Financial Data and Key Metrics Changes - The company's revenue for 2023 is projected to be 9.4 billion, down from 10.4 billion in 2022, reflecting a decrease of 1 billion [10][11] - The decline in revenue is primarily attributed to the impact of centralized procurement on three key products, which saw a sales drop of approximately 1.7 billion [10][11] - Gross profit decreased by 800 million, leading to a net profit decline of 600 million [13][59] Business Line Data and Key Metrics Changes - The company has five innovative drugs that have entered the commercialization phase, with one recently approved [14][15] - The sales of non-centralized procurement products showed a growth rate of around 10%, while centralized procurement products experienced a significant decline [11][12] - The company aims to produce at least three marketable innovative drugs annually, with a focus on specialized fields such as central nervous system and dermatology [7][8] Market Data and Key Metrics Changes - The company is focusing on the Southeast Asian market, establishing a comprehensive platform for development, production, and commercialization [8][40] - The company acquired a 45% stake in a Southeast Asian CDMO factory to enhance production capabilities and meet market demands [41][42] - The overall market environment in Southeast Asia is seen as favorable, with a growing demand for high-quality innovative drugs [49][50] Company Strategy and Development Direction - The company is transitioning towards a model that emphasizes innovative drug development and commercialization, moving away from reliance on traditional products [6][7] - The strategic focus includes establishing a strong presence in specialized therapeutic areas and expanding into Southeast Asia as a key growth market [8][40] - The company has set ambitious internal KPIs for new drug approvals, aiming for 10 to 12 new drugs by 2027 [17][18] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the challenges posed by centralized procurement but remains optimistic about recovery in the second half of the year [35][56] - The company expects to achieve stable revenue in 2023, with a potential for double-digit growth starting in 2025 [57][58] - Management emphasizes the importance of innovative drugs in driving future profitability and market share [60][62] Other Important Information - The company has a robust pipeline of 13 innovative drugs, with several in various stages of regulatory approval [16][17] - The company is committed to maintaining a stable sales team despite recent challenges, ensuring continued support for new product launches [12][13] Q&A Session All Questions and Answers Question: What is the current status of the recently approved innovative products? - The recently approved methylene blue sustained-release tablet has just entered the commercialization phase, while other innovative products are progressing well in clinical applications [44][45] Question: How does the company assess the Southeast Asian market's payment capacity and policy differences? - The Southeast Asian market is seen as having a significant demand for both low-cost generics and high-quality innovative drugs, with a favorable environment for market entry [48][49] Question: What are the expectations for revenue growth in the second half of the year? - The company anticipates a positive growth trajectory in the second half of the year, with expectations for revenue to stabilize compared to the previous year [56][57]

研究报告Research Report 24 Apr 2024 康哲药业 China Medical System Holdings (867 HK) 集采下业绩承压，创新管线陆续迎来转化 Earnings Under Pressure Due to VBP, Expecting Transformation of Innovative Pipeline [观Ta点bl聚e_焦yem Inevie1s] tment Focus [Tab维le_持Inf优o] 于大市Maintain OUTPERFORM (Please see APPENDIX 1 for English summary) 事件 评级 优于大市OUTPERFORM 现价 HK$7.10 康哲药业公布 2023 年业绩：营业额 80.1 亿元（-12.4%）；若全按 目标价 HK$9.90 药品销售收入计算，营业额 94.7 亿元（-9.8%）。毛利率 76.2% HTI ESG 2.0-2.5-4.0 （-0.7pct）；销售费用 25.1 亿元（-7.7%），销售费用率 31.3% E-S-G: 0-5, (Please refer to ...

Financial Performance - Revenue decreased by 12.4% to RMB 8,013.3 million, compared to RMB 9,150.3 million in the previous year; if calculated based on pharmaceutical sales, revenue decreased by 9.8% to RMB 9,472.2 million[6]. - Gross profit decreased by 13.2% to RMB 6,109.2 million, compared to RMB 7,035.8 million in the previous year; if calculated based on pharmaceutical sales, gross profit decreased by 12.4% to RMB 6,053.7 million[6]. - Annual profit decreased by 27.2% to RMB 2,384.4 million, compared to RMB 3,276.2 million in the previous year; normalized annual profit decreased by 18.8% to RMB 2,709.3 million[6]. - Basic earnings per share decreased by 26.3% to RMB 0.9792, compared to RMB 1.3281 in the previous year[6]. - The proposed final dividend per share is RMB 0.0783, resulting in a total dividend of RMB 0.3917 per share for the year, a decrease of 26.7% from the previous year[6]. - The group's sales revenue for the year was RMB 8,013.3 million, a decrease of 12.4% compared to RMB 9,150.3 million in 2022[34]. - The annual profit was RMB 2,384.4 million, down 27.2% from RMB 3,276.2 million in 2022[34]. - The normalized annual profit decreased by 18.8% to RMB 2,709.3 million from RMB 3,338.3 million in 2022[34]. Product Development and Innovation - The company launched three innovative drugs in China, all of which were included in the national medical insurance catalog[7][8]. - The company obtained exclusive promotion rights for a new drug Y-3 injection for ischemic stroke in August 2023, with clinical trials progressing steadily[10]. - The innovative drug Tretinoin injection has entered large-scale clinical application[14]. - Three innovative drugs, including Diazepam nasal spray, Tretinoin injection, and Methotrexate injection, were successfully approved for listing in China, significantly enhancing accessibility and affordability[19]. - The company has approximately 30 differentiated innovative pipeline products, actively promoting clinical development and commercialization[17]. - The exclusive licensing rights for the new generation iron-based non-calcium phosphate binder, Sucrose Hydroxyl Iron Chewable Tablets, were successfully obtained, marking the fourth innovative drug entering the commercialization phase[19]. - The company has established a collaborative framework with Junshi Bioscience to commercialize Tretinoin in Southeast Asia, enhancing the availability of high-quality innovative drugs for local cancer patients[14]. - The innovative medical device EyeOP1 for glaucoma treatment has completed market access work in multiple provinces and cities[14]. - The company is focusing on specialized deep development in cardiovascular, digestive, dermatology, and ophthalmology sectors to accelerate expansion and ensure sustainable growth[22]. - The company is advancing clinical development for methotrexate injection for rheumatoid arthritis, with NDA acceptance in December 2023, aiming to become the first subcutaneous treatment for RA in China[46]. - The diazepam nasal spray has been recognized in expert consensus guidelines for the treatment of Dravet syndrome, indicating its clinical significance[39]. - The Yiluqu injection has been recommended in multiple authoritative psoriasis treatment guidelines globally, enhancing its market credibility[43]. - The methotrexate injection demonstrated better gastrointestinal safety compared to oral methotrexate, improving patient compliance[48]. - The company is progressing with over ten clinical trials focused on registration-based randomized controlled trials (RCTs), creating a robust pipeline[36]. - The innovative product pipeline is expected to drive future growth and market expansion, leveraging existing product synergies[36]. Market and Business Strategy - The company is committed to developing affordable differentiated pharmaceutical products to improve accessibility for patients in China and other developing countries[27]. - The Southeast Asia business, "Kanglian Health," has rapidly introduced a diverse product portfolio, covering various countries in the region[25]. - The group is expanding its international business into the Middle East and North Africa, establishing a commercialization network in emerging markets[25]. - The company is exploring market expansion opportunities both domestically and internationally[64]. - The company is engaged in strategic collaborations to enhance its research and development capabilities[64]. - The company aims to become "China's leading ophthalmic medical device company" through continuous optimization of its ophthalmic business[24]. - The company is enhancing its international supply chain and production capacity to ensure supply chain security and stability[25]. - The company has implemented organizational restructuring to enhance execution capabilities throughout the product lifecycle, ensuring a more agile modern organization[20]. Financial Management and Operations - Cash generated from operating activities was RMB 2,502.9 million, a decrease of 29.6% from RMB 3,553.2 million in the previous year[129]. - Cash used in investing activities decreased by 62.5% to RMB 442.3 million, compared to RMB 1,178.2 million in the previous year[130]. - Total bank borrowings decreased to RMB 1,269.7 million from RMB 1,783.3 million, with the debt-to-asset ratio declining to 7.2% from 10.0%[135]. - The company plans to utilize long-term bank loans and other financing tools to meet liquidity needs based on its development strategy and cash flow from operations[132]. - The group closely monitors interest rates and foreign exchange market fluctuations to mitigate risks[137]. - The group has signed several foreign exchange forward contracts to hedge foreign exchange risks as of December 31, 2023[136]. - The company has received clinical trial approval for the innovative drug TYK2 inhibitor (CMS-D001) from China's NMPA in January 2024[65]. - The company has also obtained clinical trial approval for the GnRH receptor antagonist (CMS-D002) from China's NMPA in February 2024[65]. Corporate Governance and Management - The company has implemented a share incentive plan on January 17, 2024, to motivate and retain key employees[188]. - The management team includes experienced professionals with over 10 years in marketing, operations, and finance, enhancing the company's strategic capabilities[165][166][180]. - The board of directors will present resolutions for the re-election of three directors at the upcoming annual general meeting[181]. - The company has confirmed the independence of all non-executive directors in accordance with listing rules[182]. - The company has approved the addition of five employees to its core employee benefits plan during the reporting period[186]. - The company has implemented a share incentive plan aimed at encouraging core management and key personnel to contribute to the launch and sales of new products[189]. - The total number of shares that can be purchased under the share incentive plan is capped at 100,000,000 shares, representing approximately 4% of the company's issued share capital as of the report date[192]. - The maximum number of shares that can be granted to any selected employee within any 12-month period shall not exceed 1% of the company's issued share capital at any time[193]. - The share incentive plan is set to be effective from January 17, 2024, and will last for ten years, with a remaining duration of 9 years and 9 months as of the report date[197]. - The board of directors sets performance targets based on the number of new products launched and their sales revenue[196]. Research and Development - Research and development expenses increased by 11.7% to RMB 815.9 million, representing 10.2% of revenue, up from 8.0% in the previous year, with R&D expenses alone rising by 55.6% to RMB 195.1 million[113]. - The company is focused on accelerating the clinical development and registration process of innovative products to continuously meet clinical demands[104]. - The company emphasizes its commitment to innovation and research in the pharmaceutical sector[65]. - The company is actively pursuing clinical trials for new treatments for conditions like acute ischemic stroke and non-alcoholic fatty liver disease[65]. - The company has a pipeline of products in various stages of clinical trials, including those for glaucoma and skin diseases[65].

Financial Performance - Revenue decreased by 12.4% to RMB 8,013.3 million compared to RMB 9,150.3 million in 2022; pharmaceutical sales revenue decreased by 9.8% to RMB 9,472.2 million from RMB 10,497.5 million in 2022[5] - Gross profit declined by 13.2% to RMB 6,109.2 million from RMB 7,035.8 million in 2022; gross profit from pharmaceutical sales decreased by 12.4% to RMB 6,053.7 million from RMB 6,910.5 million in 2022[5] - Annual profit fell by 27.2% to RMB 2,384.4 million from RMB 3,276.2 million in 2022; normalized annual profit decreased by 18.8% to RMB 2,709.3 million from RMB 3,338.3 million in 2022[5] - Basic earnings per share decreased by 26.3% to RMB 0.9792 from RMB 1.3281 in 2022[5] - The company reported a net profit of RMB 2,384,430 thousand for 2023, a decline of 27.3% from RMB 3,276,195 thousand in the previous year[13] - The company's basic earnings per share for 2023 was RMB 0.9792, a decrease of 26.3% from RMB 1.3281 in 2022[13] - The company's annual profit was RMB 2,384.4 million, down 27.2% from RMB 3,276.2 million in the previous year[62] - The company's normalized annual profit decreased by 18.8% to RMB 2,709.3 million from RMB 3,338.3 million in 2022[62] Dividends - Proposed final dividend per share is RMB 0.0783, resulting in a total dividend of RMB 0.3917 per share for the year, a decrease of 26.7% from RMB 0.5344 in 2022[5] - The company declared an interim dividend of RMB 0.3134 per share for 2023, up from RMB 0.2930 per share in 2022, totaling RMB 768,453 thousand[42] - The proposed final dividend for 2023 is RMB 0.0783 per share, down from RMB 0.2414 per share in 2022, amounting to RMB 191,991 thousand[42] Cash and Assets - As of December 31, 2023, cash and cash equivalents amounted to RMB 4,311.1 million, with bank acceptance bills of RMB 181.0 million[5] - The company’s cash and cash equivalents stood at RMB 4,311,058 thousand as of December 31, 2023, slightly down from RMB 4,376,376 thousand in 2022[14] - Total assets as of December 31, 2023, were RMB 15,682,051 thousand, compared to RMB 14,876,436 thousand in 2022, reflecting a growth of 5.4%[14] - Current assets net value increased to RMB 6,745,649 thousand in 2023, up from RMB 5,952,273 thousand in 2022, representing a rise of 13.3%[14] - The company’s equity attributable to owners increased to RMB 15,520,208 thousand in 2023, compared to RMB 14,589,067 thousand in 2022, marking a growth of 6.4%[16] Research and Development - Research and development expenses increased to RMB 195,134 thousand in 2023, up 55.5% from RMB 125,431 thousand in 2022[13] - The company is expanding its innovative pipeline, with several new drugs progressing through clinical trials and regulatory approvals, including a new oral formulation for treating rheumatoid arthritis[10][12] - The company is advancing clinical development for multiple innovative products, with several projects in the pipeline for clinical trials[65] - The company has ongoing research and development for multiple innovative drugs, with a total of approximately 10 new drugs in the pipeline[87] Innovative Products - Three innovative drugs were successfully approved for market launch in China and included in the national medical insurance catalog, enhancing the foundation for rapid commercialization[6][7] - The first diazepam nasal spray (Vituco) was approved in June 2023 and included in China's national medical insurance directory in December 2023, marking a significant advancement in acute treatment for epilepsy patients[66] - The diazepam nasal spray is the first drug approved by China's NMPA for treating cluster seizures in patients aged 6 and above, offering a rapid and convenient administration method[66] - The NDA for Methotrexate injection for treating active rheumatoid arthritis was accepted in December 2023, with promising clinical trial results indicating non-inferiority to oral methotrexate[73] - The innovative biological agent for moderate to severe plaque psoriasis, targeting IL-23 p19 subunit, has been approved for marketing in China and included in the national medical insurance catalog[99] Market Expansion - The company is enhancing its international presence through the acquisition of a production facility in Singapore and expanding its CDMO business in Southeast Asia to improve drug accessibility[12] - The company has expanded its business into Southeast Asia, aiming to internationalize high-quality pharmaceutical products[60] - The strategic focus on Southeast Asia is driven by increasing pharmaceutical demand due to aging populations and the rising burden of non-communicable diseases in the region[111] Financial Management - Financial expenses decreased slightly to RMB 46.3 million in 2023 from RMB 49.1 million in 2022[36] - The income tax expense for 2023 was RMB 481.3 million, compared to RMB 476.1 million in 2022, reflecting stable tax obligations[36] - The effective corporate income tax rate for the company's Chinese subsidiaries is 25%, with a reduced rate of 15% for Tianjin Kangzhe[37] - The company experienced a foreign exchange gain of RMB 31.5 million in 2023, a significant improvement from a loss of RMB 126.2 million in 2022[35] Compliance and Governance - The company has complied with applicable corporate governance codes during the reporting period, ensuring adherence to regulatory standards[161] - The audit committee held three meetings during the year ended December 31, 2023, with attendance rates of 100% for the chairman and one member, and 66.67% for another member[163] - The board proposed amendments to the existing articles of association to comply with new electronic communication requirements effective from December 31, 2023[169] Operational Efficiency - Selling expenses decreased by 7.7% to RMB 2,511.3 million, accounting for 31.3% of revenue, an increase of 1.6 percentage points year-on-year[127] - Administrative expenses increased by 3.1% to RMB 656.6 million, representing 8.2% of revenue, up 1.2 percentage points from the previous year[128] - R&D expenditures rose by 11.7% to RMB 815.9 million, accounting for 10.2% of revenue, an increase of 2.2 percentage points year-on-year[129] Customer and Market Dynamics - In the fiscal year ending December 31, 2023, the largest customer accounted for 20.2% of the company's revenue, up from 14.4% in 2022[34] - The company has not reported any individual customer contributing more than 10% of revenue aside from the largest customer[34] - The group has a strong market presence in the inflammatory bowel disease treatment segment, with the drug "莎爾福" (Mesalazine) holding the top market share in China[92]

