华东医药:2020年年度报告(英文版)

                     The 2020 Annul Report of Huadong Medicine Co., Ltd.




Huadong Medicine Co., Ltd.

    2020 Annual Report




        April 2021




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                              To the shareholders


    In 2020, Huadong Medicine encountered unprecedented challenges, including

COVID-19 pandemic impact on the entire manufacturing operation, the unsuccessful GPO

participation of Acarbose products, as well as the impact of a series of subsequent policies such

as the GPO process and National Drug Reimbursement List (NDRL) price negotiations.

Nevertheless, we acknowledged that Huadong overcame these challenges and successfully

met its full year operational & business targets. Although the Company’s total revenue was

slightly delclined year on year while profit growth had been squeezed, the Pharmaceutical

Industry business sector maintained its growth, while bucking market trends. Acarbose tablets

maintained its market share and continued to increase its share of the ex-hospital and retail

markets. This achievement was really a hard-won!



    Huadong Medicine’s R&D strategy has always adhered to the corporate philosophy of

being “Devoted to science, Dedicated to patients”, with “clinical value, healthcare economical

value and commercial value” as key focuses. It has established a pipeline of innovative

products in the field of oncology, immunology and endocrinology. Through reconstruction of

innovative drug R&D functions, the Company’s R&D capability has been significantly

strengthened. The IND application in China for an in-licensed ADC product was completed

within 100 days and has already obtained CTA approval from CDE. The excellent execution

capability of the R&D team has underpinned our confidence in the long term transformation

and growth of the Company’s innovative drug business. In the TA of diabetes, the Company

continues to monitor cutting-edge technologies and innovative product pipeline globally, and


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will continue enriching its product portfolio. The Company has already participated and

invested in a number of domestic and international biotech companies with leading

technologies. Through establishing differentiated peptide innovation technology platform,

autoimmune disease antibody technology platform, microbial fermentation cytotoxin

technology platform and innovative linker technology platform, as well as mutually beneficial

collaborations, Huadong Medicine is building and improving its pharmaceutical research and

development ecosystem.



    Huadong commercial distribution business has been adhering to the philosophy of “caring

the world with sincerity, integrity, persistence and being pragmatic”, transforming from a basic

distributor to an integrated service provider with greater industry expertise. The Company’s

cold chain business is positioned as the whole life-cycle precision management and control for

biological specialty drugs. It has continuously strengthened the competitive advantage of the

cold chain capability and driven the high-quality development of digital intelligent supply

chain. The Company will vigorously expand e-commerce business, establish a new “online

offline interaction” growth model, and actively explore the new healthcare services business of

“internet + chronic disease management”.



    Huadong Medicine has begun expanding in the field of aesthetics when China’s aesthetics

industry is in the ascendant. We have witnessed aesthetics products transitioning from

discretionary consumer products to necessities and the industry is about to experience a long
term high growth phase. This strengthened our commitment to expand in the field of aesthetics.

There are still significant upside in aesthetics over the long term. Going forward, we will

continue following the strategy of “global operational positioning, dual-cycle business


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development”, make China an important market for aesthetics and bring "first-in-class",

high-end international products to China over time. We will leverage the Company’s

established aesthetics distribution capabilities in China and the fast growth of the aesthetics

industry, to support rapid availability of high quality international product portfolio in China

and provide beauty seekers personalised and differentiated aesthetics product portfolios. Thus,

a new model of domestic and international dual-cycle joint growth and mutual promotion is

formed.



    2021 will be another significant year for Huadong Medicine’s strategic transformation. As

GPO policies and price reduction may continue to impact the Company’s overall operation,

Huadong Medicine will also face the strongest pressure on its business growth in history.

Nevertheless, we constantly remind ourselves: don’t waste a good crisis. The current situation

of China’s pharmaceutical market represents a rare opportunity for Huadong Medicine to

transform into an innovative company and expand globally.



    Expansion in innovative pharmaceutical business remains firmly as the main theme of

Huadong Medicine. Aesthetics, as a core strategic focus of the Company’s healthcare business,

marks the beginning of the Company’s globalization strategy. We are committed to continue

strategically positioning across the global pharmaceutical and healthcare value chain, and

actively integrate into global pharmaceutical innovation collaborations by strengthening our

own innovative drug R&D capabilities and key advantages.



    This is an era of survival of the fittest and in the end all sands will be removed and only

the gold left shinning. From now on to the foreseeable future, the only certainty is that we will

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continue experiencing various uncertainties caused by infrastructural changes in the industry.

Huadong Medicine will remain committed to its course, continue to outperform in the current

environment and strategically plan for the future. Thanks to all the investors for your

recognition and long term support, which are the source of our commitment and confidence in

pursuing the transformation! Huadong Medicine will strive to firmly meet shareholders

expectations and continue delivering excellent results.




                                                                                                 Lv Liang

                                                                 On Behalf Of Huadong Medicine

                                                                                       Grain Rain 2021




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        Section I. Important Declaration, Contents and Definitions


     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 annual

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.

     Lv 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

annual report are authentic, accurate and complete.

     All directors have attended the Board of Directors meeting to review this

annual report.

     The future plans, development strategies and other forward-looking

statements in this annual report shall not be considered as substantial

commitment of the Company to investor. Therefore, investors are kindly

reminded to pay attention to possible investment risks.

     The profit distribution plan reviewed and adopted by this Board of

Directors meeting is as follows: on the basis of 1,749,809,548 shares, a cash

dividend of 2.3 yuan (tax included) is to be distributed to all shareholders for


                                        6
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every 10 shares; no bonus share will be issued; and no capital reserve will be

converted to increase the capital stock.

    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.




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                                                                                                        The 2020 Annul Report of Huadong Medicine Co., Ltd.




                                                                         Contents
To the shareholders ............................................................................................................................................................ 2

Section I. Important Declaration, Contents and Definitions ......................................................................... 6

Section II. Company Profile and Key Financial Indicators ......................................................................... 11

Section III. Overview of the Company’s Business......................................................................................... 16

Section IV. Discussion and Analysis of Operations .......................................................................................... 23

Section V. Important Matters ...................................................................................................................................... 75

Section VI. Share Change and Shareholders ..................................................................................................... 117

Section VIII. Convertible Corporate Bonds ...................................................................................................... 125

Section VIII. Convertible Corporate Bonds ...................................................................................................... 126

Section IX. Directors, Supervisors, Senior Managers and Employees ................................................. 127

Section X. Corporate Governance .......................................................................................................................... 137

Section XI. Information about Corporate Bonds ............................................................................................ 143

Section XII. Financial Report ................................................................................................................................... 144




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                                           Definitions
                     Term                  refers to                                Definition

CSRC                                       refers to   China Securities Regulatory Commission

SSE                                        refers to   Shenzhen Stock Exchange

Huadong Medicine/the Company/our Company   refers to   Huadong Medicine Co., Ltd.

CGE                                        refers to   China Grand Enterprises, Inc.

Huadong Medicine Group                     refers to   Hangzhou Huadong Medicine Group Co., Ltd.

Zhongmei Huadong                           refers to   Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.

Jiangdong Company                          refers to   Hangzhou Zhongmei Huadong Pharmaceutical Jiangdong Co., Ltd.

Jiuyang Bio                                refers to   Jiangsu Jiuyang Biopharm Co., Ltd.

Xi’an Bohua                               refers to   Huadong Medicine (Xi’an) Bohua Pharmaceutical Co., Ltd.

Jiuyuan Gene                               refers to   Hangzhou Jiuyuan Gene Engineering Co., Ltd.

Huadong Ningbo Company                     refers to   Huadong Ningbo Medicine Co., Ltd.

Chongqing Peg-Bio                          refers to   Chongqing Peg-Bio Biopharm Co., Ltd.

Qyuns Therapeutics                         refers to   Qyuns Therapeutics Co., Ltd.

XtalPi                                     refers to   XtalPi Inc.

Sanyou Bio                                 refers to   Sanyou Biopharmaceuticals Co., Ltd.

Sinclair                                   refers to   Sinclair Pharma Limited

vTv 公司                                   refers to   vTv Therapeutics LLC

R2                                         refers to   R2 Technologies,Inc.

MediBeacon                                 refers to   MediBeacon Inc.

ImmunoGen                                  refers to   ImmunoGen, Inc.

Provention Bio                             refers to   Provention Bio, Inc.

RAPT                                       refers to   RAPT Therapeutics,Inc.

Kylane                                     refers to   Kylane Laboratoires SA

High Tech                                  refers to   High Technology Products, S.L.U.

LG                                         refers to   LG Chem Ltd

Jetema                                     refers to   Jetema. Co,.ltd

Exscientia                                 refers to   Exscientia Ltd.

GMP                                        refers to   Good Manufacturing Practice

CGMP                                       refers to   Current Good Manufacture Practices

GSP                                        refers to   Good Supply Practice


                                                        9
                                                                       The 2020 Annul Report of Huadong Medicine Co., Ltd.


BE                                         refers to   Bioequivalence

CDE                                        refers to   Center for Drug Evaluation (of National Medical Products
                                                       Administration)

MAH                                        refers to   Marketing Authorization Holder

FDA                                        refers to   (U.S.) Food and Drug Administration

NMPA                                       refers to   National Medical Products Administration

NDA                                        refers to   New Drug Application

ANDA                                       refers to   Abbreviated New Drug Application

ICH                                        refers to   International     Council    for    Harmonisation    (of   Technical
                                                       Requirements for Pharmaceuticals for Human Use)

IND                                        refers to   Investigational New Drug

PK/PD                                      refers to   pharmacokinetics/pharmacodynamics

CMC                                        refers to   Chemistry, Manufacturing and Control

CMO                                        refers to   Contract Manufacturing Organization

CDMO                                       refers to   Contract Development        and    Manufacturing Organization

PMA                                        refers to   Premarket Application

QA                                         refers to   Quality Assurance (department)

                                                       Catalogue of Drugs for Basic National Medical
Catalogue of Drugs for Insurance(2020)   refers to
                                                       Insurance/Employment Injury Insurance/Birth Insurance(2020)

ADC                                        refers to   Antibody-Drug Conjugate

EHS                                        refers to   Environment、Health、Safety

                                                       Drugs that can only be purchased and used according to
Prescription Drugs                         refers to
                                                       prescriptions issued by physicians

OTC                                        refers to   Over The Counter

MRCT                                       refers to   International Multi-center Clinical Trial




                                                        10
                                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.




            Section II. Company Profile and Key Financial Indicators

I. Company information

Stock name (abbreviation)      Huadong Medicine                           Stock code                    000963

Stock listed on                Shenzhen Stock Exchange

Company name in Chinese        华东医药股份有限公司

Company name in Chinese
                               华东医药
(abbreviation)

Company name in English (if
                               Huadong Medicine Co., Ltd.
any)

Company name in English
                               Huadong Medicine
(abbreviation, if any)

Legal representative           Lv Liang

Registered address             Floor 7, 9 and 10, Gate No. 1, Building No. 1, 468 Yan’an Road, Hangzhou

Zip code of the registered
                               310006
address

Office address                 866 Moganshan Road, Hangzhou

Zip code of the office address 310011

Official website               www.eastchinapharm.com

Email address                  hz000963@126.com


II. Contact persons and contact information

                                               Secretary of the Board of Directors              Securities affairs representative

Name                                                        Chen Bo                                             /

Contact address                                 866 Moganshan Road, Hangzhou                                    /

Tel.                                                      0571-89903300                                         /

Fax                                                       0571-89903300                                         /


III. Channels of disclosure and location of preparation

                                                                       China Securities Journal, Securities Times, and Shanghai
Media selected by the Company for information disclosure
                                                                       Securities News

Website designated by CSRC for publication of the annual report        http://www.cninfo.com.cn

Location of preparation of the Company’s annual report                Office of the Company’s Board of Directors


                                                                  11
                                                                                The 2020 Annul Report of Huadong Medicine Co., Ltd.


IV. Registration changes

Organization code                                          91330000143083157E

Changes of the Company’s main business since its
                                                           None
listing (if any)

Previous changes of controlling shareholder (if any)       None


IV. Registration changes

Organization code                                          91330000143083157E

Changes of the Company’s main business since its
                                                           None
listing (if any)

Previous changes of controlling shareholder (if any)       None


VI. Key accounting data and financial indicators

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

                                                                                             Percentage
                                                                                         increase/decrease
                                             2020                       2019                                          2018
                                                                                        from last year to this
                                                                                                year

 Operating revenue (yuan)               33,683,058,759.75         35,445,698,216.15                    -4.97%    30,663,374,326.27
 Net profit attributable to
 shareholders of listed companies        2,819,861,203.63          2,813,118,702.11                    0.24%      2,267,229,174.08
 (yuan)
 Net profit attributable to
 shareholders of listed companies
                                         2,429,761,433.56          2,574,437,417.52                    -5.62%     2,236,323,500.44
 after deducting non-recurring
 gains/losses (yuan)
 Net cash flow from operating
                                         3,411,447,747.56          2,001,698,170.67                    70.43%     2,039,496,083.26
 activities (yuan)
 Basic earnings per share
                                                       1.6115                  1.6077                  0.24%                    1.29
 (yuan/share)
 Diluted earnings per share
                                                       1.6115                  1.6077                  0.24%                    1.29
 (yuan/share)
 Weighted average return on
                                                    20.95%                     25.29%                  -4.34%                24.87%
 equity (ROE)

                                                                                             Percentage
                                          End of 2020              End of 2019           increase/decrease        End of 2018
                                                                                        from last year to this



                                                                   12
                                                                                 The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                                                                                 year

 Total assets (yuan)                      24,201,348,154.75        21,463,974,146.63                    12.75%      19,217,357,282.33
 Net assets attributable to
 shareholders of listed companies         14,619,821,308.60        12,309,477,308.00                    18.77%       9,938,148,996.53
 (yuan)

The Company’s net profit before or after deducting non-recurring gains and losses, whichever is lower, in the last three fiscal years
are all negative, and the audit report of last year shows doubt about the Company’s ability to continue as a going concern.
□Yes √No
The company's net profit before and after deducting non-recurring gains/losses in the last three fiscal years is negative.

□Yes √No
Capital stock of the Company as of the trading day before disclosure

Capital stock of the Company as of the trading day before
                                                                                                                         1,749,809,548
disclosure (share)

Fully diluted earnings per share calculated on the basis of the latest capital stock

Dividends paid on preferred shares                                                                                                  0.00

Fully diluted earnings per share calculated on the basis of the
                                                                                                                                  1.6115
latest capital stock (yuan/share)


VII. Differences in accounting data under domestic and overseas accounting standards

1. Differences in net profit and net assets disclosed in financial statements under international and Chinese
accounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under international and
Chinese accounting standards.
2. Differences in net profit and net assets disclosed in financial statements under overseas and Chinese
accounting standards
□ Applicable √ N/A
There are no differences in net profit and net assets disclosed in financial statements under overseas and Chinese
accounting standards.

3、Reasons for differences in accounting data under overseas and Chinese accounting standards

□ Applicable √ N/A


VIII. Key financial indicators by quarter

                                                                                                                       Unit: RMB yuan

                                                 Q1                       Q2                      Q3                         Q4

 Operating revenue                         8,598,069,911.29          8,062,864,246.35       8,839,942,450.31         8,182,182,151.80



                                                                     13
                                                                                 The 2020 Annul Report of Huadong Medicine Co., Ltd.


 Net profit attributable to
                                           1,147,278,457.64           583,906,263.61            660,281,883.53           428,394,598.85
 shareholders of listed companies

 Net profit attributable to
 shareholders of listed companies
                                              856,930,262.10          549,793,711.00            624,184,921.23           398,852,539.23
 after deducting non-recurring
 gains/losses

 Net cash flow from operating
                                              218,779,623.89         1,036,763,043.40           646,271,689.37         1,509,633,390.90
 activities

Whether the above financial indicators or their totals are significantly different from relevant financial indicators in prev ious
quarterly and semiannual reports by the Company
□ Yes √ No


IX. Items and amounts of non-recurring gains/losses

√ Applicable □ N/A
                                                                                                                          Unit: RMB yuan

                       Item                             2020                  2019                  2018                     Note

                                                                                                                   Mainly due to the
                                                                                                                   transfer of
                                                                                                                   distribution rights in
                                                                                                                   the Western
                                                                                                                   European market of
 Gains/losses on disposal of non-current                                                                           related products of
 assets (including the written-off part of the      319,656,661.95        109,574,836.97            -697,591.38    Sinclair, a
 accrued assets impairment reserve)                                                                                wholly-owned
                                                                                                                   subsidiary of the
                                                                                                                   Company in the
                                                                                                                   UK, during the
                                                                                                                   current reporting
                                                                                                                   period.

 Tax refund and reduction with ultra vires
 examination and approval or without                  8,424,351.97          4,407,536.93          1,630,170.53
 offical approval documents

                                                                                                                   Mainly due to the
 Government grants included in current                                                                             government
 gains/losses (excluding those closely                                                                             subsidies
 related to operating activities and                190,906,656.31        112,527,883.18         79,368,271.28     recognized by
 measured according to unified national                                                                            subsidiaries during
 standards)                                                                                                        the current reporting
                                                                                                                   period.

 Gains/losses on assets entrusted to others                                                      16,058,460.95



                                                                     14
                                                                              The 2020 Annul Report of Huadong Medicine Co., Ltd.


 for investment or management

 Receivables subject to separate
 impairment test and reversal of reserve for        3,845,312.41          1,896,979.79
 impairment of contract assets

 Other non-operating revenue or
 expenditure expect above-mentioned               -20,500,748.15         77,976,120.18       -34,052,605.70
 items



 Other profit and loss items satisfying the        -4,899,999.00
 definition of non-recurring gain/loss

 Minus: Amount affected by income tax              92,420,221.30         47,542,186.99       14,789,855.01

        Amount affected by rights and
 interests of minority stakeholders (after         14,912,244.12         20,159,885.47       16,611,177.03
 tax)

 Total                                            390,099,770.07        238,681,284.59       30,905,673.64          --

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




                                                                   15
                                                           The 2020 Annul Report of Huadong Medicine Co., Ltd.




               Section III. Overview of the Company’s Business

I   Main business of the company during the reporting period

     Huadong Medicine Co., Ltd. (stock code: 000963), founded in 1993 and headquartered in
Hangzhou, Zhejiang Province, was listed on Shenzhen Stock Exchange in December 1999. After
more than 20 years of development, the Company has developed into a large comprehensive listed
pharmaceutical company integrating R&D, production and sales of medicine. The Company has
more than 10,000 employees, and its business covers the whole pharmaceutical industrial chain.
With the pharmaceutical industry as its core, the Company expands its medicine business and

aesthetic medicine industry.

     The pharmaceutical industry of the Company focuses on R&D, production and sales of
specialist medication, chronic disease medication and medication for special purposes. The
Company has formed core product pipelines in such fields as chronic kidney diseases,
transplantation immunity, internal secretion and gastrointestinal system, and owns a number of
first-line clinical medications with market advantages in China. Meanwhile, through independent
development, external introduction and project cooperation, the Company focuses on the R&D
layout of innovative drugs and generic drugs with high technical barriers in the three core fields of
anti-tumor, internal secretion and autoimmunity. Its pharmaceutical sales channels have covered
more than ten thousand large and medium-sized hospitals in China. And its pharmaceutical R&D
involves fungal and microbial fermentation, small molecule, biological macromolecule and peptide
drugs, covering drug discovery, clinical and preclinical research, chemical manufacturing and
control (CMC) and registration. The Company continues to carry out international product
registration, international certification, consistency evaluation, etc., forming an international

pharmaceutical industry system with a leading position in China.

     By means of pharmaceutical business, the Company becomes one of the leading and powerful
comprehensive large-scale pharmaceutical business service providers in Zhejiang Province, ranking
the top ten pharmaceutical business enterprises in China for many years consecutively. It has set up
11 regional subsidiaries in Zhejiang Province, with customers covering 11 cities and 90 counties

                                                 16
                                                                      The 2020 Annul Report of Huadong Medicine Co., Ltd.



(county-level cities) in the province. It has four business segments, including Traditional Chinese
Medicine (TCM) and Western Medicine, medical devices, ginseng, antler and other herbs, and
health industry, covering the whole field of pharmaceutical circulation, mainly including
pharmaceutical wholesale (public health care, private health care, retail pharmacies and commercial
distribution), pharmaceutical retail, third-party pharmaceutical logistics characterized by cold chain,
pharmaceutical e-commerce, pharmaceutical service (hospital value-added service), market

development and featured mega health industry, providing customers with integrated solutio ns.

      The Company’s aesthetic medicine business focuses on R&D, production and sales of the
latest products and devices in facial micro-plastic surgery and skin management. Sinclair, a
wholly-owned subsidiary of the Company that is headquartered in the United Kingdom and serves
as the holding company of a Spanish firm named High Tech, has production bases in France, the
Netherlands, the United States, Switzerland and Bulgaria, and promotes and sells long-effect
microsphere fillers for injection, hyaluronic acid, as well as face thread lift and coolsculpting
products in the global market. Sinclair is the global operation platform of the Company for aesthetic
medicine business. Huadong Ningbo Medicine Co., Ltd., a controlled subsidiary of the Company, is
a comprehensive aesthetic medicine health platform focusing on product R&D and professional
promotion, and also acts as the general agent for the promotion and sales of Korean YVOIRE

hyaluronic acid products and skin care products series of SanteMuse in the Chinese market.



II. Significant changes in major assets

1. Significant changes in major assets


                 Major assets                                    Note on significant changes


                                    The ending balance is 107,553 million yuan, an increase of 131.66% from the
 Equity assets                      beginning of the period, which is mainly due to the increase of long-term equity
                                    investments and other equity instrument investment in the current period.

