Huadong Medicine Co., Ltd.
2022 Annual Report
April 2023
A Letter to the ShareholdersDistinguished shareholders,
As the year ends, we usher in a new year with endless possibilities. The year of2022 brought more challenges that forced the pharmaceutical industry to accelerate itstransform, reshuffle and reshaping in response to the gloomy situation, numerousuncertainties, and downward pressure, which raises more challenges forpharmaceutical enterprises’ emergency response abilities and resilience.For Huadong Medicine Co., Ltd. (“We” or “the Company”), the year of 2022witnessed our unremitting efforts and remarkable achievements, which is the first yearfor us to implement our seventh three-year planning, step forward to a new stage ofinnovative transformation and development, and pull off our visions by 2030. Bycontinuously strengthening the strategic guidance, focusing on the primary business ofpharmaceuticals, taking active actions and seeking progress while maintaining stability,we have accelerated our businesses quarter by quarter and successfully achievedcontinuous growth against changes in the pharmaceutical industry under complicatedinternal and external environments in the new era. Over the past four years, we havekept improving our capacities, embracing more cooperation opportunities in an openmanner, and endeavoring to seek sustained development, with the focus on four majorbusiness segments of pharmaceutical industry, pharmaceutical business, aestheticmedicine and industrial microbiology. Taking targeted steps from multiple aspects, wehave made look-forwarding and international layout to adapt to cutting-edgeinnovative technology platforms and unsatisfied market demands. The strategicreshaping empowers qualitative changes of development paths. To date, the Companyhas stepped into a new stage in both scale of operation & development and quality ofintrinsic growth.
In 2022, we made breakthrough in our operating revenue as the net profit afterdeducting non-recurring profit and loss was still comparable with the highest level inhistory in spite of up to 2 billion yuan of annual R&D and BD input. The Company’s
pharmaceutical industry segment has now broken through bottlenecks of growth,witnessed stable recovery, and fostered strong resilience after gradually getting out ofthe influence of multiple external factors. Remarkable achievements in strategictransformation and positive figures further strengthen our confidence to unswervinglyseek the high-quality development driven by technological innovation. We alsolaunched our equity incentive plan since we were listed to motivate excellent staffcreating values for us.In 2022, we have brought new connotations for our R&D ecology with the focuson “advantaged, differentiated and source-based innovation” to create a new ecologyof innovative R&D. As for reform in R&D, we have successfully incubated our internalwholly-owned subsidiary - Hangzhou VicrobX Biotech Co., Ltd., established two coretechnology platforms of Micro-restructuring and Micro-delivery, and set up the ADCR&D Center to gradually create a differentiated ADC independent R&D platform. Interms of external collaboration, we strategically held the equity of Heidelberg Pharma,a global emerging technology enterprise based in Germany that specializes in ADC,and established cooperation in product development to empower the oncology productschain and ADC ecological chain, and further enhance our R&D ecology that featurescooperation and sharing.
In 2022, we also achieved successive milestones in R&D. ELAHERE?, a globalpioneering ADC medicine for platinum-resistant ovarian cancer co-developed withImmunoGen from the U.S., was the only ADC medicine approved by FDA in 2022. Itsclinical work in China is progressed smoothly and it is planned to submit for BLA bylate 2023. HDM1002 (micromolecule GLP-1 receptor stimulant), an innovativemedicine for type 1 diabetic mellitus that is developed by us independently with globalintellectual property rights, has been successfully submitted for approval in the U.S.and China. ARCALYST?, an overseas new medicine in urgent need for clinicalpurpose introduced from Kiniksa and included in the list of priority review varieties,will be submitted for BLA this year and is expected to put in commercializedproduction in China to benefit Chinese patients. To date, the Company has launched
ongoing development programs for over 50 types of innovative and biosimilarmedicines. The Liraglutide Injection, the Company’s first biological medicine fordiabetes mellitus indications, was approved for sale in March 2023, being the firstdomestic of its kind in China. It is also under normal review for weight loss indicationsand is expected to be approved in 2023, which will facilitate the successful overseasauthorizations for both indications. The strategic transformation of the Company isnow gradually rewarded and new products are ready for commercialized sales, furtherempowering the attainment of its visions.In 2022, we made new strides in our other business segments. As forpharmaceutical business, the Company has never stopped its pace in expanding theZhejiang market and enriching innovative businesses, with significant progress madein operation and development of self-developed and agent products. The internationalaesthetic medicine and industrial microbiology, two strategic business tracks of theCompany, witnessed rapid development. Moreover, the Company has launched about40 high-end medical aesthetic products and over 100 ongoing industrial microbiologyprograms, which dramatically empower the sustained development of the Company.As for the industrial microbiology segment, the Company has strategically held theequity of Wuhu Huaren Science and Technology Co., Ltd., established HangzhouHizyme Biotech Co., Ltd., and co-built the HIT Institute of Synthetic Biology, fosteringthe pattern that features three major R&D and innovation platforms and six industrialbases. Meanwhile, the Company has insisted on optimizing its product structures,accelerated the transformation of scientific research achievements, actively expandedits international businesses, and endeavored to explore new growth points. In terms ofaesthetic medicine, the Company set a record high in both global operating revenueand profitability, with the Chinese market as an important engine for growth. Ellansé,the Company’s star product, has witnessed continuous improvement in marketattention and penetration rate, occupying a leading position in the high-end market ofmedical beauty regenerative filling in China.Now, we have fostered more specific goals, clearer mind, and firmer confidence
after several years of transformation, upgrading, exploration and practice. In thepharmaceutical industry segment, we always stand at the forefront of innovation,endeavor to satisfy clinical needs, stick to the innovative R&D philosophy of“Independent R&D + Introduction”, and keep strengthening the ability in independentinnovation and R&D, with “innovation” at the core. Focusing on three core productcategories of oncology, immunity and endocrinology, we give priority to dominantvarieties that rapidly benefit the Company, further optimize product lines, and supportthe Company’s strategical development. As for pharmaceutical business, we insist onthe operation principle of “Value Creation” and “Service Foremost” and endeavor tobecome an excellent pharmaceutical service provider in China by revolving around thephilosophy of “steadiness”. With regard to the industrial microbiology segment, wekeep optimizing the core business layout, facilitate the synergy of internal resources,strengthen the input in market promotion, allocate proper resources and makebreakthrough in key business to leverage more support for the transformation andupgrading, thus attaining our goal of “overall success”. In the aesthetic medicinesegment, we attach great importance to the innovation in aesthetic technologies, keeppracticing the operation concept of “hi-tech R&D, high-quality positioning and globalproducts”, continuously increase the input in innovative technologies of massiveaesthetic medicine, keep enriching innovative product lines, facilitate the launching ofhigh-quality products in and out of China, and enhance our core competitiveness inaesthetic medicine, thus making the Company the “leader” of the aesthetic medicineindustry.We should be inclusive and far-sighted despite diverse challenges and difficulties.It is a great yet glory ambition to become a powerful international pharmaceuticalenterprise driven by scientific research innovation. Looking into the future, we willkeep forging ahead steadily toward the established strategic direction and makeunremitting endeavor to empower the high-quality and efficient development of theCompany. It is also our aspiration to maintain the healthy growth in both scale andprofits, and to continuously improve the comprehensive profitability!
Unremitting efforts bring great success and collaboration enables win-win results.In 2023, we will keep marching forward along the Company’s reform strategy,endeavor to conquer new heights of development, satisfactorily accomplish theCompany’s operation and development goals of the year, and make unremitting effortsto implement the seventh three-year planning and attain the long-term visions.We will take practical and solid actions to make our aspiration a reality. Dearshareholders, thank you for your trust and support. Let's join hands to co-build theCompany an excellent player with great intrinsic values and market values and embracea brighter future!
Lv Liang, ChairmanHuadong Medicine Co., Ltd.
April 2023
2022 Annual Report
Section I. Important Declaration, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors andsenior managers of Huadong Medicine Co., Ltd. (hereinafter referred to as the“Company”) hereby guarantee that the information presented in this annualreport is authentic, accurate and complete and free of any false records,misleading statements or material omissions, and shall undertake individual andjoint legal liabilities.
Lv Liang, the Company’s legal representative and the officer in charge ofaccounting, and Qiu Renbo, head of accounting department (accountingsupervisor) hereby declare and guarantee that the financial statements in thisannual report are authentic, accurate and complete.
All directors have attended the Board of Directors meeting to review thisannual report.
The future plans, development strategies and other forward-lookingstatements in this annual report shall not be considered as substantialcommitment of the Company to investor. Investors and related parties should befully aware of the risks, and understand the differences between plans, forecastsand commitments.
The risks the Company faces in operation including industry policy andproduct price reduction risk, new drug R&D risk, investment and M&A risk andexchange rate fluctuation risk. For details, please refer to “v. Potential risks andresponses” under “XI. Prospect of the Company’s future development” in“Section III. Management Discussion and Analysis”. Therefore, investors arekindly reminded to pay attention to possible investment risks.
The dividend distribution scheme approved at the 7th meeting of the 10thBoard of Directors is as follows: On the basis of 1,753,995,348 ordinary shares ofthe total share capital of the Company, RMB2.90 (before tax) of cash dividendsper ten ordinary shares will be distributed to all shareholders; a total of 0 bonusshare (before tax) will be issued; and no capital reserve will be converted toincrease the capital stock. In case the Company’s total share capital changesbefore the dividend distribution scheme is put in place, the proportion ofdistribution per share will be adjusted with the shares base unchanged. Theaforesaid dividend distribution scheme is subject to the approval at the AnnualGeneral Meeting.
According to “Stock Listing Rules of the Shenzhen Stock Exchange”, if listedcompanies have both Chinese and other language version of public notice, theyshould ensure the content of both versions are the same. In the case of discrepancy,
the original version in Chinese shall prevail.
Contents
To the Shareholders ...... 2
Section I. Important Declaration, Contents and Definitions ......................................................... 7
Section II. Company Profile and Key Financial Indicators ......................................................... 14
Section III. Management Discussion and Analysis ....................................................................... 18
Section IV. Corporate Governance ................................................................................................. 83
Section V. Environment and Social Responsibility ..................................................................... 106
Section VI. Important Matters ..................................................................................................... 124
Section VII. Share Change and Shareholders ............................................................................. 137
Section VIII. Information on Preferred Shares ........................................................................... 146
Section IX. Information on Bonds ................................................................................................ 147
Section X. Financial Report .......................................................................................................... 148
Contents of Reference FileI. Financial statements signed and stamped by the legal representative, the person in charge ofaccounting work and the head of accounting institution (accounting manager).II. Original audit report stamped by public accountants, and signed and stamped by certified publicaccountant.III. The original of all Company’s documents publicly disclosed in the press designated by CSRCduring the reporting period and the original of announcements.
Definitions
| Term | refers to | Definition |
| CSRC | refers to | China Securities Regulatory Commission |
| SSE | refers to | Shenzhen Stock Exchange |
| Huadong Medicine/the Company/our Company | refers to | Huadong Medicine Co., Ltd. |
| CGE | refers to | China Grand Enterprises, Inc. |
| Huadong Medicine Group | refers to | Hangzhou Huadong Medicine Group Co., Ltd. |
| Zhongmei Huadong | refers to | Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. |
| Jiangdong Company | refers to | Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd. |
| Jiuyang Bio | refers to | Jiangsu Jiuyang Biopharm Co., Ltd. |
| Xi’an Bohua | refers to | Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. |
| Jiuyuan Gene | refers to | Hangzhou Jiuyuan Gene Engineering Co., Ltd. |
| Doer Biologics | refers to | Zhejiang Doer Biologics Co., Ltd. |
| Huadong Ningbo Company | refers to | Huadong Ningbo Medicine Co., Ltd. |
| Chongqing Peg-Bio | refers to | Chongqing Peg-Bio Biopharm Co., Ltd. |
| Qyuns Therapeutics | refers to | Qyuns Therapeutics Co., Ltd. |
| Nuoling Bio | refers to | Nuoling Biomedical technology (Beijing) Co., Ltd. |
| Grand Chanrong | refers to | Shanghai Grand Industrial and Financial Investment Management Co., Ltd. |
| Hangzhou Gaotou | refers to | Hangzhou Hi-Tech Venture Capital Management Co., Ltd. |
| Grand Huachuang | refers to | Beijing Grand Huachuang Investment Co., Ltd. |
| Hangzhou Heda | refers to | Hangzhou Heda Industrial Fund Investment Co., Ltd. |
| Pharmaceutical Industry Fund/Fuguang Hongxin | refers to | Hangzhou Fuguang Hongxin Equity Investment Partnership (Limited Partnership) |
| Meihua Hi-Tech | refers to | Anhui Meihua Hi-Tech Pharmaceutical Co., Ltd. |
| Wuhu Huaren | refers to | Wuhu Huaren Science and Technology Co., Ltd. |
| Meiqi Health | refers to | Hubei Meiqi Health Technology Co., Ltd. |
| Angel Group | refers to | Hubei Angel Biological Group Co., Ltd. |
| CARsgen Therapeutics | refers to | CARsgen Therapeutics Holdings Limited |
| Takeda | refers to | Takeda Pharmaceuticals Company Ltd. |
| Sinclair | refers to | Sinclair Pharma Limited |
| Sinclair (Shanghai) | refers to | Sinclair (Shanghai) Co., Ltd., |
| vTv | refers to | vTv Therapeutics LLC |
| R2 | refers to | R2 Technologies, Inc. |
| MediBeacon | refers to | MediBeacon Inc. |
| ImmunoGen | refers to | ImmunoGen, Inc. |
| Provention Bio | refers to | Provention Bio, Inc. |
| RAPT | refers to | RAPT Therapeutics, Inc. |
| Kylane | refers to | Kylane Laboratoires SA |
| High Tech | refers to | High Technology Products, S.L.U. |
| Exscientia | refers to | Exscientia Ltd. |
| Heidelberg Pharma | refers to | Heidelberg Pharma AG |
| Kiniksa | refers to | Kiniksa Pharmaceuticals (UK), Ltd. |
| KiOmed | refers to | KiOmed Pharma SA |
| Daewon | refers to | Daewon Pharmaceutical Co., Ltd. |
| AKSO | refers to | AKSO Biopharmaceutical, Inc. |
| Ashvattha | refers to | Ashvattha Therapeutic, Inc. |
| SCOHIA | refers to | SCOHIA PHARMA, Inc. |
| EMA Aesthetics | refers to | EMA Aesthetics Limited |
| Julphar | refers to | Gulf Pharmaceutical Industries PJSC (JULPHAR) |
| GMP | refers to | Good Manufacturing Practice |
| cGMP | refers to | Current Good Manufacturing Practices |
| GSP | refers to | Good Supply Practice |
| BE | refers to | Bioequivalence |
| CDE | refers to | Center for Drug Evaluation (of National Medical Products Administration) |
| MAH | refers to | Marketing Authorization Holder |
| FDA | refers to | (U.S.) Food and Drug Administration |
| NMPA | refers to | National Medical Products Administration |
| NHSA | refers to | National Healthcare Security Administration |
| NDA | refers to | New Drug Application |
| ANDA | refers to | Abbreviated New Drug Application (or Generic Drug Application) |
| ICH | refers to | International Council for Harmonisation (of Technical Requirements for Pharmaceuticals for Human Use) |
| IND | refers to | Investigational New Drug |
| PK/PD | refers to | pharmacokinetics/pharmacodynamics |
| CMC | refers to | Chemistry, Manufacturing and Control |
| CMO | refers to | Contract Manufacturing Organization |
| CDMO | refers to | Contract Development and Manufacturing Organization |
| QA | refers to | Quality Assurance (department) |
| ADC | refers to | Antibody-Drug Conjugates |
| EBD | refers to | Energy-Based Devices |
| license-in | refers to | Product License Introduction |
| license-out | refers to | Product External License Authorization |
| BD | refers to | Business Development |
| EBITDA | refers to | Earnings Before Interest, Taxes, Depreciation and Amortization |
| EHS | refers to | Environment, Health, Safety |
| MRCT | refers to | International Multi-center Clinical Trial |
| OTC | refers to | Over The Counter |
| PFS | refers to | progression-free survival |
| Prescription Drugs | refers to | Drugs that require medical prescriptions issued by physicians to be bought and used |
| Real World Research/Study，RWR/RWS | refers to | Real World Research/Study，RWR/RWS, refers to collect datas related to patients in the real world environtment (Real World Data), through analysis, acquiring the use value of medical products and clinical evidence of potential benefits or risks (Real World Evidence). |
| 2022 Drug Catalog | refers to | Catalogue of Drugs for Basic National Medical Insurance/Employment Injury Insurance/Birth Insurance (2022) |
| Reporting Period | refers to | From January 1, 2022, to December 31, 2022 |
Section II. Company Profile and Key Financial IndicatorsI. Company information
| Stock name (abbreviation) | Huadong Medicine | Stock code | 000963 |
| Stock listed on | Shenzhen Stock Exchange | ||
| Company name in Chinese | 华东医药股份有限公司 | ||
| Company name in Chinese (abbreviation) | 华东医药 | ||
| Company name in English (if any) | Huadong Medicine Co., Ltd. | ||
| Company name in English (abbreviation, if any) | Huadong Medicine | ||
| Legal representative | Lv Liang | ||
| Registered address | Floor 9/10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou | ||
| Zip code of the registered address | 310006 | ||
| Changes of registered address | From the date of listing to July 2012, the registered address was “No. 439 Zhongshanbei Road, Xiacheng District, Hangzhou”. From July 2012, the registered address was changed to “Floor 9/10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou”. From July 2019, the registered address was changed to “Floor 7/9/10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou”. From July 2022, the registered address was changed to “Floor 9/10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou”. | ||
| Office address | No. 866 Moganshan Road, Hangzhou | ||
| Zip code of the office address | 310011 | ||
| Official website | www.eastchinapharm.com | ||
| Email address | hz000963@126.com | ||
II. Contact persons and contact information
| Secretary of the Board of Directors | Securities affairs representative | |
| Name | Chen Bo | Hu Shufen |
| Contact address | 866 Moganshan Road, Hangzhou | 866 Moganshan Road, Hangzhou |
| Tel. | 0571-89903300 | 0571-89903300 |
| Fax | 0571-89903300 | 0571-89903300 |
| Email address | hz000963@126.com | hz000963@126.com |
III. Channels of disclosure and location of preparation
| Website of the Shenzhen Stock Exchange for publishing the annual report | www.szse.cn |
| Media and website for publishing the annual report | China Securities Journal, Securities Times, Shanghai Securities News and www.cninfo.com.cn |
| Location of preparation of the Company’s annual report | Office of the Company’s Board of Directors |
IV. Registration changes
| Unified Social Credit Code | 91330000143083157E |
| Changes of the Company’s main business since its listing (if any) | None |
| Previous changes of controlling shareholder (if any) | None |
V. Other information
Certified public accountants
| Name | Pan-China Certified Public Accounts (Special General Partnership) |
| Office address | Huarun Building B, 1366 Qianjiang Road, Hangzhou, Zhejiang Province |
| Signing accountants | Wang Fukang and Chen Xiaodong |
Sponsors for continuous supervision and guidance during the reporting period
□ Applicable √ N/A
Financial consultant for continuous supervision and guidance during the reporting period
□ Applicable √ N/A
VI. Key accounting data and financial indicatorsWhether the Company needs to perform a retroactive adjustment or restatement of previous accounting data
□Yes √No
| 2022 | 2021 | Percentage increase/decrease from last year to this year | 2020 | |
| Operating revenue (yuan) | 37,714,587,458.01 | 34,563,301,233.67 | 9.12% | 33,683,058,759.75 |
| Net profit attributable to shareholders of listed companies (yuan) | 2,499,214,359.57 | 2,301,631,347.64 | 8.58% | 2,819,861,203.63 |
| Net profit attributable to shareholders of listed companies after deducting non-recurring gains/losses (yuan) | 2,409,954,557.05 | 2,188,946,362.34 | 10.10% | 2,429,761,433.56 |
| Net cash flow from operating activities (yuan) | 2,381,852,668.60 | 3,169,757,867.95 | -24.86% | 3,411,447,747.56 |
| Basic earnings per share (yuan/share) | 1.4283 | 1.3154 | 8.58% | 1.6115 |
| Diluted earnings per share (yuan/share) | 1.4283 | 1.3154 | 8.58% | 1.6115 |
| Weighted average return on equity (ROE) | 14.21% | 14.75% | -0.54% | 20.95% |
| End of 2022 | End of 2021 | Percentage increase/decrease from last year to this year | End of 2020 | |
| Total assets (yuan) | 31,192,203,406.84 | 26,996,403,366.69 | 15.54% | 24,201,348,154.75 |
| Net assets attributable to shareholders of listed companies (yuan) | 18,577,919,237.39 | 16,579,374,323.08 | 12.05% | 14,619,821,308.60 |
The Company’s net profit before or after deducting non-recurring gains and losses, whichever is lower, in the last three fiscal years areall negative, and the audit report of last year shows doubt about the Company’s ability to continue as a going concern.
□Yes √No
The Company’s net profit before and after deducting non-recurring gains/losses in the last three fiscal years is negative.
□Yes √No
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) | 1,753,995,348.00 |
Fully diluted earnings per share based on the latest share capital:
| Paid preference dividends | 0.00 |
| Paid perpetual bond interest (yuan) | 0.00 |
| Fully diluted earnings per share based on the latest share capital (yuan/share) | 1.4249 |
VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences in net profit and net assets disclosed in financial statements under international and Chineseaccounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under international and Chineseaccounting standards during the reporting period.
2. Differences in net profit and net assets disclosed in financial statements under overseas and Chineseaccounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under overseas and Chineseaccounting standards during the reporting period.VIII. Key financial indicators by quarter
Unit: RMB yuan
| Q1 | Q2 | Q3 | Q4 | |
| Operating revenue | 8,932,579,251.75 | 9,265,384,739.26 | 9,660,543,088.09 | 9,856,080,378.91 |
| Net profit attributable to shareholders of listed companies | 704,364,775.13 | 636,205,709.85 | 640,899,562.97 | 517,744,311.62 |
| Net profit attributable to shareholders of listed companies after deducting non-recurring gains/losses | 698,524,004.62 | 573,315,175.01 | 629,214,050.43 | 508,901,326.99 |
| Net cash flow from operating activities | -260,603,628.32 | 544,838,038.59 | 1,036,018,515.72 | 1,061,599,742.61 |
Whether the above financial indicators or their totals are significantly different from relevant financial indicators in previous quarterlyand semiannual reports by the Company
□Yes √No
IX. Items and amounts of non-recurring gains/losses
√ Applicable □ N/A
Unit: RMB yuan
| Item | 2022 | 2021 | 2020 | Note |
| Gains/losses on disposal of non-current | 2,390,031.00 | -2,354,117.13 | 319,656,661.95 |
| assets (including the written-off part of the accrued assets impairment reserve) | ||||
| Tax refund and reduction with ultra vires examination and approval or without official approval documents | 9,606,310.96 | 10,101,524.84 | 8,424,351.97 | |
| 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) | 89,767,756.38 | 173,543,413.54 | 190,906,656.31 | |
| 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 | 28,469,286.61 | 521,193.82 | ||
| Reversal of impairment reserve for receivables subject to independent impairment test | 953,089.60 | 4,803,651.87 | 3,845,312.41 | |
| Other non-operating revenue or expenditure expect above-mentioned items | -24,166,799.87 | -25,651,193.11 | -20,500,748.15 | |
| Other profit and loss items satisfying the definition of non-recurring gain/loss | 4,374,234.54 | -32,065,178.00 | -4,899,999.00 | |
| Minus: Amount affected by income tax | 20,305,520.86 | 20,249,495.43 | 92,420,221.30 | |
| Amount affected by minority interest (after tax) | 1,828,585.84 | -4,035,184.90 | 14,912,244.12 | |
| Total | 89,259,802.52 | 112,684,985.30 | 390,099,770.07 | -- |
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
Section III Discussion and Analysis of the ManagementI. Industry Situation during the Reporting Period
The year of 2022 is the second year of the implementation of China’s 14th five-year plan andan important year for deepening the reform of the medical and health sectors. Party and state leadershave taken active measures to empower the socioeconomic development despite increasinglycomplex and uncertain external environment, as well as triple pressures of shrinking domesticdemands, disrupted supply and weakening expectations. Thanks to all these efforts, China hassuccessfully tided over such an extraordinary course and continuously improved its economicstrength, comprehensive national strength and people's living standards, writing a new chapter inpromoting the Chinese-style modernization.The pharmaceutical industry in China faces the structural adjustment as a whole affected byChina’s policies on facilitating the reform of medical insurance, volume-based procurement ofmedicines and medical insurance payment methods, and space for overall revenue and profit growthof the industry has been squeezed coupled with the downward economy. Nevertheless, thepharmaceutical industry in China still boasts huge potential market space. In the long term run,pharmaceutical enterprises in China will keep transforming toward innovation and drive the overalloptimization and upgrading of the industry empowered by favorable policies.In 2022, China’s policies on reform of medical insurance were further deepened, multiple reformmeasures were launched and optimized, the country’s volume-based procurement of medicines andmedical insurance negotiation were normalized, the industry ecology was evolved at a rapid speed,and the overall tone of cost control and price reduction kept unchanged. From 2018 to June 2022, thepharmaceutical industry in China launched 7 times of national volume-based procurement ofmedicines, 3 times of national volume-based procurement of high-value consumables, 6 times ofmedical insurance negotiations, and dozens of local volume-based procurement that cover 294medicines and involve about 324.6 billion yuan by price before volume-based procurement,accounting for 35% of annual purchase amount of pharmaceutical chemicals and biological medicinesby public medical institutions.The pharmaceutical industry in China witnessed decline in overall growth rate in 2022 affectedby volume-based procurement and multiple internal and external factors. According to the data of theNational Bureau of Statistics, industrial enterprises above designated size throughout China achievedthe total profits of 8.40385 trillion yuan in 2022, down 4.0% from the previous year (on comparable
basis). Among them, the medicine manufacturing industry achieved the cumulative operating revenueof 2.91114 trillion yuan, down 1.6% year on year, and its operating costs were 1.69846 trillion yuan,up 7.8% year on year. The total cumulative profits were 428.87 billion yuan, down 31.8% year onyear.II. Main Businesses of the Company during the Reporting Period
Founded in 1993 and headquartered in Hangzhou, Zhejiang Province, Huadong Medicine Co.,Ltd. (stock code: 000963) was listed on Shenzhen Stock Exchange in December 1999. With itsbusinesses covering the entire pharmaceutical industry chain thanks to over 20 years of vigorousdevelopment, the Company has now fostered four major business segments of pharmaceuticalindustry, pharmaceutical business, aesthetic medicine and industrial microbiology, and has been alarge comprehensive listed pharmaceutical enterprise specialized in pharmaceutical R&D, productionand marketing. Moreover, the Company has won diverse awards and honors, including Fortune China500 by Fortune China for 13 consecutive years, 2021 China Top 100 Enterprises of PharmaceuticalIndustry, and 2021 China Top 100 Enterprises in Pharmaceutical Businesses by All-China Federationof Industry and Commerce.
Specialized in the R&D, production and marketing of specialized and chronic diseases, as wellas special medicines for years, the Company has established complete pharmaceutical production andquality research systems, and fostered core product lines focusing on chronic nephrosis,transplantation immunity, internal secretion, digestive system and other fields. With multiple first-line clinical medicines with market advantages in China, the Company has made layout in R&D ofinnovative and high technology barrier generic medicines in three core therapeutic fields of oncology,endocrinology and autoimmunity through independent development, external introduction, projectcooperation and by other means. The Company has continued to engage in international registration,international certification, consistency evaluation, etc. of products, with successive results achieved.Moreover, the Company has fostered the internationally-oriented pharmaceutical industry system,established and maintained R&D and project cooperation with multiple international innovative R&Denterprises.
With regard to the pharmaceutical business, the Company has vigorously consolidated itsfoundation in Zhejiang Province and has been ranked top 10 pharmaceutical business enterprises inChina for consecutive years. To date, the Company has established 11 regional subsidiaries inZhejiang Province, with its customers distributed in 11 cities and 90 districts, counties and county-level cities throughout Zhejiang Province. The Company has four business segments of Chinese &
western medicine, medical apparatus, medicine materials and ginseng & antler, and health industrythat cover the pharmaceutical wholesale & retailing, third-party medical logistics featuring cold chain,medical e-commerce, hospital value-added services and featured massive health industry. Furtherexpanding the product agency and market development, the Company has formed the whole industrychain from planting in bases to processing of prepared pieces, automatic decoction, own-brandfunctional products for its traditional Chinese medicine industry. As the leader of pharmaceuticalbusiness in Zhejiang Province, the Company has always focused on strengthening the policy affairs,reserve, distribution and marketing ability, established service platforms, and fostered the competitiveadvantages of regional enterprises to offer customers comprehensive solutions.
In terms of aesthetic medicine, the Company has developed over 30 “noninvasive and micro-invasive” aesthetic medicine products cover facial and body filling, thread lifting, skin management,body shaping, facial cleansing, depilation, private repair and other non-operative mainstreamaesthetic medicine fields. by following the strategy of “global operation layout and dual-circulationoperation & development” with an international vision through forward-looking layout. Specifically,over 20 products have been launched in China and abroad, and more than a dozen innovative globalproducts in development. With comprehensive product clusters formed, the Company now ranks inthe forefront of the industry in terms of product quantity and coverage. Headquartered in UK, theCompany’s wholly-owned subsidiary Sinclair is its global aesthetic medicine operation platform thathas R&D centers in UK, the Netherlands, France, Switzerland, Spain and Israel, and production basesin the Netherlands, France, the U.S., Switzerland, Bulgaria and Israel. Promoting and marketingsustained-release microspheres for injection, hyaluronic acid, facial thread lifting and other productsin global markets, Sinclair researches, develops and expands its energy-source aesthetic medicineapparatus businesses through its wholly-owned subsidiaries High Tech and Viora. As for the aestheticmedicine segment, the Company also has Sinclair (Shanghai), a wholly-owned subsidiary and itsmarket operation platform in China, as well as R2 in the U.S. and Kylane in Switzerland, two overseastechnical development type joint-stock subsidiaries.
With profound industrial base and powerful industrial transformation ability thanks to over 40years of development in the industrial microbiology sector, the Company has successfullydevelopment and manufactured multiple types of microbiological medicines, and established the keytechnology system for R&D and production of microbiological products, ranking in the forefront ofthe industry in terms of scale and technological level of microbiological fermented products. Beingmarket demand-oriented, R&D technology-driven and industrial resource-coordinative in theindustrial microbiology segment, the Company has fostered differentiated product lines and solutions,and established three microbiology R&D platforms Zhongmei Huadong, Huida Biotech and Hizyme
Biotech, and six industrial bases in Hangzhou Xiangfuqiao, Qiantang New Area, Jiangsu JoyangLaboratories, Magic Health, Twisun Hi-tech and Wuhu Huaren. Moreover, the Company has set upthe largest fermentation monomer plants in Zhejiang, formed the industry-leading microbiologicalmedicine production ability and high-level R&D capacity that covers all stages of microbiologicalengineering technologies from strain construction, metabolic regulation, enzymatic catalysis,synthetic modification to separation and purification, and built a complete manufacturing system forR&D, pilot test, commercial production, engineering and public system guarantee of microbiologicalprojects. To date, the Company has a total of over 130 R&D programs in the industrial microbiologysector.III. Core Competitiveness
1. Open innovative medicine R&D system and continuously improved innovation abilityThe Company has always attached great importance to innovative R&D and maintained greatinput in R&D. Being “Scientific Research-based and Patient-centered”, the Company has fostered asound independent innovation system for R&D of medicines that covers the whole process frommedicine discovery, pharmaceutical research, pre-clinical study and clinical study to industrialproduction, and set up its Global New Medicine R&D Center after years of vigorous development,with “clinical value, pharmacoeconomic value and commercial value” as the starting point.
Focusing on three core therapeutic fields of oncology, endocrinology and autoimmunity, theCompany has established in-depth strategic cooperation with leading pharmaceutical enterprises inand out of China through collaborative product development, equity investment or by other means,successfully its global R&D ecosystem via introduction, fusion and innovation.Moreover, the Company keeps developing and has fostered differentiated innovative productlines that cover the full R&D cycle via independent R&D, external cooperation, license-in, etc. As ofthe date of the Report, the Company has reserved 52 innovative and biosimilar medicines underdevelopment. Among them, 5 products and 3 products are under phase III and phase II clinical trialsrespectively, which cover oncology, endocrinology, autoimmunity and other fields. All these meritseffectively empower the continuous initiation and launching of innovative products, offeringimpetuses for the medium- and long-term development.
2. Comprehensive ability in developing international businesses
Vigorously advancing its internationalization, the Company has further strengthened itspresence in global energy-source aesthetic medicine apparatuses market by acquiring 100% equity ofHigh Tech and Viora. Meanwhile, the Company has also established product or equity cooperation
with Akso and Kiniksa in U.S., Heidelberg Pharma in Germany, etc. to complement and enrich theinterests of commercial development of innovative medicines in and out of China. Efforts are madeto facilitate the international registration of products, and all chemical raw medicines launched haveobtained authorized certifications from FDA or EU. Our products such as Daptomycin for Injection,Acarbose Tablets and Pantoprazole Sodium for Injection have been approved by FDA, while somehigh-end industrial microbiological raw products enjoy strong international competitiveness. TheCompany never stops its pace in developing international logistics and purchase supplies to fosterinternational purchasing abilities, and has been a part of global innovative medicine R&D industrychain by driving the constant improvement of its abilities in CMO/CDMO businesses.
3. Diverse product lines for specialized and chronic diseases, and comprehensivecompetitiveness in diabetes treatment and careSpecialized in specialized and chronic diseases, as well as special medicines for years, theCompany has fostered good brand effect and laid strong market foundation in such fields as chronicnephrosis, transplantation immunity, internal secretion and digestive system, continuously keeping inthe forefront of similar products in China in terms of market share. The Company hascomprehensively laid out product lines of innovative and differentiated generic medicines for clinicalmainstream therapeutic targets of diabetes, with over 20 products under development or put incommercial production. The Company has also achieved full coverage of clinical first-line immune-suppressive medicines and subsequent products in the field of organ transplantation. With the world’sfirst-in-class layout in three core therapeutic fields of anti-tumor, internal secretion and autoimmunity,the Company has fostered multiple global innovative medicine layouts and R&D ecologies in thefield of ADC medicines, forming differentiated advantages.
4. China's leading professional pharmaceutical service team and extensive market networkIn the pharmaceutical industry segment, the Company has fostered a professionalpharmaceutical service and market development team comprising 7,000 members. Coring at theclinical values and academic promotion, the team vigorously promotes the marketing mode thatfeatures the online integration of comprehensive hospitals, primary level medical institutions,retailing, third-party terminals and Internet, and has gradually formed multi-channel effectivecoverage and strong competitive advantages.As for pharmaceutical business, the Company has made its presence in Zhejiang market for yearsand boasts a complete business ecosystem with diverse categories of products and services, formingcomprehensive competitive advantages in market access and coverage. Keeping improving its fourcore competencies of logistics, information, finance and operation, and offering such high-end value-added services as policy affairs, the Company has established business partnership with 90%mainstream pharmaceutical enterprises in and out of China, and covered all public medicalinstitutions, key private medical institutions and retain pharmacies in Zhejiang Province, with aleading market share in Zhejiang Province and forefront ranking in the industry for consecutive years.In recent years, the Company has witnessed rapid development in innovative businesses such asproducts agency and market development, characteristic massive health industry, third-party medicallogistics featuring cold chain and medical e-commerce and has formed complete cold chain logisticsservice system and ability at a leading level in China.
5. High-end international aesthetic medicine product lines that cover noninvasive andmicro-invasive mainstream non-operative fieldsThe Company successfully made its presence in the aesthetic medicine industry by acquiringSinclair based in UK. Acquiring international energy-source aesthetic medicine apparatus enterprisesHigh Tech and Viora in 2021 and 2022 respectively, Sinclair was granted the global distributorship(except for Germany and UK) of Préime DermaFacial Multi-functional facial skin managementplatform of EMA Aesthetics, an Irish company, in May 2022. Covering all middle- and high-endmarkets of non-operative aesthetic medicine injections and energy-source aesthetic medicineapparatuses, the Company has now held global rights of multiple patented products in such fields asfacial and body filling, facial cleansing, body shaping, thread lifting, and energy-source apparatuses,and set up an international aesthetic medicine operation and BD team. The Company furtherintegrates its R&D resources and competencies focusing on global high-end aesthetic medicinemarkets. The Company has successfully developed its international aesthetic medicine businessesthat organically combine R&D, manufacturing and marketing, and established an internationalaesthetic medicine marketing network based on its six global R&D centers in UK, the Netherlands,
France, Switzerland, Spain and Israel, as well as Sinclair’s six global production bases in theNetherlands, France, the U.S., Switzerland, Bulgaria and Israel, with its products sold in over 80countries and regions. To date, the Company has developed 36 international high-end “noninvasiveand micro-invasive” aesthetic medicine products that cover facial and body filling, thread lifting, skinmanagement, body shaping, depilation, private repair and other non-operative mainstream aestheticmedicine fields. Specifically, 24 of these products have been launched in China and abroad, and theother 12 are innovative global products in development. With comprehensive product clusters formed,the Company now ranks in the forefront of the industry in terms of product quantity and coverage.
6. Constant efforts in developing industrial microbiology sector based on solid R&D andindustrial base
With profound industrial base thanks to over 40 years of development in the industrialmicrobiology sector, the Company has successfully development and manufactured multiple types ofmicrobiological medicines, and established the key technology system for R&D and production ofmicrobiological products, ranking in the forefront of the industry in terms of scale and technologicallevel of microbiological fermented products. Being market demand-oriented, R&D technology-driven and industrial resource-coordinative in the industrial microbiology segment, the Company hasfostered differentiated product lines and solutions, and established three microbiology R&D basesZhongmei Huadong, Huida Biotech and Hizyme Biotech, and six industrial bases in HangzhouXiangfuqiao, Qiantang New Area, Jiangsu Joyang Laboratories, Magic Health, Twisun Hi-tech andWuhu Huaren. Moreover, the Company has set up the industry-leading fermentation monomer plants,formed the microbiological medicine production ability and high-level R&D capacity that covers allstages of microbiological engineering technologies from strain construction, metabolic regulation,enzymatic catalysis, synthetic modification to separation and purification, and built a completemanufacturing system for R&D, pilot test, commercial production, engineering and public systemguarantee of microbiological projects.
In the industrial microbiology sector, the Company has initiated over 130 R&D projects,including 17 projects for xRNA, ADC and other innovative raw materials (including 71 subprojects),30 projects for active pharmaceutical ingredients and pharmaceutical intermediates, and 18 projectsfor massive health and aesthetic medicine raw materials, animal health, biomaterials, etc. TheCompany has established the Industrial Microbiology Division with complete structure, introducedtop-notch technical personnel, and kept in line with international talent cultivation system tocontinuously optimize its R&D efficiency. To date, the Company has engaged 335 developmentpersonnel, 23% of whom have obtained their master or doctoral degree.
7. Prudent and pragmatic operation style, and stable returns to shareholders
Valuing innovation in management, the Company has always endeavored to satisfy the demandsfor market competition by improving the quality of its operation. As a result, the Company hasachieved long-term steady development thanks to its high-quality products, excellentcommercialization capability, compliant yet efficient marketing services, differentiated marketpositioning, innovative R&D layout, and complete talent planning. Over the past 22 years since itwas listed, the Company has distributed dividends for 19 times with the cumulative amount of 5.084billion yuan, which is well in excess of the 250 million yuan raised during IPO. The Company bringsshareholders consistent and steady returns on investment.IV. Main Businesses
1. Overview
In 2022, we witnessed not only the great transformation, but also our unremitting efforts andrich harvest. In this world marked by changes unseen in a century, global competitions and conflictshave brought both opportunities and challenges for the Company’s international transformationtogether with the win-win cooperation situation. In 2022, all employees of Huadong Medicinevigorously forged ahead, overcame difficulties, exercised lean management, worked hard, aimed high,and accelerated various operation, innovation and transformation tasks by following theentrepreneurial spirit of “looking at the current situation considering the future” with recovery ofgrowth as the core goal. Moreover, we actively responded to complicated and changeable externalenvironment and multiple market uncertainties by leveraging our advantages of definite and stabledevelopment, harvesting in innovation & transformation, as well as the recovery and growth ofoperation performance. All these active actions and efforts successfully empowered the successfulstarting of our seventh three-year planning.
In 2022, the Company achieved the operating revenue of 37.715 billion yuan, setting a new highwith an increase of 9.12% year on year. The net profit attributable to shareholders of listed companieswas 2.499 billion yuan, up 8.58% year on year. After deducting the profits and losses of participatingand holding R&D institutions, the net profit after deducting non-recurring profit and loss attributableto shareholders of listed companies was 2.598 billion yuan, up 13.24% year on year. In Q4 2022, theCompany achieved the operating revenue of 9.856 billion yuan, up 14.13% year on year. The netprofit after deducting non-recurring profit and loss attributable to shareholders of listed companieswas 509 million yuan, up 19.20% year on year. The all-round and stable recovery and upturn of theCompany’s performance vividly embody the Company’s great resilience as a large pharmaceutical
company in China. To date, the Company has gradually gotten from the influence of industrialpolicies, built the new ecology for innovative R&D, and made remarkable achievements in strategictransformation, embarking on a high-quality development track driven by scientific and technologicalinnovation.During the reporting period, the Company kept maintaining stable and good operation, andachieved the consolidated gross margin of 31.90%, up 1.22% year on year. The net cash flow fromoperating activities of the Company was 2.382 billion yuan, which is in line with the operatingrevenue and net profit achieved. As of the end of 2022, the Company’s total assets, net assetsattributable to shareholders of listed companies, asset-liability ratio, and return on equity (ROE) were
31.192 billion yuan, 18.578 billion yuan, 38.52% and 14.21% respectively.In 2022, the Company actively advanced its corporate culture construction, kept deepening theorganizational structure reform, and endeavored to improve the level of its grouping operation. Manydepartments were established to empower the Company’s strategic transformation, such as theCompliance Management Department under the Pharmaceutical Service Company, the EighthPreparation Department under the Production Center of the Pharmaceutical Production Company, theADC R&D Center under the Innovative Medicine R&D Center, and the International Supply ChainDepartment under the Operation Management Department.During the reporting period, the Company launched the equity incentive program for the firsttime since it was listed to give full play to the initiative of talents on key positions, clarify theirresponsibilities and values, and effectively combine personal responsibilities, as well as interests ofshareholders, the Company and individuals, thus empowering its sustained development.I. Operation and Development of Four Business Segments of the Company during theReporting Period(I) Pharmaceutical IndustryDuring the reporting period, the pharmaceutical industry segment vigorously responded tovarieties of unexpected factors, insisted on finding out inherent problems, facilitated innovation inR&D by strengthening the system construction, focused on the improvement of ability, promotedpersonnel development, and advanced the production, operation, innovation and transformation, withpositive results achieved. Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd., its core subsidiary,witnessed continuous and stable upturn in operation, with its operational indicators turning fromdecrease in the beginning to recovery growth. The sales of all core products achieved stable and rapidincrease throughout the year. It successfully shook off the influence of volume-based procurementon operation and completed the year’s operational goals. In 2022, Hangzhou Zhongmei HuadongPharmaceutical Co., Ltd. achieved the sales revenue (including CSO business) of 11.244 billion yuan,
up 10.88% year on year, and the net profit after deducting non-recurring profit and loss of 2.093billion yuan, up 4.71% year on year. The net return on equity (ROE) was 24.54%.
