The 2023 Annual Report of Huadong Medicine Co., Ltd.
Huadong Medicine Co., Ltd.
2023 Annual Report
April 2024
1
The 2023 Annual Report of Huadong Medicine Co., Ltd.
A Letter to the Shareholders
Distinguished shareholders,
As time flies, we usher in a new year with endless possibilities. Over the past
year, we have witnessed and experienced profound changes brought by the era. The
pharmaceutical industry is marching towards a new track of increasingly healthy and
compliant high-quality development driven by continuous pressures it withstands,
accelerated industrial clearing due to medical anti-corruption, and continuously
increased values of innovative medicines. We are keenly aware that we can tide over
the difficulties only by constantly fostering our resilience for development, which
will be achieved through our down-to-earth efforts.
Since we started our innovation and transformation, we have gradually defined
development strategies for our four major business segments of pharmaceutical
industry, pharmaceutical business, aesthetic medicine and industrial microbiology.
Thanks to our consistent practice, we have transformed our innovative R&D system
from external introduction to “self-development + introduction” step by step and have
successfully achieved historic breakthrough in both innovative R&D team building
and its capacity, with an industry chain for the complete cycle of innovation medicine
R&D fostered. To date, we have established over 100 pharmaceutical product
pipelines, including more than 60 pipelines for innovative products, and built the
R&D ecology with Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. as the
core.
In 2023, our constant efforts have been bearing fruits. The Liraglutide Injection
was successfully launched, and had its marketing authorization application for
diabetes, obesity or overweight applications approved successively, being the first of
its kind in China and playing a leading role in the GLP-1 track. In the meantime,
applications for launching of multiple blockbuster products were submitted.
Mirvetuximab Soravtansine Injection, a global pioneering ADC medicine, was firstly
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
launched in Hainan, benefiting over 30 patients. Its application for launching in
China was accepted in October 2023. Ustekinumab Injection (QX001S) was the first
of its kind in China submitting the BLA, which was already accepted. Marketing
authorization applications of Rilonacept Injection for Cryopyrin-Associated Periodic
Syndromes and recurrent pericarditis were accepted by NMPA, expecting to benefit
patients with rare diseases as soon as possible. In addition, the Company has also
seen achievements in R&D of innovative medicines. Applications on IND of
HDM1002, a small-molecule GLP-1 receptor agonist with global innovation level,
were accepted in both China and the U.S. Its clinical trials are now progressing
smoothly. The application on IND of HDM1005, a GLP-1 and GIP dual-target
innovative medicine, in China was successfully approved, and its clinical trials have
been officially launched. The application on IND of HDM2005, the first ADC
innovative medicine independently developed by the Company, was submitted and
accepted. A variety of independent innovation achievements of the Company have
also debuted at diverse key international academic conferences and journals, further
showcasing our unremitting endeavors and positive results in independent innovation.
All these have laid a solid foundation for our future development and expansion.
In 2023, we embraced more exchanges through opening up, expanded
cooperation, and consolidated resilience for development. Zevorcabtagene Autoleucel
Injection, a CAR-T product introduced in early 2023, was successfully launched in
2024. The Company will continue to roll out its businesses in the field of cell therapy.
The Company introduced various types of global innovative external preparations
from Arcutis in the U.S. and MC2 in Denmark, further enriching our pipelines of
external preparations in the field of immunity and fostering a “golden combination”
that features a multi-target point and multi-acting mechanism in psoriasis treatment.
In the aesthetic medicine field, the Company introduced ATGC-110 from ATGC in
South Korea and YY001 from Chongqing Yuyan in China, two new botulinum toxin
products under research, fully enriching the Company’s pipelines in facial injection
products through differentiated positioning. In the industrial microbiology segment,
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
the Company set foot in the field of animal health through its holding subsidiary
Jiangsu Nanjing Nongda Animal Pharmaceutical Co., Ltd. and won the exclusive
selling right of Baoshining, the first new opioid veterinary drug for central analgesia
in China. The Company has continued to optimize its layout of pet protection
products.
Looking into 2024, we will always place our focus on “development of the
innovative medicine industry”. In this year’s government work report, the term
“innovative medicine” was mentioned for the first time. It will occupy an
increasingly important position in the future, validate and guide our strategic
orientation. Being “scientific research-based and patient-centered”, the Company will
give priority to three core therapeutic fields of oncology, endocrinology and
autoimmunity, follow the development trends of cutting-edge technologies, and focus
on the field of chronic diseases with significant unmet clinical needs oriented at
unmet clinical needs of global patients. In the meantime, we will keep strengthening
and improving our independent innovation and R&D abilities, consolidate established
technology platforms for R&D, exploit potentialities of the featured global R&D
ecosystem of Huadong Medicine, and foster new quality productive forces for
vigorous growth.
As for the aesthetic medicine segment, one of the Company’s core strategic
areas, the Company will continue to implement its unique strategy of “global
operation layout and dual-circulation operation & development”. Insisting on the
high-end and natural treatment, our patent-oriented professional teams in China
further enhance promotion of product brands and enterprise brands, and actively
advance registration and launching of more high-end aesthetic medicine products in
China. As for pharmaceutical business, the Company will further optimize business
structure, facilitate transformation of innovative businesses, keep increasing
proportion of innovative businesses, and improve operating benefits. In the industrial
microbiology segment, the Company will conduct in-depth study on trends of market
change, optimize layout of core businesses, focus on expansion of international
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
market, and endeavor to foster core varieties revolving around four key business
directions, thus injecting vitality for the Company’s vigorous development.
Taking informed and decisive actions, the Company will surely be rewarded for
its unremitting endeavors. The year of 2024 is full of unknowns and variables. In the
face of increasingly fierce industry competitions, the Company encounters a deep end
and enters the critical stage of innovation and transformation. Therefore, we must
forge ahead steadily. This year also marks the end of our 7th three-year planning. We
must get ready to start again from zero, define strategic goals, pool system capacities,
strengthen team building, and consolidate foundation for development. In 2024, a
crucial year for securing our achievements and continuing our great efforts, the
Company will remain goal-oriented and problem-oriented, benchmark our 2030
vision plan, deepen transformation of diverse businesses, and advance the high-
quality development through active reflection, bold challenging, and brave
pioneering.
Forging ahead despite strong wind and heavy rains, the Company has now
harvested fruits. My sincere thanks go to all staff for their selfless dedication, and to
our investors and shareholders for their trust and support. It is the responsibility of
Huadong Medicine, a pharmaceutical enterprise, to keep strengthening our ability in
creating values, to continuously improve our core values, and to maintain consistent
profitability to reward the society and shareholders. In 2024, we increase the total
amount of our annual dividend to 1 billion yuan for the first time and propose to
launch an interim dividend distribution to reward our shareholders. We hope to boost
confidence through practical actions, forge ahead and work hard to unfold a brilliant
new chapter.
Finally, I would like to share with you a few lyrics. Let’s encourage each other
and show our respect to the new era and those who struggle ahead bravely.
“We all race ourselves for a better future and a significant victory. There is no
end ahead and we will never stop our steps ...”
Lv Liang, Chairman
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Huadong Medicine Co., Ltd.
April 2024
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
2023 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 individua l
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
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
risks and responses” under “XI. Prospect of future development” in “Section
III. Management’s Discussion and Analysis”. Therefore, investors are kindly
reminded to pay attention to possible investment risks.
The dividend distribution scheme approved at the meeting of the Board of
Directors is as follows: On the basis of 1,754,327,548 shares of the total share
capital of the Company, 5.8 yuan (before tax) of cash dividends per ten
common 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.
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, the original version in Chinese shall prevail.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Contents
Section I. Important Declaration, Contents and Definitions .................................. 7
Section II. Company Profile and Key Financial Indicators ................................. 14
Section III Management’s Discussion and Analysis ............................................. 19
Section IV. Corporate Governance ........................................................................ 95
Section V Environmental and Social Responsibilities ........................................ 128
Section VI. Important Matters ............................................................................ 146
Section VII. Share Change and Shareholders..................................................... 181
Section VIII. Information on Preferred Shares .................................................. 197
Section IX. Information on Bonds ....................................................................... 198
Section X. Financial Report ................................................................................. 199
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The 2023 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 2023 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
refers to Huadong Medicine Co., Ltd.
Company/our Company
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.
Jiangsu Joyang refers to Joyang Laboratories
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.
Grand Huachuang refers to Beijing Grand Huachuang Investment Co., Ltd.
Hangzhou Heda refers to Hangzhou Heda Industrial Fund Investment Co., Ltd.
Hangzhou Fuguang Hongxin Equity Investment Partnership
Fuguang Hongxin refers to
(Limited Partnership)
Meihua Hi-Tech/ Anhui Meihua refers to Anhui Meihua Hi-Tech Pharmaceutical Co., Ltd.
Wuhu Huaren refers to Wuhu Huaren Science and Technology Co., Ltd.
Magic Health refers to Hubei Magic Health Technology Co., Ltd.
CARsgen Therapeutics refers to CARsgen Therapeutics Holdings Limited
Nanjing Nongda Animal
refers to Jiangsu Nanjing Nongda Animal Pharmaceutical Co., Ltd.
Pharmaceutical
Hibe refers to Hibe Technology Co., Ltd.
Chongqing Yuyan refers to Chongqing Yuyan Pharmaceutical Co., Ltd.
IMPACT Therapeutics refers to Nanjing IMPACT Therapeutics Co., Ltd.
Takeda refers to Takeda Pharmaceuticals Company Ltd.
GLP-1 refers to Glucagon-like Peptide 1
Sinclair refers to Sinclair Pharma Limited
vTv refers to vTv Therapeutics LLC
R2 refers to R2 Technologies, Inc.
MediBeacon refers to MediBeacon Inc.
ImmunoGen refers to ImmunoGen, Inc.
Provention Bio refers to Provention Bio, Inc.
RAPT refers to RAPT Therapeutics, Inc.
Kylane refers to Kylane Laboratories SA
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
High Tech refers to High Technology Products, S.L.U.
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
Julphar refers to Gulf Pharmaceutical Industries PJSC (JULPHAR)
Arcutis refers to Arcutis Biotherapeutics, Inc.
MC2 refers to MC2 Therapeutics Ltd.
ATGC refers to ATGC Co., Ltd.
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
BLA refers to Biologic License 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
Chemistry, Manufacturing and Control, mainly such
pharmaceutical researches as manufacturing technology,
CMC refers to
impurity research, quality research, and stability research
during drug research and development.
Contract Manufacturing Organization, i.e. Providing such
services as customized manufacturing of medical
CMO refers to
intermediates, APIs and pharmaceutical preparations entrusted
by pharmaceutical companies.
Contract Development and Manufacturing Organization,
mainly including providing customized R&D and production
services for multinational pharmaceutical companies and
biotechnology companies, such as process R&D and
CDMO refers to
preparation, process optimization, scale-up manufacturing,
registration and verification batches manufacturing, and
commercial manufacturing of medicines, especially innovative
medicines.
QA refers to Quality Assurance (department)
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The 2023 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 and Safety Management Systems
MRCT refers to Multi-regional Clinical Trials
Over The Counter, i.e. medicines published by the medical
products administration under the State Council and purchased
OTC refers to and used by consumers at their discretion without the
prescription of practicing doctors or assistant practicing
doctors.
PFS refers to Progression-free survival
Drugs that require medical prescriptions issued by physicians
Prescription Drugs refers to
to be bought and used
Real World Research/Study, RWR/RWS, refers to collect data
related to patients in the real world environment (Real World
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
2023 Drug Catalog refers to
Insurance/Employment Injury Insurance/Birth Insurance (2023)
Reporting Period refers to From January 1, 2023, to December 31, 2023
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The 2023 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 4/7, No. 439, Zhongshanbei Road, Gongshu District, Hangzhou City, Zhejiang Province
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
address was changed to “Floor 7/9/10, Gate No. 1, Building No. 1, 468 Yan’an Road,
Changes of registered address
Hangzhou”. From July 2022, the registered address was changed to “Floor 9/10, Gate No. 1,
Building No. 1, 468 Yan’an Road, Hangzhou”. From June 2023, the registered address was
changed to “Floor 4/7, No. 439, Zhongshanbei Road, Gongshu District, Hangzhou City, Zhejiang
Province”.
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 No. 866, Moganshan Road, Hangzhou No. 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 stock exchange for publishing the annual report Shenzhen Stock Exchange - www.szse.cn
China Securities Journal, Securities Times, Shanghai Securities
Media and website for publishing the annual report
News and Cninfo (www.cninfo.com.cn)
Location of preparation of the Company’s annual report Office of the Company’s Board of Directors
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
IV. Registration changes
Unified Social Credit Code 91330000143083157E
Changes of the Company’s main business since its listing (if
None
any)
Previous changes of controlling shareholder (if any) None
V. Other information
Certified public accountants
Name Pan-China Certified Public Accountants LLP
Huarun Building B, 1366 Qianjiang Road, Hangzhou, Zhejiang
Office address
Province
Signing accountants Hu Yanhua 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
2023 2022 increase/decrease from 2021
last year to this year
Operating revenue
40,623,782,520.43 37,714,587,458.01 7.71% 34,563,301,233.67
(yuan)
Net profit attributable
to shareholders of
2,838,860,542.80 2,499,214,359.57 13.59% 2,301,631,347.64
listed companies
(yuan)
Net profit attributable
to shareholders of
listed companies after
2,736,571,736.98 2,409,954,557.05 13.55% 2,188,946,362.34
deducting non-
recurring gains/losses
(yuan)
Net cash flow from
operating activities 3,929,216,706.70 2,381,852,668.60 64.96% 3,169,757,867.95
(yuan)
Basic earnings per
1.6219 1.4283 13.55% 1.3154
share (yuan/share)
Diluted earnings per
1.6207 1.4283 13.47% 1.3154
share (yuan/share)
Weighted average
13.96% 14.21% -0.25% 14.75%
return on equity (ROE)
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Percentage
End of 2023 End of 2022 increase/decrease from End of 2021
last year to this year
Total assets (yuan) 33,509,361,816.98 31,192,203,406.84 7.43% 26,996,403,366.69
Net assets attributable
to shareholders of
21,047,609,756.66 18,577,919,237.39 13.29% 16,579,374,323.08
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, whichever is lower, is negative.
□Yes No
The Company’s total share capital as of the trading day prior to disclosure:
The Company’s total share capital as of the trading day prior to
1,754,327,548.00
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
1.6182
(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: yuan
Q1 Q2 Q3 Q4
Operating revenue 10,114,531,331.77 10,270,812,957.04 10,009,186,220.70 10,229,252,010.92
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Net profit attributable
to shareholders of 755,284,976.47 678,539,653.09 755,222,215.06 649,813,698.18
listed companies
Net profit attributable
to shareholders of
listed companies after 757,542,618.01 669,945,252.96 732,567,027.72 576,516,838.29
deducting non-
recurring gains/losses
Net cash flow from
-246,152,770.16 2,267,896,518.81 227,534,135.16 1,679,938,822.89
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: yuan
Item 2023 2022 2021 Note
Gains/losses on
disposal of non-current
assets (including the
-823,262.36 2,390,031.00 -2,354,117.13
written-off part of the
accrued assets
impairment reserve)
Government grants
included in current
gains/losses (excluding
those closely related to
daily business
operation, distributed
See XI of the Notes to
constantly in
Financial Statements
accordance with 143,315,700.34 89,767,756.38 173,543,413.54
for details of
defined standards in
government grants.
line with national
policies and
regulations, and
constantly affecting the
Company’s
gains/losses)
Gains/losses caused by
fair value changes in
financial assets and
financial liabilities held
by non-financial
enterprises, and
-13,756,372.80 28,469,286.61 521,193.82
gains/losses incurred
by disposal of financial
assets and financial
liabilities, excluding
hedging business
related to operating
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
activities
Return of receivables
impairment reserves
5,566,940.29 953,089.60 4,803,651.87
that are individually
tested for impairment
One-time impact on
current gains/losses
Reduction and
caused by adjustment
136,860.05 exemption of house
of tax, accounting and
property tax
other laws and
regulations
Other non-operating
income and
18,554,535.07 -24,166,799.87 -25,651,193.11
expenditures except the
aforesaid items
Other profit and loss
items that satisfy the
definition of non- -11,588,239.52 13,980,545.50 -21,963,653.16
recurring profit and
loss
Minus: Amount
28,072,652.93 20,305,520.86 20,249,495.43
affected by income tax
Impact on
minority interests 11,044,702.32 1,828,585.84 -4,035,184.90
(post-tax)
Total 102,288,805.82 89,259,802.52 112,684,985.30 --
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 Gains/Losses 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 Gains/Losses as a recurring gain/loss.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Section III Management’s Discussion and Analysis
I. Industry Situation during the Reporting Period
In 2023, the world economy recovered sluggishly and struggled to move forward amid the
turmoil as a result of intensified international geopolitical conflicts and complicated global
development and security situations. The year of 2023 marks the start of fully implementing the
guiding principles of the 20th CPC National Congress. Superpower games a nd capital winter have
posed great challenges to the bio-pharmaceutical industry in China. The pharmaceutical industry
in China has also entered the stage of accelerated adjustment, and the pharmaceutical R&D,
production and management structure in China is undergoing a historic reconstruction. Since the
18th CPC National Congress, the CPC Central Committee with Comrade Xi Jinping as the core
has always given strategic priority to safeguarding people’s health, included the deepening of
medical reform in the all-round deepening of reform, facilitated the transformation from
“centering on disease curing” to “centering on people’s health”, and launched a series of
important reform measures revolving around two key challenges of “difficulty and high cost of
getting medical services”, with remarkable phased results achieved. In 2023, China’s volume-
based procurement of medicines was institutionalized and normalized. The optimization of rules
for centralized bulk purchase was gradually weakened the impacts on the i ndustry and the
mechanism for dynamic adjustment of health insurance directory got increasingly mature.
Medical insurance negotiations on innovative medicines were normalized, further accelerating the
commercialization of Chinese innovative medicines. The reform of payment method was
accelerated and DRG mode further drove the revolution of the industry. Laws, regulations and
policy systems that motivate innovation in medicines were optimized at an accelerated pace. The
National Medical Products Administration continuously deepened the reform of review and
approval systems, accelerated the launching of new medicines in urgent need for clinical purpose,
as well as medicines for rare diseases and children, and supported the pharmaceutical innovation
to continuously inject vitality into R&D and innovation of medicines in China. Due to increasing
influence from clinical values, pharmaceutical enterprises began to pay increasing attention to
R&D and innovation of medicines. The development of innovative medicines is becoming a n
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
important link that drives the new quality productive forces. Since the 14th Five-year Plan Period,
the R&D input throughout the industry in China has witnessed a mean annual growth of over 20%,
pushing China to the second place in the world in terms of number of new medicines. China
witnessed continuously enhanced strength in R&D of innovative medicines and contributed more
to global medicine R&D, receiving international recognition and seeing constantly increased
international competitiveness and influence. China continuously made positive progresses in
overseas registration and commercialization of its local new medicines, and hit a new high in the
number of varieties with externally licensed technologies and transaction amount. The
pharmaceutical industry in China has stepped up a new level in international operation and
entered the key period for independent innovation-driven transformation and innovation.
In July 2023, ten ministries and commissions including the National Health Commission of
the People’s Republic of China printed and issued the Guiding Opinions on Carrying out the
Centralized Rectification of Corruption in the Pharmaceutical Industry in China, launching the
one-year national centralized rectification of corruption in the p harmaceutical industry. The
campaign is aimed at systematically rectify problems in production, supply, sales, use,
reimbursement, “critical minorities” and other key links in the pharmaceutical industry, with all
chains and fields covered. With unprecedented input, the anti-corruption campaign helps to create
a compliant industry environment, regularize enterprises’ operations, facilitate the benign
competition among enterprises, and reshape the industrial order.
In 2023, major economic indicators in China’s pharmaceutical industry witnessed year-on-
year decline caused by such factors as decreased sales of products related to prevention and
control of special health events, reduced prices of medicines, and rising prices of raw materials.
According to National Bureau of Statistics, in 2023, the added value of the pharmaceutical
industry above designated size was about 1.3 trillion yuan, down 5.2% year on year in constant
price. Enterprises above designated size achieved 2.95525 trillion yuan of operating revenue and
412.72 billion yuan of profits, down 4% and 16.2% year on year, respectively. The growth rates
of the aforesaid three indicators were negative for the first time over the years. The business
differentiation of enterprises became more serious under the backdrop of overall decline in the
growth rate of the industry.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 30 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.
Specialized in the R&D, production and marketing of specialized medicines, medicines for
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. To date, the
Company has formed a good rhythm in launching innovative medicines annually. The Compa ny
has continued to engage in international registration, international certification, consistenc y
evaluation, etc. of products, with successive results achieved. Moreover, the Company has
fostered a complete internationally-oriented pharmaceutical industry system, established and
maintained R&D and project cooperation with multiple international innovative R&D enterprises.
Moreover, the Company has established strategic partnership with Pfizer, Takeda and other
multinational pharmaceutical companies on products in Chinese market.
As for the pharmaceutical business, the Company has continuously made innovation in
services and kept upgrading in consideration of needs of upstream and downstream customers. To
date, the Company has been ranked among the top ten pharmaceutical business enterprises in
China for consecutive years. Having four business segments of Chinese & western medicine,
medical devices, medicine materials and ginseng & antler, and health industry, the Company has
established 11 regional subsidiaries in Zhejiang Province, and three self-owned pharmaceutical
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
logistics bases in northern, central and southern Zhejiang Province, as well as retail chain
pharmacies and outpatient departments, with its customers distributed in 11 cities and 90 districts,
counties and county-level cities throughout Zhejiang Province. With full-product, full-network
and integrated wholesale-retail collaboration advantages, 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 for the innovative
business, the Company has always focused on featured massive health, product agency and
market expansion, pharmaceutical logistics characterized by cold chain, e-commerce of self-
owned brand medicines to further facilitate the transformation of its business structure. The
Company has always focused on strengthening its service abilities in policy affairs handling,
reserve, distribution and marketing, and fostered the full-channel promotion ability to offer
customers comprehensive solutions.
In terms of aesthetic medicine, the Company has created a comprehensive and differentiated
product matrix by following the strategy of “global operation layout and dual-circulation
operation & development” with an international vision through forward-looking layout, and now
ranks in the forefront of the industry in terms of product quantity and coverage. Specifically, over
20 products have been launched in China and abroad, and more than a dozen innovative global
products are in development. Fostering differentiated product lines that cover three major
injectable categories of regeneration products, hyaluronic acids and botulinum toxin, the
Company is committed to becoming a global leading aesthetic medicine comprehensive solution
provider by offering patients with more professional, efficient, comprehensive and safer
integrated solutions through diversified combined therapy techniques that combine “noni nvasive
and micro-invasive”, “facial and body filling”, “products + technologies”, and “injection + energy
based device”. Headquartered in the UK, the Company’s wholly-owned subsidiary Sinclair is its
global aesthetic medicine operation platform that has R&D centers in the 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 devices businesses through
its wholly-owned subsidiaries High Tech and Viora. As for the aesthetic medicine segment, the
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 placed its focus on two
business scenarios of application of synthetic biology technology system and innovative
development of bio-pharmaceuticals, and has fostered differentiated product lines and business
solutions in four major fields of xRNA, featured APIs &Intermediates, massive
health&biomaterials, and animal health. The Company has also established the R&D clusters with
Industrial Microbiology of Zhongmei Huadong, HIT Institute of Synthetic Biology, Huida
Biotech, Hizyme Biotech, Perfect mRNA and Hibe as the core, and seven industrial bases in
Hangzhou Xiangfuqiao, Qiantang New Area, Jiangsu Joyang Laboratories, Magic Health, Anhui
Meihua, Wuhu Huaren, and Nanjing Nongda Animal Pharmaceutical. Moreover, the Company
has set up the largest fermentation monomer plants in Zhejiang Province, 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 p urification, and built a complete
manufacturing system for R&D, pilot test, commercial production, engineering and public syste m
guarantee of microbiological projects.
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
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 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 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. All these merits
effectively empower the continuous initiation and launching of innovative products, offering
impetuses for the medium- and long-term development.
2. Diverse product lines for specialized and chronic diseases, and featured layout in
three core therapeutic fields
Focusing on 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. With the world’s
first-in-class layout in three core therapeutic fields of anti-tumor, internal secretion and
autoimmunity, the Company has fostered three featured R&D matrices of ADC, GLP-1 and
external preparation, forming differentiated advantages.
Specialized in medicines for diabetes for about two decades, the Company has fostered good
brand effect and laid strong market foundation, continuously keeping in the forefront of similar
products in China in terms of market share. The Company has formed comprehensive layout for
innovative medicines and differentiated generic medicines in the mainstream clinical treatment
targets of diabetes. To date, there have been 20 products under commercialization and research.
The existing and subsequently-upgraded products cover multiple clinical mainstream targets,
including α-glucosidase inhibitor, DPP-4 inhibitor, SGLT-2 inhibitor, GLP-1 receptor agonist,
double-target and triple-target agonists, insulin, and its analogues. 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.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
In the field of oncology, the Company kept enriching its pipelines around the key layout of
ADC products. In the meantime, the Company has successively invested in, controlled and
incubated numerous biotechnology companies with leading technologies in China. Specifically,
the Company successively invested in Qyuns Therapeutics, an anti-body R&D and production
company, Nuoling Biomedical Technology (Beijing) Co., Ltd., an ADC linker and coupling
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
technology company, incubated Zhejiang Huida Biotech Co., Ltd. with full product lines for
ADCpayloads, and held shares of Doer Biologics, a multi-antibody platform R&D company.
Moreover, the Company established cooperation with Heidelberg Pharma on equity investment
and products as its second largest shareholder and introduced its advanced ATAC (Antibody-
Amanita Conjugate) technology platform, fostering a unique ADC global R&D ecology of
Huadong Medicine and gradually creating a world-leading ADC independent R&D platform that
is unique to Huadong Medicine. The Company will keep developing ADC innovative products
via a differentiated manner and bringing tumor patients better and more advanced solutions.
In the field of autoimmunity, the indications of the Company’s existing and under-
development products include transplant immunity, systemic lupus erythematosus, psoriasis,
atopic dermatitis, seborrheic dermatitis, recurrent pericarditis, Cryopyrin-Associated Periodic
Syndromes and other diseases, covering such diseases as skin, rheumatism, cardiovascular,
respiratory, and transplantation. The Company has become one of the pharmaceutical companies
with comprehensive coverage in the field of autoimmunity in China. To date, the Company has
had over 10 varieties of biomedicines and small-molecule innovative products in the field of
autoimmunity. In the meantime, the Company’s Innovative Medicine R&D Center developed
multiple new target and biological mechanism immune disease early projects, which are all
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
smoothly advanced. With regard to autoimmunity, the Company stretched its coverage to external
preparations, built external preparations R&D platforms, and steadily advanced the R&D and
innovation of external preparations and complicated preparations. To date, its wholly-owned
subsidiary Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. has fostered three
production lines for external preparations.
3. China’s leading professional pharmaceutical service te am and complete commercial
format
In the pharmaceutical industry segment, the Company has fostered a professional
pharmaceutical service and market development team. Coring at the clinical values and academic
promotion, the team vigorously promotes the mar keting mode that features the online integration
of comprehensive hospitals, primary level medical institutions, retailing, third-party terminals and
Internet, with its sales network covering over 30 provinces (autonomous regions and
municipalities). To date, the Company 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
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
offering such high-end value-added services as policy affairs, the Company has established
business partnership with over 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.
4. 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 the UK. Acquiring international energy based aesthetic medicine device
enterprises High Tech and Viora in 2021 and 2022 respectively, Sinclair was granted the global
distributorship (except for Germany and the UK) of Préime DermaFacial Multi-functional facial
skin management platform of EMA Aesthetics, an Irish compa ny, in May 2022. In 2023, the
Company successively obtained the global rights of ATGC-110, a botulinum toxin product from
ATGC in the Republic of Korea, and the commercial rights of YY001 by Chongqing Yuyan in
China, realizing the full coverage of three categories of injection products, i.e. regeneration
products, hyaluronic acids, and botulinum toxin. For each category, the Company has formed
more than two differentiated product lines and built a comprehensive multi-dimensional aesthetic
product system to provide patients with one-stop integrated facial aesthetics solutions. Covering
all middle- and high-end markets of non-operative aesthetic medicine injections and energy based
aesthetic medicine devices, 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
based devices and set up an international aesthetic medicine operation and BD team. To date, the
Company has developed 38 types of international high-end “noninvasive and micro-invasive”
aesthetic medicine products that cover frown lines improvement, facial and body filling, thread
lifting, skin management, body shaping, depilation, private repair and other non-operative
mainstream aesthetic medicine fields. Specifically, 24 types of these products have been launched
in and out of China, and the other 14 types are innovative products under development. With
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
comprehensive product clusters formed, the Company now ranks in the forefront of the industry
in terms of product quantity and coverage.
5. Building R&D industrial cluster and compre hensively improving the international
competitiveness of industrial microbiology segment
Since the establishment of the Industrial Microbiology Division, the Company has led the
overall business development in the field of industrial microbiology, and formed a complete
independent management system in marketing, operation, R&D, human resources, and finance.
The Company has also established R&D clusters with Industrial Microbiology of Zhongmei
Huadong, HIT Institute of Synthetic Biology, Huida Biotech, Hizyme Biotech, Perfect mRNA,
and Hibe as the core, and seven industrial bases in Hangzhou Xiangfuqiao, Qiantang New Area,
Jiangsu Joyang Laboratories, Magic Health, Anhui Meihua, Wuhu Huaren, and Nanjing Nongda
Animal Pharmaceutical. 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 cover 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.
The Company’s industrial microbiology team is rich-experienced and full of vitality. Mr. Wu
Hui, Deputy General Manager of the Company, serves as the leader of the Company’s industrial
microbiology segment. With profound technical foundation and over 30 years of experience in the
field of industrial microbiology, he won the second prize of National Science and Technology
Progress Award twice. In terms of R&D, the Company’s industrial microbiology segment has
been committed to forming an efficient R&D team with high-quality talents as the core. To date,
there are 336 R&D personnel, 26% of whom have obtained their master and/or doctoral degrees.
In the industrial microorganism sector, the Company has initiated over 268 R&D projects,
including 48 projects for xRNA (including 170 subprojects), 61 projects for featured APIs and
pharmaceutical intermediates, 16 projects for massive health and biomaterials, and 21 projects for
animal health.
6. Prudent and pragmatic operation style, and stable returns to shareholders
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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. Since it was listed, the
Company has distributed dividends for 21 times with the cumulative amount of 5.61 billion yuan,
which is 22.44 times the fund raised during IPO. The Company brings shareholders consistent
and steady returns on investment.
IV. Main Businesses
1. Overview
In 2023, the Company continuously followed its operation philosophy of “high quality and
efficiency” and “struggling forward for development and putting management first”, vigorously
deepened transformation and innovation, actively advanced the management of diverse operations,
and constantly motivated its business vitality and impetus for growth revolving around its annual
operation plan and 7th three-year plan. In the meantime, the Company proactively responded to
policies on volume-based procurement, external competitions and multiple challenges, kept
exploring and practicing paths for innovative development, and made forward-looking and
international layout targeting at global cutting-edge innovative technology platforms and markets
with unmet demands. Thanks to all these efforts, the Company achieved great progress in clinical
R&D and BD, further enriched its product lines, steadily improved the development quality, and
pushed its business performance, R&D and innovation, and comprehensive strength to a higher
level, embarking on a new journey toward the high-quality growth driven by scientific and
technological innovation.
In 2023, the Company achieved the operating revenue of 40.624 billion yuan, up 7.71% year
on year. The net profit attributable to shareholders of listed companies was 2.839 billion yuan, up
13.59% year on year. The net profit after deducting non-recurring profits and losses attributable to
the parent company was 2.737 billion yuan, up 13.55% year on year. After deducting the profits
and losses of participating and holding R&D institutions, the net profit after deducting non-
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
recurring profit and loss attributable to shareholders of listed companies was 3.154 billion yuan,
up 30.87% compared with the Company’s net profit after deducting non-recurring profits and
losses attributable to the parent company in 2022. In Q4 2023, the Company achieved the
operating revenue of 10.229 billion yuan, up 3.79% year on year. The net profit attributable to
shareholders of listed companies was 650 million yuan, up 25.51% year on year. During the
reporting period, the Company’s performance achieved growth against trend in a complex and
difficult environment, and maintained a stable and positive development trend. Its four major
business segments of pharmaceutical industry, pharmaceutical business, aesthetic medicine and
industrial microbiology together contributed to the Company’s historical breakthrough in both
operating revenue and achieved. The Company achieved its annual operation goals, with
satisfactory achievements made.
During the reporting period, the Company kept maintaining stable and good operation, and
achieved the consolidated gross margin of 32.40%, increased by 0.5% year on year. The net cash
flow from operating activities of the Company was 3.929 billion yuan. The Company kept
operating at a high level throughout the year. As of the end of 2023, the Company’s total assets,
net assets attributable to shareholders of listed companies, asset-liability ratio, and return on
equity (ROE) were 33.509 billion yuan, 21.048 billion yuan, 35.60% and 13.96% respectively.
During the reporting period, the Company satisfactorily attained its overall performance goals for
2023 set in 2022 Restricted Stock Incentive Plan and is expected to attain its overall performance
goals for 2024. In 2023, the Company completed series of work specified in 2022 Restricted
Stock Incentive Plan, including releasing the restricted shares for the first time, and registration of
reserved restricted shares.
I. Operation and Developme nt of the Four Business Segments of the Company during
the Reporting Period
(I) Pharmaceutical Industry
In 2023, the Company strictly followed its operation philosophy of “Strengthening
Collaboration, Controlling Risks and Improving Speed for High Quality and High Efficiency”. Its
core subsidiary Zhongmei Huadong witnessed stable and positive growth as a whole and achieved
the operating revenue of 12.217 billion yuan, up 9.45% year on year, and the net profit
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
attributable to the parent company of 2.33 billion yuan, up 9.63% year on year. The return on
equity was 23.98%.
During the reporting period, Zhongmei Huadong kept expanding efforts in three core
therapeutic fields of oncology, endocrinology and autoimmunity, followed the innovative R&D
idea of “self-research + introduction”, advanced the initiation of innovative projects and
introduction of external innovative businesses, and continuously enriched its product lines.
Hangzhou Zhongmei Huadong Pharmaceutical Service Corporation constantly deepened the
transformation of pharmaceutical services and comprehensively improved its abilities in
pharmaceutical services. Moreover, it endeavored to build and develop a three-dimensional
marketing strategy by consolidating the existing marketing system, further enhanced talent
training and external introduction, strengthened professional support, actively advanced lean
management and digital marketing, optimized the out-of-hospital promotion system, and
continuously fostered multi-dimensional market access and professional promotion capacities. It
facilitated, optimized and improved the Regional Marketing Department and the KA syste m
construction, and further strengthened the academic-driven development. While stabilizing the
hospital market, it continuously expanded grassroots and out-of-hospital markets, and further
strengthened online markets, OTC markets, DTP stores and other market networks and channels.
The Company actively explored strategies for expansion of markets of products subject to
volume-based procurement and medical insurance negotiations, endeavored to maintain retention
rate of medicines procured on volume basis and safeguard channels for patients to purchase
medicines by increasing terminal coverage and fostering brand advantages at clients and pa tients
levels. All these efforts contributed to stable growth of sales of the Company’s key categories.
Being “Scientific Research-based and Patient-centered”, the Company attached great
importance to innovative R&D, resolutely practiced transformation and innovation strategies, and
rapidly fostered a full-chain and international new medicine R&D system that satisfies diverse
clinical demands and bears huge commercial values. In recent years, the Company has
continuously maintained an annual R&D investment of more than 1 billion yuan in the
pharmaceutical industry, which has been continuously increased as the scope of China’s volume -
based procurement continues to expand. During the reporting period, the Company’s R&D
investment in the pharmaceutical industry (excluding equity investment) was 2.293 billion yuan,
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
up 23.67% year-on-year. Among them, direct R&D expenditure was 1.6 billion yuan, up 33.74%
year-on-year, which accounts for 13.1% of the operating revenue of the pharmaceutical industry.
With “clinical value, pharmacoeconomic value and commercial value” as the starting point, the
Company focused on three core therapeutic fields of oncology, endocrinology and autoimmunity,
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. Having researched and
developed various categories of medicines including small-molecules, monoclonal antibodies,
polyclonal antibodies, polypeptides and ADCs, 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 R&D Center. In the meantime, 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. During the reporting period, the Company’s
clinical and R&D teams rapidly promoted the implementation of existing clinical projects and
development of R&D projects in early stage, and accelerated the pace to put series innova tive
products with first-in-class (best-in-class) or differentiated/iterative development values into the
clinical research stage in and out of China. As of the date of the Report, the Company has had
over 60 innovative product lines, 9 types of which are under phase III clinical trial or NDA/BLA
application stage. To date, the Company has formed a favorable trend for continuous initiation
and launching of innovative products, offering impetuses for the medium- and long-ter m
development.
In the field of endocrinology, the Company fostered product lines of innovative and
differentiated generic medicines with GLP-1 and other clinical mainstream therapeutic targets as
the core, with over 20 products under development or put in commercial production. The
Company fostered all-round 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.
In the field of autoimmunity, the Company successively established partnership with many
technically advanced innovative R&D enterprises in and out of China, including Qyuns
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Therapeutics in Jiangsu, Provention Bio, Ashvattha, Kiniksa and Arcutis based in the U.S. and
MC2 in Denmark, and introduced world-leading innovative technologies and products. In the
meantime, the Company continuously improved its ability in independent innovation and R&D
and had more than 10 biomedicine and small-molecule innovative products under research or
launched overseas. Indications of the Company’s existing products and those under research
include transplantation immunity, systemic lupus erythematosus, psoriasis, atopic dermatitis,
seborrheic dermatitis, recurrent pericarditis, and Cryo-Pyrin-Associated Periodic Syndromes,
covering multiple categories of diseases related to skin, rheumatism, cardiovascular, respiratory
and transplantation. In August 2023, the Company successively introduced roflumilast external
preparation (ZORYVE cream and foam) from Arcutis based in the U.S. and Wynzora cream
from MC2 in Denmark, further enriching its innovative product lines for external preparations.
