Stock code: 000963 Stock abbreviation: Huadong Medicine Announcement No.: 2023-028
Huadong Medicine Co., Ltd.First Quarterly Report 2023The Company and all members of the Board of Directors hereby guarantee that the informationpresented in this report is authentic, accurate and complete and free of any false records, misleadingstatements or material omissions.Important Declaration:
1. The Board of Directors, Board of Supervisors, directors, supervisors and senior management of HuadongMedicine Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee that the information presented inthis report is authentic, accurate and complete and free of any false records, misleading statements or materialomissions, and shall undertake individual and joint legal liabilities.
2. The Company’s legal representative, the officer in charge of accounting, and the head of accounting department(accounting supervisor) hereby declare that the financial information in this quarterly report is authentic, accurateand complete.
3. Has the First Quarterly Report been audited?
□ Yes ?No
According to “Stock Listing Rules of the Shenzhen Stock Exchange”, if listed companies have both Chinese andother language version of public notice, they should ensure the content of both versions are the same. In the case ofdiscrepancy, the original version in Chinese shall prevail.I. Key Financial Data
(I) Key accounting data and financial indicators
Is the Company required to adjust or restate retroactively the accounting data in previous years?
□ Yes ?No
| For the reporting period | For the same period last year | Increase/decrease for the reporting period as compared with the same period last year (%) | |
| Operating income (CNY) | 10,114,531,331.77 | 8,932,579,251.75 | 13.23% |
| Net profit attributable to shareholders of the listed company (CNY) | 755,284,976.47 | 704,364,775.13 | 7.23% |
| Net profit attributable to shareholders of the listed company after deducting non-recurring profit or loss (CNY) | 757,542,618.01 | 698,524,004.62 | 8.45% |
| Net cash flow from operating activities (CNY) | -246,152,770.16 | -260,603,628.32 | 5.55% |
| Basic earnings per share (CNY/per share) | 0.4316 | 0.4025 | 7.23% |
| Diluted earnings per share (CNY/share) | 0.4315 | 0.4025 | 7.20% |
| Weighted average return on equity (ROE) | 3.99% | 4.17% | -0.18% |
| As at the end of the reporting period | As at the end of last year | Increase/decrease as at the end of the reporting period as compared with the end of last year (%) | |
| Total assets (CNY) | 32,115,200,767.26 | 31,192,203,406.84 | 2.96% |
| Owners' equity attributable to shareholders of the listed company (CNY) | 19,314,073,760.97 | 18,577,919,237.39 | 3.96% |
Total share capital of the Company as at the trading date prior to disclosure:
| Total share capital of the Company as at the trading date prior to disclosure (shares) | 1,753,995,348.00 |
Fully diluted earnings per share calculated with the latest share capital:
| Preferred stock dividends paid (CNY) | 0.00 |
| Interest on perpetual bonds paid (CNY) | 0.00 |
| Fully diluted earnings per share calculated with the latest share capital (CNY/share) | 0.4306 |
(II) Non-recurring profit or loss items and amounts?Applicable □ Not applicable
Unit: CNY
| Item | For the reporting period | Description |
| Profit or loss from disposal of non-current assets (including the written-off portion for which provision for impairment of assets is made) | -2,020,270.17 | |
| Tax returns and exemption with approval exceeding one's authority or without formal approval document | 3,225,285.68 | |
| Government grants included in current profit or loss (excluding those closely related to the normal operations of the Company granted on an ongoing basis in fixed amount or fixed quota in accordance with national policies and regulations) | 11,357,170.62 | |
| Other non-operating revenue or expenditure | -13,443,089.32 | |
| Less: Effect on income tax | 1,140,865.86 |
| Effect on minority interests (after tax) | 235,872.49 | |
| Total | -2,257,641.54 |
Details of other profit or loss items conforming to the definition of non-recurring profit or loss
□Applicable ?Not applicable
The Company had no other profit or loss item conforming to the definition of non-recurring profit or loss.If an item listed as non-recurring profit or loss item in the Explanatory Announcement on Information Disclosure by CompaniesOffering Securities to the Public No. 1: Non-Recurring Profits and Losses is defined as a recurring profit or loss item, please describethe details.
□Applicable ?Not applicable
The Company did not define any item listed as non-recurring profit or loss item in the Explanatory Announcement on InformationDisclosure by Companies Offering Securities to the Public No. 1: Non-Recurring Profits and Losses as a recurring profit or loss item.(III) Details and reasons for changes in key accounting data and financial indicators?Applicable □ Not applicable
| Items in the balance sheet | Ending balance | Opening balance | Amount of variation | Reason for change |
| Monetary funds | 2,375,152,352.20 | 3,996,302,178.41 | -40.57% | Mainly due to the loan repayment and investment spending in the current period |
| Other receivables | 426,378,917.15 | 283,710,955.63 | 50.29% | Mainly due to the increase in receivable temporary payments |
| Other current assets | 154,239,503.07 | 52,692,618.78 | 192.72% | Mainly due to the increase in value-added tax to be deducted |
| Short-term borrowing | 563,013,919.12 | 947,516,383.37 | -40.58% | Mainly due to the loan repayment in the current period |
| Notes payable | 1,360,474,461.93 | 1,029,409,686.81 | 32.16% | Mainly due to the increase in the settlement of bills |
| Contract Liabilities | 192,637,694.45 | 146,488,489.07 | 31.50% | Mainly due to the increase in sales revenue received in advance |
| Employee remuneration payable | 175,666,718.25 | 256,883,423.68 | -31.62% | Mainly due to the payment of employee remuneration in the current period |
| Dividends payable | 224,219.60 | 14,924,219.60 | -98.50% | Mainly due to the payment of dividends to minority shareholders in the current period |
| Long-term borrowings | 677,604,268.25 | 1,051,457,747.44 | -35.56% | Mainly due to the loan repayment in the current period |
Other current liabilities
| Other current liabilities | 24,158,784.99 | 15,788,164.30 | 53.02% | Mainly due to the increase in output tax to be transferred |
| Other comprehensive incomes | -119,904,045.95 | -88,552,636.42 | -35.40% | Mainly due to the translation balance of foreign currency statements |
| Items in the income statement | Amount of current period | Amount of prior period | Amount of variation | Reason for change |
| Financial expense | 29,150,841.84 | 8,060,234.62 | 261.66% | Mainly due to the increase in net interest expenses |
| Income from disposal of assets | -2,199,859.71 | 557,821.07 | -494.37% | Mainly due to the decrease in income from disposal of fixed assets |
| Investment incomes | -61,752,708.66 | -27,961,493.36 | -120.85% | Mainly due to the decrease in recognized income from investment in associates in the current period |
| Other incomes | 14,582,456.30 | 10,669,007.70 | 36.68% | Mainly due to the increase in government grant in the current period as compared with the same |
| period last year | ||||
| Non-operating incomes | 1,389,195.74 | 831,619.81 | 67.05% | Mainly due to the increase in income from waste disposal |
| Profits and losses of minority shareholders | 4,640,513.86 | 9,667,799.11 | -52.00% | Mainly due to the decrease in net profit of partly-owned subsidiaries in the current period as compared with the same period last year |
| Items in the cash flow statement | Amount of current period | Amount of prior period | Amount of variation | Reason for change |
| Net cash flows generated from financing activities | -849,412,643.67 | -5,561,294.58 | -15173.65% | Mainly due to the increase in loan repayment in the current period as compared with the same period last year |
II. Shareholder Information(I) Total number of ordinary shareholders, number of preferred shareholders with restored voting rightsand shareholdings of top 10 shareholders
Unit: Shares
| Total number of ordinary shareholders as at the end of the reporting period | 72,114 | Total number of preferred shareholders with restored voting rights as at the end of the reporting period (if any) | 0 | |||
| Shareholdings of top 10 shareholders | ||||||
| Name of shareholder | Nature of shareholder | Shareholding proportion (%) | Number of shares held | Number of shares with trading moratorium held | Pledged, marked or locked-up status | |
| Status of shares | Quantity | |||||
| China Grand Enterprises, Inc. | Domestic non-state-owned legal person | 41.67% | 730,938,157.00 | 0.00 | Pledged | 138,110,000.00 |
| Hangzhou Huadong Medicine Group Co., Ltd. | State-owned legal person | 16.42% | 288,000,000.00 | 0.00 | ||
| Hong Kong Securities Clearing Company Limited | Overseas legal person | 3.11% | 54,522,678.00 | 0.00 | ||
| Industrial and Commercial Bank of China Limited–China EU Medical Health Hybrid Securities Investment Fund | Others | 2.80% | 49,178,041.00 | 0.00 | ||
| China Securities Finance Co., Ltd. | Domestic non-state-owned legal person | 1.26% | 22,186,818.00 | 0.00 | ||
| China Construction Bank Corporation–ICBC Credit Suisse Frontier Medical | Others | 1.14% | 20,000,078.00 | 0.00 | ||
| Securities Investment Fund | ||||||
| National Social Security Fund Portfolio 110 | Others | 0.59% | 10,380,842.00 | 0.00 | ||
| Industrial and Commercial Bank of China Limited–China EU Medical Innovation Securities Investment Fund | Others | 0.55% | 9,577,584.00 | 0.00 | ||
| National Social Security Fund Portfolio 503 | Others | 0.51% | 9,000,067.00 | 0.00 | ||
| China Construction Bank Corporation–E Fund CSI300 Medicine and Health Exchange Traded Fund | Others | 0.47% | 8,306,632.00 | 0.00 | ||
| Shareholding of top 10 holders of shares without trading moratorium | ||||||
| Name of shareholder | Number of shares without trading moratorium held | Type of share | ||||
| Type of share | Quantity | |||||
| China Grand Enterprises, Inc. | 730,938,157.00 | Ordinary share in CNY | 730,938,157.00 | |||
| Hangzhou Huadong Medicine Group Co., Ltd. | 288,000,000.00 | Ordinary share in CNY | 288,000,000.00 | |||
| Hong Kong Securities Clearing Company Limited | 54,522,678.00 | Ordinary share in CNY | 54,522,678.00 | |||
| Industrial and Commercial Bank of China Limited–China EU Medical Health Hybrid Securities Investment Fund | 49,178,041.00 | Ordinary share in CNY | 49,178,041.00 | |||
| China Securities Finance Co., Ltd. | 22,186,818.00 | Ordinary share in CNY | 22,186,818.00 | |||
| China Construction Bank Corporation–ICBC Credit Suisse Frontier Medical Securities Investment Fund | 20,000,078.00 | Ordinary share in CNY | 20,000,078.00 | |||
| National Social Security Fund Portfolio 110 | 10,380,842.00 | Ordinary share in CNY | 10,380,842.00 | |||
| Industrial and Commercial Bank of China Limited–China EU Medical Innovation Securities Investment Fund | 9,577,584.00 | Ordinary share in CNY | 9,577,584.00 | |||
| National Social Security Fund Portfolio 503 | 9,000,067.00 | Ordinary share in CNY | 9,000,067.00 | |||
| China Construction Bank Corporation–E Fund CSI300 Medicine and Health Exchange Traded Fund | 8,306,632.00 | Ordinary share in CNY | 8,306,632.00 | |||
| A description of the relationship or concerted action of the above shareholders | The Company did not know whether the shareholders mentioned above were related parties with each other or whether they were acting-in-concert parties with each other. | |||||
| Description of top 10 shareholders engaging in securities margin trading business (if any) | As at the end of the reporting period, none of the top 10 ordinary shareholders held the Company’s shares via a securities margin trading | |||||
account.
