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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_________________
FORM 10-K
_________________
(Mark One)
xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number: 001-40947
_________________
LianBio
(Exact Name of Registrant as Specified in its Charter)
_________________
Cayman Islands98-1594670
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
103 Carnegie Center Drive, Suite 309
Princeton, NJ
08540
(Address of principal executive offices)(Zip Code)
Registrant’s telephone number, including area code: (609) 486-2308
_________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
American depositary shares, each representing 1 ordinary share, $0.000017100448 par value per shareLIANThe Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes o No x
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 x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§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 x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
x
Smaller reporting company
x
Emerging growth company
x
If an emerging growth company, 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. x

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 accounting firm that prepared or issued its audit report.

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements
of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).                                 ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of June 30, 2022, the last business day of the registrant’s most recent completed second fiscal quarter, the aggregate market value of the ordinary shares, including in the form of American Depositary Shares (“ADSs”), each representing one ordinary share, held by non-affiliates of the registrant was approximately $97.3 million, based upon the closing price of the registrant’s ADSs on the Nasdaq Global Market of $2.16 as of such date. In determining the market value of the voting equity held by non-affiliates, ordinary shares of the registrant beneficially owned by each director and officer and each person who owns 10% or more of the registrant’s outstanding ordinary shares have been excluded. This determination of affiliate status is not necessarily a conclusive determination for other purposes.
As of March 23, 2023, 107,161,871 ordinary shares of the registrant, par value $0.000017100448 per share, were outstanding, of which 41,306,477 ordinary shares were held in the form of ADSs. This total number of ordinary shares and total number of ordinary shares held in the form of ADSs excludes 2,057,148 ordinary shares that are held by the depositary on reserve to satisfy obligations of the registrant under the registrant's equity plans.

DOCUMENTS INCORPORATED BY REFERENCE
The registrant intends to file a definitive proxy statement pursuant to Regulation 14A for its 2023 Annual Meeting of Shareholders scheduled to be held on June 21, 2023. Portions of such definitive proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein.



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ITEM 1A.
ITEM 9C.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, about us and our industry that involve substantial risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. All statements other than statements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, future financial position, prospects, plans, objectives of management and expected growth, are forward-looking statements. These statements are based on our current beliefs, expectations and assumptions regarding our intentions, beliefs or current expectations concerning, among other things, the future of our business, future plans and strategies, our operational results and other future conditions. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Forward-looking statements can be identified by words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “seek,” “target,” “will,” “would,” “could,” “should,” “continue,” “contemplate” and other similar expressions, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:
our ability to successfully develop, gain regulatory approval for and launch commercial products in Greater China and other Asian markets;
our ability to deliver innovative therapeutic solutions to patients and become a leading biopharmaceutical company in Greater China, including Mainland China, Hong Kong, Taiwan and Macau, and other Asian markets;
our plans and ability to leverage data generated in our partners’ global registrational trials and clinical development programs to obtain regulatory approval for and bring our current product candidates to market in our licensed territories, and our plans to maximize patient reach for each of our product candidates;
our partners’ announced plans and expectations with respect to the success, cost and timing of their product development activities, preclinical studies and clinical trials, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work, the timing of expected review from regulatory authorities and the period during which the results of the trials are expected to become available;
our ability to expand our pipeline through the continued strategic in-licensing of innovative and complementary product candidates with the potential to become the new standard of care in Greater China and other Asian markets;
our ability to successfully establish an international infrastructure, including by building a focused salesforce in China and leveraging the commercial infrastructure we create to benefit our other assets;
our ability to establish and maintain relationships and collaborations with investors and our current and any future licensing partners that will contribute to our success in sourcing value and creating partnerships to enable us to build out a broad and clinically validated pipeline;
our ability to design, initiate and complete any clinical trials to advance our current product candidates, including mavacamten, TP-03, NBTXR3, infigratinib, BBP-398, LYR-210, omilancor and NX-13, as well as any future product candidates, towards regulatory approval in China and our other licensed territories;
our ability to conduct, and the timing of and costs related to, our product development activities, including any preclinical studies and related clinical trials in Greater China and other Asian markets of our current and any future product candidates, and our ability to obtain, and the timing of and costs related to, potential regulatory approval of such product candidates in Greater China and other Asian markets;
our plans to pursue the development of certain product candidates for additional treatment indications;
our ability to successfully utilize the data we may generate from any clinical trials we conduct in Greater China or other territories, including in conjunction with data from clinical trials conducted by our partners, to seek regulatory approval in Greater China and other Asian markets;
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our plans and ability to join our current and future partners’ clinical and registrational trials and our plans and ability to initiate and complete our standalone clinical and registrational trials;
our ability to design and implement the development strategies for our product candidates in each of our licensed territories and, where applicable, our ability to design and implement global development strategies for our product candidates in new indications in connection with our local development strategies;
the potential for certain of our current and future product candidates to have more benign safety profiles or result in differentiated safety profiles than currently available therapeutic options;
the size, composition and growth potential of the patient populations and markets we intend to target with our product candidates and our ability to develop and commercialize product candidates to address those patient populations and markets;
our ability to successfully procure from our partners or other third parties, as applicable, sufficient supply of our product candidates for any preclinical studies, clinical trials or commercial use, if approved;
our ability to obtain funding for our operations, including funding necessary to complete further development and commercialization of our product candidates and our general and administrative expenses;
the rate and degree of market acceptance of our product candidates;
our ability to attract and retain key scientific or management personnel;
the impact of laws and regulations and of any legal and regulatory developments in our licensed territories or internationally;
our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;
our ability to license intellectual property relating to our product candidates and to comply with our existing license and collaboration agreements;
our reliance on third parties to conduct product development, manufacturing and other services, and any agreements we have or into which we may enter with such parties in connection with the commercialization of our product candidates and any other approved product;
our expectations regarding the time during which we will be an emerging growth company or smaller reporting company;
the direct and indirect impact of the COVID-19 pandemic on our business, operations (including clinical trials) and the markets and communities in which we and our partners, collaborators and vendors operate;
our estimates of our expenses, capital requirements and needs for additional financing; and
other risks and uncertainties, including those listed in “Part I—Item 1A—Risk Factors” of this Annual Report on Form 10-K.
Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution investors that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this Annual Report on Form 10-K. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Annual Report on Form 10-K, those results or developments may not be indicative of results or developments in subsequent periods.
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Given these risks and uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statement that we make in this Annual Report on Form 10-K speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statements or to publicly announce the results of any revisions to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data. Investors should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Annual Report on Form 10-K.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Annual Report on Form 10-K, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Unless the context requires otherwise, references in this report to the “Company,” “LianBio,” “we,” “us” and “our” refer to LianBio and its consolidated subsidiaries.
Risk factors summary
Our business is subject to a number of risks that are discussed more fully in “Part I—Item 1A—Risk Factors” of this Annual Report on Form 10-K. These risks include the following:
Changes in the economic, political, legal and social conditions and policies of the Chinese government or in relations between China and the United States (or other countries) may materially and adversely affect our business, financial condition, results of operations, access to capital, and the market price of our American Depositary Shares (“ADSs”). Statements and regulatory actions undertaken by China’s government, including the enactment of the Data Security Law of the People’s Republic of China (the “Data Security Law”), as well as our obligations to comply with China’s Cybersecurity Review Measures, regulations and guidelines relating to the multi-level protection scheme (“MLPS”), the Personal Information Protection Law of the People’s Republic of China (the “PIPL”) and any other future laws and regulations may require us to incur significant expenses and could materially affect our ability to conduct our business, accept foreign investments, list on a foreign exchange or stay listed on Nasdaq. For additional information regarding the risks associated with having the majority of our operations in China, see “Part I—Item 1A—Risk Factors—Risks Related to Doing Business in China and Our International Operations.”
China’s economic, political and social conditions, as well as governmental policies, could affect the business environment and financial markets in China, our ability to operate our business, our liquidity and our access to capital.
Although the audit report included in this Annual Report on Form 10-K is prepared by U.S. auditors who are currently inspected by the Public Company Accounting Oversight Board (the “PCAOB”), there is no guarantee that future audit reports will be prepared by auditors that are completely inspected by the PCAOB and, as such, our investors may in the future be deprived of such inspections, which could result in limitations or restrictions to our ability to access the U.S. capital markets. Furthermore, trading in our securities may be prohibited under the Holding Foreign Companies Accountable Act (the “HFCA Act”) or the Consolidated Appropriations Act, 2023 (the “CAA”) if the SEC subsequently determines our audit work is performed by auditors that the PCAOB is unable to inspect or investigate completely or the SEC identifies us as a Commission-Identified Issuer (as defined below), and as a result, U.S. national securities exchanges, such as the Nasdaq, may determine to delist our securities.
Proceedings brought by the SEC against China-based accounting firms could result in our inability to file future financial statements in compliance with the requirements of the Exchange Act.
The Chinese government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of our ADSs, and the Chinese government has indicated an intent to increase the government’s oversight and control over offerings conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer ADSs to our investors, and could cause the value of our ADSs to significantly decline or become worthless. Due to our extensive operations in China, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising or other activities by companies with extensive operations in China could adversely affect our business, results of operations and the market price of our ADSs.
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As of the date of this Annual Report on Form 10-K, we are not required to obtain prior approval or prior permission from the CSRC or any other Chinese regulatory authority under the Chinese laws and regulations currently in effect for offerings of our equity securities to foreign investors. On February 17, 2023, the CSRC promulgated a new set of regulations consisting of the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies (the “Trial Measures”) and five supporting guidelines which will come into effect on March 31, 2023 to regulate overseas securities offering and listing activities by domestic companies either in direct or indirect form. According to the Trial Measures, we may be required to submit filings to the CSRC in connection with future offerings of our equity securities to foreign investors. However, there remains uncertainty as to the interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities, and we cannot assure you that the relevant Chinese regulatory authorities, including the CSRC, would reach the same conclusion as us. Any uncertainties and/or negative publicity regarding the aforementioned approval(s), filing or other procedure(s), the interpretation and implementation of existing laws and regulations, or any further laws, regulations or interpretations that may be released and enacted in the future could have a material adverse effect on our business and/or on the trading price of the ADSs.
Pharmaceutical companies in China are required to comply with extensive regulations and hold a number of permits and licenses to carry on their business. Our ability to obtain and maintain these regulatory approvals is uncertain.
We have incurred significant losses since our incorporation, have not generated any revenue from product sales to date and anticipate that we will continue to incur losses in the future and may never achieve or maintain profitability.
Our business model is designed to continue to in-license additional product candidates for development. We will likely need substantial additional funding for our future in-licensing and product development programs and commercialization efforts, which may not be available on acceptable terms, or at all. If we are unable to raise capital on acceptable terms when needed, we could incur losses or be forced to delay, reduce or terminate such efforts.
We have a very limited operating history, which may make it difficult to evaluate the success of our business to date and to assess our future viability.
We are heavily dependent on the successful development and commercialization of our late-stage product candidates, including mavacamten, TP-03 and NBTXR3.
All of our product candidates are still in clinical development. If we are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize our product candidates or experience significant delays in doing so, our business, financial condition, results of operations and prospects will be materially adversely affected.
If we experience delays or difficulties in the enrollment of patients in clinical trials, the progress of such clinical trials and our receipt of necessary regulatory approvals could be delayed or prevented.
If we breach our licenses or other intellectual property-related agreements for our product candidates or otherwise experience disruptions to our business relationships with our licensors, we could lose the ability to continue the development and commercialization of our product candidates.
We rely on Perceptive Advisors, LLC (“Perceptive”), our founder and a significant shareholder in our company, as a source for identifying partners from which we may in-license product candidates. If Perceptive divests of its investment in our company or is no longer a significant shareholder, we may lose access to its expertise in sourcing opportunities and our business could be substantially harmed. Perceptive and its affiliates exercise significant influence over our Company, which may limit the ability of our investors and other holders to influence corporate matters and could delay or prevent a change in corporate control. Additionally, Perceptive may invest in or advise businesses that directly or indirectly compete with certain portions of our business or that are suppliers or customers of our business in such a way that may not always coincide with minority ADS holders’ interests.
We rely on third parties to conduct some of our preclinical studies and clinical trials.
If we are unable to obtain and maintain patent and other intellectual property protection for our technology and product candidates through intellectual property rights, or if the scope of such intellectual property rights obtained is not sufficiently broad, third parties may compete directly against us, and our ability to successfully develop and commercialize any of our product candidates and technology may be adversely affected.
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The foregoing is only a summary of some of our risks. For a more detailed discussion of these and other risks investors should consider before making an investment in our securities, see “Part I—Item 1A—Risk Factors.”
INDUSTRY AND MARKET DATA
Although we are responsible for all disclosure contained in this Annual Report on Form 10-K, in some cases we have relied on certain market and industry data obtained from third-party sources that we believe to be reliable. Our estimates of the addressable market for our various product candidates are derived from independent industry publications, government publications and third-party forecasts, as well as epidemiological data, including incidence and prevalence estimates of addressable populations from peer-reviewed scientific journal and medical research articles related to diagnosis and treatment of our various therapeutic indications. Certain population data used in this Annual Report on Form 10-K was calculated using information from the World Health Organization International Agency for Research on Cancer and the United Nations Population Prospectus 2019. While we are not aware of any misstatements regarding any market, industry or similar data presented herein, such data involves risks and uncertainties and is subject to change based on various factors, including those discussed under the heading “Cautionary Note Regarding Forward-Looking Statements” and in “Part I—Item 1A—Risk Factors” in this Annual Report on Form 10-K.
TRADEMARKS AND SERVICE MARKS
We have applied for rights to trademarks, service marks and trade names for use in connection with the operation of our business, including, but not limited to, LianBio, 联拓 and 联拓生物. All other trademarks or service marks appearing in this Annual Report on Form 10-K that are not identified as marks owned or applied for by us are the property of their respective owners.
Solely for convenience, the trademarks, service marks and trade names referred to in this Annual Report on Form 10-K may be listed without the ®, (TM) and (sm) symbols, but we will assert, to the fullest extent under applicable law, our applicable rights in these trademarks, service marks and trade names. We do not intend our use or display of other entities’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other entity.

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PART I
Item 1. Business
Overview
We are a clinical stage biopharmaceutical company dedicated to bringing innovative medicines to patients with unmet medical needs in Asia. Our initial focus is to in-license assets for development and commercialization in Greater China and other Asian markets. We have assembled a pipeline of eight therapeutic candidates across cardiovascular, oncology, ophthalmology, and inflammatory disease indications, each with its own distinct value proposition and the potential to drive new standards of care. With operations in China, Asia Pacific, and the United States, we have built a cross-border platform to provide our licensing partners access to our regulatory, development, and commercial expertise in China and other Asian markets. We have created a diverse, balanced portfolio of highly differentiated assets that represent our broad program scope and significant potential market opportunity across various stages of development, providing multiple avenues for value creation. We intend to continue to evaluate innovative, complementary product
candidates with the potential to become new standards of care in Asia to deepen our pipeline.
We are currently conducting three registrational studies designed to support regulatory approval of our product candidates in our licensed territories, including the EXPLORER-CN trial of mavacamten in obstructive hypertrophic cardiomyopathy (“oHCM”), the LIBRA trial of TP-03 in Demodex blepharitis (“DB”), and the NANORAY-312 trial of NBTXR3 in elderly patients with locally advanced head and neck (“H&N”) squamous cell carcinoma.
Today, China represents the second largest pharmaceutical market in the world, with estimated branded pharmaceutical market revenues of $174 billion in 2022, and which are expected to reach $196 billion by 2025. Recent regulatory reforms aimed at accelerating drug availability, a series of government development initiatives to support innovation and an improving reimbursement and access landscape have all increased the strategic importance of the Chinese pharmaceutical market. In addition, enhanced intellectual property protection, increasing healthcare coverage and capital inflows into life sciences have created a more favorable environment for providing access to innovative medicines. While China is becoming an increasingly critical component of biopharmaceutical companies’ global development and commercialization strategies, challenges remain for Western companies to access this market. We have designed our company with fit-for-purpose cross-border infrastructure to navigate the complex regulatory and commercial landscape in China. It is our vision to serve as a gateway to China for Western biopharmaceutical companies focused on the large addressable market unlocked by these recent advances and reforms.
We are advancing a broad, robust pipeline of eight product candidates across four different therapeutic areas. We have sought to in-license programs that have established proof of concept, are highly innovative and can provide differentiated treatment options for patients both globally and in our target markets. Pending the results from our ongoing registrational clinical trials, we aspire to launch multiple commercial products and to become a leading biopharmaceutical company in Greater China and other Asian markets in the coming years. We will also continue to expand our pipeline by anchoring our therapeutic areas of focus with core assets and then building around them to drive development and future commercial and market access synergies.



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1.
The commercialization of each of our product candidates will require regulatory approval in the respective jurisdiction in which we intend to market such product candidate; however, obtaining and maintaining regulatory approval in one jurisdiction does not guarantee we will be successful in obtaining or maintaining regulatory approval of the product candidate in other jurisdictions that are material to the success of LianBio. For more information regarding the risks related to our business operations and clinical and regulatory strategies, see “Part I—Item 1A—Risk Factors—Risks Related to our Business and Industry.”
2.
Mavacamten has received FDA approval in the United States, which is not a part of our licensed territory, for the treatment of NYHA class II-III oHCM
3.
NBTXR3 has received European market approval (CE mark) in the EU, which is not a part of our licensed territory, for the treatment of locally advanced soft tissue sarcoma (“STS”). At present, we are not pursuing NBTXR3 in relation to this STS indication.
4.
Infigratinib has received FDA approval in the United States, which is not a part of our licensed territory, for the treatment of previously treated, unresectable locally advanced or metastatic cholangiocarcinoma with fibroblast growth factor receptor (“FGFR”) 2 fusion or other rearrangement.
5.Ongoing Phase 2a gastric cancer and other FGFR-driven tumor standalone clinical trial in China. Separate investigator sponsored Phase 2 clinical trial of infigratinib in FGFR-driven tumors is ongoing in the United States.






















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Regulatory developments
Potential CSRC approval required
On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law, pursuant to which Chinese regulators are required to accelerate rulemaking related to the overseas issuance and listing of securities, and update the existing laws and regulations related to data security, cross-border data flow, and management of confidential information. Numerous regulations, guidelines and other measures have been or are expected to be adopted under the umbrella of or in addition to the Cyber Security Law of the People’s Republic of China (the “Cyber Security Law”) and the Data Security Law of the People’s Republic of China (the “Data Security Law”). As there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, we cannot assure investors that we will be able to comply with new regulatory requirements relating to our future overseas capital-raising activities and we may become subject to more stringent requirements with respect to matters including data privacy and cross-border investigation and enforcement of legal claims.
On February 17, 2023, the CSRC promulgated the Trial Measures and five supporting guidelines which will come into effect on March 31, 2023 to regulate overseas securities offering and listing activities by domestic companies either in direct or indirect form. According to the Trial Measures, we may be required to submit filings to the CSRC in connection with future offerings of our equity securities to foreign investors.
As of the date of this Annual Report on Form 10-K, we have not received any inquiry, notice, warning or sanction regarding obtaining approval, or completing filing with or other procedures in connection with previous offering of our equity securities to foreign investors from the CSRC or any other Chinese regulatory authorities that have jurisdiction over our operations. However, there remains uncertainty as to the interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities, and we cannot assure you that the relevant Chinese regulatory authorities, including the CSRC, would reach the same conclusion as us. If it is determined in the future that the approval of, filing or other procedure with the CSRC or any other regulatory authority are required for previous offerings of our equity securities to foreign investors, or if we are required to complete relevant procedures for future offerings of our equity securities to foreign investors, it is uncertain whether we will be able and how long it will take for us to obtain the approval or complete the filing or other procedure or obtain a waiver for such procedures, despite our best efforts. If we, for any reason, are unable to obtain or complete, or experience significant delays in obtaining or completing, the requisite relevant approvals, filing or other procedures, we may face sanctions by the CSRC or other Chinese regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in mainland China, limit our ability to pay dividends outside of mainland China, limit our operations in mainland China, delay or restrict the repatriation of the proceeds from our public offerings into mainland China or take other actions that could have a material adverse effect on our business and/or on the trading price of our ADSs. Furthermore, our ability to offer or continue to offer securities to investors in future overseas securities offerings may be significantly limited or hindered, and the value of our securities may significantly decline or be worthless.
For additional information, see “Part I—Item 1A—Risk Factors—Risks Related to Doing Business in China and Our International Operations—The approval of, or filing or other procedures with, the CSRC or other Chinese regulatory authorities may be required in connection with issuing our equity securities to foreign investors under Chinese law, and, if required, we cannot predict whether we will be able, or how long it will take us, to obtain such approval or complete such filing or other procedures. We are also required to obtain business licenses from Chinese authorities in connection with our general business activities currently conducted in China.”
Other
To operate our general business activities currently conducted in China, each of our Chinese subsidiaries is required to obtain a business license from the State Administration for Market Regulation (the “SAMR”). Each of our Chinese subsidiaries has obtained a valid business license from the SAMR, and no application for any such license has been denied.
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Corporate information
We are an exempted company incorporated in the Cayman Islands with limited liability under the Companies Act of the Cayman Islands on July 17, 2019. 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 principal executive office of our research and development operations is located at 16F, 5 Corporate Avenue, 150 Hubin Road, Huangpu District, Shanghai, People’s Republic of China, 200021. Our telephone number at this address is (021) 2308 1188. Our current registered office in the Cayman Islands is located at the offices of International Corporation Services Ltd., 2nd Floor, Harbour Place, 103 South Church Street, P.O. Box 472, George Town, Grand Cayman KY1-1106, Cayman Islands. Our principal executive offices are located at 103 Carnegie Center Drive, Suite 309, Princeton, New Jersey 08540 and our telephone number is (609) 486-2308.
Dividends and other distributions
We are a holding company, and we may rely on dividends and other distributions on equity paid by our Chinese subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders or holders of our ADSs or to service any debt we may incur. If any of our Chinese subsidiaries incur debt on its own behalf in the future, the instruments governing such debt may restrict their ability to pay dividends to us. To date, there have not been any such dividends or other distributions from our Chinese subsidiaries to our subsidiaries located outside of China. In addition, as of the date of this Annual Report on Form 10-K, none of our subsidiaries have ever issued any dividends or distributions to us or their respective shareholders outside of China. As of the date of this Annual Report on Form 10-K, neither we nor any of our subsidiaries have ever paid dividends or made distributions to U.S. investors. Our Chinese operating subsidiary, Shanghai LianBio Development Co., Ltd., received $5,000,000, $2,500,095, $17,499,905, $5,000,000, $9,999,995 and $14,999,995 in equity financing via capital contributions from its shareholder outside of China in February 2020, September 2020, December 2020, October 2021, December 2021 and January 2022, respectively, to fund its business operations in China. In the future, cash proceeds raised from overseas financing activities may be transferred by us to our Chinese subsidiaries via capital contribution or shareholder loans, as the case may be.
According to the Foreign Investment Law of the People’s Republic of China (the “Foreign Investment Law”) and its implementing rules, which jointly established the legal framework for the administration of foreign-invested companies, a foreign investor may, in accordance with other applicable laws, freely transfer into or out of China its contributions, profits, capital earnings, income from asset disposal, intellectual property, royalties acquired, compensation or indemnity legally obtained, and income from liquidation, made or derived within the territory of China in renminbi or any foreign currency. According to the Company Law of the People’s Republic of China (the “PRC Company Law”) and other Chinese laws and regulations, our Chinese subsidiaries may pay dividends only out of their respective accumulated profits as determined in accordance with Chinese accounting standards and regulations. In addition, each of our Chinese subsidiaries is required to set aside at least 10% of its accumulated after-tax profits, if any, each year to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. Where the statutory reserve fund is insufficient to cover any loss the Chinese subsidiary incurred in the previous financial year, its current financial year’s accumulated after-tax profits shall first be used to cover the loss before any statutory reserve fund is drawn therefrom. Such statutory reserve funds and the accumulated after-tax profits that are used for covering the loss cannot be distributed to us as dividends. At their discretion, our Chinese subsidiaries may allocate a portion of their after-tax profits based on Chinese accounting standards to a discretionary reserve fund.
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Renminbi is not freely convertible into other currencies. As result, any restriction on currency exchange may limit the ability of our Chinese subsidiaries to use their potential future renminbi revenues to pay dividends to us. The Chinese government imposes controls on the convertibility of renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. Shortages in availability of foreign currency may then restrict the ability of our Chinese subsidiaries to remit sufficient foreign currency to our offshore entities for our offshore entities to pay dividends or make other payments or otherwise to satisfy our foreign-currency-denominated obligations. The renminbi is currently convertible under the “current account,” which includes dividends, trade and service-related foreign exchange transactions, but not under the “capital account,” which includes foreign direct investment and foreign currency debt, including loans we may secure for our onshore subsidiaries. Currently, our Chinese subsidiaries may purchase foreign currency for settlement of “current account transactions,” including payment of dividends to us, without the approval of the State Administration of Foreign Exchange of China (“SAFE”) by complying with certain procedural requirements. However, the relevant Chinese governmental authorities may limit or eliminate our ability to purchase foreign currencies in the future for current account transactions. The Chinese government may continue to strengthen its capital controls, and additional restrictions and substantial vetting processes may be instituted by SAFE for cross-border transactions falling under both the current account and the capital account. Any existing and future restrictions on currency exchange may limit our ability to utilize revenue generated in renminbi to fund our business activities outside of China or pay dividends in foreign currencies to holders of our securities. Foreign exchange transactions under the capital account remain subject to limitations and require approvals from, or registration with, SAFE and other relevant Chinese governmental authorities. This could affect our ability to obtain foreign currency through debt or equity financing for our subsidiaries. See “Part I—Item 1A—Risks Related to Doing Business in China and Our International Operations—We may rely on dividends and other distributions on equity paid by our Chinese subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our Chinese subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business” for a detailed discussion of the Chinese legal restrictions on the payment of dividends and our ability to transfer cash within our group. In addition, ADS holders may potentially be subject to Chinese taxes on dividends paid by us in the event we are deemed a Chinese resident enterprise for Chinese tax purposes. See “Part II—Item 5—Taxation—Material Chinese Taxation” for more details.
Organizational structure
The following diagram depicts our corporate structure as of the date of this Annual Report on Form 10-K. As of the date of this report, the shares of each of our subsidiaries are 100% owned by the respective entity displayed immediately above that subsidiary. Certain warrant rights are outstanding and may be exercised in the future for equity interests in our Cayman parent entity, LianBio, and our subsidiary, Lian Cardiovascular, as described in “Note 10: Equity” in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Currently, our corporate structure contains no variable interest entities.
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Within the organization, investor cash inflows have all been received by our parent Cayman entity, LianBio. Cash to fund our Chinese operations is transferred from our Cayman parent entity down through our Hong Kong entities and then into our Chinese entities through capital contributions. Cash to fund our operations in the United States is transferred from our Cayman parent entity down to our United States entity through a capital contribution.
Our pipeline
Cardiovascular
Mavacamten for the potential treatment of HCM
We have partnered with MyoKardia, Inc. (“MyoKardia,” now a wholly owned subsidiary of Bristol-Myers Squibb (“BMS”)) to develop and commercialize mavacamten in Greater China and other Asian markets. Mavacamten is an oral small-molecule allosteric modulator of cardiac myosin, which is approved in the United States for the treatment of symptomatic obstructive hypertrophic cardiomyopathy (oHCM) and is also being studied as a treatment for other diseases of diastolic dysfunction. Hypertrophic cardiomyopathy (“HCM”) is a disease that leads to progressive deterioration of heart function and an increased risk of atrial fibrillation, stroke, heart failure and sudden cardiac arrest. There are currently no approved therapies for HCM in China. HCM can be segmented into two groups, oHCM and non-obstructive HCM (“nHCM”). In 2020, MyoKardia completed a global Phase 3 clinical trial of mavacamten for the treatment of symptomatic oHCM. This trial met its primary and all secondary endpoints and mavacamten was observed to be well-tolerated. In February 2022, we announced that the Center for Drug Evaluation (“CDE”) of the National Medical Products Administration (“NMPA”) granted Breakthrough Therapy Designation in China for mavacamten for the treatment of patients with oHCM. In May 2022, we announced the completion of a pharmacokinetics (“PK”) trial of mavacamten in healthy Chinese volunteers. The PK trial demonstrated a favorable safety, tolerability and PK profile. A single oral administration of mavacamten showed no new safety signals in Chinese subjects, and the data were comparable to those observed in the Phase 1 PK study of mavacamten conducted by MyoKardia in healthy volunteers in the United States. In August 2022, we announced that we completed enrollment of patients in a Phase 3 clinical trial of mavacamten, EXPLORER-CN, in China, and that we expect to report topline results in mid-2023. If the data are consistent with the data demonstrated in global clinical trials, we intend to use the China data in combination with data generated in global trials conducted by MyoKardia to seek regulatory approval in China. We also plan to develop mavacamten in nHCM and heart failure with preserved ejection fraction (“HFpEF”).
Hypertrophic cardiomyopathy disease overview
HCM is an inherited form of cardiomyopathy mainly caused by genetic mutations that result in excessive cardiac muscle contraction and abnormally thick cardiac muscle growth. HCM is characterized by left ventricular hypertrophy unexplained by secondary causes and a nondilated left ventricle with preserved or increased ejection fraction. The histological features of HCM include hypertrophy and disarray of myocytes, cardiac muscle cells, as well as interstitial fibrosis. The hypertrophy is also frequently associated with left ventricular diastolic dysfunction.
Patients with HCM are at increased risk for developing arrhythmia, shortness of breath, chest pain, heart failure and sudden cardiac death. The most frequent arrhythmia observed is atrial fibrillation, which occurs in 22% to 32% of HCM patients. Atrial fibrillation is also a major risk factor for thromboembolic stroke. The combination of the loss of ventricular filling and the rapid ventricular contraction results in further elevations of left ventricular diastolic pressure and symptoms of heart failure. Although rare, HCM is the most common cause of sudden cardiac death in young people and athletes under the age of 35.
HCM patients can be segmented into two groups:
Obstructive HCM: In two-thirds of HCM patients, the path through which blood exits the heart, known as the left ventricular outflow tract (“LVOT”), becomes obstructed by the enlarged and diseased heart muscle, restricting the flow of blood from the heart to the rest of the body. oHCM patients are at an increased risk of severe heart failure and death.
Non-Obstructive HCM: Patients with nHCM do not have significant LVOT obstruction but have reduced cardiac output due to an enlarged and stiffened heart muscle. These patients can be difficult to manage medically as they often present with an advanced state of disease due to damage that accumulates before patients become symptomatic.
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Most cases of HCM appear to be inherited, as family members of HCM patients are at increased risk of developing the disease. Mutations in more than a dozen genes have been linked to the development of HCM. However, in 40% of patients, the causal mutation is not known. A typical HCM patient presents with a range of symptoms, including shortness of breath, chest pain and heart palpitations. Diagnosis of HCM is generally by echocardiography, a noninvasive technique that allows key parameters such as the thickness of the heart wall, the size of the left ventricle and the output of the heart to be quantitatively and qualitatively measured. Most patients are diagnosed in middle age. We estimate there are approximately 1.1 million to 2.8 million HCM patients in China, with approximately two-thirds of patients having oHCM, and one-third of patients having nHCM.
Current standard of care for HCM
There are currently no approved pharmacologic therapies indicated for the treatment of HCM in China. Patients in China are typically prescribed one or more drugs indicated for the treatment of hypertension, heart failure or other cardiovascular disorders to address disease symptoms. These drugs, including beta blockers, such as metoprolol, and calcium channel blockers, such as verapamil, may help some patients manage the symptoms of HCM, but they do not directly address the underlying cause of disease or affect disease progression. In some countries, but not in China, disopyramide, a sodium channel blocker with significant side effects, is added if patients do not respond to other therapies.
Despite pharmacologic management, symptoms and disease burden persist for many patients, and therapeutic options are limited. For a subset of patients with advanced disease progression or more pronounced symptoms, invasive therapies may be appropriate, including use of an implantable cardioverter-defibrillator, open surgical myectomy, percutaneous alcohol septal ablation or, in rare cases, heart transplantation for end-stage HCM. However, these invasive therapies are associated with inherent risks and require expertise that is not universally available in China.
HFpEF disease overview and current standard of care
HFpEF is a disease in which the heart’s ability to pump blood through the body is decreased due to the inability of the ventricle to fully relax and fill with blood. HFpEF can arise from multiple other conditions including diabetes, obesity, atrial fibrillation and high blood pressure. At a cellular level, cardiac myocytes in patients with HFpEF are thicker and shorter than normal myocytes, and collagen content is increased. Early symptoms of HFpEF include shortness of breath upon exertion and fatigue. Therapeutic management has typically been directed toward associated conditions such as hypertension and symptoms such as edema. Patients have historically been treated with standard medications for hypertension such as beta blockers or renin-angiotensin-aldosterone inhibitors, and in 2021 the United States Food and Drug Administration (“FDA”) approved Novartis AG’s Entresto for the treatment of HFpEF.
Approximately 41% of heart failure cases are attributed to HFpEF. We believe there are approximately four million HFpEF patients in China. In a subset of approximately 10-20% of HFpEF patients, the underlying cause of symptoms is similar to that of nHCM, and we believe mavacamten has the potential to address this underlying disease pathology in HFpEF patients.
Mavacamten development path
Mavacamten was designed to correct or address the impaired cardiac muscle contractility and relaxation that characterizes HCM by acting on cardiac myosin, a key myocyte protein, to allow the heart muscle to relax, thereby expanding the volume of the heart and enabling it to pump more blood. In 2020, MyoKardia announced results from a global Phase 3 clinical trial called EXPLORER-HCM, in which patients with symptomatic oHCM treated with mavacamten experienced statistically significant and clinically meaningful improvements in symptoms, functional status and key aspects of quality of life. In April 2022, the FDA approved mavacamten for the treatment of adults with symptomatic New York Heart Association (“NYHA”) Class II-III oHCM to improve functional capacity and symptoms. We have an exclusive license to develop and commercialize mavacamten in Greater China and other Asian markets.
Results from the global EXPLORER-HCM trial
Per data published in the Lancet, the EXPLORER-HCM trial was a randomized, double-blind, placebo-controlled Phase 3 clinical trial that enrolled 251 patients with symptomatic NYHA functional Class II or III oHCM. Patients were randomized on a 1:1 basis to receive individualized once-daily dosing of mavacamten or placebo. Patients started on a dose of 5mg, with up to two opportunities for dose adjustments (to doses of 2.5mg, 5mg, 10mg or 15mg) based on a combination of residual LVOT gradient, drug plasma concentration and left ventricular ejection fraction levels. Patients were evaluated every two to four weeks for 30 weeks.
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The primary endpoint for EXPLORER-HCM was a composite functional analysis designed to capture mavacamten’s effect on both symptoms and cardiac function. The composite functional endpoint was defined by either (i) the achievement of a ≥1.5mL/kg/min improvement in peak oxygen consumption (“pVO2”) accompanied by an improvement of ≥1 NYHA functional class, or (ii) the achievement of a ≥3.0mL/kg/min improvement of pVO2 with no worsening in NYHA functional class. The 30-week treatment with mavacamten resulted in a highly statistically significant outcome relative to placebo (p=0.0005) for the primary endpoint.
Additionally, mavacamten demonstrated beneficial results (p≤0.0006) for all secondary endpoints: post-exercise LVOT peak gradient, pVO2, NYHA functional class, Kansas City Cardiomyopathy Questionnaire-Clinical Summary Score (“KCCQ-CSS”) and HCM Symptom Questionnaire Shortness-of-Breath subscore.
The primary and all secondary endpoints of the EXPLORER-HCM trial were met with statistical significance (p≤0.0006 for all endpoints)
Results from the EXPLORER-HCM trial published in 2020
Mavacamten Group (n=123)

Placebo Group (n=128)

Difference1 (95% CI), p Value

Primary Endpoint2
Either ≥1.5 mL/kg per Min Increase in pVO2 with ≥1 NYHA Class Improvement or ≥3.0 mL/kg per Min Increase in pVO2 with No Worsening of NYHA Class
45 (37%)
22 (17%)
19.4 (8.7 to 30.1; p=0.0005)
≥1.5 mL/kg per Min Increase in pVO2 with ≥1 NYHA Class Improvement
41 (33%)
18 (14%)
19.3 (9.0 to 29.6)
≥3.0 mL/kg per Min Increase in pVO2 with No Worsening of NYHA Class
29 (24%)
14 (11%)
12.6 (3.4 to 21.9)
Both ≥3.0 mL/kg per Min Increase in pVO2 and1 NYHA Class Improvement
25 (20%)
10 (8%)
12.5 (4.0 to 21.0)
Secondary Endpoints3
Post-exercise LVOT Gradient Change from Baseline to Week 30, mm Hg
-47 (40), n=117
-10 (30), n=122
-35.6 (-43.2 to -28.1; p<0.0001)
pVO2 Change from Baseline to Week 30, mL/Kg per Min
1.4 (3.1), n=120
-0.1 (3.0), n=125
1.4 (0.6 to 2.1; p=0.0006)
≥1 NYHA Class Improvement from Baseline to Week 304
80 (65%)
40 (31%)
34% (22 to 45; p<0.0001)
Change from Baseline to Week 30 in KCCQ-CSS4
13.6 (14.4), n=92
4.2 (13.7), n=88
9.1 (5.5 to 12.7; p<0.0001)
Change from Baseline to Week 30 in HCMSQ-SoB4
-2.8 (2.7), n=85
-0.9 (2.4), n=86
-1.8 (-2.4 to -1.2; p<0.0001)

Note: Data are n (%) or mean (SD). HCMSQ-SoB=Hypertrophic Cardiomyopathy Symptom Questionnaire Shortness-of-Breath subscore. KCCQ-CSS= Kansas City Cardiomyopathy Questionnaire-Clinical Symptom Score. LVOT=Left Ventricular Outflow Tract. pVo2 = Peak Oxygen Consumption. NYHA = New York Heart Association.
1 Model estimated least-square mean differences were reported for continuous variable.
2 Patients with a non-evaluable primary endpoint and NYHA secondary endpoint were considered as non-responders. The response rates were
calculated with the N value as the denominator.
3 N was the number analyzable for secondary endpoints based on availability of both baseline and week 30 values.
4 Due to the smaller number evaluable for patient-reported outcome endpoints, additional post-hoc analyses compared the reasons for missing data.
Patients administered mavacamten showed rapid and sustained improvement in resting and Valsalva LVOT gradient compared with placebo. By week 30, 57% of mavacamten-treated patients had reductions in post-exercise LVOT peak gradient less than 30 mmHg compared to only 7% of patients on placebo.


