The 2022 Annual Report of Huadong Medicine Co., Ltd.
Huadong Medicine Co., Ltd.
2022 Annual Report
April 2023
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
A Letter to the Shareholders
Distinguished shareholders,
As the year ends, we usher in a new year with endless possibilities. The year of
2022 brought more challenges that forced the pharmaceutical industry to accelerate its
transform, reshuffle and reshaping in response to the gloomy situation, numerous
uncertainties, and downward pressure, which raises more challenges for
pharmaceutical enterprises’ emergency response abilities and resilience.
For Huadong Medicine Co., Ltd. (“We” or “the Company”), the year of 2022
witnessed our unremitting efforts and remarkable achievements, which is the first year
for us to implement our seventh three-year planning, step forward to a new stage of
innovative transformation and development, and pull off our visions by 2030. By
continuously strengthening the strategic guidance, focusing on the primary business of
pharmaceuticals, taking active actions and seeking progress while maintaining stability,
we have accelerated our businesses quarter by quarter and successfully achieved
continuous growth against changes in the pharmaceutical industry under complicated
internal and external environments in the new era. Over the past four years, we have
kept improving our capacities, embracing more cooperation opportunities in an open
manner, and endeavoring to seek sustained development, with the focus on four major
business segments of pharmaceutical industry, pharmaceutical business, aesthetic
medicine and industrial microbiology. Taking targeted steps from multiple aspects, we
have made look-forwarding and international layout to adapt to cutting-edge
innovative technology platforms and unsatisfied market demands. The strategic
reshaping empowers qualitative changes of development paths. To date, the Company
has stepped into a new stage in both scale of operation & development and quality of
intrinsic growth.
In 2022, we made breakthrough in our operating revenue as the net profit after
deducting non-recurring profit and loss was still comparable with the highest level in
history in spite of up to 2 billion yuan of annual R&D and BD input. The Company’s
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
pharmaceutical industry segment has now broken through bottlenecks of growth,
witnessed stable recovery, and fostered strong resilience after gradually getting out of
the influence of multiple external factors. Remarkable achievements in strategic
transformation and positive figures further strengthen our confidence to unswervingly
seek the high-quality development driven by technological innovation. We also
launched our equity incentive plan since we were listed to motivate excellent staff
creating values for us.
In 2022, we have brought new connotations for our R&D ecology with the focus
on “advantaged, differentiated and source-based innovation” to create a new ecology
of innovative R&D. As for reform in R&D, we have successfully incubated our internal
wholly-owned subsidiary - Hangzhou VicrobX Biotech Co., Ltd., established two core
technology platforms of Micro-restructuring and Micro-delivery, and set up the ADC
R&D Center to gradually create a differentiated ADC independent R&D platform. In
terms of external collaboration, we strategically held the equity of Heidelberg Pharma,
a global emerging technology enterprise based in Germany that specializes in ADC,
and established cooperation in product development to empower the oncology products
chain and ADC ecological chain, and further enhance our R&D ecology that features
cooperation and sharing.
In 2022, we also achieved successive milestones in R&D. ELAHERE, a global
pioneering ADC medicine for platinum-resistant ovarian cancer co-developed with
ImmunoGen from the U.S., was the only ADC medicine approved by FDA in 2022. Its
clinical work in China is progressed smoothly and it is planned to submit for BLA by
late 2023. HDM1002 (micromolecule GLP-1 receptor stimulant), an innovative
medicine for type 1 diabetic mellitus that is developed by us independently with global
intellectual property rights, has been successfully submitted for approval in the U.S.
and China. ARCALYST, an overseas new medicine in urgent need for clinical
purpose introduced from Kiniksa and included in the list of priority review varieties,
will be submitted for BLA this year and is expected to put in commercialized
production in China to benefit Chinese patients. To date, the Company has launched
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
ongoing development programs for over 50 types of innovative and biosimilar
medicines. The Liraglutide Injection, the Company’s first biological medicine for
diabetes mellitus indications, was approved for sale in March 2023, being the first
domestic of its kind in China. It is also under normal review for weight loss indications
and is expected to be approved in 2023, which will facilitate the successful overseas
authorizations for both indications. The strategic transformation of the Company is
now gradually rewarded and new products are ready for commercialized sales, further
empowering the attainment of its visions.
In 2022, we made new strides in our other business segments. As for
pharmaceutical business, the Company has never stopped its pace in expanding the
Zhejiang market and enriching innovative businesses, with significant progress made
in operation and development of self-developed and agent products. The international
aesthetic medicine and industrial microbiology, two strategic business tracks of the
Company, witnessed rapid development. Moreover, the Company has launched about
40 high-end medical aesthetic products and over 100 ongoing industrial microbiology
programs, which dramatically empower the sustained development of the Company.
As for the industrial microbiology segment, the Company has strategically held the
equity of Wuhu Huaren Science and Technology Co., Ltd., established Hangzhou
Hizyme Biotech Co., Ltd., and co-built the HIT Institute of Synthetic Biology, fostering
the pattern that features three major R&D and innovation platforms and six industrial
bases. Meanwhile, the Company has insisted on optimizing its product structures,
accelerated the transformation of scientific research achievements, actively expanded
its international businesses, and endeavored to explore new growth points. In terms of
aesthetic medicine, the Company set a record high in both global operating revenue
and profitability, with the Chinese market as an important engine for growth. Ellansé,
the Company’s star product, has witnessed continuous improvement in market
attention and penetration rate, occupying a leading position in the high-end market of
medical beauty regenerative filling in China.
Now, we have fostered more specific goals, clearer mind, and firmer confidence
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
after several years of transformation, upgrading, exploration and practice. In the
pharmaceutical industry segment, we always stand at the forefront of innovation,
endeavor to satisfy clinical needs, stick to the innovative R&D philosophy of
“Independent R&D + Introduction”, and keep strengthening the ability in independent
innovation and R&D, with “innovation” at the core. Focusing on three core product
categories of oncology, immunity and endocrinology, we give priority to dominant
varieties that rapidly benefit the Company, further optimize product lines, and support
the Company’s strategical development. As for pharmaceutical business, we insist on
the operation principle of “Value Creation” and “Service Foremost” and endeavor to
become an excellent pharmaceutical service provider in China by revolving around the
philosophy of “steadiness”. With regard to the industrial microbiology segment, we
keep optimizing the core business layout, facilitate the synergy of internal resources,
strengthen the input in market promotion, allocate proper resources and make
breakthrough in key business to leverage more support for the transformation and
upgrading, thus attaining our goal of “overall success”. In the aesthetic medicine
segment, we attach great importance to the innovation in aesthetic technologies, keep
practicing the operation concept of “hi-tech R&D, high-quality positioning and global
products”, continuously increase the input in innovative technologies of massive
aesthetic medicine, keep enriching innovative product lines, facilitate the launching of
high-quality products in and out of China, and enhance our core competitiveness in
aesthetic medicine, thus making the Company the “leader” of the aesthetic medicine
industry.
We should be inclusive and far-sighted despite diverse challenges and difficulties.
It is a great yet glory ambition to become a powerful international pharmaceutical
enterprise driven by scientific research innovation. Looking into the future, we will
keep forging ahead steadily toward the established strategic direction and make
unremitting endeavor to empower the high-quality and efficient development of the
Company. It is also our aspiration to maintain the healthy growth in both scale and
profits, and to continuously improve the comprehensive profitability!
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Unremitting efforts bring great success and collaboration enables win-win results.
In 2023, we will keep marching forward along the Company’s reform strategy,
endeavor to conquer new heights of development, satisfactorily accomplish the
Company’s operation and development goals of the year, and make unremitting efforts
to implement the seventh three-year planning and attain the long-term visions.
We will take practical and solid actions to make our aspiration a reality. Dear
shareholders, thank you for your trust and support. Let's join hands to co-build the
Company an excellent player with great intrinsic values and market values and embrace
a brighter future!
Lv Liang, Chairman
Huadong Medicine Co., Ltd.
April 2023
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
2022 Annual Report
Section I. Important Declaration, Contents and Definitions
The Board of Directors, Board of Supervisors, directors, supervisors and
senior managers 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. Investors and related parties should be
fully aware of the risks, and understand the differences between plans, forecasts
and commitments.
The risks the Company faces in operation including industry policy and
product price reduction risk, new drug R&D risk, investment and M&A risk and
exchange rate fluctuation risk. For details, please refer to “v. Potential risks and
responses” under “XI. Prospect of the Company’s future development” in
“Section III. Management Discussion and Analysis”. Therefore, investors are
kindly reminded to pay attention to possible investment risks.
The dividend distribution scheme approved at the 7th meeting of the 10th
Board of Directors is as follows: On the basis of 1,753,995,348 ordinary shares of
the total share capital of the Company, RMB2.90 (before tax) of cash dividends
per ten ordinary shares will be distributed to all shareholders; a total of 0 bonus
share (before tax) will be issued; and no capital reserve will be converted to
increase the capital stock. In case the Company’s total share capital changes
before the dividend distribution scheme is put in place, the proportion of
distribution per share will be adjusted with the shares base unchanged. The
aforesaid dividend distribution scheme is subject to the approval at the Annual
General Meeting.
According to “Stock Listing Rules of the Shenzhen Stock Exchange”, if listed
companies have both Chinese and other language version of public notice, they
should ensure the content of both versions are the same. In the case of discrepancy,
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
the original version in Chinese shall prevail.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Contents
To the Shareholders ........................................................................................................................... 2
Section I. Important Declaration, Contents and Definitions ......................................................... 7
Section II. Company Profile and Key Financial Indicators ......................................................... 14
Section III. Management Discussion and Analysis ....................................................................... 18
Section IV. Corporate Governance ................................................................................................. 83
Section V. Environment and Social Responsibility ..................................................................... 106
Section VI. Important Matters ..................................................................................................... 124
Section VII. Share Change and Shareholders ............................................................................. 137
Section VIII. Information on Preferred Shares ........................................................................... 146
Section IX. Information on Bonds ................................................................................................ 147
Section X. Financial Report .......................................................................................................... 148
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Contents of Reference File
I. Financial statements signed and stamped by the legal representative, the person in charge of
accounting work and the head of accounting institution (accounting manager).
II. Original audit report stamped by public accountants, and signed and stamped by certified public
accountant.
III. The original of all Company’s documents publicly disclosed in the press designated by CSRC
during the reporting period and the original of announcements.
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The 2022 Annual 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.
Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co.,
Jiangdong Company refers to
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.
Doer Biologics refers to Zhejiang Doer Biologics 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.
Nuoling Bio refers to Nuoling Biomedical technology (Beijing) Co., Ltd.
Shanghai Grand Industrial and Financial Investment
Grand Chanrong refers to
Management Co., Ltd.
Hangzhou Gaotou refers to Hangzhou Hi-Tech Venture Capital Management Co., Ltd.
Grand Huachuang refers to Beijing Grand Huachuang Investment Co., Ltd.
Hangzhou Heda refers to Hangzhou Heda Industrial Fund Investment Co., Ltd.
Pharmaceutical Industry Fund/Fuguang Hangzhou Fuguang Hongxin Equity Investment Partnership
refers to
Hongxin (Limited Partnership)
Meihua Hi-Tech refers to Anhui Meihua Hi-Tech Pharmaceutical Co., Ltd.
Wuhu Huaren refers to Wuhu Huaren Science and Technology Co., Ltd.
Meiqi Health refers to Hubei Meiqi Health Technology Co., Ltd.
Angel Group refers to Hubei Angel Biological Group Co., Ltd.
CARsgen Therapeutics refers to CARsgen Therapeutics Holdings Limited
Takeda refers to Takeda Pharmaceuticals Company Ltd.
Sinclair refers to Sinclair Pharma Limited
Sinclair (Shanghai) refers to Sinclair (Shanghai) Co., Ltd.,
vTv refers to vTv Therapeutics LLC
R2 refers to R2 Technologies, Inc.
MediBeacon refers to MediBeacon Inc.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
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.
Exscientia refers to Exscientia Ltd.
Heidelberg Pharma refers to Heidelberg Pharma AG
Kiniksa refers to Kiniksa Pharmaceuticals (UK), Ltd.
KiOmed refers to KiOmed Pharma SA
Daewon refers to Daewon Pharmaceutical Co., Ltd.
AKSO refers to AKSO Biopharmaceutical, Inc.
Ashvattha refers to Ashvattha Therapeutic, Inc.
SCOHIA refers to SCOHIA PHARMA, Inc.
EMA Aesthetics refers to EMA Aesthetics Limited
Gulf Pharmaceutical
Julphar refers to
Industries PJSC (JULPHAR)
GMP refers to Good Manufacturing Practice
cGMP refers to Current Good Manufacturing Practices
GSP refers to Good Supply Practice
BE refers to Bioequivalence
Center for Drug Evaluation (of National Medical Products
CDE refers to
Administration)
MAH refers to Marketing Authorization Holder
FDA refers to (U.S.) Food and Drug Administration
NMPA refers to National Medical Products Administration
NHSA refers to National Healthcare Security Administration
NDA refers to New Drug Application
Abbreviated New Drug Application (or Generic Drug
ANDA refers to
Application)
International Council for Harmonisation (of Technical
ICH refers to
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
QA refers to Quality Assurance (department)
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
ADC refers to Antibody-Drug Conjugates
EBD refers to Energy-Based Devices
license-in refers to Product License Introduction
license-out refers to Product External License Authorization
BD refers to Business Development
EBITDA refers to Earnings Before Interest, Taxes, Depreciation and Amortization
EHS refers to Environment, Health, Safety
MRCT refers to International Multi-center Clinical Trial
OTC refers to Over The Counter
PFS refers to progression-free survival
Drugs that require medical prescriptions issued by physicians to
Prescription Drugs refers to
be bought and used
Real World Research/Study，RWR/RWS, refers to collect datas
related to patients in the real world environtment (Real World
Real World Research/Study，RWR/RWS refers to Data), through analysis, acquiring the use value of medical
products and clinical evidence of potential benefits or risks (Real
World Evidence).
Catalogue of Drugs for Basic National Medical
2022 Drug Catalog refers to
Insurance/Employment Injury Insurance/Birth Insurance (2022)
Reporting Period refers to From January 1, 2022, to December 31, 2022
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The 2022 Annual 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 9/10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou
Zip code of the registered
310006
address
From the date of listing to July 2012, the registered address was “No. 439 Zhongshanbei Road,
Xiacheng District, Hangzhou”. From July 2012, the registered address was changed to “Floor
9/10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou”. From July 2019, the registered
Changes of registered address
address was changed to “Floor 7/9/10, Gate No. 1, Building No. 1, 468 Yan’an Road,
Hangzhou”. From July 2022, the registered address was changed to “Floor 9/10, Gate No. 1,
Building No. 1, 468 Yan’an Road, Hangzhou”.
Office address No. 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 Hu Shufen
Contact address 866 Moganshan Road, Hangzhou 866 Moganshan Road, Hangzhou
Tel. 0571-89903300 0571-89903300
Fax 0571-89903300 0571-89903300
Email address hz000963@126.com hz000963@126.com
III. Channels of disclosure and location of preparation
Website of the Shenzhen Stock Exchange for publishing the
www.szse.cn
annual report
China Securities Journal, Securities Times, Shanghai Securities
Media and website for publishing the annual report
News and www.cninfo.com.cn
Location of preparation of the Company’s annual report Office of the Company’s Board of Directors
IV. Registration changes
Unified Social Credit Code 91330000143083157E
Changes of the Company’s main business since its listing (if
None
any)
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Previous changes of controlling shareholder (if any) None
V. Other information
Certified public accountants
Pan-China Certified Public Accounts (Special General
Name
Partnership)
Huarun Building B, 1366 Qianjiang Road, Hangzhou, Zhejiang
Office address
Province
Signing accountants Wang Fukang and Chen Xiaodong
Sponsors for continuous supervision and guidance during the reporting period
□ Applicable √ N/A
Financial consultant for continuous supervision and guidance during the reporting period
□ Applicable √ N/A
VI. Key accounting data and financial indicators
Whether the Company needs to perform a retroactive adjustment or restatement of previous accounting data
□Yes √No
Percentage
2022 2021 increase/decrease from 2020
last year to this year
Operating revenue
37,714,587,458.01 34,563,301,233.67 9.12% 33,683,058,759.75
(yuan)
Net profit attributable
to shareholders of
2,499,214,359.57 2,301,631,347.64 8.58% 2,819,861,203.63
listed companies
(yuan)
Net profit attributable
to shareholders of
listed companies after
2,409,954,557.05 2,188,946,362.34 10.10% 2,429,761,433.56
deducting non-
recurring gains/losses
(yuan)
Net cash flow from
operating activities 2,381,852,668.60 3,169,757,867.95 -24.86% 3,411,447,747.56
(yuan)
Basic earnings per
1.4283 1.3154 8.58% 1.6115
share (yuan/share)
Diluted earnings per
1.4283 1.3154 8.58% 1.6115
share (yuan/share)
Weighted average
14.21% 14.75% -0.54% 20.95%
return on equity (ROE)
Percentage
End of 2022 End of 2021 increase/decrease from End of 2020
last year to this year
Total assets (yuan) 31,192,203,406.84 26,996,403,366.69 15.54% 24,201,348,154.75
Net assets attributable
to shareholders of
18,577,919,237.39 16,579,374,323.08 12.05% 14,619,821,308.60
listed companies
(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
The Company’s total share capital as of the trading day prior to disclosure:
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
The Company’s total share capital as of the trading day prior to
1,753,995,348.00
disclosure (share)
Fully diluted earnings per share based on the latest share capital:
Paid preference dividends 0.00
Paid perpetual bond interest (yuan) 0.00
Fully diluted earnings per share based on the latest share capital
1.4249
(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 during the reporting period.
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 during the reporting period.
VIII. Key financial indicators by quarter
Unit: RMB yuan
Q1 Q2 Q3 Q4
Operating revenue 8,932,579,251.75 9,265,384,739.26 9,660,543,088.09 9,856,080,378.91
Net profit attributable
to shareholders of 704,364,775.13 636,205,709.85 640,899,562.97 517,744,311.62
listed companies
Net profit attributable
to shareholders of
listed companies after 698,524,004.62 573,315,175.01 629,214,050.43 508,901,326.99
deducting non-
recurring gains/losses
Net cash flow from
-260,603,628.32 544,838,038.59 1,036,018,515.72 1,061,599,742.61
operating activities
Whether the above financial indicators or their totals are significantly different from relevant financial indicators in previous quarterly
and semiannual reports by the Company
□Yes √No
IX. Items and amounts of non-recurring gains/losses
√ Applicable □ N/A
Unit: RMB yuan
Item 2022 2021 2020 Note
Gains/losses on disposal of non-current 2,390,031.00 -2,354,117.13 319,656,661.95
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
assets (including the written-off part of the
accrued assets impairment reserve)
Tax refund and reduction with ultra vires
examination and approval or without 9,606,310.96 10,101,524.84 8,424,351.97
official approval documents
Government grants included in current
gains/losses (excluding those closely related
to daily business operation and distributed
89,767,756.38 173,543,413.54 190,906,656.31
constantly in accordance with certain
standard quota or quantity in line with
national policies and regulations)
Gains/losses caused by fair value changes
for holding financial assets for trading and
financial liabilities for trading, and
investment income for handling financial
28,469,286.61 521,193.82
assets for trading, financial liabilities for
trading and AFS securities, excluding
hedging business related to operating
activities
Reversal of impairment reserve for
receivables subject to independent 953,089.60 4,803,651.87 3,845,312.41
impairment test
Other non-operating revenue or expenditure
-24,166,799.87 -25,651,193.11 -20,500,748.15
expect above-mentioned items
Other profit and loss items satisfying the
4,374,234.54 -32,065,178.00 -4,899,999.00
definition of non-recurring gain/loss
Minus: Amount affected by income tax 20,305,520.86 20,249,495.43 92,420,221.30
Amount affected by minority interest (after
1,828,585.84 -4,035,184.90 14,912,244.12
tax)
Total 89,259,802.52 112,684,985.30 390,099,770.07 --
Details of other items of gains/losses meet the definition of non-recurring gains/losses:
□ Applicable √ N/A
Details of other items of gains/losses meet the definition of non-recurring gains/losses.
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 Profit/Loss as a recurring gain/loss
□ Applicable √ N/A
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 Profit/Loss as a recurring gain/loss
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Section III Discussion and Analysis of the Management
I. Industry Situation during the Reporting Period
The year of 2022 is the second year of the implementation of China’s 14th five-year plan and
an important year for deepening the reform of the medical and health sectors. Party and state leaders
have taken active measures to empower the socioeconomic development despite increasingly
complex and uncertain external environment, as well as triple pressures of shrinking domestic
demands, disrupted supply and weakening expectations. Thanks to all these efforts, China has
successfully tided over such an extraordinary course and continuously improved its economic
strength, comprehensive national strength and people's living standards, writing a new chapter in
promoting the Chinese-style modernization.
The pharmaceutical industry in China faces the structural adjustment as a whole affected by
China’s policies on facilitating the reform of medical insurance, volume-based procurement of
medicines and medical insurance payment methods, and space for overall revenue and profit growth
of the industry has been squeezed coupled with the downward economy. Nevertheless, the
pharmaceutical industry in China still boasts huge potential market space. In the long term run,
pharmaceutical enterprises in China will keep transforming toward innovation and drive the overall
optimization and upgrading of the industry empowered by favorable policies.
In 2022, China’s policies on reform of medical insurance were further deepened, multiple reform
measures were launched and optimized, the country’s volume-based procurement of medicines and
medical insurance negotiation were normalized, the industry ecology was evolved at a rapid speed,
and the overall tone of cost control and price reduction kept unchanged. From 2018 to June 2022, the
pharmaceutical industry in China launched 7 times of national volume-based procurement of
medicines, 3 times of national volume-based procurement of high-value consumables, 6 times of
medical insurance negotiations, and dozens of local volume-based procurement that cover 294
medicines and involve about 324.6 billion yuan by price before volume-based procurement,
accounting for 35% of annual purchase amount of pharmaceutical chemicals and biological medicines
by public medical institutions.
The pharmaceutical industry in China witnessed decline in overall growth rate in 2022 affected
by volume-based procurement and multiple internal and external factors. According to the data of the
National Bureau of Statistics, industrial enterprises above designated size throughout China achieved
the total profits of 8.40385 trillion yuan in 2022, down 4.0% from the previous year (on comparable
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
basis). Among them, the medicine manufacturing industry achieved the cumulative operating revenue
of 2.91114 trillion yuan, down 1.6% year on year, and its operating costs were 1.69846 trillion yuan,
up 7.8% year on year. The total cumulative profits were 428.87 billion yuan, down 31.8% year on
year.
II. Main Businesses of the Company during the Reporting Period
Founded in 1993 and headquartered in Hangzhou, Zhejiang Province, Huadong Medicine Co.,
Ltd. (stock code: 000963) was listed on Shenzhen Stock Exchange in December 1999. With its
businesses covering the entire pharmaceutical industry chain thanks to over 20 years of vigorous
development, the Company has now fostered four major business segments of pharmaceutical
industry, pharmaceutical business, aesthetic medicine and industrial microbiology, and has been a
large comprehensive listed pharmaceutical enterprise specialized in pharmaceutical R&D, production
and marketing. Moreover, the Company has won diverse awards and honors, including Fortune China
500 by Fortune China for 13 consecutive years, 2021 China Top 100 Enterprises of Pharmaceutical
Industry, and 2021 China Top 100 Enterprises in Pharmaceutical Businesses by All-China Federation
of Industry and Commerce.
Specialized in the R&D, production and marketing of specialized and chronic diseases, as well
as special medicines for years, the Company has established complete pharmaceutical production and
quality research systems, and fostered core product lines focusing on chronic nephrosis,
transplantation immunity, internal secretion, digestive system and other fields. With multiple first-
line clinical medicines with market advantages in China, the Company has made layout in R&D of
innovative and high technology barrier generic medicines in three core therapeutic fields of oncology,
endocrinology and autoimmunity through independent development, external introduction, project
cooperation and by other means. The Company has continued to engage in international registration,
international certification, consistency evaluation, etc. of products, with successive results achieved.
Moreover, the Company has fostered the internationally-oriented pharmaceutical industry system,
established and maintained R&D and project cooperation with multiple international innovative R&D
enterprises.
With regard to the pharmaceutical business, the Company has vigorously consolidated its
foundation in Zhejiang Province and has been ranked top 10 pharmaceutical business enterprises in
China for consecutive years. To date, the Company has established 11 regional subsidiaries in
Zhejiang Province, with its customers distributed in 11 cities and 90 districts, counties and county-
level cities throughout Zhejiang Province. The Company has four business segments of Chinese &
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
western medicine, medical apparatus, medicine materials and ginseng & antler, and health industry
that cover the pharmaceutical wholesale & retailing, third-party medical logistics featuring cold chain,
medical e-commerce, hospital value-added services and featured massive health industry. Further
expanding the product agency and market development, the Company has formed the whole industry
chain from planting in bases to processing of prepared pieces, automatic decoction, own-brand
functional products for its traditional Chinese medicine industry. As the leader of pharmaceutical
business in Zhejiang Province, the Company has always focused on strengthening the policy affairs,
reserve, distribution and marketing ability, established service platforms, and fostered the competitive
advantages of regional enterprises to offer customers comprehensive solutions.
In terms of aesthetic medicine, the Company has developed over 30 “noninvasive and micro-
invasive” aesthetic medicine products cover facial and body filling, thread lifting, skin management,
body shaping, facial cleansing, depilation, private repair and other non-operative mainstream
aesthetic medicine fields. by following the strategy of “global operation layout and dual-circulation
operation & development” with an international vision through forward-looking layout. Specifically,
over 20 products have been launched in China and abroad, and more than a dozen innovative global
products in development. With comprehensive product clusters formed, the Company now ranks in
the forefront of the industry in terms of product quantity and coverage. Headquartered in UK, the
Company’s wholly-owned subsidiary Sinclair is its global aesthetic medicine operation platform that
has R&D centers in UK, the Netherlands, France, Switzerland, Spain and Israel, and production bases
in the Netherlands, France, the U.S., Switzerland, Bulgaria and Israel. Promoting and marketing
sustained-release microspheres for injection, hyaluronic acid, facial thread lifting and other products
in global markets, Sinclair researches, develops and expands its energy-source aesthetic medicine
apparatus businesses through its wholly-owned subsidiaries High Tech and Viora. As for the aesthetic
medicine segment, the Company also has Sinclair (Shanghai), a wholly-owned subsidiary and its
market operation platform in China, as well as R2 in the U.S. and Kylane in Switzerland, two overseas
technical development type joint-stock subsidiaries.
With profound industrial base and powerful industrial transformation ability thanks to over 40
years of development in the industrial microbiology sector, the Company has successfully
development and manufactured multiple types of microbiological medicines, and established the key
technology system for R&D and production of microbiological products, ranking in the forefront of
the industry in terms of scale and technological level of microbiological fermented products. Being
market demand-oriented, R&D technology-driven and industrial resource-coordinative in the
industrial microbiology segment, the Company has fostered differentiated product lines and solutions,
and established three microbiology R&D platforms Zhongmei Huadong, Huida Biotech and Hizyme
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Biotech, and six industrial bases in Hangzhou Xiangfuqiao, Qiantang New Area, Jiangsu Joyang
Laboratories, Magic Health, Twisun Hi-tech and Wuhu Huaren. Moreover, the Company has set up
the largest fermentation monomer plants in Zhejiang, formed the industry-leading microbiological
medicine production ability and high-level R&D capacity that covers all stages of microbiological
engineering technologies from strain construction, metabolic regulation, enzymatic catalysis,
synthetic modification to separation and purification, and built a complete manufacturing system for
R&D, pilot test, commercial production, engineering and public system guarantee of microbiological
projects. To date, the Company has a total of over 130 R&D programs in the industrial microbiology
sector.
III. Core Competitiveness
1. Open innovative medicine R&D system and continuously improved innovation ability
The Company has always attached great importance to innovative R&D and maintained great
input in R&D. Being “Scientific Research-based and Patient-centered”, the Company has fostered a
sound independent innovation system for R&D of medicines that covers the whole process from
medicine discovery, pharmaceutical research, pre-clinical study and clinical study to industrial
production, and set up its Global New Medicine R&D Center after years of vigorous development,
with “clinical value, pharmacoeconomic value and commercial value” as the starting point.
Focusing on three core therapeutic fields of oncology, endocrinology and autoimmunity, the
Company has established in-depth strategic cooperation with leading pharmaceutical enterprises in
and out of China through collaborative product development, equity investment or by other means,
successfully its global R&D ecosystem via introduction, fusion and innovation.
Moreover, the Company keeps developing and has fostered differentiated innovative product
lines that cover the full R&D cycle via independent R&D, external cooperation, license-in, etc. As of
the date of the Report, the Company has reserved 52 innovative and biosimilar medicines under
development. Among them, 5 products and 3 products are under phase III and phase II clinical trials
respectively, which cover oncology, endocrinology, autoimmunity and other fields. All these merits
effectively empower the continuous initiation and launching of innovative products, offering
impetuses for the medium- and long-term development.
2. Comprehensive ability in developing international businesses
Vigorously advancing its internationalization, the Company has further strengthened its
presence in global energy-source aesthetic medicine apparatuses market by acquiring 100% equity of
High Tech and Viora. Meanwhile, the Company has also established product or equity cooperation
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with Akso and Kiniksa in U.S., Heidelberg Pharma in Germany, etc. to complement and enrich the
interests of commercial development of innovative medicines in and out of China. Efforts are made
to facilitate the international registration of products, and all chemical raw medicines launched have
obtained authorized certifications from FDA or EU. Our products such as Daptomycin for Injection,
Acarbose Tablets and Pantoprazole Sodium for Injection have been approved by FDA, while some
high-end industrial microbiological raw products enjoy strong international competitiveness. The
Company never stops its pace in developing international logistics and purchase supplies to foster
international purchasing abilities, and has been a part of global innovative medicine R&D industry
chain by driving the constant improvement of its abilities in CMO/CDMO businesses.
3. Diverse product lines for specialized and chronic diseases, and comprehensive
competitiveness in diabetes treatment and care
Specialized in specialized and chronic diseases, as well as special medicines for years, the
Company has fostered good brand effect and laid strong market foundation in such fields as chronic
nephrosis, transplantation immunity, internal secretion and digestive system, continuously keeping in
the forefront of similar products in China in terms of market share. The Company has
comprehensively laid out product lines of innovative and differentiated generic medicines for clinical
mainstream therapeutic targets of diabetes, with over 20 products under development or put in
commercial production. The Company has also achieved full coverage of clinical first-line immune-
suppressive medicines and subsequent products in the field of organ transplantation. With the world’s
first-in-class layout in three core therapeutic fields of anti-tumor, internal secretion and autoimmunity,
the Company has fostered multiple global innovative medicine layouts and R&D ecologies in the
field of ADC medicines, forming differentiated advantages.
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4. China's leading professional pharmaceutical service team and extensive market network
In the pharmaceutical industry segment, the Company has fostered a professional
pharmaceutical service and market development team comprising 7,000 members. Coring at the
clinical values and academic promotion, the team vigorously promotes the marketing mode that
features the online integration of comprehensive hospitals, primary level medical institutions,
retailing, third-party terminals and Internet, and has gradually formed multi-channel effective
coverage and strong competitive advantages.
As for pharmaceutical business, the Company has made its presence in Zhejiang market for years
and boasts a complete business ecosystem with diverse categories of products and services, forming
comprehensive competitive advantages in market access and coverage. Keeping improving its four
core competencies of logistics, information, finance and operation, and offering such high-end value-
added services as policy affairs, the Company has established business partnership with 90%
mainstream pharmaceutical enterprises in and out of China, and covered all public medical
institutions, key private medical institutions and retain pharmacies in Zhejiang Province, with a
leading market share in Zhejiang Province and forefront ranking in the industry for consecutive years.
In recent years, the Company has witnessed rapid development in innovative businesses such as
products agency and market development, characteristic massive health industry, third-party medical
logistics featuring cold chain and medical e-commerce and has formed complete cold chain logistics
service system and ability at a leading level in China.
5. High-end international aesthetic medicine product lines that cover noninvasive and
micro-invasive mainstream non-operative fields
The Company successfully made its presence in the aesthetic medicine industry by acquiring
Sinclair based in UK. Acquiring international energy-source aesthetic medicine apparatus enterprises
High Tech and Viora in 2021 and 2022 respectively, Sinclair was granted the global distributorship
(except for Germany and UK) of Préime DermaFacial Multi-functional facial skin management
platform of EMA Aesthetics, an Irish company, in May 2022. Covering all middle- and high-end
markets of non-operative aesthetic medicine injections and energy-source aesthetic medicine
apparatuses, the Company has now held global rights of multiple patented products in such fields as
facial and body filling, facial cleansing, body shaping, thread lifting, and energy-source apparatuses,
and set up an international aesthetic medicine operation and BD team. The Company further
integrates its R&D resources and competencies focusing on global high-end aesthetic medicine
markets. The Company has successfully developed its international aesthetic medicine businesses
that organically combine R&D, manufacturing and marketing, and established an international
aesthetic medicine marketing network based on its six global R&D centers in UK, the Netherlands,
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France, Switzerland, Spain and Israel, as well as Sinclair’s six global production bases in the
Netherlands, France, the U.S., Switzerland, Bulgaria and Israel, with its products sold in over 80
countries and regions. To date, the Company has developed 36 international high-end “noninvasive
and micro-invasive” aesthetic medicine products that cover facial and body filling, thread lifting, skin
management, body shaping, depilation, private repair and other non-operative mainstream aesthetic
medicine fields. Specifically, 24 of these products have been launched in China and abroad, and the
other 12 are innovative global products in development. With comprehensive product clusters formed,
the Company now ranks in the forefront of the industry in terms of product quantity and coverage.
6. Constant efforts in developing industrial microbiology sector based on solid R&D and
industrial base
With profound industrial base thanks to over 40 years of development in the industrial
microbiology sector, the Company has successfully development and manufactured multiple types of
microbiological medicines, and established the key technology system for R&D and production of
microbiological products, ranking in the forefront of the industry in terms of scale and technological
level of microbiological fermented products. Being market demand-oriented, R&D technology-
driven and industrial resource-coordinative in the industrial microbiology segment, the Company has
fostered differentiated product lines and solutions, and established three microbiology R&D bases
Zhongmei Huadong, Huida Biotech and Hizyme Biotech, and six industrial bases in Hangzhou
Xiangfuqiao, Qiantang New Area, Jiangsu Joyang Laboratories, Magic Health, Twisun Hi-tech and
Wuhu Huaren. Moreover, the Company has set up the industry-leading fermentation monomer plants,
formed the microbiological medicine production ability and high-level R&D capacity that covers all
stages of microbiological engineering technologies from strain construction, metabolic regulation,
enzymatic catalysis, synthetic modification to separation and purification, and built a complete
manufacturing system for R&D, pilot test, commercial production, engineering and public system
guarantee of microbiological projects.
In the industrial microbiology sector, the Company has initiated over 130 R&D projects,
including 17 projects for xRNA, ADC and other innovative raw materials (including 71 subprojects),
30 projects for active pharmaceutical ingredients and pharmaceutical intermediates, and 18 projects
for massive health and aesthetic medicine raw materials, animal health, biomaterials, etc. The
Company has established the Industrial Microbiology Division with complete structure, introduced
top-notch technical personnel, and kept in line with international talent cultivation system to
continuously optimize its R&D efficiency. To date, the Company has engaged 335 development
personnel, 23% of whom have obtained their master or doctoral degree.
7. Prudent and pragmatic operation style, and stable returns to shareholders
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Valuing innovation in management, the Company has always endeavored to satisfy the demands
for market competition by improving the quality of its operation. As a result, the Company has
achieved long-term steady development thanks to its high-quality products, excellent
commercialization capability, compliant yet efficient marketing services, differentiated market
positioning, innovative R&D layout, and complete talent planning. Over the past 22 years since it
was listed, the Company has distributed dividends for 19 times with the cumulative amount of 5.084
billion yuan, which is well in excess of the 250 million yuan raised during IPO. The Company brings
shareholders consistent and steady returns on investment.
IV. Main Businesses
1. Overview
In 2022, we witnessed not only the great transformation, but also our unremitting efforts and
rich harvest. In this world marked by changes unseen in a century, global competitions and conflicts
have brought both opportunities and challenges for the Company’s international transformation
together with the win-win cooperation situation. In 2022, all employees of Huadong Medicine
vigorously forged ahead, overcame difficulties, exercised lean management, worked hard, aimed high,
and accelerated various operation, innovation and transformation tasks by following the
entrepreneurial spirit of “looking at the current situation considering the future” with recovery of
growth as the core goal. Moreover, we actively responded to complicated and changeable external
environment and multiple market uncertainties by leveraging our advantages of definite and stable
development, harvesting in innovation & transformation, as well as the recovery and growth of
operation performance. All these active actions and efforts successfully empowered the successful
starting of our seventh three-year planning.
In 2022, the Company achieved the operating revenue of 37.715 billion yuan, setting a new high
with an increase of 9.12% year on year. The net profit attributable to shareholders of listed companies
was 2.499 billion yuan, up 8.58% year on year. After deducting the profits and losses of participating
and holding R&D institutions, the net profit after deducting non-recurring profit and loss attributable
to shareholders of listed companies was 2.598 billion yuan, up 13.24% year on year. In Q4 2022, the
Company achieved the operating revenue of 9.856 billion yuan, up 14.13% year on year. The net
profit after deducting non-recurring profit and loss attributable to shareholders of listed companies
was 509 million yuan, up 19.20% year on year. The all-round and stable recovery and upturn of the
Company’s performance vividly embody the Company’s great resilience as a large pharmaceutical
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company in China. To date, the Company has gradually gotten from the influence of industrial
policies, built the new ecology for innovative R&D, and made remarkable achievements in strategic
transformation, embarking on a high-quality development track driven by scientific and technological
innovation.
During the reporting period, the Company kept maintaining stable and good operation, and
achieved the consolidated gross margin of 31.90%, up 1.22% year on year. The net cash flow from
operating activities of the Company was 2.382 billion yuan, which is in line with the operating
revenue and net profit achieved. As of the end of 2022, the Company’s total assets, net assets
attributable to shareholders of listed companies, asset-liability ratio, and return on equity (ROE) were
31.192 billion yuan, 18.578 billion yuan, 38.52% and 14.21% respectively.
In 2022, the Company actively advanced its corporate culture construction, kept deepening the
organizational structure reform, and endeavored to improve the level of its grouping operation. Many
departments were established to empower the Company’s strategic transformation, such as the
Compliance Management Department under the Pharmaceutical Service Company, the Eighth
Preparation Department under the Production Center of the Pharmaceutical Production Company, the
ADC R&D Center under the Innovative Medicine R&D Center, and the International Supply Chain
Department under the Operation Management Department.
During the reporting period, the Company launched the equity incentive program for the first
time since it was listed to give full play to the initiative of talents on key positions, clarify their
responsibilities and values, and effectively combine personal responsibilities, as well as interests of
shareholders, the Company and individuals, thus empowering its sustained development.
I. Operation and Development of Four Business Segments of the Company during the
Reporting Period
(I) Pharmaceutical Industry
During the reporting period, the pharmaceutical industry segment vigorously responded to
varieties of unexpected factors, insisted on finding out inherent problems, facilitated innovation in
R&D by strengthening the system construction, focused on the improvement of ability, promoted
personnel development, and advanced the production, operation, innovation and transformation, with
positive results achieved. Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd., its core subsidiary,
witnessed continuous and stable upturn in operation, with its operational indicators turning from
decrease in the beginning to recovery growth. The sales of all core products achieved stable and rapid
increase throughout the year. It successfully shook off the influence of volume-based procurement
on operation and completed the year’s operational goals. In 2022, Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd. achieved the sales revenue (including CSO business) of 11.244 billion yuan,
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up 10.88% year on year, and the net profit after deducting non-recurring profit and loss of 2.093
billion yuan, up 4.71% year on year. The net return on equity (ROE) was 24.54%.
