▍Source: Minounet Author: Bai Yu
In October 2016, Cr Pharma was listed in Hong Kong, and as a leading integrated pharmaceutical company in China, its every move has attracted much attention. A few days ago, Cr pharma disclosed the results of the first half of 2019, with revenue exceeding HK$100 billion and gross profit reaching HK$17.434 billion. In addition, its four A-share listed companies, China Resources Shuanghe, China Resources Sanjiu, Jiangzhong Pharmaceutical and East Ejiao, also disclosed semi-annual reports, of which THE net profit of CR Sanjiu was as high as 1.722 billion yuan, an increase of 108.39% year-on-year; non-infusion of Crus Shuanghe accounted for more than 60% of revenue; Jiangzhong Pharmaceutical's revenue and net profit growth exceeded 10%; and Dong'e-e-e-jiao's ejiao series products accounted for nearly 80% of revenue.
Organizational Structure of CR Pharmaceuticals
China Resources Pharmaceutical: Revenue in the first half of the year exceeded 100 billion
Revenue of CR Pharma from January to June 2019 (Unit: HK$1,000)
In the first half of the year, CR Pharmaceutical's revenue was HK$101.923 billion, an increase of 8.7% year-on-year, and the three major business segments of pharmaceuticals, pharmaceutical distribution and pharmaceutical retail accounted for 15.5%, 81.5% and 2.9% respectively. In addition, gross profit reached HK$17,434 million, up 3.3% year-on-year, while overall gross margin was 17.1%, down 0.9% year-on-year, mainly due to faster revenue growth in the distribution business than the pharmaceutical business.
Pharmaceuticals: Revenue of HK$17,367 million, up 2.9% year-on-year
In the pharmaceutical business, the revenue of chemical drugs was HK$8.463 billion, an increase of 5.3% year-on-year, mainly due to the increase in revenue from chronic diseases and specialty drugs; the revenue of Chinese medicines was HK$7.487 billion, basically flat year-on-year, mainly due to the increase in revenue from Chinese medicine OTC products and Chinese medicine formula granules in many categories such as colds, gastrointestinal, orthopedics and cardiovascular and cerebrovascular diseases, and benefiting from the impact of the merger and acquisition of Jiangzhong Pharmaceutical; while the revenue of biological drugs was HK$106 million, an increase of 19.7% year-on-year, mainly due to the optimization of the marketing system Revenue from nutraceuticals was HK$328 million, up 7.0% year-on-year. It is worth mentioning that after the completion of the acquisition of Jiangzhong Pharmaceutical, the Group's market leadership position in the self-diagnosis and treatment business (including OTC products and nutraceutical products business) has been further strengthened.
All along, CR Pharmaceutical has taken R&D innovation as an important driving force for long-term development and continued to increase R&D investment. Total R&D expenditure in the first half of the year was HK$658 million, and as of June 30, 2019, there were about 200 research projects, including 45 innovative drug research projects, mainly involving the cardiovascular system, metabolism and endocrinology, respiratory system, oncology and immunity, mental nervous system, anti-infection and other research and development areas. Irinotecan hydrochloride (nano) micelles for injection were clinically licensed, moxifloxacin hydrochloride eye drops submitted a production registration application, and two products, chewable aluminum carbonate tablets and acetaminophen oral solution, were approved for production, further enriching the product line of the pharmaceutical business. In addition, it has also introduced a number of varieties under research with clinical value and market value from home and abroad, mainly involving ophthalmology, cardiovascular, anti-tumor and other therapeutic fields, including 5 Class 1 chemical innovative drugs and 1 biosimilar drug.
In terms of consistency evaluation, more than 40 special projects have been focused on, of which more than 20 projects are 289 varieties outside the catalog. 8 projects have carried out bioequivalence clinical trials, 9 varieties have completed bioequivalence clinical trials, including valsartan capsules, mifepristone tablets (0.2g), misoprostol tablets, montmorillonite powder and other varieties have been declared, sodium sulpatan for injection, bovine lung surfactant for injection have been declared reference preparations. In January this year, mifepristone tablets (10 mg and 25 mg) passed the consistency evaluation and obtained the national reference preparation qualification; in April 2019, metformin extended-release tablets passed the consistency evaluation. By the end of the reporting period, a total of 5 products had passed the consistency evaluation.
