The valuation of 0.7895 million yuan of intangible assets is 0.63 billion yuan.

"Investors Net" Cai Jun

On November 25, Jiangsu Kanion Pharmaceutical (600557.SH, hereinafter referred to as "the company") released the adjustment plan for asset acquisition and the regulatory reply letter to the Shanghai Stock Exchange.

In this acquisition round, the company not only involves the injection of large shareholder assets across different sectors but has also attracted widespread attention from investors due to high valuations and trade setups. In the new plan, the company has made adjustments to equity and debt handling, with various parties engaging in negotiations and compromises.

The valuation of intangible assets has surged dramatically.

According to the announcement, Jiangsu Kanion Pharmaceutical plans to use its own funds of 0.27 billion yuan to acquire 100% of the shares of Zhongxin Pharmaceutical, aiming to further enrich its biopharmaceutical research and development pipeline. The symbol has not yet commercialized any products and is currently in a loss-making state, with Jiangsu Kanion Group and Nanjing Kangzhu holding 70% and 30% of the shares, respectively, thus constituting a related party transaction.

The valuation sensitivity of such large shareholder asset injections has always been significant. The evaluation plan shows that the book value of Zhongxin Pharmaceutical's shareholder equity is -0.358 billion yuan, with a valuation of 0.272 billion yuan, resulting in an appreciation rate of 175.87%. The company mainly focuses on innovative drugs and has 4 core pipelines.

The key to raising the valuation of a symbol with liabilities exceeding assets lies in the method. In this round of trade, the company's assessment adopted the asset-based method, valuing total assets of 0.085 billion yuan at 0.715 billion yuan, then deducting liabilities of 0.443 billion yuan to arrive at a valuation of 0.272 billion yuan.

The key is the intangible assets that have appreciated the most in total assets, with a book value of 0.7895 million yuan appraised at 0.63 billion yuan, and an average value of pipelines at 0.157 billion yuan. The company believes that the significant appreciation comes from including unreflected patents, trademarks, domain names, research pipelines, and technology platforms, and indicates that the market expectations for new drugs are good.

Data shows that the symbols in research products include recombinant human nerve growth factor injection/eye drops, and three-target long-acting weight loss (blood sugar reduction) fusion protein, among others. The latter falls within the popular GLP-1 category, which has weight loss effects.

In other words, Jiangsu Kanion Pharmaceutical has elevated the overall valuation of the acquisition target based on the future prospects of the research drugs. However, taking weight loss drugs as an example, the only product making substantial progress in the industry is Innovent Bio's Munch peptide, which is expected to be approved for market release next year. As of the first half of this year, Innovent Bio's research pipeline included 36 products, with an intangible asset value of 0.987 billion yuan, and an average value of approximately 0.027 billion yuan per product.

In response, the Shanghai Stock Exchange also paid attention to this point, requesting the company to disclose the rationality of intangible asset valuation in an inquiry letter. In the response announcement, the company continued to use the income method to forecast revenues, profits, and expenses after the product launch.

Any trade is like an iceberg floating on the sea, where the acquisition is visible above water, but the subsequent expenditures are easily overlooked by the market. In addition to paying the transfer payment, the company clearly states in the original plan that it will continue to invest in research and development expenditures, capital expenditures, debt repayment, and other areas in China-Singapore medicine.

As of the third quarter of this year, the borrowings from the target to Jiangsu Kanion Group amounted to a total of 0.479 billion yuan, including principal and interest, and the core pipeline is expected to require approximately 0.4 billion yuan in clinical funding. Therefore, this round of trade was once questioned as the company 'picking up the tab' for the target's debts.

In the amended plan, the company stated that to protect the interests of small and medium investors, adjustments were made to debt handling. First, China-Singapore medicines will repay the remaining interest of 0.089 billion yuan owed to Jiangsu Kanion Group, and the remaining principal of 0.389 billion yuan will be paid in installments after the drug obtains market approval, but interest must be repaid annually. Meanwhile, the company also provided different debt handling plans for various situations that may occur in the future pipeline.

The assignee experiences 'delayed gratification.'

In 2011, with the assistance of Kangyuan Group, former chief scientist of Bristol-Myers Squibb Zhang Yigui returned to China and founded Sino-Medic with a 30% shareholding. According to Qichacha, this October, the shareholder of the symbol changed, with Zhang Yi's equity transferred to Nanjing Kangzhu.

