The 2020 Annul Report of Huadong Medicine Co., Ltd.
Huadong Medicine Co., Ltd.
2020 Annual Report
April 2021
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
To the shareholders
In 2020, Huadong Medicine encountered unprecedented challenges, including
COVID-19 pandemic impact on the entire manufacturing operation, the unsuccessful GPO
participation of Acarbose products, as well as the impact of a series of subsequent policies such
as the GPO process and National Drug Reimbursement List (NDRL) price negotiations.
Nevertheless, we acknowledged that Huadong overcame these challenges and successfully
met its full year operational & business targets. Although the Company’s total revenue was
slightly delclined year on year while profit growth had been squeezed, the Pharmaceutical
Industry business sector maintained its growth, while bucking market trends. Acarbose tablets
maintained its market share and continued to increase its share of the ex-hospital and retail
markets. This achievement was really a hard-won!
Huadong Medicine’s R&D strategy has always adhered to the corporate philosophy of
being “Devoted to science, Dedicated to patients”, with “clinical value, healthcare economical
value and commercial value” as key focuses. It has established a pipeline of innovative
products in the field of oncology, immunology and endocrinology. Through reconstruction of
innovative drug R&D functions, the Company’s R&D capability has been significantly
strengthened. The IND application in China for an in-licensed ADC product was completed
within 100 days and has already obtained CTA approval from CDE. The excellent execution
capability of the R&D team has underpinned our confidence in the long term transformation
and growth of the Company’s innovative drug business. In the TA of diabetes, the Company
continues to monitor cutting-edge technologies and innovative product pipeline globally, and
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
will continue enriching its product portfolio. The Company has already participated and
invested in a number of domestic and international biotech companies with leading
technologies. Through establishing differentiated peptide innovation technology platform,
autoimmune disease antibody technology platform, microbial fermentation cytotoxin
technology platform and innovative linker technology platform, as well as mutually beneficial
collaborations, Huadong Medicine is building and improving its pharmaceutical research and
development ecosystem.
Huadong commercial distribution business has been adhering to the philosophy of “caring
the world with sincerity, integrity, persistence and being pragmatic”, transforming from a basic
distributor to an integrated service provider with greater industry expertise. The Company’s
cold chain business is positioned as the whole life-cycle precision management and control for
biological specialty drugs. It has continuously strengthened the competitive advantage of the
cold chain capability and driven the high-quality development of digital intelligent supply
chain. The Company will vigorously expand e-commerce business, establish a new “online
offline interaction” growth model, and actively explore the new healthcare services business of
“internet + chronic disease management”.
Huadong Medicine has begun expanding in the field of aesthetics when China’s aesthetics
industry is in the ascendant. We have witnessed aesthetics products transitioning from
discretionary consumer products to necessities and the industry is about to experience a long
term high growth phase. This strengthened our commitment to expand in the field of aesthetics.
There are still significant upside in aesthetics over the long term. Going forward, we will
continue following the strategy of “global operational positioning, dual-cycle business
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development”, make China an important market for aesthetics and bring "first-in-class",
high-end international products to China over time. We will leverage the Company’s
established aesthetics distribution capabilities in China and the fast growth of the aesthetics
industry, to support rapid availability of high quality international product portfolio in China
and provide beauty seekers personalised and differentiated aesthetics product portfolios. Thus,
a new model of domestic and international dual-cycle joint growth and mutual promotion is
formed.
2021 will be another significant year for Huadong Medicine’s strategic transformation. As
GPO policies and price reduction may continue to impact the Company’s overall operation,
Huadong Medicine will also face the strongest pressure on its business growth in history.
Nevertheless, we constantly remind ourselves: don’t waste a good crisis. The current situation
of China’s pharmaceutical market represents a rare opportunity for Huadong Medicine to
transform into an innovative company and expand globally.
Expansion in innovative pharmaceutical business remains firmly as the main theme of
Huadong Medicine. Aesthetics, as a core strategic focus of the Company’s healthcare business,
marks the beginning of the Company’s globalization strategy. We are committed to continue
strategically positioning across the global pharmaceutical and healthcare value chain, and
actively integrate into global pharmaceutical innovation collaborations by strengthening our
own innovative drug R&D capabilities and key advantages.
This is an era of survival of the fittest and in the end all sands will be removed and only
the gold left shinning. From now on to the foreseeable future, the only certainty is that we will
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
continue experiencing various uncertainties caused by infrastructural changes in the industry.
Huadong Medicine will remain committed to its course, continue to outperform in the current
environment and strategically plan for the future. Thanks to all the investors for your
recognition and long term support, which are the source of our commitment and confidence in
pursuing the transformation! Huadong Medicine will strive to firmly meet shareholders
expectations and continue delivering excellent results.
Lv Liang
On Behalf Of Huadong Medicine
Grain Rain 2021
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The 2020 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.
Lv 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 2.3 yuan (tax included) is to be distributed to all shareholders for
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The 2020 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 2020 Annul Report of Huadong Medicine Co., Ltd.
Contents
To the shareholders ............................................................................................................................................................ 2
Section I. Important Declaration, Contents and Definitions ......................................................................... 6
Section II. Company Profile and Key Financial Indicators ......................................................................... 11
Section III. Overview of the Company’s Business......................................................................................... 16
Section IV. Discussion and Analysis of Operations .......................................................................................... 23
Section V. Important Matters ...................................................................................................................................... 75
Section VI. Share Change and Shareholders ..................................................................................................... 117
Section VIII. Convertible Corporate Bonds ...................................................................................................... 125
Section VIII. Convertible Corporate Bonds ...................................................................................................... 126
Section IX. Directors, Supervisors, Senior Managers and Employees ................................................. 127
Section X. Corporate Governance .......................................................................................................................... 137
Section XI. Information about Corporate Bonds ............................................................................................ 143
Section XII. Financial Report ................................................................................................................................... 144
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Definitions
Term refers to Definition
CSRC refers to China Securities Regulatory Commission
SSE refers to Shenzhen Stock Exchange
Huadong Medicine/the Company/our Company refers to Huadong Medicine Co., Ltd.
CGE refers to China Grand Enterprises, Inc.
Huadong Medicine Group refers to Hangzhou Huadong Medicine Group Co., Ltd.
Zhongmei Huadong refers to Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.
Jiangdong Company refers to Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd.
Jiuyang Bio refers to Jiangsu Jiuyang Biopharm Co., Ltd.
Xi’an Bohua refers to Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd.
Jiuyuan Gene refers to Hangzhou Jiuyuan Gene Engineering Co., Ltd.
Huadong Ningbo Company refers to Huadong Ningbo Medicine Co., Ltd.
Chongqing Peg-Bio refers to Chongqing Peg-Bio Biopharm Co., Ltd.
Qyuns Therapeutics refers to Qyuns Therapeutics Co., Ltd.
XtalPi refers to XtalPi Inc.
Sanyou Bio refers to Sanyou Biopharmaceuticals Co., Ltd.
Sinclair refers to Sinclair Pharma Limited
vTv 公司 refers to vTv Therapeutics LLC
R2 refers to R2 Technologies,Inc.
MediBeacon refers to MediBeacon Inc.
ImmunoGen refers to ImmunoGen, Inc.
Provention Bio refers to Provention Bio, Inc.
RAPT refers to RAPT Therapeutics,Inc.
Kylane refers to Kylane Laboratoires SA
High Tech refers to High Technology Products, S.L.U.
LG refers to LG Chem Ltd
Jetema refers to Jetema. Co,.ltd
Exscientia refers to Exscientia Ltd.
GMP refers to Good Manufacturing Practice
CGMP refers to Current Good Manufacture Practices
GSP refers to Good Supply Practice
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
BE refers to Bioequivalence
CDE refers to Center for Drug Evaluation (of National Medical Products
Administration)
MAH refers to Marketing Authorization Holder
FDA refers to (U.S.) Food and Drug Administration
NMPA refers to National Medical Products Administration
NDA refers to New Drug Application
ANDA refers to Abbreviated New Drug Application
ICH refers to International Council for Harmonisation (of Technical
Requirements for Pharmaceuticals for Human Use)
IND refers to Investigational New Drug
PK/PD refers to pharmacokinetics/pharmacodynamics
CMC refers to Chemistry, Manufacturing and Control
CMO refers to Contract Manufacturing Organization
CDMO refers to Contract Development and Manufacturing Organization
PMA refers to Premarket Application
QA refers to Quality Assurance (department)
Catalogue of Drugs for Basic National Medical
Catalogue of Drugs for Insurance（2020） refers to
Insurance/Employment Injury Insurance/Birth Insurance（2020）
ADC refers to Antibody-Drug Conjugate
EHS refers to Environment、Health、Safety
Drugs that can only be purchased and used according to
Prescription Drugs refers to
prescriptions issued by physicians
OTC refers to Over The Counter
MRCT refers to International Multi-center Clinical Trial
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The 2020 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 Lv 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 /
Contact address 866 Moganshan Road, Hangzhou /
Tel. 0571-89903300 /
Fax 0571-89903300 /
III. Channels of disclosure and location of preparation
China Securities Journal, Securities Times, and Shanghai
Media selected by the Company for information disclosure
Securities News
Website designated by CSRC for publication of the annual report http://www.cninfo.com.cn
Location of preparation of the Company’s annual report Office of the Company’s Board of Directors
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
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
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
VI. Key accounting data and financial indicators
Whether the Company needs to perform a retroactive adjustment or restatement of previous accounting data
□Yes √No
Percentage
increase/decrease
2020 2019 2018
from last year to this
year
Operating revenue (yuan) 33,683,058,759.75 35,445,698,216.15 -4.97% 30,663,374,326.27
Net profit attributable to
shareholders of listed companies 2,819,861,203.63 2,813,118,702.11 0.24% 2,267,229,174.08
(yuan)
Net profit attributable to
shareholders of listed companies
2,429,761,433.56 2,574,437,417.52 -5.62% 2,236,323,500.44
after deducting non-recurring
gains/losses (yuan)
Net cash flow from operating
3,411,447,747.56 2,001,698,170.67 70.43% 2,039,496,083.26
activities (yuan)
Basic earnings per share
1.6115 1.6077 0.24% 1.29
(yuan/share)
Diluted earnings per share
1.6115 1.6077 0.24% 1.29
(yuan/share)
Weighted average return on
20.95% 25.29% -4.34% 24.87%
equity (ROE)
Percentage
End of 2020 End of 2019 increase/decrease End of 2018
from last year to this
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
year
Total assets (yuan) 24,201,348,154.75 21,463,974,146.63 12.75% 19,217,357,282.33
Net assets attributable to
shareholders of listed companies 14,619,821,308.60 12,309,477,308.00 18.77% 9,938,148,996.53
(yuan)
The Company’s net profit before or after deducting non-recurring gains and losses, whichever is lower, in the last three fiscal years
are all negative, and the audit report of last year shows doubt about the Company’s ability to continue as a going concern.
□Yes √No
The company's net profit before and after deducting non-recurring gains/losses in the last three fiscal years is negative.
□Yes √No
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
1.6115
latest capital stock (yuan/share)
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.
3、Reasons for differences in accounting data under overseas and Chinese accounting standards
□ Applicable √ N/A
VIII. Key financial indicators by quarter
Unit: RMB yuan
Q1 Q2 Q3 Q4
Operating revenue 8,598,069,911.29 8,062,864,246.35 8,839,942,450.31 8,182,182,151.80
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Net profit attributable to
1,147,278,457.64 583,906,263.61 660,281,883.53 428,394,598.85
shareholders of listed companies
Net profit attributable to
shareholders of listed companies
856,930,262.10 549,793,711.00 624,184,921.23 398,852,539.23
after deducting non-recurring
gains/losses
Net cash flow from operating
218,779,623.89 1,036,763,043.40 646,271,689.37 1,509,633,390.90
activities
Whether the above financial indicators or their totals are significantly different from relevant financial indicators in prev ious
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 2020 2019 2018 Note
Mainly due to the
transfer of
distribution rights in
the Western
European market of
Gains/losses on disposal of non-current related products of
assets (including the written-off part of the 319,656,661.95 109,574,836.97 -697,591.38 Sinclair, a
accrued assets impairment reserve) wholly-owned
subsidiary of the
Company in the
UK, during the
current reporting
period.
Tax refund and reduction with ultra vires
examination and approval or without 8,424,351.97 4,407,536.93 1,630,170.53
offical approval documents
Mainly due to the
Government grants included in current government
gains/losses (excluding those closely subsidies
related to operating activities and 190,906,656.31 112,527,883.18 79,368,271.28 recognized by
measured according to unified national subsidiaries during
standards) the current reporting
period.
Gains/losses on assets entrusted to others 16,058,460.95
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
for investment or management
Receivables subject to separate
impairment test and reversal of reserve for 3,845,312.41 1,896,979.79
impairment of contract assets
Other non-operating revenue or
expenditure expect above-mentioned -20,500,748.15 77,976,120.18 -34,052,605.70
items
Other profit and loss items satisfying the -4,899,999.00
definition of non-recurring gain/loss
Minus: Amount affected by income tax 92,420,221.30 47,542,186.99 14,789,855.01
Amount affected by rights and
interests of minority stakeholders (after 14,912,244.12 20,159,885.47 16,611,177.03
tax)
Total 390,099,770.07 238,681,284.59 30,905,673.64 --
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 2020 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 has developed into a large comprehensive listed
pharmaceutical company integrating R&D, production and sales of medicine. The Company has
more than 10,000 employees, and its business covers the whole pharmaceutical industrial chain.
With the pharmaceutical industry as its core, the Company expands its medicine business and
aesthetic medicine industry.
The pharmaceutical industry of the Company focuses on R&D, production and sales of
specialist medication, chronic disease medication and medication for special purposes. The
Company has formed core product pipelines in such fields as chronic kidney diseases,
transplantation immunity, internal secretion and gastrointestinal 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. Its pharmaceutical sales channels have covered
more than ten thousand large and medium-sized hospitals in China. And its pharmaceutical R&D
involves fungal and microbial fermentation, small molecule, biological macromolecule and peptide
drugs, covering drug discovery, clinical and preclinical research, chemical manufacturing and
control (CMC) and registration. The Company continues to carry out international product
registration, international certification, consistency evaluation, etc., forming an international
pharmaceutical industry system with a leading position in China.
By means of pharmaceutical business, the Company becomes one of the leading and powerful
comprehensive large-scale pharmaceutical business service providers in Zhejiang Province, ranking
the top ten pharmaceutical business enterprises in China for many years consecutively. It has set up
11 regional subsidiaries in Zhejiang Province, with customers covering 11 cities and 90 counties
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
(county-level cities) in the province. It has four business segments, including Traditional Chinese
Medicine (TCM) and Western Medicine, medical devices, ginseng, antler and other herbs, and
health industry, covering the whole field of pharmaceutical circulation, mainly including
pharmaceutical wholesale (public health care, private health care, retail pharmacies and commercial
distribution), pharmaceutical retail, third-party pharmaceutical logistics characterized by cold chain,
pharmaceutical e-commerce, pharmaceutical service (hospital value-added service), market
development and featured mega health industry, providing customers with integrated solutio ns.
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 of the Company that is headquartered in the United Kingdom and serves
as the holding company of a Spanish firm named High Tech, has production bases in France, the
Netherlands, the United States, Switzerland and Bulgaria, and promotes and sells long-effect
microsphere fillers for injection, hyaluronic acid, as well as face thread lift and coolsculpting
products in the global market. Sinclair is the global operation platform of the Company for aesthetic
medicine business. Huadong Ningbo Medicine Co., Ltd., a controlled subsidiary of the Company, is
a comprehensive aesthetic medicine health platform focusing on product R&D and professional
promotion, and also acts as the general agent for the promotion and sales of Korean YVOIRE
hyaluronic acid products and skin care products series of SanteMuse 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 107,553 million yuan, an increase of 131.66% from the
Equity assets beginning of the period, which is mainly due to the increase of long-term equity
investments and other equity instrument investment in the current period.
Fixed assets None
Intangible assets None
Constructions in progress None
Other non-current assets The ending balance is 712. 07 million yuan, an increase of 286.7% from the beginning
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
of the period, mainly due to the increased prepayment for technology transfer during
the current reporting period
The ending balance is 1,416.93 million yuan, an increase of 116.14% from the
Short-term borrowing beginning of the period, mainly due to the increased repayment upon maturity of bank
financing during the current reporting period
The ending balance is 88.74 million yuan, a increase of 124.06% from the beginning of
deferred tax liability the period, mainly due to the increased repayment upon maturity of bank financing
during the current reporting period
2、Major overseas assets
Applicable □ N/A
Proportion of Whether
Specific Assets size overseas there are any
Reason for Operating Control measures to Profit or
content of (ten thousand Location assets in the significant
formation mode ensure assets safety loss
assets yuan) Company’s impairment
net assets risks
Control of the Board
of Directors and
examination &
approval of major
Sinclair
Acquisition Independent decisions; daily
Pharma 97,594.13 UK Profit 6.68% None
of equity accounting supervision of
Limited
financial matters;
entrusting external
intermediaries to
conduct audits
Note: 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 Compa ny has
invested 30 million US dollars, with a shareholding ratio of 34%. 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 innovative drug R&D System and continuous improve ment of innovation
capability
After years of development, the Company has established its independent R&D system, a
global new drug R&D center as well as a global R&D strategic collaboration ecosystem centered on
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd., and cooperated with world-renowned
colleges at home and abroad, research institutes, innovative R&D companies, professional
technology platforms and so on in new drug R&D projects. The Company continuously has
increased R&D investment, made an overall planning for the global innovative products in the three
core areas of anti-tumor, internal secretion and autoimmunity, and carried out cooperation with the
world’s leading AI drug discovery company Exscientia and XtalPi in anti-tumor drug R&D.
Through independent R&D, external cooperation and product license-in, the Company has
continuously enriched the product pipelines in core areas, formed a good development trend of
continuous clinical promotion and marketing of innovative products, and provided new momentum
for medium- and long-term growth.
2. Comprehensive capability in international business development
The Company has actively promotes global expansion. Through the acquisition of the equity of
UK Sinclair and Spanish High Teach engaged in aesthetic medicine, the Company has realized the
global layout of aesthetic medicine sales network. Through strategic and equity collaboration with
R2 (US), Medibeacon (US), ImmunoGen (US), Provention Bio (US), Kylane (Switzerland), LG
(South Korea), Jetema (South Korea) and so on, the Company supplemented and enriched the
commercial development rights of innovative drugs and high-end aesthetic medicine products at
home and abroad. The Company also accelerated the international registration of products. Its
online chemical raw medicines have been certified by the Food and Drug Administration (FDA) or
EU and other authoritative authentication in markets; its Pantoprazole Sodium Lyophilized Powder
for Injection has been temporarily approved by the FDA; and its Acarbose Tablets gained market
access to the United States and the European Union Austria. The Company is the first Chinese
medicine enterprise to achieve these results. In addition, the Company actively develops
international logistics and purchasing suppliers to realize the internationalization of purchasing
ability. It has promoted the internationalization level of CMO/CDMO business and integrate it into
the global innovative drug R&D industry chain.
3. Abundant product pipelines for specialized 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 specialized
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
departments, chronic diseases and special drugs, 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, and has maintained a leading market share of similar products in China. The
Company has formed a comprehensive pipeline of innovative drugs and differentiated generic drugs
in the diabetes clinical mainstream therapeutic target. In the field of organ transplantation, it also
realized full coverage of clinical first-line immunosuppressive drugs. The Company has established
a global first-in-class distribution of new drugs in the three core areas of anti-tumor, internal
secretion and autoimmunity, forming a differentiated advantage. At present, 24 core marketed
products of the Company have been included in the 2020 Catalog of Medicines Covered by the
National Medical Insurance System.
4. Leading professional pharmaceutical care team and extensive market network in China
The pharmaceutical industry of the Company has a professional pharmaceutical care team of
6,000 people, takes the promotion of clinical value and academic results as the core, and promotes a
multi-channel marketing model that combines general hospitals, primary medical institutions, retail
and third terminals, and Internet online. It has gradually formed effective coverage through multiple
channels and has a good competitive advantage.
The business of the Company has been deeply rooted in the market of Zhejiang Province for
many years, with complete commercial formats and rich distribution varieties, and has
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
comprehensive competitive advantages in policy affairs, market access and network coverage. It has
fully covered the customers from public medical institutions, key private medical institutions and
retail pharmacies in Zhejiang Province, and maintained the leading order satisfaction rate. The
Company has established business cooperation with 90% of the mainstream pharmaceutical
enterprises at home and abroad. The Company has a complete cold chain logistics distribution
service system and professional capabilities, and its cold chain logistics distribution business is in
the lead in China. The Company has obtained the first express business license of pharmaceutical
cold chain enterprise in Zhejiang Province, and got the exclusive qualification of third-party storing
and transporting vaccine from Zhejiang Provincial Center for Disease Control and Prevention.
5. High end international aesthetic medicine product pipeline covering mainstream
non-surgical fields
In 2018, through the successful acquisition of Sinclair in UK, the Company strategically
entered the aesthetic medicine industry, effectively completed the integration of products and
businesses in less than three years, and realized the full layout of the non-invasive and minimally
invasive aesthetic medicine industry chain. In the fields of facial fillers, body shaping, catgut
embedding, energy source devices and so on, we have a number of patented products with global
rights and also have an international aesthetic medicine operation and BD team. Focusing on t he
global high-end aesthetic medicine market, further integrating R&D resources and capabilities, and
relying on the four global R&D centers of Sinclair in the UK, High Tech in Spain, R2 in the United
States and Kylane in Switzerland, and five global production bases in the Netherlands, France, the
United States, Switzerland and Bulgaria, the Company has formed its international aesthetic
medicine business integrating R&D, production, and marketing, and set up a global aesthetic
medicine marketing network, which has covered more than 60 countries and regions in the world.
Huadong Ningbo Medicine Co., Ltd., the controlled subsidiary of the Company, has a sales team
which has been deeply engaged in the Chinese aesthetic medicine market for many years, and a
wide range of aesthetic medicine institutions, with outstanding sales and promotion ability. Its
market share has been in the lead in the domestic hyaluronic acid market for many years
continuously.
6. Prudent and pragmatic operation style and shareholder re turn
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The 2020 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. High quality products, excellent
commercialization ability, compliant and efficient marketing services, differentiated market
positioning, innovative R&D layout and completed talent planning all boost the long-term and
stable development of the Company. Since its listing, the Company has maintained steady growth in
performance for 21 years. Since 2007, the Company has kept the return on equity (ROE) above
20% for 14 years consecutively, leading A-share listed companies and the medicine industry. Since
its listing 21 years ago, the Company has paid dividends for 17 times, with a total value of
RMB4.174 billion, far exceeding the RMB250 million raised in its IPO. The Company has brought
continuous and stable returns of investment to shareholders.
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Section IV. Discussion and Analysis of Operations
I. Overview
For China and the world, 2020 is an extraordinary year. It is also a key year for the Company
to fully implement strategic transformation and internationalization. In the past year, in the face of
the sudden outbreak of COVID-19 pandemic, the reform of the domestic pharmaceutical industry,
the new challenges brought by the changes in internal and external environments, the Company has
suffered unprecedented operating and development pressures, coupled with the impact of failure in
national centralized procurement tendering of acarbose and lower price for medical insurance
reimbursement list through negotiations. However, with its bravery and tenacity, the Company
survived in this challenging year, unswervingly promoted the transformation of R&D innovation
and marketing mode, and steadily implemented various measures of operation and management by
responding to changes and hardships with dedication, thus delivering strategic decisions and
maintaining the steady development with joint forces in 2020. In this year, the Company completed
the reform of R&D system, rapidly adjusted the marketing strategy, strengthened the cooperation in
overseas new drugs, and accelerated the international layout of aesthetic medicine industry. It also
actively explored new operation mode of pharmaceutical business, opened up new market areas,
and laid a solid foundation for continuous innovation and transformation in 2021.
Growth trend of Huadong Medicine’s operating income over the past 10 years
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Growth trend of Huadong Medicine’s net profit attributable to the parent company over the past 10 years
In 2020, due to the impacts of the COVID-19 pandemic and national medicine centralized
procurement, the Company achieved annual operating income of RMB33.683 billion, down 4.97%
year on year; the net profit attributable to the shareholders of the listed company was RMB2.82
billion, up 0.24% year on year, and the net profit attributable to the shareholders of the listed
company after deducting non-operating profit was RMB2.43 billion, down 5.62% year on year. By
the end of 2020, the total assets of the Company were RMB24.201 billion, and the net assets
attributable to the shareholders of the parent company was RMB14.62 billion, and the asset-liability
ratio was 37.28%, and the ROE was 20.95%, which has remained above 20% for 14 consecutive
years.
The core subsidiary of the Company in pharmaceutical industry, Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd., actively overcame the influence of national medicine centralized
procurement, and stabilized the market and development. Its business performance continued to grow
in adversity. During the reporting period, the operating income reached to RMB11.04 billion, up
5.07% year on year, and the net profit was RMB2.332 billion, up 6.13% year on year, which has
maintained growth for 20 years on end. The annual ROE of Zhongmei Huadong was 35.53%, which
has remained above 35% for 14 consecutive years.
(i) Pharmaceutical industry
1. Accelerating R&D innovation and constantly enriching product pipelines
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
ROE (%) of Huadong Medicine and Zhongmei Huadong during 2007-2020
In 2020, the Company continued to strengthen R&D innovation, reconstructed R&D system,
arranged R&D personnel properly, and promoted R&D function return. The first stage of R&D
system reform has been completed. In 2020, the Company’s innovative drug R&D center actively
explored and learned from the international advanced innovative drug R&D system building,
continuously optimized and adjusted the overall innovation R&D system framework of the Company,
and improved the functional modules of innovation project R&D through introducing high-end R&D
talents, so as to fully guarantee the realization of strategic planning objectives of the innovation
project. During the reporting period, the Company completed 15 innovative projects, and introduced
47 innovative R&D talents at home and abroad, including 15 doctors and 27 masters. The Company
has initially established a vigorous innovation team with international concept, international vision
and international management ability. Meanwhile, we established a core expert consultant pool,
including dozens of senior experts in statistics, medicine, registration and other fields. In addition, we
started the recruitment of postdoctoral programme. The Company reached the cooperation intention
of postdoctoral joint training with Zhejiang University, Institute of Nephrology of Peking University
and other domestic first-class universities.