Financial Performance - Revenue increased by 3.6% to RMB 4,610.1 million compared to RMB 4,447.8 million in the same period last year; if calculated based on pharmaceutical sales, revenue grew by 7.1% to RMB 5,536.6 million from RMB 5,170.0 million[9]. - Gross profit rose by 4.9% to RMB 3,605.9 million, up from RMB 3,436.2 million in the previous year; if based on pharmaceutical sales, gross profit increased by 5.7% to RMB 3,567.3 million from RMB 3,375.0 million[9]. - Net profit for the period grew by 6.7% to RMB 1,916.0 million, compared to RMB 1,796.3 million in the same period last year[9]. - Basic earnings per share increased by 7.0% to RMB 0.7835 from RMB 0.7325 in the previous year[9]. - The operating profit for the same period was RMB 1,916.0 million, reflecting a year-on-year growth of 6.7% from RMB 1,796.3 million in the previous year[17]. - The group's profit for the period grew by 6.7% to RMB 1,916.0 million, compared to RMB 1,796.3 million in the same period last year[82]. - The company reported a net profit of RMB 3,258,992 for the period, contributing significantly to the overall equity growth[123]. Dividends and Shareholder Returns - Declared interim dividend of RMB 0.3134 per share, a 7.0% increase from RMB 0.2930 in the same period last year[9]. - The board declared an interim dividend of RMB 0.3134 per share for the six months ending June 30, 2023, expected to be paid on September 20, 2023[100]. - The proposed dividend for the period is RMB 591,910, indicating a commitment to returning value to shareholders[123]. - The company paid dividends amounting to RMB 591,910 thousand during the reporting period, compared to RMB 557,594 thousand in the previous year[126]. Research and Development - Three innovative drugs were approved for marketing in China during the reporting period, marking a significant milestone in the company's R&D efforts[11]. - The company is advancing multiple innovative products, including a nasal spray for acute repetitive seizures and a monoclonal antibody for moderate to severe psoriasis, which were recently approved in China[14]. - Continuous improvement of the product development system is being implemented to support the commercialization of innovative products[19]. - Research and development expenses surged by 89.6% to RMB 238.9 million, representing 5.2% of revenue, an increase of 2.4 percentage points from 2.8%[73]. - The company is focusing on enhancing its research and development capabilities to innovate and improve its product offerings[123]. Market Expansion and Strategic Partnerships - Collaboration with Junshi Biosciences to commercialize Tislelizumab in Southeast Asia, enhancing access to innovative treatments for local cancer patients[13]. - The company is expanding its Southeast Asia business, enhancing market access for high-quality pharmaceutical products from both overseas and China[16]. - The company aims to expand its presence in the Southeast Asian market, leveraging high-quality pharmaceutical products from Europe, the U.S., Japan, and China[66]. - The company established a partnership with Junshi Biosciences to co-develop and commercialize the intravenous injection of Tretinoin Monoclonal Antibody in nine Southeast Asian countries[58]. Product Development and Innovation - The company is actively developing innovative products, with several in the pipeline, including Y-3 injection, which received exclusive promotion rights in mainland China, Hong Kong, and Macau[35]. - The approval of the IL-23 targeted monoclonal antibody, Tzab, provides a safer and more effective treatment option for moderate to severe plaque psoriasis patients, with a PASI 75 response rate of 91.3% at week 52[24]. - The methotrexate injection, the first subcutaneous formulation in China, offers improved patient compliance and reduced gastrointestinal side effects compared to oral administration[25]. - The company is developing new products targeting various conditions, including SDN-037 for post-cataract surgery pain and inflammation, and PDP-716 for glaucoma[35]. Financial Position and Assets - As of June 30, 2023, the group's bank balances and cash amounted to RMB 4,451.4 million, with bank acceptances of RMB 254.9 million[9]. - The total assets as of June 30, 2023, were RMB 16,165,907,000, compared to RMB 14,876,436,000 at the end of 2022, showing a growth in asset base[119]. - The company's total assets reached RMB 16,165,907, up from RMB 14,876,436, marking an increase of approximately 8.7%[121]. - The company holds investments in associates valued at RMB 5,501,542,000 as of June 30, 2023, up from RMB 3,326,859,000 at the end of 2022[143]. Operational Efficiency and Compliance - The company emphasizes compliance and has implemented a detailed compliance control system, including real-time monitoring and effective early warning mechanisms[38]. - The company has adhered to the corporate governance code and has established an audit committee to oversee financial reporting and risk management[113]. - The company plans to continue monitoring its management structure and may make adjustments as necessary to enhance operational efficiency[113]. Inventory and Receivables Management - Inventory increased by 29.2% to RMB 616.4 million, with an average inventory turnover period of 100 days, up 4 days from the previous year[83]. - Trade receivables decreased by 6.2% to RMB 1,353.2 million, with an average turnover period of 72 days, down 2 days from the previous year[84]. - Trade payables increased by 37.7% to RMB 245.1 million, with an average turnover period of 39 days, up 14 days from the previous year[86]. Human Resources and Team Development - As of June 30, 2023, the group has a total of 5,622 employees, with a focus on optimizing organizational structure and performance management[108]. - The company has implemented a human resources platform construction and regular training empowerment plan to enhance team professional skills and organizational execution[44]. Market Segmentation and Revenue Breakdown - The cardiovascular segment achieved revenue of RMB 2,131.4 million, a decrease of 0.5% year-on-year; if calculated based on pharmaceutical sales revenue, it reached RMB 3,096.2 million, an increase of 5.9%, accounting for 55.9% of the total pharmaceutical sales revenue[45]. - The digestive segment generated revenue of RMB 1,779.9 million, an increase of 4.2% year-on-year, representing 32.1% of the total pharmaceutical sales revenue[45]. - The dermatology and aesthetic segment reported revenue of RMB 245.7 million, a growth of 27.4% year-on-year, contributing 4.4% to the total pharmaceutical sales revenue[45]. - The ophthalmology segment achieved revenue of RMB 245.6 million, an increase of 29.6% year-on-year, also accounting for 4.4% of the total pharmaceutical sales revenue[45].

[Interim Results Announcement](index=1&type=section&id=Interim%20Results%20Announcement) [Financial Highlights](index=1&type=section&id=Financial%20Highlights) During the reporting period, CMS Pharma achieved steady growth in turnover and gross profit, with increased profit for the period and basic earnings per share, and declared an interim dividend, indicating a healthy financial position | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Turnover | 4,610.1 | 4,447.8 | 3.6% | | Turnover from Pharmaceutical Product Sales | 5,536.6 | 5,170.0 | 7.1% | | Gross Profit | 3,605.9 | 3,436.2 | 4.9% | | Gross Profit from Pharmaceutical Product Sales | 3,567.3 | 3,375.0 | 5.7% | | Profit for the Period | 1,916.0 | 1,796.3 | 6.7% | | Basic Earnings Per Share (RMB) | 0.7835 | 0.7325 | 7.0% | | Bank Balances and Cash (as of June 30, 2023) | 4,451.4 | - | - | | Readily Realizable Bank Acceptance Bills (as of June 30, 2023) | 254.9 | - | - | | Interim Dividend Per Share (RMB) | 0.3134 | 0.2930 | 7.0% | [Business Highlights](index=2&type=section&id=Business%20Highlights) During the reporting period, CMS Pharma's operating performance continued to grow, with three innovative drugs approved for marketing in China, marking a harvest period for innovation and R&D - The Group's operating performance continued to grow during the reporting period, with three innovative drugs approved for marketing in China, marking a harvest cycle for innovation and R&D[4](index=4&type=chunk) - Independently operated dermatology and medical aesthetics, ophthalmology, and Southeast Asia business systems are maturing, safeguarding the Group's continuous high-quality development[4](index=4&type=chunk) - Diazepam Nasal Spray: China's first approved diazepam nasal spray, offering convenient administration and rapid onset for acute recurrent epileptic seizures[4](index=4&type=chunk) - Tildrakizumab Injection: A specific IL-23 targeting monoclonal antibody, with fewer injections and good long-term safety and tolerability, providing a better treatment option for moderate-to-severe psoriasis patients[4](index=4&type=chunk) - Methotrexate Injection (Psoriasis Indication): China's first subcutaneous MTX pre-filled syringe, meeting the basic treatment needs of psoriasis patients[4](index=4&type=chunk) - Methylene Blue Enteric-Coated Sustained-Release Tablets: China NDA is under CDE review, used to enhance diagnostic sensitivity for colorectal cancer or precancerous lesions[4](index=4&type=chunk) - Methotrexate Injection (RA Indication): China bridging trial has completed enrollment of all subjects[4](index=4&type=chunk) - Dedosertat Tablets: An innovative oral HIF-PHI, China Phase III clinical trial is steadily progressing, with enrollment of all subjects completed in August[4](index=4&type=chunk) - Dermatology and Medical Aesthetics "CMS Beauty": Tildrakizumab Injection approved for marketing, synergistically developing with existing products Hylatopic and Ansoxine; obtained exclusive China license for "Sculptra" (poly-L-lactic acid microsphere filler), a regenerative light medical aesthetic injectable product[4](index=4&type=chunk) - Ophthalmology "CMS Vision": Innovative medical device EyeOP1® Glaucoma Treatment System achieved market access in multiple provinces and cities; China clinical trial application for Class I innovative biologic VEGF+ANG2 tetravalent bispecific antibody approved[4](index=4&type=chunk) - Southeast Asia "CMS Health": Partnered with Junshi Biosciences to jointly promote the commercialization of Toripalimab in Southeast Asia[4](index=4&type=chunk) [Condensed Consolidated Financial Statements](index=3&type=section&id=Condensed%20Consolidated%20Financial%20Statements) [Condensed Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=3&type=section&id=Condensed%20Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the six months ended June 30, 2023, CMS Pharma's turnover and gross profit increased, with profit for the period rising 6.7% year-on-year, and profit attributable to owners was RMB 1,921.1 million | Indicator (RMB thousands) | Six Months Ended June 30, 2023 (Unaudited) | Six Months Ended June 30, 2022 (Unaudited) | | :--- | :--- | :--- | | Turnover | 4,610,127 | 4,447,791 | | Cost of Sales | (1,004,237) | (1,011,641) | | Gross Profit | 3,605,890 | 3,436,150 | | Other Income | 133,710 | 108,793 | | Other Gains and Losses | 97,262 | 60,146 | | Selling Expenses | (1,339,620) | (1,278,460) | | Administrative Expenses | (317,984) | (279,676) | | Research and Development Expenses | (75,740) | (55,551) | | Finance Costs | (21,208) | (18,112) | | Share of Profits of Associates | 197,816 | 82,424 | | Share of Profits of Joint Ventures | 2,466 | - | | Profit Before Tax | 2,282,592 | 2,055,714 | | Income Tax Expense | (366,641) | (259,390) | | Profit for the Period | 1,915,951 | 1,796,324 | | Profit for the Period Attributable to Owners of the Company | 1,921,056 | 1,798,736 | | Profit for the Period Attributable to Non-controlling Interests | (5,105) | (2,412) | | Basic Earnings Per Share (RMB) | 0.7835 | 0.7325 | [Condensed Consolidated Statement of Financial Position](index=4&type=section&id=Condensed%20Consolidated%20Statement%20of%20Financial%20Position) As of June 30, 2023, CMS Pharma's total assets increased from December 31, 2022, with a significant rise in net current assets and equity, reflecting strengthened financial position | Indicator (RMB thousands) | June 30, 2023 (Unaudited) | December 31, 2022 (Audited) | | :--- | :--- | :--- | | **Non-current Assets** | | | | Property, Plant and Equipment | 402,602 | 425,480 | | Interests in Associates | 3,220,405 | 3,044,818 | | Intangible Assets | 1,925,074 | 2,066,423 | | Goodwill | 1,547,903 | 1,665,993 | | Prepayments for Purchase of Intangible Assets | 1,388,911 | 1,285,415 | | Deferred Tax Assets | 48,918 | 39,007 | | **Current Assets** | | | | Inventories | 616,448 | 477,206 | | Financial Assets at Fair Value Through Profit or Loss | 1,629,112 | 1,491,336 | | Trade and Other Receivables and Prepayments | 1,950,952 | 2,043,944 | | Amounts Due from Associates | 493,550 | 328,072 | | Bank Balances and Cash | 4,451,367 | 4,376,376 | | **Current Liabilities** | | | | Trade and Other Payables | 496,082 | 563,194 | | Bank Borrowings | 1,281,485 | 1,783,337 | | Tax Liabilities | 400,000 | 327,819 | | Net Current Assets | 7,024,056 | 5,952,273 | | **Equity and Reserves** | | | | Equity Attributable to Owners of the Company | 15,984,136 | 14,589,067 | | Non-controlling Interests | 47,604 | 148,010 | | **Non-current Liabilities** | | | | Deferred Tax Liabilities | 107,878 | 124,959 | [Notes to Condensed Consolidated Financial Statements](index=6&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section outlines the basis of preparation, significant accounting policies, and revenue and segment information for the condensed consolidated financial statements, ensuring transparency and compliance [Basis of Preparation](index=6&type=section&id=Basis%20of%20Preparation) These condensed consolidated financial statements are prepared in accordance with IAS 34 Interim Financial Reporting and relevant disclosure requirements of Appendix 16 of the Listing Rules - These condensed consolidated financial statements are prepared in accordance with International Accounting Standard 34 Interim Financial Reporting issued by the International Accounting Standards Board and the relevant disclosure requirements of Appendix 16 to the Listing Rules[8](index=8&type=chunk) [Significant Accounting Policies](index=6&type=section&id=Significant%20Accounting%20Policies) These condensed consolidated financial statements are primarily prepared on a historical cost basis, adopting new or revised IFRSs effective during the