The Shanghai Stock Exchange is very concerned about the core technology sources of Huaxi Bio, and has repeatedly asked Huaxi Bio to explain the core technology sources.
The manufacturer of the Forbidden City lipstick Huaxi Bio may be listed on the Science and Technology Board! Huaxi Bio is not only producing beauty and skin care products such as lipsticks and masks, but also the largest manufacturer of hyaluronic acid in the world.
On April 10, the website of the Shanghai Stock Exchange showed that Huaxi Biotech Co., Ltd. (“Huaxi Biological”) Science and Technology Board IPO application was accepted.
In January 2000, Huaxi Biological’s predecessor Shandong Furida Biochemical Co., Ltd. was established. According to the prospectus, Huaxi Bio focuses on the biomedical field and is a world-renowned bio-tech enterprise with hyaluronic acid as its core, covering a variety of bioactive substances, from raw materials to terminal complete industrial chain research and development, production and sales. Products cover the fields of medicine, medical equipment, functional skin care products.
Hyaluronic acid, also known as hyaluronic acid, is one of the most important raw materials for beauty and beauty. It is widely used in skin care products and micro-plastic surgery (injection beauty). Hyaluronic acid is also the core product of Huaxi Bio.
The prospectus shows that from 2016 to 2018, Huaxi Biotech achieved revenues of 733 million yuan, 818 million yuan, and 1.263 billion yuan respectively, achieving net profit of 269 million yuan, 222 million yuan, and 424 million yuan respectively. Huaxi Bio is proposed to issue no more than 4,956,260 shares, and the total share capital after the issuance will not exceed 480 million shares. The proposed fundraising will be 3.154 billion yuan, mainly for three projects including Huaxi Biological Life Health Industry Park.
Before this, Huaxi Biotech (00963.HK) was listed on the Hong Kong Stock Exchange in October 2008 and delisted from the Hong Kong Stock Exchange in early November 2017.
On May 7th, May 20th, June 4th, and June 18th, Huaxi Biology responded to the Shanghai Stock Exchange four times inquiries about the listing of its science and technology board. The latest information on the website of the Shanghai Stock Exchange shows that Huaxi Bio is currently in the inquiry state.
Insufficient R&D investment 5%
High sales growth costs
Although Huaxi Bio has announced that many technologies are internationally leading in the prospectus, its R&D investment in recent years is not high.
The prospectus shows that in 2016-2018, Huaxi Biotech achieved revenues of 733 million yuan, 818 million yuan, and 1.263 billion yuan respectively, and R&D investment was 24 million yuan, 206 million yuan, and 59 million yuan respectively. The proportions received were 3.27%, 3.14%, and 4.19%, all of which were less than 5%.
In terms of the number of employees, as of the end of 2018, the total number of Huaxi bio-employees was 1,235, of which R&D personnel accounted for 15% of the total number of employees, production personnel accounted for 41%, and sales personnel accounted for 27%. .
According to the second inquiries, Huaxi Bio was produced at the medical terminal.The R&D expense ratio of products and functional skin care products is comparable to that of major companies in the same industry. However, in the raw material products business with a revenue of 51.70%, the R&D expense ratio is obviously lower than that of the same industry.
In sharp contrast to R&D investment, Huaxi Bio’s sales expenses increased rapidly in 2016-2018, respectively, of 107 million yuan, 125 million yuan, and 284 million yuan, accounting for 14.60% of the current operating income. 15.34% and 22.46%. Among them, advertising promotion fees soared in 2018, an increase of 483% year-on-year, and market development fees also increased by 326%.
Huaxi Bio said that the main reason for the increase in sales expenses in 2018 was that the company continued to strengthen its marketing team construction and the number of sales staff increased. CCTV advertising and other propaganda methods to strengthen brand promotion, the corresponding advertising and publicity expenses increased by 44.176 million yuan; Since 2018, the company has launched more functional skin care sub-brands, and the market development fee has also increased.
The Shanghai Stock Exchange also noticed that the “research and development expense rate is lower than comparable companies in the same industry and the technology maintains international leadership”. In response to the inquiry of the Shanghai Stock Exchange, Huaxi Bio believes that the company has accumulated profoundly in the production of hyaluronic acid technology by microbial fermentation. The technology reserves are relatively mature, and the product yield and product quality are at the international leading level. Therefore, in the raw materials It is reasonable to have a relatively low R&D expense rate in the product business.
