Reporter Su Hao and Cao Xueping report from Beijing
Recently, Zhongsheng Pharmaceutical (002317. SZ) disclosed its first quarter 2024 report. During the reporting period, the company achieved operating income of 641 million yuan, a year-on-year decrease of 14.15%, and the net profit attributable to shareholders of listed companies was 51.2939 million yuan, a year-on-year decrease of 63.2%.
The reporter of "China Business Daily" noticed that in 2023, Zhongsheng Pharmaceutical's compound thrombotong series products will be selected in the centralized procurement of the National Chinese Patent Medicine Alliance, and the company's performance will be under pressure in the short term. In addition, in recent years, the company has been actively investing in the research and development of innovative drugs, which is still too early for real commercialization. In this context, how should Zhongsheng Pharmaceutical boost its performance?
In response to the above problems, the reporter recently called the securities department of Zhongsheng Pharmaceutical as an investor, and its staff said that with the implementation of new bid-winning prices for drugs in 30 provinces, municipalities and autonomous regions, the company's bid-winning products will be affected to a certain extent in the short term. However, in order to cope with the impact of centralized procurement, the company has also taken relevant measures such as "reducing costs" and "exchanging price for volume".
Prices of core products declined
According to public information, Zhongsheng Pharmaceutical was founded in 1979 and listed on the Shenzhen Stock Exchange in 2009. It is a high-tech enterprise integrating R&D, production and sales of drugs.
Although Zhongsheng Pharmaceutical's existing product pipeline covers many major disease fields such as ophthalmology, respiratory, digestive, cardiovascular and cerebrovascular, from the perspective of products, Chinese patent medicine is still the company's core business foundation and an important source of growth.
In 2023, the sales revenue of Zhongsheng Pharmaceutical's proprietary Chinese medicines will be 1.391 billion yuan, a year-on-year decrease of 14.86%, accounting for 53.29% of revenue, the sales revenue of chemical drugs will be 962 million yuan, an increase of 17.17% year-on-year, accounting for 36.84% of revenue, and the sales revenue of Chinese herbal medicines and Chinese herbal decoction pieces will be 206 million yuan, an increase of 18.14% year-on-year, accounting for 7.87% of revenue.
In the 2022 Guangdong Six Provinces Alliance Centralized Procurement of Chinese Patent Medicine, Zhongsheng Pharmaceutical's Compound Thrombotong Capsule, Compound Danshen Tablets, Compound Thrombotong Soft Capsules, Brain Thrombotong Capsules and other products were selected. In June 2023, the National Alliance of Proprietary Chinese Medicine Co., Ltd. (Proprietary Chinese Medicine) Co., Ltd. (Zhongsheng Pharmaceutical Co., Ltd.) and Compound Thrombotong Soft Capsule were selected again.
The decline in the selling price of core business products also directly affected the performance of Zhongsheng Pharmaceutical. In 2023, Zhongsheng Pharmaceutical's operating income will be 2.611 billion yuan, down 2.45% year-on-year, and the net profit attributable to shareholders of listed companies will be 263 million yuan, down 18.25% year-on-year.
Talking about the reasons for the decline in net profit attributable to the parent company, Zhongsheng Pharmaceutical said in the online performance briefing of the 2023 annual report held on April 30 that the main reason is the impact of the volume procurement of proprietary Chinese medicines, as well as the increase in the price of upstream Chinese herbal medicines, and the company's overall pharmaceutical manufacturing costs increased year-on-year last year, which compressed the company's profit margins.
As for how to deal with the impact of centralized procurement of Chinese patent medicines on the company's performance, Zhongsheng Pharmaceutical said that under the policy background of centralized drug procurement, the company actively responded. The company's compound thrombotong series products actively participated in the centralized procurement work of the National Proprietary Chinese Medicine Procurement Alliance, and were successfully selected, which is expected to increase the use of products, laying the foundation for the company to continue to expand its market share and consolidate the market dominance of the company's generic products. Based on product medical research and market access, the company copes with the impact of centralized procurement by continuously strengthening the team's professional academic promotion capabilities, continuously promoting the terminal coverage and sales growth of core varieties, continuously promoting the optimization of commercial channels and the sinking of marketing networks, and continuously improving organizational performance and human efficiency, so as to achieve the goal of "price reduction and volume increase".