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Mavacamten was well-tolerated in the clinical trial. Overall rates of adverse events (“AEs”), serious adverse events (“SAEs”) and cardiac adverse events, including atrial fibrillation, were comparable for patients treated with mavacamten versus placebo. Over 97% of patients completed the trial with similar rates of discontinuation in the mavacamten treatment group relative to the placebo group.
In February 2022, BMS announced positive topline results from Phase 3 VALOR-HCM trial, evaluating mavacamten in patients with obstructive hypertrophic cardiomyopathy who are eligible for septal reduction therapy.
Our strategy to seek regulatory approval of mavacamten in China
Our goal is to bring mavacamten to market in China for the treatment of oHCM patients. To accomplish this goal, we conducted a PK trial and are currently conducting a Phase 3 trial in China to evaluate the safety, efficacy and pharmacokinetics in Chinese subjects and consistency with the corresponding data demonstrated in global trials. We completed a PK trial in May 2022 and completed subject dosing in the Phase 3 EXPLORER-CN clinical trial in August 2022.
Phase 3 EXPLORER-CN clinical trial: We have designed our randomized, double-blind, placebo-controlled Phase 3 EXPLORER-CN clinical trial to assess the safety and efficacy of mavacamten in Chinese adults with symptomatic oHCM. We enrolled 81 patients, randomized 2:1. The primary endpoint is the change in Valsalva LVOT gradient from baseline to Week 30. Eligible patients will continue in a long-term extension treatment period.
Pharmacokinetic trial in China: We also conducted a PK trial of mavacamten in healthy adults in China. We announced in May 2022 that a single oral administration of mavacamten showed no new safety signals in Chinese subjects, and the data were comparable to those observed in the Phase 1 PK study of mavacamten conducted by MyoKardia in healthy volunteers in the United States.
We are also planning to pursue the development of mavacamten for the treatment of nHCM and HFpEF:
nHCM: In 2020, MyoKardia announced that a double-blind, placebo-controlled Phase 2 clinical trial of mavacamten in symptomatic nHCM patients demonstrated that patients dosed with mavacamten had significant reductions in N-terminal pro-B type natriuretic peptide and cardiac troponin I, biomarkers of cardiac stress and injury that correlate with poor prognosis in multiple cardiovascular diseases. We intend to develop mavacamten in our licensed territories for the treatment of nHCM.

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HFpEF: We believe that mavacamten has the potential to directly address a key underlying pathology in HFpEF and we intend to develop mavacamten in our licensed territories for the treatment of HFpEF.
Ophthalmology
TP-03 for the potential treatment of demodex blepharitis and meibomian gland disease
We have partnered with Tarsus Pharmaceuticals, Inc. (“Tarsus”) to develop and commercialize TP-03 (lotilaner ophthalmic solution, 0.25%) in Greater China. TP-03 is a novel, topical ophthalmic formulation of lotilaner, that is an antagonist of insect and arachnid γ-aminobutyric-gated chloride channels (“GABA-Cl”) and which is initially being studied for the treatment of Demodex blepharitis (“DB”) and has potential therapeutic applications for Meibomian Gland Disease (“MGD”). DB is caused by an infestation of Demodex mites triggering inflammation and is characterized by a specific type of debris called “collarettes” that form at the base of the eyelash follicles, inflammation of the eyelid margin, redness and ocular irritation. We estimate DB affects approximately 43 million patients in China. TP-03 is designed to paralyze and eventually cause the death of Demodex mites through the inhibition of parasite-specific GABA-Cl channels. The active ingredient in TP-03 is lotilaner, an anti-parasitic that is part of a class of molecules named isoxazolines. Tarsus has completed two pivotal trials of TP-03 for the treatment of DB in the United States, Saturn-1 and Saturn-2. All pre-specified primary and secondary endpoints were met in Saturn-1 and Saturn-2, and complete resolution of DB signs was demonstrated in patients treated with TP-03. Tarsus submitted a New Drug Application (“NDA”) to the FDA, with a target action date for the Prescription Drug User Fee Act (“PDUFA”) of August 25, 2023. We plan to generate clinical data in China to be used in combination with clinical data generated in Saturn-1 and Saturn-2, if such data are positive, to seek regulatory approval in DB in Greater China. We also plan to develop TP-03 for the treatment of MGD. In November 2022, we began dosing patients in the registrational Phase 3 LIBRA trial of TP-03 in Chinese patients with DB. We expect to report topline results from the trial in the fourth quarter of 2023.
DB disease overview
Blepharitis is a disease characterized by eye inflammation, irritation, redness and lid margin disease. Symptoms can become severe if left untreated, and progress to blurred vision, missing eyelashes, corneal damage and even blindness in extreme cases. Demodex mites are a common underlying cause of blepharitis, and they are the most common ectoparasite found on humans. The Demodex parasite causes a significant portion of blepharitis cases through an infestation of the eyelash follicles. Demodex infestation may be accompanied by cylindrical dandruff on the eyelids called collarettes. The presence of collarettes is pathognomonic for Demodex infestation. Collarettes are composed of partially digested epithelial cells, mite waste and eggs, among other things. Aging is the main risk factor for DB. Relapse is common in patients who have had DB as the Demodex mites can stay in the skin of the face even after they have been eradicated from the eyelid. We estimate DB affected approximately 43 million patients in China in 2020. We believe there is a significant opportunity to raise awareness of and improve the diagnosis rate of DB through physician and patient education. The approval and introduction of an effective disease-modifying therapy may help encourage patient and physician awareness to grow the identifiable patient population.
Current standard of care for DB
DB in China is most commonly diagnosed through signs of collarettes, sparse eyelashes, missing eyelash and trichiasis, among other symptoms, which is similar to the diagnosis approach in the United States. Other symptoms of DB, including eyelid redness, itching and dry eye, are non-specific and unclear for diagnosis. Patients are often diagnosed when they visit eye care professionals for other conditions such as dry eye, cataracts or contact lens discomfort. Light microscopy and slit lamps are used to diagnose DB, and testing prevalence and accuracy are expected to increase in the coming years. There are currently no FDA-approved therapies for DB. The condition is currently treated in some cases with tea tree oil and metronidazole to repel mites, along with a topical steroid to control inflammation. Key opinion leader (“KOL”) research indicates treatment typically is not efficacious, lasting two to three months, and 60% of patients relapse within six months, assuming any improvement to begin with. Many patients are not able to tolerate these treatments long-term. We believe the absence of a currently available FDA-approved treatment and a large existing patient population create a significant market opportunity in China.
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MGD disease overview and current standard of care
MGD is a common eye condition where the glands do not secrete enough oil or when the oil they secrete is of poor quality. MGD is a leading cause of dry eye disease. In the early stages of the disease, patients are often asymptomatic but, if left untreated, MGD can cause exacerbated dry eye symptoms and eyelid inflammation. Symptoms include dryness, burning, itching, stickiness or crustiness, watering, light sensitivity, red eyes and foreign body sensation. Clinical signs of MGD have been shown to be correlated with infestation of a certain species of Demodex mite. We estimate 50% of diagnosed Demodex-driven MGD patients also have DB. The standard of care for the treatment of Demodex-driven MGD is similar to that of DB. Demodex-driven MGD patients are currently treated with tea tree oil and metronidazole to repel mites, along with a topical steroid to control inflammation. We believe, based on KOL research, there were an estimated 73 million Demodex-driven MGD patients in China in 2020. There are no currently approved therapies for MGD in China.
TP-03 development path
Tarsus has completed two pivotal trials of TP-03 for the treatment of DB in the United States, Saturn-1 and Saturn-2. All pre-specified primary and secondary endpoints were met in the trials, and complete resolution of DB signs was demonstrated in patients treated with TP-03. Tarsus submitted an NDA to the FDA, with a PDUFA target action date of August 25, 2023. In August 2022, Tarsus initiated a Phase 2a clinical trial of TP-03 for the treatment of MGD.
Results from pivotal Phase 2b/3 Saturn-1 clinical trial
In June 2021, Tarsus announced positive results of the pivotal Phase 2b/3 Saturn-1 trial. All pre-specified primary and secondary endpoints were met, and complete resolution of DB signs was demonstrated in patients treated with TP-03.
44% of patients on TP-03 achieved the primary endpoint of complete collarette cure, defined as 0-2 collarettes per lid at day 43, compared to 7% on vehicle (p<0.0001).
81% of patients on TP-03 achieved a clinically meaningful collarette cure, defined as 0-10 collarettes per lid at day 43 compared to 23% of those on vehicle (p<0.0001).
68% of patients on TP-03 achieved mite eradication defined as 0 mites per lash at day 43, compared to 18% on vehicle (p<0.0001).
Additionally, significant efficacy in lid erythema (redness) was demonstrated across multiple measures including complete and clinically meaningful composite cures, and in erythema alone. Results showed 45% of patients improved erythema by one grade or more (compared to 28% of patients on vehicle, p=0.0002) and 19% of patients on TP-03 achieved a complete erythema cure (compared to 7% of patients on vehicle, p=0.0001).
TP-03 was well tolerated with a safety profile similar to the vehicle group. Additionally, most TP-03 patients (92%) reported that the drop comfort was neutral to very comfortable. There were no serious treatment-related AEs nor any treatment-related AEs leading to treatment discontinuation.
Results from pivotal Phase 3 Saturn-2 clinical trial
In May 2022, Tarsus announced positive results of the pivotal Phase 3 Saturn-2 trial. All pre-specified primary and secondary endpoints were met, TP-03 was well tolerated, and complete resolution of DB was demonstrated in patients treated with TP-03.
Primary Endpoint:
56% of patients on TP-03 achieved complete collarette cure, defined as 0-2 collarettes per lid at day 43, compared to 13% on vehicle (p<0.0001).
Secondary Endpoints:
52% of patients on TP-03 achieved mite eradication defined as zero mites per lash at day 43, compared to 15% on vehicle (p<0.0001).
31% of patients on TP-03, as compared to 9% of patients on vehicle (p<0.0001), achieved complete lid erythema cure at day 43.
19% of patients on TP-03 achieved a complete composite cure, based on achieving both complete collarette cure and complete lid erythema cure, compared to 4% on vehicle (p<0.0001) at day 43.

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Additional Analysis:
89% of patients on TP-03 achieved a clinically meaningful collarette cure, defined as 0-10 collarettes per lid at day 43 compared to 33% of those on vehicle (p<0.0001).
Safety Profile:
Consistent with Saturn-1, Saturn-2 demonstrated that TP-03 was well tolerated with a safety profile similar to the vehicle group.
91% of TP-03 patients reported that the drop comfort was neutral to very comfortable.
There were no serious treatment-related AEs nor any treatment-related AEs leading to treatment discontinuation.
Tarsus has also completed four Phase 2 clinical trials in which TP-03 achieved efficacy endpoints including collarette grade, mite density, collarette cure rate and/or mite eradication rate. TP-03 was generally well-tolerated in all four trials. Based on the strength and consistency of the TP-03 clinical data, we believe TP-03 has the potential to have a global impact.
Our strategy to seek regulatory approval of TP-03 in DB and MGD in China
We believe TP-03 has the potential to become the new standard of care for the treatment of DB, and our goal is to bring TP-03 to market for patients in China. To accomplish this goal, we are conducting the Phase 3 LIBRA clinical trial to evaluate the safety, efficacy and pharmacokinetics in Chinese patients with DB and consistency with the corresponding data demonstrated in the United States. We expect to report topline data from LIBRA in the fourth quarter of 2023.
Phase 3 LIBRA clinical trial: We have designed our randomized, double-blind, placebo-controlled Phase 3 LIBRA clinical trial to assess the safety and efficacy of TP-03 in Chinese patients with DB. We plan to enroll approximately 162 patients, randomized 1:1. The co-primary endpoints are complete collarette cure (0-2 collarettes per eyelid) and mite eradication (mite density of 0 mites per lash) at day 43. Secondary endpoints include composite cure of collarette and erythema (0-2 collarettes per eyelid and grade 0 erythema) at day 43.
We also intend to pursue the development of TP-03 in Greater China for the treatment of MGD. We plan to join any future global pivotal trial of TP-03 in MGD conducted by Tarsus. We believe that enrolling patients in China in a global Phase 3 clinical trial may expedite the global development program as well as enable us to seek regulatory approval in China.
Oncology
NBTXR3, a radioenhancer for the potential treatment of H&N cancer and other solid tumors
We have partnered with Nanobiotix S.A. (“Nanobiotix”) to develop and commercialize NBTXR3, a radioenhancer designed to be injected directly into a malignant tumor prior to standard radiotherapy (“RT”). When exposed to ionizing radiation, NBTXR3 has been shown to enhance the localized effect of RT, in our licensed territories of Mainland China, Hong Kong, Taiwan, Macau, South Korea, Singapore and Thailand. NBTXR3 is designed to increase the dose of RT delivered within the tumor without increasing the dose in surrounding healthy tissue. NBTXR3 may also prime the body’s immune response against cancer. We believe that NBTXR3 has a broadly applicable mechanism of action that has the potential to be used in conjunction with RT in the treatment of various solid tumor types. Clinical proof of concept for NBTXR3 has been demonstrated in soft tissue sarcoma, for which Nanobiotix received CE mark approval in the European Union, which is not a part of our licensed territory. Nanobiotix is currently prioritizing registration of NBTXR3 for the treatment of locally advanced H&N cancer, for which the FDA has granted Fast Track designation for the treatment of elderly patients ineligible for platinum-based chemotherapies. Additionally, in a Phase 1 clinical trial (Study 1100), NBTXR3 has shown the potential to convert patients who initially failed checkpoint inhibitor therapy into responders while also displaying a potential abscopal effect. Nanobiotix and its collaborators are currently conducting clinical trials to evaluate NBTXR3 as a potential treatment in various cancer indications. We plan to join the NBTXR3 development program by enrolling patients in China in five of Nanobiotix’s current and potential future global pivotal trials across indications and therapeutic combinations including immunotherapy, beginning with Nanobiotix’s ongoing Phase 3 NANORAY-312 clinical trial in locally advanced H&N cancer. We announced in September 2022 that we had begun enrolling patients in LianBio’s licensed territories in the NANORAY-312 clinical trial.
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Radiotherapy overview
Radiotherapy is an essential component of cancer care and may be used alone or in combination with other treatments, including surgery, chemotherapy and targeted therapies. RT can cure cancer, prevent its recurrence or stop or slow its growth. Nevertheless, many cancer patients still experience progressive disease, because, among other reasons, they are not able to receive a high enough radiation dose to completely destroy their tumor without resulting in an unacceptable level of damage to surrounding healthy tissues. We believe that by easing this limitation, NBTXR3 has the potential to improve the survival rate for cancer patients.
In developed countries, more than half of cancer patients receive RT as part of their treatment protocol. Currently, 20-25% of cancer patients in China are treated with RT, due in part to a shortage of equipment. In recent years, the government has issued policies aimed at expanding the availability of RT in China. We believe access to RT is improving in China due to policies supporting its use, hospital capability expansion and new training requirements. In 2018, a total of 1.3 million patients received RT in China, an increase of 37% compared to 2015.
NBTXR3 overview
NBTXR3 is an aqueous suspension of functionalized crystalline hafnium oxide nanoparticles designed for injection directly into a solid tumor prior to standard RT. NBTXR3’s approach brings a universal, physics-based mechanism of action to destroy cancer cells from within.
When NBTXR3 nanoparticles are directly injected into a malignant tumor before standard RT, they are internalized through endocytosis to function as radioenhancers. The nanoparticles contain an inorganic core of crystallized hafnium oxide which has a high electron density, thus allowing the nanoparticles to absorb more energy than would otherwise be absorbed by the surrounding water molecules. Greater energy absorption generates more electrons, and, in turn, more free radicals thereby enhancing damage within the tumor cell and leading to greater cell death. NBTXR3 nanoparticles are pharmacologically inert, meaning that they do not interact with cellular or molecular systems in the absence of ionizing radiation. After radiation exposure, nanoparticles return to their inactive state, meaning that multiple RT procedures can be performed after a single NBTXR3 injection.


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NBTXR3 Nanoparticles Enabling Hyper-Focused Radiation Dose Delivery

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*Dose enhancement determined by Monte Carlo simulation (CEA Saclay, France).

Preclinical and early clinical data also suggest that the use of NBTXR3 activated by RT could trigger the destruction of metastatic cells through an abscopal effect, and that NBTXR3 could be effective in making tumors visible to the immune system and increasing patient responses to immunotherapy by turning “cold” tumors “hot.”
NBTXR3 received European market approval (CE mark) in 2019 for the treatment of locally advanced soft tissue sarcoma based on the results of a registrational Phase 2/3 clinical trial (Study 301) in patients with locally advanced soft tissue sarcoma of the extremity or trunk wall. Study 301 achieved its primary endpoint with a pathological complete response (<5% viable cancer cells) rate of 16.1% in the NBTXR3 arm compared to 7.9% in the control arm (p=0.0448). In the subgroup of patients with more aggressive disease (histologic grade 2 and 3), a pathological complete response was achieved in 17.1% of patients in the NBTXR3 arm compared to 3.9% in the control arm. Similar rates of SAEs were observed in the NBTXR3 and control arms (39% and 30% respectively), including the rate of postsurgical wound complications, which were the most common treatment-emergent adverse event (9% in both arms). NBTXR3 administration did not show an impact on the severity or incidence of RT-related AEs.
Head and neck cancer overview
H&N cancers include cancers of the oral cavity, pharynx, larynx, paranasal sinuses, nasal cavity and salivary glands. Tobacco use, heavy alcohol use, human papillomavirus infection, Epstein-Barr virus infection, poor oral hygiene and certain industrial exposures increase the risk of H&N cancer. Globally, the five-year survival rate for patients with H&N cancer is approximately 40-50%.
In China, we estimate that approximately 90,000 non-nasopharyngeal cancer H&N cancer patients are diagnosed each year. Due to the aging of the population, we believe H&N cancer incidence will continue to grow in China over the coming decade.
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Current standard of care for locally advanced H&N cancer
Chemotherapy in combination with concomitant radiation is the current standard of care for inoperable locally advanced H&N cancer. In China, KOL research indicates most patients with inoperable locally advanced H&N cancer are eligible to be treated by RT. This presents limitations in elderly patients, for whom these cancers are more prevalent, due to their reduced ability to withstand chemotherapy and its associated AEs. Cetuximab and RT can sometimes be offered as an alternative to chemoradiation but has shown limited efficacy in elderly patients. Data presented at the Multidisciplinary H&N Cancers Symposium 2020 showed that elderly patients treated with RT alone or RT plus cetuximab had a median progression-free survival (“PFS”) of 7.3 months. These patients reported poor quality of life due to high unmet medical need as well as limited availability of therapeutic options.
Other solid tumor indications
Nanobiotix is also studying NBTXR3 in other solid tumor types as both a single agent and in combination with programmed cell death protein 1 (“PD-1”) inhibitors and with chemotherapy.
Phase 1 dose escalation and expansion study in head & neck cancer (Study 102)
In March 2022, Nanobiotix announced an updated analysis of overall survival (“OS”) from the ongoing Phase 1 trial of NBTXR3 in elderly and frail locally advanced head and neck squamous cell carcinoma (“HNSCC”) patients ineligible for cisplatin and intolerant to cetuximab (Study 102) demonstrating median OS of 17.9 months in the all-treated population (n=56) and 23.0 months in evaluable patients (n=44) from the dose expansion part of the study. NBTXR3 administration was feasible and well-tolerated overall. The most recently reported safety data, as of September 2021, showed that a total of 8 Grade 3-4 NBTXR3-related AEs were observed in 8 patients. Of these AEs related to NBTXR3, 5 SAEs were observed across 5 patients: one Grade 4 tumor hemorrhage (also related to RT), one Grade 3 stomatitis (also related to RT), one Grade 3 soft tissue necrosis (also related to RT), one Grade 4 dysphagia (also related to RT) and one Grade 4 sepsis (also related to RT and disease). Of the SAEs, one death from sepsis occurred, which the investigator assessed as possibly related to NBTXR3, RT, and cancer.
Phase 3 registrational trial (NANORAY-312)
Based on the preliminary Phase 1 data demonstrated in Study 102, Nanobiotix has designed a global pivotal Phase 3 clinical trial of NBTXR3 in elderly patients with locally advanced HNSCC who are ineligible for platinum-based chemotherapy (cisplatin). In January 2022, Nanobiotix randomized the first patient in the study in Europe. Enrollment in the United States by Nanobiotix was initiated in the fourth quarter of 2022.
NBTXR3 in immuno-oncology
Nanobiotix has generated preclinical data demonstrating that RT-activated NBTXR3 resulted in greater tumor cell death than RT alone due to higher tumor recognition by the patient’s immune system.
In March 2021, Nanobiotix presented preclinical data at the American Association for Cancer Research Annual Meeting which demonstrated that a combination therapy of RT-activated NBTXR3 and checkpoint inhibitors (anti-PD-1, anti-LAG3, anti-TIGIT) significantly promoted the proliferation of CD8+ T-cells and improved local and distal tumor control, as well as increased survival rate. Moreover, survivor mice were immune to re-injections of tumor cells and maintained significantly higher levels of memory T-cells compared to control mice. This combination therapy approach also augmented antitumor response in abscopal tumors. These data suggest that NBTXR3 could modulate the immunogenicity of cancer tumor cells and that NBTXR3 could potentially be used in combination with existing immunotherapies.
Phase 1 basket trial (Study 1100)
Nanobiotix is currently conducting Study 1100, a Phase 1 prospective, multi-center, open-label, non-randomized basket trial of NBTXR3-enhanced RT in combination with anti-PD-1 immune checkpoint inhibitors nivolumab or pembrolizumab in patients with inoperable local-regional recurrent or metastatic HNSCC eligible for re-irradiation and patients with lung or liver metastases from any primary cancer that is amenable to anti-PD-1 therapy. In November 2022, Nanobiotix presented updated data from Study 1100 at the 37th Annual Meeting of the Society for Immunotherapy of Cancer (“SITC”). Objective reduction in target lesion(s) from baseline was observed in 71.43% of evaluable patients (15/21), 67% of prior anti-PD-1 resistant patients (10/15) and 83% of anti-PD-1 naive patients (5/6). The results suggest that NBTXR3 administration was feasible and well-tolerated and the recommended Phase 2 dose was established at 33% of Gross Tumor Volume in each of the 3 cohorts.
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Based on available outcomes from Study 1100, Nanobiotix initiated discussion with FDA and subsequently received preliminary feedback in the first half of 2022 regarding a potential registrational program for patients with unresectable relapsed or metastatic head and neck squamous cell carcinoma (R/M HNSCC) that developed primary or secondary resistance to previous anti-PD-1/PD-L1 therapy. Feedback from the agency suggested a single, randomized, controlled trial including a pre-specified comparative analysis of overall response rate (ORR) may be suitable to support an accelerated approval, subject to confirmation of clinical benefit based on overall survival (OS) results from the same trial.
Our strategy to seek regulatory approval of NBTXR3 in China
We believe NBTXR3 has the potential to be broadly applicable against solid tumors where RT can be used. We have the potential to join five of Nanobiotix’s planned global registrational trials by enrolling patients in China. We believe that enrolling patients in China in global Phase 3 clinical trials may expedite the global development program as well as support regulatory approval in China. The initial cancer indication we are pursuing for NBTXR3 in China is locally advanced HNSCC as part of the ongoing Phase 3 NANORAY-312 clinical trial. We initiated enrollment in the NANORAY-312 trial in LianBio territories in September 2022. Additionally, we plan to join potential future pivotal studies in other solid tumor indications. We believe that NBTXR3 activated by RT has the potential to modulate antitumor immune response, and we may join Nanobiotix’s future registrational trials of NBTXR3 in combination with anti-PD-1 antibodies for the treatment of certain solid tumors. We believe NBTXR3 has the potential to be used in the treatment of up to 925,000 patients in China each year across our current potential solid tumor target indications, including an estimated 25,000 patients with locally advanced H&N cancer, up to 150,000 patients with other solid tumors (with or without additional chemotherapy), and up to 750,000 patients in combination with RT and immunotherapy.
Infigratinib, a targeted FGFR1-3 inhibitor for the potential treatment of gastric cancer
We have partnered with BridgeBio Pharma, Inc. (“BridgeBio”) and its affiliate QED Therapeutics, Inc. (“QED”) to develop and commercialize infigratinib in Mainland China, Hong Kong and Macau for FGFR-driven tumors. Infigratinib is an orally administered, ATP-competitive, FGFR1-3 tyrosine kinase inhibitor in development for the treatment of individuals with FGFR-driven diseases. Infigratinib is approved in the United States for the treatment of patients with previously-treated, unresectable locally advanced or metastatic cholangiocarcinoma (“CCA”) harboring an FGFR2 fusion or rearrangement. Infigratinib has also shown clinical activity in advanced and/or metastatic urothelial carcinoma with FGFR3 genomic alterations, and FGFR1-amplified lung cancer. We believe infigratinib has the potential to become an important treatment option for patients with FGFR-driven cancers, including those with high prevalence rates across Asia, such as gastric and related cancers.

Incidence and Mutation Rate of Gastric Cancer in the United States and China
United States
China
Diagnosed Incidence
Estimated Occurrence of FGFR2 Genomic Alterations
Diagnosed Incidence
Estimated Occurrence of FGFR2 Genomic Alterations
FGFR Genomic Alterations
GC...........................................
~26k
4.0 %
~480k
4.6 %
FGFR2 amplification
CCA disease overview
Gastric cancer overview
Gastric cancer develops from the cancerous transformation of cells that line the stomach. There are geographic and ethnic differences in the incidence of gastric cancer around the world, suggesting that environmental factors, including Helicobacter pylori infection, salt intake and concentrated use of nitrates as food preservatives, have an important role in its development.
Gastric cancer is the second most common type of cancer in China and the third leading cause of cancer-related deaths. Worldwide, there are approximately 1.2 million newly diagnosed cases of gastric cancer yearly and an estimated 480,000 newly diagnosed cases annually in China. The five-year survival rate for gastric cancer in China is 27.4%. Globally, the five-year survival rate for gastric cancer patients with distant metastatic disease is 6%.
Complete surgical removal of the tumor in early-stage disease can be curative. However, by the time of diagnosis, the majority of patients have advanced disease and are treated with systemic chemotherapy. First-line chemotherapy is typically with cytotoxic agents used in combination, such as fluorouracil, cisplatin, epirubicin and oxaliplatin.
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Approximately 22,000 patients with gastric cancer in China have tumors with FGFR2 gene amplification. FGFR1, FGFR2 and FGFR3 are tyrosine kinase receptors that play a pivotal role in the regulation of cell growth, with important functions in tissue repair, angiogenesis and inflammation in adults. However, given the role in these functions, FGFR dysregulation is believed to be involved in cancer pathogenesis. Genetic alterations in the FGFR pathway have been found in over 7% of all tumor types, making it one of the most frequently altered pathways. Patients with gastric cancer expressing FGFR2 gene amplification have significantly reduced survival rates compared to other patients with gastric cancer. We believe that FGFR inhibitors have the potential to provide therapeutic benefit to patients in China.
Infigratinib development path
Infigratinib has demonstrated encouraging clinical activity in chemotherapy-refractory CCA with FGFR2 fusions, advanced urothelial carcinoma with FGFR3 genomic alterations, and FGFR1-amplified lung cancer. In May 2021, the FDA approved infigratinib for the treatment of patients with previously-treated, unresectable locally advanced or metastatic CCA harboring an FGFR2 fusion or rearrangement under the accelerated approval program. We licensed infigratinib from QED as part of our collaboration with BridgeBio for development and commercialization in Mainland China, Hong Kong and Macau. We plan to pursue local development strategies in China with a focus on gastric cancer, with the possibility of leading infigratinib’s global development in gastric cancer indications. We initiated a Phase 2a proof of concept clinical trial in patients with locally advanced or metastatic gastric cancer or gastroesophageal junction adenocarcinoma with FGFR2 genetic amplification and other solid tumors with FGFR alterations in August 2021.
In October 2022, we reported that our partner, BridgeBio, informed us that Helsinn Healthcare SA, which holds the Truseltiq (infigratinib) NDA in the United States, is permanently discontinuing distribution of the drug and anticipates requesting withdrawal of the NDA in the United States due to business reasons. Due to the planned withdrawal of the NDA, BridgeBio informed us that it intends to close the ongoing global Phase 3 PROOF-301 clinical trial of infigratinib in first-line CCA. Consequently, we are terminating activities related to the PROOF-301 clinical trial in China and no longer plan to pursue development and commercialization of infigratinib in CCA indications in our licensed territories. Subject to physician determination, we intend to continue to support patients who are currently being treated with infigratinib under the special pilot program implemented in the Bo’ao Lecheng pilot zone in Hainan Province.
We expect to continue the ongoing Phase 2a China standalone proof of concept clinical trial of infigratinib in patients with locally advanced, metastatic gastric cancer or gastroesophageal junction adenocarcinoma with FGFR2 genetic amplification and other solid tumors with FGFR alterations. We expect to report topline data from this clinical trial in the second half of 2023.
Results from phase 2 and phase 1 clinical trials
A Phase 2 global, open-label, single arm clinical trial of infigratinib was conducted by QED in advanced CCA patients with FGFR2 fusions or translocations who previously failed gemcitabine-based chemotherapy. The primary endpoint was overall response rate. A final analysis conducted in 108 patients demonstrated an overall response rate of 23%, most of which were partial responses. One patient had a complete response. Median PFS was 7.3 months and median OS was 12.2 months.


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Clinical Activity of Infigratinib in Advanced CCA
Activity Endpoints in the Full Analysis Set...................................................................................
N=108
BICR-assessed objective response rate, % (95% CI)......................................................................
23.1% (15.6-32.2)
   ≤1 previous line of therapy (n=50)34.0%
   ≥2 previous lines of therapy (n=58)7.4%
BICR-assessed best overall response
Complete response, n (%).....................................................................................................
1 (1%)
Partial response, n (%).........................................................................................................
24 (22%)
Stable disease, n (%)............................................................................................................
66 (61%)
Unconfirmed complete response or partial response...................................................................
12 (11%)
Progressive disease, n (%).....................................................................................................
11 (10%)
Unknown, n (%).................................................................................................................
6 (6%)
BICR-assessed confirmed or unconfirmed response, % (95% CI)....................................................
34.3% (25.4-44.0)
BICR-assessed disease control rate, % (95% CI)...........................................................................
84.3% (76.0-90.6)
BICR-assessed median duration of response (IQR), months............................................................
5.0 (3.7-9.3)
BICR-assessed median PFS (95% CI), months................................................
7.3 (5.6-7.6)
Median overall survival (95% CI), months...................................................................................
12.2 (10.7-14.9)
* BICR=blinded independent central review

Infigratinib-associated toxicity was manageable, with expected on-target class effects, which include hyperphosphatemia, the most common adverse event reported in trials of infigratinib. Development of hyperphosphatemia in clinical trials of infigratinib was generally reversible and managed using standard phosphate binders.

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Treatment-Emergent AEs reported in Infigratinib Phase 2 clinical trial in advanced CCA: any grade AEs > 20%
Number of Patients (%)
Any Grade
Hyperphosphatemia................................................................................................................................
83 (77%)
Stomatitis..............................................................................................................................................
59 (55%)
Fatigue..................................................................................................................................................
43 (40%)
Alopecia................................................................................................................................................
41 (38%)
Dry Eye.................................................................................................................................................
37 (34%)
Palmar-plantar Erythrodysesthesia Syndrome................................................................................................
36 (33%)
Arthralgia..............................................................................................................................................
34 (31%)
Dysgeusia..............................................................................................................................................
34 (31%)
Constipation...........................................................................................................................................
32 (30%)
Dry Mouth.............................................................................................................................................
27 (25%)
Hypercalcemia........................................................................................................................................
27 (25%)
Blood creatinine concentration increased......................................................................................................
26 (24%)
Diarrhea................................................................................................................................................
26 (24%)
Dry skin................................................................................................................................................
25 (23%)
Decreased appetite...................................................................................................................................
24 (22%)
Hypophosphatemia..................................................................................................................................
24 (22%)
Vision Blurred........................................................................................................................................
23 (21%)
AST concentration increased.....................................................................................................................
23 (21%)
Vomiting...............................................................................................................................................
23 (21%)
Similar antitumor activity was reported from a Phase 1 open label trial of infigratinib conducted by Novartis AG in 67 patients with advanced, unresectable or metastatic urothelial carcinoma. In this trial, patients had an objective response rate of 25.4% when treated with infigratinib as first-line or later therapy. In addition, one patient achieved a complete response.
Infigratinib has been studied in over 700 patients to date. It has shown acceptable tolerability with expected on-target class effects, which include hyperphosphatemia, the most common adverse event reported in trials of infigratinib. Most patients with hyperphosphatemia have no symptoms. However, in rare cases, some patients develop calcium deposits in soft tissue. Hyperphosphatemia is believed to be a class-specific, mechanism-based toxicity caused by FGFR inhibition leading to dysregulation of FGF23, resulting in phosphorus retention. Development of hyperphosphatemia in clinical trials of infigratinib was generally reversible and managed using standard phosphate binders.
Our strategy for the development of infigratinib in gastric cancer in China
We initiated a Phase 2a proof of concept trial in China for FGFR2 amplified gastric cancer and other solid tumors with FGFR alterations in August 2021. The results of the Phase 2a trial will inform our development strategy moving forward. As part of our Phase 2a trial, we are including a cohort of patients with tumors that have FGFR alterations that are not related to gastric cancer, gastroesophageal junction cancer, urothelial cancer or CCA. The results of this cohort may guide our further development strategy in tumor-agnostic treatment. We expect to report topline data from this trial in the second half of 2023.
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In December 2021, infigratinib was approved by the Health Commission and Medical Products Administration of Hainan Province, under the special Named Patient Program (“NPP”), for the treatment of patients with previously treated, unresectable locally advanced or metastatic CCA with a FGFR2 fusion or other rearrangement. The special NPP was enacted by the State Council of PRC as a pilot program implemented in the Bo’ao Lecheng International Medical Tourism Pilot Zone to accelerate patient and physician access to urgently needed medicines that are approved in certain jurisdictions, but not yet approved in Mainland China. Subject to physician determination, we intend to continue to support patients who are currently being treated with infigratinib under the special pilot program implemented in the Bo’ao Lecheng pilot zone in Hainan Province.
We plan to initiate a Phase 2 trial of infigratinib in locally advanced or metastatic gastric cancer with FGFR2 gene amplification in the first half of 2024 to support regulatory approval in China.
BBP-398, a SHP2 inhibitor for the potential treatment of MAPK-driven solid tumors
BBP-398 is an orally available allosteric inhibitor of SHP2, a tyrosine phosphatase that plays a key role in the RTK-mediated MAPK signal transduction pathway. We have partnered with BridgeBio and its affiliate Navire Pharma, Inc. (“Navire”) to develop and commercialize BBP-398 in Greater China, Thailand, Singapore and South Korea. We plan to develop BBP-398 in combination with an epidermal growth factor receptor (“EGFR”)-inhibitor and in combination with PD-1 inhibitors for the treatment of drug-resistant and other hard-to-treat MAPK-driven solid tumors, including non-small-cell lung carcinoma (“NSCLC”). We initiated a Phase 1 monotherapy dose escalation trial of BBP-398 in Chinese patients with advanced solid tumors in November 2022. We received clearance from the NMPA to enroll patients in China in a local Phase 1a/1b clinical trial of BBP-398 in combination with osimertinib, and we plan to initiate this study in the second half of 2023.
NSCLC disease overview
An estimated 1.8 million people die of lung cancer each year. Lung cancer is the leading cause of cancer-related death, accounting for approximately 18% of all cancer deaths globally. NSCLC accounts for 80% to 85% of lung cancer cases. There are an estimated 670,000 patients diagnosed with NSCLC each year in China.
Genetic profiling of tumors has identified a number of genes that are altered in NSCLC, including MAPK, which has been identified as one of the most important signaling pathways in promoting tumor growth in many types of cancer. Upregulation of MAPK signaling is a common mechanism of resistance to targeted therapies. SHP2 is a protein tyrosine phosphatase that positively regulates MAPK signaling. Additionally, SHP2 has a role in regulating immune checkpoint inhibition, whereby tumors can suppress patients’ anti-tumor immune responses.

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Signaling Through Receptor Tyrosine Kinases and RAS Converge on SHP2

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NSCLC current standard of care
Targeted therapies developed for the proteins encoded by some of the genes most commonly upregulated in NSCLC, such as EGFR and the anaplastic lymphoma kinase gene (“ALK”), have been approved and are now part of the standard of care. In China, approximately 36-39% of NSCLC cases contain mutations in EGFR, double the rate found in the United States. EGFR-targeted therapies such as osimertinib lead to clinical benefit in more than 65% of patients treated. However, almost all of these patients will acquire resistance to these therapies. Up to two-thirds of NSCLC patients who do not have EGFR or ALK gene alterations or who develop resistance to targeted therapies have tumors that express PD-L1 and are candidates for checkpoint inhibitor therapies. Despite the availability of targeted agents and immunotherapies, the prognosis in NSCLC remains poor, with an overall five-year survival rate for all patients diagnosed with NSCLC of 19%.
One method by which tumors develop resistance to therapeutic inhibitors of kinases such as EGFR is by shifting growth factor signaling to an alternate receptor. However, signaling from many of these pathways converges on SHP2, making it a highly attractive target for oncology drug development. Inhibition of SHP2 may be an effective way to restore sensitivity to kinase inhibitors by blocking signaling through common resistance pathways as confirmed by cellular and animal model experiments. We believe an inhibitor of SHP2 has the potential to be used as a targeted cancer therapy both as a monotherapy as well as in combination with multiple therapies targeted against the RAS pathway or receptor tyrosine kinases, as well as in combination with immunotherapies including PD-1 inhibitors. We believe that BBP-398’s favorable tolerability profile with no major overlapping AEs with key targeted therapies positions this agent as an attractive combination partner.
BBP-398 development path
In preclinical studies, BBP-398 blocked RAS and MAPK signaling and inhibited cell growth of tumor cell lines containing EGFR amplification and KRAS activating mutations. As a monotherapy in mouse xenograft models, BBP-398 prevented tumor growth of EGFR amplified and KRAS-mutant tumors. In a model of EGFR tyrosine kinase inhibitors (“TKI”)-resistant NSCLC, neither IACS-13909, a preclinical compound with a profile similar to BBP-398, nor osimertinib led to tumor shrinkage in most mice. However, the combination of IACS-13909 with osimertinib led to tumor shrinkage in all treated mice.

