On the evening of May 21stPennpursuitiiispinningcombos, Huabei Pharmaceutical (600812) (SH600812, share price 5Pennpursuitiiispinningcombos.07 yuan, market capitalization 86Pennpursuitiiispinningcombos.99 billion yuan) previously issued to the Shanghai Stock ExchangePennpursuitiiispinningcombosThe "working letter on the Supervision of Information Disclosure in the 2023 Annual report of North China Pharmaceutical Co., Ltd." (Shanghai official letter [2024] No. 0319) was replied.

The company is required to disclose additional details of R & D projects that have met the capitalization conditions, including project establishment time, project category (conformance evaluation project / new product project / new technology project), industry segmentation and main treatment areas, R & D model, R & D expenditure in major stages and the amount incurred in the reporting period, current R & D stage, book value of intangible assets and development expenditure, etc. Such as the use of outsourced R & D, additional disclosure of the trustee's name, qualifications, whether related parties, related business cooperation time and mode, etc. ", Huabei Pharmaceutical explained in detail through the table in its reply.

According to the reply of Huabei Pharmaceutical, according to the capitalization time of drug evaluation, the company has reached 270 R & D projects with capitalization conditions.

In this case, the company's financial situation is still not optimistic. As of the end of 2023, the monetary capital is only 988 million yuan, and the total current liabilities are 10.269 billion yuan. In order to optimize costs, the company expects the volume of related party transactions to increase 11-fold in 2024, including 368 million yuan purchased from related parties and 400 million yuan sold to related parties.

Deducting non-net profit for four consecutive years of loss

The reason why the Shanghai Stock Exchange sent regulatory work letters to Huabei Pharmaceutical is likely to be related to the company's poor performance.

According to the North China Pharmaceutical Annual report, in 2023, the company achieved an operating income of 10.12 billion yuan, a net profit of 4.8903 million yuan, and a non-net profit of-45.2326 million yuan, which has lost money for four consecutive years.

From a product-by-product point of view, North China pharmaceutical anti-infection products accounted for nearly 50% of the revenue, but the gross profit margin decreased year after year, decreasing by 2.02%, 5.04%, 3.13% and 7.89% respectively from 2020 to 2023; the combined income of cardiovascular and cerebrovascular products, vitamins and healthy consumer goods accounted for 4.63%, and the gross profit margin increased by 18.02% and 10.98% respectively.

It is worth noting that the gross profit margin of cardiovascular and cerebrovascular products, vitamins and healthy consumer goods of Huabei Pharmaceutical fluctuated greatly from year to year. The gross profit margin of the former decreased by 7.75%, 20.85%, 15.10% and 6.93% respectively from 2019 to 2022, while that of the latter decreased by 20.99%, 1.46%, 2.84% and 5.60% respectively.

Huabei Pharmaceutical said that the decline in gross profit margin of anti-infective products was mainly due to a year-on-year decline in sales prices and sales after the state organized centralized volume procurement of drugs (hereinafter referred to as "national mining"), in line with the industry trend.

Specifically, amoxicillin sodium clavulanate potassium for injection in North China Pharmaceutical was selected as the eighth batch of "National Mining". Since seven companies selected this product, the market share of North China pharmaceutical products decreased greatly after the bid was imposed in July 2023, reducing gross profit by 114 million yuan. In addition, the winning prices of cefotaxime sodium for injection and amoxicillin sodium clavulanate potassium for injection decreased significantly, reducing gross profit by 250 million yuan and 82.0732 million yuan respectively.

The gross profit of cardiovascular and cerebrovascular drugs, vitamins and healthy consumer goods of Huabei Pharmaceutical has increased significantly, which is mainly related to the hypertension drug-levamlodipine besylate tablets and eye protection products-lutein ester tablets.

Last year, sales revenue of levamlodipine besylate tablets was 219 million yuan, gross profit increased by 61.8282 million yuan to 125 million yuan, and gross profit margin increased 19.37 percent to 57.30 percent, Huabei Pharmaceutical said. The main reason is that although the sales price of the product decreased by 5.0778 million yuan, the gross profit increased by 8.3351 million yuan and 58.5709 million yuan respectively due to the increase in sales volume and the decrease in the purchase price of raw materials.

In addition, last year, Huabei Pharmaceutical lutein Ester tablets achieved sales revenue of 132 million yuan, gross profit increased by 28.8589 million yuan to 42.2973 million yuan, and gross profit margin increased by 9.44 percent to 32.02 percent. The main reason was that the sales price of lutein ester tablets increased, the sales volume increased and the cost decreased, which increased the gross profit by 14.5578 million yuan, 13.0974 million yuan and 1.2037 million yuan respectively.

The volume of related party transactions has increased significantly this year.

In addition to poor performance, poor credit rating is also a "hard wound" of North China Pharmaceutical. Since 2021 due to "insufficient capacity" cut off supply and collection, the company has been on the list of dishonesty for three consecutive years, and has been rated as a "serious" untrustworthy pharmaceutical enterprise.

In this case, in order to optimize the company's product structure and enhance its core competitiveness, North China Pharmaceutical has continuously increased its R & D investment, with a total R & D investment of 1.782 billion yuan in the past two years, of which 1.173 billion yuan occurred in 2023, a sharp increase of 92.51%. And capitalization accounted for 74.65%, an increase of 10.32% over the same period last year.

In addition, the capitalization time point of North China Pharmaceutical R & D expenditure is drug evaluation, while the capitalization time of companies in the same industry is based on obtaining relevant approval documents (such as "Clinical trial approval", "Drug Registration approval", etc.), reaching pilot test conditions, in order to complete the intangible asset so that it can be used or sold in terms of technical feasibility, or similar time points, are later than drug evaluation.

In the above reply, Huabei Pharmaceutical listed 270 R & D projects that have met the capitalization conditions, some of which have been developed for many years but are still in the stage of preclinical research. Important capitalized R & D projects include the R & D project of recombinant anti-rabies virus antibody combination, the recombinant anti-human vascular endothelial growth factor monoclonal antibody injection project, the recombinant human anti-human tumor necrosis factor (TNF- α) monoclonal antibody injection project and the LCZ-696 project.

Huabei Pharmaceutical explained that the main reason for the different timing of capitalization is that R & D projects are at different stages, R & D processes and processes are also different, and the possibility of forming results is also different. Therefore, the time of capitalization is reasonable.

In this regard, the annual audit accountant of North China Pharmaceutical agrees. However, a reporter from the Daily Business News noted that Huabei Pharmaceutical is under great financial pressure, with an asset-liability ratio of 70.08% by the end of 2023, with monetary funds remaining only 988 million yuan and current liabilities totaling 10.269 billion yuan.

In order to optimize costs, North China Pharmaceutical expects its related party transaction volume to increase to 865 million yuan in 2024, an actual increase of 794 million yuan from 2023. Specifically, in order to reduce procurement costs, North China Pharmaceutical can conduct liquid sugar and other businesses with North China Pharmaceutical Group Co., Ltd.(hereinafter referred to as related parties). It is estimated that the annual related transaction volume of raw materials (liquid sugar, methyl ester, white sugar), packaging materials (PVC, tropical aluminum) and labor insurance (daily chemical miscellaneous products) will be 368 million yuan.

In addition, if the import and export trade conditions of Tianjin Company are better than the company's existing import and export trade conditions, North China Pharmaceutical and its subsidiaries can integrate resources and screen varieties with Tianjin Company to carry out cooperation in penicillin industrial salts and other pharmaceutical intermediates (including but not limited to self-production), and plans to carry out annual cooperation of 400 million yuan.