Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong
Limited take no responsibility for the contents of this announcement, make no representation
as to its accuracy or completeness and expressly disclaim any liability whatsoever for any
loss howsoever arising from or in reliance upon the whole or any part of the contents of this
announcement.
CLARIFICATION ANNOUNCEMENT
AND
RESUMPTION OF TRADING
Reference is made to the announcement of the Company dated 11 August 2016 in relation
to the suspension of trading in the Company’s shares (stock code: 00587) and debt
securities (stock code: 05676) regarding the Allegation Report. This announcement is
made to refute the allegations concerning the Group in the Allegation Report and to rebut
the attempt to undermine the confidence of the Company’s shareholders in its business
and financial condition.
At the request of the Company, trading in the Company’s shares and debt securities on the
Stock Exchange was halted with effect from 11:39 a.m. on Thursday, 11 August 2016
pending the release of a clarification announcement regarding the Allegation Report.
Application has been made by the Company for resumption of trading in the Company’s
shares and debt securities on the Stock Exchange with effect from 9:00 a.m. on 18 August
2016.
THE COMPANY’S POSITION
Groundless allegations in the Allegation Report
Reference is made to the announcement of Hua Han Health Industry Holdings Limited
(‘‘Company’’) dated 11 August 2016 in relation to the suspension of trading in the
Company’s shares (stock code: 00587) and debt securities (stock code: 05676) regarding the
negative report (‘‘Allegation Report’’) from Emerson Analytics Co. Ltd. (‘‘Emerson’’).
This announcement is made pursuant to Part XIVA of the SFO and Rule 13.09(2)(a) of the
Listing Rules. The board (‘‘Board’’) of directors (‘‘Directors’’) of the Company is deeply
shocked and furious at the Allegation Report since all those allegations in the Allegation
Report are malicious, untrue and groundless. This announcement is made to refute the
allegations concerning the Group in the Allegation Report and to rebut the attempt to
undermine the confidence of the Company’s shareholders in its business and financial
condition.
–1–
The Directors and the senior management of the Company confirmed that they had not been
contacted or interviewed by Emerson before the issuance of the Allegation Report to verify
any data or information stated in the Allegation Report.
The Directors confirm that the information contained in the published financial reports of
the Company is accurate and complete in all material respects and not be misleading or
deceptive.
Caution
The Allegation Report contained a disclosure that ‘‘We and/or our associates/partners may
have long or short positions in the equities and/or their derivatives at the time of publication
of our reports, and we and/or our associates/partners may maintain or change our positions
at any time.’’
The Group questions the intention of the Allegation Report which uses extremely damaging
statements without seeking direct verification from the Group. The Board believes that the
Allegation Report was published merely out of Emerson’s possible gains as a short seller of
securities and the fact that it may have short sold the Company’s securities.
Shareholders and investors should be cautioned that Emerson has never revealed their true
identity nor their registered business address. Their credibility is extremely questionable.
REFUTATION OF ALLEGATIONS IN THE ALLEGATION REPORT
The Board vigorously denies the allegations against the Group in the Allegation Report, and
considers that the information contained in the Allegation Report to be incomplete, biasedlyselected and presented and materially misleading.
The Company has carefully reviewed the Allegation Report. Set forth below are the
responses by the Company to the allegations in the Allegation Report:
Allegation 1 of the Emerson Report: alleged that the Company hugely inflated revenue
and profit from its product sales
Information of financial statements disclosed in the annual report of the Company
Sales
Income tax expenses
Profit attributable to owners
FY2011
HK$’000
FY2012
HK$’000
FY2013
HK$’000
1,157,263
73,478
441,838
1,312,127
79,278
657,228
1,754,392
97,766
223,041
The above financial statement of the Company has been audited by the auditor with
unqualified audit opinion.
–2–
The Company’s revenue for 2013 natural year was RMB1,659.9470 million, with paid valueadded taxes of RMB230.1120 million and corporate income tax of RMB73.0022 million.
The complete financial records and tax return regarding all sales revenue and tax expenses
of the Company were properly kept.
1.
