The formula pellets rose fiercely, and the two leading companies broke 7 billion in half a year!

In recent years, as the society pays more and more attention to traditional Chinese medicine, traditional Chinese medicine formula granules have gradually become known and widely used by doctors and patients.
The performance of the company is also rising year by year, and the market is improving
.

In the first half of 2021, a number of new policies have been released one after another, which once again set off the industry's discussion on the future of traditional Chinese medicine formulation particles

Market liberalization, stricter supervision, and centralized procurement approaching

Market liberalization, stricter supervision, and centralized procurement approaching

At present, the aging of our country’s population is a problem that cannot be ignored.
In addition, with the increase in life pressure, the sub-healthy population is gradually expanding.
The demand for health care and conditioning of these two groups is increasing.
The rapid deployment of prescriptions can well meet the needs of the elderly and sub-healthy population for treatment and health care, and there is still much room for improvement in the market
.

On February 10, the "Announcement on Ending the Pilot Work of Chinese Medicine Formula Granules" was released to the public and officially implemented on November 1
.

The New Deal mentions three points worthy of attention.

When the industry was unanimously optimistic that the market liberalization would usher in dividends, on April 29, the first batch of 160 Chinese medicine formula granules national drug standards were officially promulgated, and they were also implemented on November 1
.

With the gradual promulgation of the national standards for traditional Chinese medicine formula granules, higher requirements have been put forward for the quality control and cost control of all links in the entire industry chain of formula granules.

On August 9, the National Medical Insurance Administration stated in response to the suggestion that the next step would be to speed up the inclusion of proprietary Chinese medicines and formula granules into centralized procurement
.

At present, the centralized procurement of traditional Chinese medicine formula particles has been piloted in the local area.

High gross profit and fast growth! Formula granule faucets each show their magical powers

High gross profit and fast growth! Formula granule faucets each show their magical powers

Traditional Chinese medicine formula granules are a subdivision field with high barriers, and the dynamics of the first pilot enterprises entering the market have always attracted attention
.

A few days ago, China Traditional Chinese Medicine, Hongri Pharmaceutical, China Resources Sanjiu, Shenwei Pharmaceutical, etc.

Table 1: Performance of related companies in 2021H1

Source: Company's semi-annual report

The key enterprises of China Traditional Chinese Medicine in the field of traditional Chinese medicine formula granules include Guangdong Yifang, Longxi Yifang Pharmaceutical, Jiangyin Tianjiang, Anhui Tianxiang Pharmaceutical.
Driven by a strong enterprise cluster, the company has been firmly on the top of the list
.

It is mentioned in the semi-annual report that with the company's increased recognition of the quality controllability of traditional Chinese medicine formula granules and the operation mode of dispensing machines, the business of this sector has developed rapidly and the gross profit margin has increased steadily

Chinese Traditional Medicine

Figure 1: The performance of Chinese traditional Chinese medicine formula granules (unit: 100 million yuan)

Source: Company Annual Report

In the first half of 2021, China Traditional Chinese Medicine's traditional Chinese medicine formula granule business contributed about 5.
321 billion yuan in turnover, a year-on-year increase of 16.
40%
.

Mainly due to the company’s increased academic promotion of traditional Chinese medicine formula granules, hospitals at all levels have continuously improved the recognition of the quality controllability and convenience advantages of Chinese medicine formula granules, and continued to promote the operation model of dispensing machines, which has improved the hospital’s medication use.
Convenience.
Existing customers have brought about a 12.
2% increase in turnover.
In addition, the company is actively exploring market channels.
The growth in the number of primary medical institutions is more prominent, and the turnover caused by new customers has increased by about 4.
2%
.

From a regional perspective, sales in the four major regions of East China, South China, North China, and Central China accounted for 79.

The gross profit margin of the Chinese medicine formula granule segment increased from 68.
7% in the same period last year to 70.
6%, which is also higher than the gross profit margin for the whole year of 2020, mainly because the company has obvious advantages in large-scale and intensified production, and is committed to promoting lean management to further reduce The production cost
.

