I. Discussion and analysis of the operating situation
In the first half of 2020, the international economic environment is intricate and complex, the domestic pharmaceutical industry regulation continues to tighten, and the competitive landscape of the pharmaceutical industry is facing great challenges. Under the leadership of the board of directors, the company continues to focus on technological innovation and strengthening internal management, do a solid job in production and operation management, steadily promote the development of the main business, and improve the management system.In the first half of 2020, the company realized operating income of 575,553,159.00 yuan, a decrease of 5.77% compared with the same period of the previous year; realized net profit attributable to the owners of the parent company of 42,513,. 468.06 yuan, an increase of 4.60% over the same period of the previous year.
During the reporting period, the company focused on promoting the following work:
1. Research and development, and increase product research and development
2. Strengthening production and quality management, and comprehensively ensuring product quality
The company adheres to the guidance of the market demand, and reasonably arranges the production plan, organizes the production, and ensures the completion of the production tasks on time; strengthens the supervision and management of the whole production process to ensure product quality; strictly enforces the GMP, which ensures the quality of products. We strictly implement the relevant requirements of GMP, standardize the management of production site; strengthen the basic management of production safety and environmental protection, and carry out regular testing and periodic calibration of production equipment to ensure that the company's fire protection, environmental protection and other systems of stable, effective and reliable operation; the implementation of the WCM lean production, and strengthen the training and assessment of relevant personnel to comprehensively enhance the production of guaranteed quality control and stability, smooth and orderly production operation. The company carries out WCM lean production, strengthens the training and assessment of related personnel, and comprehensively improves the controllability and stability of product production and quality to ensure smooth and orderly production operation. The company regularly carries out production safety education activities, organizes safety training, fire emergency drills and other activities to enhance the awareness of production safety of all staff to ensure safe production without accidents.
3, sales, the company continues to strengthen the marketing network system construction
Accelerate and improve the construction of four sales system: retail chain marketing system, medical terminal marketing system, mainstream commercial distribution system, online e-commerce sales system.
Promote the cooperation between the top 100 national chains and regional leading chains, accelerate the development of ranked hospitals and grassroots medical institutions, establish a mainstream commercial distribution system, realize the distribution of single-pharmacy and clinics, and develop online sales channels to meet the new needs of consumers' purchasing behavior.
Multi-channel, multi-initiative, three-dimensional promotion of corporate and product branding: focusing on promoting the Hulu Children's Category Management Center project in retail stores for sellers; on-line and off-line children's respiratory and digestive professional knowledge popularization and education for doctors and shopkeepers; and for the general public, the use of the Internet, professional journals, and the new media to promote children's professional brand and the image of the leading products. The company's products and services have been widely recognized by the public.
4, continue to standardize the development, the implementation of lean production, the realization of refined production management, and further improve the level of corporate management.
Continue to strengthen internal management, improve the quality of operations, the implementation of lean production; pay close attention to strategy, assessment, standardization, cost, risk, safety, environmental protection and other aspects of management, enhance management effectiveness. The Company has established an internal management system with standardized governance, clear division of labor, unified authority and responsibility, synergistic and efficient management system, and has improved the internal constraint mechanism through the initiatives of sound management system, strict budget, strengthened accounting, and cost control to reduce the Company's operating cost and achieve cost reduction and efficiency; the Board of Directors, Supervisory Committee, and senior management personnel of the Company have diligently fulfilled their duties and responsibilities, and expressed their professional opinions and viewpoints on the Company's business development, operation and management, and major issues, effectively and efficiently safeguarding the Company's business development, operation and management. The Board of Directors, Supervisory Committee and senior management of the Company have all diligently performed their duties and expressed their professional opinions and views on the Company's business development, operation and management as well as major matters, effectively safeguarding the interests of all shareholders, especially small and medium-sized shareholders.
Second, the possible risks
1, the risk of fluctuations in raw material prices
The company's production of proprietary Chinese medicines require Chinese herbal medicines, mainly honeysuckle, maitake, motherwort and other dozens of Chinese herbal medicines, to the market cultivation of a large area of traditional medicinal herbs, the supply of the market is relatively sufficient. However, due to the natural growth and seasonal collection of Chinese herbal medicines, the distribution of their origins is obviously regional, and their production and quality are affected by the natural climate, soil conditions and the methods of harvesting, drying and slicing and processing, and their prices are prone to fluctuations. At the same time, the company's production of chemical drugs required by the market demand, environmental protection and other factors, the price will fluctuate.