1. Keeping optimizing the R&D system and enriching innovative product lines
The Company attached great importance to innovative R&D and maintained high proportion of
input in R&D. During the reporting period, the Company input 2.681 billion yuan in R&D in the
pharmaceutical industry segment, up 44.8% year on year. Among them, 1.196 billion yuan were used
as direct R&D expenditures, up 24.2% year on year, and 1.484 billion yuan were input for product
introduction and R&D equities. Being “scientific research-based and patient-centered”, the Company
has fostered a sound independent innovation system for R&D of medicines that covers the whole
process from medicine discovery, pharmaceutical research, pre-clinical study and clinical study to
industrial production, and set up its Global New Medicine R&D Center, with “clinical value,
pharmacoeconomic value and commercial value” as the starting point. Believing that cultivation and
introduction of top-notch talents lay foundation for innovative R&D, the Company has now
established a scientific research team that covers the whole life cycle of R&D of innovative medicines,
which comprises a total of 1,543 researchers, 34.7% of whom have obtained their doctoral or master
degrees.
With “value creation” as its core, the Company’s Innovative Medicine Global R&D Center
achieved vigorous development driven by dual engines of independent innovation and external
introduction, and fostered the new ecology for innovative R&D focusing on “advantaged,
differentiated and source-based innovation”. Meanwhile, it also leverages powerful technological
support for the initiation and incubation of new projects by strengthening the construction of
technology platforms featuring independent intellectual property rights and high barriers. To date, the
R&D team has screened and evaluated tens of thousands of pharmaceutical molecules with potential
activity. As of the date of the Report, the Company has reserved 52 innovative and biosimilar
medicines under development. Among them, 5 products and 3 products are under phase III and phase
II clinical trials respectively, which cover oncology, endocrinology, autoimmunity and other core
treatment fields. All these merits effectively empower the continuous initiation and launching of
innovative products, offering impetuses for the medium and long-term development.
During the reporting period, the Company successfully incubated Weizhi Biology Science and
Technology Co., Ltd., its internal wholly-owned subsidiary, established two core technology
platforms of Micro-restructuring and Micro-delivery, and set up some new technology platforms such
as proteolytic targeting chimera (PROTAC), antibody drug conjugate (ADC), and AI drug discovery
& design (AIDD) thanks to its excellent talent pool and continuous capital investment. In recent years,
the Company kept expanding its differentiated in-depth layout in the field of ADC, successively
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invested in Qyuns Therapeutics, an anti-body R&D and production company, Nuoling Biomedical
Technology (Beijing) Co., Ltd., an ADC linker and coupling technology company, incubated
Zhejiang Huida Biotech Co., Ltd. with full product lines for ADC drug toxin raw materials, and held
shares of Doer Biologics, a multi-antibody platform R&D company. Moreover, the Company
established cooperation with Heidelberg Pharma, a global emerging technology company in the field
of ADC based in Germany, on equity investment and products, introducing HDP-101 and HDP-103,
two its global ADC innovative products, becoming its second largest shareholder, and organically
integrating with its advanced ATAC (Antibody-Amanita Conjugate) technology platform. In the
future, the Company will keep strengthening the construction of innovative platform and integration
of resources, further expand the cooperation on new technology platforms based on the ADC Global
R&D Ecology of Huadong Medicine, create a world-leading ADC independent R&D platform, and
plan to initiate at least 10 ADC innovative products and actively facilitate their registered clinical
studies within 3 years.
In the field of oncology, major milestones were made in ELAHERE, a type of ADC medicine
for platinum-resistant ovarian cancer co-developed by the Company and ImmunoGen from the U.S.,
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which becomes the only ADC medicine approved by FDA in 2022 after being approved by FDA for
facilitated launching in November 2022. Moreover, its clinical trials in China are progressed smoothly
and BLA is planned to be submitted in 2023. In the future, the Company and its partner will keep
advancing its application in front-line treatment of ovarian cancer via clinical studies, and support to
use ELAHERE as the preferred medicine combination for treatment of ovarian cancer. In January
2022, the Company introduced Icaritin Soft Capsules, an original natural small molecular
immunomodulator researched and developed by China independently, which has been sold well in
Chinese market since it was formally launched in May 2022. Moreover, the Company also introduced
the Zevokiorense Injection, a type of CAR-T product, for the treatment of recurrent/refractory
multiple myeloma, the marketing authorization application of which was accepted by the National
Medical Products Administration in October 2022 and was included for prioritized review and
approval. No product of similar type has been approved in China yet. It further enriches the
Company’s product lines in the field of blood diseases and forms a multi-dimensional product line
layout together with chemotherapeutics, ADC products and CAR-T products. DR30303, a core
product under development of Doer Biologics for the treatment of solid tumor, and targeted medicine
Claudin 18.2 successfully completed the enrollment and administration of the first subject in phase I
clinical trial in May 2022.
As for the endocrinology, the Liraglutide Injection, the Company’s first biosimilar medicine for
diabetes mellitus indications, was approved for sale, being the first of its kind in China. It is also
under normal review for weight loss indications and is expected to be approved in 2023, which will
make up the gap of weight-reducing medicines in Chinese market. In June 2022, Zhongmei Huadong
reached strategic cooperation with JULPHAR, a famous company in Middle East, on dual indications
of the Liraglutide Injection, which is a vivid evidence that the Company’s strength, R&D and
innovation abilities in the field of diabetes are internationally recognized. With GLP-1 target as the
core, HDM1002 (micromolecule GLP-1 receptor agonist), an innovative medicine for type 1 diabetic
mellitus that is developed by the Company independently with global intellectual property rights, has
been successfully submitted for IND approval in the U.S. and China, marking that the Company’s
independent R&D has entered a new stage. DR10624, a kind of Fc fusion protein medicine developed
by Doer Biologics based on its independently developed MultipleBody platform technology, boasts
triple agonist activities, targets at GLP-1R, GCGR and FGFR1c/Klothoβ (FGF21R), and has
completed the enrollment of the first overseas clinical subject in June 2022. Moreover, HDM1005, a
GLP-1R and GIPR long-acting polypeptide dual-target agonist developed by the Company
independently, successfully obtained PCC molecules in less than one year since it was initiated,
showcasing great innovation strength of Huadong Medicine and marking the rapid increase of its
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independent R&D ability. To date, the Company has fostered all-round and differentiated product
lines that combine the long-acting and multi-target global innovative and biosimilar medicines
including oral medicines and injections revolving around GLP-1 target, continuously consolidating
its place as a front-runner in the field of endocrinology in China.
With regard to autoimmunity, the Company introduced ARCALYSTand Mavrilimumab, two
global innovative products in the field of autoimmunity by Kiniksa based in the U.S. ARCALYST
has been approved in the U.S. for the treatment of Cryo-Pyrin-Associated Periodic Syndromes
(CAPS), Deficiency IL-1 Receptor Antagonist (DIRA) and recurrent pericarditis. Having been listed
as the overseas new medicine in urgent need for clinical purpose in China, ARCALYST is also the
first and only medicine for recurrent pericarditis suitable for patients aged 12 and over approved by
FDA so far. The Company will formally submit the BLA in China in 2023, and it is expected to
satisfy the clinical needs of patients with autoimmune and rare diseases in China and achieve
commercial production rapidly relying on the priority review channel. HDM3001 (RLD - Stelara),
a type of Ustekinumab biosimilar co-developed by the Company and its shareholding enterprise
Qyuns Therapeutics is used for the treatment of moderate and severe plaque psoriasis of adults, the
phase III clinical trial of which has reached the main end of the study. It is planned to submit BLA in
Q3, 2023. Qyuns Therapeutics, one of the companies with the most comprehensive biological
medicine lines and the leading overall development progress in the field of autoimmune and allergic
diseases in China, has submitted IPO application to the Stock Exchange of Hong Kong Ltd. in March
2023.
In the future, the Company will keep optimizing its R&D system, continuously enrich its
innovative product lines, and output a batch of PCC/ IND achievements featuring superior advantages,
high potency and global independent intellectual property rights. With “value creation” as its core,
the Company clarifies the initiation goal mechanism for differentiated innovation focusing on
“advantaged, differentiated and source-based innovation” and initiates at least 15 innovative R&D
programs per year, successfully fostering the pioneering, differentiated and competitive innovative
product lines. Meanwhile, the Company has fostered the new ecology for innovative R&D driven by
dual engines of independent innovation and external introduction.
2. Keeping active optimization to form an all-round stereochemical pharmaceutical service
system
During the reporting period, the Marketing Team of Hangzhou Zhongmei Huadong
Pharmaceutical Service Corporation kept up with the pace of the Company’s development, actively
grasped the market opportunities, and made active progresses in professional team building, market
access, marketing department and human resources system building, etc., with the overall scale of
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
pharmaceutical service personnel keeping a steady rise. In recent years, the marketing team has
witnessed steady improvement in professional ability and Zhongmei Huadong has gradually become
the creator and pioneer of the medication concept in specific fields and the academic circle thanks to
the market practice in such fields as immunology, endocrinology and angiocarpy by setting up
serialized and brand-oriented academic platforms to manage the progress of access of various
products in a coordinated manner. In the meantime, we actively strengthened study and exploration,
kept upgrading our marketing skills and enriched promotion modes, gradually fostered all-round
stereochemical pharmaceutical services and medicine promotion abilities.
While consolidating the hospital markets in central cities, we kept sinking the marketing
channels, strengthening the development of primary markets, external markets and retail markets,
actively laid out pharmacies, primary layers, e-commerce and other terminals, and enhanced the direct
influence on C end, thus establishing a multi-terminal all-round stereochemical marketing pattern.
We strengthened the building of regional marketing departments and professional teams in various
provinces, municipalities, and autonomous regions by focusing on the terminal coverage, market
share and other indicators, and created an academic promotion-based marketing team with strong
professional ability and medical thinking to comprehensively and accurately convey information
about medicines and offer treatment schemes in consideration of rational medication and patients’
benefits.
3. Facilitating the vigorous development of self-owned and licensed products for more
excellent achievements in commercialization.
During the reporting period, the Company actively participated in and responded to reforms on
volume-based procurement of medicines, medical insurance negotiation, DRG/ DIP payment clients,
etc. at both the national and provincial level, with positive achievements made. Bailing Tablet of
Zhongmei Huadong won the bid for volume-based purchasing of Hubei Alliance for Volume-based
Procurement of Chinese Traditional Patent Medicines and witnessed rapid growth in sales after the
contract was executed. Bailing Capsule and Acarbose Chewable Tablets were successfully listed in
China’s National Reimbursement Drug List again. Mycophenolate Mofetil Capsule, Pioglitazone
Hydrochloride Tablets , and Ornidazole Tablets of Xi’an Bohua won the bid for China’s 7th batch of
volume-based procurement of medicines. Acarbose Tablets and Pantoprazole Sodium for Injection
completed the renewal of volume-based procurement of multiple provinces. The Company also
actively expanded the sales channels, improved the accessibility of Bailing series and Acarbose series
on primary markets, retail markets and online platforms, with remarkable achievements made in
coverage and market share of external markets.
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During the reporting period, Zhongmei Huadong also established exclusive commercial
cooperation with multinational pharmaceutical companies such as Takeda and Pfizer, as well as
Beijing Shenogen and other domestic innovative medicine pharmaceutical companies on RLD
innovative products in Chinese market, actively promoted its clinical medicine, academy and
professional team building, strengthened the market access, academic promotion and compliance
management, properly covered various terminals, worked hard on building patient groups, and
highlighted the brand advantages of RLD to ensure good market share. The Company successfully
completed its preset annual sales goals, laying a solid foundation for the launching and promotion of
innovative products in the future.
4. Making innovation in production and operation models to facilitate the international
registration of products
In 2022, the Company’s production systems actively empowered the innovation in production
and operation modes while successfully guaranteed the supply of products of various markets. Further
enhancing the foundational management, the Company vigorously promoted the full-life cycle
management of equipment and kept promoting the improvement of employees’ skills and per capita
labor efficiency. The Company also tapped internal potentials, continuously pushed the total lean
production, deepened the standardized construction of functional 5S and workshops, and fostered the
total lean production system to effectively reduce production costs. Externally, the Company actively
sought ways to increase revenue, improved the utilization rate of resources and equipment while
satisfying the market needs, actively introduced external cooperative programs, and increased
channels for profits via CMO/CDMO businesses. Moreover, the Company strengthened its efforts in
developing supplies, facilitated the substitution of imported materials with domestic products,
ensured supply safety, focused on promoting the source-tracking and development of key raw and
subsidiary materials, equipment, accessories and other exclusive or imported materials, effectively
responded to risks in supply or rise in price of bottleneck materials, and endeavored to achieve
adequate competition, obviously reducing the purchasing costs.
In 2022, various R&D tasks of the Company were progressed normally, with staged milestones
achieved. As of the date of the Report, 4 key categories were awarded the marketing authorization,
and applications of 7 under-development categories were accepted by CDE. During the reporting
period, application and renewal of patents of the Company were progressed smoothly, with a total of
151 patent applications submitted, including 88 patents for invention. A total of 69 patents were
granted. As for international registration, 1 category of preparation was approved in Singapore, and
DMF/ ANDA replies of over 10 categories were submitted. Pantoprazole Sodium for Injection was
launched and marketed in the U.S. for the first time, being the pioneer in the Company. The Company
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
steadily promoted the building of the R&D innovation platform for quality researches of external and
complex preparations in combination with actual project practices, mainly the development of
external liquores, ointments, gelling agents and creams, as well as improvement of the development
ability of in vitro release and transdermal experiment method, ability in biochemical detection of
biomedicine, level in impurity spectrum analysis and structure confirmation of APIs. Meanwhile, the
Company started to build a chemical characterization platform for implantable medical apparatuses
to provide quality research for the Company’s aesthetic medicine.
(II) Industrial Microbiology
With profound industrial base thanks to over 40 years of development in the industrial
microbiology sector, the Company has successfully developed and manufactured multiple types of
microbiological medicines, and established the key technology system for R&D and production of
microbiological products, ranking in the forefront of the industry in terms of scale and technological
level of microbiological fermented products. Being market demand-oriented, R&D technology-
driven and industrial resource-coordinative in the industrial microbiology segment, the Company has
fostered differentiated product lines and solutions, and established three microbiology R&D bases as
Zhongmei Huadong, Huida Biotech and Hizyme Biotech, and six industrial bases in Hangzhou
Xiangfuqiao, Qiantang New Area, Jiangsu Joyang Laboratories, Magic Health, Twisun Hi-tech and
Wuhu Huaren. In addition, the Company has set up the industry-leading fermentation monomer plants,
formed the microbiological medicine production ability and high-level R&D capacity that covers all
stages of microbiological engineering technologies from strain construction, metabolic regulation,
enzymatic catalysis, synthetic modification to separation and purification, and built a complete
manufacturing system for R&D, pilot test, commercial production, engineering and public system
guarantee of microbiological projects.
In the industrial microbiology sector, the Company has initiated over 130 R&D projects,
including 17 projects for xRNA, ADC and other innovative raw materials (including 71 subprojects),
30 projects for Active Pharmaceutical Ingredients and pharmaceutical intermediates, and 18 projects
for massive health and medical beauty raw materials, animal health, biomaterials, etc. The Company
has established the Industrial Microbiology Division with complete structure, introduced top-notch
technical personnel, and kept in line with international talent cultivation system to continuously
optimize its R&D efficiency. To date, the Company has engaged 335 development personnel, 23%
of whom have obtained their master or doctoral degree.
The year of 2022 witnessed the rapid development of various businesses in the segment of
industrial microbiology of the Company. Keeping practicing the Industrial Microbiology
Development Strategy, the Company determined its key orientation in five aspects including
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
innovative medicines (RNA & ADC medicines) raw materials, APIs & intermediates, massive health
& cosmetic raw materials, pets protection and featured biomaterials. Thanks to continuous R&D,
product lines in five key business segments featuring high innovation, high technology barrier and
high added-values were further enriched and product structures were constantly optimized. While
expanding domestic market, the Company also comprehensively facilitated international registration
and certification, and actively branched out its international businesses. During the reporting period,
the Company achieved favorable results in sales by integrating the traditional API business and
expanding new businesses such as raw materials for innovative medicines, massive health products,
etc. to grasp the market, seeing a stable business growth. Throughout the year, the Company achieved
the sales revenue of 510 million yuan, up 22% year on year.
In May 2022, Huida Biotech, the Company’s holding subsidiary, invested in establishing a
wholly-owned subsidiary Hizyme Biotech. Specializing in developing series of industrial catalytic
enzymes and relevant biocatalytic downstream products with synthetic biology techniques, Hizyme
Biotech has formed a complete R&D system that comprises enzyme design - evolution - strain
construction - expression - catalytic application research, and formed featured downstream product
lines in such fields as modified nucleoside and pharmaceutical intermediates.
In July 2022, the Company’s wholly-owned subsidiary Zhongmei Huadong, Gonzales District
People’s Government of Hangzhou and Zhejiang University of Technology co-built the HIT Institute
of Synthetic Biology (the HIT Institute). With synthetic biology techniques as its basis, the HIT
Institute focuses on four major fields of pharmaceutical chemicals, aesthetic medicine biology,
biomaterials and healthy sugar substitutes, and specializes in researches on technological innovation
and industrial transformation revolving around the smart biological manufacturing. In the future, the
HIT Institute will form a complete chain that comprises basic R&D - pilot R&D - industrial
development with Huida Biotech, Magic Health and Jiangsu Joyang Laboratories, vigorously
promoting the landing and commercialization of frontier innovations in synthetic biology in the
pharmaceutical industry in East China.
In August 2022, the Company merged the Wuhu Huaren Science and Technology Co., Ltd.,
further putting in place its layout of industrial microbiology innovative medicine raw materials in the
fields of mRNA medicines and IVD chemical raw materials. Meanwhile, Meihua Hi-tech, the
Company’s wholly-owned subsidiary, will empower the scale production of Huaren Science and
Technology by producing modified and protection series nucleosides and some nucleoside monomers
in the upstream. Additionally, the Company also set up its technical team for mRNA raw materials
R&D and application services, laying a foundation for business expansion in such fields as mRNA
raw materials and services. To date, the Company has formed a complete technical layout necessary
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
for RNA medicine raw materials in such fields as synthetic biotechnology, enzymatic catalysis,
chemosynthetic modification, separation and purification through series of R&D and integration of
industrial resources. Meanwhile, an overall production layout for RNA medicine raw materials and
IVD chemical raw materials has been fostered backed by separation and purification, Meihua Hi-tech
and other production bases.
With regard to engineering projects, the Company’s industrial microbiology segment completed
the phase I technical innovation of Meihua Hi-tech and launched the phase I project of Magic Health,
anti-infection product lines of Jiangsu Joyang Laboratories, and construction of high-activity API
factories in 2022, further advancing the landing of product lines in various fields.
In 2022, the Company’s industrial microbiology segment actively advanced business
advancement and integration in various fields via marketing, and the Company focused on advancing
the construction of the marketing management system of the industrial microbiology headquarters
and international marketing team. In the meantime, the Company also prepared the market strategic
plans and large variety breeding programs in various fields, and gave priority to the construction of
product application and service systems in such fields as innovative medicine raw materials, massive
health, and aesthetic medicine raw materials. As for the market access and international registration
and certification, the Company prepared and actively implemented various advancement plans
considering unique features of different fields.
To date, the Company’s industrial microbiology segment has formed the organizational structure
and layout featuring “Industrial Microbiology Division + Innovative Technology Company +
Industrial Manufacturing Bases” and has completed the overall layout of raw materials for innovative
medicines (xRNA & ADC medicines), pharmaceutical APIs & intermediates, massive health &
aesthetic medicine raw materials based on synthetic biology, industrial fermentation, green chemical
manufacturing and other technologies. In the future, the Company will actively expand pets protection
and featured biomaterials, and keep expanding the industrial layout.
(III) Aesthetic Medicine
The year of 2022 bears historical significance for the Company’s aesthetic medicine business.
As a Chinese company taking the lead in international layout of aesthetic medicine businesses, the
Company steadily advances its aesthetic medicine businesses in accordance with the overall strategy
of “global operation layout and dual-circulation development.” The Company further integrates its
R&D resources and competencies focusing on global high-end aesthetic medicine markets. The
Company has successfully developed its international aesthetic medicine businesses that organically
combine R&D, manufacturing and marketing, and established an international aesthetic medicine
marketing network based on its six global R&D centers in the U.K., the Netherlands, France,
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Switzerland, Spain and Israel, as well as Sinclair’s six global production bases in the Netherlands,
France, the U.S., Switzerland, Bulgaria and Israel, with its products sold in over 80 countries and
regions. Attaching great importance to innovation in aesthetic medicine technologies, the Company
has always practiced its operation concept of “hi-tech R&D, high-quality positioning and global
products”, continuously increased its input in innovation of technologies, enriched the innovative
product lines, and has now launched 36 categories of high-end “noninvasive + micro-invasive”
products in the aesthetic medicine field, including 24 categories that have been launched in domestic
and overseas markets and 12 categories that are under development. Moreover, the Company has
mastered cutting-edge technologies in global aesthetic medicine including STAT patented
microsphere preparation technology, OXIFREE patented manufacturing technologies, RotateRF,
Multi-CORE, SVC and PCR. With its product portfolios that cover facial and body filling,
thread lifting, skin management, body shaping, depilation, private repair and other non-operative
mainstream aesthetic medicine fields, the Company now ranks in the forefront of the industry in terms
of product quantity and coverage.
During the reporting period, the Company’s aesthetic medicine segment witnessed rapid growth
as a whole and achieved the total operating revenue of 1.915 billion yuan (excluding internal
offsetting factors), setting the record high in revenues of both domestic and overseas aesthetic
medicine businesses, and up 91.11% year on year on comparable basis (excluding Huadong Ningbo).
Overseas Aesthetic Medicine Business
In 2020, Sinclair, the Company’s wholly-owned subsidiary that serves as its global aesthetic
medicine business operation platform, set a new high in operating performance with both its injections
and EBD businesses exceeding goals in the full-year plan even under the influence of high inflation
in the global market and rising raw materials and energy costs. During the reporting period, Sinclair
achieved the consolidated operating revenue of 134.57 million pounds (about 1.144 billion yuan), up
76.9% year on year, and the EBITDA of 23.04 million pounds, up 245.95% year on year, and attained
the annual operating profits for the first time since it was acquired.
During the reporting period, Sinclair witnessed constant and rapid growth in revenue from core
injection products driven by the strong demands in overseas markets. Thanks to its unique and
exclusive STAT patented microsphere preparation technology that focus on long-term efficacy and
safety, Ellansé may not only boast instant filling and shaping effect, but also revitalize regeneration
of autologous collagen, creating more natural effect of facial rejuvenation. It is still among the list of
best-selling products even though it has been launched for multiple years. Adopting the world’s first
patented manufacturing technology of OxiFree with long molecular hyaluronic acid chains, MaiLi
series, the Company’s new high-end hyaluronic acid containing lidocaine, can produce a “Smart
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Spring” intelligent spring gel matrix, which generates more natural post-filling effect and features
long-lasting and outstanding filling ability. It has been continuously recognized by the market since
it was launched and witnessed a year-on-year growth of 190% in revenue during the reporting period.
Lanluma, a collagen stimulator of L-polylactic acid, is the only regenerative product approved for
hip and thigh filling in the world yet, which witnessed a year-on-year growth of 44% in revenue
during the reporting period, being the main driving force for the growth of overseas aesthetic
medicine business. Recently, Lanluma was awarded the “the Best Injectable Body Filler” by the
2023 AMWC, which vividly showcases the authoritative recognition of Lanluma products and
technologies by the international aesthetic medicine industry, as well as the great affirmation of
Sinclair’s achievements in the high-end aesthetic medicine field. The Company will keep advancing
the registration and promotion of its core products in global markets and Sinclair has planned to
successively embark its efforts in registering Ellansé and MaiLi series products in the U.S. Market
in the second quarter of 2023.
In February 2022, Sinclair successfully acquired the equity of Viora, a U.S. Company
specialized in non-invasive and micro-invasive energy based devices for aesthetic medicine, further
expanding the Company's innovative product lines for aesthetic medicine. Then, Sinclair integrated
its businesses and markets, marking another important global strategical layout of Sinclair in the field
of aesthetic medicine energy based device following its wholly-owned acquisition of Spain’s High
Tech. Viora will be an effective bridge for Sinclair to further expand its EBD businesses in the U.S.
Market for good brand reputation, perfect marketing service personnel staffing, complete marketing
management system and extensive market resources. In 2022, EBD businesses of Viora witnessed
rapid growth in American market, with performance that exceeds the full-year operation plan. The V
series, its key product, is a multi-functional aesthetic medicine operating platform that integrates three
energy sources of RF, IPL and laser, which boasts Multi-CORE, CORE, SVC, PCR and
other technologies for skin compactness, body shaping, etc. and offers comprehensive exclusive
treatment solutions based on different groups and skin qualities. The product has been awarded the
U.S. and European registration and certification. Viora is actively expanding its presence in EU and
Asian-Pacific region. The effect of its integration with Sinclair has been preliminarily manifested. In
2023, Sinclair will keep fostering the Company’s overall competitiveness in global aesthetic medicine
business by further enhancing the collaborative effect of EBD and injections.
In the first quarter of 2023, Sinclair launched Sculpt & Shape, a new energy based device for
body shaping and facial rejuvenation, in the European market, which adopts the innovative RotateRF
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
technology and brings patients comfortable, effective and safe experience. Sculpt & Shape is well-
received by the market immediately after it was launched.
Aesthetic Medicine in China
Sinclair (Shanghai), the Company’s wholly-owned subsidiary and its aesthetic medicine
business operating center in Chinese market, kept developing the high-end markets for aesthetic
medicine injections and maintained rapid growth in 2022 despite the fluctuation of market demands.
During the reporting period, Sinclair (Shanghai) achieved the total operating revenue of 626 million
yuan, with favorable profits. By the end of 2022, Sinclair (Shanghai) has signed cooperation contracts
with over 500 hospitals and trained over 1,100 certified physicians.
Its core product Ellansé has always attracted great market attention since it was launched in the
Chinese market for its regeneration and anti-aging technologies and concept, and has become one of
the best-selling products in the field of aesthetic medicine injects in China, playing a leading role in
the high-end market in the field of aesthetic medicine regeneration filling.
In the first quarter of 2022, Glacial Spa completed its global debut in China, which is researched
and developed by Rox Anderson, father of modern laser medicine, and many medical specialists from
Harvard University and Massachusetts Institute of Technology. Adopting the revolutionary
Cryomodulation technology, the product accurately inhibits melanin synthesis and transport from the
source at low temperature to improve the skin quality and color. To date, Sinclair (Shanghai) has
established commercial cooperation on this product with over 40 aesthetic agencies in China. In 2023,
Sinclair (Shanghai) will further expand the cooperation modes, facilitate the cooperation with Chinese
aesthetic agencies, and extend the market coverage.
During the reporting period, the Company kept advancing the domestic and overseas registration
and commercialization of its core aesthetic medicine products. Sinclair exclusive introduced the
multi-functional facial skin management platform Préime DermaFacial, a kind of energy based device
that integrates five cutting-edge technologies of spiral vacuum, microdermabrasion, micro current,
radio frequency and ultrasonic and carries the IoT technology. Being an intelligent hi-tech beauty
apparatus, it has been commercially sold in main aesthetic medicine markets in America, Europe and
other regions of the world in succession since September 2022, and is planned to be launched in China
in 2023. The bipolar RF anti-aging equipment Reaction, the Company’s EBD product, is a new
generation of intelligent beauty apparatus that integrates CORE multi-RF technology with the
vacuum negative pressure technology in a path-breaking manner. Adopting the contact cooling
technology, it can effectively avoid energy and thermal loss and dramatically improve customers’
comfort level. With its domestic agent successfully changed in 2022, the product is planned to be
sold and promoted in China in the second quarter of 2023. V version and X version of poly-L-lactic
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
acid (PLLA) collagen stimulant Lanluma were approved to be launched in Bo’ao Lecheng
International Medical Tourism Pilot Zone, which are used for increasing the volume of depression
areas on the face and body, especially for correcting skin depressions.
In the first quarter of 2023, MaiLi Extreme, the Company’s novel high-end lidocaine-containing
sodium hyaluronate filler for injection and Ellansé M, a polycaprolactone microsphere facial filler
for injection, successfully completed the enrollment of all subjects in clinical trials in China, with
follow-up started.
The Company has always pursued the positive values of “keeping improving”, actively
participated in co-governance of industry, joined hands with alliance partners to foster core
competitiveness, established trustworthy cosmetic consumption environment, and empowered the
standardized development of the regeneration aesthetic medicine market in China by improving its
influence, while continuously promoting the launching of products and actively expanding its markets.
The Company conveys the therapeutic concept of “formal aesthetic medicine agencies, physicians
and products” to enable the healthy and positive development of the aesthetic medicine industry.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Figure: Aesthetic Medicine Injection and Thread Lifting Products Launched and under
Development
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Figure: Aesthetic Medicine Energy based devices Launched and under Development
(IV) Pharmaceutical Business
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
During the reporting period, the Company’s pharmaceutical business segment actively coped
with multiple influences and impacts under special circumstances, practically fulfilled the Company’s
social responsibilities as the leading pharmaceutical company throughout Zhejiang Province,
shouldered the heavy responsibilities to guarantee the supply of medical materials, and endeavored
to satisfy the needs of various medical institutions and people for medicines despite diverse
difficulties.
In the meantime, the Company’s pharmaceutical business segment maintained steady business
development in the face of fierce market competition. During the reporting period, the Company’s
pharmaceutical business segment achieved the operating revenue of 25.553 billion yuan, up 10.55%
year on year, and the net profit of 397 million yuan, up 3.85% year on year. In 2022, the Company’s
pharmaceutical business segment optimized the organizational architecture in business, tapped the
overall resources, and stretched its products out of all subsidiaries. The Jinhua Supply Chain
Warehouse of the Company was put into operation in full swing, forming the two-warehouse
distribution mode throughout Zhejiang Province. Moreover, the Company further increased its input
in external market and established equity cooperation with Zhejiang Dongyang Medicine and
Medicinal Material Co., Ltd. (renamed “Huadong Medicine Dongyang Co., Ltd.), which has become
an operating platform in Dongyang region to further improve the Company’s market share in
Zhejiang Province. As for innovative business, the Company focused on expansion of product agency
and high-end cold chain logistics to lead the high-quality development. With regard to management,
the Company advanced the centralized management to improve the quality and efficiency, shifted the
focus of human resources to innovative fields and optimized the information system to empower the
business development. Main measures taken are as follows:
1. Vigorously developing traditional businesses, stabilizing hospital market and stretching
out to external markets
The Company further refined and excelled in traditional businesses. The Company focused on
the introduction of innovative medicines, gradually optimized the structure of products for hospitals,
endeavored to increase the share of high-value products, and continuously improved the proportion
of products for hospitals, thus ensuring steady rise. With regard to OTC, the Company focused on
designated pharmacies for medical insurance, affiliated to hospitals and chain pharmacies, and
expanded the coverage and share, thus maintaining high growth rate. As for the self-operated retail,
the Company placed the focus on developing stores in hospitals and external market, as well as DTP
stores to make breakthrough in sales. Moreover, the Company expanded the regional share of such
high-value products as medical apparatuses, medicinal materials, ginseng and antler, as well as
special medicines for high growth of businesses.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
2. Cultivating innovative businesses and improving profitability
1) The Company established professional promotion teams that serve nationwide customers
from the agency in Zhejiang to regional agency and nationwide agency revolving around two lines of
medicine agency and apparatus agency to improve the profitability of agent varieties.
2) The Company leveraged full support to increase the share of third-party logistics and
distribution of the supply chain. The Company completed the collaborative integration and
optimization under multiple logistics scenarios taking the advantage of delivery of Zhezhong Jinhua
Logistics Base, focused on high-end pharmaceutical cold chain, expanded the distribution of special
medicines represented by high-end cold chain and vaccines, and consolidated its role as the first
pharmaceutical cold chain brand in Zhejiang.
3) As for the self-operated e-commerce platform, the Company fostered its own brand, further
consolidated product R&D and iteration, enriched the product groups, further improved the online
notability and influence of its self-owned brand “Xuguanghe”.
4) The Company earnestly implemented its strategy of “extending from medical care to aesthetic
medicine and massive health”, enriched existing business formats, and fostered new impetus for more
profits by expanding the boundaries of value-added services for upstream and downstream customers.
3. Reducing cost and improving efficiency, following regulatory provisions, and improving
the operating performance
The Company optimized its staffing, implemented the post rotation system for managers, and
cultivated compound talents by integrating the management of various functional departments.
Moreover, the Company implemented the quantitative performance evaluation with value creation as
the core that focusing on innovation in staffing of managers, established unified quality management
standards, enhanced the management responsibilities of the headquarters, and had GSP management
normalized. The Company also set up its operating system that covers the businesses in East China
for unified management and service of various divisions and subsidiaries, enhanced its compliance
regulation and risk control, increased income and reduced cost, steadily advanced the full coverage
of bidding and purchasing, and endeavored to reduce cost and improve efficiency by leveraging the
cohesion of the Company as a whole.
II. Awards during the reporting period
During the reporting period, as the Company’s comprehensive competitive strength, efficient
operation and governance, and value creation ability were recognized by the market, it won a number
of awards and honors:
Ranked 357th in Fortune China Top 500 Companies, the 13th consecutive year for being listed;
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Listed in Top 100 of Chinese Pharmaceutical Companies in 2021 of Menet, maintaining its ranking
as Top 10 among Top 100 Chinese Chemical Pharmaceutical Companies Ranking in 2021;
Top 100 Chinese Pharmaceutical Manufacturers in 2021 and Top 100 Chinese Pharmaceutical
Businesses in 2021 by All-China Federation of Industry and Commerce;
Top 500 Chinese Private Enterprises in 2022 and Top 500 Chinese Enterprises in Service Industry
in 2022 by China Enterprise Confederation;
Top 100 Chinese Pharmaceutical R&D Centers in 2022 and Top 100 Chinese Chemical
Pharmaceutical R&D Centers by yaozh.com.
In terms of investor relations management:
The Best Investor Relations, the Best Secretary of the Board of Directors and the Best New Media
Operator, the 13th Tianma Award for Investor Relations of Chinese Companies Listed on the Main
Board;
In terms of ESG management:
Top 100 Chinese Listed Companies in ESG by Securities Times, etc.
2. Income and cost
(1) Composition of operating revenue
Unit: RMB yuan
2022 2021 Year-on-year
Proportion in Proportion in percentage
Amount Amount increase/decrease
operating revenue operating revenue
Total operating
37,714,587,458.01 100% 34,563,301,233.67 100% 9.12%
revenue
By sector
Business 25,706,575,656.84 68.16% 24,203,730,039.28 70.03% 6.21%
Manufacturing 11,666,006,594.38 30.93% 10,519,190,765.06 30.43% 10.90%
Aesthetic medicine 1,914,953,889.03 5.08% 1,002,027,972.65 2.90% 91.11%
Including:
International 1,143,849,083.22 3.03% 665,510,309.09 1.93% 71.88%
aesthetic medicine
Domestic aesthetic
883,937,124.31 2.34% 366,560,098.82 1.06% 141.14%
medicine [Note]
Offset (inter-
-1,322,138,396.44 -971,513,302.13
sectoral offset)
By product
By region
Domestic sales 36,549,476,866.81 96.91% 33,883,474,489.91 98.03% 7.87%
Overseas sales 1,165,110,591.20 3.09% 679,826,743.76 1.97% 71.38%
By sales model
[Note] The domestic aesthetic medicine business includes the income from the self-operated products of Sinclair (Shanghai), the
income from the aesthetic medicine products of the Company’s pharmaceutical commercial agency and the income from the OTC
weight-loss products of the Company.
(2) The operating revenue or profit accounts for more than 10% of the total by industry, product, region or
sales model
√ Applicable □ N/A
Unit: RMB yuan
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Year-on-year
Year-on-year Year-on-year
percentage
percentage percentage
Operating revenue Operating cost Gross profit rate increase/decrease
increase/decrease increase/decrease
in operating
in operating cost in gross profit rate
revenue
By sector
Business 25,706,575,656.84 23,833,974,287.72 7.28% 6.21% 6.16% 0.04%
Manufacturing 11,666,006,594.38 2,568,079,627.21 77.99% 10.90% 14.99% -0.78%
By product
By region
Domestic sales 36,549,476,866.81 25,350,585,541.92 30.64% 7.87% 6.87% 0.65%
Overseas sales 1,165,110,591.20 331,911,469.63 71.51% 71.38% 40.68% 6.21%
By sales model
If the statistical specifications of the Company’s main business data have been adjusted during the reporting period, the Company’s
main business data of the most recent year should be adjusted according to the specifications at the end of the reporting period.
□ Applicable √ N/A
(3) Whether the Company’s income from in-kind sales is greater than that from labor services
√ Yes □ No
Reasons that year-on-year percentage increase/decrease in related data is over 30%
□ Applicable √ N/A
(4) Performance of major sales contracts and major procurement contracts signed by the Company as at the
reporting period
□ Applicable √ N/A
(5) Composition of operating cost
Unit: RMB yuan
2022 2021 Year-on-year
Sector Item Proportion in Proportion in percentage
Amount Amount increase/decrease
operating cost operating cost
Operating
Business 23,833,974,287.72 92.80% 22,451,262,640.00 93.71% -0.91%
cost
Operating
Manufacturing 2,568,079,627.21 10.00% 2,233,384,937.73 9.32% 0.68%
cost
International
Operating
aesthetic 403,186,286.22 1.57% 234,272,299.70 0.98% 0.59%
cost
medicine
Offset (inter-
Operating
sectoral -1,122,743,189.60 961,549,148.45
cost
offset)
Note
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
(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 X. 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) 7,933,315,239.67
Proportion of the total sales amount of the top five customers in
21.04%
the total annual sales amount
Proportion of related parties’ sales amount of the top five
0.00%
customers’ sales amount in the total annual sales amount
Information of the Company’s top five customers
Proportion in the total annual sales
No. Customer name Sales amount (yuan)
amount
1 Customer A1 3,180,251,095.06 8.43%
2 Customer A3 1,412,463,993.68 3.75%
3 Customer A2 1,339,809,252.12 3.55%
4 Customer A6 1,107,957,405.77 2.94%
5 Customer A4 892,833,493.04 2.37%
Total -- 7,933,315,239.67 21.04%
Other information of major customers
□ Applicable √ N/A
Information of the Company’s major suppliers
Total purchase amount of the top five suppliers (yuan) 3,048,387,112.07
Proportion of the total purchase amount of the top five suppliers in
11.87%
the total annual purchase amount
Proportion of related parties’ purchase amount of the top five
0.00%
customers’ purchase amount in the total annual purchase amount
Information of the Company’s top five suppliers
Proportion in the total annual
No. Supplier name Purchase amount (yuan)
purchase amount
1 Supplier B5 780,302,332.49 3.04%
2 Supplier B6 735,151,508.81 2.86%
3 Supplier B7 532,504,871.16 2.07%
4 Supplier B8 529,761,797.92 2.06%
5 Supplier B9 470,666,601.69 1.83%
Total -- 3,048,387,112.07 11.87%
Other information of major suppliers
□ Applicable √ N/A
3. Expenses
Unit: RMB yuan
Year-on-year
2022 2021 percentage Note on major changes
increase/decrease
Sales expenses 6,334,738,928.05 5,424,051,895.28 16.79%
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Administrative
1,248,781,970.63 1,166,941,288.41 7.01%
expenses
Mainly due to the
Financial expenses 78,256,567.01 22,075,055.28 254.50% increase in interest-
bearing debt
R&D expenses 1,015,971,052.33 979,644,017.93 3.71%
4. R&D input
(1) Overall R&D situation
During the reporting period, being “scientific research-based and patient-centered”, the
Company further devoted itself to the field of cancer and chronic disease treatment, continuously
increased the R&D input, kept enriching the layout of innovative medicine R&D, enhanced the
construction of innovative R&D ecology and technological platform, and actively advanced the
progress of clinical trials, with multiple major staged achievements made. As of the date of the Report,
the Company has a total of 83 pharmaceutical projects under development, including 52 innovative
and biosimilar medicine projects. Five products are under phase III clinical trial, while another three
are under phase II clinical trial. During the reporting period, the Company input 2.681 billion yuan
in R&D in the pharmaceutical industry segment, up 44.8% year on year. Among them, 1.196 billion
yuan were used as direct R&D expenditures, up 24.2% year on year, and 1.484 billion yuan were
input for product introduction and R&D equities. R&D tasks mainly include the following:
1) The Company continued to practice the new medicine R&D mode combining independent
R&D + cooperative entrusted development + product License-in, track the latest international
mechanism of medicine action and target, as well as the progress of clinical application research,
speed up the layout of innovative medicines and introduction of innovative medicine projects at home
and abroad, clarify innovative, differentiated and iterative standards for initiation of projects, and
strengthen the capabilities of independent innovation and R&D;
2) With “clinical value, pharmacoeconomic value and commercial value” as the starting point,
the Company laid out multiple categories of innovative products in fields of endocrine, autoimmunity
and oncology during the reporting period;
3) Focusing on clinical superior varieties and specialized medicines, the Company accelerated
the R&D layout of high-tech barrier generic medicines and modified new medicines;
4) The Company established and fostered the industrial chain advantages of “APIs +
preparations” for generic medicines, developed technical improvement and innovation of external
preparations, and strengthened its market competitiveness;
5) The Company strengthened the comprehensive dynamic evaluation of varieties under
development, strengthened the management of imported projects, especially clinical projects,
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
accelerated the speed and quality of development of clinical projects, especially those under phase III
clinical trials, and sped up the launching of innovative medicines;
6) The Company built its ADC global R&D ecology for win-win cooperation by fostering the
Polypeptide differentiation innovative technology platform, immune disease antibody technology
platform, microorganism fermentation cytotoxin technology platform, and innovative linker and
coupling technology platform.
