Stock code: 000963 Stock abbreviation: Huadong Medicine Announcement No.: 2022-022
Huadong Medicine Co., Ltd.The First Quarterly Report 2022
The 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,misleading statements or material omissions.
Important Declaration:
1.The Board of Directors, Board of Supervisors, directors, supervisors and senior management ofHuadong Medicine Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee that theinformation presented in this report is authentic, accurate and complete and free of any false records,misleading statements or material omissions, and shall undertake individual and joint legalliabilities.
2.The Company’s legal representative and the officer in charge of accounting, and head ofaccounting department (accounting supervisor) hereby declare and guarantee that the financialstatements in this quarter report are authentic, accurate and complete.
3.Has the first quarterly report been audited?
□ Yes √ No
This report is prepared both in Chinese and English. Should there be any discrepancy between theChinese and English versions, the Chinese version shall prevail.
I. Key financial data
(I) Key Accounting Data and Financial Indicators
Whether the Company needs to perform retroactive adjustment or restatement of previous accounting data
□ Yes √ No
| The current reporting period | Same period last year | Change of the current reporting period over the same period last year | |
| Operating revenue (yuan) | 8,932,579,251.75 | 8,896,632,277.36 | 0.40% |
| Net profit attributable to shareholders of listed companies (yuan) | 704,364,775.13 | 758,380,756.56 | -7.12% |
| Net profit attributable to shareholders of listed companies after deducting non-recurring gains/losses (yuan) | 698,524,004.62 | 695,792,411.78 | 0.39% |
| Net cash flow from operating activities (yuan) | -260,603,628.32 | 302,314,164.48 | -186.20% |
| Basic earnings per share (yuan/share) | 0.4025 | 0.4334 | -7.13% |
| Diluted earnings per share (yuan/share) | 0.4025 | 0.4334 | -7.13% |
| Weighted average return on equity (ROE) | 4.17% | 5.04% | -0.87% |
| 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) | 28,436,893,634.69 | 26,996,403,366.69 | 5.34% |
| Net assets attributable to shareholders of listed companies (yuan) | 17,268,724,312.96 | 16,579,374,323.08 | 4.16% |
(II)Items and amounts of non-recurring gains/losses
√ Applicable □ N/A
| Item | Amount of the current reporting period | Note |
| Gains/losses on disposal of non-current assets (including the written-off part of the accrued assets impairment reserve) | 1,085,520.17 | |
| Government grants included in current gains/losses(excluding those closely related to normal operating activities, in line with national policies and measured according to unified national standards) | 10,669,007.70 | |
| Other non-operating income or expenditure | -5,011,007.02 | |
| Less: Amount affected by income tax | 997,808.09 | |
| Amount affected by minority interest (after tax) | -95,057.75 | |
| Total | 5,840,770.51 | -- |
Details of other gains/losses items satisfying the definition of non-recurring gains/losses:
□ Applicable √ N/A
No such case.If the Company recognizes a non-recurring gain/loss listed in the “Interpretative Announcement No. 1 on Information DisclosureCriteria for Public Companies – Non-Recurring Profit/Loss” as a recurring gain/loss, reasons should be specified.
□ Applicable √ N/A
No such case.
(III)Changes in key accounting data and financial indicators and their reasons
√ Applicable □ N/A
| Balance sheet item | End of the period | Beginning of the period | Change rate | Notes on cause of changes |
| Prepayments | 358,007,960.17 | 275,353,134.69 | 30.02% | Mainly due to the increase in repayments for goods |
Other receivables
| Other receivables | 361,937,153.49 | 223,707,267.30 | 61.79% | Mainly due to the increase of payment of land auction money and security deposit in the current period |
| Short-term borrowings | 749,826,858.51 | 1,237,843,228.13 | -39.42% | Mainly due to loan repayment in the current period |
| Notes payable | 1,241,696,835.09 | 671,964,504.00 | 84.79% | Mainly due to the increase of bill payment in the current period |
| Dividends payable | 224,219.60 | 2,184,219.60 | -89.73% | Mainly due to payment of dividends to minority shareholders in the current period |
| Long term loan | 478,247,000.00 | 139,178,905.04 | 243.62% | Mainly due to newly increased borrowings in the current period |
| Other current liabilities | 15,546,972.37 | 11,386,267.11 | 36.54% | Mainly due to the transfer of increased corresponding tax items in contract liabilities into other current liabilities |
| Income statement item | Amount of the current period | Amount of the previous period | Change rate | Notes on cause of changes |
R&D expenses
| R&D expenses | 319,207,245.09 | 220,005,691.36 | 45.09% | Mainly due to the increase in R&D expenses |
| Other income | 10,669,007.70 | 76,459,624.41 | -86.05% | Mainly due to the year-on-year decrease in government subsidies obtained in the current period |
| Non-operating expenses | 5,355,930.46 | 3,024,042.00 | 77.11% | Mainly due to the year-on-year increase in external donations in the current period |
Minority interest income
| Minority interest income | 9,667,799.11 | 16,093,227.89 | -39.93% | Mainly due to that Hudong Ningbo is no longer included in the consolidated statements in the current period |
| Cash flow statement item | Amount of the current period | Amount of the previous period | Change rate | Notes on cause of changes |
| Net cash flows from operating activities | -260,603,628.32 | 302,314,164.48 | -186.20% | Mainly due to the year-on-year decrease in sales receipts and government subsidies, the payment of security deposit, and the increase in R&D expenses |
| Net cash flows from financing activities | -5,561,294.58 | 113,196,714.88 | -104.91% | Mainly due to the year-on-year decrease in borrowing obtained in the current period |
