Yan'an Pharmaceutical: Multiple violations of information disclosure during the reporting period; sales decline after the merger of two major clients

Ask AI · How do frequent changes in the company’s secretary of the board affect corporate governance amid repeated violations in disclosure?

More than two years ago, Shanghai Yanan Pharmaceutical Youpartment Co., Ltd. (hereinafter “Yanan Pharmaceutical”) nearly missed out on the Beijing Stock Exchange. Now, with its fund-raising plan to expand production and intensify R&D—totaling RMB 358 million—Yanan Pharmaceutical is back to knock on the door of the capital markets again.

Previously, a reporter from the Mingjing Finance Studio of the Securities Daily—China Securities Journal had noted that Yanan Pharmaceutical, which is seeking listing again, showed a clear downturn in its steady-growth performance data in the first half of 2025 at the end of the reporting period. The company also conducted two-way product transactions with a related party, especially recognizing “authorized production license fee” revenue that totaled more than RMB 100 million in aggregate. In addition, the reporter also observed that, during the reporting period, the company was subject to regulatory self-discipline measures multiple times due to violations of information disclosure; and the company’s two major customers combined during the reporting period.

Regulatory actions taken four times over two years due to information disclosure violations

After Yanan Pharmaceutical’s performance maintained steady growth from 2022 to 2024, the first half of 2025 suddenly “flipped”: revenue for the period was RMB 220 million, down 12% year over year; net profit was RMB 29.5721 million, down nearly 50% year over year. The “authorized production license fee” revenue, previously seen as an important component of profit, has been completely zeroed out after Tianjin Jun’an’s cancellation. Meanwhile, this revenue accounted for 124.47% of operating profit in 2022—meaning that after excluding this related-party income, the company’s main business was actually in a loss position that year.

Besides that, for any company planning to go public, compliance in information disclosure is the bottom line for standardized operations, yet Yanan Pharmaceutical has repeatedly been regulated for disclosure violations.

According to the prospectus disclosure, during the reporting period, Yanan Pharmaceutical and the relevant responsible entities that were listed on the National Equities Exchange and Quotations (NEEQ) received four rounds of self-regulatory supervision measures from the NEEQ at different times.

For example, on January 7, 2022, the Second Division for Listed Companies Administration of the NEEQ issued a “Delivery Notice on Taking Verbal Warning Self-Regulatory Measures” to Shanghai Yanan Pharmaceutical Youpartment Co., Ltd. and the relevant responsible entities, for failing to timely disclose related announcements regarding its filing for public offering of shares and listing consultancy and record-filing. This constituted a violation of information disclosure, and Yanan Pharmaceutical and the relevant responsible entities were subjected to verbal warning self-regulatory measures.

Just one month later, on February 10, 2022, due to failing to timely review and disclose related-party transactions and the occupation of funds by related parties—constituting violations of corporate governance and information disclosure—the NEEQ’s Second Division for Listed Companies Administration again took verbal warning self-regulatory measures against Yanan Pharmaceutical and the relevant responsible entities.

Entering 2023, Yanan Pharmaceutical faced supervision two more times. Because it failed to fulfill information disclosure obligations after adjusting share repurchase terms following its listing on NEEQ, the company was given its third verbal warning in October 2023. The following month, the regulatory measures were upgraded: because, during a private placement, it concealed special investment terms involving matters such as qualifying for listing, Yanan Pharmaceutical was subject to self-regulatory measures requiring it to issue a warning letter, and relevant records were entered into the integrity file for the securities and futures market.

From “verbal warning” to “issuing a warning letter,” the changes clearly outline the regulatory authority’s shift in measures regarding Yanan Pharmaceutical’s information disclosure compliance issues. Although Yanan Pharmaceutical stated in its prospectus, “The company has already carried out comprehensive rectification, and will strictly fulfill information disclosure obligations in accordance with relevant laws, regulations, and institutional requirements, ensuring that information disclosure is timely, accurate, and complete. The above self-regulatory supervision measures will not cause material adverse impact on this offering,” the negative impact of historical records cannot be easily erased by a statement alone.

