The 2019 Annul Report of Huadong Medicine Co., Ltd.
Huadong Medicine Co., Ltd.
The Annual Report 2019
April 2020
1
The 2019 Annul Report of Huadong Medicine Co., Ltd.
To the shareholders
Dear Fellow Shareholders,
2019 was a year where the pharmaceutical industry in China underwent significant structural
changes. It was also an incredibly important year for Huadong that we accelerated our
transformation and took great strides toward a new era of growth. Look back on 2019, our
employees had altogether accomplished outstanding results through commitment and relentless hard
work. Overall, the company continued to deliver solid overall performance and business results.
Our company’s financial results again reached new high record, with consolidated net profit
increased by 24.08% to RMB 2.813billion. Zhongmei Huadong achieved annual sales revenue of
more than RMB 10 billion for the first time, a historical milestone. Zhongmei Huadong invested
RMB1.055 billion in research and development (R&D), a 49.14% increase compared to prior year.
We successfully established Zhongmei Huadong - centered a global R&D strategic collaboration
ecosystem and completed R&D project evaluation and approval system. We made significant
breakthroughs in research and innovation, where we saw TTP273, the world’s first oral small
molecular GLP-1 agonist drug receiving regulatory approval to commence Phase I clinical trial, and
other key R&D projects, including Mafatinib and Liraglutide, entering Phase III clinical trials. We
also entered into strategic collaborations with R2 and MediBeacon in the US and Kylane in
Switzerland while obtained global commercialization rights to a number of innovative products,
which enriched our product pipeline and drivers for future growth.
In June 2019, we welcomed our new board of directors and successfully completed the
handover of the new and old management teams. We formulated a new growth strategy to focus on
the pharmaceutical and healthcare sectors, led by the pharmaceutical industry division, while
expanding in pharmaceutical distribution and aesthetics. We keep faith with our corporate
philosophy of being “R&D based and patient centered” and we are dedicated to becoming a major
global branded pharmaceutical company driven by research and innovation.
The boom of generic drugs in China has come to an end, but the golden age of innovative
drugs has already been emerging.
Going forward, Huadong Medicine will stay primary focus on three core therapeutic areas of
oncology, endocrinology and autoimmunology. We will focus on innovative products with
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
meaningful clinical value and significant market potential. We will conduct a comprehensive review
of our existing product portfolio to reduce the number of generic drugs with low barriers of entry
and low commercial value. We will continue to solidify our leading position in diabetes and
transplantation immunology in China, through establishing core competencies and strategies based
on innovative drugs R&D and differentiated generic drugs with high technical barriers of entry, as
well as targeting break-through sciences.
We will continue to invest and expand our R&D capabilities. Our annual R&D expenditure
will be at least equal up to 10% of Pharmaceutical Industry sales. Through both organic growth and
in-organic transactions, establishing partnerships and collaborations horizontally and vertically
across healthcare industries, we aim to rapidly expand and optimize our pipelines of innovative
products in core areas of focus across various stages of R&D. We will continuously improve our
R&D capabilities and effectiveness to enable Huadong Medicine to be the leading pharmaceutical
company with best-in-class R&D, strong scientific marketing promotion and state-of-the-art
manufacturing capabilities. We endeavor to launch new products every year from 2022 onwards and
by 2025 have sales contribution of innovative products to be 30% of total Pharmaceutical Industry
sales and rising.
2020 is going to be a year of transformation for Huadong. We are prepared to embrace more
intensive competitive environment and challenges. Any challenge would only ensure our continued
success in the future. We are well positioned to rapidly respond and adapt to any emerging situation
or issue as we make further advances in the transition period. We are committed to our
transformation strategy to pursue innovation as high priority. We are positioning for the longevity of
the business and have great confidence that we could overcome any obstacle. We will make steady
progress on course to innovation and transformation and target sustainable growth, cost saving and
debt reduction, by optimizing organisational structure, attracting new talents and streamlining
operating models.
We will transform from being led to leading, from generic to innovation, from domestic to
global and from success to excellence! We will fully leverage our great culture of exploration as
well as capital and technology we have cumulated through the past years. We have embarked on a
journey to innovation and transformation with a comprehensive plan and we are dedicated to make
great progress towards achieving the goal by overcoming any challenge. We envisage by 2025
Huadong Medicine will be successfully transformed from a traditional generic drug manufacturer to
a leading innovative pharmaceutical company. We also envisage that going forward Huadong
Medicine will become a leading global pharmaceutical company.
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
This year is our 20th anniversary of our initial public offering. We sincerely thank all our
shareholders for your support in Huadong Medicine for the past 20 years.
We are not afraid of change and committed to stay on course and work even more diligently to
deliver best results.
We will stay true to our purpose and core values and will continue to create long term and
sustainable meaningful value for our shareholders!
Lyu Liang, Chairman
On behalf of Huadong Medicine
April 2020
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Section I. Important Declaration, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and
senior management of Huadong Medicine Co., Ltd. (hereinafter referred to as
the “Company”) hereby guarantee that the information presented in this annual
report is authentic, accurate and complete and free of any false records,
misleading statements or material omissions, and shall undertake individual and
joint legal liabilities.
Lyu Liang, the Company’s legal representative and the officer in charge of
accounting, and Qiu Renbo, head of accounting department (accounting
supervisor) hereby declare and guarantee that the financial statements in this
annual report are authentic, accurate and complete.
All directors have attended the Board of Directors meeting to review this
annual report.
The future plans, development strategies and other forward-looking
statements in this annual report shall not be considered as substantial
commitment of the Company to investor. Therefore, investors are kindly
reminded to pay attention to possible investment risks.
The profit distribution plan reviewed and adopted by this Board of
Directors meeting is as follows: on the basis of 1,749,809,548 shares, a cash
dividend of 2.8 yuan (tax included) is to be distributed to all shareholders for
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
every 10 shares; no bonus share will be issued; and no capital reserve will be
converted to increase the capital stock.
According to “Stock Listing Rules of the Shenzhen Stock Exchange”, if
listed companies have both Chinese or other language version of public notice,
they should ensure the content of both versions are the same. In the case of
discrepancy, the original version in Chinese shall prevail.
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Contents
To the shareholders .................................................................................................................................................. 2
Section I. Important Declaration, Contents and Definitions ............................................................................... 5
Section II. Company Profile and Key Financial Indicators ................................................................................. 9
Section III. Overview of the Company’s Business .............................................................................................. 14
Section IV. Discussion and Analysis of Operations ............................................................................................. 20
Section V. Important Matters ............................................................................................................................... 66
Section VI. Share Change and Shareholders ..................................................................................................... 104
Section VII. Preferred Shares ..............................................................................................................................113
Section VIII. Convertible Corporate Bonds .......................................................................................................114
Section IX. Directors, Supervisors, Senior Managers and Employees .............................................................115
Section X. Corporate Governance ...................................................................................................................... 126
Section XI. Information about Corporate Bonds.............................................................................................. 132
Section XII. Financial Report ............................................................................................................................. 136
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Definitions
Term refers to Definition
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.
Xi’an Bohua refers to Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd.
Jiangdong Company refers to Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd.
Huadong Ningbo Company refers to Huadong Ningbo Medicine Co., Ltd.
Sinclair refers to Sinclair Pharma Limited
Chongqing Peg-Bio refers to Chongqing Peg-Bio Biopharm Co., Ltd.
CSRC refers to China Securities Regulatory Commission
RAPT refers to RAPT Therapeutics, Inc.
SSE refers to Shenzhen Stock Exchange
GMP refers to Good Manufacturing Practice
GSP refers to Good Supply Practice
BE refers to Bioequivalence
refers to Center for Drug Evaluation (of National Medical Products
CDE
Administration)
MAH refers to Marketing Authorization Holder
FDA refers to (U.S.) Food and Drug Administration
ANDA refers to (U.S.) Abbreviated New Drug Application
refers to International Council for Harmonisation (of Technical Requirements
ICH
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)
refers to Drugs that can only be purchased and used according to prescriptions
prescription drugs
issued by physicians
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Section II. Company Profile and Key Financial Indicators
I. Company information
Stock name (abbreviation) Huadong Medicine Stock code 000963
Stock listed on Shenzhen Stock Exchange
Company name in Chinese 华东医药股份有限公司
Company name in Chinese
华东医药
(abbreviation)
Company name in English (if
Huadong Medicine Co., Ltd.
any)
Company name in English
Huadong Medicine
(abbreviation, if any)
Legal representative Lyu Liang
Registered address Floor 7, 9 and 10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou
Zip code of the registered
310006
address
Office address 866 Moganshan Road, Hangzhou
Zip code of the office address 310011
Official website www.eastchinapharm.com
Email address hz000963@126.com
II. Contact persons and contact information
Secretary of the Board of Directors Securities affairs representative
Name Chen Bo Xie Lihong
Contact address 866 Moganshan Road, Hangzhou 866 Moganshan Road, Hangzhou
Tel. 0571-89903300 0571-89903300
Fax 0571-89903300 0571-89903300
Email address hz000963@126.com hz000963@126.com
III. Channels of disclosure and location of preparation
Media selected by the Company for information
China Securities Journal, Securities Times, and Shanghai Securities News
disclosure
Website designated by CSRC for publication of the http://www.cninfo.com.cn
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
annual report
Location of preparation of the Company’s annual
Office of the Company’s Board of Directors
report
IV. Registration changes
Organization code 91330000143083157E
Changes of the Company’s main business since its
None
listing (if any)
Previous changes of controlling shareholder (if any) None
V. Other relevant information
The accounting firm hired by the Company
Name of the accounting firm Pan-China Certified Public Accountants (special general partnership)
Floor 15, Block B, China Resources Building, 1366 Qianjiang Road,
Office address of the accounting firm
Jianggan District, Hangzhou, Zhejiang Province
Certified public accountants (signatories) Wang Fukang, Xu Ping
Sponsor(s) hired by the Company to fulfil the duty of continuous supervision during the reporting period
□ Applicable √ N/A
Financial consultant(s) hired by the Company to fulfil the duty of continuous supervision during the reporting period
□ Applicable √ N/A
VI. Key accounting data and financial indicators
Whether the Company needs to perform a retroactive adjustment or restatement of previous accounting data
√ Yes □ No
Reason(s) for retroactive adjustment or restatement
Other reason(s)
Percentage
increase/decrea
2018 se from last 2017
2019 year to this
year
Before After After Before After
adjustment adjustment adjustment adjustment adjustment
35,445,698,216 30,663,374,326 30,663,374,326 27,831,823,148 27,831,823,148
Operating revenue (yuan) 15.60%
.15 .27 .27 .07 .07
Net profit attributable to 2,813,118,702. 2,267,229,174. 2,267,229,174. 24.08% 1,779,506,061. 1,779,506,061.
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
shareholders of listed 11 08 08 59 59
companies (yuan)
Net profit attributable to
shareholders of listed
2,574,437,417. 2,236,323,500. 2,236,323,500. 1,740,064,200. 1,740,064,200.
companies after deducting 15.12%
52 44 44 10 10
non-recurring gains/losses
(yuan)
Net cash flow from operating 2,001,698,170. 2,039,496,083. 2,039,496,083. 1,661,118,663. 1,661,118,663.
-1.85%
activities (yuan) 67 26 26 70 70
Basic earnings per share
1.61 1.55 1.29 (Note) 24.08% 1.83 1.02 (Note)
(yuan/share)
Diluted earnings per share
1.61 1.55 1.29 (Note) 24.08% 1.83 1.02 (Note)
(yuan/share)
Weighted average return on
25.29% 24.87% 24.87% 0.42% 23.02% 23.02%
equity (ROE)
Percentage
increase/decrea
se from the end
End of 2018 End of 2017
of last year to
End of 2019
the end of this
year
Before After After Before After
adjustment adjustment adjustment adjustment adjustment
21,463,974,146 19,217,357,282 19,217,357,282 15,987,106,537 15,987,106,537
Total assets (yuan) 11.69%
.63 .33 .33 .46 .46
Net assets attributable to
12,309,477,308 9,938,148,996. 9,938,148,996. 8,393,269,796. 8,393,269,796.
shareholders of listed 23.86%
.00 53 53 56 56
companies (yuan)
Note: During the reporting period, the Company implemented Profit Distribution Plan 2018 in June 2019. On
the basis of 1,458,174,624 shares of the Company’s capital stock, a cash dividend of 3.3 yuan (tax included) was
distributed for every 10 shares, and the capital reserve was converted to increase 2 shares for every 10 shares.
Data on earnings per share for 2017 and 2018 were adjusted on the basis of the latest capital stock according to
relevant accounting standards.
Capital stock of the Company as of the trading day before disclosure
Capital stock of the Company as of the trading day before
1,749,809,548
disclosure (share)
Fully diluted earnings per share calculated on the basis of the latest capital stock
Dividends paid on preferred shares 0.00
Fully diluted earnings per share calculated on the basis of the
1.6077
latest capital stock (yuan/share)
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
VII. Differences in accounting data under domestic and overseas accounting standards
1. Differences in net profit and net assets disclosed in financial statements under international and Chinese
accounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under international and Chinese accounting
standards.
2. Differences in net profit and net assets disclosed in financial statements under overseas and Chinese
accounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under overseas and Chinese accounting
standards.
VIII. Key financial indicators by quarter
Unit: RMB yuan
Q1 Q2 Q3 Q4
Operating revenue 9,705,148,188.21 8,543,519,428.77 9,379,217,601.89 7,817,812,997.28
Net profit attributable to
907,244,647.77 689,038,770.54 616,830,635.77 600,004,648.03
shareholders of listed companies
Net profit attributable to
shareholders of listed companies
856,031,343.59 618,403,044.38 605,545,800.58 494,457,228.97
after deducting non-recurring
gains/losses
Net cash flow from operating
-433,890,841.71 1,396,919,178.57 -53,990,090.92 1,092,659,924.73
activities
Whether the above financial indicators or their totals are significantly different from relevant financial indicators in previous
quarterly and semiannual reports by the Company
□ Yes √ No
IX. Items and amounts of non-recurring gains/losses
√ Applicable □ N/A
Unit: RMB yuan
Item 2019 2018 2017 Note
Mainly due to the
Gains/losses on disposal of non-current
109,574,836.97 -697,591.38 -7,395,738.16 confirmation of
assets (including the written-off part of the
housing demolition
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
accrued assets impairment reserve) and relocation funds
in the current period.
Tax refund and reduction with ultra vires
examination and approval or without offical 4,407,536.93 1,630,170.53 11,124,356.12
approval documents
Mainly due to the
confirmation of
government grants by
Government grants included in current
the Company’s
gains/losses (excluding those closely related
112,527,883.18 79,368,271.28 85,111,812.35 subsidiaries,
to operating activities and measured
Zhongmei Huadong
according to unified national standards)
and Huadong Ningbo
Company, in the
current period.
Gains/losses on assets entrusted to others for
16,058,460.95 2,575,905.01
investment or management
Gains/losses on debt restructuring 2,439,066.31
Receivables subject to separate impairment
test and reversal of reserve for impairment 1,896,979.79
of contract assets
Mainly due to the
adjustment of
contingent
Other non-operating revenue or expenditure consideration
77,976,120.18 -34,052,605.70 -20,536,885.66
expect above-mentioned items payments of the rights
and interests of
Sinclair products in
the current period.
Less: Amount affected by income tax 47,542,186.99 14,789,855.01 19,783,865.78
Amount affected by rights and interests
20,159,885.47 16,611,177.03 14,092,788.70
of minority stakeholders (after tax)
Total 238,681,284.59 30,905,673.64 39,441,861.49 --
If the Company recognizes an item as a non-recurring gain/loss based on the “Interpretative Announcement No. 1 on Information
Disclosure 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.
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Section III. Overview of the Company’s Business
I. Main business of the Company during the reporting period
Huadong Medicine Co., Ltd. (stock code: 000963), founded in 1993 and headquartered in
Hangzhou, Zhejiang Province, was listed on Shenzhen Stock Exchange in December 1999. After
more than 20 years of development, the Company’s business covers the whole pharmaceutical
industrial chain. With the medicine industry as its core, the Company expands its medicine business
and aesthetic medicine industry, and has developed into a large comprehensive listed
pharmaceutical company integrating R&D, production and sales of medicine.
The pharmaceutical industry of the Company focuses on R&D, production and sales of
medication for specialist departments, chronic diseases and special purposes. The Company has
formed core product pipelines in such fields as chronic kidney diseases, transplantation immunity,
internal secretion and digestive system, and owns a number of first-line clinical medications with
market advantages in China. Meanwhile, through independent development, external introduction
and project cooperation, the Company focuses on the R&D layout of innovative drugs and generic
drugs with high technical barriers in the three core fields of anti-tumor, internal secretion and
autoimmunity. The Company continues to carry out international product registration, international
certification, consistency evaluation, etc., forming an international pharmaceutical industry system.
The Company’s pharmaceutical commerce has four sections: Western Medicine & Traditional
Chinese Medince (TCM), medical equipment, ginseng & herb and health industry, covering
medicine wholesale, medicine retail, third-party medicine logistics featured by cold chain, medicine
e-commerce, hospital value-added services and featured big health industry, providing customers
with integrated solutions.
The Company’s aesthetic medicine business focuses on R&D, production and sales of the
latest products and devices in facial micro-plastic surgery and skin management. Sinclair, a
wholly-owned subsidiary headquartered in the United Kingdom, has production bases in France, the
Netherlands and the United States, and promotes and sells long-acting microspheres for injection,
hyaluronic acid, thread lift and other products in the global market. Sinclair is the Company’s global
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
operation platform for aesthetic medicine. Huadong Ningbo Company, a partially-owned subsidiary,
is a comprehensive aesthetic medicine and healthcare platform company integrating R&D,
production and sales of aesthetic medicine products and customized services. It is acting as the
general agent for Korean YVOIRE hyaluronic acid products in the Chinese market.
II. Significant changes in major assets
1. Significant changes in major assets
Major assets Note on significant changes
The ending balance is 464.27 million yuan, an increase of 157.89% from the beginning
Equity assets 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
The ending balance is 1.82981 billion yuan, an increase of 196.57% from the beginning
of the period, which is mainly due to the increase of Zhongmei Huadong R&D platform
Constructions in progress
construction and Huadong Medicine Biomedical Science and Technology Park Project
Phase II.
The ending balance is 254.89 million yuan, an increase of 63.9% from the beginning of
Advance reciepts
the period, which is mainly due to the increase of drug sales revenue received in advance.
Non-current liabilities due within one
Mainly due to the transfer of bonds payable due within one year.
year
The ending balance is 48.08 million yuan, a decrease of 82.5% from the beginning of the
Long-term payables period, which is mainly due to the adjustment of contingent consideration payments of
the rights and interests of Sinclair products in the current period.
2. Major overseas assets
√ Applicable □ N/A
Proportion of Whether
Control
Specific Assets size overseas there are any
Reason for Operating measures to
content of (ten thousand Location Profit or loss assets in the significant
formation mode ensure assets
assets yuan) Company’s impairment
safety
net assets risks
Sinclair Acquisition Independent Control of
93,619.01 UK Profit 7.61% None
Pharma of equity accounting the Board of
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Limited Directors and
examination
& approval
of major
decisions;
daily
supervision
of financial
matters;
entrusting
external
intermediarie
s to conduct
audits
Note: During the reporting period, in April 2019, the Company entered into strategic cooperation with R2
Dermatology, a US company specializing in medical devices and technology development related to dark spot
removal and skin whitening using freezing technology in the field of aesthetic medicine, and made equity
investment in R2 and became its shareholder. As of the date of this disclosure, the Company has invested 20
million US dollars, with a shareholding ratio of 26.60%. In July 2019, the Company entered into strategic
cooperation with MediBeacon, a US company dedicated to the development of contrast agents and equipment in
such medical fields as renal function and gastrointestinal function assessment, and invested 30 million US dollars
for equity investment. As of the date of this report, the Company has contributed 15 million US dollars, or 4.3% of
its shares.
III. Analysis of core competitiveness
1. Open R&D system and continuous improvement of innovation capability
After years of development, the Company has established and improved its independent R&D
system, 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 Valley
in the United States, and cooperated with world-renowned colleges, research institutes, innovative
biotech companies, professional technology platforms and other institutions in new drug R&D
projects. The Company has continuously increased R&D investment, adjusted its existing product
structure in an all-round way, resolutely cleaned up and phased out generic drugs with low barriers
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
and low commercial value, focused on three core areas of anti-tumor, internal secretion and
autoimmunity, continued to consolidate its position as a domestic leader in the field of diabetes and
autoimmune drugs, quickly completed the layout of innovative product pipelines in the core areas,
and enabled the Company to effectively supplement and take the lead in innovative products in the
core areas. Independent R&D, external M&A, and product license-in have rapidly enriched product
pipelines in the core areas, forming a good development trend of continuous proposal and market
launch of innovative products, providing new momentum for medium and long-term growth.
2. Comprehensive capability in international business development
The Company has actively promoted internationalization and acquired 100% shares of Sinclair,
a British listed company, through international M&A, thus realizing the global layout of aesthetic
medicine sales network. Its strategic cooperation with US companies R2 and MediBeacon and
Kylane in Switzerland has increased its international commercial development rights and interests.
The Company has accelerated the international registration of products. All its chemical raw
medicine in production have been certified by FDA or in authoritative markets such as the European
Union; its Pantoprazole Sodium Lyophilized Powder for Injection has been temporarily approved
by FDA; and its Acarbose Tablets gained access to the Austrian market in the European Union. The
Company is the first Chinese medicine enterprise to achieve these results. The production lines of
all of its raw medicines and some of its preparations have been certified by FDA or in authoritative
markets such as the European Union. The Company actively engages itself with international
logistics and purchasing suppliers, realizes the internationalization of purchasing ability, strengthens
international trade cooperation, and achieves positive results in the expansion of internation al raw
medicine market.
3. Abundant product pipelines for specialist departments and chronic diseases and
overall competitive advantage in the field of diabetes medication
Over 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 foundation
in such fields as chronic kidney diseases, transplantation immunity, internal secretion, and digestive
system . Its market share remains in the forefront of domestic similar products. An overall layout of
innovative targets and differentiated generic drug product pipelines has been formed in the
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
important clinical medication targets of diabetes. In the field of organ transplantation, the
Company’s products cover all clinical first-line immunosuppressant. In the future, the Company
will focus on the R&D layout of innovative products in the three core areas of anti-tumor, internal
secretion and autoimmunity. At present, the Company has 22 core products on the market and 16
varieties under R&D included in the 2019 National Reimbursement Drug List and 10 core products
on the market and 4 varieties under R&D included in the 2018 National Essential Drug List.
Full product line layout of Huadong Medicine in the field of diabetes medication (R&D progress as of April 2020)
Traditional oral DPP-4 inhibitors SGLT-2 inhibitors GLP-1 receptor stimulants Insulin and biosimilars
hypoglycemic drugs
Acarbose (already on the Sitagliptin -Metformin Empagliflozin-Metformin Liraglutide (clinical trial Insulin Detemir (clinical trial
market) Compound (applied for Compound (applied for phase III) phase I)
production) production)
Pioglitazone-Metformin Canagliflozin (BE Liraglutide (clinical trial Insulin Aspart (preclinical)
(already on the market) completed, to apply for phase I: indications for
production) weight loss)
Pioglitazone (already on the TTP273 (oral administration) Insulin Degludec
market) (overseas clinical trial phase (preclinical)
II completed; domestic
clinical trial phase I)
Voglibose (already on the Lucentis (preclinical)
market)
Repaglinide (BE research)
4. Leading pharmaceutical professional promotion team and market network in China
With academic promotion of clinical value as the core, the Company has promoted a
multi-channel marketing mode that combines comprehensive hospitals, primary medical institutions,
retail and third terminals, and Internet, and has gradually formed effective coverage through
multiple channels. With the full coverage of Zhejiang Province, the Company has established
business cooperation with 31 of the world’s top 50 pharmaceutical multinational companies and 80
of China’s top 100 pharmaceutical companies, and its cold-chain logistics and distribution business
is taking the lead in China. In the field of aesthetic medicine, Ningbo Company, a partially-owned
subsidiary, ranks first in the market share of domestic aesthetic medicine. The core products of
Sinclair, a wholly-owned subsidiary, have been launched in more than 60 countries and regions
around the world.
5. Prudent and pragmatic operation style and shareholder return
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
The Company values management innovation, and strives to meet the demand of market
competition by improving its quality of operation. The compliant and efficient marketing services,
differentiated market positioning, innovative R&D layout and perfect talent planning promote the
Company’s lasting and steady development. Since its listing, the Company has maintained steady
growth 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 16 times, with a total value of
3.684 billion yuan, far exceeding the 250 million yuan raised in its IPO. The Company has brought
continuous and stable returns on investment to shareholders.
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Section IV. Discussion and Analysis of Operations
I. Overview
2019 is a year of great historical significance in the development of New China, and a year of
profound and dramatic changes in China’s medicine industry. It is also a key year for the Company
to deepen its transformation, and the first year for the Company to implement the entrepreneurial
spirit and enter a new period of development. Over the past year, faced with the enormous pressure
brought by the national economic downturn, the serious situation in the domestic medicine market,
the pressure of price reduction, regulatory compliance and market competition brought by the
intensive implementation of national health reform policies such as centralized purchasing, the
Company focuses on enhancing soft value, adheres to strategic enterprise transformation,
emphasizes high-quality development, comprehensively and rapidly promotes the
internationalization of innovation transformation, maintains balanced development of industry and
business, continues to push forward in a complex and changeable policy and industry environment,
and has achieved remarkable operating results. The Company’s operating revenue and net profit
have reached new highs, and its operating performance has maintained steady growth for 20
consecutive years. Meanwhile, its business quality has been continuously improved.
During the reporting period, the income from main business and net profit continued to
increase. The annual operating revenue was 35.446 billion yuan, an increase of 15.60% over the
previous year. The net profit attributable to shareholders of the parent company was 2.813 billion
yuan, an increase of 24.08% over the previous year. By the end of 2019, the total assets of the
Company had reached 21.464 billion yuan, and the net assets belonging to the shareholders of the
parent company were 12.309 billion yuan. The liabilities to assets (L/A) ratio was 40.05%; the
return on equity (ROE) was 25.29%, which remained above 20% for 13 consecutive years.
In 2019, Zhongmei Huadong, a wholly-owned subsidiary of the Company, has completed the
tasks of scientific research, production and operation, continuously enhanced its market
competitiveness and profitability, and continued to exploit the chronic disease market; the four
product lines of chronic kidney diseases, diabetes, transplantation immunity and digestive system
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
all maintain growth. Its operating revenue topped 10 billion yuan for the first time, reaching 10.508
billion yuan, with a net profit of 2.198 billion yuan, with year-on-year increases of 28.02% and
18.14%, respectively. Huadong Medicine’s business sector has actively innovated and developed its
business mode, continuously improved its operating efficiency, and maintained a steady growth in
its business. With annual sales revenue of 25.098 billion yuan, it continued to maintain a leading
position in the medicine industry in Zhejiang Province. In the aesthetic medicine industry, it
continued to explore the domestic and overseas markets, with annual income exceeding 1.2 billion
yuan.
State of perating
Growth trend of Huadong Medicine’s operating revenue (100 million yuan) in the past 10 years
100 million yuan
Compound annual growth rate of operating
revenue (100 million yuan) in the past 10 years
(100 million yuan)
Growth trend of Huadong Medicine’s operating revenue over the past 10 years
Growth trend of Huadong Medicine’s net profit (100 million yuan)
attributable to the parent company in the past 10 years
100 million yuan
Compound annual growth rate of net profit
attributable to the parent company (100 million
yuan) in recent 10 years
(100 million yuan)
Growth trend of Huadong Medicine’s net profit attributable to the parent company in the past 10
years
21
The 2019 Annul Report of Huadong Medicine Co., Ltd.
ROE of Huadong Medicine (%) from 2007 to 2019
ROE of Huadong Medicine (%) from
2007 to 2019
ROE of Huadong ROE of domestic medicine industy
Medicine (source: SASAC; iFinD)
ROE of Huadong Medicine (%) from 2007 to 2019
Growth rate of the Company’s major product
lines in 2019
All major product lines maintained good growth
Growth
rate
Growth
rate Growth
Growth Growth rate
rate rate
TCM for kidney Diabetes Immunosuppressants Digestive Cardiovascular and
diseases medication system drugs cerebrovascular drugs
Growth rate of Huadong Medicine’s major product lines in 2019
1. Accelerated R&D transformation, increased R&D investment, and abundant product
pipelines
In 2019, the Company continued to promote R&D transformation, with an annual R&D
investment of 1.055 billion yuan, a year-on-year growth of 49.14%. Through independent
development, external introduction and project cooperation, the Company has accelerated the
enrichment of its product pipelines. It has set up an international new drug development center, a
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
R&D project decision-making committee and an expert management committee, further
strengthened BD team building, and established the BD coordination mechanism and PM
management mechanism. The Company has strengthened the full life cycle management of R&D
projects, further improved the proposal approval and dynamic evaluation system of R&D projects,
timely adjusted the R&D strategies and direction, and cleaned up and eliminated generic drugs with
low barriers and low commercial value, so as to ensure the maximum utilization of its R&D
resources. It has optimized the R&D incentive system and fostered a R&D atmosphere that
encourages innovation and initiative by taking innovation as the orientation and the actual R&D
achievement as the evaluation standard. The Company has vigorously carried out the consistency
evaluation of each product, actively promoted clinical trials and sample preparation, completed the
process verification of 8 varieties and the BE/pre-BE sample preparation of 11 varieties, and
completed the supplementary application of products on the market and supplementary research of
related new products. Aligned with international standards, the Company has actively promoted the
R&D efficiency through the CMO/CDMO cooperation mode. A total of 3 clinical approvals and 1
production approval were obtained throughout the year; TTP273 obtained phase I clinical approval;
R2, HDSY313, MB102, MET306, CX-01-T and other innovation projects under R&D are
progressing in a planned and orderly manner; Liraglutide for Injection officially entered phase III
clinical trial and clinical enrollment continued as planned. (For details about R&D investment and
product pipelines under R&D, please refer to the relevant content in the R&D section)
2. Positive results in international development and major breakthroughs in international
registration
International product introduction and cooperation: (1) The Company signed a strategic
cooperation agreement with R2 Dermatology, made equity investment in R2 and obtained the
exclusive distribution rights of medical devices F1 and F2 developed by R2 and their future
improved models in 34 Asian countries and regions including China’s mainland, Japan and South
Korea; (2) Through strategic cooperation with MediBeacon, the Company obtained the exclusive
commercialization rights of all the products (including renal function monitoring and assessment,
gastrointestinal function assessment, and surgical visualization) owned by MediBeacon in 25 Asian
countries and regions including China’s mainland after subscribing part of the series B preferred
23
The 2019 Annul Report of Huadong Medicine Co., Ltd.
shares issued by MediBeacon. The signing of this project will promote the Company to gradually
form a complementary and collaborative drug product line and accurate monitoring means in the
field of chronic disease diagnosis and treatment, and further consolidate the Company’s
comprehensive competitiveness in chronic disease diagnosis and treatment; (3) The Company
reached a strategic cooperation intention with Switzerland’s KYLANE LABORATOIRES and
formally signed an agreement in the first quarter of 2020 to obtain the commercialization rights of
its Kysense series of high-end hyaluronic acid products in the global market. The products are
expected to be approved for sale in the European market in 2020, further enriching the aesthetic
medicine product pipelines.
