twi pharmaceuticals, inc. and subsidiaries ...twi pharmaceuticals, inc. and subsidiaries...
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TWi PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT ACCOUNTANTS
DECEMBER 31, 2015 AND 2016
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For the convenience of readers and for information purpose only, the auditors’ report and the accompanying
financial statements have been translated into English from the original Chinese version prepared and used in
the Republic of China. In the event of any discrepancy between the English version and the original Chinese
version or any differences in the interpretation of the two versions, the Chinese-language auditors’ report and
financial statements shall prevail.
TWi PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2015 AND 2016 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
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December 31, 2015 December 31, 2016 Assets Notes AMOUNT % AMOUNT %
Current assets
1100 Cash and cash equivalents 6(1) $ 2,625,612 37 $ 2,445,038 35
1150 Notes receivable, net 161 - 521 -
1170 Accounts receivable, net 6(2) 102,104 1 114,170 2
1180 Accounts receivable - related
parties, net
7
- - 1 -
1200 Other receivables 43,698 1 16,145 -
1220 Current income tax assets - - 85 -
130X Inventories 6(3) 112,557 2 91,813 1
1410 Prepayments 61,440 1 74,222 1
1460 Non-current assets held for sale
- net
6(4)
- - 901,960 13
1476 Other current financial assets 6(5) 1,886,738 26 2,195,560 31
11XX Total current assets 4,832,310 68 5,839,515 83
Non-current assets
1600 Property, plant and equipment 6(6), 7 and 8 1,265,921 18 925,154 13
1780 Intangible assets 6(7) 830,955 11 136,612 2
1900 Other non-current assets 6(8) 204,562 3 113,246 2
15XX Total non-current assets 2,301,438 32 1,175,012 17
1XXX Total assets $ 7,133,748 100 $ 7,014,527 100
(Continued)
TWi PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2015 AND 2016 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
The accompanying notes are an integral part of these consolidated financial statements.
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December 31, 2015 December 31, 2016 Liabilities and Equity Notes AMOUNT % AMOUNT %
Current liabilities
2100 Short-term borrowings 6(9) $ 16,415 - $ - - 2170 Accounts payable 35,482 1 55,176 1
2200 Other payables 6(10) 228,772 3 139,531 2 2220 Other payables - related parties 7 1,143 - - -
2230 Current income tax liabilities - - 9,827 - 2260 Liabilities directly related to
non-current assets held for sale
6(4)
- - 178,346 3 2300 Other current liabilities 6(13) 31,530 - 5,665 -
21XX Total current liabilities 313,342 4 388,545 6
Non-current liabilities
2570 Deferred income tax liabilities 6(23) 152,892 2 4,933 - 2600 Other non-current liabilities 6(11)(13) 37,600 1 11,219 -
25XX Total non-current liabilities 190,492 3 16,152 -
2XXX Total liabilities 503,834 7 404,697 6
Equity attributable to owners of
the parent
Share capital
3110 Common stock 6(14) 1,274,091 18 1,273,274 18 3140 Advance receipts for share capital 6(12) 981 - 2,038 -
Capital surplus 6(12)(15)(26) 3200 Capital surplus 7,790,456 109 8,280,915 118
Retained earnings (accumulated
deficit)
6(16)(23)
3310 Legal reserve 1,199 - 1,199 - 3350 Accumulated deficit ( 2,711,177 ) ( 38 ) ( 2,931,067 ) ( 42 )
Other equity interest 3400 Other equity interest ( 53,256 ) ( 1 ) ( 89,913 ) ( 1 )
3500 Treasury shares 6(14) - - ( 212,112 ) ( 3 )
31XX Total equity attributable to
owners of the parent
6,302,294 88 6,324,334 90 36XX Non-controlling interest 327,620 5 285,496 4
3XXX Total equity 6,629,914 93 6,609,830 94
Commitments and contingent
liabilities
9
Significant events after the
reporting period
11
3X2X Total liabilities and equity $ 7,133,748 100 $ 7,014,527 100
TWi PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2015 AND 2016 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT LOSS PER SHARE DATA)
The accompanying notes are an integral part of these consolidated financial statements.
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2015 2016 Items Notes AMOUNT % AMOUNT %
4000 Operating revenues 6(17) and 7 $ 437,368 100 $ 743,778 100 5000 Operating costs 6(3)(11)(12)(21)
(22) ( 338,240 ) ( 77 ) ( 485,438 ) ( 65 ) 5900 Gross Profit 99,128 23 258,340 35 5920 Realized gain from sales 29,898 7 - - 5950 Gross profit, net 129,026 30 258,340 35 Operating expenses 6(11)(12)(21)(22)
and 7 6100 Selling and marketing ( 60,755 ) ( 14 ) ( 59,105 ) ( 8 ) 6200 General and administrative ( 161,405 ) ( 37 ) ( 164,251 ) ( 22 ) 6300 Research and development ( 794,739 ) ( 182 ) ( 720,568 ) ( 97 ) 6000 Total operating expenses ( 1,016,899 ) ( 233 ) ( 943,924 ) ( 127 ) 6900 Operating loss ( 887,873 ) ( 203 ) ( 685,584 ) ( 92 ) Non-operating income and
expenses
7010 Other income 6(18)(24) and 7 320,462 73 462,317 62 7020 Other gains and losses 6(19) and 7 178,257 41 ( 75,104 ) ( 10 ) 7050 Finance costs 6(20) ( 307 ) - ( 91 ) - 7060 Share of loss of associates and
joint ventures accounted for under equity method
( 53,737 ) ( 13 ) - - 7000 Total non-operating income
and expenses
444,675 101 387,122 52 7900 Loss before income tax ( 443,198 ) ( 102 ) ( 298,462 ) ( 40 ) 7950 Income tax benefit 6(23) 8,304 2 6,569 1 8200 Loss for the year ( $ 434,894 ) ( 100 ) ( $ 291,893 ) ( 39 )
Other comprehensive income (loss)
Other comprehensive income (loss) that will not be reclassified to profit or loss
8311 Other comprehensive income,
before tax, actuarial gains (losses) on defined benefit plans
6(11)
$ 705 - $ 2,023 - Items that may be reclassified
subsequently to profit or loss
8361 Exchange differences on
translation of foreign financial statements
( 23,905 ) ( 5 ) ( 65,754 ) ( 9 ) 8300 Other comprehensive loss, net ( $ 23,200 ) ( 5 ) ( $ 63,731 ) ( 9 )
8500 Total comprehensive loss for the year
( $ 458,094 ) ( 105 ) ( $ 355,624 ) ( 48 )
Loss attributable to: 8610 Owners of the parent ( $ 347,739 ) ( 80 ) ( $ 221,682 ) ( 30 ) 8620 Non-controlling interest ( 87,155 ) ( 20 ) ( 70,211 ) ( 9 ) ( $ 434,894 ) ( 100 ) ( $ 291,893 ) ( 39 ) Comprehensive loss attributable
to:
8710 Owners of the parent ( $ 370,939 ) ( 85 ) ( $ 266,336 ) ( 36 ) 8720 Non-controlling interest ( 87,155 ) ( 20 ) ( 89,288 ) ( 12 ) ( $ 458,094 ) ( 105 ) ( $ 355,624 ) ( 48 )
Loss Per Share (in dollars) 6(25) 9750 Basic Loss Per Share ( $ 2.99 ) ( $ 1.76 )
9850 Diluted Loss Per Share ( $ 2.99 ) ( $ 1.76 )
TWi PHARMACEUTICALS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
YEARS ENDED DECEMBER 31, 2015 AND 2016
(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
Equity attributable to owners of the parent
Capital Retained Earnings Other Equity Interest
Notes
Common
stock
Advance
receipts
for share
capital
Capital
reserves
Legal
reserve
Accumulated
deficit
Exchange
differences on
translation of
foreign
financial
statements
Other
equity -
others
Treasury shares
Total
Non-
controlling
interest
Total equity
The accompanying notes are an integral part of these consolidated financial statements.
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2015 Balance at January 1, 2015 $ 1,131,057 $ 39 $ 4,732,341 $1,199 ( $ 2,364,143 ) $ 37,439 ( $ 46,769 ) $ - $ 3,491,163 $ 343,249 $ 3,834,412 Compensation costs of employee stock options 6(12)(15) - - 28,098 - - - - - 28,098 - 28,098 Compensation costs of employee stock options from subsidiaries 6(12)(15) - - 6,478 - - - - - 6,478 - 6,478 Employee stock options exercised 6(12)(15) - 6,023 - - - - - - 6,023 - 6,023 Issuance of restricted stocks 6(12)(15) 635 - 10,379 - - - ( 10,379 ) - 635 - 635 Advance receipts for share capital transferred 6(12)(15) 1,059 ( 5,081 ) 4,022 - - - - - - - - Reversal of compensation costs of restricted stocks - - - - - - ( 22,170 ) - ( 22,170 ) - ( 22,170 ) Retirement of restricted stocks 6(14)(15) ( 2,660 ) - ( 12,528 ) - - - 12,528 - ( 2,660 ) - ( 2,660 ) Issuance of shares 6(14)(15) 144,000 - 2,660,966 - - - - - 2,804,966 - 2,804,966 Transactions with non-controlling interests 6(15)(26) - - 360,700 - - - - - 360,700 - 360,700 Loss for the year - - - - ( 347,739 ) - - - ( 347,739 ) ( 87,155 ) ( 434,894 ) Other comprehensive loss for the year 6(11) - - - - 705 ( 23,905 ) - - ( 23,200 ) - ( 23,200 ) Changes in non-controlling interests - - - - - - - - - 71,526 71,526 Balance at December 31, 2015 $ 1,274,091 $ 981 $ 7,790,456 $1,199 ( $ 2,711,177 ) $ 13,534 ( $ 66,790 ) $ - $ 6,302,294 $ 327,620 $ 6,629,914
2016 Balance at January 1, 2016 $ 1,274,091 $ 981 $ 7,790,456 $1,199 ( $ 2,711,177 ) $ 13,534 ( $ 66,790 ) $ - $ 6,302,294 $ 327,620 $ 6,629,914 Compensation costs of employee stock options 6(12)(15) - - 23,705 - - - - - 23,705 - 23,705 Compensation costs of employee stock options from subsidiaries 6(12)(15) - - 6,836 - - - - - 6,836 2,007 8,843 Compensation costs of restricted stocks 6(12) - - - - - - 2,769 - 2,769 - 2,769 Employee stock options exercised 6(12)(15) - 3,998 - - - - - - 3,998 - 3,998 Issuance of restricted stocks 6(12)(15) 500 - 5,544 - - - ( 5,544 ) - 500 - 500 Advance receipts for share capital transferred 6(12)(15) 613 ( 2,941 ) 2,328 - - - - - - - - Retirement of restricted stocks 6(14)(15) ( 1,930 ) - ( 12,795 ) - - - 12,795 - ( 1,930 ) - ( 1,930 ) Reacquisition of treasury shares 6(14) - - - - - - - ( 212,112 ) ( 212,112 ) - ( 212,112 ) Transactions with non-controlling interests 6(15)(26) - - 464,841 - ( 231 ) - - - 464,610 45,157 509,767 Loss for the year - - - - ( 221,682 ) - - - ( 221,682 ) ( 70,211 ) ( 291,893 ) Other comprehensive income (loss) for the year 6(11) - - - - 2,023 ( 46,677 ) - - ( 44,654 ) ( 19,077 ) ( 63,731 ) Balance at December 31, 2016 $ 1,273,274 $ 2,038 $ 8,280,915 $1,199 ( $ 2,931,067 ) ( $ 33,143 ) ( $ 56,770 ) ( $ 212,112 ) $ 6,324,334 $ 285,496 $ 6,609,830
TWi PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2015 AND 2016 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
Notes 2015 2016
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CASH FLOWS FROM OPERATING ACTIVITIES Loss before income tax ( $ 443,198 ) ( $ 298,462 ) Adjustments to reconcile consolidated loss before income
tax to net cash used in operating activities
Non-cash flows from income and expenses Compensation costs of employee stock options and
restricted stocks 6(12)
12,406 35,317 Long-term deferred revenue (including current portion)
transferred to revenue
( 4,225 ) ( 9,033 ) Reversal of employee benefit of associate corporations 6(21) ( 42,749 ) - Provision for (gain from reversal of) bad debts 6(2) - 208 Depreciation 6(6)(21) 109,948 124,412 Amortisation 6(7)(21) 108,917 87,923 Interest income 6(18) ( 11,139 ) ( 41,361 ) Interest expense 6(20) 307 91 Gain on disposal of investments 6(19) ( 155,165 ) - Loss (gain) on disposal of property, plant and
equipment 6(19)
131 ( 316 ) Property, plant and equipment transferred to expenses 6(6) 138 935 Impairment loss 6(19) ( 11,785 ) - Share of loss of associates and joint ventures accounted
for under the equity method 6(19)
53,737 - Realised gain from sales ( 29,898 ) - Changes in assets and liabilities relating to operating
activities
Changes in assets relating to operating activities Notes receivable, net 1,078 ( 360 ) Accounts receivable, net ( 38,479 ) ( 12,274 ) Accounts receivable - related parties, net 101,455 ( 1 ) Other receivables 2,411 39,708 Other receivables - related parties 4,835 - Inventories ( 20,862 ) 16,985 Prepayments 6,014 ( 24,439 ) Changes in liabilities relating to operating activities Accounts payable ( 2,553 ) 19,694 Other payables ( 115,183 ) ( 1,911 ) Other payables - related parties ( 3,797 ) ( 1,143 ) Other current liabilities ( 5,447 ) ( 7,821 ) Accrued pension liabilities ( 380 ) ( 354 ) Other non-current liabilities - 986
Cash outflow used in operations ( 483,483 ) ( 71,216 ) Interest received 11,139 29,206 Interest paid ( 307 ) ( 91 ) Income tax paid ( 7,961 ) ( 87 )
Net cash used in operating activities ( 480,612 ) ( 42,188 )
(Continued)
TWi PHARMACEUTICALS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2015 AND 2016 (EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS)
Notes 2015 2016
The accompanying notes are an integral part of these consolidated financial statements.
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CASH FLOWS FROM INVESTING ACTIVITIES
Increase in other current financial assets ( $ 1,864,338 ) ( $ 308,822 )
Acquisition of property, plant and equipment 6(27) ( 158,816 ) ( 85,432 )
Proceeds from disposal of property, plant and equipment 678 19,560
Increase in intangible assets 6(7) ( 2,460 ) ( 11,702 )
Changes in cash and cash equivalents reclassified to non-
current assets held for sale
6(4)
- ( 11,458 )
Return of stock subscription from capital reduction of
investment accounted for under the equity method
323,805 -
Proceeds from disposal of investment accounted for under
the equity method
163,650 -
Increase in other non-current assets ( 112,481 ) ( 19,437 )
Net cash used in investing activities ( 1,649,962 ) ( 417,291 )
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in other payables - related parties ( 66,009 ) -
Proceeds from short-term borrowings 16,415 -
Repayment of short-term borrowings - ( 16,415 )
Repayment of long-term borrowings (including current
portion)
( 2,546 ) -
Employee stock options exercised 6(12) 6,023 3,998
Issuance of restricted stocks 6(12) 635 500
Retirement of restricted stocks 6(14) ( 2,660 ) ( 1,930 )
Issuance of shares 6(14) 2,804,965 -
Increase in non-controlling interests - proceeds from
issuing shares
438,085 -
Reacquisition of treasury shares 6(14) - ( 212,112 )
Decrease in subsidiaries interests 6(26) - 509,767
Net cash flows provided by financing activities 3,194,908 283,808
Effect of exchange rate changes on cash and cash equivalents 8,405 ( 4,903 )
Net increase (decrease) in cash and cash equivalents 1,072,739 ( 180,574 )
Cash and cash equivalents at beginning of year 1,552,873 2,625,612
Cash and cash equivalents at end of year $ 2,625,612 $ 2,445,038
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TWi PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2015 AND 2016
(EXPRESSED IN THOUSANDS OF NEW TAIWAN DOLLARS, EXCEPT AS OTHERWISE INDICATED)
1. HISTORY AND ORGANIZATION
(1) TWi Pharmaceuticals Inc. (the Company), formerly Empax Pharma, Inc., was incorporated as a
company limited by shares on Decemeber 1, 1997 with the approval of the Ministry of Economic
Affairs, R.O.C. and began operations on the same day. The Company and its subsidiaries (collectively
referred herein as the “Group”) are mainly engaged in the research and development, contract
manufacturing, and contract research of generic drugs.
(2) The Company, with September 1, 2006 as the acquisition date, absorbed Anchen International
Pharmaceuticals Co., Ltd. and changed its name to Anchen Pharmaceuticals (Taiwan), Inc. after the
merger. During April 2010, due to the Group’s organizational restructuring, the Company’s parent
company was changed from Anchen Incorporated to TWi Pharmaceuticals Holding Inc. and the
Company changed its name to TWi Pharmaceuticals, Inc. Because of the Group’s decision to use the
Company as the main entity for public exchange listing, TWi Pharmaceuticals Holding Inc. gradually
transferred its shares of the Company to its stockholders during July and August 2012. After the
transfer, the Company no longer has an ultimate parent company. Also, during February and March
2013, the Company gradually acquired 100% ownership of U-Liang Co., Ltd., with March 28, 2013
as the acquisition date.
2. THE DATE OF AUTHORISATION FOR ISSUANCE OF THE CONSOLIDATED FINANCIAL
STATEMENTS AND PROCEDURES FOR AUTHORISATION
These consolidated financial statements were reported to the Board of Directors on March 23, 2017.
3. APPLICATION OF NEW STANDARDS, AMENDMENTS AND INTERPRETATIONS
(1) Effect of the adoption of new issuances of or amendments to International Financial Reporting
Standards (“IFRS”) as endorsed by the Financial Supervisory Commission (“FSC”)
None.
(2) Effect of new issuances of or amendments to IFRSs as endorsed by the FSC but not yet adopted by
the Group
New standards, interpretations and amendments as endorsed by the FSC effective from 2017:
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Based on the Group’s assessment, the above standards and interpretations have no significant impact
to the Group’s financial condition and operating results.
