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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

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Date of event requiring this shell company report

For the transition period from                       to

Commission file number 001-41773

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Securities registered or to be registered pursuant to Section 12(b) of the Act:

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Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 110,700,805 ordinary shares, consisting of 93,710,805 Class A ordinary shares, par value US$0.0001 per share, and 16,990,000 Class B ordinary shares, par value US$0.0001 per share, as of December 31, 2023.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐ Yes ☒ No

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

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If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

☐ Yes ☒ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

☐ Yes ☐ No

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INTRODUCTION

Unless otherwise indicated or the context otherwise requires, references in this annual report on Form 20-F to:

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FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains statements of a forward-looking nature. All statements other than statements of historical facts are forward-looking statements. These forward-looking statements are made under the “safe harbor” provision under Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and as defined in the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. These forward-looking statements relate to, among others:

We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.

You should read these statements in conjunction with the risks disclosed in “Item 3. Key Information—D. Risk Factors” of this annual report and other risks outlined in our other filings with the Securities and Exchange Commission, or the SEC. Moreover, we operate in an emerging and evolving environment. New risks may emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of such risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we have referred to in this annual report, completely and with the understanding that our actual future results may be materially different from what we expect.

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PART I

ITEM 1.   IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.   OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.   KEY INFORMATION

Our Organizational Structure

Adlai Nortye Ltd. is not a Chinese operating company, but is a Cayman Islands holding company. Our daily operations are conducted primarily through our operating subsidiaries in the United States and mainland China. The chart below sets forth our corporate structure and identifies our subsidiaries and their subsidiaries, as of the date of this annual report:

Cash Transfers and Dividend Distributions

As a holding company, we may rely on dividends from our subsidiaries for our cash requirements, including any payment of dividends to our shareholders. The ability of our subsidiaries to pay dividends to us, however, may be restricted by the debt they incur on their own behalf and/or laws and regulations applicable to them. Unless otherwise indicated or the context otherwise requires, “we,” “us,” “our company,” and “our” refer to Adlai Nortye Ltd., our Cayman Islands holding company and its subsidiaries, which include those in the U.S. and mainland China that conduct daily operations.

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We maintain our bank accounts and balances primarily in licensed banks in the United States, mainland China and Hong Kong. If needed, cash can be transferred between our Cayman Islands holding company and subsidiaries incorporated in the United States, mainland China and Hong Kong through equity investments and intercompany loans. Currently, there are no restrictions of transferring funds between our Cayman Islands holding company and subsidiaries in the United States and Hong Kong; however, currency exchange control measures imposed by the PRC government may restrict the ability of our subsidiaries in the PRC to transfer their cash to our Cayman Islands holding company and other subsidiaries incorporated outside the PRC through loans, advances or cash dividends. We may also make loans and additional capital contribution to our subsidiaries or branches, subject to certain restrictions under the applicable local laws, including the laws of China.

As of the date of this annual report, our Cayman Islands holding company has not declared or paid any dividends or distributions on equity to its shareholders. U.S. investors will not be subject to Cayman Islands taxation on dividend distributions, and no withholding will be required on the payment of dividends or distributions to them while they may be subject to U.S. federal income tax. Adlai Nortye Ltd., our Cayman Islands holding company, may be classified as a “resident enterprise” of China. This classification could result in unfavorable tax consequences to us and our non-PRC shareholders and dividends paid by us may be subject to PRC withholding tax. See “Item 10. Additional Information—E. Taxation — United States federal income tax considerations — Dividends.” We have no plans to declare cash dividends in the near term, but as a holding company, we may depend on receipt of funds from one or more of our subsidiaries if we determine to pay cash dividends to holders of our ordinary shares and ADSs in the future. We do not have a regular dividend policy, and our board of directors has discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law.

Our subsidiaries incorporated in the United States and Hong Kong are permitted, under the respective laws, to provide funding to Adlai Nortye Ltd. through dividend distributions without restrictions on the amount of the funds. The ability of our PRC subsidiaries to distribute dividends to us will be limited by foreign exchange restrictions under PRC law. The restrictions on currency exchanges in the PRC may limit our ability to freely convert RMB to fund any future business activities outside the PRC or other payments in U.S. dollars, and capital control measures imposed by the Chinese government may limit our ability to use capital from our PRC subsidiaries for business purposes outside of the PRC. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, cannot be made in currencies other than RMB without complying with certain procedural requirements of State Administration of Foreign Exchange, or SAFE. Specifically, approval from or registration with appropriate government authorities is required where RMB is to be converted into another currency and remitted out of China to pay capital expenses, such as the repayment of loans denominated in currencies other than RMB. As a result, we may need to obtain SAFE approval to use cash generated from the operations of our PRC subsidiaries in the future to pay off its debt in a currency other than RMB owed to entities outside the PRC, or to make other capital expenditure payments outside the PRC in a currency other than RMB. Additionally, the PRC Enterprise Tax and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated. The following table sets forth the amount of the cash transfers for the periods presented.

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The Holding Foreign Companies Accountable Act

Pursuant to the Holding Foreign Companies Accountable Act, or the HFCAA, the Public Company Accounting Oversight Board, or the PCAOB, issued a Determination Report in December 2021 which found that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong because of positions taken by the authorities in those jurisdictions. Our auditor, which is based in New York, is currently subject to inspection by the PCAOB at least every two years. However, our auditor’s China affiliate is located in, and organized under the laws of, the PRC. On August 26, 2022, the PCAOB entered into a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the PRC and, as summarized in the “Statement on Agreement Governing Inspections and Investigations of Audit Firms Based in China and Hong Kong” published on the U.S. Securities and Exchange Commission’s official website, the parties agreed to the following: (i) in accordance with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation; (ii) the PCAOB shall have direct access to interview or take testimony from all personnel of the audit firms whose issuer engagements are being inspected or investigated; (iii) the PCAOB shall have the unfettered ability to transfer information to the SEC, in accordance with the Sarbanes-Oxley Act; and (iv) the PCAOB inspectors shall have access to complete audit work papers without any redactions, with view-only procedures for certain targeted pieces of information such as personally identifiable information. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. On December 29, 2022, legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”), was signed into law by President Joseph Biden of the United States. The Consolidated Appropriations Act contained, among other things, an identical provision to Accelerating Holding Foreign Companies Accountable Act, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two. Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. We cannot assure you that we will not be identified by the SEC under the HFCAA as an issuer that has retained an auditor that has a branch or office located in a foreign jurisdiction that the PCAOB determines it is unable to inspect or investigate completely because of a position taken by an authority in that foreign jurisdiction. In addition, there can be no assurance that, if we have a “non-inspection” year, we will be able to take any remedial measures. If any such event were to occur, trading in our securities could in the future be prohibited under the HFCAA and, as a result, we cannot assure you that we will be able to maintain the listing of the ADSs on the Nasdaq Stock Market or that you will be allowed to trade the ADSs in the United States on the “over-the-counter” markets or otherwise. Should the ADSs become not listed or tradeable in the United States, the value of the ADSs could be materially affected. See “Item 3. Key Information—D. Risk Factors — Risks relating to our operation in the People’s Republic of China.” for a detailed discussion.

Our Operations are subject to PRC Laws and Regulations

We face various legal and operational risks and uncertainties relating to our operation in China. We have substantial business operations located in mainland China and are subject to evolving PRC laws and regulations. Recently, the PRC government has indicated an intent to strengthen regulatory oversight over offerings that are conducted overseas and/or involve foreign investment in China-based issuers, and initiated a series of regulatory actions and made a number of public statements, including stringent enforcement against illegal activities in the securities market, enhancing supervision over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews, and expanding efforts in anti-monopoly enforcement. We may be subject to the approval, filing or other requirements of the China Securities Regulatory Commission, or the CSRC, or other PRC governmental authorities in connection with offshore offerings under current PRC laws, regulations and rules. However, we do not believe that approval of the cybersecurity review of the Cyberspace Administration of China, or the CAC is required under current PRC laws, regulations and rules at this stage, as we have not processed, and do not anticipate to process in the foreseeable future, personal information of more than one million users or persons and the data we handle in our business operations, either by its nature or in scale, does not normally trigger significant concerns over PRC national security. However, we cannot affirm that PRC regulators share the same interpretation. Because these statements and regulatory actions are new and subject to change, it is uncertain as to how quickly the legislative or administrative regulation making bodies in China will respond to companies, or what existing or new laws or regulations will be amended or promulgated, if any, or the potential impact such amended or new legislation will have on our daily business operations or our ability to accept foreign investments and list on a U.S. stock exchange. For risks relating to approval of the CSRC, the oversight of the CAC, and other PRC government authorities, please refer to “Item 3. Key Information—D. Risk Factors — Risks relating to our operation in the People’s Republic of China.” The laws and regulations in China may change from time to time. These potential changes, as well as the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us, hinder our ability to offer or continue to offer the ADSs, result in a material adverse effect on our business operations, and damage our reputation, which might further cause the ADSs to significantly decline in value or become worthless.

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A.   [Reserved]

B.   Capitalization and Indebtedness

Not applicable.

C.   Reasons for the Offer and Use of Proceeds

Not applicable.

D.   Risk Factors

Summary of Risk Factors

Risks relating to our business

Risks relating to our operation in the People’s Republic of China

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Risks relating to the ADSs

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Risks Relating to Our Business

Our business depends substantially on the success of our preclinical and clinical drug candidates. If we are unable to successfully develop drug candidates or experience significant delays in doing so, our business will be materially harmed.

Our business will depend on the successful development, regulatory approvals, and commercialization of our drug candidates. Our drug candidates are still in preclinical and clinical development. We cannot guarantee that we will be able to obtain regulatory approvals for our drug candidates in a timely manner, or at all. None of our drug candidates has been approved for marketing in the U.S., Europe, China, or any other jurisdiction. Each of our drug candidates will require additional clinical development, regulatory approvals, development of manufacturing supply and capacity, substantial investment, and significant marketing efforts before we generate any revenue from product sales. Further, we are not in control of any clinical trials conducted by our licensors or sublicensors for obtaining regulatory clearance and they may be driven by strategical goals or concerns that do not align with ours. If our licensors or sublicensors fail to obtain regulatory approvals for those drug candidates in jurisdictions where they reserve their rights, if any, it would be more difficult for us to obtain regulatory approvals from the regulatory authorities in other jurisdictions where we have exclusive rights for to develop the drug candidates for regulatory approvals.

The success of our drug candidates will depend on several factors, including but not limited to:

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If we do not achieve one or more of these in a timely manner or at all, we could experience significant delays in our ability to obtain approval for our drug candidates, which would materially harm our business and may prevent us from generating sufficient revenues and cash flows to continue our operations.

The clinical trial results of our drug candidates may fail to satisfy regulatory authorities or might not produce positive results.

We must conduct extensive clinical trials to demonstrate the safety and efficacy of our drug candidates in humans to obtain regulatory approvals for the sale of our drug candidates. Clinical and preclinical development is expensive and can take many years to complete, and its outcome is inherently uncertain. We cannot guarantee that any clinical trials or preclinical studies will be conducted as planned or completed on schedule, if at all, and failure can occur at any time during the trial or study process. Despite promising preclinical or clinical results, any drug candidate can unexpectedly fail at any stage of clinical development. The historical failure rate for drug candidates in our industry is high, particularly in the earlier stages of development.

The results from preclinical studies or clinical trials of a drug candidate or a competitor’s candidate in the same class may not predict the results of later clinical trials of our drug candidate, and interim, top-line, or preliminary results of a clinical trial are not necessarily indicative of final results. Drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy characteristics despite having progressed through preclinical studies and initial clinical trials. It is not uncommon to observe results in clinical trials that are unexpected based on earlier clinical trials and preclinical studies, many candidates fail in clinical trials despite very promising early results, and a number of companies in the biopharmaceutical and biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies. Based upon negative or inconclusive results, we or any future collaborator may decide, or regulators may require us, to conduct additional preclinical studies or clinical trials, which would cause us to incur additional operating expenses. As a result, we cannot be certain that our ongoing and planned clinical trials and preclinical studies will be successful.

We may also experience numerous unexpected events during, or as a result of, clinical trials that could delay or prevent our ability to obtain regulatory approvals or commercialize our drug candidates, including but not limited to:

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Clinical trials are expensive and difficult to design and implement and can take many years to complete, and their outcomes are inherently uncertain. Our research and development expenses amounted to US$42.1 million, US$54.5 million, and US$58.2 million, for the years ended December 31, 2021, 2022 and 2023, respectively. With our further exploration of potential new drug candidates and indication expansion of our current drug candidates, we may need more capital to support our R&D activities. If we are unable to obtain sufficient capital resources in a timely manner, our clinical process may be adversely impacted. We could also face difficulties due to any number of reasons including, but not limited to, regulatory delay, complexities of analytical testing technology, shortage of clinical trial material supply, and health epidemics.

Clinical trials must be conducted in accordance with applicable regulatory authorities’ legal requirements, regulations or guidelines, and are subject to oversight by these governmental agencies and ethics committees or IRBs at the medical institutions where the clinical trials are conducted. We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by a Data Safety Monitoring Board for such trial or by applicable regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by applicable regulatory authorities foreign regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. In addition, changes in regulatory requirements and policies may occur, and we may need to amend clinical trial protocols to comply with these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial.

Further, conducting clinical trials in foreign countries presents additional risks that may delay completion of our clinical trials. These risks include the failure of enrolled subjects in foreign countries to adhere to clinical protocols as a result of differences in healthcare services or cultural customs, managing additional administrative burdens associated with foreign regulatory schemes, and political and economic risks, including war, relevant to such foreign countries.

Principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and receive compensation in connection with such services. Under certain circumstances, we may be required to report some of these relationships to the FDA or comparable foreign regulatory authorities. The FDA or comparable foreign regulatory authority may conclude that a financial relationship between us and a principal investigator has created a conflict of interest or otherwise affected interpretation of the study. The FDA or comparable foreign regulatory authority may therefore question the integrity of the data generated at the applicable clinical trial site and the utility of the clinical trial itself may be jeopardized. This could result in a delay in approval, or rejection, of our marketing applications by the FDA or comparable foreign regulatory authority, as the case may be, and may ultimately lead to the denial of marketing approval of one or more of our drug candidates.

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If we are required to conduct additional clinical trials or other testing of our drug candidates beyond those that we currently contemplate, or if we are unable to successfully complete clinical trials of our drug candidates or other testing, or if the results of these trials or tests are not positive or are only modestly positive or if they raise safety concerns, we may (i) be delayed in obtaining regulatory approvals for our drug candidates; (ii) not obtain regulatory approvals at all; (iii) obtain approval for indications that are not as broad as intended; (iv) have the drugs removed from the market after obtaining regulatory approvals; (v) be subject to additional post-marketing testing requirements; (vi) be subject to restrictions on how the drugs are distributed or used; or (vii) be unable to obtain reimbursement for the use of the drugs.

Significant clinical trial delays may also increase our development costs, shorten the commercialization periods enjoyed by our drug candidates, or allow our competitors to bring drugs to market before we do.

We may seek and form strategic alliance, collaboration, or licensing arrangements for the development of drug candidates in the future, which may not achieve the anticipated benefits to or even negatively impact our business.

We have in the past formed and may in the future continue to seek and form strategic alliances, collaboration, and/or licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our current and future drug candidates. Any of these relationships may require us to increase our near and long-term expenditures, issue securities that dilute our existing shareholders or disrupt our management and business.

Our strategic collaboration with partners involves various risks. If and when we collaborate with a third party for development and commercialization of a drug candidate, we may have to relinquish some or all of the control over the future success of that drug candidate to the third party. We may not achieve the revenue and cost synergies expected from the transaction. These synergies are inherently uncertain, and are subject to significant business, economic, and competitive uncertainties and contingencies, many of which are difficult to predict and are beyond our control. Even if we achieve the expected benefits, they may not be achieved within the anticipated time frame. Also, the synergies from our collaboration with partners may be offset by other costs incurred in the collaboration, increases in other expenses, operating losses, or problems in the business unrelated to our collaboration. As a result, there can be no assurance that we will be able to achieve our expected benefits and synergies from these collaborations, if at all.

We may rely on certain third parties for some of our clinical development activities, which could delay or limit the future development or regulatory approval of our drug candidates.

We collaborate with third parties for clinical development activities from time to time. For example, we reached a supply agreement with MSD to evaluate the combination of AN0025 and pembrolizumab in patients with solid tumors in a Phase Ib clinical trial, and also a supply agreement with Roche to evaluate the triple combination of AN2025, AN0025, and atezolizumab for a variety of PIK3CA mutant solid tumors in a Phase I clinical trial. We cannot guarantee that MSD, Roche, or other third parties will not diminish the amount of supply of the relevant compounds, or terminate the agreements altogether. Disputes arising between us and these third parties may cause delay or termination of the research, development, or commercialization of our drug candidates, or may result in costly litigation or arbitration that diverts management attention and resources. In such cases, we may need to reevaluate our approaches with respect to these combination trials, and potentially find other compounds with combination potential with our drug candidates. We cannot guarantee that we will be able to find such alternative combination trial opportunities, or that we will not incur significant costs and efforts in doing so.

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Our rights to develop and commercialize some of our drug candidates are subject to the terms and conditions of licenses granted to us by third parties.

We have relied on and plan to continue to rely on licenses to certain patent rights and other intellectual property from third parties that are important or necessary to the development, manufacture, or commercialization of some of our drug candidates. Pursuant to these license agreements, our licensors may also provide us with clinical data required for NDA filings in our licensed territories, besides many other types of support. However, some of the licenses may not provide exclusive rights to use such intellectual property in all relevant fields of use and in all territories where we may wish to develop or commercialize our drug candidates and the underlying patents may fail to provide the intended exclusivity. As a result, we may not be able to develop, export, or sell our drug candidates outside of the territories stipulated by the license agreements or prevent competitors from developing and commercializing competitive drug candidates in the markets that we hope to address. In addition, our licenses may not include rights to all intellectual property relevant to these drug candidates, and as a result, we may need to obtain additional licenses from our existing licensors, which may not be available on an exclusive basis or commercially reasonable terms. Otherwise, we will need to spend significant time and resources to redesign our drug candidates or the methods for manufacturing them. Moreover, we do not own the background intellectual property rights related to these drug candidates invented prior to the licenses. If our licensors breach our license agreements, we may lack bargaining power to enforce such agreements or obtain adequate remedies.

Over time, we may seek additional rights to intellectual property from our licensors and, in connection with the related negotiations, we may agree to amend our existing licenses in a manner that may be more favorable to the licensors, including by agreeing to terms that could enable third parties (potentially including our competitors) to receive licenses to a portion of the intellectual property that is subject to our existing licenses.

We may not have the rights to handle patent management related to the in-licensed drug candidates.

We may not have the right to control the preparation, filing, prosecution, maintenance, enforcement, and defense of patents and patent applications covering the drug candidates that we in-license from third parties. We also have not had and do not have primary control over these activities for certain of our patents or patent applications and other intellectual property rights that we jointly own with certain of our licensors. Therefore, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, enforced, and defended in a manner consistent with the best interests of our business. If our current or future licensors or collaboration partners fail to prosecute, maintain (including by failing to pay the relevant fees), enforce, and defend patents licensed to us that are material to our business, the exclusivity associated with the relevant drug candidate may be reduced or eliminated, and as a result, our ability to prevent competitors from developing or commercializing the same drug candidates could be adversely affected. In addition, even if we have the right to control patent prosecution and maintenance of patents and patent applications licensed to us, we may still be adversely affected or prejudiced by actions or inactions of our licensors, the inventors, third-party collaborators, and their respective counsel that took place either before or after the date upon which we assumed that control.

Pursuant to the terms of our license agreements, the licensors may have the right to control enforcement of our in-licensed patents or defense of any claims asserting the invalidity or unenforceability of these patents. Even if we are permitted to enforce or defend these patents, this will require the cooperation of our licensors and any other relevant patent owners, and we cannot be certain that such cooperation will be provided to us. We also cannot be certain that our licensors will allocate sufficient resources or prioritize their enforcement of such patents or defense of such claims to protect our interests. An adverse outcome in any of these matters, regardless of whether we are a party or otherwise participating, could significantly harm our business if we are relying on the patents for exclusivity or material technology or we are subject to damages or other restrictions on our business activities.

The in-licensed patent rights may be encumbered.

Our licensors may have relied on third party consultants or collaborators or on funds, resources, or expertise from third parties such that our licensors are not the sole and exclusive owners of the patents we in-license. If other third parties have ownership rights to our in-licensed patents, they may be able to license such patents to our competitors, and our competitors could market equivalent or substantially equivalent drug candidates and technologies. In addition, if our licensors have not obtained adequate rights and licenses from these third parties, we may need to obtain additional rights from these third parties or we could be prevented from developing and commercializing the related drug candidates or face competition.

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If we fail to comply with our obligations in the licensing agreements or experience disruptions to our business relationships with our licensors, we could lose license rights or be required to pay monetary damages.

We are required to make various payments to our licensors in exchange for in-licensing of certain drug candidates, including upfront payments, milestone payments, tiered royalties based on commercial sales and other payments. Our license and intellectual property-related agreements also require us to comply with other obligations, such as to use commercially reasonable efforts in developing and commercializing the drug candidates, provide certain information regarding our activities and maintain the confidentiality of information we receive from our licensors. In certain of our license agreements, we also are required to achieve certain developmental and commercial milestones by specific deadlines. We cannot be certain that we will be able to fulfill all such obligations. In particular, some of the milestone payments that we are obligated to pay under these agreements are payable upon our drug candidates reaching development milestones before we have commercialized or received any revenue from sales of such drug candidate, and we cannot guarantee that we will have sufficient resources to make such milestone payments.

In addition, drug development is an uncertain process and even if we have such resources, we cannot be certain that such milestones will be met within the timeline required by our license agreements. If we fail to comply with our obligations under our current or future license agreements, our counterparties may have the right to terminate these agreements and, upon the effective date of such termination, may have the right to terminate our exclusive rights or all of our rights and acquire rights to certain of our intellectual property. If any of our licensors terminate any license we rely upon, we might not be able to develop, manufacture, or market any drug candidate related to the intellectual property licensed under these agreements and we may face other additional penalties. In such case, we may have to negotiate new agreements or terms with less favorable terms to us, if we are able to do so at all. We may also face claims for monetary damages or other penalties. While we would expect to exercise all rights and remedies available to us, including seeking to cure any breach we commit if permitted, and otherwise seek to preserve our rights under the intellectual property rights licensed and sublicensed to us, we may not be able to do so in a timely manner, at an acceptable cost or at all.

Disputes may arise from the license agreements between us and our collaborating parties, which may have negative impacts on the scope of our rights.

The license agreements under which we in-license intellectual property or technology from third parties are complex, and disputes may arise regarding these agreements, including:

The resolution of any dispute could narrow what we understand to be the scope of our rights to the relevant intellectual property or technology, or increase what we understand to be our financial or other obligations under the relevant license agreement. Moreover, if disputes over intellectual property that we have in-licensed prevent or impair our ability to use the intellectual property or otherwise maintain our current licensing arrangements on commercially acceptable terms, we may not be able to successfully develop and commercialize the affected drug candidates.

We may face significant competition and fail to establish a partnership with a third party.

We may face significant competition from other pharmaceutical or biotechnology companies, even ones with greater resources or capabilities than us, in seeking appropriate strategic partners. Moreover, we may fail to establish a strategic partnership or other alternative arrangements with a third party especially when the drug candidate is in the early developmental stage, due to the fact that the third party may believe our drug candidates lacking potentials to commercial viability.

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We may lose our relationships with CROs and they may not successfully carry out their contractual duties.

We have relied on and plan to continue to rely on third-party CROs to generate, monitor, and manage data for certain of our ongoing clinical programs. We also expect to rely on third parties to assist in conducting certain preclinical studies that we may carry out in the future. Our CROs have the right to terminate their agreements with us in the event of an unrectified material breach. If any of our relationships with our third-party CROs is terminated, we may not be able to enter into arrangements with alternative qualified CROs or do so on commercially reasonable terms; or meet our desired clinical development timelines. There is a natural transition period when a new CRO commences work, and the new CRO may not provide the same type or level of services as the original provider, and as a result, we cannot assure you that data from our clinical trials may not be compromised. There is also a need for relevant technology to be transferred to the new CRO, which may take time and further delay our development timelines.

