Beida Pharmaceuticals Divests API Business, Aims to Turn Losses into Profit for the Year

 　Beida Pharmaceuticals November 6 board of directors decided that the proposed agreement will be held in a manner involving API business subsidiaries Daxin Pharmaceuticals 92.26% shares, Chongqing Synthesis 100% equity, Fangxin Chemical 66.86% equity and Chongqing and 100% of the equity transfer to the controlling shareholder Southwest Synthesis Pharmaceutical Group and its wholly owned subsidiaries, a total valuation of about 766 million yuan. Through this major asset reorganization, the listed company will have a large loss of API business related subsidiaries transferred to the outside world, is conducive to reducing losses, improve profitability.

According to the calculation, from January to May this year, Beida Pharmaceuticals realized operating income of about 955 million yuan, net profit of -52,237,500 yuan; after the completion of the sale of the above assets, the company, although the operating income was reduced to 703 million yuan, but the net profit became 14,687,800 yuan, and successfully realized the turnaround of losses to profits. At the same time, the company's total assets from 5.049 billion yuan down to 3.399 billion yuan, but the net assets will increase from 1.081 billion yuan to 1.294 billion, up nearly 20%.

It is understood that in recent years, the domestic pharmaceutical industry as a whole fixed asset investment growth faster, resulting in cyclical overcapacity of bulk APIs. With the significant increase in national environmental protection standards, the ability of enterprises to digest environmental costs is not high, the API industry profit negative growth. At the same time, with the acceleration of the internationalization of the RMB, the expansion of the floating exchange rate band, resulting in lower value-added bulk APIs and intermediates export pressure continues to increase, the domestic bulk API manufacturers in the international market price competition is gradually losing its advantage. Against this background, in the second half of 2014, the price and sales volume of domestic bulk APIs declined significantly, and competition in the industry intensified.

In the main business of Beida Pharmaceuticals, the main markets of bulk API business are domestic market and European market, and the company and its customers settled in euro in the European market. since the second half of 2014, in the domestic market, the company's sales price of API products declined sharply, and sales volume was also reduced significantly; in the international market, with the continuous depreciation of the euro, the company's foreign exchange losses have been increasing. As a result of the above, the company's net profit for 2014 was -37.9636 million yuan, and the company's net profit for the first three quarters of 2015 was -186 million yuan.

Beida Pharmaceuticals said that after the completion of the major asset sale, the company will divest its API production and sales business as a whole, and retain the preparation, drug distribution, medical device distribution, and medical service businesses. In the future, the company will strengthen the operation and management, actively expand the market, adjust the product structure, increase research and development, and relying on the shareholders' resource advantages, seize the good opportunity of the development of medical service industry, and actively layout of medical equipment, pharmaceutical distribution and other medical service fields. At the same time, the company will actively look for high-quality resources that match the company's main development areas of specialty pharmaceuticals, distribution and medical services, and seek opportunities for business cooperation and strategic mergers and acquisitions, to create an efficient and synergistic pharmaceutical industry chain, and actively enhance market competitiveness and profitability.

It is worth noting that Beida Pharmaceuticals is under investigation by the China Securities Regulatory Commission (CSRC) for suspected violation of securities laws and regulations. Up to now, the listed company has not received the final conclusion of the investigation by the CSRC.