RONG YU PHARMACEUTICALS LIMITED RONG YU PHARMACEUTICALS LIMITED RONG YU PHARMACEUTICALS LIMITED RONG YU PHARMACEUTICALS LIMITED

（（（（ASX: RY8ASX: RY8ASX: RY8ASX: RY8））））

ASX IPO Presentation

November 2017

Lead Manager

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This presentation (the Presentation

PresentationPresentation

Presentation) is provided by Rong Yu Pharmaceuticals Limited (Company

CompanyCompany

Company or RY

RYRY

RY8

88

8). The Presentation is to be treated as confidential information.

The recipient must not copy, reproduce or distribute the Presentation to any person, other than where expressly agreed with the Company. The Presentation is

provided solely for the information of the Recipient and is to be used only to assist the Recipient to evaluate its potential participation in a transaction.

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transaction. Certain information has not been included in the Presentation although the Recipient may consider such information to be necessary to its decision as to

whether to participate in a transaction. The information contained in the Presentation is of a general nature only. It has been sourced from publicly available

information as well as non-public information. The Company nor any of its other advisors has verified or conducted an independent appraisal of the information

contained in the Presentation (including the Forward Looking Statements discussed below) and none of them is under any obligation to correct, update or revise the

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2

AGENDAAGENDAAGENDAAGENDA

Investment HighlightsInvestment HighlightsInvestment HighlightsInvestment Highlights

Business OverviewBusiness OverviewBusiness OverviewBusiness Overview

Financial HighlightsFinancial HighlightsFinancial HighlightsFinancial Highlights

Industry OverviewIndustry OverviewIndustry OverviewIndustry Overview

Growth StrategiesGrowth StrategiesGrowth StrategiesGrowth Strategies

Offer DetailsOffer DetailsOffer DetailsOffer Details

1

2

3

4

5

63

：

INVESTMENT HIGHLIGHTS

� A Prescription (RX) & OTC Status Traditional Chinese Medicine(TCM) products business founded

in 2004

� Strong Chinese government support for the growth of TCM industry

� Health and wellness industry has huge growth potential in China

� RX & OTC TCM industry has a high entry barrier (Enviable CFDA registrations)

� Trusted and recognised brand

� Diversified products targeting prevalent human diseases

� Track record of profitability and growth

� Established distribution channels and networks

� Strategies to establish business operations in Australia

� Strategies to extend value chain to supply side

� Experienced Board and management

� Low PE multiples compared to peers

4

THE OFFER AT A GLANCE

Key Offer Details Minimum

Subscription

Maximum

Subscription

Offer price A$0.20 A$0.20

Total number of Shares to be

issued under the Offer

75,000,000 100,000,000

Existing shares before the Offer 300,000,000 300,000,000

Total cash proceeds from the

Offer

A$15,000,000 A$20,000,000

Total number of Shares

immediately after the Offer

375,000,000 400,000,000

Market capitalisation at the

Offer price

A$75,000,000 A$80,000,000

NPAT for 2017 financial year ending 31 March 2017 is approx. A$18.1 and a

P/E based on pre IPO value of A$60m of 3.3x.

The founder Mr Rongyu Ye, holding 206,250,000 shares, has agreed to 24

months voluntary escrow. The balance of existing shares are voluntarily

escrowed for 6 months.

Key Dates

Prospectus lodged with ASIC 31 October 2017

Offer opens 31 October 2017

Offer closes 11 December 2017

Expected allotment date of Offer

Shares

18 December 2017

Expected dispatch of holding

statements

19 December 2017

Commence trading 22 December 2017

These dates are indicative only and are subject to change.

The Company reserves the right to vary the dates without

prior notice.

5

WHO WE ARE

• A well-established business founded in 2004 involving development, manufacture and

sale of prescription and OTC pharmaceutical products based on principles of traditional

Chinese medicine (TCM).

• Currently manufactures five key products for sale in China, of which three are OTC

products and two are prescription.

• Products are currently sold throughout 28 Provinces across China via a network of over

300 wholesale distributors.

• Track record of growth and profitability – 2017 financial year with approximately A$71

million in revenue and A$19 million NPAT.

• Experienced management team with strong industry expertise and capability.