 Fixed assets                       None

 Intangible assets                  None

 Constructions in progress          None

 Other non-current assets           The ending balance is 712. 07 million yuan, an increase of 286.7% from the beginning


                                                         17
                                                                                  The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                              of the period, mainly due to the increased prepayment for technology transfer during
                                              the current reporting period

                                              The ending balance is 1,416.93 million yuan, an increase of 116.14% from the
 Short-term borrowing                         beginning of the period, mainly due to the increased repayment upon maturity of bank
                                              financing during the current reporting period

                                              The ending balance is 88.74 million yuan, a increase of 124.06% from the beginning of
 deferred tax liability                       the period, mainly due to the increased repayment upon maturity of bank financing
                                              during the current reporting period


2、Major overseas assets

Applicable □ N/A

                                                                                                             Proportion of     Whether
   Specific                     Assets size                                                                    overseas      there are any
                 Reason for                                Operating      Control measures to    Profit or
  content of                   (ten thousand Location                                                        assets in the    significant
                  formation                                  mode         ensure assets safety     loss
    assets                         yuan)                                                                     Company’s      impairment
                                                                                                              net assets         risks

                                                                         Control of the Board
                                                                         of Directors and
                                                                         examination &
                                                                         approval of major
Sinclair
               Acquisition                               Independent decisions; daily
Pharma                        97,594.13       UK                                                  Profit            6.68% None
               of equity                                 accounting      supervision of
Limited
                                                                         financial matters;
                                                                         entrusting external
                                                                         intermediaries to
                                                                         conduct audits

Note: In April 2019, the Company entered into strategic cooperation with R2 Dermatology, a US company specializing in medical
devices and technology development related to dark spot removal and skin whitening using freezing technology in the field of
aesthetic medicine, and made equity investment in R2 and became its shareholder. As of the date of this disclosure, the Compa ny has
invested 30 million US dollars, with a shareholding ratio of 34%. In July 2019, the Company entered into strategic cooperation with
MediBeacon, a US company dedicated to the development of contrast agents and equipment in such medical fields as renal function
and gastrointestinal function assessment, and invested 30 million US dollars for equity investment. As of the date of this report, the
Company has contributed 15 million US dollars, or 4.3% of its shares.


III. Analysis of core competitiveness

     1. Open innovative drug R&D System and continuous improve ment of innovation

capability

      After years of development, the Company has established its independent R&D system, a
global new drug R&D center as well as a global R&D strategic collaboration ecosystem centered on

                                                                    18
                                                          The 2020 Annul Report of Huadong Medicine Co., Ltd.



Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd., and cooperated with world-renowned
colleges at home and abroad, research institutes, innovative R&D companies, professional
technology platforms and so on in new drug R&D projects. The Company continuously has
increased R&D investment, made an overall planning for the global innovative products in the three
core areas of anti-tumor, internal secretion and autoimmunity, and carried out cooperation with the
world’s leading AI drug discovery company Exscientia and XtalPi in anti-tumor drug R&D.
Through independent R&D, external cooperation and product license-in, the Company has
continuously enriched the product pipelines in core areas, formed a good development trend of
continuous clinical promotion and marketing of innovative products, and provided new momentum

for medium- and long-term growth.

    2. Comprehensive capability in international business development

    The Company has actively promotes global expansion. Through the acquisition of the equity of
UK Sinclair and Spanish High Teach engaged in aesthetic medicine, the Company has realized the
global layout of aesthetic medicine sales network. Through strategic and equity collaboration with
R2 (US), Medibeacon (US), ImmunoGen (US), Provention Bio (US), Kylane (Switzerland), LG
(South Korea), Jetema (South Korea) and so on, the Company supplemented and enriched the
commercial development rights of innovative drugs and high-end aesthetic medicine products at
home and abroad. The Company also accelerated the international registration of products. Its
online chemical raw medicines have been certified by the Food and Drug Administration (FDA) or
EU and other authoritative authentication in markets; its Pantoprazole Sodium Lyophilized Powder
for Injection has been temporarily approved by the FDA; and its Acarbose Tablets gained market
access to the United States and the European Union Austria. The Company is the first Chinese
medicine enterprise to achieve these results. In addition, the Company actively develops
international logistics and purchasing suppliers to realize the internationalization of purchasing
ability. It has promoted the internationalization level of CMO/CDMO business and integrate it into

the global innovative drug R&D industry chain.

3. Abundant product pipelines for specialized departments and chronic diseases and overall

competitive advantage in the field of diabetes medication

    Over the years, the Company has been deeply engaged in medication for specialized


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departments, chronic diseases and special drugs, and has built a good brand effect and solid market
foundation in such fields as chronic kidney diseases, transplantation immunity, internal secretion,
and digestive system, and has maintained a leading market share of similar products in China. The
Company has formed a comprehensive pipeline of innovative drugs and differentiated generic drugs
in the diabetes clinical mainstream therapeutic target. In the field of organ transplantation, it also
realized full coverage of clinical first-line immunosuppressive drugs. The Company has established
a global first-in-class distribution of new drugs in the three core areas of anti-tumor, internal
secretion and autoimmunity, forming a differentiated advantage. At present, 24 core marketed
products of the Company have been included in the 2020 Catalog of Medicines Covered by the

National Medical Insurance System.




    4. Leading professional pharmaceutical care team and extensive market network in China

     The pharmaceutical industry of the Company has a professional pharmaceutical care team of
6,000 people, takes the promotion of clinical value and academic results as the core, and promotes a
multi-channel marketing model that combines general hospitals, primary medical institutions, retail
and third terminals, and Internet online. It has gradually formed effective coverage through multiple

channels and has a good competitive advantage.

     The business of the Company has been deeply rooted in the market of Zhejiang Province for
many years, with complete commercial formats and rich distribution varieties, and has

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comprehensive competitive advantages in policy affairs, market access and network coverage. It has
fully covered the customers from public medical institutions, key private medical institutions and
retail pharmacies in Zhejiang Province, and maintained the leading order satisfaction rate. The
Company has established business cooperation with 90% of the mainstream pharmaceutical
enterprises at home and abroad. The Company has a complete cold chain logistics distribution
service system and professional capabilities, and its cold chain logistics distribution business is in
the lead in China. The Company has obtained the first express business license of pharmaceutical
cold chain enterprise in Zhejiang Province, and got the exclusive qualification of third-party storing

and transporting vaccine from Zhejiang Provincial Center for Disease Control and Prevention.

    5. High end international aesthetic medicine product pipeline covering mainstream

non-surgical fields

    In 2018, through the successful acquisition of Sinclair in UK, the Company strategically
entered the aesthetic medicine industry, effectively completed the integration of products and
businesses in less than three years, and realized the full layout of the non-invasive and minimally
invasive aesthetic medicine industry chain. In the fields of facial fillers, body shaping, catgut
embedding, energy source devices and so on, we have a number of patented products with global
rights and also have an international aesthetic medicine operation and BD team. Focusing on t he
global high-end aesthetic medicine market, further integrating R&D resources and capabilities, and
relying on the four global R&D centers of Sinclair in the UK, High Tech in Spain, R2 in the United
States and Kylane in Switzerland, and five global production bases in the Netherlands, France, the
United States, Switzerland and Bulgaria, the Company has formed its international aesthetic
medicine business integrating R&D, production, and marketing, and set up a global aesthetic
medicine marketing network, which has covered more than 60 countries and regions in the world.
Huadong Ningbo Medicine Co., Ltd., the controlled subsidiary of the Company, has a sales team
which has been deeply engaged in the Chinese aesthetic medicine market for many years, and a
wide range of aesthetic medicine institutions, with outstanding sales and promotion ability. Its
market share has been in the lead in the domestic hyaluronic acid market for many years

continuously.

    6. Prudent and pragmatic operation style and shareholder re turn


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     The Company values management innovation, and strives to meet the demand of market
competition by improving its quality of operation. High quality products, excellent
commercialization ability, compliant and efficient marketing services, differentiated market
positioning, innovative R&D layout and completed talent planning all boost the long-term and
stable development of the Company. Since its listing, the Company has maintained steady growth in
performance for 21 years. Since 2007, the Company has kept the return on equity (ROE) above
20% for 14 years consecutively, leading A-share listed companies and the medicine industry. Since
its listing 21 years ago, the Company has paid dividends for 17 times, with a total value of
RMB4.174 billion, far exceeding the RMB250 million raised in its IPO. The Company has brought

continuous and stable returns of investment to shareholders.




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              Section IV. Discussion and Analysis of Operations

I. Overview

     For China and the world, 2020 is an extraordinary year. It is also a key year for the Company
to fully implement strategic transformation and internationalization. In the past year, in the face of
the sudden outbreak of COVID-19 pandemic, the reform of the domestic pharmaceutical industry,
the new challenges brought by the changes in internal and external environments, the Company has
suffered unprecedented operating and development pressures, coupled with the impact of failure in
national centralized procurement tendering of acarbose and lower price for medical insurance
reimbursement list through negotiations. However, with its bravery and tenacity, the Company
survived in this challenging year, unswervingly promoted the transformation of R&D innovation
and marketing mode, and steadily implemented various measures of operation and management by
responding to changes and hardships with dedication, thus delivering strategic decisions and
maintaining the steady development with joint forces in 2020. In this year, the Company completed
the reform of R&D system, rapidly adjusted the marketing strategy, strengthened the cooperation in
overseas new drugs, and accelerated the international layout of aesthetic medicine industry. It also
actively explored new operation mode of pharmaceutical business, opened up new market areas,
and laid a solid foundation for continuous innovation and transformation in 2021.




                    Growth trend of Huadong Medicine’s operating income over the past 10 years




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             Growth trend of Huadong Medicine’s net profit attributable to the parent company over the past 10 years

     In 2020, due to the impacts of the COVID-19 pandemic and national medicine centralized
procurement, the Company achieved annual operating income of RMB33.683 billion, down 4.97%
year on year; the net profit attributable to the shareholders of the listed company was RMB2.82
billion, up 0.24% year on year, and the net profit attributable to the shareholders of the listed
company after deducting non-operating profit was RMB2.43 billion, down 5.62% year on year. By
the end of 2020, the total assets of the Company were RMB24.201 billion, and the net assets
attributable to the shareholders of the parent company was RMB14.62 billion, and the asset-liability
ratio was 37.28%, and the ROE was 20.95%, which has remained above 20% for 14 consecutive
years.
     The core subsidiary of the Company in pharmaceutical industry, Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd., actively overcame the influence of national medicine centralized
procurement, and stabilized the market and development. Its business performance continued to grow
in adversity. During the reporting period, the operating income reached to RMB11.04 billion, up
5.07% year on year, and the net profit was RMB2.332 billion, up 6.13% year on year, which has
maintained growth for 20 years on end. The annual ROE of Zhongmei Huadong was 35.53%, which
has remained above 35% for 14 consecutive years.


    (i) Pharmaceutical industry
    1. Accelerating R&D innovation and constantly enriching product pipelines




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                          ROE (%) of Huadong Medicine and Zhongmei Huadong during 2007-2020

     In 2020, the Company continued to strengthen R&D innovation, reconstructed R&D system,
arranged R&D personnel properly, and promoted R&D function return. The first stage of R&D
system reform has been completed. In 2020, the Company’s innovative drug R&D center actively
explored and learned from the international advanced innovative drug R&D system building,
continuously optimized and adjusted the overall innovation R&D system framework of the Company,
and improved the functional modules of innovation project R&D through introducing high-end R&D
talents, so as to fully guarantee the realization of strategic planning objectives of the innovation
project. During the reporting period, the Company completed 15 innovative projects, and introduced
47 innovative R&D talents at home and abroad, including 15 doctors and 27 masters. The Company
has initially established a vigorous innovation team with international concept, international vision
and international management ability. Meanwhile, we established a core expert consultant pool,
including dozens of senior experts in statistics, medicine, registration and other fields. In addition, we
started the recruitment of postdoctoral programme. The Company reached the cooperation intention
of postdoctoral joint training with Zhejiang University, Institute of Nephrology of Peking University
and other domestic first-class universities.
     We boosted ongoing projects and consistently evaluated projects as scheduled, and 10 products
(11 quality specifications) obtained production approval and 13 products (14 quality specifications)
were applied for production. We established and improved the decision-making management
mechanism of R&D projects, centered on the strategic treatment field, and focused on the clinical
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value of the projects to complete the Company’s R&D pipeline analysis and dynamic evaluation of
ongoing projects. We also strengthened the project management and the training of PM, and
completed the user experience test of PLM system.
     The collaboration between R&D and BD was further deepened, which enriched the Company’s
product pipelines in the fields of tumor, autoimmune and diabetes.
     (1) Anti-tumor: Introduced the phase III clinical research products of ImmunoGen (US), the
world’s first targeting folate receptorα (FRα) Mirvetuximab Soravtansine (MIRV), an ADC candidate
drug for ovarian cancer, and acquired exclusive development and commercial rights in Greater China
(including Chinese mainland, Hongkong, Macao and Taiwan). And accelerated its clinical research in
China.
     (2) Endocrinology: Signed an agreement with PEG-BIO BIOPHARM CO., LTD. (Chongqing)
on the cooperative development and commercialization of somaluptide products, which would
further enrich the important product pipeline in the field of diabetes and consolidate its leading
position in the field of domestic diabetes drugs.
     (3) Autoimmunity: Introduced the ongoing QX001S product of Qyuns Therapeutics (a
biosimilar similar to original drug Stelara, used to treat psoriasis and Crohn’s disease), and gaine d
the rights to develop and commercialize it in Chinese mainland, which further improved the
macromolecule pipeline layout in the field of immunology.
     (For the details of the R&D work and product pipelines of the Company during the reporting
period, please refer to R&D Section)
     2. Initial building of agile production and operation system, and shifting from cost center
to profit center
     In 2020, overcoming the impact of the COVID-19 pandemic and market uncertainty, the
Company initially established an agile production and operation system, quickly integrated
production resources according to market changes, took measures such as emergency resumption of
production, shift adjustment and production capacity expansion, and successfully completed
emergency production tasks of some products due to sudden increase in demand. We promoted
outsourcing business to ensure the market supply throughout the year, fully implemented the cost
control plan, boosted the cost management of the whole value chain, and achieved cost r eduction
through technology improvement, lean management, bidding and purchasing negotiation and asset
utilization from many aspects, striving to improve labor efficiency per capita and production
efficiency. We did a good job in risk management and control of EHS, practiced the “asset-light”
production organization mode, and successfully developed a number of cooperative production

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enterprises, and gradually formed an open Huadong pharmaceutical manufacturing system. We took
internal surprise inspection as the starting point to implement the GMP normal management, and
successfully passed it four times, with no major safety accidents throughout the year.
     The manufacturing and CMC (including subsidiaries) center changed the original positioning
concept of internal facilities, started CMO/CDMO mode by following international standards, and
explored the transformation from cost center to profit center. We actively faced the international
market, and participated in the international market competition to integrate with the global
pharmaceutical R&D industry chain. In 2020, we made positive progress in export of raw materials
and CDMO business customized by foreign customers, which laid a solid foundation for realizing a
greater breakthrough in 2021.
     In 2020, the Company continued to construct production parks, and arranged the transfers of
product and personnel, and the disposal of equipment and facilities in an orderly manner. Jiangdong
Phase II project has been completed as planned and is expected to be officially put into operation in
the second half of 2021 after completing equipment commissioning and certification; the project of
international R&D and manufacturing center for preparations has also been completed and is
expected to be put into use in 2021; the project approval, land acquisition, overall planning and
design as well as construction preparation of Huadong Medicine Biomedical Science and Technology
Park have been completed, and the project officially entered the construction stage in March 2021.
     3. Making efforts in grass roots and out-of-hospital markets and improving all-round
marketing ability
      During the reporting period, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. faced the
 pandemic situation and market challenges, turned the pressure into the driving force by facing
 difficulties and changing concepts, and improved marketing ability in all respects. According to the
 trend of national normalized centralized procurement, we quickly adjusted the market strategy, took
 the establishment of “pharmaceutical care management system to adapt to the modern
 pharmaceutical industry development” as the goal, and continued to deepen the organizational
 structure reform. We strengthened the organizational structure building of local pharmaceutical care
 companies with county-level markets, increased out-of-hospital teams and primary-level market
 personnel, and comprehensively promoted the development and coverage of primary-level markets,
 out-of-hospital markets and self-paying markets. We also actively explored new channels of retail
 pharmacies and online sales, developed online market, and seized the remaining markets. In terms
 of academic promotion, we continued to focus on the patient-centered concept to strengthen patient
 education and further improve the professional level of front-line marketing personnel, and to carry

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out clinical restudy of marketed products, and improved expert consensus and clinical value
recognition through academic platform building. Through the differentiated market positioning of
Acarbose Tablets and Acarbose Chewable Tablets, we continued to work hard in the primary-level,
out-of-hospital and retail markets. The sales volume and overall market share of acarbose products
remained stable throughout the year, and the proportions of o ut-of-hospital and retail markets
increased steadily. The Company has confidence that the sales volume of acarbose will continue to
grow in 2021.




                       National marketing network distribution map of pharmaceutical industry

    4. Keeping up with international level and improving quality manage ment to new level
    In 2020, the Company further strengthened the centralized and unified quality management,
continuously improved the building of quality management system, innovated the normalized
management methods of GMP, and implemented surprise inspection system. We optimized the
management mode of public system, strengthened the linkage mechanism of quality management
from R&D to large production, established a normalized management list for weak managements,
and successfully completed the site verification for registration of all products with consistency
evaluation and new products, onsite GMP compliance inspection and surprise inspection. Aiming at
international quality level, we continued to improve the quality standard, completed the standard
setting of olistar capsule, pioglitazone hydrochloride tablet and indobufen tablets, followed up the

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progress of pharmacopoeia, and participated in the standard setting of USP for pantoprazole sodium
lyophilized powder for injection. After the Acarbose Tablets of Huadong Medicine Co., Ltd.
obtained a marketing approval from Austria of EU and was approved by the FDA of the United
States, the international quality management of the Company was lifted to a new level.
     5. “Refusing Mediocrity and Pursuing Excellence” and Creating an Appropriate Human
Resource Manage ment System
     In 2020, the Company continued to improve the level of human resource management. We
continuously optimized the talent structure, improved the talent ability and i ntroduced 66 top talents
in the fields of innovative medicines, international aesthetic medicine, strategic market as well as
investment and financing, including 21 doctors and 12 international talents. We continuously
optimized the organization and human resource allocation of companies, developed incentive and
efficiency, improved the efficiency of human resources, and gradually established an assessment
mechanism aiming at “rejecting mediocrity and pursuing excellence”. We innovated and developed
performance management mode, set up a R&D performance appraisal management mechanism that
was appropriate to the actual situation of R&D, and perfected matrix management mode for R&D,
and formed a performance appraisal and management scheme for the three R&D centers. We further
improved the building of leader echelon, standardized and unified the management of appointed
leaders, and optimized the personnel training mechanism to realize the rapid transformation of
talents.
     6. Strengthening the integration of business and finance, and deeply innovating financial
organization structure
     During the reporting period, the Company carried out the innovation of financial organization
structure, and formed a headquarters financial structure based on the professional lines of treasury
department, international business department, accounting information department (virtual), tax and
information, which enabled the coordination of treasury management among headquarters,
Zhongmei Huadong as well as business finance. By establishing a “3+X” financial analysis team
and setting up business partner team of financial aesthetic medicine, R&D and innovation business,
we strengthened the integration of business and finance and the continuous investment of the whole
financial system in the professional line, and carried out works in the aspects of fine financial fund
management and budget cost reduction, building and efficiency improvement of financial
information system, financial internal control and compliance, investment merger and
post-investment management. As a result, we straightened out the financial organizational structure
and the centralized and unified management system with “one headquarters and three business

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sectors”, and the financial management ability was also continuously improved.
    7. Achieving Positive Results in Central Purchasing and Access to Medical Insurance
System
    In August 2020, Anastrozole Tablets (1mg) and Domperidone Tablets (10mg) respectively from
the wholly-owned subsidiaries of the Company, Hangzhou Zhongmei Huadong Pharmaceutical Co.,
Ltd. and Huadong Medicine (Xi’an) Bohua Pharmacy Co., Ltd, won the bid in the third batch of
national drug centralized procurement. In December 2020, Bailing Capsule and Acarbose Chewing
Tablets from Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. participated in the
negotiations of medical insurance payment standard and renewal, and both of them were successful.
In February 2021, Pantoprazole Injection (40mg) from Hangzhou Zhongmei Huadong
Pharmaceutical Co., Ltd. won the bid in the fourth batch of national drug centralized procurement.
     (ii) Pharmaceutical commerce
     1. With optimized and adjusted business structure of the Company, its pharmaceutical
commerce continued to take the lead in Zhejiang
     In 2020, faced with the combined impact of the pandemic and the volume-based procurement,
the pharmaceutical commerce of the Company took active measures and fulfilled the emergency
medical instrument stockpile task of Zhejiang Province in an excellent way, and was commended
by many government departments at provincial, municipal and district levels. Under the background
of the normalization of volume-based procurement, the Company took the initiative to deal with it
by reverse thinking, and sped up the adjustment, optimization and enrichment of its business
structure. The Company has kept consolidating the intra-hospital markets, strengthened
coordination between purchases and sales, and increased order fill rate, the market share and
delivery rate in the province, taking the lead in the distribution volume of medicines procured
centrally in the province. The Company has built a network-wide sales platform covering both the
intra- and out-of-hospital markets, expanded and strengthened the cooperative relationship with
upstream pharmaceutical enterprises, highlighted the advantageous capabilities of market access
and policy matters, and became a trustworthy and respectable partner of the customers’ supply
chain through integrated solutions and value-added services. The Company has continued to
increase the introduction of high-quality products, accelerate the early intervention to and business
undertaking of varieties included in volume-based procurement and newly-listed high-value
innovative varieties, and improve service quality and brand influence. During the year, the
Company carried out strategic and special cooperation with many multinational pharmaceutical
companies such as Pfizer, AstraZeneca, Roche, Eli Lilly, Sanofi, Novartis and Merck with respect to


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the primary-level market of chronic disease products, realized the implementation of cooperative
projects in a quite short time through its professional project management, and won universal
recognition from customers.
     The Company has accelerated the optimization and transformation o f its sales model,
continued to expand the out-of-hospital markets while maintaining its competitive position in the
intra-hospital markets, and sped up the transition from intra-hospital to out-of-hospital and from
offline to online. Relying on its advantages in relationship with upstream suppliers and downstream
offline sales channels, the Company effectively connected to Internet and mobile Internet
technologies, built an information system from the supply end to the consumer end, and established
an effective online and offline marketing system. Through management and empowerment, the
Company gives full play to the centralized advantages of its products and the advantages of the
branches and subsidiaries in the province regarding local sales, achieving the effect of 1+1>2.
     2. Integrating e-commerce interconnection to win market opportunities
     In 2020, the Company’s pharmaceutical commerce explored and transformed the business
model of retail pharmacies, provided “value-added services” such as pharmaceutical consultation,
drug distribution and return visits for special patients through channels like self-operated DTP
pharmacy, and built a pharmaceutical care and service system centered on patients’ needs. It
optimized the promotion of marketing channels such as the “Huadong Medicine Commerce
Network”, “Huadong Pharmacy Flagship Store”. It completed the establishment of the OTC Sales
Management Department and the E-commerce Sales Department, and realized the rapid growth of
e-commerce business during the pandemic. Relying on the first prescription distribution platform in
the province developed by itself, the Company actively connected with the “Internet + diagnosis
and treatment” service in Zhejiang Province, quickly connected with provincial and municipal
health and health care departments at the beginning of the outbreak of COVID-19, launched the
province’s first “online medical insurance settlement + medicine delivery services”, and opened up
the full channel of “Internet + diagnosis and treatment”.




