The performance has changed, and the main products have been hit hard...Can Yuheng Pharmaceutical, which has broken arms to survive, can get out of the predicament

Text | Linan

Yuheng Pharmaceutical Co.
, Ltd.
, which has been established for 20 years, wrote affectionately a paragraph to shareholders in its 2020 financial report.
Among them is an intriguing sentence, which is quoted from Laozi's "Tao De Jing": "More easy is more difficult
.

In 20 years, this company has entered a weak year, which is equivalent to the beginning of an adult
.

Yuheng Pharmaceutical was established in 2000.
Its predecessor was the affiliated pharmaceutical factory of Heilongjiang Rehabilitation Research Institute.
Zhu Jiman bought it for 1.
68 million and restructured it into Yuheng Pharmaceutical
.

Yuheng Pharmaceutical is also keen on acquisitions.
According to media statistics, the company has successfully initiated 13 mergers and acquisitions since it went public in 2010.
In contrast, the company's R&D investment amount and proportion are not large
.

01 Revenues continued to decline, and main products suffered huge losses

On May 28, 2021, Yuheng Pharmaceutical received the "Inquiry Letter on the 2020 Annual Report of Harbin Yuheng Pharmaceutical Co.
, Ltd.
" issued by the Shenzhen Stock Exchange
.

The main reason is that at the end of 2020, Yuheng Pharmaceutical's uncovered losses were 874 million yuan, and the paid-in share capital was 2.
198 billion yuan.
The company's unrecovered losses exceeded one-third of the total paid-up share capital
.

Source: Yuheng Pharmaceutical's 2020 financial report

Yuheng Pharmaceutical’s pharmaceutical manufacturing revenue decreased by 32.
94% compared with the same period last year, and its pharmaceutical agency revenue decreased by 69.
41% compared with the same period last year
.

In its response, Yuheng Pharmaceutical pointed out that in 2020, the company's operating income will experience a sharp decline mainly due to the following factors: 1.
Affected by the new crown pneumonia epidemic, the company and the upstream and downstream of the industry delay resumption of work, personnel and logistics are restricted, and product demand declines; 2.
Policies such as the adjustment of the national medical insurance catalogue and the key monitoring catalogue have affected the company's main products such as creatine phosphate sodium for injection, Lugua polypeptide injection, etc.
; 3.
The company sold shares of Aonuo Pharmaceutical; 4.
The company terminated some of the agency products Such as the promotion of clopidogrel bisulfate tablets, creatine phosphate sodium for injection (Viccan), and recombinant human insulin injection
.

During the reporting period, affected by the national key medical monitoring catalogue, Yuheng Pharmaceutical's sales revenue of creatine phosphate for injection (Leibton) in 2020 was 12,413,700 yuan, a decrease of 74.
05% from the same period in 2019; and due to the termination of the agency , The sales revenue of clopidogrel bisulfate tablets in 2020 was 5,110,200 yuan, a decrease of 98.
63% compared with the same period in 2019
.

Yuheng Pharmaceutical's orthopedic drugs revenue in 2020 decreased by 46.
71% compared with the same period last year, mainly because Lugua Polypeptide Injection did not enter the new version of the National Medical Insurance Catalogue announced in December 2019, and the sales revenue of Lugua Polypeptide Injection in 2020 was 309,971,700 yuan.
, A decrease of 50.
08% compared to the same period in 2019
.
It is worth noting that in April this year, the Lugua polypeptide injection of Yuheng Pharmaceutical, a wholly-owned subsidiary of Yuheng Pharmaceutical, broke out of commercial bribery, and was rated as " Serious", was suspended for online trading in Zhejiang Province
.
Yuheng Pharmaceutical became the country's first governance case with a credit rating of "serious"
.

After selling the equity of Aonuo Pharmaceutical, Yuheng Pharmaceutical will no longer sell zinc calcium gluconate oral solution in 2020, and the sales revenue of this product in 2019 was 371 million yuan
.

02 Selling for survival, controlling shareholder bankruptcy.
.
.

In 2013, Yuheng Pharmaceutical acquired 100% of Aonuo China's equity at a price of 420 million yuan.
From 2016 to 2018, the company's performance has been showing a steady growth trend.
Aonuo's net profit was 93.
91 million yuan and 109 million yuan respectively.
, 148 million yuan
.
Its core products are calcium and zinc gluconate oral solution, vitamin C chewable tablets, and Dendrobium Shenzhi granules
.

However, in November 2019, Yuheng Pharmaceuticals announced the sale of this high-quality asset company.
Yuheng Pharmaceuticals sold 100% equity of Aonuo Pharmaceuticals to China Resources Sanjiu.
The transaction price totaled 1.
42 billion yuan.
It will be completed in the first quarter of 2020.
Delivery
.