(3) IFRSs issued by IASB but not yet endorsed by the FSC
New standards, interpretations and amendments issued by IASB but not yet included in the IFRSs
endorsed by the FSC effective from 2017:
New Standards, Interpretations and Amendments
Effective date by
International Accounting
Standards Board
Investment entities: applying the consolidation exception
(amendments to IFRS 10, IFRS 12 and IAS 28)
January 1, 2016
Accounting for acquisition of interests in joint operations
(amendments to IFRS 11)
January 1, 2016
IFRS 14, ‘Regulatory deferral accounts’ January 1, 2016
Disclosure initiative (amendments to IAS 1) January 1, 2016
Clarification of acceptable methods of depreciation and amortisation
(amendments to IAS 16 and IAS 38)
January 1, 2016
Agriculture: bearer plants (amendments to IAS 16 and IAS 41) January 1, 2016
Defined benefit plans: employee contributions
(amendments to IAS 19R)
July 1, 2014
Equity method in separate financial statements (amendments to IAS 27) January 1, 2016
Recoverable amount disclosures for non-financial assets
(amendments to IAS 36)
January 1, 2014
Novation of derivatives and continuation of hedge accounting
(amendments to IAS 39)
January 1, 2014
IFRIC 21, ‘Levies’ January 1, 2014
Improvements to IFRSs 2010-2012 July 1, 2014
Improvements to IFRSs 2011-2013 July 1, 2014
Improvements to IFRSs 2012-2014 January 1, 2016
New Standards, Interpretations and Amendments
Effective date by
International Accounting
Standards Board
Classification and measurement of share-based payment transactions
(amendments to IFRS 2)
January 1, 2018
Applying IFRS 9, ‘Financial instruments’ with IFRS 4, ‘Insurance
contracts’ (amendments to IFRS 4)
January 1, 2018
IFRS 9, ‘Financial instruments’ January 1, 2018
Sale or contribution of assets between an investor and its associate or
joint venture (amendments to IFRS 10 and IAS 28)
To be determined by
International Accounting
Standards Board
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Except for the following, the above standards and interpretations have no significant impact to the
Group’s financial condition and operating results based on the Group’s assessment. The quantitative
impact will be disclosed when the assessment is complete.
A. IFRS 9, ‘Financial instruments’
(a) Classification of debt instruments is driven by the entity’s business model and the contractual
cash flow characteristics of the financial assets, which would be classified as financial asset at
fair value through profit or loss, financial asset measured at fair value through other
comprehensive income or financial asset measured at amortised cost. Equity instruments
would be classified as financial asset at fair value through profit or loss, unless an entity makes
an irrevocable election at inception to present in other comprehensive income subsequent
changes in the fair value of an investment in an equity instrument that is not held for trading.
(b) The impairment losses of debt instruments are assessed using an ‘expected credit loss’
approach. An entity assesses at each balance sheet date whether there has been a significant
increase in credit risk on that instrument since initial recognition to recognise 12-month
expected credit losses or lifetime expected credit losses (interest revenue would be calculated
on the gross carrying amount of the asset before impairment losses occurred); or if the
instrument that has objective evidence of impairment, interest revenue after the impairment
would be calculated on the book value of net carrying amount (i.e. net of credit allowance).
The Company shall always measure the loss allowance at an amount equal to lifetime expected
credit losses for trade receivables that do not contain a significant financing component.
B. IFRS 15, ‘Revenue from contracts with customers’
IFRS 15, ‘Revenue from contracts with customers’ replaces IAS 11, ‘Construction Contracts’, IAS
New Standards, Interpretations and Amendments
Effective date by
International Accounting
Standards Board
IFRS 15, ‘Revenue from contracts with customers’ January 1, 2018
Clarifications to IFRS 15, ‘Revenue from contracts with customers’
(amendments to IFRS 15)
January 1, 2018
IFRS 16, ‘Leases’ January 1, 2019
Disclosure initiative (amendments to IAS 7) January 1, 2017
Recognition of deferred tax assets for unrealised losses (amendments to
IAS 12)
January 1, 2017
Transfers of investment property (amendments to IAS 40) January 1, 2018
IFRIC 22, ‘Foreign currency transactions and advance consideration’ January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS
1, ‘First-time adoption of International Financial Reporting Standards’
January 1, 2018
Annual improvements to IFRSs 2014-2016 cycle - Amendments to IFRS
12, ‘Disclosure of interests in other entities’
January 1, 2017
Annual improvements to IFRSs 2014-2016 cycle - Amendments to IAS
28, ‘Investments in associates and joint ventures’
January 1, 2018
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18, ‘Revenue’ and relevant interpretations. According to IFRS 15, revenue is recognised when a
customer obtains control of promised goods or services. A customer obtains control of goods or
services when a customer has the ability to direct the use of, and obtain substantially all of the
remaining benefits from, the asset.
The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. An entity recognises revenue in
accordance with that core principle by applying the following steps:
Step 1: Identify contracts with customer
Step 2: Identify separate performance obligations in the contract(s)
Step 3: Determine the transaction price
Step 4: Allocate the transaction price
Step 5: Recognise revenue when the performance obligation is satisfied
Further, IFRS 15 includes a set of comprehensive disclosure requirements that requires an entity
to disclose sufficient information to enable users of financial statements to understand the nature,
amount, timing and uncertainty of revenue and cash flows arising from contracts with customers.
IFRS 15 requires that, when products are sold with a right of return, the entity will recognise
revenue in the amount of consideration to which the entity expects to be entitled. Revenue would
not be recognised for products that the entity expects to be returned. The entity raises a refund
liability and an asset representing its right to recover the products from the customer. The asset is
presented separately from the refund liability.
IFRS 15 requires that an entity capitalises the incremental costs of obtaining a contract with a
customer if it expects to recover those costs. Contract cost assets are amortised on a systematic
basis consistent with the expected pattern of transfer of the related goods or services under the
contract.
Under IFRS 15, depending on the nature of licences, they are either (1) a promise to provide a
right to access to an entity’s intellectual property as it exists throughout the licence period, or (2)
a promise to provide a right to use an entity’s intellectual property as it exists at the point in time
when the licence is granted.
Licences that meet all of the following criteria provide access to an entity’s intellectual property,
and revenue is recognised based on the performance obligation's progress towards completion:
1. The contract requires, or the customer reasonably expects, that the entity will undertake
activities that significantly affect the intellectual property to which the customer has rights;
2. The rights granted by the licence directly expose the customer to any positive or negative effects
of the entity’s activities identified above; and
3. Those activities do not result in the transfer of a good or service to the customer as those
activities occur.
If licences cannot meet all criteria listed above, the entity provides a right to use the entity's
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intellectual property. Revenue shall be recognised at the point in time at which the licence is
granted to the customer.
A contract modification could change the scope of the contract, the price of the contract, or both.
IFRS 15 states that an entity accounts for a contract modification as a separate contract if the scope
of the contract increases because of the addition of distinct goods or services, and the price of the
contract increases by an amount of consideration that reflects the entity’s standalone selling prices
of the additional promised goods or services and any appropriate adjustments to that price to reflect
the circumstances of the particular contract.
If a modification does not meet the above criteria, an entity should determine whether the
remaining goods or services (including the increase of scope from the contract modification) are
distinct from the goods or services transferred before the modification. If they are distinct, an
entity shall account for the modification prospectively. If the remaining goods or services in the
modification are not distinct, an entity accounts for a modification through a cumulative catch-up
adjustment. The effect that the modification has on the transaction price, and the measure of
progress towards complete satisfaction of the performance obligation, is recognised as an
adjustment to revenue at the date of modification.
C. Amendments to IFRS 15, ‘Clarifications to IFRS 15 - Revenue from Contracts with Customers’
The amendments clarify how to identify a performance obligation (the promise to transfer a good
or a service to a customer) in a contract; determine whether a company is a principal (the provider
of a good or service) or an agent (responsible for arranging for the good or service to be provided);
and determine whether the revenue from granting a licence should be recognised at a point in time
or over time. In addition to the clarifications, the amendments include two additional reliefs to
reduce cost and complexity for a company when it first applies the new Standard.
D. IFRS 16, ‘Leases’
IFRS 16, ‘Leases’, replaces IAS 17, ‘Leases’ and related interpretations and SICs. The standard
requires lessees to recognise a 'right-of-use asset' and a lease liability (except for those leases with
terms of 12 months or less and leases of low-value assets). The accounting stays the same for
lessors, which is to classify their leases as either finance leases or operating leases and account for
those two types of leases differently. IFRS 16 only requires enhanced disclosures to be provided
by lessors.
E. Amendments to IAS 7, ‘Disclosure initiative’
This amendment requires that an entity shall provide more disclosures related to changes in
liabilities arising from financing activities, including both changes arising from cash flows and
non-cash changes.
4. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to all the periods presented, unless
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otherwise stated.
(1) Compliance statement
A. The consolidated financial statements of the Group have been prepared in accordance with the
“Regulations Governing the Preparation of Financial Reports by Securities Issuers”, International
Financial Reporting Standards, International Accounting Standards, IFRIC Interpretations, and
SIC Interpretations as endorsed by the FSC (collectively referred herein as the “Taiwan-IFRSs”).
(2) Basis of preparation
A. Except for the following item, the consolidated financial statements have been prepared under the
historical cost convention:
Defined benefit liabilities recognised based on the net amount of pension fund assets less present
value of defined benefit obligation.
B. The preparation of financial statements in conformity with Taiwan-IFRSs requires the use of
certain critical accounting estimates. It also requires management to exercise its judgment in the
process of applying the Group’s accounting policies. The areas involving a higher degree of
judgment or complexity, or areas where assumptions and estimates are significant to the
consolidated financial statements are disclosed in Note 5.
(3) Basis of consolidation
A. Basis for preparation of consolidated financial statements:
(a) All subsidiaries are included in the Group’s consolidated financial statements. Subsidiaries are
all entities (including structured entities) controlled by the Group. The Group controls an entity
when the Group is exposed, or has rights, to variable returns from its involvement with the
entity and has the ability to affect those returns through its power over the entity. Consolidation
of subsidiaries begins from the date the Group obtains control of the subsidiaries and ceases
when the Group loses control of the subsidiaries.
(b) Inter-company transactions, balances and unrealised gains or losses on transactions between
companies within the Group are eliminated.
(c) Profit or loss and each component of other comprehensive income are attributed to the owners
of the parent and to the non-controlling interests. Total comprehensive income is attributed to
the owners of the parent and to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance.
(d) Changes in a parent’s ownership interest in a subsidiary that do not result in the parent losing
control of the subsidiary (transactions with non-controlling interests) are accounted for as
equity transactions, i.e. transactions with owners in their capacity as owners. Any difference
between the amount by which the non-controlling interests are adjusted and the fair value of
the consideration paid or received is recognised directly in equity.
~19~
B. Subsidiaries included in the consolidated financial statements:
Note 1: As TWi Biotechnology, Inc. plans to apply for securities listing, in order to comply with
TWSE and TPEx Securities Listing Rules on equity distribution and to comply with TPEx
Rules Governing the Review of Emerging Stocks for Trading, the Company continually
sold equity interests to non-related parties during the year 2016.
Note 2: During the November 2016 meeting, the Board of Directors resolved to sell all of equity
interest in Visum Pharmaceutical Co., Ltd. As of the reporting date, the transaction has
not yet been completed.
Note 3: Certain consolidated subsidiaries included in the consolidated financial statements were
audited by auditors hired by the subsidiary. As of December 31, 2016, their financial
statements reflect total assets of $901,960 and total operating revenue of $753.
C. Subsidiaries not included in the consolidated financial statements: None.
D. Adjustments for subsidiaries with different balance sheet dates: None.
E. Significant restrictions: None.
F. Subsidiaries that have non-controlling interests that are material to the Group:
As of December 31, 2015 and 2016, non-controlling interest amounted to $327,620, and $285,496,
respectively. The information on non-controlling interest and respective subsidiaries is as follows:
Name of investor Name of subsidiary Main business activities
December
31, 2015
December
31, 2016 Note
TWi Pharmaceuticals,
Inc.
TWi Biotechnology,
Inc.
New drug R&D 85.59 73.07 (1)
TWi Pharmaceuticals,
Inc.
TWi Pharmaceuticals
USA Inc.
Consulting services and
generic drug sales
100 100
TWi Pharmaceuticals,
Inc.
TWi Pharmaceuticals
Europe Limited
Consulting services
and generic drug sales
100 100
TWi Pharmaceuticals,
Inc.
TWi Pharmaceutical
Ltd.
Investment 100 100
TWi Pharmaceutical,
Ltd.
TWi Pharmaceutical
Cayman Ltd.
Investment 99.92 99.88
TWi Pharmaceutical
Cayman Ltd.
Visum Pharmaceutical
Co., Ltd.
Formulation and
development of
oral solid dosage forms
65.58 65.58 (2)(3)
Visum Pharmaceutical
Co., Ltd.
eGen Pharmaceutical
Co., Ltd.
Formulation and
development of
oral solid dosage forms
100 100 (3)
Ownership (%)
~20~
Summarised financial information of the subsidiaries:
Balance sheets
Statements of comprehensive income
Name of Principal place
subsidiary of business Amount Ownership (%) Amount Ownership (%) Description
Visum
Pharmaceutical
Co., Ltd.
China $ 262,978 34.42% $ 199,142 34.42%
Non-controlling interest
December 31, 2015 December 31, 2016
December 31, 2015 December 31, 2016
Current assets 152,220$ 26,874$
Non-current assets 1,031,600 875,086
Current liabilities 132,750)( 41,398)(
Deferred tax liabilities 147,935)( 120,990)(
Non-current liabilities 20,075)( 15,958)(
Total net assets 883,060$ 723,614$
Visum Pharmaceutical Co., Ltd.
2015 2016
Revenue -$ 753$
Loss before income tax 232,924)( 149,879)(
Income tax benefit 21,260 16,372
Loss for the year 211,664)( 133,507)(
Other comprehensive income, net of tax - -
Total comprehensive loss for the year 211,664)($ 133,507)($
Comprehensive income attributable to
non-controlling interest 75,205)($ 45,953)($
Dividends paid to non-contronlling interest -$ -$
Visum Pharmaceutical Co., Ltd.
Years ended December 31,
~21~
Statements of cash flows
(4) Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the
currency of the primary economic environment in which the entity operates (the “functional
currency”). The consolidated financial statements are presented in New Taiwan Dollars, which is the
Company’s functional and the Group’s presentation currency.
A. Foreign currency transactions and balances
(a) Foreign currency transactions are translated into the functional currency using the exchange
rates prevailing at the dates of the transactions or valuation where items are remeasured.
Foreign exchange gains and losses resulting from the settlement of such transactions are
recognised in profit or loss in the period in which they arise.
(b) Monetary assets and liabilities denominated in foreign currencies at the period end are re-
translated at the exchange rates prevailing at the balance sheet date. Exchange differences
arising upon re-translation at the balance sheet date are recognised in profit or loss.
(c) All foreign exchange gains and losses are presented in the statement of comprehensive income
within other gains or losses.
B. Translation of foreign operations
The operating results and financial position of the foreign subsidiaries that have a functional
currency different from the presentation currency are translated into the presentation currency as
follows:
(a) Assets and liabilities for each balance sheet presented are translated at the closing exchange
rate at the date of that balance sheet;
(b) Income and expenses for each statement of comprehensive income are translated at average
exchange rates of that period.
(c) All resulting exchange differences are recognised in other comprehensive income.
(5) Classification of current and non-current items
A. Assets that meet one of the following criteria are classified as current assets; otherwise they are
classified as non-current assets:
2015 2016
Net cash used in operating activities 185,521)($ 77,052)($
Net cash used in investing activities 44,873)( 67,926)(
Net cash provided by financing activities 299,285 35,186
Effect of exchange rates on cash and cash
equivalents 1,552)( 8,169)(
Increase (decrease) in cash and cash equivalents 67,339 117,961)(
Cash and cash equivalents, beginning of year 63,241 130,580
Cash and cash equivalents, end of year 130,580$ 12,619$
Visum Pharmaceutical Co., Ltd.
Years ended December 31,
~22~
(a) Assets arising from operating activities that are expected to be realised, or are intended to be
sold or consumed within the normal operating cycle;
(b) Assets held mainly for trading purposes;
(c) Assets that are expected to be realised within twelve months from the balance sheet date;
(d) Cash and cash equivalents, excluding restricted cash and cash equivalents and those that are to
be exchanged or used to pay off liabilities more than twelve months after the balance sheet
date.
B. Liabilities that meet one of the following criteria are classified as current liabilities; otherwise they
are classified as non-current liabilities:
(a) Liabilities that are expected to be paid off within the normal operating cycle;
(b) Liabilities arising mainly from trading activities;
(c) Liabilities that are to be paid off within twelve months from the balance sheet date;
(d) Liabilities for which the repayment date cannot be extended unconditionally to more than
twelve months after the balance sheet date. Terms of a liability that could, at the option of the
counterparty, result in its settlement by the issue of equity instruments do not affect its
classification.
(6) Cash equivalents
A. Cash equivalents refer to short-term highly liquid investments that are readily convertible to known
amount of cash and subject to an insignificant risk of changes in value. Time deposits that meet
the definition above and are held for the purpose of meeting short-term cash commitment in
operations are classified as cash equivalents.
B. Time deposits that do not meet the definition of cash equivalents (listed under “Other current
financial assets”) are measured at the initial investment value, as they are held for a short period
of time and the effect of discounting is insignificant.
(7) Loans and receivables
Accounts receivable are loans and receivables originated by the entity. They are created by the entity
by selling goods or providing services to customers in the ordinary course of business. Accounts
receivable are initially recognised at fair value and subsequently measured at amortised cost using
the effective interest method, less provision for impairment. However, short-term accounts receivable
without bearing interest are subsequently measured at initial invoice amount as the effect of
discounting is immaterial.
(8) Impairment of financial assets
A. The Group assesses at each balance sheet date whether there is objective evidence that a financial
asset or a group of financial assets is impaired as a result of one or more events that occurred after
the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on
the estimated future cash flows of the financial asset or group of financial assets that can be
reliably estimated.
B. The criteria that the Group uses to determine whether there is objective evidence of an impairment
~23~
loss is as follows:
(a) Significant financial difficulty of the issuer or debtor;
(b) A breach of contract, such as a default or delinquency in interest or principal payments;
(c) The Company, for economic or legal reasons relating to the borrower’s financial difficulty,
granted the borrower a concession that a lender would not otherwise consider;
(d) It becomes probable that the borrower will enter bankruptcy or other financial reorganisation;
(e) The disappearance of an active market for that financial asset because of financial difficulties;
(f) Observable data indicating that there is a measurable decrease in the estimated future cash
flows from a group of financial assets since the initial recognition of those assets, although the
decrease cannot yet be identified with the individual financial asset in the group, including
adverse changes in the payment status of borrowers in the group or national or local economic
conditions that correlate with defaults on the assets in the group;
(g) Information about significant changes with an adverse effect that have taken place in the
technology, market, economic or legal environment in which the issuer operates, and indicates
that the cost of the investment in the equity instrument may not be recovered;
(h) A significant or prolonged decline in the fair value of an investment in an equity instrument
below its cost.
