Industry News
API monopoly case punishment has attracted much attention, special one pharmaceutical to promote fixed increase.
With the increasingly strict investigation and punishment of API monopoly behavior by the state, will the huge API monopoly case involving subsidiaries make the future of Teyi Pharmaceutical Group Co., Ltd. (hereinafter referred to as "Teyi Pharmaceutical", 002728.SZ) encounter a "chain reaction"?
On November 10, Tei Pharmaceutical said that according to the results of the meeting, the company's application for non-public issuance of A shares was approved. At present, the company has not yet received the China Securities Regulatory Commission's written approval documents.
The reporter noted that in 2018, Guangdong Taishan Xinning Pharmaceutical Co., Ltd. (hereinafter referred to as "Xinning Pharmaceutical"), a subsidiary of Special One Pharmaceutical Co., Ltd., was involved in an API monopoly case and was subject to administrative penalties and fines. 4.1243 million yuan.
The reporter found that in this fixed increase, the above-mentioned administrative penalties were mentioned by the China Securities Regulatory Commission, and the company was required to explain whether it complied with Article 39 of the Measures for the Administration of Securities Issuance of Listed Companies, and listed companies have serious damage to the legitimate rights and interests of investors. In other circumstances of social and public interests, private placement shall not be allowed.
In response to this, Xinning Pharmaceutical's penalty amount is 4% of sales, which is not within the range of "higher penalty range". The above behavior does not seriously damage the legitimate rights and interests of investors and social public interests.
In response to the above-mentioned penalties related to Xinning Pharmaceutical and the company's production and operation, the reporter sent a letter to Teyi Pharmaceutical. On the afternoon of November 10, the staff of the Securities Department of Teyi Pharmaceutical said that Xinning Pharmaceutical's performance was relatively stable, and the State Administration of Market Supervision and Administration clearly recognized Xinning Pharmaceutical's "active rectification", and the rectification measures have been recognized by the competent authorities. Xinning Pharmaceutical has been operating normally. The company and its subsidiaries have not been subject to relevant administrative penalties in their operations so far.
API Monopoly Case Penalties Concerned
In 2018, the official website of the State Administration of Market Supervision and Administration disclosed the behavior of Xinning Pharmaceutical and other three companies to jointly increase prices and monopolize glacial acetic acid APIs.
From October 2017 to February 2018, Xinning Pharmaceutical, Chengdu Huayi Pharmaceutical Accessories Manufacturing Co., Ltd. and Sichuan Jinshan Pharmaceutical Co., Ltd. finally reached a monopoly agreement to jointly increase the sales price of glacial acetic acid raw materials in the process of producing and selling glacial acetic acid raw materials. Starting from March 1, the sales price of glacial acetic acid raw materials will be increased from 7-9 yuan/kg to 28-33 yuan/kg, and according to this price of external sales, seriously undermined the order of market competition.
The above-mentioned acts of the enterprises involved in the case violated the relevant provisions of the the People's Republic of China Anti-Monopoly Law, and the State Administration for Market Supervision and Administration recently imposed administrative penalties in accordance with the law, ordering the three enterprises to stop their illegal acts, confiscating 6.5822 million yuan of illegal income, and imposing a fine of 4% of the previous year's sales on the three enterprises, totaling 6.2516 million yuan. The three enterprises involved in the case were confiscated a total of 12.8338 million yuan.
Among them, Xinning Pharmaceutical received the "Administrative Penalty Decision" issued by the State Administration for Market Regulation on December 5, 2018, and was confiscated of illegal income and fined a total of RMB 4.1243 million.
According to the announcement of Tei Pharmaceutical, its subsidiary Xinning Pharmaceutical's glacial acetic acid bulk drug sales in 2017 were 6.5187 million yuan, accounting for 0.95 of the company's sales.
It is worth noting that recently, in the process of promoting the fixed increase of special pharmaceutical, the CSRC asked special pharmaceutical to further disclose the specific circumstances of the administrative punishment of Xinning pharmaceutical, whether the rectification has been completed, and whether it conforms to the provisions of Article 39 of the measures for the administration of securities issuance of listed companies.
According to the reporter's inquiry, item 7 of Article 39 of the measures for the administration of securities issuance of listed companies shows that if a listed company has "other circumstances that seriously damage the legitimate rights and interests of investors and social and public interests", it shall not issue additional shares.