About the sales of ‘‘Yi Fu’’ and ‘‘Yi Bei’’
1.1 The data regarding the rhEGF market size in China, which was quoted from the
Emerson Report, was extracted from the relevant data as contained in the
prospectus of Shanghai Haohai Biological Technology Co. Ltd. produced by
Southern Medicine Economic Research Institute (hereinafter referred to as the
‘‘SME’’). The SME categorized ‘‘Yi Fu’’ and ‘‘Yi Bei’’ of the Company to the
rhEGF drugs. At the relevant time, the manufacturers of rhEGF drugs in China
included three companies, such as Guilin Pavay Gene Pharmaceutical Co., Ltd.*
(桂林華諾威基因藥業有限公司) (hereinafter referred to as ‘‘Guilin Pavay’’). First,
our Company approached a responsible officer for data sampling and analysis from
SME for understanding the sources and research techniques. According to the
responsible officer, all research data as contained in the Allegation Report was
mainly attributable to large-size hospitals, with a limited coverage of specialized
hospitals, as a result of which, these may be discrepancies in performing the
estimate for the national market of rhEGF products. As we understood, based on
the relevant research report produced by the SME, a specific explanation pertaining
to data used thereto says, ‘‘Data and information pertaining to the entire market and
key brands as contained in this report are mainly comprised of sampled hospitals of
PICO cities, statistics of retail drug stores, industrial statistics, and data
extrapolated from interviews with experts. Despite our efforts to employ varied
techniques to ensure data will better reflect the actual conditions of the overall
market in China, the same data and information remain subject to the inherent
statistic factors relating to the extrapolation derived from the coverage and
sampling data. All data contained in this report shall be for reference purposes
only.’’
Subsequently, our Company contacted an expert at China Pharmaceutical Industry
Information Center* (中國醫藥工業信息中心), which is an institutional entity
under MIIT, a state-level information center and a professional pharmaceutical
research consulting agency. According to this expert, the market data was derived
from more than 400 sampled hospitals subject to the monitoring by China
Pharmaceutical Industry Information Center. The sampled hospitals are mainly
large hospitals across 13 provinces in the PRC. To determine the market size or
revenue (as a reference value) of any product of a certain type in China, the data
derived from the sampled hospitals subject to the monitoring will be, after
integrating various factors, multiplied by a factor of up to 18.9. After including a
reasonable multiple for the rhEGF drugs, the market size for 2013 in China should
be more than RMB600 million. According to the data provided by China
Pharmaceutical Industry Information Center, for 2013, revenue from sales of
rhEGF drugs in the sampled hospitals was RMB46.0536 million, while revenue
from sales by the Company of Yi Fu and Yi Bei in the same sampled hospitals was
RMB24.6949 million. Their sales volume amounted to 225,400 units and 518,000
–3–
units, respectively, representing a market share of 53.62%. In the same year,
hospitals at the national second class or above amounted to 7,783, while the same
sampled hospitals only accounted for 5.29%.
Yi Fu and Yi Bei covered all major cities in China other than Tibet and Fujian
Province. By being specialized products, new drugs under the biopharmaceutical
type, and drugs exclusively covered under the national medical insurance, Yi Fu
and Yi Bei enjoy a high market share in the products related to ophthalmology,
burns, and dermatology. Over the past ten years, the privately-owned hospitals
(clinics) specialized in ophthalmology in China has witnessed a rapid development,
and they were also included in the sales coverage of Yi Bei.
1.2 Sales volume published on the website of Guilin Pavay
Following the Group’s communication with the responsible officer at Guilin Pavay,
the Group was given to understand that the data published on the website in 2011
of Guilin Pavay regarding production and sales of Yi Fu and Yi Bei, as contained
in the Emerson Report, referred to the production volume and sales volume for a
specific Yi Fu and Yi Bei product of specific dosage. As the senior management of
Guilin Pavay did not pay sufficient attention of the website development and
neglected the management of the same website, such information was thus not
meticulously reviewed prior to its release.
2.
Sales data of Qijiao Shengbai Capsules
2.1 Certain data quoted from the Emerson Report was extracted from the Top 20
Antitumor Traditional Chinese Medicines Retail Market in 2013 released by
Guangzhou Sinohealth Intelligence Co., Ltd.* (廣州中康醫藥資訊有限公司)
(hereinafter referred to as ‘‘Sinohealth Intelligence’’). The Company noted that
Sinohealth Intelligence is a privately-owned pharmaceutical consulting company,
the shareholder of which is a natural person without any involvement in the
government authorities. By searching through a well known internet website, the
Company understood that, the number of pharmaceutical consulting firms of similar
types in China currently exceeds 500. The Company does not believe that it is fair
and objective to adopt market data from a single company as a benchmark to gauge
the sales volumes of a single product in the entire Chinese market.