We boosted ongoing projects and consistently evaluated projects as scheduled, and 10 products
(11 quality specifications) obtained production approval and 13 products (14 quality specifications)
were applied for production. We established and improved the decision-making management
mechanism of R&D projects, centered on the strategic treatment field, and focused on the clinical
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
value of the projects to complete the Company’s R&D pipeline analysis and dynamic evaluation of
ongoing projects. We also strengthened the project management and the training of PM, and
completed the user experience test of PLM system.
The collaboration between R&D and BD was further deepened, which enriched the Company’s
product pipelines in the fields of tumor, autoimmune and diabetes.
(1) Anti-tumor: Introduced the phase III clinical research products of ImmunoGen (US), the
world’s first targeting folate receptorα (FRα) Mirvetuximab Soravtansine (MIRV), an ADC candidate
drug for ovarian cancer, and acquired exclusive development and commercial rights in Greater China
(including Chinese mainland, Hongkong, Macao and Taiwan). And accelerated its clinical research in
China.
(2) Endocrinology: Signed an agreement with PEG-BIO BIOPHARM CO., LTD. (Chongqing)
on the cooperative development and commercialization of somaluptide products, which would
further enrich the important product pipeline in the field of diabetes and consolidate its leading
position in the field of domestic diabetes drugs.
(3) Autoimmunity: Introduced the ongoing QX001S product of Qyuns Therapeutics (a
biosimilar similar to original drug Stelara, used to treat psoriasis and Crohn’s disease), and gaine d
the rights to develop and commercialize it in Chinese mainland, which further improved the
macromolecule pipeline layout in the field of immunology.
(For the details of the R&D work and product pipelines of the Company during the reporting
period, please refer to R&D Section)
2. Initial building of agile production and operation system, and shifting from cost center
to profit center
In 2020, overcoming the impact of the COVID-19 pandemic and market uncertainty, the
Company initially established an agile production and operation system, quickly integrated
production resources according to market changes, took measures such as emergency resumption of
production, shift adjustment and production capacity expansion, and successfully completed
emergency production tasks of some products due to sudden increase in demand. We promoted
outsourcing business to ensure the market supply throughout the year, fully implemented the cost
control plan, boosted the cost management of the whole value chain, and achieved cost r eduction
through technology improvement, lean management, bidding and purchasing negotiation and asset
utilization from many aspects, striving to improve labor efficiency per capita and production
efficiency. We did a good job in risk management and control of EHS, practiced the “asset-light”
production organization mode, and successfully developed a number of cooperative production
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
enterprises, and gradually formed an open Huadong pharmaceutical manufacturing system. We took
internal surprise inspection as the starting point to implement the GMP normal management, and
successfully passed it four times, with no major safety accidents throughout the year.
The manufacturing and CMC (including subsidiaries) center changed the original positioning
concept of internal facilities, started CMO/CDMO mode by following international standards, and
explored the transformation from cost center to profit center. We actively faced the international
market, and participated in the international market competition to integrate with the global
pharmaceutical R&D industry chain. In 2020, we made positive progress in export of raw materials
and CDMO business customized by foreign customers, which laid a solid foundation for realizing a
greater breakthrough in 2021.
In 2020, the Company continued to construct production parks, and arranged the transfers of
product and personnel, and the disposal of equipment and facilities in an orderly manner. Jiangdong
Phase II project has been completed as planned and is expected to be officially put into operation in
the second half of 2021 after completing equipment commissioning and certification; the project of
international R&D and manufacturing center for preparations has also been completed and is
expected to be put into use in 2021; the project approval, land acquisition, overall planning and
design as well as construction preparation of Huadong Medicine Biomedical Science and Technology
Park have been completed, and the project officially entered the construction stage in March 2021.
3. Making efforts in grass roots and out-of-hospital markets and improving all-round
marketing ability
During the reporting period, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. faced the
pandemic situation and market challenges, turned the pressure into the driving force by facing
difficulties and changing concepts, and improved marketing ability in all respects. According to the
trend of national normalized centralized procurement, we quickly adjusted the market strategy, took
the establishment of “pharmaceutical care management system to adapt to the modern
pharmaceutical industry development” as the goal, and continued to deepen the organizational
structure reform. We strengthened the organizational structure building of local pharmaceutical care
companies with county-level markets, increased out-of-hospital teams and primary-level market
personnel, and comprehensively promoted the development and coverage of primary-level markets,
out-of-hospital markets and self-paying markets. We also actively explored new channels of retail
pharmacies and online sales, developed online market, and seized the remaining markets. In terms
of academic promotion, we continued to focus on the patient-centered concept to strengthen patient
education and further improve the professional level of front-line marketing personnel, and to carry
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
out clinical restudy of marketed products, and improved expert consensus and clinical value
recognition through academic platform building. Through the differentiated market positioning of
Acarbose Tablets and Acarbose Chewable Tablets, we continued to work hard in the primary-level,
out-of-hospital and retail markets. The sales volume and overall market share of acarbose products
remained stable throughout the year, and the proportions of o ut-of-hospital and retail markets
increased steadily. The Company has confidence that the sales volume of acarbose will continue to
grow in 2021.
National marketing network distribution map of pharmaceutical industry
4. Keeping up with international level and improving quality manage ment to new level
In 2020, the Company further strengthened the centralized and unified quality management,
continuously improved the building of quality management system, innovated the normalized
management methods of GMP, and implemented surprise inspection system. We optimized the
management mode of public system, strengthened the linkage mechanism of quality management
from R&D to large production, established a normalized management list for weak managements,
and successfully completed the site verification for registration of all products with consistency
evaluation and new products, onsite GMP compliance inspection and surprise inspection. Aiming at
international quality level, we continued to improve the quality standard, completed the standard
setting of olistar capsule, pioglitazone hydrochloride tablet and indobufen tablets, followed up the
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
progress of pharmacopoeia, and participated in the standard setting of USP for pantoprazole sodium
lyophilized powder for injection. After the Acarbose Tablets of Huadong Medicine Co., Ltd.
obtained a marketing approval from Austria of EU and was approved by the FDA of the United
States, the international quality management of the Company was lifted to a new level.
5. “Refusing Mediocrity and Pursuing Excellence” and Creating an Appropriate Human
Resource Manage ment System
In 2020, the Company continued to improve the level of human resource management. We
continuously optimized the talent structure, improved the talent ability and i ntroduced 66 top talents
in the fields of innovative medicines, international aesthetic medicine, strategic market as well as
investment and financing, including 21 doctors and 12 international talents. We continuously
optimized the organization and human resource allocation of companies, developed incentive and
efficiency, improved the efficiency of human resources, and gradually established an assessment
mechanism aiming at “rejecting mediocrity and pursuing excellence”. We innovated and developed
performance management mode, set up a R&D performance appraisal management mechanism that
was appropriate to the actual situation of R&D, and perfected matrix management mode for R&D,
and formed a performance appraisal and management scheme for the three R&D centers. We further
improved the building of leader echelon, standardized and unified the management of appointed
leaders, and optimized the personnel training mechanism to realize the rapid transformation of
talents.
6. Strengthening the integration of business and finance, and deeply innovating financial
organization structure
During the reporting period, the Company carried out the innovation of financial organization
structure, and formed a headquarters financial structure based on the professional lines of treasury
department, international business department, accounting information department (virtual), tax and
information, which enabled the coordination of treasury management among headquarters,
Zhongmei Huadong as well as business finance. By establishing a “3+X” financial analysis team
and setting up business partner team of financial aesthetic medicine, R&D and innovation business,
we strengthened the integration of business and finance and the continuous investment of the whole
financial system in the professional line, and carried out works in the aspects of fine financial fund
management and budget cost reduction, building and efficiency improvement of financial
information system, financial internal control and compliance, investment merger and
post-investment management. As a result, we straightened out the financial organizational structure
and the centralized and unified management system with “one headquarters and three business
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
sectors”, and the financial management ability was also continuously improved.
7. Achieving Positive Results in Central Purchasing and Access to Medical Insurance
System
In August 2020, Anastrozole Tablets (1mg) and Domperidone Tablets (10mg) respectively from
the wholly-owned subsidiaries of the Company, Hangzhou Zhongmei Huadong Pharmaceutical Co.,
Ltd. and Huadong Medicine (Xi’an) Bohua Pharmacy Co., Ltd, won the bid in the third batch of
national drug centralized procurement. In December 2020, Bailing Capsule and Acarbose Chewing
Tablets from Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. participated in the
negotiations of medical insurance payment standard and renewal, and both of them were successful.
In February 2021, Pantoprazole Injection (40mg) from Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd. won the bid in the fourth batch of national drug centralized procurement.
(ii) Pharmaceutical commerce
1. With optimized and adjusted business structure of the Company, its pharmaceutical
commerce continued to take the lead in Zhejiang
In 2020, faced with the combined impact of the pandemic and the volume-based procurement,
the pharmaceutical commerce of the Company took active measures and fulfilled the emergency
medical instrument stockpile task of Zhejiang Province in an excellent way, and was commended
by many government departments at provincial, municipal and district levels. Under the background
of the normalization of volume-based procurement, the Company took the initiative to deal with it
by reverse thinking, and sped up the adjustment, optimization and enrichment of its business
structure. The Company has kept consolidating the intra-hospital markets, strengthened
coordination between purchases and sales, and increased order fill rate, the market share and
delivery rate in the province, taking the lead in the distribution volume of medicines procured
centrally in the province. The Company has built a network-wide sales platform covering both the
intra- and out-of-hospital markets, expanded and strengthened the cooperative relationship with
upstream pharmaceutical enterprises, highlighted the advantageous capabilities of market access
and policy matters, and became a trustworthy and respectable partner of the customers’ supply
chain through integrated solutions and value-added services. The Company has continued to
increase the introduction of high-quality products, accelerate the early intervention to and business
undertaking of varieties included in volume-based procurement and newly-listed high-value
innovative varieties, and improve service quality and brand influence. During the year, the
Company carried out strategic and special cooperation with many multinational pharmaceutical
companies such as Pfizer, AstraZeneca, Roche, Eli Lilly, Sanofi, Novartis and Merck with respect to
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
the primary-level market of chronic disease products, realized the implementation of cooperative
projects in a quite short time through its professional project management, and won universal
recognition from customers.
The Company has accelerated the optimization and transformation o f its sales model,
continued to expand the out-of-hospital markets while maintaining its competitive position in the
intra-hospital markets, and sped up the transition from intra-hospital to out-of-hospital and from
offline to online. Relying on its advantages in relationship with upstream suppliers and downstream
offline sales channels, the Company effectively connected to Internet and mobile Internet
technologies, built an information system from the supply end to the consumer end, and established
an effective online and offline marketing system. Through management and empowerment, the
Company gives full play to the centralized advantages of its products and the advantages of the
branches and subsidiaries in the province regarding local sales, achieving the effect of 1+1>2.
2. Integrating e-commerce interconnection to win market opportunities
In 2020, the Company’s pharmaceutical commerce explored and transformed the business
model of retail pharmacies, provided “value-added services” such as pharmaceutical consultation,
drug distribution and return visits for special patients through channels like self-operated DTP
pharmacy, and built a pharmaceutical care and service system centered on patients’ needs. It
optimized the promotion of marketing channels such as the “Huadong Medicine Commerce
Network”, “Huadong Pharmacy Flagship Store”. It completed the establishment of the OTC Sales
Management Department and the E-commerce Sales Department, and realized the rapid growth of
e-commerce business during the pandemic. Relying on the first prescription distribution platform in
the province developed by itself, the Company actively connected with the “Internet + diagnosis
and treatment” service in Zhejiang Province, quickly connected with provincial and municipal
health and health care departments at the beginning of the outbreak of COVID-19, launched the
province’s first “online medical insurance settlement + medicine delivery services”, and opened up
the full channel of “Internet + diagnosis and treatment”.
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
3. Improving ability concerning cold chain logistics and creating the “golden business
card” of commerce business transformation
Huadong business supply chain continued to improve the province-wide logistics system
featuring multi-warehouse collaboration, promoted Jinhua supply chain projects, expanded the
third-party services featuring “cold chain”, and actively explored logistics services under the new
mode of “E-commerce logistics distribution, prescription outflow distribution”. With the goal of “to
be the leader in the industry and become the leading role in the value chain”, Huadong business
cold chain built a province-wide logistics system with the cold chain distribution of
biopharmaceuticals and vaccines as the core, and established an industry brand. The Company has
undertaken the vaccine business of a number of well-known pharmaceutical enterprises at home and
abroad, with the business volume ranking first in Zhejiang Province. Besides, it has obtained the
first delivery business license for pharmaceutical cold chain enterprises in Zhejiang Province, which
promoted the expansion of the Company’s pharmaceutical cold chain business in the express
delivery field, especially the Internet C-end business distribution. In addition, the Company actively
involved in the delivery service of COVID-19 vaccines across the province, and obtained the
exclusive qualification regarding third-party vaccine storage and transportation service from the
Zhejiang Provincial Center for Disease Control and Prevention. It will give priority to guarantee the
delivery of COVID-19 vaccines as required by the Zhejiang Provincial Center for Disease Control
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
and Prevention, and complete the distribution of COVID-19 vaccines in 11 cities in the province
within 24 hours after receiving the distribution task, to ensure the timely and safe delivery of
COVID-19 vaccines, and support the nationwide vaccination of COVID-19 vaccines.
(iii) Aesthetic medicine
1. Deeply engaging in the aesthetic medicine industry, and continuously optimizing and
improving the pipeline of aesthetic medicine products
Aesthetic medicine is one of the core business areas of the Company. Adhering to the operation
philosophy of “focusing on those who pursue beauty and serving them with professionalism and
preciseness”, Huadong Medicine focuses on the R&D, production, sales and service of the latest
products and instruments in the field of facial micro plastic and skin management, and fully
integrates the global aesthetic medicine resources. Being deeply engaged in the aesthe tic medicine
industry with its scientific and rigorous attitude, the Company continues to optimize the product
structure, with emerging achievements in aesthetic medicine internationalization. Since its
successful acquisition of Sinclair in the UK in 2018, the Company has been actively introducing
high-tech new products and technologies in the field of aesthetic medicine around the world, and
creating high-end, differentiated aesthetic medicine brands and product clusters. Up to now, the
Company has many differentiated non-surgical mainstream aesthetic medicine products, such as full
product portfolio of sodium hyaluronate, collagen stimulator, botulinum toxin type A, thread
embedding and implanting, and energy source device.
2. Accelerating the introduction of new international aesthetic medicine products and
pushing forward the international strategic layout of the aesthetic medicine sector
In 2020, the Company’s aesthetic medicine business was significantly affected by the
COVID-19 pandemic at home and abroad, and its revenue and net profit decreased year on year.
But the Company seized the opportunity brought by the low ebb of the international aesthetic
medicine industry during the pandemic, quickly promoted the internationalization strategy of the
aesthetic medicine sector, and accelerated the arrangement and introduction of new international
aesthetic medicine products. As a result, it achieved positive results.
In March 2020, Sinclair, the global operating headquarters of the Company’s aesthetic
medicine business, and Galderma, a world-renowned dermatology pharmaceutical company in
Swiss, reached an agreement on the transfer of the distribution rights of Sculptra (PLLA
microspheres) in western European market, and completed the transaction, resulting in an asset
disposal earnings of approximately GBP30.65 million (after tax) for Sinclair. Later, it signed an
agreement with Kylane, a Swiss professional aesthetic medicine R&D company, thereby obtaining
from Kylane the exclusive worldwide license of the MaiLi-series lidocaine-containing hyaluronic
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
acid fillers (hyaluronic acid) (which have been approved by the European Union for launch). In
August 2020, the Company signed a strategic cooperation agreement with Jetema, a South Korean
listed company, and obtained the sole agency of its botulinum toxin type A in China, thereby further
supplementing the Company’s product pipelines in the aesthetic medicine sector. In October 2020,
Sinclair and Kylane once again reached a deep strategic cooperation on equity invest ment and
product development. Sinclair invested EUR6 million for all of Kylane’s ordinary shares, and after
the transaction was completed, Sinclair held 20% of Kylane’s equity, becoming Kylane’s third
largest shareholder. In addition, Sinclair and Kylane e ntered into a R&D partnership, enabling
Sinclair to obtain the IP and global rights of Kylane’s two key products in the face and body fillers
area, as well as the prioritized negotiation rights of Kylane’s other follow -up products. In February
2021, Sinclair has acquired the 100% equity in High Tech, a Spanish energy source aesthetic
medicine devices company by paying a consideration of EUR65 million and a sales threshold of up
to EUR20 million, intending to participate in the body shaping and skin repairing fields such as
cryolipolysis and hair removal. The equity delivery was completed in April 2021.
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
3. Accelerating the registration and launch process of key aesthetic medicine products
During the reporting period, the Company set up an aesthetic medicine international business
department, which is responsible for the strategic planning and day-to-day operation management
of the aesthetic medicine business. At the same time, the Company established Sinclair Aesthetics
(Shanghai) Medical Technology Co., Ltd. and R2 (Shanghai) Medical Technology Co., Ltd., which
will be served as the operating platform after products are launched on the market. The Company
sped up the registration and launch process of key aesthetic medicine products in the Chinese
market, and Ellansé, a long-effect microsphere for injection, the key product of Sinclair, the
Company’s subsidiary in UK, was officially approved for domestic launch and registration in April
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
2021 and is expected to go on sale in Chinese mainland in the second half of 2021.
Silhouette Instalift, the only absorbable thread for midface tissue lifting approved by the FDA, is
undergoing a domestic clinical trial as planned. The Company is actively preparing for the launch of
Glacial Spa (F0), a cool-touch cosmetic instrument introduced from R2 located in the United
States, in China, and is promoting the registration of Glacial Rx (F1), a frozen freckle-removing
medical device in China in an orderly manner. MaiLi series product, a new high-end
lidocaine-containing hyaluronic acid filler using OXIFREE patented technology and process will
be launched on the European market in the first half of 2021, and registration in the Chinese market
has been initiated. Cooltech Define, a cryolipolysis product newly acquired by Sinclair from High
Tech, a Spanish company, has obtained the CE certification from EU. The Company has actively
expanded its teams in accordance with the launch progress of Ellanséand Glacial, and has started
pre-launch preparations. The Company’s controlled subsidiary Huadong Ningbo Company actively
responded to the adverse effects of the pandemic in 2020, took multiple measures to stabilize its
sales performance, and launched the special “2020 YVOIRE Rising Star Program – Navigator
Speaking Tour Program” during the post-pandemic period to promote the gradual recovery of
performance in the second half of the year. The SanteMuse Biological Skin Care R&D Center was
set up in Hangzhou, aiming to create a new product line of customized skin care based on skin
genes centering on SanteMuse, a customized skin care brand. The center has functional modules
such as gene testing laboratory, cosmetic formula R&D laboratory, ingredient R&D laboratory, cell
culture in vitro, microbial fermentation and human efficacy evaluation laboratory, and has created a
whole process R&D system including gene detection, product development and efficacy evaluation,
realizing the one-stop closed-loop development of customized skin
care.
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
R&D of the Company’s main aesthetic medicine produc ts
In 2020, with its outstanding performance in various fields, the Company was granted for
many honors and awards, including New Fortune’s Second “New Fortune Best Listed Company”,
Securities Times’ 14th “Top 100 Chinese Listed Companies on Main Board”, MENET’s “Top 100
Pharma Companies in China in 2019”, “Jinzhi Award” in the financial industry, “Excellent
Management Award” in the pharmaceutical and biological industry, China’s Top 100 Industrial
Enterprises in Chemical-Pharmaceutical Industry in 2020, 21st Century Business Herald’s 2020
Sunshine Award of China’s Healthy Industry – Industry Benchmarking Enterprise Award, Chinese
Radio Network’s Second “Listed Companies Most Trusted by Investors – Innovative Pioneers in
Biomedicine”, Top 10 High-tech Enterprises in Zhejiang Province in the Field of Biological and
New Pharmaceutical Technology in 2020, Commendation for the 40th Anniversary of Medical
Economic News Pharmaceutical Enterprises Making Outstanding Contributions to the Joint
Prevention and Control of COVID-19 in China, and continued to be listed on the Fortune China 500
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
selected by FortuneChina.com, ranking 273rd in 2020.
II. Analysis of main business
1. Overview
Refer to “I. Overview” in “Discussion and Analysis of Operations”.
2. Income and cost
(1) Composition of operating revenue
Unit: RMB yuan
2020 2019 Year-on-year
Proportion in Proportion in percentage
Amount Amount
operating revenue operating revenue increase/decrease
Total operating
33,683,058,759.75 100% 35,445,698,216.15 100% -4.97%
revenue
By sector
Business 23,010,850,986.99 66.26% 25,098,006,088.85 68.79% -8.32%
Manufacturing 11,398,357,479.02 32.82% 10,864,875,032.13 29.78% 4.91%
aesthetic
942,632,376.28 2.80% 1,328,360,780.34 3.75% -29.04%
medicine[note1]
International
319,167,474.26 0.92% 509,190,691.24 1.43% -37.32%
aesthetic medicine
Offset (inter-sectoral
-1,045,317,180.52 -1,026,373,596.07
offset)
By product
By region
Domestic sales 33,321,963,372.21 98.93% 34,883,617,590.88 98.41% -4.48%
Overseas sales 361,095,387.54 1.07% 562,080,625.27 1.59% -35.76%
[Note 1] The aesthetic medicine business of the Company includes both the domestic and the international aesthetic medicine
business. There is a slight overlap between the income statistics of the domestic aesthetic medicine business and that of the
pharmaceutical commerce and the pharmaceutical manufacturing industry. In order to truly reflect the Company’s business reali ty,
the data is counted.
(2) Sectors, products or regions that accounts for more than 10% of the Company’s operating revenue or
operating profit:
√ Applicable □ N/A
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
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 23,010,850,986.99 21,279,818,471.97 7.52% -8.32% -8.15% -0.17%
Manufacturing 11,398,357,479.02 2,203,096,679.98 80.67% 4.91% 22.24% -2.74%
International
aesthetic 319,167,474.26 104,350,496.25 67.31% -37.32% -25.72% -5.10%
medicine
Offset
(inter-sectoral -1,045,317,180.52 -1,036,783,957.47
offset)
By product
By region
Domestic sales 33,321,963,372.21 22,423,303,870.36 32.71% -4.48% -6.24% 1.27%
Overseas sales 361,095,387.54 127,177,820.37 64.78% -35.76% -25.27% -4.94%
If the statistical specifications of the Company’s main business data have been adjusted during the reporting period, the Com pany’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
2020 2019 Year-on-year
Proportion Proportion percentage
Sector Item
Amount in operating Amount in operating increase/decrea
cost cost se
Business Operating cost 21,279,818,471.97 90.22% 23,169,206,360.31 92.26% -8.15%
39
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Manufacturing Operating cost 2,203,096,679.98 9.34% 1,802,276,075.36 7.18% 22.24%
International
aesthetic Operating cost 104,350,496.25 0.44% 140,481,356.33 0.56% -25.72%
medicine
Offset
(inter-sectoral Operating cost -1,036,783,957.47 -1,025,240,830.27
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”.
(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) 6,096,785,978.21
Proportion of the total sales amount of the top five
18.10%
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 3,052,496,406.11 9.06%
2 Customer a2 1,180,127,547.89 3.50%
3 Customer a3 676,479,961.92 2.01%
4 Customer a4 594,032,885.39 1.76%
5 Customer a5 593,649,176.90 1.76%
Total -- 6,096,785,978.21 18.10%
Other information of major customers
40
The 2020 Annul Report of Huadong Medicine Co., Ltd.
□ Applicable √ N/A
Information of the Company’s major suppliers
Total purchase amount of the top five suppliers (yuan) 2,391,591,676.59
Proportion of the total purchase amount of the top five
10.66%
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
Information of the Company’s top five suppliers
Proportion in the total annual purchase
No. Supplier name Purchase amount (yuan)
amount
1 Supplier b1 557,325,884.72 2.48%
2 Supplier b2 515,430,595.92 2.30%
3 Supplier b3 468,724,901.88 2.09%
4 Supplier b4 441,540,123.61 1.97%
5 Supplier b5 408,570,170.46 1.82%
Total -- 2,391,591,676.59 10.66%
Other information of major suppliers
□ Applicable √ N/A
3. Expenses
Unit: RMB yuan
Year-on-year
2020 2019 percentage Note on changes
increase/decrease
Sales expenses 5,970,614,819.26 5,797,236,883.02 2.99% No significant changes
Administrative
998,746,330.35 1,095,227,423.65 -8.81% No significant changes
expenses
41
The 2020 Annul Report of Huadong Medicine Co., Ltd.
It is primarily due to a lower base of
financial expense in the comparable
period as a result of the write-down
of financial expense caused by the
Financial expenses 34,200,637.61 2,473,146.13 1,282.88% cash settled interest adjustment of
the contingent consideration of
Sinclair’s product rights in the same
period of the previous year.
R&D expenses 926,725,468.93 1,072,937,182.39 -13.63% No significant changes
4. R&D investment
√Applicable □ N/A
(1) Overall situation of R&D
With “scientific research-based, patient-centered” as the corporate philosophy, the Company
continued to increase investment in R&D, and continuously enriched its arrangements in the R&D
of innovative drug pipeline. During the reporting period, the Company invested RMB1.444 billion
on R&D in the pharmaceutical industry, an increase of 8.91% year on year, of which, RMB918
million was spent on direct R&D, down 12.96% from 2019 (RMB1.055 billion), and RMB525
million was spent on the introduction of external new drug technologies and rights, up 94.10% from
2019. The research and development work of the Company mainly involves the following aspects:
1) Continued to practice the new drug R&D model which combines independent R&D +
cooperative development + product license-in, tracked the latest international drug action
mechanism and target as well as advances in clinical application research, accelerated the
development of innovative drugs and the introduction of innovative drug projects at home and
abroad, and obtained the approval regarding potential innovative drugs in the fields of metabolism
and nephrosis;
2) Focused on varieties with superior clinical effect and pharmacy for special population,
accelerated the R&D of generic drugs with high technical barrier and improved new drugs (505b
(2)), and initiated key projects centering on autoimmunity, antivirus and anti-tumor fields during the
reporting period;
3) Continued to improve the process and quality level of bulk drugs and preparations, reduced
the cost, actively developed dosage forms of on-line products, and strengthened the market
competitiveness; and
4) Strengthened the evaluation on the comprehensive dynamic of varieties under research,
42
The 2020 Annul Report of Huadong Medicine Co., Ltd.
ensured the R&D progress of key varieties under research to the greatest extent through the priority
ranking of ongoing projects and the rational allocation of R&D resources.
