Following an unsuccessful initial ruling, Huadong Medicine Co.,Ltd. has proceeded with an appeal. On the evening of February 26, Zhejiang Jolly Pharmaceutical Co.,Ltd. announced that due to a patent dispute over the Bailing product series, the plaintiff, Hangzhou Zhongmei Huadong Pharmaceutical Co., Ltd.—a wholly-owned subsidiary of Huadong Medicine—has formally appealed to the Supreme People’s Court after its entire claim was dismissed in the first instance. The Supreme Court has accepted the case, though a hearing has not yet been scheduled. Over the past six months, Huadong Medicine’s stock performance has been weak, having fallen more than 20% since its peak last year.
The patent involved in this case is titled “Enzyme, Gene for Adenylate Synthesis and Metabolism of *Cordyceps sinensis* and Their Applications,” with patent number ZL201210175221.3. It is co-owned by Zhongmei Huadong and Zhejiang University of Technology.
Huadong Medicine alleges that adenosine kinase, relevant genes, and adenine nucleotides protected by this patent were detected in Bailing tablets produced and sold by Zhufeng Pharmaceutical. The company contends that the active pharmaceutical ingredient used by Zhufeng Pharmaceutical—fermented Cordyceps sinensis mycelium powder—sourced from Zhufeng’s own supply, employs the *Cordyceps sinensis* fungus strain and utilizes the production method covered by the patent in question.
Zhejiang Jolly Pharmaceutical maintains that it conducted thorough due diligence prior to acquiring Zhufeng Pharmaceutical. Zhufeng had already obtained drug registration approval for fermented Cordyceps sinensis mycelium powder as early as 2010, and its production and sales activities comply with national regulations.
Regarding this litigation, Zhejiang Jolly Pharmaceutical stated that the second trial has not yet begun, and the final ruling remains uncertain. It is currently not possible to estimate the impact on the company’s current or future profits.
Information shows that the Bailing series—including capsules, tablets, and granules—is a traditional Chinese medicine with fermented Cordyceps sinensis mycelium powder as its core ingredient. It is primarily used to treat chronic bronchitis, chronic nephritis, and other conditions. Huadong Medicine’s Bailing capsules were once its exclusive blockbuster product, with sales reaching as high as RMB 3.486 billion in 2019.
Zhejiang Jolly Pharmaceutical acquired a 51% stake in Zhufeng Pharmaceutical for RMB 150 million in 2014, and later purchased an additional 30% stake for RMB 120 million in 2018, bringing its total controlling interest to 81%. Zhufeng’s main product is Bailing tablets. This development ended Huadong Medicine’s former monopoly in the Bailing market.
Faced with the prospect of sharing its once-exclusive major product with a competitor, Huadong Medicine has taken legal action by suing Zhufeng Pharmaceutical, a subsidiary of Zhejiang Jolly Pharmaceutical.
Huadong Medicine has demanded that the defendant cease production and sales of both the raw materials and finished products of Bailing tablets, and pay compensation of approximately RMB 110 million. Since the raw material for Bailing tablets is the same as that for Bailing capsules, Huadong Medicine’s apparent objective is to suppress Zhejiang Jolly Pharmaceutical’s approved Bailing capsules.
However, on December 15 of last year, Huadong Medicine announced that its wholly-owned subsidiary, Zhongmei Huadong, had received a Civil Judgment from the Zhejiang High People’s Court. After two public hearings in April and June 2024 regarding the invention patent dispute over fermented Cordyceps sinensis mycelium powder with Zhufeng Pharmaceutical, a subsidiary of Zhejiang Jolly Pharmaceutical, the court rejected all of Zhongmei Huadong’s claims. The disputed amount in the case was about RMB 111.39 million.
On January 7 of this year, Zhejiang Jolly Pharmaceutical announced that it had received a Drug Registration Certificate for Bailing capsules from the National Medical Products Administration. This indicates that competition between Zhejiang Jolly Pharmaceutical and Huadong Medicine will intensify in this product category, which has annual sales in the billions of renminbi.
Zhejiang Jolly Pharmaceutical’s Wuling capsules are one of its major revenue sources. For the company, the approval of Bailing capsules is clearly a positive development. From a business perspective, Huadong Medicine’s strong reaction is understandable. After facing impacts from centralized drug procurement on key products such as acarbose, Bailing capsules, as a traditionally dominant product, represent a crucial moat that must be defended.
It is worth noting that in May 2019, Huadong Medicine had planned to acquire equity in Zhejiang Jolly Pharmaceutical, but the deal fell through due to competition concerns involving the Bailing product series.
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