Financial Performance - Revenue for the six months ended June 30, 2023, was RMB 3,209.0 million, an increase of 148.1% compared to the same period last year[2]. - Gross profit for the same period was RMB 2,563.9 million, reflecting a 166.9% increase year-over-year[2]. - Operating profit before interest, tax, depreciation, and amortization (EBITDA) was RMB 1,316.4 million, up from RMB 274.7 million in the previous year[2]. - Net profit attributable to equity holders was RMB 1,029.5 million, compared to a loss of RMB 32.8 million in the same period last year[3]. - Basic and diluted earnings per share were RMB 1.17, compared to a loss of RMB 0.04 per share in the previous year[3]. - For the twelve months ending June 30, 2023, the company reported revenue of RMB 5,660,646,000, a significant increase from RMB 2,004,850,000 for the same period ending June 30, 2022, representing a growth of approximately 183%[19]. - The gross profit for the twelve months ending June 30, 2023, was RMB 4,449,354,000, compared to RMB 1,343,568,000 for the same period in 2022, indicating a growth of about 231%[19]. - The company reported a net profit of RMB 1,023.9 million, compared to a net loss of RMB 32.5 million in the same period last year[98]. Assets and Liabilities - Total non-current assets amounted to RMB 6,830.3 million, slightly down from RMB 6,875.8 million at the end of 2022[6]. - Current assets increased to RMB 6,613.9 million from RMB 5,014.0 million at the end of 2022[6]. - Total current liabilities were RMB 5,657.8 million, up from RMB 4,940.8 million at the end of 2022[6]. - As of June 30, 2023, total assets decreased to RMB 7,786,400 thousand from RMB 6,949,019 thousand as of December 31, 2022, indicating a year-over-year increase of approximately 12%[8]. - Net assets increased to RMB 7,093,925 thousand as of June 30, 2023, compared to RMB 6,070,001 thousand as of December 31, 2022, reflecting a growth of about 17%[8]. - The company’s total liabilities decreased to RMB 692,475 thousand as of June 30, 2023, from RMB 879,018 thousand as of December 31, 2022, indicating a reduction of about 21%[8]. - The company reported a total of RMB 1,509,359,000 in financial liabilities measured at amortized cost as of June 30, 2023, down from RMB 1,718,222,000[47]. Cash Flow - The net cash generated from operating activities for the six months ended June 30, 2023, was RMB 1,244,799 thousand, a significant increase from RMB 152,427 thousand in the same period of 2022[11]. - Cash and cash equivalents increased to RMB 3,781,609 thousand as of June 30, 2023, compared to RMB 859,097 thousand as of June 30, 2022, showing a substantial growth[13]. - The company reported a net cash inflow from financing activities of RMB 395,490 thousand for the six months ended June 30, 2023, compared to RMB 52,666 thousand in the previous year[13]. - The company’s cash flow from investing activities showed a net inflow of RMB 1,217,801 thousand for the six months ended June 30, 2023, compared to a net outflow of RMB 476,929 thousand in the previous year[12]. Research and Development - Research and development expenses increased to RMB 98.3 million from RMB 40.9 million year-over-year[4]. - Research and development expenses amounted to RMB 120.7 million, accounting for 3.8% of total revenue, which is a 39.4% increase year-on-year[95]. - The company achieved significant progress in the research and development of innovative drugs, particularly in the areas of anti-infection and endocrine metabolism, during the first half of 2023[74]. - The company plans to increase R&D investment, focusing on drug development in areas such as anti-infectives and endocrine diseases, to enhance product competitiveness[127]. Market and Sales - Revenue from antiviral drug sales reached RMB 2,911,437,000 for the six months ending June 30, 2023, up from RMB 1,012,403,000 in the same period of 2022, reflecting an increase of approximately 187%[18]. - The core product Kewai (Oseltamivir Phosphate) generated sales of RMB 2,880.5 million, representing a growth of 186.4% year-on-year[78]. - The sales contribution of Kewai accounted for 89.8% of the total revenue, with other products contributing significantly less[77]. - The company has developed a professional promotion team for insulin products, which now consists of nearly 500 personnel, and has established connections with over 5,000 end-users[79]. - The company is actively participating in the elimination of hepatitis C, with its product Phosphorylated Emetine already included in the national medical insurance catalog[80]. - The company has strengthened its market marketing efforts to improve the recognition and competitiveness of its drugs in response to increasing health awareness among consumers[74]. - The company is actively participating in international markets, leveraging improvements in its technological capabilities and increasing global influence[75]. Corporate Governance and Compliance - The company has adhered to high standards of corporate governance and complied with all relevant rules during the reporting period[130]. - The company’s audit committee reviewed the interim results and financial statements for the six months ending June 30, 2023, prepared in accordance with international financial reporting standards[132]. Dividends and Shareholder Information - The company did not declare an interim dividend for the six months ended June 30, 2023[2]. - The company has not declared any dividends for the six months ended June 30, 2023, and June 30, 2022[56]. - The total issued and paid-up ordinary shares as of June 30, 2023, is 879,967,700 shares, unchanged from December 31, 2022[57]. Agreements and Frameworks - The company has established a leasing and service framework agreement with Shenzhen Dongyangguang Industrial, with proposed annual limits of RMB 12,383,300, RMB 12,999,500, and RMB 13,003,300 for the three years ending December 31, 2025[118]. - The company has set a framework agreement for the sale of raw materials and pharmaceuticals, with proposed annual limits of RMB 18,000,000, RMB 20,000,000, and RMB 22,000,000 for the three years ending December 31, 2025[118]. - A framework agreement for commissioned processing has been established, with proposed annual limits of RMB 94,805,500, RMB 108,832,000, and RMB 139,468,200 for the three years ending December 31, 2025[121]. - All agreements mentioned have been approved by shareholders at the annual general meeting held on June 2, 2023[122].

Financial Performance - Revenue of the Group in 2022 was RMB3,744.95 million, representing an increase of 309.83% compared to 2021[5] - Profit and total comprehensive income attributable to equity shareholders of the Company was RMB76.60 million, an increase of RMB664.25 million compared to a loss of RMB587.65 million in 2021[5] - Basic and diluted earnings per share for 2022 was RMB0.09[5] - Gross profit margin for 2022 was 76.00%, compared to 52.93% in 2021[7] - Net profit margin for 2022 was 8.57%, compared to a negative margin of 64.32% in 2021[7] - Total assets increased to RMB11,889.80 million in 2022 from RMB10,541.58 million in 2021[7] - Total equity attributable to equity shareholders of the Company increased to RMB5,884.88 million in 2022 from RMB5,808.28 million in 2021[7] - Net cash generated from operating activities was RMB1,699.91 million in 2022, compared to a net cash used in operating activities of RMB662.51 million in 2021[7] - Cost of sales increased by 109.00% to RMB 898.88 million in 2022, primarily due to higher sales volume of Kewei[63][65] - Gross profit rose by 488.40% to RMB 2,846.07 million in 2022, driven by increased sales of Kewei[64][66] - Other net losses amounted to RMB 844.33 million in 2022, a significant decrease from RMB 85.96 million in net income in 2021, due to fair value changes and impairment losses[68] - Total expenses increased by 58.67% to RMB 1,962.31 million in 2022, with distribution costs rising by 133.21% to RMB 1,216.59 million[69][70][71] - Research and development costs grew by 18.18% to RMB 129.61 million in 2022[71] - Finance costs increased by 15.52% to RMB 281.65 million in 2022[71] - Administrative expenses decreased by 5.57% to RMB 338.45 million in 2022[71] - Total revenue for 2022 was RMB 3,744.95 million, a 309.83% increase compared to 2021[62] - Distribution costs increased due to higher marketing and travel expenses, driven by the normalization of pandemic prevention measures and increased academic promotion activities[73] - R&D investment for 2022 was RMB 199.24 million, accounting for 5.32% of revenue, a decrease of 19.08% compared to the previous year[75] - Profit before taxation for 2022 was RMB 39.42 million, a significant increase from a loss of RMB 667.18 million in 2021, primarily due to higher sales of the core product Kewei[77] - Net profit for 2022 was RMB 49.24 million, a 108.38% increase from a net loss of RMB 587.72 million in 2021, driven by increased sales of Kewei[82] - Total assets as of December 31, 2022, were RMB 11,889.80 million, with total liabilities of RMB 5,819.80 million and shareholders' equity of RMB 6,070.00 million[86] - Current assets as of December 31, 2022, totaled RMB 5,014.02 million, with inventories at RMB 315.03 million and trade receivables at RMB 1,036.92 million[89] - Current liabilities as of December 31, 2022, were RMB 4,940.78 million, including trade payables of RMB 1,718.22 million and bank loans of RMB 223.34 million[89] - Net current assets as of December 31, 2022, were RMB 6,949.02 million, compared to RMB 9,303.52 million in 2021[89] - Total current assets increased to RMB5,014.02 million in 2022, up from RMB2,057.38 million in 2021, driven by increased sales and reclassification of equity interest in Sunshine Lake Pharma[90] - Intangible assets decreased to RMB2,920.65 million in 2022, down by RMB351.34 million from RMB3,271.99 million in 2021, mainly due to amortization and impairment losses[91][93] - Gearing ratio increased to 62.96% in 2022 from 53.04% in 2021, while the quick ratio decreased to 0.95 times from 1.44 times[92] - Bank loans and other borrowings increased to RMB776.93 million in 2022, up by RMB321.49 million from RMB593.38 million in 2021[95][96] - The company recorded a net foreign exchange loss of RMB212.9 million in 2022, compared to a net gain of RMB49.2 million in 2021, primarily due to USD-denominated borrowings[97] - Capital expenditure for 2022 totaled RMB853.06 million, including construction of plants, purchase of equipment, and acquisition of pharmaceutical product approvals[98][101] - The company transferred a 9.9134% equity interest in Sunshine Lake Pharma for RMB2,312,319,650 in December 2022[99][102] - Land use rights, fixed assets, and construction in progress totaling RMB1,499.17 million were pledged for bank loans and other borrowings as of 31 December 2022[105] - Total number of employees for the year ended 31 December 2022 was 4,167, with staff costs (including Directors' emoluments but excluding pension contributions) amounting to approximately RMB 612.18 million[108][109] - Age distribution of employees: 21.53% aged 30 or below, 75.59% aged 31-50, and 2.88% aged above 50[110] - Education level of employees: 2.11% with a Master's degree or above, 32.30% with a Bachelor's degree, 35.04% with an Associate degree, and 30.55% with Vocational or below qualifications[111] - Gender distribution of employees: 54.16% male and 45.84% female[119] - The company plans to increase the proportion of female employees, particularly in senior management