The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
Stock code: 000963 Stock abbreviation: Huadong Medicine Announcement No.: 2022-070
Huadong Medicine Co., Ltd.
The Third Quarterly Report 2022
The Company and all members of the Board of Directors hereby guarantee that the information
presented in this report is authentic, accurate and complete and free of any false records, misleading
statements or material omissions.
Important Declaration:
1. 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 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.
2. The Company’s legal representative and the officer in charge of accounting, and head of accounting
department (accounting supervisor) hereby declare and guarantee that the financial statements in this
quarterly report are authentic, accurate, and complete.
3. Has the third quarterly report been audited?
□ Yes No
This report is prepared both in Chinese and English. Should there be any discrepancy between the
Chinese and English versions, the Chinese version shall prevail.
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
I. Key financial data
(I) Key accounting data and financial indicators
Whether the Company needs to perform retroactive adjustment or restatement of previous accounting data
□ Yes No
Change of the current Change of the first nine
The current reporting reporting period over First nine months of months of 2022 over
period the same period last 2022 the same period last
year year
Operating income
9,660,543,088.09 10.43% 27,858,507,079.10 7.45%
(yuan)
Net profit attributable
to listed-company 640,899,562.97 7.71% 1,981,470,047.95 4.54%
shareholders (yuan)
Net profit attributable
to listed-company
shareholders after
629,214,050.43 10.77% 1,901,053,230.06 7.89%
deducting non-
recurring gains/losses
(yuan)
Net cash flows from
operating activities — — 1,320,252,925.99 -37.31%
(yuan)
Basic earnings per
0.3663 7.71% 1.1324 4.54%
share (yuan/share)
Diluted earnings per
0.3663 7.71% 1.1324 4.54%
share (yuan/share)
Weighted average
3.62% -0.13% 11.39% -0.89%
return on equity (ROE)
End of the current Change of the end of the current reporting period
End of last year
reporting period over the end of last year
Total assets (yuan) 30,662,572,819.67 26,996,403,366.69 13.58%
Total ownership
interest attributable to
18,068,711,890.05 16,579,374,323.08 8.98%
listed-company
shareholders (yuan)
Share capital of the Company as of the trading day before disclosure:
Share capital of the Company as of the trading day before
1,749,809,548.00
disclosure (shares)
Fully diluted earnings per share calculated on the basis of the latest share capital
Dividends paid on preferred shares 0.00
Perpetual bond interest paid (yuan) 0.00
Fully diluted earnings per share calculated on the basis of the
1.1324
latest share capital (yuan/share)
(II) Items and amounts of non-recurring gains/losses
Applicable □Inapplicable
Unit: RMB yuan
Amount in the current Amount in the first nine
Item Note
reporting period months of 2022
Gains/losses on disposal of
non-current assets (including
the written-off part of the -6,456,222.42 2,413,541.61
accrued assets impairment
reserve)
Tax refund and reduction with 298,676.54 2,758,810.47
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
ultra vires examination and
approval or without official
approval documents
Government grants included
in current gains/losses
(excluding those closely
Mainly due to the
related to daily business
confirmation of government
operation and distributed 34,136,781.84 113,330,078.60
grants by subsidiaries in the
constantly in accordance with
current period.
certain standard quota or
quantity in line with national
policies and regulations)
Other non-operating revenue
or expenditure except above- -14,144,513.35 -18,729,257.39
mentioned items
Less: Amount affected by
2,614,873.55 17,708,027.55
income tax
Amount affected by rights
and interests of minority -465,663.48 1,648,327.85
stakeholders (after tax)
Total 11,685,512.54 80,416,817.89 --
Details of other items of gains/losses meet the definition of non-recurring gains/losses:
□Applicable Inapplicable
There are no other gain/loss items in line with the definition of non-recurring gains/losses in the Company.
Explanation for recognizing an item listed as a non-recurring gain/loss in the “Interpretative Announcement No. 1 on Information
Disclosure Criteria for Public Companies – Non-Recurring Gains/Losses” as a recurring gain/loss
□Applicable Inapplicable
There is no circumstance in which the Company recognizes an item listed as a non-recurring gain/loss in the “Interpretative
Announcement No. 1 on Information Disclosure Criteria for Public Companies – Non-Recurring Gains/Losses” as a recurring gain/loss.