C. When the Group assesses that there has been objective evidence of impairment and an impairment
loss has occurred. For the financial assets measured at amortised cost, the amount of the
impairment loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash flows discounted at the financial asset’s original effective interest
rate, and is recognised in profit or loss. If, in a subsequent period, the amount of the impairment
loss decreases and the decrease can be related objectively to an event occurring after the
impairment loss was recognised, the previously recognised impairment loss is reversed through
profit or loss to the extent that the carrying amount of the asset does not exceed its amortised cost
that would have been at the date of reversal had the impairment loss not been recognised
previously. Impairment loss is recognised and reversed by adjusting the carrying amount of the
asset through the use of an impairment allowance account.
(9) Derecognition of financial assets
The Group derecognises a financial asset when one of the following conditions is met:
A. The contractual rights to receive cash flows from the financial asset expire.
B. The contractual rights to receive cash flows from the financial asset have been transferred and the
Group has transferred substantially all risks and rewards of ownership of the financial asset.
C. The contractual rights to receive cash flows from the financial asset have been transferred and the
Group has not retained control of the financial asset.
(10) Operating leases (lessor)
Lease income from an operating lease (net of any incentives given to the lessee) is recognised in
profit or loss on a straight-line basis over the lease term.
~24~
(11) Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined using the
weighted-average method. The cost of finished goods and work in process comprises raw materials,
direct labor, other direct costs and related production overheads (allocated based on normal
operating capacity). It excludes borrowing costs. The item by item approach is used in applying the
lower of cost and net realisable value. Net realisable value is the estimated selling price in the
ordinary course of business, less the estimated cost of completion and applicable variable selling
expenses.
(12) Non-current assets held for sale
Non-current assets are classified as assets held for sale when their carrying amount is to be recovered
principally through a sale transaction rather than through continuing use, and a sale is considered
highly probable. They are stated at the lower of carrying amount and fair value less costs to sell.
(13) Investments accounted for under the equity method / associates
A. Associates are all entities over which the Group has significant influence but not control. In
general, it is presumed that the investor has significant influence, if an investor holds, directly or
indirectly 20 per cent or more of the voting power of the investee. Investments in associates are
accounted for under the equity method and are initially recognised at cost.
B. The Group’s share of its associates’ post-acquisition profits or losses is recognised in profit or
loss, and its share of post-acquisition movements in other comprehensive income is recognised
in other comprehensive income. When the Group’s share of losses in an associate equals or
exceeds its interest in the associate, including any other unsecured receivables, the Group does
not recognise further losses, unless it has incurred legal or constructive obligations or made
payments on behalf of the associate.
C. When changes in an associate’s equity are not recognised in profit or loss or other comprehensive
income of the associate and such changes do not affect the Group’s ownership percentage of the
associate, the Group recognises the Group’s share of change in equity of the associate in ‘Capital
reserve’ in proportion to its ownership.
D. Unrealised gains on transactions between the Group and its associates are eliminated to the extent
of the Group’s interest in the associates. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Accounting policies of
associates have been adjusted where necessary to ensure consistency with the policies adopted
by the Group.
E. When the Group disposes its investment in an associate and loses significant influence over this
associate, the amounts previously recognised in other comprehensive income in relation to the
associate, are reclassified to profit or loss, on the same basis as would be required if the relevant
assets or liabilities were disposed of. If it retains significant influence over this associate, the
amounts previously recognised in other comprehensive income in relation to the associate are
reclassified to profit or loss proportionately in accordance with the aforementioned approach.
~25~
(14) Property, plant and equipment
A. Property, plant and equipment are initially recorded at cost. Borrowing costs incurred during the
construction period are capitalised.
B. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic benefits associated with the item
will flow to the Group and the cost of the item can be measured reliably. The carrying amount of
the replaced part is derecognised. All other repairs and maintenance are charged to profit or loss
during the financial period in which they are incurred.
C. Land is not depreciated. Other property, plant and equipment apply cost model and are
depreciated using the straight-line method to allocate their cost over their estimated useful lives.
D. The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if
appropriate, at each balance sheet date. If expectations for the assets’ residual values and useful
lives differ from previous estimates or the patterns of consumption of the assets’ future economic
benefits embodied in the assets have changed significantly, any change is accounted for as a
change in estimate under IAS 8, ‘Accounting Policies, Changes in Accounting Estimates and
Errors’, from the date of the change. The estimated useful lives of property, plant and equipment
are as follows:
Buildings 3~50 years
Machinery and equipment 3~15 years
Transportation equipment 5~8 years
Office equipment 5~10 years
Leasehold improvements 2.5~5 years
(15) Operating leases (lessee)
Payments made under an operating lease (net of any incentives received from the lessor) are
recognised in profit or loss on a straight-line basis over the lease term.
(16) Intangible assets
A. Use right
Intangible assets pertaining to the right of use are stated at cost and amortised on a straight-line
basis over its estimated useful life of 6 to 10 years.
B. Patent
Acquired patents are stated at cost and amortised on a straight-line basis over its estimated useful
life of 10 years.
C. Computer software
Computer software is stated at cost and amortised on a straight-line basis over its estimated useful
life of 3 to 6 years.
D. Goodwill
Goodwill arises in a business combination accounted for by applying the acquisition method.
~26~
(17) Impairment of non-financial assets
The Group assesses at each balance sheet date the recoverable amounts of those assets where there
is an indication that they are impaired. An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher
of an asset’s fair value less costs to sell or value in use. When the circumstances or reasons for
recognizing impairment loss for an asset in prior years no longer exist or diminish, the impairment
loss is reversed. The increased carrying amount due to reversal should not be more than what the
depreciated or amortised historical cost would have been if the impairment had not been recognised.
(18) Notes and accounts payable
Notes and accounts payable are obligations to pay for goods or services that have been acquired in
the ordinary course of business from suppliers. They are recognised initially at fair value and
subsequently measured at amortised cost using the effective interest method. However, short-term
accounts payable which are non-interest bearing are subsequently measured at initial invoice amount
as the effect of discounting is immaterial.
(19) Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability specified in the contract
is discharged or cancelled or expires.
(20) Offsetting financial instruments
Financial assets and liabilities are offset and reported in the net amount in the balance sheet when
there is a legally enforceable right to offset the recognised amounts and there is an intention to settle
on a net basis or realise the asset and settle the liability simultaneously.
(21) Employee benefits
A. Short-term employee benefits
Short-term employee benefits are measured at the undiscounted amount of the benefits expected
to be paid in respect of service rendered by employees in a period and should be recognised as
expenses in that period when the employees render service.
B. Pensions
(a) Defined contribution plans
For defined contribution plans, the contributions are recognised as pension expenses when
they are due on an accrual basis. Prepaid contributions are recognised as an asset to the extent
of a cash refund or a reduction in the future payments.
(b) Defined benefit plans
i. Net obligation under a defined benefit plan is defined as the present value of an amount of
pension benefits that employees will receive on retirement for their services with the Group
in current period or prior periods. The liability recognised in the balance sheet in respect of
defined benefit pension plans is the present value of the defined benefit obligation at the
balance sheet date less the fair value of plan assets. The net defined benefit obligation is
calculated annually by independent actuaries using the projected unit credit method. The
~27~
rate used to discount is determined by using interest rates of high-quality corporate bonds
that are denominated in the currency in which the benefits will be paid, and that have terms
to maturity approximating to the terms of the related pension liability; when there is no
deep market in high-quality corporate bonds, the Group uses interest rates of government
bonds (at the balance sheet date) instead.
ii. Remeasurements arising on defined benefit plans are recognised in other comprehensive
income in the period in which they arise and are recorded as retained earnings.
C. Employees’ bonus and directors’ and supervisors’ remuneration
Employees’ bonus and directors’ and supervisors’ remuneration are recognised as expenses and
liabilities, provided that such recognition is required under legal or constructive obligation and
those amounts can be reliably estimated. However, if the accrued amounts for employees’ bonus
and directors’ and supervisors’ remuneration are different from the actual distributed amounts as
resolved by the stockholders at their stockholders’ meeting subsequently, the differences should
be recognised based on the accounting for changes in estimates.
(22) Employee share-based payment
A. For the equity-settled share-based payment arrangements, the employee services received are
measured at the fair value of the equity instruments granted at the grant date, and are recognised
as compensation cost over the vesting period, with a corresponding adjustment to equity. The
fair value of the equity instruments granted shall reflect the impact of market vesting conditions
and non-market vesting conditions. Compensation cost is subject to adjustment based on the
service conditions that are expected to be satisfied and the estimates of the number of equity
instruments that are expected to vest under the non-market vesting conditions at each balance
sheet date. Ultimately, the amount of compensation cost recognised is based on the number of
equity instruments that eventually vest.
B. For the cash-settled share-based payment arrangements, the employee services received and the
liability incurred are measured at the fair value of the liability to pay for those services, and are
recognised as compensation cost and liability over the vesting period. The fair value of the
liability shall be remeasured at each balance sheet date until settled at the settlement date, with
any changes in fair value recognised in profit or loss.
C. Restricted stocks issued by the Group to employees:
(a) Restricted stocks issued to employees are measured at the fair value of the equity instruments
granted at the grant date, and are recognised as compensation cost over the vesting period.
The Group sets the grant date as the same day the employee restricted stocks agreement is
signed.
(b) For restricted stocks where those stocks do not restrict distribution of dividends to employees
and employees are not required to return the dividends received if they resign during the
vesting period, the Group recognises the fair value of the dividends received by the
employees who are expected to resign during the vesting period as compensation cost at the
~28~
date of dividend declaration.
(c) For restricted stocks where employees have to pay to acquire those stocks, if employees resign
during the vesting period, they must return the stocks to the Group and the Group must refund
their payments on the stocks, the Group recognises the payments from the employees who
are expected to resign during the vesting period as liabilities at the grant date, and recognises
the payments from the employees who are expected to be eventually vested with the stocks
in ‘Capital reserve – restricted stocks’.
(23) Income tax
A. The tax expense for the period comprises current and deferred tax. Tax is recognised in profit or
loss, except to the extent that it relates to items recognised in other comprehensive income or
items recognised directly in equity, in which cases the tax is recognised in other comprehensive
income or equity.
B. An additional 10% tax is levied on the unappropriated retained earnings and is recorded as income
tax expense in the year the stockholders resolve to retain the earnings.
C. Deferred income tax is recognised, using the balance sheet liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts in
the consolidated balance sheet. However, the deferred income tax is not accounted for if it arises
from initial recognition of goodwill or of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither accounting nor taxable profit or
loss. Deferred income tax is determined using tax rates and laws that have been enacted or
substantially enacted by the balance sheet date and are expected to apply when the related
deferred income tax asset is realised or the deferred income tax liability is settled.
D. Deferred income tax assets are recognised only to the extent that it is probable that future taxable
profit will be available against which the temporary differences can be utilised. At each balance
sheet date, unrecognised and recognised deferred income tax assets are reassessed.
E. Current income tax assets and liabilities are offset and the net amount reported in the balance
sheet when there is a legally enforceable right to offset the recognised amounts and there is an
intention to settle on a net basis or realise the asset and settle the liability simultaneously.
Deferred income tax assets and liabilities are offset on the balance sheet when the entity has the
legally enforceable right to offset current tax assets against current tax liabilities and they are
levied by the same taxation authority on either the same entity or different entities that intend to
settle on a net basis or realise the asset and settle the liability simultaneously.
F. The Group only recognizes unused loss carryforward and tax credits (including those arising
from equity investment) as deferred tax assets if there is significant probability of taxable income
in a later period for the unused loss carryforward and investment tax credits to be used against.
(24) Share capital
A. Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new
shares or stock options are shown in equity as a deduction, net of tax, from the proceeds.
~29~
B. Where the Company repurchases the Company’s equity share capital that has been issued, the
consideration paid, including any directly attributable incremental costs (net of income taxes) is
deducted from equity attributable to the Company’s equity holders. Where such shares are
subsequently reissued, the difference between their book value and any consideration received,
net of any directly attributable incremental transaction costs and the related income tax effects,
is included in equity attributable to the Company’s equity holders.
(25) Revenue recognition
A. Sales of goods
The Group manufactures and sells generic drug products. Revenue is measured at the fair value
of the consideration received or receivable taking into account value-added tax, returns, rebates
and discounts for the sale of goods to external customers in the ordinary course of the Group’s
activities. Revenue arising from the sales of goods is recognised when the Group has delivered
the goods to the customer, the amount of sales revenue can be measured reliably and it is probable
that the future economic benefits associated with the transaction will flow to the entity. The
delivery of goods is completed when the significant risks and rewards of ownership have been
transferred to the customer, the Group retains neither continuing managerial involvement to the
degree usually associated with ownership nor effective control over the goods sold, and the
customer has accepted the goods based on the sales contract or there is objective evidence
showing that all acceptance provisions have been satisfied.
B. Sales of services
The Group provides pharmaceutical research and development services. Revenue from
delivering services is recognised under the percentage-of-completion method when the outcome
of services provided can be estimated reliably. The stage of completion of a service contract is
measured by the percentage of the actual services performed as of the financial reporting date to
the total services to be performed. If the outcome of a service contract cannot be estimated
reliably, contract revenue should be recognised only to the extent that contract costs incurred are
likely to be recoverable.
C. License revenue
If the licensing contract does not simultaneously fulfill the following criteria, royalty revenue
will be recognised based on a reasonable and systematic method over the licensing period:
(a) The amount of licensing fee is fixed or non-refundable.
(b) The contract is irrevocable.
(c) Relevant rights may be at the licensee’s disposition.
(d) The licensor has no further obligations after passing on the rights to the authorized party.
(26) Government grants
Government grants are recognised at their fair value only when there is reasonable assurance that
the Group will comply with any conditions attached to the grants and the grants will be received.
Government grants are recognised in profit or loss on a systematic basis over the periods in which
~30~
the Group recognises expenses for the related costs for which the grants are intended to compensate.
Government grants related to equipment are recognised as non-current liabilities and are amortised
to profit or loss over the estimated useful lives of the related assets using the straight-line method.
(27) Operating segments
Operating segments are reported in a manner consistent with the internal reporting provided to the
chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments.
5. CRITICAL ACCOUNTING JUDGEMENTS, ESTIMATES AND KEY SOURCES OF
ASSUMPTION UNCERTAINTY
The preparation of these consolidated financial statements requires management to make critical
judgements in applying the Group’s accounting policies and make critical assumptions and estimates
concerning future events. Assumptions and estimates may differ from the actual results and are
continually evaluated and adjusted based on historical experience and other factors. Such assumptions
and estimates have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year; and the related information is addressed below:
Critical accounting estimates and assumptions
A. Revenue recognition
The Group estimates sales discounts and returns based on historical results and other known factors.
Provisions for such liabilities are recorded as a deduction item to sales revenues when the sales are
recognised. The Group reassesses the reasonableness of estimates of discounts and returns
periodically.
B. Impairment assessment of intangible assets (excluding goodwill)
The Group assesses impairment based on its subjective judgement and determines the separate cash
flows of a specific group of assets, useful lives of assets and the future possible income and expenses
arising from the assets depending on how assets are utilised and industrial characteristics. Any
changes of economic circumstances or estimates due to the change of Group strategy might cause
material impairment on assets in the future.
6. DETAILS OF SIGNIFICANT ACCOUNTS
(1) Cash and cash equivalents
A. The Group associates with a variety of financial institutions all with high credit quality to disperse
credit risk, so it expects that the probability of counterparty default is remote.
December 31, 2015 December 31, 2016
Cash on hand and petty cash 243$ 247$
Checking accounts 62,568 32,009
Demand deposits 788,609 558,015
Time deposits 1,774,192 1,866,225
Less: Listed under "Non-current assets held for sale - net" - 11,458)(
2,625,612$ 2,445,038$
~31~
B. The Group has no cash and cash equivalents pledged to others.
(2) Accounts receivable - net
A. The credit quality of accounts receivable that were not past due was in the following categories
based on the Group’s Credit Quality Control Policy (Note):
Note:
Group A: Rating of customer’s credit limit is above 90 points.
Group B: Rating of customer’s credit limit stands between 70~89 points.
Group C: Rating of customer’s credit limit is below 69 points.
Group D: The customer has been dissolved, has incurred bad debt before or no more transactions
________have occurred.
B. The ageing analysis of accounts receivable that were past due but not impaired is as follows:
The above ageing analysis was based on past due date.
C. Movement analysis of financial assets that were impaired is as follows:
December 31, 2015 December 31, 2016
Accounts receivable 102,106$ 114,380$
Less: Allowance for bad debts 2)( 210)(
102,104$ 114,170$
December 31, 2015 December 31, 2016
Group A -$ -$
Group B 101,781 112,836
Group C 323 520
102,104$ 113,356$
December 31, 2015 December 31, 2016
Up to 30 days -$ -$
31 to 90 days - -
61 to 90 days - -
91 to 120 days - -
Over 120 days - 814
-$ 814$
Individual provision Group provision Total
At January 1 -$ 2$ 2$
Provision for impairment - - -
At December 31 -$ 2$ 2$
2015
~32~
D. The Group does not hold any collateral as security for accounts receivable.
(3) Inventories
The cost of inventories recognised as expense for the year:
Individual provision Group provision Total
At January 1 -$ 2$ 2$
Provision for impairment - 208 208
At December 31 -$ 210$ 210$
2016
Cost
Allowance for
valuation loss and
loss on obsolescence Book value
Raw materials 26,029$ 4,872)($ 21,157$
Supplies 22,411 1,869)( 20,542
Work in process 14,599 11,955)( 2,644
Finished goods 103,714 35,996)( 67,718
Inventory in transit 496 - 496
167,249$ 54,692)($ 112,557$
December 31, 2015
Cost
Allowance for
valuation loss and
loss on obsolescence Book value
Raw materials 22,911$ 1,922)($ 20,989$
Supplies 20,854 1,172)( 19,682
Work in process 1,135 15)( 1,120
Finished goods 54,807 4,785)( 50,022
99,707$ 7,894)($ 91,813$
December 31, 2016
2015 2016
Cost of goods sold and service costs 322,435$ 476,145$
Loss on obsolescence and market value decline (Note) 15,854 9,291
(Gain) loss on physical inventory 49)( 2
Operating costs 338,240$ 485,438$
Year ended December 31,
~33~
(4) Non-current assets held for sale
The Group readjusted its strategy in the China investment business and on November 30, 2016, the
Board of Directors resolved to sell all of equity interest in Visum Pharmaceutical Co., Ltd. to Tianjin
Taike Investment Partnership (Limited Partnership) and Hainan Haixinkang Pharmaceutical
Technology Development Partnership (Limited Partnership). The total proceeds is RMB 197 million,
and is expected to be executed within 12 months. As of December 31, 2016, the transaction has not
yet been completed and therefore the Group reclassified the related assets and liabilities, amounting
to $901,960 and $178,346, respectively, to disposal group held for sale.
A. Assets of disposal group held for sale:
B. Liabilities directly relating to non-current assets held for sale:
(5) Other current financial assets
The Group has no other current financial assets pledged to others.
