 20% from the date of grant, it shall be deemed as a decline of the market, and the board
of the Group or a committee that board delegated its powers or authority to shall adjust the vesting schedule as appropriate.
(c) 1/3 of the awarded restricted share units shall vest based on certain performance conditions:(i) a vesting of 20% of the performance conditions based
restricted share units if one of the performance conditions has been met at the initial vesting date;(ii) a vesting of 40% of the performance conditions
based restricted share units if two of the performance conditions have been met at the initial vesting date;(iii) a vesting of 60% of the performance
conditions based restricted share units if three of the performance conditions have been met at the initial vesting date;(iv) a vesting of 80% of the
performance conditions based restricted share units if four of the performance conditions have been met at the initial vesting date; (v) a vesting of all of
the performance conditions based restricted share units if five of the performance conditions or more have been met at the initial vesting date. As of
December 31, 2020, it is probable that the 1/3 of the awarded restricted share units are fully vested because it is probable that at least five of the
performance conditions will be met at the initial vesting date.
Notwithstanding the foregoing, if the Group’s weighted average market value during the last 30 days prior to the initial vesting date reaches
US$2 billion or above, and to the extent such restricted share units have been granted and outstanding, any such restricted share unit (except for those
are based on time attribution) shall vest in full with immediate effect, inure to the benefit of the related grantees.
For the year ended December 31, 2020 and 2021, the Group granted 4,093,079 and 1,649,045 restricted share units to employees, respectively. No
restricted share units became exercisable as of December 31, 2020.
F-65
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(f) 2020 Plan (Continued)
The following table sets forth the restricted share units of 2020 Plan for the periods presented:
Outstanding as of December 31, 2019
Granted
Forfeited
Outstanding as of December 31, 2020
Granted
Vested
Forfeited
Outstanding as of December 31, 2021
Number of
restricted
share units
—
4,093,079
(13,461)
4,079,618
1,649,045
(4,048,000)
(198,872)
1,481,791
Weighted
average
exercise
price
US$
—
—
—
—
—
—
—
—
Weighted
average
remaining
contractual
term
—
—
—
9.70
—
—
—
8.95
Aggregate
intrinsic
value
US$
—
—
—
83,632
—
—
—
30,531
A summary of non-vested restricted share units activities for the year ended December 31, 2021 is presented below:
Non-vested at December 31, 2020
Granted
Vested
Forfeited
Non-vested at December 31, 2021
Number of restricted share
units
Weighted average
grant-date fair value
US$
4,079,618
1,649,045
(4,048,000)
(198,872)
1,481,791
14.00
25.60
17.15
14.63
17.80
Share-based compensation expenses related to the aforementioned restricted share units of 2020 Plan are included in:
Research and development expenses
Administrative expenses
Equity in loss of affiliates
Year Ended December 31,
2019
RMB
—
—
—
—
2020
RMB
71,945
76,663
7,500
156,108
2021
RMB
118,368
227,392
8,512
354,272
US$ (Note 2.5)
18,575
35,681
1,336
55,592
F-66
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(f) 2020 Plan (Continued)
Apart from the aforementioned restricted share units, up to 1,446,875 shares can be issued in the form of restricted share unit to eligible grantees that the
board of the Group or a committee that board delegated its powers or authority determined appropriate with immediate effect of being fully vested,
which are defined as special awards and are subject to terms and conditions under 2018 Plan.
For the year ended December 31, 2020, the Group granted 1,328,120 such restricted share units to employees. As of December 31, 2020, 565,200
restricted share units were vested, among which 558,220 restricted share units were vested but not issued as ordinary shares as the employees will not be
entitled to the rights of ordinary shares from the Group until they have the consideration for the transaction settled.
The following table sets forth the restricted share units subject to terms and conditions under 2018 Plan for the periods presented:
Outstanding as of December 31, 2019
Granted
Vested
Outstanding as of December 31, 2020
Vested
Outstanding as of December 31, 2021
Number of
restricted
share units
—
1,328,120
(565,200)
762,920
(762,920)
—
Weighted
average
exercise
price
US$
—
1.00
1.00
1.00
1.00
—
Weighted
average
remaining
contractual
term
—
—
—
9.65
—
—
Aggregate
intrinsic
value
US$
—
—
—
14,877
—
—
A summary of non-vested restricted share units activities for the year ended December 31, 2021 is presented below:
Non-vested at December 31, 2020
Vested
Non-vested at December 31, 2021
Number of restricted share
units
762,920
(762,920)
—
Weighted average
grant-date fair value
US$
12.89
12.89
—
F-67
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(f) 2020 Plan (Continued)
Share-based compensation expenses related to these restricted share units are included in:
Research and development expenses
Administrative expenses
Equity in loss of affiliates
(g) 2021 Share Incentive Plan (“2021 Plan”)
Year Ended December 31,
2019
RMB
—
—
—
—
2020
RMB
67,181
25,985
19,085
112,251
2021
RMB
4,156
54,011
720
58,887
US$ (Note 2.5)
652
8,476
113
9,241
On May 28, 2021, the Group adopted 2021 Plan. Under the 2021 Plan, the maximum aggregate number of shares authorized to be issued is 12,023,618
ordinary shares, provided that the maximum number of shares to be issued in the form of restricted share units shall not exceed 6,011,809 ordinary
shares.
Stock options granted to employees under the 2021 Plan are graded vesting in four years with 25% vesting each year.
The following table sets forth the stock options activities of 2021 Plan for the year ended December 31, 2021:
Outstanding as of December 31, 2020
Granted
Forfeited
Outstanding as of December 31, 2021
Exercisable as of December 31, 2021
Weighted
average
exercise
price
US$
—
26.43
26.39
26.44
—
Weighted
average
remaining
contractual
term
—
—
—
9.57
—
Aggregate
intrinsic
value
US$
—
—
—
—
—
Number of
shares
—
2,698,245
(253,805)
2,444,440
—
A summary of non-vested stock option activities for the year ended December 31, 2021 is presented below:
Non-vested at December 31, 2020
Granted
Forfeited
Non-vested at December 31, 2021
Number of shares
—
2,698,245
(253,805)
2,444,440
Weighted average
grant-date fair value
US$
—
14.17
14.66
14.12
F-68
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(g) 2021 Share Incentive Plan (“2021 Plan”) (Continued)
Stock options granted to the employees were measured at fair value on the dates of grant using the Binomial Option Pricing Model with the following
assumptions:
Expected volatility
Risk-free interest rate (per annum)
Exercise multiple
Expected dividend yield
Time to maturity (in years)
Year Ended December 31,
2021
51.77%-54.37%
1.44%-1.68%
2.2-2.80
—
10
The expected volatility was estimated based on the historical volatility of comparable peer public companies with a time horizon close to the expected
term of the Group’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in US$ for a
term consistent with the expected term of the Group’s options in effect at the option valuation date. The expected exercise multiple was estimated as the
average ratio of the stock price to the exercise price when employees would decide to voluntarily exercise their vested options. As the Group did not
have sufficient information of past employee exercise history, it was estimated by referencing to a widely-accepted academic research publication.
Expected dividend yield is zero as the Group has never declared or paid any cash dividends on its shares, and the Group does not anticipate any dividend
payments in the foreseeable future. Time to maturity equals to the contract life of the option.
Share-based compensation expenses related to the stock options of 2021 Plan are included in:
Research and development expenses
Administrative expenses
Year Ended December 31,
2019
RMB
—
—
—
2020
RMB
—
—
—
2021
RMB
20,430
35,226
55,656
US$ (Note 2.5)
3,206
5,528
8,734
F-69
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(g) 2021 Share Incentive Plan (“2021 Plan”) (Continued)
Restricted share units granted to employees under the 2021 Plan will be exercisable under the following items:
(a) 1/3 of the awarded restricted share units shall vest based on the following time attribution:(i) a vesting of 25% of the time attribution based restricted
share units on the first anniversary of the applicable adoption date;(ii) a vesting of 25% of the time attribution based restricted share units on the second
anniversary of the applicable adoption date;(iii) a vesting of 25% of the time attribution based restricted share units on the third anniversary of the
applicable adoption date;(iv) a vesting of 25% of the time attribution based restricted share units on the fourth anniversary of the applicable adoption
date.
(b) 1/3 of the awarded restricted share units shall vest based on the Group’s weighted average share price during any consecutive 90 days within one
year after the adoption date of 2021 Plan (the “Share Price Based Awards”):
i. a vesting of 75% of the Share Price Based Awards on the first anniversary of the adoption date of 2021 Plan, if the Group’s weighted average
share price reaches the first share price level as approved by the Board;
ii. a vesting of 100% of the Share Price Based Awards on the first anniversary of the adoption date of 2021 Plan, if the Group’s weighted average
share price reaches the second share price level as approved by the Board;
In the event that any share issuance in connection with any share split, share dividend, reclassification or other similar event occurs, the target share
price herein shall be adjusted accordingly with the proportion of additional share issuance. In the event that the average market value of NASDAQ
Biotechnology Index falls by more than 20% from the adoption date of the 2021 Plan, it shall be deemed as a decline of the market, and the Group shall
adjust the vesting schedule as appropriate.
(c) 1/3 of the awarded restricted share units shall vest based on the performance conditions as approved by the Board (the “Performance Conditions
Based Awards”):
i. a vesting of 75% of the Performance Conditions Based Awards if more than nine (including nine) but less than twelve of the fifteen performance
conditions have been met on or before the first anniversary of the adoption date;
ii. a vesting of all of Performance Conditions Based Awards if more than twelve (including twelve) of the fifteen performance conditions have
been met on or before the first anniversary of the adoption date;
As of December 31, 2021, it is probable that the 1/3 of the awarded restricted share units are fully vested because it is probable that the Group’s
weighted average share price can reach the second share price level as approved by the Board during any consecutive 90 days within one year after the
adoption date of 2021 Plan, and more than twelve of the fifteen performance conditions will be met on or before the first anniversary of the adoption
date.
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(g) 2021 Share Incentive Plan (“2021 Plan”) (Continued)
The following table sets forth the restricted share units of 2021 Plan for the period presented:
Outstanding as of December 31, 2020
Granted
Forfeited
Outstanding as of December 31, 2021
Number of
restricted
share units
—
1,827,166
(170,913)
1,656,253
Weighted
average
exercise
price
US$
—
—
—
—
Weighted
average
remaining
contractual
term
—
—
—
9.57
Aggregate
intrinsic
value
US$
—
—
—
34,126
A summary of non-vested restricted share units activities for year ended December 31, 2021 is presented below:
Non-vested at December 31, 2020
Granted
Forfeited
Non-vested at December 31, 2021
Number of restricted share
units
Weighted average
grant-date fair value
US$
—
1,827,166
(170,913)
1,656,253
—
26.44
26.38
26.45
Share-based compensation expenses related to the restricted share units of 2021 Plan are included in:
Research and development expenses
Administrative expenses
2019
RMB
—
—
—
F-71
2020
RMB
—
—
—
Year Ended December 31,
2021
RMB
44,227
73,332
117,559
US$ (Note 2.5)
6,940
11,507
18,447
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
17. SHARE-BASED COMPENSATION (CONTINUED)
(h) Establishment of Biomaster Trust
Biomaster Trust was established under the trust deed dated October 23, 2019, between the Company and TMF Trust (HK) Limited, or TMF Trust, as the
trustee of the Biomaster Trust. Through the Biomaster Trust, the Company’s ordinary shares and other rights and interests under awards granted
pursuant to 2017 Plan and 2018 Plan may be provided to certain recipients of equity awards. Upon satisfaction of vesting conditions, TMF Trust will
exercise the equity awards and transfer the relevant ordinary shares and other rights and interests under the equity awards to the relevant grant recipients
with the consent of the advisory committee of Biomaster Trust. TMF Trust shall not exercise the voting rights attached to such ordinary shares unless
otherwise directed by the advisory committee, whose members shall be appointed by I-Mab. The Company has the power to direct the relevant activities
of Biomaster Trust and it has the ability to use its power over the Biomaster Trust to affect its exposure to returns. Therefore, the assets and liabilities of
the Biomaster Trust are included in the Group’s consolidated balance sheets.
(i) Surrender of stock options
On January 17, 2020, the Group completed its IPO. According to the amendments to 2017 Plan, the maximum aggregate number of shares which may
be granted pursuant to all awards under 2017 Plan was changed to 9,609,084. Each of the Company’s founders, namely Zheru Zhang, Lili Qian, Zhengyi
Wang and Lei Fang surrendered 83,142 unvested stock options that were granted to him or her under 2017 Plan before, totally 332,566 unvested options,
for no consideration, and these stock options were cancelled immediately. According to the amendments to 2018 Plan, the maximum aggregate number
of shares which may be granted pursuant to all awards under 2018 Plan was changed to 11,005,888. The director of the Company, Dr. Jingwu Zhang
Zang surrendered 2,544,917 unvested options that were granted to him under 2018 Plan, for no consideration, and these stock options were cancelled
immediately. Upon the completion of the Company’s IPO in January 2020, the Group has recorded RMB91,051 share-based compensation expense
related to these surrendered options.
The stock options surrendered by the founders should be accounted for as capital contribution. As the founders did not get the title of the stock options
to be surrendered and the number of stock options would not be determined until listing, the capital contribution was not accounted for during the year
ended December 31, 2019. For the year ended December 31, 2020, the Group has reclassified RMB91,051 from additional paid-in capital – share-based
compensation to additional paid-in capital – capital contribution relating to the stock options surrendered in the consolidated statement of
comprehensive income.
Share-Based Compensation Expense
The allocation of share-based compensation expense was as follows:
Research and development expenses
Administrative expenses
Equity in loss of an affiliate
2019
RMB
470
514,733
—
515,203
Year Ended December 31,
2020
RMB
284,431
209,033
32,707
526,171
RMB
201,926
406,683
13,267
621,876
2021
US$ (Note 2.5)
31,687
63,817
2,082
97,586
F-72
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS
The following is a description of the Group’s significant licensing and collaboration agreements entered into from January 1, 2017 to December 31,
2021.
A. In-Licensing Arrangements
Licensing Agreement with MorphoSys AG (“MorphoSys”)
In November 2017, the Group entered into a license and collaboration agreement with MorphoSys, with respect to the development and
commercialization of MOR202/TJ202, MorphoSys´s proprietary investigational antibody against CD38 (the “CD38 product”).
Under this agreement, MorphoSys granted to the Group an exclusive, royalty-bearing, sublicensable license to exploit MOR202/TJ202 for any human
therapeutic or diagnostic purpose in the licensed territory, namely mainland China, Hong Kong, Macau and Taiwan (collectively “Greater China”).
Pursuant to this agreement, the Group granted to MorphoSys an exclusive license to its rights in any inventions that the Group make while exploiting the
CD38 product under this agreement, solely to exploit the CD38 product outside of Greater China.
