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After four price cuts, Sharp Aix finally divested its proprietary Chinese medicine business for $82 million

Chinese medicine business


After several price reductions, on April 10, the transfer of the wholly-owned subsidiary Qiangshen Pharmaceutical Co., Ltd. has finally settled: Jilin Province Yueshi Tianbo Pharmaceutical Co., Ltd. intends to accept the transfer through the public delisting of the Shanghai United Property Rights Exchange. Shape Aisiqiangshen Pharmaceutical Co., Ltd. 100% equity, the delisting price is 82 million yuan. This is a decrease of 58% from the initial listing price of 195 million yuan, which is a far cry from the initial investment of 481 million yuan when Sharp Aix acquired Qiangshen Pharmaceutical.


The transfer process can be described as many twists and turns, but it can also be seen that Sharp Ass' determination to spin off the proprietary Chinese medicine business——


· From December 11, 2020, to December 17, 2020, the initial public listing and transfer of 100% equity of Qiangshen Pharmaceutical, with a reserve price of 195,428,100 yuan.


· From December 22, 2020, to January 5, 2021, the reserve price will be adjusted to RMB 136,799,700.


· From January 12, 2020, to January 25, 2021, the reserve price was reduced to RMB 117,257,900.


· From January 28, 2021, to February 9, 2021, the reserve price of the listing was lowered again to RMB 97,714,100.


From March 25, 2021, to April 8, 2021, the entire equity was finally transferred to Jilin Province Yueshi Tianbo Pharmaceutical Co., Ltd. for 82.0 million yuan.


The strong body pharmaceutical industry that carries hope


Qingshan Pharmaceutical was established in 2014. It was originally Jilin Qiangshen Pharmaceutical Co., Ltd. Its main products are Sizitianjing Capsules and Compound Alpine Rhodiola Oral Liquid.


In November 2015, Sharp ACE and Jilin Dongfeng Pharmaceutical Co., Ltd. signed the "Equity Transfer Agreement with Effective Conditions", and Sharp ACE acquired 100% equity of Qiangshen Pharmaceutical for 346 million yuan. Also, Sharp Aisi has put into production the Chinese medicine extraction production workshop, warehouse project, and liquor production workshop project for Qiangshen Pharmaceutical. So far, the accumulated investment has reached 481 million yuan.


Dongfeng Pharmaceutical also promised in the equity transfer agreement that Qiangshen Pharmaceutical will achieve at least 10 million yuan, 30 million yuan, and 50 million yuan in net profits from 2016 to 2018.


At that time, Sharp Ass was full of confidence and believed that after the completion of the acquisition, the company would develop simultaneously in the two fields of traditional Chinese medicine and western medicine, and its profitability would continue to increase.


However, the fact is that Qiangshen Pharmaceutical has never reached a performance promise. From 2016 to 2018, its net profits were RMB 1,253,900, RMB 1,284,200, and RMB -8.0231 million. In 2018, Sharp Aisi set aside a goodwill impairment of 178 million yuan for this, resulting in the first loss after listing that year.


From 2019 to the first half of 2020, Qiangshen Pharmaceutical achieved net profits of -43.67 million yuan and -10.707 million yuan respectively. Based on this calculation, Qiangshen Pharmaceutical not only failed to help Shape Aisi earn money, but lost 50.7995 million yuan.


Sharp's downhill road


Eye drops are the core product of Sharp Aisi, which contributes most of the company's performance. In 2014-2017, Sharp's eye drops business revenue accounted for 66.35%, 72.03%, 77.03% and 73%, respectively.


Then, this situation failed to continue. On December 2, 2017, an article titled "The brainwashing drug that sells 750 million yuan a year, please let go of the elderly in China" hit the Internet. The article questioned the fact that Sharp Aisi had no obvious drug effect. Over-promoting the function of its products to treat cataracts, since then, Sharp Aisi fell into the "magic medicine" storm.


Although Sharp Aisi has issued a clarification announcement: the company believes that 0.5% annual lysine eye drops have a certain effect on delaying the development of senile cataracts and improving or maintaining vision, and the effect is definite; it is a safe and effective Anti-cataract drug. However, the market does not seem to buy it. Since then, Sharp's performance began to decline. In 2018, the sales volume of Sharp Aisi eye drops fell by 51.51% year-on-year, and operating income also fell 52.58% year-on-year to 325 million yuan. During the reporting period, the proportion of Sharp Aisi's eye drops business revenue fell to 53.5%.


