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华东医药: 2023年第一季度报告(英文版) 世界速讯

                                                                          First Quarterly Report 2023 of Huadong Medicine Co., Ltd.


(资料图)

     Stock code: 000963 Stock abbreviation: Huadong Medicine                               Announcement No.: 2023-028

                                        Huadong Medicine Co., Ltd.

                                        First Quarterly Report 2023

The Company and all members of the Board of Directors hereby guarantee that the information

presented in this report is authentic, accurate and complete and free of any false records, misleading

statements or material omissions.

Important Declaration:

Medicine Co., Ltd. (hereinafter referred to as the “Company”) hereby guarantee that the information presented in

this report is authentic, accurate and complete and free of any false records, misleading statements or material

omissions, and shall undertake individual and joint legal liabilities.

(accounting supervisor) hereby declare that the financial information in this quarterly report is authentic, accurate

and complete.

□ Yes No

According to “Stock Listing Rules of the Shenzhen Stock Exchange”, if listed companies have both Chinese and

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.

I.     Key Financial Data

(I) Key accounting data and financial indicators

Is the Company required to adjust or restate retroactively the accounting data in previous years?

□ Yes No

                                                                                                         Increase/decrease for the

                                                                                                       reporting period as compared

                                        For the reporting period       For the same period last year

                                                                                                       with the same period last year

                                                                                                                    (%)

     Operating income (CNY)                     10,114,531,331.77                  8,932,579,251.75                          13.23%

     Net profit attributable to

     shareholders of the listed                    755,284,976.47                    704,364,775.13                           7.23%

     company (CNY)

                                                                             First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

   Net profit attributable to

   shareholders of the listed

   company after deducting non-

   recurring profit or loss (CNY)

   Net cash flow from operating

                                                    -246,152,770.16                     -260,603,628.32                           5.55%

   activities (CNY)

   Basic earnings per share

   (CNY/per share)

   Diluted earnings per share

   (CNY/share)

   Weighted average return on

   equity (ROE)

                                                                                                            Increase/decrease as at the

                                      As at the end of the reporting                                       end of the reporting period as

                                                                             As at the end of last year

                                                  period                                                   compared with the end of last

                                                                                                                      year (%)

   Total assets (CNY)                             32,115,200,767.26                   31,192,203,406.84                            2.96%

   Owners" equity attributable to

   shareholders of the listed                     19,314,073,760.97                   18,577,919,237.39                           3.96%

   company (CNY)

Total share capital of the Company as at the trading date prior to disclosure:

   Total share capital of the Company as at the trading date prior

   to disclosure (shares)

Fully diluted earnings per share calculated with the latest share capital:

   Preferred stock dividends paid (CNY)                                                                                             0.00

   Interest on perpetual bonds paid (CNY)                                                                                           0.00

   Fully diluted earnings per share calculated with the latest share

   capital (CNY/share)

(II) Non-recurring profit or loss items and amounts

Applicable □ Not applicable

                                                                                                                             Unit: CNY

                       Item                                For the reporting period                           Description

   Profit or loss from disposal of non-

   current assets (including the written-off

                                                                               -2,020,270.17

   portion for which provision for

   impairment of assets is made)

   Tax returns and exemption with approval

   exceeding one"s authority or without                                          3,225,285.68

   formal approval document

   Government grants included in current

   profit or loss (excluding those closely

   related to the normal operations of the

   Company granted on an ongoing basis in                                      11,357,170.62

   fixed amount or fixed quota in

   accordance with national policies and

   regulations)

   Other non-operating revenue or

                                                                              -13,443,089.32

   expenditure

   Less: Effect on income tax                                                    1,140,865.86

                                                                            First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

        Effect on minority interests (after

  tax)

  Total                                                                      -2,257,641.54

Details of other profit or loss items conforming to the definition of non-recurring profit or loss

□Applicable Not applicable

The Company had no other profit or loss item conforming to the definition of non-recurring profit or loss.

If an item listed as non-recurring profit or loss item in the Explanatory Announcement on Information Disclosure by Companies

Offering Securities to the Public No. 1: Non-Recurring Profits and Losses is defined as a recurring profit or loss item, please describe

the details.

□Applicable Not applicable

The Company did not define any item listed as non-recurring profit or loss item in the Explanatory Announcement on Information

Disclosure by Companies Offering Securities to the Public No. 1: Non-Recurring Profits and Losses as a recurring profit or loss item.

(III) Details and reasons for changes in key accounting data and financial indicators

Applicable □ Not applicable

   Items in the balance                                                        Amount of

                                 Ending balance         Opening balance                                Reason for change

           sheet                                                               variation

                                                                                              Mainly due to the loan repayment and

Monetary funds                  2,375,152,352.20        3,996,302,178.41        -40.57%       investment spending in the current

                                                                                              period

                                                                                              Mainly due to the increase in

Other receivables                 426,378,917.15         283,710,955.63          50.29%

                                                                                              receivable temporary payments

                                                                                              Mainly due to the increase in value-

Other current assets              154,239,503.07          52,692,618.78         192.72%

                                                                                              added tax to be deducted

                                                                                              Mainly due to the loan repayment in

Short-term borrowing              563,013,919.12         947,516,383.37         -40.58%

                                                                                              the current period

                                                                                              Mainly due to the increase in the

Notes payable                   1,360,474,461.93        1,029,409,686.81         32.16%

                                                                                              settlement of bills

                                                                                              Mainly due to the increase in sales

Contract Liabilities              192,637,694.45         146,488,489.07          31.50%

                                                                                              revenue received in advance

                                                                                              Mainly due to the payment of

Employee       remuneration

payable

                                                                                              period

                                                                                              Mainly due to the payment of

Dividends payable                   224,219.60            14,924,219.60         -98.50%       dividends to minority shareholders in

                                                                                              the current period

                                                                                              Mainly due to the loan repayment in

Long-term borrowings              677,604,268.25        1,051,457,747.44        -35.56%

                                                                                              the current period

                                                                                              Mainly due to the increase in output

Other current liabilities         24,158,784.99           15,788,164.30          53.02%

                                                                                              tax to be transferred

Other      comprehensive                                                                      Mainly due to the translation balance

                         -119,904,045.95  -88,552,636.42  -35.40%

incomes                                                                                       of foreign currency statements

   Items in the income Amount of current Amount of prior Amount of

                                                                                                       Reason for change

       statement             period           period     variation

                                                                                         Mainly due to the increase in net

Financial expense                 29,150,841.84           8,060,234.62          261.66%

                                                                                         interest expenses

Income from disposal of                                                                  Mainly due to the decrease in income

                                   -2,199,859.71           557,821.07           -494.37%

assets                                                                                   from disposal of fixed assets

                                                                                         Mainly due to the decrease in

Investment incomes                -61,752,708.66         -27,961,493.36         -120.85% recognized income from investment

                                                                                         in associates in the current period

                                                                                         Mainly due to the increase in

Other incomes                     14,582,456.30           10,669,007.70          36.68% government grant in the current

                                                                                         period as compared with the same

                                                                          First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

                                                                                          period last year

                                                                                          Mainly due to the increase in income

Non-operating incomes                1,389,195.74            831,619.81         67.05%

                                                                                          from waste disposal

                                                                                          Mainly due to the decrease in net

Profits and losses of                                                                     profit of partly-owned subsidiaries in

minority shareholders                                                                     the current period as compared with

                                                                                          the same period last year

  Items in the cash flow Amount of current Amount of prior Amount of

                                                                     Reason for change

        statement             period            period     variation

                                                                     Mainly due to the increase in loan

Net cash flows generated                                             repayment in the current period as

                          -849,412,643.67   -5,561,294.58 -15173.65%

from financing activities                                            compared with the same period last

                                                                     year

II. Shareholder Information

(I) Total number of ordinary shareholders, number of preferred shareholders with restored voting rights

and shareholdings of top 10 shareholders

                                                                                                                       Unit: Shares

 Total number of ordinary                                   Total number of preferred shareholders with restored

 shareholders as at the end of the                 72,114 voting rights as at the end of the reporting period (if                 0

 reporting period                                           any)

                                                  Shareholdings of top 10 shareholders

                                                                                  Number of          Pledged, marked or locked-up

                                                                                  shares with                     status

      Name of             Nature of         Shareholding       Number of

                                                                                    trading

     shareholder         shareholder       proportion (%)     shares held

                                                                                 moratorium        Status of shares      Quantity

                                                                                      held

                        Domestic

 China Grand            non-state-

 Enterprises, Inc.      owned legal

                        person

 Hangzhou Huadong

                        State-owned

 Medicine Group                                     16.42%     288,000,000.00             0.00

                        legal person

 Co., Ltd.

