Words from Chairman

In 2019, the global economy slowed down in the context of geopolitical instability arising from trade tension between China and the United States and the Brexit uncertainty. Battered by the trade war with the United States, China’s economy grew 6.1% in 2019, its slowest rate of growth in 29 years, but was within its official target range for 2019.

At the beginning of 2020, the outbreak of novel coronavirus pneumonia (COVID-19) that was declared as a pandemic by World Health Organisation in March, has considerable impact on the global business environment, dampening international trade and creating great uncertainty to the global economy. China’s economy shrank 6.8% in the first quarter of 2020, its first economic contraction since 1992, as the nation was substantially placed on lock down in early 2020 in order to restrict the movement of people and contain the spread of the pandemic, that caused disruption to industrial production and weakened sentiments in investment and domestic consumption.

China’s pharmaceutical industry has been undergoing continuous changes alongside the deepening comprehensive healthcare reforms accompanied by an array of intensive policies. Associated with optimisation of the drug supply side structure, multiple policies through the expansion of the pilot areas for the centralised bulk procurement program across the nation, issue of key monitoring drug list, adjustment to the national reimbursement drug list and the piloting of payment systems based on diagnosis related group, have stepped up the rationalisation of price and use of drugs. The amended Drug Administration Law aiming at, among others, improving health legislation, reinforcing drug administration and intensifying penalties for non-compliance, came into force on 1 December 2019. With China’s accession to The International Council for harmonisation of Technical Requirements for Pharmaceuticals for Human Use, together with the reforms in the pharmaceutical regulatory and supervisory systems, pharmaceutical enterprises are subject to stringent regulatory compliance, outdated production capacity of generic drug manufacturers are eliminated while the review and approval process of high-quality clinically needed products are accelerated. The advancing regulatory and supervisory frameworks facilitate the pharmaceutical industry to develop in an innovative and quality-oriented direction.

The Group believes that the healthcare reforms bring both challenges and opportunities to pharmaceutical enterprises amid intense competition in the China market with huge potential. In light of the complicated operating environment in China, the Group has kept on aligning its internal resources in recent years to strengthen its longterm development path. Through years of persistent efforts on the technical, managerial and marketing aspects to enhance productivity, optimise cost structure and promote brand awareness, the Group’s manufacturing segment has demonstrated continuous improvement in performance. And in response to the added challenges posed by the COVID-19 outbreak, the Group used its endeavor to ensure that its response actions to the containment measures kept up by the nation were adequately in place while exerting its greatest efforts to minimise disruption to its production in February 2020. With consolidated efforts in further strengthening internal management to alleviate the impacts from the COVID-19 outbreak nationwide, the Group’s manufacturing segment delivered a positive result this financial year. The Group’s trading segment of imported pharmaceuticals, however, suffered from increase in loss aggravated by the impairment provision made for trade and other receivables, and as the regulatory issues of the imported pharmaceuticals are still pending to be resolved, the Group expects to input additional efforts with its business partners in order to improve the situation. The overall operating results of the Group’s business operations have improved as compared to last financial year and the Group will continue to stay focused on improving its business performance while staying vigilant in managing risks against the ever-changing market environment.

The Group’s profit for the year attributable to owners of the Company amounted to about HK$83.3 million as compared to a profit of about HK$64.0 million of last financial year, representing an increase of about HK$19.3 million, primarily attributable to increase in the fair value of the Group’s investments in convertible bonds, which is a non-cash item.

In the midst of the global downturn caused by the COVID-19 pandemic, the Chinese government has not set an economic growth target this year but it is expected that various policies and measures will be successively released by the Chinese government to stimulate the economy and to further improve its public health system, and under the national strategy of “Healthy China 2030”, the pharmaceutical industry will continue to undergo processes of transformation and upgrading. The Group believes that favourable policies supporting the accomplishment of the national goal, together with the unmet demand for quality drugs alongside the growing aging population, changing disease spectrum and emerging rare diseases, will continue to bring business and development opportunities to pharmaceutical enterprises. The Group will keep track of the national policy direction and keep pace with the rapidly evolving policy landscape. In the meantime, the Group will continue to focus on improving its production capability and operating performance, thereby enhancing its core competitiveness for its sustainable development. With sound financial fundamentals, the Group believes it will be in a better position to respond to ongoing challenges and changes.

On behalf of the Board, I would like to express its appreciation to all those in the Group for their dedicated efforts and contribution to the Group during the past year, and to the shareholders, business partners and stakeholders for their continuous support.

Dr. Xie Yi

Chairman