Huadong Medicine Co., Ltd.
Half Year Report 2020
August 2020
Section I. Important Declaration, Contents and DefinitionsThe Board of Directors, Board of Supervisors, directors, supervisors and seniormanagement of Huadong Medicine Co., Ltd. (hereinafter referred to as the“Company”) hereby guarantee that the information presented in this half yearreport is authentic, accurate and complete and free of any false records,misleading statements or material omissions, and shall undertake individual andjoint legal liabilities.Liang Lyu, the Company’s legal representative and the officer in charge ofaccounting, and Renbo Qiu, head of accounting department (accountingsupervisor) hereby declare and guarantee that the financial statements in thishalf year report are authentic, accurate and complete.All directors have attended the Board of Directors meeting to review this halfyear report.The future plans, development strategies and other prospective statements inthis half year report shall not be considered as substantial commitment of theCompany to investors. Therefore, investors are kindly reminded to pay attentionto possible investment risks.The company does not plan to distribute cash dividends, no bonus share will beissued; and no capital reserve will be converted to increase the share capital.
According to <Stock Listing Rules of the Shenzhen Stock Exchange>, if listedcompanies have Chinese or other language versions of public notice, they shouldensure the content of versions are the same. In case of discrepancy, the originalChinese version prevails.
Contents
Section I. Important Declaration, Contents and Definitions ................................................ 2
Section II. Company Profile and Key Financial Indicators .................................................. 7
Section III. Overview of the Company’s Business............................................................... 11
Section IV. Discussion and Analysis of Operations ............................................................. 17
Section V. Important Matters .............................................................................................. 40
Section VI. Share Change and Shareholders ....................................................................... 45
Section VII. Preferred Shares .............................................................................................. 51
Section VIII. Convertible Corporate Bonds ........................................................................ 52
Section IX. Directors, Supervisors, Senior Managers ....................................................... 53
Section X. Information about Corporate Bonds ................................................................. 54
Section XI.Financial Report ............................................................................................... 55
Definitions
| Term | refers to | Definition |
| CSRC | refers to | China Securities Regulatory Commission |
| SZSE | refers to | Shenzhen Stock Exchange |
| Huadong Medicine/the Company/our Company | refers to | Huadong Medicine Co., Ltd. |
| CGE | refers to | China Grand Enterprises, Inc. |
| Huadong Medicine Group | refers to | Hangzhou Huadong Medicine Group Co., Ltd. |
| Zhongmei Huadong | refers to | Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. |
| Jiangdong Company | refers to | Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd. |
| Jiuyang Biopharmaceutical company | refers to | Jiangsu Jiuyang Biopharmaceutical Co., Ltd. |
| Xi’an Bohua | refers to | Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. |
| Huadong Ningbo Company | refers to | Huadong Ningbo Medicine Co., Ltd. |
| Chongqing Peg-Bio | refers to | Chongqing Peg-Bio Biopharm Co., Ltd. |
| Qyuns Therapeutics | refers to | Qyuns Therapeutics Co., Ltd |
| Sinclair | refers to | Sinclair Pharma Limited |
| vTv Company | refers to | vTv Therapeutics LLC |
| R2 | refers to | R2 Technologies,Inc. |
| MediBeacon | refers to | MediBeacon Inc. |
| RAPT | refers to | RAPT Therapeutics,Inc. |
| GMP | refers to | Good Manufacturing Practices |
| CGMP | refers to | Current Good Manufacture Practices |
| GSP | refers to | Good Supply Practice |
| BE | refers to | Bioequivalence |
| CDE | refers to | Center for Drug Evaluation (of National Medical Products Administration) |
| MAH | refers to | Marketing Authorization Holder |
| FDA | refers to | (U.S.) Food and Drug Administration |
| NDA | refers to | New Drug Application |
| ANDA | refers to | (U.S.) Abbreviated New Drug Application |
| ICH | refers to | International Council for Harmonisation (of Technical Requirements for Pharmaceuticals for Human Use) |
| IND | refers to | Investigational New Drug |
| PK/PD | refers to | pharmacokinetics/pharmacodynamics |
| CMC | refers to | Chemistry, Manufacturing and Control |
| PMA | refers to | Premarket Application |
| QA | refers to | Quality Assurance (department) |
Section II. Company Profile and Key Financial IndicatorsI. Company Profile
| Stock name (abbreviation) | Huadong Medicine | Stock code | 000963 |
| Changed stock abbreviation(if any) | |||
| Stock listed on | Shenzhen Stock Exchange | ||
| Company name in Chinese | 华东医药股份有限公司 | ||
| Company name in Chinese (abbreviation) | 华东医药 | ||
| Company name in English (if any) | Huadong Medicine Co., Ltd. | ||
| Company name in English (abbreviation, if any) | Huadong Medicine | ||
| Legal representative | Liang Lyu | ||
II. Contact persons and contact information
| Secretary of the Board of Directors | Securities affairs representative | |
| Name | Bo Chen | Lihong Xie |
| Contact address | 866 Moganshan Road, Hangzhou | 866 Moganshan Road, Hangzhou |
| Tel. | 0571-89903300 | 0571-89903300 |
| Fax | 0571-89903300 | 0571-89903300 |
| Email address | hz000963@126.com | hz000963@126.com |
III. Other relevant information
1. Company’s contact information
Whether there is any change in the Company’s registered address, office address, zip code, company website orcompany email address during the reporting period.
□Applicable √ N/A
There is no change in the Company’s registered address, office address, zip code, company website or companyemail address during the reporting period. Please refer to 2019 Annual Report for details.
2. Information disclosure and place of the report
Whether there is alteration in information disclosure and place of the report during the reporting period.
□ Applicable √ N/A
The newspaper designated by the Company for information disclosure, website specified by CSRC for release of thehalf-year report, and the place where the half-year report is available for inspection have not changed during thereporting period, please refer to 2019 Annual Report for details.
IV. Key accounting data and financial indicators
Whether the Company needs to perform a retroactive adjustment or restatement of previous accounting data
□ Yes √ No
| The current reporting period | Same period last year | Change of the current reporting period over the same period last year(%) | |
| Operating revenue (yuan) | 16,660,934,157.64 | 18,248,667,616.98 | -8.70% |
| Net profit attributable to shareholders of listed companies (yuan) | 1,731,184,721.25 | 1,596,283,418.31 | 8.45% |
| Net profit attributable to shareholders of listed companies after deducting non-recurring gains/losses (yuan) | 1,406,723,973.10 | 1,474,434,387.97 | -4.59% |
| Net cash flow from operating activities (yuan) | 1,255,542,667.29 | 963,028,336.86 | 30.37% |
| Basic earnings per share (yuan/share) | 0.9894 | 0.9123 | 8.45% |
| Diluted earnings per share (yuan/share) | 0.9894 | 0.9123 | 8.45% |
| Weighted average return on equity (ROE) | 13.12% | 14.88% | -1.76% |
| End of the current reporting period | End of last year | Change of the end of the current reporting period over the end of last year(%) | |
| Total assets (yuan) | 22,502,539,982.08 | 21,463,974,146.63 | 4.84% |
| Net assets attributable to shareholders of listed companies (yuan) | 13,589,246,070.11 | 12,309,477,308.00 | 10.40% |
Share capital of the Company as of the trading day before disclosure
| Share capital of the Company as of the trading day before disclosure (share) | 1,749,809,548 |
Fully diluted earnings per share calculated on the basis of the latest Share capital
| Dividends paid on preferred shares | 0.00 |
| Fully diluted earnings per share calculated on the basis of the latest Share capital (yuan/share) | 0.9894 |
V. Differences in accounting data under domestic and overseas accounting standards
1. Differences in net profit and net assets disclosed in financial statements under international and Chineseaccounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under international and Chinese accountingstandards.
2. Differences in net profit and net assets disclosed in financial statements under overseas and Chineseaccounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under overseas and Chinese accountingstandards.VI. Items and amounts of non-recurring gains/losses
√ Applicable □ N/A
Unit: RMB yuan
| Item | Amount | Note |
| Gains/losses on disposal of non-current assets (including the written-off part of the accrued assets impairment reserve) | 301,040,646.87 | Mainly due to the sale of the market distribution rights and interests in Western Europe of Sinclair, a wholly-owned subsidiary of the company in the UK. |
| Government grants included in current gains/losses (excluding those closely related to operating activities and measured according to unified national standards) | 93,032,855.48 | Mainly due to the confirmation of government grants by subsidiaries in the current period. |
| Other non-operating revenue or expenditure expect above-mentioned items | -9,757,738.08 | |
| Less: Amount affected by income tax | 46,502,562.11 | |
| Amount affected by rights and interests of minority stakeholders (after tax) | 13,352,454.01 | |
| Total | 324,460,748.15 | -- |
If the Company recognizes an item as a non-recurring gain/loss based on the “Interpretative Announcement No. 1 on InformationDisclosure Criteria for Public Companies – Non-Recurring Profit/Loss” or recognizes an item satisfying the definition of
non-recurring gain/loss in the announcement as a recurring gain/loss, reasons should be specified.
□ Applicable √ N/A
No such case during the reporting period.
Section III. Overview of the Company’s BusinessI. Main business of the Company during the reporting periodHuadong Medicine Co., Ltd. (stock code: 000963), founded in 1993 and headquartered inHangzhou, Zhejiang Province, was listed on Shenzhen Stock Exchange in December 1999. Aftermore than 20 years of development, the Company’s business covers the whole pharmaceuticalindustrial chain. With the medicine industry as its core, the Company expands its medicine businessand aesthetic industry, and has developed into a large comprehensive listed pharmaceuticalcompany integrating Research and development (R&D), manufacture and sales of medicine.The pharmaceutical industry of the Company focuses on R&D, production and sales of medicationfor specialist departments, chronic diseases and special purposes. The Company has formed coreproduct pipelines in such fields as chronic kidney diseases, transplantation immunity, internalsecretion and gastrointestinal system, and owns a number of first-line clinical medications withmarket advantages in China. Meanwhile, through independent development, external introductionand project cooperation, the Company focuses on the R&D layout of innovative drugs and genericdrugs with high technical barriers in the three core fields of anti-cancer, internal secretion andautoimmunity. The Company continues to carry out international product registration, internationalcertification, consistency evaluation, etc., forming an international pharmaceutical industry system.The Company’s pharmaceutical commerce has four sections: Western Medicine & TraditionalChinese Medicine (TCM), medical equipment, ginseng & herb and health industry, coveringmedicine wholesale, medicine retail, third-party medicine logistics featured by cold chain, medicinee-commerce, hospital value-added services and featured big health industry, providing customerswith integrated solutions.The Company’s aesthetic business focuses on R&D, manufacture and sales of the latest productsand devices in facial micro-plastic surgery and skin management. Sinclair, a wholly-ownedsubsidiary headquartered in the United Kingdom, has facilities in France and Netherlands, andpromotes and sells long-acting microspheres for injection、hyaluronic acid,、thread lift and otherproducts in the global market. Sinclair is the Company’s global operation platform for aesthetic
business. Huadong Ningbo Company, a partially-owned subsidiary, is a comprehensive aestheticand healthcare platform company integrating R&D, manufacture and sales of aesthetic products andcustomized services. It acts as the general agent for Korean YVOIRE hyaluronic acid products inthe Chinese market.
II. Significant changes in major assets
1. Significant changes in major assets
| Major assets | Note on significant changes |
| Equity assets | The ending balance is 660.95 million yuan, an increase of 42.36% from the beginning of the period, which is mainly due to the increase of long-term equity investments and other equity instrument investment in the current period. |
| Fixed assets | None |
| Intangible assets | None |
| Constructions in progress | None |
| Short-term borrowing | The ending balance is 1,362.25 million yuan, an increase of 107.80% from the beginning of the period, which is mainly due to the increase in bank financing during the current period to repay mature corporate bonds. |
| Contract liabilities | The ending balance is 54.13 million yuan, a decrease of 78.68% compared to the beginning of the period, which is mainly due to the decrease in the advance payment for drugs. |
| Non-current liabilities due within one year | The ending balance is 20.75 million yuan, a decrease of 98.03% from the beginning of the period, which is mainly due to the maturity and repayment of bonds payable in the current period |
2. Major overseas assets
√ Applicable □ N/A
| Specific content of assets | Reason for formation | Assets size | Location | Operating mode | Control measures to ensure assets safety | Profit or loss | Proportion of overseas assets in the Company’s net assets | Whether there are any significant impairment risks |
| Sinclair Pharma Limited | Acquisition of equity | 1,001.16 million yuan | UK | Independent accounting | Control of the Board of Directors and | Profit | 7.37% | None |
III. Analysis of core competitiveness
1. Open R&D system and continuous improvement of innovation capabilityAfter years of development, the Company has established and improved its independent R&Dsystem, built a global R&D strategy collaboration ecosystem centered on Zhongmei Huadong,established a global new drug R&D center, set up joint research offices in Boston and Silicon Valleyin the United States, and cooperated with world-renowned colleges, research institutes, innovativebiotech companies, professional technology platforms and other institutions in new drug R&Dprojects. The Company has continuously increased R&D investment, adjusted its existing productstructure in an all-round way, resolutely cleaned up and phased out generic drugs with low barriersand low commercial value, focused on three core areas of anti-cancer、internal secretion andautoimmunity, continued to consolidate the company's position as a domestic industry leader in thefields of diabetes and transplantation immunization drugs, quickly completed the layout ofinnovative product pipelines in the core areas, and enabled the Company to effectively supplementand take the lead in innovative products in the core areas. Independent R&D, external M&A, andproduct license-in have rapidly enriched product pipelines in the core areas, forming a gooddevelopment trend of continuous proposal and market launch of innovative products, providing newmomentum for medium and long-term growth.
2. Comprehensive capability in international business developmentThe company is actively pursuing global expansion. Through acquisition of 100% shares in LSElisted Sinclair, the Company has established a global distribution network for aesthetic products.
Through collaboration with R2 (US), Medibeacon (US) and Kylane (Switzeland), the Company hasadded to its portfolio of international commercialisation and development rights. The Company hasaccelerated the international registration of products. All its APIs in production have been certifiedby FDA or in authoritative markets such as the European Union; its Pantoprazole SodiumLyophilized Powder for Injection has been temporarily approved by FDA; and its Acarbose Tabletsgained access to the Austrian market in the European Union. The Company is the first Chinesemedicine enterprise to achieve these results. The Company actively engages itself with internationallogistics and purchasing suppliers, realizes the internationalization of purchasing ability, strengthensinternational trade cooperation, and achieves positive results in the expansion of international rawmedicine market.
