LANSEN PHARMACEUTICAL HOLDINGS LIMITED Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.
LANSEN PHARMACEUTICAL HOLDINGS LIMITED
朗生醫藥控股有限公司
(incorporated in the Cayman Islands with limited liability)
(Stock code: 503)
CONTINUING CONNECTED TRANSACTIONS UNDER
THE RENEWED ENTRUSTED MANUFACTURING FRAMEWORK AGREEMENT
Reference is made to the announcement of the Company dated 3 September 2013 in relation to the continuing connected transactions under the Existing Entrusted Manufacturing Framework
Agreement (委托生產框架協議) entered into between Liwah Zhiti, a wholly-owned subsidiary
of the Company, and Yangling Haotian and Xian Haotian, pursuant to which Liwah Zhiti agreed
to buy and the Suppliers agreed to produce and sell the Plant Extract Products to Liwah Zhiti.
The Existing Entrusted Manufacturing Framework Agreement will expire on 31 December 2014. On 17 December 2014, Liwah Zhiti and the Suppliers entered into the Renewed Entrusted Manufacturing Framework Agreement for a further term of three years from 1 January 2015 to 31
December 2017 (subject to any early termination or extension which may be agreed by the
Parties) to renew the supply arrangements.
The 2015 Annual Cap, the 2016 Annual Cap and the 2017 Annual Cap under the Renewed Entrusted Manufacturing Framework Agreement will not exceed RMB 29 million (approximately US$4.7 million or HK$36.3 million), RMB 29 million (approximately US$4.7 million or HK$36.3 million) and RMB 29 million (approximately US$4.7 million or HK$36.3 million) respectively.
CIH, which owns 50.56% interest in the Company, has a 100% indirect interest in each of Yangling Haotian and Xian Haotian. Accordingly, Yangling Haotian and Xian Haotian and their respective subsidiaries are associates of CIH and are connected persons of the Company. The transactions contemplated under the Renewed Entrusted Manufacturing Framework Agreement therefore constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.
Since the highest applicable percentage ratio calculated with reference to the highest Annual Cap is more than 0.1% but less than 5%, the Renewed Entrusted Manufacturing Framework Agreement is subject to the reporting, announcement and annual review requirements, but is exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.
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A. INTRODUCTION
Reference is made to the announcement of the Company dated 3 September 2013 in relation to the continuing connected transactions under the Existing Entrusted Manufacturing Framework Agreement entered into between Liwah Zhiti, a wholly-owned subsidiary of the Company, and Yangling Haotian and Xian Haotian, pursuant to which Liwah Zhiti agreed to buy and the Suppliers agreed to produce and sell the Plant Extract Products to Liwah Zhiti.
The Existing Entrusted Manufacturing Framework Agreement will expire on 31 December 2014. The aggregate transaction amount completed under the Existing Entrusted Manufacturing Framework Agreement was approximately RMB6.2 million (approximately US$1.0 million).
On 17 December 2014, Liwah Zhiti and the Suppliers entered into the Renewed Entrusted
Manufacturing Framework Agreement for a further term of three years from 1 January 2015 to 31
December 2017 (subject to any early termination or extension which may be agreed by the Parties)
to renew the supply arrangements.
B. RENEWED ENTRUSTED MANUFACTURING FRAMEWORK AGREEMENT
The terms of the Renewed Entrusted Manufacturing Framework Agreement have been arrived at after arm's length negotiations between the Parties and the principal terms of which are set out below.
Date
17 December 2014
Parties
(a) Liwah Zhiti, a wholly-owned subsidiary of the Company;
(b) Yangling Haotian, an indirect wholly-owned subsidiary of CIH; and
(c) Xian Haotian, an indirect wholly-owned subsidiary of CIH.
Transaction Nature
Pursuant to the Renewed Entrusted Manufacturing Framework Agreement, Liwah Zhiti may, during the Term, acquire from the Suppliers, the Plant Extract Products on an order-by-order basis. There is no minimum purchase amount under the Renewed Entrusted Manufacturing Framework Agreement and Liwah Zhiti has no obligation to acquire the Plant Extract Products from the Suppliers nor are the Suppliers required to provide such products to Liwah Zhiti.