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     3. Improving ability concerning cold chain logistics and creating the “golden business
card” of commerce business transformation
     Huadong business supply chain continued to improve the province-wide logistics system
featuring multi-warehouse collaboration, promoted Jinhua supply chain projects, expanded the
third-party services featuring “cold chain”, and actively explored logistics services under the new
mode of “E-commerce logistics distribution, prescription outflow distribution”. With the goal of “to
be the leader in the industry and become the leading role in the value chain”, Huadong business
cold chain built a province-wide logistics system with the cold chain distribution of
biopharmaceuticals and vaccines as the core, and established an industry brand. The Company has
undertaken the vaccine business of a number of well-known pharmaceutical enterprises at home and
abroad, with the business volume ranking first in Zhejiang Province. Besides, it has obtained the
first delivery business license for pharmaceutical cold chain enterprises in Zhejiang Province, which
promoted the expansion of the Company’s pharmaceutical cold chain business in the express
delivery field, especially the Internet C-end business distribution. In addition, the Company actively
involved in the delivery service of COVID-19 vaccines across the province, and obtained the
exclusive qualification regarding third-party vaccine storage and transportation service from the
Zhejiang Provincial Center for Disease Control and Prevention. It will give priority to guarantee the
delivery of COVID-19 vaccines as required by the Zhejiang Provincial Center for Disease Control

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and Prevention, and complete the distribution of COVID-19 vaccines in 11 cities in the province
within 24 hours after receiving the distribution task, to ensure the timely and safe delivery of
COVID-19 vaccines, and support the nationwide vaccination of COVID-19 vaccines.
     (iii) Aesthetic medicine
     1. Deeply engaging in the aesthetic medicine industry, and continuously optimizing and
improving the pipeline of aesthetic medicine products
     Aesthetic medicine is one of the core business areas of the Company. Adhering to the operation
philosophy of “focusing on those who pursue beauty and serving them with professionalism and
preciseness”, Huadong Medicine focuses on the R&D, production, sales and service of the latest
products and instruments in the field of facial micro plastic and skin management, and fully
integrates the global aesthetic medicine resources. Being deeply engaged in the aesthe tic medicine
industry with its scientific and rigorous attitude, the Company continues to optimize the product
structure, with emerging achievements in aesthetic medicine internationalization. Since its
successful acquisition of Sinclair in the UK in 2018, the Company has been actively introducing
high-tech new products and technologies in the field of aesthetic medicine around the world, and
creating high-end, differentiated aesthetic medicine brands and product clusters. Up to now, the
Company has many differentiated non-surgical mainstream aesthetic medicine products, such as full
product portfolio of sodium hyaluronate, collagen stimulator, botulinum toxin type A, thread
embedding and implanting, and energy source device.
     2. Accelerating the introduction of new international aesthetic medicine products and
pushing forward the international strategic layout of the aesthetic medicine sector
     In 2020, the Company’s aesthetic medicine business was significantly affected by the
COVID-19 pandemic at home and abroad, and its revenue and net profit decreased year on year.
But the Company seized the opportunity brought by the low ebb of the international aesthetic
medicine industry during the pandemic, quickly promoted the internationalization strategy of the
aesthetic medicine sector, and accelerated the arrangement and introduction of new international
aesthetic medicine products. As a result, it achieved positive results.
     In March 2020, Sinclair, the global operating headquarters of the Company’s aesthetic
medicine business, and Galderma, a world-renowned dermatology pharmaceutical company in
Swiss, reached an agreement on the transfer of the distribution rights of Sculptra (PLLA
microspheres) in western European market, and completed the transaction, resulting in an asset
disposal earnings of approximately GBP30.65 million (after tax) for Sinclair. Later, it signed an
agreement with Kylane, a Swiss professional aesthetic medicine R&D company, thereby obtaining
from Kylane the exclusive worldwide license of the MaiLi-series lidocaine-containing hyaluronic
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acid fillers (hyaluronic acid) (which have been approved by the European Union for launch). In
August 2020, the Company signed a strategic cooperation agreement with Jetema, a South Korean
listed company, and obtained the sole agency of its botulinum toxin type A in China, thereby further
supplementing the Company’s product pipelines in the aesthetic medicine sector. In October 2020,
Sinclair and Kylane once again reached a deep strategic cooperation on equity invest ment and
product development. Sinclair invested EUR6 million for all of Kylane’s ordinary shares, and after
the transaction was completed, Sinclair held 20% of Kylane’s equity, becoming Kylane’s third
largest shareholder. In addition, Sinclair and Kylane e ntered into a R&D partnership, enabling
Sinclair to obtain the IP and global rights of Kylane’s two key products in the face and body fillers
area, as well as the prioritized negotiation rights of Kylane’s other follow -up products. In February
2021, Sinclair has acquired the 100% equity in High Tech, a Spanish energy source aesthetic
medicine devices company by paying a consideration of EUR65 million and a sales threshold of up
to EUR20 million, intending to participate in the body shaping and skin repairing fields such as
cryolipolysis and hair removal. The equity delivery was completed in April 2021.




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     3. Accelerating the registration and launch process of key aesthetic medicine products
     During the reporting period, the Company set up an aesthetic medicine international business
department, which is responsible for the strategic planning and day-to-day operation management
of the aesthetic medicine business. At the same time, the Company established Sinclair Aesthetics
(Shanghai) Medical Technology Co., Ltd. and R2 (Shanghai) Medical Technology Co., Ltd., which
will be served as the operating platform after products are launched on the market. The Company
sped up the registration and launch process of key aesthetic medicine products in the Chinese
market, and Ellansé, a long-effect microsphere for injection, the key product of Sinclair, the
Company’s subsidiary in UK, was officially approved for domestic launch and registration in April

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2021 and is expected to go on sale in Chinese mainland in the second half of 2021.
Silhouette Instalift, the only absorbable thread for midface tissue lifting approved by the FDA, is
undergoing a domestic clinical trial as planned. The Company is actively preparing for the launch of
Glacial  Spa (F0), a cool-touch cosmetic instrument introduced from R2 located in the United
States, in China, and is promoting the registration of Glacial Rx (F1), a frozen freckle-removing
medical device in China in an orderly manner. MaiLi  series product, a new high-end
lidocaine-containing hyaluronic acid filler using OXIFREE patented technology and process will
be launched on the European market in the first half of 2021, and registration in the Chinese market
has been initiated. Cooltech Define, a cryolipolysis product newly acquired by Sinclair from High
Tech, a Spanish company, has obtained the CE certification from EU. The Company has actively
expanded its teams in accordance with the launch progress of Ellanséand Glacial, and has started
pre-launch preparations. The Company’s controlled subsidiary Huadong Ningbo Company actively
responded to the adverse effects of the pandemic in 2020, took multiple measures to stabilize its
sales performance, and launched the special “2020 YVOIRE Rising Star Program – Navigator
Speaking Tour Program” during the post-pandemic period to promote the gradual recovery of
performance in the second half of the year. The SanteMuse Biological Skin Care R&D Center was
set up in Hangzhou, aiming to create a new product line of customized skin care based on skin
genes centering on SanteMuse, a customized skin care brand. The center has functional modules
such as gene testing laboratory, cosmetic formula R&D laboratory, ingredient R&D laboratory, cell
culture in vitro, microbial fermentation and human efficacy evaluation laboratory, and has created a
whole process R&D system including gene detection, product development and efficacy evaluation,
realizing the one-stop closed-loop development of customized skin
care.




                                                  36
                                                        The 2020 Annul Report of Huadong Medicine Co., Ltd.




                      R&D of the Company’s main aesthetic medicine produc ts


    In 2020, with its outstanding performance in various fields, the Company was granted for
many honors and awards, including New Fortune’s Second “New Fortune Best Listed Company”,
Securities Times’ 14th “Top 100 Chinese Listed Companies on Main Board”, MENET’s “Top 100
Pharma Companies in China in 2019”, “Jinzhi Award” in the financial industry, “Excellent
Management Award” in the pharmaceutical and biological industry, China’s Top 100 Industrial
Enterprises in Chemical-Pharmaceutical Industry in 2020, 21st Century Business Herald’s 2020
Sunshine Award of China’s Healthy Industry – Industry Benchmarking Enterprise Award, Chinese
Radio Network’s Second “Listed Companies Most Trusted by Investors – Innovative Pioneers in
Biomedicine”, Top 10 High-tech Enterprises in Zhejiang Province in the Field of Biological and
New Pharmaceutical Technology in 2020, Commendation for the 40th Anniversary of Medical
Economic News  Pharmaceutical Enterprises Making Outstanding Contributions to the Joint
Prevention and Control of COVID-19 in China, and continued to be listed on the Fortune China 500

                                               37
                                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.


selected by FortuneChina.com, ranking 273rd in 2020.


II. Analysis of main business

1. Overview

Refer to “I. Overview” in “Discussion and Analysis of Operations”.


2. Income and cost

(1) Composition of operating revenue

                                                                                                                  Unit: RMB yuan

                                             2020                                       2019                       Year-on-year

                                                    Proportion in                              Proportion in        percentage
                                Amount                                       Amount
                                                  operating revenue                          operating revenue   increase/decrease

 Total operating
                           33,683,058,759.75                   100%      35,445,698,216.15              100%              -4.97%
 revenue

 By sector

 Business                  23,010,850,986.99                 66.26%      25,098,006,088.85             68.79%             -8.32%

 Manufacturing             11,398,357,479.02                 32.82%      10,864,875,032.13             29.78%              4.91%

 aesthetic
                              942,632,376.28                  2.80%       1,328,360,780.34              3.75%            -29.04%
 medicine[note1]

 International
                              319,167,474.26                  0.92%        509,190,691.24               1.43%            -37.32%
 aesthetic medicine

 Offset (inter-sectoral
                           -1,045,317,180.52                             -1,026,373,596.07
 offset)

 By product

 By region

 Domestic sales            33,321,963,372.21                 98.93%      34,883,617,590.88             98.41%             -4.48%

 Overseas sales               361,095,387.54                  1.07%        562,080,625.27               1.59%            -35.76%

[Note 1] The aesthetic medicine business of the Company includes both the domestic and the international aesthetic medicine
business. There is a slight overlap between the income statistics of the domestic aesthetic medicine business and that of the
pharmaceutical commerce and the pharmaceutical manufacturing industry. In order to truly reflect the Company’s business reali ty,
the data is counted.


(2) Sectors, products or regions that accounts for more than 10% of the Company’s operating revenue or
operating profit:

√ Applicable □ N/A


                                                                    38
                                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                                                                                                        Unit: RMB yuan

                                                                                Year-on-year          Year-on-year      Year-on-year
                                                                     Gross       percentage           percentage         percentage
                       Operating revenue       Operating cost         profit   increase/decrea    increase/decrea      increase/decrea
                                                                      rate     se in operating      se in operating      se in gross
                                                                                   revenue                cost           profit rate

 By sector

 Business              23,010,850,986.99      21,279,818,471.97       7.52%             -8.32%              -8.15%             -0.17%

 Manufacturing         11,398,357,479.02       2,203,096,679.98      80.67%             4.91%               22.24%             -2.74%

 International
 aesthetic               319,167,474.26         104,350,496.25       67.31%           -37.32%              -25.72%             -5.10%
 medicine

 Offset
 (inter-sectoral       -1,045,317,180.52      -1,036,783,957.47
 offset)

 By product

 By region

 Domestic sales        33,321,963,372.21      22,423,303,870.36      32.71%             -4.48%              -6.24%                1.27%

 Overseas sales          361,095,387.54         127,177,820.37       64.78%           -35.76%              -25.27%             -4.94%

If the statistical specifications of the Company’s main business data have been adjusted during the reporting period, the Com pany’s
main business data of the most recent year should be adjusted according to the specifications at the end of the reporting period.

□ Applicable √ N/A


(3) Whether the Company’s income from in-kind sales is greater than that from labor services

√ Yes □ No


(4) Performance of major sales contracts signed by the Company as of the current reporting period

□ Applicable √ N/A


(5) Composition of operating cost

By sector
                                                                                                                        Unit: RMB yuan

                                                        2020                                   2019                     Year-on-year

                                                                  Proportion                            Proportion       percentage
      Sector                Item
                                               Amount           in operating        Amount              in operating   increase/decrea

                                                                     cost                                  cost              se

 Business              Operating cost      21,279,818,471.97         90.22%     23,169,206,360.31           92.26%             -8.15%


                                                                    39
                                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.


 Manufacturing         Operating cost      2,203,096,679.98          9.34%       1,802,276,075.36           7.18%             22.24%

 International
 aesthetic             Operating cost        104,350,496.25          0.44%         140,481,356.33           0.56%            -25.72%
 medicine

 Offset
 (inter-sectoral       Operating cost     -1,036,783,957.47                     -1,025,240,830.27
 offset)


(6) Whether the scope of consolidation has changed during the reporting period

√ Yes □ No

For details, please refer to “VIII. Change of consolidation scope” in “Section XII. Financial Report”.

(7) Significant changes or adjustments to the Company’s business, products or services during the
reporting period

□ Applicable √ N/A


(8) Major customers and major suppliers

The Company’s major customers

 Total sales amount of the top five customers (yuan)                                                                6,096,785,978.21

 Proportion of the total sales amount of the top five
                                                                                                                              18.10%
 customers in the total annual sales amount

 Proportion of related parties’ sales amount of the top
 five customers’ sales amount in the total annual sales                                                                       0.00%
 amount

Note: The customers under the control of the same actual controller shall be listed together, except those under the actual control of
the same state-owned assets management institution.


Information of the Company’s top five customers

                                                                                               Proportion in the total annual sales
     No.                     Customer name                      Sales amount (yuan)
                                                                                                             amount

 1             Customer a1                                              3,052,496,406.11                                       9.06%

 2             Customer a2                                              1,180,127,547.89                                       3.50%

 3             Customer a3                                               676,479,961.92                                        2.01%

 4             Customer a4                                               594,032,885.39                                        1.76%

 5             Customer a5                                               593,649,176.90                                        1.76%

 Total                             --                                   6,096,785,978.21                                      18.10%

Other information of major customers

                                                                   40
                                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.


□ Applicable √ N/A
Information of the Company’s major suppliers

 Total purchase amount of the top five suppliers (yuan)                                                             2,391,591,676.59

 Proportion of the total purchase amount of the top five
                                                                                                                              10.66%
 suppliers in the total annual purchase amount

 Proportion of related parties’ purchase amount of the
 top five customers’ purchase amount in the total annual                                                                      0.00%
 purchase amount



Information of the Company’s top five suppliers

                                                                                              Proportion in the total annual purchase
     No.                    Supplier name                     Purchase amount (yuan)
                                                                                                             amount

 1            Supplier b1                                                557,325,884.72                                        2.48%

 2            Supplier b2                                                515,430,595.92                                        2.30%

 3            Supplier b3                                                468,724,901.88                                        2.09%

 4            Supplier b4                                                441,540,123.61                                        1.97%

 5            Supplier b5                                                408,570,170.46                                        1.82%

 Total                            --                                    2,391,591,676.59                                      10.66%



Other information of major suppliers
□ Applicable √ N/A




3. Expenses

                                                                                                                         Unit: RMB yuan

                                                                            Year-on-year
                                   2020                     2019             percentage                   Note on changes
                                                                          increase/decrease

 Sales expenses               5,970,614,819.26      5,797,236,883.02                 2.99%      No significant changes

 Administrative
                                998,746,330.35      1,095,227,423.65                -8.81%      No significant changes
 expenses




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                                                                          It is primarily due to a lower base of
                                                                          financial expense in the comparable
                                                                          period as a result of the write-down
                                                                          of financial expense caused by the
 Financial expenses      34,200,637.61      2,473,146.13     1,282.88%    cash settled interest adjustment of
                                                                          the   contingent   consideration   of
                                                                          Sinclair’s product rights in the same
                                                                          period of the previous year.



 R&D expenses           926,725,468.93   1,072,937,182.39      -13.63%    No significant changes


4. R&D investment

√Applicable □ N/A

      (1) Overall situation of R&D
      With “scientific research-based, patient-centered” as the corporate philosophy, the Company
continued to increase investment in R&D, and continuously enriched its arrangements in the R&D
of innovative drug pipeline. During the reporting period, the Company invested RMB1.444 billion
on R&D in the pharmaceutical industry, an increase of 8.91% year on year, of which, RMB918
million was spent on direct R&D, down 12.96% from 2019 (RMB1.055 billion), and RMB525
million was spent on the introduction of external new drug technologies and rights, up 94.10% from
2019. The research and development work of the Company mainly involves the following aspects:
      1) Continued to practice the new drug R&D model which combines independent R&D +
cooperative development + product license-in, tracked the latest international drug action
mechanism and target as well as advances in clinical application research, accelerated the
development of innovative drugs and the introduction of innovative drug projects at home and
abroad, and obtained the approval regarding potential innovative drugs in the fields of metabolism
and nephrosis;
      2) Focused on varieties with superior clinical effect and pharmacy for special population,
accelerated the R&D of generic drugs with high technical barrier and improved new drugs (505b
(2)), and initiated key projects centering on autoimmunity, antivirus and anti-tumor fields during the
reporting period;
      3) Continued to improve the process and quality level of bulk drugs and preparations, reduced
the cost, actively developed dosage forms of on-line products, and strengthened the market
competitiveness; and
      4) Strengthened the evaluation on the comprehensive dynamic of varieties under research,

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ensured the R&D progress of key varieties under research to the greatest extent through the priority
ranking of ongoing projects and the rational allocation of R&D resources.
     (2) R&D of projects regarding major innovative drugs and biosimilars
     The Company has drawn up a strategic plan for the development of innovative drugs for the
next five years, clearly defined the key direction and number of innovation projects for each year
during the planning period centering on the existing therapeutic fields, and proposed that no less
than 15 innovative varieties (including original new drugs, improved new drugs, innovative medical
devices and high-end products) should be established and reserved annually during the planning
period. During the reporting period, the Company actively boosted the clinical research on
innovative drugs under research and key biosimilars, seeking early approval for launch to the
market. In addition, the Company actively explored and learned from the international advanced
innovative drug R&D system building, continuously optimized and adjusted its overall R&D
system structure, improved the functional modules on the R&D of innovative projects through the
introduction of high-end R&D personnel, to achieve the objectives on the strategic planning of the
Company’s innovative projects.
     (3) Progress on the clinical research of key innovative drugs, innovative medical devices
and biosimilars
     1) Mefatinib: Mefatinib for the treatment of advanced non-small cell lung cancer is under
phase II clinical trial and the registration for phase III clinical trial is also under progress, and it is
planned that the enrollment of the last subject will be completed in the third quarter of this year;
     2) TTP273: the world’s first oral GLP-1 receptor agonist small-molecule innovative drugs, is
currently undergoing multi-regional phase II clinical trials in Chinese mainland and Taiwan. The
phase II clinical trial was led by Nanfang Hospital of Southern Medical University, and the first
subject was administrated in December 2020;
     3) HD-NP-102 (dynamic TGFR monitoring system): The renal function is evaluated through
real-time monitoring of glomerular filtration rate. The application for carrying out the clinical trial
of MB102 (fluorescent tracer), class 1 new drug used in the monitoring syste m, in China has been
accepted. The MRCT clinical trial of the TGFR dynamic monitoring system will be carried out after
the Clinical Trial Notification is officially obtained;
     4) HDM3002 (PRV-3279): It is used for the treatment of systemic lupus erythematos us (SLE)
and for preventing or reducing the immunogenicity of gene therapy, and two indications of it are
being tested in the United States. Phase I 1a and 1b trials have been completed for the indications of
SLE (systemic lupus erythematosus), and indications regarding preventing or reducing the

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immunogenicity of gene therapy are under preclinical trials. The phase II clinical research of
PRV-3279 is expected to be carried out in the second half of 2021, and part of the trial will be
carried out in China;
     5) HDM2002 (IMGN853, ADC drug under research): the world’s first ADC drug under
research for FRα-positive ovarian cancer, is used to treat platinum-resistant ovarian cancer with
high expression of folate receptor. The clinical trials of HDM2002, including MRCT phase III
clinical and PK bridging trials, have received clinical approval, and various pre-clinical preparations
are currently being promoted as planned;
     6) Overall arrangement of R&D of early innovative drugs: drug screening and activity
characterization regarding oral GLP-1 innovative drugs for the treatment of type 2 diabetes,
anti-tumor projects including CDK targeted drugs and innovative drugs such as PROTACT are
under way as planned; and
     7) Biosimilars: GLP-1 receptor agonist liraglutide injection, one of the Company’s key
diabetes products, is undergoing phase III clinical research for indications for diabetes and weight
loss in China. The phase III clinical trial on the indications for diabetes has basically been
completed, and it is expected that all clinical work will be completed by the end of the second
quarter of 2021, and application for registration will be submitted soon afterwards. The clinical
work regarding the indications for weight loss is expected to be completed in the third quarter of
this year, and registration will be submitted before the end of this year. It is planned that the
investigational new drug (IND) domestic clinical trial application regarding semaglutide injection
will be launched in 2021. Preparation regarding phase III clinical work of HDM3001 (QX001S) is
being made, and phase III clinical trials are scheduled to be carried out in the second half of this
year. Clinical application regarding ranibizumab injection has been submitted and supplementary
information has been submitted. Insulin degludec injection, insulin aspart injection and glucagon
are under preclinical study.
     (4) Progress of R&D of major generic drugs
     During the reporting period, the Company conducted earnest dynamic evaluation and combing
of the existing generic drug varieties under research, and further clarified the varieties to be focused
and prioritized. The progress regarding the key varieties is as follows:
     1) Diabetes: On-site verification regarding Metformin Hydrochloride and Empagliflozin
Tablets (5/500mg) has been completed, and approval is expected to be obtained within the year.
Canagliflozin Tablets (specifications: 0.1g, 0.3g) has been declared for production. Sitagliptin
Phosphate/Metformin Hydrochloride Tablets (50/850mg) has been declared for production.