(III) Changes in key accounting data and financial indicators and their reasons
Applicable □Inapplicable
Beginning of the Change
Balance sheet item End of the period Notes on cause of changes
period rate
Mainly due to the increase in payment for goods in the
Accounts receivable 8,831,060,590.99 6,430,482,175.97 37.33%
settlement period by the end of the current period
Mainly due to the increase in receivables and suspense
Other receivables 371,528,921.48 223,707,267.30 66.08%
payments in the current period
Long-term equity
1,694,315,448.54 984,927,398.68 72.02% Mainly due to investment in Heidelberg Pharma AG
investments
Other equity
instrument 359,700,638.43 257,815,844.68 39.52% Mainly due to investment in Ashvattha Therapeutics
investments
Other non-current Mainly due to the increase in payments for product
1,407,052,577.68 911,062,879.83 54.44%
assets introduction in the current period
Short-term Mainly due to the repayment of borrowings in the current
736,186,259.25 1,237,843,228.13 -40.53%
borrowing period
Mainly due to the increase in notes for payment in the
Notes payable 1,178,537,227.66 671,964,504.00 75.39%
current period
Mainly due to the increase in taxes paid in the current
Taxes payable 626,833,981.79 1,029,610,563.41 -39.12%
period
Non-current
Mainly due to the repayment of long-term borrowing in the
liabilities due within 44,491,162.31 244,256,705.59 -81.79%
current period
one year
Other current Mainly due to the increase of contract liabilities with
18,254,352.56 11,386,267.11 60.32%
liabilities corresponding taxes transferred to other current liabilities
Long-term Mainly due to the increase in new borrowing in the current
1,312,010,297.75 139,178,905.04 842.68%
borrowing period
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
Mainly due to the decrease in exchange differences arising
Other comprehensive
-66,798,628.56 -47,768,225.80 -39.84% on conversion of financial statements denominated in
income
foreign currencies
Income statement Amount of the Amount of the
Change Cause of change
item current period previous period
Mainly due to the decrease in investment income from
Investment income -99,173,464.90 -60,001,493.40 -65.28%
associates
Gains on assets Mainly due to the sale of real properties in the current
5,578,009.76 -149,966.61 3819.50%
disposal period
Non-operating Mainly due to the decrease in confiscated income year on
5,034,409.21 17,439,095.86 -71.13%
income year
Non-operating
27,069,853.11 19,888,568.89 36.11% Mainly due to the increase in donation in the current period
expenses
Cash flow statement Amount of the Amount of the
Change Cause of change
item current period previous period
Mainly due to the year-on-year decrease in government
Net cash flows from
1,320,252,925.99 2,105,916,826.72 -37.31% grants as well as the increase in taxes paid, deposit
operating activities
payment, and R&D expenses in the current period
Net cash flows from
-2,183,831,586.20 -1,406,864,147.47 -55.23% Mainly due to investment in Heidelberg Pharma AG
investment activities
Net cash flows from Mainly due to the increase in interest-bearing liabilities in
-114,865,223.05 -525,617,150.19 78.15%
financing activities the current period
II. Shareholder information
(I) Total number of common shareholders, number of shareholders of preferred shares with voting rights
restored, and information about top 10 shareholders
Unit: share
Total number of common Total number of shareholders of preferred shares with
shareholders at the end of the 83,815 voting rights restored at the end of the reporting 0
reporting period period (if any)
Information about top 10 shareholders
Number of Pledged, marked or frozen
Name of Nature of Shareholding Number of shares subject
shareholder shareholder ratio shares held to trading Status Amount
restrictions
Domestic non-
China Grand
state-owned 41.77% 730,938,157 0 Pledged 144,642,000
Enterprises Inc.
corporation
Hangzhou
Huadong State-owned
16.46% 288,000,000 0
Medicine corporation
Group Co., Ltd.
Hong Kong
Securities Overseas
3.09% 54,109,530 0
Clearing corporation
Company Ltd.
Industrial and
Commercial
Bank of China
Limited--
China-Europe
Others 2.59% 45,271,941 0
Healthcare
Hybrid
Securities
Investment
Fund
China
Domestic non-
Securities
state-owned 1.27% 22,186,818 0
Finance
corporation
Corporation
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
Limited
China
Construction
Bank
Corporation--
ICBC Credit Others 1.14% 20,000,078 0
Suisse Frontier
Medical Equity
Investment
Fund
Norges Bank-- Overseas
0.51% 8,959,308 0
Equity fund corporation
Industrial and
Commercial
Bank of China
Limited--
China-Europe
Others 0.51% 8,871,584 0
Healthcare
Innovation
Stock
Investment
Fund
Shanghai Gao
Yi Asset
Management
Partnership Others 0.40% 7,052,120 0
(L.P.)--Gao Yi
Xiaofeng No.2
Zhixin Fund
National
Council for
Social Security Others 0.40% 7,033,432 0
Fund--Portfolio
No.110
Shareholding of the top 10 shareholders without trading restrictions
Type of shares
Name of shareholder Number of the trading unrestricted shares held
Type of shares Amount
RMB common
China Grand Enterprises Inc. 730,938,157 730,938,157
shares
Hangzhou Huadong Medicine RMB common
288,000,000 288,000,000
Group Co., Ltd. shares
Hong Kong Securities Clearing RMB common
54,109,530 54,109,530
Company Ltd. shares
Industrial and Commercial Bank
of China Limited--China-Europe RMB common
45,271,941 45,271,941
Healthcare Hybrid Securities shares
Investment Fund
China Securities Finance RMB common
22,186,818 22,186,818
Corporation Limited shares
China Construction Bank
Corporation--ICBC Credit Suisse RMB common
20,000,078 20,000,078
Frontier Medical Equity shares
Investment Fund
RMB common
Norges Bank--Equity fund 8,959,308 8,959,308
shares
Industrial and Commercial Bank
of China Limited--China-Europe RMB common
8,871,584 8,871,584
Healthcare Innovation Stock shares
Investment Fund
Shanghai Gao Yi Asset
Management Partnership (L.P.)-- RMB common
7,052,120 7,052,120
Gao Yi Xiaofeng No.2 Zhixin shares
Fund
National Council for Social RMB common
7,033,432 7,033,432
Security Fund--Portfolio No.110 shares
Description of relations or acting in concert among The Company does not know whether the above-mentioned shareholders
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
the shareholders mentioned above are related parties or whether they are acting-in-concert parties with one
another.
At the end of the reporting period, among the top 10 common
Description of the participation in securities margin
shareholders of the Company, there were no shareholders holding the
trading business of the top 10 shareholders (if any)
Company’s shares through the securities margin trading account.
