Business Club April 18th The "12th Five-Year Plan" of the pharmaceutical distribution industry is about to come out. According to the specific objectives of the "National Pharmaceutical Distribution Industry Development Plan Outline (2011-2015)", "by 2015, through the encouragement of support for mergers and acquisitions and full market competition, to cultivate one or two cross-billion-dollar sales Regional large-scale pharmaceutical and commercial groups, 20 regional large-scale pharmaceutical companies with annual sales of over 10 billion yuan, and annual sales of the top 100 pharmaceutical wholesale enterprises accounted for more than 80% of the total annual sales of the entire industry.â€
This shows that integration is the biggest aspect of the pharmaceutical circulation industry in the next five years. The reporter combed and found that in the context of integration, the investment opportunities in the pharmaceutical industry will show three major directions.
Goal: From decentralization to concentration
According to statistics from the SFDA Southern Medicine Economic Research Institute, China currently has more than 7,100 registered pharmaceutical manufacturing companies and more than 13,000 wholesale and wholesale companies. As of 2009, there were 20,291 hospitals in China, including 1,233 tertiary hospitals and 19,058 secondary and secondary hospitals. In addition, there are countless community service terminals, city pharmacy terminals, and medical institutions and pharmacies below county, township, and township levels dispersed in urban and rural areas. Obviously, China's pharmaceutical industry presents a "pear-shaped" feature that is small in the upstream and large in the middle and lower reaches.
At present, the pharmaceutical distribution industry in the middle of the country is extremely fragmented. According to the 2009 data of the China Pharmaceutical Business Association, there are currently only 8 companies that have sold more than 10 billion yuan. The No. 1 China Pharmaceutical Group Corporation has sales of 65 billion yuan. The sales revenue of Top 100 companies in 2008 accounted for only 67.29% of the total pharmaceutical sales in China. Among these, the concentration of the top three industries in China's pharmaceutical business is only 20%, which is 96% in the United States and 67% in Japan. There is still a big gap.
In addition, under the background of industry consolidation, the “gray income†of small-scale pharmaceutical distribution companies has been greatly reduced, and the changes in bidding and drug pricing policies have also contributed to the transition of the reserve price proxy model.
Therefore, the integration of the pharmaceutical distribution industry is imperative. In the past year, many small pharmaceutical distribution companies were acquired by Sinopharm Group, Shanghai Pharmaceuticals and other group companies.
For example, in April 2010, Shanghai Pharmaceuticals (601607, the closing price of 21.10 yuan) issued a public announcement of the acquisition of Guangzhou Zhongshan Medical and Pharmaceutical Co., Ltd., which specializes in wholesale pharmaceutical products; in December 2010, it decided to acquire China Health System Ltd. (CHS for short), the latter's substantive asset is CITIC Pharmaceutical Industrial Co., Ltd. The purpose of this move is to use this company as a key pharmaceutical distribution network platform in North China, and strive to achieve a strategic breakthrough in the North China region, especially the Beijing market.
In the future, the pharmaceutical industry will exhibit the "cucurbit-shaped" feature, with two large and small in the middle.
Indicators: Keeping eye on gross margins
The current impression that pharmaceutical distribution companies leave investors is that gross profit margin is low, which is caused by the low threshold in the field of pharmaceutical circulation. Although the situation that a storage warehouse and several refrigerated trucks could open a pharmaceutical company no longer exists in the past, it is an indisputable fact that the long-term vicious competition has kept the gross profit margin of the industry from continuing to be low.
According to statistics, as the industry leader, the gross profit margins of the pharmaceutical distribution businesses of Sinopharm, Shanghai Pharmaceutical, and Kyushu Express were 8.19%, 8.57%, and 5.91%, respectively. For the pharmaceutical distribution business of other regional or smaller pharmaceutical companies, gross profit margin is even lower. For example, the gross profit rate of the accompaniment pharmaceuticals wholesale was 5.76%, Nanjing Pharmaceuticals was 5.8%, and the gross profit rate of the *ST Golden Flower Pharmaceutical Industry was as high as 63.58%. However, the gross profit margin of the pharmaceutical distribution business was only 1.66%.