Furthermore, except for remedies available to us under our agreements with our CROs, we cannot control whether or not our CROs devote sufficient time and resources to our ongoing clinical, nonclinical, and preclinical programs. If our CROs fail to successfully carry out their contractual duties or obligations or meet expected deadlines, or if the accuracy of the clinical data obtained by CROs is compromised due to their failure to adhere to our clinical protocols, regulatory requirements, or for other reasons, our clinical trials may be extended, delayed, or terminated and we may not be able to obtain regulatory approvals for or successfully commercialize our drug candidates.

If CROs fail to comply with applicable protocol, laws, regulations, or scientific standards, our clinical development plan can be delayed.

As we rely on CROs for the execution of certain of our clinical trials, we control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of the studies sponsored by us is conducted in accordance with the applicable protocol, legal, and regulatory requirements and scientific standards, and our reliance on the CROs does not relieve us of our regulatory responsibilities.

We, our CROs for our clinical programs and our clinical investigators are required to comply with good clinical practice, or GCP, and other regulatory regulations and guidelines enforced by the FDA and other comparable regulatory authorities for all of our drug candidates in clinical development. Regulatory authorities enforce these GCP or other regulatory requirements through periodic inspections of trial sponsors, investigators, and trial sites. If we or any of our CROs or clinical investigators fail to comply with applicable GCP or other regulatory requirements, the relevant clinical data generated in our clinical trials may be deemed unreliable and the FDA and other comparable regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. There can be no assurance that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCP requirements. In addition, our clinical trials must be conducted with drug candidates produced under GMP requirements. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process.

There may be information disclosure risks associated with using CROs.

The use of CROs requires us to disclose proprietary information to these third parties, which could increase the risk that such information will be misappropriated or disclosed. We currently have a small number of employees, which limits our ability to identify and monitor the activities of CROs. To the extent we are unable to identify and successfully manage the performance of CROs in the future, our business may be adversely affected.

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Our success depends upon our and our business partners’ ability to obtain and maintain intellectual property protection for our drug candidates and technologies.

We have and will apply for our own patents with claims covering our technologies, processes, and drug candidates. Additionally, we have also licensed patent rights from third parties for some of our pipeline products, including AN2025 from Novartis and AN0025 from Eisai. There can be no assurance that each patent eligible subject matter has been or will be applied for patent protection, the claims of any existing or future patent application that we or our partners file will be issued as a patent, or that the protection scope of a patent will be broad enough to exclude others from making, using, or selling our existing or future drug candidates or drugs similar or identical to those drug candidates. There is also no guarantee that the patent protection scope of a subject matter will be the same in all jurisdictions where patent applications have been filed. We also rely on trade secrets to protect aspects of our business, especially where we or our partners do not believe patent protection is appropriate or feasible. However, trade secrets are difficult to protect and even with trade secret protection, companies may be able to independently develop equivalent knowledge, methods, and know-how. As a result, in countries where we or our partners have not sought and do not seek patent protection, third parties may be able to manufacture and sell products we commercialize in the future without our permission, and we may not be able to stop them from doing so, even if our products are protected by trade secrets.

The patent portfolio to which we have rights may not provide us with sufficient rights to exclude others from commercializing drug candidates similar or identical to ours. With respect to issued patents in certain jurisdictions, we or our partners may be entitled to obtain a patent term extension to extend the patent expiration date provided we or our partners meet the applicable requirements for obtaining such patent term extensions. For example, patents protecting core matters of AN2025 and AN0025 will expire in 2027 and 2031 respectively. Our partners may be entitled to extend the term of those patents in jurisdictions where patent term extension is adopted, including U.S., EU, China, and Japan. However, the applicable authorities may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. In addition, we or our partners may not be granted an extension because of, for example, failing to apply within applicable deadlines, failing to apply prior to the expiration of relevant patents or otherwise failing to satisfy applicable requirements. If this occurs, any period during which we have the right to exclusively market our drug candidates will be shorter than we would otherwise expect. As such, the patent terms of AN2025 and AN0025 may not be successfully extended to 2032 and 2036 respectively, or at all.

We may face competition from generic or biosimilar manufacturers after the patent protection is no longer valid.

Even if patent protection for our approved drug candidates is successfully obtained, we may face competition from generic or biosimilar medications once the patent has expired. Manufacturers of generic or biosimilar drugs may also challenge the scope, validity, or enforceability of the patents to which we have right in court or before a patent office, and we may not be successful in enforcing or defending those intellectual property rights and, as a result, may not be able to develop or market the relevant product exclusively. The applied and issued patents of our licensing partners for our drug candidates are expected to expire on various dates as described in paragraphs headed “Business — Intellectual Property” in this annual report. Upon the expiration or invalidation of these and our future applied and issued patents, we will not be able to assert such patent rights against potential competitors.

We may face risks related to compulsory licensing.

Many jurisdictions have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many jurisdictions limit the enforceability of patents against government agencies or government contractors. In these jurisdictions, the patent owner may have limited remedies, which could materially diminish the value of such patents. If we or any of our licensors, licensees or collaborators are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be materially impaired.

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Our owned and in-licensed patents and patent applications may be subject to priority disputes, inventorship disputes, and similar proceedings.

While we are not currently aware of any pending challenges, we or our licensing partners may be subject to claims brought by former employees, collaborators, or other third parties who have an interest in our owned or in-licensed patents or other intellectual property or become involved in opposition, revocation, post-grant, and inter partes review, or interference proceedings challenging our patent rights or the patent rights of others. If we or our licensing partners are unsuccessful in any interference proceedings or other priority or validity disputes to which our owned or the in-licensed intellectual properties are subject, we may lose valuable intellectual property rights through the loss of one or more patents or our patent claims may be narrowed, invalidated, or held unenforceable. Particularly, if we or our licensing partners are unsuccessful in any inventorship disputes to which we or they are subject, we may lose valuable intellectual property rights, such as exclusive ownership.

Any such event may require us to obtain and maintain licenses from third parties, including parties involved in such proceedings or disputes. Those licenses may not be available to us on commercially reasonable terms or at all, or may be non-exclusive. If we are unable to obtain and maintain such licenses, we may need to cease the development, manufacture, and commercialization of one or more of our drug candidates. The loss of exclusivity or the narrowing of our or our licensing partners’ patent claims could limit our ability to stop others from using or commercializing similar or identical drug products. Even if we are successful in an interference proceeding or other similar priority or inventorship disputes, it could result in substantial costs and be a distraction to our management and other employees.

We may face future patent claims or alike against our drug candidates or the exploitation of our products.

Our commercial success depends in significant part upon our ability to develop, manufacture, market, and sell our drug candidates without infringing, misappropriating, or otherwise violating the intellectual property rights of third parties. There is no assurance that our drug candidates or the sale or use of our future products do not and will not in the future infringe third-party patents or other intellectual property rights. Numerous issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing drug candidates. The risk increases as patent offices issue more patents to third parties or accept and examine more patent applications filed by them.

Third parties may also allege that we misappropriated their trade secrets, or that we are otherwise violating their intellectual property rights, whether with respect to the manner in which we have conducted our research or development, or with respect to the sale, use or manufacture of the compounds we have developed, in- licensed, or are developing. Such third parties might resort to litigation against us or our licensors or other parties we have agreed to indemnify based on either existing intellectual property or intellectual property that arises in the future.

We may fail to identify potential intellectual property related risks and take precautions.

It may be possible that we or our licensors failed to identify, or may in the future fail to identify, relevant patents or patent applications held by third parties with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our drug candidates. Because patent applications can take many years to issue, there may be pending patent applications that we are not aware of and which may later result in issued patents that our drug candidates may infringe. In addition, third parties may obtain patents in the future and claim that development or commercialization of our drug candidates infringes upon these patents. We or our licensors also may incorrectly conclude that third party patents are invalid or that our activities do not infringe, misappropriate, or otherwise violate a third party’s intellectual property.

If a competent court holds that our drug candidates, their manufacturing process, or any intermediate products during the manufacturing process falls into the protection scope of a patent owned by a third party, the patent holder may be able to prevent us from manufacturing such drug candidate unless we obtain a license under the applicable patents, design around the patent, or until such patents expire or they are held invalid or unenforceable. Similarly, if a competent court holds that our formulations, processes for manufacture or methods of use, including combination therapy or patient selection methods fall within the protection scope of a patent owned by a third party, the patent holder may be able to block the development and commercialization of the applicable drug candidate unless we obtain a license, limit our uses, design around the patent, or until such patent expires or is held invalid or unenforceable. In either case, such a license may not be available on commercially reasonable terms or at all. Even if we were able to obtain a license, the rights may be nonexclusive, which could result in our competitors gaining access to the same intellectual property.

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If we were found liable for intellectual property infringement or misappropriation, we may be obligated to pay substantial damages.

In the event of a successful claim of infringement or misappropriation against us, we may have to pay substantial damages, including, in the U.S., triple damages, and attorneys’ fees in the case of willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing drug candidates, which may be impossible or require substantial time and monetary expenditure. Third parties who bring successful claims against us for infringement of their intellectual property rights may obtain injunctive or other equitable relief, which could prevent us from developing and commercializing one or more of our drug candidates.

Defending against claims of patent infringement, misappropriation of trade secrets or other violations of intellectual property rights, regardless of merit, would involve substantial expense and be time-consuming, regardless of the outcome, and our adversaries may have the ability to dedicate substantially greater resources to prosecuting these legal actions than we can. Thus, even if we were to ultimately prevail, or to settle at an early stage, such litigation could burden us with substantial unanticipated adverse impacts on our business. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace. Claims that we misappropriated the confidential information or trade secrets of third parties could have a similar material adverse effect.

We may face legal proceedings or disputes before regulatory authorities related to our patents and other intellectual property, which can be unpredictable, expensive and time-consuming.

Notwithstanding measures we or our licensors may take, now or in the future, to obtain and maintain patent and other intellectual property rights with respect to drug candidates we plan to develop, our intellectual property rights could be challenged or invalidated in courts or before regulatory authorities.

The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. An adverse result in any litigation proceeding could put one or more of our patents at risk of being invalidated or otherwise interpreted narrowly. Such proceedings could result in revocation of or amendment to our patents in such a way that they no longer adequately cover and protect our drug candidates. Even if a defendant does not prevail on a legal assertion of invalidity and/or unenforceability, our patent claims may be construed in a manner that would limit our or our licensor’s ability to enforce such claims against the defendant and others. Additionally, during an intellectual property litigation, there will be substantial amount of discovery required in connection with the litigation. As a result, there is a risk that some of our confidential information could be compromised by disclosure.

Litigation and other proceedings in connection with any of the foregoing claims can be expensive and time-consuming and, even if resolved in our favor, may cause us to incur significant expenses and could distract management and our scientific and technical personnel from their normal responsibilities. Many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce and defend their intellectual property rights than we can. Thus, we or our licensors may not have sufficient funds to defend against any such claims or may otherwise decide not to defend them for commercial or other reasons. Moreover, the damages or other remedies awarded, if any, may not be commercially meaningful.

Even if we obtain patent protection, a competent court may nevertheless find that a potentially infringing technology does not fall within protection scope of our patent protection scope.

Even if we or our licensors obtain patent protections, a competent court may still find that an alleged infringing technology does not fall within the protection scope of our or our licensor’s patent protection scope. The scope of a patent can be reinterpreted after its issuance and changes pursuant to either the patent laws or interpretation of the patent laws in the U.S. and other applicable jurisdictions. If the protection scope is interpreted narrowly, it may diminish the value of the patents we hold or in-license. Issuance is not conclusive as to its scope and any patents that we hold or in-license rights may be challenged by third parties in the courts or patent offices in the U.S., China, or other applicable jurisdictions. We cannot predict whether the claims of any issued patents will provide sufficient protection from competitors or other third parties. If a court determines that the actual protection scope of our or our licensor’s patent is narrower than the scope based on its literal meaning, the court will hold that the alleged infringer does not infringe the patent at issue and will refuse to stop the alleged infringer from using the technology at issue on the grounds that our patents do not cover the technology in question.

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Our current or any future patent applications may not be successfully granted into patents, or if granted, the protection scope may not be broad enough to cover our technology.

The patent positions of biotechnology and pharmaceutical companies, including our patent position, involve complex legal and factual questions. Therefore, the issuance of any patent applicants to which we have rights or may obtain rights cannot be predicted with certainty. Our pending and future patent applications may not result in the issuance of patents at all. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other applicable jurisdictions are typically not published until 18 months after filing or in some cases, as in the U.S., until they are issued as a patent. Therefore, we cannot be certain that we or our current or future licensors, licensees, or collaborators were the first to make or file on the inventions claimed in our owned or licensed patents or pending patent applications. There is also no assurance that all of the potentially relevant prior art relating to the patents and patent applications covering our drug candidates has been identified and disclosed to the relevant patent office, during the prosecution of the related patent application, and such prior art could be used by a third party to prevent a patent from being issued from a pending patent application.

Even if our current or future licensors’, licensees’, or collaborators’ patent applications are issued as patents, they may not issue in a form that will provide us with any meaningful protection, prevent competitors, or other third parties from competing with us, or otherwise provide us with any competitive advantage. The coverage claimed in a patent application can be significantly reduced before the patent is issued. We cannot predict whether the patent applications we are currently pursuing and may pursue in the future will successfully result in the issuance of any patents sufficiently covering our technology in any particular jurisdiction.

Intellectual property litigation may lead to unfavorable publicity which may harm our reputation.

During the course of any intellectual property litigation, there could be public announcements of the results of hearings, rulings on motions, and other interim proceedings in the litigation. If securities analysts or investors regard any such announcements as negative, the perceived value of our drug candidates, future drugs, programs, or intellectual property could be diminished. Accordingly, the market price of the ADSs may decline. Such announcements could also harm our reputation or the market for our drug candidates, which could have a material adverse effect on our business. In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to conduct our clinical trials, in-license needed technology, or enter into strategic partnerships that would help us bring our drug candidates to market.

Our patent protection could be reduced or eliminated if we or our licensors do not comply with patent administration authorities’ relevant requirements.

In several stages over the lifetime of a patent and patent application, periodic maintenance fees, renewal fees, annuity fees and various other governmental fees are due to be paid to the United States Patent and Trademark Office, or the USPTO, the China National Intellectual Property Administration, or the CNIPA, and other patent offices and agencies. The USPTO, the CNIPA and various comparable governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application and maintenance process. In certain circumstances, we may be required to rely on our licensors to take the necessary action to comply with these requirements with respect to patents or other intellectual property they have licensed to us. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in which noncompliance, which could include failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents, can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction.

Changes in patent law of the U.S., China, or other jurisdictions could diminish the value of our patents in general.

Changes in either the patent laws or their interpretation in the U.S., China, or other applicable jurisdictions may increase the uncertainties and costs surrounding the prosecution of our patents, diminish our ability to protect our inventions, obtain, maintain, defend, and enforce our intellectual property rights, and more generally, affect the value of our intellectual property or narrow the scope of our patent rights.

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Certain recently enacted U.S. laws have changed the procedures through which patents may be obtained and by which the validity of patents may be challenged. For example, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, includes a number of significant changes to U.S. patent law. Particularly, in March 2013, the U.S. changed from first to invent to first to file rule, meaning the applicant who files a patent application first is entitled to the patent regardless of whether a third party was the first to invent the claimed invention. As such, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of patent applications in the U.S. and the enforcement or defense of patents issued to us or our licensors. Recent U.S. Supreme Court rulings have also changed the law surrounding patent eligibility and narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. Furthermore, depending on decisions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that could weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Similar changes in the laws could happen in other applicable jurisdictions.

In China, intellectual property laws are constantly evolving and efforts have been made to improve intellectual property protection. For example, on October 17, 2020, the Standing Committee of the National People’s Congress of PRC promulgated the amended Patent Law of the PRC (2020 Revision), which took effect since June 1, 2021. It regulates a patent linkage for pharmaceutical patents and approves the patent term extension for eligible innovative pharmaceutical patents. However, it lacks an implementing rule for how to obtain and how to calculate patent term extension, and thus we may not be able to successfully secure sufficient patent term extensions or at all for our patents or patents we in-licensed. Also, if a third party obtains patent term extension for its patent and our drug candidates fall within the protection scope, we are required to delay commercialization for an extended period of time. Therefore, we cannot guarantee that these changes or any future changes to PRC intellectual property laws would not have a negative impact on our intellectual property protection.

We may be unable to protect our trade secrets.

In addition to patent rights, we currently rely on and plan to continue to rely on trade secrets and confidential information, including unpatented know-how, technology, and other proprietary information, to maintain our competitive position and to protect our drug candidates. We seek to protect trade secrets and confidential information, in part, by entering into non-disclosure and confidentiality agreements with parties that have access to them, such as our employees, our collaborators, sponsored researchers, contract manufacturers, consultants, advisers, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants. However, we may not be able to prevent the unauthorized disclosure or use of our trade secrets and confidential information by the parties to these agreements. Monitoring unauthorized uses and disclosures is difficult and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. Any of the parties with whom we enter into confidentiality agreements may breach or violate the terms of any such agreements and may disclose our proprietary information, and we may not be able to obtain adequate remedies for any such breach or violation. As a result, we could lose our trade secrets and third parties could use our trade secrets to compete with our drug candidates and technology.

Additionally, we cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology and processes. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is likely to be unpredictable. In addition, if any trade secrets that we rely on were to be lawfully obtained or independently developed by a competitor or other third party, we may have no right to prevent them from using that technology or information to compete with us and our competitive position would be harmed. In addition, while we typically require our employees, consultants, and contractors who may be involved in the development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact develops intellectual property that we regard as our own. Furthermore, the assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, each of which may result in claims by or against us related to the ownership of such intellectual property. Our partners who have granted rights to trade secrets or other confidential information also may not take all such precautions or may be exposed to other risk that could result in the loss of trade secrets or rights in confidential information that we rely upon.

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We may be subject to claims that we have wrongfully used or disclosed alleged trade secrets of others or claims asserting ownership of what we regard as our own or our partners’ intellectual property.

Some of our employees, consultants, and advisers, including our senior management, were previously employed at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees, consultants, and advisers, including members of our senior management, may have executed proprietary rights, non-disclosure, and non-competition agreements in connection with such previous employment. Although we try to ensure that they do not use the proprietary information or know-how of others in their work for us, we cannot be certain that we or our partners take enough precautions, and we may be subject to claims that we, our partners or these individuals have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such individual’s current or former employer. We are not aware of any such disclosures, or threatened or pending claims related to these matters or concerning the agreements with our senior management, but in the future, there can be litigation where we need to defend against such claims. If we fail in defending any such claims, in addition to possibly paying monetary damages, we may lose valuable intellectual property rights, or be required to obtain licenses to such intellectual property rights, which may not be available on commercially reasonable terms or at all. In addition, we may lose personnel or even important ones as a result of such claims, and any such litigation or the threat thereof may adversely affect our ability to hire employees or contract with independent contractors. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

Moreover, individuals executing agreements with us may have pre-existing or competing obligations to a third party, such as an academic institution, and thus an agreement with us may be ineffective in perfecting ownership of inventions developed by that individual. If we fail in prosecuting or defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights. Even if we are successful in prosecuting or defending any of the foregoing claims, litigation could result in substantial costs and be a distraction to our management and scientific personnel.

We may not be able to enjoy additional protection over drug-related patents in the U.S.

In the U.S., the Federal Food Drug and Cosmetic Act, as amended by the law generally referred to as “Hatch-Waxman”, provides the opportunity for limited patent term extension, which can compensate for patent term lost due to FDA’s regulatory review. However, a patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of drug approval; only one patent may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. The application for the extension must be submitted prior to the expiration of the patent for which extension is sought. A patent that covers multiple products for which approval is sought can only be extended in connection with one of the approvals. Even then, we may not be granted an extension because of, for example, failing to exercise due diligence during the testing phase or regulatory review process, failing to apply within applicable deadlines, failing to apply prior to expiration of relevant patents, or otherwise failing to satisfy applicable requirements. Moreover, the applicable period or the scope of patent protection afforded could be less than we request. In addition, to the extent we wish to pursue patent term extension based on a patent that we in-license from a third party, we would need the cooperation of that third party. If we fail to obtain patent term extensions or if the term of any such extension is less than we request, our competitors may obtain approval of competing products following our patent expiration.

Hatch-Waxman also has a process for patent linkage, pursuant to which the FDA will stay approval of certain follow-on applications during the pendency of litigation between the follow-on applicant and the patent holder or licensee, generally for a period of 30 months. Moreover, Hatch-Waxman provides for statutory exclusivities that can prevent submission or approval of certain follow-on marketing applications. For example, federal law provides a five-year period of exclusivity within the U.S. to the first applicant to obtain approval of a new chemical entity and three years of exclusivity protecting certain innovations to previously approved active ingredients where the applicant was required to conduct new clinical investigations to obtain approval for the modification. Similarly, the U.S. Orphan Drug Act provides seven years of market exclusivity for certain drugs to treat rare diseases, where the FDA designates the drug candidate as an orphan drug and the drug is approved for the designated orphan indication. However, we may not be able to enjoy those benefits if we fail to apply for them according to the FDA’s relevant requirements.

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Our drugs may not share the same level of protection in China as in the U.S.

The Patent Law of the PRC (2020 Revision) provides a patent linkage system, pursuant to which the patent holder or a party of interest can resolve potential patent infringement disputes before a follow-on drug receives marketing approval. Depending on the outcome of the disputes, NMPA will decide whether to delay approval of such follow-on applications. There are certain implementation rules and interpretations for the patent linkage system, such as Measures for the Implementation of Early Resolution Mechanisms for Drug Patent Disputes (Trial) published by NMPA and the CNIPA and took effect from July 4, 2021, and Provisions on Several Issues Concerning the Application of Law in the Trial of Patent Civil Cases Involving Drug Marketing Review and Approval of Patent (Draft for Solicitation of Comments) published by Supreme People’s Court on October 29, 2020. Currently, the patent linkage system has been established in China. However, the enforcement of laws and regulations to some extent remain uncertain in China. In addition, there is no currently effective law or regulation providing data exclusivity in China (referred to as regulatory data protection). Although Implementation Rules for Drug Regulatory Data Protection (Trial) (Draft for Solicitation of Comments was published by NMPA on April 25, 2018), no updates or progress have been reported on this legislation. In view of the uncertainty of the newly established patent linkage system and the lack of data protection, a lower-cost generic drug can emerge onto the market much more quickly than in the U.S.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

The registered and unregistered trademarks or trade names that we own or in-license are valuable assets and may be challenged, infringed, circumvented, declared generic, lapsed, or determined to infringe on or dilutive of other marks. We may not be able to protect and maintain our rights to these trademarks and trade names, which may be necessary to build name recognition among potential collaborators or customers in our markets of interest. Sometimes, competitors may adopt trade names or trademarks similar to ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. As of December 31, 2023, we had trademarks in the progress of registration and are subject to the risk of limited trademark protection. If we delay or fail to complete the registration of our trademarks, if third parties succeed in registering or developing common law rights in trademarks similar or identical to our trademarks and if we are not successful in challenging such rights, we may not be able to use these trademarks to develop brand recognition of our products. In addition, there could be potential trade name or trademark infringement claims brought by owners of other trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names against us. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

We may license our trademarks and trade names to third parties, such as distributors. Though these license agreements may provide guidelines for how our trademarks and trade names may be used, a breach of these agreements or misuse of our trademarks and tradenames by our licensees may jeopardize our rights in or diminish the goodwill associated with our trademarks and trade names. Our efforts to enforce or protect our proprietary rights related to trademarks, trade names, trade secrets, domain names, copyrights, or other intellectual property may be ineffective, incur substantial costs and divert our resources.

FIRRMA may restrict our ability to acquire technologies and assets in the U.S. that are material to our commercial success.