3. Abundant product pipelines for specialist departments and chronic diseases, overallcompetitive advantage in the field of diabetes medicationOver the years, the Company has been deeply engaged in medication for specialist departments,chronic diseases and special purposes, and has built a good brand effect and solid market foundationin such fields as chronic kidney diseases, transplantation immunity, internal secretion, and digestivesystem. Its market share remains in the forefront of domestic similar products. At present, theCompany has 22 core products on the market and 16 varieties under R&D included in the 2019National Reimbursement Drug List and 10 core products on the market and 4 varieties under R&Dincluded in the 2018 National Essential Drug List. In the future, the Company will focus on theR&D layout of innovative products in the three core areas of anti-tumor, internal secretion andautoimmunity.As one of the three major chronic diseases in China, diabetes mellitus has long-term developmentspace for therapeutic drugs, and is the core track of the key layout of domestic and foreignpharmaceutical companies. Diabetes medication has always been the company's core product lineand a key filed to develop in the future. Zhongmei Huadong has been deeply involved in thedomestic diabetes market for more than ten years, and has formed advantages in marketing channelsand product brands. It has won a place for domestic drugs in the diabetes market whereforeign-funded original research products are strong.By relying on comprehensive methods such as independent research and development, cooperative
development, product introduction, and investment market licensing priority, the company hascontinuously increased R&D investment and continued to enrich its product pipeline in the diabetesfield. The company has formed an overall layout of innovative targets and differentiated genericdrug product pipelines in the field of diabetes. From the three perspectives of imitation + innovation+ biological macro-molecules, the company has built a product that is gradually upgraded and has afull layout of core therapeutic targets and clinical mainstream drugs. matrix. The mechanism ofaction of products under research covers DPP-4 inhibitors, SGLT-2 inhibitors, GLP-1 innovativedrugs and their analogs, insulin analogs, and monoclonal antibodies for the treatment of diabeticcomplications, which are in line with the mainstream of the international diabetes treatment layoutand the trend of development.The company has completed the planning and layout of diabetes macro-molecular drug productionbases in Xiasha and Qiantang new districts of Hangzhou. Compound DPP-4 inhibitors, compoundSGLT-2 inhibitors and liraglutide injections will be approved for marketing in 2021-2022, which isexpected to give full play to the company's existing channel advantages and achieve synergisticeffects. The investment in the company's diabetes pipeline will enter the harvest period, pushing thecompany's diabetes products into a new growth stage. It is conducive to further expanding thedomestic and foreign endocrine drug-related markets, maintaining the domestic market leadingposition in the field of diabetes drugs, and laying a solid foundation for the company's sustained andstable growth in the future.
4. Leading pharmaceutical professional promotion team and market network in ChinaThe pharmaceutical industry of the company takes the academic promotion of clinical value as thecore, promotes a multi-channel marketing model that combines general hospitals, primary medicalinstitutions, retail and third terminals, and Internet online, and has established a nationwidemarketing network and market network promotion. It has the leading capability in the country,covering more than 2,400 Class-A hospitals across the country, accounting for about 92% of allClass-A hospitals, covering more than 9,000 Class-II and class lower hospitals, more than 50,000primary medical institutions, and more than 180,000 retail pharmacies. The pharmaceutical businesshas achieved full coverage in Zhejiang Province, and the cold chain logistics and distributionbusiness is at the leading level in the industry. In the field of medical beauty, the holding subsidiaryHuadong Ningbo Company has a leading market share in the field of domestic medical beauty. Thecore products of the wholly-owned subsidiary Sinclair of the United Kingdom have been launchedin more than 60 countries and regions around the world.
5. Prudent and pragmatic operation style and shareholder returnThe Company values management innovation, and strives to meet the demand of marketcompetition by improving its quality of operation. The compliant and efficient marketing services,differentiated market positioning, innovative R&D layout and perfect talent planning promote theCompany’s lasting and steady development. Since its listing, the Company has maintained steadygrowth in performance for 20 years. Since 2007, the Company has kept the return on equity (ROE)above 20% for 13 consecutive years, leading A-share listed companies and the medicine industry.Since its listing 20 years ago, the Company has paid dividends for 17 times, around with a totalvalue of 4.2 billion yuan, far exceeding the 250 million yuan raised in its IPO. The Company hasbrought continuous and stable returns on investment to shareholders.
Section IV. Discussion and Analysis of OperationsI. OverviewFor many industries and companies, the first half of 2020 has been an unprecedented andextremely challenging period. Covid-19 outbreak globally has caused unprecedentedcomplications to world political and economic environment. Domestic pharmaceutical companieshave not only faced the far-reaching impact of Covid-19 pandemic, but also the complexity causedby rolling out of the government centralized procurement policy, intensifying competition, andincreasing difficulties associated with business transformation.Through this challenging environment, Huadong Medicine has forged ahead and stayed focused onthe transition strategy to become an innovative pharmaceutical company, by being resilient tosignificant operational pressures, implementing a series of adjustments and conquering numerousobstacles. We are pleased to share with our shareholders, investors and all our employees that ourPharmaceutical Manufacturing has continued its growth despite challenging conditions,maintained its market position and business development, and demonstrated sustainable positiveperformance. This is a solid mid-term result, which is particularly critical in supporting ourongoing transition strategy and development plan.Phase one of the Company’s Research and Development (R&D) reform program has nowcompleted. We have restructured our R&D system, with numerous senior research talentsintroduced in, created new functions and filled them with qualified personnel. This hassignificantly expanded and energized our R&D capabilities. A number of R&D projects haveachieved the milestone established. We have made fast adjustments to sales and marketingstrategies by focusing on community and out-hospital markets and actively expanding new saleschannels such as retail pharmacies and self-funded online sales. In the first half of 2020, ourPharmaceutical Manufacturing has achieved growth in both revenue and net profit. The profitmodel of Pharmaceutical Commerce is continuously evolving. We are focusing on high qualitybusiness development, on solidifying core competitive advantages, on increasing differentiatedcommercial services capabilities and establishing professional cold chain logistics network.
Aesthetic business has continued to expand in high-end aesthetic market, with a pipeline ofproducts with significant market potential that will drive accelerated growth in the future.The company's unwavering confidence in pursuing the strategy to transform and upgrading issupported by our superior corporate culture, operational strength cumulated over many years,diversified and unique product portfolio, excellent talent pool and strong cash flow and balancesheet. Huadong Medicine, experienced this challenging and stressful environment and the pressuretest, has again demonstrated its robust operation and management capability and the strongresilience and flexibility against risks. Step by step, we are dedicated to creating and adhere to theinnovation and development pathway with distinctive Huadong Characteristics.Against the adverse trend, never stopped by any winds or rains, we will continue to advance ourstrategies and overcome the obstacles. Try to polish ourselves through the challenges to become astronger and better company!
For this reporting period, the Company has achieved operating revenue of RMB 16.66bn, decrease
8.70% on the prior corresponding period (pcp), and net profit attributable to shareholders of RMB
1.73bn, up 8.45% on the pcp. Our core subsidiary, Zhongmei Huadong, has delivered operatingrevenue of RMB 6.08bn, up 6.69% on the pcp, and net profit of RMB 1.38bn, up 5.00% on the pcp.Zhongmei Huadong's 2nd quarter results has been impacted by acarbose's unsuccessful tender innational drug procurement. Quarterly sales increased 2.74% on the pcp, and net profit decrease
3.67% on the pcp. Huadong Pharmaceutical Distribution Company has rapidly responded tochanging conditions and endured the impacts of the pandemic. For this reporting period, HuadongPharmaceutical Distribution Company has delivered operating revenue of RMB 10.76bn, decrease
14.40% on the pcp and its business has demonstrated steady recovery since the pandemic in Chinais under general effective control.
During the reporting period, faced with the abrupt outbreak of Covid-19 in China, the Companyrapidly initiated pandemic control and prevention programs, thoroughly implemented therequirements from disease control bodies to prevent inflow of cases while controlling the spreadwithin the organization. Under the leadership of the Company senior management and pandemic
response working group, with collaboration and effort by all Huadong employees, adopted nearwar time control systems and responses, rapidly established disease control networks, assignedcore responsibilities, implemented necessary protocols and procedures, initiated a series ofpandemic response programs, ensured health and safety of employees, successfully recovered fromdisruptions to work and production, achieved a critical success in simultaneous battles incontrolling the pandemic and recovering operational activities from the disruptions caused by thepandemic.
1. Pharmaceutical industry
During the reporting period, the company’s production system faced changes in nationalpharmaceutical policies and demand fluctuations caused by centralized drug procurement. In orderto overcame the impact of the epidemic and market uncertainty, the company took ‘technologicalinnovation and agile production’ into the global pharmaceutical industry chain as its goal. Internally,coordinated resources, adopted measures such as emergency resumption of production, shiftadjustments and capacity expansion, and promoted outsourcing business externally, ensuring marketsupply in the first half of the year. At the same time, fully implemented the cost control plan,promoted cost management of the entire value chain, achieved cost reductions through multipledimensions and levels such as technology upgrades, lean management, bidding negotiations, assetutilization, etc.. Moreover, strived to improve labor efficiency and production efficiency to build anew market value and competitive advantages of Huadong Medicine. Carrying out EHS riskmanagement and controlling around the R&D and production departments to consolidate thecompany's EHS normalized management foundation. Practicing the ‘asset-light’ productionorganization model, successfully developing a number of cooperative production enterprises, andgradually forming an open pharmaceutical manufacturing system of Huadong Medicine. Inaccordance with the company's strategic development plan, the company will continue to promotethe construction of the Jiangdong II project, to pay attention to build the international R&D andmanufacturing center. Furthermore, to complete the preliminary feasibility study report andplanning design of the Huadong Medicine Life Science Industrial Park, and be fully prepared forthe project to be launched in the second half of the year.During the reporting period, the company continued to develop a number of clinical studies on
innovative medicine, and actively promoted consistency evaluation and listing registration.Anastrozole tablets were approved for drug registration. Engligliflozin metformin tablets andomeprazole sodium bicarbonate capsules were declared for production. Domperidone tablets passedthe generic drug consistency evaluation, and the US ANDA data submission for acarbose wascompleted; Diabetes indications and weight loss indications of liraglutide injection have enteredphase III clinical studies, and all subjects have been enrolled in diabetes indications; caspofunginacetate for injection has completed on-site verification, letrozole tablets and micafene for injectionNet Sodium completed the process verification and BE of Fabu, Maxitentan tablets, canagliflozintablets, and sorafenib tosylate tablets; at the same time, completed the line product supplementapplication and the research work on the issuance and replenishment of related new products. Alsofully developed consistency evaluation of each product. Benchmarking internationally, launchingthe CMO/CDMO model, and promoting the international registration of key varieties such asdaptomycin for injection, tacrolimus capsules, and caspofungin for injection as planned. Meanwhile,Zhejiang Huida Biotechnology Co., Ltd., a wholly-owned subsidiary established at the beginning ofthis year, serves as the company's technology innovation platform in the field of microbialpharmacy, based on the research and development of high-end microbial products andcommercialization at home and abroad. The main research projects currently underway include:
antibodies Conjugate drug toxin library construction, synthetic biology technology development ofanti-tumor and antiparasitic drugs, development of new marine-derived microbial drugs, etc.Increased the introducing of innovative projects, to achieve new breakthroughs in the field ofimmunization. On August 14, 2020, the wholly-owned subsidiary Zhongmei Huadong and QyunsTherapeutics Co., Ltd signed a strategic cooperation agreement on equity investment and productcooperation. (For details, please refer to the ‘Announcement of Huadong Medicine on the Signingof Equity Investment Agreement and Product Cooperative Development Agreement betweenZhongmei Huadong and Qyuns Therapeutics ’, announcement number 2020-032)The company regarded scientific research and innovation as the top of all work. During thereporting period, the construction of the research and innovation system has made great progress.With the goal of establishing an intensive, efficient, open and shared R&D system, actively promoteR&D system reform, relocate R&D functions, adapt R&D personnel, vigorously introduce
high-level R&D talents, and restructure the R&D system with four major R&D function centers,stimulate scientific research and innovation ability and vitality. On the basis of completing the workobjectives of the first phase, continue to promote the reform of the second phase of the R&D system,and continue to focus on the three dimensions of R&D management decision-making mechanism,R&D project management system, and R&D performance and evaluation system, and continuouslystimulate scientific research and innovation capabilities and vitality.(For details of the R&D work, please refer to the R&D related content in this chapter.)During the reporting period, Zhongmei Huadong Pharmaceutical Service Corporation aimed toestablish a ‘pharmaceutical service management system adapted to the development of the modernpharmaceutical industry’, continued to in-depth organizational structure reform, andcomprehensively promoted the layout and construction of the primary market, out-of-hospitalmarket and self-funded market. Facing the epidemic and market challenges, turning pressure intomotivation, facing difficulties, rapidly adjusting market strategies, digging deeper into thegrassroots market and out-of-hospital markets, actively exploring new retail pharmacies and onlinesales channels, developing online markets, and seizing the remaining market. At the same time,systematically planed the market expansion strategy of subsequent products on the market. In termsof academic promotion, continue to strengthen patient education around the concept of"patient-centered", and further improve the professional standards of front line marketers; continueto develop clinical re-research of listed products, and improve expert consensus and clinical valuerecognition through the construction of expert academic platforms. With the gradualimplementation of the second batch of centralized procurement, the impact on the original hospitalmarket of the company’s acarbose tablets is more obvious, but it has gradually stabilized so far. Thecompany’s acarbose chewable tablets are actively developing nationwide sales in the hospitalmarket, based on the current market competition and sales situation, felt confident that the annualsales volume is not lower than last year's level through the differentiated market positioning ofacarbose tablets and acarbose chewable tablets and continue to deepen the diabetes basic medicinemarket and strive for acarbose products. The company's key potential product in the field ofdiabetes, pioglitazone metformin tablets and indobufen tablets, a key potential product in thecardiovascular field, both doubled their sales revenue during the reporting period. After indobufen
tablets are listed in the 2018 National Essential Drug List and the 2019 National Medical InsuranceList, they are recommended as the recommended application varieties of many guidelines such asthe National Essential Drug Clinical Application Guide (Chemical Drugs and Biological Products).Increased its academic promotion, the product is currently in the stage of rapid expansion andgrowth.