The bulk drug glacial acetic acid is mainly used in the production of hemodialysis concentrate for the treatment of advanced renal failure, uremia and other diseases. As one of the only three companies that produce glacial acetic acid APIs, does Xinning Pharmaceutical touch the red line that undermines market competition and seriously damages the public interest?
In this regard, Tei Pharmaceutical pointed out in the announcement that the above-mentioned actions do not seriously damage the legitimate rights and interests of investors and social public interests. The reason is as follows: Xinning Pharmaceutical's penalty amount this time is 4% of the sales amount, which is not within the scope of "higher penalty range" and does not belong to the higher 30% of the highest limit of the proportion of "fine of more than 1% and less than 10% of the sales amount of the previous year" stipulated in Article 46 of the Anti-monopoly Law, it does not belong to the "Guiding Opinions of the State Administration for Industry and Commerce on the Correct Exercise of Administrative Penalty Discretion by Administrative Organs for Industry and Commerce.
At present, Xinning Pharmaceutical has carried out rectification in a timely manner, has stopped illegal activities, and has turned in illegal income and corresponding fines, and the relevant penalties have been implemented.
The degree of harm of monopoly behavior is deep.
However, according to the information previously reported on the official website of the State Administration of Market Supervision and Administration, the monopoly behavior of the three enterprises is serious and harmful. First, it severely excludes and restricts market competition. As the only three glacial acetic acid production enterprises in the market, after reaching and implementing the monopoly agreement, the price of glacial acetic acid raw materials was unified, which seriously damaged the market competition order. The second is to increase the burden on downstream pharmaceutical companies. Glacial acetic acid is the main raw material of hemodialysis concentrate, and the sharp increase in price directly increases the downstream production cost and increases the cost burden of downstream pharmaceutical enterprises. Three is to endanger the normal treatment of dialysis patients. The price of glacial acetic acid raw materials is high, resulting in downstream pharmaceutical enterprises to reduce production, stop production of hemodialysis concentrate, endangering the normal treatment of hemodialysis patients.
Xu Feng, the chief partner of Shanghai Jiucheng Law Firm, talked about his views on this. The basis for defining whether an enterprise has seriously harmed the public interest is still relatively abstract. It can only refer to illegal income, the amount of administrative penalties, and whether it is suspected of crime. In terms of the degree of impact on the public interest of the society, the amount of fines usually less than hundreds of thousands of yuan can be interpreted as immaterial. If the amount reaches more than several million yuan, if the enterprise interprets it as immaterial, the market supervision department may have to issue relevant certificates. In this incident, the fines involved in the enterprise are not low, but whether it constitutes a consequence that seriously endangers the social and public interests still needs to be judged in the light of the actual situation of the industry.
Xiong Chao, a lawyer at Beijing Jingshi Law firm, believes that the information reported by the regulatory bureau can reflect the consequences of the monopoly behavior of these three enterprises harming society. As one of the few manufacturers of pharmaceutical raw materials in the market, they have a certain degree of monopoly. On this basis, they also sign monopoly agreements with other manufacturers, which not only infringes on the costs of upstream and downstream operators, but also increases the burden of patients, which in turn affects the medical industry in our country. From this point of view, the behavior of enterprises constitutes a greater harm consequences, to the industry has brought a negative chain reaction.
Then, can the amount of fines be used to judge the extent of serious harm to society mentioned in the securities law? In Xiong Chao's view, in fact, there is inconsistency between the provisions of these two laws in China. Because the consequences of corporate monopoly behavior are not judged on the basis of endangering the public interest. Therefore, the degree of social harm stipulated in Article 39 of the Measures for the Administration of Securities Issuance of Listed Companies, in this incident, the amount of punishment cannot be used as an absolute criterion for analyzing whether the enterprise's behavior constitutes a serious harm to the public interest.
Slow progress of previous refinancing projects
In fact, it is not the first time that Special One Pharmaceuticals has pushed forward with a fixed increase.
Some investors said on the public platform that Tei Pharmaceutical had failed twice in fixed increase financing, thus turning to the issuance of convertible bonds to raise funds, so they were worried about the company's capital shortage.
