华东医药:2020年第一季度报告(英文版)

             The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.




Huadong Medicine Co., Ltd.

The First Quarterly Report 2020




          April 2020




               1
                                       The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.




                       Section I Important Declaration


The Board of Directors, Board of Supervisors, directors, supervisors and senior

management of Huadong Medicine Co., Ltd. (hereinafter referred to as the

“Company”) hereby guarantee that the information presented in this report is

authentic, accurate and complete and free of any false records, misleading

statements or material omissions, and shall undertake individual and joint legal

liabilities.

All directors have attended the board of directors meeting to review this

quarterly report.

Lyu Liang, the Company’s legal representative and the officer in charge of

accounting, and Qiu Renbo, head of accounting department (accounting

supervisor)    hereby declare and guarantee that the financial statements in this

quarterly report are authentic, accurate and complete.

According to “Stock Listing Rules of the Shenzhen Stock Exchange”, if listed

companies have both Chinese or other language version of public notice, they

should ensure the content of both versions are the same. In the case of

discrepancy, the original version in Chinese shall prevail.




                                         2
                                                                   The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.




                                             Section II Company Profile

I. Key Accounting Data and Financial Indicators

Whether the Company needs to perform retroactive adjustment or restatement of previous accounting data
□ Yes √ No

                                                                                                          Change of the current
                                               The current reporting period    Same period last year     reporting period over the
                                                                                                          same period last year

Operating revenue (yuan)                                  8,598,069,911.29            9,705,148,188.21                     -11.41%
Net profit attributable to shareholders of
                                                          1,147,278,457.64              907,244,647.77                      26.46%
listed companies (yuan)
Net profit attributable to shareholders of
listed companies after deducting                            856,930,262.10              856,031,343.59                       0.11%
non-recurring gains/losses (yuan)
Net cash flow from operating activities
                                                            218,779,623.89             -433,890,841.71                     150.42%
(yuan)

Basic earnings per share (yuan/share)                                0.6557                     0.5185                      26.46%

Diluted earnings per share (yuan/share)                              0.6557                     0.5185                      26.46%

Weighted average return on equity (ROE)                              8.89%                       8.35%                       0.54%

                                                                                                         Change of the end of the
                                               End of the current reporting
                                                                                 End of last year        current reporting period
                                                          period
                                                                                                         over the end of last year

Total assets (yuan)                                      23,527,736,775.30           21,463,974,146.63                       9.62%

Net assets attributable to shareholders of
                                                         13,482,042,877.17           12,309,477,308.00                       9.53%
listed companies (yuan)



Total share capital of the Company as of the trading day before disclosure:

Total share capital of the Company as of the trading day before
                                                                                                                     1,749,809,548
disclosure (share):

Fully diluted earnings per share calculated using the latest share capital

Dividends paid on preferred shares                                                                                             0.00

Fully diluted earnings per share calculated using the latest
                                                                                                                             0.6557
share capital (yuan/share)




                                                                     3
                                                                 The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.


Items and amounts of non-recurring gains/losses
√ Applicable □ N/A
                                                                                                                          Unit: RMB yuan

                                                                        Amount (from the beginning
                               Item                                      of the year to the end of the                 Note
                                                                              reporting period)

                                                                                                         Mainly due to the transfer of
                                                                                                         market distribution rights of
Gains/losses on disposal of non-current assets (including the                                            related products in Western
                                                                                       306,108,982.13
written-off part of the accrued assets impairment reserve)                                               Europe by Sinclair, a wholly
                                                                                                         owned subsidiary of the
                                                                                                         Company in the UK
Government grants included in current gains/losses (excluding
those closely related to operating activities, or regular government                    20,044,478.23
grants)
Other non-operating income or expenditure                                               -5,345,565.75

Less: Amount affected by income                                                         31,742,841.97

     Amount affected by minority interest (after tax)                                   -1,283,142.90

Total                                                                                  290,348,195.54                    --

If the Company recognizes an item as a non-recurring gain/loss based on the “Interpretation Announcement on Information
Disclosure Criteria for Public Companies No. 1 – Non-Recurring Profit/Loss” or recognizes an item satisfying the definition of
non-recurring profit/loss in the announcement as a recurring profit/loss, reasons should be specified.
□ Applicable √ N/A
No such case during the reporting period.


II. Total number of shareholders at the end of the reporting period and information of top 10
shareholders

1. Total number of shareholders of common shares and number of shareholders of preferred shares with
voting rights restored, as well as information about top 10 shareholders

                                                                                                                                 Unit: share
                                                           Total number of shareholders of
Total number of shareholders of
                                                           preferred shares whose voting rights
common shares at the end of the                  127,673                                                                                 0
                                                           have been restored at the end of the
reporting period
                                                           reporting period (if any)
                                                Information about top 10 shareholders
                                                                                 Number of shares               Pledged or frozen
                                         Shareholding      Number of shares
        Name             Nature                                                    held with sale
                                             ratio                held                                      Status            Number
                                                                                    restrictions
中国远大集团有 Domestic                           41.77%        730,938,157                         0 Pledged                  247,963,999



                                                                    4
                                                   The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.


限责任公司            non-state-owned
( China Grand         legal person
Enterprises, Inc. )
杭州华东医药集
团有限公司
( Hangzhou            State-owned legal
                                          16.46%   288,000,000              0
Huadong               person
Medicine Group
Co., Ltd. )
香港中央结算有
限公司
( Hong Kong           Overseas legal
                                          2.47%     43,297,248              0
Securities            person
Clearing
Company Ltd. )
中国证券金融股
份有限公司
( China Securities Other                  1.27%     22,186,818              0
Finance Co.,
Ltd. )
全国社保基金一
零六组合
( National Social Other                   1.26%     22,095,713              0
Security Fund
Portfolio 106 )
泰康资产管理有
限责任公司-积
极配置投资产品
Taikang Asset
Management Co., Other                     0.93%     16,298,609              0
Ltd. – active
allocation of
investment
products
泰康人寿保险有
限责任公司-投
连-积极成长
( Taikang Life
                      Other               0.63%     11,108,211              0
Insurance Co.,
Ltd. – Unit-linked
– Proactive
growth )
#易建东               Domestic natural
                                          0.57%     10,006,080              0
( #Yi Jiandong )      person


                                                     5
                                                               The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.