(II) Total number of preferred shareholders of the Company and shareholdings of top 10 shareholders
□Applicable ?Not applicable
III. Other Important Matters
?Applicable □ Not applicable
(I) Overview of the Company's overall operations during the reporting periodIn the first quarter of 2023, the Company, with a sharp focus on the overall strategic planningand annual business objectives, continued to thoroughly implement its unique business philosophyand the business principles of "High-quality Innovation, High-efficiency Operation" in the new era,continuously improved the average labor efficiency per capita, enriched the pipeline layout,strengthened the construction of the R&D ecosystem, improved the R&D speed and quality, andactively expanded the international market. Moving forward steadily along the road of transformationand innovation with Huadong Medicine's characteristics, the Company has achieved an all-roundrecovery of overall operating performance and a steady improvement in growth and quality, laying asolid foundation for achieving the overall business objectives for the year.From January to March 2023, the Company achieved an operating income of CNY 10.115billion, the first time that the operating income exceeded CNY 10 billion in a single quarter, anincrease of 13.23% year on year and an increase of 2.62% from the fourth quarter of 2022; during thereporting period, with the equity incentive cost and the profit or loss from shareholding andcontrolling R&D institutions deducted, it achieved the net profit attributable to shareholders of thelisted company after deducting non-recurring profit or loss of CNY 855 million, a year-on-yearincrease of 14.99%.
During the reporting period, the overall operation of Zhongmei Huadong, a core subsidiary ofthe Company, continued to maintain a steady growth trend, achieving operating income (includingCSO business) of CNY 3.075 billion, a year-on-year increase of 10.19%, and realizing consolidatednet profit attributable to shareholders of the listed company after deducting non-recurring profit orloss of CNY 667 million, an increase of 15.90% year on year and an increase of 39.98% from thefourth quarter of 2022.During the reporting period, except for the orders for nucleoside intermediates affected by thedecline in international market demand, the products and businesses in the Company's industrialmicrobiology sector maintained a steady growth. The Company will continue to improve its businesslayout, enhance its overall operating functions and strengthen its marketing capabilities, in an effortto make new breakthroughs in domestic and international market expansion, and fulfil the business
objectives of maintaining rapid growth of operating income for the year of 2023.
Affected by the periodical increase in demand for medicinal products, the growth of theCompany's pharmaceutical business during the reporting period accelerated year on year; the overalloperating income amounted to CNY 6.844 billion, a year-on-year increase of 15.67%, and thecumulative net profit increased by 15.06% year on year.During the reporting period, the Company's domestic and international aesthetic medicinebusiness continued to maintain a sound momentum of growth. The total operating income of aestheticmedicine sector was CNY 503 million (excluding internal offsets), a year-on-year increase of 10.86%.Sinclair, a wholly-owned subsidiary in the United Kingdom, continued to expand the global aestheticmedicine market. During the reporting period, it achieved a consolidated operating income of GBP
33.8 million (approximately CNY 284 million), a year-on-year increase of 8.89%, and an EBITDAof GBP 2.99 million (the year-on-year slowdown was mainly due to the delay of orders in someregions, and the growth rate is expected to pick up gradually from the second quarter).
During the reporting period, Sinclair (Shanghai), a domestic wholly-owned aesthetic medicinesubsidiary of the Company, actively seized the opportunity of gradually recovering domestic aestheticmedicine market, and continued to expand the regenerative aesthetic medicine market on the premiseof compliance with relevant regulations, based on the concept of "Medicine First", and with patientexperience as the core. It achieved an operating income of CNY 210 million, an increase of 33.83%year on year and an increase of 10.51% as compared with the fourth quarter of 2022. As the domesticconsumer market continues to recover, the Company is expected to achieve better performance indomestic aesthetic medicine business in the second quarter.
(II) R&D and BD progress of the Company during the reporting period
The Company attaches great importance to innovative R&D and continues to maintain a highproportion of R&D investment. During the reporting period, the Company's R&D investment inpharmaceutical industry was CNY 387 million, including CNY 306 million in direct R&Dexpenditure, and CNY 81 million in product introduction and R&D equity investment. As at therelease date of the report, the important progresses made by the Company in the R&D and BD ofmedicinal products, innovative medical devices, aesthetic medicine products were as follows:
1. R&D progress
(1) Oncology
ELAHERE? (mirvetuximab soravtansine-gynx, R&D code: IMGN853, HDM2002): In July2022, the subject enrollment for the PK pharmacokinetic study in Phase I clinical trial in China wascompleted. In November 2022, ImmunoGen, a US partner of the Company, announced theaccelerated approval of ELAHERE? by the U.S. FDA. It is the first ADC (antibody-drug conjugate)
drug approved by the U.S. FDA for platinum-resistant ovarian cancer. It is used for the treatment ofplatinum-resistant epithelial ovarian cancer, fallopian tube cancer, or primary peritoneal cancer inadults who are folate receptor α (FRα)-positive and have previously received first to third-linesystemic therapy. In December 2022, the subject enrollment for Phase III single-arm clinical trial inChina was completed. In March 2023, the pre-BLA submission was completed after the presetprimary endpoint of study was reached; and the BLA application is planned to be submitted withinthis year. Based on the good clinical performance of this product, the Company and its partner willpromote the front-line treatment of ovarian cancer through further clinical study, to support the useof ELAHERE? as the first choice in combination therapy for ovarian cancer.Mefatinib: It is used for the treatment of advanced non-small cell lung cancer with sensitiveEGFR mutations. In June 2021, the enrollment of last subject for Phase III clinical trial was completed;and the subjects were been followed up for the number of PFS events. It is expected to submit theNDA application after the number of PFS events in the Phase III study is obtained in the secondquarter of 2023.
(2) Autoimmunity
HDM3002 (PRV-3279): It is used to treat systemic lupus erythematosus (SLE) and prevent orreduce the immunogenicity of gene therapy. Provention Bio, a US partner of the Company, iscurrently conducting Phase IIa clinical trial of the product for SLE indication in the United States andHong Kong, China. The Company submitted the IND application in China in February 2023.
HDM3001: It is a biosimilar of ustekinumab for the treatment of moderate to severe plaquepsoriasis in adults. The Phase III clinical study has reached the preset primary endpoint. The Companycompleted the pre-BLA submission in April 2023.
(3) Endocrinology and metabolism
HDM1002: It is a small molecule GLP-1 receptor agonist independently developed by theCompany. The Company submitted the IND application in China in February 2023, and completedthe submission of IND application in the United States in April 2023.
Liraglutide Injection: It is a GLP-1 receptor agonist. The marketing authorization application fordiabetes indication was approved by NMPA in March 2023. The marketing authorization applicationfor obesity or overweight indication was accepted in July 2022 and it is expected to be approvedwithin this year.
Semaglutide Injection: The Phase I study has been completed and reached the endpoint of theequivalence study. Phase III clinical study is expected to be initiated in the second half of 2023.
Insulin Degludec Injection: The Phase I study has been completed and reached the endpoint ofthe equivalence study. Phase III clinical study is expected to be initiated in the second half of 2023.
(4) Innovative medical device
HD-NP-102 (Transdermal Glomerular Filtration Rate Measurement System and MB-102Injection): It is jointly developed by the Company and MediBeacon, Inc. in the United States, and isused to continuously measure the glomerular filtration rate (GFR) of patients with normal or impairedrenal function in a non-invasive manner based on the changes in fluorescence over time emitted bythe intravenously injected MB-102. In July 2022, the medical device registration application for thesystem was formally accepted by NMPA, which is currently under review. The MB-102 Injection(Relmapirazin) used in conjunction with the system is a global innovative drug. The subjectenrollment for Phase III multi-regional clinical trial (MRCT) was completed in February 2023, andthe pre-NDA submission in China was completed in April 2023.
(5) Registration and commercialization progress of aesthetic medicine products
During the reporting period, the Company continued to push ahead the registration andpromotion of core products in the global market:
1) Injectables
? Ellansé
?
series
The subject enrollment for clinical trial of Ellansé
?-M in China has been successfully completed,and the follow-up has been started. In addition, Sinclair has initiated the registration of Ellansé
?
products, a range of injectable polycaprolactone microsphere-based dermal fillers, in the UnitedStates.
? MaiLi
?
series
The subject enrollment for clinical trial of MaiLi Extreme in China has been successfullycompleted, and the follow-up has been started. In addition, Sinclair has initiated the registration ofMaiLi
?series products, a new range of injectable premium lidocaine-containing hyaluronic acidfillers, in the United States.
2) Energy-based devices
? Sculpt ＆ Shape
In the first quarter of 2023, Sinclair launched Sculpt & Shape, a new energy-based device forbody shaping and facial rejuvenation, in the European market. Featuring innovative RotateRFtechnology, the product received good market feedback immediately after it was launched.
? Reaction
?
The Company has initiated the pre-marketing preparations for Reaction
?
, a bipolar radiofrequency anti-aging device, in China, and has established a national energy-based device sales team.In April 2023, a pre-marketing clinical application seminar was held in China, when 6 authoritative
experts in dermatology and plastic surgery were invited to conduct exchanges and discussions. Theproduct is planned to be marketed in the second quarter of 2023 in China.
