① The company plans to use the brand awareness and high market share marketing system of its core product Shuanghuanglian Oral Liquid to enhance the overall sales growth of the entire oral liquid business; ② As the subsidiary Tongjuntang won the honorary title of China's time-honored brand, it provided an opportunity for Tailong Pharmaceutical to enter the field of traditional Chinese medicine health; ③ After the company was included as the main enterprise in the biomedical industry chain in Zhengzhou, the intensity of foreign investment also increased markedly.
Finance Association, June 30 (Reporter Zhang Liangde) With state-owned investment in the Zhengzhou High-tech Zone, Tailong Pharmaceutical's performance has improved markedly in recent years. In the company's development plans for various business segments, the reporter saw an increasingly “extroverted” Tailong Pharmaceutical.
Recently, through in-depth research, the Finance Association reporter learned that this year, Tailong Pharmaceutical plans to use its core product, Shuanghuanglian Oral Liquid, to enrich the product categories to promote overall sales growth in the entire oral liquid business; in addition, as the subsidiary Tongjuntang won the honorary title of China's time-honored brand, it also provided an opportunity for Tailong Pharmaceutical to enter the field of traditional Chinese medicine health; and after the company was listed as the main enterprise in the biomedical industry chain in Zhengzhou, the company's foreign investment also increased markedly.
Tailong Pharmaceutical (Photo: Financial Services Association reporter)
New slogan “Traditional Chinese Medicine Oral Solution Expert”
Walking into the lobby on the first floor of the Tailong Pharmaceutical office building, the reporter saw on the company's image wall that this year, Tailong Pharmaceutical changed the company's advertising slogan from “do your best to prepare oral solutions” to “experts in traditional Chinese medicine oral solutions.” The reporter felt that it seemed that the “character” of the company had changed slightly.
As a company that has been a traditional Chinese medicine oral solution for 30 years, the company's slogan continues Tailong Pharmaceutical's consistent product development position in the pharmaceutical manufacturing sector, and the new slogan is more straightforward than the original slogan, creating the image of an “expert.”
Tailong Pharmaceutical, traditional Chinese medicine oral solution expert (Image source: Financial Services Association reporter photo)
Focusing on the oral liquid market may be a better choice for Tailong Pharmaceutical's volume in the pharmaceutical industry. The total sales volume of the company's oral liquid and solid preparation products in 2023 was only 672 million yuan, which is not large in the Chinese medicine industry. However, the company chose a major circuit with a certain advantage based on its differentiated positioning. According to incomplete statistics from PharmacoSmart Consulting, in 2022, there were 66 large varieties with sales exceeding 1 billion yuan, with sales reaching 134.7 billion yuan. Of these, the oral solution market accounted for up to 19%, and the total sales reached 25.4 billion yuan.
Sales in 2022 exceeded 1 billion yuan in proprietary Chinese medicine dosage distribution (100 million yuan) (Image source: PharmacoIntelligence Consulting)
Regarding the advantages of traditional Chinese medicine oral liquid dosage forms, Shen Yong, chairman of the China Medical Health Development Promotion Expert Committee and chairman of Beijing Shengshi Kanglai Traditional Chinese Medicine Marketing and Planning Company, told the Financial Federation reporter: “From a pharmacological point of view, the oral liquid dosage form is absorbed by the body the fastest, the effective concentration of the drug is high, and the effect is relatively fast. Among several dosage forms of oral medicine, the oral liquid dosage form is still relatively good.”
A company source told the Financial Federation reporter that at present, Shuanghuanglian Oral Liquid has achieved the highest sales volume in the industry. This is also the company's basic plan. In the future, it may continue to promote diversification of the oral liquid product structure, carry out product combinations in a reasonable manner, and use the Shuanghuanglian Oral Liquid market channel to achieve rapid volume growth and drive sector business.
Tailong Pharmaceutical product wall (Image source: Financial Services Association reporter)
Regarding the development plan for the oral liquid business sector, Tailong Pharmaceutical explained in its 2023 annual report that the company's products have good market share and brand awareness, have established a relatively complete marketing system, and have the ability to continue to expand its advantageous varieties and undertake more product portfolios.