基本养老保险基
金一五零四一组

( Basic
                    Other                        0.44%           7,623,568                  0
Endowment
Insurance Fund
Portfolio
15041 )
国泰君安证券资
管-光大银行-国
泰君安君得明混
合型集合资产管
理计划
( Guotai Junan
Securities Asset
Management –       Other                        0.41%           7,200,000                  0
China Everbright
Bank – Guotai
Junan Jundeming
Hybrid Collective
Assets
Management
Plan )
                                  Shares held by the top 10 shareholders of Non- restricted shares

                                                                                                            Type of shares
                 Name                     Number of shares held without sale restrictions
                                                                                                         Type           Number

                                                                                                RMB common
China Grand Enterprises, Inc.                                                    730,938,157                            730,938,157
                                                                                                shares

Hangzhou Huadong Medicine                                                                       RMB common
                                                                                 288,000,000                            288,000,000
Group Co., Ltd.                                                                                 shares

Hong Kong Securities Clearing                                                                   RMB common
                                                                                  43,297,248                                 43,297,248
Company Ltd.                                                                                    shares

                                                                                                RMB common
China Securities Finance Co., Ltd.                                                22,186,818                                 22,186,818
                                                                                                shares

National Social Security Fund                                                                   RMB common
                                                                                  22,095,713                                 22,095,713
Portfolio 106                                                                                   shares
Taikang Asset Management Co.,
                                                                                                RMB common
Ltd. – active allocation of                                                      16,298,609                                 16,298,609
                                                                                                shares
investment products
Taikang Life Insurance Co., Ltd. –                                                             RMB common
                                                                                   11,108,211                                11,108,211
Unit-linked – Proactive growth                                                                 shares



                                                                 6
                                                              The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.


                                                                                                RMB common
# Yi Jiandong                                                                     10,006,080                             10,006,080
                                                                                                shares

Basic Endowment Insurance Fund                                                                  RMB common
                                                                                    7,623,568                             7,623,568
Portfolio 15041                                                                                 shares

Guotai Junan Securities Asset
Management – China Everbright
                                                                                                RMB common
Bank – Guotai Junan Jundeming                                                      7,200,000                             7,200,000
                                                                                                shares
Hybrid Collective Assets
Management Plan
Notes on relations and concerted
                                     The Company does not know whether the shareholders mentioned above are related parties
actions among the shareholders
                                     with each other or whether they are acting-in-concert parties with each other.
mentioned above
Notes on financing and securities
                                     At the end of the current reporting period, Yi Jiandong, the eighth shareholder of the
loan conducted by top 10
                                     Company, held 10,006,080 shares of the Company through financing and securities loan.
shareholders (if any)

Does any of the Company’s top 10 shareholders of common shares or top 10 shareholders without sale restrictions on common shares
conduct any agreed repurchase transaction during the reporting period?
□ Yes √ No
No such case during the reporting period.


2. Total number of shareholders of preferred shares and information about top 10 shareholders of
preferred shares

□ Applicable √ N/A




                                                                 7
                                                          The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.




                                  Section III Substantial Matters

I. Changes in key financial data and financial indicators during the reporting period and their
causes

√ Applicable □ N/A
                                                                                                               Unit: RMB yuan

Balance sheet item                End of the period    Beginning of the Change rate                  Notes on cause of changes
                                                           period
Accounts receivable financing       1,281,939,687.52      683,884,625.14       87.45% Mainly due to the increase of notes collection in the
                                                                                         current period
Long-term equity investments          324,944,910.36      222,595,018.54       45.98% Mainly due to 100 million yuan of additional fund
                                                                                         to Peg-Bio Biopharm Co., Ltd (Chongqing) in the
                                                                                         current period
Advance receipts                       41,219,252.83      254,888,911.30       -83.83% Mainly due to the decrease of advance receipts of
                                                                                         medicine sales
Taxes and fees payable                758,947,157.69      532,802,157.61       42.44% Mainly due to the increase of value-added tax and
                                                                                         income tax in the current period
Other payables                      2,042,401,059.01    1,365,152,290.99       49.61% Mainly due to the increase in temporary receipts
                                                                                         payable
Income statement item              Amount of the       Amount of the       Change rate               Notes on cause of changes
                                   current period      previous period
R&D expenses                          263,330,349.34      157,466,270.46       67.23% Mainly due to the increase of R&D investment in
                                                                                         the current period
Financial expenses                     15,759,648.63       31,261,376.41       -49.59% Mainly due to the increase of deposit interest in the
                                                                                         current period
Gains on assets disposal              306,269,024.44       66,519,528.98      360.42% Mainly due to the transfer of market distribution
                                                                                         rights of related products in Western Europe by
                                                                                         Sinclair, a wholly owned subsidiary of the
                                                                                         Company in the UK
Other income                           20,044,478.23        3,421,536.71      485.83% Mainly due to the year-on-year increase of
                                                                                         government grants in the current period
Non-operating expenditure               8,912,738.92        4,175,197.47      113.46% Mainly due to the increase of donations
Non-controlling profit and loss         6,147,332.28       30,575,585.30       -79.89% Mainly due to the decrease of net profits of
                                                                                         non-wholly owned subsidiaries in the current period
Cash flow statement item           Amount of the       Amount of the       Change rate               Notes on cause of changes
                                   current period      previous period
Net cash flows from operating         218,779,623.89     -433,890,841.71      150.42% Mainly due to the increase of repayment and the
activities                                                                               decrease of purchase payment in the current period
Net cash flows from investing         -21,112,417.22     -438,440,235.76       95.18% Mainly due to the transfer of market distribution


                                                            8
                                                                         The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.


activities                                                                                               rights of related products in Western Europe by
                                                                                                         Sinclair, a wholly owned subsidiary of the
                                                                                                         Company in the UK
Net cash flows from financing                  110,977,513.38        244,161,977.11               54.55% Mainly due to the year-on-year decrease of loans
activities                                                                                               obtained in the current period


II. Progress and influence of significant events, and explanatory notes of corresponding solutions

□ Applicable √ N/A
Implementation progress of share repurchase
□ Applicable √ N/A
Progress in the implementation of reducing repurchased shares by centralized price bidding
□ Applicable √ N/A


III. Unfulfilled and overdue commitments from the related committed parties such as the
Company’s actual controller, shareholders, related parties, acquirer(s), and the Company
during the reporting period

□ Applicable √ N/A
No such case during the reporting period.