2. Pharmaceutical commerce
During the reporting period, Huadong Medicine Commercial Company (hereinafter referred to as“the commercial company”) ,as emergent reserve unit of medicine and medical instrument inZhejiang province, actively responded to allocation and distribution orders for Commission ofEconomy and Information Technology（CEIT）by pooling and distributing resources to theparticular medical institutions and public services. The job has been highly recognized by ZhejiangNational Health Commission (NHC), CEIT, Department of Commerce and other governmentdepartments.During Covid-19 outbreak in China, the commercial company not only highly effectivelycompleted the command of allocating medical materials, but also softened the impact of dramaticorder decrease from hospitals in Zhejiang province by taking various effective methods to boost thecompany’s revenue. One of the methods was to take fully advantage of the commercial company’slarge-scale medical supply chain to improve the capacity of business network and the ability to dealwith emergent matters.In term of Nation Volume-Based Procurement Policy, the commercial company ensured the on-timedelivery of chosen drugs, but did not give up the market opportunity of unchosen drugs. With theaim to obtain the regional franchise right, the commercial company provided the early-stage marketservices for innovative drugs, high-level generic drugs and other approved drugs. Following thediversified medical insurance payment reform such as "full coverage of medical insurance paymentstandard" and ‘payment according to disease type’, the commercial company rolled out drugeconomics solutions to assist medical institutions to solve various problems. To satisfy the suppliers’requirement, the services for grassroots medical treatment, private hospitals and retail pharmacieswere continuously to be improved. Since the second quarter, the commercial distribution order rate
has almost returned to the normal level and the market share in most hospitals has remained stableor increased. It seemed that the declining trend of sales was gradually reversed.The company has a competitive advantage in cold chain logistics distribution. Huadong MedicineSupply Chain Management (Hangzhou) Co., LTD（hereinafter referred to as ‘HMSCM’ ）, awholly-owned subsidiary, and Huadong Ningbo Company, a holding subsidiary, both have gainedthe qualification to launch the cold chain distribution business. In term of vaccine distributionbusiness, HMSCM was the first one passing the special vaccine inspection arranged by ZhejiangDrug Administration, successfully owning the qualifications to develop a vaccine distributionbusiness. Within Zhejiang Province, the commercial company has the vaccines distribution businesswith Merck, Pfizer, GlaxoSmithKline, Zhifei Biotechnology, Kangtai Biotechnology, WatsonBiotechnology and other famous pharmaceutical companies.
3. Aesthetic business
With the Company’s patient-centered business philosophy, Huadong Medicine’s aesthetic businessfocuses on the R&D, manufacturing, sales and services of the latest products and devices in thefield of non-surgical facial treatments and skin management. The Company actively introduceshigh-tech products and new technologies all over the world to build a high-end and differentiatedaesthetic brand and product portfolio with the characteristics of Huadong’s aesthetic business.Since the beginning of this year, Covid-19 has affected the Company's aesthetic business at homeand abroad. At present, the Company's aesthetic business has stabilized and is gradually recovering.It is expected that with Covid-19 being gradually controlled, the Company's domestic andinternational aesthetic business will achieve recovery growth. The Company keeps focusing on theglobal market, continuously optimizes its product pipeline, and strives to accelerate thedevelopment of aesthetic business once Covid-19 is effectively controlled, so as to realize thebreakthrough of the product launch in China and the Company’s globalization strategy.During the reporting period, Sinclair, the global operation platform of the Company’s aestheticbusiness, actively introduced a range of high-end products and expanded its global market. Sinclairreached an agreement with Galderma, the world-famous Swiss dermatology pharmaceuticalcompany, on the transfer of the right of Sculptra? (poly-L-lactic acid microspheres) in westernEuropean and completed the transaction, which brought about ?30.65 million (after-tax) profit to
Sinclair. Sinclair also signed an agreement with Kylane Laboratories, a Switzerland-based aestheticR&D company, to obtain the global exclusive license of its hyaluronic acid filler MaiLi? (withLidocaine). Having obtained CE Mark in June 2020, MaiLi? will be launched in Europe first toprovide consumers with an alternative solution for facial volumization. As for Sinclair’s coreproduct Ellansé?, its China registration, marketing plan and pre-launch activities are all runningsmoothly.In August 2020, the Company signed a strategic cooperation agreement with Jetema, a Koreanlisted company, and obtained the exclusive right of its BoNT-A product in China, which furthercompleted the product pipeline, marking a solid step forward for the globalization of Huadong’saesthetic business. The Company plans to start the product’s China registration within this year, soas to provide better aesthetic products and services to consumers.During the reporting period, Huadong Ningbo, a holding subsidiary of the Company, developed anumber of customized biological skincare products to provide consumers with gene-customizedskincare solutions. With the concept of personalized customization of biotechnology and cellskincare, two products of its SANTEMUSE brand were selected for Monde Selection and won thespecial Gold Award at the beginning of this year.On August 20th, 2020, the result of the third batch of Nation Volume-Based Procurement wasreleased. Anastrazole tablets (specifications：1mg) produced by Zhongmei Huadong andDoperidone tablets (specifications ：10mg) manufactured by Xi’an Bohua won the bidding, whichwould significantly increase market share and sales revenue in future and improve brand influence.Since this year, the company has been rewarded many honors such as “the 2nd New Wealth BestListed Company”, “the most worthy of the trust of investors of the listed company inventory, thepioneer of biological medicine field of innovation”, “2019 China top hundred pharmaceuticalindustry”, “Chinese medicine new epidemic zone spreading outstanding contribution enterpriseaward” and “the wealth fortune of China's 500 Chinese” ranked at the 273
rd
.Experienced Covid-19 and Nation Volume-Based procurement, the company has more cleardevelopment goal and more firm confidence to overcome the outside challenges such as dynamiccommercial environment, medical policy change and fierce industry competition. The company’scommercial business and aesthetic medicine business still face a lot of outside pressure due to the
uncertainty and ongoing of Covid-19. However, all staffs with high enthusiasm will stand with thecompany to complete the rest of work in 2020. In the latter half of the year, the company willimprove operating efficiency and effectiveness to achieve high-quality development, and continueto make efforts to complete the annual business plan.
II. Analysis of main business
1. Overview
Refer to “I. Overview” in “Discussion and Analysis of Operations”.
2. Income and cost
(1) Composition of operating revenue
Unit: RMB yuan
| The current reporting period | Same period last year | Year-on-year percentage increase/decrease | |||
| Amount | Proportion in operating revenue | Amount | Proportion in operating revenue | ||
| Total operating revenue | 16,660,934,157.64 | 100% | 18,248,667,616.98 | 100% | -8.70% |
| By sector | |||||
| Business | 10,760,596,159.30 | 62.82% | 12,570,628,438.98 | 67.24% | -14.40% |
| Manufacturing | 6,238,364,356.65 | 36.42% | 5,860,721,909.00 | 31.35% | 6.44% |
| International aesthetic medicine | 130,673,336.90 | 0.76% | 264,856,884.91 | 1.42% | -50.66% |
| Offset (inter-sectoral offset) | -468,699,695.21 | -447,539,615.91 | |||
| By product | |||||
| By region | |||||
| Domestic sales | 16,505,022,711.72 | 99.06% | 17,956,938,001.83 | 98.40% | -8.09% |
| Overseas sales | 155,911,445.92 | 0.94% | 291,729,615.15 | 1.60% | -46.56% |
(2) Sectors, products or regions that account for more than 10% of the Company’s operating revenue oroperating profit:
√ Applicable □ N/A
Unit: RMB yuan
| Operating revenue | Operating cost | Gross profit rate | Year-on-year percentage increase/decrease in operating revenue | Year-on-year percentage increase/decrease in operating cost | Year-on-year percentage increase/decrease in gross profit rate | |
| By sector | ||||||
| Business | 10,760,596,159.30 | 9,945,298,362.46 | 7.58% | -14.40% | -14.00% | -0.43% |
| Manufacturing | 6,238,364,356.65 | 1,099,080,469.13 | 82.38% | 6.44% | 12.99% | -1.02% |
| International aesthetic medicine | 130,673,336.90 | 48,595,732.38 | 62.81% | -50.66% | -33.89% | -9.44% |
| Offset (inter-sectoral offset) | -468,699,695.21 | -470,580,908.44 | / | / | / | / |
| By product | ||||||
| By region | ||||||
| Domestic sales | 16,505,022,711.72 | 10,559,889,938.74 | 36.02% | -8.09% | -12.55% | 3.26% |
| Overseas sales | 155,911,445.92 | 62,503,716.79 | 59.91% | -46.56% | -29.22% | -9.82% |
III. Analysis of non-main business
√ Applicable □ N/A
Unit: RMB yuan
| Amount | Proportion in total profit | Note on reasons | Sustainable or not | |
| Gains on asset disposal | 301,166,257.18 | 14.28% | Mainly due to the transfer of market distribution rights of related products in Western Europe by Sinclair, a wholly owned subsidiary of the Company in the UK | No |
| Other gains | 93,032,855.48 | 4.41% | Mainly due to the confirmation of government grants in the current period | No |
IV. Analysis of assets and liabilities
1. Major changes in asset composition
Unit: RMB yuan
| End of the current reporting period | Same period of last year | Change of proportion | Note on major changes | |||
| Amount | Proportion in total assets | Amount | Proportion in total assets | |||
| Cash and bank balance | 2,470,052,752.73 | 10.98% | 2,560,843,974.44 | 11.97% | -0.99% | |
| Accounts receivable | 6,485,487,088.32 | 28.82% | 6,853,206,048.32 | 32.04% | -3.22% | Mainly due to the acceleration in the turnover of accounts receivable and the increase in the company's total assets and the corresponding decrease in the proportion of accounts receivable |
| Inventories | 3,527,719,237.10 | 15.68% | 3,623,467,609.69 | 16.94% | -1.26% | |
| Real estate properties for investment | 21,200,079.95 | 0.09% | 23,112,876.08 | 0.11% | -0.02% | |
| Long-term equity investments | 419,056,055.31 | 1.86% | 189,629,699.61 | 0.89% | 0.97% | |
| Fixed assets | 2,144,814,526.08 | 9.53% | 1,961,302,016.45 | 9.17% | 0.36% | |
| Constructions in progress | 2,078,384,147.26 | 9.24% | 960,892,180.19 | 4.49% | 4.75% | Mainly due to the increase of Zhongmei Huadong R&D platform construction and Huadong Medicine Biomedical Science and Technology Park Project Phase II |
| Short-term borrowing | 1,362,252,205.85 | 6.05% | 841,400,000.00 | 3.93% | 2.12% | Mainly due to the increase in bank financing in the current period to repay mature corporate bonds |
| Long-term borrowing | 125,199,582.60 | 0.56% | 138,581,674.64 | 0.65% | -0.09% | |
2. Assets and liabilities measured at fair value
√ Applicable □ N/A
Unit: RMB yuan
| Item | Opening balance | Change in fair value for the current period | Cumulative changes in fair value included in equity | Impairment accrued during the current period | Amount purchased in this period | Amount sold in this period | Other Changes | Closing balance |
| Financial Assets | ||||||||
| Investment in other equity instruments | 241,675,712.05 | 217,909.39 | 241,893,621.44 | |||||
| Total of the above | 241,675,712.05 | 217,909.39 | 241,893,621.44 | |||||
| Financial Liabilities | 0.00 | 0.00 | ||||||
Other changesDuring the reporting period, whether the company’s main asset measurement attributes have changed significantly
□ Yes √ No
3. Limitation of asset rights at the end of the reporting period
Unit: RMB yuan
| Item | Book value at the end of the period | Reason for limitation |
| Cash and bank balance | 59,180,945.65 | Cash deposit |
| Notes receivable | 78,660,590.65 | Bill pledge |
| Real estate properties for investment | 2,022,168.45 | Mortgage guarantee for borrowing |
| Fixed assets | 56,761,691.48 | Mortgage guarantee for borrowing |
| Intangible assets | 4,457,395.07 | Mortgage guarantee for borrowing |
| Total | 201,082,791.30 |
V. Investment
1. Overview
√ Applicable □ N/A
| Investment amount in the reporting period (yuan) | Investment amount in the same period of last year (yuan) | Percentage change |
| 722,699,019.70 | 737,840,039.17 | -2.05% |
2. Significant equity investments acquired during the reporting period
√ Applicable □ N/A
Unit: RMB ten thousand yuan
| Name of invested company | Main business | Way of investment | Investment amount | Shareholding ratio | Capital source | Partner | Term of investment | Product type | Progress as of the balance sheet date | Projected income | Profit or loss of investment in the current period | Involved in litigation or not | Disclosure date (if any) | Disclosure index (if any) |
| Chongqing Peg-Bio Biopharm Co., Ltd. | R&D of biological chemical product and technologies; R&D of fermentation process optimization technology | Capital increase and equity transfer | 21,000 | 39.80% | Own funds | / | / | R&D | Completed the second capital increase and equity acquisition | / | No profit for the time being | No | N/A | N/A |
Note: From December 2018 to January 2020, the wholly-owned subsidiary Zhongmei Huadong madecapital increase and equity investment in Chongqing Peg-Bio twice. According to the <RegardingInvestment in Chongqing Peg-Bio> signed by Zhongmei Huadong and Chongqing Peg-Bio in December2018 The Agreement of Chongqing Peg-Bio Biotechnology Co., Ltd. and the <Agreement on CapitalIncrease and Equity Transfer of Chongqing Peg-Bio Biotechnology Co., Ltd.> signed in January 2020,Zhongmei Huadong has invested a total of 210 million yuan and acquired 39.80% of its shares, becomingthe second largest shareholder of Chongqing Peg-Bio. Chongqing Peg-Bio has completed the informationchanges in State Administration For Market Regulation on January 16, 2020. As of August 26, 2020,Zhongmei Huadong has paid 210 million yuan in equity investment in accordance with the contract.