December 31, 2016
Cash and cash equivalents 11,458$
Current assets 15,416
Property, plant and equipment 292,729
Intangible assets 568,216
Other non-current assets 14,141
901,960$
December 31, 2016
Payable on equipment 12,984$
Other payables 10,370
Advance receipts 5,849
Other current liabilities 12,195
Deferred tax liabilities 120,990
Other non-current liabilities 15,958
178,346$
Items December 31, 2015 December 31, 2016
Current items:
Other current financial assets-
time deposits 1,886,738$ 2,195,560$
~34~
(6) Property, plant and equipment
Land Buildings Machinery Leased asset
Transportation
equipment
Office
equipment
Leasehold
improvements
Equipment to
be inspected Total
At January 1, 2015
Cost 386,542$ 460,245$ 510,757$ -$ 6,752$ 19,408$ 14,712$ 27,291$ 1,425,707$
Accumulated depreciation - 110,354)( 190,349)( - 1,745)( 5,380)( 6,423)( - 314,251)(
386,542$ 349,891$ 320,408$ -$ 5,007$ 14,028$ 8,289$ 27,291$ 1,111,456$
2015
Opening net book
amount as at January 1 386,542$ 349,891$ 320,408$ -$ 5,007$ 14,028$ 8,289$ 27,291$ 1,111,456$
Additions - 11,613 140,145 20,202 - 14,133 4,647 22,023 212,763
Disposals - - 604)( - - 205)( - - 809)(
Reclassifications - - 710)( - 1,454)( 705 - - 1,459)(
Transfers - - 72,729 - - - 14,767)( 57,962
Depreciation charge - 33,813)( 68,472)( 631)( 718)( 3,737)( 2,577)( - 109,948)(
Transferred to
operating expenses - - 50)( - - 88)( - - 138)(
Net exchange differences - 2,593)( 1,134)( - 51)( 54)( - 74)( 3,906)(
Closing net book
amount as at December 31 386,542$ 325,098$ 462,312$ 19,571$ 2,784$ 24,782$ 10,359$ 34,473$ 1,265,921$
At December 31, 2015
Cost 386,542$ 469,265$ 721,133$ 20,202$ 5,247$ 33,899$ 19,359$ 34,473$ 1,690,120$
Accumulated depreciation - 144,167)( 258,821)( 631)( 2,463)( 9,117)( 9,000)( - 424,199)(
386,542$ 325,098$ 462,312$ 19,571$ 2,784$ 24,782$ 10,359$ 34,473$ 1,265,921$
~35~
Information about the property, plant and equipment pledged to others as collaterial is provided in Note 8.
Land Buildings Machinery Leased asset
Transporation
equipment
Office
equipment
Leasehold
improvements
Equipment to
be inspected Total
At January 1, 2016
Cost 386,542$ 469,265$ 721,133$ 20,202$ 5,247$ 33,899$ 19,359$ 34,473$ 1,690,120$
Accumulated depreciation - 144,167)( 258,821)( 631)( 2,463)( 9,117)( 9,000)( - 424,199)(
386,542$ 325,098$ 462,312$ 19,571$ 2,784$ 24,782$ 10,359$ 34,473$ 1,265,921$
2016
Opening net book
amount as at January 1 386,542$ 325,098$ 462,312$ 19,571$ 2,784$ 24,782$ 10,359$ 34,473$ 1,265,921$
Additions - 3,448 12,878 - 979 1,514 295 2,342 21,456
Disposals - - 8)( 18,720)( 497)( 19)( - - 19,244)(
Reclassifications - 222)( 1,072)( - - 1,886 284)( - 308
Transfers - 21,151 3,905 - - - - 71,557 96,613
Depreciation charge - 32,629)( 82,287)( 851)( 656)( 5,224)( 2,765)( - 124,412)(
Transferred to
operating expenses - 78)( - - - - - 857)( 935)(
Net exchange differences - 9,990)( 5,908)( - 116)( 468)( - 5,342)( 21,824)(
Less: Listed under "Non-
current assets held
for sale - net" - 116,323)( 68,123)( - 1,374)( 4,736)( - 102,173)( 292,729)(
Closing net book
amount as at December 31 386,542$ 190,455$ 321,697$ -$ 1,120$ 17,735$ 7,605$ -$ 925,154$
At December 31, 2016
Cost 386,542$ 307,522$ 505,746$ -$ 1,815$ 25,494$ 16,739$ -$ 1,243,858$
Accumulated depreciation - 117,067)( 184,049)( - 695)( 7,759)( 9,134)( - 318,704)(
386,542$ 190,455$ 321,697$ -$ 1,120$ 17,735$ 7,605$ -$ 925,154$
~36~
(7) Intangible assets
Cost
Accumulated
amortisation Total
Patent-
__Ocular disease new drug (Note 1 ) 21,427$ 9,285)($ 12,142$
__Diabetic new drug (Note 1 ) 51,578 22,350)( 29,228
Software cost 6,367 3,496)( 2,871
Other intangible assets – use right
__New drug A technology and right
(Note 2 ) 7,121 1,602)( 5,519
__Generic A technology and right
(Note 3 ) 18,292 9,654)( 8,638
__Generic B technology and right
(Note 4 ) 160,425 65,740)( 94,685
__Generic C technology and right
(Note 5 ) 29,964 15,771)( 14,193
__Generic D technology and right
(Note 6 ) 15,145 366)( 14,779
__Drug application approvals
(Note 7 ) 688,713 - 688,713
__Goodwill 84,452 - 84,452
1,083,484$ 128,264)($ 955,220$
January 1, 2015
Other intangible
Patent Software cost assets Goodwill Total
2015
At January 1 41,370$ 2,871$ 826,527$ 84,452$ 955,220$
Additions-
acquired
separately - 2,460 - - 2,460
Impairment loss
(Note 1) 11,785)( - - - 11,785)(
Amortisation
charge 5,515)( 1,479)( 101,633)( - 108,627)(
Net exchange
differences - 9)( 36,861)( 30,557 6,313)(
At December 31 24,070$ 3,843$ 688,033$ 115,009$ 830,955$
~37~
Cost
Accumulated
amortisation Total
Patent-
__Diabetic new drug (Note 1 ) 51,578$ 27,508)($ 24,070$
Software cost 6,829 2,986)( 3,843
Other intangible assets – use right
__New drug A technology and right
(Note 2 ) 7,121 2,314)( 4,807
__Generic A technology and right
(Note 3 ) 18,292 11,814)( 6,478
__Generic B technology and right
(Note 4 ) 160,425 76,260)( 84,165
__Generic C technology and right
(Note 5 ) 29,964 17,348)( 12,616
__Generic D technology and right
(Note 6 ) 15,145 1,989)( 13,156
__Drug application approvals
(Note 7 ) 651,345 84,534)( 566,811
__Goodwill 115,009 - 115,009
1,055,708$ 224,753)($ 830,955$
December 31, 2015
Cost
Accumulated
amortisation Total
Patent-
__Diabetic new drug (Note 1 ) 51,578$ 27,508)($ 24,070$
Software cost 6,829 2,986)( 3,843
Other intangible assets – use right
__New drug A technology and right
(Note 2 ) 7,121 2,314)( 4,807
__Generic A technology and right
(Note 3 ) 18,292 11,814)( 6,478
__Generic B technology and right
(Note 4 ) 160,425 76,260)( 84,165
__Generic C technology and right
(Note 5 ) 29,964 17,348)( 12,616
__Generic D technology and right
(Note 6 ) 15,145 1,989)( 13,156
__Drug application approvals
(Note 7 ) 651,345 84,534)( 566,811
__Goodwill 115,009 - 115,009
1,055,708$ 224,753)($ 830,955$
January 1, 2016
~38~
A. Details of amortisation on intangible assets are as follows:
Other intangible
Patent Software cost assets Goodwill Total
2016
At January 1 24,070$ 3,843$ 688,033$ 115,009$ 830,955$
Additions -
acquired
separately - 11,702 - - 11,702
Amortisation
charge 5,158)( 1,992)( 80,773)( - 87,923)(
Reclassifications - 1,028)( - - 1,028)(
Net exchange
differences - 305 40,374)( 8,809)( 48,878)(
Less: Listed under
"Non-current
assets held
for sale - net" - 1,069)( 460,947)( 106,200)( 568,216)(
At December 31 18,912$ 11,761$ 105,939$ -$ 136,612$
Cost
Accumulated
amortisation Total
Patent-
__Diabetic new drug (Note 1 ) 51,578$ 32,666)($ 18,912$
Software cost 14,323 2,562)( 11,761
Other intangible assets – use right
__New drug A technology and right
(Note 2 ) 7,121 3,027)( 4,094
__Generic A technology and right
(Note 3 ) 18,292 12,739)( 5,553
__Generic B technology and right
(Note 4 ) 160,425 86,780)( 73,645
__Generic C technology and right
(Note 5 ) 29,964 18,925)( 11,039
__Generic D technology and right
(Note 6 ) 15,145 3,537)( 11,608
296,848$ 160,236)($ 136,612$
December 31, 2016
2015 2016
Operating costs -$ 382$
Administrative expenses 796 1,493
Research and development expenses 107,831 86,048
108,627$ 87,923$
Year ended December 31,
~39~
B. Goodwill is allocated as follows to the Group’s cash-generating units identified according to
operating segment:
C. Goodwill is allocated to the Group’s cash-generating units identified according to operating
segment. The recoverable amount of all cash-generating units has been determined based on
value-in-use calculations. These calculations use pre-tax cash flow projections based on financial
budgets approved by the management covering a five-year period.
The recoverable amount of all cash-generating units calculated using the value-in-use exceeded
their carrying amount, so goodwill was not impaired. The key assumptions used for value-in-use
calculations are gross margin rate, growth rate and discount rate. Management determined
budgeted gross margin rate and growth rate based on past performance and its expectations of
market development. The discount rates used are pre-tax and reflect specific risks relating to the
relevant operating segments.
Note 1: In August 2010, TWi Biotechnology, Inc., a subsidiary, paid $21,427 and $51,578 to
purchase the patent rights of ocular disease new drug and diabetic new drug from Anchen
Laboratories Inc. as well as the rights to the contract Anchen Laboratories Inc. signed with
Universities B and C regarding ocular disease new drug. These payments have been
executed. However, TWi Biotechnology, Inc. has terminated the agreement with the two
universities for ocular disease new drug in February 2015 and recognized an impairment
loss of $11,785 (listed under “Other gains and losses”).
Note 2: TWi Biotechnology, Inc., a subsidiary, signed a Skin Disease New Drug Technology
License Agreement with Company V in July 2012. TWi Biotechnology, Inc. is the only
global licensee for this new drug, and TWi Biotechnology, Inc. is responsible for the
development, clinical trial and the US FDA registration of this new drug. TWi
Biotechnology, Inc. will pay milestone payment to Company V up to US$11,600 thousand
on the occurrence of agreed R&D achievements and product approval of the new drug.
TWi Biotechnology, Inc. will also pay a certain percentage of sales as royalty to Company
V after the drug is launched. As of December 31, 2015 and 2016, TWi Biotechnology, Inc.
has paid license fee of $7,121 to Company V (listed under “Other intangible assets - use
right”).
Note 3: The Company purchased a psychology drug-related asset from Anchen Incorporated in
October 2011 for a purchase price of $18,292. The asset includes drug-related research
and development technology and rights of production and distribution. The full amount
had been paid.
Note 4: (1) The Company has entered into a collaboration and development agreement with
December 31, 2015 December 31, 2016
Generic Drug Department $ 115,009 $ -
New Drug Department - -
115,009$ -$
~40~
Company Z for an undisclosed generic drug. Company Z is responsible for product
development and technology transfer. The Company is responsible for submitting an
ANDA to the US FDA. Company Z grants the Company an exclusive license to use,
manufacture and distribute the generic product in the United States. The Company
should pay Company Z milestone fees on the occurrence of agreed R&D
achievements and product approval. The Company will also share a certain
percentage of profit to Company Z after the product is launched.
(2) In March 2012, the Company, Company Z and Company A signed a tripartite
agreement for the above generic drug. The Company grants the rights received from
Company Z to Company A. Company A will be responsible for submitting an ANDA
for the generic product to the US FDA. According to the agreement, Company A will
pay the Company and Company Z milestone fees based on completion of
development work and technology transfer. The Company will also pay Company Z
additional milestone fees. Company A will share a certain percentage of profit to the
Company and Company Z after the product is launched. The Company and Company
Z may also receive an additional bonus if the product sales reach a certain level.
(3) The Company received a termination notice from Company A for the tripartite
agreement in the third quarter of 2013. On November 11, 2013, the Company and
Company Z signed a new collaboration and development agreement for the generic
drug and has received an upfront payment of US$824 thousand. The Company grants
rights of manufacturing and distribution in the United States to Company Z. The
Company will receive milestone fees from Company Z on occurrence of certain
R&D achievements and drug license approval. Company Z will also share a certain
percentage of profit to the Company until the aggregate amount reaches US$6,500
thousand.
(4) The Company has paid royalty fees (shown as “Other intangible asset-use right”) to
Company Z in the amount of $160,425 as of December 31, 2015 and 2016.
Note 5: The Company and Anchen Incorporated signed a transfer agreement for the generic
product’s technology and related rights in November 2011. Anchen Incorporated grants
the Company exclusive right and license to register, manufacture and distribute the
product in the United States. The Company has paid a total purchase price of $29,964.
Note 6: The Company entered into a Generic Technology and Rights Licensing Agreement with
Company U in June 2014, under which Company U will be responsible for the research
and development, testing, and documentation preparation of the generic drug while the
Company seeks approval for the new drug application from the US regulatory body.
Under the terms of the agreement, the Company has the exclusive right in the US for the
development, production and sale of the generic drug intended for sale in the US market.
Pursuant to the agreement, Company U is eligible to receive, based on agreed upon
~41~
milestones in the application process, license fees to be paid in installments. When the
product is commercialised, the Company will also pay Company U royalties based on a
fixed percentage of net sales. As of December 31, 2015 and 2016, license fees paid by the
Company to Company U were $15,145.
Note 7: The Group acquired Visum Pharmaceuitcal Co. Ltd. on October 1, 2014; the fair value of
its various regulatory body approved drug applications at acquisition date is
RMB$135,254 thousand. On November 30, 2016, the Board of Directors resolved to sell
all of equity interest in the abovementioned subsidiary, and reclassified the related assets
to “Non-current assets held for sale - net”.
(8) Other non-current assets
(9) Short-term borrowings
The Group has no short-term borrowings as at December 31, 2016.
(10) Other payables
(11) Pensions
A. (a) The Company has a defined benefit pension plan in accordance with the Labor Standards Act
(the “Act”), covering all regular employees’ service years prior to the enforcement of the
Labor Pension Act on July 1, 2005 and service years thereafter of employees who chose to
continue to be subject to the pension mechanism under the Act. Under the defined benefit
pension plan, two units are accrued for each year of service for the first 15 years and one unit
for each additional year thereafter, subject to a maximum of 45 units. Pension benefits are
December 31, 2015 December 31, 2016
Prepayment for equipment 122,468$ 42,506$
Prepayment for inventory 78,413 78,413
Others 3,681 6,468
Less: Listed under "Non-current assets held for sale - net" - 14,141)(
204,562$ 113,246$
Type of borrowings December 31, 2015 Interest rate Collateral
Short-term secured borrowings 16,415$ 2.32% Please refer to Note 8
December 31, 2015 December 31, 2016
Salary payable and annual bonus 59,369$ 31,924$
Service expenses 11,497 16,064
Payable for CRO expenses 31,749 20,080
Payable on equipment 83,068 19,092
Others 43,089 75,725
Less: Listed under "Liabilities directly relating to
non-current assets held for sale" - 23,354)(
228,772$ 139,531$
~42~
based on the number of units accrued and the average monthly salaries and wages of the last
6 months prior to retirement. The Company contributes monthly an amount equal to 2% of
the employees’ monthly salaries and wages to the retirement fund deposited with Bank of
Taiwan, the trustee, under the name of the independent retirement fund committee. Also, the
Company would assess the balance in the aforementioned labor pension reserve account by
December 31, every year. If the account balance is not enough to pay the pension calculated
by the aforementioned method to the employees expected to qualify for retirement in the
following year, the Company will make contribution for the deficit by next March.
(b) The amounts recognised in the balance sheet are as follows:
(c) Movements in net defined benefit liabilities are as follows:
December 31, 2015 December 31, 2016
Present value of defined benefit obligations 8,075$ 6,147$
Fair value of plan assets 5,289)( 5,738)(
Net defined benefit liability 2,786$ 409$
Present value of
defined benefit
obligations
Fair value of
plan assets
Net defined
benefit liability
Year ended December 31, 2015
Balance at January 1 8,583$ 4,712)($ 3,871$
Interest expense (income) 171 94)( 77
8,754 4,806)( 3,948
Remeasurements:
Return on plan assets (excluding
amounts included in interest
income or expense) - 27)( 27)(
Change in financial assumptions 399 - 399
Experience adjustments 1,078)( - 1,078)(
679)( 27)( 706)(
Pension fund contribution - 456)( 456)(
Balance at December 31 8,075$ 5,289)($ 2,786$
~43~
(d) The Bank of Taiwan was commissioned to manage the Fund of the Company’s defined benefit
pension plan in accordance with the Fund’s annual investment and utilisation plan and the
“Regulations for Revenues, Expenditures, Safeguard and Utilisation of the Labor Retirement
Fund” (Article 6: The scope of utilisation for the Fund includes deposit in domestic or foreign
financial institutions, investment in domestic or foreign listed, over-the-counter, or private
placement equity securities, investment in domestic or foreign real estate securitization
products, etc.). With regard to the utilisation of the Fund, its minimum earnings in the annual
distributions on the final financial statements shall be no less than the earnings attainable
from the amounts accrued from two-year time deposits with the interest rates offered by local
banks. If the earnings is less than aforementioned rates, government shall make payment for
the deficit after being authorized by the Regulator. The Company has no right to participate
in managing and operating that fund and hence the Company is unable to disclose the
classification of plan assets fair value in accordance with IAS 19 paragraph 142. The
composition of fair value of plan assets as of December 31, 2015 and 2016 is given in the
Annual Labor Retirement Fund Utilisation Report announced by the government.
(e) The principal actuarial assumptions used were as follows:
Assumptions regarding future mortality experience are set based on actuarial valuation in
accordance with published statistics and experience in the 5th version of Taiwan Standard
Ordinary Experience Mortality Tables.