• Well poised to leverage Chinese Central Government focus1 on Traditional Chinese

Medicine service and research and Maternal Health.

6

1.1-13

th

Five year plan for the economic and social development of PRC 2016-2020 Chapter 60 section 4 and section 6

CORPORATE STRUCTURE

• Mr Rongyu Ye is the founder. He holds 51.56% of the company assuming maximum

subscription of A$20 million

• The Chinese subsidiary has obtained the necessary approvals for the manufacture of the

Rongyu Products 7

BUSINESS MODEL

• The raw materials required to

manufacture the products are sourced

from local herb markets, including the

neighbouring province Anhui and its

home province Jiangxi. This allows the

Rongyu Group to maintain low

procurement and transportation costs.

• Developed long-term partnerships

with various trusted suppliers of Raw

Materials.

• The manufacturing facilities, warehouse,

research and development and

affiliated offices, occupy approximately

11,212 square meters of floor area.

• Strict quality control system to monitor

and control each stage of the product

process

• Sold to over 300 distributors across 28

provinces in China8

• Rong Yu Group’s products are currently sold through

wholesale to distributors which is consistent with the

common industry practice in China.

• Some Distributors operate their own retail outlets and

market Rongyu’s products directly while others on-sell

the products to pharmacies and retailers of

pharmaceutical products.

• In-house sales team coordinating with distributors.

• A diversified distributor base over 300 with its largest ten

accounting for approximately 25.49% of its FY17 sales

revenue.

• In accordance with local restrictions on online sales of

pharmaceutical products, the Rongyu products are not

sold online.

Rongyu products are distributed to all

provinces in China except Tiebet

SALES & DISTRIBUTION

9

Name Date of

launch

Category Product effect Packaging % of FY17

sales

Cholesterol-Lowering and

Hypolipidemic Chewable

Tablets

2009 Prescription

medicine

Reduction of cholesterol

and fats (lipids),

treatment of

hyperlipidemia and

atherosclerosis

18, 24 or 36

tablets

40%

Women’s Health Tablets

2006 Over-the-

counter

medicine

Treatment of women’s

anaemia, irregular

menstrual periods and

menstrual cramps

24 or 48

tablets

42%

Women’s Health Granules

2006 Over-the-

counter

medicine

Replenishment of blood,

improvement of blood

circulation, treatment of

irregular menstrual

periods and menstrual

cramps

6 sachets 5%

PRODUCTS

10

Name Date of

launch

Category Product effect Packaging % of

FY17

sales

Analgesic Capsules

2006 Over-the-

counter

medicine

Regulation of energy

ow, improvement of

blood circulation and

pain relief

24 or 60

capsules

10+%

Liver Health Granules

2010 Prescription

medicine

Improvement of liver

function

6 sachets 5%

PRODUCTS (cont’)

11

Experienced and Balanced Board

Name Role Experience

Rodney

Hannington

Non-Executive

Chairman

Over 15 years of marketing and strategy experience in consumer health sector in Asia Pacific with SPRIM,

Mondelez and Novartis. Mr Hannington has been a member of the Monash University Department of

Marketing Industry Advisory Board since 2013 and sits on several consumer health company boards. Mr

Hannington had a Bachelor of Marketing from Monash University.

Rongyu Ye Executive

director &

founder

Mr Ye has been an entrepreneur over 20 years and gained extensive experience in business management

and administration. Mr Ye is politically well connected being a member of the National People’s Congress

(NPC) and the vice-chairman of Association of Industry and Commerce in Linchuan District. Mr Ye had a

Master of Business Administration from the prestige Tsinghua University in China.

Phillip Grundy Non-Executive

director

Phillip is a partner at Moray & Agnew Lawyers, specialising in Corporate law and Mergers & Acquisitions.

Phillip has acted as a legal advisor to many ASX-listed public companies across a broad range of industry

sectors. He also previously worked for Chen & Co Law Firm in Beijing (2006) and was a director at

Pointon Partners Lawyers (where he worked between 2007-2017). Phillip is currently non-executive

director of the ASX listed companies, Broo Ltd (ASX:BEE) and Golden Mile Resources Ltd (ASX:G88).