IV. Securities investment

√ Applicable □ N/A
                                                                                                                                    Unit: RMB yuan

                                                                 Profit
                                                                           Accumu
                                                     Book       and loss                                      Gain/l
                                                                               lative
                                            Account value at     from                   Purchase Selling       oss       Book
                                                                                fair
                       Stock     Initial      ing      the        fair                  amount      amount during value at
  Type of    Stock                                                             value                                               Account Capital
                          for    investm measure beginni         value                   in the      in the    the       the end
   stock     code                                                          changes                                                 ing item source
                         short   ent cost    ment     ng of     changes                 current     current reporti of the
                                                                           included
                                             model     the       in the                  period      period    ng        period
                                                                                 in
                                                     period     current                                       period
                                                                               equity
                                                                period

                                                                                                                                   Other
Domestic                                    Fair                                                                                   equity
                                                                                                              -1,372
and                              20,207, value       42,009, -1,372,7 20,429,                                            40,636, instrum Own
             RAPT RAPT                                                                      0.00        0.00 ,747.7
overseas                          400.00 measure      254.79      47.73 107.06                                            507.06 ents         funds
                                                                                                                     3
stock                                       ment                                                                                   investm
                                                                                                                                   ent

Other securities investment
                                    0.00       --                                                                                        --      --
held at the end of the



                                                                           9
                                                                 The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.


period

                                                                                                   -1,372
                                20,207,          42,009, -1,372,7 20,429,                                   40,636,
Total                                       --                                      0.00     0.00 ,747.7                   --      --
                                400.00               254.79   47.73 107.06                                     507.06
                                                                                                        3

Date of announcement of
the board of directors on
securities investment
approval

Date of announcement of
the board of shareholders
on securities investment
approval (if any)
Notes: Huadong Medicine Investment Holding (Hong Kong) Limited, a subsidiary of the Company, subscribed for the C-2 series
preferred shares of FLX Bio (now RAPT Therapeutics, Inc.) for USD 3 million in 2019. FLX Bio was listed on the NASDAQ Stock
Exchange (stock code: RAPT) in October 2019. Huadong Medicine Investment Holding (Hong Kong) Limited holds 218,102 shares,
or 0.91% of its total shares.


V. Entrusted financial management

□ Applicable √ N/A
No such case during the reporting period.


VI. Derivatives investment

□ Applicable √ N/A
No such case during the reporting period.


VII. Registration form of receptions, including research, communication and interview,
undertaken during the reporting period

√ Applicable □ N/A
                                                                                                 Index of basic information of the
             Date                           Method                     Type of caller
                                                                                                                research
                                                                                             Please refer to the “000963 Huadong
                                                                                             Medicine communication with investors
                                                              Institutional and individual
January 19, 2020                Communication by phone                                       Activity: January 20, 2020” presented on
                                                              investors
                                                                                             the websites of     http://rs.p5w.net/ and
                                                                                             cninfo.com.cn for details.


VIII. Illegal provision of guarantees for external parties

□ Applicable √ N/A
No such case during the reporting period.


                                                                  10
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IX. The Company’s funds used by the controlling shareholder or its related parties for
non-operating purposes

□ Applicable √ N/A
No such case during the reporting period.


X. Overview of the Company’s operations from January to March, 2020


During the reporting period, the numbers of visits and prescriptions in domestic hospitals were

greatly reduced due to the COVID-19 outbreak; however, patients’ overall demand for the core

products of Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (hereinafter referred to as

“Zhongmei Huadong”), a wholly owned subsidiary of the Company, remained stable. Zhongmei

Huadong continued to develop well in the out-of-hospital, grass-roots and retail markets, and its
business performance continued to grow, achieving operating income (consolidated) of 3.619

billion yuan, with a year-on-year growth of 9.61%, and net profit of 854 million yuan, with a

year-on-year growth of 11.14%.

During the COVID-19 outbreak in China, the amount of medicines, consumables and medical

devices purchased by medical institutions dropped significantly, which had a significant impact on

the Company’s pharmaceutical commerce. In the reporting period, the growth rate of the

Company’s pharmaceutical commerce income has decreased by about 18% year on year. However,

the Company made efforts to improve its operations through a variety of measures to keep its

operating profit stable.

The outbreak and spread of COVID-19 at home and abroad have had a significant impact on the

operation of aesthetic medicine institutions. In the reporting period, the Company’s domestic and

oversea aesthetic medicine business income and net profit both decreased significantly compared

with the same period last year due to the sharp decline in periodic demand, which has a

corresponding impact on the Company’s overall net profit. The demand for aesthetic medicine is

not urgent, but it is rigid to some extent. At present, there is less domestic consumption of aesthetic

medicine; the continuation of the outbreak and its subsequent impact on the Company’s

international aesthetic medicine business remain to be seen. The Company expects consumer
demand for aesthetic medicine to recover after the outbreak ends.