Pharmaceutical distribution: Revenue of HK$84,949 million, up 9.5% year-on-year
In recent years, CR Pharmaceutical's distribution business has conformed to the market trend, accelerated the expansion of medical terminals, strengthened the construction of prefectural and municipal platforms, network sinking and grass-roots market penetration, promoted the development of multiple formats in advantageous areas, and increased the market share of terminals; the business structure has been continuously optimized, and the proportion of direct sales revenue to medical institutions in distribution business revenue has continued to increase to about 78%. As of June 30, 2019, the pharmaceutical distribution network has covered 28 provinces, municipalities directly under the central government and autonomous regions across the country, including 6,862 second- and third-level hospitals, 53,640 primary medical institutions, and 35,888 retail pharmacies. In addition, there are 185 logistics centers. The gross margin of the pharmaceutical distribution business was 7.0%.
It is worth noting that CR Pharmaceutical has accelerated the professional development of medical device distribution business, with the scale of device business increasing by more than 50% year-on-year (RMB caliber), establishing independent medical device companies in more than 10 provinces, carrying out SPD business in Shandong, Guangdong and Jiangsu provinces, and introducing 5 enterprises such as Terumo and Med-Zenith to carry out unified procurement and distribution business. In addition, it also actively optimizes the e-commerce platform and accelerates the layout of Runyao Mall, which has been launched in 14 provinces, with transactions of nearly HK$10 billion in the first half of the year, with a cumulative number of more than 20,000 active customers; exploring the Runyao cloud formula, connecting medical institutions with social pharmacies or primary medical care, and realizing the orderly and safe circulation of prescription information and the dual-guide flow. As of June 30, 2019, it has provided hospital logistics intelligent integration (HLI) services to more than 300 hospitals, and has implemented 10 regional drug intelligent management (NHLI) projects.
Pharmaceutical Retail: Revenue of HK$2,946 million, up 19.2% year-on-year
The gross margin of CR Pharma's retail business was 12.7%, down 3.6 percentage points year-on-year, mainly due to the rapid growth of the high-value direct drug delivery business (DTP) with relatively low profit margins. As of June 30, 2019, there were 842 retail pharmacies. In the first half of this year, we further strengthened brand building and retail store layout; completed the construction of the collection system platform, and completed the docking with Zhejiang Beida, Junshi Bio and other manufacturers; actively carried out innovative business models such as DTP and chronic disease management, expanded e-commerce business, traditional Chinese medicine medical and cross-border shopping business, and carried out business cooperation with WeChat and Jingdong. DTP pharmacies have reached 150, covering 76 cities in China.
For future strategic planning, CR Pharmaceutical said that it will focus on core areas, strengthen brand advantages, enrich product portfolios, and promote the transformation and upgrading of pharmaceutical business; strengthen advantageous areas, optimize business structure, and build intelligent pharmaceutical supply chain service providers; continue to optimize the innovative research and development system, build a platform for biopharmaceutical innovation technology, and accelerate the acquisition of high-quality products; accelerate epitaxial development and consolidate competitive advantages through various ways; expand international cooperation, obtain high-quality resources and advanced technologies, and enhance comprehensive competitiveness Promote business collaboration and resource integration, and optimize resource allocation and operational efficiency.
CR 39: Take the initiative to transform and upgrade, and strive to achieve sustained and high-quality business growth
The main business of CR Sanjiu in the first half of 2019 (unit: 10,000 yuan)
In the first half of the year, CR Sanjiu achieved operating income of 7.167 billion yuan, an increase of 10.73% year-on-year. Among them, the operating income of self-diagnosis and treatment (CHC) business was 3.695 billion yuan, an increase of 11.97% year-on-year, and the operating income of prescription drug business was 3.102 billion yuan, an increase of 9.01% year-on-year. Net profit was RMB1.722 billion, an increase of 108.39% year-on-year, including investment gains of approximately RMB680 million (after tax) from the sale of equity interests in subsidiary Sanjiu Hospital.