International registration of preparations: The Company has continued to promote
international strategic goals. Pantoprazole Sodium for Injection (40mg) was temporarily approved
by FDA, filling the gap in ANDA registration of the Company’s preparations. Acarbose Tablets
were approved for sale in the Austrian market in the European Union; it is the first domestic oral
diabetes drug approved for sale in the European Union market.
3. Innovative operating mode for an international medicine production system of
Huadong
The Company has actively adapted its production system to the market. Centering on patients’
unsatisfied treatment needs and the Company’s product strategies, the Company has focused on the
implementation of generic drugs and the approval of innovative products, continued to enhance the
bulk R&D registration, production and manufacturing capabilities, further integrated the Company’s
superior resources, built an open manufacturing system, accelerated the transformation of
production and operation from the traditional “hard assets” to the “light assets” operating mode,
adjusted the product structure using the total factor layout, and piloted a new diversified operating
mode of light assets (MAH).
The Company has completed the transfer for production and approval of proposal of scientific
research projects to production in 2019, continuously promoted the ANDA internationalization
project of products, and carried out the international registration of Daptomycin and Daptomycin
for Injection, Fondaparinux Sodium and Fondaparinux Sodium Injection, Acarbose Tablets,
Pioglitazone-Metformin Tablets, Everolimus Tablets, Sirolimus Tablets and other products. The
24
The 2019 Annul Report of Huadong Medicine Co., Ltd.
Company has made preparations for the international commercial production of Pantoprazole
Sodium for Injection provisionally approved by FDA and Tacrolimus Capsules to be approved.
In the new context of centralized purchasing, the Company combines independent innovation
and technology introduction to improve the technical level of its raw medicines. Focusing on the
total production factors, the Company has paid close attention to fine management, vigorously
carried out lean production and total cost management, improved the level of information
technology and operating efficiency, optimized the production process, and promoted cost saving
and reduction. The Company is devoted to improving skills in international production, making
preparations for the international commercial production of products that have obtained overseas
certification, and creating products that are compliant with regulations, international-oriented,
high-quality and competitive in the market.
The Company has steadily promoted the construction of key projects. The Company has
focused on key engineering projects such as Jiangdong Phase II and the international R&D and
manufacturing center for preparations, completed work on schedule, further improved the
construction of four major production parks (Hangzhou Xiangfuqiao, Jiangdong Park, Jiangsu
Jiuyang and Xi’an Bohua) and two off-site workshops and the transfer of product approval
numbers.
4. Strengthened talent and expert team building to promote collective and international
human resources management
In 2019, the Company thoroughly implemented the working principles of “talent management
innovation” and “strategic human resources management”, strengthening the introduction of
scientific research and international high-end talents, and promoting the continuous expansion of its
talent team through internal training and external recruitment. The Company launched the global
campus recruitment and completed the first batch of on-site publicity and recruitment at renowned
colleges and universities in the United States and Singapore, and achieved expected results. In 2019,
34 people were recruited for core positions, including 22 with doctoral degrees and 27 who have
worked or studied overseas; a total of 123 people with postgraduate degrees were hired; 96
graduates from universities in the development plan of “world-class universities and first-class
disciplines” were recruited. The structure and proportion of scientific research and technical
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
management personnel have been continuously improved. The Company has established an
incentive mechanism guided by high efficiency, high performance and high market value,
formulated a medium- and long-term incentive mechanism plan for R&D projects, implemented a
comprehensive production assessment to increase the labor efficiency per capita by about 12%,
promoted collective and international human resources management, and completed internal audit,
personnel assignment and budget management of Sinclair.
5. Implementation of whole-process quality management and promotion of the
transformation and upgrading of the quality system
The quality system follows the guideline of “compliance, implementation and acceleration”.
The Company aims at the world-class quality management and promotes the construction of
integrity quality culture, and strictly adheres to the quality bottom line. It has made great efforts to
strengthen the quality compliance and GMP normalization management, and implemented the
whole-process quality management to ensure the quality of all production links is controllable,
under control and controlled. It has also improved quality management systems such as
pharmacovigilance and R&D quality, promoted the transformation and upgrading of the quality
system using information technologies such as LIMS system and QMS system, properly carried out
pharmacy administration and MAH management, and completed the GMP certification inspection
and filing.
6. Accelerated marketing structure reform & mode transformation and accelerated
growth of the primary market
In 2019, Pharmaceutical Service Corporation of Zhongmei Huadong has set the goal of
establishing a “pharmaceutical service management system adapted to the development of the
modern medicine industry” and continued to deepen the organizational structure reform,
comprehensively promoted the layout and construction of the primary market and the
out-of-hospital market, enhanced the market service and management capabilities, and actively and
properly carried out key tasks such as business management, bid invitation and price negotiation.
The corporation has actively responded to the national policy of hierarchical diagnosis and
treatment, accelerated the transformation of marketing modes and the construction of clinical
pharmaceutical service teams, implemented hierarchical customer management and precision
26
The 2019 Annul Report of Huadong Medicine Co., Ltd.
marketing, focused on target chronic disease patients who have not received standard treatment,
delivered product value and expanded incremental markets in accordance with the policy of “three
equal attentions” (equal attention to primary market and central city market, equal attention to
out-of-hospital market and in-hospital market, and equal attention to technology-enabled marketing
and traditional marketing). It has continued to carry out clinical re-research of products for market
launch. Through the construction of the academic platform for experts and all-round academic
publicity, it has promoted products to enter clinical application guidelines, improved expert
consensus and recognition of clinical value, and created favorable conditions for products to expand
market coverage and grow rapidly. On the basis of consolidating and expanding the market of
hospitals in key cities, it has accelerated penetration into county-level hospitals, community
hospitals, township hospitals and out-of-hospital markets. During the reporting period, the sales of
the Company’s core varieties in the primary market continued to grow rapidly, and the market share
kept increasing.
Heilongjiang
Jilin
Xinjiang
Liaoning
Huzhou Jiaxing
Company Branch Daishan Company
Beijing
Inner Mongolia
Tianjin
Hebei
Hangzhou Supply
Zhoushan Cunde
Ningxia Shandong
Shanxi Company
Qinghai Chain
Gansu
Shaanxi Jiangsu
Henan Ningbo Sales Company
Shanghai
Tibet
Anhui
Shaoxing Company
Hubei
Sichuan Hangzhou
Chongqing
Chun’an Hangzhou
Hunan Jiangxi
Fujian Company
Guizhou Jinhua Supply Chain
Yunnan
Guangxi Guangdong Jinhua Company
Taizhou Company
Quzhou Office
Hainan
Lishui Company
Wenzhou Company
Wenzhou Supply Chain
Distribution of the Company’s medicine Distribution of the Company’s medicine
industry marketing network in China business marketing network in Zhejiang
Province
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
7. In-depth exploration in Zhejiang market and strengthened network layout to maintain
the leading position of medicine business in Zhejiang market
In 2019, the Company’s business sector has insisted on improving performance through
management, and actively responded to policies such as centralized purchasing and medical
insurance payment reform by vigorously promoting business and management transformation. It
has pushed forward the three key tasks of “comprehensive budget management, ERP system
upgrade, and province-wide logistics system”. It has simultaneously implemented the two key
businesses of “province-wide sales of decoction pieces and DTP province-wide network”, paid
special attention to the three rates (customer coverage rate, market share, and sales growth rate) to
stabilize and improve the order fulfillment rate, especially the order fulfillment rate of hospitals
outside the city and primary hospitals, to ensure that it ranked first in the volume of centralized
purchasing and distribution in the province. In response to the reform of county-level medical
communities and hierarchical diagnosis and treatment, it has adjusted the sales organization
structure, continued to consolidate the in-hospital market, actively expanded the OTC pharmacy
chain market, made layout in high-quality private hospitals, and promoted the channel sinking and
market sinking.
The Company has continuously optimized its product structure, with the emphasis on generic
drugs with high technical barriers that have passed consistency evaluation and new innovative drugs
on the market, strengthened the cooperation and introduction of key products with high growth
potential and high gross profit, actively changed the cooperation mode, provided customers and
hospitals with a variety of value-added services and in-depth services such as hospital access and
pharmacy service upgrade, and extended the product lines to businesses such as decoction pieces,
consumables and medical devices, and reached strategic cooperation with a number of multinational
medicine enterprises in the primary market concerning chronic disease products, covering more
than 2,400 hospitals in 10 cities of Zhejiang Province. The sales revenue of innovative business has
continued to increase rapidly, consolidating the Company’s leading position in Zhejiang and
remaining top 10 in China.
The Company has actively improved the layout network in the province, and established
Huadong Medicine Taizhou Co., Ltd. and Huadong Medicine Jinhua Co., Ltd. The preparations
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
made for various preliminary reviews have been completed for the construction of Jinhua Supply
Chain Center, which is expected to be completed and put into use in 2021. A province-wide
logistics system with multiple interconnected warehouses will be formed based on the three major
logistics centers in northern, central and southern Zhejiang, supplemented by branch warehouses of
regional subsidiaries. It is a solid step to realize the comprehensive coverage of medical logistics
network in the province.
8. Active development of global aesthetic medicine business and continuous improvement
of the layout to build a new space for future development
Sinclair, the Company’s international aesthetic medicine business platform, has been actively
expanding its business in the global market, continuously optimizing and adjusting its product
structure and introducing high-end products, and has made positive progress. During the reporting
period, new product registrations have been completed in 5 countries and regions; the annual
operating revenue was up 36% from the same period last year; the net profit went from a loss to a
profit.
In 2019, the Company established the aesthetic medicine product management department,
quickly established the initial team of aesthetic medicine product management department, and
comprehensively managed and coordinated the domestic and overseas innovative business of
aesthetic medicine. It has completed the domestic clinical work of Ellanse (long-acting microsphere
for injection), the core product of its UK subsidiary Sinclair, and formally submitted the application
for registration. The design and preparations of the clinical trials of Silhouette (a thread lift product)
in China have been completed. The Company has gradually promoted domestic clinical trials of
R2’s F1 (dark spot removal medical device using freezing technology) and F2 (whole-body
whitening medical device) imported from the United States, and improved post-investment
management such as product design improvement, supporting product development and expansion
of potential distributors in countries in the Asia-Pacific region.
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Dutch Subsidiary
German Subsidiary
Headquarters of French Subsidiary US Subsidiary
Sincalir in the UK
Spanish Subsidiary South Korean Subsidiary
Mexican Subsidiary
Indian Subsidiary
Singaporean Subsidiary
Brazilian Subsidiary
Australian Subsidiary Chilean Subsidiary
Legend Sinclair’s global sales areas
Locations of Huadong Medicine and its overseas
Direct sales area
subsidiary Sinclair Pharma Limited
Sales area in Latin America
Huadong Medicine’s major overseas partners
Sales area in Central and Eastern Europe
Major subsidiaries of Sinclair Pharma Limited Sales area in the Asian-Pacific Region
worldwide Sales area in the Middle East & Africa
Huadong Medicine’s global business partners and international layout of aesthetic medicine business
9. Change of the Board of Directors and creation of a new team leading the Company on
a new journey
In June 2019, the Company completed the change of the Board of Directors . After deliberation
and approval by the general meeting of shareholders, a new management team was elected with Mr.
Lyu Liang as Chairman of the Board and Mr. Li Yuedong as General Manager. Mr. Li Bangliang
was appointed Honorary Chairman of the Company. The change of personnel that concerns the
Company’s long-term development has been successfully completed. The new management team
will lead all the members of Huadong Medicine to unswervingly promote the transformation of the
Company into an international and innovative medicine enterprise in the new period.
II. Analysis of main business
1. Overview
Refer to “I. Overview” in “Discussion and Analysis of Operations”.
30
The 2019 Annul Report of Huadong Medicine Co., Ltd.
2. Income and cost
(1) Composition of operating revenue
Unit: RMB yuan
2019 2018 Year-on-year
Proportion in Proportion in percentage
Amount Amount
operating revenue operating revenue increase/decrease
Total operating
35,445,698,216.15 100% 30,663,374,326.27 100% 15.60%
revenue
By sector
Business 25,098,006,088.85 68.79% 22,853,322,427.62 72.89% 9.82%
Manufacturing 10,864,875,032.13 29.78% 8,573,439,130.79 26.86% 26.73%
International
509,190,691.24 1.43% 76,019,939.06 0.25% 569.81%
aesthetic medicine
Offset (inter-sectoral
-1,026,373,596.07 -839,407,171.20
offset)
By product
By region
Domestic sales 34,883,617,590.88 98.41% 30,541,135,176.56 99.60% 14.22%
Overseas sales 562,080,625.27 1.59% 122,239,149.71 0.40% 359.82%
(2) Sectors, products or regions that accounts for more than 10% of the Company’s operating revenue or
operating profit:
√ Applicable □ N/A
Unit: RMB yuan
Year-on-year Year-on-year Year-on-year
Gross percentage percentage percentage
Operating revenue Operating cost profit increase/decrea increase/decrea increase/decrea
rate se in operating se in operating se in gross
revenue cost profit rate
By sector
Business 25,098,006,088.85 23,169,206,360.31 7.69% 9.82% 10.02% -0.16%
Manufacturing 10,864,875,032.13 1,802,276,075.36 83.41% 26.73% 17.62% 1.28%
International
aesthetic 509,190,691.24 140,481,356.33 72.41% 569.81% 619.33% -1.90%
medicine
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Offset
(inter-sectoral -1,026,373,596.07 -1,025,240,830.27
offset)
By product
By region
Domestic sales 34,883,617,590.88 23,916,538,278.74 31.44% 14.22% 10.10% 2.56%
Overseas sales 562,080,625.27 170,184,682.99 69.72% 359.82% 224.62% 12.61%
If the statistical specifications of the Company’s main business data have been adjusted during the reporting period, the Company’s
main business data of the most recent year should be adjusted according to the specifications at the end of the reporting period.
□ Applicable √ N/A
(3) Whether the Company’s income from in-kind sales is greater than that from labor services
√ Yes □ No
(4) Performance of major sales contracts signed by the Company as of the current reporting period
□ Applicable √ N/A
(5) Composition of operating cost
By sector
Unit: RMB yuan
2019 2018 Year-on-year
Proportion Proportion percentage
Sector Item
Amount in operating Amount in operating increase/decrea
cost cost se
Business Operating cost 23,169,206,360.31 96.19% 21,059,806,073.72 96.72% 10.02%
Manufacturing Operating cost 1,802,276,075.36 7.48% 1,532,269,288.35 7.04% 17.62%
International
aesthetic Operating cost 140,481,356.33 0.58% 19,529,585.29 0.09% 619.33%
medicine
Offset
(inter-sectoral Operating cost -1,025,240,830.27 -836,899,569.25
offset)
(6) Whether the scope of consolidation has changed during the reporting period
√ Yes □ No
For details, please refer to “VIII. Change of consolidation scope” in “Section XII. Financial Report”.
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
(7) Significant changes or adjustments to the Company’s business, products or services during the
reporting period
□ Applicable √ N/A
(8) Major customers and major suppliers
The Company’s major customers
Total sales amount of the top five customers (yuan) 5,566,864,329.53
Proportion of the total sales amount of the top five
15.71%
customers in the total annual sales amount
Proportion of related parties’ sales amount of the top
five customers’ sales amount in the total annual sales 0.00%
amount
Note: The customers under the control of the same actual controller shall be listed together, except those under the actual control of
the same state-owned assets management institution.
Information of the Company’s top five customers
Proportion in the total annual sales
No. Customer name Sales amount (yuan)
amount
1 Customer a1 2,573,910,052.06 7.26%
2 Customer a2 1,219,154,713.77 3.44%
3 Customer a3 712,849,895.81 2.01%
4 Customer a4 585,626,847.43 1.65%
5 Customer a5 475,322,820.46 1.34%
Total -- 5,566,864,329.53 15.71%
Note: The customers under the control of the same actual controller shall be listed together, except those under the actual control of
the same state-owned assets management institution.
Other information of major customers
□ Applicable √ N/A
Note: The Company shall state whether the top five customers are related to the Company, and whether the Company’s directors,
supervisors, senior management, core technical personnel, shareholders holding more than 5% of the shares, actual controllers and
other related parties have rights and interests in the major customers directly or indirectly.
Information of the Company’s major suppliers
Total purchase amount of the top five suppliers (yuan) 2,786,324,393.06
Proportion of the total purchase amount of the top five
11.57%
suppliers in the total annual purchase amount
Proportion of related parties’ purchase amount of the
top five customers’ purchase amount in the total annual 0.00%
purchase amount
33
The 2019 Annul Report of Huadong Medicine Co., Ltd.
Note: The suppliers under the control of the same actual controller shall be listed together, except those under the actual control of
the same state-owned assets management institution.
Information of the Company’s top five suppliers
Proportion in the total annual purchase
No. Supplier name Purchase amount (yuan)
amount
1 Supplier b1 667,792,069.08 2.77%
2 Supplier b2 629,700,409.34 2.61%
3 Supplier b3 578,497,423.09 2.40%
4 Supplier b4 505,211,171.74 2.10%
5 Supplier b5 405,123,319.81 1.68%
Total -- 2,786,324,393.06 11.57%
Note: The suppliers under the control of the same actual controller shall be listed together, except those under the actual control of
the same state-owned assets management institution.
Other information of major suppliers
□ Applicable √ N/A
3. Expenses
Unit: RMB yuan
Year-on-year
2019 2018 percentage Note on changes
increase/decrease
Mainly due to the year-on-year
increase in employee benefits and
Sales expenses 5,797,236,883.02 4,297,355,738.06 34.90%
travel expenses and Sinclair’s
incorporation in November 2018.
Mainly due to the increase in
Administrative employee benefits, amortization of
1,095,227,423.65 785,170,898.51 39.49%
expenses intangible assets and Sinclair’s
incorporation in November 2018.
Mainly due to the transfer of
expenditure on discount interest to
investment income and the
write-down financial expenses
Financial expenses 2,473,146.13 86,484,247.20 -97.14%
caused by the discount interest
adjustment of contingent
consideration of Sinclair products’
rights and interests rights.
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Mainly due to the increase of R&D
R&D expenses 1,072,937,182.39 706,041,257.10 51.97%
investment in the current period.
4. R&D investment
√Applicable □ N/A
(1) Overall situation of R&D
Adhering to the corporate philosophy of “scientific research-based and patient-oriented”, the Company
continued to increase R&D investment and enrich the layout of innovative drug R&D. During the reporting period,
the Company invested 1.055 billion yuan in medicine R&D, an increase of 49.14% compared with the same
period in 2018. The R&D work during the reporting period mainly involves the following aspects:
1) The Company has continued to implement the new drug R&D mode of “independent R&D + cooperative
entrusted development + product license-in”, tracking the latest international research progress in drug action
mechanisms & targets and clinical application, accelerating the deployment of innovative drugs and the
introduction of innovative drug projects at home and abroad. It has completed the establishment of multiple
potential innovative drug projects in such fields as metabolism and kidney diseases;
2) The Company has focused on clinically effective varieties and drugs for special groups, accelerated the
R&D of generic drugs with high technical barriers and improved new drugs (505b(2)), and set up a number of
projects focusing on immunity during the reporting period;
3) The Company has continuously improved the technology and quality level of raw medicines and
preparations, reduced costs, actively developed multiple dosage forms for products on the market, and
strengthened market competitiveness;
4) The Company has strengthened the comprehensive dynamic evaluation of varieties under R&D, and
ensured the R&D progress of key varieties under R&D to the greatest extent by prioritizing projects under R&D
and rationally allocating R&D resources.
(2) R&D of major innovative drugs and biosimilar projects
The Company on the one hand has promoted the clinical research progress of several innovative drugs and
key biosimilar varieties under R&D, so as to get them approved for market launch as soon as possible. On the
other hand, it has formulated a strategic plan for the development of innovative drugs up to 2025, focusing on the
existing coverage of treatment fields, and defining the key directions and quantity of innovative projects to be
initiated each year during the planning period. It is proposed that no less than 15 innovative varieties (including
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
innovative drugs, improved new drugs, innovative aesthetic medicine products and devices) should be established
and stored every year during the planning period. In addition, during the reporting period, the Company has
actively explored and drawn lessons from the international advanced innovative drug R&D system construction,
continuously optimized and adjusted its overall R&D system structure, and improved various functional modules
of innovation project R&D through the introduction of high-end R&D talents, fully ensuring the realization of the
Company’s strategic planning objectives for innovation projects.
In 2019, more than 15 innovative projects have been established, including HD1902, HD1903, HD1906 and
other Class I innovative drug projects in the field of tumor and autoimmunity, and HD1901, HD1905, HD-IM-001
and other Class II new drugs of new indications or improved new dosage forms, which further enrich the
innovative product pipelines. In addition, Chongqing Peg-Bio invested by the Company has accumulated a
number of innovative Class I biological drugs and biosimilar varieties by virtue of its two core technologies of
PEGylation platform and high-efficiency polypeptide tandem expression platform, and will start IND application
in 2020, forming good synergy with the Company’s innovative drug strategy. The clinical research progress of the
Company’s key innovative drug projects and biosimilar projects is as follows:
1) Mefatinib: Mefatinib for advanced non-small cell lung cancer has entered the phase III clinical trial; the
phase II single arm clinical trial is for rare first- and second-line gene mutations; based on the good curative effect
in the first stage, communication with CDE will be completed, so that the drug can be applied for market launch
based on the phase II clinical results.
2) TTP273: GLP-1 innovative drug TTP273 for oral administration introduced from vTv in the United States
has obtained the clinical trial notification in May 2019; clinical protocol confirmation and hospital ethics approval
have been completed. The phase I PK bridging trial will be carried out in the first half of 2020.
3) Biosimilar varieties: The multi-center phase III clinical trial (indications for type II diabetes) for the
Company’s key product in the field of diabetes, Lilarutide Injection, has now been fully launched, which is
expected to be completed in 2020. The multi-center phase III clinical trial (indications for weight loss) for the
product has been formally launched; the phase I clinical trial has been formally launched for Insulin Detemir.
Clinical application has been submitted for Lucentis; research on the relevant supplementary information is in
progress.
(3) R&D of major generic drugs
During the reporting period, the Company carefully carried out dynamic evaluation and sorting of the
36
The 2019 Annul Report of Huadong Medicine Co., Ltd.
existing generic drugs under R&D in a scientific manner, and further clarified the key and priority varieties. The
progress of key varieties is as follows:
1) The on-site check lists have been submitted for Anastrozole Tablets, Caspofungin and Lyophilized Powder
for Injection. Siglitine-Metformin Compound Tablets (50/500mg) have passed technical review. The above
projects will be subject to on-site inspection in 2020.
2) Supplementary information research and consistency evaluation have been completed for
Omeprazole-Sodium Bicarbonate Compound Capsules; Letrozole Tablets and Empagliflozin-Metformin
Compound Tablets have been applied for production. The above projects are expected to get production approval
in 2020 or the first half of 2021.
3) Supplementary information studies have been basically completed for Micafungin and Lyophilized
Powder for Injection; the BE trial and process verification have been completed for Linezolid Tablets,
Canagliflozin and Canagliflozin Tablets, Macitentan and Macitentan Tablets and Sorafenib and Sorafenib Tablets.
These products are expected to be applied for production in 2020.
The main R&D of generic drugs is shown in the table below:
R&D progress
Treatment field Product Indication Progress description
BE ANDA
Diabetes *Canagliflozin and Canagliflozin Tablets Type II diabetes The BE trial and process verification have been completed;
production application to be submitted in 2020
*Empagliflozin-Metformin Compound Tablets Type II diabetes The production application has been submitted and is under
review
*Sitagliptin-Metformin Tablets Type II diabetes The product has passed the review and will be subject to
on-site inspection
Pioglitazone-Metformin Tablets (15/850mg) Type II diabetes Formulation and process optimization; pre-BE trial
Repaglinide Tablets Type II diabetes Under BE study
Immunity Sirolimus Tablets Anti-rejection Preparation for small-scale trial study
Tacrolimus Ointment Anti-rejection Small-scale trial study
Anti-tumor *Letrozole Tablets Note 1 Breast cancer The production application has been submitted and is under
review
Note 2
*Anastrozole Tablets Breast cancer The on-site check list has been submitted; production site
inspection to be carried out
*Sorafenib and Sorafenib Tablets Liver cancer The product has passed pre-BE trial; BE trial is in progress
Super antibiotics *Caspofungin and Caspofungin Injection Antifungal The on-site check list has been submitted; production site
inspection to be carried out
*Micafungin and Micafungin Injection Antifungal Supplementary information research has been completed;
production application to be submitted in 2020
*Linezolid Tablets Super-antibiotics Production application to be submitted in the first half of
2020
Digestive system Omeprazole-Sodium Bicarbonate Compound Gastric ulcer Supplementary information research and consistency
Capsules evaluation have been completed; the product has been
applied for production
Vonoprazan and Vonoprazan Tablets Gastric ulcer The product has passed pre-BE trial; BE trial is in progress
Cardiovascular diseases Macitentan and Macitentan Tablets Pulmonary arterial hypertension The product has passed pre-BE trial; BE trial is in progress
Kidney diseases Secondary development of Bailing Keli Tonifying lungs and kidneys The formulation and process have been optimized; samples
to be prepared
Note 1 and Note 2 refer to “7.22” clinical self-inspection varieties that have been voluntarily withdrawn, which shall be included in the priority review procedure after re-application.
Note 3: The items marked with “※” are developed by New Drug Research Institute Co., Ltd. of Hangzhou Huadong Medicine Group, entrusted by the Company. The Company or its
subsidiaries shall pay for the relevant entrusted development to obtain the property rights of the corresponding item.
At the same time, the Company has adjusted the existing product structure comprehensively in combination
with the market competition pattern and the R&D progress of projects. After careful discussion and research, the
37
The 2019 Annul Report of Huadong Medicine Co., Ltd.
Company has cleaned up and eliminated some generic drugs with low barriers and low commercial value,
including Erlotinib Tablets, Imatinib Tablets and Bosutinib Tablets in the field of anti-tumor, Fidaxomicin Tablets
and Dalbavancin Lyophilized Powder for Injection in the field of super-antibiotics, and (S)-Pantoprazole
Lyophilized Powder for Injection in the field of digestive system.
(4) R&D cooperation
During the reporting period, the Company actively carried out cooperation and negotiations with domestic
and overseas innovative drug R&D companies and research institutes on new drug projects. The details are as
follows:
1) In cooperation with Shenyang Pharmaceutical University, the Company has introduced Class 1 chemical
drug innovation projects for broad-spectrum anti-tumor treatment, and is currently carrying out a small-scale trial
study of raw medicines and preparations as well as impurity research;
2) The Company has reached the entrusted development project of new biosimilar drugs in the field of
autoimmunity (HDG1903) with the shareholding company Jiuyuan Gene, which enriched the Company’s
biosimilar projects;
3) The Company has deepened cooperation with the University of Minnesota in the field of integrated
materials science and engineering technology for medical products, and enhanced its R&D capability in the field
of high-end oral solid preparations;
4) The Company has reached cooperation with well-known domestic R&D companies or institutions such as
WuXi AppTec, Pharmaron Inc., and Zhejiang University on multiple Class1 innovative drug projects.
(5) R&D of aesthetic medicine and medical devices
During the reporting period, the Company has reached strategic cooperation with R2 and MediBeacon in the
United States, and with Kylane in Switzerland, and obtained commercialization rights of several innovative
products. The core products of Sinclair, a wholly-owned subsidiary, have continued to make positive progress in
registration in China and other countries. The specific progress is as follows:
Compan Company Relationshi Related main Indications Rights and R&D progress R&D progress
y name profile p with the products interests of (overseas) (China)
Company Huadong
(or
subsidiaries
)
38
The 2019 Annul Report of Huadong Medicine Co., Ltd.
Microspheres Facial All Registration The registration
for injection subcutaneous certification or clinical trial has
(Ellanse) implantation to market access has been completed
permanently been obtained in in China, and
reduce more than 60 the application
wrinkles countries or for market
Global regions launch has been
aesthetic accepted
Wholly-ow
medicine Thread lift Suitable for All Registration The registration
Sinclair ned
product (Silhouette) mid-face lift certification or of Silhouette in
subsidiary
business surgery, market access has China has been
operation temporarily been obtained in initiated, and
fixing and more than 60 the clinical
lifting the countries or registration
dermis under regions development
the cheek plan and trial
protocol are in
preparation
Kylane in A biotech Product MaiLi series, a Facial filler Exclusive CE certification R&D plan to be
Switzerla company that licensing novel worldwide application in determined
nd offers partnership; hyaluronic acid license progress
innovative no equity containing
facial fillers relationship lidocaine
Development F1 Eliminate Exclusive The product has Registration in
of relevant benign distribution been approved by China to be
medical pigmentation rights in 34 FDA for 510(k) started
devices and of the skin Asian and is expected to
technologies in countries be available in the
the field of and regions US by the end of
R2 in the Shareholdin
aesthetic including 2020
United g
medicine, such F2 Whole body China, Under R&D R&D plan to be
States company
as dark spot whitening Japan and determined
removal using South Korea
freezing
technology
and skin
whitening
Committed to Dynamic TGFR Renal function Rights and The phase III IND to be
MediBeac physiological monitoring assessment interests in critical study is submitted in
on in the monitoring, system through 25 countries planned for 2020 in China in 2020
Shareholdin
United surgical real-time and regions the United States;
g company
States guidance, TGFR in the PMA application is
disease monitoring Asia-Pacific expected in 2021
39
The 2019 Annul Report of Huadong Medicine Co., Ltd.
diagnosis, and region (registration of
biocompatible Class III medical
optical devices)
equipment Gastrointestinal Diagnosis of The POC trial to R&D plan to be
development monitoring gastrointestinal diagnose Crohn’s determined
and diseases disease has been
system
commercializa through completed in the
tion gastrointestinal United States
permeability
(GIP)
monitoring
(6) Progress in consistency evaluation
During the reporting period, the quality and efficacy consistency evaluation of the Company’s generic drugs
progressed smoothly. Cyclosporine Soft Capsules (25mg, 50mg) obtained the approval of supplementary
application for consistency evaluation. Acarbose Tablets (100mg) obtained the approval of supplementary
application for consistency evaluation. Pioglitazone-Metformin Tablets (15mg/500mg) obtained the acceptance
notice of supplementary application for consistency evaluation. Clarithromycin Tablets (0.25g) obtained the
acceptance notice of supplementary application for consistency evaluation. Cyclosporine Soft Capsules (10mg)
obtained the acceptance notice of supplementary application for consistency evaluation. Pioglitazone
Hydrochloride Tablets (30g) obtained the acceptance notice of supplementary application for consistency
evaluation. Materials of the supplementary application for consistency evaluation have been submitted for
Mycophenolate Mofetil Capsules (0.25g). Other varieties to be evaluated are in the stage of pharmaceutical
research, medium-scale trial and scale-up or process verification.
