Securities code: Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) stock abbreviation: Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) No.: Lin 2022044 bond Code: 143422 bond abbreviation: 18 Fuyao 01
Bond Code: 155067 bond abbreviation: 18 Fuyao 02
Bond Code: 175708 bond abbreviation: 21 Fuyao 01
Shanghai Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) (Group) Co., Ltd
Announcement on the provision for asset impairment
The board of directors and all directors of the company guarantee that there are no false records, misleading statements or major omissions in the contents of this announcement, and bear individual and joint liabilities for the authenticity, accuracy and completeness of its contents.
Shanghai Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) (Group) Co., Ltd. (hereinafter referred to as “the company”) deliberated and approved the proposal on the provision for asset impairment in 2021 (hereinafter referred to as “the provision for asset impairment”) at the 66th meeting (regular meeting) of the eighth board of directors and the first meeting (regular meeting) of the eighth board of supervisors held on March 22, 2022. The relevant information is hereby announced as follows:
1、 Overview of the provision for asset impairment this time
In order to more objectively and fairly reflect the financial position and asset value of the group (i.e. the company and its holding subsidiaries / units, the same below) as of December 31, 2021, according to the accounting standards for Business Enterprises No. 8 – asset impairment issued by the Ministry of finance of the people’s Republic of China (hereinafter referred to as the “Ministry of finance”) China Securities Regulatory Commission (hereinafter referred to as “CSRC”) “accounting regulatory risk tip No. 8 – goodwill impairment” and the company’s accounting policies and other relevant provisions, combined with the actual operation and asset status, the company regularly evaluates and tests the impairment of assets.
After evaluation and testing, in 2021, the group made provision for impairment of long-term equity investment of RMB 462.48 million and goodwill of RMB 150 million, totaling RMB 612.48 million. The provision for asset impairment this time reduced the group’s net profit by RMB 612.48 million in 2021, the net profit attributable to the parent company by RMB 570.21 million, and the owner’s equity attributable to the shareholders of the listed company by RMB 570.21 million on December 31, 2021.
The amount of the provision for impairment of assets this time refers to the appraisal and consultation report issued by Shanghai Dongzhou Assets Appraisal Co., Ltd. (hereinafter referred to as “Dongzhou appraisal”), an appraisal institution hired by the company, and is consistent with the information in the audited consolidated financial statements of 2021.
(I) provision for impairment of long-term equity investment
According to the accounting standards for Business Enterprises No. 8 – asset impairment, the group conducts asset impairment tests regularly. If there are signs of impairment, the group will withdraw the impairment provision according to the difference between the book value and the estimated recoverable amount.
After testing, the group’s holdings as of December 31, 2021 include Saladax biomedical,
The provision for impairment of long-term equity investments, including Inc. (hereinafter referred to as “Saladax”), Mingyi Zhonghe Technology (Beijing) Co., Ltd. (hereinafter referred to as “Mingyi Zhonghe”), phagelux Inc. (hereinafter referred to as “phagelux”), integrated endocopy, Inc. (hereinafter referred to as “IE”), sovereign medical services, Inc. (hereinafter referred to as “SMS”), is RMB 462.48 million in total. The details are as follows:
Unit: RMB 10000
The investment time for withdrawing impairment is December 31, 2021. At the beginning of the year, the original book value of long-term equity investment on December 31, 2021 is withdrawn, and the net book value of impairment provision is withdrawn
1) Saladax 2013129700
2) Mingyi Zhonghe 20186498 0
3) Phagelux 20164443 0 4443 0
4) Ie 20183010 0
5) SMS 201522266194712795 0
Others – 19438860165322046
Total – 6862520331 462482046
1、Saladax
Saladax is a Delaware registered company, founded in 2004, mainly engaged in development
Develop the patented technology of immunoassay and diagnosis after chemotherapy. Saladax initially focused on tumor orientation; In 2017, Saladax shifted its focus to the central nervous system (CNS). Saladax has the management and detection of the dose of 13 chemotherapeutic drugs in different research and development stages; At the same time, five antipsychotic dose management detection products have been developed, which are suitable for the field of central nervous system (CNS).
Due to the lack of clinical samples, the clinical trials of drug monitoring products such as 5-FU, imatinib and docetaxel in Saladax tumor direction have made slow progress; In the field of central nervous system (CNS), the blood drug concentration monitoring product series for risperidone, papperidone, aripiprazole, quetiapine and oxazepam antipsychotics are still in the process of FDA approval. Due to the epidemic and other factors, the clinical registration of Saladax’s main products was slow, the commercialization progress was delayed, and its revenue and profit did not meet expectations.
The group refers to the “Shanghai Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) (Group) shares” issued by Dongzhou appraisal on March 14, 2022
The company intends to know the fair value valuation report of preferred shares of Saladax biomedical, Inc. (Dongzhou Zibao Zi [2022] No. 0377) held by it, and make provision for impairment of long-term equity investment for Saladax, with an impairment amount of RMB 129.7 million.
2. Ming medicine Zhonghe
Founded in 2015, Mingyi Zhonghe provides a “digital marketing and online operation” platform for clinic doctors, upstream industrial enterprises and marketing teams in the form of SaaS (“software as a service”) around small and micro medical institutions.
