Huangshi Shi Xing Pharmaceutical Co., Ltd. 2021 Social Responsibility Report

I. Company Overview

Huangshi Shi Xing Pharmaceutical Co., Ltd. was formerly Huangshi No. 4 Pharmaceutical Factory, established in 1992, with a 30-year history in the production of chemical raw materials for pharmaceuticals. In 2003, the company was reorganized and renamed Huangshi Shi Xing Pharmaceutical Co., Ltd. in partnership with Hubei University of Technology. In 2012, the company underwent equity restructuring, forming a new joint-stock enterprise with Jinpai Co., Ltd., Guangdong Kubo Investment Co., Ltd., and company management.

The company is a national-level "High-tech Enterprise," "AAA Credit Enterprise," Hubei Province's pillar industry sub-sector "Hidden Champion" and "Technology Small Giant Enterprise," and a Hubei Province "Specialized, Refined, and Unique" small giant enterprise.

The company has focused on the research and development and production of chemical pharmaceutical raw materials for nearly 30 years. It possesses production and testing facilities, equipment, instruments, and supporting facilities that meet the standards of China's Good Manufacturing Practice (GMP) for pharmaceuticals. It has a complete raw material pharmaceutical R&D and pilot test platform. It has passed ISO9001 quality, ISO14001 environmental, and ISO45001 occupational health and safety management system certifications. It has independent import and export rights. The company's technology center was recognized as a "Hubei Provincial Enterprise Technology Center" in 2019. Through independent R&D and industry-academia-research cooperation, it has obtained a number of core technologies. The quality of its main products meets international advanced standards such as the United States Pharmacopeia (USP) and the European Pharmacopoeia (EP). Currently, it holds 29 authorized patents, including 6 invention patents.

The company's main products include more than ten raw material pharmaceutical varieties, such as macrolide antibiotics, antipyretics and analgesics, non-steroidal anti-inflammatory drugs, brain metabolism improvers, cardiotonic drugs, proton pump inhibitors, and antiviral ophthalmic drugs. 70% of its products are exported to international markets. It has exclusive international rights to five macrolide antibiotic varieties (azithromycin, clarithromycin, roxithromycin, erythromycin estolate, and erythromycin ethylsuccinate), with production and sales volumes ranking among the top globally, antipyretics and non-steroidal anti-inflammatory drug dextropropoxyphene naproxen is domestically produced exclusively, accounting for 85% of the international market share.

The company adheres to the philosophy of "people-oriented, focusing on health, striving for excellence, and green development." It is committed to the development of the pharmaceutical raw material industry and the human health cause, striving to build a world-class pharmaceutical enterprise.

II. 2021 Production and Operation Overview

In 2021, Huangshi Shi Xing Pharmaceutical Co., Ltd. continued to pursue high-quality development, continuously promoting technological transformation for high-quality development. It implemented intelligent transformation of solvent recovery, capacity expansion and upgrading of clarithromycin, and upgrading of organic waste gas collection and treatment. The company's automation, green production level, and production capacity were further improved. Marketing closely followed market dynamics, seized market opportunities, and increased efforts to develop domestic and foreign customers. The company achieved new sales performance   achieving annual sales revenue of 408.85 million yuan, with independent exports of US$35 million and profits and taxes of 30 million yuan.

In 2021, the company's raw material drug production reached 750 tons. The production and sales volume of macrolide antibiotics remained second in both domestic and international markets. It was rated as a Hubei Province "Specialized, Refined, and Unique" small giant enterprise. Azithromycin submitted for EU market (CEP) certification, and the innovative process of azithromycin won the third prize of Hubei Provincial Science and Technology Progress Award.

III. Employee Rights Protection

  1. Employee Benefits

Employees are the cornerstone of the company's value growth and sustainable development. The company adheres to a people-oriented approach, fully respecting the personality and individuality of employees, understanding, caring for, and trusting them; striving to provide a platform for employees to showcase their talents and striving to provide more opportunities for their personal career development.