(7) Patents
In recent years, the Company attaches great importance to its own intellectual property protection and
achievement transformation and application, and the number of patent applications and granted patents has been
steadily increasing. Over the years, the Company has applied for more than 500 patents at home and abroad,
including more than 260 authorized patents for invention.
During the reporting period, the Company successfully passed the supervision and verification of the
implementation of enterprise’s intellectual property standards, and declared the navigation project of enterprise
operation patents in Zhejiang Province concerning oral diabetes drugs. In 2019, Zhongmei Huadong submitted a
40
The 2019 Annul Report of Huadong Medicine Co., Ltd.
total of 18 patent applications including 12 patents for invention; a total of 14 patents for invention were
authorized; it was rated as “2019 National Intellectual Property Demonstration Enterprise” by the State
Intellectual Property Office. In 2019, Sinclair obtained one European patent and one Russian patent.
R&D investment of the Company
2019 2018 Percentage change
Number of R&D personnel
1,078 550 96%
(person)
Proportion of R&D personnel 11.31% 6.52% 4.79%
R&D investment amount (yuan) 1,054,842,676.50 707,286,570.76 49.14%
Proportion of R&D investment
10.04% 8.62% 1.42%
in operating revenue
Capitalized R&D investment
0.00 0.00 0%
amount (yuan)
Proportion of capitalized R&D
0.00% 0.00% 0%
investment in R&D investment
Note: (1) The proportion of R&D personnel is: the proportion of personnel in the Company’s subsidiaries mainly
engaged pharmaceutical production and manufacturing; the proportion of R&D investment in operating revenue is:
the proportion of R&D investment in new drugs in the operating revenue of the Company’s pharmaceutical
manufacturing.
(2) The R&D personnel of 2019 are: the total R&D personnel of the Company’s R&D system and the R&D
personnel of the production system, while the R&D personnel of 2018 are the number of R&D personnel of the
Company’s R&D system.
Reasons for the year-on-year significant change in the proportion of total R&D investment in operating revenue
√ Applicable □ N/A
In 2019, the total direct and indirect expenditure on R&D of the Company and its major industrial wholly- or
partially-owned subsidiaries reached 1.055 billion yuan, a year-on-year growth of 49.14%, and the proportion of
R&D investment in the Company’s pharmaceutical manufacturing operating revenue increased by 1.42%
compared with the same period last year. The Company’s R&D investment is mainly used in the clinical research
of products under R&D, process improvement of existing products, entrusted technological development,
consistency evaluation, international registration and certification, etc. Most of the above R&D investment is
calculated as expenses in the current period, which do not need to be amortized in the following years. It will not
have a significant impact on the Company’s future business performance.
41
The 2019 Annul Report of Huadong Medicine Co., Ltd.
Reasons for the significant change in the capitalization rate of R&D investment and its rationality
□ Applicable √ N/A
5. Cash flows
Unit: RMB yuan
Item 2019 2018 Year-on-year change
Cash inflows from operating
38,801,282,424.47 34,527,594,657.56 12.38%
activities
Cash outflows for operating
36,799,584,253.80 32,488,098,574.30 13.27%
activities
Net cash flow from operating
2,001,698,170.67 2,039,496,083.26 -1.85%
activities
Cash inflows from investing
74,637,287.55 4,662,886,992.29 -98.40%
activities
Cash outflows for investing
1,657,245,184.32 6,223,628,251.72 -73.37%
activities
Net cash flow from investing
-1,582,607,896.77 -1,560,741,259.43 1.40%
activities
Cash inflows from financing
1,922,537,327.51 2,134,859,129.38 -9.95%
activities
Cash outflows for financing
2,531,134,823.51 2,565,297,917.38 -1.33%
activities
Net cash flow from financing
-608,597,496.00 -430,438,788.00 41.39%
activities
Net increase in cash and cash
-166,937,959.56 25,889,881.24 -744.80%
equivalents
Main influencing factors of significant changes in relevant data year on year
√ Applicable □ N/A
The cash inflows from investing activities in the current period are 75 million yuan, a year-on-year decrease of 4.588 billion yuan or
98.4%, mainly due to the large number of financial products redeemed in the previous period.
The cash outflows for investing activities in the current period are 1.657 billion yuan, a year-on-year decrease of 4.567 billion yuan
or 73.37%, mainly due to the large number of financial products purchased in the previous period.
Reasons for the significant difference between the Company’s net cash flow from operating activities and the current year’s net profit
during the reporting period
□ Applicable √N/A
42
The 2019 Annul Report of Huadong Medicine Co., Ltd.
III. Analysis of non-main business
√ Applicable □ N/A
Unit: RMB yuan
Proportion
Sustainable or
Amount in total Note on reasons
not
profit
Mainly due to the adjustment of contingent
Non-operating
118,292,148.72 3.41% consideration payments of Sinclair in the current No
revenue
period
Non-operating Mainly due to the donations and compensation
45,068,060.85 1.30% No
expenditure expenditure in the current period
Gains on asset Mainly due to the confirmation of housing demolition
114,154,941.45 3.29% No
disposal and relocation funds in the current period
Mainly due to the confirmation of government grants
Other gains 113,635,429.90 3.27% No
in the current period
IV. Assets and liabilities
1. Major changes in asset composition
Since 2019, the Company has implemented new financial instrument standards, new income standards or new lease standards for the
first time, and adjusted and implemented items related to financial statements at the beginning of the year
√ Applicable □ N/A
Unit: RMB yuan
End of 2019 Beginning of 2019 Change
of
Proportion in Proportion in Note on major changes
Amount Amount proportio
total assets total assets
n
Mainly due to the increase of the
2,402,730,395. 2,442,723,381. Company’s total assets and the
Monetary funds 11.19% 12.71% -1.52%
39 93 decrease of the proportion of monetary
funds in the current period
Accounts 6,092,305,184. 5,633,011,225.
28.38% 29.31% -0.93% /
receivable 47 41
Mainly due to the increase of the
4,038,975,496. 3,875,647,048. Company’s total assets and the
Inventories 18.82% 20.17% -1.35%
93 31 decrease of the proportion of
inventories
Real estate 21,701,908.75 0.10% 23,841,968.85 0.12% -0.02% /
43
The 2019 Annul Report of Huadong Medicine Co., Ltd.
properties for
investment
Long-term equity 222,595,018.5 Mainly due to the increase of equity
1.04% 88,918,218.64 0.46% 0.58%
investments 4 investments in the current period
2,175,216,842. 2,033,587,957.
Fixed assets 10.13% 10.58% -0.45% /
65 65
Mainly due to the increase of
Zhongmei Huadong R&D platform
Constructions in 1,829,808,233.
8.53% 617,004,995.98 3.21% 5.32% construction and Huadong Medicine
progress 19
Biomedical Science and Technology
Park Project Phase II
Short-term 655,549,973.2
3.05% 636,693,929.73 3.31% -0.26% /
borrowing 7
2. Assets and liabilities measured at fair value
□ Applicable √ N/A
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
Monetary funds 170,958,848.89 Cash deposit
Bills receivable 149,235,686.25 Bill pledge
Real estate properties for 2,103,865.43 Mortgage guarantee for borrowing
investment
Fixed assets 58,428,133.40 Mortgage guarantee for borrowing
Intangible assets 4,509,292.49 Mortgage guarantee for borrowing
Total 385,235,826.46
V. Investment
1. Overview
√ Applicable □ N/A
Investment amount in the reporting period Investment amount in the same period of
Percentage change
(yuan) last year (yuan)
1,965,240,000.00 2,533,800,000.00 -22.44 %
44
The 2019 Annul Report of Huadong Medicine Co., Ltd.
Note: The investment amount in the reporting period refers to the total capital expenditure in the reporting period.
2. Significant equity investments acquired during the reporting period
√ Applicable □ N/A
Unit: RMB ten thousand yuan
Profit
Name Progres or loss
of s as of of Involve Disclos
Main Way of Investm Shareh Term of Project Disclos
investe Capital Product the investm d in ure
busines investm ent olding Partner investm ed ure date
d source type balance ent in litigatio index
s ent amount ratio ent income (if any)
compan sheet the n or not (if any)
y date current
period
R&D
of
biologi
cal
chemic
al
The
Chongq product
first
ing and Capital
capital No
Peg-Bi technol increas
Own increas profit
o ogies; e and 21,000 39.80% / / R&D / No N/A N/A
funds e has for the
Biopha R&D equity
been time
rm Co., of transfer
complet being
Ltd. ferment
ed
ation
process
optimiz
ation
technol
ogy
Develo Develo The
pment pment first
of of investm No
R2
aestheti Capital USD aestheti ent of profit
Dermat Own
c increas 30 34% / / c USD / for the No N/A N/A
ology, funds
medicin e million medicin 10 time
lnc.
e e million being
equipm equipm has
ent ent been
45
The 2019 Annul Report of Huadong Medicine Co., Ltd.
complet
ed, with
a
shareho
lding of
16.6%
The
Develo Develo first
pment pment investm
of of ent of
contrast contrast USD
agents agents 15 No
Medi with Capital USD with million profit
Own
Beacon good increas 30 8.14% / / good has / for the No N/A N/A
funds
Inc. biocom e million biocom been time
patibilit patibilit complet being
y and y and ed, with
related related a
equipm equipm shareho
ent ent lding of
4.3%
Note: 1. During the reporting period and as of the first quarter of 2020, the Company’s wholly-owned
subsidiary Zhongmei Huadong has invested a total of 210 million yuan in Chongqing Peg-Bio to acquire
39.80% of its equity through two capital increases, combined with acquisition of minority shares, and thus
became its second largest shareholder. So far, 190 million yuan has been invested, and the remaining 20
million yuan will be paid according to the contract schedule.
2. The Company has invested USD 30 million in R2 Dermatology, Inc. By April 26, 2020, USD 20 million
of equity investment has been paid, and the remaining USD 10 million will be paid according to the contract
schedule.
3. The Company has invested USD 30 million in Medi Beacon Inc. By April 26, 2020, USD 15 million of
equity investment has been paid, and the remaining USD 15 million will be paid according to the contract
schedule.
3. Significant non-equity investments in progress during the reporting period
√ Applicable □ N/A
Unit: RMB yuan
Cumulati Cumulati Reasons
Investme
Industry ve actual ve for not
Investme nt
involved investme income meeting
Way of nt in amount Disclosu Disclosu
Project in the nt Capital Project Projected realized the
investme fixed during re date re index
name investme amount source progress income by the planned
nt assets or the (if any) (if any)
nt by the end of schedule
not reporting
project end of the and
period
the reporting projected
46
The 2019 Annul Report of Huadong Medicine Co., Ltd.
reporting period income
period
Huadong March 9, http://w
Medicin 2017 ww.cninf
e o.com.cn
Biomedi
Pharmac
cal
Self-built eutical 895,157, 1,328,42 Own
Science Yes 55.00% / / N/A
project manufact 221.60 4,238.71 funds
and
uring
Technolo
gy Park
Project
Phase II
895,157, 1,328,42
Total -- -- -- -- -- / / -- -- --
221.60 4,238.71
4. Investment in financial assets
(1) Securities Investment
√ Applicable □ N/A
Unit: RMB yuan
Gain/los Accumu
Book
s from lative Purchas
Account value at Selling Gain/los Book
fair fair e
Stock Initial ing the amount s during value at
Type of Stock value value amount Account Capital
abbrevia investm measure beginni in the the the end
stock code changes changes in the ing item source
tion ent cost ment ng of current reportin of the
in the included current
model the period g period period
current in period
period
period equity
Dome Other
Fair
stic equity
20,20 value 20,20 21,80 21,80 20,20 21,80 42,00
and instru Own
RAPT RAPT 7,400. measu 7,400. 1,854. 1,854. 7,400. 1,854. 9,254.
overs ment funds
00 remen 00 79 79 00 79 79
eas invest
t
stock ment
Other securities
investments held at the -- -- --
end of the period
47
The 2019 Annul Report of Huadong Medicine Co., Ltd.
20,20 20,20 21,80 21,80 20,20 21,80 42,00
Total 7,400. -- 7,400. 1,854. 1,854. 7,400. 1,854. 9,254. -- --
00 00 79 79 00 79 79
Date of announcement of
the Board of Directors on
N/A
securities investment
approval
Date of announcement of
the Board of
Shareholders on N/A
securities investment
approval (if any)
Note: During the reporting period, Huadong Medicine Investment Holding (Hong Kong) Co., Ltd., a
subsidiary of the Company, invested USD 3 million to purchase 218,102 preferred shares of RAPT Therapeutics,
Inc. in C-2 series. RAPT Therapeutics, Inc. (stock code: RAPT) was listed on the NASDAQ Stock Exchange on
October 30, 2019. Huadong Medicine Investment Holding (Hong Kong) Co., Ltd. holds 0.91% of the total shares
of RAPT Therapeutics, Inc.
(2) Derivatives investment
□ Applicable √ N/A
No such case during the reporting period.
5. Use of raised funds
□ Applicable √ N/A
No such case during the reporting period.
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%
48
The 2019 Annul Report of Huadong Medicine Co., Ltd.
Unit: RMB yuan
Company Main Registered Operating Operating
Company type Total assets Net assets Net profit
name business capital revenue profit
Production
and
management
Hangzhou of Traditional
Zhongmei Chinese and
8,184,324,20 5,705,834,45 10,507,745,8 2,530,825,85 2,197,743,34
Huadong Subsidiary Western raw 872,308,130
2.84 4.48 23.08 0.63 4.46
Pharmaceutic medicines
al Co., Ltd. and
preparations,
and health
care products
Huadong Sales of
Ningbo biological 1,084,256,65 620,882,917. 1,666,221,69 260,927,747. 191,684,987.
Subsidiary 5,000,000
Medicine products as 9.62 22 0.42 76 77
Co., Ltd. proxy
Wholesale of
TCM
materials,
Huadong
TCM
Medicine 1,079,378,53 202,402,011. 2,571,247,12 26,292,169.4 20,384,390.6
Subsidiary decoction 61,300,000
Wenzhou 4.86 73 7.39 8 7
pieces,
Co., Ltd.
chemical
preparations,
etc.
Huadong
Medicine
Warehousing
Supply Chain 154,557,858. 111,995,746. 158,166,197. 17,479,057.3 12,546,378.1
Subsidiary and storage 50,729,863
Management 41 67 29 5 9
services
(Hangzhou)
Co., Ltd.
R&D,
production
Sinclair
and sales of 219,962,963. 936,190,063. 395,565,859. 509,190,691. 33,748,752.6 119,556,109.
Pharma Sub-subsidiary
aesthetic 92 02 60 24 2 67
Limited
medicine
products
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable □ N/A
49
The 2019 Annul Report of Huadong Medicine Co., Ltd.
Methods of acquisition and disposal of Impact on the overall production, operation
Company name
subsidiaries during the reporting period and performance
Expanding the coverage of medicine
Huadong Medicine Jinhua Co., Ltd. New subsidiary
business network in Zhejiang Province
Expanding the coverage of medicine
Huadong Medicine (Hangzhou) Co., Ltd. Equity acquisition
business network in Zhejiang Province
Huadong Medicine Skin Management The Company’s international aesthetic
New subsidiary
(Hong Kong) Co., Ltd. medicine business investment platform
International aesthetic medicine business
Huadong Ningbo Medicine (Hong Kong)
New subsidiary development platform of the Company’s
Co., Ltd.
subsidiaries
The Company’s international aesthetic
Sinclair Pharma Australia Pty Ltd New subsidiary
medicine business development platform
Adjustment of Sinclair’s international
Medicalio SL Cancellation
aesthetic medicine regional business
VIII. Structured entities controlled by the Company
□ Applicable √ N/A
IX. Prospect of the Company’s future development
1. Macro-economy and the development & prospect of medicine industry
In 2019, the global economic growth slowed down, global trade protectionism continued to
spread, and Sino-US trade frictions were deadlocked. In the context of increasing uncertainties in
global economic development, downward pressure on economic growth has increased significantly.
Represented by the Trump administration’s “America First” policy and Britain’s “Brexit”, the risk
of trade protectionism is on the rise in the US and Europe, and the global economy is weakening.
With the further opening-up of China’s economy, the external environment continues to
increase its impact on China’s economy. The domestic economic structure is in a critical period of
transformation and upgrading, and the demand for enterprise innovation and upgrading and
structural adjustment is increasingly strong. Domestic manufacturing enterprises are facing fierce
external competition and enormous policy pressure.
The international medicine industry is in a period of renewal. Patent drugs are expiring across
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
the globe, competition for generic drugs is escalating, and the global medicine market is
accelerating its shift to emerging markets; the R&D cycle and market demand for innovative drugs
have a greater impact on the treatment field. In the context of global economic downturn, drastic
cuts in health care costs have become the trend.
Multinational medicine companies take the initiative with their abundant product pipelines,
accelerating the review and launch of international innovative drugs in China. Meanwhile,
competition in the domestic market for generic drugs with expired patents has become increasingly
fierce, and prices have been sharply reduced in local bid invitations and national centralized
purchasing. All these will bring fierce market competition and operating pressure to domestic
generic drug enterprises.
The medicine industry is an important industry related to the national economy and people’s
livelihood, a key area of “Made in China 2025” and strategic emerging industries, and an important
guarantee for promoting the construction of a Healthy China. According to IQVIA, global drug
spending in 2019 was close to USD 1.3 trillion, with overall growth of 4-5%. China has become the
world’s second largest medicine market. According to the data of the National Bureau of Statistics,
in 2019, the cumulative operating revenue and total profit of domestic industrial enterprises above a
certain scale in the pharmaceutical manufacturing industry were 2390.86 billion yuan and 311.95
billion yuan, respectively, with year-on-year growth of 7.4% and 5.9%, both higher than the level of
industrial enterprises above a certain scale in China in the same period. In 2019, the growth of
industrial added value above a certain scale in the pharmaceutical manufacturing industry slowed
down to 6.6%, down 3.1 percentage points from 2018 and 0.9 percentage points higher than that of
the whole country in the same period.
2. Development trend of medicine industry
In recent years, China’s medicine industry is undergoing profound changes driven by policies.
Influenced by the medical insurance fee control, the centralized purchasing of generic starting at the
end of 2018 is the first market-oriented reform of domestic drug purchase, which also brings a value
orientation of focusing on patients to the medicine industry. This market-oriented reform has
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
brought about a sharp reduction in the price of domestic original drugs with expired patents and
price competition among mature generic drugs, reshaping the circulation value chain of the
medicine industry. Although it has brought the medicine industry into the new normal of overall
growth slowdown, it has also promoted the future standardization and centralization of the medicine
industry, accelerated its integration into the international market, facilitated the transformation and
upgrading of pharmaceutical enterprises, and increased the development of high-end generic drugs
and the investment in innovative drugs. The layout of generic drug and innovative drug business
and varieties, the selection of global supply chain systems, quality and cost control, and the
establishment of differentiated products will all be important considerations for the future market
strategies of pharmaceutical companies.
China’s medicine industry is embracing a new pattern driven by policy. The development
theme of the medicine industry has gradually shifted from imitation to innovation, and
pharmaceutical innovation has become the core driving force to support the future development of
enterprises, as well as the inevitable choice of medicine enterprises. The revised “The
Pharmaceutical Administration Law of the People's Republic of China” came into force on
December 1, 2019, and its general provisions clearly stipulate that the state encourages new drug
R&D. The state has strengthened policy support for innovative drugs, which is not only reflected in
the reform of approval processes such as the MAH system, the clinical value orientation and the
implementation of innovative review mechanism, but also in the continuous improvement of
medical insurance payments. The guidance and application of pharmacoeconomics in medical
insurance negotiation, and the gradual implementation of DRGs (disease diagnosis groups) have
played a positive role in changing medical behavior, reducing the proportion of unreasonable drug
use, and promoting the return of products to clinical value. The introduction of these policies
indicates that the medical insurance assessment mechanism will focus on medical quality and safety
instead of fee control, and China’s medicine industry will be more strictly regulated, the medicine
market will become more standardized, and the survival of the fittest will become more severe. In
the future, benefited by the national policy of encouraging innovation, pharmaceutical enterprises
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
will be greatly promoted in their enthusiasm for R&D and innovation, the domestic chemical and
pharmaceutical industry will be reshaped, and medicine enterprises will be promoted to transform
and shift their focus from common generic drugs to such fields as high-quality generic drugs,
improved new drugs, innovative drugs, and biological drugs.
With the further institutionalization and standardization of drug evaluation, the administrative
penalties for drug-related violations have been strengthened. This requires medicine enterprises to
integrate the concepts of “compliance” and “risk control” into the production, R&D, management,
marketing and operation. Domestic medicine enterprises can promote their own sustainable
development only when they have a deep understanding of and conform to the development trend
of China’s medicine industry, embrace innovation, seize opportunities, and make improvement in
such aspects as commercialization capacity, clinical value of drugs, academic promotion, clinical
influence, business strategies, policy affairs and market access.
3. The Company’s development plan
The Company has formulated a brand-new development strategy based on the medicine and
health industries, taking the medicine industry as the leading role and expanding medicine business
and aesthetic medicine business. Adhering to the philosophy of “scientific research-based and
patient-oriented”, the Company plans to become a strong international medicine enterprise driven
by scientific research and innovation.
Development plan for medicine innovation:
(1) Focus on the core treatment field; shift from imitation to innovation and from following to
leading. In the future scientific research and innovation, the Company will be oriented to meet the
clinical needs, focus on the medium- and long-term product pipeline layout, and attach equal
importance to the upgrading of generic drugs and the development of innovative drugs. The R&D
of generic drugs should be high-tech, differentiated, fast and cost-effective. The R&D of innovative
drugs should be international with a high starting point, a wide track and new targets. Taking
innovative drugs as the basis and direction for building the core competitiveness in the future, the
Company will focus on developing innovative drugs with outstanding clinical value and generic
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
drugs with high-tech barriers in serious and chronic disease fields such as anti-tumor, internal
secretion and autoimmity, and closely track the technological development and R&D trends in
frontier fields such as biological drugs, gene therapy and antibody drugs at home and abroad. With a
scientific and pragmatic attitude, combined with its own ability and risk matching degree, the
Company will start from differentiated innovation and gradually move towards the breakthrough
innovation mode of “number one/best of its kind”, accelerate integration into the innovation and
value chains of global new drug innovation, move from “new in China” to “new in the world”, and
continuously raise its innovation level.
(2) Increased R&D investment; continuous enrichment and optimization of product pipelines.
Since 2020, the Company’s annual R&D expenses have accounted for more than 10% of the sales
revenue of the medicine industry, providing sufficient material guarantee for innovation. With the
increase of investment, the use efficiency of R&D funds should be improved. Through independent
project initiation and external introduction, the Company strives to complete at least 15 innovative
projects (including drugs, medical devices, etc.) each year, of which at least 3 innovative drug
projects should be initiated, so that each existing product line is complemented and led by
innovative products, eventually building abundant product pipelines and a good product mix, thus
forming a healthy development pace with innovative products going on the market from 2022
onwards. The Company will strive to achieve the goal that the innovation business segment should
account for 30% of the total industrial operating revenue by 2025.
(3) Accelerated introduction of high-level talents and building of high-level research teams.
The Company will focus on the introduction of R&D leaders and high-level R&D technicians with
rich working experience, strengthen the internal R&D system and technology platform construction,
and actively promote the construction of domestic and overseas R&D platforms. It will also create
an innovative cultural environment and atmosphere that encourages innovation and success and
tolerates failure, and establish a success-oriented market-oriented performance mechanism. A
pioneering and innovative scientific research team with outstanding ability, open mind, passion and
courage will be built to facilitate the implementation of the Company’s innovative
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
internationalization strategies. The Company will establish a dynamic evaluation mechanism for
R&D projects, and set up an external expert academic committee to assist the Company in the
decision-making and management of R&D and product introduction, so as to ensure scientific,
advanced and feasible research innovation.
(4) Deepening of all-round cooperation with overseas partners and product introduction and
construction of a global R&D strategic collaboration ecosystem centered on Zhongmei Huadong.
The Company will integrate and connect external advantageous resources and technologies,
promote the introduction and development of high-quality innovative projects through cooperative
development, authorization & licensing or acquisition, etc., and continuously enrich its product
pipelines and improve the medium- and long-term layout of innovative products. It will also
enhance the international operating capability of products, and properly license its superior products
and advanced technologies and patents to external agencies.
Development plan for Huadong business:
With service as its core and innovation as the driving force for transformation, the Company
will stick to in-depth exploration in Zhejiang, continue to enhance its brand influence and maintain
its leading position in the industry in Zhejiang Province; pay equal attention to scale and benefits
instead of pursuing simple scale expansion; pursue high-quality and sustainable benefits through
fine management; perfect the modern medicine logistics network covering Zhejiang Province, and
make every effort to build a high-end third-party medicine logistics featuring cold chain to enhance
value-added service capability; drive the market network and channel resources with the help of
commerce, transform and upgrade the traditional business model, actively develop new business
models such as general agency, business trusteeship, BTC pharmacy, and cultivate innovative
business; consolidate the in-hospital market, expand the out-of-hospital market, use the Internet
platform and new technologies such as big data, artificial intelligence and the Internet-of-Things to
innovate services to suppliers, extend the service supply chain, accurately connect downstream
medical institutions and upstream pharmaceutical enterprises, and gradually develop value-added
services for the modern medicine sector, taking the road of sustainable development.
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
Development plan for aesthetic medicine:
The aesthetic medicine industry has a broad prospect. The Company, with the layout of
“aesthetic medicine” as an important way to implement the strategy of “big health + big
consumption”, will uphold the “customer-oriented” service concept, focus on the huge consumer
market of facial micro-plastic surgery and skin care, and continuously enrich its product portfolio
on the basis of consolidating its leading position in the aesthetic medicine market in China. With
Sinclair as the international aesthetic medicine operation platform, it will set up a professional and
international talent team, actively introduce international high-end aesthetic medicine products and
expand global market business, create high-end brands in the industry, and provide healthy, safe,
effective and personalized overall aesthetic medicine solutions to global customers.
7. The Company’s operating plan for 2020
The year 2020 will be a year of continuous great changes in the medicine industry and great
differentiation of medicine enterprises, as well as the 20th anniversary of the Company’s listing and
the key year for the comprehensive implementation of strategic transformation and
internationalization. It is bound to be one of the most difficult years in the Company’s history. In the
transition period of accelerating R&D and product pipeline adjustment, the Company is faced with
drastic changes in national policies and the medicine market; it failed to win the bid for national
centralized purchasing of Acarbose Tablets, and has been affected by the COVID-19 outbreak at
home and abroad. In the short term, it is faced with the severe test of weakened growth momentum
and slowing growth.
In 2020, the Company will adhere to the strategy of R&D innovation and internationalization
under the annual operating policy of “seeking common survival, seeking steady development, and
strengthening innovation and deepening transformation”. It will fully implement various innovative
measures, continue to deepen reform, adjust the organizational structure, optimize the incentive
mechanism, strengthen cost and expense reduction, strive for progress, overcome difficulties, and
strive to achieve the operating objective of continuous growth throughout the year.
(1) R&D: In 2020, the Company will put scientific research innovation at the top of all its
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
work, further strengthen and perfect the R&D system combining imitation and innovation, and
complete the appointment of the Company’s chief scientific officer and the continuous introduction
of high-end R&D talents. Through the comprehensive diagnosis and identification of the weak links
and pain points in R&D, the Company will define the reform direction, and complete the top-level
design of the R&D system and the reform of the organizational structure. It will intensify the
construction of innovative platforms and the integration of resources, continuously optimize the
project management mechanisms (BD coordination mechanism, project PM mechanism, project
committee mechanism and dynamic evaluation mechanism for products under R&D), optimize the
process of project selection, project initiation and approval in all aspects, and gradually phase out
the generic drug projects without market competitiveness through dynamic evaluation; focus on the
R&D of innovative drugs and generic drugs with high technical barriers, supplement and improve
the series of products in each product field of the Company, and achieve mutual supplement and
timely upgrade and substitution of the same series of products. It will speed up the registration
application for generic drug projects that have obtained clinical approval documents, complete the
phase III clinical trial for Liraglutide and phase II clinical trial for Mefatinib as soon as possible. It
will accelerate the progress of registration and approval, strive to establish 15 innovative products,
obtain more than 4 production approvals and complete 15 patent applications in the year.
(2) Medicine industry: The Company will continue to accelerate the transformation and
upgrading of the production system, continue to make use of the MAH diversified cooperation
mode, and build a brand-new Huadong medicine production and operation system adapted to the
new policies and market environment through strategic cooperation, entrusted production and
supplier development.
The Company will properly carry out production and provide supply guarantee, deliver
products in a compliant and high-quality manner, further improve the control system in such aspects
as R&D, production, quality and sales, and focus on product quality improvement, cost control and
R&D innovation. It will continue to carry out “three reductions”, improve the technical level
through technological progress and internal potential tapping, improve the operation efficiency
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
through lean production, continuously reduce production costs, realize the “high-quality, low-cost”
operation management and production objectives, enhance its market competitiveness in terms of
cost, and strengthen the safety training for all employees and raise the awareness of production
safety.
The Company will promote the construction of production parks as planned, and ensure safe
construction, efficient management and compliant production. It will complete the capital
construction of Jiangdong Phase II, complete intensive registration and certification preparations for
large-scale product transfer, complete the equipment verification of Jiangdong Phase II Project
before the end of 2020, and strive to put it into use in 2021.
The Company will continue to strengthen quality compliance and GMP normalization
management, speed up the construction of the talent team in the quality system, improve work
efficiency, accelerate drug quality consistency evaluation and international registration, and further
enrich its international product list. It will improve the collective management of the quality system
mode and post-marketing pharmacovigilance to ensure the efficient operation of future multiple
production forms.
(3) Zhongmei Huadong’s marketing and pharmaceutical services: In the severe market
environment, it is necessary to maintain strategic focus, actively respond to the new challenges in
the market after the failure to win the bid for the national centralized purchasing of Acarbose
Tablets, and deepen the transformation of marketing models. It will optimize and adjust the
marketing strategies, the marketing team structure and the personnel, and strengthen patient
education and the promotion of the clinical value of products, build a team for clinical promotion of
innovative drugs, improve the new academic promotion system of whole products with academic
marketing as the core, consolidate the foundation of compliance marketing, make good promotion
plans for each product under the new situation, focusing on the cultivation of potential varieties:
Acarbose Chewable Tablets should be promoted in the national market so that it can enter more
than 90% of Grade III hospitals in China; the sales of Pioglitazone-Metformin Tablets and
Indobufen Tablets should increase by more than 100% year on year. It will properly carry out the
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
comprehensive development of Bailing series products as well as the sales promotion in the primary
and self-paying markets.