Legislation that the U.S. Congress has passed is likely to expand the jurisdiction and powers of the Committee on Foreign Investment in the U.S., or the CFIUS, the U.S. interagency committee that conducts national security reviews of foreign investment. President Trump signed the Foreign Investment Risk Review Modernization Act or FIRRMA in August 2018. Pursuant to the FIRRMA, investments in companies that deal in “critical technology” are subject to filing requirements and, in some instances, review and approval by the CFIUS. The term “critical technology” includes, among others, technology subject to U.S. export controls and certain “emerging and foundational technology,” a term that is still being defined but is expected to include a range of U.S. biotechnology. If an investment by a foreign entity in a U.S. business dealing in “critical technology” meets certain thresholds, a filing with the CFIUS is mandatory. While the FIRRMA currently grants CFIUS jurisdiction on only controlling and certain non-controlling investments made by foreign persons in U.S. businesses in research and development in biotechnology, the CFIUS’s jurisdiction may be further expanded in the future, which may place additional limitations on strategic collaborations with our current or future U.S. partners, which could detrimentally affect our capacity to acquire foreign assets in the U.S. that may be material to our commercial success.

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Intellectual property rights do not necessarily address all potential threats.

Intellectual property rights have limitations and may not adequately protect our business or permit us to maintain our competitive advantage. Thus, the degree of future protection afforded by our intellectual property rights is uncertain. The following examples are illustrative:

Should any of these events occur, they could have a material adverse effect on our business, financial condition, results of operations, and prospects.

We may allocate our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may later prove to be more profitable, or for which there is a greater likelihood of success.

As there are many potential drug candidates to choose from, our research programs to identify drug candidates that we may wish to in-license require substantial technical, financial, and human resources. We may focus our efforts and resources on research programs or drug candidates that ultimately prove to be unsuccessful. Moreover, because we have limited financial and managerial resources, we focus on clinical development programs and drug candidates for specific indications. As a result, we may forego or delay pursuit of opportunities with other drug candidates or for other indications that later prove to have greater commercial potential or a greater likelihood of success. Our resource allocation decisions may result in failure to capitalize on viable commercial products or profitable market opportunities, which could materially and adversely affect our future growth and prospects.

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We may not be able to identify, discover, or in-license new drug candidates.

Although a substantial amount of our effort will focus on the continued clinical testing, potential approval, and commercialization of our existing drug candidates, the success of our business depends in part upon our ability to identify, license in, discover, develop, or commercialize additional drug candidates. Our research programs or licensing efforts may fail to identify, discover or in-license new drug candidates for clinical development and commercialization for a number of reasons, including, without limitation, the following:

Certain of our drug candidates may be limited to those patients who are ineligible for or have failed prior treatments and the relevant market may be relatively small.

Certain of our drug candidates are mainly targeted for treatment of patients who are ineligible for or have failed prior treatments. Our lead product buparlisib or AN2025 is used for treatment of recurrent or metastatic HNSCC after anti-PD-1/PD-L1 therapy. Also, our product AN0025 is developed in combination with Keytruda or pembrolizumab for the treatment of NSCLC and bladder cancer after anti-PD-1/PD-L1 treatments and TNBC, MSS CRC, and cervical cancer after standard of care treatments. As such drug candidates are targeting late-line patients, the relevant market may be relatively small.

We may encounter difficulties enrolling patients in our clinical trials.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients in the clinical trials. We may fail or experience significant delays to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA, NMPA, EMA, or similar regulatory authorities, or the patient enrollment is delayed. Even if we are able to enroll a sufficient number of patients in our clinical trials, delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials.

Patient enrollment for our clinical trials may be affected by many factors. For example, some of our competitors have ongoing clinical trials for drug candidates that treat the same indications as our drug candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in the clinical trials of our competitors’ drug candidates. Other factors include:

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AEs or undesirable side effects caused by our drug candidates could interrupt, delay, or halt clinical trials, delay or prevent regulatory approvals, limit the commercial profile of an approved label, or result in significant negative consequences following any regulatory approvals.

As is the case with biopharmaceuticals generally, it is likely that there may be adverse side effects associated with pipeline products or our future drug candidates’ use. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of expected or unexpected side effects or unexpected characteristics. Undesirable side effects caused by our drug candidates when used alone or in combination with approved or investigational drugs could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label, or lead to the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities.

Drug-related AEs and SAEs have been reported in our clinical trials. See “Item 4. Information on the Company—B. Business Overview— Our differentiated oncology portfolio.” Undesirable AEs caused by our drug candidates, or caused by our drug candidates when used in combination with other drugs, could potentially cause significant negative consequences, including but not limited to:

In addition, some of our drug candidates are still considered as emerging and relatively novel therapeutics for treating cancer. Their mechanisms of action are yet to be thoroughly understood, and side effects have been observed in clinical studies and reported by medical practitioners in connection with their usage in patients. For example, the FDA, NMPA, EMA, or other comparable authorities could order us to suspend or terminate our studies or to cease further development of or deny approval of our drug candidates. Any drug- related side effects could affect patient recruitment or the ability of enrolled patients to complete trials or may result in potential product liability claims, which could prevent us from obtaining regulatory approvals or achieving or maintaining market acceptance of a particular drug candidate.

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Interim, “top-line” or preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose top-line or preliminary data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the top-line or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Top-line or preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, top-line or preliminary data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available or as patients from our clinical trials continue other treatments for their disease. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Disclosure of interim data by us or by our competitors could also result in volatility in the price of the ADSs after our initial public offering.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimations, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular drug candidate or product and our stock. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and investors or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure. If the interim, top-line, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our drug candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

In conducting drug discovery, development, and commercialization, we face potential liabilities, in particular, product liability claims or lawsuits that could cause us to incur substantial liabilities.

We face an inherent risk of product liability as a result of the clinical trials and any future commercialization of our drug candidates worldwide. For example, we may be sued if our drug candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical trials, manufacturing, marketing, or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the drug, negligence, strict liability, or a breach of warranties. Claims could also be asserted under applicable consumer protection laws. If we cannot successfully defend ourselves against or obtain indemnification from our collaborators for product liability claims, we may incur substantial liabilities or be required to limit commercialization of our drug candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in significant negative consequences, including but not limited to:

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To cover such liability claims arising from clinical studies, we have purchased clinical trial insurance in the conduct of our clinical trials. However, it is possible that our liabilities could exceed our insurance coverage or that our insurance will not cover all situations in which a claim against us could be made. We may not be able to maintain insurance coverage at a reasonable cost or obtain insurance coverage that will be adequate to satisfy any liability that may arise. If a successful product liability claim or series of claims are brought against us for uninsured liabilities or in excess of insured liabilities, our assets may not be sufficient to cover such claims and our business operations could be impaired.

If a product fails to demonstrate safety and efficacy in one clinical trial, we may have to execute additional clinical trials or even terminate clinical trials of such drug candidate.

During clinical trials, there can be numerous unexpected events that could cause one or more of our drug candidates to fail to demonstrate safety and efficacy in humans in accordance with our current clinical development plans, including but not limited to: clinical trials of our drug candidates may produce negative or inconclusive results, and additional clinical trials may be required. Examples include lack of clinical response or other unexpected characteristics, participants are being exposed to unacceptable health risks, and the cost of clinical trials of our drug candidates is greater than we anticipate. If any of these events occurs and a product fails a clinical trial, we cannot guarantee that we would be able to effectively develop alternative clinical plans in time or at all and we may have to terminate clinical trials of the drug candidate.

We may in the future conduct additional clinical trials for our drug candidates outside the United States and/or China, and FDA, NMPA and similar foreign regulatory authorities may not accept data from such trials.

We have conducted clinical trials for our drug candidates in France and China, and may in the future conduct clinical trials for our drug candidates outside the U.S., including in Europe, Australia, China or other foreign jurisdictions. The acceptance of trial data from clinical trials conducted outside the U.S. by the FDA may be subject to certain conditions. In cases where data from clinical trials conducted outside the U.S. are intended to serve as the sole basis for marketing approval in the U.S., the FDA will generally not approve the application on the basis of foreign data alone unless (i) the data are applicable to the U.S. population and U.S. medical practice; (ii) the trials were performed by clinical investigators of recognized competence; and (iii) the data may be considered valid without the need for an on-site inspection by the FDA or, if the FDA considers such an inspection to be necessary, the FDA is able to validate the data through an on-site inspection or other appropriate means. Otherwise, for studies that are conducted at sites outside of the U.S. and not subject to an IND and which are intended to support a marketing application (but which are not intended to serve as the sole basis for marketing approval), the FDA requires the clinical trial to have been conducted in accordance with GCP requirements and the FDA must be able to validate the data from the clinical trial through an onsite inspection if it deems such inspection necessary. Additionally, the FDA’s clinical trial requirements, including sufficient size of patient populations and statistical powering, must be met. Many regulatory bodies, such as NMPA, have similar approval requirements. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA, NMPA, or any similar foreign regulatory authority will accept data from trials conducted outside of the U.S. or the applicable jurisdiction. If the FDA, NMPA or any similar foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our drug candidates not receiving approval or clearance for commercialization in the applicable jurisdiction.

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We have relied and will continue to rely on third parties to manufacture our drug candidates in the foreseeable future.

We currently work with qualified CMOs to manufacture drug candidates for preclinical and clinical supply. In the near future, we plan to continue outsourcing the manufacturing of our drug candidates, including commercial-scale manufacturing of our approved drugs, to CMOs/CDMOs globally and in China. The facilities used by third-party manufacturers to manufacture our drug candidates must be approved for such manufacture by the FDA and any comparable foreign regulatory authority pursuant to inspections that will be conducted after we submit an NDA to the FDA or any comparable submission to a foreign regulatory authority. We do not control the manufacturing process of, and are completely dependent on, third-party manufacturers for compliance with GMP requirements for manufacture of products. If these third-party manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or any comparable foreign regulatory authority, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability of third-party manufacturers to maintain adequate quality control, quality assurance (“QA”) and qualified personnel. If the FDA or any comparable foreign regulatory authority does not approve these facilities for the manufacture of our drug candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for such drug candidates, if approved. Our failure, or the failure of our third-party manufacturers, to comply with applicable regulations could result in sanctions being imposed on us, including clinical holds, fines, injunctions, civil penalties, delays, suspension or withdrawal of approvals, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect supplies of our products.

Our reliance on third-party CMOs exposes us to certain additional risks, such as:

If the CMOs were to encounter any of these difficulties or fail to comply with their contractual obligations, our ability to supply our drug candidates in clinical trials and to deliver drugs for commercial sales in the future would be jeopardized.

We may encounter problems in manufacturing our drug candidates or our future drug products through CMOs.

The manufacturing of biopharmaceutical products is highly complex. We currently work with qualified CMOs to manufacture drug candidates for preclinical and clinical supply. In the near future, we plan to continue outsourcing the manufacturing of our drug candidates, including commercial-scale manufacturing of our approved drugs, to CMOs/CDMOs globally and in China. Problems may arise during the course of manufacturing for a variety of reasons, such as:

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Products with quality issues may have to be discarded, resulting in product shortages or additional expenses. This could cause, among other things, increased costs, lost revenue, damage to customer relationships, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products. If problems are not discovered before the product is released to the market, recall and product liability costs may also be incurred.

We may experience delay in clinical trials or commercialization due to manufacturing problems.

Manufacturing methods and formulation are sometimes altered through the development of drug candidates from clinical trials to approval, and further to commercialization, in an effort to optimize manufacturing processes and results. Such alterations carry the risk that they will not achieve these intended objectives. Any of these alterations could cause the drug candidates to perform differently and affect the results of planned clinical trials or other future clinical trials conducted with the altered materials. This could delay the commercialization of drug candidates and require bridging studies or the repetition of one or more clinical trials, which may result in increases in clinical trial costs, delays in drug approvals and jeopardize our ability to commence product sales and generate revenue.

We may also encounter problems with achieving adequate or clinical-grade products that meet the FDA, NMPA, EMA, or other comparable regulatory authority standards or specifications, and maintaining consistent and acceptable production costs. In such events, we may be required to locate alternative suitable CMOs, and we cannot guarantee that we will be able to secure temporary, alternative manufacturers for our drug candidates with the terms, quality, and costs acceptable to us, or at all. It could delay our clinical trials and/or the availability of our future drug products for commercial sale.

CMOs that we collaborate with now or in the future may fail to exercise effective quality control and quality assurance.

The quality of our future drug products, including drug candidates manufactured for research and development purposes and, in the future, drugs manufactured for commercial use, depends in significant part on the effectiveness of the quality control and quality assurance, which in turn depends on factors such as the production processes used in the manufacturing facilities, the quality and reliability of equipment used, the quality of the staff and related training programs of our cooperative CMOs. However, we cannot assure you that the employees of CMOs will always adhere to the quality control and QA protocol, and that such quality control and QA procedures will be effective in consistently preventing and resolving deviations from pre- agreed quality standards. Any significant failure or deterioration of the quality control and QA protocol could render our future drug products unsuitable for use, or not in compliance with the relevant requirements of the GMP and/or harm our market reputation and relationship with business partners.

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We may be unable to meet the increasing demand for our existing drug candidates and future drug products due to insufficient manufacturing or shipping capabilities.

Manufacturers of pharmaceutical products often encounter difficulties in production, particularly in scaling up or out, validating the production process, and assuring high reliability of the manufacturing process, including the elimination of contamination. These problems include problems in logistics and shipping, difficulties in managing production costs and increasing yields, and potential issues related to quality control, including stability of the product, product testing, operator error, availability of qualified personnel and compliance with strictly-enforced regulations. For example, if contaminants are discovered in our supply of our drug candidates or in the manufacturing facilities of our contract manufacturers, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. If our contract manufacturers encounter unanticipated delays and expenses as a result of any of these difficulties, we may not be able to manufacture sufficient quantities of our drug candidates in the time frame we expect or at all.

To produce our drug candidates in the quantities that we understand to be required to meet anticipated market demand for our drug candidates, if approved, our contract manufacturers will need to significantly increase, or “scale up,” the production process over the initial level of production. If our contract manufacturers are unable to meet the quantity requirements, or if we cannot find a sufficient number of quality third-party suppliers, we may not be able to produce our approved drug candidates in a sufficient quantity to meet future demand.

Our suppliers may fail to provide us with sufficient quantities of the raw materials or fail to do so at acceptable quality levels or prices.

We currently rely on and expect to continue to rely on third parties to supply raw materials for us to manufacture the approved drugs in the future. However, raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier, may not be available or may not be suitable or acceptable for use due to material defects or prices. Such risks could delay or prevent R&D activities, result in higher costs, or adversely impact commercialization of our future approved drug candidates.

Our drug candidates may fail to achieve the degree of market acceptance by physicians, patients, third-party payors, and others in the medical community.

Our future approved drug candidates, if any, may fail to gain sufficient market acceptance by physicians, patients, third-party payors, and others in the medical community, who may prefer other drugs to ours. If our future approved drug candidates do not achieve an adequate level of acceptance, we may not generate significant revenue from sales of such drug candidates and may not become profitable.

The degree of market acceptance of our future approved drug candidates, if and when they are approved for commercial sale, will depend on a number of factors, including but not limited to:

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Even if our future approved drug candidates achieve market acceptance, we may not be able to maintain that market acceptance over time if new products or technologies are introduced that are more favorably received than our drug candidates and render our drug candidates obsolete.

We face intense competition and rapid technological change and the possibility that our competitors may develop therapies that are similar, more advanced, or more effective than ours.

The biotechnology and pharmaceutical industries are subject to intense competition and rapid and significant technological change. We face competition with respect to our current drug candidates, and we will face competition with respect to any drug candidates that we may seek to develop or commercialize in the future. Our competitors include major pharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. We are developing our drug candidates in competition with a number of large biopharmaceutical companies that currently market and sell drugs or are pursuing the development of drugs for the same target indications as ours. Some of these competitive drugs and therapies are based on scientific approaches that are the same as or similar to our approach, and others are based on entirely different approaches. Potential competitors also include academic institutions, government agencies and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization.

Many of our competitors have substantially greater financial, technical, and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations. Additional mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. As a result, these companies may obtain regulatory approvals from the FDA, NMPA, EMA or other comparable regulatory authorities more rapidly than we are able to and may be more effective in selling and marketing their products as well. For example, recently NMPA has accelerated market approval of drugs for diseases with high unmet medical needs, and may review and approve drugs that have gained regulatory market approval in the U.S., the European Union or Japan within the previous ten years without requiring further clinical trials in China. This may lead to increased competition from drugs which have already obtained approval in other jurisdictions.

Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring, or licensing products that are more effective or less costly than any future drug product that we may develop, or achieve earlier patent protection, regulatory approvals, product commercialization, and market penetration than we do. Additionally, technologies developed by our competitors may render our future drug products uneconomical or obsolete, and we may not be successful in marketing our future drug products against competitors.

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We have no experience in launching and marketing drug candidates. We may not be able to effectively build and manage our sales network, or benefit from third-party collaborators’ sales network.

We currently have no sales, marketing or commercial product distribution capabilities and have no experience in marketing drugs. We intend to develop an in-house marketing organization and sales force, which will require significant capital expenditures, management resources and time. We will have to compete with other biopharmaceutical companies to recruit, hire, train and retain marketing and sales personnel. If we are unable or decide not to establish internal sales, marketing and commercial distribution capabilities for any or all of the drugs we develop, we will likely pursue collaborative arrangements regarding the sales and marketing of our drugs. However, there can be no assurance that we will be able to establish or maintain such collaborative arrangements, or, if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend on the efforts of such third parties, which may not be successful. We may have little or no control over the marketing and sales efforts of such third parties, and our revenue from product sales may be lower than if we had commercialized our drug candidates ourselves. We will also face competition in our search for third parties to assist us with the sales and marketing efforts of our drug candidates. There can be no assurance that we will be able to develop in-house sales and commercial distribution capabilities or establish or maintain relationships with third-party collaborators to successfully commercialize any product, and as a result, we may not be able to generate product sales revenue.

Our future approved drug candidates may not receive reimbursement in the U.S., Europe, China, or other countries, and we may be subject to unfavorable pricing regulations.

The regulations governing regulatory approvals, pricing and reimbursement for new therapeutic products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or licensing approval is granted. In some non-U.S. markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approvals for a drug in a particular country, but then be subject to price regulations that delay our commercial launch of the drug and reduce the revenues we are able to generate from the sale of the drug in that country.

Our ability to successfully commercialize any future approved drug candidates will depend in part on the extent to which reimbursement for such drug candidates and related treatments will be available from government health administration authorities, private health insurers and other organizations. Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide the medications they will pay for and establish reimbursement levels. If our future approved drug candidates failed to be included in the reimbursement programs or did not receive a favorable reimbursement level, our drug candidates may lose advantages in pricing compared to the competitor drugs.

Obtaining reimbursement for our future approved drug candidates may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. If reimbursement is not available or is available only to limited levels, we may not be able to successfully commercialize any drug candidate that we in-license or successfully develop.

Reimbursement of our future approved drug candidates may not be immediately available or may be limited in the U.S., Europe, China, or other countries.

There may be significant delays in obtaining reimbursement for our future approved drug candidates, and coverage may be more limited than the approved indications. Inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any future approved drug candidates could have a material adverse effect on our business, operating results, and financial condition. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent.

Our revenue may be negatively affected whether our future approved drug candidates are included in reimbursement programs or not.

A primary trend in the global healthcare industry is cost containment. In recent years, government authorities and third-party payors, such as private health insurers and health maintenance organizations have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications. As a result, our revenue may be negatively affected whether our future approved drug candidates are included in reimbursement programs or not.

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For example, if the Ministry of Human Resources and Social Security of the People’s Republic of China or any of its local counterparts accepted our application for the inclusion of our future approved drug candidates in the NRDL or the Provincial Reimbursement Drug List (the “PRDL”), our potential revenue from the sales of such drug candidates could decrease as a result of the significantly lowered prices we may be required to charge for the products to be included in the NRDL or the PRDL. If we failed in our efforts to have our future drug products included in the NRDL or the PRDL but were able to successfully launch commercial sales of our future approved drug candidates, our revenue from commercial sales would be highly dependent on patient self-payment, which can make our future approved drug candidates less competitive.

Illegal and/or parallel imports and counterfeit biopharmaceutical products may reduce demand for our future approved drug candidates and could have a negative impact on our reputation and business.

The illegal importation of competing products from countries where government price controls or other market dynamics result in lower prices may adversely affect the demand for our future approved drug candidates, which may adversely affect our sales and profitability in the U.S., China, and other applicable jurisdictions where we commercialize our future approved drug candidates. Unapproved foreign imports of prescription drugs are illegal under the current laws of the U.S., China, and other applicable jurisdictions. However, illegal imports occur and may continue to occur or even increase as the ability of patients and other customers to obtain these lower priced imports continues to grow. Furthermore, cross-border imports from lower-priced markets, known as parallel imports, into higher-priced markets could harm sales of our future drug products and exert commercial pressure on pricing within one or more markets.

Certain products distributed or sold in the pharmaceutical market may be manufactured without proper licenses or approvals, or be fraudulently mislabeled with respect to their content or manufacturers. These products are generally referred to as counterfeit pharmaceutical products. The counterfeit pharmaceutical product control and enforcement system, particularly in developing markets such as China, may be inadequate to discourage or eliminate the manufacturing and sale of counterfeit pharmaceutical products imitating our future drug products. Since counterfeit pharmaceutical products in many cases are very similar in appearance to the authentic pharmaceutical products but are generally sold at lower prices, counterfeits of our products could quickly erode the demand for our future approved drug candidates.

In addition, counterfeit pharmaceutical products are unlikely to meet our or our collaborators’ rigorous manufacturing and testing standards. A patient who receives a counterfeit pharmaceutical product may be at risk for a number of dangerous health consequences. Our reputation and business could suffer as a result of counterfeit pharmaceutical products sold under our or our collaborators’ brand name(s). In addition, thefts of improperly stored inventory at warehouses or plants or while in transit which are sold through unauthorized channels could also adversely impact patient safety, our reputation, and our business.

All material aspects of the research, development, manufacturing, and commercialization of our drug candidates are heavily regulated.

All jurisdictions in which we intend to conduct our pharmaceutical-industry activities regulate these activities in great depth and detail. We intend to conduct our activities spanning over 18 significant markets in North America, Europe, and Asia. These jurisdictions strictly regulate the pharmaceutical industry, and in doing so they employ broadly similar regulatory strategies, including regulation of product development and approval, manufacturing, and marketing, sales, and distribution of products. However, there are differences in the regulatory regimes that make for a more complex and costly regulatory compliance burden for a company like ours that plans to operate in these regions.

The process of obtaining regulatory approvals and compliance with appropriate laws and regulations requires the expenditure of substantial time and financial resources. Failure to comply with the applicable requirements at any time during the product development process and approval process, or after approval, may subject an applicant to administrative or judicial sanctions. These sanctions could include refusal to approve pending applications, withdrawal of an approval, revocation of a license, a hold on clinical trials, voluntary or mandatory recalls of products, the seizure of products, total or partial suspension of production, or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or other civil or criminal penalties.

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We are subject to stringent privacy laws, information security policies, and contractual obligations related to data privacy and security.

We routinely receive, collect, generate, store, process, transmit, and maintain medical data treatment records and other personal details of subjects enrolled in our clinical trials, along with other personal or sensitive information. As such, we are subject to the relevant local, state, national, and international data protection and privacy laws, directives, regulations, and standards that apply to the collection, use, retention, protection, disclosure, transfer, and other processing of personal data in the various jurisdictions in which we operate and conduct our clinical trials, as well as contractual obligations. These data protection and privacy law regimes continue to evolve and may result in ever-increasing public scrutiny and escalating levels of enforcement and sanctions and increased costs of compliance. Failure to comply with any of these laws could result in enforcement action against us, including fines, imprisonment of company officials and public censure, claims for damages by customers, and other affected individuals, damage to our reputation and loss of goodwill.