1. Keeping optimizing the R&D system and enriching innovative product linesThe Company attached great importance to innovative R&D and maintained high proportion ofinput in R&D. During the reporting period, the Company input 2.681 billion yuan in R&D in thepharmaceutical industry segment, up 44.8% year on year. Among them, 1.196 billion yuan were usedas direct R&D expenditures, up 24.2% year on year, and 1.484 billion yuan were input for productintroduction and R&D equities. Being “scientific research-based and patient-centered”, the Companyhas fostered a sound independent innovation system for R&D of medicines that covers the wholeprocess from medicine discovery, pharmaceutical research, pre-clinical study and clinical study toindustrial production, and set up its Global New Medicine R&D Center, with “clinical value,pharmacoeconomic value and commercial value” as the starting point. Believing that cultivation andintroduction of top-notch talents lay foundation for innovative R&D, the Company has nowestablished a scientific research team that covers the whole life cycle of R&D of innovative medicines,which comprises a total of 1,543 researchers, 34.7% of whom have obtained their doctoral or masterdegrees.
With “value creation” as its core, the Company’s Innovative Medicine Global R&D Centerachieved vigorous development driven by dual engines of independent innovation and externalintroduction, and fostered the new ecology for innovative R&D focusing on “advantaged,differentiated and source-based innovation”. Meanwhile, it also leverages powerful technologicalsupport for the initiation and incubation of new projects by strengthening the construction oftechnology platforms featuring independent intellectual property rights and high barriers. To date, theR&D team has screened and evaluated tens of thousands of pharmaceutical molecules with potentialactivity. As of the date of the Report, the Company has reserved 52 innovative and biosimilarmedicines under development. Among them, 5 products and 3 products are under phase III and phaseII clinical trials respectively, which cover oncology, endocrinology, autoimmunity and other coretreatment fields. All these merits effectively empower the continuous initiation and launching ofinnovative products, offering impetuses for the medium and long-term development.During the reporting period, the Company successfully incubated Weizhi Biology Science andTechnology Co., Ltd., its internal wholly-owned subsidiary, established two core technologyplatforms of Micro-restructuring and Micro-delivery, and set up some new technology platforms suchas proteolytic targeting chimera (PROTAC), antibody drug conjugate (ADC), and AI drug discovery& design (AIDD) thanks to its excellent talent pool and continuous capital investment. In recent years,the Company kept expanding its differentiated in-depth layout in the field of ADC, successively
invested in Qyuns Therapeutics, an anti-body R&D and production company, Nuoling BiomedicalTechnology (Beijing) Co., Ltd., an ADC linker and coupling technology company, incubatedZhejiang Huida Biotech Co., Ltd. with full product lines for ADC drug toxin raw materials, and heldshares of Doer Biologics, a multi-antibody platform R&D company. Moreover, the Companyestablished cooperation with Heidelberg Pharma, a global emerging technology company in the fieldof ADC based in Germany, on equity investment and products, introducing HDP-101 and HDP-103,two its global ADC innovative products, becoming its second largest shareholder, and organicallyintegrating with its advanced ATAC
?(Antibody-Amanita Conjugate) technology platform. In thefuture, the Company will keep strengthening the construction of innovative platform and integrationof resources, further expand the cooperation on new technology platforms based on the ADC GlobalR&D Ecology of Huadong Medicine, create a world-leading ADC independent R&D platform, andplan to initiate at least 10 ADC innovative products and actively facilitate their registered clinicalstudies within 3 years.
In the field of oncology, major milestones were made in ELAHERE?, a type of ADC medicinefor platinum-resistant ovarian cancer co-developed by the Company and ImmunoGen from the U.S.,
which becomes the only ADC medicine approved by FDA in 2022 after being approved by FDA forfacilitated launching in November 2022. Moreover, its clinical trials in China are progressed smoothlyand BLA is planned to be submitted in 2023. In the future, the Company and its partner will keepadvancing its application in front-line treatment of ovarian cancer via clinical studies, and support touse ELAHERE? as the preferred medicine combination for treatment of ovarian cancer. In January2022, the Company introduced Icaritin Soft Capsules, an original natural small molecularimmunomodulator researched and developed by China independently, which has been sold well inChinese market since it was formally launched in May 2022. Moreover, the Company also introducedthe Zevokiorense Injection, a type of CAR-T product, for the treatment of recurrent/refractorymultiple myeloma, the marketing authorization application of which was accepted by the NationalMedical Products Administration in October 2022 and was included for prioritized review andapproval. No product of similar type has been approved in China yet. It further enriches theCompany’s product lines in the field of blood diseases and forms a multi-dimensional product linelayout together with chemotherapeutics, ADC products and CAR-T products. DR30303, a coreproduct under development of Doer Biologics for the treatment of solid tumor, and targeted medicineClaudin 18.2 successfully completed the enrollment and administration of the first subject in phase Iclinical trial in May 2022.As for the endocrinology, the Liraglutide Injection, the Company’s first biosimilar medicine fordiabetes mellitus indications, was approved for sale, being the first of its kind in China. It is alsounder normal review for weight loss indications and is expected to be approved in 2023, which willmake up the gap of weight-reducing medicines in Chinese market. In June 2022, Zhongmei Huadongreached strategic cooperation with JULPHAR, a famous company in Middle East, on dual indicationsof the Liraglutide Injection, which is a vivid evidence that the Company’s strength, R&D andinnovation abilities in the field of diabetes are internationally recognized. With GLP-1 target as thecore, HDM1002 (micromolecule GLP-1 receptor agonist), an innovative medicine for type 1 diabeticmellitus that is developed by the Company independently with global intellectual property rights, hasbeen successfully submitted for IND approval in the U.S. and China, marking that the Company’sindependent R&D has entered a new stage. DR10624, a kind of Fc fusion protein medicine developedby Doer Biologics based on its independently developed MultipleBody
?
platform technology, boaststriple agonist activities, targets at GLP-1R, GCGR and FGFR1c/Klothoβ (FGF21R), and hascompleted the enrollment of the first overseas clinical subject in June 2022. Moreover, HDM1005, aGLP-1R and GIPR long-acting polypeptide dual-target agonist developed by the Companyindependently, successfully obtained PCC molecules in less than one year since it was initiated,showcasing great innovation strength of Huadong Medicine and marking the rapid increase of its
independent R&D ability. To date, the Company has fostered all-round and differentiated productlines that combine the long-acting and multi-target global innovative and biosimilar medicinesincluding oral medicines and injections revolving around GLP-1 target, continuously consolidatingits place as a front-runner in the field of endocrinology in China.With regard to autoimmunity, the Company introduced ARCALYST
?and Mavrilimumab, twoglobal innovative products in the field of autoimmunity by Kiniksa based in the U.S. ARCALYST
?
has been approved in the U.S. for the treatment of Cryo-Pyrin-Associated Periodic Syndromes(CAPS), Deficiency IL-1 Receptor Antagonist (DIRA) and recurrent pericarditis. Having been listedas the overseas new medicine in urgent need for clinical purpose in China, ARCALYST
?
is also thefirst and only medicine for recurrent pericarditis suitable for patients aged 12 and over approved byFDA so far. The Company will formally submit the BLA in China in 2023, and it is expected tosatisfy the clinical needs of patients with autoimmune and rare diseases in China and achievecommercial production rapidly relying on the priority review channel. HDM3001 (RLD - Stelara
?),a type of Ustekinumab biosimilar co-developed by the Company and its shareholding enterpriseQyuns Therapeutics is used for the treatment of moderate and severe plaque psoriasis of adults, thephase III clinical trial of which has reached the main end of the study. It is planned to submit BLA inQ3, 2023. Qyuns Therapeutics, one of the companies with the most comprehensive biologicalmedicine lines and the leading overall development progress in the field of autoimmune and allergicdiseases in China, has submitted IPO application to the Stock Exchange of Hong Kong Ltd. in March2023.
In the future, the Company will keep optimizing its R&D system, continuously enrich itsinnovative product lines, and output a batch of PCC/ IND achievements featuring superior advantages,high potency and global independent intellectual property rights. With “value creation” as its core,the Company clarifies the initiation goal mechanism for differentiated innovation focusing on“advantaged, differentiated and source-based innovation” and initiates at least 15 innovative R&Dprograms per year, successfully fostering the pioneering, differentiated and competitive innovativeproduct lines. Meanwhile, the Company has fostered the new ecology for innovative R&D driven bydual engines of independent innovation and external introduction.
2. Keeping active optimization to form an all-round stereochemical pharmaceutical servicesystem
During the reporting period, the Marketing Team of Hangzhou Zhongmei HuadongPharmaceutical Service Corporation kept up with the pace of the Company’s development, activelygrasped the market opportunities, and made active progresses in professional team building, marketaccess, marketing department and human resources system building, etc., with the overall scale of
pharmaceutical service personnel keeping a steady rise. In recent years, the marketing team haswitnessed steady improvement in professional ability and Zhongmei Huadong has gradually becomethe creator and pioneer of the medication concept in specific fields and the academic circle thanks tothe market practice in such fields as immunology, endocrinology and angiocarpy by setting upserialized and brand-oriented academic platforms to manage the progress of access of variousproducts in a coordinated manner. In the meantime, we actively strengthened study and exploration,kept upgrading our marketing skills and enriched promotion modes, gradually fostered all-roundstereochemical pharmaceutical services and medicine promotion abilities.While consolidating the hospital markets in central cities, we kept sinking the marketingchannels, strengthening the development of primary markets, external markets and retail markets,actively laid out pharmacies, primary layers, e-commerce and other terminals, and enhanced the directinfluence on C end, thus establishing a multi-terminal all-round stereochemical marketing pattern.We strengthened the building of regional marketing departments and professional teams in variousprovinces, municipalities, and autonomous regions by focusing on the terminal coverage, marketshare and other indicators, and created an academic promotion-based marketing team with strongprofessional ability and medical thinking to comprehensively and accurately convey informationabout medicines and offer treatment schemes in consideration of rational medication and patients’benefits.
3. Facilitating the vigorous development of self-owned and licensed products for moreexcellent achievements in commercialization.During the reporting period, the Company actively participated in and responded to reforms onvolume-based procurement of medicines, medical insurance negotiation, DRG/ DIP payment clients,etc. at both the national and provincial level, with positive achievements made. Bailing Tablet ofZhongmei Huadong won the bid for volume-based purchasing of Hubei Alliance for Volume-basedProcurement of Chinese Traditional Patent Medicines and witnessed rapid growth in sales after thecontract was executed. Bailing Capsule and Acarbose Chewable Tablets were successfully listed inChina’s National Reimbursement Drug List again. Mycophenolate Mofetil Capsule, PioglitazoneHydrochloride Tablets , and Ornidazole Tablets of Xi’an Bohua won the bid for China’s 7th batch ofvolume-based procurement of medicines. Acarbose Tablets and Pantoprazole Sodium for Injectioncompleted the renewal of volume-based procurement of multiple provinces. The Company alsoactively expanded the sales channels, improved the accessibility of Bailing series and Acarbose serieson primary markets, retail markets and online platforms, with remarkable achievements made incoverage and market share of external markets.
During the reporting period, Zhongmei Huadong also established exclusive commercialcooperation with multinational pharmaceutical companies such as Takeda and Pfizer, as well asBeijing Shenogen and other domestic innovative medicine pharmaceutical companies on RLDinnovative products in Chinese market, actively promoted its clinical medicine, academy andprofessional team building, strengthened the market access, academic promotion and compliancemanagement, properly covered various terminals, worked hard on building patient groups, andhighlighted the brand advantages of RLD to ensure good market share. The Company successfullycompleted its preset annual sales goals, laying a solid foundation for the launching and promotion ofinnovative products in the future.
4. Making innovation in production and operation models to facilitate the internationalregistration of products
In 2022, the Company’s production systems actively empowered the innovation in productionand operation modes while successfully guaranteed the supply of products of various markets. Furtherenhancing the foundational management, the Company vigorously promoted the full-life cyclemanagement of equipment and kept promoting the improvement of employees’ skills and per capitalabor efficiency. The Company also tapped internal potentials, continuously pushed the total leanproduction, deepened the standardized construction of functional 5S and workshops, and fostered thetotal lean production system to effectively reduce production costs. Externally, the Company activelysought ways to increase revenue, improved the utilization rate of resources and equipment whilesatisfying the market needs, actively introduced external cooperative programs, and increasedchannels for profits via CMO/CDMO businesses. Moreover, the Company strengthened its efforts indeveloping supplies, facilitated the substitution of imported materials with domestic products,ensured supply safety, focused on promoting the source-tracking and development of key raw andsubsidiary materials, equipment, accessories and other exclusive or imported materials, effectivelyresponded to risks in supply or rise in price of bottleneck materials, and endeavored to achieveadequate competition, obviously reducing the purchasing costs.
In 2022, various R&D tasks of the Company were progressed normally, with staged milestonesachieved. As of the date of the Report, 4 key categories were awarded the marketing authorization,and applications of 7 under-development categories were accepted by CDE. During the reportingperiod, application and renewal of patents of the Company were progressed smoothly, with a total of151 patent applications submitted, including 88 patents for invention. A total of 69 patents weregranted. As for international registration, 1 category of preparation was approved in Singapore, andDMF/ ANDA replies of over 10 categories were submitted. Pantoprazole Sodium for Injection waslaunched and marketed in the U.S. for the first time, being the pioneer in the Company. The Company
steadily promoted the building of the R&D innovation platform for quality researches of external andcomplex preparations in combination with actual project practices, mainly the development ofexternal liquores, ointments, gelling agents and creams, as well as improvement of the developmentability of in vitro release and transdermal experiment method, ability in biochemical detection ofbiomedicine, level in impurity spectrum analysis and structure confirmation of APIs. Meanwhile, theCompany started to build a chemical characterization platform for implantable medical apparatusesto provide quality research for the Company’s aesthetic medicine.(II) Industrial MicrobiologyWith profound industrial base thanks to over 40 years of development in the industrialmicrobiology sector, the Company has successfully developed and manufactured multiple types ofmicrobiological medicines, and established the key technology system for R&D and production ofmicrobiological products, ranking in the forefront of the industry in terms of scale and technologicallevel of microbiological fermented products. Being market demand-oriented, R&D technology-driven and industrial resource-coordinative in the industrial microbiology segment, the Company hasfostered differentiated product lines and solutions, and established three microbiology R&D bases asZhongmei Huadong, Huida Biotech and Hizyme Biotech, and six industrial bases in HangzhouXiangfuqiao, Qiantang New Area, Jiangsu Joyang Laboratories, Magic Health, Twisun Hi-tech andWuhu Huaren. In addition, the Company has set up the industry-leading fermentation monomer plants,formed the microbiological medicine production ability and high-level R&D capacity that covers allstages of microbiological engineering technologies from strain construction, metabolic regulation,enzymatic catalysis, synthetic modification to separation and purification, and built a completemanufacturing system for R&D, pilot test, commercial production, engineering and public systemguarantee of microbiological projects.
In the industrial microbiology sector, the Company has initiated over 130 R&D projects,including 17 projects for xRNA, ADC and other innovative raw materials (including 71 subprojects),30 projects for Active Pharmaceutical Ingredients and pharmaceutical intermediates, and 18 projectsfor massive health and medical beauty raw materials, animal health, biomaterials, etc. The Companyhas established the Industrial Microbiology Division with complete structure, introduced top-notchtechnical personnel, and kept in line with international talent cultivation system to continuouslyoptimize its R&D efficiency. To date, the Company has engaged 335 development personnel, 23%of whom have obtained their master or doctoral degree.The year of 2022 witnessed the rapid development of various businesses in the segment ofindustrial microbiology of the Company. Keeping practicing the Industrial MicrobiologyDevelopment Strategy, the Company determined its key orientation in five aspects including
innovative medicines (RNA & ADC medicines) raw materials, APIs & intermediates, massive health& cosmetic raw materials, pets protection and featured biomaterials. Thanks to continuous R&D,product lines in five key business segments featuring high innovation, high technology barrier andhigh added-values were further enriched and product structures were constantly optimized. Whileexpanding domestic market, the Company also comprehensively facilitated international registrationand certification, and actively branched out its international businesses. During the reporting period,the Company achieved favorable results in sales by integrating the traditional API business andexpanding new businesses such as raw materials for innovative medicines, massive health products,etc. to grasp the market, seeing a stable business growth. Throughout the year, the Company achievedthe sales revenue of 510 million yuan, up 22% year on year.In May 2022, Huida Biotech, the Company’s holding subsidiary, invested in establishing awholly-owned subsidiary Hizyme Biotech. Specializing in developing series of industrial catalyticenzymes and relevant biocatalytic downstream products with synthetic biology techniques, HizymeBiotech has formed a complete R&D system that comprises enzyme design - evolution - strainconstruction - expression - catalytic application research, and formed featured downstream productlines in such fields as modified nucleoside and pharmaceutical intermediates.
In July 2022, the Company’s wholly-owned subsidiary Zhongmei Huadong, Gonzales DistrictPeople’s Government of Hangzhou and Zhejiang University of Technology co-built the HIT Instituteof Synthetic Biology (the HIT Institute). With synthetic biology techniques as its basis, the HITInstitute focuses on four major fields of pharmaceutical chemicals, aesthetic medicine biology,biomaterials and healthy sugar substitutes, and specializes in researches on technological innovationand industrial transformation revolving around the smart biological manufacturing. In the future, theHIT Institute will form a complete chain that comprises basic R&D - pilot R&D - industrialdevelopment with Huida Biotech, Magic Health and Jiangsu Joyang Laboratories, vigorouslypromoting the landing and commercialization of frontier innovations in synthetic biology in thepharmaceutical industry in East China.In August 2022, the Company merged the Wuhu Huaren Science and Technology Co., Ltd.,further putting in place its layout of industrial microbiology innovative medicine raw materials in thefields of mRNA medicines and IVD chemical raw materials. Meanwhile, Meihua Hi-tech, theCompany’s wholly-owned subsidiary, will empower the scale production of Huaren Science andTechnology by producing modified and protection series nucleosides and some nucleoside monomersin the upstream. Additionally, the Company also set up its technical team for mRNA raw materialsR&D and application services, laying a foundation for business expansion in such fields as mRNAraw materials and services. To date, the Company has formed a complete technical layout necessary
for RNA medicine raw materials in such fields as synthetic biotechnology, enzymatic catalysis,chemosynthetic modification, separation and purification through series of R&D and integration ofindustrial resources. Meanwhile, an overall production layout for RNA medicine raw materials andIVD chemical raw materials has been fostered backed by separation and purification, Meihua Hi-techand other production bases.With regard to engineering projects, the Company’s industrial microbiology segment completedthe phase I technical innovation of Meihua Hi-tech and launched the phase I project of Magic Health,anti-infection product lines of Jiangsu Joyang Laboratories, and construction of high-activity APIfactories in 2022, further advancing the landing of product lines in various fields.
In 2022, the Company’s industrial microbiology segment actively advanced businessadvancement and integration in various fields via marketing, and the Company focused on advancingthe construction of the marketing management system of the industrial microbiology headquartersand international marketing team. In the meantime, the Company also prepared the market strategicplans and large variety breeding programs in various fields, and gave priority to the construction ofproduct application and service systems in such fields as innovative medicine raw materials, massivehealth, and aesthetic medicine raw materials. As for the market access and international registrationand certification, the Company prepared and actively implemented various advancement plansconsidering unique features of different fields.To date, the Company’s industrial microbiology segment has formed the organizational structureand layout featuring “Industrial Microbiology Division + Innovative Technology Company +Industrial Manufacturing Bases” and has completed the overall layout of raw materials for innovativemedicines (xRNA & ADC medicines), pharmaceutical APIs & intermediates, massive health &aesthetic medicine raw materials based on synthetic biology, industrial fermentation, green chemicalmanufacturing and other technologies. In the future, the Company will actively expand pets protectionand featured biomaterials, and keep expanding the industrial layout.(III) Aesthetic MedicineThe year of 2022 bears historical significance for the Company’s aesthetic medicine business.As a Chinese company taking the lead in international layout of aesthetic medicine businesses, theCompany steadily advances its aesthetic medicine businesses in accordance with the overall strategyof “global operation layout and dual-circulation development.” The Company further integrates itsR&D resources and competencies focusing on global high-end aesthetic medicine markets. TheCompany has successfully developed its international aesthetic medicine businesses that organicallycombine R&D, manufacturing and marketing, and established an international aesthetic medicinemarketing network based on its six global R&D centers in the U.K., the Netherlands, France,
Switzerland, Spain and Israel, as well as Sinclair’s six global production bases in the Netherlands,France, the U.S., Switzerland, Bulgaria and Israel, with its products sold in over 80 countries andregions. Attaching great importance to innovation in aesthetic medicine technologies, the Companyhas always practiced its operation concept of “hi-tech R&D, high-quality positioning and globalproducts”, continuously increased its input in innovation of technologies, enriched the innovativeproduct lines, and has now launched 36 categories of high-end “noninvasive + micro-invasive”products in the aesthetic medicine field, including 24 categories that have been launched in domesticand overseas markets and 12 categories that are under development. Moreover, the Company hasmastered cutting-edge technologies in global aesthetic medicine including STAT? patentedmicrosphere preparation technology, OXIFREE? patented manufacturing technologies, RotateRF,Multi-CORE?, SVC? and PCR?. With its product portfolios that cover facial and body filling,thread lifting, skin management, body shaping, depilation, private repair and other non-operativemainstream aesthetic medicine fields, the Company now ranks in the forefront of the industry in termsof product quantity and coverage.
During the reporting period, the Company’s aesthetic medicine segment witnessed rapid growthas a whole and achieved the total operating revenue of 1.915 billion yuan (excluding internaloffsetting factors), setting the record high in revenues of both domestic and overseas aestheticmedicine businesses, and up 91.11% year on year on comparable basis (excluding Huadong Ningbo).Overseas Aesthetic Medicine BusinessIn 2020, Sinclair, the Company’s wholly-owned subsidiary that serves as its global aestheticmedicine business operation platform, set a new high in operating performance with both its injectionsand EBD businesses exceeding goals in the full-year plan even under the influence of high inflationin the global market and rising raw materials and energy costs. During the reporting period, Sinclairachieved the consolidated operating revenue of 134.57 million pounds (about 1.144 billion yuan), up
76.9% year on year, and the EBITDA of 23.04 million pounds, up 245.95% year on year, and attainedthe annual operating profits for the first time since it was acquired.
During the reporting period, Sinclair witnessed constant and rapid growth in revenue from coreinjection products driven by the strong demands in overseas markets. Thanks to its unique andexclusive STAT? patented microsphere preparation technology that focus on long-term efficacy andsafety, Ellansé
?
may not only boast instant filling and shaping effect, but also revitalize regenerationof autologous collagen, creating more natural effect of facial rejuvenation. It is still among the list ofbest-selling products even though it has been launched for multiple years. Adopting the world’s firstpatented manufacturing technology of OxiFree? with long molecular hyaluronic acid chains, MaiLi
?
series, the Company’s new high-end hyaluronic acid containing lidocaine, can produce a “Smart
Spring” intelligent spring gel matrix, which generates more natural post-filling effect and featureslong-lasting and outstanding filling ability. It has been continuously recognized by the market sinceit was launched and witnessed a year-on-year growth of 190% in revenue during the reporting period.Lanluma?, a collagen stimulator of L-polylactic acid, is the only regenerative product approved forhip and thigh filling in the world yet, which witnessed a year-on-year growth of 44% in revenueduring the reporting period, being the main driving force for the growth of overseas aestheticmedicine business. Recently, Lanluma
?was awarded the “the Best Injectable Body Filler” by the2023 AMWC, which vividly showcases the authoritative recognition of Lanluma
?
products andtechnologies by the international aesthetic medicine industry, as well as the great affirmation ofSinclair’s achievements in the high-end aesthetic medicine field. The Company will keep advancingthe registration and promotion of its core products in global markets and Sinclair has planned tosuccessively embark its efforts in registering Ellansé
? and MaiLi
?series products in the U.S. Marketin the second quarter of 2023.
In February 2022, Sinclair successfully acquired the equity of Viora, a U.S. Companyspecialized in non-invasive and micro-invasive energy based devices for aesthetic medicine, furtherexpanding the Company's innovative product lines for aesthetic medicine. Then, Sinclair integratedits businesses and markets, marking another important global strategical layout of Sinclair in the fieldof aesthetic medicine energy based device following its wholly-owned acquisition of Spain’s HighTech. Viora will be an effective bridge for Sinclair to further expand its EBD businesses in the U.S.Market for good brand reputation, perfect marketing service personnel staffing, complete marketingmanagement system and extensive market resources. In 2022, EBD businesses of Viora witnessedrapid growth in American market, with performance that exceeds the full-year operation plan. The Vseries, its key product, is a multi-functional aesthetic medicine operating platform that integrates threeenergy sources of RF, IPL and laser, which boasts Multi-CORE?, CORE?, SVC?, PCR? andother technologies for skin compactness, body shaping, etc. and offers comprehensive exclusivetreatment solutions based on different groups and skin qualities. The product has been awarded theU.S. and European registration and certification. Viora is actively expanding its presence in EU andAsian-Pacific region. The effect of its integration with Sinclair has been preliminarily manifested. In2023, Sinclair will keep fostering the Company’s overall competitiveness in global aesthetic medicinebusiness by further enhancing the collaborative effect of EBD and injections.In the first quarter of 2023, Sinclair launched Sculpt & Shape, a new energy based device forbody shaping and facial rejuvenation, in the European market, which adopts the innovative RotateRF
technology and brings patients comfortable, effective and safe experience. Sculpt & Shape is well-received by the market immediately after it was launched.Aesthetic Medicine in ChinaSinclair (Shanghai), the Company’s wholly-owned subsidiary and its aesthetic medicinebusiness operating center in Chinese market, kept developing the high-end markets for aestheticmedicine injections and maintained rapid growth in 2022 despite the fluctuation of market demands.During the reporting period, Sinclair (Shanghai) achieved the total operating revenue of 626 millionyuan, with favorable profits. By the end of 2022, Sinclair (Shanghai) has signed cooperation contractswith over 500 hospitals and trained over 1,100 certified physicians.
Its core product Ellansé
?has always attracted great market attention since it was launched in theChinese market for its regeneration and anti-aging technologies and concept, and has become one ofthe best-selling products in the field of aesthetic medicine injects in China, playing a leading role inthe high-end market in the field of aesthetic medicine regeneration filling.
In the first quarter of 2022, Glacial Spa
?
completed its global debut in China, which is researchedand developed by Rox Anderson, father of modern laser medicine, and many medical specialists fromHarvard University and Massachusetts Institute of Technology. Adopting the revolutionaryCryomodulation technology, the product accurately inhibits melanin synthesis and transport from thesource at low temperature to improve the skin quality and color. To date, Sinclair (Shanghai) hasestablished commercial cooperation on this product with over 40 aesthetic agencies in China. In 2023,Sinclair (Shanghai) will further expand the cooperation modes, facilitate the cooperation with Chineseaesthetic agencies, and extend the market coverage.During the reporting period, the Company kept advancing the domestic and overseas registrationand commercialization of its core aesthetic medicine products. Sinclair exclusive introduced themulti-functional facial skin management platform Préime DermaFacial, a kind of energy based devicethat integrates five cutting-edge technologies of spiral vacuum, microdermabrasion, micro current,radio frequency and ultrasonic and carries the IoT technology. Being an intelligent hi-tech beautyapparatus, it has been commercially sold in main aesthetic medicine markets in America, Europe andother regions of the world in succession since September 2022, and is planned to be launched in Chinain 2023. The bipolar RF anti-aging equipment Reaction
?
, the Company’s EBD product, is a newgeneration of intelligent beauty apparatus that integrates CORE? multi-RF technology with thevacuum negative pressure technology in a path-breaking manner. Adopting the contact coolingtechnology, it can effectively avoid energy and thermal loss and dramatically improve customers’comfort level. With its domestic agent successfully changed in 2022, the product is planned to besold and promoted in China in the second quarter of 2023. V version and X version of poly-L-lactic
acid (PLLA) collagen stimulant Lanluma
?
were approved to be launched in Bo’ao LechengInternational Medical Tourism Pilot Zone, which are used for increasing the volume of depressionareas on the face and body, especially for correcting skin depressions.In the first quarter of 2023, MaiLi Extreme, the Company’s novel high-end lidocaine-containingsodium hyaluronate filler for injection and Ellansé
?M, a polycaprolactone microsphere facial fillerfor injection, successfully completed the enrollment of all subjects in clinical trials in China, withfollow-up started.
The Company has always pursued the positive values of “keeping improving”, activelyparticipated in co-governance of industry, joined hands with alliance partners to foster corecompetitiveness, established trustworthy cosmetic consumption environment, and empowered thestandardized development of the regeneration aesthetic medicine market in China by improving itsinfluence, while continuously promoting the launching of products and actively expanding its markets.The Company conveys the therapeutic concept of “formal aesthetic medicine agencies, physiciansand products” to enable the healthy and positive development of the aesthetic medicine industry.
Figure: Aesthetic Medicine Injection and Thread Lifting Products Launched and under
Development
Figure: Aesthetic Medicine Energy based devices Launched and under Development(IV) Pharmaceutical Business
During the reporting period, the Company’s pharmaceutical business segment actively copedwith multiple influences and impacts under special circumstances, practically fulfilled the Company’ssocial responsibilities as the leading pharmaceutical company throughout Zhejiang Province,shouldered the heavy responsibilities to guarantee the supply of medical materials, and endeavoredto satisfy the needs of various medical institutions and people for medicines despite diversedifficulties.
In the meantime, the Company’s pharmaceutical business segment maintained steady businessdevelopment in the face of fierce market competition. During the reporting period, the Company’spharmaceutical business segment achieved the operating revenue of 25.553 billion yuan, up 10.55%year on year, and the net profit of 397 million yuan, up 3.85% year on year. In 2022, the Company’spharmaceutical business segment optimized the organizational architecture in business, tapped theoverall resources, and stretched its products out of all subsidiaries. The Jinhua Supply ChainWarehouse of the Company was put into operation in full swing, forming the two-warehousedistribution mode throughout Zhejiang Province. Moreover, the Company further increased its inputin external market and established equity cooperation with Zhejiang Dongyang Medicine andMedicinal Material Co., Ltd. (renamed “Huadong Medicine Dongyang Co., Ltd.), which has becomean operating platform in Dongyang region to further improve the Company’s market share inZhejiang Province. As for innovative business, the Company focused on expansion of product agencyand high-end cold chain logistics to lead the high-quality development. With regard to management,the Company advanced the centralized management to improve the quality and efficiency, shifted thefocus of human resources to innovative fields and optimized the information system to empower thebusiness development. Main measures taken are as follows:
1. Vigorously developing traditional businesses, stabilizing hospital market and stretchingout to external markets
The Company further refined and excelled in traditional businesses. The Company focused onthe introduction of innovative medicines, gradually optimized the structure of products for hospitals,endeavored to increase the share of high-value products, and continuously improved the proportionof products for hospitals, thus ensuring steady rise. With regard to OTC, the Company focused ondesignated pharmacies for medical insurance, affiliated to hospitals and chain pharmacies, andexpanded the coverage and share, thus maintaining high growth rate. As for the self-operated retail,the Company placed the focus on developing stores in hospitals and external market, as well as DTPstores to make breakthrough in sales. Moreover, the Company expanded the regional share of suchhigh-value products as medical apparatuses, medicinal materials, ginseng and antler, as well asspecial medicines for high growth of businesses.
2. Cultivating innovative businesses and improving profitability
1) The Company established professional promotion teams that serve nationwide customersfrom the agency in Zhejiang to regional agency and nationwide agency revolving around two lines ofmedicine agency and apparatus agency to improve the profitability of agent varieties.
2) The Company leveraged full support to increase the share of third-party logistics anddistribution of the supply chain. The Company completed the collaborative integration andoptimization under multiple logistics scenarios taking the advantage of delivery of Zhezhong JinhuaLogistics Base, focused on high-end pharmaceutical cold chain, expanded the distribution of specialmedicines represented by high-end cold chain and vaccines, and consolidated its role as the firstpharmaceutical cold chain brand in Zhejiang.
3) As for the self-operated e-commerce platform, the Company fostered its own brand, furtherconsolidated product R&D and iteration, enriched the product groups, further improved the onlinenotability and influence of its self-owned brand “Xuguanghe”.
4) The Company earnestly implemented its strategy of “extending from medical care to aestheticmedicine and massive health”, enriched existing business formats, and fostered new impetus for moreprofits by expanding the boundaries of value-added services for upstream and downstream customers.
3. Reducing cost and improving efficiency, following regulatory provisions, and improvingthe operating performance
The Company optimized its staffing, implemented the post rotation system for managers, andcultivated compound talents by integrating the management of various functional departments.Moreover, the Company implemented the quantitative performance evaluation with value creation asthe core that focusing on innovation in staffing of managers, established unified quality managementstandards, enhanced the management responsibilities of the headquarters, and had GSP managementnormalized. The Company also set up its operating system that covers the businesses in East Chinafor unified management and service of various divisions and subsidiaries, enhanced its complianceregulation and risk control, increased income and reduced cost, steadily advanced the full coverageof bidding and purchasing, and endeavored to reduce cost and improve efficiency by leveraging thecohesion of the Company as a whole.II. Awards during the reporting periodDuring the reporting period, as the Company’s comprehensive competitive strength, efficientoperation and governance, and value creation ability were recognized by the market, it won a numberof awards and honors:
Ranked 357th in Fortune China Top 500 Companies, the 13th consecutive year for being listed;
Listed in Top 100 of Chinese Pharmaceutical Companies in 2021 of Menet, maintaining its rankingas Top 10 among Top 100 Chinese Chemical Pharmaceutical Companies Ranking in 2021;Top 100 Chinese Pharmaceutical Manufacturers in 2021 and Top 100 Chinese PharmaceuticalBusinesses in 2021 by All-China Federation of Industry and Commerce;Top 500 Chinese Private Enterprises in 2022 and Top 500 Chinese Enterprises in Service Industryin 2022 by China Enterprise Confederation;Top 100 Chinese Pharmaceutical R&D Centers in 2022 and Top 100 Chinese ChemicalPharmaceutical R&D Centers by yaozh.com.In terms of investor relations management:
The Best Investor Relations, the Best Secretary of the Board of Directors and the Best New MediaOperator, the 13th Tianma Award for Investor Relations of Chinese Companies Listed on the MainBoard;In terms of ESG management:
Top 100 Chinese Listed Companies in ESG by Securities Times, etc.
2. Income and cost
(1) Composition of operating revenue
Unit: RMB yuan
| 2022 | 2021 | Year-on-year percentage increase/decrease | |||
| Amount | Proportion in operating revenue | Amount | Proportion in operating revenue | ||
| Total operating revenue | 37,714,587,458.01 | 100% | 34,563,301,233.67 | 100% | 9.12% |
| By sector | |||||
| Business | 25,706,575,656.84 | 68.16% | 24,203,730,039.28 | 70.03% | 6.21% |
| Manufacturing | 11,666,006,594.38 | 30.93% | 10,519,190,765.06 | 30.43% | 10.90% |
| Aesthetic medicine | 1,914,953,889.03 | 5.08% | 1,002,027,972.65 | 2.90% | 91.11% |
| Including: International aesthetic medicine | 1,143,849,083.22 | 3.03% | 665,510,309.09 | 1.93% | 71.88% |
| Domestic aesthetic medicine [Note] | 883,937,124.31 | 2.34% | 366,560,098.82 | 1.06% | 141.14% |
| Offset (inter-sectoral offset) | -1,322,138,396.44 | -971,513,302.13 | |||
| By product | |||||
| By region | |||||
| Domestic sales | 36,549,476,866.81 | 96.91% | 33,883,474,489.91 | 98.03% | 7.87% |
| Overseas sales | 1,165,110,591.20 | 3.09% | 679,826,743.76 | 1.97% | 71.38% |
| By sales model | |||||
[Note] The domestic aesthetic medicine business includes the income from the self-operated products of Sinclair (Shanghai), theincome from the aesthetic medicine products of the Company’s pharmaceutical commercial agency and the income from the OTCweight-loss products of the Company.
(2) The operating revenue or profit accounts for more than 10% of the total by industry, product, region orsales model
√ Applicable □ N/A
Unit: RMB yuan
| Operating revenue | Operating cost | Gross profit rate | Year-on-year percentage increase/decrease in operating revenue | Year-on-year percentage increase/decrease in operating cost | Year-on-year percentage increase/decrease in gross profit rate | |
| By sector | ||||||
| Business | 25,706,575,656.84 | 23,833,974,287.72 | 7.28% | 6.21% | 6.16% | 0.04% |
| Manufacturing | 11,666,006,594.38 | 2,568,079,627.21 | 77.99% | 10.90% | 14.99% | -0.78% |
| By product | ||||||
| By region | ||||||
| Domestic sales | 36,549,476,866.81 | 25,350,585,541.92 | 30.64% | 7.87% | 6.87% | 0.65% |
| Overseas sales | 1,165,110,591.20 | 331,911,469.63 | 71.51% | 71.38% | 40.68% | 6.21% |
| By sales model | ||||||
If the statistical specifications of the Company’s main business data have been adjusted during the reporting period, the Company’smain business data of the most recent year should be adjusted according to the specifications at the end of the reporting period.
□ Applicable √ N/A
(3) Whether the Company’s income from in-kind sales is greater than that from labor services
√ Yes □ No
Reasons that year-on-year percentage increase/decrease in related data is over 30%
□ Applicable √ N/A
(4) Performance of major sales contracts and major procurement contracts signed by the Company as at thereporting period
□ Applicable √ N/A
(5) Composition of operating cost
Unit: RMB yuan
| Sector | Item | 2022 | 2021 | Year-on-year percentage increase/decrease | ||
| Amount | Proportion in operating cost | Amount | Proportion in operating cost | |||
| Business | Operating cost | 23,833,974,287.72 | 92.80% | 22,451,262,640.00 | 93.71% | -0.91% |
| Manufacturing | Operating cost | 2,568,079,627.21 | 10.00% | 2,233,384,937.73 | 9.32% | 0.68% |
| International aesthetic medicine | Operating cost | 403,186,286.22 | 1.57% | 234,272,299.70 | 0.98% | 0.59% |
| Offset (inter-sectoral offset) | Operating cost | -1,122,743,189.60 | 961,549,148.45 | |||
Note
(6) Whether the scope of consolidation has changed during the reporting period
√ Yes □ No
For details, please refer to “VIII. Change of consolidation scope” in “Section X. Financial Report”.
(7) Significant changes or adjustments to the Company’s business, products or services during thereporting period
□ Applicable √ N/A
(8) Major customers and major suppliers
The Company’s major customers
| Total sales amount of the top five customers (yuan) | 7,933,315,239.67 |
| Proportion of the total sales amount of the top five customers in the total annual sales amount | 21.04% |
| Proportion of related parties’ sales amount of the top five customers’ sales amount in the total annual sales amount | 0.00% |
Information of the Company’s top five customers
| No. | Customer name | Sales amount (yuan) | Proportion in the total annual sales amount |
| 1 | Customer A1 | 3,180,251,095.06 | 8.43% |
| 2 | Customer A3 | 1,412,463,993.68 | 3.75% |
| 3 | Customer A2 | 1,339,809,252.12 | 3.55% |
| 4 | Customer A6 | 1,107,957,405.77 | 2.94% |
| 5 | Customer A4 | 892,833,493.04 | 2.37% |
| Total | -- | 7,933,315,239.67 | 21.04% |
Other information of major customers
□ Applicable √ N/A
Information of the Company’s major suppliers
| Total purchase amount of the top five suppliers (yuan) | 3,048,387,112.07 |
| Proportion of the total purchase amount of the top five suppliers in the total annual purchase amount | 11.87% |
| Proportion of related parties’ purchase amount of the top five customers’ purchase amount in the total annual purchase amount | 0.00% |
Information of the Company’s top five suppliers
| No. | Supplier name | Purchase amount (yuan) | Proportion in the total annual purchase amount |
| 1 | Supplier B5 | 780,302,332.49 | 3.04% |
| 2 | Supplier B6 | 735,151,508.81 | 2.86% |
| 3 | Supplier B7 | 532,504,871.16 | 2.07% |
| 4 | Supplier B8 | 529,761,797.92 | 2.06% |
| 5 | Supplier B9 | 470,666,601.69 | 1.83% |
| Total | -- | 3,048,387,112.07 | 11.87% |
Other information of major suppliers
□ Applicable √ N/A
3. Expenses
Unit: RMB yuan
| 2022 | 2021 | Year-on-year percentage increase/decrease | Note on major changes | |
| Sales expenses | 6,334,738,928.05 | 5,424,051,895.28 | 16.79% |
| Administrative expenses | 1,248,781,970.63 | 1,166,941,288.41 | 7.01% | |
| Financial expenses | 78,256,567.01 | 22,075,055.28 | 254.50% | Mainly due to the increase in interest-bearing debt |
| R&D expenses | 1,015,971,052.33 | 979,644,017.93 | 3.71% |
4. R&D input
(1) Overall R&D situation
During the reporting period, being “scientific research-based and patient-centered”, theCompany further devoted itself to the field of cancer and chronic disease treatment, continuouslyincreased the R&D input, kept enriching the layout of innovative medicine R&D, enhanced theconstruction of innovative R&D ecology and technological platform, and actively advanced theprogress of clinical trials, with multiple major staged achievements made. As of the date of the Report,the Company has a total of 83 pharmaceutical projects under development, including 52 innovativeand biosimilar medicine projects. Five products are under phase III clinical trial, while another threeare under phase II clinical trial. During the reporting period, the Company input 2.681 billion yuanin R&D in the pharmaceutical industry segment, up 44.8% year on year. Among them, 1.196 billionyuan were used as direct R&D expenditures, up 24.2% year on year, and 1.484 billion yuan wereinput for product introduction and R&D equities. R&D tasks mainly include the following:
1) The Company continued to practice the new medicine R&D mode combining independentR&D + cooperative entrusted development + product License-in, track the latest internationalmechanism of medicine action and target, as well as the progress of clinical application research,speed up the layout of innovative medicines and introduction of innovative medicine projects at homeand abroad, clarify innovative, differentiated and iterative standards for initiation of projects, andstrengthen the capabilities of independent innovation and R&D;
2) With “clinical value, pharmacoeconomic value and commercial value” as the starting point,the Company laid out multiple categories of innovative products in fields of endocrine, autoimmunityand oncology during the reporting period;
3) Focusing on clinical superior varieties and specialized medicines, the Company acceleratedthe R&D layout of high-tech barrier generic medicines and modified new medicines;
4) The Company established and fostered the industrial chain advantages of “APIs +preparations” for generic medicines, developed technical improvement and innovation of externalpreparations, and strengthened its market competitiveness;
5) The Company strengthened the comprehensive dynamic evaluation of varieties underdevelopment, strengthened the management of imported projects, especially clinical projects,
accelerated the speed and quality of development of clinical projects, especially those under phase IIIclinical trials, and sped up the launching of innovative medicines;
6) The Company built its ADC global R&D ecology for win-win cooperation by fostering thePolypeptide differentiation innovative technology platform, immune disease antibody technologyplatform, microorganism fermentation cytotoxin technology platform, and innovative linker andcoupling technology platform.
