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08 September 2015

Asia Pacific/China

Equity Research

Biotechnology

3Sbio Inc.

(1530.HK / 1530 HK) INITIATION

A biotech pioneer

■ Initiating coverage with an OUTPERFORM rating and TP of HK$9.7.

3SBio is the largest recombinant protein drug manufacturer in China, and

focuses on dialysis management and oncology. We expect it to deliver a

30% EPS CAGR for 2015-17E given the ~25% sales growth of its two

flagship biologic drugs, 30% plus sales growth of five high-potential drugs,

and potential new product launches in 2016-17E.

■ A pioneer in China biotech industry. China's biological drugs are the one

of the fastest growing segments in its healthcare sector with revenue growth

of 34%/15%/13% YoY in 2013/14/15 YTD. 3SBio's EPIAO and TPIAO each

maintain dominant leadership in rhEPO (44% market share) and rhTPO

(protected by patent until 2020). 3SBio also has a diversified drug portfolio

(five high-potential drugs) and pipeline (14 exclusive drugs and five first-to-

market generics focusing on dialysis treatment and oncology. We believe it

will benefit from the improving treatment rate of dialysis, accelerating drug

tenders and the National Reimbursement Drug List update.

■ Catalysts. (1) Fast growth of rhEPO sales in low-tier markets; (2) rapid market

penetration of TPIAO riding on an accelerated tender progress; (3) new

products approved; (4) potential acquisitions of high-quality pharma

companies.

■ Valuation. Our target price of HK$9.7 is based on 33x FY15 P/E, implying

1.1x PEG (a more than 30% 2015-17E CAGR), plus HK$0.5 cash per share

(unused IPO proceeds for acquisitions); we believe it deserves a valuation

premium over its peers due to: (1) its high technical barriers in biologics; (2)

rich product portfolio and pipeline; (3) faster earnings growth outlook for 2015-

17E; and (4) potential earnings accretion from acquisitions. Major risks:

intensifying competition for rhEPO, potential failure in new drug development.

Share price performance

100

105

110

115

120

6

8

10

12

Jun-15

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the

MSCI CHINA F IDX which closed at 5654.38 on 07/09/15

On 07/09/15 the spot exchange rate was HK$7.75/US$1

Performance over 1M 3M 12M Absolute (%) -18.3 — — — Relative (%) -1.9 — — —

Financial and valuation metrics

Year 12/14A 12/15E 12/16E 12/17E Revenue (Rmb mn) 1,130.9 1,607.6 2,006.3 2,511.2 EBITDA (Rmb mn) 369.3 563.8 788.6 1,023.0 EBIT (Rmb mn) 366.7 561.0 785.7 1,020.0 Net profit (Rmb mn) 388.3 575.3 752.4 975.6 EPS (CS adj.) (Rmb) 0.15 0.23 0.30 0.39 Change from previous EPS (%) n.a. Consensus EPS (Rmb) n.a. 0.24 0.31 0.39 EPS growth (%) 161.9 48.1 30.8 29.7 P/E (x) 39.6 26.8 20.5 15.8 Dividend yield (%) 4.3 0.0 0.0 0.0 EV/EBITDA (x) 43.1 21.0 14.3 10.3 P/B (x) 16.5 2.7 2.4 2.1 ROE (%) 38.8 17.6 12.6 14.3 Net debt/equity (%) 54.0 Net cash Net cash Net cash

Source: Company data, Thomson Reuters, Credit Suisse estimates.

Rating OUTPERFORM* [V] Price (07 Sep 15, HK$) 7.45 Target price (HK$) 9.70¹ Upside/downside (%) 30.2 Mkt cap (HK$ mn) 18,739 (US$2,418 mn) Enterprise value (Rmb mn) 11,832 Number of shares (mn) 2,515.32 Free float (%) 32.9 52-week price range 10.56-7.35 ADTO - 6M (US$ mn) 12.9

*Stock ratings are relative to the coverage universe in each

analyst's or each team's respective sector.

¹Target price is for 12 months.

[V] = Stock considered volatile (see Disclosure Appendix).

Research Analysts

Iris Wang

852 2101 7646

iris.wang@credit-suisse.com

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 2

Focus charts Figure 1: China's biological drug segment is taking

market share, but still lags globally

Figure 2: China's rhEPO market is expected to see an 18%

CAGR from 2013-18E

4%

6%

8%

10%

12%

14%

16%

18%

Bio

logi

cal d

rugs

as

% o

f pha

rmac

eutic

al

reve

nue

in C

hina

516

1,043

2,432

77

172

386

20

49

137

2009 2013 2018E

Chi

na r

hEP

O m

arke

t siz

e (R

mb

mn)

China rhEPO market size

CKD associated anemia (after dialysis) Chemotherapy-induced anemia

Allogeneic blood transfusion

613

1,264

2,955

CAGR=20%

CAGR=18%

13-18E CAGR:

23%

18%

18%

Source: Wind, State Statistics Bureau, Credit Suisse research Source: Frost and Sullivan

Figure 3: 3Sbio is leading in China's rhEPO market (2013) Figure 4: Significant growth of CIT (TPO's major

indication) treatment market in China

3SBio44%

Hayao Biological

14%Shanghai Chemo

10%

Beijing Sihuan6%

Chendu Diao4%

Scriprogen3% Other

companies19%

China rhEPO market share

Acquired in Dec-2014

-

500

1,000

1,500

2,000

2,500

2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

China CIT treatment market size

CAGR=35%

CAGR=19%

Rmb, mn

Source: IMS Source: Source: IMS, Frost and Sullivan

Figure 5: We estimate TPIAO to keep gaining market

share from rhIL-11

Figure 6: Biotech companies are trading at a premium

over major pharmas

30.3% 33.8%

54.6%

69.7% 66.2%

45.4%

2011 2013 2018E

CIT

trea

tmen

t mar

ket s

hare

(%

)

TPIAO rhIL-11

22x

30x

16x

29x

38x

25x

10

15

20

25

30

35

40

HK China EU/US

Comparison of avg. trading P/E (2015E)

Major pharmas Biotech companies

Source: IMS, Frost and Sullivan, Credit Suisse estimates Source: Bloomberg, Credit Suisse research

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 3

A biotech pioneer A leading biopharm player in China

3SBio is the largest recombinant protein drug manufacturer in China and focuses on

dialysis management and oncology. It maintains a dominant leadership in recombinant

human Erythropoietin (rhEPO) and recombinant human Thrombopoietin (rhTPO) in China,

recording a revenue CAGR of ~30% from 2012-14.

We believe the company is well positioned in China's healthcare sector given that: (1)

biological drugs are one of the fastest growing segments in China's healthcare sector, with

revenue growth of 34%/15%/13% YoY in 2013/14/15 YTD; (2) recombinant protein drugs

are made from genetically engineered mammalian cells with high technology barriers.

EPIAO: The No.1 rhEPO in China

In China, 3SBio's EPIAO is the first-to-market biosimilar of Amgen's Epogen, an injectable

rhEPO designed to stimulate the production of red blood cells. rhEPO is a ~Rmb 1.3 bn market

in China with expected growth of more than 18% from 2013-18. According to IMS, a third-party

healthcare research institute, EPIAO ranked No.1 with a 44% market share in 2013.

We expect EPIAO revenue to see a CAGR of 20% from 2015-17E given that: (1) it is the

only rhEPO approved for three indications in China and has a clear first-mover advantage;

(2) it has exclusive dosage forms and thus less price erosion than competitors; (3) it has the

highest molecule structure to the original biologics, Epogen; and (4) 3SBio acquired

Shenzhen Sciprogen in December 2014 and this is likely to expand EPIAO's penetration in

the low-tier market.

TPIAO: Upside in penetration expansion

TPO is a human hormone mainly produced by the liver which regulates platelet production.

3SBio's TPIAO is the only commercialised human recombinant TPO (rhTPO) in the world.

As a national Class I innovative drug, TPIAO is protected by patent until 2020. We believe

the drug will take market share in the chemotherapy-induced thrombocytopenia (CIT)

treatment market for its better efficacy, lower treatment cost and fewer side effects.

TPIAO is sold in 17 provinces and is expected to enter more in 2016 as the government

requires all provinces to launch tenders by November 2015. It will also potentially benefit

from the upcoming National Reimbursement Drug List adjustment and expand its current

reimbursement in seven provinces to one that is national.

Diversified product portfolio

Besides EPIAO and TPIAO, 3SBio has five high potential drugs namely, IV Iron Sucrose,

SEPO, Sparin, Qiming granule (芪明颗粒) and Laizi which have significant market size

growth, good insurance coverage and a benign competitive landscape. It also has a

pipeline of ~20 drugs focusing on dialysis management and oncology.

Initiating coverage with OUTPERFORM; TP HK$9.7

Our target price of HK$9.7 is based on 33x FY15 P/E, implying 1.1x PEG (more than a

30% 2015-17E CAGR), plus HK$0.5 cash/share (unused IPO proceeds for acquisitions).

We believe the company deserves a valuation premium over its peers due to: (1) its high

technical barriers in biologics; (2) rich product portfolio and pipeline; (3) faster earnings

growth outlook for 2015-17, and (4) potential earnings accretion from acquisitions.

Catalysts include: (1) Fast growth of rhEPO sales in low-tier markets; (2) rapid market

penetration of TPIAO riding on accelerated tender progress; (3) new products approved;

and (4) potential acquisition. Major risks are intensifying competition for rhEPO and

potential failure in new drug development.

Largest recombinant protein

drug manufacturer in China

focusing on dialysis

management and oncology

3SBio's EPIAO is the first-

to-market biosimilar of

Amgen's Epogen, an

injectable rhEPO designed

to stimulate the production

of red blood cells

3SBio's TPIAO is the only

commercialised human

recombinant TPO (rhTPO)

in the world

Five other high potential

drugs

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 4

3Sbio Inc. 1530.HK / 1530 HK Price (07 Sep 15): HK$7.45, Rating:: OUTPERFORM [V], Target Price: HK$9.70, Analyst: Iris Wang

Target price scenario

Scenario TP %Up/Dwn Assumptions

Upside 11.64 56.24 EPIAO sales growth reach 28%/24%/24% in 2015/16/17E

Central case 9.70 30.20 Downside 8.25 10.67 Low-than-expected penetration rate of TPO

Key earnings drivers 12/14A 12/15E 12/16E 12/17E

EPIAO sales growth (%) 24.1 20.0 20.0 20.0 TPIAO sales growth (%) 41.5 35.0 33.0 33.0

Income statement (Rmb mn) 12/14A 12/15E 12/16E 12/17E

Sales revenue 1,131 1,608 2,006 2,511 Cost of goods sold 87.5 178.6 222.9 279.0 SG&A 602 752 857 1,040 Other operating exp./(inc.) 71.9 113.5 138.1 169.0 EBITDA 369 564 789 1,023 Depreciation & amortisation 2.6 2.7 2.9 3.0 EBIT 367 561 786 1,020 Net interest expense/(inc.) 5.1 (20.8) (35.1) (51.1) Non-operating inc./(exp.) (1.4) 17.4 22.6 29.4 Associates/JV — — — — Recurring PBT 360 599 843 1,100 Exceptionals/extraordinaries — — — — Taxes 68.5 107.9 151.8 198.1 Profit after tax 291.7 491.3 691.7 902.4 Other after tax income — — — — Minority interests — — — — Preferred dividends — — — — Reported net profit 291.7 491.3 691.7 902.4 Analyst adjustments 96.6 83.9 60.8 73.2 Net profit (Credit Suisse) 388.3 575.3 752.4 975.6

