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)
SUPPLEMENTAL ANNOUNCEMENT IN RELATION TO THE CONTINUING CONNECTED TRANSACTIONS UNDER
THE RENEWED ENTRUSTED MANUFACTURING FRAMEWORK AGREEMENT
Reference is made to (i) 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 the Suppliers and (ii) the announcement of the Company dated 18 December 2014 (the "Announcement") in relation to the entering into of the Renewed Entrusted Manufacturing Framework Agreement to renew the supply arrangements under the Existing Entrusted Manufacturing Framework Agreement. Unless otherwise defined, capitalised terms used in this announcement shall have the same meanings as those defined in the Announcement.
The Company would like to provide more information on the basis for determining the pricing policies under the Renewed Entrusted Manufacturing Framework Agreement and the Annual Caps.
Pricing basis under the Renewed Entrusted Manufacturing Framework Agreement
As mentioned in the Announcement, the selling price per unit of the Plant Extract Products will be determined with reference to the prevailing market prices of comparable products on an order- by-order basis. These market prices are not a fixed price but are in a range of prices and are for comparable products. Liwah Zhiti will obtain price quotations from at least three independent third party suppliers in the market to determine the selling prices of the Plant Extract Products. If Liwah Zhiti fails to obtain the minimum number of price quotations, for example, where there are only very few suppliers in the market for certain kinds of Plant Extract Products, it will obtain price quotations from at least one independent third party suppliers in the market to determine the selling prices of the Plant Extract Products. Liwah Zhiti will not proceed to agree the selling prices without obtaining any price quotation from independent third party supplier(s). The final selling prices of the Plant Extract Products are subject to the mutual agreement by the management of the Parties after arm's length negotiation.
Apart from following the above internal control procedures to determine the selling prices of the Plant Extract Products, Liwah Zhiti has also adopted its procurement policies applicable to supplies from independent third parties as well as the Suppliers, to ensure that the supply of the Plant Extract Products by the Suppliers will be on normal commercial terms (including prices, product specification and quality, delivery time, etc.).
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Annual Caps
In addition to the factors for determining the Annual Caps as disclosed in the Announcement, the Board believes that the projected business volume of Liwah Zhiti in the sale of key ingredients for healthcare products during the Term will increase in light of the fast growing health supplement markets. Liwah Zhiti therefore plans to increase its health supplement business volume to cover its new products as well as to increase its market share of the existing products.
To achieve this goal, Liwah Zhiti requires additional production capacity from other suppliers and plans to establish long term business relationship with suppliers which supply reliable plant extract products of good quality. The Suppliers have upgraded their multi-purpose facilities to further expand their production capacity in the last quarter of 2014. After negotiation with the Suppliers and having taken into consideration the capacity that the Suppliers will need for themselves, the production capacity available to Liwah Zhiti is agreed to be no more than RMB29 million (approximately US$4.7 million or HK$36.3 million) for each year during the Term.
By order of the Board
Lansen Pharmaceutical Holdings Limited
Stephen Burnau Hunt
Chairman
Hong Kong, 31 December 2014
As at the date of this announcement, the executive Director is Mr. Liu Bang Min; the non- executive Directors are Mr. Stephen Burnau Hunt, Mr. Lee Jin Yi, Ms. Yip Pui Ling, Rebecca, Mr. Tang Jun and Ms. Tao Fang Fang; the independent non-executive Directors are Mr. Chan Kee Huen, Michael, Mr. Tang Chiu Ping, Raymond and Mr. Fritz Heinrich Horlacher.
For the purpose of this announcement, conversions of RMB into HK$ 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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