Among them, ZORYVE foam (0.3%) was approved by FDA in December 2023. With regard to
psoriasis treatment, the Company has Ustekinumab Injection, oral small-molecule drug
Cyclosporine Soft Capsules, simple-prescription external preparations ZORYVE cream and
foam, as well as compound external preparation Wynzora cream, forming multi-target and
multi-action mechanism psoriasis treatment product portfolio that cover all groups throughout the
cycle. Moreover, the Company has established its featured external preparation platform that is
specialized in the differentiated R&D of external preparations for skin, and built a professional
R&D team. Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. fostered three external
preparation production lines to facilitate the launching of products.
In the field of oncology, the Company focused on the layout of high-barrier R&D platforms
and product lines for ADC. The BLA of ELAHERE (mirvetuximab soravtansine-gynx), a global
first-in-class ADC medicine for platinum-resistant ovarian cancer co-developed with ImmunoGe n
from the U.S. was submitted and the medicine was included in the list of priority review varieties.
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,
organically integrating with its advanced ATAC (Antibody Targeted Amanitin Conjugates)
technology platform.
Since 2023, the Company has successively commercialized numerous varieties of innovative
and biosimilar medicines, or submitted applications for launching such medicines. In 2023, the
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Company’s Liraglutide Injection (trade name: Liluping) was approved for treating type 2
diabetes, obesity or overweight in adults, being the first GLP-1 target launched by the Company
and the first liraglutide biosimilar medicine approved in China. Since it was launched, Liluping
has witnessed favorable sales momentum, laying a solid foundation for the commercialization of
the Company’s subsequent GLP-1 products. In November 2023, the BLA application of the
innovative medicine ARCALYST (Rilonacept for Injection) introduced by the Company for the
treatment of Cryopyrin-Associated Periodic Syndromes in China was accepted. In March 2024,
the BLA application of ARCALYST for the treatment of recurrent pericarditis (RP) in China
was accepted. Both indications were listed in the National List of Rare Diseases and the list of
priority review varieties. In January 2024, the NDA application of Relmapirazin Injection (R&D
code: MB-102), a new Category-I medicine submitted by Zhongmei Huadong in China was
accepted. The Dynamic Monitoring System of Glomerular Filtration Rate used with Relmapirazin
Injection was approved to enter the special examination procedure of innovative pharmaceutical
devices in November 2021, and its registration application was accepted in July 2022. The
combination of Relmapirazin Injection and the Dynamic Monitoring System of Glomerular
Filtration Rate can realize real-time detection and continuous monitoring of glomerular filtration
rate (GFR), thus satisfying unmet clinical demands in the kidney function test market. In August
2023, the BLA application of the biosimilar medicine HDM3001 (QX001S), a biological similar
of Ustekinumab Injection jointly developed by the Company and Qyuns Therapeutics was
accepted. The Company is expected to become the first Chinese enterprise that obtains the
approval for biological similar of Ustekinumab Injection. In October 2023, the BLA application
of ELAHERE, a type of first-in-class ADC medicine for platinum-resistant ovarian cancer
introduced by the Company, in China was accepted. It was included in the list of priority review
varieties in China, and is expected to be approved in 2024 to benefit Chinese patients. In March
2024, it was granted full FDA approval for the treatment of folate receptor alpha (FRα)-positive,
platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal adult cancer patients
treated with up to three prior therapies. ELAHERE is the first and only ADC approved in the
U.S. for this difficult-to-treat malignancy.
On March 1, 2024, Zevorcabtagene Autoleucel Injection (trade name: Saikaize ; R&D code:
CT053), a CAR-T product developed by CARsgen Therapeutics, received the notice from the
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
National Medical Products Administration (NMPA) that it was approved for the treatment of
adult patients with relapsed or refractory multiple myeloma who have previously progressed after
at least 3 lines of therapy (including a proteasome inhibitor and immunomodulator agent) . The
Company was granted the exclusive right to commercialize zevorcabtagene autoleucel in
mainland China, and has set up a professional commercialization team. The first prescription of
this product in China was issued on the day when it was approved.
During the reporting period, the Company formally set up its Scientific Advisory Board
(SAB) with a view to further expand and optimize its strategic layout in innovative R&D of
medicines. Members of the first SAB were outstanding experts and scholars enjoying
international prestige and making profound academic attainments in the fields of medicine and
R&D in and out of China. SAB is positioned as a platform for global outstanding industry experts,
scholars and scientific research forces to provide the Company with all-round, objective,
professional and strategic guidance and suggestions on R&D of innovative medicines and help the
Company solve key problems in innovate R&D, thus better serving patients. During the reporting
period, the Company organized and held two SAB meetings.
Please refer to the “R&D Investment” section for details of the Company’s R&D pipelines,
progress in registration, and R&D.
During the reporting period, the production and quality segments of the Company resolutely
implemented the Company’s innovation and transformation strategies, and kept improving its
level of intensive, intelligent and green development with a view to foster an excellent production
system. Moreover, these segments enhanced the quality management and integrated management
of production system throughout the product life cycle and kept improving its production quality
and competitive advantage in production cost by building an inclusive production system. Efforts
were also made to strengthen the quality compliance and GMP normalized management, and
advance the product quality control and effective operation of the quality system. All employees
were encouraged to participate in lean production and total cost management by vigorously
organizing activities themed with “Compliant and Lean Basic Management System” to facil itate
the implementation of lean management measures. Employees’ skills and per capita labor
efficiency were continuously improved by optimizing the operation mode. Energy-saving and
emission reduction initiatives were organized, with remarkable achievements made in cost
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
reduction. Efforts were made to proactively implement the Company’s international strategies and
continuously advance international registration and certification of products. During the reporting
period, the Tacrolimus Capsules of Zhongmei Huadong was approved by the FDA, becoming
another product of the Company that is approved following Pantoprazole Sodium for Injection,
Acarbose Tablets and Daptomycin for Injection, China’s first Tacrolimus Preparation approved in
the U.S. and an important achievement of the international strategy of the Company’s preparation
products. Moreover, the Company also continued to advance the overseas registration of many
other products, including Caspofungin Acetate for Injection and Sermaglutide API.
(II) Industrial Microbiology
During the reporting period, the Company’s industrial microbiology segment achieved the
total sales revenue of 525 million yuan after deducting that of specific commercial products, up
20.67% year on year.
The Company kept practicing the industrial microbiology development strategy, clarifying
its strategic layout focusing on four major fields of xRNA, featured APIs & intermediates,
massive health & biomaterials, and animal health. In the meantime, the Company continuously
enriched the product lines in four major strategic segments of high innovation, high technology
barrier and high added-values, and optimized its product structures with the focus placed on R&D.
The field of xRNA mainly included several key products of nucleoside mo nomer, modifying and
protective nucleosides and cap, and was positioned as the manufacturing-end service provider of
xRNA medicines. The field of featured APIs & intermediates gave full play to the advantages of
three technical platforms of synthetic biology, fermentation and enzyme engineering, took ADC
raw material (including high-tech barrier raw material products from anti-tumor, anti-infection
and other microbial sources) as its innovative business, and was positioned as a service provider
for Highly Potent Active Pharmaceutical Ingredients (HPAPI). Focusing on such industrial
orientations as bone health, brain health, antioxidation, personal care and aesthetic medicine, and
import substitution of new injectable medicinal materials, the field of massive health &
biomaterials created the automatic and standard industrial manufacturing system and stepped out
of C-end product markets with the technical support from the HIT Institute of Synthetic Biology.
In the field of animal health, the Company focused on three orientations of pet treatment, pet
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
nutrition, and water nutrition and water environment, and endeavored to become a leader in
China’s pet and aquatic animal health industry driven by R&D, led by markets and guaranteed by
production.
xRNA: In January 2023, the Company established Hangzhou Perfect mRNA Biotechnology
Co., Ltd. (hereinafter referred to as “Perfect mRNA”), which is mainly engaged in the
development of raw materials of mRNA enzyme and molecular diagnostic enzyme, as well as
mRNA CDMO services, together with the upstream enzyme raw materials and downstream
preparation services. Perfect mRNA comprised industrial collaboration with Anhui Meihua and
Wuhu Huaren in the field of xRNA, further optimizing the whole-industrial chain layout of xRNA.
Featured APIs & intermediates: The Company completed the layout of series products for
ADC raw materials of innovation businesses, and submitted DMF application documents for
mainstream toxin varieties. The Company also completed the overall layout of pol ypeptide
business and will proactively expand its international markets. The layout of high-activity anti-
tumor, anti-parasite and microbial source API product systems was basically completed.
Massive health & biomaterials: Magic Health, the Company’s subsidiary, completed the
fundamental construction of its Yichang Industrial Base (Phase I) in December 2023 and obtained
the license for production. Production validation and international registration certifications for
multiple products were done in the first quarter of 2024. Hibe, the Company’s subsidiary, fostered
a matrix of upstream medical high-end functional materials with its self-developed products based
on biodegradable materials together with exclusively agent varieties introduced from overseas. It
proactively laid out biological medicine and aesthetic medicine CMC R&D businesses strongly
associated with self-owned materials and with global competitiveness, and joined hands with
clients to incubate global innovative products relying on its unique preparation technological
innovation platform. In this field, Magic Health will further strengthen its sales manpower in
overseas markets, build the core dealers network, and put in place its channel layout in Asia
Pacific, Europe, America, and China.
Animal health: the Company acquired Jiangsu Nanjing Nongda Animal Pharmaceutical Co.,
Ltd. (herein after referred to as “Nanjing Nongda Animal Pharmaceutical”) in April 2023, quickly
setting foot in pet and aquatic animal health segments. In October 2023, the Company obtained
the exclusive selling right and marketing right of Butorphanol Tartrate Injection (trade name:
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Baoshining), a kind of central analgesic medicine developed by Beijing CELS Medical
Technology Co., Ltd., in China (including Hong Kong SAR, Macao SAR and Taiwan, China). In
the field of aquatic animal health, the Company has always been committed to improving water
environment and enhancing aquatic nutrition, thus providing farms with comprehensive product
solutions and services. In this field, the Company will keep improving online and offline
treatment links, promote and build the “Mengdi” brand online, make long-term layout, and
endeavor to become a new brand specialized in pains and aged disease management in the field of
pet care.
In 2024, a crucial year for the rapid development of the Company’s industrial microbiology
segment, the Company will continue to accelerate its pace in expanding the international market.
In the meantime, the Company will further advance the large variety cultivation program and
increase the ratio of its international businesses by grasping the opportunities of formal operation
of Magic Health and C-end market expansion of Nanjing Nongda Animal Pharmaceutical,
enhance its international competitive advantages and achieve the rapid development of its overall
business with R&D, quality, service and compliant registration as its main competitiveness.
(III) Pharmaceutical Business
In 2023, the Company’s pharmaceutical business segment continued its continuous and
stable growth, and achieved the operating revenue of 26.981 billion yuan and the accumulative
net profit of 431 million yuan, up 5.59% and 8.74% year on year, respectively.
During the reporting period, the Company’s pharmaceutical business segment adhered to
create new competitive advantages and build a new pattern for development in line with its
philosophy of innovation in services and putting clients at the center. Adhering to the
development principle of “High Quality + High Efficiency”, the Company’s pharmaceutical
business segment actively endeavored to build itself into an enterprise with leading position in
scale, network and services for the high-quality development, with the core placed on “profits
increase and costs reduction” for high-efficient development. In the meantime, efforts were made
to advance innovation in services, enhance core competitiveness of various business fields, and
create pharmaceutical businesses of Huadong Medicine with unique characteristics. Externally,
the segment steadily improved its operation quality and efficiency, explored profit growth points,
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
and guaranteed its cash flow, while strengthening hospital businesses, expanding out-of-hospital
markets, and developing innovative businesses. As for hospitals, the segment firmly grasped
opportunities brought by the policy of “long-distance settlement of medical insurance”, placed its
focus on leading hospitals, established diverse partnerships, and steadily improved its
performance. In the field of medicinal materials, ginseng & antler and medical devices, the
segment further expanded its businesses to lower-tier markets throughout Zhejiang Province and
improved market shares in various cities. In the field of health industry, the segment focused on
rehabilitation equipment and increased its bid acceptance probability and coverage. With regard
to out-of-hospital markets, the segment further expanded its coverage, gave priority to the
development of Huadong Medicine’s retailing business, increased the profitability of retailing
business, synergize with dual-channel medicines and commercial people-benefiting insurance
policies, and build platforms with industrial competitiveness cored at introduction of varieties and
prescription reception. As for innovative businesses, the segment focused on product agent,
pharmaceutical e-commerce of self-owned brands, and tripartite pharmaceutical logistics featured
by cold chain. Product pipelines were expanded from medicines to medical devices. Its self-
owned brand “Xuguanghe” was continuously iterated and upgraded for more innovative products.
The ratio of tripartite pharmaceutical logistics was further expanded, with authorizations for more
cooperative projects and products obtained.
In 2024, the Company’s pharmaceutical business segment will continue to explore
innovation in services, always focus on clients, keep up with upgraded demands of upstream and
downstream clients, and build a new cooperation ecosystem with business partner s in and out of
China through in-depth cooperation in multiple modes, fields, and channels. The segment will
keep improving its service quality, build differentiated service brands of the Company’s
pharmaceutical business, and expand its scale for more profits. Envisioning improving its market
share through stabilized scale and optimized structure, the segment will continue to consolidate its
traditional delivery business, maintain a reasonable scale, increase the ratio of leading hospitals,
extend its medicinal materials and medical devices businesses to low-tier markets, and increase its
market shares in various cities. In the meantime, the segment will vigorously expand its out-of-
hospital markets, further develop the Company’s pharmacy retail businesses, and improve the
profitability of pharmacies in hospitals and DTP stores. As for agent products, the segment placed
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
its focus on chemical medicines and blood products, and further extended medical devices lines to
attain more profits. OTC, distribution and other departments co-established business groups for
businesses out of Zhejiang Province. The Innovation Center proactively supported the distribution
business, undertook large projects from famous enterprises, introduced agent medical devices, and
directly accessed terminals via subsidiaries in various cities. Huadong Medicine Supply Chain
Management (Hangzhou) Co., Ltd. Further optimized collaborative integration under multiple
logistics scenarios, expanded phase IV of refrigeration storage, expanded the distribution of
special medicines represented by high-end cold chain and vaccines, and consolidated its leading
role in the pharmaceutical cold chain service industry.
(IV) Aesthetic Medicine Business
During the reporting period, the Company’s aesthetic medicine segment maintained rapid
growth and achieved the record high total operating revenue of 2.447 billion yuan (excluding
internal offsetting factors), up 27.79% year on year. The overall profitability in the aesthetic
medicine segment and ratio of contribution to the Company’s overall net profit witnessed steady
improvement.
During the reporting period, Sinclair, the Company’s wholly-owned subsidiary and the
global operating platform of its aesthetic medicine business based in the UK, proactively
expanded sales of its aesthetic medicine injection, filling and EBD products globally despite
impacts of sluggish global economic growth, and achieved the sales revenue of 149.58 million
pounds (about 1.304 billion yuan), up 14.49% year on year. Sinclair achieved its first annual
profit since it was acquired by the Company.
During the reporting period, Sinclair (Shanghai), the Company’s wholly-owned subsidiary in
China for its aesthetic medicine business, achieved the accumulative revenue of 1.051 billion
yuan, up 67.83% year on year, making important contribution to the growth of the Company’s
overall performance.
During the reporting period, the Company actively practiced the long-term vision of
cultivating and building the world’s leading innovative aesthetic medicine enterprise, continued to
steadily promote the strategy of dual-circulation development in and out of China, focused on the
global high-end aesthetic medicine market, strengthened its brand building, and accelerated the
integration of product resources. To date, the Company has launched 38 high-end products in the
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
field of “non-invasive + micro-invasive” aesthetic medicine worldwide, of which 24 have been
marketed. The product portfolio covers non-surgical mainstream aesthetic medicine fields such as
frown lines improvement, facial and whole-body filling, energy source skin management, and
body shaping. In the meantime, the Company has formed integrated product clusters and ranks in
forefront of the industry in terms of quantity of products and number of fields covered, with
continuously improved international influence. With a professional marketing and promotion
team comprised of about 300 talents, the Company’s aesthetic medicine segment has built its
global aesthetic medicine marketing network with over 80 countries and regions covered.
During the reporting period, the Company signed cooperation agreements with ATGC in the
Republic of Korea and Chongqing Yuyan successively to introduce two types of innovative
botulinum toxin products under research: botulinum toxin type A ATGC-110 and recombinant
botulinum toxin type A YY001, further enriching the Company’s product lines of aesthetic
medicine injections. As of the date of the Report, the application for launching of ATGC-110 was
accepted by the Ministry of Food and Drug Safety of the Republic of Korea (MFDS) for the
declared indication of improving moderate to severe frown lines of adult patients. The enrollment
of subjects during phase III clinical trial for YY001 was completed in China. YY001 and ATGC-
110 will fully satisfy patients’ demands for rejuvenation and high security thanks to their
differentiated efficacies. To date, the Company achieved full coverage of three categories of
injection products, i.e. regeneration products, hyaluronic acids, and botulinum toxin. For each
category, the Company formed more than two differentiated product lines and is able to provide
patients with one-stop integrated facial aesthetics solutions in the future.
During the reporting period, the Company actively adva nced the global registration of its
aesthetic medicine products and simultaneously facilitated the registration and launching of
overseas products in China. Actively facilitating the registration for marketing in multiple
countries across the globe, Sinclair had obtained marketing authorizations for 16 products in 37
countries and regions during the reporting period. During the reporting period, the Company kept
advancing the registration and launching of its core products in China. The application for
registration of the Company’s optical RF therapy devices V20 was accepted by the Center for
Medical Device Evaluation, NMPA in September 2023. The product is expected to be approved
in China in 2024. MaiLi Extreme, the Company’s novel high-end lidocaine-containing sodium
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
hyaluronate filler for injection, successfully achieved primary endpoint of the clinical trial in
China, with favorable product safety data shown. In December 2023, MaiLi Precise completed the
enrollment of the first subject in clinical trials in China. In March 2023, Ellansé M, a
polycaprolactone microsphere facial filler for injection, successfully completed the enrollment of
all subjects in clinical trials in China. Moreover, 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. In February 2023, the first treatment was completed in ARSMO Lecheng,
Hainan. In April 2023, 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. Please see “(8) Progr ess of
registration and marketing of aesthetic medicine products” in “(III) R&D situation” below in this
section for the progress of registration of the Company’s other key aesthetic medicine products in
China.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
44
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Figure: Key Aesthetic Medicine Products of Huadong Medicine
During the reporting period, Sinclair (Shanghai) drove collaborative development of its
subsidiary brands with the Company’s brand as the main body, launched many star programs
since it set foot in Chinese market, linked global resources, improved its reputation on B and C
ends, and created a brand image that features “professional”, “aesthetic” and “high-end”. Its core
product Ellansé, the only regenerative filler on the aesthetic medicine market in China
introduced from Europe, brings patients natural anti-aging effects and has been extensively
recognized by users for its unique PCL + CMC combination for anti-aging. By the end of 2023,
Sinclair (Shanghai) has signed cooperation contracts with over 600 hospitals and trained over
1,100 certified physicians on Ellansé. As for Ellansé, the Sinclair (Shanghai) constantly
strengthened its brand building and consolidated the high-end orientation through diverse trans-
discipline activities, being well-received by C-end markets and witnessing improved industry
influence and competitiveness.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
During the reporting period, Sinclair (Shanghai) not only kept leading the regenerative filling
market in China, but also actively expanded its coverage in the field of aesthetic devices. In June
2023, the launch meeting of the Company’s RF therapeutic instrument Reaction was
successfully held in Shanghai, which leads the new trend of comfort anti-aging. The unique
CORE multi-channel RF technology of Reaction can effectively stimulate fiber cells, thus
improving wrinkles, lifting and relieving loose skin, and bringing patients better anti -aging
experience.
During the reporting period, Sinclair successfully held Sinclair Global Forum in Milan, Italy,
attracting over 200 industry leaders and medical specialists from across the world. Participants
shared with each other experience in using Ellansé and discussed about application and
reflections on collagen regeneration technologies based on global cases of facial features of
patients at different ages and in different races. Famous medical experts from China and 20
doctors from the delegation of aesthetic medicine in China had full and heated discussion with
international experts. The oriental aesthetics was widely concerned and China’s experience
received global recognition.
The aesthetic medicine segment of the Company has always put medicine science first. In
2023, the segment issued four papers on academic journals, including a piece of paper on a
heavyweight journal in the aesthetic medicine industry. In the meantime, two post-launching
studies on Ellansé and Reaction were conducted, with relevant results submitted to SCI
International academic journals. One paper was accepted by Aesthetic Plastic Surgery (APS).
In the future, the Company’s aesthetic medicine segment 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 by upholding the strategy of “global operation
layout and dual-circulation operation & development” and keeping optimizing its product lines.
With its core subsidiary Sinclair as the global operation platform and integrating global
technological and innovative resources, the Company has achieved the global operation layout for
its aesthetic medicine segment and successively introduces “aesthetic medicine + cosmetic
medicine” products with great scientific connotation and huge market potential into China.
Internationally, the Company empowers the rapid launching and commercialization of its superior
international products relying on its great registration and marketing abilities in China and
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
steadily expands its presence in China. Moreover, the Company will continue to foster robust
brand strength based on cutting-edge innovative technology, strive to bring comprehensive
solutions and extraordinary aesthetic experience to patients by upholding the professional and
rigorous attitude as a pharmaceutical enterprise, and bring long-term values to patients, aesthetic
medicine institutions, and physicians around the world.
II. BD Cooperation during the Reporting Period
In January 2023, the Company’s wholly-owned subsidiary Huadong Medicine (Hangzhou)
Co., Ltd., signed an exclusive commercialization cooperation agreement with Kaixing Life
Science and Technology (Shanghai) Co., Ltd., a wholly-owned subsidiary of CARsge n
Therapeutics Holdings Limited. Huadong Medicine (Hangzhou) obtained the exclusive
commercialization rights in mainland China of Zevorcabtagene Autoleucel Injection (Saikaize ,
approved for marketing in China in 2024), a product of fully human anti-autologous BCMA (B
cell mature antigen) CAR-T owned by Kaixing for the treatment of relapsed/refractory multiple
myeloma. With great potential, Zevorcabtagene Autoleucel Injection will further enrich the
Company’s product lines in the field of blood diseases, and will also share the expert network,
research and clinical resources with existing key varieties of the Company in the field in terms of
marketing, thus achieving mutual complementary, mutual development and effective
collaboration. The Company will form a multi-dimensional product lines of chemotherapy
medicines, ADC products and CAR-T products in the field of neoplastic hematologic treatment
after this transaction (refers to relevant announcement (Announcement No.: 2023-004) disclosed
by the Company on Cninfo (http://www.cninfo.com.cn) for details).
In March 2023, the Company intended to sign the Partnership Agreement of Hangzhou
Capital Biomedical Achievements Transformation Fund (hereinafter referred to as the
“Partnership Agreement”) with Hangzhou Jianheng Enterprise Management Co., Ltd., Hangzhou
Industrial Investment Co., Ltd., Hangzhou Taikun Equity Investment Fund Partnership (Limited
Partnership), Betta Pharmaceuticals Co., Ltd. and Hangzhou West Lake Industrial Fund Co., Ltd.
to jointly invest in the establishment of Guoshun Jianheng Venture Capital Partnership (Limited
Partnership) with a total subscribed capital of 210 million yuan, in a bid to further enrich the
Company’s industrial investment ecosystem relying on the industrial management experience o f
business managers and resource advantages of other contributors by organically integrating
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
government’s guidance fund and excellent pharmaceutical capitals. By contributing 40 million
yuan (or a contribution ratio of 19.05%), the Company will be the limited partner (LP) of the
Partnership (refers to relevant announcement (Announcement No.: 2023-008) disclosed by the
Company on Cninfo (http://www.cninfo.com.cn) for details).
In April 2023, the Company’s wholly-owned subsidiary Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd. signed the Agreement on Equity Transfer and Capital Increase of
Jiangsu Nanjing Nongda Animal Pharmaceutical Co., Ltd. (hereinafter referred to as “Nanjing
Nongda Animal Pharmaceutical”), with Nanjing Nongda Animal Pharmaceutical, natural person
Zhai Zhongshu and Nanjing Jiuheng Pharmaceutical LP (Limited Partnership). Zhongmei
Huadong will invest no more than 265,333,300 yuan in total and acquire 70% of the equity in
Nanjing Nongda Animal Pharmaceutical in the form of equity transfer and capital increase,
becoming a controlling shareholder of the latter. This acquisition further improved the industrial
layout of the Company’s industrial microbiology segment. After this transaction, Nanjing Nongda
Animal Pharmaceutical will become an important platform for Huadong Medicine to develop its
animal health business in industrial microbiology sector, while making full use of Huadong
Medicine’s advantages in industrial ecological chain and financial support capabilities to a chieve
coordinated development in R&D, manufacturing, marketing, selling and other dimensions (refers
to relevant announcement (Announcement No.: 2023-024) disclosed by the Company on Cninfo
(http://www.cninfo.com.cn) for details).
In July 2023, the Company’s subsidiary Doer Biologics announced a licensing agreement
with BioNTech SE (NASDAQ: BNTX, “BioNTech”). According to clauses of the agreement,
Doer Biologics will grant BioNTech a global license to use an innovative finding of Doer
Biologics for research, development, production and commercialization of an innovative bio-
therapeutic medicine with undisclosed target. Doer Biologics will receive advance payment and
payments for potential development, supervision and commercial milestones.
In August 2023, the Company’s wholly-owned subsidiary Zhongmei Huadong signed the
Exclusive Product License Agreement with the American listed company Arcutis Biotherapeutics,
Inc. (hereinafter referred to as “Arcutis”). According to the agreement, Zhongmei Huadong
obtained the exclusive license of the globally innovative Roflumilast external preparations
(including Roflumilast Cream ZORYVE and Roflumilast Foam ARQ-154) of Arcutis in Greater
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
China (including Chinese mainland, Hong Kong SAR, Macao SAR and Taiwan, China) and
Southeast Asia (Indonesia, Singapore, Philippines, Thailand, Myanmar, Brunei, Cambodia, Laos,
Malaysia and Vietnam), including rights for development, registration, production and
commercialization. Zhongmei Huadong will pay Arcutis a down payment of 30 million US
dollars, a milestone payment of development, registration and sales with a maximum of 64.25
million US dollars, and a graded double-digit net sales commission. The introduction of
ZORYVE cream and ARQ-154 will further supplement the Company’s product lines in the field
of autoimmunity and inflammatory skin diseases, and consolidate its core competitiveness in the
field of autoimmunity (refers to relevant announcement (Announcement No.: 2023-061) disclosed
by the Company on Cninfo (http://www.cninfo.com.cn) for details).
In August 2023, the Company’s wholly-owned subsidiary Zhongmei Huadong signed the
Exclusive Product License Agreement with MC2 Therapeutics Ltd., a wholly-owned subsidiary
of a Danish company MC2 Therapeutics A/S (hereinafter referred to as “MC2”). According to the
agreement, Zhongmei Huadong obtained the exclusive license of the globally innovative product
Wynzora in Greater China (including Chinese mainland, Hong Kong, Macao and Taiwan),
including rights for development, registration, production and commercialization. Zhongmei
Huadong will pay MC2 a down payment of no more than 16 million US dollars, a milestone
payment of clinical development and registration, a mile payment of sales with a maximum of 36
million US dollars, and a graded double-digit net sales commission. The introduction of
Wynzora will further enrich the Company’s innovative product lines of external preparation and
continuously consolidates its competitiveness in the treatment of psoriasis. (Please refers to
relevant announcement (Announcement No.: 2023-067) disclosed by the Company on Cninfo
(http://www.cninfo.com.cn) for details).
In October 2023, the Company’s wholly-owned subsidiary Huadong Medicine Aesthetics
Investment (Hong Kong) Limited (hereinafter referred to as “Aesthetics Investment”) signed the
Exclusive Product License Agreement with ATGC Co., Ltd. (hereinafter referred to as “ATGC”)
in the Republic of Korea. According to the agreement, Aesthetics Investment obtained the global
exclusive license of ATCG-110, an injection containing botulinum toxin type A of ATGC, in
China, the U.S., Europe, etc. (excluding India), and the non-exclusive license in the Republic of
Korea, including the clinical development, registration and commercialization rights for aesthetic
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
medicines and all of its complications. Aesthetics Investment will pay ATGC a down payment of
13 million US dollars, and a milestone payment of clinical development and registration with a
maximum of 17 million US dollars. The agreement for ATGC-110 is a strategic supplement to the
Company’s global aesthetic medicine products, which is beneficial for the Company to build
diversified aesthetic medicine brand and product clusters (refers to relevant announcement
(Announcement No.: 2023-072) disclosed by the Company on Cninfo (http://www.cninfo.com.cn)
for details).
In November 2023, Sinclair (Hangzhou) Medical Treatment Technology Co., Ltd.
(hereinafter referred to as “Sinclair (Hangzhou)”), Hangzhou Industrial Investment Co., Ltd.
(hereinafter referred to as “Hangzhou Industrial Investment”), Hangzhou Gongshu SDIC
Industrial Development Co., Ltd. (hereinafter referred to as “Gongshu SDIC”) signed the
Shareholder Agreement and Series B Investment Agreement with Chongqing Yuya n
Pharmaceutical Co., Ltd. (hereinafter referred to as “Chongqing Yuyan”) and its shareholders’
representatives. All investors subscribed 2,102,260 yuan of Chongqing Yuyan’s newly-increased
registered capital at 300 million yuan as the consideration of 8.5714% of Chongqing Yuyan’s
equity after this transaction. Among them, Sinclair (Hangzhou) contributed 150 million yuan,
holding 4.2857% of Chongqing Yuyan’s equity after this transaction. On the same day, the
Company signed the Exclusive Dealing Agreement with Chongqing Yuyan, agreeing that the
Company is granted with Chongqing Yuyan’s exclusive commercialization rights of recombinant
botulinum toxin type A YY001 for indications in the field of aesthetic medicine in Chinese
mainland, Hong Kong SAR and Macao SAR. The Company will pay Chongqing Yuyan a down
payment of 50 million yuan and a milestone payment of registration with a maximum of 100
million yuan. YY001 and ATGC-110 will fully satisfy patients’ demands for rejuvenation and
high security thanks to their differentiated efficacies, with all consumers in the botulinum toxin
market covered (refers to relevant announcement (Announcement No.: 2023-081) disclosed by
the Company on Cninfo (http://www.cninfo.com.cn) for details).
In December 2023, the Company’s wholly-owned subsidiary Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd. (hereinafter referred to as “Zhongmei Huadong”) signed the Exclusive
Marketing Service Agreement with Shanghai Junpaiyingshi Pharmaceutical Co., Ltd., a wholly-
owned subsidiary of Nanjing IMPACT Therapeutics Co., Ltd. (Hereinafter referred to as
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
“IMPACT Therapeutics”). According to the agreement, Zhongmei Huadong will obtain the
exclusive marketing rights of Senaparib (IMP4297, with its Chinese name subject to the final
approval document) of IMPACT Therapeutics in Chinese mainland. Zhongmei Huadong will pay
IMPACT Therapeutics a down payment of 100 million yuan and a milestone payment of
registration and commercialization with a maximum of 190 million yuan. In the meantime,
IMPACT Therapeutics will pay Zhongmei Huadong the marketing service fees as agreed in the
agreement. The cooperation will further enrich the Company’ product lines in the field of
oncology and consolidate the Company’s market competitiveness in this field (refers to relevant
announcement (Announcement No.: 2023-099) disclosed by the Company on Cninfo
(http://www.cninfo.com.cn) for details).
III. ESG of the Company during the Reporting Period
With regard to ESG, the Company has always adhered to the concept of sustainable
development. Setting up a special ESG Committee to coordinate the Company’s ESG work, the
Company integrates the core theory of ESG with the enterprise development strategy and daily
operation management, guides and makes innovation in various work with a scientific concept o f
social responsibility, upholds the idea of green production, actively responds to the “carbon
neutrality and carbon peaking” goals, operates with integrity in strict accordance with laws, and
actively fulfills its social responsibilities. By virtue of its excellent ESG governance ability, the
Company won the AAA rating for ESG by CNI Index of Shenzhen Stock Exchange and the A
rating for ESG of WIND, and was awarded the 17th Top 100 Chinese Listed Companies in ESG
by Securities Times, etc.
For more information about ESG, please refer to Huadong Medicine: Environmental, Social
and Governance (ESG) Report in 2023 issued by the Company.
IV. 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: The Company was included in Fortune China 500 for the 14th time
and ranked 358th. It was rated as “2023 China Top 500 Private Enterprises” and “2023 China Top
500 Private Manufacturing Enterprises”. It was selected in the list of “2022 Top 100
Pharmaceutical Industries in China” of MENET, reelected top 10 among “2022 Top 100
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Chemical Pharmaceutical Enterprises in China”. It was honored as “Top 20 Chinese Listed
Pharmaceutical Companies in Competitiveness in 2023” by E-medicine Agent and “Top 10
Innovative Medicine Enterprises in 2023” by China Times. It was included in “2023 Top 100
Chinese Enterprises in Overall Strength of Pharmaceutical Research and Development”, “2023
Top 100 Chinese Enterprises in Chemical Medicines Research and Development” and “2023 Top
50 Chinese Enterprises in Biomedicine Research and Development” by YaoZH. In terms of
investor relations management, the Company won numerous awards, including the Gold Award
for Panoramic Investor Relations - “Outstanding IR Company”, “Outstanding IR Team”, “Best
Corporate Communication Award”, “Best New Media Operation Award”, and the 14th Tianma
Awards for Investor Relations of Chinese Listed Companies - “New Media Award”, etc.
2. Income and cost
(1) Composition of operating revenue
Unit: yuan
2023 2022 Year-on-year
Proportion in Proportion in percentage
Amount Amount
operating revenue operating revenue increase/decrease
Total operating
40,623,782,520.43 100% 37,714,587,458.01 100% 7.71%
revenue
By sector
Business 27,641,104,822.67 68.04% 25,706,575,656.84 68.16% 7.53%
Manufacturing 14,834,472,398.22 36.52% 13,308,829,442.90 35.29% 11.46%
Including:
12,663,534,159.13 31.17% 11,666,006,594.38 30.93% 8.55%
Industrial
Aesthetic
2,447,076,357.48 6.02% 1,914,953,889.03 5.08% 27.79%
medicine
Including:
International 1,303,938,229.47 3.21% 1,143,849,083.22 3.03% 14.00%
aesthetic medicine
Aesthetic
medicine in China 1,328,453,681.15 3.27% 883,937,124.31 2.34% 50.29%
[Note]
Offset (inter-
-1,851,794,700.46 -1,300,817,641.73
sectoral offset)
By products
By regions
Sales in China 39,196,619,466.20 96.49% 36,549,476,866.81 96.91% 7.24%
Overseas sales 1,427,163,054.23 3.51% 1,165,110,591.20 3.09% 22.49%
By sales modes
[Note] The aesthetic medicine in China includes the income from the self-operated aesthetic medicine products, 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.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
(2) The operating revenue or profit accounts for more than 10% of the total by industries, products, regions and sales
modes
Applicable □ N/A
Unit: yuan
Year-on-year Year-on-year Year-on-year
percentage percentage percentage
Operating Gross profit
Operating cost increase/decrea increase/decrea increase/decrea
revenue rate
se in operating se in operating se in gross
revenue cost profit rate
By sectors
27,641,104,822 25,712,981,178
Business 6.98% 7.53% 7.88% -0.31%
.67 .42
14,834,472,398 3,285,586,681.
Manufacturing 77.85% 11.46% 10.58% 0.18%
.22 98
By products
By regions
39,196,619,466 26,982,182,311
Sales in China 31.16% 7.24% 6.44% 0.52%
.20 .26
1,427,163,054.
Overseas sales 479,549,262.33 66.40% 22.49% 44.48% -5.11%
23
By sales modes
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 of the reporting
period
□ Applicable N/A
(5) Composition of operating cost
Sector
Unit: yuan
2023 2022 Year-on-year
percentage
Sector Item Proportion in Proportion in
Amount Amount increase/decrea
operating cost operating cost se
25,712,981,178 23,833,974,287
Business Operating cost 93.63% 92.80% 7.88%
.42 .72
Manufacturing Operating cost 3,285,586,681. 11.96% 2,971,265,913. 11.57% 10.58%
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
98 43
Note
N/A
(6) Whether the scope of consolidation has changed during the reporting period
Yes □No
For details, please refer to “IX. 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) 7,900,667,787.76
Proportion of the total sales amount of the top five customers in
19.45%
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
No. Customer name Sales amount (yuan)
sales amount
1 Customer A1 3,441,266,958.78 8.47%
2 Customer A3 1,491,471,437.54 3.67%
3 Customer A11 1,150,922,662.95 2.83%
4 Customer A5 945,813,964.81 2.33%
5 Customer A2 871,192,763.68 2.14%
Total -- 7,900,667,787.76 19.45%
Other information of major customers
□ Applicable N/A
Information of the Company’s major suppliers
Total purchase amount of the top five suppliers (yuan) 3,746,525,314.04
Proportion of the total purchase amount of the top five
13.64%
suppliers in the total annual purchase amount
Proportion of related parties’ purchase amount of the top five
customers’ purchase amount in the total annual purchase 0.00%
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 892,682,050.91 3.25%
2 Supplier B6 857,207,409.96 3.12%
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
3 Supplier B7 770,300,103.44 2.80%
4 Supplier B8 640,988,014.05 2.33%
5 Supplier B9 585,347,735.68 2.13%
Total -- 3,746,525,314.04 13.64%
Other information of major suppliers
□ Applicable N/A
3. Expenses
Unit: yuan
Year-on-year
2023 2022 percentage Note on major changes
increase/decrease
Sales expenses 6,645,411,414.21 6,334,738,928.05 4.90%
Administrative
1,420,188,961.59 1,248,781,970.63 13.73%
expenses
Mainly due to the
Financial expenses 51,189,784.17 78,256,567.01 -34.59% increase in exchange
gains and losses
R&D expenses 1,270,803,119.96 1,015,971,052.33 25.08%
4. R&D input
Applicable □ N/A
(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 111 pharmaceutical projects under development, including 73
innovative and biosimilar medicine projects. During the reporting period, the Company’s R&D
investment in the pharmaceutical industry (excluding equity investment) was 2.293 billion yuan, up
23.67% year-on-year. Among them, direct R&D expenditure was 1.6 billion yuan, up 33.74% year-
on-year, which accounts for 13.1% of the operating revenue of the pharmaceutical industry. 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
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
home and abroad, clarify innovative, differentiated and iterative standards for initiation of projects,
and strengthen the capabilities of independent innovation and R&D;
2) The Company insisted on its differentiated R&D strategy with the focus placed on
unsatisfied clinical needs of global patients. With “clinical value, pharmacoeconomic value and
commercial value” as the starting point, the Company laid out multiple categories of innovative
products in fields of endocrinology, autoimmunity and oncology;
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,
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, microbiology fermentation cytotoxin technology platform, and innovative linker and
coupling technology platform.