(2) Innovative medicine development planning
The Company formulated a strategic planning for the development of innovative medicines inthe next five years. With the focus placed on existing treatment fields, the Company made clear keydirection and number of innovative projects to be initiated each year during the planning period, andproposed that no less than 15 innovative varieties (including innovative medicines, modified newmedicines and innovative medical apparatuses, etc.) should be initiated and reserved each year duringthe planning period. During the reporting period, the Company endeavored to promote the progressof clinical research of innovative medicines and key biosimilar medicines under developed, with aview to have them approved and launched as early as possible. In addition, the Company also activelyexplored and referred to the construction of international advanced innovative medicine R&D system,constantly optimized and adjusted the overall R&D system structure, and established a research teamthat covers the whole life cycle of innovative medicine R&D by introducing top-notch R&D talents,and perfected various functional modules of innovative project R&D, thus empowering theattainment of strategic planning goals of the Company’s innovative projects.
Particularly in the field of ADC, the Company kept expanding its differentiated in-depth layout,successively invested in Qyuns Therapeutics, an anti-body R&D and production company, NuolingBiomedical Technology (Beijing) Co., Ltd., an ADC linker and coupling technology company,incubated Zhejiang Huida Biotech Co., Ltd. with full product lines for ADC drug toxin raw materials,and held shares of Doer Biologics, a multi-antibody platform R&D company. Moreover, the Companyestablished cooperation with Heidelberg Pharma, a global emerging technology company in the fieldof ADC based in Germany, on equity investment and products. In the future, the Company will keepstrengthening the construction of innovative platform and integration of resources, further expand thecooperation on new technology platforms based on the ADC Global R&D Ecology of HuadongMedicine, create differentiated ADC independent R&D platform, and plan to initiate at least 10 ADCinnovative products and actively facilitate their registered clinical studies within 3 years.
With “value creation” as its core, the Company’s Innovative Medicine Global R&D Centerfocused on “advantaged, differentiated and source-based innovation” and ultimately: 1) achieved the
dual-engine driving by independent R&D + external introduction, and built the new ecology forinnovative R&D; 2) clarified the differentiated and innovative initiation goal mechanism (no less than15 innovative R&D projects initiated each year) and formed the pioneering, differentiated andcompetitive innovative product lines; 3) built the global R&D strategic cooperation ecology withHuadong Medicine as the core and produced a batch of PCC/ IND achievements with greatadvantages, high druggability and global independent intellectual property rights, with NDA/ BLAapplications to be submitted and innovative medicines to be launched since 2023; 4) cultivated a high-level scientific research team that can support the whole life cycle of innovative medicine R&D; 5)kept enhancing the construction of technology platform with independent intellectual property andhigh barrier, including proteolytic targeting chimera (PROTAC), antibody drug conjugate (ADC), andAI drug discovery & design (AIDD), as well as products and innovative projects with high valuesand independent intellectual property rights based on such platform.
(3) Main tasks regarding independent R&D and innovation
The Innovative Medicine R&D Center has preliminarily completed the construction oftranslational medicine research technology platform, AI drug design and discovery platform, modernpharmaceutical chemical synthesis technology platform and ADC R&D platform, which haveprovided strong technical support for initiation and incubation of new projects. To date, the R&Dteam has screened and evaluated tens of thousands of pharmaceutical molecules with potentialactivity (including small modules of pharmaceutical chemicals and large modules of biomedicine),which mainly distributed in such fields as endocrine metabolism, autoimmunity and oncology.Among them, HDM1002, the Company’s first self-developed innovative medicine program that isunder the IND stage, has completed IND applications in both the U.S. and China, and has won theglobal independent intellectual property rights, marking that the Company’s independent R&D hasentered a new stage. HDM1005 and HDM2005 projects have successfully obtained PCC modules,especially HDM1005 that successfully obtained PCC molecules in less than one year since it wasinitiated, showcasing great innovation strength of Huadong Medicine and marking the rapid increaseof its independent R&D ability. To date, the Company’s Innovative Medicine R&D Center hasclaimed a total of over 80 patent applications, including 18 formal and PCT patent applications.Moreover, the Company won the honor of “Pioneering Innovation Team” of Zhejiang Provincein 2021 and obtained the fund under Zhejiang Province’s Pioneer Scientific and Technology Programin 2022, which provide support for the establishment and operation of the Huadong MedicineInnovation and Development Union Fund of Zhejiang Natural Science Foundation. Meanwhile,HDM1002, TTP273 and some other programs were all awarded prizes for scientific and technological
projects at the provincial and/ or municipal level. Being funded by the “Special Program for High-quality Development of Bio-pharmaceutical Industry in Hangzhou”, Mefatinib successfully imports“Hangzhou 115” overseas intelligence.
(4) Progress of development of key innovative medicines, innovative medical apparatusesand clinical researches of biosimilar projectsAs of the date of the Report, progresses of the Company’s development of key innovativemedicines, innovative medical apparatuses, and clinical researches of biosimilar projects are asfollows:
Endocrine metabolism
The application on IND of HDM1002, a micromolecule GLP-1 receptor agonist independentlydeveloped by the Company, has been submitted in China in February 2023, which will be submittedin the U.S. in April 2023.
Liraglutide Injection, a GLP-1 receptor agonist, has had its marketing authorization applicationfor diabetes indications approved by NMPA in March 2023. Its marketing authorization applicationfor obese or overweight applications was accepted in July 2022, and is expected to be approved in2023.
Semaglutide Injection, a GLP-1 receptor agonist, has now completed the administration andfollow-up of all subjects in phase I clinical trial.
The Investigational New Drug Application (IND) of Insulin Degludec Injection has obtained thenotification of approval for clinical trial in September 2022, and its administration of all subjects inphase I clinical trial has been completed yet.
HDM7003 (D-4517.2) is a product under joint development by the Company and its joint stockcompany Ashvattha Therapeutic, Inc. based in the U.S. In September 2022, Ashvattha announced thatit has completed the enrollment of the first subject of phase II clinical trial of the product in the U.S.for the treatment of wet age-related macular degeneration and diabetic macular edema.
The Company is carrying out preclinical study of HDM1005, a GLP-1R and GIPR long-actingpolypeptide dual-target agonist used for treating diabetes, obesity and other diseases.
DR10624 is a GLP-1R/GCGR/FGF21R target multiple agonist developed by the Company’sholding subsidiary Doer Biologics, which can be used for treating type 2 diabetes, obesity,hyperlipidemia, etc. It was approved to start its phase I clinical trial in New Zealand in April 2022and the administration of the first subject was completed in June 2022.
Ranibizumab Injection has completed the enrollment of the first subject during phase III clinicaltrial in March 2022.
OncologyELAHERE? (mirvetuximab soravtansine-gynx, R&D code: IMGN853, HDM2002): it hascompleted the enrollment of all subjects for PK medicine metabolic study during phase I clinical trialin China in July 2022. In November 2022, ImmunoGen, the American partner of the Company,announced that ELAHERE? was accelerated approved by the FDA. It is the first ADC medicineapproved by the FDA for platinum-resistant ovarian cancer, which is used to treat adult patients withplatinum-resistant ovarian epithelial cancer, fallopian tube cancer or primary peritoneal cancer whoare folate receptor α (FRα) positive and have previously received 1-3 systemic therapy. The productcompleted the enrollment of all subjects for phase III single-arm clinical trial in China in December2022, with its pre-BLA submitted in March 2023. It is planned to submit the BLA within 2023. In thefuture, the Company and its partner will keep advancing its application in front-line treatment ofovarian cancer via clinical studies, and support to use ELAHERE? as the preferred medicinecombination for treatment of ovarian cancer.
Mefatinib Tablets are used for treating advanced non-small cell lung cancer. Currently, theoverall enrollment of subjects for phase III clinical trial has been completed, and it is expected thatthe NDA application will be started after the PFS events of phase III study are obtained in the secondquarter of 2023.DR30303, a product under development of Doer Biologics and targeted medicine Claudin 18.2for the treatment of solid tumor, obtained the notification of approval for clinical trial in January 2022,and successfully completed the enrollment and administration of the first subject in phase I clinicaltrial in May 2022.HDP-101 is an ATAC
?(Antibody-Amanita Conjugate) targeting at B-cell maturation antigen.Heidelberg Pharma, the Company’s Germany partner, is currently carrying out overseas phase I/IIaclinical trials of the product for the treatment of relapsed/refractory multiple myeloma, with theadministration for the first subject completed in February 2022.
HDP-103 is an ATAC? medicine targeting at prostate-specific membrane antigen (PSMA).Heidelberg Pharma, the Company’s Germany partner, is currently carrying out preclinical researchon this product, with metastatic castration-resistant prostate cancer (mCRPC) as its target indication.
HDM2003 (AB002) is a kind of dual-target fusion protein targeting at PD-L1/L2 and IL15 co-developed by the Company and AKSO in the U.S., which is used for the treatment of solid tumor. Itis now under preclinical study.
HDM2005, an ADC product independently developed by the Company, is used for the treatmentof solid and hematologic tumors, and is now under preclinical study.
Autoimmunity
ARCALYST? (Rilonacept): It is a kind of recombinant dimer fusion protein, which can blockthe signal transduction of IL-1α and Il-1β. It was introduced by the Company through a cooperationagreement with Kiniksa in February 2022. ARCALYST? has been approved in the U.S. for thetreatment of Cryopyrin-Associated Periodic Syndromes (CAPS), Deficiency of Interleukin-1Receptor Antagonist (DIRA) and recurrent pericarditis in 2008, 2020 and 2021 respectively. Beinglisted as Overseas New Medicine in Urgent Need for Clinical Purpose (First Batch) by CDE,ARCALYST? is used for the treatment of Cryopyrin-Associated Periodic Syndromes (CAPS). InJuly 2022, the Company submitted a Pre-BLA for CAPS indications of this product to CDE, withfeedback received. The Company plans to formally submit the BLA for such indication in China in2023. Moreover, the Company is carrying out an epidemiological survey of recurrent pericarditis inChina, and will determine the scheme for product registration according to the survey results.HDM3001 (QX001S), a biological similar of Ustekinumab (Stelara?), is a product underdevelopment by the Company in cooperation with Qyuns Therapeutics, which is used for thetreatment of moderate and severe plaque psoriasis of adults. In February 2022, the enrollment of allsubjects in phase III clinical trial was completed ahead of schedule, with the main end point of thestudy achieved. The BLA of the product is expected to be submitted in the third quarter of 2023.HDM3002 (PRV-3279) is used for the treatment of systemic lupus erythematosus (SLE) andprevention or reduction of the immunogenicity of gene therapy. Provention Bio, the Company’spartner, is carrying out Iia clinical trials for SLE indications of the project in the U.S. and Hong Kong,China. The Company submitted the IND in China in February 2023.HDM5001 (OP-101) is a product under joint development by the Company and its joint stockcompany Ashvattha Therapeutic, Inc. based in the U.S. Currently, the Company is exploring newindications for the product and will submit IND in China after clear conclusion is drawn.Mavrilimumab is a fully human monoclonal antibody targeting at GM-CSFRα. The Company’spartner Kiniksa is evaluating the relevant development plan for rare cardiovascular diseases.Innovative pharmaceutical equipmentHD-NP-102 (Dynamic Monitoring System of Glomerular Filtration Rate and MB-102 Injection):
The Dynamic Monitoring System of Glomerular Filtration Rate and MB-102 Injection jointlydeveloped 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 apparatus registration application for the system and isnow reviewing the application. The MB-102 injection (Relmapirazin) used in conjunction with thissystem is a global innovative medicine that completed the enrollment of all subjects for international
multi-center phase III clinical trial in February 2023. The preliminary study results show that the mainresearch end point has been reached, and it is planned to submit the pre-NDA in China in April 2023.The product is a combination of medicine and equipment in the U.S. and is expected to be approvedin the fourth quarter of 2023.
Pipeline Diagram of Main Innovative Medicines and Biosimilars as of the Date of the Report.
(5) Progress of development of major generic medicines
The Company further clarified the focused and prioritized varieties of existing generic medicinesunder development by regularly organizing dynamic evaluation and analysis. As of the date of theReport, key varieties are as follows:
| S/N | Field | Item | Specification | Latest Progress |
| 1 | Endocrine | Canagliflozin Tablets | 0.1g, 0.3g | Approved to be launched by NMPA in January 2023 |
| 2 | Endocrine | Sitagliptin Phosphate and Metformin Hydrochloride Tablets | 50/850mg | Approved to be launched by NMPA in October 2022 |
| 3 | Endocrine | Pioglitazone Hydrochloride and Metformin Hydrochloride Tablets | 15/850mg | Application for launching submitted and accepted in June 2022, and supplementary materials submitted. |
| 4 | Immunity | Tacrolimus Ointment | 0.03%, 0.1% | Application for launching has been submitted and accepted in April 2022, and supplementary materials have been submitted. |
| 5 | Immunity | Tacrolimus Granules | 1mg | Application for launching submitted and accepted in January 2023. |
| 6 | Immunity | Tacrolimus Sustained-release Capsules | 5mg, 1mg, 0.5mg | Application for launching of 5mg version submitted and accepted; Applications for launching of 1mg and 0.5mg versions submitted and accepted in February 2023. |
| 7 | Oncology | Sorafenib Tosylate Tablets | 0.2g | Approved to be launched by NMPA in November 2022. |
| 8 | Oncology | Olaparib Tablets | 100mg, 150mg | Application for launching submitted and accepted in October 2022. |
| 9 | Oncology | Ibrutinib Capsules | 140mg | Pilot-scale study completed |
| 10 | Angiocarpy | Macitentan Tablets | 10mg | Supplementary materials have been submitted. |
(6) Progress of international registration
The Company has actively conducted its international registration tasks. As of the date of theReport, main progress is as follows:
| S/N | Field | Item | Remarks | Latest Progress |
| 1 | Endocrine | Acarbose | APIs | Supplementary materials for registration in India submitted in May, June and October 2022, and January and March 2023. |
| 2 | Immunity | Tacrolimus | APIs | DMF application in new venue in the U.S. completed in January 2022. |
| 3 | Immunity | Tacrolimus Capsules | 0.5mg, 1mg, 5mg | Supplementary materials for ANDA application (the U.S.)submitted in April and December 2022, and January 2023. |
| 4 | Oncology | Exatecan Mesylate | Intermediate | DMF application in the U.S. completed in January 2022. |
| 5 | Oncology | Maytansine DM1 | Intermediate | DMF application in the U.S. completed in July 2022. |
| 6 | Anti-infection | Daptomycin | APIs | DMF application in new venue in the U.S. completed in January 2022. |
| 7 | Anti-infection | Mupirocin Calcium | APIs | Supplementary materials for DMF application (the U.S.) submitted in March 2022. |
| 8 | Anti-infection | Mupirocin | APIs | Approved to be registered in India February 2023. |
| 9 | Anti-infection | Caspofungin Acetate for Injection | 50mg, 70mg | Supplementary materials for ANDA application (the U.S.) submitted in May 2022. |
| 10 | Anti-infection | Polymyxin B Sulfate | APIs | Supplementary materials for CEP application in Jiangdong submitted in September 2022. Approved to be registered in India February 2023. |
| 11 | RNA vaccine | N1-Methyl-Pseudouridine-5'-Triphosphate | Intermediate | DMF application in the U.S. completed in December 2022. |
| 12 | Anticoagulant | Fondaparinux Sodium | APIs | Supplementary materials for registration in Taiwan, China submitted in March and September 2022, and March 2023. |
| 13 | Anticoagulant | Fondaparinux Sodium Injection | 2.5 mg/0.5 mL, 5 mg/0.4 mL, 7.5 mg/0.6 mL, 10 mg/0.8 mL | Supplementary materials for ANDA application (the U.S.) submitted in August, October and December 2022, and February 2023. |
| 14 | Traditional Chinese Medicine | Bailing Capsule | 0.5g | Approved to be launched in Singapore in September 2022. |
(7) Progress of consistency evaluation
As of the date of the Report, the progress of consistency evaluation on quality and efficacy ofCompany’s generic medicines is as follows:
| S/N | Field | Item | Specification | Latest Progress |
| 1 | Easing pain | Paracetamol and Tramadol Hydrochloride Tablets | 325mg: 37.5mg | The notification of approval for supplementary application of consistency evaluation obtained in November 2022. |
| 2 | Immunity | Tacrolimus Capsules | 1mg, 0.5mg | Application for consistency evaluation of 1mg version submitted and accepted in June 2022; Application for consistency evaluation of 0.5mg version submitted and accepted in February 2023. |
| 3 | Gastroenterology | Pantoprazole Sodium Enteric-Coated Capsules | 40mg | Application for consistency evaluation submitted and accepted in June 2022. |
| 4 | Angiocarpy | Indobufen Tablets | 0.2g | Application for consistency evaluation submitted and accepted in March 2023. |
| 5 | Angiocarpy | Adenosine Injection | 20ml:60mg, 30ml:90mg | Application for consistency evaluation submitted and accepted in October 2022. |
(8) Progress of registration and commercialization of aesthetic medicine products
| S/N | Type | Product Name | Purpose | Latest Progress |
| 1 | Injections | MaiLi Extreme Hyaluronic acid | Facial filling | Enrollment of all subjects for clinical trial in China completed in December 2022 and follow-up in progress. |
| 2 | Injections | Ellansé-M | Facial filling | Enrollment of all subjects for clinical trial in China completed in March 2023 and follow-up in progress. |
| 3 | Injections | Perfectha? Diphasic hyaluronic acid | Facial filling | Preparing for registration in China. |
| 4 | Thread lifting | Silhouette Instalift? | Mid-face lifting | Enrollment of some subjects in clinical trial in China completed, and follow-ups of various time nodes in progress. |
| 5 | Energy based device | Glacial Rx (F1) | Removing benign pigmented lesions of skin, etc. | Testing for registration in China in progress. |
| 6 | Energy based device | Primelase | Depilation | Testing for registration in China in progress. |
| 7 | Energy based device | V series products (V20, V30) | Skin compactness, body and facial shaping, skin rejuvenation, depilation, etc. | Testing for registration in China in progress. |
| 8 | Energy based device | EnerJet | Scar repair, facial lifting, dermal thickening, etc. | Testing for registration in China in progress. |
| 9 | Energy based device | Préime DermaFacial | Facial skin management | Commercial marketing achieved in European, American and other key aesthetic medicine markets successively in September 2022. Device attribute identification in progress in China; matching cosmetics approved for registration in December 2022. |
| 10 | Energy based device | Reaction? | Body and facial shaping, skin compactness | Change of agent in China approved in August 2022; products to be launched again. |
| 11 | Energy based device | Sculpt&Shape | Body shaping and facial rejuvenation | Launched in Europe in the first quarter of 2023. |
The Company’s V version and X version of poly-L-lactic acid (PLLA) collagen stimulant Lanluma
?
obtained the approval from Hainan Medical Products Administration that Lanluma
?can be used inBoao Lecheng International Medical Tourism Pilot Zone as an urgent imported medical device forclinical purpose. In addition, the Company is advancing the application for franchise rights ofSilhouette and Ellansé
?series products in Boao Lecheng International Medical Tourism Pilot Zone.
(9) Progress of patents
In recent years, the Company attached great importance to the protection of intellectual property andthe commercialization and application of achievements, and the number of patent applications andauthorization were steadily increased. Over the years the Company applied for 1,136 patents at homeand abroad, including 404 authorized invention patents. Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd., the Company’s wholly-controlled subsidiary, is a national intellectualproperty demonstration enterprise. In November 2014, it passed the external audit of Zhongzhi(Beijing) Certification Co., Ltd., becoming one of the first 147 companies that passed the standardsimplementation certification. During the reporting period, the Company successfully passed thereexamination review on supervising the standard implementation of corporates’ intellectualproperty.During the reporting period, the Company’s patent application and maintenance proceeded smoothly.A total of 151 patents were applied and submitted, among which 88 were invention patents and 69were authorized.
| Patent type | Increase during the reporting period | Total quantity | ||
| Number of patents applied for (unit) | Number of patents received (unit) | Number of patents applied for (unit) | Number of patents received (unit) | |
| Invention patent | 88 | 30 | 931 | 404 |
| Utility patent | 56 | 35 | 171 | 150 |
| Appearance design patent | 7 | 4 | 34 | 25 |
| Total | 151 | 69 | 1136 | 579 |
Note: Data in the above table represent the statistical patent information of main subsidiaries engaging in thepharmaceutical industry, industrial microbiology and aesthetic medicine within the Company’s consolidatedstatements.R&D personnel of the Company
| 2022 | 2021 | Percentage change | |
| Number of R&D personnel (person) | 1,543 | 1,285 | 20.08% |
| Proportion of R&D personnel | 13.13% | 12.92% | 0.21% |
| R&D personnel structure by education | |||
| Bachelor | 735 | 632 | 16.30% |
| Master | 471 | 411 | 14.60% |
| PhD | 64 | 59 | 8.47% |
| R&D personnel structure by age | |||
| <30 | 502 | 458 | 9.61% |
| 30-40 | 811 | 628 | 29.14% |
| >40 | 230 | 199 | 15.58% |
R&D investment of the Company
| 2022 | 2021 | Percentage change | |
| R&D investment amount (yuan) [Note] | 1,196,309,461.22 | 962,881,963.61 | 24.24% |
| Proportion of R&D investment in operating revenue | 10.72% | 9.52% | 1.20% |
| Capitalized R&D investment amount (yuan) | 227,794,420.14 | 0.00 | |
| Proportion of capitalized R&D investment in R&D investment | 19.04% | 0.00% | 19.04% |
Note: The above R&D investment is from the direct R&D expenses of the Company’s main industrial controlled subsidiary, which ismainly used for clinical research of products under research, the upgrade of existing product process, expenses for commissionedtechnological development, consistency evaluation and international registration certification.During the reporting period, the Company’s R&D investment in the pharmaceutical industry was RMB2,681 million, up by 44.8%year-on-year, among which the direct R&D expenses were RMB1,196 million, increasing by 24.2% year-on-year, and the investmentin product introduction and R&D equity was RMB1,484 million.The proportion of R&D personnel means the proportion of the number of employees in the Company’s subsidiaries mainly engagingin R&D and manufacturing of the pharmaceutical industry and industrial microbiology.
The proportion of R&D investment in operating revenue means the proportion of the direct R&D expenses of Company’spharmaceutical industry in the operating revenue of the Company’s pharmaceutical industry.Reasons and impacts of major changes in the composition of R&D personnel
□ Applicable √ N/A
Reasons for the year-on-year significant change in the proportion of total R&D investment in operating revenue
□ Applicable √ N/A
Reasons for the significant change in the capitalization rate of R&D investment and its rationality
□ Applicable √ N/A
5. Cash flows
Unit: RMB yuan
| Item | 2022 | 2021 | Year-on-year percentage increase/decrease |
| Cash inflows from operating activities | 40,637,718,289.85 | 38,296,617,059.25 | 6.11% |
| Cash outflows for operating activities | 38,255,865,621.25 | 35,126,859,191.30 | 8.91% |
| Net cash flow from operating activities | 2,381,852,668.60 | 3,169,757,867.95 | -24.86% |
| Cash inflows from investing activities | 121,638,643.17 | 251,785,859.22 | -51.69% |
| Cash outflows for investing activities | 2,557,236,232.75 | 2,238,468,503.37 | 14.24% |
| Net cash flow from investing activities | -2,435,597,589.58 | -1,986,682,644.15 | -22.60% |
| Cash inflows from financing activities | 5,149,368,399.06 | 2,264,348,880.01 | 127.41% |
| Cash outflows for financing activities | 5,249,078,772.19 | 3,031,802,182.50 | 73.13% |
| Net cash flow from financing activities | -99,710,373.13 | -767,453,302.49 | 87.01% |
| Net increase in cash and cash equivalents | -163,229,935.84 | 422,733,564.91 | -138.61% |
Main influencing factors of significant changes in relevant data year on year
√ Applicable □ N/A
The cash inflows from investing activities in the current period are RMB120 million, a decrease of
51.69% compared with that in the same period last year (RMB250 million), mainly due to the disposalof Ningbo Donghai Bank’s equity in the same period last year.The net cash flow from financing activities in the current period is RMB-99.71 million, an increaseof 87.01% compared with that in the same period last year (RMB-770 million), mainly due to theincrease in interest-bearing debt.
Reasons for the significant difference between the Company’s net cash flow from operating activities and the current year’s net profitduring the reporting period
□ Applicable √ N/A
V. Analysis of non-main business
√ Applicable □ N/A
Unit: RMB yuan
| Amount | Proportion in total profit | Note on reasons | Sustainable or not | |
| Investment gains | -141,560,034.56 | -4.67% | Mainly due to long-term equity investment gains measured at equity method | |
| Gains and losses from changes in fair value | 28,469,286.61 | 0.94% | No | |
| Asset impairment losses | -3,821,625.15 | -0.13% | ||
| Non-operating revenue | 7,608,417.78 | 0.25% | No |
| Non-operating expenses | 37,938,443.03 | 1.25% | No | |
| Other gains | 92,781,468.16 | 3.06% | Mainly due to the confirmation of government grants in the current period | No |
| Gains on asset disposal | 8,257,595.43 | 0.27% | No |
VI. Assets and liabilities
1. Major changes in asset composition
Unit: RMB yuan
| End of 2022 | Beginning of 2022 | Change of proportion | Note on major changes | |||
| Amount | Proportion in total assets | Amount | Proportion in total assets | |||
| Monetary funds | 3,996,302,178.41 | 12.81% | 4,032,424,555.22 | 14.94% | -2.13% | |
| Accounts receivable | 7,198,746,788.59 | 23.08% | 6,430,482,175.97 | 23.82% | -0.74% | |
| Inventories | 4,495,483,328.54 | 14.41% | 3,974,549,648.96 | 14.72% | -0.31% | |
| Real estate properties for investment | 13,648,240.14 | 0.04% | 14,569,533.94 | 0.05% | -0.01% | |
| Long-term equity investments | 1,659,076,538.78 | 5.32% | 984,927,398.68 | 3.65% | 1.67% | Mainly due to the investment in Herdelberg in the current period |
| Fixed assets | 3,981,653,265.52 | 12.76% | 3,077,227,759.84 | 11.40% | 1.36% | Mainly due to the transfer of construction in process to fixed assets |
| Constructions in progress | 873,159,427.47 | 2.80% | 1,582,125,201.25 | 5.86% | -3.06% | Mainly due to the transfer to fixed assets |
| Right-of-use assets | 166,505,297.17 | 0.53% | 153,724,197.81 | 0.57% | -0.04% | |
| Short-term borrowing | 947,516,383.37 | 3.04% | 1,237,843,228.13 | 4.59% | -1.55% | Mainly due to the decrease in short-term borrowing in the current period |
| Contract liabilities | 146,488,489.07 | 0.47% | 118,341,141.48 | 0.44% | 0.03% | |
| Long-term borrowing | 1,051,457,747.44 | 3.37% | 139,178,905.04 | 0.52% | 2.85% | Mainly due to the increase in long-term borrowing in the current period |
| Lease liabilities | 84,610,324.98 | 0.27% | 80,889,403.39 | 0.30% | -0.03% | |
| Other non-current assets | 1,037,279,933.15 | 3.33% | 911,062,879.83 | 3.37% | -0.04% | |
Foreign assets account for a relatively high proportion
□ Applicable √ N/A
2. Assets and liabilities measured at fair value
√ Applicable □ N/A
Unit: RMB yuan
| Item | Amount at the beginning of the period | Gain/loss from fair value changes in the current period | Accumulated fair value changes recognized in equity | Depreciation reserves withdrawn during the period | Purchase amount in the current period | Selling amount in the current period | Other changes | Amount at the end of the period |
| Financial assets | ||||||||
| 2. Derivative financial assets | 28,469,286.61 | 29,907,470.68 | ||||||
| 4. Other equity instrument investments | 257,815,844.68 | 6,804,247.45 | 1,922,980.47 | 100,052,217.85 | 9,847,061.33 | 360,910,876.41 | ||
| Total | 257,815,844.68 | 21,665,039.16 | 1,922,980.47 | 100,052,217.85 | 9,847,061.33 | 390,818,347.09 | ||
| Financial liabilities | 0.00 | 0.00 | ||||||
Other changesChanges in exchange rateWhether there are significant changes in the main asset measurement attribute of the Company during the reporting period.
□Yes √No
3. Limitation of asset rights at the end of the reporting period
| Item | Book value at the end of the period | Reason for limitation |
| Monetary funds | 579,391,476.08 | Certificate of deposit and cash deposit that cannot be withdrawn at any time |
| Accounts receivable for financing | 7,724,981.86 | Bill pledge |
| Intangible assets | 52,782,210.00 | Land use rights mortgaged for bank loans |
| Total | 639,898,667.94 |
VII. Investment
1. Overview
√ Applicable □ N/A
| Investment amount in the reporting period (yuan) | Investment amount in the same period of last year (yuan) | Percentage change |
| 2,859,562,403.21 | 2,195,588,789.55 | 30.24% |
2. Significant equity investments acquired during the reporting period
√ Applicable □ N/A
Unit: RMB yuan
| Name of invested company | Main business | Way of investment | Investment amount | Shareholding ratio | Capital source | Partner | Term of investment | Product type | Progress as of the balance sheet date | Projected income | Profit or loss of investment in the current period | Involved in litigation or not | Disclosure date (if any) | Disclosure index (if any) |
| Heidelberg Pharma AG | R&D of anti-cancer ADCs | Capital increase + acquisition | 77,940.45 [Note] | 35.00% | Equity funds + external financing | None | Long term | Equity | Equity settlement completed | -15,641,114.82 | No | February 28, 2022 | Cninfo (http://www.cninfo.com.cn) | |
| Wuhu Huaren Science and Technology Co., Ltd. | Development, production and sales of nucleosides, nucleotides and medical intermediates of | Capital increase + acquisition | 396,000,000.00 | 60.00% | Equity funds | None | Long term | Equity | Equity transfer completed | 10,645,547.22 | No | August 10, 2022 | Cninfo (http://www.cninfo.com.cn) |
| new-generation antiviral drugs | ||||||||||||||
| Anhui Meihua Hi-Tech Pharmaceutical Co., Ltd. | Pharmaceutical and chemical manufacturing | Acquisition | 108,000,000.00 | 100.00% | Equity funds | / | Long term | Equity | Equity Investment completed | -16,794,739.88 | No | December 29, 2021 | Cninfo (http://www.cninfo.com.cn) | |
| Total | -- | -- | 504,077,940.45 | -- | -- | -- | -- | -- | -- | / | -21,790,307.48 | -- | -- | -- |
Note: The RMB central parity on December 30, 2022 is adopted in conversion between RMB and EUR, that is, 7.4229.
3. Significant non-equity investments in progress during the reporting period
√ Applicable □ N/A
Unit: RMB yuan
| Project name | Way of investment | Investment in fixed assets or not | Industry involved in the investment project | Investment amount during the reporting period | Cumulative actual investment amount by the end of the reporting period | Capital source | Project progress | Projected income | Cumulative income realized by the end of the reporting period | Reasons for not meeting the planned schedule and projected income | Disclosure date (if any) | Disclosure index (if any) |
| Huadong Medicine Biomedical Science and Technology Park Project Phase II | Self-built project | Yes | Pharmaceutical manufacturing | 29,539,771.98 | 1,783,105,544.66 | Equity funds | 98.60% | 0.00 | 0.00 | N/A | March 9, 2017 | Cninfo (http://www.cninfo.com.cn) |
| Huadong Medicine Life Science Industrial Park (Xiangfu south plot) project | Self-built project | Yes | Pharmaceutical R&D | 187,932,882.31 | 268,776,670.28 | Equity funds | 77.00% | 0.00 | 0.00 | N/A | April 21, 2021 | Cninfo (http://www.cninfo.com.cn) |
| Total | -- | -- | -- | 217,472,654.29 | 2,051,882,214.94 | -- | -- | 0.00 | 0.00 | -- | -- | -- |
4. Investment in financial assets
(1) Securities Investment
√ Applicable □ N/A
Unit: RMB yuan
| Type of stock | Stock code | Stock abbreviation | Initial investment cost | Accounting measurement model | Book value at the beginning of the period | Gain/loss from fair value changes in the current period | Accumulated fair value changes recognized in equity | Purchase amount in the current period | Selling amount in the current period | Gain/loss during the reporting period | Book value at the end of the period | Accounting item | Capital source |
| Domestic and overseas stock | RAPT | RAPT | 20,207,400.00 | Fair value measurement | 14,461,751.62 | -6,396,953.76 | 2,165,568.66 | 8,064,797.86 | Other equity instrument investments | Equity funds | |||
| Total | 20,207,400.00 | -- | 14,461,751.62 | -6,396,953.76 | 2,165,568.66 | 8,064,797.86 | -- | -- | |||||
| Date of announcement of the Board of Directors on securities investment approval | N/A | ||||||||||||
| Date of announcement of the Board of Shareholders on securities investment approval (if any) | N/A | ||||||||||||
Note: Huadong Medicine Investment Holding (Hong Kong) Limited, a subsidiary of the Company, purchased 218,102 Series C-2preferred shares of RAPT Therapeutics, Inc. in a total of USD3 million in 2018. RAPT Therapeutics, Inc. was listed on NASDAQexchange on October 30, 2019 (stock code: RAPT). As of the end of the reporting period, Huadong Medicine Investment Holding(Hong Kong) Limited holds 60,500 shares in RAPT after it reduced its stake, accounting for 0.204% of the total shares of RAPTTherapeutics, Inc.
(2) Derivatives investment
√ Applicable □ N/A
1) Derivatives investment for hedging during the reporting period
√ Applicable □ N/A
Unit: RMB ten thousand yuan
| Type of derivatives investment | Initial investment amount | Gain/loss from fair value changes in the current period | Accumulated fair value changes recognized in equity | Purchase amount during the reporting period | Selling amount during the reporting period | Amount at the end of the period | Proportion of the investment amount at the end of the period in the net assets of the Company at the end of the reporting period |
| Currency swap | 0 | 2,846.93 | 0 | 0 | 0 | 2,990.75 | 0.16% |
| Total | 0 | 2,846.93 | 0 | 0 | 0 | 2,990.75 | 0.16% |
| Note on accounting policies and specific principles of accounting concerning hedging business during the reporting period, and whether they change significantly when compared with that in the previous reporting period | Relevant accounting process is applied into currency swap, in accordance with the Accounting Standards for Enterprises No. 22 - Recognition and Measurement of Financial Instruments and the Accounting Standards for Enterprises No.37 - Presentation of Financial Instruments as well as their application guides. There is no currency swap at the end of the previous reporting period. | ||||||
| Note on the actual gains and losses during the reporting period | Gains and losses from changes in fair value arising from currency swap for hedging are RMB28,469,300 during the reporting period. | ||||||
| Note on the effect of hedging | The Company carries out foreign currency hedging business based on specific situations, which is based on normal production and operations and can effectively reduce risks on the foreign currency market. Risks facing the Company under control are bearable. | ||||||
| Capital source of derivatives investment | External financing | ||||||
| Note on the risk analysis and control measures for derivatives holding during the reporting period (including but not limited to market risks, liquidity risks, credit risks, operational risks and legal risks) | Risks: 1. Market risks: The interest rate, exchange rate and other prices on the market may fluctuate due to changed domestic and overseas economic policies and situations, thus changing the price of financial derivative instruments and causing losses. 2. Liquidity risks: Transactions fail to be completed due to the market lacking liquidity and counter-parties. 3. Operational risks: Trading financial derivative instruments requires experts who can deal with complexity, which may cause operational risks due to traders or managers thinking there is an error or system failure and out of control. 4. Contractual risks: Contracts on financial derivative business expire, some of which cannot be performed on time, and thus they are breached. 5. Legal risks: Relevant legal changes lead to a contract that is not in conformity with local laws, so that the contract cannot be performed, or contractual terms are omitted and unclear; or losses are caused to the Company due to the counter-party violating relevant laws and regulations, and thus the contract cannot be performed as required. Measures: The Company and its wholly-controlled subsidiaries avoid speculation and arbitrage when trading financial derivatives, so that strict risk control will be employed during the execution of contracts concerning financial derivatives trading. 1. The Company strictly abides by prudent investment principles, selects prudent investment types, and makes investments within the amount approved by the Board of Directors. 2. The Company carefully selects counter-parties for trading, and only trades derivatives with financial institutions featuring robust operations, sound reputation and business license for financial | ||||||
| derivative trading. The Company may resort to external professional investment and legal service institutions if necessary to provide consulting services for the Company’s financial derivative trading, as well as scientific and precise investment strategies and suggestions. 3. The Company has formulated the Management Rules for Securities Investment and Derivative Trading, setting detailed rules on the management, supervision and information closure related to the Company’s derivative trading principles, scope, decision-making authority and capital use, which can effectively prevent investment risks. Besides, the Company will strictly implement related management rules, assign special personnel to follow up on the progress of financial derivative trading. For instance, relevant measures shall be taken in time to control investment risks if there are risks that may affect the Company’s capital safety 4. The Company’s audit department is in charge of monitoring and checking the execution of financial derivative trading and reporting to the Audit Committee of the Board of Directors. | |
| In case of changing market prices or fair values of invested derivatives during the reporting period, the analysis of the derivatives’ fair values shall disclose the specific methods adopted, relevant assumptions and parameter settings. | Please refer to “Disclosure of fair value” in the “Financial Report” for details when the derivatives are measured at fair value on the market. |
| Litigation (if applicable) | N/A |
| Date of announcement of the Board of Directors on derivatives investment approval (if any) | August 10, 2022 |
| Date of announcement of the Board of Shareholders on derivatives investment approval (if any) | N/A |
| Specific opinions of independent directors on the Company’s investments in derivatives and risk control | The Company invests in derivatives for the avoidance of market fluctuation risks and hedging, which is closely associated with daily operation requirements. The Company has formulated the Management Rules for Securities Investment and Derivative Trading and enhanced trading risk management and control, which contributes to the avoidance and control of operational risks, improving the Company’s capability to withstand market risks. No loss is caused to the Company and all shareholders. |
2) Derivatives investment for speculation during the reporting period
□ Applicable √ N/A
No such case during the reporting period.
5. Use of raised funds
□ Applicable √ N/A
No such case during the reporting period.
VIII. Major assets and equity sales
1. Major assets sales
□ Applicable √ N/A
No such case during the reporting period.
2. Major equity sales
□ Applicable √ N/A
IX. Analysis of controlling and shareholding companies
√ Applicable □ N/A
Main subsidiaries and the shareholding companies that have an impact on the Company’s net profit of more than 10%
Unit: RMB yuan
| Company name | Company type | Main business | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Subsidiary | Production and management of Traditional Chinese and Western raw medicines and preparations, and health care products | 872,308,130 | 12,911,135,442.97 | 9,519,547,715.67 | 11,161,695,120.79 | 2,428,349,735.69 | 2,125,033,445.39 |
| Huadong Medicine Wenzhou Co., Ltd. | Subsidiary | Wholesale of TCM materials, TCM decoction pieces, chemical preparations, etc. | 61,300,000 | 1,400,835,496.42 | 310,621,802.96 | 3,160,259,991.28 | 52,674,575.56 | 38,004,820.83 |
| Huadong Medicine Supply Chain Management (Hangzhou) Co., Ltd. | Subsidiary | Warehousing and storage services | 50,729,863 | 395,354,452.41 | 169,298,303.29 | 205,379,718.28 | 28,540,229.16 | 19,685,980.52 |
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable □ N/A
| Company name | Methods of acquisition and disposal of subsidiaries during the reporting period | Impact on the overall production, operation and performance |
| Huaren Science and Technology | Equity acquisition, capital increase | Industrial platform of industrial microbiology |
| Anhui Huayoulai Pharmaceutical Science and Technology Co., Ltd. | Equity acquisition, capital increase | Industrial platform of industrial microbiology |
| Meihua Hi-Tech | Equity acquisition | Industrial platform of industrial microbiology |
| Viora Ltd | Equity acquisition | International BD of the Company’s energy based aesthetic devices |
| Viora Inc. | Equity acquisition | International BD of the Company’s energy based aesthetic devices |
| Viora Canada Ltd | Equity acquisition | International BD of the Company’s energy based aesthetic devices |
| Hangzhou Weizhi Biotechnology Co., Ltd. | Newly established | Technological platform of microbiology |
| Hangzhou Hizyme Biotech Co., Ltd. | Newly established | Industrial microbiology synthetic biology technological platform |
| Ruian Huiren Health-care Co., Ltd. | Newly established | Business Development |
Information of major shareholding companies
X. Structured entities controlled by the Company
□ Applicable √ N/A
XI. Prospect of Future Development(I) Prospect of macro-economy and trend of the pharmaceutical industryThe world has entered a new period of turbulence and change in 2022. The escalation of Russia-Ukraine conflict threatens the global security pattern, further worsens the gloomy growth of globaleconomy, and pushes up global inflation, giving rise to secondary crises in many fields. The cold warmentality and group politics re-surge, and the unilateralism disrupts the international order, bringingsevere challenges for global governance. The economic globalization remains hindered and theextreme weather frequently afflicts the world. Internationally, protectionism is still prevalent andinternational sanctions are escalating, bringing greater constraints for growth of international tradeand investment. The volatility in financial market is further aggravated due to continuously highinflation and debt level. The shift of macro polices in the U.S. and Europe, and the U.S. Fed’saggressive interest rate hikes produced a global spillover effect, triggered capital outflows andcurrency depreciation in developing countries, increased the pressure on the balance of payments,and aggravated the risk of debt default. Meanwhile, the U.S. continuously exerts pressure on China’shigh-tech fields through export control and by other means, making the game between the U.S. andChina a new normal. In 2023, the world will face greater pressure and more uncertainties in economicrecovery.