According to the Allegation Report, the data so extrapolated significantly outpaced
that presented by Sinohealth Intelligence through the so-called telephone
conversation. However, Emerson eventually adopted the data from Sinohealth
Intelligence, which was apparently selective and biased data.
2.2 Certain data regarding production capacity contained in the Allegation Report was
based on the telephone conversations. Our Company confirmed with senior officers
of the Sales Department and the Production Department of Guiyang De Chang
Xiang Pharmaceutical Company Limited (hereinafter referred to as ‘‘Guiyang
DCX’’) that they had never received any telephone calls or telephone conversations
of similar kind. As a result, the authenticity of the tape recording for such
telephone conversations, which the Allegation Report refers to, cannot be verified.
Guiyang DCX already issued a written statement to our Company regarding this
–4–
incident. Upon inquiries into Guiyang DCX’s production record for 2013, Guiyang
DCX reported 178 lots of Qijiao Shengbai Capsules in total with a production
volume of 10.7965 million boxes.
2.3 As a drug exclusively covered under the national medical insurance, the Qijiao
Shengbai Capsule is currently the only corrective Chinese patent medicine that
treats and reinforces Qi and blood circulation amongst traditional Chinese
medicines, which is irreplaceable. This type of drug is accredited to the Significant
Innovative Drugs Project under the Twelfth Five-Year Plan, the efficacy of which
is widely recognized by national experts at pharmaceuticals, and is applied to many
departments at hospitals relating to oncology, hematology, gynecology, retired
senior officials, cardiovascular medication, rehabilitation, etc. The sales targets of
the Qijiao Shengbai Capsules cover a majority of provinces and regions across
China.
3.
Sales data of Fuke Zaizaowan (including capsules)
3.1 Data regarding production capacity and sales contained in the Emerson Report was
based on the telephone conversations. The Company confirmed with senior officers
of the Sales Department and the Production Department of Guiyang DCX that they
had never received any telephone calls or telephone conversations of similar kind.
As a result, the authenticity of the tape recording for such telephone conversations,
which the Allegation Report refers to, cannot be verified. Guiyang DCX already
issues a written statement to our Company regarding this incident.
3.2 Upon inquiries into Guiyang DCX’s production record for 2013, Guiyang DCX
reported 158 lots of Fuke Zaizaowan in total with a production volume of 10.1042
million boxes, as well as 129 lots of Fuke Zaizaowan Capsules with a production
volume of 7.8125 million boxes.
4.
Sales of ‘‘Golden Peptides’’
4.1 Golden Peptides series products, the production of which began in 2012 based
on orders placed by Guangzhou Golden Peptides Biotech Limited* (廣州金紫
肽生物科技有限公司) (hereinafter referred to as ‘‘Guangzhou Golden Peptides’’)
and Shenzhen Gital Biotechnology Limited* (深圳市極肽生物科技有限公司)
(hereinafter referred to as ‘‘Shenzhen Gital’’) with the Company, includes such
branded products as ‘‘Golden Peptides’’, ‘‘UC Small Peptides’’, and ‘‘Gital’’, all of
which are collectively referred by the Company to as Golden Peptides series
products. The Company is only responsible for producing these products based on
their orders so placed, and supplying the same to Guangzhou Golden Peptides and
Shenzhen Gital at agreed prices. In case of packaging by the sourcing merchants,
the unit price is set at RMB1,200 per box, while it is set at RMB1,500 per box in
case of packaging by the Company.
4.2 As advised by, Mr. Liu Jianping, the general manager of Guangzhou Golden
Peptides, Golden Peptides series products are mainly sold to the high-end beauty
salons, and local distributors will be fully responsible for such sales. By 2013, the
number of the selling points of these products exceeded 500. In addition,
Guangzhou Golden Peptides will hold press release on new products and store
–5–
events on an irregular basis. Meanwhile, according to the shipment bill provided by
Shenzhen Gital and the written statement produced by Shenzhen Spamoment
Investment and Development Limited* (深圳琉璃時光投資發展有限公司)
(hereinafter referred to as ‘‘Shenzhen Spamoment’’) by to the Company, it is
confirmed that the total product value of Gital products purchased by Shenzhen
Spamoment amounted to RMB649,500 on 6 September 2013.