(2) Innovative R&D system and lines
The Company has set up a full-chain efficient and hardworking core R&D team with
international visions composed of 1,700 high-level developers of various levels, and has established
a relatively sound R&D management system that covers the whole process of medicinal
development from target research, early medicinal discovery, pre-clinical research, clinical trials to
new medicine registration and marketing.
The Company placed the focus of its innovative R&D on three core fields of oncology,
endocrinology and autoimmunity. To date, there have been over 60 innovative product lines. As its
product lines are continuously enriched, the Company has constantly expanded its innovative
medicine field to the R&D of multiple types of medicines including small-molecule medicines,
polypeptides, ADCs, bispecific or multispecific antibody medicines, as well as the explorati on
towards innovative therapies for diseases in the fields of endocrinology, autoimmunity and
oncology.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
(3) Progress of R&D of innovative medicines, innovative medical devices and biosimilar
medicines
Oncology
The Company endeavored to build the world’s leading platform for R&D of innovative cancer
medicines and established more than 30 innovative antineoplastic medicines covering targeted
small-molecule medicines, ADCs, antibodies, PROTAC, etc. through discovery, screening and
verification of new targets in preliminary R&D of medicines.
In October 2023, the application of ELAHERE (R&D code: IMGN853, HDM2002), the
world’s first in class Mirvetuximab Soravtansine Injection introduced by the Company from
ImmunoGen based in the U.S., was accepted in China for the treatment of folate receptor alpha
(FRα)-positive, platinum-resistant epithelial ovarian, fallopian tube or primary peritoneal adult
cancer patients treated with up to three prior therapies. The product was included in the list of
priority review varieties by CDE in July 2023. In April 2024, the Company was approved to join the
international multi-center phase III clinical study of PSOC (platinum-sensitive ovarian cancer) to
advance the front-line treatment of ovarian cancer, for the maintenance treatment for adult patients
with FRα-positive recurrent platinum-sensitive epithelial ovarian, fallopian tube, or primary
peritoneal cancers, who have not experienced disease progression after second-line platinum-based
chemotherapy, in combination with Bevacizumab. This product was piloted in the pioneer area of
Bo’ao Lecheng International Medical Tourism Pilot Zone, Hainan Province in July 2023, and its
real-world research for platinum-resistant ovarian cancer was officially launched in Hainan Bo’ao
Ruijin Hospital in August 2023. In addition, in March 2024, the Company’s American partner
announced that the approval state of ELAHERE in the U.S. had changed from accelerated
approval to full approval.
Mefatinib Tablet, the Company’s first-class new medicine, was included as the variety for
breakthrough treatment in May 2023 by CDE, which is used for treating advanced non-small cell
lung cancer with rare EGFR mutations. Moreover, the phase III clinical trial for advanced non-small
cell lung cancer with EGFR-sensitive mutation successfully reached the primary endpoint. The
Company is expected to submit the application of frontline EGFR-sensitive mutation of Mefatinib
Tablet in 2024.
HDM2005, an ADC product independently developed by the Company, is proposed to be used
for the treatment of advanced solid tumors and hematologic tumors. Its IND application in China
was submitted in March 2024 and was successfully accepted.
HDM2006, the Company’s first self-developed small-molecule anti-tumor medicine and the
first self-developed HPK-1 PROTAC (proteolysis-targeting chimera), entered IND study and is
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
proposed to be used for the monotherapy and combination therapy of advanced solid tumors and
hematologic tumors. Its IND application in China is expected to be submitted by the end of 2024.
In 2024, it is expected that three self-developed innovative products for tumors will obtain PCC
confirmations and that IND applications for two self-developed products will be submitted.
Endocrinology
The Company has created the world leading innovative medicine R&D development platform
for diabetes with GLP-1 target as the core. To date, the Company has established six under-research
and launched product lines that cover oral medicines, injections, including long-acting, single-target
and multi-target global innovative and biosimilar medicines. The Company will keep exploring
innovative projects related to GLP-1 targets, expanding its coverage to such indications as weight
loss, lipid reduction, NASH and heart failure, and constantly develop innovative medicines with
higher administration compliance and more clinical advantages.
HDM1002 (small-molecule GLP-1 receptor stimulant), an innovative medicine for diabetic
mellitus that is developed by the Company independently, has obtained IND approvals in the U.S.
and China in May 2023, with the administration of the first subject in the first in human (FIH)
achieved in the beginning of June 2023. The IND application for weight management indications of
patients with overweight or obesity in China was approved in September 2023. To date, this product
has completed SAD and MAD trials in China, with its phase II clinical trial initiated. To date, there
is no oral small-molecule GLP-1 receptor stimulant in the world. HDM1002 will further enrich the
Company’s product lines in the field of endocrine therapy, accelerate the Company’s integration
into the global innovative pharmaceutical industry, and further enhance its comprehensive
competitiveness.
IND applications in China for two indications of weight management of patients with
overweight or obesity and type 2 diabetes of HDM1005, a GLP-1R and GIPR long-acting
polypeptide dual-target agonist developed by the Company independently, were approved in March
2024. The enrollment and administration of the first subject during phase Ia clinical trial in China
were completed in March 2024. In addition, the Company submitted IND application of this
product for overweight or obesity in the U.S. in March 2024.
DR10624, a kind of FGF21R/GCGR/GLP-1R target multiple agonist developed by Doer
Biologics, the Company’s holding subsidiary, completed SAD studies during phase I in China and
New Zealand. The phase Ib/ Ⅱa clinical trial for obesity with hypertriglyceridemia is now
conducted in New Zealand, which is expected to be completed by the end of 2024.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Liraglutide Injection has had its BLA application for diabetes indications approved by NMPA
in March 2023, and its BLA application for obese or overweight applications was approved in June
2023.
To date, Semaglutide Injection completed the enrollment of all subjects during phase III
clinical study for diabetes indication. It is expected that primary endpointdata will be obtained in
Q4 2024.
Insulin Degludec Injection completed the enrollment of all subjects during phase III clinical
study. It is expected that primary endpoint data will be obtained in Q4 2024.
Autoimmunity
The Company has had over 10 varieties of biomedicines and small-molecule innovative
products in the field of autoimmunity.
Being listed as Overseas New Medicine in Urgent Need for Clinical Purpose (First Batch) by
CDE in China, Rilonacept for Injection (ARCALYST ), a global innovative product introduced
from Kiniksa in the U.S., is used for the treatment of Cryo-Pyrin-Associated Periodic Syndromes
(CAPS). The BLA application for CAPS indication was accepted in November 2023 and the
product was included in the list of priority review varieties in January 2023. Moreover, in
September 2023, recurrent pericarditis (RP) was included in the Second Catalogue of Rare Diseases
jointly issued by the National Health Commission and other miniseries. In March 2024, the BLA
application of Rilonacept for Injection for RP indication was accepted in March 2024 and the
product was included in the list of priority review varieties in December 2023.
The marketing authorization application of HDM3001 (QX001S), a biosimilar of Ustekinumab
(Stelara) for plaque psoriasis has been accepted by NMPA in August 2023.
The IND application of HDM3002 (PRV-3279), an innovative medicine used for the treatment
of systemic lupus erythematosus (SLE), was approved by CDE in April 2023 and was formally
included in phase IIa MRCT (PREVAIL-2).
In 2023, the Company introduced a series of external preparations for skin diseases, including
Zoryve (Roflumilast Cream and Roflumilast Foam) introduced from Arcutis based in the U.S.,
which is used for the treatment of plaque psoriasis, atopic dermatitis, seborrheic dermatitis and
psoriasis of scalp and body, and Wynzora Cream from MC2, which is used for the treatment of
plaque psoriasis. The relevant clinical registration work is vigorously advanced.
Innovative pharmaceutical devices
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
HD-NP-102 (Dynamic Monitoring System of Glomerular Filtration Rate and Relmapirazin
Injection): The Dynamic Monitoring System of Glomerular Filtration Rate and Relmapirazin
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 Relmapirazin Injection through intravenous
injection. According to Chinese laws and regulations on registration, Dynamic Monitoring System
of Glomerular Filtration Rate and Relmapirazin Injection shall be applied for registration in
accordance with application and registration procedures for medical devices and medicine
separately. In November 2021, the Dynamic Monitoring System of Glomerular Filtration Rate was
approved to enter the special review procedure for innovative medical devices in China. In July
2022, NMPA formally accepted the medical devices registration application for the system and is
now reviewing the application. The NDA application of Relmapirazin Injection used together with
the system was accepted in January 2024. In addition, the MediBeacon Dynamic Monitoring
System of Glomerular Filtration Rate that contains Relmapirazin Injection and the Dynamic
Monitoring System of Glomerular Filtration Rate was approved by FDA as a pharmaceutical and
mechanical combination product with the device as its main action mode. MediBeacon submitted
the marketing application to FDA before, which was formally accepted in July 2023.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Figure: Pipeline Diagram of Main Innovative Medicines and Biosimilar Medicines as of the Date of the
Report
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
(4) Others tasks regarding innovation R&D
Exploring innovative mechanism and continuously motivating vitality for innovation
In 2023, the Company launched its early exploratory project mechanism revolving around two
strategies of innovative transformation and internationalization, showcasing huge potential.
Focusing on three core fields of oncology, immunity and endocrinology, the Company conducted
more than 10 early exploratory projects and successively incubated first-in-class or best-in-class
innovative medicine molecules by identifying frontier targets piloted on the platform via targets and
accelerating innovation.
Facilitating innovation transformation and advancing clinical development
The Company’s clinical R&D team continued to explore the speed and coverage of innovation
and break through the differentiated bottleneck in i nnovation in accordance with the orientation of
high efficiency and high quality, endeavoring to achieve the leap-forward development of
diversified innovation in clinical R&D. The R&D team charged and supported 22 clinical projects
from such dimensions as clinical study, operation, biometrics, registration and pharmaco-vigilance.
Advanced technical platforms
The Company successfully built medicinal R&D platforms such as new target discovery
platform, medicine design and synthesis platform, AIDD platform, PROTAC technology platform
and ADC R&D platform, aiming at accelerating the promotion of numerous pipe lines with original
innovation (first-in-class, best-in-class) or differentiated/iterative development values. Thanks to
these platforms, the Global R&D Center accumulated seven self-dependent innovation PCC
molecules in the past three years.
Among them, AI drug discovery & design (AIDD) platform is a key orientation currently
valued by the Company, which strengthens the construction of computing power and algorithm
system and intelligently process the data generated and accumulated in combination with the
research progress of the industry. In the meantime, rich data on the properties of finished medicines
accumulated by the Company lays the foundation for continuous optimization and iterative
prediction model of the properties of finished medicines and greatly improves the R&D progress of
several projects at different stages. This year, the platform has increased the prediction of small
molecule novelty, hemolysis, efflux, ADC drug solubility, and other properties. At present, the
platform is also expanding its application in the R&D of small molecule, PROTAC, ADC, protein,
polypeptide, and nucleic acid medicines. In the meantime, the platform also introduced Hermite and
Uni-QSAR technologies, which fill the FEP precision shortcomings of the platform and enrich the
prediction methods of small molecular properties. To date, the platform has submitted 34 patent
applications and got over 2,000 compounds.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
With the focus placed on the Company’s core therapeutic fields, the special and future
medicines platform actively explored the R&D of new medicine molecular forms such as cell gene
therapy, nucleic acid medicines, and innovative ADCs, supporting and laying foundation for the
Company’s product line layout in the future. The liver-targeted siRNA project for metabolic
diseases that the platform is developing is expected to complete PCC certification in 2024.
Postdoctoral research workstation
Zhongmei Huadong, a wholly-owned subsidiary of the Company, was approved to set up the
postdoctoral research workstation in February 2021, which was registered as a national postdoctoral
research workstation in September 2022. The workstation now has 13 postdoctors. Postdoctors at
the Company’s postdoctoral research workstation are devoted to frontier and translational studies on
R&D of innovative medicines and join hands with moving stations at Zhejiang University, Zhejiang
University of Technology and other universities in combination with the Company’s development
strategies and product lines under research.
Other innovation results
1) Patent applications
The Company’s Global R&D Center attached great importance to the protection of intellectual
property rights, valued the management of intellectual property rights in the whole life cycle of
medicines and the formulation of patent strategies, and set up an intellectual property BP for the
early warning, declaration and retention of patents in and out of China, thus improving the
comprehensive competitiveness of its products. Since its establishment, the Global R&D Center has
claimed a total of over 100 patent applications, including 44 formal and PCT patent applications.
All these patents cover such aspects as structures/ sequences, salt type/ crystal type, preparation
processes, applications and formulations of new medicines. From 2023 to date, the Company has
submitted a total of 17 formal (Chinese) or PCT (international) patent applications. Among them,
many key international patents have been applied in over 20 regions across the globe. In the
meantime, the Company obtained six authorized patents, including five Chinese patents and one
Japanese patent.
2) Academic publications
From 2023 to date, the innovative medicine team successively published nine conference/
journal papers in the fields of oncology and endocrinology at conferences or on journals:
KRAS G12D-PROTAC research selected in the summary of 2023 WCLC, with an oral presentation
made; oral GLP-1 small-molecule agonist HMD1002 selected in the summary of 2023 EASD, with
an oral presentation made; single-arm registration study of Mirvetuximab Soravtansine in China
(R&D code: IMGN853-301) selected as the POSTER of IGCS; targeted HPK1 PROTAC research
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
selected as the POSTER of 2024 AACR; oral HPK1 small-molecule inhibitor HDM2004 research
selected as the POSTER of 2024-CIMT Annual Conference; positive results of phase III key
clinical study of Mefatinib (HDHY-MHTN-III-1907) and oral PTPN2 small molecule inhibitor
HDM2010 selected as the POSTER and in the summary of 2024 ASCO Annual Conference,
respectively; PROTAC research results targeting BTK published on RSC Medicinal Chemistry
Journal, and clinical study results of Mefatinib at the first-line treatment for NSCLC published on
Cancer Communications.
Since 2022, Huadong Medicine has published 12 innovative research results on journals/
conferences, highlighting its strength and influence in innovative transformation and further
showcasing our unremitting endeavors and positive results in independent innovation.
3) Governmental subsidies
To date, the Company’s Global R&D Center has won the government’s approvals for initiation
of 15 projects, with the certified subsidies of up to 43.052 million yuan. 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 for three consecutive years in
2021, 2022 and 2023. Meanwhile, HDM1002 and some other programs were awarded prizes for
scientific and technological projects at the provincial and/or municipal level. HD-NP-102 and
Mefatinib won the fund from the “Special Program for High-quality Development of Bio-
pharmaceutical Industry in Hangzhou”.
(5) Progress of development of major generic medicines
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:
No. Field Item Specification Latest Progress
Approved by NMPA in January
1 Endocrine Canagliflozin Tablets 0.1g, 0.3g
2023
Pioglitazone Hydrochloride
Approved by NMPA in September
2 Endocrine and Metformin 15/850mg
2023
Hydrochloride Tablets
Approved by NMPA in August
3 Immunity Tacrolimus Ointment 0.03%, 0.1%
2023
Application accepted in January
4 Immunity Tacrolimus Granules 1mg 2023 and supplementary materials
submitted in January 2024
5mg version approved by NMPA in
February 2024
Tacrolimus Sustained- Applications of 1mg and 0.5mg
5 Immunity 5mg, 1mg, 0.5mg
release Capsules versions submitted and accepted in
February 2023, and supplementary
materials submitted in February
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
2024
Application accepted in February
6 Immunity Sirolimus Tablets 1mg
2024
Application accepted in January
7 Immunity Sirolimus Gel 0.2%
2024
Mycophenolate Mofetil for Application accepted in November
8 Immunity 34.98g
Suspension 2023
Application accepted in October
9 Oncology Olaparib Tablets 100mg, 150mg 2022 and supplementary materials
submitted in January 2024
Application accepted in January
10 Oncology Ibrutinib Capsules 140mg
2024
Application accepted in February
11 Oncology Carfilzomib for Injection 60mg
2024
Approved by NMPA in October
12 Angiocarpy Macitentan Tablets 10mg
2023
13 Anti-infection Fusidic Acid Cream 15g: 0.3g Application accepted in May 2023
Application accepted in August
14 Easing pain Lornoxicam for Injection 8mg
2023
Vonoprazan Fumarate Application accepted in January
15 Gastroenterology 10mg, 20mg
Tablets 2024
(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:
No. Field Item Remarks Latest Progress
Officially approved in India in June 2023.
Supplementary materials for registration
1 Endocrine Acarbose APIs
in Taiwan, China submitted in April and
June 2023.
IND Application submitted in the U.S. in
2 Endocrine Liraglutide Injection 3ml: 18mg October 2023 and clinical license
obtained in November
DMF Application submitted in the U.S.
3 Endocrine Semaglutide APIs
in July 2023
Approved by FDA in the U.S. in April
4 Immunity Tacrolimus Capsules 0.5mg, 1mg, 5mg
2023.
Supplementary DMF application
5 Oncology Exatecan Mesylate Intermediate
submitted in the U.S. in March 2023
DMF Application submitted in the U.S. in
6 Oncology Plitidepsin APIs
November 2023
DMF Application submitted in the U.S. in
7 Oncology CAP-2 (7413) Intermediate
August 2023
DMF Application submitted in the U.S. in
8 Oncology P55 Intermediate
August 2023
DMF Application submitted in the U.S. in
9 Oncology MMAE Intermediate
July 2023
10 Anti-infection Mupirocin APIs Approved in India in February 2023
Supplementary materials for ANDA
Caspofungin Acetate
11 Anti-infection 50mg, 70mg application submitted in the U.S. in May
for Injection
2022
CEP application for Jiangdong Site
approved by EDQM in May 2023
12 Anti-infection Polymyxin B Sulfate APIs Approved in India in February 2023
Application for registration in Brazil
submitted in August 2023
65
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Registration in Taiwan, China approved.
13 Anticoagulant Fondaparinux Sodium APIs DMF defect reply submitted in the U.S. in
April 2023
2.5 mg/0.5 ml, 5
Supplementary materials for ANDA
Fondaparinux Sodium mg/0.4 ml, 7.5
14 Anticoagulant application submitted in the U.S. in
Injection mg/0.6 ml, 10
February, May and August 2023
mg/0.8 ml
Traditional
Registration in Canada approved in May
15 Chinese Bailing Capsule 0.5g
2023.
Medicine
Poly (lactic-co-
DMF Application submitted in the U.S. in
16 / glycolic acid) Excipients
November 2023
(PLGA7525)
(7) Progress of consistency evaluation
As of the date of the Report, the progress of consistency evaluation on quality and efficacy of
Company’s generic medicines is as follows:
No. Field Item Specification Latest Progress
The notification of approval for
supplementary application of
consistency evaluation for 1mg
version obtained in July 2023
1 Immunity Tacrolimus Capsules 1mg, 0.5mg
The notification of approval for
supplementary application of
consistency evaluation for 0.5mg
version obtained in January 2024
The notification of approval for
Pantoprazole Sodium supplementary application of
2 Gastroenterology 40mg
Enteric Capsules consistency evaluation obtained in
May 2023.
The notification of approval for
supplementary application of
3 Angiocarpy Indobufen Tablets 0.2g
consistency evaluation obtained in
November 2023.
The notification of approval for
supplementary applications of
20ml:60mg, consistency evaluation for
4 Angiocarpy Adenosine Injection 30ml:90mg, 20ml:60mg, 30ml:90mg versions
2ml:6mg obtained in August 2023
Application of 2ml:6mg version
accepted in August 2023
(8) Progress of registration and launching of aesthetic medicine products in China
No. Type Product Designation Purpose Latest Progress
Clinical trials in China successfully
reached primary endpoint of the clinical
MaiLi Extreme trial, with favorable product safety data
1 Injections Facial filling
Hyaluronic acid shown. Application for registration in
China is expected to be submitted in Q2
2024.
Enrollment of the first subject for clinical
MaiLi Precise trial in China completed in December
2 Injections Facial filling
Hyaluronic acid 2023 and enrollment proceeded as
planned.
66
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Enrollment of all subjects for clinical trial
3 Injections Ellansé-M Facial filling in China completed in March 2023 and
follow-up in progress.
Ethical approval for principal investigator
LanlumaV
4 Injections Facial filling of clinical trial in China obtained in
Poly-l-lactic Acid
February 2024.
Removing benign
Energy based Testing for registration in China and
5 Glacial Rx (F1) pigmented lesions
device preparation of technical data in progress.
of skin, etc.
Improvement of
Application for registration accepted by
body and facial
the Center for Medical Device Evaluation,
wrinkles, benign
Energy based NMPA in September 2023; notice for
6 V20 skin lesions, benign
device supplementary advice received in
vascular lesions,
December 2023; preparation of all
inflammatory acne,
technical data in progress.
hair removal, etc.
Improvement of
body and facial
wrinkles, benign
skin lesions, benign All testing for registration completed and
Energy based
7 V30 vascular lesions, test data sorting in progress; preparation
device
benign pigmented of technical data in progress.
lesions,
inflammatory acne,
hair removal, etc.
Notice of Classification and Definition of
Cosmetic Facial skin Non-medical Devices issued by Medical
8 Préime DermaFacial
device management Equipment Standard Management Center,
NMPA received in September 2023.
(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
more than 1,420 patents in and out of China, including over 470 authorized invention patents.
Hangzhou Zhongmei Huadong 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 and successfully passed the re -
examination of the enterprise intellectual property management system in October 2023.
During the reporting period, application and renewal of patents of the Company were
progressed smoothly, with a total of 224 patent applications submitted, including 167 patents for
invention. A total of 104 patents were granted.
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 167 47 1136 473
67
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Utility patent 52 52 253 227
Appearance design
5 5 39 35
patent
Total 224 104 1428 735
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
2023 2022 Percentage change
Number of R&D personnel
1,777 1,543 15.17%
(person)
Proportion of R&D personnel 12.81% 13.13% -0.32%
R&D personnel structure by education
Bachelor 733 735 -0.27%
Master 527 471 11.89%
PhD 96 64 50.00%
R&D personnel structure by age
< 30 537 502 6.97%
30-40 932 811 14.92%
> 40 308 230 33.91%
R&D investment of the Company
2023 2022 Percentage change
R&D investment amount
1,599,987,406.05 1,196,309,461.22 33.74%
(yuan)
Proportion of R&D
investment in operating 13.10% 10.72% 2.38%
revenue
Capitalized R&D investment
368,631,977.43 227,794,420.14 61.83%
amount (yuan)
Proportion of capitalized
R&D investment in R&D 23.04% 19.04% 4.00%
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 (excluding investment in equity) was 2.293 billion yuan,
up by 23.67% year-on-year, among which the direct R&D expenses were 1.6 billion yuan, up 33.74% year-on-year. The direct
R&D expenditure accounted for 13.10% of the operating revenue of the pharmaceutical industry. R&D personnel of the Company
in 2023 means the number of employees in the Company’s subsidiaries engaging in R&D in R&D and manufacturing systems of
the pharmaceutical industry and industrial microbiology. The proportion of R&D personnel means the proportion of the number o f
employees in the Company’s subsidiaries mainly engaging in R&D and manufacturing of the pharmaceutical industry and
industrial microbiology. 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
68
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Reasons for the year-on-year significant change in the proportion of total R&D investment in operating revenue.
□ Applicable N/A
Reasons for the significant change in the capitalization rate of R&D investment and its rationality
□ Applicable N/A
5. Cash flows
Unit: yuan
Year-on-year percentage
Item 2023 2022
increase/decrease
Subtotal of cash inflows from
44,170,157,818.41 40,637,718,289.85 8.69%
operating activities
Subtotal of cash outflows for
40,240,941,111.71 38,255,865,621.25 5.19%
operating activities
Net cash flow from operating
3,929,216,706.70 2,381,852,668.60 64.96%
activities
Subtotal of cash inflows from
243,482,795.78 121,638,643.17 100.17%
investing activities
Subtotal of cash outflows for
1,994,034,738.29 2,557,236,232.75 -22.02%
investing activities
Net cash flow from investing
-1,750,551,942.51 -2,435,597,589.58 28.13%
activities
Subtotal of cash inflows from
5,099,369,770.65 5,149,368,399.06 -0.97%
financing activities
Subtotal of cash outflows for
6,492,731,116.63 5,249,078,772.19 23.69%
financing activities
Net cash flow from financing
-1,393,361,345.98 -99,710,373.13 -1,297.41%
activities
Net increase of cash and cash
791,249,308.58 -163,229,935.84 584.75%
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 243 million yuan, up
100.17% compared with that in the same period last year (122 million yuan), mainly due to
collection of large-value bank deposit certificates due in this period.
Reasons for the significant difference between the Company’s net cash flow from operating activities and the current year’s net
profit during the reporting period.
□ Applicable N/A
V. Analysis of non-main business
Applicable □ N/A
Unit: yuan
Proportion in total
Amount Note on reasons Sustainable or not
profit
69
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Mainly due to long
term equity investment
Total return -219,713,034.52 -6.34%
gains measured at
equity method
Gains and losses from
-13,756,372.80 -0.40% No
changes in fair value
Assets Impairment -6,519,844.03 -0.19%
Non-operating revenue 50,548,825.60 1.46% No
Non-operating
37,490,279.21 1.08% No
expenses
Mainly due to the
confirmation of
Other income 172,492,861.66 4.98% No
government grants in
the current period
VI. Assets and liabilities
1. Major changes in asset composition
Unit: yuan
End of 2023 Beginning of 2023
Change of Note on major
Proportion in Proportion in proportion changes
Amount Amount
total assets total assets
4,663,378,011. 3,996,302,178.
Monetary funds 13.92% 12.81% 1.11%
64 41
Accounts 7,455,250,690. 7,198,746,788.
22.25% 23.08% -0.83%
receivable 83 59
4,290,214,266. 4,495,483,328.
Inventories 12.80% 14.41% -1.61%
03 54
Investment real
12,746,181.87 0.04% 13,648,240.14 0.04% 0.00%
estate
Long-term
1,535,907,809. 1,659,076,538.
equity 4.58% 5.32% -0.74%
85 78
investment
4,140,144,817. 3,981,653,265.
Fixed Assets 12.36% 12.76% -0.40%
51 52
Construction in
913,147,212.17 2.73% 873,159,427.47 2.80% -0.07%
Progress
Right-of-use
151,175,007.16 0.45% 166,505,297.17 0.53% -0.08%
Assets
Short-term
822,380,292.37 2.45% 947,516,383.37 3.04% -0.59%
borrowings
Contract
135,459,275.17 0.40% 146,488,489.07 0.47% -0.07%
liabilities
Mainly due to
Long-term 1,051,457,747. repayment of
520,759,460.07 1.55% 3.37% -1.82%
borrowings 44 debt in the
current period
Lease liabilities 56,695,158.59 0.17% 84,610,324.98 0.27% -0.10%
Other non- 1,561,458,605. 1,037,279,933.
4.66% 3.33% 1.33%
current assets 23 15
70
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Foreign assets account for a relatively high proportion.
□ Applicable N/A
2. Assets and liabilities measured at fair value
Applicable □ N/A
Unit: yuan
Gain/loss Accumulat
Amount at Depreciatio
from fair ed fair Purchase Selling
the n reserves Amount at
value value amount in amount in Other
Item beginning withdrawn the end of
changes in changes the current the current changes
of the during the the period
the current recognized period period
period period
period in equity
Financial assets
2.
-
Derivative 29,907,470. 16,434,493.
13,756,372. 0.00 283,396.09
financial 68 97
80
assets
4. Other
equity
360,910,87 3,419,879.0 3,047,483.6 201,794,25 4,489,536.9 3,588,404.2 565,223,87
instrument
6.41 0 8 0.00 5 2 2.68
investment
s
Subtotal of -
390,818,34 3,047,483.6 201,794,25 4,489,536.9 3,871,800.3 581,658,36
financial 10,336,493. 0.00
7.09 8 0.00 5 1 6.65
assets 80
Receivable 1,002,511,2 11,074,468, 10,642,613, 1,434,366,3
s financing 08.21 738.83 646.35 00.69
-
1,393,329,5 3,047,483.6 11,276,262, 10,647,103, 3,871,800.3 2,016,024,6
Total 10,336,493. 0.00
55.30 8 988.83 183.30 1 67.34
80
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
Type of
Item Ending book balance Ending book value Reasons for limitation
limitation
The deposit is used for
Monetary funds 44,887,976.31 44,887,976.31 Deposit issuing bills, letters of
credit, etc.
Certificate of deposit pledge
Monetary funds 152,594,375.00 152,594,375.00 Bill pledge
is used for issuing bills.
71
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Monetary funds 1,000,000.00 1,000,000.00 Freezing Judicially frozen payment
Receivables Bill pledge is used for
8,022,020.00 8,022,020.00 Bill pledge
financing issuing bills.
Total 206,504,371.31 206,504,371.31
VII. Investment
1. Overview
Applicable □ N/A
Investment amount in the reporting Investment amount in the same
Percentage change
period (yuan) period of last year (yuan)
2,386,619,197.31 2,859,562,403.21 -16.54%
2. Significant equity investments acquired during the reporting period
Applicable □ N/A
Unit: yuan
P
r
o In
F j vo
Te
u e lv
rm Profit or
Nam n Pr c ed
of loss of Discl Discl
e of Way Inves Share d od t in
Main in investm osure osure
inves of tment holdi s Partne uc Progress as of the e liti
busin ve ent in date index
ted inves amou ng o r t balance sheet date d ga
ess st the (if (if
comp tment nt ratio u ty tio
m current any) any)
any r pe i n
en period
c n or
t
e c no
o t
m
e
R&D 1. All capital
, Nanjin increase payments
Jiang
produ g were made and
su
ction E Jiuhen some equity transfer
Nanji
and q g payments were Cninf
ng Capit
sales u Pharm made. o
Nong al
of it aceuti Lo 2. All parties (http:
da incre 255,3 Eq - April
anim 70.00 y cal LP ng completed the N //ww
Anim ase + 33,30 uit / 6,786,90 20,20
al % f (Limit ter equity transfer on o w.cni
al share 0.00 y 6.94 23
drugs u ed m May 31, 2023. nfo.c
Phar acqui
and n Partne 3. In accordance om.c
mace sition
healt d rship), with the adjustment n)
utical
h s Zhai of equity
Co.,
care Zhong consideration
Ltd.
produ shu payment agreed in
cts the Investment
72
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Agreement and
subsequent remedial
measures, the
parties reached the
Agreement on
Matters Related to
Equity Transfer of
Jiangsu Nanjing
Nongda Animal
Pharmaceutical
Co., Ltd. on July 31,
2023, reducing the
milestone payment
amount agreed in
the original
investment
agreement from a
total of 60 million
yuan to 50 million
yuan, and other
milestones remain
unchanged.
255,3 -
-
Total -- -- 33,30 -- -- -- -- -- / 6,786,90 -- -- --
-
0.00 6.94
3. Significant non-equity investments in progress during the reporting period
Applicable □ N/A
Unit: yuan
Reaso
Cumulat Cumul ns for
ive ative not
Industr
Investm actual incom meetin
Invest y
Way ent investm Proj e g the Disclo
ment involv Fun Disclo
of amount ent ecte realize planne sure
Project in ed in d Project sure
inve during amount d d by d index
name fixed the sou progress date (if
stme the by the inco the end schedu (if
assets invest rce any)
nt reportin end of me of the le and any)
or not ment
g period the reporti project
project
reportin ng ed
g period period incom
e
Huadong
Medicine
Pharm
Biomedic Cninfo
Self- aceutic Equ
al Science March (http://
built al 18,062,4 1,801,16 ity
and Yes 98.80% N/A 9, www.c
proj manuf 41.25 7,985.91 fun
Technolog 2017 ninfo.c
ect acturin ds
y Park om.cn)
g
Project
Phase II
Huadong Self- Pharm Equ Cninfo
April
Medicine built aceutic 106,668, 375,444, ity (http://
Yes 95.00% N/A 21,
Life proj al 322.43 992.71 fun www.c
2021
Science ect R&D ds ninfo.c
73
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Industrial om.cn)
Park
(Xiangfu
south plot)
project
124,730, 2,176,61
Total -- -- -- -- -- 0.00 0.00 -- -- --
763.68 2,978.62
4. Investment in financial assets
(1) Securities Investment
Applicable □ N/A
Unit: yuan
Gain/l
Accu
oss
mulat Purch Sellin
Book from Gain/l
Accou ed fair ase g Book
value fair oss
Stock Initial nting value amou amou value
Type at the value during Accou
Stock abbre invest measu chang nt in nt in at the Fund
of begin chang the nting
code viatio ment remen es the the end of source
stock ning es in report item
n cost t recog curren curren the
of the the ing
model nized t t period
period curren period
in period period
t
equity
period
Dome Other
Meas
stic equity
20,20 ureme 8,064, 3,419, 3,047, 4,489, 7,122, Equit
and 127,7 instru
RAPT RAPT 7,400. nt of 797.8 835.0 483.6 0 536.9 858.9 y
overse 62.94 ment
00 Fair 6 6 8 5 1 funds
as invest
Value
stock ments
20,20 8,064, 3,419, 3,047, 4,489, 7,122,
127,7
Total 7,400. -- 797.8 835.0 483.6 0 536.9 858.9 -- --
62.94
00 6 6 8 5 1
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 3 million US dollars 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 39,500 shares in RAPT after it reduced its stake, accounting for 0.113% 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: ten thousand yuan
Initial Amount at Gain/loss Accumula Purchas Sellin Amount Proportion
Type of derivatives
investment the from fair ted fair e g at the of the
investment
amount beginning value value amount amoun end of investment
74
The 2023 Annual Report of Huadong Medicine Co., Ltd.
of the changes in changes during t the amount at
period the current recognize the during period the end of
period d in equity reportin the the period
g period reporti in the net
ng assets of
period the
Company
at the end
of the
reporting
period
Currency swap
2,990.75 2,990.75 -1,375.64 0 0 0 1,643.45 0.08%
derivatives
Total 2,990.75 2,990.75 -1,375.64 0 0 0 1,643.45 0.08%
Note on accounting
policies and specific
principles of accounting
concerning hedging
business during the
reporting period, and N/A
whether they change
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 -13.7564
and losses during the
million yuan 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
Equity or self-raised funds
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
complexity, which may cause operational risks due to traders or managers thinking there is an error or
Note on the risk
system failure and out of control.
analysis and control
4. Contractual risks: Contracts on financial derivative business expire, some of which cannot be
measures for derivatives
performed on time, and thus they are breached.
holding during the
5. Legal risks: Relevant legal changes lead to a contract that is not in conformity with local laws, so
reporting period
that the contract cannot be performed, or contractual terms are omitted and unclear; or losses are
(including but not
caused to the Company due to the counter-party violating relevant laws and regulations, and thus the
limited to market risks,
contract cannot be performed as required..
liquidity risks, credit
Measures: The Company and its wholly-controlled subsidiaries avoid speculation and arbitrage when
risks, operational risks
trading financial derivatives, so that strict risk control will be employed during the execution of
and legal risks)
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
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,
75
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 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.
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
analysis of the Please refer to “Disclosure of fair value” in the “Financial Report” for details when the derivatives are
derivatives’ fair values measured at fair value on the market.
shall disclose the
specific methods
adopted, relevant
assumptions and
parameter settings.
Litigation (if
N/A
applicable)
Date of announcement
of the Board of
Directors on derivatives August 16, 2023
investment approval (if
any)
Specific opinions of
The Company invests in derivatives for the avoidance of market fluctuation risks and hedging, which
independent directors
is closely associated with daily operation requirements. The Company has formulated the Management
on the Company’s
Rules for Securities Investment and Derivative Trading and enhanced trading risk management and
investments in
control, which contributes to the avoidance and control of operational risks, improving the Company’s
derivatives and risk
capability to withstand market risks. No loss is caused to the Company and all shareholders.
control
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
76
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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%
Unit: yuan
Company Company Main Registered Operating Operating
Total assets Net assets Net profits
Name type business capital revenue Profits
Production
and
manageme
nt of
Traditional
Hangzhou
Chinese
Zhongmei
and
Huadong 872,308,13 15,374,935, 10,918,440, 12,216,814, 2,665,817,0 2,298,709,9
Subsidiary Western
Pharmaceut 0 980.12 795.27 339.78 65.31 33.73
raw
ical Co.,
medicines
Ltd.
and
preparation
s, and
health care
products
Acquisition and disposal of subsidiaries during the reporting period
Applicable □ N/A
Methods of acquisition and disposal of Impact on the overall production,
Company Name
subsidiaries during the reporting period operation and performance
Expand the pharmaceutical business
Huadong Medicine Dongyang Co., Ltd. Equity acquisition
network coverage in Zhejiang Province
Jiangsu Nanjing Nongda Animal Industrial platform of industrial
Equity acquisition, capital increase
Pharmaceutical Co., Ltd. microbiology
Supplement to commercial retail
Hangzhou Huayi Pharmacy Co., Ltd. Equity acquisition segment network throughout Zhejiang
Province
Supplement to commercial retail
Zhejiang Yiqun Biology Medical
Equity acquisition segment network throughout Zhejiang
Instrument Trading Co., Ltd.
Province
Technology innovation platform in the
Hangzhou Perfect mRNA Biotechnology
Incorporation field of industrial microbiology and
Co., Ltd.
pharmaceuticals
Technology innovation platform in the
Hibe Technology Co., Ltd. Incorporation
field of industrial microbiology
Shaoxing Huadong Yueren Pharmacy
Cancellation of registration
Chain Co., Ltd.
Information of major shareholding companies
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X. Structured entities controlled by the Company
□ Applicable N/A
XI. Prospect of Future Development
(I) Prospect of macro-economy and trend of the pharmaceutical industry
From the perspective of macro-economic background, the world is still in a period of
turbulence and change in 2023, with intensified international geopolitical conflicts and continued
high inflation. The growth of most major economies slowed down, global economic development
faced rising complexity, severity and uncertainty, and adverse impacts of external environment on
China’s development continued to increase. Nevertheless, China’s economy withstood severe
external situation and downward pressure. In 2023, China’s national economy moved forward
steadily and the overall economy showed a favorable trend of recovery despite multiple
influences of geopolitical conflicts, economic downturn and shrinking demands. According to the
statistics of the National Bureau of Statistics, the gross domestic product (GDP) in 2023 was
126.0582 trillion yuan, up 5.2% year on year.