 Hong Kong

                        Overseas

 Securities Clearing                                3.11%       54,522,678.00             0.00

                        legal person

 Company Limited

 Industrial and

 Commercial Bank

 of China Limited–

 China EU Medical       Others                      2.80%       49,178,041.00             0.00

 Health Hybrid

 Securities

 Investment Fund

                        Domestic

 China Securities       non-state-

 Finance Co., Ltd.      owned legal

                        person

 China Construction

 Bank Corporation–

                        Others                      1.14%       20,000,078.00             0.00

 ICBC Credit Suisse

 Frontier Medical

                                                                       First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

Securities

Investment Fund

National Social

Security Fund          Others                     0.59%     10,380,842.00                0.00

Portfolio 110

Industrial and

Commercial Bank

of China Limited–

China EU Medical       Others                     0.55%      9,577,584.00                0.00

Innovation

Securities

Investment Fund

National Social

Security Fund          Others                     0.51%      9,000,067.00                0.00

Portfolio 503

China Construction

Bank Corporation–

E Fund CSI300

                       Others                     0.47%      8,306,632.00                0.00

Medicine and

Health Exchange

Traded Fund

                                Shareholding of top 10 holders of shares without trading moratorium

                                                                                                          Type of share

        Name of shareholder               Number of shares without trading moratorium held

                                                                                                 Type of share        Quantity

                                                                                                Ordinary share

China Grand Enterprises, Inc.                                                 730,938,157.00                      730,938,157.00

                                                                                                in CNY

Hangzhou Huadong Medicine                                                                       Ordinary share

Group Co., Ltd.                                                                                 in CNY

Hong Kong Securities Clearing                                                                   Ordinary share

Company Limited                                                                                 in CNY

Industrial and Commercial Bank of

China Limited–China EU Medical                                                                  Ordinary share

Health Hybrid Securities Investment                                                             in CNY

Fund

                                                                                                Ordinary share

China Securities Finance Co., Ltd.                                             22,186,818.00                        22,186,818.00

                                                                                                in CNY

China Construction Bank

Corporation–ICBC Credit Suisse                                                                  Ordinary share

Frontier Medical Securities                                                                     in CNY

Investment Fund

National Social Security Fund                                                                   Ordinary share

Portfolio 110                                                                                   in CNY

Industrial and Commercial Bank of

China Limited–China EU Medical                                                                  Ordinary share

Innovation Securities Investment                                                                in CNY

Fund

National Social Security Fund                                                                   Ordinary share

Portfolio 503                                                                                   in CNY

China Construction Bank

Corporation–E Fund CSI300                                                                       Ordinary share

Medicine and Health Exchange                                                                    in CNY

Traded Fund

                                                           The Company did not know whether the shareholders mentioned above

A description of the relationship or concerted action of

                                                           were related parties with each other or whether they were acting-in-

the above shareholders

                                                           concert parties with each other.

Description of top 10 shareholders engaging in             As at the end of the reporting period, none of the top 10 ordinary

securities margin trading business (if any)                shareholders held the Company’s shares via a securities margin trading

           First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

account.

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

(II) Total number of preferred shareholders of the Company and shareholdings of top 10 shareholders

□Applicable Not applicable

III. Other Important Matters

Applicable □ Not applicable

      (I) Overview of the Company"s overall operations during the reporting period

      In the first quarter of 2023, the Company, with a sharp focus on the overall strategic planning

and annual business objectives, continued to thoroughly implement its unique business philosophy

and the business principles of "High-quality Innovation, High-efficiency Operation" in the new era,

continuously improved the average labor efficiency per capita, enriched the pipeline layout,

strengthened the construction of the R&D ecosystem, improved the R&D speed and quality, and

actively expanded the international market. Moving forward steadily along the road of transformation

and innovation with Huadong Medicine"s characteristics, the Company has achieved an all-round

recovery of overall operating performance and a steady improvement in growth and quality, laying a

solid foundation for achieving the overall business objectives for the year.

      From January to March 2023, the Company achieved an operating income of CNY 10.115

billion, the first time that the operating income exceeded CNY 10 billion in a single quarter, an

increase of 13.23% year on year and an increase of 2.62% from the fourth quarter of 2022; during the

reporting period, with the equity incentive cost and the profit or loss from shareholding and

controlling R&D institutions deducted, it achieved the net profit attributable to shareholders of the

listed company after deducting non-recurring profit or loss of CNY 855 million, a year-on-year

increase of 14.99%.

      During the reporting period, the overall operation of Zhongmei Huadong, a core subsidiary of

the Company, continued to maintain a steady growth trend, achieving operating income (including

CSO business) of CNY 3.075 billion, a year-on-year increase of 10.19%, and realizing consolidated

net profit attributable to shareholders of the listed company after deducting non-recurring profit or

loss of CNY 667 million, an increase of 15.90% year on year and an increase of 39.98% from the

fourth quarter of 2022.

      During the reporting period, except for the orders for nucleoside intermediates affected by the

decline in international market demand, the products and businesses in the Company"s industrial

microbiology sector maintained a steady growth. The Company will continue to improve its business

layout, enhance its overall operating functions and strengthen its marketing capabilities, in an effort

to make new breakthroughs in domestic and international market expansion, and fulfil the business

                                                       First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

objectives of maintaining rapid growth of operating income for the year of 2023.

     Affected by the periodical increase in demand for medicinal products, the growth of the

Company"s pharmaceutical business during the reporting period accelerated year on year; the overall

operating income amounted to CNY 6.844 billion, a year-on-year increase of 15.67%, and the

cumulative net profit increased by 15.06% year on year.

     During the reporting period, the Company"s domestic and international aesthetic medicine

business continued to maintain a sound momentum of growth. The total operating income of aesthetic

medicine sector was CNY 503 million (excluding internal offsets), a year-on-year increase of 10.86%.

Sinclair, a wholly-owned subsidiary in the United Kingdom, continued to expand the global aesthetic

medicine market. During the reporting period, it achieved a consolidated operating income of GBP

of GBP 2.99 million (the year-on-year slowdown was mainly due to the delay of orders in some

regions, and the growth rate is expected to pick up gradually from the second quarter).

     During the reporting period, Sinclair (Shanghai), a domestic wholly-owned aesthetic medicine

subsidiary of the Company, actively seized the opportunity of gradually recovering domestic aesthetic

medicine market, and continued to expand the regenerative aesthetic medicine market on the premise

of compliance with relevant regulations, based on the concept of "Medicine First", and with patient

experience as the core. It achieved an operating income of CNY 210 million, an increase of 33.83%

year on year and an increase of 10.51% as compared with the fourth quarter of 2022. As the domestic

consumer market continues to recover, the Company is expected to achieve better performance in

domestic aesthetic medicine business in the second quarter.

     (II) R&D and BD progress of the Company during the reporting period

     The Company attaches great importance to innovative R&D and continues to maintain a high

proportion of R&D investment. During the reporting period, the Company"s R&D investment in

pharmaceutical industry was CNY 387 million, including CNY 306 million in direct R&D

expenditure, and CNY 81 million in product introduction and R&D equity investment. As at the

release date of the report, the important progresses made by the Company in the R&D and BD of

medicinal products, innovative medical devices, aesthetic medicine products were as follows:

     (1) Oncology

     ELAHERE™ (mirvetuximab soravtansine-gynx, R&D code: IMGN853, HDM2002): In July

completed. In November 2022, ImmunoGen, a US partner of the Company, announced the

accelerated approval of ELAHERE™ by the U.S. FDA. It is the first ADC (antibody-drug conjugate)

                                                         First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

drug approved by the U.S. FDA for platinum-resistant ovarian cancer. It is used for the treatment of

platinum-resistant epithelial ovarian cancer, fallopian tube cancer, or primary peritoneal cancer in

adults who are folate receptor α (FRα)-positive and have previously received first to third-line

systemic therapy. In December 2022, the subject enrollment for Phase III single-arm clinical trial in

China was completed. In March 2023, the pre-BLA submission was completed after the preset

primary endpoint of study was reached; and the BLA application is planned to be submitted within

this year. Based on the good clinical performance of this product, the Company and its partner will

promote the front-line treatment of ovarian cancer through further clinical study, to support the use

of ELAHERE™ as the first choice in combination therapy for ovarian cancer.

     Mefatinib: It is used for the treatment of advanced non-small cell lung cancer with sensitive

EGFR mutations. In June 2021, the enrollment of last subject for Phase III clinical trial was completed;

and the subjects were been followed up for the number of PFS events. It is expected to submit the

NDA application after the number of PFS events in the Phase III study is obtained in the second

quarter of 2023.

     (2) Autoimmunity

     HDM3002 (PRV-3279): It is used to treat systemic lupus erythematosus (SLE) and prevent or

reduce the immunogenicity of gene therapy. Provention Bio, a US partner of the Company, is

currently conducting Phase IIa clinical trial of the product for SLE indication in the United States and

Hong Kong, China. The Company submitted the IND application in China in February 2023.

     HDM3001: It is a biosimilar of ustekinumab for the treatment of moderate to severe plaque

psoriasis in adults. The Phase III clinical study has reached the preset primary endpoint. The Company

completed the pre-BLA submission in April 2023.

     (3) Endocrinology and metabolism

     HDM1002: It is a small molecule GLP-1 receptor agonist independently developed by the

Company. The Company submitted the IND application in China in February 2023, and completed

the submission of IND application in the United States in April 2023.

     Liraglutide Injection: It is a GLP-1 receptor agonist. The marketing authorization application for

diabetes indication was approved by NMPA in March 2023. The marketing authorization application

for obesity or overweight indication was accepted in July 2022 and it is expected to be approved

within this year.

     Semaglutide Injection: The Phase I study has been completed and reached the endpoint of the

equivalence study. Phase III clinical study is expected to be initiated in the second half of 2023.

     Insulin Degludec Injection: The Phase I study has been completed and reached the endpoint of

the equivalence study. Phase III clinical study is expected to be initiated in the second half of 2023.

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

     (4) Innovative medical device

     HD-NP-102 (Transdermal Glomerular Filtration Rate Measurement System and MB-102

Injection): It is jointly developed by the Company and MediBeacon, Inc. in the United States, and is

used to continuously measure the glomerular filtration rate (GFR) of patients with normal or impaired

renal function in a non-invasive manner based on the changes in fluorescence over time emitted by

the intravenously injected MB-102. In July 2022, the medical device registration application for the

system was formally accepted by NMPA, which is currently under review. The MB-102 Injection

(Relmapirazin) used in conjunction with the system is a global innovative drug. The subject

enrollment for Phase III multi-regional clinical trial (MRCT) was completed in February 2023, and

the pre-NDA submission in China was completed in April 2023.

     (5) Registration and commercialization progress of aesthetic medicine products

     During the reporting period, the Company continued to push ahead the registration and

promotion of core products in the global market:

         Ellansé® series

     The subject enrollment for clinical trial of Ellansé®-M in China has been successfully completed,

and the follow-up has been started. In addition, Sinclair has initiated the registration of Ellansé®

products, a range of injectable polycaprolactone microsphere-based dermal fillers, in the United

States.

         MaiLi® series

     The subject enrollment for clinical trial of MaiLi Extreme in China has been successfully

completed, and the follow-up has been started. In addition, Sinclair has initiated the registration of

MaiLi® series products, a new range of injectable premium lidocaine-containing hyaluronic acid

fillers, in the United States.