2. Pharmaceutical BD cooperation of the Company
In January 2023, Huadong Medicine (Hangzhou) Co., Ltd., a wholly-owned subsidiary of theCompany, signed an exclusive commercialization cooperation agreement with Kaixing Life Science,a wholly-owned subsidiary of CARsgen Therapeutics Co., Ltd. Huadong Medicine (Hangzhou) hasbeen granted by Kaixing Life Science the exclusive rights for commercialization of zevorcabtageneautoleucel (R&D code: CT053), a fully human anti-autologous BCMA (B cell maturation antigen)CAR-T (chimeric antigen receptor T cell) candidate for the treatment of relapsed/refractory multiplemyeloma. As a product with great potential, zevorcabtagene autoleucel will further enrich theCompany's product line in the field of blood diseases. In terms of marketing, it will share expertnetworks, research and clinical resources with existing key product varieties in this field, to achievemutual promotion and development and generate effective synergies. After this transaction, theCompany will form a multi-dimensional pipeline layout of chemotherapeutic drugs, ADC productsand CAR-T products in the treatment of hematological tumors. For details, please refer to theAnnouncement on Exclusive Commercialization Cooperation Agreement Signed by a Wholly-ownedSubsidiary (Announcement No.: 2023-004) disclosed by the Company at http://www.cninfo.com.cn.
In April 2023, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (hereinafter referred toas "Zhongmei Huadong"), a wholly-owned subsidiary of the Company, signed the Agreement onEquity Transfer and Capital Increase in Jiangsu Nanjing Nongda Animal Pharmaceutical Co., Ltd.with Jiangsu Nanjing Nongda Animal Pharmaceutical Co., Ltd. (hereinafter referred to as "NanjingNongda Animal Pharmaceutical"), Zhai Zhongshu and Nanjing Jiuheng Pharmaceutical LP (LimitedPartnership). Zhongmei Huadong will invest no more than CNY 265,333,300 in total and acquire 70%of the equity in Nanjing Nongda Animal Pharmaceutical in the form of equity transfer and capitalincrease, to become a controlling shareholder of the latter. This acquisition of Nanjing NongdaAnimal Pharmaceutical further improves the industrial layout of the Company in industrialmicrobiology. Nanjing Nongda Animal Pharmaceutical is at a stage of rapid growth. The averageannual growth rate of sales revenue in the past three years has exceeded 50%.The preliminaryconstruction has laid a solid foundation for its rapid development. After this transaction, NanjingNongda Animal Pharmaceutical will become an important platform for Huadong Medicine to developits animal health business in industrial microbiology sector, while making full use of HuadongMedicine’s advantages in industrial ecological chain and financial support capabilities to achievecoordinated development in R&D, manufacturing, marketing, selling and other dimensions. Fordetails, please refer to the Announcement on Acquisition of 70% Equity in Jiangsu Nanjing Nongda
Animal Pharmaceutical Co., Ltd. Through Equity Transfer and Capital Increase (Announcement No.:
2023-024) disclosed by the Company at http://www.cninfo.com.cn.(III) Reception of research, communication, interview and other activities during thereporting period
| Reception time | Reception location | Way of reception | Type of visitor | Visitor | Main contents of discussion and materials provided | Basic condition index of investigation |
| January 17, 2023 | Meeting room of the Company | Others | Institution, individual | CICC, TF Securities, Industrial Securities, China Securities, etc. | Huadong Medicine & CARsgen Therapeutics Commercialization Project Exchange | For details, please refer to the Record of Investor Relations Activities on January 17, 2023 published by the Company on the websites of irm.cninfo.com.cn of Shenzhen Stock Exchange and www.cninfo.com.cn. |
| February 15 and 16, 2023 | Meeting room of the Company | Field research | Institutions | China Securities, Zheshang Securities, etc. | Investor communication | For details, please refer to the Record of Investor Relations Activities on February 15 and 16, 2023 published by the Company on the websites of irm.cninfo.com.cn of Shenzhen Stock Exchange and www.cninfo.com.cn. |
| March 2 and 3, 2023 | Meeting room of the Company | Field research | Institution, individual | Kaiyuan Securities, CICC, GF Securities, etc. | Investor communication | For details, please refer to the Record of Investor Relations Activities on March 2 and 3, 2023 published by the Company on the websites of irm.cninfo.com.cn of Shenzhen Stock Exchange and www.cninfo.com.cn. |
(IV) Innovation progress of the Company
1. Pharmaceutical industry
Huadong Medicine's R&D of innovative drugs are aimed to build excellent innovative drugdiscovery capabilities, strong biotechnological R&D capabilities, and efficient clinical developmentcapabilities to address the unmet clinical needs of global patients. With the continuous enrichment ofproduct pipeline, the Company has continuously expanded in the field of innovative drugs to coverthe R&D of small molecule drugs, polypeptide drugs, antibody-drug conjugates (ADCs), bispecificor multi-specific antibody drugs and other types of drugs, while exploring the innovative therapiesfor metabolic, autoimmune, neoplastic and other diseases.
(1) Continuous improvement of innovative R&D ecosystem with Huadong Medicine’scharacteristics
The Company has established an international capable and efficient innovative drug R&D teamconsisting of various high-level talents from the whole industry chain, and has more than 500 coretechnical talents in the innovative drug R&D ecosystem. The enterprises in the ecosystem cooperateclosely with each other to implement the research and development projects smoothly as follows:
1) Qyuns Therapeutics is one of the companies with the most comprehensive pipeline ofbiological drugs and the most advanced overall development schedule in the field of autoimmune andallergic diseases in China. At present, Qyuns Therapeutics' product pipeline covers skin, respiratory,digestive, and rheumatic diseases, including psoriasis, atopic dermatitis, ankylosing spondylitis,inflammatory bowel disease, systemic lupus erythematosus and asthma. It has a leading APIproduction base, including four 2000L disposable bioreactors and a downstreampurification/production line, with an annual production capacity of approximately 300KG therapeuticantibodies. In March 2023, Qyuns Therapeutics submitted an application for IPO on the StockExchange of Hong Kong Limited. The Phase III study of Project HDM3001 has reached the presetprimary endpoint. The Company completed the pre-BLA submission in April 2023 and is expectedto submit the BLA application in the third quarter of 2023.
2) Heidelberg Pharma is a global biopharmaceutical company focusing on the research anddevelopment of anticancer ADC drugs. Heidelberg Pharma has a proprietary ATAC
?
(AntibodyTargeted Amanitin Conjugates) technology platform and is the first company in the world to developamanitin and its derivatives for cancer treatment. At present, clinical progress is made in ProjectHDP-101; the IND development is advanced in Project HDP-103; and an early study on a newgeneration of ADCs based on the ATAC
?platform is undergoing.
3) Doer Biologics focuses on the development of multi-domain-based multi-specific innovativefusion proteins, antibody drugs and polypeptide drugs. At present, it has xLONGylation, a
recombinant PEGylation (rPEG) platform for long-acting transformation of biological drugs,MultipleBody, a multi-domain fusion protein technology platform, AccuBody, a precision tumortreatment technology platform, and HTS-VHHBody, a high-throughput discovery and engineeringplatform for domain antibodies. The Project DR30303 in oncology is currently at Phase I clinical trialin China; the Project DR10624 in Metabolism is currently at Phase I clinical trials in New Zealand,and the Phase I multiple ascending dose (MAD) phase will be started soon.
4) Chongqing PEG-BIO is specialized in the independent R&D of genetically engineeredrecombinant proteins and polypeptide drugs. At present, it has MAS-PEG, a platform that employs avariety of key technologies to solve major defects such as short half-life and high immunogenicity ofmacromolecular drugs in vivo and finally realizes long-acting, low immunogenicity and long-termmacromolecular drugs (therapeutic enzymes), and TE-Peptides, a polypeptide tandem recombinationhigh-efficiency expression platform that adopts unique patented design, high-density fermentation,unique enzyme digestion, modification technology and purification technology to obtain products,and has the advantages of no optical isomers, no missing peptides, short production cycle, high yieldand much lower manufacturing cost. In terms of Semaglutide Injection, the Phase I study has beencompleted and reached the endpoint of the equivalence study. It is expected to initiate Phase IIIclinical study in the second half of 2023.The Company will continue to strengthen the construction of Huadong Medicine's R&Decosystem. In the future, it will focus on the layout centering on a new generation of nucleic aciddrugs, drugs used in cell and gene therapy, etc., expand the technology platform of R&D ecosystem,and continuously enrich the pipeline of differentiated and leading innovative pharmaceutical products.
(2) Enriching the ADC product pipeline and creating a differentiated independent R&Dplatform of Huadong Medicine
As at the end of the reporting period, the introduced ADC projects, including HDM2002(ELAHERE?), HDP-101 and HDP-103, were implemented smoothly, among which HDM2002(ELAHERE?) is the world’s first ADC being developed by Huadong Medicine and ImmunoGen forthe treatment of folate receptor alpha (FRα)-positive ovarian cancer. In November 2022, ImmunoGen,a strategic partner of the Company, announced the accelerated approval of ELAHERE? by the U.S.FDA. It is the first ADC drug approved by the U.S. FDA for platinum-resistant ovarian cancer. TheCompany completed the Pre-BLA submission in China in March 2023, and plans to submit a BLAapplication within this year. HDP-101, a BCMA-targeted ADC drug for multiple myeloma, isintroduced from Heidelberg Pharma and is currently at the stage of Phase I/II clinical study overseas;HDP-103, a PSMA-targeted ADC drug for prostate cancer, is introduced from Heidelberg Pharmaand is at the stage of preclinical study.
So far, Huadong Medicine's innovative R&D ecosystem has formed a system and has begun tocontinuously introduce new pipeline projects. The Company established an independent ADC R&Dcenter last year, which is aimed to gradually build a differentiated independent ADC R&D platform,strengthen and optimize the ecological chain in the ADC field, develop no less than 10 innovativeADC products in 2022-2024, and actively promote registered clinical studies. Up to now, 6 preclinicalor exploratory newly-targeted ADC projects have been established independently. It is expected thatat least 4 additional independently-developed products will be confirmed for PCC and 2independently-developed ADC projects will be approved for IND before 2025. By now, the firstoriginal ADC project has completed PCC confirmation and is undergoing IND development; it isplanned to apply for clinical study within 2024. The Company will continue to enlarge the layout inthe field of anti-tumor ADC drugs, and continue to develop differentiated and iterative ADC productsfor different cancer types based on unmet clinical needs.
