Sinopharm Announces 2020 Interim Results Maintaining Advantages of a Leading Distributor Achieving Rapid Growth in Retail Business and Medical Device Business
24 Aug 2020
(August 24 , 2020, Hong Kong) Sinopharm Group Co. Ltd. (“Sinopharm” or the“Company”, Stock Code: 1099.HK), the biggest wholesaler and retailer of pharmaceutical and healthcare products, as well as a leading supply chain service vendor in China, is pleased to announce the unaudited interim results of the Company and its subsidiaries (the “Group”) prepared under the Hong Kong Financial Reporting Stand ards (“HKFRSs”) for the six month ended 30 June 2020 (the “Reporting
During the Reporting Period, the Group recorded revenue of RMB 203 764.71 million, representing an increase of RMB2,099.57 million or 1.04% as compared with the corresponding pe riod of last year. T he profit of the Group for the Reporting Period was RMB 4 ,803.38 million, representing a decrease of RMB164.84 million or 3.32% as compared with the corresponding period of last year; profit attributable to owners of the parent amounted to RMB2,895.68 million, representing a decrease of RMB79.50 million or 2.67% as com pared with the corresponding period of last year. Basic earnings per share of the Company amounted to RMB0.93, representing a decrease of 7.00% as compared with the corresponding period of last year.
At present, as the pandemic prevention and control has entered the normalization stage, relevant reform measures such as “linkage among medical treatment, medical insurance and pharmacy” and “medical insurance fee control” are still being steadily advanced . Building on the experience of continuously expanding the scope of drug volume based procurement (“VBP”), government regulatory authorities are also actively promoting the implementation of policies such as “consistency evaluation for injection” and “high value consumables VBP”. Outdated production capacity and unreasonable operating mechanism have been gradually weeded out, the medical insurance payment structure has been continuously optimized, and the supply chain system of the pharmaceutical industry h as been continuously transformed and upgraded.
Since March 2020, the Group actively formulated a number of control measures to accelerate business development and business conditions continued to improve. The year on year growth rate of the business of t he Group in the first half of the year still far exceeded the industry average. Benefiting from the Group’s strategic layout and the growth of industry demands, the pharmaceutical retail and medical device segments showed strong resilience and growth poten tial during the special period of the pandemic. The proportion of the Group’s business segments showed a trend of further diversification.
Advantages of a leading distributor consolidated amidst deepening policy impacts
In the past two years , regulatory p olicies such as “ drug VBP” and “national medical insurance negotiation” have had a profound impact on the drug distribution industry. The G roup actively responded to adjustments to supplier strategy and business structure resulted from industry changes, de eply explored the unique network and service advantages, continued to promote the development of value added supply chain business with higher profitability with VBP at the core, and accelerated the Group’s transform and upgrade to a service provider with comprehensive promotion and service capabilities, thereby further consolidating leading position in the industry. In addition, the outbreak of the pandemic further accelerated the implementation of systems such as the “the building of a hierarchical diagno sis and treatment system” and the “county level comprehensive medical insurance reform”. During the Reporting Period, the Group largely resumed direct sales of medicines to secondary and tertiary hospitals, while direct sales to hospitals in non provincial capital cities rose against the trend. The business coverage over lower tired markets continued to increase, signifi cantly contributing to the stab ility of the Group’s overall revenue.
Retail business grew rapidly with coordinated development online an d offline business
The outbreak of the pandemic accelerated the implementation of policies such as “separation of medical services and pharmaceutical sales” and “prescription outflow”. The demand for “centralized connection of medical insurance” and “out of hospital drug purchase” increased significantly. The retail industry is presented with unprecedented development opportunities and changes. At the end of the Reporting Period, t he number of professional pharmacies of the Group increased from 1,183 as at the end of 2019 to 1,209 as at th e end of the Reporting Period . The number of pharmacies of Guoda Drugstore increased from 5,021 as at the end of 2019 to 5,838 as at the end of the Reporting Period In addition, the Group achieved orderly growth in t he retail network through endogenous growth and external mergers and acquisitions as well as franchising, and further improve the single store operation efficiency of retail pharmacies. During the Reporting Period, overcoming the impact of the pandemic, th e revenue f rom retail business reached RMB 11,015.77 million , achieving a rapid year on year growth of more than 24.59%.
