Huadong Medicine Acquires Guizhou Hengba Pharmaceutical for Over RMB 528 Million to Strengthen Topical Drug Portfolio

On July 21, Huadong Medicine announced that its wholly-owned subsidiary, Huadong Medicine (Xian) Bodyguard Pharmaceutical Co., Ltd. (hereinafter referred to as “Bodyguard Pharmaceutical”), had entered into an Agreement on the Acquisition of Equity Interest in Guizhou HengBa Pharmaceutical Limited Liability Company with Guizhou HengBa Pharmaceutical Limited Liability Company (hereinafter referred to as “HengBa Pharmaceutical”), He Xiaoling, He Yao, and other parties.Bodyguard Pharmaceutical Acquires 100% Equity Interest in HengBa Pharmaceutical for a Base Consideration of RMB 528.47 Million, with Contingent Consideration Payable in Accordance with the Agreement。

Huadong Medicine stated in a press release that the full acquisition of Hengba Pharmaceutical has secured exclusive rights to multiple products, including Shangkeling Spray and Tongbining Capsules. This move will further enrich the company’s pipeline of topical formulations and strengthen its core competitiveness in the topical formulation sector.

Guizhou HengBa Pharmaceutical Limited Liability Company, established in 1995, is a national high-tech enterprise specializing in the research and development of Miao ethnic medicines, with integrated operations in Chinese herbal medicine cultivation, scientific research, production, and sales.Currently, the company offers four dosage forms: sprays, tablets, capsules, and granules. It operates one production line for sterile preparations and one for oral solid dosage forms.

According to the financial data disclosed in the announcement, as of June 30, 2024, Guizhou HengBa Pharmaceutical Limited Liability Company had total assets of RMB 134 million and net assets of RMB 86 million; in the first half of 2024, it achieved revenue of RMB 35 million and net profit of RMB 6 million.

After years of development, Guizhou HengBa Pharmaceutical Limited Liability Company currently holds 23 drug approval numbers, all of which are valid. Among them, one new traditional Chinese medicine (TCM) drug classified as Category 6 has completed clinical trials and entered the stage of production application. At present, the company's main products in production and sales are Shangkeling Spray and Bitongning Capsules.

Among them,The core product, Shangkeling Spray, is an exclusive variety, a dual-status prescription/OTC drug, and a Class B drug under the National Reimbursement Drug List.. The product is widely used in clinical practice, covering multiple therapeutic areas such as bone and joint injuries, burns and scalds, acute herpes zoster, and acute and chronic soft tissue injuries. Among these, Shangkeling Spray accounts for a relatively high proportion of sales in the field of bone and joint injuries.

According to data from Yaozhi.com and the National Reimbursement Drug List for Basic Medical Insurance, Work-Related Injury Insurance, and Maternity Insurance (2023), Shangkeling Spray is currently the only dual-status (prescription/OTC) Chinese proprietary medicine spray included in the national medical insurance list approved in China.。

Since its approval by the National Medical Products Administration (NMPA) in 2002, Shangkeling Spray has been on the market for over two decades, accumulating a substantial body of academic research and evidence-based medical data. Studies have demonstrated that Shangkeling Spray exhibits significant efficacy and superiority in multiple indications, including burns and scalds, acute herpes zoster, and acute and chronic soft tissue injuries. Its benefits are evident in analgesia and anti-inflammation, inhibition of various pathogenic bacteria, promotion of epithelial hyperplasia, and reduction of healing time. Furthermore, academic studies indicate that Shangkeling Spray provides marked pain relief in the treatment of acute herpes zoster, significantly shortening the duration of vesicle formation, crusting, and scab detachment. It offers remarkable therapeutic effects, along with ease of application and consistent efficacy and safety profiles.

It is understood that Shangkeling Spray is currently sold in major provinces and municipalities across China, with a high degree of sales concentration; the combined sales from five key provinces and municipalities account for approximately 80% of the product's total sales.

Meanwhile, the sales market for Shangkeling Spray is expected to expand further. According to data from the China Social Welfare Foundation, approximately 26 million people in China suffer from burns and scalds of varying degrees each year, accounting for about 2% of the total population. Furthermore, against the backdrop of an aging population, the incidence of herpes zoster continues to rise. Data from the Menet database also indicates that the clinical market size of proprietary Chinese medicines for musculoskeletal disorders has grown in recent years, reaching RMB 28.119 billion in 2023, a year-on-year increase of 2.79%.

