Stock code: 000963 Stock abbreviation: Huadong Medicine Announcement No.: 2023-075
Huadong Medicine Co., Ltd.Third Quarterly Report 2023The Company and all members of the Board of Directors hereby guarantee that the informationpresented in this report is authentic, accurate and complete and free of any false records, misleadingstatements or material omissions.Important Declaration:
1. The Board of Directors, Board of Supervisors, directors, supervisors and senior management of HuadongMedicine Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee that the information presented inthis report is authentic, accurate and complete and free of any false records, misleading statements or materialomissions, and shall undertake individual and joint legal liabilities.
2. The Company’s legal representative, the officer in charge of accounting, and the head of accounting department(accounting supervisor) hereby declare that the financial information in this quarterly report is authentic, accurateand complete.
3. Has the Third Quarterly Report been audited?
□Yes ?□No
According to “Stock Listing Rules of the Shenzhen Stock Exchange”, if listed companies have both Chinese andother language version of public notice, they should ensure the content of both versions are the same. In the case ofdiscrepancy, the original version in Chinese shall prevail.
I. Key Financial Data
(I) Key accounting data and financial indicators
Whether the Company needs to perform a retroactive adjustment or restatement of previous accounting data
□Yes ?□No
| Current reporting period | Change of the current reporting period over the same period last year (%) | Beginning of the year to the end of the reporting period | Change from the beginning of the year to the end of the reporting period over the end of last year | |
| Operating revenue (yuan) | 10,009,186,220.70 | 3.61% | 30,394,530,509.51 | 9.10% |
| Net profit attributable to shareholders of listed companies (yuan) | 755,222,215.06 | 17.84% | 2,189,046,844.62 | 10.48% |
| Net profit attributable to shareholders of listed companies after deducting non-recurring gains/losses (yuan) | 732,567,027.72 | 16.43% | 2,160,054,898.69 | 13.62% |
| Net cash flow from operating activities (yuan) | - | - | 2,249,277,883.81 | 70.37% |
| Basic earnings per share (yuan/share) | 0.4316 | 17.83% | 1.2510 | 10.47% |
| Diluted earnings per share (yuan/share) | 0.4313 | 17.73% | 1.2503 | 10.41% |
| Weighted average return on equity (ROE) | 3.79% | 0.17% | 11.21% | -0.18% |
| End of the current reporting period | End of last year | Change of the end of the current reporting period over the end of last year (%) | ||
| Total assets (yuan) | 33,992,685,509.48 | 31,192,203,406.84 | 8.98% | |
| Owners’ equity attributable to the listed company (yuan) | 20,298,210,883.66 | 18,577,919,237.39 | 9.26% | |
The Company's total share capital as of the trading day prior to disclosure:
| The Company's total share capital as of the trading day prior to disclosure (share) | 1,754,425,348.00 |
Fully diluted earnings per share based on the latest share capital:
| Paid preference dividends (yuan) | 0.00 |
| Paid perpetual bond interest (yuan) | 0.00 |
| Fully diluted earnings per share based on the latest share capital (yuan/share) | 1.2477 |
(II) Items and amounts of non-recurring gains/losses?□ Applicable □ N/A
Unit: yuan
| Item | Amount during the reporting period | Amount from the beginning of the year to the end of the reporting period | Explanation |
| Gains/losses on disposal of non-current assets (including the written-off part of the accrued assets impairment reserve) | -132,485.80 | -1,535,664.50 | |
| Government grants included in current gains/losses (excluding those closely related to daily business operation and distributed constantly in accordance with certain standard quota or quantity in line with national policies and regulations) | 35,815,661.30 | 68,060,746.87 | Mainly due to the confirmation of government grants for subsidiaries in the current period |
| Gains/losses caused by fair value changes for holding financial assets for trading and financial liabilities for trading, and investment income for handling financial assets for trading, financial liabilities for trading and AFS securities, excluding hedging business related to operating activities | 138,601.36 | -4,962,097.02 | |
| Other non-operating revenue or expenditure expect above-mentioned items | -6,855,407.81 | -26,420,236.87 | |
| Other profit and loss items satisfying the definition of non-recurring gain/loss | -1,316,601.56 | 2,121,729.06 | |
| Minus: Amount affected by income tax | 4,831,298.52 | 7,901,962.26 | |
| Amount affected by minority interest (after tax) | 163,281.63 | 370,569.35 | |
| Total | 22,655,187.34 | 28,991,945.93 | -- |
Details of other items of gains/losses meet the definition of non-recurring gains/losses:
□ Applicable ?□ N/A
Details of other items of gains/losses meet the definition of non-recurring gains/losses.Explanation for recognizing an item listed as a non-recurring gain/loss in the Interpretative Announcement No. 1 on InformationDisclosure Criteria for Public Companies - Non-Recurring Profit/Loss as a recurring gain/loss
□ Applicable ?□ N/A
Explanation for recognizing an item listed as a non-recurring gain/loss in the Interpretative Announcement No. 1 on InformationDisclosure Criteria for Public Companies - Non-Recurring Profit/Loss as a recurring gain/loss.(III) Details and reasons for changes in key accounting data and financial indicators?□ Applicable □ N/A
Unit: ten thousand yuan
| Balance sheet accounts | Amount at the end of the period | Amount at the beginning of the period | Percentage change | Reasons for changes |
| Notes receivable | 3,000.00 | 842.50 | 256.08% | Mainly due to the increase in trade acceptance in the current period |
| Other receivables | 51,113.44 | 28,371.10 | 80.16% | Mainly due the increase in receivable suspense payment |
| Other current assets | 2,800.90 | 5,269.26 | -46.84% | Mainly due to the decrease in VAT to be deducted |
| Other non-current assets | 153,297.34 | 103,727.99 | 47.79% | Mainly due to the increase in prepaid technology transfer payment |
| Trading financial liabilities | 897.03 | 1,484.19 | -39.56% | Mainly due to the impact of hedging exchange rate of net investment in foreign operations |
| Notes payable | 200,246.46 | 102,940.97 | 94.53% | Mainly due to the increase in bill settlement |
| Dividend payable | 22.42 | 1,492.42 | -98.50% | Mainly due to the payment of dividends minority shareholders of the subsidiaries in the current period |
| Other non-current liabilities due within one year | 29,935.42 | 14,783.55 | 102.49% | Mainly due to the unpaid acquisition funds transferred from long-term payables |
| Long-term borrowings | 72,850.61 | 105,145.77 | -30.71% | Mainly due to the debt repayment in the current period |
| Long-term payables | 8,726.61 | 28,749.72 | -69.65% | Mainly due to the transfer of unpaid acquisition funds to non-current liabilities due within one year |