(2) R&D of projects regarding major innovative drugs and biosimilars
The Company has drawn up a strategic plan for the development of innovative drugs for the
next five years, clearly defined the key direction and number of innovation projects for each year
during the planning period centering on the existing therapeutic fields, and proposed that no less
than 15 innovative varieties (including original new drugs, improved new drugs, innovative medical
devices and high-end products) should be established and reserved annually during the planning
period. During the reporting period, the Company actively boosted the clinical research on
innovative drugs under research and key biosimilars, seeking early approval for launch to the
market. In addition, the Company actively explored and learned from the international advanced
innovative drug R&D system building, continuously optimized and adjusted its overall R&D
system structure, improved the functional modules on the R&D of innovative projects through the
introduction of high-end R&D personnel, to achieve the objectives on the strategic planning of the
Company’s innovative projects.
(3) Progress on the clinical research of key innovative drugs, innovative medical devices
and biosimilars
1) Mefatinib: Mefatinib for the treatment of advanced non-small cell lung cancer is under
phase II clinical trial and the registration for phase III clinical trial is also under progress, and it is
planned that the enrollment of the last subject will be completed in the third quarter of this year;
2) TTP273: the world’s first oral GLP-1 receptor agonist small-molecule innovative drugs, is
currently undergoing multi-regional phase II clinical trials in Chinese mainland and Taiwan. The
phase II clinical trial was led by Nanfang Hospital of Southern Medical University, and the first
subject was administrated in December 2020;
3) HD-NP-102 (dynamic TGFR monitoring system): The renal function is evaluated through
real-time monitoring of glomerular filtration rate. The application for carrying out the clinical trial
of MB102 (fluorescent tracer), class 1 new drug used in the monitoring syste m, in China has been
accepted. The MRCT clinical trial of the TGFR dynamic monitoring system will be carried out after
the Clinical Trial Notification is officially obtained;
4) HDM3002 (PRV-3279): It is used for the treatment of systemic lupus erythematos us (SLE)
and for preventing or reducing the immunogenicity of gene therapy, and two indications of it are
being tested in the United States. Phase I 1a and 1b trials have been completed for the indications of
SLE (systemic lupus erythematosus), and indications regarding preventing or reducing the
43
The 2020 Annul Report of Huadong Medicine Co., Ltd.
immunogenicity of gene therapy are under preclinical trials. The phase II clinical research of
PRV-3279 is expected to be carried out in the second half of 2021, and part of the trial will be
carried out in China;
5) HDM2002 (IMGN853, ADC drug under research): the world’s first ADC drug under
research for FRα-positive ovarian cancer, is used to treat platinum-resistant ovarian cancer with
high expression of folate receptor. The clinical trials of HDM2002, including MRCT phase III
clinical and PK bridging trials, have received clinical approval, and various pre-clinical preparations
are currently being promoted as planned;
6) Overall arrangement of R&D of early innovative drugs: drug screening and activity
characterization regarding oral GLP-1 innovative drugs for the treatment of type 2 diabetes,
anti-tumor projects including CDK targeted drugs and innovative drugs such as PROTACT are
under way as planned; and
7) Biosimilars: GLP-1 receptor agonist liraglutide injection, one of the Company’s key
diabetes products, is undergoing phase III clinical research for indications for diabetes and weight
loss in China. The phase III clinical trial on the indications for diabetes has basically been
completed, and it is expected that all clinical work will be completed by the end of the second
quarter of 2021, and application for registration will be submitted soon afterwards. The clinical
work regarding the indications for weight loss is expected to be completed in the third quarter of
this year, and registration will be submitted before the end of this year. It is planned that the
investigational new drug (IND) domestic clinical trial application regarding semaglutide injection
will be launched in 2021. Preparation regarding phase III clinical work of HDM3001 (QX001S) is
being made, and phase III clinical trials are scheduled to be carried out in the second half of this
year. Clinical application regarding ranibizumab injection has been submitted and supplementary
information has been submitted. Insulin degludec injection, insulin aspart injection and glucagon
are under preclinical study.
(4) Progress of R&D of major generic drugs
During the reporting period, the Company conducted earnest dynamic evaluation and combing
of the existing generic drug varieties under research, and further clarified the varieties to be focused
and prioritized. The progress regarding the key varieties is as follows:
1) Diabetes: On-site verification regarding Metformin Hydrochloride and Empagliflozin
Tablets (5/500mg) has been completed, and approval is expected to be obtained within the year.
Canagliflozin Tablets (specifications: 0.1g, 0.3g) has been declared for production. Sitagliptin
Phosphate/Metformin Hydrochloride Tablets (50/850mg) has been declared for production.
44
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Pioglitazone Hydrochloride and Metformin Hydrochloride Tablets (15/850mg) is under laboratory
research;
2) Immunity: Laboratory research regarding tacrolimus extended-release tablets, granules and
ointment was carried out as planned;
3) Anti-tumor: On-site verification regarding letrozole tablets has been completed, and
approval is expected to be obtained within the year. Sorafenib tablets has been declared for
production. Ibrutinib capsules and olaparib tablets are under laboratory research;
4) Super antibiotic: On-site verification regarding Micafungin Sodium for Injection has been
completed, and approval is expected to be obtained within the year;
5) Digestion: Supplementary materials regarding Compound Omeprazole and Sodium
Bicarbonate Capsule have been submitted and approval is expected to be obtained within the year;
and
6) Cardiovascular: Macitentan tablets has been declared for production.
(5) R&D and registration of aesthetic medicine products
During the reporting period, MaiLi series products, new and high-end lidocaine-containing
hyaluronic acid filler produced by Sinclair, a wholly-owned subsidiary of the Company, using
OXIFREE patented technology and process have obtained CE certification of EU in June 2020,
which will be launched in the European market in the first half of 2021, and registration in the
Chinese market has already been started.
F1, a medical device related to frozen freckle-removing and skin whitening introduced from
R2, US, has obtained the 510(k) approved by the FDA. In August 2020, the Company signed a
strategic cooperation agreement with Jetema, a South Korean listed company, to introduce its
botulinum toxin type A. In February, 2021, Sinclair, a wholly-owned subsidiary of the Company,
acquired the 100% equity in High Tech, a Spanish company engaged in energy source aesthetic
medicine device. The design of the clinical protocols in China of the above products is being carried
out in an orderly manner.
Ellansé, a novel collagen stimulator, the core product of Sinclair, has obtained the Medical
Device Registration Certificate issued by the National Medical Products Administration on April 13,
2021, and will be officially marketed in Chinese mainland in the second half of 2021.
Silhouette Instalift is the only absorbable thread approved by the FDA for mid-face tissue
lift, which adopts 3D cone suspension technology, can achieve immediate and long-lasting tissue
repositioning, stimulate collagen regeneration, and effectively remodel face and neck contours. The
clinical trial of Silhouette Instalift in China is being carried out smoothly.
45
The 2020 Annul Report of Huadong Medicine Co., Ltd.
The Glacial Spa (F0), a whitening and refreshing device imported from R2, is the life
cosmetology version of the medical instrument for frozen freckle removal. It adopts aesthetic
medicine technology and is introduced into the life cosmetology channel through the energy safety
test, and is scheduled to go on sale in China in the second quarter of 2021. The registration of
Glacial Rx (F1) in China, a medical instrument for frozen freckle removal, is being carried out in
an orderly manner.
MaiLi series products, novel high-end lidocaine-containing hyaluronic acid filler using
OXIFREE patented technology and process, will be launched in the European market in the first
half of 2021, and registration in the Chinese market has been initiated.
Cooltech Define, a non-invasive cryolipolysis equipment independently developed by High
Tech, Spain, which is newly acquired by Sinclair, has officially obtained the CE certification of EU
in February 2021, and Titania, an innovative radiofrequency product under research for skin
tightening and body shaping, is expected to obtain the CE certification of EU in the fourth quarter
of 2021 and will be available for sale globally once it is approved.
The Company has actively expanded its teams in accordance with the launch progress of
Ellanséand Glacial, and has started pre-launch preparations.
(6) Progress of consistency evaluation
During the reporting period and the first quarter of 2021, the consistency evaluation on the
quality and efficacy of the Company’s generic drugs was progressing well, Mycophenolate Mofetil
Capsules (0.25g), Clarithromycin Tablets (0.25g) and Pioglitazone Hydrochloride and Metformin
Hydrochloride Tablets have all obtained consistency evaluation. Pioglitazone Hydrochloride Tablets
(15mg) was granted the notice of acceptance of the supplementary application for consistency
evaluation. On-site verification of Pioglitazone Hydrochloride Tablets (30mg) has been completed.
Decitabine for injection and daptomycin for injection are under the stage of submitting
supplementary materials, and the other varieties to be evaluated are under pharmaceutical research,
pilot scale-up or process validation.
(7) Progress of patent
The Company has attached great importance to the protection of its intellectual property rights
and the application of results in recent years, and the number of patent applications and grants are
steadily increasing. The Company has applied for more than 560 patents at ho me and abroad over
the years, of which more than 270 were granted. Hangzhou Zhongmei Huadong Pharmaceutical Co.,
Ltd., a wholly-owned subsidiary of the Company, is a national IP demonstration enterprise and is
rated as excellent in the annual assessment in 2020. In November 2014, the Company passed the
46
The 2020 Annul Report of Huadong Medicine Co., Ltd.
external audit of Zhongzhi (Beijing) Certification Co., Ltd., becoming one of the 147 enterprises
who have firstly passed the standard implementation certification. During the reporting period, the
Company successfully passed the reexamination review on supervising the standard implementation
of corporates’ intellectual property.
During the reporting period, the Company’s patent application and maintenance proceeded
smoothly. Zhongmei Huadong, a wholly-owned subsidiary of the Company, applied and submitted
a total of 67 patents, among which 58 were utility patents, 14 were authorized in China and 11 of
the authorized ones were utility patents. In April 2020, the utility patent “Enzyme for synthesizing
and metabolizing inosine monophosphate of Cordyceps sinensis (Berk.) Sacc. Hirsutella sinensis
and application thereof” of Zhongmei Huadong was awarded the golden patent prize in Zhejiang
Province, with the patent number: ZL201110267161.3.
(8) Other important issues related to R&D
1) In January 2021, the Company entered into an agreement with Shanghai Yuanda Investment
Management Co., Ltd. and Hangzhou High-tech Venture Capital Management Co., Ltd. and jointly
set up Hangzhou Fuguang Hongxin Equity Investment Partnership (L.P.) (referred to as
“Pharmaceutical Industry Fund”). The Pharmaceutical Industry Fund was established with a total
scale of RMB200 million, of which RMB98 million is contributed by the Company with its own
funds and the Company is a limited partner of the Pharmaceutical Industry Fund. The
Pharmaceutical Industry Fund mainly invests in startup and early projects in the fields of aesthetic
medicine, endocrinology, anti-rejection regarding organ transplantation, alimentary canal, tumor,
nephrology, immunology, etc. As of the disclosure date of this report, the Pharmaceutical Industry
Fund had completed the initial fund raising, finished the industrial and commercial registration
procedures, and completed the filing with AMAC on April 2, 2021.
2) In December 2020, Zhongmei Huadong, a wholly-owned subsidiary of the Company, signed
a strategic cooperation agreement with Sanyou Bio, a biotechnology company that focuses on the
overall solution for the R&D of innovative antibody drugs. The two sides will jointly develop
innovative dual-antibody and ADC molecules targeting high-quality targets to accelerate the launch
of a new generation of anti-tumor drugs.
3) In November 2020, Zhongmei Huadong, a wholly-owned subsidiary of the Company,
signed an agreement on the cooperative development of pipelines with XtalPi, an artificial
intelligence (AI) drug R&D technology company driven by digital and intelligent technologies. The
two sides will conduct in-depth cooperation on the discovery of high-quality new anti-tumor drug
targets, and make full use of the advantages of AI technology featuring large exploration space, high
47
The 2020 Annul Report of Huadong Medicine Co., Ltd.
computing efficiency and accurate computational results, as well as the advanced technologies and
commercial integration capability of Huadong Medicine in the field of anti-tumor, to jointly
develop a new generation of anti-tumor drugs.
4) In September 2020, the Company established a cooperative development partnership with
Exscientia, the world’s leading AI drug R&D company, to accelerate the discovery of novel
treatments for small-molecule drugs against tumor. The first project between the two sides is the
development of drugs that target the transcriptional control of DNA damage response genes to treat
patients with a high frequency of mutations in repair of DNA damage, such as patients with ovarian
and breast cancer.
R&D investment of the Company
2020 2019 Percentage change
Number of R&D personnel
1,207 1,078 11.97%
(person)
Proportion of R&D personnel 12.79% 11.31% 1.48%
R&D investment amount
918,180,946.98 1,054,842,676.50 -12.96%
(yuan)
Proportion of R&D
investment in operating 8.06% 10.04% -1.98%
revenue
Capitalized R&D investment
0.00 0.00 0.00%
amount (yuan)
Proportion of capitalized
R&D investment in R&D 0.00% 0.00% 0.00%
investment
Notes: (1) The above R&D investment is from the R&D expenses of the Company’s main industrial controlled subsidiary, totaling
RMB918 million, which is mainly used for clinical research of products under research, upgrading of existing product process,
expenses for commissioned technological development, consistency evaluation and international registration certification. In terms of
finances, most of R&D investment is listed in expense, and is recognized in the current period without subsequent annual
amortization, which will not have a significant impact on the Company’s future operating results.
In 2020, the Company’s total R&D investment in the pharmaceutical industry was RMB1.444 billion, a year-on-year increase of
8.91%; of which, RMB918 million was used for direct R&D, a decrease of 12.96% from 2019 (RMB1.055 billion), and RMB525
million was used for the introduction of external new drug technologies and rights, an increase of 94.10% over 2019.
(2) The proportion of the number of R&D personnel means the proportion of the number of people in the Company’s subsidiaries
mainly engaging in pharmaceutical manufacturing; the proportion of R&D investment in operating income means the proportion of
the R&D investment of Company’s pharmaceutical industry in the operating income of the Company’s pharmaceutical
manufacturing.
(3) The above-mentioned R&D personnel for 2020 are: The total of R&D personnel of the Company’s R&D system and R&D
personnel of the production system.
48
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Reasons for the year-on-year significant change in the proportion of total R&D investment in operating revenue
□ Applicable √ N/A
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 2020 2019 Year-on-year change
Cash inflows from operating
37,110,493,946.97 38,801,282,424.47 -4.36%
activities
Cash outflows for operating
33,699,046,199.41 36,799,584,253.80 -8.43%
activities
Net cash flow from operating
3,411,447,747.56 2,001,698,170.67 70.43%
activities
Cash inflows from investing
385,678,726.69 74,637,287.55 416.74%
activities
Cash outflows for investing
2,124,316,150.63 1,657,245,184.32 28.18%
activities
Net cash flow from investing
-1,738,637,423.94 -1,582,607,896.77 -9.86%
activities
Cash inflows from financing
2,211,047,477.21 1,922,537,327.51 15.01%
activities
Cash outflows for financing
2,936,777,488.44 2,531,134,823.51 16.03%
activities
Net cash flow from financing
-725,730,011.23 -608,597,496.00 -19.25%
activities
Net increase in cash and cash
925,635,526.76 -166,937,959.56 654.47%
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 3.86 billion yuan, a year-on-year decrease of 75 million yuan or
416.74%, mainly due to the transfer of distribution rights in the Western European market of related products of Sinclair, a
wholly-owned subsidiary of the Company in the UK, during the current reporting 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
49
The 2020 Annul Report of Huadong Medicine Co., Ltd.
II. 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 confirmation of government grants
Other gains 191,999,829.91 5.56% No
in the current period
Nainly due to the transfer of distribution rights in the
Gains on asset Western European market of related products of
322,636,323.26 9.34% No
disposal Sinclair, a wholly-owned subsidiary of the Company
in the UK, during the current reporting period..
IV. Assets and liabilities
1. Major changes in asset composition
Since 2020, 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 2020 Beginning of 2020 Change
of
Proportion in Proportion in Note on major changes
Amount Amount proportio
total assets total assets
n
Mainly due to the increase of inflow of
operating net cash during the current
3,198,080,997. 2,402,730,395.
Monetary funds 13.21% 11.19% 2.02% period and the increase of balance of
82 39
monetary capital at the end of the
period.
Mainly due to the increase of the total
Accounts 6,137,675,568. 6,092,305,184. assets during the current period and the
25.36% 28.38% -3.02%
receivable 82 47 decrease of the proportion of accounts
receivable.
Mainly due to the increase of total
4,067,635,254. 4,038,975,496.
Inventories 16.81% 18.82% -2.01% assets during the current period and the
80 93
decrease of the proportion of inventory.
Real estate
properties for 17,792,735.95 0.07% 21,701,908.75 0.10% -0.03% /
investment
50
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Long-term equity 850,072,053.0 Mainly due to the increase of equity
3.51% 222,595,018.54 1.04% 2.47%
investments 2 investment during the current period.
2,420,366,582. 2,175,216,842.
Fixed assets 10.00% 10.13% -0.13%
92 65
Constructions in 2,240,201,926. 1,829,808,233.
9.26% 8.53% 0.73%
progress 65 19
Mainly due to the increase in
Short-term 1,416,932,884. repayment of corporate bonds upon
5.85% 655,549,973.27 3.05% 2.80%
borrowing 87 maturity of bank financing during the
current reporting period.
Long-term 151,611,367.8
0.63% 0.00 0.00% 0.63% /
borrowing 6
Mainly due to the increase in advance
Other non current 712,069,194.0
2.94% 184,141,659.07 0.86% 2.08% payment of technology transfer during
assets 8
the current period.
2. Assets and liabilities measured at fair value
√Applicable □ N/A
Unit: RMB yuan
Depreciat
Amount Accumulated ion
Gains and Amount of Amount of Amount
at the fair value reserves
losses from buying in selling out Other at the end
Item beginnin changes withdraw
changes in during the during the changes of the
g of the recognized in n during
fair value period period period
period equity the
period
Financial
assets
Including:
Other equity 241,675, -7,557,508. 3,252,055.1 5,413,028 225,453,1
-7,557,508.15
instrument 712.05 15 9 .66 20.05
investments
241,675, -7,557,508. 3,252,055.1 5,413,028 225,453,1
Total -7,557,508.15
712.05 15 9 .66 20.05
Financial
0.00 0.00
liabilities
Other changes
None
51
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Whether there are significant changes in the main asset measurement attribute of the Company during the Report Period.
□ Yes √ No
3. Limitation of asset rights at the end of the reporting period
Unit: RMB yuan
Item Book value at the end of the period Reason for limitation
Monetary funds 40,673,924.56 Cash deposit
Bills receivable 2,648,002.20 Bill pledge
Fixed assets 32,222,155.71 Mortgage guarantee for borrowing
Intangible assets 4,428,290.15 Mortgage guarantee for borrowing
Total 79,972,372.62
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)
2,195,588,789.55 1,965,240,000.00 11.72%
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 Pro or loss
of Progress as ject of Involve Disclos
Main Way of Investm Shareh Term of Disclos
investe Capital Product of the ed investm d in ure
busines investm ent olding Partner investm ure date
d source type balance inc ent in litigatio index
s ent amount ratio ent (if any)
compan sheet date om the n or not (if any)
y e current
period
Chongq R&D Capital http://w
All
ing of increas Own No ww.cni
21,000 39.80% / / Equity payments / No N/A
Peg-Bi biologi e and funds profit nfo.co
completed
o cal equity for the m.cn
52
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Biopha chemic transfer time
rm Co., al being
Ltd. product
and
technol
ogies;
R&D
of
ferment
ation
process
optimiz
ation
technol
ogy
http://w
Biologi Capital
Qyuns No ww.cni
cal increas All August
Therapeu 37,000. Own profit nfo.co
medicin e and 20.56% / / Equity payments / No 18,
tics Co., 00 funds for the m.cn
e R&D, equity completed 2020
Ltd. time
etc. transfer
being
http://w
Aesthet No ww.cni
Kylane EUR6, All October
ic Acquisi Own profit nfo.co
Laborato 000,00 20.00% / / Equity payments / No 16,
medicin tion funds for the m.cn
ires SA 0 completed 2020
e R&D time
being
Notes: 1. Zhongmei Huadong, a wholly-owned subsidiary of the Company, invested a total of RMB210 million to Peg-Bio Biopharm
Co., Ltd. (Chongqing) by means of capital increase and acquisition of minority holding twice, and acquired 39.80% of its equity,
becoming its second largest shareholder. As of December 31, 2020, Zhongmei Huadong had paid all the investment funds, and
Peg-Bio Biopharm Co., Ltd. (Chongqing) had completed the relevant industrial and commercial change registration.
2. Zhongmei Huadong, a wholly-owned subsidiary of the Company, contributed RMB370 million to invest in the stock equity of
Qyuns Therapeutics through the form of capital increase, and held 20.56% of its equity after investment, becoming its second largest
shareholder. As of December 31, 2020, Zhongmei Huadong had paid all the investment funds, and Qyuns Therapeutics had
completed the relevant industrial and commercial change registrat ion.
3. Sinclair, a wholly-owned subsidiary of the Company, entered into an agreement on equity investment and collaborative product
development with Kylane Laboratoires SA, a Swiss advanced aesthetic medicine R&D firm. Sinclair contributed EUR6 million for a
20% equity in Kylane, making it Kylane’s third-largest shareholder. As of December 31, 2020, all the investment funds had been
paid.
4. In April 2019, the Company entered into a strategic partnership with R2, an American company specializing in the development of
medical devices and technologies related to frozen freckle-removing and whitening. The Company invested USD30 million in R2’s
equity and became a shareholder. As of the reporting date, the USD30 million for equity investment had been fully paid out and the
Company held a 34% equity upon completion of the investment.
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
5. In July 2019, the Company entered into a strategic cooperation with MediBeacon, a US company dedicated to the development of
contrast agents and equipment in the medical field such as renal function and gastrointestinal function evaluation, and invested
USD30 million in its stock equity. As of the end of the reporting period, the Company had paid USD15 million to MediBeacon,
accounting for 4.30% of its shares, and the remaining USD15 million will be paid as agreed in the contract.
3. Significant non-equity investments in progress during the reporting period
√ Applicable □ N/A
Unit: RMB yuan
Cumulati
Cumulati Reasons
ve actual
Investme ve for not
Industry investme
Investme nt income meeting
involved nt
Way of nt in amount realized the Disclosu Disclosu
Project in the amount Capital Project Projected
investme fixed during by the planned re date re index
name investme by the source progress income
nt assets or the end of schedule (if any) (if any)
nt end of
not reporting the and
project the
period reporting projected
reporting
period income
period
Huadong March 9, http://w
Medicin 2017 ww.cninf
e o.com.cn
Biomedi
Pharmac
cal
Self-built eutical 387,907, 1,716,33 Own
Science Yes 90.00% / / N/A
project manufact 668.09 1,906.80 funds
and
uring
Technolo
gy Park
Project
Phase II
387,907, 1,716,33
Total -- -- -- -- -- / / -- -- --
668.09 1,906.80
4. Investment in financial assets
(1) Securities Investment
√ Applicable □ N/A
Unit: RMB yuan
Stock Initial Account Book Gain/los Accumu Purchas Selling Gain/los Book
Type of Stock Account Capital
abbrevia investm ing value at s from lative e amount s during value at
stock code ing item source
tion ent cost measure the fair fair amount in the the the end
54
The 2020 Annul Report of Huadong Medicine Co., Ltd.
ment beginni value value in the current reportin of the
model ng of changes changes current period g period period
the in the included period
period current in
period equity
Dome Other
Fair
stic equity
20,20 value 42,00 -9,76 -9,76 8,665, 23,58
and instru Own
RAPT RAPT 7,400. measu 9,254. 1,293. 1,293. -- 083.8 -- 2,877.
overs ment funds
00 remen 79 38 38 5 56
eas invest
t
stock ment
Other securities
investments held at the -- -- --
end of the period
20,20 42,00 -9,76 -9,76 8,665, 23,58
Total 7,400. -- 9,254. 1,293. 1,293. -- 083.8 -- 2,877. -- --
00 79 38 38 5 56
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: In 2019, 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 0.74% 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..
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
VI. Major assets and equity sales
1. Major assets sales
□ Applicable √ N/A
No such case during the reporting period.
2. Major equity sales
□ Applicable √ N/A
VII. Analysis of wholly-partially owned and shareholding companies
√ Applicable □ N/A
Main subsidiaries and the shareholding companies that have an impact on the Company’s net profit of more than 10%
Unit: RMB yuan
Company 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
9,552,485,03 6,943,175,42 11,040,482,0 2,683,887,25 2,332,440,96
Huadong Subsidiary Western raw 872,308,130
6.62 2.15 97.70 7.80 7.67
Pharmaceutic medicines
al Co., Ltd. and
preparations,
and health
care products
Huadong Sales of
Ningbo biological 1,004,249,30 564,257,925. 1,284,921,26 164,162,105. 123,375,008.
Subsidiary 5,000,000
Medicine products as 6.28 95 2.37 58 73
Co., Ltd. proxy
Wholesale of
TCM
materials,
Huadong
TCM
Medicine 1,206,969,15 231,107,415. 2,519,633,08 42,021,431.2 28,705,403.6
Subsidiary decoction 61,300,000
Wenzhou 9.63 39 0.86 4 6
pieces,
Co., Ltd.
chemical
preparations,
etc.