(2) Innovative medicine development planning
The Company formulated a strategic planning for the development of innovative medicines in
the next five years. With the focus placed on existing treatment fields, the Company made clear key
direction and number of innovative projects to be initiated each year during the planning period, and
proposed that no less than 15 innovative varieties (including innovative medicines, modified new
medicines and innovative medical apparatuses, etc.) should be initiated and reserved each year during
the planning period. During the reporting period, the Company endeavored to promote the progress
of clinical research of innovative medicines and key biosimilar medicines under developed, with a
view to have them approved and launched as early as possible. In addition, the Company also actively
explored and referred to the construction of international advanced innovative medicine R&D system,
constantly optimized and adjusted the overall R&D system structure, and established a research team
that covers the whole life cycle of innovative medicine R&D by introducing top-notch R&D talents,
and perfected various functional modules of innovative project R&D, thus empowering the
attainment of strategic planning goals of the Company’s innovative projects.
Particularly in the field of ADC, the Company kept expanding its differentiated in-depth layout,
successively invested in Qyuns Therapeutics, an anti-body R&D and production company, Nuoling
Biomedical Technology (Beijing) Co., Ltd., an ADC linker and coupling technology company,
incubated Zhejiang Huida Biotech Co., Ltd. with full product lines for ADC drug toxin raw materials,
and held shares of Doer Biologics, a multi-antibody platform R&D company. Moreover, the Company
established cooperation with Heidelberg Pharma, a global emerging technology company in the field
of ADC based in Germany, on equity investment and products. In the future, the Company will keep
strengthening the construction of innovative platform and integration of resources, further expand the
cooperation on new technology platforms based on the ADC Global R&D Ecology of Huadong
Medicine, create differentiated ADC independent R&D platform, and plan to initiate at least 10 ADC
innovative products and actively facilitate their registered clinical studies within 3 years.
With “value creation” as its core, the Company’s Innovative Medicine Global R&D Center
focused on “advantaged, differentiated and source-based innovation” and ultimately: 1) achieved the
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
dual-engine driving by independent R&D + external introduction, and built the new ecology for
innovative R&D; 2) clarified the differentiated and innovative initiation goal mechanism (no less than
15 innovative R&D projects initiated each year) and formed the pioneering, differentiated and
competitive innovative product lines; 3) built the global R&D strategic cooperation ecology with
Huadong Medicine as the core and produced a batch of PCC/ IND achievements with great
advantages, high druggability and global independent intellectual property rights, with NDA/ BLA
applications to be submitted and innovative medicines to be launched since 2023; 4) cultivated a high-
level scientific research team that can support the whole life cycle of innovative medicine R&D; 5)
kept enhancing the construction of technology platform with independent intellectual property and
high barrier, including proteolytic targeting chimera (PROTAC), antibody drug conjugate (ADC), and
AI drug discovery & design (AIDD), as well as products and innovative projects with high values
and independent intellectual property rights based on such platform.
(3) Main tasks regarding independent R&D and innovation
The Innovative Medicine R&D Center has preliminarily completed the construction of
translational medicine research technology platform, AI drug design and discovery platform, modern
pharmaceutical chemical synthesis technology platform and ADC R&D platform, which have
provided strong technical support for initiation and incubation of new projects. To date, the R&D
team has screened and evaluated tens of thousands of pharmaceutical molecules with potential
activity (including small modules of pharmaceutical chemicals and large modules of biomedicine),
which mainly distributed in such fields as endocrine metabolism, autoimmunity and oncology.
Among them, HDM1002, the Company’s first self-developed innovative medicine program that is
under the IND stage, has completed IND applications in both the U.S. and China, and has won the
global independent intellectual property rights, marking that the Company’s independent R&D has
entered a new stage. HDM1005 and HDM2005 projects have successfully obtained PCC modules,
especially HDM1005 that successfully obtained PCC molecules in less than one year since it was
initiated, showcasing great innovation strength of Huadong Medicine and marking the rapid increase
of its independent R&D ability. To date, the Company’s Innovative Medicine R&D Center has
claimed a total of over 80 patent applications, including 18 formal and PCT patent applications.
Moreover, the Company won the honor of “Pioneering Innovation Team” of Zhejiang Province
in 2021 and obtained the fund under Zhejiang Province’s Pioneer Scientific and Technology Program
in 2022, which provide support for the establishment and operation of the Huadong Medicine
Innovation and Development Union Fund of Zhejiang Natural Science Foundation. Meanwhile,
HDM1002, TTP273 and some other programs were all awarded prizes for scientific and technological
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
projects at the provincial and/ or municipal level. Being funded by the “Special Program for High-
quality Development of Bio-pharmaceutical Industry in Hangzhou”, Mefatinib successfully imports
“Hangzhou 115” overseas intelligence.
(4) Progress of development of key innovative medicines, innovative medical apparatuses
and clinical researches of biosimilar projects
As of the date of the Report, progresses of the Company’s development of key innovative
medicines, innovative medical apparatuses, and clinical researches of biosimilar projects are as
follows:
Endocrine metabolism
The application on IND of HDM1002, a micromolecule GLP-1 receptor agonist independently
developed by the Company, has been submitted in China in February 2023, which will be submitted
in the U.S. in April 2023.
Liraglutide Injection, a GLP-1 receptor agonist, has had its marketing authorization application
for diabetes indications approved by NMPA in March 2023. Its marketing authorization application
for obese or overweight applications was accepted in July 2022, and is expected to be approved in
2023.
Semaglutide Injection, a GLP-1 receptor agonist, has now completed the administration and
follow-up of all subjects in phase I clinical trial.
The Investigational New Drug Application (IND) of Insulin Degludec Injection has obtained the
notification of approval for clinical trial in September 2022, and its administration of all subjects in
phase I clinical trial has been completed yet.
HDM7003 (D-4517.2) is a product under joint development by the Company and its joint stock
company Ashvattha Therapeutic, Inc. based in the U.S. In September 2022, Ashvattha announced that
it has completed the enrollment of the first subject of phase II clinical trial of the product in the U.S.
for the treatment of wet age-related macular degeneration and diabetic macular edema.
The Company is carrying out preclinical study of HDM1005, a GLP-1R and GIPR long-acting
polypeptide dual-target agonist used for treating diabetes, obesity and other diseases.
DR10624 is a GLP-1R/GCGR/FGF21R target multiple agonist developed by the Company’s
holding subsidiary Doer Biologics, which can be used for treating type 2 diabetes, obesity,
hyperlipidemia, etc. It was approved to start its phase I clinical trial in New Zealand in April 2022
and the administration of the first subject was completed in June 2022.
Ranibizumab Injection has completed the enrollment of the first subject during phase III clinical
trial in March 2022.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Oncology
ELAHERE (mirvetuximab soravtansine-gynx, R&D code: IMGN853, HDM2002): it has
completed the enrollment of all subjects for PK medicine metabolic study during phase I clinical trial
in China in July 2022. In November 2022, ImmunoGen, the American partner of the Company,
announced that ELAHERE was accelerated approved by the FDA. It is the first ADC medicine
approved by the FDA for platinum-resistant ovarian cancer, which is used to treat adult patients with
platinum-resistant ovarian epithelial cancer, fallopian tube cancer or primary peritoneal cancer who
are folate receptor α (FRα) positive and have previously received 1-3 systemic therapy. The product
completed the enrollment of all subjects for phase III single-arm clinical trial in China in December
2022, with its pre-BLA submitted in March 2023. It is planned to submit the BLA within 2023. In the
future, the Company and its partner will keep advancing its application in front-line treatment of
ovarian cancer via clinical studies, and support to use ELAHERE as the preferred medicine
combination for treatment of ovarian cancer.
Mefatinib Tablets are used for treating advanced non-small cell lung cancer. Currently, the
overall enrollment of subjects for phase III clinical trial has been completed, and it is expected that
the NDA application will be started after the PFS events of phase III study are obtained in the second
quarter of 2023.
DR30303, a product under development of Doer Biologics and targeted medicine Claudin 18.2
for the treatment of solid tumor, obtained the notification of approval for clinical trial in January 2022,
and successfully completed the enrollment and administration of the first subject in phase I clinical
trial in May 2022.
HDP-101 is an ATAC (Antibody-Amanita Conjugate) targeting at B-cell maturation antigen.
Heidelberg Pharma, the Company’s Germany partner, is currently carrying out overseas phase I/IIa
clinical trials of the product for the treatment of relapsed/refractory multiple myeloma, with the
administration for the first subject completed in February 2022.
HDP-103 is an ATAC medicine targeting at prostate-specific membrane antigen (PSMA).
Heidelberg Pharma, the Company’s Germany partner, is currently carrying out preclinical research
on this product, with metastatic castration-resistant prostate cancer (mCRPC) as its target indication.
HDM2003 (AB002) is a kind of dual-target fusion protein targeting at PD-L1/L2 and IL15 co-
developed by the Company and AKSO in the U.S., which is used for the treatment of solid tumor. It
is now under preclinical study.
HDM2005, an ADC product independently developed by the Company, is used for the treatment
of solid and hematologic tumors, and is now under preclinical study.
Autoimmunity
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
ARCALYST (Rilonacept): It is a kind of recombinant dimer fusion protein, which can block
the signal transduction of IL-1α and Il-1β. It was introduced by the Company through a cooperation
agreement with Kiniksa in February 2022. ARCALYST has been approved in the U.S. for the
treatment of Cryopyrin-Associated Periodic Syndromes (CAPS), Deficiency of Interleukin-1
Receptor Antagonist (DIRA) and recurrent pericarditis in 2008, 2020 and 2021 respectively. Being
listed as Overseas New Medicine in Urgent Need for Clinical Purpose (First Batch) by CDE,
ARCALYST is used for the treatment of Cryopyrin-Associated Periodic Syndromes (CAPS). In
July 2022, the Company submitted a Pre-BLA for CAPS indications of this product to CDE, with
feedback received. The Company plans to formally submit the BLA for such indication in China in
2023. Moreover, the Company is carrying out an epidemiological survey of recurrent pericarditis in
China, and will determine the scheme for product registration according to the survey results.
HDM3001 (QX001S), a biological similar of Ustekinumab (Stelara), is a product under
development by the Company in cooperation with Qyuns Therapeutics, which is used for the
treatment of moderate and severe plaque psoriasis of adults. In February 2022, the enrollment of all
subjects in phase III clinical trial was completed ahead of schedule, with the main end point of the
study achieved. The BLA of the product is expected to be submitted in the third quarter of 2023.
HDM3002 (PRV-3279) is used for the treatment of systemic lupus erythematosus (SLE) and
prevention or reduction of the immunogenicity of gene therapy. Provention Bio, the Company’s
partner, is carrying out Iia clinical trials for SLE indications of the project in the U.S. and Hong Kong,
China. The Company submitted the IND in China in February 2023.
HDM5001 (OP-101) is a product under joint development by the Company and its joint stock
company Ashvattha Therapeutic, Inc. based in the U.S. Currently, the Company is exploring new
indications for the product and will submit IND in China after clear conclusion is drawn.
Mavrilimumab is a fully human monoclonal antibody targeting at GM-CSFRα. The Company’s
partner Kiniksa is evaluating the relevant development plan for rare cardiovascular diseases.
Innovative pharmaceutical equipment
HD-NP-102 (Dynamic Monitoring System of Glomerular Filtration Rate and MB-102 Injection):
The Dynamic Monitoring System of Glomerular Filtration Rate and MB-102 Injection jointly
developed by the Company and MediBeacon, Inc of the U.S. can continuously measure the
glomerular filtration rate (GFR) of patients with normal or impaired renal functions by non-invasive
monitoring of the fluorescence emitted by MB-102 through intravenous injection. In July 2022,
NMPA formally accepted the pharmaceutical apparatus registration application for the system and is
now reviewing the application. The MB-102 injection (Relmapirazin) used in conjunction with this
system is a global innovative medicine that completed the enrollment of all subjects for international
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
multi-center phase III clinical trial in February 2023. The preliminary study results show that the main
research end point has been reached, and it is planned to submit the pre-NDA in China in April 2023.
The product is a combination of medicine and equipment in the U.S. and is expected to be approved
in the fourth quarter of 2023.
Pipeline Diagram of Main Innovative Medicines and Biosimilars as of the Date of the Report.
(5) Progress of development of major generic medicines
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
The Company further clarified the focused and prioritized varieties of existing generic medicines
under development by regularly organizing dynamic evaluation and analysis. As of the date of the
Report, key varieties are as follows:
S/N Field Item Specification Latest Progress
Approved to be launched by NMPA
1 Endocrine Canagliflozin Tablets 0.1g, 0.3g
in January 2023
Sitagliptin Phosphate and
Approved to be launched by NMPA
2 Endocrine Metformin Hydrochloride 50/850mg
in October 2022
Tablets
Pioglitazone Hydrochloride Application for launching submitted
3 Endocrine and Metformin 15/850mg and accepted in June 2022, and
Hydrochloride Tablets supplementary materials submitted.
Application for launching has been
submitted and accepted in April
4 Immunity Tacrolimus Ointment 0.03%, 0.1%
2022, and supplementary materials
have been submitted.
Application for launching submitted
5 Immunity Tacrolimus Granules 1mg
and accepted in January 2023.
Application for launching of 5mg
version submitted and accepted;
Tacrolimus Sustained-
6 Immunity 5mg, 1mg, 0.5mg Applications for launching of 1mg
release Capsules
and 0.5mg versions submitted and
accepted in February 2023.
Approved to be launched by NMPA
7 Oncology Sorafenib Tosylate Tablets 0.2g
in November 2022.
Application for launching submitted
8 Oncology Olaparib Tablets 100mg, 150mg
and accepted in October 2022.
9 Oncology Ibrutinib Capsules 140mg Pilot-scale study completed
Supplementary materials have been
10 Angiocarpy Macitentan Tablets 10mg
submitted.
(6) Progress of international registration
The Company has actively conducted its international registration tasks. As of the date of the
Report, main progress is as follows:
S/N Field Item Remarks Latest Progress
Supplementary materials for registration in
1 Endocrine Acarbose APIs India submitted in May, June and October
2022, and January and March 2023.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
DMF application in new venue in the U.S.
2 Immunity Tacrolimus APIs
completed in January 2022.
Supplementary materials for ANDA
Tacrolimus
3 Immunity 0.5mg, 1mg, 5mg application (the U.S.)submitted in April and
Capsules
December 2022, and January 2023.
DMF application in the U.S. completed in
4 Oncology Exatecan Mesylate Intermediate
January 2022.
DMF application in the U.S. completed in
5 Oncology Maytansine DM1 Intermediate
July 2022.
DMF application in new venue in the U.S.
6 Anti-infection Daptomycin APIs
completed in January 2022.
Supplementary materials for DMF
7 Anti-infection Mupirocin Calcium APIs application (the U.S.) submitted in March
2022.
Approved to be registered in India February
8 Anti-infection Mupirocin APIs
2023.
Caspofungin Supplementary materials for ANDA
9 Anti-infection Acetate for 50mg, 70mg application (the U.S.) submitted in May
Injection 2022.
Supplementary materials for CEP
application in Jiangdong submitted in
Polymyxin B
10 Anti-infection APIs September 2022.
Sulfate
Approved to be registered in India February
2023.
N1-Methyl-
DMF application in the U.S. completed in
11 RNA vaccine Pseudouridine-5'- Intermediate
December 2022.
Triphosphate
Supplementary materials for registration in
Fondaparinux
12 Anticoagulant APIs Taiwan, China submitted in March and
Sodium
September 2022, and March 2023.
2.5 mg/0.5 mL, 5 Supplementary materials for ANDA
Fondaparinux mg/0.4 mL, 7.5 application (the U.S.) submitted in August,
13 Anticoagulant
Sodium Injection mg/0.6 mL, 10 October and December 2022, and February
mg/0.8 mL 2023.
Traditional
Approved to be launched in Singapore in
14 Chinese Bailing Capsule 0.5g
September 2022.
Medicine
(7) Progress of consistency evaluation
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
As of the date of the Report, the progress of consistency evaluation on quality and efficacy of
Company’s generic medicines is as follows:
S/N Field Item Specification Latest Progress
The notification of approval for
Paracetamol and Tramadol supplementary application of
1 Easing pain 325mg: 37.5mg
Hydrochloride Tablets consistency evaluation obtained in
November 2022.
Application for consistency
evaluation of 1mg version submitted
and accepted in June 2022;
2 Immunity Tacrolimus Capsules 1mg, 0.5mg Application for consistency
evaluation of 0.5mg version
submitted and accepted in February
2023.
Application for consistency
Pantoprazole Sodium
3 Gastroenterology 40mg evaluation submitted and accepted in
Enteric-Coated Capsules
June 2022.
Application for consistency
4 Angiocarpy Indobufen Tablets 0.2g evaluation submitted and accepted in
March 2023.
Application for consistency
20ml:60mg,
5 Angiocarpy Adenosine Injection evaluation submitted and accepted in
30ml:90mg
October 2022.
(8) Progress of registration and commercialization of aesthetic medicine products
S/N Type Product Name Purpose Latest Progress
Enrollment of all subjects for clinical
MaiLi Extreme
1 Injections Facial filling trial in China completed in December
Hyaluronic acid
2022 and follow-up in progress.
Enrollment of all subjects for clinical
2 Injections Ellansé-M Facial filling trial in China completed in March 2023
and follow-up in progress.
Perfectha
3 Injections Diphasic hyaluronic Facial filling Preparing for registration in China.
acid
Enrollment of some subjects in clinical
4 Thread lifting Silhouette Instalift Mid-face lifting trial in China completed, and follow-
ups of various time nodes in progress.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Removing benign
Energy based Testing for registration in China in
5 Glacial Rx (F1) pigmented lesions
device progress.
of skin, etc.
Energy based Testing for registration in China in
6 Primelase Depilation
device progress.
Skin compactness,
body and facial
Energy based V series products Testing for registration in China in
7 shaping, skin
device (V20, V30) progress.
rejuvenation,
depilation, etc.
Scar repair, facial
Energy based Testing for registration in China in
8 EnerJet lifting, dermal
device progress.
thickening, etc.
Commercial marketing achieved in
European, American and other key
aesthetic medicine markets successively
Energy based Facial skin in September 2022.
9 Préime DermaFacial
device management Device attribute identification in
progress in China; matching cosmetics
approved for registration in December
2022.
Body and facial Change of agent in China approved in
Energy based
10 Reaction shaping, skin August 2022; products to be launched
device
compactness again.
Energy based Body shaping and Launched in Europe in the first quarter
11 Sculpt&Shape
device facial rejuvenation of 2023.
The Company’s V version and X version of poly-L-lactic acid (PLLA) collagen stimulant Lanluma
obtained the approval from Hainan Medical Products Administration that Lanluma can be used in
Boao Lecheng International Medical Tourism Pilot Zone as an urgent imported medical device for
clinical purpose. In addition, the Company is advancing the application for franchise rights of
Silhouette and Ellansé series products in Boao Lecheng International Medical Tourism Pilot Zone.
(9) Progress of patents
In recent years, the Company attached great importance to the protection of intellectual property and
the commercialization and application of achievements, and the number of patent applications and
authorization were steadily increased. Over the years the Company applied for 1,136 patents at home
and abroad, including 404 authorized invention patents. Hangzhou Zhongmei Huadong
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Pharmaceutical Co., Ltd., the Company’s wholly-controlled subsidiary, is a national intellectual
property demonstration enterprise. In November 2014, it passed the external audit of Zhongzhi
(Beijing) Certification Co., Ltd., becoming one of the first 147 companies that passed the standards
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.
A total of 151 patents were applied and submitted, among which 88 were invention patents and 69
were authorized.
Increase during the reporting period Total quantity
Patent type Number of patents Number of patents Number of patents Number of patents
applied for (unit) received (unit) applied for (unit) received (unit)
Invention patent 88 30 931 404
Utility patent 56 35 171 150
Appearance design
7 4 34 25
patent
Total 151 69 1136 579
Note: Data in the above table represent the statistical patent information of main subsidiaries engaging in the
pharmaceutical industry, industrial microbiology and aesthetic medicine within the Company’s consolidated
statements.
R&D personnel of the Company
2022 2021 Percentage change
Number of R&D personnel (person) 1,543 1,285 20.08%
Proportion of R&D personnel 13.13% 12.92% 0.21%
R&D personnel structure by education
Bachelor 735 632 16.30%
Master 471 411 14.60%
PhD 64 59 8.47%
R&D personnel structure by age
<30 502 458 9.61%
30-40 811 628 29.14%
>40 230 199 15.58%
R&D investment of the Company
2022 2021 Percentage change
R&D investment amount (yuan) [Note] 1,196,309,461.22 962,881,963.61 24.24%
Proportion of R&D investment in operating
10.72% 9.52% 1.20%
revenue
Capitalized R&D investment amount (yuan) 227,794,420.14 0.00
Proportion of capitalized R&D investment
19.04% 0.00% 19.04%
in R&D investment
Note: The above R&D investment is from the direct R&D expenses of the Company’s main industrial controlled subsidiary, which is
mainly used for clinical research of products under research, the upgrade of existing product process, expenses for commissioned
technological development, consistency evaluation and international registration certification.
During the reporting period, the Company’s R&D investment in the pharmaceutical industry was RMB2,681 million, up by 44.8%
year-on-year, among which the direct R&D expenses were RMB1,196 million, increasing by 24.2% year-on-year, and the investment
in product introduction and R&D equity was RMB1,484 million.
The proportion of R&D personnel means the proportion of the number of employees in the Company’s subsidiaries mainly engaging
in R&D and manufacturing of the pharmaceutical industry and industrial microbiology.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
The proportion of R&D investment in operating revenue means the proportion of the direct R&D expenses of Company’s
pharmaceutical industry in the operating revenue of the Company’s pharmaceutical industry.
Reasons and impacts of major changes in the composition of R&D personnel
□ Applicable √ N/A
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
Year-on-year percentage
Item 2022 2021
increase/decrease
Cash inflows from operating activities 40,637,718,289.85 38,296,617,059.25 6.11%
Cash outflows for operating activities 38,255,865,621.25 35,126,859,191.30 8.91%
Net cash flow from operating activities 2,381,852,668.60 3,169,757,867.95 -24.86%
Cash inflows from investing activities 121,638,643.17 251,785,859.22 -51.69%
Cash outflows for investing activities 2,557,236,232.75 2,238,468,503.37 14.24%
Net cash flow from investing activities -2,435,597,589.58 -1,986,682,644.15 -22.60%
Cash inflows from financing activities 5,149,368,399.06 2,264,348,880.01 127.41%
Cash outflows for financing activities 5,249,078,772.19 3,031,802,182.50 73.13%
Net cash flow from financing activities -99,710,373.13 -767,453,302.49 87.01%
Net increase in cash and cash
-163,229,935.84 422,733,564.91 -138.61%
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 RMB120 million, a decrease of
51.69% compared with that in the same period last year (RMB250 million), mainly due to the disposal
of Ningbo Donghai Bank’s equity in the same period last year.
The net cash flow from financing activities in the current period is RMB-99.71 million, an increase
of 87.01% compared with that in the same period last year (RMB-770 million), mainly due to the
increase in interest-bearing debt.
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
V. Analysis of non-main business
√ Applicable □ N/A
Unit: RMB yuan
Proportion in total
Amount Note on reasons Sustainable or not
profit
Mainly due to long-
term equity investment
Investment gains -141,560,034.56 -4.67%
gains measured at
equity method
Gains and losses from
28,469,286.61 0.94% No
changes in fair value
Asset impairment
-3,821,625.15 -0.13%
losses
Non-operating revenue 7,608,417.78 0.25% No
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Non-operating
37,938,443.03 1.25% No
expenses
Mainly due to the
confirmation of
Other gains 92,781,468.16 3.06% No
government grants in
the current period
Gains on asset disposal 8,257,595.43 0.27% No
VI. Assets and liabilities
1. Major changes in asset composition
Unit: RMB yuan
End of 2022 Beginning of 2022
Change of Note on major
Proportion in Proportion in proportion changes
Amount Amount
total assets total assets
Monetary funds 3,996,302,178.41 12.81% 4,032,424,555.22 14.94% -2.13%
Accounts
7,198,746,788.59 23.08% 6,430,482,175.97 23.82% -0.74%
receivable
Inventories 4,495,483,328.54 14.41% 3,974,549,648.96 14.72% -0.31%
Real estate
properties for 13,648,240.14 0.04% 14,569,533.94 0.05% -0.01%
investment
Mainly due to
Long-term the investment
equity 1,659,076,538.78 5.32% 984,927,398.68 3.65% 1.67% in Herdelberg
investments in the current
period
Mainly due to
the transfer of
Fixed assets 3,981,653,265.52 12.76% 3,077,227,759.84 11.40% 1.36% construction in
process to fixed
assets
Mainly due to
Constructions
873,159,427.47 2.80% 1,582,125,201.25 5.86% -3.06% the transfer to
in progress
fixed assets
Right-of-use
166,505,297.17 0.53% 153,724,197.81 0.57% -0.04%
assets
Mainly due to
the decrease in
Short-term short-term
947,516,383.37 3.04% 1,237,843,228.13 4.59% -1.55%
borrowing borrowing in
the current
period
Contract
146,488,489.07 0.47% 118,341,141.48 0.44% 0.03%
liabilities
Mainly due to
the increase in
Long-term long-term
1,051,457,747.44 3.37% 139,178,905.04 0.52% 2.85%
borrowing borrowing in
the current
period
Lease liabilities 84,610,324.98 0.27% 80,889,403.39 0.30% -0.03%
Other non-
1,037,279,933.15 3.33% 911,062,879.83 3.37% -0.04%
current assets
Foreign assets account for a relatively high proportion
□ Applicable √ N/A
2. Assets and liabilities measured at fair value
√ Applicable □ N/A
Unit: RMB yuan
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Gain/loss Accumulated Depreciation
Selling
Amount at the from fair fair value reserves Purchase Amount at the
amount in Other
Item beginning of value changes changes withdrawn amount in the end of the
the current changes
the period in the current recognized during the current period period
period
period in equity period
Financial assets
2. Derivative
financial 28,469,286.61 29,907,470.68
assets
4. Other
equity
257,815,844.68 6,804,247.45 1,922,980.47 100,052,217.85 9,847,061.33 360,910,876.41
instrument
investments
Total 257,815,844.68 21,665,039.16 1,922,980.47 100,052,217.85 9,847,061.33 390,818,347.09
Financial
0.00 0.00
liabilities
Other changes
Changes in exchange rate
Whether there are significant changes in the main asset measurement attribute of the Company during the reporting period.
□Yes √No
3. Limitation of asset rights at the end of the reporting period
Book value at the end
Item Reason for limitation
of the period
Certificate of deposit and cash deposit that cannot be
Monetary funds 579,391,476.08
withdrawn at any time
Accounts receivable for
7,724,981.86 Bill pledge
financing
Intangible assets 52,782,210.00 Land use rights mortgaged for bank loans
Total 639,898,667.94
VII. Investment
1. Overview
√ Applicable □ N/A
Investment amount in the reporting Investment amount in the same period of
Percentage change
period (yuan) last year (yuan)
2,859,562,403.21 2,195,588,789.55 30.24%
2. Significant equity investments acquired during the reporting period
√ Applicable □ N/A
Unit: RMB yuan
Progress as Profit or loss of Involved
Name of Disclosure
Way of Investment Shareholding Capital Term of Product of the Projected investment in in
invested Main business Partner date (if Disclosure index (if any)
investment amount ratio source investment type balance income the current litigation
company any)
sheet date period or not
Equity
Capital Equity
Heidelberg R&D of anti- funds + February Cninfo
increase + 77,940.45 [Note] 35.00% None Long term Equity settlement -15,641,114.82 No
Pharma AG cancer ADCs external 28, 2022 (http://www.cninfo.com.cn)
acquisition completed
financing
Development,
production and
Wuhu Huaren
sales of Capital Equity
Science and Equity August 10, Cninfo
nucleosides, increase + 396,000,000.00 60.00% None Long term Equity transfer 10,645,547.22 No
Technology funds 2022 (http://www.cninfo.com.cn)
nucleotides and acquisition completed
Co., Ltd.
medical
intermediates of
61
The 2022 Annual Report of Huadong Medicine Co., Ltd.
new-generation
antiviral drugs
Anhui Meihua
Pharmaceutical Equity
Hi-Tech Equity December Cninfo
and chemical Acquisition 108,000,000.00 100.00% / Long term Equity Investment -16,794,739.88 No
Pharmaceutical funds 29, 2021 (http://www.cninfo.com.cn)
manufacturing completed
Co., Ltd.
Total -- -- 504,077,940.45 -- -- -- -- -- -- / -21,790,307.48 -- -- --
Note: The RMB central parity on December 30, 2022 is adopted in conversion between RMB and EUR, that is, 7.4229.
3. Significant non-equity investments in progress during the reporting period
√ Applicable □ N/A
Unit: RMB yuan
Reasons
Cumulative for not
Cumulative
income meeting
Investment Industry Investment actual
realized by the Disclosure
Project Way of in fixed involved in the amount during investment Capital Project Projected
the end of planned date (if Disclosure index (if any)
name investment assets or investment the reporting amount by the source progress income
the schedule any)
not project period end of the
reporting and
reporting period
period projected
income
Huadong
Medicine
Biomedical
Science
Self-built Pharmaceutical Equity March 9, Cninfo
and Yes 29,539,771.98 1,783,105,544.66 98.60% 0.00 0.00 N/A (http://www.cninfo.com.cn)
project manufacturing funds 2017
Technology
Park
Project
Phase II
Huadong
Medicine
Life
Science
Self-built Pharmaceutical Equity April 21, Cninfo
Industrial Yes 187,932,882.31 268,776,670.28 77.00% 0.00 0.00 N/A (http://www.cninfo.com.cn)
project R&D funds 2021
Park
(Xiangfu
south plot)
project
Total -- -- -- 217,472,654.29 2,051,882,214.94 -- -- 0.00 0.00 -- -- --
4. Investment in financial assets
(1) Securities Investment
√ Applicable □ N/A
Unit: RMB yuan
Accumulate Selling
Gain/loss from Purchase Gain/loss
Initial Accounting Book value at d fair value amount Book value
Type of Stock Stock fair value amount in during the Accounting Capital
investment measurement the beginning changes in the at the end of
stock code abbreviation changes in the the current reporting item source
cost model of the period recognized current the period
current period period period
in equity period
Domestic
Other equity
and Fair value Equity
RAPT RAPT 20,207,400.00 14,461,751.62 -6,396,953.76 2,165,568.66 8,064,797.86 instrument
overseas measurement funds
investments
stock
Total 20,207,400.00 -- 14,461,751.62 -6,396,953.76 2,165,568.66 8,064,797.86 -- --
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)
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Note: Huadong Medicine Investment Holding (Hong Kong) Limited, a subsidiary of the Company, purchased 218,102 Series C-2
preferred shares of RAPT Therapeutics, Inc. in a total of USD3 million in 2018. RAPT Therapeutics, Inc. was listed on NASDAQ
exchange on October 30, 2019 (stock code: RAPT). As of the end of the reporting period, Huadong Medicine Investment Holding
(Hong Kong) Limited holds 60,500 shares in RAPT after it reduced its stake, accounting for 0.204% of the total shares of RAPT
Therapeutics, Inc.
(2) Derivatives investment
√ Applicable □ N/A
1) Derivatives investment for hedging during the reporting period
√ Applicable □ N/A
Unit: RMB ten thousand yuan
Proportion of
the
investment
Gain/loss
Accumulated Purchase Selling amount at the
Initial from fair
fair value amount amount Amount at end of the
Type of derivatives investm value
changes during the during the the end of period in the
investment ent changes in
recognized in reporting reporting the period net assets of
amount the current
equity period period the Company
period
at the end of
the reporting
period
Currency swap 0 2,846.93 0 0 0 2,990.75 0.16%
Total 0 2,846.93 0 0 0 2,990.75 0.16%
Note on accounting
policies and specific
principles of accounting
concerning hedging Relevant accounting process is applied into currency swap, in accordance with the Accounting
business during the Standards for Enterprises No. 22 - Recognition and Measurement of Financial Instruments and the
reporting period, and Accounting Standards for Enterprises No.37 - Presentation of Financial Instruments as well as their
whether they change application guides. There is no currency swap at the end of the previous reporting period.
significantly when
compared with that in the
previous reporting period
Note on the actual gains
Gains and losses from changes in fair value arising from currency swap for hedging are
and losses during the
RMB28,469,300 during the reporting period.
reporting period
The Company carries out foreign currency hedging business based on specific situations, which is
Note on the effect of
based on normal production and operations and can effectively reduce risks on the foreign currency
hedging
market. Risks facing the Company under control are bearable.
Capital source of
External financing
derivatives investment
Risks: 1. Market risks: The interest rate, exchange rate and other prices on the market may fluctuate
due to changed domestic and overseas economic policies and situations, thus changing the price of
financial derivative instruments and causing losses.
2. Liquidity risks: Transactions fail to be completed due to the market lacking liquidity and counter-
parties.
3. Operational risks: Trading financial derivative instruments requires experts who can deal with
Note on the risk analysis complexity, which may cause operational risks due to traders or managers thinking there is an error
and control measures for or system failure and out of control.
derivatives holding during 4. Contractual risks: Contracts on financial derivative business expire, some of which cannot be
the reporting period performed on time, and thus they are breached.
(including but not limited 5. Legal risks: Relevant legal changes lead to a contract that is not in conformity with local laws, so
to market risks, liquidity that the contract cannot be performed, or contractual terms are omitted and unclear; or losses are
risks, credit risks, caused to the Company due to the counter-party violating relevant laws and regulations, and thus the
operational risks and legal contract cannot be performed as required.
risks) Measures: The Company and its wholly-controlled subsidiaries avoid speculation and arbitrage when
trading financial derivatives, so that strict risk control will be employed during the execution of
contracts concerning financial derivatives trading.
1. The Company strictly abides by prudent investment principles, selects prudent investment types,
and makes investments within the amount approved by the Board of Directors.
2. The Company carefully selects counter-parties for trading, and only trades derivatives with
financial institutions featuring robust operations, sound reputation and business license for financial
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
derivative trading. The Company may resort to external professional investment and legal service
institutions if necessary to provide consulting services for the Company’s financial derivative
trading, as well as scientific and precise investment strategies and suggestions.
3. The Company has formulated the Management Rules for Securities Investment and Derivative
Trading, setting detailed rules on the management, supervision and information closure related to the
Company’s derivative trading principles, scope, decision-making authority and capital use, which
can effectively prevent investment risks. Besides, the Company will strictly implement related
management rules, assign special personnel to follow up on the progress of financial derivative
trading. For instance, relevant measures shall be taken in time to control investment risks if there are
risks that may affect the Company’s capital safety
4. The Company’s audit department is in charge of monitoring and checking the execution of
financial derivative trading and reporting to the Audit Committee of the Board of Directors.
In case of changing
market prices or fair
values of invested
derivatives during the
reporting period, the
Please refer to “Disclosure of fair value” in the “Financial Report” for details when the derivatives
analysis of the
are measured at fair value on the market.
derivatives’ fair values
shall disclose the specific
methods adopted, relevant
assumptions and
parameter settings.
Litigation (if applicable) N/A
Date of announcement of
the Board of Directors on
August 10, 2022
derivatives investment
approval (if any)
Date of announcement of
the Board of Shareholders
N/A
on derivatives investment
approval (if any)
The Company invests in derivatives for the avoidance of market fluctuation risks and hedging, which
Specific opinions of
is closely associated with daily operation requirements. The Company has formulated the
independent directors on
Management Rules for Securities Investment and Derivative Trading and enhanced trading risk
the Company’s
management and control, which contributes to the avoidance and control of operational risks,
investments in derivatives
improving the Company’s capability to withstand market risks. No loss is caused to the Company
and risk control
and all shareholders.
2) Derivatives investment for speculation during the reporting period
□ 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.
VIII. 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
IX. Analysis of controlling 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%
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Unit: RMB yuan
Company Company Main Registered
Total assets Net assets Operating revenue Operating profit Net profit
name type business capital
Production
and
management
of
Hangzhou Traditional
Zhongmei Chinese and
Huadong Subsidiary Western raw 872,308,130 12,911,135,442.97 9,519,547,715.67 11,161,695,120.79 2,428,349,735.69 2,125,033,445.39
Pharmaceutical medicines
Co., Ltd. and
preparations,
and health
care
products
Wholesale
of TCM
materials,
Huadong
TCM
Medicine
Subsidiary decoction 61,300,000 1,400,835,496.42 310,621,802.96 3,160,259,991.28 52,674,575.56 38,004,820.83
Wenzhou Co.,
pieces,
Ltd.
chemical
preparations,
etc.
Huadong
Medicine
Warehousing
Supply Chain
Subsidiary and storage 50,729,863 395,354,452.41 169,298,303.29 205,379,718.28 28,540,229.16 19,685,980.52
Management
services
(Hangzhou)
Co., Ltd.
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
Industrial platform of industrial
Huaren Science and Technology Equity acquisition, capital increase
microbiology
Anhui Huayoulai Pharmaceutical Science Industrial platform of industrial
Equity acquisition, capital increase
and Technology Co., Ltd. microbiology
Industrial platform of industrial
Meihua Hi-Tech Equity acquisition
microbiology
International BD of the Company’s
Viora Ltd Equity acquisition
energy based aesthetic devices
International BD of the Company’s
Viora Inc. Equity acquisition
energy based aesthetic devices
International BD of the Company’s
Viora Canada Ltd Equity acquisition
energy based aesthetic devices
Technological platform of
Hangzhou Weizhi Biotechnology Co., Ltd. Newly established
microbiology
Industrial microbiology synthetic
Hangzhou Hizyme Biotech Co., Ltd. Newly established
biology technological platform
Ruian Huiren Health-care Co., Ltd. Newly established Business Development
Information of major shareholding companies
X. Structured entities controlled by the Company
□ Applicable √ N/A
65
The 2022 Annual Report of Huadong Medicine Co., Ltd.
XI. Prospect of Future Development
(I) Prospect of macro-economy and trend of the pharmaceutical industry
The world has entered a new period of turbulence and change in 2022. The escalation of Russia-
Ukraine conflict threatens the global security pattern, further worsens the gloomy growth of global
economy, and pushes up global inflation, giving rise to secondary crises in many fields. The cold war
mentality and group politics re-surge, and the unilateralism disrupts the international order, bringing
severe challenges for global governance. The economic globalization remains hindered and the
extreme weather frequently afflicts the world. Internationally, protectionism is still prevalent and
international sanctions are escalating, bringing greater constraints for growth of international trade
and investment. The volatility in financial market is further aggravated due to continuously high
inflation and debt level. The shift of macro polices in the U.S. and Europe, and the U.S. Fed’s
aggressive interest rate hikes produced a global spillover effect, triggered capital outflows and
currency depreciation in developing countries, increased the pressure on the balance of payments,
and aggravated the risk of debt default. Meanwhile, the U.S. continuously exerts pressure on China’s
high-tech fields through export control and by other means, making the game between the U.S. and
China a new normal. In 2023, the world will face greater pressure and more uncertainties in economic
recovery.
