Recently, Zhendong Pharmaceutical (300158.SZ) was once a partner in arbitration, the amount of claims reached 1.47 billion yuan, almost close to the company's operating income in the first half of the year.

September 9, Zhendong Pharmaceutical announcement shows that the company received on September 7, China International Economic and Trade Arbitration Commission issued the “DE20242588 commissioned production contract dispute arbitration notice”, Beijing Lundy Pharmaceuticals Co. (hereinafter referred to as “Lundy Pharmaceuticals”) filed an application for arbitration with the China International Economic and Trade Arbitration Commission in respect of the contract dispute between Lundy Pharmaceuticals and Zhendong Pharmaceuticals.

After the announcement, September 10 to 11, Zhendong Pharmaceuticals shares fell more than 10%, closing price of 3.40 yuan / share on the 11th.

Market on both sides of the arbitration situation is also quite concerned about the two sides of the disagreement related to the situation, the “China Business News” reporter called Zhendong Pharmaceutical letter, as of press time did not get a reply.

Regarding the details of the arbitration, Lundy Pharmaceuticals said to the reporter, please pay attention to the official announcement of the relevant departments. In addition, the company always believes that any business behavior should be carried out in compliance and legally, as a responsible enterprise, the company has the obligation to safeguard its legitimate rights and interests. The company will invest sufficient resources and capabilities to continue research and development, continuous innovation, and bring more and better products to the society, to return the love of consumers.

In fact, Zhendong Pharmaceuticals and Lundy Pharmaceuticals have a long history. Lundy Pharmaceuticals was once a wholly-owned subsidiary of Zhendong Pharmaceuticals, and in August 2021, Zhendong Pharmaceuticals sold Lundy Pharmaceuticals at a price of 5.8 billion yuan, but the partnership between the two sides did not end.

On August 17, 2021, Lundy Pharmaceuticals and Zhendong Pharmaceuticals signed the Drug Entrusted Production Contract, agreeing that Lundy Pharmaceuticals entrusted Zhendong Pharmaceuticals with the production of Calcium Carbonate D3 Tablets (Ⅱ) and Calcium Carbonate D3 Granules, with the entrustment period taking effect from the date of delivery as stated in the Agreement on Sale of Equity Interests and valid for ten years.

According to the Agreement on Entrusted Production of Pharmaceuticals between the two parties in respect of “Disputes”, “In the event of disputes under this contract, both parties shall negotiate to resolve the disputes. If consultation fails, both parties may apply to the China International Economic and Trade Arbitration Commission for arbitration in accordance with the arbitration rules of the Commission in force at the time, with the place of arbitration being Beijing.” As of the disclosure date of the announcement, the case has not yet been heard.

In 2023, both parties were caught in the storm over “Lundy Calcium”.

In July 2023, the State Drug Administration website informed that, after Gansu Province Drug Inspection and Research Institute test, labeled as Beijing Zhendong Lundy Pharmaceutical Company Limited, Beijing Zhendong Lundy Pharmaceutical Company Limited commissioned by Shanxi Zhendong Pharmaceutical Company Limited, Beijing Zhendong Kangyuan Pharmaceutical Company Limited commissioned by Shanxi Zhendong Pharmaceutical Company Limited 24 batches of Calcium Carbonate D3 granules do not comply with the provisions of the program do not meet the requirements are Vitamin D3 content determination; 7 batches of Calcium D3 Carbonate Granules (Ⅱ) and 1 batch of Calcium D3 Carbonate Tablets (Ⅱ) commissioned by Beijing Lundy Pharmaceuticals Ltd. and produced by Shanxi Zhendong Pharmaceutical Co.

Three months later, Lundy Pharma was administratively penalized by Beijing Municipal Administration of Market Supervision for the unqualified drugs. Lundy Pharma was fined 134 million yuan, confiscated 6.18 million yuan of the illegal income and more than 54,000 boxes of the relevant products, and was ordered to suspend production and rectify the situation for 30 days.

When selling Lundy Pharmaceuticals, Zhendong Pharmaceuticals and the buyer agreed that, within ten years from the date of delivery, without the prior written permission of the buyer, Zhendong Pharmaceuticals and shall ensure that its controlling shareholder Zhendong Group, the actual controller Li Anping and their respective entities shall not, directly or indirectly, engaged in the production, research and development, and sales of calcium preparations, aminoglycose preparations, and vitamin D preparations related to the production, research and development and sales of the business.

After the sale of Lundy Pharmaceuticals, Zhendong Pharmaceuticals performance successive losses. 2022 and 2023, Zhendong Pharmaceuticals operating income of 3.729 billion yuan, 3.626 billion yuan, net profit of -51.29 million yuan and -43.98 million yuan, respectively.

According to the 2024 semi-annual report released by Zhendong Pharmaceuticals, Zhendong Pharmaceuticals realized operating income of 1.507 billion yuan in the first half of the year, a year-on-year decline of 22.05%; net profit of 30,657,500 yuan, a year-on-year increase of 110.81%; and non-deductible net profit of -30,764,500 yuan.

As to whether the future will cooperate with other enterprises to produce related products, Lundy Pharmaceuticals said that the company has always regarded integrity as the basis of business, focusing on providing high-quality, safe and secure products. The company also has an open attitude and is looking forward to reaching in-depth cooperation with all enterprises that share the same philosophy and goals.