II. Shareholder information(I) Total number of shareholders of common shares and number of shareholders of preferred shares with
voting rights restored, as well as information about top 10 shareholders
Unit: share
| Total number of shareholders of common shares at the end of the reporting period | 131,993 | Total number of shareholders of preferred shares whose voting rights have been restored at the end of the reporting period (if any) | 0 | |||||
| Information about top 10 shareholders | ||||||||
| Name | Nature | Shareholding ratio | Number of shares held | Number of shares held with sale restrictions | Pledged, marked or frozen | |||
| Status | Number | |||||||
| China Grand Enterprises, Inc. | Domestic non-state-owned legal person | 41.77% | 730,938,157 | 0 | Pledged | 187,360,000 | ||
| Hangzhou Huadong Medicine Group Co., Ltd. | State-owned legal person | 16.46% | 288,000,000 | 0 | ||||
| Hong Kong Securities Clearing Company Ltd. | Overseas legal person | 2.62% | 45,881,785 | 0 | ||||
| China Securities Finance Co., Ltd. | Domestic non-state-owned legal person | 1.27% | 22,186,818 | 0 | ||||
| China Construction Bank Corporation - ICBC Credit Suisse Frontier Medical Equity Investment Fund | Others | 1.03% | 18,000,094 | 0 | ||||
| Industrial and Commercial Bank of China Limited – Zhong Ou Healthcare Hybrid Securities | Others | 0.57% | 10,051,704 | 0 | ||||
| Investment Fund | ||||||
| National Social Security Fund Portfolio 503 | Others | 0.54% | 9,499,905 | 0 | ||
| Perseverance Asset Management L.l.p. – Gaoyi Xiaofeng No. 2 Zhixin Fund | Others | 0.43% | 7,453,020 | 0 | ||
| Norges Bank－own funds | Overseas legal person | 0.37% | 6,560,791 | 0 | ||
| China Foreign Economy and Trade Trust Co., Ltd. – Foreign Trade Trust – Gaoyi Xiaofeng Hongyuan Collective Fund Trust Plan | Others | 0.34% | 5,923,200 | 0 | ||
| Shares held by the top 10 shareholders of non- restricted shares | ||||||
| Name | Number of shares held without sale restrictions | Type of shares | ||||
| Type | Number | |||||
| 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. | 45,881,785 | RMB common shares | 45,881,785 | |||
| China Securities Finance Co., Ltd. | 22,186,818 | RMB common shares | 22,186,818 | |||
| China Construction Bank Corporation - ICBC Credit Suisse Frontier Medical Equity Investment Fund | 18,000,094 | RMB common shares | 18,000,094 | |||
| Industrial and Commercial Bank of China Limited – Zhong Ou Healthcare Hybrid Securities Investment Fund | 10,051,704 | RMB common shares | 10,051,704 | |||
| National Social Security Fund Portfolio 503 | 9,499,905 | RMB common shares | 9,499,905 |
| Perseverance Asset Management L.l.p.– Gaoyi Xiaofeng No. 2 Zhixin Fund | 7,453,020 | RMB common shares | 7,453,020 |
| Norges Bank－own funds | 6,560,791 | RMB common shares | 6,560,791 |
| China Foreign Economy and Trade Trust Co., Ltd. – Foreign Trade Trust – Gaoyi Xiaofeng Hongyuan Collective Fund Trust Plan | 5,923,200 | RMB common shares | 5,923,200 |
| Notes on relations and concerted actions among the shareholders mentioned above | The Company does not know whether the shareholders mentioned above are related parties with each other or whether they are acting-in-concert parties with each other. | ||
| Notes on financing and securities loan conducted by top 10 shareholders (if any) | At the end of the reporting period, among the top 10 common shareholders, no shareholders held the Company’s shares via a securities margin trading account. | ||
(II)Total number of shareholders of preferred shares and information about top 10 shareholders of
preferred shares
□ Applicable √ N/A
III. Other important matters
√ Applicable □ N/A
(I) Overview of operations
1. The Company’s operations during the reporting period
In the first quarter of 2022, all work of the Company was carried out as planned. With thepharmaceutical industry and domestic aesthetic medicine business overcoming the impact of theCovid-19 pandemic at home, the Company’s operations were steadily improving on the whole, withbusiness indicators witnessing an increase from the same period in 2021. From January to March2022, the Company realized operating income of RMB8,933 million, up 0.4% year on year, and netprofit attributable to listed company shareholders after deduction of non-recurring gains or losses ofRMB699 million, up 0.39% year on year. Calculated by the same standard of the previous year’sannual report after excluding the controlling subsidiary Huadong Ningbo, operating incomeincreased by 3.79% year on year, and net profit attributable to listed company shareholders afterdeduction of non-recurring gains or losses went up by 1.74% year on year.
The core subsidiary Zhongmei Huadong implemented work closely centering on its strategicobjectives and annual business plan during the reporting period. Its overall operations were stableand sales of major products maintained growth. Affected by decreases in prices of some products, itrealized operating income of RMB2,791 million, down 9.73% year on year while up 19.45 % fromthe fourth quarter of 2021. Its net profit after deduction of non-recurring gains or losses registeredRMB580 million, down 13.41% year on year while significantly up 48.08% quarter on quarter.Zhongmei Huadong is expected to maintain growth momentum throughout the year. During thereporting period, Zhongmei Huadong continued to deeply engage in the pharmaceutical business inthe Zhejiang market, expanded out-of-hospital markets and accelerated expansion of agencybusiness. Its operating income after digesting the impact of the liquidation of Huadong Ningbo wentup by 5.8% year on year. It maintained stable growth (the controlling subsidiary Huadong Ningbo,which went into liquidation during this reporting period, realized operating income of RMB290million in the same period last year including RMB96 million operating income from aestheticmedicine agency business, and net profit attributable to the Company’s consolidated statements ofRMB9,265,000).
