Brush your teeth, make up and drink coffee… Have you ever thought that traditional Chinese medicine enterprises can also provide services for your life?
In recent years, with the increasing competitive pressure, enterprises with the production and marketing of traditional Chinese medicine as their only business have almost disappeared, replaced by the “transformational school” who wrote the “great health ecosystem” into the annual report.
These traditional Chinese medicine enterprises are busy becoming “young”. In business communication, they not only talk about “four Qi and five flavors”, but also try to integrate into the circle of biopharmaceutical, and even make a large investment, spending billions of yuan just to buy a ticket.
In the concept of traditional Chinese medicine provided by the data, nine head companies are included in the concept of traditional Chinese medicine, a total of nine Head Companies in the concept of traditional Chinese medicine provided by the data, including nine head companies, namely: the Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) 38.81 yuan) Dong-E-E-Jiao Co.Ltd(000423) ( Dong-E-E-Jiao Co.Ltd(000423) , SZ; yesterday’s closing price of 30.87 yuan), Tasly Pharmaceutical Group Co.Ltd(600535) ( Tasly Pharmaceutical Group Co.Ltd(600535) , SH; yesterday’s closing price of 10.43 yuan), Heilongjiang Zbd Pharmaceutical Co.Ltd(603567) ( Heilongjiang Zbd Pharmaceutical Co.Ltd(603567) , SH; yesterday’s closing price of 11.55 yuan) and Guizhou Xinbang Pharmaceutical Co.Ltd(002390) ( Guizhou Xinbang Pharmaceutical Co.Ltd(002390) , SZ; yesterday’s closing price of 4.63 yuan).
Among the nine companies, even if they are generally worth more than 10 billion yuan, not all have a smooth transformation. In 2021, the performance of two enterprises declined year-on-year, three enterprises were burdened with hundreds of millions of yuan of goodwill, and five enterprises made provisions for goodwill impairment totaling nearly 600 million yuan… For many small and medium-sized traditional Chinese medicine enterprises, studying and judging industry policies, improving product identification and raising R & D funds are also practical problems in their future development.
achievements: over 60% of the company’s profits expanded
Driven by favorable policies, rising prices of raw materials and rising drug prices, traditional Chinese medicine enterprises were in full swing last year. Especially in the second half of 2021, under the background of the sharp correction of the pharmaceutical sector, the traditional Chinese medicine sector with rising share prices has attracted the attention of the capital market.
From the perspective of financial performance, the performance of listed companies of traditional Chinese medicine generally improved in 2021. According to the data, 48 of the 74 listed companies of traditional Chinese medicine have expanded their profits, accounting for more than 60% Dong-E-E-Jiao Co.Ltd(000423) , Zhejiang Conba Pharmaceutical Co.Ltd(600572) ( Zhejiang Conba Pharmaceutical Co.Ltd(600572) , SH; yesterday’s closing price of 4.76 yuan), Tasly Pharmaceutical Group Co.Ltd(600535) and other eight companies’ net profit attributable to the parent company increased by three digits year-on-year. Among the companies with losses, only six companies, including Chongqing Taiji Industry (Group) Co.Ltd(600129) ( Chongqing Taiji Industry (Group) Co.Ltd(600129) , SH; yesterday’s closing price of 18.48 yuan) and Guangyuyuan Chinese Herbal Medicine Co.Ltd(600771) ( Guangyuyuan Chinese Herbal Medicine Co.Ltd(600771) , SH; yesterday’s closing price of 28.54 yuan), further expanded their losses.
The financial data of listed companies of traditional Chinese medicine in 2021 showed a bright overall performance, and the growth rate of profit side was better than that of income side, but for different reasons.
In terms of the overall performance of the traditional Chinese medicine sector, in May, the Southwest Securities Co.Ltd(600369) research and development center believed that it was mainly due to the price increase and volume of traditional Chinese medicine consumer goods. At the beginning of this year, the daily economic news also reported that the sharp rise in the traditional Chinese medicine sector last year was affected by the continuous rise in the price of traditional Chinese medicine in the past two years and the price increase of related traditional Chinese medicine listed companies on their products.
According to the price index released by tiandi.com, the price index of traditional Chinese medicine continued to rise in 2021, and the overall trend in the second half of the year was basically consistent with that of the concept index of traditional Chinese medicine. From 2022, the price index of traditional Chinese medicine tends to be stable. Correspondingly, after entering the year of the tiger, the concept index of traditional Chinese medicine fluctuates and falls, with a large correction range.
