2024 / Interim Report

BOARD OF DIRECTORS

Executive Directors

Mr. Sum Kwong Yip, Derek

(Chairman and Chief Executive Officer)

Mr. Yim Chun Leung

Ms. Pun Yue Wai

Non-executive Director

Professor Wong Chi Kei, Ian

Independent Non-executive Directors

Dr. Lam Kwing Tong, Alan

Mr. Young Chun Man, Kenneth Professor Lam Sing Kwong, Simon

AUDIT COMMITTEE

Mr. Young Chun Man, Kenneth (Chairman) Dr. Lam Kwing Tong, Alan Professor Lam Sing Kwong, Simon

REMUNERATION COMMITTEE

Dr. Lam Kwing Tong, Alan (Chairman)

Mr. Young Chun Man, Kenneth

Ms. Pun Yue Wai

NOMINATION COMMITTEE

Mr. Young Chun Man, Kenneth (Chairman)

Dr. Lam Kwing Tong, Alan

Mr. Yim Chun Leung

EXECUTIVE COMMITTEE

Mr. Sum Kwong Yip, Derek (Chairman)

Mr. Yim Chun Leung

Ms. Pun Yue Wai

ENVIRONMENTAL, SOCIAL AND GOVERNANCE COMMITTEE

Professor Lam Sing Kwong, Simon (Chairman)

Mr. Yim Chun Leung

Mr. Yu Chun Kau

HONG KONG HEADQUARTERS AND PRINCIPAL PLACE OF BUSINESS

Unit 2313-18, 23/F

Tower 1, Millennium City 1

388 Kwun Tong Road

Kwun Tong, Kowloon

Hong Kong

PRINCIPAL SHARE REGISTRAR AND TRANSFER OFFICE

Conyers Trust Company (Cayman) Limited

Cricket Square

Hutchins Drive

PO Box 2681

Grand Cayman KY1-1111

Cayman Islands

HONG KONG BRANCH SHARE REGISTRAR

Tricor Investor Services Limited

17/F, Far East Finance Centre

16 Harcourt Road

Hong Kong

AUDITOR

KPMG

Certified Public Accountant

Public Interest Entity Auditor registered in accordance with

the Accounting and Financial Reporting Council Ordinance

PRINCIPAL BANKERS

(in alphabetical order) Chong Hing Bank Limited Standard Chartered Bank (Hong Kong) Limited

The Hongkong and Shanghai Banking Corporation Limited

OUR VISION

At Jacobson, we aspire to be an eminent player in essential medicines, specialty drugs and healthcare solutions in Greater China and Asia.

OUR CULTURE

Three core components i.e. Challenge, Connect, Commit unite our corporate culture and values that define how we act and what we do:

OUR MISSION

We strive to create sustainable values that meet current and future customer needs through carefully-orchestrated investment in R&D.

We enhance the communities in which we operate.

We build shareholder values in all we do.

CHALLENGE

We proactively venture into uncharted turf for exploring opportunities. We go the extra-mile for attaining excellence via innovative solutions.

CONNECT

We work cohesively as "one company one team" to create and share best practices. We connect local knowledge with global resources.

COMPETITIVE STRENGTHS

• Leadership in a Diverse Range of Essential and Specialty Drugs in Hong Kong

Over a long and successful track record, we have built a comprehensive product portfolio, including respiratory, cardiovascular, central nervous system, gastrointestinal and oral anti-diabetics, cementing our position as a leader in a number of large and fast growing therapeutic categories in the Hong Kong pharmaceutical market. We continually expand our portfolio to reinforce our leadership position with a strategic focus on specialty drugs and biosimilars to tap the fast growing market segments.

• Leading Research and Development Capabilities That Can Develop Premium Generic Drugs and Healthcare Solutions to Fulfill Unmet Demands

We are a leading pharmaceutical R&D company in Hong Kong among generic drug manufacturers in terms of number of new drugs registered in the past few years. We have been able to identify products with good potential based on our strong relationships with customers and deep market insight. We actively explore collaborations with local and overseas R&D institutions and companies on the development of innovative technologies for pharmaceutical manufacturing.