roles, and will provide career development support and professional training for female employees[120] - The company has no immediate plans for significant investments or acquisitions of major capital assets as of 31 December 2022[106] - The company strictly complies with PRC labor laws and provides various social insurance premiums, housing provident funds, and additional benefits such as Corporate Annuity Plan, Housing Welfare, and Children's Welfare[113][115] - The company adheres to an Equal Employment system and ensures fair opportunities for both male and female employees in recruitment, promotion, and senior management elections[117][118] - The company's remuneration policy aims to motivate and retain talented employees, with regular reviews conducted by management[112][114] Product Portfolio and Market Performance - The Company has manufactured, promoted, and sold a total of 39 pharmaceutical products in China as of 31 December 2022[9] - Oseltamivir Phosphate, a core product, was included in the National Drug List for Basic Medical Insurance, Work-Related Injury Insurance, and Maternity Insurance (2022 Version)[9] - The company has a total of 39 pharmaceutical products in production, promotion, and sales in China as of December 31, 2022, supported by a nationwide distribution network and 1,726 professional sales personnel[10] - The core product, Kewei (Oseltamivir Phosphate), is a leading anti-flu drug in China, included in the National Essential Drug List (2018 edition) and the Influenza Diagnosis and Treatment Guidelines (2020 edition)[10] - The company launched several new products, including Insulin Aspart Injection, Insulin Glargine Injection, and Recombinant Human Insulin Injection[15][16][17] - Oseltamivir Phosphate Capsules became the first drug to pass the Consistency Evaluation in 2019[18] - The company's Kewei granule product became the only manufacturer of Oseltamivir Phosphate Granule in China in 2008[22] - Kewei product dominated the largest market share of Oseltamivir Phosphate products in China in 2013[22] - The company's Metoprolol Succinate Sustained-release Tablets and Azithromycin Tablets were approved for launch in 2022[29] - The company's self-developed Insulin Aspart Injection and Insulin Aspart 30 Injection were approved for launch in 2022[29] - Recombinant Human Insulin Injection and Insulin Glargine Injection were approved by the NMPA in 2022[29] - Rongliflozin L-Pyroglutamic Acid, a national Class 1 innovative new drug, is under Phase III clinical stage[29] - Biosimilar Liraglutide is under the pending submission stage of new drug application[29] - Isophane Protamine Recombinant Human Insulin Injection (Pre-mixed 30R) is under the approval stage of production registration in China[29] - 29 out of 33 generic drugs acquired from Sunshine Lake Pharma have been approved to launch by the NMPA, covering more diverse therapeutic areas[31] - Metoprolol Succinate Sustained-Release Tablets, Azithromycin Tablets, Insulin Aspart Injection, and Insulin Aspart 30 Injection have been approved to launch[37][38] - The 2022 National Reimbursement Drug List added 111 types of drugs, which will expand the market size of innovative drugs in China[40] - The company aims to enhance its product portfolio and market competitiveness through continuous innovation and new product launches[34] - The pharmaceutical industry in China is expected to stabilize, with a positive cycle and thriving development opportunities due to favorable policies[39] - The company focuses on developing drugs with independent intellectual property rights to reduce reliance on foreign drugs and improve therapeutic effects[41] - The demand for effective drugs from domestic pharmaceutical companies is expected to surge due to rising national income and drug quality expectations[42] - Sales of the core product Kewei amounted to RMB3,092.71 million, a 457.66% increase compared to the previous year, driven by normalized social activities and recovery in medical institutions[43][45] - 29 generic drugs acquired from Sunshine Lake Pharma were approved for launch by the NMPA, enriching the Group's product portfolio[44][45] - R&D investment in Rongliflozin L-Pyroglutamic Acid amounted to RMB39,887.19 thousand, accounting for 1.07% of revenue and 4.44% of operating costs[53] - R&D investment in Liraglutide amounted to RMB17,679.37 thousand, accounting for 0.47% of revenue and 1.97% of operating costs[53] - Revenue from Kewei (Oseltamivir Phosphate) Granules was RMB2,585.15 million, accounting for 69.03% of total revenue[53] - Revenue from Kewei (Oseltamivir Phosphate) Capsules was RMB507.55 million, accounting for 13.55% of total revenue[53] - Revenue from Ertongshu (Benzbromarone Tablets) was RMB98.42 million, accounting for 2.63% of total revenue[53] - Revenue from Oumeining (Telmisartan Tablets) was RMB62.92 million, accounting for 1.68% of total revenue[53] - Revenue of Olmesartan Tablets amounted to RMB44.26 million, accounting for 1.18% of total revenue[55] - Revenue of Clarithromycin Tablets amounted to RMB33.60 million, accounting for 0.90% of total revenue[55] - Total revenue of the six core products accounted for 88.97% of the total revenue during the Reporting Period[55] - The Group recorded a revenue of RMB3,744.95 million for the year ended 31 December 2022, representing a 309.83% increase compared to 2021[59] - Revenue from Kewei amounted to RMB3,092.70 million, representing a 457.66% increase compared to the corresponding period last year[59] - Anti-viral drugs revenue increased by 456.47% to RMB 3,116.06 million in 2022, driven by strong sales of Kewei (Oseltamivir Phosphate) Granules and Capsules[62] - Kewei (Oseltamivir Phosphate) Granules revenue surged by 450.64% to RMB 2,585.15 million, accounting for 69.03% of total revenue[62] - The Group has a total of 1,726 staff in its sales teams as of 31 December 2022[55] - The Group has started to expand its online pharmacy channel and cooperated with well-known online channel operators[55] - Kewei is included in the National Drug List for Basic Medical Insurance, Work-Related Injury Insurance, and Maternity Insurance (2022 Version)[55] - The Group adjusted the division of labor of the sales teams to focus on core products in graded hospitals, chain pharmacies, and centralized procurement markets[55] - The Group's sales teams are structured into self-operated, new retail, and centralized procurement teams to enhance market coverage[55] - The company acquired 33 generic drugs from Sunshine Lake Pharma, all approved for domestic declaration, with core products Kewei capsules and Benzbromarone tablets being the first to pass the Consistency Evaluation[164] - The company's core product Kewei faces less market competition, and the cost of distribution is under control, with the ability to achieve self-sufficiency in API production, reducing costs[164] - The national Medical Reimbursement Drug List added 111 types of drugs, with the market size of China's innovative drugs expected to steadily expand[164] - The company will increase R&D investment and accelerate the transformation of drug R&D into clinical applications in therapeutic areas such as anti-infective, endocrine, and metabolic diseases[166] - The company aims to strengthen product R&D and innovation capabilities, introduce new products, and enrich the existing product portfolio to enhance market competitiveness[166] - The company will optimize its scientific and sustainable marketing strategy, strengthen academic promotion, and further promote core products in graded hospitals and primary medical markets[166] - The company plans to create a highly recognized business image and reputation in the domestic market to lay a solid foundation for future product launches[166] - The company will focus on consolidating and expanding strategic target markets by grasping market demand and trends in the pharmaceutical industry[166] Strategic Partnerships and Collaborations - The company established a joint venture with TaiGen Biopharmaceuticals for clinical trials of Emitasvir Phosphate and Furaprevir combination therapy[11][12] - A strategic partnership with Jointown Pharmaceutical grants exclusive OTC channel distribution rights for Kewei products in mainland China for three years[11][12] - The company signed a cooperation agreement with Wuhan Institute of Virology and Sunshine Lake Pharma to establish a national antiviral drug center and emergency prevention drug platform[11][12] - The company entered into a leasing and services agreement with Shenzhen HEC Industrial, with proposed annual caps of RMB 12,383,300, RMB 12,999,500, and RMB 13,003,300 for the years ending 31 December 2025[148] - The company agreed to sell APIs to Shenzhen HEC Industrial with proposed annual caps of RMB 18,000,000, RMB 20,000,000, and RMB 22,000,000 for the years ending 31 December 2025[148] - The company agreed to purchase energy from Shenzhen HEC Industrial with proposed annual caps of RMB 50,400,000, RMB 56,750,000, and RMB 56,750,000 for the years ending 31 December 2025[149] - The company agreed to purchase APIs from Shenzhen HEC Industrial with proposed annual caps of RMB 38,946,300, RMB 53,786,800, and RMB 75,442,100 for the years ending 31 December 2025[149] - The company entered into an Energy Purchase Framework Agreement with Shenzhen HEC Industrial, with proposed annual caps of RMB50.4 million, RMB56.75 million, and RMB56.75 million for the years ending December 31, 2023, 2024, and 2025, respectively[150] - The company signed an APIs Purchase Agreement with Shenzhen HEC Industrial, with proposed annual caps of RMB38.9463 million, RMB53.7868 million, and RMB75.4421 million for the years ending December 31, 2023, 2024, and 2025, respectively[150] - The company established a Packaging and Production Materials Purchase Framework Agreement with Shenzhen HEC Industrial, with proposed annual caps of RMB40.6 million for each of the three years ending December 31, 2025[151] - The company entered into an Equipment Purchase and Civil Construction Framework Agreement with Shenzhen HEC Industrial, with proposed annual caps of RMB27.05 million, RMB7.9 million, and RMB7.9 million for the years ending December 31, 2023, 2024, and 2025, respectively[151] - The company signed an Entrusted Processing Framework Agreement with Shenzhen HEC Industrial, with proposed annual caps of RMB94.8055 million, RMB108.832 million, and RMB139.4682 million for the years ending December 31, 2023, 2024, and 2025, respectively[152] - The company entered into an Equipment Sales Framework Agreement with Shenzhen HEC Industrial, with a proposed annual cap of RMB30.4965 million for the year ending December 31, 2023[152] - The company established an Entrusted Production and Inspection Services Framework Agreement with Shenzhen HEC Industrial, with proposed annual caps of RMB105.23 million, RMB68.992 million, and RMB49.25 million for the years ending December 31, 2023, 2024, and 2025, respectively[153] - The above agreements and transactions are subject to approval by independent shareholders at an extraordinary general meeting[154] Corporate Governance and Leadership - Mr. Jiang Juncai, aged 41, has been the executive Director and general manager of the Company since May 2015, and is a member of the Remuneration and Evaluation Committee[175] - Mr. Wang Danjin, aged 53, has been the executive Director and deputy general manager of the Company since February 2006, and served as a supervisor of HEC Pharm from December 201

