Genscript Biotech Reports 2021 Interim Financial Results

Strong Momentum across All Business Segments,particularly in Gene & Cell Therapy CDMO

Continue to accelerate R&D investment to capture Future Growth

Revenue of the Group for the six months endedJune30,2021wasapproximatelyUS$229.6 million,representing an increase of 38.0% as compared with approximately US$166.4 million recorded for the same period of 2020

Revenue for Biologics Development Service for the six months ended June 30,2021 was approximately US$31.5 million,within which Gene & Cell Therapy CDMO revenue was approximately US$7.53million,representing an increase of 253% as compared with approximately US$2.13 million recorded for the same period of 2020

During the Reporting Period,the Group invested significantly into researchanddevelopment activities as well as talent recruitment,and both of which are key drivers for a sustainable business growth in the long run. Forthesixmonths ended June 30,2021,the Group's research and development expense was approximately US$175.1 million,representing an increase of51.6% ascompared with approximately US$115.5 million forthe same period in 2020,in which the total investment in research and development was approximately US$154.5 million on cell therapy for the six months ended June 30,representing an increase of 52.1% as compared with approximately US$101.6 million for the same period of 2020.

NANJING,China,Aug. 24,2021 -- Genscript Biotech (HKEX: 1548.HK) (GenScript),a global leading biotech company,today announced its audited financial results for the year ended June 30,2021.

"In the first half of 2021,the Group maintained a strong momentum across all business segments. Among others,our gene and cell therapy CDMO business scored historic breakthrough," said Dr. Patrick Liu,Rotating CEO of GenScript. "Over the past six months,the COVID-19 pandemic is still raging around the world. All GenScript employees overcame challenges and seized industry opportunities amid the pandemic,contributing the Group's rapid growth. In the next few years,GenScript will accelerate strategic investment in the gene and cell therapy industry supply chain in an effort to meet strong demand from customers on this revolutionary industry. We are confident in our ability to continue to create value for our customers and shareholders and fulfill our mission to make people and nature healthier through biotechnology".

BUSINESS REVIEW

For the six months ended June 30,the Group's overall revenue increased by 38.0% to approximately US$229.6 million (the same period in 2020: approximately US$166.4million).Gross profit was approximately US$138.6 million,representing an increase of 28.1% from approximately US$108.2 million for the same period in 2020. The loss attributable to the shareholders of the Company (the "Shareholders") was approximately US$91.1 million,whilst the loss attributable to the Shareholders of approximately US$113.1 million was recorded for the same period of2020.

During the Reporting Period,the external revenue of (i) life-science services and products,(ii) biologics development services,(iii) industrial synthetic biology products,(iv) cell therapy,and (v) operation unit accounted for approximately 63.7%,13.6%,7.8%,14.8%,and 0.1%,respectively,of the total revenue of theGroup.

Results Analysis of the Four Business Segments

Life-science Services and Products

During the Reporting Period,revenue of life-science services and products amounted to approximately US$152.0million,representinganincreaseof32.2%(thesame period in 2020: approximately US$115.0 million. The gross profit was approximately US$91.7 million,representing an increase of 17.6% as compared with approximately US$78.0millionfor the same period in 2020. During the Reporting Period,the segment operating profit of life-science services and products was approximately US$52.2 million,representing an increase of 25.5% from approximatelyUS$41.6millionforthesameperiodin2020.

The growth ofrevenue wasmainly attributabletothe (i) expanded capacity and productivity in molecular biology and oligo synthesis,(ii) continued growth in protein and reagent antibody production services,(iii) successful developmentof new accounts,and partially offset by (iv)the decrease in COVID-19 related products. The decrease in gross profit margin was primarily attributable to the (i) significant decrease of exchange rate ofUSD against RMBas compared to the same period of last year,caused an increase of converted cost as most part of production cost occurs in Mainland China,(ii) change of product portfolio strategy which caused higher proportionof products with lower gross profit margin,and (iii) increased freight and duty costs. The increase in operating profit was primarily attributable to the (i) increased revenue,(ii) increased efficiencyand profitability of oligo synthesis service resulted from capacity development,and (iii) continuous improvement of operation efficiency in both commercial and management team. The increase in operatingprofitwaspartlyoffsetbyunfavorableexchangeratemovements.

Biologics Development Services

During the Reporting Period,revenue of biologics development services amounted to approximately US$31.5 million,representing an increase of 65.8% (the same period in 2020: approximately US$19.0 million). Thegross profit wasapproximately US$10.0 million,representing an increase of 112.8% as compared with approximately US$4.7 million for the same period in 2020.The gross profit margin increased from 24.7% for the same period last year to 31.7% this year. Duringthe Reporting Period,the operating loss of biologics development services was approximately US$2.4million.

The rapid growth of revenue was mainly attributable to the (i) significant increase of customer projects for antibody and protein drug development,(ii) significant increase in plasmid and viral vector revenue from the booming development in gene and cell therapies ("GCT") and mRNA vaccines,(iii) improved capacity for pre-clinical and clinical development,(iv) improvement of delivery quality and turnaround time,and (v) new and upgraded service offering and integrated service package which contributed to extra opportunities and better market awareness.Theoperating loss was primarily attributable to the (i) continuous investment in selling and distribution to build a robust pipeline of future projects,and (ii) investment into research anddevelopmentfor the establishment of adeno-associated virus ("AAV") platform and optimization of lentivirus ("LVV") platform and plasmid platform,as well as development and optimization of antibody production processplatform.