                                                  11
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Since the outbreak, the Company has actively carried out related work to fight against the virus. As

an emergency equipment reserve unit of Zhejiang Province and Hangzhou, the Company was in

charge of laborious material distribution, efficiently implemented the allocation and distribution

task of Zhejiang Economy and Information Technology Department, worked day and night, sent the

anti-epidemic medicine and equipment to the forefront, and provided reliable material support for

epidemic prevention and control. The Company has taken the initiative to fulfill its social

responsibility and donated drugs and related materials to the front-line medical personnel and the

health commissions at all levels with a cumulative value of more than 20 million yuan. After the full

resumption of production and work, the Company actively endeavored to gradually restore

normalcy to all its work.

During the reporting period, the Company continued to promote R&D in all aspects, and the R&D

expenses of the pharmaceutical manufacturing amounted to 260.31 million yuan, with a

year-on-year growth of 69.04%. The application for registration of Zhongmei Huadong Metformin

Hydrochloride and Empagliflozin Tablets was submitted to and accepted by the National Medical

Products Administration. The phase I clinical trial of Liraglutide Injection (indications for weight

loss) has been completed and all preparations for the phase III trial have been completed. The phase

III clinical trial is expected to begin in the second quarter of this year.

During the reporting period, Zhongmei Huadong invested 150 million yuan to increase its

shareholding in Peg-Bio Biopharm Co., Ltd. (Chongqing) by acquiring minority shareholders’

equity; the shareholding ratio was raised to 39.8%, and Zhongmei Huadong remained the second

largest shareholder (as of the disclosure date of this reporting period, it has actually contributed 130
million yuan). In the future, the Company will deepen cooperation with Peg-Bio Biopharm Co., Ltd.

(Chongqing) in the R&D of biosimilars and innovative biopharmaceuticals, industrial layout and

other aspects. With the help of PEGylation platform and high-efficiency polypeptide tandem

expression platform technology of Peg-Bio Biopharm Co., Ltd. (Chongqing) with proprietary

intellectual property rights, the Company will accelerate the technical improvement and project

reserve in biomedicine.

During the reporting period, the Acarbose Tablets of Zhongmei Huadong failed to win the bid in the


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second national centralized drug purchase due to the price, which brought new challenges to the

future development of the Company’s acarbose products. The Company will comprehensively

conduct market analysis and planning, and actively develop the sales of Acarbose Tablets in the

markets other than centralized purchase (including grass-roots and community markets, private

hospitals and OTC markets). Meanwhile, it will expand the promotion of Acarbose Chewable

Tablets in large and medium-sized hospitals in China through market differentiation.

Sinclair, a wholly owned subsidiary of the Company in the UK, has actively enriched product

channels and optimized the structure: (1) During the reporting period, it reached an agreement with

Galderma, a world-renowned Swiss dermatological pharmaceutical company, on the transfer of

market distribution rights for Sculptra (poly-L-lactic acid microsphere) products in Western Europe

and has completed the transaction. According to the agreement, the specific information of the

transaction is regarded as trade secret, and the Company has the confidentiality obligation under the

condition of non-mandatory disclosure. The transaction brought Sinclair gains from assets disposal

of approximately GBP 30.65 million (after tax), which had a positive impact on Sinclair’s net profit,

balance sheet structure, cash flow and the Company’s net profit in consolidated statements in the

reporting period; (2) During the reporting period, Sinclair and Kylane Laboratoires, a Swiss

professional R&D company in the field of aesthetic medicine, formally signed an agreement based

on the cooperation intention reached earlier; Sinclair obtained the exclusive global license for

Kylane Laboratoires’ MaiLi series new lidocaine hyaluronic acid fillers (hyaluronic acid). The

MaiLi series products are aimed at the high-end market. The lidocaine components in the MaiLi

series reduce the pain of injection and greatly improve the comfort of use. The MaiLi series

products can be applied to different parts of the face with differentiated formulation, providing

consumers with an overall solution of cosmetic facial fillings, which can last for 12~18 months after

injection. This series is expected to become the core products of the Company’s aesthetic medicine

business. The products are expected to obtain the CE certification in Europe and be successively

launched in every country this year.




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                                         Section IV Financial Statements

I. Financial Statements

1. Consolidated balance sheet

Prepared by Huadong Medicine Co., Ltd.
                                                     March 31, 2020
                                                                                                      Unit: RMB yuan

                     Item                          March 31, 2020                       December 31, 2019

Current assets:

       Monetary funds                                           2,705,353,661.31                     2,402,730,395.39

       Settlement reserve

       Lending to other banks and other
financial institutions

       Financial assets for trade

       Derivative financial assets

       Notes receivable

       Accounts receivable                                      7,096,262,043.82                     6,092,305,184.47

       Accounts receivable financing                            1,281,939,687.52                       683,884,625.14

       Advance payments                                          332,283,548.35                        363,246,612.94

       Premiums receivable

       Reinsurance accounts receivable

       Reinsurance contract reserve
receivable

       Other receivables                                            75,749,112.24                       92,201,271.22

         Including: Interests receivable

                  Dividends receivable                                815,965.44                            815,965.44

       Financial assets purchased for
resale

       Inventories                                              4,036,053,414.00                     4,038,975,496.93

       Contract assets

       Assets held for sale

       Non-current assets due within one
year



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     Other current assets                         71,686,499.81                          62,526,471.96

Total current assets                         15,599,327,967.05                       13,735,870,058.05

Non-current assets:

     Loans and prepayments issuance

     Debt investments

     Other debt investments

     Long-term receivables

     Long-term equity investments                324,944,910.36                         222,595,018.54

     Other equity instrument
                                                 240,302,964.32                         241,675,712.05
investments

     Other non-current financial assets

     Real estate properties for
                                                  21,470,209.97                          21,701,908.75
investment

     Fixed assets                               2,176,447,708.09                      2,175,216,842.65

     Constructions in progress                  1,959,751,440.53                      1,829,808,233.19

     Biological assets for production

     Oil & gas assets

     Right-of-use assets

     Intangible assets                          1,371,393,017.31                      1,454,900,160.45

     Development expenditures

     Goodwill                                   1,469,617,262.10                      1,469,617,262.10