• Well-EstablishedSales and Distribution Network with Extensive Market Coverage

We have extensive local market penetration, covering substantially all of the Public and Private Sector institutions and registered pharmacies, as well as doctors in private practice. Our deep industry knowledge, extensive sales network and close interactions with market participants enable us to gather significant feedback, relevant market intelligence and data on industry trends for further strengthening our product development strategies and identifying business opportunities. We are also committed to the strategy of expanding our regional presence into strategically selected markets in Asia Pacific.

• Robust Logistics Infrastructure and Specialised Capabilities

Our key strengths stem from a centralised distribution center and a high-capacity fleet of delivery trucks, positioning us to meet substantial volume demands with efficiency. We maintain industry-leading accreditations and adhere to stringent standards, ensuring both quality and regulatory compliance, thereby reinforcing our commitment to excellence. In addition to our robust foundation, we have developed specialised capabilities in vaccine and advanced therapy products logistics. Our effective warehousing practices, powered by advanced IT systems, drive accuracy and efficiency in our operations, establishing a reliable service framework. Beyond infrastructure and compliance, our specialised capabilities in addressing diverse storage and distribution needs position us as a comprehensive logistics provider within the pharmaceutical industry.

BUSINESS REVIEW

Building on solid growth momentum, the Group achieved robust operational performance with a double-digit revenue increase in the first half of FY2025, despite a broader economic slowdown through the first three quarters of 2024. A surge in flu cases across Hong Kong in early 2024 drove a marked increase in medical visits to hospitals and clinics. This rise in healthcare demand was further fueled by an aging population, a growing prevalence of chronic illnesses, and heightened public awareness of health issues, all contributing to sustained growth in healthcare visits and medication usage.

Our strong first-half performance underscores the impetus we have gained through the effective execution of our strategic initiatives and our unwavering commitment to solidifying our position as a leader in Hong Kong's generic drugs sector. This progress reflects our focused efforts to strengthen our R&D pipeline and manufacturing capabilities, expand our product portfolio, optimise our commercial strategies, and fortify our sales channels.

We have made significant progress in aligning our business strategy with sustainable development, advancing the "5 to Thrive" sustainability framework, which focuses on Corporate Governance, Product Responsibility, Societal Engagement, Environmental Stewardship, and Employee Commitment. Environmental sustainability remains a key priority, and we are on track to meet our targets for managing greenhouse gas emissions, waste, energy, and water use. During the Reporting Period, we engaged in several ESG initiatives, including the "Mid-Autumn Festival Goodies Bag Delivery 2024" for elderly individuals, supporting education through scholarships at The University of Hong Kong, and opening the "J+ Fellow" staff shared space to foster learning, collaboration, and growth. Jacobson was also honored with the "Good MPF Employer" and "EcoPartner Award" for its commitment to environmental and social responsibility.

RESULTS

During the six months ended 30 September 2024, the Group achieved 13.3% growth in total revenue compared to FY2024 Interim, totalling HK$810.0 million. The profit for the period from continuing operations amounted to HK$140.3 million, reflecting an increase of 44.2%.

The significant increase in profit for the period from continuing operations was primarily driven by strong performance in the generic drug business across both Public and Private Sectors, as well as revenue contributions from newly in-licensed products and the successful launch of new products. Additionally, increased operating leverage at our production facilities and financial savings from effective cost-control measures contributed to the growth.

As a result of the Company no longer consolidating the results of JBM Healthcare Group following the distribution of shares in JBM Healthcare as a special dividend in specie to the shareholders of the Company, the profit attributable to equity shareholders of the Company for FY2024 Interim showed a slight decrease of 8.9%, totalling HK$140.3 million, compared to the same period last year.

Driven by robust business performance and disciplined cost management, the Group achieved a strong adjusted EBITDA of HK$272.2 million throughout the Reporting Period. As at the end of the Reporting Period, the net gearing ratio significantly improved to 5.6%, down from 12.2% at the close of FY2024, while the Group's cash reserves demonstrated resilience, with a balance of HK$515.9 million. These financial metrics highlight the Group's operational discipline and ability to adapt to market dynamics, positioning the business for continued growth and development.