Financial Performance - For the fiscal year ending December 31, 2022, the company reported a revenue of RMB 3,744.95 million, an increase of 309.83% compared to the previous year[2] - The EBITDA for the same period was RMB 698.43 million, reflecting a growth of 502.63% year-over-year[2] - The net profit attributable to equity holders of the company was RMB 76.60 million, a significant recovery from a loss of RMB 587.65 million in the previous year[2] - Basic earnings per share for the fiscal year was RMB 0.09, compared to a loss per share of RMB 0.67 in the prior year[4] - The gross profit margin improved significantly, with gross profit reported at RMB 2,846.07 million, up from RMB 483.70 million the previous year[4] - The company reported a significant reduction in operating losses, with operating profit of RMB 321.07 million compared to a loss of RMB 423.38 million in the previous year[4] - The company reported a net profit of RMB 76,603 thousand for the year 2022, recovering from a loss of RMB (587,649) thousand in 2021[8] - The group recorded a pre-tax profit of RMB 39.42 million for the year ended December 31, 2022, an increase of RMB 706.60 million compared to a pre-tax loss of RMB 667.18 million for the previous year[70] - The net profit for the group was RMB 49.24 million for the year ended December 31, 2022, an increase of 108.38% from a net loss of RMB 587.72 million for the year ended December 31, 2021[73] Revenue Sources - The total revenue for the year 2022 was RMB 3,744,952,000, a significant increase from RMB 913,788,000 in 2021, representing a growth of approximately 309%[15] - The sales of antiviral drugs reached RMB 3,116,059,000 in 2022, compared to RMB 559,973,000 in 2021, indicating a growth of about 455%[15] - The core product, Kewai (Phosphate Oseltamivir), generated sales of RMB 3,092.71 million, representing a 457.66% increase year-on-year[53] - Kewai (Phosphate Oseltamivir) accounted for 82.58% of total revenue, while other products contributed significantly less, with the next highest being Ertongshu (Bromfenac Tablets) at 2.63%[53] - The sales of Kewai (Phosphate Oseltamivir) granules reached RMB 2,585.15 million, making up 69.03% of total revenue[59] - The sales of Kewai (Phosphate Oseltamivir) capsules were RMB 507.55 million, accounting for 13.55% of total revenue[59] Expenses and Costs - Total expenses for the group reached RMB 1,962.31 million for the year ended December 31, 2022, an increase of 58.67% from RMB 1,236.73 million for the year ended December 31, 2021[67] - Distribution costs increased by 133.21% to RMB 1,216.59 million, primarily due to increased marketing costs associated with higher product sales volume[68] - R&D expenses totaled RMB 199.24 million, accounting for 5.32% of revenue, a decrease of 19.08% year-on-year[69] - The sales cost for the year was RMB 898.88 million, a 109.00% increase from RMB 430.09 million in the previous year, mainly due to increased sales volume of Kewai[64] Assets and Liabilities - Total assets as of December 31, 2022, were RMB 6,949.02 million, down from RMB 9,303.52 million the previous year[6] - The company’s cash and cash equivalents amounted to RMB 923.54 million, compared to RMB 1,131.12 million in the previous year[6] - The company’s total liabilities decreased to RMB 879,018 thousand from RMB 879,018 thousand, reflecting a stable financial position[7] - The company has a total of RMB 1,718,222,000 in financial liabilities measured at amortized cost as of 2022, up from RMB 911,680,000 in 2021[44] Investments and Capital Expenditures - The company invested RMB 290,000,000 in a trust investment plan as part of its financial strategy[34] - Capital expenditures for the year included RMB 853.06 million for construction of facilities, purchase of office equipment, and acquisition of drug production and marketing rights[81] - The company has ongoing applications for property ownership certificates valued at RMB 544,900,000 as of December 31, 2022, up from RMB 415,843,000 in 2021, representing an increase of approximately 30.9%[26] Research and Development - The company will continue to increase R&D investment, focusing on drug development in areas such as anti-infection, endocrine, and metabolic diseases, aiming for clinical application[88] - The company has established a comprehensive R&D system for insulin products, covering both second and third-generation insulin[55] - The company’s R&D investment in the field of diabetes treatment amounted to RMB 39,887.19 thousand for the drug Jiao Guo An Suan Rong Ge Lian Jing, representing 1.07% of revenue[58] Corporate Governance and Shareholder Relations - The company did not declare a final dividend for the fiscal year ending December 31, 2022[4] - The company did not declare or pay dividends for the years ending December 31, 2021, and December 31, 2022[50] - The company has received eight waiver letters from bondholders, allowing them to waive their rights to early redemption of convertible bonds until January 1, 2023[48] Employee and Management - The group employed 4,167 individuals as of December 31, 2022, with total employee costs approximately RMB 612.18 million[83] - The employee age distribution showed that 75.59% were aged between 31 and 50 years, while 21.53% were 30 years or younger[84] - The group’s compensation policy aims to motivate and retain talent, regularly reviewing employee compensation based on industry standards and performance[86] Future Outlook - The company anticipates steady growth in the innovative drug market, supported by favorable government policies and an expanding national medical insurance drug list[51] - The company plans to enhance its product portfolio by continuously launching new products to strengthen market competitiveness[88] - The company aims to improve its scientific and sustainable marketing strategies, promoting core products in tiered hospitals and grassroots medical markets[88]

Financial Performance - The Group's revenue for the year ended December 31, 2021, was RMB 913.79 million, representing a decrease of 61.08% compared to 2020[3]. - Loss attributable to equity shareholders in 2021 (excluding convertible bonds) was RMB 414.92 million, a decrease of 170.30% from a profit of RMB 590.21 million in 2020[4]. - Total comprehensive loss attributable to equity shareholders in 2021 (including convertible bonds) was RMB 587.65 million, down 170% from a profit of RMB 839.46 million in 2020[5]. - Basic and diluted losses per share for 2021 were both RMB 0.67, with no final dividend recommended for the year[6]. - The gross profit margin for 2021 was 52.93%, a significant decline from previous years[9]. - Revenue from the core product, Kewei, reached RMB 554.59 million, a decrease of 73.19% compared to the same period in 2020[63]. - The revenue from anti-viral drugs decreased by 72.97% to RMB 559.97 million in 2021 from RMB 2,071.61 million in 2020[114]. - The revenue from cardiovascular and cerebrovascular drugs increased by 43.98% to RMB 96.15 million in 2021 from RMB 66.78 million in 2020[114]. - The total revenue from the Group's five core products accounted for 78.64% of total revenue during the reporting period[101]. Assets and Liabilities - The total assets of the company as of December 31, 2021, were RMB 10,541.58 million, an increase from RMB 9,561.27 million in 2020[9]. - As of December 31, 2021, the Group's total current assets amounted to RMB 2,057.38 million, a decrease of RMB 1,206.73 million compared to RMB 3,264.11 million for the year ended December 31, 2020[160]. - The Group's total liabilities were RMB 4,520.82 million, and shareholders' equity was RMB 6,020.76 million[150]. - The Group's cash and cash equivalents decreased to RMB 1,131.12 million as of December 31, 2021, from RMB 2,044.97 million as of December 31, 2020[158]. - The gearing ratio as of December 31, 2021, was 53.04%, down from 58.99% as of December 31, 2020[166]. - The quick ratio as of December 31, 2021, was 1.44 times, compared to 0.69 times as of December 31, 2020[166]. Research and Development - The company has established a mature R&D, production, and sales platform, with plans to deepen innovation in antiviral, endocrine, metabolic, and cardiovascular diseases[42]. - The Group's investment in R&D for the year ended December 31, 2021, was RMB 246.24 million, accounting for 26.95% of revenue, a decrease of 75.71% compared to the previous year[133]. - The Group made significant R&D progress in anti-virus and endocrine/metabolic diseases during 2021[72]. - The Group is dedicated to the R&D of insulin products, covering both second and third generations of insulin[74]. - The Group has established a comprehensive R&D system for insulin products, achieving quality standards equivalent to originator drugs, with successful approvals for Recombinant Human Insulin Injection and Insulin Glargine Injection[82]. - The latest progress of insulin products during the Reporting Period indicates ongoing development in this therapeutic area[79]. Product Development and Market Strategy - The company aims to enhance international production standards and quality while expanding marketing and sales coverage to drive business growth and profitability[23]. - The company plans to further develop and enrich its product lines and markets in the future[24]. - The introduction of new products is facilitated by the "Amendments to the Non-Competition Agreement" with Sunshine Lake Pharma, positively impacting future performance[110]. - The Group's product portfolio will be enriched with the approval of generic drug products, providing patients with high-quality and fairly priced medical choices[64]. - The Group signed a revised agreement with Guangdong Dongyangguang Pharmaceutical to introduce more new products based on market demand, positively impacting future performance[65]. - The Group is actively expanding its online pharmacy channel and collaborating with well-known online operators[105]. Sales and Distribution - The company has a distribution network supported by 1,746 professional sales staff across China[15]. - The establishment of four sales teams aims to strengthen market presence across various channels, with a total of 1,746 staff as of December 31, 2021[105]. - Eight products won the bid for national centralized procurement, positively impacting sales expansion and domestic market development[38]. - A total of 13 products from the Group won bids for centralized bulk purchase of drugs by December 31, 2021, which is expected to enhance profitability and expand product channels[60]. Governance and Corporate Strategy - The company is committed to improving its governance level and management systems to enhance competitiveness in both domestic and international markets[31]. - The company aims to become a benchmark pharmaceutical enterprise in China and globally through comprehensive development strategies and strict management systems[44]. - The Group's strategy aligns with the "Healthy China" initiative, aiming to enhance the effectiveness of medical insurance funds and improve access to high-quality drugs[54]. Employee and Operational Insights - The Group had a total of 3,616 employees as of December 31, 2021, with staff costs approximately RMB 356.59 million for the year[186]. - The Group's remuneration policy aims to motivate and retain talent, with regular reviews based on industry standards[192][195]. - Employee benefits include compliance with PRC labor laws and additional welfare programs such as a Corporate Annuity Plan and public facilities[193][196].