Pursuant to this agreement, the Group paid to MorphoSys an upfront license fee of US$20.0 million (equivalent to approximately RMB132.7 million).
The Group also agreed to make milestone payments to MorphoSys, conditioned upon the achievement of certain development, regulatory and
commercial milestones, in the aggregate amount of US$98.5 million (equivalent to approximately RMB653.5 million). Such milestones include first
patient dosed in human clinical trials, marketing approval, and first annual net sales of CD38 products covered by the agreement in excess of a certain
amount.
In addition, the Group is required to pay tiered low-double-digit royalties to MorphoSys on a country-by-country and product-by-product basis during
the term, commencing with the first commercial sale of a relevant licensed product in Greater China. Unless terminated earlier in accordance with the
terms thereof, this agreement will remain in effect until the expiration of the Group’s last payment obligation under the agreement.
In 2017, the Group paid US$20.0 million (equivalent to approximately RMB132.7 million) upfront fee to MorphoSys, which was recorded as research
and development expense. No additional payments were made in 2018. Due to the uncertainty involved in meeting these developments and
commercialization based targets, the Group evaluated and concluded that the remaining milestones are still not probable as of December 31, 2018. In
March and April 2019, the project achieved the first and second milestone and the Group paid US$8.0 million (equivalent to approximately RMB55.7
million) of milestone fees to MorphoSys, which was recorded as research and development expense in the consolidated statement of comprehensive loss
for the year ended December 31, 2019. No additional payments were made for the years ended December 31, 2020 and 2021 as no milestone has been
achieved.
Summarized financial information related to the above agreement is presented below:
2021
2020
2019
Year ended December 31,
Research and Development Expense
Upfront Fees
—
—
—
Milestones
—
—
US$8,000
Extension/Termination
of agreements
Amortization of prepaid
research and
development
—
—
—
—
—
—
As of December 31,
Intangible asset balance
—
—
—
F-73
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Licensing Agreement with Genexine, Inc. (“Genexine”)
In December 2017, the Group entered into an intellectual property agreement with Genexine with respect to GX-I7/TJ107, a long-acting IL-7 cytokine.
Under this agreement, the Group obtained an exclusive, sublicensable and transferable license to use and otherwise exploit certain intellectual property
in connection with the pre-clinical and clinical development, manufacturing, sale and distribution of GX-I7 to treat cancer in Greater China.
Under the terms of the agreement, the Group made an upfront payment of US$12.0 million (equivalent to approximately RMB79.6 million) to Genexine
which was recorded as a research and development expense in January 2018. The Group also agreed to make milestone payments in the aggregate
amount of US$23.0 million (equivalent to approximately RMB152.6 million), conditioned upon the achievement of certain development milestones,
including completion of Phase 2 and Phase 3 clinical studies and new drug application (“NDA”) or biologic license application (“BLA”) approval in
Greater China.
Further, the Group agreed to make milestone payments in the aggregate amount of US$525.0 million (equivalent to approximately RMB3,482.7
million), conditioned upon the achievement of certain cumulative net sales of GX-I7 up to US$2,000 million. The Group also is required to pay
Genexine a low-single-digit percentage royalty in respect of the total annual net sales of GX-I7. The aforesaid milestones and royalties (other than the
upfront payment) will be reduced by 50% following the entry of a generic version of GX-I7 in China, Hong Kong, Macau and Taiwan without the
consent or authorization of the Group or any of the Group’s sublicensees.
Unless terminated earlier in accordance with the terms thereof, this agreement will remain in effect until the later of (i) the expiry of the last to expire
patent of the licensed intellectual property that includes a valid claim for Greater China and that covers the composition of GX-I7; and (ii) 15 years from
the date of the first commercial sale of GX-I7.
No additional payments to Genexine were made in the year ended December 31, 2020 and 2021. Due to the uncertainty involved in meeting these
development and commercialization based targets, the Group evaluated and concluded that the remaining milestones are still not probable as of
December 31, 2020 and 2021.
In May 2020, the Group and Genexine entered into an amendment to this agreement whereby both parties desire to establish collaboration on TJ107
GBM Study in Greater China Under the terms of the expanded collaboration, the Group will be mainly responsible for using commercially reasonable
efforts to conduct the Phase 2 GBM clinical trial in Greater China, and Genexine will share the development strategies, data and costs for success of this
clinical trial. The Group shall undertake to bear two-thirds (2/3) proportion of the clinical development costs and Genexine shall undertake to bear
one-third (1/3) proportion of these costs. For the year ended December 31, 2020, the costs incurred for the development of this new indication was
RMB4.3 million and thus RMB2.9 million expense was recorded in the consolidated statement of comprehensive income. For the year ended
December 31, 2021, the costs incurred for the development of this new indication was RMB13.2 million and thus RMB8.8 million expense was
recorded in the consolidated statement of comprehensive loss.
F-74
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Licensing Agreement with MorphoSys
In November 2018, the Group entered into a license and collaboration agreement with MorphoSys for MorphoSys´s proprietary antibody
(MOR210/TJ210) directed against C5aR (the “C5aR Agreement”). Under this agreement, the Group obtained an exclusive, royalty-bearing license to
explore, develop and commercialize certain anti-C5aR antibodies in Greater China and South Korea.
The Group will perform and fund all global development activities related to the development of MOR210/TJ210 in Greater China and South Korea,
including all relevant clinical trials (including in the U.S. and China) and all development activities required for IND filing in the US as well as CMC
development of manufacturing processes. MorphoSys retains rights in respect of development and commercialization of MOR210/TJ210 in the rest of
the world.
Under the terms of the agreement, the Group also agreed to make milestone payments conditional upon the achievement of certain development
milestones and certain annual net sales of anti-C5aR antibodies. The Group is also required to pay to MorphoSys tiered mid-single-digit royalties on
annual net sales of anti-C5aR antibody products within the licensed territory.
In 2018, the Group paid US$3.5 million (equivalent to approximately RMB23.2 million) upfront fee to MorphoSys, which was recorded as research and
development expense in the consolidated statement of comprehensive loss for the year ended December 31, 2018. No additional payments were made in
the year ended December 31, 2019. In August 2020, the project achieved the first milestone and the Group paid US$1.0 million (equivalent to
approximately RMB6.9 million) of milestone fees to Morphosys, which was recorded as research and development expenses in the consolidated
statement of comprehensive income for the year ended December 31, 2020. In January 2021, the project achieved the second milestone and the Group
paid US$1.5 million (equivalent to approximately RMB9.7 million) of milestone fees to Morphosys and the related withholding tax of RMB1.1 million,
which was recorded as research and development expenses in the consolidated financial statements of comprehensive loss for the year ended
December 31, 2021. Due to the uncertainty involved in meeting these development and commercialization based targets, the Group evaluated and
concluded that the remaining milestones are still not probable as of December 31, 2020 and 2021.
Summarized financial information related to the above agreement is presented below:
2021
2020
2019
Years Ended December 31,
Research and Development Expense
Upfront Fees
—
—
—
Milestones
US$1,500
US$1,000
—
Extension/ Termination
of agreements
Amortization of prepaid
research and
development
—
—
—
—
—
—
As of December 31,
Intangible asset balance
—
—
—
F-75
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Licensing Agreement with MacroGenics
In July 2019, the Group entered into a license and collaboration agreement with MacroGenics, Inc. for development and commercialization of an
Fc-optimized antibody known as enoblituzumab that targets B7-H3, including in combination with other agents, such as the anti-PD-1 antibody known
as MGA012, in the People’s Republic of China, Hong Kong, Macau and Taiwan (“Greater China”). Under this agreement, the Group obtained an
exclusive, sublicenseable, royalty-bearing license to MacroGenics’ patents and know-how to develop and commercialize the enoblituzumab product,
and a combination regimen of enoblituzumab and MGA012, in Greater China during the term of the agreement.
In exchange for these rights, in addition to certain financial consideration, the Group will grant to MacroGenics a royalty-free, sublicenseable, license
outside of Greater China, to the patents and know-how that are related to the enoblituzumab product or useful or necessary for MacroGenics to develop
or commercialize the enoblituzumab product or a product containing MGA012, and combinations thereof. The license is (i) non-exclusive with respect
to the enoblituzumab product, and (ii) exclusive with regard to MGA012.
Pursuant to the agreement, the Group paid an upfront fee of US$15.0 million (equivalent to approximately RMB104.4 million) to MacroGenics, which
was recorded as research and development expense in the consolidated statement of comprehensive loss for the year ended December 31, 2019. No
additional payments were made in the year ended December 31, 2020. Under the terms of the agreement, the Group also agreed to pay MacroGenics
development milestone fees of up to US$75.0 million and regulatory milestones fees of up to US$60.0 million, respectively, and tiered double-digit
royalties (ranging from mid-teens to twenty percent) based on annual net sales in the territories. In September 2021, the project achieved the first
milestone and the Group paid around US$4.5 million (equivalent to approximately RMB28.9 million) of milestone fees to MacroGenics, which was
recorded as research and development expenses in the consolidated statement of comprehensive loss for the year ended December 31, 2021.
The Group is responsible for all development costs in Greater China. MacroGenics is responsible for all development costs in the rest of the world,
except that the Group is responsible for 20% of the costs incurred in (i) activities supporting global clinical trials in which the Group participates, (ii)
certain CMC activities for material intended to be used in clinical trials in Greater China, and (iii) companion diagnostic development and validation for
indications being studied in Greater China.
Due to the uncertainty involved in meeting these development and commercialization based targets, the Group evaluated and concluded that the
remaining milestones are still not probable as of December 31, 2020 and 2021.
Summarized financial information related to the above agreement is presented below:
2021
2020
2019
Year ended December 31,
Research and Development Expense
Upfront Fees
—
—
US$15,000
Milestones
US$4,484
—
—
Extension/Termination
of agreements
Amortization of prepaid
research and
development
—
—
—
—
—
—
As of December 31,
Intangible asset balance
—
—
—
F-76
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Other In-Licensing Arrangements
In addition to the above arrangements, the Group has entered into other various in-licensing and collaboration agreements with third party licensors to
develop and commercialize drug candidates. Based on the terms of these agreements the Group is contingently obligated to make additional material
payments upon the achievement of certain contractually defined milestones. The Group recorded US$1.2 million (equivalent to approximately RMB8.4
million) milestone payment during the year ended December 31, 2019. The Group recorded US$3.1 million (equivalent to approximately RMB21.3
million) milestone payment during the year ended December 31, 2020. The Group recorded US$1.1 million (equivalent to approximately RMB6.8
million) upfront payment and US$2.9 million (equivalent to approximately RMB19.8 million) milestone payment as research and development expenses
during the year ended December 31, 2021. As of December 31, 2021, under the terms of the agreements, the licensors are eligible to receive from the
Group up to an aggregate of approximately US$174.1 million (equivalent to approximately RMB1,122.3 million) in milestone payments upon the
achievement of contractually specified development milestones and sales milestones, such as regulatory approval for the drug candidates, which may be
before the Group has commercialized the drug or received any revenue from sales of such drug candidate, which may never occur.
F-77
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Collaboration Agreement with Everest (“Everest”)
In January 2018, the Group entered into a collaboration agreement with Everest, which is controlled by the ultimate controlling party of a principal
shareholder of the Group. Under the agreement, both parties agreed to collaborate on programs to co-develop MorphoSys’ proprietary anti-CD38
antibody for all indications in hematologic oncology and commercialize of MOR202/TJ202 in Greater China.
A joint steering committee with equal representation from each party was established to coordinate and oversee the development and commercialization
of the CD38 product. All decisions of the joint steering committee shall be made by unanimous vote.
Under the agreement, the Group is primarily responsible for carrying out the development, manufacture and supply of the CD38 product, as well as
seeking regulatory approval of the CD38 product. Everest is primarily responsible for sharing the development costs of the CD38 product, including
payments due to MorphoSys under the Licensing Agreement, dated November 30, 2017, in the proportion of 75% by Everest and 25% by the Group.
The joint steering committee will decide which party shall be responsible for conducting the commercialization of the CD38 product pursuant to the
commercialization plan approved by the committee. If Everest is selected to be responsible for commercialization, the Group shall grant an exclusive
royalty-free license to Everest to commercialize the CD38 product for all indications in hematologic oncology in Greater China.
The Group and Everest will share the profit and loss and out-licensing revenue derived from the CD 38 product in proportion to the costs that each party
incur in developing the product. The parties will also split out-license revenue according to the proportion of development costs incurred, with the
Group getting an additional five percent (5%) share and Everest receiving five percent (5%) less. Everest cannot share in any profit from the
commercialization of CD38 product until it has fulfilled its payment obligations under this agreement.
Upon any termination of this arrangement, the terminating party has the right to continue the development and commercialization of CD38 product. If
Everest is the rightful terminating party, the Group shall reasonably cooperate with Everest to facilitate the following: (i) assign the MorphoSys license
to Everest (subject to the terms and conditions of such license); (ii) grant to Everest an exclusive license to all intellectual property rights that the Group
owns or controls to further develop, manufacture, and commercialize the CD38 product; (iii) transfer the development, manufacture and
commercialization of the CD38 product to Everest. The terminating party shall be solely responsible for the cost and expense of such development and
commercialization after termination. In the event that such continuing party successfully develops and commercializes the CD38 product, it shall pay to
the other party a percentage of the product profit and out-license revenue generated therefrom in accordance with the terms of this agreement.
During the year ended December 31, 2018, the US$26.0 million in aggregate proceeds from Everest under the agreement represented the funding
available under the agreement, and was recorded as a research and development funding received liability (equivalent to approximately RMB178.7
million) on the consolidated balance sheet as of December 31, 2018, in accordance with ASC 730, Research and Development. Because there is a
significant related party relationship between the Group and Everest, the Group is treating its obligation to make payments under the commercialization
stage as an implicit obligation to repay the funds advanced by Everest (see Note 23). During the year ended December 31, 2019, an additional
US$7.6million (equivalent to approximately RMB53.1 million) of funding was received and recorded as a research and development funding received
liability. No additional milestone has been achieved in the year ended December 31, 2019.