In addition to external factors such as policies and rising prices of raw materials, traditional Chinese medicine enterprises strengthen R & D, which is also an important reason why the market is optimistic about the traditional Chinese medicine industry. Since 2021, the review of innovative drugs of traditional Chinese medicine has accelerated, and seizing the incremental market has become the survival way of traditional Chinese medicine enterprises.
Although there are differences in cases, the overall logic of the traditional Chinese medicine industry is very clear – either invest a large amount of money in drug research and development, or stick to the diversification strategy to the end and open up new tracks such as great health, pharmaceutical e-commerce and even food. Companies represented by Tasly Pharmaceutical Group Co.Ltd(600535) chose the former, companies represented by Yunnan Baiyao Group Co.Ltd(000538) focused on the latter, and companies represented by Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) said “I want all”.
From the perspective of traditional Chinese medicine itself, by combing the annual reports of top companies in the traditional Chinese medicine industry, it can be found that traditional Chinese medicine listed companies focusing on traditional Chinese medicine generally pay attention to the R & D, secondary development and re evaluation of innovative traditional Chinese medicine. A number of head companies said that they should make efforts to study the standards of classic famous prescriptions and formula granules of traditional Chinese medicine. In March this year, Dongguan Securities pointed out in the research report that innovative traditional Chinese medicine and traditional Chinese medicine formula particles are the two main investment lines of the traditional Chinese medicine industry.
From the perspective of R & D expenditure, the data show that in 2021, Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited(600332) ( Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited(600332) , SH; yesterday’s closing price of 29.85 yuan), Shijiazhuang Yiling Pharmaceutical Co.Ltd(002603) , Tasly Pharmaceutical Group Co.Ltd(600535) , Shandong Buchang Pharmaceuticals Co.Ltd(603858) ( Shandong Buchang Pharmaceuticals Co.Ltd(603858) , SH; yesterday’s closing price of 21.17 yuan) and China Resources Sanjiu Medical & Pharmaceutical Co.Ltd(000999) ranked among the top five with the total R & D expenditure of 879 million yuan, 792 million yuan, 761 million yuan, 634 million yuan and 631 million yuan respectively. Taking Shijiazhuang Yiling Pharmaceutical Co.Ltd(002603) as an example, in 2021 Shijiazhuang Yiling Pharmaceutical Co.Ltd(002603) obtained the new drug registration approval, there were two innovative traditional Chinese medicine drugs, both of which were aimed at diseases in the field of nervous system; There are 6 innovative traditional Chinese medicines approved for clinical research, covering diabetes retinopathy, children’s cold, chronic cholecystitis, allergic rhinitis and other diseases.
However, although the financial performance of listed companies of traditional Chinese medicine in 2021 was good, the decline of the traditional Chinese medicine sector this year also exposed its vulnerability in the valuation of the capital market.
Until today, the evaluation system of traditional Chinese medicine and the safety of traditional Chinese medicine injections will sometimes arouse public discussion. At present, traditional Chinese medicine enterprises are still in an awkward transition period. On the one hand, they should “make up their homework”, do the re evaluation of listed drugs, and invest a lot of resources in clinical research; The brand image of some “time-honored” traditional Chinese medicine enterprises is old, which is difficult to adapt to the marketing mode in the digital era. It is urgent to transform and reshape the brand value.
On the other hand, the “new homework” of traditional Chinese medicine enterprises has not been done enough, and it is not uncommon to see insufficient innovative products, weak liquidity and slow speed.
cross border: Aiming at big health busy “open source”
As the “two heroes of traditional Chinese medicine” who often appear as “model students”, the different development trends of Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) and Yunnan Baiyao Group Co.Ltd(000538) in 2021 reflect the joy and worry of the large-scale healthy layout of traditional Chinese medicine enterprises incisively and vividly.
Last July, with the help of market speculation, the unit price of ” Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) ” lozenge soared to thousands of yuan (original price of 590 yuan), even exceeding the full gold unit price in the same period, and the market value of the company once approached 300 billion yuan. Even after several shocks, as of the closing on May 18, its market value was still as high as 179.1 billion yuan, surpassing Yunnan Baiyao Group Co.Ltd(000538) (market value 103.3 billion yuan), which ranked second in market value, by more than 70 billion yuan.