The company strictly abides by laws and regulations such as the "Labor Law of the People's Republic of China" and the "Labor Contract Law of the People's Republic of China," legally protecting the legitimate rights and interests of employees and promoting harmonious and stable labor relations. All major decisions of the company must go through a democratic decision-making process, and through democratic discussions, open enterprise affairs supervision columns, and employee rationalization suggestion platforms (corporate WeChat), continuously expanding and improving communication mechanisms, fully listening to the opinions and suggestions of employees. Company employees implement post-performance wages, establishing a profit-centered salary distribution model based on the company's business strategy and goals, with annual salary increases for all employees and additional adjustments for outstanding performance.

The company has established an employee social insurance system and provident fund in accordance with national, provincial, and municipal insurance policies, and promptly pays employees' pensions, unemployment, work-related injury, medical, maternity insurance, and provident fund.

During the hot season, the company provides drinks and mineral water to frontline employees every day, and each workshop is equipped with heatstroke prevention medicines. The canteen prepares mung bean soup, etc.

Improving employee welfare and improving employee dining, the company comprehensively supervises the restaurant's meals from the source of ingredient procurement to the final quality, quantity, hygiene, and price of the meals, ensuring that employees eat well; implementing WeChat group reporting for meals, implementing monitoring, and weekly checks at least twice to check the canteen's hygiene, procurement vouchers, sample records, variety, quantity, and quality of meals, further ensuring the quality and quantity of meals. The company subsidized dining employees a total of 1.48 million yuan throughout the year.

2. Employee Training

Closely focusing on the company's development plan and new management concepts, the 2021 training plan was effectively formulated and implemented, the "Training Management System" was revised and improved, the continuous training methods and management model were improved, and the methods and content of all-staff training, key job training, and management personnel training were innovated, improved, and enriched, continuously guiding self-motivated training, innovation, and efficiency-enhancing activities.

(1) Strengthen Employee Skills Training

A total of 13 company-level training sessions, 60 thematic training sessions, 4 thematic training classes, and 188 department-level training sessions were held throughout the year. Training mainly focused on process, technology, quality, safety, environmental protection, and professional skills. At the same time, the company sent 11 people for external training, including 2 for long-term external training and 2 for talent recuperation.

(2) Specific Training as Follows

Company-level large-scale training (Shixing Training Day) ： According to the "Huangshi Shixing Pharmaceutical 2021 Annual Training Plan," 12 "Shixing Training Days" should be held throughout the year. Currently, 13 training sessions have been completed on topics such as "Safety Production Knowledge," "Enterprise Strategic Planning Analysis," and "Advanced Cultivation for Grassroots Managers."

Thematic Training ： According to the "2021 Annual Training Work Plan," 60 thematic training sessions should be held throughout the year. Currently, 60 training sessions have been conducted on courses such as "Document and System Learning," "Analysis of Common Problems in GMP and On-site Inspections," "International Settlement Business Knowledge," "Correspondent Training," and "Cost Management Knowledge for Team Leaders," achieving the training's predetermined goals.

Departmental Training ： Based on the "Departmental Training Plan for 2021" formulated by each department at the beginning of the year, each department conducted 188 training sessions on 289 courses, including "Document Study," "Basic Knowledge of Microbiology," "2021 Annual Work Plan and 2020 Summary," "Attendance and Leave Management System," "Employee Welfare Management System," "Goal and Performance Management," "Fault Identification and Handling of High-Performance Liquid Chromatography," "Quality Management and Company Product Knowledge Learning," "Lean Production and 6S," "Hubei Province's Implementation Measures for Emergency Response to Production Safety Accidents," "Cash Flow Statement and Discontinued Operations," and "Normative Accounting of Period Expenses." All departmental training plans have been completed.

The first session of the Shixing Pharmaceutical Group Leader Training was held. To help grassroots group leaders improve their job competence and better fulfill their responsibilities in personnel management, safety management, and quality management in group management, the Human Resources and Administration Department organized a special training program for workshop group leaders and reserve personnel in May and June. A total of 37 trainees participated in this training, all of whom passed the final examination and received training certificates.

The fourth "Future Stars" training camp was held. This training was for college students in management, technology, and production reserves who joined in 2021. There were 14 participants, all of whom successfully completed the training after passing the final examination.