Self-diagnosis and treatment (CHC) business: colds, gastrointestinal categories achieved rapid growth, skin categories performed steadily, and "Easy Good Fu" continued to maintain a good growth trend in hospital and retail dual channels. At the same time, the company actively embraces the trend of consumption upgrading, takes consumers as the center, carries out product upgrading and new product development, and lists a number of products such as arginine ibuprofen granules, loratadine syrup, puddish blue anti-inflammatory tablets, ginchild clear pharyngeal granules and so on. In terms of the big health business, the company has built a combination of health brands based on different customer groups and categories. In terms of rehabilitation of chronic diseases, around the Lihuan ace blood plug soft capsules, carry out process and product strength improvement, relying on the resource advantages of Sanqi production area, improve the in-depth development and recycling research program of Sanqi whole plant, extend the industrial chain of Sanqi, and gradually introduce products suitable for chronic disease management and broaden the product line. In terms of terminal coverage, the company further promotes channel sinking and wider coverage, focuses on strategic cooperation with chain customers, and increases the proportion of directly controlled terminals.
Prescription drug business: In the first half of the year, the Chinese medicine formula granule business achieved rapid growth; Chinese medicine injection reversed the downward trend and achieved a slight growth, after adjustment in recent years, the proportion of Chinese medicine injection in operating income has gradually decreased to about 6%. Focusing on key areas such as cardiovascular and cerebrovascular diseases, orthopedics, digestion, and oncology, CR Sanjiu actively expands its business, pays attention to the full-cycle management of diseases, emphasizes the competitive advantage of "dislocation between China and the West", and gradually extends to the two ends of prevention and rehabilitation, expands product pipelines, and drives the layout of specialization. At the same time, we will continuously improve the product strength of large varieties, strengthen academic value broadcasting and professional market promotion, take clinical diagnosis and treatment path as the main line, and transform to an academic-driven development model with the core.
Chinese medicine formula granules is one of the important businesses in the field of prescription drugs of China Resources Sanjiu, relying on the core concept of traditional Chinese medicine, the company carries out the value chain management of the whole industry of traditional Chinese medicine, and is committed to creating a "original and original" formula granule product series, while constantly enriching the product form. The anti-infection business continues to promote the integration of marketing resources, expand the retail business, and focus on product research and development and the introduction of new varieties in the context of anti-resistance and generic drug policy changes, and the work is steadily advancing as planned. The progress of the fifth-generation cephalosporin antibiotic (cefbirol) project is in line with expectations, the consistency evaluation of key varieties is being carried out in an orderly manner, and azithromycin tablets have passed the on-site verification of consistency evaluation. The company will accelerate the pace of consistency evaluation, continuously improve product quality while controlling the cost of the industrial chain, strengthen product and process research and development, and cope with the risks caused by future policy changes. In the first half of 2019, the transformation of the anti-infection business has achieved initial results, and the transformation speed will be accelerated in the future and the terminal will be gradually sunk.
China Resources Shuanghe: The three major business platforms have formed a good mutual undertaking and synergy effect
Main accounting data of China Resources Shuanghe (unit: 10,000 yuan)
CR Shuanghe is the pillar enterprise of the chemical drug platform of the pharmaceutical sector of China Resources Group, and has built three major business platforms of chronic disease business, specialty business and infusion business, and the business platform has formed a good mutual undertaking and synergy effect. In the first half of the year, the operating income was 4.866 billion yuan, an increase of 19.03% year-on-year, and the net profit was 638 million yuan, an increase of 9.47% year-on-year.