“At present, the pattern of the pharmaceutical distribution industry has caused the gross margin of the entire industry to continue to decline in the past few years, and the average net profit rate of the entire industry is less than 1%.†Zou Min, an analyst at UBS Securities Pharmaceuticals, pointed out that this pattern has preceded the United States and Japan has also emerged, so when the market sees low profitability in the pharmaceutical distribution industry, it should also see this providing conditions for industry consolidation and mergers.
Zou Min pointed out that during the “Twelfth Five-Year Plan†period, the integration of the pharmaceutical circulation industry will form the business status of many pharmaceutical companies, a few large circulation companies, and many hospital pharmacies. This format determines that the profitability of pharmaceutical distribution companies may increase significantly. Among these, the most typical example is Shanghai Pharmaceuticals. Zou Min pointed out that at present, Shanghai's 55% market is controlled by Shanghai Pharmaceuticals, and the increase in the gross profit rate of Shanghai Pharmaceuticals actually reflects the increase in the ability of regional oligarchs to ask for price. During the “Twelfth Five-Year Plan†period, the pharmaceutical distribution industry not only has the opportunity for industry-wide integration, but also has the endogenous opportunities for the recovery of industry profitability. From this we can see that the gross profit rate will become an important indicator to measure the value of pharmaceutical distribution companies.
Tender: low valuation industry leader
For future investment opportunities in pharmaceutical stocks, investors need to sort out several issues.
First of all, the circulation of medicine is divided into two parts, namely, medicine wholesale and medicine retail. The medicine wholesale business mainly provides distribution and logistics distribution services for pharmaceutical production companies or other distributors and acts as a “porterâ€; pharmaceutical retailing is the downstream of medicine wholesale. , Through the retail pharmacy to direct the medical products to patients.
Qi Dejun analyst Hu Dejun believes that the future of pharmaceutical business is mainly in the field of pharmaceutical wholesale. In the context of policies such as pharmaceutical tendering, there are clearly more opportunities for large pharmaceutical distribution companies.
Western Securities analyst Fang Quanan believes that in the short term, the scope and depth of drug price adjustment may be further increased, which will have a greater impact on the pharmaceutical circulation and even the profits of the entire pharmaceutical industry. However, in the medium to long term, national and regional pharmaceutical and commercial leading enterprises that benefit from policy support will benefit even more, such as Sinopharm, Nanjing Pharmaceuticals and Shanghai Pharmaceuticals.
On the other hand, the integration and expansion of pharmaceutical distribution companies will advance from three aspects. First, industry mergers and acquisitions, through the combination of strong and rapid market, to enhance the company's profitability. Hu Dejun suggested that, in addition to focusing on the national pharmaceutical and pharmaceutical leading Chinese medicine group and Shanghai Pharmaceutical, provincial-level pharmaceutical and commercial leading enterprises such as Nanjing Pharmaceutical, Accord Medicine and Guangzhou Pharmaceutical (600332, closing price of 19.49 yuan) all have geographical resource advantages; The second is to dig deeper into the third terminal market, such as the rural cooperative medical institutions and community medical and health institutions, etc., to provide them with a series of value-added services; third is the retail and pharmacy hosting. Hu Dejun believes that in the latter two types of expansion, Kyushu Link, which has a flexible mechanism and a wide coverage and based on the third terminal market, will undoubtedly go ahead.
Key Company
Shanghai Pharmaceuticals: Increased holdings by major shareholders
Shanghai Pharmaceuticals, which is about to issue H-share financing, recently announced that its major shareholder, Shanghai Shangshi Group, has increased its shareholding in the company's shares.
Shows that Shanghai's pharmaceutical business achieved steady growth, operating income increased 19.67% year-on-year, net profit increased 46.15%.
In 2010, the company became a national large-scale pharmaceutical industry group covering the whole industry chain of the pharmaceutical industry through major asset restructuring without precedent. It has become the core medical asset and business of Shanghai Pharmaceutical Group and Shanghai Pharmaceutical Group. The overall listing of the Group's antibiotic business assets.