3. Significant non-equity investments in progress during the reporting period
√ Applicable □ N/A
Unit: RMB yuan
| Project name | Way of investment | Investment in fixed assets or not | Industry involved in the investment project | Investment amount during the reporting period | Cumulative actual investment amount by the end of the reporting period | Capital source | Project progress | Projected income | Cumulative income realized by the end of the reporting period | Reasons for not meeting the planned schedule and projected income | Disclosure date (if any) | Disclosure index (if any) |
| Huadong Medicine Biomedical Science and Technology Park Project Phase II | Self-built project | Yes | Pharmaceutical manufacturing | 151,511,298.39 | 1,479,935,537.10 | Own funds | 70.00% | / | / | N/A | March 9, 2017 | http://www.cninfo.com.cn |
| Total | -- | -- | -- | 151,511,298.39 | 1,479,935,537.10 | -- | -- | / | / | -- | -- | -- |
4.Financial assets measured at fair value
□ Applicable √ N/A
5. Investment in financial assets
(1) Securities Investment
√ Applicable □ N/A
Unit: RMB yuan
| Type of stock | Stock code | Stock abbreviation | Initial investment cost | Accounting measurement model | Book value at the beginning of the period | Gain/loss from fair value changes in the current | Accumulative fair value changes included in | Purchase amount in the current period | Selling amount in the current period | Gain/loss during the reporting period | Book value at the end of the period | Accounting item | Capital source |
| period | equity | ||||||||||||
| Domestic and overseas stock | RAPT | RAPT | 20,207,400.00 | Fair value measurement | 42,009,254.79 | 217,909.39 | 217,909.39 | 0.00 | 0.00 | 217,909.39 | 42,227,164.18 | Other equity instrument investment | Own funds |
| Total | 20,207,400.00 | -- | 42,009,254.79 | 217,909.39 | 217,909.39 | 0.00 | 0.00 | 217,909.39 | 42,227,164.18 | -- | -- | ||
| Date of announcement of the Board of Directors on securities investment approval | |||||||||||||
| Date of announcement of the Board of Shareholders on securities investment approval (if any) | |||||||||||||
Note: Huadong Pharmaceutical Investment Holdings (Hong Kong) Co., Ltd., a subsidiary of the company,invested US$3.00 million in 2019 to purchase 218,102 Series C-2 preferred shares of RAPT Therapeutics, Inc.RAPT Therapeutics, Inc. was listed on the Nasdaq Stock Exchange (stock code: RAPT) on October 30, 2019. Asof the end of the reporting period, Huadong Pharmaceutical Investment Holdings (Hong Kong) Co., Ltd.accounted for the total amount of RAPT Therapeutics, Inc. 0.89% of the shares.
(2) Derivatives investment
□ Applicable √ N/A
No such case during the reporting period.
VI. Major assets and equity sales
1. Major assets sales
□ Applicable √ N/A
No such case during the reporting period.
2. Major equity sales
□ Applicable √ N/A
VII. Analysis of wholly-partially owned and shareholding companies
√ Applicable □ N/A
Main subsidiaries and the shareholding companies that have an impact on the Company’s net profit of more than 10%
Unit: RMB yuan
| Company name | Company type | Main business | Registered capital | Total assets | Net assets | Operating revenue | Operating profit | Net profit |
| Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. | Subsidiary | Production and management of Traditional Chinese and Western raw medicines and preparations, and health care products | 872,308,130 | 8,487,267,960.13 | 5,984,075,731.59 | 6,083,729,010.89 | 1,598,130,824.21 | 1,378,241,277.11 |
| Huadong Ningbo Medicine Co., Ltd. | Subsidiary | Sales of biological products as proxy | 5,000,000 | 987,587,414.88 | 589,174,647.30 | 585,927,346.26 | 93,203,716.69 | 68,291,730.08 |
| Huadong Medicine Wenzhou Co., Ltd. | Subsidiary | Wholesale of TCM materials, TCM decoction pieces, chemical preparations, etc. | 61,300,000 | 1,243,925,782.13 | 214,390,964.18 | 1,186,757,225.88 | 19,806,454.59 | 11,988,952.45 |
| Huadong Medicine Supply Chain Management (Hangzhou) Co., Ltd. | Subsidiary | Warehousing and storage services | 50,729,863 | 172,962,842.08 | 120,038,141.99 | 68,104,298.18 | 10,211,727.12 | 8,042,395.32 |
| Sinclair Pharma Limited | Sub-subsidiary | R&D, production and sales of aesthetic medicine | 219,962,963.92 | 1,001,158,558.93 | 597,806,137.79 | 130,673,336.90 | 195,486,545.46 | 163,708,849.35 |
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable □ N/A
products
Company name
| Company name | Methods of acquisition and disposal of subsidiaries during the reporting period | Impact on the overall production, operation and performance |
| Zhejiang Huida Biotech Co., Ltd. | New subsidiary company | Technology innovation platform in the field of microbial pharmacy |
| Shenzhen Xinda Yanchuang Technology Development Co., Ltd. | New subsidiary company | New drug research and development and technical service platform |
| Ningbo Sinfmuse Medical Investment Management Co., Ltd. | Cancellation | No significant impact |
VIII. Structured entities controlled by the Company
□ Applicable √ N/A
IX. Forecast of business performance from January to September 2020A warning and explanation of the reason for predicting that the cumulative net profit from the beginning of the year to the end of thenext reporting period may be a loss or a significant change compared with the same period of the previous year
□ Applicable √ N/A
X. Research and development (R&D)
1. Overview
Adhering to the corporate philosophy of ‘research-oriented, customer-focused’, the Companycontinued to increase R&D investment, set up the innovative drug R&D center, set up a new drugR&D team with international vision and multinational pharmaceutical enterprise background andaccelerated the deployment of innovative drugs and the introduction of innovative drug projects athome and abroad. It has completed the approval of several potential innovative drugs in the fieldsof anti-tumor, endocrine, immunity and other fields. Company continued to enrich the pipelinelayout of innovative drug R&D. At present, the Company has more than 50 projects under study.During the reporting period, the Company invested 0.474 billion yuan in medicine R&D with anincrease of 2.50% compared with the same period in 2019.
2. Construction of R&D strategic cooperation ecosystem
The wholly-owned subsidiary Zhejiang Huida Biotech Co., Ltd. was newly established at thebeginning of this year. As the Company's technology platform in the field of microbial pharmacy, itis based on the R&D and commercialization of high-end microbial products at home and abroad.
At present, the main research projects include the construction of antibody coupled drug toxinlibrary, the development of anti-tumor and anti-parasitic drugs by synthetic biological technology,and the development of new marine-derived microbial drugs, etc.On the basis of comprehensively improving independent innovation capabilities, the Company hascarried out a full range of joint R&D and industrial cooperation with its shareholding companiesChongqing Peg-Bio, Qyuns Therapeutics Co., Ltd, and Jiuyuan Gene, leveraged their respectiveadvantages, and continued to expand the company’s pipeline layout in diabetes peptide drugs andbuild a R&D strategic cooperation ecosystem with Zhongmei Huadong as the core, featuringwin-win cooperation, openness and compatibility.
3. R&D of major innovative drugs and biosimilar projects
The Company has formulated a strategic plan for the development of innovative drugs by 2025,focusing on the existing covered therapeutic areas, clarifying the key direction and number ofinnovative projects each year during the planning period, and proposing to complete the approvaland reserve of no less than 15 innovative varieties (including innovative drugs, modified newdrugs, innovative medical beauty products and devices, etc). During the reporting period, theCompany rushed to advance the clinical research progress of a number of innovative drugs and keybiosimilars under research, and strived to be approved as soon as possible. In addition, theCompany is also actively exploring and learning from the construction of an internationallyadvanced innovative drug R&D system, continuously optimizing and adjusting the Company’soverall R&D system structure, and through the introduction of high-end R&D talents, improvingthe functional modules of innovative project development, and fully protecting the Companyachievement of strategic planning goals for innovative projects.The Company's current clinical research progress of key innovative drugs, innovative medicaldevices and biosimilar projects are as follows:
(1) Mefatinib: Mefatinib for the treatment of advanced non-small cell lung cancer isundergoing the phase III clinical trial; for the phase II single-arm clinical trial of rare mutations inthe first/second line, the communication with CDE was completed on the basis of the goodcurative effect of the first phase. According to the requirements of CDE communication results,phase II trials were conducted with low doses in the phase II clinical of rare mutations, with theaim to directly report to the market with phase II clinical results of rare mutations.
(2) TTP273: Upgrading and improvement of new prescriptions have been completed, andphase II international multi-center clinical trials are planned to be carried out simultaneously in thesecond half of 2020 to verify the safety and efficacy of the new prescriptions. Relevantpreparations are under way.
(3) HD-NP-102 (dynamic TGFR monitoring system): Through real-time monitoring ofglomerular filtration rate, renal function will be evaluated. IND application will be submitted inChina before the end of 2020, and clinical trials will be initiated in 2021.
(4) Layout of early innovative drug R&D: Innovative drugs such as oral GLP-1 innovativedrugs for the treatment of type 2 diabetes, anti-tumor CDK-targeted innovative drugs, andrecombinant human keratinocyte factor for the treatment of diabetic feet have all been approvedand initiated in pre-clinical research work, such as pharmacology, pharmacology and toxicology.
(5) Biosimilar varieties: The Company's key product in the field of diabetes, Liraglutideinjection has been fully launched in the multi-center phase III clinical trial for type 2 diabetes. Allsubjects have been enrolled and are expected to complete all the clinical work by the end of 2020.The multi-center phase III clinical trial for weight loss indication of this product has been officiallylaunched. HD-IM-0003 (QX001S) is scheduled for phase III clinical trials in early 2021; Theclinical application for Ranibizumab injection has been submitted, and the relevant supplementarymaterials are currently being studied. The supplementary materials are expected to be submitted bythe end of 2020, and the clinical approval will be obtained in the first quarter of 2021. Insulindegludec injection, insulin aspart injection and glucagon biological analogues are under preclinicalstudy.
4. R&D of major generic drugs
During the reporting period, the Company carefully carried out dynamic evaluation and sorting ofthe existing generic drugs under R&D in a scientific manner, and further clarified the key andpriority varieties. The progress of key varieties are as follows:
(1) In the field of diabetes: Sitagliptin-Metformin Compound Tablets (50/500mg) have passedthe technical review and are expected to get the production approval by the end of 2020;Empagliflozin-Metformin Compound Tablets (5/500mg) have been applied for production;Canagliflozin Tablets (0.1g and 0.3g) have been completed BE test and process verification and areexpected to apply for production by the end of 2020. Repaglinide tablets and Sitagliptin-
Metformin tablets (50/850mg) are in the process of formulation optimization, whilePioglitazone-Metformin tablets (15/850mg) are in a pilot study.
(2) In the field of immunity: the new project of Tacrolimus sustained-release tablets andgranules are preparing for pilot studies.
(3) Anti-tumor field: Anastrozole tablets have been approved for drug production in July 2020;Letrozole tablets have completed the submission of supplementary materials and are waiting foron-site verification; Sorafenib tablets have completed the BE test and process verification. It isexpected to declare production at the end of 2020. Ibrutinib capsules and Olaparib tablets are in thepilot study stage.
(4) Super antibiotic field: Caspofungin acetate for injection has completed the on-siteinspection and is expected to obtain production approval by the end of 2020; Micafungin sodiumfor injection has completed the research on issuing supplementary materials.
(5) Digestive tract field: the compound Omeprazole and Sodium Bicarbonate capsules havebeen declared for production.
(6) Cardiovascular field: Macitentan tablets have completed the BE test and processverification and are expected to declare for production by the end of 2020.
5. External cooperation in R&D
During the reporting period, the Company actively cooperated and negotiated new drug projectswith domestic and foreign innovative drug research and development companies and scientificresearch institutes, as follows:
(1) As of the disclosure date of this report, Zhongmei Huadong completed the second equityinvestment in Chongqing Peg-Bio Biotechnology Co., Ltd.. The shares held by Zhongmei Huadonghave increased from 19.35% to 39.80%. Its two core technologies, PEG-modification platform andhigh-efficiency polypeptide tandem expression platform will effectively promote the Company'sproduct strategic layout in the field of biological macromolecules.
(2) Increase the introduction of innovative projects to achieve new breakthroughs in the field ofimmunization. On August 14, 2020, the wholly-owned subsidiary Zhongmei Huadong and QyunsTherapeutics Co., Ltd signed a strategic cooperation agreement on equity investment and productcooperation. Zhongmei Huadong invested 370 million yuan in equity investment in QyunsTherapeutics Co., Ltd through capital increase. After the investment, it accounted for 20.56% of the
shares and became the second largest shareholder of Qyuns Therapeutics Co., Ltd. By virtue of theirrespective advantages in their respective fields, the two parties will carry out extensive and in-depthcooperative development and commercialization of the ongoing research product line of QyunsTherapeutics Co., Ltd. Since then, the Company has officially entered the monoclonal antibodyfield, enriched its innovative product pipeline, and expanded its product portfolio in the field ofautoimmune diseases. At the same time, the two parties have signed an agreement on productcooperation development and commercialization for HD-IM-0003 (QX001S) (A biologicalanalogue of the original drug Stelara?Ustekinumab, used for the treatment of psoriasis and Crohn'sdisease, etc.) under development by Qyuns Therapeutics Co., Ltd in mainland China. HD-IM-0003(QX001S) is expected to become the world's first biosimilar of the original drug Uselnumab withannual sales of more than USD 6 billion. The two major indications, psoriasis and Crohn's disease,span the two dominant clinical departments of Zhongmei Huadong, the department of immunologyand gastroenterology. HD-IM-0003 (QX001S) is scheduled to begin phase III clinical trials earlynext year.
6. R&D of medical beauty products
During the reporting period, the core products of the Company’s wholly-owned subsidiary Sinclairand its shareholding subsidiary U.S. R2 have achieved positive registration progress in overseascountries. The new hyaluronic acid of the MaiLi series containing lidocaine has obtained the CEcertification of the European Union in June 2020; F1, a medical device related to frozen freckleremoval and whitening introduced from American R2 Company in the field of medical beauty, hasbeen approved by US FDA for 510(k) and is expected to be on the market in the US by the end of2020. The Chinese clinical plan design of the above two products is progressing in an orderly way.Sinclair's core product, Ellansé
?, a new long-action micropellet for injection for facial subcutaneousimplantation, can stimulate the production of collagen in beauty seekers' own skin, and improvewrinkles permanently. Registered clinical trials have been completed in China, and the applicationfor marketing registration is progressing as planned. Silhouette
?
cosmetic embedding is suitable formid-face lifting surgery and reshaping facial reconstruction. The registration in China has started,and the clinical registration development plan and trial scheme are in preparation.In August 2020, the Company signed a strategic cooperation agreement with Jetema, a listedcompany in South Korea, to introduce its type A botulinum toxin products. The plan will start the
registration and declaration in China within this year.
7. Progress of consistency evaluation
During the reporting period, the Company generic quality consistency and curative effect evaluationwork goes well. Pioglitazone hydrochloride (30mg, 15mg) received a consistency evaluationsupplementary application acceptance notice. Mycophenolate mofetil capsules (0.25g) received aconsistency evaluation supplement application acceptance notice. Clarithromycin tablets (0.25g)and Pioglitazone-Metformin tablets (15mg/500mg) completed the research and submission ofsupplementary materials. Domperidone tablets (10mg) passed the consistency evaluation. Othervarieties to be evaluated are in the stage of pharmaceutical research, pilot scale-up or processverification.