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Huadong
Medicine
Warehousing
Supply Chain 239,818,600. 129,389,498. 164,492,370. 25,093,155.0 17,393,751.7
Subsidiary and storage 50,729,863
Management 19 43 77 0 6
services
(Hangzhou)
Co., Ltd.
R&D,
production
Sinclair
and sales of 219,962,963. 975,941,324. 493,007,584. 319,167,474. 146,645,400. 109,468,406.
Pharma Sub-subsidiary
aesthetic 92 76 35 26 16 19
Limited
medicine
products
Acquisition and disposal of subsidiaries during the reporting period
√ Applicable □ N/A
Methods of acquisition and disposal of Impact on the overall production,
Company name
subsidiaries during the reporting period operation and performance
MediBeacon Technology (Shanghai) Business operation of medical apparatus
New subsidiary
Co., Ltd. and instruments of the Company
Zhejiang Huida Biotech Co., Ltd. Technology innovation platform in the
New subsidiary field of microbial pharmacy the
Company
Shenzhen Xinda Yanchuang Technology External technical services and
New subsidiary
Development Co., Ltd. cooperation
Sinclair Pharmaceuticals (Asia-Pacific) International aesthetic medicine business
Pte Ltd. New subsidiary expansion of subsidiaries of the
Company
Sinclair Chile SPA International aesthetic medicine business
New subsidiary expansion of subsidiaries of the
Company
Sinclair (Shanghai) Medical Technology International aesthetic medicine business
Co., Ltd. New subsidiary expansion of subsidiaries of the
Company
R2 (Shanghai) Medical Technology Co., International aesthetic medicine business
Ltd. New subsidiary expansion of subsidiaries of the
Company
Beijing Huachuang Dongxin External technical services and
New subsidiary
Technological Development Co., Ltd. cooperation
Huadong Medicine Medical Equipment Commercial business adjustment of the
Cancellation
Technology (Hangzhou) Co., Ltd. Company
Ningbo Sinfmuse Medical Investment Cancellation Commercial business adjustment of the
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Management Co., Ltd. Company
Huadong Medicine Wuhan Commercial business adjustment of the
Cancellation
Pharmaceutical Co., Ltd. Company
Note: Sinclair (Shanghai) Medical Technology Co., Ltd. was renamed as Xinkeli Aesthetics (Shanghai) Medical Technology Co., Ltd.
on April 1, 202
VIII. Structured entities controlled by the Company
□ Applicable √ N/A
IX. Prospect of the Company’s future development
1. Development status and prospect of macro economy and pharmaceutical industry
In 2020, the sudden outbreak of the COVID-19 pandemic was intertwined with the world’s
seismic changes not seen for a century, bringing a huge impact to the world. The pandemic has had
a serious impact on people’s life, health and economic activities, which has aggravated the already
weak world economy. Economic globalization has encountered headwinds. The international
environment is becoming more and more complex. The world has entered a period of turbulent
change, with significantly increasing instability and uncertainty. As pointed out by the Fifth Plenary
Session of the 19th CPC Central Committee, peace and development are still the theme of the ti mes,
and China’s development is still in an important strategic opportunity period. On the one hand, a
new round of scientific and technological revolution and industrial transformation has developed
deeply in the world today, and international power contrast has been profoundly adjusted. Peace and
development are still the theme of the times. The concept of a community with a shared future for
mankind has become popular, and China’s appeal and influence as a responsible large country in the
global pandemic control have increased significantly; on the other hand, China has turned to the
stage of high-quality development, with significant institutional advantages, improved governance
efficiency, long-term economic improvement, strong material basis, abundant human resources,
broad market space, strong development resilience, and social stability, and has multiple advantages
and conditions for continued development.
The Chinese government controlled the spread of COVID-19 in China in a timely manner and
achieved a rapid recovery of the national economy after the first quarter. However, the uncertainty
factors faced by the domestic economy still exist. On the one hand, the foundation of economic
recovery in China is still not solid. In the face of severe pandemic situation abroad, China still needs
to consolidate the achievements of pandemic prevention and control and socio-economic recovery.
On the other hand, external public opinions and challenges of anti-globalization and desinicization
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
are rising, and domestic enterprises are facing more business risks in both supply chain and market
environment.
In the long term, the market size of the global pharmaceutical industry will still maintain a
stable growth trend due to the growth of the total population and the aging of the population.
According to the latest data of IQVIA, the total scale of the global pharmaceutical market was close
to USD1.2 trillion in 2020, and maintained a growth rate of 3 –4% for many consecutive years. The
scale of the Chinese pharmaceutical market ranked second in the world. According to the data of the
National Bureau of Statistics, the cumulative operating income and total profit of industrial
enterprises above the scale of domestic pharmaceutical manufacturing industry in 2020 were
RMB2,485.73 billion and RMB350.67 billion, respectively, showing an increase of 4.5% and
12.8%, respectively, compared with the same period of last year. Affected by the pandemic, the
operating data of the pharmaceutical manufacturing industry were recovered in the second half of
the year after experiencing negative growth in the first half of the year, and the year-on-year growth
rate was significantly higher than the industrial growth rate above the national scale in the same
period.
With the gradual integration of drug review system with the world in China, the industrial
chain of innovative drugs has been flourishing, and the global R&D industrial chain has also begun
to shift to China. While the transfer of industrial chain has developed a large number of R&D
talents, it has also made local pharmaceutical innovation enterprises flourish. It is the key for
pharmaceutical companies to improve their pharmaceutical quality while innovating. Consumption
upgrading will further drive high growth in high-quality consumer medical track.
In 2020, China’s pharmaceutical industry played a very significant role in the process of
fighting against the pandemic. Driven by the demand for prevention and control, production was
rapidly resumed, laying an important foundation for the full recovery of the economy. China’s
pharmaceutical industry has continuously promoted high-quality and standardized development in
2020, with a solid foundation, which has become one of the important cornerstones for the steady
development of China’s economy.
According to the data of Frost & Sullivan, the revenue scale of aesthetic medicine business
service market in China reached RMB143.6 billion in 2019, and the compound annual growth rate
is expected to reach 17.3% from 2019 to 2024; among them, the growth rate of non-surgical
cosmetic diagnosis and treatment market (mainly injection and photoelectric projects) is fast. Due to
fast recovery time and low-price risk, it has become increasingly popular with consumers in recent
years, reaching a market size of RMB60 billion in 2019, with an expected compound annual growth
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
rate of 19.2% from 2019 to 2024.
2. Analysis of the developme nt trend of the pharmaceutical industry
In 2020, under the superposition of various medical reform policies, the Chinese
pharmaceutical industry was changed dramatically. As medical reform continues to be critical and
the route of deepening the reform of the medical and health system gradually becomes clear,
China’s biomedicine has entered the year of transformation. With the gradual introduction of key
policies such as consistency evaluation, drug centralized procurement, medical insurance
negotiation of innovative drugs, consumable centralized procurement and DRGs, medical reform
has entered the deep-water zone, and a new era of medicine has been ushered in. The era of high
gross profit of generic drugs has come to an end, and innovative drugs will occupy a larger market
space in the future. The Chinese pharmaceutical industry is gradually changing from “generic” to
“innovative”. With population aging in China and the substantial growth of medical insurance
expenditure, “cost control” has become the main theme of medical reform. On January 17, August
20 and November 5, 2020, the State organized the second and third round of centralized drug
procurement and centralized procurement of coronary stents, respectively, which significantly
reduced the cost of patients. The expanding and normalizing scope of centralized procurement has
become an industry consensus. In the future, injections, device consumables, insulin and other
fields will be gradually included.
2021 is the opening year of the 14th Five-Year Plan period and the turning point for the
dramatic changes in China’s pharmaceutical market landscape. It will also be a year of gr eater
change and uncertainty as the policy continues and deepens. Each link from manufacturers,
distributors to medical institutions, medical insurance supervision, doctors and patients among
others of the medical industry faces different needs for transformation and innovation. Survival of
the fittest is always the way for pharmaceutical companies to survive. In order to develop better, we
can only actively adapt to the changes in the development of the industry, and at the same time
actively make more flexible adjustments and changes in response to the market environment.
With the normalization of centralized procurement at the national level, the transmission effect
of low prices has been highlighted. The price of bid-winning drugs has been reduced to the lowest
level in history, and centralized procurement has also expanded from drugs to the field of
high-value medical consumables. In addition, the centralized procurement of provincial and
cross-provincial alliances also includes the drugs that have not passed the consistency evaluation.
The procurement variety is richer, covering a larger market, and the bid-winning rules are also
continuously optimized, forming complementarity with the national centralized procurement,
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
accelerating the change of the existing drug bidding mechanism and reshaping the drug price
system and competitive pattern. The coordinated reform of medical services, health insurance, and
the medicine industry has brought unprecedented changes in market environment and survival
challenges, urging enterprises to improve the quality of drugs in the fierce competition through
breaking through the existing production model and looking for new development focuses, thus to
further achieve innovation, transformation and upgrading.
Under the influence of domestic centralized procurement, many multinational pharmaceutical
companies are accelerating the adjustment of business models by focusing on the promotion of core
markets and optimizing product lines. In the future, focusing on core business by stripping off
non-core assets will become the norm.
From the overall point of view, the primary-level market has become a new development outlet
for pharmaceutical companies under the pressure of medical reform policies such as centralized
procurement. The change of the new medical system will definitely bring about the deconstruction
and reshaping of China’s primary-level care industry. In this context, primary-level care is bound to
become the flow entrance of future medical care, and it will also enable pharmaceutical companies
that fully lay out the primary-level market to gain more development opportunities.
Both internal pressure and pressure from foreign companies are pushing Chinese
pharmaceutical companies to make innovations. The drug review system continues to deepen
reform, which encourages pharmaceutical companies to innovate at a higher quality. The number of
new drugs entering national health insurance negotiations has increased significantly, and drug
prices have decreased rapidly, but the cos t of new drug R&D is increasing. The threshold for
domestic pharmaceutical innovation has been raised, and differentiated R&D has become the key.
The number of innovative drugs is increasing year by year, but the degree of innovation is still
insufficient. The R&D of innovative drugs is still based on chasing hot targets, especially the
crowded R&D track of anti-tumor drugs, and the homogenization phenomenon is serious, which
aggravates the market competition in the future. Therefore, the commercialization prospect is not
optimistic.
The licensing and cooperative development of innovative drug projects between Chinese
pharmaceutical companies and various countries is increasingly active. Under the background of the
“innovation plus internationalization” journey, the R&D capacity, commercialization, talent and
business layout, strategic cooperation and globalization of capital of local innovative drug
enterprises will be the key elements for the success of internationalization strategy in the future.
The Company has formulated a brand-new development strategy based on the pharmaceutical
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
and health industry, led by the pharmaceutical industry, while expanding the pharmaceutical
business and aesthetic medicine business, adhering to the scientific research-based and
patient-centered corporate philosophy, and becoming an international brand pharmaceutical
powerhouse driven by scientific research innovation.
3. Development plan for pharmaceutical innovation of the Company
(1) Focusing on the core therapeutic field, the Company plans to move from producing generic
drugs to innovative drugs, and from following to leading. In the future, the Company will be
oriented to meeting clinical needs in scientific research and innovation. In the project approval and
decision-making of new drug R&D, the Company will take innovation and differentiation as the
scale, based on clinical value, clinical pharmacoeconomic value, and commercial value of products,
and focus on the long-term pipeline layout, adhere to the upgrading of generic drugs and the
development of innovative drugs. The R&D of generic drugs should be highly technical,
differentiated, fast and cost effective, while the R&D of innovative drugs should have a high
starting point, wide track, new targets and international participation. We take innovative drugs as
the basis and direction to build our future core competitiveness, focus on and emphasize the
development of innovative drugs and high-tech barrier generic drugs with outstanding clinical value
in major diseases and chronic diseases such as anti-tumor, endocrine and autoimmune, and closely
follow the technical development and R&D trends in the cutting-edge fields of biological drugs,
gene therapy and antibody drugs at home and abroad. With a scientific and pragmatic attitude,
based on our own capabilities and risk matching, we will start from differentiated innovation,
gradually move towards the first of the same kind/the best breakthrough innovation model of the
same kind, accelerate the pace of integration into the innovation chain and value chain of global
new drug innovation, and eventually move from Chinese innovation to global innovation, so as to
continuously improve the innovation level of the Company to a new height.
(2) The Company will continuously increase R&D investment and enrich and optimize product
pipelines. Since 2020, we have strived to invest more than 10% of the sales revenue of the
pharmaceutical industry in R&D each year to provide sufficient material guarantee for innovation.
While increasing the investment, we will continue to improve the efficiency of the use of R&D
funds. Through independent project approval and external introduction, we will strive to complete
at least 15 innovation projects (including drugs, medical devices, etc.) every year, of which the
project approval of no fewer than 3 innovative drugs, so that each existing product line has the
supplement and guidance of innovative products, eventually building a rich product pipeline and a
good product ladder, forming a benign development rhythm of continuous marketing of innovative
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
products since 2022, and striving to achieve the phased goal that the innovation business sector
accounts for 30% of the overall industry in 2025.
(3) The Company will accelerate the introduction of high-level talents and building high-level
scientific research teams. Focusing on introducing R&D leaders and high-level R&D technical
talents with rich experience, we will strengthen the building of internal R&D system and technical
platform, and actively promote the building of domestic and overseas R&D platform. We will create
an innovative cultural environment and atmosphere that is bold in innovation, encourages success,
and tolerates failure, and establish a market-oriented performance mechanism oriented to success.
We will build a scientific research team with outstanding ability, open thinking, passion, courage,
pioneer and innovation, and promote the real implementation of the Company’s innovation
internationalization strategy. We will establish a dynamic evaluation mechanism for R&D projects,
and assist the Company in decision-making and management of R&D and product introduction by
establishing an external expert academic committee to ensure the scientific nature, advancement
and feasibility of scientific research and innovation.
(4) The Company will deepen comprehensive cooperation with foreign partners and product
introduction, and build a global R&D strategic cooperation ecosystem centered on Zhongmei
Huadong. Integrating and connecting external advantageo us resources and technologies, we will
promote the introduction and development of high-quality innovation projects through cooperative
development, licensing or acquisition, continuously enrich the Company’s product pipelines and
improve the medium- and long-term layout of innovative products. At the same time, we will also
continue to improve the international operation capacity of our products, and license our own
advantageous products, advanced technologies and patents.
Development plan of Huadong business:
We will take service as the core and transform with innovation. Adhering to in-depth
development in Zhejiang, we will continue to enhance the brand influence, and maintain the leading
position of the industry in Zhejiang. Instead of pursuing simple scale expansion, scale and benefits
should be paid equal attention. We will pursue high-quality and sustainable benefits through refined
management. We will improve the modern pharmaceutical logistics network covering Zhejiang
Province, make every effort to build a high-end third-party pharmaceutical logistics featuring cold
chain and improve value-added service capacity. With the help of commercial forces to drive
market networks and channel resources, we will transform and improve traditional business model s,
actively develop new business models such as general agent, business trusteeship, and BTC
pharmacy, and cultivate innovative businesses. We will consolidate the in-hospital market, expand
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
the out-of-hospital market, use the Internet platform, and innovate the services for suppliers through
big data, AI, Internet of Things and other new technologies. We will also extend the service supply
chain, and accurately connect downstream medical institutions and upstream pharmaceutical
enterprises, so as to gradually develop towards modern pharmaceutical professional value-added
services and take the path of sustainable development.
Business developme nt plan for the aesthetic medicine business:
The Company’s aesthetic medicine business adopts the strategy of “global operation layout and
dual-circulation operation and development”. Take Sinclair, a core subsidiary, as the global
operating platform to realize the global operating layout of aesthetic medicine business, we will
build it into an international first-class aesthetic medicine business enterprise and create a new
development space in the future. As a special market for the Company’s aesthetic medicine business,
the Chinese market has successively introduced the products with high scientific and technological
content and great market potential. We will steadily expand the Chinese market with the help of the
Company’s registration and marketing strength in China; internationally, relying on the Company’s
domestic aesthetic medicine business marketing basis and the rapid development of the aesthetic
medicine business industry, we will help the rapid implementation and commercialization of
international high-quality products, so as to form a new pattern of joint development and mutual
promotion of domestic and international circulations.
In the future, the Company will continue to focus on the global high-end market of aesthetic
medicine business, relying on four global R&D centers: wholly-owned subsidiaries Sinclair (UK),
High Tech (Spain) and partially-owned companies R2 (US) and Kylane (Switzerland), to further
integrate R&D resources and capacity, actively optimize and improve product structure, and enrich
and improve industrial layout. The five global production bases located in the Netherlands, France,
the United States, Switzerland and Bulgaria will provide a strong capacity guarantee for the
internationalization of the Company’s aesthetic medicine business products and better meet the
future development and market demand.
4. The Company’s business plan for 2021
2021 is a key year for Huadong Medicine’s innovation, transformation and reform to enter the
deep-water zone, and it is also the closing year of the sixth three-year plan. The severe challenges
brought about by policy changes and industry competition in the domestic pharmaceutical industry
will continue, and the Company will face greater business difficulties and policy uncertainties.
Although the positive conditions and favorable factors to promote operation are also gradually
gathering, Zhongmei Huadong will still face major challenges of declining growth rate in its annual
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
operation due to the prominent phased impact of the price reduction of key products on the
Company’s operation. The Company has formulated specific plans and assessment plans for vari ous
work, striving to maintain the continued growth of the overall business of the pharmaceutical
industry throughout the year. All officials and employees are required to further change their
mindset, clarify their own positioning, stimulate their own vitality, innovate their own value and
realize their own transformation with a more open, proactive and enterprising spirit under the
annual business working policy of “repositioning, reshaping value, stimulating vitality and
deepening transformation”. We will continue to maintain a brave and determined work style, so as
to broaden the horizon and pursue excellence. We will work with the momentum of no time to lose
and size the day to revive the entrepreneurial spirit of Huadong Medicine, create a new pattern of
the development of Huadong Medicine, and reshape the core competitiveness of Huadong
Medicine.
(1) Pharmaceutical industry:
We will promote the transformation of production system from cost center to profit center. In
2021, we will continue to optimize the production layout combining “self-built production parks”
with “outsourced production sites”, align with the advanced, improve the light asset production and
operation system, and do a good job in production planning and resource allocation. We will cr eate
an engineer culture, build agile production, lean material procurement, production organization and
product delivery, continuously save production costs, improve per capita labor efficiency, and
develop new business and create new value for the Company. Since production system preparations,
raw materials and various technology platforms are important links in the global pharmaceutical
manufacturing industry chain, we will strive to explore new moats and create more profit points in
multiple ways and in multiple fields, and make concerted efforts in BD, quality, patent, R&D and
manufacturing departments to accelerate CMO/CDMO projects and open up international markets
to make a major breakthrough in international business development in 2021.
We will make overall plans to promote fixed asset investment projects, and focus on doing a
good job in the construction of Huadong Medicine Life Sciences Industrial Park, Jiangdong Phase
II, International R&D and Manufacturing Center for Preparations, industrialization of Semaglutide
APIs and other major projects. We will strengthen the management of project progress, cost, quality
and safety, and ensure the advancement of technology while meeting the investment income
indicators.
We continue to carry out normal management, change and registration of GMP, product
transfer and entrusted production and quality group management with the overall goal of
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
“developing capacity and improving efficiency” in quality system.
(2) R&D:
We will continue to deepen the reform of R&D system, introduce international, professional
and innovative high-quality R&D talents, enhance the overall combat ability of R&D teams by
combining introduction and training, and form a refined and efficient R&D team with international
vision. We will further optimize the R&D process, improve the R&D efficiency, promote the R&D
internal order system, open up to undertake external R&D projects on the basis of ensuring the
progress and quality of our own projects, and enhance the market competitiveness of our R&D
organizations. We will also continue to strengthen cooperation with the world’s leading biomedical
R&D companies to explore innovative R&D models suitable for the future development of the
Company and build a unique core technology platform.
We will continuously follow up and evaluate new targets and cutting-edge technologies in the
field of global new drug R&D, and further consolidate the pipeline of innovative products through
independent R&D and external introduction. Moreover, we will accelerate the cultivation of the
Company’s R&D capabilities in early drug discovery and preclinical/translational medicine. In 2021,
we will strive to complete project approval for no fewer than 15 innovative drugs, 6 generic drugs
and 1 other new product, strive to obtain 3 manufacturing approvals, pass consistency evaluation for
at least 2 product categories, complete 25 patent applications and have 2 product international
registrations approved.
(3) Marketing and pharmaceutical services of Zhongmei Huadong:
We will accelerate the transformation of marketing strategy, implement the policy of “turning
from in-hospital to out-of-hospital and from medical insurance to self-financing”, carry out the
refined marketing of the Company’s products, and actively expand the out-of-hospital market,
primary-level market and self-financing market. We will continue to improve the sales volume in
the hospital market and primary-level market by means of four target management. We will
vigorously improve the building and personnel allocation of out-of-hospital market organizations,
expand personnel, and improve the coverage rate of key products of the Company in chain
pharmacies and terminals. We will explore the self-financing market sales model to strive to achieve
the breakthrough of self-financing market sales, and actively explore the new marketing model of
online prescription drug purchase and chronic disease management in Internet hospitals to increase
the coverage of Internet market and product sales.
(4) Management:
In 2021, the whole company should further change its concepts, advocate value culture and
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
incentive culture, and fully activate the overall organizational vitality of the Company. We will
improve the official management mechanism and accelerate the training of outstanding officials. We
will continuously build the organization competitiveness of Huadong Medicine. We will strengthen
the basic human resource management and consolidate the cornerstone of human resource
management; continue to carry out the introduction and training of core talents and accelerate the
introduction of talents in new business segments including devices, aesthetic medicine business and
Internet hospitals; and innovate the performance and salary incentive mechanism and activate the
organization through assessment;
We will adapt to the development needs of the Company, keep promoting the overall financial
planning objectives of “collective, compliant, IT-based and internationalized” management, take
value as the center and performance as the orienta tion, and make every effort to carry out four basic
tasks: energizing organization, aligning with the advanced, reducing costs and increasing efficiency,
and operating finance. We will strengthen foreign exchange, improve working standards and
requirements, vigorously improve the operation and management level of the financial system, and
build a lean and efficient financial management team. We will earnestly do a good job in the
building of the budget system based on value management, fully participate in the operation,
provide decision support, promote efficiency improvement, and create financial value.
(5) Pharmaceutical business:
“Achieving four transformations, innovating for profit, and regulating for efficiency” is the
main theme of Huadong business in 2021. We shall profoundly understand industrial changes,
optimize the allocation and integration of internal resources, promote coordinated development, and
improve operating efficiency. Taking customer satisfaction as the overall goal, we will change our
operation mindset, optimize the in-hospital marketing, and layout the marketing outside the hospital.
We will take the hospital as the base, keep up with the development of the hospital and achieve a
steady increase of business; deeply explore the out-of-hospital and self-financing market; and firmly
discovery a new model of the mega health industry and do a good job in the Internet market. We
will build a province-wide market expansion network, establish three promotion teams, i.e.,
in-hospital team, private team and retail team, serve the suppliers with enriched product lines,
expand the service scope and cultivate new profit models by relying on the advantages of “platform
+ product + network” of Huadong business. We will relocate the retail market, bui ld a new retail in
Huadong Medicine, pay close attention to the provincial expansion of OTC business, and focus on
the development of DTP, in-hospital and out-of-hospital stores and special outpatient departments.
We will also complete the layout of one DTP in one city as soon as possible to realize the varieties
and management down to the community level, incorporate subsidiary pharmacies into the retail
system of Huadong Medicine, and expand the coverage of the whole province with a unified retail
67
The 2020 Annul Report of Huadong Medicine Co., Ltd.
brand image of Huadong Medicine. Aiming at profit improvement, we will integrate the
e-commerce resources of Huadong Medicine and expand the Internet market. For instance, we will
promote “Business Network of Huadong Medicine”, build “Flagship Store of Huadong Pharmacy”,
introduce more varieties with online authorized sales, connect with “Internet plus medical care”,
and cooperate with physical medical institutions and Internet hospitals with order taking online and
delivering drugs to homes.
We shall earnestly focus on the innovative development of professional cold chain of Huadong
business cold chain, locate the precise management and control of the whole life cycle of special
drugs, continuously strengthen the competitive advantage of cold chain capacity and pr omote the
high-quality development of intelligent digital supply chain. We shall actively cultivate new
businesses, improve the logistics system of the whole province in the cold chain, enhance the
competitiveness of the tripartite businesses, and consolidate the industrial status. We will contribute
to the universal inoculation of COVID-19 vaccines, make every effort to do a good job in the
provincial distribution of COVID-19 vaccines, and ensure timely and safe delivery.
(6) Aesthetic medicine business
It is necessary to continue to improve the international operation system, focus on the
international high-end market of aesthetic medicine, further integrate R&D resources and capacities,
and continue to promote the structural adjustment of aesthetic medicine products and the innovative
business development. Efforts also should be made to actively optimize and enhance the product
structure, carry on the research and study of high-tech products and new technologies and the
project introduction in the field of aesthetic medicine all over the world, and enrich and improve the
industrial layout. Through accurate positioning, the Company gives full play to the brand value of
the products, quickly gets to the market, and creates a new pattern of aesthetic medicine in the
domestic market. It shall also accelerate the establishment of the promotion team for new products
of aesthetic medicine, and actively introduce marketing talents from external established aesthetic
medicine market. The Company shall implement the establishment of the marketing team, brand
and market communication, and communication with aesthetic medicine institutions, doctor training,
and other preparation related to launch and subsequent marketing promotion for the core products
such as Ellansé and Glacial Spa (F0) in Chinese market in 2021, realizing the quick coverage of
mid-to-high aesthetic medicine institutions and the rapid increase of sales after the products are put
into the market.
Besides, the Company shall carry out the business development planning and market
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
expansion after acquiring the equity of Spanish firm High Tech, speed up the domestic clinical
registration of Sinclair embedding product Silhouette Instalift, MaiLi hyaluronic acid of
Kylane of Switzerland, and creotoxin of Jetema of South Korea, try to lower the impact of the
COVID-19 pandemic on the domestic and overseas aesthetic medicine business of the Company,
and build a solid foundation for the normal operation after the pandemic.