During the reporting period, the Company’s industrial microbiology business maintained gooddevelopment momentum. External order demand maintained a rapid growth, driving up theoperating income from the business by 99% during the reporting period. Hubei Meiqi HealthTechnology Co., Ltd. (“Meiqi”), a joint venture established by the Company and Hubei AngelBiological Group, has already started construction, and it will focus on the R&D, manufacturing andsales of ingredients of nutritional and health food and functional ingredients for personal care. AnhuiHuachang High-tech Pharmaceuticals Co., Ltd. (“Huachang”), all of whose equity has been acquiredby the Company, has completed equity change registration at the administration for industry &commerce and has been included in the Company’s consolidated statements. It recently started trialproduction, with a focus on the industrialization of nucleoside series products, semisyntheticantiparasitic drugs with microbial origins and other drugs. It aims to become a wholly newindustrialization platform of the Company in the field of industrial microbiology. Thecommencement of the construction of Meiqi and the trial production of Huachang mark an importantstep of the Company on its development path of industrial microbiology. This year the Company willcontinue to accelerate development of relevant products in this field, expand layout, increase productscale, promote business development, and further explore the new blue ocean of industrialmicrobiology.
In February 2022, Sinclair, the Company’s wholly-owned subsidiary in the United Kingdom,completed the acquisition of 100% equity of Viora, an energy-based aesthetic devices company, and
officially included it into the Company’s consolidated statements. Viora has advanced productportfolios with technologies like laser, intense pulsed light, radio frequency, high-pressure jet andmicrodermabrasion. Its Reaction?, V series (V10, V20, V30), EnerJet and Pristine? andInfusion? are currently sold overseas. In 2015, Reaction? was granted the registration certificateof Class III medical devices by the National Medical Products Administration (NMPA). Viora’sproducts can effectively complement the Company’s existing energy-based product line, so theCompany will have business layout in all types of energy-based aesthetic medical devices. Throughefficient integration, High Tech will make full use of the channel resources accumulated by Viora toexpand the U.S. market. Based on the acquisition, the Company has creatively put forward theproduct concept of “V Women Tech” that focuses on professional care for women with leadingaesthetic medical technology.During the reporting period, the Company saw rapid growth in aesthetic medicine business atboth home and abroad. The dual circulation strategy has produced initial mutual facilitation effect.The Company’s aesthetic medicine business realized total operating income of RMB453 million, up
226.8% year on year on a comparable basis (excluding Huadong Ningbo). Integration and synergyeffects were seen in the injection and EBD segment of the wholly-owned subsidiary in the UnitedKingdom, Sinclair. With the lift of pandemic containment measures in a number of countries in theEuropean market and the push of strong sales in the Asian Pacific market, it realized consolidatedoperating income of GBP31.04 million (about RMB260 million) during the reporting period, up
163.1% year on year, a record high in a single quarter. It turned around year on year and realizedoperating profit for the first time in history. After acquiring Viora, Sinclair has continued toimplement operation integration. With a good number of orders in hand for the second quarter, it isexpected to maintain the rapid growth trend on the whole, making a good start for the subsidiary tomaintain rapid growth in operating income throughout the year and realize the first annual operatingbenefit since the subsidiary completed acquisition.
During the reporting period, the Company’s domestic wholly-owned aesthetic medicinecompany Sinclair (Shanghai) realized operating income of RMB157 million and demonstratedstrong profitability, which exceeded the contribution of Huadong Ningbo’s agency business incometo the Company’s profit in the same period last year. Sinclair (Shanghai) has actively expanded thecoverage of partner hospitals and promoted products. Currently it has signed a cooperationagreement with more than 400 hospitals, and has more than 700 certified doctors. Since its launch,Ellansé
?has maintained great market attention, enjoyed good reputation, and led the regenerativeaesthetic medicine market. The subsidiary has actively launched the genuine product traceabilitycampaign. It has included aesthetic medicine institutions that sell the unofficially certified products
into its cooperation blacklist and released it to the public, to urge beauty seekers to enhanceself-protection awareness and protect their legal rights and interests.
During the reporting period, Glacial Spa
?(F0, life cosmetology version of a frozenfreckle-removing medical device), a cold-touch cosmetic instrument introduced by the Companyfrom R2 Company (the USA), officially entered the Chinese market, and its sales and services werecarried out by the first group of vanguard partners in five major Chinese cities in March. Meanwhile,the Company has worked actively despite the pandemic, leveraging its online advantages to expandbusiness. It has opened the online “Glacial Flagship Shop” on TMall, to run synchronously withoffline institutions. In terms of business model, Glacial Spa
?
originated the DTC (Direct toCustomer) model. After buying a care program online, consumers choose offline contractedcooperative institutions to provide specific services. By standardizing the purchase andconsumption procedures, the Company has made prices transparent, thus providing consumers withhigh-quality services. Besides, the Company will take over Reaction? (used for body and faceshaping and skin firming), a product of Viora that has already been on the domestic market, andplans to integrate domestic EBD market resources and channels to realize resource coordination andsharing and actively promote the rapid growth of the product in the domestic market.
2. R&D progress of the Company during the reporting periodIn the reporting period, the Company accelerated the R&D work and continued to increase theR&D investment. The total R&D investment in the pharmaceutical industry was RMB 410 million,with a year-on-year increase of 46.49%.
As of the report release period, the innovative drug and biosimilar business of the Companyhas achieved a number of milestones, with the main progress as follows:
(1) Endocrine
The last subject completed the study in the phase II clinical trial of TTP273, a globalinnovative small molecule oral GLP-1 receptor agonist, in the first quarter of 2022.