Shilin Yang Non-Executive

director

Professor Shilin Yang has extensive experience in the Chinese Medicine industry. Professor Yang has held

research positions at various Chinese medicine institutes. Since 2002, Professor Yang has been a

professor at the Jiangxi University of Traditional Medicine and then the deputy chancellor from 2008 to

2014. From 2002 to 2008, Professor Yang served as an adjunct R&D director for Jiangxi Huiren Group, a

conglomerate involved in Chinese traditional medicine. Since June 2006 Professor Yang has also been

visiting professor at the School of Pharmacy of Suzhou University. Professor Yang obtained PhD in

Pharmacy (University of London) and Postdoctoral scholar with GlaxoSmithKline

Keren Tian Non-Executive

director

Mr Tian served for Chinese government agencies since 1972. From 1993 to 2007, Mr Tian was the

director of the Ganzhou City Health Bureau (which was formerly the Food and Drug Administration).

From 2007 to 2015, Mr Tian was the Deputy Director of the Jiangxi Food and Drug Administration.

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13

HISTORICAL OVERVIEW OF TCM INDUSTRY IN CHINA

14

TCM INDUSTRY OUTLOOK

This projected growth in the Chinese TCM industry, is expected to be stimulated by several

market drivers in China including favourable government policies for the industry, an aging

population, the increased incidence of chronic diseases and increasing urbanisation and

disposable income. 15

COMPETITION LANDSCAPE

The Chinese TCM market is characterised as a highly fragmented market consisting

of many industry participants.

Tongrentang, Jiang Zhong, Yunnan Baiyao and Jiuzhitang are widely considered to

be the most well-known brands for TCM products in China.

While there are several other market players that are well-recognised and attract a

stable and wide consumer base, the majority of other brands and products operate

on a relatively smaller scale.

The market development and high barriers to entry in this industry, has resulted in

consolidation of the TCM industry in China, with large and more reputable TCM

manufacturers acquiring smaller, local players.

There will be post-IPO acquisition opportunities for the Company in China.

16

STEADY REVENUE GROWTH

• All revenue was generated by the

company own branded products

• Revenue increase as a result of an

increase in customer numbers and

sales volumes, as well as high

industry growth

• Gross margin is relatively stable at

around 43% .

Note: Financial year ends 31 March 17

41.5

62.3

71.4

18

27.630.2

0

10

20

30

40

50

60

70

80

FY 2015 FY 2016 FY 2017

Revenue & Profit (AUD$M)

Revenue Gross Profit

STRONG PROFITABILITY

Note: Financial year ends 31 March

28.6% 29.0% 27.0%

Net Profit Margin

18

11.9

18.1

19.3

0

5

10

15

20

25

FY 2015 FY 2016 FY 2017

BALANCE SHEET

Historical Statement of Financial Position FY2015

$M

FY2016

$M

FY2017

$M

Cash and cash equivalents 9.8 3.1 13.8

Total current assets 18.5 18.1 38.2

Total non-current assets 7.4 9.6 7.9

Total liabilities 6.3 6.0 7.2

Net assets 19.6 21.7 39.0

19

Financial Overview

Pro Forma Historical Statements of Cash Flow FY2015($M) FY2016($M) FY2017($M)

Cash flows from operating activities

Receipts from customers 39.8 55.2 61.0

Payments to suppliers, employees and others (24.3) (36.9) (43.7)

Interest received 0.04 0.05 0.04

Finance expense paid (0.05) (0.05) -

Income tax paid (3.4) (6.0) (6.0)

Net cash provided by (used in) operating activities 12.1 12.3 11.3

Cash flows from investing activities

Purchase of property, plant and equipment - (3.0) -

Net cash provided by (used in) investing activities - (3.0) -

Cash flows from financing activities

Proceeds/(repayment) from/(of) borrowings (0.6) (1.0) -

Cash receipts(Advanced) From(to) related parties 0.03 - -

Dividends paid to shareholders (9.2) (15.0) -

Net cash provided by (used in) financing activities (9.8) (16.0) -

Net change in cash and cash equivalents held 2.4 (6.7) 11.3

Exchange rate impact on cash flow 1.6 (0.07) (0.6)

Cash and cash equivalents at beginning of financial year 5.9 9.8 3.1

Cash and cash equivalents at end of financial year 9.8 3.1 13.8

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FUTURE STRATEGIES

• Acquisition of 10,000 acres farmland near the manufacturing facility to cultivate some of the

herbs required in the production of Rongyu products.