| Deferred income | 17,594.18 | 12,612.35 | 39.50% | Mainly due to the increase in asset-related governmental subsidy |
| Income statement accounts | Amount in the current period | Amount in the previous period | Percentage change | Reasons for changes |
| Financial expenses | 6,403.32 | 1,937.15 | 230.55% | Mainly due to the increase in net interest expenses |
| Other income | 7,061.76 | 11,608.89 | -39.17% | Mainly due to the decrease in income-related governmental subsidy |
| Investment gains | -16,884.29 | -9,917.35 | -70.25% | Mainly due to the decrease in investment income confirmed by joint ventures in the current period |
| Credit impairment loss | -4,202.25 | -7,196.56 | 41.61% | Mainly due to the decrease in bad-debt reserve for account receivables |
| Gains on asset disposal | 358.76 | 557.80 | -35.68% | Mainly due to the decrease in income from the disposal of fixed assets |
| Income tax expenses | 49,456.08 | 35,822.27 | 38.06% | Mainly due to the increase in profits in the current period |
| Cash flow statement accounts | Amount in the current period | Amount in the previous period | Percentage change | Reasons for changes |
| Net cash flow from operating activities | 224,927.79 | 132,025.29 | 70.37% | Mainly due to the increase in cash received from the sale of goods |
| Net cash flow from investing activities | -94,792.15 | -218,383.16 | 56.59% | Mainly due to the decrease in investment in the current period |
| Net cash flow from financing activities | -121,831.50 | -11,486.52 | -960.65% | Mainly due to the year-on-year increase in debt repayment in the current period |
II. Shareholder Information(I) Total number of common shareholders, number of preferred shareholders with restored voting rightsand shareholdings of top 10 shareholders
Unit: Share
| Total number of common shareholders at the end of the reporting period | 81,155 | Total number of preference shareholders with restored voting rights at the end of the reporting period (if any) | 0 | |||
| Shareholdings of top 10 shareholders | ||||||
| Name of shareholder | Nature of shareholder | Shareholding ratio | Number of shares held | Number of shares with trading restrictions held | Pledged, marked or locked-up status | |
| Status of shares | Quantity | |||||
| China Grand Enterprises, Inc. | Domestic non-state-owned corporation | 41.66% | 730,938,157 | 0 | Pledged | 121,130,000 |
| Hangzhou Huadong Medicine Group Co., Ltd. | State-owned corporation | 16.42% | 288,000,000 | 0 | ||
| Hong Kong Securities Clearing Company Ltd. | Overseas corporation | 2.60% | 45,538,784 | 0 | ||
| Industrial and Commercial Bank of China Limited - China-Europe Healthcare Hybrid Securities Investment Fund | Others | 2.15% | 37,694,848 | 0 | ||
| China Securities Finance Co., Ltd. | Domestic non-state- owned corporation | 1.26% | 22,186,818 | 0 | ||
| China Construction Bank Co., Ltd. - ICBC Credit Suisse Frontier Medical Equity Fund | Others | 1.14% | 20,000,021 | 0 | ||
| China Construction Bank Corporation - E Fund CSI 300 Healthcare Exchange Traded Fund | Others | 0.79% | 13,857,532 | 0 | ||
| National Social Security Fund - Profile 0 | Others | 0.65% | 11,377,042 | 0 | ||
| National Social Security Fund - Profile 503 | Others | 0.46% | 8,000,000 | 0 | ||
| Bank of Shanghai Co., Ltd. - Yinhua CSI Innovative Medicine Exchange Traded Fund | Others | 0.42% | 7,290,613 | 0 | ||
| Shareholdings of top 10 shareholders without trading restrictions | ||||||
| Name of Shareholder | Number of shares without trading restrictions held | Type of shares and quantity | ||||
| Type of shares | Number of shares | |||||
| China Grand Enterprises, Inc. | 730,938,157 | RMB common shares | 730,938,157 | |||
| Hangzhou Huadong Medicine Group Co., Ltd. | 288,000,000 | RMB common shares | 288,000,000 | |
| Hong Kong Securities Clearing Company Ltd. | 45,538,784 | RMB common shares | 45,538,784 | |
| Industrial and Commercial Bank of China Limited - China-Europe Healthcare Hybrid Securities Investment Fund | 37,694,848 | RMB common shares | 37,694,848 | |
| China Securities Finance Co., Ltd. | 22,186,818 | RMB common shares | 22,186,818 | |
| China Construction Bank Co., Ltd. - ICBC Credit Suisse Frontier Medical Equity Fund | 20,000,021 | RMB common shares | 20,000,021 | |
| China Construction Bank Corporation - E Fund CSI 300 Healthcare Exchange Traded Fund | 13,857,532 | RMB common shares | 13,857,532 | |
| National Social Security Fund - Profile 0 | 11,377,042 | RMB common shares | 11,377,042 | |
| National Social Security Fund - Profile 503 | 8,000,000 | RMB common shares | 8,000,000 | |
| Bank of Shanghai Co., Ltd. - Yinhua CSI Innovative Medicine Exchange Traded Fund | 7,290,613 | RMB common shares | 7,290,613 | |
| Explanation on associated relationships or concerted actions among the above-mentioned shareholders | The Company does not know whether the above-mentioned shareholders are related parties or whether they are acting-in-concert parties with one another. | |||
| Description of the participation in margin trading business of the top 10 shareholders (if any) | At the end of the reporting period, the Company had no shareholders holding its shares through margin trading and securities lending accounts among the top 10 common shareholders. | |||
(II) Total number of preferred shareholders of the Company and shareholdings of top 10 shareholders
□ Applicable ?□ N/A
III. Other Important Matters
?□ Applicable □ N/A(I) Overview of the Company’s operations
1. Overview of the Company’s overall operations during the reporting periodDuring the reporting period, the Company continued to overcome pressures and challenges fromvarious aspects, vigorously deepened its transformation and innovation, actively facilitated themanagement of various businesses, and continuously spurred its vitality for operation and growth,witnessing stable and robust growth in main operational indicators.From January to September 2023, the Company achieved the operating revenue of 30.395 billionyuan, up 9.10% year on year (up 13.23% year on year in the first quarter and 12.02% year on year inthe first half of 2023), and the net profit attributable to shareholders of listed companies afterdeducting non-recurring gains/losses of 2.160 billion yuan, up 13.62% year on year (up 8.45% yearon year in the first quarter and 12.24% year on year in the first half of 2023). During the reporting
period, after deducting the equity incentive expenses and the profits and losses of participating andholding R&D institutions, the Company achieved the net profit attributable to shareholders of listedcompanies after deducting non-recurring gains/losses of 2.462 billion yuan, up 19.36% year on year.In Q3 2023, the Company achieved the operating revenue of 10.009 billion yuan, up 3.61% yearon year. The net profit after deducting non-recurring profit and loss attributable to shareholders oflisted companies was 733 million yuan, up 16.43% year on year.