Such data protection and privacy laws and regulations generally require clinical trial sponsors and operators and their personnel to protect the privacy of their enrolled subjects and prohibit unauthorized disclosure of personal information. If such institutions or personnel divulge the patients’ private or medical records without their consent, they will be held liable for damage caused thereby. We have taken measures to maintain the confidentiality of the medical records and personal data of patients enrolled in our clinical trials we collected, including encrypting such information in our information technology system so that it cannot be viewed without proper authorization, and setting internal rules requiring our employees to maintain the confidentiality of our patients’ medical records. However, these measures may not be always effective. For example, our information technology systems could be breached through hacking activities, and personal information could be leaked due to theft or misuse of personal information arising from misconduct or negligence. In addition, our clinical trials frequently also involve professionals from third party institutions working on-site with our staff and enrolled subjects. We cannot ensure that such persons will always comply with our data privacy measures. Furthermore, any change in such laws and regulations could affect our ability to use medical data and subject us to liability for the use of such data for previously permitted purposes.

The regulatory approval processes of the FDA and other comparable regulatory authorities are uncertain and time-consuming and may evolve over time.

The time required to obtain the approval from the FDA, NMPA, EMA, and other comparable regulatory authorities is inherently uncertain and depends on numerous factors, including the substantial discretion of the regulatory authorities. Generally, such approvals take many years to obtain following the commencement of preclinical studies and clinical trials. In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a drug candidate’s clinical development and may vary among jurisdictions. We cannot guarantee that we will be able to obtain regulatory approvals for our existing drug candidates or any drug candidates we may discover, in-license, or acquire and seek to develop in the future.

Our drug candidates could fail to receive the regulatory approvals from the FDA, NMPA, EMA, or a comparable regulatory authority for many reasons, including:

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The FDA, NMPA, EMA, or a comparable regulatory authority may require more information, including additional preclinical, clinical, or chemistry, manufacturing, and control data, to support approval, which may delay or prevent approval and our commercialization plans. Based on the feedback we received from the FDA, we are able to submit ORR data from the Phase III interim analysis for the potential accelerated approval of AN2025 in combination with paclitaxel for the treatment of recurrent or metastatic HNSCC after anti-PD-1/PD-L1 therapy. However, if the FDA believes that ORR is not good enough to support approval, we will need to wait to obtain and submit OS, which may at least cause delays in receiving the marketing approval. Even if we were to obtain approval, regulatory authorities may approve any of our drug candidates for fewer or more limited indications than we request, grant approval contingent on the performance of costly post-marketing clinical trials, or approve a drug candidate with an indication that is not desirable for the successful commercialization of that drug candidate.

Disruptions at the FDA and other government agencies caused by funding shortages could hinder their ability to hire, retain or deploy key leadership and other personnel, or otherwise prevent new or modified drugs from being developed, approved or commercialized in a timely manner or at all.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels. Statutory, regulatory, and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. Average review times at the FDA have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new biologics or modifications to licensed biologics to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions.

We may attempt to secure approval from the FDA or comparable foreign regulatory authorities through the use of accelerated approval pathways. If we are unable to obtain such approval, we may be required to conduct additional preclinical studies or clinical trials beyond those that we contemplate, which could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals. Even if we receive accelerated approval from the FDA, if our confirmatory trials do not verify clinical benefit, or if we do not comply with rigorous post- marketing requirements, the FDA may seek to withdraw accelerated approval.

We may in the future seek an accelerated approval for AN2025 in combination with paclitaxel for the treatment of recurrent or metastatic head and neck squamous cell carcinomas (“HNSCC”) after anti-PD1/PD-L1 therapy. Under the accelerated approval program, the FDA may grant accelerated approval to a drug candidate designed to treat a serious or life-threatening condition that provides meaningful therapeutic benefit over available therapies upon a determination that the drug candidate has an effect on a surrogate endpoint or intermediate clinical endpoint that is reasonably likely to predict clinical benefit. The FDA considers a clinical benefit to be a positive therapeutic effect that is clinically meaningful in the context of a given disease, such as irreversible morbidity or mortality. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. An intermediate clinical endpoint is a clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit. The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verity and describe the drug’s clinical benefit. If such post-approval studies fail to confirm the drug’s clinical benefit, the FDA may withdraw its approval of the drug.

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Prior to seeking accelerated approval for any of our drug candidates, we intend to seek feedback from the FDA and will otherwise evaluate our ability to seek and receive accelerated approval. There can be no assurance that after our evaluation of the feedback and other factors we will decide to pursue or submit an IND or BLA for accelerated approval or any other form of expedited development, review or approval. Similarly, there can be no assurance that after subsequent FDA feedback we will continue to pursue or apply for accelerated approval or any other form of expedited development, review or approval, even if we initially decide to do so. Furthermore, if we decide to submit an application for accelerated approval or receive an expedited regulatory designation (e.g., breakthrough therapy designation) for our drug candidates, there can be no assurance that such submission or application will be accepted or that any expedited development, review or approval will be granted on a timely basis, or at all. The FDA or other comparable foreign regulatory authorities could also require us to conduct further studies prior to considering our application or granting approval of any type. A failure to obtain accelerated approval or any other form of expedited development, review or approval for our drug candidate would result in a longer time period to commercialization of such drug candidate, could increase the cost of development of such drug candidate and could harm our competitive position in the marketplace.

A fast track designation by the FDA, even if granted for any of our drug candidates, may not lead to a faster development or regulatory review or approval process, and does not increase the likelihood that our drug candidates will receive marketing approval.

We have received fast track designation for AN2025 the treatment of recurrent or metastatic HNSCC with disease progression on or after platinum-based therapy. We may seek additional designation for some or all of our other drug candidates. If a drug or biologic is intended for the treatment of a serious condition and demonstrates the potential to address unmet medical needs for this condition, the sponsor may apply for FDA fast track designation. The sponsor of a fast track drug candidate has opportunities for more frequent interactions with the applicable FDA review team during product development and, once a BLA or NDA is submitted, the application may be eligible for priority review. A fast track drug candidate may also be eligible for rolling review, where the FDA may consider for review sections of the BLA or NDA on a rolling basis before the complete application is submitted, if the sponsor provides a schedule for the submission of the sections of the BLA or NDA, the FDA agrees to accept sections of the BLA or NDA and determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the BLA or NDA. The FDA has broad discretion on whether or not to grant this designation. Even if we believe a particular drug candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. Even if we do receive fast track designation, we may not experience a faster development process, review or approval compared to conventional FDA procedures. The FDA may withdraw fast track designation if it believes that statutory criteria for granting such designation are no longer met.

If we are unable to obtain NMPA approval for our drug candidates to be eligible for an expedited registration pathway as innovative drug candidates, the time and cost we incur to obtain regulatory approvals may increase.

NMPA has mechanisms in place for expedited review and approval for drug candidates that are innovative drug applications, provided such drug or drug candidate has a new and clearly defined structure, pharmacological property, and apparent clinical value and has not been marketed anywhere in the world. However, there is no assurance that an innovative drug designation will be granted by NMPA for any of our drug candidates. Moreover, an innovative drug designation, which is typically granted only towards the end of a drug’s developmental stage, does not increase the likelihood that our drug candidates will receive regulatory approvals on a fast-track basis, or at all.

Further, there have been recent regulatory initiatives in China regarding clinical trial approvals, the evaluation and approval of certain drugs and medical devices and the simplification and acceleration of the clinical trial process. For further details, see “Item 4. Information on the Company—B. Business Overview— Regulation — PRC laws and regulations — PRC drug regulatory regime.” in this annual report.

The regulatory environment in China has substantially changed in recent years and may change further in the future in unpredictable ways. Any future policies, or changes to current policies, that NMPA approves might require us to change our planned clinical study design or otherwise spend additional resources and effort to obtain approval of our drug candidates. In addition, policy changes may contain significant limitations related to use restrictions for certain age groups, warnings, precautions, or contraindications, or may be subject to burdensome post-approval study or risk management requirements.

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Even if we receive regulatory approvals for our drug candidates, we will be subject to ongoing regulatory obligations and continued regulatory review.

If the FDA, NMPA, EMA, or a comparable regulatory authority approves any of our drug candidates, the manufacturing processes, labeling, packaging, distribution, AE reporting, storage, advertising, promotion, and recordkeeping for the drug will be subject to extensive and ongoing regulatory requirements on pharmacovigilance. These requirements include submissions of safety and other post-marketing information and reports, registration, random quality control testing, adherence to any chemistry, manufacturing, and controls, specifications, continued compliance with current GMPs, and GCPs and potential post-approval studies for the purposes of license renewal. Any regulatory approvals that we receive for our drug candidates may also be subject to limitations on the approved indicated uses for which the drug may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing studies.

In addition, once a drug is approved by the FDA, NMPA, EMA, or a comparable regulatory authority for marketing, it is possible that there could be a subsequent discovery of previously unknown problems with the drug, including problems with third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements. If any of the foregoing occurs with respect to our drug products, it may result in, among other things:

Any government investigation of alleged violations of law could require us to spend significant time and resources and could generate negative publicity. Moreover, regulatory policies may change or additional government regulations may be enacted that could prevent, limit, or delay regulatory approvals of our drug candidates. If we are not able to maintain regulatory compliance, we may lose the regulatory approvals that we have already obtained and may not achieve or sustain profitability.

Failure by us or other parties to obtain or renew certain approvals, licenses, permits, and certificates required for our business, or any failure to comply with applicable regulations and industry standards may materially and adversely affect our reputation, business, financial condition, and results of operations.

Pursuant to the relevant laws, regulations, and relevant regulatory practice by governmental authority, we and/or other parties related to our operations, such as landlords or managers of premises on or local science parks in which we operate, are required to obtain and maintain various approvals, licenses, permits, and certificates (e.g., drainage permits) from relevant authorities to operate our business. Some of these approvals, permits, licenses and certificates are subject to periodic renewal and/or reassessment by the relevant authorities, and the standards of such renewal and/or reassessment may change from time to time. Any failure to obtain or renew any approvals, licenses, permits, and certificates necessary for our operations may result in enforcement actions thereunder, including orders issued by the relevant regulatory authorities causing operations to cease, and may include corrective measures requiring capital expenditure or remedial actions. There is also no assurance that the relevant authorities would not take any enforcement action against us.

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Furthermore, if the interpretation or implementation of existing laws and regulations changes, or new regulations come into effect requiring us and/or other such related parties to obtain any additional approvals, permits, licenses, or certificates that were previously not required to operate our existing businesses, we cannot assure you that we and/or other such related parties will successfully obtain such approvals, permits, licenses, or certificates. Our or these parties’ failure to obtain the additional approvals, permits, licenses, or certificates may restrict the conduct of our business, decrease our revenues and/or increase our costs.

The FDA and other regulatory agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses.

If any of our drug candidates are approved and we are found to have improperly promoted off-label uses of those products, we may become subject to significant liability. The FDA, NMPA, EMA and other regulatory agencies strictly regulate the promotional claims that may be made about prescription products, such as our drug candidates, if approved. In particular, a product may not be promoted for uses that are not approved by the FDA or such other regulatory agencies as reflected in the product’s approved labeling. If we receive marketing approval for any of our drug candidates, physicians may nevertheless prescribe it to their patients in a manner that is inconsistent with the approved label. If we are found to have promoted such off-label uses, we may become subject to significant liability. The U.S. federal government has levied large civil and criminal fines against companies for alleged improper promotion of off-label use and has enjoined several companies from engaging in off-label promotion. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed. If we cannot successfully manage the promotion of any of our drug candidates, if approved, we could become subject to significant liability, which would materially adversely affect our business and financial condition.

Adverse drug reactions and negative results from off-label use of our products could materially and adversely affect our business reputation, product brand name, and financial condition and expose us to liability.

Products distributed or sold in the pharmaceutical market may be subject to off-label drug use. Off-label drug use is prescribing a product for an indication, dosage or in a dosage form that is not in accordance with regulatory approved usage and labeling. Even though the FDA, NMPA, EMA, and other comparable regulatory authorities actively enforce the laws and regulations prohibiting the promotion of off-label use, there remains the risk that our product is subject to off-label drug use and is prescribed in a patient population, dosage or dosage form that has not been approved by competent authorities. This occurrence may render our products less effective or entirely ineffective and may cause adverse drug reactions. These occurrences may also expose us to liability and cause, or lead to, a delay in the progress of our clinical trials and may also ultimately result in failure to obtain regulatory approvals for our drug candidates.

If safety, efficacy, or other issues arise with any drug or medical product used in combination with or to facilitate the use of our drug candidates, we may be unable to market such drug candidate or may experience significant regulatory delays.

Our strategy to develop combination therapies depends on the safety and efficacy of each component drug within each combination therapy. If the FDA, NMPA, EMA, or another comparable regulatory agency revokes or denies its approval of one component drug, in either the clinical design, clinical administration, therapy approval or commercialization stage, we will be forced to terminate or redesign the clinical trials for the combination therapy, and experience significant regulatory delays or stop our commercialization efforts. In addition, we may fail our commercialization effort because products that facilitate the use of our drug candidates incur safety, efficacy, or availability issues.

We may be restricted from transferring our scientific data abroad.

In March 2018, the General Office of the State Council promulgated the Measures for the Management of Scientific Data, which provide a broad definition of scientific data and relevant rules for the management of scientific data. According to this new regulation, enterprises in China must seek governmental approval before any scientific data involving a state secret may be transferred abroad or to foreign parties. Further, any researcher conducting research funded at least in part by the Chinese government is required to submit relevant scientific data for management by the entity to which such researcher is affiliated before such data may be published in any foreign academic journal. If and to the extent our research and development of drug candidates will be subject to this new rule and any relevant laws as required by the relevant government authorities, we cannot guarantee that we can always obtain relevant approvals for sending scientific data (such as the results of our preclinical studies or clinical trials conducted within China) abroad. If we are unable to obtain necessary approvals in a timely manner, or at all, our research and development of drug candidates may be hindered. If the relevant government authorities consider the transmission of our scientific data to be in violation of the requirements under this new regulation, we may be subject to fines and other administrative penalties imposed by those government authorities.

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We have a limited operating history, have incurred net losses and anticipate that we will continue to incur net losses for the foreseeable future. We may not be able to generate sufficient revenue to achieve or maintain profitability.

Investment in the development of biopharmaceutical products is highly speculative as it entails substantial upfront capital expenditures and significant risks that a drug candidate may fail to demonstrate sufficient efficacy or safety to gain regulatory or marketing approvals or become commercially viable. Previously, we have financed our activities primarily through proceeds from private equity and debt financings. We have not generated any revenue from commercial product sales, and continue to incur significant upfront licensing fees, milestone payments, and other fees under existing in-license agreements, as well as research and development expenses and other expenses related to our ongoing operations. In addition, we issued a series of preferred shares to investors and recorded these financial instruments as financial liabilities at FVTPL. On September 29, 2023, such preferred shares had been automatically converted into our Class A ordinary shares upon the closing of our initial public offering. As a result, we are not profitable currently and have incurred net losses. Our net loss was US$56.7 million, US$58.8 million, and US$104.9 million for the years ended December 31, 2021, 2022 and 2023, respectively. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs, financial liabilities at FVTPL, and from general and administrative costs associated with our operations.

We expect to continue to incur significant expenses and losses for the foreseeable future, and that these expenses and losses will increase as we carry out certain activities relating to our development, such as:

We expect that it could take multiple years to develop a new drug from discovery, clinical development to commercialization. During the process, we may encounter unforeseen expenses, difficulties, complications, delays, and other unknown factors that may adversely affect our business. The size of our future net losses will depend partially on the rate of the future growth of our expenses, our ability to generate revenues, and the timing and amount of milestone payments and other payments that we make to third parties. If any of our drug candidates fails during clinical trials or does not gain regulatory approvals, or, even if approved, fails to achieve market acceptance, our business may not become profitable.

We may need to obtain additional financing to fund our drug development programs and commercialization efforts, which may not be available to us on acceptable terms, or at all.

Our operations have consumed substantial amounts of cash. We recorded net cash outflow from operating activities of US$3.0 million, US$43.2 million and US$56.7 million, for the years ended December 31, 2021, 2022, and 2023, respectively.

We believe our available financial resources, including cash and cash equivalents and the estimated net proceeds from our initial public offering and the concurrent private placement will be sufficient to meet our anticipated cash needs for the next 12 months from the date of this annual report. We may, however, from time to time experience net cash outflows from our operating activities for the foreseeable future, and require additional cash resources to meet our continued operating cash requirements in the future. We expect our expenses to increase in connection with our ongoing activities, particularly as we advance the clinical development of our drug candidates, initiate additional clinical trials of these and other future drug candidates, and seek regulatory approvals for them.

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In addition, if we obtain regulatory approvals for any of our drug candidates, we expect to incur significant commercialization expenses relating to product manufacturing, marketing, sales and distribution and post-approval commitments to continue monitoring the efficacy and safety data of those products we may have on the market. In particular, costs that may be required for the manufacture of any drug candidate that has received regulatory approvals may be substantial as we mainly rely on third party contract manufacturing organizations and/or our partners to manufacture such drug candidates. We may also incur expenses as we create additional infrastructure to support our operations as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations through public or private equity offerings, debt financing, collaborations or licensing arrangements or other sources. If we are unable to raise capital when needed or on acceptable terms, we could be forced to delay, limit, reduce or terminate our research and development programs or any future commercialization efforts.

We had a working capital deficiency as of December 31, 2022 as well as accumulated deficits as of December 31, 2021, 2022 and 2023.

We cannot assure you that we will not experience working capital deficiencies or accumulated deficits in the future, which could expose us to liquidity risks. We had net current liabilities of US$246.3 million and net current assets of US$50.9 million as of December 31, 2022 and 2023. In addition, we had net liabilities of US$185.4 million, US$241.3 million and net assets of US$79.4 million, as of December 31, 2021, 2022 and 2023, respectively. Our net current liabilities position and deficit position were in part due to the accounting treatment of our preferred shares, which were classified as financial liabilities in accordance with IFRSs. Such preferred shares automatically converted into shares upon completion of our initial public offering, at which time our working capitals turned into net current asset position and net asset position. However, there can be no assurance that we will not experience liquidity problems in the future. If we fail to maintain sufficient cash and financing, we may not have sufficient cash flows to fund our business, operations and capital expenditure and our business and financial position will be adversely affected.

Our results of operations, financial conditions, and prospects may be adversely affected by fair value changes and credit risk associated with our financial assets at FVTPL.

As of December 31, 2021 and 2022 and 2023, we recorded financial assets at FVTPL of US$53.8 million, US$21.3 million and US$7.0 thousand, respectively. Our financial assets at FVTPL represented wealth management products purchased from commercial banks in the PRC and Hong Kong. As these wealth management products were not traded in active markets, their fair values were determined based on the expected rate of return on our investment. The valuation involves the exercise of professional judgment and the use of certain bases, assumptions and unobservable inputs. As a result, such treatment of carrying amounts of our financial assets measured at FVTPL may cause significant volatility in or materially and adversely affect our financial condition and results of operations.

Share-based payment may cause shareholding dilution to our existing shareholders and potentially have a material and adverse effect on our financial performance.

We adopted employee incentive plans for the benefit of our employees as remuneration for their services provided to us to incentivize and reward the eligible persons who have contributed to the success of our company. For the years ended December 31, 2021, 2022, and 2023, we incurred share-based payment expenses of US$3.4 million, US$6.1 million, and US$4.3 million, respectively. To further incentivize our employees to contribute to us, we may grant additional share-based compensation in the future. Issuance of additional Shares with respect to such share-based payment may dilute the shareholding percentage of our existing shareholders. Expenses incurred with respect to such share-based payment may also increase our operating expenses and therefore have a material and adverse effect on our financial performance.

Disruptions in the financial markets and economic conditions could affect our ability to raise capital.

Global economies could suffer dramatic downturns as the result of a deterioration in the credit markets and related financial crisis as well as a variety of other factors including, extreme volatility in security prices, severely diminished liquidity and credit availability, ratings downgrades of certain investments and declining valuations of others. In the past, governments have taken unprecedented actions in an attempt to address and rectify these extreme market and economic conditions by providing liquidity and stability to the financial markets. If these actions are not successful, the return of adverse economic conditions may cause a significant impact on our ability to raise capital, if needed, on a timely basis and on acceptable terms or at all.

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In addition, there is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of some of the world’s leading economies, including the U.S. and China. There have been concerns over unrest and terrorist threats in the Middle East, Europe and Africa and over the conflicts involving Ukraine, Syria and North Korea. There have also been concerns on the relationship among China and other Asian countries, which may result in or intensify potential conflicts in relation to territorial disputes or the trade related disputes between the U.S. and China.

If we fail to implement and maintain an effective system of internal controls to remediate our material weaknesses over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence in our company and the market price of the ADSs may be materially and adversely affected.

Prior to our initial public offering, we have been a private company with limited reporting and accounting personnel and other resources with which to address our internal control over financial reporting. In connection with the audits of our consolidated financial statements included in this annual report, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, or PCAOB, a “material weakness” is a deficiency, or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. For details of these material weaknesses, see “Item 15. Controls and Procedures — Internal Control over Financial Reporting.” We are in the process of implementing a number of measures to address the material weaknesses and deficiencies that have been identified. See “Item 15. Controls and Procedures.” However, we cannot assure you that these measures will fully address the material weaknesses and deficiencies in our internal control over financial reporting or that we may conclude that they have been fully remediated.

We are subject to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act. Section 404 of such Act, which requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our second annual report on Form 20-F after becoming a public company. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue an adverse opinion on the effectiveness of internal control over financial reporting because of the existence of a material weakness if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. If we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. Generally speaking, if we fail to achieve and maintain an effective internal control environment, it could result in material misstatements in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of the ADSs, may be materially and adversely affected. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

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We may be contractually obligated to make significant payments for in-licensed drug candidates which may eventually not be approved for sale or which we find that we are unable to commercialize successfully.

Our research and development engine runs on both in-house discovery and external licensing of highly innovative products. Leveraging our global clinical development capability, deep understanding of relevant molecules, and proficiency in clinical trial designs, we are able to identify and secure suitable and promising compounds ahead of our competitors. We are developing two clinical-stage drug candidates which were secured from in-licensing agreements with third parties. Pursuant to the license agreements, we are required to make various payments to the licensors, including an upfront payment at the time when the relevant license agreement is signed, milestone payments for the achievements of specified clinical, regulatory and commercial milestones, and royalties calculated as a specified percentage of the annual net sales of the products covered by the license. Royalties are often structured so that the percentage increases in tiers as net sales increase. Please refer to the paragraphs headed “Business — License and collaboration agreements” in this annual report for more details.

When we negotiate our license agreements, we must estimate the probability of success for the drug’s development and the potential size of the eventual market for the drug product. We may have to make significant upfront payments to secure the rights to attractive drug candidates, and there is no guarantee that we will ever be able to recoup those expenses. Milestone or other non-royalty payments also become due on a drug candidate before we can obtain regulatory approvals for it or commercialize it, and we may not have sufficient funds available to make these payments when they come due. If and when we obtain regulatory approvals to market a drug, our profits from any sales will be reduced by the royalties that we agreed to pay under the license agreement. If we make significant payments under our license agreements for drug candidates that never reach market, or if we misjudge the potential size of the market for our drug candidates and overpay for the rights that we license, our financial condition and financial performance may be materially and adversely affected.

Raising additional capital may cause dilution to the interests of our shareholders, restrict our operations, or require us to relinquish rights to our technologies or drug candidates.

We may seek additional funding through a combination of equity offerings, debt financings, collaborations, and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the value of your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a holder of the ADSs. Incurring additional indebtedness or the issuance of certain equity securities could result in increased fixed payment obligations and also result in certain additional restrictive covenants, such as limitations on our ability to incur additional debt or issue additional equity, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, the issuance of additional equity securities, or the possibility of such issuance, may cause the market price of the ADSs to decline.

In the event we enter into collaborations or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party our rights to technologies or drug candidates on unfavorable terms, which we would have otherwise sought to develop or commercialize ourselves or reserve for future potential arrangements when we are more likely to achieve more favorable terms.

We are exposed to risks of conducting our business and operations in international markets.

