Enriches and Optimizes Product Portfolio;
Development Expansion by External Cooperation;
Active Mergers and Acquisitions Boost Growth
HONG KONG — China Resources Pharmaceutical Group Limited (“CR Pharmaceutical” or the “Group”) (stock code: 3320), announced its interim results for the six months ended 30 June 2017 (“Reporting Period”).
As at 30 June 2017, the Group recorded total revenue of approximately HK$82,737.6 million, representing an increase of 9.4% year-on-year (an increase of 15% in RMB terms). Revenue of its three major business segments, namely pharmaceutical manufacturing, pharmaceutical distribution and pharmaceutical retail, accounted for 13.9%, 83.5% and 2.6% of the Group’s total revenue, respectively. The Group’s gross profit for the period amounted to approximately HK$12,528.0 million, representing an increase of 6.6% year-on-year (12.1% in RMB terms). Gross profit margin was 15.1%, generally stable when compared to 15.5% in the corresponding period last year, down only by a slight 0.4 percentage points. The change was mainly due to the revenue of pharmaceutical distribution business growing faster than that of the pharmaceutical manufacturing business during the period. Profit attributable to owners of the Company was approximately HK$1,810.4 million, representing an increase of 10.7% year-on-year (16.3% in RMB terms). One-off gains were recorded in the corresponding period last year. Should non-recurring profit and loss be excluded, the growth in profit attributable to owners of the Company for the period would be even more considerable. During the Reporting Period, basic earnings per share were HK$0.29.
Pharma manufacturing business achieved stable revenue growth and better profitability
During the Reporting Period, revenue of the pharmaceutical manufacturing segment amounted to approximately HK$12,692.4 million, representing an increase of 3.8% year-on-year (9.2% in RMB terms). Goss profit margin of the segment was 60.1%, up by 2.2 percentage points when compared with the same period last year, attributable mainly to product mix optimization and continuous improvement of the manufacturing process. The Group sees research and development and innovation as important drivers of its long-term development. During the Reporting Period, it spent HK$397.5 million on research and development and obtained 19 patents. As at 30 June 2017, the Group had 225 projects in progress including researches on innovative drugs, generic drugs and on product improvement. During the Reporting Period, the Group started strategic cooperation on multi-front with partners, including the National Center for Nanoscience and Technology of the Chinese Academy of Sciences, Tsinghua University, Union Institute of Materia Medica, Fujifilm Corporation from Japan (“FUJIFILM”) and Crystec from the UK, covering such therapeutic areas as oncology, auto-immune diseases, anti-infection and respiratory system diseases. A number of major projects were complete and applications for those cooperated with National Natural Science Foundation of China were made. In addition, certain products of clinical and market values were introduced.
Coverage of pharma distribution business network kept growing
During the Reporting Period, the Group’s pharmaceutical distribution business recorded a segmental revenue of HK$70,413 million, representing a year-on-year increase of 10.6% (16.3% in RMB terms). Gross profit margin reached 6.4% and the proportion of revenue from direct sales increased. During the Reporting Period, by capitalizing on economies of scale and its channel advantage, the Group was able to seize the opportunities presented by the industry consolidation and market restructuring, that the “Two-Invoice System” policy brought, to strengthen network coverage, optimize business structure and speed up nationwide channel deployment as stated in its 13th Five-Year strategic plan. The Group’s distribution business entered into four provinces, namely Jiangxi, Hainan, Qinghai as well as Xinjiang, and it completed deployment of distribution business in these four provinces, thus accomplishing a pharmaceutical distribution network that to date covers 27 provinces, municipalities and autonomous regions. At the same time, the Group also hastened network consolidation in key provinces and penetrated into municipal markets in a bid to strengthen its leadership in those regions.
Competitiveness of pharma retail business gradually strengthens
The pharmaceutical retail business segment recorded revenue of HK$2,117.5 million, representing a year-on-year increase of 10.2% (15.8% in RMB terms). As at 30 June 2017, the Group had in operation 745 retail pharmacies in all.
During the Reporting Period, on top of focusing on developing its own business, the Group also actively sought opportunities to cooperate with external parties. It signed strategic cooperation agreements with including the National Engineering Laboratory for Anti-Neoplastic Protein Therapeutics at Tsinghua University, Protgen Ltd., FUJIFILM and Crystec. The aim of these partnerships in different business areas is to optimize offerings and upgrade products. At the same time, the Group also completed a number of mergers and acquisitions including the acquisition of 65% stake in Jilin Jin Fu Kang Pharmaceutical Limited by its subsidiary China Resources Sanjiu Medical & Pharmaceutical Company Limited, which represented the Group’s effort to promote overall sustainable growth of its business via different channels.
Looking ahead, the Group will continue to implement its six key business expansion strategies, which included expanding pharmaceutical manufacturing business and optimizing product portfolio to facilitate transformation and upgrade of pharmaceutical business; optimizing distribution platform and innovating business models to turn into intelligent pharmaceutical service provider; optimizing research and innovation system, strengthening research and development capability and facilitating product development and industrialization; accelerating external development through strategic mergers and acquisitions and industrial funds to consolidate leading position in industry; enhancing international co-operation and expanding international businesses to raise overall competitiveness as well as exploiting the Group’s competitive advantages overall superiority, promoting business synergy and enhancing operation efficiency.
With the gradual advancement of healthcare and pharmaceutical reform, the pharmaceutical industry in China has entered into a deepened adjustment and reform stage where supervision is tightened. By relying on its own advantages and following the direction of the policies and the market demand, the Group will speed up the development through strategic mergers and acquisitions and international collaboration. It will improve its intrinsic development potential through optimizing product mix and business model, optimizing the research and development and innovation system and deepening synergy effects so as to achieve the long-term stable and sustainable development in the pharmaceutical manufacturing, distribution and retail segments and continue to reinforce and elevate the Group’s leading position in the pharmaceutical industry in China.