Not long ago, the company successfully entered South China and North China through multiple mergers and acquisitions, and formed a nationwide distribution network. The company’s pharmaceutical business share ranked second in the country. During the “Twelfth Five-Year Plan†period, the pace of outsourcing mergers and acquisitions of companies is expected to continue.
The brokerage firm predicts that the company's EPS from 2011 to 2013 will be 0.99 yuan, 1.25 yuan, and 1.54 yuan respectively.
Kyushu Link: Benefiting from Medical Reform Policy
With the transformation of the medical system and the wider application of information technology, the future logistics and information management functions will rise to become the first competitive factor. Only finer internal management and professional logistics delivery services can occupy competitive advantages. In this regard, Kyushu Pass is undoubtedly the leader.
At present, the company has an advanced warehousing and logistics distribution system. It has successively invested in 14 provincial-level medical and pharmaceutical logistics centers in Hubei, Beijing, and Henan, and has also built 20 city-level logistics centers and 256 offices, covering a wide area.
In the context of the medical reform policy, the company is expected to benefit. First of all, the company's distribution products cover almost all the categories in the basic drug list. Second, medical reforms clearly and vigorously develop primary medical institutions and encourage them to use essential drugs. Finally, the company has established an advantageous distribution network in the country's primary medical institutions.
The brokerage firm predicts that the company's EPS from 2011 to 2012 will be 0.35 yuan and 0.44 yuan respectively.
Dialogue enterprise
Kyushu Link: New medical reform promotes expansion of pharmaceutical circulation market
In response to the development prospects of the "12th Five-Year Plan" pharmaceutical distribution industry, the reporter recently interviewed Lin Xinyang, director of the secretariat of the Board of Directors of the Jiuzhou Tong Pharmaceutical Group. Lin Xinyang believes that private enterprises are more flexible in terms of mechanism, which helps private-owned pharmaceutical distribution companies to make efforts in the “Twelfth Five-Year Planâ€.
Reporter: During the "12th Five-Year Plan" period, what do you think are the development trends of the pharmaceutical distribution industry and what are the highlights?
Lin Xinyang: During the “Twelfth Five-Year Plan†period, the concentration of the pharmaceutical circulation industry will continue to increase, industry supervision will become more stringent, non-standard enterprises will be phased out, and the connection between manufacturers, retailers, and wholesalers will become even closer. This is good for large companies.
Reporter: The concentration of the top three industries in China's pharmaceutical business is only 20%, the United States is 96% in this respect, and Japan is also 67%. In your opinion, how much can this ratio be achieved during the 12th Five-Year Plan period? In the future, will the pharmaceutical distribution industry develop a pattern similar to oligarch competition?
Lin Xinyang: The industry concentration of China's pharmaceutical business will further increase, but it needs a long-term process to reach the same level as the United States, Japan, and other developed countries.
In the foreseeable future, the oligopolistic pattern is more difficult to emerge. At present, there are more than 10,000 pharmaceutical distribution companies in China, and only a very small number of enterprises with ideal scale strength and profit level are in the minority. The competitive landscape of this pharmaceutical circulation market is formed under the long-term historical conditions and has changed. It also requires a long-term process.
Reporter: At present, Kyushu Pass ranks third in the distribution of pharmaceutical companies. The top two Sinopharm and Shanghai Pharmaceuticals are state-owned enterprises. In the future consolidation of the industry, how can Kyushutong emerge as a private enterprise?
Lin Xinyang: In the context of marketization, private enterprises will not be inferior to state-owned enterprises. Because private enterprises have more flexible systems, mechanisms and business models. Overall, opportunities will outweigh challenges. For example, Kyushu Express involved in the research and development of modern logistics technology and information technology earlier in the industry, and has certain advantages in independent intellectual property rights, e-commerce transactions, marketing of OTC products, and providing value-added services to customers.
Reporter: What are the strategic considerations for Kyushu Pass’s large-scale entry into the hospital market?
