Shenlian Bio’s performance was affected by the decline of swine fever, and there was a black history of employees bribing.
Reporter | Zhao Yangge
Although Shenlian Bio was approved at the 18th Review Meeting of science and technology innovation board Municipal Committee in 2019 held on July 31, 2019, many details of the company cannot be ignored. Interface journalists found that due to the influence of swine fever, the company’s performance continued to decline in the past year, and the annual performance was worrying. The company’s main product, pig foot-and-mouth disease vaccine, can’t be independently developed, so it needs to be co-produced, and it needs to pay a lot of cooperation fees every year. In addition, the technical dispute between the company and the two shareholders has also lasted for 9 years, and the former employees of the company have also been exposed to bribery.
Performance-affected swine fever declined
Shenlian Bio originated from Shenlian Co., Ltd., which was established on June 28, 2001. At present, it has a registered capital of 359.7 million yuan, the legal representative is Nie Dongsheng, the actual controllers are Nie Dongsheng, Yang Yufang, Yang Congzhou and Wang Dongliang, and its main products are swine foot-and-mouth disease vaccine.
In 2016 and 2017, the company’s operating income was 267.7054 million yuan and 302.076 million yuan respectively; The net profit of returning to the mother was 73.4718 million yuan and 98.678 million yuan respectively. In 2017, Shenlian Bio ranked third in the domestic market share of pig biological products industry; In 2016-2017, the company’s market share in the domestic foot-and-mouth disease synthetic peptide vaccine remained the first, and in 2017, the company’s market share in the domestic foot-and-mouth disease synthetic peptide vaccine was 62%; In 2016-2017, the company’s product swine foot-and-mouth disease O-type synthetic peptide vaccine (polypeptide 2600+2700+2800) ranked first among the 14 swine foot-and-mouth disease vaccine products in China.
However, since 2018, the company’s data began to decline. The annual operating income and net profit returned to the mother were 275.1374 million yuan and 87.5803 million yuan respectively, down 8.92% and 11.25% respectively. In the first quarter of 2019, Shenlian Bio’s operating income and net profit attributable to shareholders of the parent company were 94,831,600 yuan and 35,091,200 yuan, respectively, down by 13.25% and 14.21% year-on-year, and the net cash flow generated by the company’s operating activities was-37.26 million yuan. Shenlian Bio also disclosed the unaudited data for the first half of the year in the manual, with operating income of 130 million yuan, down 12.49% year-on-year, and net profit of 38.9628 million yuan, down 10.23% year-on-year.
Source: instruction manualThe interface journalist noticed that the financial data of Shenlian Bio is closely related to the epidemic situation of African swine fever.
According to public information, African Swine Fever (ASF) is an acute, febrile and highly contagious animal infectious disease caused by African Swine Fever virus in domestic pigs and wild boars. The highest morbidity and mortality rate can reach 100%, and there is no effective vaccine and drug control at present. World Organization for Animal Health (OIE) lists it as a legally reported animal disease, and China lists it as a kind of animal disease.
According to the information released by the Ministry of Agriculture and Rural Affairs, since the outbreak of African swine fever in China in August last year, as of April 22 this year, there have been 129 African swine fever outbreaks. Affected by the epidemic, the number of live pigs has declined rapidly since January 2019. From November 2018 to April 2019, the number of live pigs in each month was 323.06 million, 311.11 million, 293.38 million, 277.54 million, 274.21 million and 266.26 million, respectively, with year-on-year decreases of 2.9%, 4.8%, 12.62%, 16.6% and 16.26 million.
Source: instruction manual
Source: instruction manualIn July 2018, the number of fertile sows in China was 31.8 million. From November 2018 to April 2019, the number of fertile sows was 30.58 million, 29.88 million, 28.82 million, 27.38 million, 26.75 million and 26.08 million respectively, with year-on-year decreases of 6.9%, 8.3%, 14.75%, 19.1%, 21% respectively. Obviously, the reduction of fertile sows will affect the slaughter of pigs in the future. It is expected that the operation of pig foot-and-mouth disease vaccine manufacturers, including the company, will still be affected by African swine fever in the future.
For Shenlian Bio, the company’s product sales are closely related to the scale of pig breeding. Judging from the sales of foot-and-mouth disease vaccine from January to April 2019, the decline of the company’s product sales is close to the decline of the breeding scale. Fortunately, thanks to the company’s new products, swine foot-and-mouth disease type O and type A bivalent synthetic peptide vaccines, which were sold in the first half of 2019, the unit price was relatively high, and the decline in the company’s operating income and net profit was less than the decline in sales volume.