Revenue from the chronic disease business increased by 16% year-on-year, with a 9% increase in the blood pressure reduction area, a 15% increase in the sugar reduction field, and a 42% increase in the lipid reduction field. In the field of blood pressure reduction, pressure Shida, Suiyue, Fusuiyue and nifedipine sustained-release tablets all showed double-digit growth; the sales revenue of glycosyl-lowering drug key product glycosylping (gliquinone tablets) increased by 4% year-on-year, and Buke (metformin hydrochloride extended-release tablets) achieved a rapid growth of 66% in sales revenue in the first half of the year; the lipid-lowering drug pitvastatin calcium tablets continued to maintain rapid growth, with sales revenue increasing by 42% year-on-year, becoming the company's third largest chronic disease product; cerebrovascular drug cytophosphocholine sodium tablets achieved double-digit growth.
The revenue of the specialty business increased by 87% year-on-year, of which the pediatric drug field increased by 16%, the sales revenue of the core product Keriso increased by 11% year-on-year, the nephrology drug field increased by 29% year-on-year, the core product peritoneal dialysate maintained rapid growth, and the sales revenue increased by 26% year-on-year; and the newly laid-out psychiatric/neurological field contributed 226 million yuan.
Infusion business revenue increased by 4% year-on-year; basic infusion sales remained stable this year, packaging materials structure adjustment and breakthroughs, flexible packaging sales increased by 6%, flexible packaging sales accounted for another 2 percentage points compared with 2018, of which BFS revenue increased by 66% year-on-year, and direct soft infusion revenue increased by 20% year-on-year.
In addition, CR Shuanghe actively accelerated the consistency evaluation of generic drugs, with 88 projects under research (including consistency evaluation projects), of which 13 projects were in the application, 4 projects were planned to be approved this year, and 1 project had been approved. At the same time, in response to the requirements of consistency evaluation and quality supervision, we will carry out the improvement of product quality and technology in production to comprehensively enhance product competitiveness.
Jiangzhong Pharmaceutical: The first year of integration into China Resources and integration of Songhai Pharmaceutical and Jisheng Pharmaceutical
The main business of Jiangzhong Pharmaceutical in the first half of 2019 (unit: 10,000 yuan)
The operating income of Jiangzhong Pharmaceutical in the first half of the year was 1.141 billion yuan, an increase of 27.44% year-on-year, and the net profit was 252 million yuan, an increase of 10.35% year-on-year. As the first year of integration into China Resources and the integration of Songhai Pharmaceutical and Jisheng Pharmaceutical, Jiangzhong Pharmaceutical on the one hand actively integrates into the management of the China Resources system, with 6S management, 5C capital management and other systems docking as the starting point, to promote organizational optimization, sort out development strategies, and lay out for follow-up high-quality development. On the other hand, the integration of Songhai Pharmaceutical and Jisheng Pharmaceutical was promoted in an orderly manner, and financial management, quality control, procurement monitoring, product collaboration and other aspects were sorted out and optimized, laying a foundation for standardized development and enhanced collaboration.
Over-the-counter drugs: Focus on the gastrointestinal field, with stomach digestion tablets and lactic acid bacteria tablets as the core, clarify product positioning, optimize product appeals, and establish a strong brand association with consumers. Among them, stomach digestion tablets strengthen the product positioning of "bloating and non-digestion" and enhance consumer stickiness; lactic acid bacteria tablets launch a new brand of "Li Huo" to focus on the daily intestinal conditioning market. In addition, it has also strengthened in-depth cooperation with chains, continuously innovated marketing models, and created an online and offline promotion model of brand, channel and public relations. Complete the layout of e-commerce sales channels, complement the original sales system, carry out cross-border cooperation, find communication methods with young people, especially "foodie people", and promote brand rejuvenation. Actively promote the product planning of Songhai Pharmaceutical and Jisheng Pharmaceutical, which are newly acquired and merged in 2019, set up a control and sales business line, and use the Jiangzhong brand to gradually revitalize the stock approvals and products of Songhai Pharmaceutical and Jisheng Pharmaceutical.