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Our partner Navire is currently dosing patients in a Phase 1/1b clinical trial of BBP-398 in approximately 60 patients with advanced solid tumors. Navire announced in October 2022 that the company had begun dosing patients in a Phase 1/2 clinical trial of BBP-398 in combination with sotorasib in advanced solid tumors with the KRAS G12C mutation. BridgeBio has also indicated its plans to study BBP-398 in combination with nivolumab in advanced solid tumors with KRAS mutations.
In May 2022, BridgeBio entered into an exclusive license agreement with BMS to develop and commercialize BBP-398 outside of LianBio’s licensed territories. Under the terms of the agreement, BridgeBio will lead its ongoing Phase 1 trials, and BMS will lead and fund all other development and commercial activities outside of LianBio’s licensed territories.
Our clinical development strategy for BBP-398 in China
We intend to develop BBP-398 in China as part of a global development plan in partnership with Navire. Our strategy is to initially conduct an abbreviated monotherapy dose escalation trial in China followed by a monotherapy expansion arm. We then plan to lead a local trial of BBP-398 in combination with osimertinib in NSCLC. We believe the higher rate of EGFR mutations in China compared to the United States confers key advantages and we plan to leverage the anticipated large addressable patient population and augmented enrollment capabilities to inform the development strategy of BBP-398 in our licensed territories. We believe there are approximately 250,000 patients diagnosed with EGFR-mutant NSCLC in China each year.
We also plan to conduct a local Phase 1/2a trial in combination with a PD-1 inhibitor in solid tumor indications, leveraging the unique PD-1 landscape in China to seek out opportunities that otherwise may be inaccessible within the United States and other major markets. Key market advantages in China include a wide variety of potential PD-1 combination partners, a differentiated set of indications for which PD-1s are approved or in development in China and differences in epidemiology of target indications. We have prioritized indications for development based on strong scientific rationale for BBP-398/PD-1 combination. We believe there are approximately 900,000 PD-L1 positive patients (defined as those with PD-L1 expression >1%) across select high-incidence tumor types in which PD-1s are approved in China. SHP2i has the potential to impact the tumor cells directly as well as reshape the tumor microenvironment through effects on T-cells and macrophages, among other factors. We have selected several tumor types with evidence of SHP2i impacting both tumor cells and microenvironment for inclusion in an exploratory Phase 1 dose escalation trial. We may also in the future join global combination trials with inhibitors of KRAS, BRAF, MEK or CDK4/6 conducted by our partner Navire.
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In November 2022, we announced that we began dosing Chinese patients in a two-part Phase 1 dose escalation and dose expansion clinical trial of BBP-398 in advanced solid tumors. Part 1 is a dose escalation to establish the recommended Phase 2 dose of BBP-398 and assess the pharmacokinetic profile of BBP-398 in Chinese patients. Part 2 is a dose expansion to examine preliminary antitumor activity in patients with advanced or metastatic EGFR-mutant NSCLC.
We also received clearance from the NMPA to enroll patients in China in a local Phase 1a/1b clinical trial of BBP-398 in combination with osimertinib. We expect to initiate this trial in the second half of 2023.
LYR-210 for the potential treatment of chronic rhinosinusitis
We have partnered with Lyra Therapeutics, Inc. (“Lyra”) to develop and commercialize LYR-210 in Greater China, South Korea, Singapore and Thailand. LYR-210 is an anti-inflammatory implantable drug matrix that is designed to consistently and locally elute mometasone furoate (“MF”) to inflamed mucosal sinus tissue for up to six months with a single administration. Chronic rhinosinusitis (“CRS”) is an inflammatory disease of the paranasal sinuses which leads to debilitating symptoms and significant morbidities. CRS constitutes a substantial disease burden in Asia, with 88 million cases in Chinese adults ages 18-74 alone, an estimated 3.4 million of whom have failed currently available medical management. In December 2020, Lyra announced positive topline results from its Phase 2 LANTERN clinical trial demonstrating statistically significant improvement in symptom scores. Lyra has announced the initiation of its Phase 3 ENLIGHTEN I clinical trial of LYR-210 in adult, surgically naïve CRS patients and plans to initiate ENLIGHTEN II, the second Phase 3 clinical trial, in the third quarter of 2023. We plan to conduct a Phase 3 China standalone trial to support regulatory approval in China, leveraging the results of Lyra’s Phase 3 program.
CRS disease overview
CRS is an inflammatory disease of the paranasal sinus in which the mucosa lining the sinuses become swollen and inflamed, leading to significant patient morbidities. Inflammation may be caused by infections, allergies or environmental factors, as well as structural issues such as blockages of an ostium. If the sinus drainage pathways become blocked, normal mucus drainage is prevented and damage to ciliary function may occur. The four cardinal symptoms of CRS are nasal obstruction and congestion, facial pain and pressure, nasal discharge and olfactory loss (loss of sense of smell). Other symptoms include chronic headaches, bodily pain, fatigue, sleep deprivation, depression and recurrent infections. CRS may be diagnosed when two of the four cardinal symptoms persist for 12 weeks or longer and when inflammation is confirmed via endoscopy or CT scan.
CRS has two phenotypes: CRS with nasal polyps, which are teardrop-shaped benign masses arising from the mucosa, and CRS without nasal polyps, with the non-polyp form representing approximately 70% to 90% of CRS patients. Patients with polyps develop non-cancerous polyps on the chronically inflamed surfaces, but both subgroups typically share the same symptoms and level of severity. Currently, the majority of therapies target CRS patients with polyps and there are no approved treatments for CRS patients without polyps who have failed medical therapy, creating a vast untapped market opportunity for a more effective treatment solution.
Current standard of care for CRS
Current treatments are directed towards managing the symptoms of CRS through a combination of medical management and surgical intervention techniques. The first line of therapy is medical management involving nasal saline irrigation, intranasal corticosteroid sprays and oral steroids. Antibiotics are employed for patients with an active sinus infection. It is estimated that at least 40% of CRS patients in China who are seen by ENT physicians and receive medical management remain symptomatic. In addition to its use as a first line of therapy, medical management is utilized as a maintenance therapy for patients who receive surgery.
CRS patients whose symptoms persist despite medical management are generally recommended to undergo functional endoscopic sinus surgery (“FESS”) or balloon sinus dilation (“BSD”), or both. FESS is a highly invasive surgery performed in the operating room, under full anesthesia, to open the blocked sinus pathways by removing inflamed tissue and bone. Approximately 65% of patients have recurrent symptoms post-FESS and up to 20% require a revision surgery. BSD is a less severe form of endoscopic sinus surgery, often used in combination with FESS, in which small balloon catheters are inserted and inflated to drain the large nasal sinuses. Although FESS and BSD can improve symptoms and quality of life, limitations remain. Neither corrects the underlying cause of the inflammation and patients who undergo either or both procedures often experience significant pain and require continued post-operative medical therapy to maintain improvements, with a high incidence of repeat symptoms and surgeries. Physicians report that many patients, when presented with sinus surgery as a treatment option, opt to forego the procedure, as some patients regard the often temporary benefits provided by surgery as not worth the expense, recovery time or use of general anesthesia.
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For refractory patients with nasal polyps, who remain symptomatic following surgery, certain non-surgical options are available. A steroid-eluting implant that continuously delivers three months of low-dose MF was approved in the United States, although not in China, to treat adults with nasal polyps. However, this stent only has a two- to three-month elution profile, requiring frequent visits to an ENT’s office. Monoclonal antibodies (“mAbs”), targeting type 2 inflammation, including Dupixent, Xolair and Nucala, have been approved in the United States for the treatment of adults with nasal polyps. Dupixent and Xolair have been approved in China for atopic dermatitis and for asthma, respectively, and, while not approved in China for polyps, they have been included in the treatment guidelines for CRS with nasal polyps. Nasal polyps are a condition of local inflammation and physicians prefer to treat them locally before moving on to systemic treatments, due in part to limited data regarding long-term safety of systemic biologics in the treatment of CRS. In addition to the limitations described, these treatment options are only used for the treatment of nasal polyps, leaving non-polyp patients who are refractory with no approved treatment options.
LYR-210 overview
We believe LYR-210, if successfully developed and approved, has the potential to become a treatment for patients that have failed medical management as an alternative to surgery for CRS patients, both with and without polyps. We believe it is the only product candidate that may provide up to six months of local delivery of anti-inflammatory medication with a single administration. LYR-210 is designed to enhance patient comfort and physician experience and to eliminate patient compliance issues associated with other CRS treatments, such as intranasal steroid sprays. The brief, non-invasive, in-office procedure allows for implantation without the need for surgery.

Illustration of Placement of LYR-210 in Middle Meatus

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LYR-210 is an investigational local drug delivery system based on Lyra’s XTreoTM platform, which is a proprietary drug delivery technology designed to locally and continuously deliver drugs to affected tissue over a sustained period of time from a single administration. It is designed to fit within, and conform to, the confined space of a surgically-naïve patient’s middle meatus, a space that plays a fundamental role in drainage of the paranasal sinuses. LYR-210 consists of MF, which has been an active ingredient in a number of FDA-approved drugs. MF is embedded in biocompatible polymers to aid in the controlled and sustained delivery of the active ingredient to the sinonasal mucosal tissue from a single drug administration. LYR-210 has a tubular braid configuration with a uniform diamond pattern throughout and is 13mm in diameter and 10mm in length in the unconstrained state. It has elastic properties to promote patient comfort and is designed to be self-retaining against the mucosal tissue to allow effective drug transfer.
LYR-210 is intended to be administered bilaterally into the non-operated middle meatus by an ENT physician under endoscopic visualization via a provided, single-use applicator. It is designed for office-based administration performed with topical anesthesia. Once administered, LYR-210 is designed to gradually release MF to the inflamed mucosal tissue for up to six months from a single administration. LYR-210 can be removed at six months or earlier at the physician’s discretion using standard instruments and, if needed, replaced with a new LYR-210. LYR-210 is made with bioresorbable polymers that, if left in place, gradually dissolves over time.
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LYR-210 development path
Lyra plans to conduct two Phase 3 trials of LYR-210, ENLIGHTEN I and ENLIGHTEN II, to support regulatory approval in its territories. Lyra expects to complete enrollment in ENLIGHTEN I in mid-2023. Lyra expects to resume enrollment in ENLIGHTEN II in the third quarter of 2023 following a temporary pause in enrollment to align with internal manufacturing timelines for clinical trial supply.
Results from phase 2 LANTERN clinical trial
Lyra presented positive topline and full results from its Phase 2 LANTERN clinical trial in December 2020 and April 2021. The LANTERN clinical trial was a randomized, sham procedure-controlled, patient-blinded study that evaluated adult patients with CRS who had failed previous medical management and had not undergone FESS. The clinical trial enrolled 67 patients, with enrollment curtailed due to the COVID-19 pandemic, across Australia, Czech Republic, New Zealand and Poland. The clinical trial consisted of three arms with a 1:1:1 randomization: an experimental arm with bilateral placement of 2,500 µg of LYR-210; an experimental arm with bilateral placement of 7,500 µg of LYR-210; and a control arm with bilateral sham procedure only. Patients were also supplied with saline for daily nasal irrigation treatment during the course of the treatment period.

Results from 4 Cardinal Symptoms Composite Score (4CS)

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The primary endpoint of the clinical trial was the change from baseline in the 7-day average scores of the 4 cardinal symptoms composite score (“4CS”) at week 4. The 4CS is comprised of the four cardinal symptoms of CRS, as described earlier, that are scored 0-3 with a total score of up to 12. At the 7,500 µg dose, LYR-210 achieved statistically significant improvement in the 4CS composite score in favor of the treatment arm at weeks 16 (-1.47) (p=0.021), 20 (-1.61) (p=0.012) and 24 (-1.64) (p=0.016).
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Results 22-Item Sino-Nasal Outcome Test (SNOT-22)

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Mean change from baseline (CFBL) in SNOT-22 total score. Data represents LSM. P<0.05 is considered statistically significant to control MCID = Minimal Clinically Important Difference. 1Hopkins et al., Clinical Otolaryngology 2009, 34, 447–454.
The secondary endpoints of the LANTERN clinical trial included the Sino-Nasal Outcomes Test score (the “SNOT-22 score”), symptom improvement at week 24, sinus imaging to assess reduction in inflammation, time to treatment failure, reduction in inflammation, frequency of exacerbations and plasma PK. A single administration of LYR-210 7500 µg achieved statistically significant improvement in the SNOT-22 score in favor of the treatment arm at weeks 8 (-12.2) (p=0.039), 16 (-15.0) (p=0.008), 20 (-18.4) (p=0.001) and 24 (-19.0) (p=0.001). Furthermore, all patients, both with and without polyps, receiving the 7500 µg dose of LYR-210 achieved the minimal clinically important difference (“MCID”) of 8.9 points for SNOT-22 by week 24.
LYR-210 was observed to be well-tolerated at all doses in the study, and no treatment related SAEs were reported. AEs were generally mild to moderate in nature and in line with the known safety profile of MF. While there was one subject in the 2500 µg group that experienced an SAE of increased viscosity of upper respiratory secretion, treatment-related AEs in the control and 7500 µg groups occurred at comparable rates. LYR-210 had high levels of intranasal retention out to 24 weeks. There were no AEs associated with the matrices that were dislodged.
In the LANTERN 24-week post-treatment follow-up, approximately 50% of patients experienced a durable response post-removal of LYR-210 (7500 µg), with no worsening of 4CS scores from Week 24, compared to approximately 90% of control patients who either experienced a worsening of 4CS scores or required a rescue treatment. LYR-210 continued to show strong safety post removal with no increased incidence of treatment related AEs.
Our strategy to seek regulatory approval in China
We plan to conduct a Phase 3 China standalone trial to support regulatory approval in China, leveraging the results of Lyra’s Phase 3 program.
Inflammatory disease
NX-13 and omilancor for the potential treatment of inflammatory bowel disease
In 2021, we partnered with Landos BioPharma, Inc. (“Landos”) to develop and commercialize NX-13 and omilancor in Greater China, Cambodia, Indonesia, Myanmar, Philippines, Singapore, South Korea, Thailand, and Vietnam in inflammatory bowel disease (“IBD”).
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NX-13 is an oral, gut-restricted small molecule targeting the novel NLRX1 pathway. NX-13 works to decrease inflammasome activity and reduce reactive oxygen species, resulting in reduced differentiation of effector CD4 T-cells as well as promoting maintenance of intestinal barrier integrity. NX-13 has the potential to target moderate to severe ulcerative colitis (“UC”) and Crohn’s Disease (“CD”). Landos announced topline results from a Phase 1b trial of NX-13 in UC patients in August 2022. The data showed favorable safety and tolerability profiles across a range of doses, as well as signals of clinical improvement in as few as two weeks in patient symptoms and four weeks by endoscopy in exploratory endpoints.
Omilancor is an orally administered, gut-restricted small molecule activator of the lanthionine synthetase C-like protein 2 (“LANCL2”) pathway, which is upstream of multiple key regulators of inflammation that can intercept autoimmune disease at multiple levels. Activation of LANCL2 enhances CD25/STAT5 signaling and increases oxidative metabolism to support the anti-inflammatory functionality of regulatory T-cells while decreasing TNF-α and IFN-γ production.
IBD overview
IBD is a chronic autoimmune inflammatory condition that primarily affects the intestines and colon. It is believed to be caused by a mix of genetic and environmental factors in which immune response is triggered from various potential stimulants such as bacteria crossing the intestinal lumen barrier. Diet and lifestyle are hypothesized to be key drivers of IBD, and IBD produces a variety of signs and symptoms ranging from mild to severe that negatively impact quality of life. The most common symptoms include abdominal pain, diarrhea, weight loss and anemia. IBD can lead to severe adverse outcomes including colectomy, disability and colorectal cancer. We estimate that there are 590,000 IBD patients in China.
IBD can be further classified into UC, which affects the large intestine (colon) and rectum, and CD, which can affect any part of the gastrointestinal tract but most commonly affects the small bowel. UC is more prevalent in ages 30-40 while CD is more prevalent in ages 20 to 30.
Both UC and CD can be classified as mild, moderate or severe, with treatments differing based on severity. In China, approximately 35% of active UC patients are classified as mild, 43% as moderate and 22% as severe. Additionally, 20% of patients experience at least one severe exacerbating symptom that requires hospitalization. In CD, approximately 30% of patients are classified as moderate and 17% as severe.