5.
Total revenue of the Group
Therefore, the Company disagrees with the revenue from sales by the Group as claimed
in the Emerson Report as it was derived from unreasonable extrapolation by Emerson as
illustrated.
Allegation 2 of the Emerson Report: The extrapolation based on the Nationwide
Company Credit Information System (全國企業信息公示系統) (‘‘ECIS’’).
1.
The Company’s internal sales procedure: The majority of the manufacturers’ products
are sold to the pharmaceutical distributors which are the subsidiaries of the Company at
a base price. Then these pharmaceutical distributors will supply the products to external
dealers based on the sales agreement entered into with the dealers. The statistics
benchmark for sales revenue of the Company is based on the data regarding sales by the
pharmaceutical distributors to external dealers.
2.
As per the Emerson Report, inquiries made with the Nationwide Company Credit
Information System only referred to the revenue of subsidiaries of the Company, i.e.
only the revenue derived from sales by the manufacturers to pharmaceutical distributors
of the Company.
Allegation 3 of the Emerson Report: the so-called asset black hole in the amount of
HK$2,800 million
1.
Land value of Shawen Ecological Science and Technology Industrial Park
Shawen industrial park belongs to Class I industrial park of Guizhou province. Its entry
conditions include: companies engaging in healthcare & pharmaceuticals, new materials
and new energy, high-end equipment manufacture and electronic information, etc.
Guiyang High-tech Industrial Development Zone reached an agreement with the
Company in 2010 in respect of the planning of 521 mu of land within Guiyang Shawen
Ecological Science and Technology Industrial Park (hereinafter ‘‘Shawen Industrial
Park’’) for use as the Company’s industrial development and to support development of
the Company. The Chinese government has cancelled all preferential policies for
foreign-funded enterprises in 2010. Due to Shawen Industrial Park’s optimal
geographical location, far higher land acquisition price than the listed price and its
huge privilege actually implied as well as the policy guidelines for rebate, it was
difficult for foreign enterprises to enjoy such benefits under prevailing policies. The
Company therefore entrusted Guizhou Hanfang (Group) Company Limited* (貴州漢
方(集團)有限公司) (hereinafter referred as to ‘‘Hanfang Group’’) and other two
companies to undertake such land parcel and entered into a nominee holding agreement
with these companies. The nominees have undertaken to assign the ownership of such
land parcel to the Company.
–6–
The development expenses of the land parcel is expected to be RMB250 million,
besides land assignment fees (land listed price), including compensation costs for
farmers (shortfall shall be compensated by government), planning and design fees, costs
for surrounding auxiliary facilities, processing fees for construction permits and licenses
and geological exploration expenses. The Company has made a pre-payment of
RMB200 million.
As an example, the land parcel registered in the name of Hanfang Group occupied an
area of 99 mu, on which a production base of Guizhou Hanfang Medicine Manufacture
Co., Ltd. (貴州漢方藥業有限公司) (‘‘Hanfang Medicine’’), a subsidiary of the
Company, was erected and completed at the end of 2015. Hanfang Medicine has
obtained state-owned land use certificate ‘‘Qian Zhu Gao Xin Guo Yong 2015 No.
0146’’ on 20 November 2015. It is noted that land premium and development costs of
the parcel include land assignment fees, compensation costs for farmers (shortfall shall
be compensated by government), planning and design fees, costs for surrounding
auxiliary facilities, processing fees for construction permits and licenses and geological
exploration expenses, with the actual payment from the Company of approximately
RMB52 million. After checking the expensing record of construction for production
base of Hanfang Medicine, the abovementioned expense was not listed in the record of
such construction.
Guizhou Beike Factorr Biotech Company Limited* (貴州省北科泛特爾生物科技有限公
司) (‘‘Beike Factorr’’) has become a wholly-owned subsidiary of the Company on 8
October 2015 and the Company has obtained the ownership of its land on the same
date. The pre-stage procedures for transfer of the title for the land to the name of
Guizhou Hanfang Guomei Pharmaceutical Company Limited* (貴州漢方國美醫藥有限
公司) (‘‘Hanfang Guomei’’) is being processed.