period, with no material impact on presented amounts or disclosures - These condensed consolidated financial statements are prepared on the historical cost basis, except for certain financial instruments which are measured at their applicable fair values[9](index=9&type=chunk) - The adoption of new or revised International Financial Reporting Standards has no material impact on the amounts presented in these condensed consolidated financial statements and their disclosures[9](index=9&type=chunk) [Revenue and Segment Information](index=7&type=section&id=Revenue%20and%20Segment%20Information) The Group's turnover primarily derives from selling pharmaceutical products to distributors and providing promotion services to manufacturers, with one reportable operating segment mainly within the PRC - The Group's turnover primarily comprises sales of pharmaceutical products to various distributors and provision of promotion services to certain pharmaceutical manufacturers[10](index=10&type=chunk) - During the reporting period, the Group had one reportable operating segment, namely the marketing, promotion, sales, and manufacturing of pharmaceutical products[10](index=10&type=chunk) | Source of Revenue (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Sales of Pharmaceutical Products | 3,278,537 | 3,330,644 | | Promotion Income | 1,331,590 | 1,117,147 | | **Total Turnover** | **4,610,127** | **4,447,791** | [Notes to Condensed Consolidated Financial Statements (Continued)](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Continued)) [Income Tax Expense](index=8&type=section&id=Income%20Tax%20Expense) During the reporting period, the Group's income tax expense significantly increased by 41.3%, primarily due to higher withholding tax related to internal dividend distribution | Tax Category (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | **Current Tax** | | | | PRC Enterprise Income Tax | 249,366 | 178,665 | | Hong Kong Profits Tax | 43,559 | 3,219 | | Macau Complementary Income Tax | 84,885 | 72,899 | | **Deferred Tax** | | | | Current Period | (11,169) | 4,607 | | **Income Tax Expense for the Period** | **366,641** | **259,390** | - Income tax expense for the period increased by **41.3%**, primarily due to an increase in withholding tax related to the Group's internal dividend distribution[64](index=64&type=chunk) [Profit for the Period](index=8&type=section&id=Profit%20for%20the%20Period) Profit for the period was calculated considering factors such as depreciation, amortization, inventory costs, interest income, and exchange gains/losses, with net exchange gains positively impacting profit | Item (RMB thousands) | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Depreciation of Property, Plant and Equipment | 22,495 | 21,477 | | Amortization of Intangible Assets (included in cost of sales) | 81,050 | 83,012 | | Inventory Costs Recognized as Expense | 918,741 | 923,913 | | Interest Income | (64,876) | (51,742) | | Net Exchange (Gains) Losses | (69,095) | 50,162 | [Dividends](index=9&type=section&id=Dividends) The company paid a final dividend for 2022 during the reporting period and decided to declare an interim dividend for 2023 after the period, showing an increase from the prior year | Dividend Type | Amount Per Share (RMB) | Total (RMB thousands) | Comparison Period | | :--- | :--- | :--- | :--- | | 2022 Final Dividend | 0.2414 | 591,910 | Six Months Ended June 30, 2022 | | 2021 Final Dividend | 0.2269 | 557,594 | Six Months Ended June 30, 2022 | | 2023 Interim Dividend | 0.3134 | 768,453 | Post-reporting period decision | | 2022 Interim Dividend | 0.2930 | 718,645 | Post-reporting period decision | [Earnings Per Share](index=9&type=section&id=Earnings%20Per%20Share) For the six months ended June 30, 2023, basic earnings per share attributable to owners of the company increased to RMB 0.7835 from the prior year | Indicator | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Earnings Used to Calculate Basic Earnings Per Share (Profit for the Period Attributable to Owners of the Company) (RMB thousands) | 1,921,056 | 1,798,736 | | Weighted Average Number of Ordinary Shares Used to Calculate Basic Earnings Per Share | 2,451,988,512 | 2,455,551,910 | | Basic Earnings Per Share (RMB) | 0.7835 | 0.7325 | - For the six months ended June 30, 2023 and 2022, the calculation of diluted earnings per share assumes that non-controlling shareholders of subsidiaries do not exercise their put options, as exercising them would result in an increase in earnings per share[15](index=15&type=chunk) [Trade and Other Receivables and Prepayments](index=10&type=section&id=Trade%20and%20Other%20Receivables%20and%20Prepayments) As of June 30, 2023, the Group's trade receivables (net of credit loss allowance) decreased from year-end 2022, with most receivables within credit terms, indicating good management | Item (RMB thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Trade Receivables | 1,362,858 | 1,451,678 | | Less: Allowance for Credit Losses | (9,643) | (9,643) | | **Net Trade Receivables** | **1,353,215** | **1,442,035** | | Bills Receivable | 254,921 | 269,579 | | Prepayments for Purchases | 179,292 | 211,746 | | Other Receivables and Deposits | 163,524 | 120,584 | | **Total** | **1,950,952** | **2,043,944** | - The Group generally grants credit terms of **0 to 90 days** to trade customers, which can be extended to four months for certain selected customers[16](index=16&type=chunk) | Ageing of Trade Receivables (RMB thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | 0 - 90 Days | 1,302,237 | 1,363,828 | | 91 - 365 Days | 35,949 | 57,802 | | Over 365 Days | 15,029 | 20,405 | | **Total** | **1,353,215** | **1,442,035** | [Amounts Due from Associates](index=11&type=section&id=Amounts%20Due%20from%20Associates) As of June 30, 2023, amounts due from associates included non-trade exclusive distribution right deposits and trade-related promotion income, with a significant increase in trade-related amounts - As of June 30, 2023, an amount of approximately **RMB 30,000,000** was non-trade in nature and non-interest bearing, representing a deposit for exclusive distribution rights paid to Tibet Pharmaceutical[18](index=18&type=chunk) - As of June 30, 2023, an amount of approximately **RMB 493,550,000** was trade in nature and non-interest bearing, representing promotion income receivable from Tibet Pharmaceutical, an increase from RMB 328,072,000 at December 31, 2022[18](index=18&type=chunk) - The Group grants Tibet Pharmaceutical a credit period of **90 days**, and the ageing of trade receivables as of June 30, 2023, was within three months[18](index=18&type=chunk) [Trade and Other Payables](index=11&type=section&id=Trade%20and%20Other%20Payables) As of June 30, 2023, the Group's trade payables increased from year-end 2022, while salaries and welfare payables, other tax payables, and accrued promotion expenses decreased | Item (RMB thousands) | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Trade Payables** | | | | 0 - 90 Days | 242,229 | 164,837 | | 91 - 365 Days | 1,948 | 11,715 | | Over 365 Days | 933 | 1,457 | | **Total Trade Payables** | **245,110** | **178,009** | | Salaries and Welfare Payables | 133,100 | 200,360 | | Other Tax Payables | 28,906 | 61,318 | | Accrued Promotion Expenses | 50,482 | 71,273 | | Accrued Expenses | 24,710 | 34,743 | | Other Payables | 13,774 | 17,491 | | **Total** | **496,082** | **563,194** | - The credit period for goods purchased ranges from **0 to 120 days**[18](index=18&type=chunk) [Management Discussion and Analysis](index=12&type=section&id=Management%20Discussion%20and%20Analysis) [Company Overview](index=12&type=section&id=Company%20Overview) CMS Pharma is an open platform company connecting pharmaceutical innovation with commercialization, managing product lifecycles, and has a strong commercialization capability in China, with a focus on R&D and investment - CMS Pharma is an open platform company that connects pharmaceutical innovation with commercialization and manages the entire product lifecycle, committed to providing competitive products and services to meet unmet medical needs[20](index=20&type=chunk) - The Group has been deeply rooted in the Chinese market for **31 years**, possessing proven successful commercialization capabilities, and has formed an innovation research strategy centered on "joint R&D and investment"[20](index=20&type=chunk) - Approximately **30 innovative products** with differentiated competitive advantages for short, medium, and long terms have been strategically deployed, with **3** of them successfully approved for marketing in China in the first half of this year[20](index=20&type=chunk) - The Group is deeply engaged in specialized disease areas such as cardiovascular, digestive, central nervous system, dermatology, ophthalmology, and pediatrics, and independently operates "CMS Beauty" (dermatology and medical aesthetics), "CMS Vision" (ophthalmology), and Southeast Asia businesses[20](index=20&type=chunk) [Business Review](index=12&type=section&id=Business%20Review) In H1 2023, CMS Pharma executed its innovation strategy, achieving continuous growth in operating performance with three innovative drugs approved and enhanced sales and profit from existing exclusive/branded drugs - During the reporting period, CMS Pharma steadfastly executed its innovation development strategy guided by actual clinical needs, steadily entering a harvest cycle for innovation, with **three innovative drugs** with differentiated advantages approved for marketing in China[21](index=21&type=chunk) - The Group continued to leverage the academic differentiation advantages of its existing exclusive/branded drugs, and with the combined support of a specialized business structure and compliant, refined internal controls, achieved continuous growth in operating performance[21](index=21&type=chunk) | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Sales Revenue | 4,610.1 | 4,447.8 | 3.6% | | Turnover from Pharmaceutical Product Sales | 5,536.6 | 5,170.0 | 7.1% | | Profit for the Period | 1,916.0 | 1,796.3 | 6.7% | [Innovation Research](index=12&type=section&id=Innovation%20Research) CMS Pharma leverages an open innovation platform to develop differentiated products in key therapeutic areas, efficiently advancing clinical development and commercialization, while enhancing R&D systems and digital management - The Group is based on an open innovation product incubation platform, deeply connecting global original innovation resources, targeting real clinical needs, and strategically deploying innovative products with differentiated advantages in advantageous specialized fields[22](index=22&type=chunk)[23](index=23&type=chunk) - Continuously improving the product R&D system that covers the entire lifecycle of innovative products, deepening the integration of "industry, academia, and research," and strengthening the ability to verify innovative technologies such as basic research and target analysis[23](index=23&type=chunk) - Promoting the digitalization and standardization of the entire product management process, comprehensively enhancing the organizational capability and execution efficiency of product value assessment, medical development, clinical operations, and registration management[23](index=23&type=chunk) [Innovation Transformation Entering Harvest Period](index=13&type=section&id=Innovation%20Transformation%20Entering%20Harvest%20Period) CMS Pharma achieved significant milestones in innovation, with three differentiated innovative products approved in China in H1 2023, enriching its commercial product matrix and advancing other pipeline developments - In the first half of 2023, the Group successfully obtained approval for **three innovative products** with differentiated advantages in China: Diazepam Nasal Spray, Tildrakizumab Injection, and Methotrexate Injection (Psoriasis indication)[24](index=24&type=chunk) - Methylene Blue Enteric-Coated Sustained-Release Tablets are currently under review for China New Drug Application (NDA); bridging trials for Methotrexate Injection (RA indication) and Dedosertat Tablets are progressing smoothly[24](index=24&type=chunk) [Three Innovative Products Approved in China](index=13&type=section&id=Three%20Innovative%20Products%20Approved%20in%20China) In H1 2023, CMS Pharma successfully obtained approval for three innovative drugs in China: Diazepam Nasal Spray, Tildrakizumab Injection, and Methotrexate Injection, all offering significant clinical advantages and market potential - Diazepam Nasal Spray: China's first approved drug for cluster epileptic seizures, suitable for children aged 6 and above and adults, offering differentiated advantages of convenient administration and rapid onset, expected to meet the treatment needs of nearly **500,000** patients with cluster epileptic seizures in China[25](index=25&type=chunk) - Tildrakizumab Injection (Ilumya): A specific IL-23 targeting monoclonal antibody for adult patients with moderate-to-severe plaque psoriasis suitable for systemic therapy or phototherapy. Its China Phase III clinical trial showed high response rates and good long-term safety, requiring only **4 doses per year** during the maintenance phase, which is expected to improve patient compliance and serve over **7 million** psoriasis patients in China[26](index=26&type=chunk) - Methotrexate Injection: China's first subcutaneous MTX pre-filled syringe for severe, stubborn, and disabling psoriasis. Compared to oral MTX, it has lower gastrointestinal side effects, improving patient compliance, and comes in various small-volume specifications for convenient self-administration at home[27](index=27&type=chunk) [Progress of Clinical Development of Key Innovative Products in China](index=14&type=section&id=Progress%20of%20Clinical%20Development%20of%20Key%20Innovative%20Products%20in%20China) CMS Pharma's key innovative products, including Methylene Blue Enteric-Coated Sustained-Release Tablets, Dedosertat Tablets, Ruxolitinib Cream, and PLENITY, are making steady progress in China's clinical development, addressing unmet medical needs - Methylene Blue Enteric-Coated Sustained-Release Tablets: China NDA is currently under review by the Center for Drug Evaluation (CDE), and Phase III clinical trial results showed a significant increase in the detection rate of non-polypoid colorectal lesions[28](index=28&type=chunk) - Dedosertat Tablets: China Phase III clinical trial is steadily progressing, with enrollment of all **152 subjects** completed in August, expected to address unmet treatment needs in chronic kidney disease (CKD) anemia[29](index=29&type=chunk) - Ruxolitinib Cream: Actively preparing for China clinical development and has signed a strategic cooperation agreement, expected to accelerate the product's clinical application in China for non-segmental vitiligo and mild-to-moderate atopic dermatitis[30](index=30&type=chunk)[31](index=31&type=chunk) - PLENITY: The marketing application based on US approval data has been withdrawn, and the company is actively preparing to conduct supplementary clinical trials in China for weight management in adults with a Body Mass Index (BMI) of **25-40 kg/m2**[32](index=32&type=chunk)[33](index=33&type=chunk) - The China bridging trial for Methotrexate Injection for adult rheumatoid arthritis (RA) has completed enrollment of all subjects, expected to become China's first subcutaneous pre-filled methotrexate injection for RA[27](index=27&type=chunk) [Innovative Pipeline List](index=16&type=section&id=Innovative%20Pipeline%20List) CMS Pharma's innovative pipeline spans multiple therapeutic areas, including marketed/under review products and R&D stage products, showcasing a rich product reserve and diversified innovation strategy China/Overseas Marketed or Under Review Products | Product | Rights Region | Indication | | :--- | :--- | :--- | | Diazepam Nasal Spray | China | Acute treatment of cluster epileptic seizures/acute recurrent epileptic seizures in children aged six and above and adults with epilepsy | | Tildrakizumab Injection (Biologic) | China | Adult patients with moderate-to-severe plaque psoriasis suitable for systemic therapy or phototherapy | | Methotrexate Injection | China | Severe, stubborn, disabling psoriasis in adults unresponsive to other treatments; adult rheumatoid arthritis | | Methylene Blue Enteric-Coated Sustained-Release Tablets | China | As a diagnostic agent, to enhance visualization of colorectal lesions in adult patients undergoing screening or colonoscopy surveillance | | Dedosertat Tablets | China | Anemia in patients with chronic kidney disease | | 0.09% Cyclosporine Ophthalmic Emulsion | China | To increase tear production in patients with dry eye disease (keratoconjunctivitis sicca) | | PLENITY | China | For weight management in adults with BMI of 25-40 kg/m2, in conjunction with diet and exercise | | Latanoprost Ophthalmic Solution | China | To reduce elevated intraocular pressure in patients with open-angle glaucoma or ocular hypertension | | Ruxolitinib Cream | China/Eleven Southeast Asian Countries | Topical treatment for non-segmental vitiligo in adults and children aged 12 and above; topical short-term and non-continuous chronic treatment for mild-to-moderate AD patients | | Levetiracetam Extended-Release Tablets | China | Adjunctive therapy for focal onset seizures in epilepsy | | BCG for Bladder Instillation (Biologic) | China | Curative treatment and prophylactic treatment for recurrence of non-invasive urothelial bladder cancer | | PoNS | China | Chronic balance deficit caused by mild-to-moderate traumatic brain injury | Products in R&D Stage | Product | Rights Region | Indication | Preclinical | CTA Approved | Phase I | Phase II | Phase III | NDA | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | SDN-037 | Global | Pain and inflammation after cataract surgery | | | | | | | | PDP-716 | Global | To reduce elevated intraocular pressure in patients with open-angle glaucoma or ocular hypertension | | | | | | | | CF101 | Global | Psoriasis | | | | | | | | ACT017 (Biologic) | Global | Acute ischemic stroke | | | | | | | | CF102 | Global | Hepatocellular carcinoma; non-alcoholic fatty liver disease/non-alcoholic steatohepatitis | | | | | | | | XF-73 | Global | Prevention of postoperative Staphylococcus aureus infection; infectious diseases | | | | | | | | Y-3 Injection * | Mainland China, Hong Kong, Macau | To improve neurological symptoms, activities of daily living, and functional impairment caused by acute ischemic stroke | | | | | | | | BB2603 | Global | Onychomycosis and tinea pedis | | | | | | | | VXM01 (Biologic) | Global | Recurrent glioblastoma | | | | | | | | VEGF+ANG2 Tetravalent Bispecific Antibody (Biologic) | China | Intended for neovascular eye diseases | | | | | | | | Nearly 10 Self-Customized Innovative Drugs | Global | Including small molecules, mAbs, bispecific antibodies, siRNAs, etc | | | | | | | [Commercialization System](index=17&type=section&id=Commercialization%20System) CMS Pharma has established a compliant, efficient, and resource-sharing commercialization platform with a strong promotion team and extensive channel coverage, accelerating the commercialization of innovative products - The Group has established a compliant, efficient, and resource-sharing open commercialization platform, possessing a highly capable and professional promotion team, extensive channel coverage, and expert resources across multiple specialized therapeutic areas[36](index=36&type=chunk) - By deeply exploring the differentiated academic advantages of products, precise product positioning, actively promoting academic clinical guidelines and expert consensus recommendations, the Group accelerates the brand building of innovative products[36](index=36&type=chunk) - As of June 30, 2023, the Group's promotion network covered over **50,000 hospitals and medical institutions** and over **200,000 retail pharmacies** nationwide[37](index=37&type=chunk) [On-Market Products](index=18&type=section&id=On-Market%20Products) CMS Pharma's on-market products cover cardiovascular, digestive, ophthalmology, dermatology, and medical aesthetics, with many holding leading positions or unique advantages in their respective markets | Product Line | Product | Indication / Function | Product Advantage | | :--- | :--- | :--- | :--- | | Cardiovascular Line | XinHuoSu (Recombinant Human Brain Natriuretic Peptide for Injection) | Acute decompensated heart failure | China's only recombinant human brain natriuretic peptide (rhBNP) on the market | | | Poiyidin (Felodipine Extended-Release Tablets) | Hypertension and stable angina pectoris | High cardio-cerebral protection and vascular selectivity, a calcium channel blocker (CCB) suitable for Chinese patients | | | Deanxit (Flupentixol and Melitracen Tablets) | Mild-to-moderate depression, anxiety, and psychosomatic disorders | According to IQVIA 2022 data, this product is the **number one** antidepressant in the Chinese market | | Digestive Line | Ursodeoxycholic Acid Capsules (Ursofalk) | Gallbladder cholesterol stones, cholestatic liver disease, and bile reflux gastritis | According to IQVIA 2022 data, this product consistently ranks **first** in market share for choleretic drugs in China | | | Salofalk (Mesalazine) | Ulcerative colitis, including acute exacerbation and maintenance treatment to prevent recurrence, and treatment of acute exacerbation of Crohn's disease | According to IQVIA 2022 data, this product ranks **first** in market share for aminosalicylates, a first-line drug for inflammatory bowel disease in China | | | Enterol (Saccharomyces boulardii powder) | Diarrhea in adults and children and diarrheal symptoms caused by intestinal flora imbalance | A probiotic pharmaceutical preparation with sufficient evidence-based medicine and high-level recommendations from domestic and international authoritative guidelines | | | Combizym (Aspergillus oryzae and Pancreatin Tablets) | Indigestion caused by reduced digestive enzymes | Gastrointestinal dual-action, a recommended digestive enzyme preparation for pancreatic exocrine insufficiency enzyme replacement therapy | | Ophthalmology Line | Stulln Eye Drops (Aescin and Digitalis Glycosides Eye Drops) | Macular degeneration and various types of visual fatigue | A representative drug for professional anti-visual fatigue, a safe and convenient choice for treating macular degeneration | | | EyeOP1 ® Glaucoma Treatment System | Glaucoma where intraocular pressure cannot be controlled by medication and surgery | Applies focused ultrasound technology, scalpel-free micro-invasive, precise focusing, easy to operate, an innovative, safe, and effective glaucoma treatment technology | | Dermatology Line | Hylatopic (Mucopolysaccharide Polysulphate Cream) | Blunt trauma with and without hematoma formation and superficial phlebitis not treatable by compression | A multi-functional skin barrier repair agent | | | Ansoxine (Polidocanol Injection) | Various specifications for sclerotherapy of various varicose veins | A German original brand for varicose vein sclerotherapy with many years of clinical application | | Dermocosmetics | Hylatopic Soothing Product Series (including three products) | Moisturizing and soothing, combining cleansing and moisturizing, suitable for sensitive skin | Four core ingredients, moisturizing and soothing, gently repairing the skin barrier | | Light Medical Aesthetics Products | Vmonalisa (Modified Sodium Hyaluronate Gel for Injection) | For mid-to-deep dermal injection to correct moderate-to-severe nasolabial folds (medium-to-large molecules); for deep dermal to subcutaneous injection to correct moderate-to-severe nasolabial folds (small molecules) | Korean light luxury hyaluronic acid with anesthetic, safe, natural, and youthful, featuring dual-particle hyaluronic acid with various molecular sizes to meet diverse anti-aging needs | | | ScarAway / Strataderm (Self-drying Silicone Gel for Scar Care) | Prevention and improvement of hypertrophic scar tissue | An effective silicone gel widely used for improving new and old scars and preventing hyperplasia in various populations | | | Mesoestetic - Mesohyal Product Series (including five products) | Enhancing skin firmness, moisturizing skin, increasing skin elasticity, etc | Formula-based therapy providing personalized medical aesthetic solutions for beauty seekers | | | Novellina Hyaluronic Acid Product Series * (including four products) | Superficial and deep skin filling, long-lasting hydration | Based on unique SMART cross-linking technology and PEG cross-linking, with excellent rheological ratio, high biocompatibility, and good bio-integration | [Sales Data by Product Line](index=20&type=section&id=Sales%20Data%20by%20Product%20Line) During the reporting period, CMS Pharma's major product lines performed well, with significant growth in dermatology and medical aesthetics and ophthalmology, while cardiovascular and digestive lines remained stable - Cardiovascular Line: Achieved revenue of **RMB 2,131.4 million**, a decrease of **0.5%** year-on-year; if calculated entirely based on pharmaceutical product sales revenue, it increased by **5.9%** to **RMB 3,096.2 million**, accounting for **55.9%** of the Group's pharmaceutical product sales turnover[40](index=40&type=chunk) - Digestive Line: Achieved revenue of **RMB 1,779.9 million**, an increase of **4.2%** year-on-year, accounting for **32.1%** of the Group's pharmaceutical product sales turnover[40](index=40&type=chunk) - Dermatology and Medical Aesthetics Line: Achieved revenue of **RMB 245.7 million**, an increase of **27.4%** year-on-year, accounting for **4.4%** of the Group's pharmaceutical product sales turnover[41](index=41&type=chunk) - Ophthalmology Line: Achieved revenue of **RMB 245.6 million**, an increase of **29.6%** year-on-year, accounting for **4.4%** of the Group's pharmaceutical product sales turnover[41](index=41&type=chunk) - Other Products: Achieved revenue of **RMB 207.5 million**, a decrease of **4.0%** year-on-year; if calculated entirely based on pharmaceutical product sales revenue, it increased by **8.8%** to **RMB 169.2 million**, accounting for **3.1%** of the Group's pharmaceutical product sales turnover[42](index=42&type=chunk) [Dermatology and Medical Aesthetics Business](index=21&type=section&id=Dermatology%20and%20Medical%20Aesthetics%20Business) CMS Pharma's dermatology and medical aesthetics business "CMS Beauty" has established three divisions and an "one body, two wings" product strategy, covering nearly 10,000 hospitals and medical institutions in China - CMS Beauty has formed a business structure with three major divisions: dermatology prescription, medical aesthetics products, and new retail, and has established an "one body" (dermatology prescription products) and "two wings" (dermocosmetics and light medical aesthetics products) product layout strategy[43](index=43&type=chunk) - By consolidating the expert network for dermatology prescription products, leveraging rich dermatological academic resources, promoting through new media platforms, and leading the development of differentiated aesthetic solutions, CMS Beauty fosters positive communication and long-term cooperation with institutional clients[43](index=43&type=chunk) - As of June 30, 2023, CMS Beauty covered nearly **10,000 hospitals and medical institutions** in China[43](index=43&type=chunk) [Breakthrough in Dermatology Prescription Product Layout](index=21&type=section&id=Breakthrough%20in%20Dermatology%20Prescription%20Product%20Layout) CMS Beauty achieved a breakthrough in dermatology prescription products with the approval of Tildrakizumab Injection, synergistic with existing products, and is preparing for Ruxolitinib Cream's China development - The innovative biologic Tildrakizumab Injection, targeting the IL-23 p19 subunit (for moderate-to-severe plaque psoriasis), has been successfully approved for marketing in China[44](index=44&type=chunk) - Relying on the academic platform accumulated from existing dermatology products Hylatopic and Ansoxine, CMS Beauty is rapidly advancing the brand building and proactive academic promotion of Tildrakizumab Injection[44](index=44&type=chunk) - Preparatory work for the China development, registration, and clinical application of Ruxolitinib Cream is being carried out in an orderly manner[44](index=44&type=chunk) [Expanding Portfolio of Dermocosmetics and Light Medical Aesthetics Products](index=22&type=section&id=Expanding%20Portfolio%20of%20Dermocosmetics%20and%20Light%20Medical%20Aesthetics%20Products) CMS Beauty continues to expand its dermocosmetics and light medical aesthetics portfolio, launching the Hylatopic soothing series, approving a small molecule hyaluronic acid, and securing exclusive China rights for "Sculptra" - "Hylatopic," CMS Beauty's dermocosmetics R&D platform, has successfully developed and launched **three cleansing and moisturizing soothing series products**[45](index=45&type=chunk) - In the light medical aesthetics field, building on the existing Korean hyaluronic acid Vmonalisa, a small molecule hyaluronic acid of the same brand was approved for marketing in China during the reporting period[45](index=45&type=chunk) - An exclusive license agreement was signed with Jiangsu Xihong Biomedical Co., Ltd. for poly-L-lactic acid microsphere filler for injection ("Sculptra") in mainland China, Hong Kong, Macau, and Taiwan, filling a gap in the regenerative medical aesthetics product portfolio[45](index=45&type=chunk) [Orderly Progress in R&D of Focused Ultrasound Technology Medical Aesthetic Devices](index=22&type=section&id=Orderly%20Progress%20in%20R%26D%20of%20Focused%20Ultrasound%20Technology%20Medical%20Aesthetic%20Devices) CMS Beauty's "Carnation" focused ultrasound technology R&D platform is making orderly progress in energy-based medical aesthetic devices, with the FUBA5200 focused ultrasound body sculpting device completing Phase III enrollment - "Carnation," CMS Beauty's focused ultrasound technology R&D platform, has **three energy-based series products** in its pipeline: FUBA focused ultrasound fat reduction device series, LITU focused ultrasound skin treatment device series, and MEBA ultrasound introduction device series[46](index=46&type=chunk) - The China Phase III clinical trial for the main R&D product, FUBA5200 focused ultrasound body sculpting device, is steadily progressing, with enrollment of all **144 subjects** completed in August[46](index=46&type=chunk) [Ophthalmology Business](index=22&type=section&id=Ophthalmology%20Business) CMS Pharma's "CMS Vision" ophthalmology business has a complete structure and professional team, aiming to be a leading ophthalmic drug and device company in China, covering nearly 10,000 hospitals - CMS Vision has established a relatively complete business structure and built a professional ophthalmic team that understands products, markets, and possesses high expertise, aiming to become a leading ophthalmic drug and device company in China[47](index=47&type=chunk) - It possesses the innovative medical device EyeOP1® Glaucoma Treatment System and the main on-market exclusive drug Stulln Eye Drops, both approved for marketing in China[47](index=47&type=chunk) - The China clinical trial application for the Class I innovative biologic VEGF+ANG2 tetravalent bispecific antibody, used for treating neovascular eye diseases, has been approved by the NMPA[48](index=48&type=chunk) - As of June 30, 2023, CMS Vision covered nearly **10,000 hospitals and medical institutions** in China[48](index=48&type=chunk) [Southeast Asia Business](index=23&type=section&id=Southeast%20Asia%20Business) CMS Pharma established "CMS Health" for its Southeast Asia business, headquartered in Singapore, to introduce quality products and partner with Junshi Biosciences for Toripalimab's commercialization in the region - The Group established "CMS Health," a platform-based and systematic Southeast Asia business company, headquartered in Singapore, with a business network radiating to Malaysia, Indonesia, Thailand, the Philippines, and other regions[49](index=49&type=chunk) - Actively preparing and promoting product commercialization, as well as the scaled construction of academic platforms and sales networks, to rapidly introduce high-quality products from Europe, America, Japan, and China[49](index=49&type=chunk) - In March this year, CMS Health partnered with Junshi Biosciences to jointly promote the cooperative development and commercialization of Toripalimab in **nine Southeast Asian countries** through a joint venture[49](index=49&type=chunk) - Toripalimab is China's first domestically produced PD-1 approved for marketing and the first to submit a marketing application in the United States, having received multiple FDA Breakthrough Therapy Designations in various fields and currently undergoing review by the US FDA, EMA, and MHRA[49](index=49&type=chunk)[50](index=50&type=chunk) [Post-Reporting Period Events](index=24&type=section&id=Post-Reporting%20Period%20Events) Post-reporting period, CMS Pharma secured permanent exclusive promotion rights for Y-3 Injection, a Class 1 new drug for ischemic stroke, in mainland China, Hong Kong, and Macau, currently in Phase II clinical trials - On August 24, 2023, the Group signed a cooperation agreement with Nanjing Ningdan New Drug Technology Co., Ltd., obtaining permanent exclusive promotion rights for Y-3 Injection, a Class 1 new drug brain