Cash flow (Rmb mn) 12/14A 12/15E 12/16E 12/17E

EBIT 367 561 786 1,020 Net interest 5.1 (20.8) (35.1) (51.1) Tax paid — — — — Working capital 319.0 (10.0) (9.5) (2.8) Other cash & non-cash items (304.1) (21.1) (8.0) (5.9) Operating cash flow 386.6 509.2 733.1 960.2 Capex (19.9) (127.0) (233.2) (276.2) Free cash flow to the firm 366.7 382.2 499.9 684.0 Disposals of fixed assets — — — — Acquisitions (378.2) (524.1) — — Divestments — — — — Associate investments — — — — Other investment/(outflows) 108.9 79.2 91.3 108.3 Investing cash flow (289.2) (571.9) (141.9) (167.9) Equity raised — 4,170 — — Dividends paid (659.0) — — — Net borrowings 437.2 (123.5) (98.8) (79.0) Other financing cash flow (28.6) (39.5) (31.6) (25.3) Financing cash flow (250) 4,007 (130) (104) Total cash flow (153) 3,944 461 688 Adjustments — — — — Net change in cash (153) 3,944 461 688

Balance sheet (Rmb mn) 12/14A 12/15E 12/16E 12/17E

Cash & cash equivalents 108 4,052 4,513 5,201 Current receivables 348.0 452.8 546.6 704.4 Inventories 100.4 100.9 143.8 125.0 Other current assets 386.6 396.9 405.5 416.3 Current assets 943 5,003 5,609 6,446 Property, plant & equip. 374.0 425.9 565.6 726.6 Investments 4.0 528.1 528.1 528.1 Intangibles 636.1 656.4 677.7 700.1 Other non-current assets 349.7 349.1 356.9 365.2 Total assets 2,306 6,962 7,737 8,766 Accounts payable 551.4 654.2 794.9 947.2 Short-term debt 617.4 493.9 395.2 316.1 Current provisions — — — — Other current liabilities 83.1 85.2 87.6 90.1 Current liabilities 1,252 1,233 1,278 1,353 Long-term debt — — — — Non-current provisions — — — — Other non-current liab. 111.0 111.0 111.0 111.0 Total liabilities 1,363 1,344 1,389 1,464 Shareholders' equity 932 5,607 6,337 7,291 Minority interests 11.2 11.2 11.2 11.2 Total liabilities & equity 2,306 6,962 7,737 8,766

Per share data 12/14A 12/15E 12/16E 12/17E

Shares (wtd avg.) (mn) 2,515 2,515 2,515 2,515 EPS (Credit Suisse) (Rmb)

0.15 0.23 0.30 0.39 DPS (Rmb) 0.26 — — — BVPS (Rmb) 0.37 2.23 2.52 2.90 Operating CFPS (Rmb) 0.15 0.20 0.29 0.38

Key ratios and valuation 12/14A 12/15E 12/16E 12/17E

Growth(%) Sales revenue 29.2 42.2 24.8 25.2 EBIT 87.5 53.0 40.1 29.8 Net profit 162 48 31 30 EPS 162 48 31 30 Margins (%)

EBITDA 32.7 35.1 39.3 40.7 EBIT 32.4 34.9 39.2 40.6 Pre-tax profit 31.9 37.3 42.0 43.8 Net profit 34.3 35.8 37.5 38.9 Valuation metrics (x) P/E 39.6 26.8 20.5 15.8 P/B 16.5 2.7 2.4 2.1 Dividend yield (%) 4.28 — — — P/CF 39.8 30.2 21.0 16.0 EV/sales 14.1 7.4 5.6 4.2 EV/EBITDA 43.1 21.0 14.3 10.3 EV/EBIT 43.4 21.1 14.3 10.3 ROE analysis (%) ROE 38.8 17.6 12.6 14.3 ROIC 26.2 26.2 30.0 36.0 Asset turnover (x) 0.49 0.23 0.26 0.29 Interest burden (x) 0.98 1.07 1.07 1.08 Tax burden (x) 0.81 0.82 0.82 0.82 Financial leverage (x) 2.44 1.24 1.22 1.20 Credit ratios Net debt/equity (%) 54.0 (63.3) (64.9) (66.9) Net debt/EBITDA (x) 1.38 (6.31) (5.22) (4.77) Interest cover (x) 72.0 (27.0) (22.4) (20.0)

Source: Company data, Credit Suisse estimates.

18

19

20

21

22

23

24

25

26

20-Aug-15 03-Sep-15

12MF P/E multiple

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

20-Aug-15 03-Sep-15

12MF P/B multiple

Source: IBES

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 5

A leading biopharm player in China 3SBio is a leading manufacturer of biological drugs in China. According to Frost and

Sullivan, 3SBio ranks No.1 in terms of sales from recombinant protein drugs and is second

in terms of sales from overall biological products. Thanks to the rapid development of

China's biological drug segment, 3SBio recorded a strong top-line CAGR of ~30% for

2012-14.

3SBio maintains a dominant leadership in two key products, recombinant human

Erythropoietin (rhEPO) and recombinant human Thrombopoietin (rhTPO), in China:

(1) 3SBio's flagship drug, namely EPIAO, leads in China's rhEPO market with a 44%

market share. rhEPO is designed to stimulate the production of red blood cells in chronic

kidney disease (CKD) patients or cancer patients who suffer from anemia after receiving

chemotherapy, and was a more than Rmb1.2 bn market in China in 2013.

(2) Its other key drug, TPIAO, is the world's only commercialised rhTPO product. rhTPO is

a hormone regulating platelet production and approved for chemotherapy-induced

thrombocytopenia (CIT) and immune thrombocytopenia (ITP). TIPAO is now at a rapid

growth stage and has the potential to reach more than Rmb1 bn p.a.

EPIAO and TPIAO contributed an aggregate of ~91% of FY14 sales. Besides these two

blockbusters, the company has a rich portfolio comprising anemia or dialysis-related

recombinant human protein drugs.

Figure 7: 3SBio's current product portfolio

Brand name Generic name Indication Launch year 2014 sales

(Rmb mn)

EPIAO Recombinant human Erythropoietin

(rhEPO)

CKD/chemotherapy/surgical blood loss-

induced anemia (Tier 1/2 cities)

2000 594

TPIAO Recombinant human Thrombopoietin

(rhTPO)

Chemotherapy-induced/immune-related

thrombocytopenia

2005 445

IV Iron Sucrose IV Iron Sucrose Iron deficiency anemia 2007 65

Intefen Recombinant human interferon alpha-2a Chronic hepatitis B 1995 6

Inleusin Recombinant human interleukin 2 Renal cell carcinoma, melanoma, etc. 1996 4

SEPO Recombinant human Erythropoietin

(rhEPO)

CKD/chemotherapy-induced anemia (Tier

3/4 cities)

2001 ~40

Sparin Low-molecular-weight heparin calcium

(LMWH-Ca)

Anticoagulation 2011 n.a.

Source: Company data, Credit Suisse research

3SBio is a leading

manufacturer of biological

drugs in China

3SBio's EPIAO leads

China's rhEPO market with

a 44% market share

TPIAO is the only

commercialised rhTPO

product in the world

EPIAO and TPIAO together

contributed ~91% to FY14

revenue

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 6

Figure 8: 3SBio recorded solid top-line growth Figure 9: Key blockbusters, EPIAO and TPIAO accounted

for ~91% of FY14 sales

0%

5%

10%

15%

20%

25%

30%

35%

-

200

400

600

800

1,000

1,200

1,400

2009 2010 2011 2012 2013 2014

3sbio sales (Rmb, mn) YoY %, RHS

Rmb, mn YoY, %

EPIAO52%

TPIAO 39%

IV Iron Sucrose

6%

Others3%

Source: Company data Source: Company data

Biological drugs are the one of the fastest growing

segments in China's pharma market

According to the National Statistics Bureau, domestic manufacturing revenue from

biological products grew 34%/15%/13% YoY in 2013/14/15 YTD (from January to May),

faster than China's chemical drug segment's 14%/10%/10% YoY. Meanwhile, biological

drugs as a percentage of total pharmaceutical revenue reached 11.8% in 2014 from 7.7%

in 2004. We estimate the growth momentum to continue, as the current market share of

biological drugs is much lower than the global level of ~18%.

Figure 10: The manufacturing revenue of the biological

segment grew faster than for chemical drugs in China

Figure 11: Biological drugs are gradually taking market

share, but still lag globally

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Biologics manufacturing revenue YoY%

Chemical drug manufacturing revenue YoY%

YoY, %

4%

6%

8%

10%

12%

14%

16%

18%

Bio

logi

cal d

rugs

as

% o

f pha

rmac

eutic

al

reve

nue

in C

hina

Source: Wind, China Statistics Bureau, Credit Suisse research Source: Wind, China Statistics Bureau, Credit Suisse research

Revenue from biological

products grew faster than

that of China's chemical

drugs

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 7

High entry barriers in recombinant protein drugs

Based on drug manufacturing platforms, China's biological drug industry can be roughly

divided into three segments: (1) plasma-derived products & vaccines; (2) recombinant

protein drugs; and (3) monoclonal antibodies (mAb).

It is well acknowledged that R&D and manufacturing entry barriers for mAb are greater

than for recombinant proteins which are in turn greater than for plasma-derived products.

Plasma derivatives are proteins directly isolated and purified from human blood, while

recombinant proteins are the outcomes from genetically engineered mammalian cells. The

manufacturing technology of mAb is the most difficult given complex and time-consuming

work flows.

3SBio has long enjoyed a leading position among domestic players in the recombinant

protein segment, which is heavily contributed to by its two blockbuster drugs, EPIAO and

TPIAO. Since 2006, the company has begun to develop anti-TNFa mAb (a monoclonal

antibody drug designed to treat arthritis) in cooperation with Epitomics. Under the

agreement, 3SBio was granted the right to manufacture and distribute anti-TNFa mAb in

China under the intellectual property rights owned by Epitomics. In December 2014, the

company acquired ~7% equity of Shanghai CP Guojian Pharma, an industry leader in

China's mAb segment, to reinforce its capacity on mAb development.

Figure 12: Technology hierarchy of China's biologics' sector & 3SBio's position

Low

Plasma derivatives& Vaccine

Recombinant protein

High

Technologylevel

Monoclonal antibody

• Domestic leader ship in EPO

• Exclusive patent on TPO

• Developing anti-TNFa mAb

• Acquiring ~7% equity of GP Guojian

3Sbio involvement:

Source: Company data, Credit Suisse research

China's biological drug

industry comprises three

segments

R&D entry barrier: mAb tops

the list followed by

recombinant proteins and

plasma-derived products

3SBio begun to develop

anti-TNFa mAb in

cooperation with Epitomics

in 2006. It also acquired

~7% equity interest in CP

Guojian in 2014, an industry

leader in China's mAb

segment

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 8

EPIAO: The No.1 rhEPO in China In China, EPIAO is the first-to-market biosimilar of Amgen's Epogen, an injectable

recombinant human erythropoietin (rhEPO) targeting anemia treatment and designed to

stimulate the production of red blood cells in three types of patients: (1) late-stage chronic

kidney disease (CKD) patients especially those undergoing dialysis treatment; (2) cancer

patients who suffer anemia after receiving chemotherapy; and (3) surgery patients likely to

suffer severe anemia caused by blood loss during surgeries.

EPIAO accounted for 52% of 3SBio's FY14 sales, and achieved a revenue CAGR of 25%

from 2009 to 2014 mainly thanks to a growing rhEPO market as well as its rising market

share.

Figure 13: 3SBio's EPIAO had a revenue CAGR of ~25% for 2009-14

0%

5%

10%

15%

20%

25%

30%

35%

-

100

200

300

400

500

600

700

2009 2010 2011 2012 2013 2014

EPIAO sales (Rmb, mn), LHS YoY (%)

Rmb, mn YoY

Source: Company data

~18%E CAGR of rhEPO market size in China…

The rhEPO market in China has experienced rapid expansion in recent years. It recorded

a total size of Rmb1,264 mn in 2013, representing a five-year CAGR of 20% and is

expected to reach ~ Rmb2,955 mn in 2018 by delivering a future CAGR of 18%, according

to Frost and Sullivan.

rhEPO can be further divided into three sub-segments according to different indications:

■ The rhEPO market for CKD associated anemia (usually after dialysis) recorded

Rmb1,043 mn in 2013 and is estimated to have a 18% 2013-18E CAGR, mainly driven

by the increasing penetration rate of dialysis treatment for late-stage CKD.