     Long-term unamortized expenses               11,474,753.47                          12,289,677.31

     Deferred income tax assets                  116,157,614.49                         116,157,614.47

     Other non-current assets                    236,848,927.61                         184,141,659.07

Total non-current assets                        7,928,408,808.25                      7,728,104,088.58

Total assets                                 23,527,736,775.30                       21,463,974,146.63

Current liabilities:

     Short-term borrowing                        805,041,426.38                         655,549,973.27

     Borrowing from the Central bank

     Borrowing from other banks and
other financial institutions

     Financial liabilities for trade

     Derivative financial liabilities

     Notes payable                               680,294,256.61                         613,374,356.61

     Accounts payable                           3,782,012,016.18                      3,789,054,234.58


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     Advance receipts                             41,219,252.83                         254,888,911.30

     Contract liabilities

     Financial assets sold for
repurchase

     Absorbing deposits and due from
banks

     Receipts for buying and selling
securities as proxy

     Receipts for underwriting
securities as proxy

     Employee benefits payable                   150,113,044.38                         132,584,982.71

     Taxes and fees payable                      758,947,157.69                         532,802,157.61

     Other payables                             2,042,401,058.99                      1,365,152,290.99

        Including: Interests payable

                      Dividends payable              224,219.60                             224,219.60

     Handling fees and commissions
payable

     Reinsurance accounts payable

     Liabilities held for sale

     Non-current liabilities due within
                                                1,063,535,474.95                      1,053,231,727.73
one year

     Other current liabilities

Total current liabilities                       9,323,563,688.01                      8,396,638,634.80

Non-current liabilities:

     Insurance contract reserve

     Long-term borrowing

     Bonds payable

        Including: Preferred shares

                 Perpetual bonds

     Lease liabilities

     Long-term payables                           34,857,575.89                          48,080,030.00

     Long-term employee benefits
payable

     Provision                                    50,739,356.15                          52,066,643.01

     Deferred gains                               61,826,236.03                          60,960,255.68

     Deferred income tax liabilities              38,231,709.58                          39,604,343.27


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     Other non-current liabilities

Total non-current liabilities                              185,654,877.65                        200,711,271.96

Total liabilities                                         9,509,218,565.66                     8,597,349,906.76

Ownership interest:

     Share capital                                        1,749,809,548.00                     1,749,809,548.00

     Other equity instruments

        Including: Preferred shares

                     Perpetual bonds

     Capital reserve                                      2,157,862,037.14                     2,158,080,661.07

     Less: Treasury shares

     Other comprehensive income                               48,298,224.27                       22,792,488.80

     Special reserve

     Surplus reserve                                       710,359,967.51                        710,359,967.51

     General risk reserve

     Undistributed profit                                 8,815,713,100.25                     7,668,434,642.62

Total ownership interest attributable to
                                                       13,482,042,877.17                      12,309,477,308.00
the parent company

     Minority interest                                     536,475,332.47                        557,146,931.87

Total ownership interest                               14,018,518,209.64                      12,866,624,239.87

Total liabilities & ownership interest                 23,527,736,775.30                      21,463,974,146.63


Legal representative: Lyu Liang
Officer in charge of accounting: Lyu Liang
Head of accounting department : Qiu Renbo


2. Balance sheet of the parent company

                                                                                                 Unit: RMB yuan

                    Item                     March 31, 2020                       December 31, 2019

Current assets:

     Monetary funds                                       1,163,618,887.92                       893,939,724.56

     Financial assets for trade

     Derivative financial assets

     Notes receivable

     Accounts receivable                                  3,896,212,553.19                     3,601,796,850.84

     Accounts receivable financing                         414,618,169.64                        102,285,661.94



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       Advance payments                             90,938,710.63                         183,776,687.98

       Other receivables                          1,158,557,203.10                        857,127,207.17

         Including: Interests receivable

                  Dividends receivable             400,000,000.00

       Inventories                                1,780,183,507.56                      1,726,815,773.41

       Contract assets

       Assets held for sale

       Non-current assets due within one
year

       Other current assets                         18,206,486.26                           4,529,331.87

Total current assets                              8,522,335,518.30                      7,370,271,237.77

Non-current assets:

       Debt investments

       Other debt investments

       Long-term receivables

       Long-term equity investments               4,812,052,039.45                      4,809,521,228.65

       Other equity instrument
                                                    92,108,957.26                          92,108,957.26
investments

       Other non-current financial assets

       Real estate properties for
                                                     8,475,251.02                           8,591,809.18
investment

       Fixed assets                                146,014,043.26                         144,102,366.02

       Constructions in progress                    15,970,543.05                          15,728,406.26

       Biological assets for production

       Oil & gas assets

       Right-of-use assets

       Intangible assets                            44,090,063.16                          45,226,361.12

       Development expenditures

       Goodwill

       Long-term unamortized expenses                  893,242.36                             975,689.14

       Deferred income tax assets                   48,849,165.52                          48,849,165.52

       Other non-current assets                      8,076,419.28                           8,076,419.28

Total non-current assets                          5,176,529,724.36                      5,173,180,402.43

Total assets                                   13,698,865,242.66                       12,543,451,640.20

Current liabilities:


                                             18
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     Short-term borrowing                        250,182,163.24                          55,000,000.80

     Financial liabilities for trade

     Derivative financial liabilities

     Notes payable                               251,797,671.37                          81,036,745.94

     Accounts payable                           2,303,300,252.85                      2,469,675,798.54

     Advance receipts                             44,293,704.23                          52,914,932.34

     Contract liabilities

     Employee benefits payable                     4,716,249.36                           3,203,215.95

     Taxes and fees payable                       37,342,228.23                          32,881,935.68

     Other payables                              409,339,976.29                         638,551,969.04

        Including: Interests payable

                Dividends payable                    224,219.60                             224,219.60

     Liabilities held for sale

     Non-current liabilities due within
                                                1,040,399,054.43                      1,028,002,952.88
one year