Lin Xinyang: In the past, Kyushu Pass rarely entered the high-end hospital market. However, it needs to be entered in the future. The new medical reform will gradually realize the expansion of the universal health insurance and grass-roots pharmaceutical market. This is an advantageous market for Kyushu Express and will promote the rapid development of Kyushu Express; in addition, the continuous deepening of the reform of public hospitals will enter the high-end of Kyushu Link. The hospital market offers good opportunities.
This shows that integration is the biggest aspect of the pharmaceutical circulation industry in the next five years. The reporter combed and found that in the context of integration, the investment opportunities in the pharmaceutical industry will show three major directions.
Goal: From decentralization to concentration
According to statistics from the SFDA Southern Medicine Economic Research Institute, China currently has more than 7,100 registered pharmaceutical manufacturing companies and more than 13,000 wholesale and wholesale companies. As of 2009, there were 20,291 hospitals in China, including 1,233 tertiary hospitals and 19,058 secondary and secondary hospitals. In addition, there are countless community service terminals, city pharmacy terminals, and medical institutions and pharmacies below county, township, and township levels dispersed in urban and rural areas. Obviously, China's pharmaceutical industry presents a "pear-shaped" feature that is small in the upstream and large in the middle and lower reaches.
At present, the pharmaceutical distribution industry in the middle of the country is extremely fragmented. According to the 2009 data of the China Pharmaceutical Business Association, there are currently only 8 companies that have sold more than 10 billion yuan. The No. 1 China Pharmaceutical Group Corporation has sales of 65 billion yuan. The sales revenue of Top 100 companies in 2008 accounted for only 67.29% of the total pharmaceutical sales in China. Among these, the concentration of the top three industries in China's pharmaceutical business is only 20%, which is 96% in the United States and 67% in Japan. There is still a big gap.
In addition, under the background of industry consolidation, the “gray income†of small-scale pharmaceutical distribution companies has been greatly reduced, and the changes in bidding and drug pricing policies have also contributed to the transition of the reserve price proxy model.
Therefore, the integration of the pharmaceutical distribution industry is imperative. In the past year, many small pharmaceutical distribution companies were acquired by Sinopharm Group, Shanghai Pharmaceuticals and other group companies.
For example, in April 2010, Shanghai Pharmaceuticals (601607, the closing price of 21.10 yuan) issued a public announcement of the acquisition of Guangzhou Zhongshan Medical and Pharmaceutical Co., Ltd., which specializes in wholesale pharmaceutical products; in December 2010, it decided to acquire China Health System Ltd. (CHS for short), the latter's substantive asset is CITIC Pharmaceutical Industrial Co., Ltd. The purpose of this move is to use this company as a key pharmaceutical distribution network platform in North China, and strive to achieve a strategic breakthrough in the North China region, especially the Beijing market.
In the future, the pharmaceutical industry will exhibit the "cucurbit-shaped" feature, with two large and small in the middle.
Indicators: Keeping eye on gross margins
The current impression that pharmaceutical distribution companies leave investors is that gross profit margin is low, which is caused by the low threshold in the field of pharmaceutical circulation. Although the situation that a storage warehouse and several refrigerated trucks could open a pharmaceutical company no longer exists in the past, it is an indisputable fact that the long-term vicious competition has kept the gross profit margin of the industry from continuing to be low.
According to statistics, as the industry leader, the gross profit margins of the pharmaceutical distribution businesses of Sinopharm, Shanghai Pharmaceutical, and Kyushu Express were 8.19%, 8.57%, and 5.91%, respectively. For the pharmaceutical distribution business of other regional or smaller pharmaceutical companies, gross profit margin is even lower. For example, the gross profit rate of the accompaniment pharmaceuticals wholesale was 5.76%, Nanjing Pharmaceuticals was 5.8%, and the gross profit rate of the *ST Golden Flower Pharmaceutical Industry was as high as 63.58%. However, the gross profit margin of the pharmaceutical distribution business was only 1.66%.
“At present, the pattern of the pharmaceutical distribution industry has caused the gross margin of the entire industry to continue to decline in the past few years, and the average net profit rate of the entire industry is less than 1%.†Zou Min, an analyst at UBS Securities Pharmaceuticals, pointed out that this pattern has preceded the United States and Japan has also emerged, so when the market sees low profitability in the pharmaceutical distribution industry, it should also see this providing conditions for industry consolidation and mergers.