[Financial Highlights](index=3&type=section&id=Financial%20Highlights) This section outlines the key financial performance for the six months ended June 30, 2019, highlighting significant revenue and profit growth, primarily driven by core product Kewei | Metric | Six Months Ended June 30, 2019 (RMB in thousands) | Six Months Ended June 30, 2018 (RMB in thousands) | | :--- | :--- | :--- | | Revenue | 3,071,259 | 1,482,428 | | Gross Profit | 2,620,820 | 1,243,433 | | Operating Profit | 1,257,067 | 747,383 | | Profit Before Taxation | 1,172,634 | 746,863 | | Profit Attributable to Equity Shareholders of the Company | 968,424 | 634,544 | | Basic/Diluted Earnings Per Share (RMB cents) | 215 | 140 | | Total Assets | 9,131,251 | 4,572,321 | | Total Liabilities | 4,865,688 | 1,012,594 | | Net Assets | 4,265,563 | 3,559,727 | | Gross Profit Margin | 85.3% | 83.9% | | Operating Profit Margin | 40.9% | 50.4% | | Net Profit Margin | 31.3% | 41.2% | - For the six months ended June 30, 2019, revenue increased by **107.2% year-on-year** to **RMB 3,071,259 thousand**[7](index=7&type=chunk) - Profit attributable to equity shareholders of the Company increased by **52.6% year-on-year** to **RMB 968,424 thousand**[7](index=7&type=chunk) [Corporate Profile](index=4&type=section&id=Corporate%20Profile) The company is a pharmaceutical enterprise specializing in antiviral, endocrine, metabolic, and cardiovascular treatments, with its core product Kewei being a leading anti-influenza drug - The company specializes in the research, development, production, and sale of pharmaceutical products for antiviral, endocrine and metabolic, and cardiovascular diseases[8](index=8&type=chunk)[13](index=13&type=chunk) - Core product Kewei (Oseltamivir Phosphate) is a first-line drug for clinical anti-influenza virus application in China, with its granule formulation being the company's exclusive patented product, included in national medical insurance and essential drug lists[10](index=10&type=chunk)[12](index=12&type=chunk) - As of June 30, 2019, the company produced, promoted, and sold **38 pharmaceutical products** domestically, supported by **over 3,000 professional sales personnel**[10](index=10&type=chunk)[12](index=12&type=chunk) - Strategic partnerships have been established with Lannett Company, Inc., TaiGen Biopharmaceutical Holdings Limited, and Sinopharm Group Accord Pharmaceutical Co., Ltd. for generic insulin development, combination drug clinical trials, and business expansion[11](index=11&type=chunk)[13](index=13&type=chunk) [Management Discussion and Analysis](index=5&type=section&id=Management%20Discussion%20and%20Analysis) This section details the company's operating results, financial position, industry review, R&D progress, significant events, and future outlook, highlighting substantial growth from core product sales and strategic initiatives [I. Industry Review](index=5&type=section&id=I.%20Industry%20Review) China's pharmaceutical market is expanding, with government reforms driving industry consolidation, favoring companies with strong R&D, diverse products, mature production, and excellent marketing - In 2018, China's overall pharmaceutical market exceeded **RMB 1,300 billion**, growing by **8% year-on-year**, with an anticipated annual growth rate of **3-6%** from 2019-2023[14](index=14&type=chunk)[16](index=16&type=chunk) - The government is deepening drug review reforms, accelerating approvals for clinically urgent and rare disease drugs, encouraging R&D innovation, and promoting generic drug consistency evaluations[15](index=15&type=chunk)[16](index=16&type=chunk) - The National Healthcare Security Administration continues to advance centralized drug procurement to reduce drug prices and medical insurance expenditure, with the new national essential drug list including more life-saving medications[15](index=15&type=chunk)[16](index=16&type=chunk) - Healthcare reform will lead to industry differentiation, creating development opportunities for pharmaceutical companies with strong R&D capabilities, rich product pipelines, mature production systems, strong brand advantages, and excellent marketing teams[16](index=16&type=chunk)[17](index=17&type=chunk) [II. Business Review](index=6&type=section&id=II.%20Business%20Review) The Group achieved significant business growth in H1 2019, driven by strong core product sales and new generic drug contributions, alongside R&D advancements in consistency evaluations and clinical trials [Summary of Overall Results](index=6&type=section&id=Summary%20of%20Overall%20Results) For H1 2019, the Group's revenue surged by 107.2% to RMB 3,071.3 million, driven by a 116.5% increase in core product Kewei sales, with profit attributable to equity shareholders rising by 52.6% H1 2019 Overall Performance Overview (RMB in millions) | Metric | H1 2019 | H1 2018 | Year-on-year Growth | | :--- | :--- | :--- | :--- | | Revenue | 3,071.3 | 1,482.4 | 107.2% | | Core Product Kewei Sales | 2,930.3 | 1,353.5 | 116.5% | | Profit Attributable to Equity Shareholders of the Group | 968.4 | 634.5 | 52.6% | - Revenue contributions from Kewei, Ertongshu, Oumeining, Linluoxing, and Xining accounted for **95.4%**, **1.2%**, **0.9%**, **0.8%**, and **0.6%** of total revenue, respectively[18](index=18&type=chunk)[20](index=20&type=chunk) - Of the six generic drug portfolios acquired in 2018, five have obtained production approvals, contributing a total revenue of **RMB 30.5 million** in the current period[19](index=19&type=chunk)[21](index=21&type=chunk) - Among the **27 generic drug portfolios** acquired from Guangdong HEC Pharmaceutical in February 2019, **23 marketing authorization applications** have been submitted to the NMPA, pending approval to further enrich the product portfolio[19](index=19&type=chunk)[21](index=21&type=chunk) [Summary of Sales Team](index=7&type=section&id=Summary%20of%20Sales%20Team) The Group has established four specialized sales teams for various healthcare channels, comprising **3,123 personnel** as of June 30, 2019, to support comprehensive product distribution - The Group has established four sales teams responsible for distributing academic products in secondary and above hospitals, academic products in general practitioner-led medical institutions, core products in pharmacies, and general products across all medical institutions[22](index=22&type=chunk)[25](index=25&type=chunk) - As of June 30, 2019, the Group's sales personnel totaled **3,123 individuals**[22](index=22&type=chunk)[25](index=25&type=chunk) [R&D Progress](index=7&type=section&id=R%26D%20Progress) The Group has achieved significant R&D progress, including consistency evaluation approval for Oseltamivir Phosphate capsules, completion of anti-HCV new drug Phase III trials, and a robust insulin product pipeline [Consistency Evaluation of Generic Drugs](index=7&type=section&id=Consistency%20Evaluation%20of%20Generic%20Drugs) The Group's Oseltamivir Phosphate capsules (75mg) received NMPA approval for consistency evaluation, becoming the first and exclusive product in China to pass, with granule evaluation ongoing - Oseltamivir Phosphate capsules (75mg) have been approved by the NMPA for consistency evaluation, making it the first and exclusive product in China to pass this evaluation[23](index=23&type=chunk)[26](index=26&type=chunk) - Oseltamivir Phosphate is a first-line treatment recommended by the National Health Commission for influenza and was included in the National Essential Drug List in November 2018[23](index=23&type=chunk)[26](index=26&type=chunk) - The R&D team is fully advancing the consistency evaluation work for Oseltamivir Phosphate granules[23](index=23&type=chunk)[26](index=26&type=chunk) [Anti-hepatitis C Therapeutic Area](index=7&type=section&id=Anti-hepatitis%20C%20Therapeutic%20Area) Significant progress in anti-HCV includes Class 1 innovative drug Yimitasvir Phosphate/Sofosbuvir completing Phase III trials and submitting a marketing application, and Volasvir/Yimitasvir Phosphate initiating Phase III trials - The Class 1 innovative drug, non-structural protein (NS) 5A inhibitor Yimitasvir Phosphate in combination with Sofosbuvir, has completed Phase III clinical trials, with its new drug marketing application submitted and accepted[24](index=24&type=chunk) - The NS3/4A protease inhibitor Volasvir in combination with Yimitasvir Phosphate has initiated Phase III clinical trials, with a new drug marketing application expected to be submitted in 2020[24](index=24&type=chunk) [Endocrine and Metabolic Diseases Area](index=8&type=section&id=Endocrine%20and%20Metabolic%20Diseases%20Area) The Group is dedicated to insulin R&D in endocrine and metabolic diseases, with a complete product line covering second and third-generation insulins, and multiple candidates in clinical trials or new drug application stages - The Group is committed to insulin product R&D in the endocrine and metabolic diseases area, with a complete insulin product line planning covering second and third-generation insulins[28](index=28&type=chunk) Latest Progress of Insulin Series Products | Key Endocrine and Metabolic Products | Current Stage | Planned Listing Time | | :--- | :--- | :--- | | Recombinant Human Insulin Injection | New Drug Marketing Application Submitted | 2019 | | Protamine Recombinant Human Insulin Injection (Premixed 30R) | Phase III Clinical Trial | 2021 | | Insulin Glargine Injection | Phase III Clinical Trial | 2020 | | Insulin Aspart Injection | Phase I Clinical Trial | 2021 | | Insulin Aspart 30 Injection | Phase III Clinical Trial | 2021 | [III. Operating Results and Analysis](index=9&type=section&id=III.%20Operating%20Results%20and%20Analysis) This section analyzes the Group's H1 2019 operating performance, showing significant revenue and gross profit growth driven by core product Kewei sales, alongside increased distribution and finance costs [1. Revenue](index=9&type=section&id=1.%20Revenue) For H1 2019, Group revenue surged by 107.2% to RMB 3,071.3 million, primarily from a 116.5% increase in core product Kewei sales, driven by enhanced influenza treatment awareness Revenue and Proportion by Therapeutic Area (RMB in thousands) | Therapeutic Area | Six Months Ended June 30, 2019 | Proportion | Six Months Ended June 30, 2018 | Proportion | Year-on-year Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Antiviral Drugs | 2,932,847 | 95.5% | 1,357,171 | 91.6% | 116.1% | | Of which: Key Product Kewei | 2,930,316 | 95.4% | 1,353,523 | 91.3% | 116.5% | | －Kewei Granules | 2,135,267 | 69.5% | 953,196 | 64.3% | 124.0% | | －Kewei Capsules | 795,049 | 25.9% | 400,327 | 27.0% | 98.6% | | Cardiovascular Drugs | 44,602 | 1.5% | 54,607 | 3.7% | -18.3% | | Endocrine and Metabolic Drugs | 38,677 | 1.3% | 41,549 | 2.8% | -6.9% | | Others | 55,133 | 1.7% | 29,101 | 1.9% | 89.5% | | Total | 3,071,259 | 100% | 1,482,428 | 100.0% | 107.2% | - The growth in Kewei sales primarily stemmed from the nationwide popularization of influenza treatment concepts and the gradual adoption of Oseltamivir as a first-line treatment option[32](index=32&type=chunk)[33](index=33&type=chunk) [2. Cost of Sales](index=10&type=section&id=2.