     Other current liabilities

Total current liabilities                       4,341,371,300.00                      4,361,267,551.17

Non-current liabilities:

     Long-term borrowing

     Bonds payable

        Including: Preferred shares

                Perpetual bonds

     Lease liabilities

     Long-term payables

     Long-term employee
compensation payable

     Estimated liabilities

     Deferred gains                               42,623,317.14                          43,264,785.87

     Deferred income tax liabilities

     Other non-current liabilities

Total non-current liabilities                     42,623,317.14                          43,264,785.87

Total liabilities                               4,383,994,617.14                      4,404,532,337.04

Ownership interest:

     Share capital                              1,749,809,548.00                      1,749,809,548.00

     Other equity instruments


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          Including: Preferred shares

                 Perpetual bonds

     Capital reserve                                                 2,168,451,528.01                          2,168,451,528.01

     Less: Treasury shares

     Other comprehensive income                                           847,526.06                                 847,526.06

     Special reserve

     Surplus reserve                                                  788,215,726.95                             788,215,726.95

     Undistributed profit                                            4,607,546,296.50                          3,431,594,974.14

Total ownership interest                                             9,314,870,625.52                          8,138,919,303.16

Total liabilities & ownership interest                            13,698,865,242.66                           12,543,451,640.20


3. Consolidated income statement

                                                                                                                 Unit: RMB yuan
                     Item                   Amount incurred during the current period Amount incurred during the previous period
I. Total operating income                                            8,598,069,911.29                          9,705,148,188.21

     Including: Operating income                                     8,598,069,911.29                          9,705,148,188.21

              Interests received

              Premiums earned

              Handling fees and
commissions received

II. Total operating cost                                             7,564,443,071.57                          8,644,836,746.18

     Including: Operating cost                                       5,095,658,368.85                          6,323,022,089.39

              Interests paid

              Handling fees and
commissions paid

              Surrender value

              Net payment of insurance
claims

              Net appropriation of policy
reserve

              Policy dividends paid

              Reinsurance expenses

              Taxes and surcharges                                      56,323,252.14                             67,692,820.71

              Selling expenses                                       1,936,667,262.56                          1,858,882,516.36

              Administrative expenses                                  196,704,190.05                            206,511,672.85



                                                                20
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                R&D expenses                            263,330,349.34                         157,466,270.46

                Financial expenses                       15,759,648.63                          31,261,376.41

                  Including: Interests paid              26,067,525.96                          29,093,368.24

                            Interests received           13,915,252.93                           5,700,539.51

         Add: Other gains                                20,044,478.23                           3,421,536.71

             Investment gains (Losses are
                                                          -1,256,335.99                         -3,643,248.51
indicated by “-”)

             Including: Investment gains
                                                          2,349,891.83                           1,200,000.00
from associates and joint ventures

                  Gains from the
derecognition of financial assets
measured at amortized cost

             Gains on exchange (Losses are
indicated by “-”)

             Gains on net exposure hedging
(Losses are indicated by “-”)

             Gains on changes in fair value
(Losses are indicated by “-”)

             Credit impairment loss (Losses
are indicated by “-”)

             Assets impairment loss (Losses
are indicated by “-”)

             Gains on assets disposal
                                                        306,269,024.44                          66,519,528.98
(Losses are indicated by “-”)
III. Operating profit (Losses are indicated
                                                       1,358,684,006.40                      1,126,609,259.21
by “-”)

         Add: Non-operating income                        3,389,386.17                           2,542,382.25

         Less: Non-operating expenditure                  8,912,738.92                           4,175,197.47
IV. Total profit (Total losses are
                                                       1,353,160,653.65                      1,124,976,443.99
indicated by “-”)

         Less: Income tax expenses                      199,734,863.73                         187,156,210.92
V. Net profit (Net losses are indicated by
                                                       1,153,425,789.92                        937,820,233.07
“-”)

   (I) Categorized by the continuity of
operations

         1. Net profit from continued
operations (Net deficit is indicated by                1,153,425,789.92                        937,820,233.07
“-”)



                                                  21
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         2. Net profit from discontinued
operations (Net deficit is indicated by
“-”)

   (II) Categorized by attribution of the
ownership

         1. Net profit attributable to owners
                                                      1,147,278,457.64                        907,244,647.77
of the parent company

         2. Gains/losses of minority
                                                         6,147,332.28                          30,575,585.30
shareholders
VI. Net amount after tax of other
                                                        25,505,735.47                         -32,032,857.46
comprehensive income
   Net amount after tax of other
comprehensive income attributable to                    25,505,735.47                         -32,032,857.46
owners of the parent company

         (I) Other comprehensive income that
                                                         -1,372,747.73
cannot be reclassified into gains/losses

                1. Changes in
remeasurement on the defined benefit
plan

                2. Other comprehensive
income that cannot be reclassified into
gains/losses under equity method

                3. Changes in fair value of
                                                         -1,372,747.73
other equity instrument investments

                4. Changes in fair value of
credit risk of the enterprise

                5. Others

         (II) Other comprehensive income to
                                                        26,878,483.20                         -32,032,857.46
be reclassified into gains/losses

                1. Other comprehensive
income that can be reclassified into
gains/losses under equity method

                2. Changes in fair value of
other debt investments

                3. Amount of financial assets
reclassified into other comprehensive
income

                4. Credit impairment reserve
of other debt investments



                                                 22
                                                                The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.


             5. Cash flow hedging reserve

             6. Exchange differences arise
from translation of foreign currency                                      26,878,483.20                              -32,032,857.46
financial statements

             7. Others

  Net amount after tax of other
comprehensive income attributable to
minority shareholders

VII. Total comprehensive income                                        1,178,931,525.39                              905,787,375.61

     Total comprehensive income
attributable to owners of the parent                                   1,172,784,193.11                              875,211,790.31
company

     Total comprehensive income
                                                                           6,147,332.28                               30,575,585.30
attributable to minority shareholders

VIII. Earnings per share (EPS):

     (I) Basic EPS                                                              0.6557                                        0.5185

     (II) Diluted EPS                                                           0.6557                                        0.5185

As for enterprise merger under the same control in the current period, the net profit generated by the merged party before the merger
is 0 yuan, and that generated during the previous period is 0 yuan.