Zou Min pointed out that during the “Twelfth Five-Year Plan†period, the integration of the pharmaceutical circulation industry will form the business status of many pharmaceutical companies, a few large circulation companies, and many hospital pharmacies. This format determines that the profitability of pharmaceutical distribution companies may increase significantly. Among these, the most typical example is Shanghai Pharmaceuticals. Zou Min pointed out that at present, Shanghai's 55% market is controlled by Shanghai Pharmaceuticals, and the increase in the gross profit rate of Shanghai Pharmaceuticals actually reflects the increase in the ability of regional oligarchs to ask for price. During the “Twelfth Five-Year Plan†period, the pharmaceutical distribution industry not only has the opportunity for industry-wide integration, but also has the endogenous opportunities for the recovery of industry profitability. From this we can see that the gross profit rate will become an important indicator to measure the value of pharmaceutical distribution companies.
Tender: low valuation industry leader
For future investment opportunities in pharmaceutical stocks, investors need to sort out several issues.
First of all, the circulation of medicine is divided into two parts, namely, medicine wholesale and medicine retail. The medicine wholesale business mainly provides distribution and logistics distribution services for pharmaceutical production companies or other distributors and acts as a “porterâ€; pharmaceutical retailing is the downstream of medicine wholesale. , Through the retail pharmacy to direct the medical products to patients.
Qi Dejun analyst Hu Dejun believes that the future of pharmaceutical business is mainly in the field of pharmaceutical wholesale. In the context of policies such as pharmaceutical tendering, there are clearly more opportunities for large pharmaceutical distribution companies.
Western Securities analyst Fang Quanan believes that in the short term, the scope and depth of drug price adjustment may be further increased, which will have a greater impact on the pharmaceutical circulation and even the profits of the entire pharmaceutical industry. However, in the medium to long term, national and regional pharmaceutical and commercial leading enterprises that benefit from policy support will benefit even more, such as Sinopharm, Nanjing Pharmaceuticals and Shanghai Pharmaceuticals.
On the other hand, the integration and expansion of pharmaceutical distribution companies will advance from three aspects. First, industry mergers and acquisitions, through the combination of strong and rapid market, to enhance the company's profitability. Hu Dejun suggested that, in addition to focusing on the national pharmaceutical and pharmaceutical leading Chinese medicine group and Shanghai Pharmaceutical, provincial-level pharmaceutical and commercial leading enterprises such as Nanjing Pharmaceutical, Accord Medicine and Guangzhou Pharmaceutical (600332, closing price of 19.49 yuan) all have geographical resource advantages; The second is to dig deeper into the third terminal market, such as the rural cooperative medical institutions and community medical and health institutions, etc., to provide them with a series of value-added services; third is the retail and pharmacy hosting. Hu Dejun believes that in the latter two types of expansion, Kyushu Link, which has a flexible mechanism and a wide coverage and based on the third terminal market, will undoubtedly go ahead.
Key Company
Shanghai Pharmaceuticals: Increased holdings by major shareholders
Shanghai Pharmaceuticals, which is about to issue H-share financing, recently announced that its major shareholder, Shanghai Shangshi Group, has increased its shareholding in the company's shares.
Shows that Shanghai's pharmaceutical business achieved steady growth, operating income increased 19.67% year-on-year, net profit increased 46.15%.
In 2010, the company became a national large-scale pharmaceutical industry group covering the whole industry chain of the pharmaceutical industry through major asset restructuring without precedent. It has become the core medical asset and business of Shanghai Pharmaceutical Group and Shanghai Pharmaceutical Group. The overall listing of the Group's antibiotic business assets.
Not long ago, the company successfully entered South China and North China through multiple mergers and acquisitions, and formed a nationwide distribution network. The company’s pharmaceutical business share ranked second in the country. During the “Twelfth Five-Year Plan†period, the pace of outsourcing mergers and acquisitions of companies is expected to continue.