As the only traditional Chinese medicine (TCM) spray in China that is available both as a prescription drug and an over-the-counter (OTC) product and is included in the National Reimbursement Drug List, Shangkangling Spray enjoys inherent advantages in market share and penetration, enabling it to reach a broader patient population.

Huadong Medicine stated in its announcement that, following the completion of this acquisition, the Company will continuously strengthen the evidence-based medical data for Shangkeling Spray, refine the evidence chains for all products, and enhance the clinical value and competitiveness of the target company’s products. Leveraging its comprehensive marketing network and professional pharmaceutical services team, the Company will actively expand product coverage across both in-hospital and out-of-hospital channels in all 31 provinces and municipalities nationwide, uncover potential commercial opportunities, build brand awareness, and boost product market competitiveness.

According to incomplete statistics, Huadong Medicine executed nearly 20 business development (BD) transactions between 2019 and 2021, earning it the industry moniker of “BD Maniac.” Since then, the company has continued its aggressive inorganic growth strategy through BD. In recent years, Huadong Medicine has been actively pursuing acquisitions across sectors ranging from innovative drugs to medical aesthetics.

Simultaneously with the announcement of the acquisition of 100% equity in Guizhou HengBa Pharmaceutical, this “BD fanatic” unveiled another BD partnership:

On July 21, Huadong Medicine and Jiangsu Quanxin Biopharmaceutical Co., Ltd. (hereinafter referred to as “Quanxin Bio”) jointly announced thatHuadong Medicine’s wholly-owned subsidiary, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd. (hereinafter referred to as “Zhongmei Huadong”), has signed a collaborative development and marketing services agreement with Quanxin Biologics for the QX005N product。

Under the cooperation agreement, Huadong Medicine has obtained the exclusive co-development rights for Quanxin Bio’s QX005N product in China, an option for exclusive marketing promotion, and priority cooperation rights for the transfer of the Marketing Authorization Holder (MAH) status. Huadong Medicine and Quanxin Bio will jointly conduct clinical and non-clinical studies as well as registration-related work, with each party bearing 50% of the clinical development and registration costs incurred prior to commercialization.

QX005N is an innovative humanized monoclonal antibody independently developed by Quanxin Biologics, targeting the human interleukin-4 receptor alpha subunit (IL-4Rα). By specifically binding to IL-4Rα, it blocks the interaction between IL-4Rα and IL-4 as well as IL-13, while simultaneously inhibiting IL-4- and IL-13-mediated signaling pathways and biological effects, thereby exerting therapeutic efficacy against type 2 inflammatory allergic diseases. Currently, QX005N injection has obtained seven Investigational New Drug (IND) approvals in China for the treatment of moderate-to-severe atopic dermatitis in adults, atopic dermatitis in adolescents aged 12–17 years, prurigo nodularis, chronic rhinosinusitis with nasal polyps, chronic spontaneous urticaria, asthma, and chronic obstructive pulmonary disease.

Previously, Quanxin Biologics announced the Phase II clinical data of QX005N injection for the treatment of prurigo nodularis. The study results showed that the primary endpoints were fully met in all dose groups. QX005N demonstrated a rapid onset of action within the first week of treatment, significantly relieving pruritus and improving skin lesions. Meanwhile, QX005N exhibited a favorable safety and tolerability profile. On January 31, 2024, QX005N was included in the Breakthrough Therapy Designation list by the Center for Drug Evaluation (CDE) of the National Medical Products Administration, with the corresponding indication being prurigo nodularis.

Currently, two Phase 3 clinical trials of QX005N injection for moderate-to-severe atopic dermatitis and prurigo nodularis in adults are both enrolling patients.Among them, the Phase 3 clinical trial of QX005N for prurigo nodularis is the first Phase 3 clinical trial conducted by a Chinese company in China for the indication of prurigo nodularis.