DR10624, a multi-agonist targeting GLP-1R/GCGR/FGF21R being developed by DoerBiologics, a holding subsidiary of the Company, has been approved for phase I clinical trials inNew Zealand in April 2022 for the treatment of type 2 diabetes, obesity and metabolic syndrome.
Liraglutide Injection, a GLP-1 receptor agonist, has been completed the drug registrationinspection for diabetes indication, and it is expected to be approved for marketing by the end of2022. The phase III clinical study on weight loss indication has been completed in China, it is in thepre-NDA stage now, and it is expected to submit the New Drug Application in the second quarter of2022.
The Investigational New Drug Application (IND) for Semaglutide Injection, a GLP-1 receptoragonist, has been accepted in April 2022.
Insulin Aspart Injection: The clinical trial approval notice has been obtained in April 2022.
Insulin Degludec Injection is in the preclinical phase, of which a pre-IND application has beensubmitted in March 2022.
(2) Tumor
HDM2002 (Mirvetuximab), the world's first ADC (in development) for folate receptor α(FRα)-positive ovarian cancer, is used to treat platinum-resistant ovarian cancer with high FRαexpression. On March 20, 2022, ImmunoGen, the Company's R&D partner, announced all theresults of its pivotal single-arm clinical trial (SORAYA Trial) in the U.S.: The trial has reached itsprimary endpoint, with a confirmed objective response rate (ORR) of 32.4%, including 5 cases ofcomplete response. The updated median duration of response (DOR) was 6.9 months, and theclinical trial results showed that it had clinically significant antitumor activity, consistent safety andgood tolerability for platinum-resistant ovarian cancer with a high expression of folate receptor α(FRα). On March 29, 2022, ImmunoGen announced the submission of a Biological LicenseApplication (BLA) for this product to the U.S. Food and Drug Administration (FDA). In addition toSORAYA trial, MIRASOL, an international multi-center randomized controlled phase III study, isbeing conducted now, and it is expected for ImmunoGen to obtain the top-line data from itsMIRASOL trial in the third quarter of 2022.
DR30303, an investigational product targeting Claudin 18.2 of the holding subsidiary DoerBiologics, was designed for the treatment of solid tumors, for which the clinical trial approvalnotice was obtained in January 2022, and the phase I clinical trial has been officially initiated.
HDM2003 (AB002) is a double-target fusion protein targeting PD-L1/L2 and IL15 for thetreatment of solid tumors. AKSO, a U.S. partner of the Company, is conducting preclinical studieson HDM2003.
Heidelberg Pharma, a Germany partner of the Company, is currently conducting a phase I/IIaclinical trial on HDP-101, an ATAC
?drug (Antibody Targeted Amanitin Conjugate) targeting Bcell maturation antigen (BCMA), for the treatment of relapsed/refractory multiple myeloma, and thefirst patient was dosed on February 15, 2022.
Heidelberg Pharma, a Germany partner of the Company, is currently conducting preclinicaltrials on HDP-103, an ATAC
?drug targeting prostate-specific membrane antigen (PSMA), ofwhich the target indication is metastatic castration-resistant prostate cancer (mCRPC).
(3) Autoimmunity
ARCALYST
?
(Rilonacept), a recombinant dimer fusion protein that can block IL-1α andIL-1β signaling, was introduced by the Company in February 2022 under a partnership agreementwith Kiniksa. ARCALYST
?
is already available in the U.S. market for the treatment ofcryopyrin-associated periodic syndromes, deficiency of IL-1 receptor antagonist, and recurrentpericarditis. ARCALYST
?has been listed in the List of the First Batch of Overseas New DrugsUrgently Needed in Clinical Practice by CDE for the treatment of cryopyrin-associated periodicsyndromes. The Company will actively communicate with CDE, and promote the registration andmarketing of this product in China as soon as possible.Mavrilimumab is a fully humanized monoclonal antibody targeting GM-CSFRα, for whichKiniksa, a partner of the Company, is preparing the phase II overseas clinical trial for GM-CSFrelated cardiovascular disease.HDM3002 (PRV-3279) is a drug used to treat systemic lupus erythematosus (SLE) andprevent or reduce the immunogenicity of gene therapy. In January 2022, Provention Bio (USA), apartner of the Company, announced that it would launch a phase IIa clinical trial for SLE indicationin the U.S. and Hong Kong, China, and the subject screening is currently underway in the U.S.Domestic pre-IND application has been submitted and feedback has been obtained.HDM5001 (OP-101), an investigational product jointly developed by the Company and itsjoint-stock company Ashvattha Therapeutic, Inc (U.S.) for the treatment of hyperinflammation inhospitalized adult patients with severe COVID-19, is currently undergoing phase II clinical trial inthe U.S. The product is undergoing preparation for clinical application in China, and it is expectedto submit an IND application in the second quarter of this year.HDM3001 (QX001S), a biosimilar of Stelara
?
, is a product being jointly developed by theCompany and Qyuns Therapeutics for the treatment of moderate to severe plaque psoriasis in adultpatients, and the subject enrollment for phase III clinical trial has been completed ahead of schedulein February 2022.
3. BD cooperation of the Company during the reporting periodDuring the reporting period, the Company focused on innovative varieties with excellentclinical value and great market potential, continued the in-depth layout around the core therapeuticfields, and further enriched the autoimmune and tumor innovation pipeline.