8. Patent work
In recent years, the Company attaches great importance to its own intellectual property protectionand achievements transformation application work. The number of patent applications andauthorization has increased steadily. Over the years, the Company has applied for more than 500patents at home and abroad, among which more than 260 patents are authorized.During the reporting period, the Company submitted a total of 20 patent applications and obtained 5authorized patents.XI. Risks and countermeasures
1. Industry policies and market impact
At present, China has continuously deepened reform in the field of medicine and health, andvarious policies have been introduced intensively. Policies such as national centralized purchasing,generic drug consistency evaluation, two-vote system, new drug approval, control of theproportion of hospital drugs, secondary price negotiation in hospitals, and close medicalassociation will have a significant impact on the R&D, production, and circulation of drugs. At thesame time, with the implementation of medical insurance fee control, the reform of paymentmethods, and the further implementation of the generic drug centralized purchasing policy, somedrugs will face the risk of further price reduction.Countermeasures:The Company will pay close attention to, analyze and grasp major
national medicine policies and industry development trends, strengthen the layout of innovativevarieties and R&D investment through endogenous development and outward extension, reduceproduction and operation risks through lean production, fully implement the internationaldevelopment strategy and improve the technological quality advantages of products withinternational standards. It will continue to tap the advantageous products and subdivisions ofaesthetic medicine to create new profit points. It will vigorously expand grassroots communitiesand OTC markets, and increase the coverage of primary and retail terminal markets to maintainstable growth in operations.
2. New drug R&D risk
New drug R&D involves a long cycle, large investment and many uncertainties. In the R&Dprocess, there are also risks such as shortage of high-level talents, failure to obtain registration andapproval for new drug R&D due to curative effect or safety reasons. After new drugs hit the market,there are also risks such as market demand test, purchasing by bidding, medical insurance paymentaccess, and market competition for similar products. In addition, the investment in R&D will alsobring certain pressure to the realization of the Company’s current operating objectives.Countermeasures: The Company will continue to increase investment in new drug R&D,optimize the innovation mechanism, improve the scientific new drug research evaluation anddecision-making system, and establish close ties with well-known R&D institutions at home andabroad, focus on the core treatment fields, continue to enrich and optimize the product pipelinesthrough independent project establishment and external introduction, vigorously developinnovative drugs and generic drugs with high technical barriers, and gradually eliminate thebackward varieties that are not competitive in the market, increase the introduction of high-levelresearch personnel, build a research team that covers the entire development cycle of new drugs,and strengthen the training and encouragement of core technical personnel, and accelerate theconstruction of high-standard medicine R&D centers and pilot test bases.
3. Price reduction risk
With the intensified competition in the medicine market and the further promotion of the nationalcentralized purchasing policy, domestic medicine enterprises will face the pressure of policy-based
price reduction for a long time. There will be more competitive manufacturers of similar products,leading to the risk of failure in bidding, which is also a negative factor affecting the Company’sbusiness performance.Countermeasures: Focusing on scientific R&D and technological innovation, the Company willimprove the technological quality advantages of its products with international standards,strengthen internal management and technological upgrading, strengthen cost competitiveadvantages, carry out marketing assessment and incentives and channel sinking, continue toexpand the professional promotion team of county-level markets, vigorously expand primarycommunities and OTC markets, and increase the coverage of primary and retail terminal marketsto maintain stable market growth.
Section V Important MattersI. Annual General Meeting and Extraordinary General Meetings convened during thereporting period
1. Annual General Meeting convened during the current reporting period
| Meeting | Nature | Proportion of participating investors | Convened Date | Disclosure Date | Disclosure Index |
| 2019 Annual General Meeting of Shareholders | Annual General Meeting of Shareholders | 59.61% | June 5th, 2020 | June 5th, 2020 | No. 2020-026; www.cninfo.com.cn |
2. Extraordinary general meetings convened at the request of preferred shareholders with resumed votingrights:
□ Applicable √ N/A
II. Profit distribution and capitalization of capital reserves plan or proposal for the currentreporting period
□ Applicable √ N/A
The Company did not plan to distribute cash dividends, send bonus shares, or convert capital reserve into share capital during thefirst half of 2019.
III. Unfulfilled and overdue commitments from the related committed parties such as theCompany’s actual controller, shareholders, related parties, acquirer(s), and the Companyduring the current reporting period
□ Applicable √ N/A
No such case during the reporting period.IV. Engagement and disengagement of the accounting firmWhether the half year report was audited
□ Applicable √ N/A
The Company’s half year report was not audited.
V. Explanation given by the board of directors and supervisory committee regarding the“non-standard auditor’s report” issued by the accounting firm for the current reportingperiod
□ Applicable √ N/A
VI. Explanation given by the board of directors regarding the “non-standard auditor’sreport” issued by the accounting firm for the prior year
□ Applicable √ N/A
VII. Bankruptcy and restructuring
□ Applicable √ N/A
No such case during the reporting period.
VIII. LitigationsMaterial litigation and arbitration
□ Applicable √ N/A
No such case during the reporting period.
Other litigations
□ Applicable √ N/A
IX. Media queries
□ Applicable √ N/A
There was no prevalent media query during the reporting period.
X. Punishments and rectifications
□ Applicable √ N/A
No such case during the reporting period.XI. Integrity of the Company and its controlling shareholders and actual controllers
□ Applicable √ N/A
XII. The implementation of Equity Incentive Plan, Employee Stock Incentive Plan, or otherincentive plans
□ Applicable √ N/A
No such case during the reporting period
XIII. Significant related-party transaction
1. Related-party transactions arising from routine operation
√Applicable □N/A
During the reporting period, the company's daily related-party transactions were implemented in accordance with the resolutionsof the shareholders' meeting.
2. Related-party transactions regarding purchase and disposal of assets or equity
□ Applicable √ N/A
No such case in the reporting period.
3. Significant related-party transactions arising from joint investments on external parties
□ Applicable √ N/A
No such case in the reporting period.
4. Related credit and debt transactions
□ Applicable √ N/A
No related-parties’ creditor’s rights or debts during the reporting period
5. Other significant related party transactions
□ Applicable √ N/A
No other significant related party transactions during the reporting period.
XIV. The Company’s funds used by the controlling shareholder or its related parties fornon-operating purpose.
□ Applicable √ N/A
No such case during the reporting period.
XV. Significant contracts and their execution
1. Trusteeship, contracting and leasing
（1）Trusteeship
□ Applicable √ N/A
No such case in the reporting period.
（2）Contracting
□ Applicable √ N/A
No such case in the reporting period.
（3）Leasing
□ Applicable √ N/A
No such case in the reporting period.
2. Significant guarantees
√Applicable □ N/A
（1）Details of guarantees
During the reporting period, the company did not have any external guarantees except for providing guarantees for funds and loansrequired for the daily operating activities of its subsidiaries in accordance with the resolutions of the board of directors andshareholders.
（2）Illegal provision of guarantees for external parties
□ Applicable √ N/A
No such case in the reporting period.
3. Entrusted financial management
□ Applicable √ N/A
No entrusted finance during the reporting period.
4. Other significant contracts
□ Applicable √ N/A
XVI. Social responsibility
1. Significant environmental problems
Whether the Company or the Company’s subsidiaries are critical pollution enterprises disclosed by national environmentalprotection departmentYes
2. Fulfillment of the social responsibility of targeted poverty alleviation
□ Applicable √ N/A
XVII. Other significant events
□ Applicable √ N/A
No such case in the reporting period.
XVIII. Other significant events of the Company’s subsidiaries
□ Applicable √ N/A
Section VI Share Change and Shareholders
I. Changes in Share Capital
1. Table of changes in share capital
Unit: Share
| Before the change | Changes in the period（＋，－） | After the change | |||||||
| Number of shares | Proportion | New shares | Bonus shares | Conversion of capital reserve into shares | Others | Subtotal | Number of shares | Proportion | |
| I. Shares subject to conditional restriction | 25,245 | 0.00% | 0 | 0 | 0 | 0 | 0 | 25,245 | 0.00% |
| 1. Shares held by the state | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 2. Shares held by state-owned corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 3. Shares held by other domestic investors | 25,245 | 0.00% | 0 | 0 | 0 | 0 | 0 | 25,245 | 0.00% |
| Including: held by domestic corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| held by domestic natural persons | 25,245 | 0.00% | 0 | 0 | 0 | 0 | 0 | 25,245 | 0.00% |
| 4. Shares held by overseas investors | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| Including: held by overseas corporations | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| held by overseas natural persons | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| II. Shares without restriction | 1,749,784,303 | 100.00% | 0 | 0 | 0 | 0 | 0 | 1,749,784,303 | 100.00% |
| 1. RMB ordinary shares | 1,749,784,303 | 100.00% | 0 | 0 | 0 | 0 | 0 | 1,749,784,303 | 100.00% |
| 2. Domestically listed foreign shares | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 3. Foreign shares listed overseas | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| 4. Others | 0 | 0.00% | 0 | 0 | 0 | 0 | 0 | 0 | 0.00% |
| III. Total number of shares | 1,749,809,548 | 100.00% | 0 | 0 | 0 | 0 | 0 | 1,749,809,548 | 100.00% |
Reason for the changes in share capital
□ Applicable √ N/A
Approval for changes in share capital
□ Applicable √N/A
Transfer of shares
□ Applicable √N/A
Progress of share repurchase
□ Applicable √ N/A
Progress of reducing repurchased shares through centralized bidding
□ Applicable √N/A
Effects of changes in share capital on the basic earnings per share, diluted earnings per share for the most recent year and the most recent period, the net assets per share attributable to theCompany’s shareholders of common shares and other financial indicators
□ Applicable √ N/A
Other disclosures the Company deems necessary or required by securities regulatory authorities
□ Applicable √ N/A
2. Changes in restricted shares
□ Applicable √ N/A
II. Issuance and listing of securities
□ Applicable √ N/A
III. Total number of shareholders and their shareholdings
Unit: Share
| Total number of common shareholders at the end of the reporting period | 132,086 | Total number of preference shareholders with restoration of the voting rights at the end of the reporting period (if any) | 0 | |||||||
| Particulars about shareholders with a shareholding ratio over 5% or the Top 10 shareholders | ||||||||||
| Name of shareholder | Nature of shareholder | Share- holding ratio | Total shares held at the end of the reporting period | Changes in the reporting period | The number of common shares held with trading restrictions restricted shares held | The number of shares held without trading restriction | Pledged or frozen | |||
| Status | Amount | |||||||||
| China Grand Enterprises, Inc. 中国远大集团有限责任公司 | Domestic non-state-owned corporation | 41.77% | 730,938,157 | 0 | 0 | 730,938,157 | Pledged | 263,884,000 | ||
| Hangzhou Huadong Medicine Group Co., Ltd. 杭州华东医药集团有限公司 | State-owned corporation | 16.46% | 288,000,000 | 0 | 0 | 288,000,000 | ||||
| Hong Kong Securities Clearing Company Ltd. 香港中央结算有限公司 | Overseas corporation | 2.02% | 35,403,136 | -1,383,584 | 0 | 35,403,136 | ||||
| National Social Security Fund Portfolio 106全国社保基金一零六组合 | Other | 1.59% | 27,797,163 | 4,455,650 | 0 | 27,797,163 | ||||
| China Securities Finance Co., Ltd. 中国证券金融股份有限公司 | Other | 1.27% | 22,186,818 | 0 | 0 | 22,186,818 | ||||
| Taikang Life Insurance Co., Ltd. – Unit-linked – Proactive growth泰康人寿保险有限责任公司—投连—积极成长 | Other | 0.56% | 9,815,785 | -50,926 | 0 | 9,815,785 | ||||
| Basic Endowment Insurance Fund Portfolio 807基本养老保险基金八零七组合 | Other | 0.51% | 8,873,423 | 3,522,910 | 0 | 8,873,423 | ||||
| #Yi, Jiandong易建东 | Domestic natural person | 0.47% | 8,279,987 | 8,279,987 | 0 | 8,279,987 | ||||
| Basic Endowment Insurance Fund Portfolio 15041基本养老保险基金一五零四一组合 | Other | 0.44% | 7,623,568 | 2,505,480 | 0 | 7,623,568 | ||||
| Bank of China Ltd- Harvest Healthcare Equity Securities Investment Fund中国银行股份有限公 | Other | 0.28% | 4,848,229 | 180,000 | 0 | 4,848,229 | ||||
| 司－嘉实医疗保健股票型证券投资基金 | ||||
| Strategic investors or general corporations become the top 10 shareholders due to the placement of new shares (if any) | N/A | |||
| Explanation on associated relationship or concerted actions among the above-mentioned shareholders: | The Company does not know whether the above-mentioned shareholders are related parties or whether they are acting-in-concert parties with one another. | |||
| Particulars about the Top 10 common shareholders holding unrestricted shares | ||||
| Name of shareholder | Number of unrestricted common shares at the end of reporting period | Type of shares | ||
| Type | Number | |||
| China Grand Enterprises, Inc. 中国远大集团有限责任公司 | 730,938,157 | RMB common shares | 730,938,157 | |
| Hangzhou Huadong Medicine Group Co., Ltd. 杭州华东医药集团有限公司 | 288,000,000 | RMB common shares | 288,000,000 | |
| Hong Kong Securities Clearing Company Ltd. 香港中央结算有限公司 | 35,403,136 | RMB common shares | 35,403,136 | |
| National Social Security Fund Portfolio 106全国社保基金一零六组合 | 27,797,163 | RMB common shares | 27,797,163 | |
| China Securities Finance Co., Ltd. 中国证券金融股份有限公司 | 22,186,818 | RMB common shares | 22,186,818 | |
| Taikang Life Insurance Co., Ltd. – Unit-linked – Proactive growth泰康人寿保险有限责任公司—投连—积极成长 | 9,815,785 | RMB common shares | 9,815,785 | |
| Basic Endowment Insurance Fund Portfolio 807基本养老保险基金八零七组合 | 8,873,423 | RMB common shares | 8,873,423 | |
| #Yi, Jiandong易建东 | 8,279,987 | RMB common shares | 8,279,987 | |
| Basic Endowment Insurance Fund Portfolio 15041基本养老保险基金一五零四一组合 | 7,623,568 | RMB common shares | 7,623,568 | |
| Bank of China Ltd- Harvest Healthcare Equity Securities Investment Fund中国银行股份有限公司－嘉实医疗保健股票型证券投资基金 | 4,848,229 | RMB common shares | 4,848,229 | |
| Explanation on associated relationships and concerted actions among the Top 10 common shareholders without trading restriction, and between the Top 10 common shareholders without trading restriction and the Top 10 common shareholders | The Company does not know whether the above-mentioned common shareholders are related parties or whether they are acting-in-concert parties. | |||
| Notes on financing and securities loan conducted by top 10 shareholders (if any) | At the end of the current reporting period, Yi Jiandong, the eighth shareholder of the Company, held 8,250,087 shares of the Company through financing and securities loan. | |||
Whether the Company’s Top 10 common shareholders or the Top 10 common shareholders without trading restriction have carried out any agreement to repurchase transaction during thereporting period
□ Yes √ No
No such case during the reporting period.