Medical device business developed sustainably with accelerating value added services
From the perspective of the broader industry, the impacts of policies such as the “two invoice system for medical device” and the “VBP of high value consumables” had gradually manifested, leading to similar structural adjustments to medical device distribu tion as that to drug distribution, and further concentration of product structure and market share. The Group actively seized important opportunities arising from the integration of the medical device industry, strengthened its business data analysis capab ilities, and made full use of its competitive advantages of “drug device synergic development” to provide accurate marketing network and business coverage for upstream customers’ business expansion, assist in the preparation for VBP, and increase the stick iness of upstream customers. Meanwhile, during the pandemic, the Group actively expanded the lower tier market and continued to promote the rapid development of value added services such as the benchmarking model of centralized delivery of consumables for hospital consortium and medical community, in hospital logistics, and smart logistics, so as to achieve rapid growth of network coverage and business share. During the Reporting Period, the Group’s medical device business recorded sales revenue of RMB 35,87 3.04 million , representing a year on year increase of more than 23.59%.
Improve headquarters’ support capabilities to strengthen business risk control
Faced with constant changes in the industry structure and competitive environment, the Group continued t o promote the optimization of the top level system and the improvement of the internal control system in the first half of the year to improve operation efficiency, innovate services ability and strengthen internal control. To better respond to policy chan ges and the needs of business diversification, the Group actively promoted the digital transformation of its business, built an innovative digital technology driven information sharing platform covering the entire industry chain to comprehensively improve the service level for various terminal medical institutions and further tap the competitive advantages and development ‘potential of the Group's business. At the same time, with the continuous and in depth implementation of policies such as “VBP” and “ nati onal medical insurance negotiation” negotiation”, t he Group actively explored product and service innovation, leveraged the operational capabilities of the integrated global procurement and supply chain service center, deeply explored its network and data advantages covering terminals at all levels in the industry, intensified market expansion and model innovation of innovative drugs, first to mark generic drugs and other products focusing on derivative services, and further improved the s ervice capabilities and quality of upstream companies in the industry.
During the Reporting Period, the Group also focused on strengthening the risk management and further improve d the quality of business operations. As at the end of the Reporting Period , its financial expense ratio decreased by 0.04 percentage point on a year on year basis.
Fulfilling its missions beyond the pandemic
In the face of the sudden outbreak of the pandemic, the Group responded quickly and efficiently coordinated, overcame nu merous difficulties and went all out to fi ght the pandemic. Relying on its strong “network coverage” capabili ty, the Group gave full play to the advantages of cross regional business synergy during the effective period of the pandemic induced isolation mea sures to ensure that pandemic prevention supplies were shipped to key areas with the highest efficiency during the special period. Meanwhile, the Global Purchasing Center efficiently integrated domestic and foreign resources and carried out emergency globa l material dispatch to ensure the rapid procurement and transportation of imported materials.
With its advantages of an efficient supply chain and the selfless dedication of general employees to fighting the pandemic, the Group completed the distribution and delivery of a large number of medical devices and anti pandemic drugs such as masks, protective suits and ventilators. During this period, its retail stores also stuck to their posts to dedicatedly provide patients with professional pharmaceutical ser vices and undertook medical service demands from hospitals on the basis of complying with various prevention and control policies.
2020 is a year for the Group to lay down its plans for the “14th Five Year Plan”. Faced with challenges from the oscillating pandemic and complex geopolitics, the Group will continuously follow the strategic guidance of the Board, closely focus on the Company’s overall positioning, a ctively explore the supply chain service innovation with commercial and trading distribution at the core, comprehensively strengthen the Group's diversified business layout, and give play to the synergy between various businesses to achieve long term high quality growth of the overall business through the following business development strategies.
In the future, The Group will actively improve the “five year plan” for the next development cycle, make full use of the experience and advantages accumulated in the pharmaceutical distribution industry, focus on value added services in the pharmaceutical distribution supply chain, and promote win win development with upstream manufacturing industry and downstream end customers. At the same time, the Group will further promote the development strategy of “wholesale retail integration” and “drug device synergic development”, enhance the profitability and market competitiveness of core businesses, and, empowered by technology empowerment and driven by innovation, p ursue the synergetic development of innovative businesses, sparing no efforts to build a “global distinguished medical and healthcare service provider”.