%20Cost%20of%20Sales) For H1 2019, cost of sales increased by 88.5% to RMB 450.4 million, primarily due to expanded sales volume, comprising raw materials, labor, manufacturing overheads, and royalties Cost of Sales and Proportion by Therapeutic Area (RMB in thousands) | Therapeutic Area | Six Months Ended June 30, 2019 | Proportion | Six Months Ended June 30, 2018 | Proportion | Year-on-year Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Antiviral Drugs | 432,140 | 95.9% | 220,248 | 92.2% | 96.2% | | Of which: Key Product Kewei | 431,439 | 95.8% | 219,312 | 91.8% | 96.7% | | －Kewei Granules | 296,778 | 65.9% | 140,446 | 58.8% | 111.3% | | －Kewei Capsules | 134,661 | 29.9% | 78,866 | 33.0% | 70.7% | | Cardiovascular Drugs | 5,196 | 1.2% | 6,025 | 2.5% | -13.8% | | Endocrine and Metabolic Drugs | 4,021 | 0.9% | 4,293 | 1.8% | -6.3% | | Others | 9,082 | 2.0% | 8,429 | 3.5% | 7.7% | | Total | 450,439 | 100% | 238,995 | 100.0% | 88.5% | - The increase in cost of sales was primarily due to expanded sales volume[37](index=37&type=chunk)[40](index=40&type=chunk) [3. Gross Profit](index=11&type=section&id=3.%20Gross%20Profit) For H1 2019, gross profit increased by 110.8% to RMB 2,620.8 million, primarily due to a significant increase in sales of the high-margin product Kewei Gross Profit Contribution and Proportion by Therapeutic Area (RMB in thousands) | Therapeutic Area | Six Months Ended June 30, 2019 | Proportion | Six Months Ended June 30, 2018 | Proportion | Year-on-year Change | | :--- | :--- | :--- | :--- | :--- | :--- | | Antiviral Drugs | 2,500,707 | 95.4% | 1,136,923 | 91.4% | 120.0% | | Of which: Key Product Kewei | 2,498,877 | 95.4% | 1,134,211 | 91.2% | 120.3% | | －Kewei Granules | 1,838,489 | 70.2% | 812,750 | 65.4% | 126.2% | | －Kewei Capsules | 660,388 | 25.2% | 321,461 | 25.8% | 105.4% | | Cardiovascular Drugs | 39,406 | 1.5% | 48,582 | 3.9% | -18.9% | | Endocrine and Metabolic Drugs | 34,656 | 1.3% | 37,256 | 3.0% | -7.0% | | Others | 46,051 | 1.8% | 20,672 | 1.7% | 122.8% | | Total | 2,620,820 | 100% | 1,243,433 | 100.0% | 110.8% | - The growth in gross profit was primarily due to a significant increase in sales of the high-margin product Kewei during the reporting period[42](index=42&type=chunk)[43](index=43&type=chunk) [4. Other Income](index=12&type=section&id=4.%20Other%20Income) For H1 2019, other income was RMB 10.4 million, an increase of RMB 1.1 million, primarily due to higher interest income, including government grants and miscellaneous items Other Income (RMB in millions) | Metric | H1 2019 | H1 2018 | | :--- | :--- | :--- | | Other Income | 10.4 | 9.3 | - The increase in other income was primarily due to higher interest income[47](index=47&type=chunk)[50](index=50&type=chunk) [5. Expenses Analysis](index=12&type=section&id=5.%20Expenses%20Analysis) For H1 2019, total expenses increased by RMB 888.9 million to RMB 1,396.7 million, driven by higher distribution, administrative, and finance costs, while R&D investment decreased by 25.1% to RMB 114.0 million Major Expense Components (RMB in thousands) | Expense Category | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | Year-on-year Change | | :--- | :--- | :--- | :--- | | Distribution Costs | 1,117,203 | 332,759 | 235.7% | | Administrative Expenses | 195,058 | 174,490 | 11.8% | | Finance Costs | 84,433 | 520 | 16,137.1% | | Total | 1,396,694 | 507,769 | 175.1% | - The increase in distribution costs was primarily due to expanded product sales volume, higher marketing and travel expenses, and sales team expansion[52](index=52&type=chunk)[54](index=54&type=chunk) - The increase in administrative expenses was mainly due to higher labor costs, taxes and surcharges, and professional fees[53](index=53&type=chunk)[54](index=54&type=chunk) - The significant increase in finance costs was primarily due to increased accrued interest on new convertible bonds[54](index=54&type=chunk)[55](index=55&type=chunk) - Total R&D investment amounted to **RMB 114.0 million**, representing **3.7% of revenue**, a **25.1% decrease** from the same period last year, mainly due to reduced R&D expenditure on the anti-HCV new drug project[53](index=53&type=chunk)[55](index=55&type=chunk) [6. Other Net Expenses](index=14&type=section&id=6.%20Other%20Net%20Expenses) For H1 2019, other net expenses were RMB 61.8 million, mainly due to exchange losses from USD/RMB fluctuations, increased USD debt exposure, and fair value changes of convertible bonds Other Net Expenses (RMB in millions) | Metric | H1 2019 | H1 2018 | | :--- | :--- | :--- | | Other Net Expenses | 61.8 | 1.9 (Income) | - Other net expenses were primarily due to exchange losses resulting from USD/RMB exchange rate fluctuations and increased USD-denominated debt exposure, as well as fair value changes of convertible bonds[56](index=56&type=chunk)[61](index=61&type=chunk) [7. Profit Before Taxation](index=14&type=section&id=7.%20Profit%20Before%20Taxation) For H1 2019, the Group's profit before taxation totaled RMB 1,172.6 million, a 57.0% increase from the prior year Profit Before Taxation (RMB in millions) | Metric | H1 2019 | H1 2018 | Year-on-year Growth | | :--- | :--- | :--- | :--- | | Profit Before Taxation | 1,172.6 | 746.9 | 57.0% | [8. Income Tax](index=14&type=section&id=8.%20Income%20Tax) For H1 2019, income tax expense was RMB 212.5 million, a 56.1% increase, primarily due to the growth in profit before taxation Income Tax Expense (RMB in millions) | Metric | H1 2019 | H1 2018 | Year-on-year Growth | | :--- | :--- | :--- | :--- | | Income Tax Expense | 212.5 | 136.1 | 56.1% | - The increase in income tax expense was primarily due to the growth in profit before taxation[57](index=57&type=chunk)[62](index=62&type=chunk) [9. Profit for the Reporting Period](index=14&type=section&id=9.%20Profit%20for%20the%20Reporting%20Period) For H1 2019, the Group's net profit was RMB 960.2 million, a 57.2% increase from the prior year Net Profit for the Reporting Period (RMB in millions) | Metric | H1 2019 | H1 2018 | Year-on-year Growth | | :--- | :--- | :--- | :--- | | Net Profit | 960.2 | 610.8 | 57.2% | [10. Profit and Total Comprehensive Income for the Period Attributable to Equity Shareholders of the Company](index=14&type=section&id=10.%20Profit%20and%20Total%20Comprehensive%20Income%20for%20the%20Period%20Attributable%20to%20Equity%20Shareholders%20of%20the%20Company) For H1 2019, profit and total comprehensive income attributable to equity shareholders (considering convertible bond impact) was RMB 968.4 million, a 52.6% increase Profit and Total Comprehensive Income for the Period Attributable to Equity Shareholders of the Company (RMB in millions) | Metric | H1 2019 | H1 2018 | Year-on-year Growth | | :--- | :--- | :--- | :--- | | Considering Convertible Bond Impact | 968.4 | 634.5 | 52.6% | | Excluding Convertible Bond Impact | 1,095.9 | 634.5 | 72.7% | [IV. Financial Position](index=15&type=section&id=IV.%20Financial%20Position) This section outlines the Group's financial position as of June 30, 2019, showing significant increases in total assets and net current assets, good cash flow, but also a higher gearing ratio [1. Overview](index=15&type=section&id=1.%20Overview) As of June 30, 2019, the Group's total assets were RMB 9,131.3 million, total liabilities RMB 4,865.7 million, and shareholders' equity RMB 4,265.6 million Financial Position Overview (RMB in millions) | Metric | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Assets | 9,131.3 | 4,560.9 | | Total Liabilities | 4,865.7 | 882.0 | | Shareholders' Equity | 4,265.6 | 3,678.9 | [2. Net Current Assets](index=15&type=section&id=2.%20Net%20Current%20Assets) As of June 30, 2019, net current assets significantly increased to RMB 3,241.2 million, driven by higher sales increasing current assets and accrued dividends/expenses increasing current liabilities Net Current Assets (RMB in thousands) | Metric | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | 5,214,230 | 1,785,364 | | Total Current Liabilities | 1,973,034 | 812,798 | | Net Current Assets | 3,241,196 | 972,566 | - Current assets increased by **RMB 3,428.9 million**, and current liabilities increased by **RMB 1,160.2 million**, resulting in a net increase in current assets of **RMB 2,268.6 million**[68](index=68&type=chunk)[69](index=69&type=chunk) [3. Gearing Ratio and Quick Ratio](index=16&type=section&id=3.%20Gearing%20Ratio%20and%20Quick%20Ratio) As of June 30, 2019, the Group's gearing ratio increased to **74.6%** from **1.5%**, while the quick ratio rose from **2.0 times** to **2.6 times** Gearing Ratio and Quick Ratio | Metric | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Gearing Ratio | 74.6% | 1.5% | | Quick Ratio | 2.6 times | 2.0 times | [4. Cash Flow Analysis](index=16&type=section&id=4.%20Cash%20Flow%20Analysis) For H1 2019, net cash from operating activities was RMB 1,057.5 million, net outflow from investing activities was RMB 1,522.3 million, and net inflow from financing activities was RMB 2,727.6 million, leading to a net increase of RMB 2,262.8 million in cash and cash equivalents Cash Flow Situation (RMB in thousands) | Metric | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 1,057,505 | 631,882 | | Net Cash Outflow from Investing Activities | (1,522,318) | (89,529) | | Net Cash Generated from/(Outflow from) Financing Activities | 2,727,616 | (75,158) | | Net Increase in Cash and Cash Equivalents | 2,262,803 | 467,195 | - The increase in net cash from operating activities was primarily due to sales growth during the reporting period[72](index=72&type=chunk)[74](index=74&type=chunk) - The increase in net cash outflow from investing activities was mainly due to increased payments for property, plant, and equipment, and increased prepayments for intangible assets[72](index=72&type=chunk)[75](index=75&type=chunk) - Net cash inflow from financing activities was primarily due to bank loans and proceeds from the issuance of convertible bonds[73](index=73&type=chunk)[75](index=75&type=chunk) [5. Bank Loans](index=17&type=section&id=5.%20Bank%20Loans) As of June 30, 2019, the Group's bank loan balance was RMB 356.2 million, an increase of RMB 302.8 million, with good liquidity, no repayment risk, and all loans being RMB-denominated from domestic banks - As of June 30, 2019, the Group's bank loan balance was **RMB 356.2 million**, an increase of **RMB 302.8 million** from December 31, 2018[74](index=74&type=chunk) - The Group maintains good liquidity, sufficient funds, and no repayment risk, with all bank loans being RMB-denominated from domestic banks in China[74](index=74&type=chunk) [6. Capital Structure](index=17&type=section&id=6.%20Capital%20Structure) As of June 30, 2019, total equity attributable to equity shareholders was RMB 4,062.4 million, an increase of RMB 628.4 million, primarily due to increased net assets from higher operating profit - As of June 30, 2019, the Group's total equity attributable to equity shareholders of the Company was **RMB 4,062.4 million**, an increase of **RMB 628.4 million** from December 31, 2018[74](index=74&type=chunk) - This increase was primarily due to higher net assets resulting from increased operating profit[74](index=74&type=chunk) [7. Capital Expenditure](index=18&type=section&id=7.%20Capital%20Expenditure) For H1 2019, capital expenditure totaled RMB 1,169.3 million, an increase of RMB 731.3 million, primarily for a RMB 590 million capital injection into Yichang Pharmaceutical and acquisition of IP from Guangdong HEC Pharmaceutical - For the six months ended June 30, 2019, the Group's capital expenditure totaled **RMB 1,169.3 million**, an increase of **RMB 731.3 million** from the same period last year[76](index=76&type=chunk)[78](index=78&type=chunk) - The company plans to inject **RMB 590 million** of its own funds into its wholly-owned subsidiary, Yichang HEC Pharmaceutical Co., Ltd., for production and operation construction[76](index=76&type=chunk)[78](index=78&type=chunk) - To enrich its product portfolio, the company acquired all China-based intellectual property, industrial property, and ownership rights related to several pharmaceutical products from Guangdong HEC Pharmaceutical[76](index=76&type=chunk)[78](index=78&type=chunk) [8. Major Purchases and Sales](index=18&type=section&id=8.