X. Risks and Countermeasures
1. Industry policies and market risks
The pharmaceutical industry is one of the industries influenced by national policies in the
deepest manner. In recent years, the reform in the area of medical health has been deepened
continuously with various policies introduced intensively, and the State has conducted the
regulation and supervision of the pharmaceutical industry in a stricter manner. The pharmaceutical
market is facing many uncertainties due to the trend of the normalization of the COVID-19
pandemic. With the further promotion of the policies such as volume-based procurement and health
insurance negotiation, the production costs and profitability in the pharmaceutical industry are also
facing challenges.
Countermeasures:
The Company will pay close attention to and study the national pharmaceutical policies and
industrial development trends, increase the investment in R&D, speed up the layout of innovative
varieties, enrich the product pipelines, and optimize the product structure. At the same time, it shall
maintain lean production to realize lower costs and risks and higher efficiency in production and
operation. Besides, it will make great efforts to expand the primary-level and self-funded market to
increase the market coverage. Its task is also to continue to excavate the dominant products and
subdivision of aesthetic medicine, improve brand competitiveness, and create new profit points.
2. New drug R&D risk
The R&D of new medicine has the characteristics of high technology and high risks. The
innovative drug products also experience long cycle and various links including R&D at the early
stage, technology development, clinical trials, registration, and launch, and are subject to preclinical
research, clinical trials, registration and declaration, production approval and other processes, which
are time-consuming and have many uncertainties and risks in the process. In addition, the R&D of
new medicine has extremely high requirements of personnel quality, and is apt to be affected by
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
factors such as policies, approval, and technologies. The R&D expenses at the early stage will lead
to some pressure on the Company for the current operation goal, meanwhile, the new medicine after
its launch will be subject to the testing of market demands, which may result in consequences such
as the return of the R&D investment lower than expectation, and the negatively affected
profitability.
Countermeasures:
The Company will enrich and optimize the product pipelines, adopt generic drugs and
innovative drugs with high barriers, and stoutly eliminate outmoded varieties through independent
project approval and external introduction. It will also proactively promote the R&D system
establishment of international innovative drugs, continuously conduct dynamic optimization and
adjustment of the Company’s entire R&D system and framework, and improve the scientific and
dynamic investigation, assessment, and decision-making system, based on the increasing
investment in R&D of new medicine. The Company aims to continue to introduce high-level R&D
talents, strengthen the cultivation and incentive of internal talents, create a scientific research team
covering the whole cycle of new medicine R&D, and promote the establishment of the high-level
pharmaceutical R&D base.
3. Price reduction risk
With the more intensive competition in the pharmaceutical market, and more deepening
medical insurance fee control, and the comprehensive launch of the national policies for
volume-based procurement, the Chinese pharmaceutical market has entered into a stage of steady
development when generic drugs have fallen from the golden age to the age with low profitability.
With the foreign-invested enterprises targeting at the domestic market, the competition in the area
of innovative drugs is more intensive. The national policies of medical insurance negotiation also
have a profound impact on the pricing of innovative drugs, and the innovative drugs also face the
risks of price reduction.
Countermeasures:
The Company will actively handle the changes in policies and market to enhance the
technological quality advantages mainly driven by scientific R&D and technological innovation in
line with the international standards. It will accelerate the transformation of marketing strategies,
carry out the delicacy marketing of the Company’s products, and actively explore the marketing
mode of the self-financing market, and new marketing mode of medicine purchase with the online
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
hospital prescription and chronic disease management. It will also adopt primary-level marketing
channels and academic promotion, enhance the market expansion, enlarge the market coverage, and
increase the market access capacity.
4. Risk of change in exchange rate
The changes in exchange rate have a profound and long-lasting impact on enterprises, which
can not only bring good economic benefits but also cause serious economic risks. With the
continuous promotion of the Company’s internationalization, international cooperation and
communication have increased continuously with the aesthetic medicine marketing network
covering all around the world, and the proportion of business settled by foreign currencies is
increasing. The changes in exchange rate will have an impact on the asset, liability, and benefits of
enterprises, further affecting the operation capacity, debt repayment capacity, and profitability.
Countermeasures:
The Company will pay attention to the changes in exchange rate all the time, and adjust the
operation strategies and resolve negative impacts in a timely manner based on its own condition. It
will foster the awareness of curreny risk prevention, and create a sound management system of
foreign exchange risks while strengthening the professional skills of financial personnel and the
training of risk awareness, and avoiding risks by means of financial methods.
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
Main content
of discussion Index of basic
Reception Reception Type of Reception
Reception Method and information of the
Date Adress visitor object
information research
provided
Company Institution Industrial Interpretation Please refer to
conference Securities, of the bidding “Huadong Medicine:
January 19, room Communication by etc. results of 000963 Huadong
2020 phone Huadong Medicine information
Medicine on research activities:
attending the January 19, 2020”
71
The 2020 Annul Report of Huadong Medicine Co., Ltd.
national presented on the
centralized websites of
medicine irm.cninfo.com.cn
procurement and cninfo.com.cn
for details.
Company Institution China Interpretation Please refer to
conference Internationa of 2019 “Huadong Medicine:
room l Capital Annual Report record of investor
Corporation and 2020 First relations activities:
Communication by Limited., Quarterly April 30, 2020”
April 30, 2020
phone etc. Report of presented on the
Huadong websites of
Medicine irm.cninfo.com.cn
and cninfo.com.cn
for details.
Company Institution Zhongtai Activities of Please refer to
conference Securities, investors’ “Huadong Medicine:
room etc. reception day record of investor
of the relations activities:
Company June 5, 2020
(investor reception
June 5, 2020 Field research
day activities)”
presented on the
websites of
irm.cninfo.com.cn
and cninfo.com.cn
for details.
Company Institution Industrial Please refer to
conference Securities, “Huadong Medicine:
room etc. record of investor
relations activities:
August 28, Communication by August 28, 2020”
2020 phone presented on the
websites of
irm.cninfo.com.cn
and cninfo.com.cn
for details.
Company Institution UBS Interpretation Please refer to
conference Securities, of 2020 Half “Huadong Medicine:
September 2, room Communication by etc. Year Report of record of investor
2020 phone Huadong relations activities:
Medicine September 2, 2020”
presented on the
72
The 2020 Annul Report of Huadong Medicine Co., Ltd.
websites of
irm.cninfo.com.cn
and cninfo.com.cn
for details.
Company Institution Changjiang Online For details, please
conference Securities, discussion on refer to “Huadong
room etc. China Medicine: record of
A-shares investor relations
October 27, Communication by activities: October
2020 phone 27, 2020” presented
on the websites of
irm.cninfo.com.cn
and cninfo.com.cn
for details.
Company Institution Industrial Interpretation Please refer to
conference Securities, of 2020 Third “Huadong Medicine:
room etc. Quarterly 000963 Huadong
Report of Medicine information
Haudong on research activities:
November 3, Communication by
Medicine November 3, 2020”
2020 phone
presented on the
websites of
irm.cninfo.com.cn
and cninfo.com.cn
for details.
Company Institution RoyalFlush Special Please refer to
conference , etc. communicatio “Huadong Medicine:
room n on aesthetic record of investor
medicine relations activities:
November 10, business of the November 10, 2020”
Field research
2020 Company presented on the
websites of
irm.cninfo.com.cn
and cninfo.com.cn
for details.
Company Institution Goldman “Activities for Please refer to
conference Sachs, etc. Listed “Huadong Medicine:
room Companies” – record of investor
November 18, Communication by Huadong relations activities:
2020 phone Medicine November 18, 2020”
presented on the
websites of
irm.cninfo.com.cn
73
The 2020 Annul Report of Huadong Medicine Co., Ltd.
and cninfo.com.cn
for details.
Company Institution Industrial Online Please refer to
conference Securities, communicatio “Huadong Medicine:
room Founder n of 2020 record of investor
Securities, Goldman relations activities:
Field research and
November 19, etc. Sachs Asia November 19, 2020”
Communication by
2020 Pacific presented on the
phone
Medical websites of
Investors irm.cninfo.com.cn
Summit and cninfo.com.cn
for details.
Number of receptions 10
Number of institutions received 1,200
Number of individuals received 100
Number of other visitors received 0
Has any undisclosed important information been
disclosed, revealed or divulged? No
74
The 2020 Annul Report 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 po licy,
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 conve rsion
(preplan) in recent three years (including the current reporting period):
(1) 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;
(2) 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.
(3) The Company’ s distribution plan for 2020: Based on the total share capital of 1,749,809,548 shares, 2.3 yuan (tax included) is
paid as a cash dividend for every 10 shares; the total share dividend distributed is 402,456,196.04 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 2020 Annul Report 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
2,819,861,203.
2020 402,456,196.04 14.27% 0.00 0.00% 402,456,196.04 14.27%
63
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
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) 2.3
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) 402,456,196.04
Cash dividends by other means (such as share
0.00
repurchase) (yuan)
Total cash dividends (yuan) 402,456,196.04
Distributable profit (yuan) 4,303,533,798.88
Proportion of total cash dividends (including those 100%
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The 2020 Annul Report 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 2020: Based on the total share capital of 1,749,809,548 shares, 2.3 yuan (tax included)
is paid as a cash dividend for every 10 shares; the total share dividend distributed is 402,456,196.04 yuan, and 0 shares are added
for every 10 shares by capital reserve conversion.
III. Fulfillment of commitme nts
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
Term of
Commitmen Type of Details of Date of Fulfilled or
Commitment commitmen
t maker commitment commitment commitment unfulfilled
t
Share reform N/A N/A N/A N/A N/A
A commitment made in the report
of acquisition or the report of N/A N/A N/A N/A N/A
change in equity
A commitment made in assets
N/A N/A N/A N/A N/A
restructuring
A commitment made at the time of
an initial public offering or N/A N/A N/A N/A N/A
refinancing
Equity incentives N/A N/A N/A N/A N/A
China
Grand
Enterprises
undertakes
China Commitmen
Other commitments made to the that it has
Grand t to reducing February
Company’ s small and medium no plan to 12 months Fulfilled
Enterprises, shareholdin 11, 2019
shareholders sell all of its
Inc. gs
shares in
Huadong
Medicine
within 12
77
The 2020 Annul Report of Huadong Medicine Co., Ltd.
months
from the
date of the
lifting of
restrictions
on the
non-public
offering of
shares by
Huadong
Medicine in
2016.
Huadong
Group
undertakes
that it has
no plan to
sell all of its
shares in
Huadong
Medicine
Hangzhou
Commitmen within 12
Huadong
t to reducing months February
Medicine 12 months Fulfilled
shareholdin from the 11, 2019
Group Co.,
gs date of the
Ltd.
lifting of
restrictions
on the
non-public
offering of
shares by
Huadong
Medicine in
2016.
Whether the commitment has been
Yes
fulfilled on time
If the commitment is overdue and
has not been fulfilled, the specific
reasons for unfulfillment and the N/A
future work plan should be
explained in detail.
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
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
See section 12 of financial report five important accounting policies and accounting estimates 44 for details.
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
Method of equity Time of equity
Company name Amount of capital Ratio of capital
acquisition acquisition
MediBeacon Technology (Shanghai) New subsidiary 2020.9 1,000,000.00 100.00%
Co., Ltd.
Zhejiang Huida Biotech Co., Ltd. New subsidiary 2020.1 5,100,000.00 51.00%
Shenzhen Xinda Yanchuang New subsidiary 2020.5 500,000.00 100.00%
Technology Development Co., Ltd.
79
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Sinclair Pharmaceuticals New subsidiary 2020.8 [Note ] 100.00%
(Asia-Pacific) Pte Ltd.
Sinclair Chile SPA New subsidiary 2020.9 7.5 million pesos 100.00%
Sinclair (Shanghai) Medical New subsidiary 2020.9 [Note ] 100.00%
Technology Co., Ltd.
R2 (Shanghai) Medical Technology New subsidiary 2020.9 [Note ] 100.00%
Co., Ltd.
Beijing Huachuang Dongxin New subsidiary 2020.11 [Note ] 100.00%
Technological Development Co., Ltd.
Note: No capital has been contributed as of December 31, 2020.
2. Reduction of the consolidation scope
Net profit from the
Method of equity Time of equity Net assets at disposal
Company name beginning of the period to
disposal disposal date
the disposal date
2020.11 -4,277,665.48 -503,242.26
Huadong Medicine Medical Cancellation
Equipment Technology
(Hangzhou) Co., Ltd.
2020.3 2,448,018.16
Ningbo Sinfmuse Medical Cancellation
Investment Management Co.,
Ltd.
2020.7 5,425,926.85
Huadong Medicine Wuhan Cancellation
Pharmaceutical Co., Ltd.
IX. Employme nt 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
165
domestic accounting firm
Remuneration of the domestic accounting firm (ten thousand
23
yuan)
Certified public accountants of the domestic accounting firm Wang Fukang, Xu Ping
Continuous number of years of audit services provided by
5
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)
80
The 2020 Annul Report of Huadong Medicine Co., Ltd.
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 None
certified public accountants of the overseas accounting firm (if
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. Delisting after annual report disclosure
□ Applicable √ N/A
XI. Bankruptcy reorganization
□ Applicable √ N/A
XII. Major litigation and arbitration
□ Applicable √ N/A
No such case during the reporting period.
XIII. Punishment and rectification
□ Applicable √ N/A
No such case during the reporting period.
XIV. Integrity of the Company and its controlling shareholder and actual controller
□ Applicable √ N/A
XV. Imple mentation of the Company’s equity incentive plan, e mployee stock ownership plan
or other employee incentive measures
√Applicable □ N/A
In this period, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. invested 10 million yuan to establish Zhejiang Huida
Biotechnology Co., Ltd. with a registered capital of 10 million yuan and a shareholding ratio of 100.00%. In August 2020, Han gzhou
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Zhongmei Huadong Pharmaceutical Co., Ltd. signed the team equity incentive agreement with the members of the core technology
team, which agreed that the members of the core technology team would join Hangzhou Zhongmei Huadong or Zhejiang Huida ,
Hangzhou Zhongmei Huadong transferred its 49.00% incentive equity of Zhejiang Hunda to the core technology team at the price of
1.00 yuan. Hangzhou Zhongmei Huadong recorded the difference between the incentive equity price of 1.00 yuan and the incentive
equity cost of 4899999.00 yuan into the management expenses.
XVI. Imple mentation of the Company’s equity incentive plan, employee stock ownership plan
or other employee incentive measures
√Applicable □ N/A
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. invested RMB10 million to the establishment of Zhejiang Huida Biotech
Co., Ltd. with the registered capital of RMB10 million. The shareholding ratio of Zhongmei Huadong reaches 100.00% . In August
2020, Zhongmei Huadong entered into the Team Equity Incentive Agreement with its core technical team members, specifying that
after the members join Zhongmei Huadong or Zhejiang Huida Biotech Co., Ltd., Zhongmei Huadong will transfer its 49.00%
incentive equity of Huida Biotech to the core technical team at the price of RMB1.00, and Zhongmei Huadong includes the
difference of RMB4,899,999.00 between the equity incentive price of RMB1.00 and the incentive equity costs into the management
expenses.
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
XVI. Major related transactions
1. Transactions related to daily operations
√ Applicable □ N/A
Approve
Related Wheth Settleme
Proportio d Available
transacti er it nt
Type of Pricing Price of n in the transacti market
Content of on exceed method Date of
Related Relationshi related principles for related amount on prices of
related amount s the of disclosu Disclosure index
party p transactio related transacti of similar amount similar
transaction (ten approv related re
n transaction on transactio (ten transactio
thousan ed transacti
ns thousan ns
d yuan) amount on
d yuan)
Market price
determined
Subsidiary
by the Cash,
Grandphar of the April cninfo
Drug Drug Company’s Market banker’s Market
ma (China) Company’s 6,343.28 0.28% 5,000 Yes 28, (http://www.cninfo.co
purchase purchase related price acceptan price
Co., Ltd. controlling 2020 m.cn)
transaction ce bill
shareholder
decision-mak
ing process
Market price
determined
Sichuan Subsidiary
by the Cash,
Yuanda of the April cninfo
Drug Drug Company’s Market banker’s Market
Shuyang Company’s 5,977.15 0.27% 5,500 Yes 28, (http://www.cninfo.co
purchase purchase related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd. shareholder
decision-mak
ing process
83
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Market price
determined
Hangzhou
Joint by the Cash,
Jiuyuan April cninfo
venture of Drug Drug Company’s Market banker’s Market
Gene 4,334.04 0.19% 8,500 No 28, (http://www.cninfo.co
the purchase purchase related price acceptan price
Engineering 2020 m.cn)
Company transaction ce bill
Co., Ltd.
decision-mak
ing process
Market price
determined
Beijing Subsidiary
by the Cash,
Grand of the April cninfo
Drug Drug Company’s Market banker’s Market
Johamu Company’s 2,695.87 0.12% 4,500 No 28, (http://www.cninfo.co
purchase purchase related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd. shareholder
decision-mak
ing process
Market price
determined
Subsidiary
Penglai by the Cash,
of the April cninfo
Nuokang Drug Drug Company’s Market banker’s Market
Company’s 2,082.01 0.09% 2,400 No 28, (http://www.cninfo.co
Pharmaceuti purchase purchase related price acceptan price
controlling 2020 m.cn)
cal Co. Ltd. transaction ce bill
shareholder
decision-mak
ing process
Yunnan Subsidiary Market price
Cash,
Leiyunshan of the determined April cninfo
Drug Drug Market banker’s Market
g Lixiang Company’s by the 1,414.59 0.06% 1,200 Yes 28, (http://www.cninfo.co
purchase purchase price acceptan price
Pharmaceuti controlling Company’s 2020 m.cn)
ce bill
cal Co., Ltd. shareholder related
84
The 2020 Annul Report of Huadong Medicine Co., Ltd.
transaction
decision-mak
ing process
Market price
determined
Hangzhou Subsidiary
by the Cash,
Grand of the April cninfo
Drug Drug Company’s Market banker’s Market
Biologic Company’s 1,108.19 0.05% 350 Yes 28, (http://www.cninfo.co
purchase purchase related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Inc shareholder
decision-mak
ing process
Market price
Wuhan determined
Subsidiary
Grand by the Cash,
of the April cninfo
Pharmaceuti Drug Drug Company’s Market banker’s Market
Company’s 1,064.18 0.05% 700 Yes 28, (http://www.cninfo.co
cal Group purchase purchase related price acceptan price
controlling 2020 m.cn)
Sales Co., transaction ce bill
shareholder
Ltd. decision-mak
ing process
Market price
Shenyang determined
Subsidiary
Yaoda by the Cash,
of the April cninfo
Leiyunshan Drug Drug Company’s Market banker’s Market
Company’s 531.34 0.02% 500 Yes 28, (http://www.cninfo.co
g purchase purchase related price acceptan price
controlling 2020 m.cn)
Pharmaceuti transaction ce bill
shareholder
cal Co., Ltd. decision-mak
ing process
Leiyunshan Subsidiary Drug Drug Market price Market Cash, Market April cninfo
399.91 0.02% 300 Yes
g of the purchase purchase determined price banker’s price 28, (http://www.cninfo.co
85
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Pharmaceuti Company’s by the acceptan 2020 m.cn)
cal Group controlling Company’s ce bill
Co. Ltd. shareholder related
transaction
decision-mak
ing process
Market price
determined
Shanghai Subsidiary
by the Cash,
Xudong of the April cninfo
Drug Drug Company’s Market banker’s Market
Haipu Company’s 394.89 0.02% 400 No 28, (http://www.cninfo.co
purchase purchase related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd shareholder
decision-mak
ing process
Market price
determined
Guangdong Subsidiary
by the Cash,
Leiyunshan of the April cninfo
Drug Drug Company’s Market banker’s Market
g Company’s 254.79 0.01% 100 Yes 28, (http://www.cninfo.co
purchase purchase related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd. shareholder
decision-mak
ing process
Market price
Xi'an Subsidiary determined
Cash,
Yuanda new of the by the April cninfo
Drug Drug Market banker’s Market
Beilin Company’s Company’s 167.41 0.01% 420 No 28, (http://www.cninfo.co
purchase purchase price acceptan price
Pharmaceuti controlling related 2020 m.cn)
ce bill
cal Co., Ltd shareholder transaction
decision-mak
86
The 2020 Annul Report of Huadong Medicine Co., Ltd.
ing process
Market price
determined
Changshu Subsidiary
by the Cash,
Leiyunshan of the April cninfo
Drug Drug Company’s Market banker’s Market
g Company’s 126.48 0.01% 150 No 28, (http://www.cninfo.co
purchase purchase related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd. shareholder
decision-mak
ing process
Market price
determined
Changchun Subsidiary
by the Cash,
Leiyunshan of the April cninfo
Drug Drug Company’s Market banker’s Market
g Company’s 102.24 0.00% 110 No 28, (http://www.cninfo.co
purchase purchase related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd. shareholder
decision-mak
ing process
Hangzhou Market price
Huadong Subsidiary determined
Medicine of the by the Cash,
April cninfo
Group Company’s Drug Drug Company’s Market banker’s Market
79.51 0.00% 0 Yes 28, (http://www.cninfo.co
Guizhou second purchase purchase related price acceptan price
2020 m.cn)
TCM largest transaction ce bill
Developme shareholder decision-mak
nt Co., Ltd. ing process
Grandphar Subsidiary Market price Cash,
April cninfo
ma of the Drug Drug determined Market banker’s Market
11.58 0.00% 0 Yes 28, (http://www.cninfo.co
Huangshi Company’s purchase purchase by the price acceptan price
2020 m.cn)
Feiyun controlling Company’s ce bill
87
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Pharmaceuti shareholder related
cal Co., Ltd. transaction
decision-mak
ing process
Market price
determined
Xi'an Subsidiary
by the Cash,
Yuanda of the April cninfo
Drug Drug Company’s Market banker’s Market
Detian Company’s 0.29 0.00% 0 Yes 28, (http://www.cninfo.co
purchase purchase related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd shareholder
decision-mak
ing process
Market price
determined
Subsidiary
Beijing by the Cash,
of the April cninfo
Huajin Drug Drug Company’s Market banker’s Market
Company’s 39.11 0.00% 50 No 28, (http://www.cninfo.co
Pharmaceuti purchase purchase related price acceptan price
controlling 2020 m.cn)
cal Co., Ltd transaction ce bill
shareholder
decision-mak
ing process
Market price
determined
Hangzhou
by the Cash,
Junlan April cninfo
Shareholdin Drug Company’s Market 12,416.1 banker’s Market
Pharmaceuti Drug sales 0.37% 11,000 Yes 28, (http://www.cninfo.co
g enterprise sales related price 4 acceptan price
cal Trading 2020 m.cn)
transaction ce bill
Co. Ltd.
decision-mak
ing process
Hangzhou Subsidiary Drug Drug sales Market price Market 1,014.18 0.03% 920 Yes Cash, Market April cninfo
88
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Tangyangyu of the sales determined price banker’s price 28, (http://www.cninfo.co
an TCM Company’s by the acceptan 2020 m.cn)
Outpatient joint Company’s ce bill
Department venture related
Co., Ltd. Hangzhou transaction
Tangyangyu decision-mak
an ing process
Pharmaceuti
cal Co., Ltd.
