Shanghai Yan'an Pharmaceutical Yangpu Co., Ltd. (hereinafter referred to as "Yan'an Pharma") has once again submitted a listing application to the Beijing Stock Exchange, with Tianfeng Securities serving as the sponsor. This marks the company's second attempt to enter the A-share market, following its initial application in September 2023, which was withdrawn voluntarily in September 2024 after two rounds of detailed inquiries in December 2023 and April 2024.
After a hiatus of just over a year, the company has regrouped and intends to re-enter the capital market. However, a review of the prospectus and related materials reveals numerous underlying concerns, including volatile financial performance, repeated red flags in corporate governance, unresolved historical VAM agreements, and questions regarding the core drivers of its business.
The company's financial data shows revenue growth from 323 million yuan in 2022 to 467 million yuan in 2024, with net profit increasing from 49.3455 million yuan to 84.4452 million yuan, maintaining an upward trend. However, in the first half of 2025, the company's performance showed signs of weakness, with revenue falling 12% year-on-year to 220 million yuan, and net profit attributable to shareholders plummeting 47% to 33 million yuan, nearly halving.
Simultaneously, the gross profit margin of the company's main business has declined from 51.04% in 2022 to 47.91% in the first half of 2025, with a significant year-on-year drop of 4.59 percentage points in H1 2025. By business segment, the gross margin of the core formulation business decreased by 4.27% year-on-year to 54.45%, the API business margin fell by 4.96% to 32.24%, and the margin for other businesses collapsed by 41.66%.
The comprehensive narrowing of profit margins across all segments is primarily related to centralized procurement. Information indicates that the company's core product, Gliclazide Extended-Release Tablets, successfully won the bid in the fourth national centralized drug procurement in February 2021. After the expiration of the first national procurement agreement, the product subsequently won bids in follow-up procurement rounds organized by regional alliances or provinces such as the Su-Gui-Shan Alliance, Guangdong Province, and Shandong Province.
Winning the centralized procurement bids has provided the company with relatively stable market share, allowing its products to enter a broad public hospital sales network and ensuring a baseline sales volume; in 2024, the product held a 7.64% share in public medical institutions. However, the core of centralized procurement is "trading price for volume," and winning bids necessitates accepting significant price reductions, leading to sustained pressure on the company's gross margins.
Regarding cash flow, the net cash flow from operating activities during the reporting period fluctuated sharply, recorded at 126 million yuan, 141 million yuan, 69.3483 million yuan, and 19.8885 million yuan respectively, with the ratio to net profit continuously declining. In the first half of 2025, the net operating cash flow was only 67% of the net profit for the same period, suggesting potentially low "quality" of earnings and leaving the company facing the dilemma of paper prosperity in its operations.
In terms of expenses, Yan'an Pharma's investment in R&D innovation is noticeably insufficient. During the reporting period, the company's R&D expenses were 17.0448 million yuan, 27.6041 million yuan, 9.9254 million yuan, and 5.5175 million yuan respectively, with the R&D expense ratio dropping from 5.28% in 2022 to 2.12% in 2024, and only 2.51% in H1 2025.
In stark contrast, the average R&D expense ratio for comparable companies in the same industry during the same periods was 5.84%, 6.99%, 8.70%, and 7.37% respectively. The company explained that some R&D expenditures met capitalization criteria starting in 2023, but its overall R&D investment intensity still runs counter to industry trends, with the gap widening. In an industry context where drug lifecycle management and iterative upgrades are accelerating, weak R&D investment will undoubtedly severely constrain the company's new product pipeline layout, the construction of core technological barriers, and its ability to respond to future market changes, raising concerns about its long-term competitiveness.
From a business perspective, the procurement concentration from Yan'an Pharma's top five suppliers and the sales concentration to its top five customers have remained persistently high. During the reporting period, the procurement share from the top five suppliers reached 77.38%, 69.94%, 72.17%, and 72.84% respectively. Excessive supplier concentration may place the company in a passive position regarding the pricing of key raw materials, supply stability, and cost control.
On the client side, sales to the top five customers accounted for a high 60.25%, 56.59%, 65.6%, and 63.51% respectively, indicating significant reliance on a few major clients. This dual concentration of clients and suppliers ties the lifeline of the company's operational stability to a handful of external partners, potentially challenging its business independence and risk resilience.
Regarding corporate governance and compliance, Yan'an Pharma has a notable "record" in the capital market. During the reporting period, the company and its relevant responsible entities received self-regulatory measures from the National Equities Exchange and Quotations (NEEQ) four times due to issues such as information disclosure violations, a frequency that is striking.
Specifically, in January 2022, Yan'an Pharma received an oral warning for failing to disclose its IPO tutoring filing promptly; in February 2022, it received another oral warning for failing to review and disclose related-party transactions and related-party fund occupation promptly; in October 2023, it received a third oral warning for adjusting share repurchase terms after listing on the NEEQ without fulfilling disclosure obligations; and in November 2023, it was escalated to a written warning disciplinary measure for concealing special investment clauses related to qualified listings during a private placement.
Simultaneously, instability in corporate governance is also reflected in the frequent turnover of key positions. During the reporting period, the position of Board Secretary at Yan'an Pharma changed like a "revolving door," transitioning successively from Su Hongming to Zhang Wei and then to Yan Shihan. The Board Secretary, as the direct person responsible for external information disclosure and a key coordinator for standardized operations, frequent replacement itself is a reflection of underlying governance issues.
Furthermore, the company has unresolved historical VAM agreements. Between 2015 and 2022, to meet financing needs, Yan'an Pharma and its actual controllers, the couple Wang Xueliang and Qiu Huizhen, signed VAM agreements with investors including Shanghai Furong, Suzhou Jianyuan, Shanghai Jinpu, and Shangda Capital, containing performance commitments and share repurchase clauses.
As the company failed to achieve the promised performance in 2018, the actual controller Wang Xueliang paid a total of 24.48 million yuan in cash compensation to the relevant investors in 2019. Additionally, the company's failure to achieve a qualified listing by December 31, 2022, activated the relevant share repurchase clauses.
According to disclosures, Wang Xueliang and his designated third party, Qiu Huizhen, fulfilled substantial repurchase obligations between December 2022 and July 2023, for instance, using over 100 million yuan to repurchase shares held by Shangda Capital. As of now, some VAM agreements remain uncleared. The prospectus indicates that a clause agreed with some investors stating that "if a qualified listing is not completed by December 31, 2026, special rights such as the repurchase right will be reinstated" remains effective.
Looking at the fundraising projects, the company plans to raise 358 million yuan in this IPO, primarily for the "Formulation Production Line Construction Project" and the "Multifunctional Formulation R&D Center Project." However, judging from the actual utilization rate of the company's existing production capacity, the necessity of fundraising for capacity expansion may be questionable.
Data shows that the utilization rate of the company's tablet production capacity fluctuated significantly during the reporting period, reaching a peak of 127.71% in 2023, indicating periodic capacity bottlenecks; whereas the utilization rate for hard capsule production has remained relatively low for a long time, at only 62.47% in H1 2025; utilization rates for ointments and Hubei API production also hovered between 50% and 87%, with significant annual fluctuations.
These conditions reflect, on one hand, that the company's production is significantly affected by order volatility, resulting in poor operational predictability; on the other hand, with the production capacity of some dosage forms not yet fully utilized, whether the large-scale expansion plan has been justified by market demand, whether the new capacity can be effectively absorbed, and whether it might exacerbate future idle capacity and depreciation pressures all remain to be seen.
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