Current standard of care for IBD
The approach to diagnosis in China is similar to the United States, although the diagnosis rate is lower. A combination of fecal culture and imaging are used, and endoscopy and histopathology are deployed if the diagnosis is unclear after six months. The median time from symptom onset to diagnosis is three months for UC patients and 10 months for CD patients, and misdiagnosis is common. However, diagnosis has been improving in China, and there are now specialty medical centers established to focus on IBD, with additional treatment centers expected to be established in the future. China’s IBD treatment guidelines were more recently updated in 2018 and reference global guidelines. The treatment paradigm in China is similar to that in the United States. For mild UC patients, aminosalicylic acid (“ASA”) is commonly used for both induction and maintenance, while oral steroids are used for induction if ASA is not effective. Treatment of moderate UC starts with the same path as mild UC, and progresses to thiopurines if oral steroids are not effective, and chronic use may lead to multiple significant side effects. Infliximab can be used if thiopurines fail. In severe UC, IV steroids are used for the induction phase and can progress to infliximab if IV steroids are not effective. Other alternatives include cyclosporine, tacrolimus or surgery.
Similar to UC, mild CD is most often treated with ASA. Moderate CD is treated with oral steroids or thiopurines if oral steroids are not effective. Infliximab or adalimumab can be deployed if thiopurines are ineffective. In severe CD, surgery is recommended along with the aforementioned therapies.
While many therapies exist for UC and CD, unsatisfactory efficacy, side effects and inconvenient administration leave significant unmet need. There is a therapeutic gap for patients with mild to moderate disease. For these patients, steroids are not recommended for maintenance therapy due to the significant side effects, and ASA may be sub-optimal, but progressing to thiopurines may not offer an attractive benefit / risk profile. Certain biologics are associated with potentially SAEs, including leukopenia, immunosuppression, cancer, infection and death. We believe the gut-restrictive nature of omilancor and its potential to have a more benign safety profile than systemic biologics may result in a differentiated safety profile and could make it an important therapeutic option.
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NX-13 development path
Landos announced the completion of a Phase 1b trial of NX-13 in UC patients in August 2022. The data showed favorable safety and tolerability profiles across a range of doses, as well as signals of clinical improvement as few as two weeks in patient symptoms and four weeks by endoscopy in exploratory endpoints.
Landos plans to conduct a Phase 2 proof-of-concept clinical trial of NX-13 in UC, which will be dose-ranging, blinded, placebo-controlled, and statistically powered. Landos expects to achieve first site activation and initiate patient enrollment in the second quarter of 2023, and expects to report topline results from the trial by the fourth quarter of 2024.
Our strategy to seek regulatory approval in China
Should NX-13 advance into Phase 3 studies, we plan to join Landos’s potential future global pivotal trials of NX-13 by enrolling patients in LianBio territories.
Omilancor for the potential treatment of IBD
Omilancor is an orally administered, gut-restricted small molecule activator of the lanthionine synthetase C-like protein 2 (“LANCL2”) pathway, which is upstream of multiple key regulators of inflammation that can intercept autoimmune disease at multiple levels. Activation of LANCL2 enhances CD25/STAT5 signaling and increases oxidative metabolism to support the anti-inflammatory functionality of regulatory T-cells while decreasing TNF-α and IFN-γ production.
Landos completed a global Phase 2 trial in mild-to-moderate UC, which confirmed the safety and tolerability characteristics observed in an earlier Phase 1a trial. While this study showed a clinical remission rate of over 30%, it did not reach statistical significance due to a higher-than-expected placebo remission rate of over 20%.
Landos announced in January 2023 that following an in-depth review of their pipeline and overall development plans, omilancor was poised for partnering and continued clinical development in the future and that Landos would continue to explore collaborations and other arrangements that would provide additional resources and/or capabilities to advance omilancor. In February 2023, Landos announced the transfer of omilancor to Dr. Josep Bassaganya-Riera, Ph.D., the founder of Landos who previously served as its Chairman, President and CEO, and certain affiliated individuals and entities. Dr. Bassaganya-Riera subsequently launched NImmune Biopharma, Inc. (“NImmune”) to continue the development of its LANCL portfolio including omilancor.
In February 2023, we entered into an amendment to the Landos Agreement, reflecting that Landos has transferred and assigned substantially all of its rights in omilancor, and we have entered into a direct license agreement with NImmune setting forth the terms of our continued development and commercialization of omilancor in LianBio territories.
Our strategy to seek regulatory approval in China
Should omilancor advance into Phase 3 studies, we have the option to join potential future global pivotal trials of omilancor.
Competition
The biopharmaceutical industry is characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. There are many companies, including biotechnology and pharmaceutical companies, engaged in developing products for the indications our product candidates are designed to treat and in the therapeutic areas we are targeting. Many of our competitors may have substantially greater scientific, research and product development capabilities as well as greater financial, marketing and sales and human resources than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Accordingly, our competitors may be more successful than we may be in developing, commercializing, and achieving widespread market acceptance for their products.
An important part of our corporate strategy is to build a diversified product pipeline by acquiring or in-licensing and developing, or partnering to license and develop, product candidates that we believe are highly differentiated and have significant commercial potential. The acquisition or licensing of product candidates is very competitive and more established companies, which have acknowledged strategies to license or acquire products, may have competitive advantages over us, as may other emerging companies that take similar or different approaches to product acquisitions. We are aware of certain companies, including Zai Lab Limited and BeiGene, Ltd., that have business models that may compete directly with our own.
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We expect that our ability to compete effectively will depend on our ability to advance our existing product candidates through clinical development and regulatory approval in our licensed territories on a timely basis, license additional product candidates to build on our existing platform, establish and maintain patent and other proprietary positions in our technologies and products, and the efficacy, reliability, product safety, price and patent position of our product candidates approved for sale, if any. Our ability to achieve a leadership position in our licensed territories will depend largely upon our ability to maximize the approval, acceptance and use of our product candidates and the availability of adequate financial resources to fund our personnel costs, clinical testing and development initiatives and marketing efforts. Another key aspect of remaining competitive in the industry is recruiting and retaining leading scientists to advance our development programs and personnel with the commercial expertise to effectively market our products.
We believe our long-term competitive position will depend upon our success in developing, obtaining regulatory approval for and commercializing innovative, cost-effective product candidates that serve critical unmet needs, along with our ability to launch and market products effectively in a highly competitive environment.
For additional information about the competition that our product candidates face, see “Part I—Item 1A—Risk Factors.”
License and collaboration agreements
License Agreement with MyoKardia
In August 2020, we, together with our wholly owned subsidiary LianBio Licensing, LLC, entered into an exclusive license agreement with MyoKardia (as subsequently amended, the “MyoKardia Agreement”), under which we obtained an exclusive license under certain patents and know-how of MyoKardia to develop, manufacture, use, sell, import and commercialize MyoKardia’s proprietary compound, mavacamten, in the licensed territory of Mainland China, Hong Kong, Macau, Taiwan, Thailand and Singapore, and in the licensed field of any indication in humans, which includes any prophylactic or therapeutic use in humans. The MyoKardia Agreement was subsequently assigned to Lian Cardiovascular and then to Lian Cardiovascular Limited. Under the MyoKardia Agreement, we agreed not to develop and commercialize certain competing products for a certain specified period.
We are obligated to use commercially reasonable efforts to develop and commercialize mavacamten in our licensed field and licensed territory under a development plan and a commercial plan.
Under the terms of the MyoKardia Agreement, we paid to MyoKardia an upfront payment of $40.0 million and paid an additional $35.0 million upon a specified financing event, which occurred on October 29, 2020. In conjunction with entering into the MyoKardia Agreement, we also granted a warrant (the “MyoKardia Warrant”) to MyoKardia as partial consideration for the grant of certain licenses and rights to us pursuant to the MyoKardia Agreement. The MyoKardia Warrant is exercisable for 170,000 ordinary shares of Lian Cardiovascular, our wholly owned subsidiary, at any time and from time to time at the option of the holder. In accordance with the terms of that certain Amended and Restated Option Agreement dated as of August 10, 2020, by and among the Company, QED, MyoKardia and certain other parties thereto (the “Option Agreement”), MyoKardia had an option to (i) convert the 170,000 ordinary shares of Lian Cardiovascular into 2,924,011 of the Company’s ordinary shares or (ii) convert the MyoKardia Warrant into a warrant to purchase 103,805 of the Company’s ordinary shares, with an exercise price of $47.03 per share, in connection with the completion of our initial public offering. MyoKardia elected not to exercise this option and continues to hold the MyoKardia Warrant to purchase ordinary shares in Lian Cardiovascular. The Option Agreement, and MyoKardia’s option to convert the MyoKardia Warrant, irrevocably terminated upon the completion of our initial public offering.
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In addition, under the terms of the MyoKardia Agreement, if we achieve specified development and commercialization milestones, we will be required to pay to MyoKardia development milestone payments of up to $60.0 million and sales milestone payments based on cumulative sales of mavacamten of up to $87.5 million. In addition, if we successfully develop and commercialize mavacamten, we will pay MyoKardia tiered royalties on the sales of mavacamten at percentage rates ranging from the low- to upper-teens until the latest of the last-to-expire licensed patent covering mavacamten, the expiration of regulatory exclusivity for mavacamten, or the tenth anniversary of the first commercial sale of mavacamten, in each case on a product-by-product and region-by-region basis. As of the date of this Annual Report on Form 10-K, the last-to-expire patent under the agreement in Taiwan will have a twenty-year statutory expiration date in 2040 if allowed, and in each of the other licensed territories the last-to-expire patent is a Patent Cooperation Treaty (“PCT”) application and will have a twenty-year statutory expiration date in 2040, provided that such PCT application would be allowed in each of such licensed territories. The expected termination of the royalty obligations will depend on factors such as the filing of additional patents covering the licensed product during the term of the applicable agreement, the availability and application of patent term extensions and/or expiration of regulatory exclusivity for the licensed product in the licensed territory. We also have entered into a clinical supply agreement and agreed to enter into a commercial supply agreement, pursuant to which we will purchase mavacamten exclusively from MyoKardia for the clinical supply and commercial supply, respectively. However, we also have the right to have a third party manufacture mavacamten in the licensed territory in certain circumstances, including if MyoKardia fails to supply certain amounts of mavacamten.
The term of the MyoKardia Agreement will depend on the patent coverage we and MyoKardia may obtain, as well as any available regulatory exclusivity, in each region within the licensed territory. The MyoKardia Agreement will remain in effect until the expiration of all payment obligations, and may be earlier terminated by either party for the other party’s uncured material breach, bankruptcy, or insolvency. MyoKardia may also terminate the agreement for our failure to achieve certain key milestones, or if we challenge any of the licensed patents. We have the right to terminate the MyoKardia Agreement for convenience upon advance notice to MyoKardia.
On October 8, 2020, we entered into an amendment with MyoKardia to change the timing for the parties to enter into the development supply agreement. On January 4, 2021, we entered into a second amendment with MyoKardia to change the timing for the parties to enter into the development supply agreement and pharmacovigilance agreement; we have subsequently entered into those agreements.
License Agreement with QED Therapeutics, Inc.
In October 2019, we entered into a license agreement with QED (as subsequently amended, the “QED Agreement”), under which we obtained an exclusive, sublicensable license under certain patents and know-how (including patents and know-how that QED licensed from QED’s upstream licensor) to develop, manufacture, use, sell, import, and commercialize QED’s ATP-competitive, FGFR1-3 tyrosine kinase inhibitor, infigratinib, in pharmaceutical products in the licensed territory of Mainland China, Macau, Hong Kong, Taiwan, Thailand, Singapore and South Korea, in the licensed field of human prophylactic and therapeutic uses in cancer indications. In September 2020, we entered into an amendment with QED to reduce the licensed territories to include Mainland China, Macau and Hong Kong. In December 2021, we entered into a second amendment with QED to modify our development obligations with respect to certain clinical trials, and change the development milestone payments we owe to QED and the royalty rates for the tiered royalties on net sales of licensed products we will pay to QED.
Under the QED Agreement, we are obligated to use commercially reasonable efforts to develop and commercialize licensed products in our licensed field and licensed territory under a development plan. Under the terms of the QED Agreement, we are also responsible for funding all development and commercialization of the licensed products in our licensed territory. Our rights under the QED Agreement are subject to QED’s upstream licensor’s license to a third party to use infigratinib in combination with such third party’s proprietary compounds in clinical trials for oncology. If we (or QED) do not promptly respond to an inquiry from QED’s upstream licensor about whether we intend to seek regulatory approval for and commercialize infigratinib in a particular indication, then QED’s upstream licensor may grant such third party an exclusive, worldwide license commercialize infigratinib in combination with such third party’s proprietary compounds in the field of oncology.
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Under the terms of the QED Agreement, we made an upfront payment of $10.0 million. We also granted three warrants (collectively, the “QED Warrants”), valued at $1.0 million, to QED, exercisable for an aggregate of 100,000 ordinary shares of Lian Oncology, our wholly owned subsidiary, at an exercise price of $0.0001 per share. The QED Warrants subsequently vested and each underlying warrant was exercisable at any time and from time to time at the option of the holder. Pursuant to the Option Agreement, QED had an option to convert the QED Warrants into a warrant to purchase a certain number of our ordinary shares. On October 5, 2021, QED exercised its option to convert the QED Warrants. Accordingly, on October 18, 2021, we issued to QED a warrant to purchase 347,569 of our ordinary shares at an exercise price of $0.000017100448 per share and, concurrently with such issuance, the QED Warrants were deemed to be performed and settled in full and were irrevocably terminated.
In addition, under the terms of the QED Agreement, we will be required to pay QED development milestone payments of up to $7.0 million if we achieve specified development milestones, and sales milestone payments of up to $87.5 million if we achieve specified commercialization milestones. Additionally, if we successfully develop and commercialize the licensed products, we will pay QED tiered royalties on net sales of licensed products at the greater of (a) percentage rates in the mid- to high-teens on the net sales of the licensed products, or (b) the applicable rate payable under QED’s agreement with its upstream licensor (capped in the mid-teens), until the latest of the last-to-expire licensed patent, the expiration of regulatory exclusivity for the licensed product, or the tenth anniversary of the first commercial sale of the licensed product, in each case on a product-by-product and region-by-region basis. As of the date of this Annual Report on Form 10-K, the last-to-expire patent under the agreement is a Chinese priority application and will have a twenty-year statutory expiration date no later than 2043 in each licensed territory, provided such Chinese priority application will be converted to a non-provisional PCT application, enter each of the licensed territories and be allowed therein. The expected termination of the royalty obligations will depend on factors such as the filing of additional patents covering the licensed product during the term of the applicable agreement, the availability and application of patent term extensions and/or expiration of regulatory exclusivity for the licensed product in the licensed territory. We also entered into a clinical supply agreement and will enter into a commercial supply agreement pursuant to which we will purchase licensed products from QED or its assignee. We also have the right to manufacture licensed products in the licensed territory for development and commercialization of the licensed products in the licensed territory and licensed field.
The term of the QED Agreement will depend on the patent coverage we and QED may obtain, as well as any available regulatory exclusivity, in each region within the licensed territory. The QED Agreement will remain in effect until the expiration of the royalty term and may be earlier terminated by either party for the other party’s uncured material breach, bankruptcy or insolvency. We have the right to terminate the QED Agreement for convenience at any time upon advance notice to QED, and QED may terminate the agreement if we challenge any of the licensed patents.
In October 2020, we, together with our wholly owned subsidiary, LianBio Licensing, LLC, entered into a novation agreement with QED, pursuant to which the QED Agreement was novated and transferred from us to our wholly owned subsidiary LianBio Licensing, LLC. The QED Agreement was subsequently assigned to Lian Oncology and then to Lian Oncology Limited.
License Agreement with Navire
In August 2020, we, together with our wholly owned subsidiary, LianBio Licensing, LLC, entered into an exclusive license agreement with Navire (as subsequently amended, the “Navire Agreement”), under which we obtained an exclusive, sublicensable license under certain patents and know-how of Navire to develop, manufacture, use, sell, import and commercialize Navire’s proprietary SHP2 inhibitor, BBP-398 (formerly known as IACS-15509) in the licensed territory of Mainland China, Hong Kong, Macau, Taiwan, Thailand, Singapore, and South Korea, in the licensed field of diagnostic, prophylactic, palliative, and therapeutic uses or indications in humans. We also have certain option rights to take licenses to certain compounds or products that Navire or its affiliates may acquire during the term of the Navire Agreement to develop combination products or therapies in combination with the licensed compound. The Navire Agreement was subsequently assigned to Lian Oncology and then to Lian Oncology Limited.
Under the Navire Agreement, each party agreed not to develop and commercialize certain competing products for specified time periods. This obligation also extends to certain affiliates of each party.
We are obligated to use commercially reasonable efforts to develop and commercialize the licensed products in our licensed field and licensed territory under a development plan.
We also have the right to request to participate in certain clinical studies conducted by Navire intended to support development of licensed products outside of the licensed territory. If we do participate in such studies, we would include clinical study sites within the licensed territory and be responsible for the costs of such studies for the licensed territory.
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We also have the right to conduct our own local combination study for the licensed products within the licensed territory. Navire has the option to participate in such combination study and obtain a license to the resultant data in exchange for being responsible for a portion of the costs of such study.
Under the terms of the Navire Agreement, we made an upfront payment of $8.0 million, as well as an additional $8.5 million upon the occurrence of a specified milestone event, which occurred on June 29, 2021. We will be required to pay Navire development milestone payments of up to $24.5 million if we achieve specified development milestones, including the $8.5 million milestone payment referenced above, and sales milestone payments of up to $357.6 million if we achieve specified commercialization milestones. In addition, if we successfully develop and commercialize the licensed products, we will pay Navire tiered royalties on net sales of licensed products at percentage rates ranging from approximately 5-15% on the net sales of the licensed products until the latest of the last-to-expire licensed patent covering the licensed product, the expiration of regulatory exclusivity for the licensed product, or the tenth anniversary of the first commercial sale of the licensed product, in each case on a product-by-product and region-by-region basis. As of the date of this Annual Report on Form 10-K, the last-to-expire patent under the agreement will have a twenty-year statutory expiration date in 2039 in Mainland China, Hong Kong, Taiwan, Thailand, Singapore, and South Korea, if allowed. The expected termination of the royalty obligations will depend on factors such as the filing of additional patents covering the licensed product during the term of the applicable agreement, the availability and application of patent term extensions and/or expiration of regulatory exclusivity for the licensed product in the licensed territory. We have agreed to enter into separate supply agreements pursuant to which we will purchase licensed products exclusively from Navire. We also have the right to manufacture licensed products in the licensed territory for development and commercialization of the licensed products in the licensed territory and licensed field.
The term of the Navire Agreement will depend on the patent coverage we and Navire may obtain, as well as any available regulatory exclusivity, in each region within the licensed territory. The Navire Agreement with Navire will remain in effect until the expiration of all payment obligations, and may be earlier 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 upon advance notice to Navire, and Navire may terminate the agreement if we challenge any of the licensed patents. Upon termination of the Navire Agreement, we must grant to Navire an exclusive license under certain of our intellectual property to develop, manufacture, and commercialize the licensed products in the licensed territory.
In September 2020, we entered into two amendments with Navire to change the timing of the upfront payment, and to include the chemical structure for the licensed compound as an exhibit to the Navire Agreement. In December 2020, we entered into an amendment with Navire to change the timing for the parties to enter into the pharmacovigilance agreement and we have subsequently entered into such agreement.
Pfizer Strategic Collaboration
In November 2020, we entered into a strategic collaboration agreement (the “Pfizer Agreement”) with Pfizer, pursuant to which Pfizer agreed to contribute up to $70.0 million of restricted, non-dilutive capital (the “Funds”), $20.0 million of which was paid upfront, toward our in-licensing and co-development activities in Greater China. Under the Pfizer Agreement, Pfizer and we will form a joint collaboration committee to discuss potential third party in-license opportunities and development and commercialization of our products in Greater China for up to five products. In the event we seek to engage a third-party commercialization partner with respect to the commercialization of our future products in Greater China, Pfizer will have a right to opt into such product. Upon opting in, a portion of the Funds will become available for our use for development and commercialization costs of such product (“Opted-In Product”) and Pfizer will thereafter have a right of first negotiation and right of last refusal (“Options”) to obtain the commercialization rights of such Opted-In Product in Greater China, in each instance for additional, separate financial consideration, further details of which will be separately agreed and set forth in a separate commercialization agreement to be executed between us and Pfizer at such time (each, a “Commercialization Agreement”). During the collaboration, Pfizer may provide in-kind support to us for marketing, development and regulatory activities.
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The term of the Pfizer Agreement will depend on the status and progress of the collaboration activities of the parties. The Pfizer Agreement will remain in effect until the later of (a) the date on which we enter into our fifth Commercialization Agreement with Pfizer and (b) the date on which Pfizer has fully paid the Funds to us and all such amounts have become available for our use pursuant to the Pfizer Agreement. The Pfizer Agreement may be early terminated by either party for the other party’s uncured material breach and Pfizer also has the right to terminate the Pfizer Agreement for convenience upon advance notice to us. Under certain termination scenarios, Pfizer may opt to retain its Options with respect to existing Opted-In Products, in which case its obligation to contribute the Funds with respect to such Opted-In Products will survive termination. Under other termination scenarios, Pfizer will not retain its Options with respect to existing Opted-In Products but may remain obligated to contribute Funds up to an amount necessary to cover certain development costs of such Opted-In Products for a limited period of time. In December 2021, the Pfizer Agreement was assigned to LianBio Development (HK) Limited.
In December 2022, we entered into a commercial agreement with Pfizer (the “Pfizer Commercial Agreement”) with respect to sisunatovir as the first Opted-in Product under the Strategic Collaboration Agreement. Pursuant to the Pfizer Commercial Agreement, we assigned and transferred our development and commercialization rights to sisunatovir in Mainland China, Hong Kong, Macau and Singapore to Pfizer. We received a $20.0 million upfront payment, which was released as part of previously restricted cash paid by Pfizer to us in 2020 pursuant to the Strategic Collaboration Agreement. In addition, we are eligible to receive up to $135.0 million in potential development and sales milestones contingent on sisunatovir achieving a specified regulatory milestone event prior to the end of October 2035 and specified net sales milestone events. We are further entitled to receive tiered payments in the low single digits on a percentage of net sales of sisunatovir in the territory. Pfizer will lead all development and commercial activities and assume all costs in the territory, and will waive LianBio’s milestone payment and royalty payment obligations previously due to ReViral pursuant to the Co-Development and License Agreement dated March 1, 2021 by and between LianBio and ReViral, which was superseded in its entirety by the Pfizer Commercial Agreement.
License Agreement with Nanobiotix
In May 2021, we entered into a license, development and commercialization agreement with Nanobiotix (the “Nanobiotix Agreement”), under which we obtained an exclusive license under certain patents and know-how of Nanobiotix with certain rights to sublicense, to develop and commercialize Nanobiotix’s proprietary product NBTXR3 in the territory of Mainland China, Macau, Hong Kong, Thailand, Taiwan, South Korea and Singapore, in the licensed field of use of a product activated by RT in oncology. Under the Nanobiotix Agreement, both parties agreed not to develop, manufacture or commercialize competing products in the licensed territory, subject to customary exceptions.
We are obligated to use commercially reasonable efforts to develop, in accordance with a development and regulatory plan, and commercialize the licensed products in the field and in the licensed territory. We will participate in a global Phase 3 registrational study in H&N cancer for the licensed product and four additional registrational studies across indications and therapeutic combinations. We are obligated to use commercially reasonable efforts to enroll a certain percentage of study patients in the territory in such studies.
We agreed to purchase all licensed products for development and commercialization purposes from Nanobiotix. The parties agreed to execute, within a certain period following the execution of the Nanobiotix Agreement, a separate supply agreement for supply of licensed products in the licensed territory and we have subsequently entered into the clinical supply agreement with Nanobiotix. Under certain specified circumstances, we may request the appointment of a third-party contractor to be mutually agreeable to both LianBio and Nanobiotix for manufacturing licensed products for use in development and commercialization purposes in the territory.
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Under the terms of the Nanobiotix Agreement, we paid to Nanobiotix an upfront payment of $20.0 million. If we achieve specified development and sales milestones events, we may be required to make further milestone payments up to $65.0 million in development milestones and up to $155.0 million in commercial milestones to Nanobiotix. In addition, if we successfully develop and commercialize the licensed products, we will pay Nanobiotix tiered royalties of 10-13% of net sales of the licensed products until the latest of the last-to-expire valid claim of a Nanobiotix patent covering the licensed product, the expiration of regulatory exclusivity for the licensed product, or a the tenth anniversary of the first commercial sale of the licensed product, in each case on a licensed product-by-licensed product and country-by-country basis. As of the date of this Annual Report on Form 10-K, the last-to-expire patent under the agreement will be from a PCT application filed in 2021. The PCT application will have a twenty-year statutory expiration date in 2041 in each of the licensed territories, provided such PCT application would be extended or filed to each licensed territory through national phase and be allowed therein. The expected termination of the royalty obligations will depend on factors such as the filing of additional patents covering the licensed product during the term of the applicable agreement, the availability and application of patent term extensions and/or expiration of regulatory exclusivity for the licensed product in the licensed territory. Therefore the term of the Nanobiotix License will depend on the patent coverage we and our partners may obtain, as well as any available regulatory exclusivity, in each region within the licensed territory.
The Nanobiotix Agreement will remain in effect until the expiration of all royalty payment obligations, and may be earlier terminated by either party for the other party’s uncured material breach or insolvency. If we have a right to terminate for Nanobiotix’s material breach, we may elect, instead, to have the agreement continue with a specified reduction to all milestone and royalty payments owed by us. We may also terminate the Nanobiotix Agreement upon a specified notice period if Nanobiotix undergoes a change of control and, under that circumstance, we agree to complete our development activities in support of any ongoing global trial in accordance with the then-current global development plan. Nanobiotix may also terminate the agreement if we challenge any of the licensed patents or if we are acquired by a third party with a competing product and fail to meet certain commercialization benchmarks thereafter. Upon termination of the Nanobiotix Agreement with respect to one or more countries in the territory, we agree to grant to Nanobiotix a fully-paid, royalty-free, non-exclusive license, with the right to grant sublicenses through multiple tiers, under any and all party-inventions and patents claiming such party-inventions controlled by us or our affiliates that are necessary or reasonably useful for Nanobiotix to develop, manufacture, and commercialize the licensed product in the terminated territory.
License Agreement with Tarsus
In March 2021, we entered into a development and license agreement with Tarsus (the “Tarsus Agreement”), under which we obtained an exclusive license under certain patents and know-how of Tarsus to develop, commercialize, make and have made (under certain conditions), use, offer for sale, sell and import Tarsus’s proprietary product, TP-03, in the licensed territory of Mainland China, Hong Kong, Macau and Taiwan in the licensed field of treatment of Demodex blepharitis and Meibomian Gland Disease in humans. We also obtained a non-exclusive license, under certain conditions, to make and have made the licensed products outside the territory for exploitation in the field and in the territory. Under the Tarsus Agreement, we agreed not to exploit any competing product in the licensed territory.
We are obligated to use commercially reasonable efforts to develop and commercialize the licensed products in our licensed field and licensed territory. We agreed to achieve certain development milestones by specified deadlines that may be extended by paying an extension fee, creditable against subsequent development milestone payments if achieved.
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Under the terms of the Tarsus Agreement, we paid to Tarsus an upfront payment of $15.0 million and a second payment of $10.0 million, as well as an additional $30.0 million upon the occurrence of specified milestone events which occurred during 2021. We also issued three warrants (collectively, the “Tarsus Warrants”) to Tarsus exercisable for 125,000 ordinary shares in Lian Ophthalmology, our wholly owned subsidiary, representing 12.5% of the fully diluted equity of Lian Ophthalmology at fair market value as of the date of the transaction. The first of the Tarsus Warrants (the “first tranche”) became exercisable for 41,666 ordinary shares of Lian Ophthalmology at an exercise price of $109 per share in June 2021 as a result of the achievement of a specified milestone event. Tarsus also had an option to convert the ordinary shares of Lian Ophthalmology underlying the first tranche into 78,373 of our ordinary shares. The second and third of the Tarsus Warrants (the “second tranche” and the “third tranche,” respectively) were to become exercisable upon the achievement of certain milestone events for 41,667 ordinary shares of Lian Ophthalmology, at an exercise price of $109 per share. Tarsus also had an option, subject to the achievement of the same milestone events, to convert each of the second tranche and the third tranche into warrants exercisable for 78,373 of our ordinary shares, at an exercise price of $0.000017100448, in each case in accordance with the terms and conditions of the Option Agreement dated as of October 18, 2021 by and among the Company, Lian Ophthalmology and Tarsus (the “Tarsus Option Agreement”). On October 18, 2021, Tarsus exercised its options to convert the Tarsus Warrants under the Tarsus Option Agreement and we subsequently issued to Tarsus 78,373 of our ordinary shares and two warrants to purchase an aggregate of 156,746 of our ordinary shares at an exercise price of $0.000017100448 per share. Concurrently therewith, the Tarsus Warrants were irrevocably terminated. The two outstanding warrants expire on October 17, 2031.
In addition, if we achieve specified development and commercialization milestones, we may be required to pay milestone payments of up to $75.0 million (including the $30.0 million milestone payments referenced above) and $100.0 million, respectively, to Tarsus. In addition, if we successfully develop and commercialize the licensed products, we will pay Tarsus tiered royalties at percentage rates ranging from the low- to high-teens on the net sales of the licensed products until the latest of the last-to-expire licensed patent covering the licensed product, the expiration of regulatory exclusivity for the licensed product, or a the tenth anniversary of the first commercial sale of the licensed product, in each case on a product-by-product and region-by-region basis. As of the date of this Annual Report on Form 10-K, the last-to-expire patent under the agreement in Taiwan will have a twenty-year statutory expiration date in 2029, and in each of the other licensed territories the last-to-expire patent is a PCT application and will have a twenty-year statutory expiration date in 2040, provided that such PCT application would enter each of such other licensed territories and be allowed therein. The expected termination of the royalty obligations will depend on factors such as the filing of additional patents covering the licensed product during the term of the applicable agreement, the availability and application of patent term extensions and/or expiration of regulatory exclusivity for the licensed product in the licensed territory. We also agreed to enter into separate supply agreements pursuant to which we will purchase licensed products exclusively from Tarsus. However, we also have the right to have a third party manufacture the licensed products for the licensed territory in certain circumstances, including if Tarsus fails to supply certain amounts of licensed product.
The term of the Tarsus Agreement will depend on the patent coverage we and our partners may obtain, as well as any available regulatory exclusivity, in each region within the licensed territory. The Tarsus Agreement will remain in effect until the expiration of all royalty payment obligations, and may be earlier terminated by either party for the other party’s uncured material breach or bankruptcy. Tarsus may also terminate the agreement if we challenge any of the licensed patents. We have the right to terminate the Tarsus Agreement for convenience upon advance notice to Tarsus.
Upon termination of the Tarsus Agreement, we must assign and transfer to Tarsus certain product materials related to the licensed products that were created or generated under the agreement.
License Agreement with Landos
In May 2021, we entered into a license and collaboration agreement with Landos (the “Landos Agreement”), under which we obtained an exclusive license with the right to sublicense to affiliates and specified third parties under certain patents and know-how of Landos to develop, manufacture, commercialize and otherwise, make and have made, use, offer for sale, sell, have sold, and import Landos’s proprietary compounds, omilancor (formerly known as BT-11) and NX-13, in the licensed regions of Mainland China, Hong Kong, Macau, Taiwan, Cambodia, Indonesia, Myanmar, Philippines, Singapore, South Korea, Thailand and Vietnam. We also obtained an exclusive right of negotiation to obtain an exclusive license under applicable patents and know-how of Landos to exploit certain additional products with the same mechanism of action as any licensed compound that are being developed by Landos for use outside the licensed territory. Under the Landos Agreement, both parties agreed not to develop, manufacture, or commercialize competing products in the licensed territory, subject to customary exceptions.
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In February 2023, we entered into an amendment to the Landos Agreement, reflecting that Landos has transferred and assigned substantially all of its rights in omilancor to NImmune. As a result, the Landos Agreement will relate only to NX-13, and we have entered into a direct license agreement with NImmune setting forth the terms of our continued development and commercialization of omilancor in the above-mentioned licensed regions, as further detailed below.
We granted to Landos a non-exclusive license under any inventions and discoveries that we invent relating to the licensed product, for use in the development, manufacture, commercialization, and exploitation of the compound and licensed product anywhere in the world outside of the territory.
We are obligated to use commercially reasonable efforts to develop, seek regulatory approval for and, following receipt of marketing authorization, commercialize the licensed product in the field and in the licensed territory. Should we decide to participate in a global Phase 3 clinical trial for the licensed product, then we are obligated to use commercially reasonable efforts to enroll a certain percentage of study patients in the territory.
We agreed to purchase all licensed product for development and commercialization purposes from Landos. The parties agreed to execute, within a certain number of months following the execution of the Landos Agreement, a separate clinical supply agreement, and within a certain number of months prior to the first commercial sale, a separate commercial supply agreement, for supply of licensed product in the licensed territory. Under certain specified circumstances, we may assume responsibility for manufacturing the licensed product for use in development and commercialization purposes in the territory.
Under the terms of the Landos Agreement, we paid to Landos an upfront payment of $18.0 million. If we achieve specified development and sales milestones events, we may be required to make further milestone payments under the amended Landos Agreement of up to $40.0 million and $105.0 million, respectively, to Landos. In addition, if we successfully develop and commercialize the licensed product, we will pay Landos tiered royalties at percentage rates ranging from the low- to the mid-teens on the net sales of the licensed product until the latest of the last-to-expire licensed patent covering the licensed product, the expiration of regulatory exclusivity for the licensed product, or the tenth anniversary of the first commercial sale of the licensed product, in each case on a region-by region basis. As of the date of this Annual Report on Form 10-K, the last-to-expire patent under the agreement is a PCT application and will have a twenty-year statutory expiration date in 2039 in each licensed region, provided such PCT application will be extended to each licensed region and be allowed therein. The expected termination of the royalty obligations will depend on factors such as the filing of additional patents covering the licensed product during the term of the applicable agreement, the availability and application of patent term extensions and/or expiration of regulatory exclusivity for the licensed product in the licensed territory. The term of the Landos Agreement will depend on the patent coverage we and our partners may obtain, as well as any available regulatory exclusivity, in each region within the licensed territory. The Landos Agreement will remain in effect until the expiration of all royalty payment obligations, and may be earlier terminated by either party for the other party’s uncured material breach or insolvency. Landos may also terminate the agreement if we challenge any of the licensed patents. We have the right to terminate the agreement for convenience upon advance notice to Landos.
Upon termination of the Landos Agreement with respect to one or more regions, we agree to grant to Landos a worldwide, irrevocable, perpetual, transferable, exclusive license to certain product inventions and patent rights relating to the licensed product as it exists as of the time of termination, for use in the terminated territory. If the Landos Agreement is terminated after the first commercial sale of the licensed product, then we will assign and transfer, or exclusively license, to Landos any trademarks relating to the licensed product for use in the terminated territory. In addition, upon early termination of the agreement and at the request of Landos, we agreed to assign and transfer to Landos all regulatory filings and approvals and market authorizations for the licensed product for use in the terminated territory. If we terminate the agreement for Landos’s material breach, then Landos agrees to pay us for the licenses granted to Landos in the terminated territory, at an amount to be negotiated at the time of termination.
License Agreement with NImmune
In February 2023, we entered into a license and collaboration agreement with NImmune, under which we obtained an exclusive license with the right to sublicense to affiliates and specified third parties under certain patents and know-how of NImmune to develop, manufacture, commercialize and otherwise, make and have made, use, offer for sale, sell, have sold, and import NImmune’s proprietary compound, omilancor, in the licensed regions of Mainland China, Hong Kong, Macau, Taiwan, Cambodia, Indonesia, Myanmar, Philippines, Singapore, South Korea, Thailand and Vietnam. We also obtained an exclusive right of negotiation to obtain an exclusive license under applicable patents and know-how of NImmune to exploit additional products with the same mechanism of action as the licensed compound that may be developed by NImmune for use outside the licensed territory. Under the NImmune Agreement, both parties have agreed not to develop, manufacture, or commercialize competing products in the licensed territory, subject to customary exceptions.
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We granted to NImmune a non-exclusive license under any inventions and discoveries that we invent relating to the licensed product, for use in the development, manufacture, commercialization, and exploitation of the compound and licensed product anywhere in the world outside of the territory.
We are obligated to use commercially reasonable efforts to develop, seek regulatory approval for and, following receipt of marketing authorization, commercialize the licensed product in the field and in the licensed territory. Should we decide to participate in a global Phase 3 clinical trial for a licensed product, then we are obligated to use commercially reasonable efforts to enroll a percentage of study patients to be agreed in the territory.
We agreed to purchase all licensed product for development and commercialization purposes from NImmune. The parties agreed to execute, within a certain number of months following the execution of the NImmune Agreement, a separate clinical supply agreement, and within a certain number of months prior to the first commercial sale, a separate commercial supply agreement, for supply of licensed product in the licensed territory. Under certain specified circumstances, we may assume responsibility for manufacturing licensed product for use in development and commercialization purposes in the territory.
Under the terms of the NImmune Agreement, if we achieve specified development and sales milestones events, we may be required to make milestone payments up to $45.0 million and $105.0 million, respectively, to NImmune. In addition, if we successfully develop and commercialize the licensed product, we will pay NImmune tiered royalties at percentage rates ranging from the low- to the mid-teens on the net sales of the licensed product until the latest of the last-to-expire licensed patent covering the licensed product, the expiration of regulatory exclusivity for the licensed product, or a the tenth anniversary of the first commercial sale of the licensed product, in each case on a licensed product-by licensed product and region-by region basis. As of the date of this Annual Report on Form 10-K, the last-to-expire patent under the agreement is a PCT application and will have a twenty-year statutory expiration date in 2041 in each licensed region, provided such PCT application will be extended to each licensed region and be allowed therein. The expected termination of the royalty obligations will depend on factors such as the filing of additional patents covering the licensed product during the term of the applicable agreement, the availability and application of patent term extensions and/or expiration of regulatory exclusivity for the licensed product in the licensed territory. The term of the NImmune Agreement will depend on the patent coverage we and our partners may obtain, as well as any available regulatory exclusivity, in each region within the licensed territory. The NImmune Agreement will remain in effect until the expiration of all royalty payment obligations, and may be earlier terminated by either party for the other party’s uncured material breach or insolvency. NImmune may also terminate the agreement if we challenge any of the licensed patents. We have the right to terminate the agreement for convenience upon advance notice to NImmune.
Upon termination of the NImmune Agreement with respect to one or more regions, we agree to grant to NImmune a worldwide, irrevocable, perpetual, transferable, exclusive license to certain product inventions and patent rights relating to the licensed product as it exists as of the time of termination, for use in the terminated territory. If the NImmune Agreement is terminated after the first commercial sale of the licensed product, then we will assign and transfer, or exclusively license, to NImmune any trademarks relating to the licensed product for use in the terminated territory. In addition, upon early termination of the agreement and at the request of NImmune, we agreed to assign and transfer to NImmune all regulatory filings and approvals and market authorizations for the licensed product for use in the terminated territory. If we terminate the agreement for NImmune’s material breach, then NImmune agrees to pay us for the licenses granted to NImmune in the terminated territory, at an amount to be negotiated at the time of termination.
License Agreement with Lyra
In May 2021, we entered into a license and collaboration agreement with Lyra (the “Lyra Agreement”), under which we obtained an exclusive, sublicensable license under certain patents and know-how of Lyra to develop and commercialize and otherwise use, offer for sale, sell, have sold and import Lyra’s proprietary product, LYR-210, in the licensed territory of Mainland China, Hong Kong, Macau, Taiwan, Singapore, South Korea and Thailand. Under the agreement, both parties agreed not to commercialize competing products for specified time periods in the field of chronic rhinosinusitis in the licensed territory, subject to customary exceptions. Lyra will retain rights to LYR-210 outside of the licensed territory.
As part of the Lyra Agreement, we will also have the first right to obtain development and commercial rights in the licensed territories to Lyra’s LYR-220, an anti-inflammatory, intra-nasal, drug matrix in development for the treatment of CRS patients who have undergone a prior sinus surgery but continue to have persistent disease.
We granted to Lyra a non-exclusive license under any inventions and discoveries that we invent relating to the licensed product, for use in the development, manufacture, commercialization and other exploitation of the licensed product anywhere in the world outside of the territory.
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We are obligated to use commercially reasonable efforts to develop, seek regulatory approval for and, following receipt of marketing authorization, commercialize the licensed product in the field and in the licensed territory.
We agreed to purchase all licensed products for development and commercialization purposes from Lyra. The parties agreed to execute, within a certain number of months following the execution of the Lyra Agreement, a separate clinical supply agreement, and within a certain number of months prior to the first commercial sale, a separate commercial supply agreement, for supply of licensed products in the licensed territory. Under certain specified circumstances, we may assume responsibility for manufacturing licensed products for use in development and commercialization purposes in the territory.
Under the terms of the Lyra Agreement, we paid to Lyra an upfront payment of $12.0 million. In February 2022, the Company was notified that Lyra had achieved a certain development milestone, which, pursuant to the license agreement, triggered a $5.0 million payment due in April 2022. If we achieve specified development and sales milestones events, we may be required to make further milestone payments up to $35.0 million and $95.0 million, respectively, to Lyra. In addition, if we successfully develop and commercialize the licensed product, we will pay Lyra tiered royalties from the low- to high-teens on the net sales of the licensed product until the latest of the last-to-expire licensed patent covering the licensed product, the expiration of regulatory exclusivity for the licensed product, or the tenth anniversary of the first commercial sale of the licensed product, in each case on a region-by region basis. As of the date of this Annual Report on Form 10-K, the last-to-expire patent under the agreement will have a twenty-year statutory expiration date in 2038 in Mainland China, Hong Kong, South Korea, and Singapore, provided the latest application in each of these countries is allowed. The expected termination of the royalty obligations will depend on factors such as the filing of additional patents covering the licensed product during the term of the applicable agreement, the availability and application of patent term extensions and/or expiration of regulatory exclusivity for the licensed product in the licensed territory. The term of this license agreement will depend on the patent coverage we and our partners may obtain, as well as any available regulatory exclusivity, in each region within the licensed territory. The Lyra Agreement will remain in effect until the expiration of all royalty payment obligations, and may be earlier terminated by either party for the other party’s uncured material breach or insolvency. Lyra may also terminate the agreement if we challenge any of the licensed patents or if we cease to conduct material development or commercialization activities for a certain period and such cessation is not due to any certain specified circumstances. We have the right to terminate the agreement for convenience upon advance notice to Lyra.
Upon termination of the Lyra Agreement, we agree to grant to Lyra a worldwide, irrevocable, perpetual, transferable, exclusive license to certain know-how and patent rights relating to the licensed product as it exists as of the time of termination, for use in the terminated territory. In addition, upon early termination of the agreement and at the request of Lyra, we agree to assign and transfer to Lyra all regulatory filings and approvals and market authorizations for the licensed product for use in the terminated territory. If we terminate the agreement for Lyra’s material breach, then Lyra agrees to pay us for the licenses granted to Lyra in the terminated territory at a specified royalty rate.
License Agreement with ReViral
In March 2021, we entered into a co-development and license agreement with ReViral (the “ReViral Agreement”), under which we obtained an exclusive license with certain rights to sublicense under certain patents and know-how of ReViral to develop, commercialize and otherwise exploit ReViral’s proprietary compound, sisunatovir, in the licensed territory of Mainland China, Macau, Hong Kong, and Singapore, in the licensed field of all uses and indications for the treatment of respiratory syncytial virus in humans.
In December 2022, we entered into the Pfizer Commercial Agreement with respect to sisunatovir. The ReViral Agreement was superseded in its entirety by the Pfizer Commercial Agreement between Pfizer, ReViral and us. Our responsibilities to carry out development and commercialization activities regarding sisunatovir in the licensed territories and make milestone and royalty payments to ReViral pursuant to the ReViral Agreement are all waived pursuant to the Pfizer Commercial Agreement.
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Patents and other intellectual property
Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual property protection for our drug candidates and other commercially important products, technologies, invention and know-how, to operate without infringing, misappropriating or otherwise violating the proprietary or intellectual property rights of others and to prevent others from infringing, misappropriating or otherwise violating our proprietary or intellectual property rights. Generally, we seek initial proprietary and intellectual property protection for our product candidates in the territories of our business by licensing intellectual property rights from other technology originators or third parties. Throughout the development of our product candidates, we may seek additional means, such as obtaining patents and filing patent applications of our own, to obtain additional protection for improvements to pharmaceutical formulations, methods of use and production, new discoveries and inventions, among other things, which would potentially enhance our proprietary position.
We also rely on trade secrets, know-how and continuing technological innovation to develop and maintain our proprietary and intellectual property position, which we generally seek to protect through contractual obligations with third parties. We generally require our employees, consultants and advisors to enter into confidentiality agreements. These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed to third parties except under specific circumstances. In the case of our employees, the agreements provide that all of the technology which is conceived by the individual during the course of employment is our exclusive intellectual property. Furthermore, as a matter of company policy, all scientific and technical employees have entered into agreements that generally require disclosure and assignment to us of ideas, developments, discoveries and inventions made by them which relate to their employment with us.
As of December 31, 2022, our patent portfolio includes 34 patent families, including issued patents and pending patent applications that we exclusively in-license from external technology originators in a respective field in territories of Greater China. Our rights are generally limited to the licensed territories.
Mavacamten
As of December 31, 2022, our patent portfolio related to mavacamten includes three patent families licensed from MyoKardia. The first patent family is directed to certain small molecules that are allosteric inhibitors of cardiac myosin, including mavacamten. The family includes an issued patent in Mainland China, Singapore and Hong Kong, and pending patent applications in Mainland China, Singapore and Thailand. Protection based on this patent family was not pursued in Taiwan. There are additional issued patents and pending patent applications in this patent family outside the territory of our license. Any patents issuing from this family will have a twenty-year statutory expiration date in 2034, excluding any patent term extension or patent term adjustment, if applicable, that may be available. The second patent family is directed to mavacamten for use in the treatment of hypertrophic cardiomyopathy, as well as the dosage form. The family includes pending patent applications in Taiwan, Singapore and Mainland China, as well as other jurisdictions outside the territory of our license. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2038, excluding any patent term extension or patent term adjustment, if applicable, that may be available. The third patent family is directed to the administration of mavacamten and the polymorph. The family includes pending patent applications in Mainland China, Singapore, Hong Kong, Thailand and Taiwan. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2040, excluding any patent term extension or patent term adjustment, if applicable, that may be available. We will only have a license to patent applications in this family to the extent that patent applications are filed in countries within the territory of our license prior to applicable deadlines.
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Infigratinib
As of December 31, 2022, our patent portfolio related to infigratinib included five patent families, three of which are owned by Novartis and sublicensed to us by QED and two of which are owned by QED and licensed to us. The first patent family is directed to the composition of matter for infigratinib. The family includes issued patents in Mainland China and Hong Kong, as well as other jurisdictions outside the territory of the QED Agreement. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2025, excluding any patent term adjustment and patent term extension, if applicable, that may be available. The second patent family is directed to a variety of salts and crystalline forms of infigratinib. The family includes an issued patent in Hong Kong and pending applications in Mainland China. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2030, excluding any patent term adjustment and patent term extension, if applicable, that may be available. The third patent family is directed to certain formulations of infigratinib. The family includes an issued patent in Hong Kong and a pending application in Mainland China. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2034, excluding any patent term adjustment and patent term extension, if applicable, that may be available. The fourth patent family licensed from QED is directed to treating urothelial carcinoma and CCA, respectively, with infigratinib. This patent family includes pending applications in Mainland China and Hong Kong. Any patents that may issue from this family of patent applications would have an expected statutory expiration in 2040, excluding any patent term adjustment and patent term extension, if applicable, that may be available. The fifth patent family licensed from QED is directed to treating gastric cancer with infigratinib. This patent family includes a priority application in Mainland China. Any patents that may issue from this family of patent application would have an expected statutory expiration no later than 2043, excluding any patent term adjustment and patent term extension, if applicable, that may be available, provided such Chinese priority application will be converted to a non-provisional PCT application, enter each of the licensed territories and be allowed therein.
BBP-398
As of December 31, 2022, we licensed from Navire three families of patent applications, one of which are owned by the University of Texas System and sublicensed to us by Navire and two of which are owned by Navire and licensed to us. One of these patent families is directed to certain small molecules as ptpn11 (SHP2) inhibitors for treating cancer, including BBP-398. The family includes pending applications in Mainland China, Hong Kong, Taiwan, Thailand, Singapore and South Korea. Any patent that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2039, excluding any patent term extension or patent term adjustment, if applicable, that may be available. The other two patent families are directed to other compounds as SHP2 inhibitors and any patents that may issue from these families of patent applications will have a twenty-year statutory expiration date between 2037-2039, excluding any patent term adjustment or patent term extension, if applicable, that may be available.
TP-03
As of December 31, 2022, we licensed from Tarsus four families of patent applications, two of which are owned by Elanco and sublicensed to us by Tarsus and two of which are owned by Tarsus and licensed to us. The first patent family is directed to the composition of matter for lotilaner (the active ingredient) and is owned by Elanco. The family includes issued patents in Mainland China and Taiwan. Any patent that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2029, excluding any patent term extension or patent term adjustment, if applicable, that may be available. The second patent family is directed to treating blepharitis with lotilaner as well as the eye drop formulation. The family includes pending applications in Mainland China and Hong Kong. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2038, excluding any patent term adjustment and patent term extension, if applicable, that may be available. The third patent family is also directed to the eye drop formulation of lotilaner and its use in treating blepharitis, with additional definition of excipient. The family includes pending applications in Mainland China and Hong Kong. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2040, excluding any patent term adjustment and patent term extension, if applicable, that may be available. We will only have a license to patent applications in this family to the extent that patent applications are filed in countries within the territory of our license prior to applicable deadlines. The fourth patent family is owned by Elanco and is directed to the manufacturing process of lotilaner. The family includes a pending PCT application. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2040, excluding any patent term adjustment and patent term extension, if applicable, that may be available. We will only have a license to patent applications in this family to the extent that patent applications are filed in countries within the territory of our license prior to applicable deadlines.
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NBTXR3
As of December 31, 2022, we licensed from Nanobiotix nine families of patent applications. The first patent family is directed to the use of NBTXR3 in RT for treating cancer. The family includes issued patents in Mainland China, Macau, Singapore, Hong Kong and South Korea, and one pending application in Hong Kong. Any patent that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2029, excluding any patent term extension or patent term adjustment, if applicable, that may be available. The second patent family is directed to the composition of matter for NBTXR3. The family includes issued patents in Mainland China, Hong Kong, Singapore and South Korea, and pending applications in Singapore and Thailand. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2034, excluding any patent term adjustment and patent term extension, if applicable, that may be available. The third patent family is directed to the use of NBTXR3 in immuno-oncology. The family includes pending applications in Mainland China, Hong Kong, South Korea and Taiwan. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2036, excluding any patent term adjustment and patent term extension, if applicable, that may be available. The fourth patent family is directed to the combo use of NBTXR3 with anti-checkpoint inhibitors. The family includes a PCT application. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2041, excluding any patent term adjustment and patent term extension, if applicable, that may be available. We will only have a license to patent applications in this family to the extent that patent applications are filed in countries within the territory of our license prior to applicable deadlines. The fifth patent family is directed to therapeutic combinations of nanoparticles. The family includes pending applications in Mainland China, South Korea, Singapore and Thailand. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2041, excluding any patent term adjustment and patent term extension, if applicable, that may be available. We will only have a license to patent applications in this family to the extent that patent applications are filed in countries within the territory of our license prior to applicable deadlines. The sixth patent family is directed to another type of chemically different nanoparticles as radioenhancers in oncology. The family includes a PCT application. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2041, excluding any patent term adjustment and patent term extension, if applicable, that may be available. We will only have a license to patent applications in this family to the extent that patent applications are filed in countries within the territory of our license prior to applicable deadlines. The other three patent families are directed to second generation products of NBTXR3 and any patents that may issue from these families of patent applications will have a twenty-year statutory expiration date between 2032-2034, excluding any patent term adjustment or patent term extension, if applicable, that may be available.