Global markets are a crucial component of our growth strategy. If we fail to obtain licenses or enter into collaboration arrangements with third parties in such markets, or if third-party collaborators are not successful, our revenue-generating growth potential will be adversely affected. Risks associated with global operation include, but are not limited to:

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On September 12, 2022, the President of the United States issued an “Executive Order on Advancing Biotechnology and Biomanufacturing Innovation for a Sustainable, Safe, and Secure American Bioeconomy”, launching a national biotechnology and biomanufacturing initiative in the United States. This initiative will be comprised of various efforts by the U.S. government, including investments, programs and partnerships to advance research and development in biotechnology, and biomanufacturing, as well as efforts to secure and protect the U.S. bioeconomy. This executive order may lead to potential changes to U.S. policies affecting the biotechnology and biomanufacturing industries, however, it is unknown at this time whether and what specific policies and actions will be adopted by the U.S. government. Our business and operations in the U.S. primarily involve conducting research and development. We therefore expect that this executive order will have no immediate impact on our activities in the United States. Nevertheless, if the U.S. government were to adopt any policies that adversely impact transnational companies with business operating in China conducting research and development activities in the United States, our business and results of operations could be adversely affected.

Our international operations may require us to comply with various trade restrictions, such as economic sanctions and export controls.

Our international operations may be subject to various trade restrictions, including economic sanctions and export controls, imposed by governments around the world with jurisdiction over our operations. Such trade restrictions may prohibit or restrict transactions involving certain persons and certain designated countries or territories. Our failure to successfully comply with applicable trade restrictions may expose us to legal, business or reputational harm. Investigations of alleged violations can be expensive and disruptive.

For example, the United States continues to expand economic sanctions targeting Russian financial institutions in response to Russia’s military action against Ukraine. Such sanctions on Russian financial institutions may interfere with our ability to make payment to Russian CROs in US dollars and may force us to choose another settlement currency, limit or stop our collaboration with Russian CROs. We are currently engaging a Russian CRO for conducting one clinical trial in Russia.

We endeavor to conduct our activities in compliance with applicable trade restrictions. However, we cannot guarantee that our existing compliance policies and procedures will be effective in preventing violations, which could adversely affect our business, reputation, financial condition and results of operations. Further, we cannot predict the nature, scope or effect of future regulatory requirements, including changes that may impose additional restrictions on our international operations.

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We may face force majeure risks.

Our operations may be under threat of numerous natural disasters such as floods, earthquakes, sandstorms, snowstorms, fire, or drought, the outbreak of a widespread health epidemic, such as swine flu, avian influenza, severe acute respiratory syndrome, or SARS, Ebola, Zika, COVID-19, or other events, such as power, water or fuel shortages, failures, malfunction, and breakdown of information management systems, unexpected maintenance, or technical problems, or are susceptible to unforeseen catastrophic events such as potential wars or terrorist attacks. Serious natural disasters may result in loss of lives, injury, destruction of assets, and disruption of our business and operations. Acts of war or terrorism may also injure our employees, cause loss of lives, disrupt our business network, and destroy our markets. For example, our business could be adversely impacted by the ongoing geopolitical tensions related to Russia’s actions in Ukraine, resulting sanctions imposed by the United States and other countries and retaliatory actions taken by Russia in response to such sanctions; or other catastrophic events. Any of these factors and other factors beyond our control could have an adverse effect on the overall business sentiment and environment, cause uncertainties in the regions where we conduct business, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition, and results of operations.

The market opportunities for our drug candidates can be smaller than we estimate or the approvals that we obtain may be based on a narrower definition of the patient population.

We make estimates regarding the incidence and prevalence of target patient populations for particular diseases based on various third-party sources and internally generated analysis and use such estimates in making decisions regarding our drug development strategy, including acquiring or in-licensing drug candidates and determining indications on which to focus in preclinical or clinical trials.

These estimates may be inaccurate or based on imprecise data. For example, the total addressable market opportunity will depend on, among other things, acceptance by the medical community, patient access, drug pricing and reimbursement. The number of patients in the addressable markets may turn out to be lower than expected, patients may not be otherwise amenable to treatment with our drugs, or new patients may become increasingly difficult to identify or gain access to, all of which may significantly harm our business, financial condition, results of operations, and prospects.

Our future success depends on our ability to retain key executives and to attract, train, retain, and motivate qualified and highly skilled personnel especially R&D and clinical related staff.

We are heavily dependent on the expertise of our senior management and other key employees and consultants, as well as our scientific teams. Although we have formal employment agreements with each of our executive officers, these agreements do not prevent our executives from terminating their employment with us at any time. In addition, we do not maintain key-person insurance for any of our executives or other key personnel.

Recruiting and retaining qualified management, scientific, technical, clinical, manufacturing, and sales and marketing personnel in the future will also be critical to our success. The loss of the services of our executive officers or other key employees and consultants could impede the achievement of our research, development and commercialization objectives and seriously harm our ability to successfully implement our business strategy.

Furthermore, replacing executive officers, key employees, experienced R&D staff, or consultants may be difficult and take an extended period of time due to the limited number of individuals in our industry with the breadth of skills and experience required to successfully develop, obtain regulatory approvals of and commercialize drugs. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain, or motivate these key personnel on acceptable terms given the competition among numerous pharmaceutical and biopharmaceutical companies for similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. To compete effectively, we may need to offer higher compensation and other benefits.

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If we or our suppliers, CROs or CMOs fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs.

We are subject to various environmental, health and safety laws and regulations, including but not limited to the treatment and discharge of pollutants into the environment and the use of toxic and hazardous chemicals in the process of our business operations. In addition, our construction projects can only be put into operation after the relevant administrative authorities in charge of environmental protection and health and safety have examined and approved the relevant facilities in certain jurisdictions. We cannot guarantee that we will be able to obtain all the regulatory approvals or complete all the required procedure for our construction projects in a timely manner, or at all. Delays or failures in obtaining all the requisite regulatory approvals or completing all the required procedure for our construction projects may affect our business operation. Furthermore, we may be required to incur substantial costs to comply with current or future environmental, health and safety laws and regulations. These current or future laws and regulations may impair our research, development, or production efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties, or other sanctions.

While we attempt to comply with such laws and regulations, we cannot fully eliminate the risk of accidental contamination, biological or chemical hazards or personal injury at our or third-parties’ facilities during the process of discovery, testing, development and manufacturing of biopharmaceuticals. In the event of such accident, we could be held liable for damages and clean-up costs which, to the extent not covered by existing insurance or indemnification. Other adverse effects could result from such liability, including reputational damage. We or our collaborators may also be forced to close or suspend operations at certain of the affected facilities temporarily, or permanently due to any accidental contamination, biological or chemical hazards or personal injury. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.

Our employees, management, service providers, independent contractors, principal investigators, consultants, commercial partners, vendors, CROs, and CMOs may engage in misconduct or other improper activities.

We are exposed to the risk of fraud, misconduct or other illegal activities by our employees, management, service providers, independent contractors, principal investigators, consultants, commercial partners, vendors, CROs and CMOs. Misconduct by these parties could include intentional, reckless and/or negligent conduct that fails to:

If we obtain approval of any of our drug candidates and begin commercializing those drugs in the U.S., Europe, China, or other applicable jurisdictions, our potential exposure under the laws of such jurisdictions will increase considerably and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as future sales, marketing, and educational programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws and regulations designed to prevent fraud, kickbacks, self-dealing, and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing, and promotion, structuring and commissions, certain customer incentive programs, and other business arrangements generally. Misconduct by these parties could also involve individually identifiable information, including, without limitation, the improper use of information obtained in the course of clinical trials, or illegal misappropriation of drug product, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other parties, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of civil, criminal, and administrative penalties, damages, monetary fines, possible exclusion from the NRDL, contractual damages, reputational harm, diminished profits, and future earnings and curtailment of our operations.

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In addition, our employees, management, directors, independent contractors, commercial partners, and vendors may be subject to legal, regulatory, and administrative proceedings. The existence of legal, regulatory, and administrative proceedings against any of our employees, management, directors, independent contractors, commercial partners, and vendors, even if they do not involve our company, may harm our reputation, and adversely affect our business and operations.

We may be involved in lawsuits, claims, administrative proceedings, or other legal proceedings against us, which could adversely affect our business, financial condition, results of operations, and reputation.

From time to time, we may be involved in lawsuits, claims, administrative proceedings, or other legal proceedings arising in the ordinary course of business or pursuant to governmental or regulatory enforcement activity. In addition, as we are under the progress of inspection and acceptance of one of our completed construction projects, we are subject to risks of administrative penalty if we delay or fail to obtain relevant approvals. Litigation and governmental proceedings can be expensive, lengthy, and disruptive to normal business operations, and can require extensive management attention and resources, regardless of their merit. Furthermore, any litigation, legal disputes, claims, or administrative proceedings which are initially not of material importance may escalate and become important to us due to a variety of factors, such as the facts and circumstances of the cases, the likelihood of loss, the monetary amount at stake, and the parties involved.

Additionally, our insurance might not cover claims brought against us, provide sufficient payments to cover all of the costs to resolve one or more such claims, or continue to be available on terms acceptable to us. In particular, any claim could result in unanticipated liability to us if the claim is outside the scope of the indemnification arrangement we have with third parties, they do not abide by the indemnification arrangement as required, or the liability exceeds the amount of any applicable indemnification limits or available insurance coverage. While we intend to defend the aforementioned matters vigorously, we cannot predict the results of complex legal proceedings and an unfavorable resolution of a lawsuit or proceeding could materially adversely affect our business, results of operations, financial condition, and reputation.

Mr. Yang Lu, our co-founder, chairman and the chief executive officer, may face a divorce lawsuit against him. If a case is brought to a court, and the court rules in favor of Mr. Lu’s spouse, it could be detrimental to our business and reputation. For example, the litigation proceedings could divert a significant amount of Mr. Lu’s attention and other resources from our business and operations, which could harm our results of operations. Also, the publicity of the divorce lawsuit could damage our brand or have material adverse effect on our business, results of operations and financial condition.

Our reputation is key to our business success. Negative publicity may adversely affect our reputation, business, and growth prospects.

Our reputation and business prospects could be adversely affected by any negative publicity concerning us, our affiliates, our employees, or any entity that shares the “Adlai Nortye” name, even if untrue. Therefore, we cannot assure you that negative publicity about us or any of our affiliates or any entity that shares the “Adlai Nortye” name would not damage our brand image or have a material adverse effect on our business, results of operations and financial condition. In addition, referrals and word of mouth have significantly contributed to our ability to establishing new partnerships. As a result, any negative publicity about us or any of our affiliates or any entity that shares the “Adlai Nortye” name could adversely affect our ability to maintain our existing collaboration arrangements or attract new partners. A recent example of negative publicity relates to a blog published in August 2021, alleging us paying RMB2.87 million bribes for our Series C financing purposes. Although the local police concluded that the bribery allegation had no factual basis and issued a Notice of Dismissal of Accusation, and the blog post was removed after we issued a warning letter to the blogger for potential defamation, we still suffered reputational damages associated with this blog post. We cannot assure you that similar events or negative publicity will not repeat in the future.

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Our business operations and current or future relationships with healthcare professionals, principal investigators, consultants, customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency and other healthcare laws and regulations.

Healthcare providers, physicians, and others play a primary role in recommending and prescribing any products for which we obtain regulatory approvals. If we obtain the FDA, NMPA, EMA, PMDA, or other comparable regulatory authorities’ approval for any of our drug candidates and begin commercializing those drug products in the U.S., China, Europe, Japan or other applicable jurisdictions, our operations may be subject to various fraud and abuse laws of such jurisdictions, including, without limitation, the PRC Anti- Unfair Competition Law, the PRC Criminal Law, the Federal Anti-Kickback Statute, the Federal False Claims Act, and transparency laws and regulations with respect to drug pricing and transfers of value made to physicians and other licensed healthcare professionals. These laws may impact, among other things, our proposed sales, marketing, and education programs. In the U.S., such laws include:

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Efforts to ensure that our current and future business arrangements with third parties will comply with applicable healthcare and privacy laws and regulations will involve ongoing substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant penalties, including civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government-funded healthcare programs, such as Medicare and Medicaid, integrity oversight and reporting obligations, contractual damages, reputational harm, diminished profits and future earnings and the curtailment or restructuring of our operations. Defending against any such actions can be costly and time-consuming and may require significant financial and personnel resources. Therefore, even if we are successful in defending against any such actions that may be brought against us, our business may be impaired. Further, if any of the physicians or other healthcare providers or entities with whom we expect to do business are found not to be in compliance with applicable laws or regulations, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government-funded healthcare programs.

If any of the physicians or other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal, civil, or administrative sanctions, including exclusions from government-funded healthcare programs.

If we fail to comply with applicable anti-bribery laws, our reputation may be harmed and we could be subject to penalties and significant expenses.

We are subject to anti-bribery laws in China that generally prohibit companies and their intermediaries from making payments to government officials for the purpose of obtaining or retaining business or securing any other improper advantage. In addition, although currently our primary operating business is in China, we are subject to the Foreign Corrupt Practices Act or the FCPA. The FCPA generally prohibits us from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Although we have policies and procedures designed to ensure that we, our employees, and our agents comply with anti-bribery laws, there is no assurance that such policies or procedures will prevent our agents, employees, and intermediaries from engaging in bribery activities.

Failure to comply with anti-bribery laws could disrupt our business and lead to severe criminal and civil penalties, including imprisonment, criminal and civil fines, loss of our export licenses, suspension of our ability to do business with the government, denial of government reimbursement for our products and/or exclusion from participation in government healthcare programs. Other remedial measures could include further changes or enhancements to our procedures, policies, and controls and potential personnel changes and/or disciplinary actions, any of which could have a material adverse effect on our business, financial condition, results of operations, and liquidity.

Recently enacted and future legislation in the United States and other countries may affect the prices we may obtain for our drug candidates and increase the difficulty and cost for us to obtain marketing approval of and commercialize our drug candidates.

In the U.S. and many other countries, rising healthcare costs have been a concern for governments, patients and the health insurance sector, which resulted a number of changes to laws and regulations, and may result in further legislative and regulatory action regarding the healthcare and health insurance systems that could affect our ability to profitably sell any drug candidates for which we obtain marketing approval.

For example, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, was enacted in the U.S. in March 2010 with the stated goals of containing healthcare costs, improving quality and expanding access to healthcare, and includes measures to change health care delivery, increase the number of individuals with insurance, ensure access to certain basic health care services, and contain the rising cost of care.

In addition, other federal health reform measures have been proposed and adopted in the U.S. For example, as a result of the Budget Control Act of 2011, providers are subject to Medicare payment reductions through 2031, unless additional Congressional action is taken. Further, the American Taxpayer Relief Act of 2012 reduced Medicare payments to several providers and increased the statute of limitations period for the government to recover overpayments from providers from three to five years. The Medicare Access and CHIP Reauthorization Act of 2015 also introduced a quality payment program under which certain individual Medicare providers will be subject to certain incentives or penalties based on new program quality standards. Payment adjustments for the Medicare quality payment program began in 2019. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors.

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Further, there has been heightened governmental scrutiny in the U.S. of pharmaceutical pricing practices in light of the rising cost of prescription drugs. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient assistance programs, and reform government program reimbursement methodologies for products. Most recently, the Inflation Reduction Act of 2022, or IRA, included a number of significant drug pricing reforms, which include the establishment of a drug price negotiation program within the U.S. Department of Health and Human Services, or HHS (beginning in 2026) that requires manufacturers to charge a negotiated “maximum fair price” for certain selected drugs or pay an excise tax for noncompliance, the establishment of rebate payment requirements on manufacturers under Medicare Parts B and D to penalize price increases that outpace inflation (first due in 2023), and a redesign of the Part D benefit, as part of which manufacturers are required to provide discounts on Part D drugs (beginning in 2025). The IRA permits the HHS Secretary to implement many of these provisions through guidance, as opposed to regulation, for the initial years. Additional drug pricing proposals could appear in future legislation.

At the state level, legislatures have increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This could reduce the ultimate demand for our product candidates, if approved, or put pressure on our product pricing, which could negatively affect our business, results of operations, financial condition and prospects.

These new laws and other healthcare reform measures that may be adopted in the future may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drug candidates, if approved.

We have limited insurance coverage, and any claims beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources.

We maintain insurance policies that are required under PRC laws and regulations as well as insurance based on our assessment of our operational needs and industry practice. Our principal insurance policies cover losses arising from liabilities in our human clinical trials for the development of our clinical-stage drug candidates in the United States, United Kingdom, Poland, and France. We have elected not to maintain certain types of insurances, such as business interruption insurance or key-man insurance. Our insurance coverage may be insufficient to cover any claim for product liability, damage to our fixed assets or employee injuries. Any liability or damage to, or caused by, our facilities or our personnel beyond our insurance coverage may result in our incurring substantial costs and a diversion of resources and may negatively impact our drug development and overall operations.

Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches.

Notwithstanding the implementation of security measures, our internal computer systems, and those of our partners and other contractors and consultants may be vulnerable to damage from computer viruses and unauthorized access.

In the ordinary course of our business, we collect and store sensitive data, and manage and maintain our applications and data utilizing on-site systems and outsourced vendors. These applications and data encompass a wide variety of business-critical information including research and development information, commercial information, and business and financial information. Shutdowns, or service disruptions at us or vendors that provide information systems, networks, or other services to us could have an adverse impact on us and our business, including loss of data and damage to equipment and data. In addition, system redundancy may be ineffective or inadequate, and our disaster recovery planning may not be sufficient to cover all eventualities. Significant events could result in a disruption of our operations, damage to our reputation or a loss of revenues.

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In addition, we could be subject to risks caused by misappropriation, misuse, leakage, falsification, or intentional or accidental release or loss of information maintained in the information systems and networks of us and our vendors. Moreover, outside parties may attempt to penetrate our systems or those of our vendors or fraudulently induce our personnel or the personnel of our vendors to disclose sensitive information in order to gain access to our data and/or systems. Like other companies, we may experience threats to our data and systems, including malicious codes and viruses, phishing, and other cyberattacks. If a material breach of our information technology systems or those of our vendors occurs, the market perception of the effectiveness of our security measures could be harmed, our reputation and credibility could be damaged, and significant amounts of money and other resources could be required to expend on the repair or replacement of information systems or networks. In addition, we could be subject to regulatory actions and/or claims made by individuals and groups in private litigation involving privacy issues related to data collection and use practices, and other data privacy laws and regulations. The development and maintenance of systems and controls for preventing, identifying, and mitigating threats are costly and requires ongoing monitoring and updating. Moreover, despite our efforts, the possibility of these events occurring cannot be eliminated entirely.

Cybersecurity incidents, including data security breaches or computer viruses, could harm our business by disrupting our delivery of services, damaging our reputation or exposing us to liability.

We receive, process, store and transmit, often electronically, the data of our clinical trial and others, much of which is confidential. Unauthorized access to our computer systems or stored data could result in the theft, including cyber-theft, or improper disclosure of confidential information, and the deletion or modification of records could cause interruptions in our operations. These cybersecurity risks increase when we transmit information from one location to another, including over the internet or other electronic networks. Despite the security measures we have implemented, our facilities, systems and procedures, and those of our third-party service providers, may be vulnerable to security breaches, acts of vandalism, software viruses, misplaced or lost data, programming or human errors or other similar events which may disrupt our operations. Any security breach involving the misappropriation, loss or other unauthorized disclosure or use of confidential information, whether by us or a third party, could (i) subject us to civil and criminal penalties, (ii) have a negative impact on our reputation, or (iii) expose us to liability to third parties or government authorities. We are not aware of such breaches to date. Any of these developments could have a material adverse effect on our business, financial condition and results of operations.

We are subject to changing law and regulations regarding regulatory matters, corporate governance, and public disclosure that have increased both our costs and the risk of non-compliance.

The oncology drug market is subject to influence of relevant regulations. Recently, there is a trend of enhanced regulations. On November 19, 2021, the Center for Drug Evaluation issue the Clinical Value- Oriented Anti-tumor Drug Clinical Research and Development Guidelines with the purpose to better address the needs of patients and to promote the clinical value-oriented R&D of anti-tumor drugs. Such regulations expose our R&D of oncology drugs to higher requirements. According to the Guidelines, when clinical trials of innovative drugs are designed to choose controlled drugs, the best supportive treatment should be preferred over placebo. Also, if an indication already has the current best drug recommendation in the treatment guidelines, the new drug should be compared with the existing drug.

The Guidelines aim to select more high-quality first-in-class drugs. As AN2025 has the potential to be the first treatment globally for recurrent or metastatic HNSCC patients after disease progression with anti-PD-1/PD-L1 therapy, this new focus of regulatory policies promoting value-oriented research and development activities in China is in line with our development strategies and may further facilitate our clinical trials and studies. To the best of our knowledge, we are currently in compliance with the relevant requirements in the Guidelines. However, we cannot assure you that there will be no adverse regulatory changes in the implementation of Guidelines in the PRC, or other regulatory changes in the PRC that will have a negative impact on our business going forward.

Moreover, because these laws, regulations, and standards are subject to disparate interpretations, their application in practice may evolve over time as new guidance becomes available. This evolution may result in continuing uncertainty regarding compliance matters and additional costs necessitated by ongoing revisions to our disclosure and governance practices. If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalties and our business may be harmed.

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Changes in U.S. and international policies, particularly with regard to China, may adversely impact our business and operating results.

Any tensions and political concerns between China and the relevant foreign countries or regions may adversely affect our business, financial condition, results of operations, cash flows, and prospects. The U.S. government has recently made statements and taken certain actions that may lead to potential changes to the U.S. and international policies with regard to China. It is unknown whether and to what extent other new laws or regulations will be adopted, or the effect that any such actions would have on us or our industry. While we have not started commercialization of drug candidates, any unfavorable international government policies, such as capital controls or tariffs, may affect the demand for our future approved drug products, the competitive position of our future approved drug products, the hiring of scientists and other research and development personnel, the use and transfer of clinical data, and import or export of raw materials in relation to drug development, or prevent us from selling our future approved drug products in certain countries. If any new legislation and/or regulations are implemented, or in particular, if the U.S. government takes retaliatory actions due to the recent U.S.-China tension, such changes could have an adverse effect on our business, financial condition, and results of operations.

It also remains unclear what actions, if any, the U.S. government will take with respect to other existing international trade agreements. If the U.S. were to withdraw from or materially modify certain international trade agreements to which it is a party, especially with respect to intellectual properties transfer, our business, financial condition, and results of operations could be negatively impacted.

Our business benefits from certain financial incentives and discretionary policies granted by local governments. Expiration of, or changes to, these incentives or policies would have an adverse effect on our results of operations.

In the past, local governments in mainland China granted certain financial incentives from time to time to our PRC subsidiaries as part of their efforts to encourage the development of local business. We recorded government grants of approximately US$2,000.0, US$2.1 million and US$3.3 million for the years ended December 31, 2021, 2022, and 2023. The local governments have discretion in deciding the timing, amount, and criteria of government financial incentives and thus we cannot predict with certainty whether or how much financial incentive will be granted to us even if we apply for such funding. We generally do not have the ability to influence local governments in making these decisions. Government authorities may also decide to reduce or eliminate incentives or may amend or terminate the relevant financial incentive policies at any time. In addition, some of the government financial incentives are granted to us on a project basis and subject to the satisfaction of certain conditions, including compliance with the applicable financial incentive agreements and completion of the specific projects therein. We cannot guarantee that we will satisfy all relevant conditions, and if we fail to satisfy any such conditions, we may be deprived of the relevant incentives. We cannot assure you of the continued availability of the government incentives currently enjoyed by us.

Risks relating to our operation in the People’s Republic of China

The operational risks associated with being based in and having operations in China also apply to operations in Hong Kong and Macau. With respect to the legal risks associated with being based in and having operations in China, the laws, regulations and discretion of the governmental authorities in China discussed in this annual report are expected to apply to entities and businesses in mainland China, rather than to entities or businesses in Hong Kong and Macau which operate under different sets of laws from those of mainland China.

The approval, filing, or other procedures of the CSRC or other PRC regulatory authorities may be required in connection with our offshore offerings under PRC laws, regulations, and rules.