In recent years, the global pharmaceutical technologies have witnessed continuous innovationand the R&D speed of innovative targets has kept accelerating. Large multinational pharmaceuticalcompanies further increase their input in innovative biomedicine. AI, an important driving force forthe improvement of R&D efficiency of new medicines, is penetrating to all aspects of new medicineR&D at a rapid speed. IQVIA data shows that the global medicine expenditures were about 1.48trillion US dollars in 2022 (excluding vaccines and therapy-related expenses), and it is estimated thatthe global medicine expenditures will reach 1.9 trillion US dollars in 2027, with a compound annualgrowth rate (CAGR) of 3~6%. Main factors driving the growth include: the contribution of newmedicines, the impact of expiration of patents, and the growing impact of biosimilars. The key growtharea in the next five years is biomedicine that accounts for 35% of the global expenditures. In addition,the global cumulative expenditures on biosimilars will exceed 290 billion US dollars by 2027, easingthe budgetary pressure on the overall expenditures by payers. By 2027, the CAGRs of the world’stop two therapeutic fields - anti-tumor medicines and immune system medicines - will increase by13~16% and 3~6% respectively. The main reason for difference in growth rate lies that the anti-tumorfield is still driven by new medicines and about 100 new therapies are expected to emerge in the anti-tumor field within five years, while the immune system field will face competition from biosimilars.
By 2027, the expenditure on diabetes will reach about 168 billion US dollars, being expected to bethe world’s third largest treatment field. The growth rate in the next five years is expected to reach3~6%.As estimated by IQVIA, the medicine expenditure in China was about 166 billion US dollars in2022. Over the past five years, the CAGR of RLD in China was as high as 10.1%, becoming the mostimportant driving factor that promotes the growth of medicine expenditure. In 2022, RLD accountedfor 28% of the total medicine expenditure, higher than 22% five years ago. In the next five years, itis expected that the update of China’s medical insurance reimbursement list will promote more newlylaunched RLDs to be included in the medical insurance, promoting higher expenditure scale. It isestimated that the CAGR of RLD will exceed 5% in the next five years, while the CAGR of othermedicines will not exceed 4%, slowing down the total growth rate to 2~5%. Non-RLD brandmedicines are the second largest part of medicine expenditures in China. It is estimated that thesemedicine expenditures will increase by less than 1% each year due to cost control of hospitals. In thecoming five years, China’s medicine expenditure is expected to increase by about 30 billion USdollars, and will exceed 194 billion US dollars by 2027.(II) Industrial development trend
1. Pharmaceutical industry in China
The pharmaceutical manufacturing industry is a strategic industry that matters the nationaleconomy and people’s livelihood, economic development, and national security. As one of thepowerful pillars of China’s economy, the pharmaceutical industry has experienced three years ofmarket adjustment and development, and once again ushered in an opportunity for development. Itwill become an important impetus and guarantee for strengthening China’s endogenous cycle.Looking back on 2022, the pharmaceutical industry experienced a cold winter of capital: theprimary and secondary markets of the pharmaceutical industry was seriously threatened due to capital.Its primary and secondary markets became gloomy simultaneously. As the valuation bubble ofpharmaceutical enterprises began to fade, the industry gradually returned to rationality indevelopment. Meanwhile, independently developed innovative medicines are approved at an evenfaster speed and more innovative medicines are launched successively. High-quality substitution ofdomestic medicines has become the key word. As series of innovative medicines are launchedsuccessively, the substitution progress of some domestic medicines in segment tracks sped up in 2022,with obvious improvement in the quality of substitution.
In 2022, the proportions of R&D pipelines of Chinese pharmaceutical enterprises and emergingbiopharma companies (EBP) in China continued to rise even though the financing of thepharmaceutical industry was negatively impacted. According to the relevant report by IQVIA
Institute, emerging biopharma companies in China currently own 20% of the global EBP pipelines,which is higher than 9% five years ago and also higher than Chinese companies’ share of the globaltotal pipelines (15%). The EBP pipeline in China has the strongest growth compared with that ofother regions, up 19% over the past year.China’s innovative medicines once were all fast-follow ones. However, as innovative medicineR&D is continuously iterated, more and more medicines have achieved me-better and even first-in-class in efficacy. Statistics show that the total transaction amount of innovative medicines/ newtechnologies license out in China reached 17.42 billion US dollars in 2022, setting a new high and up
22.80% year on year. The number of transactions reached 48, up 14.29% year on year. There were 7transactions with a total amount of over 1 billion US dollars, indicating the gradual recognition ofChina’s local R&D strength by overseas enterprises and its continuously improved R&D quality.From the demand side, there will be obviously more medical needs for senile and chronicdiseases due to obvious trend of population aging in China, and a large number of unsatisfied clinicalneeds are the driving force for the innovation and development of the pharmaceutical industry. Inaddition, upgraded consumption will drive the growing demand for aesthetic medicine,ophthalmology, dentistry and other medical care consumption scenarios. From the payment end, theproportion of health expenditures to GDP in China can still be improved. As the per capita income ofresidents is still rising and the coverage of medical insurance keeps expanding, the overall scale ofthe pharmaceutical industry in China witnesses continuous growth and the long-term positivedevelopment trend of the industry remains unchanged.In 2021, the National Healthcare Security Administration released the Three-Year Action Planfor the Reform of DRG/DIP Payment Methods, requesting that all regions in China under unifiedcoordination must implement DRG or DIP within 3 years. The efficiency of medical insurance fundswill be effectively improved by establishing applicable and efficient payment management, incentiveand constrain mechanism for medical institutions, which will impose overall impact on thedevelopment orientation and operation management of hospitals.In 2022, the relevant state ministries and commissions issued varieties of the Fourteenth Five-Year Plans related to the pharmaceutical industry under the guidance of the China’s Fourteenth Five-Year Plan in combination with the changes of current economic situations at home and abroad,including the Fourteenth Five-Year Plan for the Development of the Pharmaceutical Industry, theFourteenth Five-Year Plan for the Development of the Traditional Chinese Medicine, the FourteenthFive-Year Plan for the Development of the Bio-economy, the Fourteenth Five-Year Plan for NationalHealth, the Fourteenth Five-Year Plan for Network Security and Informatization Construction ofDrug Supervision, the Fourteenth Five-Year Plan for Health Talents Development, and the Fourteenth
Five-Year Plan for National Health Informatization, etc. The release and implementation of theaforesaid plans will play an important role in standardizing and leading the high-quality developmentof the medical and pharmaceutical industry.The year of 2022 witnessed the massive development of the traditional Chinese medicineindustry. As policies for examination and approval of new traditional Chinese medicines have beencontinuously revised and optimized in recent years, the R&D of innovative traditional Chinesemedicines keep warming up. It is clearly proposed in the report of the 20th CPC National Congressto promote the inheritance and innovation of traditional Chinese medicine. Therefore, more focus isplaced on innovation. Various supporting policies for the traditional Chinese medicine industry inChina indicate that the Chinese government will not only gradually increase the input in the traditionalChinese medicine industry and support the construction of the traditional Chinese medicine industry,but also fundamentally protect the development of the traditional Chinese medicine enterprises,which is conducive to the improvement of the level of the whole industry. It is estimated that the scaleof the traditional Chinese medicine industry will reach more than one trillion yuan by 2027.
In 2023, the pharmaceutical economy in China is expected to recover, but witnesses moreobvious trend of differentiation and transformation. Innovation is still the only way to realize thedream of a nation with great power in medicine.
2. Aesthetic medicine
As China’s economy grows and its consumption upgrades, the aesthetic medicine industry inChina ushers in rapid development, with its market scale ranking the second globally. Theconsumption medical industry represented by aesthetic medicine becomes one of the new pointsdriving the growth of consumption. The aesthetic medicine industry boasts great space fordevelopment, but also faces increasingly fierce market competition. According to Frost & Sullivan’sdata, the market scale of the aesthetic medicine in China increased from 99.3 billion yuan in 2017 to
189.1 billion yuan in 2021 by service income, with a CAGR of 17.5%, which is much higher thanthat of the global market. It is estimated that the market scale of the aesthetic medicine in China willreach 226.7 billion yuan in 2022 and 638.2 billion yuan by 2030. The CAGR from 2021 to 2030 is
14.5%. The market scale of global aesthetic medicine market increased from 125.8 billion US dollarsin 2017 to 141.7 billion US dollars in 2021, with a CAGR of 3%. It is expected to reach 360.2 billionUS dollars by 2030, with a CAGR of 10.9% from 2021 to 2030. The future growth of the aestheticmedicine market in China will lead the global aesthetic medicine market.
The growth rate of the aesthetic medicine market in China slowed down since 2020 affected bymultiple factors and witnesses recovery since 2023. It is expected that the market scale of the aesthetic
medicine in China will reach 410.8 billion yuan by 2025 (with a CAGR of 17.2% from 2021 to 2025).The non-surgical (including injection filling and non-injection filling) aesthetic medicine market willbecome the main aesthetic medicine market in China for its features of less risk, faster recovery, andnatural effect. In 2021, the market scale of non-surgical aesthetic medicine in China reached 97.7billion yuan, with a CAGR of 24.94% from 2017 to 2021. It is estimated that the market scale willrise to 227.9 billion yuan in 2025 (with a CAGR of 31.9% from 2021 to 2025).The aesthetic medicine market in China boasts three characteristics as follows: (1) thepenetration rate in first-tier cities is much higher than that in other cities, and second- and third-tiercities have great growth potential in the future; (2) different from other developed countries,consumers aged 20 to 35 are the main consumers, with the highest penetration rate seen in consumersaged 20 to 25; (3) the scale of aesthetic medicine users witnesses rapid growth. It is estimated thatthere will be more than 23 million aesthetic medicine users in China by 2023.The aesthetic medicine, a pure offline consumption scenario, features high viscosity andrelatively greater recovery elasticity. Sufficient market scale, increasingly enriched aestheticmedicine products and advanced technologies will keep satisfy the needs of more patients, thusbecoming the core impetus for the development of the aesthetic medicine industry in China.To standardize the development of the industry, China launched various centralized rectificationactions and many ministries successively issued the relevant policies and regulations in 2021. Theaesthetic medicine industry ushered in an era of strict supervision that has covered the upper middleand lower reaches of the industry. The continuation of normalized supervision since 2022 isconductive to facilitating the reshuffle of the industry, increasing the market concentration, andpromoting the compliant and healthy development of the industry. Leading aesthetic medicineenterprises with strong brand effects will usher in a new growth space in a more fair competitionatmosphere.(III) Innovative development strategies of various business segments of the Company
1. Development plan of the pharmaceutical industry
Upholding the main theme of development of innovative R&D, the Company takes innovativemedicines as the foundation and orientation for building core competitiveness in the future, closelytrack the technological development and R&D dynamics of such frontier fields as biomedicine, genetherapy, cell therapy and ADC medicines in and out of China, focuses on and gives priority to thedevelopment of innovative medicines and high-technical barrier generic medicines with outstandingclinical values for anti-tumor, endocrine, autoimmunity, and other major diseases and chronicdiseases, with differentiated and pioneering innovative medicine pipelines formed. In terms ofphilosophy for development of R&D, the Company will deepen all-round foreign cooperation and
product introduction, inject new connotations into the long-term strategic plan of “digestion andabsorption”, and follow the innovative R&D idea of “self-research + introduction”. The Companywill continuously enrich its product lines, improve the medium- and long-term layout of innovativeproducts, keep maintaining the dual-wheel driving and coordinated development engines of powerand innovation for Huadong Medicine, build a global R&D strategic cooperation ecosystem centeredon Zhongmei Huadong. Moreover, the Company will continue to improve the ability in internationaloperation of products, and do well in external authorization of superior products, advancedtechnologies and patents. During the scientific and technological innovation in the future, theCompany will benchmark with innovation and differentiation and grasp its basic orientation ofclinical values, focusing on the project promotion speed, as well as middle- and long-term pipelinelayout.
The Company will continue to increase its investment in R&D, continuously enrich and optimizelines of core innovative products, endeavor to improve the proportion of annual R&D expenditure tomore than 10% of the sales revenue of the pharmaceutical industry, and constantly improve theutilization rate of R&D funds. Moreover, the Company will endeavor to initiate and reserve at least15 innovation projects (including medicines, medical apparatus, etc.) through independent initiation,external introduction or by other means, so as to provide innovative products that supplement andlead each of the existing product line and ultimately form rich product lines and favorable productechelons. As a result, there will be a benign development rhythm that innovative products arelaunched annually and the staged goal that the innovative business segment accounts for 30% of theoverall industrial revenue by 2025 can be achieved.More efforts will be made to introduce top-notch talents to create high-level scientific researchteams. The Company will also create an innovative cultural atmosphere that encourages innovationand success and bears failure, and enhance the construction of internal R&D system and technologicalplatforms. Another action is to build a scientific team with outstanding ability, open mind, greatpassion and sense of responsibility that cherishes innovation to facilitate the landing of theCompany’s international innovation strategy. The Company will establish a dynamic evaluationmechanism for R&D projects, set up an academic committee of external experts to assist theCompany in decision-making and management of R&D and product introduction, thus ensuringscientific, advanced and feasible scientific innovation.
2. Development plan of the pharmaceutical business
With regard to the pharmaceutical business, the Company has vigorously consolidated itsfoundation in Zhejiang Province and has been ranked top 10 pharmaceutical business enterprises in
China for consecutive years. To date, the Company has established 11 regional subsidiaries inZhejiang Province, with its customers distributed in 11 cities and 90 districts, counties and county-level cities throughout Zhejiang Province. The Company has four business segments of Chinese &western medicine, medical apparatus, medicine materials and ginseng & antler, and health industrythat cover the pharmaceutical wholesale & retailing, third-party medical logistics featuring coldchain, medical e-commerce, hospital value-added services and featured massive health industry.Further expanding the product agency and market development, the Company has formed the wholeindustry chain from planting in bases to processing of prepared pieces, automatic decoction, own-brand functional products for its traditional Chinese medicine industry. As the leader ofpharmaceutical business in Zhejiang Province, the Company focuses on forming the governmentaffairs, reserve, distribution and marketing abilities, established service platforms, and fostered thecompetitive advantages of regional enterprises.
Following the operating philosophy of “value creation and service foremost”, the Companyplaces its focus on hospitals and further enhances its presence in external markets. The Companykeeps expanding the proportion of hospital businesses, while strengthening the coverage in externalmarkets. Focusing on the retailing in East China, the Company further improves the profitability ofits retailing business and establishes attractive platforms for introduction of varieties and acceptanceof prescriptions. More efforts are made to develop its agency businesses that have become the mainbattle field for commercial transformation. “Xuguanghe” series products are promoted online tofurther enrich its product portfolios. In addition, the Company spares no efforts to support thesupply chain to develop the third-party businesses and cold chain logistics, and optimize theprovincial logistics system featuring cold chain, thus building the first brand of pharmaceutical coldchain in Zhejiang Province, expanding the market share of its high-end cold chain products, andobtaining authorizations for more products. The Company will increase the proportion of high-margin products and expand the coverage of apparatuses, ginseng and antler throughout ZhejiangProvince, actively explore business models of county-level medical institutions, cooperate withsubsidiaries to expand the business coverage starting with assisted decoction, and actively expandthe businesses of traditional Chinese medicine decoction pieces in various regions of ZhejiangProvince.
3. Development plan of the aesthetic medicine
Upholding the domestic and international dual-circulation development strategy, the Company’saesthetic medicine business vigorously follows the strategy of “global operation layout and dual-circulation operating development” by maintaining its good momentum of rapid development. Withits core subsidiary Sinclair as the global operating platform, the Company has achieved the globallayout of its aesthetic medicine and built itself into an international aesthetic medicine enterpriseswith great space of development in the future. The Company successively introduces “aestheticmedicine + biomedicine” products with great scientific connotation and huge market potential intoChina, a special market of the Company’s aesthetic medicine businesses, thus expanding its presencein China relying on its great registration and marketing abilities in China. Internationally, theCompany empowers the rapid launching and commercialization of its superior international productsrelying on the Company’s aesthetic medicine marketing basis in China, as well as the aestheticmedicine industry’s rapid development, thus fostering a new pattern features dual-circulationcoordinated development and mutual promotion of domestic and international businesses.In the future, the Company will continue to focus on the high-end market of global aestheticmedicine to form an international aesthetic medicine business integrating R&D, manufacturing andmarketing. The Company will further integrate its R&D resources and competencies, activelyoptimize its product structure, enrich and improve the industrial layout based on its six global R&Dcenters in UK, the Netherlands, France, Switzerland, Spain and Israel. Sinclair’s six global productionbases in the Netherlands, France, the U.S., Switzerland, Bulgaria and Israel will significantlyguarantee the international presence of the Company’s aesthetic medicine products and better satisfythe demands for future development and diverse market needs.
4. Development plan of the industrial microbiology
Aiming at international development, the industrial microbiology segment will keep up with thedevelopment trend of global industrial microbiology and synthetic biology industry and technologies,and endeavors to become an industry leader in the field of industrial microbiology by building an“industrialized, large-scale and international” industrial cluster. The industrial microbiology segmentis devoted to developing and manufacturing upstream raw material products in the fields of lifescience, massive health and personal care, animal nutrition and healthcare based on microbiologymanufacturing and the relevant industrial technologies. In the field of life sciences, the Company’sindustrial microbiology segment focuses on the development and manufacturing of raw materials andcomponents of nucleic acid drugs, antibody-coupled drugs, high-value and new microorganism-
derived medicines, and mainly arranges such business lines as nucleoside, antibody-coupled drugtoxins, highly active APIs (HPAPI), and lead compounds of innovative medicines frommicroorganisms. In the field of massive health and personal care, the Company focuses on thedevelopment and manufacturing of functional raw materials for healthcare products and cosmetics,mainly involving functional raw materials for healthcare such as bone health, oxidation resistance, aswell as functional raw materials for cosmetics featuring moisturizing and whitening. In the field ofanimal nutrition and healthcare, the Company mainly arranges such business lines as anti-parasiticinfection, anti-microbial infection, and animal nutrition raw materials. In addition, the Companyactively carries out R&D layout and business exploration in the development and application of livingmicroorganism medicines, pharmaceutical biomaterials and enzyme technologies.(IV) Business Plan in 2023Adhering to the philosophy of “high quality and efficiency”, Huadong Medicine will deepen theindustrial layout to achieve greater breakthrough in 2023. For the pharmaceutical industry segment,the Company will continue to introduce mature varieties with clinical value, which can be quicklylisted or have been listed, to ensure steady growth of revenue; for the pharmaceutical businesssegment, the Company will focus on value-oriented sales and strive to maintain a steady growth ofsales scale in line with the 2030 vision plan and the seventh three-year plan, thus realizing thedevelopment goal of “high quality and efficiency”; for the industrial microbiology segment, theCompany will perfect the business layout, coordinate the internal resources, and strengthen the overallallocation of marketing forces to make breakthrough in key businesses and actively support theenterprise transformation and upgrading; for the aesthetic medicine segment, the Company will offerhigh-end anti-aging and beauty solutions to patients and professionals, and dedicate to becoming aleader in the aesthetic medicine industry.In 2023, Huadong Medicine will focus on the following key tasks while maintaining steadydevelopment of each segment: Adhere to the internationalization strategy through combining thebring-in and going-out policies and making great efforts in international product registration,cooperation with foreign enterprises and product expansion in the international market; adhere to theinnovation-driven transformation strategy through supporting the innovative businesses, such asinnovative medicine R&D, instruments & devices and Internet hospital construction, and optimizingthe dynamic evaluation mechanism of innovative R&D lines; actively fulfill the requirements of “highquality and efficiency” through improving the operation level and per capita profit, and strengthening
the business thinking and sensitivity to business opportunities; strengthen the financial managementthrough maintaining the financial health and continuing to reduce the costs while keeping the steadyrevenue growth; and follow the seventh three-year plan and 2030 vision plan through developing theechelon plan of star products to create top varieties, ensuring the long-term sustained and stablegrowth, and continuously providing effective strength for enterprise innovation and transformation.
1. Pharmaceutical industry
Adhering to the “scientific research-driven and patient-centered” corporate philosophy, theCompany continuously increases investments in R&D to enrich the layout of innovative medicineR&D lines. In 2023, Huadong Medicine adds new innovative R&D connotation in the long-termstrategic plan of “digestion and absorption”, persists in the innovative R&D idea of “self-research +introduction”, and maintains the coordinated development driven by the “power engine” and“innovation engine”. “Innovation engine” is targeted to the clinical demand, keeping the Company atthe forefront of innovation. “Power engine” gives full play to existing technical accumulation andadvantages, and continuously supports the development of innovative R&D.Firstly, strengthen the independent innovative R&D capability, clarify the innovative,differentiated and iterative project establishment mechanism, center on innovation team to give fullplay to Huadong Medicine’s advantages in ecological circle and quickly output self-developed results,strengthen the management of introduced projects, and accelerate the listing process of clinical phaseIII projects. Secondly, continue to introduce mature varieties with high clinical value and hightechnical barriers, which can be listed quickly or have been listed, so as to ensure steady growth ofrevenue. Thirdly, strengthen the marketing compliance transformation, especially to strengthen thebuilding of professional product team, marketing systematization and compliance, give full play tothe service value of Internet hospitals for doctors and patients, unswervingly deepen the layout ofgrassroots and out-of-hospital markets, and improve market coverage.The quality management team should stick to the lifeline of enterprise product quality. On onehand, it is required to further optimize the collectivized supervision system of product quality toensure products compliant and safe. On the other hand, it is necessary to accelerate the managementimprovement of international registration of products, seriously study the international registration
policies, keep the quality compliance standards in line with international standards, and continue topromote the “going-out” internationalization strategy of products.
2. Pharmaceutical business
In 2023, the business segment should adhere to the business philosophy of “value creation” and“service first”, transform to value creation, high quality and efficient operation while maintaining asteady growth in sales scale, and make contributions to the high-quality improvement of operationperformance. In term of traditional business, it is required to further consolidate the hospital market,fully study the factors from market structure, policy impact, institutional cooperation, industrycompetition, etc., and make scientific judgments to steadily increase the hospital market share. Inaddition, it is necessary to insist on expanding the out-of-hospital market, and pay attention toimproving the profitability of retail and large pharmacies of Huadong Medicine. It is required to focuson agency products and third-party logistics to strengthen innovative business.
3. Aesthetic medicine business
Committing to long-term strategy of becoming a leader in the aesthetic medicine industry,Sinclair should further integrate the injection and EBD sectors in major regions and markets aroundthe world and create a new direct selling business system. On the other hand, Sinclair should createnew business growth through distribution mode in some major markets, establish and build excellentglobal sales teams. Sinclair will expand and strengthen the cooperation with leading aestheticmedicine groups, continue to cultivate first-tier and new first-tier cities, gradually expand second-tiercities, and strengthen doctor training and market education, thus to build a high-end aestheticmedicine enterprise and product brand, and expand market share through multiple channels.
4. Industrial microbiology
In 2023, the Company will focus on the industrial microbiology segment to perfect the corebusiness layout and make breakthrough in major businesses, fulfill the requirements of “high qualityand efficiency”, give full play to the overall operation function, coordinate the internal resources, andstrengthen the overall allocation of marketing powers. In xRNA field, efforts will be made toconsolidate the leading position in domestic industry through Huaren Science and Technology andmRNA Project Company. In the massive health field, efforts will be made to accelerate the Magic
Project, select industrial varieties with suitable market scale and feasible technology for rapid R&D,and use Magic production resources for commercialization. In term of APIs, efforts will be made tostrengthen the construction and development of APIs production bases, and promote the globalregistration and certification of APIs products as planned to market the products in the internationalmarket, thus building the Company an international major supplier. The Company will coordinateand integrate all subjects in the xRNA raw material section to form an integrated commercial supplysystem of ADC toxins, and integrate R&D forces to make breakthroughs in key projects of syntheticbiology.
5. Production and supply chain management
In 2023, on the basis of inheritance and development, Huadong Medicine will still spare noeffort to seek new innovation breakthroughs in production system, learn by doing, promote team andsystem construction, do a good job in basic management, reduce unit production cost, and maximizeproduction capacity through lean management and efficient operation. We will strive to build a “safe,compliant and efficient” production and operation system, persist in reducing costs and increasingefficiency, and support the transformation and new business development. Combined with the actualoperation of each business segment, we will do a good job in the construction ofinternational/domestic supply chain systems for various products, and set up an management teamfor international/domestic supply chains, offering supports to the Company’s internationaldevelopment strategy. The production system management team will try the best to strengthenbusiness sensitivity, operational thinking and profit-centered thinking, and cultivate the overallthinking ability. On the basis of ensuring the development of existing varieties, we should concentrateour superior production capacity on more valuable products.
6. BD strategy
In 2023, the BD team should follow the Company’s seventh three-year plan and the 2030 visionplan, improve the precision and accuracy of investment layout, and closely cooperate with thestrategic marketing department, the finance department and other departments to analyze theinvestment revenue, identify, control and prevent risks, so as to promote our superior products,improve the product lines, and support the Company’s strategic development. The BD team will focuson the following three directions. Firstly, we will focus on the superior varieties that can quickly bringbenefits to the Company, such as mature varieties that have been listed or at phase III, thus constantly
enriching our product lines. Secondly, based on the three core product areas of cancer, immunologyand endocrine, the team will continue to expand the treatment field and cooperate with existingproduct layout to quickly form a sales scale. Thirdly, the team will lay out a new technology platform.
(V) Possible Risks and Countermeasures
1. Change of industry policy and risk of product price reduction
The pharmaceutical industry is one of the key industries concerned by the State, and closelyrelated to the national economy and people’s livelihood. The national supervision of pharmaceuticalindustry has a profound impact on the development of the domestic pharmaceutical industry. In recentyears, the policies such as centralized procurement and medical insurance negotiation have beencontinuously promoted, gradually standardized, normalized and systematized with the deepening ofreforms in the medical and health care field. The external factors such as geopolitics andmacroeconomic policies disturb the market, pose new challenges to the production cost andprofitability of the pharmaceutical industry. Besides, there is a risk of price reduction of new drugproducts. Countermeasures: The Company continuously pays close attention to the industrialdevelopment trend, studies the national medicine policies, makes adjustments in time, increasesinvestment in R&D, enriches the product lines in the core treatment field, and improves the corecompetitiveness. In addition, the Company reduces production and operation risks through leanmanagement, cost reduction and benefit increase, and vigorously expands grassroots and self-fundedmarkets to enlarge the market coverage. Great efforts are made to explore the fields of aestheticmedicine and industrial microbiology, constantly improve brand competitiveness, and create newprofit points.
2. Risk in new drug R&D
Generally, it takes a long time for a new product to be launched from R&D to pre-clinicalresearch, clinical trials, application for registration, production approval, commercialization and etc.The R&D progress is affected by such factors as national policies, market factors, and regulatoryapproval. In addition, the new drug R&D sets higher requirements for R&D personnel; the investmentof manpower and early R&D expenses will put some pressure on the Company to achieve its current
business objectives. Meanwhile, new drugs will be tested by the market demands after launching,with the risk of price reduction, resulting in the return on R&D investment less than expected.
Countermeasures: The Company continues to introduce high-level scientific research talents,strengthen the training and encouragement of internal core technicians, and cultivate a high-levelinnovative scientific research team that can support the whole cycle of innovative drug R&D. Wewill focus on the core treatment field, continuously enrich and optimize the product lines throughindependent project establishment and external introduction, and continuously improve theindependent R&D strength to build Huadong Medicine R&D ecosystem. In addition, we will continueto optimize the innovation mechanism, constantly improve the scientific research, evaluation anddecision-making system for new drugs, and strengthen the close cooperation with well-known R&Dinstitutions at home and abroad.
3. Risk in investment and merger
Foreign investment is one of important ways of enterprise development. In recent years, theCompany has continued to invest and do mergers and acquisitions in such fields as innovative drugs,aesthetic medicine and industrial microbiology, so as to form goodwill and realize the innovation andtransformation development strategy. If the company acquired in the future faces the risk ofperformance fluctuation, there may be a risk of goodwill impairment, adversely affecting theCompany’s current operation performance. At the same time, the post-investment management andbusiness integration of the target company also put forward higher requirements for the managementof the Company.
Countermeasures: The company will strive to comprehensively improve our capabilities inoverall planning, management structure, financial management, overall operation and governance,and business integration; strengthen the resource sharing and synergy of acquired subsidiaries;regularly test the impairment of goodwill; and enhance comprehensive, scientific and timely post-investment management.
4. Risk in exchange rate fluctuation
With the rapid internationalization development, the Company increasingly developsinternational cooperation and exchanges, expands the sales network of aesthetic medicine in the world,
and accelerates the international marketing of industrial microbiology segment, rising the proportionof foreign currency settlement business. The fluctuation in exchange rate has a far-reaching andlasting impact on the Company, i.e. Bringing good economic benefits but also affecting the cost andprofit level. The fluctuation in exchange rate will affect the price of the Company’s export productsand cause exchange gains and losses to the Company, thus directly affecting the Company’s assets,liabilities and income, further the operation ability, debt repayment ability and profitability.Countermeasures: the Company will pay close attention to the fluctuation in exchange rate,adjust our business countermeasures in time according to its own situation, and resolve the adverseeffects; develop the exchange risk awareness, and improve the foreign exchange risk managementsystem; strengthen the training of financial personnel’s professional skills and risk awareness,enhance the awareness of risk avoidance, and make good use of financial means to avoid exchangerate risks.
XII. Registration form of receptions, including research, communication and interview,undertaken during the reporting period
√ Applicable □ N/A
| 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 |
| January 5, 2022 | Company conference room | Others | Institution | Huatai Securities, etc. | Themed communication on Huadong Medicine industrial microbiology | Please refer to the Huadong Medicine: Record of Investor Relations Activities: January 5, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| January 7, 2022 | Company conference room | Communication by phone | Institution | Industrial Securities, Horizon Insights, etc. | Investor communication | Please refer to the Huadong Medicine: Record of Investor Relations Activities: January 7 and 10, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for |
| details. | ||||||
| February 9, 2022 | Company conference room | Others | Institution | Zheshang Fund, etc. | Special communication on aesthetic medicine business and EBD trading interpretation of Huadong Medicine | Please refer to the Huadong Medicine: Record of Investor Relations Activities: February 9, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| March 1, 2022 | Company conference room | Others | Institution | Industrial Securities, etc. | Recent innovative BD project exchange of Huadong Medicine | Please refer to the Huadong Medicine: Record of Investor Relations Activities: March 1, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| April 28, 2022 | Company conference room | Communication by phone | Institution | Huatai Securities, etc. | Interpretation of 2021 annual and first quarter report performance of Huadong Medicine | Please refer to the Huadong Medicine: Record of Investor Relations Activities: April 28, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| May 13, 2022 | Company conference room | Others | Institution | Social and public investor | Description of 2021 annual and first quarter report performance of Huadong Medicine | Please refer to the Huadong Medicine: Record of Investor Relations Activities: May 13, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| June 1, 2022 | Company conference room | Field research | Institution | J.P. Morgan, etc. | Activities of investors’ reception day | Please refer to the Huadong Medicine: Record of Investor Relations Activities: June 1, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| July 6, 2022 | Company conference room | Field research | Institution | Industrial Securities, Zheshang | Investor communication, online discussion | Please refer to the Huadong Medicine: Record |
| Securities, Morgan Stanley, CITIC Securities, etc. | on China A-shares | of Investor Relations Activities: July 6 and 8, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. | ||||
| August 10, 2022 | Company conference room | Communication by phone | Institution | Industrial Securities, etc. | Interpretation of 2022 mid-year report performance of Huadong Medicine | Please refer to the Huadong Medicine: Record of Investor Relations Activities: August 10, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
| October 26, 2022 | Company conference room | Communication by phone | Institution | China International Capital Corporation Limited., etc. | Interpretation of 2022 third quarter report performance of Huadong Medicine | Please refer to the Huadong Medicine: Record of Investor Relations Activities: October 26, 2022 presented on the websites of irm.cninfo.com.cn and cninfo.com.cn for details. |
Section IV. Corporate GovernanceI. Basic situation of corporate governanceDuring the reporting period, the Company strictly complied with the requirements of the regulatorydocuments on corporate governance issued by the CSRC and the SSE, such as the Company Law, theSecurities Law, the Governance Guidelines for Listed Companies, and the Rules for Stock Listing ofShenzhen Stock Exchange. In order to realize its strategic development goals and safeguard theinterests of all shareholders, the Company carried out comprehensive internal control andstandardized management, built and polished internal control systems, strengthened internalmanagement, standardized information disclosure and improved the corporate governance structure,thus protecting shareholders’ rights and interests. There is no material difference between actualcorporate governance and the requirements of the Company Law and the relevant provisions of theCSRC.According to the regulatory documents on the governance of listed companies issued by the CSRC,the Company has formed a system that is legally compliant and in line with the actual operation ofthe Company. By the end of the reporting period, the actual corporate governance was basicallyconsistent with the regulatory documents on corporate governance issued by the CSRC and theShenzhen Stock Exchange, and there were no outstanding governance issues.
Whether the actual corporate governance of the Company is significantly different from the normative documents on corporategovernance issued by the CSRC
□Yes √No
No such case during the reporting period.
II. The Company’s independence in corporate assets, personnel, finance, institutions andbusiness from controlling shareholders and de facto controllerDuring the reporting period, the Company continuously strengthened the corporate governancestructure and implemented standardized operation in accordance with the requirements of regulatoryauthorities. The Company and its controlling shareholder realized the separation of management andindependent operation in terms of personnel, assets, finance, institutions and business.
| Category | Independent or not | Note |
| Independence in business | Yes | The Company is mainly engaged in the production and operation of pharmaceutical products, and has its own independent production and sales systems. The Company’s business activities are completely independent from its controlling shareholder. Although the subsidiaries of the Company and the controlling shareholder are engaged in pharmaceutical business, they focus on different medical fields and different customer groups. Therefore, there is no competition between the Company, controlling shareholders and related parties. |
| Independence in personnel | Yes | The company is completely independent in the management of labor, personnel and salaries, and has an independent Human Resources Department and a sound personnel management system. |
| Independence in assets | Yes | The Company has various independent assets, such as independent production systems, auxiliary production systems and supporting facilities; independent purchasing and sales systems; independent industrial property rights, trademarks, non-patented technologies and other intangible assets. |
Independence in institutions
| Independence in institutions | Yes | The Company has established an independent Board of Directors, management and other internal organizations, and each functional department is independent from controlling shareholders in duty and personnel. There is no superior-subordinate relation between functional departments of controlling shareholders and those of the Company, which would have an impact on the Company’s independent operations. |
| Independence in finance | Yes | The Financial Management Head Office is responsible for the financial accounting and budget management of the Company, and has established independent and sound financial, accounting and budget management systems according to relevant laws and regulations. |
Note: The Company is independent in Businesses, Management, Assets, Institutions and Finance from controlling shareholders. TheCompany does not have peer competition or related transactions caused by partial restructuring, industry characteristics, nationalpolicies or mergers and acquisitions.
III. Horizontal competition
□ Applicable √ N/A
IV. Annual and extraordinary general meetings held during the reporting period
1. Shareholders’ meetings in the reporting period
| Sessions | Meeting type | Proportion of investors present | Convene date | Disclosure date | Meeting resolution |
| 2021 Annual General Meeting | Annual general meeting | 60.99% | June 1, 2022 | June 1, 2022 | On China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn). Announcement of Resolutions of 2021 Annual General Meeting (Announcement No.: 2022-041) |
| 2022 First Extraordinary General Meeting | Extraordinary general meeting | 61.05% | August 31, 2022 | August 31, 2022 | On China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn). Announcement of the Resolutions of 2022 First Extraordinary General Meeting (Announcement No.: 2022-063) |
2. Extraordinary general meetings convened at the request of preference shareholders with resumed votingrights:
□ Applicable √ N/A
V. Directors, supervisors and senior management members
1. Brief information
| Name | Title | Holding of positions | Gender | Age | Commencement of the term | Termination of the term | Shares held at the beginning of the period (shares) | Shares increased during the Period (shares) | Shares decreased during the Period (shares) | Other changes (shares) | Shares held at the end of the Period (shares) | Reasons of changes in shareholding |
| Lv Liang | Chairman and General Manager | Incumbent | Male | 49 | June 1, 2022 | June 1, 2025 | 0 | 200,000 | 0 | 0 | 200,000 | Granted with 2022 restricted shares of the |
| Company | ||||||||||||
| Li Bangliang | Honorary Chairman | Retired | Male | 77 | June 06, 2019 | June 05, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Niu Zhanqi | Director | Incumbent | Male | 56 | June 03, 2016 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Kang Wei | Director | Incumbent | Female | 55 | December 05, 2016 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Zhu Feipeng | Director | Incumbent | Male | 57 | June 1, 2022 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Ye Bo | Director | Incumbent | Male | 35 | June 1, 2022 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Zhu Liang | Director | Incumbent | Male | 46 | June 06, 2019 | June 1, 2025 | 0 | 30,000 | 0 | 0 | 30,000 | Granted with 2022 restricted shares of the Company |
| Jin Xuhu | Director | Retired | Male | 60 | June 06, 2019 | June 1, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Gao Xiangdong | Independent Director | Incumbent | Female | 60 | June 1, 2022 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Yang Lan | Independent Director | Incumbent | Female | 54 | April 27, 2017 | April 27, 2023 | 0 | 0 | 0 | 0 | 0 | / |
| Wang Ruwei | Independent Director | Incumbent | Male | 56 | June 1, 2022 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Zhong Xiaoming | Independent Director | Retired | Male | 61 | January 6, 2016 | June 1, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Yang Jun | Independent Director | Retired | Female | 51 | June 06, 2019 | June 1, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Bai Xinhua | Supervisor | Incumbent | Female | 57 | January 20, 1998 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Zhou Yanwu | Supervisor | Incumbent | Male | 54 | June 1, 2022 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Qin Yun | Supervisor | Incumbent | Female | 53 | May 19, 2006 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Dong Jiqin | Supervisor | Incumbent | Female | 39 | June 1, 2022 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Xu Zhifeng | Supervisor | Incumbent | Male | 48 | June 06, 2019 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Zhu Yinhua | Supervisor | Incumbent | Female | 49 | June 1, 2022 | June 1, 2025 | 0 | 0 | 0 | 0 | 0 | / |
| Liu Chengwei | Supervisor | Retired | Male | 50 | January 6, 2016 | June 1, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| Hu Baozhen | Supervisor | Retired | Female | 50 | June 06, 2019 | June 1, 2022 | 0 | 0 | 0 | 0 | 0 | / |
| He Rufen | Supervisor | Retired | Female | 55 | June 06, 2019 | June 1, 2022 | 33,660 | 0 | 23,000 | 0 | 10,660 | The Company’s Board of Directors and Board of Supervisors completed the election at expiration of office terms on June 1, 2022, and Ms. He Rufen will not serve as the Employee Supervisor at expiration of her office |
| term. | ||||||||||||
| Wu Hui | Deputy General Manager | Incumbent | Male | 54 | June 06, 2019 | June 1, 2025 | 0 | 150,000 | 0 | 0 | 150,000 | Granted with 2022 restricted shares of the Company |
| Zhu Li | Deputy General Manager | Incumbent | Female | 48 | October 12, 2020 | June 1, 2025 | 30,000 | 150,000 | 0 | 0 | 180,000 | Granted with 2022 restricted shares of the Company |
| Zhang Jianfei | Deputy General Manager | Incumbent | Male | 48 | June 1, 2022 | June 1, 2025 | 80,000 | 150,000 | 0 | 0 | 230,000 | Granted with 2022 restricted shares of the Company |
| Zhou Shunhua | Deputy General Manager | Retired | Male | 63 | June 30, 2009 | June 1, 2022 | 0 | 0 | 0 | 0 | 0 | |
| Chen Bo | Secretary of the Board of Directors | Incumbent | Male | 51 | June 30, 2009 | June 1, 2025 | 0 | 100,000 | 0 | 0 | 100,000 | Granted with 2022 restricted shares of the Company |
| Qiu Renbo | Person in Charge of Finance | Incumbent | Male | 41 | November 28, 2019 | June 1, 2025 | 0 | 100,000 | 0 | 0 | 100,000 | Granted with 2022 restricted shares of the Company |
| Total | -- | -- | -- | -- | -- | -- | 143,660 | 880,000 | 23,000 | 0 | 1,000,660 | -- |
Whether directors and supervisors left office or senior managers were dismissed during their terms of office during the reportingperiod
√ Yes □ No
The Board of Directors and Board of Supervisors of the Company completed the election at expirationof office terms on June 1, 2022. Mr. Li Bangliang will not serve as the Company’s HonoraryChairman; Mr. Jin Xuhu ceased to hold the position of the Company’s Director; Mr. Zhong Xiaomingand Ms. Yang Jun ceased to hold the position of the Company’s Independent Directors; Mr. LiuChengwei and Ms. Hu Baozhen ceased to hold the position of the Company’s Supervisors; Ms. HeRufen ceased to hold the position of the Employee Supervisor; Mr. Zhou Shunhua ceased to hold theposition of the Company’s Deputy General Manager due to his age after the renewal.Change of directors, supervisors and senior managers of the Company
√ Applicable □ N/A
| Name | Title | Type | Date | Reason |
| Li Bangliang | Honorary Chairman | Retirement at expiration of the term | June 5, 2022 | Retirement at expiration of the term |
| Zhu Feipeng | Director | Elected | June 1, 2022 | Election at expiration of office terms |
| Ye Bo | Director | Elected | June 1, 2022 | Election at expiration of office terms |
| Jin Xuhu | Director | Retirement at expiration of the term | June 1, 2022 | Resignation from the Company’s director after election |
| Gao Xiangdong | Independent Director | Elected | June 1, 2022 | Election at expiration of office terms |
| Wang Ruwei | Independent Director | Elected | June 1, 2022 | Election at expiration of office terms |
| Zhong Xiaoming | Independent Director | Retirement at expiration of the term | June 1, 2022 | Resignation from the Company’s independent director |
| after election | ||||
| Yang Jun | Independent Director | Retirement at expiration of the term | June 1, 2022 | Resignation from the Company’s independent director after election |
| Zhou Yanwu | Supervisor | Elected | June 1, 2022 | Election at expiration of office terms |
| Dong Jiqin | Supervisor | Elected | June 1, 2022 | Election at expiration of office terms |
| Zhu Yinhua | Supervisor | Elected | June 1, 2022 | Election at expiration of office terms |
| Liu Chengwei | Supervisor | Retirement at expiration of the term | June 1, 2022 | Resign from the Company’s Supervisor after election |
| Hu Baozhen | Supervisor | Retirement at expiration of the term | June 1, 2022 | Resign from the Company’s Supervisor after election |
| He Rufen | Supervisor | Retirement at expiration of the term | June 1, 2022 | Resign from the Company’s Supervisor after election |
| Zhang Jianfei | Deputy General Manager | Appointment | June 1, 2022 | Requirements of the position |
| Zhou Shunhua | Deputy General Manager | Retirement at expiration of the term | June 1, 2022 | Resign from the Company’s Deputy General Manager after renewal |
2. Positions and incumbency
Professional background, main working experiences and main responsibilities of the Company’s incumbent directors, supervisors andsenior managers
(1) Profile of directors
Chairman: Mr. Lv Liang: Born in 1974, holds a master’s degree. He was the Project Manager of Grand Asset Management Co., Ltd.from July 1997 to July 2001; the Deputy General Manager and the General Manager of Changshu Leiyunshang Pharmaceutical Co.,Ltd. from July 2001 to March 2010; the Director and the Deputy General Manager of the Company from April 2010 to January 2016;the Director and the General Manager of the Company from January 6, 2016 to June 5, 2019. He has also been the Chairman of theBoard of the Company since June 6, 2019. Besides, he has served as the General Manager of the Company since October 26, 2021.Director: Mr. Niu Zhanqi: Born in 1967, Doctor of Pharmacy. He has served as a technical researcher of Chengde Technical SupervisionBureau; Deputy Director of Hebei Pharmaceutical Group Research Institute; Manager of Technical Development Department of ChinaShijiazhuang Pharmaceutical Group; Manager of Medicine Department of CSPC Ouyi Pharmaceutical Co. Ltd.; Deputy GeneralManager of CSPC NBP Pharmaceutical Co., Ltd.; senior R&D director of CSPC; Vice President of Pharmaceutical Management HeadOffice and the General Manager of R&D Management Department of China Grand Enterprises, Inc. from March 2013 to June 2016;CEO of Pharmaceutical Management Head Office of China Grand Enterprises, Inc. from June 2016 to November 2018; President ofPharmaceutical Management Head Office of China Grand Enterprises, Inc. since November 2018 and Director of the Company sinceJune 2016.Director: Ms. Kang Wei: Born in 1968, holds a master’s degree. She has served as Manager of the Trade Division, Manager of theCapital Division and Manager of Financial Management of the Financial Management Department of China Grand Enterprises, Inc.;Chief Financial Officer and Deputy General Manager of Heilongjiang Grand Shopping Center; currently Chief Financial Officer ofChina Grand Enterprises, Inc. and Director of the Company since December 2016.Director: Mr. Zhu Feipeng: Born in 1966, Doctor of Cytopharmacology. He has served as a reviewer, Director of the third reviewoffice and Chief Reviewer of respiratory and tumor indications of the Center for Drug Evaluation of National Medical ProductsAdministration. He has been Vice President of Pharmaceutical Management Head Office of China Grand Enterprises, Inc. since March2021. Besides, he has also served as Director of the Company since June 2022.Director: Mr. Ye Bo: Born in 1988, holds a master’s degree. He has served as Customer Manager of Zhejiang Branch, ChinaDevelopment Bank; Manager of Bonds Investment Bank Headquarters, Zheshang Securities Co., Ltd.; Deputy Head of the Departmentof Investment and Operation, Hangzhou State-owned Capital Investment and Operation Co., Ltd. He has been Deputy General Managerof Hangzhou Guoyou Asset Operation Co., Ltd. since March 2020. Besides, he has also served as Director of the Company since June2022.Director: Mr. Zhu Liang: Born in 1977, holds a bachelor’s degree. He has served as Director, Vice Chairman and Chairman of theLabor Union of Hangzhou Huadong Medicine Group Co., Ltd., and is a member of the Party committee and Chairman of the LaborUnion of the Company. He has served as the Company’s Supervisor from April 2017 to June 2019; and Director of the Company sinceJune 2019.