In face of complicated and fierce market competitions and uncertainties, the Company continuedto seek improvement in stability and achieved robust business resilience and favorable developmentprospect, laying a solid foundation for the attainment of its annual goals.During the reporting period, the pharmaceutical industry segment actively improved itsoperation and management levels and continued to facilitate the cost reduction and expense control,seeing steady improvement in operational quality and efficiency. From January to September 2023,the pharmaceutical industry segment achieved the operating revenue of 8.994 billion yuan (includingthat of CSO business), up 9.48% year on year, and the net profit attributable to the parent companyafter deducting non-recurring gains/losses of 1.835 billion yuan, up 13.41% year on year. Amongthem, in Q3 2023, the pharmaceutical industry segment achieved the operating revenue of 2.940billion yuan (including that of CSO business), up 8.34% year on year, and the net profit attributableto the parent company after deducting non-recurring gains/losses of 609 million yuan, up 10.13%year on year.The Company continued to implement the industrial microbiology development strategy, keptimproving its industrial distribution, endeavored to improve the overall operation capabilities, andput more efforts in fostering its marketing capacity. During the reporting period, the industrialmicrobiology segment of the Company achieved positive progress in expanding the markets of ADCraw materials and featured APIs, reached strategic and business cooperation agreements with multipleoverseas clients, and facilitated its product pipeline layout and market promotion in the field of animalhealth. The overall sales revenue of the Company’s industrial microbiology segment deducting thatof specific commercial products businesses achieved a year-on-year increase of 36.22%. In August2023, the Company established its holding subsidiary Zhejiang Shengji Material Technology Co.,Ltd., in a bid to build a R&D technology platform that is capable of undertaking global aestheticmedicine CMC businesses of Huadong Medicine, practice and improve its capabilities in R&D ofsystematic products and industrial chain control, create three major technology platforms for thepolymerization of biodegradable materials, microsphere formulations, as well as innovative carrierraw materials for Nano-sunscreen and skin care products, enable the commercialization of pipelines,and incubate global innovative products. In October 2023, the Company’s holding subsidiary Jiangsu
NAU Animal Pharmaceutical Co., Ltd. obtained the exclusive distribution, market promotion andsales rights of Butorphanol Tartrate Injection (trade name: 保适宁
?
) in China. Butorphanol TartrateInjection is a kind of central analgesia drug for pets of Beijing Saiersi Medicine Technology Co., Ltd.that has been approved for marketing and also the first opiates new animal drug approved in China.This cooperation will further improve the Company’s layout in professional products for pet healthcare.
During the reporting period, the Company’s pharmaceutical business segment witnessedcontinuous and stable growth as a whole. From January to September 2023, the segment achieved theoperating revenue of 20.291 billion yuan, up 6.99% year on year, and the net profit of 316 millionyuan, up 6.03% year on year.
During the reporting period, the Company’s aesthetic medicine segment witnessed rapid growthas a whole and achieved the total operating revenue of 1.874 billion yuan (excluding internaloffsetting factors), up 36.99% year on year.
Its wholly-owned subsidiary Sinclair actively overcame the negative impact of the slowingglobal economic growth and kept expanding the global aesthetic medicine market. During thereporting period, Sinclair achieved the sales revenue of 110 million pounds (about 973 million yuan,up 23.27% year on year), and the EBITDA of 17.29 million pounds (about 148 million yuan),attaining continuous operating profits. It is expected that Sinclair will maintain a relatively fast growthas a whole throughout 2023, making increasingly more contribution to the Company’s profits.
In the field of domestic aesthetic medicine, the Company’s wholly-owned subsidiary Sinclair(Shanghai) continued to expand its Chinese market and continuously developed and improved Ellansé,its core star product, playing a leading role in the regenerative aesthetic medicine market in China. Inthe meantime, Sinclair (Shanghai) created its “one-stop” facial rejuvenation and shaping solution tosatisfy the growing demands of Chinese consumers for anti-aging in combination with its two newly-launched products of Reaction
?, a kind of RF product that features dual effects of “anti-aging andskin tightening” on fine parts, and Glacial Spa
?
, a functional skin color management devicedeveloped on the basis of cryomodulation. From January to September 2023, Sinclair (Shanghai)achieved the operating revenue of 824 million yuan, up 88.79% year on year, and made morecontribution to the Company’s overall profits while achieving favorable profitability. It is expectedthat Sinclair (Shanghai) will maintain its excellent performance and satisfactorily attain its annualbusiness goals.
2. R&D progress of the Company
(1) Pharmaceutical industry
1) Overall R&D situation
During the reporting period, being “Scientific Research-based and Patient-centered”, theCompany continuously increased the R&D input, kept enriching the layout of innovative medicineR&D, enhanced the construction of Global innovative R&D ecology and technological platform, andactively advanced the progress of clinical trials, with multiple major staged achievements made. Asof the date of the Report, the Company has formed 60 innovative product lines, with 50% of theproducts researched and developed independently. During the reporting period, the Company input
1.65 billion yuan in R&D in the pharmaceutical industry segment. Among them, 1.022 billion yuanwere used as direct R&D expenditures, up 17.29% year on year.