Sisunatovir
As of December 31, 2022, we assigned and transferred our development and commercialization rights to sisunatovir (including three families of patent applications) to Pfizer, which were previously licensed from ReViral.
Omilancor
As of December 31, 2022, we licensed from Landos three families of patent applications directed to omilancor. The first patent family is directed to a composition of matter for omilancor. The family includes issued patents in Mainland China, Hong Kong and South Korea. The patents in this family will have a twenty-year statutory expiration date in 2035, excluding any patent term extension or patent term adjustment, if applicable, that may be available. The second patent family is directed to crystalline forms of omilancor. A PCT application has been filed for this family and will extend to Mainland China, Hong Kong and South Korea. Any patents that may issue from these families of patent applications will have a twenty-year statutory expiration date in 2041, excluding any patent term adjustment or patent term extension, if applicable, that may be available. The third patent family is directed to the administration of omilancor. A PCT application has been filed for this family and will extend to Mainland China, Hong Kong and South Korea. Any patents that may issue from these families of patent applications will have a twenty-year statutory expiration date in 2041, excluding any patent term adjustment or patent term extension, if applicable, that may be available. We will only have a license to patent applications in the second and third families to the extent that patent applications are filed in countries within the territory of our license prior to applicable deadlines. In February 2023, we entered into an amendment to the Landos Agreement, reflecting that Landos has transferred and assigned substantially all of its rights in omilancor to NImmune, and we have entered into a direct license agreement with NImmune setting forth the terms of our continued development and commercialization of omilancor in LianBio territories.
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NX-13
As of December 31, 2022, we licensed from Landos one family of patent applications directed to a composition of matter for NX-13. The family includes issued patents in Mainland China and South Korea, and one pending application in Hong Kong. Any patent that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2039, excluding any patent term extension or patent term adjustment, if applicable, that may be available.
LYR-210
As of December 31, 2022, we licensed from Lyra three families of patent applications. The first patent family is directed to the implant part for LYR-210. The family includes an issued patent in Mainland China, and pending applications in Mainland China and Hong Kong. Any patent that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2036, excluding any patent term extension or patent term adjustment, if applicable, that may be available. The second patent family is a follow-up filing to pursue the implant for LYR-210. The family includes pending applications in Mainland China, South Korea, Singapore and Hong Kong. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2038, excluding any patent term adjustment or patent term extension, if applicable, that may be available. The third patent family is directed to an alternative design of the applicator part for LYR-210. The family includes an issued patent in Mainland China and a pending application in Hong Kong. Any patents that may issue from this family of patent applications will have a twenty-year statutory expiration date in 2036, excluding any patent term adjustment and patent term extension, if applicable, that may be available.
Generally, patents that may issue from regularly filed applications in the many jurisdictions, including the United States and China, are granted a term of 20 years from the earliest effective non-provisional filing date. In certain jurisdictions, individual patent terms may be extended for varying periods depending on the filing date of the patent application or the issuance date of the patent and the legal term of patents in the countries in which they are obtained. For example, in certain instances, a patent term can be extended to recapture a portion of the U.S. Patent and Trademark Office review period in issuing the patent as well as a portion of the term effectively lost as a result of the FDA regulatory review period. In China, according to the new Patent Law that came into force on June 1, 2021 (the “PRC Patent Law”), the term of the patent for new drugs that have been approved for marketing in China can be compensated at the request of the patentee. The compensation shall not exceed five years, and the total effective term of the patent after the new drug is approved for marketing shall not exceed 14 years. Detailed stipulations such as manner for calculating and conditions for requesting compensation are still under discussion. For more information regarding the risks related to our intellectual property, please see “Part I—Item 1A—Risk Factors—Risks Related to our Intellectual Property.”
Regulation
Government regulation of pharmaceutical product development and approval
Chinese regulation of pharmaceutical product development and approval
Since China’s entry into the World Trade Organization in 2001, the Chinese government has made significant efforts to standardize regulations, develop its pharmaceutical regulatory system and strengthen intellectual property protection.
In October 2017, the drug regulatory system entered a new and significant period of reform. The General Office of the State Council and the General Office of the Communist Party of China Central Committee jointly issued the Opinion on Deepening the Reform of the Regulatory Approval System to Encourage Innovation in Drugs and Medical Devices (the “Innovation Opinion”), which is a mandatory plan to further reform the review and approval system and to encourage the innovation of drugs and medical devices. Under the Innovation Opinion and other recent reforms, the expedited programs and other advantages encourage drug manufacturers to seek marketing approval in China first and to develop drugs in high priority disease areas, such as oncology or rare disease.
To implement the regulatory reform introduced by the Innovation Opinion, the Standing Committee of the National People’s Congress of the People’s Republic of China (the “SCNPC”) and the NMPA have revised the fundamental laws, regulations and rules governing pharmaceutical products and the pharmaceutical industry, including the amendment of the framework law known as the Drug Administration Law of the People’s Republic of China (the “Drug Administration Law”), which became effective on December 1, 2019. The State Administration for Market Regulation (the “SAMR”) has promulgated two key implementing regulations for the Drug Administration Law: (i) the amended Administrative Measures for Drug Registration and (ii) the amended Measures on the Supervision and Administration of the Manufacture of Drugs. Both regulations took effect on July 1, 2020.
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Regulatory authorities
In China, the NMPA is the authority under the SAMR that monitors and supervises the administration of pharmaceutical products, medical appliances and equipment, and cosmetics. The NMPA was established in March 2018 as part of the institutional reform of the State Council. Predecessors of the NMPA include the former China Food and Drug Administration (the “CFDA”) established in March 2013, the State Food and Drug Administration (the “SFDA”) established in March 2003, and the State Drug Administration established in August 1998. The primary responsibilities of the NMPA include:
monitoring and supervising the administration of pharmaceutical products, medical devices and equipment as well as cosmetics in China;
formulating administrative rules and policies concerning the supervision and administration of the pharmaceutical, medical device, and cosmetics industry;
evaluating, registering and approving chemical drugs, biological products and traditional Chinese medicine (the “TCM”);
approving and issuing permits for the manufacture and export/import of pharmaceutical products; and examining and evaluating the safety of pharmaceutical products, medical devices, and cosmetics and handling significant accidents involving these products.
According to the Decision of the CFDA on Adjusting the Approval Procedures under the Administrative Approval Items for Certain Drugs published in March 2017, which became effective in May 2017, approvals of clinical trial applications should be issued by the CDE in the name of the CFDA.
China’s National Health and Family Planning Commission (the “NHFPC”) was rebranded as the National Health Commission (the “NHC”) in March 2018. The NHC is an authority at the ministerial level under the State Council and is primarily responsible for national public health. The NHC combines the responsibilities of the former NHFPC, the Leading Group Overseeing Medical and Healthcare Reform under the State Council, the China National Working Commission on Aging, partial responsibilities of the Ministry of Industry and Information Technology in relation to tobacco control, and partial responsibilities from the former State Administration of Work Safety in relation to occupational safety. The predecessor of NHFPC is the Ministry of Health (the “MOH”). Following the establishment of the former SFDA in 2003, the MOH was put in charge of the overall administration of the national health in China, excluding the pharmaceutical industry. The NHC performs a variety of tasks in relation to the health industry such as establishing and overseeing the operation of medical institutions, some of which also serve as clinical trial sites, regulating the licensure of hospitals, and producing professional codes of ethics for public medical personnel. The NHC plays a significant role in drug reimbursement.
Drug Administration Law
The Drug Administration Law as promulgated by the SCNPC in 1984, and the Implementing Measures of the Drug Administration Law as promulgated by the State Council in August 2002, established the legal framework for the administration of pharmaceutical products, including the development and manufacturing of new drugs and the medicinal preparations by medical institutions. The Drug Administration Law also regulates the distribution, packaging, labels and advertisements of pharmaceutical products in China.
Certain amendments to the Drug Administration Law took effect on December 1, 2001 and subsequent amendments were made on December 28, 2013, April 24, 2015 and August 26, 2019. These amendments were formulated to strengthen the supervision and administration of pharmaceutical products and to ensure the quality and safety of pharmaceutical products. The current Drug Administration Law applies to entities and individuals engaged in the development, production, distribution, application, supervision and administration of pharmaceutical products. The Drug Administration Law regulates and prescribes a framework for the administration of the law to pharmaceutical manufacturers, pharmaceutical distribution companies, and medicinal preparations of medical institutions and the development, research, manufacturing, distribution, packaging, pricing and advertisements of pharmaceutical products.
According to the Drug Administration Law, no pharmaceutical products may be produced in China without a Pharmaceutical Manufacturing Permit. A local manufacturer of pharmaceutical products must obtain a Pharmaceutical Manufacturing Permit from one of the provincial administrations of medical products in order to commence production of pharmaceuticals. Prior to granting such license, the relevant government authority will inspect the manufacturer’s production facilities and decide whether the sanitary conditions, quality assurance system, management structure and equipment within the facilities have met the required standards.
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In August 2019, the SCNPC promulgated the latest Drug Administration Law (the “2019 Amendment”), which became effective in December 2019. The 2019 Amendment brought a series of changes to the drug supervision and administration system, including (i) the formalization of the drug marketing authorization holder system (the “MAH system”); (ii) expedited approval pathway; and (iii) the cancellation of relevant certification in relation to Good Manufacturing Practice and Good Supply Practice. The 2019 Amendment requires the marketing authorization holder to assume responsibilities for the entire product life cycle, including non-clinical studies, clinical trials, manufacturing, marketing, post-marketing studies, monitoring, reporting and handling of adverse reactions of the drug. The 2019 Amendment also stipulates that the state supports the innovation of drugs with clinical value, encourages the development of drugs with new therapeutic mechanisms and multi-targeted, systematic adjustment and intervention of physiological function, and promotes the technological advancement of drugs.
The Implementing Measures of the Drug Administration Law promulgated by the State Council on August 4, 2002 were amended on February 6, 2016 and March 2, 2019 and serve to provide detailed implementation regulations for the Drug Administration Law. On May 9, 2022, the NMPA published a comprehensive draft of an Amendment to the Implementing Measures of the Drug Administration Law for public comments. The draft amendment introduced changes to the regulatory framework and aimed to codify certain regulatory initiatives implemented by the Chinese government since the promulgation of the current Drug Administration Law in 2019. However, the draft amendment has not been finalized.
Administrative measures for drug registration
In July 2007, the former SFDA released the Administrative Measures for Drug Registration which took effect on October 1, 2007 (the “2007 Drug Registration Regulation”). The 2007 Drug Registration Regulation covers (i) definitions of drug marketing authorization applications and regulatory responsibilities of the former SFDA; (ii) general requirements for drug marketing authorization; (iii) drug clinical trials; (iv) application, examination and approval of drugs (such as new drugs, generic drugs, imported drugs and OTC drugs); (v) supplemental applications and marketing authorization renewals of drugs; (vi) re-registration of drugs; (vii) inspections; (viii) marketing authorization standards and specifications; (ix) time limits; (x) re-examination; and (xi) liabilities and other supplementary provisions.
In January 2020, the SAMR released the amended Administrative Measures for Drug Registration, which took effect in July 2020 (the “2020 Drug Registration Regulation”). Compared to the 2007 Drug Registration Regulation, the 2020 Drug Registration Regulation provides detailed procedural and substantive requirements for the key regulatory concepts established by the 2019 Amendment and confirms a number of reform actions that have been taken in the past years, including but not limited to: (i) fully implementing the MAH system and implied approval for the commencement of clinical trials; (ii) implementing associated review of drugs, excipients and packaging materials; and (iii) introducing four expedited approval pathways, namely the breakthrough designation, conditional approvals, prioritized reviews and special reviews and approvals.
Collecting and using patients’ human genetic resources (“HGRs”) and derived data
In June 1998, the Ministry of Science and Technology (the “MOST”) and the former MOH jointly established the Interim Measures for the Administration of Human Genetic Resources in China. In July 2015, the MOST issued the Service Guide for the Examination and Approval of Sampling, Collecting, Trading, Exporting Human Genetic Resources, which provides that foreign entities that collect and use patients’ HGRs in clinical trials shall be required to file for an advance approval with the Human Genetic Resources Administration of China (the “HGRAC”) through its online system.
In October 2017, the MOST issued the Circular on Optimizing the Administrative Examination and Approval of Human Genetic Resources, which simplified the approval process for collecting and using HGRs for the purpose of seeking marketing authorization of drugs in China.
In May 2019, the State Council of the People’s Republic of China issued the Regulation on the Administration of Human Genetic Resources (the “HGR Regulation”), which applies to activities that involve collection; biobanking; use of China-sourced HGRs, which includes the genetic materials with respect to organs, tissues, cells and other materials that contain the human genome, genes and other genetic substances (the “China Biospecimens”) and derived data (together with the China Biospecimens, the “China-Sourced HGR”); and the provision of such items to foreign parties or entities established or actually controlled by them. Pursuant to this new rule, a new filing system (as opposed to the advance approval approach originally in place) is put in place for international clinical trials using Chinese patients’ biospecimens at clinical study sites without involving the export of such biospecimens outside of China. A notification filing that specifies the type, quantity and usage of the biospecimens, among others, with the HGRAC is required before conducting such clinical trials. The collection, use, and outbound transfer of Chinese patients’ biospecimens in international collaboration for basic scientific research involving export of such biospecimens are still subject to the advance approval of the HGRAC.
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In October 2020, the SCNPC promulgated the Biosecurity Law, which became effective on April 15, 2021. The Biosecurity Law reaffirms the regulatory requirements stipulated by the HGR Regulation while potentially increasing the administrative fines significantly in cases in which foreign entities are alleged to have collected, preserved or exported Chinese HGRs.
In March 2022, the MOST issued Answers to Frequently Asked Questions Regarding Human Genetic Resources Administration (the “Q&A Series I”). The Q&A Series I provides short answers to 30 frequently asked questions relating to the collection, preservation, utilization, and external provision of China-Sourced HGR. For example, the Q&A Series I clarifies that a notification filing with the HGRAC is required for the purpose of transferring China-Sourced HGR to regulatory authorities in other jurisdictions.
In March 2022, the MOST issued the Draft Implementing Rules of the HGR Regulation (Draft for Comment) (the “Draft Implementing Rules”). The Draft Implementing Rules are intended to provide operational details and clarify questions that have emerged in the past few years. Under the Draft Implementing Rules, clinical studies conducted for the purpose of obtaining marketing authorization for drugs and medical devices in China, if not involving the export of human genetic materials, will be eligible for a notification filing (as opposed to the advance approval) if the human genetic materials are collected by sites, and processed by sites or an onshore third-party lab specified in the clinical trial protocol. The Draft Implementing Rules provide clearer guidance on how to allocate the intellectual property derived from Sino-foreign cooperative research utilizing China-Sourced HGR. The Draft Implementing Rules enumerate situations where a security review is required for external provision of or open access to of human genetic data, such as external provision of or open access to human genetic data about important genetic pedigrees, human genetic data from specific regions, and exome sequencing and genome sequencing information of over 500 individuals.
In April 2022, the MOST issued Answers to Frequently Asked Questions Regarding Human Genetic Resources Administration (Q&A Series II) (the “Q&A Series II”). The Q&A Series II provides formal written replies to 5 frequently asked questions relating to the collection, preservation, utilization, and external provision of China-Sourced HGR. The Q&A Series II specifies that collection and external provision of or open access to the data related to clinical practices, patient demographics, lab tests, medical images, etc. that do not carry genetic attributes will not be regulated as collection and external provision of or open access to human genetic data. The Q&A Series II stipulates that no advance approval for Sino-foreign cooperative research is required for research utilizing China-Sourced HGR, if the foreign entity who provides funding support will not substantially participate in the research and have no access to or ownership of the research data and research results.
Regulations on the clinical trials and marketing authorization of drugs
Four phases of clinical trials
According to the 2020 Drug Registration Regulation, a clinical development program consists of Phases I, II, III and IV clinical trials as well as bioequivalence trials. Based on the characteristics of study drugs and research objectives, the four phases of studies respectively focus on clinical pharmacology, exploratory, confirmatory and post-approval assessment of efficacy and safety.
Approval authority and process for clinical trial applications
According to the 2019 Amendment and the 2020 Drug Registration Regulation, clinical studies on investigational drugs must be approved by the CDE before their commencement.
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Upon the completion of the pharmaceutical, pharmacological and toxicological research of the drug clinical trial, the applicant may submit relevant research materials to the CDE for the application of the Clinical Trial Application (the “CTA”) to conduct a drug clinical trial. The CDE will organize pharmaceutical, medical and other reviewers to review the application and to decide whether to approve the drug clinical trial within 60 business days of accepting the application. Once the decision is made, the applicant can locate such decision on the CDE’s website. If no notice of decision is issued within the aforementioned time limit, the application of clinical trial shall be deemed as approval. The 2020 Drug Registration Regulation further requires that the applicant shall, prior to conducting a drug clinical trial, register the information of the drug clinical trial protocol, etc. on the Drug Clinical Trial Information Platform. During the drug clinical trials, the applicant shall update registration information continuously and, upon completion, register information about the outcome of the drug clinical trial. The applicant shall be responsible for the authenticity of the drug clinical trial information published on the platform. Pursuant to the Notice on the Drug Clinical Trial Information Platform promulgated by former SFDA in September 2013, the applicant shall complete the trial pre-registration within one month after obtaining the approval of the CTA in order to obtain the trial’s unique registration number and complete registration of certain follow-up information and first-time submission for disclosure of the drug clinical trial information on the platform before the first subject’s enrollment in the trial. If the first-time submission for disclosure is not completed within one year after the approval of the CTA, the applicant shall submit an explanation, and if the first-time submission for disclosure is not completed within three years, the approval of the CTA shall automatically expire.
Qualification of clinical trial institutions and compliance with GCP
According to the Innovation Opinion, certification of clinical trial institutions by the former CFDA and the former NHFPC was no longer required. Instead, a clinical trial institution can be engaged by a drug marketing authorization applicant (i.e., a sponsor) to conduct a drug clinical study after it has been duly registered with the online platform designated by the NMPA. On November 29, 2019, pursuant to the 2019 Amendment, the NMPA and the NHC jointly released the Rules for Administration of the Drug Clinical Trial Institutions, which became effective on December 1, 2019. The rules specify requirements for clinical trial institutions and recordable procedures. Pursuant to the rules, a clinical trial institution should comply with the requirements of the Good Practices for Drug Clinical Trials (the “GCP”) and be capable of undertaking drug clinical trials. It should also evaluate, or engage a third party to evaluate, its clinical trial proficiency, facilities and expertise before the recordation. According to the Implementing Measures of the Drug Administration Law, a drug marketing authorization applicant should only engage a clinical trial institution that complies with relevant regulations to carry out a drug clinical trial.
The conduct of clinical trials must adhere to the GCP and the protocols approved by the ethics committee. Since 2015, the former CFDA has strengthened the enforcement against widespread data integrity issues associated with clinical trials in China. To ensure authenticity and reliability of the clinical data, the former CFDA mandated drug marketing authorization applicants to conduct self-inspection and verification of their clinical trial data. Based on the submitted self-inspection results, the former CFDA also regularly launched onsite clinical trial audits over selected applications and rejected those found with data forgery. The GCP audit has been ongoing and has been able to curb the number of unreliable marketing authorization applications.
In April 2020, the NMPA and the NHC released the Amended GCP that took effect on July 1, 2020. The Amended GCP provides comprehensive and substantive requirements on the design and conduct of clinical trials in China. In particular, the Amended GCP enhances the protection for study subjects and tightens the control over bio-samples collected under clinical trials.
International multi-center clinical trials regulations
On January 30, 2015, the former CFDA promulgated the Tentative Guidelines for International Multi-Center Clinical Trial (the “Multi-Center Clinical Trial Guidelines”), which took effect on March 1, 2015. The Multi-Center Clinical Trial Guidelines aimed to provide guidance for the regulation of application, implementation and administration of International Multi-Center Clinical Trials in China (the “IMCCT”). IMCCT applicants may simultaneously perform clinical trials in different centers using the same clinical trial protocol. Where the marketing authorization applicant plans to make use of the data derived from the IMCCTs, such IMCCTs shall satisfy, in addition to the requirements set forth in the Drug Administration Law and its implementation regulations, the Administrative Measures for Drug Registration, the GCP and relevant laws and regulations, the following requirements:
The applicant shall 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 shall consider the representativeness of the research subjects, i.e., the participating patients;
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The applicant shall analyze whether the amount of Chinese research subjects is sufficient to assess and adjudicate the safety and effectiveness of the study drug, and satisfy the statistical and relevant legal requirements; and
The onshore and offshore IMCCT research centers shall be subject to on-site inspections by the Chinese regulatory authorities.
IMCCTs shall follow the Good Clinical Trial Practice of the International Conference on Harmonization of Technical Requirements for Registration of Pharmaceuticals for Human Use (the “ICH-GCP”) principles and ethics requirements. Marketing authorization applicants shall ensure the truthfulness, reliability and trustworthiness of clinical trials results. The investigators shall have the qualification and capability to perform relevant clinical trials. The ethics committee shall continuously supervise the trials and protect the subjects’ interests, benefits and safety. Before the commencement of the IMCCT, applicants shall obtain clinical trial approvals or complete filings pursuant to requirements under the local regulations where clinical trials are conducted, and applicants shall register and disclose the information of all major investigators and study sites on the NMPA’s drug clinical trial information platform.
Data derived from IMCCTs can be used for the marketing authorization applications with the NMPA. When using international multi-center clinical trial data to support marketing authorization applications in China, applicants shall submit the completed global clinical trial report, statistical analysis report and database, along with relevant supporting data in accordance with International Conference on Harmonization-Common Technical Document (the “ICH-CTD”) content and format requirements. Also, subgroup research results summary and comparative analysis shall be conducted concurrently.
In October 2017, the former CFDA released the Decision on Adjusting Items concerning the Administration of Imported Drug Registration to reform the regulatory framework for IMCCT in China, which includes the following key points:
The IMCCT drug does not need to be approved or entered into either a Phase II or III clinical trial in a foreign country, except for preventive biological products. Phase I IMCCT is permissible in China.
The application for drug marketing authorization can be submitted directly after the completion of the IMCCT.
With respect to clinical trial and market authorization applications for imported innovative chemical drugs and therapeutic biological products, the marketing authorization in the country or region where the foreign drug manufacturer is located will not be required.
Clinical trial waivers and acceptance of foreign clinical trial data
On July 6, 2018, the NMPA issued the Technical Guidance for Accepting Foreign Clinical Trial Data (the “Foreign Clinical Trial Data Guidance”) as one of the implementing rules for the Innovation Opinion. According to the Foreign Clinical Trial Data Guidance, sponsors may use the data of foreign clinical trials to support drug marketing authorization in China, provided that sponsors must ensure the authenticity, completeness, accuracy and traceability requirements, and that such data must be obtained in consistency with the relevant requirements under the ICH-GCP. Clinical trial sponsors must be attentive to potentially meaningful ethnic differences in the subject population.
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 and the NHC issued the Procedures for the Review and Approval of Urgently Needed Foreign New Drugs. The procedures are intended to accelerate approvals for drugs that have been approved within the last ten years in the United States, the European Union or Japan and that 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 post-approval trials in China.
Marketing authorization holder system
Under the authorization of the SCNPC in November 2015, the State Council issued the Pilot Plan for the Drug Marketing Authorization Holder Mechanism on May 26, 2016, which provides a detailed pilot plan for the MAH system for drugs in 10 provinces in China. Under the MAH system, domestic drug research and development institutions and individuals in the piloted regions are eligible to be holders of drug marketing authorizations without having to become drug manufacturers. The Pilot Plan was originally set for a 3-year period by the SCNPC and would end in November 2018. Effective as of November 5, 2018, the SCNPC decided to extend the pilot program for another year.
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The latest Drug Administration Law purports to roll out the MAH system nationwide. Companies and research and development institutions can be drug marketing authorization holders. The drug marketing authorization holder should be responsible for their products throughout the life cycle, including nonclinical 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 2019 Amendment. The marketing authorization holders may engage contract manufacturers for manufacturing, provided that (i) pursuant to the Measures on the Supervision and Administration of the Manufacture of Drugs, the marketing authorization holder must meet the specified requirements and obtain the Pharmaceutical Manufacturing Permit for MAH holder; and (ii) each of the contract manufacturers has obtained and maintained a valid Pharmaceutical Manufacturing Permit for the specific type of drugs. The marketing authorization holders can also engage pharmaceutical distribution enterprises with a valid Pharmaceutical Distribution Permit for the distribution activities. Upon receiving the marketing authorizations from the NMPA, a drug marketing authorization holder may transfer its drug marketing authorization to a company that has the capability of quality management, risk prevention and control, and liability compensation to ensure the safety, effectiveness and quality of the drug, and to fulfill the obligations of the drug marketing authorization holder.
In December 2022, the NMPA issued the Provisions on Supervision and Administration of Marketing Authorization Holders Concerning the Implementation of Primary Responsibilities for Drug Quality and Safety. This regulation requires marketing authorization holders to establish and improve the drug quality management system, and assume primary responsibility for the safety, effectiveness, and quality of drugs during the total product life cycle. Marketing authorization holders need to build an information-based traceability system and establish a sound drug recall system, among other things.
Drug marketing authorization
According to the 2020 Drug Registration Regulation, the applicant may submit an application for drug marketing authorization to CDE upon completion of relevant research on pharmacy, pharmacology, toxicology and drug clinical trials, determination of the quality standards of the drug, validation of commercial-scale production processes and preparation for acceptance of verification and inspection conducted by the Center for Food and Drug Inspection (the “CFDI”). The NMPA then determines whether to approve the application according to the comprehensive technical review by the CDE. We must obtain approval of drug marketing authorizations before our drugs can be manufactured and sold in the China market.
Drug registration classification
According to the 2020 Drug Registration Regulation, drug marketing authorization applications are divided into three different types, namely traditional Chinese medicine, chemical drugs and biological products. Drugs falling into one of three general types are further divided by their characteristic, level of innovation and status of review and administration according to auxiliary regulatory documents to the 2020 Drug Registration Regulation.
In March 2016, the former CFDA issued the Reform Plan for Registration Classification of Chemical Medicine (the “Reform Plan”), which outlined the reclassifications of drug marketing authorization applications under the 2007 Drug Registration Regulation. Under the Reform Plan, Category 1 drugs refer to innovative chemical drugs that have not been marketed anywhere in the world. Improved new chemical drugs that are not marketed anywhere in the world fall into Category 2. Generic drugs that have equivalent quality and efficacy to the originator’s drugs that have been marketed abroad but not yet in China fall into Category 3. Generic drugs that have equivalent quality and efficacy to the originator’s drugs and have been marketed in China fall into Category 4. Category 5 drugs are chemical drugs which have already been marketed abroad, but are not yet approved in China.
As a support policy and implementing rule of the 2020 Drug Registration Regulation, the NMPA issued the Chemical Drug Registration Classification and Application Data Requirements in June 2020, effective in July 2020, which reaffirmed the principles of the classification of chemical drugs set forth by the Reform Plan, and made minor adjustments to the subclasses of Category 5. According to such rule, Category 5.1 are originator drugs and improved drugs with clear clinical advantages while Category 5.2 are generic drugs, all of which shall have been already marketed abroad but not yet approved in China.
Priority review and accelerated review and approval channels
The NMPA and its predecessors have issued a series of regulatory documents aiming to simplify or accelerate the review and approval process for innovative new drugs or drugs in great clinical demand. According to the Special Examination and Approval of Registration of New Drugs promulgated by the former SFDA on January 7, 2009, the former SFDA conducts special examination and approval for new drug marketing authorization applications when:
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the effective constituent of drug extracted from plants, animals, minerals, etc. as well as the preparations thereof have never been marketed in China, and the material medicines and the preparations thereof are newly discovered;
the chemical raw material medicines as well as the preparations thereof and the biological product have not been approved for marketing home and abroad;
the new drugs are for treating AIDS, malignant tumors and rare diseases, etc., and have obvious advantages in clinical treatment; or
the new drugs are for treating diseases with no effective methods of treatment.
The Special Examination and Approval of Registration of New Drugs provide that the applicant may file for special examination and approval at the CTA stage if the drug candidate falls within the first or second items. The provisions provide that for drug candidates that fall within the third or fourth items, the application for special examination and approval cannot be made until the marketing authorization application stage.
The Circular Concerning Several Policies on Drug Registration Review and Approval issued by the former CFDA on November 11, 2015 further provides the following policies, potentially simplifying and accelerating the approval process of clinical trials: (x) a single approval for all phases of clinical trials for a new drug, replacing the phase-by-phase application and approval procedure; and (y) a fast-track approval pathway for the following applications: (i) marketing authorization of innovative new drugs treating AIDS, malignant tumors, serious infectious diseases and rare diseases; (ii) marketing authorization of pediatric drugs; (iii) marketing authorization of drugs treating specific or prevalent diseases in elders; (iv) marketing authorization of drugs listed in national major science and technology projects or national key research and development plans; (v) marketing authorization of drugs using advanced technology, using innovative treatment methods, or having distinctive clinical benefits that are urgently needed clinically; (vi) marketing authorization of foreign innovative drugs to be manufactured locally in China; (vii) concurrent applications for CTA which are already approved in the United States or the European Union or concurrent drug marketing authorization applications for drugs which have applied to the United States or European Union regulatory authorities and are manufactured in China using the same production line that passed the onsite inspections by the United States or the European Union regulatory authorities; and (viii) CTA for drugs with urgent clinical need and patent expiry within three years, and marketing authorization applications for drugs with urgent clinical need and patent expiry within one year.
The Opinions on Encouraging Priority Review and Approval for Drug Innovations promulgated by the former CFDA on December 21, 2017 provide that a fast-track CTA or marketing authorization pathway will be available to both innovative drugs with distinctive clinical benefits, which have not been sold within or outside China, and drugs using advanced technology, innovative treatment methods or having distinctive treatment advantages.
The 2020 Drug Registration Regulation has incorporated the previous reform with respect to the accelerated review and approval process for clinical trials and drug marketing authorizations. The 2020 Drug Registration Regulation and the auxiliary regulatory documents currently provide four procedures for fast-track review and approvals of drugs. The NMPA would prioritize the allocation of resources for communication, guidance, review, inspection, examination and approval of applications that are qualified for the application of the four procedures. The four procedures are (i) the review and approval procedures for break-through therapeutic drugs; (ii) the review and approval procedures for drug conditional approval application; (iii) the priority review procedures for drug marketing authorization approval; and (iv) drug special review and approval procedures in case of public health emergency.
Review and approval procedures for break-through therapeutic drugs
In principle, during the drug clinical trials, an applicant may submit the application to the CDE for its drug to be designated as a break-through therapeutic drug if the following general conditions are met:
The drug candidate must be an innovative new drug or improved new drug;
The drug candidate must be used for the prevention and treatment of life-threatening illnesses or illnesses which have a serious impact on the quality of life; and
There is no other effective prevention or treatment method, or there is adequate evidence proving that the drug candidate has obvious clinical advantages over existing treatment methods.
Review and approval procedures for drug conditional approval application
At the clinical trial stage, an applicant may submit the application to the CDE for its drug to be qualified for conditional approval if the following general conditions are met:
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The drug candidate is for treatment of life-threatening illnesses with no effective treatment method or in dire need in case of a public health emergency; and clinical trial data on drug efficacy is available and the clinical value of the drug candidate can be predicated based on such data; or
For vaccines urgently needed in major public health crisis or other vaccines that are deemed by the NHC to be urgently needed, they may receive conditional approvals if their assessed benefits outweigh the risks.
Priority review procedures for drug marketing authorization approval
Upon the submission of the marketing authorization application for a drug candidate that has obvious clinical value, an applicant may request that the marketing authorization application be qualified for priority review. Drugs that are qualified for priority review include:
Drugs that are in short supply and urgently needed clinically, or innovative new drugs or improved new drugs for the prevention and treatment of major contagious diseases or rare diseases;
Drugs for pediatric use with new product specification, dosage form and strength that comply with pediatric physiological characteristics;
Vaccines and innovative vaccines urgently needed for the prevention and control of diseases;
Drugs that received break-through therapeutic drug designation;
Drugs that are qualified for conditional approval; and
Others qualified for priority review as stipulated by the NMPA.
Drug special review and approval procedures in case of public health emergency
At the time of a threat or occurrence of public health emergency, the NMPA may, in accordance with law, decide to implement special examination and approval for an urgently needed drug required for the prevention and treatment during the public health emergency. Drugs included in the special examination and approval procedures may, based on special needs of disease prevention and control, be restricted for use within a certain period and scope.
Administrative protection for new drugs
Under the 2007 Drug Registration Regulation, the Implementing Measures of the Drug Administration Law (effective as of March 2, 2019) and the Reform Plan, the NMPA may provide for an administrative monitoring period of not more than five years for Category 1 new drugs for the purpose of protecting public health. The new drug monitoring period commences from the date of approval, and the NMPA will continually monitor the safety of those new drugs. However, the 2020 Drug Registration Regulation omits the provisions relating to the administrative exclusivity created by the new drug monitoring period. The NMPA has not issued any written guidance regarding whether it will grant administrative exclusivity during the new drug monitoring period to new drugs approved after the 2020 Drug Registration Regulation took effect.
In July 2021, the NMPA and the China National Intellectual Property Administration (the “CNIPA”), jointly published the Measures for Implementing an Early-Stage Resolution Mechanism for Pharmaceutical Patent Disputes (Tentative) (the “Measures on Patent Linkage”). The Measures on Patent Linkage provide an operating mechanism for the NMPA and CNIPA to link generic drug applications to pharmaceutical patent protection, also known as Patent Linkage. The most recent amendment to the PRC Patent Law, which was promulgated by the SCNPC in October 2020 and became effective in June 2021, describes the general principles of Patent Linkage, but lacks operational details. The Measures on Patent Linkage are intended to answer these operational questions.
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The Measures on Patent Linkage describe a framework for a patentee to defend their patent exclusivity. Upon discovery of generic applications and certifications, if the patentee or the interested person disagrees, the patentee or the interested person will need to file a claim with the court or the CNIPA within 45 days after the CDE’s publication and must submit a copy of the case acceptance notification to the CDE within 15 working days after the case acceptance date. Otherwise, the NMPA can proceed with the technical review and approval. Moreover, for chemical drugs, the NMPA’s approval stay is only nine months, and the technical review does not need to stay in this nine-month period. If the patentee or the interested person cannot secure a favorable court judgment or a decision from the CNIPA within the nine-month period, the NMPA can grant marketing authorization to the generic applicant after the nine-month period expires. In Mainland China, no NMPA approval stay is available for biosimilar applications. The NMPA can proceed with the technical review and grant of marketing authorization following its receipt of biosimilar applications. To delay the entry of biosimilars, the patentee/interested person will need to file an infringement claim with the court or the CNIPA within 45 days after the CDE’s publication of the biosimilar application and secure a favorable decision before the NMPA’s issuance of the marketing authorization. The NMPA will then convert the marketing authorizations into a conditional approval effective after the relevant patents expire.
The Measures on Patent Linkage further provides the conditions and procedures for the certification of non-infringement for generic companies and the marketing exclusivity period that may be granted to the first generic company succeeding the patent challenge and receiving marketing authorization approval.
Data privacy and data protection
The Chinese government continues to strengthen its regulation of network security, data protection, data privacy and personal information (including personal health information). For example, the PRC Civil Code, which was promulgated by the National People’s Congress of the People’s Republic of China in May 2020 and became effective in January 2021, provides that the personal information of a natural person shall be protected by the law. Any organization or individual that needs to obtain personal information of others shall obtain such information legally and ensure the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal information of others.
In November 2016, the SCNPC promulgated the Cyber Security Law, which became effective in June 2017. The Cyber Security Law requires network operators to perform certain functions related to cybersecurity protection and strengthen their network information management and comply with certain requirements when collecting and using personal information. For instance, under the Cyber Security Law, operators of critical information infrastructure generally are required to store within the territory of Mainland China personal information and important data collected or produced in connection with operations conducted within the territory of Mainland China. In addition, when collecting and using personal information, network operators are required to abide by principles of lawfulness, justifiableness and necessity. Network operators that collect and use personal information are required to announce the rules for such collection and use, expressly disclose the purpose, methods and scope of such collection and use, and obtain the consent of the persons whose personal information are to be collected. Network operators are prohibited from collecting personal information that is unrelated to the services they provide, and from collecting or using personal information in violation of applicable laws and regulations and their agreements regarding their collection and use of such personal information. Network operators are also required to process the personal information they store in accordance with the provisions of laws and administrative regulations and their agreements reached with relevant persons. Network operators are prohibited from disclosing, tampering with or destroying personal information that they collect, and may not disclose personal information to others without the prior consent of the person whose personal information has been collected, unless such personal information has been anonymized by processing it in a manner that prevents the related persons from being identified and any information that can be used to re-identify the related persons from being restored. Under the Cyber Security Law, an individual has the right to require a network operator to delete his or her personal information if he or she finds that the collection and use of such information by such network operator violates applicable laws, administrative regulations or his or her agreement with such network operator, and to require a network operator to correct errors in his or her personal information collected and stored by such network operator. Also, under the Cyber Security Law, individuals or organizations are prohibited from acquiring personal information by stealing it or through other illegal ways, and from illegally selling or providing personal information to others.
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On September 14, 2022, the Cyberspace Administration of China (the “CAC”) published a draft amendment to the Cyber Security Law for public comment. According to the CAC’s explanatory note published together with draft amendment, the draft amendment was formulated to align the Cyber Security Law with several new laws that were released after the Cyber Security Law came into effect in June 2017. These new laws include the Administrative Punishment Law of the People’s Republic of China, the Data Security Law, and the PIPL, all of which were adopted or amended in 2021. The draft amendment mainly proposes revisions to Chapter VI of the Cyber Security Law on legal responsibility to adjust the types and ranges of administrative penalties for violating the Cyber Security Law and to align them with other laws. Generally, the fines and penalties available to be imposed by Chinese cyberspace regulators have been significantly increased and expanded.
In July 2018, the National Health Commission promulgated the Measures on Health and Medical Big Data (the “Measures”), which sets out guidelines and principles for standards management, security management and services management for the health and medical big data sector. Under the Measures, health and medical big data is defined as health and medical related data created in the course of preventing and treating illness and managing the health of individuals. The Measures require that all health and medical big data be stored in secure servers located in Mainland China, and that relevant cross-border data transfer laws and regulations be followed and a security assessment be conducted in accordance with relevant laws, regulations and requirements when it is necessary to transfer such data outside of Mainland China.
In June 2021, the SCNPC promulgated the Data Security Law, which became effective on September 1, 2021. The Data Security Law establishes a tiered system for data protection in terms of the data’s importance and requires that data identified as “important data,” which will be identified by governmental authorities through the use of catalogs, be treated with a higher level of protection. Specifically, the Data Security Law requires any processors of important data to appoint a “data security officer” and a “management department” to take charge of data security. In addition, any processors of important data are required to periodically evaluate the risk of its data processing activities and file risk assessment reports with relevant regulatory authorities. The Data Security Law, in addition to reiterating the Cyber Security Law requirements for cross-border transfers of important data collected and produced during operations within the territory of Mainland China of critical information infrastructure operators, also references additional requirements that are yet-to-be formulated regulating the cross-border transfer of important data by all data processors. Additionally, the Data Security Law prohibits any organization or individual located within the territory of Mainland China from providing to a foreign judicial or law enforcement authority any data stored within the territory of Mainland China without the approval of relevant regulatory authorities. Since the Data Security Law is relatively new, uncertainties still exist in its interpretation and implementation.
The current Cybersecurity Review Measures, which were released by the CAC together with 12 other Chinese regulatory authorities on January 4, 2022, came into effect on February 15, 2022. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators procuring network products and services and online platform operators carrying out data processing activities, which affect or may affect national security, are required to conduct a cybersecurity review. In addition, online platform operators possessing personal information of more than one million users seeking to be listed on foreign stock markets must apply for a cybersecurity review.
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On August 20, 2021, the National People’s Congress promulgated the PIPL, which became effective on November 1, 2021. The PIPL is an omnibus regulation that provides a comprehensive set of data privacy and protection requirements that apply to the processing of personal information of individuals conducted within the territory of mainland China and the processing of personal information of individuals located in mainland China conducted outside of mainland China if such processing is for purposes of providing products and services to, or analyzing and evaluating the behavior of, individuals located in mainland China. Under the PIPL, the processing of personal information is not permitted unless a legal basis exists. The legal bases for processing personal information under the PIPL include (i) where the consent of the relevant individual is obtained, (ii) where it is necessary to conclude or perform a contract to which the relevant individual is a party or for implementing human resources management in accordance with labor rules and regulations that are formulated in accordance with the law or collective contracts concluded in accordance with the law, (iii) where it is necessary to perform legal duties or obligations, (iv) where it is necessary to respond to a public health emergency or to protect the life and health of persons or their property, (v) where it is for news reporting and supervision of public opinion carried out for the public interest, and the processing is reasonable in scope, (vi) where it is necessary to process the personal information disclosed by the relevant individual or otherwise legally disclosed, and the processing is reasonable in scope, and (vii) under other circumstances prescribed by laws and regulations. The PIPL clarifies and prescribes new notice and consent requirements for personal information processors, including the requirement to obtain separate consent in five circumstances: (i) when disclosing personal information to another personal information processor, (ii) when processing sensitive personal information, (iii) when transferring personal information outside the territory of mainland China, (iv) when publicly disclosing the personal information of an individual, and (v) when using an individual’s personal image or identification information collected by image capture or personal identification equipment installed in public places for purposes other than maintaining public security. The PIPL also provides that critical information infrastructure operators and personal information processors who process personal information meeting a volume threshold set by Chinese cyberspace regulators are also required to store in mainland China personal information generated or collected in mainland China, and to pass a security assessment administered by Chinese cyberspace regulators for any export of such personal information. In addition, under the PIPL, personal information processors processing certain quantities of personal information in accordance with relevant laws and regulations and need to transfer such information out of Mainland China are required to pass a security assessment organized by Chinese cyberspace regulators, and all other personal information processors that are not required to pass the security assessment and need to transfer out of Mainland China personal information shall either: (i) undergo certification by specialized certification agencies in accordance with relevant regulations, (ii) conclude a standard contract designated by China cyberspace regulators with the overseas recipient of the personal information, or (iii) satisfy other conditions contemplated by laws, administrative regulations or Chinese cyberspace regulators. In addition to the above, personal information processors that need to transfer out of Mainland China personal information shall conduct a privacy impact assessment. The PIPL also enumerates a number of data subject rights, including the right of notice, access, correction, deletion, and portability. Additionally, the PIPL prohibits any personal information processor from providing to a foreign judicial or law enforcement authority any data stored within the territory of mainland China without the approval of relevant regulatory authorities. Lastly, the PIPL provides for significant fines for serious violations of up to RMB 50 million or 5% of annual revenues from the prior year and violators may also be ordered to suspend any related activity by competent authorities.
On November 14, 2021, the CAC further published the Regulations on Network Data Security Management (Draft for Comment) (the "Draft Data Security Management Regulations"). The Draft Data Security Management Regulations proposed that data processors, defined as individuals and organizations who determine the data processing activities in terms of the purpose and methods at their discretion, are subject to cybersecurity review if either they process personal information of more than one million individuals and aim to list on foreign stock markets, or their data processing activities impact or may impact national security. The Draft Data Security Management Regulations also propose requiring data processors seeking to list on foreign stock markets to annually assess their data security and submit the assessment reports to relevant competent authorities. The timing of the release of the final version of the Draft Data Security Management Regulations and its effective date is uncertain.
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On January 13, 2022, the draft Guidelines for Identification of Important Data (the “Guidelines”) were released for public comment, which sets out six principals for identifying important data: (i) data must be assessed based on its security impact from the perspectives of state security, economy, social stability, public health and safety, etc., data which is only important to organizations internally shall not be regarded as important data; (ii) data classification is important in identifying the area(s) of focus for protection, when classifying data and specifying security protection priorities, in order to ensure the free flow of non-important data while important data should be subject to additional requirements; (iii) existing local regulations and industry practice must be considered to ensure the additional measures work seamlessly with them, (iv) risks should be assessed in a holistic matter including the data’s confidentiality, completeness, availability, authenticity, and accuracy, etc.; (v) both the quality and quantity of data must be considered; and (vi) the assessment must be conducted and reviewed on a regular basis because the uses of the data, the way that the data is shared and the importance of data may change over time. The Guidelines, when finalized, are intended to be used by Chinese industry sector regulators to comply with a directive under the Data Security Law to formulate catalogs of important data that apply to organizations operating within the respective sectors.
Data privacy and data protection (cross-border data transfer)
On September 1, 2022, the Security Assessment Measures issued by the CAC came into effect. The Security Assessment Measures set out a security assessment framework for transfers out of Mainland China as well as ground rules for security assessment filings for data transfers out of Mainland China stipulated in the Cyber Security Law and the PIPL.
A security assessment is required for any data transfer out of Mainland China is under any of the following circumstances: (i) transfer of important data by data processors; (ii) transfer of personal information by critical information infrastructure operators and data processors that process personal information of more than one million individuals; (iii) transfer of personal information by data processors that have transferred either personal information of over 100,000 individuals or sensitive personal information of over 10,000 individuals abroad since January 1 of the preceding year; and (iv) other situations as determined by the CAC. According to the CAC, a cross-border data transfer includes (x) an outbound transfer and overseas storage of data collected and generated during a data processor’s operation in Mainland China; and (y) a remote access or use of data collected and generated by a data processor stored within Mainland China by overseas institutions, organizations, and individuals.
Data processors are required to submit an application filing and other required materials to apply for a security assessment. During a security assessment, the CAC will primarily focus on risks to national security, public interests, and the legitimate rights and interests of individuals or organizations resulting from the transfer of data out of Mainland China. The data transfer will not be allowed if the CAC does not approve the security assessment filing. Once the CAC approves the security assessment filing, the approval will remain valid for two years and may be renewed. An application for security assessment needs to be re-submitted if there is a change in the data transfer that may affect the security of the transferred data, such as changes in the purpose, method, scope, and type of the transferred data and changes in the purpose and method of the processing of the transferred data by overseas recipients.
The Security Assessment Measures apply to relevant data transfers out of Mainland China conducted prior to September 1, 2022. If a data processor fails to complete its security assessment for any relevant data transfer prior to the effective date of the Security Assessment Measures, it needs to rectify the failure within six months after the effective date of the Security Assessment Measures.
On August 31, 2022, the CAC promulgated the first edition of the Guide to Applications for Security Assessment of Outbound Data Transfers (the “Security Assessment Guide”). The Security Assessment Guide provides practical guidance to the implementation of the Security Assessment Measures.
The Security Assessment Guide reiterates the timeline and procedures for applications for security assessment of outbound data transfers under the Security Assessment Measures. The Security Assessment Guide specifies the dossier requirements for applications for security assessment and provides templates for some required documents. Additionally, the Security Assessment Guide clarifies that the application of security assessment filings are to be submitted to provincial branches of the CAC, who will forward it to the CAC for further review and assessment.
The Security Assessment Guide also reaffirms CAC’s position that a cross-border data transfer out of Mainland China includes where a data processor transfers or stores overseas the data collected or generated in its operations in Mainland China, and where a data processor allows an overseas entity, organization, or individual to access, retrieve, download, or export data the data processor collects or generates and stores in Mainland China.
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On November 4, 2022, the CAC and SAMR jointly issued the Notification on the Implementation of Personal Information Protection Certification, which implements, among other things, the personal information protection certification (“PIPC”) mechanism to satisfy the requirements of the PIPL for the cross-border transfer out of Mainland China of personal information. In parallel with that notification, on June 24, 2022, the National Information Security Standardization Technical Committee issued the first version of the Guidance on Network Security Standardized Practice – Specification for Certification of Personal Information Cross-Border Processing Activities (the “Certification Specification”), and on December 16, 2022, the National Information Security Standardization Technical Committee issued an updated version of the Certification Specification. The Certification Specification serves as an industry standard and provides the general principles and detailed requirements for personal information processors engaging in the cross-border transfer out of Mainland China of personal information to meet in order to obtain a PIPC from qualified certification institutions with respect to such data transfers. Personal information processors that obtain a PIPC may rely on a PIPC to comply with PIPL requirements for cross-border data transfers of personal information out of Mainland China that do not need to undergo a security assessment.
Under the Certification Specification, personal information processors seeking to obtain a PIPC need to (i) demonstrate adherence to general personal information protection principles; (ii) put in place a data transfer agreement meeting certain requirements with overseas recipients of the transferred personal information located outside of Mainland China; (iii) implement certain technical and organizational measures directed at personal information protection, including with respect to the cross-border data transfer processing activities; (iv) agree with the overseas recipients’ the same rules for cross-border processing of personal information regarding multiple aspects and jointly observe such rules; (v) conducted personal information protection impact assessments and periodic audits of, among other things, the personal information processor’s and the overseas recipients’ personal information protection measures, internal controls, protection of data subject rights, and the impact of the legal and network security environment in destination countries and regions; and (vi) meet, bear, and be subject to, and require the overseas recipients to meet, bear, and be subject to certain legal responsibilities and liabilities and supervision by qualified certification institutions and Chinese cyber regulators with respect to their cross-border data transfer processing activities and to data subjects.
On February 24, 2023, the CAC issued the Measures for the Standard Contract for Cross-Border Transfer of Personal Information (the “Measures for the PRC Standard Contract”), which will come into effect on June 1, 2023, introducing a standard contract template for the cross-border transfer of personal information outside of Mainland China (the “PRC Standard Contract”). The PRC Standard Contract clarifies terms and conditions to be agreed on between personal information processors as a data exporter and an overseas recipient as a data importer with respect to cross-border data transfers of personal information out of Mainland China. When the Measures for the PRC Standard Contract come into effect, a personal information processor may enter into the PRC Standard Contract and provide it along with other required materials to relevant governmental authorities for filing to ensure the legality of a cross-border transfer out of Mainland China if the following conditions are satisfied: the personal information processor (i) is not a CIIO; (ii) processes personal information of fewer than 1 million individuals; (iii) has provided personal information of fewer than 100,000 individuals overseas in aggregate since January 1 of the preceding year; and (iv) has provided sensitive personal information of fewer than 10,000 individuals overseas in aggregate since January 1 of the preceding year.