With regard to the demands of the pharmaceutical industry, people’s health care awareness
was enhanced and medical insurance systems of various countries were continuously improved as
the world economy develops, the total population grows, population aging keeps accelerating, and
the prevalence of chronic non-communicable diseases continuously increases. The global
pharmaceutical markets showed a trend of continuous growth.
IQVIA data shows that the global medicine expenditures were about 1.6 trillion US dollars
in 2023, and it is estimated that the figure will reach 2.3 trillion US dollars in 2028, with a
compound annual growth rate of 5–8% (including increase of expenditures for COVID-19
vaccines and treatment. Main factors driving the growth include: the contribution of new
medicines, the impact of expiration of patents, and the growing impact of biosimilar medicines.
The key growth area in the next five years is biomedicine that accounts for 39% of the global
expenditures. Although the growth rate slowed down to 9.5–12.5%, the global biomedicine
expenditure is expected to exceed 890 billion US dollars by 2028. By 2028, the CAGRs of the
world’s top two therapeutic fields — anti-tumor medicines and immune system medicines — will
increase by 14–17% and 2–5% respectively. It is expected that about 100 new therapies will
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emerge in the anti-tumor field within five years and the market size of anti-tumor medicines is
expected to be 440 billion US dollars by 2028. Affected by the steady increase in the number of
patients and launching of new medicines, the market size of autoimmune medicines is expected to
reach 192 billion US dollars by 2028 as competitions brought by the launching of biosimilar
medicines are continuously offset. GLP-1 agonist has been extensively applied in the fields of
diabetes and obesity. By 2028, the expenditure on diabetes will reach about 184 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 expenditures of medicines in China will increase from 103
billion US dollars in 2014 to about 163 billion US dollars in 2023. In 2023, RLD accounted for 29%
of the total medicine expenditure, the proportion being 20% 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. More and more RLDs are developed by local enterprises in China rather than multinational
pharmaceutical companies. Such a mode reshapes the Chinese market and has influenced China
and other countries. Over the past five years, the CAGR of RLDs in China was up to 8.5%. It is
estimated that the CAGR of RLDs will exceed 7.5% in the next five years, while the CAGR of
other medicines will be 6% or lower, 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 197 billion US dollars by 2028.
(II) Industrial development trend
1. Pharmaceutical industry in China
The pharmaceutical industry is a strategic industry related to the national policies, people’s
livelihood, economic development, and national security, and an important part of China’s
national economy. The medical demands keep increasing as Chinese people’s living standards
improve, population aging intensifies, urbanization further accelerates, people’s medical care
awareness improves, facilitation of medical services increases, and the prevalence of chronic
diseases continuously raises. During the new medical system reform, China further increases
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input in medical insurances and the expansion of medical insurances stimulates medical demands,
thus driving the continuous development of the pharmaceutical industry in China. Generally
speaking, the future development of the pharmaceutical industry shows a favorable trend, and the
industry enjoys broad space for development. The pharmaceutical industry in China continuously
steps toward the high-quality development as its macroeconomic situation improves, the national
medical security system is gradually optimized, residents’ health awareness is further enhanced,
medicine supply modes become more diversified, and demands for medicines grow.
From the perspective of industrial policies, the pharmaceutical industry in China is highly
dependent on policies. Under the backdrop of the continuous deepening of the medical syste m
reform in China, the key of current pharmaceutical industry in China still lies in control of
medical insurance costs. The scope of volume-based procurement has been continuously
expanded and the medicine review system has been further optimized since 2023. Policies are
enacted to encourage pharmaceutical enterprises to research and develop new medicines. The
national insurance drug list has been adjusted and normalized, with commercialization of new
medicines facilitated. All these together advance the innovation-driven transformation and high-
quality development of the pharmaceutical industry. In recent years, the medical reform featuring
linkage of medical insurance, medicine and medical treatment has been continuously advanced,
further driving the constantly standardized development of the industry. Among them, the
pharmaceutical policies are enacted to guide and standardize the industrial devel opment in an all-
round way from such dimensions as medicine R&D, marketing review, rational administration,
and quality supervision and control considering the actual conditions of the supply side. Moreover,
medical anti-corruption policies all raise higher requirements on the standardized development of
the pharmaceutical industry. The aforesaid policies have advanced the promotion of medicine
quality, driven the overall upgrade of the industry, optimized the industrial structure, and provided
guidance for the high-quality and high-standard overall development of the pharmaceutical
industry in China.
The trend of innovative R&D shows that emerging bio-pharmaceutical companies in China
have constantly advanced the development of clinical trials and Chinese p harmaceutical
companies have witnessed vigorous improvement in the level of innovative R&D. According to
the statistics of IQVIA, the participation of China-headquartered pharmaceutical companies in
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clinical trials continues to increase, with their shares increased from 1% in 2008 and 3% in 2013
to 28% in 2023. In recent five years, the total number of global new medicines launched in China
has surpassed that in four European countries (Germany, France, Spain and Italy) and U.K.,
second only to the U.S. The significant increase in the number of new active substances (NAS)
launched in China means that China has begun to narrow the gap with other major countries and
regions, with more new medicines launched in Chinese market at a faster pace.
From the perspective of breakthroughs in the field of diseases and new technology platforms,
there are ceaseless breakthroughs in the field of diseases represented by GLP-1 and new
technology platforms represented by ADC. Chinese enterprises enjoy comparative advantages in
competition. The underlying logic driven by innovation in the field of innovative medicines will
not change and breakthroughs in the field of diseases, such as GLP-1, AD and NASH, are
expected to be made in terms of indications in markets in addition to tumors. Breakthroughs in
innovation of technology platforms are represented by ADC, CAR-T, nuclear medicines, gene
editing, etc., with global frontier progresses constantly mapped to China.
2. Aesthetic medicine
In 2023, the growth rate of the aesthetic medicine market in China gradually slowed down
and the market competition became increasingly fierce as more and more enterprises entered the
market. However, the aesthetic medicine market in China enjoys huge potential of growth in the
long run. According to the statistics of the National Bureau of Statistics, China’s per capita
disposable income was 39,218 yuan in 2023, a nominal increase of 6.3% over the previous year.
According to Frost & Sullivan, the size of the aesthetic medicine market in China will reach 638.2
billion yuan in 2030, with a compound annual growth rate of 14.5% from 2021 to 2030. As
education and training on the aesthetic medicine market in China keep deepening, an increasing
number of emerging aesthetic medicines enter the market to satisfy patients’ diverse demands.
Moreover, consumers raise their demands for anti-wrinkle and anti-aging, and depend more on
brand effect, which are expected to steadily expand the size of the aesthetic medicine market in
China.
The proportion of non-surgical projects continues to increase and its market scale expands
gradually. According to the statistics of iResearch, the market share of non-surgical projects is
expected to increase to 55.5% by 2025. Non-surgical aesthetic medicine projects are mainly
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comprised of injection-based aesthetic medicine projects and photoelectric aesthetic medicine
projects. Among them, hyaluronic acid and botulinum toxins are mainstream materials for
injection-based projects, followed by collagen injections and regenerative materials. Hyaluronic
acids feature higher product homogeneity and increasingly fierce competitions, while botulinum
toxins have lower penetration rate in China and enjoy huge market space restricted by high
barriers and strict approval procedures. Therefore botulinum toxins have attracted increasing
number of enterprises and there are expected to be more new products launched to fill in the
market gap. According to Frost & Sullivan, the scale of admission price of botulinum toxins in
Chinese market was 6.5 billion yuan in 2022 and is expected to reach 12.6 billion yuan in 2025,
with a CAGR of 25%.
The vigorous development of the aesthetic medicine market went with multiple chaos. In
recent years, the aesthetic medicine market in China has been under constant, normalized and
strong regulation. On May 4, 2023, eleven ministries and commissions including the State
Administration for Market Regulation jointly printed and issued the Guiding Opinions on Further
Strengthening the Regulation of the Aesthetic Medicine Industry (“the Opinions”). The Opinions
highlights and emphasized trans-ministry comprehensive supervision, clearly requires to include
aesthetic medicine diagnosis and treatment activities, business activities related to aesthetic
medicine, as well as medicines and medical devices for aesthetic medicine into comprehensive
matters under regulation, and clears away “institutions without license”, “physicians without
license” and “medical devices without license”. In addition, Chinese tax authorities have also
placed their focus on tax declaration of aesthetic medicine institutions, severely punished those
without non-compliances, and strengthened their efforts in regulation, thus ensuring the healthy
development of the aesthetic medicine industry. Such measures are 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 fairer 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
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future, closely track the technological development and R&D dynamics of such fronti er 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 product introduction, inject new connotations into the long-ter m
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 devices, 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.
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 syste m
and technological platforms. Another action is to build a scientific team with outstanding ability,
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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
Engaged in the pharmaceutical businesses in Zhejiang Province for years, the Company has
been rated as Top 10 Pharmaceutical Business Enterprises in China for consecutive years, and has
four business segments of Chinese & western medicine, medical devices, 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,
featured massive health, product agency and market expansion. The Company has formed the
whole industry chain from planting in bases to processing of prepared pieces, automatic decoction,
self-owned 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.
In 2024, the Company’s pharmaceutical business segment will continue to explore
innovation in services, always focus on clients, keep up with upgraded demands of upstream and
downstream clients, and build a differentiated service brand and reputed name car d for Huadong
Medicine. In the meantime, the segment will consolidate the foundation of traditional distribution
business, continue to expand medicinal materials and devices to lower-tier markets, keep
improving the market share in hospitals, actively expa nd out-of-hospital markets, vigorously
develop its retail business, and enhance the profitability of in-hospital and DTP stores. Strictly
following the management philosophy of “Compliance, Empowerment and Efficiency
Improvement”, the segment has always earnestly exercised its management and regulation
responsibilities to comprehensively improve the operation quality.
3. Development plan of the aesthetic medicine
Upholding the domestic and international dual-circulation development strategy, the
Company’s aesthetic medicine business vigorously follows the strategy of “global operation
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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 enterprise 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 the 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 microorganis m
by building an “industrialized, large-scale and international” industrial cluster. The Company kept
practicing the industrial microbiology development strategy, clarifying its strategic layout
focusing on four major fields of xRNA, featured APIs & intermediates, massive health &
biomaterials and animal health. In the meanti me, the Company continuously enriched the product
lines in four major strategic segments of high innovation, high technology barrier and high added-
values and optimized its product structures through R&D.
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(IV) Business Plan in 2024
Starting from a new point for all business segments, the Company will place the focus on
solving core problems, anchor strategic goals, pool institutional capacities, and consolidate the
foundation for development. In the meantime, the Company will continue to uphold its operation
philosophy of “high quality and efficiency” and “struggling forward for development and putting
management first”, keep in line with its 2030 Vision, vigorously deepened transformation and
innovation in such segments as pharmaceutical industry, pharmaceutical business, aesthetic
medicine, and industrial microbiology, and keep pursuing technological, product-based and scale
development.
1. Pharmaceutical industry
Being “Scientific Research-based and Patient-centered”, the Company will continuously
increase the R&D input and keep enriching the layout of innovative medicine R&D. In 2024, the
Company’s R&D team will closely focus on “speed and quality”, uphold the dual -wheel driving
of “introduction + self-research” based on the current product and R&D lines, supplement mature
products with high clinical values, high-tech barriers and that have been launched or can be
launched quickly, and quickly enrich product lines, thus empowering the Company’s
development.
With regard to innovative projects, the Innovation R&D Center focuses on the layout of
three core therapeutic fields of oncology, endocrinology/ metabolism and
immunity/autoimmunity oriented at unmet clinical demands of global patients, while caring about
the development of disruptive technologies and other major unmet clinical demands. We will
continue to strengthen and improve the independent innovation and R&D capabilities, consolidate
established R&D technology platforms, establish a scientific ideal mechanism and a dynamic
evaluation mechanism for R&D lines at various stages, and provide project reserves and scientific
support for formal R&D projects.
In terms of generic medicines, CMC R&D Center continues to foster the industrial chain
advantage featuring “raw materials + preparations” and combination of generic medicines and
innovative medicines, develop generic medicines with high-tech barriers, explore medicine
delivery systems such as complex injections, and deepen the technological improvement and
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
innovation of external preparations. In the mea ntime, CMC R&D Center carefully analyzes
various national laws and policies to promote volume-based procurement, and insists on
researching and developing generic medicines with clinical and market values for smooth
launching of the first batch of medicines.
As for the quality system, we attach great importance to the quality and lifeline, and further
optimize domestic and international registration revolving around the Company’s annual working
policy of “Integrity, Efficiency, Quality, International Integration, Innovation and Excellence”,
thus motivating the market and business development.
2. Pharmaceutical business
In the pharmaceutical business segment, we insist on business innovation (i.e. service
innovation), put clients at the center, keep up with the upgraded demands of upstream and
downstream clients, keep improving our service quality, build differentiated service brands of the
Company’s pharmaceutical business, and expand the scale for more profits. It is particularly
emphasized that Huadong Pharmacy and Wulin Pharmacy shall further improve their service
quality and level, foster a reputed name card for Huadong Medicine’s pharmaceutical business
services. Retail pharmacies shall set up and implement the store management system with store
manager management as the core.
The segment will continue to consolidate its traditional delivery business, maintain a
reasonable scale, keep increasing the ratio of leading hospitals, extend its medicinal materials and
medical devices businesses to low-tier markets, and increase its market shares in various cities
throughout Zhejiang Province. In the meantime, the segment will vigorously expand its out-of-
hospital markets, further develop the Company’s pharmacy retail businesses, and improve the
profitability of pharmacies in hospitals and DTP stores.
Strictly following the management philosophy of “Compliance, Empowerment and
Efficiency Improvement”, the segment has always earnestly exercised its management and
regulation responsibilities to comprehensively improve the operation quality. The business tea m
shall also foster the operational thinking of lean management, cost reduction and efficiency
improvement, and take “efficiency improvement and cost reduction” as important indicators for
evaluation of main leaders, with the key placed on the improvement of labor efficiency and
operating performance.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
3. Aesthetic medicine business
In 2024, the Company’s aesthetic medicine segment will actively promote the R&D and
registration of high-end aesthetic medicine products worldwide, endeavor to ensure the normal
progress of relevant projects, and further enrich product lines vertically and horizontally, thus
benefiting more patients. As for the aesthetic medicine business in China, the Company shall
always target at high-end markets, put patients at the center, improve the service quality,
strengthen the market education of Sinclair and the Company’s brands, and increase market share
through multiple channels. Moreover, training for physicians is further enhanced and the brand
image is promoted to reach more clients.
Efforts are also made to ensure the normal progress of projects as for R&D and registration
of aesthetic medicine products to launch products as early as possible, thus further enriching
product lines vertically and horizontally.
4. Industrial microbiology
In 2024, the industrial microbiology segment shall continue to deeply study changes in
market trend and optimize the layout of core businesses, especially the expansion of international
market and growth of non-associated businesses, focusing on four major fields of xRNA, featured
APIs & intermediates, massive health & biomaterials and animal health. In this segment, the
Company will strengthen the Industrial Microbiology Division’s ability in marketing and
operation of core businesses in line with its operating philosophy of “Market-oriented and Client
Foremost”. Advancing R&D based on for strategic segments, the Company continuously enriches
the product lines with high innovation, high technology barrier and high added-values, and
optimizes its product structures.
5. Production and supply chain management
In 2024, the production system will continuously promote the transformation of the
Company’s operating mode, keep improving the procurement management and supplier
management systems, optimize the engineering construction processes, improve the factory
management level, further improve the efficiency and reduce production costs based on the lean
management system established and efforts made in cost reduction and efficiency improvement.
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(V) Possible Risks and Countermeasures
1. Change of industry policy and risk of product price reduction
The pharmaceutical industry is a strategic industry supported and developed in China, which
is closely related to people’s health and life safety. Being highly competitive and innovative, it
needs to constantly adapt to market changes and policy adjustment. In recent years, the
pharmaceutical industry has been gradually standardized, normalized and systematized as suc h
policies as volume-based procurement and medical insurance negotiation are constantly advanced.
In the meantime, such external factors as geopolitics and macroeconomic policies also disturb
enterprise management and market conditions, posing new challenges to the production cost and
profitability of the pharmaceutical industry. Besides, there is a risk of price reduction of new
medicines.
Countermeasures: The Company has always paid great attention to national policies and
industrial development, with corresponding adjustment made when necessary. In terms of R&D,
the Company continues to increase its R&D input and improves its competitiveness and potential
for future development by enriching product lines in core therapeutic fields. In the meantime, the
Company actively expands the aesthetic medicine and industrial microbiology fields to create new
growth points. In addition, the Company also reduces its production and operation risks through
cost reduction, efficiency improvement, lean management, or by other means.
2. Risk in new medicine 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 R&D of innovative medicines needs excellent R&D
personnel with high education level. The investment of manpower and early R&D expenses will
put some pressure on the Company to achieve its current business objectives. Meanwhile, new
medicines will be tested by the market demands after launching and may face such risks as price
reduction, which may result in return on R&D investment that is less than expected.
Countermeasures: The Company focuses on its core therapeutic fields, continuously
improves its capacity in independent R&D, keeps enriching and optimizing its product lines
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through independent R&D + introduction, and fosters the R&D ecology unique to Huadong
Medicine, with featured R&D matrices formed in the fields of oncology, endocrinology and
autoimmunity. The Company will continue to optimize its innovation mechanism, constantly
improve scientific research, evaluation and decision-making system for new medicines, and
strengthen close partnership with well-known R&D institutions in and out of China. In the
meantime, the Company inputs more to introduce high-level scientific research talents, enhances
training and incentive for internal core technical staff, and endeavors to foster a high-level
innovative R&D team that supports the complete cycle of innovative medicine R&D.
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
medicines, 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
The Company has always been devoted to advancing its international development. In recent
years, the Company increasingly develops international cooperation and exchanges, expands the
sales network of aesthetic medicine in the world, and accelerates the development of its industrial
microbiology segment, raising the proportion of foreign currency settlement business. The
fluctuation in exchange rate will affect the price of the Company’s export products, cause
exchange gains and losses to the Company, and increase the operating costs, thus affecting the
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Company’s assets, liabilities and income, further its 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 discussion Index of basic
Reception Reception Reception Type of Reception
and information of the
date address method visitor object
information research
provided
Please refer to the
CICC, TF Huadong Record of Investor
Securities, Medicine & Relations Activities
Institutio
Conference Industrial CARsgen on January 17, 2023
January 17, n and
Room of the Others Securities, Therapeutics presented on the
2023 individu
Company CSC Commercializ websites of
al
Financial, ation Project irm.cninfo.com.cn
etc. Exchange and cninfo.com.cn
for details.
Please refer to the
Record of Investor
China
Relations Activities
Securities
Conference Investor on February 15 to
February 15 On-site Institutio Cooperation
Room of the communicati 16, 2023 presented
to 16, 2023 survey n , Zheshang
Company on on the websites of
Securities,
irm.cninfo.com.cn
etc.
and cninfo.com.cn
for details.
Please refer to the
Record of Investor
Kaiyuan Relations Activities
Institutio
Conference Securities, Investor on March 2 to 3,
March 2 to 3, On-site n and
Room of the CCIC, GF communicati 2023 presented on
2023 survey individu
Company Securities, on the websites of
al
etc. irm.cninfo.com.cn
and cninfo.com.cn
for details.
Conference Institutio GF 2022 Annual Please refer to the
April 14, Online
Room of the n and Securities, Performance Record of Investor
2023 meeting
Company individu Haitong Exchange Relations Activities
91
The 2023 Annual Report of Huadong Medicine Co., Ltd.
al Internationa Meeting of on April 14, 2023
l, CCIC, etc. Huadong presented on the
Medicine websites of
irm.cninfo.com.cn
and cninfo.com.cn
for details.
Please refer to the
Citic Record of Investor
2023 Q1
Securities, Relations Activities
Institutio Performance
Conference TF on April 21, 2023
April Online n and Exchange
Room of the Securities, presented on the
21,2023 meeting individu Meeting of
Company Haitong websites of
al Huadong
Securities, irm.cninfo.com.cn
Medicine
etc. and cninfo.com.cn
for details.
Please refer to the
Record of Investor
Relations Activities
on May 8, 2023
Institutio Activities of
Conference CICC, Citic (Activities of
On-site n and Investors’
May 8, 2023 Room of the Securities, Investors’ Reception
survey individu Reception
Company etc. Day) presented on
al Day
the websites of
irm.cninfo.com.cn
and cninfo.com.cn
for details.
Please refer to the
2022 Annual Record of Investor
and 2023 Q1 Relations Activities
Institutio Institution
Conference Online on May 12, 2023
May 12, Online n and and
Room of the Performance presented on the
2023 meeting individu individual
Company Meeting of websites of
al investors
Huadong irm.cninfo.com.cn
Medicine and cninfo.com.cn
for details.
Please refer to the
Huatai Record of Investor
Securities, Relations Activities
June 13, June Conference China Life Investor on June 13, 15 and
On-site Institutio
15 and June Room of the Assets, communicati 16, 2023 presented
survey n
16, 2023 Company UBS on on the websites of
Securities, irm.cninfo.com.cn
etc. and cninfo.com.cn
for details.
Please refer to the
Record of Investor
2023 Interim
China Relations Activities
Institutio Performance
Conference Securities, on August 16, 2023
August 16, Online n and Exchange
Room of the CICC, Citic presented on the
2023 meeting individu Meeting of
Company Securities, websites of
al Huadong
etc. irm.cninfo.com.cn
Medicine
and cninfo.com.cn
for details.
Huatai 2023 Q3 Please refer to the
Institutio
Conference Securities, Performance Record of Investor
October 25, Online n and
Room of the GF Exchange Relations Activities
2023 meeting individu
Company Securities, Meeting of on October 25, 2023
al
Haitong Huadong presented on the
92
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Securities, Medicine websites of
etc. irm.cninfo.com.cn
and cninfo.com.cn
for details.
XIII. Implementation of the Action Plan of “Improvement of Quality and Return”
Whether the Company discloses its Action Plan of “Improvement of Quality and Return”
Yes □No
The Company has formulated the Action Plan of “Improvement of Quality and Return” in a
bid to implement the guiding principles of “Activating the capital market and boosting investors’
confidence” put forward by the Political Bureau of the CPC Central Committee and “Vigorously
improving the quality and investment value of listed companies, taking more powerful and effective
measures to stabilize the market and confidence” pointed out at the executive meeting of the State
Council, safeguard the interests of all shareholders of the Company, continuously enhance the
Company’s core competitiveness and investment values, and realize high-quality, high-efficiency
and sustainable development. Please refer to the Announcement on Advancing the Implementation
of the Action Plan of “Improvement of Quality and Return” (Announcement No.: 2024-011)
disclosed by the Company on Cninfo (http://www.cninfo.com.cn) on March 9, 2024 for details.
The Company implements the Action Plan of “Improvement of Quality and Return”, focuses
on four business segments of pharmaceutical industry, pharmaceutical business, aesthetic medicine
and industrial microbiology, and continues to advance the innovation and transformation strategy,
fully stimulates the innovation vitality, improves the operating quality and efficiency, and promotes
the its sustainable and high-quality development.
The Company kept increasing its input in R&D. During the reporting period, the Company’s
R&D investment in the pharmaceutical industry (excluding investment in eq uity) was 2.293 billion
yuan, up by 23.67% year-on-year, among which the direct R&D expenses were 1.6 billion yuan, up
33.74% year-on-year. The direct R&D expenditure accounted for 13.10% of the operating revenue
of the pharmaceutical industry. Over the years, the Company applied for more than 1,420 patents in
and out of China, including over 470 authorized invention patents. In 2023, application and renewal
of patents of the Company were progressed smoothly, with a total of 224 patent applications
submitted by its main subsidiaries, including 167 patents for invention. A total of 104 patents were
granted.
The Company conducted information disclosure and investor exchange activities based on the
needs of investors, enhanced its transparency, listened to and drawn opinions and suggestions of
investors, continuously improved corporate governance, strengthened internal control and risk
93
The 2023 Annual Report of Huadong Medicine Co., Ltd.
prevention, and improved the level of standardized operation. The Company further standardized
the operation of the mechanism comprised of shareholders’ meeting, board of directors, board of
supervisors and senior managers, gave full play to the roles of special committees, independent
directors and professional organizations of the board of directors, continuously improved the
decision-making level, and safeguarded the interests of the Company and stakeholders.
The Company has always kept the philosophy of returning investors in mind and operated
stably. In 2023, the Company achieved the operating revenue of 40.624 billion yuan, up 7.71% year
on year. The net profit attributable to shareholders of listed companies was 2.839 billion yuan, up
13.59% year on year.
The Company’s profit distribution plan for 2023 is as follows: based on the Company’s
existing total share capital of 1,754,327,548 shares, the Company allocates 5.8 yuan (including tax)
in cash for every 10 shares held by shareholders. No bonus shares will be distributed, and no
reserved funds can be converted as the share capital. The total cash dividend will be
1,017,509,977.84 yuan (including tax), and the remaining undistributed profits will be carried
forward to future annual distribution. If the total share capital of the Company changes before the
implementation of this profit distribution plan, the distribution ratio per share will be adjusted while
the total amount to be distributed keeps unchanged.
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The 2023 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 laws, administrative regulations, and the
normative documents on corporate governance issued by the CSRC
□Yes No
No such case during the reporting period.
II. The Company’s independe nce 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
Independence in business Yes business activities are completely independent from its controlling shareholder.
Although the subsidiaries of the Company and the controlling shareholder are engaged
in pharmaceutical business, they focus on different medical fields and different customer
95
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 personne l
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.
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 Convening date Disclosure date Meeting resolution
investors
present
On China Securities
Journal, Securities Times,
Shanghai Securities News,
and cninfo
2022 Annual Annual general (www.cninfo.com.cn).
61.65% May 8, 2023 May 8, 2023
General Meeting meeting Announcement of
Resolutions of 2022 Annual
General Meeting
(Announcement No.: 2023-
033)
On China Securities
Journal, Securities Times,
Shanghai Securities News,
2023 First
Extraordinary and cninfo
Extraordinary 64.24% July 19, 2023 July 19, 2023
general meeting (www.cninfo.com.cn).
General Meeting
Announcement of the
Resolutions of 2023 First
Extraordinary General
96
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Meeting (Announcement
No.: 2023-054)
On China Securities
Journal, Securities Times,
Shanghai Securities News,
and cninfo
2023 Second
Extraordinary (www.cninfo.com.cn).
Extraordinary 61.27% December 8, 2023 December 8, 2023
general meeting Announcement of the
General Meeting
Resolutions of 2023 Second
Extraordinary General
Meeting (Announcement
No.: 2023-093)
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
held at Shares
increas decrea Reaso
Comm the Other held at
Holdin Termin ed sed ns of
encem beginn change the end
Gende g of ation during during change
Name Age Title ent of ing of s of the
r positio of the the the s in
the the (shares period
ns term period period shareh
term period ) (shares
(shares (shares olding
(shares )
) )
)
Chair
man
and
Lv Incum June 1, June 1, 200,00 200,00
Male 50 Genera 0 0 0
Liang bent 2022 2025 0 0
l
Manag
er
Decem
Kang Femal Direct Incum June 1,
56 ber 5, 0 0 0 0 0
Wei e or bent 2025
2016
Zhu
Direct Incum June 1, June 1,
Feipen Male 58 0 0 0 0 0
or bent 2022 2025
g
Direct Incum June 1, June 1,
Ye Bo Male 36 0 0 0 0 0
or bent 2022 2025
Zhu Direct Incum June 6, June 1,
Male 47 30,000 0 0 0 30,000
Liang or bent 2019 2025
July
Wang Direct Incum June 1,
Male 48 19, 0 0 0 0 0
Yang or bent 2025
2023
June
Niu Direct Retire June 3,
Male 57 21,202 0 0 0 0 0
Zhanqi or d 2016
3
Wang Male 57 Indepe Incum June 1, June 1, 0 0 0 0 0
97
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Ruwei ndent bent 2022 2025
Direct
or
Indepe
Gao
Femal ndent Incum June 1, June 1,
Xiang 61 0 0 0 0 0
e Direct bent 2022 2025
dong
or
Indepe
Huang Femal ndent Incum May 8, June 1,
55 0 0 0 0 0
Jian e Direct bent 2023 2025
or
Indepe
April
Yang Femal ndent Retire May 8,
55 27, 0 0 0 0 0
Lan e Direct d 2023
2017
or
Bai Januar
Femal Superv Incum June 1,
Xinhu 58 y 20, 0 0 0 0 0
e isor bent 2025
a 1998
Zhou Superv Incum June 1, June 1,
Male 55 0 0 0 0 0
Yanwu isor bent 2022 2025
May
Qin Femal Superv Incum June 1,
54 19, 0 0 0 0 0
Yun e isor bent 2025
2006
Dong Femal Superv Incum June 1, June 1,
40 0 0 0 0 0
Jiqin e isor bent 2022 2025
Xu
Superv Incum June 6, June 1,
Zhifen Male 49 0 0 0 0 0
isor bent 2019 2025
g
Zhu Femal Superv Incum June 1, June 1,
50 0 0 0 0 0
Yinhua e isor bent 2022 2025
Deput
y
Wu Genera Incum June 6, June 1, 150,00 150,00
Male 55 0 0 0
Hui l bent 2019 2025 0 0
Manag
er
Deput
y
Octobe
Femal Genera Incum June 1, 180,00 180,00
Zhu Li 49 r 12, 0 0 0
e l bent 2025 0 0
2020
Manag
er
Deput
y
Zhang Genera Incum June 1, June 1, 230,00 230,00
Male 49 0 0 0
Jianfei l bent 2022 2025 0 0
Manag
er
Secret
ary of
the June
Chen Incum June 1, 100,00 100,00
Male 52 Board 30, 0 0 0
Bo bent 2025 0 0
of 2009
Direct
ors
Qiu Person Incum Nove June 1, 100,00 100,00
Male 42 0 0 0
Renbo in bent mber 2025 0 0
98
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Charge 28,
of 2019
Financ
e
990,00 990,00
Total -- -- -- -- -- -- 0 0 0 --
0 0
Whether directors and supervisors left office or senior managers were dismissed during their terms of office during the reporting
period
Yes □No
Ms. Yang Lan, an independent director of the 10th Board of Directors of the Company, had
been an independent director of the Company since April 28, 2017. Since she had served as an
independent director for six years, the Board of Directors of the Company received Ms. Yang Lan’s
resignation application and completed the procedure for addition of independent directors. Since
May 7, 2023, Ms. Yang Lan ceased to be an independent director of the Company. On June 21,
2023, the Company received a written resignation report from Mr. Niu Zhanqi, a director of the
Company. Mr. Niu Zhanqi ceased to be a director of the Company for personal reasons.
Change of directors, supervisors and senior managers of the Company
Applicable □ N/A
Name Title Type Date Reasons
Wang Yang Director Elected July 19, 2023 Additional Director
Resignation for
Niu Zhanqi Director Retired June 21,2023
personal reasons
Additional Independent
Huang Jian Independent Director Elected May 8, 2023
Director
Retirement at Retirement at
Yang Lan Independent Director May 7, 2023
expiration of the term expiration of the term
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: 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 Financia l
Officer of China Grand Enterprises, Inc. and Director of the Company since December 2016.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Director: Mr. Zhu Feipeng: Born in 1966, Doctor of Cytopharmacology. He has served as a reviewer, Director of the Third Revie w
Office and Chief Reviewer of respiratory and tumor indications of the Center for Drug Evaluation of National Medical Products
Administration. He was Vice President of Pharmaceutical Management Head Office of China Grand Enterprises, Inc. from March
2021 to June 2023. He was the General Manager of Pharmaceutical Management Head Office of China Grand Enterprises, Inc.
since July 2023. 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
Executive Deputy General Manager of Hangzhou Guoyou Asset Operation Co., Ltd. since March 2020; Deputy Head of the
Department of Assets Management, Hangzhou State-owned Capital Investment and Operation Co., Ltd. since June 2023. 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.
Director: Mr. Wang Yang: Born in October 1975, Doctor of Pharmaceutical Chemistry. He joined in work in September 2003. He
was a postdoctor at Southampton University, Boston College, and Texas A&M University. He was the R&D Director of Shangha i
ChemPartner Chemical Research Co., Ltd.; Assistant Director of BioDuro Beijing Co., Ltd.; Senior Reviewer at Center for Drug
Evaluation, NMPA; and Senior Director of Beijing Innocare Pharmaceutical Technology Co., Ltd. He has served as the Assistant
President and R&D Head of the Pharmaceutical Management Head Office of China Grand Enterprises, Inc. since September 2022,
and Director of the Company since July 2023.
Independent Director: Ms. Gao Xiangdong: Born in July 1963, PhD. She has served as a teaching assistant, a lecturer, an assoc iate
professor of Biopharmaceutical Teaching and Research Department, and a professor, Vice President, President and Party Secretary
of the School of Life Science and Technology, China Pharmaceutical University. She has served as a professor of the School of
Life Science and Technology, China Pharmaceutical University, since April 2021. She has also been Independent Director of the
Company since June 2022.
Independence Director: Ms. Huang Jian: Born in October 1968, holds a master’s degree, certified public accountant, and senior
accountant. She was a Senior Partner of RSM China Certified Public Accountants; Member of the 3rd, 4th and 5th Issuance
Examination Committees of the Growth Enterprise Market of China Securities Regulatory Commission; Partner of Ruihua
Certified Public Accountants (Special General Partnership); Partner of ShineWing Certified Public Accountants (Special General
Partnership). She is now Non-executive Director of Concord New Energy Group Limited and Independent Director of Hygon
Information Technology Co., Ltd. She has also been Independent Director of the Company since May 8, 2023.
Independent Director: Mr. Wang Ruwei: Born in 1967, Doctor of Medicine of Shimane University in Japan, a professor-leve l
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., and Founding Partner and Managing Director of Hangzhou Tailong Venture
Capital Partnership (Limited Partnership). He has been a member of Chinese Pharmacopoeia Commission since 2010, and is now
Independent Director of Zhejiang 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
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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. She is now Deputy General Manager of the Financia l
Management Head Office of China Grand Enterprises, Inc. She has been the 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, he 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 Departmen t
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. She 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 a member 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. He has served as 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; and 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, and 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; General Manager of the Industrial Microbiology Division of the
Company since August 2021.
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
101
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 Hube i
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; and Secretary of the Board of Directors of the Company 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;
and Officer in Charge of Financial Affairs of the Company since December 2019.
Positions in shareholders’ entities
Applicable □ N/A
Compensation and
Position in
Shareholders’ Commencement of Termination of the allowance from the
Name shareholders’
entity the term term shareholders’
entities
entity
China Grand
Kang Wei CFO February 2010 To date Yes
Enterprises, Inc.
Assistant President
and R&D Head of
China Grand
Wang Yang the Pharmaceutical September 2022 To date Yes
Enterprises, Inc.
Management Head
Office
Deputy General
Manager of the
China Grand
Bai Xinhua Financial September 2003 To date Yes
Enterprises, Inc.
Management Head
Office
Business Director
of the
China Grand
Qin Yun Pharmaceutical May 2021 To date Yes
Enterprises, Inc.
Management Head
Office
President of the
China Grand Pharmaceutical
Zhu Feipeng March 2021 To date Yes
Enterprises, Inc. Management Head
Office
Hangzhou
Ye Bo Huadong Medicine Executive Director November 3, 2022 June 27, 2023 No
Group Co., Ltd.
General Manager
China Grand
Zhou Yanwu of the Supervision January 2012 To date Yes
Enterprises, Inc.
and Audit
102
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Department
Note on positions
in shareholders’ None
entities
Position in other entities
Applicable □ N/A
Compensation and
Name of other Position in other Commencement of Termination of the allowance from the
Name
entity entity the term term shareholders’
entity
Leiyunshang
Zhu Feipeng Pharmaceutical Director May 2022 To date No
Co., Ltd.
Western Securities To date
Kang Wei Supervisor November 2010 Yes
Co., Ltd.
Leiyunshang To date
Pharmaceutical
Co., Ltd. and other
Kang Wei wholly/partially Director / No
owned subsidiaries
of China Grand
Enterprises, Inc.
Grand Industrial To date
Holding Co., Ltd.
and other
Director and
Bai Xinhua wholly/partially / Yes
Supervisor
owned subsidiaries
of China Grand
Enterprises, Inc.
Yunnan To date
Leiyunshang
Qin Yun Lixiang Director September 2011 No
Pharmaceutical
Co., Ltd.
Sichuan Yuanda
Shuyang
Pharmaceutical
Co., Ltd. and other Director and
Zhou Yanwu / To date No
wholly/partially Supervisor
owned subsidiaries
of China Grand
Enterprises, Inc.
Hangzhou Guoyou Executive Deputy
Ye Bo Asset Operation General Manager March 27, 2020 To date No
Co., Ltd. and Director
Hangzhou State-
Deputy Head of
owned Capital
the Department of
Ye Bo Investment and June 1, 2023 To date Yes
Assets
Operation Co.,
Management
Ltd.
Hangzhou Electric
Power Equipment December 31,
Ye Bo Director June 9, 2023 No
Manufacturing 2020
Co., Ltd.
Ye Bo Hangzhou Director April 28, 2023 August 11, 2023 No
103
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Kechuang Group
Co., Ltd.
Hangzhou Yingde
Ye Bo Technology Co., Executive Director July 31, 2023 To date No
Ltd.
Hangzhou State-
owned Capital Head of the Risk
Dong Jiqin Investment and Control and Legal October 2019 To date Yes
Operation Co., Department
Ltd.
Hangzhou State-
owned Capital
Dong Jiqin Investment and Supervisor September 2, 2020 To date No
Operation Co.,
Ltd.
Hangzhou Oxygen
Chairman of Board
Dong Jiqin Plant Group Co., April 21, 2023 To date No
of Supervisors
Ltd.
Hangzhou
Goodwill
Dong Jiqin Supervisor August 5, 2020 To date No
International Trade
Co., Ltd.
Hangzhou
Dong Jiqin Kechuang Group Supervisor December 2, 2022 April 28, 2023 No
Co., Ltd.
Hangzhou Electric
Power Equipment December 31,
Dong Jiqin Supervisor June 9, 2023 No
Manufacturing 2020
Co., Ltd.