■ The rhEPO market for chemotherapy-induced anemia recorded Rmb172 mn in

2013 and is estimated to have a 17.5% 2013-18E CAGR, mainly driven by the

increasing cancer patient base in China together with the growing physician awareness

of EPO treatment after chemotherapy.

■ The rhEPO market targeting allogeneic blood transfusion recorded Rmb49 mn in

2013 and is estimated to see a 22.8% 2013-18E CAGR, mainly driven by fast-growing

surgery volumes and increasing safety concerns during surgery.

EPIAO is the FTM biosimilar

of Amgen's Epogen, an

injectable rhEPO targeting

anemia treatment

EPIAO accounted for 52%

of 3SBio's FY14 sales with a

revenue CAGR of 25% for

2009-14

China's rhEPO market is

expected to deliver an 18%

CAGR for 2013-18E

Three indications of EPIAO

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 9

Figure 14: Great growth potential of China's rhEPO market

516 1,043

2,432

77

172

386

20

49

137

2009 2013 2018E

Chi

na r

hEP

O m

arke

t siz

e (R

mb

mn)

CKD associated anemia (after dialysis) Chemotherapy-induced anemia

Allogeneic blood transfusion

613

1,264

2,955

CAGR=20%

CAGR=18%

13-18E CAGR:

23%

18%

18%

Source: Frost and Sullivan

…mainly driven by increasing dialysis penetration

The rhEPO market for late-stage CKD patients accounted for ~83% of FY13 rhEPO

market share. Compared with global levels, the current dialysis penetration rate for CKD

patients remains low in China; however, we expect some recently announced policies to

unlock the huge market potential of China's dialysis segment.

China's ESRD patients are undertreated

End-stage renal disease (ESRD) is the last stage (stage five) of CKD. With ESRD, kidneys

function at only below 10-15% of their normal capacity and cannot effectively remove

waste or excess fluid from the blood. Overall ESRD patients in China reached 1.5 mn in

2013. Dialysis is the most effective and popular ESRD treatment. While the average

treatment rate is 37% globally and 75% in developed countries, in China, ESRD patients

are undertreated with a treatment rate of only ~22% in 2013.

We believe that the low dialysis penetration rate is mainly due to:

■ High treatment costs: Assuming costs per treatment of Rmb500 with an ESRD

patient receiving 120 treatments annually, the annual treatment costs amount to

Rmb60,000 compared to the average annual salary of less than Rmb50,000 in China.

■ Insufficient number of dialysis centres: There are only ~3,600 dialysis centres in

China, mostly set up in Class II and Class III hospitals. The current capacity can only

serve 200-300k patients who receive dialysis treatment three times a week.

The rhEPO market for late-

stage CKD patients

accounted for ~83% of

FY13 rhEPO market share

ESRD patients are

undertreated in China with a

treatment rate of only 22%

as of 2013

High treatment costs:

annual treatment costs

amount to ~Rmb 60K

Shortage of dialysis centres:

the current capacity can

only serve 200-300K

patients.

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 10

Figure 15: Only around 330K ESRD patients are treated

with dialysis in China in 2013

Figure 16: Dialysis treatment rate in China is much lower

than developed countries

1500

330

No. of ESRD patients ('000) No. of ESRD patients treated withdialysis ('000)

No.

of p

atie

nts

(in th

ousa

nd)

22%

~22%

~37%

~75%

China Global level Developed countries

ES

RD

tre

atm

ent r

ate

(%)

Source: IMS, Frost and Sullivan Source: IMS, Frost and Sullivan, Credit Suisse estimate

Favourable policies to unlock market potential

We believe the dialysis penetration rate will improve from the favourable reimbursement

policy on ESRD, which will significantly lower the treatment costs burden especially for

rural residents.

■ In September 2012, ESRD was included in the National Serious Illness List (大病医保)

of which the medical expense reimbursement ratio is no lower than 50%.

■ In January 2013, the government further raised the medical expense reimbursement

ratio for this to 70~90%.

■ In June 2014, the government reiterated rolling over the serious illness reimbursement

programme from pilot cities to nationwide regions by end-2014.

We believe that the expanding reimbursement coverage and increasing number of dialysis

centres will help improve the treatment rate of dialysis on ESRD patients to 35%, in line

with the global average within the next three years, suggesting the patients base receiving

dialysis treatment will reach 608K in 2016E from the current 330K.

Favourable policies to

unlock market potential.

We expect the treatment

rate of dialysis on ESRD to

reach 35% within the next

three years, in line with

global average

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 11

Figure 17: We estimate the number of dialysis patients to double in 2016E from 2013

4870

156

330

608

2004 2007 2010 2013 2016E

No.

of d

ialy

sis

patie

nts

(in th

ousa

nd)

CAGR=22%

CAGR=25%

Source: Frost and Sullivan, Credit Suisse estimate

EPIAO maintains dominant leadership in China

China's rhEPO market is shared by twelve domestic companies and two multinational

ones. According to IMS, EPIAO ranked No.1 with 44% market share in 2013, followed by

Hayao Biological and Shanghai Chemo, each having 14% and 10% market share

respectively.

3SBio's market share has kept growing in recent years, despite intensifying market

competition. The company acquired Sciprogen in Dec-2014, whose rhEPO product, SEPO,

ranked 10th in China's rhEPO market with 3% market share in 2013. After acquisition, we

estimate 3SBio's total market share reached ~47% in 2014.

Figure 18: Market leader in China rhEPO market (2013) Figure 19: 3SBio kept gaining market share

3SBio44%

Hayao Biological

14%Shanghai Chemo

10%

Beijing Sihuan

6%

Chendu Diao4%

Scriprogen3% Other

companies19%

Acquired in Dec-2014

39%

40%

41%

42%

43%

44%

45%

46%

47%

48%

2009 2010 2011 2012 2013 2014E

3Sbi

o m

arke

t sha

re in

rhE

PO

(%

)

Source: IMS Source: IMS, company data, Credit Suisse estimates

We believe 3SBio will be able to maintain its dominant leadership in China's rhEPO market

because:

EPIAO ranked No. 1 with

44% market share in 2013

among all rhEPO drugs

After acquisition of SEPO in

2014, we estimate 3SBio's

share in rhEPO market

reached ~47% in 2014

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 12

Widest indication coverage with first mover advantage

EPIAO is the only rhEPO product in China market approved for all three indications

namely CKD-associated anemia, chemotherapy-induced anemia and allogeneic blood

transfusion, followed by Shandong Ahua (CKD-associated anemia and allogeneric blood

transfusion) and Sciprogen (CKD-associated/chemotherapy-induced anemia). Therefore,

EPIAO faces much less competition in CIA (chemotherapy-induced anemia) treatment and

allogeneic blood transfusion.

Besides, EPIAO also enjoys the first-mover advantage, which helps to establish a strong

brand loyalty among physicians and patients. Its first indication of CKD-associated anemia

was approved as early as 1998, while all other domestic competitors entered this market

after 2001.

Figure 20: 3SBio's EPIAO is the only product approved for three indications and launched the earliest

CKD associated anemia Allogeneric blood transfusion Chemotherapy-induced anemia

Manufacturers Approval status Approval year Approval status Approval year Approval status Approval year

3SBio (沈阳三生) Y 1998 Y 2000 Y 2001

Chendu Diao (成都地奥) Y 2002

Hayao Biological (哈药生物) Y 2005

Beijing Sihuan (北京四环) Y 2007

Sciprogen (赛保尔) Y 2001 Y 2001

Shanghai Chemo (上海凯茂) Y 2009

Shandong Ahua (山东阿华) Y 2002 Y 2002

Source: CFDA, Credit Suisse estimates

Exclusive dosage forms

CIA and surgery patients generally require higher rhEPO dosages than CKD patients.

Therefore, the company developed the 36,000 IU EPIAO product to allow for less frequent

administration than lower dosage forms. So far, the company’s 36,000 IU dosage form is

the only approved rhEPO product at this dosage level in China and is typically used for the

treatment of CIA. In addition, EPIAO and SEPO are two of the only three rhEPO products

in China available in the 10,000 IU dosage form. The exclusive dosage forms protect

3SBio from ASP erosion caused by drug tenders.

Figure 21: 3SBio is the only approved manufacturer of 36,000 IU dosage

Manufacturers 2,000~6000 IU 1,0000 IU 36,000 IU

3SBio (沈阳三生) Y Y Y

Chendu Diao (成都地奥) Y

Hayao Biological (哈药生物) Y

Beijing Sihuan (北京四环) Y

Sciprogen (赛保尔) Y Y

Shanghai Chemo (上海凯茂) Y

Shandong Ahua (山东阿华) Y

Source: CFDA, Credit Suisse estimates

Highly similar to the original biologics: Amgen's Epogen

Different to chemical generics, the molecular structure of biosimilars cannot be tightly

controlled and made as identical as branded drugs during the manufacturing process

because the biosimilar is generated from living organisms instead of assembled from

chemical synthesis. Biosimilars are more similar to original biologics in molecular structure

and are generally regarded to be of better quality.

In 2008, a research result published in the Journal of Pharmaceutical Sciences validated

that the biological fingerprint of EPIAO is the closest to that of Amgen (the originator)'s

product among the couple of rhEPO biosimilars made in China, implying that EPIAO is the

best substitute for Amgen's Epogen.

EPIAO is the only rhEPO

product approved for all

three indications

EPIAO also enjoys the first-

mover advantage

Exclusive dosage forms

protect 3SBio from ASP

erosion in provincial tenders

Biosimilar refers to the

similarity in molecular

structure with original

biologics

The biological fingerprint of

EPIAO is the closest to the

original products among all

generic products

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 13

Figure 22: Biosimilar is “similar” but not “identical” to the

original biologics

Figure 23: 3SBio's EPO has the most similar structure to

Amgen's Epogen) among the various biosimilars

(Western Blot analysis

Patent biological drug Biosimilar

High structual similarity

Source: Wikipedia Source: Journal of Pharmaceutical Sciences

Acquisition of Sciprogen: access to the faster-

growing low-tier market

In Dec-2014, the company acquired Shenzhen Sciprogen, a biopharmaceutical company

with two principal products: SEPO and Sparin. SEPO is an rhEPO injection which had 3%

market share in 2013. Unlike EPIAO who uses its own sales team to target class III

hospitals, SEPO largely uses third-party agencies to cover low-tier drug markets. After the

acquisition, the number of third-party agencies of 3SBio surged to 421 by the end of 2014,

among which 199 were originally controlled by Sciprogen.

We expect this acquisition to enhance the penetration rate of 3Sbio's rhEPO product

portfolio in low-tier drug markets. We believe the channel sinking will help the company to

grab more share from the fast-growing low-tier drug markets. During the past five years,

the low-tier drug markets have been outperforming high-tier ones. The growth rate of drug

sales in city hospitals decelerated to 14% YoY in 2013, yet drug sales in county hospitals

maintained 19% YoY growth.

Figure 24: The distribution channels of Sciprogen are in

focus low-tier cities

Figure 25: 3SBio's number of third-party agencies surged

to 421 in 2014 driven by the merging of Sciprogen's sales

channel

3Sbio EPO

EPIAO

In-house sales team

Tier-1/2 cities

SEPOLow-tier cities

Agency

0

50

100

150

200

250

300

350

400

450

2011 2012 2013 2014

No.

of t

hird

-par

ty a

genc

ies

Source: Company data Note: 199 third-party agencies are used by Sciprogen in low-tier cities.

