Key points of the report describe the events recently. We have followed the business situation in Baihua Village. The main contents are as follows. Incident review introduces war investment+asset exchange to begin the path of mixed reform and transformation: On February 16, the company announced the asset restructuring plan (revised draft), which includes the three aspects of introducing war investment, asset exchange & asset purchase, and raising supporting capital. ① Six Division State-owned Companies, Corps State-owned Companies, Corps Investment Company, and Corps Design Institute transferred a total of 10.326 million shares of share capital to Liyi Pharmaceutical Fund managed by Liyi Investment, accounting for 4.16% of the total share capital, and transferred 14.837 million shares to Ruidong Capital and Ruidong Pharmaceutical Fund managed by Liyi, accounting for a total of 11.94% of the total share capital, and a price of 13.5 yuan per share; ② The proposed asset is 66.08% of Hongji Coking Co., Ltd., 51% of Yuxin Coal, 100% of natural products, and 2010 coal mine Claims totaled 255 million yuan, The company plans to invest 100% equity in assets of Warwick Pharmaceuticals at a price of 1,945 million yuan. The difference between the two is 1,228 yuan/share to 11 counterparties for the non-public offering of 100 million shares and 456 million yuan in cash; ③ It plans to raise no more than 1,198 billion yuan in supporting capital from 8 targets, including employee stock ownership plans, Xinnong Hyundai, Ruifeng Pharmaceutical Fund, and Dao Kang Xiangyun, with an issue price of 1,288 yuan/share, to pay cash consideration, pharmaceutical research center projects (350 million), clinical research service projects (100 million), and listed drug license projects (200 million yuan), etc. After the transaction was completed, the six state-owned companies held 19.48% of the shares and were still the actual controllers of the company. Warwick Pharmaceuticals is a preclinical CRO leader. The company has begun a path of mixed reform and transformation by introducing war investment and placing loss-making assets to buy pharmaceutical assets. Injecting preclinical CRO leaders, downstream extension+consistency evaluation brings incremental space: The injection target of Warwick Pharmaceutical's business includes preclinical drug development services, clinical trial services, key intermediates, and high-value-added API CMO business, with preclinical drug development and transfer services as the core, and has now completed more than 200 preclinical studies. Warwick has an absolute advantage in pre-clinical services for 3 types of new drugs. The total number of Class 3.1 clinical approvals declared in 2008-2015 was 77, far surpassing other CRO companies, ranking second among all domestic pharmaceutical companies. The target currently has a research and development team of around 250 people, which can carry out 40-50 projects in parallel. By the end of 2015, Warwick had 203 ongoing research projects, which are expected to be completed within the next 2-3 years, generating revenue of at least 600 million yuan. At the same time, the company is also actively expanding downstream clinical services and pre-clinical services for innovative drugs. Currently, the volume of clinical CRO business is still small, and it is expected that in the future, collaborative development with preclinical business is expected. Eight varieties of innovative drugs are being studied. Furthermore, along with the reform of the drug review policy, drug consistency evaluation will bring a lot of room for growth, and the company will also actively promote the development of this business. In 2015, Warwick Pharmaceuticals is expected to achieve net profit of 75.61 million yuan, deducting non-net profit of 71.47 million yuan, an increase of 98% over the previous year. From 2016 to 2018, the promised net profit was not less than 100 million yuan, 123 million yuan and 147 million yuan, respectively. With investment in the two major wars plus state-owned holdings, the transformation of pharmaceuticals is expected to accelerate: this plan introduces two major investments, Liyi Investment and Ruidong Capital. Among them, the actual controller of Liyi Investment is Lilly Asia, which has extensive investment experience in the pharmaceutical field and manages US dollar funds and RMB funds totaling about 600 million US dollars. The R&D outsourcing companies that have invested include Fangen Pharmaceutical, Huiyuan Biotech, China and US Crown Technology, etc., and biopharmaceutical companies include Zhejiang Beida Pharmaceutical, Shenzhen Microchip Biotech, and Suzhou Cinda Biotech. Liyi Investment promised to promote the priority loading of its high-quality pharmaceutical projects into the company, and help the company carry out mergers and acquisitions in the field of R&D outsourcing and biopharmaceuticals (genes, cell therapy, targeted drugs, etc.). Ruidong Capital has extensive experience in capital operations, and is expected to help the company in financial management, model operation, and target negotiations in the future. Meanwhile, the Xinjiang Construction Corps is likely to maintain its controlling position, and it is hoped that it will use its state-owned capital background to provide an advantage as a financing platform. In the future, with the cooperation of the three parties, the company is expected to accelerate pharmaceutical transformation, build a platform for the entire CRO industry chain, and expand into the field of biopharmaceuticals. First coverage, giving a “buy” rating: the company has begun the path of mixed reform and transformation by introducing war investment, placing loss-making assets, and injecting pharmaceutical assets. The target Warwick Pharmaceuticals is a leading preclinical CRO, and clinical service extensions and generic drug consistency evaluations drive continued high performance growth; war investment has opened up space for the company's expansion throughout the CRO industry chain and in the field of biopharmaceuticals. According to performance promises, it is estimated that after restructuring and supporting financing, listed companies preparing for the 2016-2018 EPS exam will be 0.23 yuan, 0.28 yuan, and 0.33 yuan respectively, covering the first time, and giving them a “buy” rating. Risk warning: Asset restructuring progress falls short of expectations, target profit falls short of expectations