%20Major%20Purchases%20and%20Sales) On February 25, 2019, the Company agreed to acquire IP and ownership rights for 27 pharmaceutical products from Guangdong HEC Pharmaceutical for RMB 1,626,434,600, approved by shareholders on May 10, 2019 - On February 25, 2019, the Company entered into an acquisition agreement with Guangdong HEC Pharmaceutical to acquire all China-based intellectual property, industrial property, and ownership rights for **27 pharmaceutical products**[77](index=77&type=chunk)[79](index=79&type=chunk) - The total consideration was **RMB 1,626,434,600**, including prepayments, milestone payments, and remaining balances[77](index=77&type=chunk)[79](index=79&type=chunk) - The acquisition was approved by the Company's independent shareholders at an extraordinary general meeting held on May 10, 2019[77](index=77&type=chunk)[79](index=79&type=chunk) [9. Contingent Liabilities](index=19&type=section&id=9.%20Contingent%20Liabilities) As of June 30, 2019, the Group had no external guarantees - As of June 30, 2019, the Group had no external guarantees[80](index=80&type=chunk)[85](index=85&type=chunk) [10. Pledge of the Group's Assets](index=19&type=section&id=10.%20Pledge%20of%20the%20Group's%20Assets) As of June 30, 2019, the Group had no pledged assets except for bills receivable used to secure certain bank loans - As of June 30, 2019, the Group had no other pledged assets except for bills receivable used to secure certain bank loans[81](index=81&type=chunk)[85](index=85&type=chunk) [11. Foreign Exchange and Exchange Rate Risk](index=19&type=section&id=11.%20Foreign%20Exchange%20and%20Exchange%20Rate%20Risk) The Group primarily operates in China and faces no other significant direct foreign exchange fluctuation risks, except for convertible bonds and foreign currency-denominated bank deposits - The Group primarily operates in China and faces no other significant direct risks from foreign exchange fluctuations, except for convertible bonds and foreign currency-denominated bank deposits[82](index=82&type=chunk)[86](index=86&type=chunk) [12. Employee and Remuneration Policies](index=19&type=section&id=12.%20Employee%20and%20Remuneration%20Policies) As of June 30, 2019, the Group employed **4,595 staff**, with employee costs of approximately RMB 356.6 million for H1 2019, and remuneration policies are regularly reviewed to incentivize and retain talent - As of June 30, 2019, the Group employed a total of **4,595 employees**[83](index=83&type=chunk)[86](index=86&type=chunk) - For the six months ended June 30, 2019, staff costs (including directors' emoluments) amounted to approximately **RMB 356.6 million**[83](index=83&type=chunk)[86](index=86&type=chunk) - The Group's remuneration policy aims to incentivize and retain outstanding employees, with regular reviews based on overall industry salary conditions and employee performance[83](index=83&type=chunk)[86](index=86&type=chunk) [13. Hedging Transactions](index=19&type=section&id=13.%20Hedging%20Transactions) For H1 2019, the Group did not engage in any hedging transactions for foreign exchange or interest rate risks - For the six months ended June 30, 2019, the Group did not enter into any hedging transactions for foreign exchange or interest rate risks[84](index=84&type=chunk) [14. Future Plans for Material Investments or Capital Expenditure](index=19&type=section&id=14.%20Future%20Plans%20for%20Material%20Investments%20or%20Capital%20Expenditure) As of the report date, the Group had no material investment or capital expenditure plans beyond those already disclosed - Except for investments and capital expenditures mentioned elsewhere in this report, the Group had no other material investment or capital expenditure plans as of the report date[84](index=84&type=chunk) [V. Other Significant Events](index=20&type=section&id=V.%20Other%20Significant%20Events) This section discloses important events during the reporting period, including Oseltamivir Phosphate's consistency evaluation approval, USD 400 million H-share convertible bond issuance, and H-share repurchases [1. Passing of Consistency Evaluation for Oseltamivir Phosphate](index=20&type=section&id=1.%20Passing%20of%20Consistency%20Evaluation%20for%20Oseltamivir%20Phosphate) During the reporting period, the Company's Oseltamivir Phosphate capsules (75mg) received NMPA approval for generic drug quality and efficacy consistency evaluation - The Company's Oseltamivir Phosphate capsules (75mg) have been approved by the National Medical Products Administration for consistency evaluation of generic drug quality and efficacy[87](index=87&type=chunk)[88](index=88&type=chunk) [2. Completion of the Issue of USD400,000,000 3.0% H Share Convertible Bonds to The Blackstone Group L.P. and its Affiliates](index=20&type=section&id=2.%20Completion%20of%20the%20Issue%20of%20USD400%2C000%2C000%203.0%25%20H%20Share%20Convertible%20Bonds%20to%20The%20Blackstone%20Group%20L.P.%20and%20its%20Affiliates) On February 20, 2019, the Company issued **USD 400 million** H-share convertible bonds at **3.0% annual interest** to Blackstone, aiming to introduce strategic investors and fund drug acquisitions, capital expenditures, and sales network expansion - On February 20, 2019, the Company issued H-share convertible bonds with a total principal of **USD 400 million**, an annual interest rate of **3.0%**, and an initial conversion price of **HKD 38 per share**[89](index=89&type=chunk)[92](index=92&type=chunk)[127](index=127&type=chunk) - The issuance of H-share convertible bonds aimed to introduce The Blackstone Group L.P. and its affiliates as long-term strategic investors to facilitate drug acquisitions, advance development strategies, enhance operations and management, strengthen international cooperation, and improve corporate governance and investor relations[91](index=91&type=chunk)[92](index=92&type=chunk) Use of Proceeds from H-Share Convertible Bonds (As of June 30, 2019) | Item | Percentage of Net Proceeds | Remaining Net Proceeds to be Used for the Item (USD in millions) | | :--- | :--- | :--- | | For Acquisition of Pharmaceutical Products and Other Pharmaceutical Products (Including APIs) | 60% – 70% | 162.78 | | For Capital Expenditure on Production Facilities | 20% – 30% | 46.51 | | For Expansion of Sales and Distribution Network and Other Purposes | 10% – 20% | 23.25 | | Total | 100% | 234.54 | - As of June 30, 2019, **USD 161.90 million** of net proceeds had been utilized, with the remaining **USD 234.54 million** expected to be fully used within 2019[100](index=100&type=chunk) [3. Repurchase of H Shares of the Company ("H Shares")](index=23&type=section&id=3.%20Repurchase%20of%20H%20Shares%20of%20the%20Company%20(%22H%20Shares%22)) From May 7 to June 6, 2019, the Company completed ten H-share repurchases, totaling **3,202,800 H shares** - From May 7, 2019, to June 6, 2019, the Company conducted **ten H-share repurchases**[102](index=102&type=chunk)[106](index=106&type=chunk) - A total of **3,202,800 H shares** were repurchased[158](index=158&type=chunk) [VI. Events After Reporting Period](index=23&type=section&id=VI.%20Events%20After%20Reporting%20Period) This section discloses significant post-reporting period events, including the acquisition of HEC Biological Pharmacy, cancellation of repurchased H shares, and establishment of a joint venture, impacting future operations [1. Acquisition of HEC Biological Pharmacy Co. ("HEC Biological Pharmacy Co.")](index=23&type=section&id=1.%20Acquisition%20of%20HEC%20Biological%20Pharmacy%20Co.%20(%22HEC%20Biological%20Pharmacy%20Co.%22)) On September 12, 2019, the Company acquired all equity in HEC Biological Pharmacy Co. from Shenzhen HEC Industrial Development Co., Ltd. for **RMB 78,161,200** - On September 12, 2019, the Company entered into an equity transfer agreement with Shenzhen HEC Industrial Development Co., Ltd. to acquire all equity in HEC Biological Pharmacy Co.[104](index=104&type=chunk)[108](index=108&type=chunk) - The total consideration was **RMB 78,161,200**[104](index=104&type=chunk)[108](index=108&type=chunk) [2. Cancellation of Repurchased H Shares](index=23&type=section&id=2.%20Cancellation%20of%20Repurchased%20H%20Shares) On July 16, 2019, the Company canceled **3,202,800 repurchased H shares**, resulting in **448,820,050 total issued shares** - On July 16, 2019, the Company canceled **3,202,800 repurchased H shares**[105](index=105&type=chunk)[109](index=109&type=chunk) - As of the report date, the Company's total issued shares were **448,820,050** (including **222,620,050 H shares** and **226,200,000 domestic shares**)[105](index=105&type=chunk)[109](index=109&type=chunk) [3. Establishment of Joint Venture](index=24&type=section&id=3.%20Establishment%20of%20Joint%20Venture) On July 24, 2019, the Company established Yichang HEC Pharmaceutical Technology Promotion Service Co., Ltd. with Yidu Guijun Pharmaceutical Technology Co., Ltd., contributing **RMB 46.50 million** for a **93% equity stake** in the **RMB 50 million** registered capital joint venture - On July 24, 2019, the Company entered into a capital contribution agreement with Yidu Guijun Pharmaceutical Technology Co., Ltd. to jointly establish Yichang HEC Pharmaceutical Technology Promotion Service Co., Ltd.[110](index=110&type=chunk)[114](index=114&type=chunk) - The joint venture's total registered capital is **RMB 50 million**, with the Company contributing **RMB 46.50 million** in cash for a **93% equity stake**[110](index=110&type=chunk)[114](index=114&type=chunk) [VII. Business Prospects of the Group for the Second Half of the Year](index=24&type=section&id=VII.BUSINESS%20PROSPECTS%20OF%20THE%20GROUP%20OF%20THE%20SECOND%20HALF%20OF%20THE%20YEAR) The Group expects continued benefits from industry transformation in H2 2019, with Kewei's high growth supporting short-term performance, generic drug reviews enriching the portfolio, and insulin/anti-HCV applications driving medium-to-long-term development, alongside R&D and sales enhancements - China's pharmaceutical industry faces unprecedented transformation and consolidation, creating significant development opportunities for high-quality pharmaceutical enterprises[111](index=111&type=chunk)[115](index=115&type=chunk) - The sustained high growth in sales of core product Kewei lays the foundation for the Group's stable short-to-medium-term performance growth[112](index=112&type=chunk)[115](index=115&type=chunk) - The progressive completion of review procedures for the recently acquired **33 generic drugs** will enrich the product portfolio and optimize the revenue structure[112](index=112&type=chunk)[115](index=115&type=chunk) - The application and approval of insulin products and anti-HCV drugs will further diversify therapeutic areas, providing impetus for medium-to-long-term development[112](index=112&type=chunk)[115](index=115&type=chunk) - In the second half of the year, the Group will continue to drive R&D innovation, enrich its product portfolio, strengthen production management, and enhance sales team building to achieve long-term stable development[113](index=113&type=chunk)[115](index=115&type=chunk) [VIII. Use of Proceeds](index=25&type=section&id=VIII.