The PRC Standard Contract imposes certain obligations on the parties of such cross-border data transfers to protect the interests of data subjects, including, for example, (i) data exporters are required to use reasonable efforts to ensure data importers have adequate technical and organizational measures to ensure secure processing and have relevant capabilities to fulfill their obligations relating to the data transfer, and (ii) the parties of such cross-border transfer are required to ensure that the rights and interests of data subjects are well recognized in practice (and data subjects’ inquiries are promptly responded to), as such data subjects are considered third-party beneficiaries of the PRC Standard Contract.
Additional regulations, guidelines, and measures relating to data privacy and data protection are expected to be adopted, including more guidance from industry sector regulators on the catalogs of important data, which may contain additional requirements for transferring personal health information out of Mainland China.
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Since our subsidiaries located in Mainland China operate computer networks as part of their normal operations, we are required to comply with the requirements of Mainland China’s cyber security, data protection, and privacy laws and regulations. In addition, in the ordinary course of our business, we collect and store personal information, including personal information about our clinical trial subjects, customers, and employees in Mainland China. We may need to share such personal information with our subsidiaries, licensors, partners, or contractors located outside Mainland China. Mainland China’s network and data protection regime is constantly evolving, and we continue to face uncertainties as to whether our efforts to comply with these requirements will be sufficient. Although we develop and maintain compliance protocols and controls designed to maintain compliance with these requirements, development, implementation, improvement, and maintenance of these protocols and controls is costly and requires significant effort, resources, and time. In addition, in certain cases, our CROs, licensors, licensees, partners, and contractors are also required to comply with these laws, and our agreements with them require them to comply with these requirements, but there is always a risk that they may not fully comply with them.
Good pharmacovigilance practice
The latest Drug Administration Law provides that the State shall establish a pharmacovigilance system for monitoring, identifying, assessing and controlling adverse drug reactions and other harmful reactions associated with the use of drugs. As a supporting document in this regard, the Good Pharmacovigilance Practice (“GVP”), which was promulgated by the NMPA and became effective as of December 1, 2021, outlines the key requirements for pharmacovigilance activities to be carried out by drug marketing authorization holders and/or drug clinical trial sponsors. The GVP clarifies that pharmacovigilance activities, including collection, identification, evaluation and control of adverse drug reactions, shall take place in the total life cycle of drugs, from the clinical development stage through the post-approval stage. The GVP calls for effective and differentiated pharmacovigilance activities for different types of drugs, such as innovative drugs, traditional Chinese medicines and ethnic medicines.
Good laboratories practice certification for nonclinical research
To improve the quality of nonclinical research, the former SFDA promulgated the Administrative Measures for Good Laboratories Practice of Pre-clinical Laboratory in 2003 (the “GLP 2003”). The GLP 2003 was then abolished and replaced by the Administrative Measures for Good Laboratories Practice of Pre-clinical Laboratory promulgated in 2017. In April 2007, the former SFDA promulgated the Administrative Measures for Certification of Good Laboratory Practice of Pre-clinical Laboratory, providing that the former SFDA (now the NMPA) is responsible for certification of nonclinical research institutions. According to the Administrative Measures for Certification of Good Laboratory Practice of Pre-clinical Laboratory, the former SFDA (now the NMPA) decides whether an institution is qualified for undertaking pharmaceutical nonclinical research upon the evaluation of the institution’s organizational administration, personnel, laboratory equipment and facilities and its operation and management of nonclinical pharmaceutical projects. If all requirements are met, a GLP certification will be issued by the former SFDA (now the NMPA) and published on the government website.
An online information platform has been launched by the NMPA in December 2022. GLP certified institutions, provincial medical products administrations and the Center for Food and Drug Inspection of NMPA must maintain information related to GLP institutions on the platform, including, among others, GLP certification status, results of GLP inspections, investigations, and penalty of violations.
In January 2023, the NMPA issued a revised version of the Administrative Measures for Certification of Good Laboratory Practice of Pre-clinical Laboratory, which will come into effect on July 1, 2023. Under the new rule, a GLP certification issued by the NMPA will be valid for five years. GLP certified institutions shall submit a GLP annual report to the provincial medical products administration, covering, among other items, the institution’s basic information, QMS operation status, research progress.
Animal testing permits
According to Regulations for the Administration of Affairs Concerning Experimental Animals promulgated by the State Science and Technology Commission in November 1988, as amended by the State Council in January 2011, July 2013 and March 2017, and Administrative Measures on the Certificate for Animal Experimentation (Tentative) promulgated by the State Science and Technology Commission and other regulatory authorities in December 2001, performing experiments on animals requires a Certificate for Use of Laboratory 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 state requirements;
the animals’ feed must meet state 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.
Drug technology transfer regulations and marketing authorization transfer
On August 19, 2009, the former SFDA promulgated the Administrative Regulations for Registration of Drug Technology Transfer to standardize the registration process of drug technology transfer, which includes application for, and evaluation, examination, approval and monitoring of, drug technology transfer. Drug technology transfer refers to the transfer of drug production technology by the owner to a drug manufacturer and the application for drug registration by the transferee according to the provisions in the technology transfer regulations. Drug technology transfer includes new drug technology transfer and drug production technology transfer.
Conditions for the application for new drug technology transfer
Applications for new drug technology transfer may be submitted prior to the expiration date of the monitoring period of the new drugs with respect to:
drugs with new drug certificates only; or
drugs with new drug certificates and drug approval numbers.
For drug products with new drug certificates only and not yet in the monitoring period, or drug substances with new drug certificates, applications for new drug technology transfer should be submitted prior to the respective expiration date of the monitoring periods.
Conditions for the application of drug production technology transfer
Applications for drug production technology transfer may be submitted if:
the transferor holds new drug certificates or both new drug certificates and drug approval numbers, and the monitoring period has expired or there is no monitoring period; or
with respect to drugs without new drug certificates, both the transferor and the transferee are legally qualified drug manufacturing enterprises, one of which holds over 50% of the equity interests in the other, or both of which are majority-owned subsidiaries of the same drug manufacturing enterprise.
With respect to imported drugs with imported drug licenses, the original applicants for the imported drug licenses may transfer these drug production technologies to domestic drug manufacturing enterprises.
Application for, and examination and approval of, drug technology transfer
Applications for drug technology transfer should be submitted to the provincial administration of medical products where the transferee is located. If the transferor and the transferee are located in different provinces, the provincial administration of medical products where the transferor is located should provide examination opinions. The provincial administration of medical products where the transferee is located is responsible for examining application materials for technology transfer and organizing inspections on the production facilities of the transferee. Drug control institutes are responsible for testing three batches of drug samples.
The CDE should further review the application materials, provide technical evaluation opinions and form a comprehensive evaluation opinion based on the site inspection reports and the testing results of the samples. The NMPA should determine whether to approve the application according to the comprehensive technical review opinions of the CDE. An approval letter of supplemental application and a drug approval number will be issued to qualified applications. The CDE may require the conduct of clinical studies. For rejected applications, a notification letter of the examination opinions will be issued with the reasons for rejection.
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Conditions for the application for marketing authorization transfer
As previously discussed under “Part I—Item 1A—Risk Factors—Risks Related to our In-Licensing Business Model and Dependence on Third Parties,” the Drug Administration Law and the 2020 Drug Registration Regulation allow for the transfer of marketing authorization under the MAH system. If the manufacturing location of an imported drug is relocated to China through drug manufacturing technology transfer, the transferee in China can choose to file a supplemental application pursuant to the Administrative Regulations for Technology Transfer Registration of Drugs with the provincial medical product administration which contains technical data showing consistency of quality and manufacturing processes during the two-year grace period from January 13, 2021. Alternatively, the transferee in China can file a marketing authorization application with the CDE referencing technical data in the original import drug approval application dossier pursuant to the NMPA’s Administrative Measures for Post-approval Changes to Drugs (Tentative).
Permits and licenses for drug manufacturing operations
Pharmaceutical manufacturing permit and GMP requirements
According to the Drug Administration Law and the Implementing Measures of the Drug Administration Law, to manufacture pharmaceutical products in China, a pharmaceutical manufacturing enterprise must first obtain a Pharmaceutical Manufacturing Permit issued by the relevant provincial medical products administration where the enterprise is located. Among other things, such a permit must set forth the scope of production and effective period. The grant of such license is subject to an inspection of the manufacturing facilities, and an inspection to determine whether the sanitary condition, quality assurance systems, management structure and equipment meet the required standards.
According to the Implementing Measures of the Drug Administration Law and Measures on the Supervision and Administration of the Manufacture of Drugs, promulgated in August 2004 and amended in November 2017 and January 2020, each Pharmaceutical Manufacturing Permit issued to a pharmaceutical manufacturing enterprise is effective for a period of five years. Any enterprise holding a Pharmaceutical Manufacturing Permit is subject to review by the relevant regulatory authorities on an annual basis. The enterprise is required to apply for renewal of such permit within six months prior to its expiry and will be subject to reassessment by the issuing authorities in accordance with then prevailing legal and regulatory requirements for the purposes of such renewal.
The Good Manufacturing Practice was promulgated in March 1988 and was amended in June 1999 and January 2011. The Good Manufacturing Practice comprises a set of detailed standard guidelines governing the manufacture of drugs, which includes institution and staff qualifications, production premises and facilities, equipment, hygiene conditions, production management, quality controls, product operation, raw material management, maintenance of sales records and management of customer complaints and adverse event reports.
Pharmaceutical distribution permit and GSP requirements
To distribute pharmaceutical products in China, including wholesale and retail distribution, a pharmaceutical distribution enterprise must first obtain a Pharmaceutical Distribution Permit.
Pursuant to the Administrative Measures of the Pharmaceutical Distribution Permit promulgated by the former CFDA in February 2004 and subsequently amended in November 2017, each Pharmaceutical Distribution Permit issued to a pharmaceutical distribution enterprise is effective for a period of five years. Any enterprise holding a Pharmaceutical Distribution Permit is subject to periodic review and inspection by the relevant regulatory authorities. The enterprise is required to apply for renewal of such permit within six months prior to its expiry and will be subject to reassessment by the issuing authorities in accordance with then prevailing legal and regulatory requirements for the purposes of such renewal.
The Good Supply Practice for Drugs was promulgated in April 2000 and was amended in November 2012, May 2015 and July 2016. The Good Supply Practice for Drugs is the basic rules for drug operation and quality control, setting forth the requirements for pharmaceutical distribution enterprises throughout the process of procurement, storage, sales and transportation.
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U.S. regulation of pharmaceutical product development and approval
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (the “FDCA”) and its implementing regulations. Drugs are also subject to other federal, state and local statutes and regulations. The process of obtaining marketing approvals and the subsequent compliance with appropriate federal, state and local rules and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable U.S. regulatory requirements at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions. These sanctions could include, among other actions, FDA’s refusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning or untitled letters and other types of enforcement-related letters, product recalls, product seizures, relabeling or repackaging, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by FDA and the Department of Justice or other governmental entities. Our drug candidates must be approved by the FDA through the NDA process before they may be legally marketed in the United States. The process required by the FDA before a drug may be marketed in the United States generally involves the following:
completion of extensive pre-clinical studies, sometimes referred to as pre-clinical laboratory tests, pre-clinical animal studies and formulation studies all performed in compliance with applicable regulations, including the FDA’s Good Laboratory Practices (“GLP”) regulations;
submission to the FDA of an investigational new drug application (“IND”) which must become effective before human clinical trials may begin and must be updated annually and when certain changes are made;
approval by an independent institutional review board (“IRB”) or independent ethics committee representing each clinical site before each clinical trial may be initiated;
performance of adequate and well-controlled human clinical trials in accordance with applicable good clinical practices (“GCPs”) and other clinical trial-related regulations, to establish the safety and efficacy of the proposed drug candidate for its proposed indication;
preparation and submission to the FDA of an NDA;
a determination by the FDA within sixty days of its receipt of an NDA to file the NDA for review and review by an FDA advisory committee, where appropriate or if applicable;
satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities at which the active pharmaceutical ingredients (“API”) and finished drug product are produced to assess compliance with the FDA’s current Good Manufacturing Practices (“cGMPs”);
potential FDA audit of the pre-clinical and/or clinical trial sites that generated the data in support of the NDA; and
payment of user fees and FDA review and approval of the NDA prior to any commercial marketing or sale of the drug in the United States.
Pre-clinical studies
The data required to support an NDA is generated in two distinct development stages: pre-clinical and clinical. For new chemical entities, the pre-clinical development stage generally involves synthesizing the active component, developing the formulation and determining the manufacturing process, evaluating purity and stability, as well as carrying out non-human toxicology, pharmacology and drug metabolism studies in the laboratory, which support subsequent clinical testing. The conduct of the pre-clinical tests must comply with federal regulations, including GLPs and the U.S. Department of Agriculture’s Animal Welfare Act. The sponsor must submit the results of the pre-clinical tests, together with manufacturing information, analytical data, any available clinical data or literature and a proposed clinical protocol, to the FDA as part of the IND. An IND is a request for authorization from the FDA to administer an investigational drug product to humans. The central focus of an IND submission is on the general investigational plan and the protocol(s) for human trials. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or questions regarding the proposed clinical trials and places the IND on clinical hold within that 30-day time period. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns or questions before the clinical trial can begin. Some long-term pre-clinical testing, such as animal tests of reproductive AEs and carcinogenicity, may continue after the IND is submitted. The FDA may also impose clinical holds on a drug candidate at any time before or during clinical trials due to safety concerns or non-compliance. Accordingly, submission of an IND does not guarantee the FDA will allow clinical trials to begin, or that, once begun, issues will not arise that could cause the trial to be suspended or terminated.
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Clinical studies
If the FDA accepts the IND, the drug can then be studied in human clinical trials to determine if the drug is safe or effective. The clinical stage of development involves the administration of the drug product to human subjects or patients under the supervision of qualified investigators, generally physicians not employed by or under the trial sponsor’s control, in accordance with GCPs, which establish standards for conducting, recording data from, and reporting the results of clinical trials, and GCPs are intended to assure that the data and reported results are accurate, and that the rights, safety, and well-being of study participants are protected. GCPs also include the requirement that all research subjects provide their informed consent in writing for their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selection and exclusion criteria, and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequent amendments to the protocol, must be submitted to the FDA as part of the IND. Further, each clinical trial must be reviewed and approved by the IRB at or servicing each institution at which the clinical trial will be conducted. An IRB is charged with protecting the welfare and rights of trial participants and considers such items as whether the risks to individuals participating in the clinical trials are minimized and are reasonable in relation to anticipated benefits. The IRB also reviews and approves the informed consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trial until completed.
Clinical trials are generally conducted in three sequential phases that may overlap or be combined, known as Phase 1, Phase 2 and Phase 3 clinical trials.
Phase 1: The drug is initially introduced into a small number of healthy volunteers or patients with the target disease or condition who are initially exposed to a single dose and then multiple doses of the drug candidate. The primary purpose of these clinical trials is to assess the metabolism, pharmacologic action, side effect tolerability and safety of the drug.
Phase 2: The drug is administered to a limited patient population with the specified disease or condition to determine dose tolerance and optimal dosage required to produce the desired benefits. At the same time, safety and further pharmacokinetic and pharmacodynamic information is collected, as well as identification of possible adverse effects and safety risks and preliminary evaluation of efficacy.
Phase 3: The drug is administered to an expanded number of patients, generally at multiple sites that are geographically dispersed, in well-controlled clinical trials to generate enough data to demonstrate the efficacy of the drug for its intended use, its safety profile, and to establish the overall benefit/risk profile of the drug and provide an adequate basis for drug approval and labeling of the drug product. Phase 3 clinical trials may include comparisons with placebo and/or other comparator treatments.
Post-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used to gain additional experience from the treatment of patients in the intended therapeutic indication. In certain instances, the FDA may mandate the performance of Phase 4 clinical trials as a condition of approval of an NDA.
Progress reports detailing the results of the preclinical studies and clinical trials must be submitted at least annually to the FDA, and more frequently if SAEs occur. Written IND safety reports must be submitted to the FDA and the investigators for serious and unexpected AEs or any finding from tests in laboratory animals that suggests a significant risk to human subjects. The FDA, the IRB, or the clinical trial sponsor may suspend or terminate a clinical trial at any time during the initial 30-day period or while clinical trials are ongoing under the IND, on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk or that the trial is unlikely to meet its stated objectives. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted. 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. Additionally, some clinical trials are overseen by an independent group of qualified experts organized by the clinical trial sponsor, known as a data safety monitoring board or committee. This group may determine whether a trial may move forward at designated check points based on access to certain data from the trial. There also are requirements governing the reporting of ongoing clinical trials and completed clinical trials to public registries. Information about applicable clinical trials, including results for clinical trials other than Phase 1 investigations, must be submitted within specific timeframes for publication on the clinical trials database maintained by the National Institutes of Health.
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NDA submission and FDA review process
The results of pre-clinical studies and of the clinical trials, together with other detailed information, including extensive manufacturing information and information on the composition of the drug and proposed labeling, are submitted to the FDA in the form of an NDA requesting approval to market the drug for one or more specified indications. The FDA reviews an NDA to determine, among other things, whether a drug is safe and effective for its intended use and whether the product is being manufactured in accordance with cGMPs to assure and preserve the product’s identity, strength, quality and purity. FDA approval of an NDA must be obtained before a drug may be offered for sale in the United States.
Under the Prescription Drug User Fee Act, as amended (“PDUFA”), each NDA must be accompanied by an application user fee.
The FDA reviews all NDAs submitted before it accepts them for filing and may request additional information rather than accepting an NDA for filing. Under the goals and policies agreed to by the FDA under PDUFA, the FDA aims to complete its initial review of an NDA and respond to the applicant within 10 months from the filing date for a standard NDA and within six months from the filing date for a priority NDA.
The FDA reviews the NDA to determine, among other things, whether the proposed drug is safe and effective for its intended use, and whether the drug is being manufactured in accordance with cGMPs to assure and preserve the drug’s identity, strength, quality and purity. The FDA may refer applications for novel drugs or drug candidates that present difficult questions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Before approving an NDA, the FDA will conduct a pre-approval inspection of the manufacturing facilities for the new drug to determine whether they comply with cGMPs. The FDA will not approve the drug unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the drug within required specifications. In addition, before approving an NDA, the FDA may re-analyze clinical trial data and may also audit data from clinical trials to ensure compliance with GCP requirements. After the FDA evaluates the application, manufacturing process and manufacturing facilities where the drug product and/or its API will be produced, it may issue an approval letter or a Complete Response Letter (“CRL”). An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A CRL indicates that the review cycle of the application is complete and the application is not ready for approval. A CRL usually describes all of the specific deficiencies in the NDA identified by the FDA. The CRL may require additional clinical data and/or an additional pivotal clinical trial(s), and/or other significant, expensive and time-consuming requirements related to clinical trials, pre-clinical studies or manufacturing. If a CRL is issued, the applicant may either resubmit the NDA, addressing all of the deficiencies identified in the letter, or withdraw the application. Even if such data and information is submitted, the FDA may ultimately decide that the NDA does not satisfy the criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret the same data.
If a drug receives marketing approval, the approval may be significantly limited to specific diseases, dosages, or patient populations or the indications for use may otherwise be limited. Further, the FDA may require that certain contraindications, warnings or precautions be included in the drug labeling or may condition the approval of the NDA on other changes to the proposed labeling, development of adequate controls and specifications, or a commitment to conduct post-market testing or clinical trials and surveillance to monitor the effects of approved drugs. For example, the FDA may require Phase 4 testing which involves clinical trials designed to further assess a drug’s safety and effectiveness and may require testing and surveillance programs to monitor the safety of approved drugs that have been commercialized. The FDA may also place other conditions on approvals including the requirement for a Risk Evaluation and Mitigation Strategy (“REMS”) to ensure that the benefits of a drug or biological product outweigh its risks. Any of these limitations on approval or marketing could restrict the commercial promotion, distribution, prescription or dispensing of drugs. Drug approvals may be withdrawn for non-compliance with regulatory standards or if problems occur following initial marketing.
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Post-marketing requirements
Following approval of a new drug, a pharmaceutical company and the approved drug are subject to continuing regulation by the FDA, including, among other things, monitoring and recordkeeping activities, reporting to the applicable regulatory authorities of adverse experiences with the drug, providing the regulatory authorities with updated safety and efficacy information, drug sampling and distribution requirements, and complying with applicable promotion and advertising requirements, which include regulations regarding promoting products for unapproved uses or patient populations (known as “off-label use”) and limitations on industry-sponsored scientific and educational activities. Although physicians may legally prescribe drugs for off-label uses, manufacturers may not market or promote such off-label uses. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including investigation by federal and state authorities. Modifications or enhancements to the drug or its labeling or changes of the site of manufacture are often subject to the approval of the FDA and other regulators, which may or may not be received or may result in a lengthy review process.
FDA regulations also require that approved products be manufactured in specific approved facilities and in accordance with cGMPs. We rely, and expect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMP regulations. NDA holders using contract manufacturers, laboratories or packagers are responsible for the selection and monitoring of qualified firms, and, in certain circumstances, qualified suppliers to these firms. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance as well as the corresponding maintenance of records and documentation and the obligation to investigate and correct any deviations from cGMPs. Drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with cGMPs and other laws. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance. The discovery of violative conditions, including failure to conform to cGMPs, could result in enforcement actions that interrupt the operation of any such facilities or the ability to distribute products manufactured, processed or tested by them. Discovery of problems with a product after approval may result in restrictions on a product, manufacturer, or holder of an approved NDA, including, among other things, recall or withdrawal of the product from the market. Discovery of previously unknown problems with a drug or the failure to comply with applicable FDA requirements can have negative consequences, including adverse publicity, judicial or administrative enforcement, warning letters from the FDA, mandated corrective advertising or communications with doctors, and civil or criminal penalties, among others. Newly discovered or developed safety or effectiveness data may require changes to a drug’s approved labeling, including the addition of new warnings and contraindications, and also may require the implementation of other risk management measures. Also, new government requirements, including those resulting from new legislation, may be established, or the FDA’s policies may change, which could delay or prevent regulatory approval of our drugs under development.
Other U.S. regulatory matters
Manufacturing, sales, promotion and other activities following drug approval are also subject to regulation by numerous regulatory authorities in addition to the FDA, including, in the United States, the Centers for Medicare & Medicaid Services, other divisions of the Department of Health and Human Services, the Drug Enforcement Administration for controlled substances, the Consumer Product Safety Commission, the Federal Trade Commission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments. In the United States, the activities of pharmaceutical manufacturers are subject to federal and state laws designed to prevent “fraud and abuse” in the healthcare industry. The laws generally limit financial interactions between manufacturers and health care providers or other participants in the healthcare industry and/or require disclosure to the government and public of such interactions. Many of these laws and regulations contain ambiguous requirements or require administrative guidance for implementation. Pharmaceutical manufacturers are also required to provide discounts or rebates under government healthcare programs or to certain government and private purchasers in order to obtain coverage under federal healthcare programs such as Medicaid. Participation in such programs may require tracking and reporting of certain drug prices. Manufacturers are subject to fines and other penalties if such prices are not reported accurately. The handling of any controlled substances must comply with the U.S. Controlled Substances Act and Controlled Substances Import and Export Act. Drugs must meet applicable child-resistant packaging requirements under the U.S. Poison Prevention Packaging Act. Manufacturing, sales, promotion and other activities are also potentially subject to federal and state consumer protection and unfair competition laws.
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The distribution of pharmaceutical drugs is subject to additional requirements and regulations, including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceutical drugs.
The failure to comply with regulatory requirements subjects manufacturers to possible legal or regulatory action. Depending on the circumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, recall or seizure of drugs, total or partial suspension of production, denial or withdrawal of product approvals, exclusion from participation in government healthcare programs or refusal to allow a firm to enter into supply contracts, including government contracts. In addition, even if a firm complies with FDA and other requirements, new information regarding the safety or efficacy of a product could lead the FDA to modify or withdraw product approval. Prohibitions or restrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.
Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example: (i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products; or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.
Rest of the world regulation of pharmaceutical product development and approval
For other countries outside of China and the United States, such as countries in Europe, Latin America or other parts of Asia, the requirements governing the conduct of clinical trials, drug licensing, pricing and reimbursement vary from country to country. In all cases the clinical trials must be conducted in accordance with applicable GCP requirements and the applicable regulatory requirements and ethical principles.
If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.
Coverage and reimbursement
Chinese coverage and reimbursement
Historically, most Chinese healthcare costs had been borne by patients out-of-pocket, which had limited the growth of more expensive pharmaceutical products. However, in recent years the number of people covered by government and private insurance has increased. According to the National Healthcare Security Administration (the “NHSA”), as of December 2021, approximately 1.36 billion residents in China were enrolled in the Basic Medical Insurance scheme, representing a coverage rate of above 95% of the total population.
Reimbursement under the national medical insurance program
The Basic Medical Insurance scheme was adopted pursuant to the Decision of the State Council on the Establishment of the Urban Employee Basic Medical Insurance Program issued by the State Council on December 14, 1998, under which all employers in urban cities are required to enroll their employees in the Basic Medical Insurance scheme and the insurance premium is jointly contributed by the employers and employees. The State Council promulgated Guiding Opinions for the Pilot of Urban Resident Basic Medical Insurance on July 10, 2007, under which urban residents of the pilot district, rather than urban employees, may voluntarily join Urban Resident Basic Medical Insurance.
Pursuant to the Chinese Social Insurance Law promulgated by the SCNPC in October 2010 and subsequently amended in December 2018, all employees are required to enroll in the basic medical insurance program and the insurance premium is jointly contributed by the employers and employees as required by the state.
The Interim Measures for the Administration of Use of Drugs Covered by the Basic Medical Insurance was promulgated by NHSA in July 2020 and came into effect in September 2020. According to which, expenses of drugs listed in the Basic Medical Insurance Catalog, typically known in the industry as the National Reimbursable Drug List (“NRDL”),will be paid in full or part from the basic medical insurance fund in accordance with applicable provisions, and the drugs with the same generic names as those specified in the Basic Medical Insurance Catalog will be automatically regulated by the Basic Medical Insurance Catalog and shall also be eligible for the reimbursement by the basic medical insurance fund. These measures further clarify that the Basic Medical Insurance Catalog shall be promulgated by the NHSA and adjusted on an annual basis. Provinces shall have the right to add eligible ethnic drugs, preparations of medical institutions, and traditional Chinese medicine decoction pieces into the provincial medical insurance-based payment scope, which shall be implemented after being filed with the NHSA for record.
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The Chinese Ministry of Human Resources and Social Security, together with other government authorities, have the power to determine the medicines included in the NRDL. In January 2023, the NHSA and the Chinese Ministry of Human Resources and Social Security released the National Drug Catalog for Basic Medical Insurance, Work-Related Injury Insurance and Maternity Insurance (the “2022 NRDL”), and 111 new drugs were admitted to the 2022 NRDL. Previous updates to the NRDL occurred in 2021, 2020, 2019, 2017 and 2009. Admission to the NRDL depends on a number of factors, including on-market experience, scale of patient adoption, physician endorsement, cost effectiveness and budget impact. Since 2019, provincial governments were not allowed to create provincial reimbursable drug lists by adding or removing chemical and biological drugs from the NRDL.
Medicines included in the NRDL are divided into two classes, Class A and Class B. Patients purchasing medicines included in the NRDL are entitled to reimbursement of the entire amount or a certain percentage of the purchase price. The percentage of reimbursement for Class B medicines differs from region to region in China.
The total amount of reimbursement for the cost of medicines, in addition to other medical expenses, for an individual participant under the Basic Medical Insurance scheme in a calendar year is capped at the amount in such participant’s individual account under such program. The amount in a participant’s account varies, depending on the amount of contributions from the participant and his or her employer.
National list of essential drugs
On August 18, 2009, the former MOH and eight other ministries and commissions in China issued the Provisional Measures on the Administration of the National List of Essential Drugs (the “NEDL”) and the Guidelines on the Implementation of the NEDL System. The provisional measures aimed to promote essential medicines sold to consumers at fair prices in China and ensured that the general public in China has equal access to the drugs contained in the NEDL. The Provisional Measures on the Administration of the National List of Essential Drugs was then amended in February 2015. The former MOH promulgated the NEDL (Catalog for the Basic Healthcare Institutions) on August 18, 2009, a revised NEDL on March 13, 2013 and another revised NEDL on September 30, 2018, which became effective on November 1, 2018. According to these regulations, basic healthcare institutions funded by government, which primarily include county-level hospitals, county-level Chinese medicine hospitals, rural clinics and community clinics, shall store up and use drugs listed in the NEDL. The drugs listed in NEDL shall be purchased by centralized tender process and shall be subject to the price control by the National Development and Reform Commission (the “NDRC”). Drugs listed in the NEDL will be given priority to being listed in the NRDL.
Commercial insurance
On October 25, 2016, the State Council and the Communist Party of China Central Committee jointly 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.
Price controls
Instead of direct price controls which were historically used in China but abolished in June 2015, the government regulates prices mainly by establishing price negotiations, consolidated procurement mechanism, and revising medical insurance reimbursement standards as discussed below.
NRDL price negotiations
The Chinese government has initiated several rounds of price negotiations with manufacturers of patented drugs, drugs with an exclusive source of supply and oncology drugs since 2016. The average percentage of price reduction has been around 50%. Once the government agreed with the drug manufacturers on the supply prices, the drugs would be automatically listed in the NRDL and qualified for public hospital purchase.
There were NRDL price negotiations in 2018, 2019, 2020, 2021 and 2022. In 2022, 111 new drugs were added to the 2022 NRDL, the average price reduction of the 108 drugs participating in price negotiations is 60.1%.
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Centralized procurement and tenders
The Guiding Opinions concerning the Urban Medical and Health System Reform, promulgated on February 21, 2000, aims to regulate the purchasing process of pharmaceutical products by medical institutions. The former MOH and other relevant government authorities have promulgated a series of regulations in order to implement the tender requirements.
According to the Notice on Issuing Certain Regulations on the Trial Implementation of Centralized Tender Procurement of Drugs by Medical Institutions promulgated on July 7, 2000 and the Notice on Further Improvement on the Implementation of Centralized Tender Procurement of Drugs by Medical Institutions promulgated on August 8, 2001, non-for-profit medical institutions established by county or higher-level government are required to implement centralized tender procurement of drugs.
The former MOH promulgated the Working Regulations of Medical Institutions for Procurement of Drugs by Centralized Tender and Price Negotiations (for Trial Implementation) on March 13, 2002, which provides rules for the tender process and negotiations of the prices of drugs, operational procedures, a code of conduct and standards or measures of evaluating bids and negotiating prices. On January 17, 2009, the former MOH, the former SFDA and other four national departments jointly promulgated the Notice of the Financial Planning Department of Ministry of Health on Issue of the Opinions on Further Regulating Centralized Procurement of Drugs by Medical Institutions. According to the notice, non-for-profit medical institutions owned by the government at the county level or higher or owned by state-owned enterprises (including state-controlled enterprises) shall purchase pharmaceutical products by online centralized procurement. Each provincial government shall formulate its catalog of drugs subject to centralized procurement. Except for drugs in the NEDL (the procurement of which shall comply with the relevant rules on NEDL), certain pharmaceutical products which are under the national government’s special control, such as toxic, radioactive and narcotic drugs and TCMs, in principle, all drugs used by non-for-profit medical institutions medical institutions shall be subject to centralized procurement. On July 7, 2010, the former MOH and six other ministries and commissions jointly promulgated the Notice on Printing and Distributing the Working Regulations of Medical Institutions for Centralized Procurement of Drugs to further regulate the centralized procurement of drugs and clarify the code of conduct of the parties in centralized drug procurement. The Opinions of the General Office of the State Council on Improvement of the Policy of Production, Circulation and Use of Drugs promulgated in January 2017 aim to deepen the reform of medical health system, improve the quality of the drug and regulate the distribution and use of the drug. The Notice of the General Office of the State Council on Issuing Pilot Plan of Centralized Procurement and Use of the Drug Organized by the State promulgated in January 2019 aims to improve the pricing mechanism of the drug, which also further regulates the scope and model of centralized procurement.
The centralized tender process takes the form of public tender operated and organized by provincial or municipal government agencies. The centralized tender process is in principle conducted once every year in the relevant province or city in China. The bids are assessed by a committee composed of pharmaceutical and medical experts who will be randomly selected from a database of experts approved by the relevant government authorities. 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, qualifications and reputation of the manufacturer, after-sale services and innovation. Only pharmaceuticals that have won in the centralized tender process may be purchased by public medical institutions funded by the governmental or state-owned enterprise (including state-controlled enterprises) in the relevant region.
“4+7” Volume-based drug procurement and tenders
In June 2018, the State Council decided to launch a new round of drug pricing and procurement reform. This reform is implemented mainly by the NHSA, a new government authority established in 2018 as part of the institutional restructuring with a mandate of pricing and procurement of drugs and medical disposables. The NHC supports the reform by introducing policy that encourages purchasing and prescribing of the selected drug, and managing the supplier’s behavior. The NMPA is responsible for the quality assurance of the drug.
On November 15, 2018, the Joint Procurement Office, the procurement alliance formed by representatives of procurement agencies in 11 pilot cities established to oversee the bidding and procurement process, published the Paper on Drug Centralized Procurement in “4+7” Regions, launching the national pilot scheme for centralized volume-based drug procurement and tenders. According to the papers, the initial procurement of 31 generic drugs was implemented in 4 municipalities, namely Beijing, Shanghai, Tianjin and Chongqing, and 7 cities, namely Shenyang, Guangzhou, Shenzhen, Xi’an, Dalian, Chengdu, and Xiamen. This pilot program is thus also referred to as the “4+7” procurement scheme. On January 1, 2019, the General Office of the State Council published a circular on National Pilot Program for Centralized Procurement and Use of the Drug Organized by the State, which provides detailed implementing measures for the nation-wide centralized drug procurement and tender scheme.
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The “4+7” pilot program puts special emphasis on procurement volume guarantee. Public hospitals in pilot regions are encouraged to form a group procurement organization to increase the negotiation leverage. The committed volume will be shared by all qualified bid-winners, and public hospitals should prioritize their use of drugs purchased through the volume-based procurement in order to realize the volume commitment. Under this program, a company is provided with a substantial volume guarantee. The selected drugs must pass the generic drug consistency evaluation on quality and effectiveness. The reform policy is aimed to lower drug costs for patients, reduce transaction costs for enterprises, regulate drug use of hospitals, and improve the centralized drug procurement and pricing system. The centralized volume-based procurement is open to all approved enterprises that manufacture drugs on the government-set procurement list in China. Clinical effects, adverse reactions, and batch stability of the drugs are considered, and their quality consistency with the originator drugs will be the main criteria for evaluation. Production capacity and stability of the supplier are also considered.
On December 17, 2018, the preliminary results of the “4+7” centralized volume-based procurement were announced: 25 out of 31 generic drugs were selected, of which there are 3 originator drugs and 22 generics. As of December 2019, many provinces have published regional implementation measures, expanding the pilot program. On January 21, 2020, the results of the second round of the national centralized volume-based procurement and tender program were published: the average price reduction reached more than 50%, and the highest reduction has reached 90%. The results of the third, the fourth, the fifth, the sixth (specially for insulin) and the seventh round of the national centralized volume-based procurement and tender program published on August 24, 2020, February 8, 2021, June 28, 2021, November 30, 2021 and July 12, 2022, respectively, show similar levels of reduction in average price reduction of about 50%, with the highest reduction reaching about 93%, 96%, 98%, 74% and 98%, respectively.
Two-invoice system
In addition to the centralized tender process, the Chinese government also rolled out a “two-invoice system.” Under the 2016 List of Major Tasks in Furtherance of the Healthcare and Pharmaceutical Reforms issued by the General Office of the State Council in April 2016, the two-invoice system will be fully implemented in China. According to the Circular on Issuing the Implementing Opinions on Carrying out the Two-invoice System for Drug Procurement among Public Medical Institutions (Tentative), which came into effect in December 2016, the two-invoice system means, in principle, there cannot be more than two invoices issued for drug products supplied by manufacturers to public hospitals. To meet this requirement, many drug manufacturers have reduced the tiers of distributors, or converted drug distributors into contracted service organizations. 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. The reduction in distribution tiers resulted in a decrease in distribution mark-ups, hence the supply prices to public hospitals would also be reduced. Compliance with the two-invoice system is a prerequisite for pharmaceutical companies to participate in the tender and procurement processes of public hospitals, which currently provide most of Chinese healthcare services. Manufacturers and distributors that fail to implement the two-invoice system may lose their qualifications to participate in the tender and procurement process. Non-compliant manufacturers may also be blacklisted from engaging in drug sales to public hospitals. The two-invoice system has been implemented in all provinces, each with its own regional implementation rules.
Medical insurance reimbursement standards
The Opinions on Integrating the Basic Medical Insurance Systems for Urban and Rural Residents, issued by the State Council on January 3, 2016, call for the integration of the urban resident basic medical insurance and the new rural cooperative medical care system and the establishment of a unified Basic Medical Insurance system. This unified Basic Medical Insurance system will cover all urban and rural residents other than rural migrant workers and persons in flexible employment arrangement who participate in the Basic Medical Insurance for urban employees.
The General Office of the State Council further announced a master plan for the medical insurance reimbursement reform in June 2017. The main objectives are to implement a diversified reimbursement mechanism including Diagnosis Related Groups (“DRGs”), per-capita caps, and per-bed-day caps. Local administration of healthcare security will introduce a total budget control for their jurisdictions and decide the amount of reimbursement to public hospitals based on hospitals’ performance and the spending targets of individual Basic Medical Insurance funds. In June 2019, the NHSA, the Ministry of Finance, the NHC and the National Administration of Traditional Chinese Medicine jointly issued the Notice on the National List of Pilot Cities for the DRG Payment Mechanism, identifying 30 cities as pilot cities for the DRG payment pilot program, proposing to further the medical insurance reimbursement reform.
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To further standardize payment in the Basic Medical Insurance schemes, in October 2019, the NHSA issued two key technical documents for a pilot project that introduces DRGs, the Technical Guideline of the Classification and Payment for China Healthcare Security Diagnosis Related Groups (CHS-DRG) and the CHS-DRG Classification Plan. According to the classification plan, patients will be sorted into 26 major diagnostic categories and 376 adjacent diagnosis-related groups. DRG-based settlement is currently only applicable to expenses of inpatient care incurred by the insureds at designated hospitals participating in the DRG payment pilot programs and payable by regional medical insurance fund under the Basic Medical Insurance schemes. DRG-based payments are made directly to the participating medical institutions, while the covered benefits enjoyed by the insureds, under the current public insurance schemes, are not affected by such settlement. In June 2020, the NHSA issued a more detailed CHS-DRG Classification Plan, further diving the 376 diagnosis-related groups into 618 basic reimbursement unit. The 30 municipalities participating in the DRG pilot project were required to submit technical assessment report to the local branch of NHSA before August 31, 2020. Upon receiving NHSA’s approval, the participating municipalities may commence conducting simulation runs of the pilot project. After the simulation runs, the DRG-based settlement system is expected to be launched gradually from 2022 to 2024. In February 2020, the Communist Party of China Central Committee and the State Council jointly promulgated the Opinions on Deepening the Reform of the Healthcare Security System, which suggests that a multi-compound medical insurance payment method based on payment by disease shall be implemented. In October 2020, the NHSA issued the Notice on Issuance of the Pilot Work Plan for Total Budget by Regional Points Method and Diagnosis-Intervention Packet Payment to introduced and further implement the Diagnosis-Intervention Packet ("DIP") payment. DIP and DRG are the same in essence and principle, and therefore DIP can be considered as a variant of DRG. In November 2020, the NHSA issued two key technical documents for the DIP payment pilot project, the China Healthcare Security Technical Specification of Diagnosis-Intervention Packet (DIP) and the DIP Classification Catalog (Version 1.0). In July 2021, the NHSA issued the Medical Insurance Handling Management Regulations (Trial) for Diagnosis-Intervention Packet (DIP) Payment to provide detailed guidance for implementing medical insurance payment based on DIP. In the List of Pilot Cities for DRG/DIP Payment published by the NHSA on December 17, 2021, 18 cities were identified as pilot cities for the DRG payment pilot program, 12 cities were identified as pilot cities for the DIP payment pilot program, and 2 cities were identified as pilot cities for both the DRG payment pilot program and the DIP payment pilot program. In order to accelerate the reform of DRG / DIP payment, the NHSA has formulated and made public a Three-Year Action Plan for DRG / DIP payment reform on November 19, 2021, which makes it clear that by the end of 2024, DRG / DIP payment reform will be carried out in all overall planning areas across the country. By the end of 2025, DRG / DIP payment will cover all qualified medical institutions providing inpatient services.
Healthcare system reform
In the past decade, the Chinese government promulgated several healthcare reform policies and regulations to reform the healthcare system. On March 17, 2009, the Communist Party of China Central Committee and the State Council jointly issued the Guidelines on Strengthening the Reform of Healthcare System. The State Council issued the Notice on the Issuance of the 13th Five-year Plan on Strengthening the Reform of Healthcare System on December 27, 2016. The General Office of the State Council issued a Notice on the Issuance of the 14th Five-year Medical-Security Plan on September 29, 2021. The General Office of the State Counsel issued a Notice on the Main Tasks for Strengthening the Reform of Healthcare System for each year of 2017, 2018, 2019, 2021, and 2022.
Highlights of these healthcare reform policies and regulations include the following:
One of the main objectives of the reform was to establish a basic healthcare system to cover both urban and rural residents and provide the Chinese people with safe, effective, convenient and affordable healthcare services. During the 14th five-year period (2021-2025), Basic Medical Insurance coverage will remain above 95% of the country’s population every year.
Another main objective of reform was to improve the healthcare system, through the reform and development of a graded diagnosis and treatment system, modern hospital management, Basic Medical Insurance, drug supply support and comprehensive supervision.
The reforms aimed to promote orderly market competition and improve the efficiency and quality of the healthcare system to meet the various medical needs of the Chinese population. From 2009, basic public healthcare services such as preventive healthcare, maternal and child healthcare and health education were to be provided to urban and rural residents. In the meantime, the reforms also encouraged innovations by pharmaceutical companies to eliminate pharmaceutical products that fail to prove definite efficacy and positive risk-benefit ratio.
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The key tasks of the reform in the 13th five-year period were as follows: (i) to deepen the reform of public hospitals, (ii) to accelerate the development of a graded diagnosis and treatment system, (iii) to consolidate and improve the universal medical insurance system, (iv) to guarantee drug supply, (v) to establish and improve a comprehensive supervision system, (vi) to cultivate talented health-care practitioners, (vii) to stabilize and perfect the basic public health service equalization system, (viii) to advance the construction of health information technology, (ix) to accelerate the development of the health services industry generally, and (x) to strengthen organization and implementation.
On December 28, 2019, the SCNPC promulgated the Law of the People’s Republic of China on Promotion of Basic Medical and Health Care, which came into effect in June 2020. Such law established the legal framework for the administration of basic medical and health services for citizens in China, including the administration of basic medical care services, medical care institutions, medical staff, guarantee of drug supply, health promotion and guarantee of medical funds.
On February 25, 2020, the Communist Party of China Central Committee and the State Council jointly promulgated the Opinions on Deepening the Reform of the Healthcare Security System, which envisages that a higher-level healthcare system should be established by 2030, which centers on basic medical insurance, is underpinned by medical aid and pursues the joint development of supplementary medical insurance, commercial health insurance, charitable donations and medial mutual assistance. To this end, such opinions map out tasks in several respects, including making the mechanism of medical insurance benefits more impartial and appropriate, improving the robust and sustainable operating mechanism for funds raised, establishing more effective and efficient healthcare payment mechanism, and enhancing the supervision and administration on medical security fund and etc.
According to the 14th Five-year Medical-Security Plan, China should enhance the medical insurance system through collaborative governance, optimizing medical insurance payments and the drug pricing mechanism, while strengthening the medical fund supervision system. Efforts should also be made to build up a strong supporting system with a solid legal basis and better digital services. More efforts are needed too to enhance the basic medical security system, improve the mechanism that provides insurance and aid for the treatment of major and serious diseases, and boost the synergy between health insurance and medical assistance.
U.S. coverage and reimbursement
Successful sales of our drug candidates in the U.S. market, if approved, will depend, in part, on the extent to which our drugs are covered and adequately reimbursed by third-party payors, such as government health programs or private health insurance (including managed care plans). Patients who are provided with prescriptions as part of their medical treatment generally rely on such third-party payors to reimburse all or part of the costs associated with their prescriptions and therefore adequate coverage and reimbursement from such third-party payors are critical to new and ongoing product acceptance. These third-party payors are increasingly limiting coverage of medical drugs, reducing reimbursements for medical drugs and services and implementing measures to control utilization of drugs (such as requiring prior authorization for coverage). Additionally, the containment of healthcare costs has become a priority of federal and state governments, and the prices of drugs have been a focus in this effort. Federal and state governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic drugs. If our drug candidates are approved, limitations on coverage or reimbursement as well as price controls and cost-containment measures could have a material adverse effect on our sales, results of operations and financial condition.
Health care reform initiatives in the United States have resulted in significant changes to the coverage, reimbursement and delivery of health care, including drugs. Health care reform efforts are likely to continue and such efforts have included, and may include in the future, attempts to repeal or modify prior healthcare reform.
General legislative cost control measures may also affect reimbursement for our products. The Budget Control Act, as amended, resulted in the imposition of 2% reductions in Medicare (but not Medicaid) payments to providers in 2013 and will remain in effect through 2030 (except May 1, 2020 to March 31, 2022) unless additional Congressional action is taken. If we obtain approval to market a drug candidate in the United States, any significant spending reductions affecting Medicare, Medicaid or other publicly funded or subsidized health programs that may be implemented and/or any significant taxes or fees that may be imposed on us could have an adverse impact on our results of operations.
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Other healthcare laws
Other Chinese healthcare laws
Advertising of pharmaceutical products
Pursuant to the Interim Administrative Measures for the Review of Advertisements for Drugs, Medical Devices, Health Food and Formula Food for Special Medical Purposes promulgated by the SAMR in December 2019 and effective in March 2020, an enterprise seeking to advertise its pharmaceutical products must apply for an advertisement approval number. The advertisement approval number is issued by the relevant local administrative authority. The validity term of the advertisement approval number for drugs shall be consistent with the shortest validity term of the pharmaceutical product marketing authorization, filing certificate or Pharmaceutical Manufacturing Permit. If no valid term is prescribed in the pharmaceutical product marketing authorization, filing certificate or Pharmaceutical Manufacturing Permit, the valid term of the advertisement approval number shall be two years. The content of an approved advertisement may not be altered without prior approval.
Insert sheet and labels of pharmaceutical products
According to the Measures for the Administration of the Insert Sheets and Labels of Drugs effective on June 1, 2006, the insert sheets and labels of drugs should be reviewed and approved by the former SFDA (now the NMPA). A drug insert sheet should include the scientific data, conclusions and information concerning drug safety and efficacy in order to direct the safe and rational use of drugs. The inner label of a drug should bear such information as the drug’s name, indication or function, strength, dose and usage, production date, batch number, expiry date and drug manufacturer, and the outer label of a drug should indicate such information as the drug’s name, ingredients, description, indication or function, strength, dose and usage, adverse reaction, contraindication, precautions, storage, production date, batch number, expiry date and drug manufacturer.
Packaging of pharmaceutical products
According to the Measures for the Administration of Pharmaceutical Packaging effective on September 1, 1988, pharmaceutical packaging must comply with national and industry standards. If no national or industry standards are available, the enterprise can formulate its own standards and implement after obtaining the approval of administration of medical products and bureau of standards at provincial level. The enterprise shall reapply with the relevant authorities if it needs to change its own packaging standards. Drugs that have not developed and received approval for packing standards must not be sold or traded in China (except for drugs for the military).
Measures for the supervision and administration of online drug sales
On August 3, 2022, the SAMR announced the Measures for the Supervision and Administration of Online Drug Sales (the “Measures”), which came into effect on December 1, 2022. The Measures set out a comprehensive regulatory framework for the online sale of drugs, including the online sale of prescription drugs and the regulation of trading platforms that engage in the online sale of drugs.
The Measures include six chapters and 42 articles. The main sections include: (i) the obligations, qualifications, and responsibilities of online drug sellers; (ii) the responsibilities of trading platforms for online drug sales; (iii) the supervision and management of online sales of prescription drugs; (iv) the division of responsibilities of drug regulators at all levels in the supervision of online drug sales; and (v) the legal liability for illegal online drug sales. Notably, both drug marketing authorization holders and drug distributors can qualify as online drug sellers. Online sale of prescription drugs is permitted, but drug retailers and providers of trading platforms for the online sale of prescription drugs must abide by the regulatory requirements specified in the Measures.
Other U.S. healthcare laws
We may also be subject to healthcare regulation and enforcement by the U.S. federal government and the states where we may market our drug candidates, if approved. These laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security and transparency laws, such as the following:
federal healthcare program anti-kickback laws, which prohibit, among other things, persons from knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;
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federal false claims laws, including the False Claim Act and the Civil Monetary Penalties Law, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, information or claims for payment from Medicare, Medicaid, or other third-party payers that are false or fraudulent;
the federal Health Insurance Portability and Accountability Act of 1996, which prohibits executing a scheme to defraud any healthcare benefit program (including private health plans) or making false statements relating to healthcare matters and which also imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;
the FDCA, which among other things, strictly regulates drug and medical device marketing, prohibits manufacturers from marketing such products prior to approval or for off-label use and regulates the distribution of samples;
federal laws that require pharmaceutical manufacturers to report certain calculated product prices to the government or provide certain discounts or rebates to government authorities or private entities, often as a condition of reimbursement under government healthcare programs;
the so-called “federal sunshine” law, which requires pharmaceutical and medical device companies to monitor and report certain financial interactions with physicians and teaching hospitals (and other healthcare professionals starting in 2021) to the federal government for re-disclosure to the public; and
state law equivalents of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third-party payor, including private insurers, state transparency laws, state laws limiting interactions between pharmaceutical manufacturers and members of the healthcare industry, 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 federal laws, thus complicating compliance efforts.
If and when we become subject to such laws, efforts to ensure that our activities comply with applicable healthcare laws may involve substantial costs. Many of these laws and their implementing regulations contain ambiguous requirements or require administrative guidance for implementation. Given the lack of clarity in laws and their implementation, our activities could be subject to challenge. If our operations were found to be in violation of any of these laws or any other governmental regulations that may apply to us, we could be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations, which could significantly harm our business.

