Chairman of Xintian Pharmaceutical: Huilun Pharmaceutical is a high-quality asset and will not give up to continue to promote the integration of industrial resources

On the evening of July 26, Xintian Pharmaceutical (002873. SZ) announced that the board of directors deliberated and approved the "Proposal on Terminating the Issuance of Shares to Purchase Assets and Related Party Transactions", and the company will terminate the issuance of shares to purchase 85.12% of the equity assets and related party transactions of Shanghai Huilun Pharmaceutical Co., Ltd. (hereinafter referred to as "Huilun Pharmaceutical").

The announcement pointed out that in view of the different expectations of the parties to the project transaction, the company and some parties to the transaction failed to reach an agreement. The Company is working hard to negotiate specific solutions with the above-mentioned counterparties, target companies and other relevant parties, but it will take some time for the relevant plans to be formed and implemented. Combined with the current market situation and the above reasons, the transaction is expected to be unable to complete the relevant matters within the specified time in accordance with the original plan, the company's board of directors after careful study and full demonstration, decided to terminate the issuance of shares to purchase assets and related transactions.

After the announcement was issued, the reporter contacted Xintian Pharmaceutical for the first time, and the chairman of the company further pointed out that "in the multiple rounds of business communication between the parties to the merger and acquisition plan, the company and some of the parties to the transaction failed to reach an agreement due to the different expectations of the parties to the transaction. This is the main reason for the closure of this merger. ”

According to the chairman of the company, in order to ensure the optimal allocation of resources and maximize the synergy between the listed company and the acquired company after the reorganization, the listed company still hopes to achieve the merger and acquisition of 100% of the equity of the target company. However, as far as the current communication situation is concerned, it will take some time for the specific plan to be negotiated and resolved by the relevant parties, and it is a reasonable choice to terminate it at present.

However, the termination of this transaction does not mean that Xintian Pharmaceutical has given up the merger and acquisition of Huilun Pharmaceutical. The announcement pointed out that the company will continue to actively respond to national policies, in addition to focusing on the endogenous development of the main business and focusing on R&D, based on the strategic goal of building an industry-leading comprehensive pharmaceutical enterprise, and continue to promote the integration of relevant industrial resources.

Regarding the follow-up arrangements for the termination of this transaction, the chairman of the company also said: "Whether from the perspective of chemical drugs' innovation capabilities, R&D capabilities, numerous pipelines under development, or from the perspective of marketed products and their commercialization capabilities, Huilun Pharmaceutical is a rare high-quality asset, and it is also worthy of Xintian Pharmaceutical to continue to promote industrial integration." We hope that the merger and acquisition can be restarted and completed with a new plan after all parties reach an agreement. ”

As the chairman of the company said, Huilun Pharmaceutical's own excellent texture may be the main reason for Xintian Pharmaceutical's insistence on promoting mergers and acquisitions. It is understood that Huilun Pharmaceutical is an innovative pharmaceutical enterprise engaged in the research and development, production and sales of small molecule chemical drugs, with "high clinical value" as the pharmaceutical concept, and through the strategy of "promoting innovation with imitation" and "combining imitation and innovation" to achieve rapid development. Huilun Pharma has solid innovation and R&D capabilities in the field of small molecule chemical drug industry, has fruitful innovation achievements, and has a high industry position in the country.

Taking Huilun Pharmaceutical's current core product, cevelestat sodium for injection, as an example, this product is the only domestic exclusive drug for ALI/ARDS (acute lung injury/acute respiratory distress syndrome) in the world, which fills the gap in the field of ALI/ARDS drug treatment in mainland China after its marketing. According to the chairman of the company, the product has the characteristics of "high difficulty in clinical research, high threshold for clinical trials, and long clinical research cycle", and Huilun Pharmaceutical's persistence for more than 10 years has realized the launch of the product in China, providing clinicians with a treatment option. It is precisely because of its good clinical performance and clinical drug verification in hospitals since its listing that the product has achieved breakthrough growth after its launch, and has become the current "fist product" of Huilun Pharmaceutical, helping Huilun Pharmaceutical achieve nearly 1 billion yuan in revenue in 2023, and also allowing Huilun Pharmaceutical to achieve a turnaround in performance under the condition of continuous years of high-intensity R&D investment. This product is a testament to the fact that Huilun Pharmaceutical, as an innovative R&D enterprise of small molecule chemical drugs, also has strong commercialization capabilities.

In the field of new drugs, Huilun Pharma has more than 10 Class 1 and Class 2 innovative varieties under development, of which 6 are Class 1 varieties under development, 3 are in phase I clinical trials, 1 has completed phase II enrollment, and will soon start phase III clinical trials, and 2 are about to apply for IND; There are 3 varieties under development in Class 2, of which 1 is in clinical phase II and 2 are in clinical phase I; In addition, there are several products in the preclinical research stage. Huilun Pharmaceutical's products under development cover many fields such as immunoinflammation and tumors, and the market scale is huge, such as a new dosage form of cevelestat sodium for injection - nebulized inhaler, which realizes that the drug distribution at the lesion site is much higher than that at the non-lesion site, so that the effectiveness and safety of the product have been improved; In addition, another Category 1 new drug for the clinical treatment of small cell lung cancer, the median survival analysis results shown in the current phase II clinical data are significantly better than existing treatments, and an application for breakthrough therapy designation has been submitted to the Center for Drug Evaluation (CDE) of the National Medical Products Administration, which has previously obtained clinical trial approval and orphan drug designation from the United States Food and Drug Administration (FDA).

Huilun Pharmaceutical's R&D strength has also been recognized by the market. At the "9th Annual Meeting of Medical Scientists (2024)" co-sponsored by the official media of the Chinese Medical Doctor Association and Physician Daily, Huilun Pharmaceutical was awarded the "Top Ten Pharmaceutical Innovation Enterprises" in 2023 as "the power to promote the industry forward". At the "2024 International Pharmaceutical Service Industry Innovation and Development Conference and the 9th China Pharmaceutical R&D · Innovation Summit (PDI)" held on July 4, Xintian Pharmaceutical and Huilun Pharmaceutical won the "2024 China Top 50 Chinese Medicine R&D Strength" and "2024 China Top 100 Chemical Drug R&D Strength" respectively.

Although Xintian Pharmaceutical's merger and acquisition plan for Huilun Pharmaceutical was disclosed as "terminated", the company will continue to promote the integration of relevant industrial resources that have been laid out, and the chairman of the company also expressed his willingness to restart the merger and acquisition of Huilun Pharmaceutical with a new plan. This should be a "pause button" and the company may continue to push the deal forward. At present, the value of the target company has been gradually fully recognized by the market and all participants in this transaction, and if the follow-up company restarts at the right time, it may be able to seize a better opportunity for mergers and acquisitions.

The chairman of the company pointed out that if the follow-up parties reach an agreement and complete the merger and acquisition, for Xintian Pharmaceutical, whether from the perspective of improving the R&D and innovation resources and capabilities of "modern Chinese medicine", expanding the business scale of listed companies, enriching the pipeline of listed products, or developing synergistically in R&D, production and sales, it will be conducive to the listed company to become better and stronger, and build a leading comprehensive pharmaceutical enterprise, which will boost the development of Guizhou's local pharmaceutical industry.