In a number of regular reports in 2021, Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) put forward the development strategy of “multi-core driven and two-way development” for the great health industry, replacing the “one core and two wings” repeatedly mentioned in the past six years.
In terms of meaning, “one core and two wings” refers to “strengthening the two wings of cosmetics, daily chemical products, health products and health food on the basis of consolidating the pharmaceutical manufacturing industry, and expanding the pharmaceutical circulation industry at the same time”.
But the company’s latest strategy seems to emphasize that each sector “draws on its strengths”. Among them, “multi-core” refers to making Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) , expanding Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) brand Angong Niuhuang Pill, and strengthening Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) cosmetics; “Two way” refers to tapping potential internally and promoting outward extension M & A.
The annual report shows that the income from the pharmaceutical industry accounts for nearly 90% of the total income of Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) and the rest mainly comes from the cosmetics industry, while the income from the food industry accounts for less than 1%.
The development path of Yunnan Baiyao Group Co.Ltd(000538) is quite different from that of Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) although its market value has dropped by 100 billion yuan in the past year and its net profit returned to its mother has declined year-on-year for the first time in 10 years, it has little to do with medicine.
Due to poor stock speculation, by the end of last year, Yunnan Baiyao Group Co.Ltd(000538) securities and fund investment fair value change profit and loss was -1.929 billion yuan, and the company’s performance growth suddenly stalled. Although the net profit attributable to the parent company of RMB 2.804 billion is still among the best in the industry, the year-on-year decrease of 49.17% has brought the net profit attributable to the parent company back to the level of 2015.
In 2021, Yunnan Baiyao Group Co.Ltd(000538) ‘s operating revenue also maintained a year-on-year growth of 11.09%, including industrial sales revenue including toothpaste of 12.703 billion yuan, accounting for 34.92% of the total revenue. From 2018 to 2021, the growth rate of this part of revenue was slightly slow, and the growth momentum was significantly lower than that of wholesale and retail business with large base and low gross profit.
In fact, the transformation of Yunnan Baiyao Group Co.Ltd(000538) has gone through nearly 20 years since its entry into the Bureau in 2004.
In 2021, Yunnan Baiyao Group Co.Ltd(000538) expanded customized toothpaste for different groups, as well as mouthwash, tooth rinse and other categories of oral care products. The company’s R & D expenses also increased by 82.99% year-on-year, mainly due to the new R & D and registration of special medical food and the research and development of collected biomedical skin care products.
In June last year, Yunnan Baiyao Group Co.Ltd(000538) also announced the construction plan of the Shanghai International Center project, with an estimated total investment of 1.55 billion yuan. The construction contents include the construction of Yunnan Baiyao Group Co.Ltd(000538) precision customized skin management platform, the establishment of biomedical industry development fund, etc.
The construction of a new park is almost the road that traditional Chinese medicine enterprises in the field of health will embark on. Even Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) , which has natural advantage products, announced in January this year that it plans to invest in new industrial parks with self raised funds with an estimated upper limit of investment of no more than 4.48 billion yuan. The investment projects include Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) great health intelligent park and Zhangzhou Pientzehuang Pharmaceutical Co.Ltd(600436) health beauty Park.
In addition, the flagship stores of “Taofeng” and .
However, the performance of these new businesses is unknown. At least for now, most of them rarely appear in the regular reports of listed companies.
Innovation: heavy money into the biomedical circle
In addition to the transformation to health care products, daily chemical products and other major health directions, another transformation path of traditional Chinese medicine enterprises is to transform to high-end generic drugs, chemical drugs or biological drugs, and Heilongjiang Zbd Pharmaceutical Co.Ltd(603567) and Jiuzhitang Co.Ltd(000989) ( Jiuzhitang Co.Ltd(000989) , SZ; yesterday’s closing price of 8.86 yuan) are typical types of entering biomedicine.
Last year, Heilongjiang Zbd Pharmaceutical Co.Ltd(603567) announced to invest 400million yuan in Zhejiang teres Pharmaceutical Co., Ltd. to focus on major tumor diseases such as breast cancer and lung cancer, and take ADC as the core product to enter the field of biological drugs.
The company also announced that it plans to set up a wholly-owned subsidiary in Hangzhou Qiantang new area, invest in the construction of the company’s Hangzhou biological drug project, engage in the research and development of antitumor ADC drugs, and set up other subsidiaries and other industries. The proposed total investment of the project is about 1.7 billion yuan, including about 100 million yuan in fixed assets and about 1.6 billion yuan in R & D within 6 years.