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Pioglitazone Hydrochloride and Metformin Hydrochloride Tablets (15/850mg) is under laboratory
research;
      2) Immunity: Laboratory research regarding tacrolimus extended-release tablets, granules and
ointment was carried out as planned;
      3) Anti-tumor: On-site verification regarding letrozole tablets has been completed, and
approval is expected to be obtained within the year. Sorafenib tablets has been declared for
production. Ibrutinib capsules and olaparib tablets are under laboratory research;
      4) Super antibiotic: On-site verification regarding Micafungin Sodium for Injection has been
completed, and approval is expected to be obtained within the year;
      5) Digestion: Supplementary materials regarding Compound Omeprazole and Sodium
Bicarbonate Capsule have been submitted and approval is expected to be obtained within the year;
and
      6) Cardiovascular: Macitentan tablets has been declared for production.
      (5) R&D and registration of aesthetic medicine products
      During the reporting period, MaiLi  series products, new and high-end lidocaine-containing
hyaluronic acid filler produced by Sinclair, a wholly-owned subsidiary of the Company, using
OXIFREE patented technology and process have obtained CE certification of EU in June 2020,
which will be launched in the European market in the first half of 2021, and registration in the
Chinese market has already been started.
      F1, a medical device related to frozen freckle-removing and skin whitening introduced from
R2, US, has obtained the 510(k) approved by the FDA. In August 2020, the Company signed a
strategic cooperation agreement with Jetema, a South Korean listed company, to introduce its
botulinum toxin type A. In February, 2021, Sinclair, a wholly-owned subsidiary of the Company,
acquired the 100% equity in High Tech, a Spanish company engaged in energy source aesthetic
medicine device. The design of the clinical protocols in China of the above products is being carried
out in an orderly manner.
      Ellansé, a novel collagen stimulator, the core product of Sinclair, has obtained the Medical
Device Registration Certificate issued by the National Medical Products Administration on April 13,
2021, and will be officially marketed in Chinese mainland in the second half of 2021.
      Silhouette Instalift is the only absorbable thread approved by the FDA for mid-face tissue
lift, which adopts 3D cone suspension technology, can achieve immediate and long-lasting tissue
repositioning, stimulate collagen regeneration, and effectively remodel face and neck contours. The
clinical trial of Silhouette Instalift in China is being carried out smoothly.
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     The Glacial Spa (F0), a whitening and refreshing device imported from R2, is the life
cosmetology version of the medical instrument for frozen freckle removal. It adopts aesthetic
medicine technology and is introduced into the life cosmetology channel through the energy safety
test, and is scheduled to go on sale in China in the second quarter of 2021. The registration of
Glacial Rx (F1) in China, a medical instrument for frozen freckle removal, is being carried out in
an orderly manner.
     MaiLi series products, novel high-end lidocaine-containing hyaluronic acid filler using
OXIFREE patented technology and process, will be launched in the European market in the first
half of 2021, and registration in the Chinese market has been initiated.
     Cooltech Define, a non-invasive cryolipolysis equipment independently developed by High
Tech, Spain, which is newly acquired by Sinclair, has officially obtained the CE certification of EU
in February 2021, and Titania, an innovative radiofrequency product under research for skin
tightening and body shaping, is expected to obtain the CE certification of EU in the fourth quarter
of 2021 and will be available for sale globally once it is approved.
     The Company has actively expanded its teams in accordance with the launch progress of
Ellanséand Glacial, and has started pre-launch preparations.
     (6) Progress of consistency evaluation
     During the reporting period and the first quarter of 2021, the consistency evaluation on the
quality and efficacy of the Company’s generic drugs was progressing well, Mycophenolate Mofetil
Capsules (0.25g), Clarithromycin Tablets (0.25g) and Pioglitazone Hydrochloride and Metformin
Hydrochloride Tablets have all obtained consistency evaluation. Pioglitazone Hydrochloride Tablets
(15mg) was granted the notice of acceptance of the supplementary application for consistency
evaluation. On-site verification of Pioglitazone Hydrochloride Tablets (30mg) has been completed.
Decitabine for injection and daptomycin for injection are under the stage of submitting
supplementary materials, and the other varieties to be evaluated are under pharmaceutical research,
pilot scale-up or process validation.
     (7) Progress of patent
     The Company has attached great importance to the protection of its intellectual property rights
and the application of results in recent years, and the number of patent applications and grants are
steadily increasing. The Company has applied for more than 560 patents at ho me and abroad over
the years, of which more than 270 were granted. Hangzhou Zhongmei Huadong Pharmaceutical Co.,
Ltd., a wholly-owned subsidiary of the Company, is a national IP demonstration enterprise and is
rated as excellent in the annual assessment in 2020. In November 2014, the Company passed the

                                                  46
                                                           The 2020 Annul Report of Huadong Medicine Co., Ltd.


external audit of Zhongzhi (Beijing) Certification Co., Ltd., becoming one of the 147 enterprises
who have firstly passed the standard implementation certification. During the reporting period, the
Company successfully passed the reexamination review on supervising the standard implementation
of corporates’ intellectual property.
     During the reporting period, the Company’s patent application and maintenance proceeded
smoothly. Zhongmei Huadong, a wholly-owned subsidiary of the Company, applied and submitted
a total of 67 patents, among which 58 were utility patents, 14 were authorized in China and 11 of
the authorized ones were utility patents. In April 2020, the utility patent “Enzyme for synthesizing
and metabolizing inosine monophosphate of Cordyceps sinensis (Berk.) Sacc. Hirsutella sinensis
and application thereof” of Zhongmei Huadong was awarded the golden patent prize in Zhejiang
Province, with the patent number: ZL201110267161.3.
     (8) Other important issues related to R&D
     1) In January 2021, the Company entered into an agreement with Shanghai Yuanda Investment
Management Co., Ltd. and Hangzhou High-tech Venture Capital Management Co., Ltd. and jointly
set up Hangzhou Fuguang Hongxin Equity Investment Partnership (L.P.) (referred to as
“Pharmaceutical Industry Fund”). The Pharmaceutical Industry Fund was established with a total
scale of RMB200 million, of which RMB98 million is contributed by the Company with its own
funds and the Company is a limited partner of the Pharmaceutical Industry Fund. The
Pharmaceutical Industry Fund mainly invests in startup and early projects in the fields of aesthetic
medicine, endocrinology, anti-rejection regarding organ transplantation, alimentary canal, tumor,
nephrology, immunology, etc. As of the disclosure date of this report, the Pharmaceutical Industry
Fund had completed the initial fund raising, finished the industrial and commercial registration
procedures, and completed the filing with AMAC on April 2, 2021.
     2) In December 2020, Zhongmei Huadong, a wholly-owned subsidiary of the Company, signed
a strategic cooperation agreement with Sanyou Bio, a biotechnology company that focuses on the
overall solution for the R&D of innovative antibody drugs. The two sides will jointly develop
innovative dual-antibody and ADC molecules targeting high-quality targets to accelerate the launch
of a new generation of anti-tumor drugs.
     3) In November 2020, Zhongmei Huadong, a wholly-owned subsidiary of the Company,
signed an agreement on the cooperative development of pipelines with XtalPi, an artificial
intelligence (AI) drug R&D technology company driven by digital and intelligent technologies. The
two sides will conduct in-depth cooperation on the discovery of high-quality new anti-tumor drug
targets, and make full use of the advantages of AI technology featuring large exploration space, high

                                                 47
                                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.


computing efficiency and accurate computational results, as well as the advanced technologies and
commercial integration capability of Huadong Medicine in the field of anti-tumor, to jointly
develop a new generation of anti-tumor drugs.
      4) In September 2020, the Company established a cooperative development partnership with
Exscientia, the world’s leading AI drug R&D company, to accelerate the discovery of novel
treatments for small-molecule drugs against tumor. The first project between the two sides is the
development of drugs that target the transcriptional control of DNA damage response genes to treat
patients with a high frequency of mutations in repair of DNA damage, such as patients with ovarian
and breast cancer.
R&D investment of the Company

                                               2020                              2019                     Percentage change

 Number of R&D personnel
                                                           1,207                             1,078                         11.97%
 (person)

 Proportion of R&D personnel                             12.79%                            11.31%                           1.48%

 R&D investment amount
                                                 918,180,946.98                  1,054,842,676.50                         -12.96%
 (yuan)

 Proportion of R&D
 investment in operating                                   8.06%                           10.04%                          -1.98%
 revenue

 Capitalized R&D investment
                                                             0.00                             0.00                          0.00%
 amount (yuan)

 Proportion of capitalized
 R&D investment in R&D                                     0.00%                            0.00%                           0.00%
 investment

Notes: (1) The above R&D investment is from the R&D expenses of the Company’s main industrial controlled subsidiary, totaling
RMB918 million, which is mainly used for clinical research of products under research, upgrading of existing product process,
expenses for commissioned technological development, consistency evaluation and international registration certification. In terms of
finances, most of R&D investment is listed in expense, and is recognized in the current period without subsequent annual
amortization, which will not have a significant impact on the Company’s future operating results.
In 2020, the Company’s total R&D investment in the pharmaceutical industry was RMB1.444 billion, a year-on-year increase of
8.91%; of which, RMB918 million was used for direct R&D, a decrease of 12.96% from 2019 (RMB1.055 billion), and RMB525
million was used for the introduction of external new drug technologies and rights, an increase of 94.10% over 2019.
(2) The proportion of the number of R&D personnel means the proportion of the number of people in the Company’s subsidiaries
mainly engaging in pharmaceutical manufacturing; the proportion of R&D investment in operating income means the proportion of
the R&D investment of Company’s pharmaceutical industry in the operating income of the Company’s pharmaceutical
manufacturing.
(3) The above-mentioned R&D personnel for 2020 are: The total of R&D personnel of the Company’s R&D system and R&D
personnel of the production system.


                                                                    48
                                                                                The 2020 Annul Report of Huadong Medicine Co., Ltd.




Reasons for the year-on-year significant change in the proportion of total R&D investment in operating revenue

□ Applicable √ N/A
Reasons for the significant change in the capitalization rate of R&D investment and its rationality
□ Applicable √ N/A


5. Cash flows

                                                                                                                     Unit: RMB yuan

               Item                              2020                             2019                     Year-on-year change

Cash inflows from operating
                                                37,110,493,946.97                 38,801,282,424.47                            -4.36%
activities

Cash outflows for operating
                                                33,699,046,199.41                 36,799,584,253.80                            -8.43%
activities

Net cash flow from operating
                                                 3,411,447,747.56                  2,001,698,170.67                            70.43%
activities

Cash inflows from investing
                                                   385,678,726.69                     74,637,287.55                          416.74%
activities

Cash outflows for investing
                                                 2,124,316,150.63                  1,657,245,184.32                            28.18%
activities

Net cash flow from investing
                                                -1,738,637,423.94                 -1,582,607,896.77                            -9.86%
activities

Cash inflows from financing
                                                 2,211,047,477.21                  1,922,537,327.51                            15.01%
activities

Cash outflows for financing
                                                 2,936,777,488.44                  2,531,134,823.51                            16.03%
activities

Net cash flow from financing
                                                  -725,730,011.23                   -608,597,496.00                           -19.25%
activities

Net increase in cash and cash
                                                   925,635,526.76                   -166,937,959.56                          654.47%
equivalents

Main influencing factors of significant changes in relevant data year on year

√ Applicable □ N/A
The cash inflows from investing activities in the current period are 3.86 billion yuan, a year-on-year decrease of 75 million yuan or
416.74%, mainly due to the transfer of distribution rights in the Western European market of related products of Sinclair, a
wholly-owned subsidiary of the Company in the UK, during the current reporting period..


Reasons for the significant difference between the Company’s net cash flow from operating activities and the current year’s net profit
during the reporting period
□ Applicable √N/A



                                                                   49
                                                                                          The 2020 Annul Report of Huadong Medicine Co., Ltd.


II. Analysis of non-main business

√ Applicable □ N/A
                                                                                                                                   Unit: RMB yuan

                                                  Proportion
                                                                                                                                    Sustainable or
                                Amount              in total                               Note on reasons
                                                                                                                                         not
                                                        profit

                                                                     Mainly due to the confirmation of government grants
 Other gains                 191,999,829.91               5.56%                                                                    No
                                                                     in the current period

                                                                     Nainly due to the transfer of distribution rights in the
 Gains on asset                                                      Western European market of related products of
                             322,636,323.26               9.34%                                                                    No
 disposal                                                            Sinclair, a wholly-owned subsidiary of the Company
                                                                     in the UK, during the current reporting period..


IV. Assets and liabilities

1. Major changes in asset composition

Since 2020, the Company has implemented new financial instrument standards, new income standards or new lease standards for the
first time, and adjusted and implemented items related to financial statements at the beginning of the year

√ Applicable □ N/A
                                                                                                                                   Unit: RMB yuan

                               End of 2020                        Beginning of 2020            Change
                                                                                                  of
                                        Proportion in                          Proportion in                         Note on major changes
                          Amount                                 Amount                        proportio
                                         total assets                           total assets
                                                                                                  n

                                                                                                           Mainly due to the increase of inflow of
                                                                                                           operating net cash during the current
                       3,198,080,997.                     2,402,730,395.
Monetary funds                                13.21%                                 11.19%       2.02% period and the increase of balance of
                                   82                                     39
                                                                                                           monetary capital at the end of the
                                                                                                           period.

                                                                                                           Mainly due to the increase of the total
Accounts               6,137,675,568.                     6,092,305,184.                                   assets during the current period and the
                                              25.36%                                 28.38%      -3.02%
receivable                         82                                     47                               decrease of the proportion of accounts
                                                                                                           receivable.

                                                                                                           Mainly due to the increase of total
                       4,067,635,254.                     4,038,975,496.
Inventories                                   16.81%                                 18.82%      -2.01% assets during the current period and the
                                   80                                     93
                                                                                                           decrease of the proportion of inventory.

Real estate
properties for         17,792,735.95           0.07% 21,701,908.75                    0.10%      -0.03% /
investment



                                                                           50
                                                                                       The 2020 Annul Report of Huadong Medicine Co., Ltd.


Long-term equity      850,072,053.0                                                                   Mainly due to the increase of equity
                                               3.51% 222,595,018.54                 1.04%     2.47%
investments                        2                                                                  investment during the current period.

                      2,420,366,582.                    2,175,216,842.
Fixed assets                               10.00%                                   10.13%   -0.13%
                                 92                                  65

Constructions in      2,240,201,926.                    1,829,808,233.
                                               9.26%                                8.53%     0.73%
progress                         65                                  19

                                                                                                      Mainly due to the increase in
Short-term            1,416,932,884.                                                                  repayment of corporate bonds upon
                                               5.85% 655,549,973.27                 3.05%     2.80%
borrowing                        87                                                                   maturity of bank financing during the
                                                                                                      current reporting period.

Long-term             151,611,367.8
                                               0.63%                0.00            0.00%     0.63% /
borrowing                          6

                                                                                                      Mainly due to the increase in advance
Other non current 712,069,194.0
                                               2.94% 184,141,659.07                 0.86%     2.08% payment of technology transfer during
assets                             8
                                                                                                      the current period.




2. Assets and liabilities measured at fair value

√Applicable □ N/A

                                                                                                                                Unit: RMB yuan

                                                                      Depreciat
                      Amount                       Accumulated              ion
                                  Gains and                                            Amount of      Amount of                       Amount
                       at the                          fair value      reserves
                                 losses from                                            buying in     selling out      Other       at the end
       Item           beginnin                         changes        withdraw
                                  changes in                                           during the     during the      changes         of the
                      g of the                    recognized in        n during
                                  fair value                                             period         period                        period
                       period                           equity              the
                                                                           period

 Financial
 assets

 Including:
 Other equity         241,675,    -7,557,508.                                                         3,252,055.1    5,413,028     225,453,1
                                                  -7,557,508.15
 instrument             712.05            15                                                                     9          .66         20.05
 investments

                      241,675,    -7,557,508.                                                         3,252,055.1    5,413,028     225,453,1
 Total                                            -7,557,508.15
                        712.05            15                                                                     9          .66         20.05

 Financial
                          0.00                                                                                                           0.00
 liabilities

Other changes
None



                                                                       51
                                                                                        The 2020 Annul Report of Huadong Medicine Co., Ltd.


Whether there are significant changes in the main asset measurement attribute of the Company during the Report Period.
□ Yes     √ No


3. Limitation of asset rights at the end of the reporting period

                                                                                                                                      Unit: RMB yuan

Item                                               Book value at the end of the period                        Reason for limitation
Monetary funds                                                                      40,673,924.56                      Cash deposit
Bills receivable                                                                     2,648,002.20                       Bill pledge
Fixed assets                                                                        32,222,155.71    Mortgage guarantee for borrowing
Intangible assets                                                                    4,428,290.15    Mortgage guarantee for borrowing

Total                                                                               79,972,372.62




V. Investment

1. Overview

√ Applicable □ N/A

 Investment amount in the reporting period          Investment amount in the same period of
                                                                                                                   Percentage change
                      (yuan)                                     last year (yuan)

                                2,195,588,789.55                               1,965,240,000.00                                                 11.72%


Note: The investment amount in the reporting period refers to the total capital expenditure in the reporting period.

2. Significant equity investments acquired during the reporting period

√ Applicable □ N/A
                                                                                                                       Unit: RMB ten thousand yuan

                                                                                                               Profit
 Name                                                                                                 Pro or loss
    of                                                                                   Progress as ject        of       Involve               Disclos
             Main     Way of Investm Shareh                          Term of                                                         Disclos
 investe                                           Capital                     Product      of the        ed investm        d in                  ure
            busines investm       ent    olding              Partner investm                                                         ure date
      d                                            source                        type      balance    inc      ent in litigatio                  index
                  s     ent     amount    ratio                         ent                                                          (if any)
compan                                                                                    sheet date om         the       n or not              (if any)
      y                                                                                                   e   current
                                                                                                               period

Chongq R&D            Capital                                                                                                                   http://w
                                                                                         All
ing         of        increas                      Own                                                        No                                ww.cni
                                21,000 39.80%                /      /          Equity payments        /                  No          N/A
Peg-Bi biologi e and                               funds                                                      profit                            nfo.co
                                                                                         completed
o           cal       equity                                                                                  for the                           m.cn


                                                                        52
                                                                              The 2020 Annul Report of Huadong Medicine Co., Ltd.


Biopha chemic transfer                                                                             time
rm Co., al                                                                                         being
Ltd.        product
            and
            technol
            ogies;
            R&D
            of
            ferment
            ation
            process
            optimiz
            ation
            technol
            ogy

                                                                                                                               http://w
            Biologi Capital
Qyuns                                                                                              No                          ww.cni
            cal       increas                                                   All                                  August
Therapeu                         37,000.            Own                                            profit                      nfo.co
            medicin e and                  20.56%           /   /        Equity payments       /             No      18,
tics Co.,                            00             funds                                          for the                     m.cn
            e R&D, equity                                                       completed                            2020
Ltd.                                                                                               time
            etc.      transfer
                                                                                                   being

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            Aesthet                                                                                No                          ww.cni
Kylane                           EUR6,                                          All                                  October
            ic        Acquisi                       Own                                            profit                      nfo.co
Laborato                         000,00 20.00%              /   /        Equity payments       /                  No 16,
            medicin tion                            funds                                          for the                     m.cn
ires SA                                0                                        completed                            2020
            e R&D                                                                                  time
                                                                                                   being

Notes: 1. Zhongmei Huadong, a wholly-owned subsidiary of the Company, invested a total of RMB210 million to Peg-Bio Biopharm
Co., Ltd. (Chongqing) by means of capital increase and acquisition of minority holding twice, and acquired 39.80% of its equity,
becoming its second largest shareholder. As of December 31, 2020, Zhongmei Huadong had paid all the investment funds, and
Peg-Bio Biopharm Co., Ltd. (Chongqing) had completed the relevant industrial and commercial change registration.
2. Zhongmei Huadong, a wholly-owned subsidiary of the Company, contributed RMB370 million to invest in the stock equity of
Qyuns Therapeutics through the form of capital increase, and held 20.56% of its equity after investment, becoming its second largest
shareholder. As of December 31, 2020, Zhongmei Huadong had paid all the investment funds, and Qyuns Therapeutics had
completed the relevant industrial and commercial change registrat ion.
3. Sinclair, a wholly-owned subsidiary of the Company, entered into an agreement on equity investment and collaborative product
development with Kylane Laboratoires SA, a Swiss advanced aesthetic medicine R&D firm. Sinclair contributed EUR6 million for a
20% equity in Kylane, making it Kylane’s third-largest shareholder. As of December 31, 2020, all the investment funds had been
paid.
4. In April 2019, the Company entered into a strategic partnership with R2, an American company specializing in the development of
medical devices and technologies related to frozen freckle-removing and whitening. The Company invested USD30 million in R2’s
equity and became a shareholder. As of the reporting date, the USD30 million for equity investment had been fully paid out and the
Company held a 34% equity upon completion of the investment.

                                                                    53
                                                                                                         The 2020 Annul Report of Huadong Medicine Co., Ltd.


