Watson Bio "Sold" Its Subsidiaries At A Low Price Or Repeatedly "Bought And Sold" To Realize Equity Incentive And Lost Good Assets

Although the "review of Shanghai Zerun equity transfer and capital increase proposal" was cancelled, the stock price of Watson biological still fell sharply, several shocks and finally fell to the limit.

On December 7, the total turnover of Watson biological was close to 10 billion yuan, and the market value evaporated by 14.88 billion yuan. According to longhubang data, Shenzhen Stock connect sold 400 million yuan and bought 226 million yuan, one institution sold 210 million yuan, CITIC Securities Shenzhen Binhai Avenue sold 149 million yuan, Huaxi Securities Chengdu gaoshengqiao road bought 204 million yuan, and CITIC Securities Shanghai Branch bought 153 million yuan.

In the view of many investors, the "farce" of Watson biological capital operation has exposed the deficiency of current internal control system and investor protection. It is worth mentioning that throughout the acquisition journey and various capital distribution of Watson biological in recent years, the drama of "upside down" subsidiaries like Shanghai Zerun has been staged continuously. Jiahe biological, which was sold at a low price earlier by Watson biological, has made a great success in its direct performance after being divested and successfully listed on the stock market.

"I'm mainly disappointed with the company's managers. Although I have made some small money in Watson, I still have a lot of hard injuries and scattered shares. Although there are many product lines in recent years, such as monoclonal antibody, HPV and mRNA vaccine, they have only hit the hot spots and the competitiveness of the products is limited. If the transfer of interests is involved, it may "explode." A long-term investment in pharmaceutical stocks in South China told reporters.

"Cheap sale" or equity incentive?

On the evening of December 4, Watson bio announced the transfer of 32.60% equity of Shanghai Zerun with 1.14 billion yuan. After the deal is completed, Shanghai Zerun will no longer be its holding subsidiary.

According to the public data, Shanghai Zerun was a holding company of Watson bio through equity transfer and capital increase in 2013. Watson bio first transferred 40.609% equity of Shanghai Zerun held by Wison investment with 122 million yuan, and subscribed for its new registered capital with 143 million yuan, taking 50.69% equity of Shanghai Zerun in total.

In 2016, Watson raised RMB 0.80 billion for R & D projects, and invested RMB 0.80 billion in Shanghai for R & D projects.

At this time, the company will receive the notice of "clinical trial of HPV vaccine" issued by the State Administration of Virology in December, 2018, but the company will receive the notice of "the second phase of clinical trial of HPV vaccine" in June, 2018.

As soon as the news came out, the Shenzhen stock exchange immediately issued a letter of concern, questioning the rationality and real purpose of the transactions of listed companies.

It is worth mentioning that in July 2018, Watson bio disclosed the stock option incentive plan (Draft) in 2018, in which the assessment requirement for the company level is that the accumulated net profit of two years in 2019 and 2020 is no less than 1.2 billion yuan.

However, in 2019, the total net profit of Watson bio is only RMB 194 million; in the first three quarters of 2020, the net profit of Watson bio is RMB 541 million, which is still RMB 465 million short of the commitment gap.

In addition, on November 3, 2020, Watson bio again disclosed the "2020 stock option incentive plan (Draft)". The performance evaluation index of the company is that the accumulated net profit of the company in 2020 and 2021 is no less than 2.2 billion yuan, and that of the company in 2021 and 2022 is no less than 2.7 billion yuan.

According to the information disclosed by Watson bio, if Shanghai Zerun is sold, it is expected to generate a net profit of about 1.18 billion to 1.28 billion yuan. The market doubts that Watson bio may try to achieve the performance evaluation index of the stock option incentive plan in 2018 and 2020.

Although Watson biological has cancelled the transfer of equity of Shanghai Zerun, in the announcement, Watson biological said, "the company will continue to promote the product research and development and industrialization process of Shanghai Zerun as always. On the basis of obtaining more extensive recognition, it will formulate and launch a planning scheme that conforms to the company's strategy and the long-term development of Shanghai Zerun, so as to ensure its sustainable development."

This move is only a slow move for investors.

It is worth noting that Zibo Yunze, one of the parties receiving the plate, has also attracted attention.

According to the announcement of Watson biology, Zibo Yunze was only established on November 19, 2020, and its main partners are Ningbo Xiangcheng venture capital partnership (limited partnership) and Xi'an Taiming equity investment partnership (limited partnership). After penetration, the shareholders are hillock capital and tiger pharmaceutical.

According to the 21st century economic report, Watson biological had transferred the equity of Jiahe biological, and tiger pharmaceutical also appeared to take over the offer.

In this regard, the Shenzhen stock exchange requires to clarify whether Zibo Yunze and yongxiuguan are related to shareholders of listed companies, directors, supervisors and senior executives or other interest arrangements.

Keen on buying and selling

In fact, throughout the acquisition tour and various capital distribution of Watson biological in recent years, similar to Shanghai Zerun, the "upside down" subsidiary has been playing out constantly.