In recent years, the global pharmaceutical technologies have witnessed continuous innovation
and the R&D speed of innovative targets has kept accelerating. Large multinational pharmaceutical
companies further increase their input in innovative biomedicine. AI, an important driving force for
the improvement of R&D efficiency of new medicines, is penetrating to all aspects of new medicine
R&D at a rapid speed. IQVIA data shows that the global medicine expenditures were about 1.48
trillion US dollars in 2022 (excluding vaccines and therapy-related expenses), and it is estimated that
the global medicine expenditures will reach 1.9 trillion US dollars in 2027, with a compound annual
growth rate (CAGR) of 3~6%. Main factors driving the growth include: the contribution of new
medicines, the impact of expiration of patents, and the growing impact of biosimilars. The key growth
area in the next five years is biomedicine that accounts for 35% of the global expenditures. In addition,
the global cumulative expenditures on biosimilars will exceed 290 billion US dollars by 2027, easing
the budgetary pressure on the overall expenditures by payers. By 2027, the CAGRs of the world’s
top two therapeutic fields - anti-tumor medicines and immune system medicines - will increase by
13~16% and 3~6% respectively. The main reason for difference in growth rate lies that the anti-tumor
field is still driven by new medicines and about 100 new therapies are expected to emerge in the anti-
tumor field within five years, while the immune system field will face competition from biosimilars.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
By 2027, the expenditure on diabetes will reach about 168 billion US dollars, being expected to be
the world’s third largest treatment field. The growth rate in the next five years is expected to reach
3~6%.
As estimated by IQVIA, the medicine expenditure in China was about 166 billion US dollars in
2022. Over the past five years, the CAGR of RLD in China was as high as 10.1%, becoming the most
important driving factor that promotes the growth of medicine expenditure. In 2022, RLD accounted
for 28% of the total medicine expenditure, higher than 22% five years ago. In the next five years, it
is expected that the update of China’s medical insurance reimbursement list will promote more newly
launched RLDs to be included in the medical insurance, promoting higher expenditure scale. It is
estimated that the CAGR of RLD will exceed 5% in the next five years, while the CAGR of other
medicines will not exceed 4%, slowing down the total growth rate to 2~5%. Non-RLD brand
medicines are the second largest part of medicine expenditures in China. It is estimated that these
medicine expenditures will increase by less than 1% each year due to cost control of hospitals. In the
coming five years, China’s medicine expenditure is expected to increase by about 30 billion US
dollars, and will exceed 194 billion US dollars by 2027.
(II) Industrial development trend
1. Pharmaceutical industry in China
The pharmaceutical manufacturing industry is a strategic industry that matters the national
economy and people’s livelihood, economic development, and national security. As one of the
powerful pillars of China’s economy, the pharmaceutical industry has experienced three years of
market adjustment and development, and once again ushered in an opportunity for development. It
will become an important impetus and guarantee for strengthening China’s endogenous cycle.
Looking back on 2022, the pharmaceutical industry experienced a cold winter of capital: the
primary and secondary markets of the pharmaceutical industry was seriously threatened due to capital.
Its primary and secondary markets became gloomy simultaneously. As the valuation bubble of
pharmaceutical enterprises began to fade, the industry gradually returned to rationality in
development. Meanwhile, independently developed innovative medicines are approved at an even
faster speed and more innovative medicines are launched successively. High-quality substitution of
domestic medicines has become the key word. As series of innovative medicines are launched
successively, the substitution progress of some domestic medicines in segment tracks sped up in 2022,
with obvious improvement in the quality of substitution.
In 2022, the proportions of R&D pipelines of Chinese pharmaceutical enterprises and emerging
biopharma companies (EBP) in China continued to rise even though the financing of the
pharmaceutical industry was negatively impacted. According to the relevant report by IQVIA
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Institute, emerging biopharma companies in China currently own 20% of the global EBP pipelines,
which is higher than 9% five years ago and also higher than Chinese companies’ share of the global
total pipelines (15%). The EBP pipeline in China has the strongest growth compared with that of
other regions, up 19% over the past year.
China’s innovative medicines once were all fast-follow ones. However, as innovative medicine
R&D is continuously iterated, more and more medicines have achieved me-better and even first-in-
class in efficacy. Statistics show that the total transaction amount of innovative medicines/ new
technologies license out in China reached 17.42 billion US dollars in 2022, setting a new high and up
22.80% year on year. The number of transactions reached 48, up 14.29% year on year. There were 7
transactions with a total amount of over 1 billion US dollars, indicating the gradual recognition of
China’s local R&D strength by overseas enterprises and its continuously improved R&D quality.
From the demand side, there will be obviously more medical needs for senile and chronic
diseases due to obvious trend of population aging in China, and a large number of unsatisfied clinical
needs are the driving force for the innovation and development of the pharmaceutical industry. In
addition, upgraded consumption will drive the growing demand for aesthetic medicine,
ophthalmology, dentistry and other medical care consumption scenarios. From the payment end, the
proportion of health expenditures to GDP in China can still be improved. As the per capita income of
residents is still rising and the coverage of medical insurance keeps expanding, the overall scale of
the pharmaceutical industry in China witnesses continuous growth and the long-term positive
development trend of the industry remains unchanged.
In 2021, the National Healthcare Security Administration released the Three-Year Action Plan
for the Reform of DRG/DIP Payment Methods, requesting that all regions in China under unified
coordination must implement DRG or DIP within 3 years. The efficiency of medical insurance funds
will be effectively improved by establishing applicable and efficient payment management, incentive
and constrain mechanism for medical institutions, which will impose overall impact on the
development orientation and operation management of hospitals.
In 2022, the relevant state ministries and commissions issued varieties of the Fourteenth Five-
Year Plans related to the pharmaceutical industry under the guidance of the China’s Fourteenth Five-
Year Plan in combination with the changes of current economic situations at home and abroad,
including the Fourteenth Five-Year Plan for the Development of the Pharmaceutical Industry, the
Fourteenth Five-Year Plan for the Development of the Traditional Chinese Medicine, the Fourteenth
Five-Year Plan for the Development of the Bio-economy, the Fourteenth Five-Year Plan for National
Health, the Fourteenth Five-Year Plan for Network Security and Informatization Construction of
Drug Supervision, the Fourteenth Five-Year Plan for Health Talents Development, and the Fourteenth
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Five-Year Plan for National Health Informatization, etc. The release and implementation of the
aforesaid plans will play an important role in standardizing and leading the high-quality development
of the medical and pharmaceutical industry.
The year of 2022 witnessed the massive development of the traditional Chinese medicine
industry. As policies for examination and approval of new traditional Chinese medicines have been
continuously revised and optimized in recent years, the R&D of innovative traditional Chinese
medicines keep warming up. It is clearly proposed in the report of the 20th CPC National Congress
to promote the inheritance and innovation of traditional Chinese medicine. Therefore, more focus is
placed on innovation. Various supporting policies for the traditional Chinese medicine industry in
China indicate that the Chinese government will not only gradually increase the input in the traditional
Chinese medicine industry and support the construction of the traditional Chinese medicine industry,
but also fundamentally protect the development of the traditional Chinese medicine enterprises,
which is conducive to the improvement of the level of the whole industry. It is estimated that the scale
of the traditional Chinese medicine industry will reach more than one trillion yuan by 2027.
In 2023, the pharmaceutical economy in China is expected to recover, but witnesses more
obvious trend of differentiation and transformation. Innovation is still the only way to realize the
dream of a nation with great power in medicine.
2. Aesthetic medicine
As China’s economy grows and its consumption upgrades, the aesthetic medicine industry in
China ushers in rapid development, with its market scale ranking the second globally. The
consumption medical industry represented by aesthetic medicine becomes one of the new points
driving the growth of consumption. The aesthetic medicine industry boasts great space for
development, but also faces increasingly fierce market competition. According to Frost & Sullivan’s
data, the market scale of the aesthetic medicine in China increased from 99.3 billion yuan in 2017 to
189.1 billion yuan in 2021 by service income, with a CAGR of 17.5%, which is much higher than
that of the global market. It is estimated that the market scale of the aesthetic medicine in China will
reach 226.7 billion yuan in 2022 and 638.2 billion yuan by 2030. The CAGR from 2021 to 2030 is
14.5%. The market scale of global aesthetic medicine market increased from 125.8 billion US dollars
in 2017 to 141.7 billion US dollars in 2021, with a CAGR of 3%. It is expected to reach 360.2 billion
US dollars by 2030, with a CAGR of 10.9% from 2021 to 2030. The future growth of the aesthetic
medicine market in China will lead the global aesthetic medicine market.
The growth rate of the aesthetic medicine market in China slowed down since 2020 affected by
multiple factors and witnesses recovery since 2023. It is expected that the market scale of the aesthetic
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
medicine in China will reach 410.8 billion yuan by 2025 (with a CAGR of 17.2% from 2021 to 2025).
The non-surgical (including injection filling and non-injection filling) aesthetic medicine market will
become the main aesthetic medicine market in China for its features of less risk, faster recovery, and
natural effect. In 2021, the market scale of non-surgical aesthetic medicine in China reached 97.7
billion yuan, with a CAGR of 24.94% from 2017 to 2021. It is estimated that the market scale will
rise to 227.9 billion yuan in 2025 (with a CAGR of 31.9% from 2021 to 2025).
The aesthetic medicine market in China boasts three characteristics as follows: (1) the
penetration rate in first-tier cities is much higher than that in other cities, and second- and third-tier
cities have great growth potential in the future; (2) different from other developed countries,
consumers aged 20 to 35 are the main consumers, with the highest penetration rate seen in consumers
aged 20 to 25; (3) the scale of aesthetic medicine users witnesses rapid growth. It is estimated that
there will be more than 23 million aesthetic medicine users in China by 2023.
The aesthetic medicine, a pure offline consumption scenario, features high viscosity and
relatively greater recovery elasticity. Sufficient market scale, increasingly enriched aesthetic
medicine products and advanced technologies will keep satisfy the needs of more patients, thus
becoming the core impetus for the development of the aesthetic medicine industry in China.
To standardize the development of the industry, China launched various centralized rectification
actions and many ministries successively issued the relevant policies and regulations in 2021. The
aesthetic medicine industry ushered in an era of strict supervision that has covered the upper middle
and lower reaches of the industry. The continuation of normalized supervision since 2022 is
conductive to facilitating the reshuffle of the industry, increasing the market concentration, and
promoting the compliant and healthy development of the industry. Leading aesthetic medicine
enterprises with strong brand effects will usher in a new growth space in a more fair competition
atmosphere.
(III) Innovative development strategies of various business segments of the Company
1. Development plan of the pharmaceutical industry
Upholding the main theme of development of innovative R&D, the Company takes innovative
medicines as the foundation and orientation for building core competitiveness in the future, closely
track the technological development and R&D dynamics of such frontier fields as biomedicine, gene
therapy, cell therapy and ADC medicines in and out of China, focuses on and gives priority to the
development of innovative medicines and high-technical barrier generic medicines with outstanding
clinical values for anti-tumor, endocrine, autoimmunity, and other major diseases and chronic
diseases, with differentiated and pioneering innovative medicine pipelines formed. In terms of
philosophy for development of R&D, the Company will deepen all-round foreign cooperation and
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
product introduction, inject new connotations into the long-term strategic plan of “digestion and
absorption”, and follow the innovative R&D idea of “self-research + introduction”. The Company
will continuously enrich its product lines, improve the medium- and long-term layout of innovative
products, keep maintaining the dual-wheel driving and coordinated development engines of power
and innovation for Huadong Medicine, build a global R&D strategic cooperation ecosystem centered
on Zhongmei Huadong. Moreover, the Company will continue to improve the ability in international
operation of products, and do well in external authorization of superior products, advanced
technologies and patents. During the scientific and technological innovation in the future, the
Company will benchmark with innovation and differentiation and grasp its basic orientation of
clinical values, focusing on the project promotion speed, as well as middle- and long-term pipeline
layout.
The Company will continue to increase its investment in R&D, continuously enrich and optimize
lines of core innovative products, endeavor to improve the proportion of annual R&D expenditure to
more than 10% of the sales revenue of the pharmaceutical industry, and constantly improve the
utilization rate of R&D funds. Moreover, the Company will endeavor to initiate and reserve at least
15 innovation projects (including medicines, medical apparatus, etc.) through independent initiation,
external introduction or by other means, so as to provide innovative products that supplement and
lead each of the existing product line and ultimately form rich product lines and favorable product
echelons. As a result, there will be a benign development rhythm that innovative products are
launched annually and the staged goal that the innovative business segment accounts for 30% of the
overall industrial revenue by 2025 can be achieved.
More efforts will be made to introduce top-notch talents to create high-level scientific research
teams. The Company will also create an innovative cultural atmosphere that encourages innovation
and success and bears failure, and enhance the construction of internal R&D system and technological
platforms. Another action is to build a scientific team with outstanding ability, open mind, great
passion and sense of responsibility that cherishes innovation to facilitate the landing of the
Company’s international innovation strategy. The Company will establish a dynamic evaluation
mechanism for R&D projects, set up an academic committee of external experts to assist the
Company in decision-making and management of R&D and product introduction, thus ensuring
scientific, advanced and feasible scientific innovation.
2. Development plan of the pharmaceutical business
With regard to the pharmaceutical business, the Company has vigorously consolidated its
foundation in Zhejiang Province and has been ranked top 10 pharmaceutical business enterprises in
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
China for consecutive years. To date, the Company has established 11 regional subsidiaries in
Zhejiang Province, with its customers distributed in 11 cities and 90 districts, counties and county-
level cities throughout Zhejiang Province. The Company has four business segments of Chinese &
western medicine, medical apparatus, medicine materials and ginseng & antler, and health industry
that cover the pharmaceutical wholesale & retailing, third-party medical logistics featuring cold
chain, medical e-commerce, hospital value-added services and featured massive health industry.
Further expanding the product agency and market development, the Company has formed the whole
industry chain from planting in bases to processing of prepared pieces, automatic decoction, own-
brand functional products for its traditional Chinese medicine industry. As the leader of
pharmaceutical business in Zhejiang Province, the Company focuses on forming the government
affairs, reserve, distribution and marketing abilities, established service platforms, and fostered the
competitive advantages of regional enterprises.
Following the operating philosophy of “value creation and service foremost”, the Company
places its focus on hospitals and further enhances its presence in external markets. The Company
keeps expanding the proportion of hospital businesses, while strengthening the coverage in external
markets. Focusing on the retailing in East China, the Company further improves the profitability of
its retailing business and establishes attractive platforms for introduction of varieties and acceptance
of prescriptions. More efforts are made to develop its agency businesses that have become the main
battle field for commercial transformation. “Xuguanghe” series products are promoted online to
further enrich its product portfolios. In addition, the Company spares no efforts to support the
supply chain to develop the third-party businesses and cold chain logistics, and optimize the
provincial logistics system featuring cold chain, thus building the first brand of pharmaceutical cold
chain in Zhejiang Province, expanding the market share of its high-end cold chain products, and
obtaining authorizations for more products. The Company will increase the proportion of high-
margin products and expand the coverage of apparatuses, ginseng and antler throughout Zhejiang
Province, actively explore business models of county-level medical institutions, cooperate with
subsidiaries to expand the business coverage starting with assisted decoction, and actively expand
the businesses of traditional Chinese medicine decoction pieces in various regions of Zhejiang
Province.
3. Development plan of the aesthetic medicine
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Upholding the domestic and international dual-circulation development strategy, the Company’s
aesthetic medicine business vigorously follows the strategy of “global operation layout and dual-
circulation operating development” by maintaining its good momentum of rapid development. With
its core subsidiary Sinclair as the global operating platform, the Company has achieved the global
layout of its aesthetic medicine and built itself into an international aesthetic medicine enterprises
with great space of development in the future. The Company successively introduces “aesthetic
medicine + biomedicine” products with great scientific connotation and huge market potential into
China, a special market of the Company’s aesthetic medicine businesses, thus expanding its presence
in China relying on its great registration and marketing abilities in China. Internationally, the
Company empowers the rapid launching and commercialization of its superior international products
relying on the Company’s aesthetic medicine marketing basis in China, as well as the aesthetic
medicine industry’s rapid development, thus fostering a new pattern features dual-circulation
coordinated development and mutual promotion of domestic and international businesses.
In the future, the Company will continue to focus on the high-end market of global aesthetic
medicine to form an international aesthetic medicine business integrating R&D, manufacturing and
marketing. The Company will further integrate its R&D resources and competencies, actively
optimize its product structure, enrich and improve the industrial layout based on its six global R&D
centers in UK, the Netherlands, France, Switzerland, Spain and Israel. Sinclair’s six global production
bases in the Netherlands, France, the U.S., Switzerland, Bulgaria and Israel will significantly
guarantee the international presence of the Company’s aesthetic medicine products and better satisfy
the demands for future development and diverse market needs.
4. Development plan of the industrial microbiology
Aiming at international development, the industrial microbiology segment will keep up with the
development trend of global industrial microbiology and synthetic biology industry and technologies,
and endeavors to become an industry leader in the field of industrial microbiology by building an
“industrialized, large-scale and international” industrial cluster. The industrial microbiology segment
is devoted to developing and manufacturing upstream raw material products in the fields of life
science, massive health and personal care, animal nutrition and healthcare based on microbiology
manufacturing and the relevant industrial technologies. In the field of life sciences, the Company’s
industrial microbiology segment focuses on the development and manufacturing of raw materials and
components of nucleic acid drugs, antibody-coupled drugs, high-value and new microorganism-
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derived medicines, and mainly arranges such business lines as nucleoside, antibody-coupled drug
toxins, highly active APIs (HPAPI), and lead compounds of innovative medicines from
microorganisms. In the field of massive health and personal care, the Company focuses on the
development and manufacturing of functional raw materials for healthcare products and cosmetics,
mainly involving functional raw materials for healthcare such as bone health, oxidation resistance, as
well as functional raw materials for cosmetics featuring moisturizing and whitening. In the field of
animal nutrition and healthcare, the Company mainly arranges such business lines as anti-parasitic
infection, anti-microbial infection, and animal nutrition raw materials. In addition, the Company
actively carries out R&D layout and business exploration in the development and application of living
microorganism medicines, pharmaceutical biomaterials and enzyme technologies.
(IV) Business Plan in 2023
Adhering to the philosophy of “high quality and efficiency”, Huadong Medicine will deepen the
industrial layout to achieve greater breakthrough in 2023. For the pharmaceutical industry segment,
the Company will continue to introduce mature varieties with clinical value, which can be quickly
listed or have been listed, to ensure steady growth of revenue; for the pharmaceutical business
segment, the Company will focus on value-oriented sales and strive to maintain a steady growth of
sales scale in line with the 2030 vision plan and the seventh three-year plan, thus realizing the
development goal of “high quality and efficiency”; for the industrial microbiology segment, the
Company will perfect the business layout, coordinate the internal resources, and strengthen the overall
allocation of marketing forces to make breakthrough in key businesses and actively support the
enterprise transformation and upgrading; for the aesthetic medicine segment, the Company will offer
high-end anti-aging and beauty solutions to patients and professionals, and dedicate to becoming a
leader in the aesthetic medicine industry.
In 2023, Huadong Medicine will focus on the following key tasks while maintaining steady
development of each segment: Adhere to the internationalization strategy through combining the
bring-in and going-out policies and making great efforts in international product registration,
cooperation with foreign enterprises and product expansion in the international market; adhere to the
innovation-driven transformation strategy through supporting the innovative businesses, such as
innovative medicine R&D, instruments & devices and Internet hospital construction, and optimizing
the dynamic evaluation mechanism of innovative R&D lines; actively fulfill the requirements of “high
quality and efficiency” through improving the operation level and per capita profit, and strengthening
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
the business thinking and sensitivity to business opportunities; strengthen the financial management
through maintaining the financial health and continuing to reduce the costs while keeping the steady
revenue growth; and follow the seventh three-year plan and 2030 vision plan through developing the
echelon plan of star products to create top varieties, ensuring the long-term sustained and stable
growth, and continuously providing effective strength for enterprise innovation and transformation.
1. Pharmaceutical industry
Adhering to the “scientific research-driven and patient-centered” corporate philosophy, the
Company continuously increases investments in R&D to enrich the layout of innovative medicine
R&D lines. In 2023, Huadong Medicine adds new innovative R&D connotation in the long-term
strategic plan of “digestion and absorption”, persists in the innovative R&D idea of “self-research +
introduction”, and maintains the coordinated development driven by the “power engine” and
“innovation engine”. “Innovation engine” is targeted to the clinical demand, keeping the Company at
the forefront of innovation. “Power engine” gives full play to existing technical accumulation and
advantages, and continuously supports the development of innovative R&D.
Firstly, strengthen the independent innovative R&D capability, clarify the innovative,
differentiated and iterative project establishment mechanism, center on innovation team to give full
play to Huadong Medicine’s advantages in ecological circle and quickly output self-developed results,
strengthen the management of introduced projects, and accelerate the listing process of clinical phase
III projects. Secondly, continue to introduce mature varieties with high clinical value and high
technical barriers, which can be listed quickly or have been listed, so as to ensure steady growth of
revenue. Thirdly, strengthen the marketing compliance transformation, especially to strengthen the
building of professional product team, marketing systematization and compliance, give full play to
the service value of Internet hospitals for doctors and patients, unswervingly deepen the layout of
grassroots and out-of-hospital markets, and improve market coverage.
The quality management team should stick to the lifeline of enterprise product quality. On one
hand, it is required to further optimize the collectivized supervision system of product quality to
ensure products compliant and safe. On the other hand, it is necessary to accelerate the management
improvement of international registration of products, seriously study the international registration
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
policies, keep the quality compliance standards in line with international standards, and continue to
promote the “going-out” internationalization strategy of products.
2. Pharmaceutical business
In 2023, the business segment should adhere to the business philosophy of “value creation” and
“service first”, transform to value creation, high quality and efficient operation while maintaining a
steady growth in sales scale, and make contributions to the high-quality improvement of operation
performance. In term of traditional business, it is required to further consolidate the hospital market,
fully study the factors from market structure, policy impact, institutional cooperation, industry
competition, etc., and make scientific judgments to steadily increase the hospital market share. In
addition, it is necessary to insist on expanding the out-of-hospital market, and pay attention to
improving the profitability of retail and large pharmacies of Huadong Medicine. It is required to focus
on agency products and third-party logistics to strengthen innovative business.
3. Aesthetic medicine business
Committing to long-term strategy of becoming a leader in the aesthetic medicine industry,
Sinclair should further integrate the injection and EBD sectors in major regions and markets around
the world and create a new direct selling business system. On the other hand, Sinclair should create
new business growth through distribution mode in some major markets, establish and build excellent
global sales teams. Sinclair will expand and strengthen the cooperation with leading aesthetic
medicine groups, continue to cultivate first-tier and new first-tier cities, gradually expand second-tier
cities, and strengthen doctor training and market education, thus to build a high-end aesthetic
medicine enterprise and product brand, and expand market share through multiple channels.
4. Industrial microbiology
In 2023, the Company will focus on the industrial microbiology segment to perfect the core
business layout and make breakthrough in major businesses, fulfill the requirements of “high quality
and efficiency”, give full play to the overall operation function, coordinate the internal resources, and
strengthen the overall allocation of marketing powers. In xRNA field, efforts will be made to
consolidate the leading position in domestic industry through Huaren Science and Technology and
mRNA Project Company. In the massive health field, efforts will be made to accelerate the Magic
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Project, select industrial varieties with suitable market scale and feasible technology for rapid R&D,
and use Magic production resources for commercialization. In term of APIs, efforts will be made to
strengthen the construction and development of APIs production bases, and promote the global
registration and certification of APIs products as planned to market the products in the international
market, thus building the Company an international major supplier. The Company will coordinate
and integrate all subjects in the xRNA raw material section to form an integrated commercial supply
system of ADC toxins, and integrate R&D forces to make breakthroughs in key projects of synthetic
biology.
5. Production and supply chain management
In 2023, on the basis of inheritance and development, Huadong Medicine will still spare no
effort to seek new innovation breakthroughs in production system, learn by doing, promote team and
system construction, do a good job in basic management, reduce unit production cost, and maximize
production capacity through lean management and efficient operation. We will strive to build a “safe,
compliant and efficient” production and operation system, persist in reducing costs and increasing
efficiency, and support the transformation and new business development. Combined with the actual
operation of each business segment, we will do a good job in the construction of
international/domestic supply chain systems for various products, and set up an management team
for international/domestic supply chains, offering supports to the Company’s international
development strategy. The production system management team will try the best to strengthen
business sensitivity, operational thinking and profit-centered thinking, and cultivate the overall
thinking ability. On the basis of ensuring the development of existing varieties, we should concentrate
our superior production capacity on more valuable products.
6. BD strategy
In 2023, the BD team should follow the Company’s seventh three-year plan and the 2030 vision
plan, improve the precision and accuracy of investment layout, and closely cooperate with the
strategic marketing department, the finance department and other departments to analyze the
investment revenue, identify, control and prevent risks, so as to promote our superior products,
improve the product lines, and support the Company’s strategic development. The BD team will focus
on the following three directions. Firstly, we will focus on the superior varieties that can quickly bring
benefits to the Company, such as mature varieties that have been listed or at phase III, thus constantly
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
enriching our product lines. Secondly, based on the three core product areas of cancer, immunology
and endocrine, the team will continue to expand the treatment field and cooperate with existing
product layout to quickly form a sales scale. Thirdly, the team will lay out a new technology platform.
(V) Possible Risks and Countermeasures
1. Change of industry policy and risk of product price reduction
The pharmaceutical industry is one of the key industries concerned by the State, and closely
related to the national economy and people’s livelihood. The national supervision of pharmaceutical
industry has a profound impact on the development of the domestic pharmaceutical industry. In recent
years, the policies such as centralized procurement and medical insurance negotiation have been
continuously promoted, gradually standardized, normalized and systematized with the deepening of
reforms in the medical and health care field. The external factors such as geopolitics and
macroeconomic policies disturb the market, pose new challenges to the production cost and
profitability of the pharmaceutical industry. Besides, there is a risk of price reduction of new drug
products. Countermeasures: The Company continuously pays close attention to the industrial
development trend, studies the national medicine policies, makes adjustments in time, increases
investment in R&D, enriches the product lines in the core treatment field, and improves the core
competitiveness. In addition, the Company reduces production and operation risks through lean
management, cost reduction and benefit increase, and vigorously expands grassroots and self-funded
markets to enlarge the market coverage. Great efforts are made to explore the fields of aesthetic
medicine and industrial microbiology, constantly improve brand competitiveness, and create new
profit points.
2. Risk in new drug R&D
Generally, it takes a long time for a new product to be launched from R&D to pre-clinical
research, clinical trials, application for registration, production approval, commercialization and etc.
The R&D progress is affected by such factors as national policies, market factors, and regulatory
approval. In addition, the new drug R&D sets higher requirements for R&D personnel; the investment
of manpower and early R&D expenses will put some pressure on the Company to achieve its current
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
business objectives. Meanwhile, new drugs will be tested by the market demands after launching,
with the risk of price reduction, resulting in the return on R&D investment less than expected.
Countermeasures: The Company continues to introduce high-level scientific research talents,
strengthen the training and encouragement of internal core technicians, and cultivate a high-level
innovative scientific research team that can support the whole cycle of innovative drug R&D. We
will focus on the core treatment field, continuously enrich and optimize the product lines through
independent project establishment and external introduction, and continuously improve the
independent R&D strength to build Huadong Medicine R&D ecosystem. In addition, we will continue
to optimize the innovation mechanism, constantly improve the scientific research, evaluation and
decision-making system for new drugs, and strengthen the close cooperation with well-known R&D
institutions at home and abroad.
3. Risk in investment and merger
Foreign investment is one of important ways of enterprise development. In recent years, the
Company has continued to invest and do mergers and acquisitions in such fields as innovative drugs,
aesthetic medicine and industrial microbiology, so as to form goodwill and realize the innovation and
transformation development strategy. If the company acquired in the future faces the risk of
performance fluctuation, there may be a risk of goodwill impairment, adversely affecting the
Company’s current operation performance. At the same time, the post-investment management and
business integration of the target company also put forward higher requirements for the management
of the Company.
Countermeasures: The company will strive to comprehensively improve our capabilities in
overall planning, management structure, financial management, overall operation and governance,
and business integration; strengthen the resource sharing and synergy of acquired subsidiaries;
regularly test the impairment of goodwill; and enhance comprehensive, scientific and timely post-
investment management.
4. Risk in exchange rate fluctuation
With the rapid internationalization development, the Company increasingly develops
international cooperation and exchanges, expands the sales network of aesthetic medicine in the world,
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
and accelerates the international marketing of industrial microbiology segment, rising the proportion
of foreign currency settlement business. The fluctuation in exchange rate has a far-reaching and
lasting impact on the Company, i.e. Bringing good economic benefits but also affecting the cost and
profit level. The fluctuation in exchange rate will affect the price of the Company’s export products
and cause exchange gains and losses to the Company, thus directly affecting the Company’s assets,
liabilities and income, further the operation ability, debt repayment ability and profitability.
Countermeasures: the Company will pay close attention to the fluctuation in exchange rate,
adjust our business countermeasures in time according to its own situation, and resolve the adverse
effects; develop the exchange risk awareness, and improve the foreign exchange risk management
system; strengthen the training of financial personnel’s professional skills and risk awareness,
enhance the awareness of risk avoidance, and make good use of financial means to avoid exchange
rate risks.
XII. Registration form of receptions, including research, communication and interview,
undertaken during the reporting period
√ Applicable □ N/A
Main content of
Index of basic
Reception Reception discussion and
Reception date Type of visitor Reception object information of the
address method information
research
provided
Please refer to the
Huadong
Medicine: Record
of Investor
Themed
Relations
communication
Activities:
Company Huatai on Huadong
January 5, 2022 Others Institution January 5, 2022
conference room Securities, etc. Medicine
presented on the
industrial
websites of
microbiology
irm.cninfo.com.cn
and
cninfo.com.cn for
details.
Please refer to the
Huadong
Medicine: Record
of Investor
Industrial Relations
Company Communication Securities, Investor Activities:
January 7, 2022 Institution
conference room by phone Horizon Insights, communication January 7 and 10,
etc. 2022 presented on
the websites of
irm.cninfo.com.cn
and
cninfo.com.cn for
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
details.
Please refer to the
Huadong
Special Medicine: Record
communication of Investor
on aesthetic Relations
medicine Activities:
Company Zheshang Fund,
February 9, 2022 Others Institution business and February 9, 2022
conference room etc.
EBD trading presented on the
interpretation of websites of
Huadong irm.cninfo.com.cn
Medicine and
cninfo.com.cn for
details.
Please refer to the
Huadong
Medicine: Record
of Investor
Recent
Relations
innovative BD
Company Industrial Activities: March
March 1, 2022 Others Institution project exchange
conference room Securities, etc. 1, 2022 presented
of Huadong
on the websites of
Medicine
irm.cninfo.com.cn
and
cninfo.com.cn for
details.
Please refer to the
Huadong
Medicine: Record
Interpretation of of Investor
2021 annual and Relations
first quarter Activities: April
Company Communication Huatai
April 28, 2022 Institution report 28, 2022
conference room by phone Securities, etc.
performance of presented on the
Huadong websites of
Medicine irm.cninfo.com.cn
and
cninfo.com.cn for
details.
Please refer to the
Huadong
Medicine: Record
Description of of Investor
2021 annual and Relations
first quarter Activities: May
Company Social and public
May 13, 2022 Others Institution report 13, 2022
conference room investor
performance of presented on the
Huadong websites of
Medicine irm.cninfo.com.cn
and
cninfo.com.cn for
details.
Please refer to the
Huadong
Medicine: Record
of Investor
Relations
Activities of
Company Activities: June 1,
June 1, 2022 Field research Institution J.P. Morgan, etc. investors’
conference room 2022 presented on
reception day
the websites of
irm.cninfo.com.cn
and
cninfo.com.cn for
details.
Industrial Investor Please refer to the
Company
July 6, 2022 Field research Institution Securities, communication, Huadong
conference room
Zheshang online discussion Medicine: Record
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Securities, on China A- of Investor
Morgan Stanley, shares Relations
CITIC Activities: July 6
Securities, etc. and 8, 2022
presented on the
websites of
irm.cninfo.com.cn
and
cninfo.com.cn for
details.
Please refer to the
Huadong
Medicine: Record
of Investor
Interpretation of
Relations
2022 mid-year
Activities: August
Company Communication Industrial report
August 10, 2022 Institution 10, 2022
conference room by phone Securities, etc. performance of
presented on the
Huadong
websites of
Medicine
irm.cninfo.com.cn
and
cninfo.com.cn for
details.
Please refer to the
Huadong
Medicine: Record
of Investor
Interpretation of
China Relations
2022 third
International Activities:
October 26, Company Communication quarter report
Institution Capital October 26, 2022
2022 conference room by phone performance of
Corporation presented on the
Huadong
Limited., etc. websites of
Medicine
irm.cninfo.com.cn
and
cninfo.com.cn for
details.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Section IV. 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 SSE, such as the Company Law, the
Securities Law, the Governance Guidelines for Listed Companies, and the 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, built and polished internal control systems, strengthened internal
management, standardized information disclosure and improved the corporate governance structure,
thus protecting shareholders’ rights and interests. There is no material difference between actual
corporate governance and the requirements of the Company Law and the relevant provisions of the
CSRC.
According to the regulatory documents on the governance of listed companies issued by the CSRC,
the Company has formed a system that is legally compliant and in line with the actual operation of
the Company. By the end of the reporting period, the actual corporate governance was basically
consistent with the regulatory documents on corporate governance issued by the CSRC and the
Shenzhen Stock Exchange, and there were no outstanding governance issues.
Whether the actual corporate governance of the Company is significantly different from the normative documents on corporate
governance issued by the CSRC
□Yes √No
No such case during the reporting period.
II. The Company’s independence in corporate assets, personnel, finance, institutions and
business from controlling shareholders and de facto controller
During the reporting period, the Company continuously strengthened the corporate governance
structure and implemented standardized operation in accordance with the requirements of regulatory
authorities. The Company and its controlling shareholder realized the separation of management and
independent operation in terms of personnel, assets, finance, institutions and business.
Independent or
Category Note
not
The Company is mainly engaged in the production and operation of pharmaceutical
products, and has its own independent production and sales systems. The Company’s
business activities are completely independent from its controlling shareholder.
Independence in business Yes 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
shareholders and related parties.
The company is completely independent in the management of labor, personnel and
Independence in personnel Yes salaries, and has an independent Human Resources Department and a sound personnel
management system.
The Company has various independent assets, such as independent production systems,
auxiliary production systems and supporting facilities; independent purchasing and sales
Independence in assets Yes
systems; independent industrial property rights, trademarks, non-patented technologies
and other intangible assets.
The Company has established an independent Board of Directors, management and
other internal organizations, and each functional department is independent from
Independence in institutions Yes 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.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
The Financial Management Head Office is responsible for the financial accounting and
budget management of the Company, and has established independent and sound
Independence in finance Yes
financial, accounting and 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. Horizontal competition
□ Applicable √ N/A
IV. Annual and extraordinary general meetings held during the reporting period
1. Shareholders’ meetings in the reporting period
Proportion of
Sessions Meeting type Convene date Disclosure date Meeting resolution
investors present
On China Securities
Journal,
Securities Times,
Shanghai Securities
News,
and cninfo
2021 Annual Annual general
60.99% June 1, 2022 June 1, 2022 (www.cninfo.com.cn).
General Meeting meeting
Announcement of
Resolutions of 2021
Annual General
Meeting
(Announcement No.:
2022-041)
On China Securities
Journal,
Securities Times,
Shanghai Securities
News,
2022 First and cninfo
Extraordinary
Extraordinary 61.05% August 31, 2022 August 31, 2022 (www.cninfo.com.cn).
general meeting
General Meeting Announcement of the
Resolutions of 2022
First Extraordinary
General Meeting
(Announcement No.:
2022-063)
2. Extraordinary general meetings convened at the request of preference shareholders with resumed voting
rights:
□ Applicable √ N/A
V. Directors, supervisors and senior management members
1. Brief information
Shares
Shares Shares Shares
held at
increased decreased held at
Holding the Other Reasons of
Commencement Termination during during the end of
Name Title of Gender Age beginning changes changes in
of the term of the term the the the
positions of the (shares) shareholding
Period Period Period
period
(shares) (shares) (shares)
(shares)
Granted
Chairman
June 1, with 2022
Lv Liang and General Incumbent Male 49 June 1, 2022 0 200,000 0 0 200,000
2025 restricted
Manager
shares of the
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Company
Li Honorary June 05,
Retired Male 77 June 06, 2019 0 0 0 0 0/
Bangliang Chairman 2022
Niu June 1,
Director Incumbent Male 56 June 03, 2016 0 0 0 0 0/
Zhanqi 2025
December 05, June 1,
Kang Wei Director Incumbent Female 55 0 0 0 0 0/
2016 2025
Zhu June 1,
Director Incumbent Male 57 June 1, 2022 0 0 0 0 0/
Feipeng 2025
June 1,
Ye Bo Director Incumbent Male 35 June 1, 2022 0 0 0 0 0/
2025
Granted
with 2022
June 1,
Zhu Liang Director Incumbent Male 46 June 06, 2019 0 30,000 0 0 30,000 restricted
2025
shares of the
Company
June 1,
Jin Xuhu Director Retired Male 60 June 06, 2019 0 0 0 0 0/
2022
Gao Independent June 1,
Incumbent Female 60 June 1, 2022 0 0 0 0 0/
Xiangdong Director 2025
Independent April 27,
Yang Lan Incumbent Female 54 April 27, 2017 0 0 0 0 0/
Director 2023
Wang Independent June 1,
Incumbent Male 56 June 1, 2022 0 0 0 0 0/
Ruwei Director 2025
Zhong Independent June 1,
Retired Male 61 January 6, 2016 0 0 0 0 0/
Xiaoming Director 2022
Independent June 1,
Yang Jun Retired Female 51 June 06, 2019 0 0 0 0 0/
Director 2022
Bai January 20, June 1,
Supervisor Incumbent Female 57 0 0 0 0 0/
Xinhua 1998 2025
Zhou June 1,
Supervisor Incumbent Male 54 June 1, 2022 0 0 0 0 0/
Yanwu 2025
June 1,
Qin Yun Supervisor Incumbent Female 53 May 19, 2006 0 0 0 0 0/
2025
June 1,
Dong Jiqin Supervisor Incumbent Female 39 June 1, 2022 0 0 0 0 0/
2025
Xu June 1,
Supervisor Incumbent Male 48 June 06, 2019 0 0 0 0 0/
Zhifeng 2025
Zhu June 1,
Supervisor Incumbent Female 49 June 1, 2022 0 0 0 0 0/
Yinhua 2025
Liu June 1,
Supervisor Retired Male 50 January 6, 2016 0 0 0 0 0/
Chengwei 2022
Hu June 1,
Supervisor Retired Female 50 June 06, 2019 0 0 0 0 0/
Baozhen 2022
The
Company’s
Board of
Directors
and Board
of
Supervisors
completed
the election
at expiration
June 1, of office
He Rufen Supervisor Retired Female 55 June 06, 2019 33,660 0 23,000 0 10,660
2022 terms on
June 1,
2022, and
Ms. He
Rufen will
not serve as
the
Employee
Supervisor
at expiration
of her office
85
The 2022 Annual Report of Huadong Medicine Co., Ltd.
term.