(3) Focus on the cultivation of reserve talents

Establishment of an internal lecturer team. To effectively carry out various company training programs and promote internal experience exchange and knowledge sharing, the Human Resources and Administration Department established an internal lecturer team in November 2021. 25 professional backbones within the company, including Tang Xueliang, were appointed as the company's first batch of lecturers, and course development was completed.

Optimization of college student training model. In order to standardize the management of reserve college students and improve the retention rate and training efficiency of reserve college students, a "step-by-step" training model for college students was implemented from September 2021. The introduced reserve college students are trained according to the "1+2+6" training model (1 month of on-the-job training in the production workshop, 2 months of cross-departmental internship, and 6 months of pre-job training). Currently, college students introduced in the second half of 2021 have been trained according to this model, and the implementation effect is good.

(4) The training effect is tested through appraisal, and advanced individuals are rewarded to play an incentive role.

Each quarter, through appraisal, 45 key jobs with good training from 9 key production units are selected and given quarterly awards, which promotes the enthusiasm for basic training; each quarter, 11 studios are evaluated and rewarded for their training, which motivates the studios to actively and spontaneously carry out training and create efficiency. Li Qinghai's studio was named the Xinyang City Skills Competition Studio.

(5) The annual internal professional title evaluation and labor skills competition were held.

In order to stimulate employees' enthusiasm for work and improve their business skills, a working atmosphere of "comparison, learning, catching up, helping, and surpassing" has been created within the company, and skills training activities have been carried out in various departments and workshops through competitions. Through labor skills competitions, internal professional titles for production workshop employees and environmental protection workshop employees are evaluated, encouraging front-line employees to take the path of professional development. In 2021, the annual internal professional title evaluation and labor skills competition were held, with 324 people participating in the labor skills competition and 209 people being awarded senior, intermediate, and junior internal professional titles.

(6) The 2021 annual commendation meeting was held.

10 departments and groups and 27 individuals received awards and commendations. 12 innovative projects and key topics received awards and commendations, with a total reward amount of 300,000 yuan.

In 2021, one person in the company won the District Craftsman award, and two people were recognized as district high-skilled practical talents. General Manager Zhang Xiangyang was elected as a member of the Municipal People's Congress and the District Political Consultative Conference, a Huangshi City expert with outstanding contributions, and the Zhang Xiangyang (model worker) innovation studio was recognized as a Huangshi City model worker innovation studio.

IV. Supporting rural revitalization and employee condolence work

In 2021, the company made outstanding contributions to Huangshi City's "Two Helps, Two Assists," "Three Stabilize, One Send" precision poverty alleviation campaign and was commended as an advanced private enterprise in Huangshi City's "Precision Poverty Alleviation, Private Enterprise Assistance" campaign. In 2021, the company supported the development zone Tieshan District Taizi Town Zhangpu Village, providing 150,000 yuan in education poverty alleviation funds to support rural revitalization, used for the renovation of the village primary school roads and canteen, and purchased more than 20,000 yuan worth of agricultural products. At the same time, the company's other poverty alleviation and procurement of poverty alleviation agricultural products amounted to 180,000 yuan in 2021.

The company organized visits and condolences to employees who were sick or had weddings or funerals, and a total of 31,000 yuan in condolence money was distributed throughout the year.

V. Product Quality Management

  1. Fully launched the EU certification work

This year, the company established an EU certification team, invited an external international quality management expert team for guidance, comprehensively promoted benchmarking self-examination work according to EU certification requirements, upgraded the quality management document system, and accelerated its progress towards the high-end regulated market of the EU.

2. Registration and declaration work has made substantial progress

This year, the re-registration applications for 7 products, including azithromycin, were completed and certificates were obtained; the application materials for the azithromycin CEP certificate were submitted, achieving phased results.

3. Effectively promote domestic customer related declaration work

This year, the focus was on domestic customer related declaration work, and the azithromycin related consistency evaluation data has been successfully submitted; the consistency evaluation of milrinone has been successfully linked.

