As the state-owned assets of Zhengzhou High-tech Zone take over, the performance of Henan Taloph Pharmaceuticals has significantly improved in recent years. In the development plan of various business sectors of the company, reporters have seen a more and more outward-looking Henan Taloph Pharmaceuticals.

Recently, reporters from Caijing Network have learned through in-depth research that Henan Taloph Pharmaceuticals plans to use the brand awareness and high market share of its core product, Shuanghuanglian oral liquid, to enrich product categories and promote the overall sales growth of the entire oral liquid business this year. In addition, with the subsidiary Tongjuntang receiving the honor of China Time-Honored Brand, it also provides an opportunity for Henan Taloph Pharmaceuticals to enter the Chinese patent medicine and health field. Moreover, after the company was listed as the main enterprise in the biopharmaceutical industry chain in Zhengzhou city, the company's external investment has also significantly increased.

New slogan "Expert in traditional Chinese medicine oral liquid"

Walking into the lobby on the first floor of Henan Taloph Pharmaceuticals' office building, reporters saw on the company's image wall that Henan Taloph Pharmaceuticals has changed its advertising slogan from "Wholeheartedly make oral liquid" to "Expert in traditional Chinese medicine oral liquid" this year. Reporters feel that the company's "personality" seems to have changed slightly.

As a company that has been producing traditional Chinese medicine oral liquid for 30 years, the company's slogan continues Henan Taloph Pharmaceuticals' product development positioning in the pharmaceutical manufacturing sector. The new slogan is more straightforward than the original slogan, shaping the image of "expert".

Focusing on the oral liquid market may be a better choice for the volume of Henan Taloph Pharmaceuticals in the pharmaceutical industry sector. The total sales of oral liquid and solid preparation products of the company in 2023 were only 672 million yuan, which is not large in the Chinese patent medicine industry. The company has chosen a big track in which it has certain advantages according to differentiated positioning. According to incomplete statistics from Yaozhi Consulting, there are 66 large varieties of Chinese patent medicine with sales exceeding 1 billion yuan in 2022, with a total sales of 134.7 billion yuan, among which the market share of oral liquid solution is the highest, reaching 19%, with a total sales of 25.4 billion yuan.

Regarding the advantage of traditional Chinese medicine oral liquid dosage form, Shen Yong, director of the China Medicine and Health Development Promotion Expert Committee and chairman of Beijing Shengshi Kanglai Traditional Chinese Medicine Marketing Planning Co., Ltd., told Caijing Network reporters: "From a pharmacological perspective, the oral liquid dosage form enters the body most quickly, with a relatively high effective drug concentration and a relatively fast onset. Among several dosage forms of oral medication, the oral liquid dosage form is still relatively good."

Company officials told Caijing Network reporters that currently Shuanghuanglian oral liquid is the top-selling product in the industry, which is the company's basic plate. In the future, it may continue to promote the diversification of oral liquid product structure and use reasonable ways to combine products to help the business of the sector grow rapidly through the market channels of Shuanghuanglian oral liquid.

Regarding the development plan of the oral liquid business sector, Henan Taloph Pharmaceuticals introduced in its 2023 annual report that the company's products have a good market share and brand awareness, have established a relatively complete marketing system, and have the ability to continue to expand the advantages of key products and undertake more product combinations.

At present, Shuanghuanglian oral liquid is the main product in the oral liquid sector of Henan Taloph Pharmaceuticals. According to data from Yaorongyun, the total sales of Shuanghuanglian oral liquid in the national hospital and terminal market exceeded 222 million yuan in 2023, and the total sales in the national drugstore retail market exceeded 176 million yuan, ranking first in the industry. Among the company's other products, only Shuanghuanglian mixture had sales in the hospital market exceeding 100 million yuan, and other second-line products of the company, such as Danshen oral liquid and Shuangjinlian mixture oral liquid, had sales in the hospital market exceeding 10 million yuan. However, sales of the company's other main products outside the main product line are less than 10 million yuan.