(1) In February 2022, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd., awholly-owned subsidiary of the Company, signed a product exclusive license agreement withKiniksa Pharmaceuticals (UK), Ltd. (hereinafter referred to as "Kiniksa"), a wholly-owned
subsidiary of Kiniksa Pharmaceuticals, Ltd. (Nasdaq: KNSA). Hangzhou Zhongmei HuadongPharmaceutical Co., Ltd. obtained the exclusive license of Kiniksa's two globally innovativeautoimmunology products namely ARCALYST
?and Mavrilimumab in 24 Asia-pacific countriesand regions (excluding Japan), including China, South Korea, Australia, New Zealand and India.ARCALYST
?
is already available in the U.S. market for the treatment of cryopyrin-associatedperiodic syndromes, deficiency of IL-1 receptor antagonist, and recurrent pericarditis, obtaininggood clinical feedback. The product is the first and only drug approved by FDA available for thetreatment of recurrent pericarditis in people aged 12 years and above. In China, ARCALYST
?
hasbeen listed in the List of the First Batch of Overseas New Drugs Urgently Needed in ClinicalPractice by CDE for the treatment of cryopyrin-associated periodic syndromes. The introduction ofthe first-in-class biological drugs above is expected to accelerate to meet the clinical needs ofdomestic autoimmune and rare disease patients, and it also reflects that the Company has beenaccelerating the process of innovation and internationalization, and deepening the layout of immuneproducts.
(2) In February 2022, the Company and its wholly-owned subsidiaries Hangzhou ZhongmeiHuadong Pharmaceutical Co., Ltd. and Huadong Medicine Investment Holding (Hong Kong)Limited signed the Equity Investment Agreement and Exclusive Product License Agreement withHeidelberg Pharma AG (" Heidelberg Pharma "), a German listed company, and its shareholders'representatives. Through its wholly-owned subsidiary Huadong Medicine Investment Holding(Hong Kong) Limited, the Company will subscribe for the secondary public offering of HeidelbergPharma and acquire part of the equity from the counterparty, ultimately acquiring a total of 35% ofequity of Heidelberg Pharma and becoming its second largest shareholder. Hangzhou ZhongmeiHuadong Pharmaceutical Co., Ltd. has obtained the exclusive license (including exclusivedevelopment and commercialization) from Heidelberg Pharma for its 2 products under research, i.e.,HDP-101 and HDP-103, in 20 Asian countries and regions including Chinese Mainland, HongKong SAR, Macao SAR, Taiwan Region, Korea and Singapore. In addition, Hangzhou ZhongmeiHuadong Pharmaceutical Co., Ltd. will obtain the exclusive opt-in rights for two additionalproducts under research of Heidelberg Pharma namely HDP-102 and HDP-104, as well as the rightof first negotiation (ROFN) for two additional products in development. Heidelberg Pharma is thefirst company in the world that has successfully developed the toxin Amanitin and its derivativesfor cancer treatment through its proprietary ATAC
?(Antibody Targeted Amanitin Conjugate)technology platform. Amanitin, the only known RNA polymerase II inhibitor in the world, is of anovel mechanism of action. The cooperation will enable the Company to fully integrate its ownADC research technology with Heidelberg Pharma's advanced and proprietary ATAC
?
technology
platform, further enriching the Company's global ADC R&D ecosystem.Mirvetuximab, the world's first ADC being developed by Hangzhou Zhongmei HuadongPharmaceutical Co., Ltd. (a wholly-owned subsidiary of the Company) and ImmunoGen for thetreatment of FRα -positive ovarian cancer, is in smooth clinical progress, and the pivotalsingle-arm clinical trial in the U.S. has reached its primary endpoint. The first subject enrollmentand administration has been completed for phase I PK study and phase III clinical trial ofMirvetuximab in China, and related clinical work is progressing on schedule. To date,the exemptionfrom the duty to make an offer issued by the Federal Financial Supervisory Authority (BaFin) havebeen obtained; the Company has also obtained the Certificate of Non-Objection from the GermanFederal Ministry for Economic Affairs and Climate Action (BMWK) regarding the transaction; andthe approval or filing of relevant overseas investment in China for this transaction is progressing onschedule. The successful cooperation with ImmunoGen, Heidelberg Pharma and other leadingglobal ADC technology companies has further enhanced the Company's R&D technology andclinical registration capabilities in the ADC field. The Company will gradually build a differentiatedADC independent R&D platform, strengthen and optimize the oncology product innovation chainand ADC eco-chain, and plan to develop at least 10 ADC innovative products and actively promoteregistered clinical studies within three years.
(3) In February 2022, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd., awholly-owned subsidiary of the Company, signed an exclusive strategic cooperation agreementwith AKSO Biopharmaceutical, Inc., U.S. ("AKSO") for the clinical development andcommercialization rights of AB002 in the Asia-pacific region (excluding Japan). AB002, adouble-target fusion protein targeting PD-L1/L2 and IL15 in preclinical development, can be usedfor the treatment of solid tumors by inhibiting immune checkpoints and activating natural killercells (NK cells). The Company believes that AB002's unique mechanism of action is of greatpotential in the immunotherapy of cancer, and this cooperation will also further enrich theCompany's oncology product pipeline.
(4) In January 2022, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd., a wholly-ownedsubsidiary of the Company, signed an exclusive product marketing agreement with BeijingShenogen Pharmaceutical Co., Ltd. and Hainan Shenogen Pharmaceutical Co., Ltd., twowholly-owned subsidiaries of Beijing Shenogen Pharma Group Ltd. ("Shenogen"), and obtained theexclusive marketing rights of "Icaritin Soft Capsule", a first-in-class national innovative drug forsmall molecule immunoregulation in the treatment of advanced hepatocellular carcinoma, in 27provinces in Chinese Mainland. The Company has a complete pharmaceutical service system and a
wide range of market resources in the pharmaceutical industry, and this cooperation is just anaffirmation of the Company's commercialization ability in the local market, which will help to builda win-win cooperation model that can achieve mutual complementarity and collaborativedevelopment. Moreover, it is expected to continuously improve the Company's marketcompetitiveness in the oncology field.