Legal representative: Lyu Liang
Officer in charge of accounting: Lyu Liang
Head of accounting department : Qiu Renbo


4. Income statement of the parent company

                                                                                                                     Unit: RMB yuan

                  Item                       Amount incurred during the current period Amount incurred during the previous period

I. Operating income                                                    3,694,664,751.43                            4,750,751,718.90

     Less: Operating cost                                              3,497,138,685.81                            4,519,692,455.89

          Taxes and surcharges                                            1,742,409.45                                 6,135,847.99

          Selling expenses                                               91,950,292.45                               109,542,301.79

          Administrative expenses                                        34,825,269.77                                27,006,339.53

          R&D expenses

          Financial expenses                                             14,360,429.84                                20,870,555.66

             Including: Interests paid                                   21,895,125.22                                21,396,244.01

                       Interests received                                 5,644,762.49                                 1,609,862.67

     Add: Other gains                                                     5,462,052.44                                 1,910,068.73


                                                                  23
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              Investment gains (Losses are
                                                     1,132,672,992.82                        857,083,782.05
indicated by “-”)

              Including: Investment gains
from associates and joint ventures

                   Income from the
derecognition of financial assets
measured at amortized cost (Losses are
indicated by “-”)

              Gains on net exposure
hedging (Losses are indicated by “-”)

              Gains on changes in fair value
(Losses are indicated by “-”)

              Credit impairment loss
(Losses are indicated by “-”)

              Assets impairment loss
(Losses are indicated by “-”)

              Gains on assets disposal
                                                            -7,754.30                         66,516,649.00
(Losses are indicated by “-”)
II. Operating profit (Losses are
                                                     1,192,774,955.04                        993,014,717.82
indicated by “-”)
         Add: Non-operating income                      2,525,818.53                           2,316,802.22

         Less: Non-operating expenditure                2,532,343.76                           3,052,321.97
III. Total profit (Total losses are
                                                     1,192,768,429.81                        992,279,198.07
indicated by “-”)

         Less: Income tax expenses                     16,817,107.45                          35,560,862.02
IV. Net profit (Net losses are indicated
                                                     1,175,951,322.36                        956,718,336.05
by “-”)

         (I) Net profit from continued
operations (Net losses are indicated by              1,175,951,322.36                        956,718,336.05
“-”)

         (II) Net profit from discontinued
operations (Net deficit is indicated by
“-”)
V. Net amount after tax of other
comprehensive income

         (I) Other comprehensive income
that cannot be reclassified into
gains/losses

                1. Changes in
remeasurement on the defined benefit


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plan

              2. Other comprehensive
income that cannot be reclassified into
gains/losses under equity method

              3. Changes in fair value of
other equity instrument investments

              4. Changes in fair value of
credit risk of the enterprise

              5. Others

       (II) Other comprehensive income
to be reclassified into gains/losses

              1. Other comprehensive
income that can be reclassified into
gains/losses under equity method

              2. Changes in fair value of
other debt investments

              3. Amount of financial
assets reclassified into other
comprehensive income

              4. Credit impairment
reserve of other debt investments

              5. Cash flow hedging
reserve

              6. Exchange differences
arise from translation of foreign
currency financial statements

              7. Others

VI. Total comprehensive income                                        1,175,951,322.36                           956,718,336.05

VII. Earnings per share (EPS):

       (I) Basic EPS

       (II) Diluted EPS




5. Consolidated cash flow statement

                                                                                                                Unit: RMB yuan

                   Item                     Amount incurred during the current period Amount incurred during the previous period

I. Cash flows from operating activities:


                                                                 25
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     Cash from the sale of goods and
                                                 7,665,300,254.21                      8,187,663,071.84
provision of services

     Net increase in customer deposits
and due from banks

     Net increase in borrowing from the
central bank

     Net increase in borrowing from
other financial institutions

     Cash from the premium of the
original insurance policy

     Net cash from reinsurance

     Net increase in deposits and
investment of the insured

     Cash from interests, handling fees
and commissions

     Net increase in borrowing from
other banks and other financial
institutions

     Net increase in funds for
repurchase

     Net cash received for buying and
selling securities as proxy

     Tax refund received                            1,138,819.80

     Other cash receipts in relation to
                                                  362,756,808.71                         154,228,462.86
operating activities

Total cash inflows from operating
                                                 8,029,195,882.72                      8,341,891,534.70
activities

     Cash payments for goods and
                                                 5,172,908,493.72                      6,321,052,081.64
services

     Net increase in customer loans and
prepayments

     Net increase in deposits of central
bank and due from banks

     Cash for payment of original
insurance claims

     Net increase in lending to other
banks and other financial institutions

     Cash for payment of interests,



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handling fees and commissions

     Cash for payment of policy
dividends

     Cash payments to and for
                                                  579,438,808.77                         435,270,367.30
employees

     Payment of taxes and fees                    453,422,088.98                         501,157,690.76

     Other cash payments in relation to
                                                 1,604,646,867.36                      1,518,302,236.71
operating activities

Total cash outflows for operating
                                                 7,810,416,258.83                      8,775,782,376.41
activities

Net cash flows from operating activities          218,779,623.89                        -433,890,841.71

II. Cash flows from investing activities

     Cash from recovery of investments

     Cash from investment gains

     Net cash from disposal of fixed
assets, intangible assets and other               345,902,424.29                              49,385.41
long-term assets

     Net cash from disposal of
subsidiaries and other business units

     Other cash receipts in relation to
                                                                                          30,000,000.00
investing activities

Total cash inflows from investing
                                                  345,902,424.29                          30,049,385.41
activities

     Cash payments for purchase and
construction of fixed assets, intangible          267,014,841.51                         311,215,321.17
assets and other long-term assets

