Thanks to various supporting policies on pharmaceuticals and the surging price of certain traditional Chinese medicinal materials, investment institutes are highly concerned about the performance of pharmaceutical enterprises in their interim reports.
Based on SSN’s statistics, 44 pharmaceutical enterprises have released their interim reports for the first half of 2017 as at Aug. 14. 35 companies recorded performance growth in the first half, accounting for nearly 80 percent. 14 companies recorded an increase of over 30 percent, accounting for 31.8 percent. Based on the interim reports published, almost all companies in medical services, pharmaceutical commerce and medical equipment sectors saw stable growth. But TCM and chemical medical companies witnessed different performance.
Biological products companies see surging profits
Companies in the biological products sector recorded the highest increase in the interim report. The influence of the vaccine incident in Shandong has been eliminated gradually and the market gradually recovered. The vaccine industry recorded significant growth in business revenue. Chongqing Zhifei Biological Products Co., Ltd. (300122.SZ) and Shenzhen Kangtai Biological Products Co., Ltd. (300601.SZ) recorded outstanding performance.
According to the interim report of Zhifei Biological Products released today, the company has been focusing on the sale of its own products in the first half of 2017. With the AC-Hib vaccine as the core and the sale of its own products as the driver to profit growth, the company recorded business revenue of 445 million yuan, increasing 142.01 percent year on year. It recorded a net profit of 172 million yuan, increasing 1,326.96 percent year on year.
It is noteworthy that MSD tetravalent HPV vaccine under the agency of Zhifei Biological Products has obtained the registration approval for drugs in the mainland of China during the reporting period. According to relevant agreements, MSD will exclusively supply the product to the company and will allow the company to exclusively distribute the proiduct in the mainland. According to the public data released, the product has won the bidding in Yunnan Province. Relevant bidding and tendering work are under progress currently.
Kangtai Biological Products also recorded outstanding performance. During the reporting period, the company sped up in marketing, strengthened the R&D and innovation and enhanced international cooperation. It recorded business revenue of 469 million yuan in the first half, representing an increase of 128.72 percent. It recorded a net profit of 71 million yuan, increasing 25.79 percent year on year.
The chemical raw medicine sector also saw significant increases. Take Zhejiang Garden Bio-chemical High-tech Co., Ltd. (300401.SZ) as an example, major products of the company are under full production. The company achieved business revenue of 233 million yuan, increasing 46.4 percent year on year. It recorded a net profit of 75 million yuan, increasing 378.01 percent year on year.
With the updating of the health insurance directory, some companies gained bigger market shares with high quality products. The list of directory under negotiation also promoted the application of new quality medicines. Shandong Xinhua Pharmaceutical Company Limited (00719.HK; 000756.SZ) expanded the market exploration with two new medicines. During the reporting period, the two new medicines contributed to the hiking sales revenue. The company recorded a profit attributable to the parent company of 107 million yuan, increasing 132.79 percent year on year.
Hiking prices of traditional Chinese medicinal materials brings different effects
It is noteworthy that the TCM sector saw differentiated performance. Some companies saw outstanding performance thanks to the hiking prices of raw materials. However, not all companies benefited from the hiking prices. Some even recorded more expenses.
According to the interim report released by Dong-e-e-jiao Co., Ltd. (000423.SZ) today, the company recorded business revenue of 2,934 million yuan, increasing 9.72 percent year on year. It recorded a net profit of 901 million yuan, increasing 8.75 percent year on year. The business revenue and net profit of the company saw stable increases. Meanwhile, the operating cost of the company increased 19.88 percent. The company attributed the increase to the hiking cost of raw materials. Insiders believe that the company will expand to the upper stream and establish a sustainable industrial system to integrate the farmers, the enterprise and the market in the future in order to strengthen its leading position in the industry.
Guangdong Jiaying Pharmaceutical Co., Ltd. (002198.SZ) also disclosed its interim report today. The company recorded business revenue of 187 million yuan, increasing 12.43 percent year on year. The net profit attributable to shareholders of the listed company was 9,899,300 yuan, decreasing 37.91 percent year on year. It is caused by the hiking prices of raw materials, which resulted in the increasing production cost and the declining net profit.
The study report of the Orient Securities pointed out that as the TCM decoction pieces are not included in the bidding and the market-based pricing mechanism for OTC products has been established, TCM decoction pieces and OTC products can offset the hiking cost through raising the selling price. Well-known TCM enterprises can maintain stable sales and achieve increases in the sales quantity and price driven by the marketing reform.
Translated by Star Zhang
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