Financial Services Association, March 19 (Reporter Zhang Liangde) Due to favorable expectations brought about by the lifting of medical insurance restrictions on traditional Chinese medicine injections this year, Dali Pharmaceutical (603963.SH)'s stock price began a “boom” model. The stock price rose 77% in the last six trading days.

According to a company source to the Financial Federation reporter, “The company's main products are brain rejuvenation injection and Shenmai injection.” What is the impact on the company's products mentioned above after the medical insurance limit has been lifted, the company only stated: “Production and operation are normal at present.”

The main revenue of Dali Pharmaceutical comes from traditional Chinese medicine injection products. In the past ten years, the sales revenue of the company's injectable products accounted for more than 99% of the company's total revenue. Changes in the market policy environment have had a significant impact on the company's operations. Due to changes in health insurance policies after 2017, the traditional Chinese medicine injection market continued to decline.

According to data from Yao Rongyun, the in-hospital market for Xingnangjing injections was 2,891 billion yuan in 2016. Since then, overall market sales have declined, and the market size dropped to 793 million yuan in 2023. Meanwhile, Dali Pharmaceutical's Xingnangjing injection began to decline in 2014. The in-hospital market sales fell all the way from 883 million yuan to 100 million yuan in 2023, while the in-hospital market sales of Shenmai injections fell from 193 million yuan in 2015 to 24.39 million yuan in 2023.

The sharp decline in the market size of the main product market has also led to a continuous decline in the performance of Dali Pharmaceutical in recent years. Losses were recorded in 2021 and 2022, with losses amounting to 41.89 million yuan and 17.7 million yuan respectively. The company expects to achieve net profit attributable to owners of the parent company in 2023 of 22 million yuan to -18 million yuan, while the revenue scale is expected to be 83 million yuan to 92 million yuan in 2023.

However, the 2023 performance also exposed the company to the risk of “wearing a hat”. According to the provisions of section 9.3.2 (1) (1) of the “Shanghai Stock Exchange Stock Listing Rules”, if the company's audited 2023 financial report shows that the company's net profit is negative and the main revenue is less than 100 million yuan, Dali Pharmaceutical may be subject to a delisting risk warning after the disclosure of the annual report.

Due to the lifting of restrictions on the new medical insurance payment policy, many industry insiders are optimistic about their expectations for the overall market size of traditional Chinese medicine injections this year. Shen Yong, chairman of the China Medical Health Development Promotion Expert Committee and chairman of Beijing Shengshi Kanglai Traditional Chinese Medicine Marketing Planning Company, told the Financial Federation reporter: “After the restrictions on traditional Chinese medicine injections are lifted, the market size of related varieties may resume growth. It is expected that the market will grow by 30% to 50% this year.”

Referring to the above expectations, Dali Pharmaceutical's performance may recover after 2024, but due to continued contraction in previous years, related business personnel may be lost, and the restructuring of the marketing system will be a potential bottleneck in the recovery of related pharmaceutical companies' performance.

At the same time, it is worth noting that while the market size is re-entering an upward channel, the current market environment for traditional Chinese medicine injections is different from the past.

On the one hand, due to the collection of proprietary Chinese medicines, product prices have dropped quite drastically. According to the product sales data and product sales data, it was calculated that, without counting product specifications, the average single price of Sanmenaojing injections dropped from around 31.73 yuan in 2016 to about 22.79 yuan in 2023, and the average single price of Shenmai injections dropped from around 52.36 yuan in 2016 to about 35.35 yuan in 2023. As can also be seen from recent financial statements, the company's gross margin of products has also declined significantly.

On the other hand, due to the improvement of the policy's supervision of traditional Chinese medicine injections, the company's main product instructions have changed, and the number of people applicable to them may be smaller than before. In 2015, the China Food and Drug Administration (CFDA) added warning words to the instructions for the active brain injection and revised the drug's “adverse reactions”, “contraindications” and “precautions” to expand adverse reactions related to allergic reactions, systemic damage, respiratory system, cardiovascular system, neuropsychiatric system, skin and appendages, and gastrointestinal system.

Since then, the instructions for Shenmai injection have also been adjusted, adding “prohibited for newborns, infants, and young children” and “prohibited for pregnant women and nursing women.” Added to the “Precautions” section: “Patients with severe heart disease, patients with abnormal liver and kidney function, the elderly, children, and patients using this product for the first time should use this product with caution.”