Prior to this, Huadong Medicine had already entered into a collaboration with Quanxin Biologics for the development of new drugs in the autoimmune field. On August 11, 2023, Quanxin Biologics also licensed the domestic commercialization rights of QX001S (HDM3001) injection (a ustekinumab biosimilar) to Huadong Medicine. In the same month, the marketing authorization application for QX001S was accepted by the National Medical Products Administration (NMPA).

Huadong Medicine stated,QX001S is expected to be approved for marketing in the second half of this year, becoming the first approved ustekinumab biosimilar in China.。

Currently, Huadong Medicine has established four major business segments: pharmaceutical manufacturing, pharmaceutical commerce, medical aesthetics, and industrial microbiology. Within the pharmaceutical manufacturing segment, the company focuses on three core therapeutic areas: endocrinology, autoimmune diseases, and oncology.

According to Huadong Medicine's 2023 annual report, the pharmaceutical industrial sector generated revenue of RMB 12.217 billion in 2023. Although this business segment did not constitute the largest portion of the company's total revenue, it served as the primary driver of Huadong Medicine's profitability. Data shows that the pharmaceutical industrial sector achieved a net profit attributable to shareholders of RMB 2.33 billion in 2023, accounting for a substantial 85% of the company's total profit.

Among these, autoimmune diseases, as one of the three core therapeutic areas prioritized by Huadong Medicine, represent its most rewarding segment. Currently, Huadong Medicine is making remarkable strides in both the autoimmune disease sector and its topical formulation platform.

It is understood that, driven by a model combining independent R&D with external collaborations, Huadong Medicine currently has more than 10 innovative biologic and small-molecule products under development or already marketed overseas. These products cover indications such as transplant immunology, systemic lupus erythematosus, psoriasis, atopic dermatitis, seborrheic dermatitis, recurrent pericarditis, and cryopyrin-associated periodic syndromes, spanning therapeutic areas including dermatology, rheumatology, cardiovascular diseases, respiratory diseases, and transplantation. As such, Huadong Medicine is one of the pharmaceutical companies in China with the most comprehensive portfolio in the field of autoimmune diseases.

Meanwhile, Huadong Medicine has established a specialized platform for topical formulations and assembled a professional R&D team dedicated to the differentiated development of dermatological topical products.

Currently, the company’s topical formulation pipeline includes ZORYVE® cream and ARQ-154 (roflumilast foam), Wynzora® cream, tacrolimus ointment, and fusidic acid cream. Tacrolimus ointment was approved for marketing in August 2023; the marketing application for fusidic acid cream was accepted in May 2023; and the marketing application for sirolimus gel was accepted in January 2024. Meanwhile, Huadong Medicine is actively advancing the clinical registration of the ZORYVE® series in China. Specifically, the Investigational New Drug (IND) applications for roflumilast cream for the indications of atopic dermatitis in patients aged 6 years and older and plaque psoriasis in patients aged 6 years and older were both accepted in July 2024.

Huadong Medicine’s Product Portfolio in the Autoimmune Field Source: Summary of Huadong Medicine’s 2023 Annual Report

The 100% acquisition of Hengba Pharmaceutical and the collaboration with Quanxin Biologics have further expanded Huadong Medicine’s topical formulation pipeline, strengthened its comprehensive capabilities in the field of autoimmune and inflammatory skin diseases, and marked a significant step in extending the company’s autoimmune portfolio into topical formulations.

Currently, Huadong Medicine maintains healthy cash flow, which supports the steady advancement of further research and development as well as industrialization of its existing candidate products. According to Huadong Medicine’s Q1 2024 performance report, the company achieved steady growth in both revenue and net profit during the first quarter. Operating revenue reached RMB 10.411 billion, a year-on-year increase of 2.93%; net profit attributable to shareholders of the listed company amounted to RMB 862 million, up 14.18% year on year; and net profit attributable to shareholders after deducting non-recurring gains and losses stood at RMB 838 million, representing a 10.66% year-on-year increase. Both operating revenue and net profit recorded positive quarter-on-quarter growth compared with the fourth quarter of 2023.

Huadong Medicine stated that the company will actively advance the R&D and industrialization of its pipeline and in-licensed new drugs.It is expected that before 2030, more than ten products from the company’s topical formulation platform will be launched sequentially, ultimately achieving differentiated strategic positioning in the fields of autoimmune diseases and topical formulations, thereby establishing a leading competitive edge in the market.Force.