4. Develop and validate test methods to improve testing capabilities

This year, the method validation of the genotoxic impurities hydroxylamine, methyl methanesulfonate, and benzene in the foreign application data of dihydroerythromycin was completed, improving the company's self-testing capabilities.

VI. Energy conservation, emission reduction, and environmental protection project construction

1. Wastewater discharge compliance rate

All met the standards in 2021.

2. The "production closure, waste gas harmlessness" transformation project is basically completed

In order to effectively implement the classification and treatment of workshop production waste gas and ensure the compliance of the company's production waste gas emissions, with the cooperation of the relevant departments of the company, after nearly half a year of basic construction and equipment installation, by March 25, 2021, the workshop waste gas pipeline collection project and the newly added RTO project equipment installation were all completed; by May 25, both projects had been completed and put into stable operation. Thus, the company's "production closure, waste gas harmlessness" transformation project has achieved phased results. It effectively solved the problems of non-compliance with the treatment of the company's production waste gas, large consumption of production solvents, and the risk of explosion of flammable gases in the production process.

3. Completion of the signing of the strategic cooperation agreement for the disposal of hazardous waste from the company

To reduce the company's hazardous waste disposal costs and improve the long-term stability of hazardous waste disposal, in March 2021, a business investigation team composed of relevant personnel from the company's finance department, procurement department, and safety and environmental protection department was organized to conduct on-site inspections and business negotiations with three pre-selected hazardous waste disposal companies in the province with strong comprehensive disposal capabilities. Through a comprehensive comparison of the operating conditions, disposal capabilities, and prices of each company, two companies were ultimately selected as strategic partners for the packaged and entrusted disposal of all types of hazardous waste from the company.

4. Complete the technical modification and overhaul of the Phase I RTO exhaust gas incineration furnace.

Due to the influence of a large amount of residual organic solvents in the company's exhaust gas components, serious local corrosion problems (such as the lower box) occurred in the Phase I RTO exhaust gas treatment facility, which significantly affected the stable operation of the RTO system and posed significant environmental and safety hazards. This upgrade and transformation focuses on combining the advantages of the Phase II new RTO technology improvements. The furnace body is raised as a whole to facilitate the discharge of liquid accumulation at the bottom of the furnace; the inlet and outlet valves are changed to gas-sealed leak-proof valves; the heat storage chamber adds a saddle ring layer to facilitate the cleaning of blocked heat storage bodies; the corrosion resistance grade of the lower box body material is upgraded, and the anti-corrosion layer is upgraded, etc. As of August 17, the project transformation and construction have been fully completed. On August 18, the Phase I RTO exhaust gas incineration system began preheating, air intake, and parallel commissioning. The operation is currently good, and the upgrade and transformation have been very successful.

5. Establish a normalized analysis mechanism for monthly water use and discharge balance in the company.

Although the company reads the water meters of various departments (workshops) every month, it has not been able to systematically analyze the water use and discharge by combining the amount of wastewater discharged by each department (workshop), and find out the possible problems. This year, the safety and environmental protection department has conducted statistical analysis of the water use and discharge data of each department (workshop) every month, and conducted a balance analysis. According to the analysis results, departments (workshops) with unbalanced water use and discharge are required to investigate the existing problems and make corresponding improvements. The establishment of a monthly water use and discharge balance analysis mechanism helps various departments (workshops) to investigate and rectify unclear water sources and unclear wastewater discharge. It promptly corrects the phenomenon of water waste and investigates and rectifies the possible situation of mixed sewage discharge to achieve the purpose of energy saving and emission reduction.

6. Continuously promote the verification work of high-salt and difficult-to-biodegrade wastewater treatment technology.

This year, according to the verification results, it has been determined that the electron beam irradiation pretreatment technology has a significant effect on improving the biodegradability of the company's high-amine salt wastewater, with high investment cost-effectiveness and overall feasibility of the technology, and can basically meet the company's current high-salt wastewater treatment requirements, thus laying the foundation for the research on the disposal scheme and technical route of the company's difficult-to-biodegrade wastewater. Next, in conjunction with the company's decisions, we will collect, hear, and implement the project technical plan.