Present value of
defined benefit
obligations
Fair value of
plan assets
Net defined
benefit liability
Year ended December 31, 2016
Balance at January 1 8,075$ 5,289)($ 2,786$
Interest expense (income) 137 90)( 47
8,212 5,379)( 2,833
Remeasurements:
Return on plan assets (excluding
amounts included in interest
income or expense) - 42 42
Change in financial assumptions - - -
Experience adjustments 2,065)( - 2,065)(
2,065)( 42 2,023)(
Pension fund contribution - 401)( 401)(
Balance at December 31 6,147$ 5,738)($ 409$
Year ended
December 31, 2015
Year ended
December 31, 2016
Discount rate 1.70% 1.70%
Future salary increases 4.00% 4.00%
~44~
Because the main actuarial assumption changed, the present value of defined benefit
obligation is affected. The analysis was as follows:
The sensitivity analysis above was based on one assumption which changed while other
conditions remain unchanged. In practice, more than one assumption may change all at once.
The method of analysing sensitivity and the method of calculating net pension liability in the
balance sheet are the same.
The methods and types of assumptions used in preparing the sensitivity analysis did not
change compared to the previous period.
(f) Expected contributions to the defined benefit pension plans of the Group for the year ending
December 31, 2017 are $392.
B. (a) Effective July 1, 2005, the Company and its domestic subsidiaries have established a defined
contribution pension plan (the “New Plan”) under the Labor Pension Act (the “Act”), covering
all regular employees with the R.O.C. nationality. Under the New Plan, the Company and its
domestic subsidiaries contribute monthly an amount based on 6% of the employees’ monthly
salaries and wages to the employees’ individual pension accounts at the Bureau of Labor
Insurance. The benefits accrued are paid monthly or in lump sum upon termination of
employment.
(b) For overseas subsidiaries, except for a periodic contribution based on a certain percentage of
the employees’ monthly salaries and wages in accordance with the local pension regulations,
there is no further pension obligation.
(c) The pension costs under the defined contribution pension plans of the Group for the years
ended December 31, 2015 and 2016 were $17,092 and $11,936, respectively.
Increase 0.25% Decrease 0.25% Increase 0.25% Decrease 0.25%
December 31, 2015
Effect on present
value of defined
benefit obligation 310)($ 381$ 345$ 290)($
December 31, 2016
Effect on present
value of defined
benefit obligation 260)($ 273$ 251$ 240)($
Discount rate Future salary increases
~45~
(12) Share-based payment
A. As of December 31, 2016, the Group’s share-based payment arrangements were as follows:
Type of
arrangement Description Grant date
Before
conversion
After
conversion
Contract
period
Vesting
conditions
The company:
Employee stock
options-A
Note 1 2011.4.1 2,410,000 1,507,613 10 years 1~5 years'
service
Employee stock
options-B
" 2011.4.1 152,000 95,085 10 years 4 years' service
Employee stock
options-C
" 2012.4.1 3,527,200 2,206,495 10 years 1~5 years'
service
Employee stock
options-D
" 2012.4.1 8,800 5,505 10 years 1~5 years'
service
Employee stock
options-E
" 2012.4.1 13,200 8,257 10 years 1~5 years'
service
Employee stock
options-F
2013.5.1 187,231 8.75 years 2~3.75 years'
service
Employee stock
options-G
2013.5.1 1,693,800 10 years 2~3 years'
service
Employee stock
options-H
2014.4.1 962,500 10 years 2~3 years'
service
Employee stock
options-I
2014.8.1 122,200 10 years 2~3 years'
service
Employee stock
options-J
2014.9.1 3,800 10 years 2~3 years'
service Employee stock
options-K
2014.12.1 13,500 10 years 2~3 years'
service
Employee stock
options-L
2015.6.1 1,402,600 10 years 2~5 years'
service
Employee stock
options-O
2015.9.1 140,000 10 years 2~5 years'
service
Employee stock
options-P
2015.11.17 205,000 10 years 2~5 years'
service
Employee stock
options-Q
2016.4.26 5,000 10 years 2~5 years'
service
Restricted stocks to
employees -A
Note 2 2013.4.25 and
2013.4.26
600,000 3 years Achievement of
performance
condition
Restricted stocks to
employees -B
" 2013.12.4,
2013.12.5
and 2013.12.6
600,000 2 years 10 days' to 2
years' service
Restricted stocks to
employees -C
" 2014.8.1 12,000 1 year 1 year's service
Restricted stocks to
employees -D
" 2014.9.1 7,000 1 year 1 year's service
Restricted stocks to
employees -E
" 2015.2.3 10,000 1 year 1 year's service
Quantity granted
(number of shares)
~46~
Note 1: The Company’s former ultimate company, TWi Pharmaceuticals Holding, Inc., has
granted employee stock options to employees of the Company during April 2011 and
April 2012. Each unit of options may acquire l share of TWi Pharmaceuticals Holding,
Inc. In 2012, because the Group decided to use the Company as the main entity for
public exchange listing, through a Board of Directors’ resolution on July l, 2012, TWi
Pharmaceuticals Holding, Inc. converted the target of the abovementioned employee
stock option into the Company’s stock using a ratio of 1:0.6255655.
Note 2: The restricted stocks issued by the Company cannot be transferred during the vesting
period, but voting right and dividend right are not restricted on these stocks. Employees
are required to return the stocks but not required to return the dividends received if they
resign during the vesting period.
Type of
arrangement Description Grant date
Before
conversion
After
conversion
Contract
period
Vesting
conditions
The company:
Restricted stocks to
employees -F
Note 2 2015.3.9 3,500 1 year 1 year's service
Restricted stocks to
employees -G
" 2015.9.1 50,000 5 years 1~5 years'
service
Restricted stocks to
employees-H
" 2016.3.22 50,000 5 years 1~5 years'
service
Subsidiary:
Employee stock
options-M
2014.10.1 97,000 3.5 years 0.25~3.5 years'
service
Employee stock
options-N
2015.2.5 1,534,400 10 years 1~5 years'
service
Employee stock
options-R
2016.6.1 500,000 10 years 1~2 years'
service
Quantity granted
(number of shares)
~47~
B. Details of the share-based payment arrangements are as follows:
The Company:
(a) Employee stock options- A~E
Note: The 40 and 30 thousand shares of employee stock options exercised in 2015 and 2016,
respectively, had been converted to common stocks. However, as of December 31,
2015 and 2016, the amendment of paid-in capital registration for 2 and 6 thousand
shares amounting to $74 and $291, respectively, is still in progress, and is part of
“Advance receipt for share capital”.
(b) Employee stock options- F~L & O~P
Note: The 86 and 53 thousand shares of employee stock options exercised in 2015 and 2016,
respectively, had been completed. However, as of December 31, 2015 and 2016, the
amendment of paid-in capital registration for 19 and 36 thousand shares amounting to
$907 and $1,747, respectively, is still in progress, and is part of “Advance receipt for
No. of options
Weighted-average
exercise price
(in dollars) No. of options
Weighted-average
exercise price
(in dollars)
Options outstanding
at beginning
of the year 252,288 48$ 188,441 48$
Options exercised
(Note) 39,744)( 48 30,443)( 48
Options forfeited 24,103)( 48 500)( 48
Options outstanding
at end of the year 188,441 48 157,498 48
Options exercisable
at end of the year 114,507 48 121,859 48
Year ended December 31, 2015 Year ended December 31, 2016
No. of shares
Weighted-average
exercise price
(in dollars) No. of shares
Weighted-average
exercise price
(in dollars)
Options outstanding
at beginning
of the year 2,712,650 220$ 3,358,030 202$
Options granted 1,747,600 197 5,000 108
Options adjusted
due to issuance
of shares 33,502 231 - -
Options exercised
(Note) 85,750)( 48 52,850)( 48
Options forfeited 1,049,972)( 207 436,171)( 214
Options outstanding
at end of the year 3,358,030 202 2,874,009 212
Options exercisable
at end of the year 704,656 209 1,428,827 221
Year ended December 31, 2015 Year ended December 31, 2016
~48~
share capital”.
(c) Restricted stocks-A~H
Subsidiary:
Employee stock options-M~N
Employee stock options-R
C. The weighted-average stock price of stock options at exercise dates for the years ended December
31 , 2015 and 2016 was $206.21 (in dollars) and $120.77 (in dollars), respectively.
2015 2016
Quantity Quantity
(number of shares) (number of shares)
At January 1 645,000 172,500
Issued for the year 63,500 50,000
Retired for the year 342,000)( 102,000)(
Restrictions removed for the year 194,000)( 30,500)(
At December 31 172,500 90,000
Year ended December 31,
Weighted-average Weighted-average
exercise price exercise price
(in dollars) (in dollars)
Options outstanding at
beginning of the year
Options exercised 38,800)( 0.01US$ 19,400)( 0.01US$
Options granted 1,534,000 0.50US$ - -US$
Options recalled - -US$ 1,290,920)( 0.50US$
Options outstanding at
end of the year 1,592,200 0.48US$ 281,880 0.43US$
Year ended Year ended
No. of shares No. of shares
97,000 0.01US$ 1,592,200 0.48US$
December 31, 2015 December 31, 2016
Weighted-average Weighted-average
exercise price exercise price
(in dollars) (in dollars)
Options outstanding at
beginning of the year
Options granted - - 500,000 35
Options outstanding at
end of the year - - 500,000 35
- -$ - -$
Year ended Year ended
December 31, 2015 December 31, 2016
No. of shares No. of shares
~49~
D. The expiry date and exercise price of stock options outstanding at balance sheet date are as
follows:
E. The fair value of stock options is measured using the Black-Scholes option-pricing model.
Relevant information is as follows:
(a) Employee stock options A~E
Before conversion:
No. of shares Exercise price No. of shares Exercise priceExpiry date (in thousands) (in dollars) (in thousands) (in dollars)
The Company:
_2012.4.1 2022.3.31 188 48$ 157 48$
_2013.5.1 2022.1.31 82 48 30 48
_2013.5.1 2023.4.30 1,292 219 1,113 219
_2014.4.1 2024.3.31 675 240 613 240
_2014.12.1 2024.11.30 2 262 - -
_2015.6.1 2025.5.31 1,038 201 872 201
_2015.9.1 2020.8.31 64 203 36 203
_2015.11.17 2025.11.16 205 165 205 165
_2016.4.26 2026.4.25 - - 5 108
Subsidiary:
_2014.10.1 2018.3.31 58 0.01US$ 39 0.01US$
_2015.2.5 2025.2.4 1,534 0.5US$ 243 0.5US$
_2016.6.1 2026.5.31 - -$ 500 35$
December 31, 2015 December 31, 2016
Issue date
Type of
arrangement
Grant
date
Stock price
(in dollars)
Exercise
price
(in dollars)
Expected
price
volatility
Expected
option life
Expected
dividends
yield rate
Risk-free
interest
rate
Fair value
per unit
(in dollars)
The company:
Employee stock
options-A
2011.4.1 Note 10$ 26.67% 6.35 years 0% 1.17% $1.16~
1.53
Employee stock
options-B
2011.4.1 " " 26.67% 7 years " 1.21% 1.44
Employee stock
options-C
2012.4.1 " 30 30.11% 2.70 years " 0.92% 10.53~
11.56
Employee stock
options-D
2012.4.1 " " 30.11% 2.70 years " 0.92% 10.53~
11.56
Employee stock
options-E
2012.4.1 " " 30.11% 2.70 years " 0.92% 10.53~
11.56
~50~
After conversion:
Note: Both the Company’s former parent company’s and the Company’s shares were not
publicly traded when granting employee stock options, therefore the weighted-average
price of $7.3~36.91 (in dollars) was estimated using industry stock price and
capitalized cash flow method taking into account liquidity discount.
(b) Employee stock options F to Q and restricted stocks:
Type of
arrangement
Grant
date
Stock price
(in dollars)
Exercise
price
(in dollars)
Expected
price
volatility
Expected
option life
Expected
dividends
yield rate
Risk-free
interest
rate
Fair value
per unit
(in dollars)
The company:
Employee stock
options-A
2011.4.1 Note 16$ 26.67% 6.35 years 0% 1.17% $1.85~
2.45
Employee stock
options-B
2011.4.1 " " 26.67% 7 years " 1.21% 2.30
Employee stock
options-C
2012.4.1 " 48 30.11% 2.70 years " 0.92% 16.83~
18.48
Employee stock
options-D
2012.4.1 " " 30.11% 2.70 years " 0.92% 16.83~
18.48
Employee stock
options-E
2012.4.1 " " 30.11% 2.70 years " 0.92% 16.83~
18.48
Grant
date
Stock
price
(in dollars)
Exercise
price
(in dollars)
Expected
price
volatility
Expected
option
life
Expected
dividends
yield rate
Risk-free
interest rate
Fair value
per unit
(in dollars)
The company:
Employee stock
options-F
2013.5.1 153.74$ 48$ 52.66% 2.5~4.25
years
2.9% 0.80%~
0.89%
$96.20~
98.62
Employee stock 2013.5.1 153.74 218.5 " 2.5~3.5 " 0.80%~ 27.60~
options-G (Note) years 0.85% 34.41
Employee stock 2014.4.1 245.5 240 30.22%~ 2.5~3.5 0% 0.73%~ 51.27~
options-H (Note) 32.29% years 0.93% 57.79
Employee stock 2014.8.1 242 237 30.45%~ 2.5~3.5 " 0.81%~ 49.77~
options-I (Note) 31.63% years 0.99% 57.56
Employee stock 2014.9.1 247 241.5 30.94%~ 2.5~3.5 " 0.83%~ 50.47~
options-J (Note) 31.38% years 1.01% 59.66
Employee stock 2014.12.1 270 261.5 30.82%~ 2.5~3.5 " 0.79%~ 54.15~
options-K (Note) 31.54% years 0.95% 66.13
Employee stock 2015.6.1 201.5 210 30.08%~ 2.5~5.5 " 0.74%~ 39.40~
options-L (Note) 35.57% years 1.15% 69.51
Employee stock 2015.9.1 204 203 30.94%~ 2.5~5.5 " 0.61%~ 40.68~
options-O (Note) 35.68% years 0.95% 69.79
Employee stock
options-P
2015.11.17 165 165 31.51%~
35.60%
2.5~5.5
years"
0.52%~
0.91%
33.33~
56.21
Employee stock
options-Q
2016.4.26 108 108 31.98%~
36.40%
2.5~5.5
years"
0.45%~
0.67%
22.05~
37.03
Type of
arrangement
~51~
Note: As resolved by the Board of Directors, the exercise prices of employee stock options were
adjusted due to issuance of global depository receipts.
F. Expenses incurred on share-based payment transactions are shown below:
Grant
date
Stock
price
(in dollars)
Exercise
price
(in dollars)
Expected
price
volatility
Expected
option
life
Expected
dividends
yield rate
Risk-free
interest rate
Fair value
per unit
(in dollars)
The company:
Restricted stocks
-A
2013.4.25
and
2013.4.26
153.74$ 10$ 50.75%~
54.87%
0.5~2.2
years
" 0.74%~
0.84%
102.7~
124.62
Restricted stocks
-B
2013.12.4,
2013.12.5
and
2013.12.6
324 10 47.35%~
51.23%
0.03~2
years
" 0.48%~
0.67%
235.5~
307.2
Restricted stocks
-C
2014.8.1 242 10 31.27% 1 year " 0.59% 206.96
Restricted stocks
-D
2014.9.1 247 10 31.66% 1 year " 0.56% 210.93
Restricted stocks
-E
2015.2.3 233.5 10 32.00% 1 year " 0.66% 198.9
Restricted stocks
-F
2015.3.9 228 10 45.54% 1 year " 0.61% 181.75
Restricted stocks
-G
2015.9.1 204 10 30.34%~
41.39%
1~5 years " 0.50%~
0.88%
140.89~
165.17 Restricted stocks
-H
2016.3.22 144.5 10 31.08%~
35.70%
1~5 years " 0.39%~
0.57%
95.92~
120.88Subsidiary:
Employee stock
options-M
2014.10.1 0.011US$ 0.01US$ 25.08%~
28.51%
0.25~3.5
years
0% 0.50%~
1.12%
US$0.001~
US$0.003
Employee stock
options-N
2015.2.5 0.2US$ 0.5US$ 28.22%~
34.77%
5.5~7.5
years
" 1.17%~
1.41%
US$0.009~
US$0.029
Employee stock
options-R
2016.6.1 26.56$ 35$ 49.60% 5.5~6
years
" 0.67%~
0.71%
$9.90~
10.45
Type of
arrangement
2015 2016
Equity-settled 12,406$ 35,317$
Year ended December 31,
~52~
(13) Other non-current liabilities
Note 1: As described in the generic drug development contract signed with Company A and
Company Z as mentioned in Note 4 of Note 6 (7), the Company has received royalty of
US$2 million in the second half of 2012 and has deferred recognition of the revenue over
the development period. For the years ended December 31, 2015 and 2016, the Company
has recognised $4,912 (shown as “Operating revenues”).
Note 2: Between 2012 and 2013, the subsidiary, Visum Pharmaceutical Co., Ltd., entered into
R&D related grant programs with the Hainan Province government. As of December 31,
2015 and 2016, government grants amounting to $20,078 and $15,957 were deferred,
respectively. For the years ended December 31, 2015 and 2016, $2,584 and $7,273 was
recognised (shown as “Other income”), respectively.
(14) Common stock
A. As of December 31, 2016, the Company’s authorised capital was $2,000,000, consisting of 200
million shares of common stock, and the paid-in capital was $1,273,274 with a par value of $10
(in dollars) per share. All proceeds from shares issued have been collected.
B. Movements in the number of the Company’s common stock outstanding are as follows (in
thousands of shares):
December 31, 2015 December 31, 2016
Long-term deferred revenue
(Note 1~ 2) 39,726$ 30,693$
Less : current portion of
long-term deferred
revenue (shown as
“Other current liabilities”) 4,912)( 4,912)(
34,814 25,781
Accrued pension liabilities 2,786 409
Others - 986
Less: Listed under "Liabilities directly
relating to non-current assets
held for sale" - 15,957-
37,600$ 11,219$
2015 2016
At January 1 113,106 127,409
Employee stock options exercised 106 61
Issuance of restricted stocks 63 50
Issuance of shares-global depository receipts 14,400 -
Retirement of restricted stocks 266)( 193)(
At December 31 127,409 127,327
Year ended December 31,
~53~
C. On June 29, 2015, the Board of Directors of the Company adopted a resolution to issue 14.4
million units of global depository receipts (GDRs), represented by 14.4 million new shares of
common stock (deposited shares), with one unit of GDR representing 1 share of outstanding
common stock. After obtaining approval from the Securities and Futures Bureau of the Financial
Supervisory Commision, these GDRs were listed on the Securities Exchange of Luxembourg on
September 22, 2015, with total proceeds of US$87,088 thousand. The main terms and conditions
of the GDRs are as follows:
(a) Voting rights
Except as required by law, GDR holders may, pursuant to the depositary agreement and the
relevant laws and regulations of the R.O.C., exercise the voting rights pertaining to the
underlying common shares represented by the GDRs.