Granted
Deputy with 2022
June 1,
Wu Hui General Incumbent Male 54 June 06, 2019 0 150,000 0 0 150,000 restricted
2025
Manager shares of the
Company
Granted
Deputy with 2022
October 12, June 1,
Zhu Li General Incumbent Female 48 30,000 150,000 0 0 180,000 restricted
2020 2025
Manager shares of the
Company
Granted
Deputy with 2022
Zhang June 1,
General Incumbent Male 48 June 1, 2022 80,000 150,000 0 0 230,000 restricted
Jianfei 2025
Manager shares of the
Company
Deputy
Zhou June 1,
General Retired Male 63 June 30, 2009 0 0 0 0 0
Shunhua 2022
Manager
Granted
Secretary of with 2022
June 1,
Chen Bo the Board Incumbent Male 51 June 30, 2009 0 100,000 0 0 100,000 restricted
2025
of Directors shares of the
Company
Granted
Person in with 2022
November 28, June 1,
Qiu Renbo Charge of Incumbent Male 41 0 100,000 0 0 100,000 restricted
2019 2025
Finance shares of the
Company
Total -- -- -- -- -- -- 143,660 880,000 23,000 0 1,000,660 --
Whether directors and supervisors left office or senior managers were dismissed during their terms of office during the reporting
period
√ Yes □ No
The Board of Directors and Board of Supervisors of the Company completed the election at expiration
of office terms on June 1, 2022. Mr. Li Bangliang will not serve as the Company’s Honorary
Chairman; Mr. Jin Xuhu ceased to hold the position of the Company’s Director; Mr. Zhong Xiaoming
and Ms. Yang Jun ceased to hold the position of the Company’s Independent Directors; Mr. Liu
Chengwei and Ms. Hu Baozhen ceased to hold the position of the Company’s Supervisors; Ms. He
Rufen ceased to hold the position of the Employee Supervisor; Mr. Zhou Shunhua ceased to hold the
position of the Company’s Deputy General Manager due to his age after the renewal.
Change of directors, supervisors and senior managers of the Company
√ Applicable □ N/A
Name Title Type Date Reason
Retirement at Retirement at
Li Bangliang Honorary Chairman June 5, 2022
expiration of the term expiration of the term
Election at expiration
Zhu Feipeng Director Elected June 1, 2022
of office terms
Election at expiration
Ye Bo Director Elected June 1, 2022
of office terms
Resignation from the
Retirement at
Jin Xuhu Director June 1, 2022 Company’s director
expiration of the term
after election
Election at expiration
Gao Xiangdong Independent Director Elected June 1, 2022
of office terms
Election at expiration
Wang Ruwei Independent Director Elected June 1, 2022
of office terms
Resignation from the
Retirement at
Zhong Xiaoming Independent Director June 1, 2022 Company’s
expiration of the term
independent director
86
The 2022 Annual Report of Huadong Medicine Co., Ltd.
after election
Resignation from the
Retirement at Company’s
Yang Jun Independent Director June 1, 2022
expiration of the term independent director
after election
Election at expiration
Zhou Yanwu Supervisor Elected June 1, 2022
of office terms
Election at expiration
Dong Jiqin Supervisor Elected June 1, 2022
of office terms
Election at expiration
Zhu Yinhua Supervisor Elected June 1, 2022
of office terms
Resign from the
Retirement at
Liu Chengwei Supervisor June 1, 2022 Company’s Supervisor
expiration of the term
after election
Resign from the
Retirement at
Hu Baozhen Supervisor June 1, 2022 Company’s Supervisor
expiration of the term
after election
Resign from the
Retirement at
He Rufen Supervisor June 1, 2022 Company’s Supervisor
expiration of the term
after election
Deputy General Requirements of the
Zhang Jianfei Appointment June 1, 2022
Manager position
Resign from the
Deputy General Retirement at Company’s Deputy
Zhou Shunhua June 1, 2022
Manager expiration of the term General Manager after
renewal
2. Positions and incumbency
Professional background, main working experiences and main responsibilities of the Company’s incumbent directors, supervisors and
senior managers
(1) Profile of directors
Chairman: Mr. Lv Liang: Born in 1974, holds a master’s degree. He was the Project Manager of Grand Asset Management Co., Ltd.
from July 1997 to July 2001; the Deputy General Manager and the General Manager of Changshu Leiyunshang Pharmaceutical Co.,
Ltd. from July 2001 to March 2010; the Director and the Deputy General Manager of the Company from April 2010 to January 2016;
the Director and the General Manager of the Company from January 6, 2016 to June 5, 2019. He has also been the Chairman of the
Board of the Company since June 6, 2019. Besides, he has served as the General Manager of the Company since October 26, 2021.
Director: Mr. Niu Zhanqi: Born in 1967, Doctor of Pharmacy. He has served as a 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 the 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. Zhu Feipeng: Born in 1966, Doctor of Cytopharmacology. He has served as a reviewer, Director of the third review
office and Chief Reviewer of respiratory and tumor indications of the Center for Drug Evaluation of National Medical Products
Administration. He has been Vice President of Pharmaceutical Management Head Office of China Grand Enterprises, Inc. since March
2021. Besides, he has also served as Director of the Company since June 2022.
Director: Mr. Ye Bo: Born in 1988, holds a master’s degree. He has served as Customer Manager of Zhejiang Branch, China
Development Bank; Manager of Bonds Investment Bank Headquarters, Zheshang Securities Co., Ltd.; Deputy Head of the Department
of Investment and Operation, Hangzhou State-owned Capital Investment and Operation Co., Ltd. He has been Deputy General Manager
of Hangzhou Guoyou Asset Operation Co., Ltd. since March 2020. Besides, he has also served as Director of the Company since June
2022.
Director: Mr. Zhu Liang: Born in 1977, holds a bachelor’s degree. He has served as Director, Vice Chairman and Chairman of the
Labor Union of Hangzhou Huadong Medicine Group Co., Ltd., and is a member of the Party committee and Chairman of the Labor
Union of the Company. He has served as the Company’s Supervisor from April 2017 to June 2019; and Director of the Company since
June 2019.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Independent Director: Ms. Gao Xiangdong: Born in July 1963, PhD. She has served as a teaching assistant, a lecturer associate professor
of Biopharmaceutical Teaching and Research Department, China Pharmaceutical University, and a professor, Vice President, President
and Party Secretary of the School of Life Science and Technology. She has served as a professor of the School of Life Science and
Technology, China Pharmaceutical University, since April 2021. He has also been Independent Director of the Company since June
2022.
Independent Director: Ms. Yang Lan: Born in 1969, holds a master’s degree. She has served as a certified tax accountant, a certified
public valuer, a certified public accountant and an auditor. She 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; was the Senior Manager of Pan-China Certified Public Accountants (Special General Partnership) Guangdong
Branch; the Financial Director and Investment Director of Guangzhou Securities Innovation Investment Co., Ltd.; is the Head of Zhuhai
ZGX Certified Tax Agent Firm and Deputy Head of Reanda Certified Public Accountants LLP Guangdong Branch. She has been
Independent Director of the Company since April 27, 2017.
Independent Director: Mr. Wang Ruwei: Born in 1967, Doctor of Medicine of Shimane University in Japan, a professor-level senior
engineer and a supervisor of PhD candidates (Zhejiang University, Shenyang Pharmaceutical University, Zhejiang Chinese Medical
University). He has served as Business Vice President of No.6 Hospital affiliated to Wenzhou Medical University, Deputy Chairman
and President of Zhejiang Conba Pharmaceutical Co., Ltd. and Genor Biopharma Co. Ltd, and Executive Vice-president of Hangzhou
Tigermed Consulting Co., Ltd. He has been a member of Chinese Pharmacopoeia Commission since 2010, Managing Director of
Hangzhou Tailong Venture Capital Partnership (Limited Partnership), Independent Director of Sichuan Huiyu Pharmaceutical Co.,
Ltd., Longevity Valley Botanical Co., Ltd. and Zhejiang Sundoc Pharmaceutical Science and Tech Co., Ltd. He has also been
Independent Director of the Company since June 2022.
(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 1998.
Supervisor: Mr. Zhou Yanwu: Born in 1969, holds a master’s degree. He has served as an assistant accountant of the Office of Financial
Management, China International Trust Investment Corporation, an assistant of General Manager of Beijing Guoqiang Technology
Co., Ltd., and an assistant of Financial Director of Electrolux (China) Home Appliance Co., Ltd. He worked for China Grand
Enterprises, Inc. in 2000, served as Accountant Manager and Financial Manager of Financial Management Head Office, Deputy
General Manager of the Supervision and Audit Department, and Financial Director of China Grand Enterprises (HK) Limited. He has
been General Manager of the Supervision and Audit Department, China Grand Enterprises, Inc. since January 2012. Besides, she has
also served as Supervisor of the Company since June 2022.
Supervisor: Ms. Qin Yun: Born in 1970, holds a bachelor’s degree. She has served as an attending physician in the Internal Medicine
Department of Beijing Shougang Hospital; a medical representative in the Beijing Office of Tianjin Takeda Pharmaceuticals Co., Ltd.,
a senior medical representative in the Beijing Office of Lilly Asia; and Head of the Product Department in the sales branch of China
National Pharmaceutical Foreign Trade Corporation; worked for China Grand Enterprises, Inc. in 2002 and was Project Manager of
Pharmaceutical Business Division, Business Director of Operation Department of Pharmaceutical Management Head Office; is now
Business Director of Bidding and Procurement Management Center of China Grand Enterprises, Inc. She has also been Supervisor of
the Company since 2006.
Supervisor: Ms. Dong Jiqin: Born in 1984, holds a master’s degree. She has served as a member of the Department of Finance, Zhejiang
Ocean University (Xiaoshan College), and of the Foreign Trade Department, Xiaoshan Foreign Trade and Economic Cooperation
Bureau, Deputy Chief and Chief of the Financial Audit Department, Xiaoshan Commerce Bureau, Hangzhou. She has been Head of
the Risk Control and Legal Department of Hangzhou State-owned Capital Investment and Operation Co., Ltd. since October 2019.
Besides, she has also served as Supervisor of the Company since June 2022.
Employee Supervisor: Mr. Xu Zhifeng: Born in 1975, holds a bachelor’s degree, economist. Commissioner of the Business
Administration Office and Director Assistant of the General Manager Office of Hangzhou Zhongmei Huadong Pharmaceutical Co.,
Ltd. from August 1997 to July 2011; Manager of the Risk Management and Audit Department of the Company from August 2011 to
January 2018; Director of the Risk Management and Audit Department of the Company since February 2018; Employee Supervisor of
the Company since June 2019.
Employee Supervisor: Ms. Zhu Yinhua: Born in 1974, holds a bachelor’s degree. She joined the Company in August 1995, and has
served as Head of the accounting institution and Senior Head of Finance of the Financial Management Head Office; has been Senior
Head of Finance of the Company’s Medical Business since September 2018. She has been Financial Manager of Huadong Medicine
Supply Chain Management (Hangzhou) Co., Ltd. since March 2010. She has also served as Employee Supervisor of the Company
since June 2022.
(3) Profile of senior managers
Deputy General Manager: Mr. Wu Hui: Born in April 1969, holds a master’s degree, professor-level senior engineer. He worked in the
Company in July 1991, and has served as technician, Workshop Director and Chief Engineer of Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd.; Deputy General Manager of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. since 2015; Deputy
General Manager of the Company since June 2019.
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Deputy General Manager: Ms. Zhu Li: Born in 1975, holds 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 served as the Deputy General
Manager (responsible for the commercial matters) of the Company and concurrently the General Manager of Huadong Pharmaceutical
Distribution Company.
Deputy General Manager: Mr. Zhang Jianfei: Born in April 1975, holds a bachelor’s degree. He has served as a salesman/Manager,
Manager of Wuhan region, Director of the Second Sales and Management Department of Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd., General Manager and Director of the Second Pharmaceutical Service Management Department of Hubei
Pharmaceutical Service Co., Ltd., and has been Deputy General Manager of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.
since December 2020. He has also served as Deputy General Manager of the Company since June 2022.
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 and Manager of the Investment
Department; Secretary of the Board of Directors since June 2009.
Officer in Charge of Financial Affairs: Mr. Qiu Renbo: Born in 1982, holds a master’s degree. He has served as commissioner of the
Financial Management Head Office and Chief of the Finance Section of the Manufacturing Branch of the Company from August 2004
to July 2010; Manager of the Financial Department of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. from August 2010 to
April 2015; Chief Financial Officer of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. since May 2015; Officer in Charge of
Financial Affairs of the Company since December 2019.
Positions in shareholders’ entities
√ Applicable □ N/A
Compensation and
Position in Commencement of Termination of the
Name Shareholders’ entity allowance from the
shareholders’ entities the term term
shareholders’ entity
President of the
Pharmaceutical
China Grand
Niu Zhanqi Management Head Yes
Enterprises, Inc.
Office of China Grand
Enterprises, Inc.
China Grand CFO of China Grand
Kang Wei Yes
Enterprises, Inc. Enterprises, Inc.
Deputy General
Manager of the
China Grand
Bai Xinhua Financial Management Yes
Enterprises, Inc.
Head Office of China
Grand Enterprises, Inc.
Business Director of
the Pharmaceutical
China Grand
Qin Yun Management Head Yes
Enterprises, Inc.
Office of China Grand
Enterprises, Inc.
President of the
Pharmaceutical
China Grand
Zhu Feipeng Management Head Yes
Enterprises, Inc.
Office of China Grand
Enterprises, Inc.
Hangzhou Huadong
Ye Bo Medicine Group Co., Executive Director No
Ltd.
General Manager of
China Grand
Zhou Yanwu the Supervision and Yes
Enterprises, Inc.
Audit Department
Note on
positions in
None
shareholders’
entities
Position in other entities
√ Applicable □ N/A
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Compensation and
Position in other Commencement of Termination of the
Name Name of other entity allowance from the
entity the term term
shareholders’ entity
Sichuan Yuanda
Shuyang Pharmaceutical
Co., Ltd. and other
Niu Zhanqi Director No
wholly/partially owned
subsidiaries of China
Grand Enterprises, Inc.
Western Securities Co.,
Kang Wei Supervisor Yes
Ltd.
Leiyunshang
Pharmaceutical Co.,
Ltd. and other
Kang Wei Director No
wholly/partially owned
subsidiaries of China
Grand Enterprises, Inc.
Grand Industrial
Holding Co., Ltd. and
other wholly/partially
Bai Xinhua Director No
owned subsidiaries of
China Grand
Enterprises, Inc.
Yunnan Leiyunshang
Qin Yun Lixiang Pharmaceutical Director No
Co., Ltd.
Hangzhou Guoyou
Deputy General
Ye Bo Asset Operation Co., Yes
Manager
Ltd.
Hangzhou State-owned Head of the Risk
Dong Jiqin Capital Investment and Control and Legal Yes
Operation Co., Ltd. Department
Note on
position in other None
entities
Incumbent and off-office directors, supervisors and senior managers during the reporting period that have been imposed
administrative penalties by the SCRC during the last three years.
□ Applicable √ N/A
3. Remuneration of directors, supervisors and senior managers
The decision-making procedure, determination basis and actual remuneration for directors, supervisors and senior managers
In 2022, the Company completed the general election of the 10th Board of Directors and the 10th
Board of Supervisors from the 9th ones.
The allowance plan of directors of the 9th Board of Directors and that of supervisors on the 9th Board
of Supervisors of the Company lasted to May 31, 2022 after review and approval by the Company’s
shareholder’s meeting: The annual allowance for the independent directors of the Company was
RMB80,000 (before tax); that for the non-independent directors not in charge of the Company’s
management or business was RMB30,000 (before tax); that for the non-employee representative
supervisors was RMB30,000 (before tax);
The allowance plan of directors of the 10th Board of Directors and that of supervisors on the 10th
Board of Supervisors of the Company has become effective since June 1, 2022 after review and
approval by the Company’s shareholder’s meeting: The annual allowance for the independent
directors of the Company is RMB100,000 (before tax); that for the non-independent directors not in
charge of the Company’s management or business was RMB30,000 (before tax); that for the non-
employee representative supervisors was RMB30,000 (before tax);
Remuneration of directors, supervisors and senior managers of the Company during the reporting period
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Unit: RMB ten thousand yuan
Receive
Total pretax remuneration
Holding of remuneration from related
Name Title Gender Age
positions received from parties of the
the Company Company or
not
Chairman and
Lv Liang General Male 49 Incumbent 240 No
Manager
Niu Zhanqi Director Male 56 Incumbent 3 Yes
Kang Wei Director Female 55 Incumbent 3 Yes
Zhu Feipeng Director Male 57 Incumbent 1.75 No
Ye Bo Director Male 35 Incumbent 1.75 No
Zhu Liang Director Male 46 Incumbent 65 No
Jin Xuhu Director Male 60 Retired 1.25 Yes
Independent
Gao Xiangdong Female 60 Incumbent 5.83 No
Director
Independent
Yang Lan Female 54 Incumbent 9.17 No
Director
Independent
Wang Ruwei Male 56 Incumbent 5.83 No
Director
Zhong Independent
Male 61 Retired 3.33 No
Xiaoming Director
Independent
Yang Jun Female 51 Retired 3.33 No
Director
Bai Xinhua Supervisor Female 57 Incumbent 3 Yes
Zhou Yanwu Supervisor Male 54 Incumbent 1.75 Yes
Qin Yun Supervisor Female 53 Incumbent 3 Yes
Dong Jiqin Supervisor Female 39 Incumbent 1.75 No
Xu Zhifeng Supervisor Male 48 Incumbent 65 No
Zhu Yinhua Supervisor Female 49 Incumbent 9.94 No
Liu Chengwei Supervisor Male 50 Retired 1.25 Yes
Hu Baozhen Supervisor Female 50 Retired 1.25 Yes
He Rufen Supervisor Female 55 Retired 41.67 No
Deputy General
Wu Hui Male 54 Incumbent 140 No
Manager
Deputy General
Zhu Li Female 48 Incumbent 140 No
Manager
Deputy General
Zhang Jianfei Male 48 Incumbent 81.67 No
Manager
Deputy General
Zhou Shunhua Male 63 Retired 54.17 No
Manager
Secretary of the
Chen Bo Board of Male 51 Incumbent 130 No
Directors
Person in
Qiu Renbo Charge of Male 41 Incumbent 130 No
Finance
Total -- -- -- -- 1,147.69 --
VI. Performance of duties of directors during the reporting period
1. Board meetings during the reporting period
Sessions Convene date Disclosure date Meeting resolution
Announcement of the
Resolutions of the 9th Interim
Meeting of the Board of
The interim session of the 9th
February 21, 2022 February 23, 2022 Directors (announcement
Board of Directors
No.: 2022-003) on China
Securities Journal, Securities
Times, Shanghai Securities
91
The 2022 Annual Report of Huadong Medicine Co., Ltd.
News, and cninfo
(www.cninfo.com.cn)
Announcement of the
Resolutions of the 9th Interim
Meeting of the Board of
Directors (announcement
The interim session of the 9th
February 27, 2022 February 28, 2022 No.: 2022-005) on China
Board of Directors
Securities Journal, Securities
Times, Shanghai Securities
News, and cninfo
(www.cninfo.com.cn)
Announcement of the
Resolutions of the 15th
session of the 9th Board of
Directors (announcement
The 15th session of the 9th
April 26, 2022 April 28, 2022 No.: 2022-011) on China
Board of Directors
Securities Journal, Securities
Times, Shanghai Securities
News, and cninfo
(www.cninfo.com.cn)
Announcement of the
Resolutions of the 16th
session of the 9th Board of
Directors (announcement
The 16th session of the 9th
May 11, 2022 May 11, 2022 No.: 2022-024) on China
Board of Directors
Securities Journal, Securities
Times, Shanghai Securities
News, and cninfo
(www.cninfo.com.cn)
Announcement of the
Resolutions of the 1st session
of the 10th Board of Directors
(announcement No.: 2022-
The 1st session of the 10th
June 1, 2022 June 1, 2022 042) on China Securities
Board of Directors
Journal, Securities Times,
Shanghai Securities News,
and cninfo
(www.cninfo.com.cn)
Announcement of the
Resolutions of the 2nd session
of the 10th Board of Directors
(announcement No.: 2022-
The 2nd session of the 10th
August 8, 2022 August 10, 2022 052) on China Securities
Board of Directors
Journal, Securities Times,
Shanghai Securities News,
and cninfo
(www.cninfo.com.cn)
Announcement of the
Resolutions of the 3rd session
of the 10th Board of Directors
(announcement No.: 2022-
The 3rd session of the 10th
October 24, 2022 October 26, 2022 068) on China Securities
Board of Directors
Journal, Securities Times,
Shanghai Securities News,
and cninfo
(www.cninfo.com.cn)
Announcement of the
Resolutions of the 4th session
of the 10th Board of Directors
(announcement No.: 2022-
The 4th session of the 10th
October 27, 2022 October 28, 2022 071) on China Securities
Board of Directors
Journal, Securities Times,
Shanghai Securities News,
and cninfo
(www.cninfo.com.cn)
The 5th session of the 10th Announcement of the
November 18, 2022 November 18, 2022
Board of Directors Resolutions of the 5th session
92
The 2022 Annual Report of Huadong Medicine Co., Ltd.
of the 10th Board of Directors
(announcement No.: 2022-
078) on China Securities
Journal, Securities Times,
Shanghai Securities News,
and cninfo
(www.cninfo.com.cn)
2. Attendance of directors at Board meetings and general meetings
Attendance of directors at Board meetings and general meetings
Whether or
Number of
not attend
Board Number of Number of Number of
Times of Board Times of
meetings to Board Board Board
Name of absent from meetings in attendance of
be attended meetings meetings meetings
directors Board person for general
during the attended on attended attended by
meetings two meeting
reporting site virtually proxy
consecutive
period
times
Lv Liang 9 9 0 0 0 No 2
Kang Wei 9 0 9 0 0 No 2
Niu Zhanqi 9 0 9 0 0 No 2
Zhu Feipeng 5 0 5 0 0 No 1
Ye Bo 5 1 4 0 0 No 1
Zhu Liang 9 9 0 0 0 No 2
Jin Xuhu 4 0 4 0 0 No 1
Gao
5 0 5 0 0 No 1
Xiangdong
Wang Ruwei 5 0 5 0 0 No 1
Yang Lan 9 0 9 0 0 No 2
Zhong
4 0 4 0 0 No 1
Xiaoming
Yang Jun 4 0 4 0 0 No 1
Note on non-attendance of Board meetings in person for two consecutive times
3. Objections from directors on relevant issues of the Company
Whether the directors have raised any objection to relevant issues of the Company
□Yes √No
No such case during the reporting period.
4. Other details about the performance of duties by directors
Whether the directors’ suggestions were adopted or not
√ Yes □ No
Note on the adoption or non-adoption of the directors’ suggestions
During the reporting period, in strict accordance with the relevant laws and regulations, normative
documents, the Articles of Association, Rules of Procedure of the Board of Directors, and other
relevant provisions, all directors of the Company preformed duties and exercise their functions and
power earnestly, strictly implemented the resolution of the general meeting of shareholders, and
actively carried out all works of the Board of Directors. They also conscientiously reviewed and
approved various proposals of the Board of Directors, exercised right to vote according to law,
actively participated in corporate governance and decision-making activities, and constantly
standardized corporate governance. With a responsible attitude towards the Company and all
shareholders, the independent directors performed their duties and obligations diligently and
faithfully, and carefully deliberated various proposals of the Board of Directors. In addition, they
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
expressed objective opinions on relevant matters under deliberation based on independent position,
actively promoted the standardized operation of the Board of Directors and improved corporate
governance, safeguarding the interests of the Company and all investors. All suggestions above have
been adopted by the Company.
VII. Performance of special committees under the Board of Directors during the reporting
period
Important Other Details of
Committee Number of Meeting
Members Convene date comments and performance objection (if
name meetings content
suggestions of duties any)
No dispute
with the
annual auditor
on various
matters of the
Company’s
annual
financial
report is
found, and it is
believed that
the basis,
ground,
principles and
methods of the
preparation of
financial
statements
comply with
new
Accounting
Communicated Standard for
and discussed Business
the major Enterprises,
Yang Lan issues Accounting
Audit (Chair of concerned in System for
Committee of Committee), the audit of the Business
5 April 21, 2022 None None
the 9th Board Zhong Huadong Enterprises,
of Directors Xiaoming, Jin Medicine’s relevant laws
Xuhu 2021 Annual and
Report with the regulations
Audit and the
Committee. Company’s
internal
management
system; (2) the
content and
format of the
financial
statements
comply with
the relevant
provisions of
China
Securities
Regulatory
Commission,
Shenzhen
Stock
Exchange and
Accounting
Standards for
Business
Enterprises,
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
and fairly
reflect the
Company’s
financial
position as at
December 31,
2021, and
operating
results and
cash flow in
2021;
The following
proposals were
reviewed: 1.
Proposal on
the Company’s
2021 Annual
Report;
2. Proposal on
Reappointing
the Accounting
Firm;
3. Proposal on
Evaluating the
Accounting
Firm’s
The internal
Performance in
audit was
2021;
Yang Lan carried out as
4. Proposal on
Audit (Chair of planned and
Evaluating the
Committee of Committee), no major
April 26, 2022 Company’s None None
the 9th Board Zhong problems were
Internal
of Directors Xiaoming, Jin found; all
Control in
Xuhu proposals were
2021;
approved after
5. Proposal on
review.
the Company’s
Q1 Report in
2022;
6. Proposal on
the 2021 Work
Report of the
Company’s
Internal Audit
Department;
7. Proposal on
the 2022 Work
Plan of the
Company’s
Internal Audit
Department;
The following
proposal was
The internal
Yang Lan reviewed:
audit was
Audit (Chair of Proposal on
carried out as
Committee of Committee), the Work
May 11, 2022 planned and None None
the 9th Board Zhong Report of the
no major
of Directors Xiaoming, Jin Company’s
problems were
Xuhu Internal Audit
found.
Department in
Q1 of 2022.
The following The internal
Yang Lan proposals were audit of the
Audit
(Chair of reviewed: 1. Company was
Committee of August 8,
Committee), Proposal on carried out as None None
the 10th Board 2022
Lv Liang, the Work planned and
of Directors
Wang Ruwei Report of the no major
Company’s problems were
95
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Internal Audit found; the
Department in Company’s
the 1st Half of 2022 Semi-
2022; annual Report
2. Proposal on and its abstract
the Work Plan were approved
of the after review.
Company’s
Internal Audit
Department in
the 2nd Half of
2022;
3. Proposal on
the Company’s
2022 Semi-
annual Report
and its abstract.
The following
proposals were
reviewed: 1.
Proposal on
the Company’s
The internal
Q3 Report in
audit of the
2022;
Company was
2. Proposal on
carried out as
Yang Lan the Work
Audit planned and
(Chair of Report of the
Committee of October 24, no major
Committee), Company’s None None
the 10th Board 2022 problems were
Lv Liang, Internal Audit
of Directors found; the
Wang Ruwei Department in
Company’s Q3
Q3 of 2022;
Report in 2022
3. Proposal on
was approved
the Work Plan
after review.
of the
Company’s
Internal Audit
Department in
Q4 of 2022;
The following
proposals were
reviewed: 1.
Proposal on
the Election at
Expiration of
Office Terms of
the Company’s
The
Board of
Nomination
Directors and
Committee
Nomination of
Zhong verified and
Non-
Nomination Xiaoming reviewed the
Independent
Committee of (Chair of matters under
2 May 11, 2022 Director None None
the 9th Board Committee), deliberation,
Candidates for
of Directors Kang Wei, and
the 10th Board
Yang Lan unanimously
of Directors;
agreed upon
2. Proposal on
relevant
the Election at
proposals.
Expiration of
Office Terms of
the Company’s
Board of
Directors and
Nomination of
Independent
Director
96
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Candidates for
the 10th Board
of Directors;
The following
proposals were
reviewed:
1. Proposal on
the
Appointment of
the Company’s
General
Manager;
2. Proposal on The
the Nomination
Appointment of Committee
Gao the Company’s verified and
Nomination Xiangdong Deputy reviewed the
Committee of (Chair of August 8, General matters under
None None
the 10th Board Committee), 2022 Manager; deliberation,
of Directors Yang Lan, 3. Proposal on and
Kang Wei the unanimously
Appointment of agreed upon
the Company’s relevant
Secretary of proposals.
the Board of
Directors;
4. Proposal on
the
Appointment of
the Company’s
Person in
Charge of
Finance.
The
Remuneration
The Proposal and Approval
on the Committee
Yang Jun
Remuneration Company’s verified and
(Chair of
and Approval 2022 Annual reviewed the
Committee),
Committee of April 26, 2022 Compensation matters under None None
Lv Liang,
the 9th Board Assessment deliberation,
Zhong
of Directors Plan for Senior and
Xiaoming
Executives was unanimously
reviewed. agreed on the
relevant
proposals.
The
Remuneration
The Proposal and Approval
3 on the Committee
Yang Jun
Remuneration Company’s verified and
(Chair of
and Approval Allowance reviewed the
Committee),
Committee of May 11, 2022 Plan of matters under None None
Lv Liang,
the 9th Board Directors of deliberation,
Zhong
of Directors the 10th Board and
Xiaoming
of Directors unanimously
was reviewed. agreed on the
relevant
proposals.
The following The
Remuneration Wang Ruwei proposals were Remuneration
and Approval (Chair of reviewed: 1. and Approval
August 8,
Committee of Committee), Proposal on Committee None None
2022
the 10th Board Lv Liang, Gao the Company’s verified and
of Directors Xiangdong 2022 reviewed the
Restricted matters under
97
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Share Incentive deliberation,
Scheme (Draft) and
and Its unanimously
Summary; agreed on the
2. Proposal on relevant
Management proposals.
Rules for the
Implementation
and
Assessment of
the Company’s
2022
Restricted
Share Incentive
Scheme;
3. Proposal on
the
Management
Rules of the
Company’s
2022
Restricted
Share Incentive
Scheme.
VIII. Performance of 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.
IX. Employees of the Company
1. Number of employees, expertise structure and educational background
Number of incumbent employees in the parent company at the
917
end of the reporting period (person)
Number of incumbent employees in major subsidiaries at the
13,144
end of the reporting period (person)
Total number of incumbent employees at the end of the
14,061
reporting period (person)
Total number of employees receiving salaries in the current
14,061
period (person)
Number of retired employees requiring the parent Company
20
and its subsidiaries to bear costs (person)
Expertise structure
Category Number (person)
Production staff 1,257
Sales staff 8,496
Technical staff 2,380
Financial staff 242
Administrative staff 1,312
Storage and transportation staff 374
Total 14,061
Educational background
Category Number (person)
Master’s degree or above 1,000
Bachelor’s degree 5,974
Junior college (professional training) 6,170
Other 917
Total 14,061
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
2. Staff remuneration policy
Based on strategic development planning and talent strategy, the Company builds a market- oriented
differentiating remuneration system, establishes a flexible and diversified incentive mechanism, and
makes its talent team younger, professional and international. It upgrades and optimizes employee
structure, encourages employees to stick to innovation and value creation, and enables employees
themselves and as a whole to achieve sustainable development and strategic goals.
3. Training program
Based on its 7th “Three-Year Plan”, the Company is dedicated to building a diversified and multi-
level personnel training system and prioritizes personnel to help transform Huadong Medicine. The
Learning and Development Department continues carrying out various personnel and management
training programs, and building a training and know-how system in 2023 based on the extensive
training demands collected from the Company’s middle and senior management and employees.
The Company is going to promote the Pilot Program for Entrepreneurs, and provide training sessions
for reserve managers, highly potential experts and management trainees in 2023, in order to create an
active, responsible entrepreneur and scientist team. The Company mainly carries out internal
cultivation such as management case study, on-the-job development and cultivation, and rotation and
assignment, combined with certain advanced management concepts of external industries, so as to
guide the officials to innovate their management and concepts, and assist in the establishment of
reserve teams for middle and senior managers.
In terms for expert training programs, the training of researchers is of great urgency, considering that
the Company is on the crucial period of strategic transformation and scientific research and
innovation. The Company requires better performance of this new training to perfectly meet the
demands of business department, and gives priority to programs of R&D personnel review, individual
development plan (IDP) training, and R&D project manager training.
As for other mature expert training programs, including the business strengthen and leadership
improvement programs related to production, quality, marking and other sectors, the Company aims
at implementing the 2025 development strategic plan, strictly controls costs, refines projects, and
ensures that the costs and expenses of all programs are reduced.
When building a system, the Company establishes the system and conducts various training programs
from a big picture perspective, continuously polishes internal trainer and tutor teams and various
courses, makes overall planning for the demands of the subsidiaries, and provides branches and
subsidiaries with courses and teaching resources to create the sharing culture and promote the
establishment of collectivized and learning-oriented organizations, in order to better connect all
project resources of various companies. Besides, the Company opens on-line courses for all
employees of subsidiaries and branches.
4. Labor outsourcing
□ Applicable √ N/A
X. The Company’s profit distribution and increase of capital stock by capital reserve conversion
Formulation, implementation or adjustment of the profit distribution policy, especially the cash dividend policy, during the reporting
period
√ Applicable □ N/A
During the reporting period, the Company strictly abode by the Articles of Association to review the
relevant distribution policy and implement the profit distribution plan. The criteria and proportion of
dividends were specific and clear and the decision-making process and mechanism were well-
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
established. The profit distribution plan was implemented during specific period after review and
approval. These efforts guaranteed all shareholders’ interests. During the reporting period, the
Company did not change the profit distribution policy.
The Company convened on April 26, 2022 the 15th session of the 9th Board of Directors, reviewed
and approved the Proposal on the Company’s 2021 Profit Distribution Scheme, and agreed to submit
the proposal to the Company’s general meeting for deliberation. The 2021 Annual General Meeting
convened on June 1, 2022 deliberated on and approved the proposal. Based on the total share capital
of 1,749,809,548 of the Company on December 31, 2021, RMB2.90 (before tax) of cash dividends
per ten ordinary shares were distributed to all shareholders; no bonus share was issued; and no capital
reserve was converted to share capital. A Total of RMB507,444,768.92 (before tax) cash dividends
were distributed, and the remaining undistributed profits were set to be distributed in future years.
The Company’s independent directors agreed on the profit distribution plan. On June 10, 2022, the
Company implemented the above profit distribution plan. The criteria and proportion of dividends
were specific and clear in this profit distribution plan with well-established decision-making process,
which complied with the Articles of Association and resolutions of the General Meeting.
Specific note on the cash dividend policy
Whether it complied with the Articles of Association and resolutions of the General Meeting: Yes
Whether the criteria and proportion of dividends were specific and clear: Yes
Whether the decision-making process and mechanism was well-established: Yes
Whether independent directors performed their duties and roles: Yes
Whether minority shareholders could express their opinions and requirements, and whether their
Yes
legal rights and interests were fully protected:
Whether conditions and process were conforming and transparent if the cash dividend policy was
N/A
adjusted or changed:
During the reporting period, the Company made profits and the profit available to shareholders of the parent company was positive,
but no cash dividend plan for common shares was proposed
□ Applicable √ N/A
Profit distribution and share capital 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) 2.9
Share capital base of the distribution plan (share) 1,753,995,348
Cash dividends (yuan) (tax included) 508,658,650.92
Cash dividends by other means (such as share repurchase) (yuan) 0.00
Total cash dividends (yuan) 508,658,650.92
Distributable profit (yuan) 5,999,424,983.44
Proportion of total cash dividends (including those by other means)
100%
in the total profit distributed
Current cash dividends
If the Company is in a mature stage of development and has significant capital expenditure arrangements, 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
XI. Implementation of the Company’s equity incentive plan, employee stock ownership plan
or other employee incentive measures
√ Applicable □ N/A
1. Equity incentive
(1) On August 8, 2022, the Company convened the 2nd session of the 10th Board of Directors and
that of the 10th Board of Supervisors, during which the Proposal on the Company’s 2022 Restricted
Share Incentive Scheme (Draft) and Its Summary, the Proposal on Management Rules for the
100
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Implementation and Assessment of the Company’s 2022 Restricted Share Incentive Scheme, the
Proposal on the Management Rules of the Company’s 2022 Restricted Share Incentive Scheme, and
the Proposal on Applying to the General Meeting for Authorizing the Board of Directors to Handle
Equity Incentive-related Matters were reviewed and approved. Independent directors gave their
independent opinions on whether the 2022 Restricted Share Incentive Scheme contributed to the
Company’s sustainable development and whether it harmed the interests of the Company and all
shareholders. Please refer to the announcement published by the Company on www.cninfo.com.cn
on August 10, 2022.
(2) On August 10, the Company disclosed the Announcement on Independent Directors Publicly
Soliciting Proxy Voting Rights on www.cninfo.com.cn. Mr. Wang Ruwei, Independent Director of
the Company, commissioned by other independent directors publicly solicited proxy voting rights
from all shareholders of the Company on proposals related to the 2022 Restricted Share Incentive
Scheme reviewed on the 1st extraordinary general meeting in 2022 that was set to be convened on
August 31, 2022.
(3) The Company announced publicly the list of the first batch of employees receiving the incentive
from the restricted share incentive scheme on the Company’s intra-net from August 15 to 25, 2022,
which lasted for 10 days in total. As of the end of the announcement on August 25, 2022, the Board
of Supervisors did not receive any objection against these employees. On August 25, 2022, the
Company convened a session of the Board of Supervisors, during which the Verification Opinions
and Announcement Note on the List of the First Batch of Employees Receiving the Incentive from the
Company’s 2022 Restricted Share Incentive Scheme was reviewed and approved. On the same day,
the Company disclosed the Board of Supervisors’ Verification Opinions and Announcement Note on
the List of the First Batch of Employees Receiving the Incentive from the Company’s 2022 Restricted
Share Incentive Scheme and a related announcement on www.cninfo.com.cn.
(4) On August 31, 2022, the Company convened the 1st extraordinary general meeting in 2022.
During the meeting, the Proposal on the Company’s 2022 Restricted Share Incentive Scheme (Draft)
and Its Summary, the Proposal on Management Rules for the Implementation and Assessment of the
Company’s 2022 Restricted Share Incentive Scheme, the Proposal on the Management Rules of the
Company’s 2022 Restricted Share Incentive Scheme, and the Proposal on Applying to the General
Meeting for Authorizing the Board of Directors to Handle Equity Incentive-related Matters were
deliberated on and approved. On the same day, the Company disclosed on www.cninfo.com.cn the
Self-Inspection Report on Insiders and Incentive Receivers of the 2022 Restricted Share Incentive
Scheme Purchasing and Selling the Company’s Shares and a related announcement. The incentive
scheme was approved in the Company’s 1st extraordinary general meeting in 2022, and the Board of
Directors was authorized to implement the restricted share incentive scheme and handle relevant
matters according to laws and regulations.
(5) On October 27, 2022, the Company convened the 4th session of the 10th Board of Directors and
the 5th session of the 10th Board of Supervisors. During these two sessions, the Proposal on
Adjustments of the Company’s 2022 Restricted Share Incentive Scheme, and the Proposal on
Granting Restricted Shares to the First Batch of Employees Receiving Incentive from the 2022
Restricted Share Incentive Scheme were reviewed and approved. The Company’s Board of Directors
believed that conditions of the incentive scheme for granting restricted shares were fulfilled, and the
Board of Supervisors re-verified the list of incentive receivers on the first grant date, and expressed
opinions on the grant. The Company’s independent directors agreed on the above proposals. Lawyers
and independent financial advisers prepared related reports. On October 28, the Company disclosed
a related announcement on www.cninfo.com.cn.
Equity Incentive Received by the Company’s Directors and Senior Managers
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
√ Applicable □ N/A
Unit: Share
Number Number
Number
Number of Number Exercise Number of
of Number
of Share Newly Number of of Price of of Restricted Restricted
Market Price Restricted of Shares
Options Granted Exercisable Exercised Exercised Share Shares Grant Price Shares
at the End of Shares Unlocked
Held at Share Shares Shares Shares Options Newly of Restricted Held at
Name Title the reporting Held at during
the Options during the during during the Held at Granted Shares the End
period the the
Beginning during reporting the reporting the End during (Yuan/Share) of the
(Yuan/Share) Beginning Current
of the the period reporting period of the the Period
of the Period
Year reporting period (Yuan/Share) Period reporting
Period
period period
Chairman,
Lv
General 0 0 0 0 0 0 0 0 0 200,000 25 200,000
Liang
Manager
Deputy
Wu
General 0 0 0 0 0 0 0 0 0 150,000 25 150,000
Hui
Manager
Deputy
Zhu
General 0 0 0 0 0 0 0 0 0 150,000 25 150,000
Li
Manager
Deputy
Zhang
General 0 0 0 0 0 0 0 0 0 150,000 25 150,000
Jianfei
Manager
Zhu
Director 0 0 0 0 0 0 0 0 0 30,000 25 30,000
Liang
Secretary
Chen of the
0 0 0 0 0 0 0 0 0 100,000 25 100,000
Bo Board of
Directors
Person in
Qiu
Charge of 0 0 0 0 0 0 0 0 0 100,000 25 100,000
Renbo
Finance
Total -- 0 0 0 0 -- 0 -- 0 0 880,000 -- 880,000
Note (if any) N/A
Assessment mechanism and incentive for senior managers
1. In order to ensure that the Company’s senior managers can better perform their duties and be clear
about their rights and obligations, the Company has established a sound performance assessment
management system combining the senior managers’ remuneration and performance. During the
reporting period, the Company’s senior managers could strictly abide by the Company Law, the
Articles of Association and relevant laws and regulations to diligently perform their duties, actively
implement resolutions of the Company’s general meetings and Board of Directors and continue
prudent operations with the Board of Directors’ correct instructions to enhance internal management.