Looking back at the first five batches and six rounds of centralized procurement of chemical drugs, price reduction is an inevitable result, and cost control is an important link in the sustainable development of bid-winning companies.

China Traditional Chinese Medicine stated that the end of the pilot work is a milestone in the policy development of the Chinese medicine formula granule industry.
The full opening of the market and the sinking of channels will also benefit the company's sales
.
To this end, the company will continue to consolidate and improve its leading position in the field of traditional Chinese medicine formula granules through the construction of the whole industrial chain of traditional Chinese medicine.
As of the first half of this year, the company has 17 subsidiaries (distributed in Chongqing, Chongqing, Fujian, Guangdong, Guangxi, Guizhou, Hubei, Heilongjiang, Hunan, Jilin, Jiangxi, Jiangsu, Shandong, Shanxi, Shaanxi, Sichuan, Yunnan, Zhejiang), each subsidiary has sufficient capacity reserves, with a total extraction capacity of more than 50.
000 tons/year, and The total preparation production capacity exceeds 15.
000 tons/year
.

Facing stricter standards set by the industry, the company has also accelerated the research on the standard of traditional Chinese medicine formula granules, adapting to national and provincial standards at the fastest speed.
As of the first half of this year, the company has submitted a total of 319 national standards for traditional Chinese medicine formula granules.
At the same time, more than 200 varieties of provincial standard filing materials have been submitted to Guangdong, Guizhou, Yunnan, Shandong, Gansu, Shanxi, Zhejiang, Sichuan and other provinces, and some of them are being publicized
.

Since 2017, China Traditional Chinese Medicine has taken Chinese medicine formula granules as the core, planned ahead, deployed ahead of time, and built up, middle and downstream businesses in the traditional Chinese medicine industry chain to support it, and realized the industrial landing in key areas of the country through the industrial park model.
Interaction and complementarity between each other, and economies of scale are gradually emerging
.

Beijing Kangrentang , a subsidiary of Hongri Pharmaceutical , is one of the earliest pilot companies.
Now it has more than 600 products, which basically cover the varieties with high frequency of clinical use of Chinese medicine.
The company has built 128 Chinese herbal medicine planting bases nationwide.

.
In the latest news, the products of many subsidiaries including Henan Kangrentang, Chongqing Kangrentang, and Hubei Chenmei have been filed with the Provincial Drug Administration, and have obtained the qualification for the sales of formulated granules, which is expected to help the company's further improvement in performance
.

Hongri Pharmaceutical

Figure 2: The performance of Hongri Pharmaceutical's traditional Chinese medicine formula granules and decoction pieces (unit: 100 million yuan)

Source: Company Annual Report

In the first half of 2021, the operating income of Hongri Pharmaceutical's traditional Chinese medicine formula granules and decoction pieces business segment increased by 49.
56%, thanks to the company's participation in the formulation of industry standards, industrial chain layout, variety, channels, and first-mover advantages in terms of quality
.
At present, China Traditional Chinese Medicine and Hongri Pharmaceutical have entered the first echelon of formula granules
.

Hongri Pharmaceutical continues to expand its production layout.
The eighth largest production base project was officially launched in Jinan earlier, covering an area of ​​100 acres.
After completion, it will extract 10,000 tons of Chinese medicinal materials and produce 3,000 tons of formula particles.
The company will continue to improve the country.
Production layout network
.

In terms of sales business, Hongri Pharmaceuticals is expanding its mixed operation area in an all-round way, strengthening the construction of the doctor-side "big medical wisdom platform" and the patient-side "big doctor solution platform", promoting the upgrade of the company's marketing system to academic marketing, and promoting stock and The incremental market continues to increase in volume
.

In the first half of 2021, Hongri Pharmaceutical has also actively participated in the application of national standards for formula granules, and has completed supplementary research on 13 national standard varieties.
In addition, the company has also participated in the formulation of provincial standards in 19 provinces, and has now started new Production of national standard and provincial standard varieties
.