(b) Redemption of GDRs
For sales and redemption of the underlying common shares represented by the GDRs when
the holders of the GDRs request the depositary to redeem the GDRs in accordance with the
relevant R.O.C. regulations and the provisions in the depositary agreement, the depositary
may deliver the underlying common shares represented by the GDRs to the GDR holders, or
sell the underlying common shares represented by the GDRs in the R.O.C. stock market on
behalf of the GDR holder. The payment of proceeds from such sale shall be made subject to
the relevant R.O.C. laws and regulations and the provisions in the depositary agreement.
(c) Distribution of dividends, preemptive rights and other rights
Except as otherwise stated in the depositary agreement, distribution of dividends, preemptive
rights and other rights and interests of GDR units bear the same rights as common shares.
(d) After considering cash capital increases, as of December 31, 2016, there were 167 thousand
units outstanding, representing 167 thousand common shares of the Company’s common
stock.
D. During its meetings on June 12, 2014 and June 2, 2015, the stockholders adopted a resolution to
issue restricted stocks (please refer to Note 6 (12)) with the effective date set on February 3, 2015,
March 9, 2015, September 1, 2015 and March 22, 2016. The subscription price is $10 (in dollars)
per share. Restricted stocks issued are subject to certain transfer restrictions before their vesting
conditions are met. Other than these restrictions, the rights and obligations of these stocks issued
are the same as other issued common stocks.
E. In 2015, restricted stocks totaling 342 thousand shares transferred to some of the Company’s
employees did not meet the vesting conditions set forth in the rules of issuance. The Board of
Directors during its meeting on June 15, 2015 and March 21, 2016 adopted a resolution for the
shares to be repurchased and retired. The registration procedures were completed on October 7,
2015 and May 6, 2016, respectively. In addition, in 2016, employee restricted stocks of 102
thousand shares distributed to certain employees did not meet the vesting conditions in
accordance with the terms of restricted shares, however, the Board of Directors has resolved to
~54~
buy back the restricted shares as of August 12, 2016, thus those restricted shares are considered
as shares yet to be retired.
F. Treasury shares
(a) Reason for share reacquisition and movements in the number of the Company’s treasury
shares are as follows:
As of December 31, 2015: None.
(b) Pursuant to the R.O.C. Securities and Exchange Law, the number of shares bought back as
treasury share should not exceed 10% of the number of the Company’s issued and outstanding
shares and the amount bought back should not exceed the sum of retained earnings, paid-in
capital in excess of par value and realised capital surplus.
(c) Pursuant to the R.O.C. Securities and Exchange Law, treasury shares should not be pledged
as collateral and is not entitled to dividends before it is reissued.
(d) Pursuant to the R.O.C. Securities and Exchange Law, treasury shares to enhance the
Company’s credit rating and the stockholders’ equity should be retired within six months of
acquisition.
(15) Capital reserve
A. Pursuant to the R.O.C. Company Act, capital surplus arising from paid-in capital in excess of
par value on issuance of common stocks and donations can be used to cover accumulated
deficit or to issue new stocks or cash to shareholders in proportion to their share ownership,
provided that the Company has no accumulated deficit. Further, the R.O.C. Securities and
Exchange Law requires that the amount of capital surplus to be capitalised mentioned above
should not exceed 10% of the paid-in capital each year. Capital surplus should not be used to
cover accumulated deficit unless the legal reserve is insufficient.
B. Regarding Capital reserve - Employee stock option, Capital reserve - Restricted stock to
employees, and Transactions with non-controlling interests, please refer to Notes 6(12) and
6(26).
Name of company
holding the shares Reason for reacquisition
Number of
shares
Carrying
amount
The Company To enhance the Company's credit rating
and the stockholders' equity
2,007,000 $212,112
December 31, 2016
~55~
Difference
between
consideration
and carrying
amount Changes in
Additional
paid-in
capital
Employee
stock
options
Restricted
stock to
employees
of subsidiaries
acquired or
disposed
ownership
interests in
subsidiaries
Premium
from
merger Total
At January 1 4,572,340$ 47,415$ 106,063$ -$ -$ 6,523$ 4,732,341$ Compensation
costs of
employee
stock options - 28,098 - - - - 28,098 Compensation
costs of
employee
stock options
from
subsidiaries - 6,478 - - - - 6,478
Employee
stock options
exercised 9,680 9,680)( - - - - - Issuance of
restricted
stocks - - 10,379 - - - 10,379
Advance
receipts for
share capital
transferred 4,022 - - - - - 4,022
Retirement of
restricted
stocks - - 12,528)( - - - 12,528)(
Issuance of
shares 2,660,966 - - - - - 2,660,966 Transactions with
non-controlling
interests - 1,070)( - - 361,770 - 360,700
At December 31 7,247,008$ 71,241$ 103,914$ -$ 361,770$ 6,523$ 7,790,456$
2015
~56~
(16) Retained earnings (accumulated deficit)
A. According to the amended Articles of Incorporation of the Company, when there is any profit for
distribution for each financial year, the Company shall first pay all applicable taxes and offset
losses from previous years, and then set aside no less than ten percent (10%) of the remaining
profits of the Company for the relevant financial year as a legal reserve(s). Special reserve shall
be set aside or reversed in accordance with related regulations or Competent Authority. The
remaining amount, if any, along with the accumulated unappropriated earnings from prior years
is accumulated distributable earnings. The appropriation of the accumulated distributable
Difference
between
consideration
and carrying
amount Changes in
Additional
paid-in
capital
Employee
stock
options
Restricted
stock to
employees
of subsidiaries
acquired or
disposed
ownership
interests in
subsidiaries
Premium
from
merger Total
At January 1 7,247,008$ 71,241$ 103,914$ -$ 361,770$ 6,523$ 7,790,456$ Compensation
costs of
employee
stock options - 23,705 - - - - 23,705
Compensation
costs of
employee
stock options
from
subsidiaries - 6,836 - - - - 6,836
Employee
stock options
exercised 3,218 3,218)( - - - - -
Issuance of
restricted
stocks - - 5,544 - - - 5,544 Advance
receipts for
share capital
transferred 2,328 - - - - - 2,328
Restricted stock
vested 43,310 - 43,310)( - - - -
Retirement of
restricted
stocks - - 12,795)( - - - 12,795)(
Transactions with
non-controlling
interests - - - 464,841 - - 464,841
At December 31 7,295,864$ 98,564$ 53,353$ 464,841$ 361,770$ 6,523$ 8,280,915$
2016
~57~
earnings, less an appropriate portion for the operational needs, shall be proposed by the Board of
Directors and resolved by the shareholders as bonus to shareholders.
B. The dividends to stockholders shall be no less than ten percent (10%) of the net profit after tax
of the relevant financial year. The cash dividends shall comprise no less than ten percent (10%)
of the aggregate of the cash and stock dividends declared in such year; provided that if the cash
dividend per share is less than NT$0.1, the dividends shall be issued in the form of stock
dividends in lieu of the cash dividend. The ratio of distribution may be adjusted by taking into
consideration the Company's future revenues and cash flow. If there is any significant capital
expenditure and R&D plan in the future, subject to the approval of the stockholders at the
stockholders’ meeting, the dividends may only be distributed in the form of stock dividends. The
Company shall not pay any dividends or bonuses if it does not have earnings.
C. Under the R.O.C. Company Act, when the accumulated deficit exceeds 50% of the paid-in capital,
the Board of Directors should convene a stockholders’ meeting and report the situation.
D. Except for covering accumulated deficit or issuing new stocks or cash to stockholders in
proportion to their stock ownership, the legal reserve shall not be used for any other purpose.
The use of legal reserve for the issuance of stocks or cash to stockholders in proportion to their
stock ownership is permitted, provided that the distribution of the reserve is limited to the portion
in excess of 25% of the Company’s paid-in capital.
E. In accordance with the regulations, the Company shall set aside special reserve from the debit
balance on other equity items at the balance sheet date before distributing earnings. When debit
balance on other equity items is reversed subsequently, the reversed amount could be included
in the distributable earnings.
F. For information on employees’ compensation (bonus) and directors’ and supervisors’
remuneration, please see Note 6(22).
(17) Operating revenue
2015 2016
Sales revenue 414,818$ 728,597$
Service revenue 376 2,558
License revenue 22,174 12,623
437,368$ 743,778$
Year ended December 31,
~58~
(18) Other income
Note 1: On April 27, 2015, the Company and Takeda Pharmaceutical Company Limited, and its
American subsidiaries (individually and collectively, “Takeda”) entered into a settlement
agreement pertaining to pending patent litigations. In accordance with the terms of the
agreement, Takeda has paid the Company US$9,500 thousand.
Note 2: On November 11, 2016, the Group and Par Pharmaceuticals, Inc. (Par) reached an agreement
to drop the generic drug patent lawsuit. Par paid US$12,840 thousand in full for damages
plus interest to the Company.
(19) Other gains and losses
Note 1: This represents a gain on disposal of associate company’s shares. In December 2015, the
Company disposed all its shares in the associate to another related party for $163,650
resulting in a gain on disposal of $155,165 (listed under “Other gains and losses”). For 2015,
the Group recognized share of loss of associates and joint ventures accounted for under the
equity method of $53,737 based on financial statements audited by other auditors.
Note 2: This represents impairment loss on intangible asset. Details of the impairment are described
in Note 6 (7) Note 1.
(20) Finance costs
2015 2016
Settlement income (Notes 1 and 2) 295,628$ 410,172$
Interest income 11,139 41,361
Government grants revenue 4,058 7,273
Other income 9,637 3,511
320,462$ 462,317$
Year ended December 31,
2015 2016
Gain on disposal of investment (Note 1) 155,165$ -$
Net currency exchange gain (loss) 35,211 73,748)(
Impairment loss (Note 2) 11,785)( -
(Loss) gain on disposal of property, plant
and equipment 131)( 316
Miscellaneous expenses 203)( 1,672)(
178,257$ 75,104)($
Year ended December 31,
2015 2016
Interest expense - Bank borrowings 307$ 91$
Year ended December 31,
~59~
(21) Expenses by nature
Note: The Group wishes to offer substantial assistance to people who cannot afford their medical
expenses. Thus, the Group donated pharmaceutical products to medical institutions in the
United States in the first quarter of 2015 amounting to $16,004.
(22) Employee benefit expense
A. According to the amended Articles of Incorporation of the Company, a ratio of the pre-tax
income before distribution of employees’ compensation and directors’ and supervisors’
remuneration, after covering accumulated losses, shall be distributed as employees’
compensation and directors’ and supervisors’ remuneration. The ratio shall be 1%~10% for
employees’ compensation and shall not be higher than 5% for directors’ and supervisors’
remuneration.
B. The Company had an accumulated deficit as of December 31, 2014 and 2015, thus, the Company
did not distribute employees’ bonus and directors’ and supervisors’ remuneration.
C. The Company had an accumulated deficit as of December 31, 2015 and 2016, thus, the Company
did not accrue employees’ compensation (bonus) and directors’ and supervisors’ remuneration.
D. Information about employees’ compensation (bonus) and directors’ and supervisors’
remuneration of the Company as resolved by the Board of Directors during its meeting will be
posted in the “Market Observation Post System” at the website of the Taiwan Stock Exchange.
2015 2016
Employee benefit expense 366,325$ 327,281$
Depreciation on property, plant and equipment 109,948$ 124,412$
Amortization expense 108,917$ 87,923$
Donation (Note) 16,004$ 1,280$
Reversal of employee benefits of associate
corporations 42,749)($ -$
Year ended December 31,
2015 2016
Wages and salaries 320,125$ 293,133$
Labour and health insurance fees 20,089 16,671
Pension costs 17,169 11,983
Other personnel expenses 8,942 5,494
366,325$ 327,281$
Year ended December 31,
~60~
(23) Income tax
A. Components of income tax benefit:
B. Reconciliation between income tax expense and accounting profit
2015 2016
Current tax:
Current tax on profits for the year 5,203$ 12,154$
Foreign tax credit 4,918 22
Adjustments in respect of prior years 2,835 2,347)(
Total current tax 12,956 9,829
Deferred tax:
Effect of deferred income tax liabilities
arising from business combination 21,260)( 16,372)(
Origination and reversal of
temporary differences - 26)(
Total deferred tax 21,260)( 16,398)(
Income tax benefit 8,304)($ 6,569)($
Year ended December 31,
Year ended
December 31, 2015
Year ended
December 31, 2016
Tax calculated based on profit before
tax and statutory tax rate 75,624)($ 48,438)($
Foreign tax credit not apllied 4,918 22
Temporary difference not recognised
as deferred tax assets - 4,981
Taxable loss not recognised as
deferred tax assets 46,260 28,001
Effect of expenses disallowed by
tax regulation 34,567 27,610
Prior year income tax
(over) underestimate 2,835 2,347)(
Effect of deferred income tax liabilities
arising from business combination 21,260)( 16,372)(
Change in assessment of realisation of
deferred tax assets - 26)(
Tax expenses 8,304)($ 6,569)($
~61~
C. Amounts of deferred tax assets or liabilities as a result of temporary differences are as follows:
D. Details of the investment tax credits and unrecognised deferred tax assets are as follows:
Note: In accordance with the Ministry of Economic Affairs (MOEA) Jing-Shou-Gong-Zi Letter
No. 10020425350 dated December 16, 2011, the subsidiary - TWi Biotechnology, Inc. (TWi
Biotech) was approved as a biotech pharmaceuticals company. The Company made an
January 1
Recognised in
profit or loss
Translation
differences December 31
Deferred tax liabilities:
Deferred income tax
liabilities arising from
business combination 172,179)($ 21,260$ 2,986$ 147,933)($
Unrealised exchange gain 26)( - - 26)(
Land revaluation increment 4,933)( - - 4,933)(
177,138)($ 21,260$ 2,986$ 152,892)($
2015
January 1
Recognised
in profit or
loss
Translation
differences
Listed under
"Liabilities
directly relating
to non-current
assets held for
sale" December 31
Deferred tax liabilities:
Deferred income tax
liabilities arising
from business
combination 147,933)($ 16,372$ 10,571$ 120,990$ -$
Unrealised exchange
gain 26)( 26 - - -
Land revaluation
increment 4,933)( - - - 4,933)(
Total 152,892)($ 16,398$ 10,571$ 120,990$ 4,933)($
2016
Qualifying items
Unused tax
credits
Unrecognised
deferred tax
assets Expiry year
Biotech and New Pharmaceuticals
investment- stockholder
investment tax credit 32,000$ 32,000$
Note
December 31, 2016
~62~
additional investment in TWi Biotech on April 25, 2012 and continually held the shares for
more than three years and was approved by the Ministry of Finance that the above listed
investment tax credit can be used to offset against the Company’s income tax within five
years from the year in which the Company starts to have income tax payable.
E. In accordance with the Ministry of Economic Affairs (MOEA) Jing-Shou-Gong-Zi Letter No.
10020425350 dated December 16, 2011, the subsidiary - TWi Biotechnology, Inc. was approved
as a biotech pharmaceuticals company for the next five years, and the subsidiary has reapplied
in the year 2016. Accordingly, TWi Biotechnology, Inc. is eligible for investment tax credits
under the Statute for Development of Biotech New Pharmaceuticals Industry. Relevant
investment tax credits can be used to offset against the subsidiary’s income tax within five years
from the year in which the subsidiary starts to have income tax payable. As of December 31,
2015 and 2016, investment tax credits of the subsidiary, TWi Biotechnology, Inc., which was
not recognised as deferred tax assets are $58,749 and $70,485, respectively.
F. Expiration dates of unused tax losses and amounts of unrecognised deferred tax assets are as
follows:
Year incurred
Amount filed/
assessed Unused amount
Unrecognised
deferred tax
assets Expiry year
2006 6,720$ 6,720$ 6,720$ 2016
2010 191,311 191,311 191,311 2020
2011 353,940 353,940 353,940 2021
2012 548,835 548,835 548,835 2022
2013 498,412 498,412 498,412 2023
2014 724,765 724,765 724,765 2024
2015 272,014 272,014 272,014 2025
2,595,997$ 2,595,997$ 2,595,997$
December 31, 2015
Year incurred
Amount filed/
assessed Unused amount
Unrecognised
deferred tax
assets Expiry year
2010 191,311$ 191,311$ 191,311$ 2020
2011 353,940 353,940 353,940 2021
2012 548,835 548,835 548,835 2022
2013 498,412 498,412 498,412 2023
2014 724,765 724,765 724,765 2024
2015 327,260 327,260 327,260 2025
2016 164,714 164,714 164,714 2026
2,809,237$ 2,809,237$ 2,809,237$
December 31, 2016
~63~
G. The Company’s income tax returns through 2014 have been assessed and approved by the Tax
Authority. The subsidiary-TWi Biotechnology, Inc.’s income tax returns through 2014 have been
assessed and approved by the Tax Authority.
H. Accumulated deficit
I. As of December 31, 2015 and 2016, the balance of the imputation tax credit account was $8,545.
As the Company had an accumulated deficit in 2015 and 2016, there was no estimated or actual
creditable ratio of appropriated retained earnings.
(24) Government grants
A. The Company participated in the Industrial Technology Development Program (ITDP) of the
Ministry of Economic Affairs (MOEA) in 2011 and received Program Grants of $41,080 and
$29,100 for two projects “Development of Generic Products with High Technical Barriers and
International Competitiveness” and “Development of High-Tech Controlled-Release Dosage
Form”, respectively. The Company recognised income from government grant of $737 and $0
(shown as “Other income”) in 2015 and 2016, respectively.
B. The subsidiary, Visum Pharmaceutical Co., Ltd., entered into R&D-related grant programs with
the Hainan Province government. Please refer to Note 2 of Note 6 (13) for details.
C. The Company and its subsidiary recognised income from government grant of $3,321 and $7,273
(shown as “Other income”) in 2015 and 2016, respectively.
(25) Loss per share
Note: Options and restricted stocks issued to employees do not have dilutive effect.
December 31, 2015 December 31, 2016
Generated in and after 1998 2,711,177)($ 2,931,067)($
Amount
after tax
Weighted average
number of common stock
outstanding
(shares in thousands)
Earnings per
share
(in dollars)
Basic loss per share (Note)
Profit attributable to the parent 347,739)($ 116,452 2.99)($
Year ended December 31, 2015
Amount
after tax
Weighted average
number of common stock
outstanding
(shares in thousands)
Loss per
share
(in dollars)
Basic loss per share (Note)
Loss attributable to the parent 221,682)($ 126,220 1.76)($
Year ended December 31, 2016
~64~
(26) Transactions with non-controlling interests
A. The Group did not participate proportionately to its ownership percentage in the subsidiary’s
cash capital increase:
(a) On February 4, 2015, the Group acquired additional 11.92% equity interest in the capital
increase of its subsidiary - Visum Pharmaceutical Co., Ltd. (Visum). As the acquisition was
not proportionate to the Group’s ownership percentage, the transaction resulted in an increase
in the non-controlling interests by $76,914 and a decrease in the equity attributable to owners
of the parent by $76,914.
