Suffer from the sequela of merger and acquisition, Shuangcheng pharmaceutical industry makes a profit hole

[China Pharmaceutical network enterprise news] affected by industry policies, Shuangcheng pharmaceutical company's two major businesses, pharmaceutical industry and commercial sales volume of medicine dropped significantly The main polypeptide products' revenue dropped by more than 30% last year, other products by more than 40%, and the profitability of products also declined (suffering from the sequelae of merger and acquisition, Shuangcheng pharmaceutical industry has made a profit hole Picture source: Baidu picture) extension merger and acquisition expansion is one of the important ways for enterprises to enhance their strength, but it is often accompanied by risks As a result, Shuangcheng pharmaceutical industry is suffering from the sequela of M & A the acquired company has not become a performance booster, but a huge profit hole In 2016, Shuangcheng pharmaceutical realized revenue of 145 million yuan, a year-on-year decrease of 37.16%; net profit loss attributable to shareholders of listed companies was 388 million yuan, a year-on-year decrease of 837.32% This is the fifth consecutive year that the company's net profit has declined since it went public in 2012, and it is also a loss Prior to that, Shuangcheng pharmaceutical has issued performance forecasts for many times, and investors are constantly frightened by large losses In the third quarter report of last year, the company estimated that its net profit in 2016 would be RMB 230 million to RMB 260 million, and the long-term equity investment impairment provision of RMB 180 million should be made for the subsidiary Hangzhou AoYa Biotechnology Co., Ltd (hereinafter referred to as Hangzhou AoYa) However, in January this year, the company issued a revised announcement that it would lose 380 million yuan to 395 million yuan, and said that the impairment loss originally accrued for Hangzhou AoYa was insufficient, and it is expected to lose 280 million yuan In the 2016 annual report, Shuangcheng pharmaceutical explained many reasons for the loss of operating performance, including the decline in product sales, the inclusion of R & D expenditure in profit and loss, the preparation costs of subsidiaries in the early stage of production and the termination of the implementation of equity incentive plan to accelerate the amortization of equity incentive costs, which affected the company's profit by nearly 79 million yuan At the same time, it is also determined that due to the sharp decline in the operating performance of Hangzhou AoYa, the provision for asset impairment of 277 million yuan is included in the current profit and loss, which is the main factor leading to the performance loss Shuangcheng Pharmaceutical Co., Ltd and Hangzhou AoYa are related back to 2015 In February of that year, the company announced a non-public offering plan, and planned to raise 900 million yuan to purchase 46% of the equity of Hangzhou AoYa held by Zhejiang juke Industry Co., Ltd (hereinafter referred to as juke industry) and 100% of the equity of Hangzhou aopeng Investment Management Co., Ltd (hereinafter referred to as aopeng investment) Among them, 46% of Hangzhou AoYa's equity is priced at RMB 505 million, and 100% of aopeng's equity is priced at RMB 962 million, with RMB 300 million and RMB 600 million respectively used for fundraising The difference is partially solved by the company's own funds It is worth noting that oppeng investment directly holds 54% equity of Hangzhou AoYa, and the acquisition aims to control 100% equity of Hangzhou AoYa Shuangcheng pharmaceutical, whose performance has been declining in recent years, has high hopes for the acquisition and the market is generally optimistic According to the data, Hangzhou AoYa, founded in 1993, is committed to providing aseptic production solutions and professional and personalized customer service for the pharmaceutical industry It is one of the largest freeze-dried powder injection processing outsourcing enterprises (CMO) in China After the completion of the acquisition, it can improve the existing freeze-drying technology level of Shuangcheng pharmaceutical, and also provide production guarantee for the company's reserve varieties to be quickly put into the market In May 2015, Shuangcheng pharmaceutical completed the transfer of 46% equity of Hangzhou AoYa However, aopeng's 100% equity acquisition failed after a year's waiting In February 2016, Shuangcheng pharmaceutical announced the termination of cooperation with oppeng investment and decided to withdraw its application for non-public offering of shares The company's "good wish" to take full control of Hangzhou, Australia and Asia was suspended halfway The reason for the termination of the transaction also triggered a variety of speculation in the market Some analysts say it may be related to the upside down of Shuangcheng pharmaceutical's share price, when the company's share price was lower than the additional issue price for acquisition The company only said that since 2015, the relevant policies of the pharmaceutical industry have changed a lot, which has affected the operation of Hangzhou AoYa However, what Shuangcheng pharmaceutical said is true As the injection of traditional Chinese medicine preparation is not allowed to be processed by Commission, Hangzhou AoYa unfortunately lies on the gun, business orders are reduced, and the company's performance has declined substantially in the past two years The company's net profit in 2014 reached 100 million yuan, with a decrease of more than 90% to 51 million yuan in 2015, and only 20 million yuan in 2016, with a year-on-year decrease of more than 60% It is worth noting that when Shuangcheng pharmaceutical acquired Hangzhou AoYa in 2015, Huang Shaofeng, the actual controller of AoYa and aopeng investment, made a performance commitment In 2015, the net profit of Hangzhou AoYa was not less than 110 million yuan, in 2016 it was not less than 120 million yuan, and in 2017 it was not less than 130 million yuan If the performance is not up to the standard, it will be compensated in cash However, with the termination of the transaction between Shuangcheng pharmaceutical and aopeng investment, the performance compensation commitment has been invalidated, and only Shuangcheng pharmaceutical can pay for the poor performance of Hangzhou AoYa In fact, in the 2015 and 2016 annual reports of Shuangcheng pharmaceutical, there is no information about the performance compensation of Hangzhou AoYa With the continuous decline in performance, the total equity value of Hangzhou AoYa has also declined significantly, from RMB 1.468 billion in 2014 to RMB 1.075 billion in 2015 and RMB 450 million in 2016 This also makes Shuangcheng pharmaceutical's equity investment in Hangzhou AoYa impaired However, after the company calculated according to the shareholding ratio in 2015, it was determined that there was no impairment of the equity investment However, in 2016, the company had to make an asset impairment provision of 277 million yuan In addition to the impact of M & a sequelae, Shuangcheng pharmaceutical's internal business is not optimistic Under the influence of industrial policies, the sales volume of the two major businesses of the company, the pharmaceutical industry and the pharmaceutical business, fell sharply The main polypeptide products saw a sharp drop of more than 30% in revenue last year, and other products saw a drop of more than 40%, and the profitability of the products also declined At the same time, the company's sales expense and management expense increased by 1.2 times and 1.5 times, respectively The market benefits brought by the large amount of R & D investment have not been shown yet There are variables in the development of two API and lyophilized preparation projects It can be said that Shuangcheng pharmaceutical industry is facing the situation of internal worries and external difficulties Shuangcheng pharmaceutical's performance in the first quarter of this year is not good either It is estimated that the net profit of the first quarter will be 7 million yuan – 9 million yuan The main reason, the company said, was the substantial increase in market development costs, which was not covered by the increased gross margin of product sales.