Market price
determined
Hangzhou
Joint by the Cash,
Jiuyuan April cninfo
venture of Drug Company’s Market banker’s Market
Gene Drug sales 491.69 0.01% 800 No 28, (http://www.cninfo.co
the sales related price acceptan price
Engineering 2020 m.cn)
Company transaction ce bill
Co., Ltd.
decision-mak
ing process
Market price
determined
Guangdong Subsidiary
by the Cash,
Leiyunshan of the April cninfo
Drug Company’s Market banker’s Market
g Company’s Drug sales 325.03 0.01% 300 Yes 28, (http://www.cninfo.co
sales related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd. shareholder
decision-mak
ing process
Hangzhou Association Market price Cash,
April cninfo
Huadong with the Drug determined Market banker’s Market
Drug sales 473.63 0.01% 400 Yes 28, (http://www.cninfo.co
Medicine Senior sales by the price acceptan price
2020 m.cn)
Group New managemen Company’s ce bill
89
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Drug t [note] related
Research transaction
Institute decision-mak
Co., Ltd. ing process
Market price
determined
Leiyunshan Subsidiary
by the Cash,
g of the April cninfo
Drug Company’s Market banker’s Market
Pharmaceuti Company’s Drug sales 416.85 0.01% 300 Yes 28, (http://www.cninfo.co
sales related price acceptan price
cal Group controlling 2020 m.cn)
transaction ce bill
Co. Ltd. shareholder
decision-mak
ing process
Market price
determined
Yunnan Subsidiary
by the Cash,
Leiyunshan of the April cninfo
Drug Company’s Market banker’s Market
g Lixiang Company’s Drug sales 217.11 0.01% 150 Yes 28, (http://www.cninfo.co
sales related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd. shareholder
decision-mak
ing process
Market price
determined
Hangzhou
Joint by the Cash,
Tangyangyu April cninfo
venture of Drug Company’s Market banker’s Market
an Drug sales 18.23 0.00% 0 Yes 28, (http://www.cninfo.co
the sales related price acceptan price
Pharmaceuti 2020 m.cn)
Company transaction ce bill
cal Co., Ltd.
decision-mak
ing process
Grand Subsidiary Drug Drug sales Market price Market 14.58 0.00% 0 Yes Cash, Market April cninfo
90
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Resources of the sales determined price banker’s price 28, (http://www.cninfo.co
Group Co., Company’s by the acceptan 2020 m.cn)
Ltd. controlling Company’s ce bill
shareholder related
transaction
decision-mak
ing process
Market price
determined
Hangzhou Subsidiary
by the Cash,
Grand of the April cninfo
Drug Company’s Market banker’s Market
Biologic Company’s Drug sales 84.68 0.00% 0 Yes 28, (http://www.cninfo.co
sales related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Inc. shareholder
decision-mak
ing process
Market price
determined
Changchun Subsidiary
by the Cash,
Leiyunshan of the April cninfo
Drug Company’s Market banker’s Market
g Company’s Drug sales 9.27 0.00% 0 Yes 28, (http://www.cninfo.co
sales related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd. shareholder
decision-mak
ing process
Market price
China the determined Cash,
April cninfo
Grand Company’s Drug by the Market banker’s Market
Drug sales 85.24 0.00% 0 Yes 28, (http://www.cninfo.co
Enterprises, controlling sales Company’s price acceptan price
2020 m.cn)
Inc. shareholder related ce bill
transaction
91
The 2020 Annul Report of Huadong Medicine Co., Ltd.
decision-mak
ing process
Market price
determined
Changshu Subsidiary
by the Cash,
Leiyunshan of the April cninfo
Drug Company’s Market banker’s Market
g Company’s Drug sales 6.55 0.00% 0 Yes 28, (http://www.cninfo.co
sales related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Co., Ltd. shareholder
decision-mak
ing process
Market price
determined
Hangzhou
Joint by the Cash,
Jiuyuan April cninfo
venture of House House Company’s Market banker’s Market
Gene 34.76 0.00% 0 Yes 28, (http://www.cninfo.co
the rental rental related price acceptan price
Engineering 2020 m.cn)
Company transaction ce bill
Co., Ltd.
decision-mak
ing process
Market price
determined
Hangzhou The
by the Cash,
Huadong Company’s April cninfo
House House Company’s Market banker’s Market
Medicine second 34.12 0.00% 34 No 28, (http://www.cninfo.co
rental rental related price acceptan price
Group Co., largest 2020 m.cn)
transaction ce bill
Ltd. shareholder
decision-mak
ing process
Hangzhou Joint Rent and Market price Cash, April cninfo
House Market Market
Jiuyuan venture of rent determined 1,328.44 0.06% 220 Yes banker’s 28, (http://www.cninfo.co
leasing price price
Gene the compensat by the acceptan 2020 m.cn)
92
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Engineering Company ion Company’s ce bill
Co., Ltd. related
transaction
decision-mak
ing process
Market price
determined
Subsidiary
Beijing by the Cash,
of the April cninfo
Yanhuang House House Company’s Market banker’s Market
Company’s 86.18 0.00% 0 Yes 28, (http://www.cninfo.co
Real Estate leasing leasing related price acceptan price
controlling 2020 m.cn)
Co., Ltd. transaction ce bill
shareholder
decision-mak
ing process
Market price
determined
Hangzhou
Joint by the Cash,
Huadong April cninfo
venture of House House Company’s Market banker’s Market
Medicine 26.68 0.00% 0 Yes 28, (http://www.cninfo.co
the leasing leasing related price acceptan price
Group Co., 2020 m.cn)
Company transaction ce bill
Ltd.
decision-mak
ing process
Market price
determined
Hangzhou Subsidiary
by the Cash,
Grand of the April cninfo
processin processing Company’s Market banker’s Market
Biologic Company’s 32.3 0.00% 0 Yes 28, (http://www.cninfo.co
g charge charge related price acceptan price
Pharmaceuti controlling 2020 m.cn)
transaction ce bill
cal Inc. shareholder
decision-mak
ing process
93
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Market price
determined
Hangzhou The Property
Property by the Cash,
Huadong Company’s and April cninfo
and Company’s Market banker’s Market
Medicine second security 30.19 0.00% 50 No 28, (http://www.cninfo.co
security related price acceptan price
Group Co., largest service 2020 m.cn)
service fee transaction ce bill
Ltd. shareholder fee
decision-mak
ing process
Market price
determined
Hangzhou The
by the Cash,
Huadong Company’s April cninfo
Energy Energy Company’s Market banker’s Market
Medicine second 9.02 0.00% 25 No 28, (http://www.cninfo.co
service service related price acceptan price
Group Co., largest 2020 m.cn)
transaction ce bill
Ltd. shareholder
decision-mak
ing process
Market price
Beijing determined
Subsidiary
Yuanda by the Cash,
of the Property Property April cninfo
Chuangxin Company’s Market banker’s Market
Company’s managem manageme 19.28 0.00% 0 Yes 28, (http://www.cninfo.co
Property related price acceptan price
controlling ent fee nt fee 2020 m.cn)
Managemen transaction ce bill
shareholder
t Co., Ltd. decision-mak
ing process
Beijing Subsidiary Market price
Cash,
Haiwan of the determined April cninfo
conferenc conference Market banker’s Market
Banshan Company’s by the 10.42 0.00% 0 Yes 28, (http://www.cninfo.co
e fee fee price acceptan price
Hotel controlling Company’s 2020 m.cn)
ce bill
Managemen shareholder related
94
The 2020 Annul Report of Huadong Medicine Co., Ltd.
t Co., Ltd. transaction
decision-mak
ing process
44,311.4
Total -- -- -- 44,379 -- -- -- -- --
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 market reference price (if N/A
applicable)
95
The 2020 Annul Report of Huadong Medicine Co., Ltd.
2、Related transactions involving the acquisition or sale of assets and shares
√ Applicable □ N/A
Book Assesse
value d value Settlem Trading
Pricing
Content of of Transfe ent profit
Type of principl
of transfer transfer r price method and Date of Disclos
Related Relatio related es for
related red red (ten of loss disclos ure
party nship transact related
transact assets assets thousan related (ten ure index
ion transact
ion (ten (ten d yuan) transact thousan
ion
thousan thousan ions d yuan)
d yuan) d yuan)
evaluat
ed price
determi
Subsidi
ned by
Penglai ary of
the
Nuokan the cninfo
Compa
g Compa Purchas Purchas Septem (http://
ny’s 8,076.8
Pharma ny’s e of e of 5,000 5,000 cash / ber 16, www.c
related 1
ceutical controll assets assets 2020 ninfo.c
transact
Co. ing om.cn)
ion
Ltd. shareho
decisio
lder
n-maki
ng
process
Reasons for the large difference between The appraised value is 80,768,100 yuan, and the buyer and the seller confirm: 50
the transfer price and the carrying value million yuan in cash plus sales share (9% of the sales revenue per year within 10
or assessed value (if any) years from the year of the completion of the transfer of the target product).
Impact on the company’s operating
No significant impact
results and financial status
If the relevant transaction involves
performance agreement, the performance N/A
achieved during the reporting period
3、Related transactions of joint external investment
□ Applicable √N/A
No such case during the reporting period.
4、Associated claim and debt transactions
□ Applicable √N/A
96
The 2020 Annul Report of Huadong Medicine Co., Ltd.
No such case during the reporting period.
5、Other major related transactions
□ Applicable √N/A
No such case during the reporting period.
XVII. Major contracts and their fulfilme nt
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
During the company's reporting period, there was no lease project that brought the company's profits and losse s to more than 10% of
the company's total profit during the reporting period.
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
announcem Actual Fulfille Guarantee
guaranteed Guarantee Actual date of Type of Period of
ent related guaranteed d or for a related
party Cap occurrence guarantee guarantee
to the amount not party or not
guarantee
Cap
/ / / / / / / / /
97
The 2020 Annul Report of Huadong Medicine Co., Ltd.
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 Related
date of the Actual party
Guaranteed Guarant Actual date of Type of Term of Fulfilled
announcement guarantee guarant
party ee cap occurrence guarantee guarantee or not
of the amount ee or
guarantee cap not
Hangzhou
Zhongmei Joint
March 16,
Huadong April 19, 2019 50,000 4,600 liability One year No No
2020
Pharmaceutical guarantee
Co., Ltd.
Hangzhou
Zhongmei Joint
June 1,
Huadong April 28, 2020 80,000 21,474 liability One year No No
2020
Pharmaceutical guarantee
Co., Ltd.
Huadong
Joint
Ningbo December 28,
April 28, 2020 27,000 1,200 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo December 18,
April 28, 2020 23,000 2,029 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo November 20,
April 28, 2020 23,000 1,607 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo October 23,
April 28, 2020 23,000 1,041 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong April 28, 2020 23,000 October 28, 375 Joint One year No No
98
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Ningbo 2020 liability
Medicine Co., guarantee
Ltd.
Huadong
Joint
Ningbo October 21,
April 28, 2020 23,000 995 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo October 14,
April 28, 2020 23,000 995 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo September 23,
April 28, 2020 23,000 995 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo September 11,
April 28, 2020 23,000 960 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo June 12,
April 28, 2020 23,000 2,387 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo September 4,
April 28, 2020 23,000 682 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo September 25,
April 28, 2020 23,000 863 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo June 28,
April 28, 2020 27,000 1,200 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo June 28,
April 28, 2020 27,000 800 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong July 2, Joint
April 28, 2020 27,000 1,000 One year No No
Ningbo 2020 liability
99
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Medicine Co., guarantee
Ltd.
Huadong
Joint
Ningbo July 2,
April 28, 2020 27,000 1,000 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Ningbo June 1,
April 28, 2020 27,000 7,498 liability One year No No
Medicine Co., 2020
guarantee
Ltd.
Huadong
Joint
Medicine February 20,
April 19, 2019 24,000 3,000 liability One year No No
Wenzhou Co., 2020
guarantee
Ltd.
Huadong
Joint
Medicine February 27,
April 19, 2019 24,000 4,000 liability One year No No
Wenzhou Co., 2020
guarantee
Ltd.
Huadong
Medicine
April 28, 2020 24,000 One year
Wenzhou Co.,
Ltd.
Hangzhou
Huadong
April 28, 2020 5,000 One year
Pharmacy Chain
Co., Ltd.
Huadong
Medicine
(Xi’an) Bohua April 28, 2020 5,000 One year
Pharmaceutical
Co., Ltd.
Jiangsu Joyang
Laboratories April 28, 2020 7,000 One year
Co., Ltd.
Huadong
Medicine
April 28, 2020 15,000 One year
Ningbo Sales
Co., Ltd.
Huadong Joint
Feburary 13,
Medicine 18,000 1,100 liability One year No No
2020
Huzhou Co., guarantee
100
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Ltd.
Huadong
Medicine
April 28, 2020 19,000 One year
Huzhou Co.,
Ltd.
Huadong
Medicine
April 28, 2020 18,000 One year
Shaoxing Co.,
Ltd.
Huadong
Medicine
Joint
Supply Chain Feburary 28,
April 19, 2019 6,000 379 liability One year No No
Management 2020
guarantee
(Hangzhou)
Co., Ltd.
Huadong
Medicine
Supply Chain
April 28, 2020 6,000 One year
Management
(Hangzhou)
Co., Ltd.
Huadong
Medicine
Supply Chain
April 19, 2019 20,000 One year
Management
(JinHua) Co.,
Ltd.
Huadong Joint
Feburary 28,
Medicine Lishui April 19, 2019 10,000 2,600 liability One year No No
2020
Co., Ltd. guarantee
Huadong
Medicine Lishui April 28, 2020 15,000 One year
Co., Ltd.
Huadong
Medicine
(Hangzhou)
April 28, 2020 3,200 One year
Biological
Products Co.,
Ltd.
Hangzhou
March 30,
Zhongmei 180,000 Ten years
2018
Huadong
101
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Pharmaceutical
Jiangdong Co.,
Ltd.
Hangzhou
Zhongmei
Joint
Huadong Dcember 1,
April 28, 2020 17,000 1,848 liability One year No No
Pharmaceutical 2020
guarantee
Jiangdong Co.,
Ltd.
Huadong
Medicine Jinhua April 28, 2020 10,000 One year
Co., Ltd.
Huadong
Medicine Cunde
April 28, 2020 12,000 One year
(Zhoushan) Co.,
Ltd.
Huadong
Medicine
April 28, 2020 5,500 One year
Daishan Co.,
Ltd.
Sinclair Pharma September17,
15,000 One year
Limited 2020
Joint
Sinclair Pharma December23, March 26, Three
40,000 15,114 liability No No
Limited 2018 2019 years
guarantee
Total actual guarantee
Total guarantee cap for
amount for subsidiaries
subsidiaries approved during the 306,700 79,742
during the reporting
reporting period (B1)
period (B2)
Total actual guarantee
Total approved guarantee cap
balance for subsidiaries
for subsidiaries at the end of the 546,700 79,742
at the end of the reporting
reporting period (B3)
period (B4)
Subsidiariesguarantee for subsidiaries
Disclosure
date of the Related
Actual Fulfille
Guaranteed announcem Guarantee Actual date of Type of Term of party
guarantee d or
party ent of the cap occurrence guarantee guarantee guarantee
amount not
guarantee or not
cap
/ / / / / / / / /
102
The 2020 Annul Report of Huadong Medicine Co., Ltd.
Total guarantee cap for
Total guarantee cap for
subsidiaries approved
subsidiaries approved during the / /
during the reporting
reporting period (C1)
period (C1)
Total approved
Total approved guarantee cap
guarantee cap for
for subsidiaries at the end of the / /
subsidiaries at the end of
reporting period (C3)
the reporting period (C3)
Total amount of the Company’s guarantees (i.e. the sum of the above-mentioned 3 kinds of guarantees)
Total actual guarantee
Total guarantees cap approved
amount during the
during the reporting period 306,700 79,742
reporting period
(A1+B1+C1)
(A2+B2+C2)
Total actual guarantee
Total approved guarantee cap at
balance at the end of
the end of the reporting period 546,700 79,742
the reporting period
(A3+B3+C3)
(A4+B4+C4)
Proportion of the actual guarantee amount (i.e. A4+B4+C4) in
5.45%
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
10,700
the entities with a liability-to 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
10,700
guarantees (D+E+F)
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.
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
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. Daily significant contracts
□ Applicable √ N/A
No such case during the reporting period.
5. Other significant contracts
□ Applicable √ N/A
No such case during the reporting period.
XVIII. Social responsibilities
1. Fulfillment of social responsibilities
2020 is a crucial year for deepening the transformation of Huadong Medicine. It’s also a year
of hard work to face challenges and overcome difficulties and a year of remarkable achievements
and fruitful harvest. 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 2020 can be found in “2020 Social
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
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
Number Distributi Discharge
the Name of Concentra Approved
Discharge of on of standard Total Excessive
company major tion of total
type discharge discharge of discharge discharge
or pollutants discharge discharge
outlets outlets pollutants
subsidiary
Hangzhou
Zhongmei Front
Water Intermitte
Huadong gate, 866
pollutant:: nt 1 7.86 6-9 / / None
Pharmace Mogansh
PH value discharge
utical an Road
Co., Ltd.
Hangzhou
Zhongmei Front
Water Intermitte
Huadong gate, 866 150.59 475.5tons
pollutant:: nt 1 186 mg/l 500mg/l None
Pharmace Mogansh tons /year
COD discharge
utical an Road
Co., Ltd.
Hangzhou
Zhongmei Water Front
Intermitte
Huadong pollutant: gate, 866
nt 1 8.61mg/l 35mg/l 6.97 tons / None
Pharmace ammonia Mogansh
discharge
utical nitrogen an Road
Co., Ltd.
Hangzhou Legal
Solid In the
Zhongmei disposal
pollutant: factory at
Huadong by 3304.35
hazardous 2 866 / / / None
Pharmace entrusted tons
solid Mogansh
utical qualified
waste an Road
Co., Ltd. units
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Hangzhou Legal
Solid In the
Zhongmei disposal
pollutant: factory at
Huadong by 4896.59
general 2 866 / / / None
Pharmace entrusted tons
solid Mogansh
utical qualified
waste an Road
Co., Ltd. units
Hangzhou
Roof of
Zhongmei Air
the boiler
Huadong pollutant: Organize 32.6mg/ 400mg/ 17.7
1 room in 3.56 tons None
Pharmace nitrogen d m m tons/year
Building
utical oxide emission
No. 25
Co., Ltd.
Hangzhou
Roof of
Zhongmei Air
Organize the boiler
Huadong pollutant: 100mg/ 0.321
d 1 room in 3 mg/ m3 3
/ None
Pharmace sulfur m tons
emission Building
utical dioxide
No. 25
Co., Ltd.
Hangzhou
Roof of
Zhongmei Air
Organize the boiler
Huadong pollutant: 4.44 mg/
d 1 room in 30mg/ m3 0.481tons / None
Pharmace dust and m3
emission Building
utical fume
No. 25
Co., Ltd.
Hangzhou Air
103
Zhongmei pollutant:
Organize refining
Huadong volatile 9.35 mg/
d 1 (east), 80mg/ m3 / / None
Pharmace organic m3
emission Building
utical compoun
No. 16
Co., Ltd. d
Hangzhou
103
Zhongmei
Air Organize refining
Huadong 800(dime
pollutant: d 1 (east), 194 / / None
Pharmace nsionless)
foul smell emission Building
utical
No. 16
Co., Ltd.
Hangzhou Air
103
Zhongmei pollutant:
Organize refining
Huadong volatile 10.7mg/
d 1 (west), 80mg/ m3 / / None
Pharmace organic m3
emission Building
utical compoun
No. 16
Co., Ltd. d
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Hangzhou
103
Zhongmei
Air Organize fermentati
Huadong 800(dime
pollutant: d 1 on, 214 / / None
Pharmace nsionless)
foul smell emission Building
utical
No. 27
Co., Ltd.
Hangzhou
107
Zhongmei
Air Organize fermentati
Huadong 800(dime
pollutant: d 1 on, 146 / / None
Pharmace nsionless)
foul smell emission Building
utical
No. 33
Co., Ltd.
Hangzhou
303
Zhongmei
Air Organize sewage
Huadong 800(dime
pollutant: d 1 station, 614 / / None
Pharmace nsionless)
foul smell emission Building
utical
No. 18
Co., Ltd.
Along
Huadong
National
Medicine
Highway
(Xi’an) Water Intermitte
310,
Bohua pollutant: nt 1 7.67 6-9 / / None
Liuye
Pharmace PH value discharge
River,
utical
Huayin
Co., Ltd.
City
Along
Huadong
National
Medicine
Highway
(Xi’an) Water Intermitte
310,
Bohua pollutant: nt 1 17.34mg/l 50mg/l 0.25tons 3tons None
Liuye
Pharmace COD discharge
River,
utical
Huayin
Co., Ltd.
City
Along
Huadong
National
Medicine
Water Highway
(Xi’an) Intermitte
pollutant: 310,
Bohua nt 1 0.92mg/l 8mg/l 0.013tons 0.72tons None
ammonia Liuye
Pharmace discharge
nitrogen River,
utical
Huayin
Co., Ltd.
City
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Along
Huadong
National
Medicine
Water Highway
(Xi’an) Intermitte
pollutant: 310,
Bohua nt 1 5.29mg/l 15mg/l 0.076tons / None
total Liuye
Pharmace discharge
nitrogen River,
utical
Huayin
Co., Ltd.
City
Huadong
Complian
Medicine
Solid t disposal
(Xi’an)
pollutant: by In the 392.88ton
Bohua 3 / / / None
hazardous entrusted company s
Pharmace
waste qualified
utical
units
Co., Ltd.
Huadong
Air
Medicine
pollutant: Raw
(Xi’an) Organize
volatile medicine
Bohua d 1 / 60mg/ m3 / / None
organic No.1
Pharmace emission
compoun workshop
utical
d
Co., Ltd.
Huadong
Medicine
Air Raw
(Xi’an) Organize
pollutant: medicine
Bohua d 1 / 30mg/ m3 / / None
hydrogen No.1
Pharmace emission
chloride workshop
utical
Co., Ltd.
Huadong
Medicine
Air Raw
(Xi’an) Organize
pollutant: medicine
Bohua d 1 / 20mg/ m3 / / None
hydrogen No.2
Pharmace emission
chloride workshop
utical
Co., Ltd.
Huadong
Medicine Air Raw
Organize
(Xi’an) pollutant: medicine
d 1 / 20mg/ m3 / / None
Bohua particulat No.2
emission
Pharmace e matter workshop
utical
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Co., Ltd.
Huadong
Medicine
Air Raw
(Xi’an) Organize
pollutant: medicine
Bohua d 1 / 45mg/ m3 / / None
sulfuric No.2
Pharmace emission
acid mist workshop
utical
Co., Ltd.
Jiangsu
Joyang Water Intermitte
Haidubei
Laborator pollutant: nt 1 8.32 6-9 / / None
Road
ies Co., PH value discharge
Ltd.
Jiangsu
Joyang Water Intermitte
Haidubei 51.4173to
Laborator pollutant: nt 1 170mg/l 500mg/l 12.24tons None
Road ns/year
ies Co., COD discharge
Ltd.
Jiangsu
Water
Joyang Intermitte
pollutant: Haidubei 3.6819ton
Laborator nt 1 13mg/l 35mg/l 0.9tons None
ammonia Road s/year
ies Co., discharge
nitrogen
Ltd.
Jiangsu
Joyang Water Intermitte
Haidubei 24.968ton
Laborator pollutant: nt 1 92mg/l 400mg/l 6.624tons None
Road s/year
ies Co., SS discharge
Ltd.
Legal
Jiangsu Solid
disposal In the
Joyang pollutant:
by factory at 786.698to 3148.7ton
Laborator hazardous / / / None
entrusted Haidubei ns s/year
ies Co., solid
qualified Road
Ltd. waste
units
Dosing
section of
Jiangsu
Air workshop
Joyang Organize
pollutant: 101, 0.354tons 0.797tons
Laborator d 5 6.3mg/m3 10mg/m3 None
particulat fermentati /year /year
ies Co., emission
e matter on section
Ltd.
of
workshop
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
101,
dosing
section of
workshop
104
(shared
by 107
and 108),
fermentati
on section
of
workshop
104
(shared
by 107
and 108),
and
drying
section of
workshop
104
(shared
by 107
and 108)
Extractio
n of
workshop
Jiangsu
Air 101,
Joyang Organize
pollutant: Extractio 0.392tons 1.074tons
Laborator d 3 7.7mg/m3 50mg/m3 None
ethyl n of /half year /year
ies Co., emission
acetate workshop
Ltd.
104, and
workshop
303
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 tons/day after technical
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
station bed transformation transformation in 2007
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
(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 Low nitrogen 8,000 2009 (The low Normal
(DA008 and DA009) combustion + high nitrogen
altitude emission transformation
completed in
December 2019.)
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
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
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. 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
(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 + dry filter October 2020 Normal
(filter cotton) +UV
photolysis + activated
carbon adsorption
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
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
Waste water treatment Air floatation tank + hydrolysis 300 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
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
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
carbon adsorption
Waste gas treatment unit of workshop 103 Level 1 water spray + moisture 10,000 2019 Normal
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 + level 2 activated
carbon adsorption + high-altitude
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 20,000 2019 Normal
+photocatalytic oxidation + level 2
activated carbon adsorption+
high-altitude discharge via 25m
exhaust pipe
Waste gas treatment unit of sewage station Level 1 water spray + light 10,000 2014 Normal
303 catalytic+photocatalytic oxidation
+ level 2 activated carbon
adsorption+ high-altitude
discharge via 25m exhaust pipe
(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 300 tons December 2020 Standardized storage; legal
disposal by entrusted
qualified units
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
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 environme ntal
protection requirements.
On May 21, 2020, Zhongmei Huadong completed the filing of the environmental report form for the technical transformation
project of the macromolecular drug research and development professional laboratory (pilot test), and obtained the filing acc eptance
letter (No.: Hangzhou Gonghuan Parts [2020] 01). Zhongmei Huadong completed the independent inspection and acceptance of
environmental protection for the completion of the comprehensive production quality inspection building construction project, and
disclosed the acceptance information in the National Completed Environmental Protection Acceptance Information System.
Emergency plan for environmental emergencies
The company has established a comprehensive emergency response plan for environmental emergenc ies, standardizes the
emergency handling of environmental emergencies, and minimizes the impact on human health caused by the leakage of
environmental risk substances into the air, water or soil due to fire, explosion, leakage or other unexpected emergencies. And
environmental hazards, continue to improve the company's emergency response capabilities for sudden environmental pollution
incidents.
The company has comprehensively established the emergency plan for environmental emergencies, standardized the emergency
treatment of environmental emergencies, minimized the harm to human health and environment caused by the leakage of
environmental risk substances to air, water or soil due to fire, explosion, leakage or other unexpected emergencies, and cont inuously
improved the emergency response capacity of the company for environmental pollution 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,
Huadong Pharmaceutical (Xi'an) Bohua Pharmaceutical Co., Ltd. and Huayin branch of Weinan Ecological Environment Bureau
jointly held the emergency drill for environmental emergencies in Huayin City in 2020 on June 3, 2020.
Jiangsu Joyang Laboratories Co., Ltd organized a fire emergency drill in the storage tank area of the 302 workshop in May 202 0.
In June and July 2020, it organized more than 30 comprehensive and special drills such as solvent leakage, fire emergency drills, and
119 fire protection publicity day activities, which standardized the emergency handling of environmental emergencies, minimized the
hazards to human health and the environment caused by the leakage of environmental risk substances into the air, water or soil due to
fire, explosion, leakage or other unexpected emergencies, and enhanced the emergency response capability for 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.
Other environmental information that should be made public
None
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
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 (2020)” (hereinafter referred to as the “Drug List”(2020 Edition)) , which will be officially implemented on March 1, 2021.
As of the end of the reporting period, the Company has listed 24 core products and 15 products under research into the “Drug
List” (2020 Edition), of which the Company's listed products, Acarbose Chewable Tablets and Bailing Capsules, are listed in the
“Drug List” (2020 Edition) Negotiation varieties.
As of the end of the reporting period, the Company had a total of 14 varieties (including 3 under-research varieties) included in
the “National Essential Drug List (2018 Edition)”.