The Company will continue to give full play to its overall marketing advantages, closely
follow the trend of prescription outflows after the implementation of hierarchical diagnosis and
treatment, firmly expand and continue to sink marketing channels, speed up the deployment in key
markets, and vigorously expand the primary market, out-of-hospital market and OTC retail market.
The number of hospitals covered by the primary market should double year on year.
(4) Human resources: The Company will continue to raise the level of human resources
management, strengthen the building of talent reserves and teams, vigorously introduce high-end
and scarce talents in the field of innovative drug R&D, optimize the enterprise organization and
human resources allocation, promote both incentives and efficiency, and constantly improve the
efficiency of human resources. It will further strengthen the cultivation of cadres, continue to
strengthen ideological education for cadres, strengthen the management of their rights and
responsibilities, allocation, assessment and motivation, and establish an assessment mechanism with
the goal of “abandoning mediocrity and pursuing excellence”. It will accelerate the development
and practice of a mechanism for the movement of cadres, and cultivate versatile talents who are
willing to take on responsibilities and explore new areas.
(5) Medicine business company: It will actively face the new challenges after the
implementation of centralized purchasing in Zhejiang Province and continue to improve its
comprehensive service capability, implement differentiated in-hospital and out-of-hospital market
service modes, combine with “Internet medical care” and “continuous prescription for chronic
diseases”, extend services to end patients, and create a closed-loop innovative service with
prescription outflow, adhere to the in-depth development in the Zhejiang market, and accelerate the
development of high-end third-party logistics services featuring “cold chain” and special medicine
distribution supported by the logistics system covering Zhejiang Province with “order fulfillment
rate” as the starting point.
The Company will promote innovative business modes, continue to expand cooperation with
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
multinational medicine companies and domestic innovative drug R&D enterprises, steadily promote
CSO team building, strengthen e-commerce business, cooperate with Internet platforms, and
continue to develop BTB and BTC business.
The Company will deepen the organizational restructuring of its business company, strengthen
financial budget management, continuously improve the management and operation efficiency
through the ERP information system, actively overcome the impact of the COVID-19 outbreak,
ensure the completion of the three major operating assessment indicators (annual main operating
revenue, net profit, and capital return rate), and strive to maintain year-on-year growth in overall
income and net profit.
(6) Aesthetic medicine: The Company will improve the international operation system,
actively carry out research and project introduction of high-tech new products and new technologies
in the field of aesthetic medicine worldwide, continue to promote the structural adjustment of
aesthetic medicine products and the development of innovative business, and complete the
registration and launch of core products such as Ellanse and R2-SPA in the Chinese market in 2020
as planned. It will speed up the construction of a promotion team of new aesthetic medicine
products, properly plan and implement the launch and promotion of products, actively reduce
expenses and costs, carry out brand promotion and customer relationship maintenance, and strive to
reduce the impact of the continued COVID-19 outbreak on the Company’s aesthetic medicine
business at home and abroad in 2020, laying a solid foundation for normal operation after the
pandemic.
X. Risks and countermeasures
1. Industry policies and market impact
At present, China has continuously deepened reform in the field of medicine and health, and
various policies have been introduced intensively. Policies such as national centralized purchasing,
generic drug consistency evaluation, two-vote system, new drug approval, control of the proportion
of hospital drugs, secondary price negotiation in hospitals, and close medical association will have a
significant impact on the R&D, production, and circulation of drugs. At the same time, with the
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
implementation of medical insurance fee control, the reform of payment methods, and the further
implementation of the generic drug centralized purchasing policy, some drugs 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 innovative varieties and R&D investment
through endogenous development and outward extension, reduce production and operation risks
through lean production, fully implement the international development strategy and improve the
technological quality advantages of products with international standards. It will continue to tap the
advantageous products and subdivisions of aesthetic medicine to create new profit points. It will
vigorously expand grassroots communities and OTC markets, and increase the coverage of primary
and retail terminal markets to maintain stable 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&D
process, there are also risks such as shortage of high-level talents, failure to obtain registration and
approval 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 payment
access, and market competition for similar products. In addition, the investment in R&D will also
bring 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 and
decision-making system, and establish close ties with well-known R&D institutions at home and
abroad, focus on the core treatment fields, continue to enrich and optimize the product pipelines
through independent project establishment and external introduction, vigorously develop innovative
drugs and generic drugs with high technical barriers, and gradually eliminate the backward varieties
that are not competitive in the market, increase the introduction of high-level research 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 the construction of
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
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
national centralized 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’s business performance.
Countermeasures: Focusing on scientific R&D and technological innovation, the Company
will improve the technological quality advantages of its products with international standards,
strengthen internal management and technological upgrading, strengthen cost competitive
advantages, carry out marketing assessment and incentives and channel sinking, continue to expand
the professional promotion team of county-level markets, vigorously expand primary communities
and OTC markets, and increase the coverage of primary and retail terminal markets to maintain
stable market growth.
XI. Activities of receptions, including research, communication and interview
1. Registration form of receptions, including research, communication and interview, undertaken during
the reporting period
√ Applicable □ N/A
Index of basic information of the
Date Method Type of visitor
research
Please refer to “Huadong Medicine:
000963 Huadong Medicine information
on research activities: January 18, 2019”
January 16, 2019 Field research Institution
presented on the websites of
irm.cninfo.com.cn and cninfo.com.cn for
details.
Please refer to “Huadong Medicine:
record of investor relations activities:
February 19, 2019 Field research Institution February 19 and 20, 2019” presented on
the websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
February 20, 2019 Field research Institution Please refer to “Huadong Medicine:
62
The 2019 Annul Report of Huadong Medicine Co., Ltd.
record of investor relations activities:
February 19 and 20, 2019” presented on
the websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
record of investor relations activities:
Institution and individual
April 19, 2019 Communication by phone April 19-24, 2019” presented on the
investor
websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
record of investor relations activities:
Institution and individual
April 23, 2019 Communication by phone April 19-24, 2019” presented on the
investor
websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
For details, please refer to “Huadong
Medicine: record of investor relations
April 24, 2019 Field research Institution activities: April 19-24, 2019” presented
on the websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
000963 Huadong Medicine information
Institution and individual on research activities: January 18, 2019”
April 30, 2019 Communication by phone
investor presented on the websites of
irm.cninfo.com.cn and cninfo.com.cn for
details.
Please refer to “Huadong Medicine:
record of investor relations activities:
Institution and individual
May 28, 2019 Communication by phone May 28-29, 2019” presented on the
investor
websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
record of investor relations activities:
May 29, 2019 Field research Institution May 28-29, 2019” presented on the
websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
record of investor relations activities:
Shareholders’ meeting and Institution, shareholder
June 6, 2019 (investor reception day
June 06, 2019 investor reception day representative and individual
activities)” presented on the websites of
activities investor
irm.cninfo.com.cn and cninfo.com.cn for
details.
July 18, 2019 Field research Institution Please refer to “Huadong Medicine:
63
The 2019 Annul Report of Huadong Medicine Co., Ltd.
record of investor relations activities:
July 18-19, 2019” presented on the
websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
record of investor relations activities:
July 19, 2019 Field research Institution July 18-19, 2019” presented on the
websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
record of investor relations activities:
Institution and individual
August 28, 2019 Communication by phone August 28, 2019” presented on the
investor
websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
record of investor relations activities:
September 23, 2019 Field research Institution September 23-25, 2019” presented on
the websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
record of investor relations activities:
September 25, 2019 Field research Institution September 23-25, 2019” presented on
the websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
record of investor relations activities:
Institution and individual
October 30, 2019 Communication by phone October 30, 2019” presented on the
investor
websites of irm.cninfo.com.cn and
cninfo.com.cn for details.
Please refer to “Huadong Medicine:
“Huadong Medicine - communication
Group reception day for for development and rational co-growth -
Institution and individual
November 05, 2019 investors – online Q&A on investor group reception day of listed
investor
quanjing.com companies in Zhejiang Province in
2019” presented on http://rs.p5w.net/ for
details
Number of receptions 17
Number of institutions received 1,500
Number of individuals received 60
Number of other visitors received 0
Has any undisclosed important information been
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The 2019 Annul Report of Huadong Medicine Co., Ltd.
disclosed, revealed or divulged? No
65
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Section V. Important Matters
I. The Company’s profit distribution of common shares and increase of capital stock by
capital reserve conversion
Formulation, implementation or adjustment of the profit distribution policy of common shares, especially the cash dividend policy,
during the reporting period
√ Applicable □ N/A
During the reporting period, the Company’s profit distribution policy conforms to the Articles of Association and the review
procedure, and fully protects the legitimate rights and interests of small and medium investors. The independent directors have
expressed their opinion, and there is a clear standard and ratio of dividends.
Special notes on cash dividend policy
Whether it complies with the provisions of the Articles of
Association or the requirements of the resolutions of Yes
shareholders’ meeting:
Whether the standard and ratio of dividends are clear: Yes
Whether the relevant decision-making procedures and
Yes
mechanisms are complete:
Whether the independent directors have performed their duties
Yes
and played their due roles:
Whether minority shareholders have the opportunity to fully
express their opinions and demands, and whether their legitimate Yes
rights and interests are fully protected:
If the cash dividend policy is adjusted or changed, whether the
Yes
conditions and procedures are compliant and transparent:
The Company’s common share dividend distribution plan (preplan) and plan for capital stock increase by capital reserve conversion
(preplan) in recent three years (including the current reporting period):
(1) The Company’s distribution plan for 2017: Based on the total share capital of 972,116,416 shares, 7.2 yuan (tax included) is paid
as a cash dividend for every 10 shares; the total share dividend distributed is 699,923,819.52 yuan, and 5 shares are added for every
10 shares by capital reserve conversion;
(2) The Company’s distribution plan for 2018: Based on the total share capital of 1,458,174,624 shares, 3.3 yuan (tax included) is
paid as a cash dividend for every 10 shares; the total share dividend distributed is 481,197,625.92 yuan, and 2 shares are added for
every 10 shares by capital reserve conversion;
(3) The Company’s distribution plan for 2019: Based on the total share capital of 1,749,809,548 shares, 2.8 yuan (tax included) is
paid as a cash dividend for every 10 shares; the total share dividend distributed is 489,946,673.44 yuan, and 0 shares are added for
every 10 shares by capital reserve conversion.
The Company’s cash dividends of common shares in recent three years (including the reporting period)
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
Unit: RMB yuan
Proportion of
total cash
Proportion of
Proportion of dividends
cash dividends
Net profit cash dividends (including
by other means
attributable to in the net profit those by other
in the net profit Total cash
the common attributable to Cash dividends means) in the
Year when attributable to dividends
Cash dividends shareholders of the common by other means net profit
dividends are the common (including
(tax included) the Company shareholders of (such as share attributable to
distributed shareholders of those by other
in the annual the Company repurchase) the common
the Company means)
consolidated in the shareholders of
in the
statements consolidated the Company
consolidated
statements in the
statements
consolidated
statements
2,813,118,702.
2019 489,946,673.44 17.42% 0.00 0.00% 489,946,673.44 17.42%
11
2,267,229,174.
2018 481,197,625.92 21.22% 0.00 0.00% 481,197,625.92 21.22%
08
1,779,506,061.
2017 699,923,819.52 39.33% 0.00 0.00% 699,923,819.52 39.33%
59
During the reporting period, the Company made profits and the profit available to common shareholders of the parent company was
positive, but no cash dividend plan for common shares was proposed
□ Applicable √ N/A
II. Profit distribution and capital stock increase by capital reserve conversion during the
current reporting period
√ Applicable □ N/A
Number of bonus shares every 10 shares (share) 0
Dividends paid every 10 shares (tax included) 2.8
Number of shares added for every 10 shares by
0
capital reserve conversion
Capital stock base of the distribution plan (share) 1,749,809,548
Cash dividends (yuan) (tax included) 489,946,673.44
Cash dividends by other means (such as share
0.00
repurchase) (yuan)
Total cash dividends (yuan) 489,946,673.44
Distributable profit (yuan) 3,431,594,974.14
Proportion of total cash dividends (including those 100%
67
The Annul Report 2019 of Huadong Medicine Co., Ltd.
by other means) in the total profit distributed
Current cash dividends
If the Company is in a mature stage of development and has a significant capital expenditure arrangement, the proportion of cash
dividends in the current profit distribution should be at least 40%.
Details of the profit distribution plan or the plan for capital stock increase by capital reserve conversion
The Company’s profit distribution plan for 2019: Based on the total share capital of 1,749,809,548 shares, 2.8 yuan (tax included)
is paid as a cash dividend for every 10 shares; the total share dividend distributed is 489,946,673.44 yuan, and 0 shares are added
for every 10 shares by capital reserve conversion.
III. Fulfillment of commitments
1. Commitments made by interested parties such as the Company’s actual controller, shareholders, related
parties, acquirer(s), and the Company that are fulfilled during the reporting period or unfulfilled by the
end of the reporting period
√ Applicable □ N/A
Commitment Type of Date of Term of Fulfilled or
Commitment Details of commitment
maker commitment commitment commitment unfulfilled
Share reform N/A N/A N/A N/A N/A
A commitment made in
the report of acquisition or
N/A N/A N/A N/A N/A
the report of change in
equity
A commitment made in
N/A N/A N/A N/A N/A
assets restructuring
China Grand
Enterprises will abide
by the “Administrative
Measures for the
Issuance of Securities
A by Listed Companies”,
A commitment made at
commitment “Rules for Stock Listing
the time of an initial China Grand February 05,
made at the of Shenzhen Stock 36 months Fulfilled
public offering or Enterprises, Inc. 2016
time of Exchange”, and
refinancing
refinancing relevant provisions of
laws, regulations and
regulatory documents,
and will not transfer the
shares it has subscribed
for within 36 months
68
The Annul Report 2019 of Huadong Medicine Co., Ltd.
from the date of this
non-public offering of
shares by Huadong
Medicine.
Huadong Group will
abide by the
“Administrative
Measures for the
Issuance of Securities
by Listed Companies”,
“Rules for Stock Listing
A of Shenzhen Stock
Hangzhou
commitment Exchange”, and
Huadong February 05,
made at the relevant provisions of 36 months Fulfilled
Medicine Group 2016
time of laws, regulations and
Co., Ltd.
refinancing regulatory documents,
and will not transfer the
shares it has subscribed
for within 36 months
from the date of this
non-public offering of
shares by Huadong
Medicine.
Equity incentives N/A N/A N/A N/A N/A
China Grand
Enterprises undertakes
that it has no plan to sell
all of its shares in Fulfilled (the
Commitmen
Huadong Medicine commitment
China Grand t to reducing February 11,
within 12 months from 12 months expired on
Enterprises, Inc. shareholding 2019
the date of the lifting of February 10,
s
restrictions on the 2020)
Other commitments made non-public offering of
to the Company’s small shares by Huadong
and medium shareholders Medicine in 2016.
Huadong Group
undertakes that it has no
Fulfilled (the
Hangzhou Commitmen plan to sell all of its
commitment
Huadong t to reducing shares in Huadong February 11,
12 months expired on
Medicine Group shareholding Medicine within 12 2019
February 10,
Co., Ltd. s months from the date of
2020)
the lifting of restrictions
on the non-public
69
The Annul Report 2019 of Huadong Medicine Co., Ltd.
offering of shares by
Huadong Medicine in
2016.
Whether the commitment
Yes
has been fulfilled on time
If the commitment is
overdue and has not been
fulfilled, the specific
reasons for unfulfillment N/A
and the future work plan
should be explained in
detail.
2. If there is a profit forecast for the Company’s assets or projects and the reporting period is in the profit
forecast period, the Company should state the assets or projects that meet the original profit forecast and
the reasons for that
□ Applicable √ N/A
IV. Controlling shareholder’s and related parties’ occupation of non-operating funds of the
listed companies
□ Applicable √ N/A
No such case during the reporting period.
V. Explanation by the Board of Directors, the Board of Supervisors and the independent
directors (if any) on the “auditor’s nonstandard report” of the accounting firm during the
current reporting period
□ Applicable √ N/A
VI. Changes in accounting policies, estimation and accounting methods as compared with the
previous financial report
√ Applicable □ N/A
Since January 1, 2019, the Company has implemented “Accounting Standard for Business Enterprises No. 22 - Recognition and
Measurement of Financial Instruments”, “Accounting Standard for Business Enterprises No. 23 - Transfer of Financial Assets”,
“Accounting Standard for Business Enterprises No. 24 – Hedging”, and “Accounting Standard for Business Enterprises No. 37 -
Presentation of Financial Instruments” revised by the Ministry of Finance in 2017. For details, please refer to “V (44) Changes in
important accounting policies and accounting estimation” in “Section XII. Financial Report” of this report.
70
The Annul Report 2019 of Huadong Medicine Co., Ltd.
VII. Retrospective restatement of the correction of significant accounting errors during the
reporting period
□ Applicable √ N/A
No such case during the reporting period.
VIII. Changes in the scope of consolidated statements as compared to the previous financial
report
√ Applicable □ N/A
1. Increase of the consolidation scope
Time of equity
Company name Method of equity acquisition Amount of capital Ratio of capital
acquisition
Huadong Medicine Jinhua Co., Ltd. New subsidiary March 2019 80,000,000.00 100%
Huadong Medicine (Hangzhou) Co., Ltd. Share acquisition May 2019 50,059,838.75 100%
Huadong Medicine Skin Management
New subsidiary April 2019 [Note 1] 100%
(Hong Kong) Co., Ltd.
Huadong Ningbo Medicine (Hong Kong)
New subsidiary July 2019 [Note 2] 100%
Co., Ltd.
Sinclair Pharma Australia Pty Ltd New subsidiary February 2019 [Note 3] 100%
Note 1: No capital has been contributed as of December 31, 2019.
Note 2: No capital has been contributed as of December 31, 2019.
Note 3: No capital has been contributed as of December 31, 2019.
2. Reduction of the consolidation scope
Net profit from the
Time of equity Net assets at beginning of the
Company name Method of equity disposal
disposal disposal date period to the disposal
date
Medicalio SL Cancellation December 2019 43,121.51
IX. Employment and dismissal of accounting firms
Accounting firm employed by the Company for now
Pan-China Certified Public Accountants (special general
Name of the domestic accounting firm
partnership)
Continuous number of years of audit services provided by the 22
71
The Annul Report 2019 of Huadong Medicine Co., Ltd.
domestic accounting firm
Remuneration of the domestic accounting firm (ten thousand
165
yuan)
Certified public accountants of the domestic accounting firm Wang Fukang, Xu Ping
Continuous number of years of audit services provided by
4
certified public accountants of the domestic accounting firm
Name of the overseas accounting firm (if any) None
Remuneration of the overseas accounting firm (ten thousand
0
yuan) (if any)
Continuous number of years of audit services provided by the
None
overseas accounting firm (if any)
Certified public accountants of the overseas accounting firm (if
None
any)
Continuous number of years of audit services provided by
certified public accountants of the overseas accounting firm (if None
any)
Whether the accounting firm employed was replaced in the current period
□ Yes √ No
Information about the internal control audit accounting firm, financial consultant or sponsor employed by the Company
√ Applicable □ N/A
During the reporting period, the Company employed Pan-China Certified Public Accountants (special general partnership) as the
audit institution of its annual financial report and internal control audit report; the annual financial report and internal control audit
report audit fee paid is 1.65 million yuan.
X. Suspension and termination of listing after annual report disclosure
□ Applicable √ N/A
XI. Bankruptcy reorganization
□ Applicable √ N/A
No such case during the reporting period.
XII. Major litigation and arbitration
□ Applicable √ N/A
No such case during the reporting period.
XIII. Punishment and rectification
□ Applicable √ N/A
72
The Annul Report 2019 of Huadong Medicine Co., Ltd.
No such case during the reporting period.
XIV. Integrity of the Company and its controlling shareholder and actual controller
□ Applicable √ N/A
XV. Implementation of the Company’s equity incentive plan, employee stock ownership plan
or other employee incentive measures
□ Applicable √ N/A
No such case during the reporting period.
XVI. Major related transactions
1. Transactions related to daily operations
√ Applicable □ N/A
Proporti Approv Availabl
Related Whethe Settlem
Pricing on in ed e
Content transacti r it ent
Type of principl Price of the transacti market
of on exceeds method Date of Disclos
Related Relation related es for related amount on prices
related amount the of disclosu ure
party ship transacti related transacti of amount of
transacti (ten approve related re index
on transacti on similar (ten similar
on thousan d transacti
on transacti thousan transacti
d yuan) amount on
ons d yuan) ons
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price
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the cninfo
Yuanda Compan Cash,
Drug Compan April (http://
Shuyang y’s Drug Market 5,236.9 banker’s Market
purchas y’s 0.17% 5,000 Yes 19, www.c
Pharmace controlli purchase price 7 accepta price
e related 2019 ninfo.c
utical ng nce bill
transacti om.cn)
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on
der
decision
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process
73
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
determi
Subsidia
ned by
Beijing ry of the
the cninfo
Grand Compan Cash,
Drug Compan April (http://
Johamu y’s Drug Market banker’s Market
purchas y’s 4,939.7 0.16% 5,000 No 19, www.c
Pharmace controlli purchase price accepta price
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price
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Grandpha Compan Cash,
Drug Compan April (http://
rma y’s Drug Market 4,325.7 banker’s Market
purchas y’s 0.14% 3,500 Yes 19, www.c
(China) controlli purchase price 2 accepta price
e related 2019 ninfo.c
Co., Ltd. ng nce bill
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on
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Joint the cninfo
Jiuyuan Cash,
venture Drug Compan April (http://
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of the purchas y’s 0.07% 6,000 No 19, www.c
Engineeri purchase price 9 accepta price
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74
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
determi
Subsidia
Yunnan ned by
ry of the
Leiyunsh the cninfo
Compan Cash,
ang Drug Compan April (http://
y’s Drug Market 1,527.1 banker’s Market
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price
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ry of the
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Compan Cash,
Pharmace Drug Compan April (http://
y’s Drug Market banker’s Market
utical purchas y’s 884.55 0.03% 850 Yes 19, www.c
controlli purchase price accepta price
Group e related 2019 ninfo.c
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price
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ry of the
Yaoda the cninfo
Compan Cash,
Leiyunsh Drug Compan April (http://
y’s Drug Market banker’s Market
ang purchas y’s 719.43 0.02% 1,500 No 19, www.c
controlli purchase price accepta price
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Co., Ltd. on
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75
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
determi
Subsidia
ned by
ry of the
Penglai the cninfo
Compan Cash,
Nuokang Drug Compan April (http://
y’s Drug Market banker’s Market
Pharmace purchas y’s 531.14 0.02% 2,500 No 19, www.c
controlli purchase price accepta price
utical Co. e related 2019 ninfo.c
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price
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Compan Cash,
rma Drug Compan April (http://
y’s Drug Market banker’s Market
Xinbeilin purchas y’s 323.93 0.01% 50 Yes 19, www.c
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Subsidia the cninfo
Xudong Cash,
ry of the Drug Compan April (http://
Haipu Drug Market banker’s Market
Compan purchas y’s 332.17 0.01% 400 No 19, www.c
Pharmace purchase price accepta price
y’s e related 2019 ninfo.c
utical Co. nce bill
controlli transacti om.cn)
Ltd.
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sharehol decision
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76
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
determi
Subsidia
ned by
Leiyunsh ry of the
the cninfo
ang Compan Cash,
Drug Compan April (http://
Pharmace y’s Drug Market banker’s Market
purchas y’s 298.16 0.01% 500 No 19, www.c
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ry of the
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Compan Cash,
Grand Drug Compan April (http://
y’s Drug Market banker’s Market
Biologic purchas y’s 207.96 0.01% 850 No 19, www.c
controlli purchase price accepta price
Pharmace e related 2019 ninfo.c
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Leiyunsh Compan Cash,
Drug Compan April (http://
ang y’s Drug Market banker’s Market
purchas y’s 210.22 0.01% 400 No 19, www.c
Pharmace controlli purchase price accepta price
e related 2019 ninfo.c
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transacti om.cn)
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on
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decision
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77
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
determi
Subsidia
Guangdo ned by
ry of the
ng the cninfo
Compan Cash,
Leiyunsh Drug Compan April (http://
y’s Drug Market banker’s Market
ang purchas y’s 126.77 0.00% 300 No 19, www.c
controlli purchase price accepta price
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Leiyunsh Drug Compan April (http://
y’s Drug Market banker’s Market
ang purchas y’s 75.23 0.00% 100 No 19, www.c
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price
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Huadong ned by
ry of the
Medicine the cninfo
Compan Cash,
Group Drug Compan April (http://
y’s Drug Market banker’s Market
Guizhou purchas y’s 49.33 0.00% 0 Yes 19, www.c
second purchase price accepta price
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78
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
determi
Subsidia
ned by
ry of the
Beijing the cninfo
Compan Cash,
Huajin Drug Compan April (http://
y’s Drug Market banker’s Market
Pharmace purchas y’s 14.64 0.00% 80 No 19, www.c
controlli purchase price accepta price
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Grandpha ned by
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Huangshi Drug Compan April (http://
y’s Drug Market banker’s Market
Feiyun purchas y’s 1.96 0.00% 0 Yes 19, www.c
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Drug Compan April (http://
Xianle y’s Drug Market banker’s Market
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79
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
determi
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ry of the
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Compan Cash,
Beilin Drug Compan April (http://
y’s Drug Market banker’s Market
Pharmace purchas y’s 0.94 0.00% 0 Yes 19, www.c
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Junlan Shareho Cash,
Compan April (http://
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Cash,
TCM Hangzh Compan April (http://
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Outpatien ou y’s 1,078.8 0.03% 1,500 No 19, www.c
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80
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
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Hangzhou
Joint the cninfo
Jiuyuan Cash,
venture Compan April (http://
Gene Drug Drug Market banker’s Market
of the y’s 553.86 0.02% 1,000 No 19, www.c
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Leiyunsh Compan April (http://
y’s Drug Drug Market banker’s Market
ang y’s 459.48 0.01% 400 Yes 19, www.c
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Compan April (http://
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81
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
determi
Subsidia
Yunnan ned by
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Leiyunsh the cninfo
Compan Cash,
ang Compan April (http://
y’s Drug Drug Market banker’s Market
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venture Compan April (http://
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82
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
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Grand Compan Cash,
Compan April (http://
Resources y’s Drug Drug Market banker’s Market
y’s 15.82 0.00% 0 Yes 19, www.c
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Compan Cash,
Grand Compan April (http://
y’s Drug Drug Market banker’s Market
Biologic y’s 15.79 0.00% 0 Yes 19, www.c
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Grand Compan April (http://
y’s Drug Drug Market banker’s Market
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83
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Market
price
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Compan Cash,
Leiyunsh Compan April (http://
y’s Drug Drug Market banker’s Market
ang y’s 6.12 0.00% 0 Yes 19, www.c
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Compan April (http://
Donghai lding Drug Drug Market banker’s Market
y’s 1.05 0.00% 0 Yes 19, www.c
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House House Cash,
Huadong y’s Compan April (http://
rental; rental; Market banker’s Market
Medicine second y’s 34.12 0.00% 110 No 19, www.c
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
Subsidia
ry of Market
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determi
Subsidia
ned by
ry of the
Beijing the cninfo
Compan Cash,
Yanhuang Compan April (http://
y’s House House Market banker’s Market
Real y’s 64.63 0.00% 0 Yes 19, www.c
controlli leasing leasing price accepta price
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ng nce bill
Co., Ltd. transacti om.cn)
sharehol
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der
decision
-making
process
38,397.
Total -- -- -- 35,390 -- -- -- -- --
3
Details of bulk sales returns N/A
Actual performance during the
reporting period where the total
amount of daily related transactions is N/A
estimated by category for the current
period (if any)
Reasons for the large difference
between the transaction price and the N/A
market reference price (if applicable)
85
The Annul Report 2019 of Huadong Medicine Co., Ltd.
2. Related transactions involving the acquisition or sale of assets and shares
□ Applicable □ N/A
3. Related transactions of joint external investment
□ Applicable √ N/A
4. Associated claim and debt transactions
□ Applicable √ N/A
5. Other major related transactions
□ Applicable √ N/A
XVII. Major contracts and their fulfilment
1. Entrustment, contracting and leasing
(1) Entrustment
□ Applicable √ N/A
No such case during the reporting period.
(2) Contracting
□ Applicable √ N/A
No such case during the reporting period.
(3) Leasing
□ Applicable √ N/A
No such case during the reporting period.
86
The Annul Report 2019 of Huadong Medicine Co., Ltd.
2. Important guarantees
√ Applicable □ N/A
(1) Guarantees
Unit: RMB ten thousand yuan
External guarantees of the Company and its subsidiaries (excluding guarantees for subsidiaries)
Disclosure
date of the
announceme Actual Guarantee
guaranteed Guarantee Actual date of Type of Period of Fulfille
nt related to guaranteed for a related
party Cap occurrence guarantee guarantee d or not
the amount party or not
guarantee
Cap
/ / / / / / / / /
Total actual amount of
Total amount of external
external guarantees
guarantees approved during the / /
during the reporting
reporting period (A1)
period (A2)
Total actual balance of
Total amount of approved
external guarantees at the
external guarantees at the end of / /
end of the reporting
the reporting period (A3)
period (A4)
The Company’s guarantees for its subsidiaries
Disclosure
date of the Related
Actual
Guaranteed announceme Guarantee Actual date of Type of Term of Fulfille party
guarantee
party nt of the cap occurrence guarantee guarantee d or not guarantee or
amount
guarantee not
cap
Hangzhou
Zhongmei Joint
April 19,
Huadong 50,000 July 18, 2019 23,629 liability Six months No No
2019
Pharmaceutical guarantee
Co., Ltd.
Huadong
Joint
Ningbo March 30,
27,000 May 24, 2019 3,500 liability One year No No
Medicine Co., 2018
guarantee
Ltd.
87
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Huadong
Joint
Ningbo April 19, October 15, Four
27,000 6,880 liability No No
Medicine Co., 2019 2019 months
guarantee
Ltd.
Huadong
Joint
Ningbo April 19, November 21,
23,000 975 liability One year No No
Medicine Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Ningbo April 19, November 21,
23,000 960 liability One year No No
Medicine Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Ningbo April 19, November 08,
27,000 5,000 liability One year No No
Medicine Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Ningbo April 19, December 19,
23,000 995 liability One year No No
Medicine Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Ningbo April 19, December 19,
23,000 995 liability One year No No
Medicine Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Ningbo April 19, December 19,
23,000 995 liability One year No No
Medicine Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Ningbo April 19, December 19,
23,000 995 liability One year No No
Medicine Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Medicine March 30,
24,000 May 15, 2019 3,000 liability One year No No
Wenzhou Co., 2018
guarantee
Ltd.
Huadong
Joint
Medicine April 19, September 02,
24,000 2,000 liability One year No No
Wenzhou Co., 2019 2019
guarantee
Ltd.