Concord New To date
Non-executive
Huang Jian Energy Group December 2012 Yes
Director
Limited
Hygon To date
Information Independent
Huang Jian September 2020 Yes
Technology Co., Director
Ltd.
China To date
Teacher and
Gao Xiangdong Pharmaceutical August 1983 Yes
Professor
University
Hangzhou Institute To date
Specially-
of Medicine
Wang Ruwei appointed February 2023 No
Chinese Academy
Researcher
of Sciences
Sichuan Huiyu May 2023
Independent
Wang Ruwei Pharmaceutical June 2020 Yes
Director
Co., Ltd.
Zhejiang To date
Independent
Wang Ruwei Longevity Valley May 2021 Yes
Director
Botanical Co., Ltd.
Zhejiang Sundoc To date
Pharmaceutical Independent
Wang Ruwei November 2021 Yes
Science and Tech Director
Co., Ltd.
Note on position in
None
other 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.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
□ 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
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: Non-independent directors who hold
management positions or are in charge of business in the Company shall be paid according to the
business they are in charge of or position they hold, and shall not receive allowance for
independent directors separately; the annual allowance for independent directors of the Company
was 100,000 yuan (before tax); that for independent directors not in charge of the Company’s
management or business was 30,000 yuan (before tax); that for non-employee supervisors of the
Company was 30,000 yuan (before tax); employee supervisors shall receive performance-related
remuneration according to their positions in the Company, and shall not receive allowance for
supervisors separately.
Scheme for assessment of remuneration of the Company’s senior managers shall be
implemented upon the resolution of the 7th Meeting of the 10th Board of Directors of the
Company.
The Company has paid remunerations for directors, supervisors and senior managers of the
Company.
Remuneration of directors, supervisors and senior managers of the Company during the reporting period
Unit: ten thousand yuan
Receive
Total pretax remuneration
Holding of remuneration from related
Name Gender Age Title
positions received from parties of the
the Company Company or
not
Chairman and
Lv Liang Male 50 General Incumbent 240.00 No
Manager
Niu Zhanqi Male 57 Director Retired 1.41 Yes
Kang Wei Female 56 Director Incumbent 3.00 Yes
Zhu Feipeng Male 58 Director Incumbent 3.00 No
Ye Bo Male 36 Director Incumbent 3.00 No
Zhu Liang Male 47 Director Incumbent 65.00 No
Wang Yang Male 48 Director Incumbent 1.36 Yes
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Independent
Gao Xiangdong Female 61 Incumbent 10.00 No
Director
Independent
Wang Ruwei Male 57 Incumbent 10.00 No
Director
Independent
Huang Jian Female 55 Incumbent 6.52 No
Director
Independent
Yang Lan Female 55 Retired 3.51 No
Director
Bai Xinhua Female 58 Supervisor Incumbent 3.00 Yes
Zhou Yanwu Male 55 Supervisor Incumbent 3.00 Yes
Qin Yun Female 54 Supervisor Incumbent 3.00 Yes
Dong Jiqin Female 40 Supervisor Incumbent 3.00 No
Xu Zhifeng Male 49 Supervisor Incumbent 65.00 No
Zhu Yinhua Female 50 Supervisor Incumbent 22.60 No
Deputy General
Wu Hui Male 55 Incumbent 140.00 No
Manager
Deputy General
Zhu Li Female 49 Incumbent 140.00 No
Manager
Deputy General
Zhang Jianfei Male 49 Incumbent 140.00 No
Manager
Secretary of the
Chen Bo Male 52 Board of Incumbent 130.00 No
Directors
Person in
Qiu Renbo Male 42 Charge of Incumbent 130.00 No
Finance
Total -- -- -- -- 1,126.41 --
Note on other situations
□ Applicable N/A
VI. Performance of duties of directors during the reporting period
1. Board meetings during the reporting period
Sessions Convening date Disclosure date Meeting resolution
Announcement of the Resolutions of the 6th
Session of the 10th Board of Directors
The 6th session of the 10th (Announcement No.: 2023-003) on China
January 16, 2023 January 17, 2023
Board of Directors Securities Journal, Securities Times, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 7th
Session of the 10th Board of Directors
The 7th session of the 10th (Announcement No.: 2023-010) on China
April 12, 2023 April 14, 2023
Board of Directors Securities Journal, Securities Times, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 8th
Session of the 10th Board of Directors
The 8th session of the 10th (Announcement No.: 2023-023) on China
April 18, 2023 April 20, 2023
Board of Directors Securities Journal, Securities Times, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
The 9th session of the 10th April 19, 2023 April 21, 2023 Announcement of the Resolutions of the 9th
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Board of Directors Session of the 10th Board of Directors
(Announcement No.: 2023-026) on China
Securities Journal, Securities Times, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 10th
Session of the 10th Board of Directors
The 10th session of the 10th (Announcement No.: 2023-034) on China
May 8, 2023 May 9, 2023
Board of Directors Securities Journal, Securities Times, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 11th
Session of the 10th Board of Directors
The 11th session of the 10th (Announcement No.: 2023-044) on China
June 30, 2023 July 1, 2023
Board of Directors Securities Journal, Securities Once, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 12th
Session of the 10th Board of Directors
The 12th session of the 10th (Announcement No.: 2023-050) on China
July 12, 2023 July 13, 2023
Board of Directors Securities Journal, Securities Once, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 13th
Session of the 10th Board of Directors
The 13th session of the 10th (Announcement No.: 2023-055) on China
July 19, 2023 July 20, 2023
Board of Directors Securities Journal, Securities Once, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 14th
Session of the 10th Board of Directors
The 14th session of the 10th (Announcement No.: 2023-060) on China
August 9, 2023 August 11, 2023
Board of Directors Securities Journal, Securities Once, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 15th
Session of the 10th Board of Directors
The 15th session of the 10th (Announcement No.: 2023-063) on China
August 14, 2023 August 16, 2023
Board of Directors Securities Journal, Securities Once, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 16th
Session of the 10th Board of Directors
The 16th session of the 10th (Announcement No.: 2023-073) on China
October 23, 2023 October 25, 2023
Board of Directors Securities Journal, Securities Once, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 17th
Session of the 10th Board of Directors
The 17th session of the 10th (Announcement No.: 2023-080) on China
November 14, 2023 November 15, 2023
Board of Directors Securities Journal, Securities Once, Shanghai
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 18th
The 18th session of the 10th Session of the 10th Board of Directors
November 21, 2023 November 22, 2023
Board of Directors (Announcement No.: 2023-082) on China
Securities Journal, Securities Once, Shanghai
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Securities News, and cninfo
(www.cninfo.com.cn)
Announcement of the Resolutions of the 19th
Session of the 10th Board of Directors
The 19th session of the 10th (Announcement No.: 2023-098) on China
December 19, 2023 December 20, 2023
Board of Directors Securities Journal, Securities Once, 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 14 14 0 0 0 No 3
Kang Wei 14 1 13 0 0 No 3
Niu Zhanqi 5 1 4 0 0 No 1
Zhu Feipeng 14 1 13 0 0 No 3
Ye Bo 14 1 13 0 0 No 3
Zhu Liang 14 12 2 0 0 No 3
Wang Yang 7 0 7 0 0 No 1
Gao
14 1 13 0 0 No 3
Xiangdong
Wang Ruwei 14 1 13 0 0 No 3
Yang Lan 4 1 3 0 0 No 1
Huang Jian 10 0 10 0 0 No 2
Note on non-attendance of Board meetings in person for two consecutive times
N/A
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
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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
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
Number Other
Important Details of
Committee of Conveni performa
Members Meeting content comments and objection (if
name meeting ng date nce of
suggestions any)
s duties
The Audit Committee and
some senior managers of
the Company
communicated with the
Audit certified public
Committee accountants and project The annual
of the 10th managers in charge of the audit was
Board of Yang Lan, Company’s audit work on carried out as
January
Directors Wang Ruwei, 7 the planning phase of planned and None None
31, 2023
(annual audit Lv Liang audit, and communicated no major
communicati in advance on the 2022 problems
on - planning audit plan, change of were found.
phase) signatory certified public
accountants, pre-audit
concerns and areas of
significant risk in annual
audit.
The Audit Committee and
Audit some senior managers of
Committee the Company
The annual
of the 10th communicated with the
audit was
Board of certified public
Yang Lan, carried out as
Directors April 7, accountants and project
Wang Ruwei, 7 planned and None None
(annual audit 2023 managers in charge of the
Lv Liang no major
communicati Company’s audit work on
problems
on - the execution phase of
were found.
execution audit, and communicated
phase) on the execution of the
2022 audit plan,
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
preliminary results of
audit on financial
statements in 2022, key
audit matters, comparison
of main financial data of
listed companies in the
same industry, etc.
The Audit Committee and
some senior managers of
the Company
communicated with the
certified public
accountants and project
Audit
managers in charge of the
Committee
Company’s audit work on The annual
of the 10th
the completion phase of audit was
Board of
Yang Lan, audit, and communicated carried out as
Directors April
Wang Ruwei, 7 on the execution of the planned and None None
(annual audit 11, 2023
Lv Liang 2022 audit plan, audited no major
communicati
financial data in 2022, problems
on -
key audit matters, audit were found.
completion
comments on financial
phase)
statements in 2022,
establishment and
implementation of
internal control related to
the financial report as of
December 31, 2022.
The following proposals
were reviewed: 1.
Proposal on the
Company’s 2022 Annual
Report;
2. Proposal on Evaluating
the Accounting Firm’s The work of
Performance in 2022; the
Company’s
The 1st Internal Audit
session of the 3. Proposal on Department
Audit Reappointing the was carried
Committee Accounting Firm; out According
Yang Lan,
of the 10th April 4. Proposal on Evaluating planned
Wang Ruwei, 7 None None
Board of 12, 2023 the Company’s Internal Implementatio
Lv Liang
Directors Control in 2022; n no major
(regular 5. Proposal on the 2022 problems
meeting) in Work Report of the were found;
2023 Company’s Internal Audit all proposals
Department; were
approved after
review.
6. Proposal on the 2023
Work Plan of the
Company’s Internal Audit
Department;
7. Proposal on Changes
in Accounting Policies.
The 2nd Yang Lan, April 1. Proposal on the The work of
7 None None
session of the Wang Ruwei, 19, 2023 Company’s Q1 Report in the
110
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Audit Lv Liang 2023; Company’s
Committee 2. Proposal on the Work Internal Audit
of the 10th Report of the Company’s Department
Board of Internal Audit was carried
Directors Department in Q1 of out According
(regular 2023; planned
meeting) in Implementatio
2023 n no major
problems
were found;
all proposals
were
approved after
review.
The work of
1. Proposal on the Work the
Report of the Company’s Company’s
The 3rd Internal Audit Internal Audit
session of the Department in H1 of Department
Audit 2023; was carried
Committee 2. Proposal on the Work out According
Huang Jian,
of the 10th August Report of the Company’s planned
Wang Ruwei, 7 None None
Board of 14, 2023 Internal Audit Implementatio
Lv Liang
Directors Department in H2 of n no major
(regular 2023; problems
meeting) in 3. Proposal on the were found;
2023 Company’s 2023 Semi- all proposals
annual Report and its were
Abstract. approved after
review.
The work of
the
1. Proposal on the Work
Company’s
Report of the Company’s
The 4th Internal Audit
Internal Audit
session of the Department
Department in Q3 of
Audit was carried
2023;
Committee out According
Huang Jian, 2. Proposal on the Work
of the 10th October planned
Wang Ruwei, 7 Report of the Company’s None None
Board of 23, 2023 Implementatio
Lv Liang Internal Audit
Directors n no major
Department in Q4 of
(regular problems
2023;
meeting) in were found;
3. Proposal on the Work
2023 all proposals
Report of the Company in
were
Q3 of 2023.
approved after
review.
The
Nomination
The 1st Committee
session of the verified and
1. Proposal on the
Nomination Kang Wei, reviewed the
Nomination of
Committee Gao April matters under
2 Independent Director None None
of the 10th Xiangdong, 12, 2023 deliberation,
Candidates for the 10th
Board of Yang Lan and
Board of Directors;
Directors in unanimously
2023 agreed upon
relevant
proposals.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
The
Nomination
The 2nd Committee
session of the verified and
Nomination Kang Wei, 1. Proposal on the reviewed the
Committee Gao June 30, Addition of Directors for matters under
2 None None
of the 10th Xiangdong, 2023 the 10th Board of deliberation,
Board of Huang Jian Directors; and
Directors in unanimously
2023 agreed upon
relevant
proposals.
The
Remuneration
The 1st
and Approval
session of the
Committee
Remuneratio
verified and
n and Lv Liang, 1. Proposal on the
reviewed the
Approval Gao April Company’s 2023 Annual
1 matters under None None
Committee Xiangdong, 12, 2023 Compensation Assessment
deliberation,
of the 10th Wang Ruwei Plan for Senior Managers
and
Board of
unanimously
Directors in
agreed on the
2023
relevant
proposals.
ESG
Committee Ye Bo, Zhu
of the 10th Feipeng, Gao 0
Board of Xiangdong
Directors
Strategy
Committee Lv Liang,
of the 10th Wang Yang, 0
Board of Wang Ruwei
Directors
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
931
end of the reporting period (person)
Number of incumbent employees in major subsidiaries at the
16,038
end of the reporting period (person)
Total number of incumbent employees at the end of the
16,969
reporting period (person)
Total number of employees receiving salaries in the current 16,969
112
The 2023 Annual Report of Huadong Medicine Co., Ltd.
period (person)
Number of retired employees requiring the parent Company
0
and its subsidiaries to bear costs (person)
Expertise structure
Category Number (person)
Production staff 1,571
Sales staff 10,527
Technical staff 2,693
Financial staff 308
Administrative staff 1,483
Storage and transportation staff 387
Total 16,969
Educational background
Category Number (person)
Master’s degree or above 1,252
Bachelor’s degree 7,161
Junior college (professional training) 7,060
Other 800
The undisclosed education background of staff in overseas
696
subsidiaries (Note)
Total 16,969
Note: The data under “educational background” only covers staff of the Company and its subsidiaries in
China, and the information of 696 employees of the Company’s overseas subsidiaries is not included.
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
Training talents independently is an important foundation for the Company’s sustainable
development. In recent years, the Company has always been committed to fostering a diversified
and multi-layer talent training system, and put talents first to empower its transformation. In 2024,
the Company will continue to advance its pilot program, induction training for new employees,
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
sailing program, training of talents with high potential and training of professional staff to enable
the Company’s talent development.
By providing new employees with professional induction training and full-process probation
management, the Company helps them fit in the team quickly.
As fresh graduates bring the Company vitality, the Company launches its Sailing Program to
help them quickly engage in their role, shape healthy professional quality and unders tand the
Company’s culture. Moreover, the Company quickly trains young talents through collective
training, selection, rotation, assessment, practice, etc.
In the empowerment of management ability, the Company focuses on the construction of
talent teams, cares about the cultivation and development of core and backbone management
talents, and improves its internal cultivation and promotion mechanism.
In terms of improvement of business abilities, the Company regularly counts and trains
business talents in R&D, quality, production and sales to empower the sustainable development of
the Company and advance the implementation of its international strategic development.
As for improvement of professional abilities, the Company improves employees’ skills
quickly by strengthening post standardization, solidifying on-the-job training and retraining
system, combines assessment and training, replaces training with practice to quickly improve
employees’ skills, thus optimizing business processes and efficiency.
With regard to the construction of digital training platform, the Company gradually enriches
the curriculum system regarding each business, devotes to building a systematic and perfect
learning platform, and helps employees participate in training through personalized courses on the
digital platform, thus helping to improve their post competence.
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
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 mechanis m
were well- 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 the 6th session of the 10th Board of Directors on April 12, 2023,
reviewed and approved the Proposal on the Company’s 2022 Profit Distribution Scheme, and
agreed to submit the proposal to the Company’s general meeting for deliberation. The 2022
Annual General Meeting convened on May 8, 2023 deliberated on and approved the proposal. On
December 31, 2022, based on the total share capital of 1,753,995,348 of the Company, 2.9 yua n
(before tax) of cash dividends per ten common shares were distributed to all shareholders. No
bonus share was issued and no capital reserve was converted to share capital. A Total of
508,658,650.92 yuan (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 13, 2023, 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
Yes
resolutions of the General Meeting:
Whether the criteria and proportion of dividends were specific
Yes
and clear:
Whether the decision-making process and mechanism was
Yes
well-established:
Whether independent directors performed their duties and
Yes
roles:
Specific reasons and measures to be taken in the next step to
increase investor returns if the Company does not pay cash N/A
dividends:
Whether minority shareholders could express their opinions
and requirements, and whether their legal rights and interests Yes
were fully protected:
Whether conditions and process were conforming and
transparent if the cash dividend policy was adjusted or N/A
changed:
115
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 (yuan) (tax included) 5.8
Share capital base of the distribution plan (share) 1,754,327,548
Cash dividends (yuan) (tax included) 1,017,509,977.84
Cash dividends by other means (such as share repurchase)
0.00
(yuan)
Total cash dividends (including those by other means) (yuan) 1,017,509,977.84
Distributable profit (yuan) 6,629,739,641.30
Proportion of total cash dividends (including those by other
100%
means) 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 second meeting of the 10th Board of
Directors and the 2nd meeting of the 10th Board of Supervisors, deliberating on and passing 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. Independent directors expressed their independent opinions on whether this incentive
scheme is conducive to the sustainable development of the Co mpany and whether there is any
situation that harms the interests of the Company and all shareholders. See the relevant
announcement of the Company published on Cninfo (http://www.cninfo.com.cn) on August 10,
2022 for details.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
(2) On August 10, the Company disclosed the Announcement on Independent Directors
Publicly Soliciting Proxy Voting Rights on Cninfo (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 first 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 first 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.
117
The 2023 Annual Report of Huadong Medicine Co., Ltd.
(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 deliberated on 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, 2022, the Company disclosed a related announcement on www.cninfo.com.cn.
(6) On November 9, 2022, the Company disclosed the Announcement on Completion of
Registration of the First Grant of the Restricted Share Incentive Scheme in 2022. The Company
completed the registration of the first grant of the restricted share incentive scheme in 2022, and
the listing date of the granted restricted shares was November 15, 2022.
(7) On July 12, 2023, the Company convened the 12th session of the 10th Board of
Directors and the 8th session of the 10th Board of Supervisors. During these two sessions, the
Proposal on Adjustments of the Granted Price of the Company’s 2022 Restricted Share Incentive
Scheme, and the Proposal on Granting Reserved Restricted Shares to the First Batch of
Employees Receiving Incentive from the 2022 Restricted Share Incentive Scheme were deliberated
on and approved. The Company’s Board of Directors believed that reserved 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 date of granting reserved shares, 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 the same day, the
Company disclosed a related announcement on www.cninfo.com.cn.
(8) The Company announced publicly the list of this batch of employees receiving the
incentive from the restricted share incentive scheme on the Company’s OA system from July 13
to 23, 2023, which lasted for 10 days in total. As of the end of the announcement on July 23, 2023,
the Board of Supervisors did not receive any objection against these employees. On July 26, 2023,
the Company convened a session of the Board of Supervisors, during which the Verification
118
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Opinions and Announcement Note on the List of Employees Receiving the Reserved Restricted
Share 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 Employees Receiving the Reserved Restricted
Share Incentive from the Company’s 2022 Restricted Share Incentive Scheme and a related
announcement on www.cninfo.com.cn.
(9) On September 27, 2023, the Company disclosed the Announcement on Completion of
Registration of the Reserved Grant of Restricted Share Incentive Scheme in 2022. The Company
completed the registration of the reserved grant of the restricted share incentive scheme in 2022,
and the listing date of the granted restricted shares was September 28, 2023.
(10) On November 21, 2023, the Company convened the 18th session of the 10th Board of
Directors and the 12th session of the 10th Board of Supervisors. During these two sessions, the
Proposal on Achievement of the Release of Restriction Conditions during the First Restriction
Period of Restricted Shares Granted for the First Time from the Restricted Share Incentive
Scheme in 2022, the Proposal on Adjusting the Repurchase Price of Shares under the Restricted
Share Incentive Scheme in 2022, and the Proposal on Repurchase and Cancellation of Some
Restricted Shares were deliberated on and approved. The Board of Directors believed that the
Company attained conditions for the unlock of restriction conditions during the first restriction
period of restricted shares granted for the first time from the Restricted Share Incentive Scheme in
2022. According to the authorization of the Company’s first extraordinary general meeting in
2022, the Board of Directors agreed that the Company can handle the procedures for releasing
restricted sales of 1,220,940 restricted shares with the restricted sales period for 108 incentive
subjects. The Board of Directors also agreed to repurchase and cancel 97,800 shares of restricted
shares that have been granted but have not been unlocked for four incentive subjects who are no
longer eligible for incentives due to resignation and two incentive subjects who fail to satisfy the
standards due to personal performance during the first restricted sales releasing period. The
Company’s independent directors issued independent opinions on related matters, and the
Company’s Board of Supervisors issued verification opinions on related matters. Lawyers and
independent financial advisers prepared related reports. On the same day, the Company disclosed
a related announcement on www.cninfo.com.cn.
119
The 2023 Annual Report of Huadong Medicine Co., Ltd.
(11) On December 8, 2023, the Company convened the second extraordinary general
meeting in 2023, deliberated on and approved the Proposal on Repurchase and Cancellation of
Some Restricted Shares and the Proposal on Altering the Registered Capital and Amending the
Articles of Association. On the same day, the Company disclosed the Announcement on
Repurchase and Cancellation of Some Restricted Shares to Reduce Registered Capital and Notify
the Creditors. As of January 24, 2024, the benchmark date for capital verification, i.e. within
forty-five days from the date when the Company announced the reduction of capital, no creditor
asked the Company to pay off its debts or provide corresponding guarantees.
(12) On March 27, 2024, the Company disclosed the Announcement on the Completion of
Repurchase and Cancellation of Some Restricted Shares. Upon examination and confirmation by
Shenzhen Branch of China Securities Depository and Clearing Co., Ltd., the Company completed
the cancellation of 97,800 restricted shares that were granted for the first time under this incentive
scheme, i.e. four incentive subjects who were no longer eligible for incentive due to resignation,
and two incentive subjects who were no longer eligible for incentive due to failure in satisfying
the standards due to personal performance during the first restricted sales releasing period.
Equity Incentive Received by the Company’s Directors and Senior Managers
Applicable □ N/A
Unit: Share
Exerci
Numb Numb
se
er of Numb er of
Numb Numb Numb price Numb Marke Numb Numb
newly er of restric
er of er of er of of er of t price er of Grant er of
grante restric ted
share exerci exerci exerci share at the shares price restric
d ted shares
option sable sed sed option end of unloc of ted
share shares newly
s held shares shares shares s held the ked restric shares
Name Title option held grante
at the during during during at the report during ted held
s at the d
begin the the the begin ing the shares at the
during begin during
ning report report report ning period curren (yuan/ end of
the ning the
of the ing ing ing of the (yuan/ t share) the
report of the report
year period period period period share) period period
ing period ing
(yuan/
period period
share)
Chair
man
and
Lv 200,0 60,00 140,0
Gener 0 0 0 0 0 0 41.46 0 25
Liang 00 0 00
al
Mana
ger
Wu Deput 150,0 45,00 105,0
0 0 0 0 0 0 41.46 0 25
Hui y 00 0 00
120
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Gener
al
Mana
ger
Deput
y
Zhu Gener 150,0 45,00 105,0
0 0 0 0 0 0 41.46 0 25
Li al 00 0 00
Mana
ger
Deput
y
Zhang
Gener 150,0 45,00 105,0
Jianfe 0 0 0 0 0 0 41.46 0 25
al 00 0 00
i
Mana
ger
Zhu Direct 30,00 21,00
0 0 0 0 0 0 41.46 9,000 0 25
Liang or 0 0
Secret
ary of
the
Chen 100,0 30,00 70,00
Board 0 0 0 0 0 0 41.46 0 25
Bo 00 0 0
of
Direct
ors
Perso
n in
Qiu Charg 100,0 30,00 70,00
0 0 0 0 0 0 41.46 0 25
Renbo e of 00 0 0
Finan
ce
880,0 264,0 616,0
Total -- 0 0 0 0 -- 0 -- 0 --
00 00 00
The number of restricted shares with restricted sales unlocked granted from the Restricted Share Incentive
Scheme in 2022 was 1,220,940. These shares were listed on December 5, 2023. Among them, Chairman and
General Manager Lv Liang, Deputy General Manager Wu Hui, Deputy General Manager Zhang Jianfei,
Deputy General Manager Zhu Li, Director Zhu Liang, Secretary of the Board of Directors Chen Bo, and
Note (if any)
Person in Charge of Finance Qiu Renbo unlocked 60,000 shares, 45,000 shares, 45,000 shares, 45,000 shares,
9,000 shares, 30,000 shares and 30,000 shares respectively. The remaining restricted shares of the aforesaid
persons are 140,000 shares, 105,000 shares, 105,000 shares, 105,000 shares, 21,000 shares, 70,000 shares and
70,000 shares respectively.
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
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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.
On November 21, 2023, the Company convened the 18th session of the 10th Board of
Directors and the 12th session of the 10th Board of Supervisors. During these two sessions, the
Proposal on Achievement of the Release of Restriction Conditions during the First Restriction
Period of Restricted Shares Granted for the First Time from the Restricted Share Incentive
Scheme in 2022 was deliberated on and approved. The Board of Directors believed that the
Company attained conditions for the unlock of restriction conditions during the first restriction
period of restricted shares granted for the first time from the Restricted Share Incentive Scheme in
2022. According to the authorization of the Company’s first extraordinary general meeting in
2022, the Board of Directors agreed that the Company can handle the procedures for releasing
restricted sales of 1,220,940 restricted shares with the restricted sales period for 108 incentive
subjects, including 255,000 shares involving senior managers.
2. Implementation of the employee stock ownership plan
□ Applicable N/A
3. Other employee incentives
□ Applicable N/A
122
The 2023 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 18, 2024.
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
indirectly held
70% of its
Jiangsu
shares, and
Nanjing
integrated its
Nongda Animal N/A N/A N/A N/A N/A
assets,
Pharmaceutical
employees,
Co., Ltd.
finance and
business after
acquisition.
The Company
Hangzhou
indirectly held
Huayi
100% of its N/A N/A N/A N/A N/A
Pharmacy Co.,
shares, and
Ltd.
integrated its
123
The 2023 Annual Report of Huadong Medicine Co., Ltd.
assets,
employees,
finance and
business after
acquisition.
The Company
held 100% of
Zhejiang Yiqun
its shares, and
Biology
integrated its
Medical
assets, N/A N/A N/A N/A N/A
Instrument
employees,
Trading Co.,
finance and
Ltd.
business after
acquisition.
The Company
indirectly held
51% of its
Huadong shares, and
Medicine integrated its
N/A N/A N/A N/A N/A
Dongyang Co., assets,
Ltd. employees,
finance and
business after
acquisition.
Hangzhou
Perfect mRNA
N/A N/A N/A N/A N/A N/A
Biotechnology
Co., Ltd.
Hibe
Technology N/A N/A N/A N/A N/A N/A
Co., Ltd.
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 18, 2024
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 The Company stipulates that internal
internal control deficiencies control deficiencies involving the
involving the following fields shall following fields shall be considered as
Qualitative criteria
be identified as at least “important “material deficiencies”: serious violation
deficiencies”: anti-fraud procedure of laws and regulation; in addition to
and control; internal control over policy reasons, the Company has been
124
The 2023 Annual Report of Huadong Medicine Co., Ltd.
unconventional or unsystematic losing money for years, and its
transactions; internal control over continuous operation has been
the selection and application of challenged; lack of system control or
accounting policies in relation to systematic failure in important business;
Generally Accepted Accounting frequent exposure of negative news in
Principles (GAAP); internal the media that causes material adverse
control over the end-of-period effect; internal control evaluation results,
financial reporting process. especially major or significant
The Company stipulates that internal deficiencies have not been corrected.
control deficiencies involving the The Company stipulates that internal
following fields shall be identified as at control deficiencies involving the
least “important deficiencies”, and has following fields shall be considered as
strong indications of “material “important deficiencies”: there is much
deficiencies”: restatement of previously negative news in the major media at
published financial statements to reflect provincial level and above, which results
correction of misstatements resulting in relatively large adverse effect; exodus
from errors or fraud; the auditor found of middle management or operating
material misstatement in the Company’s personnel; general defects identified last
financial statements for the current year have not been rectified and there is
period that was not initially detected by no reasonable explanation.
the Company’s internal control over
financial reports; the Audit Committee’s
failure to supervise the Company’s
financial reports and internal control over
financial reports; compliance supervision
function is invalid, and the violation of
laws and regulations may have a
significant impact on the reliability of
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.
The quantitative criteria for the
evaluation of internal control
deficiencies in financial report
determined by the Company are as
follows:
The quantitative criteria for the
(1) Internal control deficiencies
evaluation of internal control
satisfying one of the following
deficiencies in non-financial report
conditions can be considered as “material
determined by the Company are as
deficiencies”:
follows:
Item Impact of deficiency
Type of
Potentia Impact on total assets
deficiencies
Quantitative criteria l
General Impact on total assets <
misstate Misstated amount ≥ 10%
deficiencies 1.5%
ment of of total profit
1.5% of total assets ≤
total Important
impact on total assets <
profit deficiencies
3% of total assets
Potentia
Material Impact on total assets ≥
l
deficiencies 3%
misstate Misstated amount ≥ 3% of
ment of total assets
total
assets
(2) Internal control deficiencies
125
The 2023 Annual Report of Huadong Medicine Co., Ltd.
satisfying one of the following
conditions can be considered as
“important deficiencies”:
Item Impact of deficiency
Potentia 5% of total profit ≤
l misstated amount < 10%
misstate of total profit
ment of
total
profit
Potentia 1.5% of total assets ≤
l misstated amount < 3% of
misstate total assets
ment of
total
assets
(3) Internal control deficiencies
satisfying one of the following
conditions can be considered as “general
deficiencies”:
Item Impact of deficiency
Potentia Misstated amount < 5% of
l total profit
misstate
ment of
total
profit
Potentia Misstated amount < 1.5%
l of total assets
misstate
ment of
total
assets
Number of material deficiencies in
0
financial reports
Number of material deficiencies in non-
0
financial reports
Number of important deficiencies in
0
financial reports
Number of important deficiencies in non-
0
financial reports
2. Audit report on internal control
Applicable □ N/A
Opinions of Internal Control Audit Report
On December 31, 2023, Huadong Medicine 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 text of audit report on internal
April 18, 2024
control
Disclosure index of the full text of audit report on internal
Cninfo (www.cninfo.com.cn)
control
126
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Type of opinions in the internal control audit report Unmodified unqualified opinions
Whether there are material deficiencies in non-financial
No
reporting
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
127
The 2023 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’s Republic of China on the Prevention and Control of Ambient Noise
Pollution, Law of the People’s Republic of China on the Prevention and Control of Soil Pollution, Regulations on
the Administration of Permitting of Pollutant Discharges, Emission Standard of Air Pollutants for Pharmaceutical
Industry (GB 37823-2019), 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 18597-2023), Technical Specification for
Setting Identification Signs of Hazardous Waste (HJ 1276-2022), Standard for Fugitive Emission of Volatile
Organic Compounds (GB 37822-2019), Emission Standards for Odor Pollutants (GB 14554-93), Wastewater
Quality Standards for Discharge to Municipal Sewers (GB/T 31962-2015), Integrated Wastewater Discharge
Standard (GB 8978 1996), Discharge Standard of Water Pollutants for Pharmaceutical Industry - Chemical
Synthesis Products Category (GB 21904-2008), Technical Methods for Making Local Emission Standards of Air
Pollutants (GB13201-1991), Emission Standard of Air Pollutants for Pharmaceutical Industry (DB34/310005-
2021), Emission Standard of Air Pollutants for Pharmaceutical Industry (DB33/310005-2021), Discharge
Standard of Pollutants for Bio-pharmaceutical Industry (DB 33/923-2014), 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), Integrated Emission Standard of Air Pollutants (DB 32/4041-2021),
Discharge Standard of Pollutants for Bio-pharmaceutical Industry (DB 31/373-2010), Emission Control Standard
of Volatile organic Compounds (DB61/T 1061-2017), Integrated Wastewater Discharge Standard of Yellow River
Basin in Shannxi Province (DB 61/224-2018), Emission Standard of Volatile Organic Compounds for Chemical
Industry (DB 32/3151-2016), etc.
Information on environmental protection-related administrative licensing
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. re-applied for the Pollutant Emission Permit on June
20, 2023, which is valid until June 19, 2028.
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. re-applied for the Pollutant Emission
Permit on March 4, 2023, which is valid until March 3, 2028. In addition, Hangzhou Zhongmei Huadong
Pharmaceutical (Jiangdong) Co., Ltd. has obtained the EIA approval of Product Transfer and Expansion of
Indobufen Tablets and Clarithromycin Tablets and Expansion and Transformation Project of Acarbose Chewable
128
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Tablets on April 25, 2023, with the approval number of HHQ EIA Batch [2023] No. 28; obtained the EIA
approval of the Acceptance of EIA Registration Form for Pulsecathi VAC2L API Product Construction Project on
July 18, 2023, with the approval number of HHQ EIA Batch [2023] No. 32; obtained the EIA approval of
HDG1901 Preparation Workshop Construction Project on September 27, 2023, with the approval number of HHQ
EIA Batch [2023] No. 68.
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 the Transformation Project of Storage Tank Area of the Second Workshop
of APIs within the reporting period, with the approval number of WHYF (2023) No. 34.
The Pollutant Emission Jiangsu Joyang Laboratories is valid from February 28, 2022 to February 27, 2027.
The Pollutant Emission Permit of Wuhu Huaren Science and Technology Co., Ltd. is valid from February 26,
2024 to February 25, 2029.
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
to No.
ei Water ent
pH value 1 866 6.91 6-9 / / None
Huadong pollutant discharg
Mogans
Pharmac e
han
eutical
Road
Co., Ltd.
Hangzho
Main
u 7.70
Entrance
Zhongm Intermitt tons
to No.
ei Water ent 35.74mg (dischar
COD 1 866 500mg/l 33.3 t/a None
Huadong pollutant discharg /l ged to
Mogans
Pharmac e environ
han
eutical ment)
Road
Co., Ltd.
Hangzho
Main
u
Entrance 0.11 tons
Zhongm Intermitt
Ammoni to No. (dischar
ei Water ent
a- 1 866 1.25mg/l 35mg/l ged to 2.38 t/a None
Huadong pollutant discharg
nitrogen Mogans environ
Pharmac e
han ment)
eutical
Road
Co., Ltd.
Hangzho Complia Within
u nt the
Hazardo
Zhongm Solid disposal factory 817.99
us solid 2 / / / None
ei pollutant by at No. tons
waste
Huadong entrusted 866
Pharmac qualified Mogans
129
The 2023 Annual Report of Huadong Medicine Co., Ltd.
eutical units han
Co., Ltd. Road
Hangzho Within
Complia
u the
nt
Zhongm factory
General disposal
ei Solid at No. 90.2
solid by 2 / / / None
Huadong pollutant 866 tons
waste entrusted
Pharmac Mogans
qualified
eutical han
units
Co., Ltd. Road
Hangzho
u
Roof of
Zhongm Organize
Boiler
ei Air Nitric d 27.25mg 50mg/m 1.84
1 Room at 17.7 t/a None
Huadong pollutant oxide discharg /m3 3 tons
Building
Pharmac e
25
eutical
Co., Ltd.
Hangzho
u
Roof of
Zhongm Organize
Boiler
ei Air Sulfur d 5.5mg/m 20mg/m 0.24
1 Room at / None
Huadong pollutant dioxide discharg 3 3 tons
Building
Pharmac e
25
eutical
Co., Ltd.
Hangzho
u
Roof of
Zhongm Organize
Boiler
ei Air Dust and d 3.6mg/m 10mg/m 0.31
1 Room at / None
Huadong pollutant fume discharg 3 3 tons
Building
Pharmac e
25
eutical
Co., Ltd.
Hangzho
u
Zhongm
ei Continu
Phase II
Huadong Water ous
pH value 1 Factory 8.17 6-9 / / None
Pharmac pollutant discharg
Area
eutical e
Jiangdon
g Co.,
Ltd.
Hangzho
u
Zhongm 262.099 66.286
ei Continu 9 tons tons
Phase II
Huadong Wastewa ous 100– (Nanotu (dischar
COD 1 Factory 500mg/l None
Pharmac ter discharg 350mg/l be ged to
Area
eutical e discharg environ
Jiangdon e) ment)
g Co.,
Ltd.
Hangzho Ammoni Continu Phase II 3.1906 10.606
Wastewa 0–
u a- ous 1 Factory 35mg/l tons tons None
ter 25mg/l
Zhongm nitrogen discharg Area (Nanotu (dischar
130
The 2023 Annual Report of Huadong Medicine Co., Ltd.
ei e be ged to
Huadong discharg environ
Pharmac e) ment)
eutical
Jiangdon
g Co.,
Ltd.
Hangzho
u
Zhongm 1.705 0.663
ei Continu tons tons
Total Phase II
Huadong Wastewa ous (Nanotu (dischar
phospho 1 Factory 0–5mg/l 8mg/l None
Pharmac ter discharg be ged to
rus Area
eutical e discharg environ
Jiangdon e) ment)
g Co.,
Ltd.
Hangzho
u
Zhongm
ei Non- Organize
Phase II
Huadong Exhaust methane d 0– 2.5328
1 Factory 60mg/l / None
Pharmac gas hydrocar discharg 30mg/l tons
Area
eutical bon e
Jiangdon
g Co.,
Ltd.
Hangzho
u
Complia
Zhongm
nt
ei Within
Hazardo disposal
Huadong Solid the 947.142
us solid by 2 / / / None
Pharmac pollutant Compan 3 tons
waste entrusted
eutical y
qualified
Jiangdon
units
g Co.,
Ltd.
Hangzho
u
Complia
Zhongm
nt
ei Within
General disposal
Huadong Solid the 21142.0
solid by 4 / / / None
Pharmac pollutant Compan 3 tons
waste entrusted
eutical y
qualified
Jiangdon
units
g Co.,
Ltd.
Beside
Huadong
National
Medicin
Intermitt Highway
e (Xi’an)
Water ent 310,
Bohua pH value 1 7.98 6-9 / / None
pollutant discharg Liuye
Pharmac
e River,
eutical
Huayin
Co., Ltd.
