Yabao Pharmaceutical Group's Chairman, Ren Wuxian, told Caixin reporter during the earnings conference held today that the cancellation of Yabao Pharmaceutical Group's (600351.SH) multiple products by Hebei Province has little impact on the company's profitability, and the company will strive to succeed in the next bidding season. He also mentioned that the sales of H1 levocetirizine hydrochloride injection were affected by volume-based procurement, resulting in a slight decline in sales revenue. It is expected that the sales of this drug will normalize in 2025. In addition, the sales of Dingeernavel Patch and other products were also of concern during the earnings conference.

On August 13, according to the official website of the Hebei Provincial Medical Pharmaceutical and Medical Device Centralized Procurement Center, Yabao Pharmaceutical Group's skincare capsule, Sanhuang tablet, and other products were listed as Chinese patent medicines and biologics that do not meet the conditions for being included in the network. Therefore, their network qualification has been canceled.

In response to this, Ren Wuxian told Caixin reporter that the sales of Sanhuang tablet and skincare capsule mainly rely on drugstore sales and are not affected by the procurement platform. These products have a low gross margin and have little impact on the company's profitability. The company will focus on expanding its sales to medical institutions in the future and actively strive to succeed in the next bidding season.

In addition, the reason for the YoY decline in Yabao Pharmaceutical Group's H1 revenue was of particular concern during the earnings conference. Ren Wuxian responded that the slight decline in sales revenue was mainly due to the sales decline of prescription drug Levocetirizine Hydrochloride Injection as a result of volume-based procurement. Excluding the commercial segment, pediatric products accounted for approximately 50% of the total revenue, among which Dingeernavel Patch achieved sales of 0.25 billion yuan, a 10% YoY decrease; Yiyajianpi Nourishing Gel achieved sales of 38.22 million yuan, a 23% YoY increase; pediatric sore throat and antipyretic oral solution achieved sales of 35.93 million yuan, a 126% YoY increase; and swelling pain relief patch achieved sales of 0.127 billion yuan, a 4% YoY increase.

When asked about when products like Levocetirizine Hydrochloride Injection affected by volume-based procurement will be cleared, Ren Wuxian responded that the implementation of volume-based procurement policy varies across different regions, and it is expected that all policies will be fully unified by the end of this year. Normalized sales will be achieved by 2025.

According to the semi-annual report, Yabao Pharmaceutical Group achieved a total revenue of 1.444 billion yuan in H1, a 5.82% YoY decrease, and a net income attributable to the parent company of 0.18 billion yuan, a 6.99% YoY increase.

On the other hand, the revenue of Yabao Pharmaceutical Group's pharmaceutical production sector in H1 was 1.148 billion yuan, a decrease of approximately 10% YoY. In response to this, the company's CFO, Zuo Zhefeng, told Caixin reporter that this was due to the impact of the decline in sales of products that won bids in volume-based procurement. It is expected that this sector will continue to be affected in the second half of the year.

Ding Gui Er Qi Tie is the representative product of Yabao Pharmaceutical Group's pediatric sector. In response to the decline in sales revenue of this product, the company's director, Ren Pengbo, revealed to the Financial Association reporter that its sales are seasonal, with a slight decline in second-quarter revenue. On the basis of strengthening cooperation with chain terminals, the company will actively adapt to consumers' new purchasing habits, vigorously expand online marketing, and continue to carry out brand promotion. Ren Pengbo also added that the OTO marketing model will be the main strategy for online marketing of the Ding Gui product line.