On October 15, 2024, YSB (09885) announced on the Stock Exchange website that it has signed a transaction agreement to acquire 100% of the shares in pharmaceuticals. The total consideration for the purchase is RMB 1.035 billion, of which the cash consideration is RMB 0.42 billion and the share consideration is RMB 0.615 billion. The share consideration portion issued new shares to the original shareholders of Pharmaceuticals at HK$12 per share, a 63.04% premium over the closing price on the day the acquisition agreement was signed, reflecting the buyer and seller's recognition of the value of YSB Company after the transaction. The acquisition will further enhance YSB Bank's upstream supply chain and commercial service capabilities, and accelerate the development of its own brand business. It is a key step for YSB to continue to implement the “upward move” strategy, deepen the industrial layout, and enhance market competitiveness.

YSB increase private brand business and further enhance synergy

Established in 2019 and headquartered in Changsha, Yipai Pharmaceutical focuses on providing medical and health products and services for downstream pharmacy chains, multi-body pharmacies and single pharmacies. Its own pharmaceutical brands Yuandian, Antaibang, and Xinglintai cover various categories such as proprietary Chinese medicines, chemicals, and supplements. Currently, Yipuang Pharmaceutical has established strategic partnerships with more than 1,000 pharmaceutical companies to provide about 700 private brand SKUs for 3,000 downstream pharmacy chain headquarters and tens of thousands of multi-body and monomer pharmacies.

Industry insiders analyzed that the two acquirers are highly compatible in terms of business philosophy, and their respective advantages in supply chains, products and markets can form significant scale and synergy effects.

After the acquisition is completed, YSB's upstream supply chain capabilities will be further enhanced. The rapid growth in the number and procurement volume of its own brands, especially in the field of direct supply and exclusive sales, is expected to expand, which will bring stronger bargaining power, lower procurement costs, and more stable exclusive supply, further unleash the advantages of the company's digital warehousing and distribution system, and improve the efficiency of warehousing operations.

Looking at downstream customer groups, the two sides can share customer resources, achieve integration and complementarity of customer groups, thereby enhancing overall customer value, and will continue to expand YSB's market share. YSB will also create a synergy effect between cost-effective generic drugs and a differentiated drug that is directly supplied and sold by pharmaceuticals, providing a competitive supply of drugs to downstream customer groups and bringing more diversified product choices. The continuous expansion of the breadth and depth of our own brand products will also accelerate the increase in the stickiness and depth of penetration of downstream customers and create a good ecosystem where all parties win.

Deeply cultivate the blue ocean market outside the hospital, and YSB “move forward”

In recent years, driven by pharmaceutical reform policies, prescription drugs have gradually flowed from the in-hospital market to the out-of-hospital market. In particular, with the introduction of outpatient coordination policies in various regions, the out-of-hospital pharmaceutical market has entered a period of rapid development and has broad development space and growth potential. According to data from the Mi Intranet, the out-of-hospital market is expected to grow to 1,600 billion yuan in 2029, of which the scale of online and offline retail pharmacies will reach 1,150 billion yuan, and the scale of private hospitals, private clinics, and village health rooms will reach 450 billion yuan, showing broad development prospects.

In YSB's 2024 plan, improving supply chain capabilities is still a priority. In the March annual report of this year, it was proposed to “continuously deploy upstream, use digital technology to redefine pharmaceutical manufacturing and distribution, and continue to build supply chain capabilities.” This wholly-owned acquisition of a drug is the implementation of Pharmacists' “upward trajectory” strategy. It is also an important step in continuing to cultivate the main business, broaden the industrial layout, and expand user coverage. It has further enhanced supply capacity, operational capacity, and profitability, and is expected to occupy a leading position in the future market.

After years of working in the primary market, YSB has established the largest digital pharmaceutical trading and service network in China, covering 0.426 million pharmacy users and 0.31 million primary care institution users. Armed with rich supply chain resources and high-base users, integrating upstream and downstream resources with digital technology, developing own brands has become a powerful gripper to YSB “move up” the supply chain.

In the first half of this year, YSB Helped further expand the brand's first promotion, especially its own brand Le Pharmacist, and strengthened omnichannel coverage of high-quality and unique products such as the first major single product on the basis of the first major product. Exclusive strategic cooperative brands and private brand GMV increased the share of GMV in the brand's first promotion business to 45% from 22% in the same period last year. Among them, Le Pharmacist sold more than 170 varieties, and the cumulative number of purchased pharmacies exceeded 0.3 million. Its large single product, Agastache Zhengqi Oral, was on the market for 5 months and covered 0.1 million end users.

As part of YSB strategic layout to enhance the supply chain, this acquisition will achieve efficient integration of resources and complementary advantages between the two parties, inject strong momentum into the YSB brand launch, especially the development of its own brand business, optimize the company's gross profit structure, and achieve revenue growth and profit expansion. With the gradual implementation of the YSB industry chain layout and the release of business synergy effects, its leading edge in the segment is expected to expand and continue to create value for the company's shareholders.