(b) On March 9, 2015 and May 29, 2015, the Group subscribed to the capital increase of its
subsidiary - TWi Biotechnology, Inc. As the acquisition was not proportionate to the Group’s
ownership percentage, the Group’s equity interest in TWi Biotechnology, Inc. decreased by
14.41%. The transaction resulted in an increase in non-controlling interests by $182,011 and
an increase in the equity attributable to owners of the parent by $356,075. The effect of
changes in ownership interests in TWi Biotechnology, Inc. on the equity attributable to
owners of the parent in 2015 is shown below:
B. Disposal of equity interest in a subsidiary (that did not result in a loss of control)
On May 20, 2016, May 30, 2016, May 31, 2016, September 12, 2016 and December 20, 2016,
the Group disposed 12.52% shares of its subsidiary-TWi Biotechnology, Inc. for a total cash
consideration of $509,767. This transaction resulted in an increase in the non-controlling interest
by $44,926 and an increase in the equity attributable to owners of the parent by $464,841. The
effect of changes in interests in TWi Biotechnology, Inc. on the equity attributable to owners of
the parent for the year ended December 31, 2016 is shown below:
Year ended
December 31, 2015
Cash 438,085$
Increase in non-controlling interests 76,006)(
Recognised changes in owner’s equity in subsidiary
(shown as “Capital reserve”) 362,079$
Year ended
December 31, 2016
Increase in the carrying amount of non-controlling interest 509,767$
Less: carrying amount of non-controlling interest disposed 44,926)(
Capital reserve - recognition of changes in ownership interest in
subsidiaries 464,841$
~65~
(27) Supplemental cash flow information
Investing activities with partial cash payments:
7. RELATED PARTY TRANSACTIONS
(1) Significant related party transactions
A. Operating revenue:
Service revenue arises from providing related parties with contract research and administration
and management services. For the transaction price and payment terms, there are no other
comparable transactions to be compared with, thus are executed at the terms that both parties
agreed upon.
B. Rent revenue (shown as “Other income”)
The above pertains to rent of machinery and laboratory to other related party. The leasing period
is from August 1, 2015 to December 31, 2016. The contract price was negotiated by both parties
and is paid monthly.
C. Receivables from related parties
The receivables from associate and other related party arise mainly from providing services and
2015 2016
Acquisition of property, plant and equipment 212,763$ 21,456$
Add: Opening balance of payable on equipment 29,121 83,068
Less: Ending balance of payable on equipment 83,068)( 19,092)(
Ending balance of payable on equipment
(Listed under "Non-current assets held for
sale - net") - 12,984)(
Cash paid during the year 158,816$ 72,448$
Year ended December 31,
2015 2016
Service revenue:
Associate 376$ -$
Other related party - 670
376$ 670$
Year ended December 31,
2015 2016
Other related party 1,371$ 829$
Year ended December 31,
December 31, 2015 December 31, 2016
Accounts receivable:
Other related party -$ 1$
~66~
sale of research consumables.
D. Payables to related parties
(a) The payables to related parties arise mainly from collections and payments made on behalf of
others.
(b) The maximum outstanding balance of loans from other related parties in 2015 and 2016 was
$66,009 and $0, respectively.
E. Property transactions
(a) Acquisition of property, plant and equipment:
(b) Disposal of machinery:
i. During 2015, the Company rented out machinery to other related party. As of December 31,
2015, the aforementioned asset amounted to $19,571 (listed under Property, Plant and
Equipment as “Leased equipment”). The Company terminated the rent agreement in March
2016 and sold the machinery to said other related party.
ii. In 2015, the Group did not dispose any machinery and equipment.
(c) The Company acquired 33.61% equity interest in the associate–Genovi Pharmaceuticals
Limited at a cost of $463,980 during August, 2014. However, during October 2015, the
associate reduced capital and returned $323,805 of subscription back to the Company. In
December 2015, the Company disposed all its shares in the associate to another related party
for $163,650 resulting to a gain on disposal of $155,165 (listed under “Other gains and losses”).
As of Decemeber 31, 2015, the Company has fully received the proceeds from the disposal.
F. The subsidiary, TWi Biotechnology, Inc., entered into a cooperative development agreement with
other related party in 2016. Other related party will assist the Group in developing and researching
pro-drugs, however the Group does not need to pay any consideration in exchange for the research
and development. If pro-drugs are successfully developed, the Group will grant exclusive license
to other related party for further use in development of the research results and related rights of
the pro-drugs in Mainland China (including Hong Kong and Macao). If other related party sold
any oral products which are made from the pro-drugs in China, they shall pay royalties at a certain
December 31, 2015 December 31, 2016
Other payables - others
Other related parties 1,143$ -$
2015 2016
Associate 66,444$ -$
Year ended December 31,
Disposal proceeds Gain (loss) on disposal
Other related party 19,150$ 430$
Year ended December 31, 2016
~67~
percentage of net profit from sales of the oral products to the Group. However, if other related
party fails to meet the requirements within a certain period as stated in the agreement, the
obligation to grant the license would be automatically terminated.
(2) Key management compensation
8. PLEDGED ASSETS
The Group’s assets pledged as collateral are as follows:
9. SIGNIFICANT CONTINGENT LIABILITIES AND UNRECOGNISED CONTRACT
COMMITMENTS
In addition to the contingent license fees as explained in Note 6 (7), the Group’s other significant
contingent liabilities and unrecognized contract commitments are as follows:
(1) Contingencies
When the Company submits ANDAs to the US FDA with Paragraph IV certifications claiming that
the Company’s generic products do not infringe the listed Orange Book patents or such patents are
not valid, NDA holders and patent owners may sue the Company, requesting an order enjoining the
Company from commercial sale of the generic products before the expiration date of the Orange Book
patents. This type of patent litigation is common practice in the pharmaceutical industry. Before
launching generic products, there would be no concern about compensation for damages. The
Company’s lawsuits associated with Paragraph IV certifications are as follows:
A. Supernus Pharmaceuticals, Inc.: The Company submitted its ANDA for a generic version of
Oxtellar XR to the US FDA with Paragraph IV certifications, the NDA and patent holder
(Supernus Pharmaceuticals, Inc.) sued the Company for alleged patent infringement in January
2015. As of March 23, 2017, this lawsuit is still pending with the US Court and the outcome is not
predictable. The Company has not yet launched this generic product, therefore there is no concern
about compensation for damages at this stage.
B. Allergan, Inc.: The Company submitted its ANDA for a generic version of Restasis to the US FDA
2015 2016
Salaries and other short-term employee benefits 83,815$ 75,568$
Post-employment benefits 873 940
Termination benefits 2,116 924
Share-based payments 19,500)( 7,633
67,304$ 85,065$
Year ended December 31,
Pledged asset December 31, 2015 December 31, 2016 Purpose
Land (including revaluation increment) 386,542$ 386,542$ Credit limit
Buildings 188,349 190,454 ″
574,891$ 576,996$
Book value
~68~
with Paragraph IV certifications, the NDA holder (Allergan, Inc.) sued the Company for alleged
patent infringement in July 2016. The parties settled the lawsuit on January 12, 2017, and all
litigation related to the Company’s generic version of Restasis were dismissed.
C. Eli Lilly: The Company submitted its ANDA for a generic version of AXIRON to the US FDA
with Paragraph IV certifications, the NDA holder (Eli Lilly) and patent holder Acrux DDS PTY
LTD. sued the Company for alleged patent infringement in February 2017. This is a common and
typical Paragraph IV patent infringement litigation. As the Company has not yet launched this
product, there is no concern about compensation for damages at this stage.
(2) Commitments
A. Capital expenditure contracted for at the balance sheet date but not yet incurred is as follows:
B. Operating lease arrangements
The Group leases offices and cars with lease terms of less than 5 years, and the majority of lease
agreements are renewable at the end of the lease period at market rate.
The future aggregate minimum lease payments under non-cancellable operating leases are as
follows:
C. The Company and Company Y entered into a contract research agreement in 2010. Company Y is
responsible for drug development and manufacturing. Depending on completion stages of drug
license application and approval, the Company will pay up to $2,400 as milestone fees to
Company Y. The Company will share profit with Company Y after the product is launched.
D. The Company and Company C entered into an agreement in July 2014. Under the agreement, the
Company terminated Company C’s distribution right for a certain drug, and in exchange, the
Company needs to pay Company C a certain percentage of net profit from sales of the drug once
it begins to commercially distribute the drug.
E. During 2015 and 2016, the Company entered into various contract research agreements. In
accordance with the payment schedules in the agreements, depending on the progress of the
clinical studies, the maximum amount that the Group will have to pay is $16,297.
F. In May 2015, the Company’s subsidiary, TWi Biotechnology, Inc., and Company O entered into
several contract research agreements. Company O is responsible for clinical trials and license
application services. In accordance with the payment schedules in the agreement, depending on
the progress of the clinical trials and license application, the maximum amount that TWi
Biotechnology, Inc. is obligated to pay is $10,385.
December 31, 2015 December 31, 2016
Property, plant and equipment 135,715$ 44,534$
December 31, 2015 December 31, 2016
Up to 12 months 16,942$ 19,240$
Later than one year but
not later than five years 16,862 10,918
33,804$ 30,158$
~69~
G. In May 2016, the Company’s subsidiary, TWi Biotechnology, Inc., and Company D entered into
a Master Contract agreement and signed specific work orders based on the subsidiary’s needs. In
accordance with the payment schedules in the work orders, depending on the progress of the
clinical trials, the maximum amount that the Company is obligated to pay is $2,995.
10. SIGNIFICANT DISASTER LOSS
None
11. SIGNIFICANT EVENTS AFTER THE BALANCE SHEET DATE
Please refer to Note 9(1)B. and C. for details.
12. OTHERS
(1) Capital management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue
as a going concern in order to provide returns for stockholders and to maintain an optimal capital
structure to reduce the cost of capital, and in the future, when the Company's operations have
generated a profit, to provide steady returns for stockholders. In order to achieve the above goals,
the Group will maintain or adjust the capital structure using the following methods, including but
not limited to: raising additional capital, borrowing from the bank, issuing company debt,
disposing assets in order to repay debt or replenish operational capital, issuing dividends, and
reducing capital, etc. The Group uses the gearing ratio to monitor and manage capital, the ratio is
calculated by dividing "net liabilities" by "total equity". "Net liabilities" is calculated by "total
liabilities" subtracted by cash and cash equivalents. "Total equity" is the amount listed in the
consolidated balance sheets as "total equity".
During 2016, the Group’s strategy, which was unchanged from 2015, was to maintain the gearing
ratio under 50%. As of December 31, 2016 and 2015, the Group’s total liabilities were lower than
its cash and cash equivalents, thus the gearing ratio was 0%.
(2) Financial instruments
A. Fair value information of financial instruments
The carrying amounts of the Group’s financial instruments not measured at fair value (including
cash and cash equivalents, notes receivable, accounts receivable (including related parties), other
receivables, short-term loans, accounts payable and other payables (including related parties))
are approximate to their fair values.
B. Financial risk management policies
The Group’s activities expose it to a variety of financial risks: market risk (including foreign
exchange risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall
risk management programme focuses on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the Group’s financial position and financial performance.
~70~
C. Significant financial risks and degrees of financial risks
(a) Market risk
Foreign exchange risk
i. The Company operates internationally and is exposed to foreign exchange risk arising from
various currency exposures, primarily with respect to the USD. Foreign exchange risk
arises from future commercial transactions, as well as recognised assets and liabilities.
ii. The Group’s businesses involve some non-functional currency operations (the Company’s
and certain subsidiaries’ functional currency: NTD; overseas subsidiaries’ functional
currencies: USD and RMB). The information on assets and liabilities denominated in
foreign currencies whose values would be materially affected by the exchange rate
fluctuations is as follows:
Foreign currency
amount Book value
(In thousands) Exchange rate (NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD 118,513$ 32.87 3,895,522$
Non-monetary items
USD:NTD 1,359)( 32.87 44,667)(
RMB:NTD 125,396 4.98 624,470
Financial liabilities
Monetary items
USD:NTD 1,698)($ 32.87 55,821)($
EUR:NTD 1,032)( 35.92 37,074)(
December 31, 2015
Foreign currency
amount Book value
(In thousands) Exchange rate (NTD)
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD 132,268$ 32.250 4,265,638$
RMB:NTD 7,116 4.617 32,853
Non-monetary items
USD:NTD 1,239)( 32.250 39,943)(
RMB:NTD 107,016 4.617 494,094
Financial liabilities
Monetary items
USD:NTD 4,005$ 32.250 129,147$
RMB:NTD 509 4.617 2,349
December 31, 2016
~71~
iii. The realized and unrealized exchange gain (loss) arising from significant foreign
exchange variation on the monetary items held by the Group amounted to $35,211 and
($73,748) in 2015 and 2016, respectively.
iv. Analysis of foreign currency market risk arising from significant foreign exchange
variation:
Price risk
The Group is exposed to equity securities price risk because of investments held by the Group
and classified on the consolidated balance sheet as financial assets at fair value through profit
or loss. To manage the price risk of investing in financial instruments, the Group monitors
the price changes at all times, and also sets stop-loss at the proper time.
Interest rate risk
The Group’s interest rate risk arises from short-term and long-term borrowings. Borrowings
issued at floating rates expose the Group to cash flow interest rate risk which is partially
offset by cash and cash equivalents held at floating rates. Borrowings issued at fixed rates
Degree of
variation
Effect on
profit or loss
Effect on other
comprehensive
income
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD 1% 38,955$ -$
Financial liabilities
Monetary items
USD:NTD 1% 558)($ -$
EUR:NTD 1% 371)( -
Year ended December 31, 2015
Sensitivity analysis
Degree of
variation
Effect on
profit or loss
Effect on other
comprehensive
income
(Foreign currency: functional currency)
Financial assets
Monetary items
USD:NTD 1% 42,656$ -$
RMB:NTD 1% 329 -
Financial liabilities
Monetary items
USD:NTD 1% 1,291$ -$
Year ended December 31, 2016
Sensitivity analysis
~72~
expose the Group to fair value interest rate risk.
(b) Credit risk
i. Credit risk refers to the risk of financial loss to the Group arising from default by the clients
or counterparties of financial instruments on the contract obligations. According to the
Group’s credit policy, each local entity in the Group is responsible for managing and
analysing the credit risk for each of their new clients before standard payment and delivery
terms and conditions are offered. Internal risk control assesses the credit quality of the
customers, taking into account their financial position, of the customer with same scale past
experience and other factors. Individual risk limits are set based on internal or external
ratings in accordance with limits set by the Board of Directors. The utilisation of credit
limits is regularly monitored. Credit risk arises from cash and cash equivalents and deposits
with banks and financial institutions, as well as credit exposures to clients, including
outstanding receivables and committed transactions. For banks and financial institutions,
only independently rated parties with high grading are accepted.
ii. No credit limits were exceeded in 2015 and 2016, and management does not expect any
significant losses from non-performance by these counterparties.
iii. For the Group’s credit quality information of financial assets that are neither past due nor
impaired, past due but not impaired and those that had been impaired, please refer to Note
6 (2).
(c) Liquidity risk
i. Cash flow forecasting is performed in the operating entities of the Group and aggregated
by Group treasury. Group treasury monitors rolling forecasts of the Group’s liquidity
requirements to ensure it has sufficient cash to meet operational needs.
ii. The table below analyses the Group’s non-derivative financial liabilities into relevant
maturity groupings based on the remaining period at the balance sheet date to the
contractual maturity date for non-derivative financial liabilities and to the expected
maturity date for derivative financial liabilities. The amounts disclosed in the table are the
contractual undiscounted cash flows.
~73~
iii. The Group does not expect the timing of occurrence of the cash flows estimated through
the maturity date analysis will be significantly earlier, nor expect the actual cash flow
amount will be significantly different.
13. SUPPLEMENTARY DISCLOSURES
(1) Significant transactions information
A. Loans to others: Please refer to table 1.
B. Provision of endorsements and guarantees to others: Please refer to table 2.
C. Holding of marketable securities at the end of the period (not including subsidiaries, associates
and joint ventures): None.
D. Acquisition or sale of the same security with the accumulated cost exceeding $300 million or
20% of the Company’s paid-in capital: Please refer to table 3.
E. Acquisition of real estate reaching $300 million or 20% of paid-in capital or more: None.
F. Disposal of real estate reaching $300 million or 20% of paid-in capital or more: None.
G. Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in
capital or more: Please refer to table 4.
H. Receivables from related parties reaching $100 million or 20% of paid-in capital or more: Please
refer to table 5.
I. Trading in derivative instruments undertaken during the reporting periods: None.
J. Significant inter-company transactions during the reporting periods: Please refer to table 6.
(2) Information on investees
Names, locations and other information of investee companies (not including investees in
Mainland China): Please refer to table 7.
December 31, 2015
Less than 1 year
Between 1
and 2 years Over 2 years
Short-term borrowings 16,415$ -$ -$
Accounts payable 35,482 - - Other payables
(including related parties) 229,915 - -
281,812$ -$ -$
December 31, 2016
Less than 1 year
Between 1 and
2 years Over 2 years
Accounts payable 55,176$ -$ -$ Other payables 139,531 - -
Liabilities directly relating
to non-current assets held
for sale 23,354 - -
218,061$ -$ -$
~74~
(3) Information on investments in Mainland China
A. Basic information: Please refer to table 8.
B. Significant transactions conducted with investees in Mainland China directly or indirectly
through other companies in the third areas: No material transactions.
14. SEGMENT INFORMATION
(1) General information
The Group’s main areas of business are generic drug and new drug research and development,
transferring, and providing drug regulatory approval and marketing information consultation
services. Therefore, the Group’s chief operating decision-makers evaluate performance and allocate
resources by viewing generic drug and new drug as two separate operating segments.
(2) Measurement of segment information
The Group’s accounting policies for the operating segments are the same as those listed in Note 4.
The Group’s chief operating decision-maker uses the after-tax net income (loss) as the basis for
assessing the performance of the Group’s operating segments.
(3) Information about segment profit or loss, assets and liabilities
The segment information provided to the chief operating decision-maker for the reportable segments
is as follows:
Year ended December 31, 2015
Generic Drug
Department
New Drug
Department
Eliminated
transactions during
the consolidation Total
Revenue from external
customers 420,973$ 16,395$ -$ 437,368$
Inter-segment revenue - - - -
Total segment revenue 420,973$ 16,395$ -$ 437,368$
Segment loss 323,143)($ 111,751)($ -$ 434,894)($
Segment loss includes :
Depreciation and
amortisation 212,338$ 6,527$ -$ 218,865$
Income tax expense
(benefit) 13,222)($ 4,918$ -$ 8,304)($
Segment assets 6,666,666$ 469,316$ 2,234)($ 7,133,748$
Segment liabilities 485,775$ 20,293$ 2,234)($ 503,834$
~75~
Year ended December 31, 2016
(4) Reconciliation for segment income (loss)
The operating segments’ assets, liabilities, after-tax net loss reported to the chief operating decision-
makers are measured in a manner consistent with the balance sheet and the statement of
comprehensive income. As a result, reconciliation is not needed.
