China Times (www.chinatimes.net.cn) reporter Wang Yu Yu Na reported in Beijing
The farce of "seizing the seal" between Huadong Pharmaceutical Co., Ltd. (000963.sz, hereinafter referred to as Huadong Pharmaceutical) and its subsidiary Huadong Ningbo has come to an end.
The latest news is that Huadong Pharmaceutical said in the third quarter financial report recently released that it has communicated with the shareholders and management representatives of natural persons in Ningbo, East China, on relevant matters, and all parties agreed to accelerate the preparation of the due liquidation of Ningbo in East China.
The main business of Ningbo in East China is the agent sales of Korean Yiwan hyaluronic acid, and with the listing of East China Pharmaceutical's blockbuster product "Girl Needle", the overlap of medical aesthetic business between the two sides has become more and more obvious. According to the third quarter financial report, as of October 26, the "girl needle" advance collection has exceeded 100 million yuan, however, although the company's medical aesthetic revenue rose sharply in the first three quarters, but the net profit is still a loss; in the pharmaceutical industry, the core subsidiary China and the United States East China are affected by the collection and drug price reduction, the third quarter revenue and net profit are still down year-on-year, but the single quarter has achieved growth.
Since the second half of this year, Huadong Pharmaceutical's medical aesthetic products have been listed one after another, and whether the medical aesthetic business that has been given high hopes can become a new profit growth point of Huadong Pharmaceutical remains to be answered by the market.
Shake hands?
Huadong Pharmaceutical said in its recently released third-quarter financial report that the litigation case between Huadong Pharmaceutical and Ningbo in East China has been heard in the Beilun District Court of Ningbo on September 22 this year, and no judgment has yet been pronounced. Since then, Huadong Pharmaceutical has also held a meeting with the shareholders and management representatives of natural persons in Ningbo, East China, and the two sides have reached a consensus that East China Ningbo has entered the liquidation preparation period, and will mainly carry out capital withdrawal before the end of the year, and will not carry out new business operations, and all parties agree to accelerate the preparation of the due liquidation of East China Ningbo. Huadong Pharmaceutical said that the company will be responsible for all shareholders and safeguard the interests of all shareholders, and properly do a good job in the follow-up liquidation of Ningbo in East China in accordance with the law.
The reporter of China Times asked the secretary of the board of directors of East China Medicine for verification on whether the two sides had settled out of court, but had not received a reply as of press time.
East China Ningbo is a subsidiary of East China Pharmaceutical. As the major shareholder, Huadong Pharmaceutical holds 51% of the equity of East China Ningbo, and the east China Ningbo management layer represented by 20 natural persons holds 49% of the equity of East China Ningbo. In August this year, the shareholders of Ningbo Natural Persons in East China sued the People's Court of Beilun District of Ningbo, Ningbo, China, on the grounds that there were serious difficulties in the operation and management of Ningbo in East China and that the continued operation would cause significant losses to the interests of shareholders, requesting an order for the early dissolution of Ningbo, East China.
East China Ningbo as early as 2013 began to operate medical beauty, the main business is to represent South Korea lg life sciences of the Ywan series hyaluronic acid and South Korea Jetema company medical beauty products botulinum toxin, because botulinum toxin has not yet been listed in China, East China Ningbo medical beauty revenue is mainly composed of Ywam series hyaluronic acid. In 2018, the operating period of East China Ningbo expired, and the two sides had a greater dispute over the control, so the business period of East China Ningbo was changed to one year.
In 2018, Huadong Pharmaceutical itself was involved in medical beauty and acquired a wholly-owned subsidiary, Sinclair, which is currently mainly engaged in hyaluronic acid products. East China Ningbo believes that the wholly-owned subsidiary of East China Pharmaceutical Cultivation Business overlaps with East China Ningbo to form direct competition with East China Ningbo, and the one-year business term is also to leave enough time for the cultivation of its own medical aesthetic company Sinclair.
The two sides buried a gap in 2018, and the operating performance of Ningbo in East China also began to decline. From 2018 to 2020, the operating income of Ningbo in East China was 1.741 billion yuan, 1.667 billion yuan and 1.285 billion yuan, and the net profit was 229 million yuan, 192 million yuan and 123 million yuan, respectively.
Where is the new profit growth point?
According to the third quarterly report of Huadong Pharmaceutical, the operating income in the third quarter was 8.748 billion yuan, down 1.04% year-on-year; the net profit attributable to the shareholders of the listed company was 595 million yuan, down 9.88% year-on-year; and the non-net profit was 568 million yuan, down 9.00% year-on-year.
The Company believes that the main reason for the year-on-year decline in the Company's net profit and deduction net profit in the reporting period is that the non-recurring profit and loss in the first quarter of 2020 was 290 million yuan, including the net gain of 30.65 million pounds obtained by the British subsidiary Sinclair from the transfer of regional distribution interests in the product to Gao Demei Company, which significantly increased the company's overall earnings for the first quarter of 2020, and no such matters occurred during the reporting period, resulting in an increased year-on-year decline in net profit attributable to shareholders of listed companies.
East China pharmaceutical business is mainly divided into three major sectors: pharmaceutical industry, pharmaceutical business and medical aesthetic business. During the reporting period, the core subsidiary of the pharmaceutical industry sector, Sino-US East China, continued to be affected by drug collection and price reduction in operation, and the growth rate of revenue and net profit both declined. In the first three quarters of this year, China and the United States and East China achieved operating income of 7.804 billion yuan, down 11.4% year-on-year, and net profit of 1.72 billion yuan, down 11.1% year-on-year. Operating income in the third quarter of this year decreased by 12.7% year-on-year. However, Huadong Pharmaceutical pointed out that the year-on-year decline in the financial report of China and China and East China has narrowed, and it has achieved growth from the previous month. The data shows that the operating income of China, the United States and East China in the quarter increased by 2.0% month-on-month, and the net profit of the quarter increased by 14.8% month-on-month. During the reporting period, the total R&D investment in the pharmaceutical industry was 904 million yuan, an increase of 8.9% year-on-year.
In the first three quarters of this year, the East China Pharmaceutical and Medical Aesthetic Sector achieved operating income (including the merger of the newly acquired Spanish high tech company) of 53.06 million pounds (about 473 million yuan), an increase of 127.4% year-on-year, of which sinclair's own revenue increased by 79.24%, but due to factors such as one-time expenses related to the acquisition of high tech company equity, sinclair's overall consolidated net profit was still a loss. Shi Lichen, an expert in pharmaceutical strategic planning, told the China Times that it will take several years for the medical aesthetic business to really contribute to profitability.
The core product of medical beauty, "Girl Needle", has officially landed on the Chinese mainland market at the end of August this year, and the number of cooperative hospitals has been signed up at present, and as of October 26, more than 100 million yuan has been received in advance. In addition, some of Huadong Pharmaceutical's medical aesthetic products will be listed in China in the fourth quarter or next year.