Recently, it was reported that five former executives of the company, including Wang Minghui, the former chairman of Yunnan Baiyao, and Yin Pinyao, the former chief operating officer and senior vice president, were taken away for investigation by the Commission for Discipline Inspection and Supervision from the beginning of 2023 to the beginning of 2024 for being involved in the same matter. Up to now, Yunnan Baiyao has not responded positively to the relevant situation, but within two days after the "corruption nest case" was exposed, the market value of Yunnan Baiyao evaporated by more than 6 billion yuan.
The anti-corruption storm in the pharmaceutical industry, which began last year, has continued to this day. According to the reporter's incomplete statistics, since the beginning of this year, more than 14 pharmaceutical company executives have been officially notified to be investigated. In the past month, executives of well-known pharmaceutical companies, including Hisun Pharmaceutical, Shanghai Pharmaceutical, and Sinopharm, have been investigated. In the face of the high-pressure situation, many pharmaceutical companies "cut" sales expenses, and a senior executive of a pharmaceutical company in Taizhou Pharmaceutical High-tech Zone said that adjusting and optimizing the marketing model has become the company's top priority. With the traditional sales model being subverted, pharmaceutical companies are beginning to seek new growth points, and "AI+" and "going overseas" are becoming new trends in the industry.
Selling expenses have been significantly reduced
Flush data shows that there are a total of 494 A-share pharmaceutical and biological listed companies. Excluding undisclosed financial reports and newly listed companies, the reporter counted the sales expenses of 487 listed pharmaceutical companies in 2023. According to the financial report, the sales expenses of 487 listed pharmaceutical companies in 2023 will be 345.191 billion yuan, a year-on-year increase of 1.1%; The average selling expense ratio was 13.8%, up 0.03% year-over-year. It is still common for sales expenses to exceed annual net profit, and more than seventy percent of listed pharmaceutical companies will have a net profit lower than sales expenses in 2023. Shanghai Pharmaceutical ranks first with a "sky-high" sales expense of 13.902 billion yuan, and is also the only company in the industry with a sales expense of more than 10 billion yuan, of which marketing and advertising costs account for the highest proportion, reaching 6.407 billion yuan.
Considering that the centralized rectification of corruption in the national pharmaceutical field began in July last year, the reporter sorted out the sales expenses of listed pharmaceutical companies in the second half of 2023. According to the financial report, in the second half of 2023, the sales expenses of 487 listed pharmaceutical companies totaled 172.103 billion yuan, a year-on-year decrease of 8.431 billion yuan. Shanghai Pharmaceutical's sales expenses in the second half of last year decreased by 1.315 billion yuan year-on-year. Fosun Pharma, which has the second largest sales expenses in the industry, also "slashed" sales expenses such as marketing, academic and brand promotion in the second half of last year. The largest reduction in sales expenses is Wantai Biotech, which will decrease by 1.629 billion yuan for the whole year of 2023.
However, in the second half of 2023, there will still be 252 listed pharmaceutical companies whose sales expenses have increased instead of decreasing. The largest increase in last year was China Resources Sanjiu, with a year-on-year increase of 1.889 billion yuan. From the perspective of subdivided industries, the situation of high sales expenses and low R&D investment is more prominent in the traditional Chinese medicine industry. According to the data, among the 72 listed companies in the traditional Chinese medicine category, nearly sixty percent of the company's sales expenses will increase year-on-year in 2023, more than sixty percent of the company's R&D investment ratio will be lower than the average, and more than forty percent of the company's R&D expenses will decline year-on-year. It is worth mentioning that, compared with the leading enterprises, small and medium-sized listed pharmaceutical companies are more aggressive in the use of sales expenses. Among the listed companies in the traditional Chinese medicine category, there are 5 companies whose sales expenses will increase by more than 40% in 2023, namely Longshen Rongfa, Pien Tze Huang, ST Bailing, Foci Pharmaceutical and Shanghai Kaibao. Except for Pien Tze Huang, the market value of these companies has not exceeded 10 billion yuan.
The marketing model has started a big change
In the eyes of industry insiders, the overall decline in the sales expenses of listed pharmaceutical companies in the second half of 2023 is a reflection of the important achievements of pharmaceutical anti-corruption. "When making accounts, pharmaceutical companies will include all kinds of expenses in sales expenses." Sunny, a senior auditor at Ernst & Young, told reporters that pharmaceutical companies with high sales expenses, the proportion of sales expenses in total operating costs, and the proportion of marketing expenses in sales expenses are also more likely to have commercial bribery risks.