5. In July 2019, the Company entered into a strategic cooperation with MediBeacon, a US company dedicated to the development of
contrast agents and equipment in the medical field such as renal function and gastrointestinal function evaluation, and invested
USD30 million in its stock equity. As of the end of the reporting period, the Company had paid USD15 million to MediBeacon,
accounting for 4.30% of its shares, and the remaining USD15 million will be paid as agreed in the contract.


3. Significant non-equity investments in progress during the reporting period

√ Applicable □ N/A
                                                                                                                                                          Unit: RMB yuan

                                                                 Cumulati
                                                                                                                         Cumulati Reasons
                                                                  ve actual
                                                   Investme                                                                 ve              for not
                                        Industry                 investme
                           Investme                      nt                                                               income           meeting
                                       involved                        nt
               Way of        nt in                 amount                                                                 realized           the       Disclosu Disclosu
    Project                              in the                   amount         Capital          Project Projected
              investme      fixed                   during                                                                by the           planned      re date   re index
    name                               investme                    by the        source       progress income
                 nt        assets or                     the                                                              end of           schedule (if any)      (if any)
                                           nt                      end of
                             not                   reporting                                                                the              and
                                        project                        the
                                                    period                                                               reporting projected
                                                                 reporting
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Huadong                                                                                                                                                March 9, http://w
Medicin                                                                                                                                                2017       ww.cninf
e                                                                                                                                                                 o.com.cn
Biomedi
                                       Pharmac
cal
              Self-built               eutical     387,907, 1,716,33 Own
Science                    Yes                                                                    90.00%             /                 / N/A
              project                  manufact      668.09 1,906.80 funds
and
                                       uring
Technolo
gy Park
Project
Phase II

                                                   387,907, 1,716,33
Total             --             --        --                                        --             --               /                 /      --          --         --
                                                     668.09 1,906.80


4. Investment in financial assets

(1) Securities Investment

√ Applicable □ N/A


                                                                                                                                                          Unit: RMB yuan

                           Stock       Initial Account          Book        Gain/los Accumu Purchas Selling Gain/los                          Book
 Type of      Stock                                                                                                                                     Account Capital
                        abbrevia investm           ing         value at s from            lative          e     amount s during value at
    stock      code                                                                                                                                     ing item source
                           tion       ent cost measure           the          fair         fair      amount      in the          the         the end

                                                                                     54
                                                                                    The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                        ment      beginni    value         value    in the    current reportin   of the
                                       model       ng of    changes changes current           period g period period
                                                    the      in the   included period
                                                  period    current         in
                                                            period     equity

 Dome                                                                                                                     Other
                                       Fair
 stic                                                                                                                     equity
                               20,20   value       42,00      -9,76        -9,76              8,665,             23,58
 and                                                                                                                      instru   Own
            RAPT       RAPT   7,400.   measu       9,254.    1,293.        1,293.        --    083.8        --   2,877.
 overs                                                                                                                    ment     funds
                                  00   remen          79         38           38                   5                56
 eas                                                                                                                      invest
                                       t
 stock                                                                                                                    ment

 Other securities
 investments held at the                     --                                                                             --       --
 end of the period

                               20,20               42,00      -9,76        -9,76              8,665,             23,58
 Total                        7,400.         --    9,254.    1,293.        1,293.        --    083.8        --   2,877.     --       --
                                  00                  79         38           38                   5                56

 Date of announcement of
 the Board of Directors on
                              N/A
 securities investment
 approval

 Date of announcement of
 the Board of
 Shareholders on              N/A
 securities investment
 approval (if any)

     Note: In 2019, Huadong Medicine Investment Holding (Hong Kong) Co., Ltd., a subsidiary of the Company,
invested USD 3 million to purchase 218,102 preferred shares of RAPT Therapeutics, Inc. in C-2 series. RAPT
Therapeutics, Inc. (stock code: RAPT) was listed on the NASDAQ Stock Exchange on October 30, 2019.
Huadong Medicine Investment Holding (Hong Kong) Co., Ltd. holds 0.74% of the total shares of RAPT
Therapeutics, Inc.

(2) Derivatives investment

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


5. Use of raised funds

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




                                                                      55
                                                                              The 2020 Annul Report of Huadong Medicine Co., Ltd.


VI. Major assets and equity sales

1. Major assets sales

□ Applicable √ N/A

No such case during the reporting period.


2. Major equity sales

□ Applicable √ N/A


VII. Analysis of wholly-partially owned and shareholding companies

√ Applicable □ N/A
Main subsidiaries and the shareholding companies that have an impact on the Company’s net profit of more than 10%
                                                                                                                     Unit: RMB yuan

  Company                             Main       Registered                                 Operating    Operating
               Company type                                   Total assets    Net assets                                 Net profit
    name                         business          capital                                  revenue       profit

                               Production
                               and
                               management
Hangzhou                       of Traditional
Zhongmei                       Chinese and
                                                              9,552,485,03 6,943,175,42 11,040,482,0 2,683,887,25 2,332,440,96
Huadong        Subsidiary      Western raw 872,308,130
                                                                       6.62          2.15        97.70         7.80             7.67
Pharmaceutic                   medicines
al Co., Ltd.                   and
                               preparations,
                               and health
                               care products

Huadong                        Sales of
Ningbo                         biological                     1,004,249,30 564,257,925. 1,284,921,26 164,162,105. 123,375,008.
               Subsidiary                       5,000,000
Medicine                       products as                             6.28            95         2.37             58             73
Co., Ltd.                      proxy

                               Wholesale of
                               TCM
                               materials,
Huadong
                               TCM
Medicine                                                      1,206,969,15 231,107,415. 2,519,633,08 42,021,431.2 28,705,403.6
               Subsidiary      decoction        61,300,000
Wenzhou                                                                9.63            39         0.86               4                6
                               pieces,
Co., Ltd.
                               chemical
                               preparations,
                               etc.



                                                                  56
                                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.


Huadong
Medicine
                                Warehousing
Supply Chain                                                  239,818,600. 129,389,498. 164,492,370. 25,093,155.0 17,393,751.7
               Subsidiary       and storage    50,729,863
Management                                                              19                43                77            0                  6
                                services
(Hangzhou)
Co., Ltd.

                                R&D,
                                production
Sinclair
                                and sales of   219,962,963. 975,941,324. 493,007,584. 319,167,474. 146,645,400. 109,468,406.
Pharma         Sub-subsidiary
                                aesthetic      92                       76                35                26           16             19
Limited
                                medicine
                                products

Acquisition and disposal of subsidiaries during the reporting period
√ Applicable □ N/A

                                                Methods of acquisition and disposal of             Impact on the overall production,
               Company name
                                               subsidiaries during the reporting period                operation and performance

 MediBeacon      Technology     (Shanghai)                                                     Business operation of medical apparatus
                                               New subsidiary
 Co., Ltd.                                                                                     and instruments of the Company

 Zhejiang Huida Biotech Co., Ltd.                                                              Technology innovation platform in the
                                               New subsidiary                                  field   of    microbial   pharmacy      the
                                                                                               Company

 Shenzhen Xinda Yanchuang Technology                                                           External      technical   services      and
                                               New subsidiary
 Development Co., Ltd.                                                                         cooperation

 Sinclair Pharmaceuticals (Asia-Pacific)                                                       International aesthetic medicine business
 Pte Ltd.                                      New subsidiary                                  expansion     of   subsidiaries    of   the
                                                                                               Company

 Sinclair Chile SPA                                                                            International aesthetic medicine business
                                               New subsidiary                                  expansion of subsidiaries of the
                                                                                               Company

 Sinclair (Shanghai) Medical Technology                                                        International aesthetic medicine business
 Co., Ltd.                                     New subsidiary                                  expansion     of   subsidiaries    of   the
                                                                                               Company

 R2 (Shanghai) Medical Technology Co.,                                                         International aesthetic medicine business
 Ltd.                                          New subsidiary                                  expansion     of   subsidiaries    of   the
                                                                                               Company

 Beijing        Huachuang         Dongxin                                                      External technical services and
                                               New subsidiary
 Technological Development Co., Ltd.                                                           cooperation

 Huadong Medicine Medical Equipment                                                            Commercial business adjustment of the
                                               Cancellation
 Technology (Hangzhou) Co., Ltd.                                                               Company

 Ningbo Sinfmuse Medical Investment            Cancellation                                    Commercial business adjustment of the


                                                                  57
                                                                          The 2020 Annul Report of Huadong Medicine Co., Ltd.


 Management Co., Ltd.                                                                Company

 Huadong          Medicine       Wuhan                                               Commercial business adjustment of the
                                           Cancellation
 Pharmaceutical Co., Ltd.                                                            Company

Note: Sinclair (Shanghai) Medical Technology Co., Ltd. was renamed as Xinkeli Aesthetics (Shanghai) Medical Technology Co., Ltd.
on April 1, 202


VIII. Structured entities controlled by the Company

□ Applicable √ N/A


IX. Prospect of the Company’s future development

      1. Development status and prospect of macro economy and pharmaceutical industry
      In 2020, the sudden outbreak of the COVID-19 pandemic was intertwined with the world’s
seismic changes not seen for a century, bringing a huge impact to the world. The pandemic has had
a serious impact on people’s life, health and economic activities, which has aggravated the already
weak world economy. Economic globalization has encountered headwinds. The international
environment is becoming more and more complex. The world has entered a period of turbulent
change, with significantly increasing instability and uncertainty. As pointed out by the Fifth Plenary
Session of the 19th CPC Central Committee, peace and development are still the theme of the ti mes,
and China’s development is still in an important strategic opportunity period. On the one hand, a
new round of scientific and technological revolution and industrial transformation has developed
deeply in the world today, and international power contrast has been profoundly adjusted. Peace and
development are still the theme of the times. The concept of a community with a shared future for
mankind has become popular, and China’s appeal and influence as a responsible large country in the
global pandemic control have increased significantly; on the other hand, China has turned to the
stage of high-quality development, with significant institutional advantages, improved governance
efficiency, long-term economic improvement, strong material basis, abundant human resources,
broad market space, strong development resilience, and social stability, and has multiple advantages
and conditions for continued development.
      The Chinese government controlled the spread of COVID-19 in China in a timely manner and
achieved a rapid recovery of the national economy after the first quarter. However, the uncertainty
factors faced by the domestic economy still exist. On the one hand, the foundation of economic
recovery in China is still not solid. In the face of severe pandemic situation abroad, China still needs
to consolidate the achievements of pandemic prevention and control and socio-economic recovery.
On the other hand, external public opinions and challenges of anti-globalization and desinicization

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are rising, and domestic enterprises are facing more business risks in both supply chain and market
environment.
     In the long term, the market size of the global pharmaceutical industry will still maintain a
stable growth trend due to the growth of the total population and the aging of the population.
According to the latest data of IQVIA, the total scale of the global pharmaceutical market was close
to USD1.2 trillion in 2020, and maintained a growth rate of 3 –4% for many consecutive years. The
scale of the Chinese pharmaceutical market ranked second in the world. According to the data of the
National Bureau of Statistics, the cumulative operating income and total profit of industrial
enterprises above the scale of domestic pharmaceutical manufacturing industry in 2020 were
RMB2,485.73 billion and RMB350.67 billion, respectively, showing an increase of 4.5% and
12.8%, respectively, compared with the same period of last year. Affected by the pandemic, the
operating data of the pharmaceutical manufacturing industry were recovered in the second half of
the year after experiencing negative growth in the first half of the year, and the year-on-year growth
rate was significantly higher than the industrial growth rate above the national scale in the same
period.
     With the gradual integration of drug review system with the world in China, the industrial
chain of innovative drugs has been flourishing, and the global R&D industrial chain has also begun
to shift to China. While the transfer of industrial chain has developed a large number of R&D
talents, it has also made local pharmaceutical innovation enterprises flourish. It is the key for
pharmaceutical companies to improve their pharmaceutical quality while innovating. Consumption
upgrading will further drive high growth in high-quality consumer medical track.
     In 2020, China’s pharmaceutical industry played a very significant role in the process of
fighting against the pandemic. Driven by the demand for prevention and control, production was
rapidly resumed, laying an important foundation for the full recovery of the economy. China’s
pharmaceutical industry has continuously promoted high-quality and standardized development in
2020, with a solid foundation, which has become one of the important cornerstones for the steady
development of China’s economy.
     According to the data of Frost & Sullivan, the revenue scale of aesthetic medicine business
service market in China reached RMB143.6 billion in 2019, and the compound annual growth rate
is expected to reach 17.3% from 2019 to 2024; among them, the growth rate of non-surgical
cosmetic diagnosis and treatment market (mainly injection and photoelectric projects) is fast. Due to
fast recovery time and low-price risk, it has become increasingly popular with consumers in recent
years, reaching a market size of RMB60 billion in 2019, with an expected compound annual growth

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rate of 19.2% from 2019 to 2024.
     2. Analysis of the developme nt trend of the pharmaceutical industry
     In 2020, under the superposition of various medical reform policies, the Chinese
pharmaceutical industry was changed dramatically. As medical reform continues to be critical and
the route of deepening the reform of the medical and health system gradually becomes clear,
China’s biomedicine has entered the year of transformation. With the gradual introduction of key
policies such as consistency evaluation, drug centralized procurement, medical insurance
negotiation of innovative drugs, consumable centralized procurement and DRGs, medical reform
has entered the deep-water zone, and a new era of medicine has been ushered in. The era of high
gross profit of generic drugs has come to an end, and innovative drugs will occupy a larger market
space in the future. The Chinese pharmaceutical industry is gradually changing from “generic” to
“innovative”. With population aging in China and the substantial growth of medical insurance
expenditure, “cost control” has become the main theme of medical reform. On January 17, August
20 and November 5, 2020, the State organized the second and third round of centralized drug
procurement and centralized procurement of coronary stents, respectively, which significantly
reduced the cost of patients. The expanding and normalizing scope of centralized procurement has
become an industry consensus. In the future, injections, device consumables, insulin and other
fields will be gradually included.
     2021 is the opening year of the 14th Five-Year Plan period and the turning point for the
dramatic changes in China’s pharmaceutical market landscape. It will also be a year of gr eater
change and uncertainty as the policy continues and deepens. Each link from manufacturers,
distributors to medical institutions, medical insurance supervision, doctors and patients among
others of the medical industry faces different needs for transformation and innovation. Survival of
the fittest is always the way for pharmaceutical companies to survive. In order to develop better, we
can only actively adapt to the changes in the development of the industry, and at the same time
actively make more flexible adjustments and changes in response to the market environment.
     With the normalization of centralized procurement at the national level, the transmission effect
of low prices has been highlighted. The price of bid-winning drugs has been reduced to the lowest
level in history, and centralized procurement has also expanded from drugs to the field of
high-value medical consumables. In addition, the centralized procurement of provincial and
cross-provincial alliances also includes the drugs that have not passed the consistency evaluation.
The procurement variety is richer, covering a larger market, and the bid-winning rules are also
continuously optimized, forming complementarity with the national centralized procurement,

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accelerating the change of the existing drug bidding mechanism and reshaping the drug price
system and competitive pattern. The coordinated reform of medical services, health insurance, and
the medicine industry has brought unprecedented changes in market environment and survival
challenges, urging enterprises to improve the quality of drugs in the fierce competition through
breaking through the existing production model and looking for new development focuses, thus to
further achieve innovation, transformation and upgrading.
     Under the influence of domestic centralized procurement, many multinational pharmaceutical
companies are accelerating the adjustment of business models by focusing on the promotion of core
markets and optimizing product lines. In the future, focusing on core business by stripping off
non-core assets will become the norm.
     From the overall point of view, the primary-level market has become a new development outlet
for pharmaceutical companies under the pressure of medical reform policies such as centralized
procurement. The change of the new medical system will definitely bring about the deconstruction
and reshaping of China’s primary-level care industry. In this context, primary-level care is bound to
become the flow entrance of future medical care, and it will also enable pharmaceutical companies
that fully lay out the primary-level market to gain more development opportunities.
     Both internal pressure and pressure from foreign companies are pushing Chinese
pharmaceutical companies to make innovations. The drug review system continues to deepen
reform, which encourages pharmaceutical companies to innovate at a higher quality. The number of
new drugs entering national health insurance negotiations has increased significantly, and drug
prices have decreased rapidly, but the cos t of new drug R&D is increasing. The threshold for
domestic pharmaceutical innovation has been raised, and differentiated R&D has become the key.
The number of innovative drugs is increasing year by year, but the degree of innovation is still
insufficient. The R&D of innovative drugs is still based on chasing hot targets, especially the
crowded R&D track of anti-tumor drugs, and the homogenization phenomenon is serious, which
aggravates the market competition in the future. Therefore, the commercialization prospect is not
optimistic.
     The licensing and cooperative development of innovative drug projects between Chinese
pharmaceutical companies and various countries is increasingly active. Under the background of the
“innovation plus internationalization” journey, the R&D capacity, commercialization, talent and
business layout, strategic cooperation and globalization of capital of local innovative drug
enterprises will be the key elements for the success of internationalization strategy in the future.
     The Company has formulated a brand-new development strategy based on the pharmaceutical

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and health industry, led by the pharmaceutical industry, while expanding the pharmaceutical
business and aesthetic medicine business, adhering to the scientific research-based and
patient-centered corporate philosophy, and becoming an international brand pharmaceutical
powerhouse driven by scientific research innovation.
     3. Development plan for pharmaceutical innovation of the Company
     (1) Focusing on the core therapeutic field, the Company plans to move from producing generic
drugs to innovative drugs, and from following to leading. In the future, the Company will be
oriented to meeting clinical needs in scientific research and innovation. In the project approval and
decision-making of new drug R&D, the Company will take innovation and differentiation as the
scale, based on clinical value, clinical pharmacoeconomic value, and commercial value of products,
and focus on the long-term pipeline layout, adhere to the upgrading of generic drugs and the
development of innovative drugs. The R&D of generic drugs should be highly technical,
differentiated, fast and cost effective, while the R&D of innovative drugs should have a high
starting point, wide track, new targets and international participation. We take innovative drugs as
the basis and direction to build our future core competitiveness, focus on and emphasize the
development of innovative drugs and high-tech barrier generic drugs with outstanding clinical value
in major diseases and chronic diseases such as anti-tumor, endocrine and autoimmune, and closely
follow the technical development and R&D trends in the cutting-edge fields of biological drugs,
gene therapy and antibody drugs at home and abroad. With a scientific and pragmatic attitude,
based on our own capabilities and risk matching, we will start from differentiated innovation,
gradually move towards the first of the same kind/the best breakthrough innovation model of the
same kind, accelerate the pace of integration into the innovation chain and value chain of global
new drug innovation, and eventually move from Chinese innovation to global innovation, so as to
continuously improve the innovation level of the Company to a new height.
     (2) The Company will continuously increase R&D investment and enrich and optimize product
pipelines. Since 2020, we have strived to invest more than 10% of the sales revenue of the
pharmaceutical industry in R&D each year to provide sufficient material guarantee for innovation.
While increasing the investment, we will continue to improve the efficiency of the use of R&D
funds. Through independent project approval and external introduction, we will strive to complete
at least 15 innovation projects (including drugs, medical devices, etc.) every year, of which the
project approval of no fewer than 3 innovative drugs, so that each existing product line has the
supplement and guidance of innovative products, eventually building a rich product pipeline and a
good product ladder, forming a benign development rhythm of continuous marketing of innovative


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products since 2022, and striving to achieve the phased goal that the innovation business sector
accounts for 30% of the overall industry in 2025.
     (3) The Company will accelerate the introduction of high-level talents and building high-level
scientific research teams. Focusing on introducing R&D leaders and high-level R&D technical
talents with rich experience, we will strengthen the building of internal R&D system and technical
platform, and actively promote the building of domestic and overseas R&D platform. We will create
an innovative cultural environment and atmosphere that is bold in innovation, encourages success,
and tolerates failure, and establish a market-oriented performance mechanism oriented to success.
We will build a scientific research team with outstanding ability, open thinking, passion, courage,
pioneer and innovation, and promote the real implementation of the Company’s innovation
internationalization strategy. We will establish a dynamic evaluation mechanism for R&D projects,
and assist the Company in decision-making and management of R&D and product introduction by
establishing an external expert academic committee to ensure the scientific nature, advancement
and feasibility of scientific research and innovation.
     (4) The Company will deepen comprehensive cooperation with foreign partners and product
introduction, and build a global R&D strategic cooperation ecosystem centered on Zhongmei
Huadong. Integrating and connecting external advantageo us resources and technologies, we will
promote the introduction and development of high-quality innovation projects through cooperative
development, licensing or acquisition, continuously enrich the Company’s product pipelines and
improve the medium- and long-term layout of innovative products. At the same time, we will also
continue to improve the international operation capacity of our products, and license our own
advantageous products, advanced technologies and patents.
     Development plan of Huadong business:
     We will take service as the core and transform with innovation. Adhering to in-depth
development in Zhejiang, we will continue to enhance the brand influence, and maintain the leading
position of the industry in Zhejiang. Instead of pursuing simple scale expansion, scale and benefits
should be paid equal attention. We will pursue high-quality and sustainable benefits through refined
management. We will improve the modern pharmaceutical logistics network covering Zhejiang
Province, make every effort to build a high-end third-party pharmaceutical logistics featuring cold
chain and improve value-added service capacity. With the help of commercial forces to drive
market networks and channel resources, we will transform and improve traditional business model s,
actively develop new business models such as general agent, business trusteeship, and BTC
pharmacy, and cultivate innovative businesses. We will consolidate the in-hospital market, expand