Source: Company data

3SBio acquired Shenzhen

Sciprogen with two principal

products, SEPO and Sparin,

in Dec-2014

We expect the acquisition to

enhance the penetration of

3SBio's rhEPO product

portfolio into low-tier

markets, which grew more

than high-tier ones

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 14

China's low-tier drug markets include a total of 11,631 county hospitals, hundreds of

thousands of community healthcare centres and township/village-level medical institutes.

These low-tier hospitals and medical institutes take the healthcare responsibility to serve

~1 bn or 74% of China's population; however, in contrast to their broad coverage, low-tier

markets only accounted for 23% of overall drug sales in China, versus a 54% market

share taken by city hospitals, according to Menet, a domestic healthcare research institute.

We expect a rapid sales expansion of low-tier drug markets in the near future driven by

solid healthcare demand from the rural population as well as improved medical expense

reimbursement systems in rural areas.

Figure 26: Attractive low-tier drug market in China

City hospitals

Pharmacies

County hospitals

Community healthcare centers

Township medical institutions

Rmb584 bn (54%)

Rmb256 bn (23%)

Rmb167 bn (15%)

Rmb31 bn (3%)

Rmb56 bn (5%)

Low tiermarket

Grassrootmarket

Source: www.menet.com, Credit Suisse research

We expect rapid sales

expansion of low-tier drug

markets in the near term

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 15

TPIAO: Upside in penetration expansion 3Sbio's other key product, TPIAO, registered FY14 sales of Rmb445 mn, accounting for

39% of total revenue. TPIAO sales recorded a 6Y CAGR of 37.8% since 2009, without

decelerating.

Figure 27: We expect TPIAO to maintain a fast sales CAGR of above 30% in 2015-17

0%

10%

20%

30%

40%

50%

60%

-

200

400

600

800

1,000

1,200

1,400

2009 2010 2011 2012 2013 2014 2015E 2016E 2017E

Sales of TPAIO (特比澳) YoY (%), RHS

Rmb, mn YoY, %

Source: Company data, Credit Suisse estimates

Benign competitive landscape

Thrombopoietin ("TPO") is a human hormone mainly produced by the liver which regulates

platelet production. 3SBio's TPIAO is the only commercialised human recombinant TPO

(rhTPO) product in the world since its launch in 2006. The drug is approved for two

indications: chemotherapy-induced thrombocytopenia (CIT, 肿瘤化疗所致血小板减少症)

and immune thrombocytopenia (ITP, 免疫性血小板减少症).

As a national Class I innovative drug, TPIAO does not face any direct competition thanks

to a high technology barrier and patent protection, which will expire in 2020, while it

indirectly competes with other drugs which are used in CIT and ITP treatments. In terms of

treatment for CIT, it primarily competes with rhIL-11 (recombinant human interleukin 11, a

recombinant cytokine to improve platelet recovery after CIT); in terms of treatment for ITP,

it primarily competes with alternative treatment methods such as platelet transfusion

treatment.

TPIAO's exclusivity will maintain for at least five years, protected by China patent until

2020. Even after patent expiration, competition will be limited, in our view, because (1)

currently no one has applied for a biosimilar of the drug, and (2) competing drugs of the

same indication such as TPO-like peptide are still at the early clinical trial stage.

Revenue from TPIAO

accounted for 38.2% of total

revenue in FY14, with a

CAGR of 37.8% in 2009-14

TPIAO is the only

commercialised human

recombinant TPO in the

world

TPIAO faces no direct

competition but competes

indirectly with other drugs

used for CIT and ITP

treatments

We expect limited

competition for TPIAO even

after patent expiration in

2020

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 16

Figure 28: TPO faces zero direct competition thanks to its exclusivity

Product name Chinese name Manufacturers (Est.) launch year

Biosimilar competitors

None - - -

Indirect competitors

rhIL-11 注射用重组人白细胞介素-11 (1) CP Guojian 2006

(2) Hangzhou Jiuyuan 2007

Potential competitors

TPO-like peptide drugs 注射用血小板生成素拟肽 (1) Shandong Quangang After 2020

(2) Qilu Pharm After 2020

Source: www.yaozhi.com, Credit Suisse research

Taking market share in CIT treatment market

The market size of CIT (chemotherapy-induced thrombocytopenia), the major indication of

TPIAO, grew at a five-year CAGR of 35% during 2009-13.

There are only two drugs approved for CIT treatment namely rhIL-11 and TPIAO, and only

~10% of CIT patients are treated by TIPAO because the drug has a relatively short history.

In 2013, rhIL-11 accounted for ~66% market share which was contributed by its early

market launch, while TPIAO only took 34%. We believe TPIAO will gradually gain market

share from rhIL-11 in the near future, driven by less side effects, lower treatment cost and

better efficacy.

Figure 29: TPO treatment penetration rate is still low Figure 30: We estimate a rapid expansion of TPIAO's

market share

~220,000

~22,000

No. of chemotherapy patientswith thrombocytopenia

No. of patients received TPOtreatment

No.

of p

atie

nts

TPO penetration rate: ~10%

30.3% 33.8%

54.6%

69.7% 66.2%

45.4%

2011 2013 2018E

CIT

trea

tmen

t mar

ket s

hare

(%

)

TPIAO rhIL-11

Source: Company data, Credit Suisse estimates Source: IMS, Frost and Sullivan, Credit Suisse estimates

A fast-growing CIT market

One major indication of TPIAO, CIT (chemotherapy-induced thrombocytopenia), is a

clinical syndrome of platelet deficiency induced by chemotherapy. TPIAO and rhIL-11 are

two major drugs used for CIT treatment through the mechanism of increasing platelet

counts. The overall CIT treatment market in China reached Rmb907 mn in 2013, with a

five-year CAGR of 35%, and is expected to grow at 19% CAGR from 2014 to 2018E,

according to Frost and Sullivan.

The CIT market grew at a

5Y CAGR of 35% in 2009-

13

We expect rhTPO to gain

market share from rhIL in

CIT treatment

The CIT treatment market is

expected to grow at 19%

CAGR in 2014-2018E

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 17

Figure 31: Significant growth of China's CIT treatment market

-

500

1,000

1,500

2,000

2,500

2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E

CIT

trea

tmen

t mar

ket (

Rm

b, m

n)

CAGR=35%

CAGR=19%

Source: IMS, Frost and Sullivan

TPIAO vs. rhIL-11: Better efficacy, lower cost and safer

Before the biological drugs became available, platelet transfusion was the most commonly

used method for CIT treatment. However, its usage is largely constrained by its low

efficacy, high infection risks and supply shortage.

rhIL-11 (recombinant Interleukin 11), originated by Genetics in 1997, was the first drug

designed for CIT treatment. Compared with TPIAO, rhIL-11 shows a weaker efficacy,

higher cost and, most importantly, results in some side effects such as cardiotoxicity and

peripheral edema. In China, rhIL-11 is not covered by social medical insurance and thus

less preferred by physicians and patients.

Figure 32: Comparison of TPIAO with other CIT treatments

TPIAO rhIL-11 Platelet transfusion treatment

Efficacy rate High Medium Low

Effective period: how long,

how short?

Medium Long Short

Side effects High safety Cardiotoxicity & peripheral edema Infection risks associated with

transfusion

Total treatment cost (CIT) ~Rmb1,800 ~Rmb3,600 n.a.

Medical insurance coverage 7 Provincial Reimbursement Drug

List

None None

Constraints n.a. n.a. Shortage of platelet supply

Source: Company data, Credit Suisse research

Drug tenders and NRDL adjustment are near-term

growth drivers for TPIAO

3Sbio's TPIAO has successfully entered into 17 provinces and expected to enter more in

2H15/1H16 as the government required all provinces to launch tenders by November.

Besides, TIPAO is a potential beneficiary of the upcoming NRDL adjustment given its

comparatively lower cost and better efficacy.

Entering into second/third largest provincial drug market in recent tenders

Drug tender is a mandatory bidding process for all drugs to be sold in China's public

hospitals. Each province will hold its own drug tender event every 4-5 years. The last

round of drug tendering took place during 2009-11; the progress in the current round was

sluggish until July-2015, but it started to pick up as the government requires all provinces

to launch tenders by Nov-2015.

Platelet transfusion was the

most common approach for

CIT treatment pre biological

drugs

rhIL is less preferred by

physicians and patients to

rhTPO

TPIAO has entered into 17

provinces and we expect it

to enter more in 2H15/1H16.

We expect drug tenders to

pick up as the government

requires all provinces to

launch tenders by Nov-2015

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 18

During the recent tender, 3Sbio's TPIAO successfully entered into two of the largest

provincial drug markets, Shanghai and Guangdong, which account for 8.5% and 8.0%

market share of China's drug market, respectively. We view this as a positive catalyst to

boost sales of TPIAO in 2015/16.

In total, TPIAO has entered into 17 provinces. As the nationwide provincial tender is still

progressing, we expect TIPAO to gain more tender wins, such as Fujian and Sichuan,

which have already launched their drug tenders recently.

Figure 33: Two big tender wins in 2014/15

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Beijing

Shanghai

Guangdong

Jiangsu

Zhejiang

Anhui

Shandong

Chongqing

Tianjin

Sichuan

Hubei

Hebei

Henan

Yunnan

Hunan

Liaoning

Shanxi

Shaanxi

Fujian

Heilongjiang

Jiangxi

Guangxi

Jilin

Hainan

Guizhou

Xinjiang

Gansu

Inner Mongolia

Ningxia

QinghaiP

harm

a m

arke

t sha

re fo

r ea

ch p

rovi

nce

(%)

Provinces already entered

2014/15 new tender wins

Provinces not entered

TPO provincial coverage through drug tenders

Source: Yaozhi; Credit Suisse research

Potential beneficiary of upcoming NRDL adjustment

In 2005, TPIAO was included in the National Work-Related Injury Drug Reimbursement

List (全国工伤限定医保)—drugs which are reimbursable only when the treatment is for

work-related injury. Later, TPIAO was included in seven provincial reimbursement drug

lists (Category B，省级乙类医保) including Hainan, Heilongjiang, Jilin, Liaoning, Shaanxi,

Shanghai and Tibet. Given its comparatively lower cost and better efficacy among drugs

for CIT treatment, we expect TPIAO to be a potential beneficiary of the upcoming NRDL

adjustment which is estimated to take place in 2016. If this happens, TPIAO can enjoy

national-wide reimbursement without the constraint pertaining to work-related injury .

TPIAO recently won the

tenders of Shanghai and

Guangdong provinces—the

two largest provincial drug

markets

We expect more tender wins

for TPIAO.

We expect TPIAO to be

included in the NRDL when

the government adjusts the

list in 2016E

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 19

Figure 34: TPO's provincial reimbursement coverage is low

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Beijing

Shanghai

Guangdong

Jiangsu

Zhejiang

Anhui

Shandong

Chongqing

Tianjin

Sichuan

Hubei

Hebei

Henan

Yunnan

Hunan

Liaoning

Shanxi

Shaanxi

Fujian

Heilongjiang

Jiangxi

Guangxi

Jilin

Hainan

Guizhou

Xinjiang

Gansu

Inner Mongolia

Ningxia

Qinghai

Pha

rma

mar

ket s

hare

for

each

pro

vinc

e (%

)

Not included in PRDL

Inlcuded in PRDL

TPO PRDL coverage

Note: (1) PRDL represents Provincial Reimbursement Drug List. (2) TPIAO is also included in Tibet PRDL.

Source: Yaozhi; Credit Suisse research

We expect sales channel synergy of EPIAO and TPIAO

3Sbio applies two distinct sales strategies for its product portfolio. The company promotes

EPIAO, TPIAO and Iron Sucrose through its in-house sales team, while it relies on third-

party agencies to promote SEPO/Sparin/Inleusin/Intefen/Ganxin.