Henan Taloph Pharmaceuticals' original oral liquid products mainly focus on respiratory drugs, and the company has begun to launch new products in the past two years. In July last year, the company launched alcohol-free Huoxiang Zhengqi mixture into the market, and received Drug Production License approved and issued by the Henan Provincial Drug Administration the same month, agreeing that Shengmai Drink (Dangshen Formula), Wuzi Yanzong oral liquid, and Huoxiang Zhengqi mixture could be changed from entrusting Zhejiang Guoguang Biopharmaceutical Co., Ltd. to produce to self-production.

All three varieties mentioned above have great potential in their respective lanes. According to data from the Yao Rongyun website, Huoxiang Zhengqi-class products are expected to exceed 3.2 billion yuan in retail sales in pharmacies by 2023, making it the best-selling traditional Chinese medicine oral liquid. Sheng Mai drinks are expected to exceed 400 million yuan in retail sales in pharmacies by 2023, and the market has shown accelerating growth trends in recent years. Lastly, Wu Zi Yan Zong class products are expected to exceed 125 million yuan in retail sales in pharmacies by 2023. However, for Henan Taloph Pharmaceutical Co., Ltd., the company is still in its infancy in terms of the aforementioned product categories.

Company sources told the Caixin media reporter that the company's Shuang Huang Lian oral liquid product has already provided supply and sales to more than 10,000 domestic hospitals and about 200,000 pharmacies. This usually will bring other products in the same channels in the next one to two years.

However, it is not equally difficult to simultaneously open up the hospital and retail markets using a channel that relies on the brand and major products. In comparison, the company's extensible product experience in the retail market is easier to replicate.

"Under normal circumstances, if a product has established a brand, it can use the power of other products under that brand to expand into the pharmacy channel," said Sun Yuewu, the Secretary General of the Traditional Chinese Medicine Formula Particle Industry Alliance.

However, because Wu Zi Yan Zong type products are not included in the medical insurance catalog, this type of product may be difficult to open up the hospital market in the short term.

Looking at the company's recent ad campaigns, it is clear that the company has significantly increased promotion efforts for Huoxiang Zhengqi compound.

During the interaction with company insiders, the reporter felt that due to the smooth introduction of new products and the ease of extending product channels, the company may use its oral liquid business as its main growth sector for the next few years.

Tongjuntang, a recipient of the "China Time-Honored Brand" title, has expanded its healthcare product market.

In Henan Taloph Pharmaceutical Co.'s business sector, the largest sales do not come from the oral liquid sector, but the Chinese herbal medicine tablet sector controlled by its subsidiary Tongjuntang, which is expected to earn revenues of 0.908 billion yuan in 2023 with gross profit margins expected to reach 12.55%.

In February this year, the "Tongjuntang" brand was recognized by the Ministry of Commerce, the Ministry of Culture and Tourism, the State Administration for Market Regulation, the National Intellectual Property Administration, and the State Administration of Cultural Heritage as the third batch of "China Time-Honored Brands." Meanwhile, "Tongjuntang" is also a state-level non-heritage project, and traditional Chinese medicine culture protection unit of "Tongjunchuan untraditional Chinese medicine culture."

Although Henan is the company's headquarters, the focus of the company's Chinese herbal medicine tablet business is in Zhejiang. The "Yao Zu Tong Jun" brand of Chinese herbal medicine tablets produced by Tongjuntang are highly recognized in the local market. Company insiders told Caixin reporters that currently, Tongjuntang’s Chinese herbal medicine tablets are mainly sold to medical institutions such as hospitals through direct sales, and later expansions and deepening of these services may take place in the East China Jiangsu, Zhejiang, and Shanghai areas.

Due to the improvement brought about by the increase of the Tongjuntang brand, the company no longer wants to fully use the brand on medicinal tablets alone. From the Board of Directors operation evaluation materials provided, the company has planned to mine the advantages of traditional Chinese medicine in the "disease free treatment" field, develop a series of products that are suitable for the large health market as according to the "Internet+" concept.