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the out-of-hospital market, use the Internet platform, and innovate the services for suppliers through
big data, AI, Internet of Things and other new technologies. We will also extend the service supply
chain, and accurately connect downstream medical institutions and upstream pharmaceutical
enterprises, so as to gradually develop towards modern pharmaceutical professional value-added
services and take the path of sustainable development.
     Business developme nt plan for the aesthetic medicine business:
     The Company’s aesthetic medicine business adopts the strategy of “global operation layout and
dual-circulation operation and development”. Take Sinclair, a core subsidiary, as the global
operating platform to realize the global operating layout of aesthetic medicine business, we will
build it into an international first-class aesthetic medicine business enterprise and create a new
development space in the future. As a special market for the Company’s aesthetic medicine business,
the Chinese market has successively introduced the products with high scientific and technological
content and great market potential. We will steadily expand the Chinese market with the help of the
Company’s registration and marketing strength in China; internationally, relying on the Company’s
domestic aesthetic medicine business marketing basis and the rapid development of the aesthetic
medicine business industry, we will help the rapid implementation and commercialization of
international high-quality products, so as to form a new pattern of joint development and mutual
promotion of domestic and international circulations.
     In the future, the Company will continue to focus on the global high-end market of aesthetic
medicine business, relying on four global R&D centers: wholly-owned subsidiaries Sinclair (UK),
High Tech (Spain) and partially-owned companies R2 (US) and Kylane (Switzerland), to further
integrate R&D resources and capacity, actively optimize and improve product structure, and enrich
and improve industrial layout. The five global production bases located in the Netherlands, France,
the United States, Switzerland and Bulgaria will provide a strong capacity guarantee for the
internationalization of the Company’s aesthetic medicine business products and better meet the
future development and market demand.
     4. The Company’s business plan for 2021
     2021 is a key year for Huadong Medicine’s innovation, transformation and reform to enter the
deep-water zone, and it is also the closing year of the sixth three-year plan. The severe challenges
brought about by policy changes and industry competition in the domestic pharmaceutical industry
will continue, and the Company will face greater business difficulties and policy uncertainties.
Although the positive conditions and favorable factors to promote operation are also gradually
gathering, Zhongmei Huadong will still face major challenges of declining growth rate in its annual

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operation due to the prominent phased impact of the price reduction of key products on the
Company’s operation. The Company has formulated specific plans and assessment plans for vari ous
work, striving to maintain the continued growth of the overall business of the pharmaceutical
industry throughout the year. All officials and employees are required to further change their
mindset, clarify their own positioning, stimulate their own vitality, innovate their own value and
realize their own transformation with a more open, proactive and enterprising spirit under the
annual business working policy of “repositioning, reshaping value, stimulating vitality and
deepening transformation”. We will continue to maintain a brave and determined work style, so as
to broaden the horizon and pursue excellence. We will work with the momentum of no time to lose
and size the day to revive the entrepreneurial spirit of Huadong Medicine, create a new pattern of
the development of Huadong Medicine, and reshape the core competitiveness of Huadong
Medicine.
     (1) Pharmaceutical industry:
     We will promote the transformation of production system from cost center to profit center. In
2021, we will continue to optimize the production layout combining “self-built production parks”
with “outsourced production sites”, align with the advanced, improve the light asset production and
operation system, and do a good job in production planning and resource allocation. We will cr eate
an engineer culture, build agile production, lean material procurement, production organization and
product delivery, continuously save production costs, improve per capita labor efficiency, and
develop new business and create new value for the Company. Since production system preparations,
raw materials and various technology platforms are important links in the global pharmaceutical
manufacturing industry chain, we will strive to explore new moats and create more profit points in
multiple ways and in multiple fields, and make concerted efforts in BD, quality, patent, R&D and
manufacturing departments to accelerate CMO/CDMO projects and open up international markets
to make a major breakthrough in international business development in 2021.
     We will make overall plans to promote fixed asset investment projects, and focus on doing a
good job in the construction of Huadong Medicine Life Sciences Industrial Park, Jiangdong Phase
II, International R&D and Manufacturing Center for Preparations, industrialization of Semaglutide
APIs and other major projects. We will strengthen the management of project progress, cost, quality
and safety, and ensure the advancement of technology while meeting the investment income
indicators.
     We continue to carry out normal management, change and registration of GMP, product
transfer and entrusted production and quality group management with the overall goal of

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“developing capacity and improving efficiency” in quality system.
     (2) R&D:
     We will continue to deepen the reform of R&D system, introduce international, professional
and innovative high-quality R&D talents, enhance the overall combat ability of R&D teams by
combining introduction and training, and form a refined and efficient R&D team with international
vision. We will further optimize the R&D process, improve the R&D efficiency, promote the R&D
internal order system, open up to undertake external R&D projects on the basis of ensuring the
progress and quality of our own projects, and enhance the market competitiveness of our R&D
organizations. We will also continue to strengthen cooperation with the world’s leading biomedical
R&D companies to explore innovative R&D models suitable for the future development of the
Company and build a unique core technology platform.
     We will continuously follow up and evaluate new targets and cutting-edge technologies in the
field of global new drug R&D, and further consolidate the pipeline of innovative products through
independent R&D and external introduction. Moreover, we will accelerate the cultivation of the
Company’s R&D capabilities in early drug discovery and preclinical/translational medicine. In 2021,
we will strive to complete project approval for no fewer than 15 innovative drugs, 6 generic drugs
and 1 other new product, strive to obtain 3 manufacturing approvals, pass consistency evaluation for
at least 2 product categories, complete 25 patent applications and have 2 product international
registrations approved.
     (3) Marketing and pharmaceutical services of Zhongmei Huadong:
     We will accelerate the transformation of marketing strategy, implement the policy of “turning
from in-hospital to out-of-hospital and from medical insurance to self-financing”, carry out the
refined marketing of the Company’s products, and actively expand the out-of-hospital market,
primary-level market and self-financing market. We will continue to improve the sales volume in
the hospital market and primary-level market by means of four target management. We will
vigorously improve the building and personnel allocation of out-of-hospital market organizations,
expand personnel, and improve the coverage rate of key products of the Company in chain
pharmacies and terminals. We will explore the self-financing market sales model to strive to achieve
the breakthrough of self-financing market sales, and actively explore the new marketing model of
online prescription drug purchase and chronic disease management in Internet hospitals to increase
the coverage of Internet market and product sales.
     (4) Management:
     In 2021, the whole company should further change its concepts, advocate value culture and

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incentive culture, and fully activate the overall organizational vitality of the Company. We will
improve the official management mechanism and accelerate the training of outstanding officials. We
will continuously build the organization competitiveness of Huadong Medicine. We will strengthen
the basic human resource management and consolidate the cornerstone of human resource
management; continue to carry out the introduction and training of core talents and accelerate the
introduction of talents in new business segments including devices, aesthetic medicine business and
Internet hospitals; and innovate the performance and salary incentive mechanism and activate the
organization through assessment;
We will adapt to the development needs of the Company, keep promoting the overall financial
planning objectives of “collective, compliant, IT-based and internationalized” management, take
value as the center and performance as the orienta tion, and make every effort to carry out four basic
tasks: energizing organization, aligning with the advanced, reducing costs and increasing efficiency,
and operating finance. We will strengthen foreign exchange, improve working standards and
requirements, vigorously improve the operation and management level of the financial system, and
build a lean and efficient financial management team. We will earnestly do a good job in the
building of the budget system based on value management, fully participate in the operation,
provide decision support, promote efficiency improvement, and create financial value.
     (5) Pharmaceutical business:
     “Achieving four transformations, innovating for profit, and regulating for efficiency” is the
main theme of Huadong business in 2021. We shall profoundly understand industrial changes,
optimize the allocation and integration of internal resources, promote coordinated development, and
improve operating efficiency. Taking customer satisfaction as the overall goal, we will change our
operation mindset, optimize the in-hospital marketing, and layout the marketing outside the hospital.
We will take the hospital as the base, keep up with the development of the hospital and achieve a
steady increase of business; deeply explore the out-of-hospital and self-financing market; and firmly
discovery a new model of the mega health industry and do a good job in the Internet market. We
will build a province-wide market expansion network, establish three promotion teams, i.e.,
in-hospital team, private team and retail team, serve the suppliers with enriched product lines,
expand the service scope and cultivate new profit models by relying on the advantages of “platform
+ product + network” of Huadong business. We will relocate the retail market, bui ld a new retail in
Huadong Medicine, pay close attention to the provincial expansion of OTC business, and focus on
the development of DTP, in-hospital and out-of-hospital stores and special outpatient departments.
We will also complete the layout of one DTP in one city as soon as possible to realize the varieties
and management down to the community level, incorporate subsidiary pharmacies into the retail
system of Huadong Medicine, and expand the coverage of the whole province with a unified retail


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brand image of Huadong Medicine. Aiming at profit improvement, we will integrate the
e-commerce resources of Huadong Medicine and expand the Internet market. For instance, we will
promote “Business Network of Huadong Medicine”, build “Flagship Store of Huadong Pharmacy”,
introduce more varieties with online authorized sales, connect with “Internet plus medical care”,
and cooperate with physical medical institutions and Internet hospitals with order taking online and
delivering drugs to homes.
     We shall earnestly focus on the innovative development of professional cold chain of Huadong
business cold chain, locate the precise management and control of the whole life cycle of special
drugs, continuously strengthen the competitive advantage of cold chain capacity and pr omote the
high-quality development of intelligent digital supply chain. We shall actively cultivate new
businesses, improve the logistics system of the whole province in the cold chain, enhance the
competitiveness of the tripartite businesses, and consolidate the industrial status. We will contribute
to the universal inoculation of COVID-19 vaccines, make every effort to do a good job in the
provincial distribution of COVID-19 vaccines, and ensure timely and safe delivery.

     (6) Aesthetic medicine business

     It is necessary to continue to improve the international operation system, focus on the
international high-end market of aesthetic medicine, further integrate R&D resources and capacities,
and continue to promote the structural adjustment of aesthetic medicine products and the innovative
business development. Efforts also should be made to actively optimize and enhance the product
structure, carry on the research and study of high-tech products and new technologies and the
project introduction in the field of aesthetic medicine all over the world, and enrich and improve the
industrial layout. Through accurate positioning, the Company gives full play to the brand value of
the products, quickly gets to the market, and creates a new pattern of aesthetic medicine in the
domestic market. It shall also accelerate the establishment of the promotion team for new products
of aesthetic medicine, and actively introduce marketing talents from external established aesthetic
medicine market. The Company shall implement the establishment of the marketing team, brand
and market communication, and communication with aesthetic medicine institutions, doctor training,
and other preparation related to launch and subsequent marketing promotion for the core products
such as Ellansé and Glacial Spa (F0) in Chinese market in 2021, realizing the quick coverage of
mid-to-high aesthetic medicine institutions and the rapid increase of sales after the products are put
into the market.

     Besides, the Company shall carry out the business development planning and market


                                                  68
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expansion after acquiring the equity of Spanish firm High Tech, speed up the domestic clinical
registration of Sinclair embedding product Silhouette  Instalift, MaiLi  hyaluronic acid of
Kylane of Switzerland, and creotoxin of Jetema of South Korea, try to lower the impact of the
COVID-19 pandemic on the domestic and overseas aesthetic medicine business of the Company,
and build a solid foundation for the normal operation after the pandemic.


X. Risks and Countermeasures

     1. Industry policies and market risks

     The pharmaceutical industry is one of the industries influenced by national policies in the
deepest manner. In recent years, the reform in the area of medical health has been deepened
continuously with various policies introduced intensively, and the State has conducted the
regulation and supervision of the pharmaceutical industry in a stricter manner. The pharmaceutical
market is facing many uncertainties due to the trend of the normalization of the COVID-19
pandemic. With the further promotion of the policies such as volume-based procurement and health
insurance negotiation, the production costs and profitability in the pharmaceutical industry are also
facing challenges.

     Countermeasures:

     The Company will pay close attention to and study the national pharmaceutical policies and
industrial development trends, increase the investment in R&D, speed up the layout of innovative
varieties, enrich the product pipelines, and optimize the product structure. At the same time, it shall
maintain lean production to realize lower costs and risks and higher efficiency in production and
operation. Besides, it will make great efforts to expand the primary-level and self-funded market to
increase the market coverage. Its task is also to continue to excavate the dominant products and
subdivision of aesthetic medicine, improve brand competitiveness, and create new profit points.

     2. New drug R&D risk

     The R&D of new medicine has the characteristics of high technology and high risks. The
innovative drug products also experience long cycle and various links including R&D at the early
stage, technology development, clinical trials, registration, and launch, and are subject to preclinical
research, clinical trials, registration and declaration, production approval and other processes, which
are time-consuming and have many uncertainties and risks in the process. In addition, the R&D of
new medicine has extremely high requirements of personnel quality, and is apt to be affected by


                                                   69
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factors such as policies, approval, and technologies. The R&D expenses at the early stage will lead
to some pressure on the Company for the current operation goal, meanwhile, the new medicine after
its launch will be subject to the testing of market demands, which may result in consequences such
as the return of the R&D investment lower than expectation, and the negatively affected
profitability.

     Countermeasures:

     The Company will enrich and optimize the product pipelines, adopt generic drugs and
innovative drugs with high barriers, and stoutly eliminate outmoded varieties through independent
project approval and external introduction. It will also proactively promote the R&D system
establishment of international innovative drugs, continuously conduct dynamic optimization and
adjustment of the Company’s entire R&D system and framework, and improve the scientific and
dynamic investigation, assessment, and decision-making system, based on the increasing
investment in R&D of new medicine. The Company aims to continue to introduce high-level R&D
talents, strengthen the cultivation and incentive of internal talents, create a scientific research team
covering the whole cycle of new medicine R&D, and promote the establishment of the high-level
pharmaceutical R&D base.

     3. Price reduction risk

     With the more intensive competition in the pharmaceutical market, and more deepening
medical insurance fee control, and the comprehensive launch of the national policies for
volume-based procurement, the Chinese pharmaceutical market has entered into a stage of steady
development when generic drugs have fallen from the golden age to the age with low profitability.
With the foreign-invested enterprises targeting at the domestic market, the competition in the area
of innovative drugs is more intensive. The national policies of medical insurance negotiation also
have a profound impact on the pricing of innovative drugs, and the innovative drugs also face the
risks of price reduction.

     Countermeasures:

     The Company will actively handle the changes in policies and market to enhance the
technological quality advantages mainly driven by scientific R&D and technological innovation in
line with the international standards. It will accelerate the transformation of marketing strategies,
carry out the delicacy marketing of the Company’s products, and actively explore the marketing
mode of the self-financing market, and new marketing mode of medicine purchase with the online


                                                   70
                                                                      The 2020 Annul Report of Huadong Medicine Co., Ltd.


hospital prescription and chronic disease management. It will also adopt primary-level marketing
channels and academic promotion, enhance the market expansion, enlarge the market coverage, and
increase the market access capacity.

        4. Risk of change in exchange rate

        The changes in exchange rate have a profound and long-lasting impact on enterprises, which
can not only bring good economic benefits but also cause serious economic risks. With the
continuous promotion of the Company’s internationalization, international cooperation and
communication have increased continuously with the aesthetic medicine marketing network
covering all around the world, and the proportion of business settled by foreign currencies is
increasing. The changes in exchange rate will have an impact on the asset, liability, and benefits of
enterprises, further affecting the operation capacity, debt repayment capacity, and profitability.

        Countermeasures:

        The Company will pay attention to the changes in exchange rate all the time, and adjust the
operation strategies and resolve negative impacts in a timely manner based on its own condition. It
will foster the awareness of curreny risk prevention, and create a sound management system of
foreign exchange risks while strengthening the professional skills of financial personnel and the
training of risk awareness, and avoiding risks by means of financial methods.



XI. Activities of receptions, including research, communication and interview

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

√ Applicable □ N/A

                                                                                   Main content
                                                                                   of discussion          Index of basic
    Reception          Reception                        Type of      Reception
                                   Reception Method                                     and             information of the
        Date            Adress                           visitor       object
                                                                                   information               research
                                                                                     provided

                   Company                            Institution   Industrial    Interpretation      Please refer to
                   conference                                       Securities,   of the bidding      “Huadong Medicine:
 January 19,       room            Communication by                 etc.          results        of   000963 Huadong
 2020                              phone                                          Huadong             Medicine information
                                                                                  Medicine            on research activities:
                                                                                  attending     the   January 19, 2020”


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                                                                   The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                                                                national             presented on the
                                                                                centralized          websites of
                                                                                medicine             irm.cninfo.com.cn
                                                                                procurement          and cninfo.com.cn
                                                                                                     for details.

                 Company                         Institution   China            Interpretation       Please refer to
                 conference                                    Internationa     of            2019   “Huadong Medicine:
                 room                                          l      Capital   Annual Report        record of investor
                                                               Corporation      and 2020 First       relations activities:
                              Communication by                 Limited.,        Quarterly            April 30, 2020”
April 30, 2020
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                                                                                Huadong              websites of
                                                                                Medicine             irm.cninfo.com.cn
                                                                                                     and cninfo.com.cn
                                                                                                     for details.

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                 conference                                    Securities,      investors’          “Huadong Medicine:
                 room                                          etc.             reception day        record of investor
                                                                                of             the   relations activities:
                                                                                Company              June 5, 2020
                                                                                                     (investor reception
June 5, 2020                  Field research
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                                                                                                     websites of
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                                                                                                     for details.

                 Company                         Institution   Industrial                            Please refer to
                 conference                                    Securities,                           “Huadong Medicine:
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August 28,                    Communication by                                                       August 28, 2020”
2020                          phone                                                                  presented on the
                                                                                                     websites of
                                                                                                     irm.cninfo.com.cn
                                                                                                     and cninfo.com.cn
                                                                                                     for details.

                 Company                         Institution   UBS              Interpretation       Please refer to
                 conference                                    Securities,      of 2020 Half         “Huadong Medicine:
September 2,     room         Communication by                 etc.             Year Report of       record of investor
2020                          phone                                             Huadong              relations activities:
                                                                                Medicine             September 2, 2020”
                                                                                                     presented on the


                                                      72
                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                                                                              websites of
                                                                                              irm.cninfo.com.cn
                                                                                              and cninfo.com.cn
                                                                                              for details.

               Company                         Institution   Changjiang    Online             For details, please
               conference                                    Securities,   discussion on      refer to “Huadong
               room                                          etc.          China              Medicine: record of
                                                                           A-shares           investor relations
October 27,                 Communication by                                                  activities: October
2020                        phone                                                             27, 2020” presented
                                                                                              on the websites of
                                                                                              irm.cninfo.com.cn
                                                                                              and cninfo.com.cn
                                                                                              for details.

               Company                         Institution   Industrial    Interpretation     Please refer to
               conference                                    Securities,   of 2020 Third      “Huadong Medicine:
               room                                          etc.          Quarterly          000963 Huadong
                                                                           Report       of    Medicine information
                                                                           Haudong            on research activities:
November 3,                 Communication by
                                                                           Medicine           November 3, 2020”
2020                        phone
                                                                                              presented on the
                                                                                              websites of
                                                                                              irm.cninfo.com.cn
                                                                                              and cninfo.com.cn
                                                                                              for details.

               Company                         Institution   RoyalFlush    Special            Please refer to
               conference                                    , etc.        communicatio       “Huadong Medicine:
               room                                                        n on aesthetic     record of investor
                                                                           medicine           relations activities:
November 10,                                                               business of the    November 10, 2020”
                            Field research
2020                                                                       Company            presented on the
                                                                                              websites of
                                                                                              irm.cninfo.com.cn
                                                                                              and cninfo.com.cn
                                                                                              for details.

               Company                         Institution   Goldman       “Activities for   Please refer to
               conference                                    Sachs, etc.   Listed             “Huadong Medicine:
               room                                                        Companies” –     record of investor
November 18,                Communication by                               Huadong            relations activities:
2020                        phone                                          Medicine           November 18, 2020”
                                                                                              presented on the
                                                                                              websites of
                                                                                              irm.cninfo.com.cn


                                                    73
                                                                         The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                                                                                        and cninfo.com.cn
                                                                                                        for details.

                  Company                                Institution   Industrial    Online             Please refer to
                  conference                                           Securities,   communicatio       “Huadong Medicine:
                  room                                                 Founder       n   of      2020   record of investor
                                                                       Securities,   Goldman            relations activities:
                                    Field research and
November 19,                                                           etc.          Sachs       Asia   November 19, 2020”
                                    Communication by
2020                                                                                 Pacific            presented on the
                                    phone
                                                                                     Medical            websites of
                                                                                     Investors          irm.cninfo.com.cn
                                                                                     Summit             and cninfo.com.cn
                                                                                                        for details.

Number of receptions                                                                                                            10

Number of institutions received                                                                                            1,200

Number of individuals received                                                                                                  100

Number of other visitors received                                                                                                 0

Has any undisclosed important information been
disclosed, revealed or divulged?                                                                                                No




                                                              74
                                                                                 The 2020 Annul Report of Huadong Medicine Co., Ltd.




                                            Section V. Important Matters

I. The Company’ s profit distribution of common shares and increase of capital stock by
capital reserve conversion

Formulation, implementation or adjustment of the profit distribution policy of common shares, especially the cash dividend po licy,
during the reporting period

√ Applicable □ N/A
During the reporting period, the Company’ s profit distribution policy conforms to the Articles of Association and the review
procedure, and fully protects the legitimate rights and interests of small and medium investors. The independent directors have
expressed their opinion, and there is a clear standard and ratio of dividends.


                                                 Special notes on cash dividend policy

Whether it complies with the provisions of the Articles of
Association or the requirements of the resolutions of                                              Yes
shareholders’ meeting:

Whether the standard and ratio of dividends are clear:                                             Yes

Whether the relevant decision-making procedures and
                                                                                                   Yes
mechanisms are complete:

Whether the independent directors have performed their duties
                                                                                                   Yes
and played their due roles:

Whether minority shareholders have the opportunity to fully
express their opinions and demands, and whether their legitimate                                   Yes
rights and interests are fully protected:

If the cash dividend policy is adjusted or changed, whether the
                                                                                                   Yes
conditions and procedures are compliant and transparent:
The Company’ s common share dividend distribution plan (preplan) and plan for capital stock increase by capital reserve conve rsion
(preplan) in recent three years (including the current reporting period):
(1) The Company’ s distribution plan for 2018: Based on the total share capital of 1,458,174,624 shares, 3.3 yuan (tax included) is
paid as a cash dividend for every 10 shares; the total share dividend distributed is 481,197,625.92 yuan, and 2 shares are added for
every 10 shares by capital reserve conversion;
(2) The Company’ s distribution plan for 2019: Based on the total share capital of 1,749,809,548 shares, 2.8 yuan (tax included) is
paid as a cash dividend for every 10 shares; the total share dividend distributed is 489,946,673.44 yuan, and 0 shares are added for
every 10 shares by capital reserve conversion.
(3) The Company’ s distribution plan for 2020: Based on the total share capital of 1,749,809,548 shares, 2.3 yuan (tax included) is
paid as a cash dividend for every 10 shares; the total share dividend distributed is 402,456,196.04 yuan, and 0 shares are added for
every 10 shares by capital reserve conversion.