Other significant Chinese regulation affecting our business activities in China

Chinese regulation of foreign investment
The establishment, operation and management of corporate entities in China are governed by the PRC Company Law, which was adopted by the SCNPC in December 1993, implemented in July 1994, and subsequently amended in December 1999, August 2004, October 2005, December 2013 and October 2018. Under the PRC Company Law, companies are generally classified into two categories: limited liability companies and companies limited by shares. The PRC Company Law also applies to foreign-invested limited liability companies and foreign-invested companies limited by shares. Pursuant to the PRC Company Law, where laws on foreign investment have other stipulations, such stipulations shall prevail. In December 2021, the SCNPC issued the first draft amendment to the PRC Company Law for comment. The first draft amendment to the PRC Company Law has made roughly 70 substantive changes on the basis of the 13 chapters and 218 articles of the current PRC Company Law (rev. 2018). The amendment would (i) refine special provisions on state-funded companies; (ii) improve the company establishment and exit system; (iii) optimize corporate structure and corporate governance; (iv) optimize the capital structure; (v) tighten the responsibilities of controlling shareholders and management personnel; and (vi) strengthen corporate social responsibility. In December 2022, the SCNPC issued the second draft amendment to the PRC Company Law for comment. On the basis of the changes made in the previous draft, the second draft amended PRC Company Law has introduced numerous new provisions to further strengthen shareholder’s capital contribution responsibility, reinforce liabilities of directors and senior management by holding them jointly liable for their willful misconduct or gross negligence, optimize corporate structure and enhance corporate governance of listed companies, among other things. Listed companies are required to disclose information on shareholders and actual controllers in accordance with applicable laws. Shareholders are obliged to make capital contributions in advance at the request of a company or its creditor where the company is unable to pay its debts when they become due.
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Investment activities in China by foreign investors are governed by the Guiding Foreign Investment Direction, which was promulgated by the State Council on February 11, 2002 and came into effect on April 1, 2002, and the latest Special Administrative Measures (Negative List) for Foreign Investment Access (2021) (the “Negative List”), which was promulgated by the Ministry of Commerce of the People’s Republic of China (the “MOFCOM”) and the NDRC on December 27, 2021 and took effect on January 1, 2022. The Negative List set out in a unified manner the restrictive measures, such as the requirements on shareholding percentages and management, for the access of foreign investments, and the industries that are prohibited for foreign investment. The Negative List covers 12 industries, and any field not falling in the Negative List shall be administered under the principle of equal treatment to domestic and foreign investment.
The Foreign Investment Law was promulgated by the NPC in March 2019 and become effective in January 2020. After the Foreign Investment Law came into force, the Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises, the Law of the People’s Republic of China on Sino-foreign Equity Joint Ventures and the Law of the People’s Republic of China on Sino-foreign Contractual Joint Ventures have been repealed simultaneously. The investment activities of foreign natural persons, enterprises or other organizations (hereinafter referred to as foreign investors) directly or indirectly within the territory of China shall comply with and be governed by the Foreign Investment Law, including: (i) establishing by foreign investors of foreign-invested enterprises in China alone or jointly with other investors; (ii) acquiring by foreign investors of shares, equity, property shares, or other similar interests of Chinese domestic enterprises; (iii) investing by foreign investors in new projects in China alone or jointly with other investors; and (iv) other forms of investment prescribed by laws, administrative regulations or the State Council.
In December 2019, the State Council issued the Regulations on Implementing the Foreign Investment Law, which came into effect in January 2020. After the Regulations on Implementing the Foreign Investment Law came into effect, the Regulation on Implementing the Law on Sino-Foreign Equity Joint Ventures, Provisional Regulations on the Duration of Sino- Foreign Equity Joint Ventures, the Regulations on Implementing the Law on Wholly Foreign-Owned Enterprises and the Regulations on Implementing the Law on Sino-Foreign Cooperative Joint Ventures have been repealed simultaneously.
In December 2019, the MOFCOM and the SAMR issued the Measures for the Reporting of Foreign Investment Information, which came into effect in January 2020. After the Measures for the Reporting of Foreign Investment Information came into effect, the Interim Measures on the Administration of Filing for Establishment and Change of Foreign Invested Enterprises has been repealed simultaneously. Since January 1, 2020, for foreign investors carrying out investment activities directly or indirectly in China, the foreign investors or foreign-invested enterprises shall submit investment information to the relevant commerce administrative authorities pursuant to these measures.
Chinese regulation of commercial bribery
Pursuant to specific provisions in the Anti-Unfair Competition Law of the People’s Republic of China promulgated by the SCNPC on September 2, 1993, as amended on November 4, 2017 and on April 23, 2019 (the “PRC Anti-Unfair Competition Law”), commercial bribery is prohibited. Under the current effective PRC Anti-Unfair Competition Law, a business operator shall not resort to bribery, by offering money or goods or by any other means, to any of the following entities or individuals, in order to seek a transaction opportunity or competitive advantage: (i) any employee of the counterparty in a transaction; (ii) any entity or individual entrusted by the counterparty in a transaction to handle relevant affairs; or (iii) any other entity or individual that is to take advantage of powers or influence to influence a transaction. Administrative liability is directly imposed on the bribe maker, however, both the bribe maker and the bribe recipient are subject to civil and criminal liability.
In November 2022, the SAMR issued for public comments a draft revision to the PRC Anti-Unfair Competition Law. Under the draft revised law, offering benefits directly to the transaction counterparty might also be considered a commercial bribe, and the scope of commercial bribery has been expanded to include making a bribe with the help of a third party. Both the bribe maker and the bribe recipient are subject to administrative liability prescribed by the draft revised law.
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Further, pharmaceutical companies involved in a criminal investigation or administrative proceedings related to bribery are listed in the Adverse Records of Commercial Briberies by its 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 the establishment of Adverse Records of Commercial Briberies. If a pharmaceutical company is listed in the Adverse Records of Commercial Briberies for the first time, their production is not required to be purchased by public medical institutions. A pharmaceutical company will not be penalized by the relevant Chinese government authorities merely by virtue of having contractual relationships with distributors or third-party promoters who are engaged in bribery activities, so long as such pharmaceutical company and its employees are not utilizing the distributors or third party promoters for the implementation of, or acting in conjunction with them in, the prohibited bribery activities. In addition, a pharmaceutical company is under no legal obligation to monitor the operating activities of its distributors and third-party promoters, and it will not be subject to penalties or sanctions by relevant Chinese government authorities as a result of failure to monitor their operating activities.
Chinese regulation of product liability
In addition to the strict new drug approval process, certain Chinese laws have been promulgated to protect the rights of consumers and to strengthen the control of medical products in China. Under current Chinese law, manufacturers and vendors of defective products in China may incur liability for loss and injury caused by such products. Pursuant to the General Principles of the Civil Law of the People’s Republic of China (the “PRC Civil Law”), promulgated on April 12, 1986 and amended on August 27, 2009, a defective product which causes property damage or physical injury to any person may subject the manufacturer or vendor of such product to civil liability for such damage or injury. The Civil Code of the People’s Republic of China (the “PRC Civil Code”), which was promulgated in May 2020 and became effective on January 1, 2021, amalgamates and replaces a series of specialized laws in civil law area, including the PRC Civil Law. The rules on product liability in the PRC Civil Code remain consistent with the rules in the PRC Civil Law.
On February 22, 1993, the Product Quality Law of the People’s Republic of China (the “Product Quality Law”) was promulgated to supplement the PRC Civil Law aiming to protect the legitimate rights and interests of the end-users and consumers and to strengthen the supervision and control of the quality of products. The Product Quality Law was revised on July 8, 2000, August 27, 2009 and December 29, 2018 respectively. Pursuant to the revised Product Quality Law, manufacturers who produce defective products and distributors who sell defective products may be subject to civil or criminal liability and revocation of their business licenses.
The Law of the People’s Republic of China on the Protection of the Rights and Interests of Consumers was promulgated on October 31, 1993 and was amended on August 27, 2009 and October 25, 2013 to protect consumers’ rights when they purchase or use goods and accept services. All business operators must comply with this law when they manufacture or sell goods and/or provide services to customers. Under the amendment on October 25, 2013, all business operators shall pay high attention to protect the customers’ privacy and strictly keep confidential any consumer information they obtain during the business operation. In addition, in extreme situations, pharmaceutical product manufacturers and operators may be subject to criminal liability if their goods or services lead to the death or injuries of customers or other third parties.
Chinese tort law
Under the Tort Law of the People’s Republic of China (the “Tort Law”), which became effective on July 1, 2010, if damages to other persons are caused by defective products due to the fault of a third party, such as the parties providing transportation or warehousing, the producers and the sellers of the products have the right to recover their respective losses from such third parties. If defective products are identified after they have been put into circulation, the producers or the sellers shall take remedial measures such as the issuance of a warning, the recall of products, etc. in a timely manner. The producers or the sellers shall be liable under tort if they fail to take remedial measures in a timely manner or have not made efforts to take remedial measures, thus causing damages. If the products are produced or sold with known defects, causing deaths or severe adverse health issues, the infringed party has the right to claim punitive damages in addition to compensatory damages. The PRC Civil Code amalgamated and replaced the Tort Law effective January 1, 2021. The rules on tort in the PRC Civil Code are generally consistent with the Tort Law.
Chinese regulation of intellectual property rights
China has made substantial efforts to adopt comprehensive legislation governing intellectual property rights, including patents, trademarks, copyrights and domain names.
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Patents
Pursuant to the PRC Patent Law, most recently amended in December 2008 and October 2020, and its implementation rules, most recently amended in January 2010, 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 and fifteen years, respectively, 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. Inventiveness 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 CNIPA. Normally, the CNIPA 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 CNIPA for a substantive examination within three years from the date of application.
Article 19 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 CNIPA 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 CNIPA 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. The PRC Patent Law also sets up the framework and adds the provisions for patent linkage and patent term extension.
Patent term extension and adjustment
The PRC Patent Law, which was most recently amended by the SCNPC on October 17, 2020, and became effective on June 1, 2021, for the first time, provides for patent term extension and adjustments for certain patents. Under the PRC Patent Law, patent term extensions 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. The PRC Patent Law also provides for patent term adjustments where there is an unreasonable delay caused during patent examination. A patentee may apply for a patent term adjustment where the patent is granted at least four years after the filing date, and at least three years after substantive examination was requested. It remains to be seen how the patent term extensions and adjustments under the PRC Patent Law will be implemented. The Chinese government published draft amendments to the Implementing Regulations of the Patent Law on November 27, 2020, which provides further details on what is an unreasonably delay in respect of patent term adjustments and proposes certain limitations on the types of patents eligible for patent term extensions, details of how amount of the extension would be determined and applicability to drug products covered by the relevant patent. For example, there is a risk that the patent term extension will only apply where approval in Mainland China by the NMPA is the first approval anywhere in the world.
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Patent linkage
The PRC Patent Law describes the general principles of linking generic drug applications to pharmaceutical patent protection, also known as Patent Linkage. In July 2021, the NMPA and the China National Intellectual Property Administration (“CNIPA”), jointly published the Measures for Implementing an Early-Stage Resolution Mechanism for Pharmaceutical Patent Disputes (Tentative) (“Measures on Patent Linkage”), providing an operating mechanism for Patent Linkage. Upon notification of generic applications and certifications, if the patentee or the interested person disagrees, the patentee or the interested person will need to file a claim with the court or the CNIPA within 45 days after the CDE’s publication and must submit a copy of the case acceptance notification to the CDE within 15 working days after the case acceptance date. Otherwise, the NMPA can proceed with the technical review and approval. For chemical drugs, the NMPA would initiate a nine-month approval stay period upon notification. If the patentee or the interested person cannot secure a favorable court judgment or a decision from the CNIPA within the nine-month period, the NMPA can grant marketing authorization to the generic applicant after the nine-month period expires.
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, or 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 shall 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 CNIPA may grant a compulsory license for manufacturing patented drugs and exporting them to countries or regions covered under relevant international treaties to which China has acceded.
Exemptions for unlicensed manufacture, use, sale or import of patented products
The PRC Patent Law provides five exceptions permitting the unauthorized manufacture, use, sale or import of patented products. None of following circumstances are deemed an infringement of the patent rights, and any person may manufacture, use, sell or import patented products without authorization granted by the patent owner as follows:
Any person who uses, promises to sell, sells or imports any patented product or product directly obtained in accordance with the patented methods after such product is sold by the patent owner or by its licensed entity or individual;
Any person who has manufactured an identical product, has used an identical method or has made necessary preparations for manufacture or use prior to the date of patent application and continues to manufacture such product or use such method only within the original scope;
Any foreign transportation facility that temporarily passes through the territory, territorial waters or territorial airspace of China and uses the relevant patents in its devices and installations for its own needs in accordance with any agreement concluded between China and that country to which the foreign transportation facility belongs, or any international treaty to which both countries are party, or on the basis of the principle of reciprocity;
Any person who uses the relevant patents solely for the purposes of scientific research and experimentation; or
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Any person who manufactures, uses or imports patented drug or patented medical equipment for the purpose of providing information required for administrative approval, or manufactures, users or imports patented drugs or patented medical equipment for the above mentioned person.
However, if patented drugs are utilized on the ground of exemptions for unauthorized manufacture, use, sale or import of patented drugs prescribed in PRC Patent Law, such patented drugs cannot be manufactured, used, sold or imported for any commercial purposes without authorization granted by the patent owner.
Trade secrets
According to the PRC Anti-Unfair Competition Law, the term “trade secrets” refers to technical and business information that is unknown to the public that has utility and 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: (i) 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; (ii) disclosing, using or permitting others to use the trade secrets obtained illegally under item (i) above; (iii) 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 (iv) instigating, inducing or assisting others to violate confidentiality obligation or to violate a rights holder’s requirements on keeping confidentiality of trade secrets, disclosing, using or permitting others to use the trade secrets of the rights holder. If a third party knows or should have known of above mentioned illegal conduct but nevertheless obtains, uses or discloses trade secrets of others trade secrets, the third party may be deemed to have committed a misappropriation of the others’ trade secrets.
The measures to protect trade secrets include oral or written non-disclosure agreements or other reasonable measures to require the employees of, or persons in business contact with, legal owners or holders to keep trade secrets confidential. Once the legal owners or holders have asked others to keep trade secrets confidential and have adopted reasonable protection measures, the requested persons bear the responsibility for keeping the trade secrets confidential.
Trademarks and domain names
Trademarks. According to the Trademark Law of the People’s Republic of China, promulgated by the SCNPC in August 1982, as amended in February 1993, October 2001, August 2013 and April 2019 and its implementation rules (collectively, the “Trademark Law”), the Trademark Office of China National Intellectual Property Administration is responsible for the registration and administration of trademarks throughout China. The Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. As of December 31, 2022, we had four trademark applications pending in Mainland China, nine trademarks registered in Mainland China, five trademarks registered in Hong Kong, three trademarks registered in Singapore, one trademark application pending in Singapore, one trademark application pending in the United States, four trademarks registered in Taiwan, four trademarks registered in Macau, six trademark applications pending in Macau, two trademark applications pending in South Korea, one trademark application pending in Thailand, two trademark applications pending in Cambodia, two trademarks registered in Indonesia and two trademarks registered in the Philippines.
Domain Names. Domain names are protected under the Administrative Measures on the Internet Domain Names promulgated by the Ministry of Industry and Information Technology in August 2017 and effective from November 2017. The Ministry of Industry and Information Technology is the main regulatory body responsible for the administration of Chinese internet domain names. We have registered www.lianbiopharma.com and www.lianbio.com.
PRC Anti-Monopoly Law
On June 24, 2022, the SCNPC published amendments to the PRC Anti-Monopoly Law (the “amended AML”), which came into effect on August 1, 2022. The amended AML formally implements China’s latest anti-monopoly policies by, among other things, improving regulatory rules for anti-competitive agreements, expressly addressing monopoly issues in the platform economy, and substantially increasing the penalties for violating the law.
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The improvements of the regulatory rules for anti-competitive agreements made by the amended AML mainly includes: (i) expressly stipulating that an agreement which fixes or limits resale prices, that is, a vertical anti-competitive agreement, is not prohibited if relevant business operators can prove that such agreement does not have the effect of eliminating or restricting competition; (ii) formally provides the “safe harbor” regime which stipulates that a vertical anti-competitive agreement is not prohibited, if the parties’ market share in the relevant market is lower than the market share percentage set by the anti-monopoly enforcement agency and other conditions established by the anti-monopoly enforcement agency are met; (iii) codifies that business operators shall not organize other business operators to reach a monopoly agreement or provide substantial assistance for other business operators to reach a monopoly agreement.
The amended AML formally extends the anti-monopoly regulatory regime to the platform economy by outlining the general principal that business operators shall not engage in monopolistic activities, such as by taking advantage of data and algorithms, technology, capital advantage, and platform rules. The amended AML also specifically prohibits business operators from abusing market dominance, such as by using data and algorithms, technology, and platform rules.
Penalties for violation of the AML have been substantially increased by the amended AML. For example, according to the amended AML, if a company completes a concentration of business in violation of the AML that will have or is likely to have the effect of eliminating or restricting competition, in addition to other remedial measures, a fine of up to 10% of the last year’s sales revenue may be imposed. If the concentration of business in violation of the AML completed by the company does not have the effect of eliminating or restricting competition, a fine of up to RMB 5 million may be imposed. In the case that the aforementioned violation has particularly serious circumstances, bad impact, or consequences, the fine imposed may be further increased to between two and five times the aforementioned fine amount.
Chinese regulation of labor protection
Under the Labor Law of the People’s Republic of China, effective on January 1, 1995 and subsequently amended on August 27, 2009 and December 29, 2018, the Employment Contract Law of the People’s Republic of China, effective on January 1, 2008 and subsequently amended on December 28, 2012 and the Implementing Regulations of the Employment Contract Law, effective on September 18, 2008, employers must establish a comprehensive management system to protect the rights of their employees, including a system governing occupational health and safety to provide employees with occupational training to prevent occupational injury, and employers are required to truthfully inform prospective employees of the job description, working conditions, location, occupational hazards and status of safe production as well as remuneration and other conditions as requested by the Labor Contract Law of the People’s Republic of China.
Pursuant to the Work Safety Law of the People’s Republic of China effective on November 1, 2002 and amended on August 27, 2009, August 31, 2014 and June 10, 2021, manufacturers must establish a comprehensive management system to ensure manufacturing safety in accordance with applicable laws, regulations, national standards, and industrial standards. Manufacturers not meeting relevant legal requirements are not permitted to commence their manufacturing activities.
Pursuant to the Good Manufacturing Practice effective on March 1, 2011, manufacturers of pharmaceutical products are required to establish production safety and labor protection measures in connection with the operation of their manufacturing equipment and manufacturing process.
Pursuant to applicable Chinese laws, rules and regulations, including the Social Insurance Law which became effective on July 1, 2011 and was amended on December 29, 2018, the Interim Regulations on the Collection and Payment of Social Security Funds, which became effective on January 22, 1999 and was amended on March 24, 2019, Interim Measures concerning the Maternity Insurance of Employees, which became effective on January 1, 1995, and the Regulations on Work-related Injury Insurance, which became effective on January 1, 2004 and was subsequently amended on December 20, 2010, 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, work-related injury insurance and maternity insurance. If an employer fails to make social insurance contributions timely and in full, the social insurance collecting authority will order the employer to make up outstanding contributions within the prescribed time period and impose a late payment fee at the rate of 0.05% per day from the date on which the contribution becomes due. If such employer fails to make the overdue contributions within such time limit, the relevant administrative department may impose a fine equivalent to one to three times the overdue amount.
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Regulations relating to foreign exchange registration of offshore investment by Chinese residents
In July 2014, the State Administration of Foreign Exchange (the “SAFE”) issued SAFE Circular 37 and its implementation guidelines. Pursuant to SAFE Circular 37 and its implementation guidelines, residents of China (including Chinese institutions and individuals) must register with local branches of SAFE in connection with their direct or indirect offshore investment in an overseas special purpose vehicle (“SPV”) directly established or indirectly controlled by Chinese residents for the purposes of offshore investment and financing with their legally owned assets or interests in domestic enterprises, or their legally owned offshore assets or interests. Such Chinese residents are also required to amend their registrations with SAFE when there is a change to the basic information of the SPV, such as changes of a Chinese resident individual shareholder, the name or operating period of the SPV, or when there is a significant change to the SPV, such as changes of the Chinese individual resident’s increase or decrease of its capital contribution in the SPV, or any share transfer or exchange, merger, division of the SPV. Failure to comply with the registration procedures set forth in the SAFE Circular 37 may result in restrictions being imposed on the foreign exchange activities of the relevant onshore company, including the payment of dividends and other distributions to its offshore parent or affiliate, the capital inflow from the offshore entities and settlement of foreign exchange capital, and may also subject relevant onshore company or Chinese residents to penalties under Chinese foreign exchange administration regulations.
Regulations relating to employee stock incentive plan
In February 2012, 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”). In accordance with the Stock Option Rules and relevant rules and regulations, Chinese citizens or non-Chinese 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 SAFE through a domestic qualified agent, which could be a Chinese subsidiary of such overseas listed company, and complete certain procedures. We and our employees who are Chinese citizens or who reside in China for a continuous period of not less than one year and who participate in our share 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 China who exercise stock options, or whose restricted shares vest, will be subject to Chinese individual income tax (“IIT”). The Chinese subsidiaries of an overseas listed company have obligations to file documents related to employee stock options or restricted shares with relevant tax authorities and to withhold IIT of those employees related to their stock options or restricted shares. If the employees fail to pay, or the Chinese subsidiaries fail to withhold, their IIT according to relevant laws, rules and regulations, the Chinese subsidiaries may face sanctions imposed by the tax authorities or other Chinese government authorities.
Regulations relating to dividend distribution
Pursuant to the PRC Company Law and Foreign Investment Law, and Regulations on Implementing the Foreign Investment Law of the People’s Republic of China, foreign investors may freely remit into or out of China, in renminbi or any other foreign currency, their capital contributions, profits, capital gains, income from asset disposal, intellectual property royalties, lawfully acquired compensation, indemnity or liquidation income and so on within the territory of China.
In January 2017, the SAFE issued the Notice on Improving the Check of Authenticity and Compliance to Further Promote the Reform of 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 shall check board resolutions regarding profit distribution, the original version of tax filing records and audited financial statements; and (ii) domestic entities shall hold income to account for previous years’ losses before remitting the profits. Moreover, domestic entities shall 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.

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Regulations relating to foreign exchange
The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended in August 2008. Under the Foreign Exchange Administration Regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, approval from or registration with appropriate government authorities is required where renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of foreign currency-denominated loans.
In August 2008, SAFE issued 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 (“SAFE Circular 142”) regulating the conversion by a foreign-invested enterprise of foreign currency-registered capital into renminbi by restricting how the converted renminbi may be used. SAFE Circular 142 provides that the renminbi capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable government authority and may not be used for equity investments within China. SAFE also strengthened its oversight of the flow and use of the renminbi capital converted from foreign currency registered capital of foreign-invested enterprises. The use of such renminbi capital may not be changed without SAFE’s approval, and such renminbi capital may not in any case be used to repay renminbi loans if the proceeds of such loans have not been used. In March 2015, SAFE issued the Circular of the State Administration of Foreign Exchange on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises (“SAFE Circular 19”), which took effective and replaced SAFE Circular 142 on June 1, 2015. Although SAFE Circular 19 allows for the use of renminbi converted from the foreign currency-denominated capital for equity investments in China, the restrictions continue to apply as to foreign-invested enterprises’ use of the converted renminbi for purposes beyond the business scope, for entrusted loans or for inter-company renminbi loans. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account (“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 renminbi capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue renminbi entrusted loans to a prohibition against using such capital to issue loans to unassociated enterprises. Violations of SAFE Circular 19 or SAFE Circular 16 could result in administrative penalties.
The Circular of Further Improving and Adjusting Foreign Exchange Administration Policies on Foreign Direct Investment was promulgated by SAFE in November 2012 and amended in May 2015, which substantially amends and simplifies the current foreign exchange procedure. Pursuant to this circular, the opening of various special purpose foreign exchange accounts (e.g., pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts), the reinvestment of lawful incomes derived by foreign investors in China (e.g. profit, proceeds of equity transfer, capital reduction, liquidation and early repatriation of investment), and purchase and remittance of foreign exchange as a result of capital reduction, liquidation, early repatriation or share transfer in a foreign-invested enterprise no longer require SAFE approval, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible before. In addition, SAFE promulgated the Circular on Printing and Distributing the Provisions on Foreign Exchange Administration over Domestic Direct Investment by Foreign Investors and the Supporting Documents in May 2013, which specifies that the administration by SAFE or its local branches over direct investment by foreign investors in China shall be conducted by way of registration and banks shall process foreign exchange business relating to the direct investment in China based on the registration information provided by SAFE and its branches.
In February 2015, SAFE promulgated the Circular on Further Simplifying and Improving the Policies Concerning Foreign Exchange Control on Direct Investment (“SAFE Circular 13”), which took effect on June 1, 2015 and was amended in December 2019. SAFE Circular 13 delegates the authority to enforce the foreign exchange registration in connection with the inbound and outbound direct investment under relevant SAFE rules to certain banks and therefore further simplifies the foreign exchange registration procedures for inbound and outbound direct investment.
Other Chinese 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.