City
Huadong Intermitt Beside
Water 35.63mg 1.18709
Medicin COD ent 1 National 50mg/l 3 tons None
pollutant /l 5 tons
e (Xi’an) discharg Highway
131
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Bohua e 310,
Pharmac Liuye
eutical River,
Co., Ltd. Huayin
City
Beside
Huadong
National
Medicin
Intermitt Highway
e (Xi’an) Ammoni
Water ent 310, 0.01082 0.48
Bohua a- 1 0.33mg/l 8mg/l None
pollutant discharg Liuye 9 tons tons
Pharmac nitrogen
e River,
eutical
Huayin
Co., Ltd.
City
Beside
Huadong
National
Medicin
Intermitt Highway
e (Xi’an)
Water Total ent 310, 0.31980
Bohua 1 9.97mg/l 15mg/l / None
pollutant nitrogen discharg Liuye 8 tons
Pharmac
e River,
eutical
Huayin
Co., Ltd.
City
Huadong Complia
Medicin nt
Within
e (Xi’an) Hazardo disposal
Solid the 339.07
Bohua us by 3 / / / None
pollutant Compan tons
Pharmac wastes entrusted
y
eutical qualified
Co., Ltd. units
Huadong
Medicin
Volatile Organize
e (Xi’an)
Air organic d APIs 60mg/m
Bohua 1 / / / None
pollutant compou discharg Plant 1 3
Pharmac
nd e
eutical
Co., Ltd.
Huadong
Medicin
Organize
e (Xi’an) Hydroge
Air d APIs 30mg/m
Bohua n 1 / / / None
pollutant discharg Plant 1 3
Pharmac chloride
e
eutical
Co., Ltd.
Huadong
Medicin
Ammoni Organize
e (Xi’an)
Air a d APIs 20mg/m
Bohua 1 / / / None
pollutant (ammoni discharg Plant 1 3
Pharmac
a gas) e
eutical
Co., Ltd.
Huadong
Medicin
Organize
e (Xi’an)
Air Sulfuric d APIs 45mg/m
Bohua 1 / / / None
pollutant acid mist discharg Plant 1 3
Pharmac
e
eutical
Co., Ltd.
Huadong Air Hydroge Organize 1 APIs / 30mg/m / / None
132
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Medicin pollutant n d Plant 2 3
e (Xi’an) chloride discharg
Bohua e
Pharmac
eutical
Co., Ltd.
Huadong
Medicin
Organize
e (Xi’an)
Air d APIs 20mg/m
Bohua PM 1 / / / None
pollutant discharg Plant 2 3
Pharmac
e
eutical
Co., Ltd.
Huadong
Medicin
Ammoni Organize
e (Xi’an) Sewage
Air a d 20mg/m
Bohua 1 treatmen / / / None
pollutant (ammoni discharg 3
Pharmac t station
a gas) e
eutical
Co., Ltd.
Huadong
Medicin
Organize
e (Xi’an) Sewage
Air Hydroge d
Bohua 1 treatmen / 5mg/m3 / / None
pollutant n sulfide discharg
Pharmac t station
e
eutical
Co., Ltd.
Huadong
Medicin
Non- Organize
e (Xi’an) Sewage
Air methane d 60mg/m
Bohua 1 treatmen / / / None
pollutant hydrocar discharg 3
Pharmac t station
bon e
eutical
Co., Ltd.
Huadong
Medicin
Organize
e (Xi’an) Odor Sewage
Air d
Bohua concentr 1 treatmen / 6000 / / None
pollutant discharg
Pharmac ation t station
e
eutical
Co., Ltd.
Huadong
Medicin
Organize
e (Xi’an) Solid
Air d 20mg/m
Bohua PM 1 preparati / / / None
pollutant discharg 3
Pharmac on plant
e
eutical
Co., Ltd.
Jiangsu Intermitt No. 9,
Joyang Water ent Haidu
pH value 1 8.4 6-9 / / None
Laborato pollutant discharg North
ries e Road
Jiangsu Intermitt No. 9,
Joyang Water ent Haidu 100~350 9.38 22.401
COD 1 500mg/l None
Laborato pollutant discharg North mg/l tons t/a
ries e Road
Jiangsu Water Ammoni Intermitt 1 No. 9, 0~25mg/ 35mg/l 0.057 1.156 t/a None
133
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Joyang pollutant a- ent Haidu l tons
Laborato nitrogen discharg North
ries e Road
Jiangsu Intermitt No. 9,
Joyang Water Total ent Haidu 0~35mg/ 1.39
1 45mg/l 1.486 t/a None
Laborato pollutant nitrogen discharg North l tons
ries e Road
Jiangsu Intermitt No. 9,
Total
Joyang Water ent Haidu 0.08
phospho 1 0~5mg/l 8mg/l 0.164 t/a None
Laborato pollutant discharg North tons
rus
ries e Road
Complia
nt
Jiangsu No. 9,
Hazardo disposal
Joyang Solid Haidu 1916 3,148.7
us solid by / / / None
Laborato pollutant North tons t/a
waste entrusted
ries Road
qualified
units
Jiangsu Organize No. 9, 1.29
Joyang Air d Haidu 2.28mg/ 60mg/N tons/ 42.7409
PM 3 None
Laborato pollutant discharg North m3 m3 semi- t/a
ries e Road annual
Wuhu
Huaren At the
Intermitt
Science east gate
Water ent 48.759m
and COD 1 of the 120mg/l 0.1646t 0.2272t No
pollutant discharg g/l
Technol factory
e
ogy Co., area
Ltd.
Wuhu
Huaren At the
Intermitt
Science Ammoni east gate
Water ent 12.17mg 0.00540
and a- 1 of the 25mg/l 0.04735t No
pollutant discharg /l 6t
Technol nitrogen factory
e
ogy Co., area
Ltd.
Wuhu
Huaren At the
Intermitt
Science east gate
Water Suspend ent
and 1 of the 12mg/l 50mg/l / / No
pollutant ed solids discharg
Technol factory
e
ogy Co., area
Ltd.
Wuhu
Huaren At the
Intermitt
Science east gate
Water Total ent
and 1 of the 9.95mg/l 35mg/l / / No
pollutant nitrogen discharg
Technol factory
e
ogy Co., area
Ltd.
Wuhu
Huaren At the
Intermitt
Science Total east gate
Water ent
and phospho 1 of the 0.05 1mg/l / / No
pollutant discharg
Technol rus factory
e
ogy Co., area
Ltd.
134
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Wuhu
Huaren At the
Intermitt
Science east gate
Water Dichloro ent 0.001mg
and 1 of the 0.3mg/l / / No
pollutant methane discharg /l
Technol factory
e
ogy Co., area
Ltd.
Wuhu
Huaren At the
Intermitt
Science east gate
Water PH ent
and 1 of the 7.1mg/l 6~9 / / No
pollutant value discharg
Technol factory
e
ogy Co., area
Ltd.
Wuhu
Huaren In the
Organize
Science middle
Air Dichloro d 40mg/N
and 1 of the 11 / / No
pollutant methane discharg m3
Technol factory
e
ogy Co., area
Ltd.
Wuhu
Huaren In the
Organize
Science middle
Air Methyl d 50
and 1 of the 0.6 / / No
pollutant alcohol discharg mg/Nm3
Technol factory
e
ogy Co., area
Ltd.
Wuhu
the
Huaren In the
General Organize
Science middle
Air Volatile d 100mg/
and 1 of the / / / No
pollutant organic discharg Nm3
Technol factory
compou e
ogy Co., area
nd
Ltd.
Wuhu
Huaren In the
Volatile Organize
Science middle
Air organic d 6.41mg/ 60mg/N 0.12356
and 1 of the 9t No
pollutant compou discharg Nm3 m3 7t
Technol factory
nd e
ogy Co., area
Ltd.
Wuhu
Huaren In the
Organize
Science middle
Air Ethyl d 40mg/N
and 1 of the 0.311 / / No
pollutant acetate discharg m3
Technol factory
e
ogy Co., area
Ltd.
Wuhu
Huaren Around
Unorgan
Science Odor the
Air ized 20mg/N
and concentr / factory 10 / / No
pollutant discharg m3
Technol ation boundari
e
ogy Co., es
Ltd.
Wuhu Air Methyl Unorgan / Around 0.88 12mg/N / / No
135
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Huaren pollutant alcohol ized the m3
Science discharg factory
and e boundari
Technol es
ogy Co.,
Ltd.
Wuhu
Huaren Around
Unorgan
Science the
Air Dichloro ized 1.5mg/N
and / factory / / / No
pollutant methane discharg m3
Technol boundari
e
ogy Co., es
Ltd.
Wuhu
Huaren Around
Unorgan
Science the
Air Ethyl ized 0.5mg/N
and / factory / / / No
pollutant acetate discharg m3
Technol boundari
e
ogy Co., es
Ltd.
Wuhu
Huaren Around
Unorgan
Science the
Air n- ized 0.7
and / factory / / / No
pollutant Hexane discharg mg/Nm3
Technol boundari
e
ogy Co., es
Ltd.
Wuhu
Huaren Around
Unorgan
Science Hydroge the
Air ized 0.2
and n / factory / / / No
pollutant discharg mg/Nm3
Technol chloride boundari
e
ogy Co., es
Ltd.
Wuhu
Huaren Around
Volatile Unorgan
Science the
Air organic ized 6mg/Nm
and / factory / / / No
pollutant compou discharg 3
Technol boundari
nd e
ogy Co., es
Ltd.
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 Originally 600 t/d,
Facultative + fluidized November 1993
system of old sewage and 800 t/d after technical Demolished
bed process Technical improvement in 2007
treatment station improvement
December 2001
Wastewater treatment Technical improvement in 2014
Facultative + CASS + (adding IC and steam flotation) Normal
system of new sewage 2,200 t/d
steam flotation operation
treatment station IC tower outage for demolition in
2022
136
The 2023 Annual Report of Huadong Medicine Co., Ltd.
(2) Exhaust gas
Designation of pollution Treatment process Treatment capacity Time when put into Operation
prevention and control (CMH) operation condition
facility
DA002 (16#-1) Water Spraying + activated carbon 40,000 2023 Normal
operation
DA010 (35#-1) Secondary water spraying + dry filter + 30,000 / Under
activated carbon adsorption and desorption construction
DA013 (32#-1) Secondary water spraying + dry filter + 35,000 2023 Normal
activated carbon adsorption and desorption operation
DA016 (18#-1) Two-level water spraying + activated carbon + 30,000 2022 Normal
primary spraying operation
DA019 (3#-1) Primary water spraying + photo-oxidation 20,000+52,000 2019 Normal
operation
DA020 (36#-2) Two-level water spraying + condensation + 10,000 2019 Normal
photo-oxidation + activated carbon + inorganic operation
nano-catalysis + water spraying
DA023 (27#-1) Condensation + alkaline water spraying + all-in- 15,000 2009 Outage
one machine + alkaline water spraying
DA024 (33#-1) Secondary water spraying + dry filter + 1,000 2023 Normal
activated carbon adsorption and desorption operation
DA026 (34#-1) Secondary water spraying + dry filter + 40,000 2023 Normal
activated carbon adsorption and desorption operation
DA027 (7#-1) Secondary alkaline water spraying (activated 26,000 2015 Normal
carbon) operation
DA028 (6#-1) Primary clean water spraying 12,200 2016 Normal
operation
DA030 (18#-3) Primary clean water spraying + primary alkaline 5,000 2017 Normal
water spraying operation
DA031 (25#-1) Low nitrogen combustion + high altitude 16,000 2009 Normal
emission Low nitrogen operation
transformation
completed in
December 2019
Online monitoring
installed for
integrated emptying
in 2023
DA034 (27#-2) Two-level 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 (8/13#-1) Secondary water spraying/ two-level spraying + 25,000 2017 Normal
activated carbon adsorption and desorption operation
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 water 45,000 2014 Normal
spraying operation
DA045 (46#-1) Primary clean water spraying 3,000 2015 Normal
operation
DA046 (46#-2) Primary clean water spraying 25,000 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
DA049 (36#-3) Secondary water spraying + dry filter + 10,000 / Under
activated carbon adsorption and desorption construction
(3) Solid wastes
137
The 2023 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
disposal by entrusted
yard Normative storage 30 tons June 2004 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 t/d March 2016 Normal
station aerobic + advanced treatment operation
Phase II sewage treatment EGSB + facultative + aerobic + advanced 8,500 t/d July 2019 Normal
station treatment operation
(2) Exhaust gas
Designation of pollution
Treatment Time when put Operation
prevention and control Treatment process
capacity (CMH) into operation condition
facility
Exhaust gas from Two-level alkaline
DA001 fermenting east spraying + photo-catalytic 45,000 May 2016 Normal operation
section oxidation
Exhaust gas from Secondary alkaline
DA002 fermenting west spraying + photo-catalytic 40,000 May 2016 Normal operation
section oxidation
Exhaust gas from
Two-level alkaline
DA003 drying north 80,000 May 2016 Normal operation
spraying
section
Exhaust gas from
Secondary alkaline
DA004 sewage treatment 50,000 May 2016 Normal operation
spraying
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
Secondary alkaline
DA008 drying south 80,000 May 2016 Normal operation
spraying
section
Exhaust gas from Secondary alkaline
DA010 plate-and-frame spraying + photo-catalytic 40,000 May 2017 Normal operation
filter oxidation
Exhaust gas from Secondary alkaline
DA011 20,000 May 2017 Normal operation
drying cooling bin spraying
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
138
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Exhaust gas I
DA016 from Vogely Bag dust removal Few June 2019 Normal operation
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
Acid spraying + water
DA019 X8 exhaust gas 6,000 June 2019 Normal operation
spraying
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 Bag dust removal + water
DA023 Few June 2019 Normal operation
from spray drying spraying
Exhaust gas from Alkaline spraying + photo-
DA024 AK fermenting catalytic oxidation + water 90,000 June 2019 Normal operation
north section spraying
Exhaust gas from Alkaline spraying + photo-
DA025 AK fermenting catalytic oxidation + water 90,000 June 2019 Normal operation
south 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 Bag dust removal + water
DA029 Few June 2019 Normal operation
from spray drying spraying
Exhaust gas from
Alkaline spraying + water
DA030 AK refining ethyl 1,000 June 2019 Normal operation
spraying
alcohol
Exhaust gas from
Condensation + two-level
DA031 Bailing Tablets 20,000 July 2022 Normal operation
water spraying
preparation
HDG solvent-
HDBL- Oxidation spraying + two-
containing 2,000 September 2022 Normal operation
FQ217 level alkaline spraying
exhaust gas
HDBL- HDG odor Oxidation spraying +
20,000 September 2022 Normal operation
FQ218 exhaust gas alkaline spraying
(3) Solid wastes
Designation of pollution Treatment process Treatment capacity Time when put into Operation condition
prevention and control 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 15 tons March 2016 Normative storage, compliant
General solid waste storage
disposal by entrusted
yard Normative storage 40 tons July 2019 qualified units
Normative storage 30 tons July 2019
139
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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
Wastewater treatment Pretreatment + Fenton system
system of sewage treatment + facultative + aerobic + 250 t/d July 2012 Normal operation
station MBR + 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
Tertiary alkaline solution spraying +
Exhaust gas treatment equipment for
steam-water separator + dry filter + November 2019 Normal operation
APIs Plant 2
two-level 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
Treatment Time when put Operation
pollution prevention Treatment process
capacity into operation condition
and control facility
Steam flotation tank + hydrolytic
Wastewater treatment acidification + IC tower +
system of sewage UASB tank + A/O tank + O tank 1,000 t/d December 2014 Normal operation
treatment station + secondary sedimentation
tank
(2) Exhaust gas
Treatment
Designation of pollution prevention Time when put Operation
Treatment process capacity
and control facility into operation condition
(CMH)
Primary water spraying +
water-gas separator + photo-
Exhaust gas treatment equipment for catalytic oxidation + Normal
20,000 2014
extracting section in Plant 101 secondary activated carbon operation
adsorption + 25m exhaust
pipe high altitude emission
Primary water spraying +
water-gas separator +
Exhaust gas treatment equipment for Normal
secondary activated carbon 20,000 2019
fermentation section in Plant 101 operation
adsorption + 25m exhaust
pipe high altitude emission
Primary water spraying +
water-gas separator +
Exhaust gas treatment equipment for Normal
secondary activated carbon 15,000 2017
drying section in Plant 101 operation
adsorption + 25m exhaust
pipe high altitude emission
Exhaust gas treatment equipment for Cyclone separator + primary Normal
2,000 2014
batching section in Plant 101 water spray + 15m exhaust operation
140
The 2023 Annual Report of Huadong Medicine Co., Ltd.
pipe high altitude emission
Primary water spraying +
Exhaust gas treatment equipment for water-gas separator +
Normal
fermentation sections in Plants secondary activated carbon 75,000 2021
operation
104/107/108 adsorption + 25m exhaust
pipe high altitude emission
Primary water spraying +
water-gas separator + photo-
Exhaust gas treatment equipment for catalytic oxidation + Normal
11,000 2015
extracting section in Plant 104 secondary activated carbon operation
adsorption + 25m exhaust
pipe high altitude emission
Exhaust gas treatment equipment for Cyclone separator + primary
Normal
batching sections in Plants water spray + 15m exhaust 2,000 2015
operation
104/107/108 pipe high altitude emission
Primary water spraying +
Exhaust gas treatment equipment for water-gas separator + Normal
10,000 2015
drying sections in Plants 104/107/108 secondary activated carbon operation
adsorption
Primary water spraying +
Exhaust gas treatment equipment for water-gas separator + photo-
pretreatment tank and hazardous catalytic oxidation + Normal
45,000 2019
waste warehouse in Plants 103 and secondary activated carbon operation
303 adsorption + 25m exhaust
pipe high altitude emission
Primary water spraying +
water-gas separator + photo-
Exhaust gas treatment equipment for catalytic oxidation + Normal
10,000 2015
Plant 106 secondary activated carbon operation
adsorption + 25m exhaust
pipe high altitude emission
Primary water spraying +
water-gas separator + photo-
Exhaust gas treatment equipment for catalytic oxidation + Normal
25,000 2019
extracting section in Plant 107 secondary activated carbon operation
adsorption + 25m exhaust
pipe high altitude emission
Primary water spraying +
water-gas separator + photo-
Exhaust gas treatment equipment for catalytic oxidation + Normal
40,000 2019
extracting section in Plant 108 secondary activated carbon operation
adsorption + 25m exhaust
pipe high altitude emission
Primary water spraying
Exhaust gas treatment equipment for Normal
+25m exhaust pipe high 40,000 2019
Plant 109 operation
altitude emission
Primary water spraying +
Exhaust gas treatment equipment for water-gas separator + photo- Normal
15,000 2021
sewage treatment station 303 catalytic + 25m exhaust pipe operation
high altitude emission
Primary water spraying +
water-gas separator + photo-
Exhaust gas treatment equipment for catalytic oxidation + Normal
50,000 2022
Plant 103 secondary activated carbon operation
adsorption + 25m exhaust
pipe high altitude emission
Exhaust gas treatment equipment in Spraying + activated carbon Normal
25,000 2023
laboratories adsorption operation
(3) Solid wastes
Designation of pollution
Time when put into
prevention and control Treatment process Treatment capacity Operation condition
operation
facility
Hazardous waste Normative storage,
Normative storage 3,148.7 t/a October 2020
warehouse compliant disposal by
141
The 2023 Annual Report of Huadong Medicine Co., Ltd.
entrusted qualified units
Household garbage Garbage disposal site in
Normative storage 1,000 t/a March 2015
dumping site the east of the city
5. Pollutant treatment by Wuhu Huaren Science and Technology Co., Ltd.
(1) Wastewater
Designation of Treatment process Treatment capacity Time when put into operation Operation
pollution prevention condition
and control facility
Acid-base adjustment
Wastewater treatment
+ coagulation and Normal
system of new sewage 20 t/d August 2023
sedimentation + operation
treatment station
biological treatment
(2) Exhaust gas
Designation of pollution Treatment process Treatment Time when put Operation
prevention and control capacity (CMH) into operation condition
facility
DA001 (Building A) Activated carbon 14,100 2016 Normal
operation
DA002 (Building C) Secondary water spraying 6,200 Under
/
construction
(3) Solid wastes
Designation of pollution Treatment process Treatment capacity Time when put into Operation condition
prevention and control operation
facility
Disposal by qualified
Hazardous waste warehouse 20 tons July 15, 2022 Normal operation
units
Environmental self-monitoring program
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. revised the Pollution Source Self-monitoring
Program on October 31, 2023.
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. has formulated the entrusted
monitoring plan according to the self-monitoring requirements in the Pollutant Emission Permit, carried out daily,
monthly, quarterly or annual entrusted monitoring according to the monitoring plan, and reported all monitoring
data as required.
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.
Wuhu Huaren Science and Technology Co., Ltd. has formulated the entrusted monitoring plan according to
the self-inspection requirements in the Pollutant Emission Permit, and carried out daily, monthly, quarterly or
annual entrusted monitoring according to the monitoring plan.
Emergency plan for sudden environmental events
Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. has formulated, established, regularly modified and
perfected the Emergency Plan for Sudden Environmental Events as required, with the record No. of 330105-2021-
003-M.
142
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 Huayin Sub-bureau of 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, with the record No. of 320924–2021-039-M.
Wuhu Huaren Science and Technology Co., Ltd. has formulated and recorded the Emergency Plan for
Sudden Environmental Events with the record No. 340203-2022-018-L.
Investment in environmental governance and protection, and the relevant information on paying environmental protection tax
In 2023, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. invested 9,760,000 yuan in environmental
governance and protection, and paid the environmental protection tax of 1,877.53 yuan.
Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd. invested 51,320,300 yuan in
environmental governance and protection, and did not pay environmental protection tax according to relevant
policies.
Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd. invested 1,337,100 yuan in environmental
governance and protection, and paid the environmental protection tax of 1,728.77 yuan.
In 2023, Jiangsu Joyang Laboratories invested 9,949,900 yuan in environmental governance and protection,
and paid the environmental protection tax of 56,702.25 yuan.
Wuhu Huaren Science and Technology Co., Ltd. invested about 785,800 yuan in environmental governance
and protection, and paid the environmental protection tax of 179.32 yuan.
Measures taken to reduce carbon emissions during the reporting period and corresponding effects
Applicable □ N/A
Hangzhou Zhongmei Huadong Pharmaceutical (Jiangdong) Co., Ltd. continued to use biogas to generate
electricity and supplement RTO natural gas, reducing the emissions of methane, hydrogen sulfide, and other
pollutants, and continuously took lean measures in the plants to reduce pollutant emissions, such as saving water
and reducing consumption.
Jiangsu Joyang Laboratories made technical improvement for air-conditioning units and heat exchanger pipes
and reduced direct steam discharge by combing the Company’s steam use points, expecting to save 150 tons of
standard coal every year. Moreover, it adjusted the actual load and demand load by analyzing the power
consumption of the Company, which saves the transformer capacity fee of 45,000 kW every month.
Administrative penalties for environmental issues during the reporting period
Impacts on
the
Designation of production
Company or Reasons Type of violation Results and Rectification measures
subsidiary operation of
listed
company
Jiangsu Joyang On April 14, April Jiangsu Joyang A fine of No The Company transported back
143
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Laboratories 22 and April 25, violated 750,000 significant the recovery solvents from the
2023, Yancheng regulations in yuan and impact site and entrusted a third-party
Ecological Clause 3 of confiscati hazardous waste disposal unit for
Environment Article 80 of the on of disposal as hazardous wastes
Bureau found that Law of the illegal through legal channels. As for
Jiangsu Joyang People’s Republic gains of compliant use and disposal of
Laboratories of China on 30,800 recovery solvents, the Company
illegally provided Prevention and yuan. determined to standardize
hazardous waste Control of Soil management and reduce
recovery solvents Contamination. compliance risks by the following
to Wu Zhihong, an means after consultation and
individual without research:
a hazardous waste 1. Improve the recycling rate of
treatment license, solvents and reduce the amount of
for disposal in two recovery solvents generated.
batches on January Currently, almost all ethyl ester
14 and February 1, can be recycled.
2021, illegally 2. Ethanol is treated via
obtaining a profit biochemical degradation of
of 30,800 yuan. wastewater for complete disposal
of recovered ethanol.
3. The third party is entrusted to
dispose of solvents that cannot be
recycled as hazardous waste
(code: HW02) by legal means.
There are two
exhaust gas outlets Jiangsu Joyang
in Plant 104, which violated
is inconsistent with regulations in
the pollutant Article 36 of the The Company merged two
discharge quantity Regulation on the exhaust gas outlets during
stipulated in the Administration of shutdown for maintenance,
Pollutant Emission Permitting of changed the frequency for
Permit; the exhaust Pollutant A fine of No inspection and replacement of
Jiangsu Joyang
gas treatment Discharges and 188,600 significant photo-catalytic oxidation UV
Laboratories
facilities in P lant Article 99 of the yuan. impact beams from once every three
101 fail to run Law of the months to once a month, and
normally, and People’s Republic marked allowable damage rate of
nearly half of the of China on the UV beams outside the box for
photo-catalytic Prevention and better maintenance.
oxidation UV Control of
beams are damaged Atmospheric
without any UV Pollution.
light.
On May 24, 2023,
Yijiang Sub-bureau
of Wuhu Wuhu Huaren
Ecological violated Article 39
Wuhu Huaren Environment of the Law of the The Company rectified
A fine of No
Science and Bureau found that People’s Republic immediately and treated the water
560,000 significant
Technology Co., Wuhan Huaren of China on the pollutants in sewage treatment
yuan. impact
Ltd. discharged water Prevention and station.
pollutants by Control of Water
setting up Pollution.
concealed pipes
without permission.
Other environmental information to be disclosed
144
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 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 ho me 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 2023, please refer to the
Environmental, Social and Governance (ESG) of Huadong Medicine in 2023.
III. Consolidating and Expanding Achievements of Poverty Alleviation and Rural
Revitalization
During the reporting period, the Company actively carried out special poverty alleviation and
rural revitalization work. For details, please refer to the Environmental, Social and Governance
(ESG) of Huadong Medicine in 2023.
145
The 2023 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 inde pendent
directors (if any) on the “nonstandard audit report” of the accounting firm during the
current reporting period
□ Applicable N/A
146
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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 due to changes in accounting standards for business
enterprises
The Company has implemented the provision on the “accounting treatment for deferred
income taxes relating to assets and liabilities arising from individual transactions that the initial
recognition exemption does not apply” stipulated in the Interpretation No. 16 of the Accounting
Standards for Business Enterprises issued by the Ministry of Finance since January 1, 2023,
adjusting the single transaction to which this provision applies between the beginning of the earliest
financial statement presentation period and the first implementation date according to the provision.
With regard to taxable temporary differences and deductible temporary differences arising from the
lease liabilities and right-to-use assets recognized due to the application of the provisions at the
beginning of the earliest period in the financial statement where the provisions are firstly
implemented, the financial statements are adjusted by the cumulative impact to present the retained
earnings at the beginning of the earliest period and other related financial statement items in
accordance with this provision and the Accounting Standards for Business Enterprises No. 18 -
Income Tax. The Company made no adjustment considering less cumulative impact.
VII. Changes in the scope of consolidated statements as compared to the previous financial
report
Applicable □ N/A
Please refer to “IX. 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
Name of the domestic accounting firm Pan-China Certified Public Accountants LLP
Remuneration of the domestic accounting firm (ten thousand
165
yuan)
Continuous number of years of audit services provided by the
26
domestic accounting firm
Certified public accountants of the domestic accounting firm Hu Yanhua and Chen Xiaodong
Continuous number of years of audit services provided by
Hu Yanhua: 1 year; Chen Xiaodong: 2 years
certified public accountants of the domestic accounting firm
Name of the overseas accounting firm (if any) None
147
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Remuneration of the overseas accounting firm (ten thousand
0
yuan) (if any)
Continuous number of years of audit services provided by the
None
overseas accounting firm (if any)
Certified public accountants of the overseas accounting firm (if
None
any)
Continuous number of years of audit services provided by
certified public accountants of the overseas accounting firm (if None
any)
Whether the accounting firm employed was replaced in the current period
□Yes No
Information about the internal control audit accounting firm, financial consultant or sponsor employed by the Company
Applicable □ N/A
During the reporting period, the Company employed Pan-China Certified Public Accountants
LLP 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 1.65 million yuan (before tax).
IX. Delisting after annual report disclosure
□ Applicable N/A
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
Whether Litigation
Amount Execution of
Basic of an Litigation (arbitration)
involved (ten litigation Disclosure Disclosure
litigations estimated (arbitration) adjudication
thousand (arbitration) date index (if any)
(arbitrations) liability is progress result and
yuan) judgments
formed impact
The
summary of Some cases are Some cases
the litigation under The have been
matters that acceptance and summary of executed; some
don’t satisfy some the litigation adjudicated
the criteria 10,195.87 No adjudications matters has cases are being / /
for disclosure have come into no significant executed.
of major force (involving impact on the Some cases are
litigations 37.9905 million Company not
(arbitrations) yuan) adjudicated.
(China)
The This Cases are
summary of 278.6 No All under trail summary of under trails and / /
the litigation litigation s are to be
148
The 2023 Annual Report of Huadong Medicine Co., Ltd.
matters that has no adjudicated
don’t satisfy significant
the criteria impact on the
for disclosure Company
of major
litigations
(arbitrations)
(overseas)
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 judgment
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
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158
The 2023 Annual Report of Huadong Medicine Co., Ltd.
nt on-
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159
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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160
The 2023 Annual Report of Huadong Medicine Co., Ltd.
transa
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161
The 2023 Annual Report of Huadong Medicine Co., Ltd.
s
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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163
The 2023 Annual Report of Huadong Medicine Co., Ltd.
makin
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t price t price
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164
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Biolo Comp es es mined accept /www
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165
The 2023 Annual Report of Huadong Medicine Co., Ltd.
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166
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Marke
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48,25 53,45
Total -- -- -- -- -- -- -- --
9.35 4.92
2. Related transactions involving the acquisition or selling 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.
167
The 2023 Annual Report of Huadong Medicine Co., Ltd.
5. Transactions with financial companies that 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
On October 7, 2023, Jiangsu Nanjing Nongda Animal Pharmaceutical Co., Ltd., a holding
subsidiary of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd., a wholly-owned
subsidiary of the Company, signed the Exclusive Sales Agreement with Beijing CELS Medical
Technology Co., Ltd. (hereinafter referred to as “Beijing CELS”), an animal medicine R&D
company. According to the agreement, Nanjing Nongda Animal Pharmaceutical obtained the
exclusive selling right and marketing right of Butorphanol Tartrate Injection (trade name:
Baoshining), a kind of central analgesic medicine developed by Beijing CELS Medical
Technology Co., Ltd., in China (including Hong Kong SAR, Macao SAR and Taiwan). As agreed,
the Exclusive Sales Agreement shall come into effect on the date when Beijing CELS and
Hangzhou Fuguang Hongxin Equity Investment Partnership (Limited Partnership) (hereinafter
referred to as “Fuguang Hongxin”) signed the Equity Investment Agreement.
On October 7, 2023, Fuguang Hongxin signed an Investment Agreement with Beijing
CELS. Fuguang Hongxin invested 20 million yuan in Beijing CELS for capital increase and will
hold 20% equity in Beijing CELS after investment. On the same day, the Exclusive Sales
Agreement came into effect formally (hereinafter referred to as “this transaction”).
As Fuguang Hongxin’s executive partner and fund manager Fuguang Chengdu Equity
Investment Management Co., Ltd. (hereinafter referred to as “Fuguang Chengdu”), one of its
limited partners Shanghai Grand Industrial and Financial Investment Management Co., Ltd.
(hereinafter referred to as “Grand Chanrong”) and the Company are enterprises controlled by the
same de facto controller, and the Company is a limited partner of Fuguang Hongxin (please refer
to the Announcement on Participating in the Investment in the Establishment of Pharmaceutical
168
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Industry Investment Funds and Related Transactions issued by the Company on January 7, 2021
(Announcement No.: 2021-002 for details). According to the relevant provisions of the Rules for
Stock Listing of Shenzhen Stock Exchange, Fuguang Hongxin and the Company are related parties,
and this transaction is deemed as a related transaction.
Inquiries related to the disclosure website of the interim report on major related transactions.
Disclosure date of provisional Name of disclosure website of
Name of provisional announcement
announcement provisional announcement
Announcement on Signing of Exclusive
Product Sales Agreement and Related October 10, 2023 Cninfo (http://www.cninfo.com.cn)
Transactions by Holding Subsidiaries
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
Refer to “8. Others - Leasing - Other material matters in Section X. Financial Report” for details.
Projects generating gains and losses to the Company that account for over 10% of the total profits during the reporting period
□ Applicable N/A
No such case during the reporting period.
2. Important guarantees
Applicable □ N/A
Unit: ten thousand yuan
External guarantees of the Company and its subsidiaries (excluding guarantees for subsidiaries)
Guarant Disclosu Guarante Actual Actual Type of Collatera Counter Period Fulfilled Guarante
eed re date e cap date of guarante guarante l (if any) guaranty of or not e for a
169
The 2023 Annual Report of Huadong Medicine Co., Ltd.
party of the occurren ed e (if any) guarante related
announc ce amount e party or
ement not
related
to the
guarante
e cap
/ / / / / / / / / / /
Total external Total external
guarantees cap guarantee amount
approved during the / actually occurred /
reporting period during the reporting
(A1) period (A2)
Total approved Total actual external
external guarantee guarantee balance at
cap at the end of the / the end of the /
reporting period reporting period
(A3) (A4)
Guarantee for subsidiaries
Disclosu
re date
of the Guarante
Actual Actual Period
Guarant announc Type of Counter e for a
Guarante date of guarante Collatera of Fulfilled
eed ement guarante guaranty related
e Cap occurren ed l (if any) guarante or not
party related e (if any) party or
ce amount e
to the not
guarante
e Cap
Hangzho
u
Zhongm Joint and
ei several
April 14, July 26, 20,956.7
Huadon 85,000 liability One year No No
2023 2023 8
g guarante
Pharmac e
eutical
Co., Ltd.
Hangzho
u
Zhongm Joint and
ei several
April 14, August 18,396.9
Huadon 85,000 liability One year No No
2023 29, 2023 5
g guarante
Pharmac e
eutical
Co., Ltd.
Hangzho
u
Zhongm Joint and
ei Septemb several
April 14,
Huadon 85,000 er 26, 4,584.42 liability One year No No
2023
g 2023 guarante
Pharmac e
eutical
Co., Ltd.
Hangzho April 14, 85,000 October 1,088.16 Joint and One year No No
170
The 2023 Annual Report of Huadong Medicine Co., Ltd.
u 2023 30, 2023 several
Zhongm liability
ei guarante
Huadon e
g
Pharmac
eutical
Co., Ltd.
Hangzho
u
Zhongm Joint and
ei Decemb several
April 14,
Huadon 85,000 er 21, 7,178.61 liability One year No No
2023
g 2023 guarante
Pharmac e
eutical
Co., Ltd.
Huadon
g
Medicin Joint and
e Supply several
April 19, Ten
Chain 20,000 liability No No
2019 years
Manage guarante
ment e
(Jinhua)
Co., Ltd.
Huadon
g
Joint and
Medicin
several
e (Xi’an) April 14,
5,000 liability One year No No
Bohua 2023
guarante
Pharmac
e
eutical
Co., Ltd.
Huadon
g Joint and
Medicin several
April 14, October
e 16,000 3,000 liability One year No No
2023 19, 2023
Ningbo guarante
Sales e
Co., Ltd.
Huadon Joint and
g several
April 14, October
Medicin 15,000 4,000 liability One year No No
2023 26, 2023
e Jinhua guarante
Co., Ltd. e
Huadon
Joint and
g
several
Medicin April 14, October
15,000 4,500 liability One year No No
e 2023 26, 2023
guarante
Huzhou
e
Co., Ltd.
Huadon Joint and
g Decemb several
April 14,
Medicin 15,000 er 15, 500 liability One year No No
2023
e 2023 guarante
Huzhou e
171
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Co., Ltd.
Huadon
g Joint and
Medicin several
April 14, March
e 19,000 7,000 liability One year No No
2023 31, 2023
Shaoxin guarante
g Co., e
Ltd.
Huadon
g
Medicin
Joint and
e
several
(Hangzh April 14, October
3,000 16.35 liability One year No No
ou) 2023 12, 2023
guarante
Biologic
e
al
Products
Co., Ltd.
Huadon
g
Medicin
Joint and
e
Novemb several
(Hangzh April 14,
3,000 er 17, 12.4 liability One year No No
ou) 2023
2023 guarante
Biologic
e
al
Products
Co., Ltd.
Huadon
g
Medicin
Joint and
e
Decemb several
(Hangzh April 14,
3,000 er 13, 25.65 liability One year No No
ou) 2023
2023 guarante
Biologic
e
al
Products
Co., Ltd.
Huadon
g
Medicin
Joint and
e
Decemb several
(Hangzh April 14,
3,000 er 29, 63.7 liability One year No No
ou) 2023
2023 guarante
Biologic
e
al
Products
Co., Ltd.
Joint and
Jiangsu
several
Joyang April 14,
7,000 liability One year No No
Laborato 2023
guarante
ries
e
Huadon Joint and
g April 14, July 17, several
24,000 1,000 One year No No
Medicin 2023 2023 liability
e guarante
172
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Wenzho e
u Co.,
Ltd.
Huadon
g Joint and
Medicin several
April 14, July 17,
e 24,000 1,000 liability One year No No
2023 2023
Wenzho guarante
u Co., e
Ltd.
Huadon
g Joint and
Medicin several
April 14, July 19,
e 24,000 1,000 liability One year No No
2023 2023
Wenzho guarante
u Co., e
Ltd.
Huadon
g Joint and
Medicin several
April 14, July 20,
e 24,000 1,000 liability One year No No
2023 2023
Wenzho guarante
u Co., e
Ltd.
Huadon
g Joint and
Medicin several
April 14, July 21,
e 24,000 1,000 liability One year No No
2023 2023
Wenzho guarante
u Co., e
Ltd.
Huadon
g Joint and
Medicin several
April 14, August
e 24,000 1,000 liability One year No No
2023 4, 2023
Wenzho guarante
u Co., e
Ltd.
Huadon
g Joint and
Medicin several
April 14, August
e 24,000 1,000 liability One year No No
2023 7, 2023
Wenzho guarante
u Co., e
Ltd.