(II) Total number of shareholders of preferred shares and information about top 10 shareholders of
preferred shares
□Applicable Inapplicable
III. Other important matters
Applicable □Inapplicable
(I) Overview of operations
1. The Company’s overall operations during the reporting period
During the reporting period, the Company continued to overcome the challenges brought about
by the COVID-19 resurgence and the fierce market competition. With the core objective of restoring
growth, it accelerated operation and innovation in various fields, so its key operational indicators
continued to recover growth amid the effective response to various pressures and uncertainties. In the
first nine months of 2022, the Company realized operating income of RMB27.86 billion, up 7.4%
year on year (up 0.4% in the first quarter and 5.9% in the first half year on year). Meanwhile, it
produced net profit attributable to listed-company shareholders after deduction of non-recurring gains
or losses of RMB1.9 billion, up 7.9% (up 0.4% in the first quarter and 6.5% in the first half year on
year). Calculated by the same standard in the previous annual report after excluding the controlling
subsidiary Huadong Ningbo, operating income in the first nine months of 2022 increased by 11.2%
year on year, and net profit attributable to listed-company shareholders after deduction of non-
recurring gains or losses went up by 9.3% year on year. The Company saw its overall operations
growing steadily.
In the third quarter of 2022, the Company posted total operating income of RMB9.66 billion, an
increase of 10.4% compared with the same period last year and 4.3% from the second quarter of the
year as well as net profit attributable to listed-company shareholders after deduction of non-recurring
gains or losses of RMB630 million, an increase of 10.8% compared with the same period last year
and 9.8% from the second quarter of the year. Calculated by the same standard in the previousannual
report after excluding the controlling subsidiary Huadong Ningbo, the Company’s operating income
in the third quarter of 2022 increased by 14.4% year on year, and its net profit attributable to listed-
company shareholders after deduction of non-recurring gains or losses rose by 11.2% year on year.
The pharmaceutical industry segment (including CSO business) recorded operating income of
RMB8.22 billion in the first nine months of 2022, up 5.3% year on year (down 13.4% in the first
quarter and up 1.4% in the first half year on year). It realized net profit attributable to listed-company
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
shareholders after deduction of non-recurring gains or losses of RMB1.62 billion, up 0.9% year on
year (down 4.3% in the first quarter and down 3.7% in the first half year on year). In the third quarter
of 2022, the segment achieved operating income of RMB2.71 billion and net profit attributable to
listed-company shareholders after deduction of non-recurring gains or losses of RMB550 million, up
14.0% and 11.1% year on year. The industrial microbiology business grew slower in the third quarter
of 2022 compared with the first half of the year, due to the decline in demand for nucleoside raw
materials in the downstream international market and the delayed delivery of the Company’s
production in pursuit of overseas certification. However, the overall business is expected to gradually
recover in the fourth quarter. From a full-year perspective, the Company continued to implement its
industrial microbiology strategy, to enrich product pipelines with high innovation, technical barriers,
and value-added in various business areas, and to optimize the product structure. At the same time, it
got products registered overseas and launched international business actively. All of these steps aimed
to promote the steady growth of the industrial microbiology business.
During the reporting period, the Company’s pharmaceutical commerce maintained steady
growth, achieving operating income of RMB18.97 billion, up 9.8% year on year, and total net profit
of RMB300 million, up 5.0% year on year.
During the reporting period, the Company’s aesthetic medicine segment maintained rapid
growth as a whole. In the period, the segment achieved total operating income of RMB1.37 billion
(excluding internal offsetting factors), representing the highest level of the same period in the
Company’s history, and a year-on-year increase of 113.7% on a comparable basis (excluding
Huadong Ningbo). Sinclair, a wholly-owned subsidiary in the United Kingdom (the UK), continued
to grow fast, making strides in overseas market expansion and international sales. During the
reporting period, Sinclair registered consolidated operating income of GBP95.37 million
(approximately RMB790 million), an increase of 79.7% year on year, and earnings before interest,
taxes, depreciation, and amortization (EBITDA) of GBP17.36 million, an increase of 254.9% year
on year. In the third quarter alone, the subsidiary posted operating income of over GBP32 million in
spite of the mounting pressures from inflation and rising costs overseas. The Préime DermaFacial, a
multi-functional facial skin management platform that Sinclair exclusively introduced from Ireland-
based EMA Aesthetics Limited, become available for commercial sales in major global aesthetic
medicine markets such as Europe and the United States from September 2022. The energy-based
device is scheduled to be launched in China in 2023.
As for domestic aesthetic medicine business, Sinclair (Shanghai), the wholly-owned subsidiary
of the Company, tapped deep into the core target markets, on the premise of ensuring operational
compliance. As its flagship product Ellansé grew market share and gained greater brand visibility,
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
the subsidiary continued to lead high-end regenerative filler market in China. Thanks to the constantly
enhanced attention and penetration, the domestic aesthetic medicine business saw its sales proceeds
in the third quarter of 2022 rebounding significantly compared with the second quarter. Sinclair
(Shanghai) racked up total operating income of RMB440 million in the first nine months of 2022.
China hence become the largest market for Ellansé worldwide. In the fourth quarter, which is a peak
season for medical aesthetics sales, Sinclair (Shanghai) is expected to continue its good performance
in the third quarter, thus beating the full-year business target smoothly.