There are disputes on acquisition for the remaining 202 mu of land due to illegal rush
construction of peccant buildings by surrounding peasants, resulting in a far expensive
land development costs than the Company’s expectation. Negotiations are under going
in respect of the disputes.
2.
Regarding to prepaid the equipment amount of RMB405 million
In order to develop the bio-pharmaceutical products and technology industry with
placenta as raw material, the Company decided to introduce production approvals and
technology of series products including ‘‘Human Placenta Blood Albumin Injection (人
胎盤血白蛋白注射劑)’’ (hereinafter referred to as the ‘‘Albumin’’) and ‘‘Human
Placental Tissue Fluid Injection (人胎盤組織液注射劑)’’ from National Vaccine &
Serum Institute (hereinafter referred to as the ‘‘National Institute’’) in 2011, and reached
a memorandum of cooperation with the National Institute. According to relevant
requirements as to transfer of production approvals and technology from China State
Food and Drug Administration (‘‘SFDA’’), the Company must have a production line
which has passed the GMP standard for national pharmaceutical production in order to
apply to SFDA for such transfer of production approvals and technology for the
product.
–7–
The prepayment of RMB405 million mentioned in the Emerson Report is divided into
two contracts, which were equipment agent purchase agreements entered into with
Guizhou Shunzhi Trade Co., Ltd. (‘‘Guizhou Shunzhi’’) in 2011 and 2013, respectively.
Pursuant to these two agreements, the Company repaid a total amount of RMB405
million.
In subsequent years, SFDA has been raising the standards for bio-pharmaceutical
products and technology in China, and upgraded ‘‘Human Placenta Blood Albumin
Injection’’ in standard management of blood products. These changes led to repeated
changes and deferral in orders to equipment suppliers.
The project delayed in progress because of huge obstacle in the transfer of production
approvals and technology for the Albumin. The Company subsequently negotiated with
Guizhou Shunzhi for applying such prepayments to partial equipment price for the
production base of Guizhou Hanfang and equipment price for the production lines of
‘‘Human Placenta Pills’’ of Phase one construction of 銅仁漢方大健康產業園
(unofficial translation being Tongren City Hanfang Medical All-round Healthcare
Industrial Park) and for the production lines of liquid injection of Phase Two
construction. As of 31 December 2015, Guizhou Shunzhi delivered equipments of
RMB241.1094 million to Hanfang Medicine and delivered equipments of RMB32.3561
million to Tongren Factorr Bio-Technology Co., Ltd. (銅仁泛特爾生物技術有限公司).
The purchasing orders for the remaining equipments were being executed in succession.
The management of Guizhou Shunzhi has many years of experience of importing
equipment. The Company will commission Guizhou Shunzhi as purchasing agent to
import relevant equipment according to the requirement of production process of the
Group, and contact customized equipment manufacturers for the Group. Regarding to
the relevant data of Guizhou Shunzhi as showed in ECIS (Guizhou) mentioned in the
Emerson Report, we have inquired with Guizhou Shunzhi and they replied that it is
sufficient for them to declare only the commission income.
3.
Issues on cash and bank balances of the Company
The Group started to involve in investment field of healthcare industry since the
beginning of 2014. Investment in healthcare industry requires an abundant amount of
liquidity capital, so does the integration of different business chains of the Company.
The Company conducted convertible bonds, rights issue and USD debt in 2015 and
2016 for the purpose of enhancing resources allocation of the Company in healthcare
industry. The current projects of the Group include renovation projects on 六盤水市涼
都人民醫院 (unofficial translation being Liupanshui City Liang Dou People’s Hospital)
and Tongren City Central Hospital* (銅仁市中心醫院), and Jiangsu Huaian Economic
& Development District People’s Hospital* (淮安市經開區人民醫院) and chains of
special hospitals.
The Company’s balance of deposits in China at the beginning and the end of 2012/2013
financial year amounted to RMB1,675 million and RMB2,119 million respectively. The
then cash management of the Company indeed had defects as no other financial
methods have been adopted on banks deposits, resulting in low interest income of the
Company. Based on the deposit interest rate published by the People’s Bank of China in
the same period, 0.35%, the interest income of the Company amounted to RMB6.922
–8–
million (equivalent to HK$8.4414 million). The Company recognized the defects of
cash management and has adopted financial management tools since the 2014 financial
year. Interest incomes in financial years of 2014 and 2015 have both significantly
improved, with an amount of HK$19.805 million and HK$35.283 million respectively.