Huadon
g Joint and
Medicin several
April 14, August
e 24,000 1,000 liability One year No No
2023 8, 2023
Wenzho guarante
u Co., e
Ltd.
Huadon Joint and
g several
April 14, August
Medicin 24,000 1,000 liability One year No No
2023 10, 2023
e guarante
Wenzho e
173
The 2023 Annual Report of Huadong Medicine Co., Ltd.
u Co.,
Ltd.
Huadon
g Joint and
Medicin Septemb several
April 14,
e 24,000 er 12, 1,000 liability One year No No
2023
Wenzho 2023 guarante
u Co., e
Ltd.
Huadon
g Joint and
Medicin Septemb several
April 14,
e 24,000 er 14, 1,000 liability One year No No
2023
Wenzho 2023 guarante
u Co., e
Ltd.
Huadon Joint and
g several
April 14, April 7,
Medicin 15,000 6,000 liability One year No No
2023 2023
e Lishui guarante
Co., Ltd. e
Huadon
Joint and
g
several
Medicin April 14,
2,600 liability One year No No
e 2023
guarante
Daishan
e
Co., Ltd.
Huadon
g Joint and
Medicin several
April 14, October
e Cunde 9,900 2,000 liability One year No No
2023 20, 2023
(Zhoush guarante
an) Co., e
Ltd.
Hangzho
u
Zhongm
ei Joint and
Huadon several
April 14, March
g 40,000 8,000 liability One year No No
2023 31, 2023
Pharmac guarante
eutical e
Jiangdon
g Co.,
Ltd.
Hangzho
u
Zhongm
ei Joint and
Huadon several
April 14, August
g 40,000 470.28 liability One year No No
2023 29, 2023
Pharmac guarante
eutical e
Jiangdon
g Co.,
Ltd.
Hangzho April 14, 40,000 Septemb 480.8 Joint and One year No No
174
The 2023 Annual Report of Huadong Medicine Co., Ltd.
u 2023 er 19, several
Zhongm 2023 liability
ei guarante
Huadon e
g
Pharmac
eutical
Jiangdon
g Co.,
Ltd.
Hangzho
u
Zhongm
ei Joint and
Huadon several
April 14, October
g 40,000 302.67 liability One year No No
2023 26, 2023
Pharmac guarante
eutical e
Jiangdon
g Co.,
Ltd.
Hangzho
u
Zhongm
ei Joint and
Huadon Decemb several
April 14,
g 40,000 er 15, 20,000 liability One year No No
2023
Pharmac 2023 guarante
eutical e
Jiangdon
g Co.,
Ltd.
Hangzho
u Joint and
Huadon several
April 14, May 26,
g 5,000 liability One year No No
2023 2023
Pharmac guarante
y Chain e
Co., Ltd.
Anhui
Joint and
Meihua
several
Hi-Tech April 14,
3,500 liability One year No No
Pharmac 2023
guarante
eutical
e
Co., Ltd.
Hubei
Joint and
Magic
several
Health April 14, July 12,
5,400 56.7 liability One year No No
Technol 2023 2023
guarante
ogy Co.,
e
Ltd.
Hubei
Joint and
Magic
several
Health April 14, July 27,
5,400 238.7 liability One year No No
Technol 2023 2023
guarante
ogy Co.,
e
Ltd.
175
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Hubei
Joint and
Magic
several
Health April 14, August
5,400 247.47 liability One year No No
Technol 2023 14, 2023
guarante
ogy Co.,
e
Ltd.
Hubei
Joint and
Magic
several
Health April 14, August
5,400 123.14 liability One year No No
Technol 2023 29, 2023
guarante
ogy Co.,
e
Ltd.
Hubei
Joint and
Magic
Septemb several
Health April 14,
5,400 er 6, 803.96 liability One year No No
Technol 2023
2023 guarante
ogy Co.,
e
Ltd.
Hubei
Joint and
Magic
Septemb several
Health April 14,
5,400 er 22, 154.63 liability One year No No
Technol 2023
2023 guarante
ogy Co.,
e
Ltd.
Hubei
Joint and
Magic
several
Health April 14, October
5,400 105.56 liability One year No No
Technol 2023 12, 2023
guarante
ogy Co.,
e
Ltd.
Hubei
Joint and
Magic
several
Health April 14, October
5,400 250.61 liability One year No No
Technol 2023 30, 2023
guarante
ogy Co.,
e
Ltd.
Hubei
Joint and
Magic
Novemb several
Health April 14,
5,400 er 21, 70.28 liability One year No No
Technol 2023
2023 guarante
ogy Co.,
e
Ltd.
Hubei
Joint and
Magic
Novemb several
Health April 14,
5,400 er 29, 350 liability One year No No
Technol 2023
2023 guarante
ogy Co.,
e
Ltd.
Hubei
Joint and
Magic
Decemb several
Health April 14,
5,400 er 25, 1,343.8 liability One year No No
Technol 2023
2023 guarante
ogy Co.,
e
Ltd.
Huadon
April 14,
g 76,000
2023
Pharmac
176
The 2023 Annual Report of Huadong Medicine Co., Ltd.
eutical
(Hong
Kong)
Investm
ent
Holding
Co., Ltd.
Joint and
Sinclair Novemb several
April 1, Three
Pharma er 23, 52,591 18,082.2 liability No No
2022 years
Limited 2018 guarante
e
Joint and
Sinclair several
July 16, January 35,059.3 Three
Pharma 38,305.3 liability No No
2021 13, 2022 7 years
Limited guarante
e
Joint and
Sinclair several
March April 8, Three
Pharma 14,845.8 15,718.4 liability No No
16, 2021 2021 years
Limited guarante
e
Joint and
Sinclair several Decemb
March March
Pharma 14,845.8 15,718.4 liability er 31, No No
16, 2021 17, 2021
Limited guarante 2024
e
Sinclair
March 31,695.7 Three
Pharma
16, 2021 8 years
Limited
Sinclair
April 28,
Pharma 58,600 One year
2022
Limited
Sinclair
April 14,
Pharma 65,000 One year
2023
Limited
Total guarantee
Total guarantee cap amount for
for subsidiaries subsidiaries actually
411,400 123,321.63
approved during the occurred during the
reporting period (Bl) reporting period
(B2)
Total actual
Total approved
guarantee balance
guarantee cap for
for subsidiaries at
subsidiaries at the 627,438.03 207,899.99
the end of the
end of the reporting
reporting period
period (B3)
(B4)
Subsidiaries guarantee for subsidiaries
Disclosu
re date Guarante
Actual Actual Period
Guarant of the Type of Counter e for a
Guarante date of guarante Collatera of Fulfilled
eed announc guarante guaranty related
e Cap occurren ed l (if any) guarante or not
party ement e (if any) party or
ce amount e
related not
to the
177
The 2023 Annual Report of Huadong Medicine Co., Ltd.
guarante
e Cap
Chongqi
Joint and
ng Peg-
Novemb several
Bio April 14, Three
4,800 er 16, liability No Yes
Biophar 2023 years
2023 guarante
m Co.,
e
Ltd.
Total guarantee
Total guarantee cap
amount for
for subsidiaries
subsidiaries actually
approved during the 4,800
occurred during the
reporting period
reporting period
(C1)
(C2)
Total actual
Total approved
guarantee balance
guarantee cap for
for subsidiaries at
subsidiaries at the 4,800
the end of the
end of the reporting
reporting period
period (C3)
(C4)
Total amount of the Company’s guarantees (i.e. the sum of the above-mentioned 3 kinds of guarantees)
Total guarantees cap Total actual
approved during the guarantee amount
416,200 123,321.63
reporting period during the reporting
(A1+B1+C1) period (A2+B2+C2)
Total actual
Total approved
guarantee balance at
guarantee cap at the
632,238.03 the end of the 207,899.99
end of the reporting
reporting period
period (A3+B3+C3)
(A4+B4+C4)
Proportion of the actual guarantee amount
9.88%
(i.e. A4+B4+C4) in the Company’s net assets
Among them:
Balance of guarantees for shareholders, de
0
facto controllers and their related parties (D)
Amount of debt guarantees provided directly
or indirectly for the entities with a liability to 111,578.37
asset ratio over 70% (E)
The total amount of guarantees exceeds 50%
0
of the net assets (F)
Total guarantee amount of the above-
mentioned three kinds of guarantees 111,578.37
(D+E+F)
Note on the circumstance that guarantee
liability has occurred or there may be joint
liability for settlement during the reporting N/A
period in terms of unexpired guarantee
contracts (if any)
Note of external guarantees in violation of
N/A
prescribed procedures (if any)
Note: The difference between the sum of the above totals and addends in mantissa is due to rounding.
Note on the specific circumstance if multiple methods are adopted for guarantees
178
The 2023 Annual Report of Huadong Medicine Co., Ltd.
N/A
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 other significant contract 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
(I) Major medicines (products) newly entering and withdrawing from the Medicines List for
Medical Insurance
In December 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 (2023) (hereinafter referred to as the 2023 Drug Catalog), which has been effective since
January 1, 2024.
As of the release of the Report, the Company had a total of 40 core products (12 Category A
and 29 Category B) approved for launching and 15 strategic cooperation products (1 Category A
and 14 Category B) included in the 2023 Drug Catalog. Among them, the launched acarbose
chewable tablets, Bailing capsules and empagliflozin and metformin combination (I) as well as
strategic cooperation products Etanercept Injection, Mulberry twig total alkaloids and Icaritin soft
capsule of the Company have been included in the negotiated medicines of the 2023 Drug catalog.
179
The 2023 Annual Report of Huadong Medicine Co., Ltd.
The strategic cooperation product Tofacitinib Citrate Sustained-release Tablets has been included in
competitive price medicine of the 2023 Drug catalog.
(II) As of the release of the 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.
180
The 2023 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
New Bonus
Quantity Ratio from Others Subtotal Quantity Ratio
shares shares
capital
reserve
I. Shares
subject to
condition 4,268,300 0.24% 0 0 0 -746,940 -746,940 3,521,360 0.20%
al
restriction
1.
Shares
0 0.00% 0 0 0 0 0 0 0.00%
held by
the state
2.
Shares
held by
state- 0 0.00% 0 0 0 0 0 0 0.00%
owned
corporatio
ns
3.
Shares
held by
4,068,300 0.23% 0 0 0 -695,940 -695,940 3,372,360 0.19%
other
domestic
investors
Inclu
ding:
Shares
held by 0 0.00% 0 0 0 0 0 0 0.00%
domestic
corporatio
ns
Shar
es held by
domestic 4,068,300 0.23% 0 0 0 -695,940 -695,940 3,372,360 0.19%
natural
persons
4.
Shares
200,000 0.01% 0 0 0 -51,000 -51,000 149,000 0.01%
held by
overseas
181
The 2023 Annual Report of Huadong Medicine Co., Ltd.
investors
Inclu
ding:
Shares
held by 0 0.00% 0 0 0 0 0 0 0.00%
overseas
corporatio
ns
Shar
es held by
overseas 200,000 0.01% 0 0 0 -51,000 -51,000 149,000 0.01%
natural
persons
II. Shares
1,749,727 1,750,903
without 99.76% 0 0 0 1,176,940 1,176,940 99.80%
,048 ,988
restriction
1.
Common 1,749,727 1,750,903
99.76% 0 0 0 1,176,940 1,176,940 99.80%
shares in ,048 ,988
yuan
2.
Domestic
ally listed 0 0.00% 0 0 0 0 0 0 0.00%
foreign
shares
3.
Foreign
shares 0 0.00% 0 0 0 0 0 0 0.00%
listed
overseas
4.
0 0.00% 0 0 0 0 0 0 0.00%
Others
III. Total
1,753,995 1,754,425
number of 100.00% 0 0 0 430,000 430,000 100.00%
,348 ,348
shares
Reasons for the changes in share capital
Applicable □ N/A
During the reporting period, the Company completed the reserved grant registration of 430,000
shares in the 2022 Restricted Share Incentive Scheme; in the meantime, the Company’s had attained
the first condition to unlock restricted shares for the first time from the 2022 Restricted Share
Incentive Scheme. The number of restricted shares that can be unlocked this time is 1,220,940. The
total number of restricted shares with equity incentives decreased by 790,940 shares in total.
During the reporting period, the Company’s locked shares of senior managers increased by
44,000 shares.
During the reporting period, the total number of shares increased by 430,000 shares, of which
the total number of shares with restricted sales conditions decreased by 746,940 shares and the total
number of shares with unlimited sale conditions increased by 1,176,940 shares.
182
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Approval for changes in share capital
Applicable □ N/A
1. On July 12, 2023, the Company convened the 12th session of the 10th Board of Directors
and the 8th session of the 10th Board of Supervisors. During these two sessions, the Proposal on
Granting Reserved Restricted Shares to the First Batch of Employees Receiving Incentive from the
2022 Restricted Share Incentive Scheme was deliberated on and approved. The Company’s Board
of Directors believed that reserved 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 date of
granting reserved shares, 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 the same day, the Company disclosed a related announcement on
www.cninfo.com.cn.
2. The Company announced publicly the list of this batch of employees receiving the incentive
from the restricted share incentive scheme on the Company’s OA system from July 13 to 23, 2023,
which lasted for 10 days in total. As of the end of the announcement on July 23, 2023, the Board of
Supervisors did not receive any objection against these employees. On July 26, 2023, the Company
convened a session of the Board of Supervisors, during which the Verification Opinions and
Announcement Note on the List of Employees Receiving the Reserved Restricted Share 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 Employees Receiving the Reserved Restricted Share Incentive
from the Company’s 2022 Restricted Share Incentive Scheme and a related announcement on
www.cninfo.com.cn.
3. On September 27, 2023, the Company disclosed the Announcement on Completion of
Registration of the Reserved Grant of Restricted Share Incentive Scheme in 2022. The Company
completed the registration of the reserved grant of the restricted share incentive scheme in 2022,
and the listing date of the granted restricted shares was September 28, 2023.
4. On November 21, 2023, the Company convened the eighteenth session of the 10th Board of
Directors and the 12th session of the 10th Board of Supervisors. During these two sessions, the
Proposal on Achievement of the Release of Restriction Conditions during the First Restriction
Period of Restricted Shares Granted for the First Time from the Restricted Share Incentive Scheme
in 2022 was deliberated on and approved. The Board of Directors believed that the Company
attained conditions for the release of restriction conditions during the first restriction period of
restricted shares granted for the first time from the Restricted Share Incentive Scheme in 2022.
183
The 2023 Annual Report of Huadong Medicine Co., Ltd.
According to the authorization of the Company’s first extraordinary general meeting in 2022, the
Board of Directors agreed that the Company can handle the procedures for releasing restricted sales
of 1,220,940 restricted shares with the restricted sales period for 108 incentive subjects. The Board
of Directors also agreed to repurchase and cancel 97,800 shares of restricted shares that have been
granted but have not been released for four incentive subjects who are no longer eligible for
incentives due to resignation and two incentive subjects who fail to satisfy the standards due to
personal performance during the first restricted sales releasing period. The Company’s independent
directors issued independent opinions on related matters, and the Company’s Board of Supervisors
issued verification opinions on related matters. Lawyers and independent financial advisers
prepared related reports. On the same day, the Company disclosed a related announcement on
www.cninfo.com.cn.
Transfer of shares
Applicable □ N/A
During the reporting period, 430,000 common shares in yuan reserved for the Company’s 2022
Restricted Share Incentive Scheme have been credited to shareholders’ securities accounts by
Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. 1,220,940
common shares in yuan with restriction conditions for the first granting reserved for the Company’s
2022 Restricted Share Incentive Scheme have been unlocked and credited to shareholders’
securities accounts by Shenzhen Branch of China Securities Depository and Clearing Corporation
Limited, and have been listed and circulated since December 5, 2023.
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
The aforesaid changes in share capital led to the Company’s diluted earnings per share in 2023
and increase in net assets per share attributable to common shareholders, while the basic earnings
per share in 2023 were not affected. If we calculate based on the total number of shares before
changes in share capital of 1,753,995,348, the Company’s diluted earnings per share in 2023 was
1.6199 yuan/share, and the net assets per share attributable to common shareholder s of the
Company was 12.0263 yuan/share. If we calculate based on the total number of shares after changes
in share capital of 1,754,425,348 shares, the diluted earnings per share of the Company in 2023 was
1.6200 yuan/share, and the net assets per share attributable to common shareholders of the
Company was 12.0266 yuan/share.
184
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Generally speaking, the aforesaid changes in share capital did not impose material impacts on
the basic earnings per share, diluted earnings per share, and the net assets per share a ttributable to
the Company’s common shareholders and other financial indicators in 2023.
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 newly Number of Number of
restricted increased restricted restricted
Name of Reasons for
shares at the restricted shares unlocked shares at the Unlock date
shareholder restriction
beginning of shares during during the end of the
the period the current current period period
period
Be unlocked
according to
Locked-up relevant rules
shares for of the
Zhang Jianfei 60,000 0 0 60,000
senior management of
managers shares for
senior
managers
Be unlocked
according to
Locked-up relevant rules
shares for of the
Zhang Jianfei 0 7,500 0 7,500
senior management of
managers shares for
senior
managers
Be unlocked
according to
Equity relevant rules
incentive and of the
Zhang Jianfei 150,000 0 45,000 105,000
restricted Company’s
shares 2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
Equity relevant rules
incentive and of the
Lv Liang 200,000 0 60,000 140,000
restricted Company’s
shares 2022 Restricted
Share Incentive
Scheme
Locked-up Be unlocked
shares for according to
Lv Liang 0 10,000 0 10,000
senior relevant rules
managers of the
185
The 2023 Annual Report of Huadong Medicine Co., Ltd.
management of
shares for
senior
managers
Be unlocked
according to
Locked-up relevant rules
shares for of the
Zhu Li 22,500 0 0 22,500
senior management of
managers shares for
senior
managers
Be unlocked
according to
Locked-up relevant rules
shares for of the
Zhu Li 0 7,500 0 7,500
senior management of
managers shares for
senior
managers
Be unlocked
according to
Equity relevant rules
incentive and of the
Zhu Li 150,000 0 45,000 105,000
restricted Company’s
shares 2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
Equity relevant rules
incentive and of the
Wu Hui 150,000 0 45,000 105,000
restricted Company’s
shares 2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
Locked-up relevant rules
shares for of the
Wu Hui 0 7,500 0 7,500
senior management of
managers shares for
senior
managers
Be unlocked
according to
Equity relevant rules
incentive and of the
Xu Junfang 150,000 45,000 105,000
restricted Company’s
shares 2022 Restricted
Share Incentive
Scheme
Be unlocked
Equity
LIU according to
incentive and
DONGZHOU 150,000 45,000 105,000 relevant rules
restricted
JEFFERY of the
shares
Company’s
186
The 2023 Annual Report of Huadong Medicine Co., Ltd.
2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
Equity relevant rules
incentive and of the
Chen Bo 100,000 0 30,000 70,000
restricted Company’s
shares 2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
Locked-up relevant rules
shares for of the
Chen Bo 0 5,000 0 5,000
senior management of
managers shares for
senior
managers
Be unlocked
according to
Equity relevant rules
incentive and of the
Qiu Renbo 100,000 0 30,000 70,000
restricted Company’s
shares 2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
Locked-up relevant rules
shares for of the
Qiu Renbo 0 5,000 0 5,000
senior management of
managers shares for
senior
managers
Be unlocked
according to
Equity relevant rules
incentive and of the
Zhou Zhaohua 30,000 50,000 9,000 71,000
restricted Company’s
shares 2022 Restricted
Share Incentive
Scheme
Be unlocked
according to
Equity relevant rules
incentive and of the
Qin Xiangtian 30,000 50,000 9,000 71,000
restricted Company’s
shares 2022 Restricted
Share Incentive
Scheme
Be unlocked
Equity according to
incentive and relevant rules
Huang Yanshan 30,000 50,000 9,000 71,000
restricted of the
shares Company’s
2022 Restricted
187
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Share Incentive
Scheme
Be unlocked
according to
Equity relevant rules
Other middle incentive, of the
management restricted Company’s
and core shares, and 2022 Restricted
2,945,800 281,500 848,940 2,378,360
technicians locked-up Share Incentive
(business shares for Scheme and the
specialists) senior management of
managers shares for
senior
managers
Total 4,268,300 474,000 1,220,940 3,521,360 -- --
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
In September 2023, the Company completed the reserved granting registration for 430,000
shares from the Company’s 2022 Restricted Share Incentive Scheme, and the listing date of the
granted restricted shares was September 28, 2023. After the registration of reserved granting of
restricted shares this time, the total number of shares of the Company increased from
1,753,995,348.00 shares to 1,754,425,348.00 shares. Change in shares this time does not result in
changes in controlling right of the Company’s controlling shareholders and de facto controllers,
and has no material impacts on the Company’s assets and liabilities structure.
On March 26, 2024, the Company completed the repurchase and cancellation of 97,800
restricted shares that have been granted by the 2022 Restricted Stock Incentive Plan but have not
yet been unlocked. The repurchase and cancellation of some restricted shares will not have
substantial impact on the Company’s financial position and operating results, will not result in
failure of the Company’s equity distribution in meeting the listing conditions, nor will it lead to
changes in the control rights of the Company’s controlling shareholders and de facto controllers.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
3. Existent shares held by internal employees of the Company
□ Applicable N/A
III. Particulars about shareholders and the de facto controller
1. Number of shareholders and their shareholdings
Unit: Share
Total
Total
number of
number of
preference
common
Total shareholder Total number of
shareholder
number of s with preference shareholders
s at the end
common restoration with restoration of the
of the
shareholder of the voting rights at the end of
77,151 previous 93,834 0 0
s at the end voting the previous month before
month
of the rights at the the disclosure of the
before the
reporting end of the annual report (if any) (see
disclosure
period reporting Note 8)
of the
period (if
annual
any) (see
report
Note 8)
Particulars about shareholders with a shareholding ratio of over 5% or the Top 10 shareholders (excluding shares lent through
conversions)
Total Pledged, marked or
Number of Number of
shares held Changes in locked-up status
shares with shares held
Name of Nature of Shareholdi at the end the
trading without
shareholder shareholder ng ratio of the reporting Status of
restrictions trading Quantity
reporting period shares
held restriction
period
China Domestic
Grand non-state- 730,938,15 730,938,15 121,130,00
41.66% 0 0 Pledge
Enterprises, owned 7 7 0
Inc. corporation
Hangzhou
2. State-
Huadong
owned 288,000,00 288,000,00
Medicine 16.42% 0 0 N/A 0
corporation 0 0
Group Co.,
s
Ltd.
Hong Kong
Securities
Overseas
Clearing 2.73% 47,954,932 -8,053,139 0 47,954,932 N/A 0
corporation
Company
Ltd.
Industrial
and
Commercia
l Bank of
-
China Others 1.77% 31,080,515 0 31,080,515 N/A 0
18,235,726
Limited -
China-
Europe
Healthcare
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Hybrid
Securities
Investment
Fund
China Domestic
Securities non-state-
1.26% 22,186,818 0 0 22,186,818 N/A 0
Finance owned
Co., Ltd. corporation
China
Constructio
n Bank
Co., Ltd. -
ICBC
Credit Others 1.08% 19,000,000 -1,000,078 0 19,000,000 N/A 0
Suisse
Frontier
Medical
Equity
Fund
National
Social
Security Others 0.78% 13,619,804 3,238,962 0 13,619,804 N/A 0
Fund -
Profile 0
China
Constructio
n Bank
Corporatio
n - E Fund
Others 0.74% 12,896,932 5,861,900 0 12,896,932 N/A 0
CSI 300
Healthcare
Exchange
Traded
Fund
New China
Life
Insurance
Company,
Ltd. -
Traditional Others 0.49% 8,616,047 8,616,047 0 8,616,047 N/A 0
- General
Insurance
Products -
018L-
CT001 SZ
Bank of
Shanghai
Co., Ltd. -
Yinhua CSI
Innovative Others 0.46% 7,991,905 4,812,649 0 7,991,905 N/A 0
Medicine
Exchange
Traded
Fund
Strategic investors or general corporations become the
top 10 shareholders due to the placement of new shares N/A
(if any) (see Note 3)
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
The Company does not know whether the above-mentioned
Explanation on associated relationships or concerted
shareholders are related parties or whether they are acting-in-concert
actions among the above-mentioned shareholders
parties with one another.
Description about above-mentioned shareholders’
entrusting/being entrusted with and waiving voting N/A
rights
Explanation of special account for repurchase among
N/A
the top 10 shareholders (if any) (see Note 10)
Shareholdings of top 10 shareholders without trading restrictions
Number of shares without Type of shares
Name of shareholder restriction held at the end
of the reporting period Type of shares Quantity
RMB-denominated 730,938,15
China Grand Enterprises, Inc. 730,938,157
ordinary share 7
RMB-denominated 288,000,00
Hangzhou Huadong Medicine Group Co., Ltd. 288,000,000
ordinary share 0
RMB-denominated
Hong Kong Securities Clearing Company Ltd. 47,954,932 47,954,932
ordinary share
Industrial and Commercial Bank of China Limited - RMB-denominated
China-Europe Healthcare Hybrid Securities Investment 31,080,515 ordinary share 31,080,515
Fund
RMB-denominated
China Securities Finance Co., Ltd. 22,186,818 22,186,818
ordinary share
China Construction Bank Co., Ltd. - ICBC Credit RMB-denominated
19,000,000 19,000,000
Suisse Frontier Medical Equity Fund ordinary share
RMB-denominated
National Social Security Fund - Profile 0 13,619,804 13,619,804
ordinary share
China Construction Bank Corporation - E Fund CSI RMB-denominated
12,896,932 12,896,932
300 Healthcare Exchange Traded Fund ordinary share
New China Life Insurance Company, Ltd. - Traditional RMB-denominated
8,616,047 8,616,047
- General Insurance Products -018L-CT001 SZ ordinary share
Bank of Shanghai Co., Ltd. - Yinhua CSI Innovative RMB-denominated
7,991,905 7,991,905
Medicine Exchange Traded Fund ordinary share
Description for affiliated relationship or concerted
action among the top 10 shareholders holding tradable
The Company does not know whether the above-mentioned
shares without trading restriction conditions and
shareholders are related parties or whether they are acting-in-concert
between the top 10 shareholders holding tradable shares
parties with one another.
without trading restriction conditions and the top 10
shareholders
Description of the participation in margin trading At the end of the reporting period, the Company had no shareholders
business of the top 10 common shareholders (if any) holding its shares through margin trading and securities lending
(see Note 4) accounts among the top 10 common shareholders.
Participation of top 10 shareholders in refinancing lending
Applicable □ N/A
Unit: Share
Participation of top 10 shareholders in refinancing lending
Shareholding in common Shareholding in common
Shares lent and not Shares lent and not
accounts and credit accounts and credit
returned at the beginning returned at the end of the
Name of accounts at the beginning accounts at the end of the
of the period period
shareholder of the period period
(full name) Proportion Proportion Proportion
Total Total Total Proportion Total
in total in total in total
number number number in share number
share share share
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
capital capital capital capital
China
Grand 730,938,15 730,938,15
41.67% 0 0.00% 41.66% 0 0.00%
Enterprises, 7 7
Inc.
Hangzhou
Huadong
288,000,00 288,000,00
Medicine 16.42% 0 0.00% 16.42% 0 0.00%
0 0
Group Co.,
Ltd.
Hong Kong
Securities
Clearing 56,008,071 3.19% 0 0.00% 47,954,932 2.73% 0 0.00%
Company
Ltd.
Industrial
and
Commercia
l Bank of
China
Limited -
China- 49,316,241 2.81% 0 0.00% 31,080,515 1.77% 0 0.00%
Europe
Healthcare
Hybrid
Securities
Investment
Fund
China
Securities
22,186,818 1.26% 0 0.00% 22,186,818 1.26% 0 0.00%
Finance
Co., Ltd.
China
Constructio
n Bank
Co., Ltd. -
ICBC
Credit 20,000,078 1.14% 0 0.00% 19,000,000 1.08% 0 0.00%
Suisse
Frontier
Medical
Equity
Fund
National
Social
Security 10,380,842 0.59% 0 0.00% 13,619,804 0.78% 0 0.00%
Fund -
Profile 0
China
Constructio
n Bank
Corporatio
n - E Fund 7,035,032 0.40% 667,700 0.04% 12,896,932 0.74% 328,500 0.02%
CSI 300
Healthcare
Exchange
Traded
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Fund
New China
Life
Insurance
Company,
Ltd. -
Traditional / / 0 0.00% 8,616,047 0.49% 0 0.00%
- General
Insurance
Products -
018L-
CT001 SZ
Bank of
Shanghai
Co., Ltd. -
Yinhua CSI
Innovative 3,179,256 0.18% 0 0.00% 7,991,905 0.46% 9,400 0.00%
Medicine
Exchange
Traded
Fund
Notes: The shareholding in common accounts and credit accounts at the beginning of the period of New China Life Insurance
Company, Ltd. - Traditional - General Insurance Products -018L-CT001 SZ does not within top 200 of the Company. The
Company does not have such data.
Change in top 10 shareholders compared with the previous period
Applicable □ N/A
Unit: Share
Change in top 10 shareholders compared with the end of the previous period
Number of shares lent through
Number of shares lent through
refinancing and not returned in common
Name of Addition/ exit refinancing and not returned at the end of
accounts and credit accounts at the end
shareholder (full during the the period
of the period
name) reporting period
Proportion in total Proportion in total
Total number Total number
share capital share capital
New China Life
Insurance
Company, Ltd. -
Traditional - Addition 0 0.00% 8,616,047 0.49%
General Insurance
Products -018L-
CT001 SZ
Bank of Shanghai
Co., Ltd. - Yinhua
CSI Innovative
Addition 9,400 0.00% 8,001,305 0.46%
Medicine
Exchange Traded
Fund
Industrial and
Commercial Bank
of China Limited -
China-Europe Exit 0 0.00% 612,318 0.03%
Healthcare
Innovation Stock
Investment Fund
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Norges Bank -
Exit 0 0.00% 1,439,607 0.08%
equity funds
Whether the Company’s top 10 common shareholders or the top 10 common shareholders without trading restrictions have carried
out any agreement to repurchase transaction during the reporting period
□Yes No
The Company’s top 10 common shareholders or the top 10 common shareholders without trading restrictions have not carried out
any agreement to repurchase transaction 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
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.
Block diagram of the property right and control relationship between the Company and the de facto controller
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The 2023 Annual Report of 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
Name of legal Main business or
representative/person Date of establishment Registered capital
representative management activities
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
Hangzhou Huadong
government; industrial
Medicine Group Co., Dong Jiabo December 21, 1992 60 million yuan
investment; wholesale
Ltd.
and retail: chemical
raw materials and
products (except
dangerous chemicals
and precursor
chemicals), package
materials, medical
intermediates (except
dangerous chemicals
and precursor
chemicals); other legal
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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
Proportion of
number of
repurchased
Proposed
Number of Number of shares to
Scheme Proportion in repurchase Proposed
shares to be Purpose of shares underlying
disclosure total share amount (ten repurchase
repurchased repurchase repurchased shares
date capital thousand duration
(share) (share) involved in
yuan)
the Equity
Incentive
Plan (if any)
45 days after
the
Company’s Repurchase
Board of and
November Directors cancellation
97800 0.006% 245.81 0 0.00%
21, 2023 disclosed the of some
notification restricted
announceme shares
nt of
creditors
Progress of reducing repurchased shares through centralized bidding
□ Applicable N/A
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Section VIII. Information on Preferred Shares
□ Applicable N/A
No such case during the reporting period.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Section IX. Information on Bonds
□ Applicable N/A
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Section X. Financial Report
I. Audit report
Audit Opinion Unmodified unqualified audit opinion
Audit Report sign-off Date April 16, 2024
Audit Institution Name Pan-China Certified Public Accountants LLP
Audit Report Number T. J. S. (2024) No. 2117
Certified Public Accounts Name Hu Yanhua and Chen Xiaodong
Text of the Audit Report
Audit Report
T. J. S. (2024) No. 2117
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, 2023, the consolidated and the parent company’s income statements for the year
2023, 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 fi nancial
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, 2023, as well as the consolidated and the parent company’s operating results and cash flows in
2023.
II. Basis for Formation of the Audit Opinion
We conducted our audit in accordance with the China Registered Accountants Auditing
Standards. Our responsibilities under those standards are further described in the Auditor ’s
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Responsibilities for the Audit of the Financial Statements section of our 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
1. Description
The relevant information disclosure is detailed in Notes III (XXV), V (II) 1 and XV (I) to the
financial statements.
The operating revenue of Huadong Medicine mainly comes from the production and sales of
medicines. The operating revenue of Huadong Medicine in 2023 was 40.624 billion yuan.
As the operating revenue is one of the key performance indicators of Huado ng 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;
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
(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, choosing supporting documents for checked items, including
sales contracts, orders, sales invoices, outbound delivery orders, shipping orders, shipping
documents, customers’ signature form, 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 of
sampled items;
(6) Carrying out a cut-off test 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
(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 (XI), (XII) and V (I) 4 to the
financial statements.
As of December 31, 2023, the book balance of accounts receivable of Huadong Medicine
was 7.878 billion yuan, the bad debt reserve was 423 million yuan, and the book value was 7.455
billion yuan.
Based on the credit risk characteristics of various accounts receivable and the individual
account receivable or the combination of accounts receivable, the Management measured its loss
reserve according to the expected credit loss equivalent to the entire duration. Due to the
significant amount of accounts receivable and significant judgment of the Management involved
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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) With regard to the Management’s forecast on bad debt reserve in previous years,
reviewing the results or follow-up forecasts made by the Management;
(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, reviewing the Management’s forecast of the expected cash flow received, evaluating the
rationality, relevance and reliability of the key assumptions used in the forecast, 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 expected credit loss rate of accounts
receivable determined by the Management, including the rationality of major assumptions used
and the rationality, relevance and reliability of data; checking the accuracy of the Management’s
calculation of bad debt reserve;
(6) Evaluating the rationality of the Management’s bad debt reserve in combination with the
confirmation of accounts receivable and repayment after the period; 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
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
The relevant information disclosure is detailed in Notes III (VI), III (XX) and V (I) 18 to the
financial statements.
As of December 31, 2023, the original book value of goodwill of Huadong Medicine was
2.603 billion yuan, the impairment reserve was 4 million yuan, and the book value was 2.599
billion yuan.
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 or the net amount
of fair value minus the disposal expenses. 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) Understanding the key internal controls related to goodwill, evaluating the design of
these controls, determining whether they are implemented, and testing the operating effectiveness
of relevant internal controls;
(2) With regard to the Management’s forecast on present value of the expected future cash
flow in previous years, reviewing the results or follow-up forecasts made by the Management;
(3) Understanding and evaluating the competence, professional quality and objectivity of
external valuation experts employed by the Management;
(4) Evaluating the rationality and consistency of the Management’s methods in the
impairment test;
(5) 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;
(6) 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;
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
(7) Testing whether the Management’s calculation of the present value of expected future
cash flows is accurate;
(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 materi ally
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.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
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, whether due to fraud or error, and to issue an auditor ’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with auditing standards will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements.
As part of the audit in accordance with the audit sta ndards, we exercise professional
judgment and maintain professional skepticism throughout the process. We also:
(I) Identify and assess the risks of material misstatement of the financial statements, whether
due to fraud or error, design and perform audit procedures responsive to those risks, and obtain
audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of no t
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, the
auditing standards require us to draw attention to users of the financial statements in our auditor ’s
report to the related disclosures in the financial statements or, if such disclosures are inadequate ,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause Huadong Medicine to cease
to continue as a going concern.
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
(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.
Pan-China Certified Public Accountants LLP Chinese Certified Public Accountant: Hu
Yanhua
(Project partner)
Hangzhou, China Chinese Certified Public Accountant: Chen Xiaodong
April 16, 2024
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
II. Financial statements
The unit of statements in the financial notes is: yuan.
1. Consolidated balance sheet
Prepared by: Huadong Medicine Co., Ltd.