OPERATION PERFORMANCE

Robust Portfolio and Supply to Meet Public Demand

From mid-January to late July 2024, Hong Kong experienced a prolonged flu season, with cases particularly affecting vulnerable groups such as children and the elderly. This 28-week period began with a surge in influenza A (H3) cases before shifting to influenza A (H1), driven by changes in circulating virus strains. The extended flu season significantly boosted demand for cold and flu treatments, driving strong sales momentum in the first half of FY2025 for both the Public and Private Sectors of the Group's business during the Reporting Period.

Beyond seasonal flu, several factors contributed to high healthcare visits and medication use in Hong Kong. The aging population, with widespread chronic conditions like diabetes and hypertension, drove demand for long-term medications and healthcare consultations. Increased health consciousness, fueled by public health campaigns, has also raised awareness of preventive care and the importance of early treatment. Additionally, rising mental health issues, including depression and anxiety, exacerbated by factors such as isolation, chronic illness, and economic stress, have led to a surge in medication use for mental health conditions.

These factors align with the strong growth of the Group's products in relevant therapeutic categories. For example, the Group's cardiovascular offerings - ACE inhibitors, beta-blockers, and diuretics

• saw significant sales growth during the Reporting Period, driven by success in securing public tenders for products such as Eplerenone, Lisinopril, and Atenolol. Additionally, medications for bladder and prostate disorders, as well as hypnotics, experienced notable growth across both Public and Private Sectors during the same period.

The Group's extensive portfolio and efficient supply chain allow it to effectively meet the rising demand for essential and specialty medications. By continuously enhancing its offerings, the Group ensures healthcare professionals and patients have access to high- quality, cost-effective treatments that address Hong Kong's evolving healthcare needs. This focus is particularly important as aging demographics and the increasing prevalence of chronic diseases continue to drive demand.

New Product Introduction

Throughout the Reporting Period, the Group expanded its product portfolio with new offerings, including Sildenafil Tablet 20mg, Cyanocobalamin Tablet 50mcg, and Amlodipine Oral Solution. Additionally, the Group received registration approval for 15 new products, positioning them for upcoming market launches and further strengthening its capacity to meet diverse healthcare needs.

R&D Pipeline Progress

During the Reporting Period, we made steady progress in advancing our R&D pipeline to expand and strengthen our product offerings. As of 30 September 2024, 14 products completed development and were submitted to the Department of Health for regulatory approval, while 3 products entered the stability testing phase. To further support our growth strategy, 8 new items were also added to the pipeline.

By 30 September 2024, our pipeline expanded to 193 products, underscoring the strength of our development efforts. Among these, 65 products have secured registration approval, 14 are pending approval, and 58 have reached the stability preparation or study phase. An additional 19 products are currently in the formulation or pre-formulation research phase. This robust pipeline highlights our commitment to long-term growth and our readiness to meet market demands with a comprehensive portfolio of high-quality treatments.

Enhancing Production Capacity

During the Reporting Period, the Group made significant strides in production capacity and capability, underscoring our commitment to meeting rising market demands. Semi-solid dosage production rose by an impressive 17.5%, surpassing 187.2 tonnes. Eye drop production increased by 14.9% to approximately 21,000 liters, while liquid dosage production grew by 14.2% to approximately 1.3 million liters. Solid dosage production also achieved steady growth, up 8.0% to approximately 1.7 billion capsules and tablets.

The Group's ability to respond to market fluctuations and operational challenges has been essential in maintaining production levels. New production lines for semi-solid and suppository formulations were recently commissioned, further enhancing our output in these segments.

With ongoing investments in plant expansions and equipment upgrades, the Group is well-positioned to increase production capacity further and respond swiftly to future market demands. Strategic planning through our subsidiaries has enabled us to maintain buffer stocks in anticipation of upcoming facility renovations. Additionally, increased liquid dosage production across subsidiaries has optimised resource utilisation to meet growing market needs. These initiatives reflect the Group's robust infrastructure and proactive approach, highlighting our agility in adapting to evolving business requirements and responding effectively to market dynamics.