The Emerson Report deduction of the Company’s bank deposits only through interest
rate subjectively is wrong and irresponsible.
4.
Issues on account receivables in the amount of HK$437 million
The amount of the Company’s account receivables presented in the Emerson Report was
based on the extrapolated revenue. As the extrapolated revenue is wrong (as illustrated
above), the conclusion that no account receivables exist referred to herein is wrong.
5.
Issues on calculation of assets value
The assets value referred to in the Emerson Report was calculated based on wrong
estimation, the Company’s assets black hole referred herein is therefore a wrong
conclusion.
Allegation 4 of the Emerson Report: Hidden connected transactions
The Company confirms that each of the above transactions did not constitute a connected
transaction as defined under Chapter 14A of the Rules (‘‘Listing Rules’’) Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited (‘‘Stock Exchange’’) as
the counterparty in each of the above transactions was an independent third party (being an
individual(s) or a company(ies) who or which was/were independent of and not connected
with (within the meaning of the Listing Rules) any Director, chief executive or substantial
shareholders (within the meaning of the Listing Rules) of the Company, its subsidiaries or
any of their respective associates) (‘‘Independent Third Party’’). The accusation made in
the Allegation Report was totally groundless.
1.
About Chengdu Hechuang Pharmacy Company Limited ( 成都禾創藥業有限公司)
Chengdu Hechuang Pharmacy Company Limited* (成都禾創藥業有限公司) (‘‘Chengdu
Hechuang’’) was previously a supplier of pharmaceuticals in Chengdu, which was a
serious loss-making and insolvent state-owned enterprise at that time. The Company
acquired Chengdu Hechuang in 2003, and delegated a management team to operate it.
Over several years of development, Chengdu Hechuang has become a top-ranking
commercial pharmaceutical company in Sichuan. After 2006, the Company disposed
Chengdu Hechuang in consideration of the low net profit margin of commercial
pharmaceutical companies. Meanwhile, according to relevant agreements with the
department in charge of state-owned enterprises in the PRC, the management team
(including Mr. Yang Chengquan and Mr. Yang Jianbo mentioned in the Allegation
Report) delegated by the Company remained at Chengdu Hechuang, and resigned from
the Company. According to Hanfang Group, Mr. Yang Jianbo resigned in 2011.
According to ‘‘social security situation of Mr. Yang Jianbo’’ provided by Guiyang City
Social Insurance Receipts and Management Center* (貴陽市社會保險收付管理中心),
the social security account of Mr. Yang Jianbo has been moved out of Hanfang Group
in January 2012. The biography of Mr. Yang Jianbo in the website of Chengdu
Hechuang was incorrect. In addition, due to the historical relationship between Chengdu
–9–
Hechuang and the Company, the management of Chengdu Hechuang invited Mr. Zhang
Peter Y., chairman of the Company, to attend in several activities after the death of Mr.
Yang Chengquan, in order to strengthen and expand its cooperation with the Company.
The Company confirmed that it is not connected with and has no connected transaction
with Chengdu Hechuang.
2.
About the equity transfer of Hanfang Guomei
Hanfang Guomei was a subsidiary of the Company prior to its sale, which was owned
99% by the Company and 1% by a pharmaceutical company on behalf of the Company.
The Company transferred 99% of its interest in Hanfang Guomei to Chengdu Hechuang
in 2011 by considering the business development of the Company. The equity transfer
agreement in respect of the remaining 1% interest held on behalf of the Company was
also signed at the same time. It was known that Hanfang Guomei is now wholly owned
by Chengdu Hechuang. As illustrated above, Chengdu Hechuang was not a connected
person (as defined under the Listing Rules) of the Company at the relevant time,
therefore, the sale of Hanfang Guomei in 2011 to Chengdu Hechuang did not constitute
a connected transaction.
3.
