Guangshengtang Responds to Shenzhen Stock Exchange's Second Round of Inquiries on Private Placement; No Substantial Obstacles in Approval of Traditional Chinese Medicine Famous Prescription Industrialization Project

Fujian Guangshengtang Pharmaceutical Co., Ltd. (stock abbreviation: Guangshengtang; stock code: 300436) recently released a notice titled “Reply to the Second Round of Administrative Inquiry Letters Concerning the Application for Issuance of Shares to Specific Investors.” In the notice, it provides detailed explanations regarding six major issues raised by the Shenzhen Stock Exchange, including the approval progress of the projects for which proceeds will be raised, financial investments, changes to the previous fund-raising, sales and inventories related to Taizhongding, and capital increases by minority shareholders of subsidiaries. The announcement shows that, for the company’s projects related to the industrialization of traditional Chinese medicine (TCM) classic named formulas, there are no substantive obstacles in terms of approvals, and the benefit calculations for this fund-raising project are reasonable and prudent.

Regarding the approvals for the industrialization of TCM classic named formulas, which have drawn significant attention, Guangshengtang disclosed that the project consists of two parts: the purchase of drug approval documents and the construction of a production line for TCM pills. As of the date of issuance of the reply letter, the marketing authorization holder of WujibaiFeng Wan has been changed to the company’s subsidiary Zhangzhou Guangshengtang and has obtained the drug approval documents; the matter relating to changes to the marketing authorization holder for Liuweidihuang Wan’s drug production license (B certificate) has been completed, and it is expected to obtain the “Notice of Approval for Drug Supplementary Application” reflecting the marketing authorization holder change in June 2026; Niuhuang Qingxin Wan has had a formal purchase agreement signed, and it is expected that the transfer of the relevant approval documents and the change to the production license will have no substantive obstacles. For production line construction, the project has completed the filing with the NDRC and the approval of the EIA, and Zhangzhou Guangshengtang has obtained the drug production license (B certificate). After the production line construction is completed and passes GMP compliance verification, the company can apply for the drug production license (A certificate).

Regarding the relevance of the project to the company’s existing business, Guangshengtang stated that the present fund-raising project has a high degree of relatedness with the company’s existing TCM products in terms of production technology (raw material pretreatment, extraction and pill-simplification process), indications (chronic illness management or treatment categories), and customer groups (persons seeking wellness and chronic illness management). The project is part of the main business toward which the raised funds will be directed. The project is positioned as high-quality OTC premium TCM with high added value. It will build a new growth driver for profits by leveraging strategic cooperation with leading TCM enterprises, drawing on their brand influence and the advantages of their GuoYitang chain distribution channels.

In terms of benefit calculations, Guangshengtang said that the total investment of the industrialization project for TCM classic named formulas is RMB 105.2529 million, and it plans to use RMB 88.0405 million of the raised funds. After reaching full production capacity, the project’s internal rate of return is 23.22%, and the static investment payback period after tax is 6.47 years. This level of return is close to the average level of comparable projects in the same industry (26.64%). Considering the company’s product positioning as high-end, brand enablement, and channel advantages, the benefit calculations are reasonable.

| Company name | | --- | Project name | Raised funds product | Internal rate of return | Static investment payback period after tax | | --- | --- | --- | --- | --- | | Jichuan Pharmaceutical | An annual production of 720 million bags of Xiaoshu Douqiao Qingre Granules project | Xiaoshu Douqiao Qingre Granules | 39.72% | 4.18 years | | Zhongsheng Pharmaceutical | Construction project of a TCM extraction workshop | Naoshuantong capsules, compound Xuesuantong capsules, etc. | 29.41% | 6.26 years | | Zorli Pharmaceutical | Intelligent TCM production base construction and upgrade project | Wuling capsules, Lingze tablets, etc. | 18.74% | 7.25 years | | Panlong Pharmaceutical | Research and industrialization project for TCM formula granules | Huangqin, Heshou, etc. formula granules | 18.69% | 7.44 years | | Average value |

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• | 26.64% | 6.28 years | | Guangshengtang | Industrialization project for TCM classic named formulas | Liuweidihuang Wan, WujibaiFeng Wan, etc. | 23.22% | 6.47 years |

Regarding the use of proceeds from the previous fund-raising, Guangshengtang explained that the unspent funds of RMB 38.0174 million from the “Integrated Production Base Construction Project for API and Preparations,” which will be permanently replenished as working capital, resulted from cost control during project construction and process optimization; the “Jiangsu Zhongxing Preparations Workshop Construction Project” was terminated and the remaining RMB 85.4349 million will be supplemented as working capital, mainly because existing production capacity can meet demand and the company’s strategic focus has shifted to innovative drugs and premium TCM. Both adjustments have already completed the necessary approval procedures.

Regarding the sales and inventory issues of the anti–COVID-19 drug Taizhongding, Guangshengtang stated that the product’s sales revenue from January to September 2025 was RMB 13.4753 million. Sales declined mainly because it was launched and entered the medical insurance formulary relatively late. As of the end of September 2025, the book value of Taizhongding related inventories was RMB 86.9468 million, and the company has made an inventory price decline provision of RMB 4.03M. Because the effective period of the API has been extended to 24 months, and the effective period of the prepared dosage forms can be recalculated, it is expected that the related products can complete sales within the effective period. In the intangible asset impairment test, the company, based on factors such as product advantages, long-term market demand during the ongoing circulation of COVID-19, and medical insurance access, predicts that Taizhongding’s peak sales revenue in 2029 of RMB 480 million is reasonable, and as of now, the provision for intangible asset impairment has been made sufficiently.

In addition, Guangshengtang also provided explanations regarding financial investments, capital increases by minority shareholders of subsidiaries, and other matters. As of September 30, 2025, the company’s financial investment amount was RMB 40.0006 million, accounting for 10.44% of the net assets attributable to shareholders of the parent company. The company plans to deduct RMB 1.6971 million from the total amount of the original fund-raising proceeds to comply with regulatory requirements. For the capital increases by minority shareholders of the company’s controlling subsidiary Guangsheng Zhonglin in a different proportion, the company said that this is due to the minority shareholders’ considerations of their own funds and investment plans; the company’s control over Guangsheng Zhonglin has not been affected. The probability of triggering the share repurchase provisions for the relevant shareholders is low, and it will not constitute material uncertainty for the implementation of the current fund-raising projects.

After examination, intermediaries believe that the company’s issuance of shares to specific investors in this transaction complies with regulatory requirements, the fund-raising projects are feasible, and the relevant risks have been adequately disclosed.

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