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Chinese regulations on securities offering and listing outside of China
On February 17, 2023, the CSRC promulgated a new set of regulations consists of the Trial Measures and five supporting guidelines which will come into effect on March 31, 2023 to regulate overseas securities offering and listing activities by domestic companies either in direct or indirect form.
The Trial Measures and supporting guidelines apply to overseas offerings by domestic companies of equity shares, depository receipts, convertible corporate bonds, or other equity-like securities, and overseas listing of the securities for trading. Both direct and indirect overseas securities offering and listing by domestic companies would be regulated, of which the former refers to securities offering and listing in an overseas market made by a joint-stock company incorporated domestically, and the latter refers to securities offering and listing in an overseas market made in the name of an offshore entity, while based on the underlying equity, assets, earnings or other similar rights of a domestic company which operates its main business domestically. According to the Trial Measures, if an issuer meets the following conditions, the offering and listing shall be determined as an indirect overseas offering and listing by a domestic company: (i) the total assets, net assets, revenues or gross profits of the domestic companies of the issuer in the most recent financial year account for more than 50% of the corresponding figure in the issuer’s audited consolidated financial statements over the same period; (ii) the majority of the senior management in charge of business operation and management of the issuer are Chinese citizens or habitually reside in China, or its main places of business operation are located in China or main parts of business activities are conducted in China.
Under the Trial Measures and supporting guidelines, a filing-based regulatory system would be implemented covering both direct and indirect overseas offering and listing. For an indirect initial public offering and listing in an overseas market, the issuer shall designate a major domestic operating entity to submit the filing documents to the CSRC within three working days after such application of overseas offering and listing is submitted. The CSRC would, within 20 working days if filing documents are complete and in compliance with the stipulated requirements, complete the filing and publish the filing information on the CSRC’s official website. While for confidential filings of overseas offering and listing application documents, the designated filing entity may apply for an extension of the publication of such filing. The issuer shall report to the CSRC within three working days after the overseas offering and listing application documents become public. In addition, subsequent securities offerings of an issuer in the same overseas market where it has previously offered and listed securities shall be filed with the CSRC within three working days after the offering is completed.
Meanwhile, overseas offering and listing would be prohibited under certain circumstances, including but not limited to that (i) the offering and listing are expressly forbidden by the Chinese laws, regulations and relevant rules; (ii) the intended overseas securities offering and listing may endanger national security as reviewed and determined by competent authorities under the State Council in accordance with laws or (iii) there are material disputes with regard to the ownership of the equity held by the domestic company’s controlling shareholder or by other shareholders that are controlled by the controlling shareholder and/or actual controller. If a domestic company falls into the circumstances where overseas offering and listing is prohibited prior to the overseas offering and listing, the domestic company shall postpone or terminate the intended overseas offering and listing, and report to the CSRC and competent authorities under the State Council in a timely manner.
If domestic companies fail to fulfill the above-mentioned filing procedures or offer and list in an overseas market against the prohibited circumstances, they may be warned and fined up to RMB10 million. The controlling shareholders, and actual controllers of such domestic companies that organize or instruct the aforementioned violations may be fined up to RMB10 million and directly liable persons-in-charge and other directly liable persons may be each fined up to RMB 5 million..
Auxiliary rules for the regulations on supervision and administration of medical devices
On February 9, 2021, the State Council published new Regulations on Supervision and Administration of Medical Devices, or Order 739, which became effective on June 1, 2021. This top-level medical device administrative regulation contains a number of important changes, the practical effects of which will be implemented in corresponding auxiliary regulations and rules. Recently, a series of regulations have been amended accordingly to support the implementation of Order 739 in terms of the production, distribution and clinical trials of medical devices.
Measures for the Supervision and Administration of the Production of Medical Devices
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On May 1, 2022, a revised version of the Measures for the Supervision and Administration of the Production of Medical Devices, or Order 53, promulgated by the SAMR, became effective. All medical device manufacturing activities within China should comply with Order 53. Order 53 clarifies the responsibilities and obligations of medical device registrants/record-filing applicants and their entrusted manufacturers where applicable. Order 53 also establishes a medical device reporting system with an aim to improve administration of medical device production. The reporting system consists of several types of reports, including annual self-inspection report, production product variety report, production conditions change report, re-production report and recall and disposal report. The medical device registrants/ record-filing applicants and/or the medical device manufacturers need to submit corresponding reports to the local relevant Medical Product Administrations in accordance with Order 53.

Measures for the Supervision and Administration of the Distribution of Medical Devices

On May 1, 2022, a revised version of the Measures for the Supervision and Administration of the Distribution of Medical Devices, or Order 54, promulgated by SAMR, came into effect. All medical device distribution activities within China should comply with Order 54. Under Order 54, explicit regulatory requirements were introduced to distributors of medical devices. For example, Order 54 requires medical device distributors to establish a quality management system and adopt quality control measures covering the total process of distribution and submit annual self-inspection reports to local relevant medical product administrations.

Good Practices for Medical Device Clinical Trials

On May 1, 2022, a revised version of the Good Practices for Medical Device Clinical Trials, or 2022 Medical Device GCP, jointly released by the NMPA and the National Health Commission, came into effect. All medical device clinical trials that have not passed ethics review by May 1, 2022 must be conducted in compliance with the 2022 Medical Device GCP, if they were conducted for the purpose of applying for medical device registrations. The 2022 Medical Device GCP specifies responsibilities of each party participating in a medical device clinical trial, in particular the responsibilities of the sponsor. The 2022 Medical Device GCP no longer requires clinical trials of medical devices to be conducted in two or more clinical trial institutions. This will make it easier for medical device companies to conduct medical device registration studies.
Other Chinese 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 in all material aspects. We believe that we are currently in compliance with these laws and regulations in material aspects; 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.
Manufacturing
We plan to rely on our licensing partners and third-party contract manufacturing organizations with which they contract to manufacture our drug product supply for our planned clinical trials. We do not own or operate manufacturing facilities for the production of clinical or commercial quantities of our product candidates. We currently have no plans to build our own clinical or commercial scale manufacturing capabilities. To meet our projected needs for commercial manufacturing, we expect to work with our licensors’ third-party suppliers to ensure sufficient capacity to meet our manufacturing requirements. In addition, we may rely on other third parties to perform additional steps in the manufacturing process, including storage of our product candidates.

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We have entered into clinical supply agreements with our licensing partners with respect to certain of our product candidates, and expect to enter into additional clinical supply agreements related to other product candidates. We believe that these clinical supply agreements will be sufficient to accommodate our planned clinical trials of our current product candidates. We currently do not have any commercial supply contracts for our product candidates and we are in discussions with, or plan to have discussions with, our licensing partners to enter into such commercial supply contracts. We may need to obtain additional manufacturing arrangements to meet our future clinical and commercial needs, which would require significant capital investment.
Employees and human capital resources
As of December 31, 2022, we had 163 full-time employees. Of these full-time employees, 61 employees are engaged in research and development activities and 102 are engaged in general and administrative activities. As of December 31, 2022, 17 employees were employed in the United States and 146 employees were employed in Greater China and South East Asia. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We consider our relationship with our employees to be good.
We operate in a highly competitive environment for human capital, particularly as we seek to attract and retain talent with solid experience in the biotechnology and pharmaceutical sectors. Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. To help promote alignment between our employees and our shareholders, all employees are currently eligible to participate in our equity programs through the receipt of new hire and annual equity grants. We believe that in addition to incentivizing growth that leads to shareholder value, broad eligibility for our equity programs helps promote employee retention.
Available information
Our website address is www.lianbio.com, and our investor relations website is located at investors.lianbio.com. Information on our website is not incorporated by reference herein. We will make available on our website, free of charge, our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an Internet site (http://www.sec.gov) containing reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.
Item 1A. Risk Factors.
Investing in our American Depositary Shares (“ADSs”) involves a high degree of risk. Investors should carefully consider the risks described below, together with all other information contained in this Annual Report on Form 10-K, including our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our ADSs. The following information sets forth risk factors that could cause our actual results to differ materially from those contained in forward-looking statements we have made in this Annual Report on Form 10-K and those we may make from time to time. Our business, financial condition or results of operations could be harmed by any of these risks. The risks and uncertainties described below are not the only ones we face. Additional risks not presently known to us or other factors not perceived by us to present significant risks to our business at this time also may impair our business operations.
Risks Related to Doing Business in China and Our International Operations
Changes in the economic, political, legal and social conditions and policies of the Chinese government or in relations between China and the United States (or other countries) may materially and adversely affect our business, financial condition, results of operations, access to capital, and the market price of our ADSs.

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Due to our extensive operations in China, our business, results of operations, financial condition and prospects may be influenced to a significant degree by economic, political, legal and social conditions in China or changes in government relations between China and the United States or other governments. There is significant uncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations and tariffs. China’s economy differs from the economies of developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While China’s economy has experienced significant growth over the past four decades, growth has been uneven across different regions and among various economic sectors. The Chinese government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are currently applicable to us. In addition, in the past, the Chinese government has 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. In July 2021, the Chinese government provided new guidance on China-based companies raising capital outside of China, including through arrangements called variable interest entities (“VIEs”). In light of such developments, the U.S. Securities and Exchange Commission (the “SEC”) has imposed enhanced disclosure requirements on China-based companies. Although we do not have a VIE structure, due to our extensive operations in China, any future Chinese, U.S. or other rules and regulations that place restrictions on capital raising or other activities by companies with extensive operations in China could adversely affect our business and results of operations. If the business environment in China deteriorates from the perspective of domestic or international investment, or if relations between China and the United States or other governments deteriorate, the Chinese government may intervene with our operations and our business in China and the United States, and the market price of our ADSs may also be adversely affected.
The Chinese government may intervene in or influence our operations at any time, which could result in a material change in our operations and significantly and adversely impact the value of our ADSs, and the Chinese government has indicated an intent to increase the government’s oversight and control over offerings conducted overseas and foreign investment in China-based issuers, which could significantly limit or completely hinder our ability to offer ADSs to our investors, and could cause the value of our ADSs to significantly decline or become worthless.
The Chinese 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 further its regulatory, political and societal goals. The Chinese government published new policies in 2021 that significantly affect certain industries, such as the education industry and internet platform economics, and we cannot rule out the possibility that it will in the future release regulations or policies regarding our industry that could require us to seek permission from Chinese authorities to continue to operate our business, which may adversely affect our business, financial condition and results of operations. Furthermore, statements made by the Chinese government have indicated an intent to increase the government’s oversight and control over offerings of securities of companies with significant operations in China that are to be conducted in foreign markets, as well as foreign investment in China-based issuers like us. Any such action, if taken by the Chinese government, could significantly limit or completely hinder our ability to continue to offer ADSs to our investors, and could cause the value of our ADSs to significantly decline or become worthless.
Changes in relations between the United States and China, as well as relations with other countries, and/or changes in U.S. and Chinese regulations may adversely impact our business, our operating results, our ability to raise capital and the market price of our ADSs.

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The U.S. government, including the SEC, has made statements and taken certain actions that led to changes to United States and international relations, and will impact companies with connections to the United States or China, including imposing several rounds of tariffs affecting certain products manufactured in China, imposing certain sanctions and restrictions in relation to China and issuing statements indicating enhanced review of companies with significant China-based operations. It is unknown whether and to what extent new legislation, executive orders, tariffs, laws or regulations will be adopted, or the effect that any such actions would have on companies with significant connections to the United States or to China, our industry or on us. We have business operations in both the United States and China and conduct clinical activities in China. Any unfavorable government policies on cross-border relations and/or international trade, including increased scrutiny on companies with significant China-based operations, capital controls or tariffs, may affect the competitive position of our product candidates, the hiring of scientists and other research and development personnel, the demand for our product candidates, the import or export of raw materials in relation to drug development, our ability to raise capital, the market price of our ADSs or prevent us from selling our product candidates in certain countries. Furthermore, the SEC has issued statements primarily focused on companies with significant China-based operations, such as us. For example, on July 30, 2021, Gary Gensler, Chairman of the SEC, issued a Statement on Investor Protection Related to Recent Developments in China, pursuant to which Chairman Gensler stated that he asked the SEC staff to engage in targeted additional reviews of filings for companies with significant China-based operations. The statement also addressed risks inherent in companies with VIE structures. We do not have a VIE structure and are not in an industry that is subject to foreign ownership limitations in China. However, it is possible that this Annual Report on Form 10-K and the Company’s other filings with the SEC may be subject to enhanced review by the SEC, and that this additional scrutiny could affect our ability to effectively raise capital in the United States.
In response to the SEC’s July 30, 2021 statement, the China Securities Regulatory Commission (the “CSRC”) announced on August 1, 2021, that “[i]t is our belief that Chinese and U.S. regulators shall continue to enhance communication with the principle of mutual respect and cooperation, and properly address the issues related to the supervision of China-based companies listed in the United States so as to form stable policy expectations and create benign rules framework for the market.” While the CSRC will continue to collaborate “closely with different stakeholders including investors, companies, and relevant authorities to further promote transparency and certainty of policies and implementing measures,” the CSRC emphasized that it “has always been open to companies’ choices to list their securities on international or domestic markets in compliance with relevant laws and regulations.”
If any new legislation, executive orders, tariffs, laws and/or regulations are implemented, if existing trade agreements are renegotiated, if the U.S. or Chinese governments take retaliatory actions due to trade or geopolitical tensions between the two countries, or if the Chinese government exerts more oversight and control over securities offerings that are conducted in the United States, such changes could have an adverse effect on our business, financial condition and results of operations, our ability to raise capital and the market price of our ADSs.
Uncertainties in the China legal system could materially and adversely affect us.
In 1979, the Chinese government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. 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. The China legal system is based on written statutes and unlike the common law system, prior court decisions may be cited for reference but have limited precedential value. Since these laws and regulations are relatively new and the China legal system continues to rapidly evolve, 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. 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 China 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. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention.
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On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council jointly issued a document to enhance its enforcement against illegal activities in the securities market and promote the high-quality development of capital markets, which, among other things, requires the relevant governmental authorities to strengthen cross-border oversight of law-enforcement and judicial cooperation, to enhance supervision over China-based companies listed overseas, and to establish and improve the system of extraterritorial application of the Chinese securities laws. Since this document is relatively new, uncertainties exist in relation to how soon legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, and the potential impact such modified or new laws and regulations will have on companies like us.
Compliance with the Data Security Law of the People’s Republic of China (the “Data Security Law”), Cybersecurity Review Measures, Personal Information Protection Law of the People’s Republic of China (the “PIPL”), the regulations and guidelines relating to the multi-level protection scheme (the “MLPS”) and any other future laws and regulations may entail significant expenses and could materially affect our business. Our failure to comply with such laws and regulations could lead to government enforcement actions and significant penalties against us, materially and adversely impacting our operating results.
China has implemented extensive data protection, privacy and information security rules and is considering a number of additional proposals relating to these subject areas. Based on our understanding of these laws, regulations and policies, some of which were only recently enacted, and the government regulators’ interpretation of those legal requirements as applied to biopharmaceutical companies like us, we believe we are compliant with all of our material legal obligations. Nevertheless, we face significant uncertainties and risks which, as explained below, may materially and adversely affect our operations.
General risks surrounding the types of data we process and types of processing activities in which we engage
We do not maintain, nor do we intend to maintain in the future, personally identifiable health information of patients in China. We do, however, collect and maintain de-identified or anonymized health data for clinical trials in compliance with local regulations. This data could be deemed by government regulators to be “personal information,” “important data,” or “core data.” Under the Cyber Security Law of the People’s Republic of China (the “Cyber Security Law”) and the Data Security Law, data categorized as core data or important data, the latter of which will be determined by governmental authorities in the form of catalogs which have not been published, is to be processed and handled with a higher level of protection, but what data constitutes core data or important data is currently not clearly defined except for certain industry sections. Therefore, in order to comply with the statutory requirements, we will need to determine whether we possess core data or important data, monitor the important data catalogs that are expected to be published by local governments and industry regulators, perform risk assessments and comply with reporting obligations to applicable regulators. We may also be required to disclose to regulators business-sensitive or network security-sensitive details regarding our processing of core data or important data.
With China’s growing emphasis on its sovereignty over data derived from China, the outbound transmission of de-identified or anonymized health data for clinical trials may be subject to the new national security legal regime, including the Cyber Security Law, Data Security Law, the PIPL, the HGR Regulations and various implementing regulations and standards. Due to operational needs, we may from time to time transfer and store personal data and information outside of China in the future. Therefore, we will need to comply with the increasingly strict regulations over cross-border data transfers and monitor any new rules or regulations published by local governments and industry regulators.
Cybersecurity
The Cyber Security Law, which became effective in 2017, requires companies to take certain organizational, technical and administrative measures and other necessary measures to ensure the security of their networks and data stored on their networks. Specifically, the Cyber Security Law provides that companies adopt an MLPS, under which network operators are required to perform obligations of security protection to ensure that their networks are free from interference, disruption or unauthorized access, and prevent network data on their networks from being disclosed, stolen or tampered. Under the MLPS, entities’ operating information systems must have a thorough assessment of the risks and the conditions of their information and network systems to determine the level to which the entity’s information and network systems belong, from the lowest Level 1 to the highest Level 5 pursuant to a series of national standards on the grading and implementation of the classified protection of cyber security. The grading result will determine the set of security protection obligations that entities must comply with. Entities classified as Level 2 or above should report the grade to the relevant government authority for examination and approval.
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Under the Cyber Security Law and Data Security Law, we are required to establish and maintain a comprehensive data and network security management system that will enable us to monitor and respond appropriately to data security and network security risks. We will need to classify and take appropriate measures to address risks created by our data processing activities and use of networks. We are obligated to notify affected individuals and appropriate Chinese regulators of and respond to any data security and network security incidents.
Establishing and maintaining such systems and complying with such requirements takes substantial time, effort, and cost, and we may not be able to establish and maintain such systems or comply with such requirements as fully as needed for compliance with our legal obligations. Despite our investment, such systems and compliance efforts may not adequately protect us or enable us to appropriately respond to or mitigate all data compliance risks or data security and network security risks or incidents we face.
Cybersecurity review
Following the Draft Data Security Management Regulations, the Cybersecurity Review Measures, which came into effect on February 15, 2022, confirmed that critical information infrastructure operators procuring network products and services and online platform operators carrying out data processing activities, which affect or may affect national security, are required to conduct a cybersecurity review pursuant to the provisions therein. In addition, online platform operators possessing personal information of more than one million users seeking to be listed on foreign stock markets must apply for a cybersecurity review.
Pursuant to the Draft Data Security Management Regulations, data processors seeking to list on foreign stock markets shall assess their data security themselves or through data security service organizations annually, and submit the assessment reports to relevant competent authorities.
We have not received any notice from any Chinese regulatory authority identifying us as a “critical information infrastructure operator” or “online platform operator” or requiring us to go through cybersecurity review procedures by the CAC pursuant to the Cybersecurity Review Measures. Based on our understanding of the Cybersecurity Review Measures and the Draft Data Security Management Regulations, if enacted as currently proposed, we do not expect ourselves to become subject to cybersecurity review by the CAC for issuing securities to foreign investors because: (i) the clinical and preclinical data we handle in our business operations, either by its nature or in scale, do not normally trigger significant concerns over Mainland China’s national security; and (ii) we have not processed, and do not anticipate to process in the foreseeable future, personal information of more than one million users or individuals. However, there remains uncertainty as to how the Cybersecurity Review Measures and the Draft Data Security Management Regulations, if enacted as currently proposed, will be interpreted or implemented and whether Chinese regulatory authorities may adopt new laws, regulations, rules, or detailed implementation and interpretation in relation, or in addition, to the Cybersecurity Review Measures and the proposed Draft Data Security Management Regulations. While we intend to closely monitor the evolving laws and regulations in this area and take all reasonable measures to mitigate compliance risks, we cannot guarantee that our business and operations will not be adversely affected by the potential impact of the Cybersecurity Review Measures, the Draft Data Security Management Regulations, if enacted, or other laws and regulations related to privacy, data protection and information security.
It is also unclear at the present time how widespread the cybersecurity review requirement and the enforcement action will be and what effect they will have on the life sciences sector generally and the Company in particular. Mainland China’s regulators may impose penalties for non-compliance ranging from fines to suspension of operations, and this could lead to us delisting from the U.S. stock market. Currently, we have not been involved in any investigations on cybersecurity review initiated by the CAC or related governmental regulatory authorities, and we have not received any inquiry, notice, warning, or sanction in such respect.
Cross-border data transfer requirements (security assessment; certification; standard contract)
China continues to strengthen its regulation of cross-border transfers out of Mainland China of data, including important data and personal information.
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The requirement for some data processors to store personal information or important data in China, unless certain legally recognized protective measures are undertaken, was first introduced in 2017 under the Cyber Security Law, but is now solidified through the publication of the PIPL and the Security Assessment Measures. The PIPL requires that personal information processors processing certain quantities of personal information in accordance with relevant laws and regulations and need to transfer such information out of Mainland China to pass a security assessment organized by Chinese cyberspace regulators, and all other personal information processors that are not required to pass the security assessment and need to transfer out of Mainland China personal information to either: (i) undergo certification by specialized certification agencies in accordance with relevant regulations, (ii) conclude a standard contract designated by China cyberspace regulators with the overseas recipient of the personal information, or (iii) satisfy other conditions contemplated by laws, administrative regulations or Chinese cyberspace regulators. In addition to the above, personal information processors that need to transfer out of Mainland China personal information shall conduct a privacy impact assessment.
Notably, the PIPL provides for significant fines for serious violations of up to RMB 50 million, or 5% of annual revenues from the prior year and violators may also be ordered to suspend any related activity by competent authorities. We do not maintain, nor do we intend to maintain in the future, personally identifiable health information of patients in China. We do, however, collect and maintain de-identified or pseudonymized health data for clinical trials in compliance with local regulations. This data could be deemed as personal data or important data. We may transfer and store personal data and information that whistleblowers provide through our whistleblower hotline to, in, and using centralized databases and systems located in the United States, Mainland China, and Hong Kong. In addition, we have engaged a third-party data processor to process the personal data and information that such whistleblowers provide, on our behalf. Such personal data and information will be stored in one or more databases located on servers hosted and operated by the third party, in the United States.
To implement the security assessment mechanisms for cross-border transfers out of China of data under the Cyber Security Law, the Data Security Law, and the PIPL, the CAC promulgated the Security Assessment Measures, which took effect on September 1, 2022, and published the Security Assessment Guide on August 31, 2022. Under the Security Assessment Measures, a mandatory security assessment is required for data transfers out of Mainland China under any of the following circumstances: (i) transfer of important data by data processors; (ii) transfer of personal information by critical information infrastructure operators and data processors that process personal information of more than one million individuals; (iii) transfer of personal information by data processors that have transferred either personal information of over 100,000 individuals or sensitive personal information of over 10,000 individuals abroad since January 1 of the preceding year; and (iv) other situations as determined by the CAC. The Security Assessment Measures have retroactive effect for relevant cross-border data transfers out of Mainland China conducted prior to September 1, 2022, and data processors are required to undergo mandatory security assessment for such prior relevant cross-border data transfers by February 28, 2023. We do not believe, based on our understanding of the Security Assessment Measures that our transfers of data out of Mainland China currently or in the past require us to undergo a mandatory security assessment under the Security Assessment Measures, but we may in the foreseeable future conduct cross-border data transfers of data that require us to undergo a mandatory security assessment under the Security Assessment Measures for such transfers.
To implement the standard contract mechanism for cross-border transfers out of China of personal information under the PIPL, on February 24, 2023, the CAC published the PRC Standard Contract, which will come into effect on June 1, 2023. Once this comes into effect, personal information processors may conclude a PRC Standard Contract with overseas recipients of personal information to comply with PIPL requirements for cross-border transfers out of Mainland China of personal information that do not need to undergo a security assessment.
To implement the personal information protection certification mechanism for cross-border transfers out of China of personal information under the PIPL, on November 4, 2022, the CAC and SAMR jointly issued the Notification on the Implementation of Personal Information Protection Certification. In parallel, on December 16, 2022, the National Information Security Standardization Technical Committee released an updated version of the Certification Specification which provides the general principles and detailed requirements for personal information processors engaging in the cross-border transfer out of Mainland China of personal information to meet in order to obtain a personal information protection certification from qualified certification institutions for cross-border transfers out of China of personal information governed by the PIPL.
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Transferring data to foreign law enforcement agencies or judicial authorities
The Data Security Law and PIPL prohibit entities in Mainland China from transferring data (including personal information) stored in Mainland China to foreign law enforcement agencies or judicial authorities without prior approval by the Chinese government. We may need to pass a government security review or obtain government approval in order to share data (including personal information) stored in Mainland China with judicial and law enforcement authorities outside of Mainland China. Therefore, if judicial and law enforcement authorities outside Mainland China require us to provide data stored in Mainland China, and we are not able to pass any required government security review or obtain any required government approval to do so, we may not be able to meet the foreign authorities’ requirements. The potential conflicts in legal obligations could have adverse impacts on our operations in and outside of Mainland China. Recently, the CAC has taken action against several Chinese internet companies listed on U.S. securities exchanges for alleged national security risks and improper collection and use of the personal information of Chinese data subjects. According to the official announcement, the action was initiated based on the National Security Law of the People’s Republic of China (the “National Security Law”), the Cyber Security Law and the Cybersecurity Review Measures, which are aimed at “preventing national data security risks, maintaining national security and safeguarding public interests.”
Industry and local regulations
In addition, certain industry-specific laws and regulations affect the collection and transfer of personal data in Mainland China. For example, the HGR Regulation prohibits both onshore and offshore entities established or actually controlled by foreign entities and individuals from collecting or biobanking any China-Sourced HGR in China, as well as providing such China-Sourced HGR outside of China. Chinese parties are required to seek an advance approval for the collection and biobanking of all China-Sourced HGR. Approval for any export or cross-border transfer of China-Sourced HGR in the form of biospecimens is required, and transfer of derived data by Chinese parties to foreign parties or entities established or actually controlled by them also requires the Chinese parties to file, before the transfer, a copy of the data with the Human Genetic Resources Administration of China (the “HGRAC”) for record purposes and to obtain a notification filing number in order to transfer the data. The HGR Regulation also requires that foreign parties or entities established or actually controlled by them ensure the full participation of Chinese parties in international collaborations and share all records and data with the Chinese parties.
To further tighten the control of China-Sourced HGR, the SCNPC issued the Eleventh Amendment to the Criminal Law of the People’s Republic of China on December 26, 2020, which became effective on March 1, 2021, criminalizing the illegal collection of China-Sourced HGR and the illegal transfer of China-sourced biospecimens outside of Mainland China. An individual who is convicted of any of these violations may be subject to public surveillance, criminal detention, a fixed-term imprisonment of up to seven years and/or a criminal fine. In October 2020, the SCNPC adopted the Biosecurity Law, which became effective on April 15, 2021. The Biosecurity Law will establish an integrated system to regulate biosecurity-related activities in Mainland China, including, among others, the security regulation of HGR and biological resources. The Biosecurity Law for the first time expressly declared that Mainland China has sovereignty over its HGR, and further endorsed the HGR Regulation by recognizing the fundamental regulatory principles and systems established by it over the utilization of China-Sourced HGR by foreign parties or entities established or actually controlled by them in Mainland China. Though the Biosecurity Law does not provide any specific new regulatory requirements on HGR, as it is a law adopted by Mainland China’s highest legislative authority, it gives Mainland China’s primary regulator of HGR, the Ministry of Science and Technology, or MOST, significantly more power and discretion to regulate HGR and it is expected that the overall regulatory landscape for China-Sourced HGR will evolve and become even more rigorous and sophisticated. In addition, the interpretation and application of data protection laws in Mainland China and elsewhere are often uncertain and in flux.
So far, the HGRAC has disclosed a number of HGR violation cases. In one case, the sanctioned party was the Chinese subsidiary of a multinational pharmaceutical company that was found to have illegally transferred certain biospecimens to CROs for conducting certain unapproved research. In addition to a written warning and confiscation of relevant human genetic materials, the Chinese subsidiary of the multinational pharmaceutical company was requested by the HGRAC to take rectification measures and was also banned by the HGRAC from submitting any clinical trial applications until the HGRAC was satisfied with the rectification results, which rendered it unable to initiate new clinical trials in Mainland China until the ban was lifted. In another case, the CRO engaged by the Chinese subsidiary of a multinational pharmaceutical company was found to have forged an ethics committee approval in order to accelerate the HGRAC approval. Both the Chinese subsidiary of the multi-national pharmaceutical company and the CRO were debarred from initiating new applications for a period of 6 to 12 months, respectively.
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Uncertainties about our compliance with the changing legal landscape despite our best efforts
Interpretation, application and enforcement of these laws, rules and regulations evolve from time to time and their scope may continually change, through new legislation, amendments to existing legislation or changes in enforcement. Compliance with the Cyber Security Law, the Data Security Law, the PIPL and other related laws and regulations could significantly increase the cost to us of providing our products, require significant changes to our operations or even prevent us from providing certain products in jurisdictions in which we currently operate or in which we may operate in the future. Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection and information security, it is possible that our practices, products or platform could fail to meet all of the requirements imposed on us by the Cyber Security Law, the Data Security Law, the PIPL and/or related laws and regulations. Any failure on our part to comply with such laws or regulations or any other obligations relating to privacy, data protection or information security, or any compromise of security that results in unauthorized access, use or release of personally identifiable information or other data, or the perception or allegation that any of the foregoing types of failure or compromise has occurred, could damage our reputation, discourage new and existing counterparties from contracting with us or result in investigations, fines, suspension or other penalties by Chinese government authorities and private claims or litigation, any of which could materially adversely affect our business, financial condition and results of operations. If the Chinese parties fail to comply with data protection, data privacy and cybersecurity laws, regulations and practice standards, and our research data is obtained by unauthorized persons, used or disclosed inappropriately or destroyed, we may lose our confidential information and be subject to litigation and government enforcement actions. It is possible that these laws and regulations may be interpreted and applied in a manner that is inconsistent with our or our collaborators’ practices, potentially resulting in suspension of relevant ongoing clinical trials or delays in the initiation of new trials, delays in sharing or an inability to share or receive clinical trial data with or from our collaborators, confiscation of China-Sourced HGR, administrative fines, disgorgement of illegal gains, or temporary or permanent debarment of our or our collaborators’ entities and responsible persons from further clinical trials and, consequently, a de-facto ban on the debarred entities from initiating new clinical trials in Mainland China. In addition, a data breach affecting personal information, including health information, or a failure to comply with applicable requirements could result in significant management resources, legal and financial exposure and reputational damage that could potentially have a material adverse effect on our business and results of operations. Even if our practices are not subject to legal challenge, the perception of privacy concerns, whether or not valid, may harm our reputation and brand and adversely affect our business, financial condition and results of operations. Moreover, the legal uncertainty created by the Data Security Law, the PIPL, the Cyber Security Law, the Cybersecurity Review Measures and the recent Chinese government actions could materially adversely affect our ability, on favorable terms, to raise capital in the U.S. market in the future.
The national security legal regime imposes stricter data localization requirements on personal information and human health-related data and requires us to undergo cybersecurity or other security review and assessments, obtain government approval or certification, implement technical and organizational measures for data privacy and protection, conduct privacy impact assessments, or put in place certain contractual protections before transferring personal information and human health-related data out of Mainland China. As a result, personal information, important data and health and medical data that we or our customers, vendors, clinical trial sites, pharmaceutical partners and other third parties collect, generate or process in Mainland China may be subject to such data localization requirements and heightened regulatory oversight and controls. We may need to maintain local data centers in Mainland China, enter into standard contracts with the overseas recipients of any personal information processed by us, conduct privacy impact assessments, undergo security assessments, or obtain the requisite approvals from the Chinese government for the transmission outside of Mainland China of such controlled information and data, which could significantly increase our operating costs or cause delays or disruptions in our business operations in and outside Mainland China. We expect that the evolving regulatory interpretation and enforcement of the national security legal regime will lead to increased operational and compliance costs and will require us to continually monitor and, where necessary, make changes to our operations, policies, and procedures. If our operations, or the operations of our CROs, licensees or partners, are found to be in violation of these requirements, we may suffer loss of use of data, suffer a delay in obtaining regulatory approval for our products, be unable to transfer data out of Mainland China, be unable to comply with our contractual requirements, suffer reputational harm, or be subject to penalties, including administrative, civil and criminal penalties, damages, fines, and the curtailment or restructuring of our operations. If any of these were to occur, it could materially adversely affect our ability to operate our business and our financial results.
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The approval of, or filing or other procedures with, the CSRC or other Chinese regulatory authorities may be required in connection with issuing our equity securities to foreign investors under Chinese law, and, if required, we cannot predict whether we will be able, or how long it will take us, to obtain such approval or complete such filing or other procedures. We are also required to obtain business licenses from Chinese authorities in connection with our general business activities currently conducted in China.
On July 6, 2021, the General Office of the Communist Party of China Central Committee and the General Office of the State Council of the People’s Republic of China (the “State Council”) jointly promulgated the Opinions on Strictly Cracking Down on Illegal Securities Activities in Accordance with the Law, pursuant to which Chinese regulators are required to accelerate rulemaking related to the overseas issuance and listing of securities, and update the existing laws and regulations related to data security, cross-border data flow, and management of confidential information. Numerous regulations, guidelines and other measures have been or are expected to be adopted under the umbrella of or in addition to the Cyber Security Law and Data Security Law. As there are still uncertainties regarding the interpretation and implementation of such regulatory guidance, we cannot assure investors that we will be able to comply with new regulatory requirements relating to our future overseas capital-raising activities and we may become subject to more stringent requirements with respect to matters including data privacy and cross-border investigation and enforcement of legal claims.
Furthermore, On February 17, 2023, the CSRC promulgated a new set of regulations consists of the Trial Measures and five supporting guidelines which will come into effect on March 31, 2023, to regulate overseas securities offering and listing activities by domestic companies either in direct or indirect form.
As of the date of this Annual Report on Form 10-K, we have not received any inquiry, notice, warning or sanction regarding obtaining approval, completing filing or other procedures in connection with previous offerings of our equity securities to foreign investors from the CSRC or any other Chinese regulatory authorities that have jurisdiction over our operations. Based on our understanding of the newly issued Trial Measures and the supporting guidelines after they come into effect on March 31, 2023, we will not at once be required to submit an application to the CSRC for previous offerings of our equity securities to foreign investors. However, if we intend to make any subsequent securities offerings in the same overseas market, we may be required to submit filings with the CSRC within three working days after any such subsequent securities offering is completed. However, there remains uncertainty as to the interpretation and implementation of regulatory requirements related to overseas securities offerings and other capital markets activities, and we cannot assure you that the relevant Chinese regulatory authorities, including the CSRC, would reach the same conclusion as us. If it is determined in the future that the approval of, filing or other procedure with the CSRC or any other regulatory authority is required with respect to previous offerings of our equity securities to foreign investors, or if we are required to complete relevant procedures for future offerings of our equity securities to foreign investors, it is uncertain whether we will be able and how long it will take for us to obtain the approval or complete the filing or other procedure or obtain a waiver for such procedures, despite our best efforts. If we, for any reason, are unable to obtain or complete, or experience significant delays in obtaining or completing, the requisite relevant approvals, filing or other procedures, we may face sanctions by the CSRC or other Chinese regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in mainland China, limit our ability to pay dividends outside of mainland China, limit our operations in mainland China, delay or restrict the repatriation of the proceeds from our public offerings into mainland China or take other actions that could have a material adverse effect on our business, financial condition, results of operations and prospects, as well as the trading price of our ADSs. Any uncertainties and/or negative publicity regarding the aforementioned approval(s), filing or other procedure(s), the interpretation and implementation of existing laws and regulations, or any further laws, regulations or interpretations that may be released and enacted in the future could have a material adverse effect on the trading price of the ADSs.
To operate our general business activities currently conducted in China, each of our Chinese subsidiaries is required to obtain a business license from the local counterpart of the SAMR. Each of our Chinese subsidiaries has obtained a valid business license from the local counterpart of the SAMR, and no application for any such license has been denied.
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Proceedings brought by the SEC against China-based accounting firms could result in our inability to file future financial statements in compliance with the requirements of the Exchange Act.
In December 2012, the SEC instituted administrative proceedings under Rule 102(e)(1)(iii) of the SEC’s Rules of Practice against China-based accounting firms alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide to the SEC the firms’ audit work papers with respect to certain China-based companies under the SEC’s investigation. On January 22, 2014, the administrative law judge (the “ALJ”) presiding over the matter rendered an initial decision that each of the firms had violated the SEC’s rules of practice by failing to produce audit workpapers to the SEC. The initial decision censured each of the firms and barred them from practicing before the SEC for a period of six months. On February 12, 2014, certain of these China-based accounting firms appealed the ALJ’s initial decision to the SEC. On February 6, 2015, the four China-based accounting firms each agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their ability to practice before the SEC and audit U.S.-listed companies. The settlement required the firms to follow detailed procedures and to seek to provide the SEC with access to Chinese firms’ audit documents via the CSRC in response to future document requests by the SEC made through the CSRC. If China-based accounting firms fail to comply with the documentation production procedures in the settlement agreement or if there is a failure of the process between the SEC and the CSRC, the SEC could restart the proceedings against the firms.
In the event that the SEC restarts the administrative proceedings, depending upon the final outcome, listed companies in the United States with major Chinese operations may find it difficult or impossible to retain auditors in respect of their operations in China, which could result in financial statements being determined to not be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about the proceedings against these audit firms may cause investor uncertainty regarding China-based, U.S.-listed companies and the market price of our ADSs may be adversely affected.
If the accounting firms are subject to additional remedial measures, our ability to file our financial statements in compliance with SEC requirements could be impacted. A determination that we have not timely filed financial statements in compliance with SEC requirements would substantially reduce or effectively terminate the trading of our ADSs in the United States.
Pharmaceutical companies in China are required to comply with extensive regulations and hold a number of permits and licenses to carry on their business. Our ability to obtain and maintain these regulatory approvals is uncertain, and future government regulation may place additional burdens on our efforts to commercialize our product candidates.
The pharmaceutical industry in China is subject to extensive government regulation and supervision. The regulatory framework addresses all aspects of operating in the pharmaceutical industry, including product development activities, clinical trials, registration, production, distribution, packaging, labelling, storage and shipment, advertising, licensing and post-approval pharmacovigilance certification requirements and procedures, periodic renewal and reassessment processes, data security and data privacy protection requirements and compliance and environmental protection. Violation of applicable laws and regulations may materially and adversely affect our business. In order to commercialize our product candidates and manufacture and distribute pharmaceutical products in China, the third-party manufacturers, distributors or service providers with which we or our partners contract, as applicable, will be required to:
obtain a pharmaceutical manufacturing permit for each production facility or active ingredient registration approval from the National Medical Products Administration of China (the “NMPA”)