88
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Huadong
Joint
Medicine April 19, November 08,
24,000 1,000 liability One year No No
Wenzhou Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Medicine April 19, August 15,
24,000 2,000 liability One year No No
Wenzhou Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Medicine April 19, August 21,
24,000 500 liability One year No No
Wenzhou Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Medicine April 19, September 23,
24,000 400 liability One year No No
Wenzhou Co., 2019 2019
guarantee
Ltd.
Huadong
Joint
Medicine April 19, September 04,
24,000 1,100 liability One year No No
Wenzhou Co., 2019 2019
guarantee
Ltd.
Hangzhou
Zhongmei
Joint
Huadong April 19,
7,000 July 09, 2019 4,088 liability Six months No No
Pharmaceutical 2019
guarantee
Jiangdong Co.,
Ltd.
Joint
Sinclair Pharma November March 26, Three
40,000 18,226 liability No No
Limited 23, 2018 2019 years
guarantee
Hangzhou
Huadong TCM April 19,
1,500 / / / One year / /
Decoction 2019
Pieces Co., Ltd.
Huadong
Medicine
April 19,
(Xi’an) Bohua 5,000 / / / One year / /
2019
Pharmaceutical
Co., Ltd.
Jiangsu Joyang
April 19,
Laboratories 7,000 / / / One year / /
2019
Co., Ltd.
89
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Huadong
Medicine April 19,
18,000 / / / One year / /
Ningbo Sales 2019
Co., Ltd.
Huadong
Medicine April 19,
18,000 / / / One year / /
Huzhou Co., 2019
Ltd.
Huadong
Medicine April 19,
10,000 / / / One year / /
Shaoxing Co., 2019
Ltd.
Huadong
Medicine
Supply Chain April 19,
6,000 / / / One year / /
Management 2019
(Hangzhou)
Co., Ltd.
Huadong
Medicine
Supply Chain April 19,
20,000 / / / Ten years / /
Management 2019
(Jinhua) Co.,
Ltd.
Huadong
April 19,
Medicine Lishui 10,000 / / / One year / /
2019
Co., Ltd.
Huadong
Medicine
(Hangzhou) April 19,
2,000 / / / One year / /
Biological 2019
Products Co.,
Ltd.
Hangzhou
Zhongmei
Huadong March 30,
180,000 / / / Ten years / /
Pharmaceutical 2018
Jiangdong Co.,
Ltd.
90
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Huadong
Medicine April 19,
4,000 / / / One year / /
Taizhou Co., 2019
Ltd.
Huadong
Medicine Cunde April 19,
9,000 / / / One year / /
(Zhoushan) Co., 2019
Ltd.
Huadong
Medicine April 19,
5,000 / / / One year / /
Daishan Co., 2019
Ltd.
Total actual guarantee
Total guarantee cap for
amount for subsidiaries
subsidiaries approved during 246,500 77,238
during the reporting
the reporting period (B1)
period (B2)
Total actual guarantee
Total approved guarantee cap
balance for subsidiaries
for subsidiaries at the end of the 466,500 77,238
at the end of the reporting
reporting period (B3)
period (B4)
Subsidiariesguarantee for subsidiaries
Disclosure
date of the Related
Actual
Guaranteed announceme Guarantee Actual date of Type of Term of Fulfille party
guarantee
party nt of the cap occurrence guarantee guarantee d or not guarantee or
amount
guarantee not
cap
/ / / / / / / / /
Total actual guarantee
Total guarantee cap for
amount for subsidiaries
subsidiaries approved during / /
during the reporting
the reporting period (C1)
period (C2)
Total actual guarantee
Total approved guarantee cap
balance for subsidiaries
for subsidiaries at the end of the / /
at the end of the reporting
reporting period (C3)
period (C4)
Total amount of the Company’s guarantees (i.e. the sum of theabove-mentioned 3 kinds of guarantees)
Total actual guarantee
Total guarantees cap approved
amount during the
during the reporting period 246,500 77,238
reporting period
(A1+B1+C1)
(A2+B2+C2)
91
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Total actual guarantee
Total approved guarantee cap
balance at the end of
at the end of the reporting 466,500 77,238
the reporting period
period (A3+B3+C3)
(A4+B4+C4)
Proportion of the actual guarantee amount (i.e. A4+B4+C4) in
6.27%
the Company’s net assets
Including:
Balance of guarantees for shareholders, actual controllers and their related parties (D) /
Amount of debt guarantees provided directly or indirectly for the entities with a liability-to
10,000
asset ratio over 70% (E)
The total amount of guarantees exceeds 50% of the net assets (F) /
Total guarantee amount of the above-mentioned three kineds of guarantees (D+E+F) 10,000
For the unexpired guarantee, a guarantee liability has occurred or there may be a joint liability
/
for satisfaction during the reporting period (if any)
Note of external guarantees in violation of prescribed procedures (if any) /
(2) External guarantees in violation of provisions
□ Applicable √ N/A
No such case during the reporting period.
3. Entrusted management of cash assets
(1) Entrusted finances
□ Applicable √ N/A
No such case during the reporting period.
(2) Entrusted loans
□ Applicable √ N/A
No such case during the reporting period.
4. Other significant contracts
□ Applicable √ N/A
No such case during the reporting period.
92
The Annul Report 2019 of Huadong Medicine Co., Ltd.
XVIII. Social responsibilities
1. Fulfillment of social responsibilities
2019 is a crucial year for deepening the transformation of Huadong Medicine, and the first
year of a new period of development. All members of Huadong Medicine have created innovative
business management ideas and empowered the Company with wisdom and hard work, ensuring the
steady development of Huadong Medicine.
In the process of strategic transformation, the Company has strictly performed its social
responsibilities as a corporate citizen; paid attention to the demands of shareholders, employees,
customers, suppliers, communities and other stakeholders; assumed social responsibilities for
environmental protection, saved energy and reduced emissions, and promoted the efficient and
stable operation of the EHS system; and taken an active part in public welfare undertakings.
The Company’s fulfillment of social responsibilities in 2019 can be found in “2019 Social
Responsibility Report of Huadong Medicine”.
2. Fulfillment of social responsibility for targeted poverty alleviation
The Company has not carried out targeted poverty alleviation in the reporting year, and there is no follow-up targeted poverty
alleviation plan for the time being.
3. Environmental protection
Whether the Company and its subsidiaries are the key pollutant discharging units announced by the environmental protection
authorities
Yes
Name of the Name of Number of Distribution Concentrati Discharge Approved
Discharge Total Excessive
company or major discharge of discharge on of standard of total
type discharge discharge
subsidiary pollutants outlets outlets discharge pollutants discharge
Hangzhou
Front gate,
Zhongmei Water
Intermittent 866
Huadong pollutant: 1 7.86 6-9 / / None
discharge Moganshan
Pharmaceuti PH value
Road
cal Co., Ltd.
Hangzhou Water Front gate,
Intermittent 475.5
Zhongmei pollutant: 1 866 179mg/l 500mg/l 163.3 tons None
discharge tons/year
Huadong COD Moganshan
93
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Pharmaceuti Road
cal Co., Ltd.
Hangzhou
Water Front gate,
Zhongmei
pollutant: Intermittent 866
Huadong 1 5.38mg/l 35mg/l 4.91 tons / None
ammonia discharge Moganshan
Pharmaceuti
nitrogen Road
cal Co., Ltd.
Hangzhou Legal In the
Solid
Zhongmei disposal by factory at
pollutant:
Huadong entrusted 2 866 / / 0 ton / None
hazardous
Pharmaceuti qualified Moganshan
solid waste
cal Co., Ltd. units Road
Hangzhou In the
Solid Legal
Zhongmei factory at
pollutant: disposal by
Huadong 2 866 / / 0 ton / None
general qualified
Pharmaceuti Moganshan
solid waste units
cal Co., Ltd. Road
Hangzhou
Air Roof of the
Zhongmei
pollutant: Organized boiler room 17.7
Huadong 1 75.6mg/ m 400mg/ m 8.16 tons None
nitrogen emission in Building tons/year
Pharmaceuti
oxide No. 25
cal Co., Ltd.
Hangzhou
Air Roof of the
Zhongmei
pollutant: Organized boiler room
Huadong 1 4mg/ m 100mg/ m 0.43 tons / None
sulfur emission in Building
Pharmaceuti
dioxide No. 25
cal Co., Ltd.
Hangzhou
Air Roof of the
Zhongmei
pollutant: Organized boiler room
Huadong 1 7.8mg/ m 30mg/ m 0.84 tons / None
dust and emission in Building
Pharmaceuti
fume No. 25
cal Co., Ltd.
Hangzhou Air
103 refining
Zhongmei pollutant:
Organized (east),
Huadong volatile 1 12.6mg/ m 80mg/ m / / None
emission Building
Pharmaceuti organic
No. 16
cal Co., Ltd. compound
Hangzhou
103 refining
Zhongmei Air 800
Organized (east),
Huadong pollutant: 1 120.67 (dimensionl / / None
emission Building
Pharmaceuti foul smell ess)
No. 16
cal Co., Ltd.
94
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Hangzhou Air
103 refining
Zhongmei pollutant:
Organized (west),
Huadong volatile 1 11.1 m 80mg/ m / / None
emission Building
Pharmaceuti organic
No. 16
cal Co., Ltd. compound
Hangzhou
103
Zhongmei Air 800
Organized fermentatio
Huadong pollutant: 1 345 (dimensionl / / None
emission n, Building
Pharmaceuti foul smell ess)
No. 27
cal Co., Ltd.
Hangzhou
107
Zhongmei Air 800
Organized fermentatio
Huadong pollutant: 1 146 (dimensionl / / None
emission n, Building
Pharmaceuti foul smell ess)
No. 33
cal Co., Ltd.
Hangzhou
303 sewage
Zhongmei Air 800
Organized station,
Huadong pollutant: 1 344 (dimensionl / / None
emission Building
Pharmaceuti foul smell ess)
No. 18
cal Co., Ltd.
Huadong Along
Medicine National
Water
(Xi’an) Intermittent Highway
pollutant: 1 7.50 6-9 / / None
Bohua discharge 310, Liuye
PH value
Pharmaceuti River,
cal Co., Ltd. Huayin City
Huadong Along
Medicine National
Water
(Xi’an) Intermittent Highway
pollutant: 1 22.81mg/l 50mg/l 0.401 tons 3 tons None
Bohua discharge 310, Liuye
COD
Pharmaceuti River,
cal Co., Ltd. Huayin City
Huadong Along
Medicine Water National
(Xi’an) pollutant: Intermittent Highway
1 1.94mg/l 12mg/l 0.034 tons 0.72 tons None
Bohua ammonia discharge 310, Liuye
Pharmaceuti nitrogen River,
cal Co., Ltd. Huayin City
Huadong Water Along
Medicine pollutant: Intermittent National
1 7.18mg/l 20mg/l 0.126 tons / None
(Xi’an) total discharge Highway
Bohua nitrogen 310, Liuye
95
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Pharmaceuti River,
cal Co., Ltd. Huayin City
Huadong
Compliant
Medicine Solid
disposal by
(Xi’an) pollutant: In the
entrusted 2 / / 153.02 tons / None
Bohua hazardous company
qualified
Pharmaceuti waste
units
cal Co., Ltd.
Huadong
Air
Medicine Raw
pollutant:
(Xi’an) Organized medicine
volatile 1 / 120mg/ m / / None
Bohua emission No.1
organic
Pharmaceuti workshop
compound
cal Co., Ltd.
Huadong
Medicine Air Raw
(Xi’an) pollutant: Organized medicine
1 / 100mg/ m3 / / None
Bohua hydrogen emission No.1
Pharmaceuti chloride workshop
cal Co., Ltd.
Huadong
Medicine Air Raw
(Xi’an) pollutant: Organized medicine
1 / 100mg/ m / / None
Bohua hydrogen emission No.2
Pharmaceuti chloride workshop
cal Co., Ltd.
Huadong
Medicine Air Raw
(Xi’an) pollutant: Organized medicine
1 / 120mg/ m / / None
Bohua particulate emission No.2
Pharmaceuti matter workshop
cal Co., Ltd.
Huadong
Medicine Air Raw
(Xi’an) pollutant: Organized medicine
1 / 45mg/ m / / None
Bohua sulfuric acid emission No.2
Pharmaceuti mist workshop
cal Co., Ltd.
Jiangsu
Water
Joyang Intermittent Haidubei
pollutant: 1 8.35 6-9 / / None
Laboratorie discharge Road
PH value
s Co., Ltd.
96
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Jiangsu
Water
Joyang Intermittent Haidubei 51.4173
pollutant: 1 164mg/l 500mg/l 7.4 tons None
Laboratorie discharge Road tons/year
COD
s Co., Ltd.
Jiangsu Water
Joyang pollutant: Intermittent Haidubei 3.6819
1 14.47mg/l 35mg/l 0.652 tons None
Laboratorie ammonia discharge Road tons/year
s Co., Ltd. nitrogen
Jiangsu
Water
Joyang Intermittent Haidubei 24.968
pollutant: 1 62mg/l 400mg/l 2.797 tons None
Laboratorie discharge Road tons/year
SS
s Co., Ltd.
Legal
Jiangsu Solid In the
disposal by
Joyang pollutant: factory at 841.581 2398.5
entrusted / / / None
Laboratorie hazardous Haidubei tons tons/year
qualified
s Co., Ltd. solid waste Road
units
Dosing
section of
workshop
101,
fermentatio
n section of
workshop
101, dosing
section of
workshop
104 (shared
Jiangsu Air
by 107 and
Joyang pollutant: Organized 0.236 0.797
5 108), 4.2mg/ m 80mg/ m None
Laboratorie particulate emission tons/year tons/year
fermentatio
s Co., Ltd. matter
n section of
workshop
104 (shared
by 107 and
108), and
drying
section of
workshop
104 (shared
by 107 and
108)
97
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Extraction
of
workshop
Jiangsu Air 101,
Joyang pollutant: Organized Extraction 252.9mg/ 0.576 1.074
3 27.8mg/ m None
Laboratorie ethyl emission of m tons/year tons/year
s Co., Ltd. acetate workshop
104, and
workshop
303
Jiangsu Extraction
Air
Joyang Organized of 0.023 0.0884
pollutant: 1 15.3mg/ m 190mg/ m None
Laboratorie emission workshop tons/year tons/year
methanol
s Co., Ltd. 101
Jiangsu
Air
Joyang Organized Workshop 317.7mg/ 0.0396 0.3215
pollutant: 1 9.2mg/ m None
Laboratorie emission 106 m tons/year tons/year
ethanol
s Co., Ltd.
Construction and operation of pollution prevention and control facilities
1. Construction and operation of pollution prevention and control facilities of Hangzhou Zhongmei Huadong Pharmaceutical Co.,
Ltd.:
(1) Waste water
Name of pollution Treatment process Processing capacity Time of operation Status of operation
prevention and control
facilities
Waste water treatment Facultative + fluidized Original 600 tons/day; 800 November 1993; technical Normal
system of the old sewage bed tons/day after technical transformation in 2007
station transformation
Waste water treatment Anaerobic (IC tower)+ 2,200 tons/day December 2001; technical Normal
system of the new sewage facultative +CASS+ air transformation in 2014 (IC
station flotation and air flotation added)
(2) Waste gas
Name of pollution prevention and control Treatment process Processing capacity Time of operation Status of operation
facilities
Waste gas treatment unit of 103 Condensation + level 15,000 2009 Normal
fermentation (DA001) 1 alkali spray +
all-in-one machine +
level 1 alkali spray
Waste gas treatment unit of 103 refining Level 1 water spray 12,000 2012 Normal
98
The Annul Report 2019 of Huadong Medicine Co., Ltd.
(DA002) + level 1 alkali spray
Waste gas treatment unit of 103 refining Level 1 water spray 30,000 2014 Normal
DA003) + level 1 plant oil
and water spray
Waste gas treatment unit of 303 sewage Level 2 alkali spray 16,000 2001 Normal
station (DA004) + photo-oxidation + (one standby plant:
activated carbon + 13,000）
level 1 alkali spray
Waste gas treatment unit of 107 Level 3 alkali spray 48,000+30,000 2009 Normal
fermentation (DA005) / condensation +
level 1 alkali spray
Waste gas treatment unit of 107 drying Bag dust removal + 5,000 2012 Normal
tower (DA006) high efficiency
filtration
Waste gas treatment unit of 301 boiler High-altitude 8,000 2009 Normal
(DA008 and DA009) discharge
Note: Waste gas treatment process of 107 fermentation section: when the fermentation tank is not disinfected, the waste gas is
discharged at high altitude after level 3 alkali spray; when the fermentation tank is disinfected, the waste gas is first condensed and
then treated with level 1 alkali spray, and then discharged at high altitude.
(3) Solid waste
Name of pollution Treatment process Processing capacity Time of operation Status of operation
prevention and control
facilities
Hazardous waste warehouse Standardized storage 160 tons March 2012 Standardized storage; legal
disposal by qualified units
Standardized storage 240 tons March 2010
General solid waste yard Standardized storage 7 tons March 2010 Standardized storage; legal
disposal by qualified units
Standardized storage 30 tons June 2004
2. Construction and operation of pollution prevention and control facilities of Huadong Medicine (Xi’an) Bohua Pharmaceutical Co.,
Ltd.:
(1) Waste water
Name of pollution Treatment process Processing capacity Time of operation Status of operation
prevention and control
facilities
Waste water treatment Ozone oxidation + 250 tons/day July 2012 Normal
system of the sewage station facultative + aerobic +
MBR + carbon
99
The Annul Report 2019 of Huadong Medicine Co., Ltd.
filtration
(2) Waste gas
Name of pollution prevention and control facilities Treatment process Time of operation Status of operation
Waste gas treatment unit of raw medicine No. 1 workshop Alkali spray August 2015 Normal
Waste gas treatment unit of raw medicine No. 2 workshop Alkali spray + UV November 2019 Normal
photo-oxidation + activated
carbon
(3) Solid waste
Name of pollution Treatment process Storage capacity Time of operation Status of operation
prevention and control
facilities
Hazardous waste warehouse Standardized 60 tons January 2012 Standardize storage; legal disposal
storage by entrusted qualified units
3. Construction and operation of pollution prevention and control facilities of Jiangsu Joyang Laboratories Co., Ltd.:
(1) Waste water
Name of pollution Treatment process Processing capacity Time of operation Status of operation
prevention and control
facilities
Waste water treatment Air floatation tank + hydrolysis 250 tons/day December 2014 Normal
system of the sewage acidification + IC tower + UASB
station pool + A/O pool + O pool +
secondary sedimentation tank
(2) Waste gas
Name of pollution prevention and Treatment process Processing Time of operation Status of
control facilities capacity operation
CMH
Waste gas treatment unit of the extraction Level 1 water spray + moisture 10,000 2014 Normal
section of workshop 101 separator + photocatalytic
oxidation + level 2 activated
carbon adsorption + high-altitude
discharge via 25m exhaust pipe
Waste gas treatment unit of the Level 1 water spray + moisture 2,000 2019 Normal
fermentation section of workshop 101 separator + level 2 activated
carbon adsorption + high-altitude
100
The Annul Report 2019 of Huadong Medicine Co., Ltd.
discharge via 25m exhaust pipe
Waste gas treatment unit of the drying Level 1 water spray + moisture 22,000 2017 Normal
section of workshop 101 separator + level 2 activated
carbon adsorption + high-altitude
discharge via 25m exhaust pipe
Waste gas treatment unit of the dosing Cyclone separator + level 1 water 5,000 2014 Normal
section of workshop 101 spray + high-altitude discharge via
15m exhaust pipe
Waste gas treatment unit of the Level 1 water spray + moisture 10,000 2015 Normal
fermentation section of workshop 104 separator + level 2 activated
carbon adsorption + high-altitude
discharge via 25m exhaust pipe
Waste gas treatment unit of the extraction Level 1 water spray + moisture 10,000 2015 Normal
section of workshop 104 separator + photocatalytic
oxidation + level 2 activated
carbon adsorption + high-altitude
discharge via 25m exhaust pipe
Waste gas treatment unit of the dosing Cyclone separator + level 1 water 5,000 2015 Normal
section of workshop 104 spray + high-altitude discharge via
15m exhaust pipe
Waste gas treatment unit of the drying Level 1 water spray + moisture 20,000 2015 Normal
section of workshop 104 separator + level 2 activated
carbon adsorption
Waste gas treatment unit of workshop 103 Level 1 water spray + moisture 10,000 / /
separator + photocatalytic
oxidation + level 2 activated
carbon adsorption + high-altitude
discharge via 25m exhaust pipe
Waste gas treatment unit of workshop 106 Level 1 water spray + moisture 10,000 2015 Normal
separator + photocatalytic
oxidation + level 2 activated
carbon adsorption + high-altitude
discharge via 25m exhaust pipe
Waste gas treatment unit of the extraction Level 1 water spray + moisture 20,000 2019 Normal
section of workshop 107 separator + photocatalytic
oxidation + level 2 activated
carbon adsorption + high-altitude
101
The Annul Report 2019 of Huadong Medicine Co., Ltd.
discharge via 25m exhaust pipe
Waste gas treatment unit of the extraction Level 1 water spray + moisture 40,000 2019 Normal
section of workshop 108 separator + photocatalytic
oxidation + level 2 activated
carbon adsorption + high-altitude
discharge via 25m exhaust pipe
Workshop 109 Level 1 water spray + high-altitude 20,000 2019 Normal
discharge via 25m exhaust pipe
Waste gas treatment unit of sewage station Level 1 water spray + 10,000 2014 Normal
303 photocatalytic oxidation
(3) Solid waste
Name of pollution Treatment process Processing capacity Time of operation Status of operation
prevention and control
facilities
Hazardous waste warehouse Standardized storage 200 tons December 2014 Standardized storage; legal
disposal by entrusted
qualified units
Domestic waste yard Standardized storage 3 tons March 2015 Chengdong Garbage Disposal
Station
Environmental impact assessment of construction projects and other administrative permits for environmental protection
All construction projects of the above three subsidiaries of the Company have be declared, constructed and accepted in strict
accordance with the requirements of “three simultaneous” for environmental protection, have passed environmental impact
assessment, and met the requirements of environmental impact assessment for construction projects. The Company has obtained the
pollutant discharge permit and the discharge permit of urban sewage into the drainage pipe network according to the environmental
protection requirements. Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. completed the post-environmental impact
assessment report in November 2019 and submitted it to Weinan Bureau of Ecology and Environment for the record, with the filing
number: W. H. P. B. (2020) No. 3.
Emergency plan for environmental emergencies
The above three subsidiaries of the Company have compiled and established the mechanism of “Emergency Plan for Environmental
Emergencies”, revised and improved it regularly according to the requirements, and regularly organized an emergency treatment
exercise for environmental emergencies, so as to continuously improve their ability to respond to unexpected environmental pollution
incidents.
Environmental self-monitoring scheme
The above three subsidiaries of the Company have all established the mechanism of “Self-monitoring Scheme for Pollution Sources”
which has been put on record in the environmental protection authorities, and all the monitoring data are reported daily according to
the regulations.
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
Other environmental information that should be made public
None
Other information related to environmental protection
None
XIX. Other major events
√ Applicable □ N/A
Main drugs (products) included, newly included and withdrawn from the National Essential Drug List and the National
Reimbursement Drug List during the reporting period:
During the reporting period, the National Healthcare Security Administration and the Ministry of Human Resources and Social
Security officially launched the “National Drug List for Basic Medical Insurance, Work-Related Injury Insurance and Maternity
Insurance (2019)” (hereinafter referred to as the “Drug List”). The Company’s wholly-owned subsidiary Zhongmei Huadong has a
new product included into the “Drug List” and Xi’an Bohua has a new product included into the “Drug List”. The two products
newly included in the list are both Category B drugs of medical insurance. In addition, Acarbose Chewable Tablets produced by
Zhongmei Huadong were included in Category B drugs of the “Drug List” for the first time through negotiation. The three new
products included in the “Drug List” are in normal production and sales.
Currently, the Company has 22 core products on the market and 16 varieties under R&D, which have been included in the
“National Drug List for Basic Medical Insurance, Work-Related Injury Insurance and Maternity Insurance (2019)”. A total of 10
varieties (including 4 under R&D) have been included in the “National Essential Drug List (2018)”.
XX. Major events of subsidiaries
□ Applicable √ N/A
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Section VI. Share Change and Shareholders
I. Changes in Share Capital
1. Table of Changes in share capital
Unit: share
Before the change Change in the period (+/-) After the change
Conversion of
Number of New Bonus Number
Proportion capital reserve Others Subtotal Proportion
shares shares shares of shares
into shares
I. Shares subject to
155,994,651 10.70% 0 0 0 -155,969,406 -155,969,406 25,245 0.00%
conditional restriction
1. Shares held by the state 0 0.00% 0 0 0 0 0 0 0.00%
2. Shares held by
9,201,816 0.63% 0 0 0 -9,201,816 -9,201,816 0 0.00%
state-owned corporations
3. Shares held by other
146,792,835 10.07% 0 0 0 -146,767,590 -146,767,590 25,245 0.00%
domestic investors
Including: held by
146,792,835 10.07% 0 0 0 -146,792,835 -146,792,835 0 0.00%
domestic corporations
held by domestic
0 0.00% 0 0 0 25,245 25,245 25,245 0.00%
natural persons
4. Shares held by overseas
0 0.00% 0 0 0 0 0 0 0.00%
investors
Including: held by
0 0.00% 0 0 0 0 0 0 0.00%
overseas corporations
held by overseas
0 0.00% 0 0 0 0 0 0 0.00%
natural persons
II. Shares without 1,749,78
1,302,179,973 89.30% 0 0 291,634,924 155,969,406 447,604,330 100.00%
restriction 4,303
1,749,78
1. RMB ordinary shares 1,302,179,973 89.30% 0 0 291,634,924 155,969,406 447,604,330 100.00%
4,303
2. Domestically listed
0 0.00% 0 0 0 0 0 0 0.00%
foreign shares
3. Foreign shares listed
0 0.00% 0 0 0 0 0 0 0.00%
overseas
4. Others 0 0.00% 0 0 0 0 0 0 0.00%
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1,749,80
III. Total number of shares 1,458,174,624 100.00% 0 0 291,634,924 0 291,634,924 100.00%
9,548
Reasons for the changes in share capital
√ Applicable □ N/A
During the reporting period, the Company implemented the plan of profit distribution and share capital increase by capital
reserve conversion for 2018 in June 2019: based on the capital stock of 1,458,174,624 shares, a cash dividend of 3.3 yuan (tax
included) was paid to all shareholders for every 10 shares, and 2 shares were granted for every 10 shares through converting from the
capital reserve. Upon completion of the above profit distribution plan, the capital stock of the Company increased from
1,458,174,624 shares to 1,749,809,548 shares. For details, please refer to the “Notice on Implementation of Rights and Interests
Allocation in 2018” (No. 2019-040) issued by the Company on June 15, 2019.
Approval for changes in share capital
√ Applicable □ N/A
On April 17, 2019, the 17th meeting of the 8th Board of Directors and the 12th meeting of the 8th Board of Supervisors of the
Company deliberated and approved the Company’s “2018 Profit Distribution Plan”, and the independent directors gave their
consents. For details, please refer to “Notice on the Resolution of the 17th Meeting of the 8th Board of Directors” (No. 2019-011),
“Notice on the Resolution of the 12th Meeting of the 8th Board of Supervisors” (No. 2019-012) and “Summary of Independent
Opinions from Independent Directors in the 17th Meeting of the 8th Board of Directors” (No. 2019-012) issued by the Company on
April 19, 2019.
On June 6, 2019, the Company’s 2018 annual shareholders’ meeting reviewed and approved the Company’s “2018 Profit
Distribution Plan”. For details, please refer to “Notice on the Resolution of the 2018 Annual Shareholders’ Meeting” (No. 2019-036)
issued by the Company on June 6, 2019.
Transfer of shares
√ Applicable □ N/A
The Company has implemented the plan of profit distribution and share capital increase by capital reserve conversion for 2018 on
June 21, 2019, and the new shares have been credited to the shareholders’ accounts on the same day. For details, please refer to
“Notice on Implementation of Rights and Interests Allocation in 2018” (No. 2019-040) issued by the Company on June 14, 2019.
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 the Company’s shareholders of common shares and other financial indicators
√ Applicable □ N/A
(1) Basic EPS: Based on the share captial at the beginning of the period, the basic EPS of the current period is 1.9293 yuan; the basic
EPS after the change of share captial in the current period is 1.6077 yuan; EPS decreased by 20% due to the increase of shares in the
current period. The effect on diluted EPS is the same as that on basic EPS.
(2) Net assets per share attributable to the Company’s shareholders of common shares: Based on the share captial at the beginning of
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
the period, the net assets per share attributable to the Company’s shareholders of common shares at the end of the period are 8.4417
yuan; After the increase of share captial, the net assets per share attributable to the Company’s shareholders of common shares at the
end of the period is 7.0348 yuan; due to the increase of shares in the current period, the net assets per share attributable to the
Company’s shareholders of common shares decreased by 20%.
Other disclosures the Company deems necessary or required by securities regulatory authorities
□ Applicable √ N/A
2. Changes in restricted shares
√ Applicable □ N/A
Unit: share
Name of Opening Increased in Vested in current Closing restricted Note for Date of
shareholder restricted shares current period peirod shares restricted share unlocking
A commitment
China Grand
146,792,835 0 146,792,835 0 made at the time February 4, 2019
Enterprises, Inc.
of refinancing
Hangzhou A commitment
Huadong Medicine 9,201,816 0 9,201,816 0 made at the time February 4, 2019
Group Co., Ltd. of refinancing
Supervisor
He, Rufen 0 25,245 0 25,245 \
restriction
Total 155,994,651 25,245 155,994,651 25,245 -- --
II. Issuance and listing of securities
1. Securities (excluding preferred shares) during the reporting period
□ Applicable √ N/A
2. Explanation on changes in share capital, the structure of shareholders and the structure of assets and
liabilities
√ Applicable □ N/A
During the reporting period, the Company implemented the plan of profit distribution and share capital increase by capital reserve
conversion for 2018 in June 2019: based on the capital stock of 1,458,174,624 shares, a cash dividend of 3.3 yuan (tax included) was
paid to all shareholders for every 10 shares, and 2 shares were granted for every 10 shares through converting from the capital
reserve. After the implementation of the above profit distribution plan, the Company’s capital stock increased from 1,458,174,624
shares to 1,749,809,548 shares, with no change in its shareholder structure.