"The company continues to adhere to the optimization of the operation and management mechanism, continue to alleviate the pressure of rising costs through management improvement, and continue to increase market expansion efforts, increase operating income, drive efficiency growth with scale effect, and maintain the company's performance growth. Zhongsheng Pharmaceutical said.
It will take time to commercialize innovative drugs
In fact, in order to cope with the impact of centralized procurement and price reduction, in recent years, Zhongsheng Pharmaceutical has also actively transformed into innovative drugs.
It is understood that at present, the research and development of innovative drugs of Zhongsheng Pharmaceutical Co., Ltd. is concentrated in the therapeutic fields of metabolic diseases, respiratory diseases, tumors and other therapeutic fields.
According to the 2023 annual report, as of 2023, the company has 1 Class I new drug approved for marketing (Leretgravir tablets, for the treatment of mild to moderate new coronavirus infection, trade name: Leruiling), 1 Class I new drug marketing application has been accepted (onladivir tablets, for the treatment of influenza A, trade name: Everivus), and 6 new drug projects are in the clinical trial stage.
In March 2023, it was conditionally approved by the National Medical Products Administration (NMPA) for the treatment of adult patients with mild to moderate novel coronavirus infection (COVID-19) in accordance with the special drug approval procedure, and has been successfully included in the 2023 National Medical Insurance Catalogue in the same year.
Since Zhongsheng Pharmaceutical's 2023 annual report did not mention the specific sales data of Leruiling, the reporter asked about Leruiling's sales in 2023 in Zhongsheng Pharmaceutical's performance briefing.
However, the relevant personnel of Zhongsheng Pharmaceutical only said that the company's product sales are classified by product, including sales of Chinese patent medicines, sales of chemical drugs, sales of APIs and intermediates, sales of Chinese herbal medicines and Chinese medicine decoction pieces, etc., please refer to the company's 2023 annual report for specific sales.
Another influenza A treatment for influenza A is also a key product of Zhongsheng Pharmaceutical, which is a small molecule RNA polymerase inhibitor with a clear mechanism of action and global independent intellectual property rights, which is clinically intended for the treatment of adult simple influenza A. At present, the new drug application of the drug has been accepted by the NMPA and is in the process of review and approval.
Regarding the listing process of Everway, Zhongsheng Pharmaceutical said that the company is continuing to promote the work of Everv's drug registration and marketing application, and maintains close communication with CDE, hoping to be approved as soon as possible.
However, on the track of anti-influenza drugs, many local pharmaceuticals have entered the track through independent research and development or introduction, and the competition is becoming increasingly fierce.
Specifically, the RNA polymerase inhibitor GP681 jointly developed by Qingfeng Pharmaceutical and Ginkgo Biloba Pharmaceutical is a Class 1 innovative drug. On November 25, 2023, the official website of the Center for Drug Evaluation of the State Food and Drug Administration announced that Qingfeng Pharmaceutical has submitted an application for marketing of the drug and has been accepted.
Taijing Pharma's TG-1000 is also a Cap-dependent endonuclease inhibitor and has entered Phase III clinical trials. ADC189 is also an anti-influenza polymerase acid protein (PA) inhibitor, which has the same mechanism of action as mabaloxavir, and the phase III clinical study is progressing smoothly.
ZX-7101A, a new anti-influenza drug independently developed by Zhengxiang Pharmaceutical, is a new generation of RNA polymerase inhibitor. On August 7, 2023, Jichuan Pharmaceutical disclosed that its wholly-owned subsidiary, Jichuan Co., Ltd., signed an exclusive cooperation agreement with Zhengxiang Pharmaceutical to cooperate in the agreed indications of ZX-7101A oral preparations in Chinese mainland, and ZX-7101A is about to complete the phase III clinical trial of the first indication.
The company's remaining innovative drug R&D pipeline is in preclinical research, clinical phase I, phase II and other stages. At present, it may be too early to rely on innovative drug projects to improve the company's performance.
(Editor: Cao Xueping Review: Tong Haihua Proofreader: Yan Jingning)