2. R&D progress of the Company during the reporting period
(1) Progress of clinical studies on major innovative drugs, innovative medical equipment
and biosimilars
From January to September 2022, the Company continued to accelerate the R&D work. The
R&D expenditure in the pharmaceutical industry was RMB870 million, with a year-on-year increase
of 21.5% among which RMB760 million was for R&D expenses. As at the date of issuance of this
Report, the Company’s main R&D progress of innovative drugs, innovative medical equipment and
biosimilars is as follows:
Endocrine
HDM1002: A GLP-1 receptor agonist formed from small molecules which is independently
researched and developed by the Company. It is projected that Pre-IND applications will be delivered
both in China and the United States by the end of 2022.
Liraglutide Injection: A GLP-1 receptor agonist. The marketing authorization application for
diabetes indication was accepted in September 2021 and the submission of materials for
supplementary studies was completed in August 2022. The marketing authorization application for
obesity or overweight indication was accepted in July 2022.
Semaglutide Injection: A GLP-1 receptor agonist. The administration and follow-up visits to all
subjects for Phase I clinical trials have been completed.
Insulin Degludec Injection: Its IND approval received in September 2022.
HDM7003 (D-4517.2): This product is under development jointly by the Company and
Ashvattha Therapeutic, Inc., the joint-stock company in the United States. In September 2022,
Ashvattha announced that the first subject enrollment for the Phase II clinical trial in the United States
of the product, which is utilized for treating wet age-related macular degeneration and diabetic
macular edema, had been completed.
Oncology
HDM2002 (Mirvetuximab Soravtansine): The first investigational ADC targeting positive
ovarian cancer with folate receptor alpha (“FRα”) in the world. It is utilized for treating platinum-
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
resistant ovarian cancer with high expression of FRα. In terms of its Phase I clinical trials in China
for pharmacokinetics, the enrollment of all subjects was completed in July 2022. In August 2022, the
first subject enrollment was completed for its Phase III single-arm clinical trial in China.
Autoimmunity
ARCALYST (Rilonacept): A recombinant dimer fusion protein that can block the transmission
of IL-1α and IL-1β signals. In February 2022, the Company signed a cooperative agreement with
Kiniksa on introducing this product. Continually, ARCALYST was approved in the United States
in 2008, 2020 and 2021 for treating cryopyrin-associated periodic syndromes (“CAPS”), deficiency
of IL-1 receptor antagonist (“DIRA”) and recurrent pericarditis. Also, ARCALYST was included
by the CDE in the List of Overseas New Drugs for Urgent Clinical Needs (Group 1) for CAPS. The
Company filed a Pre-BLA to the CDE for the product’s CAPS indication in July 2022 and feedback
has been procured. It is expected that the BLA application will be delivered domestically in the fourth
quarter of 2022.
HDM5001 (OP-101): This product is under development jointly by the Company and Ashvattha
Therapeutic, Inc., the joint-stock company in the United States. On the basis of its original function
of treating severe COVID-19 indications, the possibility of new indication development is currently
under assessment. An IND application will be delivered domestically after a conclusion is formed.
Innovative medical equipment
HD-NP-102 (Transdermal Glomerular Filtration Rate Measurement System and MB102): This
product is jointly developed by the Company and MediBeacon, Inc. in the United States. Based on
the changes in fluorescence over time emitted by exogenous tracers for non-invasive monitoring, this
system can continuously measure the glomerular filtration rate (“GFR”) of patients with normal or
impaired renal functions. In July 2022, the registration application for medical equipment of this
system was accepted by the NMPA and will enter the review phase. MB-102 Injection (Relmapirazin)
which works together with this system is a global innovative drug. The first domestic subject
enrollment for the Phase III multi-regional clinical trial (MRCT) was completed in September 2022.
(2) R&D and registration of domestic aesthetic medicine products
No. Category Product Name Purpose Latest Progress
MaiLi Extreme As for clinical trials in China, the first subject
1 Injection Facial filling
HA enrollment was completed in September 2022
Domestic registration inspection reached the
end in August 2022, and clinical trials in
2 Injection Ellansé-M Facial filling
China are underway and the ethical approval
of the main research unit has been obtained
Perfectha Efforts related to domestic registration are
3 Injection Facial filling
Biphase HA underway
As for domestic clinical trials, part of the
4 Thread lifting Silhouette Instalift Mid-facial lifting subjects have been enrolled, and the follow-
ups at time nodes are in progress
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
Removal of benign
5 Energy based device Glacial Rx (F1) pigmentary lesions of Domestic registration inspection is underway
the skin
Fat reduction and
6 Energy based device Cooltech Define Domestic registration inspection is underway
body shaping
7 Energy based device Primelase Hair removal Domestic registration inspection is underway
Skin firming, body
V product line and facial shaping,
8 Energy based device Domestic registration inspection is underway
(V20, V30) skin rejuvenation and
hair removal
Scar rehabilitation,
9 Energy based device EnerJet facial lifting and Domestic registration inspection is underway
dermal thickening
Equipment classification and complementary
Préime Facial skin
10 Energy based device cosmetics registration are underway
DermaFacial management
domestically
Changes in domestic agents were approved in
Body and facial August 2022, registration of the foreign
11 Energy based device Reaction shaping and skin factory address change is under review, and
firming the product will reenter the Chinese market in
Q1 2023 as envisaged
In addition, the Company is actively accelerating its applications for the franchises for Silhouette,
Lanluma and Ellansé series products in Hainan Boao Lecheng Pilot Zone of International Medical
Tourism.