2) Innovative R&D strategy
As for innovative medicines, the Company insisted on its differentiated R&D strategy with thefocus placed on unsatisfied clinical needs of global patients, gaving priority to the layout of three keyfields of endocrinology, autoimmunity and oncology, and is committed to becoming a leadingcompany in the field of comprehensive metabolic diseases. As its product lines are continuouslyenriched, the Company has expanded its innovative medicine field to multiple types of medicineproducts including small molecule medicines, polypeptides, ADCs, bispecific or multispecificantibody medicines, as well as the exploration towards innovative therapies for diseases in the fieldsof endocrinology, autoimmunity and oncology.
The Company’s early R&D team actively followed up the latest progress of researches onmedicines/targets and conducted deep investigations from such aspects as target mechanism,medicine screening, druggable potential and selection of indications, in a bid to facilitate theimplementation of the Company’s innovation and internationalization strategies, and to follow up theindustrial development trend featuring anterior target shift. Since 2023, the Company hasimplemented the early exploratory project mechanism, accelerated its innovation, placed its focus onthree key fields of endocrinology, autoimmunity and oncology. The Company has launched 11 earlyexploratory and prospective projects to date since 2023, expecting to developing the first-in-class orbest-in-class innovative medicines.
The Company’s clinical R&D team has always dedicated to breaking through the differentiatedbottleneck in innovation in accordance with the orientation of high efficiency and high quality,endeavoring to achieve the leap-forward development of diversified innovation in clinical R&D. The
clinical R&D team has charged and supported clinical projects from such dimensions as clinical study,operation, registration and pharmaco-vigilance from multiple dimensions.
3) Progress of R&D of innovative medicines, innovative medical devices and biosimilarmedicinesOncologyThe Company developed more than 30 innovative antineoplastic medicines covering targetedsmall molecule medicines, ADCs, antibodies, PROTAC, etc. through discovery, screening andverification of new targets in preliminary R&D of medicines.The BLA in China of mirvetuximab soravtansine injection (ELAHERE?, R&D code:
IMGN853, HDM2002), the world’s first-in-class ADC drug introduced by the Company fromImmunoGen in the U.S., is expected to be accepted in Q4 2023. It was included in the priority reviewby CDE in July 2023 and is expected to be approved for marketing in 2024. In July 2023,ELAHERE? was approved to be introduced in Hainan province thanks to the “Pioneering in PilotZone” licensed medical devices policies in Hainan Bo’ao Lecheng International Medical TourismPilot Zone, which is expected to help Chinese PROC patients with platinum-resistant ovarianepithelial cancer, fallopian tube cancer or primary peritoneal cancer who are folate receptor α (FRα)positive in time. In the future, the Company plans to participate in the international multi-center PSOCclinical research to advance its application in front-line treatment of ovarian cancer and support touse ELAHERE? as the medicine combination for treatment of ovarian cancer.
Mefatinib Tablet, the Company’s innovative medicine, was included as the variety forbreakthrough treatment in May 2023, which is used for treating advanced non-small cell lung cancerwith rare EGFR mutations. The phase III clinical trial for advanced non-small cell lung cancer withEGFR-sensitive mutation has successfully reached the main end point.
HDM2005, an ADC product independently developed by the Company, has completed PCCconfirmation in Q1 2023 and IND development is now in progress. It is planned to apply for clinicaltrial within 2024.
HDM2006, a PROTAC product independently developed by the Company, has been confirmedas PCC in September 2023 and entered the IND development.
In Q4 2023, one independent innovative product for tumors is expected to receive PCCconfirmation.
EndocrinologyWith GLP-1 target as the core, the Company has established eight products of GLP-1 and relatedtargets that cover oral medicines, and injections, including long-acting and multi-target globalinnovative and biosimilar medicines. In the future, the Company will keep exploring innovativeprojects related to GLP-1 targets, expanding its coverage to such indications as weight management,dyslipidemia, non-alcoholic steatohepatitis (NASH), cardiovascular disease, chronic kidney disease(CKD), and constantly develop innovative medicines with higher iterability and more clinicaladvantages.HDM1002 (oral small molecule GLP-1 receptor agonist), an innovative medicine for diabeticmellitus that is developed by the Company independently, has obtained IND approvals in the U.S.and China, with the administration of the first subject achieved in the beginning of June 2023. TheIND application for obesity in China was approved in September 2023. To date, there is no oral smallmolecule GLP-1 receptor agonist approved for marketing in the world. HDM1002 will further enrichthe Company’s product lines in the field of endocrine therapy, accelerate the Company’s integrationinto the global innovative pharmaceutical industry, and further enhance its comprehensivecompetitiveness.
HDM1005, a GLP-1R and GIPR long-acting polypeptide dual-target agonist independentlydeveloped by the Company, has entered the research stage of IND. To date, the project is smoothlyadvanced and clinical batch of medicines is manufactured as scheduled. It is expected to submit theIND application in early 2024.
DR10624, a GLP-1R/GCGR/FGF21R multi-target agonist developed by the Company’s holdingsubsidiary Doer Biologics, completed its first subject administration in phase I Multiple AscendingDose (MAD) clinical trial for the treatment of obesity in New Zealand in July 2023. DR10624’s INDapplication for weight management of overweight or obese people in China was approved in July2023. The first cohort (12 subjects) administration in phase I Single Ascending Dose (SAD) clinicaltrial in China was completed in October 2023. The IND application for diabetes mellitus in Chinawas approved in September 2023. The IND for severe hypertriglyceridemia in China was submittedin August 2023.
Semaglutide Injection has now launched the phase III clinical trial, with the enrollment of thefirst subject completed in September 2023.
Insulin Degludec Injection has now launched the phase III clinical trial, with the enrollment ofthe first subject completed in September 2023.
Autoimmunity
The Company has had over 10 varieties of biomedicines and small molecule innovative productsin the field of autoimmunity.
The marketing authorization application of HDM3001 (QX001S), a biological similar ofUstekinumab (Stelara?) for plaque psoriasis has been submitted and accepted by NMPA in August2023.
HDM3002 (PRV-3279), an innovative medicine used for the treatment of systemic lupuserythematosus (SLE), has been formally included in IIa phase MRCT (PREVAIL-2).