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I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Termination Agreement with Everest
On November 4, 2019, the Group and Everest have terminated the collaboration agreement with respect to the co-development and commercialization
of TJ202 in Greater China. Upon the termination, Everest will not retain any rights or entitlements to develop or commercialize TJ202 or any economic
interest in its commercialization. All intellectual property rights in respect of TJ202 arising from its development under the collaboration agreement are
vested and owned by I-Mab, and the Group holds all intellectual property rights and have maximum flexibility to further develop, manufacture and
commercialize TJ202 in Greater China. In consideration of the above arrangements, the board of directors of the Group has approved the issuance of a
total value of US$37.0 million of ordinary shares (the “CPP Shares”) to Everest, representing Everest’s historical contribution to the collaboration and
the associated time cost. The CPP Shares will be issued concurrently with, and subject to, the completion of the Company’s initial public offering within
180 days from termination of the collaboration agreement. The total value of US$37.0 million was calculated based on the sum of (1) US$33.7 million,
which equals cumulative paid-in contributions historically made by Everest under the collaboration agreement; and (2) a negotiated US$3.3 million time
cost of the foregoing historical contribution in light of I-Mab’s exclusive rights over the commercialization of TJ202 after this termination. The issuance
of the CPP Shares was approved by I-Mab’s existing shareholders on December 25, 2019. In the event that the initial public offering has not been
completed within 180 days from the termination of the collaboration agreement, the Company will issue 4,762,751 ordinary shares (the “Subject
Shares”) to Everest on the 181st day. As a result of the aforementioned termination of the collaboration agreement with Everest, the Group derecognized
the research and development funding received from Everest and recognized a liability that represented the ordinary shares to be issued to Everest,
which was measured at fair value in accordance with ASC 480, and the difference of US$3.3 million (equivalent to approximately RMB23.0 million)
between the initial fair value of the liability and the carrying amount of research and development funding received was recognized as other expenses in
the consolidated statements of comprehensive loss for the year ended December 31, 2019. Upon the completion of the IPO in January 2020, the Group
issued 6,078,571 ordinary shares to Everest.
Licensing Agreement with ABL Bio
In July 2018, the Group entered into a license and collaboration agreement with ABL Bio, under which the Group granted to ABL Bio exclusive,
worldwide (excluding Greater China), royalty-bearing rights to develop and commercialize a bispecific antibody (“BsAb”).
The Group agreed to share costs fifty-fifty (50:50) with ABL Bio through the completion of in vivo studies, with ABL Bio responsible for all costs and
activities following that time. For the year ended December 31, 2019, US$0.2 million (equivalent to approximately RMB1.4 million) expenses were
incurred by ABL Bio. Accordingly, the Group recorded US$0.1 million (equivalent to approximately RMB0.7 million) (50% cost sharing) of expenses
in the Group’s consolidated statement of comprehensive loss for the year ended December 31, 2019. For the year ended December 31, 2020,
US$0.04 million (equivalent to approximately RMB0.28 million) expenses were incurred by ABL Bio. Accordingly, the Group recorded
US$0.02 million (equivalent to approximately RMB0.14 million) (50% cost sharing) of expenses in the Group’s consolidated statement of
comprehensive income for the year ended December 31, 2020.
Pursuant to the license and collaboration agreement that signed in July 2018 and memorandum of understanding that subsequently entered into with
ABL Bio in January 2020, ABL Bio agreed to pay the Group an upfront fee of US$2.5 million (equivalent to approximately RMB17.2 million), and
milestone payments in the aggregate amount of US$97.5 million (equivalent to approximately RMB690.3 million) conditioned upon achieving certain
research, clinical development and sales milestones. These include clinical milestones of up to US$32.5 million (equivalent to approximately RMB230.1
million) and sales milestones of up to US$65 million (equivalent to approximately RMB460.2 million). Further, ABL Bio agreed to pay the Group
royalties at mid-single-digit percentages in respect of the total annual net sales of the licensed BsAb product.
In addition, ABL Bio granted to the Group an exclusive, royalty-free, sublicensable license to use the BsAb technology solely to exploit the licensed
BsAb product for all indications in Greater China.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Licensing Agreement with ABL Bio (continued)
The Group determined that this collaboration is reflective of a vendor-customer relationship and therefore within the scope of ASC 606. Under this
agreement, the only one performance obligation was to grant the BsAb license to ABL Bio. If it is probable that a significant revenue reversal would not
occur, the associated milestone value is included in the transaction price. Achievement of milestones that are not within the control of the Group or the
licensee, such as regulatory approvals, are not considered probable until the approvals are achieved.
The Group recognized revenue of US$2.5 million (equivalent to RMB17.2 million) of revenue in the consolidated statements of comprehensive loss for
the year ended December 31, 2018, which was the upfront fee related to the grant of the rights of BsAb to ABL Bio as mentioned above. As of
December 31, 2020, no other milestone has been achieved. No revenue was recognized for the year ended December 31, 2019 ,2020.
On December 4, 2020, I-Mab Hong Kong, ABL Bio and I-Mab Hangzhou entered into an amendment, which is made effective as of September 15,
2020, that I-Mab Hong Kong, as the subject of the aforementioned licensing agreement, shall be replaced and substituted by I-Mab Hangzhou.
Collaboration Agreement with ABL Bio
In July 2018, the Group and ABL Bio entered into a collaboration agreement (the “ABL Bio Collaboration”) whereby both parties agreed to collaborate
to develop three PD-L1 based bispecific antibodies by using ABL Bio’s proprietary BsAb technology and commercialize them in their respective
territories, which, collectively, include Greater China and South Korea, and other territories throughout the rest of the world if both parties agree to do so
in such other territories during the performance of the agreement.
At contract inception, as both I-Mab and ABL Bio participate actively in the research and development activity. Also, the parties share the risk of failure
of the BsAb products and share the income of licensing, so this contract meet the criteria of the definition of a collaborative arrangement, the Group
categorized this agreement within the scope ASC 808. Prior to commercialization, the Group recorded the share of the expenses incurred by the
collaboration for the development of three PD-L1 based bispecific antibodies products in research and development expense in the consolidated
statements of comprehensive income (loss). As of December 31, 2018, RMB1.0 million expenses were incurred by the Group and ABL Bio did not
incur any expense. According to the terms set out in the agreement, the Group recorded RMB0.5 million (50% cost sharing) of expense in the Group’s
consolidated statement of comprehensive loss for the year ended December 31, 2018. For the year ended December 31, 2019, RMB11.2 million
expenses were incurred by the Group and RMB8.0 million expenses were incurred by ABL Bio. Accordingly, the Group recorded RMB9.6 million
(50% cost sharing) of expenses in the Group’s consolidated statement of comprehensive loss for the year ended December 31, 2019. For the year ended
December 31, 2020, RMB43.6 million expenses were incurred by the Group and RMB44.0 million expenses were incurred by ABL Bio. Accordingly,
the Group recorded RMB43.8 million (50% cost sharing) of expenses in the Group’s consolidated statement of comprehensive income for the year
ended December 31, 2020. For the year ended December 31, 2021, RMB27.9 million expenses were incurred by the Group and RMB20.7 million
expenses were incurred by ABL Bio. Accordingly, the Group recorded RMB24.3 million (50% cost sharing) of expenses in the Group’s consolidated
statement of comprehensive loss for the year ended December 31, 2021.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Collaboration Agreements with Tracon Pharmaceuticals, Inc. (“Tracon”)
In November 2018, the Group entered into collaboration agreements with Tracon, under which both parties agreed to co-develop the Group’s proprietary
CD73 antibody, TJD5 (the “TJD5 Agreement”) and co-develop up to five BsAbs (the “BsAbs Agreement”). Both agreements may be terminated by
either party for the other party’s uncured material breach, bankruptcy or insolvency or for safety reasons. In addition, the agreement in respect of TJD5
may be terminated by the Group: (i) for convenience within a certain period upon completing different clinical stages subject to certain payments and
royalties, based on the clinical stage, that would be owed to Tracon upon the exercise of such termination for convenience; (ii) in the event that Tracon
causes the Phase 1 study timeline to be delayed beyond the agreed extension periods; or (iii) if the Group decides to end the development of the
collaborative product prior to its first commercial sale. Further, prior to the first commercial sale, Tracon may deem this agreement to be terminated by
the Group if it reasonably believes that the Group has discontinued all meaningful development of the collaborative product for at least 12 months and
certain other conditions are met. Additionally, in March 2019, the Group agreed with Tracon and F. Hoffmann-La Roche Ltd (“Roche”) on a clinical
supply agreement for Roche to supply atezolizumab for use in clinical studies under the collaboration agreement with Tracon. As of December 31, 2019,
no payments or royalties are due under this agreement. As of December 31, 2019, the Group has recorded US$4.0 million (equivalent to approximately
RMB27.8 million) of research and development costs in the consolidated statement of comprehensive loss for the year ended December 31, 2019. As of
December 31, 2020, the Group has recorded US$0.03 million (equivalent to approximately RMB0.17 million) of research and development costs in the
consolidated statement of comprehensive income for the year ended December 31, 2020. As of December 31, 2021, the Group has recorded
US$0.02 million (equivalent to approximately RMB0.11 million) of research and development costs in the consolidated statement of comprehensive
loss for the year ended December 31, 2021.
In April 2020, Tracon issued a notice of dispute with respect to the TJD5 Agreement and the BsAbs Agreement. The disputes relating to the TJD5
Agreement and the BsAbs Agreement are the subject of a binding arbitration proceeding under the Rules of Arbitration of the International Chamber of
Commerce before an arbitration tribunal. The arbitration tribunal held a hearing on the merits in February 2022. As of the date of this report, the
disputes have not been resolved and the Group is not able to predict the likely outcome. The Group expects that the decision from the arbitration tribunal
may be available in late 2022.
In February 2021, the Group sent Tracon a notice to terminate the TJD5 Agreement, which would result in a prespecified termination fee of US$9.0
million owing to Tracon. The Group accrued and recorded this termination fee of US$9.0 million (equivalent to approximately RMB58.0 million) as
administrative expenses in the consolidated financial statements of comprehensive loss for the year ended December 31, 2021.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Licensing Agreement with CSPC Pharmaceutical Group Limited (“CSPC”)
In December 2018, the Group entered into a product development agreement with CSPC. The Group granted to CSPC exclusive, non-transferable,
non-irrevocable and sublicensable rights in the PRC (excluding Hong Kong, Macau and Taiwan) to develop and commercialize TJ103 for treating type 2
diabetes.
CSPC is responsible for developing, obtaining market approval and commercializing the licensed products. The Group is responsible for transferring the
manufacturing technology of the licensed products to CSPC and assisting CSPC in the continued optimization of such manufacturing technology
thereafter.
In consideration of the license, CSPC agreed to pay the Group an upfront fee of RMB15.0 million and milestone payments in an aggregate amount of
RMB135.0 million conditioned upon achieving certain clinical development and regulatory approval milestones. In addition, the Group is also entitled
to royalties of up to low-double-digit percentages in respect of the total annual net sales of the products after its commercialization in the PRC. On
January 31, 2022, the Group and CSPC entered into an amendment to revise the second milestone payment from RMB10 million to RMB8.5 million.
The Group determined that this collaboration is more reflective of a vendor-customer relationship and therefore within the scope of ASC 606. Under this
agreement, the only one performance obligation was to grant TJ103 license to CSPC. Considering that the achievements of milestones are constrained
such that the transaction price shall initially only include upfront payment and subsequently, once another milestone was achieved (that means when
uncertainty associated with the variable consideration is subsequently resolved), the additional milestone payment shall be included in the total
transaction price when it is no longer probable that a significant reversal of cumulative revenue would occur in future periods. As of December 31,
2018, the amount received of RMB14.2 million (net of VAT) was recorded as advance from customers in the consolidated balance sheet. In February
2019, an additional amount of RMB0.8 million (net of VAT) was received, and the license was also approved by China intellectual property office in
May 2019. The first milestone was achieved in September 2019 and the amount of RMB15.0 million (net of VAT) was received according to the terms
of the agreement. Accordingly, RMB30.0 million was recognized as revenue in the consolidated statements of comprehensive loss for the year ended
December 31, 2019. No additional revenue was recognized in the year ended December 31, 2020 as no further milestone has been achieved. The second
milestone was achieved in November 2021 and RMB8.5 million was recognized as revenue in the consolidated statements of comprehensive loss for the
year ended December 31, 2021. As of December 31, 2021, the second milestone payment of RMB8.5 million was not received by the Group and
recognized as accounts receivable in the consolidated balance sheet.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Strategic Alliance Agreement with PT Kalbe Genexine Biologics (“KG Bio”)
In March 2020, the Group entered into a strategic partnership with Kalbe Genexine Biologics (“KG Bio”) to grant a right of first negotiation for an
exclusive license for the development and commercialization of two I-Mab-discovered product candidates: uliledlimab, a highly differentiated anti-
CD73 antibody in Phase 1 development for advanced solid tumors (“First Program”), and an I-Mab product candidate (“Second Program”) to be agreed
upon by both parties in certain regions. Through this agreement, both parties intend to negotiate the terms that will be reflected in definitive agreements
for each prospective program covered under this agreement.
If and when the Group and KG Bio enter into the definitive licensing agreement, the Group will be eligible to receive from KG Bio an aggregate amount
of up to approximately US$340 million, including an upfront payment and subsequent payments conditional upon achieving certain development and
commercial milestones. KG Bio will pay the Group tiered royalties in the low to mid-teen percentages on net sales from certain regions. As the right of
first negotiation has not been exercised and the definitive agreement has not been entered into as of December 31, 2020 and 2021, no revenue was
recognized during the years ended December 31, 2020 and 2021.
Global Strategic Partnership with AbbVie
On September 3, 2020, the Group, through I-Mab Biopharma (Shanghai) Co., Ltd. and I-Mab Biopharma US Limited, each a wholly-owned subsidiary
of the Group, entered into a broad global strategic partnership with AbbVie.
Pursuant to this collaboration, the Group will grant AbbVie a global license, excluding Mainland China, Macau, and Hong Kong, to develop and
commercialize lemzoparlimab (also known as TJC4), an innovative anti-CD47 monoclonal antibody internally discovered and developed by I-Mab for
the treatment of multiple cancers. The Group will retain all rights to develop and commercialize lemzoparlimab (as well as certain other compounds
directed against CD47) in Mainland China, Macau, and Hong Kong. The Group is also responsible for performing the development activities at its sole
cost and expense as outlined in the initial development plan. Such initial development activities consist of two studies, Study I and Study II. Study I is
conducted in the United States evaluating lemzoparlimab in combination with pembrolizumab or rituximab in patients with relapsed or refractory solid
tumors and lymphoma. Study II is conducted in Mainland China evaluating the safety, tolerability, pharmacokinetics, pharmacodynamics and
preliminary efficacy of lemzoparlimab in patients with acute myeloid leukemia (AML) or myelodysplastic syndrome (MDS). AbbVie will conduct
further global clinical trials (which the Group may elect to co-fund) to evaluate lemzoparlimab in multiple cancers.
Potential collaboration on future CD47-related therapeutic agents is also allowed for under this arrangement, including CD47-based bispecific
antibodies and combination therapies with lemzoparlimab and AbbVie’s venetoclax (Venclexta®). Each party will have the opportunity, subject to rights
of first negotiation to further licenses, to explore certain of each other’s related CD47-antibody programs in their respective territories.