BUSINESS DEVELOPMENT

In-license of Specialised Products

In line with our strategy to expand and diversify our portfolio of specialised pharmaceuticals, we continue to focus on forming strategic in-licensing agreements with reputable global manufacturers, strengthening our offerings in key therapeutic areas.

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During the Reporting Period, we advanced our in-licensing strategy by securing exclusive agreements for several pharmaceutical products strengthening our portfolio in cardiovascular health, diabetes management, and allergy treatment. Key achievements include the in-licensing of an anticoagulant therapy for blood clot prevention and treatment, enhancing our cardiovascular offerings, and the addition of an ophthalmic product from Taiwan for allergic eye conditions, bolstering our presence in allergy management. Additionally, we obtained exclusive distribution rights for a key antibiotic from the United Kingdom, which will be available in Hong Kong and Macau on a named-patient basis, addressing specific healthcare needs.

These agreements reflect the ongoing progress of our in-licensing strategy, enabling us to provide specialised products to healthcare providers and patients and to strengthen our position in essential therapeutic areas.

The product is seeing increasing adoption in Southeast Asian markets, particularly Malaysia and Singapore, with further growth expected.

Through a Group subsidiary, we have entered into a Dossier License Agreement with a US company specialising in hematology, oncology, and rare diseases. This partnership is pivotal in registering Arsenol Oral Solution as an orphan drug with the U.S. FDA, thereby expediting its clinical development.

We are also planning a Phase 3 clinical trial in collaboration with SDK Therapeutics Inc. in the US and the EU. This initiative underscores our dedication to advancing oncology treatments and improving patient outcomes in rare diseases. By shifting arsenic trioxide from intravenous to oral administration, we aim to enhance patient convenience, reduce healthcare costs, and establish a new standard of care in treating acute promyelocytic leukemia (APL).

Strategic Partnership and Collaboration

Collaboration with Biocon Biologics Limited ("Biocon") for Insulin Glargine and Aspart

The Group has entered into a strategic partnership with Biocon, one of the world's largest biosimilar companies, to market and distribute Insulin Glargine and Aspart in Hong Kong. This collaboration combines Biocon's expertise in biosimilar insulin products with Jacobson's strong market presence.

Notably, Biocon's Insulin Glargine has received U.S. Food and Drug Administration ("U.S. FDA") approval as the first interchangeable insulin, allowing pharmacists to substitute it for the brand-name product without requiring dose titration. This designation could facilitate broader adoption by simplifying the transition from branded insulin to a biosimilar alternative.

We expect registration in Hong Kong to be completed by the first quarter of 2025. This partnership not only meets the growing demand for affordable insulin therapies but also expands our portfolio, serving as a foundation for future biosimilar collaborations and reinforcing our position in the market.

Market Expansion of Arsenol Oral Solution (Arsenic Trioxide Oral Solution)

Aligned with our commitment to innovative therapies and improved patient outcomes, we are broadening the market reach of Arsenic Trioxide Oral Solution - a product co-developed with The University of Hong Kong and Jacobson. This oral formulation, approved for treating acute promyelocytic leukemia, has demonstrated clinical efficacy comparable to the injectable version, with the added benefit of an enhanced safety profile.

Collaboration with Fosun Kairos Biotechnology Inc. ("FosunKairos")

We have enhanced our collaboration with Shanghai Fosun Pharmaceutical (Group) Co., Ltd.* (上海復星醫藥(集團)股份有限公 司)("Fosun Pharma") to market Axicabtagene Ciloleucel ("Yikaida"), a pioneering CAR-T cell therapy developed by FosunKairos, a joint venture between Fosun Pharma and Kite Pharma, Inc. in the US, in Hong Kong and Macau. Axicabtagene Ciloleucel is approved in key regions, including the US, EU, Australia, Canada, and Japan, for the treatment of various lymphomas. It is the first and only second-line recommended CAR-T therapy for diffuse large B-cell lymphoma (DLBCL) by both the U.S. FDA and the National Medical Products Administration in China. Recent results from the ZUMA-7 study show significant improvements in patient survival rates and event-free survival compared to standard treatments.