On July 6, 2021, the General Office of the State Council, together with another regulatory authority, jointly promulgated the Opinions on Strictly Combating Illegal Securities Activities in Accordance with the Law, which calls for, among others, enhanced administration and supervision of overseas-listed China-based companies, proposes to revise the relevant regulation governing the overseas issuance and listing of shares by such companies, and clarifies the responsibilities of competent domestic industry regulators and government authorities.

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On February 17, 2023, the China Securities Regulatory Commission, or the CSRC, released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Trial Measures, and five supporting guidelines, which took effect on March 31, 2023. Pursuant to the Trial Measures, domestic companies that seek to list overseas, both directly and indirectly, should fulfill the filing procedure and report relevant information to the CSRC. Where a domestic company seeks to conduct indirect overseas offerings and listings, the issuer shall designate a major domestic operating entity. This entity shall act as the domestic responsible entity and be responsible for filing with the CSRC. If a domestic company fails to complete the filing procedure or conceals any material fact or falsifies any major content in its filing documents, such domestic company may be subject to administrative penalties, such as order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person directly in charge, and other directly liable persons may also be subject to administrative penalties, such as warnings and fines. See “Item 4. Information on the Company—B. Business Overview—Regulation — Regulations on M&A Rules and Overseas Listings.”

If the filing procedure with the CSRC under the Trial Measures is required for any future offerings or any other capital raising activities, it is uncertain whether it would be possible for us to complete the filing, or how long it will take us to do so. Failure to complete the required filing may result in an investigation by the relevant authorities, as well as fines or penalties, and could lead to an order prohibiting us from conducting an offering. These risks have the potential to cause a material adverse change in our operations and the value of our ordinary shares. Moreover, they could significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause such securities to significantly decline in value or become worthless.

On February 24, 2023, the CSRC jointly with other relevant governmental authorities, promulgated the Confidentiality and Archives Management Provisions, which took effect on March 31, 2023. According to the Confidentiality and Archives Management Provisions, domestic companies, whether offering and listing securities overseas directly or indirectly, must strictly abide the applicable laws and regulations when providing or publicly disclosing, either directly or through their overseas listed entities, documents and materials to securities services providers such as securities companies and accounting firms or overseas regulators in the process of their overseas offering and listing. If such documents or materials contain any state secrets or government authorities work secrets, domestic companies must obtain the approval from competent governmental authorities according to the applicable laws, and file with the secrecy administrative department at the same level with the approving governmental authority. Furthermore, the Confidentiality and Archives Management Provisions provide that securities companies and securities service providers shall fulfill the applicable legal procedures when providing overseas regulatory institutions and other relevant institutions and individuals with documents or materials containing any state secrets or government authorities work secrets or other documents or materials that, if divulged, will jeopardize national security or public interest. Since the Confidentiality and Archives Management Provisions were promulgated recently, substantial uncertainties still exist with respect to the interpretation and implementation of such provisions and how they will affect us.

In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is determined in the future that we are subject to the approval of the CSRC for our offshore offerings, we may fail to obtain such approval, filing or meet such requirements in a timely manner or at all, or completion could be rescinded. Any failure to obtain or delay in obtaining such approval, filing or completing such procedures for our offshore offerings, or a rescission of any such approval or filing obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of future capital raising activities into China, or take other actions that could materially and adversely affect our business, financial condition, results of operations and prospects, as well as the trading price of our listed securities.

The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if any regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our future capital raising activities, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. The procedure for obtaining such waiver must still be determined in conjunction with the legal and regulatory requirements in effect at the time. Concerning such approvals, filings, or other requirements, if they are not timely met, or if there are any negative reports or other unforeseeable circumstances, it could materially and adversely affect our business, prospects, financial condition, reputation, and this offering, and the trading price of our listed securities.

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The impact of the CAC’s increasing oversight over data security remains uncertain, particularly for companies with substantial China operations seeking to list on a foreign stock exchange.

In January 2022, the CAC amended Measures of Cybersecurity Review, or the Revised CAC Measures, which came into effect on February 15, 2022. Pursuant to the Revised CAC Measures, critical information infrastructure operators procuring network products and services, and online platform operators (as opposed to “data processors” in the Draft Management Regulation) carrying out data processing activities which affect or may affect national security, shall conduct a cybersecurity review pursuant to the provisions therein. In addition, online platform operators possessing personal information of more than one million users seeking to be listed in foreign country must apply for a cybersecurity review.

As of the date of this annual report, we have not received any notice from any PRC regulatory authority identifying us as a “critical information infrastructure operator,” “online platform operator” or “data processor,” or requiring us to go through the cybersecurity review procedures pursuant to the Revised CAC Measures and the Draft Management Regulations. According to the Revised CAC Measures, we do not expect ourselves to become subject to cybersecurity review by the CAC given that: (i) the data we handle in our business operations, either by its nature or in scale, do not normally trigger significant concerns over PRC national security and (ii) we have not processed, and do not anticipate to process in the foreseeable future, personal information of more than one million users or persons. Based on the above and the information currently available, we believe the impact of the CAC’s increasing oversight over data security on our business is immaterial as of the date of this annual report.

However, the implementation and interpretation of the Revised CAC Measures , and the decision as to whether the PRC regulatory authorities may adopt new laws, regulations, rules, or detailed implementation and interpretation in relation, or in addition to the Revised CAC Measures, will be determined on an ad hoc basis depending on the facts and circumstances. While we intend to closely monitor the evolving laws and regulations in this area and take all reasonable measures to mitigate compliance risks, we cannot guarantee that our business and operations will not be adversely affected by the potential impact of the Revised CAC Measures or other laws and regulations related to privacy, data protection and information security.

We may be influenced by changes in the political and economic policies of the PRC government.

A very substantial portion of our assets and operations are currently located in mainland China. Accordingly, we may be influenced to a significant degree by political and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, regulation of foreign exchange and allocation of resources. Before the adoption of its reform and opening up policies in 1978, the PRC was primarily a planned economy. In recent years, the PRC government has been reforming the PRC economic system and government structure. For example, the PRC government has implemented economic reform and measures emphasizing the utilization of market forces in the development of the PRC economy in the past three decades. These reforms have resulted in significant economic growth and social prospects. Economic reform measures, however, may be adjusted, modified or applied to varying degrees between different industries or different regions within the country. While the Chinese economy has experienced significant growth over past decades, growth has been uneven, both geographically and among various sectors of the economy. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and results of operations, lead to a reduction in demand for our future products and adversely affect our competitive position.

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Uncertainties with respect to the interpretation and enforcement of laws, and changes in laws and regulations in China could materially and adversely affect us.

Our operations in mainland China are governed by PRC laws and regulations. Our operating subsidiary in the PRC, Hangzhou Adlai, is a foreign-invested enterprise, or FIE, and is subject to laws and regulations applicable to foreign investment in China and, in particular, laws applicable to FIEs. The PRC legal system is a civil law system based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. The interpretation and application of PRC laws and regulations including, but not limited to, the laws and regulations governing our business and the enforcement and performance of our business arrangements in certain circumstances, will be determined on an ad hoc basis depending on the facts and circumstances. The laws and regulations are sometimes vague and the government authorities have a certain degree of discretion within their scope of authority to interpret and enforce such laws and regulations, and we may not accurately predict the results of their official interpretation and enforcement; these laws and regulations are subject to change in the future and there may be limited advance notice of such changes before they become effective or we may not have the opportunity to address such newly promulgated regulatory requirements in a timely manner. The effectiveness and interpretation of newly enacted laws or regulations, including amendments to existing laws and regulations, may be delayed, and our business may be affected if we rely on laws and regulations which are subsequently adopted or interpreted in a manner different from our current understanding of these laws and regulations. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our business.

Since late 1970s, the PRC government has been developing a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past several decades has significantly enhanced the protections afforded to various forms of foreign investments in China. However, China is still in the process of perfecting its legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules, some of which may not be published on a timely basis, and some of which may have a retroactive effect. In view of the fact that we may be unable to be aware of or foresee some regulations, policies, and internal rules, along with their possible occasional adjustments, we may not become aware of our violation of these policies and rules until sometime after the violation has occurred. Any administrative and court proceedings in China or any jurisdiction where we operate our business may result in additional costs and diversion of resources and management attention. However, since administrative and court authorities have the right to exercise conclusive discretion and judgment in interpreting and implementing statutory and contractual terms, depending on the facts and circumstances, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. These uncertainties may also impede our ability to enforce the contracts we have entered into. As a result, these uncertainties could materially and adversely affect our business and results of operations.

The PRC government may exert influence on our operations in mainland China.

The PRC government has significant authority to exert influence on our operations in mainland China in various aspects in accordance with laws and regulations. Therefore, uncertainties in the PRC laws and regulations from time to time and the interpretation and enforcement of PRC laws and regulations could limit the legal protection available to you and us, hinder our ability to offer or continue to offer the ADSs, result in a material adverse effect on our business operations, and affect our reputation, which might further cause the ADSs to significantly decline in value or become worthless. Changes in China’s economic, political or social conditions, or government policies could materially and adversely affect our business, financial condition, and results of operations.

We cannot predict whether the resulting changes will have any adverse effect on our current or future business, financial condition or results of operations. Despite these economic reforms and measures, the PRC government continues to play a significant role in regulating industrial development, allocation of natural and other resources, production, pricing and management of currency, and there can be no assurance that the PRC government will continue to pursue a policy of economic reform or that the direction of reform will continue to be market friendly. Our ability to successfully expand business operations in the PRC depends on a number of factors, including macro-economic and other market conditions. Demand for our future products in the Chinese market and our business, financial condition and results of operations may be materially and adversely affected by the following factors:

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These factors are affected by a number of variables which are beyond our control.

Recent negative publicity surrounding China-based companies listed in the United States may negatively impact the trading price of the ADSs.

We believe that recent negative publicity surrounding companies with operations in China that are listed in the United States have negatively impacted the stock prices of these companies. Certain politicians in the United States have publicly warned investors to shun China-based companies listed in the United States. The SEC and the PCAOB, also issued a joint statement on April 21, 2020, reiterating the disclosure, financial reporting and other risks involved in the investments in companies that are based in emerging markets as well as the limited remedies available to investors who might take legal action against such companies.

Furthermore, various equity-based research organizations have recently published reports on China- based companies after examining their corporate governance practices, related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges. Any similar scrutiny on us, regardless of its lack of merit, could cause the market price of the ADSs to fall, divert management resources and energy, cause us to incur expenses in defending ourselves against rumors, and increase the premiums we pay for director and officer insurance.

The ADSs may be delisted under the HFCAA if the PCAOB is unable to inspect auditors or their affiliates that are located in mainland China. The delisting of the ADSs, or the threat of such delisting, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors of the benefits of such inspections.

The HFCAA was enacted on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over the counter trading market in the U.S.

Our auditor, the independent registered public accounting firm that issued the audit report in this annual report, as auditor of companies that are traded publicly in the United States and as a firm registered with the PCAOB is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Our auditor, which is based in New York, is currently subject to inspection by the PCAOB at least every two years. However, our auditor’s China affiliate is located in, and organized under the laws of, the PRC, which is a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities.

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On March 18, 2021, the SEC adopted on an interim basis rules disclosure requirements for companies with PCAOB member auditors whom the PCAOB has determined that it cannot inspect their operations within a foreign jurisdiction, or the Covered Issuers. Covered Issuers are required to disclose in their annual reports on Form 20-F: (i) that, during the period covered by the form, the registered public accounting firm has prepared an audit report for the issuer; (ii) the percentage of the shares of the issuer owned by governmental entities in the foreign jurisdiction in which the issuer is incorporated or otherwise organized; (iii)whether governmental entities in the applicable foreign jurisdiction with respect to that registered public accounting firm have a controlling financial interest with respect to the issuer; (iv) the name of each official of the Chinese Communist Party who is a member of the board of directors of the issuer or the operating entity with respect to the issuer; and (v) whether the articles of incorporation of the issuer (or equivalent organizing document) contains any charter of the Chinese Communist Party, including the text of any such charter. Furthermore, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, or the AHFCAA, which would amend the HFCAA and require the SEC to prohibit an issuer’s securities from trading on any U.S. stock exchanges if its auditor is not subject to PCAOB inspections for two consecutive years instead of three. On September 22, 2021, the PCAOB adopted rules governing its procedures for making determinations as to its inability to inspect or investigate registered firms headquartered in a particular foreign jurisdiction or which has an office in a foreign jurisdiction, or a PCAOB-Identified Firm. Promptly after the effective date of this rule, the PCAOB will make determinations under the HFCAA to the extent such determinations are appropriate. Thereafter, the PCAOB will consider, at least annually, whether changes in facts and circumstances support any additional determinations. The PCAOB will make additional determinations as and when appropriate, to allow the SEC on a timely basis to identify covered issuers pursuant to the SEC rules. The rule became effective when the SEC approved the rule on November 4, 2021. On December 2, 2021, the SEC finalized its rules regarding disclosure by Covered Issuers. In addition, the release discussed the procedures the SEC will follow in implementing trading prohibitions for Covered Issuers. A foreign company would have to be designated a Covered Issuer three years in a row to be subject to a trading prohibition on that basis. The trading suspension would prohibit trading of the Covered Issuer’s securities on any exchange or in the over-the-counter markets.

The trading prohibition will be terminated if the Covered Issuer certifies to the SEC that the issuer has retained a registered public accounting firm that the PCAOB has inspected to the satisfaction of the SEC and files financial statements that include an audit report signed by the non-PCAOB-Identified Firm. The SEC is not required to engage in rulemaking to implement the trading prohibition provisions of the HFCAA. Neither the Act nor the SEC’s release create an obligation for an exchange to delist the Covered Issuer, but the SEC noted that under existing listing rules of the exchanges, a trading prohibition would be grounds for delisting. On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and in Hong Kong because of positions taken by PRC authorities in those jurisdictions.

On August 26, 2022, the PCAOB entered into a Statement of Protocol with the China Securities Regulatory Commission and the Ministry of Finance of the PRC and, as summarized in the “Statement on Agreement Governing Inspections and Investigations of Audit Firms Based in China and Hong Kong” published on the U.S. Securities and Exchange Commission’s official website, the parties agreed to the following: (i) in accordance with the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, the PCAOB shall have independent discretion to select any issuer audits for inspection or investigation; (ii) the PCAOB shall have direct access to interview or take testimony from all personnel of the audit firms whose issuer engagements are being inspected or investigated; (iii) the PCAOB shall have the unfettered ability to transfer information to the SEC, in accordance with the Sarbanes-Oxley Act; and (iv) the PCAOB inspectors shall have access to complete audit work papers without any redactions, with view-only procedures for certain targeted pieces of information such as personally identifiable information. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. On December 29, 2022, legislation entitled “Consolidated Appropriations Act, 2023” (the “Consolidated Appropriations Act”), was signed into law by President Joseph Biden of the United Sates. The Consolidated Appropriations Act contained, among other things, an identical provision to the AHFCAA, which reduces the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two.

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The auditor of our PRC-based subsidiaries is located in mainland China and the auditor is an affiliate of our New York based auditor that signs our audit report. Given the current question as to how “retain” should be understood for purposes of the HFCA Act, we cannot assure you that we will not be identified by the SEC as an issuer that has retained an auditor that has a branch or office that is located in a foreign jurisdiction that the PCAOB determines it is unable to inspect or investigate completely because of a position taken by an authority in that foreign jurisdiction as a result of the fact that the auditor of our China affiliates is located in, and organized under the laws of, the PRC. In addition, there can be no assurance that, if we have a “non- inspection” year, we will be able to take remedial measures in response thereto. If any such event were to occur, trading in our securities could in the future be prohibited under the HFCAA, so we cannot assure you that we will be able to maintain the listing of the ADSs on the Nasdaq or that you will be allowed to trade the ADSs in the United States on the “over-the-counter” markets or otherwise. Should the ADSs not be listed or tradeable in the United States, the value of the ADSs could be materially affected.

This lack of PCAOB inspections in China prevents the PCAOB from fully evaluating audits and quality control procedures of our independent registered public accounting firm. As a result, we and investors in the ADSs are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s China affiliate’s audit procedures or quality control procedures as compared to auditor outside of China that are subject to PCAOB inspections, which could cause investors and potential investors in the ADSs to lose confidence in our audit procedures, reported financial information and the quality of our financial statements.

PRC regulation of loans to, and direct investments in, PRC entities by offshore holding companies may delay or prevent us from making loans or additional capital contributions to our PRC subsidiaries and thereby prevent us from funding our business.

As an offshore holding company with PRC subsidiaries, we may transfer funds to our PRC subsidiaries by means of loans or capital contributions. Any loans to our operating subsidiary in the PRC, Hangzhou Adlai, which is a foreign-invested enterprise, cannot exceed statutory limits based on the difference between the amount of our investments and registered capital in such subsidiary, and shall be registered with SAFE, the PRC State Administration of Foreign Exchange, or its local counterparts. Furthermore, at this stage, any capital increase contributions we make to Hangzhou Adlai, which is a foreign-invested enterprise, shall be registered with the SAMR or its local counterparts, and reported to the Ministry of Commerce or its local counterparts. In addition, the PRC government also restricts the convertibility of foreign currencies into RMB and use of the proceeds. Furthermore, SAFE promulgated a series of rules and regulations, including Notice on Reforming the Management Method for the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, the Circular on Reforming and Regulating Policies on the Management of Foreign Exchange Settlement of Capital Accounts, and the Circular to Further Facilitating Cross-border Trade and Investment, to further regulate the all foreign-invested companies to use RMB converted from foreign currency- denominated capital for equity investments in China.

In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we may not be able to obtain these government registrations or approvals on a timely basis, if at all, with respect to future loans to our PRC subsidiaries or future capital contributions by us to our PRC subsidiaries. If we fail to receive such registrations or approvals, our ability to provide loans or capital to increase contributions to our PRC subsidiaries may be negatively affected, which could adversely affect their liquidity and our ability to fund and expand their business.

Our business may be negatively affected by the potential obligations to make additional social insurance and housing fund contributions.

We are required by PRC labor laws and regulations to make registrations for social insurance and housing funds, and to pay various statutory employee benefits, including pensions insurance, medical insurance, work- related injury insurance, unemployment insurance, maternity insurance, and housing funds, to designated government agencies for the benefit of our employees. The relevant government agencies may examine whether we are in compliance with the relevant labor laws and regulations. Failure to make full payment of the requisite statutory employee benefits and any potential non-compliance may subject us to late payment fees, fines, and/or other penalties. If the relevant PRC authorities determine that we shall make supplemental social insurance and housing fund contributions or that we are subject to fines and legal sanctions in relation to our failure to make social insurance and housing fund contributions in full for our employees, our business, financial condition, and results of operations may be adversely affected.

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It may be difficult for overseas regulators to conduct investigations or collect evidence within the PRC.

Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law or practicality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatory investigations or litigation initiated outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of a mutual and practical cooperation mechanism. Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC; no organization or individual is allowed to provide documents and information related to securities business activities to overseas securities regulators without the consent of the securities regulatory authority under the State Council and the relevant competent department under the State Council; and according to the Data Security Law, no organization or individual within the territory of the PRC may provide foreign judicial or law enforcement authorities with data stored within the territory of the PRC without the approval of the competent authorities of the PRC. While detailed interpretation of or implementation rules under these regulations have yet to be promulgated, the inability of an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.

We are a holding company, and we may rely principally on dividends and other distributions on equity paid by our PRC subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.

Under PRC laws and regulations, our operating subsidiary in the PRC, Hangzhou Adlai, as a wholly foreign-owned enterprise in the PRC, may pay dividends only out of their accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise, such as Hangzhou Adlai, is required to set aside at least 10% of its accumulated after-tax profits after making up the previous year’s accumulated losses each year, if any, to fund statutory reserve funds, until the aggregate amount of such fund reaches 50% of its registered capital. It may allocate a portion of its after-tax profits based on PRC accounting standards to discretionary reserve funds according to its shareholder’s decision. These statutory reserve funds and discretionary reserve funds are not distributable as cash dividends.

In addition, the PRC Enterprise Income Tax Law, and its implementation rules provide that withholding tax rate of 10% will be applicable to dividends payable by PRC companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

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We may be deemed to be a PRC resident enterprise under the Enterprise Income Tax Law, and be subject to the PRC taxation on our worldwide income, which may significantly increase our income tax expenses and materially decrease our profitability.

Under the PRC Enterprise Income Tax Law, enterprises established outside of China whose “de facto management bodies” are located in China are considered to be “resident enterprises” and will generally be subject to a uniform 25% corporate income tax on their global income (excluding dividends received from “resident enterprises”). In addition, a circular issued by State Administration of Taxation, or the SAT, on April 22, 2009 and amended on January 29, 2014 sets out certain standards for determining whether the “de facto management body” of an offshore enterprise funded by Chinese enterprises as controlling shareholders is located in China. Although this circular applies only to offshore enterprises funded by Chinese enterprises as controlling shareholders, rather than those funded by Chinese or foreign individuals or foreign enterprises as controlling shareholders, the determining criteria set forth in the circular may reflect SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of how they are funded. Although our company is not funded by Chinese enterprises as controlling shareholders, substantial uncertainties remain as to whether our company or any of our other non-PRC entities will be deemed a PRC resident enterprise for the Enterprise Income Tax purposes. If we or any of our subsidiaries registered outside the PRC are to be deemed a “resident enterprise” under the PRC Enterprise Income Tax Law, our income tax expenses may increase significantly, and our profitability could decrease materially.

We face uncertainties in the PRC with respect to indirect transfer of equity interests in our PRC subsidiaries.

The indirect transfer of equity interest in PRC enterprises by a non-resident enterprise, is potentially subject to income tax in China at a rate of 10% on the gain if such transfer is considered not to have a commercial purpose and is carried out for tax avoidance. We also face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries or investments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transaction. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiaries may be requested to assist in investors’ tax filing in China. As a result, we may be required to expend valuable resources to comply with SAT Circular 7 and SAT Circular 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these publications, or to establish that our company should not be taxed under these publications, which may have a material adverse effect on our financial condition and results of operations.

Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

Under the applicable regulations and SAFE rules, PRC citizens who participate in an employee stock ownership plan or a stock option plan in an overseas publicly listed company are required to register with SAFE and complete certain other procedures. Pursuant to the rules related to stock options by SAFE, if a PRC resident participates in any stock incentive plan of an overseas publicly listed company, a qualified PRC domestic agent must, among other things, file on behalf of such participant an application with SAFE to conduct the SAFE registration with respect to such stock incentive plan and obtain approval for an annual allowance with respect to the purchase of foreign exchange in connection with the exercise or sale of stock options or stock such participant holds. Such participating PRC residents’ foreign exchange income received from the sale of stock and dividends distributed by the overseas publicly listed company must be fully remitted into a PRC collective foreign currency account opened and managed by the PRC agent before distribution to such participants. We and our PRC resident employees who have been granted stock options or other share- based incentives of ours are subject to these rules after our initial public offering. If we or our PRC resident participants fail to comply with these regulations, we and/or our PRC resident participants may be subject to fines and legal sanctions. In addition, SAT has issued certain circulars concerning employee share options and restricted shares. Under these circulars, our employees working in China who exercise share options and/or are granted restricted shares in the future will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee share options and/or restricted shares with tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to laws and regulations, we may face sanctions imposed by the tax authorities or other PRC government authorities.

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Conversion of RMB to and from other currency may be subject to governmental regulation in China.

Currently, the RMB cannot be freely converted into any foreign currency. The PRC government regulates the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency dominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments, and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. However, for most capital account items, approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange regulatory system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the ADSs.

Risks relating to the ADSs

The trading price of our ADSs may be volatile regardless of our operating performance, which could result in substantial losses to you.

The trading price of our ADSs may be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. The securities of some of these companies have experienced significant volatility since their initial public offerings, including, in some cases, substantial trading price declines. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or matters of other companies with substantial operations in China may also negatively affect the attitudes of investors towards similar companies in general, including us, regardless of whether we have conducted any inappropriate activities.

In addition to the above factors, the price and trading volume for our ADSs may be volatile for factors specific to our own operations, including the following:

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Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.

