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By the end of April, the 2023 annual reports of 72 listed companies in the Wind traditional Chinese medicine sector were all unveiled.
From the point of view of the year-on-year changes in revenue and net profit, more than half of the traditional Chinese medicine enterprises have achieved a "double increase" in business income and net profit. On the one hand, the performance of head enterprises continues to be stable, with the annual income of Baiyunshan, Yunnan Baiyao, China Resources Sanjiu, Tongrentang, Yiling Pharmaceutical and Pian Tsai Kui all exceeding 10 billion yuan.CursewerewolfslotOn the other hand, Tianshili, Tailong Pharmaceutical, ST Kangmei and other enterprises have stepped out of the quagmire of losses and reversed their performance.
On May 7, Han Yufeng, president of the inheritance and Innovation and Development Branch of traditional Chinese Medicine of the China Future Research Association and Secretary-General of the Young Physicians Branch of the China Association for the Promotion of traditional Chinese Medicine, told the Daily Economic News that in the post-epidemic era, people pay more attention to their own health, but Western medicine is relatively weak in disease prevention and intervention, and many Chinese medicine enterprises seize the opportunity to increase publicity and promotion. As a result, the performance has risen generally.
However, in the traditional Chinese medicine industry, the phenomenon of low R & D investment and high sales cost is still common. Data show that in 2023, among the 72 listed enterprises, nearly 60% of the enterprises' sales expenses increased compared with the same period last year, and the market capitalization of many aggressive expansion companies was less than 10 billion yuan; the R & D investment ratio of more than 60% of enterprises was lower than the average; the R & D expenses of more than 40% of enterprises declined compared with the same period last year, and leading enterprises such as Yunnan Baiyao and Baiyunshan also ranked among them.
More than half of the enterprises have both increased revenue and net profit, and Tianshili and other companies have staged a "roller coaster".
Wind data show that as of December 29, 2023, the three major A-share indexes (Shanghai Composite Index, Shenzhen Composite Index and gem Index) have fallen 3% respectively during the year.Cursewerewolfslot.70%, 13Cursewerewolfslot.54%, 19.41%, the pharmaceutical index fell 4.47% this year, while the traditional Chinese medicine index rose 1.57% this year, winning all the way under the catalysis of favorable policies and performance.
Specifically, in 2023, the performance of more than 60% (47) listed companies of traditional Chinese medicine achieved positive growth, and more than 50% of the companies achieved a double increase in operating income and return net profit. Among them, the small market capitalization enterprises represented by Shanghai Kaibao, Longshen Rongfa and ST Spring have shown a good momentum of revenue growth through marketing reform, brand building or cost reduction, and together with China Resources Sanjiu, the leader of OTC (over-the-counter drugs), they have achieved more than 30% year-on-year income growth. The net profit of Tianshili, Tailong Pharmaceutical and Zhenbao Island has increased by three digits, of which Tianshili's net profit has the highest year-on-year increase of 505.34%.
However, according to the statistics of the Daily Business News, the performance change rates of Tianshili, Tailong Pharmaceutical, Zhenbaodao, Guanyuyuan (rights protection), Yibai Pharmaceutical (rights protection) and ST Kangmei in 2022 are-110.87%,-1303.26%,-44.18%,-341.25%,-274.94% and-133.96%, respectively. There are still a lot of questions about whether the "explosive power" of these enterprises is sustainable.
In sharp contrast to this, the head enterprise lineup is becoming more and more stable. In 2023, the business income of Baiyunshan, Yunnan Baiyao, China Resources Sanjiu, Tongrentang, Yiling Pharmaceutical Co., Ltd., and Pian Tsai Yi all exceeded 10 billion yuan. Baiyunshan ranked first among 72 traditional Chinese medicine enterprises with revenue of 75.515 billion yuan, leaving Yunnan Baiyao in second place with 36.404 billion yuan.