Worth mentioning is that, as the direct person responsible for the company’s information disclosure and a key role for internal and external communication, Yanan Pharmaceutical’s secretary of the board position saw frequent personnel changes between 2021 and 2023, with several replacements.

During the prior IPO reporting period, in January 2021, Director Su Hongming submitted a resignation letter, stepping down as the company’s director, secretary of the board, and other positions (chief executive officer assistant).

After that, the role was temporarily assumed by Zhao Junling, the finance负责人. Up until April 2021, the company appointed Zhang Wei as the secretary of the board; eight months later, in December 2021, an extraordinary general meeting of shareholders of Yanan Pharmaceutical approved resolutions including “On Revising the <Company 2021 Restricted Stock Incentive Plan (Draft) (Revised Version)>” and other resolutions. In February 2022, six senior management personnel and core employees, including Zhang Wei, were granted incentive equity; Zhang Wei subscribed for 100,000 shares, with an grant price of RMB 5 per share.

What was unexpected is that Zhang Wei, who held incentive equity, resigned from his position as secretary of the board in January 2023, less than two years after taking office, and terminated his employment relationship with the company. In March of the same year, Yanan Pharmaceutical repurchased the 100,000 shares held by Zhang Wei at RMB 4.20 per share and completed the cancellation procedures.

The successor to Zhang Wei as secretary of the board was Yan Shihan, but she only joined Yanan Pharmaceutical in February 2023. From October 2010 to October 2017, Yan Shihan worked at Jing Shanglvye Group Co., Ltd., holding roles including securities affairs representative, director of the president’s office, and assistant to the chairman and chief investment and financing officer. From November 2017 to March 2018, Yan Shihan joined Changzhou Bosong Children’s Products Co., Ltd. as vice president and chief investment and financing officer. From March 2018 to January 2023, Yan Shihan worked at Shanghai Pu Chen Rui Bo Technology Development Co., Ltd., serving as investment director, and later as director and secretary of the board. Based on her work history, Yan Shihan has relatively extensive professional experience related to investment and financing and investor relations.

Just, while Yanan Pharmaceutical’s disclosure violations occurred frequently, the secretary of the board position changed hands several times, which naturally drew market attention: are the company’s repeated disclosure violations related to a lack of continuity in the relevant positions due to personnel changes?

After the two major customers merged, sales fell

Yanan Pharmaceutical’s revenue mainly comes from the sale of products such as chemical pharmaceutical formulations, active pharmaceutical ingredients, and intermediates, as well as authorized production license fees. The company’s formulation products are sold through a distribution model: it first sells formulation products directly to first-tier distributors, and then the first-tier distributors distribute them to downstream pharmaceutical commercial companies, pharmacies, and other customers. The company’s active pharmaceutical ingredients and intermediates, on the other hand, are sold directly to chemical pharmaceutical formulation manufacturers and active pharmaceutical ingredient traders.

As for authorized production license fees, in March 2023, Tianjin Jun’an changed the marketing authorization holder for Gliclazide sustained-release tablets to the name of Yanan Pharmaceutical’s subsidiary, and Tianjin Jun’an also stopped production of that product. In August 2023, after Tianjin Jun’an’s inventory sales were completed, the company no longer generated authorized production license fee revenue.

The prospectus disclosure of Yanan Pharmaceutical’s key customers shows that, among its top five customers before 2022, they were respectively Tianjin Jun’an Biopharmaceutical Co., Ltd. (hereinafter “Tianjin Jun’an”), Sino-United Pharmaceutical Group Co., Ltd. (hereinafter “Sino-United”), Changxing Pharmaceutical Co., Ltd. (hereinafter “Changxing Pharmaceutical”), Chuangmei Pharmaceutical Co., Ltd. (including its subsidiary Guangdong Chuangmei Pharmaceutical Co., Ltd.), and Jiangyao Group Co., Ltd. (hereinafter “Jiangyao Group”). Yanan Pharmaceutical’s sales amounts to them were RMB 76.0809 million, RMB 50.5315 million, RMB 32.9819 million, RMB 23.0911 million, and RMB 17.3630 million, respectively.