3. External investment and cooperation progress of the Company during the reporting
period
(1) During the reporting period, the Company completed the delivery of the additional stocks
issued publicly and shares transferred by agreement by the listing company in Germany Heidelberg
Pharma (please refer to the relevant announcements disclosed by the Company on the website of
cninfo.com.cn for details; announcement No.: 2022-060 and 2022-065). After the completion of the
delivery, the Company’s equity investment in Heidelberg Pharma was successfully completed.
Ultimately, the Company’s wholly owned subsidiary Huadong Medicine Investment Holding (Hong
Kong) Limited holds a total of 16,304,560 shares in Heidelberg Pharma, with the corresponding
percentage of equity interest held being 35.00%. For this percentage, the Company becomes the
second largest shareholder.
In terms of the ADC field, the Company further expanded its differentiated layout. It invested
in Qyuns Therapeutics, an antibody R&D and production company, and Nuoling Bio, a company
specializing in ADC linkers and conjugate techniques, and incubated Huida Biotech which owns the
whole product line of ADC payloads. It also controls Doer Biologics, a multi-antibody platform R&D
company, and has strong ADC R&D technological accumulations. By carrying out equity investment
and product cooperation with Heidelberg Pharma, a global emerging technology company in the ADC
field, and introducing a number of ADC innovative products, the Company further enriched its
innovative pipeline for oncology products and realized a differentiated layout in the ADC field. In
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
the future, the Company will fully integrate its ADC R&D technological accumulations with the
advanced and proprietary ATAC technological platform of Heidelberg Pharma to form a unique ADC
global R&D ecosystem, gradually build a differentiating ADC independent R&D platform, and
strengthen and improve the antineoplastic product innovation chain and the ADC ecological chain.
The Company has established an independent ADC R&D center which will, driven by clinical needs
that have not been satisfied, actively cooperate with international leading technical teams and
integrate advantageous ecosystem resources. In the next three years, it plans to develop at least ten
ADC innovative products and actively promote the registration work and clinical studies.
(2) On August 8, 2022, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (hereinafter
referred to as “Zhongmei Huadong”), the Company’s wholly owned subsidiary, signed the Agreement
on Capital Injection to and Transfer of Equity Interest in Wuhu Huaren Science and Technology Co.,
Ltd. with Wuhu Huaren Science and Technology Co., Ltd. (hereinafter referred to as “Huaren Science
and Technology”), natural persons Shi Ping and Zhao Huijiao, and Wuhu Huaxuan Enterprise
Management Partnership (Limited Partnership). Zhongmei Huadong will contribute no more than
RMB396 million in total, in the form of capital injection and share acceptance, to acquire a 60%
equity interest in Huaren Science and Technology and become its controlling shareholder (please
refer to the relevant announcement disclosed by the Company on the website of cninfo.com.cn for
details; announcement No.: 2022-056). Up to now, the Company has completed the formalities for
changing registration with the administration for industry and commerce related to this transaction,
the payment of all the capital injection funds and part of the equity transfer consideration, and the
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
closing of the capital injection to and acceptance of the equity interest in Huaren Science and
Technology.
In the future, in the nucleoside business layout of the Company’s industrial microbial segment,
Huaren Science and Technology will mainly focus on the markets of nucleoside raw materials for
small nucleic acid drugs and diagnostic reagents, with modified nucleosides, phosphoramidite
monomers and dNTPs, among others, as the main products. The Company’s wholly owned subsidiary,
Anhui Meihua Hi-Tech Pharmaceutical Co., Ltd. (hereinafter referred to as “Meihua Hi-Tech”), will
assist Huaren Science and Technology with its large-scale production and undertake the function of
producing modified nucleosides, monomers and upstream raw materials.
Through a series of R&D and integration of industry resources, the Company has formed a
complete technological layout necessary for the nucleoside business in fields such as synthetic
biology technology, enzyme catalysis, chemical synthesis and modification, and separation and
purification. Meanwhile, leveraging Huaren Science and Technology, Meihua Hi-Tech and other
production bases, a comprehensive production layout of nucleic acid drugs and upstream raw
materials for diagnosis has been formed. In the future, the Company will continue to expand and
strengthen the production of nucleic acid drugs and upstream raw materials for diagnosis, and
dedicate itself to becoming an international leading supplier in the field of nucleoside raw materials.
(3) Meihua Hi-Tech (formerly Anhui Huachang Hi-Tech Pharmaceutical Co., Ltd.), all of whose
equity has been acquired by the Company, has started the production of existing nucleoside product
projects in an orderly manner and has formed industry linkage and resource integration with
Zhongmei Huadong and Huaren Science and Technology within the Company. Currently, the trial
production of the Phase I project of Meihua Hi-Tech is undergoing acceptance inspection and at the
same time Phase II project planning is being actively promoted.
(4) In July 2022, the Company’s wholly owned subsidiary, Zhongmei Huadong, and Gongshu
District Government in Hangzhou and Zhejiang University of Technology jointly established the
Huadong Institute of Synthetic Biology Industry Technology (hereinafter referred to as the
“Institute”), which will focus on the four fields of nutrition and pharmaceutical chemicals, aesthetic
medical biology, biomaterials and health substitutes based on synthetic biology technology.
Meanwhile, the Institute insists on serving the strategic needs of the national “bio-economy”, and
takes as breakthroughs the new mechanism of intelligent biological manufacturing and industrial
revolutionary technical issues, while carrying out technological innovation research and industrial
transformation research around intelligent biological manufacturing with the help of artificial
intelligence, big data and intelligent automation equipment. The Institute is in the Huadong Medical
Life Science Industrial Park (the Company’s Xiangfu Qiao plant), and Zheng Yuguo, an academician
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
of the Chinese Academy of Engineering, is the president. Synthetic biology is one of the core
technologies that the Company relies on for industrial microbial development. Through linkage,
sharing and integration, the pioneer cooperation between “government, industry and university in
research and application” will accelerate the transformation of innovative projects, which is expected
to help build a new cluster of biological manufacturing industry and give the Company a new impetus
for industrial microbial innovation.