A joint governance committee was established as set forth in the agreement, functioning as an oversight and governance mechanism. Both parties will
participate in the joint governance committee to facilitate decision-making during the terms of the collaborative endeavor. Furthermore, the Group and
AbbVie will share manufacturing responsibilities, with AbbVie having the opportunity to manufacture supply outside of Mainland China, Hong Kong
and Macau and the Group being the primary manufacturer for supply for Mainland China, Hong Kong and Macau.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Global Strategic Partnership with AbbVie (continued)
Upon the satisfaction of all the pre-effect date covenants, the collaborative agreement took effect on December 10, 2020, on which date the Group was
entitled to a non-refundable upfront payment of US$180 million. In addition, the Group has received milestone payment of US$20 million from AbbVie
and is eligible to receive up to US$1.74 billion in further success-based development, regulatory and sales milestone payments for lemzoparlimab, of
which US$840 million are based on clinical development and regulatory approval milestones, with the remainder based on commercial milestones.
Upon commercialization of lemzoparlimab, AbbVie will also pay tiered royalties from low-to-mid teen double-digit percentages on global net sales
outside of Mainland China, Macau, and Hong Kong.
The Group identified three performance obligations: (1) grant of lemzoparlimab license upon the effective date, (2) delivering the Study I initial
development services, and (3) delivering the Study II initial development services. The total transaction price under the agreement for the years ended
December 31, 2020 and 2021 is US$250 million consisting of (i) the upfront payment of US$180 million upon the effective date, (ii) the first milestone
payment of US$20 million upon the achievement of the first milestone event in late December 2020, and (iii) the second milestone payment of
US$50 million as of December 31, 2020 and 2021 as the Group deemed that the achievement of the second milestone event is probable as of
December 31, 2020 and 2021 that a significant reversal of revenue would not occur. The achievements of the remaining development and regulatory
based milestone events are constrained as of December 31, 2020 and 2021, and will be included in the transaction price when uncertainty associated
with the variable consideration is subsequently resolved. Sales-based milestones and royalties will be recognized when the subsequent sales occur.
The non-constrained consideration of US$250 million is then allocated to the three performance obligations based on the relative stand-alone selling
price. For the grant of lemzoparlimab license, the Group adopted an income approach based on key assumptions and several factors including, but not
limited to estimated market demand, stand-alone selling price by making reference to market comparable, development timeline, regulatory risks, future
revenue potential and discount rate. The allocated price is US$228.8 million. The entire US$228.8 million (equivalent to approximately RMB1,502.9
million) was recognized as revenue at the point of the license transfer at the effective date. For the Study I and Study II initial development services, a
cost-plus margin approach is utilized. The allocated price to Study I and Study II is US$11.0 million and US$10.2 million respectively. These two
performance obligations are determined to be satisfied over time. The Group uses a cost-to-cost input method to measure progress as that method best
depicts the transfer of the two performance obligations under the agreement. As of December 31, 2020, the cumulative percentages complete in the
cost-to-cost input method for Study I and Study II were estimated to approximate 17% and 41% respectively. As a result, US$1.8 million (equivalent to
approximately RMB12.0 million) and US$4.2 million (equivalent to approximately RMB27.8 million) were recognized as revenue for the year ended
December 31, 2020 in the consolidated statement of comprehensive income for Study I and Study II respectively, resulting in a contract asset of
US$34.8 million (RMB 227.4 million) for this agreement as of December 31, 2020 in the consolidated balance sheets. As of December 31, 2020, the
upfront payment of US$180 million was received by the Group. The 1st milestone payment of US$20 million was subsequently collected by the Group
in March 2021. As of December 31, 2021, the cumulative percentages complete in the cost-to-cost input method for Study I and Study II were estimated
to approximate 53% and 51% respectively. As a result, US$4.0 million (equivalent to approximately RMB25.6 million) and US$0.9 million (equivalent
to approximately RMB6.0 million) were recognized as revenue for the year ended December 31, 2021 in the condensed consolidated financial
statements of comprehensive loss for Study I and Study II respectively, resulting in an addition of contract asset of US$4.9 million (equivalent to
approximately RMB31.6 million) for this agreement, and the total contract asset related to this agreement was US$39.7 million (RMB 253.8 million) as
of December 31, 2021.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
18. LICENSING AND COLLABORATION ARRANGEMENTS (CONTINUED)
Strategic collaboration with Jumpcan
On November 10, 2021, the Group entered into a strategic collaboration agreement (the “Jumpcan Agreement”) with Jumpcan Pharmaceutical Group
(“Jumpcan”), a China pharmaceutical company specialized in and committed to pediatric medicines, for the development, manufacturing and
commercialization of I-Mab’s highly differentiated long-acting recombinant human growth hormone, eftansomatropin alfa (the “TJ101” and “Licensed
Product”) in mainland China (the “Territory”).
Under the collaboration agreement, I-Mab will continue to lead the ongoing registrational Phase 3 clinical trial of eftansomatropin alfa in pediatric
growth hormone deficiency (PGHD). The two companies will share costs of manufacturing tech transfer, process optimization and new formulation
development. I-Mab will be the marketing authorization holder (MAH) of the product and supply the product at agreed cost to Jumpcan. Jumpcan will
be responsible for commercializing the product and developing new indications in collaboration with I-Mab in mainland China. I-Mab will provide
clinical, manufacturing and academic support.
According to the terms of the collaboration agreement, Jumpcan will make an upfront payment of RMB 224 million to I-Mab and, upon achievement of
development, registration and sales milestones, certain milestone payments of up to RMB 1.792 billion, making the non-royalty payments a total of up
to RMB 2.016 billion. In addition, I-Mab and Jumpcan will share profits generated from commercialization of the product in mainland China on a 50/50
basis, pursuant to which I-Mab will be entitled to receive tiered low double-digit royalties on net sales.
The Group performed assessment and concluded that all the promise identified, including the grant of the license to Jumpcan, Phase III clinical trial in
PGHD and CMC development under the Jumpcan Agreement have been bundled into a single performance obligation. The amounts of the transaction
price allocable to this performance obligation are deferred until the control of the manufactured commercial drug product has begun to transfer to
Jumpcan. For the year ended December 31, 2021, the Group received the upfront fee of RMB224 million from Jumpcan and recorded it as contract
liabilities in the consolidated balance sheet.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
19. OTHER INCOME (EXPENSES), NET
The following table summarizes other income (expenses), net recognized for the years ended December 31, 2019, 2020 and 2021:
Year Ended December 31
Loss on termination agreement with Everest
Income of incentive payment from depository bank
Fair value change of short-term investments
Fair value change of put right liabilities
Net foreign exchange gains (losses)
Subsidy income (3)
Gains on deconsolidation of a subsidiary
Fair value change of other financial assets
Others
2021
2019
2020
RMB
RMB
Notes RMB
US$
(Note 2.5)
18 (23,039) — — —
376
11 —
2,348 2,395
703 11,288 30,360 4,764
—
3,024 16,628 2,609
1,619 (22,126) 25,373 3,982
568 11,633 9,216 1,446
10 — 407,598 — —
42 — — —
(127)
(98)
(873)
(20,205) 412,892 83,162 13,050
(810)
(3)
For the year ended December 31, 2020, subsidy income consists primarily of the government grant of RMB10 million. The government grant was
granted by the project management office of Shanghai Zhangjiang Science City to support the research and development activities in the local
region. For the year ended December 31, 2021, subsidy income primarily consists of an amount of RMB2.9 million related to the paycheck
protection program loan forgiveness approved by the U.S. Small Business Administration in April 2021, and an amount of RMB4.5 million
recognized in connection with the completion of a project related to one of the Group’s pipelines.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
20. NET INCOME (LOSS) PER SHARE
Basic and diluted net income (loss) per share for each of the periods presented are calculated as follows:
Numerator:
Net income (loss) attributable to I-Mab
Deemed dividend to Series C-1 preferred shareholders at
extinguishment of Series C-1 Preferred Shares
Deemed dividend to Series B-1, B-2 and C preferred shareholders at
modification of Series B-1, B-2 and C Preferred Shares
Net income (loss) attributable to ordinary shareholders
Denominator:
Denominator for basic calculation-weighted average number of common
shares outstanding
Dilutive effect of convertible preferred shares
Dilutive effect of ordinary shares to be issued to Everest
Dilutive effect of convertible promissory notes
Dilutive effect of restricted shares units
Dilutive effect of stock options
Denominator for diluted income (loss) per share calculation
Net income (loss) per share - basic
Net income (loss) per share - diluted
2019
RMB
Year Ended December 31
2020
RMB
RMB
2021
US$ (Note 2.5)
(in thousands, except for share and per share data)
(1,451,950)
470,915
(2,331,541)
(365,870)
(5,283)
—
—
—
(27,768)
(1,485,001)
—
470,915
—
(2,331,541)
—
(365,870)
7,381,230 134,158,824
—
4,373,047
—
266,458
—
865,479
778,130
—
— 16,789,714
7,381,230 157,231,652
3.51
3.00
(201.19)
(201.19)
—
—
—
—
—
174,707,055 174,707,055
—
—
—
—
—
174,707,055 174,707,055
(2.09)
(2.09)
(13.35)
(13.35)
The effects of all outstanding convertible preferred shares, restricted shares, certain stock options and warrants have been excluded from the
computation of diluted loss per share for the years ended December 31, 2019 and 2021 as their effects would be anti-dilutive. The potentially dilutive
securities that have not been included in the calculation of diluted net loss per share as their inclusion would be anti-dilutive are as follows:
Year Ended December 31
Convertible preferred shares
Restricted shares
Stock options
Warrants
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2021
2019
92,238,119
—
— 3,150,881
11,388,776 14,584,833
648,359
—
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
21. EMPLOYEE BENEFITS
Full time employees of the Group in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension
benefits, medical care, employee housing fund and other welfare benefits are provided to the employees. Chinese labor regulations require that the PRC
subsidiaries of the Group make contributions to the government for these benefits based on certain percentage of the employees’ salaries, up to a
maximum amount specified by the government. The Group has no legal obligation for the benefits beyond the contribution made. The total amounts
charged to the consolidated statements of comprehensive income (loss) for such employee benefits amounted to approximately RMB14,152,
RMB10,049 and RMB26,426 for the years ended December 31, 2019, 2020 and 2021, respectively.
22. COMMITMENTS AND CONTINGENCIES
Contingencies
The Group is a party to or an assignee of license and collaboration agreements that may require it to make future payments relating to milestone fees and
royalties on future sales of licensed products (see Note 18). In April 2020, Tracon issued a notice of dispute with respect to the TJD5 Agreement and the
BsAbs Agreement. The disputes relating to the TJD5 Agreement and the BsAbs Agreement are the subject of a binding arbitration proceeding under the
Rules of Arbitration of the International Chamber of Commerce before an arbitration tribunal. The arbitration tribunal held a hearing on the merits in
February 2022. As of the date of this report, the disputes have not been resolved and the Group is not able to predict the likely outcome. The Group
expects that the decision from the arbitration tribunal may be available in late 2022 (see Note 18). As of December 31, 2020 and 2021, the Group did not
record any liabilities for these disputes. Information available prior to issuance of the financial statements did not indicate that it is probable that a
liability had been incurred at the date of the financial statements and the Company is also unable to reasonably estimate the range of any liability or
possible loss, if any.
The Group did not have significant long-term obligations, or guarantees as of December 31, 2020 and 2021.
Capital commitments
The capital expenditures related to property, equipment and software contracted for as of December 31, 2021 but not recognized in the Group’s
consolidated financial statements were RMB24,426. The Group did not have significant capital commitments as of December 31, 2020.
23. RELATED PARTY BALANCES AND TRANSACTIONS
The table below sets forth the major related parties and their relationships with the Group as of December 31, 2020 and 2021:
Name of related parties
Everest
CMAB Biopharma (Suzhou) Inc.
Tasly Pharmaceutical Group Co., Ltd.
Jiangsu Taslydiyi Pharmaceutical Co., Ltd.
I-Mab Biopharma (Hangzhou) Co., Limited
Relationship with the Group
Controlled by the ultimate controlling party of a principal shareholder of
the Group
Controlled by the ultimate controlling party of a principal shareholder of
the Group before April 30, 2021
Controlled by the ultimate controlling party of a principal shareholder of
the Group before December 9, 2021
Controlled by the ultimate controlling party of a principal shareholder of
the Group before December 9, 2021
Subsidiary of the Group before September 15, 2020; Affiliate of the
Group after September 15, 2020
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
23. RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
Details of related party balances as of December 31, 2020 and 2021 are as follows:
Prepayments and other receivables
I-Mab Hangzhou
Accruals and other payables
Jiangsu Taslydiyi Pharmaceutical Co., Ltd.
2020
RMB
21,212
As of December 31,
2021
RMB
8,079
US$ (Note 2.5)
1,268
2020
RMB
2,395
As of December 31,
2021
RMB
5,092
US$ (Note 2.5)
799
Details of related party transactions for the years ended December 31, 2019, 2020 and 2021 are as follows:
Receipt of CRO and CMC services - recognized in research and development expenses
CMAB Biopharma (Suzhou) Inc.
Jiangsu Taslydiyi Pharmaceutical Co., Ltd.
Tasly Pharmaceutical Group Co., Ltd.
I-Mab Hangzhou
Receipt of research and development funding
Everest (Note 18)
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For the year ended December 31,
2021
2019
RMB
—
—
5,590
—
2020
RMB
681
2,395
—
—
RMB
—
2,697
—
2,465
US$ (Note 2.5)
—
423
—
387
For the year ended December 31,
2021
2019
RMB
53,148
2020
RMB
—
RMB
—
US$ (Note 2.5)
—
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
23. RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
Collection of loan to an affiliate
I-Mab Hangzhou (4)
For the year ended December 31,
2020
RMB
52,000
2021
RMB
—
US$ (Note 2.5)
—
(4)
In July 2019 and July 2020, I-Mab Shanghai provided an interest free loan to I-Mab Hangzhou of RMB2,000 and RMB50,000 respectively to
finance I-Mab Hangzhou’s operation. These loans were repaid in November 2020.