In this round of trade, Kangyuan Pharmaceutical has put a lot of effort into the payment design. In summary, it requires a certain degree of 'delayed gratification' from related parties.

According to the agreement, Kangyuan Group will hold 70% of the corresponding transfer price of Sino-Medic, which is 0.189 billion yuan. The company will first pay 60% of the down payment, which is 0.113 billion yuan, with the remaining 40% to be paid in installments after the symbol pharmaceutical obtains marketing approval.

Nanjing Kangzhu originally planned to pay once for its 30% equity in Sino-Medic, corresponding to a transfer price of 0.081 billion yuan. After deducting taxes and fees from the funds received, Nanjing Kangzhu intends to use all the funds for increasing the company's shareholding in the secondary market at an opportune time, and to lift the restrictions on selling in installments after the symbol pharmaceutical obtains marketing approval.

Data shows that Nanjing Kangzhu was established in May of this year as an incentive platform for the symbol management team and core members, with a wholly-owned subsidiary of Kangyuan Group serving as the executive partner, which is a related party. After penetrating, five individual shareholders collectively invested 0.08 million yuan to hold 80%. Among them, Zhang Yi invested 0.047 million yuan, thus diluting his shareholding in Sino-Medic to 14%.

In the latest revised plan, the company stated that to reduce upfront capital payments, the plan would be adjusted through negotiation. First, the company will pay 60% of the total price, which is 0.0486 billion yuan, to Nanjing Kangzhu, which must use the funds obtained to increase its shareholding in the company when the opportunity arises. The remaining 40%, which is 0.0324 billion yuan, must be paid in installments after the drug from Sino-Medic obtains marketing approval.

It can be seen that the drug's listing is a condition set by the company. The company anticipates that the relevant drugs will be launched in 2026 and 2027. If approval is not obtained by the agreed time, both Kangyuan Group and Nanjing Kangzhu must compensate the company for performance.

In any case, Kangyuan Group has initially secured part of the funds, which can be considered a safe bet. According to Qichacha, Kangyuan Group has recently been involved in multiple disputes as a defendant, including construction, shareholder rights to know, house rental, etc., which may require funding at this time.

Mysterious related transactions.

For a long time, the actual controller of jiangsu kanion pharmaceutical, Xiao Weixian, has seldom appeared in public. A graduate of Nanjing University of Chinese Medicine, he is known as an 'academic entrepreneur' and took over the company's predecessor, jiangsu lianyungang port traditional chinese medicine factory, around the 1990s. By building core single products, the company transformed from the brink of loss to a leading enterprise in traditional chinese medicine.

Now, the company has once again reached a painful node. In the first three quarters of this year, the company's revenue and net income attributable to the parent excluding non-recurring gains and losses were 3.11 billion yuan and 0.285 billion yuan, respectively, with year-on-year declines of 11.06% and 10.16%. The decline in performance is related to the participation of core products in centralized procurement, namely, Hot Poisoning Injection and Ginkgo Terpene Lactone Glucosamine Injection.

This pain has forced jiangsu kanion pharmaceutical to make multiple measures. On one hand, the company has reduced marketing expenses through sales standardization; on the other hand, the company continues to maintain high expenditure on research and development in order to recreate a major single product.

In the first three quarters of this year, the company's sales expenses were 1.177 billion yuan, a year-on-year decrease of 20.6%, with a sales expense ratio of 37.8%. During the same period, the company's R&D expenses amounted to 0.467 billion yuan, although it decreased by 8.4% year-on-year, the R&D expense ratio remained at 15%, ranking among the top in the traditional chinese medicine industry.

Just one day before announcing the acquisition, the company announced that it received a regulatory work letter, mainly regarding this round of related transactions. In July, the company also issued a similar announcement but did not disclose the specific reasons. Which enterprises are involved in the related transactions has become a mystery.

From the financial report, in the first half of this year, the company sold 0.22 billion yuan to jiangsu kanion pharmaceutical commerce, making it the largest related transaction. As of the same period, the company's accounts receivable balance for this related party was 0.15 billion yuan, with a bad debt reserve of 3.05 million yuan. (Produced by Sigh Finance) ■