4. Other work matters
During the reporting period, the Company launched the equity incentive plan for the first time
since its listing. To further establish and improve the long-term incentive mechanisms, attract and
retain outstanding talents, fully mobilize the initiative of the senior management members, managers,
and core technical (business) personnel, effectively combine the interests of shareholders, the
Company, core teams, and employees together, and rally all parties around the long-term
development of the Company, the Restricted Share Incentive Plan 2022 (Draft) (hereinafter referred
to as “the Plan”) was formulated on the premise of fully safeguarding the interests of shareholders,
as per the principle of matching earnings and contributions, and in accordance with the pertinent laws,
regulations, and normative documents of China, such as the Company Law, the Securities Law, the
Administrative Measures for Equity Incentives of Listed Companies as well as the Articles of
Association of the Company. The Plan would grant restricted shares to the incentive recipients.
The second session of the 10th Meeting of the Board of Directors and the second session of the
10th Meeting of the Board of Supervisors were held on August 8, 2022, to review and adopt the
Proposal on the Company’s Restricted Share Incentive Plan 2022 (Draft) and Its Summary (details
can be seen in the announcement disclosed by the Company on cninfo.com.cn on August 10, 2022).
According to the Plan, the Company would grant 5 million restricted shares, at the price of RMB25.00
per share, which represented approximately 0.286% of 1,749,809,548 shares, the total share capital
of the Company at the time of the announcement of the Plan. These restricted shares would go to 117
persons in total, including directors, senior management, middle management, and core technical
(business) personnel who were working for the Company (including its subsidiaries) at the time of
the announcement of the Plan.
The Company released the list of first incentive recipients of the Restricted Share Incentive Plan
through its intranet for 10 days, that is, August 15-25, 2022. By the end of the public announcement
period on August 25, 2022, the Board of Supervisors did not receive any objection from anyone to
the incentive recipients. On August 25, 2022, the Board of Supervisors meeting was convened to
review and adopt the Verification Opinions and Public Announcement on the List of First Incentive
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
Recipients under the Restricted Share Incentive Plan 2022 (details can be seen in the relevant
announcement disclosed on by the Company on cninfo.com.cn on the same day).
The Company held the first extraordinary general meeting of 2022 on August 31, 2022 to review
and adopt the Proposal on the Company’s Restricted Share Incentive Plan 2022 (Draft) and Its
Summary (details can be seen in the relevant announcement disclosed by the Company on
cninfo.com.cn on the same day). The work related to equity incentive is now continuing as scheduled.
(II) Registration form of receptions, including research, communication and interview,
undertaken
Main content of
Reception Reception Type of Affiliation of discussion and Index of basic information of the
Reception method
date venue visitor visitor information research
provided
Industrial Please refer to “Huadong Medicine:
Investor
Securities, record of investor relations
July 06 and Company Field research, communication,
Institution, Zheshang activities on July 06 and July 08,
July 08, conference communication online seminar on
individual Securities, Morgan 2022” presented on the websites of
2022 room via phone call China’s A-share
Stanley, CITIC irm.cninfo.com.cn and
market
Securities, etc. cninfo.com.cn for details.
Please refer to “Huadong Medicine:
Interpretation of record of investor relations
Company
August 10, Communication Institution, Industrial results of 2022 activities on August 10, 2022”
conference
2022 via phone call individual Securities, etc. Interim Report by presented on the websites of
room
Huadong Medicine irm.cninfo.com.cn and
cninfo.com.cn for details.
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
IV. Quarterly financial statements
(I) Financial statements
1. Consolidated balance sheet
Prepared by Huadong Medicine Co., Ltd.