In January 2021, Sharp Aisi issued a performance pre-loss announcement saying that after preliminary calculations by the company's financial department, the company expects a loss of 136 million to 170 million yuan in 2020 and a profit of 7.8573 million yuan in the same period last year.


Sharpeith also started the consistency evaluation of annual lysine eye drops in 2016, but the progress was not smooth.


As Sharp Ass once stated in the 2020 third-quarter report: “The consistency evaluation of the quality and efficacy of beneath lysine eye drops may not be completed within three years according to the requirements of the State Food and Drug Administration, or there is a company application. Delayed completion of consistency evaluation-related work may fail; or although the consistency evaluation of the quality and efficacy of beneath lysine eye drops has been completed and reported to the Drug Evaluation Center of the State Food and Drug Administration, some cases have not passed the State Food and Drug Administration Risk of review and approval. In the event of the above circumstances, the company’s annual lysine eye drops drug approval number may be canceled or not re-registered after expiration, which will cause the product to be unable to continue production and sales. Acid eye drops are the company’s core product. If the company is unable to continue to produce and sell Bengal lysine eye drops, it will have a major impact on the company’s production and operation."


However, after a few years, Shap Aisi still seems to have not completely emerged from the shadow of the "magic drug" incident. In the announcement of the listing and transfer, Sharp Aix once stated: Due to reports about Sharp Aix’s self-media incidents, Sharp Aix’s brand reputation has been negatively affected, and the relevant marketing plan has not been implemented as originally planned. As a result, the sales volume of proprietary Chinese medicine products has fallen sharply, coupled with the impact of the new crown epidemic and the limited subsequent sales expense input, (Qiangshen Pharmaceutical) is expected to continue to lose money in the coming years.


The actual controller cashed out and left, Putian moved in


It doesn't stop there that put Shap Aisi on the cusp.


On February 27, 2020, Sharp Aisi issued an announcement stating that the original controller Chen Dekang had signed the "Share Transfer Agreement" and transferred 70,966,700 shares (accounting for 7.24% of the company's total shares) to Shanghai Yanghe Shanghai Yihe Medical Management Co., Ltd. ("Yihe Medical"), a wholly-owned subsidiary of Investment Management Co., Ltd. ("Yihe Investment"), promised to irrevocably give up the remaining 21.73% of the company's shares. right to vote. At the same time, Chen Dekang will also transfer his 17.5242 million shares of the company (accounting for 5.43% of the company's total shares) to Yihe Medical or its designated transferee in 2021.


What is the background of raising and investing? It is reported that the company was established on June 23, 2015, the legal representative and major shareholder are Lin Hongli (holding 70%), and the second shareholder is Lin Hongyuan (holding 30%). As a result, the controlling shareholder of Sharp Aisi changed, and the actual controller of the company was changed to the Lin brothers, who were the sons of Lin Chunguang of the Putian family.


On September 29 of the same year, Sharp ACE announced again that it planned to acquire Shanghai Yuxie Medical Management Co., Ltd. (hereinafter referred to as "Yuxie Management") and Shanghai Union Hospital Investment Management Co., Ltd. (hereinafter referred to as "Xiehe Investment") 100% equity of Taizhou Women and Children's Hospital held in total. The shareholders of Taizhou Women's and Children's Hospital Yuxie Management and Xiehe Investment are companies controlled by the actual controller's Lin Hongli and Lin Hongyuan, the actual controllers of Sharp Aixian. This transaction constitutes a connected transaction.


The next day, Sharp Ace received an inquiry letter from the Shanghai Stock Exchange, requesting it to supplement the disclosure of the synergy and difficulty of integration between the target company’s business and the existing business, and whether the payment arrangement for the consideration of the transaction caused financial pressure on the company’s normal production and operation, etc. matter. On October 12, the Zhejiang Securities Regulatory Bureau also issued an inquiry letter to it, asking whether the actual controller has other controlled hospitals, whether the business engaged in is in a competitive relationship with Taizhou Hospital, and the Taizhou Hospital was merged into Sharp Will it leads to competition in the same industry?

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