The Group's revenue for the second quarter of this year was HK$283,732,000, represented a decrease of 12.6% over the same quarter last year but a sequential increase of 3.9% over the first quarter of 2020. Revenue for the first half of 2020 was HK$556,716,000, represented a decrease of 8.4% over same period last year when Renminbi currency has been weakened by 5.1% year on- year. Sales of licensed-in products accounted for 60.9% (1H 2019: 55.4%) of the Group's revenue while sales of proprietary and generic products contributed 39.1% (1H 2019: 44.6%) of the Group's revenue.
Drugs for surgical use such as Livaracine and Slounase have been affected most as the hospitals were still inclined to postpone elective surgeries amid novel coronavirus ("COVID-19") resurgence fears during the quarter under review but began to show improvement on a quarter-to-quarter comparison. The sales of Livaracine and Slounase dropped 31.8% and 23.5%, respectively, during the period under review as compared to the same period last year, and were improved from decrease in the first quarter of 33.1% and 34.8%, respectively. Yallaferon was categorised by the Department of Economic and Information Technology of Anhui Province as one of the critical materials for the COVID-19 pandemic prevention and control during the period under review, and the sale thereof was comparatively less affected, declined by 13.4% as compared to the same period last year. On the other hand, the demand for chronic disease medications remains intact during the period under review. Revenue of Carnitene and Zanidip recorded a growth of 18.6% and 1.6%, respectively, and revenue of Ferplex decreased by 14.0%. The timely approved generic Treprostinil Injection in March 2020 has instantly made contribution to the revenue since the end of first quarter of this year and partially compensated for the loss of revenue following the termination of distribution of Remodulin by end of 2019.
Following the slowdown in the first quarter amid COVID-19 pandemic, the Group's research and development ("R&D") activities for new drugs have been resumed gradually in the second quarter and HK$151,136,000 was spent in R&D activities during the first half of 2020, representing 27.1% to the corresponding revenue during the period under review.
During the period under review, the product license of Zanidip which would be originally expired on 31 December 2021 was early terminated in return for compensation. Given the availability of several generic lercanidipines in China, the Group believes that the early termination of this product at this juncture not only brings short term financial benefit but also paves the way for the Group to launch its generic version in the near future for long term prosperity. Net profit attributable to the owners of the Company in the first half of 2020 was HK$96,982,000, increased by 153.3% over the same period last year.
Dr. Benjamin Li, Executive Director and Chief Executive Officer of the Group, said, "Given the backdrop of the volatile global macro environment, 2020 was the year not without its challenges. The market was in a slowing growth situation but inflationary pressure in raw material costs, manufacturing and administrative overhead remained high during the period under review. Together with the tensions between China and the U.S. attained an all-time high and the negative impact arising from the outbreak of a COVID-19 persisted, the business operating environment was stayed tough in China during the period under review. The Group continued to impose stringent cost-control measures in order to mitigate cost pressures in other areas. The Group has allocated more resources to the sales and marketing team during the period under review in order to explore new distribution channels and to prepare for the roll-out of new products."
From the aspect of manufacturing facilities and production capabilities, following the completion of the upgrading of facilities for APIs such as Nadroparin Calcium, there are more upgrading works in progress in Hefei site such as the upgrading of Yallaferon production facilities and pre-filled syringe production facilities in order to improve the capacity and efficiency. In Nansha site, the manufacturing of Tecarfarin tablet batch samples for GMP application and clinical trials is actively moving forward in good progress. In addition, the three new manufacturing facilities in the Nansha premise for Staccato fentanyl, oral cytotoxic drugs and continuous glucose monitor have been erected. Clinical sample of Staccato fentanyl for inhalation for the treatment of cancer breakthrough pain has been successfully produced and the submission of Investigational New Drug ("IND") will be made in September 2020. The equipment installation for the production of oral cytotoxic drugs and continuous glucose monitor is ongoing and full commission is expected during the second half of 2020.
With respect to New Drug Application ("NDA"), the Group's R&D pipeline includes over 60 projects from early-to late-stage development in various therapeutics areas. The Group's commitment to R&D persisted and measurable progress has been made during the period and up to date. The Group's applications for Import Drug License ("IDL"), namely Trazodone, INOmax, Zingo and Teglutik, were under review by the Centre for Drug Evaluation (the "CDE"). The New Drug Application ("NDA") of INOmax has been granted priority review for pediatric orphan disease by China's National Medical Products Administration ("NMPA"). The Group's applications for Abbreviated New Drug Application ("ANDA"), namely Fondaparinux, Sodium Phenylbutyrate Granule, Sodium Phenylbutyrate Tablet and Bimatoprost, were also in good progress during the period under review and up to date.