(3) Pipeline progress
1) Oncology
The Company strives to build a world-leading innovative anti-tumor drug R&D platform.Through the discovery, screening and validation of new targets in the early stage of drug development,it has established a product pipeline that covers more than 20 innovative anti-tumor drugs, includingtargeted small molecule drugs, ADCs, antibodies, and PROTACs, of which 4 clinical projects and 4IND development projects have clinical competitive advantages in related indications including solidtumors and hematological tumors. As the Company continues to explore and validate more innovativetargets, more drugs under development will be included in the development pipeline in the future,which provides an impetus for innovation, drives the continuous development of innovative drugswith better safety and clinical effect and offers patients more hope for a cure.
2) Endocrinology
With the GLP-1 target as the core, the Company has built a world-leading innovative drug R&Dplatform for obesity, diabetes and diabetic complications. By now, the Company has established aproduct pipeline of GLP-1 and related targets that combines long-acting and multi-target globalinnovative drugs and biosimilars of oral, injectable and other dosage forms, including 4 clinicalprojects and 2 IND development projects, some of which have the potential to become a best-in-classdrug. As the in-depth research and development of GLP-1 drugs continues, the range of indicationswill be expanded to a greater extend beyond diabetes. Based on the advantages of the existing pipeline,the Company will continue to explore innovative projects related to GLP-1 targets, expand to includeweight loss, lipid lowering, NASH and other related indications, continue to develop innovative drugswith higher bioavailability and more clinical value, and offer patients a more convenient medication
experience.
3) Autoimmunity
Up to now, the Company has had nearly 10 biological drugs and small molecule innovativeproducts in the field of autoimmune diseases. Among them, for ARCALYST
?and Mavrilimumab,two global innovative products in the field of autoimmunity, introduced from Kiniksa in the UnitedStates, the Company will formally submit the BLA application to NMPA in 2023; and for HDM3001,a biosimilar of ustekinumab (Stelara
?) jointly developed by the Company and Qyuns Therapeutics,it is expected to submit a BLA application in the third quarter of 2023. Furthermore, the Company'sglobal innovative drug R&D center has independently developed a number of early new target andbiological mechanism projects for immune diseases, all of which are progressing smoothly. In thesecond half of 2023, it will move from PCC to IND development for one independently-developedinnovative product.
HDM3002 (PRV-3279): It is used to treat systemic lupus erythematosus (SLE) and prevent orreduce the immunogenicity of gene therapy. Provention Bio, a US partner of the Company, iscurrently conducting Phase IIa clinical trial of the product for SLE indication in the United States andHong Kong, China. The Company submitted the IND application in China in February 2023.
4) Progress of key registered clinical projects in 2023
HDM3001 (QX001S): It is a biosimilar of the original drug ustekinumab (Stelara
?
,) being jointlydeveloped by the Company and Qyuns Therapeutics for the treatment of moderate to severe plaquepsoriasis in adults; its Phase III study has reached the preset primary endpoint. The Companycompleted the pre-BLA submission in April 2023, and is expected to submit the BLA application inthe third quarter of 2023.
HDM2002 (ELAHERE?): In July 2022, the subject enrollment for the PK pharmacokineticstudy in Phase I clinical trial in China was completed. In November 2022, ImmunoGen, a US partnerof the Company, announced the accelerated approval of ELAHERE? by the U.S. FDA. It is the firstADC (antibody-drug conjugate) drug approved by the U.S. FDA for platinum-resistant ovarian cancer.It is used for the treatment of platinum-resistant epithelial ovarian cancer, fallopian tube cancer, orprimary peritoneal cancer in adults who are folate receptor α (FRα)-positive and have previouslyreceived first to third-line systemic therapy. In December 2022, the subject enrollment for Phase IIIsingle-arm clinical trial in China was completed. In March 2023, the pre-BLA submission wascompleted after the preset primary endpoint of study was reached; and the BLA application is plannedto be submitted within this year. Based on the good clinical performance of this product, the Companyand its partner will promote the front-line treatment of ovarian cancer through further clinical study,to support the use of ELAHERE? as the first choice in combination therapy for ovarian cancer.
Mefatinib: It is used for the treatment of advanced non-small cell lung cancer with sensitiveEGFR mutations. In June 2021, the enrollment of last subject for Phase III clinical trial was completed;and the subjects were been followed up for the number of PFS events. It is expected to submit themarketing application after the number of PFS events in the Phase III study is obtained in the secondquarter of 2023.HD-NP-102 (Transdermal Glomerular Filtration Rate Measurement System and MB-102Injection): It is jointly developed by the Company and MediBeacon, Inc. in the United States, and isused to continuously measure the glomerular filtration rate (GFR) of patients with normal or impairedrenal function in a non-invasive manner based on the changes in fluorescence over time emitted bythe intravenously injected MB-102. In July 2022, the medical device registration application for thesystem was formally accepted by NMPA, which is currently under review. The MB-102 Injectionused in conjunction with the system is a global innovative drug. The subject enrollment for Phase IIImulti-regional clinical trial (MRCT) was completed in February 2023, and the pre-NDA submissionin China was completed in April 2023.
(4) Technology platform
1) New target discovery platform
Relying on the independent information platform, the Target Validation and Drug ScreeningLaboratory has established its own target database to explore targets related to neoplastic,autoimmune, and metabolic diseases. At early stage, the target biological mechanism team hasestablished a related technology platform at gene and protein levels, which can be used to discovernew disease targets. The existing platform technologies of the R&D laboratory include: High-throughput gene expression technology, cDNA overexpression technology, gene knockouttechnology; yeast two-hybrid system, proteomics, and other protein-level technologies; transgenicanimal construction technology.
2) Drug screening and evaluation research platform
The Company has established a relatively complete pre-clinical evaluation solution for drugs intreatment of neoplastic, autoimmune, and endocrine and metabolic diseases. The platform has beenable to cover the three dimensions of molecules, cells, and animals, and gradually developed fromtraditional screening method to high-throughput screening mode featuring high speed, trace amountand large scale. The current innovation team has built the full-chain drug R&D and post-marketingsupport capabilities ranging from the early drug discovery, PCC confirmation, IND enabling studyand clinical development to drug marketing.
3) AIDD platform
The Company's CADD/AIDD platform combines industrial research progress, strengthens the
computing power and algorithm system construction, and intelligently processes the generated andaccumulated data. Furthermore, the Company has accumulated rich data on the properties of patentmedicines, laying a foundation for the continuous optimization and the iterative property predictionmodel of patent medicines, and greatly improving the R&D progress of multiple projects at differentstages. At present, the Company's CADD/AIDD platform is also extensively applied in the researchand development of polypeptide drugs, ADC drugs, protein drugs and nucleic acid drugs.
4) PROTAC technology platform
PROTAC is a new bifunctional targeted protein degradation technology, which can completelydegrade the targeted protein when compared with traditional small molecules. According to thetechnical characteristics and advantages of PROTAC, we conduct differentiated PROTAC targetselection based on un-druggable targets, scaffold protein targets, drug resistance mutations, proteinsubtype selectivity and protein complexes, apply artificial intelligence, molecular simulation,chemistry-proteomics and combinatorial chemistry and other technologies in the R&D of newPROTAC drugs, combine AIDD/CADD and medicinal chemistry in the structure design of PROTACmolecules, construct Warhead and E3 ligase ligands with independent patents, and constantly expandand enrich the independent Linker database, so as to effectively optimize the PROTAC druggabilityand the PK characteristics after oral administration. Based on the existing platform technology, theglobal innovative drug R&D center has initiated the differentiated R&D for a number of PROTACprojects, which have shown excellent PK characteristics and efficacy.
(5) Cumulative innovative drug R&D results as at the end of the reporting period
1) R&D results
The Company continuously enriches the product pipeline, persistently explores the combinationtherapy of drugs, invests corresponding R&D expenses as the R&D projects process, rapidlypromotes the implementation of existing clinical projects and the development of early R&D projects,and accelerates a number of product pipelines that are characterized by source innovations (first-in-class, best-in-class) or has differentiated/iterative development value. Since its establishment 3 yearsago, the Global Innovative Drug R&D Center has established more than 40 innovative drug R&Dpipeline projects, obtained 6 independently-developed PCC molecules in terms of innovative drugs,received approval for 6 IND applications, and submitted 3 pre-NDA /pre-BLA applications.
2) Intellectual property rights
The Company strengthens the intellectual property protection for key core technologies, andcarries out intellectual property protection and patent layout for core technologies at different levelsand from different aspects. It improves intellectual property risk assessment and early warningmechanisms, strengthens tracking and monitoring of intellectual property protection in key areas, and
improves patent early warning and risk response and prevention capabilities.
The Company builds and continuously improves a comprehensive intellectual propertyprotection system, integrates intellectual property rights into R&D activities, and safeguards thedevelopment, product value and future market of scientific research projects.
The Global Innovative Drug R&D Center attaches great importance to the protection ofintellectual property rights, focusing on the intellectual property management throughout the lifecycle of drugs and the formulation of patent strategies. The intellectual property BP is set up to beresponsible for the early warning, declaration and maintenance of domestic and foreign patents, so asto improve the overall competitiveness of products. Since its establishment, the Global InnovativeDrug R&D Center has submitted a total of more than 80 patent applications for inventions, of which21 are formal and PCT patents. The patents cover the new drug structure, preparation process, use,formulation and other aspects.
3) Academic publication
In the past year, the innovation team published 5 abstracts about research results on new drugdesign, drug efficacy evaluation and clinical trials in the field of neoplastic and metabolic diseases atASCO, WCLC, EASD and ESMO conferences; among others, the Phase II clinical study onMefatinib as first-line treatment of patients with rare EGFR-mutant non-small-cell lung cancer waspublished in the form of POSTER at the 2022 ASCO Annual Meeting.
4) Government funding
Up to now, the Global Innovative Drug R&D Center has received the approval for a total of 11government funds, with an approved amount of CNY 27.25 million. In 2021, it was appraised as the"Leading Innovation Team" in Zhejiang Province. In 2021 and 2022, it was granted the funds underthe "Pioneering Soldier" and "Leading Wild Goose" Projects in Zhejiang Province. Besides, it wonawards in provincial and municipal science and technology projects for HDM1002, TTP273 and otherprojects and received funds for Mefatinib under the "Special Project for High-Quality Developmentof Biomedical Industry in Hangzhou". Focusing on scientific and technological innovation andinternationalization strategy, the Global Innovative Drug R&D Center continues to promote high-quality and high-efficiency work style of teams, increases their attractiveness to high-end talents, andhas successfully introduced (recognized) 2 experts from the "115" Foreign (Overseas) IntelligenceIntroduction Project in Hangzhou City. The Global Innovative Drug R&D Center continues toprovide support for the establishment and operation of the Huadong Pharmaceutical Innovation andDevelopment Joint Fund of the Natural Science Foundation of Zhejiang Province.
