Dilemma And Salvation Of "Four Old Pharmaceutical Enterprises"

Recently, Northeast Pharmaceutical announced that Fangda iron and Steel Co., Ltd. transferred all shares of Northeast Pharmaceutical held by Dongyao group and Shengjing financial holding group and triggered the tender offer. After the completion of the transfer, Fangda steel and its persons acting in concert hold 57.88% of the company's shares.

In fact, as early as 2018, when Fangda group took a stake in Northeast Pharmaceutical, the actual controller of Northeast Pharmaceutical changed from Shenyang SASAC to Fangwei. Because it is good at capital operation, it is known as "state-owned enterprise Hunter". It takes traditional assets at a low price, and then through cost reduction and other means, revitalizes the company's performance and then exits.

In the year of mixed reform, the operating revenue of Northeast Pharmaceutical reached 7.467 billion yuan, with a year-on-year increase of 31.54%, and the net profit attributable to parent company reached 195 million yuan, with a year-on-year increase of 64.04%. In order to mobilize the enthusiasm of employees, the controlling shareholders have established a clear reward and punishment, fine management and other mechanisms, and directly issue cash in terms of rewards. However, the good times are not long. In 2019 and 2020, the net profit of Northeast Pharmaceutical Co., Ltd. will continue to decline. With the deep promotion of national centralized procurement, the comprehensive development of generic drug consistency evaluation, and the global new crown pneumonia epidemic prevention and control situation is still complex and severe, the market competition is increasingly fierce, the development of Northeast Pharmaceutical is facing great impact and challenge.

In addition to the acquisition of Northeast Pharmaceutical, the other three are not well off. Among them, Taiyuan pharmaceutical has long been bankrupt, Xinhua Pharmaceutical is heavily in debt, and Huabei pharmaceutical has just been severely punished.

Where are these old pharmaceutical companies going? Shi lichen, head of Beijing Dingchen pharmaceutical management consulting center, told reporters of the 21st century economic report that there are two directions for the old brand pharmaceutical enterprises. One is to fundamentally solve the problem, that is, to increase investment in research and development. Second, based on its own cost advantages, to achieve economies of scale.

Shi also stressed that the key to the transformation of old pharmaceutical enterprises is to solve the problems of internal management confusion, rigid management thinking and lack of innovation“ To strengthen the internal governance and improve the competitiveness is the primary problem to be solved. After solving the problems that caused the internal management confusion before, it is useful to talk about increasing investment in product research and development and carrying out business model innovation. "

The development of Beijing Pharmaceutical is facing great impact and challenge. Visual China

The old state-owned pharmaceutical enterprises were acquired

On August 23, Northeast Pharmaceutical issued the tender offer report of Northeast Pharmaceutical Group Co., Ltd., which triggered the full acquisition of Northeast Pharmaceutical by Fangda iron and Steel Co., Ltd.

According to the relevant provisions of the securities law and the administrative measures for the acquisition of listed companies, Fangda iron and Steel Co., Ltd. is required to perform the obligation of comprehensive tender offer. Therefore, this tender offer is issued to fulfill the above statutory tender offer obligations, not for the purpose of terminating the listing status of Northeast Pharmaceutical, and the control right of the listed company will not change due to this tender offer.

In fact, before the transfer, Fangda steel and its persons acting in concert had held 525256568 shares of the listed company, accounting for 38.97% of the total shares of the listed company, and the shareholding ratio was more than 30%. After the completion of the transfer, Fangda iron and steel and its persons acting in concert hold 780121651 shares of the listed company, accounting for 57.88% of the total shares of the listed company.

As early as 2018, Fangda group participated in the mixed reform of Northeast Pharmaceutical and became the controlling shareholder of Northeast Pharmaceutical. Three years later, the state-owned assets were completely withdrawn. Fangda iron and steel, Fangda group and its actual controller, Fang Wei, hold 57.55% of the shares of Northeast Pharmaceutical, realizing absolute control.

Data show that northeast pharmaceutical, formerly known as the Northeast General Pharmaceutical Factory, was founded in 1946. It has aided the construction of 52 pharmaceutical enterprises in 19 provinces and cities in China, and transported more than 1300 cadres. It is known as the cradle of China's national pharmaceutical industry.