4. Miscellaneous
During the reporting period, the Company’s controlled subsidiary Huadong Ningbo officiallywent into liquidation due to expiry of operating period. The Company and Huadong Ningbo’snatural person shareholders submitted an application to Ningbo Beilun District People’s Court(“Beilun District Court”) respectively, requesting the court to preside over the liquidation ofHuadong Ningbo. On March 14, 2022, the Company received the electronic civil ruling papernumbered (2022) Zh. 0206 Q.S. No. 1 from Beilun District Court. The ruling is as follows: Thecourt accepts the application regarding the liquidation of Huadong Ningbo, and the ruling shallcome into immediate effect.
The liquidation of Huadong Ningbo is one presided over by a court. Currently, Beilun DistrictCourt has completed the selection and appointment of an intermediary to establish a liquidationteam according to relevant procedures, and the liquidation team will preside over the liquidation ofHuadong Ningbo. In the process of liquidation of Huadong Ningbo, the Company does not havedominance over the liquidation work or control Huadong Ningbo. According to the Company Lawand the Accounting Standards for Business Enterprises, Huadong Ningbo is no longer included inthe Company’s consolidated financial statements beginning on December 31, 2021. The Companywill assign special personnel to actively participate in and cooperate in the subsequent liquidationwork of Huadong Ningbo. The matter is unlikely to have a significant impact on the Company’soperations.
（II）Registration form of receptions, including research, communication and interview,undertaken
| Date | Place | Method | Type of visitor | Reception target | Main contents of discussion and materials provided | Index of basic information of the research |
| January 5, 2022 | Company | Online | Institution, | Huatai | Communication | Please refer to the |
| conference room | conferencing | individual | Securities, etc. | Meeting on Industrial Microbiology of Huadong Medicine | "Record of Investor Relations Activities on January 5, 2022" published by the company on the Shenzhen Stock Exchange Interactive Easy website and cninfo.com.cn for details. | |
| January 7, 10, 2022 | Company conference room | Communication by phone | Institution | Industrial Securities, Horizon Insights, etc. | Investor Exchange Meeting | Please refer to the "Record of Investor Relations Activities on January 7、10, 2022" published by the company on the Shenzhen Stock Exchange Interactive Easy website and cninfo.com.cn for details. |
| February 9, 2022 | Company conference room | Online conferencing | Institution, individual | Zheshang Fund, etc. | Communication Meeting on Aesthetic Medicine of Huadong Medicine and Interpretation of Overseas EBD Trading | Please refer to the "Record of Investor Relations Activities on February 9, 2022" published by the company on the Shenzhen Stock Exchange Interactive Easy website and cninfo.com.cn for details. |
| March 1, 2022 | Company conference room | Online conferencing | Institution, individual | Industrial Securitiess, etc. | Communication Meeting on Recent Innovative BD Projects of Huadong Medicine | Please refer to the "Record of Investor Relations Activities on March 1, 2022" published by the company on the Shenzhen Stock Exchange Interactive Easy website and cninfo.com.cn for details. |
IV. Quarterly financial statements(I) Financial Statements
1. Consolidated balance sheet
Prepared by Huadong Medicine Co., Ltd.
March 31,2022
Unit: RMB yuan
| Item | Balance at the end of the reporting period | Balance at the beginning of the year |
| Current assets: | ||
| Monetary funds | 3,277,119,559.03 | 4,032,424,555.22 |
| Settlement reserve | ||
| Lending to other banks and other financial institutions | ||
| Financial assets for trade | ||
| Derivative financial assets | ||
| Notes receivable | ||
| Accounts receivable | 8,276,463,607.40 | 6,430,482,175.97 |
| Accounts receivable financing | 524,344,158.22 | 509,190,888.54 |
| Advance payments | 358,007,960.17 | 275,353,134.69 |
| Premiums receivable | ||
| Reinsurance accounts receivable | ||
| Reinsurance contract reserve receivable | ||
| Other receivables | 361,937,153.49 | 223,707,267.30 |
| Including: Interests receivable | ||
| Dividends receivable | 877,734.45 | 877,734.45 |
| Financial assets purchased for resale | ||
| Inventories | 3,919,092,799.43 | 3,974,549,648.96 |
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 34,962,736.44 | 40,907,922.76 |
| Total current assets | 16,751,927,974.18 | 15,486,615,593.44 |
| Non-current assets: | ||
| Loans and prepayments issuance | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables | ||
| Long-term equity investments | 999,348,054.71 | 984,927,398.68 |
| Other equity instrument investments | 251,734,330.18 | 257,815,844.68 |
| Other non-current financial assets | ||
| Real estate properties for investment | 14,309,609.42 | 14,569,533.94 |
| Fixed assets | 3,018,883,552.71 | 3,077,227,759.84 |
| Constructions in progress | 1,668,374,105.38 | 1,582,125,201.25 |
| Biological assets for production | ||
| Oil & gas assets | ||
| Right-of-use assets | 143,374,053.51 | 153,724,197.81 |
| Intangible assets | 2,225,881,462.23 | 2,233,450,369.34 |
| Development expenditures | ||
| Goodwill | 2,138,808,037.01 | 2,138,808,037.01 |
| Long-term unamortized expenses | 13,311,191.85 | 12,425,364.03 |
| Deferred income tax assets | 143,651,186.84 | 143,651,186.84 |
| Other non-current assets | 1,067,290,076.67 | 911,062,879.83 |
| Total non-current assets | 11,684,965,660.51 | 11,509,787,773.25 |
| Total assets | 28,436,893,634.69 | 26,996,403,366.69 |
| Current liabilities: | ||
| Short-term borrowing | 749,826,858.51 | 1,237,843,228.13 |
| Borrowing from the Central bank | ||
| Borrowing from other banks and other financial institutions | ||
| Financial liabilities for trade | ||
| Derivative financial liabilities | ||
| Notes payable | 1,241,696,835.09 | 671,964,504.00 |
| Accounts payable | 3,929,295,600.85 | 3,847,719,574.86 |
| Advance receipts | 1,164,793.56 | 1,147,425.45 |
| Contract liabilities | 129,862,570.81 | 118,341,141.48 |
| Financial assets sold for repurchase | ||
| Absorbing deposits and due from banks | ||
| Receipts for buying and selling securities as proxy | ||