Since the launch of the centralized rectification of corruption in the pharmaceutical field across the country, the regulatory authorities have been paying close attention to the sales expenses of pharmaceutical companies, and the scale is too high or will trigger investigations. On May 13, Kunming Longjin Pharmaceutical Co., Ltd. received an inquiry letter from the Shenzhen Stock Exchange on the annual report. In view of Longjin Pharmaceutical's sales expenses accounting for 73.6% of the current revenue in 2023, the Shenzhen Stock Exchange requires it to explain the specific content of market expenses, whether the market expense ratio matches the existing business, and whether there is commercial bribery or facilitation of commercial bribery.
At present, "cost control" has become the top priority of many pharmaceutical companies. The person in charge of a number of pharmaceutical companies in Taizhou Pharmaceutical High-tech Zone said frankly that since the second half of last year, the company has tightened the control of sales expenses, and almost all of them need to be signed by the top leader. "The card was too strict, and it even affected the normal sales work. For example, the travel expenses of salespeople are no longer reimbursed, which greatly affects their motivation. "The person in charge of a pharmaceutical company complained to reporters. From the perspective of the financial report, the reduction of sales expenses did affect the company's performance to a certain extent, and Fosun Pharma's revenue in 2023 fell by 5.81% year-on-year, while in the first half of the year, Fosun Pharma's revenue was still in positive growth. However, the person in charge of the above-mentioned pharmaceutical company also said that the company's management has been aware of this problem and will start a major change to the existing sales model to adapt to market competition under the new situation.
However, many people in the industry believe that strict control of sales expenses will help enterprises increase innovation expenses and improve the "internal strength" of the industry. In Sunny's view, there is still room for further decline in sales expenses in the pharmaceutical industry, "The sales expense ratio of most leading domestic pharmaceutical companies is much higher than that of international giants. International pharmaceutical companies usually combine sales expenses and management expenses, accounting for about 20% of revenue. In contrast, the sales expense ratio of domestic pharmaceutical companies is basically more than 30%. ”
Focus on tapping new growth drivers
In the face of continuous efforts to fight corruption in the pharmaceutical industry, many pharmaceutical companies have begun to change the business strategy of "emphasizing marketing and ignoring R&D", focusing on tapping new growth momentum. In the interview, a number of pharmaceutical company executives said that "AI+" and "going overseas" are the current industry hotspots.
In March last year, the General Office of the State Council issued the "Opinions on Further Improving the Medical and Health Service System", proposing to accelerate the application of artificial intelligence in the medical and health field. At present, major biomedical companies have successively cooperated with technology giants in the field of artificial intelligence drug research and development, and more than a dozen biomedical companies in our province have claimed to be involved in "AI pharmaceuticals". In addition, according to the financial reports of listed pharmaceutical companies, well-known pharmaceutical companies in the province such as WuXi AppTec have laid out the "AI+" field. "AI technology is expected to help the biopharmaceutical industry solve the problem of low return on investment, and improve the prosperity of the entire industry by improving the efficiency and success rate of drug research and development. This is also the reason why many traditional pharmaceutical companies are willing to join. A person in charge of the enterprise said.
Over the past year, many pharmaceutical companies have accelerated the pace of "going overseas" of their products. On the evening of May 5, Sinovac Pharmaceutical announced that the company's paclitaxel for injection (albumin-bound) was approved for EU GMP certification, an important step in overseas market expansion. Some pharmaceutical company executives said that although many products developed by domestic pharmaceutical companies are homogeneous, they still have high competitive advantages in many developing countries, and choosing developing countries such as Brazil, Saudi Arabia, and Indonesia as the entry point is an important opportunity to improve the performance of domestic pharmaceutical companies. Ding Sheng, founding dean of the School of Pharmacy of Tsinghua University and director of the Global Health Drug R&D Center, said that in the past two years, there have been more transactions of China's innovative drugs going overseas, "Originally, only one or two pharmaceutical companies had overseas licensing transactions every year, but now there are one or twenty pharmaceutical companies going overseas every year." ”
In the view of industry insiders, the momentum of pharmaceutical anti-corruption is still strong, and it is expected that this high-pressure situation will continue for a period of time in the future. This is a positive signal for the long-term healthy development of the entire pharmaceutical industry, and more pharmaceutical companies will embark on the road of innovation and seek new growth points.
Jiangsu Economic News reporter Fan Jun