Several inquiries from the Shanghai Stock Exchange
The core technology source is concerned
Although R&D investment is less than 5% in recent years, Huaxi Bio considers itself to be a typical R&D and technology-driven company. At present, the three main businesses of hyaluronic acid raw materials, medical terminal products and functional skin care products have been supported by bio-fermentation technology and gradient 3D cross-linking technology.
Huaxi Biological admits in the prospectus that its business development begins withAt the beginning of its establishment, it was a technological breakthrough in the field of bio-fermentation production of hyaluronic acid.
The Shanghai Stock Exchange is also very concerned about the source of the core technology of Huaxi Bio. In the first, third and fourth inquiries, Huaxi Biotech was asked to explain the core technology sources.
So, how did Huaxi Biotech get the technology of producing hyaluronic acid by microbial fermentation at the beginning of its establishment?
In January 2000, Huaxi Biological’s predecessor Shandong Furida Biochemical Co., Ltd. was established. In May 2001, Huaxi Bio purchased the initial technology of fermentation to produce medicinal hyaluronic acid from the Shandong Institute of Biopharmaceuticals. According to the agreement, the latter will transfer Huaxi Biotransport to the “fermentation method to produce medicinal hyaluronic acid” project, provide all technical data of the project, and guide the company to produce three batches of qualified products. In order to further clarify the ownership and use rights of technical achievements, in February 2008, Huaxi Biology and Shandong Biopharmaceutical Research Institute signed a supplementary agreement on the “Technical Contract” signed in May 2001.
For the transaction price of the pharmaceutical production of medicinal hyaluronic acid technology, until the fourth inquiry, Huaxi Bio revealed that the technology transfer fee of the project totaled 450,000 yuan, which was once in August 2001. Pay off. However, Huaxi Bio did not give further explanation on how the technology transaction was priced and whether the pricing was fair.
In fact, the background of the trading of this technology can be traced back to the early days of Huaxi Biological’s predecessor, Shandong Freda.
Shandong Freda was established in January 2000. Its founding shareholders include Zhengda Freda, American Freda, Biochemical Company and Zhengda Technology, each holding 25%. The biochemical company is the predecessor of the state-owned enterprise Freda Group (in July 2005, the name of the biochemical company was changed to Shandong Freda Pharmaceutical Group Co., Ltd.), and the only investor was the Shandong Biopharmaceutical Research Institute.
Shandong Freda (Huaxi Biological Predecessor) is a state-owned funded enterprise. In its previous capital increase and shareholding changes, Biochemical Corporation (Freida Group) did not participate, for example, in June 2008, it gave up cash. Dividends subscribe for capital increase at the price of 1 yuan per dollar of registered capital; in 2009, they will abandon the capital increase at a price of 1 yuan per dollar of registered capital. Therefore, the shareholding ratio of Biochemical Company (Furida Group) was gradually diluted until December 2017, when it transferred its 5.63% stake in Huaxi Biotech at a price of RMB 11,83.323 million.Let Hong Kong work hard. Hong Kong Qinxin is the 100% ultimate shareholding company of Huaxi Biological’s actual controller Zhao Yan.
In addition, microbial fermentation production of hyaluronic acid technology was initiated by Dr. Guo Xueping and his team in China. Guo Xueping was the director and vice president of the Shandong Institute of Biopharmaceutics from 1987 to 1997. When Shandong Freda was established, Shandong Academy of Pharmacy sent Guo Xueping to work in Shandong Freda, and as a staff of Shandong Freda, only retained the establishment of the Shandong Academy of Pharmacy.
At present, Guo Xueping is the director, deputy general manager and chief scientist of Huaxi Biological.
Huaxi Bio said in response to the inquiry of the Shanghai Stock Exchange that Guo Xueping has served in the company from the Shandong Academy of Pharmacy, and has fulfilled the relevant approval procedures in accordance with relevant regulations, and has fulfilled relevant procedures and complied with relevant policies and regulations and undertakings. Relevant regulations within the unit.
Disclaimer: This article (report) is based on published information, and the information in this document or the opinions expressed do not constitute investment advice for anyone.