Expenses paid on behalf of an affiliate
I-Mab Hangzhou
Provision of FTE and other services - recognized in other income
I-Mab Hangzhou
Amounts received on behalf of an affiliate
I-Mab Hangzhou
F-90
For the year ended December 31,
2020
RMB
21,212
2021
RMB
17,649
US$ (Note 2.5)
2,770
For the year ended December 31,
2020
RMB
—
2021
RMB
11,691
US$ (Note 2.5)
1,834
For the year ended December 31,
2020
RMB
—
2021
RMB
281
US$ (Note 2.5)
44
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
23. RELATED PARTY BALANCES AND TRANSACTIONS (CONTINUED)
Amounts received related to the sublicense agreement
I-Mab Hangzhou (5)
For the year ended December 31,
2020
RMB
—
2021
RMB
19,102
US$ (Note 2.5)
2,998
(5)
In November 2016, the Company, as the licensee, entered into a license and sublicense agreement with Ferring International Center SA
(“Ferring”), with respect to Olamkicept (TJ301), a potential highly differentiated IL-6 blocker for ulcerative colitis and other autoimmune diseases
(the “Ferring Agreement”). Under the Ferring Agreement, Ferring granted to I-Mab an exclusive license to research, commercially develop, make,
import, use, sell, dispose of, offer to sell or dispose of the licensed product in China (including Hong Kong, Macau), Taiwan and Korea. In July
2018, the Company sub-licensed the above license to I-Mab Hong Kong. In September 2020, I-Mab Hong Kong agreed to assign all rights and
obligations/ownership of Target Pipelines (including TJ301) to I-Mab Hangzhou (see Note 10 (a)). The rights and interests of TJ301 were
exclusively sublicensed to I-Mab Hangzhou. In the second half year of 2021, I-Mab Hangzhou achieved one of the development milestones by
completing the Phase IIA study report in China. Upon the achievement of the milestone, I-Mab Hangzhou made a milestone payment with the
amount of US$3 million to I-Mab Hong Kong. As I-Mab Hangzhou’s payment of US$3 million is just passthrough payment to I-Mab, and will be
eventually paid to Ferring, which does not have any financial impact to I-Mab. The Company recorded it as a payable to Ferring in the
consolidated balance sheets for the year ended December 31, 2021.
Amounts paid by an affiliate on behalf of the Group
I-Mab Hangzhou
24. CONCENTRATION OF CREDIT RISK
For the year ended December 31,
2020
RMB
—
2021
RMB
25,448
US$ (Note 2.5)
3,993
Financial instruments that are potentially subject to significant concentration of credit risk consist of cash and cash equivalents, restricted cash, short-
term investments, other financial assets, accounts receivable, contract assets, and other receivables. The carrying amounts of cash and cash equivalents,
short-term investments and contract assets represent the maximum amount of loss due to credit risk. As of December 31, 2020 and 2021, all of the
Group’s cash and cash equivalents, restricted cash and short-term investments were held by major financial institutions located in the PRC and
international financial institutions outside of the PRC which management believes are of high credit quality and continually monitors the credit
worthiness of these financial institutions. With respect to the accounts receivable, contract assets and other receivables, the Group performs on-going
credit evaluations of the financial condition of its customers and counterparties.
F-91
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
25. SUBSEQUENT EVENTS
On February 22, 2022, the Group announced that Vivere Lifesciences Acquisition Corp. (“Vivere”), a special purpose acquisition company (the
“SPAC”), of which the Group owns 30% of the Class B shares (the “Promoter Shares”), has filed a listing application with the Hong Kong Stock
Exchange (the “Proposed Listing”). The Group intends to utilize Vivere as a platform to enhance its global innovation ecosystem and forge strong
partnerships with potential targets through the de-SPAC process. The SPAC is a capital-efficient tool to support the Group to build strategic alliances
with worldwide innovators with the goal to develop transformational medicines for patients. As of the report date, no cash has been injected into Vivere
by the Company.
F-92
Table of Contents
I-MAB
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(All amounts in thousands, except for share and per share data, unless otherwise noted)
26. RESTRICTED NET ASSETS
The Group’s ability to pay dividends may depend on the Group receiving distributions of funds from its PRC subsidiary. Relevant PRC statutory laws
and regulations permit payments of dividends by the Group’s PRC subsidiary only out of its retained earnings, if any, as determined in accordance with
PRC accounting standards and regulations. The results of operations reflected in the consolidated financial statements prepared in accordance with U.S.
GAAP differ from those reflected in the statutory financial statements of the Group’s PRC subsidiary.
In accordance with the Company law of the PRC, a domestic enterprise is required to provide statutory reserves of at least 10% of its annual after-tax
profit until such reserve has reached 50% of its respective registered capital based on the enterprise’s PRC statutory accounts. A domestic enterprise is
also required to provide discretionary surplus reserve, at the discretion of the Board of Directors, from the profits determined in accordance with the
enterprise’s PRC statutory accounts. The aforementioned reserves can only be used for specific purposes and are not distributable as cash dividends. The
Group’s PRC subsidiary was established as domestic invested enterprise and therefore is subject to the above mentioned restrictions on distributable
profits.
For the years ended December 31, 2019, 2020 and 2021, no appropriation to statutory reserves was made because the PRC subsidiary had substantial
losses during such periods.
As a result of these PRC laws and regulations subject to the limit discussed above that require annual appropriations of 10% of after-tax income to be set
aside, prior to payment of dividends, as general reserve fund, the Group’s PRC subsidiary is restricted in their ability to transfer a portion of their net
assets to the Group.
Foreign exchange and other regulations in the PRC further restrict the Company’s PRC subsidiaries from transferring funds to the Company in the form
of dividends, loans and advances.
As of December 31, 2021, the net asset base for purposes of calculating the proportionate share of restricted net assets of consolidated subsidiaries
should be zero, while the Group has a consolidated shareholders’ equity. Therefore, as the restricted net assets of consolidated subsidiaries do not exceed
25% of consolidated net assets as of the most recent fiscal year end, the Group is not required to provide parent company financial information.
F-93
Exhibit 4.24
THE SYMBOL “[REDACTED]” DENOTES PLACES WHERE CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM
THE EXHIBIT BECAUSE IT IS (1) NOT MATERIAL AND (2) THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR
CONFIDENTIAL.
Exclusive Development, Manufacture, and Sales Cooperation Agreement
This Exclusive Development, Manufacture, and Sales Cooperation Agreement (the “Agreement”) is executed on November 10, 2021 (the
“Effective Date”) in Pudong New Area, Shanghai by and between:
1.
2.
3.
4.
I-MAB Biopharma Hong Kong Limited (“I-MAB Hong Kong”), a limited company incorporated under the laws of Hong Kong Special
Administrative Region of the People’s Republic of China, located at Suite 5105, 51/F, The Center, 99 Queen’s Road Central, Hong Kong;
l-MAB Biopharma Co., Ltd. (“l-MAB Shanghai”, collectively known as “l-MAB” with l-MAB Hong Kong), a limited liability company
established under the laws of the People’s Republic of China, located at Suite 802, West Tower, OmniVision, 88 Shangke Road, Pudong District,
Shanghai, China;
Jumpcan Pharmaceutical Group Co., Ltd. (“Jumpcan”), a limited liability company established under the laws of the People’s Republic of
China, located in Baotawan, West Daqing Road, Taixing, Jiangsu; and
Jiangsu Jiyuan Medicine Co., Ltd. (“Jiyuan”, collectively known as the “Partner” with Jumpcan), a limited liability company established
under the laws of the People’s Republic of China, located at 318 South Yongfengqiao Road, Huangqiao Industrial Park, Taixing, Jiangsu.
I-MAB and the Partner are individually referred to as “one party” or “each party” and collectively as the “parties”.
Introduction
I-MAB expects to license the Partner to develop, manufacture, and commercialize the Target Product in the Target Territory (as defined below),
and the Partner is willing and able to carry out such activities in accordance with the terms and conditions set forth in this Agreement.
1
Definitions and Interpretation
1.1
Definitions
In this Agreement:
1.1.1
“Confidential Information” means all information of confidential nature disclosed (whether in writing, oral or any other manner,
whether directly or indirectly) to the Partner by I-MAB or its affiliates, including but not limited to, information related to the target
product and its pricing and marketing, technical information of the target product, and information related to the business of I-MAB
or its affiliates.
1.1.2
“CMC” means chemistry, manufacturing, and control.
1.1.3
“Inclusion” or “Included” means that, in the case of an authorized patent, the manufacture, use or sale of a product will fall within the
protection of the patent’s claims; in the case of an unauthorized patent application, the manufacture, use or sale of a product will fall
within the protection of the latest claims of the patent application.
1
1.1.4
“Third Party” means a person or an entity other than I-MAB, the Partner, and their respective affiliates.
1.1.5
1.1.6
1.1.7
“Affiliate” means, for an entity, an entity that controls, jointly controls or exerts a material influence on the entity, that controlled by,
jointly controlled by or under a material influence from the entity, that is controlled, jointly controlled, or materially influenced by a
party with the entity; “Control” used in this definition, means, for an entity, the direct or indirect ownership of more than 50% of its
shares, interests or voting rights, or the power to appoint or direct the management of the entity, or the power to appoint or elect a
majority of directors of the entity, or the capacity to directly or indirectly affect the operations and policies of the entity by holding
voting securities, agreements, trusts or in other ways.
“National Medical Products Administration” (NMPA) means the National Medical Products Administration of China, including its
local branches at all levels, and their respective predecessors and successors.
“Reasonable Commercial Efforts” means, with respect to either Party’s obligations hereunder, efforts and resources consistent with
those (for the avoidance of doubt, including funds, human resources, expertise, and facilities) expended by a biopharmaceutical
company equivalent in resources and expertise to the Party and its affiliates in such country for the compounds and products of its own
or its affiliates (such compounds and products shall have similar values to the target product, are at similar stages of development and
lifecycles, and have similar commercial potential, the similarity should take into account all relevant factors, including, with respect to
the target product, safety and efficacy issues, product profile, difficulty in research and development or manufacture, patent or other
proprietary status including patent protection and exclusive approval, and the regulatory requirements involved and the potential profit
value of the target product).
1.1.8
“Partner” shall have the meaning set forth in the preamble to this Agreement.
1.1.9
“Cooperation Contact” shall have the meaning set forth in Article 7.4.
1.1.10
“Collective Purchase” refers to the collective bidding and purchasing process of drugs organized by government agencies (including
their local branches at all levels) in the target territory for the purpose of supplying drugs to multiple public hospitals belonging to
different provinces.
1.1.11
“Collective Purchase and Sale” means the sale of the target product through collective purchase.
1.1.12
“Ongoing Phase III Clinical Trial” means the Phase III clinical trial currently performed by I-MAB according to “A Phase III,
Randomized, Open-Label, Active-Controlled, Multicenter Study to Evaluate the Efficacy and Safety of Recombinant Long-Acting
Human Growth Hormone (TJ101) in Subjects with Pediatric Growth Hormone Deficiency” (see Attachment 1.1.12 to this Agreement)
submitted to NMPA/Center for Drug Evaluation.
2
1.1.13
“Competitive Product” means [Redacted].
1.1.14
“Domestic Marketing Authorization Holder” shall have the meaning set forth in Article 4.1.
1.1.15
“Overseas Marketing Authorization Holder” shall have the meaning set forth in Article 4.1.
1.1.16
“Agent of Overseas Marketing Authorization Holder” shall have the meaning set forth in Article 4.1.
1.1.17
“Net Sales” means that the total amount invoiced by the Partner or its sublicensees (hereinafter collectively referred to as “Seller”) for
the sale or disposal of the target product to a third party in the target territory minuses the following deductions actually allowed
and incurred: [Redacted]
Net sales shall be accounted for in accordance with applicable standard practice in the target territory.
1.1.18
“Development” means, with respect to a product, activities such as all studies, preclinical test, nonclinical test, clinical trials, test
method development, stability test, toxicity test, dosage form development, process development, manufacturing quantitative
development, quality assurance/quality control, statistical analysis and reporting, development of matching syringes, etc. To avoid
ambiguity, “Development” does not include writing a marketing authorization application, submitting a marketing authorization
application, or other regulatory matters related to such product.
1.1.19
“Control” means, with respect to any patent and know-how, either Party, without breaching any agreement or other arrangements
with a third party, grants to the other Party relevant authorization or license set forth in this Agreement regarding such patents and
know-how (including those rights arising from such Party’s ownership of such patents and patent technologies or other authorization
from a third party, but excluding licenses hereunder).
1.1.20
“Milestone Payment” shall have the meaning set forth in Article 8.2.
1.1.21
“Milestone Event” shall have the meaning set forth in Article 8.2.
1.1.22
“PC/PV” means “Process Characterization and Validation”, i.e., the design and validation of the production process of the target
product.
1.1.23
“Approval” shall have the meaning set forth in Article 4.4.
1.1.24
“Commercialization” means, with respect to a product, all market activities, promotional activities, promotion, distribution, import,
export, sale or offer sales and other commercialization activities, including pricing, health insurance negotiations, and pharmaceutical
representative activities of the product.
3
1.1.25
“Marketing Authorization” means a government license issued by NMPA that is necessary for the development, manufacture or
commercialization of the target product in the target territory.
1.1.26
“Marketing Authorization Holder” shall have the meaning set forth in Article 4.1.2.
1.1.27
“Manufacture” means, with respect to a product, all planning, purchase, manufacturing, processing, synthesis, storage, filling,
packaging, waste disposal, labeling, placement in package inserts, testing, quality assurance, sample storage, stability test, release,
shipment, and supply.
1.1.28
“Upstream License Agreement” means the Intellectual Property Assignment and License Agreement, dated as of October 16, 2015,
between Tasgen Bio tech (Tianjin) Co., Ltd. and Genexine, Inc.
1.1.29
“Effective Date” means the date indicated at the beginning of the document.
1.1.30
1.1.31
1.1.32
“Indication” means, with respect to a product, any clinically recognized independent disease, disorder or symptom treated with such
product, or any independent disease, disorder, symptom requiring a separate marketing authorization to be treated with such product, or
a population suffering from such disease, disorder or symptom.
“Applicable Law” means all laws, regulations, departmental regulations, or administrative decisions applicable to this Agreement and
the rights and obligations set forth hereunder from time to time.
“First Commercial Sale” means the sale of the target product to any third party by the Partner or its sublicensees after all
necessary marketing authorizations are obtained.
1.1.33
“Down Payment” shall have the meaning set forth in Article 8.1.
1.1.34
“I-MAB” shall have the meaning set forth in the preamble to this Agreement.
1.1.35
“I-MAB Trademark” means a Chinese trademark and the corresponding English trademark in the trademarks listed in Attachment
1.1.35, which are determined in writing by both parties after the effective date.
1.1.36
“I-MAB Shanghai” shall have the meaning set forth in the preamble to this Agreement.
1.1.37
“I-MAB Hong Kong” shall have the meaning set forth in the preamble to this Agreement.
1.1.38
“I-MAB Intellectual Property Rights” means patents and know-hows of I-MAB.
1.1.39
“I-MAB Patents” means all patents controlled by I-MAB on the effective date or during the term of this Agreement, which are
necessary for the use, development, manufacture or commercialization of the target product, including but not limited to patents
listed in Attachment 1.1.39 that have been authorized from the patentee to I-MAB at the time of signing this Agreement and other
patents filed or controlled by I-MAB or its affiliates for the target product after the execution of this Agreement.
