On the evening of the 15th, Hybio Pharmaceutical, a GLP-1 concept stock, announced that its controlling shareholder had transferred the shares worth over 0.2 billion yuan previously pledged to Shenzhen Guarantee; in the past two years, the controlling shareholder had loaned money to Hybio Pharmaceutical several times, and last year's and this year's Q1 financial reports showed that the cash flow of Hybio Pharmaceutical is relatively tight; lawyers stated that the above-mentioned share pledge financing by shareholders is compliant and is not directly related to the cash flow of Hybio Pharmaceutical.
On July 16th, Cailian Press News (Reporter Lu Afeng) Huanyu Pharmaceuticals (300199.SZ), one of the leading companies in domestic GLP-1, seems to have a problem with the turnover of its controlling shareholder's funds. On the evening of the 15th, Hybio Pharmaceuticals announced that the controlling shareholder and the actual controller had transferred the shares worth more than 0.2 billion yuan previously pledged to the borrower. This again brought the financial situation of Hybio Pharmaceutical's controlling shareholder to the forefront and highlighted the tight cash flow of the company.
Xu Feng, the director of Shanghai Jiucheng Law Firm, told Cailian Society reporters that although it is not common for controlling shareholders to transfer shares directly to borrowers after the pledge expires, the financial turnover of the controlling shareholders is not highly correlated with the cash flow of the listed company, and the relevant behavior of the controlling shareholders does not violate legal regulations. According to Cailian Society reporters, Hybio Pharmaceutical has to repay the loan of about 0.429 billion yuan in the second half of this year, and the net cash flow from operating activities in Q1 2024 is only about 0.015 billion yuan.
On the evening of the 15th, Hybio Pharmaceuticals released a prompt announcement about the signing of the "Pledge Shares Disposal Agreement" by the controlling shareholder and the actual controller. Zeng Shaogui, the controlling shareholder and the actual controller of Hybio Pharmaceuticals, and Zeng Shaoqiang signed an "Agreement" with Shenzhen Guarantee to transfer their 11,104,125 shares of unlimited tradable common shares of the company (1.26% of the total share capital) and 8,843,994 shares of unlimited tradable common shares (1.00% of the total share capital), respectively, in a non-trading transfer way. The total number of shares transferred in the non-trading transfer this time is 19,948,119 shares, accounting for 2.26% of the company's total share capital. The non-trading transfer price is 10.24 yuan/share, and the non-trading transfer amount is all used to repay the stock pledge financing principal and interest. The closing price of Hybio Pharmaceuticals on the 15th was 9.97 yuan/share.
On June 28th last year, Zeng Shaogui and Zeng Shaoqiang, the controlling shareholders of Hybio Pharmaceuticals, signed a "Commissioned Loan Contract" with Shenzhen Guarantee Group Co., Ltd., pledging the shares to Shenzhen Guarantee for a loan of 0.113 billion yuan and 0.09 billion yuan, respectively. The shares were pledged to repay the interest of 0.007 billion yuan and 0.0056 billion yuan, respectively.
"Although this kind of behavior of transferring shares directly to the guarantee party after expiration is not common, the share pledge financing of the controlling shareholder and the cash flow of the listed company are independent," Xu Feng, a lawyer, told Cailian Society reporters. The share pledge financing bottom line of the shareholders is compliant, and this kind of repayment method does not exclude the voluntary behavior of the two controlling shareholders and Shenzhen Guarantee. There is no direct relationship with the current cash flow situation of Hybio Pharmaceuticals.
Cailian Press reporters noticed that since 2013, Hybio Pharmaceuticals has issued more than 100 announcements related to share pledge financing by Zeng Shaogui and Zeng Shaoqiang, the two controlling shareholders. The two controlling shareholders are "frequent customers" of share pledge loans, and the actual controller has borrowed money from the listed company many times last year and this year.
Last year, there were rumors in the industry that Hybio Pharmaceuticals had liquidity risks in cash flow. The 2023 financial report showed that the net cash flow from operating activities was negative.