Pricing basis
The pricing basis of the supply of the Plant Extract Products under the Renewed Entrusted Manufacturing Framework Agreement will remain the same as that under the Existing Entrusted Manufacturing Framework Agreement. The selling price per unit of the Plant Extract Products will be determined with reference to the prices of comparable products in the market on an order- by-order basis. Liwah Zhiti will follow its standard purchasing procedures with independent third party suppliers in negotiating and determining the purchase price of the Plant Extract Products with the Suppliers. This will involve obtaining fee quotations from independent third party suppliers in the market from time to time and comparing them with those from the Suppliers. The supply of the Plant Extract Products by the Suppliers will be on normal
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commercial terms and terms (including prices) which are not less favourable to Liwah Zhiti than those available to Liwah Zhiti from independent third parties supplying comparable products.
Purchase Orders
Liwah Zhiti will enter into, from time to time and as necessary, separate purchase orders for each specific transaction contemplated under the Renewed Entrusted Manufacturing Framework Agreement during the Term with the Suppliers. Each purchase order will set out the specific products, price, quantities, technical information and other relevant specifications.
It is expected that Liwah Zhiti will pay the consideration for the orders under the Renewed
Entrusted Manufacturing Framework Agreement from internal resources.
As the purchase orders are for the order of products contemplated by the Parties under the Renewed Entrusted Manufacturing Framework Agreement, the transactions under the purchase orders do not constitute new categories of connected transactions for the Company. Any such purchase order will be within the ambit of the Renewed Entrusted Manufacturing Framework Agreement including the Annual Caps.
Term
The Renewed Entrusted Manufacturing Framework Agreement will commence on 1 January
2015 and will expire on 31 December 2017 (subject to any extension which may be agreed by the
Parties), unless terminated by either Party giving the other written notice of termination at least one month prior to the effective date of such termination.
C. ANNUAL CAPS FOR THE RENEWED ENTRUSTED MANUFACTURING FRAMEWORK AGREEMENT
In accordance with Rule 14A.53 of the Listing Rules, the Group has capped the value of its annual transactions contemplated under the Renewed Entrusted Manufacturing Framework Agreement with the Suppliers, as set out below:-
Year ending 31 December 2015 | Year ending 31 December 2016 | Year ending 31 December 2017 |
RMB29 million (approximately US$4.7 million or HK$36.3 million) | RMB29 million (approximately US$4.7 million or HK$36.3 million) | RMB29 million (approximately US$4.7 million or HK$36.3 million) |
The Annual Caps were arrived at after taking into account the following:-
(a) the projected business volume of Liwah Zhiti in the sale of key ingredients for healthcare products during the Term;
(b) the historical business volume of Liwah Zhiti in the sale of key ingredients for healthcare products in 2013, which was approximately RMB179.4 million (approximately US$28.7 million or HK$224 million); and
(c) the Suppliers' production capacity of the Plant Extract Products during the Term.
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D. REASONS FOR AND BENEFITS OF THE RENEWED ENTRUSTED MANUFACTURING FRAMEWORK AGREEMENT
The Group believes that there is great potential for growth of the health supplement business globally as a result of an increasing awareness of and concern on personal health among the general population and the Group is keen to explore ways to capture the opportunities in such business sector.
In view of the fast growing health supplement markets, Liwah Zhiti has transformed its plant extract business from one relying on an outsourcing service for semi-finished Chinese medicine products to a provider of major ingredients for pharmaceutical-graded healthcare products.
Liwah Zhiti's strategy in the development of its health supplement business is to expand its key ingredient product to cover its new products as well as to increase its market share of the existing products. Liwah Zhiti will establish business relationship with suppliers which supply reliable plant extract products of good quality.
