Shenzhen Haiwang Bioengineering Co., Ltd. (Haiwang Bio) recently announced that the sale of part of the company’s equity to the state-owned enterprise Sifang Group in Guangdong Province has been terminated, putting a halt to the asset restructuring of the group. It is reported that the group has accumulated losses of 3.9 billion Chinese Yuan over the past three years.
In a statement titled “Announcement on Termination of Change in Control and Issuance of Shares to Specific Parties,” Haiwang Bio stated that through “friendly negotiations,” Haiwang Bio and Guangdong Silk Textile Group Co., Ltd. signed a “Termination Agreement” and will refund the 10 million Yuan deposit paid by Sifang Group without interest. This three-year equity transfer saga has come to an end.
As early as March 2022, Haiwang Bio first announced plans for significant asset restructuring and mixed ownership reform by the controlling shareholder. It was not until July 2024 that the two parties finally reached an agreement on the transfer details.
According to the announcement, in July 2024, the two parties agreed on the transaction terms: Haiwang Group would transfer 316 million shares it held (12% of the company’s total share capital) to Sifang Group at a price of 2.43 Yuan per share, totaling 767 million Yuan, and issue up to 620 million shares to Sifang Group and its controlling shareholders. After the transaction, Sifang Group and its concert parties’ shareholding ratio will increase to 28.78%, the actual controlling shareholder of Haiwang Bio will change to the Guangdong Provincial Government, and Haiwang Group and its concert parties will relinquish voting rights for the remaining shares.
The reason for the termination of the equity transfer was not disclosed in the announcement. However, market analysts generally attribute Haiwang Group’s consecutive huge losses over three years as the primary cause.
Financial reports show that from 2022 to 2024, Haiwang Bio’s operating income was 37.835 billion Yuan, 36.419 billion Yuan, and 30.317 billion Yuan respectively; the net loss attributable to the owners of the company was -1.027 billion Yuan, -1.69 billion Yuan, and -1.193 billion Yuan respectively, with a total accumulated loss of 3.91 billion Yuan over three years. The first-quarter report for 2025 shows that the company achieved revenue of 7.376 billion Yuan, a year-on-year decrease of 8.81%; the net profit attributable to the owners was only 23.7158 million Yuan, a drop of 44.38% year-on-year.
While experiencing continuous losses, Haiwang Bio faces high debt levels and tight cash flow. A report by “China Business News” on June 22 revealed that as of the end of March 2025, Haiwang Bio’s asset-liability ratio had climbed to 89.76%. This is higher than the average asset-liability ratio of 60%-70% in the pharmaceutical distribution industry, indicating that the company’s financial leverage has reached an extremely high level, making its risk resistance extremely fragile. At the same time, the company’s short-term borrowings on the books amount to 9.93 billion Yuan, while the corresponding monetary funds stand at only 3.276 billion Yuan, putting continuous pressure on its short-term debt repayment ability.
Furthermore, according to “Changjiang Business News,” from the end of 2022 to 2024, Haiwang Bio’s impairment provision for goodwill balance was 1.692 billion Yuan, 2.497 billion Yuan, and 2.954 billion Yuan respectively, with impairment losses recognized each period totaling 524 million Yuan, 876 million Yuan, and 478 million Yuan, amounting to a total of 1.878 billion Yuan over three years. As of the end of March this year, the book value of Haiwang Bio’s goodwill still amounted to 379 million Yuan, posing a risk of recognizing impairment losses in the future that may impact its performance.
Additionally, Haiwang Group currently has a high percentage of pledged shares. As of the end of March this year, Haiwang Group directly held 1.216 billion shares of Haiwang Bio, accounting for 46.23% of the total shares, of which 1.214 billion shares had been pledged, with a pledge ratio of 99.83%. Moreover, since 2019, Haiwang Bio has not distributed dividends for six consecutive years.
In response to the decline in performance in 2024, Haiwang Bio’s explanation cited that the decrease in operating income was mainly concentrated in the pharmaceutical distribution sector, primarily due to industry policy adjustments such as government centralized procurement, regional collective procurement, and a decrease in procurement by some regional public medical institutions.
Public records show that Haiwang Bio was established in 1992 and went public on the Shenzhen Stock Exchange in December 1998. The company’s core business is in pharmaceutical distribution, encompassing three main business segments including pharmaceutical research and development and pharmaceutical industry.