According to the bio-manual of Shenlian, at present, the epidemic situation of swine fever in Africa has slowed down. There have been 30 epidemics this year, and the epidemic situation in 23 provinces has been lifted.
Source: instruction manual
Source: instruction manualIt is impossible to complete the research and development of foot-and-mouth disease vaccine alone
Shenlian Bio said that after years of dedicated research and development in the field of foot-and-mouth disease synthetic peptide vaccine, it has mastered a number of industry-leading key core technologies of foot-and-mouth disease vaccine in product design, production and testing, including Fmoc/tBu strategy solid-phase synthesis industrial production technology, antigen polypeptide concentration and purification technology, precise control technology of chemical cutting process, antigen epitope screening technology, polypeptide structure construction technology, polypeptide "structural library" synthesis technology, pig foot-and-mouth disease synthetic peptide vaccine inspection technology, etc.
However, it should be pointed out that under the relevant regulations (according to the Regulations on Biosafety Management of Pathogenic Microbiological Laboratories and the Measures for the Examination and Approval of Biosafety Management of Pathogenic Microbiological Laboratories of Highly Pathogenic Animals, the national policy requires enterprises to obtain vaccine seeds and strains from preservation institutions through legal channels), but they still cannot independently complete the research and development of foot-and-mouth disease vaccines, and they must adopt a cooperative model in the research and development of foot-and-mouth disease vaccines. As the only reference laboratory of foot-and-mouth disease designated by the state at present, Lanyan Institute is responsible for the epidemiological identification, virus collection, virus separation and identification, and virus strain preservation of foot-and-mouth disease, and it is also the cooperative object of Shenlian Bio.
It is reported that Shenlian Bio and Lanyan Institute cooperated in research and development to obtain bivalent inactivated vaccine of swine foot-and-mouth disease O and A (strain Re-O/MYA98/JSCZ/2013+strain Re-A/WH/09) and bivalent synthetic peptide vaccine of swine foot-and-mouth disease O and A (polypeptide 2700+2700) in December 2017 and December 2018 respectively. According to the agreement between the company and the cooperative units, for bivalent inactivated vaccines of swine foot-and-mouth disease type O and type A (Re-O/MYA98/JSCZ/2013 strain +Re-A/WH/09 strain), the company will pay 10% of the product sales revenue to Lanzhou Institute for a period of 5 years; For bivalent synthetic peptide vaccine (polypeptide 2700+2800+MM13) of swine foot-and-mouth disease type O and type A, the company, as the party that has produced the product, must pay 5% of the sales revenue of the new product to Lanyan Institute, and the payment will be terminated one natural year after the subordinate enterprises of Lanyan Institute officially put into production and sold the product.
It is said that in the first half of 2019, the bivalent synthetic peptide vaccines (polypeptide 2700+2800+MM13) of Shenlian Bio-swine Foot-and-Mouth Disease Type O and Type A started mass production and realized sales income of 50,157,300 yuan (unaudited), and the company accrued expenses of 2,507,900 yuan payable to Lanyan Institute. Shenlian Bio further predicts that bivalent inactivated swine foot-and-mouth disease vaccines (Re-O/MYA98/JSCZ/2013 strain +Re-A/WH/09 strain) will be mass-produced and sold in the second half of 2020.
Source: instruction manualDisputes with two shareholders for nine years
Looking closely at the company, the dispute between Shenlian Bio and the second shareholder is always unavoidable.
Source: instruction manualAccording to the Cooperation Contract in 2003 and the Sino-foreign Joint Venture Contract in 2003, UBI, the second shareholder of Shenlian Bio (holding 18.97%), should fulfill its responsibilities to Shenlian Bio: authorize the company to exclusively produce and sell synthetic peptide of swine foot-and-mouth disease vaccine by using UBI patented technology in Chinese mainland; Continue to provide the company with technical support such as technology research and development and product upgrading; Training personnel for the company, helping to implement the technological process, etc. so that the company can produce qualified pig foot-and-mouth disease vaccine synthetic peptide products. At the same time, the company paid UBI 10% of the sales income of synthetic peptide of pig foot-and-mouth disease vaccine, patent income of vaccine and sales income of pig foot-and-mouth disease vaccine.
However, in December, 2006, after Yang Yufang and other shareholders obtained the controlling stake in the company, things changed, and UBI had a dispute with the company on the issue of technical control. In February 2007, UBI terminated its biotechnology support for Shenlian. From 2007 to 2014, Shenlian Bio and UBI have been having disputes and lawsuits over the dissolution of the company, trade secrets, technology contracts and other factors, and both parties have spent a lot of time, energy and material resources.