On the evening of February 13, 2023, Hybio Pharmaceuticals announced that Zeng Shaogui, the controlling shareholder, and its concerted action person Zeng Shaoqiang and Zeng Shaobin planned to transfer a total of 44.1621 million shares of the company's stock through the agreement transfer method, with a total transaction price of about 0.453 billion yuan; at the same time, they also planned to reduce their holdings of Hybio Pharmaceuticals by no more than 17.66 million shares through centralized bidding trading within six months after the fifteen trading days after the disclosure of the reduction plan.
According to the closing price on February 14th last year, the current market value of the maximum limit of the proposed direct reduction of shares is about 0.229 billion yuan. This means that the actual controller or will cash out nearly 0.7 billion yuan through a combination of agreement transfers and direct reductions. Regarding the reason for the agreement transfer, Hybio Pharmaceuticals announced that the actual controller has "met its own capital needs", and the reason for the secondary market reduction is "personal capital needs and providing interest-free loans to Hybio Pharmaceuticals".
"The actual controller does not have a tight cash flow situation, mainly due to personal funding needs." A person from Hybio Pharmaceutical Company told Caixin reporters at the time: The actual controller will provide interest-free loans to the listed company. The deadline and amount are not yet clear and will be subject to the company's later announcement.
However, well-known financial and tax expert and chief consultant of Jiangsu Siwei Consulting Group, Liu Zhigeng, told Caixin reporters at the time that in general, the cash coverage ratio of interest-bearing liabilities of enterprises should be greater than 1, otherwise there is a risk of debt repayment. However, the coverage ratio of the company's interest-bearing liabilities at the end of the third quarter of 2022 is far below 1, which indicates a high risk. Combined with the company's cash balance of only 55.15 million yuan, it is difficult to sustain the daily business operations of a listed company with a market capitalization of over 10 billion yuan. "It can be seen from this that the company's funds are not abundant, and it may even be in a very tight situation, which may affect the normal turnover of funds."
On April 1 of this year, Hybio Pharmaceutical announced that the controlling shareholder and the actual controller Tseng Shao-gui would provide interest-free loans to the company not exceeding 0.2 billion yuan to support the company's innovative drug project research and development and promote the healthy and sustainable development of the company. The term of the loan is three years from the date of approval by the board of directors.
However, the announcement of 'Explanation of the Annual Report Inquiry Letter of HyBio Pharmaceutical to Deloitte Touche Tohmatsu CPA Ltd. (Special General Partnership)' released on June 8th seemingly raised the problem of Hybio Pharmaceutical's current cash flow turnover again. Hybio Pharmaceutical made detailed answers to inquiries from Deloitte Touche Tohmatsu CPA Ltd. in the 2023 annual report, including revenue performance, major business orders, cash flow, debt repayment capacity, and so on.
However, the above description shows that at the end of 2023, Hybio Pharmaceutical's short-term borrowings were about 0.617 billion yuan and non-current liabilities due within one year were about 0.453 billion yuan, totaling about 1.071 billion yuan. In the second half of 2024, the total amount to be repaid for short-term borrowings and non-current liabilities due within one year is about 0.429 billion yuan.
On the other hand, in 2024Q1, Hybio Pharmaceutical's cash flow was slightly better than in 2023, and the net cash flow from operating activities was no longer negative, at about 0.015 billion yuan.
Hybio Pharmaceutical also stated in the above inquiry that the overseas sales orders for active pharmaceutical ingredients and formulations announced in 2023 and 2024 will bring stable operating cash flow to the company, and subsequent commercial continuous supply will further consolidate the company's operating cash flow.
It is worth mentioning that on July 10th, Hybio Pharmaceutical announced that its wholly-owned subsidiary, Hybio Pharmaceutical (Wuhan) Co., Ltd., has received a cooperation agreement from customer DS3 RX LLC, which plans to purchase GLP-1 active pharmaceutical ingredients worth about $8.1 million (about RMB 58.89 million including tax) from Hybio Wuhan. On May 2nd, Hybio Pharmaceutical stated on the interactive platform that as of that day, the total amount of signed orders for liraglutide preparations and various GLP-1 active pharmaceutical ingredients was nearly 0.6 billion yuan, and some orders have been delivered.