Since 2018, Walvax Biotechnology Co.Ltd(300142) ( Walvax Biotechnology Co.Ltd(300142) . SZ) has been subject to regulatory inquiries every year due to abnormal changes in multiple accounting subjects. The company recently received the inquiry letter of the 2021 annual report issued by the Shenzhen Stock Exchange, which shows that the Shenzhen stock exchange requires the company to make a written explanation on the compliance and prudence of the accounting treatment of operating income, financial assets, construction in progress, development expenditure, accounts receivable, inventory and other subjects during the period.
The reporter of the economic information daily noted that although compared with the inquiry letter of the 2020 annual report, the inquiry letter of the Walvax Biotechnology Co.Ltd(300142) 2021 annual report only lists nine major problems, such as the authenticity of income, the conversion of projects under construction into fixed assets, the provision of bad debts of accounts receivable, and the accounting treatment of R & D expenditure seem to have become “old and difficult” problems, which have been frequently inquired by the Shenzhen Stock Exchange in recent years.
income authenticity questioned
Walvax Biotechnology Co.Ltd(300142) is a high-tech biopharmaceutical enterprise specializing in the R & D, production and sales of biotechnology drugs such as human vaccines. It is in a leading position in the industry in the subdivided field of biotechnology drugs represented by new vaccines.
The annual report shows that in 2021, the company achieved an operating revenue of 3.463 billion yuan, an increase of 17.82% over the same period of last year; The net profit attributable to the shareholders of the listed company was 428 million yuan, a decrease of 57.36% over the same period last year. During the reporting period, except that the income of 13 valent pneumococcal polysaccharide conjugate vaccine increased by 65.59%, the income of many products, including 23 valent pneumococcal polysaccharide vaccine, Haemophilus influenzae type b conjugate vaccine, freeze-dried AC vaccine group meningococcal polysaccharide conjugate vaccine and so on, declined to varying degrees.
In view of the fact that the company’s income does not increase profit, Shenzhen stock exchange requires the company to explain the reasons and rationality of the sharp decline in net profit due to the increase of operating revenue in 2021 in combination with the development status of the industry, the competition pattern, the changes and development trend of upstream procurement cost and downstream terminal demand, the changes of main product sales volume, selling price and gross profit margin, product structure and cost, depreciation and period expenses, non recurring profits and losses and other factors.
Meanwhile, SZSE requires Walvax Biotechnology Co.Ltd(300142) to explain the reasons and rationality of the changes in the income and gross profit margin of main products during the reporting period in combination with the sales and purchase amount and proportion of the company’s top ten customers and suppliers, the addition and withdrawal of the top ten customers and suppliers, and the concentration changes of customers and suppliers, and report the list of top ten customers and suppliers in recent three years, the corresponding transaction amount and proportion Related relationship with the company.
Walvax Biotechnology Co.Ltd(300142) previously said in the annual report that the main reasons for the large decline in net profit were: on the one hand, the company increased R & D investment in new products and new projects in 2021, and the company actively promoted clinical trials in China and abroad for key R & D projects, with R & D expenses increasing by 252.13% over the same period of last year; On the other hand, the ending price of the listed Jiahe biopharmaceutical (Cayman) Holding Co., Ltd. shares held by the company fell, resulting in the loss of changes in fair value during the reporting period, which showed a reverse change with the income from changes in fair value in the same period of the previous year, and the income from changes in fair value of other equity assets decreased by 200.30% compared with the same period of the previous year.
At the end of the reporting period, the closing balance of the company’s other non current financial assets was 914 million yuan. During the reporting period, the closing price of the listed Jiahe biological pharmaceutical (Cayman) Holding Co., Ltd. shares held by the company fell, resulting in a change in fair value income of – 422 million yuan, and the absolute value of the amount accounted for 59.57% of the total profit of the current period. The ending balance of other equity instrument investment was 561 million yuan, and no change in fair value was recognized during the reporting period.