• Increase distributors to grow geographical footprint and sale networks expansion in existing

market

• Development and expansion of products range

a) Research and Development of new TCM products

b) Development of Premium Range of Rongyu Products

c) Sourcing health related TCM products from Australia

• Australian expansion: intends to expand the sale of the Rongyu Products to Australia to

capitalise on the demand for TCM-based products within the growing Australian-Chinese and

Australian-Asian community.

21

WHY ASX

• Enhanced brand image: Global recognition on reputable exchange;

• Improved liquidity and funding sources: opportunities to expand and develop its business;

• ASX offers a mature and sophisticated capital market in a similar time zone;

• Access to Australian market:

� Access Australia‘s pharmaceutical and health industry.

� Consumers in Australia have an increased appetite for TCM products.

� Intellectual Property Acquisitions and Australia acquisitions and also TGA approval and China

Plant audits by TGA.

• Growing trade opportunities between China and Australia to establish a network of cooperation with

Australian companies.

� evidenced by the recent corporate mergers and acquisitions activity in this sector, including the

recent acquisition of Global Therapeutics by Blackmores. Global Therapeutics is a significant

provider of retail Chinese herbal medicine formulations, through the Fusion and Oriental

Botanicals brands.

22

USE OF FUNDS

Use of funds

Minimum subscription Maximum subscription

A$ % A$ %

Geographic expansion of distribution

networks in China 13,000,000 20% 5,000,000 25%

Acquisition of the Land usage rights2 6,550,000 43.67% 6,550,000 32.75%

Establishing Australian operations to

facilitate distribution of Rongyu products to

Australia3

3,000,000 20% 5,000,000 25%

Working capital 631,656 4.21% 1,250,906 6.29%

Costs of the Offer 1,818,344 12.12% 2,191,094 10.96%

Total 15,000,000 100% 20,000,000 100%

1. Further expand distribution networks to facilitate growth in sales of its new and existing Rongyu Products.

2. The Company intends to acquire a parcel of land of approx. 10,000 acres in Fuzhou City, Jiangxi Province China to

cultivate some of the herbs required in the production of the Rongyu Products. The Land is situated 22 kilometres

from the Company’s processing and packaging facility. That will help the Company to have greater control over the

quality of raw herbs and to increase profitability.

3. Expand the sale of the Rongyu Products to Australia to capitalise on the demand for TCM-based products within the

growing Australian-Chinese and Australian-Asian community.

23

RECAP OF THE OFFER

Key Offer Details Minimum

Subscription

Maximum

Subscription

Offer price A$0.20 A$0.20

Total number of Shares to be

issued under the Offer

75,000,000 100,000,000

Existing shares before the Offer 300,000,000 300,000,000

Total cash proceeds from the

Offer

A$15,000,000 A$20,000,000

Total number of Shares

immediately after the Offer

375,000,000 400,000,000

Market capitalisation at the

Offer price

A$75,000,000 A$80,000,000

NPAT for 2017 financial year ending 31 March 2017 is approx. A$18.1 and a

P/E based on pre IPO value of A$60m of 3.3x.

Key Dates

Prospectus lodged with ASIC 31 October 2017

Offer opens 31 October 2017

Offer closes 11 December 2017

Expected allotment date of Offer

Shares

18 December 2017

Expected dispatch of holding

statements

19 December 2017

Commence trading 22 December 2017

These dates are indicative only and are subject to change.

The Company reserves the right to vary the dates without

prior notice.

24

：

RECAP OF INVESTMENT HIGHLIGHTS

� A Prescription (RX) & OTC Status Traditional Chinese Medicine(TCM) products business founded

in 2004

� Strong Chinese government support for the growth of TCM industry

� Health and wellness industry has huge growth potential in China

� RX & OTC TCM industry has a high entry barrier (Enviable CFDA registrations)

� Trusted and recognised brand

� Diversified products targeting prevalent human diseases

� Track record of profitability and growth

� Established distribution channels and networks

� Strategies to establish business operations in Australia

� Strategies to extend value chain to supply side

� Experienced Board and management

� Low PE multiples compared to peers

25

：

Thank You

Q&A

26