The Suppliers have the expertise, experience and resources, and have established a strong presence of plant extract product development and production in the PRC. In the last quarter of
2014, the Suppliers have completed the upgrading of their multi-purpose facilities to further expand their plant extraction capacity. Liwah Zhiti has inspected the Suppliers' facilities, which
met with Liwah Zhiti's requirements as reliable, quality and stable suppliers.
The Renewed Entrusted Manufacturing Framework Agreement will enable the Group to have access to a reliable supply of good quality plant extracts at a competitive price. The Board considers it beneficial for the Group to enter into the Renewed Entrusted Manufacturing Framework Agreement and that the transactions contemplated thereunder are in line with the Group's business directions set out above.
The Directors (including the independent non-executive Directors) are of the view that the Renewed Entrusted Manufacturing Framework Agreement has been entered into in the ordinary and usual course of business of the Group and is on normal commercial terms, and the terms thereof are fair and reasonable and in the interests of the Company and the Shareholders as a whole.
E. IMPLICATIONS UNDER THE LISTING RULES
Liwah Zhiti is a wholly-owned subsidiary of the Company, while CIH, which owns 50.56% interest in the Company, has a 100% indirect interest in each of Yangling Haotian and Xian Haotian. Accordingly, Yangling Haotian and Xian Haotian and their respective subsidiaries are associates of CIH and are connected persons of the Company. The transactions contemplated under the Renewed Entrusted Manufacturing Framework Agreement therefore constitute continuing connected transactions for the Company under Chapter 14A of the Listing Rules.
Since the highest applicable percentage ratio calculated with reference to the highest Annual Cap is more than 0.1% but less than 5%, the Renewed Entrusted Manufacturing Framework Agreement is subject to the reporting, announcement and annual review requirements, but is exempt from the independent Shareholders' approval requirement under Chapter 14A of the Listing Rules.
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As Ms. Yip Pui Ling, Rebecca and Ms. Tao Fang Fang are common directors of the Company, Yangling Haotian and Xian Haotian, and Mr. Tang Jun is a common director of the Company and Xian Haotian, they are all considered to have material interests in the transactions contemplated under the Renewed Entrusted Manufacturing Framework Agreement and have therefore abstained from voting on the Board resolutions to approve, among other things, the Renewed Entrusted Manufacturing Framework Agreement. Other than Ms. Yip, Ms. Tao and Mr. Tang, none of the other Directors had abstained from voting on the Board resolutions to approve the said agreement.
F. INFORMATION RELATING TO YANGLING HAOTIAN, XIAN HAOTIAN, LIWAH ZHITI AND THE GROUP
Yangling Haotian and Xian Haotian are both companies established under the laws of the PRC and are primarily engaged in the production and sale of plant extracts as ingredients for healthcare products.
The Group is principally engaged in the manufacturing and trading of pharmaceutical products. Liwah Zhiti, a wholly-owned subsidiary of the Company, is a company established under the laws of the PRC and is principally engaged in the production and sale of plant extracts and other key ingredients for Chinese herbal medicine and healthcare products, and represents the Group's business other than its core rheumatic drugs business.