Being listed as Overseas New Medicine in Urgent Need for Clinical Purpose (First Batch) byCDE, ARCALYST?, a global innovative product introduced from Kiniksa in the U.S., is used for thetreatment of Cryo-Pyrin-Associated Periodic Syndromes (CAPS). Moreover, the Company hassubmitted the Pre-BLA for recurrent pericarditis (RP) in China at the end of June 2023. In September2023, recurrent pericarditis was included in the Second Batch of Rare Diseases Catalogue jointlyissued by the National Health Commission and other miniseries. In the future, the Company willfacilitate the registration and launching of this product in China relying on relevant evaluationprocedures for rare diseases, thus solving the problem of drug accessibility of patients as soon aspossible.
The Company developed multiple new target and biological mechanism immune disease earlyprojects, which are all smoothly advanced. In Q4 2023, a type of independently-developed innovativeproduct for autoimmunity will receive PCC confirmation.
Innovative pharmaceutical devices
HD-NP-102 (Dynamic Monitoring System of Glomerular Filtration Rate and MB-102Injection): The Dynamic Monitoring System of Glomerular Filtration Rate and MB-102 Injectionjointly developed by the Company and MediBeacon, Inc of the U.S. can continuously measure theglomerular filtration rate (GFR) of patients with normal or impaired renal functions by non-invasivemonitoring of the fluorescence emitted by MB-102 through intravenous injection. In July 2022,NMPA formally accepted the pharmaceutical device registration application for the system and isnow reviewing the application. The MB-102 injection (Relmapirazin) used in conjunction with this
system is a global innovative medicine that completed the enrollment of all subjects for internationalmulti-center phase III clinical trial in February 2023. The pre-NDA has submitted in China in April2023. The PMA has been submitted in the U.S. in June 2023, which has been accepted by FDA inJuly 2023.
4) Approval of generic medicines
| S/N | Field | Item | Specification | Time of Approval |
| 1 | Endocrine | Pioglitazone Hydrochloride and Metformin Hydrochloride Tablets | 15/850mg | Approved by NMPA in September 2023 |
| 2 | Immunity | Tacrolimus Ointment | 0.03%, 0.1% | Approved by NMPA in August 2023 |
| 3 | Angiocarpy | Macitentan Tablets | 10mg | Approved by NMPA in October 2023 |
2. Aesthetic medicine business
1) R&D and registration of aesthetic medicine products in China
| S/N | Type | Product Name | Purpose | Latest Progress |
| 1 | Injections | MaiLi Extreme Hyaluronic acid | Facial filling | Collection of efficacy measures of all subjects for clinical trial in China completed in August 2023. |
| 2 | Injections | MaiLi Precise Hyaluronic acid | Facial filling | Registration testing in China completed and preparatory work for launching of clinical trial in China in progress. |
| 3 | Injections | Ellansé-M | Facial filling | Enrollment of all subjects for clinical trial in China completed in March 2023 and follow-up in progress. |
| 4 | Injections | LanlumaV Poly-l-lactic Acid | Facial filling | Testing for registration formally launched in August 2023 and preparatory work for clinical trial in progress. |
| 5 | Energy based devices | Glacial Rx (F1) | Removing benign pigmented lesions of skin, etc. | Registration testing in China and preparation of technical data in progress. |
| 6 | Energy based devices | V series products (V20, V30) | Skin tightening, body and facial shaping, skin rejuvenation, hair removal, etc. | Application for registration of V20 submitted and accepted by the Center for Medical Device Evaluation, NMPA in September 2023. Registration testing of V30 and preparation of technical data in progress. |
| 7 | Energy based devices | Préime DermaFacial | Facial skin management | Notice of Classification and Definition of Non-medical Devices issued by Medical Equipment Standard Management Center, NMPA received in September 2023. |
2) R&D and registration of aesthetic medicine products out of ChinaKiOmed skinbooster, a global innovative chitosan aesthetic medicine introduced by theCompany from a Belgian company KiOmed Pharma SA (hereinafter referred to as “KiOmed”) is nowunder clinical trial and its overseas registration application is expected to be submitted in Q4 2023.
Moreover, KiOmed is now developing multiple types of global innovative products for facial(KiOmed Moderate lines, KiOmed Volumizer) and lip (KiOmed Lips) filling. In the meantime, theCompany is actively facilitating the R&D of Silhouette 16 cone short line, a thread lifting product,and multiple types of new products.
3. Overseas investment and cooperation of the Company from Q3 to the date of the Report
1) On August 10, 2023, the Company’s wholly-owned subsidiary Zhongmei Huadong signed theExclusive Product License Agreement with the American listed company Arcutis. According to theagreement, Zhongmei Huadong obtained the exclusive license of the globally innovative topicalroflumilast (including Roflumilast Cream ZORYVE? and Roflumilast Foam ARQ-154) of Arcutisin Greater China (including Chinese mainland, Hong Kong SAR, Macao SAR and Taiwan Province)and Southeast Asia (Indonesia, Singapore, Philippines, Thailand, Myanmar, Brunei, Cambodia, Laos,Malaysia and Vietnam), including rights for development, registration, production andcommercialization. (Please refer to relevant announcement (Announcement No.: 2023-061) disclosedby the Company on Cninfo (http://www.cninfo.com.cn) for details).
2) On August 30, 2023, the Company’s wholly-owned subsidiary Zhongmei Huadong signed theExclusive Product License Agreement with MC2 Therapeutics Ltd., a wholly-owned subsidiary of aDanish company MC2 Therapeutics A/S (hereinafter referred to as “MC2”). According to theagreement, Zhongmei Huadong obtained the exclusive license of the globally innovative productWynzora
?in Greater China (including Chinese mainland, Hong Kong SAR, Macao SAR and TaiwanProvince), including rights for development, registration, production and commercialization.
Also, the introduction of Wynzora? cream, ZORYVE? cream and ARQ-154 (roflumilast foam)will further supplement the Company’s product lines of external preparations. In the meantime, theCompany has established its featured topical preparation platform that is specialized in thedifferentiated R&D of topical preparations for skin, built a professional R&D team, equipped withlaboratory research-type and pilot-scale production complicated preparation equipment, as well asimported quality evaluation equipment, and fostered three topical preparation production lines in itsholding company Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. to facilitate thelaunching of R&D products. With multiple years of experience in R&D and platform development,the team has gotten the key points for development of ointments, creams, gels and other externalpreparations and established professional quality evaluation systems for topical preparations, which
cannot only guarantee the fast and efficient research, production conversion and registrationapplication of products, but also satisfy the development of the industrial development chain thatintegrates R&D, production and sales. (Please refers to relevant announcement (Announcement No.:
2023-067) disclosed by the Company on Cninfo (http://www.cninfo.com.cn) for details).