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
3.Existent shares held by internal staff of the Company
□ Applicable √ N/A
III. Particulars about shareholders and the actual controller
1. Total number of shareholders and their shareholdings
Unit: share
Total number of Total number of preference
Total number of Total number of preference
common shareholders shareholders with restoration of the
common shareholders with restoration
at the end of the voting rights at the end of the
shareholderss at the 121,768 127,673 of the voting rights at the end 0 0
previous month before previous month before the
end of the reporting of the reporting period (if any)
the disclosure of the disclosure of the annual report (if
period (see Note 8)
annual report any) (see Note 8)
Particulars about shareholders with a shareholding ratio over 5% or the Top 10 shareholders
The Pledged or frozen
number
Total of The
shares common number of
Changes
Share- held at shares shares
Name of Nature of in the
holding the end of held with held
shareholder shareholder reporting Status Number
ratio the trading without
period
reporting restriction trading
period srestricte restriction
d shares
held
China Grand
Domestic
Enterprises, Inc. 730,938,1 121,823,0 730,938,1
non-state-owned 41.77% 0 Pledged 247,964,000
中国远大集团有 57 26 57
corporation
限责任公司
Hangzhou
Huadong Medicine
State-owned 288,000,0 48,000,00 288,000,0
Group Co., Ltd. 16.46% 0
corporation 00 0 00
杭州华东医药集
团有限公司
Hong Kong
Securities Clearing
Overseas 36,786,72 -10,549,5 36,786,72
Company Ltd. 香 2.10% 0
corporation 0 39 0
港中央结算有限
公司
National Social Other 1.33% 23,341,51 -2,731,10 0 23,341,51
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
Security Fund 36 3
Portfolio 106 全国
社保基金一零六
组合
China Securities
Finance Co., Ltd. 22,186,81 22,186,81
Other 1.27% 3,697,802 0
中国证券金融股 8 8
份有限公司
Taikang Asset
Management Co.,
Ltd. – active
allocation of
18,554,30 18,554,30
investment Other 1.06% 8,535,941 0
9 9
products 泰康资产
管理有限责任公
司—积极配置投
资产品
Taikang Life
Insurance Co., Ltd.
– Dividend –
Personal dividend
– 019L—FH002 15,893,20 15,893,20
Other 0.91% 6,289,823 0
Shen 泰康人寿保 8 8
险有限责任公司
—分红—个人分
红—019L—FH002
深
Guotai Junan
Securities Asset
Management –
China Everbright
Bank – Guotai
Junan Jundeming
Hybrid Collective 13,199,94 13,199,94 13,199,94
Other 0.75% 0
Assets 00 0
Management Plan
国泰君安证券资
管—光大银行—
国泰君安君得明
混合型集合资产
管理计划
Taikang Life
Other 0.56% 9,866,711 3,965,591 0 9,866,711
Insurance Co., Ltd.
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
– Unit-linked –
Proactive growth
泰康人寿保险有
限责任公司—投
连—积极成长
Guotai Junan
Securities Asset
Management –
China Construction
Bank – Guotai
Junan Jundexin
Stock Collective
Other 0.43% 7,500,000 4,226,154 0 7,500,000
Assets
Management Plan
国泰君安证券资
管—建设银行—
国泰君安君得鑫
股票集合资产管
理计划
Strategic investors or general
corporations become the top 10
N/A
shareholders due to the placement of
new shares (if any) (see Note 3)
Explanation on associated
relationships or concerted actions The Company does not know whether the above-mentioned shareholders are related parties or
among the above-mentioned whether they are acting-in-concert parties with one another.
shareholders
Particulars about the Top 10 common shareholders holding unrestricted shares
Number of unrestricted common shares at the end of Type of shares
Name of shareholder
reporting period Type Number
China Grand Enterprises, Inc. 中国远 RMB common
730,938,157 730,938,157
大集团有限责任公司 shares
Hangzhou Huadong Medicine Group
RMB common
Co., Ltd. 杭州华东医药集团有限公 288,000,000 288,000,000
shares
司
Hong Kong Securities Clearing
RMB common
Company Ltd. 香港中央结算有限公 36,786,720 36,786,720
shares
司
National Social Security Fund
RMB common
Portfolio 106 全国社保基金一零六组 23,341,513 23,341,513
shares
合
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
China Securities Finance Co., Ltd. 中 RMB common
22,186,818 22,186,818
国证券金融股份有限公司 shares
Taikang Asset Management Co., Ltd. –
active allocation of investment RMB common
18,554,309 18,554,309
products 泰康资产管理有限责任公司 shares
—积极配置投资产品
Taikang Life Insurance Co., Ltd. –
Dividend – Personal dividend –
RMB common
019L—FH002 Shen 泰康人寿保险有 15,893,208 15,893,208
shares
限责任公司—分红—个人分红
—019L—FH002 深
Guotai Junan Securities Asset
Management – China Everbright Bank
– Guotai Junan Jundeming Hybrid
RMB common
Collective Assets Management Plan 国 13,199,940 13,199,940
shares
泰君安证券资管—光大银行—国泰
君安君得明混合型集合资产管理计
划
Taikang Life Insurance Co., Ltd. –
Unit-linked – Proactive growth 泰康人 RMB common
9,866,711 9,866,711
寿保险有限责任公司—投连—积极 shares
成长
Guotai Junan Securities Asset
Management – China Construction
Bank – Guotai Junan Jundexin Stock RMB common
7,500,000 7,500,000
Collective Assets Management Plan 国 shares
泰君安证券资管—建设银行—国泰
君安君得鑫股票集合资产管理计划
Explanation on associated
relationships and concerted actions
among the Top 10 common
shareholders without trading The Company does not know whether the above-mentioned common shareholders are related
restriction, and between the Top 10 parties or whether they are acting-in-concert parties .
common shareholders without trading
restriction and the Top 10 common
shareholders
Explanation on the participation of the
Top 10 common shareholders in
N/A
financing and securities loan business
(if any) (see Note 4)
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 the reporting period
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
□ Yes √ No
No such case during the reporting period.
2. Particulars about controlling shareholder of the Company
Nature of controlling shareholder: Natural individual holding
Type of controlling shareholder: Corporation
Legal
Name of controlling
representative/person Date of establishment Organization code Main business
shareholder
in charge
China Grand Enterprises, Inc. Hu Kaijun October 27, 1993 91110000101690952K Investment management
Shares held by the controlling
shareholder in other listed The other two listed companies controlled by China Grand Enterprises, Inc. are Grand Industrial
companies through Holding Co., Ltd. and China Grand Pharmaceutical and Healthcare Holdings Limited.
controlling or holding during
the reporting period
Change of the controlling shareholder during the reporting period
□ Applicable √ N/A
No such case during the reporting period.
3. Particulars about the Company’s actual controller & concerted parties
Nature of actual controller: Domestic natural individual holding
Type of actual controller: Natural individual
Relationship with the Whether the actual controller has obtained the
Name of actual controller Nationality
actual controller right of abode in another country or region
Hu Kaijun Hu Kaijun China Yes
Chairman of the Board and General Manager of China Grand Enterprises, Inc.; Chairman of
Main occupation and position
the Board and General Manager of Beijing Yuanda Huachuang Investment Co., Ltd.
Share held by the actual controlling
The three listed companies controlled by actual controller are Huadong Medicine Co., Ltd.,
shareholder in domestic or overseas
Grand Industrial Holding Co., Ltd., and China Grand Pharmaceutical and Healthcare
listed companies in the past the years
Holdings Limited.
Change of the actual controller during the reporting period
□ Applicable √ N/A
No such case during the reporting period.
The ownership and controlling relationship between the actual controller of the Company and the Company is detailed as follows:
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
Hu Kaijun
Beijing Yuanda Huachuang Investment Co., Beijing Yanhuang Real Estate Co., Ltd.
Ltd.
China Grand Enterprises, Inc.
Huadong Medicine Co., Ltd.
The actual controller controls the Company through a trust or other way of assets management
□ Applicable √ N/A
4. Other corporate shareholders with a shareholding ratioover 10%
√ Applicable □ N/A
Legal
Date of Main business or
Name of corporate shareholders representative/person in Registered capital
establishment management activities
charge
Operation of state-owned
assets within the scope
authorized by the municipal
government: industrial
Hangzhou Huadong Medicine December 21, investment, wholesale and
Jin Xuhu 60 million yuan
Group Co., Ltd. 1992 retail; chemical raw
materials and products;
packaging materials,
pharmaceutical
intermediates, etc.
5. Reduction of restricted shares held by controlling shareholder, actual controller, restructuring parties
and other commitment subjects
□ Applicable √ N/A
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
Section VII. Preferred Shares
□ Applicable √ N/A
No such case during the reporting period.
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The Annul Report 2019 of Huadong Medicine Co., Ltd.
Section VIII. Convertible Corporate Bonds
□ Applicable √ N/A
No such case during the reporting period.
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Section IX. Directors, Supervisors, Senior Managers and Employees
I. Changes in shareholding of directors, supervisors and senior managers
Shares Shares
Shares held at Shares held
increased decreased Other
Tenure Commencement Commencement the beginning of at the end of
Name Title Gender Age during the during the changes(shar
staturs of term of duty of term of duty the period the Period
Period(share Period(share es)
(shares) (shares)
s) s)
Incumben
Chairman Male 46 June 06, 2019 June 05, 2022 0 0 0 0 0
t
Director,
Appointm
General
ent & Male 46 January 6, 2016 June 05, 2019 0 0 0 0 0
Manager(CE
Lyu Liang removal
O)
Director,
Appointm
Deputy
ent & Male 46 April 26, 2010 January 05, 2016 0 0 0 0 0
General
removal
Manager
Honorary Incumben
Male 74 June 06, 2019 June 05, 2022 0 0 0 0 0
Chairman t
Li Bangliang Appointm
Chairman ent & Male 74 October 20, 1998 June 05, 2019 0 0 0 0 0
removal
Director,
General Incumben
Male 48 June 06, 2019 June 05, 2022 0 0 0 0 0
Manager(CE t
O)
Director,
Appointm
Li Yuedong Deputy
ent & Male 48 August 17, 2016 June 05, 2019 0 0 0 0 0
General
removal
Manager
Appointm
Director ent & Male 48 April 28, 2014 June 05, 2022 0 0 0 0 0
removal
Incumben
Niu Zhanqi Director Male 53 June 03, 2016 June 05, 2022 0 0 0 0 0
t
Incumben December 05,
Kang Wei Director Female 52 June 05, 2022 0 0 0 0 0
t 2016
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Leave the
Fu Hang Director Male 57 April 28, 2014 June 05, 2019 0 0 0 0 0
post
Incumben
Jin Xuhu Director Male 57 June 06, 2019 June 05, 2022 0 0 0 0 0
t
Incumben
Director Male 43 June 06, 2019 June 05, 2022 0 0 0 0 0
t
Zhu Liang Appointm
Supervisor ent & Male 43 April 27, 2017 June 05, 2019 0 0 0 0 0
removal
Zhong Independent Incumben
Male 58 January 6, 2016 June 05, 2022 0 0 0 0 0
Xiaoming Director t
Independent Incumben
Yang Lan Female 51 April 27, 2017 June 05, 2022 0 0 0 0 0
Director t
Independent Incumben
Yang Jun Female 48 June 06, 2019 June 05, 2022 0 0 0 0 0
Director t
Independent Leave the
Zhang Wei Male 49 January 6, 2016 June 05, 2019 0 0 0 0 0
Director post
Incumben
Bai Xinhua Supervisor Female 54 January 20, 1998 June 05, 2022 0 0 0 0 0
t
Liu Incumben
Supervisor Male 47 January 6, 2016 June 05, 2022 0 0 0 0 0
Chengwei t
Incumben
Qin Yun Supervisor Female 50 May 19, 2006 June 05, 2022 0 0 0 0 0
t
Incumben
Hu Baozhen Supervisor Female 47 June 06, 2019 June 05, 2022 0 0 0 0 0
t
Incumben
He Rufen Supervisor Female 52 June 06, 2019 June 05, 2022 28,050 5,610 0 0 33,660
t
Incumben
Xu Zhifeng Supervisor Male 45 June 06, 2019 June 05, 2022 0 0 0 0 0
t
Shao Leave the
Supervisor Female 57 March 25, 2005 June 05, 2019 0 0 0 0 0
Lingmin post
Leave the
Wu Yimei Supervisor Female 56 January 6, 2016 June 05, 2019 0 0 0 0 0
post
Deputy
Zhou Incumben
General Male 60 June 30, 2009 June 05, 2022 0 0 0 0 0
Shunhua t
Manager
Deputy
Incumben
Wu Hui General Male 51 June 06, 2019 June 05, 2022 0 0 0 0 0
t
Manager
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Board Incumben
Chen Bo Male 48 June 30, 2009 June 05, 2022 0 0 0 0 0
Secretary t
Person in
Incumben November 28,
Qiu Renbo Charge of Male 38 June 05, 2022 0 0 0 0 0
t 2019
Finance
Person in Appointm
November 27,
Ma Honglan Charge of ent & Female 50 July 19, 2010 0 0 0 0 0
2019
Finance removal
Total -- -- -- -- -- -- 28,050 5,610 0 0 33,660
II. Change of directors, supervisors and senior managers of the Company
√ Applicable □ N/A
Name Title Type Date Reason
Elected by the shareholders’ meeting
Lyu Liang Chairman Incumbent June 06, 2019
and the Board of Directors
General
Lyu Liang Appointment & removal June 05, 2019 Elected as the Company’s chairman
Manager(CEO)
Li Bangliang Chairman Appointment & removal June 05, 2019 Elected as honorary chairman
General
Li Yuedong Incumbent June 06, 2019 Appointed by the Board of Directors
Manager(CEO)
Deputy General Appointed as General
Li Yuedong Appointment & removal June 05, 2019
Manager Manager(CEO)
Adjustments on the Company’s
Fu Hang Director Leave the post June 05, 2019
business management
Jin Xuhu Director Incumbent June 06, 2019 Elected by the shareholders’ meeting
Independent Adjustments on the Company’s
Zhang Wei Leave the post June 05, 2019
Director business management
Independent
Yang Jun Incumbent June 06, 2019 Elected by the shareholders’ meeting
Director
Zhu Liang Director Incumbent June 06, 2019 Elected by the shareholders’ meeting
Zhu Liang Supervisor Appointment & removal June 05, 2019 Elected Director
Adjustments on the Company’s
Shao Lingmin Supervisor Leave the post June 05, 2019
business management
Adjustments on the Company’s
Wu Yimei Supervisor Leave the post June 05, 2019
business management
He Rufen Supervisor Incumbent June 06, 2019 Elected by the Labor Union
Xu Zhifeng Supervisor Incumbent June 06, 2019 Elected by the Labor Union
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Deputy General
Wu Hui Incumbent June 06, 2019 Appointed by the Board of Directors
Manager
Person in Charge of
Qiu Renbo Incumbent November 28, 2019 Appointed by the Board of Directors
Finance
Person in Charge of Position adjustment within the
Ma Honglan Appointment & removal November 27, 2019
Finance Company
III. Positions and Incumbency
Professional background, main working experiences and main responsibilities of the Company’s incumbent directors, supervisors and
senior managers
(1) Profile of directors
Chairman – Mr. Lyu Liang: born in 1974, holds a master’s degree. He has served as Project Manager of Grand Asset
Management Co., Ltd. from July 1997 to July 2001; Deputy General Manager and General Manager of Changshu Leiyunshang
Pharmaceutical Co., Ltd. from July 2001 to March 2010; Director and Deputy General Manager of the Company from April 2010 to
January 2016; Director and General Manager of the Company from January 6, 2016 to June 5, 2019; and Chairman of the Board of
the Company since June 6, 2019.
Director and General Manager – Mr. Li Yuedong: born in 1972, holds a master’s degree. He has served as clerk and section chief
of Zhejiang Pharmaceutical Supply and Marketing Company and Zhejiang Int’l Medicine Co., Ltd.; General Manager of Aibang
Health Care Products Company; Deputy General Manager and General Manager of Hangzhou Zhuyangxin Pharmaceutical Co., Ltd.;
Deputy General Manager of Hangzhou Huadong Medicine Group Co., Ltd; Director of the Company since April 2014, and Deputy
General Manager of the Company from August 17, 2016 to June 5, 2019; and Director and General Manager of the Company since
June 6, 2019.
Director – Mr. Niu Zhanqi: born in 1967, Doctor of Pharmacy. He has served as technical researcher of Chengde Technical
Supervision Bureau; Deputy Director of Hebei Pharmaceutical Group Research Institute; Manager of Technical Development
Department of China Shijiazhuang Pharmaceutical Group; Manager of Medicine Department of CSPC Ouyi Pharmaceutical Co. Ltd.;
Deputy General Manager of CSPC NBP Pharmaceutical Co., Ltd.; senior R&D director of CSPC; Vice President of Pharmaceutical
Management Head Office and General Manager of R&D Management Department of China Grand Enterprises, Inc. from March
2013 to June 2016; CEO of Pharmaceutical Management Head Office of China Grand Enterprises, Inc. from June 2016 to November
2018; President of Pharmaceutical Management Head Office of China Grand Enterprises, Inc. since November 2018; and Director of
the Company since June 2016.
Director – Ms. Kang Wei: born in 1968, holds a master’s degree. She has served as Manager of the Trade Division, Manager of the
Capital Division and Manager of Financial Management of the Financial Management Department of China Grand Enterprises, Inc.;
Chief Financial Officer and Deputy General Manager of Heilongjiang Grand Shopping Center; currently Chief Financial Officer of
China Grand Enterprises, Inc.; and Director of the Company since December 2016.
Director - Mr. Jin Xuhu: born in 1963, holds a bachelor’s degree. He has served as Chairman and General Manager of Hangzhou
Huadong Medicine Group Co., Ltd.; Party Secretary and Chairman of Hangzhou State-owned Capital Investment and Operation Co.,
Ltd., Executive Director & Manager of Hangzhou Huadong Medicine Group Co., Ltd., and Executive Director & Manager of
Hangzhou Oxygen Plant Group Co., Ltd. since January 2019; and Director of the Company since June 2019.
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Director - Mr. Zhu Liang: born in 1977, holds a bachelor’s degree. He has served as Director of the Labor Union of Hangzhou
Huadong Medicine Group Co., Ltd., Vice Chairman of the Labor Union of Hangzhou Huadong Medicine Group Co., Ltd., Chairman
of the Labor Union of Hangzhou Huadong Medicine Group Co., Ltd. and Huadong Medicine Co., Ltd.; Supervisor of the Company
from April 2017 to June 2019; and Director of the Company since June 2019.
Independent Director - Mr. Zhong Xiaoming: born in 1962, holds a master’s degree. He has been Deputy Director of the New
Drugs Office, professor, postgraduate student and doctoral supervisor of Zhejiang Chinese Medical University since 1985; chief
scientist of Zhejiang University since 2013; and Independent Director of the Company since January 2016.
Independent Director - Ms. Yang Lan: born in 1969, holds a master’s degree. She has served in Guiyang Audit Bureau, Zhuhai
Lixin Certified Public Accountants, Shanghai Lixin Changjiang Certified Public Accountants Zhuhai Branch, and Guangdong Lixin
Changjiang Certified Public Accountants. Senior Manager of Pan-China Certified Public Accountants Guangdong Branch;
Investment Director of Guangzhou Securities Innovation Investment Co., Ltd.; Deputy Director of Guangdong Pujin Xinghua
Certified Tax Agent Co., Ltd.; Deputy Director of Guangdong Lixin Jiazhou Certified Public Accountants; and Independent Director
of the Company since April 27, 2017.
Independent Director - Ms. Yang Jun: born in 1972, holds a bachelor’s degree, Canadian citizenship. She has served as Chief
Financial Officer of Freedom Foundation of Ontario, Canada; Chief Knowledge Officer and lecturer partner of Shanghai
EasyFinance Management Consulting Co., Ltd.; Chief Financial Officer of Dookbook Culture Co., Ltd.; founding partner and chief
consultant of Shanghai Yuecheng Information Technology Co., Ltd. since June 2018; and Independent Director of the Company
since June 2019.
(2) Profile of supervisors
The Chairman of Board of Supervisors - Ms. Bai Xinhua: born in 1966, holds a master’s degree. She has served as Assistant
Auditor of Beijing Municipal Bureau of Audit; Accounting Manager of the Financial Management Head Office and Audit Manager
of the Supervision and Audit Department of China Grand Enterprises, Inc.; now Deputy General Manager of the Financial
Management Head Office of China Grand Enterprises, Inc.; Supervisor of the Company since 2003;
Supervisor - Ms. Qin Yun: born in 1970, holds a bachelor’s degree. She has served as attending physician in the Internal Medicine
Department of Beijing Shougang Hospital; medical representative in the Beijing Office of Tianjin Takeda Pharmaceuticals Co., Ltd.,
senior medical representative in the Beijing Office of Lilly Asia; and head of product department in the sales branch of China
National Pharmaceutical Foreign Trade Corporation. She worked for China Grand Enterprises, Inc. in 2002 and has served as Project
Manager of Pharmaceutical Business Division, Business Director of Operation Department of Pharmaceutical Management Head
Office; now Business Director of Bidding and Procurement Management Center of China Grand Enterprises, Inc.; and Supervisor of
the Company since 2006;
Supervisor – Mr. Liu Chengwei: born in 1973, holds a master’s degree. He has served as Financial Services Manager and Chief
Financial Officer of GE Medical Systems China; Financial Manager of ECG monitoring of GE Healthcare Asia. In 2001, he joined
China Grand Enterprises, Inc., where he served as Director of Supervision and Audit, Deputy General Manager of the Investment and
Operation Head Office, Deputy General Manager and General Manager of the Pharmaceutical Business Division, and head of the
preparatory group of CGE Life & Health Insurance Company. He served as Deputy General Manager of Grandpharma (China) Co.,
Ltd. from August 2016 to September 2018; Assistant President of China Grand Enterprises, Inc. since September 2018; Director of
the Company from 2003 to January 2016; and Supervisor of the Company since January 2016.
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Supervisor - Ms. Hu Baozhen: born in 1973, holds a bachelor’s degree. She served as Chief Financial Officer and dispatched
full-time supervisor of Hangzhou State-owned Assets Supervision and Administration Commission from March 2009 to March 2019;
Deputy Manager of the Risk Control and Legal Department of Hangzhou State-owned Capital Investment and Operation Co., Ltd.
since April 2019; Supervisor of the Company from June 2012 to April 2014; Supervisor of the Company since June 2019.
Employee Supervisor – Ms. He Rufen: born in 1968, holds a bachelor’s degree, senior certified public accountant. Assistant
Manager of the Financial Department of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. from July 1990 to March 1998;
Manager of the Financial Department of the Company from April 1998 to December 1998; officer in charge of financial affairs of the
Company from January 1999 to June 2010; Deputy General Manager of Business of the Company since July 2010; Employee
Supervisor of the Company since June 2019.
Employee Supervisor - Mr. Xu Zhifeng: born in 1975, holds a bachelor’s degree, economist. Commissioner of the Business
Administration Office and Director Assistant of the General Manager Office of Hangzhou Zhongmei Huadong Pharmaceutical Co.,
Ltd. from August 1997 to July 2011; Manager of the Risk Management and Audit Department of the Company from August 2011 to
January 2018; Director of the Risk Management and Audit Department of the Company since February 2018; Employee Supervisor
of the Company since June 2019.
(3) Profile of senior managers
Deputy General Manager - Mr. Zhou Shunhua: born in 1960, holds a master’s degree, economist. He worked in the Company in
December 1978, and has served as Publicity Officer, Manager of the Operation Department, Director of Shanghai Office, and
Shanghai Regional Manager of the Company; Deputy General Manager of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.;
Deputy General Manager of the Company since 2009.
Deputy General Manager - Mr. Wu Hui: born in April 1969, holds a master’s degree, professor-level senior engineer. He worked
in the Company in July 1991, and has served as technician, workshop director and chief engineer of Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd.; Deputy General Manager of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. since 2015; Deputy
General Manager of the Company since June 2019.
Secretary of the Board of Directors - Mr. Chen Bo: born in 1972, holds a master’s degree, economist. He joined the Company in
2002, and has served as investment commissioner and Deputy Manager of the Financing Department; Secretary of the Board of
Directors since June 2009.
Officer in Charge of Financial Affairs - Mr. Qiu Renbo: born in 1982, holds a master’s degree. He has served as commissioner of
the Financial Management Head Office and Chief of the Finance Section of the Manufacturing Branch of the Company from August
2004 to July 2010; Manager of the Financial Department of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. from August
2010 to April 2015; Chief Financial Officer of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. since May 2015; Officer in
Charge of Financial Affairs of the Company since December 2019.
Positions in shareholders’ entities
√ Applicable □ N/A
Position in shareholders’ Commencement Termination of Compensation and
Name Shareholders’ entity
entities of the term the term allowance from the
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shareholders’ entity
President of the
Pharmaceutical
Niu Zhanqi China Grand Enterprises, Inc. Management Head Office of Yes
China Grand Enterprises,
Inc.
CFO of China Grand
Kang Wei China Grand Enterprises, Inc. Yes
Enterprises, Inc.
Deputy General Manager of
the Financial Management
Bai Xinhua China Grand Enterprises, Inc. Yes
Head Office of China Grand
Enterprises, Inc.
Assistant President of China
Liu Chengwei China Grand Enterprises, Inc. Yes
Grand Enterprises, Inc.
Business Director of the
Pharmaceutical
Qin Yun China Grand Enterprises, Inc. Management Head Office Yes
China Grand Enterprises,
Inc.
Executive Director and
Hangzhou Huadong Medicine Manager of Hangzhou
Jin Xuhu Yes
Group Co., Ltd. Huadong Medicine Group
Co., Ltd.
Position in other entities
√ Applicable □ N/A
Compensation
and allowance
Position in Commencemen Termination of
Name Name of other entity from the
other entity t of the term the term
shareholders’
entity
Sichuan Yuanda Shuyang Pharmaceutical
Co., Ltd. and other wholly/partially owned
Niu Zhanqi Director No
subsidiaries of China Grand Enterprises,
Inc.
Kang Wei Western Securities Co., Ltd. Supervisor Yes
Leiyunshang Pharmaceutical Co., Ltd. and
Kang Wei other wholly/partially owned subsidiaries of Director No
China Grand Enterprises, Inc.
Grand Industrial Holding Co., Ltd. and
Bai Xinhua Director No
other wholly/partially owned subsidiaries of
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China Grand Enterprises, Inc.
Yunnan Leiyunshang Lixiang
Qin Yun Director No
Pharmaceutical Co., Ltd.
Sichuan Yuanda Shuyang Pharmaceutical
Co., Ltd. and other wholly/partially owned
Liu Chengwei Director No
subsidiaries of China Grand Enterprises,
Inc.
Hangzhou State-owned Capital Investment
Jin Xuhu Chairman Yes
and Operation Co., Ltd.
Executive
Jin Xuhu Hangzhou Oxygen Plant Group Co., Ltd. Yes
Director
Incumbent and off-office directors, supervisors and senior management personel during the reporting period that have been imposed
administrative penalties by the SCRC during the last three years.
□ Applicable √ N/A
IV. Remuneration of directors, supervisors and senior managers
The decision-making procedure, determination basis and actual remuneration for directors, supervisors and senior managers
The remuneration plan of independent directors on the ninth Board of Directors of the Company was preliminarly approved by
the Board of Directors. The final decision would be made by the general meeting of shareholders.
In 2019, the annual allowance for the independent directors of the Company was 80,000 yuan (before tax), paid in a lump sum
at the end of the year. The directors and supervisor appointed by shareholders will receive allowance of 30,000yuan (before tax),paid
in a lump sum at the end of the year. Other directors, supervisors and senior managers of the Company will receive benefits in
accordance with the Company’s current Salary System and Performance Appraisal Schemes.
Remuneration of directors, supervisors and senior managers of the Company during the reporting period
Unit: RMB ten thousand yuan
Total pretax Receive remuneration
Holding of
Name Title Gender Age renumeration received from related parties of
positions
from the Company the Company or not
Honorary Chairman of the
Li Bangliang Male 74 Incumbent 220 No
Board
Lyu Liang Chairman of the Board Male 46 Incumbent 200 No
Li Yuedong Director, General Manager Male 48 Incumbent 120 No
Niu Zhanqi Director Male 53 Incumbent 3 Yes
Kang Wei Director Female 52 Incumbent 3 Yes
Fu Hang Director Male 57 off office 1.25 No
Jin Xuhu Director Male 57 Incumbent 1.75 Yes
Zhu Liang Director Male 43 Incumbent 40 No
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Zhang Wei Independent Director Male 49 off office 3.33 No
Zhong Xiaoming Independent Director Male 58 Incumbent 8 No
Yang Lan Independent Director Female 50 Incumbent 8 No
Yang Jun Independent Director Female 48 Incumbent 4.67 No
Bai Xinhua Supervisor Female 54 Incumbent 3 Yes
Qin Yun Supervisor Female 50 Incumbent 3 Yes
Liu Chengwei Supervisor Male 47 Incumbent 3 Yes
Hu Baozhen Supervisor Female 47 Incumbent 1.75 Yes
He Rufen Supervisor Female 52 Incumbent 70 No
Xu Zhifeng Supervisor Male 45 Incumbent 40 No
Shao Lingmin Supervisor Female 57 off office 0 No
Wu Yimei Supervisor Female 56 off office 0 Yes
Zhou Shunhua Deputy General Manager Male 60 Incumbent 130 No
Wu Hui Deputy General Manager Male 51 Incumbent 80 No
Secretary of the Board of
Chen Bo Male 48 Incumbent 80 No
Directors
Officer in Charge of
Qiu Renbo Male 38 Incumbent 70 No
Financial Affairs
Officer in Charge of Appointment
Ma Honglan Female 50 80 No
Financial Affairs & removal
Total -- -- -- -- 1,173.75 --
Equity incentives granted to the Company’s directors and senior managers during the reporting period
□ Applicable √ N/A
V. Employees of the Company
1. Number of employees, profession composition and education level
Number of incumbent employees in the parent company (person) 979
Number of incumbent employees in major subsidiaries (person) 11,139
Total number of incumbent employees (person) 12,118
Total number of employees receiving salaries in the current
12,118
period (person)
Number of retired employees requiring the parent Company and
0
its subsidiaries to bear costs (person)
Professional structure
Category Number (person)
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Production staff 1,382
Sales staff 6,060
Technical staff 2,273
Financial staff 259
Administrative staff 1,538
Storage and transportation staff 606
Total 12,118
Educational background
Category Number (person)
Master’s degree or above 729
Bachelor’s degree 5,045
Junior college (professional training) 4,896
Other 1,448
Total 12,118
Note: (1) Sales staff include those engaged in academic promotion, retail promotion, pharmaceutical service,
marketing, aesthetic medicine business development, etc.
(2) Technical staff include those directly engaged in R&D and other R&D support personnel
2. Staff remuneration policy
Based on its strategic development plan, the Company strives to create a high-quality talent team with the
characteristics of Huadong Medicine, and stimulates employees’ innovation and creativity through flexible and
diversified benefit policies.
3. Staff training plans
With the concept of “people orientation”, Huadong Medicine pays attention to the development of human resources within the
Company, and constructs and continuously improves the talent training system at different levels. Based on the training project
system and learning platform construction, it provides targeted training to improve employees’ knowledge and skills, stimulates the
organizational vitality through training, cultivates talents who highly agree with the Company’s values, and guides them to do their
best to create value, so as to meet the requirements of the Company’s sustainable development and internationalization strategy.