September 30, 2022
Unit: RMB yuan
Item September 30, 2022 January 1, 2022
Current assets:
Monetary funds 3,175,270,378.54 4,032,424,555.22
Settlement reserve
Lending to other banks and other
financial institutions
Financial assets for trade
Derivative financial assets
Notes receivable
Accounts receivable 8,831,060,590.99 6,430,482,175.97
Accounts receivable financing 505,223,136.35 509,190,888.54
Advance payments 286,046,854.82 275,353,134.69
Premiums receivable
Reinsurance accounts receivable
Reinsurance contract reserve receivable
Other receivables 371,528,921.48 223,707,267.30
Including: Interests receivable
Dividends receivable 3,404,934.45 877,734.45
Financial assets purchased for resale
Inventories 4,101,303,627.61 3,974,549,648.96
Contract assets
Assets held for sale
Non-current assets due within one year
Other current assets 50,283,045.05 40,907,922.76
Total current assets 17,320,716,554.84 15,486,615,593.44
Non-current assets:
Loans and advances to customers
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments 1,694,315,448.54 984,927,398.68
Other equity instrument investments 359,700,638.43 257,815,844.68
Other non-current financial assets
Real estate properties for investment 13,850,319.60 14,569,533.94
Fixed assets 2,954,233,810.76 3,077,227,759.84
Constructions in progress 1,793,856,597.84 1,582,125,201.25
Biological assets for production
Oil & gas assets
Right-of-use assets 113,951,068.86 153,724,197.81
Intangible assets 2,246,242,618.65 2,233,450,369.34
Development expenditures 107,996,900.93
Goodwill 2,479,054,921.92 2,138,808,037.01
Long-term unamortized expenses 13,991,020.81 12,425,364.03
Deferred income tax assets 157,610,340.81 143,651,186.84
Other non-current assets 1,407,052,577.68 911,062,879.83
Total non-current assets 13,341,856,264.83 11,509,787,773.25
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
Total assets 30,662,572,819.67 26,996,403,366.69
Current liabilities:
Short-term borrowing 736,186,259.25 1,237,843,228.13
Borrowing from the central bank
Borrowing from other banks and other
financial institutions
Financial liabilities for trade
Derivative financial liabilities
Notes payable 1,178,537,227.66 671,964,504.00
Accounts payable 4,721,925,574.38 3,847,719,574.86
Advance receipts 1,904,991.13 1,147,425.45
Contract liabilities 139,272,182.95 118,341,141.48
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
Employee benefits payable 211,128,617.38 168,210,088.82
Taxes payable 626,833,981.79 1,029,610,563.41
Other payables 2,437,266,239.54 1,935,116,784.93
Including: Interests payable
Dividends payable 224,219.60 2,184,219.60
Handling fees and commissions payable
Reinsurance accounts payable
Liabilities held for sale
Non-current liabilities due within one
44,491,162.31 244,256,705.59
year
Other current liabilities 18,254,352.56 11,386,267.11
Total current liabilities 10,115,800,588.95 9,265,596,283.78
Non-current liabilities:
Insurance contract reserve
Long-term borrowing 1,312,010,297.75 139,178,905.04
Bonds payable
Including: Preferred shares
Perpetual bonds
Lease liabilities 65,563,558.78 80,889,403.39
Long-term payables 262,627,804.02 261,903,489.09
Long-term employee benefits payable
Provision 37,924,447.27 39,086,238.25
Deferred gains 101,838,308.17 83,521,649.96
Deferred income tax liabilities 184,714,029.50 184,908,391.50
Other non-current liabilities
Total non-current liabilities 1,964,678,445.49 789,488,077.23
Total liabilities 12,080,479,034.44 10,055,084,361.01
Ownership interest:
Share capital 1,749,809,548.00 1,749,809,548.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserve 2,264,211,002.79 2,229,868,312.11
Less: Treasury shares
Other comprehensive income -66,798,628.56 -47,768,225.80
Special reserve
Surplus reserve 1,021,670,687.31 1,021,670,687.31
General risk reserve
Undistributed profit 13,099,819,280.51 11,625,794,001.46
Total ownership interest attributable to 18,068,711,890.05 16,579,374,323.08
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
the parent company
Minority interest 513,381,895.18 361,944,682.60
Total ownership interest 18,582,093,785.23 16,941,319,005.68
Total liabilities & ownership interest 30,662,572,819.67 26,996,403,366.69
Legal representative: Lv Liang Officer in charge of accounting: Lv Liang Head of accounting department: Qiu Renbo
2. Consolidated income statement in the first nine months of 2022
Unit: RMB yuan
Amount incurred during the current Amount incurred during the previous
Item
period period
I. Total operating income 27,858,507,079.10 25,927,477,363.27
Including: Operating income 27,858,507,079.10 25,927,477,363.27
Interests received
Premiums earned
Handling fees and commissions received
II. Total operating cost 25,422,451,966.57 23,721,020,429.04
Including: Operating cost 19,006,828,172.00 17,820,264,592.12
Interests paid
Handling fees and commissions paid
Surrender value
Net payment of insurance claims
Net appropriation of policy reserve
Policy dividends paid
Reinsurance expenses
Taxes and surcharges 145,766,634.10 132,071,642.16
Selling expenses 4,503,511,492.02 4,165,255,628.17
Administrative expenses 958,816,065.06 859,932,896.49
R&D expenses 788,158,101.57 727,596,640.52
Financial expenses 19,371,501.82 15,899,029.58
Including: Interests paid 55,731,896.99 59,960,711.55
Interests received 75,779,611.14 64,850,873.74
Add: Other gains 116,088,889.07 157,965,604.53
Investment gains (Losses are indicated
-99,173,464.90 -60,001,493.40
by “-”)
Including: Investment gains from
-80,967,957.60 -18,970,341.98
associates and joint ventures
Gains from 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 (Losses are
-71,965,559.59 -38,263,673.24
indicated by “-”)
Assets impairment losses (Losses are
3,054,806.20
indicated by “-”)
Gains on assets disposal (Losses are
5,578,009.76 -149,966.61
indicated by “-”)
III. Operating profit (Losses are
2,386,582,986.87 2,269,062,211.71
indicated by “-”)
Add: Non-operating income 5,034,409.21 17,439,095.86
Less: Non-operating expenditure 27,069,853.11 19,888,568.89
IV. Total profit (Total losses are indicated
2,364,547,542.97 2,266,612,738.68
by “-”)
Less: Income tax expenses 358,222,730.61 324,435,752.43
V. Net profit (Net losses are indicated by
2,006,324,812.36 1,942,176,986.25
“-”)
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
(I) Categorized by the continuity of
operations
1. Net profit from continued operations
2,006,324,812.36 1,942,176,986.25
(Net losses are indicated by “-”)
2. Net profit from discontinued
operations (Net losses are indicated by
“-”)
(II) Categorized by attribution of the
ownership
1. Net profit attributable to shareholders
of the parent company (Net losses are 1,981,470,047.95 1,895,384,579.34
indicated by “-”)
2. Gains/losses of minority shareholders
24,854,764.41 46,792,406.91
(Net losses are indicated by “-”)
VI. Net amount after tax of other
-19,030,402.76 115,596,732.48
comprehensive income
Net amount after tax of other
comprehensive income attributable to -19,030,402.76 115,596,732.48
owners of the parent company
(I) Other comprehensive income that
-4,775,671.98 18,270,393.86
cannot be reclassified into gains/losses
1. Changes in remeasurement on the
defined benefit plan
2. Other comprehensive income that
cannot be reclassified into gains/losses
under equity method
3. Changes in fair value of other equity
-4,775,671.98 18,270,393.86
instrument investments
4. Changes in fair value of credit risk of
the enterprise
5. Others
(II) Other comprehensive income to be
-14,254,730.78 97,326,338.62
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 arise from
translation of foreign currency financial -14,254,730.78 97,326,338.62
statements
7. Others
Net amount after tax of other
comprehensive income attributable to
minority shareholders
VII. Total comprehensive income 1,987,294,409.60 2,057,773,718.73
(I) Total comprehensive income
attributable to owners of the parent 1,962,439,645.19 2,010,981,311.82
company
(II) Total comprehensive income
24,854,764.41 46,792,406.91
attributable to minority shareholders
VIII. Earnings per share (EPS):
(I) Basic EPS 1.1324 1.0832
(II) Diluted EPS 1.1324 1.0832
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 yuan, and that generated during the previous period is 0 yuan.
