① The company “has gains and losses” in harvesting. For example, sales volume in harvesting regions has increased significantly compared to non-collection regions, but it has “lost the bid” in the collection of Bering films; ② the net profit margin of the company in the region that won the bid due to reduced sales expenses, etc.; ③ Currently, the production capacity utilization rate of the company's ooleracea powder is high, and the possibility of planning new production capacity is also being considered in the future.
Finance Association, August 27 (Reporters Wang Bin and He Fan) 2022 is an important year for Zuoli Pharmaceutical (300181.SZ). In this year, the company completed fixed growth and participated in collection for the first time. Looking at it this time, the company is probably worth being happy about a key decision made two years ago.
Achieving price for volume is an established expectation for almost all pharmaceutical companies to participate in the collection — while “gain and loss” is Zoli Pharmaceutical's tone for the past two years. All of the collection regions in which the company Wuling Capsule participated won the bid. The overall collection region that won the bid has basically achieved the goal of exchanging price for volume. In particular, sales in the collection region increased significantly compared to non-collection regions. However, the company's Bailing Film lost the bid in the Hubei League, which also had a negative impact on the sector's revenue.
As an enterprise that maintains an “open and positive” attitude towards collection, what changes has collection brought to the company? A reporter from the Financial Services Association visited Zoli Pharmaceutical in this regard. The relevant person in charge revealed to the reporter that although the company's overall revenue growth rate was indeed affected by collection, the net profit margin of the regional company that won the bid was increased due to reasons such as the reduction of sales expenses in the collection and other reasons, so the overall net profit can maintain a good growth rate. In addition, the company will also actively participate in the collection of other regions and the renewal of the Hubei Union's bid for Bailing films. In the future, the company's focus will continue to develop innovative drugs in the Wuling series, aiming to develop 10 Uling series varieties. Furthermore, the company is also actively exploring the OTC market and the Internet. The company also has a lot of plans and ambition to achieve the vision goal of 10 billion dollars in revenue.
(Photo by Zuoli Pharmaceutical, Financial Association reporter)
Beginning in 2022, the enthusiasm of institutions for Zoli Pharmaceuticals “soared”. Until now, the company has announced a number of institutional investors' surveys almost every month. Since 2024, Zoli Pharmaceutical has ranked at the top of the A-share Chinese medicine industry with a stock price increase of over 40%, and the company's first published interim report results are also impressive.
Collecting has basically achieved price in exchange for volume, and the overall net interest rate has increased
Zoli Pharmaceutical's main products include Wuling series (Wuling capsules, Lingze tablets, Linglian granules), Bering series (Bering tablets, Bering capsules), Chinese medicine tablets and traditional Chinese medicine formula granules, polycarbo non-calcium tablets, etc. In the 2022 Guangdong Alliance's centralized procurement of proprietary Chinese medicines, Zoli Pharmaceutical won the bid for both Wuling capsules and Bailing tablets, opening the “curtain” for the company to participate in the collection. Currently, these two products have already been collected in more than half of the country.
(Zoli Pharmaceutical's main product, photo taken by a reporter from the Financial Federation)
An expert in the Chinese medicine industry analyzed to the Financial Federation reporter that at the time, the Guangdong Union's collection rules were relatively reasonable, based on the average daily cost, and for the exclusive varieties of traditional Chinese medicine, the reduction rate of companies to be selected according to the P2 rules was between 1% and 20%, but at the same time it was higher than the average drop for all exclusive varieties. At the time, the price reduction of Zoli Pharmaceutical's Wuling capsules was 21%, which meant that the reduction was in place and locked in the bid. It can be seen that the company's positive attitude towards collection is inevitable.
“Collecting is the general trend. At the time, the company also responded to collection and actively participated in securing selection.” The person in charge of Zuoli Pharmaceutical told the Financial Federation that at present, Wuling Capsule has won the bid for collection in Guangdong Union, Beijing, Jiangsu, Fujian, and Beijing-Tianjin-Hebei “3+N” regions. Overall, the decline in Alliance collection is consistent with the initial decline in the Guangdong Union region. The company will also respond positively to other collections in the future. The company's products have therapeutic advantages, and they also hope to benefit more people through collection.
According to the person in charge mentioned above, compared to non-collection regions, the pace of product release is better, and the regions that won the bid collection also generally achieved price in exchange for volume. For example, sales volume of Wuling capsules increased 17.51% year-on-year in 2023. First, the cost of the company's raw materials is controllable. The production process of the company's exclusive raw material, Wuling bacteria powder, is a national secret technology, using biological fermentation technology, and is not affected by price increases of Chinese herbal medicines; secondly, after entering collection, the large packaging specifications were changed. At the same time, due to the reduction in average daily medication costs, etc., it is more conducive to patients to stick to the course of treatment, and the curative effect drives repurchases more and more rapidly; finally, after entering collection, marketing costs were significantly reduced; finally, after entering collection, marketing costs were significantly reduced. cost, and therefore in sales When the growth rate is affected, the profit of a single box in the mining area is basically unaffected, and the company's overall profit margin has increased.
Financial data can also support this.
In the first half of 2024, the company achieved revenue of 1.428 billion yuan, a year-on-year increase of 41.21%, and net profit of 0.296 billion yuan; in terms of profitability, the company's gross margin declined in the past three years, mainly due to various factors such as dynamic changes in the company's product sales structure and price reduction. The gross margin for the first half of 2024 was 62.62%, a year-on-year decline of 6.69 percentage points, but the company's net sales margin dropped significantly. The first half of this year was 20.99%, an increase of 1.05 percentage points.