VII. Safety and Environmental Protection Work

In 2021, the company adhered to the concepts of safe development, green development, and clean production, established the idea of putting life first, safety first, and environmental protection first, taking the safety production standardization and HSE system operation as the main line, and the construction of the double prevention system for safety risks and hidden dangers as the starting point; adhering to the principle of moving the pass forward, source governance; moving the center down, consolidating the foundation; and directly transferring responsibility, and the management principle of full responsibility, severely cracking down on daily three violations and hidden danger investigation and governance, internal environmental site governance, and comprehensively implementing the company's in-depth governance of the environmental site, providing strong support for the company's production and operation and development.

1. Production Safety Accidents

In 2021, the company's overall safety production was stable, with no major or above production safety accidents, and no administrative penalties due to dereliction of duty.

2. Identification and Control of Risk and Hazardous Factors

In 2021, a total of 2409 hazardous factors were identified, including 0 Level 1, 248 Level 2, 347 Level 3, and 1814 Level 4. The total number of hazard sources decreased by 29.56% year-on-year compared with 2020, the total number of Level 2 and above risks (unacceptable risks) remained basically balanced, the total number of Level 3 risks decreased by 34.03%, and the total number of Level 4 risks decreased by 31.23%.

3. Hidden Danger Investigation

In 2021, various company-level special inspections were organized, including special inspections involving dangerous chemicals, safe electricity use, special operations, unacceptable risks, tank areas, post operations, labor protection supplies, special operation certificates, etc.; regular business inspections involving the flood season, summer, autumn, major holidays, and old factory areas were all carried out in accordance with the "five fixed" principles of hidden danger investigation and governance, and rectification and review were urged. At the same time, with the continuous deepening of the company's safety production management, the management methods of hidden danger investigation and governance have also been adjusted. For many "immediate rectification" problems on site, the focus is on on-site solutions; at the same time, the hidden dangers are transformed from "small hidden dangers" on site to "fundamental problems", gradually deepening the hidden dangers from the "execution level" to the "management level", and the hidden danger investigation work continues to shift from quantity to quality.

4. Complete the sorting and rectification work of key links involving flammable and explosive materials.

In order to comprehensively reduce the explosion risk at the production site, this year, firstly, for solvent feeding (extraction), especially the extraction pipe in the purification area, the original plastic transparent soft tube was changed to a conductive soft tube, and OPL was made and posted at the corresponding post, included in the daily management control points of the workshop (team), and strictly regulated employee operations. Secondly, the nitrogen protection function of the scraper centrifuge with nitrogen protection function was restored to control the explosion risk of the centrifuge; the production department has formulated the "Operation Procedure for Nitrogen Replacement of Reaction Kettles" to guide the workshop to operate correctly, implemented full staff training, and avoided human body and production static electricity hazards during operation by "isolating oxygen". Thirdly, new feeders were added to the synthesis area and solvent feeding tanks in the production workshop, and direct opening and feeding operations were not carried out to reduce the risk of static electricity causing organic gas explosions. Fourthly, various new electrostatic protection tools such as sound and light alarm and human body electrostatic wristbands were purchased and used to further reduce the risk of static electricity. Fifthly, assist workshops 2 and 5 in completing the setting of "explosion-proof humidifiers", further reduce the generation of static electricity through more professional on-site humidity control, and thus reduce the risk of static electricity accidents.

5. Implement the work of improving the safety production skills of all employees.

In order to improve the safety production skills of all employees, in accordance with the requirements of the "Implementation Measures for the Action to Improve Safety Skills in High-Risk Industries in Hubei Province", this year, the company organized the completion of the re-examination of 15 safety management personnel (special operations) certificates, added 79 people, and conducted training courses for 132 people to improve safety production knowledge and skills. At the same time, in order to ensure the effective implementation of team safety education activities, an optimization plan was formulated to clarify that each team adopts 1+1, that is, a combination of fixed topics and self-selected topics to promote grassroots safety education work, and monthly inspection and reporting are carried out to ensure work effectiveness.