IV. Particulars about change in the controlling shareholderChange of the controlling shareholder during the current reporting period
□ Applicable √ N/A
No such cases in the reporting period
Change of the actual controller during the reporting period
□ Applicable √ N/A
No such cases in the reporting period
Section VII Preferred Shares
□ Applicable √ N/A
No such case during the reporting period.
Section VIII Convertible Corporate Bonds
□ Applicable √ N/A
No such case during the reporting period.
Section IX Directors, Supervisors, Senior Managers
I. Changes in shareholding of directors, supervisors and senior managers
□ Applicable √ N/A
There are no shareholding changes of directors, supervisors and senior management personnel during the reporting period(referring to 2019 annual report).II. Change of directors, supervisors and senior managers
□ Applicable √ N/A
There are no changes of directors, supervisors and senior management personnel during the reporting period (referring to2019 annual report).
Section X Information about Corporate BondsWhether the Company has publicly issued corporate bonds on stock exchange place, which has not terminated or terminated but failto collect the full payment before the half year report authorized disclosure date.No
Section XI. Financial ReportI. Audit reportHas the half year report been audited?
□ Yes √ No
The half year report has not been audited.II. Financial statementsThe currency unit of statements in the financial notes is: RMB yuan.
1. Consolidated balance sheet
Prepared by: Huadong Medicine Co., Ltd.
June 30
th, 2020
Unit: RMB yuan
| Item | June 30th, 2020 | December 31st, 2019 |
| Current assets: | ||
| Cash and bank balances | 2,470,052,752.73 | 2,402,730,395.39 |
| Settlement reserve | - | - |
| Lending to other banks and other financial institutions | - | - |
| Financial assets for trade | - | - |
| Financial assets that are measured at fair value and whose changes are included in current gains/losses | - | - |
| Derivative financial assets | - | - |
| Notes receivable | ||
| Accounts receivable | 6,485,487,088.32 | 6,092,305,184.47 |
| Accounts receivable for financing | 1,223,857,309.55 | 683,884,625.14 |
| Prepayments | 447,717,238.96 | 363,246,612.94 |
| Premiums receivable | - | - |
| Reinsurance accounts receivable | - | - |
| Reinsurance contract reserve receivable | - | - |
| Other receivables | 121,818,122.97 | 92,201,271.22 |
| Including: Interests receivable | - | - |
| Dividends receivable | 815,965.44 | 815,965.44 |
| Financial assets purchased for resale | - | - |
| Item | June 30th, 2020 | December 31st, 2019 |
| Inventories | 3,527,719,237.10 | 4,038,975,496.93 |
| Contract assets | - | - |
| Assets held for sale | - | - |
| Non-current assets due within one year | - | - |
| Other current assets | 19,200,711.58 | 62,526,471.96 |
| Total current assets | 14,295,852,461.21 | 13,735,870,058.05 |
| Non-current assets: | ||
| Loans and prepayments issuance | - | - |
| Debt investments | - | - |
| Financial assets available for sale | - | - |
| Other debt investments | - | - |
| Held-to-maturity investments | - | - |
| Long-term receivables | - | - |
| Long-term equity investments | 419,056,055.31 | 222,595,018.54 |
| Other equity instrument investments | 241,893,621.44 | 241,675,712.05 |
| Other non-current financial assets | - | - |
| Real estate properties for investment | 21,200,079.95 | 21,701,908.75 |
| Fixed assets | 2,144,814,526.08 | 2,175,216,842.65 |
| Constructions in progress | 2,078,384,147.26 | 1,829,808,233.19 |
| Biological assets for production | - | - |
| Oil & gas assets | - | - |
| Right-of-use assets | - | - |
| Intangible assets | 1,491,462,256.94 | 1,454,900,160.45 |
| Development expenditures | - | - |
| Goodwill | 1,469,617,262.10 | 1,469,617,262.10 |
| Long-term unamortized expenses | 9,932,911.76 | 12,289,677.31 |
| Deferred tax assets | 130,993,835.87 | 116,157,614.47 |
| Other non-current assets | 199,332,824.16 | 184,141,659.07 |
| Total non-current assets | 8,206,687,520.87 | 7,728,104,088.58 |
| Total assets | 22,502,539,982.08 | 21,463,974,146.63 |
| Current liabilities: | ||
| Short-term borrowings | 1,362,252,205.85 | 655,549,973.27 |
| Borrowing from the central bank | - | - |
| Item | June 30th, 2020 | December 31st, 2019 |
| Borrowing from other banks and other financial institutions | - | - |
| Financial liabilities for trade | - | - |
| Financial liabilities that are measured at fair value and whose changes are included in current gains/losses | - | - |
| Derivative financial liabilities | - | - |
| Notes payable | 422,541,634.85 | 613,374,356.61 |
| Accounts payable | 3,708,563,900.91 | 3,789,054,234.58 |
| Receipts in Advance | 1,615,154.91 | 254,888,911.30 |
| Contract liabilities | 54,134,614.38 | - |
| Financial assets sold for repurchase | - | - |
| Absorbing deposits and due from banks | - | - |
| Receipts for buying and selling securities as proxy | - | - |
| Receipts for underwriting securities as proxy | - | - |
| Payroll payable | 173,771,385.76 | 132,584,982.71 |
| Taxes payable | 359,453,727.61 | 532,802,157.61 |
| Other payables | 1,932,519,496.00 | 1,365,152,290.99 |
| Including: Interests payable | - | - |
| Dividends payable | 224,219.60 | 224,219.60 |
| Handling fees and commissions payable | - | - |
| Reinsurance accounts payable | - | - |
| Liabilities held for sale | - | - |
| Non-current liabilities due within one year | 20,746,317.77 | 1,053,231,727.73 |
| Other current liabilities | - | - |
| Total current liabilities | 8,035,598,438.04 | 8,396,638,634.80 |
| Non-current liabilities: | ||
| Insurance policy reserve | - | - |
| Long-term borrowings | 125,199,582.60 | - |
| Bonds payable | - | - |
| Including: Preferred shares | - | - |
| Perpetual bonds | - | - |
| Lease liabilities | - | - |
| Long-term payables | 49,079,373.13 | 48,080,030.00 |
| Long-term employee benefits payable | - | - |
| Item | June 30th, 2020 | December 31st, 2019 |
| Provisions | 51,482,784.16 | 52,066,643.01 |
| Deferred income | 56,436,438.73 | 60,960,255.68 |
| Deferred tax liabilities | 45,635,531.26 | 39,604,343.27 |
| Other non-current liabilities | - | - |
| Total non-current liabilities: | 327,833,709.88 | 200,711,271.96 |
| Total liabilities | 8,363,432,147.92 | 8,597,349,906.76 |
| Owners’ Equity: | ||
| Share capital | 1,749,809,548.00 | 1,749,809,548.00 |
| Other equity instruments | - | - |
| Including: Preferred shares | - | - |
| Perpetual bonds | - | - |
| Capital reserves | 2,157,862,037.14 | 2,158,080,661.07 |
| Less: Treasury shares | - | - |
| Other comprehensive income | 61,541,827.03 | 22,792,488.80 |
| Special reserve | - | - |
| Surplus reserves | 710,359,967.51 | 710,359,967.51 |
| General risk reserve | - | - |
| Retained earnings | 8,909,672,690.43 | 7,668,434,642.62 |
| Total owners’ equity attributable to owner of the Company | 13,589,246,070.11 | 12,309,477,308.00 |
| Minority interest | 549,861,764.05 | 557,146,931.87 |
| Total owners’ equity | 14,139,107,834.16 | 12,866,624,239.87 |
| Total liabilities & owners’ equity | 22,502,539,982.08 | 21,463,974,146.63 |
Legal representative: Liang LyuPerson in charge of accounting work: Liang LyuPerson in charge of the Accounting Department: Renbo Qiu
2. Balance sheet of the parent company
Unit: RMB yuan
| Item | June 30th, 2020 | December 31st, 2019 |
| Current assets: | ||
| Cash and bank balances | 1,336,541,043.66 | 893,939,724.56 |
| Financial assets for trade | - | - |
| Financial assets measured at fair value and whose changes are included in current gains/losses | - | - |
| Derivative financial assets | - | - |
| Notes receivable | - | - |
| Accounts receivable | 3,550,755,741.36 | 3,601,796,850.84 |
| Accounts receivable for financing | 375,970,101,31 | 102,285,661.94 |
| Prepayments | 111,464,181.52 | 183,776,687.98 |
| Other receivables | 737,320,561.71 | 857,127,207.17 |
| Including: Interests receivable | - | - |
| Dividends receivable | - | - |
| Inventories | 1,422,056,544.16 | 1,726,815,773.41 |
| Contract assets | - | - |
| Assets held for sale | - | - |
| Non-current assets due within one year | - | - |
| Other current assets | - | 4,529,331.87 |
| Total current assets | 7,534,108,173.72 | 7,370,271,237.77 |
| Non-current assets: | ||
| Debt investments | - | - |
| Financial assets available for sale | - | - |
| Other debt investments | - | - |
| Held-to-maturity investments | - | - |
| Long-term receivables | - | - |
| Long-term equity investments | 4,883,803,099.45 | 4,809,521,228.65 |
| Other equity instrument investments | 92,108,957.26 | 92,108,957.26 |
| Other non-current financial assets | - | - |
| Real estate properties for investment | 8,358,692.86 | 8,591,809.18 |
| Fixed assets | 143,430,012.76 | 144,102,366.02 |
| Constructions in progress | 21,973,342.44 | 15,728,406.26 |
| Item | June 30th, 2020 | December 31st, 2019 |
| Biological assets for production | - | - |
| Oil & gas assets | - | - |
| Right-of-use assets | - | - |
| Intangible assets | 45,140,968.27 | 45,226,361.12 |
| Development expenditures | - | - |
| Goodwill | - | - |
| Long-term unamortized expenses | 810,795.60 | 975,689.14 |
| Deferred tax assets | 48,924,184.37 | 48,849,165.52 |
| Other non-current assets | 8,076,419.28 | 8,076,419.28 |
| Total non-current assets | 5,252,626,472.29 | 5,173,180,402.43 |
| Total assets | 12,786,734,646.01 | 12,543,451,640.20 |
| Current liabilities: | ||
| Short-term borrowings | 930,707,405.39 | 55,000,000.80 |
| Financial liabilities for trade | - | - |
| Financial liabilities that are measured at fair value and whose changes are included in current gains/losses | - | - |
| Derivative financial liabilities | - | - |
| Notes payable | 53,979,780.29 | 81,036,745.94 |
| Accounts payable | 2,211,018,826.31 | 2,469,675,798.54 |
| Receipts in advance | - | 52,914,932.34 |
| Contract liabilities | 57,464,001.86 | - |
| Payroll payable | 3,148,520.04 | 3,203,215.95 |
| Taxes payable | 71,670,406.44 | 32,881,935.68 |
| Other payables | 446,072,333.60 | 638,551,969.04 |
| Including: Interests payable | - | - |
| Dividends payable | 224,219.60 | 224,219.60 |
| Liabilities held for sale | - | - |
| Non-current liabilities due within one year | - | 1,028,002,952.88 |
| Other current liabilities | - | - |
| Total current liabilities | 3,774,061,273.93 | 4,361,267,551.17 |
| Non-current liabilities: | ||
| Long-term borrowing | - | - |
| Bonds payable | - | - |
| Item | June 30th, 2020 | December 31st, 2019 |
| Including: Preferred shares | - | - |
| Perpetual bonds | - | - |
| Lease liabilities | - | - |
| Long-term payables | - | - |
| Long-term employee benefits payable | - | - |
| Provision | - | - |
| Deferred income | 41,981,848.41 | 43,264,785.87 |
| Deferred tax liabilities | - | - |
| Other non-current liabilities | - | - |
| Total non-current liabilities | 41,981,848.41 | 43,264,785.87 |
| Total liabilities | 3,816,043,122.34 | 4,404,532,337.04 |
| Owners’ Equity: | ||
| Share capital | 1,749,809,548.00 | 1,749,809,548.00 |
| Other equity instruments | - | - |
| Including: Preferred shares | - | - |
| Perpetual bonds | - | - |
| Capital reserves | 2,168,451,528.01 | 2,168,451,528.01 |
| Less: Treasury shares | - | - |
| Other comprehensive income | 847,526.06 | 847,526.06 |
| Special reserve | - | - |
| Surplus reserves | 788,215,726.95 | 788,215,726.95 |
| Retained earnings | 4,263,367,194.65 | 3,431,594,974.14 |
| Total owners’ equity | 8,970,691,523.67 | 8,138,919,303.16 |
| Total liabilities & owners’ equity | 12,786,734,646.01 | 12,543,451,640.20 |
3. Consolidated income statement
Unit: RMB yuan
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| I. Total operating income | 16,660,934,157.64 | 18,248,667,616.98 |
| Including: Operating revenue | 16,660,934,157.64 | 18,248,667,616.98 |
| Interests received | - | - |
| Premiums earned | - | - |
| Handling fees and commissions received | - | - |
| II. Total operating cost | 14,896,020,510.59 | 16,371,950,305.33 |
| Including: Operating cost | 10,622,393,655.53 | 12,163,207,615.70 |
| Interests paid | - | - |
| Handling fees and commissions paid | - | - |
| Surrender value | - | - |
| Net payment of insurance claims | - | - |
| Net appropriation of policy reserve | - | - |
| Policy dividends paid | - | - |
| Reinsurance expenses | - | - |
| Business taxes and surcharges | 101,439,816.68 | 105,568,634.37 |
| Selling expenses | 3,168,607,371.02 | 3,053,727,531.60 |
| Administrative expenses | 506,362,613.35 | 526,657,630.43 |
| Research and Development(R&D) expenses | 479,685,981.21 | 468,669,112.56 |
| Financial expenses | 17,531,072.80 | 54,119,780.67 |
| Including: Interests expenses | 47,068,116.52 | 66,248,306.83 |
| Interests income | 30,675,897.56 | 19,838,565.33 |
| Add: Other income | 93,032,855.48 | 86,070,226.02 |
| Investment income | -10,002,163.90 | -6,159,135.96 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | -3,173,963.23 | 8,057,080.97 |
| Gains on the derecognition of financial assets measured at amortized cost | - | - |
| Gains on exchange | - | - |
| Gains on net exposure hedging | - | - |
| Gains on changes in fair value | - | - |
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| Credit impairment gains (losses) | -29,841,283.63 | -64,662,855.38 |
| Impairment gains (losses) of assets | - | 4,216,269.24 |
| Gains (Losses) on assets disposal | 301,166,257.18 | 111,195,572.05 |
| III. Operating profit | 2,119,269,312.18 | 2,007,377,387.62 |
| Add: Non-operating income | 10,190,295.80 | 4,163,247.36 |
| Less: Non-operating expenses | 20,122,066.85 | 16,437,354.10 |
