Text: Good Finance
Recently, Buchang Pharmaceutical announced that its wholly-owned subsidiary, Tonghua Guhong Pharmaceutical Co., Ltd., will withdraw from the Anhui Provincial Medical Insurance Directory on December 31, 2022. Buchang Pharmaceutical said that the impact of the company's withdrawal from Anhui Medical Insurance on the company's operating performance cannot be estimated for the time being, and it will not have a significant impact on the company's performance in the short term.
It is understood that the operating income of Guhong Injection in 2020 is 192209.73 million yuan, accounting for 12.03% of the company's annual operating income in 2020. Among them, the operating income in Anhui Province was 17.1006 million yuan, accounting for only 0.11% of the company's operating income in 2020.
From the data level, the withdrawal of Gu Hong injection from Anhui Provincial Medical Insurance does not have much impact on Buchang Pharmaceutical. However, it is worth noting that this exit event is not unique.
Under the influence of medical insurance policies, from last year to now, Buchang Pharmaceutical has announced that its Guhong Injection will withdraw from the provincial medical insurance directory in Heilongjiang Province, Yunnan Province and Hebei Province. To make matters worse, another core product of Buchang Pharmaceutical, compound brain peptide ganglioside injection, is also actively or passively withdrawing from the provincial medical insurance directory in various places.
From this point of view, the two core drugs have been withdrawn from the provincial medical insurance, even Buchang Pharmaceutical is difficult not to be hairy, and this may be one of the reasons why Buchang Pharmaceutical has recently held anti-epidemic drugs to declare lung septic particles, but the stock price has not risen sharply. So where will the future of Buchang Pharmaceutical go? These are all worth exploring.
Old medicines are exhausted, new drugs are waiting to be completed?
It is understood that although Buchang Pharmaceutical has a strong market competitive advantage in many fields such as cardiovascular and cerebrovascular diseases, gynecology and urinary, from its published financial report data, the main revenue of Buchang Pharmaceutical is concentrated in the field of cardiovascular and cerebrovascular business, especially from 2016 to 2020, the revenue and profit of Buchang Pharmaceutical's cardiovascular and cerebrovascular business account for more than 70% and 80% respectively.
Among them, the six fist products under Buchang Pharmaceutical, such as Brain Heart Capsule, Steady Heart Granules, Danhong Injection, Gu Hong Injection, Compound Brain Peptide Ganglioside Injection and Compound Aspertide Injection, have a total revenue of 10.758 billion yuan in 2020, accounting for 89% of the total revenue.
From the above two sets of data, it is not difficult to find that buchang pharmaceutical has two significant characteristics: one is the unbalanced revenue composition, and the proportion of cardiovascular and cerebrovascular business is too high; the other is high dependence on star products.
However, excessive dependence on a single business or product will not only cause enterprises to have problems such as insufficient growth stability and large market fluctuations, but also inhibit the market growth potential of enterprises to a certain extent.
According to the financial report data of Buchang Pharmaceutical released by Tianyancha APP, from 2018 to 2020, the net profit growth rate of Buchang Pharmaceutical was 15.29%, 3.05% and -4.37%, respectively. In the third quarter report of 2021, Buchang Pharmaceutical achieved a total operating income of 11.377 billion yuan, an increase of 1.18% year-on-year; operating profit of 1.638 billion yuan, down 6.92% year-on-year; net profit attributable to the mother of 1.274 billion yuan, down 8.73% year-on-year, and there was an embarrassing situation of increasing income without increasing profits.
Behind the continuous decline in the profitability of Buchang Pharmaceutical is the decline in sales of its star products.
Public data show that Danhong injection is one of the core products of Buchang Pharmaceutical, but in 2019, the sales volume of the main specification of Danhong injection 10ml/stick decreased by 25.93% compared with the previous year, and the sales volume of 20ml/stick also decreased by 12.3% compared with the previous year. Compared with the sales volume of 108.9 million in 2016, the main specification of Danhong Injection 10ml/stick sold only 59.6 million in 2019, and the sales volume in four years was almost waist-cutting.
The decline of Danhong injection is due to the irrational use of too many drugs, under the relevant policies and regulations, it has been included in the auxiliary and key monitoring drug list by many provinces and cities, and has been warned (strictly monitored) and restricted use. In order to offset the negative impact of the decline in sales of Danhong injection, Buchang Pharmaceutical launched injection varieties such as Guhong injection and compound brain peptide glycoside injection to become its revenue successor.
But it is interesting that the reason why Gu Hong Injection and Compound Brain Peptide Ganglioside Injection have been widely removed from the provincial medical insurance directory is on the one hand the adjustment of the national medical insurance policy. Previously, in addition to being consistent with the drugs in the national medical insurance directory, there was a part of the supplementary space in the provincial medical insurance directory, so some drugs may be added to the local medical insurance directory even if they are not in the national medical insurance directory.