2, the risk of increased market competition
The company has formed a pediatric drugs for the development of characteristics, proprietary Chinese medicines and chemical preparations for the simultaneous development of the product system, covering the respiratory system, the digestive system, the whole body of anti-infective class and other common disease areas. By the state to encourage the pharmaceutical industry, especially the development of pediatric drugs, increase public **** health investment and population aging and other factors, China's pharmaceutical market demand scale is expanding, there will be more companies to enter the field of pediatric drugs and other market areas where the company's products, the existing industry companies will continue to increase the investment in R & D and production, research and development of new medicines and the listing of the products may increase competition, the company is facing the pressure of increased competition in the industry. The Company is facing the pressure of intensified competition in the industry. If the company can not respond to market competition in a timely and effective manner, it will face the risk of slow growth and decline in market share.
3, product bidding risk
According to the "Code of Practice for Centralized Purchasing of Medicines for Medical Institutions", "Supervision and Administration of Centralized Purchasing of Medicines" and other relevant regulations, China has formed a centralized purchasing model of medicines based on provinces, autonomous regions and municipalities directly under the Central Municipality, and has implemented a unified organization, a unified platform and a unified supervision. Non-profit medical institutions organized by people's governments at or above the county level and state-owned enterprises (including state-controlled enterprises) must participate in centralized procurement. The centralized procurement of medicines is carried out by drug manufacturers participating in the bidding process, and the relevant departments will evaluate the bidding based on a number of criteria, including bidding price, product quality, manufacturer qualification, clinical effectiveness and after-sales service. According to the former National Health and Planning Commission's "Notice on Further Strengthening the Provision and Use of Children's Drugs in Medical Institutions", localities can refer to the selection principles and model drugs for generic drugs for women and children specialties published by industry associations and academic groups commissioned by the former National Health and Planning Commission to rationally determine the scope of the region's medicines and the specific dosage forms and specifications, and directly list them for procurement.
Some of the company's medicines are required to participate in the bidding or listing of centralized purchasing of medicines in provinces, autonomous regions and municipalities directly under the central government, and after winning the bidding, they sign sales contracts with regional dealers or distributors, and are sold to medical terminals through regional dealers or distributors. If the company's products in the future in the regional centralized procurement bidding or listing in the bidding or bidding price dropped significantly, the company's future performance may be adversely affected.
4, the risk of drug price reductions
The reform of the drug price formation mechanism has a greater impact on drug prices. According to the Notice on Issuing Opinions on Promoting Drug Price Reform (Development and Reform Price [2015] No. 904), since June 1, 2015, the original government pricing has been canceled, except for narcotic drugs and the first category of psychotropic drugs.On February 9, 2017, the General Office of the State Council issued the Opinions on Further Reforming and Improving the Policy of Drug Production and Circulation (Guo Ban Fa [2017] No. 13 ), proposing that in areas where the reform of health insurance payment methods has been fully implemented or health insurance drug payment standards have been formulated, public hospitals are allowed to purchase drugs with quantity and budget on the provincial centralized drug procurement platform, which is the first time that the state has released the ban on "prohibiting hospitals from purchasing drugs for a second time," and given hospitals the right to conduct independent bargaining for drug purchases. The centralized purchasing platform is the first time that the state has liberalized the ban on "prohibiting hospitals from purchasing drugs for secondary bargaining" at the policy level, giving hospitals around the country the right to carry out autonomous bargaining for the purchase of drugs.
At the end of 2018, the state launched a pilot program of banded purchasing with four municipalities directly under the central government, namely Beijing, Shanghai, Tianjin and Chongqing, and seven key cities, namely Dalian, Xiamen, Xi'an, Guangzhou, Shenzhen, Chengdu and Shenyang as the pilot areas, with the main goal of reducing the purchase price of medicines, lowering the cost of the transaction, and guiding the medical institutions to rationalize the use of medicines. Subsequently, after a number of expansions, the band purchasing policy has been gradually extended to the whole country, and the number of drugs included in the scope has been further increased. From the bidding results, the prices of selected medicines have all dropped significantly. The band purchasing policy is a major reform in the field of drug circulation and a wind vane for the reform of China's medical and pharmaceutical system. If the scope of the pilot drug band purchasing is further expanded, some of the company's product prices may be affected by the band purchasing policy and its price linkage has been a significant decline, and at the same time, if the company failed to realize the winning bid, the company's profitability may be adversely affected.