The brokerage firm predicts that the company's EPS from 2011 to 2013 will be 0.99 yuan, 1.25 yuan, and 1.54 yuan respectively.
Kyushu Link: Benefiting from Medical Reform Policy
With the transformation of the medical system and the wider application of information technology, the future logistics and information management functions will rise to become the first competitive factor. Only finer internal management and professional logistics delivery services can occupy competitive advantages. In this regard, Kyushu Pass is undoubtedly the leader.
At present, the company has an advanced warehousing and logistics distribution system. It has successively invested in 14 provincial-level medical and pharmaceutical logistics centers in Hubei, Beijing, and Henan, and has also built 20 city-level logistics centers and 256 offices, covering a wide area.
In the context of the medical reform policy, the company is expected to benefit. First of all, the company's distribution products cover almost all the categories in the basic drug list. Second, medical reforms clearly and vigorously develop primary medical institutions and encourage them to use essential drugs. Finally, the company has established an advantageous distribution network in the country's primary medical institutions.
The brokerage firm predicts that the company's EPS from 2011 to 2012 will be 0.35 yuan and 0.44 yuan respectively.
Dialogue enterprise
Kyushu Link: New medical reform promotes expansion of pharmaceutical circulation market
In response to the development prospects of the "12th Five-Year Plan" pharmaceutical distribution industry, the reporter recently interviewed Lin Xinyang, director of the secretariat of the Board of Directors of the Jiuzhou Tong Pharmaceutical Group. Lin Xinyang believes that private enterprises are more flexible in terms of mechanism, which helps private-owned pharmaceutical distribution companies to make efforts in the “Twelfth Five-Year Planâ€.
Reporter: During the "12th Five-Year Plan" period, what do you think are the development trends of the pharmaceutical distribution industry and what are the highlights?
Lin Xinyang: During the “Twelfth Five-Year Plan†period, the concentration of the pharmaceutical circulation industry will continue to increase, industry supervision will become more stringent, non-standard enterprises will be phased out, and the connection between manufacturers, retailers, and wholesalers will become even closer. This is good for large companies.
Reporter: The concentration of the top three industries in China's pharmaceutical business is only 20%, the United States is 96% in this respect, and Japan is also 67%. In your opinion, how much can this ratio be achieved during the 12th Five-Year Plan period? In the future, will the pharmaceutical distribution industry develop a pattern similar to oligarch competition?
Lin Xinyang: The industry concentration of China's pharmaceutical business will further increase, but it needs a long-term process to reach the same level as the United States, Japan, and other developed countries.
In the foreseeable future, the oligopolistic pattern is more difficult to emerge. At present, there are more than 10,000 pharmaceutical distribution companies in China, and only a very small number of enterprises with ideal scale strength and profit level are in the minority. The competitive landscape of this pharmaceutical circulation market is formed under the long-term historical conditions and has changed. It also requires a long-term process.
Reporter: At present, Kyushu Pass ranks third in the distribution of pharmaceutical companies. The top two Sinopharm and Shanghai Pharmaceuticals are state-owned enterprises. In the future consolidation of the industry, how can Kyushutong emerge as a private enterprise?
Lin Xinyang: In the context of marketization, private enterprises will not be inferior to state-owned enterprises. Because private enterprises have more flexible systems, mechanisms and business models. Overall, opportunities will outweigh challenges. For example, Kyushu Express involved in the research and development of modern logistics technology and information technology earlier in the industry, and has certain advantages in independent intellectual property rights, e-commerce transactions, marketing of OTC products, and providing value-added services to customers.
Reporter: What are the strategic considerations for Kyushu Pass’s large-scale entry into the hospital market?
Lin Xinyang: In the past, Kyushu Pass rarely entered the high-end hospital market. However, it needs to be entered in the future. The new medical reform will gradually realize the expansion of the universal health insurance and grass-roots pharmaceutical market. This is an advantageous market for Kyushu Express and will promote the rapid development of Kyushu Express; in addition, the continuous deepening of the reform of public hospitals will enter the high-end of Kyushu Link. The hospital market offers good opportunities.
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