On April 15, Hubei Mailyard Share Co.Ltd(600107) announced that the previously acquired Qinghai Zhongyou health Huijia pharmaceutical chain Co., Ltd. failed to fulfill its performance commitment in 2021 due to the repeated covid-19 epidemic. The company plans to change the performance commitment period after negotiation with the performance commitment party.
Prior to that, China National Accord Medicines Corporation Ltd(000028) also made provision for impairment of assets of Jilin Tianhe acquired by China National Accord Medicines Corporation Ltd(000028) due to the decline in sales of Jilin Tianhe’s pharmaceutical retail business.
In this regard, Li Junguo, vice president of Zhongkang technology, told the Securities Daily that compared with other retail entities, pharmacies are still doing well. However, vertically, retail pharmacies are indeed affected by the epidemic situation, the adjustment of national medical reform policies, o2o of pharmaceutical e-commerce and other factors. Retail pharmacies are facing the problem of transforming from simple commodity sales to providing health services.
target performance commitment period will be changed
Hubei Mailyard Share Co.Ltd(600107) in the announcement, the company signed the equity transfer agreement on Qinghai Zhongyou health Huijia pharmaceutical chain Co., Ltd. (hereinafter referred to as the “original agreement”) on November 30, 2020, which agreed that the company would acquire 100% equity of Qinghai Zhongyou health Huijia pharmaceutical chain Co., Ltd. (hereinafter referred to as “Qinghai Zhongyou”) held by the performance commitment party. According to the original agreement, the performance commitment party promises that the total net profit attributable to the parent company after deducting non recurring profits and losses in the audited consolidated statements of Qinghai Zhongyou in 2020, 2021 and 2022 will not be less than 15 million yuan, 16.5 million yuan and 18 million yuan respectively (hereinafter referred to as “the original performance commitment”).
Hubei Mailyard Share Co.Ltd(600107) said that in 2020, Qinghai Zhongyou achieved a net profit attributable to the parent company of 154647 million yuan after deducting non recurring profits and losses, and completed its performance commitment in 2020. Since October 28, 2021, there has been repeated covid-19 epidemic in Qinghai Province. According to the notice of the drug administration department, some stores of the target company have closed from November 1 to November 20, 2021. At the same time, in 2021, according to the regulations of the epidemic prevention and control department, the sales of four types of drugs (antipyretic, cough, antiviral, antibiotic and other four types of drugs) were prohibited or restricted, registered sales and other control measures, resulting in a significant decline in the passenger flow in 2021 and the failure to complete the expected sales and profits in 2021.
Hubei Mailyard Share Co.Ltd(600107) said that due to the above significant impact, Qinghai Zhongyou has great difficulties in achieving the performance target of 2021. After negotiation with the performance commitment party, the company plans to postpone the performance commitment of the original 2021 year to 2022 year and the performance commitment of 2022 year to 2023 year.
China National Accord Medicines Corporation Ltd(000028) , the performance of the acquisition target is lower than expected due to the repeated covid-19 epidemic. On March 9, China National Accord Medicines Corporation Ltd(000028) issued an announcement on the provision for asset impairment, saying that the operating performance of Jilin Tianhe, a subsidiary company, declined in 2021, and there was a large deviation from the expectations when goodwill was formed, showing signs of impairment.
China National Accord Medicines Corporation Ltd(000028) introduced that the performance of Jilin Tianhe decreased significantly in 2021 due to the superposition of covid-19 epidemic, industrial policies and other factors. The sales of Jilin Tianhe retail sector declined due to the withdrawal of one drug and two anti drug drugs from the shelves due to controlled sales during 2021. At the same time, affected by the epidemic, customers’ consumption habits have changed, online drug purchases have increased, and the company’s sales structure has changed. In 2021, the proportion of o2o and B2C business sales has increased, the cost has increased greatly, and the profit space has decreased.
retail pharmacies face challenges
According to the report released by Zhongkang information, the sales scale of retail pharmacies nationwide reached 492.3 billion yuan in 2021, an increase of 2% year-on-year; In January 2022, the scale of retail pharmacies nationwide was 45.1 billion yuan, a slight decrease over the same period.
“The drugstore business is not easy to do. Many drugstores around have closed.” A drugstore operator told reporters, “at present, the real name registration system is implemented for the purchase of ‘four categories’ of epidemic prevention and control drugs for cough, fever, dry throat and anti infection. There will be a return visit after purchase, which may require you to make nucleic acid. Some places are more strict, and retail drugstores have been required to suspend the sale of four categories of drugs.”
“Some retail pharmacies are in a state of loss. On the one hand, the reason for their poor operation is that the centralized purchase of drugs sold by hospitals is cheaper than that of pharmacies. In addition, under the influence of the epidemic, people’s consumption habits have also changed. Online drug purchase has become a trend and robbed a large number of offline users.” Shi lichen, a medical strategy expert, said in an interview with Securities Daily.
For retail pharmacies, the emergence of incremental products means new opportunities. On March 11, 2022, the covid-19 virus antigen detection application program was released. The program pointed out that if community residents have self-detection needs, they can purchase antigen detection reagents for self-test through retail pharmacies, online sales platforms and other channels. The release of this news triggered a change in the stock price of chain drugstores. Analysts believe that the new antigen detection products will help to improve the passenger flow of chain pharmacies and promote the sales.
On April 12, the State Food and Drug Administration approved the registration application of two covid-19 virus antigen products, namely Zhuhai Lizhu reagent and Shanghai Berger medical. So far, the State Food and drug administration has approved 27 covid-19 antigen self-test products. The reporter inquired on tmall platform that at present, the single test price of covid-19 antigen self-test kit can reach 9.9 yuan / time. Under such a competitive pattern and price trend, what are the profits left to pharmacies?
“The emergence of covid-19 antigen self-test products may only be a short-term stimulus, but in the long run, with the improvement of the epidemic, it is difficult to have a greater impact on the sales of retail pharmacies.” An analyst who declined to be named told reporters.
According to Li Junguo, vice president of Zhongkang technology, the rise of China’s contemporary retail pharmacies initially relied on solving the problems of “convenience” and “cheapness” of drug supply. With the changes of factors such as rich supply, diversified channels and medical insurance payment reform, the industry environment of drug retail is changing. How to cooperate with medical institutions and solve the health needs of patients is an important transformation direction of retail pharmacies. “With the advent of population aging, the health management of people with chronic diseases is a huge market, and retail pharmacies have natural basic advantages in this regard.”