By the end of 2014, the hospital coverage of TPIAO (1,350 hospitals) was only half of

EPIAO (2,600 hospitals). As both drugs are designated for post-chemotherapy treatment,

we believe the huge gap will narrow driven by sales channel synergy of EPIAO and TPIAO.

Figure 35: Both EPIAO and TPIAO utilise in-house sales

team

Figure 36: TPIAO hospital coverage is lower than EPIAO

In-house sales team

Third-party agency

Hospitals/Medicalinstitutions

EPIAO/TPIAO/IVIron Sucrose

SEPO/Sparin/Inleusin/Intefen/Ganxin

1,350

2,600

TPIAO hospital coverage

EPIAO hospital coverage

No. of hospitals

Source: Company data Source: Company data

Hospital coverage of TPIAO

was only half of EPIAO in

2014

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 20

Diversified product portfolio Besides EPIAO and TPIAO, 3SBio has five high potential drugs namely IV Iron Sucrose,

SEPO, Sparin, Qiming granule (芪明颗粒) and Laizi which have significant market size

growth, good insurance coverage and a benign competitive landscape. The recent

acquisition of Zhejiang Wansheng largely complements the company's current product

portfolio which is focusing on dialysis management with 50+ chemical drugs in diabetes,

dermatology and oncology.

3Sbio also has a strong R&D capacity with 14 exclusive drugs and 5 FTM (First-to-market)

generics, which have either applied for or entered into clinical trial stage. We expect the

these drugs may get approved sooner than expected as the CFDA recently announced to

grant 'fast track' approvals to innovative drug applications.

Five high potential drugs

Besides the two blockbusters, EPIAO and TPIAO, management highlighted IV Iron

Sucrose, SEPO, Sparin, Qiming granule (芪明颗粒) and Laizi are high potential drugs

considering their potential market size/growth, medical insurance coverage and

competitive landscape.

Figure 37: 3SBio's current product portfolio

Brand name Generic name TA Manu-

facturer

Launch

year

NRDL

coverage

PRDL

coverage

No. of

compe-

titors

2014 sales

(Rmb mn)

Blockbusters

EPIAO (益比奥) Recombinant Human Erythropoietin

Injection (重组人促红素注射液)

Anemia 3SBio 2000 Yes Yes ~10 594

TPIAO (特比澳) Recombinant Human Thrombopoietin

Injection (重组人血小板生成素注射液)

Thrombocytopenia 3SBio 2005 Yes Yes 0 445

High potential

IV Iron Sucrose Iron Sucrose Injection (蔗糖铁注射液) Anemia 3SBio 2007 Yes Yes 3 65

SEPO (赛博尔) Recombinant Human Erythropoietin (

重组人促红素注射液)

Anemia Sciprogen 2001 Yes Yes ~10 n.a.

Sparin (赛博利) Low molecular weight heparin calcium

injection (低分子肝素钙)

Anticoagulation Sciprogen 2011 Yes Yes 6 n.a.

Qiming Granule (芪

明颗粒)

n.a. Diabetes Wansheng 2009 No 3 provinces 0 ~70

Laizi (莱兹) Tacrolimus ointment (他克莫司软膏) Dermatology Wansheng 2013 Yes Yes 2 ~50

Others

Intefen (因特芬) Recombinant Human Interferonα2a

Injection (重组人干扰素 α2a 注射液)

Hepatitis 3SBio 1995 No 2 provinces 5 6

Inleusin (英路因) Recombinant Human Interleukin-2 for

injection (注射用重组人白介素-2)

Oncology 3SBio 1996 Yes Yes 7 4

Yilixi (宜力喜) Rosiglitazone Hydrochloride tablet (盐

酸罗格列酮片)

Diabetes Wansheng 2001 Yes Yes 3 n.a.

Mandi (蔓迪) Minoxidil solution (米诺地尔酊) Dermatology Wansheng 2001 No No 2 ~50

Disu (迪苏) BCG Polysaccharide and Nucleic Acid

(卡介菌多糖核酸注射液)

Respiratory Wansheng 2009 No 22

provinces

6 ~70

Laiduofei (莱多菲) Fexofenadine Hydrochloride (盐酸非索

非那定片)

Dermatology Wansheng 2006 No 3 provinces 8 n.a.

n.a. Liranaftaye spray (利拉萘酯) Anti-infectious Wansheng 2010 No No 2 n.a.

n.a. Amikacin injection (阿米卡星) Anti-infectious Wansheng 2009 Yes Yes >30 n.a.

Source: Company data, Credit Suisse estimates

Other potential drugs: IV

Iron Sucrose, SEPO, Sparin, Qiming granule (芪

明颗粒) and Laizi.

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 21

IV Iron Sucrose

IV Iron Sucrose is indicated for the treatment of iron deficiency anemia, which usually

occurs together with late-stage CKD (a major indication of EPIAO), and it can be

prescribed in combination with EPIAO for the dialysis treatment of late-stage CDK patients.

The sales of 3Sbio's IV Iron Sucrose increased ~40% YoY in 2014, while its market size

also grew fast by registering a CAGR of 36% from 2009 to 2013. Leveraging on the

company's strong dialysis-related sales network, we expect the near-term growth

momentum to continue with sales CAGR of 22% in 2014-17E.

Figure 38: Fast growing Iron Sucrose injection market Figure 39: 3SBio's sales from IV Iron sucrose increased

40% YoY in FY14

0

50

100

150

200

250

300

350

400

450

2009 2013

PRC Iron Sucrose Injection market (Rmb, mn)

CAGR=36%

(Rmb, mn)

31%

32%

33%

34%

35%

36%

37%

38%

39%

40%

41%

-

10

20

30

40

50

60

70

2012 2013 2014

Sales from IV Iron Sucrose (Rmb, mn) YoY %, RHS

(Rmb, mn) YoY, %

Source: IMS, Frost and Sullivan Source: Company data

Sparin

Sparin is an injectable low-molecular-weight heparin calcium product, which was acquired

through the acquisition of Sciprogen. This drug is targets the prevention of blood clotting

during dialysis, as well as prevention and treatment of deep vein thrombosis and embolism.

Compared to standard heparin, LMWH-Ca has the advantages of lower side effects and a

more predictable anticoagulant response. The market size of low-molecular-weight

heparin in China reached Rmb15 bn in 2013 with a CAGR of 24.7% from 2009 to 2013,

according to IMS.

Qiming granule (芪明颗粒)

Qiming granule is the only CFDA-approved TCM for diabetes-caused retina damage, also

called diabetic retinopathy, which affects 80%+ patients who have suffered from diabetes

for ten years or more.

As of 2014, there are 366 mn diabetes patients worldwide and only two drugs, Lucentis

and Eylea, have been approved for diabetic retinopathy treatment so far in the US.

Qiming granule was launched in 2009 as an exclusive drug and recorded sales of Rmb70

mn in 2014. We expect the drug to deliver 30%+ YoY growth in the near future if it can be

enrolled in the National Reimbursement Drug List which is expected to be revised in 2016.

Currently the drug is reimbursable only in three provinces.

Laizi

Through the acquisition of Zhejiang Wansheng, 3SBio owns a rich product portfolio of

dermatology drugs including Laizi (莱兹), Mandi (蔓迪), Liranaftaye spray and Amikacin

injection, among which we believe Laizi will be a near-term growth driver for 3SBio. Laizi,

was approved in 2013 for treatment of androgenic alopecia, and has only one domestic

IV Iron Sucrose is used to

treat iron deficiency anemia

and can be prescribed with

EPIAO

We expect the sales of IV

Iron Sucrose to deliver a

CAGR of 22% in 2014-17E

Sparin has lower side

effects and more predictable

anticoagulant response

Qiming granule is the only

CFDA-approved TCM for

diabetes-caused retina

damage

Qiming granule could deliver

30%+ YoY growth in the

near term once it can be

enrolled into NRDL in 2016E

Laizi is listed on the NRDL

and recorded a sales of

~Rmb50 mn in 2014

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 22

competitor. It is listed on the National Reimbursement Drug List and recorded a sales of

~Rmb50 mn in 2014.

Pipeline focusing on dialysis treatment

In the pipeline, 3SBio has 14 exclusive drugs and 5 FTM (first-to-market) generics, which

have either applied for, or entered into, the clinical trial stage. Among the exclusive drugs,

eight are biological drugs.

In the near term, five chemical drugs—Nadroparin, Cinacalcet, Sevelamer carbonate,

Colestilan and Eltrombopag—are likely to get approved in 2016-18, and three of them can

be used in dialysis treatment. We believe Nadroparin calcium and Colestilan may be drugs

with high sales potential given their mild competitive landscape and synergies that emerge

from the company's strong dialysis-related sales network.

In the long term, the company's second generation rhEPO, namely NuPIAO and PEG-

EPO—both indicated for anemia and usable for dialysis treatment—may become

blockbusters, in our view.

Figure 40: Constant output from promising pipeline

Drug type Drug name TA Application stage Est.

approval

year

Exclusivity No. of

competitors

Chemical drug Nadroparin calcium (那屈肝素钙) Thrombosis Under clinical trial 2016 Generic (2nd) 2

Chemical drug Cinacalcet hydrochloride (盐酸西那卡塞) Hyperthyroidism Under clinical trial 2017 FTM >10

Chemical drug Sevelamer carbonate (碳酸司维拉姆) Hyperphosphatemia Under clinical trial 2017 FTM ~5

Chemical drug Colestilan (考来替兰) Hyperphosphatemia Under clinical trial 2018 FTM 0

Chemical drug Eltrombopag (艾曲泊帕) Thrombocytopenia Under clinical trial 2018 FTM >10

Biologic TPIAO (new indication) Aplastic Anemia Pre-clinical stage 2019 Exclusive 0

Chemical drug Fondaparinux sodium (磺达肝癸钠) Thrombosis Pre-clinical stage 2019 FTM ~5

Biologic NPIAO Anemia Phase I clinical trial 2020 Exclusive 0

Chemical drug IAP inhibitor Oncology Phase I clinical trial 2020 Exclusive 0

Chemical drug Voclosporin Lupus Nephritis Apply for clinical trial 2021 Exclusive 0

Chemical drug PEG-Irinotecan (PEG 化伊立替康) Oncology Apply for clinical trial 2021 Exclusive 0

Chemical drug Bcl-2/xL inhibitor Oncology Pre-clinical stage 2021 Exclusive 0

Biologic Anti-TNF a (抗肿瘤坏死因子 alpha) Arthritis Apply for clinical trial 2022 Exclusive 0

Biologic PEG-EPG Anemia Apply for clinical

trial

2023 Exclusive 0

Biologic Pegsiticase Gout Apply for clinical trial 2023 Exclusive 0

Chemical drug HIF-PH inhibitor Anemia Pre-clinical stage 2024 Exclusive 0

Chemical drug DJ5 ADPKD Pre-clinical stage 2024 Exclusive 0

Biologic Leukotuximab Acute leukemia Pre-clinical stage 2025 Exclusive 0

Biologic Tanibirumab Oncology Pre-clinical stage 2027 Exclusive 0

Biologic DIG-KT Oncology Pre-clinical stage 2028 Exclusive 0

Source: CFDA, company data, Credit Suisse estimates

Colestilan

Colestilan is being developed for the treatment of Hyperphosphatemia and Type 2

diabetes. Hyperphosphatemia is a condition characterised by elevated levels of phosphate

in the blood, leading to the high mortality rate of CKD patients. If necessary, Colestilan will

be prescribed together with rhEPO during dialysis to maintain phosphate level equilibrium.

Colestilan was originated by Mitsubishi Tanabe in 2002 though this drug has not been

imported to China. So far 3SBio is the only domestic player applying for CFDA registration.

Nadroparin calcium

Nadroparin calcium is a form of low molecular weight heparin, which is commonly used for

anticoagulation during dialysis. Compared with unfractionated heparin, Nadroparin calcium

has lower side effects and a more effective anti-coagulant function.