Independent Director: Ms. Gao Xiangdong: Born in July 1963, PhD. She has served as a teaching assistant, a lecturer associate professorof Biopharmaceutical Teaching and Research Department, China Pharmaceutical University, and a professor, Vice President, Presidentand Party Secretary of the School of Life Science and Technology. She has served as a professor of the School of Life Science andTechnology, China Pharmaceutical University, since April 2021. He has also been Independent Director of the Company since June2022.Independent Director: Ms. Yang Lan: Born in 1969, holds a master’s degree. She has served as a certified tax accountant, a certifiedpublic valuer, a certified public accountant and an auditor. She served in Guiyang Audit Bureau, Zhuhai Lixin Certified PublicAccountants, Shanghai Lixin Changjiang Certified Public Accountants Zhuhai Branch, and Guangdong Lixin Changjiang CertifiedPublic Accountants; was the Senior Manager of Pan-China Certified Public Accountants (Special General Partnership) GuangdongBranch; the Financial Director and Investment Director of Guangzhou Securities Innovation Investment Co., Ltd.; is the Head of ZhuhaiZGX Certified Tax Agent Firm and Deputy Head of Reanda Certified Public Accountants LLP Guangdong Branch. She has beenIndependent Director of the Company since April 27, 2017.Independent Director: Mr. Wang Ruwei: Born in 1967, Doctor of Medicine of Shimane University in Japan, a professor-level seniorengineer and a supervisor of PhD candidates (Zhejiang University, Shenyang Pharmaceutical University, Zhejiang Chinese MedicalUniversity). He has served as Business Vice President of No.6 Hospital affiliated to Wenzhou Medical University, Deputy Chairmanand President of Zhejiang Conba Pharmaceutical Co., Ltd. and Genor Biopharma Co. Ltd, and Executive Vice-president of HangzhouTigermed Consulting Co., Ltd. He has been a member of Chinese Pharmacopoeia Commission since 2010, Managing Director ofHangzhou Tailong Venture Capital Partnership (Limited Partnership), Independent Director of Sichuan Huiyu Pharmaceutical Co.,Ltd., Longevity Valley Botanical Co., Ltd. and Zhejiang Sundoc Pharmaceutical Science and Tech Co., Ltd. He has also beenIndependent Director of the Company since June 2022.
(2) Profile of supervisors
The Chairman of Board of Supervisors: Ms. Bai Xinhua: Born in 1966, holds a master’s degree. She has served as Assistant Auditorof Beijing Municipal Bureau of Audit; Accounting Manager of the Financial Management Head Office and Audit Manager of theSupervision and Audit Department of China Grand Enterprises, Inc.; now Deputy General Manager of the Financial Management HeadOffice of China Grand Enterprises, Inc.; Supervisor of the Company since 1998.Supervisor: Mr. Zhou Yanwu: Born in 1969, holds a master’s degree. He has served as an assistant accountant of the Office of FinancialManagement, China International Trust Investment Corporation, an assistant of General Manager of Beijing Guoqiang TechnologyCo., Ltd., and an assistant of Financial Director of Electrolux (China) Home Appliance Co., Ltd. He worked for China GrandEnterprises, Inc. in 2000, served as Accountant Manager and Financial Manager of Financial Management Head Office, DeputyGeneral Manager of the Supervision and Audit Department, and Financial Director of China Grand Enterprises (HK) Limited. He hasbeen General Manager of the Supervision and Audit Department, China Grand Enterprises, Inc. since January 2012. Besides, she hasalso served as Supervisor of the Company since June 2022.Supervisor: Ms. Qin Yun: Born in 1970, holds a bachelor’s degree. She has served as an attending physician in the Internal MedicineDepartment of Beijing Shougang Hospital; a medical representative in the Beijing Office of Tianjin Takeda Pharmaceuticals Co., Ltd.,a senior medical representative in the Beijing Office of Lilly Asia; and Head of the Product Department in the sales branch of ChinaNational Pharmaceutical Foreign Trade Corporation; worked for China Grand Enterprises, Inc. in 2002 and was Project Manager ofPharmaceutical Business Division, Business Director of Operation Department of Pharmaceutical Management Head Office; is nowBusiness Director of Bidding and Procurement Management Center of China Grand Enterprises, Inc. She has also been Supervisor ofthe Company since 2006.Supervisor: Ms. Dong Jiqin: Born in 1984, holds a master’s degree. She has served as a member of the Department of Finance, ZhejiangOcean University (Xiaoshan College), and of the Foreign Trade Department, Xiaoshan Foreign Trade and Economic CooperationBureau, Deputy Chief and Chief of the Financial Audit Department, Xiaoshan Commerce Bureau, Hangzhou. She has been Head ofthe Risk Control and Legal Department of Hangzhou State-owned Capital Investment and Operation Co., Ltd. since October 2019.Besides, she has also served as Supervisor of the Company since June 2022.Employee Supervisor: Mr. Xu Zhifeng: Born in 1975, holds a bachelor’s degree, economist. Commissioner of the BusinessAdministration Office and Director Assistant of the General Manager Office of Hangzhou Zhongmei Huadong Pharmaceutical Co.,Ltd. from August 1997 to July 2011; Manager of the Risk Management and Audit Department of the Company from August 2011 toJanuary 2018; Director of the Risk Management and Audit Department of the Company since February 2018; Employee Supervisor ofthe Company since June 2019.Employee Supervisor: Ms. Zhu Yinhua: Born in 1974, holds a bachelor’s degree. She joined the Company in August 1995, and hasserved as Head of the accounting institution and Senior Head of Finance of the Financial Management Head Office; has been SeniorHead of Finance of the Company’s Medical Business since September 2018. She has been Financial Manager of Huadong MedicineSupply Chain Management (Hangzhou) Co., Ltd. since March 2010. She has also served as Employee Supervisor of the Companysince June 2022.
(3) Profile of senior managers
Deputy General Manager: Mr. Wu Hui: Born in April 1969, holds a master’s degree, professor-level senior engineer. He worked in theCompany in July 1991, and has served as technician, Workshop Director and Chief Engineer of Hangzhou Zhongmei HuadongPharmaceutical Co., Ltd.; Deputy General Manager of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. since 2015; DeputyGeneral Manager of the Company since June 2019.
Deputy General Manager: Ms. Zhu Li: Born in 1975, holds a master’s degree, and serves as an accountant. She has served as theaccountant, Deputy General Manager, General Manager, Deputy Director, and Director of the Procurement and ManagementDepartment for Chinese and Western Medicine in the Chinese patent medicine branch of Huadong Pharmaceutical DistributionCompany since August 1997. From September 2019 to September 2020, she served as the Deputy General Manager of HuadongPharmaceutical Distribution Company (responsible for the overall work), and from October 2020, she served as the Deputy GeneralManager (responsible for the commercial matters) of the Company and concurrently the General Manager of Huadong PharmaceuticalDistribution Company.Deputy General Manager: Mr. Zhang Jianfei: Born in April 1975, holds a bachelor’s degree. He has served as a salesman/Manager,Manager of Wuhan region, Director of the Second Sales and Management Department of Hangzhou Zhongmei HuadongPharmaceutical Co., Ltd., General Manager and Director of the Second Pharmaceutical Service Management Department of HubeiPharmaceutical Service Co., Ltd., and has been Deputy General Manager of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.since December 2020. He has also served as Deputy General Manager of the Company since June 2022.Secretary of the Board of Directors: Mr. Chen Bo: Born in 1972, holds a master’s degree, economist. He joined the Company in 2002,and has served as investment commissioner and Deputy Manager of the Financing Department and Manager of the InvestmentDepartment; Secretary of the Board of Directors since June 2009.Officer in Charge of Financial Affairs: Mr. Qiu Renbo: Born in 1982, holds a master’s degree. He has served as commissioner of theFinancial Management Head Office and Chief of the Finance Section of the Manufacturing Branch of the Company from August 2004to July 2010; Manager of the Financial Department of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. from August 2010 toApril 2015; Chief Financial Officer of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. since May 2015; Officer in Charge ofFinancial Affairs of the Company since December 2019.
Positions in shareholders’ entities
√ Applicable □ N/A
| Name | Shareholders’ entity | Position in shareholders’ entities | Commencement of the term | Termination of the term | Compensation and allowance from the shareholders’ entity |
| Niu Zhanqi | China Grand Enterprises, Inc. | President of the Pharmaceutical Management Head Office of China Grand Enterprises, Inc. | Yes | ||
| Kang Wei | China Grand Enterprises, Inc. | CFO of China Grand Enterprises, Inc. | Yes | ||
| Bai Xinhua | China Grand Enterprises, Inc. | Deputy General Manager of the Financial Management Head Office of China Grand Enterprises, Inc. | Yes | ||
| Qin Yun | China Grand Enterprises, Inc. | Business Director of the Pharmaceutical Management Head Office of China Grand Enterprises, Inc. | Yes | ||
| Zhu Feipeng | China Grand Enterprises, Inc. | President of the Pharmaceutical Management Head Office of China Grand Enterprises, Inc. | Yes | ||
| Ye Bo | Hangzhou Huadong Medicine Group Co., Ltd. | Executive Director | No | ||
| Zhou Yanwu | China Grand Enterprises, Inc. | General Manager of the Supervision and Audit Department | Yes | ||
| Note on positions in shareholders’ entities | None | ||||
Position in other entities
√ Applicable □ N/A
| Name | Name of other entity | Position in other entity | Commencement of the term | Termination of the term | Compensation and allowance from the shareholders’ entity |
| Niu Zhanqi | Sichuan Yuanda Shuyang Pharmaceutical Co., Ltd. and other wholly/partially owned subsidiaries of China Grand Enterprises, Inc. | Director | No | ||
| Kang Wei | Western Securities Co., Ltd. | Supervisor | Yes | ||
| Kang Wei | Leiyunshang Pharmaceutical Co., Ltd. and other wholly/partially owned subsidiaries of China Grand Enterprises, Inc. | Director | No | ||
| Bai Xinhua | Grand Industrial Holding Co., Ltd. and other wholly/partially owned subsidiaries of China Grand Enterprises, Inc. | Director | No | ||
| Qin Yun | Yunnan Leiyunshang Lixiang Pharmaceutical Co., Ltd. | Director | No | ||
| Ye Bo | Hangzhou Guoyou Asset Operation Co., Ltd. | Deputy General Manager | Yes | ||
| Dong Jiqin | Hangzhou State-owned Capital Investment and Operation Co., Ltd. | Head of the Risk Control and Legal Department | Yes | ||
| Note on position in other entities | None | ||||
Incumbent and off-office directors, supervisors and senior managers during the reporting period that have been imposedadministrative penalties by the SCRC during the last three years.
□ Applicable √ N/A
3. Remuneration of directors, supervisors and senior managers
The decision-making procedure, determination basis and actual remuneration for directors, supervisors and senior managersIn 2022, the Company completed the general election of the 10th Board of Directors and the 10thBoard of Supervisors from the 9th ones.The allowance plan of directors of the 9th Board of Directors and that of supervisors on the 9th Boardof Supervisors of the Company lasted to May 31, 2022 after review and approval by the Company’sshareholder’s meeting: The annual allowance for the independent directors of the Company wasRMB80,000 (before tax); that for the non-independent directors not in charge of the Company’smanagement or business was RMB30,000 (before tax); that for the non-employee representativesupervisors was RMB30,000 (before tax);The allowance plan of directors of the 10th Board of Directors and that of supervisors on the 10thBoard of Supervisors of the Company has become effective since June 1, 2022 after review andapproval by the Company’s shareholder’s meeting: The annual allowance for the independentdirectors of the Company is RMB100,000 (before tax); that for the non-independent directors not incharge of the Company’s management or business was RMB30,000 (before tax); that for the non-employee representative supervisors was RMB30,000 (before tax);
Remuneration of directors, supervisors and senior managers of the Company during the reporting period
Unit: RMB ten thousand yuan
| Name | Title | Gender | Age | Holding of positions | Total pretax remuneration received from the Company | Receive remuneration from related parties of the Company or not |
| Lv Liang | Chairman and General Manager | Male | 49 | Incumbent | 240 | No |
| Niu Zhanqi | Director | Male | 56 | Incumbent | 3 | Yes |
| Kang Wei | Director | Female | 55 | Incumbent | 3 | Yes |
| Zhu Feipeng | Director | Male | 57 | Incumbent | 1.75 | No |
| Ye Bo | Director | Male | 35 | Incumbent | 1.75 | No |
| Zhu Liang | Director | Male | 46 | Incumbent | 65 | No |
| Jin Xuhu | Director | Male | 60 | Retired | 1.25 | Yes |
| Gao Xiangdong | Independent Director | Female | 60 | Incumbent | 5.83 | No |
| Yang Lan | Independent Director | Female | 54 | Incumbent | 9.17 | No |
| Wang Ruwei | Independent Director | Male | 56 | Incumbent | 5.83 | No |
| Zhong Xiaoming | Independent Director | Male | 61 | Retired | 3.33 | No |
| Yang Jun | Independent Director | Female | 51 | Retired | 3.33 | No |
| Bai Xinhua | Supervisor | Female | 57 | Incumbent | 3 | Yes |
| Zhou Yanwu | Supervisor | Male | 54 | Incumbent | 1.75 | Yes |
| Qin Yun | Supervisor | Female | 53 | Incumbent | 3 | Yes |
| Dong Jiqin | Supervisor | Female | 39 | Incumbent | 1.75 | No |
| Xu Zhifeng | Supervisor | Male | 48 | Incumbent | 65 | No |
| Zhu Yinhua | Supervisor | Female | 49 | Incumbent | 9.94 | No |
| Liu Chengwei | Supervisor | Male | 50 | Retired | 1.25 | Yes |
| Hu Baozhen | Supervisor | Female | 50 | Retired | 1.25 | Yes |
| He Rufen | Supervisor | Female | 55 | Retired | 41.67 | No |
| Wu Hui | Deputy General Manager | Male | 54 | Incumbent | 140 | No |
| Zhu Li | Deputy General Manager | Female | 48 | Incumbent | 140 | No |
| Zhang Jianfei | Deputy General Manager | Male | 48 | Incumbent | 81.67 | No |
| Zhou Shunhua | Deputy General Manager | Male | 63 | Retired | 54.17 | No |
| Chen Bo | Secretary of the Board of Directors | Male | 51 | Incumbent | 130 | No |
| Qiu Renbo | Person in Charge of Finance | Male | 41 | Incumbent | 130 | No |
| Total | -- | -- | -- | -- | 1,147.69 | -- |
VI. Performance of duties of directors during the reporting period
1. Board meetings during the reporting period
| Sessions | Convene date | Disclosure date | Meeting resolution |
| The interim session of the 9th Board of Directors | February 21, 2022 | February 23, 2022 | Announcement of the Resolutions of the 9th Interim Meeting of the Board of Directors (announcement No.: 2022-003) on China Securities Journal, Securities Times, Shanghai Securities |
| News, and cninfo (www.cninfo.com.cn) | |||
| The interim session of the 9th Board of Directors | February 27, 2022 | February 28, 2022 | Announcement of the Resolutions of the 9th Interim Meeting of the Board of Directors (announcement No.: 2022-005) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 15th session of the 9th Board of Directors | April 26, 2022 | April 28, 2022 | Announcement of the Resolutions of the 15th session of the 9th Board of Directors (announcement No.: 2022-011) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 16th session of the 9th Board of Directors | May 11, 2022 | May 11, 2022 | Announcement of the Resolutions of the 16th session of the 9th Board of Directors (announcement No.: 2022-024) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 1st session of the 10th Board of Directors | June 1, 2022 | June 1, 2022 | Announcement of the Resolutions of the 1st session of the 10th Board of Directors (announcement No.: 2022-042) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 2nd session of the 10th Board of Directors | August 8, 2022 | August 10, 2022 | Announcement of the Resolutions of the 2nd session of the 10th Board of Directors (announcement No.: 2022-052) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 3rd session of the 10th Board of Directors | October 24, 2022 | October 26, 2022 | Announcement of the Resolutions of the 3rd session of the 10th Board of Directors (announcement No.: 2022-068) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 4th session of the 10th Board of Directors | October 27, 2022 | October 28, 2022 | Announcement of the Resolutions of the 4th session of the 10th Board of Directors (announcement No.: 2022-071) on China Securities Journal, Securities Times, Shanghai Securities News, and cninfo (www.cninfo.com.cn) |
| The 5th session of the 10th Board of Directors | November 18, 2022 | November 18, 2022 | Announcement of the Resolutions of the 5th session |
of the 10th Board of Directors(announcement No.: 2022-078) on China SecuritiesJournal, Securities Times,Shanghai Securities News,and cninfo(www.cninfo.com.cn)
2. Attendance of directors at Board meetings and general meetings
| Attendance of directors at Board meetings and general meetings | |||||||
| Name of directors | Number of Board meetings to be attended during the reporting period | Number of Board meetings attended on site | Number of Board meetings attended virtually | Number of Board meetings attended by proxy | Times of absent from Board meetings | Whether or not attend Board meetings in person for two consecutive times | Times of attendance of general meeting |
| Lv Liang | 9 | 9 | 0 | 0 | 0 | No | 2 |
| Kang Wei | 9 | 0 | 9 | 0 | 0 | No | 2 |
| Niu Zhanqi | 9 | 0 | 9 | 0 | 0 | No | 2 |
| Zhu Feipeng | 5 | 0 | 5 | 0 | 0 | No | 1 |
| Ye Bo | 5 | 1 | 4 | 0 | 0 | No | 1 |
| Zhu Liang | 9 | 9 | 0 | 0 | 0 | No | 2 |
| Jin Xuhu | 4 | 0 | 4 | 0 | 0 | No | 1 |
| Gao Xiangdong | 5 | 0 | 5 | 0 | 0 | No | 1 |
| Wang Ruwei | 5 | 0 | 5 | 0 | 0 | No | 1 |
| Yang Lan | 9 | 0 | 9 | 0 | 0 | No | 2 |
| Zhong Xiaoming | 4 | 0 | 4 | 0 | 0 | No | 1 |
| Yang Jun | 4 | 0 | 4 | 0 | 0 | No | 1 |
Note on non-attendance of Board meetings in person for two consecutive times
3. Objections from directors on relevant issues of the Company
Whether the directors have raised any objection to relevant issues of the Company
□Yes √No
No such case during the reporting period.
4. Other details about the performance of duties by directors
Whether the directors’ suggestions were adopted or not
√ Yes □ No
Note on the adoption or non-adoption of the directors’ suggestionsDuring the reporting period, in strict accordance with the relevant laws and regulations, normativedocuments, the Articles of Association, Rules of Procedure of the Board of Directors, and otherrelevant provisions, all directors of the Company preformed duties and exercise their functions andpower earnestly, strictly implemented the resolution of the general meeting of shareholders, andactively carried out all works of the Board of Directors. They also conscientiously reviewed andapproved various proposals of the Board of Directors, exercised right to vote according to law,actively participated in corporate governance and decision-making activities, and constantlystandardized corporate governance. With a responsible attitude towards the Company and allshareholders, the independent directors performed their duties and obligations diligently andfaithfully, and carefully deliberated various proposals of the Board of Directors. In addition, they
expressed objective opinions on relevant matters under deliberation based on independent position,actively promoted the standardized operation of the Board of Directors and improved corporategovernance, safeguarding the interests of the Company and all investors. All suggestions above havebeen adopted by the Company.VII. Performance of special committees under the Board of Directors during the reportingperiod
| Committee name | Members | Number of meetings | Convene date | Meeting content | Important comments and suggestions | Other performance of duties | Details of objection (if any) |
| Audit Committee of the 9th Board of Directors | Yang Lan (Chair of Committee), Zhong Xiaoming, Jin Xuhu | 5 | April 21, 2022 | Communicated and discussed the major issues concerned in the audit of the Huadong Medicine’s 2021 Annual Report with the Audit Committee. | No dispute with the annual auditor on various matters of the Company’s annual financial report is found, and it is believed that the basis, ground, principles and methods of the preparation of financial statements comply with new Accounting Standard for Business Enterprises, Accounting System for Business Enterprises, relevant laws and regulations and the Company’s internal management system; (2) the content and format of the financial statements comply with the relevant provisions of China Securities Regulatory Commission, Shenzhen Stock Exchange and Accounting Standards for Business Enterprises, | None | None |
| and fairly reflect the Company’s financial position as at December 31, 2021, and operating results and cash flow in 2021; | |||||||
| Audit Committee of the 9th Board of Directors | Yang Lan (Chair of Committee), Zhong Xiaoming, Jin Xuhu | April 26, 2022 | The following proposals were reviewed: 1. Proposal on the Company’s 2021 Annual Report; 2. Proposal on Reappointing the Accounting Firm; 3. Proposal on Evaluating the Accounting Firm’s Performance in 2021; 4. Proposal on Evaluating the Company’s Internal Control in 2021; 5. Proposal on the Company’s Q1 Report in 2022; 6. Proposal on the 2021 Work Report of the Company’s Internal Audit Department; 7. Proposal on the 2022 Work Plan of the Company’s Internal Audit Department; | The internal audit was carried out as planned and no major problems were found; all proposals were approved after review. | None | None | |
| Audit Committee of the 9th Board of Directors | Yang Lan (Chair of Committee), Zhong Xiaoming, Jin Xuhu | May 11, 2022 | The following proposal was reviewed: Proposal on the Work Report of the Company’s Internal Audit Department in Q1 of 2022. | The internal audit was carried out as planned and no major problems were found. | None | None | |
| Audit Committee of the 10th Board of Directors | Yang Lan (Chair of Committee), Lv Liang, Wang Ruwei | August 8, 2022 | The following proposals were reviewed: 1. Proposal on the Work Report of the Company’s | The internal audit of the Company was carried out as planned and no major problems were | None | None |
| Internal Audit Department in the 1st Half of 2022; 2. Proposal on the Work Plan of the Company’s Internal Audit Department in the 2nd Half of 2022; 3. Proposal on the Company’s 2022 Semi-annual Report and its abstract. | found; the Company’s 2022 Semi-annual Report and its abstract were approved after review. | ||||||
| Audit Committee of the 10th Board of Directors | Yang Lan (Chair of Committee), Lv Liang, Wang Ruwei | October 24, 2022 | The following proposals were reviewed: 1. Proposal on the Company’s Q3 Report in 2022; 2. Proposal on the Work Report of the Company’s Internal Audit Department in Q3 of 2022; 3. Proposal on the Work Plan of the Company’s Internal Audit Department in Q4 of 2022; | The internal audit of the Company was carried out as planned and no major problems were found; the Company’s Q3 Report in 2022 was approved after review. | None | None | |
| Nomination Committee of the 9th Board of Directors | Zhong Xiaoming (Chair of Committee), Kang Wei, Yang Lan | 2 | May 11, 2022 | The following proposals were reviewed: 1. Proposal on the Election at Expiration of Office Terms of the Company’s Board of Directors and Nomination of Non-Independent Director Candidates for the 10th Board of Directors; 2. Proposal on the Election at Expiration of Office Terms of the Company’s Board of Directors and Nomination of Independent Director | The Nomination Committee verified and reviewed the matters under deliberation, and unanimously agreed upon relevant proposals. | None | None |
| Candidates for the 10th Board of Directors; | |||||||
| Nomination Committee of the 10th Board of Directors | Gao Xiangdong (Chair of Committee), Yang Lan, Kang Wei | August 8, 2022 | The following proposals were reviewed: 1. Proposal on the Appointment of the Company’s General Manager; 2. Proposal on the Appointment of the Company’s Deputy General Manager; 3. Proposal on the Appointment of the Company’s Secretary of the Board of Directors; 4. Proposal on the Appointment of the Company’s Person in Charge of Finance. | The Nomination Committee verified and reviewed the matters under deliberation, and unanimously agreed upon relevant proposals. | None | None | |
| Remuneration and Approval Committee of the 9th Board of Directors | Yang Jun (Chair of Committee), Lv Liang, Zhong Xiaoming | 3 | April 26, 2022 | The Proposal on the Company’s 2022 Annual Compensation Assessment Plan for Senior Executives was reviewed. | The Remuneration and Approval Committee verified and reviewed the matters under deliberation, and unanimously agreed on the relevant proposals. | None | None |
| Remuneration and Approval Committee of the 9th Board of Directors | Yang Jun (Chair of Committee), Lv Liang, Zhong Xiaoming | May 11, 2022 | The Proposal on the Company’s Allowance Plan of Directors of the 10th Board of Directors was reviewed. | The Remuneration and Approval Committee verified and reviewed the matters under deliberation, and unanimously agreed on the relevant proposals. | None | None | |
| Remuneration and Approval Committee of the 10th Board of Directors | Wang Ruwei (Chair of Committee), Lv Liang, Gao Xiangdong | August 8, 2022 | The following proposals were reviewed: 1. Proposal on the Company’s 2022 Restricted | The Remuneration and Approval Committee verified and reviewed the matters under | None | None |
| Share Incentive Scheme (Draft) and Its Summary; 2. Proposal on Management Rules for the Implementation and Assessment of the Company’s 2022 Restricted Share Incentive Scheme; 3. Proposal on the Management Rules of the Company’s 2022 Restricted Share Incentive Scheme. | deliberation, and unanimously agreed on the relevant proposals. |
VIII. Performance of the Board of SupervisorsWhether the Board of Supervisors found any risks of the Company in the supervision activities during the reporting period
□Yes √No
No such case during the reporting period.IX. Employees of the Company
1. Number of employees, expertise structure and educational background
| Number of incumbent employees in the parent company at the end of the reporting period (person) | 917 |
| Number of incumbent employees in major subsidiaries at the end of the reporting period (person) | 13,144 |
| Total number of incumbent employees at the end of the reporting period (person) | 14,061 |
| Total number of employees receiving salaries in the current period (person) | 14,061 |
| Number of retired employees requiring the parent Company and its subsidiaries to bear costs (person) | 20 |
| Expertise structure | |
| Category | Number (person) |
| Production staff | 1,257 |
| Sales staff | 8,496 |
| Technical staff | 2,380 |
| Financial staff | 242 |
| Administrative staff | 1,312 |
| Storage and transportation staff | 374 |
| Total | 14,061 |
| Educational background | |
| Category | Number (person) |
| Master’s degree or above | 1,000 |
| Bachelor’s degree | 5,974 |
| Junior college (professional training) | 6,170 |
| Other | 917 |
| Total | 14,061 |
2. Staff remuneration policy
Based on strategic development planning and talent strategy, the Company builds a market- orienteddifferentiating remuneration system, establishes a flexible and diversified incentive mechanism, andmakes its talent team younger, professional and international. It upgrades and optimizes employeestructure, encourages employees to stick to innovation and value creation, and enables employeesthemselves and as a whole to achieve sustainable development and strategic goals.
3. Training program
Based on its 7th “Three-Year Plan”, the Company is dedicated to building a diversified and multi-level personnel training system and prioritizes personnel to help transform Huadong Medicine. TheLearning and Development Department continues carrying out various personnel and managementtraining programs, and building a training and know-how system in 2023 based on the extensivetraining demands collected from the Company’s middle and senior management and employees.The Company is going to promote the Pilot Program for Entrepreneurs, and provide training sessionsfor reserve managers, highly potential experts and management trainees in 2023, in order to create anactive, responsible entrepreneur and scientist team. The Company mainly carries out internalcultivation such as management case study, on-the-job development and cultivation, and rotation andassignment, combined with certain advanced management concepts of external industries, so as toguide the officials to innovate their management and concepts, and assist in the establishment ofreserve teams for middle and senior managers.In terms for expert training programs, the training of researchers is of great urgency, considering thatthe Company is on the crucial period of strategic transformation and scientific research andinnovation. The Company requires better performance of this new training to perfectly meet thedemands of business department, and gives priority to programs of R&D personnel review, individualdevelopment plan (IDP) training, and R&D project manager training.As for other mature expert training programs, including the business strengthen and leadershipimprovement programs related to production, quality, marking and other sectors, the Company aimsat implementing the 2025 development strategic plan, strictly controls costs, refines projects, andensures that the costs and expenses of all programs are reduced.When building a system, the Company establishes the system and conducts various training programsfrom a big picture perspective, continuously polishes internal trainer and tutor teams and variouscourses, makes overall planning for the demands of the subsidiaries, and provides branches andsubsidiaries with courses and teaching resources to create the sharing culture and promote theestablishment of collectivized and learning-oriented organizations, in order to better connect allproject resources of various companies. Besides, the Company opens on-line courses for allemployees of subsidiaries and branches.
4. Labor outsourcing
□ Applicable √ N/A
X. The Company’s profit distribution and increase of capital stock by capital reserve conversion
Formulation, implementation or adjustment of the profit distribution policy, especially the cash dividend policy, during the reportingperiod
√ Applicable □ N/A
During the reporting period, the Company strictly abode by the Articles of Association to review therelevant distribution policy and implement the profit distribution plan. The criteria and proportion ofdividends were specific and clear and the decision-making process and mechanism were well-
established. The profit distribution plan was implemented during specific period after review andapproval. These efforts guaranteed all shareholders’ interests. During the reporting period, theCompany did not change the profit distribution policy.The Company convened on April 26, 2022 the 15th session of the 9th Board of Directors, reviewedand approved the Proposal on the Company’s 2021 Profit Distribution Scheme, and agreed to submitthe proposal to the Company’s general meeting for deliberation. The 2021 Annual General Meetingconvened on June 1, 2022 deliberated on and approved the proposal. Based on the total share capitalof 1,749,809,548 of the Company on December 31, 2021, RMB2.90 (before tax) of cash dividendsper ten ordinary shares were distributed to all shareholders; no bonus share was issued; and no capitalreserve was converted to share capital. A Total of RMB507,444,768.92 (before tax) cash dividendswere distributed, and the remaining undistributed profits were set to be distributed in future years.The Company’s independent directors agreed on the profit distribution plan. On June 10, 2022, theCompany implemented the above profit distribution plan. The criteria and proportion of dividendswere specific and clear in this profit distribution plan with well-established decision-making process,which complied with the Articles of Association and resolutions of the General Meeting.
| Specific note on the cash dividend policy | |
| Whether it complied with the Articles of Association and resolutions of the General Meeting: | Yes |
| Whether the criteria and proportion of dividends were specific and clear: | Yes |
| Whether the decision-making process and mechanism was well-established: | Yes |
| Whether independent directors performed their duties and roles: | Yes |
| Whether minority shareholders could express their opinions and requirements, and whether their legal rights and interests were fully protected: | Yes |
| Whether conditions and process were conforming and transparent if the cash dividend policy was adjusted or changed: | N/A |
During the reporting period, the Company made profits and the profit available to shareholders of the parent company was positive,but no cash dividend plan for common shares was proposed
□ Applicable √ N/A
Profit distribution and share capital increase by capital reserve conversion during the current reporting period
√ Applicable □ N/A
| Number of bonus shares every 10 shares (share) | 0 |
| Dividends paid every 10 shares (tax included) | 2.9 |
| Share capital base of the distribution plan (share) | 1,753,995,348 |
| Cash dividends (yuan) (tax included) | 508,658,650.92 |
| Cash dividends by other means (such as share repurchase) (yuan) | 0.00 |
| Total cash dividends (yuan) | 508,658,650.92 |
| Distributable profit (yuan) | 5,999,424,983.44 |
| Proportion of total cash dividends (including those by other means) in the total profit distributed | 100% |
| Current cash dividends | |
| If the Company is in a mature stage of development and has significant capital expenditure arrangements, the proportion of cash dividends in the current profit distribution should be at least 40%. | |
| Details of the profit distribution plan or the plan for capital stock increase by capital reserve conversion | |
XI. Implementation of the Company’s equity incentive plan, employee stock ownership planor other employee incentive measures
√ Applicable □ N/A
1. Equity incentive
(1) On August 8, 2022, the Company convened the 2nd session of the 10th Board of Directors andthat of the 10th Board of Supervisors, during which the Proposal on the Company’s 2022 RestrictedShare Incentive Scheme (Draft) and Its Summary, the Proposal on Management Rules for the
Implementation and Assessment of the Company’s 2022 Restricted Share Incentive Scheme, theProposal on the Management Rules of the Company’s 2022 Restricted Share Incentive Scheme, andthe Proposal on Applying to the General Meeting for Authorizing the Board of Directors to HandleEquity Incentive-related Matters were reviewed and approved. Independent directors gave theirindependent opinions on whether the 2022 Restricted Share Incentive Scheme contributed to theCompany’s sustainable development and whether it harmed the interests of the Company and allshareholders. Please refer to the announcement published by the Company on www.cninfo.com.cnon August 10, 2022.
(2) On August 10, the Company disclosed the Announcement on Independent Directors PubliclySoliciting Proxy Voting Rights on www.cninfo.com.cn. Mr. Wang Ruwei, Independent Director ofthe Company, commissioned by other independent directors publicly solicited proxy voting rightsfrom all shareholders of the Company on proposals related to the 2022 Restricted Share IncentiveScheme reviewed on the 1st extraordinary general meeting in 2022 that was set to be convened onAugust 31, 2022.
(3) The Company announced publicly the list of the first batch of employees receiving the incentivefrom the restricted share incentive scheme on the Company’s intra-net from August 15 to 25, 2022,which lasted for 10 days in total. As of the end of the announcement on August 25, 2022, the Boardof Supervisors did not receive any objection against these employees. On August 25, 2022, theCompany convened a session of the Board of Supervisors, during which the Verification Opinionsand Announcement Note on the List of the First Batch of Employees Receiving the Incentive from theCompany’s 2022 Restricted Share Incentive Scheme was reviewed and approved. On the same day,the Company disclosed the Board of Supervisors’ Verification Opinions and Announcement Note onthe List of the First Batch of Employees Receiving the Incentive from the Company’s 2022 RestrictedShare Incentive Scheme and a related announcement on www.cninfo.com.cn.
(4) On August 31, 2022, the Company convened the 1st extraordinary general meeting in 2022.During the meeting, the Proposal on the Company’s 2022 Restricted Share Incentive Scheme (Draft)and Its Summary, the Proposal on Management Rules for the Implementation and Assessment of theCompany’s 2022 Restricted Share Incentive Scheme, the Proposal on the Management Rules of theCompany’s 2022 Restricted Share Incentive Scheme, and the Proposal on Applying to the GeneralMeeting for Authorizing the Board of Directors to Handle Equity Incentive-related Matters weredeliberated on and approved. On the same day, the Company disclosed on www.cninfo.com.cn theSelf-Inspection Report on Insiders and Incentive Receivers of the 2022 Restricted Share IncentiveScheme Purchasing and Selling the Company’s Shares and a related announcement. The incentivescheme was approved in the Company’s 1st extraordinary general meeting in 2022, and the Board ofDirectors was authorized to implement the restricted share incentive scheme and handle relevantmatters according to laws and regulations.
(5) On October 27, 2022, the Company convened the 4th session of the 10th Board of Directors andthe 5th session of the 10th Board of Supervisors. During these two sessions, the Proposal onAdjustments of the Company’s 2022 Restricted Share Incentive Scheme, and the Proposal onGranting Restricted Shares to the First Batch of Employees Receiving Incentive from the 2022Restricted Share Incentive Scheme were reviewed and approved. The Company’s Board of Directorsbelieved that conditions of the incentive scheme for granting restricted shares were fulfilled, and theBoard of Supervisors re-verified the list of incentive receivers on the first grant date, and expressedopinions on the grant. The Company’s independent directors agreed on the above proposals. Lawyersand independent financial advisers prepared related reports. On October 28, the Company discloseda related announcement on www.cninfo.com.cn.Equity Incentive Received by the Company’s Directors and Senior Managers
√ Applicable □ N/A
Unit: Share
| Name | Title | Number of Share Options Held at the Beginning of the Year | Number of Newly Granted Share Options during the reporting period | Number of Exercisable Shares during the reporting period | Number of Exercised Shares during the reporting period | Exercise Price of Exercised Shares during the reporting period (Yuan/Share) | Number of Share Options Held at the End of the Period | Market Price at the End of the reporting period (Yuan/Share) | Number of Restricted Shares Held at the Beginning of the Period | Number of Shares Unlocked during the Current Period | Number of Restricted Shares Newly Granted during the reporting period | Grant Price of Restricted Shares (Yuan/Share) | Restricted Shares Held at the End of the Period |
| Lv Liang | Chairman, General Manager | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 200,000 | 25 | 200,000 |
| Wu Hui | Deputy General Manager | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 150,000 | 25 | 150,000 |
| Zhu Li | Deputy General Manager | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 150,000 | 25 | 150,000 |
| Zhang Jianfei | Deputy General Manager | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 150,000 | 25 | 150,000 |
| Zhu Liang | Director | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 30,000 | 25 | 30,000 |
| Chen Bo | Secretary of the Board of Directors | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 100,000 | 25 | 100,000 |
| Qiu Renbo | Person in Charge of Finance | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 100,000 | 25 | 100,000 |
| Total | -- | 0 | 0 | 0 | 0 | -- | 0 | -- | 0 | 0 | 880,000 | -- | 880,000 |
| Note (if any) | N/A | ||||||||||||
Assessment mechanism and incentive for senior managers
1. In order to ensure that the Company’s senior managers can better perform their duties and be clearabout their rights and obligations, the Company has established a sound performance assessmentmanagement system combining the senior managers’ remuneration and performance. During thereporting period, the Company’s senior managers could strictly abide by the Company Law, theArticles of Association and relevant laws and regulations to diligently perform their duties, activelyimplement resolutions of the Company’s general meetings and Board of Directors and continueprudent operations with the Board of Directors’ correct instructions to enhance internal management.