In the future, the Company, adhering to the concept of "Based on Scientific Research andCentered on Patients" and with "clinical value, pharmacoeconomic value, and commercial value" as
the starting point, will continue to deeply engage in the three core therapeutic areas of oncology,endocrinology and autoimmunity. Focusing on self-development and external introduction, it willcontinue to discover new targets, explore the multi-indication development of existing projects,continuously increase investment in technology platforms, and strengthen cooperation with domesticand foreign pharmaceutical and biological companies. The unique R&D ecosystem system andmultiple core R&D platforms of the Company are expected to quickly achieve a number ofblockbuster pipeline products, realize the update and iteration of the Company's core varieties in nearfuture, accelerate the marketing of innovative drug products, and provide new momentum for themedium and long-term development of the Company.
2. Industrial microbiology
The Company has been deeply engaged in the field of industrial microbiology for more than 40years, successfully developed and produced a variety of microbial drugs, and built a key technologysystem for the development and production of microbial products. The scale and technical level ofthe existing major microbial fermentation products are in the leading position in the industry, with asolid industrial foundation.
The Company's industrial microbiology business is guided by market demand, driven by R&Dtechnology, and coordinated with industrial resources. It focuses on the two business scenarios, i.e.,the systematic application of synthetic biology technologies and the biomedical innovation anddevelopment, and has established differentiated product pipelines and business solutions in the fieldsof raw materials for innovative drugs, such as nucleic acid & ADC, pharmaceutical APIs &intermediates, and raw materials for comprehensive health & aesthetic medicine.
(1) Building R&D industrial clusters to enhance international competitiveness in an all-round way
The Company has established the Industrial Microbiology Division to lead the overall businessdevelopment in the field of industrial microbiology, and has formed a complete independentmanagement system in the links of operation, research and development, investment, humanresources and marketing. Under the business division, a R&D cluster centered on Zhongmei HuadongIndustrial Microbiology Research and Development, Huadong Institute of Technology in SyntheticBiology, Huida Biotech and Hizyme Biotech has been established, as well as Hangzhou Xiangfuqiao,Qiantang New Area, Jiangsu Joyang, Hubei Maiggic, Anhui Meihua and Wuhu Huarenindustrialization bases.
There are up to more than 130 R&D projects in the field of industrial microbiology, mainlyincluding 17 projects about raw materials for innovative drugs such as nucleic acid and ADC(including 71 sub-projects), 30 about pharmaceutical APIs and intermediates, 18 projects about raw
materials for comprehensive health and aesthetic medicine, animal health care, biological materialsand others. As at the end of March 2023, the Company had 78 authorized patents and 51 pendingpatents in this field.The industrial microbiology team has both experience and vitality. Mr. Wu Hui, Deputy GeneralManager, is the main person in charge of the Company's industrial microbiology business and abusiness leader with a deep technical foundation. He has more than 30 years of experience in the fieldof industrial microbiology and has won the second prize of the National Prize for Progress in Scienceand Technology twice. Mr. Zheng Linghui, Chief Scientist of the Industrial Microbiology Division,is a well-known expert in microbial drug technology in China, responsible for or participating in anumber of major national science and technology projects and major new drug discovery projects. Interms of research and development, the Industrial Microbiology Division is committed to forming anefficient R&D team with high-quality talents as the core. At present, there are 335 research anddevelopment personnel, of which 23% are masters and doctorates.The Industrial Microbiology Division has established an international marketing team of nearly50 members, formed a business structure consisting of the sales team of Industrial MicrobiologyDivision and the market management system + the professional sales teams of subsidiaries, and hasfurther established overseas localized marketing teams to enhance overseas customer servicecapabilities. In the future, the Industrial Microbiology Division will further seek to increase theproportion of international business, and take R&D, quality, service and regulatory registration as themain dimensions of competitiveness to form the competitive advantages of international business.
(2) Making arrangements for synthetic biology in detail to build a leading edge inindustrial technologyOn the basis of systems biology, synthetic biology integrates the principles of engineeringscience, and reprograms natural or designs and synthesizes new biological systems using the bottom-up strategy to reveal the laws of life and establish a “convergent” emerging discipline for the newgeneration of bioengineering system, and it is an important technological path to promote the greatleap from "knowing life" to "designing life". With the core idea of “creation for infinite knowledgeand creation for practical use", synthetic biology technology and its application have led the thirdbiotechnology revolution, building a broad application prospect in the fields of medicine and health,materials, and chemicals.
Being engaged in the field of synthetic biology, Huadong Medicine, on the one hand, has madeembedded research and development achievements in the fields of macromolecular drugs andmicrobial drugs, providing effective technical support for existing related businesses. On the otherhand, it is also focusing on the development of new ongoing business, and seeking industrial
innovation breakthroughs on the basis of synthetic biology technology and in combination with theaccumulated achievements in the industrial microbiology. With the development tasks of theCompany in the field of synthetic biology research and development and application undertaken bythe Industrial Microbiology Division, a leading systematic layout on the tool side, platform side andproduct side of synthetic biology has been formed in China.On the tool side, with the businesses undertaken by Huaren Science and Technology and MeihuaHi-Tech, and nucleoside monomers and phosphorylated nucleosides serving as the main R&D andcommercial product pipelines, the Industrial Microbiology Division serves the gene synthesis andsequencing companies at home and abroad, making industrial microbiology the most upstreamindustry in the field of synthetic biology.On the platform side, the basic research and development capabilities in synthetic biologyincluding genetic element design, chassis cell construction and expression, and metabolic engineeringresearch have been built since the establishment of Huadong Institute of Technology in SyntheticBiology led by Academician Zheng Yuguo. With the pilot experiment, research and development andindustrial development carried out by Huida Biotech affiliated to the Industrial MicrobiologyDivision of the Company and the CMC technical platform of the Company, industrial developmentof products has been realized by virtue of systems microbial engineering development capabilitiesincluding bacteria fermentation, separation and purification established over the past 40 years. TheIndustrial Microbiology Division has set up a complete development system of enzyme design -evolution - bacteria construction - expression - catalysis, application and research and a technicalplatform for development of biocatalytic enzymes with the synthetic biology technology through theincorporation of Hizyme Biotech. Through the aforesaid platforms, it has also established a completetechnology research and development system ranging from basic research and development toindustrial development in the field of synthetic biology.
On the product side, the Industrial Microbiology Division has transformed synthetic biologytechnology products in the fields of comprehensive health and aesthetic medicine through MagicHealth, forming relatively leading technical advantages in vitamin K2, ectoin, methoxatin and otherproducts. For example, it has transformed vitamin K2 producing bacteria using the synthetic biologytechnology, which has solved the key technical problems of complex metabolism and low productexpression rate of natural bacteria. In addition, through such bases as Jiangdong and Jiangsu JiuyangBio-pharmaceutical Co., Ltd., it has transformed the achievements in synthetic biology technologyrelated to pharmaceutical APIs and intermediates, and has developed a relatively leading technologylevel and product pipeline in terms of anti-infective APIs for external use represented by mupirocinand Immunosuppressive APIs represented by tacrolimus. Based on the layout of more than 60 product
pipelines related to synthetic biology technology, it will further expand the application anddevelopment in the above product fields, as well as in the fields of medical biomaterials and rawmaterials for pet health in the future.
(3) Focusing on research, development and industrialization to facilitate the sourceinnovation of biomedicine
In recent years, approval of nucleic acid drugs for marketing has been speeded up, and clinicaldata of a number of nucleic acid drugs that have the potential to become blockbuster drugs have beenreleased, covering the fields of heart and metabolic diseases, liver diseases, and a variety of rarediseases, for which breakthroughs in key technologies of nucleic acid drugs have played an importantrole, including chemical modification and delivery system. Now, 13 nucleic acid drugs have beenapproved in the world, and the nucleic acid drugs mainly represented by small nucleic acid drugs andmRNA drugs may become a new development direction after antibody protein drugs. The IndustrialMicrobiology Division realizes mergers and acquisitions through Huaren Science and Technology,and serves the small nucleic acid drug and in vitro diagnostic reagent industries with modified andprotected nucleosides and nucleoside monomers. Based on the service and tracking of nearly athousand industry and scientific research customers, it continuously improves product quality anddevelops new product pipelines with the development of such customers. The introduction ofindustrial microbiology research and development strength and technical talents further promotes theestablishment of a richer and more complex nucleoside product system and a "moat" for the productpipeline and quality system, which will make it effective to embrace the rapid development in thefield of small nucleic acid drugs.
In January 2023, the Industrial Microbiology Division set up Hangzhou Huixin BiotechnologyCo., Ltd. Huixin Biotechnology is mainly engaged in the development and production of chemicalraw materials (e.g., modified nucleoside triphosphates, nucleotides, and cap structures) and biologicalraw materials (e.g., tool enzymes, and plasmids) required for manufacture of mRNA drugs, and alsoundertakes CRO/CDMO service business in the mRNA field. The establishment of HuixinBiotechnology and the introduction of the corresponding mRNA technology team will furtherintegrate the research and development and industrialization strength of the Industrial MicrobiologyDivision in the fields of upstream raw materials and services for mRNA drugs, and realize the mRNAdrug raw material and service business layout of the Industrial Microbiology Division.