3) On October 17, 2023, the Company’s wholly-owned subsidiary Huadong Medicine AestheticsInvestment (Hong Kong) Limited (hereinafter referred to as “Aesthetics Investment”) signed theExclusive Product License Agreement with ATGC Co., Ltd. (hereinafter referred to as “ATGC”) inthe Republic of Korea. According to the agreement, Aesthetics Investment obtained the globalexclusive license of ATCG-110, an injection containing botulinum toxin type A of ATGC, in China,the U.S., Europe, etc. (excluding India), and the non-exclusive license in the Republic of Korea,including the clinical development, registration and commercialization rights for aesthetic medicinesand all of its indications.The agreement for ATGC-110 is a strategic supplement to the Company’s global aestheticmedicine products, which is beneficial for the Company to build diversified aesthetic medicine brandand product clusters. After this transaction, the Company will have 37 types of international high-end“noninvasive and micro-invasive” aesthetic medicine products that cover improvement of frownlines, facial and body filling, thread lifting, skin management, body shaping, hair removal, privaterepair and other non-operative mainstream aesthetic medicine fields, including 14 types of injectionproducts, 22 types of energy based devices, and one type of thread lifting product. Withcomprehensive product clusters formed, the Company has ranked in the forefront of the industry interms of product quantity and coverage. (Please refers to relevant announcement (AnnouncementNo.: 2023-072) disclosed by the Company on Cninfo (http://www.cninfo.com.cn) for details).(II) Receptions, including research, communication and interview, during the reportingperiod
| Reception date | Reception address | Reception method | Type of visitor | Reception object | Main content of discussion and information provided | Index of basic information of the research |
| August 16, 2023 | Conference Room of the Company | Online meeting | Institution and individual | China Securities, CICC, Industrial Securities, | 2023 Semi-annual Operating Results Conference | Please refer to the Record of Investor Relations Activities on August 16, 2023 presented on the |
| etc. | of Huadong Medicine | websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
IV. Quarterly Financial Statements
(I) Financial statements
1. Consolidated balance sheet
Prepared by: Huadong Medicine Co., Ltd.
September 30, 2023
Unit: yuan
| Item | September 30, 2023 | January 1, 2023 |
| Current assets: | ||
| Monetary funds | 3,930,055,822.33 | 3,996,302,178.41 |
| Settlement reserve | ||
| Lending funds | ||
| Trading financial assets | ||
| Derivative financial assets | 23,781,330.81 | 29,907,470.68 |
| Notes receivable | 30,000,000.00 | 8,424,980.99 |
| Accounts receivable | 8,603,990,884.53 | 7,198,746,788.59 |
| Accounts receivable for financing | 1,179,728,033.75 | 1,002,511,208.21 |
| Prepayments | 391,738,025.42 | 500,083,953.14 |
| Premiums receivable | ||
| Reinsurance accounts receivable | ||
| Reinsurance contract reserve receivable | ||
| Other receivables | 511,134,375.07 | 283,710,955.63 |
| Including: Interests receivable | ||
| Dividends receivable | 223,747.65 | 223,747.65 |
| Financial assets purchased for resale | ||
| Inventories | 4,889,550,535.88 | 4,495,483,328.54 |
| Contract assets | ||
| Assets held for sale | ||
| Other non-current assets expiring within one year | ||
| Other current assets | 28,009,025.30 | 52,692,618.78 |
| Total current assets | 19,587,988,033.09 | 17,567,863,482.97 |
| Non-current assets: | ||
| Loans and prepayments issuance | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables | ||
| Long-term equity investment | 1,547,325,882.94 | 1,659,076,538.78 |
| Other equity instrument investments | 409,199,420.17 | 360,910,876.41 |
| Other non-current financial assets | ||
| Investment real estate | 12,957,377.00 | 13,648,240.14 |
| Fixed assets | 3,752,658,948.42 | 3,981,653,265.52 |
| Constructions in progress | 1,106,218,018.42 | 873,159,427.47 |
| Biological assets for production | ||
| Oil & gas assets | ||
| Right-of-use assets | 141,069,398.00 | 166,505,297.17 |
| Intangible assets | 2,327,531,779.99 | 2,280,064,207.30 |
| Development expenditures | 784,251,157.61 | 641,354,586.80 |
| Goodwill | 2,577,647,986.71 | 2,441,387,413.59 |
| Long-term unamortized expenses | 20,477,284.51 | 16,457,278.57 |
| Deferred tax assets | 192,386,807.93 | 152,842,858.97 |
| Other non-current assets | 1,532,973,414.69 | 1,037,279,933.15 |
| Total non-current assets | 14,404,697,476.39 | 13,624,339,923.87 |
| Total assets | 33,992,685,509.48 | 31,192,203,406.84 |
| Current liabilities: | ||
| Short-term borrowings | 813,198,243.24 | 947,516,383.37 |
| Borrowing from the central bank | ||
| Borrowing from other banks and other financial institutions | ||
| Financial liabilities for trade | 8,970,278.04 | 14,841,896.97 |
| Derivative financial liabilities | 490,500.00 | |
| Notes payable | 2,002,464,644.87 | 1,029,409,686.81 |
| Accounts payable | 4,995,617,599.40 | 4,873,029,466.44 |
| Receipts in advance | 1,975,312.86 | 1,154,243.42 |
| Contract liabilities | 167,826,339.02 | 146,488,489.07 |
| Financial assets sold for repurchase | ||
| Deposits from customers and due from banks | ||
| Receipts for buying and selling securities as proxy | ||
| Receipts for underwriting securities as proxy | ||
| Employee benefits payable | 236,487,492.70 | 256,883,423.68 |
| Taxes payable | 403,270,025.35 | 429,457,804.81 |
| Other payables | 2,693,327,807.81 | 2,290,407,022.05 |
| Including: Interests payable | ||
| Dividend payable | 224,219.60 | 14,924,219.60 |
| Handling fees and commissions payable | ||
| Reinsurance accounts payable | ||
| Liabilities held for sale | ||
| Other non-current liabilities due within one year | 299,354,234.55 | 147,835,514.81 |