After losing the bid for collection, it will affect product revenue and will actively participate in bid renewal
Collecting is not always “smooth sailing”; Zoli Pharmaceutical once “lost the bid” in the collection of Bailing tablets.
According to data, Bering tablets are fermented Cordyceps sinensis powder preparations. They have the effects of supplementing the lungs and kidneys and improving energy. They are used for adjuvant treatment of cough, asthma, lower back pain, etc. caused by lung and kidney deficiency, and chronic bronchitis. In 2022, due to Hubei Alliance Procurement's failure to win the bid, Zoli Pharmaceuticals' sales volume of the Bailing tablet series fell 3.24% to 0.256 billion yuan. In 2023, Bering tablets achieved sales of 0.202 billion yuan.
The person in charge mentioned above said, “At the time, the company also participated actively in the collection of Bailing Film Hubei Alliance, but it did not win the bid due to reduced rules, etc., which had a big impact on the company's Bailing Film revenue. The company could only try to make up for it from the local market outside the hospital. The company will continue to actively participate the next time the Hubei Alliance resumes production.”
The company's Bailing series also has an important variety - Bailing capsules. Zoli Pharmaceuticals' Bailing capsules obtained the “Drug Registration Certificate” issued by the State Drug Administration on December 29, 2023, making it the first homologous drug of the same name approved in China. By the end of June 2024, Bailing Capsule had completed the Internet connection work in 28 provinces, autonomous regions and municipalities directly under the Central Government.
Zuli Pharmaceutical is also “mentally prepared” for the possible future collection of Bailing capsules. As the first homologous drug of the same name in China, the company believes that the country will also provide more support at the policy level.
About the future: The development of 10 Wuling series varieties focuses on OTC and Internet
As for the future, Zuoli Pharmaceutical has revealed the “strategic goal of advancing future revenue of 10 billion dollars”: as the main enterprise in the Huzhou biomedical industry chain, the company will strive to make Wuling capsules a large variety with a scale of 2 billion in the future; the sales target for the first step of Lingze tablets is 0.5 billion, and the future will strive to make the large 1 billion variety; Bering series companies now own Bering tablets and Bailing capsules. It is hoped that through a series of marketing measures, the Bering series can become a 1 billion scale variety; in terms of Chinese medicine tablets and formula granules, The Chinese medicine tablet market in Zhejiang Province is about several billion dollars. The company is in a steady state of development. The formula granule market can reach 100 billion in the future, and there is also a lot of market space. At the same time, the company also established Sun Company Zhejiang Zuoli Pharmaceutical Co., Ltd. to expand the commercial business of superior products.
The sales volume of Wuling capsules over 1 billion yuan in 2023 also indicates that if the company wants to achieve the above goals, it may continue to expand the production capacity of the Wuling series raw material Uling bacteria powder. According to the person in charge mentioned above, at present, the company's production capacity utilization rate is high. It is already in the second phase of the expansion project, and the possibility of planning new production capacity is also being considered in the future, because after harvesting in some regions, the company will have a larger sales volume corresponding to the established sales target, and the amount of raw materials used will also increase.
At the same time, a reporter from the Financial Services Association learned that the future focus of Zoli Pharmaceutical is to continue developing innovative drugs in the Wuling series. While Wuling capsules expand indications such as Alzheimer's disease, the company is strengthening the development of more Uling series varieties and striving to make the Wuling series into a large family of 10 products. This can improve the competitiveness and resilience of the product line. The success of Lingze tablets has brought great confidence to the company.
In addition to prescription drugs, Zoli Pharmaceuticals will also continue to work on OTC products and the internet.
According to the semi-annual report, Zoli Pharmaceutical is strengthening OTC and Internet development and actively promoting strategic cooperation with major pharmacy chains across the country. The Wuling series of products, Linglianhua Granules, switched from prescription drugs to non-prescription drugs, and officially launched a new Internet+ Health journey in July. In terms of Chinese medicine tablets, we will continue to deeply cultivate the provincial market, speed up market terminal coverage, seize new opportunities for traditional Chinese medicine culture and health and wellness needs, and use the sales of “traditional Chinese medicine teas” on the hospital Internet to drive the company's sales growth of Chinese medicine tablets.
This summer, the topic of “Zhejiang Provincial Hospital of Traditional Chinese Medicine is in short supply” is often trending, and Zoli Pharmaceutical is actually the supplier behind it. Zhejiang Zoli Baicao Pharmaceutical Co., Ltd., a wholly-owned subsidiary of the company, won the bid for the Zhejiang Provincial Hospital of Traditional Chinese Medicine Internet Hospital in January this year. Currently, Zhejiang Provincial Hospital of Traditional Chinese Medicine Wumei Soup 2.0 is mainly produced by Zhejiang Zuoli Baicao Chinese Medicine Tablets Co., Ltd., a wholly-owned subsidiary.
This has also given Zoli Pharmaceuticals a taste of explosive growth on the internet. According to the data, in the second quarter of this year, Zoli Pharmaceutical's online sales of traditional Chinese medicine tablets increased dramatically, and the sales revenue of the Chinese medicine tablet series increased by 57.11% over the same period last year.
The person in charge mentioned above said that the company is also currently developing products of the same origin as medicine and food. The company strategically attaches great importance to OTC channels. It is also currently exploring and has its own plans, including accepting requests from hospital patients to gradually increase pharmacy coverage.