Currently, the main product in the oral liquid segment of Tailong Pharmaceutical is Shuanghuanglian oral liquid. According to data from Yao Rongyun, in 2023, Tailong Pharmaceutical's total hospital sales exceeded 222 million yuan, and the retail sales volume of pharmacies nationwide exceeded 176 million yuan, ranking first in the industry in total sales. Among the company's other products, only Shuanghuanglian combination had sales of over 100 million in the hospital market. The company's other second-tier products such as salvia oral liquid and double gold conjugate sold over 10 million yuan in the hospital market. Average sales were less than 10 million.
Tailong Pharmaceutical's original oral liquid products were mainly respiratory drugs, and the company began to launch new products in the past two years. In July of last year, the company introduced alcohol-free Agastache Zhengqi Tonic to the market. In the same month, the company received a “Pharmaceutical Production License” approved and issued by the Henan Drug Administration, agreeing to change the company's Shengmai Drink (Dang Sanfang), Wuzi Yanzong Oral Liquid, and Agastache Zhengqi Tonic from entrusting Zhejiang Guoguang Biopharmaceutical Co., Ltd. to produce it itself.
The three varieties mentioned above all have great potential on the racetrack. According to data from Yao Rongyun, the pharmacy retail sales of agastache products exceeded 3.2 billion yuan in 2023, making them the largest single product of traditional Chinese medicine oral liquid products. However, the pharmacy retail market sales of Shengmai beverage products exceeded 400 million yuan in 2023, and the market showed an accelerated growth trend in recent years. The pharmacy retail market sales of Wuzi Yanzong products exceeded 125 million yuan in 2023. However, for Tailong Pharmaceutical, the company is still in its infancy on the above product circuit.
The retail situation of the company's products in pharmacies in 2023 (Image source: Yao Rongyun)
The company source mentioned above told the Financial Federation reporter that at present, the company's Shuanghuanglian oral liquid products have been supplied and sold to more than 10,000 hospitals and about 200,000 pharmacies in China. Under normal circumstances, it is possible to drive other products to be distributed through these channels in the next two years.
However, it is not as difficult to open up the in-hospital market and the retail market at the same time by relying on the brand and main product channels. In comparison, its product development experience is easier to replicate in the retail market.
Sun Yuewu, Secretary General of the Chinese Medicine Formula Granule Industry Alliance, told the Financial Federation: “Under normal circumstances, if one product is branded, then other products of this brand can use pharmacy channels to open up the market.”
Goko Yanzong Pills transferred out of medical insurance (Image source: Yao Rongyun)
However, since Gusi Yanzong products are not on the medical insurance list of the above products, it may be difficult to open up the hospital market in the short term.
Judging from the company's recent advertising, the company's promotion of Agastache Zhengqi Tonic has clearly increased.
In the course of communication with company personnel, the reporter felt that due to the introduction of new products and convenient expansion of brand promotion channels, the company may use its oral liquid business as the main growth sector in the next few years.
Tong Jun Tang, which has won the “China Time-honored Brand”, may expand the health market
In the business segment of Tailong Pharmaceutical, the largest sales volume is not the oral liquid segment, but the Chinese medicine tablet division of the subsidiary Tongjuntang. In 2023, the company's tablet business revenue reached 908 million yuan, and the sector's gross margin was 12.55%.
In February of this year, the “Tongjun Tang” brand was recognized by the Ministry of Commerce, the Ministry of Culture and Tourism, the General Administration of Market Supervision, the State Intellectual Property Office, and the State Administration of Cultural Heritage as the third batch of time-honored Chinese brands. At the same time, “Tongjun Tang” is also the national intangible heritage project “Tongjun Traditional Chinese Medicine Culture” inheritance and protection unit.
Tailong Pharmaceutical is headquartered in Zhengzhou, but the company's tablet business is focused on Zhejiang. The “Yaozu Tongjun” brand Chinese medicine tablets produced by Tongjuntang Traditional Chinese Medicine are highly recognized in the local market. A company source told the Financial Federation reporter that currently Tongjuntang's Chinese medicine tablet business is mainly in the Zhejiang region. It is sold to hospitals and other medical institutions through direct sales, and later it may expand and further cultivate in the Jiangsu and Zhejiang regions of East China.