5, the risk of profitability decline due to further increase in marketing expenses
With the reform of the pharmaceutical distribution industry policy, in order to adapt to the direction of the reform of the "two-ticket system" and the company's need for refined marketing management, in recent years, the company in accordance with the implementation of the progress of the provinces and municipalities, the timely adjustment of the promotion and sales model to match, and actively implement the distributor model, to ensure that the company's products and services, and to promote the development of the company's products and services. The company has adjusted its promotion and sales model in accordance with the progress of implementation in each province and city in recent years, and has actively implemented the distributor model.
Under this model, the company specializes in promoting its leading products and bears the corresponding costs, making the marketing expenses rise year by year during the reporting period.
In the future, with the expansion of the company's business scale and the launch of new products, it will make the company's specialized promotion expenses further increase. If the company's products can not be effectively promoted, or the scale of sales growth can not be absorbed by the increase in marketing expenses, will have a certain adverse impact on the company's profitability and future development.
6, consistency evaluation policy risk
According to the General Office of the State Council issued in March 2016 "on the development of generic drug quality and efficacy consistency evaluation of the views" and related regulations, the new registration classification of chemical drugs before the implementation of the approval of the listing of the other generic drugs, since the first variety of the first variety through the consistency of the evaluation, the same varieties of other drug manufacturers in principle should be within three years to Completion of consistency evaluation; overdue, no re-registration; the same variety of drugs through the consistency evaluation of the production enterprises to reach more than three, in the centralized procurement of drugs and other aspects of the selection of varieties that have not passed the consistency evaluation. At present, industry enterprises due to the consistency of the evaluation of higher costs, the consistency of the evaluation of injectable varieties of operating rules introduced late, the overall progress is less than expected. At the same time, due to some products belong to change the specifications, change the dosage form, change the salt base and other "three changes" varieties make it difficult to determine the reference preparation, some products belong to the compound oral solid preparations, including a variety of drug ingredients, resulting in consistency evaluation is still difficult, etc., through the consistency evaluation varieties are still relatively few.
The company is increasing investment in the current major sales and market potential of chemical drugs to carry out consistency evaluation work. However, to carry out consistency evaluation will increase the company's operating costs, such as the company's main chemical drugs failed to pass the consistency evaluation, or through the time is significantly later than other enterprises, or public hospitals centralized purchasing process to improve the consistency of the drug evaluation requirements, the company's drugs in the centralized purchasing process in public hospitals or the future of the approval number of drug re-registration process will be adversely affected, so that the company's operating results The company's business performance will be adversely affected.
7, the new coronary pneumonia epidemic risk
Since the outbreak of the new coronary pneumonia epidemic in early 2020, China and even the global socio-economic operation has had a certain impact. The company's sales of respiratory drugs accounted for a high proportion of the new crown pneumonia is mainly transmitted through the respiratory tract and accompanied by influenza, to a certain extent, to stimulate the company's drug market demand. Since the outbreak of this epidemic, the state and some local governments have issued prevention and treatment programs for the new crown pneumonia, and some of the programs involve the company's sales of medicines, which has increased the visibility of the company and its medicines. At the same time, due to terminal channel sales restrictions, sales promotion inconvenience, population movement and logistics restrictions, the company's product sales will also be adversely affected, on balance, the short-term impact of the epidemic on the company's sales is limited. At present, the company's production base has all resumed work, with a certain safety stock, the epidemic will not have a significant adverse impact on the company's production and operation in the short term.
However, if the epidemic lasts too long, it may cause the supply of upstream raw materials to be tense, making the company's purchasing price rise, which will have a certain negative impact on the company's future production and operation. At the same time, if the spread of the epidemic makes the macro-economy is seriously adversely affected, it may affect the market consumption ability, and affect the company's marketing activities, which may have a negative impact on the company's product sales.
C. Analysis of core competitiveness during the reporting period
(A) Advantages of product categories and dosage forms
The company is characterized by the development of pediatric medicines, with proprietary Chinese medicines as the mainstay, rapid growth of chemicals, and respiratory medicines, digestive medicines, and systemic anti-infectives as the main therapeutic areas. Up to now, the company has 295 drug approval numbers, of which Huaji Tablets and Nimesulide Extended-Release Capsules are exclusive dosage form products, and Pediatric Lung-Heat Coughing and Asthma Granules (4 grams per bag), Enterogastrin Capsules (0.3 g per capsule), and Enterogastrin Granules (2 g per bag) are exclusive specification products.