3SBio has 14 exclusive

drugs ad 5 FTM generics in

its pipeline

We expect Nadroparin

calcium and Colestilan to

become high potential drugs

once approved by CFDA

In the long run, 3SBio's

second generation rhEPO

may become blockbusters

Colestilan is developed for

the treatment of

Hyperphosphatemia and

Type 2 diabetes

3SBio is the only domestic

player applying for CFDA

approval for Colestilan

Nadroparin is commonly

used for anticoagulation

during dialysis

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 23

This drug was originated by GSK under the brand name of Fraxiparine, achieving a sales

of ~Rmb319 mn in China in 2014. Currently, there is only one domestic competitor called

Nanjing Jianyou who got CFDA approval for the same molecule in April 2015. Leveraging

the company's strong sales channel on dialysis management, we believe 3SBio will gain

market share once the drug is approved.

NuPIAO and PEG-EPO

3SBio is developing two second-generation rhEPO product candidates, NuPIAO and PEG-

EPO, which are estimated to launch in 2020 or 2021. NuPIAO was originated by 3SBio

while PEG-EPO was acquired from Sciprogen. Compared with first-generation rhEPO

products, NuPIAO and PEG-EPO are optimised for longer duration and stronger biological

activities.

The second-generation rhEPO was first developed by Amgen in 2002 under the brand

name of Aranesp, which is a type of long-acting rhEPO modified with hyper-glycosylation.

According to Amgen, Aranesp recorded FY13 global sales of US$1.91 bn while the first-

generation product, Epogen, recorded US$1.95 bn. In the global market, the second-

generation product now accounts for almost half of the rhEPO market shares.

Figure 41: Aranesp and Epogen evenly contributed to Amgen's FY13 revenue

Epogen (US$1,953 mn)

51%

Aranesp (US$1,911 mn)

49%

Amgen's rhEPO product FY13 sales

Source: Company data

Nadroparin originated with

GSK with a sales of

~Rmb319 mn in China in

2014

The two second-generation

rhEPO products are

optimised for longer duration

and stronger biological

activities, and are expected

to launch in 2020-21

The second-generation

rhEPO was originated by

Amgen in 2002 with global

sales of US$ 1.91bn in 2013.

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 24

Initiating coverage with OUTPERFORM; TP HK$9.7 Our target price of HK$9.7 is based on 33x FY15 P/E, implying 1.1x PEG (over 30% 15-

17E CAGR), plus HK$0.5 cash per share (unused IPO proceeds for acquisitions).

We applied 33x P/E to 3Sbio's adjusted 2015E EPS, implying 1.1x PEG (over 30% 15-17E

CAGR). The P/E multiple implied in our target price is higher than the HK-pharma average

of 21.4x and HK/US-listed Chinese biotech average of 29x. We believe the company

deserves a valuation premium over its peers for (1) high technical barrier in developing

and manufacturing biologics rather than chemical drugs and Traditional Chinese

Medicines, (2) rich product portfolio and pipeline consisting of exclusive drugs, (3) faster

earnings growth outlook in 2015-17—30% vs. HK-pharma average of 21% and HK biotech

average of 26%, and (4) potential earnings accretion from acquisition.

Note: We define biotech companies as those that have significant revenue from

biopharmaceutical products, and major pharmas as those that have a diversified revenue

stream mainly from chemical drugs or TCM (Traditional Chinese Medicine).

The HK$0.5 cash/sh is calculated from the unused IPO proceeds for acquisitions.

According to the IPO prospectus, 3SBio will use ~HK$1,876 mn IPO proceeds for future

acquisitions. After the IPO, the company spent HK$644 mn for the acquisition of Zhejiang

Wansheng, and has HK$1,232 mn unused.

We believe incoming potential acquisitions will be likely earnings accretive as the company

has shown a clear strategy and a good track record in identifying high-quality M&A targets.

Biotech companies trading at a premium

From the comp set, we noted that biotech companies are in general growing faster than

major pharma and trading at a premium in terms of P/E multiple and PEG ratio, no matter

where the stocks are listed.

(1) For Chines biotech companies, most of them are focusing on the areas such as

plasma derivatives (Hualan Bio, Tiantan, Boya Bio and CBPO), insulin (Tonghua Dongbao)

and other recombinant protein medicine (Changchun Hightech). These biotech companies

are trading at an avg. of 38x, which is at 27% premium to A-share chemical drug sector.

(2) For EU/US biotech companies, the leading ones such as Amgen and Gilead have been

dedicated in developing monoclonal antibodies or high-end recombinant protein drugs

(second-generation insulin and EPO) because plasma derivatives and insulin are already

mature market. These biotech companies are trading at 25x 2015E EPS, which is at 59%

premium to other EU/US-listed major pharma companies.

Our target price of HK$9.7

consists of two parts:

HK$9.2 per share for the

existing business, and

HK$0.5 cash per share for

the potential acquisition

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 25

Figure 42: 3SBio comp set

Avg. daily

trading

volume - 6M Mkt cap P/E (x) P/B (x) ROE (%) EV/EBITDA (x)

CAGR

(%) PEG

Company Name Ticker

(share,

mn) (US$, bn) 2015 2016 2017 2014 2015 2014 2015 2014 2015 2015-17 2015

3SBio 1530.HK 12.8 2.4 26.8 20.5 15.8 16.5* 2.7 41.6%* 10.2% 42.8* 20.8 30.3% 0.9

Chinese peers

Fosun Pharma 2196.HK 2.8 7.7 20.7 16.3 14.6 2.9 2.3 13.2 12.6 32.6 26.7 19.2% 1.1

Guangzhou BYS 874.HK 2.6 4.9 14.1 12.3 11.7 3.1 1.9 16.4 15.6 18.5 17.1 9.6% 1.5

Sino Biopharm 1177.HK 13.9 6.0 25.0 21.0 18.1 5.3 5.4 25.0 23.7 18.8 14.1 17.3% 1.4

CSPC 1093.HK 31.9 5.1 23.3 18.7 14.8 5.0 4.1 16.3 19.5 18.7 14.1 25.6% 0.9

CTCM 570.HK 13.1 3.1 23.6 15.8 13.1 2.9 2.3 13.9 11.9 23.3 17.0 34.0% 0.7

Luye Pharma 2186.HK 12.2 2.9 22.1 17.8 15.1 5.4 3.1 18.1 14.9 21.4 15.7 20.9% 1.1

HK-listed major pharma avg. 21.5 17.0 14.6 4.1 3.2 17.2 16.4 22.2 17.5 21.0% 1.1

Fudan Zhangjiang 1349.HK 1.3 0.8 35.5 27.3 19.7 7.4 6.2 20.0 19.6 29.0 24.4 34.2% 1.0

Lee's Pharma 950.HK 0.7 0.8 23.7 19.9 17.6 6.6 4.9 22.4 23.9 24.0 17.4 16.1% 1.5

CBPO CBPO.US 0.2 2.4 27.3 21.9 17.0 7.9 5.7 31.5 28.6 20.1 16.3 26.9% 1.0

HK/US-listed Biotech company avg. 28.9 23.0 18.1 7.3 5.6 24.6 24.1 24.4 19.4 25.7% 1.2

Hengrui 600276.CH 19.2 13.6 38.5 30.4 24.0 7.1 8.0 21.2 22.5 42.7 31.6 26.8% 1.4

Haisco 002653.CH 9.9 3.6 36.4 28.8 23.2 8.8 8.4 22.3 24.1 n.a. 36.1 25.4% 1.4

Salubris 002294.CH 16.2 4.2 18.1 16.8 14.0 6.1 5.8 30.2 29.4 20.9 16.0 13.7% 1.3

Tasly 600535.CH 14.3 6.0 23.2 19.2 16.1 8.8 5.7 31.4 27.0 18.6 16.5 20.1% 1.2

Kanion 600557.CH 18.7 1.8 26.8 21.6 18.6 4.7 4.0 14.6 14.7 20.7 19.2 19.9% 1.3

Huahai 600521.CH 15.9 2.8 41.0 30.6 23.5 3.5 5.1 8.5 12.4 36.2 25.9 32.2% 1.3

Gloria 002437.CH 13.6 2.7 26.6 21.5 17.9 n.a. 3.1 16.4 18.8 42.2 21.5 21.8% 1.2

Chase sun 300026.CH 9.6 2.3 25.2 19.7 15.7 5.9 4.2 22.1 20.3 23.0 19.8 26.7% 0.9

Humanwell 600079.CH 37.2 3.2 32.8 26.5 20.7 2.9 2.9 10.0 9.5 20.4 17.5 25.8% 1.3

A-share major pharma avg. 29.9 23.9 19.3 6.0 5.2 19.6 19.8 28.1 22.7 23.6% 1.3

Hualan Bio 002007.CH 14.2 3.4 32.7 27.1 22.0 5.7 5.4 16.6 16.6 29.8 25.5 22.0% 1.5

Tonghua Dongbao 600867.CH 23.0 3.7 59.7 43.9 33.2 7.5 9.4 13.6 16.7 43.2 36.9 34.0% 1.8

Beijing Tiantan 600161.CH 13.6 2.0 26.4 25.0 21.3 6.9 n.a. 6.6 n.a. n.a. n.a. 11.4% 2.3

Changchun

Hightech

000661.CH 3.2 1.9 31.1 24.7 18.3 7.8 6.0 24.0 20.9 15.4 16.5 30.5% 1.0

Anke Bio 300009.CH 9.6 1.0 36.7 27.7 23.4 7.0 6.2 15.7 17.3 n.a. 32.4 25.3% 1.5

Boya Bio 300294. CH 0.8 0.9 41.3 30.7 25.0 5.3 5.6 12.6 12.0 n.a. 30.1 28.5% 1.5

A-share Biotech company avg. 38.0 29.8 23.9 6.7 6.5 14.9 16.7 29.5 28.3 25.3% 1.6

Global peers

Pfizer PFE.US 25.2 193.5 14.9 13.3 12.0 2.8 2.9 12.4 17.0 8.8 9.5 11.5% 1.3

Roche ROG.VX 1.4 230.1 18.4 16.9 15.6 11.7 9.4 48.0 54.2 12.3 12.3 8.9% 2.1

Merck MRK.US 10.9 145.3 14.7 13.5 12.9 3.3 3.7 24.2 19.0 10.3 10.4 6.6% 2.2

Abbvie ABBV.US 10.9 98.9 14.0 11.9 10.3 59.8 14.5 56.9 238.1 15.9 12.1 16.8% 0.8

Sanofi SAN.FP 3.2 128.7 15.4 14.8 13.9 1.8 2.0 7.8 13.0 12.0 11.1 5.2% 3.0

GSK GSK.LN 9.6 98.0 17.3 15.5 14.6 15.7 11.1 49.0 78.1 10.1 10.7 8.8% 2.0

US/EU-listed major pharmas avg. 15.8 14.3 13.2 15.9 7.2 33.0 69.9 11.6 11.0 9.6% 1.9

Amgen AMGN.US 3.5 111.5 15.1 13.7 11.9 4.7 4.0 21.5 27.3 13.2 10.9 12.4% 1.2

Gilead Gild.US 11.0 149.8 8.7 8.8 8.3 9.2 6.1 90.3 91.9 9.2 6.5 2.5% 3.4

Bristol-myers Squibb BMY.US 6.7 95.5 31.2 25.6 19.6 6.6 6.5 13.4 18.0 23.6 23.8 26.1% 1.2

Celgene CELG.US 5.0 92.8 24.5 19.6 15.6 13.7 10.9 33.0 64.6 21.9 20.0 25.3% 1.0

Biogen BIIB.US 2.2 71.1 19.0 17.2 15.5 7.4 5.6 30.2 31.1 14.4 12.5 10.7% 1.8

Regeneron REGN.US 0.8 51.8 40.8 33.3 26.7 16.5 18.2 15.5 43.4 53.5 32.6 23.7% 1.7

Alexion ALXN.US 1.8 38.9 35.5 28.9 22.4 11.2 6.9 23.1 16.6 36.9 38.5 25.9% 1.4

US/EU-listed Biotech company avg. 25.0 21.0 17.2 9.9 8.3 32.4 41.9 24.7 20.7 18.1% 1.7

* Note: (1) The data is priced on 07th-Sep 2015 after market close. (2) The FY14 P/B, ROE and EV/EBITDA multiples are much larger than that

of 2015 because 3SBio's net equity was enlarged by its IPO in 2015.