Since Tong Juntang's “promotion” of an old Chinese brand brought about an increase in brand power, the company may no longer be satisfied with using the brand alone in the beverage market. Judging from the management review data of the company's board of directors, the company has planned to develop a series of products suitable for the big health market by thoroughly exploring the advantages of traditional Chinese medicine in the “cure” field, and expand the consumer market according to the “Internet +” mentality to form new growth points.
Company sources said that Tailong also has plans to launch a boutique drink business or develop health products. Such products will also help increase the sector's gross margin.
In addition, the company has also made a major layout upstream in the Chinese herbal medicine industry chain. On the basis of assisting in the procurement of raw materials required for the company's production, the subsidiary Tongjuntang Authentic Herbal Medicine Company leverages the advantages of the authentic herbal medicine base to carry out fresh processing business and traceable high-quality herbal medicine trade to serve large well-known domestic Chinese medicine companies.
According to company sources, the company has more than 60 authentic herbal medicine planting bases, mainly large authentic medicinal herbs from Henan and Shanxi. At present, forsythia bases in Shaanxi, Lu's, and Luanchuan have been built, such as the Wuzhiling Honeysuckle Base, the Shanxi Scutellaria Base, the Chaihu Base, the Salvia Base, and the Dihuang Base.
However, most of the medicinal herb planting bases mentioned above are company-base/cooperative-farmer cooperation methods, and most of these cooperative methods are for enterprises to buy medicinal herbs from farmers and then process and sell them. According to what the reporter learned from a number of Chinese herbal medicine traders, due to the high cost, few traditional Chinese medicine manufacturers currently cultivate Chinese herbal medicines by leasing land and hiring workers to grow them, but mostly by cooperating with cooperatives and farmers. Under this cooperative approach, enterprises are more likely to pursue stability in the quality and supply of medicinal herbs. As the purchase price of medicinal herbs continues to rise, it is also difficult for enterprises to obtain excess profits while reducing management costs and reducing the risk of termination.
In 2023, the company's herbal medicine trading business was 92 million yuan, with a gross profit margin of 13.57%. The business has developed steadily in the past two years. Judging from the later plans in the company's annual report, the company still has plans to continue to expand the scale of construction of a local herbal medicine base and a traceability system for medicinal herbs.
After the two-wheel drive strategy, a “+” sign was created
In the company's 2023 annual report, Tailong Pharmaceutical also made a “small” adjustment to the company's development strategy, changing from “two-wheel drive” to “two-wheel drive +”. In addition to the original two-wheel drive focusing on the traditional Chinese medicine industry and building a CXO service system for pharmaceutical research and development throughout the industry chain, the company added a combination of technological innovation and industrial fund investment collaboration.
However, the company made strategic planning adjustments after the company's controlling shareholder changed.
On January 24, 2022, Zhengzhou Zhongsheng Industrial Group, the original shareholder of Tailong Pharmaceutical, transferred 14.37% of Tailong Pharmaceutical's shares to Tailong Industrial Investment. Tailong Industrial Investment became the controlling shareholder of Tailong Pharmaceutical, and the actual controller of Tailong Pharmaceutical was changed to the Zhengzhou High-tech Industrial Development Zone Management Committee. After a year of operation, the company began to act “+” in its development strategy.
The state-owned acquisition of Tailong Pharmaceutical by the Zhengzhou High-tech Zone may have been to strengthen the biomedical industry sector. As the only state-controlled listed company in the pharmaceutical industry in Zhengzhou, Tailong Pharmaceutical was selected as the “chain leader” enterprise in the pharmaceutical industry chain in Zhengzhou last year.
In November 2022, a subsidiary of Tailong Pharmaceutical invested a total of 220 million yuan to jointly invest and establish a Zhengzhou Longhua Pharmaceutical Industry Fund Partnership (Limited Partnership) with Zhengzhou Hi-Tech Industry Investment Group Co., Ltd., the indirect controlling shareholder of the company, with a fund size of 400 million yuan.
According to data from the Zhengzhou High-tech Zone, the fund will focus on investing in early-stage and long-term healthcare projects with rapid growth potential. Through investment, it will introduce high-quality biomedical resources from around the country and form synergies with listed companies to accelerate the industrial layout of Tailong Pharmaceutical in the biomedicine and health fields, enhance the development of the biomedical industry in the high-tech zone, and build a high-quality advanced manufacturing base.