In addition, in 2023, the net profits of Yunnan Baiyao, Baiyunshan, China Resources Sanjiu, Jichuan Pharmaceutical Co., Ltd., and Panziao Pharmaceutical all exceeded 2 billion yuan. The net profits of Tongrentang, Jilin Aodong, Yiling Pharmaceutical, Dong E E Jiao, Sunflower Pharmaceutical, Tianshili and Kanghong Pharmaceutical exceeded 1 billion yuan.
But performance is only one of the criteria for investors. As of April 30, the market capitalization of Pian Tsai and Yunnan Baiyao was 143.131 billion yuan and 102.149 billion yuan respectively, making them the only two Chinese medicine companies with a market capitalization of more than 100 billion yuan in A shares. In 2023, the share prices of the two companies fell by 15.74% and 7.13%, respectively. Tongrentang, whose share price rose 20.93% last year and had a market capitalization of nearly 85 billion yuan, was once surpassed by China Resources Sanjiu and briefly fell out of the market capitalization TOP3.
Shen Yong, chairman of the China Medical Health Development Promotion expert Committee, told the Daily Economic News on May 6 that the decline in the share prices of leading companies is likely to be accompanied by changes at the operational level. For example, in recent years, the growth of Yunnan Baiyao's core products has slowed down, and the growth of new products is weak, and the direction of focusing on the main business is still not clear enough; Pian Tsai Yi's big health products have been named and reported because they failed many spot checks, and word-of-mouth has declined. Frequent personnel changes and fierce market competition also make investors feel uneasy. In addition, hot money speculation is also one of the reasons for the sharp rise and fall in the share prices of listed companies.
Nearly 60% of the enterprises' sales expenses have increased, and the former chairman of Pian Tsai has been ousted.
With the increase in sales revenue, the sales expenses of traditional Chinese medicine enterprises have also gone up.
According to Wind data, among the 72 listed enterprises of traditional Chinese medicine, there are 24 enterprises with sales expenses exceeding 1 billion yuan in 2023, and 4 enterprises with sales expenses exceeding 4 billion yuan, respectively, namely China Resources Sanjiu, Baiyunshan, Yunnan Baiyao and Jichuan Pharmaceutical Co., Ltd., of which the sales expenses of China Resources Sanjiu are close to 7 billion yuan, a year-on-year growth rate of 37.21%, accounting for 28.16% of the total revenue.
Although the cost of sales is related to the size of revenue, expansion is not just a choice for the head company. In 2023, the sales expenses of nearly 60% (42) enterprises increased compared with the same period last year, and there were 5 enterprises whose sales expenses increased by more than 40%, namely, Longshen Rong Fa, Pian Tsai Yi, ST lark, Foci Pharmaceutical and Shanghai Kaibao. Among them, the sales fee of Longshen Rong hair increased by as much as 454.01% compared with the same period last year. With the exception of Pian Tsai, the market capitalization of the other four enterprises has not reached 10 billion yuan.
In addition, the sales expenses of ST Spring and * ST Long John accounted for 79.97% and 74.73% of the income. Among them, the former has lost money for 4 years in a row, but this year it plans to continue to focus on the business sector of the beverage sector, and strive to make a breakthrough in revenue performance and generate profits.
This is closely related to the common "big item + big health" strategy in the industry. Take Yunnan Baiyao as an example, the company has four business groups: drugs, health products, traditional Chinese medicine resources and Yunnan Pharmaceutical Company. in addition to the Yunnan Baiyao series belonging to the pharmaceutical business group (such as Yunnan Baiyao aerosol, Yunnan Baiyao ointment, Yunnan Baiyao band-aid, etc.), the toothpaste category in the health products business group is a large item of the company, and the net profit of the corresponding subsidiary is 2.022 billion yuan in 2023. The contribution to the net profit of listed companies in 2023 is close to 50%.