In order to maximize the interests of the company and shareholders, the two sides decided to settle.
On December 8, 2014, the controlling shareholder and UBI signed the Agreement on Confirmation of Technical Fees, which confirmed the technical service fees before 2014. However, there are great differences between the two parties on the payment period and amount of future technical service fees, and it is difficult to reach an agreement in the short term (the Cooperation Contract signed by the two parties in 2003 did not clearly stipulate the payment period). At the same time, both parties agree that the payment period and amount of technical service fees after 2014 will be determined separately through negotiation. The Technical Fee Confirmation Agreement signed in 2014 marked a preliminary settlement between the two parties.
In 2015, on the basis of the settlement in 2014, the two sides began to negotiate the technical service fees after 2014. After several rounds of negotiations, the two sides reached a compromise on the payment period and amount of technical fees, and signed the Technical Fee Agreement on "Pig Synthetic Peptide Foot-and-mouth Disease Vaccine" and its Extension Technology on December 30, 2015, confirming the technical service fees from 2015 to 2019. The agreement eliminates the differences between the two parties on the amount and duration of technical service fees. In order to avoid future production disputes, the agreement also stipulates that Shenlian Bio will be granted the permanent exclusive use right in China for the patents and extended technology patents of "Swine Synthetic Peptide Foot-and-Mouth Disease Vaccine" that UBI has obtained, is applying for or intends to apply for in the global field, and Shenlian Bio does not need to pay any extra fees. This agreement can effectively avoid potential disputes, which indicates that the two parties have achieved complete reconciliation.
It should be pointed out that in fact, Shenlian Bio developed through independent innovation after 2014, and its products did not use UBI-related patents, but it still paid technical service fees to UBI every year. From 2015 to 2019, the annual cost of 9.85 million yuan is close to 50 million yuan.
Former employees have a black history of bribery.
Although the black history of employee bribery was not mentioned in the manual of Shenlian Bio, it was still discovered by the regulatory authorities during the inquiry.
In the replies to the third and fourth rounds of audit inquiry letters, the interface journalist saw that the regulatory authorities mentioned that "from the second half of 2005 to December 2012, Yu Yong, the former director of Sichuan Animal Disease Prevention and Control Center, received cash from the issuer’s sales staff and provided assistance for the government procurement of animal disease vaccines".
It is understood that from the second half of 2005 to December 2012, Wang, the former salesman of Shenlian Bio, gave a total of RMB 1.06 million and GBP 50,000 to Yu Yong, then director of Sichuan Animal Disease Prevention and Control Center (some of them were given to Wang when he was a sales manager of Ganyuanhao Bio-Co., Ltd. from the second half of 2005 to August 2007, and Wang worked in the issuer’s sales department since September 2007, and now he has left). From 2011 to 2014, Jiang Wenkang, then deputy director of Sichuan Animal Husbandry and Food Bureau, was given a total of RMB 310,000, USD 10,000 and RMB 10,000 gift cards. At the end of 2013, Shao, a salesman of Shenlian Bio-products, gave a total of RMB 50,000 to Yu Yong, then director of Sichuan Animal Disease Prevention and Control Center. Related cases have been concluded.
Shenlian Bio explained that "Wang and Shao’s related property giving behaviors are personal behaviors, and they have not been indicated or approved by the issuer or its actual controllers, directors and senior management personnel, and the issuer and the issuer’s actual controllers, directors and senior management personnel are not involved; In view of the circumstances of Wang and Shao’s involvement in the case and their performance in the investigation and prosecution of the case, the procuratorate did not file a case for investigation or pursue their criminal responsibility. The sources of funds for Wang and Shao mentioned above are all personal funds, and they are not reimbursed by the issuer or obtained relevant financial assistance through the issuer or its actual controllers, directors and senior managers in other forms. Their actions have nothing to do with the issuer and its actual controllers, directors and senior managers. "
The interface journalist saw that the Sichuan Animal Disease Prevention and Control Center is still one of the top five customers of Shenlian Bio in 2018, accounting for 6.58% of the total sales amount of Shenlian Bio with a sales amount of 17.8211 million yuan. Moreover, the Sichuan Animal Disease Prevention and Control Center only invited bids once in 2018, and the products involved were porcine synthetic peptide vaccines.
Source: instruction manual
Source: instruction manual
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