In the area of ophthalmology, China Ophthalmology Focus Limited ("COPFL"), the Company's indirect non-wholly owned subsidiary, has agreed the Phase III protocol of the Cyclosporine A Ophthalmic Gel trial with CDE for the treatment of dry eye in China. The application of ethical clearance is currently in progress and the pivotal Phase III study is expected to initiate patient recruitment in September 2020. In-licensing strategy is the Group's preferred mode of its business development, and here are two in-licensing deals which involve three new ophthalmic products. On 25 June 2020, Zhaoke (Hong Kong) Ophthalmology Pharmaceutical Limited ("ZKO"), an indirectly non-wholly owned subsidiary of the Company, and PanOptica, Inc. ("PAN"), a U.S.-based ophthalmology focused pharmaceutical company developing a topical eye drop for the treatment of sight-threatening eye diseases caused by abnormal or leaky blood vessels, entered into a binding letter of intent for exclusive rights to develop, manufacture and commercialise PAN-90806 in China, Hong Kong, Macau, South Korea and other countries of Southeast Asia. On 24 July 2020, following the binding letter of intent signed in May 2020, ZKO, and IACTA Pharmaceuticals, Inc. ("IACTA"), a U.S.-based ophthalmology focused pharmaceutical company developing drugs with novel mechanisms of action that treat diseases in areas of significant unmet medical need, entered into a license agreement for exclusive rights to develop, manufacture and commercialise IC-265 and IC-270 in China and other countries of Southeast Asia.
One of the Group's strategic investments has reached a milestone during the period under review. On 20 May 2020, Windtree Therapeutics, Inc. ("Windtree") has successfully uplisted its common shares from the OTC Markets to the Nasdaq Capital Market after the completion of financing via public offering. The proceeds therefrom provide additional resources for Windtree to advance its clinical studies and create value.
Regarding corporate development, in view of the spread of the COVID-19 worldwide and the demand for masks has surged significantly, Powder Pharmaceuticals Incorporated, an associated company of the Group, is currently operating two fully automatic face mask production machines in its cleanroom which meets the ISO-8 class 100,000 requirements. To date, the production volume of masks has been ramped up to approximately 40,000 pieces daily, and is selling online at vmask.com.hk.
Looking forward, Dr. Benjamin Li, Executive Director and Chief Executive Officer of the Group said, "the tensions arising from inflationary, the challenging situations may continue for an extended period, and the Group foresees the tough environment will be persisted throughout this year. Nevertheless, the Group will continue to stay focus on its new drug development, sales organisation reform and expansion, and cost containment. With the good progress is being made on the development of new drugs, evidenced by the encouraging results from clinical trials achieved and the number of NDA approvals obtained during the period under review and up to date, the Group is confident that all these works to be done will eventually drive growth therefor. In addition, with the increasing maturity of the Chapter 18A regime introduced by The Stock Exchange of Hong Kong Limited since 2018 which support biotech companies to go public and raise capital in their pre-revenue stage, the Group is actively considering a possible spin-off and separate listing of its ophthalmology project in the near future. The Group believes that the spin-off of R&D arms, such as ophthalmology and oncology projects, into standalone companies will in turn drive the market to recognise the value of its robust R&D pipelines. Beyond the present headwinds, the Group will continuously monitor the changing situations and make timely responses and adjustments as needed. As always, the operation and management team will continue to make its unremitting efforts to achieve additional uplift on the performance in the upcoming quarters."
About Lee's Pharmaceutical Holdings Limited
Lee's Pharm is a research-based and market-oriental biopharmaceutical company listed in Hong Kong with over 25 years' operation in China's pharmaceutical industry. It is fully integrated with solid infrastructures in drug development, manufacturing, sales and marketing. It has established extensive partnerships with over 20 international companies and currently has 23 products in the market place. Lee's Pharm focuses on several key disease areas such as cardiovascular, woman health, pediatrics, rare diseases, oncology, ophthalmology, dermatology, obstetrics and urology. Lee's Pharm more than 60 products under different development stages stemming from both internal research and development as well as from the licensing of development, commercialisation, and manufacturing rights from various United States, European and Japanese companies. The mission of Lee's Pharm is to become a successful biopharmaceutical group in Asia providing innovative products to fight diseases and improve health and quality of life.
Additional information about Lee's Pharm is available at www.leespharm.com.
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