cell protective agent for anti-ischemic stroke, in mainland China, Hong Kong Special Administrative Region, and Macau Special Administrative Region[51](index=51&type=chunk) - Y-3 Injection is a Class 1 new small molecule compound drug, used to improve neurological symptoms, activities of daily living, and functional impairment caused by acute ischemic stroke, with a clear mechanism of action, expected to become the first novel neuroprotective agent that simultaneously addresses stroke and post-stroke depression[51](index=51&type=chunk) - Y-3 Injection completed its Phase I clinical study in China in January 2023, with results showing good overall safety, and is currently in the China Phase II clinical trial stage[51](index=51&type=chunk) [Impact of Major Industry Policies](index=24&type=section&id=Impact%20of%20Major%20Industry%20Policies) In H1 2023, China's "cost control and innovation encouragement" policies continued, with national volume-based procurement impacting CMS Pharma's products, but the company mitigated effects through brand building and growth in non-VBP and innovative products - In the first half of 2023, the main policy tone of China's pharmaceutical industry remained "cost control and price reduction, encouraging innovation," with national volume-based procurement (VBP) still being the most influential industry policy[52](index=52&type=chunk) - Deanxit (flupentixol and melitracen oral immediate-release formulation) was included in the **seventh batch** of national VBP catalog[52](index=52&type=chunk) - Poiyidin (felodipine extended-release/controlled-release formulation) and Ursofalk (ursodeoxycholic acid oral immediate-release formulation) were included in the **eighth batch** of national VBP catalog[52](index=52&type=chunk) - None of the above three products were selected in the national VBP[52](index=52&type=chunk) - The Group effectively mitigated the negative impact of national VBP on its performance by continuously building the brand power of VBP products and achieving steady sales growth of existing exclusive drugs, dermatology and medical aesthetics, and ophthalmology products[52](index=52&type=chunk) - In the first half of this year, **three innovative products** were successfully approved for marketing in China, and multiple innovative pipeline products are in clinical development and registration stages, laying a solid foundation for stable future performance growth[52](index=52&type=chunk) [Future Outlook](index=24&type=section&id=Future%20Outlook) CMS Pharma will adhere to its "CMS-featured" innovation strategy, accelerate new drug clinical applications, continuously develop differentiated products, deepen specialized business segments, and expand its international presence in Southeast Asia - Steadfastly maintaining the "CMS-featured" innovation strategy, the three new drugs launched this year will accelerate towards scaled clinical application, which will in turn feed back into innovation research[53](index=53&type=chunk)[54](index=54&type=chunk) - Adhering to open-mindedness to gather original scientific research forces, cultivating an innovative environment with a long-term perspective, establishing a "laboratory without walls," and incubating sustainable innovative driving forces[54](index=54&type=chunk) - Deepening innovation investment and organizational reform, continuing to strategically deploy "three good" products with differentiated academic value, a favorable competitive landscape, and promising commercial prospects, and continuously upgrading the full lifecycle management capabilities of innovative products[54](index=54&type=chunk) - Continuing to base on a "specialty-focused" business structure, vigorously promoting the in-depth development of the three major business segments: cardiovascular and digestive, dermatology and medical aesthetics, and ophthalmology, in related fields[54](index=54&type=chunk) - Focusing on the Southeast Asian market, charting an international business map, building a win-win and mutually beneficial biopharmaceutical ecosystem in Southeast Asia, and precisely empowering the rapid industrialization of high-quality pharmaceutical products in the Southeast Asian market[54](index=54&type=chunk) [Financial Review](index=25&type=section&id=Financial%20Review) [Revenue](index=25&type=section&id=Revenue) During the reporting period, CMS Pharma's turnover grew 3.6% to RMB 4,610.1 million, or 7.1% to RMB 5,536.6 million based on pharmaceutical product sales, driven by increased sales of non-VBP products | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Turnover | 4,610.1 | 4,447.8 | 3.6% | | Turnover from Pharmaceutical Product Sales | 5,536.6 | 5,170.0 | 7.1% | - The increase in turnover was primarily due to increased sales of non-VBP products, offsetting the decrease in sales of Deanxit, a product included in the **seventh batch** of VBP[55](index=55&type=chunk) [Gross Profit and Gross Margin](index=25&type=section&id=Gross%20Profit%20and%20Gross%20Margin) Gross profit increased by 4.9% to RMB 3,605.9 million, with a gross margin of 78.2%, up 0.9 percentage points, while pharmaceutical product sales gross margin decreased due to VBP product price reductions | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Gross Profit | 3,605.9 | 3,436.2 | 4.9% | | Gross Profit from Pharmaceutical Product Sales | 3,567.3 | 3,375.0 | 5.7% | | Gross Margin | 78.2% | 77.3% | +0.9 percentage points | | Gross Margin from Pharmaceutical Product Sales | 64.4% | 65.3% | -0.9 percentage points | - The decrease in gross margin was mainly due to the reduced selling price of Deanxit, a VBP product, and changes in product sales weighting[56](index=56&type=chunk) [Selling Expenses](index=26&type=section&id=Selling%20Expenses) Selling expenses increased by 4.8% to RMB 1,339.6 million, representing 29.1% of turnover, reflecting business expansion | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Selling Expenses | 1,339.6 | 1,278.5 | 4.8% | | Selling Expenses as % of Turnover | 29.1% | 28.7% | +0.4 percentage points | | Selling Expenses as % of Turnover from Pharmaceutical Product Sales | 23.5% | 23.5% | Flat | - The increase in selling expenses primarily reflects the scale development of the business[57](index=57&type=chunk) [Administrative Expenses](index=26&type=section&id=Administrative%20Expenses) Administrative expenses increased by 13.7% to RMB 318.0 million, representing 6.9% of turnover, primarily due to increased human resource and maintenance costs for new business development | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Administrative Expenses | 318.0 | 279.7 | 13.7% | | Administrative Expenses as % of Turnover | 6.9% | 6.3% | +0.6 percentage points | | Administrative Expenses as % of Turnover from Pharmaceutical Product Sales | 5.7% | 5.4% | +0.3 percentage points | - The increase in administrative expenses was mainly due to increased human resource costs and maintenance expenses required for new business development[58](index=58&type=chunk) [Research and Development Expenses](index=26&type=section&id=Research%20and%20Development%20Expenses) Total R&D expenses significantly increased by 89.6% to RMB 238.9 million, primarily due to increased equity and rights investments related to innovative pipeline products, with both expensed and capitalized R&D growing | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Total R&D Expenses | 238.9 | 126.0 | 89.6% | | Total R&D Expenses as % of Turnover | 5.2% | 2.8% | +2.4 percentage points | | Total R&D Expenses as % of Turnover from Pharmaceutical Product Sales | 4.3% | 2.4% | +1.9 percentage points | | Expensed R&D Expenses | 75.7 | 55.6 | 36.3% | | Expensed R&D Expenses as % of Turnover | 1.6% | 1.2% | +0.4 percentage points | | Capital Expenditure (Equity investment in R&D companies, product rights acquisition, and clinical trial expenses) | 163.2 | 70.5 | 131.6% | | Capital Expenditure as % of Turnover | 3.5% | 1.6% | +1.9 percentage points | - The increase in total R&D expenses was mainly due to increased equity investments and rights investments related to innovative pipeline products[59](index=59&type=chunk) | Capital Expenditure Item (RMB thousands) | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Equity Investment in R&D Companies | 58,203 | 1,440 | | Product Rights Acquisition and Development Expenses | 104,971 | 69,023 | | **Total** | **163,174** | **70,463** | [Other Income](index=27&type=section&id=Other%20Income) Other income increased by 22.9% to RMB 133.7 million, primarily reflecting higher interest income and government subsidies | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Other Income | 133.7 | 108.8 | 22.9% | - The increase in other income primarily reflects higher interest income and government subsidies[61](index=61&type=chunk) [Other Gains and Losses](index=27&type=section&id=Other%20Gains%20and%20Losses) Other gains and losses increased by 61.7% to RMB 97.3 million, primarily due to higher exchange gains | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Other Gains and Losses | 97.3 (Gain) | 60.1 (Gain) | 61.7% | - The increase in other gains and losses was mainly due to higher exchange gains[62](index=62&type=chunk) [Share of Profits of Associates](index=27&type=section&id=Share%20of%20Profits%20of%20Associates) Share of profits of associates significantly increased by 140.0% to RMB 197.8 million, primarily reflecting higher profitability from associate Tibet Pharmaceutical | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Share of Profits of Associates | 197.8 | 82.4 | 140.0% | - The increase in share of profits of associates primarily reflects higher profitability from associate Tibet Pharmaceutical[63](index=63&type=chunk) [Finance Costs](index=27&type=section&id=Finance%20Costs) Finance costs increased by 17.1% to RMB 21.2 million, primarily due to higher borrowing interest rates | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Finance Costs | 21.2 | 18.1 | 17.1% | - The increase in finance costs was mainly due to higher borrowing interest rates[64](index=64&type=chunk) [Income Tax Expense_2](index=27&type=section&id=Income%20Tax%20Expense_2) Income tax expense increased by 41.3% to RMB 366.6 million, primarily due to higher withholding tax related to internal dividend distribution | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Income Tax Expense | 366.6 | 259.4 | 41.3% | - The increase in income tax expense was mainly due to an increase in withholding tax related to the Group's internal dividend distribution[64](index=64&type=chunk) [Profit for the Period_2](index=27&type=section&id=Profit%20for%20the%20Period_2) Profit for the period increased by 6.7% to RMB 1,916.0 million, primarily driven by continuous growth in turnover | Indicator | H1 2023 (RMB millions) | H1 2022 (RMB millions) | YoY Growth (%) | | :--- | :--- | :--- | :--- | | Profit for the Period | 1,916.0 | 1,796.3 | 6.7% | - The increase in profit for the period was primarily driven by continuous growth in turnover[65](index=65&type=chunk) [Inventories](index=27&type=section&id=Inventories) At the end of the reporting period, inventories increased by 29.2% to RMB 616.4 million, with average inventory turnover days at 100, reflecting fluctuations in safety stock levels | Indicator | June 30, 2023 (RMB millions) | December 31, 2022 (RMB millions) | Change (%) | | :--- | :--- | :--- | :--- | | Inventories | 616.4 | 477.2 | 29.2% | | Average Inventory Turnover Days | 100 days | - | +4 days (vs H1 2022) | - The increase in inventories primarily reflects fluctuations in the Group's safety stock levels[65](index=65&type=chunk) [Trade Receivables](index=27&type=section&id=Trade%20Receivables) At the end of the reporting period, trade receivables decreased by 6.2% to RMB 1,353.2 million, with average trade receivable turnover days at 72, reflecting improved management | Indicator | June 30, 2023 (RMB millions) | December 31, 2022 (RMB millions) | Change (%) | | :--- | :--- | :--- | :--- | | Trade Receivables | 1,353.2 | 1,442.0 | -6.2% | | Average Trade Receivable Turnover Days | 72 days | - | -2 days (vs H1 2022) | - The decrease in trade receivables primarily reflects improved management levels[66](index=66&type=chunk) [Trade Payables](index=27&type=section&id=Trade%20Payables) At the end of the reporting period, trade payables increased by 37.7% to RMB 245.1 million, with average trade payable turnover days at 39, reflecting differences in settlement timing with suppliers | Indicator | June 30, 2023 (RMB millions) | December 31, 2022 (RMB millions) | Change (%) | | :--- | :--- | :--- | :--- | | Trade Payables | 245.1 | 178.0 | 37.7% | | Average Trade Payable Turnover Days | 39 days | - | +14 days (vs H1 2022) | - The increase in trade payables primarily reflects the impact of differences in settlement timing with suppliers[68](index=68&type=chunk) [Liquidity, Financial Resources, Capital Structure and Gearing Ratio](index=28&type=section&id=Liquidity%2C%20Financial%20Resources%2C%20Capital%20Structure%20and%20Gearing%20Ratio) As of June 30, 2023, the Group had ample bank balances and cash, reduced bank borrowings, and a gearing ratio of 7.0%, indicating good liquidity and a stable financial structure | Indicator | June 30, 2023 (RMB millions) | December 31, 2022 (RMB millions) | | :--- | :--- | :--- | | Bank Balances and Cash | 4,451.4 | 4,376.4 | | Readily Realizable Bank Acceptance Bills | 254.9 | 269.6 | | Bank Borrowings | 1,281.5 | 1,783.3 | | Weighted Average Annual Interest Rate on Borrowings | Approximately **2.8%** | - | | Gearing Ratio | Approximately **7.0%** | Approximately **10.0%** | - The Company will combine cash flows generated from operating activities, long-term bank borrowings, and other financing instruments to meet the Group's liquidity needs[69](index=69&type=chunk) [Exchange Rate and Interest Rate Risk](index=28&type=section&id=Exchange%20Rate%20and%20Interest%20Rate%20Risk) The Group faces currency risks primarily from USD, EUR, GBP, CHF, and HKD, actively monitors exchange rate fluctuations, reviews hedging strategies, and uses forward contracts, while also monitoring interest rate changes - The Group is primarily exposed to currency risks from USD, EUR, GBP, CHF, and HKD, and the conversion of RMB to foreign currencies is subject to foreign exchange laws and regulations promulgated by the government of the People's Republic of China[70](index=70&type=chunk) - The Group closely monitors exchange rate fluctuations and periodically reviews its foreign exchange risk management strategy; when appropriate, management will consider hedging foreign exchange exposures and has entered into certain foreign exchange forward contracts[70](index=70&type=chunk) - The Group will closely monitor interest rate changes to mitigate expected interest rate risk[70](index=70&type=chunk) [Pledge of Assets](index=28&type=section&id=Pledge%20of%20Assets) As of June 30, 2023, the Group had no pledged assets - As of June 30, 2023, the Group had no pledged assets[71](index=71&type=chunk) [Contingent Liabilities](index=28&type=section&id=Contingent%20Liabilities) As of June 30, 2023, the Group had no significant contingent liabilities - As of June 30, 2023, the Group had no significant contingent liabilities[71](index=71&type=chunk) [Acquisition and Disposal of Subsidiaries, Associates and Joint Ventures](index=28&type=section&id=Acquisition%20and%20Disposal%20of%20Subsidiaries%2C%20Associates%20and%20Joint%20Ventures) On February 2, 2023, the Group disposed of Hebei Xinglong Xili Pharmaceutical Co., Ltd., which became a joint venture, with no other acquisition or disposal activities during the reporting period - On February 2, 2023, the Group disposed of its subsidiary Hebei Xinglong Xili Pharmaceutical Co., Ltd. to focus more on its core business, and on the same day, it became a joint venture of the Group[71](index=71&type=chunk) - Save as disclosed above, the Group had no other acquisitions or disposals of subsidiaries, associates, or joint ventures during the six months ended June 30, 2023[72](index=72&type=chunk) [Loan Agreements Containing Conditions Relating to Specific Obligations of Controlling Shareholder](index=29&type=section&id=Loan%20Agreements%20Containing%20Conditions%20Relating%20to%20Specific%20Obligations%20of%20Controlling%20Shareholder) The company had loan agreements requiring controlling shareholder Mr. Lin Gang to maintain specific shareholding and majority status, with non-compliance allowing immediate loan repayment, but these loans were fully repaid by June 30, 2023 - Pursuant to the Standard Chartered Loan Agreement and the DBS Loan Agreement, Mr. Lin Gang was required to maintain direct or indirect ownership of more than **30%** of the Company's total issued shares