| Receipts for underwriting securities as proxy | ||
| Employee benefits payable | 130,760,380.15 | 168,210,088.82 |
| Taxes and fees payable | 1,162,848,852.85 | 1,029,610,563.41 |
| Other payables | 2,030,591,181.07 | 1,935,116,784.93 |
| Including: Interests payable | ||
| Dividends payable | 224,219.60 | 2,184,219.60 |
| Handling fees and commissions payable | ||
| Reinsurance accounts payable | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 238,567,736.86 | 244,256,705.59 |
| Other current liabilities | 15,546,972.37 | 11,386,267.11 |
| Total current liabilities | 9,630,161,782.12 | 9,265,596,283.78 |
| Non-current liabilities: | ||
| Insurance contract reserve | ||
| Long-term borrowing | 478,247,000.00 | 139,178,905.04 |
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | 95,759,850.89 | 80,889,403.39 |
| Long-term payables | 257,654,001.35 | 261,903,489.09 |
| Long-term employee benefits payable | ||
| Provision | 38,645,813.86 | 39,086,238.25 |
| Deferred gains | 81,180,000.29 | 83,521,649.96 |
| Deferred income tax liabilities | 184,908,391.50 | 184,908,391.50 |
| Other non-current liabilities |
| Total non-current liabilities | 1,136,395,057.89 | 789,488,077.23 |
| Total liabilities | 10,766,556,840.01 | 10,055,084,361.01 |
| Ownership interest: | ||
| Share capital | 1,749,809,548.00 | 1,749,809,548.00 |
| Other equity instruments | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserve | 2,229,868,312.11 | 2,229,868,312.11 |
| Less: Treasury shares | ||
| Other comprehensive income | -62,783,011.05 | -47,768,225.80 |
| Special reserve | ||
| Surplus reserve | 1,021,670,687.31 | 1,021,670,687.31 |
| General risk reserve | ||
| Undistributed profit | 12,330,158,776.59 | 11,625,794,001.46 |
| Total ownership interest attributable to the parent company | 17,268,724,312.96 | 16,579,374,323.08 |
| Minority interest | 401,612,481.72 | 361,944,682.60 |
| Total ownership interest | 17,670,336,794.68 | 16,941,319,005.68 |
| Total liabilities & ownership interest | 28,436,893,634.69 | 26,996,403,366.69 |
Legal representative: Lv LiangOfficer in charge of accounting: Lv LiangHead of accounting department : Qiu Renbo
2. Consolidated income statement
Unit: RMB yuan
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| I. Total operating income | 8,932,579,251.75 | 8,896,632,277.36 |
| Including: Operating income | 8,932,579,251.75 | 8,896,632,277.36 |
| Interests received | ||
| Premiums earned | ||
| Handling fees and commissions received | ||
| II. Total operating cost | 8,028,129,305.85 | 8,007,420,920.98 |
| Including: Operating cost | 5,914,898,927.47 | 5,805,133,494.78 |
| Interests paid | ||
| Handling fees and commissions paid | ||
| Surrender value | ||
| Net payment of insurance claims | ||
| Net appropriation of policy reserve | ||
| Policy dividends paid | ||
| Reinsurance expenses | ||
| Taxes and surcharges | 49,868,639.14 | 47,690,370.04 |
| Selling expenses | 1,433,493,143.24 | 1,648,517,354.06 |
| Administrative expenses | 302,601,116.29 | 277,542,542.53 |
| R&D expenses | 319,207,245.09 | 220,005,691.36 |
| Financial expenses | 8,060,234.62 | 8,531,468.21 |
| Including: Interests paid | 20,956,363.85 | 21,152,531.52 |
| Interests received | 24,163,304.15 | 19,057,526.99 |
| Add: Other gains | 10,669,007.70 | 76,459,624.41 |
| Investment gains (Losses are indicated by “-”) | -27,961,493.36 | -26,664,999.81 |
| Including: Investment gains from associates and joint ventures | -20,764,035.59 | -11,551,820.09 |
| Gains from 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 on changes in fair value (Losses are indicated by “-”) | ||
| Credit impairment loss (Losses are indicated by “-”) | ||
| Assets impairment loss (Losses are indicated by “-”) | ||
| Gains on assets disposal (Losses are indicated by “-”) | 557,821.07 | 304,336.80 |
| III. Operating profit (Losses are indicated by “-”) | 887,715,281.31 | 939,310,317.78 |
| Add: Non-operating income | 831,619.81 | 338,562.61 |
| Less: Non-operating expenditure | 5,355,930.46 | 3,024,042.00 |
| IV. Total profit (Total losses are indicated by “-”) | 883,190,970.66 | 936,624,838.39 |
| Less: Income tax expenses | 169,158,396.42 | 162,150,853.94 |
| V. Net profit (Net losses are indicated by “-”) | 714,032,574.24 | 774,473,984.45 |
| (I) Categorized by the continuity of operations | ||
| 1. Net profit from continued operations (Net deficit is indicated by “-”) | 714,032,574.24 | 774,473,984.45 |
| 2. Net profit from discontinued operations (Net deficit is indicated by “-”) | ||
| (II) Categorized by attribution of the ownership | ||
| 1. Net profit attributable to owners of the parent company | 704,364,775.13 | 758,380,756.56 |
| 2. Gains/losses of minority shareholders | 9,667,799.11 | 16,093,227.89 |
| VI. Net amount after tax of other comprehensive income | -15,014,785.25 | 118,964,837.49 |
| Net amount after tax of other comprehensive income attributable to owners of the parent company | -15,014,785.25 | 118,964,837.49 |
| (I) Other comprehensive income that cannot be reclassified into gains/losses | 3,113,977.59 | |
| 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 equity instrument investments | 3,113,977.59 | |
| 4. Changes in fair value of |
| credit risk of the enterprise | ||
| 5. Others | ||
| (II) Other comprehensive income to be reclassified into gains/losses | -15,014,785.25 | 115,850,859.90 |
| 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 | ||
| 6. Exchange differences arise from translation of foreign currency financial statements | -15,014,785.25 | 115,850,859.90 |
| 7. Others | ||
| Net amount after tax of other comprehensive income attributable to minority shareholders | ||
| VII. Total comprehensive income | 699,017,788.99 | 893,438,821.94 |
| Total comprehensive income attributable to owners of the parent company | 689,349,989.88 | 877,345,594.05 |
| Total comprehensive income attributable to minority shareholders | 9,667,799.11 | 16,093,227.89 |
| VIII. Earnings per share (EPS): | ||
| (I) Basic EPS | 0.4025 | 0.4334 |
| (II) Diluted EPS | 0.4025 | 0.4334 |
As for enterprise merger under the same control in the current period, the net profit generated by the merged party before the mergeris 0 yuan, and that generated during the previous period is 0 yuan.