G. DEFINITIONS
In this announcement, unless the context otherwise requires, the following terms shall have the following meanings:-
"2015 Annual Cap" the estimated maximum aggregate annual value of the transactions under the Renewed Entrusted Manufacturing Framework Agreement for the financial year of the Company ending 31 December 2015
"2016 Annual Cap" the estimated maximum aggregate annual value of the transactions under the Renewed Entrusted Manufacturing Framework Agreement for the financial year of the Company ending 31 December 2016
"2017 Annual Cap" the estimated maximum aggregate annual value of the transactions under the Renewed Entrusted Manufacturing Framework Agreement for the financial year of the Company ending 31 December 2017
"Annual Caps" collectively, the 2015 Annual Cap, the 2016 Annual Cap and the 2017 Annual Cap
"associate(s)" has the meaning given to it under the Listing Rules
"Board" the board of Directors
"CIH" Cathay International Holdings Limited, a company incorporated in Bermuda and whose shares are listed on the London Stock Exchange Group plc., and owns 50.56% in the
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Company
"Company" Lansen Pharmaceutical Holdings Limited, an exempted company incorporated in the Cayman Islands with limited liability whose shares are listed and traded on the Main Board of the Stock Exchange
"connected person(s)" has the meaning given to it under the Listing Rules
"continuing connected transactions"
has the meaning given to it under the Listing Rules
"Directors" the directors of the Company
"Existing Entrusted Manufacturing Framework Agreement"
the existing entrusted manufacturing framework agreement
( 委托生產框架協議) entered into between Liwah Zhiti,
Yangling Haotian and Xian Haotian on 3 September 2013 in
relation to the supply of the Plant Extract Products
"Group" the Company and its subsidiaries from time to time
"HK$" Hong Kong dollars, the lawful currency of Hong Kong
"Listing Rules" The Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited
"Liwah Zhiti" Ningbo Liwah Plant Extraction Technology Limited (寧波立 華植物提取技術有限公司), a company established under
the law of the PRC and a wholly-owned subsidiary of the
Company
"Parties" collectively, Liwah Zhiti, Yangling Haotian and Xian
Haotian
"percentage ratios" the percentage ratios under Rule 14.07 of the Listing Rules
"Plant Extract Products" herbal healthcare products containing plant extract components to be produced and supplied by the Suppliers to Liwah Zhiti, by using raw materials either provided by Liwah Zhiti or sourced directly by the Suppliers, as contemplated under the Renewed Entrusted Manufacturing Framework Agreement
"PRC" The People's Republic of China
"Renewed Entrusted Manufacturing Framework Agreement"
the renewed entrusted manufacturing framework agreement
( 委托生產框架協議) entered into between Liwah Zhiti,
Yangling Haotian and Xian Haotian on 17 December 2014 in
relation to the supply of the Plant Extract Products
"RMB" Renminbi, the lawful currency of the PRC
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"Shareholder(s)" holder(s) of the shares of the Company
"Suppliers" collectively, Yangling Haotian and Xian Haotian
"Term" the term for the supply and purchase of the Plant Extract Products under the Renewed Entrusted Manufacturing Framework Agreement, which commences on 1 January
2015 and ends on the earlier of (i) the date of termination of
the Renewed Entrusted Manufacturing Framework Agreement; and (ii) 31 December 2017 (subject to any extension which may be agreed by the Parties)
"US$" United States dollars, the lawful currency of the United
States of America
"Xian Haotian" Xian Haotian Bio-engineering Technology Co. Limited (西 安 皓 天 生 物 工 程 技 術 有 限 責 任 公 司 ), a company
established under the law of the PRC and an indirect wholly- owned subsidiary of CIH as well as a 74%-owned subsidiary of Yangling Haotian
"Yangling Haotian" Yangling Haotian Biotechnology Co. Limited (楊凌皓天生 物技術有限公司), a company established under the law of
the PRC and an indirect wholly-owned subsidiary of CIH
"%" per cent.
By order of the Board
Lansen Pharmaceutical Holdings Limited
Stephen Burnau Hunt
Chairman
Hong Kong, 18 December 2014
As at the date of this announcement, the executive Director is Mr. Liu Bang Min; the non- executive Directors are Mr. Stephen Burnau Hunt, Mr. Lee Jin Yi, Ms. Yip Pui Ling, Rebecca, Mr. Tang Jun and Ms. Tao Fang Fang; the independent non-executive Directors are Mr. Chan Kee Huen, Michael, Mr. Tang Chiu Ping, Raymond and Mr. Fritz Heinrich Horlacher.
For the purpose of this announcement, unless otherwise defined, conversions of RMB into HK$ are based on the approximate exchange rate of RMB1 = HK$1.25 and conversions of RMB into US$ are based on the approximate exchange rate of RMB1 = US$0.16. The exchange rates are set out for the purpose of illustration only. No representation is made that any amount in HK$ and RMB could have been or could be converted at the above rates or at any other rates.
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