We adopt a dual-class share structure such that our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the votes of shareholders, holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B ordinary shares are entitled to 15 votes per share based on our proposed dual-class share structure. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances.

Our founder, Mr. Yang Lu beneficially owns all of our issued Class B ordinary shares. These Class B ordinary shares constitute approximately 15.3% of our total issued and outstanding share capital and 73.1% of the aggregate voting power of our total issued and outstanding share capital due to the disparate voting powers associated with our dual-class share structure, as of the date of this annual report. As a result of the dual-class share structure and the concentration of ownership, the holder of our Class B ordinary shares has considerable influence over matters such as decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. They may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could have the effect of depriving our other shareholders of the opportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of the ADSs. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs may view as beneficial.

Our dual-class voting structure may render the ADSs representing our Class A ordinary shares ineligible for inclusion in certain stock market indices, and thus adversely affect the trading price and liquidity of the ADSs.

We cannot predict whether our dual-class share structure with different voting rights will result in a lower or more volatile market price of the ADSs, adverse publicity, or other adverse consequences. Certain index providers have announced restrictions on including companies with multi-class share structures in certain of their indices. For example, S&P Dow Jones and FTSE Russell have changed their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting power from being added to such indices. As a result, our dual-class voting structure may prevent the inclusion of the ADSs representing our Class A ordinary shares in such indices, which could adversely affect the trading price and liquidity of the ADSs representing our Class A ordinary shares. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structure and our dual-class structure may cause shareholder advisory firms to publish negative commentary about our corporate governance, in which case the market price and liquidity of the ADSs could be adversely affected.

You may need to rely on price appreciation of the ADSs for return on your investment.

We currently intend to retain most, if not all, of our available funds and the proceeds from our initial public offering to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the ADSs as a source for any future dividend income.

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Our board of directors has complete discretion as to whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only pay dividends out of profits or share premium account, and provided always that in no circumstances may a dividend be paid out of share premium if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides to declare and pay dividends, the timing, amount, and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions, and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in the ADSs.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding the ADSs, the market price for the ADSs and trading volume could decline.

The trading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade the ADSs, the market price for the ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for the ADSs to decline.

Our currently effective memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our ordinary shares and ADSs.

Our currently effective memorandum and articles of association contain provisions that may discourage, delay or prevent a change of control of our company, including a provision that entitles each Class B ordinary share to 15 votes in respect of all matters subject to a shareholders’ vote and a provision that authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors may determine, to the extent of available authorized but unissued shares as well as a provision that grants authority to our board of directors to establish from time to time one or more series of preferred shares without action by our shareholders and to determine, with respect to any series of preferred shares, the terms and rights of that series. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties form seeking to obtain control of our company in a tender offer or similar transaction.

Techniques employed by short sellers may drive down the market price of the ADSs.

Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s best interests for the price of the stock to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a stock short. These short attacks have, in the past, led to selling of shares in the market.

Public companies, including those having a substantial portion of their operations in China have been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.

It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which it can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business operations and stockholders’ equity, and any investment in the ADSs could be greatly reduced or rendered worthless.

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The sale of substantial amounts of the ADSs could adversely affect their market price.

Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. Shares held by our existing shareholders may be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act of 1933, as amended, or the Securities Act and the applicable lock-up agreements. Certain holders of our ordinary shares may cause us to register under the Securities Act the sale of their shares. Registration of these shares under the Securities Act would result in ADSs representing these shares becoming freely tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs.

ADS holders do not have the same rights as our shareholders.

ADS holders do not have the same rights as our shareholders. For example, ADS holders may not attend shareholders’ meetings or directly exercise the voting rights attaching to the Class A ordinary shares underlying their ADSs. ADS holders may vote only by instructing the depositary to vote on their behalf. If we request the depositary to solicit your voting instructions (and we are not required to do so), the depositary will notify you of a shareholders’ meeting and send or make voting materials available to you. Those materials will describe the matters to be voted on and explain how ADS holders may instruct the depositary how to vote. For instructions to be valid, they must reach the depositary by a date set by the depositary. The depositary will try, as far as practical, subject to the laws of the Cayman Islands and the provisions of our articles of association or similar documents, to vote or to have its agents vote the deposited common shares as instructed by ADS holders. If we do not request the depositary to solicit your voting instructions, you can still send voting instructions, and, in that case, the depositary may try to vote as you instruct, but it is not required to do so. Except by instructing the depositary as described above, you will not be able to exercise voting rights unless you surrender the ADSs and withdraw the Class A ordinary shares. However, you may not know about the meeting enough in advance to withdraw the Class A ordinary shares. We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your Class A ordinary shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise voting rights and there may be nothing you can do if your Class A ordinary shares are not voted as you requested. In addition, ADS holders have no right to call a shareholders’ meeting.

Owners or holders of the ADSs have limited recourse if we or the depositary fail to meet our respective obligations under the deposit agreement.

The deposit agreement expressly limits the obligations and liability of us and the depositary. For example, the depositary is not liable if any of us or our respective controlling persons or agents is prevented or forbidden from, or subjected to any civil or criminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the deposit agreement and any ADS, by reason of any provision of any present or future law or regulation of the United States or any state thereof, the Cayman Islands or any other country, or of any other governmental authority or regulatory authority or stock exchange, or on account of the possible criminal or civil penalties or restraint, or by reason of any provision, present or future, of our memorandum and articles of association or any provision of or governing any deposited securities, or by reason of any act of God or war or other circumstances beyond its control (including, without limitation, nationalization, expropriation, currency restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions, explosions, and computer failure). In addition, the depositary and any of its agents also disclaim any liability for (i) any failure to carry out any instructions to vote, the manner in which any vote is cast or the effect of any vote or failure to determine that any distribution or action may be lawful or reasonably practicable or for allowing any rights to lapse in accordance with the provisions of the deposit agreement, (ii) the failure or timeliness of any notice from us, the content of any information submitted to it by us for distribution to you or for any inaccuracy of any translation thereof, (iii) any investment risk associated with the acquisition of an interest in the deposited securities, the validity or worth of the deposited securities or the credit-worthiness of any third party, (iv) any tax consequences that may result from ownership of ADSs, ordinary shares or deposited securities, or (v) any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the depositary or in connection with any matter arising wholly after the removal or resignation of the depositary, provided that in connection with the issue out of which such potential liability arises the depositary performed its obligations without gross negligence or willful misconduct while it acted as depositary. These provisions of the deposit agreement will limit the ability of owners or holders of the ADSs to obtain recourse if we or the depositary fail to meet our respective obligations under the deposit agreement.

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You may experience dilution of your holdings due to the inability to participate in rights offerings.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make rights available to you in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Under the deposit agreement, the depositary will not make rights available to you unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective and we may not be able to establish a necessary exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings and may experience dilution in your holdings.

As a holder of ADSs, you may not receive distributions on the Class A ordinary shares represented by the ADSs or any value for them if it is illegal or impractical to make them available to holders of ADSs.

Under the terms of the deposit agreement, the Depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on the Class A ordinary shares or other deposited securities after deducting its fees and expenses and any taxes or other governmental charges. However, in accordance with the limitations set forth in the deposit agreement, it may be unlawful or impractical to make a distribution other than cash available to holders of ADSs. We have no obligation to take any other action to permit the distribution of the ADSs, Class A ordinary shares, rights or anything else to holders of the ADSs. This means that, as a holder of ADSs, you may not receive the distributions we make on the Class A ordinary shares or any value from them if it is unlawful or impractical to make them available to you. These restrictions may have a material adverse effect on the value of your ADSs.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems it expedient in connection with the performance of its duties. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason. In addition, ADS holders may not be able to cancel their ADSs and withdraw the underlying Class A ordinary shares when they owe money for fees, taxes and similar charges.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments, or bringing actions in China against us or our management named in this annual report based on foreign laws.

We are a company incorporated under the laws of the Cayman Islands and, to date, conduct the majority of our operations in China and a substantial portion of our assets are located in mainland China. In addition, many of our directors and executive officers reside within China for a significant portion of the time. As a result, it may be difficult for you to effect service of process upon us or those persons inside China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors residing in China. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country or region where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of written arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security, or the public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States.

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You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by, among other things, our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands, or the Companies Act, and the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors to us under the Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, the Cayman Islands companies may not have the standing to initiate a shareholder derivative action in a federal court of the United States.

Shareholders of Cayman Islands companies like us have no general rights under the Cayman Islands law to inspect corporate records, or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our currently effective memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

Certain corporate governance practices in the Cayman Islands, which is our home country, differ significantly from requirements for companies incorporated in other jurisdictions such as the United States. We may in the future rely on home country practice with respect to our corporate governance. If we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of our board of directors or our controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Companies Act and the laws applicable to companies incorporated in the United States and their shareholders, see “Item 10. Additional Information—B. Memorandum and Articles of Association.”

We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.

Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

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We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of the Nasdaq Stock Market. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.

As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.

The Nasdaq permits a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. For instance, we are not required to:

We may rely on home country practice with respect to our corporate governance. If we choose to follow home country practice in the future, our shareholders may be afforded less protection than they otherwise would enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers.

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

As a company with less than US$1.235 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. Therefore, we have elected to take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies and acknowledge such election is irrevocable pursuant to Section 107 of the JOBS Act. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. As a result, if we elect not to comply with such reporting and other requirements, in particular the auditor attestation requirements, our investors may not have access to certain information they may deem important.

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. We have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our results of operations and financial statements may not be comparable to the results of operations and financial statements of other companies that have adopted the new or revised accounting standards. If we cease to be an emerging growth company, we will no longer be able to take advantage of these exemptions or the extended transition period for complying with new or revised accounting standards.

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The deposit agreement provides that the United States District Court for the Southern District of New York (or, if the United States District Court for the Southern District of New York lacks subject matter jurisdiction over a particular dispute, the state courts in New York County, New York) shall have exclusive jurisdiction over any suit, action or proceeding arising out of or relating in any way to the ADSs or the deposit agreement, which could limit the ability of owners and holders of the ADSs or other securities to obtain a favorable judicial forum for disputes with us, our directors and officers, the depositary, and potentially others.

The deposit agreement provides that the United States District Court for the Southern District of New York (or, if the United States District Court for the Southern District of New York lacks subject matter jurisdiction over a particular dispute, the state courts in New York County, New York) shall have exclusive jurisdiction over any suit, action or proceeding against or involving us or the depositary, arising out of or relating in any way to the deposit agreement or the transactions contemplated thereby or by virtue of owning the ADSs. The enforceability of similar federal court choice of forum provisions has been challenged in legal proceedings in the United States, and it is possible that a court could find this type of provision to be inapplicable or unenforceable. If a court were to find the federal choice of forum provision contained in the deposit agreement to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions. If upheld, the forum selection provision in the deposit agreement may limit a security-holder’s ability to bring a claim against us, our directors and officers, the depositary, and potentially others in his or her preferred judicial forum, and this limitation may result in increased costs for investors to bring lawsuits and discourage such lawsuits. Owners and holders of the ADSs will not be deemed to have waived our compliance with the federal securities laws and the regulations promulgated thereunder pursuant to the exclusive forum provision in the deposit agreement. In addition, the forum selection provision of the deposit agreement does not affect the right of an ADS holder or the depositary to require any claim against us, including a federal securities law claim, to be submitted to arbitration or to commence an action in any court in aid of that arbitration provision, or to enter judgment upon or enforce any arbitration award.

ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing our Class A ordinary shares provides that, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim that they may have against us or the depositary arising out of or relating to our Class A ordinary shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.

If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement, by a federal or state court in the City of New York, which has nonexclusive jurisdiction over matters arising under the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently, and voluntarily waives the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the deposit agreement.

If you or any other owners or holders of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us or the depositary. If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.

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Nevertheless, if this jury trial waiver provision is not permitted by applicable law, an action could proceed under the terms of the deposit agreement with a jury trial. The deposit agreement also provides that ADSs holders and the depositary have the right to elect to have any claim against us arising out of or relating to our Class A ordinary shares, ADSs, ADRs or the deposit agreement settled by arbitration in New York, New York rather than in a court of law, and to have any judgment rendered by the arbitrators entered in any court having jurisdiction. The arbitral tribunal in any such arbitration would not have the authority to award any consequential, special, or punitive damages or other damages not measured by the prevailing party’s actual damages and may not make any ruling, finding or award that does not conform to the provisions of the deposit agreement. The deposit agreement does not give us the right to require that any claim, whether brought by us or against us, be arbitrated. The optional arbitration provision does not apply to claims under federal securities laws or claims other than in connection with our initial public offering.

No condition, stipulation, or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.

The deposit agreement may be amended or terminated without your consent.

We and the depositary may amend or terminate the deposit agreement without your consent. Such amendment or termination may be done in favor of our company. Holders of the ADSs, subject to the terms of the deposit agreement, will receive notice in the event of an amendment that prejudices a substantial existing right or a termination. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as amended. The deposit agreement may be terminated at any time upon a prior written notice. Upon the termination of the deposit agreement, our company will be discharged from all obligations under the deposit agreement, except for our obligations to the depositary thereunder.

We are a “controlled company” within the meaning of the Nasdaq Stock Market listing rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

We are a “controlled company” as defined under the Nasdaq Stock Market listing rules because Mr. Yang Lu, our founder, controls more than 50% of our total voting power. Pursuant to our currently effective memorandum and articles of association, an ordinary resolution to be passed at a shareholders’ meeting requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the outstanding and issued ordinary shares cast at a meeting. A special resolution will be required for important matters such as making changes to our memorandum and articles of association. As a result, Mr. Yang Lu will have the ability to control or significantly influence the outcome of matters requiring approval by shareholders. In addition, for so long as we remain a controlled company under that definition, we are permitted to elect to rely on, and may rely on, certain exemptions from corporate governance rules, including an exemption from the rule that a majority of our board of directors must be independent directors. We may also rely on the exemption available for foreign private issuers to follow our home country governance practices. See “Item 3. Key Information—D. Risk Factors — Risks Relating to the ADSs — As a foreign private issuer, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.” As a result, you may not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

We may be classified as a passive foreign investment company, which could result in adverse U.S. federal income tax consequences to U.S. investors in ADSs or ordinary shares.

Based on current estimates of our gross income and the value of our gross assets (including goodwill) and the manner in which we conduct our business, we do not believe that we were a passive foreign investment company (“PFIC”) for U.S. federal income tax purposes for the taxable year ended December 31, 2023. However, because PFIC status depends on the composition of a company’s income and assets and the market value of its assets from time to time, there can be no assurance that we will not be a PFIC for any taxable year.

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A non-U.S. corporation is a PFIC for U.S. federal income tax purposes for any taxable year in which (after taking into account the income and assets of subsidiaries in which it owns at least a 25% interest by value), (i) at least 75% of its gross income is “passive” income, such as interest and income from financial investments (the “income test”) or (ii) at least 50% of the average value of its assets (generally determined on a quarterly basis) consists of assets that produce or are held to produce passive income (the “asset test”). For purposes of the asset test, any cash, and cash equivalents (such as bank deposits) will count as passive assets, and goodwill should be treated as an active asset to the extent associated with activities that produce or intended to produce active income. In determining the average percentage value of our gross assets, the aggregate value of our assets will generally be deemed to be equal to our market capitalization (determined by the sum of the aggregate value of our outstanding equity) plus our liabilities. With certain exceptions, we do not currently generate any income from our primary business, and our gross income is currently comprised primarily of interest and other investment income (which is passive) and governmental grants and the option grant fee from Nippon Kayaku (the “Option Grant Fee”) (which are both likely to be active income). Therefore, our PFIC status under the income test for any taxable year in which we do not generate significant income from our primary business, including the current taxable year, will likely depend on the relative amounts of government grants and the Option Grant Fee against the amounts of interest and other passive income we earn. The receipt of governmental grants is subject to various conditions and there can be no assurance that we will continue to receive governmental grants in future taxable years or as to the amount of governmental grants that we will receive in any taxable year. Additionally, the Option Grant Fee is not a reoccurring payment in future taxable years. Further, we will hold a substantial amount of cash and cash equivalents following the offering and while we continue to do so, our PFIC status for any taxable year will depend on the value of our goodwill. The value of our goodwill may be determined, in large part, by reference to the market price of our ADSs, which is likely to be volatile given the nature of our business and the current market conditions. Therefore, we could be a PFIC for any future taxable year if our market capitalization were to decrease significantly while we hold substantial cash and cash equivalents, or if the gross income that we and our subsidiaries earn from investing the portion of cash raised in our initial public offering and the concurrent private placement is substantial in comparison with the gross income from our business operation. Accordingly, we cannot assure you that we will not become a PFIC for the current or any future taxable year.

If we were treated as a PFIC for any taxable year, then U.S. investors could be subject to adverse U.S. federal income tax consequences (regardless of whether we continue to be a PFIC), including increased tax liability on disposition gains and certain “excess distributions” and additional reporting requirements. See “Item 10. Additional Information—E. Taxation — United States Federal Income Tax Considerations.” for further information. U.S. investors should consult their tax advisers regarding our PFIC status for any taxable year and the potential application of the PFIC rules to an investment in ADSs or ordinary shares including the availability and the advisability of making certain elections under the PFIC rules.

We incur increased costs as a result of being a public company, and will incur further increased costs after we cease to qualify as an “emerging growth company.”

As a public company, we incur significant legal, accounting, and other expenses that we would not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the Nasdaq Stock Market, impose various requirements on the corporate governance practices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. Especially after we are no longer an emerging growth company, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages.

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ITEM 4.   INFORMATION ON THE COMPANY

A.   History and Development of the Company

We commenced our business in mainland China in 2004 through Adlai Nortye Biopharma Co., Ltd., which we refer to as our operating subsidiary in the PRC. We initially focused primarily on generic pharmaceuticals and polypeptide intermediate, until 2016 when our founders, Mr. Yang Lu and Mr. Donghui Yang, led our strategic transition to become a R&D-driven pharmaceutical company, focusing on the discovery and development of innovative cancer therapies.

Our ultimate holding company was incorporated in the Cayman Islands in May 2018 to facilitate offshore financing activities, and our daily operations are conducted primarily through our operating subsidiaries in the United States and mainland China. Between January 2018 and June 2022, Alpine Bioscience Ltd, Adlai Nortye Pte. Ltd., Adlai Nortye (HK) Limited, and Adlai Nortye (Switzerland) AG were incorporated in the British Virgin Islands, Singapore, Hong Kong, and Switzerland as our intermediary holding entities. In March 2019, Adlai Nortye (HK) Limited acquired entire equity interests in the Adlai Nortye Biopharma Co., Ltd. from its then shareholders and Adlai Nortye Biopharma Co., Ltd. became a wholly owned subsidiary of our ultimate holding company.

In order to conduct clinical trials in the U.S., Adlai Nortye USA INC was incorporated under the laws of the State of Delaware in the U.S. in January 2018. In June 2022, as a part of a reorganization, Adlai Nortye (Switzerland) AG acquired all its shares and Adlai Nortye USA INC become a wholly owned subsidiary of our ultimate holding company.

The address of our registered office in Cayman Islands and our principal executive office is at c/o PO Box 309, Ugland House, Grand Cayman KY1-1104, Cayman Islands. Our telephone number is +1 848-230-7430. The United States and China are two important markets and locations for our operations. In addition to our principal executive office in the Cayman Islands, we also have two regional headquarters at (i) New Jersey Biotechnology Development Center, 685 US Hwy 1, 2nd floor, North Brunswick Township, NJ 08902, the United States and (ii) Building 6 & 8, 1008 Xiangwang Street, Yuhang District, Hangzhou, Zhejiang, the People’s Republic of China. Our agent for service of process in the United States is Cogency Global Inc., with the address at 122 East 42nd Street, 18th Floor, New York, NY 10168.

In September 2023, we became a publicly traded company on the Nasdaq under the symbol “ANL.” Our reports filed with or furnished to the SEC are available on our website at https://www.adlainortye.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The information contained on our websites is not a part of this annual report. The SEC maintains a website at http://www.sec.gov that contains reports and other information regarding us and other companies that file materials with the SEC electronically.

B.   Business Overview

Overview

We are a global clinical-stage biotechnology company focused on the discovery and development of innovative cancer therapies for patients across the spectrum of tumor types. Our mission is to transform deadly cancer into a chronic and eventually curable disease. We are now developing multiple innovative antitumor drug candidates by leveraging our deep knowledge in cancer biology, as well as significant global R&D and clinical execution capabilities. These drug candidates are currently undergoing clinical trials, and in many cases, in collaboration with multinational pharmaceutical companies to fully realize their commercialization potential on a global scale. Our combination therapy strategy is directed towards systematically activating the immune system through a combination of multiple drugs, aiming to enhance the clinical benefit by achieving superior efficacy and safety while overcoming drug resistance.

We have identified and developed a robust pipeline of six drug candidates. Currently, our pipeline includes three clinical-stage drug candidates, buparlisib (AN2025), palupiprant (AN0025), and AN4005, as well as three preclinical candidates. Our most advanced program is our lead product AN2025, a pan-phosphoinositide 3-kinase (“PI3K”) inhibitor that is designed to act against solid tumors. AN2025 is currently undergoing a Phase III, multi-regional, randomized, open-label clinical trial for the treatment of recurrent or metastatic HNSCC after anti-programmed death-1 (“PD-1”) or its ligand (“PD-L1”) treatment in more than 180 sites in 18 jurisdictions covering North America, Europe, Asia, and South America. We completed the patient enrollment of this trial in November 2023. We believe that AN2025, if approved, has the potential to be first-to-market, and is currently the only drug candidate in active Phase III clinical trial targeting recurrent or metastatic HNSCC patients after progression on prior anti-PD-1/PD-L1 therapy, potentially addressing a global unmet medical need.

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We are collaborating with MSD International GmbH, or MSD, to evaluate AN0025, a small molecule prostaglandin E receptor 4 (“EP4”) antagonist. It is currently being developed to modulate the tumor microenvironment in combination with Keytruda or pembrolizumab, in a Phase Ib clinical trial for the treatment of recurrent non-small cell lung cancer (“NSCLC”) and urothelial cancer after anti-PD-1/PD-L1 treatments, recurrent triple-negative breast cancer (“TNBC”), microsatellite stable colorectal cancer (“MSS CRC”) and cervical cancer after standard of care treatments in the U.S. and France. In addition to evaluating the combination of AN0025 and pembrolizumab, AN0025 is also being developed as a potential enhancer of radiotherapy in different indications. A phase 1b study to assess the safety, tolerability and efficacy of AN0025 in combination with definitive CRT in patients with locally advanced esophageal cancer is underway while another phase 1b study to evaluate AN0025 in combination with RT/CRT for the treatment of preoperative rectal cancer has been completed. In addition, a Phase I clinical trial has been initiated for a combination therapy consisting of AN2025, AN0025, and Tecentriq or atezolizumab targeting a variety of PIK3CA mutant solid tumors. This triple combination is expected to target the PI3K mediated tumorigenesis while inhibiting the immunosuppressive tumor microenvironment through multiple non-overlapping mechanisms, leading to synergistic action for tumor regression. AN4005, which is currently being studied in a Phase I clinical trial in the U.S. and China, is an internally discovered oral small molecule PD-L1 inhibitor in development to induce and stabilize PD-L1 dimerization and thereby disrupt the interaction between PD-1 and PD-L1.

Additionally, we continue to advance three in-house preclinical programs which we believe have high global commercial viability. Our preclinical candidates include: AN8025, a multifunctional antibody as T cell and antigen-presenting cell (“APC”) modulator; AN1025, an oral small molecule degrader of β-catenin; and AN9025, an oral small molecule pan-KRAS inhibitor. We anticipate submitting the IND for AN8025 in the first half of 2025.

We believe the next frontier in cancer immunotherapy lies in the category of combination therapies. Our drug candidates combine an immune checkpoint inhibitor with two or more additional cancer therapies in effort to elicit synergistic anti-cancer effects and improved tolerability relative to monotherapies. As we endeavor to engender complementary and synergistic results across our portfolio, our primary consideration is the potential interaction with our other pipeline candidates and/or currently available treatments. We strive to develop innovative antitumor candidates focusing on druggability as well as combinational strength to be leveraged in the next wave of immuno-oncology treatments, ultimately helping to shape the next-generation of cancer therapy.