Antibody-drug conjugates (ADCs) are compounds formed by linking antibodies and small-molecule cytotoxic drugs through specific linkers, and their main ingredients include antibodies,linkers, and small-molecule cytotoxic drugs. By the end of 2022, 15 different ADCs had beenapproved by FDA. As of August 2022, 587 new ADCs had been at the research and development
stage all over the world, and the clinical trial stage had been started for 281 of them. Since significanttechnical improvements have been made through selection of better cytotoxic drugs, bio-conjugationmethods, better targeted antigens and optimized antibody engineering, ADCs have become animportant track for innovative drugs. In the field of ADCs, Huida Biotech affiliated to the IndustrialMicrobiology Division has completed the commercial development of the existing major ADCcytotoxins and has submitted the DMFs for Exatecan and DM1 for registration in the US, and it plansto submit the DMF for MMAE for registration in the US, making it stand at the forefront in the fieldof ADC cytotoxins in China. Huida Biotech further expands the development of new toxins andLinker using synthetic biology technology and chemical modification technology, and also expandsthe production of small molecules of ADCs (toxin-Linker) downstream. In the future, a pattern ofparallel progress in the development and production of toxins and the production of small moleculesof ADCs will be formed.The Industrial Microbiology Division will also explore business opportunities in otherbiomedical innovation fields because biomedical innovation is an eternal theme and an inexhaustiblebusiness source for the Industrial Microbiology Division. Based on the differentiation and thedevelopment in the specific fields of nucleic acid and ADCs, the Industrial Microbiology Divisionwill form a "specialized and charming" business layout in the upstream field of biomedical innovation.
(4) Expanding the new field of animal health to gradually improve the industrial strategiclayoutWith animal health as one of the five major directions of the strategic layout of the IndustrialMicrobiology Division, the Company is gradually improving the industrial layout in accordance withthe established strategic deployment. In April 2023, the Company acquired Jiangsu Nanjing NongdaAnimal Pharmaceutical Co., Ltd. (hereinafter referred to as "Nanjing Nongda AnimalPharmaceutical"), and quickly entered the sub-track of pet and aquatic animal health. Started late inChina, the pet and aquatic animal health industry is featured by a low degree of concentration, ashortage of varieties, and a large unmet demand space. Currently, the products of international animalhealth giants account for more than 80% of the market share, which means that substitution withdomestic products is speeding up and that the market penetration of the products of domesticenterprises is expected to gradually increase. In recent years, the Ministry of Agriculture hassuccessively unveiled policies on drugs for pets and aquatic animals to improve industry standardsand encourage industry development, providing a good opportunity for rapid industry development.Being optimistic about the development of the animal health industry for a long time, the Companyhas reserved more than 10 kinds of high-end APIs for pet health, and has applied and developed avariety of raw materials required for comprehensive health in the field of animal health, and it has a
potential opportunity to transform more than 10 human medicines into pet medicines to realize theintegrated development of raw materials and preparations in the future. Nanjing Nongda AnimalPharmaceutical will become an important platform for Huadong Medicine to develop its animalhealth business in the industrial microbiology sector, while making full use of Huadong Medicine’sadvantages in industrial ecological chain and financial support capabilities to achieve coordinateddevelopment in R&D, manufacturing, marketing, selling and other dimensions. In the next five years,it will develop and launch dozens of animal health products one after another to meet more marketdemands in the field of pet and aquatic animal health, and become an animal health benchmarkenterprise in China.Now, on the basis of synthetic biology, industrial fermentation, green chemical manufacturingand other technologies and in combination with the existing research and development foundationand industrial layout, the organizational structure and layout of "industrial microbiology division +innovative technology company + industrial manufacturing base" have been formed, and the overalllayout in the fields of raw materials for innovative drugs such as nucleic acid & ADCs, APIs &intermediates, and raw materials for comprehensive health & aesthetic medicine has been completedin the industrial microbiology sector of the Company. Meanwhile, active efforts are made to expandthe fields of animal health and biological materials to gradually improve the industrial strategic layout.By 2030, the Company will set up an "industrial, large-scale, and international" industry cluster andbecome the industry leader in the field of industrial microbiology in China.
3. Aesthetic medicine business
Adhering to the core concept of “focusing on beauty seekers", the Company, based on thecomprehensive and differentiated product matrix, integrates “non-invasive technology + minimallyinvasive technology", “face + body", “product + technology", “injection + energy-based device" andother diversified combination therapies to provide more professional, safer, more efficient and morecomprehensive solutions for beauty seekers, and it is committed to becoming the world's leadingprovider of comprehensive solutions in the field of aesthetic medicine. It always attaches greatimportance to the scientific and technological innovation in the field of aesthetic medicine, andalways practices the operation philosophy of "high-tech research and development, high-qualitypositioning, and product globalization". With technology and leadership as the strategic focuses, itcontinuously increases investment in innovative technology, promotes breakthroughs and upgradesin the aesthetic medicine technologies, and enriches the innovative product pipelines. It has obtained
more than 200 patents related to aesthetic medicine business worldwide.
(1) Expand the global layout and build an international leading aesthetic medicineplatform
The aesthetic medicine business focuses on the global high-end aesthetic medicine market.Sinclair, a wholly-owned subsidiary, is a global aesthetic medicine operation platform of theCompany, and headquartered in the UK, it promotes and sells long-acting microspheres for injection,hyaluronic acid, and facial lifting and thread-embedding products in the global market. HuadongMedicine also develops and expands the business of energy-based devices in the field of aestheticmedicine in the global market through High Tech and Viora, its wholly-owned subsidiaries. Viora'sgood brand reputation, perfect market service personnel, complete marketing management systemand extensive market resources accumulated in the American market will make it effective forSinclair to further expand its EBD business in the American market. Through further integration ofresearch and development resources and capabilities, the aesthetic medicine business is advantagedby six global research and development centers in the UK, Netherlands, France, Switzerland, Spainand Israel, and six global production bases in the Netherlands, France, US, Switzerland, Bulgaria andIsrael. Sinclair (Shanghai), a wholly-owned subsidiary and a Chinese market operation platform, andR2 in the US and Kylane in Switzerland, the overseas technology research and developmentsubsidiaries, are also included in the aesthetic medicine sector of the Company.
(2) Focus on high-end technology and arrange differentiated product matrix
The aesthetic medicine projects can be divided into surgical treatment projects and non-surgicaltreatment projects. The surgical treatment projects are intended to improve appearances throughsurgical treatments, mainly including the plastic surgery. The non-surgical treatment projects mainlyinclude the injection therapies, energy-based therapies and other non-surgical treatments. The non-surgical treatment projects are highly recognized by consumers because of their high safety, shortrecovery time, and easy operation. According to the Research Report on Aesthetic Medicine Industryin China 2022, the market of non-surgical treatment projects, i.e., "light aesthetic medicine" projects,is expanding rapidly, with a market size of up to 75.2 billion yuan in 2021 and the CAGR expectedto be 31.9% from 2021 to 2025, and it is expected to become the main market in the field of aestheticmedicine. Focusing on non-surgical treatment projects, the Company has 36 high-end products thatare already on the market and under research in the field of aesthetic medicine featured by “non-invasive technology + minimally invasive technology", including 13 products for injection, 22energy-based devices, and 1 thread embedding product. The product portfolio covers the mainstreamfield of aesthetic medicine characterized by non-surgical treatment projects such as facial and bodyfilling, face cleansing, thread embedding, skin management, body shaping, hair removal and private
restoration, forming a comprehensive product cluster, with the number of products and covered fieldsranking in the forefront of the industry.In recent years, with the rise of the "beauty economy", the injection projects have witnessedrapid development, and the aesthetic medicine industry in China has been dominated by injectionprojects. The products for injection are the core driving force for the rapid growth of the revenue ofthe aesthetic medicine business, mainly including the followings:
1) Ellansé
?- polycaprolactone microspheres for injectionAs a high-end filler made of polycaprolactone (PCL) microspheres and carboxymethylcellulose(CMC), Ellansé
?
can be naturally metabolized in the body, and with good biocompatibility due toexclusive STAT patented technology, it has an immediate shaping effect and a long-lasting collagenregeneration mechanism. Now, Ellansé
?has been registered and certified or approved for marketingin more than 60 countries or regions around the world. With a history of clinical use for more than10 years worldwide, it has been widely recognized for its clinical safety and effectiveness.
Ellansé
?-S has been widely recognized since it was officially launched in China in August 2021,leading the regenerative aesthetic medicine market. In the first quarter of 2023, all subjects for clinicaltrial of Ellansé
?
-M in China were enrolled successfully, and follow-up was started. During thereporting period, Sinclair started the registration of Ellansé
?
in the US market.
2) Lanluma
?- poly-l-lactic acid collagen stimulatorMade of poly-l-lactic acid (PLLA), Lanluma
?is a regenerative filler for face and body, and it iscurrently the only regenerative product approved for buttock and thigh filling in the world to providea long-lasting filling effect for 18-24 months.Granted the EU CE certification in 2020, Lanluma
?has been
approved for marketing in 32countries and regions around the world so far. It was approved for launch in Boao Lecheng, Hainanin December 2022, and granted the "Best Body Filling Injection" award by the AMWC Monaco 2023,which shows the authoritative recognition of Lanluma
?and its technology by the internationalaesthetic medicine industry.
3) MaiLi
?series new high-end lidocaine containing hyaluronic acidThere are four products in MaiLi
?series, all of which adopt the innovative OxiFree? patentedtechnology, and these products can make facial expressions more natural because of the Smart Springproperty. Compared with similar products in the industry, these products are advantaged by excellentrheological property and good filling property, which can help to effectively reduce the injectionvolume, maximize the clinical efficacy, and obtain more durable and natural effect. Granted EU CEcertification in June 2020, MaiLi
?
series have been continuously recognized by the market since theiroverseas launch. Currently, all subjects for clinical trial of MaiLi Extreme in China have been enrolled,
and follow-up is in progress. During the reporting period, Sinclair started the registration of MaiLi
?
in the US market.
4) KiOmedine
?
skin booster and 3 fillersKiOmedine
?
skin booster and 3 fillers are products under research developed by KiOmed.KiOmedine
?skin booster is a high-purity natural (not animal derived) medical grade chitosanderivative developed using the exclusive patented technology, and its core ingredients can protect theskin from oxidative stress, effectively supplement skin moisture, and improve skin quality. As fillersfor injection based on KiOmedine
? and hyaluronic acid, the 3 KiOmedine
?fillers can be used for lipfilling and shaping, improving or correcting facial wrinkles and skin depressions, and facial fillingand shaping.The aesthetic medicine projects based on energy-based device are very popular among beautyseekers because of their safety and high efficiency, and the penetration of energy-based devicecontinues to increase. According to data from iResearch, the non-invasive energy-based devicemarket size reached 2.2 billion yuan in 2021, and the compound growth rate from 2016 to 2021reached 15.6% in China. The Company has abundant product pipelines in the field of energy-baseddevice, and the core products include the followings:
1) Glacial Spa
?