In the field of pediatric drugs, the company has a variety of high-quality oral pediatric drugs, including pediatric lung-heat cough granules, enteritis granules, cefixime dispersible tablets, pediatric aminophenol xanthanamine granules, pediatric cough syrup, pediatric pharyngeal clearing granules, covering children's respiratory system, digestive system and systemic anti-infective drugs, to form a more complete product system of pediatric drugs. In view of the characteristics of drugs and the needs of different age groups, the company has invested in the construction of tablets, capsules, granules, soft capsules, dry suspension, oral liquids, dispersions, pills, powder injections, lyophilized powder, tincture and other sixteen types of pharmaceutical preparation production lines, is a more complete pharmaceutical enterprises in the form of domestic.
The company has a large number of drugs included in the National Essential Drug List and the National Health Insurance List, as well as a more complete system of products with a wide range of dosage forms. The company can adjust its products and product mix in real time according to the market demand and give full play to the advantages of scale in production, sales and brand promotion to maximize the satisfaction of the market and patients' needs.
(B) Product quality advantage
Drug quality is the important cornerstone of the company's operation, and is fundamental to the company's long-term development. Since its inception, the company has taken the quality of drugs as the top priority of business operations, set up a quality control center to carry out comprehensive control of product quality, the establishment and strict implementation of a sound quality management system, from supplier selection, raw material inspection, product production process inspection to finished product inspection, out of the warehouse, are to perform strict inspection procedures. In addition to organizing production and quality control in accordance with GMP requirements, the company has established the ICHQ10 system of the U.S. FDA and passed the international ISO9001 quality management system certification, established a quality management system and control processes covering multiple departments, full participation, and covering the whole process of the product, and under the conditions of standardization of the production process, and through the mature application of the intelligent manufacturing technology system and equipment to achieve Under the conditions of standardized production process, the company realizes digital, informationized and automated production through the mature application of intelligent manufacturing technology system and equipment, and ensures the quality of drugs through online record, online automatic sampling inspection and closed self-inspection.
The company's products account for a relatively high proportion of proprietary Chinese medicines, and its main proprietary Chinese medicine products form a set of quality system higher than the national standard through the research and development or secondary development of process, quality control and other aspects, while meeting the national drug quality standards. The company strictly enforces the standardized production of proprietary Chinese medicines, ensures the standardization and flow of the production of medicines, and realizes the organic unity of the safety and efficacy of the quality of medicines.
(C) Product R&D Advantages
Since its establishment, the company has insisted on the modernization of traditional Chinese medicine as its goal, and has used modern technology, equipment and innovation paths to promote the standardization of the company's core proprietary Chinese medicine preparations. At present, the company's R&D center and Huluwa Technology are responsible for external cooperative R&D and independent R&D respectively, and have established a scientific research and development system with the core of internal R&D strength and the first-class pharmaceutical research institutes within the United Nations. The company encourages and supports the research and development of new drugs and technological innovation, and the proportion of annual investment in research and development has been increasing year by year. The company attaches great importance to the cultivation of the talent echelon, and introduces all kinds of talents to enrich the research and development force through the cooperation with various universities and research institutes.
In recent years, the company in the independent development at the same time, and Tianjin Institute of Pharmaceutical Research Co., Ltd, Shandong Academy of Pharmaceutical Sciences, Shenyang Pharmaceutical University, Liaoning University of Traditional Chinese Medicine and other well-known domestic R & D institutions, as well as well-known scholars in the field of pediatrics, pCms, and establish a long-term cooperation mechanism, timely tracking of cutting-edge research results in the industry, and to carry out the development of new products and commercialization work. At present, the company has set up the Hainan Province Chinese Medicine Preparation Engineering Technology Research Center, Liu Changxiao Engineering Academy academician workstation, and has obtained the approval of the establishment of postdoctoral research station in Hainan Province, effectively enhancing the company's R & D strength in pediatrics, proprietary Chinese medicines.
At present, the company has 73 intellectual property patents. Since 2010, the company has passed the high-tech enterprise certification, and has been selected as the vice-chairman of the Pediatrics Branch of the Chinese Society of Traditional Chinese Medicine for two consecutive terms. With the continuous innovation of science and technology, the competitiveness of science and technology has been continuously transformed into the market competitiveness, which has gradually established the company's dominant position in the field of children's respiratory disease treatment.