2. During the reporting period, the Company launched the 2022 Restricted Share Incentive Scheme
based on equal earnings and contributions, given that shareholders’ interests would be fully protected,
in order to further establish and improve a long-term incentive scheme for the Company, attract and
retain outstanding experts, fully activate the Company’s senior managers, managers and core
technicians (business specialists) and effectively combine interests of shareholders, the Company,
core teams and personnel to attract all parties’ attention to focusing on the Company’s long-term
growth.
2. Implementation of the employee stock ownership plan
□ Applicable √ N/A
3. Other employee incentives
□ Applicable √ N/A
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
XII. Establishment and implementation of an internal control system during the reporting
period
1. Establishment and implementation of internal control
During the reporting period, the Company constantly promoted the establishment of an internal
control system, improved the corporate governance structure and internal control regulations,
normalized the implementation of such regulations, strengthened the supervision and inspection of
internal control, and ensure that the Company’s operation and management level was constantly
improved, in accordance with the Basic Norms for Enterprise Internal Control, Self-Regulatory
Guidelines for Listed Companies on the Shenzhen Stock Exchange No.1 - Standardized Operation of
Listed Companies on the Main Board, and other relevant laws, regulations and normative documents.
During the reporting period, the Company’s internal control system design is sound and reasonable.
It maintained effective internal control in all major aspects in accordance with the requirements of
internal control standard system and relevant regulations, and there is no major omission. Please refer
to the Self-evaluation Report on Internal Control published on http://www.cninfo.com.cn/ on April
14, 2023.
2. Details of major internal control deficiencies found during the reporting period
□Yes √No
XIII. The Company’s management control over subsidiaries during the reporting period
Issues
Integration encountered Solutions Solution Subsequent
Company name Integration plan
progress during the adopted progress solutions
integration
The Company N/A N/A N/A N/A N/A
held 60% of its
shares, and
Wuhu Huaren
integrated its
Science and
assets,
Technology Co.,
employees,
Ltd.
finance and
business after
acquisition.
The Company N/A N/A N/A N/A N/A
indirectly held
60% of its
shares, and
integrated its
Anhui Huayoulai assets,
Pharmaceutical employees,
Science and finance and
Technology Co., business after
Ltd. acquiring Huaren
Science and
Technology of
which it is a
wholly owned
subsidiary.
The Company N/A N/A N/A N/A N/A
held 100% of its
shares, and
Anhui Meihua
integrated its
Hi-Tech
assets,
Pharmaceutical
employees,
Co., Ltd.
finance and
business after
acquisition.
The Company N/A N/A N/A N/A N/A
Viora Ltd
held 100% of its
103
The 2022 Annual Report of Huadong Medicine Co., Ltd.
shares, and
integrated its
assets,
employees,
finance and
business after
acquisition.
The Company N/A N/A N/A N/A N/A
held 100% of its
shares, and
integrated its
Viora Inc. assets,
employees,
finance and
business after
acquisition.
The Company N/A N/A N/A N/A N/A
held 100% of its
shares, and
integrated its
Viora Canada
assets,
Ltd
employees,
finance and
business after
acquisition.
Hangzhou
Weizhi
N/A N/A N/A N/A N/A N/A
Biotechnology
Co., Ltd.
Hangzhou
Hizyme Biotech N/A N/A N/A N/A N/A N/A
Co., Ltd.
Ruian Huiren
Health-care Co., N/A N/A N/A N/A N/A N/A
Ltd.
Note: During the reporting period, the Company merged nine new subsidiaries through acquisition, capital injection and
consolidation. In strict accordance with relevant laws and regulations of CSRC and SSE, and the provisions of the Articles of
Association, the Company provided guidance on the standardized operation of the subsidiaries in terms of organizational setup,
personnel adjustment, internal control and financial system and other aspects, and timely tracked various major issues of the
subsidiaries to exercise management control over the subsidiaries.
XIV. Self-evaluation report on internal control or audit report on internal control
1. Self-evaluation report on internal control
Disclosure date of the full text of self-
April 14, 2023
evaluation report on internal control
Disclosure index of the full text of self-
cninfo (www.cninfo.com.cn)
evaluation report on internal control
Proportion of assets evaluated in total
assets per consolidated financial 95.00%
statement
Proportion of operating revenue
evaluated in total operating revenue per 90.00%
consolidated financial statement
Recognition standard of deficiencies
Category Financial report Non-financial report
The Company stipulates that internal The Company stipulates that internal
control deficiencies involving the control deficiencies involving the
following fields shall be identified as at following fields shall be considered as
least “important deficiencies”: anti-fraud “material deficiencies”: serious violation
Qualitative criteria procedure and control; internal control of laws and regulation; in addition to
over unconventional or unsystematic policy reasons, the Company has been
transactions; internal control over the losing money for years, and its
selection and application of accounting continuous operation has been
policies in relation to Generally Accepted challenged; lack of system control or
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Accounting Principles (GAAP); internal systematic failure in important business;
control over the end-of-period financial M&A and restructuring failure; the
reporting process. operation of newly expanded subordinate
The Company stipulates that internal units is unsustainable; lack of internal
control deficiencies involving the control construction and disorderly
following fields shall be identified as at management in subsidiaries; middle and
least “important deficiencies”, and has senior managers resign, or serious staff
strong indications of “material turnover in key positions; frequent
deficiencies”: restatement of previously exposure of negative news in the media;
published financial statements to reflect internal control evaluation results,
correction of misstatements resulting especially major or significant
from errors or fraud; the auditor found deficiencies have not been corrected.
material misstatement in the Company’s The Company stipulates that internal
financial statements for the current control deficiencies involving the
period that was not initially detected by following fields shall be considered as
the Company’s internal control over “important deficiencies”: there is a little
financial reports; the Audit Committee’s negative news in the major media at
failed to supervise the Company’s provincial level and above; the general
financial reports and internal control over defects identified last year have not been
financial reports; compliance supervision rectified and there is no reasonable
function is invalid, and the violation of explanation; middle management or
laws and regulations may have a operating personnel are not competent
significant impact on the reliability of enough.
financial reports; any level of
malpractice involving senior managers is
founded; Management failed to correct
important defects in a reasonable period
of time after such reporting to the
management.
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 non-
0
financial reporting
Number of important deficiencies in
0
financial reporting
Number of important deficiencies in non-
0
financial reporting
2. Audit report on internal control
√ Applicable □ N/A
Comments of Internal Control Audit Report
On December 31, 2022, Huadong Medicine has maintained effective internal control over financial reports in all major respects in
accordance with the Basic Norms for Enterprise Internal Control and relevant regulations.
Disclosure of internal control audit report Disclosure
Disclosure date of the full audit report on internal control April 14, 2023
Disclosure index of the full audit report on internal control cninfo (www.cninfo.com.cn)
Type of opinions in the internal control audit report Unmodified unqualified opinions
Whether there are material deficiencies in non-financial reporting No
Whether the accounting firm has issued the audit report on internal control with non-standard opinions
□Yes √No
Whether the audit report on internal control issued by the accounting firm is consistent with the self-evaluation report of the Board of
Directors
√ Yes □ No
XV. Rectification of self-detected problems through the special campaign to improve
governance of listed companies
N/A
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Section V Environmental and Social Responsibilities
I. Major Environmental Protection Issues
Are the listed company and its subsidiaries belong to the key pollutant discharge units announced by the
environmental protection department
Yes □ No
Relevant policies and industry standards for environmental protection
Environmental Protection Law of the People’s Republic of China, Law of the People’s Republic of China on
Water Pollution Prevention and Control, Law of the People’s Republic of China on Atmospheric Pollution
Prevention and Control, Law of the People’s Republic of China on the Prevention and Control of Environmental
Pollution by Solid Waste, Law of the People Republic of China on the Prevention and Control of Ambient Noise
Pollution, Law of the People Republic of China on the Prevention and Control of Soil Pollution, Emission
Standard of Air Pollutants for Pharmaceutical Industry (DB33/ 310005-2021), Discharge Standard of Pollutants for
Bio-pharmaceutical Industry (DB 33/ 923-2014), Emission Standard for Industrial Enterprises Noise at Boundary
(GB 12348-2008), Standard for Pollution Control on the Non-hazardous Industrial Solid Waste Storage and Landfill
(GB 18599-2020), Standard for Pollution Control on Hazardous Waste Storage (GB 18597-2001), Integrated
Wastewater Discharge Standard of Yellow River Basin in Shaanxi Province (DB 61/ 224-2018), Emission Limits
of Water and Air Pollutants for Bio-pharmaceutical Industry (DB 32/ 3560-2019), Emission Standard of Air
Pollutants for Pharmaceutical Industry (DB 32/4042-2021), Emission Standard of Air Pollutants for Pharmaceutical
Industry (GB 37823-2019), Emission Standard of Volatile Organic Compounds for Chemical Industry (DB
32/3151-2016), Integrated Emission Standard of Air Pollutants (DB 32/4041-2021), Standard for Fugitive Emission
of Volatile Organic Compounds (GB 37822-2019), Emission Standards for Odor Pollutants (GB 14554-93),
Emission Limits of Water and Air Pollutants for Bio-pharmaceutical Industry (DB 32/ 3560-2019), and Wastewater
Quality Standards for Discharge to Municipal Sewers (GB/T 31962-2015).
Information on environmental protection-related administrative licensing
All the construction projects of the Company were declared, constructed and accepted strictly according to the
requirements, approved by EIA, and met the requirements for environmental impact assessment of construction
projects.
The Pollutant Emission Permit of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. is valid from
December 25, 2020 to December 24, 2025.
The Pollutant Emission Permit is reapplied by Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co.,
Ltd. and valid from October 31, 2022 to December 20, 2025. In addition, Hangzhou Zhongmei Huadong
Pharmaceutical (Jiangdong) Co., Ltd. has obtained the EIA approval of Bailing Tablets Production Transformation
Project on April 22, 2022 within the reporting period, with the approval number of HHQ EIA Batch [2022] No. 20,
and obtained the EIA approval of HDG1901 API Industrialization Site Construction Project on September 20, 2022,
with the approval number of HHQ EIA Batch [2022] No. 53.
106
The 2022 Annual Report of Huadong Medicine Co., Ltd.
The Pollutant Emission Permit of Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. is valid from
December 27, 2020 to December 26, 2025. In addition, Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd.
has obtained the EIA approval of Technical Transformation Project of Cream Production Line within the reporting
period, with the approval number of WHYF (2022) No. 122.
The Pollutant Emission Permit of Jiangsu Joyang Laboratories is valid from February 28, 2022 to February 27,
2027.
Industrial emission standards and specific situation of pollutant emissions involved in production and business activities
Category Name of
Designat Executiv
of main main Discharg
ion of Quantity Distribut e Approve Excessiv
and and e Total
Compan Discharg of ion of pollutant d total e
particula particula concentr discharg
y or e pattern discharg discharg discharg discharg discharg
r r ation/int es
Subsidia e outlet e outlet e es e
pollutant pollutant ensity
ry standard
s s
Hangzho
Main
u
Entrance
Zhongm Intermitt
,
ei Water ent
pH value Once Mogans 7.41 6~9 / / None
Huadong pollutant discharg
han
Pharmac e
Road,
eutical
No.866
Co., Ltd.
Hangzho
Main
u
Entrance
Zhongm Intermitt 38.21mg 16.5
, 33.3
ei Water ent /l tons
COD Once Mogans 500mg/l tons/ann None
Huadong pollutant discharg (Nanotu (Nanotu
han ual
Pharmac e be) be)
Road,
eutical
No.866
Co., Ltd.
Hangzho
Main
u
Entrance
Zhongm Intermitt
Ammoni , 0.78mg/l 0.3 tons 2.38
ei Water ent
a- Once Mogans (Nanotu 35mg/l (Nanotu tons/ann None
Huadong pollutant discharg
nitrogen han be) be) ual
Pharmac e
Road,
eutical
No.866
Co., Ltd.
Hangzho Complia Within
Hazardo
u Solid nt the 866.37
us solid 2 / / / None
Zhongm pollutant disposal factory tons
waste
ei by at
107
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Huadong entrusted Mogans
Pharmac qualified han
eutical units Road,
Co., Ltd. No.866
Hangzho Within
Complia
u the
nt
Zhongm factory
General disposal
ei Solid at 640.6
solid by 2 / / / None
Huadong pollutant Mogans tons
waste entrusted
Pharmac han
qualified
eutical Road,
units
Co., Ltd. No.866
Hangzho
u
Roof of
Zhongm Organize
Boiler 17.7
ei Air Nitric d 27.5mg/ 2.916
1 Room at 50mg/m tons/ann None
Huadong pollutant oxide discharg m tons
Building ual
Pharmac e
25
eutical
Co., Ltd.
Hangzho
u
Roof of
Zhongm Organize
Boiler
ei Air Sulfur d 0.384
1 Room at 3mg/m 20mg/m / None
Huadong pollutant dioxide discharg tons
Building
Pharmac e
25
eutical
Co., Ltd.
Hangzho
u
Roof of
Zhongm Organize
Boiler
ei Air Dust and d 4.1mg/m 0.258
1 Room at 10mg/m / None
Huadong pollutant fume discharg tons
Building
Pharmac e
25
eutical
Co., Ltd.
Hangzho
u 102.717 141.299
Zhongm Continu 8 tons tons
Phase II 100-
ei Water ous 500mg/ (Nanotu (dischar
COD 1 Factory 300mg/ None
Huadong pollutant discharg L be ged to
Area L
Pharmac e discharg environ
eutical e) ment)
(Jiangdo
108
The 2022 Annual Report of Huadong Medicine Co., Ltd.
ng) Co.,
Ltd.
Hangzho
u
Zhongm 1.0043 7.066
ei Continu tons tons
Ammoni Phase II
Huadong Water ous 0- 20mg/ (Nanotu (dischar
a- 1 Factory 35mg/ L None
Pharmac pollutant discharg L be ged to
nitrogen Area
eutical e discharg environ
(Jiangdo e) ment)
ng) Co.,
Ltd.
Hangzho
u
Zhongm
ei Non- Organize
Phase II
Huadong Air methane d 0- 30mg/ 1.7146 3.002
1 Factory 60mg/ L None
Pharmac pollutant hydrocar discharg L tons tons
Area
eutical bon e
(Jiangdo
ng) Co.,
Ltd.
Huadong Beside
Medicin National
e (Xi Intermitt Highway
‘an) Water ent 310,
pH value Once 8.07 6~9 / / None
Bohua pollutant discharg Liuye
Pharmac e River,
eutical Huayin
Co., Ltd. City
Huadong
Beside
Medicin
National
e (Xi
Intermitt Highway
‘an)
Water ent 310, 0.947
Bohua COD 1 32.8mg/l 50mg/l 3 tons None
pollutant discharg Liuye tons
Pharmac
e River,
eutical
Huayin
Co.,
City
LTD.
Huadong Beside
Intermitt
Medicin Ammoni National
Water ent 0.015 0.48
e (Xi a- 1 Highway 0.55mg/l 8mg/l None
pollutant discharg tons tons
‘an) nitrogen 310,
e
Bohua Liuye
109
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Pharmac River,
eutical Huayin
Co., City
LTD.
Huadong Beside
Medicin National
e (Xi Intermitt Highway
‘an) Water Total ent 310, 0.249
1 9.06mg/l 15mg/l / None
Bohua pollutant nitrogen discharg Liuye tons
Pharmac e River,
eutical Huayin
Co., Ltd. City
Huadong
Complia
Medicin
nt
e (Xi Within
Hazardo disposal
‘an) Solid the 178.378
us by 3 / / / None
Bohua pollutant Compan 48 tons
wastes entrusted
Pharmac y
qualified
eutical
units
Co., Ltd.
Huadong
Medicin
e (Xi
Volatile Organize
‘an)
Air organic d APIs
Bohua 1 / 60mg/m / / None
pollutant compou discharg Plant 1
Pharmac
nds e
eutical
Co.,
LTD.
Huadong
Medicin
e (Xi
Organize
‘an) Hydroge
Air d APIs
Bohua n 1 / 30mg/m / / None
pollutant discharg Plant 1
Pharmac chloride
e
eutical
Co.,
LTD.
Huadong
Medicin Ammoni Organize
e (Xi Air a d APIs
1 / 20mg/m / / None
‘an) pollutant (ammoni discharg Plant 1
Bohua a) e
Pharmac
110
The 2022 Annual Report of Huadong Medicine Co., Ltd.
eutical
Co.,
LTD.
Huadong
Medicin
e (Xi Organize
Hydroge
‘an) Air d APIs
n 1 / 30mg/m / / None
Bohua pollutant discharg Plant 2
chloride
Pharmac e
eutical
Co., Ltd.
Huadong
Medicin
e (Xi Organize
‘an) Air d APIs
PM 1 / 20mg/m / / None
Bohua pollutant discharg Plant 2
Pharmac e
eutical
Co., Ltd.
Huadong
Medicin
e (Xi Ammoni Organize
Sewage
‘an) Air a d
1 treatmen / 20mg/m / / None
Bohua pollutant (ammoni discharg
t station
Pharmac a) e
eutical
Co., Ltd.
Huadong
Medicin
e (Xi Organize
Sewage
‘an) Air Hydroge d
1 treatmen / 5mg/m / / None
Bohua pollutant n sulfide discharg
t station
Pharmac e
eutical
Co., Ltd.
Huadong
Medicin
e (Xi Organize
Odor Sewage
‘an) Air d
concentr 1 treatmen / 6000 / / None
Bohua pollutant discharg
ation t station
Pharmac e
eutical
Co., Ltd.
Huadong Air PM Organize 1 Solid / 20mg/m / / None
111
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Medicin pollutant d preparati
e (Xi discharg on plant
‘an) e
Bohua
Pharmac
eutical
Co., Ltd.
Jiangsu Intermitt No. 9,
Joyang Water ent Haidu
pH value 1 7.5 6~9 / / None
Laborato pollutant discharg North
ries e Road
Jiangsu Intermitt No. 9,
22.401
Joyang Water ent Haidu 6.768
COD 1 94mg/l 500mg/l tons/ann None
Laborato pollutant discharg North tons
ual
ries e Road
Jiangsu Intermitt No. 9,
Ammoni 1.156
Joyang Water ent Haidu 0.146
a- 1 2.03mg/l 35mg/l tons/ann None
Laborato pollutant discharg North tons
nitrogen ual
ries e Road
Jiangsu Intermitt No. 9,
1.486
Joyang Water Total ent Haidu 0.423
1 5.88mg/l 45mg/l tons/ann None
Laborato pollutant nitrogen discharg North tons
ual
ries e Road
Jiangsu Intermitt No. 9,
Total 0.164
Joyang Water ent Haidu 0.123
phospho 1 1.71mg/l 8mg/l tons/ann None
Laborato pollutant discharg North tons
rus ual
ries e Road
Complia
Factory
nt
Jiangsu Area at
Hazardo disposal
Joyang Solid No. 9, 1389
us solid by / / / / None
Laborato pollutant Haidu tons
waste entrusted
ries North
qualified
Road
units
Batch
section
in Plant
Jiangsu Organize 101,
23.612 42.7409
Joyang Air d fermenta 12.5mg/ 60mg/N
PM 5 tons/ann tons/ann None
Laborato pollutant discharg tion m m
ual ual
ries e section
in Plant
101,
batching
112
The 2022 Annual Report of Huadong Medicine Co., Ltd.
section
in Plant
104
(shared
by Plant
107 and
108),
fermenta
tion
section
in Plant
104
(shared
by Plant
107 and
108),
and
drying
section
in Plant
104
(shared
by Plant
107 and
108)
Pollutant treatment
1. Pollutant treatment of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.
(1) Wastewater
Designation of pollution Treatment process Treatment capacity Time when put into operation Operation
prevention and control condition
facility
Wastewater treatment Original 600 tons/day
Facultative + fluidized November 1993 Outage for
system of old sewage 800 tons/day after technical
bed process Technical improvement in 2007 demolition
treatment station improvement
December 2001
Wastewater treatment Technical improvement in 2014
Facultative + CASS + Normal
system of new sewage 2,200 tons/day (adding IC and steam flotation)
steam flotation operation
treatment station IC tower outage for demolition in
2022
(2) Exhaust gas
113
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Designation of pollution Treatment process Treatment capacity Time when put into Operation
prevention and control (CMH) operation condition
facility
DA010 (35#-1) Secondary water spraying + surface cooling + 15,000 2017
Demolished
activated carbon adsorption and desorption
DA011 (35#-2) Secondary water spraying 22,000 2013 Demolished
DA012 (40#-2) Activated carbon + horizontal spraying 6,000 2019 Demolished
DA013 (32#-1) Secondary alkaline water spraying 22,000 2013 Demolished
DA014 (36#-1) Secondary clean water spraying + surface 27,000 2017
Normal
cooling + low-temperature plasma + primary
operation
water spraying
DA015 (40#-1) Secondary clean water spraying 24,200 / Demolished
DA016 (18#-1) Secondary water spraying + activated carbon + 30,000 2022 Normal
primary spraying operation
DA017 (19#-1) Combustion tower / 2018 Demolished
DA018 (19#-2) Combustion tower / 2018 Demolished
DA019 (3#-1) Primary water spraying + photo-oxidation 20,000-+52,000 2019 Normal
operation
DA020 (36#-2) Secondary water spraying + condensation + 10,000 2019
Normal
photo-oxidation + activated carbon + inorganic
operation
nano-catalysis + water spraying
DA021 (16#-1) Primary water spraying + primary alkaline 12,000 2012
Demolished
water spraying
DA022 (16#-2) Primary water spraying + primary vegetable oil 30,000 2014
Demolished
water spraying
DA023 (27#-1) Condensation + primary alkaline water spraying 15,000 2009
+ all-in-one machine + primary alkaline water Outage
spraying
DA024 (33#-1) Secondary alkaline water spraying + condensing 48,000 2019
Demolished
tank + shared primary alkaline water spraying
DA025 (32#-2) Bag dust removal + high efficiency filter / 2017 Demolished
DA026 (34#-1) Secondary alkaline water spraying 54,000 2008 Demolished
DA027 (7#-1) Secondary alkaline water spraying 26,000 2015 Normal
operation
DA028 (6#-1) Primary clean water spraying 12,200 2016 Normal
operation
DA029 (18#-2) Secondary alkaline water spraying + photo- 16,000 2018
oxidation + activated carbon + primary alkaline Demolished
water spraying
DA030 (18#-3) Primary clean water spraying + primary alkaline 5,000 2017 Normal
water spraying operation
114
The 2022 Annual Report of Huadong Medicine Co., Ltd.
DA031 (25#-2) Low nitrogen combustion + high altitude 8,000 2009
emission Low nitrogen
Normal
transformation
operation
completed in
December 2019
DA032 (25#-1) Low nitrogen combustion + high altitude 8,000 2009
emission Low nitrogen
Normal
transformation
operation
completed in
December 2019
DA033 (1#-1) Oil fume purifier / / Normal
operation
DA034 (27#-2) Secondary water spraying + activated carbon 15,000 2011
Outage
adsorption and desorption
DA035 (27#-3) Photo-oxidation + primary alkaline water 22,300 2016
Outage
spraying
DA036 (8#-1) Secondary water spraying 25,000 2017 Normal
operation
DA037 (13#-1) Secondary water spraying + surface cooling + 25,000 2017 Normal
activated carbon adsorption and desorption operation
DA038 (28#-1) Primary water spraying + photo-oxidation 22,000 2011 Demolished
DA039 (28#-2) Secondary water spraying + shared photo- 48,000 2011
Demolished
oxidation
DA040 (29#-1) Primary water spraying + primary alkaline 22,000 2011
Demolished
water spraying
DA041 (33#-2) Primary water spraying 18,600 2012 Demolished
DA042 (10#-1) Primary clean water spraying 20,000 2016 Normal
operation
DA043 (15#-1) Primary alkaline water spraying + photo- 25,000 2018 Normal
oxidation operation
DA044 (43#-1) Primary alkaline water spraying + primary 45,000 2014 Normal
water spraying operation
DA045 (46#-1) Primary clean water spraying 3,000 2015 Normal
operation
DA046 (46#-2) Primary clean water spraying 25000 2015 Normal
operation
DA047 (46#-3) Primary clean water spraying 30,000 2015 Normal
operation
DA048 (23#-1) Secondary water spraying 7,000 2019 Normal
operation
(3) Solid wastes
115
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Designation of pollution Treatment process Treatment capacity Time when put into Operation condition
prevention and control operation
facility
Normative storage 160 tons March 2012 Normative storage, compliant
Hazardous waste warehouse disposal by entrusted
Normative storage 240 tons March 2010
qualified units
Normative storage 7 tons March 2010 Normative storage, compliant
General solid waste storage
Normative storage 30 tons June 2004 disposal by entrusted
yard
qualified units
2. Pollutant treatment of Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd.
(1) Wastewater
Designation of pollution Treatment process Treatment capacity Time when put into Operation
prevention and control operation condition
facility
Phase I sewage treatment Primary sedimentation + EGSB + facultative + 1,500 tons/day March 2016 Normal
station aerobic + advanced treatment operation
Phase II sewage treatment EGSB + facultative + aerobic + advanced 8,500 tons/day July 2019 Normal
station treatment operation
(2) Exhaust gas
Designation of pollution Treatment capacity Time when put into
Treatment process Operation condition
prevention and control facility (CMH) operation
Exhaust gas from
Secondary alkaline spraying +
DA001 fermenting east 45,000 May 2016 Normal operation
photo-catalytic oxidation
section
Exhaust gas from
Secondary alkaline spraying +
DA002 fermenting west 40,000 May 2016 Normal operation
photo-catalytic oxidation
section
Exhaust gas from
DA003 Secondary alkaline spraying 80,000 May 2016 Normal operation
drying north section
Exhaust gas from
DA004 sewage treatment Secondary alkaline spraying 50,000 May 2016 Normal operation
station
Exhaust gas from
DA006 Primary alkaline spraying 10,000 May 2016 Normal operation
batching section
Exhaust gas from
Primary alkaline spraying +
DA007 quality testing and 20,000 May 2016 Normal operation
photo-catalytic oxidation
R&D
Exhaust gas from
DA008 Secondary alkaline spraying 80,000 May 2016 Normal operation
drying south section
116
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Exhaust gas from Secondary alkaline spraying +
DA010 40,000 May 2017 Normal operation
plate-and-frame filter photo-catalytic oxidation
Exhaust gas from
DA011 Secondary alkaline spraying 20,000 May 2017 Normal operation
drying cooling bin
Exhaust gas from
DA012 Primary alkaline spraying 20,000 May 2016 Normal operation
drying 7m
Exhaust gas from
DA013 Primary alkaline spraying 20,000 May 2016 Normal operation
drying 18m
Exhaust gas from Activated carbon + alkaline
DA014 Few June 2019 Normal operation
tank area spraying
Water spraying + RTO +
DA015 RTO exhaust gas 100,000 June 2019 Normal operation
alkaline spraying
Exhaust gas from
DA016 Bag dust removal Few June 2019 Normal operation
Vogely preparation
DA017 MP exhaust gas Photo-catalytic oxidation 44,000 June 2019 Normal operation
Exhaust gas from Alkaline spraying + photo-
DA018 super-resistant catalytic oxidation + water 20,000 June 2019 Normal operation
fermentation spraying
DA019 X8 exhaust gas Acid spraying + water spraying 6,000 June 2019 Normal operation
Alkaline spraying + photo-
Exhaust gas from
DA021 catalytic oxidation + water 30,000 June 2019 Normal operation
quality testing
spraying
Exhaust gas from
Alkaline spraying + water
DA022 AK refining 10,000 June 2019 Normal operation
spraying
hydrochloric acid
Exhaust gas I from Bag dust removal + water
DA023 Few June 2019 Normal operation
spray drying spraying
Exhaust gas from Alkaline spraying + photo-
DA024 AK fermenting north catalytic oxidation + water 90,000 June 2019 Normal operation
section spraying
Exhaust gas from Alkaline spraying + photo-
DA025 AK fermenting south catalytic oxidation + water 90,000 June 2019 Normal operation
section spraying
Exhaust gas from
Alkaline spraying + water
DA026 Phase II sewage 58,000 June 2019 Normal operation
spraying
treatment station
Alkaline spraying + photo-
Exhaust gas from
DA027 catalytic oxidation + water 8,000 June 2019 Normal operation
center control
spraying
Alkaline spraying + water
DA028 YT exhaust gas 4,000 June 2019 Normal operation
spraying
Exhaust gas II from Bag dust removal + water
DA029 Few June 2019 Normal operation
spray drying spraying
117
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Exhaust gas from
Alkaline spraying + water
DA030 AK refining ethyl 1,000 June 2019 Normal operation
spraying
alcohol
Exhaust gas from
Condensation + Secondary
DA031 Bailing Tablets 20,000 July 2022 Normal operation
water spraying
preparation
HDG solvent-
HDBL- Oxidation spraying + secondary
containing exhaust 2,000 September 2022 Outage
FQ217 alkaline spraying
gas
HDBL- HDG odor exhaust Oxidation spraying + alkaline
20,000 September 2022 Outage
FQ218 gas spraying
(3) Solid wastes
Designation of pollution
Time when put into
prevention and control Treatment process Treatment capacity Operation condition
operation
facility
Normative storage 10 tons March 2017 Normative storage, compliant
Hazardous waste warehouse disposal by entrusted
Normative storage 200 tons May 2021
qualified units
Normative storage 20 tons March 2016
Normative storage, compliant
General solid waste storage Normative storage 15 tons March 2016
disposal by entrusted
yard Normative storage 40 tons July 2019
qualified units
Normative storage 30 tons July 2019
3. Pollutant treatment of Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd.
(1) Wastewater
Designation of pollution
Time when put into
prevention and control Treatment process Treatment capacity Operation condition
operation
facility
Pretreatment + Fenton
Wastewater treatment
system + facultative +
system of sewage treatment 250 tons/day July 2012 Normal operation
aerobic + MBR +
station
carbon filtration
(2) Exhaust gas
Designation of pollution prevention and Time when put into
Treatment process Operation condition
control facility operation
Alkaline solution spraying + dry filter
Exhaust gas treatment equipment for
(filter cotton) + UV photolysis + October 2020 Normal operation
APIs Plant 1
activated carbon adsorption
118
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Secondary alkaline solution spraying
Exhaust gas treatment equipment for
+ dry filter + UV photolysis + November 2019 Normal operation
APIs Plant 2
activated carbon
Exhaust gas treatment equipment for
Bag dust removal 2018 Normal operation
solid preparation
(3) Solid wastes
Designation of pollution
Time when put into
prevention and control Treatment process Storage capacity Operation condition
operation
facility
Normative storage, compliant
Hazardous waste repository Normative storage 60 tons January 2012 transfer and disposal by entrusted
qualified units
4. Pollutant treatment of Jiangsu Joyang Laboratories
(1) Wastewater
Designation of pollution
Treatment process Operation condition
prevention and control facility
Steam flotation tank + hydrolytic acidification + IC tower +
Wastewater treatment system of
UASB tank + A/O tank + O tank + secondary sedimentation Normal operation
sewage treatment station
tank
(2) Exhaust gas
Designation of pollution prevention and
Treatment process Operation condition
control facility
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for photo-catalytic oxidation + secondary activated
Normal operation
extracting section in Plant 101 carbon adsorption + 25m exhaust pipe high altitude
emission
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for
secondary activated carbon adsorption + 25m exhaust Normal operation
fermentation section in Plant 101
pipe high altitude emission
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for drying
secondary activated carbon adsorption + 25m exhaust Normal operation
section in Plant 101
pipe high altitude emission
Exhaust gas treatment equipment for Cyclone separator + primary water spray + 15m
Normal operation
batching section in Plant 101 exhaust pipe high altitude emission
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for
secondary activated carbon adsorption + 25m exhaust Normal operation
fermentation sections in Plants 104/107/108
pipe high altitude emission
119
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for photo-catalytic oxidation + secondary activated
Normal operation
extracting section in Plant 104 carbon adsorption + 25m exhaust pipe high altitude
emission
Exhaust gas treatment equipment for Cyclone separator + primary water spray + 15m
Normal operation
batching sections in Plants 104/107/108 exhaust pipe high altitude emission
Exhaust gas treatment equipment for drying Primary water spraying + water-gas separator +
Normal operation
sections in Plants 104/107/108 secondary activated carbon adsorption
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for Plant
photo-catalytic oxidation + secondary activated
103, pretreatment tank and hazardous waste Normal operation
carbon adsorption + 25m exhaust pipe high altitude
repository in Plant 103
emission
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for Plant photo-catalytic oxidation + secondary activated
Normal operation
106 carbon adsorption + 25m exhaust pipe high altitude
emission
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for photo-catalytic oxidation + secondary activated
Normal operation
extracting section in Plant 107 carbon adsorption + 25m exhaust pipe high altitude
emission
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for photo-catalytic oxidation + secondary activated
Normal operation
extracting section in Plant 108 carbon adsorption + 25m exhaust pipe high altitude
emission
Exhaust gas treatment equipment for Plant Primary water spraying +25m exhaust pipe high
Normal operation
109 altitude emission
Primary water spraying + water-gas separator +
Exhaust gas treatment equipment for
photo-catalytic + 25m exhaust pipe high altitude Normal operation
sewage treatment station 303
emission
(3) Solid wastes
Designation of pollution prevention and
Operation condition
control facility
Hazardous waste warehouse Normative storage, compliant disposal by entrusted qualified units
Environmental self-monitoring program
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. has formulated the Pollution Source Self-monitoring
Program, registered the Program in the environmental protection department, and reported all the monitoring data
as required.
120
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. has formulated the entrusted monitoring
plan according to the self-monitoring requirements in the Pollutant Emission Permit, and carried out daily, monthly,
quarterly or annual entrusted monitoring according to the monitoring plan.
Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. has formulated the Self-monitoring Program,
registered the Program in the environmental protection department, and reported the monitoring data as required.
Jiangsu Joyang Laboratories has formulated the Pollution Source Self-monitoring Program according to the
relevant national environmental protection requirements, and reported daily monitoring data as required.
Emergency plan for sudden environmental events
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. has formulated, regularly modified and perfected the
Emergency Plan for Sudden Environmental Events as required.
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. has modified and recorded the
Emergency Plan for Sudden Environmental Events in 2022, with the record No. of 330114-2022-069-M.
Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., Ltd. has modified and perfected the Emergency Plan
for Sudden Environmental Events as required in 2021, and recorded the Plan in Weinan Ecological Environment
Bureau, with the record No. of 610582-2021-090-L.
Jiangsu Joyang Laboratories has formulated the Emergency Plan for Sudden Environmental Events, which has
been approved and recorded in June 2021. Jiangsu Joyang Laboratories organized an emergency drill for sudden
fire and environmental events in May, 2022, which standardized the emergency management of sudden
environmental events, minimized the harm to human health and the environment caused by the leakage of
environmental risk substances into air, water or soil due to fire, explosion, leakage or other unexpected emergencies,
and continuously improved its emergency response capability for sudden environmental pollution incidents.
Investment in environmental governance and protection, and the relevant information on paying environmental protection tax
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. Invested 4,468,000 yuan in environmental
governance and protection, and paid the environmental protection tax of 2,784.88 yuan.
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. is not required to pay environmental
protection tax according to relevant policies.
Huadong Medicine (Xi ‘an) Bohua Pharmaceutical Co., LTD. paid the environmental protection tax of
1,593.13 yuan.
In 2022, Jiangsu Joyang Laboratories invested 12.78 million yuan in environmental governance and protection,
and paid the environmental protection tax of 65,000 yuan as required.
Measures taken to reduce carbon emissions during the reporting period and corresponding effects
Applicable □ Not Applicable
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. implemented the strategy of lean energy consumption.
In 2022, its total energy consumption was 11,922.32 tons of coal equivalent, 2,879.64 tons lower than that in 2021,
with a decrease ratio of 19.45%. The total energy-saving cost was reduced by 11.118 million yuan from the projects
121
The 2022 Annual Report of Huadong Medicine Co., Ltd.
for reducing operation management expenses and saving energy implemented by the energy management
department, including about 6.4495 million yuan reduced by the energy saving projects.
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. continued to use biogas to generate
electricity, reducing the emissions of methane, hydrogen sulfide and other pollutants; continuously taken lean
measures in the plants to reduce pollutant emissions, such as saving water and reducing consumption, and carried
out the 2021 annual carbon emission verification in September 2022.
Jiangsu Joyang Laboratories connected the circulating water pipe network in the plants with the low-
temperature water pipe network to replace the low-temperature water in the plants for production cooling in winter,
reducing the supply of low-temperature water, and saving 300,000 kWh of electricity per annual. In addition, the
concentrated water in purified water station were recycled and reused. Some concentrated water was produced
during the operation of water making equipment of the purified water stations 1 and 2, which met the quality
standard requirements by testing. The concentrated water was stored in barrels (ton) and automatically supplied to
the plant when needed. It is estimated that 10,000 tons of water will be saved in the whole year. The technical
improvement plan of air system was designed on the basis of air usage of each department, solving the problems of
high air pressure and insufficient air flow. Meanwhile, the technical improvement of old air compressor units were
completed in June, reducing the air refilling, and saving 400,000 kWh of electricity throughout the year.
Administrative penalties for environmental issues during the reporting period
Impacts on the
Designation of
production and Rectification
Company or Reasons Type of violation Results
operation of listed measures
Subsidiary
company
Failing to re-apply
for and obtain the Increased Stop the discharge
Jiangsu Joyang Pollutant Emission categories of Fine of 228,000 No significant of the relevant
Laboratories Permit to pollutant yuan impact category of
discharge emissions pollutant
pollutants
Other environmental information to be disclosed
None
Other environmental protection related information
None
II. Social Responsibilities
In the process of strategic transformation, the Company strictly fulfills the social responsibilities
of corporate citizen, and pays attention to the demands of shareholders, governments and regulatory
122
The 2022 Annual Report of Huadong Medicine Co., Ltd.
agencies, employees, customers and patients, suppliers, communities, the public, partners and other
stakeholders to: standardize the governance, consolidate the development cornerstone; adhere to the
sustainable development and focus on long-term value; bear the responsibilities in mind and abide by
business ethics; insist on quality-oriented and make contribution to healthy China; care for employees
and build a happy home together; protect the earth, save energy, reduce emissions, and adhere to
green development; actively participate in public welfare and give back to the society.
For details of the Company’s social responsibility performance in 2022, please refer to the Social
Responsibility Report of Huadong Medicine in 2022.
III. Consolidating and Expanding Achievements of Poverty Alleviation and Rural
Revitalization
The Company has not carried out special poverty alleviation and rural revitalization work in the
reporting period.
123
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Section VI. Important Matters
I. Fulfillment of commitments
1. Commitments made by interested parties such as the Company’s de facto 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
The Company does not have commitments made by interested parties such as the Company’s de facto 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.
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 explain the assets or projects that meet the original profit forecast and
the reasons for that
□ Applicable √ N/A
II. Controlling shareholders’ and related parties’ occupation of non-operating funds of the listed
companies
□ Applicable √ N/A
No such case during the reporting period.
III. External guarantees in violation of provisions
□ Applicable √ N/A
No such case during the reporting period.
IV. Explanation by the Board of Directors on the latest “nonstandard audit report”
□ Applicable √ N/A
V. Explanation by the Board of Directors, the Board of Supervisors and the independent
directors (if any) on the “nonstandard audit report” of the accounting firm during the current
reporting period
□ Applicable √ N/A
VI. Explanation of changes in accounting policies and estimation, or the correction of significant
accounting errors as compared with the previous financial report
√ Applicable □ N/A
1. Important accounting policy changes
(1) Accounting policy changes arising from changes in the Accounting Standards for Business
Enterprises
1) The Company has implemented the provision on the “accounting treatment for products or by-
products sold by companies that are produced before the fixed assets reach the expected usable status
or in the research and development process” stipulated in the Interpretation No. 15 of the Accounting
Standards for Business Enterprises issued by the Ministry of Finance since January 1, 2022. Such
change has no influence on the Company’s financial statements.