Teyi Pharmaceutical responded to the fixed increase. The first two fixed increases were not finally implemented due to the company's comprehensive consideration of various factors, that is, the company has not implemented the fixed increase project since its listing. The issuance of convertible bonds by the company in 2017 is a refinancing project for the better development of the company and the construction of fund-raising projects, not a debt issuance under the condition of tight funds.
However, the progress of the project invested in the issuance of bonds by Special One Pharmaceuticals has been relatively slow and has not reached the expected state of use. According to the 2020 semi-annual report of Tei Pharmaceutical, the "Xinning Pharmaceutical GMP Reconstruction and Expansion Project" was originally expected to be completed on June 30, 2020, but the actual investment progress was 38.80, and the civil engineering was basically completed. Due to the failure of the purification installation project and the delay in the supply of some equipment, the project could not be completed as expected. According to the current project progress and the inspection and acceptance after completion, it is expected to be completed on December 31, 2020.
The "Drug Warehousing and Logistics Center and Information System Construction Project" was originally expected to be completed by June 30, 2020, but as of June 30, 2020, the investment progress was 30.87. The civil engineering project has not yet been completed. At the same time, due to the change of the implementation location of part of the construction project of "drug storage logistics center and information system construction project" to No. 21 Zhenxing Road, Shuibu Town, Taishan City, the parcel involves overall planning and design, resulting in further postponement of the information system construction project, which is expected to be completed on June 30, 2022.
For the progress of the new Ning pharmaceutical GMP reform and expansion project, Tei Pharmaceutical said to reporters, in view of the domestic new crown epidemic control situation is good, the new crown pneumonia epidemic prevention and control has become normal, the current project is progressing smoothly.
In addition, the operating income of Special One Pharmaceutical in the third quarter of 2020 was 0.133 billion billion yuan, down 36.19 percent from the same period last year, and the net profit attributable to shareholders of listed companies was 1.381 million billion yuan, down 96.78 percent from the same period last year.
When talking about measures to boost performance, Special One Pharmaceuticals told reporters that with the normalization of epidemic prevention and control, the company's product terminal sales are gradually improving. At this stage, the company began to gradually increase the marketing and terminal promotion of OTC products, increase the construction of marketing channels, and gradually increase brand promotion efforts, and strive to minimize the impact of the epidemic on the company.
Source: Penguin Finance
On November 10, Tei Pharmaceutical said that according to the results of the meeting, the company's application for non-public issuance of A shares was approved. At present, the company has not yet received the China Securities Regulatory Commission's written approval documents.
The reporter noted that in 2018, Guangdong Taishan Xinning Pharmaceutical Co., Ltd. (hereinafter referred to as "Xinning Pharmaceutical"), a subsidiary of Special One Pharmaceutical Co., Ltd., was involved in an API monopoly case and was subject to administrative penalties and fines. 4.1243 million yuan.
The reporter found that in this fixed increase, the above-mentioned administrative penalties were mentioned by the China Securities Regulatory Commission, and the company was required to explain whether it complied with Article 39 of the Measures for the Administration of Securities Issuance of Listed Companies, and listed companies have serious damage to the legitimate rights and interests of investors. In other circumstances of social and public interests, private placement shall not be allowed.
In response to this, Xinning Pharmaceutical's penalty amount is 4% of sales, which is not within the range of "higher penalty range". The above behavior does not seriously damage the legitimate rights and interests of investors and social public interests.
In response to the above-mentioned penalties related to Xinning Pharmaceutical and the company's production and operation, the reporter sent a letter to Teyi Pharmaceutical. On the afternoon of November 10, the staff of the Securities Department of Teyi Pharmaceutical said that Xinning Pharmaceutical's performance was relatively stable, and the State Administration of Market Supervision and Administration clearly recognized Xinning Pharmaceutical's "active rectification", and the rectification measures have been recognized by the competent authorities. Xinning Pharmaceutical has been operating normally. The company and its subsidiaries have not been subject to relevant administrative penalties in their operations so far.
API Monopoly Case Penalties Concerned
In 2018, the official website of the State Administration of Market Supervision and Administration disclosed the behavior of Xinning Pharmaceutical and other three companies to jointly increase prices and monopolize glacial acetic acid APIs.