         Sculpt & Shape

     In the first quarter of 2023, Sinclair launched Sculpt & Shape, a new energy-based device for

body shaping and facial rejuvenation, in the European market. Featuring innovative RotateRF

technology, the product received good market feedback immediately after it was launched.

         Reaction®

     The Company has initiated the pre-marketing preparations for Reaction®, a bipolar radio

frequency anti-aging device, in China, and has established a national energy-based device sales team.

In April 2023, a pre-marketing clinical application seminar was held in China, when 6 authoritative

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

experts in dermatology and plastic surgery were invited to conduct exchanges and discussions. The

product is planned to be marketed in the second quarter of 2023 in China.

     In January 2023, Huadong Medicine (Hangzhou) Co., Ltd., a wholly-owned subsidiary of the

Company, signed an exclusive commercialization cooperation agreement with Kaixing Life Science,

a wholly-owned subsidiary of CARsgen Therapeutics Co., Ltd. Huadong Medicine (Hangzhou) has

been granted by Kaixing Life Science the exclusive rights for commercialization of zevorcabtagene

autoleucel (R&D code: CT053), a fully human anti-autologous BCMA (B cell maturation antigen)

CAR-T (chimeric antigen receptor T cell) candidate for the treatment of relapsed/refractory multiple

myeloma. As a product with great potential, zevorcabtagene autoleucel will further enrich the

Company"s product line in the field of blood diseases. In terms of marketing, it will share expert

networks, research and clinical resources with existing key product varieties in this field, to achieve

mutual promotion and development and generate effective synergies. After this transaction, the

Company will form a multi-dimensional pipeline layout of chemotherapeutic drugs, ADC products

and CAR-T products in the treatment of hematological tumors. For details, please refer to the

Announcement on Exclusive Commercialization Cooperation Agreement Signed by a Wholly-owned

Subsidiary (Announcement No.: 2023-004) disclosed by the Company at http://www.cninfo.com.cn.

     In April 2023, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (hereinafter referred to

as "Zhongmei Huadong"), a wholly-owned subsidiary of the Company, signed the Agreement on

Equity Transfer and Capital Increase in Jiangsu Nanjing Nongda Animal Pharmaceutical Co., Ltd.

with Jiangsu Nanjing Nongda Animal Pharmaceutical Co., Ltd. (hereinafter referred to as "Nanjing

Nongda Animal Pharmaceutical"), Zhai Zhongshu and Nanjing Jiuheng Pharmaceutical LP (Limited

Partnership). Zhongmei Huadong will invest no more than CNY 265,333,300 in total and acquire 70%

of the equity in Nanjing Nongda Animal Pharmaceutical in the form of equity transfer and capital

increase, to become a controlling shareholder of the latter. This acquisition of Nanjing Nongda

Animal Pharmaceutical further improves the industrial layout of the Company in industrial

microbiology. Nanjing Nongda Animal Pharmaceutical is at a stage of rapid growth. The average

annual growth rate of sales revenue in the past three years has exceeded 50%.The preliminary

construction has laid a solid foundation for its rapid development. After this transaction, Nanjing

Nongda Animal Pharmaceutical will become an important platform for Huadong Medicine to develop

its animal health business in industrial microbiology sector, while making full use of Huadong

Medicine’s advantages in industrial ecological chain and financial support capabilities to achieve

coordinated development in R&D, manufacturing, marketing, selling and other dimensions. For

details, please refer to the Announcement on Acquisition of 70% Equity in Jiangsu Nanjing Nongda

                                                               First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

Animal Pharmaceutical Co., Ltd. Through Equity Transfer and Capital Increase (Announcement No.:

     (III)       Reception of research, communication, interview and other activities during the

reporting period

                                                                                  Main contents

                    Reception       Way of      Type of                           of discussion    Basic condition index

Reception time                                                    Visitor

                     location      reception    visitor                           and materials      of investigation

                                                                                    provided

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                                                                                    Huadong        Investor Relations

                                                                CICC, TF

                                                                                   Medicine &      Activities on January

                                                                Securities,

                                                                                    CARsgen        17, 2023 published by

  January 17,      Meeting room                Institution,     Industrial

                                    Others                                        Therapeutics     the Company on the

                                                                                 Commercializati   websites of

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                                                                                   on Project      irm.cninfo.com.cn of

                                                              Securities, etc.

                                                                                   Exchange        Shenzhen Stock

                                                                                                   Exchange and

                                                                                                   www.cninfo.com.cn.

                                                                                                   For details, please

                                                                                                   refer to the Record of

                                                                                                   Investor Relations

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                                                                  China                            15 and 16, 2023

 February 15       Meeting room      Field                      Securities,         Investor       published by the

                                               Institutions

 and 16, 2023     of the Company   research                     Zheshang         communication     Company on the

                                                              Securities, etc.                     websites of

                                                                                                   irm.cninfo.com.cn of

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                                                                                                   For details, please

                                                                                                   refer to the Record of

                                                                                                   Investor Relations

                                                                                                   Activities on March 2

                                                                 Kaiyuan

                                                                                                   and 3, 2023 published

March 2 and 3,     Meeting room      Field     Institution,     Securities,         Investor

                                                                                                   by the Company on

                                                                                                   the websites of

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                                                                                                   irm.cninfo.com.cn of

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                                                                                                   Exchange and

                                                                                                   www.cninfo.com.cn.

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

     (IV)    Innovation progress of the Company

     Huadong Medicine"s R&D of innovative drugs are aimed to build excellent innovative drug

discovery capabilities, strong biotechnological R&D capabilities, and efficient clinical development

capabilities to address the unmet clinical needs of global patients. With the continuous enrichment of

product pipeline, the Company has continuously expanded in the field of innovative drugs to cover

the R&D of small molecule drugs, polypeptide drugs, antibody-drug conjugates (ADCs), bispecific

or multi-specific antibody drugs and other types of drugs, while exploring the innovative therapies

for metabolic, autoimmune, neoplastic and other diseases.

     (1) Continuous improvement of innovative R&D ecosystem with Huadong Medicine’s

characteristics

     The Company has established an international capable and efficient innovative drug R&D team

consisting of various high-level talents from the whole industry chain, and has more than 500 core

technical talents in the innovative drug R&D ecosystem. The enterprises in the ecosystem cooperate

closely with each other to implement the research and development projects smoothly as follows:

biological drugs and the most advanced overall development schedule in the field of autoimmune and

allergic diseases in China. At present, Qyuns Therapeutics" product pipeline covers skin, respiratory,

digestive, and rheumatic diseases, including psoriasis, atopic dermatitis, ankylosing spondylitis,

inflammatory bowel disease, systemic lupus erythematosus and asthma. It has a leading API

production   base,   including    four   2000L     disposable     bioreactors       and     a    downstream

purification/production line, with an annual production capacity of approximately 300KG therapeutic

antibodies. In March 2023, Qyuns Therapeutics submitted an application for IPO on the Stock

Exchange of Hong Kong Limited. The Phase III study of Project HDM3001 has reached the preset

primary endpoint. The Company completed the pre-BLA submission in April 2023 and is expected

to submit the BLA application in the third quarter of 2023.

development of anticancer ADC drugs. Heidelberg Pharma has a proprietary ATAC ® (Antibody

Targeted Amanitin Conjugates) technology platform and is the first company in the world to develop

amanitin and its derivatives for cancer treatment. At present, clinical progress is made in Project

HDP-101; the IND development is advanced in Project HDP-103; and an early study on a new

generation of ADCs based on the ATAC® platform is undergoing.

fusion proteins, antibody drugs and polypeptide drugs. At present, it has xLONGylation, a

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

recombinant PEGylation (rPEG) platform for long-acting transformation of biological drugs,

MultipleBody, a multi-domain fusion protein technology platform, AccuBody, a precision tumor

treatment technology platform, and HTS-VHHBody, a high-throughput discovery and engineering

platform for domain antibodies. The Project DR30303 in oncology is currently at Phase I clinical trial

in China; the Project DR10624 in Metabolism is currently at Phase I clinical trials in New Zealand,

and the Phase I multiple ascending dose (MAD) phase will be started soon.

recombinant proteins and polypeptide drugs. At present, it has MAS-PEG, a platform that employs a

variety of key technologies to solve major defects such as short half-life and high immunogenicity of

macromolecular drugs in vivo and finally realizes long-acting, low immunogenicity and long-term

macromolecular drugs (therapeutic enzymes), and TE-Peptides, a polypeptide tandem recombination

high-efficiency expression platform that adopts unique patented design, high-density fermentation,

unique enzyme digestion, modification technology and purification technology to obtain products,

and has the advantages of no optical isomers, no missing peptides, short production cycle, high yield

and much lower manufacturing cost. In terms of Semaglutide Injection, the Phase I study has been

completed and reached the endpoint of the equivalence study. It is expected to initiate Phase III

clinical study in the second half of 2023.

     The Company will continue to strengthen the construction of Huadong Medicine"s R&D

ecosystem. In the future, it will focus on the layout centering on a new generation of nucleic acid

drugs, drugs used in cell and gene therapy, etc., expand the technology platform of R&D ecosystem,

and continuously enrich the pipeline of differentiated and leading innovative pharmaceutical products.

     (2) Enriching the ADC product pipeline and creating a differentiated independent R&D

platform of Huadong Medicine

     As at the end of the reporting period, the introduced ADC projects, including HDM2002

(ELAHERE™), HDP-101 and HDP-103, were implemented smoothly, among which HDM2002

(ELAHERE™) is the world’s first ADC being developed by Huadong Medicine and ImmunoGen for

the treatment of folate receptor alpha (FRα)-positive ovarian cancer. In November 2022, ImmunoGen,

a strategic partner of the Company, announced the accelerated approval of ELAHERE™ by the U.S.