Among them, Jiangyao Group includes Jiangyao Group Henan Co., Ltd. (previously named Henan Jiangzhong Huajie Pharmaceutical Co., Ltd. before 2023), and Jiangyao Group Changzhou Co., Ltd. (previously named Jiangsu Jiangzhong Yabang Pharmaceutical Co., Ltd. before 2023).

In 2023, Jiangyao Group completed its acquisition of Chuangmei Pharmaceutical Co., Ltd. The 2023 sales data of Yanan Pharmaceutical to Chuangmei Pharmaceutical Co., Ltd. were consolidated and disclosed within Jiangyao Group. From the information disclosed by Yanan Pharmaceutical regarding its top five customers for 2023, after the data consolidation, Jiangyao Group became the company’s third-largest customer for the year. Yanan Pharmaceutical achieved sales of RMB 34.562 million to it, accounting for 8% of sales revenue for the period.

By comparison, before the consolidated disclosure data, in 2022 the combined sales to Jiangyao Group and Chuangmei Pharmaceutical Co., Ltd. totaled RMB 40.453 million. Yanan Pharmaceutical’s 2023 sales to them were clearly lower than in 2022. In 2024, Jiangyao Group was even absent from the company’s top five customers list. The fifth-largest customer in 2024 was Shanghai Pharmaceutical, with sales of RMB 35.0221 million to it. In fact, this amount was also clearly lower than the combined sales amount in 2022 from the company to Jiangyao Group and Chuangmei Pharmaceutical Co., Ltd., indicating that Jiangyao Group’s procurement of the company further contracted.

Under common sense, after a customer completes a merger, procurement volume should become more concentrated. However, in 2023, the consolidated disclosure sales revenue for the merged “Jiangyao Group” reported by Yanan Pharmaceutical was only RMB 34.562 million. This figure not only failed to show a “1+1>2” effect, but also fell by approximately RMB 5.89 million compared with the combined sales amounts of the two independent customers previously. In 2024, the downward trend continued, and Jiangyao Group even dropped directly out of the top five customers list, meaning Yanan Pharmaceutical’s sales to Jiangyao Group were continuously lower for two consecutive years than the combined sales amounts to the two customers before the merger.

This situation unavoidably raises questions: What is the reason for the reduction in sales data, and is it normal and reasonable? Is it mainly due to internal procurement channel integration and demand duplication elimination after the customers’ acquisition and merger? How does the company assess the routine impact of such major customer mergers and integration on its own business? Besides integration factors, did the change in sales also involve proactive adjustments on both sides to cooperation strategy, product line priorities, or commercial terms?

In addition, although in the first half of 2025 Jiangyao Group ranked as Yanan Pharmaceutical’s fifth-largest customer again with sales of RMB 14.2015 million, how does this data compare with its merged figures with Chuangmei Pharmaceutical in the first half of 2024 and the first half of 2022? Based on Jiangyao Group’s case, how does the company manage supply-chain risks arising from strategic adjustments and M&A reorganizations by major customers? Are there corresponding mechanisms to maintain business resilience and sustainable growth?

Regarding the above questions, a reporter from the Mingjing Finance Studio of the Securities Daily—China Securities Journal had called and sent a letter to Yanan Pharmaceutical, but as of the time of publication, the company had not responded. As for other noteworthy circumstances of the company, this paper will continue to monitor.

Reporter Wang Jun

Company punishment during the reporting period

Share repurchase information announcement after Zhang Wei’s resignation

Screenshot of the company’s top five customers during the reporting period