From October 2017 to February 2018, Xinning Pharmaceutical, Chengdu Huayi Pharmaceutical Accessories Manufacturing Co., Ltd. and Sichuan Jinshan Pharmaceutical Co., Ltd. finally reached a monopoly agreement to jointly increase the sales price of glacial acetic acid raw materials in the process of producing and selling glacial acetic acid raw materials. Starting from March 1, the sales price of glacial acetic acid raw materials will be increased from 7-9 yuan/kg to 28-33 yuan/kg, and according to this price of external sales, seriously undermined the order of market competition.
The above-mentioned acts of the enterprises involved in the case violated the relevant provisions of the the People's Republic of China Anti-Monopoly Law, and the State Administration for Market Supervision and Administration recently imposed administrative penalties in accordance with the law, ordering the three enterprises to stop their illegal acts, confiscating 6.5822 million yuan of illegal income, and imposing a fine of 4% of the previous year's sales on the three enterprises, totaling 6.2516 million yuan. The three enterprises involved in the case were confiscated a total of 12.8338 million yuan.
Among them, Xinning Pharmaceutical received the "Administrative Penalty Decision" issued by the State Administration for Market Regulation on December 5, 2018, and was confiscated of illegal income and fined a total of RMB 4.1243 million.
According to the announcement of Tei Pharmaceutical, its subsidiary Xinning Pharmaceutical's glacial acetic acid bulk drug sales in 2017 were 6.5187 million yuan, accounting for 0.95 of the company's sales.
It is worth noting that recently, in the process of promoting the fixed increase of special pharmaceutical, the CSRC asked special pharmaceutical to further disclose the specific circumstances of the administrative punishment of Xinning pharmaceutical, whether the rectification has been completed, and whether it conforms to the provisions of Article 39 of the measures for the administration of securities issuance of listed companies.
According to the reporter's inquiry, item 7 of Article 39 of the measures for the administration of securities issuance of listed companies shows that if a listed company has "other circumstances that seriously damage the legitimate rights and interests of investors and social and public interests", it shall not issue additional shares.
The bulk drug glacial acetic acid is mainly used in the production of hemodialysis concentrate for the treatment of advanced renal failure, uremia and other diseases. As one of the only three companies that produce glacial acetic acid APIs, does Xinning Pharmaceutical touch the red line that undermines market competition and seriously damages the public interest?
In this regard, Tei Pharmaceutical pointed out in the announcement that the above-mentioned actions do not seriously damage the legitimate rights and interests of investors and social public interests. The reason is as follows: Xinning Pharmaceutical's penalty amount this time is 4% of the sales amount, which is not within the scope of "higher penalty range" and does not belong to the higher 30% of the highest limit of the proportion of "fine of more than 1% and less than 10% of the sales amount of the previous year" stipulated in Article 46 of the Anti-monopoly Law, it does not belong to the "Guiding Opinions of the State Administration for Industry and Commerce on the Correct Exercise of Administrative Penalty Discretion by Administrative Organs for Industry and Commerce.
At present, Xinning Pharmaceutical has carried out rectification in a timely manner, has stopped illegal activities, and has turned in illegal income and corresponding fines, and the relevant penalties have been implemented.
The degree of harm of monopoly behavior is deep.
However, according to the information previously reported on the official website of the State Administration of Market Supervision and Administration, the monopoly behavior of the three enterprises is serious and harmful. First, it severely excludes and restricts market competition. As the only three glacial acetic acid production enterprises in the market, after reaching and implementing the monopoly agreement, the price of glacial acetic acid raw materials was unified, which seriously damaged the market competition order. The second is to increase the burden on downstream pharmaceutical companies. Glacial acetic acid is the main raw material of hemodialysis concentrate, and the sharp increase in price directly increases the downstream production cost and increases the cost burden of downstream pharmaceutical enterprises. Three is to endanger the normal treatment of dialysis patients. The price of glacial acetic acid raw materials is high, resulting in downstream pharmaceutical enterprises to reduce production, stop production of hemodialysis concentrate, endangering the normal treatment of hemodialysis patients.