In order to promote drugs, the company needs to extend its marketing network to medical institutions and retail pharmacies in all provinces, autonomous regions, counties and townships across the country; in terms of health products, the company has cultivated a large national health product sales team with terminal coverage and complete layout, with a sales cost of 4.992 billion yuan in 2023.
As another example, the company continues to consolidate and deepen its core position in 2023, focusing on creating popular products of a series of drugs, cosmetics and health products. The company's sales cost for the year was 783 million yuan, an increase of 61.95% over the same period last year.
However, as a "risk indicator" of medical anti-corruption, abnormally high sales costs may indicate that the company is not healthy. On July 24, 2023, Pian Tsai-Kai announced that Chairman Lin Weiqi had resigned from the board of directors as chairman, director, and member of the special committee under the board of directors due to work adjustment. On August 22, the Supervision Commission of Zhangzhou Municipal Commission for discipline Inspection conducted a case examination and investigation on the serious violation of discipline and law by Liu Jianshun, former party committee secretary and chairman of Pian Zi Yi.
Shen Yong said that the increase in sales expenses of traditional Chinese medicine enterprises is the inevitable result of strict compliance requirements, increasingly meticulous management, higher labor costs and fierce market competition. As for whether the sales cost is "abnormally high", Han Yufeng believes that its specific composition should be analyzed. "in the future, whether traditional Chinese medicine or western medicine enterprises, only with the goal of promoting the academic development of medical diagnosis and treatment will they go further."
The speed of approval of innovative drugs in traditional Chinese medicine has been accelerated, and the investment in research and development such as Yunnan Baiyao is less than 1%.
According to the classification of domestic drug registration, traditional Chinese medicine includes four categories: innovative drugs of traditional Chinese medicine, improved new drugs of traditional Chinese medicine, compound preparations of ancient classical prescriptions and drugs of the same name. With the introduction of favorable policies such as the implementation opinions of the State Drug Administration on promoting the inheritance and innovative development of traditional Chinese medicine, the innovation heat of the traditional Chinese medicine industry continues to rise, and the results are becoming more and more fruitful.
According to the research report of China Investment Securities, the speed of registration and approval of innovative drugs of traditional Chinese medicine has been significantly accelerated by CDE (Drug Evaluation Center of the State Drug Administration) since 2021. According to statistics, a total of 26 innovative drugs of traditional Chinese medicine have been approved and put on the market from 2021 to 2023. At the same time, the number of new drug declarations of traditional Chinese medicine enterprises has gradually increased, with 67 new drug clinical declarations (IND) and 24 listing declarations (NDA) in 2023, which are expected to be cashed in 2024.
Among the 72 traditional Chinese medicine enterprises, Tianshili is a typical representative of innovative research and development. According to the annual report, the company's R & D investment in 2023 reached 1.315 billion yuan, an increase of 29.49% over the same period last year; R & D expenditure was 917 million yuan, an increase of 8.51% over the same period last year. At present, the company has a research and development pipeline covering 98 products under development, including 41 category 1 innovative drugs, 36 in clinical trials and 26 in clinical II and III stages.
In addition, the R & D expenses of Yiling Pharmaceutical and Baiyunshan in 2023 are 853 million yuan and 782 million yuan respectively. The former disclosed 11 traditional Chinese medicine projects under research in the annual report, and Baiyunshan disclosed 154projects under research. The main areas include new drug development, generic drug consistency evaluation, product secondary development and food, health food development and so on.
However, the reporter noted that the R & D expenses of Yiling Pharmaceutical and Baiyunshan decreased by 17.33% and 4.55% respectively in 2023 compared with the same period last year, while in more enterprises, the problem of low R & D investment still exists.
According to the data, the median R & D investment ratio of 72 listed traditional Chinese medicine enterprises is only 4.06%. 66.67% (48) of the enterprises'R & D investment ratio is lower than the average, including a number of head enterprises, such as Yunnan Baiyao, Baiyunshan, Tongrentang, Sunflower Pharmaceutical Co., Ltd., China Resources Sanjiu, Jilin Aodong and Dong E E Jiao.