FDA. It is the first ADC drug approved by the U.S. FDA for platinum-resistant ovarian cancer. The

Company completed the Pre-BLA submission in China in March 2023, and plans to submit a BLA

application within this year. HDP-101, a BCMA-targeted ADC drug for multiple myeloma, is

introduced from Heidelberg Pharma and is currently at the stage of Phase I/II clinical study overseas;

HDP-103, a PSMA-targeted ADC drug for prostate cancer, is introduced from Heidelberg Pharma

and is at the stage of preclinical study.

                                                         First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

     So far, Huadong Medicine"s innovative R&D ecosystem has formed a system and has begun to

continuously introduce new pipeline projects. The Company established an independent ADC R&D

center last year, which is aimed to gradually build a differentiated independent ADC R&D platform,

strengthen and optimize the ecological chain in the ADC field, develop no less than 10 innovative

ADC products in 2022-2024, and actively promote registered clinical studies. Up to now, 6 preclinical

or exploratory newly-targeted ADC projects have been established independently. It is expected that

at least 4 additional independently-developed products will be confirmed for PCC and 2

independently-developed ADC projects will be approved for IND before 2025. By now, the first

original ADC project has completed PCC confirmation and is undergoing IND development; it is

planned to apply for clinical study within 2024. The Company will continue to enlarge the layout in

the field of anti-tumor ADC drugs, and continue to develop differentiated and iterative ADC products

for different cancer types based on unmet clinical needs.

     (3) Pipeline progress

     The Company strives to build a world-leading innovative anti-tumor drug R&D platform.

Through the discovery, screening and validation of new targets in the early stage of drug development,

it has established a product pipeline that covers more than 20 innovative anti-tumor drugs, including

targeted small molecule drugs, ADCs, antibodies, and PROTACs, of which 4 clinical projects and 4

IND development projects have clinical competitive advantages in related indications including solid

tumors and hematological tumors. As the Company continues to explore and validate more innovative

targets, more drugs under development will be included in the development pipeline in the future,

which provides an impetus for innovation, drives the continuous development of innovative drugs

with better safety and clinical effect and offers patients more hope for a cure.

     With the GLP-1 target as the core, the Company has built a world-leading innovative drug R&D

platform for obesity, diabetes and diabetic complications. By now, the Company has established a

product pipeline of GLP-1 and related targets that combines long-acting and multi-target global

innovative drugs and biosimilars of oral, injectable and other dosage forms, including 4 clinical

projects and 2 IND development projects, some of which have the potential to become a best-in-class

drug. As the in-depth research and development of GLP-1 drugs continues, the range of indications

will be expanded to a greater extend beyond diabetes. Based on the advantages of the existing pipeline,

the Company will continue to explore innovative projects related to GLP-1 targets, expand to include

weight loss, lipid lowering, NASH and other related indications, continue to develop innovative drugs

with higher bioavailability and more clinical value, and offer patients a more convenient medication

                                                         First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

experience.

     Up to now, the Company has had nearly 10 biological drugs and small molecule innovative

products in the field of autoimmune diseases. Among them, for ARCALYST® and Mavrilimumab,

two global innovative products in the field of autoimmunity, introduced from Kiniksa in the United

States, the Company will formally submit the BLA application to NMPA in 2023; and for HDM3001,

a biosimilar of ustekinumab (Stelara®) jointly developed by the Company and Qyuns Therapeutics,

it is expected to submit a BLA application in the third quarter of 2023. Furthermore, the Company"s

global innovative drug R&D center has independently developed a number of early new target and

biological mechanism projects for immune diseases, all of which are progressing smoothly. In the

second half of 2023, it will move from PCC to IND development for one independently-developed

innovative product.

     HDM3002 (PRV-3279): It is used to treat systemic lupus erythematosus (SLE) and prevent or

reduce the immunogenicity of gene therapy. Provention Bio, a US partner of the Company, is

currently conducting Phase IIa clinical trial of the product for SLE indication in the United States and

Hong Kong, China. The Company submitted the IND application in China in February 2023.

     HDM3001 (QX001S): It is a biosimilar of the original drug ustekinumab (Stelara®,) being jointly

developed by the Company and Qyuns Therapeutics for the treatment of moderate to severe plaque

psoriasis in adults; its Phase III study has reached the preset primary endpoint. The Company

completed the pre-BLA submission in April 2023, and is expected to submit the BLA application in

the third quarter of 2023.

     HDM2002 (ELAHERE™): In July 2022, the subject enrollment for the PK pharmacokinetic

study in Phase I clinical trial in China was completed. In November 2022, ImmunoGen, a US partner

of the Company, announced the accelerated approval of ELAHERE™ by the U.S. FDA. It is the first

ADC (antibody-drug conjugate) drug approved by the U.S. FDA for platinum-resistant ovarian cancer.

It is used for the treatment of platinum-resistant epithelial ovarian cancer, fallopian tube cancer, or

primary peritoneal cancer in adults who are folate receptor α (FRα)-positive and have previously

received first to third-line systemic therapy. In December 2022, the subject enrollment for Phase III

single-arm clinical trial in China was completed. In March 2023, the pre-BLA submission was

completed after the preset primary endpoint of study was reached; and the BLA application is planned

to be submitted within this year. Based on the good clinical performance of this product, the Company

and its partner will promote the front-line treatment of ovarian cancer through further clinical study,

to support the use of ELAHERE™ as the first choice in combination therapy for ovarian cancer.

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

     Mefatinib: It is used for the treatment of advanced non-small cell lung cancer with sensitive

EGFR mutations. In June 2021, the enrollment of last subject for Phase III clinical trial was completed;

and the subjects were been followed up for the number of PFS events. It is expected to submit the

marketing application after the number of PFS events in the Phase III study is obtained in the second

quarter of 2023.

     HD-NP-102 (Transdermal Glomerular Filtration Rate Measurement System and MB-102

Injection): It is jointly developed by the Company and MediBeacon, Inc. in the United States, and is

used to continuously measure the glomerular filtration rate (GFR) of patients with normal or impaired

renal function in a non-invasive manner based on the changes in fluorescence over time emitted by

the intravenously injected MB-102. In July 2022, the medical device registration application for the

system was formally accepted by NMPA, which is currently under review. The MB-102 Injection

used in conjunction with the system is a global innovative drug. The subject enrollment for Phase III

multi-regional clinical trial (MRCT) was completed in February 2023, and the pre-NDA submission

in China was completed in April 2023.

     (4) Technology platform

     Relying on the independent information platform, the Target Validation and Drug Screening

Laboratory has established its own target database to explore targets related to neoplastic,

autoimmune, and metabolic diseases. At early stage, the target biological mechanism team has

established a related technology platform at gene and protein levels, which can be used to discover

new disease targets. The existing platform technologies of the R&D laboratory include: High-

throughput gene expression technology, cDNA overexpression technology, gene knockout

technology; yeast two-hybrid system, proteomics, and other protein-level technologies; transgenic

animal construction technology.

     The Company has established a relatively complete pre-clinical evaluation solution for drugs in

treatment of neoplastic, autoimmune, and endocrine and metabolic diseases. The platform has been

able to cover the three dimensions of molecules, cells, and animals, and gradually developed from

traditional screening method to high-throughput screening mode featuring high speed, trace amount

and large scale. The current innovation team has built the full-chain drug R&D and post-marketing

support capabilities ranging from the early drug discovery, PCC confirmation, IND enabling study

and clinical development to drug marketing.

     The Company"s CADD/AIDD platform combines industrial research progress, strengthens the

                                                         First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

computing power and algorithm system construction, and intelligently processes the generated and

accumulated data. Furthermore, the Company has accumulated rich data on the properties of patent

medicines, laying a foundation for the continuous optimization and the iterative property prediction

model of patent medicines, and greatly improving the R&D progress of multiple projects at different

stages. At present, the Company"s CADD/AIDD platform is also extensively applied in the research

and development of polypeptide drugs, ADC drugs, protein drugs and nucleic acid drugs.

     PROTAC is a new bifunctional targeted protein degradation technology, which can completely

degrade the targeted protein when compared with traditional small molecules. According to the

technical characteristics and advantages of PROTAC, we conduct differentiated PROTAC target

selection based on un-druggable targets, scaffold protein targets, drug resistance mutations, protein

subtype selectivity and protein complexes, apply artificial intelligence, molecular simulation,

chemistry-proteomics and combinatorial chemistry and other technologies in the R&D of new

PROTAC drugs, combine AIDD/CADD and medicinal chemistry in the structure design of PROTAC

molecules, construct Warhead and E3 ligase ligands with independent patents, and constantly expand

and enrich the independent Linker database, so as to effectively optimize the PROTAC druggability

and the PK characteristics after oral administration. Based on the existing platform technology, the

global innovative drug R&D center has initiated the differentiated R&D for a number of PROTAC

projects, which have shown excellent PK characteristics and efficacy.

     (5) Cumulative innovative drug R&D results as at the end of the reporting period

     The Company continuously enriches the product pipeline, persistently explores the combination

therapy of drugs, invests corresponding R&D expenses as the R&D projects process, rapidly

promotes the implementation of existing clinical projects and the development of early R&D projects,

and accelerates a number of product pipelines that are characterized by source innovations (first-in-

class, best-in-class) or has differentiated/iterative development value. Since its establishment 3 years

ago, the Global Innovative Drug R&D Center has established more than 40 innovative drug R&D

pipeline projects, obtained 6 independently-developed PCC molecules in terms of innovative drugs,

received approval for 6 IND applications, and submitted 3 pre-NDA /pre-BLA applications.

     The Company strengthens the intellectual property protection for key core technologies, and

carries out intellectual property protection and patent layout for core technologies at different levels

and from different aspects. It improves intellectual property risk assessment and early warning

mechanisms, strengthens tracking and monitoring of intellectual property protection in key areas, and

                                                         First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

improves patent early warning and risk response and prevention capabilities.

     The Company builds and continuously improves a comprehensive intellectual property

protection system, integrates intellectual property rights into R&D activities, and safeguards the

development, product value and future market of scientific research projects.