Legal representative: Lv LiangOfficer in charge of accounting: Lv LiangHead of accounting department : Qiu Renbo
3. Consolidated cash flow statement
Unit: RMB yuan
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| I. Cash flows from operating activities: | ||
| Cash from the sale of goods and provision of services | 8,140,456,622.41 | 8,756,095,736.42 |
| 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 | ||
| Tax refund received | 4,056,067.04 | 625,547.43 |
| Other cash receipts in relation to operating activities | 74,818,262.98 | 196,821,042.17 |
| Total cash inflows from operating activities | 8,219,330,952.43 | 8,953,542,326.02 |
| Cash payments for goods and services | 5,856,237,111.49 | 6,125,835,203.59 |
| Net increase in customer loans and prepayments | ||
| Net increase in deposits of central bank and due from banks |
| Cash for payment of original insurance claims | ||
| Net increase in lending to other banks and other financial institutions | ||
| Cash for payment of interests, handling fees and commissions | ||
| Cash for payment of policy dividends | ||
| Cash payments to and for employees | 719,758,010.16 | 653,692,760.67 |
| Payment of taxes and fees | 477,339,851.40 | 456,958,349.66 |
| Other cash payments in relation to operating activities | 1,426,599,607.70 | 1,414,741,847.62 |
| Total cash outflows for operating activities | 8,479,934,580.75 | 8,651,228,161.54 |
| Net cash flows from operating activities | -260,603,628.32 | 302,314,164.48 |
| II. Cash flows from investing activities | ||
| Cash from recovery of investments | ||
| Cash from investment gains | ||
| Net cash from disposal of fixed assets, intangible assets and other long-term assets | 1,439,970.00 | 50,504.23 |
| Net cash from disposal of subsidiaries and other business units | ||
| Other cash receipts in relation to investing activities | ||
| Total cash inflows from investing activities | 1,439,970.00 | 50,504.23 |
| Cash payments for purchase and construction of fixed assets, intangible assets and other long-term assets | 193,143,577.15 | 302,645,383.17 |
| Cash payments for investment | 29,400,000.00 | 105,706,000.00 |
| Net increase in pledge loans | ||
| Net cash paid for acquisition of subsidiaries and other business units | 284,030,413.64 | |
| Other cash payments in relation to investing activities | 100,000,000.00 | 78,680,000.00 |
| Total cash outflows for investing | 606,573,990.79 | 487,031,383.17 |
| activities | ||
| Net cash flows from investing activities | -605,134,020.79 | -486,980,878.94 |
| III. Cash flows from financing activities: | ||
| Cash from absorbing investments | 30,000,000.00 | |
| Including: Cash from absorption of minority shareholders’ investments by subsidiaries | ||
| Cash from borrowing | 709,751,200.00 | 852,692,161.43 |
| Other cash receipts in relation to financing activities | 109,951,775.00 | |
| Total cash inflows from financing activities | 849,702,975.00 | 852,692,161.43 |
| Cash for repayment of debt | 815,271,409.82 | 710,289,400.95 |
| Cash payments for dividends, profits or interests | 38,336,990.15 | 28,945,045.60 |
| Including: Payment of dividends and profits by subsidiaries to minority shareholders | 1,960,000.00 | |
| Other cash payments in relation to financing activities | 1,655,869.61 | 261,000.00 |
| Total cash outflows for financing activities | 855,264,269.58 | 739,495,446.55 |
| Net cash flows from financing activities | -5,561,294.58 | 113,196,714.88 |
| IV. Influence of exchange rate fluctuations on cash and cash equivalents | 10,811,591.15 | -2,854,862.94 |
| V. Net increase in cash and cash equivalents | -860,487,352.54 | -74,324,862.52 |
| Add: Balance of cash and cash equivalents at the beginning of the period | 3,580,140,638.17 | 3,157,407,073.26 |
| VI. Balance of cash and cash equivalents at the end of the period | 2,719,653,285.63 | 3,083,082,210.74 |
(II)Audit reportHas the first quarterly report been audited?
□ Yes √ No
The first quarterly report has not been audited.
The Board of Directors of Huadong Medicine Co., Ltd.
April 28, 2022