XX. Major events of subsidiaries
□ Applicable √ N/A
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
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
Number Number
Proporti New Proporti New Number
of of
on shares on shares of shares
shares shares
I. Shares subject to
25,245 0.00% 0 0 0 22,500 22,500 47,745 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
0 0.00% 0 0 0 0 0 0 0.00%
state-owned corporations
3. Shares held by other
25,245 0.00% 0 0 0 22,500 22,500 47,745 0.00%
domestic investors
Including: held by
0 0.00% 0 0 0 0 0 0 0.00%
domestic corporations
held by domestic
25,245 0.00% 0 0 0 22,500 22,500 47,745 0.00%
natural persons
4. Shares held by overseas
0 0.00% 0 0 0 0 0 0 0.00%
investors
Including: held by overseas
0 0.00% 0 0 0 0 0 0 0.00%
corporations
held by overseas
0 0.00% 0 0 0 0 0 0 0.00%
natural persons
II. Shares without 1,749,7 100.00 1,749,7
0 0 0 -22,500 -22,500 100.00%
restriction 84,303 % 61,803
1,749,7 100.00 1,749,7
1. RMB ordinary shares 0 0 0 -22,500 -22,500 100.00%
84,303 % 61,803
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
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
4. Others 0 0.00% 0 0 0 0 0 0 0.00%
1,749,8 100.00 1,749,8
III. Total number of shares 0 0 0 0 0 100.00%
09,548 % 09,548
Reasons for the changes in share capital
√ Applicable □ N/A
The Company held the 9th interim meeting of the Board of Directors on October 12, 2020, and approved the Proposal on
Appointing Ms. Zhu Li as the Deputy General Manager of the Company, consenting to engage Ms. Zhu Li as the Deputy Gener al
Manager of Huadong Medicine Co., Ltd., who is responsible for commercial matters, and concurrently as the General Manager of
Huadong Pharmaceutical Distribution Company. Ms. Zhu Li holds a total of 30,000 shares of the Company, among which 22,500
shares are restricted shares for senior executives according to relevant regulations.
Approval for changes in share capital
√ Applicable □ N/A
The Company held the 9th interim meeting of the Board of Directors on October 12, 2020, and approved the Proposal on
Appointing Ms. Zhu Li as the Deputy General Manager of the Company, consenting to engage Ms. Zhu Li as the Deputy Gener al
Manager of Huadong Medicine Co., Ltd., who is responsible for commercial matters, and concurrently as the General Manager of
Huadong Pharmaceutical Distribution Company. Her term of office starts from the date on which the resolution was approved by the
Board of Directors and ends on the expiration of the current Board of Directors (June 5, 2022). For details, please refer to the
Announcement of the Resolution of the 9th Interim Board of Directors (Announcement No.: 2020-039) issued on the same day.
Transfer of shares
□ Applicable √ N/A
Progress of share repurchase
□ Applicable √ N/A
Progress of reducing repurchased shares through centralized bidding
□ Applicable √ N/A
Effects of changes in share capital on the basic earnings per share, diluted earnings per share for the most recent year and the most
recent period, the net assets per share attributable to the Company’s shareholders of common shares and other financial indic ators
□ Applicable √ N/A
Other disclosures the Company deems necessary or required by securities regulatory authorities
□ Applicable √ N/A
2. Changes in restricted shares
√ Applicable □ N/A
Unit: share
Opening Closing
Name of Increased in Vested in Note for Date of
restricted restricted
shareholder current period current peirod restricted share unlocking
shares shares
Supervisor
He, Rufen 25,245 0 0 25,245 /
restriction
Zhu Li 0 22,500 0 22,500 Executives /
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
restriction
Total 25,245 22,500 0 47,745 -- --
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
3.Existent shares held by internal staff of the Company
□ Applicable √ N/A
III. Particulars about shareholders and the actual controller
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
1. Total number of shareholders and their shareholdings
Unit: share
Total number of
Total number of preference
Total number of common Total number of preference
shareholders with restoration
common shareholders at the shareholders with restoration of
of the voting rights at the end
shareholderss at the 129,940 end of the previous 168,355 the voting rights at the end of the 0 0
of the previous month before
end of the reporting month before the reporting period (if any) (see Note
the disclosure of the annual
period disclosure of the 8)
report (if any) (see Note 8)
annual report
Particulars about shareholders with a shareholding ratio over 5% or the Top 10 shareholders
The number Pledged or frozen
The number of
Total shares of shares
Share- Changes in the common shares
Nature of held at the end held
Name of shareholder holding reporting held with trading
shareholder of the reporting without Status Status
ratio period restrictionsrestricted
period trading
shares held
restriction
Domestic
China Grand Enterprises, Inc. non-state-owned 41.77% 730,938,157 0 0 730,938,157 Pledged 259,114,000
corporation
Hangzhou Huadong Medicine State-owned
15.92% 278,620,000 -9,380,000 0 278,620,000
Group Co., Ltd. corporation
Hong Kong Securities Clearing Overseas
2.19% 38,299,615 1,512,895 0 38,299,615
Company Ltd. corporation
Domestic
China Securities Finance Co., non-state-owned 1.27% 22,186,818 0 0 22,186,818
corporation
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
National Social Security Fund Others
0.95% 16,550,361 -6,791,152 0 16,550,361
Portfolio 106
National Social Security Fund Others
0.45% 7,926,311 7,926,311 0 7,926,311
Portfolio 602
Basic Endowment Insurance Fund Others
0.44% 7,623,568 2,505,480 0 7,623,568
Portfolio 15041
National Social Security Fund Others
0.40% 6,999,773 6,999,773 0 6,999,773
Portfolio 503
Basic Endowment Insurance Others
0.29% 5,133,343 -217,170 0 5,133,343
Fund Portfolio 807
Bank of China Co., Ltd. – Harvest Others
Mixed Type Securities Investment
Fund LOF with 3Y closed
0.24% 4,266,168 4,266,168 0 4,266,168
operation through private
placements with strategic investors
and flexible allocation
Strategic investors or general corporations become the top 10 shareholders due to the
None
placement of new shares (if any) (see Note 3)
Explanation on associated relationships or concerted actions among the above-mentioned The Company does not know whether the above-mentioned shareholders are related parties or
shareholders whether they are acting-in-concert parties with one another.
Description about above-mentioned shareholders’ entrusting/being entrusted with and
None
waiving voting rights t
Shareholding of the top 10 shareholders without trading restriction conditions
Number of the trading unrestricted stocks held Type of stocks
Name of shareholder
at the end of the Report Period Type of stocks Qty
China Grand Enterprises, Inc. 730,938,157 RMB ordinary stocks 730,938,157
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Hangzhou Huadong Medicine 278,620,000 RMB ordinary stocks 278,620,000
Hong Kong Securities Clearing Company Ltd. 38,299,615 RMB ordinary stocks 38,299,615
China Securities Finance Co., Ltd. 22,186,818 RMB ordinary stocks 22,186,818
National Social Security Fund Portfolio 106 16,550,361 RMB ordinary stocks 16,550,361
National Social Security Fund Portfolio 602 7,926,311 RMB ordinary stocks 7,926,311
Basic Endowment Insurance Fund Portfolio 15041 7,623,568 RMB ordinary stocks 7,623,568
National Social Security Fund Portfolio 503 6,999,773 RMB ordinary stocks 6,999,773
Basic Endowment Insurance RMB ordinary stocks
5,133,343 5,133,343
Fund Portfolio 807
Bank of China Co., Ltd. – Harvest Mixed Type Securities Investment Fund LOF with 3Y RMB ordinary stocks
closed operation through private placements with strategic investors and flexible 4,266,168 4,266,168
allocation
Description for affiliated relationship or concerted action among the top 10 shareholders
The Company does not know whether the above-mentioned shareholders are related parties or
holding tradable stocks without trading restriction conditions and between the top 10
whether they are acting-in-concert parties with one another.
shareholders holding tradable stocks without trading restriction conditions and
The second major shareholder of the Company, Hangzhou Huadong Medicine Group Co., Ltd.,
Description of the participation in margin trading business of the top 10 common holds 288,000,000 shares of the Company, accounting for 16.46% of the Company’s total
shareholders (if any) (see Note 4) capitalization. As of the end of the reporting period, 9,380,000 shares thereof were subject to
refinancing securities lending transactions in China Securities Finance Corporation Limited.
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
□ Yes √ No
No such case during the reporting period.
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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 follow s:
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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
Name of corporate representativ Date of Registered
Main business or management activities
shareholders e/person in establishment capital
charge
The production and processing of compound wine, bagged
tea, and donkey-hide glue products (the branches can operate
only with licenses), and the state-owned asset operation
within the authorized scope of the municipal government;
Hangzhou Huadong December 21, 60 million industrial investment; wholesale and retail: chemical raw
Jin Xuhu
Medicine Group Co., Ltd. 1992 yuan materials and products (except dangerous chemicals and
precursor chemicals), package materials, medical
intermediates (except dangerous chemicals and precursor
chemicals); other legal items that need no submission for
approval.
5. Reduction of restricted shares held by controlling shareholder, actual controller, restructuring parties
and other commitment subjects
□ Applicable √ N/A
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Section VIII. Convertible Corporate Bonds
□ Applicable √ N/A
No such case during the reporting period.
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Section VIII. Convertible Corporate Bonds
□ Applicable √ N/A
No such case during the reporting period.
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Section IX. Directors, Supervisors, Senior Managers and Employees
I. Changes in shareholding of directors, supervisors and senior managers
Shares held
Shares held
at the Shares Shares
at the end
Tenure Commencement Commencement beginning increased decreased Other
Name Title Gender Age of the
staturs of term of duty of term of duty of the during the during the changes(shares)
Period
period Period(shares) Period(shares)
(shares)
(shares)
Lv Liang Chairman Incumbent Male 47 June 06, 2019 June 05, 2022 0 0 0 0 0
Li Bangliang Honorary Incumbent Male June 06, 2019 June 05, 2022
75 0 0 0 0 0
Chairman
Li Yuedong Director, Incumbent Male June 06, 2019 June 05, 2022
General
49 0 0 0 0 0
Manager(CE
O)
Niu Zhanqi Director Incumbent Male 54 June 03, 2016 June 05, 2022 0 0 0 0 0
Kang Wei Director Incumbent Female December 05, June 05, 2022
53 0 0 0 0 0
2016
Jin Xuhu Director Incumbent Male 58 June 06, 2019 June 05, 2022 0 0 0 0 0
Zhu Liang Director Incumbent Male 44 June 06, 2019 June 05, 2022 0 0 0 0 0
Zhong Independent Incumbent Male January 6, 2016 June 05, 2022
59 0 0 0 0 0
Xiaoming Director
Yang Lan Independent Incumbent Female April 27, 2017 June 05, 2022
52 0 0 0 0 0
Director
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Yang Jun Independent Incumbent June 06, 2019 June 05, 2022
Female 49 0 0 0 0 0
Director
Bai Xinhua Supervisor Incumbent Female January 20, June 05, 2022
55 0 0 0 0 0
1998
Liu Supervisor Incumbent Male January 6, 2016 June 05, 2022
48 0 0 0 0 0
Chengwei
Qin Yun Supervisor Incumbent Female 51 May 19, 2006 June 05, 2022 0 0 0 0 0
Hu Baozhen Supervisor Incumbent Female 48 June 06, 2019 June 05, 2022 0 0 0 0 0
He Rufen Supervisor Incumbent Female 53 June 06, 2019 June 05, 2022 33,660 0 0 0 33,660
Xu Zhifeng Supervisor Incumbent Male 46 June 06, 2019 June 05, 2022 0 0 0 0 0
Zhou Deputy Incumbent Male June 30, 2009 June 05, 2022
Shunhua General 61 0 0 0 0 0
Manager
Wu Hui Deputy Incumbent Male June 06, 2019 June 05, 2022
General 52 0 0 0 0 0
Manager
Deputy
October 12,
Zhu li General Incumbent Male 46 June 5, 2022 30,000 0 0 0 30,000
2020
Manager
Chen Bo Board Incumbent Male June 30, 2009 June 05, 2022
49 0 0 0 0 0
Secretary
Qiu Renbo Person in Incumbent Male November 28, June 05, 2022
Charge of 39 2019 0 0 0 0 0
Finance
Total -- -- -- -- -- -- 63,660 0 0 0 63,660
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II. Change of directors, supervisors and senior managers of the Company
√ Applicable □ N/A
Name Title Type Date Reason
Zhu li Deputy Incumbent
October 12,
General Elected by the Board of Directors
2020
Manager
III. Positions and Incumbe ncy
Professional background, main working experiences and main responsibilities of the Company’s incumbent directors, supervisors and
senior managers
(1) Profile of directors
Chairman –Mr. Lv 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., since January 2019; and Director of the
Company since June 2019.
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 Compan y
from April 2017 to June 2019; and Director of the Company since June 2019.
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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 chie f
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.
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;
Head 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.,
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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 ch ief 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.
Deputy General Manager – Ms. Zhu Li :born in 1975, has obtained a master’s degree, and serves as an accountant. She has served
as the accountant, deputy general manager, general manager, deputy director, and director of the Procurement and Management
Department for Chinese and Western Medicine in the Chinese patent medicine branch of Huadong Pharmaceutical Distribution
Company since August 1997. From September 2019 to September 2020, she served as the Deputy General Manager of Huadong
Pharmaceutical Distribution Company (responsible for the overall work), and from October 2020, she serves as the Deputy General
Manager (responsible for the commercial matters) of the Company and concurrently as the General Manager of Huadong
Pharmaceutical Distribution Company.。
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; Off icer in
Charge of Financial Affairs of the Company since December 2019.
Positions in shareholders’ entities
√ Applicable □ N/A
Compensation and
Position in shareholders’ Commencement Termination of
Name Shareholders’ entity allowance from the
entities of the term the term
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.
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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 No
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 other wholly/partially owned subsidiaries of Director No
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. No
Director
Incumbent and off-office directors, supervisors and senior management personel during the reporting period that have been imposed
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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 2020, 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
Receive
Total pretax remuneration
Holding of renumeration from related
Name Title Gender Age
positions received from parties of the
the Company Company or
not
Chairman of Incumbent
Lv Liang Male 47 240 No
the Board
Director, Incumbent
Li Yuedong General Male 49 150 No
Manager
Niu Zhanqi Director Male 54 Incumbent 3 Yes
Kang Wei Director Female 53 Incumbent 3 Yes
Jin Xuhu Director Male 58 Incumbent 3 Yes
Zhu Liang Director Male 44 Incumbent 65 No
Zhong Independent Incumbent
Male 59 8 No
Xiaoming Director
Independent Incumbent
Yang Lan Female 52 8 No
Director
Independent Incumbent
Yang Jun Female 49 8 No
Director
Bai Xinhua Supervisor Female 55 Incumbent 3 Yes
Qin Yun Supervisor Female 51 Incumbent 3 Yes
Liu Chengwei Supervisor Male 48 Incumbent 3 Yes
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Hu Baozhen Supervisor Female 48 Incumbent 3 Yes
He Rufen Supervisor Female 53 Incumbent 100 No
Xu Zhifeng Supervisor Male 46 Incumbent 65 No
Deputy General Incumbent
Zhou Shunhua Male 61 130 No
Manager
Deputy General Incumbent
Wu Hui Male 52 120 No
Manager
Deputy General Incumbent
Zhu Li Male 46 120 No
Manager
Secretary of the Incumbent
Chen Bo Board of Male 49 120 No
Directors
Officer in Incumbent
Charge of
Qiu Renbo Male 39 120 No
Financial
Affairs
合计 -- -- -- -- 1275 --
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
900
(person)
Number of incumbent employees in major subsidiaries
10,459
(person)
Total number of incumbent employees (person) 11,359
Total number of employees receiving salaries in the current
11,359
period (person)
Number of retired employees requiring the parent Company
13
and its subsidiaries to bear costs (person)
Professional structure
Category Number (person)
Category 1039
Production staff 6367
Sales staff 2022
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Technical staff 214
Financial staff 1323
Administrative staff 394
Total 11,359
Educational background
Category Number (person)
Master’s degree or above 764
Bachelor’s degree 4,695
Junior college (professional training) 5,004
Other 896
Total 11,359
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. Training program
In order to meet the requirements of the sustainable development and international strategies of the Company,
speed up the talent transformation, further improve the cultivation and development system for various talents, the
Company’s Learning and Development Department has formulated the relevant training program for 2021 on a
basis of comprehensively collecting the demands of training from the Company’s middle and senior management
and employees. The Department divided various talent cultivation projects into four major categories with the
guiding concept of “cost control, project refinement, focusing on actual effectiveness, and resource sharing”,
including mature cultivation projects, new business cultivation projects, official cultivation projects, and system
establishment projects.
For mature cultivation projects, the goal of which is to follow the 2025 development strategy planning, the
Company strictly controls the costs and realizes delicacy project implementation so as to ensure that the
production costs and various expenses in 2021 will only decrease rather than increase. These projects mainly
cover business capacity and leadership promotion in the sectors such as production, quality, and marketing.
For new business projects, given that the Company is at the key stage of strategic transformation and
scientific innovation, it is an urgent task to cultivate scientific research teams and management trainees. In
addition, the Company will put forward higher requirements for such new businesses to match the demands of
business departments in a more accurate manner, and focus on the R&D personnel inventory projects, R&D PM
cultivation projects, and management trainee projects.
The cultivation of officials will be carried out in the form of internal cultivation such as management case
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The 2020 Annul Report of Huadong Medicine Co., Ltd.
study, on-duty development and cultivation, and rotation and assignment in conjunction with certain advanced
management concepts of external industries, so as to guide the officials to realize management innovation and
concept innovation, and assist in the establishment of reserve teams for officials. The cultivation will mainly
involve young managers.
In the system establishment, in order to better connect all project resources of various companies, the
Company will consider the system establishment and the implementation of various cultivation projects at the
level of the entire Company, continuously improve teams of internal trainers and tutors and various courses, make
overall planning for the demands of the subsidiaries, and provide branches and subsidiaries with courses and
teaching resources to create the sharing culture and promote the establishment of collectivized and
learning-oriented organizations. Besides, Jiangdong Company plans to take the lead in integrating the learning
resources to cultivate the key primary-level personnel who are responsible for the production and quality of the
industrial subsidiaries, and the online course resources will be open to all employee platforms of branches and
subsidiaries。
4. Labor outsourcing
□ Applicable √ N/A
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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 inde pendence in Businesses, Manage ment, 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 shareho lder
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 pharmaceutical
business 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 and
personnel salaries, and has an independent human resources department 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
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technologies and other intangible assets.
Independence in Yes The Company has establishedindependent Board of Directors, management and
institutions 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
2019 annual annual General
59.61% June 5, 2020 June 5, 2020 Securities News,
General Meeting Meeting
and cninfo
(www.cninfo.com.
cn)
2. Extraordinary general meetings convened at the request of preferred shareholders with resumed voting
rights:
□ Applicable √ N/A
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
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Name of Name of Name of Name of Name of Name of Name of Name of
independent independent independent independent independent independent independent independent
directors directors directors directors directors directors directors directors
Zhong Zhong
8 1 7 0 0 1
Xiaoming Xiaoming
Yang Lan 8 1 7 0 0 Yang Lan 1
Yang Jun 8 1 7 0 0 Yang Jun 1
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
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 2020
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”.
4. Nomination Committee
During the reporting period, the Nomination Committee fully performed its duties to exam and audit the criteria
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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” .。
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 le vel, 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
April 21, 2021
self-evaluation report on internal control
Disclosure index of the full text of
www.cninfo.com.cn
self-evaluation report on internal control
Proportion of assets evaluated in total
95.00%
assets
Proportion of revenue evaluated in total
revenue per consolidated financial 90.00%
statement
Recognition standard of deficiencies
Category Category Category
The Company stipulates that internal The Company stipulates that internal
control deficiencies involving the control deficiencies involving the
Qualitative criteira following fields shall be identified as at following fields shall be considered as
least “important deficiencies”: anti-fraud “material deficiencies”: serious
procedure and control; internal control violation of laws and regulations; in
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over unconventional or unsystematic addition to policy reasons, the
transactions; internal control over the Company has been losing money for
selection and application of accounting years, and its continuous operation has
policies in relation to GAAP; internal been challenged; lack of system
control over the end-of-period financial control or systematic failure in
reporting process. important business; M&A and
restructuring failure; the operation of
newly expanded subordinate units is
unsustainable; lack of internal control
construction and disorderly
management in subsidiaries; middle
and senior managers have left their
posts, or serious staff turnover in 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; Impact on total assets; significant
Quantitative criteria
potential misstatement of total assets negative impact
Number of material deficiencies in
0
financial reporting
Number of material deficiencies in
0
non-financial reporting
Number of important deficiencies in
0
financial reporting
Number of important deficiencies in
0
non-financial reporting
X. Audit report on internal control
√ Applicable □ N/A
Comments of Internal Control Audit Reprot
On December 31, 2020, Huadong Medicine has maintained effective internal control over financial reporting in all major respec ts
in accordance with the “Basic Norms for Enterprise Internal Contr ol” and relevant regulations.
Disclosure of internal control
Disclosure
audit report
Disclosure date of the full audit
April 21, 2021
report on internal control
Disclosure index of the full audit
cninfo (www.cninfo.com.cn)
report on internal control
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Type of opinions in the internal
Unmodified unquialified opinions
control audit report
Whether there are material
deficiencies in non-financial None
reporting
Whether the accounting firm has issued the auditor’s report on internal control with non-standard opinions
□ Yes √ No
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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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
No
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Section XII. Financial Report
I. Audit report
Audit Opioion Unmodified unqualified audit opinion
Audit Reprot sign-off Date April 19, 2021
Pan-China Certified Public Accountants (special
Audit Institution Name
general partnership)
Auidt Report Number T. J. S. (2021) No. 3608
Certified Public Accounts Name Wang Fukang, Xu Ping
Main body of the audit report
Audit Report
T. J. S. (2021) No. 3608
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, 2020, the consolidated and the parent company’s income statements for the year
2020, 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,
2020, as well as the consolidated and the parent company’s operating results and cash flows in
2020.
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.
III. Key audit matters
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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 (XXIV) 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 2020 is RMB 336.83 hundred million yuan.
The medicine sales business of Huadong Medicine is a performance obligation to be
performed at a certain time.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 sa mpling;
(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)The medicine sales business of Huadong Medicine is a performance obligation to be
performed at a certain time.
(8) 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) 2 to the financial
statements.
As of December 31, 2020, the book balance of accounts receivable of Huadong Medicine was
RMB 64.90 hundred million yuan, the bad debt reserve was 3.52 hundred million yuan, and the
book value was 61.38 hundred million 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 credi t
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
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credit risk characteristics; evaluating the rationality of the comparison table of acco unts receivable
ages and expected credit loss rates determined by the Management based on historical credit loss
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 (XIX) and V (I) 14 to the
financial statements.
As of December 31, 2020, the original book value of goodwill of Huadong Medicine was
14.72 hundred million yuan, the impairment reserve was 0.03 hundred million yuan, and the book
value was 14.69 hundred million 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 judgme nt 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;
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(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 significantl y from the range
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 collectivel y, 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
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resulting from error, as fraud may involve collusion, forgery, omissions, misrepresentations, or the
override of internal control.
(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 do ubt 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 19, 2021
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
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, 2020
Unit: RMB yuan
Item December 31, 2020 December 31, 2019
Current assets:
Cahs and bank balances 3,198,080,997.82 2,402,730,395.39
Settlement reserve
Lending to other banks and other
financial institutions
Financial assets for trade
Derivative financial assets
Notes receivable
Accounts receivable 6,137,675,568.82 6,092,305,184.47
Accounts receivable for financing 828,659,217.25 683,884,625.14
Prepayments 250,916,482.07 363,246,612.94
Premiums receivable
Reinsurance accounts receivable
Reinsurance contract reserve
receivable
Other receivables 87,269,489.82 92,201,271.22
Including: Interests receivable
Dividends receivable 4,195,666.37 815,965.44
Financial assets purchased for
resale
Inventories 4,067,635,254.80 4,038,975,496.93
Contract assets
Assets held for sale
Non-current assets due within one
year
Other current assets 85,654,691.58 62,526,471.96
Total current assets 14,655,891,702.16 13,735,870,058.05
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Non-current assets:
Loans and prepayments issuance
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments 850,072,053.02 222,595,018.54
Other equity instrument
225,453,120.05 241,675,712.05
investments
Other non-current financial assets
Real estate properties for
17,792,735.95 21,701,908.75
investment
Fixed assets 2,420,366,582.92 2,175,216,842.65
Constructions in progress 2,240,201,926.65 1,829,808,233.19
Biological assets for production
Oil & gas assets
Right-of-use assets
Intangible assets 1,463,242,463.99 1,454,900,160.45
Development expenditures
Goodwill 1,469,617,262.10 1,469,617,262.10
Long-term unamortized expenses 8,811,339.43 12,289,677.31
Deferred tax assets 137,829,774.40 116,157,614.47
Other non-current assets 712,069,194.08 184,141,659.07
Total non-current assets 9,545,456,452.59 7,728,104,088.58
Total assets 24,201,348,154.75 21,463,974,146.63
Current liabilities:
Short-term borrowing 1,416,932,884.87 655,549,973.27
Borrowing from the central bank
Borrowing from other banks and
other financial institutions
Financial liabilities for trade
Derivative financial liabilities
Notes payable 554,336,058.71 613,374,356.61
Accounts payable 3,947,044,331.68 3,789,054,234.58
Receipts in Advance 951,926.56 254,888,911.30
Contract liabilities 94,384,629.77
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
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 152,106,819.91 132,584,982.71
Taxes payable 571,792,475.80 532,802,157.61
Other payables 1,817,529,820.99 1,365,152,290.99
Including: Interests payable
Dividends payable 224,219.60 224,219.60
Handling fees and commissions
payable
Reinsurance accounts payable
Liabilities held for sale
Non-current liabilities due within
67,813,886.68 1,053,231,727.73
one year
Other current liabilities 10,786,034.37
Total current liabilities 8,633,678,869.34 8,396,638,634.80
Non-current liabilities:
Insurance policy reserve
Long-term borrowing 151,611,367.86
Bonds payable
Including: Preferred shares
Perpetual bonds
Lease liabilities
Long-term payables 26,812,354.90 48,080,030.00
Long-term employee benefits
payable
Provisions 39,467,829.23 52,066,643.01
Deferred income 81,628,032.54 60,960,255.68
Deferred tax liabilities 88,738,187.41 39,604,343.27
Other non-current liabilities
Total non-current liabilities 388,257,771.94 200,711,271.96
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
Total liabilities 9,021,936,641.28 8,597,349,906.76
Owners’ Equity:
Share capital 1,749,809,548.00 1,749,809,548.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserves 2,158,080,661.07 2,158,080,661.07
Less: Treasury shares
Other comprehensive income -2,191,069.45 22,792,488.80
Special reserve
Surplus reserves 861,680,578.42 710,359,967.51
General risk reserve
Retained earnings 9,852,441,590.56 7,668,434,642.62
Total owners’ equity attributable to
14,619,821,308.60 12,309,477,308.00
owner of the Company
Minority interest 559,590,204.87 557,146,931.87
Total owners’ equity 15,179,411,513.47 12,866,624,239.87
Total liabilities & owners’ equity 24,201,348,154.75 21,463,974,146.63
Legal representative: Lv Liang
Person in charge of accounting work: Lv Liang
Person in charge of the Accounting Department: Qiu Renbo
2. Balance sheet of the parent company
Unit: RMB yuan
Item December 31, 2020 December 31, 2019
Current assets:
Cash and bank balances 1,889,264,142.30 893,939,724.56
Financial assets for trade
Derivative financial assets
Notes receivable
Accounts receivable 3,287,882,027.51 3,601,796,850.84
Accounts receivable for financing 214,871,707.01 102,285,661.94
Prepayments 121,268,106.62 183,776,687.98
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
Other receivables 798,152,353.96 857,127,207.17
Including: Interests receivable
Dividends receivable 3,363,380.00
Inventories 1,845,977,070.46 1,726,815,773.41
Contract assets
Assets held for sale
Non-current assets due within one
year
Other current assets 4,529,331.87
Total current assets 8,157,415,407.86 7,370,271,237.77
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments 4,847,172,288.65 4,809,521,228.65
Other equity instrument
94,312,742.49 92,108,957.26
investments
Other non-current financial assets
Real estate properties for
8,125,576.54 8,591,809.18
investment
Fixed assets 159,486,234.04 144,102,366.02
Constructions in progress 342,161.41 15,728,406.26
Biological assets for production
Oil & gas assets
Right-of-use assets
Intangible assets 56,448,575.54 45,226,361.12
Development expenditures
Goodwill
Long-term unamortized expenses 645,902.07 975,689.14
Deferred tax assets 45,918,388.57 48,849,165.52
Other non-current assets 96,882,664.08 8,076,419.28
Total non-current assets 5,309,334,533.39 5,173,180,402.43
Total assets 13,466,749,941.25 12,543,451,640.20
Current liabilities:
Short-term borrowing 930,813,369.36 55,000,000.80
154
The Annual Report 2020 of Huadong Medicine Co., Ltd.