Industrial Synthetic Biology Products

During the Reporting Period,revenue for industrial synthetic biology products increased by 60.7%to approximately US$18.0 million (the same period in 2020: approximately US$11.2 million). The gross profit was approximately US$5.1 million,representing an increase of 18.6% ascomparedwith approximately US$4.3 million for the same period in 2020. During the Reporting Period,the operatinglossofindustrialsyntheticbiologyproductswasapproximatelyUS$0.4million.

The growth of the revenue was mainly attributable to the (i) launch of innovative products such as Catalse and Amylase,(ii) increased penetration into big industrial customers by providing upgraded marketing strategy from a product seller to a solution provider,and (iii) business development in overseas area. The operating loss was primarily attributable to the (i) significant investmentin research and development activities,especially in labor costs led by the recruitment of highly-skilled persons,(ii) reinforcement in marketing activities for our core products and sales force expansion to enhance coverage and market share for our products quickly,and (iii) investment into synthetic biologyareasuchasusingenzymaticprocesstoproducehighvalueindustrialproducts.

Cell Therapy

During the Reporting Period,revenue of cell therapy increased by46.8%to approximatelyUS$33.9 million (the same period in 2020: approximately US$23.1 million). The gross profit was approximately US$33.9 million,representing an increase of 46.8% as compared with approximately US$23.1 million for the same period in 2020. During the Reporting Period,the operating loss of cell therapy was approximately US$172.5million.

The increase in both revenue and gross profit was primarily attributable to additional milestones achieved in December 2020 and May 2021 andthus further recognition of contract revenue fromthe collaboration with Janssen on developing cilta-cel. The operating loss was primarily attributable to the (i) higher number of clinical trials with more patients enrolled and ahigher number ofresearch and development product candidates,(ii) expansion of Legend's supporting administrative functions to aid continued research and development activities,and (iii) growth inthe cost associated with commercial preparation activities forcilta-cel.

FINANCIAL REVIEW

For the six months ended June 30,

2021

2020

(Unaudited)

(Unaudited)

Change

US$'000

US$'000

Revenue

229,568

166,394

38.0%

Gross profit

138,619

108,173

28.1%

Net loss

(156,149)

(160,509)

(2.7)%

Loss attributable to theShareholders

(91,122)

(113,092)

(19.4)%

Basic loss per share (US$)

(0.0461)

(0.0601)

(23.3)%

Diluted loss per share (US$)

(0.0461)

(0.0601)

(23.3)%

Revenue

During the Reporting Period,the Group recorded revenue of approximately US$229.6 million,representing an increase of 38.0% from approximately US$166.4 million for the same period of 2020. This is mainly attributable to (i) the continued increase from life-science services and products from major strategic customers and new competitive services and products,(ii) the growth in biologics development services as project numbers continued to increase,and (iii) the increase of contractrevenuederivedfromLegend'scollaborationwithJanssenwithnewmilestonesachieved.

Gross profit

During the Reporting Period,the Group's gross profit increased by 28.1% to approximately US$138.6 million from approximately US$108.2 million for the same period of 2020. The increasein gross profit was mainly attributable to the (i) rapid growth of revenue,especially in life-science,biologics CDMO and cell therapy business,and (ii) improved capacity utilization and production efficiency. The increase in gross profit was partially offset by unfavorable exchange rate fluctuation and increased shippingcosts.

Selling and distribution expenses

During the Reporting Period,the Group's selling and distribution expenses increased by 41.8% to approximately US$58.3 million from approximately US$41.1 million for the same period in 2020. This increase is mainly driven by the (i) increased investment into the commercial talent pool by recruiting more experienced personnel and improved incentive packages,(ii) increased marketing and advertising expenses,primarily attributable to the global expansion of our business,and (iii) the increasedmarketingexpensesrelatedtoLegend'scollaborationwithJanssen.

Administrative expenses

During the Reporting Period,the administrative expense increased by 54.7% to approximately US$56.3 million from approximately US$36.4 million for the same period in 2020. This is mainly attributable to the (i) reinforcement of some key administrative functions such as information technology,supply chain and legal to build up capable and professional administrative team to support the Group's overall business expansion,and (ii) one-time consultation expenses and other costs related to the Investigation.

Research and development expenses

During the Reporting Period,the research and development expenses increased by 51.6% to approximately US$175.1 million from approximately US$115.5 million for the sameperiodin 2020. This is mainly attributable to the (i) increase in clinical trial expenses and preclinical study costs,especially in thecell therapy segment related to Legend's collaboration with Janssen,(ii) investment in new challenging research and development projects,which will significantly strengthen our competitiveness in the GCT market and related supply chain,(iii) investment in development projects that improved our production efficiency,and (iv) increase in compensation packageincludingshared-basedpaymentforresearchanddevelopmentpersonnel.