     The Global Innovative Drug R&D Center attaches great importance to the protection of

intellectual property rights, focusing on the intellectual property management throughout the life

cycle of drugs and the formulation of patent strategies. The intellectual property BP is set up to be

responsible for the early warning, declaration and maintenance of domestic and foreign patents, so as

to improve the overall competitiveness of products. Since its establishment, the Global Innovative

Drug R&D Center has submitted a total of more than 80 patent applications for inventions, of which

formulation and other aspects.

     In the past year, the innovation team published 5 abstracts about research results on new drug

design, drug efficacy evaluation and clinical trials in the field of neoplastic and metabolic diseases at

ASCO, WCLC, EASD and ESMO conferences; among others, the Phase II clinical study on

Mefatinib as first-line treatment of patients with rare EGFR-mutant non-small-cell lung cancer was

published in the form of POSTER at the 2022 ASCO Annual Meeting.

     Up to now, the Global Innovative Drug R&D Center has received the approval for a total of 11

government funds, with an approved amount of CNY 27.25 million. In 2021, it was appraised as the

"Leading Innovation Team" in Zhejiang Province. In 2021 and 2022, it was granted the funds under

the "Pioneering Soldier" and "Leading Wild Goose" Projects in Zhejiang Province. Besides, it won

awards in provincial and municipal science and technology projects for HDM1002, TTP273 and other

projects and received funds for Mefatinib under the "Special Project for High-Quality Development

of Biomedical Industry in Hangzhou". Focusing on scientific and technological innovation and

internationalization strategy, the Global Innovative Drug R&D Center continues to promote high-

quality and high-efficiency work style of teams, increases their attractiveness to high-end talents, and

has successfully introduced (recognized) 2 experts from the "115" Foreign (Overseas) Intelligence

Introduction Project in Hangzhou City. The Global Innovative Drug R&D Center continues to

provide support for the establishment and operation of the Huadong Pharmaceutical Innovation and

Development Joint Fund of the Natural Science Foundation of Zhejiang Province.

     In the future, the Company, adhering to the concept of "Based on Scientific Research and

Centered on Patients" and with "clinical value, pharmacoeconomic value, and commercial value" as

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

the starting point, will continue to deeply engage in the three core therapeutic areas of oncology,

endocrinology and autoimmunity. Focusing on self-development and external introduction, it will

continue to discover new targets, explore the multi-indication development of existing projects,

continuously increase investment in technology platforms, and strengthen cooperation with domestic

and foreign pharmaceutical and biological companies. The unique R&D ecosystem system and

multiple core R&D platforms of the Company are expected to quickly achieve a number of

blockbuster pipeline products, realize the update and iteration of the Company"s core varieties in near

future, accelerate the marketing of innovative drug products, and provide new momentum for the

medium and long-term development of the Company.

     The Company has been deeply engaged in the field of industrial microbiology for more than 40

years, successfully developed and produced a variety of microbial drugs, and built a key technology

system for the development and production of microbial products. The scale and technical level of

the existing major microbial fermentation products are in the leading position in the industry, with a

solid industrial foundation.

     The Company"s industrial microbiology business is guided by market demand, driven by R&D

technology, and coordinated with industrial resources. It focuses on the two business scenarios, i.e.,

the systematic application of synthetic biology technologies and the biomedical innovation and

development, and has established differentiated product pipelines and business solutions in the fields

of raw materials for innovative drugs, such as nucleic acid & ADC, pharmaceutical APIs &

intermediates, and raw materials for comprehensive health & aesthetic medicine.

     (1) Building R&D industrial clusters to enhance international competitiveness in an all-

round way

     The Company has established the Industrial Microbiology Division to lead the overall business

development in the field of industrial microbiology, and has formed a complete independent

management system in the links of operation, research and development, investment, human

resources and marketing. Under the business division, a R&D cluster centered on Zhongmei Huadong

Industrial Microbiology Research and Development, Huadong Institute of Technology in Synthetic

Biology, Huida Biotech and Hizyme Biotech has been established, as well as Hangzhou Xiangfuqiao,

Qiantang New Area, Jiangsu Joyang, Hubei Maiggic, Anhui Meihua and Wuhu Huaren

industrialization bases.

     There are up to more than 130 R&D projects in the field of industrial microbiology, mainly

including 17 projects about raw materials for innovative drugs such as nucleic acid and ADC

(including 71 sub-projects), 30 about pharmaceutical APIs and intermediates, 18 projects about raw

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

materials for comprehensive health and aesthetic medicine, animal health care, biological materials

and others. As at the end of March 2023, the Company had 78 authorized patents and 51 pending

patents in this field.

     The industrial microbiology team has both experience and vitality. Mr. Wu Hui, Deputy General

Manager, is the main person in charge of the Company"s industrial microbiology business and a

business leader with a deep technical foundation. He has more than 30 years of experience in the field

of industrial microbiology and has won the second prize of the National Prize for Progress in Science

and Technology twice. Mr. Zheng Linghui, Chief Scientist of the Industrial Microbiology Division,

is a well-known expert in microbial drug technology in China, responsible for or participating in a

number of major national science and technology projects and major new drug discovery projects. In

terms of research and development, the Industrial Microbiology Division is committed to forming an

efficient R&D team with high-quality talents as the core. At present, there are 335 research and

development personnel, of which 23% are masters and doctorates.

     The Industrial Microbiology Division has established an international marketing team of nearly

Division and the market management system + the professional sales teams of subsidiaries, and has

further established overseas localized marketing teams to enhance overseas customer service

capabilities. In the future, the Industrial Microbiology Division will further seek to increase the

proportion of international business, and take R&D, quality, service and regulatory registration as the

main dimensions of competitiveness to form the competitive advantages of international business.

     (2) Making arrangements for synthetic biology in detail to build a leading edge in

industrial technology

     On the basis of systems biology, synthetic biology integrates the principles of engineering

science, and reprograms natural or designs and synthesizes new biological systems using the bottom-

up strategy to reveal the laws of life and establish a “convergent” emerging discipline for the new

generation of bioengineering system, and it is an important technological path to promote the great

leap from "knowing life" to "designing life". With the core idea of “creation for infinite knowledge

and creation for practical use", synthetic biology technology and its application have led the third

biotechnology revolution, building a broad application prospect in the fields of medicine and health,

materials, and chemicals.

     Being engaged in the field of synthetic biology, Huadong Medicine, on the one hand, has made

embedded research and development achievements in the fields of macromolecular drugs and

microbial drugs, providing effective technical support for existing related businesses. On the other

hand, it is also focusing on the development of new ongoing business, and seeking industrial

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

innovation breakthroughs on the basis of synthetic biology technology and in combination with the

accumulated achievements in the industrial microbiology. With the development tasks of the

Company in the field of synthetic biology research and development and application undertaken by

the Industrial Microbiology Division, a leading systematic layout on the tool side, platform side and

product side of synthetic biology has been formed in China.

     On the tool side, with the businesses undertaken by Huaren Science and Technology and Meihua

Hi-Tech, and nucleoside monomers and phosphorylated nucleosides serving as the main R&D and

commercial product pipelines, the Industrial Microbiology Division serves the gene synthesis and

sequencing companies at home and abroad, making industrial microbiology the most upstream

industry in the field of synthetic biology.

     On the platform side, the basic research and development capabilities in synthetic biology

including genetic element design, chassis cell construction and expression, and metabolic engineering

research have been built since the establishment of Huadong Institute of Technology in Synthetic

Biology led by Academician Zheng Yuguo. With the pilot experiment, research and development and

industrial development carried out by Huida Biotech affiliated to the Industrial Microbiology

Division of the Company and the CMC technical platform of the Company, industrial development

of products has been realized by virtue of systems microbial engineering development capabilities

including bacteria fermentation, separation and purification established over the past 40 years. The

Industrial Microbiology Division has set up a complete development system of enzyme design -

evolution - bacteria construction - expression - catalysis, application and research and a technical

platform for development of biocatalytic enzymes with the synthetic biology technology through the

incorporation of Hizyme Biotech. Through the aforesaid platforms, it has also established a complete

technology research and development system ranging from basic research and development to

industrial development in the field of synthetic biology.

     On the product side, the Industrial Microbiology Division has transformed synthetic biology

technology products in the fields of comprehensive health and aesthetic medicine through Magic

Health, forming relatively leading technical advantages in vitamin K2, ectoin, methoxatin and other

products. For example, it has transformed vitamin K2 producing bacteria using the synthetic biology

technology, which has solved the key technical problems of complex metabolism and low product

expression rate of natural bacteria. In addition, through such bases as Jiangdong and Jiangsu Jiuyang

Bio-pharmaceutical Co., Ltd., it has transformed the achievements in synthetic biology technology

related to pharmaceutical APIs and intermediates, and has developed a relatively leading technology

level and product pipeline in terms of anti-infective APIs for external use represented by mupirocin

and Immunosuppressive APIs represented by tacrolimus. Based on the layout of more than 60 product

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

pipelines related to synthetic biology technology, it will further expand the application and

development in the above product fields, as well as in the fields of medical biomaterials and raw

materials for pet health in the future.

     (3) Focusing on research, development and industrialization to facilitate the source

innovation of biomedicine

     In recent years, approval of nucleic acid drugs for marketing has been speeded up, and clinical

data of a number of nucleic acid drugs that have the potential to become blockbuster drugs have been

released, covering the fields of heart and metabolic diseases, liver diseases, and a variety of rare

diseases, for which breakthroughs in key technologies of nucleic acid drugs have played an important

role, including chemical modification and delivery system. Now, 13 nucleic acid drugs have been

approved in the world, and the nucleic acid drugs mainly represented by small nucleic acid drugs and

mRNA drugs may become a new development direction after antibody protein drugs. The Industrial

Microbiology Division realizes mergers and acquisitions through Huaren Science and Technology,

and serves the small nucleic acid drug and in vitro diagnostic reagent industries with modified and

protected nucleosides and nucleoside monomers. Based on the service and tracking of nearly a

thousand industry and scientific research customers, it continuously improves product quality and

develops new product pipelines with the development of such customers. The introduction of

industrial microbiology research and development strength and technical talents further promotes the

establishment of a richer and more complex nucleoside product system and a "moat" for the product

pipeline and quality system, which will make it effective to embrace the rapid development in the

field of small nucleic acid drugs.