Glacial Spa
?
is a high-tech beauty instrument which is researched and developed by the technicalteam with Rox Anderson, M.D., the father of modern laser medicine and director of Wellman Centerfor Photomedicine at Massachusetts General Hospital (a teaching hospital affiliated to HarvardMedical School, located in Boston) as the core member, and it is a scientific and technologicalachievement of a new generation in the field of cool skin care. Glacial Spa
?achieves effectivemanagement of melanin expression through precise temperature control of semiconductors. Theglobal debut of the product was successfully completed in China in the first quarter of 2022, and nowcommercial cooperation with more than 40 beauty institutions in China has been launched.
2) Reaction
?
Provided with the CORE? multi-channel RF technology, four adjustment modes for adjustmentof RF energy, and the Vacuum negative pressure technology, Reaction
?dual-stage RF instrumentcan better activate and heat autologous cells in the dermis and subcutaneous tissue to promotecollagen regeneration and effectively tighten the skin and smooth the wrinkles. Registered with andcertified by FDA, Reaction
?
has been on the market overseas for many years. In 2015, it was grantedthe third class medical device registration certificate by the NMPA. At present, the agent in Chinahas been changed, and re-sales and promotions in China are going to be started in the second quarterof 2023.
3) V series (V10, V20, and V30)
The V series integrates all high-end application technologies of the Company (CORE, SVC,PCR, and Multi-CORE), and constitutes a multifunctional aesthetic medicine operation platformintegrating such energy sources as radio frequency (RF), intense pulsed light (IPL), and Laser. Now,it is a leader in the medical laser, photon and energy-based device markets in Europe and America.At present, V10, V20, and V30 have been registered with and certified by FDA and granted EU CEcertification.
4) Préime DermaFacial
Adopting the IoT (Internet of Things) technology, Préime DermaFacial is a multi-functional,intelligent and high-tech skin management platform integrating five advanced technologies includingspiral vacuum, microdermabrasion, micro-current, radio frequency and ultrasound, and it can be usedfor face cleansing, exfoliating, and moisturizing to create a smooth and firm skin state for beautyseekers. The product was commercially available in major global aesthetic medicine markets such asin Europe and America in September 2022, and scheduled to be launched in China in 2023.
5) Sculpt & Shape
As an energy-based device adopting the innovative RotateRF technology, Sculpt&Shape
?has 6different rotating probes and integrates unipolar and bipolar radiofrequency, and it is used for bodyshaping, skin tightening, fat reduction, wrinkle reduction, and other facial rejuvenation treatments.The product was launched in the European market in the first quarter of 2023.
(3) Improve marketing capabilities to facilitate the commercial development of aestheticmedicine business
The aesthetic medicine business of the Company is provided with a professional marketing teamof nearly 300 people. Moreover, a global aesthetic medicine marketing network has been established.At present, product distribution has covered more than 80 countries and regions around the world.
Sinclair, a wholly-owned subsidiary in the UK, is a global aesthetic medicine operation platformof the Company. It has direct sales teams in the EU, Brazil, Mexico, Colombia, the UAE, Hong KongSAR and South Korea, as well as an international distribution network. During the reporting period,the Company continued to provide the doctors in the field of aesthetic medicine with technologies,and it was committed to providing high-quality training through practical operations and exchangeswith experts.
As the operation center of the aesthetic medicine business of the Company in the Chinese market,Sinclair (Shanghai), a wholly-owned subsidiary, continues to be committed to the high-end injectionmarket in the field of aesthetic medicine. By the end of 2022, the number of cooperative hospitalsthat have signed contracts with Sinclair (Shanghai) had exceeded 500, and the number of trained and
certified doctors had exceeded 1,100. By taking advantages of the medical resources of global expertsthrough the official learning platform - "Sinclair Education Vision", it continues to provide Chinesedoctors with more high-quality and innovative medical course contents to ensure that beauty seekerscan be provided with professional and efficient services.In the future, the Company will, with respect to the aesthetic medicine business, adhere to thestrategy of "global operation layout, and dual-cycle operation and development", and continue tofocus on the global high-end aesthetic medicine market in order to form an international aestheticmedicine business integrating research and development, manufacturing, and marketing. WithSinclair, the core subsidiary, as the global operation platform, it will also integrate scientific andtechnological innovation resources to realize the global operation layout of aesthetic medicine, andcontinue to introduce the "aesthetic medicine + skin care" products featured by high technology andgreat market potential into China and help the rapid localization and commercialization ofinternational high-quality products by virtue of the registration and marketing strength of theCompany in China to steadily expand the Chinese market and form a new pattern of domestic andinternational dual-cycle interactive development.
IV. Quarterly Financial Statements(I) Financial Statements
1. Consolidated Balance Sheet
Prepared by: Huadong Medicine Co., Ltd.
March 31, 2023
Unit: CNY
| Item | Balance at the end of the period | Balance at the beginning of the year |
| Current assets: | ||
| Monetary funds | 2,375,152,352.20 | 3,996,302,178.41 |
| Balances with clearing companies | ||
| Lending to banks and other financial institutions | ||
| Financial assets held for trading | ||
| Derivative financial assets | 29,624,778.28 | 29,907,470.68 |
| Notes receivable | 8,424,980.99 | 8,424,980.99 |
| Account receivable | 8,634,543,140.84 | 7,198,746,788.59 |
| Financing of receivables | 1,072,015,668.04 | 1,002,511,208.21 |
| Accounts prepayment | 558,908,474.57 | 500,083,953.14 |
| Premiums receivable | ||
| Reinsurance accounts receivable | ||
| Receivable from subcontracting reserves | ||
| Other receivables | 426,378,917.15 | 283,710,955.63 |
| Including: Interest receivable | ||
| Dividends receivable | 223,747.65 | 223,747.65 |
| Financial assets purchased under resale | ||
| Inventories | 5,055,660,372.20 | 4,495,483,328.54 |
| Contract assets | ||
| Assets held for sale | ||
| Non-current assets due within one year | ||
| Other current assets | 154,239,503.07 | 52,692,618.78 |
| Total current assets | 18,314,948,187.34 | 17,567,863,482.97 |
| Non-current assets: | ||
| Loans and advances | ||
| Debt investment | ||
| Other debt investment | ||
| Long-term accounts receivable | ||
| Long-term equity investment | 1,615,531,125.55 | 1,659,076,538.78 |
| Other equity instrument investment | 409,905,775.09 | 360,910,876.41 |
| Other non-current financial assets | ||
| Investment real estate | 13,391,671.22 | 13,648,240.14 |
| Fixed assets | 3,932,528,399.48 | 3,981,653,265.52 |
| Construction in progress | 913,273,558.34 | 873,159,427.47 |
| Productive biological assets | ||
| Oil and gas assets | ||
| Right-of-use asset | 146,533,933.11 | 166,505,297.17 |
| Intangible assets | 2,250,237,369.24 | 2,280,064,207.30 |
| Development expenditures | 689,292,520.17 | 641,354,586.80 |
| Goodwill | 2,455,916,241.27 | 2,441,387,413.59 |
| Long-term deferred expenses | 20,514,237.77 | 16,457,278.57 |
| Deferred income tax assets | 153,369,860.61 | 152,842,858.97 |
| Other non-current assets | 1,199,757,888.07 | 1,037,279,933.15 |
| total of Non-current assets | 13,800,252,579.92 | 13,624,339,923.87 |
| Total assets | 32,115,200,767.26 | 31,192,203,406.84 |
| Current liabilities: | ||
| Short-term borrowing | 563,013,919.12 | 947,516,383.37 |
| Borrowings from the Central Bank | ||
| Borrowings from banks and other financial institutions | ||
| Financial assets held for liabilities | 14,841,896.97 | 14,841,896.97 |
| Derivative financial liabilities | ||
| Notes payable | 1,360,474,461.93 | 1,029,409,686.81 |
| Accounts payable | 4,990,423,949.03 | 4,873,029,466.44 |
| Advance receipts | 881,243.42 | 1,154,243.42 |
| Contract Liabilities | 192,637,694.45 | 146,488,489.07 |
| Assets sold under agreements to repurchase | ||
| Deposits from customers and interbank | ||
| Receiving from vicariously traded securities | ||
| Acting underwriting securities | ||
| Employee remuneration payable | 175,666,718.25 | 256,883,423.68 |
| Taxes payable | 479,789,639.50 | 429,457,804.81 |
| Other payables | 2,684,871,969.84 | 2,290,407,022.05 |
| Including: Interest payable | ||
| Dividends payable | 224,219.60 | 14,924,219.60 |
| Handling charges and commissions payable |
| Dividends payable for reinsurance | ||
| Held-for-sale liabilities | ||
| Non-current liabilities due within one year | 140,795,971.83 | 147,835,514.81 |
| Other current liabilities | 24,158,784.99 | 15,788,164.30 |
| Total Current Liabilities | 10,627,556,249.33 | 10,152,812,095.73 |
| Non-current liabilities: | ||
| Reserve fund for insurance contracts | ||
| Long-term borrowings | 677,604,268.25 | 1,051,457,747.44 |
| Bonds payable | ||
| Including: preference shares | ||
| Perpetual bonds | ||
| Lease liabilities | 105,228,290.55 | 84,610,324.98 |
| Long-term accounts payable | 289,977,495.12 | 287,497,209.49 |
| Long-term employee remuneration payable | ||
| Estimated liabilities | 39,859,049.95 | 37,925,549.41 |
| Deferred income | 179,106,792.98 | 126,123,512.71 |
| Deferred income tax liabilities | 202,084,083.93 | 202,084,083.93 |
| Other non-current liabilities | 73,251,500.00 | 73,251,500.00 |
| Total non-current liabilities | 1,567,111,480.78 | 1,862,949,927.96 |
| Total liabilities | 12,194,667,730.11 | 12,015,762,023.69 |
| Shareholder’s equity: | ||
| Shareholder Equity | 1,753,995,348.00 | 1,753,995,348.00 |
| Other equity instruments | ||
| Including: preference shares | ||
| Perpetual bonds | ||
| Capital reserves | 2,387,821,545.06 | 2,377,887,246.39 |
| Less: Treasury shares | 104,645,000.00 | 104,645,000.00 |
| Other comprehensive incomes | -119,904,045.95 | -88,552,636.42 |