According to the public information, Watson bio is a biopharmaceutical enterprise mainly engaged in the R & D, production and sales of biotechnology drugs such as human vaccines, which landed on the gem on November 12, 2010.

In the ten years since it was listed on the gem, Watson biological has gradually grown from an enterprise with a revenue of less than 300 million yuan and a net profit of less than 80 million yuan to a mature vaccine group with a revenue of more than 1.1 billion yuan (in 2019, the same below), and a net profit of nearly 200 million yuan.

The company's product line is also constantly expanding, from Hib (vials), freeze-dried group A and C meningococcal polysaccharide conjugate vaccine, hepatitis A vaccine, hepatitis B vaccine before the market, new diphtheria tetanus vaccine, 23 valent pneumonia vaccine, 13 valent pneumonia conjugate vaccine, etc., and the vaccines under research include HPV vaccine, Xinguan vaccine, acyw135 meningococcal polysaccharide conjugate vaccine, hepatitis A vaccine and hepatitis B vaccine Recombinant EV71 vaccine and other products.

In this process, in addition to the continuous improvement of self research ability, Watson biological's extension merger and acquisition also played a supporting role.

However, the 21st century economic reporter found that after carefully observing the capital operation of Watson biological, he was full of doubts. Different from some listed companies who were keen on "buying" and eventually failed in careless integration and high goodwill, Watson bio was more keen on "selling". However, the process of trading did not yield high profits, but "sold" some promising assets at a low price“ "Performance explosion" passed by.

Since 2012, the latter acquired the equity of large-scale pharmaceutical companies with a total price of RMB 66.0 billion, which was the first time for the latter to acquire equity of RMB 66.0 million for large-scale pharmaceutical enterprises, which was the first time for the latter to enter the market in 2013. Watson Bio said the purpose of the acquisition was "to ensure the achievement of the company's strategic goal of becoming bigger and stronger in the blood products business". However, it is worth mentioning that at that time, Da'an pharmaceutical had no income and lost 67.7867 million yuan in 2012.

Less than one year after the completion of the acquisition (industrial and commercial registration was completed in November 2013), in 2014, Watson biological transferred 46% equity of Da'an pharmaceutical with a loss of 635 million yuan. After the transaction, Watson biological increased capital to Da'an Pharmaceutical by 165.348 million yuan with corresponding creditor's rights to Da'an pharmaceutical, and held 45.65% equity of Da'an pharmaceutical after the completion of the transaction.

However, in 2016, after Da'an pharmaceutical finally made a profit (31.9667 million yuan in the first October of 2016), Watson biological transferred its 31.65% equity of Da'an pharmaceutical to Du Jiangtao at the price of 453 million yuan. In 2019, as the amount of plasma collected by Da'an pharmaceutical in 2018 did not reach the target, Watson bio compensated 14% equity of Da'an pharmaceutical to Bohui innovation, resulting in a loss of more than 7.7% of the company's performance Ten million yuan.

After many "sales", Watson biological not only did not make money, but also made a slight loss.

And that's just one part of Watson's frequently traded assets. According to the reporter's incomplete statistics reported by the 21st century economic report, the equity assets of Watson biological trading since its listing also include Shijie biology, Weilun biology, Yunnan Pengqiao Pharmaceutical Co., Ltd., Jiahe biology, etc.

One of the most typical is the "scalping" of Jiahe biology. In 2013, Watson biological purchased 63.576% equity of Jiahe biological with 291 million yuan, saying that "Jiahe biological is at the advanced level of domestic counterparts in the field of monoclonal antibody drug research and development, and has a domestic first-class technical team for research and development of monoclonal antibody drugs and rich R & D product lines".

At that time, Watson biological (2013) had a revenue of only one million and a net profit loss of nearly 70 million. In 2015, Watson biological purchased 8.384% shares of Jiahe biological Co., Ltd. held by Wison investment with 85 million yuan, increasing the shareholding ratio to 71.96%. After several times of capital increase, the shares of Carson and Watson were increased to 17.61%.

Three years later, in June 2018, Watson bio suddenly announced that it would transfer its 8.6455% equity of Jiahe bio at a price of 300 million yuan, and its trading partner was conurbit. Subsequently, it transferred the equity corresponding to the registered capital of Jiahe biological to HH CT Holdings Limited (hereinafter referred to as HH CT).

During this period, TEG's M & A fund and HH CT respectively increased capital to Jiahe, making Watson bio's shareholding ratio drop to 13.59%, becoming the third largest shareholder.

It is worth mentioning that during the period from 2015 to 2018, Jiahe biological has a good development momentum, and a number of products such as infliximab analogues, PD-1 mAbs, Anti-IL-6 mAbs, gb235 mAbs and other products have been approved for clinical trials. In October this year, Jiahe bio was listed directly on the stock exchange at a price of HK $24 per share.