Legal representative: Lv Liang Officer in charge of accounting: Lv Liang Head of accounting department: Qiu Renbo
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
3. Consolidated cash flow statement in the first nine months of 2022
Unit: RMB yuan
Amount incurred during the current Amount incurred during the previous
Item
period period
I. Cash flows from operating activities:
Cash from the sale of goods and
28,636,082,628.37 27,674,577,148.04
provision 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
Tax refund received 48,130,176.60 11,649,988.97
Other cash receipts in relation to
519,344,662.31 529,610,507.12
operating activities
Total cash inflows from operating
29,203,557,467.28 28,215,837,644.13
activities
Cash payments for goods and services 19,098,109,891.25 18,596,693,102.88
Net increase in customer loans and
prepayments
Net increase in deposits of central bank
and due from banks
Cash for payment of original insurance
claims
Net increase in lending to other banks
and other financial institutions
Cash for payment of interests, handling
fees and commissions
Cash for payment of policy dividends
Cash payments to and for employees 2,163,638,874.66 1,822,563,793.72
Payment of taxes and fees 2,310,543,611.37 1,531,826,498.86
Other cash payments in relation to
4,311,012,164.01 4,158,837,421.95
operating activities
Total cash outflows for operating
27,883,304,541.29 26,109,920,817.41
activities
Net cash flows from operating activities 1,320,252,925.99 2,105,916,826.72
II. Cash flows from investing activities:
Cash from recovery of investments 20,432,161.82
Cash from investment gains 900,000.00 4,281,616.50
Net cash from disposal of fixed assets,
intangible assets and other long-term 13,562,748.02 2,009,441.20
assets
Net cash from disposal of subsidiaries
and other business units
Other cash receipts in relation to
29,602,856.85
investing activities
Total cash inflows from investing
14,462,748.02 56,326,076.37
activities
Cash payments for purchase and
838,159,013.91 539,567,188.77
construction of fixed assets, intangible
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The Third Quarterly Report 2022 of Huadong Medicine Co., Ltd.
assets and other long-term assets
Cash payments for investment 855,517,746.06 120,706,000.00
Net increase in pledge loans
Net cash paid for acquisition of
404,617,574.25 776,789,194.67
subsidiaries and other business units
Other cash payments in relation to
100,000,000.00 26,127,840.40
investing activities
Total cash outflows for investing
2,198,294,334.22 1,463,190,223.84
activities
Net cash flows from investment activities -2,183,831,586.20 -1,406,864,147.47
III. Cash flows from financing activities:
Cash from absorbing investments 30,000,000.00
Including: Cash from absorption of
minority shareholders’ investments by 30,000,000.00
subsidiaries
Cash from borrowing 3,625,643,992.66 1,854,078,657.43
Other cash receipts in relation to
598,142,418.56 360,000,000.00
financing activities
Total cash inflows from financing
4,253,786,411.22 2,214,078,657.43
activities
Cash for repayment of debt 3,141,986,846.06 1,874,703,029.58
Cash payments for dividends, profits or
627,878,033.15 499,317,003.89
interests
Including: Payment of dividends and
profits by subsidiaries to minority 1,960,000.00
shareholders
Other cash payments in relation to
598,786,755.06 365,675,774.15
financing activities
Total cash outflows for financing
4,368,651,634.27 2,739,695,807.62
activities
Net cash flows from financing activities -114,865,223.05 -525,617,150.19
IV. Influence of exchange rate
17,694,818.12 -1,383,998.81
fluctuations on cash and cash equivalents
V. Net increase in cash and cash
-960,749,065.14 172,051,530.25
equivalents
Add: Balance of cash and cash
3,580,140,638.17 3,157,407,073.26
equivalents at the beginning of the period
VI. Balance of cash and cash equivalents
2,619,391,573.03 3,329,458,603.51
at the end of the period
(II) Audit report
Has the third quarterly report been audited?
□ Yes No
The third quarterly report has not been audited.
The Board of Directors of Huadong Medicine Co., Ltd.
October 26, 2022
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