2. During the reporting period, the Company launched the 2022 Restricted Share Incentive Schemebased on equal earnings and contributions, given that shareholders’ interests would be fully protected,in order to further establish and improve a long-term incentive scheme for the Company, attract andretain outstanding experts, fully activate the Company’s senior managers, managers and coretechnicians (business specialists) and effectively combine interests of shareholders, the Company,core teams and personnel to attract all parties’ attention to focusing on the Company’s long-termgrowth.
2. Implementation of the employee stock ownership plan
□ Applicable √ N/A
3. Other employee incentives
□ Applicable √ N/A
XII. Establishment and implementation of an internal control system during the reportingperiod
1. Establishment and implementation of internal control
During the reporting period, the Company constantly promoted the establishment of an internalcontrol system, improved the corporate governance structure and internal control regulations,normalized the implementation of such regulations, strengthened the supervision and inspection ofinternal control, and ensure that the Company’s operation and management level was constantlyimproved, in accordance with the Basic Norms for Enterprise Internal Control, Self-RegulatoryGuidelines for Listed Companies on the Shenzhen Stock Exchange No.1 - Standardized Operation ofListed Companies on the Main Board, and other relevant laws, regulations and normative documents.During the reporting period, the Company’s internal control system design is sound and reasonable.It maintained effective internal control in all major aspects in accordance with the requirements ofinternal control standard system and relevant regulations, and there is no major omission. Please referto the Self-evaluation Report on Internal Control published on http://www.cninfo.com.cn/ on April14, 2023.
2. Details of major internal control deficiencies found during the reporting period
□Yes √No
XIII. The Company’s management control over subsidiaries during the reporting period
| Company name | Integration plan | Integration progress | Issues encountered during the integration | Solutions adopted | Solution progress | Subsequent solutions |
| Wuhu Huaren Science and Technology Co., Ltd. | The Company held 60% of its shares, and integrated its assets, employees, finance and business after acquisition. | N/A | N/A | N/A | N/A | N/A |
| Anhui Huayoulai Pharmaceutical Science and Technology Co., Ltd. | The Company indirectly held 60% of its shares, and integrated its assets, employees, finance and business after acquiring Huaren Science and Technology of which it is a wholly owned subsidiary. | N/A | N/A | N/A | N/A | N/A |
| Anhui Meihua Hi-Tech Pharmaceutical Co., Ltd. | The Company held 100% of its shares, and integrated its assets, employees, finance and business after acquisition. | N/A | N/A | N/A | N/A | N/A |
| Viora Ltd | The Company held 100% of its | N/A | N/A | N/A | N/A | N/A |
| shares, and integrated its assets, employees, finance and business after acquisition. | ||||||
| Viora Inc. | The Company held 100% of its shares, and integrated its assets, employees, finance and business after acquisition. | N/A | N/A | N/A | N/A | N/A |
| Viora Canada Ltd | The Company held 100% of its shares, and integrated its assets, employees, finance and business after acquisition. | N/A | N/A | N/A | N/A | N/A |
| Hangzhou Weizhi Biotechnology Co., Ltd. | N/A | N/A | N/A | N/A | N/A | N/A |
| Hangzhou Hizyme Biotech Co., Ltd. | N/A | N/A | N/A | N/A | N/A | N/A |
| Ruian Huiren Health-care Co., Ltd. | N/A | N/A | N/A | N/A | N/A | N/A |
| Note: During the reporting period, the Company merged nine new subsidiaries through acquisition, capital injection and consolidation. In strict accordance with relevant laws and regulations of CSRC and SSE, and the provisions of the Articles of Association, the Company provided guidance on the standardized operation of the subsidiaries in terms of organizational setup, personnel adjustment, internal control and financial system and other aspects, and timely tracked various major issues of the subsidiaries to exercise management control over the subsidiaries. | ||||||
XIV. Self-evaluation report on internal control or audit report on internal control
1. Self-evaluation report on internal control
| Disclosure date of the full text of self-evaluation report on internal control | April 14, 2023 | |
| Disclosure index of the full text of self- evaluation report on internal control | cninfo (www.cninfo.com.cn) | |
| Proportion of assets evaluated in total assets per consolidated financial statement | 95.00% | |
| Proportion of operating revenue evaluated in total operating revenue per consolidated financial statement | 90.00% | |
| Recognition standard of deficiencies | ||
| Category | Financial report | Non-financial report |
| Qualitative criteria | The Company stipulates that internal control deficiencies involving the following fields shall be identified as at least “important deficiencies”: anti-fraud procedure and control; internal control over unconventional or unsystematic transactions; internal control over the selection and application of accounting policies in relation to Generally Accepted | The Company stipulates that internal control deficiencies involving the following fields shall be considered as “material deficiencies”: serious violation of laws and regulation; in addition to policy reasons, the Company has been losing money for years, and its continuous operation has been challenged; lack of system control or |
| Accounting Principles (GAAP); internal control over the end-of-period financial reporting process. The Company stipulates that internal control deficiencies involving the following fields shall be identified as at least “important deficiencies”, and has strong indications of “material deficiencies”: restatement of previously published financial statements to reflect correction of misstatements resulting from errors or fraud; the auditor found material misstatement in the Company’s financial statements for the current period that was not initially detected by the Company’s internal control over financial reports; the Audit Committee’s failed to supervise the Company’s financial reports and internal control over financial reports; compliance supervision function is invalid, and the violation of laws and regulations may have a significant impact on the reliability of financial reports; any level of malpractice involving senior managers is founded; Management failed to correct important defects in a reasonable period of time after such reporting to the management. | systematic failure in important business; M&A and restructuring failure; the operation of newly expanded subordinate units is unsustainable; lack of internal control construction and disorderly management in subsidiaries; middle and senior managers resign, or serious staff turnover in key positions; frequent exposure of negative news in the media; internal control evaluation results, especially major or significant deficiencies have not been corrected. The Company stipulates that internal control deficiencies involving the following fields shall be considered as “important deficiencies”: there is a little negative news in the major media at provincial level and above; the general defects identified last year have not been rectified and there is no reasonable explanation; middle management or operating personnel are not competent enough. | |
| Quantitative criteria | Potential misstatement of total profit; potential misstatement of total assets | Impact on total assets; significant negative impact |
| Number of material deficiencies in financial reporting | 0 | |
| Number of material deficiencies in non- financial reporting | 0 | |
| Number of important deficiencies in financial reporting | 0 | |
| Number of important deficiencies in non-financial reporting | 0 | |
2. Audit report on internal control
√ Applicable □ N/A
| Comments of Internal Control Audit Report | |
| On December 31, 2022, Huadong Medicine has maintained effective internal control over financial reports in all major respects in accordance with the Basic Norms for Enterprise Internal Control and relevant regulations. | |
| Disclosure of internal control audit report | Disclosure |
| Disclosure date of the full audit report on internal control | April 14, 2023 |
| Disclosure index of the full audit report on internal control | cninfo (www.cninfo.com.cn) |
| Type of opinions in the internal control audit report | Unmodified unqualified opinions |
| Whether there are material deficiencies in non-financial reporting | No |
Whether the accounting firm has issued the audit report on internal control with non-standard opinions
□Yes √No
Whether the audit report on internal control issued by the accounting firm is consistent with the self-evaluation report of the Board ofDirectors
√ Yes □ No
XV. Rectification of self-detected problems through the special campaign to improvegovernance of listed companies
N/A
Section V Environmental and Social ResponsibilitiesI. Major Environmental Protection Issues
Are the listed company and its subsidiaries belong to the key pollutant discharge units announced by theenvironmental protection department?Yes □ NoRelevant policies and industry standards for environmental protectionEnvironmental Protection Law of the People’s Republic of China, Law of the People’s Republic of China onWater Pollution Prevention and Control, Law of the People’s Republic of China on Atmospheric PollutionPrevention and Control, Law of the People’s Republic of China on the Prevention and Control of EnvironmentalPollution by Solid Waste, Law of the People?s Republic of China on the Prevention and Control of Ambient NoisePollution, Law of the People?s Republic of China on the Prevention and Control of Soil Pollution, EmissionStandard of Air Pollutants for Pharmaceutical Industry (DB33/ 310005-2021), Discharge Standard of Pollutants forBio-pharmaceutical Industry (DB 33/ 923-2014), Emission Standard for Industrial Enterprises Noise at Boundary(GB 12348-2008), Standard for Pollution Control on the Non-hazardous Industrial Solid Waste Storage and Landfill(GB 18599-2020), Standard for Pollution Control on Hazardous Waste Storage (GB 18597-2001), IntegratedWastewater Discharge Standard of Yellow River Basin in Shaanxi Province (DB 61/ 224-2018), Emission Limitsof Water and Air Pollutants for Bio-pharmaceutical Industry (DB 32/ 3560-2019), Emission Standard of AirPollutants for Pharmaceutical Industry (DB 32/4042-2021), Emission Standard of Air Pollutants for PharmaceuticalIndustry (GB 37823-2019), Emission Standard of Volatile Organic Compounds for Chemical Industry (DB32/3151-2016), Integrated Emission Standard of Air Pollutants (DB 32/4041-2021), Standard for Fugitive Emissionof Volatile Organic Compounds (GB 37822-2019), Emission Standards for Odor Pollutants (GB 14554-93),Emission Limits of Water and Air Pollutants for Bio-pharmaceutical Industry (DB 32/ 3560-2019), and WastewaterQuality Standards for Discharge to Municipal Sewers (GB/T 31962-2015).Information on environmental protection-related administrative licensingAll the construction projects of the Company were declared, constructed and accepted strictly according to therequirements, approved by EIA, and met the requirements for environmental impact assessment of constructionprojects.The Pollutant Emission Permit of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. is valid fromDecember 25, 2020 to December 24, 2025.The Pollutant Emission Permit is reapplied by Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co.,Ltd. and valid from October 31, 2022 to December 20, 2025. In addition, Hangzhou Zhongmei HuadongPharmaceutical (Jiangdong) Co., Ltd. has obtained the EIA approval of Bailing Tablets Production TransformationProject on April 22, 2022 within the reporting period, with the approval number of HHQ EIA Batch [2022] No. 20,and obtained the EIA approval of HDG1901 API Industrialization Site Construction Project on September 20, 2022,with the approval number of HHQ EIA Batch [2022] No. 53.
The Pollutant Emission Permit of Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. is valid fromDecember 27, 2020 to December 26, 2025. In addition, Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd.has obtained the EIA approval of Technical Transformation Project of Cream Production Line within the reportingperiod, with the approval number of WHYF (2022) No. 122.The Pollutant Emission Permit of Jiangsu Joyang Laboratories is valid from February 28, 2022 to February 27,2027.Industrial emission standards and specific situation of pollutant emissions involved in production and business activities
| Designation of Company or Subsidiary | Category of main and particular pollutants | Name of main and particular pollutants | Discharge pattern | Quantity of discharge outlet | Distribution of discharge outlet | Discharge concentration/intensity | Executive pollutant discharge standard | Total discharges | Approved total discharges | Excessive discharge |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant | pH value | Intermittent discharge | Once | Main Entrance, Moganshan Road, No.866 | 7.41 | 6~9 | / | / | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant | COD | Intermittent discharge | Once | Main Entrance, Moganshan Road, No.866 | 38.21mg/l (Nanotube) | 500mg/l | 16.5 tons (Nanotube) | 33.3 tons/annual | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Water pollutant | Ammonia-nitrogen | Intermittent discharge | Once | Main Entrance, Moganshan Road, No.866 | 0.78mg/l (Nanotube) | 35mg/l | 0.3 tons (Nanotube) | 2.38 tons/annual | None |
| Hangzhou Zhongmei | Solid pollutant | Hazardous solid waste | Compliant disposal by | 2 | Within the factory at | / | / | 866.37 tons | / | None |
| Huadong Pharmaceutical Co., Ltd. | entrusted qualified units | Moganshan Road, No.866 | ||||||||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Solid pollutant | General solid waste | Compliant disposal by entrusted qualified units | 2 | Within the factory at Moganshan Road, No.866 | / | / | 640.6 tons | / | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Air pollutant | Nitric oxide | Organized discharge | 1 | Roof of Boiler Room at Building 25 | 27.5mg/m? | 50mg/m? | 2.916 tons | 17.7 tons/annual | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Air pollutant | Sulfur dioxide | Organized discharge | 1 | Roof of Boiler Room at Building 25 | 3mg/m? | 20mg/m? | 0.384 tons | / | None |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Air pollutant | Dust and fume | Organized discharge | 1 | Roof of Boiler Room at Building 25 | 4.1mg/m? | 10mg/m? | 0.258 tons | / | None |
| Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdo | Water pollutant | COD | Continuous discharge | 1 | Phase II Factory Area | 100- 300mg/ L | 500mg/ L | 102.7178 tons (Nanotube discharge) | 141.299 tons (discharged to environment) | None |
| ng) Co., Ltd. | ||||||||||
| Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. | Water pollutant | Ammonia-nitrogen | Continuous discharge | 1 | Phase II Factory Area | 0- 20mg/ L | 35mg/ L | 1.0043 tons (Nanotube discharge) | 7.066 tons (discharged to environment) | None |
| Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. | Air pollutant | Non-methane hydrocarbon | Organized discharge | 1 | Phase II Factory Area | 0- 30mg/ L | 60mg/ L | 1.7146 tons | 3.002 tons | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. | Water pollutant | pH value | Intermittent discharge | Once | Beside National Highway 310, Liuye River, Huayin City | 8.07 | 6~9 | / | / | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., LTD. | Water pollutant | COD | Intermittent discharge | 1 | Beside National Highway 310, Liuye River, Huayin City | 32.8mg/l | 50mg/l | 0.947 tons | 3 tons | None |
| Huadong Medicine (Xi ‘an) Bohua | Water pollutant | Ammonia-nitrogen | Intermittent discharge | 1 | Beside National Highway 310, Liuye | 0.55mg/l | 8mg/l | 0.015 tons | 0.48 tons | None |
| Pharmaceutical Co., LTD. | River, Huayin City | |||||||||
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. | Water pollutant | Total nitrogen | Intermittent discharge | 1 | Beside National Highway 310, Liuye River, Huayin City | 9.06mg/l | 15mg/l | 0.249 tons | / | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. | Solid pollutant | Hazardous wastes | Compliant disposal by entrusted qualified units | 3 | Within the Company | / | / | 178.37848 tons | / | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., LTD. | Air pollutant | Volatile organic compounds | Organized discharge | 1 | APIs Plant 1 | / | 60mg/m? | / | / | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., LTD. | Air pollutant | Hydrogen chloride | Organized discharge | 1 | APIs Plant 1 | / | 30mg/m? | / | / | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmac | Air pollutant | Ammonia (ammonia) | Organized discharge | 1 | APIs Plant 1 | / | 20mg/m? | / | / | None |
| eutical Co., LTD. | ||||||||||
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. | Air pollutant | Hydrogen chloride | Organized discharge | 1 | APIs Plant 2 | / | 30mg/m? | / | / | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. | Air pollutant | PM | Organized discharge | 1 | APIs Plant 2 | / | 20mg/m? | / | / | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. | Air pollutant | Ammonia (ammonia) | Organized discharge | 1 | Sewage treatment station | / | 20mg/m? | / | / | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. | Air pollutant | Hydrogen sulfide | Organized discharge | 1 | Sewage treatment station | / | 5mg/m? | / | / | None |
| Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. | Air pollutant | Odor concentration | Organized discharge | 1 | Sewage treatment station | / | 6000 | / | / | None |
| Huadong | Air | PM | Organize | 1 | Solid | / | 20mg/m? | / | / | None |
| Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. | pollutant | d discharge | preparation plant | |||||||
| Jiangsu Joyang Laboratories | Water pollutant | pH value | Intermittent discharge | 1 | No. 9, Haidu North Road | 7.5 | 6~9 | / | / | None |
| Jiangsu Joyang Laboratories | Water pollutant | COD | Intermittent discharge | 1 | No. 9, Haidu North Road | 94mg/l | 500mg/l | 6.768 tons | 22.401 tons/annual | None |
| Jiangsu Joyang Laboratories | Water pollutant | Ammonia-nitrogen | Intermittent discharge | 1 | No. 9, Haidu North Road | 2.03mg/l | 35mg/l | 0.146 tons | 1.156 tons/annual | None |
| Jiangsu Joyang Laboratories | Water pollutant | Total nitrogen | Intermittent discharge | 1 | No. 9, Haidu North Road | 5.88mg/l | 45mg/l | 0.423 tons | 1.486 tons/annual | None |
| Jiangsu Joyang Laboratories | Water pollutant | Total phosphorus | Intermittent discharge | 1 | No. 9, Haidu North Road | 1.71mg/l | 8mg/l | 0.123 tons | 0.164 tons/annual | None |
| Jiangsu Joyang Laboratories | Solid pollutant | Hazardous solid waste | Compliant disposal by entrusted qualified units | / | Factory Area at No. 9, Haidu North Road | / | / | 1389 tons | / | None |
| Jiangsu Joyang Laboratories | Air pollutant | PM | Organized discharge | 5 | Batch section in Plant 101, fermentation section in Plant 101, batching | 12.5mg/m? | 60mg/Nm? | 23.612 tons/annual | 42.7409 tons/annual | None |
sectionin Plant
(sharedby Plant107 and108),fermentationsectionin Plant
(sharedby Plant107 and108),anddryingsectionin Plant
(sharedby Plant107 and108)
Pollutant treatment
1. Pollutant treatment of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.
(1) Wastewater
| Designation of pollution prevention and control facility | Treatment process | Treatment capacity | Time when put into operation | Operation condition |
| Wastewater treatment system of old sewage treatment station | Facultative + fluidized bed process | Original 600 tons/day 800 tons/day after technical improvement | November 1993 Technical improvement in 2007 | Outage for demolition |
Wastewater treatmentsystem of new sewage
treatment station
| Wastewater treatment system of new sewage treatment station | Facultative + CASS + steam flotation | 2,200 tons/day | December 2001 Technical improvement in 2014 (adding IC and steam flotation) IC tower outage for demolition in 2022 | Normal operation |
(2) Exhaust gas
| Designation of pollution prevention and control facility | Treatment process | Treatment capacity (CMH) | Time when put into operation | Operation condition |
| DA010 (35#-1) | Secondary water spraying + surface cooling + activated carbon adsorption and desorption | 15,000 | 2017 | Demolished |
| DA011 (35#-2) | Secondary water spraying | 22,000 | 2013 | Demolished |
| DA012 (40#-2) | Activated carbon + horizontal spraying | 6,000 | 2019 | Demolished |
| DA013 (32#-1) | Secondary alkaline water spraying | 22,000 | 2013 | Demolished |
| DA014 (36#-1) | Secondary clean water spraying + surface cooling + low-temperature plasma + primary water spraying | 27,000 | 2017 | Normal operation |
| DA015 (40#-1) | Secondary clean water spraying | 24,200 | / | Demolished |
| DA016 (18#-1) | Secondary water spraying + activated carbon + primary spraying | 30,000 | 2022 | Normal operation |
| DA017 (19#-1) | Combustion tower | / | 2018 | Demolished |
| DA018 (19#-2) | Combustion tower | / | 2018 | Demolished |
| DA019 (3#-1) | Primary water spraying + photo-oxidation | 20,000-+52,000 | 2019 | Normal operation |
DA020 (36#-2)
| DA020 (36#-2) | Secondary water spraying + condensation + photo-oxidation + activated carbon + inorganic nano-catalysis + water spraying | 10,000 | 2019 | Normal operation |
| DA021 (16#-1) | Primary water spraying + primary alkaline water spraying | 12,000 | 2012 | Demolished |
| DA022 (16#-2) | Primary water spraying + primary vegetable oil water spraying | 30,000 | 2014 | Demolished |
| DA023 (27#-1) | Condensation + primary alkaline water spraying + all-in-one machine + primary alkaline water spraying | 15,000 | 2009 | Outage |
| DA024 (33#-1) | Secondary alkaline water spraying + condensing tank + shared primary alkaline water spraying | 48,000 | 2019 | Demolished |
| DA025 (32#-2) | Bag dust removal + high efficiency filter | / | 2017 | Demolished |
| DA026 (34#-1) | Secondary alkaline water spraying | 54,000 | 2008 | Demolished |
| DA027 (7#-1) | Secondary alkaline water spraying | 26,000 | 2015 | Normal operation |
| DA028 (6#-1) | Primary clean water spraying | 12,200 | 2016 | Normal operation |
DA029 (18#-2)
| DA029 (18#-2) | Secondary alkaline water spraying + photo-oxidation + activated carbon + primary alkaline water spraying | 16,000 | 2018 | Demolished |
| DA030 (18#-3) | Primary clean water spraying + primary alkaline water spraying | 5,000 | 2017 | Normal operation |
| DA031 (25#-2) | Low nitrogen combustion + high altitude emission | 8,000 | 2009 Low nitrogen transformation completed in December 2019 | Normal operation |
| DA032 (25#-1) | Low nitrogen combustion + high altitude emission | 8,000 | 2009 Low nitrogen transformation completed in December 2019 | Normal operation |
| DA033 (1#-1) | Oil fume purifier | / | / | Normal operation |
| DA034 (27#-2) | Secondary water spraying + activated carbon adsorption and desorption | 15,000 | 2011 | Outage |
| DA035 (27#-3) | Photo-oxidation + primary alkaline water spraying | 22,300 | 2016 | Outage |
| DA036 (8#-1) | Secondary water spraying | 25,000 | 2017 | Normal operation |
| DA037 (13#-1) | Secondary water spraying + surface cooling + activated carbon adsorption and desorption | 25,000 | 2017 | Normal operation |
| DA038 (28#-1) | Primary water spraying + photo-oxidation | 22,000 | 2011 | Demolished |
| DA039 (28#-2) | Secondary water spraying + shared photo-oxidation | 48,000 | 2011 | Demolished |
| DA040 (29#-1) | Primary water spraying + primary alkaline water spraying | 22,000 | 2011 | Demolished |
| DA041 (33#-2) | Primary water spraying | 18,600 | 2012 | Demolished |
| DA042 (10#-1) | Primary clean water spraying | 20,000 | 2016 | Normal operation |
| DA043 (15#-1) | Primary alkaline water spraying + photo-oxidation | 25,000 | 2018 | Normal operation |
| DA044 (43#-1) | Primary alkaline water spraying + primary water spraying | 45,000 | 2014 | Normal operation |
| DA045 (46#-1) | Primary clean water spraying | 3,000 | 2015 | Normal operation |
| DA046 (46#-2) | Primary clean water spraying | 25000 | 2015 | Normal operation |
| DA047 (46#-3) | Primary clean water spraying | 30,000 | 2015 | Normal operation |
| DA048 (23#-1) | Secondary water spraying | 7,000 | 2019 | Normal operation |
(3) Solid wastes
| Designation of pollution prevention and control facility | Treatment process | Treatment capacity | Time when put into operation | Operation condition |
| Hazardous waste warehouse | Normative storage | 160 tons | March 2012 | Normative storage, compliant disposal by entrusted qualified units |
| Normative storage | 240 tons | March 2010 | ||
| General solid waste storage yard | Normative storage | 7 tons | March 2010 | Normative storage, compliant disposal by entrusted qualified units |
| Normative storage | 30 tons | June 2004 |
2. Pollutant treatment of Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd.
(1) Wastewater
| Designation of pollution prevention and control facility | Treatment process | Treatment capacity | Time when put into operation | Operation condition |
| Phase I sewage treatment station | Primary sedimentation + EGSB + facultative + aerobic + advanced treatment | 1,500 tons/day | March 2016 | Normal operation |
| Phase II sewage treatment station | EGSB + facultative + aerobic + advanced treatment | 8,500 tons/day | July 2019 | Normal operation |
(2) Exhaust gas
| Designation of pollution prevention and control facility | Treatment process | Treatment capacity (CMH) | Time when put into operation | Operation condition | |
| DA001 | Exhaust gas from fermenting east section | Secondary alkaline spraying + photo-catalytic oxidation | 45,000 | May 2016 | Normal operation |
| DA002 | Exhaust gas from fermenting west section | Secondary alkaline spraying + photo-catalytic oxidation | 40,000 | May 2016 | Normal operation |
DA003
| DA003 | Exhaust gas from drying north section | Secondary alkaline spraying | 80,000 | May 2016 | Normal operation |
| DA004 | Exhaust gas from sewage treatment station | Secondary alkaline spraying | 50,000 | May 2016 | Normal operation |
| DA006 | Exhaust gas from batching section | Primary alkaline spraying | 10,000 | May 2016 | Normal operation |
| DA007 | Exhaust gas from quality testing and R&D | Primary alkaline spraying + photo-catalytic oxidation | 20,000 | May 2016 | Normal operation |
| DA008 | Exhaust gas from drying south section | Secondary alkaline spraying | 80,000 | May 2016 | Normal operation |
| DA010 | Exhaust gas from plate-and-frame filter | Secondary alkaline spraying + photo-catalytic oxidation | 40,000 | May 2017 | Normal operation |
| DA011 | Exhaust gas from drying cooling bin | Secondary alkaline spraying | 20,000 | May 2017 | Normal operation |
| DA012 | Exhaust gas from drying 7m | Primary alkaline spraying | 20,000 | May 2016 | Normal operation |
| DA013 | Exhaust gas from drying 18m | Primary alkaline spraying | 20,000 | May 2016 | Normal operation |
| DA014 | Exhaust gas from tank area | Activated carbon + alkaline spraying | Few | June 2019 | Normal operation |
| DA015 | RTO exhaust gas | Water spraying + RTO + alkaline spraying | 100,000 | June 2019 | Normal operation |
| DA016 | Exhaust gas from Vogely preparation | Bag dust removal | Few | June 2019 | Normal operation |
| DA017 | MP exhaust gas | Photo-catalytic oxidation | 44,000 | June 2019 | Normal operation |
| DA018 | Exhaust gas from super-resistant fermentation | Alkaline spraying + photo-catalytic oxidation + water spraying | 20,000 | June 2019 | Normal operation |
DA019
| DA019 | X8 exhaust gas | Acid spraying + water spraying | 6,000 | June 2019 | Normal operation |
| DA021 | Exhaust gas from quality testing | Alkaline spraying + photo-catalytic oxidation + water spraying | 30,000 | June 2019 | Normal operation |
| DA022 | Exhaust gas from AK refining hydrochloric acid | Alkaline spraying + water spraying | 10,000 | June 2019 | Normal operation |
| DA023 | Exhaust gas I from spray drying | Bag dust removal + water spraying | Few | June 2019 | Normal operation |
| DA024 | Exhaust gas from AK fermenting north section | Alkaline spraying + photo-catalytic oxidation + water spraying | 90,000 | June 2019 | Normal operation |
| DA025 | Exhaust gas from AK fermenting south section | Alkaline spraying + photo-catalytic oxidation + water spraying | 90,000 | June 2019 | Normal operation |
| DA026 | Exhaust gas from Phase II sewage treatment station | Alkaline spraying + water spraying | 58,000 | June 2019 | Normal operation |
| DA027 | Exhaust gas from center control | Alkaline spraying + photo-catalytic oxidation + water spraying | 8,000 | June 2019 | Normal operation |
| DA028 | YT exhaust gas | Alkaline spraying + water spraying | 4,000 | June 2019 | Normal operation |
| DA029 | Exhaust gas II from spray drying | Bag dust removal + water spraying | Few | June 2019 | Normal operation |
| DA030 | Exhaust gas from AK refining ethyl alcohol | Alkaline spraying + water spraying | 1,000 | June 2019 | Normal operation |
| DA031 | Exhaust gas from Bailing Tablets preparation | Condensation + Secondary water spraying | 20,000 | July 2022 | Normal operation |
| HDBL-FQ217 | HDG solvent-containing exhaust gas | Oxidation spraying + secondary alkaline spraying | 2,000 | September 2022 | Outage |
| HDBL-FQ218 | HDG odor exhaust gas | Oxidation spraying + alkaline spraying | 20,000 | September 2022 | Outage |
(3) Solid wastes
| Designation of pollution prevention and control facility | Treatment process | Treatment capacity | Time when put into operation | Operation condition |
| Hazardous waste warehouse | Normative storage | 10 tons | March 2017 | Normative storage, compliant disposal by entrusted qualified units |
| Normative storage | 200 tons | May 2021 |
General solid waste storage
yard
| General solid waste storage yard | Normative storage | 20 tons | March 2016 | Normative storage, compliant disposal by entrusted qualified units |
| Normative storage | 15 tons | March 2016 | ||
| Normative storage | 40 tons | July 2019 | ||
| Normative storage | 30 tons | July 2019 |
3. Pollutant treatment of Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd.
(1) Wastewater
| Designation of pollution prevention and control facility | Treatment process | Treatment capacity | Time when put into operation | Operation condition |
| Wastewater treatment system of sewage treatment station | Pretreatment + Fenton system + facultative + aerobic + MBR + carbon filtration | 250 tons/day | July 2012 | Normal operation |
(2) Exhaust gas
| Designation of pollution prevention and control facility | Treatment process | Time when put into operation | Operation condition |
| Exhaust gas treatment equipment for APIs Plant 1 | Alkaline solution spraying + dry filter (filter cotton) + UV photolysis + activated carbon adsorption | October 2020 | Normal operation |
| Exhaust gas treatment equipment for APIs Plant 2 | Secondary alkaline solution spraying + dry filter + UV photolysis + activated carbon | November 2019 | Normal operation |
| Exhaust gas treatment equipment for solid preparation | Bag dust removal | 2018 | Normal operation |
(3) Solid wastes
| Designation of pollution prevention and control facility | Treatment process | Storage capacity | Time when put into operation | Operation condition |
| Hazardous waste repository | Normative storage | 60 tons | January 2012 | Normative storage, compliant transfer and disposal by entrusted qualified units |
4. Pollutant treatment of Jiangsu Joyang Laboratories
(1) Wastewater
| Designation of pollution prevention and control facility | Treatment process | Operation condition |
Wastewater treatment system of
sewage treatment station
| Wastewater treatment system of sewage treatment station | Steam flotation tank + hydrolytic acidification + IC tower + UASB tank + A/O tank + O tank + secondary sedimentation tank | Normal operation |
(2) Exhaust gas
| Designation of pollution prevention and control facility | Treatment process | Operation condition |
| Exhaust gas treatment equipment for extracting section in Plant 101 | Primary water spraying + water-gas separator + photo-catalytic oxidation + secondary activated carbon adsorption + 25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for fermentation section in Plant 101 | Primary water spraying + water-gas separator + secondary activated carbon adsorption + 25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for drying section in Plant 101 | Primary water spraying + water-gas separator + secondary activated carbon adsorption + 25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for batching section in Plant 101 | Cyclone separator + primary water spray + 15m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for fermentation sections in Plants 104/107/108 | Primary water spraying + water-gas separator + secondary activated carbon adsorption + 25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for extracting section in Plant 104 | Primary water spraying + water-gas separator + photo-catalytic oxidation + secondary activated carbon adsorption + 25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for batching sections in Plants 104/107/108 | Cyclone separator + primary water spray + 15m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for drying sections in Plants 104/107/108 | Primary water spraying + water-gas separator + secondary activated carbon adsorption | Normal operation |
| Exhaust gas treatment equipment for Plant 103, pretreatment tank and hazardous waste repository in Plant 103 | Primary water spraying + water-gas separator + photo-catalytic oxidation + secondary activated carbon adsorption + 25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for Plant 106 | Primary water spraying + water-gas separator + photo-catalytic oxidation + secondary activated carbon adsorption + 25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for extracting section in Plant 107 | Primary water spraying + water-gas separator + photo-catalytic oxidation + secondary activated carbon adsorption + 25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for extracting section in Plant 108 | Primary water spraying + water-gas separator + photo-catalytic oxidation + secondary activated carbon adsorption + 25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for Plant 109 | Primary water spraying +25m exhaust pipe high altitude emission | Normal operation |
| Exhaust gas treatment equipment for sewage treatment station 303 | Primary water spraying + water-gas separator + photo-catalytic + 25m exhaust pipe high altitude emission | Normal operation |
(3) Solid wastes
| Designation of pollution prevention and control facility | Operation condition |
| Hazardous waste warehouse | Normative storage, compliant disposal by entrusted qualified units |
Environmental self-monitoring program
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. has formulated the Pollution Source Self-monitoringProgram, registered the Program in the environmental protection department, and reported all the monitoring dataas required.
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. has formulated the entrusted monitoringplan according to the self-monitoring requirements in the Pollutant Emission Permit, and carried out daily, monthly,quarterly or annual entrusted monitoring according to the monitoring plan.
Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. has formulated the Self-monitoring Program,registered the Program in the environmental protection department, and reported the monitoring data as required.
Jiangsu Joyang Laboratories has formulated the Pollution Source Self-monitoring Program according to therelevant national environmental protection requirements, and reported daily monitoring data as required.
Emergency plan for sudden environmental events
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. has formulated, regularly modified and perfected theEmergency Plan for Sudden Environmental Events as required.
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. has modified and recorded theEmergency Plan for Sudden Environmental Events in 2022, with the record No. of 330114-2022-069-M.
Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. has modified and perfected the Emergency Planfor Sudden Environmental Events as required in 2021, and recorded the Plan in Weinan Ecological EnvironmentBureau, with the record No. of 610582-2021-090-L.
Jiangsu Joyang Laboratories has formulated the Emergency Plan for Sudden Environmental Events, which hasbeen approved and recorded in June 2021. Jiangsu Joyang Laboratories organized an emergency drill for suddenfire and environmental events in May, 2022, which standardized the emergency management of suddenenvironmental events, minimized the harm to human health and the environment caused by the leakage ofenvironmental risk substances into air, water or soil due to fire, explosion, leakage or other unexpected emergencies,and continuously improved its emergency response capability for sudden environmental pollution incidents.Investment in environmental governance and protection, and the relevant information on paying environmental protection tax
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. Invested 4,468,000 yuan in environmentalgovernance and protection, and paid the environmental protection tax of 2,784.88 yuan.
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. is not required to pay environmentalprotection tax according to relevant policies.
Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., LTD. paid the environmental protection tax of1,593.13 yuan.
In 2022, Jiangsu Joyang Laboratories invested 12.78 million yuan in environmental governance and protection,and paid the environmental protection tax of 65,000 yuan as required.Measures taken to reduce carbon emissions during the reporting period and corresponding effects
?Applicable □ Not Applicable
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. implemented the strategy of lean energy consumption.In 2022, its total energy consumption was 11,922.32 tons of coal equivalent, 2,879.64 tons lower than that in 2021,with a decrease ratio of 19.45%. The total energy-saving cost was reduced by 11.118 million yuan from the projects
for reducing operation management expenses and saving energy implemented by the energy managementdepartment, including about 6.4495 million yuan reduced by the energy saving projects.Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. continued to use biogas to generateelectricity, reducing the emissions of methane, hydrogen sulfide and other pollutants; continuously taken leanmeasures in the plants to reduce pollutant emissions, such as saving water and reducing consumption, and carriedout the 2021 annual carbon emission verification in September 2022.Jiangsu Joyang Laboratories connected the circulating water pipe network in the plants with the low-temperature water pipe network to replace the low-temperature water in the plants for production cooling in winter,reducing the supply of low-temperature water, and saving 300,000 kWh of electricity per annual. In addition, theconcentrated water in purified water station were recycled and reused. Some concentrated water was producedduring the operation of water making equipment of the purified water stations 1 and 2, which met the qualitystandard requirements by testing. The concentrated water was stored in barrels (ton) and automatically supplied tothe plant when needed. It is estimated that 10,000 tons of water will be saved in the whole year. The technicalimprovement plan of air system was designed on the basis of air usage of each department, solving the problems ofhigh air pressure and insufficient air flow. Meanwhile, the technical improvement of old air compressor units werecompleted in June, reducing the air refilling, and saving 400,000 kWh of electricity throughout the year.Administrative penalties for environmental issues during the reporting period
| Designation of Company or Subsidiary | Reasons | Type of violation | Results | Impacts on the production and operation of listed company | Rectification measures |
| Jiangsu Joyang Laboratories | Failing to re-apply for and obtain the Pollutant Emission Permit to discharge pollutants | Increased categories of pollutant emissions | Fine of 228,000 yuan | No significant impact | Stop the discharge of the relevant category of pollutant |
Other environmental information to be disclosedNoneOther environmental protection related information
NoneII. Social ResponsibilitiesIn the process of strategic transformation, the Company strictly fulfills the social responsibilitiesof corporate citizen, and pays attention to the demands of shareholders, governments and regulatory
agencies, employees, customers and patients, suppliers, communities, the public, partners and otherstakeholders to: standardize the governance, consolidate the development cornerstone; adhere to thesustainable development and focus on long-term value; bear the responsibilities in mind and abide bybusiness ethics; insist on quality-oriented and make contribution to healthy China; care for employeesand build a happy home together; protect the earth, save energy, reduce emissions, and adhere togreen development; actively participate in public welfare and give back to the society.For details of the Company’s social responsibility performance in 2022, please refer to the SocialResponsibility Report of Huadong Medicine in 2022.III. Consolidating and Expanding Achievements of Poverty Alleviation and RuralRevitalization
The Company has not carried out special poverty alleviation and rural revitalization work in thereporting period.
Section VI. Important MattersI. Fulfillment of commitments
1. Commitments made by interested parties such as the Company’s de facto controller, shareholders, relatedparties, acquirer(s), and the Company that are fulfilled during the reporting period or unfulfilled by the endof the reporting period
□ Applicable √ N/A
The Company does not have commitments made by interested parties such as the Company’s de facto controller, shareholders, relatedparties, acquirer(s), and the Company that are fulfilled during the reporting period or unfulfilled by the end of the reporting period.
2. If there is a profit forecast for the Company’s assets or projects and the reporting period is in the profitforecast period, the Company should explain the assets or projects that meet the original profit forecast andthe reasons for that
□ Applicable √ N/A
II. Controlling shareholders’ and related parties’ occupation of non-operating funds of the listedcompanies
□ Applicable √ N/A
No such case during the reporting period.III. External guarantees in violation of provisions
□ Applicable √ N/A
No such case during the reporting period.IV. Explanation by the Board of Directors on the latest “nonstandard audit report”
□ Applicable √ N/A
V. Explanation by the Board of Directors, the Board of Supervisors and the independentdirectors (if any) on the “nonstandard audit report” of the accounting firm during the currentreporting period
□ Applicable √ N/A
VI. Explanation of changes in accounting policies and estimation, or the correction of significantaccounting errors as compared with the previous financial report
√ Applicable □ N/A
1. Important accounting policy changes
(1) Accounting policy changes arising from changes in the Accounting Standards for BusinessEnterprises
1) The Company has implemented the provision on the “accounting treatment for products or by-products sold by companies that are produced before the fixed assets reach the expected usable statusor in the research and development process” stipulated in the Interpretation No. 15 of the AccountingStandards for Business Enterprises issued by the Ministry of Finance since January 1, 2022. Suchchange has no influence on the Company’s financial statements.
2) The Company has implemented the provision on the “judgment of onerous contracts” stipulated inthe Interpretation No. 15 of the Accounting Standards for Business Enterprises issued by the Ministryof Finance since January 1, 2022. Such change has no influence on the Company’s financialstatements.
(3) The Company has implemented the provision on the “accounting treatment influenced by incometaxes of related dividends associated with financial instruments categorized by issuers as equityinstruments” stipulated in the Interpretation No. 16 of the Accounting Standards for BusinessEnterprises issued by the Ministry of Finance since November 30, 2022. Such change has noinfluence on the Company’s financial statements.
4) The Company has implemented the provision on the “accounting treatment for share-basedpayment by cash settlement changed into that by equity settlement” stipulated in the InterpretationNo. 16 of the Accounting Standards for Business Enterprises issued by the Ministry of Finance sinceNovember 30, 2022. Such change has no influence on the Company’s financial statements.
(2) Other accounting policy changes
| Accounting Policy Changes and Reasons | Review and Approval Procedures | Note |
| The Company’s wholly owned subsidiaries of Huadong Medicine Investment Holding (Hong Kong) Limited, Huadong. Medicine Aesthetics Investment (Hong Kong) Limited and Huadong Medicine Skin Care (Hong Kong) Limited are players of overseas trade and platforms of investment and financing, which mainly engage in investments in outside units and management. The three subsidiaries carried out investment activities that are valued and settled in USD. Their operating expenses are mainly paid in USD and financing activities are USD loans. In accordance with the Accounting Standards for Business Enterprises, the Company believes that the three overseas subsidiaries changing their bookkeeping base currency from RMB to USD can represent their operating results and financial conditions more objectively and fairly, thus providing investors with more reliable and accurate accounting information, after prudent consideration by combining their future development planning, business development scale and current economic environment, based on the three subsidiaries’ actual business conditions. The three subsidiaries have changed their bookkeeping base currency to USD since April 26, 2022. The prospective application was adopted in the accounting policy change. | The change was reviewed and approved by the 15th session of the 9th Board of Directors of the Company. |
2. Important changes in accounting estimate
(1) Changes in accounting estimate and reasons
| Changes in Accounting Estimate and Reasons | Review and Approval Procedures | Effective Date | Note |
| The Company included R&D expenses in gains and losses for the current period at the time of occurrence, and has decided to change estimate of the capitalization date of such expenses according to the principle of stricter prudence, combined with the actual conditions of the Company’s R&D activities and by reference to the capitalization of R&D expenses of listed companies in the same industry, in order to fully and objectively represent the Company’s R&D expenses and asset measurement. The prospective application was adopted in the accounting estimate change. | The change was reviewed and approved by the 15th session of the 9th Board of Directors of the Company. | Since April 26, 2022 |
(2) Statement items and amount under material influence
| Statement Item under Material Influence | Influenced Amount | Note |
| Balance sheet accounts on December 31, 2022 | ||
| Development expenditures | 227,794,420.14 | |
| Undistributed profit | -159,456,094.10 | |
| Income statement accounts in 2022 | ||
| R&D expenses | -227,794,420.14 | |
| Income tax expenses | 68,338,326.04 | The expenses were deducted before tax according to 100% of the amount occurred, and the applicable rate of enterprise income tax was 15%. |
VII. Changes in the scope of consolidated statements as compared to the previous financialreport
√ Applicable □ N/A
Please refer to “VIII. Change of consolidation scope” in “Section X. Financial Report” of this report for details.VIII. Employment and dismissal of accounting firmsAccounting firm employed by the Company for now
| Name of the domestic accounting firm | Pan-China Certified Public Accounts (Special General Partnership) |
| Continuous number of years of audit services provided by the domestic accounting firm | 165 |
| Remuneration of the domestic accounting firm (ten thousand yuan) | 25 |
| Certified public accountants of the domestic accounting firm | Wang Fukang and Chen Xiaodong |
| Continuous number of years of audit services provided by certified public accountants of the domestic accounting firm | 5 |
| Name of the overseas accounting firm (if any) | None |
| Remuneration of the overseas accounting firm (ten thousand yuan) (if any) | 0 |
| Continuous number of years of audit services provided by the overseas accounting firm (if any) | None |
| Certified public accountants of the overseas accounting firm (if any) | None |
| Continuous number of years of audit services provided by certified public accountants of the overseas accounting firm (if any) | None |
Whether the accounting firm employed was replaced in the current period
□Yes √No
Information about the internal control audit accounting firm, financial consultant or sponsor employed by the Company
√ Applicable □ N/A
During the reporting period, the Company employed Pan-China Certified Public Accountants (special general partnership) as theaudit institution of its annual financial report and internal control audit report; audit fee of the annual financial report and internalcontrol audit report is RMB1.65 million (before tax).IX. Delisting after annual report disclosure
□ Applicable √ N/A
X. Bankruptcy reorganization
□ Applicable √ N/A
The Company does not have related matters of bankruptcy reorganization during the reporting period.XI. Major litigation and arbitration
√ Applicable □ N/A
| Amount involved (in ten thousand yuan) | Whether an estimated liability is formed | Litigation (arbitration) progress | Litigation (arbitration) adjudication result and impact | Execution of litigation (arbitration) judgments | Disclosure date | Disclosure index |
| 3841.0733 | No | Some cases are under trials and some adjudications have come into force | The summary of the litigation matters has no significant impact on the Company | Some cases have been executed; some adjudicated cases are being executed; some are not adjudicated | Do not meet the disclosure standards for major litigation | / |
| 137.97 | No | All cases are under trails | The summary of the litigation matters has no significant impact on the Company | Cases are under trails and are to be adjudicated | Do not meet the disclosure standards for major litigation | / |
XII. Punishment and rectification
□ Applicable √ N/A
No such case during the reporting period.
