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股票

华东医药: 2022年第三季度报告(英文版)

来源:证券之星

2022-11-12 00:00:00

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

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