In view of the changes in the fair value of the company, the Shenzhen stock exchange requires the company to supplement the specific contents of other non current financial assets held by the company; Combined with the contractual cash flow characteristics of the financial assets held and the business model managed by the company, explain the reasons and rationality of the company’s presentation of relevant equity investments as other non current financial assets and fair value measurement, and explain the valuation technology and basis used for fair value measurement; Combined with the company’s profit structure, explain the profitability of the company’s main business, the possible adverse impact of the price fluctuation of financial assets on the company’s performance, and how the company controls relevant risks, and give sufficient risk tips. And the specific circumstances of equity investment, including but not limited to the specific content of equity investment, investment purpose, investment time, the reason and basis designated to be measured at fair value and its changes included in other comprehensive income, the level of fair value measurement, the calculation basis and calculation process of fair value changes, and whether the relevant accounting treatment complies with the provisions of the accounting standards for business enterprises, Self check and explain whether the relevant investment matters have fulfilled the necessary review procedures and information disclosure obligations.
doubtful accounting treatment of multiple accounts
The reporter of economic information daily noted that in addition to the measurement methods of foreign equity investment and financial assets, the compliance of accounting treatment of Walvax Biotechnology Co.Ltd(300142) construction in progress and development expenditure has been frequently inquired by regulators in recent years.
According to the financial report, by the end of 2021, Walvax Biotechnology Co.Ltd(300142) projects under construction had a closing balance of 1.527 billion yuan, an increase of 107.47% over 763 million yuan at the beginning of the period. Among them, the progress of HPV industrialization and Jiangsu Watson influenza vaccine project has reached 99%, but no fixed assets have been carried forward during the reporting period.
Due to the large increase of construction in progress at the end of Walvax Biotechnology Co.Ltd(300142) period compared with the beginning of the period, and whether the construction in progress is transferred to fixed assets has a great impact on the business, the audit institution Daxin certified public accountants also listed Walvax Biotechnology Co.Ltd(300142) “construction in progress” as one of the key audit matters.
In this regard, the Shenzhen stock exchange requires the company to itemize whether the commencement time, specific construction progress, estimated completion time and construction progress of each project under construction match the plan, and whether the provision for impairment of projects under construction is sufficient; List the main expenditure items of each project under construction and the basic information of the top ten procurement suppliers by item, and verify whether there is any association relationship or any form of business and capital exchanges, sources of cooperation and other situations that may tilt interests with the company and its controlling shareholders, actual controllers, directors, supervisors, senior managers and their relatives, shareholders holding more than 5% shares and core technicians; Whether the HPV industrialization and Jiangsu Watson influenza vaccine project have reached the expected serviceable state, and whether there is any situation that the project settlement is not timely and has not been transferred into fixed assets in time.
In addition, the accounting treatment of R & D expenditure has also been frequently asked.
The annual report shows that the ending balance of Walvax Biotechnology Co.Ltd(300142) development expenditure is 1.011 billion yuan, accounting for 7.39% of the total assets. During the reporting period, the company invested 754 million yuan in R & D, a year-on-year increase of 138.61%, and the proportion of capitalized R & D expenditure in R & D investment was 17.56%, down from 44.12% in the same period last year. As of the end of the reporting period, the company has not made provision for impairment of development expenditure.
Daxin certified public accountants pointed out that since Walvax Biotechnology Co.Ltd(300142) R & D expenditure increased significantly year-on-year in 2021, and the amount of this year had a great impact on the profit and loss of this year, the increase of R & D expenses had a great impact on the performance of this period and was of great importance, the Institute identified the recognition of R & D expenses as a key audit matter.
In this regard, the Shenzhen stock exchange requires Walvax Biotechnology Co.Ltd(300142) combined with the company’s R & D expenditure accounting policy, to explain the judgment basis and time point of R & D investment capitalization during the reporting period, whether the company’s capitalization time point complies with the principle of inertia, whether the company’s R & D investment capitalization policy complies with industry practices, and explain the compliance of accounting treatment; In combination with the changes and development trends of industrial policies, competitive environment and product market space, explain whether the subsequent development expenditure has the conditions to be converted into intangible assets, whether the subsequent use or sale of relevant R & D projects and corresponding products is technically feasible, whether there is a significant increase in the risk of R & D stagnation, termination or R & D failure, and whether there are signs of impairment. If so, please supplement the disclosure and prompt the relevant risks; Combined with the specific process of the company’s impairment test of development expenditure during the reporting period, including but not limited to the evaluation method, parameter selection and calculation process, further explain the reason and rationality of the lack of impairment of development expenditure during the reporting period, whether the provision of asset impairment is sufficient and whether it complies with the relevant provisions of the accounting standards for business enterprises. The accountant shall check and give clear opinions.
In addition, the Shenzhen Stock Exchange also inquired about Walvax Biotechnology Co.Ltd(300142) inventory, accounts receivable, corporate governance and other issues.