Prescription drugs: mainly for the prescription drugs of Songhai Pharmaceutical and Jisheng Pharmaceutical and the jiangzhong brand of earth kinase enteric-coated capsules in Jiangzhong Province, the prescription drugs of Songhai Pharmaceutical and Jisheng Pharmaceutical cover gynecology, intestine, respiratory and other fields. Jiangzhong brand worm kinase enteric-coated capsules officially carried out clinical re-evaluation research and explored new efficacy. Due to the new merger into the business of Songhai Pharmaceutical and Jisheng Pharmaceutical, the operating scale increased significantly in the first half of the year.
Health care products and others: Start the sorting out of the positioning of Chuyuan and Ginseng Grass series products, and initially complete the product development planning and listing process of New Product Specifications of Ginseng Grass Brand Raw Grass Liquid for Pharmacies, Supermarkets and Online Channels of Chuyuan. However, due to the overall decline in the gift market and the high-end health care product market, the transfer of consumer purchase channels and the adjustment of some products, the operating income of this section fell by 43.33% year-on-year.
For the development plan for the second half of the year, Jiangzhong Pharmaceutical said that the first is to focus on the implementation of the "single focus and double brand" strategy in the field of gastrointestinal digestion, and carry out in-depth integrated marketing of brands, channels and public relations. In the field of healthy stomach, expand the scope of pilot provinces, promote the upgrading and re-listing of Jian'er's consumption oral liquid and the pilot exploration of catering channels of Jianzi consumer tablets; for the new brand "Lihuo" lactic acid bacteria tablets, cooperate with "Yangshengtang" to carry out national public welfare activities, terminal chains and three-dimensional in-depth publicity activities into the community, enhance brand awareness and influence, and enhance the interaction and stickiness of "brand-store-consumer". The second is to continuously clarify the positioning of Chuyuan and Ginseng Lingcao in the pilot and exploration, focus on the composite peptide category to create a representative product of composite peptide, and explore the new model of Ginseng Lingcao products by trying interactive marketing and listing new product specifications. The third is to gradually develop the products and cooperation between Songhai Pharmaceutical and Jisheng Pharmaceutical, and promote the business integration of Songhai Pharmaceutical and Jisheng Pharmaceutical.
East Ejiao: Focus on the main business of ejiao and adjust the marketing strategy
The main business of Dong'e Ejiao in the first half of 2019 (unit: 10,000 yuan)
2019 is the "reshaping year" of the "13th Five-Year Plan" of East Ejiao, with operating income of 1.890 billion yuan and net profit of 193 million yuan in the first half of the year. Dong'e Ejiao said that affected by changes in the macro environment and intensified industry competition, the company on the one hand is actively adjusting marketing strategies, optimizing channel structure, opening up new channels and new markets, promoting international market layout, actively reducing inventory, controlling shipments, pulling terminal pure sales, and consolidating the terminal foundation; on the other hand, it continues to promote new product development, industry standard establishment, pharmacological and pharmacological research, donkey industry research, and strives to build a donkey skin terminal network with the base as the core to ensure the sustainable supply of raw materials.
In terms of marketing, East Ejiao focuses on the main business of ejiao, focusing on the three major products of ejiao, compound ejiao paste and ejiao cake, steadily promoting the three major projects of "traceability project of the whole industry chain", "sensing quality, dosage form convenience" and "cultural experience marketing and value return", upgrading the glue platform, promoting experience tourism, deeply cultivating the top 100 chains, laying out medical centers and hospitals, enhancing consumer cognition, and significantly improving brand potential. East Ejiao positioning "nourishing national treasure", compound ejiao pulp Guangpu qi and blood maintenance, ejiao cake layout FMCG market.
It is worth noting that the performance of East Ejiao in the first half of the year is under pressure, and some brokerage companies have pointed out that East Ejiao is based on long-term considerations and takes the initiative to adjust channels. On the one hand, it actively explores medical channels such as traditional Chinese medicine halls; on the other hand, it strengthens the academic research of ejiao; the third is to implement strategies such as rejuvenation, internationalization, and ejiao+. It is expected that after the adjustment, it will be more suitable for the terminal pure pin.