On March 23, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) released the annual report for 2021. Data show that Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) revenue reached 39.005 billion yuan in 2021, with a year-on-year increase of 28.70%; The net profit was 4.735 billion yuan, a year-on-year increase of 29.28%; The net profit deducted from non profit was 3.277 billion yuan, an increase of 20.60% year-on-year. Among them, its core pharmaceutical business achieved an operating revenue of 28.904 billion yuan; Medical devices and medical diagnosis business achieved an operating revenue of 5.938 billion yuan; The medical and health service business achieved an operating revenue of 4.118 billion yuanP align = “center” (source: screenshot of 2021 annual report)
For the reasons for the increase in revenue, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) said that it was mainly due to the revenue contribution of covid-19 vaccine fubitai, tumor drugs hanlikang, hanquyou, chronic liver disease drug Sukexin and other new and secondary products during the reporting period, as well as the revenue growth contribution of overseas subsidiaries gladpharma and sisram.
Although the annual report was positive, at the opening of trading on March 23, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) a shares and Hong Kong shares fell to varying degrees after the afternoon market. As of the closing, their A shares closed at 50.54 yuan / share, down 6.77%; Hong Kong stocks closed at HK $35.75 per share, down 5.92%.
multiple star products disclose sales data
In 2021, the sales volume of a covid-19 vaccine has been concerned by investors all the time.
It is reported that fubitai was first developed by Germany’s biontech se. Based on the exclusive announcement of mRNA and its proprietary technology developed in 2020 by its subsidiary bioech in China. In March 2021, it was included in the government vaccination plan in Hong Kong and Macao, and was vaccinated in Taiwan, China in September 2021.
According to the data of Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) annual report, there are three single products or series of preparations with sales of more than 1 billion yuan, among which fubitai ranks first. At the same time, by the end of February 2022, fubitai has inoculated more than 20 million doses in Hong Kong, Macao and Taiwan, but the specific sales data of Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) has not been disclosed.
Although the sales volume exceeds 1 billion yuan, the gross profit margin of fubitai is not ideal. In this regard, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) said that it was mainly because fubitai’s operating cost included three parts: procurement cost, gross profit sharing to be paid to biontech according to the license agreement and corresponding sales milestones, so it was lower than the gross profit rate of other products.
In addition, car-t cell therapy product yikaida (akilunsai injection), as another heavy product of Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) is an innovative product of its joint venture Fosun Kate.
It is reported that in June 2021, yikaida was approved to become the first approved cart cell therapy product in China, which is mainly used to treat adult patients with relapsed or refractory large B-cell lymphoma after receiving second-line or more systematic treatment. In August 2021, its second indication (for the treatment of adult patients with recurrent or refractory inert non-Hodgkin’s lymphoma, including follicular lymphoma and marginal zone lymphoma) was included in the breakthrough treatment drug program by the State Food and drug administration.
Previously, it was reported that the price of yikaida was 1.2 million yuan a needle. If estimated at this price, from the approval in June last year to the end of 2021, yikaida has brought in at least more than 100 million revenue.
In addition, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) also mentioned that its subsidiary Fosun Kate’s second car-t product (fkc889) has completed technology transfer during the reporting period, and the application for clinical trial for recurrent or refractory mantle cell lymphoma was approved by the State Drug Administration in March 2022.
performance increased steadily, but the share price almost halved
Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) (hereinafter referred to as Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) ) was listed in 1998. It is a “a + H” share-holding enterprise. It mainly focuses on the pharmaceutical business. Its direct business includes pharmaceutical, medical devices, medical diagnosis and medical services, and covers the pharmaceutical business field by participating in Sinopharm holdings.
As a 100 billion pharmaceutical giant, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) ‘s performance has never been disappointing. According to the data, from 2019 to 2021, its revenue was 28.585 billion yuan, 30.307 billion yuan and 39.005 billion yuan respectively, with a year-on-year increase of 14.72%, 6.02% and 28.70% respectively; The net profit was 3.222 billion yuan, 3.663 billion yuan and 4.735 billion yuan respectively, with a year-on-year increase of 22.66%, 10.27% and 29.28% respectively.
The strength of Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) can be seen from the double increase of annual revenue and net profit, but investors don’t seem to have much enthusiasm. Since its listing on the Shanghai Stock Exchange in 1998, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) ‘s secondary market has been flat until August 2021, when its share price reached the highest point of 91.69 yuan / share since its listing, but it began to fall again.