     In January 2023, the Industrial Microbiology Division set up Hangzhou Huixin Biotechnology

Co., Ltd. Huixin Biotechnology is mainly engaged in the development and production of chemical

raw materials (e.g., modified nucleoside triphosphates, nucleotides, and cap structures) and biological

raw materials (e.g., tool enzymes, and plasmids) required for manufacture of mRNA drugs, and also

undertakes CRO/CDMO service business in the mRNA field. The establishment of Huixin

Biotechnology and the introduction of the corresponding mRNA technology team will further

integrate the research and development and industrialization strength of the Industrial Microbiology

Division in the fields of upstream raw materials and services for mRNA drugs, and realize the mRNA

drug raw material and service business layout of the Industrial Microbiology Division.

     Antibody-drug conjugates (ADCs) are compounds formed by linking antibodies and small-

molecule cytotoxic drugs through specific linkers, and their main ingredients include antibodies,

linkers, and small-molecule cytotoxic drugs. By the end of 2022, 15 different ADCs had been

approved by FDA. As of August 2022, 587 new ADCs had been at the research and development

                                                          First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

stage all over the world, and the clinical trial stage had been started for 281 of them. Since significant

technical improvements have been made through selection of better cytotoxic drugs, bio-conjugation

methods, better targeted antigens and optimized antibody engineering, ADCs have become an

important track for innovative drugs. In the field of ADCs, Huida Biotech affiliated to the Industrial

Microbiology Division has completed the commercial development of the existing major ADC

cytotoxins and has submitted the DMFs for Exatecan and DM1 for registration in the US, and it plans

to submit the DMF for MMAE for registration in the US, making it stand at the forefront in the field

of ADC cytotoxins in China. Huida Biotech further expands the development of new toxins and

Linker using synthetic biology technology and chemical modification technology, and also expands

the production of small molecules of ADCs (toxin-Linker) downstream. In the future, a pattern of

parallel progress in the development and production of toxins and the production of small molecules

of ADCs will be formed.

     The Industrial Microbiology Division will also explore business opportunities in other

biomedical innovation fields because biomedical innovation is an eternal theme and an inexhaustible

business source for the Industrial Microbiology Division. Based on the differentiation and the

development in the specific fields of nucleic acid and ADCs, the Industrial Microbiology Division

will form a "specialized and charming" business layout in the upstream field of biomedical innovation.

     (4) Expanding the new field of animal health to gradually improve the industrial strategic

layout

     With animal health as one of the five major directions of the strategic layout of the Industrial

Microbiology Division, the Company is gradually improving the industrial layout in accordance with

the established strategic deployment. In April 2023, the Company acquired Jiangsu Nanjing Nongda

Animal Pharmaceutical Co., Ltd. (hereinafter referred to as "Nanjing Nongda Animal

Pharmaceutical"), and quickly entered the sub-track of pet and aquatic animal health. Started late in

China, the pet and aquatic animal health industry is featured by a low degree of concentration, a

shortage of varieties, and a large unmet demand space. Currently, the products of international animal

health giants account for more than 80% of the market share, which means that substitution with

domestic products is speeding up and that the market penetration of the products of domestic

enterprises is expected to gradually increase. In recent years, the Ministry of Agriculture has

successively unveiled policies on drugs for pets and aquatic animals to improve industry standards

and encourage industry development, providing a good opportunity for rapid industry development.

Being optimistic about the development of the animal health industry for a long time, the Company

has reserved more than 10 kinds of high-end APIs for pet health, and has applied and developed a

variety of raw materials required for comprehensive health in the field of animal health, and it has a

                                                          First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

potential opportunity to transform more than 10 human medicines into pet medicines to realize the

integrated development of raw materials and preparations in the future. Nanjing Nongda Animal

Pharmaceutical will become an important platform for Huadong Medicine to develop its animal

health business in the industrial microbiology sector, while making full use of Huadong Medicine’s

advantages in industrial ecological chain and financial support capabilities to achieve coordinated

development in R&D, manufacturing, marketing, selling and other dimensions. In the next five years,

it will develop and launch dozens of animal health products one after another to meet more market

demands in the field of pet and aquatic animal health, and become an animal health benchmark

enterprise in China.

     Now, on the basis of synthetic biology, industrial fermentation, green chemical manufacturing

and other technologies and in combination with the existing research and development foundation

and industrial layout, the organizational structure and layout of "industrial microbiology division +

innovative technology company + industrial manufacturing base" have been formed, and the overall

layout in the fields of raw materials for innovative drugs such as nucleic acid & ADCs, APIs &

intermediates, and raw materials for comprehensive health & aesthetic medicine has been completed

in the industrial microbiology sector of the Company. Meanwhile, active efforts are made to expand

the fields of animal health and biological materials to gradually improve the industrial strategic layout.

By 2030, the Company will set up an "industrial, large-scale, and international" industry cluster and

become the industry leader in the field of industrial microbiology in China.

     Adhering to the core concept of “focusing on beauty seekers", the Company, based on the

comprehensive and differentiated product matrix, integrates “non-invasive technology + minimally

invasive technology", “face + body", “product + technology", “injection + energy-based device" and

other diversified combination therapies to provide more professional, safer, more efficient and more

comprehensive solutions for beauty seekers, and it is committed to becoming the world"s leading

provider of comprehensive solutions in the field of aesthetic medicine. It always attaches great

importance to the scientific and technological innovation in the field of aesthetic medicine, and

always practices the operation philosophy of "high-tech research and development, high-quality

positioning, and product globalization". With technology and leadership as the strategic focuses, it

continuously increases investment in innovative technology, promotes breakthroughs and upgrades

in the aesthetic medicine technologies, and enriches the innovative product pipelines. It has obtained

                                                         First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

more than 200 patents related to aesthetic medicine business worldwide.

     (1) Expand the global layout and build an international leading aesthetic medicine

platform

     The aesthetic medicine business focuses on the global high-end aesthetic medicine market.

Sinclair, a wholly-owned subsidiary, is a global aesthetic medicine operation platform of the

Company, and headquartered in the UK, it promotes and sells long-acting microspheres for injection,

hyaluronic acid, and facial lifting and thread-embedding products in the global market. Huadong

Medicine also develops and expands the business of energy-based devices in the field of aesthetic

medicine in the global market through High Tech and Viora, its wholly-owned subsidiaries. Viora"s

good brand reputation, perfect market service personnel, complete marketing management system

and extensive market resources accumulated in the American market will make it effective for

Sinclair to further expand its EBD business in the American market. Through further integration of

research and development resources and capabilities, the aesthetic medicine business is advantaged

by six global research and development centers in the UK, Netherlands, France, Switzerland, Spain

and Israel, and six global production bases in the Netherlands, France, US, Switzerland, Bulgaria and

Israel. Sinclair (Shanghai), a wholly-owned subsidiary and a Chinese market operation platform, and

R2 in the US and Kylane in Switzerland, the overseas technology research and development

subsidiaries, are also included in the aesthetic medicine sector of the Company.

     (2) Focus on high-end technology and arrange differentiated product matrix

     The aesthetic medicine projects can be divided into surgical treatment projects and non-surgical

treatment projects. The surgical treatment projects are intended to improve appearances through

surgical treatments, mainly including the plastic surgery. The non-surgical treatment projects mainly

include the injection therapies, energy-based therapies and other non-surgical treatments. The non-

surgical treatment projects are highly recognized by consumers because of their high safety, short

recovery time, and easy operation. According to the Research Report on Aesthetic Medicine Industry

in China 2022, the market of non-surgical treatment projects, i.e., "light aesthetic medicine" projects,

is expanding rapidly, with a market size of up to 75.2 billion yuan in 2021 and the CAGR expected

to be 31.9% from 2021 to 2025, and it is expected to become the main market in the field of aesthetic

medicine. Focusing on non-surgical treatment projects, the Company has 36 high-end products that

are already on the market and under research in the field of aesthetic medicine featured by “non-

invasive technology + minimally invasive technology", including 13 products for injection, 22

energy-based devices, and 1 thread embedding product. The product portfolio covers the mainstream

field of aesthetic medicine characterized by non-surgical treatment projects such as facial and body

filling, face cleansing, thread embedding, skin management, body shaping, hair removal and private

                                                          First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

restoration, forming a comprehensive product cluster, with the number of products and covered fields

ranking in the forefront of the industry.

     In recent years, with the rise of the "beauty economy", the injection projects have witnessed

rapid development, and the aesthetic medicine industry in China has been dominated by injection

projects. The products for injection are the core driving force for the rapid growth of the revenue of

the aesthetic medicine business, mainly including the followings:

     As a high-end filler made of polycaprolactone (PCL) microspheres and carboxymethylcellulose

(CMC), Ellansé® can be naturally metabolized in the body, and with good biocompatibility due to

exclusive STAT patented technology, it has an immediate shaping effect and a long-lasting collagen

regeneration mechanism. Now, Ellansé® has been registered and certified or approved for marketing

in more than 60 countries or regions around the world. With a history of clinical use for more than

     Ellansé®-S has been widely recognized since it was officially launched in China in August 2021,

leading the regenerative aesthetic medicine market. In the first quarter of 2023, all subjects for clinical

trial of Ellansé®-M in China were enrolled successfully, and follow-up was started. During the

reporting period, Sinclair started the registration of Ellansé® in the US market.

     Made of poly-l-lactic acid (PLLA), Lanluma® is a regenerative filler for face and body, and it is

currently the only regenerative product approved for buttock and thigh filling in the world to provide

a long-lasting filling effect for 18-24 months.