Xu Feng, the chief partner of Shanghai Jiucheng Law Firm, talked about his views on this. The basis for defining whether an enterprise has seriously harmed the public interest is still relatively abstract. It can only refer to illegal income, the amount of administrative penalties, and whether it is suspected of crime. In terms of the degree of impact on the public interest of the society, the amount of fines usually less than hundreds of thousands of yuan can be interpreted as immaterial. If the amount reaches more than several million yuan, if the enterprise interprets it as immaterial, the market supervision department may have to issue relevant certificates. In this incident, the fines involved in the enterprise are not low, but whether it constitutes a consequence that seriously endangers the social and public interests still needs to be judged in the light of the actual situation of the industry.
Xiong Chao, a lawyer at Beijing Jingshi Law firm, believes that the information reported by the regulatory bureau can reflect the consequences of the monopoly behavior of these three enterprises harming society. As one of the few manufacturers of pharmaceutical raw materials in the market, they have a certain degree of monopoly. On this basis, they also sign monopoly agreements with other manufacturers, which not only infringes on the costs of upstream and downstream operators, but also increases the burden of patients, which in turn affects the medical industry in our country. From this point of view, the behavior of enterprises constitutes a greater harm consequences, to the industry has brought a negative chain reaction.
Then, can the amount of fines be used to judge the extent of serious harm to society mentioned in the securities law? In Xiong Chao's view, in fact, there is inconsistency between the provisions of these two laws in China. Because the consequences of corporate monopoly behavior are not judged on the basis of endangering the public interest. Therefore, the degree of social harm stipulated in Article 39 of the Measures for the Administration of Securities Issuance of Listed Companies, in this incident, the amount of punishment cannot be used as an absolute criterion for analyzing whether the enterprise's behavior constitutes a serious harm to the public interest.
Slow progress of previous refinancing projects
In fact, it is not the first time that Special One Pharmaceuticals has pushed forward with a fixed increase.
Some investors said on the public platform that Tei Pharmaceutical had failed twice in fixed increase financing, thus turning to the issuance of convertible bonds to raise funds, so they were worried about the company's capital shortage.
Teyi Pharmaceutical responded to the fixed increase. The first two fixed increases were not finally implemented due to the company's comprehensive consideration of various factors, that is, the company has not implemented the fixed increase project since its listing. The issuance of convertible bonds by the company in 2017 is a refinancing project for the better development of the company and the construction of fund-raising projects, not a debt issuance under the condition of tight funds.
However, the progress of the project invested in the issuance of bonds by Special One Pharmaceuticals has been relatively slow and has not reached the expected state of use. According to the 2020 semi-annual report of Tei Pharmaceutical, the "Xinning Pharmaceutical GMP Reconstruction and Expansion Project" was originally expected to be completed on June 30, 2020, but the actual investment progress was 38.80, and the civil engineering was basically completed. Due to the failure of the purification installation project and the delay in the supply of some equipment, the project could not be completed as expected. According to the current project progress and the inspection and acceptance after completion, it is expected to be completed on December 31, 2020.
The "Drug Warehousing and Logistics Center and Information System Construction Project" was originally expected to be completed by June 30, 2020, but as of June 30, 2020, the investment progress was 30.87. The civil engineering project has not yet been completed. At the same time, due to the change of the implementation location of part of the construction project of "drug storage logistics center and information system construction project" to No. 21 Zhenxing Road, Shuibu Town, Taishan City, the parcel involves overall planning and design, resulting in further postponement of the information system construction project, which is expected to be completed on June 30, 2022.
For the progress of the new Ning pharmaceutical GMP reform and expansion project, Tei Pharmaceutical said to reporters, in view of the domestic new crown epidemic control situation is good, the new crown pneumonia epidemic prevention and control has become normal, the current project is progressing smoothly.
In addition, the operating income of Special One Pharmaceutical in the third quarter of 2020 was 0.133 billion billion yuan, down 36.19 percent from the same period last year, and the net profit attributable to shareholders of listed companies was 1.381 million billion yuan, down 96.78 percent from the same period last year.
When talking about measures to boost performance, Special One Pharmaceuticals told reporters that with the normalization of epidemic prevention and control, the company's product terminal sales are gradually improving. At this stage, the company began to gradually increase the marketing and terminal promotion of OTC products, increase the construction of marketing channels, and gradually increase brand promotion efforts, and strive to minimize the impact of the epidemic on the company.
Source: Penguin Finance