4
1.1.40
“I-MAB Know-How” means all know-hows controlled by I-MAB on the effective date or during the term of this Agreement, which
are necessary for the use, development, manufacture or commercialization of the target product, including but not limited to know-
hows listed in Attachment 1.1.39 that have been authorized from the know-how holder to I-MAB at the time of signing this
Agreement and other know-hows developed or obtained by I-MAB or its affiliates for the target product after the execution of this
Agreement.
1.1.41
“Target Product” means the long-acting recombinant human growth hormone (TJ101) of I-MAB and its various dosage forms, as well
as all products containing TJ101 as the sole active ingredient or in combination with one or more active ingredients, and the matching
syringes required for various dosage forms of products.
1.1.42
“Target Territory” means the Chinese mainland (excluding Hong Kong Special Administrative Region, Macao Special Administrative
Region, and Taiwan).
1.1.43
“Target Area” means all uses in humans or animals.
1.1.44
“One Party”, “Parties”, and “Each Party” shall have the meaning set forth in the preamble to this Agreement.
1.1.45
“Patents” means patent applications and patents issued in the target territory, including inventions, utility models, and designs.
1.1.46
“Know-How” means technical and other information related to the target product, including concepts, discoveries, designs, processes,
improvements, methods, tests, and test data.
1.2
Interpretation
2
2.1
The headings of articles in this Agreement are for ease of reading only and do not affect the interpretation of this Agreement. The attachments
to this Agreement are a part of it as a whole. Any change or addition to the terms and conditions of this Agreement shall be made in writing
expressly referring to this Agreement and signed by a duly authorized representative before binding upon the Parties.
Exclusive Cooperation
Pursuant to the terms of this Agreement, I-MAB hereby grants to the Partner, on the effective date, an exclusive, feeable, irrevocable (unless
this Agreement is terminated), non-assignable, non-sublicensable (unless permitted by Article 2.2) license to authorize the Partner to engage in
(a) the development of the target product (to the extent set forth in Article 3); (b) the manufacture of the target product (to the extent set
forth in Article 5); and (c) the commercialization of the target product in the target territory and in the target area.
5
2.2
The Partner shall not sublicense its rights under this Agreement to any third party without the prior written consent of I-MAB, but the partner
can sublicense the rights to its affiliates. The granting of a sublicense by the Partner to any third party or its affiliates (the “sublicensee”)
must comply with the following requirements: (a) The Partner shall sign a written sublicense agreement with such sublicensee and provide a
complete copy to I-MAB within five (5) days after signing the sublicense agreement; (b) The terms of the sublicense agreement shall not
conflict with any of the terms of this Agreement, and any sublicensee itself shall not have the right to re-license; (c) No sublicense shall relieve
the Partner of any obligations under this Agreement, and the Partner shall remain fully liable to I-MAB for the performance of all such
obligations, whereas any act or omission of a sublicensee will be deemed to be an act or omission of the Partner; and (d) Upon termination of
this Agreement, all sublicense agreements will automatically terminate.
2.3
The Partner shall not have or claim any rights or interests in any of I-MAB or its affiliates’ intellectual property rights other than those
expressly granted to the Partner under this Agreement.
2.4
During the term of this Agreement:
2.4.1
2.4.2
I-MAB shall not develop, manufacture or commercialize the target product in the target territory and the target area, and shall not
authorize a third party to develop, manufacture or commercialize the target product in the target territory and the target area,
except with the prior written consent of the Partner or permission in accordance with the terms of this Agreement; otherwise, the
benefits from such activities obtained by I-MAB shall be owned by the Partner.
Neither Party shall engage in the development, manufacture or commercialization of the competitive product in the target
territory and the target area and shall not provide any third party with the manufacture, sale, distribution, development or other
commercialization services of the competitive product, unless the other party’s prior written consent is obtained.
3
3.1
3.2
3.3
3.4
Product Development
I-MAB shall use reasonable commercial efforts to conduct and complete the ongoing Phase III clinical trials and bear all associated
development costs (except those associated with CMC). [Redacted].
The Partner shall use reasonable commercial efforts to conduct the development of the target product (other than the ongoing Phase III
clinical trial) in the target territory and the target area. [Redacted].
I-MAB shall make reasonable commercial efforts to conduct and complete CMC development related to the target product, [Redacted].
The Partner will independently bear the full costs of the clinical trial initiated by itself (including the costs of purchasing the target product).
Both Parties shall comply with the terms of this Agreement and applicable laws in the conduct of the clinical trial or other development
activities.
6
3.5
[Redacted].
4
4.1
4.2
4.3
4.4
4.5
Regulatory Matters
It is the responsibility of I-MAB or its affiliates to apply to NMPA for marketing authorization for the target product (including the addition
of any indication for the target product) in the target territory. In order to apply for marketing authorization for the target product, the
Partner shall provide reasonable support and assistance to I-MAB or its affiliates. [Redacted].
4.1.1
I-MAB Hong Kong, its affiliates or its designated third party will become the marketing authorization holder (MAH) (“Overseas
MAH”) for the target product in the target territory after obtaining the marketing authorization for the target product. The
overseas MAH has right to designate I-MAB or its affiliates in China or other suitable third party as its agent (“agent of overseas
MAH”) in the target territory to perform the obligations of the overseas MAH as specified in applicable laws and regulations on
behalf of the overseas MAH. Notwithstanding any other provision of this Agreement, I-MAB has the right to delegate its rights and
obligations under this Agreement to the agent of overseas MAH.
4.1.2
If the target product is converted to be manufactured in China, I-MAB or its affiliates in China will be responsible for obtaining the
marketing authorization for the product and becoming the MAH (the “domestic MAH”, collectively referred to as “MAH” with the
overseas MAH), [Redacted].
I-MAB or its affiliates shall be responsible for the maintenance, change or modification of the marketing authorization for the target product,
and all other communications and discussions with NMPA regarding the marketing authorization of the target product. I-MAB exclusively
reserves all rights to grant, maintain, change or modify the marketing authorization. The Partner agrees that it will not take any action with
respect to the marketing authorization unless expressly authorized in writing by I-MAB.
I-MAB shall have the right to independently decide to transfer the marketing authorization of the target product to its affiliates, [Redacted].
In addition to the approvals required to be obtained by I-MAB and its affiliates set forth in Article 4.1, the Partner is responsible for obtaining
and maintaining the validity of any other approvals, licenses, and authorizations required by laws and regulations in the target territory and
necessary for its signature and performance of the terms of this Agreement. Upon termination of this Agreement for any reason, unless
otherwise requested by I-MAB, the Partner shall maintain in force any approvals (“approvals”, if any) that it has obtained in relation to the
target product and (after obtaining the approval of the necessary fees by I-MAB) transfer such approvals to I-MAB or its designee, or revoke
the approval as required by I-MAB if the approval is not transferable.
The Partner shall maintain true and accurate records related to the target product, including, but not limited to, the batch number of the target
product purchased from and sold to the client of the Partner from I-MAB, and allow the inspection of I-MAB and its authorized
representatives upon notification to the Partner.
7
4.6
4.7
5
5.1
5.2
5.3
5.4
5.5
To ensure that the target product is identified by batch number with the shortest delay, the Partner shall maintain a rapid and effective batch
number tracking and target product recall process. The Partner shall carry out the process in the event that I-MAB believes for any reason that
the target product is required to be recalled or withdrawn from the Partner or the Client of the Partner.
The Parties will enter into a separate pharmacovigilance agreement. Pursuant to this Agreement, the Partner will report any client complaints or
adverse reactions involving the target product to I-MAB. Pursuant to the relevant provisions of such arrangements, the Partner will assist
I-MAB in responding to any queries raised by regulatory authorities related to pharmacovigilance of the target product.
Production and Supply
The Parties shall discuss and confirm a technology transfer plan for the manufacture of the target product (the “Manufacturing Technology
Transfer Plan”) that agrees to transfer all know-hows of I-MAB required by the Partner to manufacture the target product from I-MAB to
the Partner or its recognized manufacturer. I-MAB shall transfer such manufacturing technology to the Partner or its recognized manufacturer
in accordance with the manufacturing technology transfer plan. I-MAB and the Partner shall jointly bear all costs incurred by and associated
with the transfer of manufacturing technology between the Parties as set forth in Article 3.3, [Redacted].
During the transfer of manufacturing technology, the information of suppliers such as raw materials, excipients, packaging materials, etc. shall be
provided by I-MAB to the Partner or its recognized manufacturer for subsequent assessment by the Partner or its recognized manufacturer.
[Redacted].
[Redacted] Prior to the manufacturing technology transfer, I-MAB shall make reasonable commercial efforts to assist the smooth transfer of
manufacturing technology to the Partner or or its recognized manufacturer, and designate appropriate technical personnel to provide technical
answers, remote or on-site guidance to the Partner or its recognized manufacturer during the manufacturing technology transfer.
Before the completion of the manufacturing technology transfer, if the Partner needs to purchase the target product to carry out the clinical
trial initiated by itself or its other commercialization activities as described in Article 3.2, the Parties shall sign a supply agreement agreeing on
the specific terms and the price for the supply of such target product from I-MAB to the Partner. [Redacted].
Upon completion of the manufacturing technology transfer, the Parties will sign a separate supply agreement to specify that the Partner or its
recognized manufacturer will act as the Contract Development Manufacture Organization (CDMO) of I-MAB to be responsible for the
production of target product in the target territory. As MAH of the target product, I-MAB supplies the target product to the Partner to
support the commercialization of the target product. [Redacted].
8
6
6.1
Commercialization
The Partner will be the exclusive national agent of the target product, be responsible for the commercialization of the target product in the
target territory, including but not limited to the pricing of target product, charitable drug donation, medical insurance negotiation, brand
strategy, promotion plan and sales forecast, and bear relevant costs. [Redacted].
6.2
The Partner shall make reasonable commercial efforts to commercialize the target product in the target territory.
7
Governance
7.1
Joint steering committee
7.1.1
7.1.2
A Joint Steering Committee (“JSC”) will be established by the Parties. The JSC will consist of two (2) members from I-MAB and two
(2) members from the Partner. All members designated by each Party as a whole shall be able to reflect the professional opinion of
their respective companies with respect to promotion, marketing, sales, medical affairs/clinical development, finance and/or
compliance. Each Party shall notify the other Party in writing of the list of its designated personnel. To avoid doubt, the cooperation
contact designated by the Parties pursuant to Article 7.4 is not necessarily a member of JSC, but may attend meetings of JSC.
One of their members in JSC shall be appointed as the co-chairmen of JSC by I-MAB and the Partner, respectively. The co-chairmen
will: (a) establish the agenda of the meeting; provided that the agenda will include any matter reasonably requested by either party; and
(b) have the right to request an urgent meeting of JSC. The co-chairmen will be responsible for recording, preparing, and sending to the
Parties within a reasonable time the minutes of JSC meeting.
7.1.3
The JSC will meet face to face at a location mutually agreed the Parties or meet by video or telephone.
7.1.4
Unless otherwise agreed by the Parties, JSC shall meet at least once a month for the first three (3) months after the effective date.
Thereafter, JSC shall meet at least quarterly, or discuss and decide on the frequency of JSC meetings depending on actual needs.
7.2
Responsibilities of JSC. Unless otherwise provided herein, JSC will oversee the performance of this Agreement by the Parties. JSC will
perform its responsibilities in accordance with the provisions of this Agreement, but will not have the authority to modify this Agreement or
make decisions that are contrary to this Agreement. The responsibilities of JSC will include:
7.2.1
Review and approve the development plan (including clinical plan and protocol) for the target product;
7.2.2
Review the commercialization plan for the target product;
7.2.3
Approve the price and price strategy of the target product;
9
7.3
7.4
8
8.1
7.2.4
Synchronize and supervise the implementation of the development plan and the commercialization plan;
7.2.5
Supervise the compliance of the Parties with their obligations under this Agreement; and
7.2.6
Negotiate other matters specified otherwise in this Agreement and supervise the implementation of other matters determined by JSC.
Decision-making mechanism. All decisions of JSC shall be made by a unanimous vote of the Parties with one vote (regardless of the number
of members present at the meeting) for I-MAB and the Partner each. [Redacted]
Cooperation contact. Each Party shall designate an employee of such party to supervise interactions between the Parties (all referred to as
“Cooperation Contact”) with respect to all matters under this Agreement. The cooperation contact shall make every effort to ensure clear and
expeditious communication and effective transmission of information between the Parties as the contact for any matters arising out of this
Agreement and to facilitate the implementation of relevant matters within their respective companies. The cooperation contact shall have the
right to participate as a non-voting participant in all JSC meetings, may raise to JSC any matter or question reasonably considered necessary for
discussion by any of the cooperation contacts and shall assume other responsibilities as may be agreed upon in writing between the Parties.
Each Party may change its designated cooperation contact by giving written notice to the other Party.
Financial Terms
Down payment. The Partner shall make a payment (“down payment”) in the amount of RMB Two Hundred Twenty Four Million (CNY
¥224,000,000) to I-MAB, which is non-refundable and non-deductible. The down payment shall be made by the Partner within 5 days from the
effective date in an amount of RMB Ninety Six Million (CNY ¥96,000,000) and within 30 days from the effective date in an amount of RMB
One Hundred Twenty Eight Million (CNY ¥128,000,000). After the down payment is received, I-MAB shall issue a special VAT invoice to the
Partner for the down payment.
8.2 Milestone payments.
8.2.1
Upon the achievement of the following milestone events (“milestone events”) with respect to the target product, the Partner shall
notify I-MAB within ten (10) days, and upon receipt of an invoice from I-MAB for the achievement of such milestone events, the
following one-time, non-refundable, and non-deductible milestone payments (“milestone payments”) will be made to I-MAB in
accordance with the provisions of this Agreement. Each milestone payment will be made only once and will not be repeated.
10
Milestone event
Development
milestone
event
1. [Redacted]
2. [Redacted]
Sales
milestone
event
1. [Redacted]
2. [Redacted]
3. [Redacted]
4. [Redacted]
*[Redacted]
8.2.2
[Redacted].
8.2.3
[Redacted].
8.3
IP authorization royalty.
Milestone payment
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
[Redacted]
RMB One Billion
Seven Hundred
and Ninety-Two Million
(CNY ¥1,792,000,000)
Total milestone payments
8.3.1
Subject to other provisions of this Agreement, the Parties agree to share, in accordance with the principle of 50%: 50%, the proceeds
resulting from the licensing of I-MAB intellectual property rights to the Partner and the commercialization of the target product based
on the I-MAB intellectual property rights, in particular:
[Redacted]
8.3.2
[Redacted].