The Company’ s cash dividends of common shares in recent three years (including the reporting period)



                                                                    75
                                                                                     The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                                                                                                             Unit: RMB yuan

                                                                                                                               Proportion of
                                                                                                                                 total cash
                                                                                             Proportion of
                                                       Proportion of                                                             dividends
                                                                                            cash dividends
                                     Net profit        cash dividends                                                            (including
                                                                                            by other means
                                   attributable to in the net profit                                                           those by other
                                                                                            in the net profit   Total cash
                                    the common         attributable to Cash dividends                                          means) in the
   Year when                                                                                attributable to     dividends
                 Cash dividends shareholders of         the common       by other means                                          net profit
 dividends are                                                                               the common         (including
                  (tax included)   the Company shareholders of (such as share                                                  attributable to
   distributed                                                                              shareholders of those by other
                                    in the annual      the Company           repurchase)                                        the common
                                                                                             the Company         means)
                                    consolidated           in the                                                             shareholders of
                                                                                                 in the
                                     statements         consolidated                                                           the Company
                                                                                             consolidated
                                                         statements                                                                in the
                                                                                              statements
                                                                                                                                consolidated
                                                                                                                                statements

                                   2,819,861,203.
2020             402,456,196.04                               14.27%                 0.00             0.00% 402,456,196.04            14.27%
                                                  63

                                   2,813,118,702.
2019             489,946,673.44                               17.42%                 0.00             0.00% 489,946,673.44            17.42%
                                                  11

                                   2,267,229,174.
2018             481,197,625.92                               21.22%                 0.00             0.00% 481,197,625.92            21.22%
                                                  08

During the reporting period, the Company made profits and the profit available to common shareholders of the parent company was
positive, but no cash dividend plan for common shares was proposed

□ Applicable √ N/A


II. Profit distribution and capital stock increase by capital reserve conversion during the
current reporting period

√ Applicable □ N/A

Number of bonus shares every 10 shares (share)                                                                                                 0

Dividends paid every 10 shares (tax included)                                                                                                 2.3

Number of shares added for every 10 shares by
                                                                                                                                               0
capital reserve conversion

Capital stock base of the distribution plan (share)                                                                            1,749,809,548

Cash dividends (yuan) (tax included)                                                                                          402,456,196.04

Cash dividends by other means (such as share
                                                                                                                                            0.00
repurchase) (yuan)

Total cash dividends (yuan)                                                                                                   402,456,196.04

Distributable profit (yuan)                                                                                                  4,303,533,798.88

Proportion of total cash dividends (including those                                                                                     100%


                                                                        76
                                                                                    The 2020 Annul Report of Huadong Medicine Co., Ltd.


by other means) in the total profit distributed

                                                           Current cash dividends

If the Company is in a mature stage of development and has a significant capital expenditure arrangement, the proportion of cash
dividends in the current profit distribution should be at least 40%.

                 Details of the profit distribution plan or the plan for capital stock increase by capital reserve conversion

The Company’s profit distribution plan for 2020: Based on the total share capital of 1,749,809,548 shares, 2.3 yuan (tax included)
is paid as a cash dividend for every 10 shares; the total share dividend distributed is 402,456,196.04 yuan, and 0 shares are added
for every 10 shares by capital reserve conversion.




III. Fulfillment of commitme nts

1. Commitments made by interested parties such as the Company’s actual controller, shareholders, related
parties, acquirer(s), and the Company that are fulfilled during the reporting period or unfulfilled by the
end of the reporting period

√ Applicable □ N/A

                                                                                                                Term of
                                            Commitmen            Type of      Details of        Date of                         Fulfilled or
               Commitment                                                                                    commitmen
                                              t maker       commitment      commitment        commitment                        unfulfilled
                                                                                                                   t

 Share reform                               N/A             N/A             N/A                              N/A                N/A

 A commitment made in the report
 of acquisition or the report of            N/A             N/A             N/A                              N/A                N/A
 change in equity

 A commitment made in assets
                                            N/A             N/A             N/A                              N/A                N/A
 restructuring

 A commitment made at the time of
 an initial public offering or              N/A             N/A             N/A                              N/A                N/A
 refinancing

 Equity incentives                          N/A             N/A             N/A                              N/A                N/A

                                                                            China
                                                                            Grand
                                                                            Enterprises
                                                                            undertakes
                                            China           Commitmen
 Other commitments made to the                                              that it has
                                            Grand           t to reducing                     February
 Company’ s small and medium                                               no plan to                       12 months           Fulfilled
                                            Enterprises,    shareholdin                       11, 2019
 shareholders                                                               sell all of its
                                            Inc.            gs
                                                                            shares in
                                                                            Huadong
                                                                            Medicine
                                                                            within 12


                                                                       77
                                                                             The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                                                    months
                                                                    from the
                                                                    date of the
                                                                    lifting of
                                                                    restrictions
                                                                    on the
                                                                    non-public
                                                                    offering of
                                                                    shares by
                                                                    Huadong
                                                                    Medicine in
                                                                    2016.

                                                                    Huadong
                                                                    Group
                                                                    undertakes
                                                                    that it has
                                                                    no plan to
                                                                    sell all of its
                                                                    shares in
                                                                    Huadong
                                                                    Medicine
                                       Hangzhou
                                                    Commitmen       within 12
                                       Huadong
                                                    t to reducing   months            February
                                       Medicine                                                     12 months       Fulfilled
                                                    shareholdin     from the          11, 2019
                                       Group Co.,
                                                    gs              date of the
                                       Ltd.
                                                                    lifting of
                                                                    restrictions
                                                                    on the
                                                                    non-public
                                                                    offering of
                                                                    shares by
                                                                    Huadong
                                                                    Medicine in
                                                                    2016.

Whether the commitment has been
                                       Yes
fulfilled on time

If the commitment is overdue and
has not been fulfilled, the specific
reasons for unfulfillment and the      N/A
future work plan should be
explained in detail.




                                                             78
                                                                                The 2020 Annul Report of Huadong Medicine Co., Ltd.


2. If there is a profit forecast for the Company’s assets or projects and the reporting period is in the profit
forecast period, the Company should state the assets or projects that meet the original profit forecast and
the reasons for that

□ Applicable √ N/A


IV. Controlling shareholder’s and related parties’ occupation of non-operating funds of the
listed companies

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


V. Explanation by the Board of Directors, the Board of Supervisors and the independent
directors (if any) on the “auditor’s nonstandard report” of the accounting firm during the
current reporting period

□ Applicable √ N/A


VI. Changes in accounting policies, estimation and accounting methods as compared with the
previous financial report

√ Applicable □ N/A

See section 12 of financial report five important accounting policies and accounting estimates 44 for details.


VII. Retrospective restatement of the correction of significant accounting errors during the
reporting period

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


VIII. Changes in the scope of consolidated statements as compared to the previous financial
report

√ Applicable □ N/A
1. Increase of the consolidation scope

                                          Method of equity      Time of equity
  Company name                                                                      Amount of capital Ratio of capital
                                             acquisition          acquisition

MediBeacon Technology (Shanghai)         New subsidiary       2020.9               1,000,000.00         100.00%
Co., Ltd.

Zhejiang Huida Biotech Co., Ltd.         New subsidiary       2020.1               5,100,000.00         51.00%

Shenzhen Xinda Yanchuang                 New subsidiary       2020.5               500,000.00           100.00%
Technology Development Co., Ltd.




                                                                   79
                                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.


Sinclair Pharmaceuticals               New subsidiary         2020.8              [Note ]                 100.00%
(Asia-Pacific) Pte Ltd.

Sinclair Chile SPA                     New subsidiary         2020.9              7.5 million pesos       100.00%

Sinclair     (Shanghai)       Medical New subsidiary          2020.9              [Note ]                 100.00%
Technology Co., Ltd.

R2 (Shanghai) Medical Technology New subsidiary               2020.9              [Note ]                 100.00%
Co., Ltd.

Beijing      Huachuang       Dongxin New subsidiary           2020.11             [Note ]                 100.00%
Technological Development Co., Ltd.

Note: No capital has been contributed as of December 31, 2020.
2. Reduction of the consolidation scope

                                                                                                  Net profit from the
                                 Method of equity       Time of equity    Net assets at disposal
  Company name                                                                                 beginning of the period to
                                      disposal             disposal               date
                                                                                                   the disposal date
                                                    2020.11              -4,277,665.48          -503,242.26
Huadong Medicine Medical       Cancellation
Equipment Technology
(Hangzhou) Co., Ltd.
                                                    2020.3                                      2,448,018.16
Ningbo Sinfmuse Medical        Cancellation
Investment Management Co.,
Ltd.
                                                    2020.7                                      5,425,926.85
Huadong Medicine Wuhan         Cancellation
Pharmaceutical Co., Ltd.




IX. Employme nt and dismissal of accounting firms

Accounting firm employed by the Company for now

                                                                         Pan-China Certified Public Accountants (special general
 Name of the domestic accounting firm
                                                                                               partnership)

 Continuous number of years of audit services provided by the
                                                                                                   165
 domestic accounting firm

 Remuneration of the domestic accounting firm (ten thousand
                                                                                                   23
 yuan)

 Certified public accountants of the domestic accounting firm                            Wang Fukang, Xu Ping

 Continuous number of years of audit services provided by
                                                                                                      5
 certified public accountants of the domestic accounting firm

 Name of the overseas accounting firm (if any)                                                    None

 Remuneration of the overseas accounting firm (ten thousand
                                                                                                      0
 yuan) (if any)


                                                                  80
                                                                                  The 2020 Annul Report of Huadong Medicine Co., Ltd.


 Continuous number of years of audit services provided by the                                         None
 overseas accounting firm (if any)

 Certified public accountants of the overseas accounting firm (if                                     None
 any)

 Continuous number of years of audit services provided by                                             None
 certified public accountants of the overseas accounting firm (if
 any)

Whether the accounting firm employed was replaced in the current period

□ Yes √ No
Information about the internal control audit accounting firm, financial consultant or sponsor employed by the Company

√ Applicable □ N/A
During the reporting period, the Company employed Pan-China Certified Public Accountants (special general partnership) as the
audit institution of its annual financial report and internal control audit report; the annual financial report and internal control audit
report audit fee paid is 1.65 million yuan.


X. Delisting after annual report disclosure

□ Applicable √ N/A


XI. Bankruptcy reorganization

□ Applicable √ N/A


XII. Major litigation and arbitration

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


XIII. Punishment and rectification

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


XIV. Integrity of the Company and its controlling shareholder and actual controller

□ Applicable √ N/A


XV. Imple mentation of the Company’s equity incentive plan, e mployee stock ownership plan
or other employee incentive measures

√Applicable □ N/A
In this period, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. invested 10 million yuan to establish Zhejiang Huida
Biotechnology Co., Ltd. with a registered capital of 10 million yuan and a shareholding ratio of 100.00%. In August 2020, Han gzhou

                                                                     81
                                                                           The 2020 Annul Report of Huadong Medicine Co., Ltd.


Zhongmei Huadong Pharmaceutical Co., Ltd. signed the team equity incentive agreement with the members of the core technology
team, which agreed that the members of the core technology team would join Hangzhou Zhongmei Huadong or Zhejiang Huida ,
Hangzhou Zhongmei Huadong transferred its 49.00% incentive equity of Zhejiang Hunda to the core technology team at the price of
1.00 yuan. Hangzhou Zhongmei Huadong recorded the difference between the incentive equity price of 1.00 yuan and the incentive
equity cost of 4899999.00 yuan into the management expenses.


XVI. Imple mentation of the Company’s equity incentive plan, employee stock ownership plan
or other employee incentive measures

√Applicable □ N/A


Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. invested RMB10 million to the establishment of Zhejiang Huida Biotech
Co., Ltd. with the registered capital of RMB10 million. The shareholding ratio of Zhongmei Huadong reaches 100.00% . In August
2020, Zhongmei Huadong entered into the Team Equity Incentive Agreement with its core technical team members, specifying that
after the members join Zhongmei Huadong or Zhejiang Huida Biotech Co., Ltd., Zhongmei Huadong will transfer its 49.00%
incentive equity of Huida Biotech to the core technical team at the price of RMB1.00, and Zhongmei Huadong includes the
difference of RMB4,899,999.00 between the equity incentive price of RMB1.00 and the incentive equity costs into the management
expenses.




                                                               82
                                                                                                                                          The 2020 Annul Report of Huadong Medicine Co., Ltd.
XVI. Major related transactions

1. Transactions related to daily operations

√ Applicable □ N/A

                                                                                                                  Approve
                                                                                      Related                                 Wheth    Settleme
                                                                                                     Proportio       d                             Available
                                                                                      transacti                                er it      nt
                               Type of                      Pricing       Price of                    n in the    transacti                         market
                                           Content of                                    on                                   exceed   method                   Date of
  Related       Relationshi    related                   principles for    related                    amount         on                            prices of
                                             related                                  amount                                   s the      of                    disclosu     Disclosure index
   party                 p    transactio                    related       transacti                  of similar   amount                            similar
                                           transaction                                  (ten                                  approv    related                       re
                                  n                       transaction        on                      transactio     (ten                           transactio
                                                                                      thousan                                   ed     transacti
                                                                                                         ns       thousan                             ns
                                                                                      d yuan)                                 amount      on
                                                                                                                  d yuan)

                                                         Market price
                                                         determined
                Subsidiary
                                                         by the                                                                        Cash,
Grandphar       of the                                                                                                                                          April      cninfo
                              Drug         Drug          Company’s       Market                                                       banker’s   Market
ma (China)      Company’s                                                            6,343.28          0.28%        5,000    Yes                               28,        (http://www.cninfo.co
                              purchase     purchase      related          price                                                        acceptan    price
Co., Ltd.       controlling                                                                                                                                     2020       m.cn)
                                                         transaction                                                                   ce bill
                shareholder
                                                         decision-mak
                                                         ing process

                                                         Market price
                                                         determined
Sichuan         Subsidiary
                                                         by the                                                                        Cash,
Yuanda          of the                                                                                                                                          April      cninfo
                              Drug         Drug          Company’s       Market                                                       banker’s   Market
Shuyang         Company’s                                                            5,977.15          0.27%        5,500    Yes                               28,        (http://www.cninfo.co
                              purchase     purchase      related          price                                                        acceptan    price
Pharmaceuti     controlling                                                                                                                                     2020       m.cn)
                                                         transaction                                                                   ce bill
cal Co., Ltd.   shareholder
                                                         decision-mak
                                                         ing process

                                                                                                83
                                                                                                                 The 2020 Annul Report of Huadong Medicine Co., Ltd.

                                                    Market price
                                                    determined
Hangzhou
                Joint                               by the                                                    Cash,
Jiuyuan                                                                                                                             April      cninfo
                venture of    Drug       Drug       Company’s     Market                                     banker’s   Market
Gene                                                                        4,334.04    0.19%   8,500   No                          28,        (http://www.cninfo.co
                the           purchase   purchase   related        price                                      acceptan    price
Engineering                                                                                                                         2020       m.cn)
                Company                             transaction                                               ce bill
Co., Ltd.
                                                    decision-mak
                                                    ing process

                                                    Market price
                                                    determined
Beijing         Subsidiary
                                                    by the                                                    Cash,
Grand           of the                                                                                                              April      cninfo
                              Drug       Drug       Company’s     Market                                     banker’s   Market
Johamu          Company’s                                                  2,695.87    0.12%   4,500   No                          28,        (http://www.cninfo.co
                              purchase   purchase   related        price                                      acceptan    price
Pharmaceuti     controlling                                                                                                         2020       m.cn)
                                                    transaction                                               ce bill
cal Co., Ltd.   shareholder
                                                    decision-mak
                                                    ing process

                                                    Market price
                                                    determined
                Subsidiary
Penglai                                             by the                                                    Cash,
                of the                                                                                                              April      cninfo
Nuokang                       Drug       Drug       Company’s     Market                                     banker’s   Market
                Company’s                                                  2,082.01    0.09%   2,400   No                          28,        (http://www.cninfo.co
Pharmaceuti                   purchase   purchase   related        price                                      acceptan    price
                controlling                                                                                                         2020       m.cn)
cal Co. Ltd.                                        transaction                                               ce bill
                shareholder
                                                    decision-mak
                                                    ing process

Yunnan          Subsidiary                          Market price
                                                                                                              Cash,
Leiyunshan      of the                              determined                                                                      April      cninfo
                              Drug       Drug                      Market                                     banker’s   Market
g Lixiang       Company’s                          by the                  1,414.59    0.06%   1,200   Yes                         28,        (http://www.cninfo.co
                              purchase   purchase                  price                                      acceptan    price
Pharmaceuti     controlling                         Company’s                                                                      2020       m.cn)
                                                                                                              ce bill
cal Co., Ltd.   shareholder                         related

                                                                                   84
                                                                                                               The 2020 Annul Report of Huadong Medicine Co., Ltd.
                                                    transaction
                                                    decision-mak
                                                    ing process

                                                    Market price
                                                    determined
Hangzhou        Subsidiary
                                                    by the                                                  Cash,
Grand           of the                                                                                                            April      cninfo
                              Drug       Drug       Company’s     Market                                   banker’s   Market
Biologic        Company’s                                                  1,108.19    0.05%   350   Yes                         28,        (http://www.cninfo.co
                              purchase   purchase   related        price                                    acceptan    price
Pharmaceuti     controlling                                                                                                       2020       m.cn)
                                                    transaction                                             ce bill
cal Inc         shareholder
                                                    decision-mak
                                                    ing process

                                                    Market price
Wuhan                                               determined
                Subsidiary
Grand                                               by the                                                  Cash,
                of the                                                                                                            April      cninfo
Pharmaceuti                   Drug       Drug       Company’s     Market                                   banker’s   Market
                Company’s                                                  1,064.18    0.05%   700   Yes                         28,        (http://www.cninfo.co
cal Group                     purchase   purchase   related        price                                    acceptan    price
                controlling                                                                                                       2020       m.cn)
Sales Co.,                                          transaction                                             ce bill
                shareholder
Ltd.                                                decision-mak
                                                    ing process

                                                    Market price
Shenyang                                            determined
                Subsidiary
Yaoda                                               by the                                                  Cash,
                of the                                                                                                            April      cninfo
Leiyunshan                    Drug       Drug       Company’s     Market                                   banker’s   Market
                Company’s                                                   531.34     0.02%   500   Yes                         28,        (http://www.cninfo.co
g                             purchase   purchase   related        price                                    acceptan    price
                controlling                                                                                                       2020       m.cn)
Pharmaceuti                                         transaction                                             ce bill
                shareholder
cal Co., Ltd.                                       decision-mak
                                                    ing process

Leiyunshan      Subsidiary    Drug       Drug       Market price   Market                                   Cash,       Market    April      cninfo
                                                                             399.91     0.02%   300   Yes
g               of the        purchase   purchase   determined     price                                    banker’s   price     28,        (http://www.cninfo.co
                                                                                   85
                                                                                                             The 2020 Annul Report of Huadong Medicine Co., Ltd.
Pharmaceuti     Company’s                          by the                                                acceptan              2020       m.cn)
cal Group       controlling                         Company’s                                            ce bill
Co. Ltd.        shareholder                         related
                                                    transaction
                                                    decision-mak
                                                    ing process

                                                    Market price
                                                    determined
Shanghai        Subsidiary
                                                    by the                                                Cash,
Xudong          of the                                                                                                          April      cninfo
                              Drug       Drug       Company’s     Market                                 banker’s   Market
Haipu           Company’s                                                  394.89    0.02%   400   No                          28,        (http://www.cninfo.co
                              purchase   purchase   related        price                                  acceptan    price
Pharmaceuti     controlling                                                                                                     2020       m.cn)
                                                    transaction                                           ce bill
cal Co., Ltd    shareholder
                                                    decision-mak
                                                    ing process

                                                    Market price
                                                    determined
Guangdong       Subsidiary
                                                    by the                                                Cash,
Leiyunshan      of the                                                                                                          April      cninfo
                              Drug       Drug       Company’s     Market                                 banker’s   Market
g               Company’s                                                  254.79    0.01%   100   Yes                         28,        (http://www.cninfo.co
                              purchase   purchase   related        price                                  acceptan    price
Pharmaceuti     controlling                                                                                                     2020       m.cn)
                                                    transaction                                           ce bill
cal Co., Ltd.   shareholder
                                                    decision-mak
                                                    ing process

                                                    Market price
Xi'an           Subsidiary                          determined
                                                                                                          Cash,
Yuanda new      of the                              by the                                                                      April      cninfo
                              Drug       Drug                      Market                                 banker’s   Market
Beilin          Company’s                          Company’s              167.41    0.01%   420   No                          28,        (http://www.cninfo.co
                              purchase   purchase                  price                                  acceptan    price
Pharmaceuti     controlling                         related                                                                     2020       m.cn)
                                                                                                          ce bill
cal Co., Ltd    shareholder                         transaction
                                                    decision-mak

                                                                                 86
                                                                                                             The 2020 Annul Report of Huadong Medicine Co., Ltd.
                                                    ing process

                                                    Market price
                                                    determined
Changshu        Subsidiary
                                                    by the                                                Cash,
Leiyunshan      of the                                                                                                          April      cninfo
                              Drug       Drug       Company’s     Market                                 banker’s   Market
g               Company’s                                                  126.48    0.01%   150   No                          28,        (http://www.cninfo.co
                              purchase   purchase   related        price                                  acceptan    price
Pharmaceuti     controlling                                                                                                     2020       m.cn)
                                                    transaction                                           ce bill
cal Co., Ltd.   shareholder
                                                    decision-mak
                                                    ing process