| IV. Total profit | 2,109,337,541.13 | 1,995,103,280.88 |
| Less: Income tax expenses | 334,125,800.82 | 331,912,875.38 |
| V. Net profit | 1,775,211,740.31 | 1,663,190,405.50 |
| (I) Classification by continuous operation | ||
| 1. Net profit (losses) from continuous operation | 1,775,211,740.31 | 1,663,190,405.50 |
| 2. Net profit (losses) from terminational operation | - | - |
| (II) Classification by attribution of ownership | ||
| 1. Net profit attributable to owners of the parent company | 1,731,184,721.25 | 1,596,283,418.31 |
| 2. Profit or loss attributable to minority shareholders | 44,027,019.06 | 66,906,987.19 |
| VI. Other comprehensive income, net of income tax | 38,749,338.23 | -7,518,326.61 |
| Other comprehensive income attributable to owners of the parent company, net of tax | 38,749,338.23 | -7,518,326.61 |
| (I) Other comprehensive income that cannot be reclassified into gains (losses) | 217,909.39 | - |
| 1.Changes in remeasurement on the defined benefit plan | - | - |
| 2. Other comprehensive income that cannot be reclassified into gains/losses under equity method | - | - |
| 3. Changes in fair value of other equity instrument investments | 217,909.39 | - |
| 4. Changes in fair value of credit risk of the enterprise | - | - |
| 5. Others | - | - |
| (II) Other comprehensive income to be reclassified into gains (losses) | 38,531,428.84 | -7,518,326.61 |
| 1. Other comprehensive income that can be reclassified into gains/losses under equity method | - | - |
| 2. Changes in fair value of other debt investments | - | - |
| 3. Amount of financial assets reclassified into other comprehensive income | - | - |
| 4. Credit impairment reserve of other debt investments | - | - |
| 5. Cash flow hedging reserve | - | - |
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| 6. Exchange differences arising on conversion of financial statements denominated in foreign currencies | 38,531,428.84 | -7,518,326.61 |
| 7. Others | - | - |
| Net amount after tax of other comprehensive income attributable to minority shareholders | - | - |
| VII. Total comprehensive income | 1,813,961,078.54 | 1,655,672,078.89 |
| Total comprehensive income attributable to owners of the parent company | 1,769,934,059.48 | 1,588,765,091.70 |
| Total comprehensive income attributable to minority shareholders | 44,027,019.06 | 66,906,987.19 |
| VIII. Earnings per share (EPS): | ||
| (I) Basic EPS | 0.9894 | 0.9123 |
| (II) Diluted EPS | 0.9894 | 0.9123 |
As for enterprise merger under the same control in the current period, the net profit generated by the merged party before the mergeris 0.00 yuan, and that generated during the previous period is 0.00 yuan.Legal representative: Liang LyuPerson in charge of accounting work: Liang LyuPerson in charge of the Accounting Department: Renbo Qiu
4. Income statement of the parent company
Unit: RMB yuan
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| I. Total operating income | 7,916,714,385.48 | 9,210,400,098.69 |
| Less: Total operating cost | 7,466,214,287.18 | 8,669,204,076.13 |
| Business taxes and surcharges | 12,247,764.43 | 9,947,706.39 |
| Selling expenses | 176,753,942.93 | 203,130,230.54 |
| Administrative expenses | 69,866,518.00 | 63,897,687.26 |
| Research and Development (R&D) expenses | - | - |
| Financial expenses | 17,433,290.41 | 25,124,191.50 |
| Including: Interests expenses | 37,898,542.00 | 39,884,052.06 |
| Interests income | 19,437,282.41 | 15,767,836.91 |
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| Add: Other income | 10,042,695.77 | 2,774,983.45 |
| Investment income | 1,167,513,101.57 | 852,147,856.57 |
| Including: Investment gains (losses) in associated enterprise and joint-venture enterprise | - | - |
| Gains on the derecognition of financial assets measured at amortized cost | - | - |
| Gains on net exposure hedging | - | - |
| Gains from changes in fair values | - | - |
| Credit impairment gains (Losses) | 25,531,116.40 | -62,996,903.82 |
| Impairment gains (losses) of assets | - | - |
| Asset disposal income | -6,556.33 | 111,184,666.83 |
| II. Operating profit | 1,377,278,939.94 | 1,142,206,809.90 |
| Add: Non-operating income | 4,902,319.33 | 3,202,697.60 |
| Less: Non-operating expenses | 6,681,349.13 | 4,336,092.12 |
| III. Total profit | 1,375,499,910.14 | 1,141,073,415.38 |
| Less: Income tax expenses | 53,781,016.19 | 87,991,470.88 |
| IV. Net profit | 1,321,718,893.95 | 1,053,081,944.50 |
| (I) Net profit (losses) from continuous operations | 1,321,718,893.95 | 1,053,081,944.50 |
| (II) Net profit (losses) from discontinued operations | - | - |
| V. Other comprehensive income, net of income tax | - | - |
| (I) Other comprehensive income that cannot be reclassified into gains/losses | - | - |
| 1. Changes in remeasurement on the defined benefit plan | - | - |
| 2. Other comprehensive income that cannot be reclassified into gains/losses under equity method | - | - |
| 3. Changes in fair value of other equity instrument investments | - | - |
| 4. Changes in fair value of credit risk of the enterprise | - | - |
| 5. Others | - | - |
| (II) Other comprehensive income to be reclassified into gains/losses | - | - |
| 1. Other comprehensive income that can be reclassified into gains/losses under equity method | - | - |
| 2. Changes in fair value of other debt investments | - | - |
| 3. Gains/losses on changes in fair value of financial assets | - | - |
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| available for sale | ||
| 4. Amount of financial assets reclassified into other comprehensive income | - | - |
| 5. Gains/losses on held-to-maturity investments reclassified as financial assets available for sale | - | - |
| 6. Credit impairment reserve of other debt investments | - | - |
| 7. Cash flow hedging reserve | - | - |
| 8. Exchange differences from translation of foreign currency financial statements | - | - |
| 9. Others | - | - |
| VI. Total comprehensive income | 1,321,718,893.95 | 1,053,081,944.50 |
| VII. Earnings per share (EPS): | - | - |
| (I) Basic EPS | - | - |
| (II) Diluted EPS | - | - |
5. Consolidated cash flow statement
Unit: RMB yuan
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| I. Cash flows from operating activities： | ||
| Cash received from sale of goods or rendering of services | 17,305,533,832.79 | 18,923,396,329.01 |
| Net increase in customer deposits and due from banks | - | - |
| Net increase in borrowing from the central bank | - | - |
| Net increase in borrowing from other financial institutions | - | - |
| Cash from the premium of the original insurance policy | - | - |
| Net cash from reinsurance | - | - |
| Net increase in deposits and investment of the insured | - | - |
| Cash from interests, handling fees and commissions | - | - |
| Net increase in borrowing from other banks and other financial institutions | - | - |
| Net increase in funds for repurchase | - | - |
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| Net cash received for buying and selling securities as proxy | - | - |
| Receipts of tax refunds | 15,546,329.17 | 3,229,994.72 |
| Other cash receipts to operating activities | 510,015,283.23 | 611,030,274.34 |
| Sub-total of cash inflows from operating activities | 17,831,095,445.19 | 19,537,656,598.07 |
| Cash payments for goods purchased and services received | 10,990,145,679.18 | 12,781,285,389.24 |
| Net increase in customer loans and prepayments | - | - |
| Net increase in deposits of central bank and due from banks | - | - |
| Cash payments for original insurance claims | - | - |
| Net increase in lending to other banks and other financial institutions | - | - |
| Cash payments for interests, handling fees and commissions | - | - |
| Cash payments for policy dividends | - | - |
| Cash payment to and on behalf of employees | 1,139,977,576.42 | 1,131,751,688.96 |
| Payments of various types of taxes | 1,417,914,481.02 | 1,239,844,402.86 |
| Other cash payments in relation to operating activities | 3,027,515,041.28 | 3,421,746,780.15 |
| Sub-total of cash outflows from operating activities | 16,575,552,777.90 | 18,574,628,261.21 |
| Net cash flow from Operating Activities | 1,255,542,667.29 | 963,028,336.86 |
| II. Cash flows from Investing Activities | ||
| Cash receipts from recovery of investments | - | - |
| Cash receipts from investment income | 900,000.00 | 900,000.00 |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 347,790,583.31 | 54,262,567.55 |
| Net cash from disposal of subsidiaries and other business units | - | - |
| Other cash receipts in relation to investing activities | - | - |
| Sub-total of cash inflows from investing activities | 348,690,583.31 | 55,162,567.55 |
| Cash payments for purchase and construction of fixed assets, intangible assets and other long-term assets | 522,164,019.70 | 617,252,846.16 |
| Cash payments for investment | 70,535,000.00 | 119,387,400.00 |
| Net increase in pledge loans | - | - |
| Net cash paid for acquisition of subsidiaries and other business units | 130,000,000.00 | 1,199,793.01 |
| Other cash payments in relation to investing activities | - | 50,000,000.00 |
| Sub-total of cash outflows for investing activities | 722,699,019.70 | 787,840,039.17 |
| Net cash flow from Investing Activities | -374,008,436.39 | -732,677,471.62 |
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| III. Cash flows from Financing Activities: | ||
| Cash receipts from capital contributions | - | 9,800,000.00 |
| Including: Cash receipts from capital contributions from minority owners of subsidiaries | - | 9,800,000.00 |
| Cash receipts from borrowings | 1,681,800,534.35 | 1,311,739,655.44 |
| Other cash receipts in relation to financing activities | 340,000,000.00 | 4,000,000.00 |
| Sub-total of cash inflows from financing activities | 2,021,800,534.35 | 1,325,539,655.44 |
| Cash repayment of borrowings | 1,851,002,797.43 | 950,935,633.74 |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 605,214,724.28 | 634,868,602.38 |
| Including: Dividends and profits paid by subsidiaries to minority shareholders | 49,000,000.00 | 49,000,000.00 |
| Other cash payments in relation to financing activities | 308,940,044.54 | 17,862,528.23 |
| Sub-total of cash outflows from financing activities | 2,765,157,566.25 | 1,603,666,764.35 |
| Net cash flows from Financing Activities | -743,357,031.90 | -278,127,108.91 |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | 40,923,061.58 | -9,291,082.20 |
| V. Net increase in cash and cash equivalents | 179,100,260.58 | -57,067,325.87 |
| Add: Opening balance of cash and cash equivalents | 2,231,771,546.50 | 2,398,709,506.06 |
| VI. Closing balance of cash and cash equivalents | 2,410,871,807.08 | 2,341,642,180.19 |
6. Cash flow statement of the parent company
Unit: RMB yuan
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| I. Cash flows from Operating Activities： | ||
| Cash receipts from the sale of goods and the rendering of services | 8,598,969,576.40 | 9,926,893,044.27 |
| Receipts of tax refund | - | 223,445.99 |
| Other cash receipts in relation to operating activities | 325,891,677.56 | 399,652,059.84 |
| Sub-total of cash inflows from operating activities | 8,924,861,253.96 | 10,326,768,550.10 |
| Cash payments for goods acquired and services received | 8,075,190,116.72 | 9,719,493,832.22 |
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| Cash payments to and on behalf of employees | 123,512,245.38 | 100,710,485.52 |
| Payments of various types of taxes | 120,889,907.22 | 165,549,358.69 |
| Other cash payments in relation to operating activities | 395,669,539.19 | 490,571,282.82 |
| Sub-total of cash outflows for operating activities | 8,715,261,808.51 | 10,476,324,959.25 |
| Net cash flow from Operating Activities | 209,599,445.45 | -149,556,409.15 |
| II. Cash flows from Investing Activities | ||
| Cash receipts from recovery of investments | - | - |
| Cash receipts from investment income | 601,000,000.00 | 431,000,000.00 |
| Net cash receipts from disposals of fixed assets, intangible assets and other long-term assets | 45,538.08 | 53,784,248.61 |
| Net cash from disposal of subsidiaries and other business units | - | - |
| Other cash receipts in relation to investing activities | 691,791,772.13 | 381,500,000.00 |
| Sub-total of cash inflows from investing activities | 1,292,837,310.21 | 866,284,248.61 |
| Cash payments for purchase and construction of fixed assets, intangible assets and other long-term assets | 13,910,582.10 | 28,586,755.97 |
| Cash payments for investment | 74,281,870.80 | 245,607,400.00 |
| Net cash paid for acquisition of subsidiaries and other business units | - | - |
| Other cash payments in relation to investing activities | 549,000,000.00 | 491,750,000.00 |
| Sub-total of cash outflows for investing activities | 637,192,452.90 | 765,944,155.97 |
| Net cash flows from Investing Activities | 655,644,857.31 | 100,340,092.64 |
| III. Cash flows from Financing Activities: | ||
| Cash receipts from absorbing investments | - | - |
| Cash receipts from borrowings | 1,040,651,082.42 | 654,529,856.00 |
| Other cash receipts in relation to financing activities | 673,000,000.00 | 70,000,000.00 |
| Sub-total of cash inflows from financing activities | 1,713,651,082.42 | 724,529,856.00 |
| Cash repayments of borrowings | 1,165,656,610.43 | 374,529,856.00 |
| Cash payments for distribution of dividends or profits or settlement of interest expenses | 545,718,585.88 | 548,199,746.43 |
| Other cash payments in relation to financing activities | 434,406,787.51 | 77,000,000.00 |