Through our multi-national R&D centers established in New Jersey and Hangzhou, we execute on our global vision for drug development innovation. The geographic span of our R&D footprint empowers us to more effectively identify and develop novel early-stage programs, as well as recruit top R&D talent from the U.S. and China. We have assembled a management team and a scientific advisory board with industry leaders and influential scientists, who provide international and strategic guidance to our R&D, business development and operational teams. In addition to building our own R&D capabilities, we continue to seek and secure partnerships with leading multi-national pharmaceutical companies such as Eisai Co., Ltd. or Eisai and Novartis Pharma AG or Novartis, to fully realize the potential of our pipeline programs. We believe our partnerships validate our clinical expertise and reflect belief in our ability to deliver on our development and commercialization capabilities across a versatile pipeline.

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Our pipeline

We are advancing a robust pipeline of innovative drug candidates in various stages of development. The following chart provides an overview of the status of our drug candidates:

AN2025: a pan-PI3K inhibitor aimed at becoming the vanguard for recurrent or metastatic HNSCC after anti- PD-1/PD-L1 therapy

Our lead product AN2025, the most clinically advanced drug candidate in our pipeline, is a pan-PI3K inhibitor currently undergoing a global Phase III trial. In-licensed from Novartis, we have the exclusive global rights to develop and commercialize AN2025. It is currently the only drug candidate we are aware of in active registrational clinical trial for the treatment of recurrent or metastatic HNSCC after disease progression with anti-PD-1/PD-L1 therapy. Although anti-PD-1/PD-L1 therapy is becoming first line treatment in patients with recurrent or metastatic HNSCC since its U.S. Food and Drug Administration (“FDA”) approval in 2019, the current treatments are unable to meet the needs of HNSCC patients progressed on prior anti-PD-1/PD-L1 treatment. We believe that AN2025, if approved, has potential to be the first product globally with such label to address this unmet medical need and capture the sizable addressable market.

AN2025 is a widely studied molecule with Novartis alone having sponsored 40 clinical trials on over 4,200 patients across a variety of cancers. These studies include a Phase II trial that demonstrated that the combination of AN2025 with paclitaxel achieved a superior median overall survival (“mOS”), and significant improvements in median progression-free survival (“mPFS”) and overall response rate (“ORR”) compared to the control group in recurrent or metastatic HNSCC after disease progression with platinum based chemotherapy. In July 2016, AN2025 was granted Fast Track designation by the FDA for the treatment of recurrent or metastatic HNSCC with disease progression on or after platinum-based therapy. We completed patient enrollment of the Phase III trial in November 2023, enrolling 487 patients in more than 180 sites around the world, spanning over 18 markets in North America, Europe, Asia, and South America. Leveraging the benefit of OS data as primary endpoint, we expect to submit the NDA to the FDA in the first half of 2025, followed by further marketing approval applications to National Medical Products Administration (“NMPA”), European Medicines Agency (“EMA”), Pharmaceuticals and Medical Devices Agency (“PMDA”) and other authorities.

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AN0025: a tumor microenvironment modulator

AN0025, in-licensed from Eisai, is a small molecule EP4 antagonist designed to modulate the tumor microenvironment. It is designed to block the prostaglandin E2 (“PGE2”)-EP4 signaling pathway to inhibit PGE2-mediated immunosuppression in cancer patients. In the CT26 murine colon cancer model, for those which are not responsive to anti-PD-1/PD-L1 therapy, AN0025 combined with an anti-PD-1 antibody treatment demonstrated stronger antitumor activity compared to each standalone compound. In June 2020, we initiated a Phase Ib clinical trial to evaluate the combination of AN0025 and pembrolizumab for the treatment of recurrent NSCLC and urothelial cancer after anti-PD-1/PD-L1 treatments, as well as recurrent TNBC, MSS CRC and cervical cancer after standard of care treatments. We have completed the patient enrollment in the U.S. and France, and expect to obtain top-line results in the first half of 2024. We aim to identify specific cancer types sensitive to this combination based on the results and will proactively communicate with the regulatory authorities for the design of Phase II/III registrational trials. In addition to evaluating the combination of AN0025 and pembrolizumab, AN0025 is also being developed as a potential enhancer of radiotherapy in different indications. A phase 1b study to assess the safety, tolerability and efficacy of AN0025 in combination with definitive CRT in patients with locally advanced esophageal cancer is underway and the clinical update will be presented in ASCO 2024 as online poster. We also completed a phase 1b study to evaluate AN0025 in combination with RT/CRT for the treatment of preoperative rectal cancer and we have just initiated a phase II study in collaboration with Leeds University for further development.

Triple combination of AN2025, AN0025 and atezolizumab: an example of our combination therapy strategy

To fully explore the potential of AN2025 and AN0025, we initiated a study of the triple combination of AN2025, AN0025 and atezolizumab, an anti-PD-L1 antibody. This study exemplifies our combination therapy strategy to achieve synergistic effects from both targeted therapy and immunotherapy perspectives. AN2025 targets not only PI3K mediated tumorigenesis (e.g., via inhibition of PI3Kα / PIK3CA mutants) but also the immunosuppression of the tumor microenvironment (e.g., via inhibition of PI3Kδ and PI3Kγ). Leveraging the complementary and synergistic antitumor effects of our drug candidates in combination therapies, AN2025 is designed to mechanistically complement and synergize with the combination of anti-PD-1/PD-L1 antibody and AN0025 to form an improved treatment regimen for patients with multiple advanced solid tumors. In different tumor-bearing mouse models, we have consistently observed significantly stronger antitumor activity in the triple combination of AN2025, AN0025 and atezolizumab compared with the doublet combinations. In July 2021, we initiated a Phase I clinical trial to evaluate the triple combination of AN2025, AN0025, and atezolizumab, for a variety of PIK3CA mutant solid tumors. In September 2022, subsequent to the doublet arm dose-ranging studies, we initiated a dose-ranging study for the triple combination, and we expect to identify the recommended Phase II dose (“RP2D”) in the first half of 2024.

AN4005: a backbone of our future oral combination therapies

AN4005, a drug candidate discovered in-house, is an oral small-molecule PD-L1 inhibitor designed to induce and stabilize PD-L1 dimerization and thereby disrupt the interaction between PD-1 and PD-L1. Compared to the crowded development of anti-PD-1/PD-L1 antibodies, with multiple brands already available to patients and many potential candidates in clinical trials, small-molecule PD-L1 inhibitors are underdeveloped and do not have a drug approved in any jurisdiction globally, despite advantages such as shorter half-life that may allow for dose titration and schedule modifications to minimize immune-related AEs and lower production costs. In our preclinical studies, AN4005 was well tolerated and exhibited excellent tumor growth inhibition (“TGI”) to an extent comparable to an approved anti-PD-L1 antibody, and promoted an adaptive immune response for antitumor activities. We received allowance to proceed under INDs from the FDA and NMPA for the treatment of advanced tumors in June 2021 and December 2021, respectively, dosed the first patient in January 2022, and expect to identify the RP2D from the Phase I clinical trial in the first half of 2024.

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Our preclinical programs

We continue actively advancing three in-house preclinical programs which we believe have high global commercial viability. Our preclinical candidates include: AN8025, a multifunctional antibody as T cell and APC modulator; AN1025, an oral small molecule degrader of β-catenin; and AN9025, an oral small molecule pan-KRAS inhibitor. We anticipate submitting the IND for AN8025 in the first half of 2025.

Our company history and team

We rebranded in 2016 as Adlai Nortye Biopharma and began development activities focusing on the discovery and development of innovative cancer therapies, after originally incorporating in 2004. We have assembled an experienced management team consisting of successful entrepreneurs and industry veterans. Largely, our success stems from management’s leadership and industry expertise, covering the full spectrum of the cancer therapy development process, from design and execution of preclinical and clinical studies through the regulatory process and commercialization.

Our management team has more than 100 cumulative years of industry experience and a proven track record of innovative drug R&D, clinical development and commercialization. Our founder, chief executive officer, and chairman of our board of directors, Mr. Yang Lu is a successful entrepreneur who brings expertise across the domains of business development, operations, and management. Our president, chief medical officer and chief executive officer of our U.S. subsidiary, Dr. Lars Erik Birgerson, has extensive experience as a senior leader with numerous well-known companies in the biopharmaceutical industry, including Roche Pharmaceuticals, Genentech, and Bristol-Myers Squibb (“BMS”). Our senior vice president and global head of clinical operations, Dr. Kaiyang Tang, has deep experience in global clinical operations and regulatory affairs in the pharmaceutical industry, and has served as a clinical leader in a number of companies, including Generon (Shanghai) Corporation Ltd. and Hutchison MediPharma Ltd, a company triple listed on the Nasdaq, Hong Kong Stock Exchange, and Alternative Investment Market. Our senior vice president and global head of regulatory affairs, Dr. Victoria Elizabeth Demby has over 20 years of industry experience and has served in various senior positions for several multinational pharmaceutical companies such as GSK, MSD, and BMS.

Since our inception, we have received strong support from our shareholders, including financial investors as well as several industry-leading strategic investors. This investor base is, and we expect will continue to be, aligned with our vision and strategy going forward.

Scientific background — cancer therapies: immunotherapy, combination therapy, and others.

Cancer is a disease in which some of the body’s cells grow uncontrollable and potentially spread to other parts of the body. As the understanding of the human body’s functioning has evolved, it has become clear that cancer is caused by genetic abnormalities that lead to changes in cells’ function, primarily how they grow and divide. Three types of genetic changes principally contribute to cancer: the upregulation of genes that promote cancer; the downregulation of genes that suppress cancer; and the dysfunction of genes that repair DNA damage. Conventional cancer treatments commonly used include radiation therapy, chemotherapy, and surgery.

Although still a first-line treatment for some types of cancer, often chemotherapy cannot effectively control progression of advanced cancer and causes side effects significantly affecting the quality of patients’ lives, which necessitates research and development of new therapies for cancer treatments. After a long process of historical development, the field of cancer treatment has advanced rapidly in recent decades, leading to more advanced treatment options represented by targeted therapies, and more recently, immunotherapies. These therapies aim to improve patient outcomes while mitigating systemic adverse effects. Targeted therapy and immunotherapy, through targeting specific oncogenic pathways and leveraging patients’ immune systems respectively, can benefit patients in terms of improved efficacy, reduced symptoms, or better quality of life.

Targeted therapy is a form of cancer treatment that encompasses chemical drugs and biological products, and targets proteins that regulate cancer cells’ growth, division, and spread. As small molecules, chemical drugs can enter cells easily and are usually designed to target tumor-specific proteins inside cancer cells. Biological products, especially antibodies, identify targets on the surface of cancer cells and consequently are designed to directly identify and fight cancer cells, carry anti-tumor chemical toxins to the cancer cells, or mark cancer cells to facilitate easy targeting and destruction by the immune system.

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Immunotherapy is a type of cancer treatment that helps the immune system fight cancer. The human immune system can recognize and attack foreign substances and protect its own cells from those attacks. However, cancer cells escape attack in various ways. For example, cancer cell may “pretend” to be healthy cells by completing a “handshake” with immune cells called T cells. Another way is through building a tumor microenvironment that silences the immune system. Immune checkpoint inhibitors, mostly biological products such as anti-PD-1/PD-L1 antibodies, can block the “handshake” between cancer cells and T cells, thereby enabling T cells to recognize and attack cancer cells as foreign objects. Drugs that target tumor microenvironments are designed to reverse the tumor-associated immunosuppressive state. The tumor microenvironment is a complex ecosystem, which includes immune cells, the extracellular matrix, blood vessels, and other cells such as fibroblasts. Therefore, drugs targeting tumor microenvironments are designed to function in different ways, such as reducing immunosuppressive cells surrounding a tumor or suppressing generation of blood vessels.

Cancer development and progression is a complex process that can involve multiple levels of cell functional disorders. Combination therapy that addresses disorders through different mechanisms is considered a promising next generation cancer treatment. Many studies have shown that immunotherapeutic combinations can significantly boost response rates in cancer patients as compared to monotherapies. An increasing number of studies are testing combinations with previously failed monotherapy drug candidates or shelved drugs. Moreover, scientists believe that targeted therapy can be potentiated by combination with immunotherapy, because the combination will make cancer cells more susceptible to the immune system and thus potentially yield both higher response rates and longer treatment benefit.

Despite the promising future of combination therapy, there are challenges to overcome, especially escalated safety issues observed in many previously failed combinations. Therefore, deep understanding of cancer biology and strong R&D and preclinical and clinical design and execution capabilities are needed to develop the right paring, sequencing, timing, and dosage of therapies.

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Our differentiated oncology portfolio

Buparlisib (AN2025): a pan-PI3K inhibitor aimed at becoming the vanguard for recurrent or metastatic HNSCC after anti-PD-1/PD-L1 therapy

Overview

Our lead drug candidate, buparlisib, or AN2025, is a global registrational trial-stage pan-PI3K inhibitor, which specifically targets the PI3K signaling pathway and reverses the immunosuppressive tumor microenvironment through inhibition of class I PI3Ks. We have the exclusive global rights to develop and commercialize AN2025 through in-licensing agreement with Novartis. For more details, see “— License and collaboration agreements — Collaboration with Novartis.” Novartis has conducted 40 clinical trials on over 4,200 patients across a variety of tumor types and a multi-center Phase II clinical trial of AN2025 demonstrated strong antitumor activity and a manageable safety profile in combination with paclitaxel in the treatment of recurrent or metastatic HNSCC on or after disease progression with platinum based chemotherapy. In July 2016, AN2025 was granted Fast Track designation by the FDA for the treatment of recurrent or metastatic HNSCC with disease progression on or after platinum-based therapy. We are now advancing AN2025 in combination with paclitaxel for the treatment of recurrent or metastatic HNSCC after anti-PD-1/PD-L1 therapy in a Phase III clinical trial, in which we expect to enroll a total of 483 patients in more than 180 sites around the world, spanning over 18 significant markets in North America, Europe, Asia, and South America. We completed the patient enrollment in November 2023 and expect to submit an NDA to the FDA, provided the OS benefit readout, in the first half of 2025, followed by further marketing approval applications to the NMPA, EMA, PMDA, and other authorities. To the best of our knowledge, AN2025 is currently the most advanced drug candidate in Phase III clinical development for the treatment of recurrent or metastatic HNSCC after disease progression with anti-PD-1/PD-L1 therapy. We believe that AN2025, if approved, has the potential to be the first drug product with such label globally to address this unmet medical need and capture the sizable addressable market.

Background on HNSCC

Head and neck cancers are defined as any cancer that begins in cells of the oral cavity, pharynx, nose, sinuses, or salivary glands. The overwhelming majority (>90%) of head and neck cancers are squamous cell carcinomas (“HNSCC”). HNSCC is one of the most morbid, mortal, and genetically diverse malignancies. Studies show that HNSCC can be caused by various risk factors including tobacco consumption, alcohol abuse, viral infections (e.g., HPV or Epstein-Barr virus), and other carcinogens such as radiation exposures and occupational exposures to wood dust, nickel dust, or formaldehyde. Most patients present with locally advanced disease with a high risk of recurrence, and approximately 10% of HNSCC patients present with metastatic disease. Platinum-based chemotherapy was the standard regimen that dominated the treatment of first-line recurrent or metastatic HNSCC for 30 years with a mOS of less than 9 months. Despite initial responses to chemotherapy, many patients experience recurrence, which can later progress into advanced stages of these diseases with debilitating symptoms impacting their quality of life.

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An illustration of head and neck cancer regions

Source: National Institutes of Health

Targeted therapy was the first major alternative treatment for first-line recurrent or metastatic HNSCC. In 2011, cetuximab, a chimeric monoclonal antibody that targets EGFR, in combination with platinum-based therapy plus fluorouracil was approved as a first-line treatment for HNSCC by the FDA. Compared to chemotherapy alone, this treatment regimen has an improved efficacy with a higher response rate of about 36% and extends mOS to 10.1 months. In the next few years, immunotherapy became the most popular area of cancer research and was accepted by medical authorities for its durable response and long-term survival, which largely changed the therapeutic landscape of cancer. Currently, there are two anti-PD-1 antibodies, i.e., pembrolizumab (Keytruda) and nivolumab (Opdivo) approved by the FDA for the treatment of recurrent or metastatic HNSCC. Pembrolizumab was the first immune checkpoint inhibitor approved for the treatment of HNSCC. It was first approved in the U.S. and Europe for second-line treatment of recurrent or metastatic HNSCC in 2016, and later approved for first-line treatment in 2019. Pembrolizumab alone or in combination with chemotherapy significantly prolonged mOS to around 14 months, tripled the five-year survival rate compared to cetuximab in combination with chemotherapy, and also exhibited a favorable safety profile. As a result, it became the mainstream drug for first-line treatment of HNSCC in major developed countries in the U.S., Europe, and Japan.

However, it is observed that most recurrent or metastatic HNSCC patients do not respond to immunotherapy (manifested by a response rate of ~23%) and about 85% patients experience disease progression after immunotherapy. At present, these patients can only use chemotherapies, cetuximab, or combined chemotherapy drugs that were marketed in this therapeutic field before the advent of immunotherapy, notwithstanding that these treatment options have never been verified by registrational clinical trials on efficacy in progressed HNSCC patients. Presently, there is an unmet medical need for more effective therapies for recurrent or metastatic HNSCC patients after anti-PD-1/PD-L1 treatment approved by medical authorities.

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Mechanism of action

PI3K regulates many physiologic cellular functions, including protein synthesis and glucose metabolism, cell survival growth, proliferation, cell migration, and angiogenesis. It is a family of phospholipid kinase, which is categorized into three classes based on structure, function, and substrate specificity. Class I PI3Ks are widely implicated in cancer. They function as heterodimers consisting of one catalytic subunit selecting from p110α, p110ß, p110δ, and p110γ, and one regulatory subunit selecting from p85α (or its splice variants p55α and p50α), p85ß, p55γ, p101, and p84. Between the two subunits, the catalytic subunit plays the central role of performing the action of PI3K, which is to convert PIP2 to PIP3, and the regulatory subunit regulates the catalytic subunit’s activation in response to the absence or presence of upstream stimulation by growth factors. Depending on the catalytic subunit, class I PI3K is categorized into four isoforms PI3Kα, PI3Kß, PI3Kδ, and PI3Kγ.

Upon activation (e.g., by growth factor stimulation) of the PI3K signaling pathway, PI3K converts PIP2 to PIP3, a lipid second messenger that binds to the pleckstrin homology domain of target proteins and recruits them to the inner surface of the plasma membrane. The best understood PI3K target is AKT/PKB, a serine/ threonine kinase, which functions as a “molecular hub” to regulate diverse cellular functions such as cell proliferation, growth, metabolism, survival, and angiogenesis. PI3K signaling can be negatively regulated by action of dual specificity protein phosphatases, also known as 3-PI phosphatases. The prototype member of this family of phosphatases is the tumor suppressor phosphatase and tensin homologue (“PTEN”), which has the potential to attenuate the downstream signaling of multiple PI3K complexes.

Evidence suggests that constitutive PI3K activation is a critical step in mediating the transforming potential and growth stimulating activity of various oncogenes and tumor suppressors, which contribute to the onset and growth of many solid tumors as well as tumors of the hematopoietic system. Activation of the PI3K signaling pathway will lead to the subsequent activation of downstream pathways, including the PI3K/ AKT/mTOR signaling pathway. The PI3K/AKT/mTOR pathway is an important intracellular signaling network that regulates cellular metabolism, proliferation, and survival. Abnormal activation of the PI3K/ AKT/mTOR pathway has been identified as an important step in the initiation and maintenance of tumors and a key regulator of angiogenesis and upregulated metabolic activities in tumor cells. Activation of the PI3K pathway frequently occurs in HNSCC, through a number of mechanisms including PIK3CA or PTEN molecular alterations, overexpression of EGFR, or in association with HPV infection.

Our lead product AN2025 is designed to specifically inhibit PI3Kα isoform (and PI3Kß to a lesser extent) in the PI3K/AKT signaling pathway in an adenosine triphosphate (ATP)-competitive manner, inhibiting the production of the PIP3 and the subsequent activation of the PI3K signaling pathway, including the PI3K/ AKT/mTOR signaling pathway. As a pan-PI3K inhibitor, it also targets PI3Kδ and PI3Kγ, which play important roles in the immune system, empowering it to be a partner for combination therapies. For details, see “— Triple combination of AN2025, AN0025, and Tecentriq, or atezolizumab.”

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Summary of preclinical results

In a study conducted on mice transfected with FaDu cells, an HNSCC cell line, AN2025 (previously known as BKM120) showed down regulation of AKT in tumor in the animals treated with doses equivalent to patient’s maximum tolerated dose (“MTD”), to an extent more significant than BEZ235 (also known as dactolisib, another PI3K inhibitor developed by Novartis).

Source: https://doi.org/10.1158/0008-5472.CAN-11-2263

In an animal study we conducted before the initiation of our Phase III clinical trial, AN2025 showed an encouraging outcome for the treatment of anti-PD-1 antibody refractory tumors. In anti-PD-1 antibody refractory tumor bearing mice, single agent treatment with AN2025 significantly inhibited tumor growth in a dose range consistent with doses equivalent to patient’s MTD. This animal model result suggests AN2025 could potentially address anti-PD-1 antibody refractory tumors.

Activity of AN2025 in anti-PD-1 antibody refractory CT26 mice model

Summary of clinical trial results

Phase Ia trial in patients with advanced solid tumors by Novartis

Trial design. This trial was a Phase Ia, multi-center, open-label dose escalation study of AN2025 in patients with advanced solid tumors. A total of 83 patients enrolled in five clinical sites in the U.S., Canada, Spain, and Netherlands. The study was designed to consist of two stages. One was the dose escalation phase, during which patients were assigned to cohorts over six dose levels: 12.5 mg/day, 25 mg/day, 50 mg/day, 80 mg/day, 100 mg/day, and 150 mg/day. At the end of the dose escalation phase where the MTD was declared, the next stage, an MTD expansion phase, was initiated enrolling additional patients with advanced solid tumors. The primary objective of this study was to determine the MTD of AN2025 as a monotherapy. The secondary objectives included assess the safety, tolerability, pharmacokinetic (“PK”) portfolio, pharmacodynamics (“PD”), and preliminary evidence of efficacy of AN2025.

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Trial status. This trial was completed in August 2012.

Safety data. All patients reported at least one AE, with the most commonly reported (≥ 30%) AEs being nausea (45.8%), decreased appetite (42.2%), asthenia (37.3%), diarrhea (36.1%), hyperglycemia (33.7%), rash (31.3%), and constipation (30.1%). The AE profile of patients treated at the determined MTD (100 mg/day) was similar to the overall AE profile, with the most commonly reported AEs being nausea (27 patients, 49.1%), asthenia (26 patients, 47.3%), diarrhea (25 patients, 45.5%), decreased appetite (22 patients, 40.0%), hyperglycemia (19 patients, 34.5%), rash (18 patients, 32.7%), and constipation (18 patients, 32.7%). Overall, 68.7% of patients experienced at least one grade 3–4 AE. In patients treated at MTD of 100mg/day, the incidence of grade 3–4 AE was 65.5%.

Of all patients treated with AN2025, 36 (43.4%) experienced SAE, including four patients in the 50 mg/day dose group (80%), four patients in the 80 mg/day group (36.4%) and 23 patients in the 100 mg/day group (41.8%), four patients in the 150 mg/day group (100%) and 1 patient in the TEC 100mg/day group (20%). Eleven patients experienced SAEs suspected to be drug-related including one patient in the 80 mg/day dose group (9.1%), and seven patients in the 100 mg/day group (12.7%), and three patients in the 150 mg/day group (75.0%). The most frequent SAEs suspected to be treatment-related were hyperglycemia, diarrhea and fatigue. 29 (34.9%) patients died during the study, with 13 (15.7%) deaths occurring on treatment or up to 28 days after end of treatment. None of the deaths were considered by the investigator to be related to the study treatment.

Summary of deaths and AEs of patients being treated with AN2025