Last year, it earned 650 million yuan, and its performance has grown for three consecutive years!

Financial reporter Wang Beibei

BAHEAL Pharmaceutical, the first A-share health commercialization platform listed company, disclosed its 2023 annual report and 2024 first quarter report.

According to the 2023 annual report, BAHEAL Pharmaceutical achieved operating income of RMB7.564 billion, a year-on-year increase of 0.72%, net profit attributable to shareholders of listed companies of RMB656 million, a year-on-year increase of 29.55%, net operating cash flow of RMB610 million, an increase of 99.41% over the same period, and the first quarter report of 2024 disclosed on the same day showed that BAHEAL Pharmaceutical's operating income in the first quarter of 2024 was RMB1.661 billion, and net profit attributable to the parent company was RMB166 million, up 35.6% year-on-year.

It is worth mentioning that BAHEAL Pharmaceutical's performance has achieved double growth for three consecutive years, and its profitability is remarkable. From 2021 to 2023, BAHEAL Pharmaceutical's operating income will be 7.052 billion yuan, 7.51 billion yuan and 7.564 billion yuan respectively, with a year-on-year growth rate of 19.94%, 6.5% and 0.72% respectively, and the revenue growth rate has slowed down, but the net profit attributable to the parent company has continued to grow in the past three years, with 423 million yuan, 502 million yuan and 656 million yuan respectively.

The continuous growth of the profit side indicates that BAHEAL Pharmaceutical's long-term commercialization capability has been verified, and the brand effect is being released at an accelerated pace. During the reporting period, BAHEAL Pharmaceutical's basic earnings per share was RMB1.25, and the annual profit distribution plan for 2023 was RMB7.62 (tax included) for every 10 shares to all shareholders.

The profitability of brand operation continues to be optimized

With the deep transformation and rapid development of the pharmaceutical industry, the professional division of labor is becoming increasingly refined. In the commercialization of the pharmaceutical industry, traditional pharmaceutical wholesale and retail platforms have been unable to fully meet the commercialization needs of pharmaceutical products. As the first A-share health commercialization platform listed company, BAHEAL Pharma focuses on professional services for brand operation and has begun to show its unique value and scarcity.

For example, the Diqiao series of products that BAHEAL Pharmaceutical has been operating will generate nearly 2 billion yuan in revenue in 2023. According to the annual report, in 2023, the revenue of BAHEAL Pharmaceutical's core brand Diqiao series products will reach 1.897 billion yuan, a year-on-year increase of 17%, and the gross profit margin of Diqiao series is also higher than the overall gross profit margin of the brand operation business: in 2023, the gross profit margin of BAHEAL Pharmaceutical's brand operation business will be 43.17%, and the gross profit margin of Diqiao series will be as high as 67.41%.

During the Reporting Period, BAHEAL Pharmaceutical focused on the category of "imported calcium", and in terms of product specifications, Diqiao launched new specifications of liquid calcium in small yellow strips (including calcium and zinc small yellow strips, calcium DK health care products, vitamin D small yellow strips and other specifications) to meet the calcium supplement needs of different consumers. At present, Diqiao has been certified by Euromonitor as "No. 1 in the domestic imported calcium supplement market for eight consecutive years", and has won many awards such as vitamins and minerals, the brand with the highest store staff recommendation rate in 2023, and the gold single product of the China Non-prescription Drug Association.

In addition, BAHEAL Pharma has helped many brands achieve substantial growth. For example, in 2023, Haylou will generate revenue of 640 million yuan, an increase of 50%, maintaining Haylou's leading position in the retail eye drops market, and the company will build the brand positioning of "medical-grade nutrition" of Newt Shuma, and in 2023, Newt Shuma will achieve an operating income of 83 million yuan, a year-on-year increase of 44%.

It can be said that in 2023, BAHEAL Pharmaceutical will become increasingly focused and refined in the operation of its core business brand.

According to the data, BAHEAL Pharmaceutical's main business covers three sectors: brand operation, wholesale distribution and retail, of which brand operation is the company's core business, accounting for 83.78% of its profit contribution, which is the main source of BAHEAL Pharmaceutical's profits.

In 2023, BAHEAL Pharmaceutical's brand operation business generated revenue of RMB4.4 billion, a year-on-year increase of 18.91%, the wholesale business achieved revenue of RMB2.774 billion, a year-on-year decrease of 19%, and the retail business generated revenue of RMB360 million, which was basically the same as last year. According to the annual report, due to the continuous focus on the core brand operation business and the reduction of the scale of the wholesale business, the total operating income of BAHEAL Pharmaceutical in 2023 will be basically the same as that of the same period last year, but due to the high gross profit margin and net profit margin of the brand operation business, the growth rate of the company's net profit attributable to the parent company is higher than the growth rate of revenue.

The trend of continuous optimization of BAHEAL Pharmaceutical's profitability was further confirmed in the first quarter of 2024. According to the first quarterly report, the proportion of brand operation business has gradually increased, and the scale effect has gradually emerged, and the net profit margin of BAHEAL Pharmaceutical in the first quarter of 2024 has increased by 2.84 percentage points year-on-year.

