On May 28, Grand Pharma (00512. HK) announced that its subsidiary, Grand Pharmaceutical (China) Co., Ltd. (hereinafter referred to as the "Subsidiary"), was punished for monopolizing and abusing its dominant market position.
Or affected by this news, the stock once fell more than 10% after opening low on May 29, and then recovered in shock, and the final decline was 2.07% as of the close.
He was fined 285 million yuan for monopolistic conduct
According to the official website, Grand Pharma completed the change of shareholding structure in 2002 and indirectly achieved its listing in Hong Kong. The company is a scientific and technological innovation international pharmaceutical enterprise, mainly engaged in the manufacture and sales of pharmaceutical preparations and medical devices, biotechnology products and nutritional products, boutique APIs and other products. At present, the company has more than 30 member companies, involving respiratory and severe anti-infection, tumor, cardiovascular and cerebrovascular emergency care, ophthalmology, cardiovascular and cerebrovascular precision interventional diagnosis and treatment, nuclear medicine anti-tumor diagnosis and treatment, high-quality amino acids and other fields.
It is understood that the State Administration for Market Regulation of China believes that Grand Pharma's subsidiary reached and implemented a monopoly agreement with Wuhan Huihai on the sale of norepinephrine binetrate API and epinephrine API from June 2016 to July 2019, and abused its dominant market position in the Chinese norepinephrine API and epinephrine API market in May 2010 to April 2021, violating the Anti-Monopoly Law of the People's Republic of China. It constitutes the implementation of monopoly agreements and the abuse of a dominant market position.
On all accounts, the State Administration for Market Regulation of China has punished the subsidiary, ordered it to stop its illegal conduct, confiscated RMB149 million of the illegal gains (unless otherwise specified, hereinafter referred to as RMB), and imposed a fine of RMB136 million based on 3% of the subsidiary's sales in China in 2019.
Wuhan Huihai, another protagonist in the incident, was fined less money, and the company was confiscated 30.9248 million yuan of illegal income and fined 4.1268 million yuan.
How big is the impact?
It is worth mentioning that Grand Pharma's subsidiaries and Wuhan Huihai were fined for monopolistic behavior and once appeared on Baidu's hot search, but in fact, the impact of this matter may not be particularly large.
From a financial point of view, Grand Pharma said in the announcement that the penalty amount accounted for about 3.48% and 15.85% of its audited comprehensive revenue and profit attributable to company holders in the latest financial year, respectively, and is not expected to have a continuous impact on the Group's production and operation.
In addition to the financial impact, Grand Pharma's subsidiary has terminated the relevant monopoly agreement in the field of norepinephrine binetrate API and epinephrine API, and will supply relevant raw materials to the market in accordance with the law. This also affects the company's long-term performance.
However, from the data disclosed in 2022, the manufacture and sales of pharmaceutical preparations and medical devices are the company's core business, contributing nearly 60% of the revenue, followed by biotechnology products and nutritional products accounting for about 30%, and the revenue of boutique APIs and other products accounting for about 10%.
The problem that was fined this time is the business of APIs, and being punished may have an impact on the performance of Grand Pharmaceutical, but this impact should not be large. Because the proportion of API business is already low, and the above-mentioned norepinephrine bitartrate API and epinephrine API are only a small part of its API business.
In fact, Grand Pharma also stated that based on the announcement and considering the amount of the penalty, the company believes that the administrative penalty will not have any material adverse impact on the Group's business operations and financial position.
The gradual recovery of its stock price after a sharp intraday decline on May 29 also shows to some extent that most market funds do not believe that this event will have such adverse consequences.
It is worth mentioning that the company's performance in recent years has been relatively good, basically growing steadily, and subsequent investors may focus more on its core products pharmaceutical preparations, medical devices, innovative drugs and other aspects.
Author: Yan XIV