China Resources Sanjiu can currently produce more than 600 varieties of single-flavor formula granules.
In 2020, the company's traditional Chinese medicine formula granules business turnover will exceed 2 billion yuan.
In the first half of 2021, the performance of this business segment will continue to grow rapidly
.

China Resources Sanjiu

Faced with the changes in the competitive environment brought about by the end of the trial, China Resources Sanjiu stated that on the one hand, the company has accelerated the expansion of the construction of medicinal planting bases, controlled product quality from the source, and ensured the quality and stability of medicinal materials
.
On the other hand, speed up the production of the newly promulgated national standards and local standard varieties, digitally upgrade production from the aspects of equipment automation and data intelligence, and continuously improve the quality control level of formula particles
.
The company has established a traceability system covering the entire process of medicinal material planting, Chinese medicine decoction pieces, and formula granules, and has accelerated the overall industrial chain layout of the Chinese medicine formula granule business, optimized industrial chain capabilities, improved operating efficiency, and effectively controlled costs
.

China Resources Sanjiu said that after the implementation of the national standard, the regulatory requirements of management will be improved, and the ability of the entire industry chain is essential for business development
.
For varieties that implement the national standard, the product quality will be further improved, and the cost will rise accordingly, which will have a certain impact on the gross profit margin of the business
.
The company believes that the Sanjiu formula granule business has first-mover advantages in terms of products, markets, and terminals.
The business promotion method adopts the combination of "product + service" and has established a good market foundation
.
The company will also continue to increase the overall industrial chain layout to promote the rapid development of core regional businesses
.

Shenwei Pharmaceutical 's traditional Chinese medicine formula granules is currently the company's largest business segment in terms of sales revenue.
In the first half of 2021, it continues to show a rapid growth trend, with a year-on-year increase of 34.
1%.
Most of the sales still come from Hebei Province
.
Shenwei Pharmaceutical said that it has begun to fully develop the Yunnan market this year and is currently in full swing to enter the Yunnan medical institutions
.

Shenwei Pharmaceutical

After completing the pilot work and implementing the opening of the national market for formula granules, enterprises can sell traditional Chinese medicine formula granules across provinces after filing with the local provincial drug regulatory department
.
The company is currently increasing the production capacity of traditional Chinese medicine formula granules to an annual output value of 4 billion yuan, which is expected to be completed before the end of this year, preparing the company's formula granules to enter the national market
.
At the same time, the company has carried out related deployments, such as stepping up the expansion of the sales team.
After the products are filed in various provinces and cities, they can quickly prepare for promotion to local hospitals and primary medical institutions.
The company's goal is to become a major supplier of formulated granules in the country by 2024.
One
.

Regarding the subsequent entry of formula particles into centralized procurement, Shenwei Pharmaceutical believes that if the province-level online platform centralized procurement of formula particles in all provinces across the country in the future, it may become an opportunity to enter the national market more quickly, due to incomplete varieties or failure to comply with national unification.
Standard formula granule suppliers will not be able to participate, and formula granule manufacturers with complete varieties and good quality that can meet the national unified standards will occupy a place in the provincial online procurement platform market
.

Concluding remarks

Concluding remarks

With the ever-increasing market demand, it is a general trend for government departments to liberalize entry barriers.
Allowing more companies to enter the market is conducive to the long-term development of the market.
At the same time, a national drug standard and a provincial standard system for Chinese medicine formula granules have been established to ensure that the whole system is supervised.
The quality control and cost control of each link in the industrial chain put forward higher requirements, and also lays the foundation for the Chinese medicine formula particles to go abroad in the future
.
In this context, leading companies are currently making great efforts to increase production capacity, control costs, and deploy regional teams, which shows that they are very optimistic about the market prospects
.
Centralized sourcing is the general trend, and most companies are mentally prepared, hoping to take a place in the centralized sourcing market with the best quality and the most complete product line
.
Some analysts believe that there may still be a time window of more than two years for the centralized procurement of formula particles, and companies still have sufficient time to make strategic adjustments and enhance their strength
.