The announcement shows that Ouhe Bio has authorized Huaheng Bio to use the related technology of “fermentative production of succinic acid”. The nature of the technology license is an exclusive implementation license, and the exclusive implementation license period is 20 years. From the year that Huaheng Bio uses the technical achievements agreed in the contract to achieve industrial production, it will pay 0.5% of the sales (tax included) of the terminal products produced by using the technical achievements in each natural year to Ouhe Bio. The term of the license fee is 10 years, and no industrialization commission will be paid for the remaining term of the exclusive license period.

Founded in 2021, Ouhe Bio is mainly engaged in the start-up research and development of synthetic biology-related technologies. Guo Henghua, the controlling shareholder, actual controller, chairman and general manager of Huaheng Bio, holds 40% of the equity of Ouhe Bio, and Zhang Dongzhu, the company’s director and deputy general manager, holds 25% of the equity of Ouhe Bio, and the company’s director, deputy general manager and secretary of the board of directors And Fan Yi, the head of finance, holds a 25% stake in Ouhe Bio. Ouhe Biological is a related legal person of the listed company, so this technology licensing transaction constitutes a related transaction.

As one of the world’s leading companies in the large-scale production of small varieties of amino acid products through biological manufacturing, Huaheng Bio achieved revenue of 629 million yuan in the first half of 2022, a year-on-year increase of 65.66%; net profit was 129 million yuan, a year-on-year increase of 107.6%.

Huaheng Bio said that by the end of 2021, several domestic enterprises are engaged in the production and sales of succinic acid. Among them, Shandong Landian Biotechnology Co., Ltd. adopts biological fermentation process, and most other companies use petroleum-based processes to produce succinic acid such as electrolysis. or hydrogenation. The biological fermentation process is more favored by downstream customers than the petrochemical route due to its green and renewable raw materials and green manufacturing process.

In 2021, the domestic demand for succinic acid will be about 30,000 to 50,000 tons, mainly used in degradable plastic PBS, food, medicine, and agriculture industries, of which more than 50% are used in degradable plastic PBS. With the tightening of national environmental protection policies and the strengthening of restrictions on the use of non-degradable plastics, domestic degradable plastics are ushering in explosive growth. The investment and expansion of the degradable plastic PBS will drive the rapid growth of the demand for succinic acid, especially the biological fermentation succinic acid. It is estimated that the domestic demand for succinic acid will exceed 200,000 tons in 2025.

In this context, Huaheng Biology stated that the company has established a technical research and development chain of “industrial strains-fermentation and extraction-product application”. The complete technological leadership has good basic conditions for the industrialization of succinic acid production by fermentation. In the follow-up, the company will actively promote the upgrading and iteration of the bio-manufacturing process of the fermentation succinic acid technology, and will accelerate the industrialization of the fermentation succinic acid project when the relevant technical conditions are mature. In the long run, this transaction will help the company to enrich its product structure, create new profit growth points, and speed up the company’s development, which will have a positive impact on the company’s long-term development.

However, Huaheng Co., Ltd. also stated that the relevant technology for the production of succinic acid by fermentation has not been produced on a large scale, and it is uncertain whether it can achieve the expected effect. This in turn adversely affects the company’s earnings from this transaction.