6. Complete the construction and promotion work of the central gatehouse.

In order to further standardize the management of the company's production area, in view of the company's current situation, the "Implementation Plan for the Company's Concentrated Changeover and Communication Security Management in the Production Area" and the "Plan for Promoting the Management of the Central Gatehouse" were successively discussed and formulated, and implemented through on-site discussions and special meetings. From October onwards, the central gatehouse was officially put into use, realizing the functions of centralized changeover of employees outside the production area, centralized control of mobile phones, and supervision of personnel entry and exit. The micro-fire station and video surveillance system have also been transferred to the central gatehouse, further improving fire emergency response and employee behavior management capabilities.

7. Completed the safety pre-evaluation and design work for the company's "closed production, harmless waste gas" transformation project

To ensure the safety and controllability of the company's clean and safe production transformation project, in accordance with the "three simultaneous" management requirements, the project's "Safety Pre-evaluation Report" and "Safety Design Special Section" were completed and passed expert review within the year, ensuring the smooth progress of the project.

8. Upgraded the management measures for special operations

The company has a large number of special operations, which are prone to fire accidents. Aiming at the weaknesses of special operations, the Safety and Environmental Protection Department, combining actual conditions, revised the responsibility management content and execution standards of local units, operating units, and relevant personnel, further clarified the flammable and explosive hazardous areas within the company, and supplemented the eight basic requirements for operations; according to the provincial department's requirements on operation video management, work requirements were added; supplementary requirements for the assessment of irregular operations were added, and four explosion-proof law enforcement recorders were equipped for on-site employee behavior control, further strengthening the control measures for special operations.

9. Actively promote the greening and beautification of the factory area, striving to create a garden-style green factory

In 2021, the landscape transformation projects of the south and north gates of the factory area were completed, with a total investment of more than 200,000 yuan, making the factory environment more coordinated and increasing the green coverage rate.

10. Improve the self-monitoring system and on-site monitoring to ensure that the company's emissions meet standards and comply with national environmental protection requirements

The company actively cooperates with third-party monitoring institutions to complete the monitoring of particulate matter, VOCs, SO2, and NOx at key waste gas emission points according to the annual monitoring plan, and to complete the monitoring of COD, ammonia nitrogen, and other indicators at the factory's wastewater discharge outlets according to the annual monitoring plan. Unorganized waste gas and noise detection was carried out in the surrounding environment of the factory area. The emission concentrations of waste gas and wastewater pollutants meet the emission standards. The monitoring results of pollutants discharged from the company's key waste gas treatment facilities, the unorganized monitoring results of factory boundary dust, and the quarterly monitoring results of factory boundary noise will be published on the municipal environmental self-monitoring platform to ensure the smooth progress and compliance of the company's environmental protection monitoring work. At the same time, the installation and acceptance of online monitoring facilities for wastewater and waste gas were completed and filed with the environmental protection department, ultimately ensuring the compliant operation of online monitoring facilities for wastewater and waste gas.

11. Actively cooperate with and fully accept inspections and supervision by environmental protection departments at all levels

Throughout the year, we accepted and cooperated with inspections, investigations, and monitoring work by provincial, municipal, and local environmental protection departments more than 10 times. We entrusted a professional third-party maintenance company to conduct regular maintenance and calibration of online monitoring facilities for wastewater and waste gas to ensure the accuracy of the company's online monitoring data for wastewater and waste gas.

On May 24, 2021, the Huangshi City Key Industry Volatile Organic Compound Governance Experience Exchange Meeting was held at our company. The attending leaders, experts, and enterprise representatives learned about the company's volatile organic compound collection and governance technology and visited the case of using regenerative thermal oxidation to treat volatile organic compounds. Through on-site experience, they understood the excellent results achieved by the company in the governance of volatile organic compounds, and the attendees gave consistent praise to the company's achievements in the governance of volatile organic compounds. On December 2, 2021, our company and the Huangshi Municipal Ecological Environment Monitoring Center of Hubei Provincial Ecological Environment Department conducted a sudden environmental event drill at the factory area, which was successfully completed and received recognition from the superior departments.

Huangshi Shi Xing Pharmaceutical Co., Ltd.

March 10, 2022