As part of the collaboration, Jacobson will manage the logistics, sales, and marketing of Yikaida in Hong Kong and Macau. Yikaida offers a distinct advantage in CAR-T therapies by eliminating the need to transport apheresis blood samples to the US or Europe for processing, significantly reducing treatment preparation time and cost. Jacobson's logistics arm is one of only two licensed distributors authorised to handle CAR-T products in Hong Kong.

E-ordering System to Enhance Sales and Customer Service Platform

Following the successful launch of our innovative e-ordering platform, e-Jacob Pharma2U, the Group has continued to strengthen its sales and customer service capabilities. Since its official rollout for private clinic clients, the platform has seen strong growth and high adoption rates, significantly streamlining the procurement process for pharmaceutical products and medical supplies.

In response to valuable customer feedback, we have introduced several enhancements, including the option for customised labels during stock deliveries, further enhancing the user experience. We also boosted engagement with a successful online promotion offering special discounts and additional reward points, adding greater value to our customers' purchasing journeys.

To maintain strong connections with our customers, we regularly communicate through newsletters, providing updates on new products and promotions to ensure they are well-informed and fully capitalise on the platform's benefits.

As we move forward, we remain committed to further enhancing and expanding e-Jacob Pharma2U by continuously gathering feedback and implementing improvements. Our approach combines the convenience of the online platform with the personalised support of our sales teams, ensuring clients receive both efficient digital service and hands-on assistance. This blend of online and offline engagement strengthens customer relationships and reinforces our position in the market.

OUTLOOK

Hong Kong's economy is projected to grow through the end of the year, though the outlook remains fragile. Growth slowed in the third quarter of 2024, with year-on-year expansion at 1.8% and a 1.1% GDP contraction from the previous quarter. This deceleration, driven by geopolitical tensions, economic volatility, and weak private consumption, has affected both Mainland China and Hong Kong, fostering a cautious, conservative stance across sectors. However, the improving economic outlook in Mainland China, coupled with recent stimulus measures by the Hong Kong Government, is expected to support market sentiment and stimulate domestic activity.

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In spite of current headwinds, we remain confident in the long-term resilience of Hong Kong's economy as it adapts to evolving challenges aimed at reinforcing stability and boosting domestic spending. We are committed to enhancing our business's adaptability and agility in this dynamic environment, which will continue to guide our strategic initiatives.

We see strong growth potential in the generic drugs market and broader healthcare industry, driven by several key factors. Increased government investment in healthcare initiatives, such as the Chronic Disease Co-Care Pilot Scheme ("CDCC"), reflects a commitment to expanding access to affordable medications. Additionally, generics substitution policies further bolster this trend, creating a favorable environment for cost-effective healthcare solutions.

For instance, the 2024 Policy Address underscored the development of primary healthcare through expansions in the CDCC, district health centres, and the launch of a community pharmacy program. These efforts aim to improve healthcare access, especially for the elderly with chronic conditions. Starting this year, Hospital Authority patients can collect medications from chain pharmacies and receive health guidance from pharmacists, creating valuable opportunities to promote the use of affordable generic drugs through primary healthcare programs.

A demographic shift is further shaping the healthcare landscape. Hong Kong's aging population with complex health needs is driving increased demand for chronic disease medications, aligning well with the cost-effectiveness of generic drugs. The rising prevalence of chronic conditions, such as diabetes and heart disease, also heightens the demand for essential and specialty medications, while increased societal awareness of preventive care and disease management further bolsters this demand.

To capitalise on these market opportunities, we are reinforcing our position as a premier pharmaceutical provider in Hong Kong and Asia through a disciplined growth strategy. Our focus remains on optimising our product portfolio and expanding our product pipeline via strategic in-licensing and targeted R&D initiatives. To support this growth, we are strengthening our commercial and regulatory capabilities and building strategic partnerships across the regions. This approach enables us to capture emerging market opportunities and deliver essential and specialty medications to a broader patient base.