Financial liabilities for trade
Derivative financial liabilities
Notes payable 180,042,270.63 81,036,745.94
Accounts payable 2,421,476,904.57 2,469,675,798.54
Receipts in advance 52,914,932.34
Contract liabilities 32,577,236.92
Payroll payable 8,530,961.48 3,203,215.95
Taxes payable 154,676,067.87 32,881,935.68
Other payables 518,390,330.44 638,551,969.04
Including: Interests payable
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 4,273,258.99
Total current liabilities 4,250,780,400.26 4,361,267,551.17
Non-current liabilities:
Long-term borrowing
Bonds payable
Including: Preferred shares
Perpetual bonds
Lease liabilities
Long-term payables
Long-term employee benefits
payable
Provision
Deferred income 40,698,910.95 43,264,785.87
Deferred tax liabilities 10,888,106.00
Other non-current liabilities
Total non-current liabilities 51,587,016.95 43,264,785.87
Total liabilities 4,302,367,417.21 4,404,532,337.04
Owners’ Equity:
Share capital 1,749,809,548.00 1,749,809,548.00
Other equity instruments
Including: Preferred shares
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
Perpetual bonds
Capital reserves 2,168,451,528.01 2,168,451,528.01
Less: Treasury shares
Other comprehensive income 3,051,311.29 847,526.06
Special reserve
Surplus reserves 939,536,337.86 788,215,726.95
Retained earnings 4,303,533,798.88 3,431,594,974.14
Total owners’ equity 9,164,382,524.04 8,138,919,303.16
Total liabilities & owners’ equity 13,466,749,941.25 12,543,451,640.20
3. Consolidated income statement
Unit: RMB yuan
Item 2020 2019
I. Total operating income 33,683,058,759.75 35,445,698,216.15
Including: Operating revenue 33,683,058,759.75 35,445,698,216.15
Interests received
Premiums earned
Handling fees and
commissions received
II. Total operating cost 30,666,230,281.53 32,236,584,319.28
Including: Operating cost 22,550,481,690.73 24,086,722,961.73
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
185,461,334.65 181,986,722.36
surcharges
Selling expenses 5,970,614,819.26 5,797,236,883.02
Administrative expenses 998,746,330.35 1,095,227,423.65
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
Research and
926,725,468.93 1,072,937,182.39
Development(R&D) expenses
Financial expenses 34,200,637.61 2,473,146.13
Including: Interests
68,639,542.18 107,193,977.78
expenses
Interests income 60,990,405.57 30,593,316.38
Add: Other income 191,999,829.91 113,635,429.90
Investment income (Losses are
-27,525,224.08 -15,006,715.14
indicated by “-”)
Including: Investment gains
(losses) in associated enterprise and -10,825,814.85 11,058,408.16
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
(Losses are indicated by “-”)
Gains on changes in fair value
(Losses are indicated by “-”)
Credit impairment losses
-22,826,566.73 -28,581,461.03
(Losses are indicated by “-”)
Impairment losses of assets
-4,537,552.17 3,726,044.53
(Losses are indicated by “-”)
Gains on assets disposal
322,636,323.26 114,154,941.45
(Losses are indicated by “-”)
III. Operating profit (Losses are indicated
3,476,575,288.41 3,397,042,136.58
by “-”)
Add: Non-operating income 12,497,148.79 118,292,148.72
Less: Non-operating expenses 35,681,896.22 45,068,060.85
IV. Total profit (Total losses are indicated
3,453,390,540.98 3,470,266,224.45
by “-”)
Less: Income tax expenses 543,673,981.58 544,863,569.56
V. Net profit (Net losses are indicated by
2,909,716,559.40 2,925,402,654.89
“-”)
(I) Classification by continuous
operations
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
1. Net profit from continued
operations (Net losses are indicated by 2,909,716,559.40 2,925,402,654.89
“-”)
2. Net profit from terminational
operations (Net losses are indicated by
“-”)
(II) Classification by attribution of
ownership
1. Net profit attributable to owners
2,819,861,203.63 2,813,118,702.11
of the parent company
2. Profit or loss attributable to
89,855,355.77 112,283,952.78
minority shareholders
VI. Other comprehensive income, net of
-19,570,529.59 45,218,643.39
income tax
Other comprehensive income
attributable to owners of the parent -19,570,529.59 45,218,643.39
company, net of tax
(I) Other comprehensive income that
-7,557,508.15 22,649,380.85
cannot be reclassified into gains/losses
1.Changes in remeasurement
on the defined benefit plan
2. Other comprehensive
income that cannot be reclassified into
gains/losses under equity method
3. Changes in fair value of
-7,557,508.15 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
-12,013,021.44 22,569,262.54
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. Amount of financial assets
reclassified into other comprehensive
income
158
The Annual Report 2020 of Huadong Medicine Co., Ltd.
4. Credit impairment reserve
of other debt investments
5. Cash flow hedging reserve
6. Exchange differences
arising on conversion of financial
-12,013,021.44 22,569,262.54
statements denominated in foreign
currencies
7. Others
Net amount after tax of other
comprehensive income attributable to
minority shareholders
VII. Total comprehensive income 2,890,146,029.81 2,970,621,298.28
Total comprehensive income
attributable to owners of the parent 2,800,290,674.04 2,858,337,345.50
company
Total comprehensive income
89,855,355.77 112,283,952.78
attributable to minority shareholders
VIII. Earnings per share (EPS):
(I) Basic EPS 1.6115 1.6077
(II) Diluted EPS 1.6115 1.6077
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: Lv Liang
Person in charge of accounting work: Lv Liang
Person in charge of the Accounting Department: Qiu Renbo
4. Income statement of the parent company
Unit: RMB yuan
Item 2020 2019
I. Total operating income 16,872,181,187.37 18,615,152,475.02
Less: Total operating cost 15,944,922,632.47 17,632,559,302.99
Business taxes and surcharges 22,247,894.47 18,316,448.01
Selling expenses 376,745,334.88 405,018,833.52
Administrative expenses 149,533,857.93 144,525,622.55
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
Research and Development
7,744,972.45
(R&D) expenses
Financial expenses 16,997,550.09 61,561,281.10
Including: Interests
55,351,840.15 74,457,880.50
expenses
Interests income 42,365,020.49 17,378,641.11
Add: Other income 12,869,243.56 6,736,329.43
Investment income (Losses
1,230,298,386.30 884,134,498.88
are indicated by “-”)
Including: Investment gains
(losses) in associated enterprise and
joint-venture enterprise
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
20,604,531.85 -51,632,880.16
(Losses are indicated by “-”)
Impairment gains (losses) of
assets (Losses are indicated by “-”)
Asset disposal income
-6,255.56 114,473,031.50
(Losses are indicated by “-”)
II. Operating profit (Losses are
1,625,499,823.68 1,299,136,994.05
indicated by “-”)
Add: Non-operating income 1,052,923.08 1,634,235.90
Less: Non-operating expenses 8,012,091.67 1,291,907.34
III. Total profit (Total losses are
1,618,540,655.09 1,299,479,322.61
indicated by “-”)
Less: Income tax expenses 105,334,546.00 124,909,727.27
IV. Net profit (Net losses are indicated
1,513,206,109.09 1,174,569,595.34
by “-”)
(I) Net profit from continuous
operations (Net losses are indicated by 1,513,206,109.09 1,174,569,595.34
“-”)
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
(II) Net profit from discontinued
operations (Net losses are indicated by
“-”)
V. Other comprehensive income, net of
2,203,785.23 847,526.06
income tax
(I) Other comprehensive income
that cannot be reclassified into 2,203,785.23 847,526.06
gains/losses
1. Changes in
remeasurement on the defined benefit
plan
2. Other comprehensive
income that cannot be reclassified into
gains/losses under equity method
3. Changes in fair value of
2,203,785.23 847,526.06
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. Amount of financial
assets reclassified into other
comprehensive income
4. Credit impairment
reserve of other debt investments
5. Cash flow hedging
reserve
6. Exchange differences
from translation of foreign currency
financial statements
7. Others
VI. Total comprehensive income 1,515,409,894.32 1,175,417,121.40
VII. Earnings per share (EPS):
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
(I) Basic EPS
(II) Diluted EPS
5. Consolidated cash flow statement
Unit: RMB yuan
Item 2020 2019
I. Cash flows from operating activities：
Cash received from sale of goods
36,213,324,706.96 37,765,481,069.45
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 21,366,495.17 36,489,238.81
Other cash receipts to operating
875,802,744.84 999,312,116.21
activities
Sub-total of Cash inflows from
37,110,493,946.97 38,801,282,424.47
operating activities
Cash payments for goods
23,428,048,137.78 26,049,853,576.88
purchased and services received
Net increase in customer loans and
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
prepayments
Net increase in deposits of central
bank and due from banks
Cash payments for original
insurance claims
Net increase in lending to other
banks and other financial institutions
Cash payments for interests,
handling fees and commissions
Cash payments for policy
dividends
Cash payments to and on behalf of
2,292,509,541.65 2,290,705,739.73
employees
Payments of various types of taxes 2,186,582,342.29 2,151,909,142.04
Other cash payments in relation to
5,791,906,177.69 6,307,115,795.15
operating activities
Sub-total of cash outflows for operating
33,699,046,199.41 36,799,584,253.80
activities
Net cash flow from operating activities 3,411,447,747.56 2,001,698,170.67
II. Cash flows from investing activities
Cash receipts from recovery of
1.00
investments
Cash receipts from investment
900,000.00 6,375,600.00
income
Net cash from disposal of fixed
assets, intangible assets and other 373,808,641.84 57,931,687.55
long-term assets
Net cash from disposal of
subsidiaries and other business units
Other cash receipts in relation to
10,970,083.85 10,330,000.00
investing activities
Sub-total of cash inflows from investing
385,678,726.69 74,637,287.55
activities
Cash payments for purchase and
construction of fixed assets, intangible 1,472,983,747.79 1,353,444,334.16
assets and other long-term assets
Cash payments for investment 638,463,000.00 256,944,900.00
Net increase in pledge loans
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
Net cash paid for acquisition of
11,199,793.01
subsidiaries and other business units
Other cash payments in relation to
12,869,402.84 35,656,157.15
investing activities
Sub-total of cash outflows for investing
2,124,316,150.63 1,657,245,184.32
activities
Net cash flow from investing activities -1,738,637,423.94 -1,582,607,896.77
III. Cash flows from financing
activities:
Cash receipts from capital
9,800,000.00
contributions
Including: Cash receipts from
capital contributions from minority 9,800,000.00
owners of subsidiaries
Cash from borrowing 2,194,671,377.21 1,908,287,327.51
Other cash receipts in relation to
16,376,100.00 4,450,000.00
financing activities
Sub-total of cash inflows from
2,211,047,477.21 1,922,537,327.51
financing activities
Cash repayment of borrowings 2,258,202,628.26 1,880,308,079.71
Cash payments for distribution of
dividends or profits or settlement of 655,696,970.33 621,755,092.32
interet expenses
Including: Dividends and profits
paid by subsidiaries to minority 89,969,437.98 51,128,000.00
shareholders
Other cash payments in relation to
22,877,889.85 29,071,651.48
financing activities
Sub-total of cash outflows from
2,936,777,488.44 2,531,134,823.51
financing activities
Net cash flows from financing activities -725,730,011.23 -608,597,496.00
IV. Effect of foreign exchange rate
-21,444,785.63 22,569,262.54
changes on Cash and Cash Equivalents
V. Net increase in cash and cash
925,635,526.76 -166,937,959.56
equivalents
Add: Opening balance of cash and
2,231,771,546.50 2,398,709,506.06
cash equivalents
VI. Closing balance of cash and cash 3,157,407,073.26 2,231,771,546.50
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
equivalents
6. Cash flow statement of the parent company
Unit: RMB yuan
Item 2020 2019
I. Cash flows from operating activities：
Cash receipts from the sale of
18,468,734,907.54 19,888,765,400.12
goods and the rendering of services
Receipts of tax refund 62.38
Other cash receipts in relation to
75,204,158.10 72,672,145.56
operating activities
Sub-total of cash inflows from
18,543,939,128.02 19,961,437,545.68
operating activities
Cash payments for goods acquired
17,189,413,934.83 19,392,421,016.77
and services received
Cash payments to and on behalf of
221,958,975.19 215,213,920.34
employees
Payments of various types of
141,082,140.82 304,160,143.98
taxes
Other cash payments in relation to
305,941,397.18 293,133,338.39
operating activities
Sub-total of cash outflows for operating
17,858,396,448.02 20,204,928,419.48
activities
Net cash flow from operating activities 685,542,680.00 -243,490,873.80
II. Cash flows from investing activities
Cash receipts from recovery of
4,277,665.48
investments
Cash receipts from investment
252,569,238.79 854,192,000.00
income
Net cash receipts from disposal of
fixed assets, intangible assets and other 51,043.55 56,648,621.75
long-term assets
Net cash from disposal of
subsidiaries and other business units
Other cash receipts in relation to
1,008,662,454.55 719,862,834.59
investing activities
Sub-total of cash inflows from investing 1,265,560,402.37 1,630,703,456.34
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
activities
Cash payments for purchase and
construction of fixed assets, intangible 117,614,594.72 76,886,709.15
assets and other long-term assets
Cash payments for investment 45,563,072.00 292,607,400.00
Net cash paid for acquisition of
45,000,000.00
subsidiaries and other business units
Other cash payments in relation to
883,840,800.00 1,025,893,964.54
investing activities
Sub-total of cash outflows for investing
1,047,018,466.72 1,440,388,073.69
activities
Net cash flows from investing activities 218,541,935.65 190,315,382.65
III. Cash flows from financing
activities:
Cash receipts from absorbing
investments
Cash receipts from borrowing 1,290,651,754.99 804,466,686.17
Other cash receipts in relation to
8,284,000,000.00 352,692,483.11
financing activities
Sub-total of cash inflows from
9,574,651,754.99 1,157,159,169.28
financing activities
Cash repayments of borrowings 1,415,656,441.26 769,466,685.37
Cash payments for distribution of
dividends or profits or settlement of 555,848,349.12 536,573,346.34
interest expenses
Other cash payments in relation to
7,511,907,162.52 288,574,038.04
financing activities
Sub-total of cash outflows
9,483,411,952.90 1,594,614,069.75
fromfinancing activities
Net cash flow from financing activities 91,239,802.09 -437,454,900.47
IV. Effect of foreign exchange rate
changes on Cahs and Cash Equivalents
V. Net increase in cash and cash
995,324,417.74 -490,630,391.62
equivalents
Add: Opening balance of cash and
893,929,724.56 1,384,560,116.18
cash equivalents
VI. Closing balance of cash and cash
1,889,254,142.30 893,929,724.56
equivalents
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
7. Consolidated statement of changes in owners’ Equity
Amount in the current period
Unit: RMB yuan
2020
Ownership interest attributable to the parent company
Other equity Other Total
Minori
instruments Less: compr owners
Item Share Specia Surplu Genera Undist ty
Capital Treasu ehensi hip
Prefe Perpe
capita l s l risk ributed Others Total interes
rred tual Other reserve ry ve interes
l reserve reserve reserve profit t
share bond s shares incom t
s s e
I. Balance at the 1,749
2,158, 22,792 710,35 7,668, 12,309 557,14 12,866
end of the ,809,
080,66 ,488.8 9,967. 434,64 ,477,3 6,931. ,624,2
period of the 548.0
1.07 0 51 2.62 08.00 87 39.87
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 1,749
2,158, 22,792 710,35 7,668, 12,309 557,14 12,866
the beginning of ,809,
080,66 ,488.8 9,967. 434,64 ,477,3 6,931. ,624,2
the period of the 548.0
1.07 0 51 2.62 08.00 87 39.87
current year 0
III. Amount of
change in the
-24,98 151,32 2,184, 2,310, 2,312,
current period 2,443,
3,558. 0,610. 006,94 344,00 787,27
(Decreases are 273.00
25 91 7.94 0.60 3.60
indicated by
“-”)
(I) Total -19,57 2,819, 2,800, 89,855 2,890,
167
The Annual Report 2020 of Huadong Medicine Co., Ltd.
comprehensive 0,529. 861,20 290,67 ,355.7 146,02
income 59 3.63 4.04 7 9.81
(II) Capital
contributed by
4,900, 4,900,
owners and
000.00 000.00
capital
decreases
1. Common
4,900, 4,900,
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
151,32 -641,2 -489,9 -89,96 -579,9
(III) Profit
0,610. 67,284 46,673 9,437. 16,111
distribution
91 .35 .44 98 .42
1. Withdrawal 151,32 -151,3
of surplus 0,610. 20,610
reserve 91 .91
2. Withdrawal
of general risk
reserve
3. Distribution -489,9 -489,9 -89,96 -579,9
to owners (or 46,673 46,673 9,437. 16,111
shareholders) .44 .44 98 .42
4. Others
(IV) Internal
conversion of -5,413, 5,413,
ownership 028.66 028.66
interest
1. Capital (or
share capital)
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The Annual Report 2020 of Huadong Medicine Co., Ltd.
increase from
capital reserve
conversion
2. Capital (or
share capital)
increase from
surplus reserve
conversion
3. Recovery of
losses by
surplus reserve
4. Retained
earnings from
transfer of
changes in the
defined benefit
plan
5. Retained
earnings from
-5,413, 5,413,
transfer of other
028.66 028.66
comprehensive
income
6. Others
(V) Special
reserve
1. Withdrawal
in the current
period
2. Use in the
current period
-2,342, -2,342,
(VI) Others
644.79 644.79
1,749
IV. Balance at 2,158, 861,68 9,852, 14,619 559,59 15,179
,809, -2,191,
the end of the 080,66 0,578. 441,59 ,821,3 0,204. ,411,5
548.0 069.45
current period 1.07 42 0.56 08.60 87 13.47
0
Amount in the prior period
Unit: RMB yuan
2019
Items
Ownership interest attributable to the parent company Minorit Total
169
The Annual Report 2020 of Huadong Medicine Co., Ltd.
Other equity y owners
Other
instruments interest hip
Less: compr
Share Specia Surplu Genera Undist interest
Prefe Perp Capital Treasu ehensi
capita l s l risk ributed Others Total
rred etual Other reserve ry ve
l reserve reserve reserve profit
share bond s shares incom
s s e
I. Balance at 1,458
2,455, -22,42 592,90 5,453, 9,938, 10,425,
the end of the ,174, 487,379
526,99 6,154. 3,007. 970,52 148,99 528,567
period of the 624.0 ,570.98
3.18 59 98 5.96 6.53 .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, 10,425,
the beginning ,174, 487,379
526,99 6,154. 3,007. 970,52 148,99 528,567
of the period of 624.0 ,570.98
3.18 59 98 5.96 6.53 .51
the current year 0
III. Amount of
change in the
291,6 -297,4 45,218 117,45 2,214, 2,371, 2,441,0
current period 69,767,
34,92 46,332 ,643.3 6,959. 464,11 328,31 95,672.
(Decreases are 360.89
4.00 .11 9 53 6.66 1.47 36
indicated by
“-”)
(I) Total 45,218 2,813, 2,858, 2,970,6
112,283
comprehensive ,643.3 118,70 337,34 21,298.
,952.78
income 9 2.11 5.50 28
(II) Capital
9,800,0 9,800,0
contributed by
00.00 00.00
owners and
170
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capital
decreases
1. Common
9,800,0 9,800,0
shares invested
00.00 00.00
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 -532,32
(III) Profit -51,128
6,959. 54,585 97,625 5,625.9
distribution ,000.00
53 .45 .92 2
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 -532,32
-51,128
to owners (or 97,625 97,625 5,625.9
,000.00
shareholders) .92 .92 2
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)
171
The Annual Report 2020 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
-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 12,866,
,809, 557,146
the end of the 080,66 ,488.8 9,967. 434,64 ,477,3 624,239
548.0 ,931.87
current period 1.07 0 51 2.62 08.00 .87
0
8. Statement of changes in ownership interest of the parent company
Amount in the current period
Unit: RMB yuan
2020
Item Share Other equity Capital Less: Other Special Surplus Undistr Total
Others
capital instruments reserve Treasury compreh reserve reserve ibuted ownership
172
The Annual Report 2020 of Huadong Medicine Co., Ltd.
Preferr Perpet shares ensive profit interest
ed ual Others income
shares bonds
I. Balance at the 1,749,8 3,431,5
2,168,45 847,526. 788,215, 8,138,919,
end of the period 09,548. 94,974.
1,528.01 06 726.95 303.16
of the prior year 00 14
Add:
Changes in
accounting
policies
Error
correction in the
prior periods
Others
II. Balance at the
1,749,8 3,431,5
beginning of the 2,168,45 847,526. 788,215, 8,138,919,
09,548. 94,974.
period of the 1,528.01 06 726.95 303.16
00 14
current year
III. Amount of
change in the 871,93
2,203,78 151,320, 1,025,463,
current period 8,824.7
5.23 610.91 220.88
(Decreases are 4
indicated by “-”)
(I) Total 1,513,2
2,203,78 1,515,409,
comprehensive 06,109.
5.23 894.32
income 09
(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
173
The Annual Report 2020 of Huadong Medicine Co., Ltd.
included in
ownership
interest
4. Others
-641,26
(III) Profit 151,320, -489,946,6
7,284.3
distribution 610.91 73.44
5
-151,32
1. Withdrawal of 151,320,
0,610.9
surplus reserve 610.91
1
2. Distribution to -489,94
-489,946,6
owners (or 6,673.4
73.44
shareholders) 4
3. Others
(IV) Internal
conversion of
ownership
interest
1. Capital (or
share capital)
increase from
capital reserve
conversion
2. Capital (or
share capital)
increase from
surplus 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
174
The Annual Report 2020 of Huadong Medicine Co., Ltd.
income
6. Others
(V) Special
reserve
1. Withdrawal in
the current
period
2. Use in the
current period
(VI) Others
IV. Balance at 1,749,8 4,303,5
2,168,45 3,051,31 939,536, 9,164,382,
the end of the 09,548. 33,798.
1,528.01 1.29 337.86 524.04
current period 00 88
Amount in the prior period
Unit: RMB yuan
2019
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
1,458, 2,460,0
end of the 670,758 2,855,679 7,444,699,8
174,62 86,452.
period of the ,767.42 ,964.25 07.68
4.00 01
prior year
Add:
Changes in
accounting
policies
Error
correction in
the prior
periods
Others
II. Balance at
1,458, 2,460,0
the beginning 670,758 2,855,679 7,444,699,8
174,62 86,452.
of the period of ,767.42 ,964.25 07.68
4.00 01
the current year
175
The Annual Report 2020 of Huadong Medicine Co., Ltd.
III. Amount of
change in the
291,63 -291,63
current period 847,526 117,456 575,915,0 694,219,49
4,924. 4,924.0
(Decreases are .06 ,959.53 09.89 5.48
00 0
indicated by
“-”)
(I) Total
847,526 1,174,569 1,175,417,1
comprehensive
.06 ,595.34 21.40
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 117,456 -598,654, -481,197,62
distribution ,959.53 585.45 5.92
1. Withdrawal
117,456 -117,456,
of surplus
,959.53 959.53
reserve
2. Distribution
-481,197, -481,197,62
to owners (or
625.92 5.92
shareholders)
3. Others
(IV) Internal 291,63 -291,63
conversion of 4,924. 4,924.0
ownership 00 0
176
The Annual Report 2020 of Huadong Medicine Co., Ltd.
interest
1. Capital (or
share capital) 291,63 -291,63
increase from 4,924. 4,924.0
capital reserve 00 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
2. Use in the
current period
(VI) Others
IV. Balance at 1,749, 2,168,4
847,526 788,215 3,431,594 8,138,919,3
the end of the 809,54 51,528.
.06 ,726.95 ,974.14 03.16
current period 8.00 01
Huadong Medicine Co., Ltd.
177
The Annual Report 2020 of Huadong Medicine Co., Ltd.
Chairman of the Board: Lv Liang
April 21, 2021
178