     Granted the EU CE certification in 2020, Lanluma® has been approved for marketing in 32

countries and regions around the world so far. It was approved for launch in Boao Lecheng, Hainan

in December 2022, and granted the "Best Body Filling Injection" award by the AMWC Monaco 2023,

which shows the authoritative recognition of Lanluma® and its technology by the international

aesthetic medicine industry.

     There are four products in MaiLi® series, all of which adopt the innovative OxiFree™ patented

technology, and these products can make facial expressions more natural because of the Smart Spring

property. Compared with similar products in the industry, these products are advantaged by excellent

rheological property and good filling property, which can help to effectively reduce the injection

volume, maximize the clinical efficacy, and obtain more durable and natural effect. Granted EU CE

certification in June 2020, MaiLi® series have been continuously recognized by the market since their

overseas launch. Currently, all subjects for clinical trial of MaiLi Extreme in China have been enrolled,

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

and follow-up is in progress. During the reporting period, Sinclair started the registration of MaiLi ®

in the US market.

     KiOmedine® skin booster and 3 fillers are products under research developed by KiOmed.

KiOmedine® skin booster is a high-purity natural (not animal derived) medical grade chitosan

derivative developed using the exclusive patented technology, and its core ingredients can protect the

skin from oxidative stress, effectively supplement skin moisture, and improve skin quality. As fillers

for injection based on KiOmedine® and hyaluronic acid, the 3 KiOmedine® fillers can be used for lip

filling and shaping, improving or correcting facial wrinkles and skin depressions, and facial filling

and shaping.

     The aesthetic medicine projects based on energy-based device are very popular among beauty

seekers because of their safety and high efficiency, and the penetration of energy-based device

continues to increase. According to data from iResearch, the non-invasive energy-based device

market size reached 2.2 billion yuan in 2021, and the compound growth rate from 2016 to 2021

reached 15.6% in China. The Company has abundant product pipelines in the field of energy-based

device, and the core products include the followings:

     Glacial Spa® is a high-tech beauty instrument which is researched and developed by the technical

team with Rox Anderson, M.D., the father of modern laser medicine and director of Wellman Center

for Photomedicine at Massachusetts General Hospital (a teaching hospital affiliated to Harvard

Medical School, located in Boston) as the core member, and it is a scientific and technological

achievement of a new generation in the field of cool skin care. Glacial Spa® achieves effective

management of melanin expression through precise temperature control of semiconductors. The

global debut of the product was successfully completed in China in the first quarter of 2022, and now

commercial cooperation with more than 40 beauty institutions in China has been launched.

     Provided with the CORE™ multi-channel RF technology, four adjustment modes for adjustment

of RF energy, and the Vacuum negative pressure technology, Reaction® dual-stage RF instrument

can better activate and heat autologous cells in the dermis and subcutaneous tissue to promote

collagen regeneration and effectively tighten the skin and smooth the wrinkles. Registered with and

certified by FDA, Reaction® has been on the market overseas for many years. In 2015, it was granted

the third class medical device registration certificate by the NMPA. At present, the agent in China

has been changed, and re-sales and promotions in China are going to be started in the second quarter

of 2023.

                                                       First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

     The V series integrates all high-end application technologies of the Company (CORE, SVC,

PCR, and Multi-CORE), and constitutes a multifunctional aesthetic medicine operation platform

integrating such energy sources as radio frequency (RF), intense pulsed light (IPL), and Laser. Now,

it is a leader in the medical laser, photon and energy-based device markets in Europe and America.

At present, V10, V20, and V30 have been registered with and certified by FDA and granted EU CE

certification.

     Adopting the IoT (Internet of Things) technology, Préime DermaFacial is a multi-functional,

intelligent and high-tech skin management platform integrating five advanced technologies including

spiral vacuum, microdermabrasion, micro-current, radio frequency and ultrasound, and it can be used

for face cleansing, exfoliating, and moisturizing to create a smooth and firm skin state for beauty

seekers. The product was commercially available in major global aesthetic medicine markets such as

in Europe and America in September 2022, and scheduled to be launched in China in 2023.

     As an energy-based device adopting the innovative RotateRF technology, Sculpt&Shape® has 6

different rotating probes and integrates unipolar and bipolar radiofrequency, and it is used for body

shaping, skin tightening, fat reduction, wrinkle reduction, and other facial rejuvenation treatments.

The product was launched in the European market in the first quarter of 2023.

     (3) Improve marketing capabilities to facilitate the commercial development of aesthetic

medicine business

     The aesthetic medicine business of the Company is provided with a professional marketing team

of nearly 300 people. Moreover, a global aesthetic medicine marketing network has been established.

At present, product distribution has covered more than 80 countries and regions around the world.

     Sinclair, a wholly-owned subsidiary in the UK, is a global aesthetic medicine operation platform

of the Company. It has direct sales teams in the EU, Brazil, Mexico, Colombia, the UAE, Hong Kong

SAR and South Korea, as well as an international distribution network. During the reporting period,

the Company continued to provide the doctors in the field of aesthetic medicine with technologies,

and it was committed to providing high-quality training through practical operations and exchanges

with experts.

     As the operation center of the aesthetic medicine business of the Company in the Chinese market,

Sinclair (Shanghai), a wholly-owned subsidiary, continues to be committed to the high-end injection

market in the field of aesthetic medicine. By the end of 2022, the number of cooperative hospitals

that have signed contracts with Sinclair (Shanghai) had exceeded 500, and the number of trained and

                                                                    First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

certified doctors had exceeded 1,100. By taking advantages of the medical resources of global experts

through the official learning platform - "Sinclair Education Vision", it continues to provide Chinese

doctors with more high-quality and innovative medical course contents to ensure that beauty seekers

can be provided with professional and efficient services.

        In the future, the Company will, with respect to the aesthetic medicine business, adhere to the

strategy of "global operation layout, and dual-cycle operation and development", and continue to

focus on the global high-end aesthetic medicine market in order to form an international aesthetic

medicine business integrating research and development, manufacturing, and marketing. With

Sinclair, the core subsidiary, as the global operation platform, it will also integrate scientific and

technological innovation resources to realize the global operation layout of aesthetic medicine, and

continue to introduce the "aesthetic medicine + skin care" products featured by high technology and

great market potential into China and help the rapid localization and commercialization of

international high-quality products by virtue of the registration and marketing strength of the

Company in China to steadily expand the Chinese market and form a new pattern of domestic and

international dual-cycle interactive development.

IV. Quarterly Financial Statements

(I) Financial Statements

Prepared by: Huadong Medicine Co., Ltd.

                                                     March 31, 2023

                                                                                                                   Unit: CNY

                       Item                    Balance at the end of the period         Balance at the beginning of the year

     Current assets:

        Monetary funds                                            2,375,152,352.20                          3,996,302,178.41

        Balances with clearing companies

        Lending to banks and other financial

     institutions

        Financial assets held for trading

        Derivative financial assets                                  29,624,778.28                             29,907,470.68

        Notes receivable                                              8,424,980.99                              8,424,980.99

        Account receivable                                        8,634,543,140.84                          7,198,746,788.59

        Financing of receivables                                  1,072,015,668.04                          1,002,511,208.21

        Accounts prepayment                                         558,908,474.57                            500,083,953.14

        Premiums receivable

        Reinsurance accounts receivable

        Receivable from subcontracting

     reserves

        Other receivables                                           426,378,917.15                            283,710,955.63

                                              First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

      Including: Interest receivable

             Dividends receivable                 223,747.65                                223,747.65

   Financial assets purchased under

resale

   Inventories                               5,055,660,372.20                         4,495,483,328.54

   Contract assets

   Assets held for sale

   Non-current assets due within one year

   Other current assets                        154,239,503.07                            52,692,618.78

Total current assets                        18,314,948,187.34                        17,567,863,482.97

Non-current assets:

   Loans and advances

   Debt investment

   Other debt investment

   Long-term accounts receivable

   Long-term equity investment               1,615,531,125.55                         1,659,076,538.78

   Other equity instrument investment          409,905,775.09                           360,910,876.41

   Other non-current financial assets

   Investment real estate                       13,391,671.22                            13,648,240.14

   Fixed assets                              3,932,528,399.48                         3,981,653,265.52

   Construction in progress                    913,273,558.34                           873,159,427.47

   Productive biological assets

   Oil and gas assets

   Right-of-use asset                          146,533,933.11                           166,505,297.17

   Intangible assets                         2,250,237,369.24                         2,280,064,207.30

   Development expenditures                    689,292,520.17                           641,354,586.80

   Goodwill                                  2,455,916,241.27                         2,441,387,413.59

   Long-term deferred expenses                  20,514,237.77                            16,457,278.57

   Deferred income tax assets                  153,369,860.61                           152,842,858.97

   Other non-current assets                  1,199,757,888.07                         1,037,279,933.15

total of Non-current assets                 13,800,252,579.92                        13,624,339,923.87

Total assets                                32,115,200,767.26                        31,192,203,406.84

Current liabilities:

   Short-term borrowing                       563,013,919.12                            947,516,383.37

   Borrowings from the Central Bank

   Borrowings from banks and other

financial institutions

   Financial assets held for liabilities       14,841,896.97                             14,841,896.97

   Derivative financial liabilities

   Notes payable                             1,360,474,461.93                         1,029,409,686.81

   Accounts payable                          4,990,423,949.03                         4,873,029,466.44

   Advance receipts                                881,243.42                             1,154,243.42

   Contract Liabilities                        192,637,694.45                           146,488,489.07

   Assets sold under agreements to

repurchase

   Deposits from customers and

interbank

   Receiving from vicariously traded

securities

   Acting underwriting securities

   Employee remuneration payable               175,666,718.25                           256,883,423.68

   Taxes payable                               479,789,639.50                           429,457,804.81

   Other payables                            2,684,871,969.84                         2,290,407,022.05

      Including: Interest payable

             Dividends payable                    224,219.60                             14,924,219.60

   Handling charges and commissions

payable

                                                                    First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

     Dividends payable for reinsurance

     Held-for-sale liabilities

     Non-current liabilities due within one

  year

     Other current liabilities                                        24,158,784.99                             15,788,164.30