and remain the single largest shareholder[72](index=72&type=chunk) - If the above conditions were not met, the lending banks could cancel the committed amounts and declare all outstanding loans and accrued interest immediately due and payable[72](index=72&type=chunk) - As of June 30, 2023, Mr. Lin Gang (directly and indirectly) held approximately **46.39%** of the Company's total issued ordinary shares, and both the Standard Chartered Loan and DBS Loan were fully repaid during the reporting period[72](index=72&type=chunk) [Other Information](index=30&type=section&id=Other%20Information) [Share Option Scheme](index=30&type=section&id=Share%20Option%20Scheme) The company has no active share option scheme, and as of June 30, 2023, there were no outstanding share options - The Company has no active share option scheme. As of June 30, 2023, the Company had no outstanding share options[73](index=73&type=chunk) [Interim Dividend](index=30&type=section&id=Interim%20Dividend) The Board resolved to declare an interim dividend of RMB 0.3134 (equivalent to HKD 0.342) per share for the six months ended June 30, 2023, expected to be paid on September 20, 2023 | Dividend Type | Amount Per Share (RMB) | Amount Per Share (HKD) | Record Date | Payment Date | | :--- | :--- | :--- | :--- | :--- | | 2023 Interim Dividend | 0.3134 | 0.342 | September 13, 2023 | September 20, 2023 (Expected) | [Suspension of Share Transfer Registration](index=30&type=section&id=Suspension%20of%20Share%20Transfer%20Registration) To qualify for the interim dividend, the company will suspend share transfer registration on September 13, 2023, requiring all transfer documents to be submitted by 4:30 p.m. on September 12, 2023 - The Company will suspend share transfer registration on Wednesday, September 13, 2023[74](index=74&type=chunk) - To qualify for the interim dividend, all share transfer documents, accompanied by the relevant share certificates, must be lodged with the Company's Hong Kong Share Registrar by **4:30 p.m. on Tuesday, September 12, 2023**[74](index=74&type=chunk) [Purchase, Sale or Redemption of the Company’s Listed Securities](index=30&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20the%20Company%E2%80%99s%20Listed%20Securities) During the reporting period, neither the company nor its subsidiaries purchased, sold, or redeemed any of the company's listed securities - During the reporting period, neither the Company nor any of its subsidiaries purchased, sold, or redeemed any of the Company's listed securities[75](index=75&type=chunk) [Audit Committee](index=30&type=section&id=Audit%20Committee) The Audit Committee, comprising three independent non-executive directors, reviews financial reporting, internal controls, and risk management, and has reviewed and recommended the interim results announcement for Board approval - The Audit Committee currently comprises three independent non-executive directors: Mr. Feng Zheng (Chairman), Mr. Leung Chong Shun, and Ms. Luo Ying[75](index=75&type=chunk) - Its primary duties are to provide independent review to the Board on the financial reporting process, the effectiveness of the Group's internal control and risk management systems, to oversee the audit process, and to perform other duties assigned by the Board[75](index=75&type=chunk) - The Company's interim results announcement and interim report for the six months ended June 30, 2023, have been reviewed by the Company's Audit Committee and recommended to the Board for approval[75](index=75&type=chunk) [Corporate Governance Practices](index=30&type=section&id=Corporate%20Governance%20Practices) The company complied with the Corporate Governance Code during the reporting period, except for the combined roles of Chairman and CEO, an arrangement deemed beneficial for strategy execution and operational efficiency - The Company has complied with the principles and code provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules during the reporting period, save for the deviation from the code provision that the roles of chairman and chief executive should be separate and should not be performed by the same individual[76](index=76&type=chunk) - Mr. Lin Gang currently holds both the positions of Chairman and Chief Executive Officer of the Company, and the Board believes that having the same individual serve as both Chairman and Chief Executive Officer is beneficial for executing the Group's business strategies and maximizing the Group's operational efficiency[76](index=76&type=chunk) - The Company provides each director with monthly reports of the Company and developments and changes in relevant laws and the regulatory environment, and all directors participate in continuous professional development[77](index=77&type=chunk) [Directors’ Securities Transactions](index=31&type=section&id=Directors%E2%80%99%20Securities%20Transactions) The company adopted a written guideline for directors' securities transactions, confirming compliance by all directors and no employee violations during the reporting period - The Company has adopted a "Written Guideline for Securities Transactions by Directors and Relevant Employees" with terms no less exacting than the Model Code for Securities Transactions by Directors of Listed Issuers set out in Appendix 10 to the Listing Rules, as the code of conduct for directors' securities transactions[78](index=78&type=chunk) - The Company confirms that all directors have complied with the standards for directors' securities transactions stipulated in the written guideline

Financial Performance - Revenue increased by 9.8% to RMB 9,150.3 million, with pharmaceutical sales revenue growth of 13.7% to RMB 10,497.5 million[6] - Gross profit grew by 12.6% to RMB 7,035.8 million, with pharmaceutical sales gross profit growth of 14.4% to RMB 6,910.5 million[6] - Annual profit increased by 8.3% to RMB 3,276.2 million, with basic earnings per share rising by 8.6% to RMB 1.3281[6] - Total assets increased to RMB 17,753.5 million in 2022, while total liabilities rose to RMB 3,016.5 million[7] - The group’s revenue increased by 9.8% to RMB 9,150.3 million, compared to RMB 8,337.2 million in the previous year[68] - Gross profit grew by 12.6% to RMB 7,035.8 million, with a gross margin of 76.9%, up from 74.9% in the previous year[69] - Annual profit grew by 8.3% to RMB 3,276.2 million, driven by continuous revenue growth[80] - The company reported a pre-tax profit of RMB 3,762,850 thousand, up from RMB 3,456,589 thousand in the previous year, indicating an increase of 8.8%[200] - Net profit attributable to the owners of the company for 2022 was RMB 3,258,992 thousand, compared to RMB 3,017,402 thousand in 2021, marking a growth of 8.0%[200] - Basic earnings per share for 2022 was RMB 1.3281, an increase from RMB 1.2228 in 2021, representing a rise of 8.6%[200] Product Development and Innovation - The company plans to launch three innovative products that are currently in the clinical development and registration phase[8] - The company has secured exclusive rights for the commercialization of a topical JAK inhibitor and a glaucoma treatment device in China and Southeast Asia[9] - The company is advancing the clinical and registration processes for several innovative drugs, including a nasal spray and an injection for psoriasis[9] - The company has successfully developed a pipeline of 30 innovative products, with 3 products expected to be approved for market launch in China soon[22] - The company emphasizes innovation as a core strategy, transitioning from mature products to innovative patented products since 2018, establishing itself as an open platform for pharmaceutical innovation and commercialization[14] - The company aims to accelerate clinical development and commercialization of innovative products, with expectations of annual approvals for new products[16] - The company is actively developing new products such as CF101 for psoriasis and CMS-D001 for autoimmune diseases, which are in the preclinical or clinical trial phases[42] - The diazepam nasal spray NDA is under review in China, demonstrating a bioavailability of 77.55% to 86.21% in different dosage groups, indicating rapid absorption and good safety tolerance[33] - The innovative oral HIF-PHI drug, intended for treating anemia in chronic kidney disease (CKD), has completed its first subject dosing in a Phase III clinical trial with 150 subjects planned for enrollment[39] Market Expansion and Strategic Partnerships - The company is expanding its operations into Southeast Asia, aiming to broaden its business scope and depth[23] - The company has entered into an exclusive licensing agreement for a series of affordable insulin products in Southeast Asia, marking a significant entry into this market[12] - The company views Southeast Asia as a key growth market, leveraging its global investment and commercialization experience to meet the demand for high-quality pharmaceutical products[18] - The company has secured exclusive rights to register, market, and distribute insulin products in eleven Southeast Asian countries, marking a significant entry into this market[62] - The company has established a strategic partnership with Incyte for the development and commercialization of ruxolitinib cream, enhancing its dermatology product portfolio[26] - The company acquired a 60% stake in the dermatological skincare R&D platform Hezero Pharmaceuticals, enhancing its product lineup for sensitive skin[11] Financial Management and Governance - The company has a robust financial management structure, with experienced professionals overseeing financial and tax compliance[108] - The company has a strong management team with extensive experience in the pharmaceutical industry, including Mr. Lin Gang, who has been the executive director since December 18, 2006[96] - The board consists of six directors, including three executive directors and three independent non-executive directors[156] - The company emphasizes compliance and governance, with a dedicated legal and compliance team led by the company secretary[109] - The company has committed to high standards of corporate governance to enhance accountability and transparency, thereby increasing long-term shareholder value[151] - The company has established a whistleblowing system to ensure proper handling of reports related to fraud management[182] Research and Development - The company has implemented a systematic management mechanism for the entire process of innovative product development, ensuring efficient clinical research and commercialization[25] - The company is continuously working on enhancing its research and development capabilities to support the launch of new therapies and maintain a competitive edge in the market[43] - Research and development expenses for the year were RMB 125,431 thousand, compared to RMB 114,761 thousand in 2021, reflecting an increase of 9.2%[200] Regulatory and Compliance - The company has established a robust quality management system to comply with GMP and GSP standards, ensuring ongoing regulatory compliance[133] - The company has not obtained product liability insurance in China, which poses a risk of significant costs and damage to customer relationships in the event of product-related claims[134] - The Chinese healthcare system is undergoing significant reforms, with frequent changes in laws and regulations that could adversely affect the company's operations if strategies are not timely adjusted[135] - The company must participate in government-led bidding processes, and failure to win bids could impact product sales capabilities in specific provinces[136] Community Engagement and ESG Initiatives - The company made donations totaling approximately RMB 2.7 million for community welfare during the reporting period[142] - The company emphasizes environmental, social, and governance (ESG) initiatives as part of its long-term strategy[102] - The company has implemented environmental management measures in compliance with applicable laws, including the establishment of an environmental management committee[131] Operational Efficiency - The company has a robust commercialization system, focusing on specialized disease areas, which has been developed over 30 years, ensuring sustainable business growth and maximizing economic benefits[43] - The company has over 4,300 professional marketing and promotion personnel, covering more than 50,000 hospitals and medical institutions, and over 200,000 retail pharmacies in China[45] - The company is focused on academic promotion and market strategy formulation for innovative products post-launch, aiming to establish a strong academic influence quickly[44]

[Financial and Business Summary](index=1&type=section&id=Financial%20and%20Business%20Summary) [Financial Summary](index=1&type=section&id=Financial%20Summary) The Group achieved robust financial growth in 2022, with revenue increasing by 9.8% year-on-year to RMB 9.15 billion and profit for the year growing by 8.3% to RMB 3.28 billion; basic earnings per share increased by 8.6%, and the company proposed a final dividend of RMB 0.2414 per share with ample cash and bank balances at year-end Key Financial Indicators for 2022 | Indicator | 2022 (RMB Million) | 2021 (RMB Million) | YoY Growth | | :--- | :--- | :--- | :--- | | Revenue | 9,150.3 | 8,337.2 | +9.8% | | Gross Profit | 7,035.8 | 6,246.9 | +12.6% | | Profit for the Year | 3,276.2 | 3,025.3 | +8.3% | | Basic Earnings Per Share | 1.3281 (RMB Yuan) | 1.2228 (RMB Yuan) | +8.6% | | Bank Balances and Cash | 4,376.4 | - | - | | Proposed Final Dividend | 0.2414 (RMB Yuan per share) | - | - | [Business Summary](index=2&type=section&id=Business%20Summary) During the reporting period, the Group achieved robust performance driven by strong product competitiveness and commercialization capabilities, continuously expanding its innovative product pipeline, accelerating clinical and registration processes for multiple innovative drugs in China, and steadily developing independent businesses such as dermatology and medical aesthetics, ophthalmology, and Southeast Asia - Continuously expanded innovative product reserves, with **30 differentiated innovative products** primarily focused on FIC (First-in-Class) and BIC (Best-in-Class) categories[4](index=4&type=chunk) - Partnered with Incyte Corporation (US) for exclusive development and commercialization rights of ruxolitinib cream in China and Southeast Asia, the first FDA-approved drug for vitiligo repigmentation[4](index=4&type=chunk) - Significant progress in the development of multiple innovative products in China: diazepam nasal spray, teriparatide injection, and methotrexate injection (for psoriasis) are all under NDA review[5](index=5&type=chunk) - Dermatology and medical aesthetics business (CM Aesthetics) has achieved initial scale, covering dermatological therapeutics, dermo-cosmetics, and light medical aesthetics[6](index=6&type=chunk) - Ophthalmology business (CM Vision) expanded into ophthalmic devices and consumables, securing exclusive licensing rights for the EyeOP1® glaucoma treatment device[7](index=7&type=chunk) - Southeast Asia business (CM Health) steadily advanced, obtaining rights for multiple innovative products in the region and partnering with Gan & Lee Pharmaceuticals to introduce insulin series products[8](index=8&type=chunk) [Consolidated Financial Statements](index=4&type=section&id=Consolidated%20Financial%20Statements) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=4&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) For the year ended December 31, 2022, the Group's revenue was RMB 9.15 billion, a 9.8% year-on-year increase; gross profit rose 12.6% to RMB 7.04 billion, while selling and administrative expenses increased, profit before tax was RMB 3.76 billion, and profit for the year reached RMB 3.28 billion, up 8.3%, with basic earnings per share at RMB 1.3281 Consolidated Statement of Profit or Loss Summary for 2022 | Item (RMB Thousand) | 2022 | 2021 | | :--- | :--- | :--- | | Revenue | 9,150,347 | 8,337,221 | | Gross Profit | 7,035,847 | 6,246,938 | | Selling Expenses | (2,721,312) | (2,540,147) | | Administrative Expenses | (636,612) | (440,995) | | Research and Development Expenses | (125,431) | (114,761) | | Profit Before Tax | 3,762,850 | 3,456,589 | | Profit for the Year | 3,276,195 | 3,025,264 | | Profit for the Year Attributable to Owners of the Company | 3,258,992 | 3,017,402 | [Consolidated Statement of Financial Position](index=5&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) As of December 31, 2022, the Group's total assets increased to RMB 17.75 billion, with non-current assets at RMB 8.92 billion and current assets at RMB 8.83 billion; total liabilities were RMB 3.02 billion, and