8.3.3
8.3.4
During the IP authorization commission period, the parties shall reconcile, within thirty (30) days after the end of each quarter, (a) the
calculation of net sales ([Redacted]) in each month of the quarter; and (b) the calculation of the total share to be paid to I-MAB by the
Partner in respect of that quarter ([Redacted]).
“IP authorization commission period” refers to the period from the first commercial sale of the target product in the target
territory until the end of the following, whichever occurs last: (1) all applicable regulatory exclusivity periods for new drugs have
expired; (2) the last I-MAB patent including the target product has expired, revoked, and invalid; or (3) 10 years after the first
commercial sale of the target product.
8.4
In the event of major changes in the market environment of the target product due to external factors such as national collective purchase and
health insurance negotiations, the parties may negotiate amicably whether the relevant terms need to be adjusted in accordance with the
principle of maximizing the cooperative interests of the parties. If the parties agree on the need to adjust the relevant terms, the relevant
adjustments shall be made in a manner agreed in writing.
11
8.5
[Redacted].
8.6
Terms of Payment.
8.6.1
Taxes. All amounts payable under this Agreement are amounts excluding taxes. VAT will be charged in addition to I-MAB.
8.6.2
Invoices. In addition to the down payment, the receiving party shall issue a special VAT invoice to the paying party for all payments
payable to the receiving party under this Agreement, and the paying party shall pay the corresponding amounts in all special VAT
invoices within ten (10) business days from the date of receipt of the special VAT special invoices.
8.6.3
Late Payments. If one party fails to make payment to the other party accounts payable under this Agreement, it shall bear the interest
on the deferred payment from the date of the extension to the actual date of payment at an interest rate of 0.005% per day.
8.7
The Partner shall maintain accurate books and records, including:
8.7.1
Records of all Partner sales to its customers; and
8.7.2
Inventory records of target product owned by the Partner at any time
8.8
8.9
And if the Partner is notified five business days in advance, I-MAB or its authorized agents shall have the right to inspect and extract the books
and records within the working hours acceptable to the other party. In order to facilitate the annual review of the sales and inventory records of
the target product at the end of each calendar year by I-MAB or its authorized agents, Partner shall arrange its books and records in a manner.
[Redacted].
(a) I-MAB, at any time during and after the term of this Agreement, and (b) Partner, [Redacted], shall have the right to access the other party’s
premises after reasonable notice not less than ten (10) business days in advance in accordance with the record retention period specified in this
Agreement and its attachments, to audit and inspect all records, processes and behaviors related to the performance of this Agreement by the
other party, including but not limited to:
8.9.1
All distribution behaviors, materials, practices, and procedures; and
8.9.2
Controls, safety actions and procedures in accordance with the provisions of the Quality Agreement and the Drug Safety Information
Exchange Agreement, which are separately signed by the parties after the entry into force of this Agreement.
8.10
Subject to Article 8.9, each party and its designated auditors (including internal and external auditors), inspectors and other representatives
designated in writing, with five business days’ written notice to the other party, have the right to access to such premises, the other party’s
employees, data, and records to complete the audit and inspection of the other party within reasonable working hours acceptable to the other
party.
12
8.11 Each party shall exercise its audit rights no more than once a year and each inspection shall only audit the books and records within the past 3
years.
8.12
8.13
8.14
The audited party shall fully assist and ensure that its employees fully assist the auditing party in any audit or monitoring carried out in
accordance with the above article. Auditors, inspectors, and other representatives designated by the auditing party shall comply with the
reasonable security and confidentiality requirements of the audited party.
The auditing party or its designated auditor may issue a formal letter summarizing the audit results. If any findings or audit results in the audit
require the audited party to make any improvement, the audited party shall take reasonable measures to ensure that the improvement plan is
completed within the specified period required by the auditing party.
The costs and expenses of the audit agreed upon in this Agreement will be borne by the auditing party, unless there is evidence that the audited
party has not complied with any of the terms or obligations of this Agreement, in which case the costs of the audit will be paid by the audited
party.
9
Intellectual Property
9.1
Ownership.
9.1.1
9.1.2
9.1.3
This Agreement does not assign the parties’ ownership of any background intellectual property. “Background intellectual
property” refers to any patents, know-hows or other intellectual property controlled by either party on the effective date, and
patents, know-hows or other intellectual property developed by either party in the performance of activities unrelated to this
Agreement.
In terms of any intellectual property developed or generated in the course of activities related to this Agreement, (a) for intellectual
property developed or generated solely by one party in the course of performing activities related to this Agreement, such party will
own such intellectual property independently developed or generated by itself or its affiliates, employees, subcontractors or consultants
(“foreground intellectual property”); and (b) for intellectual property developed or generated by the parties in the course of
performing activities related to this Agreement, the parties will share all such intellectual property jointly developed or generated by
the parties or their respective affiliates, employees, subcontractors or consultants (“joint foreground intellectual property”).
During the performance of this Agreement, any foreground intellectual property arising out of the target product by I-MAB or its
affiliates shall promptly notify the Partner. Such foreground intellectual property shall be included in the I-MAB intellectual
property to be licensed to the Partner pursuant to this Agreement, and the Partner shall not bear any additional costs in addition to
the costs agreed upon in this Agreement.
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9.1.4
If it is necessary for the Partner to obtain a license from a third party for intellectual property controlled by a third party for the
purpose of manufacture and commercialization of the target product in the target territory, the cost arising therefrom shall be
borne by the Partner, except if this necessity is caused by the use of long-acting recombinant human growth hormone itself provided to
the Partner by I-MAB (without modification by the Partner) or indications for which I-MAB has undergone clinical development on
the Effective Date.
9.1.5
The parties shall ensure that if any affiliates, employees, subcontractors, or consultants of such party are involved in any activities of
such party in connection with this Agreement, such affiliates, employees, subcontractors or consultants shall be obligated to assign
intellectual property developed or generated by such party.
Patent application. I-MAB shall be responsible for the preparation, application, and maintenance of all I-MAB patents. I-MAB shall negotiate
amicably with the Partner on the preparation, application, and maintenance of the I-MAB patents, and allow the Partner to make substantive
suggestions on the preparation, application, and maintenance of the I-MAB patents. The relevant expenses (including patent attorney fees and
official fees) incurred in the preparation, application, and maintenance of I-MAB patents in the target territory shall be borne by I-MAB.
[Redacted]
Patent Maintenance. I-MAB shall be responsible for the maintenance of all I-MAB patents. In the event of any invalid challenge to the
I-MAB patents, I-MAB shall promptly notify the Partner. The parties shall jointly negotiate and deal with it, and make all reasonable
commercial efforts to maintain the stability of the I-MAB patents.
During the term of this Agreement, the Partner shall be obligated to notify I-MAB of any actual, suspected, or potential infringement of the
I-MAB patents. I-MAB or its designee shall make reasonable commercial efforts to initiate a defense action and retain any compensation
received. The Partner further agrees to take all necessary actions to protect the rights of I-MAB with respect to the target product and the
I-MAB patents, at the expense of such request and expense of the I-MAB or its designee.
If, during the term of this Agreement, any third party brings a patent infringement action against the Partner concerning the target product,
the Partner shall notify I-MAB in writing within seven (7) days, and I-MAB shall make reasonable commercial efforts to initiate an active
defense of such action. The Partner shall bear all compensations from such patent infringement actions and other reasonable costs (including,
but not limited to, attorney fees) incurred as a result of such infringement, except if the infringement is caused using long-acting recombinant
human growth hormone itself provided to the Partner by I-MAB (without modification by the Partner) or indications for which I-MAB has
undergone clinical development on the effective date.
9.2
9.3
9.4
9.5
14
9.6
9.7
[Redacted].
Trademarks.
9.7.1
9.7.2
9.7.3
9.7.4
9.7.5
I-MAB hereby grants a non-transferable, non-exclusive, sub-licensable license to the Partner, to allow the Partner to use the I-MAB
trademark for the sole purpose of commercialization of the target product in the target territory.
At any time during the term of this Agreement, if the Partner becomes aware of any infringement or potential infringement of the
I-MAB trademark by any third party, the Partner shall notify I-MAB and identify the infringer, infringement, and corresponding
supporting materials. I-MAB or its designee shall take necessary measures to protect I-MAB trademark at its own discretion, and the
Partner shall give I-MAB or its designee all possible assistance in connection therewith, including participating in any legal
procedures. I-MAB or its designee shall bear the costs and receive any compensation arising out of such procedures. Without the
written consent of I-MAB or its designee, the Partner shall not take any action against such infringement or suspected infringement,
except for providing all possible assistance as aforesaid.
If at any time during the term of this Agreement, any actions are brought against the Partner concerning the I-MAB Trademark, the
Partner shall promptly notify I-MAB in writing. I-MAB or its designee shall make reasonable commercial efforts to conduct a
defense of such action. If the Partner suffers losses as a result, I-MAB shall compensate the Partner for direct economic losses.
The Partner warrants that no trademark similar to or confusable to the I-MAB trademark will be used or permitted during the term of
this Agreement or after the expiration or termination of this Agreement for any reason.
The Partner shall not register or attempt to register the I-MAB trademark alone or in combination with any other trademark or
material, nor shall use it as a part of its own business name or business style.
10
Confidentiality
10.1
The Partner agrees to maintain strict confidentiality with respect to confidential information, unless such information becomes publicly
available due to the negligence of the non-Partner, its employees, or agents, or as a result of disclosure authorized by the Partner with the prior
written consent of I-MAB, or as required by laws by the Partner. The Partner shall ensure that its employees and agents comply with the
confidentiality obligations described above with respect to confidential information. The Partner shall ensure that this confidentiality
obligations remain in force for ten (10) years after termination of this Agreement.
11
Representations and Warranties
11.1
The Partner hereby represents and warrants that:
15
11.1.1 The Partner has the full right and authority to enter into this Agreement.
11.1.2 The Partner is eligible to be a partner of I-MAB in accordance with the laws in the target territory.
11.1.3 The Partner will conduct the development, manufacture, and commercialization of the target product in strict accordance with the
current Good Supply Practice, the quality agreement signed by the parties, and all applicable laws and regulations related to the
development, manufacture and commercialization of the target product in the target territory.
11.1.4 The Partner shall not sell counterfeit I-MAB or any other company’s target products or transact counterfeit target product with it or
with any member of its supply chain. The Partner will take appropriate preventive safety measures during the distribution process to
ensure the authenticity of the target product and prevent counterfeiting of the target product.
11.2
The I-MAB hereby represents and warrants that:
11.2.1 The I-MAB has the full right and authority to enter into this Agreement.
11.2.2 The I-MAB shall have the right to grant an exclusive license to the Partner of I-MAB intellectual property in the target territory in
accordance with this Agreement to give the Partner the right to engage in the development of the target product in the target
territory and the target area (subject to the provisions of Article 3), manufacture of the target product (subject to the provisions of
Article 5), and commercialization of the target product.
11.2.3 Manufacture or commercialization of the target product in the target territory will not infringe the intellectual property of any
third party based on the information known as of the effective date of I-MAB.
11.2.4 All kinds of significant information and data (i.e., information and data that may reasonably be deemed to affect the Partner’s decision-
making regarding cooperation under this Agreement) provided by I-MAB to the Partner are true based on information known as of
the effective date of I-MAB.
11.2.5 Based on the reasonable judgment of the I-MAB, as of the effective date, there are no serious defects preventing the target product
from obtaining regulatory approvals in the target territory.
11.2.6 The I-MAB will continue to make reasonable commercial efforts to maintain the validity of I-MAB intellectual property in the
target territory.
11.2.7
[Redacted].
11.2.8
[Redacted].
11.2.9 The I-MAB will make reasonable commercial efforts to maintain the validity of the marketing authorization for the target product.
16
11.2.10 The I-MAB will make reasonable commercial efforts to avoid situations in which the target product is ordered by relevant
government departments to stop production or sales based on the occurrence of primary recalls, serious adverse reactions, or group
adverse events of drugs due to the I-MAB or its affiliates.
12
Indemnification
12.1
If any third party commits any action, claim or other proceeding against I-MAB, affiliates of I-MAB, or their respective directors,
management, employees (“I-MAB indemnified party”), and any loss, liability, damage, fees, or costs (including reasonable attorney fees)
incurred by such I-MAB indemnified party, the Partner shall compensate such I-MAB indemnified party:
12.1.1 Development, manufacture, or commercialization of any target product by the Partner, affiliates of Partner, sub-licensees or
subcontractors;
12.1.2 Any negligence of the Partner, affiliates of Partner, sub-licensees or subcontractors in the conduct of activities relating to this
Agreement; or
12.1.3 Breach of any representations, warranties or other obligations set forth in this Agreement by the Partner, affiliates of Partner,
sub-licensees or subcontractors.
12.2
If any third party commits any action, claim or other proceeding against Partner, affiliates of Partner, or their respective directors,
management, employees (“Partner indemnified party”), and any loss, liability, damage, fees, or costs (including reasonable attorney fees)
incurred by such Partner indemnified party, the I-MAB shall compensate such Partner indemnified party:
12.2.1 Any negligence of the I-MAB, affiliates of I-MAB or subcontractors in the conduct of activities relating to this Agreement; or
12.2.2 Breach of any representations, warranties or other obligations set forth in this Agreement by the I-MAB, affiliates of I-MAB or
subcontractors.
12.3
If either party breaches any of the representations, warranties or other obligations agreed upon in this Agreement, it shall be liable to the other
party for breach of contract.
13
Term and Termination
13.1 This Agreement shall enter into force and become effective as of the date of signing the contract. This Agreement shall remain in force and
effect unless terminated early in accordance with the provisions of this Agreement.
13.2
13.3
If either party substantially breaches this Agreement and fails to correct the breach within thirty (30) days of receipt of written notice from the
other party, the other party may terminate this Agreement immediately by a written notice.
If either party reconciles, arranges or enters into liquidation proceedings with its creditors other than by reason of a bona fide reorganization, or
has appointed a liquidator or judicial supervisor for all or part of its business, the other party has the right to terminate this Agreement
immediately by a written notice. The parties agree to notify the other party in writing of the change within fourteen (14) days from the effective
date of such change.
17
13.4
If the Partner commits any of the following acts, I-MAB may terminate this Agreement immediately by giving a written notice to the Partner:
13.4.1 Serious breach of applicable laws, resulting in the inability to continue the performance of this Agreement;
13.4.2 Challenge of the ownership or validity of any intellectual property by I-MAB or its affiliates;
13.4.3 Failure to pay any sum due to the I-MAB prior to the due date of any payments under this Agreement, and still failure to pay within
thirty (30) business days after the written notice of I-MAB;
13.4.4 The breach of the obligations of confidentiality of I-MAB under this Agreement that causes serious losses to the I-MAB.