In addition, the R & D expenses of more than 60% (45) enterprises are less than 100 million yuan, and the R & D expenses of more than 40% (31) enterprises are lower than the same period last year. Yunnan Baiyao, Baiyunshan, Jichuan Pharmaceutical, Yiling Pharmaceutical and other leading enterprises are also among them.
Shen Yong believes that due to the limitations of many factors, such as public recognition, health insurance threshold, academic promotion ability and so on, the return space of innovative drugs of traditional Chinese medicine is not as broad as that of western medicine, which may also be one of the reasons for the low R & D investment of enterprises.
Han Yufeng said that after thousands of years of development of traditional Chinese medicine, rich human experience has been sufficient to support the clinical efficacy of drugs, but its ultimate effect still depends on the dialectical level of medical treatment, so the direction of innovation of traditional Chinese medicine is very important. the room for return is also directly related to R & D investment. At present, the level of R & D expenses in the industry is low, the main reason may be that many enterprises have not broken through the traditional pharmaceutical thinking, and the direction and strategy of traditional Chinese medicine innovation is still in the exploratory stage.
The price increase of traditional Chinese medicine has a limited impact on the head enterprises, which will accelerate the reshuffle of the industry.
In addition to good performance, difficult to reduce sales costs, difficult to rise in R & D costs, the price of traditional Chinese medicine "roller coaster" is also a major event in the industry in 2023. As Huashen Technology described in the annual report, since 2023, the price of traditional Chinese medicine has risen sharply, and the price index of Kangmei traditional Chinese medicine has risen 17.3% compared with the same period last year. Proprietary Chinese medicine manufacturers are unable to pass on the increased costs upstream in the short term, facing the risk of falling gross profit margin and shrinking profit margins.
According to the annual report, the factors affecting the rise in the price of medicinal materials are complex, mainly including costs, such as labor costs and rising initial processing costs; on the supply side, such as the reduction of planting area caused by policy adjustment, the state ban on and restrictions on the collection of rare and wild medicinal materials, and the reduction of market supply due to the decline of per unit yield caused by the long duration of abnormal weather and the damage of indiscriminate mining to wild Chinese medicine resources. In addition, there are factors such as capital speculation.
Han Yufeng also agrees that the continued rise in the price of traditional Chinese medicine is caused by a variety of factors.CursewerewolfslotHe believes that if the price of traditional Chinese medicine continues to rise, it will reduce the competitive advantage of traditional Chinese medicine enterprises, especially proprietary Chinese medicine enterprises, and even affect the planting enthusiasm of drug farmers in the future.
Shen Yong made a more detailed analysis of this. He told reporters that the prices of drugs (especially medical insurance drugs) in the hospital market are set by the state, and when the cost of raw materials increases, the retail price cannot be increased accordingly, which will reduce the profit space of the products. and directly affect the promotion expenses, publicity expenses and scientific research expenses of enterprises, resulting in a series of negative effects.
Therefore, having the ability to ensure the supply of raw materials will be an important competitive advantage. Shen Yong said that the price fluctuations of traditional Chinese medicinal materials have existed since ancient times. In order to ensure a stable supply of raw materials for the main products, many leading companies have already established their own medicinal materials planting bases. For example, Tasly has a planting base for Danshen dripping pills, Yiling Pharmaceutical has a planting base for forsythia, and Yangzijiang Pharmaceutical has a planting base for gardenia. When the price of Chinese medicinal materials fluctuates, these companies are relatively limited affected, while small and medium-sized enterprises are often unable to cope with soaring procurement costs, and the industry reshuffle accelerates.
However, Shen Yong believes that the price increase of Chinese medicinal materials will not last long. "The State Administration of Traditional Chinese Medicine has been emphasizing the need to achieve risk hedging by establishing futures markets and spot markets for Chinese medicinal materials. In the future, the impact of price fluctuations on the market may be minimized."