Company sources indicate that Henan Taloph also plans to engage in high-end medicinal tablets business or develop health products that could improve the profit margin of the Yu Ping Tang segment.

In addition, the company has made a large-scale layout in the upstream of the traditional Chinese medicine industry chain - Tongjuntang Medicinal Materials Company, which helps complete the procurement of raw materials needed for production while leveraging the advantages of local medicinal materials to carry out fresh processing operations and produce high-quality traceable medicinal materials, serving large well-known domestic traditional Chinese medicine companies.

According to company insiders, the company has a total of more than 60 traditional Chinese medicine medicinal materials production bases, mainly in Henan and Shanxi. At present, the Lu's Crested Epimedium Base, the Lushan Crested Epimedium Base, the Five Finger Ling Hua Base, the Shanxi Baical Skullcap Root Base, the Bupleurum Base, the Salvia Base, and the Rehmannia Base have been completed.

However, most of the aforementioned medicinal material planting bases are established using the cooperative method of enterprise-base/cooperative-farmers. This partnership approach is mostly a company purchasing and processing materials from village farmers for resale. Based on reports from multiple herbal trade sources, due to the high cost, few traditional Chinese medicine production companies can afford to lease land or hire labor to grow medicinal materials. Rather, they more frequently rely on cooperative methods of operation like what is used with village farmers. In this method, companies typically strive for quality and stable supplies in order to maintain high-quality standards, and the prices they pay for raw materials rise with the overall price of material in the market. Thus, in the midst of continuously rising prices in the medicinal materials market, manufacturers still cannot obtain sizable profits while seeking to lower operating costs and risks associated with terminating contracts.

In 2023, the company's medicinal material trading business reached 92 million yuan, with a gross profit margin of 13.57%. The development of this business has been relatively stable over the past two years. According to the company’s mid- and long-term plans stated in the annual report, the company still has a plan to continue to expand the scale of Chinese herbal medicine production bases and traceable medicinal materials.

Having a "dual-wheel drive" strategy, the company has added a "+" sign.

In the company's 2023 annual report, Henan Taloph Pharmaceutical Stock also made a "small" adjustment to its company development strategy, changing from a "dual-wheel drive" to a "dual-wheel drive +", adding technology innovation and industry fund investment synergy to the existing focus on traditional Chinese medicine industry and building a full industry chain pharmaceutical R&D CXO service system.

The company's strategic planning adjustment was made after a change in the company's controlling shareholder.

On January 24, 2022, Zhengzhou Zhongsheng Industrial Group, the original shareholder of Henan Taloph Pharmaceutical Stock, transferred 14.37% of the shares to Tai Rong Chan Investment Agreement, making the latter the controlling shareholder of Henan Taloph Pharmaceutical Stock. The actual controller of Henan Taloph Pharmaceutical Stock has changed to the Administration Committee of Zhengzhou High-tech Industrial Development Zone. After a year of operation, the company has started to use the "+" sign in its development strategy.

The acquisition of Henan Taloph Pharmaceutical Stock by the state-owned assets of Zhengzhou High-tech Zone was likely to strengthen its biomedical industry sector. As the only state-controlled pharmaceutical listed company in Zhengzhou City, Henan Taloph Pharmaceutical Stock was selected as the "Chain Master" enterprise of Zhengzhou City's medical industrial chain last year.

In November 2022, Henan Taloph Pharmaceutical Stock's subsidiary invested a total of 220 million yuan with Zhengzhou High-tech Industrial Investment Group, the indirect controlling shareholder of the company, to jointly establish the Zhengzhou Longhua Medical Industry Fund Partnership Enterprise (Limited Partnership). The fund size is 400 million yuan.

According to information from Zhengzhou High-tech Zone, the fund will focus on investing in early and growing medical and health projects with fast growth potential, import high-quality biomedical resources nationwide through investment, form synergies with listed companies, accelerate Henan Taloph Pharmaceutical Stock's industrial layout in biomedical and large health fields, promote the development of high-tech zone's biomedical industry, and create a high-quality and advanced manufacturing base.