| Other current liabilities | 20,429,422.29 | 15,788,164.30 |
| Total current liabilities | 11,643,411,900.13 | 10,152,812,095.73 |
| Non-current liabilities: | ||
| Insurance policy reserve | ||
| Long-term borrowing | 728,506,072.02 | 1,051,457,747.44 |
| Bonds payable | ||
| Include: Preferred stock | ||
| Perpetual bond | ||
| Lease liabilities | 105,896,905.64 | 84,610,324.98 |
| Long-term payables | 87,266,061.32 | 287,497,209.49 |
| Long-term employee remuneration payable | ||
| Provision | 35,577,667.62 | 37,925,549.41 |
| Deferred income | 175,941,782.72 | 126,123,512.71 |
| Deferred tax liabilities | 198,336,858.91 | 202,084,083.93 |
| Other non-current liabilities | 78,564,150.00 | 73,251,500.00 |
| Total non-current liabilities | 1,410,089,498.23 | 1,862,949,927.96 |
| Total liabilities | 13,053,501,398.36 | 12,015,762,023.69 |
| Owners' Equity: | ||
| Share capital | 1,754,425,348.00 | 1,753,995,348.00 |
| Other equity instrument investments |
| Including: Preferred shares | ||
| Perpetual bond | ||
| Capital reserves | 2,429,588,311.61 | 2,377,887,246.39 |
| Less: Treasury shares | 115,270,300.00 | 104,645,000.00 |
| Other comprehensive income | -92,441,607.03 | -88,552,636.42 |
| Special reserve | ||
| Surplus reserve | 1,151,441,705.28 | 1,151,213,039.48 |
| General risk reserve | ||
| Undistributed profit | 15,170,467,425.80 | 13,488,021,239.94 |
| Total owners' equity attributable to owner of the parent company | 20,298,210,883.66 | 18,577,919,237.39 |
| Minority interest | 640,973,227.46 | 598,522,145.76 |
| Total owners' equity | 20,939,184,111.12 | 19,176,441,383.15 |
| Total liabilities & owners' equity | 33,992,685,509.48 | 31,192,203,406.84 |
Legal representative: Lv Liang Person in charge of accounting: Lv Liang Person in charge of the Accounting Department: QiuRenbo
2. Consolidated income statements from the beginning of the year to the end of the reporting period
Unit: yuan
| Item | Amount in the current period | Amount in previous period |
| I. Total operating revenue | 30,394,530,509.51 | 27,858,507,079.10 |
| Including: Operating revenue | 30,394,530,509.51 | 27,858,507,079.10 |
| Interests income | ||
| Premiums earned | ||
| Handling fees and commissions received | ||
| II. Total operating cost | 27,539,505,233.90 | 25,422,451,966.57 |
| Including: Operating cost | 20,711,433,505.92 | 19,006,828,172.00 |
| Interest expenses | ||
| Handling fees and commissions paid | ||
| Surrender value | ||
| Net payment of insurance claims | ||
| Net appropriation of policy reserve | ||
| Policy dividends paid | ||
| Reinsurance expenses | ||
| Business taxes and surcharges | 155,063,860.73 | 145,766,634.10 |
| Sales expenses | 4,662,350,509.65 | 4,503,511,492.02 |
| Administrative expenses | 1,105,836,120.39 | 958,816,065.06 |
| R&D expenses | 840,788,063.58 | 788,158,101.57 |
| Financial expenses | 64,033,173.63 | 19,371,501.82 |
| Including: Interests expenses | 84,321,926.54 | 55,731,896.99 |
| Interests income | 61,683,137.57 | 75,779,611.14 |
| Add: Other income | 70,617,560.34 | 116,088,889.07 |
| Investment income (Losses are indicated by “-”) | -168,842,873.72 | -99,173,464.90 |
| Including: Investment gains | -145,314,249.10 | -80,967,957.60 |
| (losses) in associated enterprise and joint-venture enterprise | ||
| Gains on the derecognition of financial assets measured at amortized cost | ||
| Gains on exchange (Losses are indicated by “-”) | ||
| Gains on net exposure hedging (Losses are indicated by “-”) | ||
| Gains from changes in fair values (Losses are indicated by “-”) | -6,616,639.87 | |
| Credit impairment losses (Losses are indicated by “-”) | -42,022,538.00 | -71,965,559.59 |
| Impairment gains (losses) of assets (Losses are indicated by “-”) | -3,175,583.57 | |
| Asset disposal income (Losses are indicated by “-”) | 3,587,637.81 | 5,578,009.76 |
| III. Operating profit (Losses are indicated by “-”) | 2,708,572,838.60 | 2,386,582,986.87 |
| Add: Non-operating revenue | 3,536,981.13 | 5,034,409.21 |
| Less: Non-operating expenses | 24,000,149.00 | 27,069,853.11 |
| IV. Total profit (Total losses are indicated by “-”) | 2,688,109,670.73 | 2,364,547,542.97 |
| Less: Income tax expenses | 494,560,848.37 | 358,222,730.61 |
| V. Net profit (Net losses are indicated by “-”) | 2,193,548,822.36 | 2,006,324,812.36 |
| (I) Classification by business continuity | ||
| 1. Net profit from continuing operations (Net losses are indicated by “-”) | 2,193,548,822.36 | 2,006,324,812.36 |
| 2. Net profit at terminational operation (Net losses are indicated by “-”) | ||
| (II) Classification by attribution of ownership | ||
| 1. Net profit attributable to shareholders of the parent company (Net losses are indicated by “-”) | 2,189,046,844.62 | 1,981,470,047.95 |
| 2. Profit or loss attributable to minority shareholders (Net losses are indicated by “-”) | 4,501,977.74 | 24,854,764.41 |
| VI. Other comprehensive income, net of income tax | -3,888,970.61 | -19,030,402.76 |
| Other comprehensive income attributable to owners of the parent company, net of tax | -3,888,970.61 | -19,030,402.76 |
| (I) Other comprehensive income that cannot be reclassified into gains/losses | -1,453,894.59 | -4,775,671.98 |
| 1. Changes in remeasurement on the defined benefit plan | ||
| 2. Other comprehensive income that cannot be reclassified into gains/losses under equity method | ||
| 3. Changes in fair value of other | -1,453,894.59 | -4,775,671.98 |
| equity instrument investments | ||
| 4. Changes in fair value of credit risk of the enterprise | ||
| 5. Others | ||
| (II) Other comprehensive income to be reclassified into gains/losses | -2,435,076.02 | -14,254,730.78 |
| 1. Other comprehensive income that can be reclassified into gains/losses under equity method | ||
| 2. Changes in fair value of other debt investments | ||