However, in August 2019, the National Medical Insurance Bureau issued a document requiring that the local medical insurance directory supplement be cancelled, and the local supplementary medical insurance directory should in principle complete the withdrawal of drugs that do not conform to the national medical insurance directory in three batches within three years, and Gu Hong injection seems to be in the ranks of withdrawal.
On the other hand, it is also because Guhong injection and compound brain peptide glycoside injection have been included in the auxiliary and key monitoring drug catalogue in many places, and the proprietary Chinese medicine, auxiliary and key monitoring varieties are important objects of the local medical insurance catalogue cleanup.
According to the database of "auxiliary and key monitoring drugs" of Yaozhi Network, in 2015-2019, Guhong injection has been included in the auxiliary and key monitoring drug catalogue in more than 10 provinces and cities such as Anhui, Beijing, Henan and Guangxi, and the compound brain peptide ganglioside injection was also included in the auxiliary drug catalogue of Xingtai City on May 7, 2019.
Now it seems that Guhong Injection and Compound Brain Peptide Glycoside Injection, two star products that achieved revenue of more than 3.165 billion yuan in 2020, seem to be on the old road of Danhong Injection, and with the experience of Danhong Injection's revenue and sales decline, it is difficult not to worry about the future fate of Guhong Injection and Buchang Pharmaceutical.
However, some insiders pointed out that the drugs that have been withdrawn by the local medical insurance directory are not completely without the opportunity to enter the national medical insurance directory, as long as the clinical value is high and the demand is large, there is still a chance to enter the national medical insurance directory. It's just that whether the two star products of Buchang Pharmaceutical can eventually squeeze into the national medical insurance directory, we still don't know.
However, it has to be mentioned that Buchang Pharmaceutical launched in 2021 and is listed as a lung sepsis granule for the recommended drug of new crown pneumonia. Although it has not been widely rolled out in the market at present, according to the announcement of Buchang Pharmaceutical, as of March 17 this year, the sales revenue of the product was 7.6663 million yuan.
However, in the view of Xiangshan Finance, Xuan Lung Septic Particles may still have a long way to go if they want to become the killer of Buchang Pharmaceutical to reverse the decline.
On the one hand, affected by factors such as epidemic prevention and control, there is actually great uncertainty in the follow-up sales of lung sepsis granules, and due to the short listing time, there is no significant impact on the recent operating performance of Buchang Pharmaceutical.
On the other hand, under the strong prevention and control measures of the mainland government, the overall scale of the domestic epidemic is not large, which means that the real market for the "three drugs and three parties" of the recommended drugs for new crown pneumonia may be in overseas areas where the epidemic is serious.
But it is not easy for Chinese medicine to go to sea. Taking Lianhua Qingpeng capsules as an example, in China, Lianhua Qingxiao capsules have been officially proven effective in the treatment of mild or ordinary patients, but in Sweden, Canada, the United States and Australia and other countries and regions, Lianhua Qingyi capsules and other proprietary Chinese medicines are not recognized and accepted, and even directly seized by the customs of many countries.
This further limits the market imagination of Buchang Pharmaceutical's lung septic particles, and it is no wonder that the capital market has always maintained a certain degree of rationality for Buchang Pharmaceutical, which holds anti-epidemic drugs. Even after the good news of the "three drugs and three parties" came out on March 17, the stock price of Buchang Pharmaceutical only rose by 6% to 22.39 yuan, and as of the close of trading on April 8, its stock price only rose slightly to 23.30 yuan. However, the same rank of Red Sun Pharmaceutical Companies achieved a 20% surge in stock prices on the same day, and rose more than 40% for three consecutive trading days.
Heavy sales, commercial bribery and public opinion scandals, the "history of fame" of Buchang Pharmaceutical
In fact, the reason why Buchang Pharmaceutical is difficult to be optimistic about the capital market is because of the unclear product and business prospects on the one hand, and on the other hand, it may also lie in its emphasis on sales and light research and development, and the negative events of public opinion are constantly related.
According to the financial report data, from the third quarter of 2016 to 2021, the gross profit margin of Buchang Pharmaceutical has always been maintained at more than 70%, but its net profit margin has been hovering below 16%. The reason for this situation is that its large-scale sales expenses have squeezed the profit margins of Buchang Pharmaceutical.
According to the data, the sales expenses of Buchang Pharmaceutical in 2017-2020 were 8.287 billion yuan, 8.036 billion yuan, 8.081 billion yuan and 8.373 billion yuan, accounting for 59.77%, 58.81%, 56.68% and 52.31% of the current revenue, respectively; and from 2018 to 2020, the R&D expenditure of Buchang Pharmaceutical was 576 million yuan, 639 million yuan and 722 million yuan, accounting for 4.42% and 4.48% of the current revenue, respectively. 4.51%。
From a data perspective, although Buchang Pharmaceutical's R&D investment has also increased, it has always lagged far behind its sales expenses, which seems to be slightly different from the general direction of its strategic transformation to technology-based companies.