XIII. Integrity of the Company and its controlling shareholders and de facto controller
√ Applicable □ N/A
There is no case of the Company, its controlling shareholders and de facto controller failed to comply with the effective judgement ofthe court, or failed to repay the due debts of a large amount during the reporting period.
XIV. Major related transactions
1. Transactions related to daily operations
√ Applicable □ N/A
| Related party | Related relations | Type of related transaction | Content of related transaction | Pricing principles for related transaction | Price of related transaction | Related transaction amount (ten thousand yuan) | Proportion in the amount of similar transactions | Approved transaction amount (ten thousand yuan) | Whether it exceeds the approved amount | Settlement method of related transaction | Available market prices of similar transactions | Disclosure date | Disclosure index |
| Hangzhou Jiuyuan Gene Engineering Co., Ltd. | Joint venture of the Company | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 6,746.73 | 0.26% | 7,000 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Grandpharma (China) Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 5,296 | 0.21% | 7,500 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Sichuan Yuanda Shuyang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 3,496.8 | 0.14% | 6,500 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Penglai Nuokang Pharmaceutical Co. Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 3,286.77 | 0.13% | 3,000 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Beijing Grand Johamu Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 3,279.62 | 0.13% | 3,500 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Hangzhou Grand Biologic Pharmaceutical Inc. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 2,409.42 | 0.09% | 2,000 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Wuhan Grand Pharmaceutical Group Sales Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 2,408.21 | 0.09% | 3,550 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Yunnan Leiyunshang Lixiang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 1,934.32 | 0.08% | 2,200 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Leiyunshang Pharmaceutical Group Co. Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 1,263.01 | 0.05% | 500 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Shenyang Yaoda Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 581.6 | 0.02% | 500 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Xi’an Yuanda new Beilin Pharmaceutical Co., Ltd | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 522.21 | 0.02% | 300 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Grand Life Science (Wuhan) Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 518.44 | 0.02% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Grand Biopharmaceutical (Chongqing) Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 492.57 | 0.02% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Xi’an Yuanda Detian Pharmaceutical Co., Ltd | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 267.3 | 0.01% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Guangdong Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 221.47 | 0.01% | 350 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Changchun Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 208.09 | 0.01% | 150 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Changshu Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 95.57 | 0.00% | 150 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Anhui Leiyunshang pharma ceutica l Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 80.45 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Grandpharma Huangshi Feiyun Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 7.58 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Grand Life Science | Subsidiary of the Company’s | Drug purchase | Drug purchase | Market price determined by | Market price | 616.91 | 0.02% | Yes | Cash, banker’s | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| (Liaoning) Co., Ltd. | controlling shareholder | the Company’s related transact ion decision-making process | acceptance bill | ||||||||||
| Liaoning Weibang Biopharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug purchase | Drug purchase | Market price determined by the Company’s related transact ion decision-making process | Market price | 25.47 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Hangzhou Jiuyuan Gene Engineering Co., Ltd. | Joint venture of the Company | Technical service fee | Technical service fee | Market price determined by the Company’s related transact ion decision-making process | Market price | 1,280 | 0.05% | 2,200 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Chongqing Peg-Bio Biopharm Co., Ltd. | Joint venture of the Company | Technical service fee | Technical service fee | Market price determined by the Company’s related transact ion decision-making process | Market price | 200 | 0.01% | 3,000 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Penglai Nuokang Pharmaceutical Co. Ltd. | Subsidiary of the Company’s controlling shareholder | Technical service fee | Technical service fee | Market price determined by the Company’s related transact ion decision-making process | Market price | 176.98 | 0.01% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Beijing Yuanda Chuangxin Property Management Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Property management fee | Property management fee | Market price determined by the Company’s related transact ion decision-making process | Market price | 19.28 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Grand Bay View Hotel Zhuhai | Subsidiary of the Company’s controlling shareholder | conference fee | conference fee | Market price determined by the Company’s related transact ion decision-making process | Market price | 53.33 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Grand Bay Hotel View Chengdu Co., Ltd. | Subsidiary of the Company’s controlling shareholder | conference fee | conference fee | Market price determined by the Company’s related transact ion decision-making process | Market price | 42.95 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Beijing Haiwan Banshan Hotel Management Co., Ltd. | Subsidiary of the Company’s controlling shareholder | conference fee | conference fee | Market price determined by the Company’s related transact ion decision-making process | Market price | 6.8 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Hangzhou Junlan Pharmaceutical Trading Co. Ltd. | Shareholding enterprise | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 9,450.68 | 0.25% | 13,000 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Hangzhou Tangyangyuan Pharmaceutical Co., Ltd. | Joint venture of the Company | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 1,001.62 | 0.03% | 1,100 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Hangzhou Jiuyuan Gene Engineering Co., Ltd. | Joint venture of the Company | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 583.15 | 0.02% | 1,200 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Leiyunshang Pharmaceutical Group Co. Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 543.71 | 0.01% | 650 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Yunnan Leiyunshang Lixiang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 420.28 | 0.01% | 350 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Guangdong Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 271.79 | 0.01% | 220 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Hangzhou Grand Biologic Pharmaceutical Inc. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transact | Market price | 58.91 | 0.00% | 150 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| ion decision-making process | |||||||||||||
| Grand Resources Group Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 3.99 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Changchun Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 21 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Changshu Leiyunshang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 10.52 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Grand Holding Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 0.11 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Sichuan Yuanda Shuyang Pharmaceutical Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 516.37 | 0.01% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Chongqing Peg-Bio Biopharm Co., Ltd. | Joint venture of the Company | Drug sales | Drug sales | Market price determined by the Company’s related transact ion decision-making process | Market price | 15.49 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Penglai Nuokang Pharmaceutical Co. Ltd. | Subsidiary of the Company’s controlling shareholder | Agent service fee | Agent service fee | Market price determined by the Company’s related transact ion decision-making process | Market price | 2,073.15 | 0.05% | 1,978 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Chongqing Peg-Bio Biopharm Co., Ltd. | Joint venture of the Company | Preparati on filling Service | Preparation filling Service | Market price determined by the Company’s related transact ion decision-making process | Market price | 112.26 | 0.00% | 150 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Hangzhou Grand Biologic Pharmaceutical Inc. | Subsidiary of the Company’s controlling shareholder | processing charge | processing charge | Market price determined by the Company’s related transact ion decision-making process | Market price | 42.72 | 0.00% | 25 | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Fujian KaiLi Bio-Product Co., Ltd. | Subsidiary of the Company’s controlling shareholder | Technical service fee | Technical service fee | Market price determined by the Company’s related transact ion decision-making process | Market price | 33.02 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Hangzhou Jiuyuan Gene Engineering Co., Ltd. | Joint venture of the Company | House rental | House rental | Market price determined by the Company’s related transact ion decision-making process | Market price | 6.42 | 0.00% | 6.42 | No | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) |
| Hangzhou Tangyangyuan TCM Outpatient Department Co., Ltd. | Subsidiary of the Company’s joint venture Hangzhou Tangyangyuan Pharmaceutical Co., Ltd. | House rental | House rental | Market price determined by the Company’s related transact ion decision-making process | Market price | 17.71 | 0.00% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Beijing Yanhuang Real Estate Co., Ltd. | Subsidiary of the Company’s controlling shareholder | House leasing | House leasing | Market price determined by the Company’s related transact ion decision-making process | Market price | 132.48 | 0.01% | Yes | Cash, banker’s acceptance bill | Market price | May 12, 2022 | Cninfo (http://www.Cninfo.com.cn) | |
| Total | -- | -- | 50,853.26 | -- | 61,229.42 | -- | -- | -- | -- | -- | |||
| Details of bulk sales returns | N/A | ||||||||||||
| Actual performance during the reporting period where the total amount of daily related transactions is estimated by category for the current period (if any) | Actual amount occurred in daily transactions related to daily operations of the Company and its subsidiaries did not exceed the annual estimate during the reporting period. | ||||||||||||
| Reasons for the large difference between the transaction price and the market reference price (if applicable) | N/A | ||||||||||||
2. Related transactions involving the acquisition or sales of assets and equity
□ Applicable √ N/A
No such case during the reporting period.
3. Related transactions of joint external investment
□ Applicable √ N/A
No such case during the reporting period.
4. Associated claim and debt transactions
□ Applicable √ N/A
No such case during the reporting period.
5. Transactions with financial companies who are related parties of the Company
□ Applicable √ N/A
No deposit, loan, credit or other financial business between the Company and the related financial companies
6. Transactions between the financial companies controlled by the Company and the related parties
□ Applicable √ N/A
No deposit, loan, credit or other financial business between the financial companies controlled by the Company and the related parties.
7. Other major related transactions
□ Applicable √ N/A
No such case during the reporting period.XV. Major contracts and their fulfillment
1. Entrustment, contracting and leasing
(1) Entrustment
□ Applicable √ N/A
No such case during the reporting period.
(2) Contracting
□ Applicable √ N/A
No such case during the reporting period.
(3) Leasing
√ Applicable □ N/A
Note on leasing
No significant leasing of the Company.
Projects generating gains and losses to the Company that account for over 10% of the total profits during the reporting period
□ Applicable √ N/A
2. Important guarantees
√ Applicable □ N/A
Unit: RMB ten thousand yuan
| guaranteed party | Disclosure date of the announcement related to the guarantee Cap | Guarantee Cap | Actual date of occurrence | Actual guaranteed amount | Type of guarantee | Collateral (if any) | Counter - guaranty (if any) | Period of guarantee | Fulfilled or not | Guarantee for a related party or not |
| The Company’s guarantees for its subsidiaries | ||||||||||
| guaranteed party | Disclosure date of the announcement related to the guarantee Cap | Guarantee Cap | Actual date of occurrence | Actual guaranteed amount | Type of guarantee | Collateral (if any) | Counter - guaranty (if any) | Period of guarantee | Fulfilled or not | Guarantee for a related party or not |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 28, 2020 | 80,000 | April 9, 2021 | 974 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 28, 2022 | 85,000 | November 14, 2022 | 1,599 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 28, 2022 | 85,000 | October 26, 2022 | 15,000 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 28, 2022 | 85,000 | November 22, 2022 | 4,612 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | April 28, 2022 | 85,000 | July 13, 2022 | 26,445 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. | April 28, 2022 | 5,000 | 5,000 | One year | ||||||
| Huadong Medicine Ningbo Sales Co., Ltd. | April 28, 2022 | 16,000 | 16,000 | One year | ||||||
| Huadong Medicine Huzhou Co., Ltd. | April 28, 2022 | 15,000 | 15,000 | One year | ||||||
| Huadong Medicine Shaoxing Co., Ltd. | April 28, 2022 | 18,500 | March 25, 2022 | 18,500 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Supply Chain Management (Jinhua) Co., Ltd. | April 19, 2019 | 20,000 | 20,000 | Ten years | ||||||
| Huadong Medicine (Hangzhou) Biological Products Co., Ltd. | April 28, 2022 | 3,000 | 3,000 | One year | ||||||
| Jiangsu | April 28, | 7,000 | 7,000 | One year | ||||||
| Jiuyang Biopharm Co., Ltd. | 2022 | |||||||||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | July 5, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | July 8, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | July 11, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | July 12, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | July 13, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | August 4, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | August 5, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | August 24, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | September 13, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Wenzhou Co., Ltd. | April 28, 2022 | 24,000 | September 15, 2022 | 24,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Lishui Co., Ltd. | April 28, 2022 | 15,000 | April 26, 2022 | 15,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Daishan Co., Ltd. | April 28, 2022 | 2,500 | November 17, 2022 | 2,500 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Cunde (Zhoushan) Co., Ltd. | April 28, 2022 | 14,300 | 14,300 | One year | ||||||
| Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd. | April 28, 2022 | 70,000 | October 17, 2022 | 70,000 | Joint liability guarantee | One year | No | No | ||
| Hangzhou Huadong Pharmacy Chain Co., Ltd. | April 28, 2022 | 5,000 | March 25, 2022 | 5,000 | Joint liability guarantee | One year | No | No |
| Huadong Medicine Jinhua Co., Ltd. | April 28, 2022 | 10,000 | October 17, 2022 | 10,000 | Joint liability guarantee | One year | No | No | ||
| Huadong Medicine Investment Holding (Hong Kong) Limited | July 16, 2021 | 66,164 | June 30, 2022 | 66,164 | Joint liability guarantee | Three years | No | No | ||
| Huadong Medicine Investment Holding (Hong Kong) Limited | April 28, 2022 | 70,000 | 70,000 | One year | ||||||
| Sinclair Pharma Limited | November 23, 2018 | 40,000 | May 21, 2020 | 40,000 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | November 23, 2018 | 40,000 | July 30, 2020 | 40,000 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | November 23, 2018 | 40,000 | November 16, 2020 | 40,000 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | November 23, 2018 | 40,000 | February 4, 2021 | 40,000 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,591 | March 30, 2021 | 12,591 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,591 | April 19, 2021 | 12,591 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,591 | May 26, 2021 | 12,591 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,591 | August 11, 2021 | 12,591 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | September 17, 2020 | 12,591 | September 14, 2021 | 12,591 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | July 16, 2021 | 38,305 | January 13, 2022 | 38,305 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | March 16, 2021 | 14,846 | April 8, 2021 | 14,846 | Joint liability guarantee | Three years | No | No | ||
| Sinclair Pharma Limited | March 16, 2021 | 14,846 | March 17, 2021 | 14,846 | Joint liability guarantee | December 31, 2024 | No | No | ||
| Sinclair Pharma Limited | March 16, 2021 | 31,696 | Three years | |||||||
| Sinclair Pharma Limited | April 28, 2022 | 58,600 | One year | |||||||
| Total guarantee cap for subsidiaries approved during the reporting period (B1) | 418,900 | Total guarantee amount for subsidiaries actually occurred during the reporting period (B2) | 76,652 | |||||||
| Total approved guarantee cap for subsidiaries at the end of the reporting period (B3) | 722,502 | Total actual guarantee balance for subsidiaries at the end of the reporting period (B4) | 221,169 | |||||||
| Subsidiaries guarantee for subsidiaries | ||||||||||
| guaranteed party | Disclosure date of the announcement related to the guarantee Cap | Guarantee Cap | Actual date of occurrence | Actual guaranteed amount | Type of guarantee | Collateral (if any) | Counter - guaranty (if any) | Period of guarantee | Fulfilled or not | Guarantee for a related party or not |
| Total amount of the Company’s guarantees (i.e. the sum of the above-mentioned 3 kinds of guarantees) | ||||||||||
| Total guarantees cap approved during the reporting period (A1+B1+C1) | 418,900 | Total actual guarantee amount during the reporting period (A2+B2+C2) | 76,652 | |||||||
| Total approved guarantee cap at the end of the reporting period (A3+B3+C3) | 722,502 | Total actual guarantee balance at the end of the reporting period (A4+B4+C4) | 221,169 | |||||||
| Proportion of the actual guarantee amount (i.e. A4+B4+C4) in the Company’s net assets | 11.90% | |||||||||
| Including: | ||||||||||
| Balance of guarantees for shareholders, de facto controllers and their related parties (D) | 0 | |||||||||
| Amount of debt guarantees provided directly or indirectly for the entities with a liability to asset ratio over 70% (E) | 116,151 | |||||||||
| The total amount of guarantees exceeds 50% of the net assets (F) | 0 | |||||||||
| Total guarantee amount of the above-mentioned three kinds of guarantees (D+E+F) | 116,151 | |||||||||
| Note on the circumstance that guarantee liability has occurred or there may be joint liability for settlement during the reporting period in terms of unexpired guarantee contracts (if any) | N/A | |||||||||
| Note of external guarantees in violation of prescribed procedures (if any) | N/A | |||||||||
Note on the specific circumstance if multiple methods are adopted for guarantees
3. Entrusted management of cash assets
(1) Entrusted wealth management
□ Applicable √ N/A
No such case during the reporting period.
(2) Entrusted loans
□ Applicable √ N/A
No such case during the reporting period.
4. Other significant contracts
□ Applicable √ N/A
No such case during the reporting period.
XVI. Other major events
□ Applicable √ N/A
No such case during the reporting period.
XVII. Major events of subsidiaries
√ Applicable □ N/A
(I) Major medicines (products) of the wholly owned subsidiary, Zhongmei Huadong, included, newlyentering and withdrawing from the National Essential Medicine List and the Medicines List forMedical Insurance:
In January 2023, the National Healthcare Security Administration and the Ministry of HumanResources and Social Security of the People’s Republic of China launched the National Drug Catalogfor Basic Medical Insurance, Work-Related Injury Insurance, and Maternity Insurance (2022)(hereinafter referred to as the 2022 Drug Catalog), which has been effective since March 1, 2023.As of the release of this report, the Company had a total of 30 core products approved for launch andnine major ones under development in the 2022 Drug Catalog, among which the launched acarbosechewable tablets, corbrin capsules and empagliflozin and metformin combination (I) of the Companyare negotiated medicines of the 2022 Drug catalog.As of the release of this report, the Company had a total of 14 medicines (including one underdevelopment in the National Essential Medicine List (Version 2018).
(II) As of the release of this report, major assets had been disposed in the liquidation of HuadongNingbo Medicine Co., Ltd. in the court. Some claims and accounts receivable are remained to becollected.
Section VII. Share Change and Shareholders
I. Changes in shares
1. Table of changes in shares
Unit: Share
| Before the change | Change in the period (+/-) | After the change | |||||||
| Number of shares | Proportion | New shares | Bonus shares | Shares converted from capital reserve | Others | Total | Number of shares | Proportion | |
| I. Shares subject to conditional restriction | 47,745 | 0.00% | 0 | 0 | 0 | 4,220,555 | 4,220,555 | 4,268,300 | 0.24% |
| 1. Shares held by the state | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 2. Shares held by state-owned corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 3. Shares held by other domestic investors | 47,745 | 0.00% | 0 | 0 | 0 | 4,020,555 | 4,020,555 | 4,068,300 | 0.23% |
| Including: Shares held by domestic corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Shares held by domestic natural persons | 47,745 | 0.00% | 0 | 0 | 0 | 4,020,555 | 4,020,555 | 4,068,300 | 0.23% |
| 4. Shares held by overseas investors | 0 | 0.00% | 0 | 0 | 0 | 200,000 | 200,000 | 200,000 | 0.01% |
| Including: Shares held by overseas corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Shares held by overseas natural persons | 0 | 0.00% | 0 | 0 | 0 | 200,000 | 200,000 | 200,000 | 0.01% |
| II. Shares without restriction | 1,749,761,803 | 100.00% | 0 | 0 | 0 | -34,755 | -34,755 | 1,749,727,048 | 99.76% |
| 1. RMB ordinary shares | 1,749,761,803 | 100.00% | 0 | 0 | 0 | -34,755 | -34,755 | 1,749,727,048 | 99.76% |
| 2. Domestically listed foreign shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 3. Foreign shares listed overseas | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 4. Others | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| III. Total number of shares | 1,749,809,548 | 100.00% | 0 | 0 | 0 | 4,185,800 | 4,185,800 | 1,753,995,348 | 100.00% |
Reasons for the changes in share capital
√ Applicable □ N/A
During the reporting period, the Company completed election at expiration of office terms. Restrictedconditions for shares held by the retired directors, supervisors and senior managers were removed.Some shares held by newly appointed directors, supervisors and senior managers were locked-upshares for senior managers of the Company which increased by 34,755 shares in total.During the reporting period, the Company registered the first grant of the 2022 Restricted ShareIncentive Scheme. The equity incentive restricted shares increased by 4,185,800 in total.During the reporting period, the total number of shares soared by 4,185,800 in total. Among them,the number of shares subject to conditional restriction increased by 4,220,555 in total, while thenumber of shares without restriction decreased by 34,755 in total.Approval for changes in share capital
√ Applicable □ N/A
The Company convened the 2nd session of the 10th Board of Directors and the 2nd session of the10th Board of Supervisors on August 8, 2022, during which the Proposal on the Company’s 2022Restricted Share Incentive Scheme (Draft) and Its Summary was reviewed and approved. On August31, 2022, the Company convened the 1st extraordinary general meeting in 2022. During the meeting,the Proposal on the Company’s 2022 Restricted Share Incentive Scheme (Draft) and Its Summary wasdeliberated on and approved. Meanwhile, the incentive scheme was approved by the Company’s 1stextraordinary general meeting in 2022, and the Board of Directors was authorized to implement thescheme and handle relevant matters according to laws and regulations. On October 27, 2022, theCompany held the 4th session of the 10th Board of Directors and the 5th session of the 10th Board ofSupervisors. During the sessions, the Proposal on Granting Restricted Shares to the First Batch ofEmployees Receiving Incentive from the 2022 Restricted Share Incentive Scheme was reviewed andapproved. The first grant date was determined to be October 27, 2022. 113 eligible incentive receiverswere granted 4,185,800 restricted shares at the grant price of RMB25.00/share. Please refer to theAnnouncement on the Completion of the First Grant and Registration of the 2022 Restricted ShareIncentive Scheme (2022-075) disclosed by the Company on www.cninfo.com.cn for more details.
Transfer of shares
□ Applicable √ N/A
Effects of changes in share capital on the basic earnings per share, diluted earnings per share for the most recent year and the mostrecent period, the net assets per share attributable to the Company’s common shareholders and other financial indicators
□ Applicable √ N/A
Other disclosures the Company deems necessary or required by securities regulatory authorities
□ Applicable √ N/A
2. Changes in restricted shares
√ Applicable □ N/A
Unit: Share
| Name of Shareholder | Number of Restricted Shares at the Beginning of the Period | Number of Newly Increased Restricted Shares during the Current Period | Number of Restricted Shares Unlocked during the Current Period | Number of Restricted Shares at the End of the Period | Reasons for Restriction | Unlock Date |
| Zhang Jianfei | 0 | 210,000 | 0 | 210,000 | Equity incentive, locked-up shares for senior | Be unlocked according to relevant rules of |
| managers | the Company’s 2022 Restricted Share Incentive Scheme and the management of shares for senior managers | |||||
| Lv Liang | 0 | 200,000 | 0 | 200,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Zhu Li | 22,500 | 150,000 | 0 | 172,500 | Equity incentive, locked-up shares for senior managers | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme and the management of shares for senior managers |
| Wu Hui | 0 | 150,000 | 0 | 150,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Xu Junfang | 0 | 150,000 | 0 | 150,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| LIU DONGZHOU JEFFERY | 0 | 150,000 | 0 | 150,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Zhang Yun | 0 | 100,000 | 0 | 100,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Yang Chu | 0 | 100,000 | 0 | 100,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Shen Jianfang | 0 | 100,000 | 0 | 100,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Qiu Renbo | 0 | 100,000 | 0 | 100,000 | Equity incentive | Be unlocked |
| according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme | ||||||
| Chen Bo | 0 | 100,000 | 0 | 100,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Zhou Zuhua | 0 | 100,000 | 0 | 100,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Yu Xi | 0 | 100,000 | 0 | 100,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Ma Honglan | 0 | 100,000 | 0 | 100,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Li Xiaomu | 0 | 100,000 | 0 | 100,000 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Other middle management and core technicians (business specialists) | 0 | 2,335,800 | 0 | 2,335,800 | Equity incentive | Be unlocked according to relevant rules of the Company’s 2022 Restricted Share Incentive Scheme |
| Total | 22,500 | 4,245,800 | 0 | 4,268,300 | -- | -- |
II. Issuance and listing of securities
1. Securities (excluding preferred shares) issued during the reporting period
□ Applicable √ N/A
2. Explanation on changes in the total number of shares, the structure of shareholders and the structure ofassets and liabilities
√ Applicable □ N/A
During the reporting period, the Company completed election at expiration of office terms. Restrictedconditions for shares held by the retired directors, supervisors and senior managers were removed.Some shares held by newly appointed directors, supervisors and senior managers were locked-upshares for senior managers of the Company which increased by 34,755 shares in total.
During the reporting period, the Company registered the first grant of the 2022 Restricted ShareIncentive Scheme. The equity incentive restricted shares increased by 4,185,800 in total.During the reporting period, the total number of shares soared by 4,185,800 in total. Among them,the number of shares subject to conditional restriction increased by 4,220,555 in total, while thenumber of shares without restriction decreased by 34,755 in total.
3. Existent shares held by internal employees of the Company
□ Applicable √ N/A
III. Particulars about shareholders and the de facto controller
1. Total number of shareholders and their shareholdings
Unit: Share
| Total number of common shareholders at the end of the reporting period | 75,458 | Total number of common shareholders at the end of the previous month before the disclosure of the annual report | 72,114 | Total number of preference shareholders with restoration of the voting rights at the end of the reporting period (if any) (see Note 8) | 0 | Total number of preference shareholders with restoration of the voting rights at the end of the previous month before the disclosure of the annual report (if any) (see Note 8) | 0 | |
| Particulars about shareholders with a shareholding ratio over 5% or the Top 10 shareholders | ||||||||
| Name of Shareholder | Nature of shareholder | Shareholding ratio | Total shares held at the end of the reporting period | Changes in the reporting period | The number of common shares held with trading restrictions restricted shares held | The number of shares held without trading restriction | Pledged or frozen | |
| Status | Quantity | |||||||
| China Grand Enterprises, Inc. | Domestic non-state- owned corporation | 41.67% | 730,938,157 | 0 | 0 | 730,938,157 | Pledged | 164,492,000 |
| Hangzhou Huadong Medicine Group Co., Ltd. | State- owned corporation | 16.42% | 288,000,000 | 0 | 0 | 288,000,000 | ||
| Hong Kong Securities Clearing Company Ltd. | Overseas corporation | 3.19% | 56,008,071 | 23,547,558 | 0 | 56,008,071 | ||
| Industrial and Commercial Bank of China Limited - China-Europe Healthcare Hybrid Securities Investment Fund | Others | 2.81% | 49,316,241 | 45,604,092 | 0 | 49,316,241 | ||
| China | Domestic | 1.26% | 22,186,818 | 0 | 0 | 22,186,818 | ||
| Securities Finance Co., | non-state- owned corporation | |||||||
| China Construction Bank Co., Ltd. - ICBC Credit Suisse Frontier Medical Equity Fund | Others | 1.14% | 20,000,078 | 10,000,028 | 0 | 20,000,078 | ||
| National Social Security Fund - Profile 0 | Others | 0.59% | 10,380,842 | 10,380,842 | 0 | 10,380,842 | ||
| Industrial and Commercial Bank of China Limited - China-Europe Healthcare Innovation Stock Investment Fund | Others | 0.55% | 9,577,584 | 9,577,584 | 0 | 9,577,584 | ||
| Norges Bank - equity funds | Overseas corporation | 0.53% | 9,371,128 | 6,594,899 | 0 | 9,371,128 | ||
| China Construction Bank Corporation - E Fund CSI 300 Healthcare Exchange Traded Fund | Others | 0.40% | 7,035,032 | 4,204,700 | 0 | 7,035,032 | ||
| Strategic investors or general corporations become the top 10 shareholders due to the placement of new shares (if any) (see Note 3) | N/A | |||||||
| 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 about above-mentioned shareholders’ entrusting/being entrusted with and waiving voting rights | N/A | |||||||
| Explanation of special account for repurchase among the top 10 shareholders (if any) (see Note 10) | N/A | |||||||
| Shareholding of the top 10 shareholders without trading restrictions | ||||||||
| Name of Shareholder | Number of shares without restriction held at the end of the reporting period | Type of shares | ||||||
| Type of shares | Quantity | |||||||
| China Grand Enterprises, | 730,938,157 | RMB | 730,938,157 | |||||
| Inc. | common shares | ||
| Hangzhou Huadong Medicine Group Co., Ltd. | 288,000,000 | RMB common shares | 288,000,000 |
| Hong Kong Securities Clearing Company Ltd. | 56,008,071 | RMB common shares | 56,008,071 |
| Industrial and Commercial Bank of China Limited - China-Europe Healthcare Hybrid Securities Investment Fund | 49,316,241 | RMB common shares | 49,316,241 |
| China Securities Finance Co., | 22,186,818 | RMB common shares | 22,186,818 |
| China Construction Bank Co., Ltd. - ICBC Credit Suisse Frontier Medical Equity Fund | 20,000,078 | RMB common shares | 20,000,078 |
| National Social Security Fund - Profile 0 | 10,380,842 | RMB common shares | 10,380,842 |
| Industrial and Commercial Bank of China Limited - China-Europe Healthcare Innovation Stock Investment Fund | 9,577,584 | RMB common shares | 9,577,584 |
| Norges Bank - equity funds | 9,371,128 | RMB common shares | 9,371,128 |
| China Construction Bank Corporation - E Fund CSI 300 Healthcare Exchange Traded Fund | 7,035,032 | RMB common shares | 7,035,032 |
| Description for affiliated relationship or concerted action among the top 10 shareholders holding tradable stocks without trading restriction conditions and between the top 10 shareholders holding tradable stocks without trading restriction conditions and the top 10 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 common shareholders (if any) (see Note 4) | 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. | ||
Whether the Company’s Top 10 common shareholders or the Top 10 common shareholders without trading restriction have carriedout any agreement to repurchase transaction during the reporting period
□Yes √No
No such case during the reporting period.
2. Particulars about controlling shareholder of the Company
Nature of controlling shareholder: Natural person holdingType of controlling shareholder: Corporation
| Name of controlling shareholder | Legal representative/person | Date of establishment | Organization code | Main business |
| in charge | ||||
| China Grand Enterprises, Inc. | Hu Kaijun | October 27, 1993 | 91110000101690952K | Investment management |
| Shares held by the controlling shareholder in other listed companies through controlling or holding during the reporting period | The other two listed companies controlled by China Grand Enterprises, Inc. are Grand Industrial Holding Co., Ltd. and Grand Pharmaceutical Group Limited. | |||
Change of the controlling shareholder during the reporting period
□ Applicable √ N/A
No such case during the reporting period.
3. Particulars about the Company’s de facto controller & concerted parties
Nature of de facto controller: Domestic natural person holdingType of de facto controller: Natural person
| Name of de facto controller | Relationship with the de facto controller | Nationality | Whether the de facto controller has obtained the right of abode in another country or region |
| Hu Kaijun | Hu Kaijun | China | Yes |
| Main occupation and position | Chairman of the Board and General Manager of China Grand Enterprises, Inc.; Chairman of the Board and General Manager of Beijing Grand Huachuang Investment Co., Ltd. | ||
| Share held by the de facto controlling shareholder in domestic or overseas listed companies in the past ten years | The three listed companies controlled by de facto controller are Huadong Medicine Co., Ltd., Grand Industrial Holding Co., Ltd., and China Grand Pharmaceutical and Grand Pharmaceutical Group Limited. | ||
Change of the de facto controller during the reporting period
□ Applicable √ N/A
No such case during the reporting period.The ownership and controlling relationship between the de facto controller of the Company and the Company is detailed as follows:
| 胡凯军 | Hu Kaijun |
| 北京远大华创投资有限公司 | Beijing Grand Huachuang Investment Co., Ltd. |
| 北京炎黄置业有限公司 | Beijing Yanhuang Real Estate Co., Ltd. |
| 中国远大集团有限责任公司 | China Grand Enterprises, Inc. |
| 华东医药股份有限公司 | Huadong Medicine Co., Ltd. |
The de facto controller controls the Company through a trust or other way of assets management
□ Applicable √ N/A
4. The amount of shares pledged by the Company’s controlling shareholder or the largest shareholder andits parties acting in concert accounts for 80% of the total shares of the Company held by them
□ Applicable √ N/A
5. Other corporate shareholders with a shareholding ratio over 10%
√ Applicable □ N/A
| Legal representative/person in charge | Legal representative/person in charge | Date of establishment | Registered capital | Main business or management activities |
| Hangzhou Huadong Medicine Group Co., Ltd. | Ye Bo | December 21, 1992 | 60 million yuan | The production and processing of compound wine, bagged tea, and donkey-hide glue products (the branches can operate only with licenses), and the state-owned asset operation within the authorized scope of the municipal government; industrial investment; wholesale and retail: chemical raw materials and products (except dangerous chemicals and precursor chemicals), package materials, medical intermediates (except dangerous chemicals and precursor chemicals); other legal items that need no submission for approval. |
6. Reduction of restricted shares held by controlling shareholder, de facto controller, restructuring partiesand other commitment subjects
□ Applicable √ N/A
IV. Progress of share repurchase during the reporting periodProgress of share repurchase
□ Applicable √ N/A
Progress of reducing repurchased shares through centralized bidding
□ Applicable √ N/A
Section VIII. Information on Preferred Shares
□ Applicable √ N/A
No such case during the reporting period.
Section IX. Information on Bonds
□ Applicable √ N/A
Section X. Financial Report
I. Audit report
| Audit Opinion | Unmodified unqualified audit opinion |
| Audit Report sign-off Date | April 12, 2023 |
| Audit Institution Name | Pan-China Certified Public Accounts (Special General Partnership) |
| Audit Report Number | T. J. S. (2023) No. 2298 |
| Certified Public Accounts Name | Wang Fukang and Chen Xiaodong |
Audit Report
T. J. S. (2023) No. 2298
Shareholders of Huadong Medicine Co., Ltd.:
I. Audit opinionWe audited the financial statements of Huadong Medicine Co., Ltd. (hereinafter referred to as“Huadong Medicine”), including the consolidated and the parent company’s balance sheets as atDecember 31, 2022, the consolidated and the parent company’s income statements for the year 2022,the consolidated and the parent company’s cash flow statements, the consolidated and the parentcompany’s statements of changes in owners’ equity, and the notes to relevant financial statements.In our opinion, the attached financial statements are prepared in accordance with the accountingstandards for business enterprises in all material aspects and fairly reflect the consolidated and theparent company’s financial condition of Huadong Medicine as at December 31, 2022, as well as theconsolidated and the parent company’s operating results and cash flows in 2022.
II. Basis opinionWe conducted our audit in accordance with the auditing standards for certified public accountants ofChina. Our responsibilities under these standards are further elaborated in the section “CPA’sresponsibility to audit the financial statements” of the auditor report. In accordance with the code ofprofessional ethics for certified public accountants in China, we are independent of HuadongMedicine and have fulfilled other responsibilities in respect of professional ethics. We believe thatthe audit evidence we have obtained is sufficient and appropriate, providing a basis for auditor’sopinion.
III. Key audit mattersThe key audit matters are those we consider most important to the audit of the financial statementsfor the current period in our professional judgment. The response to these items is based on an auditof the financial statements as a whole and the formation of auditor’s opinion. We do not comment onthese items separately.(I) Revenue recognition
1. Description
The relevant information disclosure is detailed in Notes III (XXIV), V (II) 1 and XIV (I) to thefinancial statements.The operating revenue of Huadong Medicine mainly comes from the production and sales of drugs.The operating revenue of Huadong Medicine in 2022 was RMB37,715,000,000.The medicine sales business of Huadong Medicine is a performance obligation to be performed at acertain time. The recognition of revenue from domestic sales of products of Huadong Medicine shallmeet the following conditions: the products have been delivered to the buyer according to thecontract, and the amount of product sales revenue has been determined, the payment for goods hasbeen recovered or the receipt certificate has been obtained, and the relevant economic benefits arelikely to flow in, and the costs related to the products can be measured reliably. The recognition ofrevenue from overseas sales of products shall meet the following conditions: the products have beendeclared at the customs according to the contract, the bill of lading has been obtained, the amount ofproduct sales revenue has been determined, the payment for goods has been recovered or the receiptcertificate has been obtained, and the relevant economic benefits are likely to flow in, and the costsrelated to the products can be measured reliably.As the operating revenue is one of the key performance indicators of Huadong Medicine, there maybe inherent risks for the management of Huadong Medicine (hereinafter referred to as the“Management”) to achieve specific goals or expectations through inappropriate revenue recognition.Therefore, we identified revenue recognition as a key audit matter.
2. Audit response
For revenue recognition, the audit procedures we implemented mainly include:
(1) Understanding the key internal controls related to revenue recognition, evaluating the design ofthese controls, determining whether they are implemented, and testing the operating effectiveness ofrelevant internal controls;
(2) Reviewing the sales contract, understanding the main contract terms or conditions, and evaluatingwhether the revenue recognition method is appropriate;
(3) Analyzing the operating revenue and gross profit rate by month, product, region, etc., identifyingwhether there are significant or abnormal fluctuations, and ascertaining the reasons for thefluctuations;
(4) For domestic sales revenue, checking the supporting documents related to revenue recognition bysampling, including sales contracts, orders, sales invoices, outbound delivery orders, shipping orders,shipping documents and payment receipts. For overseas revenue, obtaining e-port information andchecking with the accounting records, and checking the sales contracts, export declaration forms, billsof lading, sales invoices and other supporting documents by sampling;
(5) In combination with accounts receivable confirmation, confirming the current sales with majorcustomers by sampling;
(6) Carrying out a cut-off test for the operating revenue recognized before and after the balance sheetdate, and evaluating whether the operating revenue is recognized within an appropriate period;
(7) Acquiring the sales return records after the balance sheet date and checking the unsatisfactorinessof revenue recognition conditions on balance sheet date; and
(8) Checking whether the information relating to operating revenue has been properly presented inthe financial statements.
(II) Impairment of accounts receivable
1. Description
The relevant information disclosure is detailed in Notes III (X) and V (I) 4 to the financial statements.As of December 31, 2022, the book balance of accounts receivable of Huadong Medicine wasRMB7,617 million, the bad debt reserve was RMB418 million, and the book value was RMB7,199million.Based on the credit risk characteristics of various accounts receivable and the individual accountreceivable or the combination of accounts receivable, the Management measured its loss reserveaccording to the expected credit loss equivalent to the entire duration. For the accounts receivablewith expected credit loss measured based on an individual item, the Management comprehensivelyconsidered the reasonable and reliable information about the past items, current conditions and futureeconomic conditions, estimated the expected cash flow, and determined the bad debt reserve thatshould be accrued. For the accounts receivable with expected credit loss measured based on thecombined items, the Management divided the accounts receivable based on age, made adjustmentsaccording to historical credit loss and prospective estimates, compiled a comparison table of accountsreceivable ages and expected credit loss rates, and determined the bad debt reserve that should beaccrued.Due to the significant amount of accounts receivable and significant judgment of the Managementinvolved in the impairment of accounts receivable, we determined the impairment of accountsreceivable as a key audit matter.
2. Audit response
For the impairment of accounts receivable, the audit procedures we implemented mainly include:
(1) Understanding the key internal controls related to the impairment of accounts receivable,evaluating the design of these controls, determining whether they are implemented, and testing theoperating effectiveness of relevant internal controls;
(2) Reviewing the follow-up actual write-off or reversal of accounts receivable for which the bad debtreserve has been accrued in previous years, evaluating the accuracy of the Management’s pastforecasts;
(3) Reviewing the relevant considerations and objective evidence of the Management’s credit riskassessment of accounts receivable, and evaluating whether the Management has properly identifiedthe credit risk characteristics of various accounts receivable;
(4) For the accounts receivable with expected credit loss measured based on an individual item,obtaining and checking the Management’s forecast of the expected cash flow received, evaluating therationality of the key assumptions used in the forecast and the accuracy of data, and checking withthe external evidence obtained;
(5) For the accounts receivable with expected credit loss measured based on the combined items,evaluating the rationality of the Management’s division of combinations according to the credit riskcharacteristics; evaluating the rationality of the comparison table of accounts receivable ages andexpected credit loss rates determined by the Management based on historical credit loss experience
and prospective estimates; testing the accuracy and completeness of the Management’s data(including the age of accounts receivable, historical loss rate, migration rate, etc.) and whether thecalculation of bad debt reserve is accurate;
(6) Checking the subsequent collection of accounts receivable, and evaluating the reasonability of theManagement’s accrual of bad debt reserve for accounts receivable; and
(7) Checking whether the information relating to the impairment of accounts receivable has beenproperly presented in the financial statements.
(III) Goodwill impairment
1. Description
The relevant information disclosure is detailed in Notes III (V), III (XIX) and V (I) 18 to the financialstatements.As of December 31, 2022, the original book value of goodwill of Huadong Medicine was RMB2,446million, the impairment reserve was RMB5 million, and the book value was RMB2,441 million.When there is any sign of impairment in the asset group or asset portfolio related to goodwill, and atthe end of each year, the Management shall conduct a goodwill impairment test. The Managementconducted the goodwill impairment test in combination with the relevant asset group or assetportfolio, and the recoverable amount of the relevant asset group or asset portfolio was determinedby the present value of the expected future cash flow. The key assumptions used in the impairmenttest include: revenue growth rate in the detailed forecast period, growth rate in the perpetual forecastperiod, gross profit rate, related expenses and discount rate.Due to the significant amount of goodwill and the significant judgment of the Management involvedin the goodwill impairment test, we determined the goodwill impairment as a key audit matter.