From the perspective of the industry, Yuheng Pharmaceutical's move is "survival with broken arms" and "survival by selling sons
.
" Due to continuous mergers and acquisitions, before the sale of Aonuo Pharmaceutical, the original book value of the goodwill of Yuheng Pharmaceutical was as high as 2.
6 billion, and Yuheng Pharmaceutical needed to sell Aonuo Pharmaceutical to stop the loss
.
And if it were not for the sale of Aonuo Pharmaceutical, Yuheng Pharmaceutical's revenue last year is estimated to be even lower
.
If it loses for two consecutive years, Yuheng Pharmaceutical will face the risk of being labeled "ST"
.

In 2020, this transaction will bring short-term profits to Yuheng Pharmaceutical.
The company has reduced its asset-liability ratio and financial expenses by selling 100% equity of Aonuo Pharmaceutical and disposing of inefficient assets
.
Looking at this year, because of the sale of this company, Yuheng Pharmaceutical's overall revenue has also been affected
.

Shortly after selling the son to survive, the house leaked in the night rain.
On the evening of July 6, 2020, Yuheng Pharmaceutical issued an announcement on the acceptance of the bankruptcy and reorganization of the controlling shareholder of the company by the court
.
According to the announcement, the creditors of Yuheng Group, the controlling shareholder of Yuheng Pharmaceutical, have applied to the Intermediate People’s Court of Harbin City, Heilongjiang Province for the bankruptcy and reorganization of Yuheng Group on the grounds that Yuheng Group is unable to pay off its due debts and its assets are insufficient to pay off all debts.

.

As of July 3, 2020, among the 707 million shares of Yuheng Pharmaceutical held by Yuheng Group, 670 million shares are under pledge, accounting for 94.
64% of the company’s total shares held by it, and accounting for the company’s total share capital.
30.
46%; In addition, all shares of Yuheng Pharmaceutical held by Yuheng Group are in a state of judicial freeze
.

The “insolvency” of Yuheng Group is also related to its acquisition of shares in the listed company Xinbang Pharmaceutical in 2017
.

03 Yuheng Pharmaceutical's transformation to "self-help"

It is worth noting that the fifth batch of centralized procurement will be opened in the near future.
Yuheng Pharmaceutical's products are mainly potassium chloride sustained-release tablets, gemcitabine, fasudil, etc.
Yuheng Pharmaceutical revealed that potassium sustained-release tablets will Based on the comprehensive consideration of the market and company situation, whether to participate in this centralized procurement, other products have small sales and have not yet carried out the consistency evaluation work, so they cannot participate in this centralized procurement
.

The lethality of centralized procurement is too great, and Yuheng Pharmaceutical is also actively deploying the over-the-counter sales market
.
It can be seen that under the pharmaceutical policies such as key monitoring catalogues and mass procurement, Yuheng Pharmaceutical's main products are deeply affected, which directly reflect on performance.
Facing crises, Yuheng Pharmaceutical is also transforming to "self-help".

.

In the direction of transformation, according to its disclosure, the company regards the CMO business as a new profit growth point
.
With the implementation of medical reform policies such as the MAH system and mass procurement of drugs, it has brought new development opportunities to the commissioned processing enterprises represented by Pude Pharmaceuticals under its subsidiary.
On the other hand, Yuheng Pharmaceuticals also plans to become a professional CSO company.
Provide customers with integrated CMO+CSO services
.

In addition, Yuheng Pharmaceutical also has a PD-1 product in its hands
.
In February 2020, Yuheng Biopharmaceuticals, a shareholding company of Yuheng Pharmaceuticals, announced that NMPA has formally accepted its new drug listing application for the recombined fully human anti-PD-1 monoclonal antibody-Sepalizumab injection, which treats second-line and above Patients with relapsed or refractory classic Hodgkin's lymphoma are expected to become the company's new profit growth point in the future
.

However, there are also investors who are quite concerned.
The company's PD-1 drug has been applied for listing for more than a year
.
In this regard, Yuheng Pharmaceutical's secretary of the board said that the 2020 epidemic has had a certain impact on the progress of drug approval, and the company is also actively following up
.
At present, domestic PD-1 products are "involved" seriously, and there will be a number of products lining up to be approved for listing in the future.
Even if the PD-1 of Yuheng Pharmaceutical is successfully listed, it will face certain competition and limited profits
.

Yuheng Pharmaceutical, which has entered the year of weak crown, is actively transforming and upgrading, and whether it can "self-help" smoothly is a long way to go
.