| 3. Amount of financial assets reclassified into other comprehensive income | ||
| 4. Credit impairment reserve of other debt investments | ||
| 5. Cash flow hedging reserve | 5,871,618.93 | |
| 6. Exchange differences from translation of foreign currency financial statements | -8,306,694.95 | -14,254,730.78 |
| 7. Others | ||
| Net amount after tax of other comprehensive income attributable to minority shareholders | ||
| VII. Total comprehensive income | 2,189,659,851.75 | 1,987,294,409.60 |
| (I) Total comprehensive income attributable to owners of the parent company | 2,185,157,874.01 | 1,962,439,645.19 |
| (II) Total comprehensive income attributable to minority shareholders | 4,501,977.74 | 24,854,764.41 |
| VIII. Earnings per share (EPS): | ||
| (I) Basic EPS | 1.2510 | 1.1324 |
| (II) Diluted EPS | 1.2503 | 1.1324 |
Legal representative: Lv Liang Person in charge of accounting: Lv Liang Person in charge of the Accounting Department: QiuRenbo
3. Consolidated cash flow statements from the beginning of the year to the end of the reporting period
Unit: yuan
| Item | Amount in the current period | Amount in previous period |
| I. Cash flows from operating activities: | ||
| Cash received from the sale of goods and the rendering of services | 32,682,451,836.29 | 28,636,082,628.37 |
| Net increase in customer deposits and due from banks | ||
| Net increase in borrowing from the central bank | ||
| Net increase in borrowing from other financial institutions | ||
| Cash from the premium of the original insurance policy | ||
| Net cash from reinsurance | ||
| Net increase in deposits and investment of the insured | ||
| Cash from interests, handling fees and |
| commissions | ||
| Net increase in borrowing from other banks and other financial institutions | ||
| Net increase in funds for repurchase | ||
| Net cash received for buying and selling securities as proxy | ||
| Receipts of tax refund | 53,209,369.56 | 48,130,176.60 |
| Other cash receipts in relation to operating activities | 594,342,751.13 | 519,344,662.31 |
| Cash inflows from operating activities | 33,330,003,956.98 | 29,203,557,467.28 |
| Cash payments for goods purchased and services received | 21,403,392,127.90 | 19,098,109,891.25 |
| Net increase in customer loans and prepayments | ||
| Net increase in deposits of central bank and due from banks | ||
| Cash payments for original insurance claims | ||
| Net increase in lending funds to other banks and other financial institutions | ||
| Cash payments for interests, handling fees and commissions | ||
| Cash payments for policy dividends | ||
| Cash payments to and on behalf of employees | 2,731,357,413.23 | 2,163,638,874.66 |
| Payments of various types of taxes | 2,018,766,158.13 | 2,310,543,611.37 |
| Other cash payments in relation to operating activities | 4,927,210,373.91 | 4,311,012,164.01 |
| Cash outflows for operating activities | 31,080,726,073.17 | 27,883,304,541.29 |
| Net cash flow from operating activities | 2,249,277,883.81 | 1,320,252,925.99 |
| II. Cash flows from investing activities | ||
| Cash receipts from recovery of investments | ||
| Cash receipts from investment income | 76,500,000.00 | 900,000.00 |
| Net cash receipts from disposal of fixed assets, intangible assets and other long-term assets | 5,487,494.29 | 13,562,748.02 |
| Net cash from disposal of subsidiaries and other business units | ||
| Other cash receipts in relation to investing activities | 143,241,408.53 | |
| Cash inflows from investing activities | 225,228,902.82 | 14,462,748.02 |
| Cash payments for purchase and construction of fixed assets, intangible assets and other long-term assets | 960,170,505.01 | 838,159,013.91 |
| Cash payments for investment | 71,474,250.00 | 855,517,746.06 |
| Net increase in pledge loans | ||
| Net cash paid for acquisition of subsidiaries and other business units | 137,922,688.09 | 404,617,574.25 |
| Other cash payments in relation to investing activities | 3,582,952.58 | 100,000,000.00 |
| Sub-total of cash outflows of investment activities | 1,173,150,395.68 | 2,198,294,334.22 |
| Net cash flow from investing activities | -947,921,492.86 | -2,183,831,586.20 |
| III. Cash flows from financing activities: | ||
| Cash receipts from absorbing investments | 10,800,300.00 | 30,000,000.00 |
| Including: Cash receipts from capital contributions from minority owners of subsidiaries | 30,000,000.00 | |
| Cash receipts from borrowing | 3,618,149,860.84 | 3,625,643,992.66 |
| Other cash receipts in relation to financing activities | 725,958,879.33 | 598,142,418.56 |
| Cash inflows from financing activities | 4,354,909,040.17 | 4,253,786,411.22 |
| Cash repayments of borrowings | 4,202,280,794.93 | 3,141,986,846.06 |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 658,879,966.42 | 627,878,033.15 |
| Including: Dividends and profits paid by subsidiaries to minority shareholders | 15,728,000.00 | 1,960,000.00 |
| Other cash payments in relation to financing activities | 712,063,268.70 | 598,786,755.06 |
| Cash outflows for financing activities | 5,573,224,030.05 | 4,368,651,634.27 |
| Net cash flow from financing activities | -1,218,314,989.88 | -114,865,223.05 |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | -20,487,569.21 | 17,694,818.12 |
| V. Net increase in cash and cash equivalents | 62,553,831.86 | -960,749,065.14 |
| Add: Opening balance of cash and cash equivalents | 3,416,910,702.33 | 3,580,140,638.17 |
| VI. Closing balance of cash and cash equivalents | 3,479,464,534.19 | 2,619,391,573.03 |
(II) Adjustments to financial statement items at the beginning of the year of the firstimplementation of the new accounting standards implemented since 2023
□ Applicable ?□ N/A
(III) Audit reportHas the Third Quarterly Report been audited?
□Yes ?□No
The Company’s Third Quarterly Report has not been audited.
Board of Directors of Huadong Medicine Co., Ltd.
October 25, 2023