13.5
If the I-MAB commits any of the following acts, Partner may terminate this Agreement immediately by giving a written notice to the I-MAB:
13.5.1 Serious breach of applicable laws, resulting in the inability to continue the performance of this Agreement;
13.5.2 Failure to pay any sum due to the Partner prior to the due date of any payments under this Agreement, and still failure to pay within
thirty (30) business days after the written notice of Partner.
13.6 Whether this Agreement is terminated for any reason:
13.6.1 All intellectual property licenses granted by I-MAB to the Partner pursuant to this Agreement will be terminated immediately;
13.6.2 The Partner shall immediately cease any development, manufacture or commercialization activities of the target product and
immediately cease the use of any trademarks or any documents or information provided by I-MAB or its affiliates;
13.6.3 Upon request of I-MAB, the Partner shall sell to I-MAB or its designee all outstanding inventory target products in the possession or
under the control of the Partner on the effective date of termination, provided that such target products meet the conditions for sale on
the market (as judged in good faith in the I-MAB). The target products that do not meet the conditions for sale on the market shall be
destroyed by the Partner under the direction and supervision of I-MAB, and the cost shall be borne by the Partner (except for the
termination of the agreement due to the breach of contract by the I-MAB);
13.6.4 The Partner shall immediately discontinue the use of all confidential information provided to the Partner by I-MAB for various
purposes, and return to I-MAB or handle all documents (including any copy) and all records (including computer disks or other forms
of electronic data) containing or related to confidential information, (as directed by I-MAB), regardless of their form and how they are
made;
18
13.6.5 The Partner shall automatically grant to I-MAB a non-exclusive, royalty-free, revocable, transferable, and sublicensable license for the
foreground intellectual property of the Partner (including the share of the Partner in the joint foreground intellectual property) to
authorize I-MAB to engage in the development, manufacture, and commercialization of the target product; and
13.6.6 The Partner shall promptly pay unpaid invoices issued by I-MAB for the target product or return the target product.
13.7
Termination or expiration of this Agreement for any reason shall not be deemed to exempt either party from liability to the other party or the
litigation right enjoyed by the other party that has already occurred at the termination of this Agreement, or due to the actions or omissions
before the termination; this right includes, but is not limited to, recourse against any monetary debts under this Agreement.
14
Prevention of Bribery and Corruption
14.1
14.2
The Partner shall always fully comply with all applicable laws and regulations in the target territory in which the Partner operates with the
I-MAB, including, but not limited to, anti-corruption laws in China and the United States.
The Partner agrees that it has not made and agreed that it will not make, undertake, authorize, approve, promise, or engaged in, directly or
indirectly, in connection with the performance of this Agreement, in any actions to promote any payment or transfer of any valuables in order to
affect, induce or reward any actions, omission or decision, thereby securing an inappropriate interest; or improperly assisting it or I-MAB in
obtaining or retaining business, or taking any measured with the purpose or effect of public or commercial bribery.
14.3 Without the prior written permission of I-MAB, the Partner shall not contact or otherwise knowingly meet with any government official for the
purpose of discussing activities arising out of or related to this Agreement and, if required by the I-MAB, it can be done only in the presence of
the designated representative of the I-MAB.
14.4
For the purposes of this Agreement, the “government official” means: (a) any official or employee of the government or any governmental
agency; (b) any person acting in a public office on behalf of the government or any governmental agency; (c) any manager or employee of a
company or enterprise owned by the government in whole or in part; (d) any official or employee of a public international organization, such as
the World Bank or the United Nations; (e) any official or officer of a political party or any person acting in a public office on behalf of a political
party; and/or (f) any candidate for a public office; and when acting as an official or official decision-maker, these government officials have the
responsibility of carrying out supervision, government authorization or permission, or have the decision-making ability that may affect the
business of I-MAB under other circumstances.
19
14.5
14.6
14.7
14.8
The Partner declares that it has not been convicted or pleaded guilty of a criminal offense, including a criminal offense involving fraud or
corruption, other than in which it was disclosed in writing to I-MAB prior to the signing of this Agreement; to the best of its knowledge, it is
not the subject of any governmental investigation into such crime; and it is not currently listed by any government agency as prohibiting or
suspending participation in government projects, is proposed to suspend or prohibit participation in government projects, or has no right to
participate in government projects for other reasons.
The Partner declares and warrants that, except for the situation that it disclosed to I-MAB in writing before the signing of this Agreement:
(1) it does not have any interests that directly or indirectly conflict with its appropriate and moral performance of this Agreement; and (2) during
the performance of this contract, it shall maintain a fair-trading relationship with all third parties which deals with or on the behalf of the
I-MAB.
The I-MAB shall have the right to investigate and audit the activities of the Partner under this Agreement during the term of this Agreement
to monitor compliance with the provisions of this Agreement. The Partner shall cooperate fully with such investigations and audits, and the
I-MAB shall have the right to make exclusive and reasonable judgment as to its scope, method, nature, and duration.
The Partner shall ensure that all material aspects of all transactions under this Agreement have been correctly and accurately recorded in its
books and records, and that the documents on which such books and records are complete and accurate in all material respects. The Partner
must maintain a reasonably designed internal accounting control system to ensure that it does not have out-of-book accounts.
14.9
The Partner agrees that, if I-MAB deems that there may be a possible breach of the terms of this Agreement, I-MAB may fully disclose such
views and relevant information to any governmental authority and authority at any time and for any reason.
14.10 If the Partner fails to perform their obligations under this Article, I-MAB shall have the right to promptly terminate this Agreement by giving a
written notice to the Partner, and the Partner shall not be entitled to request compensation from I-MAB for any loss of any nature arising out of
termination of this Agreement under this Article. If (and only to the extent) any such indemnification based on termination of this Agreement is
provided to the suppliers by the applicable laws in the target territory, the Partner hereby expressly agrees to waive (if permitted by applicable
laws in this territory) or to reimburse I-MAB any such indemnity or compensation.
15
Governing Law and Jurisdiction
15.1 This Agreement shall be governed by and construed in accordance with the laws of the People’s Republic of China.
15.2 Disputes arising out of or in connection with this Agreement shall be settled through friendly consultation between the parties. If agreement
cannot be reached through consultation, the dispute shall be submitted to the Shanghai International Arbitration Center for arbitration in
Shanghai in accordance with the arbitration rules in force at the time of the application for arbitration by the Shanghai International Arbitration
Center. The arbitral tribunal shall consist of three arbitrators: one shall be appointed by the claimant, one shall be appointed by the respondent,
and the third shall be appointed by the Shanghai International Arbitration Center and serve as the chairman of the arbitration tribunal. The
language of arbitration shall be Chinese. The arbitration award shall be final and binding on the parties.
20
16
Miscellaneous
16.1 Transfer by the Partner. The Partner agrees that they shall not transfer all or any part of this Agreement without the prior written consent of
I-MAB.
16.2
I-MAB Transfer. The I-MAB may notify the Partner in writing to transfer its rights and obligations under this Agreement to any of its
affiliates or successors of whole or any part of the product-related business at any time, and I-MAB shall ensure that the rights and obligations
of the Partner under this Agreement are not affected.
16.3 No Waiver. The failure of either party to exercise any of the provisions or rights of this Agreement at any time, or the option provided herein,
shall not be deemed to be a waiver of any provision, right or option hereof, nor shall affect the validity of this Agreement.
16.4
Integrity of the Agreement. This Agreement constitutes the entire agreement between the parties regarding the subject matter of this
Agreement and supersedes all previous relevant agreements, consultations, and commitments. Any modifications to this Agreement shall be in
writing and shall be confirmed by the seal of both parties. If in the opinion of any court or authority, in whole or in part, any provision of this
Agreement is invalid or unenforceable, the remaining provisions and, where appropriate, the remainder of such affected provision shall remain
in force.
16.5 Notices. Any notice required under this Agreement shall be deemed to have been duly issued if it is delivered to the registered address of the
parties stated at the beginning of this Agreement or at any other mailing address to which the recipient notifies the sender in advance in writing.
16.6 No Partnership or Agency. Nothing in this Agreement shall create any joint venture, partnership, joint venture, or agency relationship between
the parties. The parties to this Agreement are recognized as independent contractors. No party may bind the other party or its representative in
any way, nor shall it declare to any third party that it has such authority, nor can either party enter into any agreement, make any declaration,
provide any warranty, or incur any debt on behalf of the other party.
16.7
Promotion/Use of Names. Neither party may disclose the contents of this Agreement without the prior express written consent of the other
party. If one party requests disclosure in writing, the other party shall give reasonable support. Neither party shall use the name, trademark, firm
or logo of the other party or its affiliates in any publicity, promotional, press release or disclosure with respect to the subject matter of this
Agreement, except where such information is required by applicable laws, without the prior express written consent of the other party.
Notwithstanding the foregoing, the parties agree that it is necessary to publish and publicly disclose in due course the results and information
concerning activities under this Agreement. Accordingly, one party may, subject to breach of its confidentiality obligations hereunder, make its
own decision to publicly disclose the results and information of its activities under this Agreement in accordance with applicable laws and
industry practice by giving a written notice to the other party five business days in advance. If the other party objects to the content of the
notice upon receipt of such written notice, the party proposing to issue the notice shall fully respect and reasonably consider such opinion.
21
16.8 Modification. Modifications, amendments, corrections, or supplements to this Agreement may only be made by signing a written document
clearly stating such purpose by the parties.
[Signature page follows]
22
For and on behalf of
For and on behalf of
I-MAB Biopharma Hong Kong Limited
Jumpcan Pharmaceutical Group Co., Ltd.
/s/ Authorized Signatory
/seal/ Jumpcan Pharmaceutical Group Co., Ltd.
/s/ Authorized Signatory
For and on behalf of
For and on behalf of
I-MAB Biopharma Co., Ltd.
Jiangsu Jiyuan Medicine Co., Ltd.
/seal/ I-MAB Biopharma Co., Ltd.
/s/ Authorized Signatory
/seal/ Jiangsu Jiyuan Medicine Co., Ltd.
/s/ Authorized Signatory
Attachment 1.1.12 Ongoing Phase III Clinical Trial
[Redacted]
Attachment 1.1.35 I-MAB Trademark
[Redacted]
Attachment 1.1.39 I-MAB Patents and I-MAB Know-hows
[Redacted]
List of Principal Subsidiaries of I-MAB
EXHIBIT 8.1
Name of Subsidiary
I-Mab Biopharma Hong Kong Limited
I-Mab Biopharma US Ltd.
I-Mab Bio-tech (Tianjin) Co., Ltd.
I-Mab Biopharma Co., Ltd.
Chengdu Tasgen Bio-tech Co., Ltd.
Shanghai Tianyunjian Bio-tech Co., Ltd.
Zhejiang Tianli Pharmaceutical Sales Co., Ltd.
I-Mab Pharmaceutical (Shanghai) Co., Ltd.
Thirdventure Beijing Bio-tech Co., Ltd.
Place of Incorporation
Hong Kong
United States
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 12.1
I, Jingwu Zhang Zang, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 20-F of I-Mab (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)
(b)
(c)
(d)
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;
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;
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
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;
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)
(b)
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
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 29, 2022
/s/ Jingwu Zhang Zang
By:
Name: Jingwu Zhang Zang
Title:
Director and Acting Chief Executive Officer
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EXHIBIT 12.2
I, John Long, certify that:
1.
2.
3.
4.
I have reviewed this annual report on Form 20-F of I-Mab (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)
(b)
(c)
(d)
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;
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;
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
Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the period covered by
this 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)
(b)
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
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 29, 2022
/s/ John Long
By:
Name: John Long
Title:
Director and Chief Financial Officer
EXHIBIT 13.1
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of I-Mab (the “Company”) on Form 20-F for the year ended December 31, 2021 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, Jingwu Zhang Zang, Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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 29, 2022
/s/ Jingwu Zhang Zang
By:
Name: Jingwu Zhang Zang
Title:
Director and Acting Chief Executive Officer
EXHIBIT 13.2
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report of I-Mab (the “Company”) on Form 20-F for the year ended December 31, 2021 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), I, John Long, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; 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 29, 2022
/s/ John Long
By:
Name: John Long
Title:
Director and Chief Financial Officer
EXHIBIT 15.1
April 29, 2022
I-Mab
55th – 56th Floor, New Bund Center
555 West Haiyang Road
Pudong District, Shanghai
People’s Republic of China
Dear Sir/Madam:
We hereby consent to the reference of our name under the headings “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in
China” and “Item 10. Additional Information—E. Taxation—PRC Taxation” in I-Mab’s Annual Report on Form 20-F for the year ended December 31,
2021 (the “Annual Report”), which will be filed with the Securities and Exchange Commission (the “SEC”) on the date hereof, and further consent to
the incorporation by reference into the Registration Statements on Form S-8 (No. 333-239871 and No. 333-256603) and Form F-3 (No.
333-252793) of I-Mab of the summary of our opinions under the headings “Item 3.D. Key Information—Risk Factors—Risks Related to Doing
Business in China” and “Item 10. Additional Information—E. Taxation—PRC Taxation” in the Annual Report. We also consent to the filing of this
consent letter with the SEC as an exhibit to the Annual Report.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities
Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.
Very truly yours,
/s/ JunHe LLP
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-239871 and No. 333-256603) and
Form F-3 (No. 333-252793) of I-Mab of our report dated April 29, 2022 relating to the financial statements and the effectiveness of internal control over
financial reporting, which appears in this Form 20-F.
EXHIBIT 15.2
/s/ PricewaterhouseCoopers Zhong Tian LLP
Shanghai, the People’s Republic of China
April 29, 2022
EXHIBIT 15.3
April 29, 2022
I-Mab 天境生物
55th – 56th Floor, New Bund Center
555 West Haiyang Road
Pudong District, Shanghai
People’s Republic of China
Dear Sir/Madam:
I-MAB 天境生物 (the Company)
We are attorneys-at-law qualified to practice in the Cayman Islands and have acted as Cayman Islands legal advisers to the Company in connection with
the filing by the Company with the United States Securities and Exchange Commission (the SEC) of an annual report on Form 20-F for the year ended
31 December 2021 (the Form 20-F).
We hereby consent to the reference of our name under the heading “Item 5. Operating and Financial Review and Prospects –Taxation – Cayman Islands”
and “Item 10. Additional Information—E. Taxation—Cayman Islands” in the Form 20-F and further consent to the incorporation by reference of the
summary of our opinion under those headings into the Company’s Registration Statements on Form S-8 (No. 333-239871 and No. 333-256603) and
Form F-3 (No. 333-252793).
We consent to the filing with the SEC of this consent letter as an exhibit to the Form 20-F. In giving such consent, we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in
each case, as amended, or the regulations promulgated thereunder.
Yours faithfully
/s/ Harney Westwood & Riegels
Harney Westwood & Riegels