Tiansheng Pharmaceutical recently received a positive development amid ongoing repercussions from a past financial reporting scandal. The company announced that its wholly-owned subsidiaries, Hubei Tiansheng Pharmaceutical Co., Ltd. and Hunan Tiansheng Pharmaceutical Co., Ltd., participated in the procurement process for medicines including Diclofenac, with six products expected to be selected.

This news brings a glimmer of hope to ST Tiansheng, which has faced regulatory sanctions and operational losses in recent years. On September 12, the Chongqing Securities Regulatory Bureau revealed the severe financial fraud linked to ST Tiansheng through an administrative penalty pre-notice, which cited the company for inflating profits and concealing related-party transactions.

According to lawyer Liu Peng from Shanghai Huzhi Law Firm, the compensation claim window for investors is open for those who purchased shares between April 23, 2018, and January 8, 2025, and who sold or continue to hold these shares at a loss after January 9, 2025.

The company had falsely reported profits of approximately 120 million yuan over 2017 and 2018, employing tactics such as extracting project funds from Taihong Company and inflating procurement costs through a wholly-owned subsidiary to create an off-balance-sheet fund pool, thereby inflating profits. Significant omissions in the company's annual reports for 2017 and 2018 stemmed from the lack of disclosure regarding its financing relationships with Taihong Company and various related parties controlled by its actual controller, Liu Qun.

The potential selection of these six products for Guangdong's procurement may serve as an opportunity for ST Tiansheng's business recovery. Nevertheless, the underlying challenge remains: how to restore market trust and re-establish compliant operations. Investors should not only focus on immediate positive news but also closely monitor the company's internal reforms and the sustainability of its future operations.