equity attributable to owners of the company rose to RMB 14.59 billion, maintaining a robust financial position Consolidated Statement of Financial Position Summary as of Year-End 2022 | Item (RMB Thousand) | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Non-current Assets | 8,924,163 | 8,428,161 | | Current Assets | 8,829,376 | 7,379,718 | | **Total Assets** | **17,753,539** | **15,807,879** | | **Equity and Liabilities** | | | | Equity Attributable to Owners of the Company | 14,589,067 | 12,752,444 | | Current Liabilities | 2,877,103 | 2,081,254 | | Non-current Liabilities | 139,359 | 879,638 | | **Total Equity and Liabilities** | **17,753,539** | **15,807,879** | [Notes to the Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) [General Information and Accounting Policies](index=7&type=section&id=General%20Information%20and%20Accounting%20Policies) This section outlines the company's basic information and principal activities, details the initial application and impact of IFRS amendments for the current year, and lists new and revised standards issued but not yet effective, assessing their potential impact, particularly on liability classification and accounting policy disclosures - The Company is an investment holding company, with subsidiaries primarily engaged in the manufacturing, marketing, promotion, and sale of pharmaceutical products, and its functional currency is RMB[12](index=12&type=chunk) - Several amendments to International Financial Reporting Standards were first applied this year, but they did not have a significant impact on the Group's financial position or performance[13](index=13&type=chunk)[14](index=14&type=chunk) - The Group disclosed several new standards issued but not yet effective, such as amendments to IAS 1 regarding classification of liabilities, which are not expected to result in reclassification of liabilities upon application[17](index=17&type=chunk)[18](index=18&type=chunk)[19](index=19&type=chunk) [Revenue and Segment Information](index=11&type=section&id=Revenue%20and%20Segment%20Information) The Group's revenue primarily derives from the sale of pharmaceutical products and the provision of promotion services, with RMB 7.06 billion from product sales and RMB 2.09 billion from promotion services in 2022; the Group operates in a single reportable operating segment, the marketing, promotion, sale, and manufacturing of pharmaceutical products, primarily within China Revenue Breakdown (RMB Thousand) | Revenue Source | 2022 | 2021 | | :--- | :--- | :--- | | Sale of Pharmaceutical Products | 7,055,729 | 6,655,017 | | Promotion Income | 2,094,618 | 1,682,204 | | **Total Revenue** | **9,150,347** | **8,337,221** | - The Group has only one reportable operating segment, which is the marketing, promotion, sale, and manufacturing of pharmaceutical products, primarily operating within China[25](index=25&type=chunk) - In 2022, the largest customer accounted for **14.4% of the Group's revenue**, with no other single customer contributing more than 10%[25](index=25&type=chunk) [Key Profit or Loss Items](index=13&type=section&id=Key%20Profit%20or%20Loss%20Items) This section details key profit or loss items, with other income at RMB 199 million in 2022, mainly from interest and government grants; other gains and losses recorded a net loss of RMB 4.2 million, primarily due to exchange losses; finance costs increased to RMB 49.09 million due to higher bank borrowing interest, and income tax expense was RMB 487 million, with the effective tax rate influenced by tax incentives in different regions - Other income primarily consists of **interest income (RMB 106 million)** and **government grants (RMB 93 million)**[26](index=26&type=chunk) - Other gains and losses recorded a net loss of **RMB 4.2 million**, mainly due to a net exchange loss of **RMB 126 million**, partially offset by fair value changes in financial assets of **RMB 150 million**[27](index=27&type=chunk) - Finance costs increased year-on-year, primarily due to bank borrowing interest rising from **RMB 15.4 million to RMB 35.46 million**[28](index=28&type=chunk) - Certain Chinese subsidiaries of the Group enjoy preferential corporate income tax rates of **15% or 9%**[30](index=30&type=chunk) [Dividends and Earnings Per Share](index=17&type=section&id=Dividends%20and%20Earnings%20Per%20Share) For the year 2022, the company recognized total dividends of approximately RMB 1.276 billion, including the 2022 interim dividend and 2021 final dividend; the Board proposed a 2022 final dividend of RMB 0.2414 per share, and basic earnings per share were RMB 1.3281, calculated based on profit attributable to owners of the company of RMB 3.259 billion and weighted average ordinary shares of approximately 2.454 billion Annual Dividend Distribution (RMB Thousand) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Dividends declared for the year | 1,276,239 | 1,154,834 | | Proposed final dividend for the year | 591,910 | 557,594 | - Basic earnings per share are calculated based on profit attributable to owners of the company of **RMB 3,258,992 thousand** and a weighted average of **2,453,940,224 ordinary shares**[37](index=37&type=chunk) [Key Statement of Financial Position Items](index=18&type=section&id=Key%20Statement%20of%20Financial%20Position%20Items) At the end of 2022, trade receivables amounted to RMB 1.44 billion, with most aged within 90 days; bank balances and cash were ample at RMB 4.38 billion; trade payables were RMB 178 million; total bank borrowings were RMB 1.78 billion, all unsecured floating-rate loans; regarding share capital, the company repurchased and cancelled 5.455 million shares during the year - Trade receivables (net of allowance) amounted to **RMB 1.442 billion**, with **94.6%** aged within 90 days[38](index=38&type=chunk)[40](index=40&type=chunk) - Bank balances and cash totaled **RMB 4.376 billion**, and bills receivable were **RMB 270 million**[38](index=38&type=chunk)[42](index=42&type=chunk) - Total bank borrowings were **RMB 1.783 billion**, all unsecured floating-rate borrowings due within one year[45](index=45&type=chunk)[46](index=46&type=chunk) - During the year, the company repurchased and cancelled **5,455,000 ordinary shares**[52](index=52&type=chunk)[53](index=53&type=chunk) [Management Discussion and Analysis](index=26&type=section&id=Management%20Discussion%20and%20Analysis) [Business Review](index=26&type=section&id=Business%20Review) During the reporting period, the Group achieved robust performance, with sales revenue increasing by 9.8% year-on-year to RMB 9.15 billion, or 13.7% to RMB 10.50 billion if calculated solely on pharmaceutical product sales; profit for the year grew by 8.3% to RMB 3.28 billion, primarily driven by continuous investment in innovative product pipelines, accelerated clinical development and registration, and strengthened brand influence of existing products Performance Overview for 2022 | Indicator | Amount | YoY Growth | | :--- | :--- | :--- | | Sales Revenue | RMB 9,150.3 Million | +9.8% | | Pharmaceutical Product Sales Revenue (Alternative Calculation) | RMB 10,497.5 Million | +13.7% | | Profit for the Year | RMB 3,276.2 Million | +8.3% | [Innovation and R&D](index=26&type=section&id=Innovation%20and%20R%26D) The Group continuously expands its differentiated innovative product pipeline through a "joint R&D and investment" strategy, adding four new innovative products during the reporting period, bringing the total to 30; key introductions include ruxolitinib cream and EyeOP1® glaucoma treatment device, while multiple products made significant progress in clinical development in China, with three products under NDA review, including methotrexate injection granted priority review status and methylene blue enteric-coated sustained-release tablets' NDA accepted [Continuous Expansion of Innovative Product Pipeline](index=27&type=section&id=Continuous%20Expansion%20of%20Innovative%20Product%20Pipeline) - The innovative pipeline added **4 new products**, bringing the total to **30**, primarily FIC and BIC products[62](index=62&type=chunk) - Introduced ruxolitinib cream, the first FDA-approved topical JAK inhibitor for vitiligo repigmentation[63](index=63&type=chunk) - Obtained exclusive licensing rights for the EyeOP1® glaucoma treatment device, expanding the ophthalmic product matrix from pharmaceuticals to devices and consumables[64](index=64&type=chunk) - Acquired global assets for a VEGF+ANG2 tetravalent bispecific antibody for the treatment of neovascular eye diseases[65](index=65&type=chunk) [Continuous Advancement of Clinical Development in China](index=28&type=section&id=Continuous%20Advancement%20of%20Clinical%20Development%20in%20China) - Diazepam nasal spray, teriparatide injection, and methotrexate injection (for psoriasis) are undergoing CDE review for NDA in China[67](index=67&type=chunk)[68](index=68&type=chunk)[70](index=70&type=chunk) - The NDA for methotrexate injection (for psoriasis) was granted **priority review status** by the CDE[70](index=70&type=chunk) - Methylene blue enteric-coated sustained-release tablets achieved positive results in Phase III clinical trials, and its NDA was accepted by the NMPA in February 2023[72](index=72&type=chunk) - Teriparatide injection was approved for marketing in Hong Kong, China, in April 2022[68](index=68&type=chunk) [Commercialization System](index=33&type=section&id=Commercialization%20System) The Group possesses strong commercialization capabilities, focusing on specialized areas such as cardiovascular, digestive, dermatology and medical aesthetics, and ophthalmology; as of the end of 2022, it had over 4,300 professional promotion personnel, covering over 50,000 hospitals and medical institutions and over 200,000 retail pharmacies in China; key products like BoYiding, XinHuoSu, Deanxit, and Ursofalk hold leading market positions in their respective therapeutic areas, with sales growth across all product lines, particularly in digestive and ophthalmology segments - As of December 31, 2022, the Group had over **4,300 professional marketing and promotion personnel**, with a network covering over **50,000 hospitals and medical institutions** and over **200,000 retail pharmacies** in China[78](index=78&type=chunk) Sales Performance by Product Line for 2022 (Calculated solely on pharmaceutical product sales) | Product Line | Revenue (RMB Million) | YoY Growth | Proportion | | :--- | :--- | :--- | :--- | | Cardiovascular | 5,516.4 | +13.6% | 52.5% | | Digestive | 3,611.6 | +11.9% | 34.4% | | Ophthalmology | 440.2 | +14.1% | 4.2% | | Dermatology | 344.3 | +10.1% | 3.3% | | Other Products | 585.0 | +30.4% | 5.6% | [Specialty Business Segments](index=36&type=section&id=Specialty%20Business%20Segments) The Group's three specialty business segments have all made significant progress: the dermatology and medical aesthetics business "CM Aesthetics" has established a complete operating system, strengthening its portfolio by introducing ruxolitinib cream and botulinum toxin type A products; the ophthalmology business "CM Vision" expanded into drug-device combinations, introducing the EyeOP1® glaucoma treatment device; and the Southeast Asia business "CM Health" rapidly introduced multiple innovative products and partnered with Gan & Lee Pharmaceuticals to introduce insulin series, setting a precedent for mainland Chinese insulin products entering the Southeast Asian market - Dermatology and medical aesthetics business "CM Aesthetics" has a team of over **600 people**, covering nearly **10,000 hospitals and medical institutions**, added ruxolitinib cream, acquired **60% equity** in Heling Pharmaceutical, and obtained exclusive licensing rights for a Korean botulinum toxin type A product[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk)[87](index=87&type=chunk) - Ophthalmology business "CM Vision" has a team of over **300 people**, covering nearly **9,000 hospitals and medical institutions**, added EyeOP1® glaucoma treatment device and a VEGF+ANG2 tetravalent bispecific antibody, strengthening its drug-device combination commercialization capabilities[91](index=91&type=chunk)[92](index=92&type=chunk) - Southeast Asia business "CM Health" obtained Southeast Asia rights for multiple innovative products including ruxolitinib cream and EyeOP1®, and partnered with Gan & Lee Pharmaceuticals to introduce mainland Chinese insulin products into the Southeast Asian market for the first time[93](index=93&type=chunk) [Impact of Industry Policies and Future Outlook](index=39&type=section&id=Impact%20of%20Industry%20Policies%20and%20Future%20Outlook) National Volume-Based Procurement (VBP) is the most significant industry policy affecting the Group's business, with Deanxit not selected in the seventh round of VBP, and BoYiding and Ursofalk included in the eighth round; the Group will respond by strengthening academic brand building and deepening retail market penetration, while future strategies focus on upgrading the commercialization platform, driving innovative product launches, and expanding internationalization starting with Southeast Asia to achieve sustainable growth - National Volume-Based Procurement (VBP) is the most influential industry policy; Deanxit was not selected in the seventh round of VBP, while BoYiding and Ursofalk were included in the eighth round of VBP[95](index=95&type=chunk) - Strategies to address VBP include: strengthening academic brand building, deepening retail market penetration, expanding differentiated innovative pipelines, and developing "VBP-immune" businesses such as dermatology and medical aesthetics, ophthalmology, and Southeast Asia[95](index=95&type=chunk) - Future development strategies focus on upgrading the commercialization platform, driving the commercialization of innovative products, and expanding international business starting with Southeast Asia[96](index=96&type=chunk) [Financial Review](index=39&type=section&id=Financial%20Review) The Group's financial performance was robust this year, with revenue growing 9.8% to RMB 9.15 billion and gross profit margin improving from 74.9% to 76.9%; selling expense ratio decreased, while administrative expenses increased due to higher personnel costs; total R&D expenditure was RMB 730 million; profit for the year increased 8.3% to RMB 3.28 billion; net cash from operating activities significantly rose 42.5% to RMB 3.55 billion, and the debt-to-asset ratio (bank borrowings/total assets) decreased from 10.6% to 10.0%, indicating a sound financial structure Financial Performance Summary for 2022 | Indicator | 2022 | Change | | :--- | :--- | :--- | | Revenue | RMB 9,150.3 Million | +9.8% | | Gross Profit Margin | 76.9% | Up 2.0 percentage points | | Selling Expenses as % of Revenue | 29.7% | Down 0.8 percentage points | | Administrative Expenses as % of Revenue | 7.0% | Up 1.7 percentage points | | Profit for the Year | RMB 3,276.2 Million | +8.3% | Cash Flow Summary for 2022 (RMB Thousand) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Net cash generated from operating activities | 3,553,243 | 2,493,852 | | Net cash used in investing activities | (1,178,202) | (1,519,525) | | Net cash used in financing activities | (1,399,914) | (258,392) | - The debt-to-asset ratio (bank borrowings divided by total assets) was **10.0%**, a decrease from **10.6%** in the prior year[120](index=120&type=chunk) [Corporate Governance and Other Information](index=45&type=section&id=Corporate%20Governance%20and%20Other%20Information) [Share Repurchases](index=45&type=section&id=Share%20Repurchases) For the year ended December 31, 2022, the company repurchased a total of 5,455,000 ordinary shares on the Stock Exchange for a total consideration of HKD 59,415,400, and all repurchased shares were cancelled Share Repurchase Details for 2022 | Month of Repurchase | Number of Shares Repurchased | Total Consideration Paid (HKD) | | :--- | :--- | :--- | | March 2022 | 130,000 | 1,447,520 | | April 2022 | 3,600,000 | 40,227,820 | | May 2022 | 1,000,000 | 10,976,200 | | September 2022 | 545,000 | 5,147,640 | | October 2022 | 180,000 | 1,616,220 | | **Total** | **5,455,000** | **59,415,400** | [Dividends and Closure of Register of Members](index=46&type=section&id=Dividends%20and%20Closure%20of%20Register%20of%20Members) The company has paid an interim dividend of RMB 0.2930 per share for 2022; the Board proposed a final dividend of RMB 0.2414 per share for the year ended December 31, 2022, which, subject to approval at the Annual General Meeting, is planned for distribution on May 12, 2023 - A final dividend of **RMB 0.2414 per share (equivalent to HKD 0.274)** is proposed[131](index=131&type=chunk) - To qualify for the final dividend, shareholders must complete share transfer registration by **4:30 p.m. on May 4, 2023**[133](index=133&type=chunk) [Proposed Amendments to Memorandum and Articles of Association](index=47&type=section&id=Proposed%20Amendments%20to%20Memorandum%20and%20Articles%20of%20Association) The Board proposes to amend the existing Memorandum and Articles of Association and adopt new ones to comply with the latest amendments to the HKEX Listing Rules (regarding core shareholder protection standards) and applicable Cayman Islands laws, and to increase flexibility in convening general meetings; this proposal is subject to approval by shareholders via a special resolution at the Annual General Meeting - The proposed amendments to the Articles of Association aim to comply with a set of uniform core shareholder protection standards set out in Appendix 3 to the Listing Rules[136](index=136&type=chunk) - The amendments also include provisions to allow the company flexibility in convening general meetings and certain housekeeping amendments[136](index=136&type=chunk) - This proposal is subject to approval by shareholders via a special resolution at the Annual General Meeting to be held on **April 28, 2023**[136](index=136&type=chunk)