| Special reserves | ||
| Surplus reserves | 1,151,441,705.28 | 1,151,213,039.48 |
| General risk preparations | ||
| Undistributed profits | 14,245,364,208.58 | 13,488,021,239.94 |
| Total owners' equities attributable to equity holders of the parent company | 19,314,073,760.97 | 18,577,919,237.39 |
| Equity of minority shareholders | 606,459,276.18 | 598,522,145.76 |
| Total owners' equity | 19,920,533,037.15 | 19,176,441,383.15 |
| Total of liabilities and Owners’ equities | 32,115,200,767.26 | 31,192,203,406.84 |
Legal Representative: LYU Liang Officer in charge of accounting: LYU Liang Head of accounting department: QIU Renbo
2. Consolidated Profit Statement
Unit: CNY
| Item | Amount of the current period | Amount of the previous period |
| I. Total operating revenue | 10,114,531,331.77 | 8,932,579,251.75 |
| Including: Operating income | 10,114,531,331.77 | 8,932,579,251.75 |
| Interest income | ||
| Insurance premiums earned | ||
| Handling charges and commissions income | ||
| II. Total operating costs | 9,111,221,456.77 | 8,028,129,305.85 |
| Including: Operating cost | 6,790,724,204.77 | 5,914,898,927.47 |
| Interest expense | ||
| Handling charges and |
| commissions expenses | ||
| Surrender value | ||
| Net payments for insurance claims | ||
| Net appropriation of deposit for duty | ||
| Expenditures dividend policy | ||
| Amortized reinsurance expenditures | ||
| Taxes and surcharges | 53,150,033.98 | 49,868,639.14 |
| Sales expense | 1,642,616,610.16 | 1,433,493,143.24 |
| Administrative expenses | 330,086,070.32 | 302,601,116.29 |
| R&D expenses | 265,493,695.70 | 319,207,245.09 |
| Financial expense | 29,150,841.84 | 8,060,234.62 |
| Including: interest expenses | 34,466,716.93 | 20,956,363.85 |
| Interest income | 12,491,377.82 | 24,163,304.15 |
| Add: Other income | 14,582,456.30 | 10,669,007.70 |
| Investment income (loss is represented with “-”) | -61,752,708.66 | -27,961,493.36 |
| Including: Incomes from investment in associated enterprises and joint ventures | -52,816,907.73 | -20,764,035.59 |
| Gains from the derecognition of financial assets measured at amortized cost | ||
| Exchange income (Loss is represented with “-“) | ||
| Net exposure hedging income (loss is represented with “-”) | ||
| Net income from changes in fair value (loss is represented with “-”) | ||
| Credit impairment losses (Losses are indicated by “-”) | ||
| Impairment loss of assets (loss is represented with “-”) | ||
| Asset disposal income (loss is represented with “-”) | -2,199,859.71 | 557,821.07 |
| III. Operating Profit (loss is represented with “-") | 953,939,762.93 | 887,715,281.31 |
| Add: Non-operating income | 1,389,195.74 | 831,619.81 |
| Less: Non-operating expenditure | 6,049,187.60 | 5,355,930.46 |
| IV. Total Profit (Total loss is represented with “-”) | 949,279,771.07 | 883,190,970.66 |
| Less: Income tax expenses | 189,354,280.74 | 169,158,396.42 |
| V. Net Profit (net loss is represented with “-”) | 759,925,490.33 | 714,032,574.24 |
| (I) Categorized by the continuity of operations | ||
| 1. Net profit from continued operations (net loss is represented with “-”) | 759,925,490.33 | 714,032,574.24 |
| 2. Net profit from discontinued operations (net loss is represented with “-”) | ||
| (II) Categorized by attribution of the ownership: | ||
| 1. Net profits attributable to the parent company’s owners | 755,284,976.47 | 704,364,775.13 |
| 2. Profit And Loss of Minority Shareholders | 4,640,513.86 | 9,667,799.11 |
| VI. Net of tax from other comprehensive incomes | -31,351,409.53 | -15,014,785.25 |
| Net of tax from other comprehensive incomes attributable to the owner of the Parent Company | -31,351,409.53 | -15,014,785.25 |
| (I) Other comprehensive incomes not to be reclassified to profit or loss | 693,671.15 | |
| 1. Re-measurement of the changes in the defined benefit plan | ||
| 2. Other comprehensive incomes not to be reclassified to profit or loss via equity method | ||
| 3. Changes in fair value of other equity instrument investment | 693,671.15 | |
| 4. Changes in fair value concerning the enterprise’s own credit risks | ||
| 5. Others | ||
| (II) Other comprehensive incomes to be reclassified to profits and losses | -32,045,080.68 | -15,014,785.25 |
| 1. Other comprehensive incomes to be reclassified to profit or loss via equity method | ||
| 2. Changes in fair value of the other debt investment | ||
| 3. Amount of financial assets which are reclassified to other comprehensive incomes | ||
| 4. Credit impairment reserves for other debt investment | ||
| 5. Cash flow hedging reserves | ||
| 6. Translation balance of foreign currency financial statements | -32,045,080.68 | -15,014,785.25 |
| 7. Others | ||
| Net of tax from other comprehensive incomes attributable to minority shareholders | ||
| VII. Total amount of comprehensive income | 728,574,080.80 | 699,017,788.99 |
| Total comprehensive income attributable to Parent Company shareholders | 723,933,566.94 | 689,349,989.88 |
| Total comprehensive income attributable to the minority shareholder | 4,640,513.86 | 9,667,799.11 |
| VIII. Earnings per share: | ||
| (I) Basic earnings per share | 0.4316 | 0.4025 |
| (II) Diluted earnings per share | 0.4315 | 0.4025 |
As for the merger under the same control during this period, the merged part’s net profit gained before the merger is CYN ___, and
its net profit gained during the previous period is CNY ___.Legal Representative: LYU Liang Officer in charge of accounting: LYU Liang Head of accounting department: QIU Renbo
3. Consolidated Cash Flow Statement
Unit: CNY
| Item | Amount of the current period | Amount of the previous period |
| I. Cash flows generated from operating activities: | ||
| Cash received from sale of commodities or rendering of services | 9,958,329,191.55 | 8,140,456,622.41 |
| Net increase in deposits from customers and placements from corporations in the same industry | ||
| Net increase in borrowings from the central bank | ||
| Net increase amount in borrowing funds capital from other financial institutions | ||
| Cash receipts from premiums under direct insurance contracts | ||
| Net cash received from reinsurance business | ||
| Net increase in deposits from policyholders and investment funds | ||
| Cash received from interests, handling charges and commissions | ||
| Net increase in borrowings from banks and other financial institutions | ||
| Net increase in repurchase business funds | ||
| Net cash received from vicariously traded securities | ||
| Refund of tax and levies | 1,207,680.51 | 4,056,067.04 |
| Other cash received relating to operating activities | 166,606,563.49 | 74,818,262.98 |
| Sub-total of cash inflows from the operating activities | 10,126,143,435.55 | 8,219,330,952.43 |
| Cash paid for purchasing commodities and receiving labor services | 7,268,626,176.06 | 5,856,237,111.49 |
| Net increase in loans and advances to customers | ||
| Net increase in balance with the central bank and due from banks and other financial institutions | ||
| Cash paid for indemnity of original insurance contract | ||
| Net increase in lending to banks and other financial institutions | ||
| Cash paid for interests, handling charges and commissions | ||
| Commissions on insurance policies paid |
| Cash paid to and paid for employees | 845,672,966.99 | 719,758,010.16 |
| Payments of all taxes and fees | 609,699,664.95 | 477,339,851.40 |
| Other Cash paid for operating activities | 1,648,297,397.71 | 1,426,599,607.70 |
| Sub-total of cash outflow of the operating activities | 10,372,296,205.71 | 8,479,934,580.75 |
| Net cash flows generated from operating activities | -246,152,770.16 | -260,603,628.32 |
| II. Cash flows generated from investment activities | ||
| Cash received from disinvestment | ||
| Cash received from returns on investments | ||
| Net amount of cash recovered from disposal of fixed assets, intangible assets and other long-term assets | 149,204.89 | 1,439,970.00 |
| Net cash amount received from disposal of subsidiaries and other business units | ||
| Cash received from other concerning investing activities | 44,313,052.83 | |
| Sub-total of cash flow-in from investment activities | 44,462,257.72 | 1,439,970.00 |
| Cash payments to acquisition & construction of fixed assets, intangible assets and other long-term assets | 398,081,956.46 | 193,143,577.15 |
| Cash paid for investment | 51,794,250.00 | 29,400,000.00 |
| Net increase in secured loans | ||
| Net cash paid for acquirement of subsidiaries or other business units | 34,641,364.12 | 284,030,413.64 |
| Other cash paid which is related to investing activities | 100,000,000.00 | |
| Sub-total of cash flow-out from investment activities | 484,517,570.58 | 606,573,990.79 |
| Net cash flow generated from investment activities | -440,055,312.86 | -605,134,020.79 |
| III. Cash flows generated from financing activities | ||
| Cash received from investment absorption | 30,000,000.00 | |
| Including: Cash from absorbing minority shareholders’ equity investment by subsidiaries | 30,000,000.00 | |
| Cash received from borrowings | 907,116,269.61 | 709,751,200.00 |
| Other cash received relating to financing activities | 59,222,104.05 | 109,951,775.00 |
| Sub-total of cash inflows from financing activities | 966,338,373.66 | 849,702,975.00 |
| Cash repayments of amounts borrowed | 1,652,722,088.75 | 815,271,409.82 |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 64,853,544.08 | 38,336,990.15 |
| Including: Dividends and profits paid by subsidiaries to minority shareholders | 13,328,000.00 | 1,960,000.00 |
| Other cash paid which is related to financing activities | 98,175,384.50 | 1,655,869.61 |
| Sub-total of cash outflows from financing activities | 1,815,751,017.33 | 855,264,269.58 |
| Net cash flows generated from financing activities | -849,412,643.67 | -5,561,294.58 |
| IV. Effects of foreign exchange rate changes on cash and cash equivalents | 4,528,971.51 | 10,811,591.15 |
| V. Net increment of cash and cash equivalents | -1,531,091,755.18 | -860,487,352.54 |
| Add: Opening balance of cash and cash equivalents | 3,416,910,702.33 | 3,580,140,638.17 |
| VI. Balance at the end of the year of the cash and cash equivalents | 1,885,818,947.15 | 2,719,653,285.63 |
(II) Audit ReportHas the First Quarterly Report been audited?
□ Yes ?No
The First Quarterly Report has not been audited.
Board of Directors of Huadong Medicine Co., Ltd.
April 21, 2023