2) The Company has implemented the provision on the “judgment of onerous contracts” stipulated in
the Interpretation No. 15 of the Accounting Standards for Business Enterprises issued by the Ministry
of Finance since January 1, 2022. Such change has no influence on the Company’s financial
statements.
124
The 2022 Annual Report of Huadong Medicine Co., Ltd.
(3) The Company has implemented the provision on the “accounting treatment influenced by income
taxes of related dividends associated with financial instruments categorized by issuers as equity
instruments” stipulated in the Interpretation No. 16 of the Accounting Standards for Business
Enterprises issued by the Ministry of Finance since November 30, 2022. Such change has no
influence on the Company’s financial statements.
4) The Company has implemented the provision on the “accounting treatment for share-based
payment by cash settlement changed into that by equity settlement” stipulated in the Interpretation
No. 16 of the Accounting Standards for Business Enterprises issued by the Ministry of Finance since
November 30, 2022. Such change has no influence on the Company’s financial statements.
(2) Other accounting policy changes
Review and Approval
Accounting Policy Changes and Reasons Note
Procedures
The Company’s wholly owned subsidiaries of Huadong
Medicine Investment Holding (Hong Kong) Limited, Huadong.
Medicine Aesthetics Investment (Hong Kong) Limited and
Huadong Medicine Skin Care (Hong Kong) Limited are players
of overseas trade and platforms of investment and financing,
which mainly engage in investments in outside units and
management. The three subsidiaries carried out investment
activities that are valued and settled in USD. Their operating
expenses are mainly paid in USD and financing activities are
USD loans. In accordance with the Accounting Standards for The change was reviewed
Business Enterprises, the Company believes that the three and approved by the 15th
overseas subsidiaries changing their bookkeeping base currency session of the 9th Board of
from RMB to USD can represent their operating results and Directors of the Company.
financial conditions more objectively and fairly, thus providing
investors with more reliable and accurate accounting
information, after prudent consideration by combining their
future development planning, business development scale and
current economic environment, based on the three subsidiaries’
actual business conditions. The three subsidiaries have changed
their bookkeeping base currency to USD since April 26, 2022.
The prospective application was adopted in the accounting policy
change.
2. Important changes in accounting estimate
(1) Changes in accounting estimate and reasons
Changes in Accounting Estimate and Review and Approval
Effective Date Note
Reasons Procedures
The Company included R&D expenses in
gains and losses for the current period at the
time of occurrence, and has decided to
change estimate of the capitalization date of
such expenses according to the principle of The change was
stricter prudence, combined with the actual reviewed and approved
conditions of the Company’s R&D activities by the 15th session of
Since April 26, 2022
and by reference to the capitalization of the 9th Board of
R&D expenses of listed companies in the Directors of the
same industry, in order to fully and Company.
objectively represent the Company’s R&D
expenses and asset measurement. The
prospective application was adopted in the
accounting estimate change.
125
The 2022 Annual Report of Huadong Medicine Co., Ltd.
(2) Statement items and amount under material influence
Statement Item under Material Influence Influenced Amount Note
Balance sheet accounts on December 31, 2022
Development expenditures 227,794,420.14
Undistributed profit -159,456,094.10
Income statement accounts in 2022
R&D expenses -227,794,420.14
The expenses were deducted
before tax according to 100%
Income tax expenses 68,338,326.04 of the amount occurred, and the
applicable rate of enterprise
income tax was 15%.
VII. Changes in the scope of consolidated statements as compared to the previous financial
report
√ Applicable □ N/A
Please refer to “VIII. Change of consolidation scope” in “Section X. Financial Report” of this report for details.
VIII. Employment and dismissal of accounting firms
Accounting firm employed by the Company for now
Pan-China Certified Public Accounts (Special
Name of the domestic accounting firm
General Partnership)
Continuous number of years of audit services provided by the domestic
165
accounting firm
Remuneration of the domestic accounting firm (ten thousand yuan) 25
Certified public accountants of the domestic accounting firm Wang Fukang and Chen Xiaodong
Continuous number of years of audit services provided by certified public
5
accountants of the domestic accounting firm
Name of the overseas accounting firm (if any) None
Remuneration of the overseas accounting firm (ten thousand yuan) (if any) 0
Continuous number of years of audit services provided by the overseas
None
accounting firm (if any)
Certified public accountants of the overseas accounting firm (if any) None
Continuous number of years of audit services provided by certified public
None
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; audit fee of the annual financial report and internal
control audit report is RMB1.65 million (before tax).
IX. Delisting after annual report disclosure
□ Applicable √ N/A
126
The 2022 Annual Report of Huadong Medicine Co., Ltd.
X. Bankruptcy reorganization
□ Applicable √ N/A
The Company does not have related matters of bankruptcy reorganization during the reporting period.
XI. Major litigation and arbitration
√ Applicable □ N/A
Amount Whether an
Litigation Litigation (arbitration) Execution of
involved (in estimated Disclosure Disclosure
(arbitration) adjudication result and litigation (arbitration)
ten thousand liability is date index
progress impact judgments
yuan) formed
Some cases
Do not
are under Some cases have
The summary of the meet the
trials and been executed; some
litigation matters has no disclosure
3841.0733 No some adjudicated cases are /
significant impact on standards
adjudications being executed; some
the Company for major
have come are not adjudicated
litigation
into force
Do not
The summary of the meet the
Cases are under trails
All cases are litigation matters has no disclosure
137.97 No and are to be /
under trails significant impact on standards
adjudicated
the Company for major
litigation
XII. Punishment and rectification
□ Applicable √ N/A
No such case during the reporting period.
XIII. Integrity of the Company and its controlling shareholders and de facto controller
√ Applicable □ N/A
There is no case of the Company, its controlling shareholders and de facto controller failed to comply with the effective judgement of
the court, or failed to repay the due debts of a large amount during the reporting period.
XIV. Major related transactions
1. Transactions related to daily operations
√ Applicable □ N/A
Related Approved Whether
Proportion Available
Pricing transaction transaction it Settlement
Type of Content of Price of in the market
Related principles for amount amount exceeds method of Disclosure
Related party related related related amount of prices of Disclosure index
relations related (ten (ten the related date
transaction transaction transaction similar similar
transaction thousand thousand approved transaction
transactions transactions
yuan) yuan) amount
Market price
determined by Cash,
Hangzhou Jiuyuan Joint venture
Drug Drug the Company’s Market banker’s Cninfo
Gene Engineering of the 6,746.73 0.26% 7,000 No Market price May 12, 2022
purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. Company
ion decision- bill
making process
Market price
Subsidiary of determined by Cash,
Grandpharma the Company’s Drug Drug the Company’s Market banker’s Cninfo
5,296 0.21% 7,500 No Market price May 12, 2022
(China) Co., Ltd. controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
shareholder ion decision- bill
making process
Market price
Sichuan Yuanda Subsidiary of determined by Cash,
Shuyang the Company’s Drug Drug the Company’s Market banker’s Cninfo
3,496.8 0.14% 6,500 No Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
Subsidiary of determined by Cash,
Penglai Nuokang
the Company’s Drug Drug the Company’s Market banker’s Cninfo
Pharmaceutical 3,286.77 0.13% 3,000 Yes Market price May 12, 2022
controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co. Ltd.
shareholder ion decision- bill
making process
127
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Market price
Beijing Grand Subsidiary of determined by Cash,
Johamu the Company’s Drug Drug the Company’s Market banker’s Cninfo
3,279.62 0.13% 3,500 No Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
Hangzhou Grand Subsidiary of determined by Cash,
Biologic the Company’s Drug Drug the Company’s Market banker’s Cninfo
2,409.42 0.09% 2,000 Yes Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Inc. shareholder ion decision- bill
making process
Market price
Wuhan Grand Subsidiary of determined by Cash,
Pharmaceutical the Company’s Drug Drug the Company’s Market banker’s Cninfo
2,408.21 0.09% 3,550 No Market price May 12, 2022
Group Sales Co., controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Ltd. shareholder ion decision- bill
making process
Market price
Yunnan
Subsidiary of determined by Cash,
Leiyunshang
the Company’s Drug Drug the Company’s Market banker’s Cninfo
Lixiang 1,934.32 0.08% 2,200 No Market price May 12, 2022
controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Pharmaceutical
shareholder ion decision- bill
Co., Ltd.
making process
Market price
Subsidiary of determined by Cash,
Leiyunshang
the Company’s Drug Drug the Company’s Market banker’s Cninfo
Pharmaceutical 1,263.01 0.05% 500 Yes Market price May 12, 2022
controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Group Co. Ltd.
shareholder ion decision- bill
making process
Market price
Shenyang Yaoda Subsidiary of determined by Cash,
Leiyunshang the Company’s Drug Drug the Company’s Market banker’s Cninfo
581.6 0.02% 500 Yes Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
Xi’an Yuanda new Subsidiary of determined by Cash,
Beilin the Company’s Drug Drug the Company’s Market banker’s Cninfo
522.21 0.02% 300 Yes Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd shareholder ion decision- bill
making process
Market price
Subsidiary of determined by Cash,
Grand Life
the Company’s Drug Drug the Company’s Market banker’s Cninfo
Science (Wuhan) 518.44 0.02% Yes Market price May 12, 2022
controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd.
shareholder ion decision- bill
making process
Market price
Grand Subsidiary of determined by Cash,
Biopharmaceutical the Company’s Drug Drug the Company’s Market banker’s Cninfo
492.57 0.02% Yes Market price May 12, 2022
(Chongqing) Co., controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Ltd. shareholder ion decision- bill
making process
Market price
Xi’an Yuanda Subsidiary of determined by Cash,
Detian the Company’s Drug Drug the Company’s Market banker’s Cninfo
267.3 0.01% Yes Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd shareholder ion decision- bill
making process
Market price
Guangdong Subsidiary of determined by Cash,
Leiyunshang the Company’s Drug Drug the Company’s Market banker’s Cninfo
221.47 0.01% 350 No Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
Changchun Subsidiary of determined by Cash,
Leiyunshang the Company’s Drug Drug the Company’s Market banker’s Cninfo
208.09 0.01% 150 Yes Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
Changshu Subsidiary of determined by Cash,
Leiyunshang the Company’s Drug Drug the Company’s Market banker’s Cninfo
95.57 0.00% 150 No Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
Anhui Subsidiary of determined by Cash,
Leiyunshang the Company’s Drug Drug the Company’s Market banker’s Cninfo
80.45 0.00% Yes Market price May 12, 2022
pharma ceutica l controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
Grandpharma Subsidiary of determined by Cash,
Huangshi Feiyun the Company’s Drug Drug the Company’s Market banker’s Cninfo
7.58 0.00% Yes Market price May 12, 2022
Pharmaceutical controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Grand Life Subsidiary of Drug Drug Market price Market Cash, Cninfo
616.91 0.02% Yes Market price May 12, 2022
Science the Company’s purchase purchase determined by price banker’s (http://www.Cninfo.com.cn)
128
The 2022 Annual Report of Huadong Medicine Co., Ltd.
(Liaoning) Co., controlling the Company’s acceptance
Ltd. shareholder related transact bill
ion decision-
making process
Market price
Subsidiary of determined by Cash,
Liaoning Weibang
the Company’s Drug Drug the Company’s Market banker’s Cninfo
Biopharmaceutical 25.47 0.00% Yes Market price May 12, 2022
controlling purchase purchase related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd.
shareholder ion decision- bill
making process
Market price
determined by Cash,
Hangzhou Jiuyuan Joint venture
Technical Technical the Company’s Market banker’s Cninfo
Gene Engineering of the 1,280 0.05% 2,200 No Market price May 12, 2022
service fee service fee related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. Company
ion decision- bill
making process
Market price
determined by Cash,
Chongqing Peg- Joint venture
Technical Technical the Company’s Market banker’s Cninfo
Bio Biopharm of the 200 0.01% 3,000 No Market price May 12, 2022
service fee service fee related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. Company
ion decision- bill
making process
Market price
Subsidiary of determined by Cash,
Penglai Nuokang
the Company’s Technical Technical the Company’s Market banker’s Cninfo
Pharmaceutical 176.98 0.01% Yes Market price May 12, 2022
controlling service fee service fee related transact price acceptance (http://www.Cninfo.com.cn)
Co. Ltd.
shareholder ion decision- bill
making process
Market price
Beijing Yuanda
Subsidiary of determined by Cash,
Chuangxin Property Property
the Company’s the Company’s Market banker’s Cninfo
Property management management 19.28 0.00% Yes Market price May 12, 2022
controlling related transact price acceptance (http://www.Cninfo.com.cn)
Management Co., fee fee
shareholder ion decision- bill
Ltd.
making process
Market price
Subsidiary of determined by Cash,
Grand Bay View the Company’s conference conference the Company’s Market banker’s Cninfo
53.33 0.00% Yes Market price May 12, 2022
Hotel Zhuhai controlling fee fee related transact price acceptance (http://www.Cninfo.com.cn)
shareholder ion decision- bill
making process
Market price
Subsidiary of determined by Cash,
Grand Bay Hotel
the Company’s conference conference the Company’s Market banker’s Cninfo
View Chengdu 42.95 0.00% Yes Market price May 12, 2022
controlling fee fee related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd.
shareholder ion decision- bill
making process
Market price
Beijing Haiwan Subsidiary of determined by Cash,
Banshan Hotel the Company’s conference conference the Company’s Market banker’s Cninfo
6.8 0.00% Yes Market price May 12, 2022
Management Co., controlling fee fee related transact price acceptance (http://www.Cninfo.com.cn)
Ltd. shareholder ion decision- bill
making process
Market price
determined by Cash,
Hangzhou Junlan
Shareholding the Company’s Market banker’s Cninfo
Pharmaceutical Drug sales Drug sales 9,450.68 0.25% 13,000 No Market price May 12, 2022
enterprise related transact price acceptance (http://www.Cninfo.com.cn)
Trading Co. Ltd.
ion decision- bill
making process
Market price
Hangzhou determined by Cash,
Joint venture
Tangyangyuan the Company’s Market banker’s Cninfo
of the Drug sales Drug sales 1,001.62 0.03% 1,100 No Market price May 12, 2022
Pharmaceutical related transact price acceptance (http://www.Cninfo.com.cn)
Company
Co., Ltd. ion decision- bill
making process
Market price
determined by Cash,
Hangzhou Jiuyuan Joint venture
the Company’s Market banker’s Cninfo
Gene Engineering of the Drug sales Drug sales 583.15 0.02% 1,200 No Market price May 12, 2022
related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. Company
ion decision- bill
making process
Market price
Subsidiary of determined by Cash,
Leiyunshang
the Company’s the Company’s Market banker’s Cninfo
Pharmaceutical Drug sales Drug sales 543.71 0.01% 650 No Market price May 12, 2022
controlling related transact price acceptance (http://www.Cninfo.com.cn)
Group Co. Ltd.
shareholder ion decision- bill
making process
Market price
Yunnan
Subsidiary of determined by Cash,
Leiyunshang
the Company’s the Company’s Market banker’s Cninfo
Lixiang Drug sales Drug sales 420.28 0.01% 350 Yes Market price May 12, 2022
controlling related transact price acceptance (http://www.Cninfo.com.cn)
Pharmaceutical
shareholder ion decision- bill
Co., Ltd.
making process
Market price
Guangdong Subsidiary of determined by Cash,
Leiyunshang the Company’s the Company’s Market banker’s Cninfo
Drug sales Drug sales 271.79 0.01% 220 Yes Market price May 12, 2022
Pharmaceutical controlling related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Hangzhou Grand Subsidiary of Market price Cash,
Biologic the Company’s determined by Market banker’s Cninfo
Drug sales Drug sales 58.91 0.00% 150 No Market price May 12, 2022
Pharmaceutical controlling the Company’s price acceptance (http://www.Cninfo.com.cn)
Inc. shareholder related transact bill
129
The 2022 Annual Report of Huadong Medicine Co., Ltd.
ion decision-
making process
Market price
Subsidiary of determined by Cash,
Grand Resources the Company’s the Company’s Market banker’s Cninfo
Drug sales Drug sales 3.99 0.00% Yes Market price May 12, 2022
Group Co., Ltd. controlling related transact price acceptance (http://www.Cninfo.com.cn)
shareholder ion decision- bill
making process
Market price
Changchun Subsidiary of determined by Cash,
Leiyunshang the Company’s the Company’s Market banker’s Cninfo
Drug sales Drug sales 21 0.00% Yes Market price May 12, 2022
Pharmaceutical controlling related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
Changshu Subsidiary of determined by Cash,
Leiyunshang the Company’s the Company’s Market banker’s Cninfo
Drug sales Drug sales 10.52 0.00% Yes Market price May 12, 2022
Pharmaceutical controlling related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
Subsidiary of determined by Cash,
Grand Holding the Company’s the Company’s Market banker’s Cninfo
Drug sales Drug sales 0.11 0.00% Yes Market price May 12, 2022
Co., Ltd. controlling related transact price acceptance (http://www.Cninfo.com.cn)
shareholder ion decision- bill
making process
Market price
Sichuan Yuanda Subsidiary of determined by Cash,
Shuyang the Company’s the Company’s Market banker’s Cninfo
Drug sales Drug sales 516.37 0.01% Yes Market price May 12, 2022
Pharmaceutical controlling related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. shareholder ion decision- bill
making process
Market price
determined by Cash,
Chongqing Peg- Joint venture
the Company’s Market banker’s Cninfo
Bio Biopharm of the Drug sales Drug sales 15.49 0.00% Yes Market price May 12, 2022
related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. Company
ion decision- bill
making process
Market price
Subsidiary of determined by Cash,
Penglai Nuokang
the Company’s Agent Agent the Company’s Market banker’s Cninfo
Pharmaceutical 2,073.15 0.05% 1,978 Yes Market price May 12, 2022
controlling service fee service fee related transact price acceptance (http://www.Cninfo.com.cn)
Co. Ltd.
shareholder ion decision- bill
making process
Market price
determined by Cash,
Chongqing Peg- Joint venture Preparati on Preparation
the Company’s Market banker’s Cninfo
Bio Biopharm of the filling filling 112.26 0.00% 150 No Market price May 12, 2022
related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. Company Service Service
ion decision- bill
making process
Market price
Hangzhou Grand Subsidiary of determined by Cash,
Biologic the Company’s processing processing the Company’s Market banker’s Cninfo
42.72 0.00% 25 Yes Market price May 12, 2022
Pharmaceutical controlling charge charge related transact price acceptance (http://www.Cninfo.com.cn)
Inc. shareholder ion decision- bill
making process
Market price
Subsidiary of determined by Cash,
Fujian KaiLi Bio- the Company’s Technical Technical the Company’s Market banker’s Cninfo
33.02 0.00% Yes Market price May 12, 2022
Product Co., Ltd. controlling service fee service fee related transact price acceptance (http://www.Cninfo.com.cn)
shareholder ion decision- bill
making process
Market price
determined by Cash,
Hangzhou Jiuyuan Joint venture
the Company’s Market banker’s Cninfo
Gene Engineering of the House rental House rental 6.42 0.00% 6.42 No Market price May 12, 2022
related transact price acceptance (http://www.Cninfo.com.cn)
Co., Ltd. Company
ion decision- bill
making process
Subsidiary of
Market price
Hangzhou the Company’s
determined by Cash,
Tangyangyuan joint venture
the Company’s Market banker’s Cninfo
TCM Outpatient Hangzhou House rental House rental 17.71 0.00% Yes Market price May 12, 2022
related transact price acceptance (http://www.Cninfo.com.cn)
Department Co., Tangyangyuan
ion decision- bill
Ltd. Pharmaceutical
making process
Co., Ltd.
Market price
Subsidiary of determined by Cash,
Beijing Yanhuang
the Company’s House House the Company’s Market banker’s Cninfo
Real Estate Co., 132.48 0.01% Yes Market price May 12, 2022
controlling leasing leasing related transact price acceptance (http://www.Cninfo.com.cn)
Ltd.
shareholder ion decision- bill
making process
Total -- -- 50,853.26 -- 61,229.42 -- -- -- -- --
Details of bulk sales returns N/A
Actual performance during the reporting period where the total
Actual amount occurred in daily transactions related to daily operations of the Company and its subsidiaries did not exceed the annual estimate during
amount of daily related transactions is estimated by category
the reporting period.
for the current period (if any)
Reasons for the large difference between the transaction price
N/A
and the market reference price (if applicable)
130
The 2022 Annual Report of Huadong Medicine Co., Ltd.
2. Related transactions involving the acquisition or sales of assets and equity
□ Applicable √ N/A
No such case 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
No such case during the reporting period.
5. Transactions with financial companies who are related parties of the Company
□ Applicable √ N/A
No deposit, loan, credit or other financial business between the Company and the related financial companies
6. Transactions between the financial companies controlled by the Company and the related parties
□ Applicable √ N/A
No deposit, loan, credit or other financial business between the financial companies controlled by the Company and the related parties.
7. Other major related transactions
□ Applicable √ N/A
No such case during the reporting period.
XV. Major contracts and their fulfillment
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
Note on leasing
No significant leasing of the Company.
Projects generating gains and losses to the Company that account for over 10% of the total profits during the reporting period
□ Applicable √ N/A
2. Important guarantees
√ Applicable □ N/A
Unit: RMB ten thousand yuan
External guarantees of the Company and its subsidiaries (excluding guarantees for subsidiaries)
131
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Disclosure Guarantee
Counter
date of the Actual date Actual for a
guaranteed Guarantee Type of Collateral - Period of Fulfilled
announcement of guaranteed related
party Cap guarantee (if any) guaranty guarantee or not
related to the occurrence amount party or
(if any)
guarantee Cap not
The Company’s guarantees for its subsidiaries
Disclosure Guarantee
Counter
date of the Actual date Actual for a
guaranteed Guarantee Type of Collateral - Period of Fulfilled
announcement of guaranteed related
party Cap guarantee (if any) guaranty guarantee or not
related to the occurrence amount party or
(if any)
guarantee Cap not
Hangzhou
Zhongmei Joint
April 28, April 9,
Huadong 80,000 974 liability One year No No
2020 2021
Pharmaceutical guarantee
Co., Ltd.
Hangzhou
Zhongmei Joint
April 28, November
Huadong 85,000 1,599 liability One year No No
2022 14, 2022
Pharmaceutical guarantee
Co., Ltd.
Hangzhou
Zhongmei Joint
April 28, October 26,
Huadong 85,000 15,000 liability One year No No
2022 2022
Pharmaceutical guarantee
Co., Ltd.
Hangzhou
Zhongmei Joint
April 28, November
Huadong 85,000 4,612 liability One year No No
2022 22, 2022
Pharmaceutical guarantee
Co., Ltd.
Hangzhou
Zhongmei Joint
April 28, July 13,
Huadong 85,000 26,445 liability One year No No
2022 2022
Pharmaceutical guarantee
Co., Ltd.
Huadong
Medicine
April 28,
(Xi’an) Bohua 5,000 5,000 One year
2022
Pharmaceutical
Co., Ltd.
Huadong
Medicine April 28,
16,000 16,000 One year
Ningbo Sales 2022
Co., Ltd.
Huadong
Medicine April 28,
15,000 15,000 One year
Huzhou Co., 2022
Ltd.
Huadong
Joint
Medicine April 28, March 25,
18,500 18,500 liability One year No No
Shaoxing Co., 2022 2022
guarantee
Ltd.
Huadong
Medicine
Supply Chain April 19,
20,000 20,000 Ten years
Management 2019
(Jinhua) Co.,
Ltd.
Huadong
Medicine
(Hangzhou) April 28,
3,000 3,000 One year
Biological 2022
Products Co.,
Ltd.
Jiangsu April 28, 7,000 7,000 One year
132
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Jiuyang 2022
Biopharm Co.,
Ltd.
Huadong
Joint
Medicine April 28,
24,000 July 5, 2022 24,000 liability One year No No
Wenzhou Co., 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28,
24,000 July 8, 2022 24,000 liability One year No No
Wenzhou Co., 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, July 11,
24,000 24,000 liability One year No No
Wenzhou Co., 2022 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, July 12,
24,000 24,000 liability One year No No
Wenzhou Co., 2022 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, July 13,
24,000 24,000 liability One year No No
Wenzhou Co., 2022 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, August 4,
24,000 24,000 liability One year No No
Wenzhou Co., 2022 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, August 5,
24,000 24,000 liability One year No No
Wenzhou Co., 2022 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, August 24,
24,000 24,000 liability One year No No
Wenzhou Co., 2022 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, September
24,000 24,000 liability One year No No
Wenzhou Co., 2022 13, 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, September
24,000 24,000 liability One year No No
Wenzhou Co., 2022 15, 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, April 26,
15,000 15,000 liability One year No No
Lishui Co., 2022 2022
guarantee
Ltd.
Huadong
Joint
Medicine April 28, November
2,500 2,500 liability One year No No
Daishan Co., 2022 17, 2022
guarantee
Ltd.
Huadong
Medicine
April 28,
Cunde 14,300 14,300 One year
2022
(Zhoushan)
Co., Ltd.
Hangzhou
Zhongmei
Joint
Huadong April 28, October 17,
70,000 70,000 liability One year No No
Pharmaceutical 2022 2022
guarantee
Jiangdong Co.,
Ltd.
Hangzhou
Huadong Joint
April 28, March 25,
Pharmacy 5,000 5,000 liability One year No No
2022 2022
Chain Co., guarantee
Ltd.
133
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Huadong
Joint
Medicine April 28, October 17,
10,000 10,000 liability One year No No
Jinhua Co., 2022 2022
guarantee
Ltd.
Huadong
Medicine Joint
June 30, Three
Investment July 16, 2021 66,164 66,164 liability No No
2022 years
Holding (Hong guarantee
Kong) Limited
Huadong
Medicine
April 28,
Investment 70,000 70,000 One year
2022
Holding (Hong
Kong) Limited
Sinclair Joint
November 23, May 21, Three
Pharma 40,000 40,000 liability No No
2018 2020 years
Limited guarantee
Sinclair Joint
November 23, July 30, Three
Pharma 40,000 40,000 liability No No
2018 2020 years
Limited guarantee
Sinclair Joint
November 23, November Three
Pharma 40,000 40,000 liability No No
2018 16, 2020 years
Limited guarantee
Sinclair Joint
November 23, February 4, Three
Pharma 40,000 40,000 liability No No
2018 2021 years
Limited guarantee
Sinclair Joint
September 17, March 30, Three
Pharma 12,591 12,591 liability No No
2020 2021 years
Limited guarantee
Sinclair Joint
September 17, April 19, Three
Pharma 12,591 12,591 liability No No
2020 2021 years
Limited guarantee
Sinclair Joint
September 17, May 26, Three
Pharma 12,591 12,591 liability No No
2020 2021 years
Limited guarantee
Sinclair Joint
September 17, August 11, Three
Pharma 12,591 12,591 liability No No
2020 2021 years
Limited guarantee
Sinclair Joint
September 17, September Three
Pharma 12,591 12,591 liability No No
2020 14, 2021 years
Limited guarantee
Sinclair Joint
January 13, Three
Pharma July 16, 2021 38,305 38,305 liability No No
2022 years
Limited guarantee
Sinclair Joint
March 16, April 8, Three
Pharma 14,846 14,846 liability No No
2021 2021 years
Limited guarantee
Sinclair Joint
March 16, March 17, December
Pharma 14,846 14,846 liability No No
2021 2021 31, 2024
Limited guarantee
Sinclair
March 16, Three
Pharma 31,696
2021 years
Limited
Sinclair
April 28,
Pharma 58,600 One year
2022
Limited
Total guarantee
Total guarantee cap for amount for
subsidiaries approved during 418,900 subsidiaries actually 76,652
the reporting period (B1) occurred during the
reporting period (B2)
Total actual guarantee
Total approved guarantee cap balance for
for subsidiaries at the end of 722,502 subsidiaries at the end 221,169
the reporting period (B3) of the reporting
period (B4)
134
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Subsidiaries guarantee for subsidiaries
Disclosure Guarantee
Counter
date of the Actual date Actual for a
guaranteed Guarantee Type of Collateral - Period of Fulfilled
announcement of guaranteed related
party Cap guarantee (if any) guaranty guarantee or not
related to the occurrence amount party or
(if any)
guarantee Cap not
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 418,900 76,652
reporting period
(A1+B1+C1)
(A2+B2+C2)
Total actual guarantee
Total approved guarantee cap
balance at the end of
at the end of the reporting 722,502 221,169
the reporting period
period (A3+B3+C3)
(A4+B4+C4)
Proportion of the actual guarantee amount (i.e.
11.90%
A4+B4+C4) in the Company’s net assets
Including:
Balance of guarantees for shareholders, de facto
0
controllers and their related parties (D)
Amount of debt guarantees provided directly or indirectly
116,151
for the entities with a liability to asset ratio over 70% (E)
The total amount of guarantees exceeds 50% of the net
0
assets (F)
Total guarantee amount of the above-mentioned three
116,151
kinds of guarantees (D+E+F)
Note on the circumstance that guarantee liability has
occurred or there may be joint liability for settlement
N/A
during the reporting period in terms of unexpired
guarantee contracts (if any)
Note of external guarantees in violation of prescribed
N/A
procedures (if any)
Note on the specific circumstance if multiple methods are adopted for guarantees
3. Entrusted management of cash assets
(1) Entrusted wealth management
□ Applicable √ N/A
No such case during the reporting period.
(2) Entrusted loans
□ Applicable √ N/A
No such case during the reporting period.
4. Other significant contracts
□ Applicable √ N/A
No such case during the reporting period.
XVI. Other major events
□ Applicable √ N/A
No such case during the reporting period.
XVII. Major events of subsidiaries
√ Applicable □ N/A
135
The 2022 Annual Report of Huadong Medicine Co., Ltd.
(I) Major medicines (products) of the wholly owned subsidiary, Zhongmei Huadong, included, newly
entering and withdrawing from the National Essential Medicine List and the Medicines List for
Medical Insurance:
In January 2023, the National Healthcare Security Administration and the Ministry of Human
Resources and Social Security of the People’s Republic of China launched the National Drug Catalog
for Basic Medical Insurance, Work-Related Injury Insurance, and Maternity Insurance (2022)
(hereinafter referred to as the 2022 Drug Catalog), which has been effective since March 1, 2023.
As of the release of this report, the Company had a total of 30 core products approved for launch and
nine major ones under development in the 2022 Drug Catalog, among which the launched acarbose
chewable tablets, corbrin capsules and empagliflozin and metformin combination (I) of the Company
are negotiated medicines of the 2022 Drug catalog.
As of the release of this report, the Company had a total of 14 medicines (including one under
development in the National Essential Medicine List (Version 2018).
(II) As of the release of this report, major assets had been disposed in the liquidation of Huadong
Ningbo Medicine Co., Ltd. in the court. Some claims and accounts receivable are remained to be
collected.
136
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Section VII. Share Change and Shareholders
I. Changes in shares
1. Table of changes in shares
Unit: Share
Before the change Change in the period (+/-) After the change
Shares
converted
Number of New Bonus Number of
Proportion from Others Total Proportion
shares shares shares shares
capital
reserve
I. Shares
subject to
47,745 0.00% 0 0 0 4,220,555 4,220,555 4,268,300 0.24%
conditional
restriction
1. Shares
held by the 0 0.00% 0 0 0 0 0 0 0.00%
state
2. Shares
held by
0 0.00% 0 0 0 0 0 0 0.00%
state-owned
corporations
3. Shares
held by other
47,745 0.00% 0 0 0 4,020,555 4,020,555 4,068,300 0.23%
domestic
investors
Including:
Shares held
0 0.00% 0 0 0 0 0 0 0.00%
by domestic
corporations
Shares held
by domestic
47,745 0.00% 0 0 0 4,020,555 4,020,555 4,068,300 0.23%
natural
persons
4. Shares
held by
0 0.00% 0 0 0 200,000 200,000 200,000 0.01%
overseas
investors
Including:
Shares held
0 0.00% 0 0 0 0 0 0 0.00%
by overseas
corporations
Shares held
by overseas
0 0.00% 0 0 0 200,000 200,000 200,000 0.01%
natural
persons
II. Shares
without 1,749,761,803 100.00% 0 0 0 -34,755 -34,755 1,749,727,048 99.76%
restriction
1. RMB
ordinary 1,749,761,803 100.00% 0 0 0 -34,755 -34,755 1,749,727,048 99.76%
shares
2.
Domestically
0 0.00% 0 0 0 0 0 0 0.00%
listed foreign
shares
3. Foreign
shares listed 0 0.00% 0 0 0 0 0 0 0.00%
overseas
4. Others 0 0.00% 0 0 0 0 0 0 0.00%
III. Total
number of 1,749,809,548 100.00% 0 0 0 4,185,800 4,185,800 1,753,995,348 100.00%
shares
137
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Reasons for the changes in share capital
√ Applicable □ N/A
During the reporting period, the Company completed election at expiration of office terms. Restricted
conditions for shares held by the retired directors, supervisors and senior managers were removed.
Some shares held by newly appointed directors, supervisors and senior managers were locked-up
shares for senior managers of the Company which increased by 34,755 shares in total.
During the reporting period, the Company registered the first grant of the 2022 Restricted Share
Incentive Scheme. The equity incentive restricted shares increased by 4,185,800 in total.
During the reporting period, the total number of shares soared by 4,185,800 in total. Among them,
the number of shares subject to conditional restriction increased by 4,220,555 in total, while the
number of shares without restriction decreased by 34,755 in total.
Approval for changes in share capital
√ Applicable □ N/A
The Company convened the 2nd session of the 10th Board of Directors and the 2nd session of the
10th Board of Supervisors on August 8, 2022, during which the Proposal on the Company’s 2022
Restricted Share Incentive Scheme (Draft) and Its Summary was reviewed and approved. On August
31, 2022, the Company convened the 1st extraordinary general meeting in 2022. During the meeting,
the Proposal on the Company’s 2022 Restricted Share Incentive Scheme (Draft) and Its Summary was
deliberated on and approved. Meanwhile, the incentive scheme was approved by the Company’s 1st
extraordinary general meeting in 2022, and the Board of Directors was authorized to implement the
scheme and handle relevant matters according to laws and regulations. On October 27, 2022, the
Company held the 4th session of the 10th Board of Directors and the 5th session of the 10th Board of
Supervisors. During the sessions, the Proposal on Granting Restricted Shares to the First Batch of
Employees Receiving Incentive from the 2022 Restricted Share Incentive Scheme was reviewed and
approved. The first grant date was determined to be October 27, 2022. 113 eligible incentive receivers
were granted 4,185,800 restricted shares at the grant price of RMB25.00/share. Please refer to the
Announcement on the Completion of the First Grant and Registration of the 2022 Restricted Share
Incentive Scheme (2022-075) disclosed by the Company on www.cninfo.com.cn for more details.
Transfer of shares
□ 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 common shareholders and other financial indicators
□ 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
Number of Number of
Number of Number of
Newly Increased Restricted Shares
Name of Restricted Shares Restricted Shares Reasons for
Restricted Shares Unlocked during Unlock Date
Shareholder at the Beginning at the End of the Restriction
during the the Current
of the Period Period
Current Period Period
Equity incentive, Be unlocked
Zhang Jianfei 0 210,000 0 210,000 locked-up shares according to
for senior relevant rules of
138
The 2022 Annual Report of Huadong Medicine Co., Ltd.
managers the Company’s
2022 Restricted
Share Incentive
Scheme and the
management of
shares for senior
managers
Be unlocked
according to
relevant rules of
Lv Liang 0 200,000 0 200,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Equity incentive, the Company’s
locked-up shares 2022 Restricted
Zhu Li 22,500 150,000 0 172,500
for senior Share Incentive
managers Scheme and the
management of
shares for senior
managers
Be unlocked
according to
relevant rules of
Wu Hui 0 150,000 0 150,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Xu Junfang 0 150,000 0 150,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
LIU relevant rules of
DONGZHOU 0 150,000 0 150,000 Equity incentive the Company’s
JEFFERY 2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Zhang Yun 0 100,000 0 100,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Yang Chu 0 100,000 0 100,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Shen Jianfang 0 100,000 0 100,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Qiu Renbo 0 100,000 0 100,000 Equity incentive Be unlocked
139
The 2022 Annual Report of Huadong Medicine Co., Ltd.
according to
relevant rules of
the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Chen Bo 0 100,000 0 100,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Zhou Zuhua 0 100,000 0 100,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Yu Xi 0 100,000 0 100,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Ma Honglan 0 100,000 0 100,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
relevant rules of
Li Xiaomu 0 100,000 0 100,000 Equity incentive the Company’s
2022 Restricted
Share Incentive
Scheme
Be unlocked
Other middle according to
management and relevant rules of
core technicians 0 2,335,800 0 2,335,800 Equity incentive the Company’s
(business 2022 Restricted
specialists) Share Incentive
Scheme
Total 22,500 4,245,800 0 4,268,300 -- --
II. Issuance and listing of securities
1. Securities (excluding preferred shares) issued during the reporting period
□ Applicable √ N/A
2. Explanation on changes in the total number of shares, the structure of shareholders and the structure of
assets and liabilities
√ Applicable □ N/A
During the reporting period, the Company completed election at expiration of office terms. Restricted
conditions for shares held by the retired directors, supervisors and senior managers were removed.
Some shares held by newly appointed directors, supervisors and senior managers were locked-up
shares for senior managers of the Company which increased by 34,755 shares in total.
140
The 2022 Annual Report of Huadong Medicine Co., Ltd.
During the reporting period, the Company registered the first grant of the 2022 Restricted Share
Incentive Scheme. The equity incentive restricted shares increased by 4,185,800 in total.
During the reporting period, the total number of shares soared by 4,185,800 in total. Among them,
the number of shares subject to conditional restriction increased by 4,220,555 in total, while the
number of shares without restriction decreased by 34,755 in total.
3. Existent shares held by internal employees of the Company
□ Applicable √ N/A
III. Particulars about shareholders and the de facto controller
1. Total number of shareholders and their shareholdings
Unit: Share
Total
Total number of
number of preference
Total common shareholders Total number of preference
number of shareholders with shareholders with
common at the end of restoration restoration of the voting
shareholders 75,458 the previous 72,114 of the voting 0 rights at the end of the 0
at the end of month rights at the previous month before the
the reporting before the end of the disclosure of the annual
period disclosure of reporting report (if any) (see Note 8)
the annual period (if
report any) (see
Note 8)
Particulars about shareholders with a shareholding ratio over 5% or the Top 10 shareholders
The number Pledged or frozen
Total shares of common The number
held at the Changes in shares held of shares
Name of Nature of Shareholding
end of the the reporting with trading held without
Shareholder shareholder ratio Status Quantity
reporting period restrictions trading
period restricted restriction
shares held
Domestic
China Grand
non-state-
Enterprises, 41.67% 730,938,157 0 0 730,938,157 Pledged 164,492,000
owned
Inc.
corporation
Hangzhou
Huadong
State- owned
Medicine 16.42% 288,000,000 0 0 288,000,000
corporation
Group Co.,
Ltd.
Hong Kong
Securities
Overseas
Clearing 3.19% 56,008,071 23,547,558 0 56,008,071
corporation
Company
Ltd.
