九洲药业(603456CH)APPENDIX 1SummaryEventOn July 07,2023,the U.S.Di strict Court for the District of Delaware issued a negative decision regarding the validity of a patentcovering Entresto and combinations of sacubitril and valsartan,which expires in 2025 with its pediatric exclusivity.Novartisstrongly believes the combination patent is valid and will a ppeal to the U.S.Court of Appeals for the Federal Circuit(CAFC)toreverse the District Court's decision.Mea nwhile,Novartis also discosed multiple patents of Entres to registered in the UnitedStates,including combination therapy patents,a morphous patents,as well as 2 crystalline patents and1 dosageregimen patent,which will expire between 2023 and 2036(induding extension of pediatric indications)Flash Analysis(1)Duringthe appeal period of the patent dispute,we believethat therisk of Entresto being imitated produced commericallyis relatively low.According to the pra cti cei n the pha rmaceuticalindustry,patentdispute litigation usuallyl asts for two to threeyears.Since Novartis hasalready filed an appeal duringthe patentperiod,we believethat there is less possibility for a thirdpartyto replicate the production of Entresto before the final judgment of thecourt.(2)The core production patents are still under protection,making it difficult for other manufacturerstobypass relate dpate ntsNovartis has provided sufficient patent layout protection around Entresto,and other enterprises need to face many patent barriersin order to ca rry out imitation production.In the United States,Entresto has multiple patents protecting its formula,induding(expiring on May 8,2027 and November 27,2027),and dosage regimen patents (expiring on May 9,2036).The combinationthera py patents that were ruled invalid by the US Di strict Court this time are only one of them.Before the expi ration of its keycrystalline and other production pa tents,other manufacturers are unable to by pass the patents for production.(3)In 2023,orders will continue to grow,and we believe that the short-temm performance growth will rely on the strongcertainty of Novartis'orders.In thel ong term,thecompany will continueto expand CDMO customers,andthe growth trend willbe positive.In 2022,thecompanys CDMOorders took ona total of 851 projects (+30.7%),including 26listed projects(+30%)and61 Phaselll projects (+24.5%).Thecompany added 6 commercial varieties and 12 clinical phase lll projects,mainly involving fiedssuch as anti-cancer and trea tment of fatty liver causing CNS damage.Ba sed on current res erved projects and customer forecasts,we believe that commercial varieties are expected to mai ntain a continuous growth in 2023.In 2019,Jiuzhou Pharmaceuticalacquired a nAmerican CRO company,Raybow America,taking an important step towards theinter nationalization of the companysCDMO business.In 2022,the company increased its investment in Raybow America,added R&D personnel and equipment,expanded the pil ot plant(which has already been put into use),further expanded its business capacity in the United States,accel erated thel ayout of overseas commercialproduction ba ses,achieved one-stop services for overseas innovative drugCDMO,and promoted thela yout of CGT and macromolecular business in medium and long-term planning.Accordingto the2022 annualreport,in a ddition to Novartis,the company has also formed deep cooperation with international well-known pharmaceuticalenter pri ses such as Roche,Zoetis,Gliead,Daiichi Sankyo,etc.We believe that business orders areexpected to achieve rapid growthin the future,a nd thecompa ny's long-term performancetrend isrelatively good.RiskThe outcome of the patent lawsuit against Entresto did not meet expectations,global biopharmaceutical research anddevelopment expenses declined,competition in the small molecule CDMOindustryintensified,customer product s ales did notmeet ex pectations,and overseas business customerexpansion did not meetexpecta tions12Jul20232