     Cash payments for investment                 100,000,000.00                          30,150,000.00

     Net increase in pledge loans

     Net cash paid for acquisition of
                                                                                           7,000,000.00
subsidiaries and other business units

     Other cash payments in relation to
                                                                                         120,124,300.00
investing activities

Total cash outflows for investing
                                                  367,014,841.51                         468,489,621.17
activities

Net cash flows from investing activities           -21,112,417.22                       -438,440,235.76

III. Cash flows from financing
activities:

     Cash from absorbing investments                                                       9,800,000.00


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     Including: Cash from absorption of
minority shareholders’ investments by
subsidiaries

     Cash from borrowing                                              684,996,551.61                            813,097,755.69

     Other cash receipts in relation to
                                                                                                                   4,000,000.00
financing activities

Total cash inflows from financing
                                                                      684,996,551.61                            826,897,755.69
activities

     Cash for repayment of debt                                       536,798,734.58                            540,192,394.20

     Cash payments for dividends,
                                                                       34,425,592.85                             42,543,384.38
profits or interests

     Including: Payment of dividends
and profits by subsidiaries to minority                                24,500,000.00                              14,112,000.00
shareholders

     Other cash payments in relation to
                                                                        2,794,710.80
financing activities

Total cash outflows for financing
                                                                      574,019,038.23                            582,735,778.58
activities

Net cash flows from financing activities                              110,977,513.38                            244,161,977.11

IV. Influence of exchange rate
fluctuations on cash and cash                                           7,174,858.69                             -33,095,996.77
equivalents

V. Net increase in cash and cash
                                                                      315,819,578.74                           -661,265,097.13
equivalents

     Add: Balance of cash and cash
equivalents at the beginning of the                                  2,231,771,546.50                         2,398,709,506.06
period

VI. Balance of cash and cash
                                                                     2,547,591,125.24                         1,737,444,408.93
equivalents at the end of the period




6. Cash flow statement of the parent company

                                                                                                               Unit: RMB yuan

                   Item                    Amount incurred during the current period Amount incurred during the previous period

I. Cash flow from operating activities:

     Cash from the sale of goods and
                                                                     3,511,097,388.40                         3,725,034,236.17
provision of services



                                                                28
                                            The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.


     Tax refunds received

     Other cash receipts in relation to
                                                   222,397,124.86                          75,012,263.27
operating activities

Total cash inflows from operating
                                                  3,733,494,513.26                      3,800,046,499.44
activities

     Cash payments for goods and
                                                  3,830,179,895.19                      4,874,314,937.78
services

     Cash payments to and for
                                                    74,881,392.11                          59,381,893.15
employees

     Payment of taxes and fees                      31,131,815.13                          59,734,079.75

     Other cash payments in relation to
                                                    99,668,377.06                           5,520,387.64
operating activities

Total cash outflow under operating
                                                  4,035,861,479.49                      4,998,951,298.32
activities

Net cash flow from operating activities           -302,366,966.23                      -1,198,904,798.88

II. Cash flows from investing activities:

     Cash from recovery of investments

     Cash from investment gains                    175,500,000.00                         250,000,000.00

     Net cash from disposal of fixed
assets, intangible assets and other                     35,000.00                              12,525.00
long-term assets

     Net cash from disposal of
subsidiaries and other business units

     Other cash receipts in relation to
                                                   217,902,741.44                          40,000,000.00
investing activities

Total cash inflows from investing
                                                   393,437,741.44                         290,012,525.00
activities

     Cash payments for purchase and
construction of fixed assets, intangible             3,423,339.18                          22,140,302.23
assets and other long-term assets

     Cash payments for investment                    2,530,810.80                         204,814,300.00

     Net cash paid for acquisition of
                                                                                            7,000,000.00
subsidiaries and other business units

     Other cash payments in relation to
                                                   160,000,000.00                         142,900,000.00
investing activities

Total cash outflows for investing
                                                   165,954,149.98                         376,854,602.23
activities

Net cash flows from investing activities           227,483,591.46                         -86,842,077.23


                                             29
                                                   The First Quarterly Report 2020 of Huadong Medicine Co., Ltd.


III. Cash flows from financing
activities:

     Cash from absorbing investments

     Cash from borrowing                                   310,202,546.78                        630,487,956.25

     Other cash receipts in relation to
                                                           218,391,068.03                         45,000,000.00
financing activities

Total cash inflows from financing
                                                           528,593,614.81                        675,487,956.25
activities

     Cash for repayment of debt                            115,202,547.58                        339,022,441.10

     Cash payments for dividends,
                                                             3,495,155.18                         11,409,844.26
profits or interest

     Other cash payments in relation to
                                                            67,321,291.66
financing activities

Total cash outflows for financing
                                                           186,018,994.42                        350,432,285.36
activities

Net cash flows from financing activities                   342,574,620.39                        325,055,670.89

IV. Influence of exchange rate
fluctuations on cash and cash                                1,987,917.74                           -858,503.05
equivalents

V. Net increase in cash and cash
                                                           269,679,163.36                       -961,549,708.27
equivalents

     Add: Balance of cash and cash
equivalents at the beginning of the                        893,929,724.56                      1,384,560,116.18
period

VI. Balance of cash and cash
                                                          1,163,608,887.92                       423,010,407.91
equivalents at the end of the period


II. Notes on adjustments of financial statements

1. Adjustments of financial statements for the first time at the beginning of the year due to adoption of new
income standards or new lease standards since 2020

□ Applicable √ N/A


2. Notes on retrospective adjustments on comparative data in the previous period due to adoption of new
income standards and new lease standards since 2020

□ Applicable √ N/A




                                                     30
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III. Audit report

Has the first quarterly report been audited?
□ Yes √ No
The first quarterly report has not been audited.



                                                                        Huadong Medicine Co., Ltd.

                                                                Chairman of the Board: Lyu Liang

                                                                                          April 30, 2020




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