2. Audit response
For the goodwill impairment, the audit procedures we implemented mainly include:
(1) Reviewing the Management’s forecast of the present value of future cash flows in previous yearsand actual operating results, and evaluating the accuracy of the Management’s past forecasts;
(2) Understanding and evaluating the competence, professional quality and objectivity of externalvaluation experts employed by the Management;
(3) Evaluating the rationality and consistency of the Management’s methods in the impairment test;
(4) Evaluating the rationality of the key assumptions adopted by the Management in the impairmenttest, and verifying whether the relevant assumptions are consistent with the overall economicenvironment, industry conditions, operating conditions, historical experience, operating plans,approved budgets, meeting minutes, and other assumptions used by the Management in relation tothe financial statements;
(5) Testing the accuracy, completeness and relevance of the data used by the Management in theimpairment test, and rechecking the internal consistency of the relevant information in the impairmenttest;
(6) Testing whether the Management’s calculation of the present value of expected future cash flowsis accurate;
(7) Based on the methods and assumptions used by the Management, estimating the present valuerange of future cash flows and evaluating whether it differs significantly from the range estimated bythe Management; and
(8) Checking whether the information relating to the goodwill impairment has been properlypresented in the financial statements.
IV. Other informationThe Management is responsible for other information, including information covered in the annualreport, but not the financial statements and the auditor report.The auditor’s opinion on the financial statements does not cover other information, and we do notpublish any form of corroborating conclusions on other information.In conjunction with our audit of the financial statements, it is our responsibility to read otherinformation and, in doing so, consider whether other information is materially inconsistent with thefinancial statements or what we learned during the audit or appears to be materially misrepresented.Based on the work we have performed, if we determine that other information is materiallymisrepresented, we should report that fact. In this connection, we have nothing to report.
V. Responsibility of the Management and governance for the financial statementsThe Management is responsible for preparing the financial statements in accordance with theaccounting standards for business enterprises to achieve fair presentation and for designing,implementing and maintaining the necessary internal controls so that the financial statements are freefrom material misstatement due to fraud or error.In preparing the financial statements, the Management is responsible for assessing HuadongMedicine’s competence for continuing operations, disclosing matters relating to continuingoperations (if applicable) and applying the going concern assumption, unless liquidation andtermination are planned or there is no other realistic alternative.Those charged with governance of Huadong Medicine is responsible for overseeing the Company’sfinancial reporting process.
VI. Responsibility of certified public accountants on the audit of the financial statementsOur objectives are to obtain reasonable assurance about whether the financial statements as a wholeare free from material misstatement due to fraud or error, and to issue an audit report that includesour opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an auditperformed in accordance with the audit standards will always detect a material misstatement when itexists. Misstatements can arise from fraud or error and are considered material when it is reasonablyexpected that misstatements, individually or collectively, may affect the economic decisions made byusers based on the financial statements.As part of the audit in accordance with the audit standards, we exercise professional judgment andmaintain professional skepticism throughout the process. We also:
(I) Identify and assess the risks of material misstatement of the financial statements, whether due tofraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detectinga material misstatement resulting from fraud is higher than the risk of not detecting one resulting fromerror, as fraud may involve collusion, forgery, omissions, misrepresentations, or the override ofinternal control.(II) Understand the internal control associated with the audit to design appropriate audit procedures.(III) Evaluate the appropriateness of accounting policies used and the rationality of accountingestimates and related disclosures made by the Management.(IV) Conclude on the appropriateness of using the going concern assumption by the Management,and conclude, based on the audit evidence obtained, whether a material uncertainty exists related toevents or conditions that may cast significant doubt on Huadong Medicine’s ability to continue as agoing concern. If we conclude that a material uncertainty exists, we are required to draw the attentionof users to relevant disclosures in the financial statements in our audit report; if such disclosures areinadequate, we should offer qualified opinion. Our conclusions are based on the audit evidenceobtained up to the date of our auditor report. However, future events or conditions may causeHuadong Medicine to cease to continue as a going concern.(V) Evaluate the overall presentation, structure and content of the financial statements, includingwhether the financial statements represent the underlying transactions and events in a manner thatachieves fair presentation.(VI) Obtain sufficient and appropriate audit evidence on the financial information of entities orbusiness activities of Huadong Medicine to express auditor’s opinions on the financial statements.We are responsible for the guidance, supervision and implementation of group audits and take fullresponsibility for the auditor’s opinions.We communicate with those charged with governance regarding, among other matters, the plannedscope and timing of the audit and significant audit findings, including any significant deficiencies ininternal control that we identify during our audit.We also provide those charged with governance with a statement that we have complied with theprofessional ethical requirements associated with our independence, and communicate to thosecharged with governance all relationships and other matters that may reasonably be deemed to affectour independence, as well as relevant precautions (if applicable).From the matters communicated to those charged with governance, we determine which matters aremost important to the current financial statement audit and thus constitute key audit matters. Wedescribe these matters in our auditor report, unless laws and regulations prohibit their publicdisclosure or, in rare cases, if it is reasonably expected that the negative consequences ofcommunicating a matter in the auditor report outweigh the benefits in the public interest, wedetermine that the matter should not be communicated in the auditor report.
Pan-China Certified Public Accounts (Special General Partnership) Chinese Certified Public
Accountant: Wang Fukang
(Project partner)
Hangzhou, China Chinese Certified Public Accountant: Chen Xiaodong
April 12, 2023
II. Financial statements
The unit of statements in the financial notes is: RMB yuan.
1. Consolidated balance sheet
Prepared by: Huadong Medicine Co., Ltd.
December 31,2022
Unit: RMB yuan
| Item | December 31,2022 | January 1, 2022 |
| Current assets: | ||
| Monetary funds | 3,996,302,178.41 | 4,032,424,555.22 |
| Settlement reserve | ||
| Lending to other banks and other financial institutions | ||
| Financial assets for trade | ||
| Derivative financial assets | 29,907,470.68 | |
| Notes receivable | 8,424,980.99 | |
| Accounts receivable | 7,198,746,788.59 | 6,430,482,175.97 |
| Accounts receivable for financing | 1,002,511,208.21 | 509,190,888.54 |
| Prepayments | 500,083,953.14 | 275,353,134.69 |
| Premiums receivable | ||
| Reinsurance accounts receivable | ||
| Reinsurance contract reserve receivable | ||
| Other receivables | 283,710,955.63 | 223,707,267.30 |
| Including: Interests receivable | ||
| Dividends receivable | 223,747.65 | 877,734.45 |
| Financial assets purchased for resale | ||
| Inventories | 4,495,483,328.54 | 3,974,549,648.96 |
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 52,692,618.78 | 40,907,922.76 |
| Total current assets | 17,567,863,482.97 | 15,486,615,593.44 |
| Non-current assets: | ||
| Loans and prepayments issuance | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables | ||
| Long-term equity investments | 1,659,076,538.78 | 984,927,398.68 |
| Other equity instrument investments | 360,910,876.41 | 257,815,844.68 |
| Other non-current financial assets | ||
| Real estate properties for investment | 13,648,240.14 | 14,569,533.94 |
| Fixed assets | 3,981,653,265.52 | 3,077,227,759.84 |
| Constructions in progress | 873,159,427.47 | 1,582,125,201.25 |
| Biological assets for production | ||
| Oil & gas assets | ||
| Right-of-use assets | 166,505,297.17 | 153,724,197.81 |
| Intangible assets | 2,280,064,207.30 | 2,233,450,369.34 |
| Development expenditures | 641,354,586.80 | |
| Goodwill | 2,441,387,413.59 | 2,138,808,037.01 |
| Long-term unamortized expenses | 16,457,278.57 | 12,425,364.03 |
| Deferred tax assets | 152,842,858.97 | 143,651,186.84 |
| Other non-current assets | 1,037,279,933.15 | 911,062,879.83 |
| Total non-current assets | 13,624,339,923.87 | 11,509,787,773.25 |
| Total assets | 31,192,203,406.84 | 26,996,403,366.69 |
| Current liabilities: | ||
| Short-term borrowing | 947,516,383.37 | 1,237,843,228.13 |
| Borrowing from the central bank | ||
| Borrowing from other banks and other financial institutions | ||
| Financial liabilities for trade | 14,841,896.97 | |
| Derivative financial liabilities | ||
| Notes payable | 1,029,409,686.81 | 671,964,504.00 |
| Accounts payable | 4,873,029,466.44 | 3,847,719,574.86 |
| Receipts in advance | 1,154,243.42 | 1,147,425.45 |
| Contract liabilities | 146,488,489.07 | 118,341,141.48 |
| 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 | ||
| Payroll payable | 256,883,423.68 | 168,210,088.82 |
| Taxes payable | 429,457,804.81 | 1,029,610,563.41 |
| Other payables | 2,290,407,022.05 | 1,935,116,784.93 |
| Including: Interests payable | ||
| Dividends payable | 14,924,219.60 | 2,184,219.60 |
| Handling fees and commissions payable | ||
| Reinsurance accounts payable | ||
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 147,835,514.81 | 244,256,705.59 |
| Other current liabilities | 15,788,164.30 | 11,386,267.11 |
| Total current liabilities | 10,152,812,095.73 | 9,265,596,283.78 |
| Non-current liabilities: | ||
| Insurance policy reserve | ||
| Long-term borrowing | 1,051,457,747.44 | 139,178,905.04 |
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | 84,610,324.98 | 80,889,403.39 |
| Long-term payables | 287,497,209.49 | 261,903,489.09 |
| Long-term employee remuneration payable | ||
| Provision | 37,925,549.41 | 39,086,238.25 |
| Deferred income | 126,123,512.71 | 83,521,649.96 |
| Deferred tax liabilities | 202,084,083.93 | 184,908,391.50 |
| Other non-current liabilities | 73,251,500.00 | |
| Total non-current liabilities | 1,862,949,927.96 | 789,488,077.23 |
| Total liabilities | 12,015,762,023.69 | 10,055,084,361.01 |
| Owners’ Equity: | ||
| Share capital | 1,753,995,348.00 | 1,749,809,548.00 |
| Other equity instruments | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserve | 2,377,887,246.39 | 2,229,868,312.11 |
| Less: Treasury shares | 104,645,000.00 | |
| Other comprehensive income | -88,552,636.42 | -47,768,225.80 |
| Special reserve | ||
| Surplus reserve | 1,151,213,039.48 | 1,021,670,687.31 |
| General risk reserve | ||
| Undistributed profit | 13,488,021,239.94 | 11,625,794,001.46 |
| Total owners’ equity attributable to owner of the Company | 18,577,919,237.39 | 16,579,374,323.08 |
| Minority interest | 598,522,145.76 | 361,944,682.60 |
| Total owners’ equity | 19,176,441,383.15 | 16,941,319,005.68 |
| Total liabilities & owners’ equity | 31,192,203,406.84 | 26,996,403,366.69 |
Legal representative: Lv Liang Person in charge of accounting: Lv Liang Person in charge of the Accounting Department:
Qiu Renbo
2. Balance sheet of the parent company
Unit: RMB yuan
| Item | December 31,2022 | January 1, 2022 |
| Current assets: | ||
| Monetary funds | 2,486,399,844.96 | 2,280,519,812.31 |
| Financial assets for trade | ||
| Derivative financial assets | ||
| Notes receivable | 8,424,980.99 | |
| Accounts receivable | 4,224,944,294.54 | 3,369,254,003.85 |
| Accounts receivable for financing | 157,097,728.09 | 196,523,246.00 |
| Prepayments | 271,448,367.52 | 140,828,160.14 |
| Other receivables | 1,065,267,397.05 | 986,757,703.19 |
| Including: Interests receivable | ||
| Dividends receivable | ||
| Inventories | 2,391,038,707.33 | 1,946,036,027.82 |
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 20,289.53 | |
| Total current assets | 10,604,621,320.48 | 8,919,939,242.84 |
| Non-current assets: | ||
| Debt investments | ||
| Other debt investments | ||
| Long-term receivables | ||
| Long-term equity investments | 5,473,824,934.24 | 5,079,071,023.37 |
| Other equity instrument investments | 10,100,870.56 | 10,100,870.56 |
| Other non-current financial assets | ||
| Real estate properties for investment | 7,193,111.26 | 7,659,343.90 |
| Fixed assets | 144,023,222.94 | 160,678,584.54 |
| Constructions in progress | 824,024.88 | 211,760.72 |
| Biological assets for production | ||
| Oil & gas assets | ||
| Right-of-use assets | 3,631,025.07 | 11,020,708.66 |
| Intangible assets | 188,198,218.40 | 218,720,898.11 |
| Development expenditures | ||
| Goodwill | ||
| Long-term unamortized expenses | 77,379.81 | 321,067.34 |
| Deferred tax assets | 49,729,544.62 | 47,289,929.98 |
| Other non-current assets | 346,564,596.26 | 406,493,149.98 |
| Total non-current assets | 6,224,166,928.04 | 5,941,567,337.16 |
| Total assets | 16,828,788,248.52 | 14,861,506,580.00 |
| Current liabilities: | ||
| Short-term borrowing | 431,081,029.52 | 630,446,420.72 |
| Financial liabilities for trade | ||
| Derivative financial liabilities | ||
| Notes payable | 629,281,486.95 | 311,085,944.14 |
| Accounts payable | 3,373,959,848.93 | 2,416,471,973.20 |
| Receipts in advance |
| Contract liabilities | 46,097,912.05 | 19,690,922.48 |
| Employee remuneration payable | 10,063,669.60 | 9,353,991.58 |
| Taxes payable | 86,458,570.85 | 176,633,138.73 |
| Other payables | 949,611,806.93 | 877,397,177.28 |
| Including: Interests payable | ||
| Dividends payable | 224,219.60 | 224,219.60 |
| Liabilities held for sale | ||
| Non-current liabilities due within one year | 33,427,007.32 | 5,939,175.02 |
| Other current liabilities | 5,830,680.38 | 2,494,822.02 |
| Total current liabilities | 5,565,812,012.53 | 4,449,513,565.17 |
| Non-current liabilities: | ||
| Long-term borrowing | ||
| Bonds payable | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Lease liabilities | 59,030.94 | 2,701,526.22 |
| Long-term payables | ||
| Long-term employee remuneration payable | ||
| Provision | ||
| Deferred income | 35,567,161.11 | 38,133,036.03 |
| Deferred tax liabilities | 12,511,476.38 | |
| Other non-current liabilities | 73,251,500.00 | |
| Total non-current liabilities | 108,877,692.05 | 53,346,038.63 |
| Total liabilities | 5,674,689,704.58 | 4,502,859,603.80 |
| Owners’ Equity: | ||
| Share capital | 1,753,995,348.00 | 1,749,809,548.00 |
| Other equity instruments | ||
| Including: Preferred shares | ||
| Perpetual bonds | ||
| Capital reserve | 2,276,383,543.02 | 2,168,451,528.01 |
| Less: Treasury shares | 104,645,000.00 | |
| Other comprehensive income | -129,129.44 | -129,129.44 |
| Special reserve | ||
| Surplus reserve | 1,229,068,798.92 | 1,099,526,446.75 |
| Undistributed profit | 5,999,424,983.44 | 5,340,988,582.88 |
| Total owners’ equity | 11,154,098,543.94 | 10,358,646,976.20 |
| Total liabilities & owners’ equity | 16,828,788,248.52 | 14,861,506,580.00 |
3. Consolidated income statement
Unit: RMB yuan
| Item | 2022 | 2021 |
| I. Total operating revenue | 37,714,587,458.01 | 34,563,301,233.67 |
| Including: Operating revenue | 37,714,587,458.01 | 34,563,301,233.67 |
| Interests income | ||
| Premiums earned | ||
| Handling fees and commissions received | ||
| II. Total operating cost | 34,568,570,175.18 | 31,727,336,299.43 |
| Including: Operating cost | 25,682,497,011.55 | 23,957,370,728.98 |
| Interests paid | ||
| 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 | 208,324,645.61 | 177,253,313.55 |
| Sales expenses | 6,334,738,928.05 | 5,424,051,895.28 |
| Administrative expenses | 1,248,781,970.63 | 1,166,941,288.41 |
| R&D expenses | 1,015,971,052.33 | 979,644,017.93 |
| Financial expenses | 78,256,567.01 | 22,075,055.28 |
| Including: Interests expenses | 127,654,612.93 | 88,587,220.57 |
| Interests income | 103,350,838.03 | 80,402,140.26 |
| Add: Other income | 92,781,468.16 | 174,690,581.52 |
| Investment income (Losses are indicated by “-”) | -141,560,034.56 | -96,311,975.25 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | -115,619,080.98 | -53,433,345.46 |
| 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 “-”) | 28,469,286.61 | |
| Credit impairment losses (Losses are indicated by “-”) | -68,689,699.09 | -41,689,977.06 |
| Impairment gains (losses) of assets (Losses are indicated by “-”) | -3,821,625.15 | -16,908,408.55 |
| Asset disposal income (Losses are indicated by “-”) | 8,257,595.43 | -31,626.51 |
| III. Operating profit (Losses are indicated by “-”) | 3,061,454,274.23 | 2,855,713,528.39 |
| Add: Non-operating revenue | 7,608,417.78 | 2,682,255.28 |
| Less: Non-operating expenses | 37,938,443.03 | 30,860,834.95 |
| IV. Total profit (Total losses are indicated by “-”) | 3,031,124,248.98 | 2,827,534,948.72 |
| Less: Income tax expenses | 498,498,547.62 | 488,907,390.69 |
| V. Net profit (Net losses are indicated by “-”) | 2,532,625,701.36 | 2,338,627,558.03 |
| (I) Classification by business continuity | ||
| 1. Net profit from continuing operations (Net losses are indicated by “-”) | 2,532,625,701.36 | 2,338,627,558.03 |
| 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 | 2,499,214,359.57 | 2,301,631,347.64 |
| 2. Profit or loss attributable to minority shareholders | 33,411,341.79 | 36,996,210.39 |
| VI. Other comprehensive income, net of income tax | -40,784,410.62 | -24,076,315.61 |
| Other comprehensive income attributable to owners of the parent company, net of tax | -40,784,410.62 | -24,076,315.61 |
| (I) Other comprehensive income that cannot be reclassified into gains/losses | -6,804,247.45 | 20,549,224.62 |
| 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 | -6,804,247.45 | 20,549,224.62 |
| 4. Changes in fair value of credit risk of the enterprise |
| 5. Others | ||
| (II) Other comprehensive income to be reclassified into gains/losses | -33,980,163.17 | -44,625,540.23 |
| 1. Other comprehensive income that can be reclassified into gains/losses under equity method | -19,404.48 | 13,371.08 |
| 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 from translation of foreign currency financial statements | -19,118,861.72 | -44,638,911.31 |
| 7. Others | -14,841,896.97 | |
| Net amount after tax of other comprehensive income attributable to minority shareholders | ||
| VII. Total comprehensive income | 2,491,841,290.74 | 2,314,551,242.42 |
| Total comprehensive income attributable to owners of the parent company | 2,458,429,948.95 | 2,277,555,032.03 |
| Total comprehensive income attributable to minority shareholders | 33,411,341.79 | 36,996,210.39 |
| VIII. Earnings per share (EPS): | ||
| (I) Basic EPS | 1.4283 | 1.3154 |
| (II) Diluted EPS | 1.4283 | 1.3154 |
As for business merger under the same control in the current period, the net profit generated by the merged party before the wasRMB, and that generated during the previous period was RMB.Legal representative: Lv Liang Person in charge of accounting: Lv Liang Person in charge of the Accounting Department:
Qiu Renbo
4. Income statement of the parent company
Unit: RMB yuan
| Item | 2022 | 2021 |
| I. Total operating revenue | 20,630,904,717.76 | 18,244,390,942.29 |
| Less: Total operating cost | 19,368,401,281.90 | 17,251,703,368.39 |
| Business taxes and surcharges | 36,661,029.40 | 21,076,198.14 |
| Sales expenses | 601,932,806.60 | 377,727,331.87 |
| Administrative expenses | 211,999,885.94 | 179,218,304.43 |
| R&D expenses | ||
| Financial expenses | -14,538,929.98 | 8,473,695.73 |
| Including: Interests expenses | 45,824,339.68 | 54,072,019.26 |
| Interests income | 77,307,324.10 | 58,998,380.29 |
| Add: Other income | 16,694,280.62 | 11,127,440.65 |
| Investment income (Losses are indicated by “-”) | 1,067,326,046.80 | 1,047,838,931.11 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | 981,095.77 | -3,572,410.52 |
| Gains on the derecognition of financial assets measured at amortized cost (Losses are indicated by “-”) | ||
| Gains on net exposure hedging (Losses are indicated by “-”) | ||
| Gains from changes in fair values (Losses are indicated by “-”) | ||
| Credit impairment losses (Losses are indicated by “-”) | -94,827,679.48 | -37,258,383.02 |
| Impairment gains (losses) of assets | -2,923,308.83 |
| (Losses are indicated by “-”) | ||
| Asset disposal income (Losses are indicated by “-”) | 8,065,244.06 | 10,369.02 |
| II. Operating profit (Losses are indicated by “-”) | 1,423,706,535.90 | 1,424,987,092.66 |
| Add: Non-operating revenue | 872,151.83 | 4,529.76 |
| Less: Non-operating expenses | 7,145,666.36 | 5,472,564.05 |
| III. Total profit (Total losses are indicated by “-”) | 1,417,433,021.37 | 1,419,519,058.37 |
| Less: Income tax expenses | 122,009,499.72 | 120,747,280.50 |
| IV. Net profit (Net losses are indicated by “-”) | 1,295,423,521.65 | 1,298,771,777.87 |
| (I) Net profit from continuous operations (Net losses are indicated by “-”) | 1,295,423,521.65 | 1,298,771,777.87 |
| (II) Net profit from discontinued operations (Net losses are indicated by “-”) | ||
| V. Other comprehensive income, net of income tax | 65.17 | |
| (I) Other comprehensive income that cannot be reclassified into gains/losses | 65.17 | |
| 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 | 65.17 | |
| 4. Changes in fair value of credit risk of the enterprise | ||
| 5. Others | ||
| (II) Other comprehensive income to be reclassified into gains/losses | ||
| 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 from translation of foreign currency financial statements | ||
| 7. Others | ||
| VI. Total comprehensive income | 1,295,423,521.65 | 1,298,771,843.04 |
| VII. Earnings per share (EPS) | ||
| (I) Basic EPS | ||
| (II) Diluted EPS |
5. Consolidated cash flow statement
Unit: RMB yuan
| Item | 2022 | 2021 |
| I. Cash flows from operating activities: | ||
| Cash received from the sale of goods and the rendering of services | 39,950,662,882.10 | 37,705,732,220.73 |
| 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 | 47,556,552.81 | 56,001,263.57 |
| Other cash receipts in relation to operating activities | 639,498,854.94 | 534,883,574.95 |
| Cash inflows from operating activities | 40,637,718,289.85 | 38,296,617,059.25 |
| Cash payments for goods purchased and services received | 26,418,181,602.79 | 25,581,019,339.56 |
| 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 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 | 3,126,251,201.80 | 2,642,677,316.23 |
| Payments of various types of taxes | 3,065,133,366.96 | 1,595,252,332.08 |
| Other cash payments in relation to operating activities | 5,646,299,449.70 | 5,307,910,203.43 |
| Cash outflows for operating activities | 38,255,865,621.25 | 35,126,859,191.30 |
| Net cash flow from operating activities | 2,381,852,668.60 | 3,169,757,867.95 |
| II. Cash flows from investing activities | ||
| Cash receipts from recovery of investments | 92,381,381.75 | |
| Cash receipts from investment income | 100,327,200.00 | 43,721,334.71 |
| Net cash receipts from disposal of fixed assets, intangible assets and other long-term assets | 15,434,935.53 | 79,161,948.94 |
| Net cash from disposal of subsidiaries and other business units | ||
| Other cash receipts in relation to investing activities | 5,876,507.64 | 36,521,193.82 |
| Cash inflows from investing activities | 121,638,643.17 | 251,785,859.22 |
| Cash payments for purchase and construction of fixed assets, intangible assets and other long-term assets | 1,193,238,725.97 | 819,095,124.00 |
| Cash payments for investment | 848,909,498.16 | 246,401,722.50 |
| Net increase in pledge loans | ||
| Net cash paid for acquisition of subsidiaries and other business units | 411,908,915.12 | 791,857,512.24 |
| Other cash payments in relation to investing activities | 103,179,093.50 | 381,114,144.63 |
| Cash outflows for investing activities | 2,557,236,232.75 | 2,238,468,503.37 |
| Net cash flow from investing activities | -2,435,597,589.58 | -1,986,682,644.15 |
| III. Cash flows from financing activities: | ||
| Cash receipts from absorbing investments | 174,645,000.00 | 5,000,000.00 |
| Including: Cash receipts from capital | 70,000,000.00 | 5,000,000.00 |
| contributions from minority owners of subsidiaries | ||
| Cash receipts from borrowing | 4,689,802,455.69 | 2,110,032,213.34 |
| Other cash receipts in relation to financing activities | 284,920,943.37 | 149,316,666.67 |
| Cash inflows from financing activities | 5,149,368,399.06 | 2,264,348,880.01 |
| Cash repayments of borrowings | 4,290,690,528.23 | 2,296,363,034.67 |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 578,859,909.67 | 463,028,834.38 |
| Including: Dividends and profits paid by subsidiaries to minority shareholders | 2,366,353.48 | 2,920,000.00 |
| Other cash payments in relation to financing activities | 379,528,334.29 | 272,410,313.45 |
| Cash outflows for financing activities | 5,249,078,772.19 | 3,031,802,182.50 |
| Net cash flow from financing activities | -99,710,373.13 | -767,453,302.49 |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | -9,774,641.73 | 7,111,643.60 |
| V. Net increase in cash and cash equivalents | -163,229,935.84 | 422,733,564.91 |
| Add: Opening balance of cash and cash equivalents | 3,580,140,638.17 | 3,157,407,073.26 |
| VI. Closing balance of cash and cash equivalents | 3,416,910,702.33 | 3,580,140,638.17 |
6. Cash flow statement of the parent company
Unit: RMB yuan
| Item | 2022 | 2021 |
| I. Cash flows from operating activities: | ||
| Cash receipts from the sale of goods and the rendering of services | 21,148,206,043.93 | 19,578,902,300.31 |
| Receipts of tax refund | 2,136,711.19 | |
| Other cash receipts in relation to operating activities | 238,589,265.58 | 194,135,943.58 |
| Cash inflows from operating activities | 21,386,795,309.51 | 19,775,174,955.08 |
| Cash payments for goods purchased and services received | 19,990,439,841.50 | 18,617,179,307.59 |
| Cash payments to and on behalf of employees | 267,942,450.21 | 251,434,357.34 |
| Payments of various types of taxes | 510,694,836.67 | 268,426,804.41 |
| Other cash payments in relation to operating activities | 637,104,187.46 | 320,447,047.23 |
| Cash outflows for operating activities | 21,406,181,315.84 | 19,457,487,516.57 |
| Net cash flow from operating activities | -19,386,006.33 | 317,687,438.51 |
| II. Cash flows from investing activities | ||
| Cash receipts from recovery of investments | 81,031,431.20 | |
| Cash receipts from investment income | 1,097,509,530.22 | 1,028,872,757.80 |
| Net cash receipts from disposal of fixed assets, intangible assets and other long-term assets | 13,460,544.24 | 423,127.11 |
| Net cash from disposal of subsidiaries and other business units | 50,059,838.75 | |
| Other cash receipts in relation to investing activities | 830,315,580.61 | 608,901,831.03 |
| Cash inflows from investing activities | 1,991,345,493.82 | 1,719,229,147.14 |
| Cash payments for purchase and construction of fixed assets, intangible assets and other long-term assets | 56,266,286.12 | 96,179,759.09 |
| Cash payments for investment | 443,169,200.00 | 238,516,032.77 |
| Net cash paid for acquisition of subsidiaries and other business units |
| Other cash payments in relation to investing activities | 988,641,844.00 | 979,989,850.00 |
| Cash outflows for investing activities | 1,488,077,330.12 | 1,314,685,641.86 |
| Net cash flow from investing activities | 503,268,163.70 | 404,543,505.28 |
| III. Cash flows from financing activities: | ||
| Cash receipts from absorbing investments | 104,645,000.00 | |
| Cash receipts from borrowing | 2,754,131,709.35 | 960,000,000.00 |
| Other cash receipts in relation to financing activities | 2,932,396,166.67 | 3,883,416,666.67 |
| Cash inflows from financing activities | 5,791,172,876.02 | 4,843,416,666.67 |
| Cash repayments of borrowings | 2,953,130,999.69 | 1,389,996,025.48 |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 525,613,233.72 | 423,529,087.27 |
| Other cash payments in relation to financing activities | 2,685,609,711.52 | 3,722,279,458.85 |
| Cash outflows for financing activities | 6,164,353,944.93 | 5,535,804,571.60 |
| Net cash flow from financing activities | -373,181,068.91 | -692,387,904.93 |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | ||
| V. Net increase in cash and cash equivalents | 110,701,088.46 | 29,843,038.86 |
| Add: Opening balance of cash and cash equivalents | 1,919,097,181.16 | 1,889,254,142.30 |
| VI. Closing balance of cash and cash equivalents | 2,029,798,269.62 | 1,919,097,181.16 |
7. Consolidated statement of changes in owners’ equity
Amount in the current period
Unit: RMB yuan
| Item | 2022 | ||||||||||||||
| Owners’ equity attributable to the parent company | Minority interest | Total owners’ equity | |||||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserve | Surplus reserve | General risk reserve | Undistributed profit | Others | Total | |||||
| Preferred shares | Perpetual bonds | Others | |||||||||||||
| I. Balance at the end of the period of the prior year | 1,749,809,548.00 | 2,229,868,312.11 | -47,768,225.80 | 1,021,670,687.31 | 11,625,794,001.46 | 16,579,374,323.08 | 361,944,682.60 | 16,941,319,005.68 | |||||||
| Add: Changes in accounting policies | |||||||||||||||
| Error correction in the prior periods | |||||||||||||||
| Merger of enterprises under the same control | |||||||||||||||
| Others | |||||||||||||||
| II. Balance at the beginning of the period of the current year | 1,749,809,548.00 | 2,229,868,312.11 | -47,768,225.80 | 1,021,670,687.31 | 11,625,794,001.46 | 16,579,374,323.08 | 361,944,682.60 | 16,941,319,005.68 | |||||||
| III. Amount of change in the current period (Decreases are indicated by “-”) | 4,185,800.00 | 148,018,934.28 | 104,645,000.00 | -40,784,410.62 | 129,542,352.17 | 1,862,227,238.48 | 1,998,544,914.31 | 236,577,463.16 | 2,235,122,377.47 | ||||||
| (I) Total comprehensive income | -40,784,410.62 | 2,499,214,359.57 | 2,458,429,948.95 | 33,411,341.79 | 2,491,841,290.74 | ||||||||||
| (II) Capital contributed by owners and capital decreases | 4,185,800.00 | 107,684,664.01 | 104,645,000.00 | 7,225,464.01 | 70,018,295.44 | 77,243,759.45 | |||||||||
| 1. Common shares invested by owners | 4,185,800.00 | 100,459,200.00 | 104,645,000.00 | 70,000,000.00 | 174,645,000.00 | ||||||||||
| 2. Capital invested by holders of other equity instruments | |||||||||||||||
| 3. Amount of share-based payment included in owners’ equity | 7,225,464.01 | 7,225,464.01 | 18,295.44 | 7,243,759.45 | |||||||||||
| 4. Others | 104,645,000.00 | -104,645,000.00 | -104,645,000.00 | ||||||||||||
| (III) Profit distribution | 129,542,352.17 | -636,987,121.09 | -507,444,768.92 | -15,106,353.48 | -522,551,122.40 | ||||||||||
| 1. Withdrawal of surplus reserve | 129,542,352.17 | -129,542,352.17 | |||||||||||||
| 2. Withdrawal of general risk reserve | |||||||||||||||
| 3. Distribution to owners (or shareholders) | -507,444,768.92 | -507,444,768.92 | -15,106,353.48 | -522,551,122.40 | |||||||||||
| 4. Others | |||||||||||||||
| (IV) Internal conversion of owners’ equity | |||||||||||||||
| 1. Capital (or share capital) increase from capital reserve conversion | |||||||||||||||
| 2. Capital (or share capital) increase from surplus reserve conversion | |||||||||||||||
| 3. Recovery of losses by surplus reserve | |||||||||||||||
| 4. Retained earnings from transfer of changes in the defined benefit plan | |||||||||||||||
| 5. Retained earnings from other comprehensive income | |||||||||||||||
| 6. Others | |||||||||||||||
| (V) Special reserve | |||||||||||||||
| 1. Withdrawal in the current period | |||||||||||||||
| 2. Use in the current period | |||||||||||||||
| (VI) Others | 40,334,270.27 | 40,334,270.27 | 148,254,179.41 | 188,588,449.68 | |||||||||||
| IV. Balance at the end of the current period | 1,753,995,348.00 | 2,377,887,246.39 | 104,645,000.00 | -88,552,636.42 | 1,151,213,039.48 | 13,488,021,239.94 | 18,577,919,237.39 | 598,522,145.76 | 19,176,441,383.15 |
Amount in the prior period
Unit: RMB yuan
Item
| 2021 | ||||||||||||||
| Owners’ equity attributable to the parent company | Minority interest | Total owners’ equity | ||||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserve | Surplus reserve | General risk reserve | Undistributed profit | Others | Total | ||||
| Preferred shares | Perpetual bonds | Others | ||||||||||||
I. Balance atthe end of theperiod of theprior year
| 1,749,809,548.00 | 2,158,080,661.07 | -2,191,069.45 | 861,680,578.42 | 9,852,441,590.56 | 14,619,821,308.60 | 559,590,204.87 | 15,179,411,513.47 |
Add: Changesin accountingpolicies
Errorcorrection inthe priorperiods
Merger ofenterprisesunder the samecontrol
Others
II. Balance atthe beginningof the periodof the currentyear
| 1,749,809,548.00 | 2,158,080,661.07 | -2,191,069.45 | 861,680,578.42 | 9,852,441,590.56 | 14,619,821,308.60 | 559,590,204.87 | 15,179,411,513.47 |
III. Amount ofchange in thecurrent period(Decreases areindicated by“-”)
| 71,787,651.04 | -45,577,156.35 | 159,990,108.89 | 1,773,352,410.90 | 1,959,553,014.48 | -197,645,522.27 | 1,761,907,492.21 |
(I) Totalcomprehensiveincome
| -24,076,315.61 | 2,301,631,347.64 | 2,277,555,032.03 | 36,996,210.39 | 2,314,551,242.42 |
(II) Capitalcontributed byowners andcapitaldecreases
| 5,000,000.00 | 5,000,000.00 |
1. Common
sharesinvested byowners
| 5,000,000.00 | 5,000,000.00 |
2. Capital
invested byholders ofother equityinstruments
3. Amount of
share-basedpaymentincluded inowners’ equity
4. Others
(III) Profitdistribution
| 129,877,177.79 | -532,333,373.83 | -402,456,196.04 | -4,880,000.00 | -407,336,196.04 |
1. Withdrawal
of surplusreserve
| 129,877,177.79 | -129,877,177.79 |
2. Withdrawal
of general riskreserve
3. Distribution
to owners (orshareholders)
| -402,456,196.04 | -402,456,196.04 | -4,880,000.00 | -407,336,196.04 |
4. Others
(IV) Internalconversion ofowners’ equity
| -21,500,840.74 | 28,846,278.36 | -7,345,437.62 |
1. Capital (or
share capital)increase fromcapital reserveconversion
2. Capital (or
share capital)increase fromsurplus reserveconversion
3. Recovery of
losses bysurplus reserve
4. Retained
earnings fromtransfer ofchanges in thedefined benefitplan
5. Retained
earnings fromtransfer ofothercomprehensiveincome
| -21,500,840.74 | 318,050.59 | 21,182,790.15 |
6. Others
| 28,528,227.77 | -28,528,227.77 |
(V) Specialreserve
1. Withdrawal
in the currentperiod
2. Use in the
current period
(VI) Others
| 71,787,651.04 | 1,266,652.74 | 11,399,874.71 | 84,454,178.49 | -234,761,732.66 | -150,307,554.17 |
IV. Balance atthe end of thecurrent period
| 1,749,809,548.00 | 2,229,868,312.11 | -47,768,225.80 | 1,021,670,687.31 | 11,625,794,001.46 | 16,579,374,323.08 | 361,944,682.60 | 16,941,319,005.68 |
8. Statement of changes in owners’ equity of the parent company
Amount in the current period
Unit: RMB yuan
| Item | 2022 | |||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserve | Surplus reserve | Undistributed profit | Others | Total owners’ equity | |||
| Preferred shares | Perpetual bonds | Others | ||||||||||
| I. Balance at the end of the period of the prior year | 1,749,809,548.00 | 2,168,451,528.01 | -129,129.44 | 1,099,526,446.75 | 5,340,988,582.88 | 10,358,646,976.20 | ||||||
| Add: Changes in accounting policies | ||||||||||||
| Error correction in the prior periods | ||||||||||||
| Others | ||||||||||||
| II. Balance at the beginning of the period of the current year | 1,749,809,548.00 | 2,168,451,528.01 | -129,129.44 | 1,099,526,446.75 | 5,340,988,582.88 | 10,358,646,976.20 | ||||||
| III. Amount of change in the current period (Decreases are indicated by “-”) | 4,185,800.00 | 107,932,015.01 | 104,645,000.00 | 129,542,352.17 | 658,436,400.56 | 795,451,567.74 | ||||||
| (I) Total comprehensive income | 1,295,423,521.65 | 1,295,423,521.65 | ||||||||||
| (II) Capital contributed by owners and capital decreases | 4,185,800.00 | 107,702,959.45 | 104,645,000.00 | 7,243,759.45 | ||||||||
| 1. Common shares invested by owners | 4,185,800.00 | 100,459,200.00 | 104,645,000.00 | |||||||||
| 2. Capital invested by holders of other equity instruments | ||||||||||||
| 3. Amount of share-based payment included in owners’ equity | 7,243,759.45 | 7,243,759.45 | ||||||||||
| 4. Others | 104,645,000.00 | -104,645,000.00 | ||||||||||
| (III) Profit distribution | 129,542,352.17 | -636,987,121.09 | -507,444,768.92 | |||||||||
| 1. Withdrawal of surplus reserve | 129,542,352.17 | -129,542,352.17 | ||||||||||
| 2. Distribution to owners (or shareholders) | -507,444,768.92 | -507,444,768.92 | ||||||||||
| 3. Others | ||||||||||||
| (IV) Internal conversion of owners’ equity | ||||||||||||
| 1. Capital (or share capital) increase from capital reserve conversion | ||||||||||||
| 2. Capital (or share capital) increase from surplus reserve conversion | ||||||||||||
| 3. Recovery of losses by surplus reserve | ||||||||||||
| 4. Retained earnings from transfer of changes in the defined benefit plan | ||||||||||||
| 5. Retained earnings from |
| transfer of other comprehensive income | ||||||||||||
| 6. Others | ||||||||||||
| (V) Special reserve | ||||||||||||
| 1. Withdrawal in the current period | ||||||||||||
| 2. Use in the current period | ||||||||||||
| (VI) Others | 229,055.56 | 229,055.56 | ||||||||||
| IV. Balance at the end of the current period | 1,753,995,348.00 | 2,276,383,543.02 | 104,645,000.00 | -129,129.44 | 1,229,068,798.92 | 5,999,424,983.44 | 11,154,098,543.94 |
Amount in the prior period
Unit: RMB yuan
| Item | 2021 | |||||||||||
| Share capital | Other equity instruments | Capital reserve | Less: Treasury shares | Other comprehensive income | Special reserve | Surplus reserve | Undistributed profit | Others | Total owners’ equity | |||
| Preferred shares | Perpetual bonds | Others | ||||||||||
| I. Balance at the end of the period of the prior year | 1,749,809,548.00 | 2,168,451,528.01 | 3,051,311.29 | 939,536,337.86 | 4,303,533,798.88 | 9,164,382,524.04 | ||||||
| Add: Changes in accounting policies | ||||||||||||
| Error correction in the prior periods | ||||||||||||
| Others | ||||||||||||
| II. Balance at the beginning of the period of the current year | 1,749,809,548.00 | 2,168,451,528.01 | 3,051,311.29 | 939,536,337.86 | 4,303,533,798.88 | 9,164,382,524.04 | ||||||
| III. Amount of change in the current period (Decreases are indicated by “-”) | -3,180,440.73 | 159,990,108.89 | 1,037,454,784.00 | 1,194,264,452.16 | ||||||||
| (I) Total comprehensive income | 65.17 | 1,298,771,777.87 | 1,298,771,843.04 | |||||||||
| (II) Capital contributed by owners and capital decreases | ||||||||||||
| 1. Common shares invested by owners | ||||||||||||
| 2. Capital invested by holders of other equity instruments | ||||||||||||
| 3. Amount of share-based payment included in owners’ equity | ||||||||||||
| 4. Others | ||||||||||||
| (III) Profit distribution | 129,877,177.79 | -532,333,373.83 | -402,456,196.04 | |||||||||
| 1. Withdrawal of surplus reserve | 129,877,177.79 | -129,877,177.79 | ||||||||||
| 2. Distribution | -402,456,196.04 | -402,456,196.04 | ||||||||||
| to owners (or shareholders) | ||||||||||||
| 3. Others | ||||||||||||
| (IV) Internal conversion of owners’ equity | -3,180,505.90 | 28,846,278.36 | -25,665,772.46 | |||||||||
| 1. Capital (or share capital) increase from capital reserve conversion | ||||||||||||
| 2. Capital (or share capital) increase from surplus reserve conversion | ||||||||||||
| 3. Recovery of losses by surplus reserve | ||||||||||||
| 4. Retained earnings from transfer of changes in the defined benefit plan | ||||||||||||
| 5. Retained earnings from transfer of other comprehensive income | -3,180,505.90 | 318,050.59 | 2,862,455.31 | |||||||||
| 6. Others | 28,528,227.77 | -28,528,227.77 | ||||||||||
| (V) Special reserve | ||||||||||||
| 1. Withdrawal in the current period | ||||||||||||
| 2. Use in the current period | ||||||||||||
| (VI) Others | 1,266,652.74 | 296,682,152.42 | 297,948,805.16 | |||||||||
| IV. Balance at the end of the current period | 1,749,809,548.00 | 2,168,451,528.01 | -129,129.44 | 1,099,526,446.75 | 5,340,988,582.88 | 10,358,646,976.20 |
Huadong Medicine Co., Ltd.Chairman of the Board: Lv Liang
April 14, 2023