| Sub-total of cash outflows from financing activities | 2,145,781,983.82 | 999,729,602.43 |
| Net cash flow from Financing Activities | -432,130,901.40 | -275,199,746.43 |
| IV. Effect of foreign exchange rate changes on Cash and Cash Equivalents | 1,987,917.74 | 5,850.73 |
| Item | Amount incurred during the current period | Amount incurred during the previous period |
| V. Net increase in cash and cash equivalents | 435,101,319.10 | -324,410,212.21 |
| Add: Opening balance of cash and cash equivalents | 893,929,724.56 | 1,384,560,116.18 |
| VI. Closing balance of Cash and Cash Equivalents | 1,329,031,043.66 | 1,060,149,903.97 |
7. Consolidated statement of changes in owners’ Equity
Amount in the current period
Unit: RMB yuan
| Item | Amount for the first half of 2020 | |||||||
| Ownership interest attributable to the parent company | Minority interests | Total owners’ equity | ||||||
| Share capital | Capital Reserves | Other comprehensive income | Surplus reserve | Retained earnings | Sub-total | |||
| I. Closing balance of the prior year | 1,749,809,548.00 | 2,158,080,661.07 | 22,792,488.80 | 710,359,967.51 | 7,668,434,642.62 | 12,309,477,308.00 | 557,146,931.87 | 12,866,624,239.87 |
| Add: changes in accounting policies | - | - | - | - | - | - | - | - |
| Error correction in the prior periods | - | - | - | - | - | - | - | - |
| Merger of enterprises under the same control | - | - | - | - | - | - | - | - |
| Others | - | - | - | - | - | - | - | - |
| II. Opening balance of the current year | 1,749,809,548.00 | 2,158,080,661.07 | 22,792,488.80 | 710,359,967.51 | 7,668,434,642.62 | 12,309,477,308.00 | 557,146,931.87 | 12,866,624,239.87 |
| III. Amount of change in the current period | - | -218,623.93 | 38,749,338.23 | - | 1,241,238,047.81 | 1,279,768,762.11 | -7,285,167.82 | 1,272,483,594.29 |
| (I) Total comprehensive income | - | - | 38,749,338.23 | - | 1,731,184,721.25 | 1,769,934,059.48 | 44,027,019.06 | 1,813,961,078.54 |
| (II) Capital contributed by owners and capital decreases | - | - | - | - | - | - | - | - |
| 1. Common shares invested by owners | - | - | - | - | - | - | - | - |
| Item | Amount for the first half of 2020 | |||||||
| Ownership interest attributable to the parent company | Minority interests | Total owners’ equity | ||||||
| 2. Capital invested by holders of other equity instruments | - | - | - | - | - | - | - | - |
| 3. Amount of share-based payment included in ownership interest | - | - | - | - | - | - | - | - |
| 4. Others | - | - | - | - | - | - | - | - |
| (III) Profit distribution | - | - | - | - | -489,946,673.44 | -489,946,673.44 | -49,000,000.00 | -538,946,673.44 |
| 1.Withdrawal to surplus reserves | - | - | - | - | - | - | - | - |
| 2. Withdrawal of general risk reserve | - | - | - | - | - | - | - | - |
| 3.Distributions to shareholders | - | - | - | - | -489,946,673.44 | -489,946,673.44 | -49,000,000.00 | -538,946,673.44 |
| 4.Others | - | - | - | - | - | - | - | - |
| (IV) Internal conversion of ownership interest | - | - | - | - | - | - | - | - |
| 1. Capital (or share capital) increase from capital reserve conversion | - | - | - | - | - | - | - | - |
| 2. Capital (or share capital) increase from surplus reserve conversion | - | - | - | - | - | - | - | - |
| 3. Recovery of losses by surplus reserve | - | - | - | - | - | - | - | - |
| 4. Retained earnings from transfer of changes in the defined benefit plan | - | - | - | - | - | - | - | - |
| Item | Amount for the first half of 2020 | |||||||
| Ownership interest attributable to the parent company | Minority interests | Total owners’ equity | ||||||
| 5. Retained earnings from transfer of other comprehensive income | - | - | - | - | - | - | - | - |
| 6. Others | - | - | - | - | - | - | - | - |
| (V) Special reserve | - | - | - | - | - | - | - | - |
| 1. Withdrawal in the current period | - | - | - | - | - | - | - | - |
| 2. Use in the current period | - | - | - | - | - | - | - | - |
| (VI) Others | - | -218,623.93 | - | - | - | -218,623.93 | -2,312,186.88 | -2,530,810.81 |
| IV. Closing balance of the current period | 1,749,809,548.00 | 2,157,862,037.14 | 61,541,827.03 | 710,359,967.51 | 8,909,672,690.43 | 13,589,246,070.11 | 549,861,764.05 | 14,139,107,834.16 |
Amount in the prior period
Unit: RMB yuan
| Item | Amount for the first half of 2019 | |||||||
| Ownership interest attributable to the parent company | Minority interests | Total owners’ equity | ||||||
| Share capital | Capital Reserves | Other | Surplus reserve | Retained | Sub-total | |||
| Item | Amount for the first half of 2019 | |||||||
| Ownership interest attributable to the parent company | Minority interests | Total owners’ equity | ||||||
| comprehensive income | earnings | |||||||
| I. Closing balance of the prior year | 1,458,174,624.00 | 2,455,526,993.18 | -22,426,154.59 | 592,903,007.98 | 5,453,970,525.96 | 9,938,148,996.53 | 487,379,570.98 | 10,425,528,567.51 |
| Add: changes in accounting policies | - | - | - | - | - | - | - | - |
| Error correction in the prior periods | - | - | - | - | - | - | - | - |
| Merger of enterprises under the same control | - | - | - | - | - | - | - | - |
| Others | - | - | - | - | - | - | - | - |
| II. Opening balance of the current year | 1,458,174,624.00 | 2,455,526,993.18 | -22,426,154.59 | 592,903,007.98 | 5,453,970,525.96 | 9,938,148,996.53 | 487,379,570.98 | 10,425,528,567.51 |
| III. Amount of change in the current period | 291,634,924.00 | -297,694,046.61 | -7,518,326.61 | - | 1,117,800,483.46 | 1,104,223,034.24 | 26,766,109.81 | 1,130,989,144.05 |
| (I) Total comprehensive income | - | - | -7,518,326.61 | - | 1,596,283,418.31 | 1,588,765,091.70 | 66,906,987.19 | 1,655,672,078.89 |
| (II) Capital contributed by owners and capital decreases | - | - | - | - | - | - | 8,859,122.62 | 8,859,122.62 |
| 1.Common shares invested by owners | - | - | - | - | - | - | 9,800,000.00 | 9,800,000.00 |
| 2. Capital invested by | - | - | - | - | - | - | - | - |
| Item | Amount for the first half of 2019 | |||||||
| Ownership interest attributable to the parent company | Minority interests | Total owners’ equity | ||||||
| holders of other equity instruments | ||||||||
| 3. Amount of share-based payment included in ownership interest | - | - | - | - | - | - | - | - |
| 4. Others | - | - | - | - | - | - | -940,877.38 | -940,877.38 |
| (III) Profit distribution | - | - | - | - | -478,482,934.85 | -478,482,934.85 | -49,000,000.00 | -527,482,934.85 |
| 1.Withdrawal to surplus reserves | - | - | - | - | - | - | - | - |
| 2. Withdrawal of general risk reserve | - | - | - | - | - | - | - | - |
| 3. Distributions to shareholders | - | - | - | - | -478,482,934.85 | -478,482,934.85 | -49,000,000.00 | -527,482,934.85 |
| 4. Others | - | - | - | - | - | - | - | - |
| (IV) Internal conversion of ownership interest | 291,634,924.00 | -291,634,924.00 | - | - | - | - | - | - |
| 1. Capital (or share capital) increase from capital reserve conversion | 291,634,924.00 | -291,634,924.00 | - | - | - | - | - | - |
| 2. Capital (or share capital) increase from surplus reserve conversion | - | - | - | - | - | - | - | - |
| 3. Recovery of losses by surplus reserve | - | - | - | - | - | - | - | - |
| Item | Amount for the first half of 2019 | |||||||
| Ownership interest attributable to the parent company | Minority interests | Total owners’ equity | ||||||
| 4. Retained earnings from transfer of changes in the defined benefit plan | - | - | - | - | - | - | - | - |
| 5. Retained earnings from transfer of other comprehensive income | - | - | - | - | - | - | - | - |
| 6. Others | - | - | - | - | - | - | - | - |
| (V) Special reserve | - | - | - | - | - | - | - | - |
| 1. Withdrawal in the current period | - | - | - | - | - | - | - | - |
| 2. Use in the current period | - | - | - | - | - | - | - | - |
| (VI) Others | - | -6,059,122.61 | - | - | - | -6,059,122.61 | - | -6,059,122.61 |
| IV. Closing balance of the current period | 1,749,809,548.00 | 2,157,832,946.57 | -29,944,481.20 | 592,903,007.98 | 6,571,771,009.42 | 11,042,372,030.77 | 514,145,680.79 | 11,556,517,711.56 |
8. Statement of changes in ownership interest of the parent company
Amount in the current period
Unit: RMB yuan
| Item | Amount for the first half of 2020 | |||||
| Share capital | Capital Reserves | Other comprehensive income | Surplus reserve | Retained earnings | Total owners’ equity | |
| Item | Amount for the first half of 2020 | |||||
| I. Closing balance of the prior year | 1,749,809,548.00 | 2,168,451,528.01 | 847,526.06 | 788,215,726.95 | 3,431,594,974.14 | 8,138,919,303.16 |
| Add: Changes in accounting policies | - | - | - | - | - | - |
| Error correction in the prior periods | - | - | - | - | - | - |
| Merger of enterprises under the same control | - | - | - | - | - | - |
| Others | - | - | - | - | - | - |
| II. Opening balance of the current year | 1,749,809,548.00 | 2,168,451,528.01 | 847,526.06 | 788,215,726.95 | 3,431,594,974.14 | 8,138,919,303.16 |
| III. Amount of change in the current period | - | - | - | - | 831,772,220.51 | 831,772,220.51 |
| (I) Total comprehensive income | - | - | - | - | 1,321,718,893.95 | 1,321,718,893.95 |
| (II) Capital contributed by owners and capital decreases | - | - | - | - | - | - |
| 1. Common shares invested by owners | - | - | - | - | - | - |
| 2. Capital invested by holders of other equity instruments | - | - | - | - | - | - |
| 3. Amount of share-based payment included in ownership interest | - | - | - | - | - | - |
| 4. Others | - | - | - | - | - | - |
| (III) Profit distribution | - | - | - | - | -489,946,673.44 | -489,946,673.44 |
| 1.Withdrawal to surplus reserves | - | - | - | - | - | - |
| 2.Distributions to shareholders | - | - | - | - | -489,946,673.44 | -489,946,673.44 |
| 3.Others | - | - | - | - | - | - |
| (IV) Internal conversion of ownership interest | - | - | - | - | - | - |
| 1. Capital (or share capital) increase from capital reserve conversion | - | - | - | - | - | - |
| 2. Capital (or share capital) increase from surplus | - | - | - | - | - | - |
| Item | Amount for the first half of 2020 | |||||
| reserve conversion | ||||||
| 3. Recovery of losses by surplus reserve | - | - | - | - | - | - |
| 4. Retained earnings from transfer of changes in the defined benefit plan | - | - | - | - | - | - |
| 5. Retained earnings from transfer of other comprehensive income | - | - | - | - | - | - |
| 6. Others | - | - | - | - | - | - |
| (V) Special reserve | - | - | - | - | - | - |
| 1. Withdrawal in the current period | - | - | - | - | - | - |
| 2. Use in the current period | - | - | - | - | - | - |
| (VI) Others | - | - | - | - | - | - |
| IV. Closing balance of the current period | 1,749,809,548.00 | 2,168,451,528.01 | 847,526.06 | 788,215,726.95 | 4,263,367,194.65 | 8,970,691,523.67 |
Amount in the prior period
Unit: RMB yuan
| Item | Amount for the first half of 2019 | |||||
| Share capital | Capital Reserves | Other comprehensive income | Surplus reserve | Retained earnings | Total owners’ equity | |
| I. Closing balance of the prior year | 1,458,174,624.00 | 2,460,086,452.01 | - | 670,758,767.42 | 2,855,679,964.25 | 7,444,699,807.68 |
| Add: Changes in accounting policies | - | - | - | - | - | - |
| Item | Amount for the first half of 2019 | |||||
| Error correction in the prior periods | - | - | - | - | - | - |
| Merger of enterprises under the same control | - | - | - | - | - | - |
| Others | - | - | - | - | - | - |
| II. Opening balance of the current year | 1,458,174,624.00 | 2,460,086,452.01 | - | 670,758,767.42 | 2,855,679,964.25 | 7,444,699,807.68 |
| III. Amount of change in the current period | 291,634,924.00 | -291,634,924.00 | - | - | 574,599,009.65 | 574,599,009.65 |
| (I) Total comprehensive income | - | - | - | - | 1,053,081,944.50 | 1,053,081,944.50 |
| (II) Capital contributed by owners and capital decreases | - | - | - | - | - | - |
| 1. Common shares invested by owners | - | - | - | - | - | - |
| 2. Capital invested by holders of other equity instruments | - | - | - | - | - | - |
| 3. Amount of share-based payment included in ownership interest | - | - | - | - | - | - |
| 4. Others | - | - | - | - | - | - |
| (III) Profit distribution | - | - | - | - | -478,482,934.85 | -478,482,934.85 |
| 1.Withdrawal to surplus reserves | - | - | - | - | - | - |
| 2. Distributions to shareholders | - | - | - | - | -478,482,934.85 | -478,482,934.85 |
| 3. Others | - | - | - | - | - | - |
| (IV) Internal conversion of ownership interest | 291,634,924.00 | -291,634,924.00 | - | - | - | - |
| 1. Capital (or share capital) increase from capital reserve conversion | 291,634,924.00 | -291,634,924.00 | - | - | - | - |
| 2. Capital (or share capital) increase from surplus reserve conversion | - | - | - | - | - | - |
| 3. Recovery of losses by surplus reserve | - | - | - | - | - | - |
| Item | Amount for the first half of 2019 | |||||
| 4. Retained earnings from transfer of changes in the defined benefit plan | - | - | - | - | - | - |
| 5. Retained earnings from transfer of other comprehensive income | - | - | - | - | - | - |
| 6. Others | - | - | - | - | - | - |
| (V) Special reserve | - | - | - | - | - | - |
| 1. Withdrawal in the current period | - | - | - | - | - | - |
| 2. Use in the current period | - | - | - | - | - | - |
| (VI) Others | - | - | - | - | - | - |
| IV. Closing balance of the current period | 1,749,809,548.00 | 2,168,451,528.01 | - | 670,758,767.42 | 3,430,278,973.90 | 8,019,298,817.33 |
Huadong Medicine Co., Ltd.Chairman of the Board: Liang Lyu
August 28, 2020