%20Use%20of%20Proceeds) This section details the use of proceeds from the global offering and H-share convertible bond issuance, with global offering net proceeds reallocated for a new insulin plant and working capital, and convertible bond proceeds for drug acquisitions and sales network expansion [1. Proceeds from the Global Offering](index=25&type=section&id=1.%20Proceeds%20from%20the%20Global%20Offering) The global offering raised net proceeds of approximately RMB 1,095.4 million, with unutilized funds reallocated for a new insulin plant, working capital, and general corporate purposes, and RMB 1,045.39 million utilized as of June 30, 2019 - The global offering raised net proceeds of approximately **HKD 1,307.5 million** (approximately **RMB 1,095.4 million**)[116](index=116&type=chunk)[118](index=118&type=chunk) - The Board resolved to reallocate approximately **RMB 701.4 million** of unutilized net proceeds, initially allocated for a new oral formulation production plant and product promotion/marketing, to fund a new insulin production plant, working capital, and general corporate purposes[117](index=117&type=chunk)[118](index=118&type=chunk) Details of Net Proceeds from Global Offering (As of June 30, 2019, RMB in millions) | Use | Revised Allocation | Amount Utilized | | :--- | :--- | :--- | | New Oral Formulation Production Plant | 300.00 | 270.51 | | New Insulin Production Plant | 328.70 | 328.55 | | Promotion and Marketing Activities | 136.10 | 136.06 | | Working Capital and General Corporate Purposes | 330.60 | 310.27 | | Total | 1,095.40 | 1,045.39 | - The net proceeds from the global offering are expected to be fully utilized within 2019[119](index=119&type=chunk)[120](index=120&type=chunk) [2. Completion of the Issue of USD400,000,000 3.0% H Share Convertible Bonds to The Blackstone Group L.P. and its Affiliates](index=26&type=section&id=2.%20Completion%20of%20the%20Issue%20of%20USD400%2C000%2C000%203.0%25%20H%20Share%20Convertible%20Bonds%20to%20The%20Blackstone%20Group%20L.P.%20and%20its%20Affiliates) On February 20, 2019, the Company issued **USD 400 million** H-share convertible bonds at **3.0% annual interest** to Blackstone, with proceeds for drug acquisitions, capital expenditures, and sales network expansion; **USD 234.54 million** remained unutilized as of June 30, 2019 - On February 20, 2019, the Company issued H-share convertible bonds with a total principal of **USD 400 million**, an annual interest rate of **3.0%**, and an initial conversion price of **HKD 38 per share**[121](index=121&type=chunk)[123](index=123&type=chunk)[127](index=127&type=chunk) - The proceeds from the issuance are intended for drug acquisitions, production facility capital expenditures, expansion of sales and distribution networks, and other purposes[122](index=122&type=chunk)[123](index=123&type=chunk) Use of Proceeds from H-Share Convertible Bonds (As of June 30, 2019) | Item | Percentage of Net Proceeds | Remaining Net Proceeds to be Used for the Item (USD in millions) | | :--- | :--- | :--- | | For Acquisition of Pharmaceutical Products and Other Pharmaceutical Products (Including APIs) | 60% – 70% | 162.78 | | For Capital Expenditure on Production Facilities | 20% – 30% | 46.51 | | For Expansion of Sales and Distribution Network and Other Purposes | 10% – 20% | 23.25 | | Total | 100% | 234.54 | - As of June 30, 2019, **USD 161.90 million** of net proceeds had been utilized, with the remaining **USD 234.54 million** expected to be fully used within 2019[129](index=129&type=chunk) [Corporate Governance and Other Information](index=28&type=section&id=Corporate%20Governance%20and%20Other%20Information) This section details the Company's corporate governance practices, director and shareholder interests, share repurchases, dividend policy, and post-reporting personnel changes, confirming compliance and proposing an interim dividend [Compliance with Corporate Governance Code](index=28&type=section&id=Compliance%20with%20Corporate%20Governance%20Code) For H1 2019, the Company consistently complied with all code provisions of the Corporate Governance Code in Appendix 14 of the Listing Rules - For the six months ended June 30, 2019, the Company consistently complied with all code provisions of the Corporate Governance Code set out in Appendix 14 to the Listing Rules of the Stock Exchange[130](index=130&type=chunk)[133](index=133&type=chunk) [Compliance with Code for Securities Transactions](index=28&type=section&id=Compliance%20with%20Code%20for%20Securities%20Transactions) The Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers, with all directors and supervisors confirming full compliance - The Company adopted the Model Code for Securities Transactions by Directors of Listed Issuers, as set out in Appendix 10 of the Listing Rules, as the code of conduct for directors and supervisors in their securities transactions of the Company[131](index=131&type=chunk)[134](index=134&type=chunk) - Following specific inquiries to all directors and supervisors of the Company, each director and supervisor confirmed full compliance with the required standards set out in the Model Code for the six months ended June 30, 2019[131](index=131&type=chunk)[134](index=134&type=chunk) [Audit Committee](index=28&type=section&id=Audit%20Committee) The Audit Committee, comprising Mr. Tang Jianxin (Chairman), Mr. Li Zhiming, and Mr. Tang Xinfa, reviewed the Group's 2019 interim results announcement, interim report, and unaudited interim financial statements - The Audit Committee comprises three members: Mr. Tang Jianxin (Independent Non-executive Director, Chairman), Mr. Li Zhiming (Independent Non-executive Director), and Mr. Tang Xinfa (Non-executive Director)[132](index=132&type=chunk)[135](index=135&type=chunk) - The Audit Committee has reviewed the Group's 2019 interim results announcement, interim report, and unaudited interim financial statements for the six months ended June 30, 2019, prepared in accordance with International Financial Reporting Standards[132](index=132&type=chunk)[135](index=135&type=chunk) [Share Capital](index=28&type=section&id=Share%20Capital) As of June 30, 2019, the Company's total share capital was RMB 452,022,850, comprising 452,022,850 shares of RMB 1.00 each, including 226,200,000 domestic shares and 225,822,850 H shares - As of June 30, 2019, the Company's total share capital was **RMB 452,022,850**, divided into **452,022,850 shares** of **RMB 1.00 each**[132](index=132&type=chunk)[135](index=135&type=chunk) - This includes **226,200,000 domestic shares** and **225,822,850 H shares**[132](index=132&type=chunk)[135](index=135&type=chunk) [Interests and Short Positions of Directors, Supervisors and Chief Executive in Shares, Underlying Shares and Debentures](index=29&type=section&id=Interests%20and%20Short%20Positions%20of%20Directors%2C%20Supervisors%20and%20Chief%20Executive%20in%20Shares%2C%20Underlying%20Shares%20and%20Debentures) As of June 30, 2019, several directors and supervisors held H shares, with Mr. Tang Xinfa holding **65,200 shares**, and others holding between **16,000** and **33,600 shares** Interests of Directors and Supervisors in Shares (As of June 30, 2019) | Name | Class of Shares | Capacity | Number of Shares Held (shares) | Approximate Percentage of Relevant Class of Share Capital (%) | Approximate Percentage of Total Issued Share Capital (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | **Directors** | | | | | | | Tang Xinfa | H Shares | Beneficial Owner | 65,200 (L) | 0.029% | 0.014% | | Chen Yangui | H Shares | Beneficial Owner | 33,200 (L) | 0.015% | 0.007% | | Li Shuang | H Shares | Beneficial Owner | 33,400 (L) | 0.015% | 0.007% | | Wang Danjin | H Shares | Beneficial Owner | 33,600 (L) | 0.015% | 0.007% | | Jiang Juncai | H Shares | Beneficial Owner | 33,400 (L) | 0.015% | 0.007% | | **Supervisors** | | | | | | | Wang Shengchao | H Shares | Beneficial Owner | 16,000 (L) | 0.007% | 0.004% | | Luo Zhonghua | H Shares | Beneficial Owner | 33,400 (L) | 0.015% | 0.007% | [Substantial Shareholders' Interests in Shares](index=30&type=section&id=Substantial%20Shareholders'%20Interests%20in%20Shares) As of June 30, 2019, Guangdong HEC Technology, North & South Brother Pharmacy, and Blackstone were substantial shareholders, holding significant domestic or H shares, some through controlled corporations or equity derivatives Substantial Shareholders' Interests in Shares (As of June 30, 2019) | Shareholder Name | Class of Shares | Capacity | Number of Shares Held (shares) | Approximate Percentage of Relevant Class of Share Capital (%) | Approximate Percentage of Total Issued Share Capital (%) | | :--- | :--- | :--- | :--- | :--- | :--- | | Guangdong HEC Technology Holding Co., Ltd. | Domestic Shares | Beneficial Owner | 226,200,000 (L) | 100% (L) | 50.04% (L) | | Shenzhen HEC Industrial Development Co., Ltd. | Domestic Shares | Interest of Controlled Corporation | 226,200,000 (L) | 100% (L) | 50.04% (L) | | North & South Brother Pharmacy Investment Company Limited | H Shares | Beneficial Owner | 81,456,400 (L) | 36.07% (L) | 18.02% (L) | | North & South Brother Investment Holdings Limited | H Shares | Interest of Controlled Corporation | 81,456,400 (L) | 36.07% (L) | 18.02% (L) | | Mr. MO Kif (毛杰先生) | H Shares | Interest of Controlled Corporation | 81,456,400 (L) | 36.07% (L) | 18.02% (L) | | Stephen A. SCHWARZMAN | H Shares | Interest of Controlled Corporation | - | 36.59% (L) | 18.28% (L) | | The Blackstone Group L.P. | H Shares | Interest of Controlled Corporation | - | 36.59% (L) | 18.28% (L) | | Blackstone Dawn Pte. Ltd. | H Shares | Beneficial Owner | 80,978,946 (L) | 35.86% (L) | 17.91% (L) | - The Blackstone Group L.P. and its affiliates are deemed to have an interest in **82,631,578 underlying shares** through the conversion rights of H-share convertible bonds[149](index=149&type=chunk)[34](index=34&type=chunk) [Purchase, Sale or Redemption of Listed Securities of the Company](index=36&type=section&id=Purchase%2C%20Sale%20or%20Redemption%20of%20Listed%20Securities%20of%20the%20Company) For H1 2019, the Company repurchased **3,202,800 H shares** on the Stock Exchange for **HKD 119,022,882**, which were subsequently canceled on July 16, 2019 Details of H-Share Repurchases (For the Six Months Ended June 30, 2019) | Period of Repurchase | Total Number of H Shares Repurchased | Price Paid Per Share (Highest) | Price Paid Per Share (Lowest) | Total Consideration (HKD) | | :--- | :--- | :--- | :--- | :--- | | May 2019 | 3,024,400 | 39.05 | 35.95 | 112,696,362 | | June 2019 | 178,400 | 35.70 | 35.25 | 6,326,520 | | Total | 3,202,800 | | | 119,022,882 | - The repurchased H shares were canceled on July 16, 2019[159](index=159&type=chunk)[160](index=160&type=chunk) [Pledging of Shares by the Controlling Shareholder](index=37&type=section&id=Pledging%20of%20Shares%20by%20the%20Controlling%20Shareholder) For H1 2019, the controlling shareholder did not pledge any Company shares as security for debts or to obtain guarantees - For the six months ended June 30, 2019, the Company's controlling shareholder did not pledge any shares of the Company as security for the Company's debts or to obtain guarantees or support for the Company[161](index=161&type=chunk)[164](index=164&type=chunk) [Loan Agreements or Financial Assistance of the Company](index=37&type=section&id=Loan%20Agreements%20or%20Financial%20Assistance%20of%20the%20Company) For H1 2019, the Company provided no financial assistance or guarantees to affiliates requiring disclosure, nor did it enter into loan agreements with controlling shareholder covenants or breach any loan terms - For the six months ended June 30, 2019, the Company did not provide any financial