In addition, among the fixed raising and investment projects completed by the company last year, the raised funds of 1.238 billion yuan were mainly used for the R & D platform project of innovative drugs and generic drugs, the phase III project construction project of Jixi branch, the origin processing project of traditional Chinese medicine and the information upgrading construction project.
It is worth noting that although Heilongjiang Zbd Pharmaceutical Co.Ltd(603567) this year’s revenue and net profit grew back in the first quarter, the net profit attributable to the parent company in 2021 was only 332 million yuan, a year-on-year decrease of 23.88%.
Jiuzhitang Co.Ltd(000989) is also a loyal supporter of biomedicine. In June last year, Li Zhenguo, chairman of Jiuzhitang Co.Ltd(000989) board of directors, said in an exclusive interview with the reporter of the daily economic news that “it is a shift period ( Jiuzhitang Co.Ltd(000989) ) and also a transition period. It is not easy for any enterprise to turn its strategy well. You should have expectations for difficulties, divide your strategic ideas according to different businesses, make plans and think carefully”.
Stem cell project is an important decision in the process of Jiuzhitang Co.Ltd(000989) strategic transformation. In 2018, Jiuzhitang Co.Ltd(000989) Meike (Beijing) cell technology Co., Ltd. was established and invested in stemedica, an American regenerative medicine enterprise, which is mainly engaged in the R & D, production and clinical work of allogeneic adult stem cells and related derivatives. Last December, Jiuzhitang Co.Ltd(000989) invested an additional 100 million yuan in the M & A fund with its own funds. The final purpose of part of the additional investment in the M & A fund is to increase the capital of the M & A fund participating company stemedica.
However, due to the amortization and loss of stemedica intangible assets invested by the M & A fund, Jiuzhitang Co.Ltd(000989) last year’s investment income was -547947 million yuan, accounting for – 15.36% of the total profit.
In addition, the layout of Jiuzhitang Co.Ltd(000989) in the field of innovative drugs also includes LFG project, yb211 project (innovative cyclic lipopeptide antibiotics) and remd-477 project. According to the annual report, the company is currently reporting and communicating with FDA and other regulatory authorities on the development plan of clinical phase III of remd-477 project.
In terms of R & D investment, in 2021, Jiuzhitang Co.Ltd(000989) R & D investment was 118 million yuan and Heilongjiang Zbd Pharmaceutical Co.Ltd(603567) R & D investment was 146 million yuan, both showing a year-on-year growth trend.
Considering that the R & D projects of the two enterprises are still in the early stage, their R & D capital demand may expand significantly in the future.
Take Rongchang Biology (688331, SH; yesterday’s closing price of 29.91 yuan), the first manufacturer of domestic ADC drugs, as an example. Before its ADC products were listed, the company invested more than 1 billion yuan in R & D from 2018 to 2020; The research and development of an innovative drug takes an average of 10 years, and there is no new “short, flat and fast” on big health consumer products.
However, more and more traditional Chinese medicine enterprises do choose this path. Taking Tasly Pharmaceutical Group Co.Ltd(600535) as an example, the company invested 761 million yuan in R & D in 2021, accounting for 9.58% of the operating revenue. At present, the company has 94 pipeline products under development, including 46 class 1 innovative drugs, and 52 drugs have entered the clinical stage, of which 19 are in clinical phase II and III studies.
However, frequent investment and acquisition also put many companies on the burden of goodwill. According to the statistics of the reporter of the daily economic news, by the end of last year, 24 of the 74 traditional Chinese medicine enterprises had a book value of goodwill of more than 100 million yuan, of which Shandong Buchang Pharmaceuticals Co.Ltd(603858) ranked first with 5.147 billion yuan, and Guizhou Yibai Pharmaceutical Co.Ltd(600594) ( Guizhou Yibai Pharmaceutical Co.Ltd(600594) , SH; yesterday’s closing price of 5.39 yuan) accrued a provision for goodwill impairment of 1.392 billion yuan, the highest in the industry.
test question: how to make a breakthrough in enterprise transformation
No matter what transformation path, its source is mostly the dilemma of traditional Chinese medicine in clinical research and marketing.