Source: Company data, Credit Suisse estimates, Bloomberg

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 26

Potential earnings accretion from acquisition

3SBio has been actively engaged in M&A activities to broaden its product portfolio. Since

December 2014, it has acquired Sirton, Sciprogen and Zhejiang Wansheng, with the key

products SEPO, Sparin and Qiming, etc. It also acquired ~7% equity of CP Guojian in

January 2015, to become the third largest shareholder.

Figure 43: Overview of recent corporate activities

Dec 2014 Jan 2015 Jun 2015

Acquisition of 100% equity of Sirton (Italy)and Sciprogen (China)

Acquisition of 100% equity of Zhejiang Wansheng

Jul 2015Oct 2014

Sign contracts with Zhejiang Wansheng to acquire exclusive distribution rights of three oncology drugs

Becoming 3rd largest shareholder (~7%equity) of CP Guojian

Global offering

Source: Company data

The company received ~HK$4,170 mn net proceeds from the global offering, of which

~45% or HK$1,876 mn will be used to expand the company's current product portfolio

through selective acquisitions. According to the prospectus, the acquisition targets will be

limited to (1) biotechnology companies with strengths in recombinant protein or mAb and

(2) chemical drug companies with small-molecule drugs within/complement to the

company's current product portfolio. After acquisition of Zhejiang Wansheng at a

consolidation of HK$630 mn (at ~17x 15E P/E), there is still HK$1,232 mn cash left. We

expect future M&A activities will bring positive earnings accretion given the company's

clear strategy and good track record in identifying high-quality M&A targets.

Figure 44: Use of IPO proceeds

Potential acquisition

45%, HK$1,876mn

Strengthening sales network

15%, HK$ 626mn

Increasing production capability

15%, HK$ 626mn

R&D15%, HK$ 626mn

Others10%, HK$

417mn

Source: Company data

Acquisition of Sciprogen (赛博尔): broaden EPO coverage to low-tier markets

On 31 December 2014, the company acquired 100% equity interest of Sciprogen at

consideration of ~Rmb540 mn. Sciprogen is a biopharmaceutical company based in

Shenzhen with two principal products, SEPO and Sparin.

The company received

~HK$4,170 mn net

proceeds from the global

offering

3SBio acquired Sciprogen at

~Rmb 540mn in Dec-2014

with two principal products

SEPO and Sparin

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 27

SEPO is an rhEPO injection which owns 3% market share in 2013. Unlike EPIAO whose

targeting markets are tier 1/2 cities, the market focus of SEPO is largely in low-tier cities.

After acquisition, the number of third-party agencies surged to 421 by the end of 2014,

among which 199 were originally controlled by Sciprogen.

Acquisition of Sirton: establishing footprint in Europe

On 31 December 2014, the company acquired 100% equity interest in Excel Partner which

held 100% of the equity interest in Sirton. The purchase consideration for the acquisition

amounts to Rmb217 mn. Sirton is a contract-based pharmaceutical manufacturer based in

Italy with a European GMP certificate.

After acquisition, the company intends to leverage Sirton as a platform to register and

market its own biological products in the Europe market. Now Sirton has entered into

contracts with four major customers, Mylan, UCB, Sanofi and Crinos. Its main products

include omeparazole, calcium folinate, teicoplanin, urokinase, heparin, ibandronate and

biperidene

Third largest shareholder of CP Guojian: a quick move into mAb business

To enhance its R&D capacity on mAb drugs (monoclonal antibody drugs), the company

entered into a strategic cooperation with CP Guojian by acquiring an aggregate of 6.96%

equity interest of the target company in Dec-2014.

CP Guojian is the domestic leader of the mAb therapeutic industry. The blockbuster

product of CP Guojian, Yisaipu (益赛普), generically known as Etanercept, is a TNFa

inhibitor product indicated for the treatment of rheumatoid arthritis. Yisaipu recorded FY13

sales of ~Rmb400 mn, or accounted for 61% domestic market share, according to IMS.

Besides, CP Guojian has a strong pipeline of mAb product candidates with significant

market potential in the oncology and arthritis segment.

According to the agreement, the company intends to cooperate with CP Guojian in the

following areas: (1) mAb development, including cell line development, cell culture

technique, purification and preparation process. (2) mAb manufacturing, using CP

Guojian as a contract manufacturer for the company's future mAb products. CP Guojian

currently has five mAb production lines with annual capacity of 8,000 litres, while six new

production lines with a capacity of 30,000 litres are still under construction. (3) Sales and

marketing. The company will help market CP Guojian's oncology products with its

oncology sales team, and CP Guojian may help market 3Sbio's future arthritis products

with its arthritis sales team.

China's mAb drug market size registered ~US$400 mn in 2013, accounting for ~2% of

domestic biological drug sales, much lower than the global level of ~35%. Besides, when

comparing the top-ten best-selling drugs in China vs. the global market, no mAb drug was

listed in China while seven were ranked in the global list. We expect the huge potential of

China's mAb market to be unlocked once more domestic players enter this segment.

3SBio acquired Sirton at

Rmb217 mn in Dec-2014

3SBio intends to leverage

Sirton as a platform to

register and market its own

biological products in

Europe

3SBio acquired ~7% equity

interest in CP Guojian in

Dec-2014, to become the

third largest shareholder

CP Guojian is the domestic

leader in the mAb

therapeutic industry with the

blockbuster product Yisaipu

3SBio cooperates with CP

Guojian in (1) mAb

development, (2) mAb

manufacturing and 3) sales

and marketing

China's mAb market size

only accounted for ~1% of

the global market

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 28

Figure 45: Among the 10 best selling drugs, six are mAb in global pharma market, while there are zero in China.

Generic name Chinese name

2013 sales

(Rmb, bn) Generic name Chinese name

2013 sales

(Rmb, bn)

Adalimumab 阿达木单抗 65.7 Monosialotetrahexosylganlioside 单唾液酸四己糖神经节苷脂钠 3.1

Infliximab 英夫利昔单抗 55.2 Deproteinized Calfblood Extractives 小牛血去蛋白提取物 3.0

Rituximab 利妥昔单抗 55.2 Xueshuangtong 血栓通 3.0

Salmeterol/Fluticasone 沙美特罗/替卡松 54.6 Clopidogrel 氯吡格雷 2.9

Etanercept 依那西普 51.5 Andrographolide 穿心莲内酯 2.5

Insulin glargine 甘精胰岛素 48.4 Salvianolate 丹参多酚酸盐 2.5

Bevacizumab 贝伐单抗 43.4 Atorvastatin 阿托伐他汀钙 2.5

Trastuzumab 曲妥珠单抗 42.2 Danhong 丹红 2.4

Rosuvastatin 瑞舒伐他汀钙 37.2 Kangai 康艾 2.0

Aripiprazole 阿立哌唑 32.2 Acarbose 阿卡波糖 1.8

Global top-10 best selling drugs China Top-10 best selling drugs

Note: The monoclonal antibodies are highlighted with blue colour. Source: Menet, Credit Suisse research

Acquisition of Zhejiang Wansheng: complement to company's current therapeutic

areas

On 24 July 2015, the company acquired 100% equity interest in Zhejiang Wansheng (浙江

萬晟) Pharma at a consideration of Rmb528 mn. The acquisition price is based on ~17x

15E EPS, at ~40% discount to the A-share pharma average. Zhejiang Wansheng is a

chemical drug manufacturer with 50+ drug products on diabetes, dermatology, respiratory

system and oncology.

The acquisition largely extended 3SBio's chemical drug exposure to the therapeutic areas

other than kidney disease. As mentioned before, Wansheng's Qiming granule is the only

CFDA approved TCM for diabetic retinopathy; in addition, the company has a rich portfolio

on dermatology drugs including Mandi (蔓迪) and Laizi (莱兹).

Zhejiang Wansheng recorded FY14 sales and net profit of Rmb279 mn and Rmb26.6 mn,

up 23.2% YoY and 24.3% YoY, respectively. According to our estimates, the acquisition

will provide ~5% accretion to FY16 earnings on a fully consolidated basis.

Three catalysts

Entering low-tier markets will drive rhEPO growth. The company acquired Shenzhen

Sciprogen to extend its rhEPO sales network to low-tier drug markets. After acquisition,

the company's rhEPO product portfolio may deliver a higher-than-expected growth rate

given drug sales in China's low-tier markets are growing faster than the high-tier market.

Drug tenders and NRDL adjustment should accelerate TPIAO penetration. So far the

penetration rate of TPIAO in CIT treatment is as low as ~10%. We expect more provincial

markets to open for TPIAO on the back of accelerated drug tenders and upcoming NRDL

adjustment.

Favourable policies to accelerate innovative drug development. In Aug-2015, CFDA

announced that it would grant 'fast track' approvals to innovative drug applications which

we expect to shorten the registration progress of innovative drugs. 3SBio has 14 exclusive

drugs and 5 FTM (first-to-market) generics, which have either applied for or entered the

clinical trial stage. The favourable government policy may trigger an early launch of the

company's pipeline products.

3SBio acquired Zhejiang

Wansheng in Jul-2015 with

50+ drugs

The acquisition largely

extended 3SBio's chemical

drug exposure to the

therapeutic areas other than

kidney disease

The acquisition of Zhejiang

Wansheng provides ~6%

accretion to FY16 earnings

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3Sbio Inc.

(1530.HK / 1530 HK) 29

Investment risks Reliance on sales of two core products

3SBio is largely dependent on sales of the two core products: EPIAO and TPIAO. The

revenue of EPIAO/TPIAO accounted for 52%/39% of total FY14 revenue. In the near term,

we expect the sales of EPIAO and TPIAO will continue to take a substantial portion of the

total revenue. Any reduction in the sales or profit margins of EPIAO and TPIAO will thus

have a direct negative impact on 3SBio's business.

Intensifying competition

EPIAO competes directly with a couple of other rhEPO products in the Chinese market,

including products marketed by both MNCs and domestic companies. In addition, 3SBio

does not have patents of any commercial significance covering EPIAO.

To date, TPIAO is the only rhTPO product available in China. However, other companies

may enter this market and introduce products similar to TPIAO, which could exert

competitive pressure in the rhTPO market.

Potential failure in new drug development

3SBio's long-term growth depends on its ability to enhance the existing product portfolio

by consistently introducing new products. However, the development process of

pharmaceutical products in China, is time-consuming and costly and there is no assurance

that 3SBio can successfully develop new products. If 3SBio fails in developing new drugs,

its business prospects could be adversely affected.

Potential failure in post-acquisition business

integration

3SBio acquired Sciprogen and Sirton in December 2014, and Zhejiang Wansheng in July

2015, to expand its product portfolio. However, there is no assurance that 3SBio will be

able to integrate these subsidiaries to achieve the expected synergies with the existing

business. In particular, (1) Sirton's business is based in the EU market where 3SBio had

little exposure previously and (2) Zhejiang Wansheng's key products are chemical drugs

vs. 3SBio's current product portfolio of biologic drugs, which brings about higher

integration risks.

Limited control over third-party promoters

3SBio intends to primarily rely on third-party promoters to market certain of its products to

low-tier markets in China, including two products recently added to its product portfolio,

SEPO and Sparin. However, 3SBio has limited control over third-party promoters, some of

which may fail to effectively promote its products. If 3Sbio fails to expand the third-party

promotion network or integrate the third-party promoter network with its original network, it

may not be able to extend the coverage and increase market penetration as planned,

causing an adverse effect on sales volume of the relevant products as well as brand

reputation.