The moat of brand operation has been continuously consolidated

After nearly 20 years of accumulation, BAHEAL Pharmaceutical has formed professional brand operation capabilities and a strong marketing network, cooperated with 14,000 large and medium-sized hospitals and nearly 400,000 pharmacies, successfully incubated a number of leading brands such as imported calcium brand Diqiao and dyspepsia brand Secret, accumulated rich experience in in-hospital and out-of-hospital channel brand operation, and established a professional commercialization platform that can replicate successful experience, which can maximize the commercial value of the brand more efficiently and accurately.

In terms of core competitiveness, BAHEAL Pharma has established a mature brand operation strategy and process through the accumulation of years of experience in brand operation, and formed a brand management system based on category research; second, it has established a full-data platform covering mainstream hospitals and retail terminals, and with the full-data platform as the market map, the company can find matching end customers for upstream enterprises and their products to carry out precision marketing, realize the rapid introduction of products and release value, and avoid structural waste; third, allocate resources according to different stages of the brand life cycle; fourth, most of the management team of BAHEAL Pharma are from professional large-scale pharmaceutical enterprises with many years of experienceAt the same time, the company's ecological organization has good synergy capabilities.

According to the financial report, BAHEAL Pharmaceutical has formed four major category matrices: OTC and big health products, OTX and other prescription drugs, oncology and other critical drugs, and high-end medical devices, and has key products in multiple subdivisions, and has maintained continuous growth for many years.

This commercialization model with "branding" as the core is also reflected in the financial data of BAHEAL Pharmaceutical. According to the 2023 financial report, BAHEAL Pharmaceutical's sales expenses were RMB1.062 billion, down 5.3% year-on-year, and the proportion of sales expenses in revenue was 14%, far lower than the average sales expenses of A-share pharmaceutical companies. (According to public data, among the A-share listed pharmaceutical companies, nearly 40 sales expenses accounted for more than 50% of revenue in 2022)

Ma Shuai, chief pharmaceutical officer of SDIC Securities, believes that thanks to the "dual channel" and "outpatient co-ordination" policies, the trend of prescription outflow has accelerated, promoting the continuous expansion of the market scale of physical pharmacies and online pharmacies. In addition, according to Zhongkang CMH data, the drug sales scale of China's pharmaceutical retail market will reach 501.5 billion yuan in 2023, a year-on-year increase of 3.3%, of which the drug scale of physical pharmacies (including O2O) will increase slightly by 1.0% year-on-year in 2023, and the growth rate of e-commerce B2C will reach 21.0%, which is much higher than the growth rate of physical pharmacies (including O2O), and the proportion of channels will increase by 1.9%, further highlighting the importance of channels.

BAHEAL Pharmaceutical, which took the lead in capturing the changing trend of marketing channels, relied on its keen market insight and flexibly responded to the changes in consumer purchasing behavior, and its online business showed a significant growth trend, with online sales revenue of 508 million yuan in 2023, a year-on-year increase of 52.16%.

"Industrial investors" help improve hematopoietic capacity

Some people in the industry pointed out that in the trend of pharmaceutical circulation enterprises to the upstream pharmaceutical industry, enterprises use their own channel advantages to promote the integration of research, production and marketing, and accelerate the launch and volume of new products. BAHEAL Pharmaceutical has an advantage in this direction. Based on the long-term experience in the commercialization of pharmaceutical brands, BAHEAL Pharma has the ability to gain in-depth insight into medical scenarios, identify scientific research results or products with clinical value, and help them quickly achieve commercialization.

According to public information, BAHEAL Pharmaceutical has entered the domestic first-in-class innovative drug and device development through the equity cooperation between its parent company BAHEAL Pharmaceutical Group and national scientific research institutions, and the listed company will give priority to obtaining commercial rights and interests after the cooperative products are approved for listing, and gradually establish its own innovation incubation platform.

As an "industrial investor", BAHEAL Pharmaceutical Group has built a platform for the transformation of scientific research achievements, joined hands with national scientific research institutions to explore valuable source innovation, make efforts to invest in the incubation of innovative achievements, continuously deliver high-quality products to listed companies, and enhance the hematopoietic capacity of listed companies.

In 2023, BAHEAL Pharmaceutical's innovative drugs and high-end medical devices have made achievements.

In terms of high-end medical devices, Suzhou Tongxin Medical Technology Co., Ltd.'s full magnetic levitation artificial heart was the first to be commercialized, and high-end medical device products such as electromagnetic positioning puncture guidance equipment of Beijing Medisys Medical Technology Co., Ltd. and home electrocardiometer of Beijing Wuweikang Technology Co., Ltd. have also entered the commercialization stage one after another It is the first self-developed Class 1 innovative drug in the field of nuclear medicine in mainland China, which has completed phase III clinical trials in China and is about to be declared for marketing and enter the commercialization stage, and will become the company's blockbuster product in the field of innovative drugs in the future.

"At present, the company has formed a multi-brand matrix in the four major tracks of OTC and big health, OTX and other prescription drugs, oncology and other critical drugs, and high-end medical devices, and its operational capabilities continue to improve, and we hope that innovative drugs and devices can account for 20%-30% of the company's revenue in the future. The person in charge of BAHEAL Pharmaceutical's related business said.

(The views in this article are for reference only and do not constitute investment advice, investment is risky, and you need to be cautious when entering the market!)