Based on SaaS system, Mingyi Zhonghe has built business ecology such as grass-roots drug distribution, digital marketing and clinical diagnosis and treatment. However, Mingyi Zhonghe failed to give full play to its own advantages to achieve a major breakthrough in business. In addition, it failed to adjust its business strategy in time under the changing external environment, resulting in its poor overall operation. At the end of 2021, Ming Medical Zhonghe had liquidity problems and liquidation risk.
According to the recoverable amount of the long-term equity investment, the group will fully withdraw the asset impairment provision for the long-term equity investment of Mingyi Zhonghe, and the impairment amount is RMB 64.98 million.
3、Phagelux
Phagelux is an innovative biotechnology company, which mainly uses phage, lyase and related technologies to develop and manufacture substitutes or auxiliary products of antibiotics in the field of biological agriculture and human drugs.
By the end of 2021, phagelux’s product R & D progress and commercialization process did not meet expectations, and financing was blocked, resulting in major liquidity problems.
According to the recoverable amount of the long-term equity investment, the group will fully withdraw the provision for asset impairment of phagelux long-term equity investment, with an impairment amount of RMB 44.43 million.
4、IE
Ie was founded in 1996 and headquartered in the United States. Its core product is disposable wireless HD arthroscopy for bone and joint surgery.
In recent years, ie’s product development progress is sluggish, the financing progress is slow, and its operation has sustained losses. At the end of 2021, due to the shortage of funds, the normal operation of ie was affected, and there was uncertainty and liquidation risk in its resumption of normal operation.
According to the recoverable amount of the long-term equity investment, the group will fully withdraw the asset impairment provision of IE long-term equity investment of RMB 30.1 million.
SMS is mainly engaged in providing day surgery and other related supporting services. Its main business location is in the United States. During the period from SMS to 2018, the gross profit margin of the group’s business expansion has been gradually squeezed by the integration of SMS, but the profit margin of the group’s business has been gradually reduced. Although SMS tries to improve its operation by strengthening strategic cooperation with other medical groups and other measures, the overall effect is not obvious.
In 2019, according to the investor rights agreement signed in 2015, the group exercised the right of repurchase request and sent the repurchase notice accordingly, requiring SMS, SMS founder John H. Hajjar and sovereign capital holdings, LLC to jointly undertake the obligation to repurchase the SMS shares held by the group, and the repurchase price is calculated according to the initial investment cost plus 5% annual interest rate (calculated from 2017). With reference to the appraisal and consultation report of Shanghai Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) (Group) Co., Ltd. on the fair value measurement project of the long-term equity investment sovereign medical services, Inc. (Dongzhou Zi Bao Zi [2020] No. 0322) issued by Dongzhou appraisal on March 26, 2020, the group has accrued a long-term equity investment impairment provision of RMB 110.85 million for SMS.
In 2020, due to the impact of covid-19 epidemic, in order to prevent cross infection of the epidemic, most public places implemented flow restriction measures. Therefore, the number of patients who went to the day operation center for treatment decreased significantly, resulting in the further deterioration of the operation of SMS. The group made long-term equity investment impairment provision of RMB 83.86 million for SMS in 2020.
On December 10, 2021, the arbitration tribunal issued a (transitional) ruling in support of the group’s exercise of the repurchase right. SMS, SMS founder John H. Hajjar and sovereign capital holdings, LLC should pay the repurchase price and corresponding interest to the group. However, due to the epidemic and other reasons, it is difficult to verify the current operation of SMS and John H. Hajjar’s personal assets, and the implementation of the ruling result is uncertain. The group will fully withdraw the asset impairment provision for the remaining SMS long-term equity investment according to the recoverable amount of the long-term equity investment, with an impairment amount of 27.95 million yuan.
(II) provision for impairment of goodwill
In accordance with the accounting standards for Business Enterprises No. 8 – asset impairment issued by the Ministry of finance, the accounting regulatory risk tip No. 8 – goodwill impairment issued by the CSRC and the company’s accounting policies, the company regularly conducts impairment tests on the goodwill formed by business merger in combination with its related asset groups.
The goodwill impairment test of the group calculates the present value of the estimated future cash flow of relevant asset groups according to the basic assumptions of continuous operation and the characteristics of assets, and compares the calculation results with the book value of corresponding asset groups. After calculation, according to the goodwill impairment test results of Jinzhou AoHong Pharmaceutical Co., Ltd. and its holding subsidiaries (hereinafter collectively referred to as “AoHong pharmaceutical”), the corresponding goodwill impairment reserves are accrued. The details are as follows:
In August 2011, the Group invested RMB 133184 million to acquire 70% equity of AoHong pharmaceutical held by Xinjiang Brose Equity Investment Co., Ltd. (“Xinjiang Brose”), and then purchased the equity held by minority shareholders of AoHong pharmaceutical. By the end of 2021, the group held 100% equity of AoHong pharmaceutical. AoHong pharmaceutical is a biopharmaceutical enterprise. Its main products are odekin (calf serum deproteinization injection) and Bangting (white eyebrow snake venom hemagglutinase for injection). In 2019, AoHong pharmaceutical acquired Chengdu Liszt Pharmaceutical Co., Ltd. (hereinafter referred to as “Liszt pharmaceutical”) and obtained penehyclidine hydrochloride injection (long term) as a new class 1 Chemical drug