Revenue of EPIAO/TPIAO

accounted for 52%/39% of

total revenue in FY14

EPIAO competes directly

with other rhEPO products

in Chinese market while

TPIAO may face

competition from new

products

No assurance that 3SBio

can successfully develop

new products

3SBio may not successfully

integrate its subsidiaries to

achieve the expected

synergies with existing

business

3SBio has limited control

over third-party promoters,

some of which may fail to

effectively promote its

products

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3Sbio Inc.

(1530.HK / 1530 HK) 30

Appendix: Company profile Founded in 1993, 3SBio has developed into a leading biotechnology company in China. It

ranked second among all Chinese companies in terms of sales from all

biopharmaceuticals in 2013. Its core product, EPIAO, leads the PRC rhEPO market with a

market share of 43.6% by sales in 2013, more than the combined market shares of the

next six largest competitors. Another key product, TPIAO, is the only commercialised

rhTPO product in the world. 3SBio also has a robust pipeline with 20 products, of which 14

are being developed as National Class I New Drugs in China.

History

In 1993, Mr Lou and his son, co-founder of 3SBio commenced business operations

through Shenyang Sunshine, a major operating subsidiary of the company. 3Sbio

launched EPIAO in 1998, which has become the number one rhEPO product in China

since 2002. In 2005, TPIAO, a recombinant human TPO was approved by CFDA. To date,

it still remains the only approved rhTPO in China.

3SBio listed on NASDAQ on February in 2007, to fund its rapidly expanding business and

growing capital expenditures. On 29 May 2013, the company was privatised due to low

trading liquidity, and for the purpose of greater management flexibility and realising

shareholders' investments. On 11 June 2015, 3SBio was listed on HKEx at an initial

offering price of HK$9.1.

Figure 46: History and development of 3SBio

1993 ▪ Shenyang Sunshine, the major operating subsidiary of 3SBio, was

established in China.

1996 ▪ EPIAO was launched in China

2002 ▪ EPIAO has became the number one rhEPO product in China in terms

of both sales volume and revenue

2005 ▪ TPIAO, the first and only recombinant human TPO was approved by

CFDA.

2007 ▪ 3SBio was listed on the NASDAQ.

2014 ▪ 3SBio acquired Sciprogen and Sirton. It also acquired ~7% equity

interest in CP Guojian.

2015 ▪ 3SBio was listed on HKEx at an initial offering price HK$ 9.1. 3SBio

aquired Zhejiang Wansheng.

Source: Company data

3SBio has developed into a

leading biotechnology

company in China with two

key products: EPIAO and

TPIAO

Mr Lou and his son, the co-

founder of 3SBio

commenced business

through Shenyang Sunshine

in 1993

3SBio went listed on

NASDAQ on February in

2007, but delisted on May

2013

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 31

Shareholding structure

Figure 47: Shareholding structure of 3SBio

Dr. LouThe Glory

TrustMr. Tan

Ms. Su

Mr. Lou/Huang

The Sun

Shine Trust

Other

shareholders

CS

SunshineDaceng

Other public

shareholders

Century Sunshine(cayman)

Decade Sunshine(cayman)

3SBio(1530.HK)

CICC Bio Investments(HK) Hong Kong Sansheng(HK) 3SBio, LLC(US)

Shenyang Sunshine(PRC)

Ample Harvest(BVI)

Shenzhen

Baishitong

Taizhou Huangsheng

Investment

Taizhou Huangsheng

Healthcare

Zhejiang

Sunshine

Shanghai

Pudong TianyuLiaoning

Sunshine

Shanghai

Aoxi

Sirton(Italy)

Zhejiang

WanshengSciprogen

58.5% 32.4% 9.1%

4.77% 2.75% 2.36% 7.15% 29.38% 1.39% 25.0%

100%

27.2%

100% 100% 100%

100%

100%

100%

100% 100% 79.6% 100% 23.5% 100% 100% 100%

90.57%

9.43%

Offshore

Onshore

Source: Company data

Management background

Dr. Lou Jing(娄竞) is the Chief Executive Officer and President of the company. He was

appointed as the chairman of the Board on 1 April 2012. He is responsible for the strategic

development and planning, overall operational management and major decision making of

the Group. He joined Shenyang Sunshine as a director of R&D in September 1995. Dr.

Lou was the leading scientist and principal investigator in the development of EPIAO and

TPIAO. He obtained a Medical Doctor degree from Shanghai Second Military Medical

University in July 1986 and a PhD in molecular and cell biology from Fordham University

in February 1994.

Mr. Tan Bo(谭擘) is the Chief Financial Officer and Vice President of 3SBio. He is

responsible for overseeing the financial activities and the daily operation of the business

development. He joined Shenyang Sunshine as the chief financial officer and vice

president in February 2009. Prior to that, he worked in private equity, equity research and

commercial sectors. He has extensive experience within the financial and pharmaceutical

industries. He obtained a bachelor's degree in economics from Renmin University of China

in July 1994, a master's degree in economics from the University of Connecticut in

December 1996 and a Master of International Management from Thunderbird School of

Global Management in August 1998.

Ms. Su Dongmei (苏冬梅) is an Executive Director and a Senior Vice President of the

Company. She is responsible for the strategic direction and leadership of R&D of the

Group. She joined Shenyang Sunshine as a scientist in the R&D department in January

1993, and served as a director of R&D from 1997 to 2006. She subsequently served as a

chief technology officer responsible for R&D and manufacturing process of Shenyang

Sunshine from 2006 to 2008. She was promoted to vice president of Shenyang Sunshine

in April 2008. Ms. Su obtained a bachelor's degree in biochemistry from Jilin University in

Dr. Lou Jing is the CEO,

president and chairman of

the Board of 3SBio. He was

also the leading scientist in

the development of EPIAO

and TPIAO

Mr Tan Bo is the CFO and

vice president of 3SBio

Mr. Su Dongmei is an

executive Director and

senior vice president of

3SBio. She is responsible

for strategic direction and

leadership of R&D of the

Group

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 32

July 1992 and a master's and doctorate degree in microbiology and pharmacology from

Shenyang Pharmaceutical University in June 2001 and July 2010, respectively.

Mr. Huang Bin (黄斌) was first appointed as a Director of 3SBio on 5 September 2006

and ceased to be a Director on 29 May 2013. He was reappointed an Executive Director of

the company on 27 November 2014. He is responsible for the administrative management

of the Group and the operations management of the subsidiaries and joint ventures. Mr.

Huang joined Shenyang Sunshine in 1993 as a manager of the human resources

department. He received a diploma in engineering from Northeast College of Engineering,

(currently known as Northeast University) in July 1987.

Mr. Huang Bin is

responsible for the

administrative mgmt. of the

Group.

08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 33

Companies Mentioned (Price as of 07-Sep-2015)

3Sbio Inc. (1530.HK, HK$7.45, OUTPERFORM[V], TP HK$9.7) AbbVie Inc. (ABBV.N, $59.77) Alexion Pharmaceuticals Inc. (ALXN.OQ, $171.98) Amgen Inc. (AMGN.OQ, $147.02) Anke Bio (300009.SZ, Rmb17.01) Biogen Idec (BIIB.OQ, $302.26) Boya Bio (300294.SZ, Rmb49.58) Bristol-Myers (BMY.BA, $836.0) CCHN (000661.SZ, Rmb93.25) CN Biologic Prod (CBPO.OQ, $94.4) CSPC Pharmaceutical Group Ltd (1093.HK, HK$6.7) Celgene Corp. (CELG.OQ, $117.39) Chase Sun (300026.SZ, Rmb16.0) China Traditional Chinese Medicine Co. Ltd (0570.HK, HK$5.62) Fudan Zhangjiang (1349.HK, HK$6.49) Gilead Sciences Inc. (GILD.OQ, $102.06) GlaxoSmithKline plc (GSK.L, 1314.0p) Gloria Pharma (002437.SZ, Rmb23.05) Guangzhou Baiyunshan Pharmaceutical Holdings Co Lt (0874.HK, HK$18.18) Haisco (002653.SZ, Rmb21.25) Hualan Bio (002007.SZ, Rmb37.3) Humanwell Healthcare Group Co Ltd (600079.SS, Rmb16.06) Jiangsu Hengrui Medicine Co. Ltd (600276.SS, Rmb44.21) Jiangsu Kanion Pharmaceutical Co Ltd. (600557.SS, Rmb21.69) Lee's (0950.HK, HK$10.02) Luye Pharma Group Ltd. (2186.HK, HK$6.74) Merck & Co., Inc. (MRK.N, $51.59) Mitsubishi Tanabe Pharma (4508.T, ¥2,097) Mylan (MYLNP.OQ^K10, $1131.0) Pfizer (PFE.N, $31.37) Regeneron Pharmaceutical (REGN.OQ, $499.99) Roche (ROG.VX, SFr260.4) Sanofi (SASY.F, €88.12) Shanghai Fosun Pharmaceutical (Group) Co., Ltd. (2196.HK, HK$22.9) Shenzhen Salubris Pharmaceuticals Co Ltd (002294.SZ, Rmb25.3) Sino Biopharmaceutical Limited (1177.HK, HK$9.34) THDB (600867.SS, Rmb21.0) Tasly Pharmaceutical Group Co Ltd (600535.SS, Rmb35.41) Tiantan Bio (600161.SS, Rmb24.72) UCB (UCB.BR, €70.38) Zhejiang Huahai Pharmaceutical Co Ltd (600521.SS, Rmb22.81)

Disclosure Appendix

Important Global Disclosures

I, Iris Wang, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark*over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in opera tion from 7 July 2011.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

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Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cove r multiple sectors.

Credit Suisse's distribution of stock ratings (and banking clients) is:

Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 54% (31% banking clients)

Neutral/Hold* 31% (42% banking clients)

Underperform/Sell* 12% (33% banking clients)

Restricted 3%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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Credit Suisse's policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer to Credit Suisse's Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research-and-analytics/disclaimer/managing_conflicts_disclaimer.html

Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot be used, by any taxpayer for the purposes of avoiding any penalties.

Price Target: (12 months) for 3Sbio Inc. (1530.HK)

Method: Our target price of HK$9.7 is based on 33x FY 15 P/E, implying 1.1x PEG (over 30% 15-17E CAGR), plus HK$0.5 cash per share (unused IPO proceeds for acquisition). We believe the company deserves a valuation premium over its peers for: (1) high technical barrier in biologics, (2) rich product portfolio and pipeline, (3) faster earnings growth outlook in 2015-2017, and (4) potential earnings accretion from acquisition.

Risk: The major risks of our target price of HK$9.7 are: (1) reliance on sales of two core products. 3SBio is largely dependent on sales of the two core products: EPIAO and TPIAO. The revenue of EPIAO/TPIAO accounted for 52%/39% of total FY14 revenue. Any reduction in the sales or profit margins of EPIAO and TPIAO will thus have a direct negative impact on 3SBio's business. (2) Intensifying competition. EPIAO competes directly with a couple of other rhEPO products in the Chinese market, including products marketed by both MNCs and domestic companies. In addition, 3SBio does not have patents of any commercial significance covering EPIAO.

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

Important Regional Disclosures

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Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

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(1530.HK / 1530 HK) 35

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

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Credit Suisse (Hong Kong) Limited ............................................................................................................................................................ Iris Wang

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08 September 2015

3Sbio Inc.

(1530.HK / 1530 HK) 36

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Investment principal on bonds can be eroded depending on sale price or market price. In addition, there are bonds on which investment principal can be eroded due to changes in redemption amounts. Care is required when investing in such instruments. When you purchase non-listed Japanese fixed income securities (Japanese government bonds, Japanese municipal bonds, Japanese government guaranteed bonds, Japanese corporate bonds) from CS as a seller, you will be requested to pay the purchase price only.

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