Industrial
and
Commercial
Bank of
China
Limited -
China- Others 2.81% 49,316,241 45,604,092 0 49,316,241
Europe
Healthcare
Hybrid
Securities
Investment
Fund
China Domestic 1.26% 22,186,818 0 0 22,186,818
141
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Securities non-state-
Finance Co., owned
corporation
China
Construction
Bank Co.,
Ltd. - ICBC
Others 1.14% 20,000,078 10,000,028 0 20,000,078
Credit Suisse
Frontier
Medical
Equity Fund
National
Social
Security Others 0.59% 10,380,842 10,380,842 0 10,380,842
Fund -
Profile 0
Industrial
and
Commercial
Bank of
China
Limited -
China- Others 0.55% 9,577,584 9,577,584 0 9,577,584
Europe
Healthcare
Innovation
Stock
Investment
Fund
Norges Bank
Overseas
- equity 0.53% 9,371,128 6,594,899 0 9,371,128
corporation
funds
China
Construction
Bank
Corporation
- E Fund CSI Others 0.40% 7,035,032 4,204,700 0 7,035,032
300
Healthcare
Exchange
Traded Fund
Strategic investors or
general corporations
become the top 10
N/A
shareholders due to the
placement of new shares (if
any) (see Note 3)
Explanation on associated
relationships or concerted The Company does not know whether the above-mentioned shareholders are related parties or
actions among the above- whether they are acting-in- concert parties with one another.
mentioned shareholders
Description about above-
mentioned shareholders’
entrusting/being entrusted N/A
with and waiving voting
rights
Explanation of special
account for repurchase
among the top 10 N/A
shareholders (if any) (see
Note 10)
Shareholding of the top 10 shareholders without trading restrictions
Type of shares
Number of shares without restriction held at the end of the reporting
Name of Shareholder Type of
period Quantity
shares
China Grand Enterprises, 730,938,157 RMB 730,938,157
142
The 2022 Annual Report of Huadong Medicine Co., Ltd.
Inc. common
shares
RMB
Hangzhou Huadong
288,000,000 common 288,000,000
Medicine Group Co., Ltd.
shares
RMB
Hong Kong Securities
56,008,071 common 56,008,071
Clearing Company Ltd.
shares
Industrial and Commercial
Bank of China Limited - RMB
China-Europe Healthcare 49,316,241 common 49,316,241
Hybrid Securities shares
Investment Fund
RMB
China Securities Finance
22,186,818 common 22,186,818
Co.,
shares
China Construction Bank
RMB
Co., Ltd. - ICBC Credit
20,000,078 common 20,000,078
Suisse Frontier Medical
shares
Equity Fund
RMB
National Social Security
10,380,842 common 10,380,842
Fund - Profile 0
shares
Industrial and Commercial
Bank of China Limited - RMB
China-Europe Healthcare 9,577,584 common 9,577,584
Innovation Stock shares
Investment Fund
RMB
Norges Bank - equity funds 9,371,128 common 9,371,128
shares
China Construction Bank
RMB
Corporation - E Fund CSI
7,035,032 common 7,035,032
300 Healthcare Exchange
shares
Traded Fund
Description for affiliated
relationship or concerted
action among the top 10
shareholders holding
tradable stocks without
trading restriction The Company does not know whether the above-mentioned shareholders are related parties or
conditions and between the whether they are acting-in- concert parties with one another.
top 10 shareholders holding
tradable stocks without
trading restriction
conditions and the top 10
shareholders
Description of the
participation in margin
At the end of the reporting period, the Company had no shareholders holding its shares through
trading business of the top
margin trading and securities lending accounts among the top 10 common shareholders.
10 common shareholders (if
any) (see Note 4)
Whether the Company’s Top 10 common shareholders or the Top 10 common shareholders without trading restriction have carried
out any agreement to repurchase transaction during the reporting period
□Yes √No
No such case during the reporting period.
2. Particulars about controlling shareholder of the Company
Nature of controlling shareholder: Natural person holding
Type of controlling shareholder: Corporation
Name of controlling Legal
Date of establishment Organization code Main business
shareholder representative/person
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in charge
China Grand Investment
Hu Kaijun October 27, 1993 91110000101690952K
Enterprises, Inc. 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 Grand Pharmaceutical Group 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 de facto controller & concerted parties
Nature of de facto controller: Domestic natural person holding
Type of de facto controller: Natural person
Whether the de facto
Relationship with the de facto controller has obtained the
Name of de facto controller Nationality
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 the
Main occupation and position
Board and General Manager of Beijing Grand Huachuang Investment Co., Ltd.
Share held by the de facto
controlling shareholder in The three listed companies controlled by de facto controller are Huadong Medicine Co., Ltd.,
domestic or overseas listed Grand Industrial Holding Co., Ltd., and China Grand Pharmaceutical and Grand Pharmaceutical
companies in the past ten Group Limited.
years
Change of the de facto controller during the reporting period
□ Applicable √ N/A
No such case during the reporting period.
The ownership and controlling relationship between the de facto controller of the Company and the Company is detailed as follows:
胡凯军 Hu Kaijun
北京远大华创投资有限公司 Beijing Grand Huachuang Investment Co., Ltd.
北京炎黄置业有限公司 Beijing Yanhuang Real Estate Co., Ltd.
中国远大集团有限责任公司 China Grand Enterprises, Inc.
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华东医药股份有限公司 Huadong Medicine Co., Ltd.
The de facto controller controls the Company through a trust or other way of assets management
□ Applicable √ N/A
4. The amount of shares pledged by the Company’s controlling shareholder or the largest shareholder and
its parties acting in concert accounts for 80% of the total shares of the Company held by them
□ Applicable √ N/A
5. Other corporate shareholders with a shareholding ratio over 10%
√ Applicable □ N/A
Legal Legal
Main business or
representative/person representative/person Date of establishment Registered capital
management activities
in charge in 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; industrial
Hangzhou Huadong investment; wholesale
Medicine Group Co., Ye Bo December 21, 1992 60 million yuan and retail: chemical
Ltd. raw 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.
6. Reduction of restricted shares held by controlling shareholder, de facto controller, restructuring parties
and other commitment subjects
□ Applicable √ N/A
IV. Progress of share repurchase during the reporting period
Progress of share repurchase
□ Applicable √ N/A
Progress of reducing repurchased shares through centralized bidding
□ Applicable √ N/A
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Section VIII. Information on Preferred Shares
□ Applicable √ N/A
No such case during the reporting period.
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Section IX. Information on Bonds
□ Applicable √ N/A
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Section X. Financial Report
I. Audit report
Audit Opinion Unmodified unqualified audit opinion
Audit Report sign-off Date April 12, 2023
Pan-China Certified Public Accounts (Special General
Audit Institution Name
Partnership)
Audit Report Number T. J. S. (2023) No. 2298
Certified Public Accounts Name Wang Fukang and Chen Xiaodong
Audit Report
T. J. S. (2023) No. 2298
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, 2022, the consolidated and the parent company’s income statements for the year 2022,
the consolidated and the parent company’s cash flow statements, the consolidated and the parent
company’s statements of changes in owners’ equity, 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, 2022, as well as the
consolidated and the parent company’s operating results and cash flows in 2022.
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 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
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
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1. Description
The relevant information disclosure is detailed in Notes III (XXIV), V (II) 1 and XIV (I) 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 2022 was RMB37,715,000,000.
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 sampling;
(5) In combination with accounts receivable confirmation, confirming the current sales with major
customers by sampling;
(6) Carrying out a cut-off test for the operating revenue recognized before and after the balance sheet
date, and evaluating whether the operating revenue is recognized within an appropriate period;
(7) Acquiring the sales return records after the balance sheet date and checking the unsatisfactoriness
of revenue recognition conditions on balance sheet date; and
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(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) 4 to the financial statements.
As of December 31, 2022, the book balance of accounts receivable of Huadong Medicine was
RMB7,617 million, the bad debt reserve was RMB418 million, and the book value was RMB7,199
million.
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 judgment of the Management
involved in the impairment of accounts receivable, we determined the impairment of accounts
receivable as a key audit matter.
2. Audit response
For the impairment of accounts receivable, the audit procedures we implemented mainly include:
(1) Understanding the key internal controls related to the impairment of accounts receivable,
evaluating the design of these controls, determining whether they are implemented, and testing the
operating effectiveness of relevant internal controls;
(2) Reviewing the follow-up actual write-off or reversal of accounts receivable for which the bad debt
reserve has been accrued in previous years, evaluating the accuracy of the Management’s past
forecasts;
(3) Reviewing the relevant considerations and objective evidence of the Management’s credit risk
assessment of accounts receivable, and evaluating whether the Management has properly identified
the credit risk characteristics of various accounts receivable;
(4) For the accounts receivable with expected credit loss measured based on an individual item,
obtaining and checking the Management’s forecast of the expected cash flow received, evaluating the
rationality of the key assumptions used in the forecast and the accuracy of data, and checking with
the external evidence obtained;
(5) For the accounts receivable with expected credit loss measured based on the combined items,
evaluating the rationality of the Management’s division of combinations according to the credit risk
characteristics; evaluating the rationality of the comparison table of accounts receivable ages and
expected credit loss rates determined by the Management based on historical credit loss experience
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
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) 18 to the financial
statements.
As of December 31, 2022, the original book value of goodwill of Huadong Medicine was RMB2,446
million, the impairment reserve was RMB5 million, and the book value was RMB2,441 million.
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 judgment of the Management 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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The 2022 Annual Report of Huadong Medicine Co., Ltd.
(7) Based on the methods and assumptions used by the Management, estimating the present value
range of future cash flows and evaluating whether it differs significantly from the range 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 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 audit report that includes
our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
performed in accordance with the audit standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material when it is reasonably
expected that misstatements, individually or collectively, may affect the economic decisions made by
users based on the financial statements.
As part of the audit in accordance with the audit standards, we exercise professional judgment and
maintain professional skepticism throughout the process. We also:
(I) Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than the risk of not detecting one resulting from
error, as fraud may involve collusion, forgery, omissions, misrepresentations, or the override of
internal control.
(II) Understand the internal control associated with the audit to design appropriate audit procedures.
(III) Evaluate the appropriateness of accounting policies used and the rationality of accounting
estimates and related disclosures made by the Management.
(IV) Conclude on the appropriateness of using the going concern assumption by the Management,
and conclude, based on the audit evidence obtained, whether a material uncertainty exists related to
events or conditions that may cast significant doubt on Huadong Medicine’s ability to continue as a
going concern. If we conclude that a material uncertainty exists, we are required to draw the attention
of users to relevant disclosures in the financial statements in our audit 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 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 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 report outweigh the benefits in the public interest, we
determine that the matter should not be communicated in the auditor report.
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Pan-China Certified Public Accounts (Special General Partnership) Chinese Certified Public
Accountant: Wang Fukang
(Project partner)
Hangzhou, China Chinese Certified Public Accountant: Chen Xiaodong
April 12, 2023
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The 2022 Annual Report 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 31,2022
Unit: RMB yuan
Item December 31,2022 January 1, 2022
Current assets:
Monetary funds 3,996,302,178.41 4,032,424,555.22
Settlement reserve
Lending to other banks and other
financial institutions
Financial assets for trade
Derivative financial assets 29,907,470.68
Notes receivable 8,424,980.99
Accounts receivable 7,198,746,788.59 6,430,482,175.97
Accounts receivable for financing 1,002,511,208.21 509,190,888.54
Prepayments 500,083,953.14 275,353,134.69
Premiums receivable
Reinsurance accounts receivable
Reinsurance contract reserve receivable
Other receivables 283,710,955.63 223,707,267.30
Including: Interests receivable
Dividends receivable 223,747.65 877,734.45
Financial assets purchased for resale
Inventories 4,495,483,328.54 3,974,549,648.96
Contract assets
Assets held for sale
Non-current assets due within one year
Other current assets 52,692,618.78 40,907,922.76
Total current assets 17,567,863,482.97 15,486,615,593.44
Non-current assets:
Loans and prepayments issuance
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments 1,659,076,538.78 984,927,398.68
Other equity instrument investments 360,910,876.41 257,815,844.68
Other non-current financial assets
Real estate properties for investment 13,648,240.14 14,569,533.94
Fixed assets 3,981,653,265.52 3,077,227,759.84
Constructions in progress 873,159,427.47 1,582,125,201.25
Biological assets for production
Oil & gas assets
Right-of-use assets 166,505,297.17 153,724,197.81
Intangible assets 2,280,064,207.30 2,233,450,369.34
Development expenditures 641,354,586.80
Goodwill 2,441,387,413.59 2,138,808,037.01
Long-term unamortized expenses 16,457,278.57 12,425,364.03
Deferred tax assets 152,842,858.97 143,651,186.84
Other non-current assets 1,037,279,933.15 911,062,879.83
Total non-current assets 13,624,339,923.87 11,509,787,773.25
Total assets 31,192,203,406.84 26,996,403,366.69
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Current liabilities:
Short-term borrowing 947,516,383.37 1,237,843,228.13
Borrowing from the central bank
Borrowing from other banks and other
financial institutions
Financial liabilities for trade 14,841,896.97
Derivative financial liabilities
Notes payable 1,029,409,686.81 671,964,504.00
Accounts payable 4,873,029,466.44 3,847,719,574.86
Receipts in advance 1,154,243.42 1,147,425.45
Contract liabilities 146,488,489.07 118,341,141.48
Financial assets sold for repurchase
Deposits from customers and due from
banks
Receipts for buying and selling securities
as proxy
Receipts for underwriting securities as
proxy
Payroll payable 256,883,423.68 168,210,088.82
Taxes payable 429,457,804.81 1,029,610,563.41
Other payables 2,290,407,022.05 1,935,116,784.93
Including: Interests payable
Dividends payable 14,924,219.60 2,184,219.60
Handling fees and commissions payable
Reinsurance accounts payable
Liabilities held for sale
Non-current liabilities due within one
147,835,514.81 244,256,705.59
year
Other current liabilities 15,788,164.30 11,386,267.11
Total current liabilities 10,152,812,095.73 9,265,596,283.78
Non-current liabilities:
Insurance policy reserve
Long-term borrowing 1,051,457,747.44 139,178,905.04
Bonds payable
Including: Preferred shares
Perpetual bonds
Lease liabilities 84,610,324.98 80,889,403.39
Long-term payables 287,497,209.49 261,903,489.09
Long-term employee remuneration
payable
Provision 37,925,549.41 39,086,238.25
Deferred income 126,123,512.71 83,521,649.96
Deferred tax liabilities 202,084,083.93 184,908,391.50
Other non-current liabilities 73,251,500.00
Total non-current liabilities 1,862,949,927.96 789,488,077.23
Total liabilities 12,015,762,023.69 10,055,084,361.01
Owners’ Equity:
Share capital 1,753,995,348.00 1,749,809,548.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserve 2,377,887,246.39 2,229,868,312.11
Less: Treasury shares 104,645,000.00
Other comprehensive income -88,552,636.42 -47,768,225.80
Special reserve
Surplus reserve 1,151,213,039.48 1,021,670,687.31
General risk reserve
Undistributed profit 13,488,021,239.94 11,625,794,001.46
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Total owners’ equity attributable to
18,577,919,237.39 16,579,374,323.08
owner of the Company
Minority interest 598,522,145.76 361,944,682.60
Total owners’ equity 19,176,441,383.15 16,941,319,005.68
Total liabilities & owners’ equity 31,192,203,406.84 26,996,403,366.69
Legal representative: Lv Liang Person in charge of accounting: Lv Liang Person in charge of the Accounting Department:
Qiu Renbo
2. Balance sheet of the parent company
Unit: RMB yuan
Item December 31,2022 January 1, 2022
Current assets:
Monetary funds 2,486,399,844.96 2,280,519,812.31
Financial assets for trade
Derivative financial assets
Notes receivable 8,424,980.99
Accounts receivable 4,224,944,294.54 3,369,254,003.85
Accounts receivable for financing 157,097,728.09 196,523,246.00
Prepayments 271,448,367.52 140,828,160.14
Other receivables 1,065,267,397.05 986,757,703.19
Including: Interests receivable
Dividends receivable
Inventories 2,391,038,707.33 1,946,036,027.82
Contract assets
Assets held for sale
Non-current assets due within one year
Other current assets 20,289.53
Total current assets 10,604,621,320.48 8,919,939,242.84
Non-current assets:
Debt investments
Other debt investments
Long-term receivables
Long-term equity investments 5,473,824,934.24 5,079,071,023.37
Other equity instrument investments 10,100,870.56 10,100,870.56
Other non-current financial assets
Real estate properties for investment 7,193,111.26 7,659,343.90
Fixed assets 144,023,222.94 160,678,584.54
Constructions in progress 824,024.88 211,760.72
Biological assets for production
Oil & gas assets
Right-of-use assets 3,631,025.07 11,020,708.66
Intangible assets 188,198,218.40 218,720,898.11
Development expenditures
Goodwill
Long-term unamortized expenses 77,379.81 321,067.34
Deferred tax assets 49,729,544.62 47,289,929.98
Other non-current assets 346,564,596.26 406,493,149.98
Total non-current assets 6,224,166,928.04 5,941,567,337.16
Total assets 16,828,788,248.52 14,861,506,580.00
Current liabilities:
Short-term borrowing 431,081,029.52 630,446,420.72
Financial liabilities for trade
Derivative financial liabilities
Notes payable 629,281,486.95 311,085,944.14
Accounts payable 3,373,959,848.93 2,416,471,973.20
Receipts in advance
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Contract liabilities 46,097,912.05 19,690,922.48
Employee remuneration payable 10,063,669.60 9,353,991.58
Taxes payable 86,458,570.85 176,633,138.73
Other payables 949,611,806.93 877,397,177.28
Including: Interests payable
Dividends payable 224,219.60 224,219.60
Liabilities held for sale
Non-current liabilities due within one
33,427,007.32 5,939,175.02
year
Other current liabilities 5,830,680.38 2,494,822.02
Total current liabilities 5,565,812,012.53 4,449,513,565.17
Non-current liabilities:
Long-term borrowing
Bonds payable
Including: Preferred shares
Perpetual bonds
Lease liabilities 59,030.94 2,701,526.22
Long-term payables
Long-term employee remuneration
payable
Provision
Deferred income 35,567,161.11 38,133,036.03
Deferred tax liabilities 12,511,476.38
Other non-current liabilities 73,251,500.00
Total non-current liabilities 108,877,692.05 53,346,038.63
Total liabilities 5,674,689,704.58 4,502,859,603.80
Owners’ Equity:
Share capital 1,753,995,348.00 1,749,809,548.00
Other equity instruments
Including: Preferred shares
Perpetual bonds
Capital reserve 2,276,383,543.02 2,168,451,528.01
Less: Treasury shares 104,645,000.00
Other comprehensive income -129,129.44 -129,129.44
Special reserve
Surplus reserve 1,229,068,798.92 1,099,526,446.75
Undistributed profit 5,999,424,983.44 5,340,988,582.88
Total owners’ equity 11,154,098,543.94 10,358,646,976.20
Total liabilities & owners’ equity 16,828,788,248.52 14,861,506,580.00
3. Consolidated income statement
Unit: RMB yuan
Item 2022 2021
I. Total operating revenue 37,714,587,458.01 34,563,301,233.67
Including: Operating revenue 37,714,587,458.01 34,563,301,233.67
Interests income
Premiums earned
Handling fees and commissions received
II. Total operating cost 34,568,570,175.18 31,727,336,299.43
Including: Operating cost 25,682,497,011.55 23,957,370,728.98
Interests paid
Handling fees and commissions paid
Surrender value
Net payment of insurance claims
Net appropriation of policy reserve
Policy dividends paid
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Reinsurance expenses
Business taxes and surcharges 208,324,645.61 177,253,313.55
Sales expenses 6,334,738,928.05 5,424,051,895.28
Administrative expenses 1,248,781,970.63 1,166,941,288.41
R&D expenses 1,015,971,052.33 979,644,017.93
Financial expenses 78,256,567.01 22,075,055.28
Including: Interests expenses 127,654,612.93 88,587,220.57
Interests income 103,350,838.03 80,402,140.26
Add: Other income 92,781,468.16 174,690,581.52
Investment income (Losses are indicated
-141,560,034.56 -96,311,975.25
by “-”)
Including: Investment gains (losses) in
associated enterprise and joint-venture -115,619,080.98 -53,433,345.46
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 from changes in fair values
28,469,286.61
(Losses are indicated by “-”)
Credit impairment losses (Losses are
-68,689,699.09 -41,689,977.06
indicated by “-”)
Impairment gains (losses) of assets
-3,821,625.15 -16,908,408.55
(Losses are indicated by “-”)
Asset disposal income (Losses are
8,257,595.43 -31,626.51
indicated by “-”)
III. Operating profit (Losses are
3,061,454,274.23 2,855,713,528.39
indicated by “-”)
Add: Non-operating revenue 7,608,417.78 2,682,255.28
Less: Non-operating expenses 37,938,443.03 30,860,834.95
IV. Total profit (Total losses are indicated
3,031,124,248.98 2,827,534,948.72
by “-”)
Less: Income tax expenses 498,498,547.62 488,907,390.69
V. Net profit (Net losses are indicated by
2,532,625,701.36 2,338,627,558.03
“-”)
(I) Classification by business continuity
1. Net profit from continuing operations
2,532,625,701.36 2,338,627,558.03
(Net losses are indicated by “-”)
2. Net profit at terminational operation
(Net losses are indicated by “-”)
(II) Classification by attribution of
ownership
1. Net profit attributable to shareholders
2,499,214,359.57 2,301,631,347.64
of the parent company
2. Profit or loss attributable to minority
33,411,341.79 36,996,210.39
shareholders
VI. Other comprehensive income, net of
-40,784,410.62 -24,076,315.61
income tax
Other comprehensive income attributable
to owners of the parent company, net of -40,784,410.62 -24,076,315.61
tax
(I) Other comprehensive income that
-6,804,247.45 20,549,224.62
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
-6,804,247.45 20,549,224.62
instrument investments
4. Changes in fair value of credit risk of
the enterprise
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
5. Others
(II) Other comprehensive income to be
-33,980,163.17 -44,625,540.23
reclassified into gains/losses
1. Other comprehensive income that can
be reclassified into gains/losses under -19,404.48 13,371.08
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
-19,118,861.72 -44,638,911.31
of foreign currency financial statements
7. Others -14,841,896.97
Net amount after tax of other
comprehensive income attributable to
minority shareholders
VII. Total comprehensive income 2,491,841,290.74 2,314,551,242.42
Total comprehensive income attributable
2,458,429,948.95 2,277,555,032.03
to owners of the parent company
Total comprehensive income attributable
33,411,341.79 36,996,210.39
to minority shareholders
VIII. Earnings per share (EPS):
(I) Basic EPS 1.4283 1.3154
(II) Diluted EPS 1.4283 1.3154
As for business merger under the same control in the current period, the net profit generated by the merged party before the was
RMB, and that generated during the previous period was RMB.
Legal representative: Lv Liang Person in charge of accounting: Lv Liang Person in charge of the Accounting Department:
Qiu Renbo
4. Income statement of the parent company
Unit: RMB yuan
Item 2022 2021
I. Total operating revenue 20,630,904,717.76 18,244,390,942.29
Less: Total operating cost 19,368,401,281.90 17,251,703,368.39
Business taxes and surcharges 36,661,029.40 21,076,198.14
Sales expenses 601,932,806.60 377,727,331.87
Administrative expenses 211,999,885.94 179,218,304.43
R&D expenses
Financial expenses -14,538,929.98 8,473,695.73
Including: Interests expenses 45,824,339.68 54,072,019.26
Interests income 77,307,324.10 58,998,380.29
Add: Other income 16,694,280.62 11,127,440.65
Investment income (Losses are indicated
1,067,326,046.80 1,047,838,931.11
by “-”)
Including: Investment gains (losses) in
associated enterprise and joint-venture 981,095.77 -3,572,410.52
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 (Losses are
-94,827,679.48 -37,258,383.02
indicated by “-”)
Impairment gains (losses) of assets -2,923,308.83
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
(Losses are indicated by “-”)
Asset disposal income (Losses are
8,065,244.06 10,369.02
indicated by “-”)
II. Operating profit (Losses are indicated
1,423,706,535.90 1,424,987,092.66
by “-”)
Add: Non-operating revenue 872,151.83 4,529.76
Less: Non-operating expenses 7,145,666.36 5,472,564.05
III. Total profit (Total losses are indicated
1,417,433,021.37 1,419,519,058.37
by “-”)
Less: Income tax expenses 122,009,499.72 120,747,280.50
IV. Net profit (Net losses are indicated by
1,295,423,521.65 1,298,771,777.87
“-”)
(I) Net profit from continuous operations
1,295,423,521.65 1,298,771,777.87
(Net losses are indicated by “-”)
(II) Net profit from discontinued
operations (Net losses are indicated by
“-”)
V. Other comprehensive income, net of
65.17
income tax
(I) Other comprehensive income that
65.17
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
65.17
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 1,295,423,521.65 1,298,771,843.04
VII. Earnings per share (EPS)
(I) Basic EPS
(II) Diluted EPS
5. Consolidated cash flow statement
Unit: RMB yuan
Item 2022 2021
I. Cash flows from operating activities:
Cash received from the sale of goods and
39,950,662,882.10 37,705,732,220.73
the 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
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
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 refund 47,556,552.81 56,001,263.57
Other cash receipts in relation to
639,498,854.94 534,883,574.95
operating activities
Cash inflows from operating activities 40,637,718,289.85 38,296,617,059.25
Cash payments for goods purchased and
26,418,181,602.79 25,581,019,339.56
services received
Net increase in customer loans and
prepayments
Net increase in deposits of central bank
and due from banks
Cash payments for original insurance
claims
Net increase in lending to other 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
3,126,251,201.80 2,642,677,316.23
employees
Payments of various types of taxes 3,065,133,366.96 1,595,252,332.08
Other cash payments in relation to
5,646,299,449.70 5,307,910,203.43
operating activities
Cash outflows for operating activities 38,255,865,621.25 35,126,859,191.30
Net cash flow from operating activities 2,381,852,668.60 3,169,757,867.95
II. Cash flows from investing activities
Cash receipts from recovery of
92,381,381.75
investments
Cash receipts from investment income 100,327,200.00 43,721,334.71
Net cash receipts from disposal of fixed
assets, intangible assets and other long- 15,434,935.53 79,161,948.94
term assets
Net cash from disposal of subsidiaries
and other business units
Other cash receipts in relation to
5,876,507.64 36,521,193.82
investing activities
Cash inflows from investing activities 121,638,643.17 251,785,859.22
Cash payments for purchase and
construction of fixed assets, intangible 1,193,238,725.97 819,095,124.00
assets and other long-term assets
Cash payments for investment 848,909,498.16 246,401,722.50
Net increase in pledge loans
Net cash paid for acquisition of
411,908,915.12 791,857,512.24
subsidiaries and other business units
Other cash payments in relation to
103,179,093.50 381,114,144.63
investing activities
Cash outflows for investing activities 2,557,236,232.75 2,238,468,503.37
Net cash flow from investing activities -2,435,597,589.58 -1,986,682,644.15
III. Cash flows from financing activities:
Cash receipts from absorbing
174,645,000.00 5,000,000.00
investments
Including: Cash receipts from capital 70,000,000.00 5,000,000.00
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
contributions from minority owners of
subsidiaries
Cash receipts from borrowing 4,689,802,455.69 2,110,032,213.34
Other cash receipts in relation to
284,920,943.37 149,316,666.67
financing activities
Cash inflows from financing activities 5,149,368,399.06 2,264,348,880.01
Cash repayments of borrowings 4,290,690,528.23 2,296,363,034.67
Cash payments for distribution of
dividends or profits or settlement of 578,859,909.67 463,028,834.38
interest expenses
Including: Dividends and profits paid by
2,366,353.48 2,920,000.00
subsidiaries to minority shareholders
Other cash payments in relation to
379,528,334.29 272,410,313.45
financing activities
Cash outflows for financing activities 5,249,078,772.19 3,031,802,182.50
Net cash flow from financing activities -99,710,373.13 -767,453,302.49
IV. Effect of foreign exchange rate
-9,774,641.73 7,111,643.60
changes on Cash and Cash Equivalents
V. Net increase in cash and cash
-163,229,935.84 422,733,564.91
equivalents
Add: Opening balance of cash and cash
3,580,140,638.17 3,157,407,073.26
equivalents
VI. Closing balance of cash and cash
3,416,910,702.33 3,580,140,638.17
equivalents
6. Cash flow statement of the parent company
Unit: RMB yuan
Item 2022 2021
I. Cash flows from operating activities:
Cash receipts from the sale of goods and
21,148,206,043.93 19,578,902,300.31
the rendering of services
Receipts of tax refund 2,136,711.19
Other cash receipts in relation to
238,589,265.58 194,135,943.58
operating activities
Cash inflows from operating activities 21,386,795,309.51 19,775,174,955.08
Cash payments for goods purchased and
19,990,439,841.50 18,617,179,307.59
services received
Cash payments to and on behalf of
267,942,450.21 251,434,357.34
employees
Payments of various types of taxes 510,694,836.67 268,426,804.41
Other cash payments in relation to
637,104,187.46 320,447,047.23
operating activities
Cash outflows for operating activities 21,406,181,315.84 19,457,487,516.57
Net cash flow from operating activities -19,386,006.33 317,687,438.51
II. Cash flows from investing activities
Cash receipts from recovery of
81,031,431.20
investments
Cash receipts from investment income 1,097,509,530.22 1,028,872,757.80
Net cash receipts from disposal of fixed
assets, intangible assets and other long- 13,460,544.24 423,127.11
term assets
Net cash from disposal of subsidiaries
50,059,838.75
and other business units
Other cash receipts in relation to
830,315,580.61 608,901,831.03
investing activities
Cash inflows from investing activities 1,991,345,493.82 1,719,229,147.14
Cash payments for purchase and
construction of fixed assets, intangible 56,266,286.12 96,179,759.09
assets and other long-term assets
Cash payments for investment 443,169,200.00 238,516,032.77
Net cash paid for acquisition of
subsidiaries and other business units
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
Other cash payments in relation to
988,641,844.00 979,989,850.00
investing activities
Cash outflows for investing activities 1,488,077,330.12 1,314,685,641.86
Net cash flow from investing activities 503,268,163.70 404,543,505.28
III. Cash flows from financing activities:
Cash receipts from absorbing
104,645,000.00
investments
Cash receipts from borrowing 2,754,131,709.35 960,000,000.00
Other cash receipts in relation to
2,932,396,166.67 3,883,416,666.67
financing activities
Cash inflows from financing activities 5,791,172,876.02 4,843,416,666.67
Cash repayments of borrowings 2,953,130,999.69 1,389,996,025.48
Cash payments for distribution of
dividends or profits or settlement of 525,613,233.72 423,529,087.27
interest expenses
Other cash payments in relation to
2,685,609,711.52 3,722,279,458.85
financing activities
Cash outflows for financing activities 6,164,353,944.93 5,535,804,571.60
Net cash flow from financing activities -373,181,068.91 -692,387,904.93
IV. Effect of foreign exchange rate
changes on Cash and Cash Equivalents
V. Net increase in cash and cash
110,701,088.46 29,843,038.86
equivalents
Add: Opening balance of cash and cash
1,919,097,181.16 1,889,254,142.30
equivalents
VI. Closing balance of cash and cash
2,029,798,269.62 1,919,097,181.16
equivalents
7. Consolidated statement of changes in owners’ equity
Amount in the current period
Unit: RMB yuan
2022
Owners’ equity attributable to the parent company
Item
Other equity instruments Other General Minority interest Total owners’ equity
Less: Treasury Special
Share capital Capital reserve comprehensive Surplus reserve risk Undistributed profit Others Total
Preferred Perpetual shares reserve
Others income reserve
shares bonds
I. Balance at
the end of the
1,749,809,548.00 2,229,868,312.11 -47,768,225.80 1,021,670,687.31 11,625,794,001.46 16,579,374,323.08 361,944,682.60 16,941,319,005.68
period of the
prior year
Add: Changes
in accounting
policies
Error
correction in
the prior
periods
Merger of
enterprises
under the same
control
Others
II. Balance at
the beginning
of the period 1,749,809,548.00 2,229,868,312.11 -47,768,225.80 1,021,670,687.31 11,625,794,001.46 16,579,374,323.08 361,944,682.60 16,941,319,005.68
of the current
year
III. Amount of
change in the
current period
4,185,800.00 148,018,934.28 104,645,000.00 -40,784,410.62 129,542,352.17 1,862,227,238.48 1,998,544,914.31 236,577,463.16 2,235,122,377.47
(Decreases are
indicated by
“-”)
(I) Total
comprehensive -40,784,410.62 2,499,214,359.57 2,458,429,948.95 33,411,341.79 2,491,841,290.74
income
(II) Capital
contributed by
owners and 4,185,800.00 107,684,664.01 104,645,000.00 7,225,464.01 70,018,295.44 77,243,759.45
capital
decreases
1. Common
shares
4,185,800.00 100,459,200.00 104,645,000.00 70,000,000.00 174,645,000.00
invested by
owners
2. Capital
invested by
holders of
other equity
instruments
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
3. Amount of
share-based
payment 7,225,464.01 7,225,464.01 18,295.44 7,243,759.45
included in
owners’ equity
4. Others 104,645,000.00 -104,645,000.00 -104,645,000.00
(III) Profit
129,542,352.17 -636,987,121.09 -507,444,768.92 -15,106,353.48 -522,551,122.40
distribution
1. Withdrawal
of surplus 129,542,352.17 -129,542,352.17
reserve
2. Withdrawal
of general risk
reserve
3. Distribution
to owners (or -507,444,768.92 -507,444,768.92 -15,106,353.48 -522,551,122.40
shareholders)
4. Others
(IV) Internal
conversion of
owners’ equity
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
other
comprehensive
income
6. Others
(V) Special
reserve
1. Withdrawal
in the current
period
2. Use in the
current period
(VI) Others 40,334,270.27 40,334,270.27 148,254,179.41 188,588,449.68
IV. Balance at
the end of the 1,753,995,348.00 2,377,887,246.39 104,645,000.00 -88,552,636.42 1,151,213,039.48 13,488,021,239.94 18,577,919,237.39 598,522,145.76 19,176,441,383.15
current period
Amount in the prior period
Unit: RMB yuan
2021
Owners’ equity attributable to the parent company
Item Minority Total owners’
Other equity instruments Less: Other General
Special Undistributed interest equity
Share capital Preferred Perpetual Capital reserve Treasury comprehensive Surplus reserve risk Others Total
Others reserve profit
shares bonds shares income reserve
I. Balance at
the end of the
1,749,809,548.00 2,158,080,661.07 -2,191,069.45 861,680,578.42 9,852,441,590.56 14,619,821,308.60 559,590,204.87 15,179,411,513.47
period of the
prior year
Add: Changes
in accounting
policies
Error
correction in
the prior
periods
Merger of
enterprises
under the same
control
Others
II. Balance at
the beginning
of the period 1,749,809,548.00 2,158,080,661.07 -2,191,069.45 861,680,578.42 9,852,441,590.56 14,619,821,308.60 559,590,204.87 15,179,411,513.47
of the current
year
III. Amount of
change in the
current period - -
71,787,651.04 159,990,108.89 1,773,352,410.90 1,959,553,014.48 1,761,907,492.21
(Decreases are 45,577,156.35 197,645,522.27
indicated by
“-”)
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
(I) Total
-
comprehensive 2,301,631,347.64 2,277,555,032.03 36,996,210.39 2,314,551,242.42
24,076,315.61
income
(II) Capital
contributed by
owners and 5,000,000.00 5,000,000.00
capital
decreases
1. Common
shares
5,000,000.00 5,000,000.00
invested by
owners
2. Capital
invested by
holders of
other equity
instruments
3. Amount of
share-based
payment
included in
owners’ equity
4. Others
(III) Profit
129,877,177.79 -532,333,373.83 -402,456,196.04 -4,880,000.00 -407,336,196.04
distribution
1. Withdrawal
of surplus 129,877,177.79 -129,877,177.79
reserve
2. Withdrawal
of general risk
reserve
3. Distribution
to owners (or -402,456,196.04 -402,456,196.04 -4,880,000.00 -407,336,196.04
shareholders)
4. Others
(IV) Internal
-
conversion of 28,846,278.36 -7,345,437.62
21,500,840.74
owners’ equity
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 -
318,050.59 21,182,790.15
other 21,500,840.74
comprehensive
income
6. Others 28,528,227.77 -28,528,227.77
(V) Special
reserve
1. Withdrawal
in the current
period
2. Use in the
current period
-
(VI) Others 71,787,651.04 1,266,652.74 11,399,874.71 84,454,178.49 -150,307,554.17
234,761,732.66
IV. Balance at
-
the end of the 1,749,809,548.00 2,229,868,312.11 1,021,670,687.31 11,625,794,001.46 16,579,374,323.08 361,944,682.60 16,941,319,005.68
47,768,225.80
current period
8. Statement of changes in owners’ equity of the parent company
Amount in the current period
Unit: RMB yuan
2022
Item Other equity instruments Other
Less: Treasury Special Undistributed Total owners’
Share capital Preferred Perpetual Capital reserve comprehensive Surplus reserve Others
Others shares reserve profit equity
shares bonds income
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
I. Balance at
the end of the
1,749,809,548.00 2,168,451,528.01 -129,129.44 1,099,526,446.75 5,340,988,582.88 10,358,646,976.20
period of the
prior year
Add: Changes
in accounting
policies
Error
correction in
the prior
periods
Others
II. Balance at
the beginning
of the period 1,749,809,548.00 2,168,451,528.01 -129,129.44 1,099,526,446.75 5,340,988,582.88 10,358,646,976.20
of the current
year
III. Amount of
change in the
current period
4,185,800.00 107,932,015.01 104,645,000.00 129,542,352.17 658,436,400.56 795,451,567.74
(Decreases are
indicated by
“-”)
(I) Total
comprehensive 1,295,423,521.65 1,295,423,521.65
income
(II) Capital
contributed by
owners and 4,185,800.00 107,702,959.45 104,645,000.00 7,243,759.45
capital
decreases
1. Common
shares
4,185,800.00 100,459,200.00 104,645,000.00
invested by
owners
2. Capital
invested by
holders of
other equity
instruments
3. Amount of
share-based
payment 7,243,759.45 7,243,759.45
included in
owners’ equity
4. Others 104,645,000.00 -104,645,000.00
(III) Profit
129,542,352.17 -636,987,121.09 -507,444,768.92
distribution
1. Withdrawal
of surplus 129,542,352.17 -129,542,352.17
reserve
2. Distribution
to owners (or -507,444,768.92 -507,444,768.92
shareholders)
3. Others
(IV) Internal
conversion of
owners’ equity
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
167
The 2022 Annual Report of Huadong Medicine Co., Ltd.
transfer of
other
comprehensive
income
6. Others
(V) Special
reserve
1. Withdrawal
in the current
period
2. Use in the
current period
(VI) Others 229,055.56 229,055.56
IV. Balance at
the end of the 1,753,995,348.00 2,276,383,543.02 104,645,000.00 -129,129.44 1,229,068,798.92 5,999,424,983.44 11,154,098,543.94
current period
Amount in the prior period
Unit: RMB yuan
2021
Item Other equity instruments Less: Other
Special Undistributed Total owners’
Share capital Preferred Perpetual Capital reserve Treasury comprehensive Surplus reserve Others
Others reserve profit equity
shares bonds shares income
I. Balance at
the end of the
1,749,809,548.00 2,168,451,528.01 3,051,311.29 939,536,337.86 4,303,533,798.88 9,164,382,524.04
period of the
prior year
Add: Changes
in accounting
policies
Error
correction in
the prior
periods
Others
II. Balance at
the beginning
of the period 1,749,809,548.00 2,168,451,528.01 3,051,311.29 939,536,337.86 4,303,533,798.88 9,164,382,524.04
of the current
year
III. Amount of
change in the
current period
-3,180,440.73 159,990,108.89 1,037,454,784.00 1,194,264,452.16
(Decreases are
indicated by
“-”)
(I) Total
comprehensive 65.17 1,298,771,777.87 1,298,771,843.04
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
owners’ equity
4. Others
(III) Profit
129,877,177.79 -532,333,373.83 -402,456,196.04
distribution
1. Withdrawal
of surplus 129,877,177.79 -129,877,177.79
reserve
2. Distribution -402,456,196.04 -402,456,196.04
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The 2022 Annual Report of Huadong Medicine Co., Ltd.
to owners (or
shareholders)
3. Others
(IV) Internal
conversion of -3,180,505.90 28,846,278.36 -25,665,772.46
owners’ equity
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
-3,180,505.90 318,050.59 2,862,455.31
other
comprehensive
income
6. Others 28,528,227.77 -28,528,227.77
(V) Special
reserve
1. Withdrawal
in the current
period
2. Use in the
current period
(VI) Others 1,266,652.74 296,682,152.42 297,948,805.16
IV. Balance at
the end of the 1,749,809,548.00 2,168,451,528.01 -129,129.44 1,099,526,446.75 5,340,988,582.88 10,358,646,976.20
current period
Huadong Medicine Co., Ltd.
Chairman of the Board: Lv Liang
April 14, 2023
169
