(Yicai Global) April 5 -- About 18 months after Jinghua Pharmaceutical Group Co. [SHE:002349] took a stake in US biopharmaceutical company Kadmon Holdings, LLC [NYSE:KDMN], the former has decided to set aside provision for asset impairment on the available-for-sale financial assets in the first quarter of 2017 due to an over 50 percent decline in the US company's share prices.
Jinghua Pharmaceutical spent USD10 million to buy Kadmon's shares at a price of USD10.2 a share on Oct. 20, 2015, the company said today.
After Kadmon went public on the New York Stock Exchange, Jinghua Pharmaceutical classified its investment in the US company as available-for-sale financial assets measured at fair value, the statement said. Kadmon's share price was USD3.70 on March 31, 2017, down more than 50 percent.
Pursuant to the 'Accounting Standards for Enterprises,' Jinghua Pharmaceutical needs to set aside provision for asset impairment on the available-for-sale financial assets, which will cause net profit attributable to shareholders of the listed company to fall by CNY33.27 million (USD4.8 million) in the first quarter of this year, the company stated.
Without the provision, its net profit would grow 45 to 60 percent to CNY60.44 million to CNY66.71 million in the first quarter of 2017 from a year ago, it added. Due to the provision, however, its net profit is expected to fall 20 to 35 percent from the previous year to CNY27.17 million to CNY33.44 million.
The target company is a firm engaged in the research, development and investment of biomedical technologies and boasts certain characteristics, said an earlier statement issued by Jinghua Pharmaceutical when it announced its Kadmon investment in October 2015. The investment can help Jinghua Pharmaceutical establish presence in the biopharmaceutical industry and build sound partnerships with Kadmon.