assistance or guarantees to its affiliates requiring disclosure under Listing Rule 13.16[162](index=162&type=chunk)[164](index=164&type=chunk) - The Company did not enter into any loan agreements with covenants related to specific obligations of its controlling shareholder, nor did it breach any terms of any loan agreement[162](index=162&type=chunk)[164](index=164&type=chunk) [Share Option Scheme](index=37&type=section&id=Share%20Option%20Scheme) The Company has not adopted any share option scheme - The Company has not adopted any share option scheme[163](index=163&type=chunk)[165](index=165&type=chunk) [Interim Dividend](index=37&type=section&id=Interim%20Dividend) The Board proposes an interim dividend of **RMB 1.0 per share** (tax inclusive) for H1 2019, totaling approximately RMB 448.8 million, subject to shareholder approval and tax withholding based on relevant laws - The Board resolved to recommend an interim dividend of **RMB 1.0 per share** (tax inclusive) for the six months ended June 30, 2019, totaling approximately **RMB 448.8 million**[163](index=163&type=chunk)[165](index=165&type=chunk) - The interim dividend is expected to be paid on or around November 15, 2019, subject to shareholder approval at the extraordinary general meeting on October 11, 2019[163](index=163&type=chunk)[165](index=165&type=chunk) - The Company will withhold **10% corporate income tax** for non-resident enterprise shareholders and generally **10% individual income tax** for H-share individual shareholders, with specific rates varying based on tax treaties and nationality[166](index=166&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - For dividends and bonuses obtained by mainland individual investors through Shenzhen-Hong Kong Stock Connect investing in H shares, the Company will withhold individual income tax at a rate of **20%**; for mainland corporate investors, no withholding will occur, and they are responsible for self-declaration and payment[169](index=169&type=chunk)[171](index=171&type=chunk) [Closure of Register of Members](index=40&type=section&id=Closure%20of%20Register%20of%20Members) The H-share registrar will suspend transfer registration from September 11-October 11 and October 17-October 22, 2019, to determine eligibility for the EGM and the proposed 2019 interim dividend - The H-share registrar will suspend transfer registration from September 11 to October 11, 2019 (both dates inclusive), to determine shareholders' eligibility to attend and vote at the extraordinary general meeting[172](index=172&type=chunk) - The H-share registrar will suspend transfer registration from October 17 to October 22, 2019 (both dates inclusive), to determine shareholders' eligibility to receive the proposed 2019 interim dividend[172](index=172&type=chunk) [Change in Information of Directors, Supervisors and Senior Management](index=40&type=section&id=Change%20in%20Information%20of%20Directors%2C%20Supervisors%20and%20Senior%20Management) Mr. Lei Xiantong resigned as CFO, succeeded by Mr. Zhang Qiang (effective February 25, 2019); Ms. Huang Fangfang resigned as Supervisor and Chairwoman, and Mr. Tang Jinlong was appointed Supervisor (effective June 6, 2019) - Mr. Lei Xiantong resigned as the Company's Chief Financial Officer due to health reasons, effective February 25, 2019[172](index=172&type=chunk) - Mr. Zhang Qiang was appointed as the Company's Chief Financial Officer, effective February 25, 2019[172](index=172&type=chunk) - Ms. Huang Fangfang resigned as the Company's Supervisor and Chairwoman of the Supervisory Committee due to work arrangement adjustments, effective June 6, 2019[172](index=172&type=chunk) - Mr. Tang Jinlong was appointed as the Company's Supervisor, effective June 6, 2019[173](index=173&type=chunk) [Review Report](index=42&type=section&id=Review%20Report) KPMG reviewed Yichang HEC Changjiang Pharmaceutical Co., Ltd.'s interim financial report for H1 2019, concluding no material non-compliance with IAS 34 based on Hong Kong Standard on Review Engagements 2410 - KPMG has reviewed the Company's interim financial report, which includes the consolidated statement of financial position as of June 30, 2019, and the related consolidated statement of profit or loss and other comprehensive income, consolidated statement of changes in equity, and consolidated cash flow statement[176](index=176&type=chunk)[178](index=178&type=chunk) - The review was conducted in accordance with Hong Kong Standard on Review Engagements 2410, issued by the Hong Kong Institute of Certified Public Accountants[180](index=180&type=chunk)[182](index=182&type=chunk) - The review concluded that nothing has come to the reviewer's attention that causes them to believe the interim financial report is not prepared, in all material respects, in accordance with International Accounting Standard 34 Interim Financial Reporting[181](index=181&type=chunk)[183](index=183&type=chunk) [Consolidated Statement of Profit or Loss and Other Comprehensive Income](index=44&type=section&id=Consolidated%20Statement%20of%20Profit%20or%20Loss%20and%20Other%20Comprehensive%20Income) This consolidated statement presents the Group's H1 2019 financial performance, with revenue of RMB 3,071,259 thousand, net profit of RMB 960,170 thousand, and basic/diluted EPS of RMB 2.15 Summary of Consolidated Statement of Profit or Loss and Other Comprehensive Income (For the Six Months Ended June 30, 2019, RMB in thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Revenue | 3,071,259 | 1,482,428 | | Cost of Sales | (450,439) | (238,995) | | Gross Profit | 2,620,820 | 1,243,433 | | Other Income | 10,352 | 9,291 | | Distribution Costs | (1,117,203) | (332,759) | | Administrative Expenses | (195,058) | (174,490) | | Other (Expenses)/Income, Net | (61,844) | 1,908 | | Operating Profit | 1,257,067 | 747,383 | | Finance Costs | (84,433) | (520) | | Profit Before Taxation | 1,172,634 | 746,863 | | Income Tax | (212,464) | (136,072) | | Profit for the Period | 960,170 | 610,791 | | Profit Attributable to Equity Shareholders of the Company | 968,424 | 634,544 | | Non-controlling Interests | (8,254) | (23,753) | | Basic and Diluted Earnings Per Share (RMB) | 2.15 | 1.40 | [Consolidated Statement of Financial Position](index=45&type=section&id=Consolidated%20Statement%20of%20Financial%20Position) This consolidated statement presents the Group's assets, liabilities, and equity as of June 30, 2019, with total assets of RMB 9,131,300 thousand, liabilities of RMB 4,865,688 thousand (influenced by convertible bonds), and total equity of RMB 4,265,563 thousand Summary of Consolidated Statement of Financial Position (As of June 30, 2019, RMB in thousands) | Metric | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Non-current Assets** | | | | Property, Plant and Equipment | 1,554,630 | 1,351,479 | | Intangible Assets | 752,241 | 498,604 | | Goodwill | 75,896 | 75,896 | | Prepayments | 1,468,494 | 817,509 | | Deferred Tax Assets | 65,760 | 32,088 | | **Total Non-current Assets** | **3,917,021** | **2,775,576** | | **Current Assets** | | | | Inventories | 165,027 | 164,286 | | Trade and Other Receivables | 1,831,759 | 1,027,332 | | Fixed Deposits with Maturity Over Three Months | 100,000 | – | | Other Financial Assets | 260,000 | – | | Cash and Cash Equivalents | 2,857,444 | 593,746 | | **Total Current Assets** | **5,214,230** | **1,785,364** | | **Current Liabilities** | | | | Trade and Other Payables | 1,488,584 | 676,250 | | Contract Liabilities | 15,365 | 8,095 | | Bank Loans | 356,235 | 53,399 | | Deferred Income | 4,379 | 4,379 | | Current Taxation | 108,471 | 70,675 | | **Total Current Liabilities** | **1,973,034** | **812,798** | | **Net Current Assets** | **3,241,196** | **972,566** | | **Total Assets Less Current Liabilities** | **7,158,217** | **3,748,142** | | **Non-current Liabilities** | | | | Interest-bearing Borrowings | 2,825,580 | – | | Deferred Income | 67,074 | 69,214 | | **Total Non-current Liabilities** | **2,892,654** | **69,214** | | **Net Assets** | **4,265,563** | **3,678,928** | | **Capital and Reserves** | | | | Share Capital | 452,023 | 452,023 | | Treasury Shares | (105,515) | – | | Reserves | 3,715,877 | 2,981,933 | | **Total Equity Attributable to Equity Shareholders of the Company** | **4,062,385** | **3,433,956** | | Non-controlling Interests | 203,178 | 244,972 | | **Total Equity** | **4,265,563** | **3,678,928** | [Consolidated Statement of Changes in Equity](index=47&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Equity) This consolidated statement illustrates the Group's equity changes for H1 2019, with total equity attributable to equity shareholders increasing from RMB 3,433,956 thousand to RMB 4,062,385 thousand, influenced by profit, share-based payments, and repurchases Summary of Consolidated Statement of Changes in Equity (For the Six Months Ended June 30, 2019, RMB in thousands) | Metric | Share Capital | Capital Reserve | Treasury Shares | Statutory Reserve | Retained Earnings | Total (Attributable to Equity Shareholders) | Non-controlling Interests | Total Equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance as of January 1, 2019 | 452,023 | 1,476,578 | - | 232,676 | 1,272,679 | 3,433,956 | 244,972 | 3,678,928 | | Equity-settled Share-based Transactions | - | - | - | - | 36,734 | 36,734 | (33,540) | 3,194 | | Profit and Total Comprehensive Income for the Period | - | - | - | - | 968,424 | 968,424 | (8,254) | 960,170 | | Repurchase of Shares | - | - | (105,515) | - | - | (105,515) | - | (105,515) | | Dividends Approved for Prior Year | - | - | - | - | (271,214) | (271,214) | - | (271,214) | | Balance as of June 30, 2019 | 452,023 | 1,476,578 | (105,515) | 232,676 | 2,006,623 | 4,062,385 | 203,178 | 4,265,563 | [Consolidated Cash Flow Statement](index=49&type=section&id=Consolidated%20Cash%20Flow%20Statement) This consolidated statement presents the Group's H1 2019 cash flows, with net cash generated from operating activities of RMB 1,057,505 thousand, net outflow from investing activities of RMB 1,522,318 thousand, and net inflow from financing activities of RMB 2,727,616 thousand, resulting in a net increase of RMB 2,262,803 thousand in cash and cash equivalents Summary of Consolidated Cash Flow Statement (For the Six Months Ended June 30, 2019, RMB in thousands) | Metric | 2019 | 2018 | | :--- | :--- | :--- | | Net Cash Generated from Operating Activities | 1,057,505 | 631,882 | | Net Cash Outflow from Investing Activities | (1,522,318) | (89,529) | | Net Cash Generated from/(Outflow from) Financing Activities | 2,727,616 | (75,158) | | Net Increase in Cash and Cash Equivalents | 2,262,803 | 467,195 | | Cash and Cash Equivalents as of January 1 | 593,746 | 887,183 | | Effect of Foreign Exchange Rate Changes | 895 | 1,525 | | Cash and Cash Equivalents as of June 30 | 2,857,444 | 1,355,903 | [Notes to the Unaudited Interim Financial Information](index=50&type=section&id=Notes%20to%20the%20Unaudited%20Interim%20Financial%20Information) This section provides detailed explanations and supplementary information for the unaudited interim financial information, covering preparation basis, accounting policy changes, segment reporting, profit before tax, income tax, EPS, balance sheet items, capital management, fair value, capital commitments, related party transactions, and post-reporting events [1 Basis of Preparation](index=50&type=section&id=1%20Basis%20of%20Preparation) This interim financial report is prepared under HKEX Listing Rules and IAS 34, reviewed by KPMG, and adopts 2018 annual accounting policies, with exceptions noted in sections 2