On October 15, Cailian News (Reporter Zhang Liangde) reported that due to the decline in sales of the Lianhua series products from the previous peak stage, Shijiazhuang Yiling Pharmaceutical (002603.SZ) has been significantly impacted in the past two years. Wu Xiangjun, Chairman and General Manager of the company, stated at today's performance briefing that 2023-2024 is a particularly special period for Yiling. Due to the impact of factors such as the high base number of respiratory products from the previous year and the high social inventory leading to a decrease in market demand, the performance has declined.

In the first half of this year, Shijiazhuang Yiling Pharmaceutical's respiratory system products achieved revenue of 1.284 billion yuan, a 58.42% decrease from the same period in 2023. During this performance briefing, some investors expressed concerns about the company's channel inventory of respiratory products, mentioning that the shelf life of the market-sold Lianhua Qingwen capsules will expire in May-June of next year and inquired about how the company will deal with it. Wu Xiangjun responded that the future sales of respiratory varieties in the company will gradually return to normal.

Furthermore, the decline in performance of Shijiazhuang Yiling Pharmaceutical in the first half of this year is also related to the rise in the prices of medicinal materials. Li Chenguang, Director and CFO of the company, stated: 'Among the Chinese medicinal materials used exclusively by the company, the prices of some medicinal materials have significantly increased compared to last year, impacting the gross margin of some products to a certain extent.'

However, according to Cailian News reporters, entering the second half of the year, Chinese herbal prices are beginning to generally decline, and the related impacts may gradually diminish.

Regarding the company's future performance growth points, Wu Xiangjun stated that the company expects good market potential for both the cardiovascular system's main products and second-line products such as Bazibu Shen and Jieyu Chufan. The future performance of respiratory system's new products is also promising.

The company anticipates that with the exacerbation of aging population in the future, the company's medicines for cardiovascular diseases such as Tongshen Qili will have good performance growth potential. Wu Rui, Director and Secretary of the Board of the company, stated that although the market size of cardiovascular disease chinese patent medicine at public hospitals has been declining since 2018, the internal structural changes are favorable for oral preparations. The market share of oral preparations has significantly increased and the market concentration has been steadily rising, with a compound annual growth rate of 5.59% from 2015 to 2022, and a growth of 2.12% in 2023. The market share of the three major products of Tongshen Qili has increased from 13.64% in 2015 to 16.61% in 2023.

Additionally, Wu Xiangjun mentioned that in the future, the market performance is still worth looking forward to as the company's respiratory system's new varieties gradually receive market approval. In October of this year, the company received the 'Acceptance Notification' issued by the National Medical Products Administration, approving the clinical trials of Lianhua Yuping particles according to the submitted plan. Previously, the company had conducted clinical trials for children's Lianhua Qinggan particles, Qifang Bitong tablets, and Lianhua Qingke particles.

The management of Shijiazhuang Yiling Pharmaceutical also has high expectations for some second-line varieties. At the end of 2021, the newly launched anti-depression and kidney-nourishing heart-benefiting products have been included in the new national medical insurance catalog through negotiations. With market promotion and abundant academic evidence, the products will experience rapid development. In addition, the company is exploring an effective business model for the Bazibu Kidney Capsule, planning to cultivate it as a csi consumer 360 index variety. Wu Xiangjun stated that this product is a star product within the company.

The core advantage of Shijiazhuang Yiling Pharmaceutical lies in its ability to innovate in the research and development of traditional chinese medicine. In the past four years, the company has developed and launched four innovative traditional chinese medicines, maintaining an average of one new drug per year. The company's current research and development pipeline covers more than 40 innovative traditional chinese medicine varieties, leading the industry level. Hebei Yiling Hospital has over a hundred in-hospital preparations, forming a strong reserve variety support for the transformation into new drugs.

From the company management's planning for the company's future development, it can be seen that Shijiazhuang Yiling Pharmaceutical's development path is more focused on the internal development of the enterprise itself. Overall, Shijiazhuang Yiling Pharmaceutical's attitude towards external merger and acquisition is relatively lukewarm. Today, an investor asked: 'Does the company have any plans for external acquisitions to expand?' Wu Xiangjun responded that currently the company does not have any clear plans. Wu Rui also told investors that the company currently has no plans to acquire established traditional chinese medicine brands.