(5) Information on product and service
The Company’s main sources of revenue are sales of pharmaceutical products, providing technical
services and license revenue. Revenues consist of the following:
(6) Geographical information
Geographical information for the years ended December 31, 2015 and 2016 is as follows:
Generic Drug
Department
New Drug
Department
Eliminated
transactions during
the consolidation Total
Revenue from external
customers 743,778$ -$ -$ 743,778$
Inter-segment revenue - - - -
Total segment revenue 743,778$ -$ -$ 743,778$
Segment loss 173,816)($ 118,077)($ -$ 291,893)($
Segment loss includes :
Depreciation and
amortisation 205,415$ 6,920$ -$ 212,335$
Income tax benefit 6,543)($ 26)($ -$ 6,569)($
Segment assets 6,662,346$ 354,336$ 2,155)($ 7,014,527$
Segment liabilities 389,251$ 17,601$ 2,155)($ 404,697$
Year ended
December 31, 2015
Year ended
December 31, 2016
Generic drug sales revenue 414,818$ 728,597$
Service revenue 376 2,558
License revenue 22,174 12,623
437,368$ 743,778$
Revenue
Non-current
assets Revenue
Non-current
assets
Taiwan 12,455$ 1,260,909$ 16,446$ 1,160,987$
America 424,913 1,447$ 717,734$ 7,714$
China - 1,035,734 9,598 -
437,368$ 2,298,090$ 743,778$ 1,168,701$
Year ended December 31, 2016Year ended December 31, 2015
~76~
(7) Major customer information
Details of sales to individual customers reaching 10% of the Group’s revenue for the years ended
December 31, 2015 and 2016 are as follows:
Note: Revenue from Customer C did not exceed 10% of the Group’s revenue in 2015.
Revenue Segment Revenue Segment
Customer A 201,701$
Generic Drug
Department 303,654$
Generic Drug
Department
Customer C (Note) 45,898 " 98,695 "
247,599$ 402,349$
Year ended December 31, 2016Year ended December 31, 2015
Table 1
Item Value
0 TWi Pharmaceuticals, Inc.Visum Pharmaceutical
Co., Ltd.
Other receivables-
related partiesYes $ 23,085 $ - $ - -
Short-term
financing - Working Capital - - - $ 1,264,867 $ 2,529,734 Note e
0 TWi Pharmaceuticals, Inc.TWi Pharmaceuticals
USA, Inc.
Other receivables-
related partiesYes 161,250 161,250 48,375 2.39%
Short-term
financing - Working Capital - - - 1,264,867 2,529,734
0 TWi Pharmaceuticals, Inc.TWi Pharmaceuticals
USA, Inc.
Other receivables-
related partiesYes 16,125 - - -
Short-term
financing - Working Capital - - - 1,264,867 2,529,734 Note d
0 TWi Pharmaceuticals, Inc.TWi Pharmaceuticals
Europe Limited
Other receivables-
related partiesYes 16,125 - - -
Short-term
financing - Working Capital - - - 1,264,867 2,529,734 Note d
0 TWi Pharmaceuticals, Inc.Visum Pharmaceutical
Co., Ltd.
Other receivables-
related partiesYes 69,255 69,255 32,319 5.00%
Short-term
financing - Working Capital - - - 1,264,867 2,529,734
Note a: The numbers filled in for the loans provided by the Company or subsidiaries are as follows:
(1). Number 0 represents the Company.
(2). The investee companies are in order from number 1.
Note b: Accumulated financing activities to any company or person should not be in excess of 40% of net assets on December 31, 2016; and the individual limit to any company or person should not be in excess of 20% of net assets on December 31, 2016.
Note c: For the amounts denominated in foreign currencies, profit and loss amounts were translated into New Taiwan Dollars at the average exchange rate of the year 2016: 1:32.251 (USD:NTD) and 1:4.842 (RMB:NTD), while others were translated into New Taiwan Dollars
at the spot exchange rates at the balance sheet date: 1:32.250 (USD:NTD) and 1:4.617 (RMB:NTD).
Note d: The short-term financing credit for working capital was eliminated during the Board of Directors’ meeting held on May 13, 2016.
Note e: The short-term financing credit for working capital was eliminated during the Board of Directors’ meeting held on October 17, 2016.
General ledger account
Is a
related
party
TWi Pharmaceuticals, Inc. and Subsidiaries
Loans to others
Year ended December 31, 2016
Expressed in thousands of New Taiwan dollars, except as otherwise indicated
Collateral
Limit on
loans granted
to a single
party
(Note b)
Ceiling on total
loans granted
(Note b)
Note Interest rate
Nature of
loan
Amount of
transactions
with the
borrower
Reason for short-
term financing
Allowance
for
doubtful
accounts
Maximum
outstanding
balance
during the
year ended
December 31,
2016 (Note c)
Balance at
December 31,
2016
(Note c)
Actual
amount
drawn down
No.
(Note a)Creditor Borrower
Table 1-1
Company name
Relationship
with the
endorser /
guarantor
0 TWi Pharmaceuticals, Inc. TWi Pharmaceuticals
USA, Inc.
Note b 6,324,334$ 161,250$ 161,250$ 161,250$ -$ 2.55% 6,324,334$ Y N N Notes c
and d
0 TWi Pharmaceuticals, Inc. TWi Pharmaceuticals
USA, Inc.
Note b 6,324,334 96,750 96,750 - - 1.53% 6,324,334 Y N N Notes c,
d and e
0 TWi Pharmaceuticals, Inc. TWi Pharmaceuticals
USA, Inc.
Note b 6,324,334 123,000 123,000 - - 1.94% 6,324,334 Y N N Notes c,
d and e
0 TWi Pharmaceuticals, Inc. Visum Pharmaceutical
Co., Ltd.
Note b 1,264,867 69,255 - - - 1.10% 3,162,167 Y N Y Notes c,
d and f
Note a: The numbers filled in for the endorsements/guarantees provided by the Company or subsidiaries are as follows:
(1). The Company is ‘0’
(2). The subsidiaries are numbered in order starting from ‘1’.
Note c: The guarantee amount should not exceed 50% of the company’s net assets; the limit to a single company should not exceed 20% of the Company’s net assets. The guarantee amount to a subsidiary which is 100% directly or indirectly held by the Company should not
exceed 100% of the Company's net assets.
Note d: The limit amount of guarantee from the Company and subsidiaries as a whole to companies not included in the Group should not be exceed 50% of the Company's net assets; the limit to a single company not included in the Group should not exceed 20% of the
Company's net assets; the guarantee amount to a company which 100% directly or indirectly hold the Company should not exceed 100% of the Company's net assets.
the Board of Directors’ Meeting held on November 11, 2016.
Note g: For the amounts denominated in foreign currencies, profit and loss amounts were translated into New Taiwan Dollars at the average exchange rate of the year 2016: 1:32.251 (USD:NTD) and 1:4.842 (RMB:NTD), while others were translated into New Taiwan Dollars
at the spot exchange rates at the balance sheet date: 1:32.250 (USD:NTD) and 1:4.617 (RMB:NTD).
Ceiling on total
amount of
endorsements /
guarantees
provided
TWi Pharmaceuticals, Inc. and Subsidiaries
Provision of endorsements and guarantees to others
Table 2 Expressed in thousands of New Taiwan dollars, except as otherwise indicated
Year ended December 31, 2016
Note e: Originally, the endorsements and guarantees amount is shared between TWi Pharmaceuticals USA, Inc. and TWi Pharmaceuticals Europe Limited, but the endorsement and guarantee to TWi Pharmaceuticals Europe Limited was rescinded during
Note f: The endorsement and guarantee was rescinded during the Board of Directors’ Meeting held on October 17, 2016.
Provision of
endorsements /
guarantees by
parent company
to subsidiary
Provision of
endorsements /
guarantees by
subsidiary to
parent company
Outstanding
endorsement /
guarantee amount
at December 31,
2016
(Note g)
Note b: The endorser/guarantor parent company owns directly more than 50% voting shares of the endorsed/guaranteed subsidiary.
Provision of
endorsements /
guarantees to the
party in Mainland
China
Note
Amount of
endorsements
/ guarantees
secured with
collateral
Ratio of
accumulated
endorsement /
guarantee amount to
net asset value of
the endorser /
guarantor company
Actual
amount drawn
down
(Note g)
Number
(Note a)Endorser / guarantor
Party being endorsed/guaranteedLimit on
endorsements /
guarantees provided
for a single party
Maximum
outstanding
endorsement /
guarantee amount
as of December
31, 2016
(Note g)
Table 2-1
Number of
sharesAmount Number of shares Amount
Number of
sharesSelling price Book value
Gain (loss)
on disposal
Number of
sharesAmount
Note a: Marketable securities in the table refer to stocks, bonds, beneficiary certificates and other related derivative securities.
Note b: Fill in the columns the counterparty and relationship if securities are accounted for under the equity method; otherwise leave the columns blank.
Note c: Aggregate purchases and sales amounts should be calculated at their market values to verify whether they individually reach NT$300 million or 20% of paid-in capital or more.
Note d: As TWi Biotechnology, Inc. plans to apply for securities listing, in order to comply with TWSE and TPEx Securities Listing Rules on equity distribution and to comply with TPEx Rules Governing the Review of Emerging Stocks for Trading,
the Company repeatedly sold equity interests to non-related parties during the year 2016.
Acquisition or sale of the same security with the accumulated cost exceeding $300 million or 20% of the Company’s paid-in capital
Table 3
TWi Pharmaceuticals, Inc. and Subsidiaries
Expressed in thousands of New Taiwan dollars, except as otherwise indicated
Year ended December 31, 2016
Addition (Note c) Disposal (Note c) Balance as at December 31, 2016
InvestorMarketable security
(Note a)
General ledger
account
Counterparty
(Note b)
Relationship
with the
investor
(Note b)
Balance as at January 1,
2016
(Not Applicable)
TWi Pharmaceuticals, Inc. TWi Biotechnology, Inc. Investments
accounted
for under the equity
method
Note d Non-related
parties
Table 3-1
Table 4
Purchases
(sales)Amount
Percentage of
total purchases
(sales)
Credit terms Unit price Credit terms Balance
Percentage of
total
notes/accounts
receivable
(payable)
TWi Pharmaceuticals Inc. TWi Pharmaceuticals USA, Inc. Subsidiary Sales 352,038)($ (50.52%) Note Note Note 217,648$ 84.93%
Note : Based on negotiation between both parties.
Expressed in thousands of New Taiwan dollars, except as otherwise indicated
NotePurchaser/seller Counterparty
Relationship
with the
counterparty
Transaction
Differences in transaction
term compared to third
party transactions
Notes / accounts receivable
(payable)
TWi Pharmaceuticals, Inc. and Subsidiaries
Purchases or sales of goods from or to related parties reaching $100 million or 20% of paid-in capital or more
Year ended December 31, 2016
Table 4-1
Table 5
Amount Action taken
TWi Pharmaceuticals Inc. TWi Pharmaceuticals USA, Inc. Subsidiary 217,648$ 287.23% 102,679$ Continually paying 6,010$ $ -
TWi Pharmaceuticals Inc. TWi Pharmaceuticals USA, Inc. Subsidiary 48,468 Not Applicable - 32,343 -
Note a: Please fill in by receivable nature, for example account receivable-related parties, note receivables and other receivables, etc.
Note b: Paid-in capital means the parent company’s paid-in capital. For share that has no par value or par value is not $10 (in dollars) per share, the amount regarding 20% of paid-in capital is calculated by 10% of total equity attributable to owners of the parent as shown on the balance sheet.
Note c: For the amounts denominated in foreign currencies, profit and loss amounts were translated into New Taiwan Dollars at the average exchange rate of the year 2016: 1:32.251 (USD:NTD) and 1:4.842 (RMB:NTD), while others were translated into New Taiwan Dollars
at the spot exchange rates at the balance sheet date: 1:32.250 (USD:NTD) and 1:4.617 (RMB:NTD).
Amount collected
subsequent to the balance
date
Allowance for
doubtful accountsCreditor Counterparty
Relationship with the
counterpartyBalance as at December 31, 2016
(Note a)
Turnover rateOverdue receivables
TWi Pharmaceuticals, Inc. and Subsidiaries
Receivables from related parties reaching $100 million or 20% of paid-in capital or more
Year ended December 31, 2016
Expressed in thousands of New Taiwan dollars, except as otherwise indicated
Table 5-1
General ledger accountAmount
Transaction
terms
Percentage of consolidated total
operating revenue or total assets
(Note c)
0 TWi Pharmaceuticals Inc. TWi Pharmaceuticals USA, Inc. 1 Sales 352,038$ Note d 47.33%
0 TWi Pharmaceuticals Inc. TWi Pharmaceuticals USA, Inc. 1 Receivables 217,648 Note d 3.10%
Note a: The numbers filled in for the transaction company in respect of inter-company transactions are as follows:
(1). Parent company is ‘0’
(2). The subsidiaries are numbered in order starting from‘1’.
Note b: Relationship between transaction company and counterparty is classified into the following three categories:
(1). Parent company to subsidiary
(2). Subsidiary to parent company.
(3). Subsidiary to subsidiary
Note c: Regarding percentage of transaction amount to consolidated total operating revenues or total assets, it is computed based on period-end balance of transaction to consolidated total assets for balance sheet accounts and based on accumulated transaction amount for the
period to consolidated total operating revenues for income statement accounts.
Note d: Based on negotiation between both parties.
Number
(Note a)Company name Counterparty
Relationship
(Note b)
Expressed in thousands of New Taiwan dollars, except as otherwise indicated
Transaction
TWi Pharmaceuticals, Inc. and Subsidiaries
Significant inter-company transactions during the reporting period
Year ended December 31, 2016
Table 6
Table 6-1
Balance as at
December 31, 2016
Balance as at
December 31,
2015
Number of sharesOwnership
(%)
Book value
(Note c)
TWi Pharmaceuticals Inc. TWi Biotechnology, Inc. Taiwan New drug R&D 438,905$ 514,108$ 41,239,000 73.07 250,380$ 118,077)($ 93,864)($ Subsidiary
TWi Pharmaceuticals Inc. TWi Pharmaceuticals USA, Inc. United States
of America
Consulting services and
generic drug sales
5,986 5,986 100 100.00 53,636)( 23,270 23,270 Subsidiary
TWi Pharmaceuticals Inc. TWi Pharmaceuticals Europe Limited United
Kingdom
Consulting services and
generic drug sales
16,431 16,431 500,000 100.00 13,693 5,434)( 3,130 Subsidiary
TWi Pharmaceuticals Inc. TWi Pharmaceutical Ltd. British Virgin
Islands
Investment 757,598 756,491 24,766 100.00 494,094 87,509)( 87,509)( Subsidiary
TWi Pharmaceutical Ltd. TWi Pharmaceuticals Cayman Ltd. Cayman Islands Investment 757,278 756,171 49,511,778 99.88 493,968 87,527)( 87,422)( Note a
Note a: An indirect subsidiary.
Note b: For mandatory disclosure of information about the above investee companies that are required to be disclosed, please see Table 1 to 6.
Note c: For the amounts denominated in foreign currencies, profit and loss amounts were translated into New Taiwan Dollars at the average exchange rate of the year 2016: 1:32.251 (USD:NTD) and 1:4.842 (RMB:NTD), while others were translated into New Taiwan Dollars
at the spot exchange rates at the balance sheet date: 1:32.250 (USD:NTD) and 1:4.617 (RMB:NTD).
Names, locations and other information of investee companies (not including investees in Mainland China)
Year ended December 31, 2016
Table 7
TWi Pharmaceuticals, Inc. and Subsidiaries
Expressed in thousands of New Taiwan dollars, except as otherwise indicated
Net profit (loss)
of the investee for
the year ended
December 31,
2016
(Note c)
Investment
income (loss)
recognized by
the Company for
the year ended
December 31,
2016
(Note c)
NoteInvestorInvestee
(Note b)Location Main business activities
Initial investment amount Shares held as at December 31, 2016
Table 7-1
Remitted to
Mainland China
Remitted back
to Taiwan
Visum Pharmaceutical Co., Ltd. Formulation and development of oral solid
dosage forms
179,830$ Note a 755,553$ -$ -$ 755,553$ 91,511)($ 65.58% 87,458)($ 493,528$ -$
Company name
Accumulated amount remitted from
Taiwan to Mainland China as of
December 31, 2016
Investment amount
approved by the
Investment Commission
of Ministry of Economic
Affairs (MOEA)
(Note c)
Ceiling of investments in
Mainland China imposed
by the Investment
Commission of MOEA
(Note d)
TWi Pharmaceuticals Inc. $ 755,553 $ 1,406,250 $ 3,794,600
Note a: The Mainland China investee is invested indirectly through third area company in the Cayman Islands which in turn is invested indirectly through third area company in the British Virgin Islands.
Note b: The Company recognized investment income / loss based on financial statements which were reviewed by the Company's independent auditors.
Note c: The amount evaluated and recognized is based on the investee’s financial report, audited by other independent auditor.
Note d: The amount was calculated based on 60% of the equity attributable to owners of the parent as stipulated in Investment Commission, MOEA Regulation No. 09704604680 which was announced on August 29, 2008.
Note e: For the amounts denominated in foreign currencies, profit and loss amounts were translated into New Taiwan Dollars at the average exchange rate of the year 2016: 1:32.251 (USD:NTD) and 1:4.842 (RMB:NTD), while others were translated into New Taiwan Dollars
at the spot exchange rates at the balance sheet date: 1:32.250 (USD:NTD) and 1:4.617 (RMB:NTD).
Note
Accumulated
amount of
remittance from
Taiwan to
Mainland China as
of December 31,
2016
Net income of
investee for the year
ended December 31,
2016
Ownership held
by Company
(direct or
indirect)
Investment income
(loss) recognised
by the Company
for the year ended
December 31,
2016 (Note b)
Book value of
investments in
Mainland China
as of December
31, 2016
Accumulated
amount of
investment
income remitted
back to Taiwan
as of December
31, 2016
TWi Pharmaceuticals, Inc. and Subsidiaries
Information on investments in Mainland China-Basic information
Year ended December 31, 2016
Table 8 Expressed in thousands of New Taiwan dollars, except as otherwise indicated
Amount remitted from Taiwan to
Mainland China/Amount remitted
back to Taiwan for the year ended
December 31, 2016Investee in Mainland China Main business activities
Paid-in
capital
Investment
method
Accumulated
amount of
remittance from
Taiwan to
Mainland China
as of January 1,
2016
Table 8-1