                                                    Market price
                                                    determined
Changchun       Subsidiary
                                                    by the                                                Cash,
Leiyunshan      of the                                                                                                          April      cninfo
                              Drug       Drug       Company’s     Market                                 banker’s   Market
g               Company’s                                                  102.24    0.00%   110   No                          28,        (http://www.cninfo.co
                              purchase   purchase   related        price                                  acceptan    price
Pharmaceuti     controlling                                                                                                     2020       m.cn)
                                                    transaction                                           ce bill
cal Co., Ltd.   shareholder
                                                    decision-mak
                                                    ing process

Hangzhou                                            Market price
Huadong         Subsidiary                          determined
Medicine        of the                              by the                                                Cash,
                                                                                                                                April      cninfo
Group           Company’s    Drug       Drug       Company’s     Market                                 banker’s   Market
                                                                             79.51    0.00%     0   Yes                         28,        (http://www.cninfo.co
Guizhou         second        purchase   purchase   related        price                                  acceptan    price
                                                                                                                                2020       m.cn)
TCM             largest                             transaction                                           ce bill
Developme       shareholder                         decision-mak
nt Co., Ltd.                                        ing process

Grandphar       Subsidiary                          Market price                                          Cash,
                                                                                                                                April      cninfo
ma              of the        Drug       Drug       determined     Market                                 banker’s   Market
                                                                             11.58    0.00%     0   Yes                         28,        (http://www.cninfo.co
Huangshi        Company’s    purchase   purchase   by the         price                                  acceptan    price
                                                                                                                                2020       m.cn)
Feiyun          controlling                         Company’s                                            ce bill

                                                                                 87
                                                                                                                     The 2020 Annul Report of Huadong Medicine Co., Ltd.
Pharmaceuti     shareholder                            related
cal Co., Ltd.                                          transaction
                                                       decision-mak
                                                       ing process

                                                       Market price
                                                       determined
Xi'an           Subsidiary
                                                       by the                                                     Cash,
Yuanda          of the                                                                                                                  April      cninfo
                               Drug       Drug         Company’s     Market                                      banker’s   Market
Detian          Company’s                                                         0.29    0.00%        0   Yes                         28,        (http://www.cninfo.co
                               purchase   purchase     related        price                                       acceptan    price
Pharmaceuti     controlling                                                                                                             2020       m.cn)
                                                       transaction                                                ce bill
cal Co., Ltd    shareholder
                                                       decision-mak
                                                       ing process

                                                       Market price
                                                       determined
                Subsidiary
Beijing                                                by the                                                     Cash,
                of the                                                                                                                  April      cninfo
Huajin                         Drug       Drug         Company’s     Market                                      banker’s   Market
                Company’s                                                       39.11     0.00%      50    No                          28,        (http://www.cninfo.co
Pharmaceuti                    purchase   purchase     related        price                                       acceptan    price
                controlling                                                                                                             2020       m.cn)
cal Co., Ltd                                           transaction                                                ce bill
                shareholder
                                                       decision-mak
                                                       ing process

                                                       Market price
                                                       determined
Hangzhou
                                                       by the                                                     Cash,
Junlan                                                                                                                                  April      cninfo
                Shareholdin    Drug                    Company’s     Market   12,416.1                           banker’s   Market
Pharmaceuti                               Drug sales                                       0.37%   11,000   Yes                         28,        (http://www.cninfo.co
                g enterprise   sales                   related        price           4                           acceptan    price
cal Trading                                                                                                                             2020       m.cn)
                                                       transaction                                                ce bill
Co. Ltd.
                                                       decision-mak
                                                       ing process

Hangzhou        Subsidiary     Drug       Drug sales   Market price   Market   1,014.18    0.03%     920    Yes   Cash,       Market    April      cninfo
                                                                                      88
                                                                                                              The 2020 Annul Report of Huadong Medicine Co., Ltd.
Tangyangyu      of the          sales                determined     price                                  banker’s   price     28,        (http://www.cninfo.co
an TCM          Company’s                           by the                                                acceptan              2020       m.cn)
Outpatient      joint                                Company’s                                            ce bill
Department      venture                              related
Co., Ltd.       Hangzhou                             transaction
                Tangyangyu                           decision-mak
                an                                   ing process
                Pharmaceuti
                cal Co., Ltd.

                                                     Market price
                                                     determined
Hangzhou
                Joint                                by the                                                Cash,
Jiuyuan                                                                                                                          April      cninfo
                venture of      Drug                 Company’s     Market                                 banker’s   Market
Gene                                    Drug sales                           491.69    0.01%   800   No                          28,        (http://www.cninfo.co
                the             sales                related        price                                  acceptan    price
Engineering                                                                                                                      2020       m.cn)
                Company                              transaction                                           ce bill
Co., Ltd.
                                                     decision-mak
                                                     ing process

                                                     Market price
                                                     determined
Guangdong       Subsidiary
                                                     by the                                                Cash,
Leiyunshan      of the                                                                                                           April      cninfo
                                Drug                 Company’s     Market                                 banker’s   Market
g               Company’s              Drug sales                           325.03    0.01%   300   Yes                         28,        (http://www.cninfo.co
                                sales                related        price                                  acceptan    price
Pharmaceuti     controlling                                                                                                      2020       m.cn)
                                                     transaction                                           ce bill
cal Co., Ltd.   shareholder
                                                     decision-mak
                                                     ing process

Hangzhou        Association                          Market price                                          Cash,
                                                                                                                                 April      cninfo
Huadong         with the        Drug                 determined     Market                                 banker’s   Market
                                        Drug sales                           473.63    0.01%   400   Yes                         28,        (http://www.cninfo.co
Medicine        Senior          sales                by the         price                                  acceptan    price
                                                                                                                                 2020       m.cn)
Group New       managemen                            Company’s                                            ce bill

                                                                                  89
                                                                                                            The 2020 Annul Report of Huadong Medicine Co., Ltd.
Drug            t [note]                           related
Research                                           transaction
Institute                                          decision-mak
Co., Ltd.                                          ing process

                                                   Market price
                                                   determined
Leiyunshan      Subsidiary
                                                   by the                                                Cash,
g               of the                                                                                                         April      cninfo
                              Drug                 Company’s     Market                                 banker’s   Market
Pharmaceuti     Company’s            Drug sales                           416.85    0.01%   300   Yes                         28,        (http://www.cninfo.co
                              sales                related        price                                  acceptan    price
cal Group       controlling                                                                                                    2020       m.cn)
                                                   transaction                                           ce bill
Co. Ltd.        shareholder
                                                   decision-mak
                                                   ing process

                                                   Market price
                                                   determined
Yunnan          Subsidiary
                                                   by the                                                Cash,
Leiyunshan      of the                                                                                                         April      cninfo
                              Drug                 Company’s     Market                                 banker’s   Market
g Lixiang       Company’s            Drug sales                           217.11    0.01%   150   Yes                         28,        (http://www.cninfo.co
                              sales                related        price                                  acceptan    price
Pharmaceuti     controlling                                                                                                    2020       m.cn)
                                                   transaction                                           ce bill
cal Co., Ltd.   shareholder
                                                   decision-mak
                                                   ing process

                                                   Market price
                                                   determined
Hangzhou
                Joint                              by the                                                Cash,
Tangyangyu                                                                                                                     April      cninfo
                venture of    Drug                 Company’s     Market                                 banker’s   Market
an                                    Drug sales                            18.23    0.00%     0   Yes                         28,        (http://www.cninfo.co
                the           sales                related        price                                  acceptan    price
Pharmaceuti                                                                                                                    2020       m.cn)
                Company                            transaction                                           ce bill
cal Co., Ltd.
                                                   decision-mak
                                                   ing process

Grand           Subsidiary    Drug    Drug sales   Market price   Market    14.58    0.00%     0   Yes   Cash,       Market    April      cninfo
                                                                                90
                                                                                                         The 2020 Annul Report of Huadong Medicine Co., Ltd.
Resources       of the        sales                determined     price                               banker’s   price     28,        (http://www.cninfo.co
Group Co.,      Company’s                         by the                                             acceptan              2020       m.cn)
Ltd.            controlling                        Company’s                                         ce bill
                shareholder                        related
                                                   transaction
                                                   decision-mak
                                                   ing process

                                                   Market price
                                                   determined
Hangzhou        Subsidiary
                                                   by the                                             Cash,
Grand           of the                                                                                                      April      cninfo
                              Drug                 Company’s     Market                              banker’s   Market
Biologic        Company’s            Drug sales                           84.68    0.00%   0   Yes                         28,        (http://www.cninfo.co
                              sales                related        price                               acceptan    price
Pharmaceuti     controlling                                                                                                 2020       m.cn)
                                                   transaction                                        ce bill
cal Inc.        shareholder
                                                   decision-mak
                                                   ing process

                                                   Market price
                                                   determined
Changchun       Subsidiary
                                                   by the                                             Cash,
Leiyunshan      of the                                                                                                      April      cninfo
                              Drug                 Company’s     Market                              banker’s   Market
g               Company’s            Drug sales                            9.27    0.00%   0   Yes                         28,        (http://www.cninfo.co
                              sales                related        price                               acceptan    price
Pharmaceuti     controlling                                                                                                 2020       m.cn)
                                                   transaction                                        ce bill
cal Co., Ltd.   shareholder
                                                   decision-mak
                                                   ing process

                                                   Market price
China           the                                determined                                         Cash,
                                                                                                                            April      cninfo
Grand           Company’s    Drug                 by the         Market                              banker’s   Market
                                      Drug sales                           85.24    0.00%   0   Yes                         28,        (http://www.cninfo.co
Enterprises,    controlling   sales                Company’s     price                               acceptan    price
                                                                                                                            2020       m.cn)
Inc.            shareholder                        related                                            ce bill
                                                   transaction

                                                                               91
                                                                                                                 The 2020 Annul Report of Huadong Medicine Co., Ltd.
                                                      decision-mak
                                                      ing process

                                                      Market price
                                                      determined
Changshu        Subsidiary
                                                      by the                                                  Cash,
Leiyunshan      of the                                                                                                              April      cninfo
                              Drug                    Company’s     Market                                   banker’s   Market
g               Company’s               Drug sales                               6.55    0.00%     0   Yes                         28,        (http://www.cninfo.co
                              sales                   related        price                                    acceptan    price
Pharmaceuti     controlling                                                                                                         2020       m.cn)
                                                      transaction                                             ce bill
cal Co., Ltd.   shareholder
                                                      decision-mak
                                                      ing process

                                                      Market price
                                                      determined
Hangzhou
                Joint                                 by the                                                  Cash,
Jiuyuan                                                                                                                             April      cninfo
                venture of    House      House        Company’s     Market                                   banker’s   Market
Gene                                                                            34.76     0.00%     0   Yes                         28,        (http://www.cninfo.co
                the           rental     rental       related        price                                    acceptan    price
Engineering                                                                                                                         2020       m.cn)
                Company                               transaction                                             ce bill
Co., Ltd.
                                                      decision-mak
                                                      ing process

                                                      Market price
                                                      determined
Hangzhou        The
                                                      by the                                                  Cash,
Huadong         Company’s                                                                                                          April      cninfo
                                House      House      Company’s     Market                                   banker’s   Market
Medicine        second                                                          34.12     0.00%   34    No                          28,        (http://www.cninfo.co
                                rental     rental     related        price                                    acceptan    price
Group Co.,      largest                                                                                                             2020       m.cn)
                                                      transaction                                             ce bill
Ltd.            shareholder
                                                      decision-mak
                                                      ing process

Hangzhou        Joint                    Rent and     Market price                                            Cash,                 April      cninfo
                              House                                  Market                                               Market
Jiuyuan         venture of               rent         determined              1,328.44    0.06%   220   Yes   banker’s             28,        (http://www.cninfo.co
                              leasing                                price                                                price
Gene            the                      compensat    by the                                                  acceptan              2020       m.cn)

                                                                                     92
                                                                                                           The 2020 Annul Report of Huadong Medicine Co., Ltd.
Engineering   Company                   ion          Company’s                                         ce bill
Co., Ltd.                                            related
                                                     transaction
                                                     decision-mak
                                                     ing process

                                                     Market price
                                                     determined
              Subsidiary
Beijing                                              by the                                             Cash,
              of the                                                                                                          April      cninfo
Yanhuang                    House       House        Company’s     Market                              banker’s   Market
              Company’s                                                     86.18    0.00%   0   Yes                         28,        (http://www.cninfo.co
Real Estate                 leasing     leasing      related        price                               acceptan    price
              controlling                                                                                                     2020       m.cn)
Co., Ltd.                                            transaction                                        ce bill
              shareholder
                                                     decision-mak
                                                     ing process

                                                     Market price
                                                     determined
Hangzhou
              Joint                                  by the                                             Cash,
Huadong                                                                                                                       April      cninfo
              venture of      House       House      Company’s     Market                              banker’s   Market
Medicine                                                                     26.68    0.00%   0   Yes                         28,        (http://www.cninfo.co
              the            leasing      leasing    related        price                               acceptan    price
Group Co.,                                                                                                                    2020       m.cn)
              Company                                transaction                                        ce bill
Ltd.
                                                     decision-mak
                                                     ing process

                                                     Market price
                                                     determined
Hangzhou      Subsidiary
                                                     by the                                             Cash,
Grand         of the                                                                                                          April      cninfo
                            processin   processing   Company’s     Market                              banker’s   Market
Biologic      Company’s                                                      32.3    0.00%   0   Yes                         28,        (http://www.cninfo.co
                             g charge     charge     related        price                               acceptan    price
Pharmaceuti   controlling                                                                                                     2020       m.cn)
                                                     transaction                                        ce bill
cal Inc.      shareholder
                                                     decision-mak
                                                     ing process

                                                                                 93
                                                                                                             The 2020 Annul Report of Huadong Medicine Co., Ltd.

                                                      Market price
                                                      determined
Hangzhou      The           Property
                                        Property      by the                                              Cash,
Huadong       Company’s    and                                                                                                 April      cninfo
                                        and           Company’s     Market                               banker’s   Market
Medicine      second        security                                          30.19    0.00%   50   No                          28,        (http://www.cninfo.co
                                        security      related        price                                acceptan    price
Group Co.,    largest       service                                                                                             2020       m.cn)
                                        service fee   transaction                                         ce bill
Ltd.          shareholder   fee
                                                      decision-mak
                                                      ing process

                                                      Market price
                                                      determined
Hangzhou      The
                                                      by the                                              Cash,
Huadong       Company’s                                                                                                        April      cninfo
                            Energy      Energy        Company’s     Market                               banker’s   Market
Medicine      second                                                           9.02    0.00%   25   No                          28,        (http://www.cninfo.co
                            service     service       related        price                                acceptan    price
Group Co.,    largest                                                                                                           2020       m.cn)
                                                      transaction                                         ce bill
Ltd.          shareholder
                                                      decision-mak
                                                      ing process

                                                      Market price
Beijing                                               determined
              Subsidiary
Yuanda                                                by the                                              Cash,
              of the        Property    Property                                                                                April      cninfo
Chuangxin                                             Company’s     Market                               banker’s   Market
              Company’s    managem     manageme                              19.28    0.00%    0   Yes                         28,        (http://www.cninfo.co
Property                                              related        price                                acceptan    price
              controlling   ent fee     nt fee                                                                                  2020       m.cn)
Managemen                                             transaction                                         ce bill
              shareholder
t Co., Ltd.                                           decision-mak
                                                      ing process

Beijing       Subsidiary                              Market price
                                                                                                          Cash,
Haiwan        of the                                  determined                                                                April      cninfo
                            conferenc   conference                   Market                               banker’s   Market
Banshan       Company’s                              by the                  10.42    0.00%    0   Yes                         28,        (http://www.cninfo.co
                            e fee       fee                          price                                acceptan    price
Hotel         controlling                             Company’s                                                                2020       m.cn)
                                                                                                          ce bill
Managemen     shareholder                             related

                                                                                  94
                                                                                                           The 2020 Annul Report of Huadong Medicine Co., Ltd.
t Co., Ltd.                                             transaction
                                                        decision-mak
                                                        ing process

                                                                            44,311.4
Total                                                         --       --               --   44,379   --   --         --         --               --
                                                                                   3

Details of bulk sales returns                           N/A

Actual performance during the reporting period where
the total amount of daily related transactions is       N/A
estimated by category for the current period (if any)

Reasons for the large difference between the
transaction price and the market reference price (if    N/A
applicable)




                                                                                   95
                                                                                     The 2020 Annul Report of Huadong Medicine Co., Ltd.


2、Related transactions involving the acquisition or sale of assets and shares

√ Applicable □ N/A

                                                          Book        Assesse
                                                          value          d value                Settlem    Trading
                                              Pricing
                                   Content                  of             of         Transfe     ent       profit
                        Type of               principl
                                        of               transfer        transfer     r price   method       and     Date of   Disclos
 Related     Relatio     related               es for
                                    related                red             red         (ten        of       loss     disclos     ure
     party    nship     transact              related
                                   transact               assets         assets       thousan   related     (ten       ure      index
                           ion                transact
                                        ion                (ten           (ten        d yuan)   transact   thousan
                                                ion
                                                         thousan      thousan                    ions      d yuan)
                                                         d yuan)         d yuan)

                                              evaluat
                                              ed price
                                              determi
             Subsidi
                                              ned by
 Penglai     ary of
                                              the
 Nuokan      the                                                                                                               cninfo
                                              Compa
 g           Compa      Purchas    Purchas                                                                           Septem    (http://
                                              ny’s                      8,076.8
 Pharma      ny’s      e of       e of                    5,000                        5,000   cash          /      ber 16,   www.c
                                              related                            1
 ceutical    controll   assets     assets                                                                            2020      ninfo.c
                                              transact
 Co.         ing                                                                                                               om.cn)
                                              ion
 Ltd.        shareho
                                              decisio
             lder
                                              n-maki
                                              ng
                                              process

 Reasons for the large difference between     The appraised value is 80,768,100 yuan, and the buyer and the seller confirm: 50
 the transfer price and the carrying value    million yuan in cash plus sales share (9% of the sales revenue per year within 10
 or assessed value (if any)                   years from the year of the completion of the transfer of the target product).

 Impact on the company’s operating
                                              No significant impact
 results and financial status

 If the relevant transaction involves
 performance agreement, the performance       N/A
 achieved during the reporting period


3、Related transactions of joint external investment

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


4、Associated claim and debt transactions

□ Applicable √N/A

                                                                    96
                                                                                       The 2020 Annul Report of Huadong Medicine Co., Ltd.


No such case during the reporting period.


5、Other major related transactions

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


XVII. Major contracts and their fulfilme nt

1. Entrustment, contracting and leasing

(1) Entrustment

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


(2) Contracting

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


(3) Leasing

□ Applicable √N/A
During the company's reporting period, there was no lease project that brought the company's profits and losse s to more than 10% of
the company's total profit during the reporting period.


2. Important guarantees

√ Applicable □ N/A


(1) Guarantees

                                                                                                              Unit: RMB ten thousand yuan

                   External guarantees of the Company and its subsidiaries (excluding guarantees for subsidiaries)

                       Disclosure
                       date of the
                       announcem                                           Actual                                   Fulfille    Guarantee
     guaranteed                      Guarantee       Actual date of                          Type of    Period of
                       ent related                                        guaranteed                                  d or     for a related
       party                            Cap           occurrence                            guarantee   guarantee
                           to the                                          amount                                     not      party or not
                       guarantee
                           Cap

 /                     /                         /                    /                 /     /           /            /           /



                                                                      97
                                                                                The 2020 Annul Report of Huadong Medicine Co., Ltd.


                                                                       Total actual amount of
Total amount of external
                                                                       external guarantees
guarantees approved during the                                    /                                                                  /
                                                                       during the reporting
reporting period (A1)
                                                                       period (A2)

                                                                       Total actual balance of
Total amount of approved
                                                                       external guarantees at the
external guarantees at the end of                                 /                                                                  /
                                                                       end of the reporting
the reporting period (A3)
                                                                       period (A4)

                                         The Company’s guarantees for its subsidiaries

                        Disclosure                                                                                          Related
                        date of the                                      Actual                                              party
  Guaranteed                          Guarant    Actual date of                         Type of      Term of    Fulfilled
                    announcement                                        guarantee                                           guarant
       party                          ee cap      occurrence                           guarantee    guarantee    or not
                          of the                                         amount                                              ee or
                    guarantee cap                                                                                             not

Hangzhou
Zhongmei                                                                              Joint
                                                March 16,
Huadong             April 19, 2019     50,000                                4,600    liability     One year    No          No
                                                2020
Pharmaceutical                                                                        guarantee
Co., Ltd.

Hangzhou
Zhongmei                                                                              Joint
                                                June 1,
Huadong             April 28, 2020     80,000                               21,474    liability     One year    No          No
                                                2020
Pharmaceutical                                                                        guarantee
Co., Ltd.

Huadong
                                                                                      Joint
Ningbo                                          December 28,
                    April 28, 2020     27,000                                1,200    liability     One year    No          No
Medicine Co.,                                   2020
                                                                                      guarantee
Ltd.

Huadong
                                                                                      Joint
Ningbo                                          December 18,
                    April 28, 2020     23,000                                2,029    liability     One year    No          No
Medicine Co.,                                   2020
                                                                                      guarantee
Ltd.

Huadong
                                                                                      Joint
Ningbo                                          November 20,
                    April 28, 2020     23,000                                1,607    liability     One year    No          No
Medicine Co.,                                   2020
                                                                                      guarantee
Ltd.

Huadong
                                                                                      Joint
Ningbo                                          October 23,
                    April 28, 2020     23,000                                1,041    liability     One year    No          No
Medicine Co.,                                   2020
                                                                                      guarantee
Ltd.

Huadong             April 28, 2020     23,000   October 28,                    375    Joint         One year    No          No


                                                                  98
                                                                 The 2020 Annul Report of Huadong Medicine Co., Ltd.


Ningbo                                    2020                         liability
Medicine Co.,                                                          guarantee
Ltd.

Huadong
                                                                       Joint
Ningbo                                    October 21,
                April 28, 2020   23,000                         995    liability   One year    No         No
Medicine Co.,                             2020
                                                                       guarantee
Ltd.

Huadong
       &e