Regarding the Disposal of rhEGF Intellectual Property
The rhEGF intellectual property referred in the Emerson Report includes the
development expenses of the three new drugs, which are rhEGF Eye-Gel (重組人表皮
生長因子眼用凝膠), rhEGF Oral Solution (重組人表皮生長因子口服溶液) and rhIFN-l
(重組人干擾素-l). The Company entered into a cooperation development agreement
with a third party drug research institute (the ‘‘Institute’’) in October 2009, pursuant to
which the Company agreed to invest RMB200 million into the Institute as the
development expenses of these three new drugs. The first prepayment was RMB98
million, and it was agreed that the prepayment should be returned to the Company in
full if the Institute could not obtain clinical approval documents within two years from
the effective date of the agreement. However, with subsequent increasing development
expenses of the three new drugs and longer development period, upon the request of the
Institute and after negotiation, the Company had transferred the research achievement of
the three new drugs to Xingda Yongsheng Investment Company Limited* (北京興大永
盛投資有限公司) (hereinafter referred as ‘‘Xingda Yongsheng’’) and taken back the
prepayment of RMB98 million. Mr. Zhang Bing Sheng is a shareholder and the legal
representative of Xingda Yongsheng. At the relevant time, Mr. Zhang Bing Sheng was
working for several companies and was also acting as the product development
consultant of the subsidiaries of the Company responsible for seeking new drugs
projects, while he has not acted as the director or senior management of the Company.
Since 2013, Mr. Zhang Bing Sheng has acted as the investment director of the
Company. Therefore, the above transaction in 2011 does not constitute a connected
transaction (as defined under the Listing Rules) of the Company.
The Board emphasises that the Company has been complying and will ensure compliance
with Chapter 14A of the Listing Rules.
– 10 –
Allegation 5 of the Emerson Report: Extrapolated Value of the Company
Since a lot of the data cited in the Emerson Report are biased and unfair, and the financial
models involved lack true and rational data support, therefore the Company believes that the
extrapolated value of the Company as claimed in the Allegation Report is incorrect.
Conclusion
The Company has always strived for the best interests of the Company and its shareholders
since the listing of its shares in 2002. The Company’s business has been developing in an
orderly and healthy manner for the last fifteen years, and the Board endeavours to uphold
strict corporate governance measures. The information contained in the published financial
reports of the Company is accurate and complete in all material respects and not be
misleading or deceptive. The Company has made substantial progress in its investment in
the medical industry in recent years and is working to become a medical conglomerate
underpinned by diversified developments in the manufacturing of pharmaceuticals, services
of bio-technology and investments in medical industry.
The fabricated and groundless allegations from Emerson have resulted in significant losses
of the Group’s human resources, financial resources and time. The reputation of the
Company has been seriously damaged by the Allegation Report. The Company reserves the
right to take legal action against Emerson and those who are responsible for the Allegation
Report and to hold them responsible for all losses caused to the Group.
RESUMPTION OF TRADING
At the request of the Company, trading in the Company’s shares (stock code: 00587) and
debt securities (stock code: 05676) on the Stock Exchange was halted with effect from
11:39 a.m. on Thursday, 11 August 2016 pending the release of a clarification
announcement regarding the Allegation Report.
Application has been made by the Company for resumption of trading in the Company’s
shares and debt securities on the Stock Exchange with effect from 9:00 a.m. on 18 August
2016.
As the author of the Allegation Report may be a short seller or may associate with
short seller(s), who stands to gain from its and/or its associates’ short position when the
prices of the Company’s shares and/or debt securities fall, the Board would like to
emphasise that the shareholders and potential investors of the Company should exercise
extreme caution in reading the Allegation Report, which are seriously misleading,
groundless and full of hyperboles and logic flaws. Shareholders and potential investors
of the Company should also read this announcement carefully.
Shareholders and potential investors of the Company are advised to exercise caution
when dealing in the securities of the Company.
By Order of the Board of
Hua Han Health Industry Holdings Limited
Zhang Peter Y.
Chairman
Hong Kong, 17 August 2016
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As at the date of this announcement, the Board comprises Mr. Zhang Peter Y., Mr. Deng
Jie, Mr. Zhou Chong Ke, Mr. Chen Lei and Mr. Luo Zhan Biao as executive Directors, Mr.
Tarn Sien Hao as non-executive Director, and Professor Lin Shu Guang, Professor Zhou
Xin and Mr. Tso Sze Wai as independent non-executive Directors.
* For identification purposes only
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