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Training project system Learning platforms
Cadres and reserve cadres
sessions
Management transition
Leadership development for senior managers: EMBA/MBA/ Private sharing session
Online learning sessions
Huadong Lectures
Leadership development for cadres: Action learning/competency certification program
Training for new directors and department managers: 90-day turnaround plan
Reserve cadres: Plan M
Quality core talents
Human resources
BD professionals
R&D PM talents
Business core
professionals
professionals
management
management
management
Employee development sessions
Production
The backbone of the
Marketing
business grassroots
Financial
Overseas
trainees
talents
talents
talents
management
Orientation training and refreshment
New employees: new members of College graduates: Set Sail Project
employees
Grassroots
Huadong Medicine
Training and development of technical talents
4. Labor outsourcing
□ Applicable √ N/A
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Section X. Corporate Governance
I. Basic situation of corporate governance
During the reporting period, the Company strictly complied with the requirements of the regulatory documents on corporate
governance issued by the CSRC and the Shenzhen Stock Exchange, such as “Company Law”, “Securities Law”, “Governance
Guidelines for Listed Companies”, and “Rules for Stock Listing of Shenzhen Stock Exchange”. In order to realize its strategic
development goals and safeguard the interests of all shareholders, the Company carried out comprehensive internal control and
standardized management, strengthened system construction and internal management, standardized information disclosure and
improved the corporate governance structure. There is no difference between corporate governance and the requirements of
“Company Law” and the relevant provisions of the CSRC.
According to the regulatory documents on the governance of listed companies issued by the CSRC, the Company has formed a
system that is legally compliant and in line with the actual operation of the Company. By the end of the reporting period, the actual
corporate governance was basically consistent with the regulatory documents on corporate governance issued by the CSRC and the
Shenzhen Stock Exchange, and there were no outstanding governance issues.
Whether the actual corporate governance of the Company is significantly different from the normative documents on corporate
governance issued by the CSRC
□ Yes √ No
No such case during the reporting period.
II. The Company’s independence in Businesses, Management, Assets, Institutions and
Finance from Controlling shareholders
During the reporting period, the Company continuously strengthened the corporate governance structure and
implemented standardized operation in accordance with the requirements of regulatory authorities. The Company
and its controlling shareholder realized the separation of management and independent operation in terms of
personnel, assets, finance, institutions and business.
Category Independent Note
or not
Independence in Yes The Company is mainly engaged in the production and operation of
business pharmaceutical products, and has its own independent production and sales
systems. The Company’s business activities are completely independent
from its controlling shareholder. Although the subsidiaries of the Company
and the controlling shareholder are engaged in pharmaceutical business,
they focus on different medical fields and different customer groups.
Therefore, there is no competition between the Company, controlling
shareholdersand related parties.
Independence in Yes The company is completely independent in the management of labor,
personnel personnel and salaries, and has an independent human resources department
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and a sound personnel management system.
Independence in assets Yes The Company has various independent assets, such as independent
production systems, auxiliary production systems and supporting facilities;
independent purchasing and sales systems; independent industrial property
rights, trademarks, non-patented technologies and other intangible assets.
Independence in Yes The Company has establishedindependent Board of Directors,
institutions management and other internal organizations, and each functional
department is independent from controlling shareholders in duty and
personnel. There is no superior-subordinate relation between functional
departments of controlling shareholders and those of the Company, which
would have an impact on the Company’s independent operations.
Independence in finance Yes The Financial Management Head Office is responsible for the financial
accounting and budget management of the Company, and has established
independent and sound financial, accountingand budget management
systems according to relevant laws and regulations.
Note: The Company is independent in Businesses, Management, Assets, Institutions and Finance from Controlling shareholders.The
Company does not have peer competition or related transactions caused by partial restructuring, industry characteristics, national
policies or mergers and acquisitions.
III. Horizongtal competition
□ Applicable √ N/A
IV. Annual and extraordinary general meetings held during the reporting period
1. Shareholders’ meetings in the reporting period
Proportion of
Meeting Meeting type Convene date Disclosure date Disclosure index
investors present
China Securities
Journal, Securities
Times, Shanghai
2018 annual General Annual General
63.33% June 06, 2019 June 06, 2019 Securities News, and
Meeting Meeting
cninfo
(www.cninfo.com.cn
)
2. Extraordinary general meetings convened at the request of preferred shareholders with resumed voting
rights:
□ Applicable √ N/A
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
V. Performance of duties of independent directors during the reporting period
1. Attendance of independent directors at Board meetings and general meetings
Attendance of independent directors at Board meetings and general meetings
Board
Board
meetings Board Board meeting Presence of
Board meetings
Name of presence meetings absence in independent
meetings presence by Board meeting
independent required presence person for two directors in
presence on telecom- absence
directors during the through a consecutive general
site communicatio
reporting proxy times meetings
n
period
Zhang Wei 3 1 2 0 0 No 1
Zhong Xiaoming 8 2 6 0 0 No 1
Yang Lan 8 2 6 0 0 No 1
Yang Jun 5 1 4 0 0 No 0
Note on not attending board meetings in person for two consecutive times
N/A
2. Objections from independent directors on relevant issues of the Company
Whether the independent directors have raised any objection to relevant issues of the Company
□ Yes √ No
No such case during the reporting period.
3. Other details aboutthe performance of duties by independent directors
Whether the independent directors’ suggestions were adopted or not
√ Yes □ No
Note on the adoption or non-adoption of the independent directors’ suggestions
N/A
VI. Performance of duties by special committees under the Board during the reporting period
1. Strategic Committee
During the reporting period, the Strategic Committee, based on the domestic and foreign conditions and the
characteristics of the industry,conducted an in-depth analysis of the Company’s current operating situation and
made an effective guidance for the Company to respond to market changes in a timely manner. In addition, the
Strategic Committee put forward valuable opinions and suggestions for the Company to ensure its sustainable and
robust development.
2. Audit Committee
During the reporting period, the Audit Committee strictly abided the rules of the CSRC, Shenzhen Stock
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Exchange and the Company’s “Rules of Procedure for the Audit Committee of the Board of Directors”. It listened
to the reports of the internal audit department and deliberated on the external audit reports of the Company’s 2019
financial report.
During the annually external auditing period, the Audit Committee held three regular meetings to fulfilled its
obligation of fully communicating with the external auditors, carefully reviewing the external auditing plan,
scrutinizing the financial statement data and effectively supervising the preparation of the annual report.
3. Remuneration and Appraisal Committee
During the reporting period, the Remuneration and Appraisal Committee carefully investigated the
implementation of the Company’s remuneration system in accordance to “Rules of Procedure for the
Remuneration and Assessment Committee of the Board of Directors”. In 2019, the Committee held one meeting
to review and approve the “Independent Opinions on Allowances for Directors and Independent Directors
Appointed by Shareholders on the Ninth Board of Directors”, and agreed to submit it to the Board of Directors for
further deliberation.
4. Nomination Committee
During the reporting period, the Nomination Committee fully performed its duties to exam and audit the
criteria and procedure of selecting directors, senior managerial staff and other personnel. The Committee strickly
acted in accordance with the relevant rules of the Articles of Association and “Rules of Procedure for the
Nomination Committee of the Board of Directors” . During the reporting period, the Committee held two
meetings on which the “Proposal on the General Election of the Board of Directors” and the “Proposal on the
Adjustment of the Officer in Charge of Financial Affairs” were deliberated on and approved to submit to the
Board of Directors for deliberation.
VII. Performance of duties by the Board of Supervisors
Whether the Board of Supervisors found any risks of the Company in the supervision activities during the reporting period
□ Yes √ No
No such case during the reporting period.
VIII. Assessment and incentive mechanism for senior managers
During the reporting period, the Company established a market-oriented assessment and incentive mechanism for senior
managers.Based on their personal abilities, annual target achievements, market and industry salary level, the Company implemented
a competitive renumeration policy and set up a sound renumeration management system to retain and attract talent.
IX. Evaluation report on internal control
1. Details of major internal control deficiencies found during the reporting period
□ Yes √ No
2. Self-evaluation report on internal control
Disclosure date of the full text of self-evaluation report on internal control April 28, 2020
Disclosure index of the full text of self-evaluation report on internal control Cninfo (www.cninfo.com.cn)
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Proportion of assets evaluated in total assets 95.00%
Proportion of revenue evaluated in total revenue per consolidated financial statement 90.00%
Recognition standard of deficiencies
Category Financial reporting Non-financial reporting
The Company stipulates that internal control deficiencies
involving the following fields shall be considered as
The Company stipulates that internal control “material deficiencies”: serious violation of laws and
deficiencies involving the following fields regulations; in addition to policy reasons, the Company has
shall be identified as at least “important been losing money for years, and its continuous operation
deficiencies”: anti-fraud procedure and has been challenged; lack of system control or systematic
control; internal control over unconventional failure in important business; M&A and restructuring
Qualitative criteira
or unsystematic transactions; internal control failure; the operation of newly expanded subordinate units
over the selection and application of is unsustainable; lack of internal control construction and
accounting policies in relation to GAAP; disorderly management in subsidiaries; middle and senior
internal control over the end-of-period managers have left their posts, or serious staff turnover in
financial reporting process. key positions; frequent exposure of negative news in the
media; internal control evaluation results, especially major
or significant deficiencies have not been corrected.
Potential misstatement of total profit;
Quantitative criteria Impact on total assets; significant negative impact
potential misstatement of total assets
Number of material deficiencies in financial reporting 0
Number of material deficiencies in non-financial reporting 0
Number of important deficiencies in financial reporting 0
Number of important deficiencies in non-financial reporting 0
X. Audit report on internal control
√ Applicable □ N/A
Comments of Internal Control Audit Reprot
On December 31, 2019, Huadong Medicine has maintained effective internal control over financial reporting in all major respects
in accordance with the “Basic Norms for Enterprise Internal Control” and relevant regulations.
Disclosure of internal control audit report Disclosure
Disclosure date of the full audit report on internal control April 28, 2020
Disclosure index of the full audit report on internal control cninfo (www.cninfo.com.cn)
Type of opinions in the internal control audit report Unmodified unquialified opinions
Whether there are material deficiencies in non-financial reporting None
Whether the accounting firm has issued the auditor’s report on internal control with non-standard opinions
□ Yes √ No
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Whether the auditor’s report on internal control issued by the accounting firm is consistent with the self-evaluation report of the
Board of Directors
√ Yes □ No
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Section XI. Information about Corporate Bonds
Whether the Company have any corporate bonds that are publicly issued and listed on the stock exchange and have not expired on
the approval date of the annual report or have not been fully paid upon maturity
Yes
I. Basic information about corporate bonds
Bond balance Repayment of
Bond
Bond name Bond code Issue date Maturity day (ten thousand Interest rate principal and
abbreviation
yuan) interest
Interest is paid
once a year,
and the
principal is
Huadong repaid once
Medicine Co., upon maturity.
15 Huadong
Ltd. 2015 112247 May 19, 2015 May 19, 2020 99,877 4.70% The interest of
Bonds
Corporate the last
Bonds installment is
paid together
with the
repayment of
the principal.
Trading venue for the listing or
Shenzhen Stock Exchange
transfer of corporate bonds
Investor suitability arrangement N/A
Interest payment of the
During the reporting period, the Company paid the fourth installment of the bond interest on May
corporate bonds during the
20, 2019 (subject to postponement in case of a non-trading day).
reporting period
Where the corporate bonds are
subject to special terms such as
issuer or investor option terms,
exchangeable terms, etc., the N/A
performance of such terms
during the reporting period (if
applicable)
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
II. Information about the bond trustee and credit rating agency
Bond trustee:
No. 1508,
Everbright
Xinzha Road,
Securities Sun Bei, Chu
Name Office address Jing’an Contacts Tel. 021-22169999
Company Wei
District,
Limited
Shanghai
Credit rating agency that tracked and rated the corporate bonds during the reporting period:
Room 968, Building 1, No. 599 Xinye Road,
Name China Chengxin Securities Rating Co., Ltd. Office address
Qingpu District, Shanghai
If the bond trustee or credit rating agency
hired by the Company changes during the
reporting period, the reasons for the
N/A
change, performance of procedures, and
the impact on investors’ interests, etc. (if
applicable)
III. Use of funds raised by corporate bonds
After deducting the issuance costs, the 600 million yuan raised by the bonds were used
to repay some bank loans and optimize the Company’s debt structure. The remaining
400 million yuan was used to supplement the Company’s working capital and the
Use of funds raised by the Company’s
operating capital of the pharmaceutical business and improve the Company’s fund
bonds and performance of procedures
situation. The above funds were used in accordance with the relevant regulatory
requirements of listed companies in Shenzhen Stock Exchange; corresponding
decision-making procedures were implemented.
Year-end balance (ten thousand yuan) 99,877
Operation of the special fund-raising
Normal
account
Whether the use of the raised funds is
consistent with the purpose, use plan and
Yes
other agreements promised in the
prospectus
IV. Corporate bond rating
During the reporting period, the main credit rating of the Company is maintained at AA+; the credit rating of
the current bonds is maintained at AA+.
According to the CSRC regulations, credit rating industry practice, and the Company’s rating system, from
the date of issuance of the first rating report, the rating agency should pay constant attention to such factors as
changes in the external operating environment, operating or financial conditions of the current bond issuer and the
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debt service guarantee of the current bonds within the validity period of the credit rating of the current bonds or
the duration of the current bonds, so as to continuously track the credit risks of the current bonds. Tracking ratings
include regular and irregular tracking ratings.
During the reporting period, the Company entrusted China Chengxin Securities Rating Co., Ltd. to track and
rate the 2015 corporate bonds (“15 Huadong Bonds”) issued by the Company on May 19, 2015 for the year 2019.
The rating results were as follows: the main credit rating of Huadong Medicine is maintained at AA+, with a
stable rating outlook; the credit rating of the current debt is maintained at AA+. For details of the tracking rating
report, please refer to “2015 Corporate Bond Tracking Rating Report of Huadong Medicine Co., Ltd. (2019)”
published by the Company on June 18, 2019 on cninfo (www.cninfo.com.cn).
V. Corporate bond credit enhancement mechanism, debt repayment plan and other debt
repayment guarantee measures
During the reporting period, the Company’s corporate debt credit enhancement mechanism, debt repayment plan
and other debt repayment safeguard measures did not change, and the relevant commitments in the prospectus
were duely performed.
VI. Bondholders’ meetings during the reporting period
The meetings were duely held as required.
VII. Performance of duties of the bond trustee during the reporting period
The duties were duely performed as required.
VIII. Major accounting data and financial indicators of the Company in the last 2 years by
the end of the reporting period
Unit: RMB ten thousand yuan
Year-on-year percentage
Item 2019 2018
change
EBITDA 399,182.38 329,251.92 21.24%
Current ratio 163.59% 176.56% -12.97%
L/A ratio 40.05% 45.75% -5.70%
Quick ratio 111.16% 119.43% -8.27%
EBITDA total debt ratio 46.43% 37.45% 8.98%
Interest coverage ratio 32.15 28.67 12.14%
Cash interest coverage ratio 29.76 33.04 -9.93%
EBITDA interest coverage
35.88 31.73 13.08%
ratio
Loan repayment rate 100.00% 100.00% 0.00%
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The Annual Report 2019 of Huadong Medicine Co., Ltd.
Interest payment rate 100.00% 100.00% 0.00%
Main reasons for the above accounting data and financial indicators changing by more than 30% year on year
□ Applicable √ N/A
IX. Interest payments on other bonds and debt financing instruments during the reporting
period
□ Applicable √ N/A
X. Bank credit, use and repayment of bank loans obtained during the reporting period
As of December 31, 2019, the Company had obtained 9.671 billion yuan of bank credit and used 876 million yuan
of credit. During the reporting period, the Company repaid the bank loans on time, and there was no extension or
exemption.
XI. Implementation of relevant provisions or commitments of the Company’s bond
prospectus during the reporting period
During the reporting period, the Company fulfilled the relevant commitments in accordance with the prospectus. The Company paid
the fourth installment of the bond interest on May 20, 2019.
XII. Major events during the reporting period
None
XIII. Whether there is a guarantor for corporate bonds
√ Yes □ No
Whether the guarantor of corporate bonds is a legal person or other organization
√ Yes □ No
Whether the guarantor’s financial statements for the reporting period are separately disclosed within 4 months from the end of each
fiscal year, including the balance sheets, income statements, cash flow statements, statements of changes in ownership intere st
(shareholders’ rights and interests) and notes to financial statements
√ Yes □ No
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Section XII. Financial Report
I. Audit report
Audit Opioion Unmodified unqualified audit opinion
Audit Reprot sign-off Date April 26, 2020
Pan-China Certified Public Accountants (special
Audit Institution Name
general partnership)
Auidt Report Number T. J. S. (2020) No. 3788
Certified Public Accounts Name Wang Fukang, Xu Ping
Main body of the audit report
Audit Report
T. J. S. (2020) No. 3788
Shareholders of Huadong Medicine Co., Ltd.:
I. Audit opinion
We audited the financial statements of Huadong Medicine Co., Ltd. (hereinafter referred to as
“Huadong Medicine”), including the consolidated and the parent company’s balance sheets as at
December 31, 2019, the consolidated and the parent company’s income statements for the year
2019, the consolidated and the parent company’s cash flow statements, the consolidated and the
parent company’s statements of changes in ownership interest, and the notes to relevant financial
statements.
In our opinion, the attached financial statements are prepared in accordance with the
accounting standards for business enterprises in all material aspects and fairly reflect the
consolidated and the parent company’s financial condition of Huadong Medicine as at December 31,
2019, as well as the consolidated and the parent company’s operating results and cash flows in
2019.
II. Basis opinion
We conducted our audit in accordance with the auditing standards for certified public
accountants of China. Our responsibilities under these standards are further elaborated in the section
“CPA’s responsibility to audit the financial statements” of the auditor’s report. In accordance with
the code of professional ethics for certified public accountants in China, we are independent of
Huadong Medicine and have fulfilled other responsibilities in respect of professional ethics. We
believe that the audit evidence we have obtained is sufficient and appropriate, providing a basis for
auditor’s opinion.
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III. Key audit matters
The key audit matters are those we consider most important to the audit of the financial
statements for the current period in our professional judgment. The response to these items is based
on an audit of the financial statements as a whole and the formation of auditor’s opinion. We do not
comment on these items separately.
(I) Revenue recognition
1. Description
The relevant information disclosure is detailed in Notes III (XXIII) and V (II) 1 to the financial
statements.
The operating revenue of Huadong Medicine mainly comes from the production and sales of
drugs. The operating revenue of Huadong Medicine in 2019 is RMB 35,445,698,216.15 yuan.
The recognition of revenue from domestic sales of products of Huadong Medicine shall meet
the following conditions: the products have been delivered to the buyer according to the contract,
and the amount of product sales revenue has been determined, the payment for goods has been
recovered or the receipt certificate has been obtained, and the relevant economic benefits are likely
to flow in, and the costs related to the products can be measured reliably. The recognition of
revenue from overseas sales of products shall meet the following conditions: the products have been
declared at the customs according to the contract, the bill of lading has been obtained, the amount of
product sales revenue has been determined, the payment for goods has been recovered or the receipt
certificate has been obtained, and the relevant economic benefits are likely to flow in, and the costs
related to the products can be measured reliably.
As the operating revenue is one of the key performance indicators of Huadong Medicine, there
may be inherent risks for the management of Huadong Medicine (hereinafter referred to as the
“Management”) to achieve specific goals or expectations through inappropriate revenue recognition.
Therefore, we identified revenue recognition as a key audit matter.
2. Audit response
For revenue recognition, the audit procedures we implemented mainly include:
(1) Understanding the key internal controls related to revenue recognition, evaluating the
design of these controls, determining whether they are implemented, and testing the operating
effectiveness of relevant internal controls;
(2) Reviewing the sales contract, understanding the main contract terms or conditions, and
evaluating whether the revenue recognition method is appropriate;
(3) Analyzing the operating revenue and gross profit rate by month, product, region, etc.,
identifying whether there are significant or abnormal fluctuations, and ascertaining the reasons for
the fluctuations;
(4) For domestic sales revenue, checking the supporting documents related to revenue
recognition by sampling, including sales contracts, orders, sales invoices, outbound delivery orders,
shipping orders, shipping documents and payment receipts. For overseas revenue, obtaining e-port
information and checking with the accounting records, and checking the sales contracts, export
declaration forms, bills of lading, sales invoices and other supporting documents by sampling;
(5) In combination with accounts receivable confirmation, confirming the current sales with
major customers by sampling;
(6) Carrying out a cut-off test for the operating revenue recognized before and after the balance
sheet date, and evaluating whether the operating revenue is recognized within an appropriate period;
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and
(7) Checking whether the information relating to operating revenue has been properly
presented in the financial statements.
(II) Impairment of accounts receivable
1. Description
The relevant information disclosure is detailed in Notes III (X) and V (I) 3 to the financial
statements.
As of December 31, 2019, the book balance of accounts receivable of Huadong Medicine was
RMB 6,428,095,660.39 yuan, the bad debt reserve was 335,790,475.92 yuan, and the book value
was 6,092,305,184.47 yuan.
Based on the credit risk characteristics of various accounts receivable and the individual
account receivable or the combination of accounts receivable, the Management measured its loss
reserve according to the expected credit loss equivalent to the entire duration. For the accounts
receivable with expected credit loss measured based on an individual item, the Management
comprehensively considered the reasonable and reliable information about the past items, current
conditions and future economic conditions, estimated the expected cash flow, and determined the
bad debt reserve that should be accrued. For the accounts receivable with expected credit loss
measured based on the combined items, the Management divided the accounts receivable based on
age, made adjustments according to historical credit loss and prospective estimates, compiled a
comparison table of accounts receivable ages and expected credit loss rates, and determined the bad
debt reserve that should be accrued.
Due to the significant amount of accounts receivable and significant management judgment
involved in the impairment of accounts receivable, we determined the impairment of accounts
receivable as a key audit matter.
2. Audit response
For the impairment of accounts receivable, the audit procedures we implemented mainly
include:
(1) Understanding the key internal controls related to the impairment of accounts receivable,
evaluating the design of these controls, determining whether they are implemented, and testing the
operating effectiveness of relevant internal controls;
(2) Reviewing the follow-up actual write-off or reversal of accounts receivable for which the
bad debt reserve has been accrued in previous years, evaluating the accuracy of the Management’s
past forecasts;
(3) Reviewing the relevant considerations and objective evidence of the Management’s credit
risk assessment of accounts receivable, and evaluating whether the Management has properly
identified the credit risk characteristics of various accounts receivable;
(4) For the accounts receivable with expected credit loss measured based on an individual item,
obtaining and checking the Management’s forecast of the expected cash flow received, evaluating
the rationality of the key assumptions used in the forecast and the accuracy of data, and checking
with the external evidence obtained;
(5) For the accounts receivable with expected credit loss measured based on the combined
items, evaluating the rationality of the Management’s division of combinations according to the
credit risk characteristics; evaluating the rationality of the comparison table of accounts receivable
ages and expected credit loss rates determined by the Management based on historical credit loss
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experience and prospective estimates; testing the accuracy and completeness of the Management’s
data (including the age of accounts receivable, historical loss rate, migration rate, etc.) and whether
the calculation of bad debt reserve is accurate;
(6) Checking the subsequent collection of accounts receivable, and evaluating the reasonability
of the Management’s accrual of bad debt reserve for accounts receivable; and
(7) Checking whether the information relating to the impairment of accounts receivable has
been properly presented in the financial statements.
(III) Goodwill impairment
1. Description
The relevant information disclosure is detailed in Notes III (V), III (XVIII) and V (I) 15 to the
financial statements.
As of December 31, 2019, the original book value of goodwill of Huadong Medicine was
1,472,250,061.24 yuan, the impairment reserve was 2,632,799.14 yuan, and the book value was
1,469,617,262.10 yuan.
When there is any sign of impairment in the asset group or asset portfolio related to goodwill,
and at the end of each year, the Management shall conduct a goodwill impairment test. The
Management conducted the goodwill impairment test in combination with the relevant asset group
or asset portfolio, and the recoverable amount of the relevant asset group or asset portfolio was
determined by the present value of the expected future cash flow. The key assumptions used in the
impairment test include: revenue growth rate in the detailed forecast period, growth rate in the
perpetual forecast period, gross profit rate, related expenses and discount rate.
Due to the significant amount of goodwill and the significant management judgment involved
in the goodwill impairment test, we determined the goodwill impairment as a key audit matter.
2. Audit response
For the goodwill impairment, the audit procedures we implemented mainly include:
(1) Reviewing the Management’s forecast of the present value of future cash flows in previous
years and actual operating results, and evaluating the accuracy of the Management’s past forecasts;
(2) Understanding and evaluating the competence, professional quality and objectivity of
external valuation experts employed by the Management;
(3) Evaluating the rationality and consistency of the Management’s methods in the impairment
test;
(4) Evaluating the rationality of the key assumptions adopted by the Management in the
impairment test, and verifying whether the relevant assumptions are consistent with the overall
economic environment, industry conditions, operating conditions, historical experience, operating
plans, approved budgets, meeting minutes, and other assumptions used by the Management in
relation to the financial statements;
(5) Testing the accuracy, completeness and relevance of the data used by the Management in
the impairment test, and rechecking the internal consistency of the relevant information in the
impairment test;
(6) Testing whether the Management’s calculation of the present value of expected future cash
flows is accurate;
(7) Based on the methods and assumptions used by the Management, estimating the present
value range of future cash flows and evaluating whether it differs significantly from the range
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estimated by the Management; and
(8) Checking whether the information relating to the goodwill impairment has been properly
presented in the financial statements.
IV. Other information
The Management is responsible for other information, including information covered in the
annual report, but not the financial statements and the auditor’s report.
The auditor’s opinion on the financial statements does not cover other information, and we do
not publish any form of corroborating conclusions on other information.
In conjunction with our audit of the financial statements, it is our responsibility to read other
information and, in doing so, consider whether other information is materially inconsistent with the
financial statements or what we learned during the audit or appears to be materially misrepresented.
Based on the work we have performed, if we determine that other information is materially
misrepresented, we should report that fact. In this connection, we have nothing to report.
V. Responsibility of the Management and Governance for the Financial Statements
The Management is responsible for preparing the financial statements in accordance with the
accounting standards for business enterprises to achieve fair presentation and for designing,
implementing and maintaining the necessary internal controls so that the financial statements are
free from material misstatement due to fraud or error.
In preparing the financial statements, the Management is responsible for assessing Huadong
Medicine’s competence for continuing operations, disclosing matters relating to continuing
operations (if applicable) and applying the going concern assumption, unless liquidation and
termination are planned or there is no other realistic alternative.
Those charged with governance of Huadong Medicine is responsible for overseeing the
Company’s financial reporting process.
VI. Responsibility of Certified Public Accountants on the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a
whole are free from material misstatement due to fraud or error, and to issue an auditor’s report that
includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that
an audit performed in accordance with the audit standards will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered
material when it is reasonably expected that misstatements, individually or collectively, may affect
the economic decisions made by users based on the financial statements.
As part of the audit in accordance with the audit standards, we exercise professional judgment
and maintain professional skepticism throughout the process. We also:
(I) Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not
detecting a material misstatement resulting from fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve collusion, forgery, omissions, misrepresentations, or the
override of internal control.
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(II) Understand the internal control associated with the audit to design appropriate audit
procedures.
(III) Evaluate the appropriateness of accounting policies used and the rationality of accounting
estimates and related disclosures made by the Management.
(IV) Conclude on the appropriateness of using the going concern assumption by the
Management, and conclude, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on Huadong Medicine’s ability
to continue as a going concern. If we conclude that a material uncertainty exists, we are required to
draw the attention of users to relevant disclosures in the financial statements in our auditor’s report;
if such disclosures are inadequate, we should offer qualified opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause Huadong Medicine to cease to continue as a going concern.
(V) Evaluate the overall presentation, structure and content of the financial statements,
including whether the financial statements represent the underlying transactions and events in a
manner that achieves fair presentation.
(VI) Obtain sufficient and appropriate audit evidence on the financial information of entities or
business activities of Huadong Medicine to express auditor’s opinions on the financial statements.
We are responsible for the guidance, supervision and implementation of group audits and take full
responsibility for the auditor’s opinions.
We communicate with those charged with governance regarding, among other matters, the
planned scope and timing of the audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with
the professional ethical requirements associated with our independence, and communicate to those
charged with governance all relationships and other matters that may reasonably be deemed to
affect our independence, as well as relevant precautions (if applicable).
From the matters communicated to those charged with governance, we determine which
matters are most important to the current financial statement audit and thus constitute key audit
matters. We describe these matters in our auditor’s report, unless laws and regulations prohibit their
public disclosure or, in rare cases, if it is reasonably expected that the negative consequences of
communicating a matter in the auditor’s report outweigh the benefits in the public interest, we
determine that the matter should not be communicated in the auditor’s report.
Pan-China Certified Public Accountants Chinese Certified Public Accountant: Wang Fukang
(special general partnership) (Project partner)
Hangzhou, China Chinese Certified Public Accountant: Xu Ping
April 26, 2020
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II. Financial statements
The unit of statements in the financial notes is: RMB yuan.
1. Consolidated balance sheet
Prepared by: Huadong Medicine Co., Ltd.