Financial Performance - Revenue increased by 15.7% to RMB 4,447.8 million, with pharmaceutical sales revenue growth of 21.1% to RMB 5,170.0 million[6]. - Gross profit rose by 19.6% to RMB 3,436.2 million, with pharmaceutical sales gross profit growth of 22.1% to RMB 3,375.0 million[6]. - Net profit grew by 10.1% to RMB 1,796.3 million, with basic earnings per share increasing by 11.2% to RMB 0.7325[6]. - The company declared an interim dividend of RMB 0.2930 per share, a 10.9% increase from the previous year[6]. - The company reported a sales revenue of RMB 4,447.8 million for the first half of 2022, representing a year-on-year growth of 15.7% compared to RMB 3,843.0 million in the same period of 2021[16]. - The net profit for the period was RMB 1,796.3 million, reflecting a year-on-year increase of 10.1% from RMB 1,631.6 million in the first half of 2021[16]. - The group's gross profit increased by 19.6% to RMB 3,436.2 million, compared to RMB 2,873.8 million in the same period last year, with a gross profit margin of 77.3%, up 2.5 percentage points from 74.8%[51]. - The total comprehensive income for the period amounted to RMB 1,668,243,000, compared to RMB 1,646,494,000 in the previous year, showing a slight increase[84]. Product Development and Innovation - The company is advancing its innovative product development with nearly 30 differentiated products in the pipeline[12]. - The company has established nearly 30 innovative products, with 9 products already approved in the US/Europe, and 3 products currently under NDA review in China[19]. - The company is developing a diazepam nasal spray for treating acute repetitive seizures, which is currently under NDA review in China, with promising pharmacokinetic study results[20]. - The diazepam nasal spray demonstrated a bioavailability of 77.55% and 80.13% for the 15mg dose group, indicating rapid absorption and good safety tolerance in healthy Chinese subjects[20]. - The company is developing a pre-filled methotrexate injection for the treatment of severe, refractory, disabling psoriasis, which has received priority review status from the CDE in January 2022, potentially accelerating its market entry in China[23]. - The pre-filled methotrexate injection is also expected to be the first subcutaneous treatment for rheumatoid arthritis (RA) in China, with a Phase III bridging trial completed in April 2022, involving 140 subjects across approximately 17 centers[24]. - The company is conducting a Phase III clinical trial for Daprodustat, an innovative oral HIF-PHI for treating anemia in chronic kidney disease (CKD), with 150 subjects planned for enrollment across about 28 centers[26]. - The innovative pipeline includes various products, such as the Daprodustat for CKD anemia and the methotrexate injection for RA, which are currently under clinical trials or awaiting approval in multiple regions[27]. Market Strategy and Expansion - The company is implementing an international strategy focusing on Southeast Asia to meet the demand for quality and affordable products[14]. - The company is collaborating with global biotech and pharmaceutical companies to develop products for the Southeast Asian market[14]. - The company aims to enhance its commercialization capabilities by leveraging its proven experience in market access, academic promotion, and brand building[30]. - The company is focusing on expanding its presence in Southeast Asia, leveraging local talent and establishing a core management team to penetrate the market effectively[41]. - The Southeast Asian market is seen as a significant opportunity due to its growing economy and favorable policies, with Singapore as the management hub[40]. - The company aims to develop and commercialize high-quality products tailored to local needs in Southeast Asia, creating a robust operational platform[41]. - The company is focusing on building an open platform for product development and commercialization in Southeast Asia, enhancing its competitive edge in the region[192]. Operational Efficiency and Management - The company is committed to responsible business operations and has implemented a refined management mechanism for employee behavior and performance evaluation[30]. - The company is enhancing its digital tools and new media promotion channels to improve product brand recognition and expand market penetration[31]. - The company is leveraging its academic promotion network and expert resources to enhance clinical trial efficiency and patient recruitment[25]. - The company has established a management system covering the entire product lifecycle to enhance development efficiency from clinical trials to commercialization[200]. - The company is committed to continuous improvement of its management system to enhance the efficiency of product development from clinical trials to commercialization[49]. Financial Position and Assets - Cash and cash equivalents amounted to RMB 4,019.1 million as of June 30, 2022, compared to RMB 3,385.7 million at the end of the previous year[65]. - The company's debt-to-asset ratio was approximately 10.4% as of June 30, 2022, compared to 10.6% at the end of the previous year[65]. - The company reported a total of RMB 1,770,835,000 in unsecured bank loans as of June 30, 2022, up from RMB 1,677,573,000 as of December 31, 2021[109]. - The company’s total assets as of June 30, 2022, amounted to RMB 12,296,730 thousand, compared to RMB 11,102,715 thousand as of January 1, 2021, reflecting a growth of 10.7%[89]. - The company’s cash flow hedge reserve was recorded at (1,719) as of the end of the reporting period[88]. Product Segmentation and Revenue Contribution - The cardiovascular segment achieved revenue of RMB 2,141.4 million, a year-on-year increase of 19.7%, contributing 56.6% to the total pharmaceutical sales revenue[190]. - The digestive segment reported revenue of RMB 1,707.7 million, up 17.4% year-on-year, accounting for 33.0% of total pharmaceutical sales revenue[190]. - The ophthalmology segment generated revenue of RMB 189.5 million, reflecting a 14.2% increase compared to the previous year, representing 3.7% of total pharmaceutical sales revenue[190]. - The dermatology segment's revenue reached RMB 146.5 million, a growth of 11.4% year-on-year, making up 2.8% of total pharmaceutical sales revenue[190]. Acquisitions and Partnerships - The company acquired global assets for a targeted VEGF+ANG2 bispecific antibody in July 2022[28]. - The company has entered into agreements to acquire rights related to the product Traumakine, with the final price to be negotiated based on net sales in the region[146][147]. - The company acquired a 60% stake in He Ling Pharmaceutical, expanding its portfolio in dermatological skincare products, which are formulated with safe, non-irritating ingredients[46]. - The company signed a licensing agreement for the EyeOP1® glaucoma treatment device, granting exclusive rights for commercialization in multiple regions including Southeast Asia[43]. Corporate Governance and Employee Management - The company has adhered to applicable corporate governance codes during the reporting period, with a clear separation of roles between the chairman and CEO[81]. - The total remuneration for key management personnel was RMB 6,761,000 for the reporting period, compared to RMB 6,093,000 for the same period in 2021[151]. - The company is committed to providing equal opportunities and continuous education and training for all employees to enhance their skills and collaboration[78].

Financial Performance - Revenue increased by 20.0% to RMB 8,337.2 million, with pharmaceutical sales revenue growth of 24.8% to RMB 9,230.2 million[9]. - Gross profit grew by 21.7% to RMB 6,246.9 million, with pharmaceutical sales gross profit growth of 24.7% to RMB 6,039.2 million[9]. - Annual profit increased by 18.4% to RMB 3,025.3 million, with basic earnings per share rising by 19.4% to RMB 1.2228[9]. - The company recorded a sales revenue of RMB 8,337.2 million for the reporting period, representing a year-on-year growth of 20.0% compared to RMB 6,946.0 million in 2020[24]. - The operating revenue from pharmaceutical sales increased by 24.8% to RMB 9,230.2 million, up from RMB 7,395.2 million in 2020[24]. - The annual profit reached RMB 3,025.3 million, reflecting an 18.4% increase from RMB 2,555.7 million in 2020[24]. - Gross profit grew by 21.7% to RMB 6,246.9 million, with a gross margin of 74.9%, up from 73.9% year-on-year[64]. - Other income increased by 36.1% to RMB 146.9 million, primarily due to higher interest income and government subsidies[69]. - Trade receivables increased by 33.2% to RMB 1,395.8 million, reflecting the rise in revenue[74]. - Cash and cash equivalents amounted to RMB 3,385.7 million as of December 31, 2021, compared to RMB 2,668.4 million a year earlier[76]. Dividends and Shareholder Returns - Proposed final dividend of RMB 0.2269 per share, resulting in a total dividend of RMB 0.4910 per share, an increase of 18.7% compared to the previous year[9]. - The board proposed a final dividend of RMB 0.2269 per share, equivalent to HKD 0.279, to be distributed on May 6, 2022, pending shareholder approval[101]. - The company paid dividends of RMB 652.5 million for the 2021 interim and RMB 502.3 million for the 2020 final dividend[88]. - The company aims to balance shareholder interests with prudent capital management through its sustainable dividend policy[102]. - The company’s financial performance and expected operational needs will influence future dividend declarations[102]. Business Development and Innovation - The company is developing a local innovation drug incubation platform in collaboration with Chinese biotech firms, focusing on four fully human antibody new drugs[12]. - The company has initiated a new model for custom innovative product development, targeting areas such as autoimmune diseases and gynecology[12]. - The innovative drug pipeline has expanded to nearly 30 products, with 3 products' registration applications accepted in China and 2 products achieving positive results in bridging trials[18]. - The company has formed an open innovation drug platform linking pharmaceutical innovation with commercialization, enhancing its capabilities in drug lifecycle management[17]. - The company aims to leverage its open innovation platform to connect pharmaceutical innovation with commercialization, enhancing the efficiency of drug development[25]. - The company is committed to expanding its business depth and breadth through independent operations and specialized focus, ensuring long-term growth[25]. - The company has established nearly 30 innovative products with high market potential and competitive advantages globally, with 9 products approved for market in the US/Europe as of December 31, 2021[31]. Acquisitions and Partnerships - Acquired skin medical beauty company Lukai to expand into the medical beauty sector and enhance product offerings[14]. - Acquired ultrasound technology platform company Kangnaixin to develop and produce photonic medical beauty devices, with clinical trials for the FUBA5200 device underway[14]. - Entered into an exclusive cooperation agreement with OVMEDI for high-quality implant line products to meet diverse consumer needs in China[14]. - The company holds a 5.97% stake in Zhuhai Tainuo Maibo Biotechnology Co., with a joint venture established to develop innovative products[27]. - The joint venture with Tainuo Maibo focuses on four innovative products based on the HitmAb® platform, including antibodies for Staphylococcus aureus and COVID-19[28]. Research and Development - The company has initiated two new innovative research models focusing on investment in China's biotech industry and custom development of innovative products[18]. - The company is developing a fully human anti-Sa Hlα antibody drug, currently in preclinical research, aimed at preventing disease progression in high-risk populations and treating infections caused by MRSA[32]. - A fully human anti-HCMV antibody drug is also in preclinical research, with the potential to fill the gap in the market for HCMV monoclonal antibodies, as there are currently no vaccines available globally[33]. - The company is advancing a fully human anti-COVID-19 antibody drug, which shows efficacy against major circulating strains, currently in preclinical research[34]. - The diazepam nasal spray, approved in the US, has received NMPA acceptance for registration in China, demonstrating rapid absorption and good safety tolerance in clinical studies[36]. Market Expansion and Sales Strategy - The company has established a multi-channel sales network, extending its commercialization efforts from mainland China to Hong Kong and Southeast Asia[18]. - The company plans to enhance its product structure in the dermatology aesthetic business, aiming for comprehensive coverage of skin disease medications and a diverse range of aesthetic products[61]. - The company will focus on expanding its e-commerce platform to create popular products, enhancing brand and reputation management in the health sector[61]. - The company aims to develop a leading position in the ophthalmology sector by enhancing its commercialization capabilities and expanding its product offerings[61]. Corporate Governance and Management - The company has a strong management team with extensive experience in the pharmaceutical industry, including Mr. Lin, who has clinical experience and deep understanding of the Chinese pharmaceutical sector[89]. - The company has been recognized multiple times for its financial management, with its CFO receiving accolades for best CFO in the Greater China region[89]. - The company has a robust board of directors with expertise in corporate financing and mergers and acquisitions[91]. - The board consists of six directors, including three executive directors and three independent non-executive directors[142]. - The company emphasizes compliance with listing rules and corporate governance, overseen by the company secretary[96]. Environmental, Social, and Governance (ESG) Initiatives - The company’s ESG efforts received broad recognition, maintaining an "AA" rating from MSCI, surpassing 83% of global peers[21]. - The company is committed to providing affordable, high-quality medications while actively engaging in environmental protection and social responsibility initiatives[21]. - The company has established a three-tier ESG governance structure, including a board of directors, an ESG committee, and an ESG working group, to systematically manage ESG initiatives[178]. - The company aims to reduce greenhouse gas emissions density by at least 5% in 2023 compared to 2020 levels, alongside similar targets for hazardous waste and electricity usage[188]. - The company has committed to ensuring 100% of suppliers and internal employees can report misconduct through established channels, enhancing its anti-corruption framework[187]. Compliance and Risk Management - The company adheres to the GMP and GSP standards, ensuring compliance with the relevant regulations in drug production and operation[123]. - The company has established a compliance management committee chaired by the CEO to oversee compliance and business ethics[197]. - The company has implemented various internal compliance management systems, including anti-fraud and procurement management policies[198]. - The company emphasizes communication with shareholders and investors, engaging over a thousand representatives from domestic and international investment institutions during the reporting period[168].