December 31, 2023
Unit: yuan
Item December 31, 2023 January 01, 2023
Current assets:
Monetary funds 4,663,378,011.64 3,996,302,178.41
Settlement reserve
Lending funds
Trading financial assets
Derivative financial assets 16,434,493.97 29,907,470.68
Notes receivable 6,812,089.97 8,424,980.99
Accounts receivable 7,455,250,690.83 7,198,746,788.59
Receivables financing 1,434,366,300.69 1,002,511,208.21
Prepayments 279,207,655.40 500,083,953.14
Premiums receivable
Reinsurance accounts receivable
Reinsurance contract reserve
receivable
Other receivables 291,135,104.33 283,710,955.63
Including: Interests receivable
Dividend receivable 2,623,608.84 223,747.65
Financial assets purchased for resale
Inventories 4,290,214,266.03 4,495,483,328.54
Contract assets
Assets held for sale
Other non-current assets due within
one year
Other non-current assets 59,881,757.08 52,692,618.78
Total current assets 18,496,680,369.94 17,567,863,482.97
Non-current assets:
Loans and prepayments issuance
Debt investment
Other debt investments
Long-term receivables
Long-term equity investment 1,535,907,809.85 1,659,076,538.78
Other equity instrument investments 565,223,872.68 360,910,876.41
Other non-current financial assets
207
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Investment real estate 12,746,181.87 13,648,240.14
Fixed Assets 4,140,144,817.51 3,981,653,265.52
Construction in Progress 913,147,212.17 873,159,427.47
Productive biological assets
Oil and gas assets
Right-of-use Assets 151,175,007.16 166,505,297.17
Intangible Assets 2,333,787,357.62 2,280,064,207.30
Development expenditure 992,532,091.86 641,354,586.80
Goodwill 2,598,696,062.31 2,441,387,413.59
Long-term Deferred Expenses 20,053,854.34 16,457,278.57
Deferred income tax assets 187,808,574.44 152,842,858.97
Other non-current assets 1,561,458,605.23 1,037,279,933.15
Total non-current assets 15,012,681,447.04 13,624,339,923.87
Total Assets 33,509,361,816.98 31,192,203,406.84
Current liabilities:
Short-term borrowings 822,380,292.37 947,516,383.37
Borrowing from the central bank
Borrowing from other banks and other
financial institutions
Trading financial liabilities 14,841,896.97
Derivative financial liabilities
Notes payable 1,727,420,960.30 1,029,409,686.81
Accounts payable 4,374,832,979.95 4,873,029,466.44
Advances from customers 1,393,551.48 1,154,243.42
Contract liabilities 135,459,275.17 146,488,489.07
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
Employee benefits payable 359,148,474.25 256,883,423.68
Taxes payable 489,385,055.57 429,457,804.81
Other payables 2,518,621,382.87 2,290,407,022.05
Including: Interests payable
Dividends payable 143,024,219.60 14,924,219.60
Handling fees and commissions
payable
Reinsurance accounts payable
Liabilities held for sale
Other non-current liabilities due
359,342,623.38 147,835,514.81
within one year
Other current liabilities 14,621,494.85 15,788,164.30
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Total current liabilities 10,802,606,090.19 10,152,812,095.73
Non-current liabilities:
Insurance policy reserve
Long-term borrowings 520,759,460.07 1,051,457,747.44
Bonds payable
Including: Preferred shares
Perpetual bond
Lease liabilities 56,695,158.59 84,610,324.98
Long-term payables 107,251,248.59 287,497,209.49
Long-term employee benefits payable
Estimated Liabilities 37,184,074.06 37,925,549.41
Deferred income 171,056,435.34 126,123,512.71
Deferred income tax liabilities 184,373,974.04 202,084,083.93
Other non-current liabilities 47,170,650.00 73,251,500.00
Total non-current liabilities 1,124,491,000.69 1,862,949,927.96
Total liabilities 11,927,097,090.88 12,015,762,023.69
Owners’ Equity:
Share capital 1,754,425,348.00 1,753,995,348.00
Other equity instruments
Including: Preferred shares
Perpetual bond
Capital reserves 2,446,313,774.82 2,377,887,246.39
Less: Treasury stock 84,519,369.07 104,645,000.00
Other comprehensive income -40,341,544.18 -88,552,636.42
Special reserves
Surplus reserves 1,277,779,972.18 1,151,213,039.48
General risk reserve
Undistributed profit 15,693,951,574.91 13,488,021,239.94
Total owners’ equity attributable to
21,047,609,756.66 18,577,919,237.39
owner of the Company
Minority interests 534,654,969.44 598,522,145.76
Total owners’ equity 21,582,264,726.10 19,176,441,383.15
Total liabilities & owners’ equity 33,509,361,816.98 31,192,203,406.84
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: yuan
Item December 31, 2023 January 01, 2023
Current assets:
Monetary funds 3,202,969,593.32 2,486,399,844.96
Trading financial assets
Derivative financial assets
Notes receivable 6,812,089.97 8,424,980.99
Accounts receivable 4,232,306,149.56 4,224,944,294.54
Receivables financing 257,987,672.16 157,097,728.09
209
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Prepayments 104,299,584.06 271,448,367.52
Other receivables 1,826,331,443.42 1,065,267,397.05
Including: Interests receivable
Dividend receivable 95,200,000.00
Inventories 2,064,496,012.45 2,391,038,707.33
Contract assets
Assets held for sale
Other non-current assets due within
one year
Other non-current assets
Total current assets 11,695,202,544.94 10,604,621,320.48
Non-current assets:
Debt investment
Other debt investments
Long-term receivables
Long-term equity investment 5,961,344,825.40 5,473,824,934.24
Other equity instrument investments 10,080,000.00 10,100,870.56
Other non-current financial assets
Investment real estate 6,734,389.40 7,193,111.26
Fixed Assets 131,994,767.68 144,023,222.94
Construction in Progress 423,088.16 824,024.88
Productive biological assets
Oil and gas assets
Right-of-use Assets 9,101,653.07 3,631,025.07
Intangible Assets 160,438,646.19 188,198,218.40
Development expenditure
Goodwill
Long-term Deferred Expenses 77,379.81
Deferred income tax assets 53,563,924.40 49,729,544.62
Other non-current assets 250,146,911.16 346,564,596.26
Total non-current assets 6,583,828,205.46 6,224,166,928.04
Total Assets 18,279,030,750.40 16,828,788,248.52
Current liabilities:
Short-term borrowings 425,185,172.23 431,081,029.52
Trading financial liabilities
Derivative financial liabilities
Notes payable 500,551,829.47 629,281,486.95
Accounts payable 3,128,538,765.74 3,373,959,848.93
Advances from customers
Contract liabilities 56,745,329.30 46,097,912.05
Employee benefits payable 13,664,428.10 10,063,669.60
Taxes payable 67,429,440.31 86,458,570.85
Other payables 1,970,918,606.32 949,611,806.93
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
Including: Interests payable
Dividends payable 224,219.60 224,219.60
Liabilities held for sale
Other non-current liabilities due
41,336,796.82 33,427,007.32
within one year
Other current liabilities 6,234,741.10 5,830,680.38
Total current liabilities 6,210,605,109.39 5,565,812,012.53
Non-current liabilities:
Long-term borrowings
Bonds payable
Including: Preferred shares
Perpetual bond
Lease liabilities 3,610,383.31 59,030.94
Long-term payables
Long-term employee benefits payable
Estimated Liabilities
Deferred income 33,001,286.19 35,567,161.11
Deferred income tax liabilities
Other non-current liabilities 47,170,650.00 73,251,500.00
Total non-current liabilities 83,782,319.50 108,877,692.05
Total liabilities 6,294,387,428.89 5,674,689,704.58
Owners’ Equity:
Share capital 1,754,425,348.00 1,753,995,348.00
Other equity instruments
Including: Preferred shares
Perpetual bond
Capital reserves 2,329,361,969.66 2,276,383,543.02
Less: Treasury stock 84,519,369.07 104,645,000.00
Other comprehensive income -129,129.44
Special reserves
Surplus reserves 1,355,635,731.62 1,229,068,798.92
Undistributed profit 6,629,739,641.30 5,999,424,983.44
Total owners’ equity 11,984,643,321.51 11,154,098,543.94
Total liabilities & owners’ equity 18,279,030,750.40 16,828,788,248.52
3. Consolidated income statement
Unit: yuan
Item 2023 2022
I. Total operating revenue 40,623,782,520.43 37,714,587,458.01
Including: Operating revenue 40,623,782,520.43 37,714,587,458.01
Interest income
Premiums earned
Handling fees and
commissions received
II. Total operating cost 37,081,915,122.91 34,568,570,175.18
211
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Including: Operating cost 27,461,731,573.59 25,682,497,011.55
Interest expenses
Handling fees and
commissions paid
Surrender value
Net payment of insurance
claims
Net appropriation of policy
reserve
Policy dividends paid
Reinsurance expenses
Taxes and surcharges 232,590,269.39 208,324,645.61
Sales expenses 6,645,411,414.21 6,334,738,928.05
Administrative expenses 1,420,188,961.59 1,248,781,970.63
R&D expenses 1,270,803,119.96 1,015,971,052.33
Financial expenses 51,189,784.17 78,256,567.01
Including: Interest expenses 119,514,554.96 127,654,612.93
Interest income 94,045,345.71 103,350,838.03
Add: Other income 172,492,861.66 92,781,468.16
Investment income (Losses are
-219,713,034.52 -141,560,034.56
indicated by “-”)
Including: Investment gains
(losses) in associated enterprise and -188,390,620.91 -115,619,080.98
joint-venture enterprise
Gains on the
derecognition of financial assets
measured at amortized cost
Gains on exchange (Losses are
indicated by “-”)
Gains on net exposure hedging
(Losses are indicated by “-”)
Gains from changes in fair values
-13,756,372.80 28,469,286.61
(Losses are indicated by “-”)
Credit impairment losses (Losses
-25,763,586.64 -68,689,699.09
are indicated by “-”)
Impairment gains (losses) of
-6,519,844.03 -3,821,625.15
assets (Losses are indicated by “-”)
Asset disposal income (Losses
4,319,797.54 8,257,595.43
are indicated by “-”)
III. Operating profit (Losses are
3,452,927,218.73 3,061,454,274.23
indicated by “-”)
Add: Non-operating revenue 50,548,825.60 7,608,417.78
Less: Non-operating expenses 37,490,279.21 37,938,443.03
IV. Total profit (Total losses are indicated
3,465,985,765.12 3,031,124,248.98
by “-”)
Less: Income tax expense 619,588,815.15 498,498,547.62
V. Net profit (Net losses are indicated by 2,846,396,949.97 2,532,625,701.36
212
The 2023 Annual Report of Huadong Medicine Co., Ltd.
“-”)
(I) Classification by business
continuity
1. Net profit from continuing
operations (Net losses are indicated by “- 2,846,396,949.97 2,532,625,701.36
”)
2. Net profit at terminational
operation (Net losses are indicated by “-
”)
(II) Classification by attribution of
ownership
1. Net profit attributable to
2,838,860,542.80 2,499,214,359.57
shareholders of the parent company
2. Profit or loss attributable to
7,536,407.17 33,411,341.79
minority shareholders
VI. Other comprehensive income, net of
50,506,468.03 -40,784,410.62
income tax
Other comprehensive income
attributable to owners of the parent 50,506,468.03 -40,784,410.62
company, net of tax
(I) Other comprehensive income
that cannot be reclassified into 3,419,879.00 -6,804,247.45
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
3,419,879.00 -6,804,247.45
equity instrument investments
4. Changes in fair value of credit
risk of the enterprise
5. Others
(II) Other comprehensive income to
47,086,589.03 -33,980,163.17
be reclassified into gains/losses
1. Other comprehensive income
that can be reclassified into gains/losses 5,371,371.90 -19,404.48
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 26,873,320.16 -19,118,861.72
statements
7. Others 14,841,896.97 -14,841,896.97
Net amount after tax of other
comprehensive income attributable to
minority shareholders
VII. Total comprehensive income 2,896,903,418.00 2,491,841,290.74
Total comprehensive income
attributable to owners of the parent 2,889,367,010.83 2,458,429,948.95
company
213
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Total comprehensive income
7,536,407.17 33,411,341.79
attributable to minority shareholders
VIII. Earnings per share (EPS)
(I) Basic EPS 1.6219 1.4283
(II) Diluted EPS 1.6207 1.4283
As for business merger under the same control in the current period, the net profit generated by the merged party before the was
0.00 yuan, and that generated during the previous period was 0.00 yuan.
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: yuan
Item 2023 2022
I. Total operating revenue 22,045,386,635.53 20,630,904,717.76
Less: Total operating cost 20,820,391,664.50 19,368,401,281.90
Taxes and surcharges 34,048,780.98 36,661,029.40
Sales expenses 650,742,977.03 601,932,806.60
Administrative expenses 225,726,564.80 211,999,885.94
R&D expenses
Financial expenses -48,770,456.27 -14,538,929.98
Including: Interest expenses 46,882,329.40 45,824,339.68
Interest income 75,742,432.47 77,307,324.10
Add: Other income 18,760,191.87 16,694,280.62
Investment income (Losses are
1,152,151,267.18 1,067,326,046.80
indicated by “-”)
Including: Investment gains
(losses) in associated enterprise and -12,860,749.73 981,095.77
joint-venture enterprise
Gains on the
derecognition of financial assets
measured at amortized cost (Losses are
indicated by “-”)
Gains on net exposure hedging
(Losses are indicated by “-”)
Gains from changes in fair values
(Losses are indicated by “-”)
Credit impairment losses (Losses
-146,582,684.69 -94,827,679.48
are indicated by “-”)
Impairment gains (losses) of
assets (Losses are indicated by “-”)
Asset disposal income (Losses
3,563,127.07 8,065,244.06
are indicated by “-”)
II. Operating profit (Losses are indicated
1,391,139,005.92 1,423,706,535.90
by “-”)
Add: Non-operating revenue 50,286.42 872,151.83
Less: Non-operating expenses 6,496,080.94 7,145,666.36
III. Total profit (Total losses are indicated 1,384,693,211.40 1,417,433,021.37
214
The 2023 Annual Report of Huadong Medicine Co., Ltd.
by “-”)
Less: Income tax expense 119,023,884.42 122,009,499.72
IV. Net profit (Net losses are indicated by
1,265,669,326.98 1,295,423,521.65
“-”)
(I) Net profit from continuous
operations (Net losses are indicated by “- 1,265,669,326.98 1,295,423,521.65
”)
(II) Net profit from discontinued
operations (Net losses are indicated by “-
”)
V. Other comprehensive income, net of
43.94
income tax
(I) Other comprehensive income
that cannot be reclassified into 43.94
gains/losses
1. Changes in remeasurement on
the defined benefit plan
2. Other comprehensive income
that cannot be reclassified into 43.94
gains/losses under equity method
3. Changes in fair value of other
equity instrument investments
4. Changes in fair value of credit
risk of the enterprise
5. Others
(II) Other comprehensive income to
be reclassified into gains/losses
1. Other comprehensive income
that can be reclassified into gains/losses
under equity method
2. Changes in fair value of other
debt investments
3. Amount of financial assets
reclassified into other comprehensive
income
4. Credit impairment reserve of
other debt investments
5. Cash flow hedging reserve
6. Exchange differences from
translation of foreign currency financial
statements
7. Others
VI. Total comprehensive income 1,265,669,370.92 1,295,423,521.65
VII. Earnings per share (EPS)
(I) Basic EPS
(II) Diluted EPS
5. Consolidated cash flow statement
Unit: yuan
Item 2023 2022
I. Cash flows from operating activities:
Cash received from the sale of goods
43,564,701,238.84 39,950,662,882.10
and the rendering of services
Net increase in customer deposits and
215
The 2023 Annual Report of Huadong Medicine Co., Ltd.
due from banks
Net increase in borrowing from the
central bank
Net increase in borrowing from other
financial institutions
Cash from the premium of the original
insurance policy
Net cash from reinsurance
Net increase in deposits and
investment of the insured
Cash from interests, handling fees and
commissions
Net increase in borrowing from other
banks and other financial institutions
Net increase in funds for repurchase
Net cash received for buying and
selling securities as proxy
Receipts of tax refund 60,827,371.05 47,556,552.81
Other cash receipts in relation to
544,629,208.52 639,498,854.94
operating activities
Subtotal of cash inflows from operating
44,170,157,818.41 40,637,718,289.85
activities
Cash payments for goods purchased
27,689,294,593.31 26,418,181,602.79
and services received
Net increase in customer loans and
prepayments
Net increase in deposits of central
bank and due from banks
Cash payments for original insurance
claims
Net increase in lending funds 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
3,912,660,863.10 3,126,251,201.80
employees
Payments of various types of taxes 2,612,807,407.43 3,065,133,366.96
Other cash payments in relation to
6,026,178,247.87 5,646,299,449.70
operating activities
Subtotal of cash outflows for operating
40,240,941,111.71 38,255,865,621.25
activities
Net cash flow from operating activities 3,929,216,706.70 2,381,852,668.60
II. Cash flows from investing activities
Cash receipts from recovery of
2,085,916.63
investments
Cash receipts from investment income 94,516,496.70 100,327,200.00
Net cash receipts from disposal of
fixed assets, intangible assets and other 10,850,236.05 15,434,935.53
long-term assets
Net cash from disposal of subsidiaries
and other business units
Other cash receipts in relation to 136,030,146.40 5,876,507.64
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The 2023 Annual Report of Huadong Medicine Co., Ltd.
investing activities
Subtotal of cash inflows from investing
243,482,795.78 121,638,643.17
activities
Cash payments for purchase and
construction of fixed assets, intangible 1,606,618,467.79 1,193,238,725.97
assets and other long-term assets
Cash payments for investment 221,474,250.00 848,909,498.16
Net increase in pledge loans
Net cash paid for acquisition of
162,367,804.50 411,908,915.12
subsidiaries and other business units
Other cash payments in relation to
3,574,216.00 103,179,093.50
investing activities
Subtotal of cash outflows of investment
1,994,034,738.29 2,557,236,232.75
activities
Net cash flow from investing activities -1,750,551,942.51 -2,435,597,589.58
III. Cash flows from financing activities:
Cash receipts from absorbing
35,625,300.00 174,645,000.00
investments
Including: Cash receipts from capital
contributions from minority owners of 25,000,000.00 70,000,000.00
subsidiaries
Cash receipts from borrowing 4,662,018,278.15 4,689,802,455.69
Other cash receipts in relation to
401,726,192.50 284,920,943.37
financing activities
Subtotal of cash inflows from financing
5,099,369,770.65 5,149,368,399.06
activities
Cash repayments of borrowings 5,353,842,747.11 4,290,690,528.23
Cash payments for distribution of
dividends or profits or settlement of 613,814,534.49 578,859,909.67
interest expenses
Including: Dividends and profits paid
19,599,647.35 2,366,353.48
by subsidiaries to minority shareholders
Other cash payments in relation to
525,073,835.03 379,528,334.29
financing activities
Subtotal of cash outflows for financing
6,492,731,116.63 5,249,078,772.19
activities
Net cash flow from financing activities -1,393,361,345.98 -99,710,373.13
IV. Effect of foreign exchange rate
5,945,890.37 -9,774,641.73
changes on cash and cash equivalents
V. Net increase in cash and cash
791,249,308.58 -163,229,935.84
equivalents
Add: Opening balance of cash and
3,416,910,702.33 3,580,140,638.17
cash equivalents
VI. Closing balance of cash and cash
4,208,160,010.91 3,416,910,702.33
equivalents
6. Cash flow statement of the parent company
Unit: yuan
Item 2023 2022
I. Cash flows from operating activities:
Cash received from the sale of goods
23,572,571,460.53 21,148,206,043.93
and the rendering of services
Receipts of tax refund 3,178,131.15
Other cash receipts in relation to 96,137,098.06 238,589,265.58
217
The 2023 Annual Report of Huadong Medicine Co., Ltd.
operating activities
Subtotal of cash inflows from operating
23,671,886,689.74 21,386,795,309.51
activities
Cash payments for goods purchased
22,245,449,767.50 19,990,439,841.50
and services received
Cash payments to and on behalf of
313,589,350.89 267,942,450.21
employees
Payments of various types of taxes 393,222,221.95 510,694,836.67
Other cash payments in relation to
529,329,348.56 637,104,187.46
operating activities
Subtotal of cash outflows for operating
23,481,590,688.90 21,406,181,315.84
activities
Net cash flow from operating activities 190,296,000.84 -19,386,006.33
II. Cash flows from investing activities
Cash receipts from recovery of
20,914.50
investments
Cash receipts from investment income 1,096,472,035.41 1,097,509,530.22
Net cash receipts from disposal of
fixed assets, intangible assets and other 4,173,691.06 13,460,544.24
long-term assets
Net cash from disposal of subsidiaries
50,059,838.75
and other business units
Other cash receipts in relation to
2,176,393,914.80 830,315,580.61
investing activities
Subtotal of cash inflows from investing
3,277,060,555.77 1,991,345,493.82
activities
Cash payments for purchase and
construction of fixed assets, intangible 24,448,648.76 56,266,286.12
assets and other long-term assets
Cash payments for investment 468,375,000.00 443,169,200.00
Net cash paid for acquisition of
subsidiaries and other business units
Other cash payments in relation to
2,793,998,540.00 988,641,844.00
investing activities
Subtotal of cash outflows of investment
3,286,822,188.76 1,488,077,330.12
activities
Net cash flow from investing activities -9,761,632.99 503,268,163.70
III. Cash flows from financing activities:
Cash receipts from absorbing
10,625,300.00 104,645,000.00
investments
Cash receipts from borrowing 3,846,416,549.97 2,754,131,709.35
Other cash receipts in relation to
4,365,496,086.39 2,932,396,166.67
financing activities
Subtotal of cash inflows from financing
8,222,537,936.36 5,791,172,876.02
activities
Cash repayments of borrowings 3,852,457,799.76 2,953,130,999.69
Cash payments for distribution of
dividends or profits or settlement of 531,097,864.52 525,613,233.72
interest expenses
Other cash payments in relation to
3,102,315,256.45 2,685,609,711.52
financing activities
Subtotal of cash outflows for financing
7,485,870,920.73 6,164,353,944.93
activities
Net cash flow from financing activities 736,667,015.63 -373,181,068.91
IV. Effect of foreign exchange rate
changes on cash and cash equivalents
V. Net increase in cash and cash 917,201,383.48 110,701,088.46
218
The 2023 Annual Report of Huadong Medicine Co., Ltd.
equivalents
Add: Opening balance of cash and
2,029,798,269.62 1,919,097,181.16
cash equivalents
VI. Closing balance of cash and cash
2,946,999,653.10 2,029,798,269.62
equivalents
7. Consolidated statement of changes in owners’ equity
Amount in the current period
Unit: yuan
2023
Owners’ equity attributable to the parent company
Other equity Othe
instruments r Total
Gene Undi Min own
Item Shar Capi Less: com Spec Surp ority
ral strib ers’
e Prefe tal Trea preh ial lus Othe Subt inter
Perp risk uted equit
capit rred Othe reser sury ensiv reser reser rs otal ests
etual reser profi y
al share rs ves stock e ves ves
bond ve t
s inco
me
I.
Bala
nce
at
the - 13,4 18,5 19,1
1,75 2,37 104, 1,15 598,
end 88,5 88,0 77,9 76,4
3,99 7,88 645, 1,21 522,
of 52,6 21,2 19,2 41,3
5,34 7,24 000. 3,03 145.
the 36.4 39.9 37.3 83.1
8.00 6.39 00 9.48 76
perio 2 4 9 5
d of
the
prior
year
A
dd:
Chan
ges
in
acco
untin
g
polic
ies
E
rror
corre
ction
in
the
prior
perio
ds
O
219
The 2023 Annual Report of Huadong Medicine Co., Ltd.
thers
II.
Bala
nce
at
the
begi - 13,4 18,5 19,1
1,75 2,37 104, 1,15 598,
nnin 88,5 88,0 77,9 76,4
3,99 7,88 645, 1,21 522,
g of 52,6 21,2 19,2 41,3
5,34 7,24 000. 3,03 145.
the 36.4 39.9 37.3 83.1
8.00 6.39 00 9.48 76
perio 2 4 9 5
d of
the
curre
nt
year
III.
Amo
unt
of
chan
ge in
the
- -
curre 68,4 48,2 126, 2,20 2,46 2,40
430, 20,1 63,8
nt 26,5 11,0 566, 5,93 9,69 5,82
000. 25,6 67,1
perio 28.4 92.2 932. 0,33 0,51 3,34
00 30.9 76.3
d 3 4 70 4.97 9.27 2.95
3 2
(Dec
rease
s are
indic
ated
by “-
”)
(I)
Total
com 50,5 2,83 2,88 2,89
7,53
preh 06,4 8,86 9,36 6,90
6,40
ensiv 68.0 0,54 7,01 3,41
7.17
e 3 2.80 0.83 8.00
inco
me
(II)
Capi
tal
contr
ibute -
52,8 73,4 28,4 101,
d by 430, 20,1
46,9 02,5 20,5 823,
own 000. 25,6
24.3 55.3 57.8 113.
ers 00 30.9
9 2 1 13
and 3
capit
al
decr
eases
1. 430, 10,1 10,6 28,0 38,6
220
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Com 000. 95,3 25,3 60,0 85,3
mon 00 00.0 00.0 00.0 00.0
share 0 0 0 0
s
inves
ted
by
own
ers
2.
Capi
tal
inves
ted
by
hold
ers
of
other
equit
y
instr
ume
nts
3.
Amo
unt
of
share
-
base
42,6 42,6 43,0
d 360,
51,6 51,6 12,1
pay 557.
24.3 24.3 82.2
ment 81
9 9 0
inclu
ded
in
own
ers’
equit
y
-
20,1 20,1
4. 20,1
25,6 25,6
Othe 25,6
30.9 30.9
rs 30.9
3 3
3
(III)
- - - -
Profi 126,
635, 508, 147, 656,
t 566,
225, 658, 689, 348,
distri 932.
583. 650. 847. 498.
butio 70
62 92 13 05
n
1. 126, -
With 566, 126,
draw 932. 566,
al of 70 932.
221
The 2023 Annual Report of Huadong Medicine Co., Ltd.
surpl 70
us
reser
ve
2.
Prov
ision
of
gene
ral
risk
reser
ve
3.
Distr
ibuti
- - - -
on to
508, 508, 147, 656,
own
658, 658, 680, 338,
ers
650. 650. 000. 650.
(or
92 92 00 92
share
hold
ers)
4. - -
Othe 9,84 9,84
rs 7.13 7.13
(IV)
Inter
nal
conv -
2,29
ersio 2,29
5,37 0.00 0.00
n of 5,37
5.79
own 5.79
ers’
equit
y
1.
Capi
tal
(or
share
capit
al)
incre
ase
from
capit
al
reser
ve
conv
ersio
n
2.
Capi
tal
222
The 2023 Annual Report of Huadong Medicine Co., Ltd.
(or
share
capit
al)
incre
ase
from
surpl
us
reser
ve
conv
ersio
n
3.
Reco
very
of
losse
s by
surpl
us
reser
ve
4.
Retai
ned
earni
ngs
from
trans
fer
of
chan
ges
in
the
defin
ed
bene
fit
plan
5.
Retai
ned
earni
ngs
from
-
trans 2,29
2,29
fer 5,37 0.00 0.00
5,37
of 5.79
5.79
other
com
preh
ensiv
e
inco
223
The 2023 Annual Report of Huadong Medicine Co., Ltd.
me
6.
Othe
rs
(V)
Spec
ial
reser
ve
1.
With
draw
al in
the
curre
nt
perio
d
2.
Use
in
the
curre
nt
perio
d
15,5 15,5 47,8 63,4
(VI)
79,6 79,6 65,7 45,3
Othe
04.0 04.0 05.8 09.8
rs
4 4 3 7
IV.
Bala
nce
at
- 15,6 21,0 21,5
the 1,75 2,44 84,5 1,27 534,
40,3 93,9 47,6 82,2
end 4,42 6,31 19,3 7,77 654,
41,5 51,5 09,7 64,7
of 5,34 3,77 69.0 9,97 969.
44.1 74.9 56.6 26.1
the 8.00 4.82 7 2.18 44
8 1 6 0
curre
nt
perio
d
Amount in previous period
Unit: yuan
2022
Owners’ equity attributable to the parent company
Other equity Othe
instruments r Total
Gene Undi Min
Item Shar Capi Less: com Spec Surp own
ral strib ority
e Prefe tal Trea preh ial lus Othe Subt ers’
Perp risk uted inter
capit rred Othe reser sury ensiv reser reser rs otal equit
etual reser profi ests
al share rs ves stock e ves ves y
bond ve t
s inco
me
224
The 2023 Annual Report of Huadong Medicine Co., Ltd.
I.
Bala
nce
at
the - 11,6 16,5 16,9
1,74 2,22 1,02 361,
end 47,7 25,7 79,3 41,3
9,80 9,86 1,67 944,
of 68,2 94,0 74,3 19,0
9,54 8,31 0,68 682.
the 25.8 01.4 23.0 05.6
8.00 2.11 7.31 60
perio 0 6 8 8
d of
the
prior
year
A
dd:
Chan
ges
in
acco
untin
g
polic
ies
E
rror
corre
ction
in
the
prior
perio
ds
O
thers
II.
Bala
nce
at
the
begi - 11,6 16,5 16,9
1,74 2,22 1,02 361,
nnin 47,7 25,7 79,3 41,3
9,80 9,86 1,67 944,
g of 68,2 94,0 74,3 19,0
9,54 8,31 0,68 682.
the 25.8 01.4 23.0 05.6
8.00 2.11 7.31 60
perio 0 6 8 8
d of
the
curre
nt
year
III.
Amo -
148, 104, 129, 1,86 1,99 236, 2,23
unt 4,18 40,7
018, 645, 542, 2,22 8,54 577, 5,12
of 5,80 84,4
934. 000. 352. 7,23 4,91 463. 2,37
chan 0.00 10.6
28 00 17 8.48 4.31 16 7.47
ge in 2
the
225
The 2023 Annual Report of Huadong Medicine Co., Ltd.
curre
nt
perio
d
(Dec
rease
s are
indic
ated
by “-
”)
(I)
Total
-
com 2,49 2,45 33,4 2,49
40,7
preh 9,21 8,42 11,3 1,84
84,4
ensiv 4,35 9,94 41.7 1,29
10.6
e 9.57 8.95 9 0.74
2
inco
me
Capi
tal
contr
ibute
d by 107, 104, 70,0 77,2
4,18 7,22
own 684, 645, 18,2 43,7
5,80 5,46
ers 664. 000. 95.4 59.4
0.00 4.01
and 01 00 4 5
capit
al
decr
eases
1.
Com
mon
share 100, 104, 70,0 174,
4,18
s 459, 645, 00,0 645,
5,80
inves 200. 000. 00.0 000.
0.00
ted 00 00 0 00
by
own
ers
2.
Capi
tal
inves
ted
by
hold
ers
of
other
equit
y
instr
ume
nts
226
The 2023 Annual Report of Huadong Medicine Co., Ltd.
3.
Amo
unt
of
share
-
base
d 7,22 7,22 18,2 7,24
pay 5,46 5,46 95.4 3,75
ment 4.01 4.01 4 9.45
inclu
ded
in
own
ers’
equit
y
- -
104,
4. 104, 104,
645,
Othe 645, 645,
000.
rs 000. 000.
00
00 00
Profi - - - -
129,
t 636, 507, 15,1 522,
542,
distri 987, 444, 06,3 551,
352.
butio 121. 768. 53.4 122.
17
n 09 92 8 40
1.
With
-
draw 129,
129,
al of 542,
542,
surpl 352.
352.
us 17
17
reser
ve
2.
Prov
ision
of
gene
ral
risk
reser
ve
3.
Distr
ibuti
- - - -
on to
507, 507, 15,1 522,
own
444, 444, 06,3 551,
ers
768. 768. 53.4 122.
(or
92 92 8 40
share
hold
ers)
4.
Othe
227
The 2023 Annual Report of Huadong Medicine Co., Ltd.
rs
Inter
nal
conv
ersio
n of
own
ers’
equit
y
1.
Capi
tal
(or
share
capit
al)
incre
ase
from
capit
al
reser
ve
conv
ersio
n
2.
Capi
tal
(or
share
capit
al)
incre
ase
from
surpl
us
reser
ve
conv
ersio
n
3.
Reco
very
of
losse
s by
surpl
us
reser
ve
4.
Retai
228
The 2023 Annual Report of Huadong Medicine Co., Ltd.
ned
earni
ngs
from
trans
fer
of
chan
ges
in
the
defin
ed
bene
fit
plan
5.
Retai
ned
earni
ngs
from
trans
fer
of
other
com
preh
ensiv
e
inco
me
6.
Othe
rs
Spec
ial
reser
ve
1.
With
draw
al in
the
curre
nt
perio
d
2.
Use
in
the
curre
nt
perio
d
229
The 2023 Annual Report of Huadong Medicine Co., Ltd.
40,3 40,3 148, 188,
(VI)
34,2 34,2 254, 588,
Othe
70.2 70.2 179. 449.
rs
7 7 41 68
IV.
Bala
nce
at
- 13,4 18,5 19,1
the 1,75 2,37 104, 1,15 598,
88,5 88,0 77,9 76,4
end 3,99 7,88 645, 1,21 522,
52,6 21,2 19,2 41,3
of 5,34 7,24 000. 3,03 145.
36.4 39.9 37.3 83.1
the 8.00 6.39 00 9.48 76
2 4 9 5
curre
nt
perio
d
8. Statement of changes in owners’ equity of the parent company
Amount in the current period
Unit: yuan
2023
Other equity instruments Other
Less: compr Specia Surplu Total
Item Capital Undist
Share Preferr Perpet Treasu ehensi l s owners
reserve ributed Others
capital ed ual Others ry ve reserve reserve ’
s profit
shares bond stock incom s s equity
e
I.
Balanc
e at the
end of 1,753, 2,276, 104,64 - 1,229, 5,999, 11,154
the 995,34 383,54 5,000. 129,12 068,79 424,98 ,098,5
period 8.00 3.02 00 9.44 8.92 3.44 43.94
of the
prior
year
A
dd:
Chang
es in
accoun
ting
policie
s
E
rror
correct
ion in
the
prior
period
s
O
230
The 2023 Annual Report of Huadong Medicine Co., Ltd.
thers
II.
Balanc
e at the
beginn
1,753, 2,276, 104,64 - 1,229, 5,999, 11,154
ing of
995,34 383,54 5,000. 129,12 068,79 424,98 ,098,5
the
8.00 3.02 00 9.44 8.92 3.44 43.94
period
of the
current
year
III.
Amou
nt of
change
in the
-
current 52,978 126,56 630,31 830,54
430,00 20,125 129,12
period ,426.6 6,932. 4,657. 4,777.
0.00 ,630.9 9.44
(Decre 4 70 86 57
3
ases
are
indicat
ed by
“-”)
(I)
Total
compr 1,265, 1,265,
ehensi 43.94 669,32 669,37
ve 6.98 0.92
incom
e
(II)
Capital
contrib
uted -
53,207 73,763
by 430,00 20,125
,482.2 ,113.1
owners 0.00 ,630.9
0 3
and 3
capital
decrea
ses
1.
Comm
on 10,195 10,625
430,00
shares ,300.0 ,300.0
0.00
investe 0 0
d by
owners
2.
Capital
investe
d by
holder
s of
other
equity
231
The 2023 Annual Report of Huadong Medicine Co., Ltd.
instru
ments
3.
Amou
nt of
share-
based
43,012 43,012
payme
,182.2 ,182.2
nt
0 0
includ
ed in
owners
’
equity
-
20,125
4. 20,125
,630.9
Others ,630.9
3
3
(III) - -
126,56
Profit 635,22 508,65
6,932.
distrib 5,583. 8,650.
70
ution 62 92
1.
Withdr -
126,56
awal 126,56
6,932.
of 6,932.
70
surplus 70
reserve
2.
Distrib
ution - -
to 508,65 508,65
owners 8,650. 8,650.
(or 92 92
shareh
olders)
3.
Others
(IV)
Interna
l
-
conver 129,08
129,08
sion of 5.50
5.50
owners
’
equity
1.
Capital
(or
share
capital
)
increas
e from
capital
232
The 2023 Annual Report of Huadong Medicine Co., Ltd.
reserve
conver
sion
2.
Capital
(or
share
capital
)
increas
e from
surplus
reserve
conver
sion
3.
Recov
ery of
losses
by
surplus
reserve
4.
Retain
ed
earnin
gs
from
transfe
r of
change
s in the
define
d
benefit
plan
5.
Retain
ed
earnin
gs
from
-
transfe 129,08
129,08
r of 5.50
5.50
other
compr
ehensi
ve
incom
e
6.
Others
(V)
Specia
l
233
The 2023 Annual Report of Huadong Medicine Co., Ltd.
reserve
1.
Withdr
awal in
the
current
period
2. Use
in the
current
period
- -
(VI)
229,05 229,05
Others
5.56 5.56
IV.
Balanc
e at the 1,754, 2,329, 84,519 1,355, 6,629, 11,984
end of 425,34 361,96 ,369.0 635,73 739,64 ,643,3
the 8.00 9.66 7 1.62 1.30 21.51
current
period
Amount in previous period
Unit: yuan
2022
Other equity instruments Other
Less: compr Specia Surplu Total
Item Capital Undist
Share Preferr Perpet Treasu ehensi l s owners
reserve ributed Others
capital ed ual Others ry ve reserve reserve ’
s profit
shares bond stock incom s s equity
e
I.
Balanc
e at the
end of 1,749, 2,168, - 1,099, 5,340, 10,358
the 809,54 451,52 129,12 526,44 988,58 ,646,9
period 8.00 8.01 9.44 6.75 2.88 76.20
of the
prior
year
A
dd:
Chang
es in
accoun
ting
policie
s
E
rror
correct
ion in
the
prior
period
234
The 2023 Annual Report of Huadong Medicine Co., Ltd.
s
O
thers
II.
Balanc
e at the
beginn
1,749, 2,168, - 1,099, 5,340, 10,358
ing of
809,54 451,52 129,12 526,44 988,58 ,646,9
the
8.00 8.01 9.44 6.75 2.88 76.20
period
of the
current
year
III.
Amou
nt of
change
in the
current 107,93 104,64 129,54 658,43 795,45
4,185,
period 2,015. 5,000. 2,352. 6,400. 1,567.
800.00
(Decre 01 00 17 56 74
ases
are
indicat
ed by
“-”)
(I)
Total
compr 1,295, 1,295,
ehensi 423,52 423,52
ve 1.65 1.65
incom
e
(II)
Capital
contrib
uted
107,70 104,64
by 4,185, 7,243,
2,959. 5,000.
owners 800.00 759.45
45 00
and
capital
decrea
ses
1.
Comm
on 100,45 104,64
4,185,
shares 9,200. 5,000.
800.00
investe 00 00
d by
owners
2.
Capital
investe
d by
holder
235
The 2023 Annual Report of Huadong Medicine Co., Ltd.
s of
other
equity
instru
ments
3.
Amou
nt of
share-
based
payme 7,243, 7,243,
nt 759.45 759.45
includ
ed in
owners
’
equity
-
104,64
4. 104,64
5,000.
Others 5,000.
00
00
(III) - -
129,54
Profit 636,98 507,44
2,352.
distrib 7,121. 4,768.
17
ution 09 92
1.
Withdr -
129,54
awal 129,54
2,352.
of 2,352.
17
surplus 17
reserve
2.
Distrib
ution - -
to 507,44 507,44
owners 4,768. 4,768.
(or 92 92
shareh
olders)
3.
Others
(IV)
Interna
l
conver
sion of
owners
’
equity
1.
Capital
(or
share
capital
)
236
The 2023 Annual Report of Huadong Medicine Co., Ltd.
increas
e from
capital
reserve
conver
sion
2.
Capital
(or
share
capital
)
increas
e from
surplus
reserve
conver
sion
3.
Recov
ery of
losses
by
surplus
reserve
4.
Retain
ed
earnin
gs
from
transfe
r of
change
s in the
define
d
benefit
plan
5.
Retain
ed
earnin
gs
from
transfe
r of
other
compr
ehensi
ve
incom
e
6.
Others
(V)
237
The 2023 Annual Report of Huadong Medicine Co., Ltd.
Specia
l
reserve
1.
Withdr
awal in
the
current
period
2. Use
in the
current
period
(VI) 229,05 229,05
Others 5.56 5.56
IV.
Balanc
e at the 1,753, 2,276, 104,64 - 1,229, 5,999, 11,154
end of 995,34 383,54 5,000. 129,12 068,79 424,98 ,098,5
the 8.00 3.02 00 9.44 8.92 3.44 43.94
current
period
Huadong Medicine Co., Ltd.
Chairman of the Board: Lv Liang
April 18, 2024
238