December 31, 2019
Unit: RMB yuan
Item December 31, 2019 December 31, 2018
Current assets:
Cahs and bank balances 2,402,730,395.39 2,442,723,381.93
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 639,854,829.69
Accounts receivable 6,092,305,184.47 5,633,011,225.41
Accounts receivable for financing 683,884,625.14
Prepayments 363,246,612.94 351,676,102.16
Premiums receivable
Reinsurance accounts receivable
Reinsurance contract reserve
receivable
Other receivables 92,201,271.22 82,878,867.32
Including: Interests receivable
Dividends receivable 815,965.44 779,957.18
Financial assets purchased for
resale
Inventories 4,038,975,496.93 3,875,647,048.31
Contract assets
Assets held for sale
Non-current assets due within one
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year
Other current assets 62,526,471.96 38,097,580.91
Total current assets 13,735,870,058.05 13,063,889,035.73
Non-current assets:
Loans and prepayments issuance
Debt investments
Financial assets available for sale 91,111,431.20
Other debt investments
Held-to-maturity investments
Long-term receivables
Long-term equity investments 222,595,018.54 88,918,218.64
Other equity instrument
241,675,712.05
investments
Other non-current financial assets
Real estate properties for
21,701,908.75 23,841,968.85
investment
Fixed assets 2,175,216,842.65 2,033,587,957.65
Constructions in progress 1,829,808,233.19 617,004,995.98
Biological assets for production
Oil & gas assets
Right-of-use assets
Intangible assets 1,454,900,160.45 1,507,864,929.72
Development expenditures
Goodwill 1,469,617,262.10 1,458,322,456.39
Long-term unamortized expenses 12,289,677.31 12,487,374.06
Deferred tax assets 116,157,614.47 96,924,790.85
Other non-current assets 184,141,659.07 223,404,123.26
Total non-current assets 7,728,104,088.58 6,153,468,246.60
Total assets 21,463,974,146.63 19,217,357,282.33
Current liabilities:
Short-term borrowing 655,549,973.27 625,731,594.90
Borrowing from the central bank
Borrowing from other banks and
other financial institutions
Financial liabilities for trade
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Financial liabilities that are
measured at fair value and whose
changes are included in current
gains/losses
Derivative financial liabilities
Notes payable 613,374,356.61 566,955,074.64
Accounts payable 3,789,054,234.58 3,905,462,438.68
Receipts in Advance 254,888,911.30 155,516,265.85
Contract liabilities
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 132,584,982.71 115,269,567.11
Taxes payable 532,802,157.61 591,738,858.25
Other payables 1,365,152,290.99 1,397,399,947.38
Including: Interests payable 40,192,471.83
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
1,053,231,727.73 40,904,660.77
one year
Other current liabilities
Total current liabilities 8,396,638,634.80 7,398,978,407.58
Non-current liabilities:
Insurance policy reserve
Long-term borrowing
Bonds payable 995,545,627.39
Including: Preferred shares
Perpetual bonds
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Lease liabilities
Long-term payables 48,080,030.00 274,759,833.53
Long-term employee benefits
payable
Provisions 52,066,643.01 34,746,434.39
Deferred income 60,960,255.68 68,138,547.84
Deferred tax liabilities 39,604,343.27 19,659,864.09
Other non-current liabilities
Total non-current liabilities 200,711,271.96 1,392,850,307.24
Total liabilities 8,597,349,906.76 8,791,828,714.82
Owners’ Equity:
Share capital 1,749,809,548.00 1,458,174,624.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserves 2,158,080,661.07 2,455,526,993.18
Less: Treasury shares
Other comprehensive income 22,792,488.80 -22,426,154.59
Special reserve
Surplus reserves 710,359,967.51 592,903,007.98
General risk reserve
Retained earnings 7,668,434,642.62 5,453,970,525.96
Total owners’ equity attributable to
12,309,477,308.00 9,938,148,996.53
owner of the Company
Minority interest 557,146,931.87 487,379,570.98
Total owners’ equity 12,866,624,239.87 10,425,528,567.51
Total liabilities & owners’ equity 21,463,974,146.63 19,217,357,282.33
Legal representative: Lyu Liang
Person in charge of accounting work: Lyu Liang
Person in charge of the Accounting Department: Qiu Renbo
2. Balance sheet of the parent company
Unit: RMB yuan
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Item December 31, 2019 December 31, 2018
Current assets:
Cash and bank balances 893,939,724.56 1,385,023,943.20
Financial assets for trade
Financial assets measured at fair
value and whose changes are included
in current gains/losses
Derivative financial assets
Notes receivable 240,692,611.41
Accounts receivable 3,601,796,850.84 3,169,895,951.84
Accounts receivable for financing 102,285,661.94
Prepayments 183,776,687.98 190,099,922.21
Other receivables 857,127,207.17 671,375,825.45
Including: Interests receivable
Dividends receivable
Inventories 1,726,815,773.41 1,699,409,254.34
Contract assets
Assets held for sale
Non-current assets due within one
year
Other current assets 4,529,331.87 501,622.85
Total current assets 7,370,271,237.77 7,356,999,131.30
Non-current assets:
Debt investments
Financial assets available for sale 91,111,431.20
Other debt investments
Held-to-maturity investments
Long-term receivables
Long-term equity investments 4,809,521,228.65 4,324,003,989.90
Other equity instrument
92,108,957.26
investments
Other non-current financial assets
Real estate properties for
8,591,809.18 9,058,041.82
investment
Fixed assets 144,102,366.02 76,599,082.48
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Constructions in progress 15,728,406.26 46,137,210.35
Biological assets for production
Oil & gas assets
Right-of-use assets
Intangible assets 45,226,361.12 46,549,160.16
Development expenditures
Goodwill
Long-term unamortized expenses 975,689.14 1,341,804.52
Deferred tax assets 48,849,165.52 44,071,892.75
Other non-current assets 8,076,419.28
Total non-current assets 5,173,180,402.43 4,638,872,613.18
Total assets 12,543,451,640.20 11,995,871,744.48
Current liabilities:
Short-term borrowing 55,000,000.80 20,000,000.00
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 81,036,745.94 262,559,098.87
Accounts payable 2,469,675,798.54 2,571,660,073.04
Receipts in advance 52,914,932.34 25,072,721.43
Contract liabilities
Payroll payable 3,203,215.95 2,828,750.56
Taxes payable 32,881,935.68 68,310,184.18
Other payables 638,551,969.04 559,364,820.54
Including: Interests payable 29,256,720.34
Dividends payable 224,219.60 224,219.60
Liabilities held for sale
Non-current liabilities due within
1,028,002,952.88
one year
Other current liabilities
Total current liabilities 4,361,267,551.17 3,509,795,648.62
Non-current liabilities:
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Long-term borrowing
Bonds payable 995,545,627.39
Including: Preferred shares
Perpetual bonds
Lease liabilities
Long-term payables
Long-term employee benefits
payable
Provision
Deferred income 43,264,785.87 45,830,660.79
Deferred tax liabilities
Other non-current liabilities
Total non-current liabilities 43,264,785.87 1,041,376,288.18
Total liabilities 4,404,532,337.04 4,551,171,936.80
Owners’ Equity:
Share capital 1,749,809,548.00 1,458,174,624.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserves 2,168,451,528.01 2,460,086,452.01
Less: Treasury shares
Other comprehensive income 847,526.06
Special reserve
Surplus reserves 788,215,726.95 670,758,767.42
Retained earnings 3,431,594,974.14 2,855,679,964.25
Total owners’ equity 8,138,919,303.16 7,444,699,807.68
Total liabilities & owners’ equity 12,543,451,640.20 11,995,871,744.48
3. Consolidated income statement
Unit: RMB yuan
Item 2019 2018
I. Total operating income 35,445,698,216.15 30,663,374,326.27
Including: Operating revenue 35,445,698,216.15 30,663,374,326.27
Interests received
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Premiums earned
Handling fees and
commissions received
II. Total operating cost 32,236,584,319.28 27,820,710,587.36
Including: Operating cost 24,086,722,961.73 21,774,705,378.11
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
181,986,722.36 170,953,068.38
surcharges
Selling expenses 5,797,236,883.02 4,297,355,738.06
Administrative expenses 1,095,227,423.65 785,170,898.51
Research and
1,072,937,182.39 706,041,257.10
Development(R&D) expenses
Financial expenses 2,473,146.13 86,484,247.20
Including: Interests
107,193,977.78 102,777,144.97
expenses
Interests income 30,593,316.38 35,313,124.90
Add: Other income 113,635,429.90 80,998,441.81
Investment income (Losses are
-15,006,715.14 34,761,671.07
indicated by “-”)
Including: Investment gains
(losses) in associated enterprise and 11,058,408.16 18,703,210.12
joint-venture enterprise
Gains on the
derecognition of financial assets
measured at amortized cost
Gains on exchange (Losses are
indicated by “-”)
Gains on net exposure hedging
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(Losses are indicated by “-”)
Gains on changes in fair value
(Losses are indicated by “-”)
Credit impairment losses
-28,581,461.03
(Losses are indicated by “-”)
Impairment losses of assets
3,726,044.53 -51,018,817.28
(Losses are indicated by “-”)
Gains on assets disposal
114,154,941.45 2,165,646.31
(Losses are indicated by “-”)
III. Operating profit (Losses are indicated
3,397,042,136.58 2,909,570,680.82
by “-”)
Add: Non-operating income 118,292,148.72 1,575,573.21
Less: Non-operating expenses 45,068,060.85 38,601,994.56
IV. Total profit (Total losses are indicated
3,470,266,224.45 2,872,544,259.47
by “-”)
Less: Income tax expenses 544,863,569.56 477,374,647.49
V. Net profit (Net losses are indicated by
2,925,402,654.89 2,395,169,611.98
“-”)
(I) Classification by continuous
operations
1. Net profit from continued
operations (Net losses are indicated by 2,925,402,654.89 2,395,169,611.98
“-”)
2. Net profit from terminational
operations (Net losses are indicated by
“-”)
(II) Classification by attribution of
ownership
1. Net profit attributable to owners
2,813,118,702.11 2,267,229,174.08
of the parent company
2. Profit or loss attributable to
112,283,952.78 127,940,437.90
minority shareholders
VI. Other comprehensive income, net of
45,218,643.39 -22,426,154.59
income tax
Other comprehensive income
attributable to owners of the parent 45,218,643.39 -22,426,154.59
company, net of tax
(I) Other comprehensive income that
22,649,380.85
cannot be reclassified into gains/losses
150
The Annul Report 2019 of Huadong Medicine Co., Ltd.
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
22,649,380.85
other equity instrument investments
4. Changes in fair value of
credit risk of the enterprise
5. Others
(II) Other comprehensive income to
22,569,262.54 -22,426,154.59
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 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
arising on conversion of financial
22,569,262.54 -22,426,154.59
statements denominated in foreign
currencies
9. Others
Net amount after tax of other
comprehensive income attributable to
minority shareholders
VII. Total comprehensive income 2,970,621,298.28 2,372,743,457.39
151
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Total comprehensive income
attributable to owners of the parent 2,858,337,345.50 2,244,803,019.49
company
Total comprehensive income
112,283,952.78 127,940,437.90
attributable to minority shareholders
VIII. Earnings per share (EPS):
(I) Basic EPS 1.61 1.29
(II) Diluted EPS 1.61 1.29
As for enterprise merger under the same control in the current period, the net profit generated by the merged party before the merger
is 0.00 yuan, and that generated during the previous period is 0.00 yuan.
Legal representative: Lyu Liang
Person in charge of accounting work: Lyu Liang
Person in charge of the Accounting Department: Qiu Renbo
4. Income statement of the parent company
Unit: RMB yuan
Item 2019 2018
I. Total operating income 18,615,152,475.02 16,949,200,953.03
Less: Total operating cost 17,632,559,302.99 16,058,479,264.34
Business taxes and surcharges 18,316,448.01 10,188,442.34
Selling expenses 405,018,833.52 378,254,696.38
Administrative expenses 144,525,622.55 163,148,284.02
Research and Development
7,744,972.45
(R&D) expenses
Financial expenses 61,561,281.10 11,095,804.17
Including: Interests
74,457,880.50 67,604,518.13
expenses
Interests income 17,378,641.11 63,903,204.54
Add: Other income 6,736,329.43 8,030,137.28
Investment income (Losses
884,134,498.88 795,547,331.48
are indicated by “-”)
Including: Investment gains
(losses) in associated enterprise and
joint-venture enterprise
152
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Gains on the
derecognition of financial assets
measured at amortized cost (Losses are
indicated by “-”)
Gains on net exposure
hedging (Losses are indicated by “-”)
Gains from changes in fair
values (Losses are indicated by “-”)
Credit impairment losses
-51,632,880.16
(Losses are indicated by “-”)
Impairment gains (losses) of
-32,906,965.18
assets (Losses are indicated by “-”)
Asset disposal income
114,473,031.50 -48,893.42
(Losses are indicated by “-”)
II. Operating profit (Losses are
1,299,136,994.05 1,098,656,071.94
indicated by “-”)
Add: Non-operating income 1,634,235.90 93,443.66
Less: Non-operating expenses 1,291,907.34 5,046,377.09
III. Total profit (Total losses are
1,299,479,322.61 1,093,703,138.51
indicated by “-”)
Less: Income tax expenses 124,909,727.27 87,220,803.86
IV. Net profit (Net losses are indicated
1,174,569,595.34 1,006,482,334.65
by “-”)
(I) Net profit from continuous
operations (Net losses are indicated by 1,174,569,595.34 1,006,482,334.65
“-”)
(II) Net profit from discontinued
operations (Net losses are indicated by
“-”)
V. Other comprehensive income, net of
847,526.06
income tax
(I) Other comprehensive income
that cannot be reclassified into 847,526.06
gains/losses
1. Changes in
remeasurement on the defined benefit
plan
2. Other comprehensive
income that cannot be reclassified into
153
The Annul Report 2019 of Huadong Medicine Co., Ltd.
gains/losses under equity method
3. Changes in fair value of
847,526.06
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 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 1,175,417,121.40 1,006,482,334.65
VII. Earnings per share (EPS):
(I) Basic EPS
(II) Diluted EPS
5. Consolidated cash flow statement
Unit: RMB yuan
154
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Item 2019 2018
I. Cash flows from operating activities：
Cash received from sale of goods
37,765,481,069.45 33,882,351,330.58
or rendering of services
Net increase in customer deposits
and due from banks
Net increase in borrowing from the
central bank
Net increase in borrowing from
other financial institutions
Cash from the premium of the
original insurance policy
Net cash from reinsurance
Net increase in deposits and
investment of the insured
Cash from interests, handling fees
and commissions
Net increase in borrowing from
other banks and other financial
institutions
Net increase in funds for
repurchase
Net cash received for buying and
selling securities as proxy
Receipts of tax refunds 36,489,238.81 8,721,685.64
Other cash receipts to operating
999,312,116.21 636,521,641.34
activities
Sub-total of Cash inflows from
38,801,282,424.47 34,527,594,657.56
operating activities
Cash payments for goods
26,049,853,576.88 24,017,233,502.68
purchased and services received
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
155
The Annul Report 2019 of Huadong Medicine Co., Ltd.
banks and other financial institutions
Cash payments for interests,
handling fees and commissions
Cash payments for policy
dividends
Cash payments to and on behalf of
2,290,705,739.73 1,680,688,095.87
employees
Payments of various types of taxes 2,151,909,142.04 1,975,348,921.21
Other cash payments in relation to
6,307,115,795.15 4,814,828,054.54
operating activities
Sub-total of cash outflows for operating
36,799,584,253.80 32,488,098,574.30
activities
Net cash flow from operating activities 2,001,698,170.67 2,039,496,083.26
II. Cash flows from investing activities
Cash receipts from recovery of
investments
Cash receipts from investment
6,375,600.00 21,379,953.63
income
Net cash from disposal of fixed
assets, intangible assets and other 57,931,687.55 4,990,389.66
long-term assets
Net cash from disposal of
subsidiaries and other business units
Other cash receipts in relation to
10,330,000.00 4,636,516,649.00
investing activities
Sub-total of cash inflows from investing
74,637,287.55 4,662,886,992.29
activities
Cash payments for purchase and
construction of fixed assets, intangible 1,353,444,334.16 876,462,903.54
assets and other long-term assets
Cash payments for investment 256,944,900.00
Net increase in pledge loans
Net cash paid for acquisition of
11,199,793.01 1,457,165,348.18
subsidiaries and other business units
Other cash payments in relation to
35,656,157.15 3,890,000,000.00
investing activities
Sub-total of cash outflows for investing
1,657,245,184.32 6,223,628,251.72
activities
156
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Net cash flow from investing activities -1,582,607,896.77 -1,560,741,259.43
III. Cash flows from financing
activities:
Cash receipts from capital
9,800,000.00 24,100,000.00
contributions
Including: Cash receipts from
capital contributions from minority 9,800,000.00 24,100,000.00
owners of subsidiaries
Cash from borrowing 1,908,287,327.51 1,750,759,129.38
Other cash receipts in relation to
4,450,000.00 360,000,000.00
financing activities
Sub-total of cash inflows from
1,922,537,327.51 2,134,859,129.38
financing activities
Cash repayment of borrowings 1,880,308,079.71 1,679,729,129.38
Cash payments for distribution of
dividends or profits or settlement of 621,755,092.32 861,183,572.54
interet expenses
Including: Dividends and profits
paid by subsidiaries to minority 51,128,000.00 92,009,391.18
shareholders
Other cash payments in relation to
29,071,651.48 24,385,215.46
financing activities
Sub-total of cash outflows from
2,531,134,823.51 2,565,297,917.38
financing activities
Net cash flows from financing activities -608,597,496.00 -430,438,788.00
IV. Effect of foreign exchange rate
22,569,262.54 -22,426,154.59
changes on Cash and Cash Equivalents
V. Net increase in cash and cash
-166,937,959.56 25,889,881.24
equivalents
Add: Opening balance of cash and
2,398,709,506.06 2,372,819,624.82
cash equivalents
VI. Closing balance of cash and cash
2,231,771,546.50 2,398,709,506.06
equivalents
6. Cash flow statement of the parent company
Unit: RMB yuan
Item 2019 2018
I. Cash flows from operating activities：
157
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Cash receipts from the sale of
19,888,765,400.12 18,857,466,027.75
goods and the rendering of services
Receipts of tax refund 29,098.10
Other cash receipts in relation to
72,672,145.56 46,134,037.65
operating activities
Sub-total of cash inflows from
19,961,437,545.68 18,903,629,163.50
operating activities
Cash payments for goods acquired
19,392,421,016.77 17,767,939,467.84
and services received
Cash payments to and on behalf of
215,213,920.34 191,359,631.29
employees
Payments of various types of
304,160,143.98 185,877,507.84
taxes
Other cash payments in relation to
293,133,338.39 377,260,475.00
operating activities
Sub-total of cash outflows for operating
20,204,928,419.48 18,522,437,081.97
activities
Net cash flow from operating activities -243,490,873.80 381,192,081.53
II. Cash flows from investing activities
Cash receipts from recovery of
investments
Cash receipts from investment
854,192,000.00 809,693,024.16
income
Net cash receipts from disposal of
fixed assets, intangible assets and other 56,648,621.75 138,500.94
long-term assets
Net cash from disposal of
subsidiaries and other business units
Other cash receipts in relation to
719,862,834.59 4,373,146,305.84
investing activities
Sub-total of cash inflows from investing
1,630,703,456.34 5,182,977,830.94
activities
Cash payments for purchase and
construction of fixed assets, intangible 76,886,709.15 54,271,219.89
assets and other long-term assets
Cash payments for investment 292,607,400.00 1,555,288,914.76
Net cash paid for acquisition of
45,000,000.00
subsidiaries and other business units
158
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Other cash payments in relation to
1,025,893,964.54 3,816,741,206.87
investing activities
Sub-total of cash outflows for investing
1,440,388,073.69 5,426,301,341.52
activities
Net cash flows from investing activities 190,315,382.65 -243,323,510.58
III. Cash flows from financing
activities:
Cash receipts from absorbing
investments
Cash receipts from borrowing 804,466,686.17 891,309,129.38
Other cash receipts in relation to
352,692,483.11 1,172,333,703.84
financing activities
Sub-total of cash inflows from
1,157,159,169.28 2,063,642,833.22
financing activities
Cash repayments of borrowings 769,466,685.37 871,309,129.38
Cash payments for distribution of
dividends or profits or settlement of 536,573,346.34 748,075,092.93
interest expenses
Other cash payments in relation to
288,574,038.04 788,573,175.53
financing activities
Sub-total of cash outflows
1,594,614,069.75 2,407,957,397.84
fromfinancing activities
Net cash flow from financing activities -437,454,900.47 -344,314,564.62
IV. Effect of foreign exchange rate
changes on Cahs and Cash Equivalents
V. Net increase in cash and cash
-490,630,391.62 -206,445,993.67
equivalents
Add: Opening balance of cash and
1,384,560,116.18 1,591,006,109.85
cash equivalents
VI. Closing balance of cash and cash
893,929,724.56 1,384,560,116.18
equivalents
7. Consolidated statement of changes in owners’ Equity
Amount in the current period
Unit: RMB yuan
2019
Item
Ownership interest attributable to the parent company Minori Total
159
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Other equity Other ty owners
instruments Less: compr interes hip
Share Specia Surplu Genera Undist t interes
Prefe Perpe Capital Treasu ehensi
capita l s l risk ributed Others Total t
rred tual Other reserve ry ve
l reserve reserve reserve profit
share bond s shares incom
s s e
I. Balance at the 1,458
2,455, -22,42 592,90 5,453, 9,938, 487,37 10,425
end of the ,174,
526,99 6,154. 3,007. 970,52 148,99 9,570. ,528,5
period of the 624.0
3.18 59 98 5.96 6.53 98 67.51
prior year 0
Add:
changes in
accounting
policies
Error
correction in the
prior periods
Merger of
enterprises
under the same
control
Others
II. Balance at 1,458
2,455, -22,42 592,90 5,453, 9,938, 487,37 10,425
the beginning of ,174,
526,99 6,154. 3,007. 970,52 148,99 9,570. ,528,5
the period of the 624.0
3.18 59 98 5.96 6.53 98 67.51
current year 0
III. Amount of
change in the
291,6 -297,4 45,218 117,45 2,214, 2,371, 69,767 2,441,
current period
34,92 46,332 ,643.3 6,959. 464,11 328,31 ,360.8 095,67
(Decreases are
4.00 .11 9 53 6.66 1.47 9 2.36
indicated by
“-”)
(I) Total 45,218 2,813, 2,858, 112,28 2,970,
comprehensive ,643.3 118,70 337,34 3,952. 621,29
income 9 2.11 5.50 78 8.28
(II) Capital
contributed by 9,800, 9,800,
owners and 000.00 000.00
capital
160
The Annul Report 2019 of Huadong Medicine Co., Ltd.
decreases
1. Common
9,800, 9,800,
shares invested
000.00 000.00
by owners
2. Capital
invested by
holders of other
equity
instruments
3. Amount of
share-based
payment
included in
ownership
interest
4. Others
117,45 -598,6 -481,1 -51,12 -532,3
(III) Profit
6,959. 54,585 97,625 8,000. 25,625
distribution
53 .45 .92 00 .92
1. Withdrawal 117,45 -117,4
of surplus 6,959. 56,959
reserve 53 .53
2. Withdrawal
of general risk
reserve
3. Distribution -481,1 -481,1 -51,12 -532,3
to owners (or 97,625 97,625 8,000. 25,625
shareholders) .92 .92 00 .92
4. Others
(IV) Internal
291,6 -291,6
conversion of
34,92 34,924
ownership
4.00 .00
interest
1. Capital (or
share capital) 291,6 -291,6
increase from 34,92 34,924
capital reserve 4.00 .00
conversion
2. Capital (or
share capital)
increase from
161
The Annul Report 2019 of Huadong Medicine Co., Ltd.
surplus reserve
conversion
3. Recovery of
losses by
surplus reserve
4. Retained
earnings from
transfer of
changes in the
defined benefit
plan
5. Retained
earnings from
transfer of other
comprehensive
income
6. Others
(V) Special
reserve
1. Withdrawal
in the current
period
2. Use in the
current period
-5,811, -5,811, -1,188, -7,000,
(VI) Others
408.11 408.11 591.89 000.00
1,749
IV. Balance at 2,158, 22,792 710,35 7,668, 12,309 557,14 12,866
,809,
the end of the 080,66 ,488.8 9,967. 434,64 ,477,3 6,931. ,624,2
548.0
current period 1.07 0 51 2.62 08.00 87 39.87
0
Amount in the prior period
Unit: RMB yuan
2018
Ownership interest attributable to the parent company
Other equity Other
Total
instruments Less: compr Minorit
Items owners
Share Specia Surplu Genera Undist
Capital Treasu ehensi y
Prefe Perp hip
capita l s l risk ributed Others Total
rred etual Other reserve ry ve interest
l reserve reserve reserve profit interest
share bond s shares incom
s s e
162
The Annul Report 2019 of Huadong Medicine Co., Ltd.
I. Balance at
972,1 2,941, 492,25 3,987, 8,393, 8,808,8
the end of the 415,593
16,41 585,20 4,774. 313,40 269,79 62,920.
period of the ,124.26
6.00 1.18 51 4.87 6.56 82
prior year
Add:
Changes in
accounting
policies
Error
correction in
the prior
periods
Merger of
enterprises
under the same
control
Others
II. Balance at
972,1 2,941, 492,25 3,987, 8,393, 8,808,8
the beginning 415,593
16,41 585,20 4,774. 313,40 269,79 62,920.
of the period of ,124.26
6.00 1.18 51 4.87 6.56 82
the current year
III. Amount of
change in the
486,0 -486,0 -22,42 100,64 1,466, 1,544, 1,616,6
current period 71,786,
58,20 58,208 6,154. 8,233. 657,12 879,19 65,646.
(Decreases are 446.72
8.00 .00 59 47 1.09 9.97 69
indicated by
“-”)
(I) Total -22,42 2,267, 2,244, 2,372,7
127,940
comprehensive 6,154. 229,17 803,01 43,457.
,437.90
income 59 4.08 9.49 39
(II) Capital
contributed by
24,100, 24,100,
owners and
000.00 000.00
capital
decreases
1. Common
24,100, 24,100,
shares invested
000.00 000.00
by owners
2. Capital
163
The Annul Report 2019 of Huadong Medicine Co., Ltd.
invested by
holders of other
equity
instruments
3. Amount of
share-based
payment
included in
ownership
interest
4. Others
100,64 -800,5 -699,9 -780,17
(III) Profit -80,253
8,233. 72,052 23,819 7,810.7
distribution ,991.18
47 .99 .52 0
1. Withdrawal 100,64 -100,6
of surplus 8,233. 48,233
reserve 47 .47
2. Withdrawal
of general risk
reserve
3. Distribution -699,9 -699,9 -780,17
-80,253
to owners (or 23,819 23,819 7,810.7
,991.18
shareholders) .52 .52 0
4. Others
(IV) Internal
486,0 -486,0
conversion of
58,20 58,208
ownership
8.00 .00
interest
1. Capital (or
share capital) 486,0 -486,0
increase from 58,20 58,208
capital reserve 8.00 .00
conversion
2. Capital (or
share capital)
increase from
surplus reserve
conversion
3. Recovery of
losses by
surplus reserve
164
The Annul Report 2019 of Huadong Medicine Co., Ltd.
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
1,458
IV. Balance at 2,455, -22,42 592,90 5,453, 9,938, 10,425,
,174, 487,379
the end of the 526,99 6,154. 3,007. 970,52 148,99 528,567
624.0 ,570.98
current period 3.18 59 98 5.96 6.53 .51
0
8. Statement of changes in ownership interest of the parent company
Amount in the current period
Unit: RMB yuan
2019
Other equity
Other
instruments Less: Undistr Total
Item Share Capital compreh Special Surplus
Preferr Perpet Treasury ibuted Others ownership
capital reserve ensive reserve reserve
ed ual Others shares profit interest
income
shares bonds
I. Balance at the 1,458,1 2,855,6
2,460,08 670,758, 7,444,699,
end of the period 74,624. 79,964.
6,452.01 767.42 807.68
of the prior year 00 25
Add:
165
The Annul Report 2019 of Huadong Medicine Co., Ltd.
Changes in
accounting
policies
Error
correction in the
prior periods
Others
II. Balance at the
1,458,1 2,855,6
beginning of the 2,460,08 670,758, 7,444,699,
74,624. 79,964.
period of the 6,452.01 767.42 807.68
00 25
current year
III. Amount of
change in the 291,63 575,91
-291,634 847,526. 117,456, 694,219,4
current period 4,924.0 5,009.8
,924.00 06 959.53 95.48
(Decreases are 0 9
indicated by “-”)
(I) Total 1,174,5
847,526. 1,175,417,
comprehensive 69,595.
06 121.40
income 34
(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
-598,65
(III) Profit 117,456, -481,197,6
4,585.4
distribution 959.53 25.92
5
166
The Annul Report 2019 of Huadong Medicine Co., Ltd.
-117,45
1. Withdrawal of 117,456,
6,959.5
surplus reserve 959.53
3
2. Distribution to -481,19
-481,197,6
owners (or 7,625.9
25.92
shareholders) 2
3. Others
(IV) Internal
291,63
conversion of -291,634
4,924.0
ownership ,924.00
0
interest
1. Capital (or
share capital) 291,63
-291,634
increase from 4,924.0
,924.00
capital reserve 0
conversion
2. Capital (or
share capital)
increase from
surplus reserve
conversion
3. Recovery of
losses by surplus
reserve
4. Retained
earnings from
transfer of
changes in the
defined benefit
plan
5. Retained
earnings from
transfer of other
comprehensive
income
6. Others
(V) Special
reserve
1. Withdrawal in
the current
period
167
The Annul Report 2019 of Huadong Medicine Co., Ltd.
2. Use in the
current period
(VI) Others
IV. Balance at 1,749,8 3,431,5
2,168,45 847,526. 788,215, 8,138,919,
the end of the 09,548. 94,974.
1,528.01 06 726.95 303.16
current period 00 14
Amount in the prior period
Unit: RMB yuan
2018
Other equity
Other
instruments Less: Undistrib Total
Item Share Capital compre Special Surplus
Preferr Perpet Treasur uted Others ownership
capital reserve hensive reserve reserve
ed ual Others y shares profit interest
income
shares bonds
I. Balance at the
972,11 2,946,1
end of the 570,110 2,649,769 7,138,141,2
6,416. 44,660.
period of the ,533.95 ,682.59 92.55
00 01
prior year
Add:
Changes in
accounting
policies
Error
correction in
the prior
periods
Others
II. Balance at
972,11 2,946,1
the beginning 570,110 2,649,769 7,138,141,2
6,416. 44,660.
of the period of ,533.95 ,682.59 92.55
00 01
the current year
III. Amount of
change in the
486,05 -486,05
current period 100,648 205,910,2 306,558,51
8,208. 8,208.0
(Decreases are ,233.47 81.66 5.13
00 0
indicated by
“-”)
(I) Total 1,006,482 1,006,482,3
comprehensive ,334.65 34.65
168
The Annul Report 2019 of Huadong Medicine Co., Ltd.
income
(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 100,648 -800,572, -699,923,81
distribution ,233.47 052.99 9.52
1. Withdrawal
100,648 -100,648,
of surplus
,233.47 233.47
reserve
2. Distribution
-699,923, -699,923,81
to owners (or
819.52 9.52
shareholders)
3. Others
(IV) Internal
486,05 -486,05
conversion of
8,208. 8,208.0
ownership
00 0
interest
1. Capital (or
share capital) 486,05 -486,05
increase from 8,208. 8,208.0
capital reserve 00 0
conversion
2. Capital (or
share capital)
169
The Annul Report 2019 of Huadong Medicine Co., Ltd.
increase from
surplus reserve
conversion
3. Recovery of
losses by
surplus reserve
4. Retained
earnings from
transfer of
changes in the
defined benefit
plan
5. Retained
earnings from
transfer of other
comprehensive
income
6. Others
(V) Special
reserve
1. Withdrawal
in the current
period
2. Use in the
current period
(VI) Others
IV. Balance at 1,458, 2,460,0
670,758 2,855,679 7,444,699,8
the end of the 174,62 86,452.
,767.42 ,964.25 07.68
current period 4.00 01
Huadong Medicine Co., Ltd.
Chairman of the Board: Lyu Liang
April 28, 2020
170