If it is said that heavy sales and light research and development are the choice of Buchang Pharmaceutical's enterprises, then this is not wrong, but behind the high sales costs of Buchang Pharmaceutical is a huge commercial bribery and illegal operation, which has become the sword of Damocles hanging high above its head.
In 2020, the sales cost of Buchang Pharmaceutical reached 8.3 billion yuan, of which at least 8 billion yuan was used for "marketing, academic promotion fees and consulting fees". The huge sales expenses have also attracted the attention of the Shanghai Stock Exchange, and in 2019, the Shanghai Stock Exchange sent a letter to Buchang Pharmaceutical to inquire, and Buchang Pharmaceutical said that the proportion of marketing expenses is within a reasonable range, which is in line with the characteristics of the industry.
However, it is embarrassing that in 2020, a criminal judgment in a bribery case showed that the physician Wang Moumou illegally accepted a bribe from Su Mou, a salesman of Shaanxi Buchang Pharmaceutical, and issued 36,000 boxes of Buchang Brain Heart Capsules and obtained a kickback of 125,000 yuan.
In addition, on April 12, 2021, the Ministry of Finance imposed administrative penalties on 19 pharmaceutical companies. Among them, the reason why Buchang Pharmaceutical was punished was to pay funds to the pharmaceutical promotion company in the name of consulting fees and marketing fees, and then transferred by the pharmaceutical promotion company to the company's agents, involving an amount of 51.2239 million yuan.
The reason why Buchang Pharmaceutical wants to turn the funds around, some insiders said that Buchang Pharmaceutical will transfer funds back to agents through a third party, one is to facilitate accounting, and the other is to provide cash protection for agents to "sell with gold".
The so-called "gold sales" refers to the improper behavior of pharmaceutical companies in determining the bidding price of drugs, taking into account commercial bribes to prescription doctors and people with decision-making power and influence on drugs in advance, and seeking trading opportunities or competitive advantages by giving kickbacks.
The other side of the "gold sales" of pharmaceutical companies is often associated with false invoicing. Last year, the indictment of the "Hekai Procuratorate Criminal Prosecution [2021] No. 111" showed that the People's Procuratorate of Heze Economic Development Zone in Shandong Province filed a public prosecution against the defendants Wang xxx, Wu xx, and others suspected of false invoicing and intentionally destroying accounting vouchers.
Among the companies that accepted the false invoices, shandong Danhong Pharmaceutical Co., Ltd., Shaanxi Buchang Pharmaceutical Co., Ltd., Qionglai Tianyin Pharmaceutical Co., Ltd., and Buchang Pharmaceutical Co., Ltd., which are subsidiaries of Shandong Buchang Pharmaceutical Co., Ltd. (hereinafter referred to as "Buchang Pharmaceutical"), introduced 523 false VAT ordinary invoices, with a total face value of 49.0507 million yuan and a total price and tax of 49.1016 million yuan.
In fact, according to the information of the China Judgment Documents Network, at least 10 judgments in recent years show that Buchang Pharmaceutical has engaged in commercial bribery in the process of drug promotion.
However, it is worth mentioning that what really makes Buchang Pharmaceutical "famous" is the public opinion scandal exposed in 2019 that Zhao Yusi, the daughter of Zhao Tao, chairman of Buchang Pharmaceutical, bought into Stanford University.
On May 2, 2019, a number of foreign media reported that a Chinese tycoon gave an intermediary 6.5 million US dollars (about 43.7 million yuan) to let his daughter enter Stanford University, of which 500,000 US dollars was used to bribe the coach of the Stanford University sailing team to package his daughter as a sailing player. Subsequently, some media broke the news that the rich man was Shandong Buchang Pharmaceutical (603858. SH) Group Chairman Zhao Tao, the student involved is his daughter.
Although after the incident was exposed, Zhao Tao's wife said that her daughter was a "victim" of the fraud incident, Zhao Tao, chairman of Buchang Pharmaceutical, posted a message on the company's official website: The daughter's study in the United States is a personal and family behavior, and the source of funds has nothing to do with Buchang Pharmaceutical, which does not have any impact on the financial situation of Buchang Pharmaceutical.
But the two's response may indirectly confirm the public opinion that the daughter of the chairman of Buchang Pharmaceutical has spent money to buy Stanford. Subsequently, Zhao Yusi was expelled from Stanford University, the coach involved was arrested, and the public image of Buchang Pharmaceutical fell sharply.
The poor impression of the market and the public, coupled with the fact that Buchang Pharmaceutical's current star products seem to have encountered a moment of green and yellow, it is difficult not to worry about its future market fate, and how Buchang Pharmaceutical should break the game may be witnessed by time.