From the perspective of medicine, traditional Chinese medicine has more shortcomings than western medicine. Generally speaking, the efficacy of Western medicine lies in a specific chemical component, and the action mechanism is clear, which is mainly realized by affecting specific pathways such as hormones or nerves; However, traditional Chinese medicine belongs to holistic medicine, which emphasizes the relationship between various parts of the human body in diseases. For example, the Shexiang Baoxin Pill, which carried out the basic research earlier, contains 95 pure compounds, including volatile and non-volatile components.
This means that the difficulty of identifying the effective components of traditional Chinese medicine and elaborating the specific mechanism of action has increased sharply; This also explains why traditional Chinese medicine lacks rigorous clinical trials, and its market share in the field of public health care is declining year by year.
Due to financial strength and market competition, many traditional Chinese medicine enterprises with a large number of batch numbers and production qualifications actually produce only a few types of products, mainly because it is difficult to unify the standards of “one person, one party” traditional Chinese medicine.
At present, there are a large number of traditional Chinese medicine products with the same name on the market, which all meet the national production and naming standards. However, different producing areas and manufacturing processes lead to quality differences between different products and cost differences among manufacturers. This makes the traditional Chinese medicine enterprises that seem to “let a hundred flowers bloom” imply the risk of “bad money expelling good money”.
In this regard, the “14th five year plan for the development of traditional Chinese medicine” issued by the general office of the State Council in March this year gives a response plan. The document points out the key issue of the industrial development of “the quality of traditional Chinese medicine is uneven”. Aiming at the main task of “promoting the high-quality development of traditional Chinese medicine industry”, it puts forward four specific measures to complete the quality improvement project of traditional Chinese medicine through “strengthening the protection and utilization of traditional Chinese medicine resources”, “strengthening the production and management of genuine traditional Chinese medicine”, “improving the development level of traditional Chinese medicine industry” and “strengthening the safety supervision of traditional Chinese medicine”.
This echoes the industry’s call for “establishing a standardized pricing system”, but there still seems to be room for improvement.
On May 12, Shi lichen, a pharmaceutical strategic marketing expert, said in a telephone interview with the reporter of daily economic news that every point in the whole industrial chain will affect the quality of traditional Chinese medicine products from the origin of traditional Chinese medicine to terminal sales. Therefore, the quality improvement of traditional Chinese medicine is a series of projects, and more policies can be expected in the future. In addition, the state has issued relevant policies on the promotion of clinical research projects and the cultivation of the health management concept of “treating and preventing diseases”, but there is still a lack of supporting landing policies and rules. This part is also worth looking forward to in the future.
As for the two paths for the transformation and development of traditional Chinese medicine enterprises, Shi lichen said that the threshold of the great health path is low and the speed of product listing is fast, but the market competition is very fierce. It is difficult for traditional Chinese medicine enterprises to take the lead in the Red Sea market if they do not choose the fields such as the best-selling categories cultivated in the market, the products close to the advantageous products of enterprises, or the rehabilitation of chronic diseases explicitly supported by national policies. On the contrary, the threshold of biomedical path is too high, and many traditional Chinese medicine enterprises do not have the matching scientific research and financial strength, so they will encounter great difficulties.
Shi lichen believes that in addition to the above two paths, traditional Chinese medicine enterprises actually have a third choice, namely traditional Chinese medicine research and development.
On March 30, 2020, the State Administration of market supervision and administration announced the new measures for the administration of drug registration. The registration of traditional Chinese medicine is divided into four categories: innovative traditional Chinese medicine, improved new traditional Chinese medicine, traditional Chinese medicine compound preparations of ancient classic famous prescriptions, and drugs with the same name and the same prescription.
According to the data of China business intelligence network, a third-party industry market research institution, a total of 12 new drug varieties of traditional Chinese medicine were approved for listing in 2021, higher than the sum of the number of new drugs approved in the previous four years, reaching a new high in recent four years. In addition, in terms of the number of new traditional Chinese medicine drugs declared for listing and clinical, there were 10 and 48 respectively in 2021, both reaching a new high.
However, “shyness in the bag” is still a big pain in the innovation of traditional Chinese medicine enterprises.
“It’s really unlikely to borrow money for research and development. The risk of new drug research and development is too great.” Shi lichen said. Shi lichen suggested that in addition to paying attention to the project initiation dynamics of industrial policies and national related topics and actively seeking listing, traditional Chinese medicine enterprises can also learn from the financing experience of innovative drug enterprises and introduce funds through equity cooperation with large pharmaceutical companies with the help of high-quality R & D projects.