Obviously, the performance has increased steadily, but what are the reasons why investors in the secondary market are not enthusiastic?
Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) has been famous for “buy buy” since its listing. In the early stage, it acquired enterprises including Zhejiang Dian Diagnostics Group Co.Ltd(300244) , Yueyang Guangji hospital, Anhui Jimin Cancer Hospital, united family hospital, Zhongwu hospital, Nanyang cancer hospital and other local hospitals, and later acquired Lister pharmaceutical and GlaxoSmithKline Pharmaceutical (Suzhou) Co., Ltd.
In order to enrich the company’s product line, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) almost spends money on acquisition.
However, after acquiring so many companies, its goodwill value began to surge. According to the data, the goodwill of Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) has soared from 3.473 billion yuan in 2016 to 9.4 billion yuan in 2021, almost tripled.
Despite the high goodwill, the dividends of generic drugs have begun to fade in recent years. In the face of the normalization of centralized procurement, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) has also suffered a great impact.
centralized purchase products gross profit margin under pressure
How much “water” is the net profit?
According to the annual report data of 2021, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) a total of 23 products that have passed or are deemed to have passed the conformity evaluation of generic drugs have been selected in the bidding for centralized procurement of six batches of drugs, resulting in the decline of gross profit margin of pharmaceutical business.
According to the data, at present, the gross profit margin of Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) pharmaceutical business has decreased by 8.27 percentage points year-on-year. In addition, the gross profit margin of medical devices, medical diagnosis and medical health services has also decreased to varying degrees. At present, its overall gross profit margin has decreased from 55.68% in the 2020 annual report to 48.14% in the 2021 annual report.
In addition to centralized procurement, the reasons for the decline in gross profit margin include the rise in the price of raw and auxiliary materials, the rise in unit costs, and the impact of medical insurance negotiations. In this regard, the gross profit margin of its anti-tumor and immune regulation core products decreased, and the gross profit margin of its metabolic and digestive system core products also decreased.
In the face of centralized purchase, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) is not without a way. In 2021, it began to sell assets and integrate them.
According to the reporter’s statistics, in 2021, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) sold a total of four subsidiaries, with a total transfer amount of about 4.031 billion yuan.
Specifically, in April 2021, Chancheng hospital and Fosun medical, the holding subsidiaries of Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) intends to transfer 100% of the total equity of Foshan Chanxi held by Shanghai Yuyuan Tourist Mart (Group) Co.Ltd(600655) to Shanghai Yuyuan Tourist Mart (Group) Co.Ltd(600655) with a total transfer price of 550 million yuan; In May, its subsidiary Fosun health plans to sell 75% equity of Taizhou Zhedong medical and nursing investment (its main asset is Taizhou Zhedong hospital under construction) for 553 million yuan; In August, it is proposed to transfer 250011% of the total equity of Tianjin Pharmaceutical to Tianjin Jinyao, with a total transfer price of RMB 1.432 billion; At the end of September, it is planned to transfer the total 29.02% equity of yanneng biology and 100% equity of Jinshi medical examination institute for a consideration of 1.596 billion yuan.
The income obtained from the transfer of the company is also reflected in the 2021 annual report, in which the investment income from the disposal of subsidiaries by the company reached 2.013 billion yuan, accounting for almost half of the annual net profit in 2021.
Why did Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) still achieve steady growth in revenue and net profit under the influence of centralized purchase and medical insurance negotiation?
After careful observation, it is not difficult to find that most of the income of Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) comes from investment income. According to the data, from 2018 to 2020, the company’s net profit was 3.020 billion yuan, 3.744 billion yuan and 3.940 billion yuan respectively, and its net investment income was 1.815 billion yuan, 3.565 billion yuan and 2.284 billion yuan respectively. In 2021, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) had a net profit of 4.735 billion yuan, and the net investment income alone reached 4.624 billion yuan.
In addition, on the same day of publishing the annual report, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) also issued an announcement on withdrawing asset impairment.
After evaluation and testing, Shanghai Fosun Pharmaceutical (Group) Co.Ltd(600196) will make provision for impairment of long-term equity investment of 462 million yuan and goodwill of 150 million yuan in 2021, totaling 612 million yuan. The provision for asset impairment this time reduced the net profit by 612 million yuan, the net profit by 570 million yuan and the owner’s equity attributable to the shareholders of the listed company by 570 million yuan on December 31, 2021.