  Total Current Liabilities                                       10,627,556,249.33                        10,152,812,095.73

  Non-current liabilities:

     Reserve fund for insurance contracts

     Long-term borrowings                                            677,604,268.25                          1,051,457,747.44

     Bonds payable

       Including: preference shares

                Perpetual bonds

     Lease liabilities                                               105,228,290.55                             84,610,324.98

     Long-term accounts payable                                      289,977,495.12                            287,497,209.49

     Long-term employee remuneration

  payable

     Estimated liabilities                                            39,859,049.95                             37,925,549.41

     Deferred income                                                 179,106,792.98                            126,123,512.71

     Deferred income tax liabilities                                 202,084,083.93                            202,084,083.93

     Other non-current liabilities                                    73,251,500.00                             73,251,500.00

  Total non-current liabilities                                    1,567,111,480.78                          1,862,949,927.96

  Total liabilities                                               12,194,667,730.11                        12,015,762,023.69

  Shareholder’s equity:

     Shareholder Equity                                            1,753,995,348.00                          1,753,995,348.00

     Other equity instruments

       Including: preference shares

                Perpetual bonds

     Capital reserves                                              2,387,821,545.06                          2,377,887,246.39

     Less: Treasury shares                                           104,645,000.00                            104,645,000.00

     Other comprehensive incomes                                    -119,904,045.95                            -88,552,636.42

     Special reserves

     Surplus reserves                                              1,151,441,705.28                          1,151,213,039.48

     General risk preparations

     Undistributed profits                                        14,245,364,208.58                        13,488,021,239.94

  Total owners" equities attributable to

  equity holders of the parent company

     Equity of minority shareholders                                 606,459,276.18                            598,522,145.76

  Total owners" equity                                            19,920,533,037.15                        19,176,441,383.15

  Total of liabilities and Owners’ equities                       32,115,200,767.26                        31,192,203,406.84

Legal Representative: LYU Liang Officer in charge of accounting: LYU Liang     Head of accounting department: QIU Renbo

                                                                                                                  Unit: CNY

                          Item                    Amount of the current period             Amount of the previous period

     I. Total operating revenue                                  10,114,531,331.77                          8,932,579,251.75

        Including: Operating income                              10,114,531,331.77                          8,932,579,251.75

                Interest income

                Insurance premiums earned

                Handling charges and

     commissions income

     II. Total operating costs                                     9,111,221,456.77                         8,028,129,305.85

       Including: Operating cost                                   6,790,724,204.77                         5,914,898,927.47

               Interest expense

               Handling charges and

                                               First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

commissions expenses

           Surrender value

           Net payments for insurance

claims

           Net appropriation of deposit

for duty

           Expenditures dividend policy

         Amortized reinsurance

expenditures

           Taxes and surcharges                 53,150,033.98                             49,868,639.14

           Sales expense                      1,642,616,610.16                         1,433,493,143.24

           Administrative expenses             330,086,070.32                            302,601,116.29

           R&D expenses                        265,493,695.70                            319,207,245.09

           Financial expense                    29,150,841.84                              8,060,234.62

             Including: interest expenses       34,466,716.93                             20,956,363.85

                    Interest income             12,491,377.82                             24,163,304.15

  Add: Other income                             14,582,456.30                             10,669,007.70

       Investment income (loss is

                                                -61,752,708.66                           -27,961,493.36

represented with “-”)

             Including: Incomes from

investment in associated enterprises and        -52,816,907.73                           -20,764,035.59

joint ventures

                    Gains from the

derecognition of financial assets

measured at amortized cost

       Exchange income (Loss is

represented with “-“)

         Net exposure hedging income

(loss is represented with “-”)

        Net income from changes in fair

value (loss is represented with “-”)

         Credit impairment losses (Losses

are indicated by “-”)

         Impairment loss of assets (loss is

represented with “-”)

         Asset disposal income (loss is

                                                 -2,199,859.71                               557,821.07

represented with “-”)

III. Operating Profit (loss is represented

with “-")

   Add: Non-operating income                     1,389,195.74                                831,619.81

   Less: Non-operating expenditure               6,049,187.60                              5,355,930.46

IV. Total Profit (Total loss is represented

with “-”)

   Less: Income tax expenses                   189,354,280.74                            169,158,396.42

V. Net Profit (net loss is represented with

“-”)

   (I) Categorized by the continuity of

operations

operations (net loss is represented with       759,925,490.33                            714,032,574.24

“-”)

                                                                         First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

   operations (net loss is represented with

   “-”)

      (II) Categorized by attribution of the

   ownership:

   parent company’s owners

   Shareholders

   VI. Net of tax from other comprehensive

                                                                         -31,351,409.53                                -15,014,785.25

   incomes

      Net of tax from other comprehensive

   incomes attributable to the owner of the                              -31,351,409.53                                -15,014,785.25

   Parent Company

         (I) Other comprehensive incomes

   not to be reclassified to profit or loss

   changes in the defined benefit plan

   not to be reclassified to profit or loss via

   equity method

   equity instrument investment

   concerning the enterprise’s own credit

   risks

         (II) Other comprehensive incomes

                                                                         -32,045,080.68                                -15,014,785.25

   to be reclassified to profits and losses

   to be reclassified to profit or loss via

   equity method

   other debt investment

   which are reclassified to other

   comprehensive incomes

   other debt investment

                                                                         -32,045,080.68                                -15,014,785.25

   currency financial statements

      Net of tax from other comprehensive

   incomes attributable to minority

   shareholders

   VII. Total amount of comprehensive

   income

      Total comprehensive income

   attributable to Parent Company                                        723,933,566.94                                689,349,989.88

   shareholders

      Total comprehensive income

   attributable to the minority shareholder

   VIII. Earnings per share:

      (I) Basic earnings per share                                                 0.4316                                      0.4025

      (II) Diluted earnings per share                                              0.4315                                      0.4025

As for the merger under the same control during this period, the merged part’s net profit gained before the merger is CYN ___, and

                                                                   First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

its net profit gained during the previous period is CNY ___.

Legal Representative: LYU Liang Officer in charge of accounting: LYU Liang      Head of accounting department: QIU Renbo

                                                                                                                   Unit: CNY

                        Item                     Amount of the current period              Amount of the previous period

     I. Cash flows generated from operating

     activities:

        Cash received from sale of

     commodities or rendering of services

       Net increase in deposits from

     customers and placements from

     corporations in the same industry

       Net increase in borrowings from the

     central bank

        Net increase amount in borrowing

     funds capital from other financial

     institutions

        Cash receipts from premiums under

     direct insurance contracts

       Net cash received from reinsurance

     business

       Net increase in deposits from

     policyholders and investment funds

       Cash received from interests, handling

     charges and commissions

       Net increase in borrowings from banks

     and other financial institutions

       Net increase in repurchase business

     funds

        Net cash received from vicariously

     traded securities

       Refund of tax and levies                                       1,207,680.51                              4,056,067.04

       Other cash received relating to

     operating activities

     Sub-total of cash inflows from the

     operating activities

       Cash paid for purchasing commodities

     and receiving labor services

       Net increase in loans and advances to

     customers

       Net increase in balance with the

     central bank and due from banks and

     other financial institutions

        Cash paid for indemnity of original

     insurance contract

       Net increase in lending to banks and

     other financial institutions

       Cash paid for interests, handling

     charges and commissions

       Commissions on insurance policies

     paid

                                                First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

   Cash paid to and paid for employees          845,672,966.99                            719,758,010.16

   Payments of all taxes and fees               609,699,664.95                            477,339,851.40

   Other Cash paid for operating

activities

Sub-total of cash outflow of the

operating activities

Net cash flows generated from operating

                                                -246,152,770.16                          -260,603,628.32

activities

II. Cash flows generated from investment

activities

   Cash received from disinvestment

   Cash received from returns on

investments

   Net amount of cash recovered from

disposal of fixed assets, intangible assets         149,204.89                              1,439,970.00

and other long-term assets

   Net cash amount received from

disposal of subsidiaries and other

business units

   Cash received from other concerning

investing activities

Sub-total of cash flow-in from

investment activities

  Cash payments to acquisition &

construction of fixed assets, intangible        398,081,956.46                            193,143,577.15

assets and other long-term assets

  Cash paid for investment                       51,794,250.00                             29,400,000.00

  Net increase in secured loans

   Net cash paid for acquirement of

subsidiaries or other business units

   Other cash paid which is related to

investing activities

Sub-total of cash flow-out from

investment activities

Net cash flow generated from investment

                                                -440,055,312.86                          -605,134,020.79

activities

III. Cash flows generated from financing

activities

   Cash received from investment

absorption

      Including: Cash from absorbing

minority shareholders’ equity investment                                                   30,000,000.00

by subsidiaries

   Cash received from borrowings                907,116,269.61                            709,751,200.00

   Other cash received relating to

financing activities

Sub-total of cash inflows from financing

activities

  Cash repayments of amounts

borrowed

   Cash payments for distribution of

dividends or profits or settlement of            64,853,544.08                             38,336,990.15

interest expenses

     Including: Dividends and profits

paid by subsidiaries to minority                 13,328,000.00                              1,960,000.00

shareholders

                                                        First Quarterly Report 2023 of Huadong Medicine Co., Ltd.

      Other cash paid which is related to

   financing activities

   Sub-total of cash outflows from

   financing activities

   Net cash flows generated from financing

                                                       -849,412,643.67                             -5,561,294.58

   activities

   IV. Effects of foreign exchange rate

   changes on cash and cash equivalents

   V. Net increment of cash and cash

                                                      -1,531,091,755.18                          -860,487,352.54

   equivalents

      Add: Opening balance of cash and

   cash equivalents

   VI. Balance at the end of the year of the

   cash and cash equivalents

(II) Audit Report

Has the First Quarterly Report been audited?

□ Yes No

The First Quarterly Report has not been audited.

                                                   Board of Directors of Huadong Medicine Co., Ltd.

                                                                                              April 21, 2023

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