On December 21, 2021, the daily economic news exclusively reported “behind the Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) 1 billion yuan related mergers and Acquisitions: it is difficult to find a basis for the revenue forecast of 445 million yuan, and the right defects of key products are not disclosed?” The article pointed out that Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) (300401, SZ; yesterday’s closing price was 14.24 yuan) spent 1.07 billion yuan to acquire Zhejiang Huayuan Pharmaceutical Co., Ltd. (hereinafter referred to as Huayuan Pharmaceutical), and there were rights defects of key products that were not clearly disclosed.
On January 5, 2022, Shenzhen Stock Exchange issued a letter of concern to Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) , requiring Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) to explain whether to entrust other subjects to develop or jointly develop valsartan amlodipine tablets (I) or other drugs with other subjects, explain the income sharing, and require auditors to explain whether the revenue recognition of garden pharmaceutical complies with the provisions of accounting standards.
right defects of key products are not disclosed
Previously, Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) announced a related merger and acquisition of Huayuan Pharmaceutical at a cost of 1.07 billion yuan. Since Shao Qinxiang is the actual controller of Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) and Huayuan Pharmaceutical, this transaction also constitutes a related merger and acquisition.
The reporter of the daily economic news found that valsartan amlodipine tablets (I), the core product accounting for about 64% of the operating revenue of garden pharmaceutical in the first three quarters of 2021, is not the exclusive product of garden pharmaceutical.
According to the prospectus of Baicheng Pharmaceutical (301096, SZ), the company claims that it holds 37% interest in valsartan amlodipine tablets (I) of Huayuan Pharmaceutical.
Baicheng pharmaceutical said: “at present, the issuer holds 37% of the equity of valsartan amlodipine tablets (I). After the varieties are listed and sold, it will further enhance the company’s performance. From January to June 2021, the company obtained the equity share of valsartan amlodipine tablets from Huayuan Pharmaceutical Co., Ltd. of RMB 12.6216 million (including tax).”
It is worth noting that Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) did not mention that Huayuan Pharmaceutical did not own 100% of the equity of valsartan amlodipine tablets (I), Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) in its announcement before completing the above-mentioned 1 billion yuan related merger and acquisition.
Previously, the reporter of the daily economic news also asked, “does garden pharmaceutical fully grasp the 100% equity of valsartan amlodipine tablets (I)? If not, what proportion of equity does garden pharmaceutical grasp valsartan amlodipine tablets (I)? Because garden pharmaceutical does not fully grasp valsartan amlodipine tablets (I) Which account is the expenditure required for equity finally included in? Does your company consider this factor when predicting the future performance of Huayuan Pharmaceutical? ” And other questions sent an interview letter to Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) , but received no response from the other party.
explain the impact on the valuation of Huayuan Pharmaceutical
As the equity of valsartan amlodipine tablets (I) is not 100% owned by Huayuan Pharmaceutical, the Shenzhen stock exchange requires Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) to explain whether Huayuan Pharmaceutical entrusts other subjects to develop valsartan amlodipine tablets (I) or other drugs. If so, please list the information of relevant subjects and explain the specific R & D division between Huayuan Pharmaceutical and relevant subjects Equity distribution arrangements (including but not limited to ownership of product rights, revenue sharing, etc.), revenue sharing in the first three quarters of 2021, and relevant supporting materials shall be reported.
In the letter of concern, SZSE requested Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) : “please explain whether the revenue recognition of the target company complies with the provisions of accounting standards and the audit measures taken by the auditor on the rationality of the revenue recognition policies of the target company (especially those related to drugs requiring revenue sharing).”
In addition, the Shenzhen Stock Exchange also requires Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) to supplement whether relevant equity distribution is considered in the evaluation of garden pharmaceutical, and list the calculation process of income sharing in the forecast period and stable period and its impact on the valuation of garden pharmaceutical.
It is worth noting that neither Baicheng medicine nor Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) clearly explained the specific meaning of “37% equity of valsartan amlodipine tablets (I)”.
The reporter of daily economic news also sent an interview letter to Baicheng pharmaceutical on the specific calculation criteria of Baicheng pharmaceutical’s 37% interest in valsartan amlodipine tablets (I) of garden pharmaceutical. Baicheng medicine replied: “this equity refers to the equity share of sales profit agreed by both parties.” Meanwhile, Baicheng medicine replied to the reporter: “the company regularly checks the product sales details with Huayuan Pharmaceutical, calculates the amount of equity that the company should enjoy according to the agreed method, and makes settlement after confirmation by both parties. In principle, the settlement cycle is once a quarter.”
On the investor interaction platform, some investors also asked Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) : “what is’ 37% sales equity ‘? 37% of sales revenue, 37% of gross profit or 37% of net profit?” Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) replied: “sales equity refers to net profit”.
According to the Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) announcement, Huayuan Pharmaceutical currently has a number of drugs under its name, including valsartan amlodipine tablets (I), doxofylline injection, levofloxacin tablets, lipoic acid injection, magnesium aluminate chewable tablets, levofloxacin hydrochloride capsules, Roxithromycin Capsules and Azithromycin Dispersible Tablets.
According to the general meaning, there are many accounting difficulties in accounting the net profit of valsartan amlodipine tablets (I) alone. Obviously, the “sales equity refers to net profit” mentioned in Zhejiang Garden Bio-Chemical High-Tech Co.Ltd(300401) still needs to disclose the specific accounting caliber and calculation method in detail.
(Daily Economic News)