(D) marketing network advantage
After nearly a decade of development, the company has established a marketing network system basically covering the major provinces and cities across the country, the company is currently set up in accordance with the different market terminals, OTC Division, the new Feiluo Division, the medical institutions Division, the channel control sales Division, the Gourd Father Division, the Special Administrative Region Division, the YiZhenYuan Division and other seven business units, at present, the product has covered 2,000 children's respiratory diseases across the country, the company has been the first to set up a marketing network. At present, the products have covered more than 2,000 urban, township and rural sales terminals, more than 3,500 medical institutions above the second level, more than 9,600 township health centers and community service centers, more than 200,000 clinics, health offices and service stations, and more than 150,000 chain and single-pharmacy stores, forming a complete sales team and service system covering grade hospitals, primary medical institutions, individual clinics, retail chains and single-pharmacy stores. The company has formed a complete sales team and service system that covers the level hospitals, primary medical institutions, individual clinics, retail chains and individual pharmacies. The company has established a long-term cooperation mechanism with domestic famous pharmacy chain enterprises, such as Sinopharm Holdings Pharmacy Limited, Dasanlin (603233) Pharmaceutical Group Company Limited, Yifeng Pharmacy Company Limited, Common People's Pharmacy Chain Company Limited, and Yixintang (002727) Pharmaceutical Group Company Limited, and other large and medium-sized retail pharmacy chains, and has realized deep market coverage of the national market through famous chain enterprises. We have established a long-term cooperation mechanism with large and medium-sized retail pharmacy chains such as Yixintang (002727) Pharmaceutical Group Co.
The company is based on the grass-roots market, and vigorously explores the third terminal market. Through cooperation with well-known industry associations such as the Pediatrics Branch of the Chinese Society of Traditional Chinese Medicine and the China Association for Pharmaceutical Education, and the establishment of the Huluwa Management and Business School, it conducts comprehensive education and training for grass-roots healthcare personnel, the company's distributors, and the cooperative retail terminal storekeepers to improve grass-roots doctors and retail pharmacies' safe use of drugs and standardize the level of drug administration and establishes a comprehensive network covering key city-level hospitals, mainstream hospitals, and retail pharmacies. We have established an all-round marketing network covering key city-level hospitals, mainstream OTC retail chains and primary medical institutions. The strong sales network and marketing system ensures that the company responds to market demand in a timely manner, and ensures that the company's subsequent products can be quickly introduced to the market.
(E) brand advantage
Brand advantage is one of the company's core competitiveness, the company in the strict quality control at the same time, the brand building to the same important work. Since 2015, the company has launched its brand strategy, with the goal of creating a world brand of China's national medicines, practicing the corporate mission of "Healthy Chinese Children", and striving to create a brand image of the guardian of children's health in China. In terms of brand building, the company insists on taking the road of specialized promotion, joining hands with domestic mainstream media, and creating three series of brands including "Huluwa", "Hulu Dad" and "Hulu Mom" through image positioning. The three series of brands, including "Hulu Wa", "Hulu Dad" and "Hulu Mom", are closely integrated with the company's existing development strategy of pediatrics, adult drugs and gynecology drugs.
After more than 10 years of development, the company has a strong comprehensive strength in the field of pediatric pharmaceuticals, and has now become the vice president of the China Association of Traditional Chinese Medicine, vice president of the China Pharmaceutical Materials Association, vice chairman of the Chinese Society of Traditional Chinese Medicine Pediatrics Branch, and vice chairman of the China Association of Traditional Chinese Medicine, the fusion of Western and Chinese medicine, children's health and drug research professional committee. 2016 and 2017 the company's In 2016 and 2017, the Company's pediatric lung-heat cough granules and enteritis capsules were listed on the 28th and 29th "China Pharmaceutical-Brand List [Sharp List]" organized by the Southern Institute of Pharmaceutical Economics; according to the statistics of China Association of OTC Pharmaceuticals, the Company was ranked twenty-fourth on the brand list of China's OTC enterprises in 2018; in 2017, 2018 and 2019, the Company was ranked twenty-fourth on the brand list of China's OTC enterprises. In 2017, 2018 and 2019, the Company was selected as a representative brand of children's medicines in the CCTV-1 "Great Country Brand Raising" program of CCTV for three consecutive years, and the Company's brand awareness and influence have been significantly enhanced.
Through the company's comprehensive control of product quality, continuous improvement of brand influence and rapid development of product sales, the "Huluwa" brand has gained a high degree of visibility and reputation in the industry and among consumers, which is one of the company's important advantages in participating in the industry competition and achieving sustainable development.