Recently, the pharmaceutical industry as a whole is in a lying flat situation, and this pit is indeed a bit difficult to climb.
It is reported that in the process of bursting the valuation bubble in the pharmaceutical industry this year, many pharmaceutical companies with a market value of 100 billion yuan have ceased to return to the state of a year ago. Although this is a normal market capitalization matching process, it also reminds us to stay awake at all times.
Pull out the list of R&D investment of pharmaceutical companies for a long time, take a look, the first few are still familiar with several companies, no matter how turbulent the stock market is, how the internal operation of the enterprise should be or how.
But one of the top 10 companies caught my attention, Shanghai Pharmaceutical is obviously a pharmaceutical commercial company, does it also need such a high investment in research and development? Or what is the research and development of innovative drugs in Shanghai Pharmaceutical?
Note: The data comes from Flush iFinD
First, Shanghai Pharmaceutical's investment in the research and development of innovative drugs is not as high as it seems
Looking at the revenue structure of Shanghai Pharmaceutical, we can see that the company achieved revenue of 191.909 billion yuan in 2020 (you read it correctly), of which 87.36% of the revenue comes from the pharmaceutical distribution business.
Shanghai Pharmaceutical is China's second largest pharmaceutical commercial enterprise and the largest imported drugs, vaccines and medical device service providers in China, covering the commercial channels and retail networks of 24 provinces, municipalities directly under the Central Government and autonomous regions across the country, as a national pharmaceutical commercial enterprise, Shanghai Pharmaceutical has a strong "network effect".
Therefore, although the gross profit margin is not high, in recent years, under the background of medical reform, the gross profit margin of Shanghai Pharmaceutical has still increased steadily.
And after nearly three decades of development, Shanghai Pharmaceutical has also gained a lot of wealth, with more than 20 billion yuan of monetary funds on the book.
With the gene of dealing with medicine, Shanghai Pharmaceutical has gradually developed the pharmaceutical industry (pharmaceutical) business. In 2020, the pharmaceutical industry achieved operating income of 23.743 billion yuan, accounting for 11.83% of the total revenue, and the gross profit margin was 59.09%.
However, it is worth noting that Shanghai Pharmaceutical's current pharmaceutical industry business is still dominated by generic drugs, and not all of the R&D investment is used for the research and development of innovative drugs, and the investment in the research and development of innovative drugs in 2018 was 269 million yuan, accounting for only 18.7% of the total investment in research and development.
Almost other parts of R&D investment are invested in the field of generic drugs, including 19.93% to generic drug research and development, 33.60% to the secondary development of existing products, and 27.77% to the consistency evaluation of generic drugs and efficacy. (2018 data)
Second, what happened to the research and development of innovative drugs in Shanghai Medicine?
Although the research and development of innovative drugs started late, Shanghai Pharmaceutical has been promoting the transformation of innovative drugs.
As of the first half of 2021, Shanghai Pharmaceutical has entered the pre-clinical and follow-up research stage of 35 innovative drug pipelines, of which 21 projects are located in the clinical research and development stage, 3 products have been listed, and the research and development pipeline has tripled compared with the 11 projects in 2018.
The promotion of this speed is actually inseparable from Shanghai Pharmaceutical's "self-research + introduction" innovative drug research and development model. The three innovative drugs currently listed by Shanghai Pharmaceutical are not self-developed products, and the company's first independent product is I001 (hypertension), which is still in the third phase of clinical stage.
What can be expected in the future (in a few years)?
3. How is Shanghai Medicine affected by collection and procurement?
Undoubtedly, some of Shanghai Pharmaceutical's products are affected by the national procurement policy, but despite this, under the support of a wide variety (especially large varieties) and sales channel networks, the impact of the pharmaceutical industry business on collection is not high.
In 2020, the sales revenue of Shanghai Pharmaceutical Industry was 23.743 billion yuan, an increase of 1.08% over the same period of the previous year, and the gross profit margin was 58.14%, an increase of 0.62 percentage points over the same period of the previous year; of which the sales revenue of 60 key varieties was 13.318 billion yuan, down 1.55% year-on-year, and the average gross profit margin was 70.51%.
In the first half of 2021, the sales revenue of Shanghai Pharmaceutical Industry was 12.602 billion yuan, an increase of 7.94% over the same period of the previous year. The sales revenue of 60 key products increased by 11.94% year-on-year, of which the sales revenue of the top five key products increased year-on-year doubled compared with the same period last year, and the gross profit margin of the pharmaceutical industry increased by 0.10 percentage points as a whole.
One of the points I am more concerned about is that Shanghai Pharmaceutical will change its sales model in order to increase product sales, and "accurately formulating marketing strategies" has always been a skill for pharmaceutical companies to add points.
(The above data is from the 2020 annual report of Shanghai Pharmaceutical)
On the contrary, the distribution business of Shanghai Pharmaceutical has been affected by the collection to a certain extent, and in the context of the compression of the profit margin of the pharmaceutical business, the gross profit margin of the enterprise distribution business has declined, falling by 0.62 percentage points in the first half of 2021.
However, according to the Guiding Opinions on Promoting the High-quality Development of the Pharmaceutical Circulation Industry during the 14th Five-Year Plan Period issued by the Ministry of Commerce, the development prospects of Shanghai Pharmaceutical are still optimistic.
The future of pharmaceutical business is still an integration trend, the "Guiding Opinions" proposes that by 2025, cultivate and form 1-3 large-scale digital and comprehensive drug circulation enterprises of more than 500 billion yuan and 5-10 billion yuan, 5-10 specialized and diversified pharmaceutical retail chain enterprises of more than 50 billion yuan, and about 100 intelligent, characteristic and platform-based pharmaceutical supply chain service enterprises.
(The above figure is from the Guiding Opinions)
Fourth, to sum up
Due to the low gross profit margin of pharmaceutical business, coupled with the impact of medical reform policies in recent years, although the operation of Shanghai Pharmaceutical is not much worse, it has indeed been affected a lot, and its valuation has dropped from about 20 times in 2018 to 10 times + in 2020, and now the valuation is only 10 times less.
In the first three quarters of 2021, Shanghai Pharmaceutical achieved a non-net profit of 3.524 billion yuan, but the market value was only 53 billion yuan, and who earned was not hard money.
So can Shanghai Pharmaceutical achieve Davis double-click? To some extent, or can it be expected??
Disclaimer: This analysis only represents the personal views of the author and does not constitute investment advice. Entering the market is risky, and investment needs to be cautious.