In 1993, Northeast Pharmaceutical Co., Ltd. merged into Shenyang No.1 pharmaceutical factory through joint-stock system transformation, and was listed on Shenzhen Stock Exchange in 1996. However, after listing, the performance of Northeast Pharmaceutical is not ideal, and there are a lot of related party transactions with the parent company, and the financial transparency is low.

It is worth mentioning that in 2008, the price of vitamin C suddenly rose to 150 yuan / kg. As the main supplier of vitamin C, Northeast Pharmaceutical achieved revenue of 4.61 billion yuan in the same year, with a year-on-year increase of 24.38%, and net profit of 358 million yuan, an increase of 653.15%. However, the market of API passed quickly. In 2011, the Northeast Pharmaceutical Company suffered a large loss of 394 million yuan. Since then, the performance of Northeast Pharmaceutical has been in a slump.

In 2013, Wei Haijun, former director of Shenyang Municipal Government Research Office, took the post of chairman of Northeast Pharmaceutical, and carried out radical reform. It is understood that Dongyao group had a large organization and too many management levels, so they had to fight their own way. After Wei Haijun took office, he began to solve the problem of poor executive ability, adjusted the organizational structure, simplified the hierarchy, and recruited professional managers from outside. In addition, Wei Haijun also vigorously developed biomedicine and pharmaceutical engineering on the basis of the original business of API, chemical preparation and pharmaceutical business.

In 2018, Northeast Pharmaceutical was the only pilot enterprise of mixed ownership reform in Shenyang. Through the mixed reform, Fangda group imported mature and advanced market-oriented management mode, business model, efficiency creation mode and abundant financial support for Northeast Pharmaceutical, and established a market-oriented, professional and legal management decision-making mechanism.

According to the annual report of Northeast Pharmaceutical Co., Ltd., in the year of mixed reform in 2018, with the arrival of mixed ownership reform and the settlement of Fangda group, the operating revenue of Northeast Pharmaceutical reached 7.467 billion yuan, a year-on-year increase of 31.54%, and the net profit attributable to the parent reached 195 million yuan, with a year-on-year increase of 64.04%.

Why did the state-owned assets withdraw completely? The reporter of 21st century economic report noticed that although the performance of Northeast Pharmaceutical increased significantly in the year of mixed reform, the growth of follow-up performance was slightly insufficient. In 2019 and 2020, the net profit of Northeast Pharmaceutical was 174 million yuan and 12.26 million yuan respectively, and the net profit decreased continuously in two years.

In 2019, the growth rate of Northeast Pharmaceutical's revenue dropped by 20 percentage points, and the company's performance was lower than expected due to factors such as the price decline of API and bad debts. The new crown epidemic in 2020 will bring a heavy blow, net profit will drop by more than 90% year on year, and the revenue of Northeast Pharmaceutical will drop for the first time in five years.

On August 25, Northeast Pharmaceutical released its performance report for the first half of 2021. In the first half of the year, the net profit attributable to shareholders of the listed company was 60.3841 million yuan, an increase of 3.73% over the same period of the previous year. However, the net profit attributable to shareholders of the listed company after deducting non recurring profit and loss decreased by 50.67% year on year. There are two main reasons. First, in the same period of last year, enterprises enjoyed the social security relief policy given by the government during the epidemic period, which affected the related expenses to increase by more than 30 million yuan compared with the same period last year; Second, the assets transferred to fixed assets of Xihe API factory affected the company's depreciation in the first half of this year, which increased by more than 30 million yuan compared with the same period last year.

In view of the relevant issues such as whether the business strategy will be adjusted after the acquisition, the reporter of the 21st century economic report called Fangda iron and Steel Co., Ltd., but the telephone has not been reached.

Can the "state-owned enterprise Hunter" complete the redemption?

In recent years, the performance of Northeast Pharmaceutical has declined significantly. However, Fangda group has been trying to increase its shareholding and seek to acquire Northeast Pharmaceutical. Why did Fangda group choose to take over?

According to the data, Fangda iron and steel is a wholly-owned subsidiary of Fangda group. Fangwei currently holds 100% equity of Fangda international, and it indirectly holds 99.2% equity of Fangda group through Fangda international, which is the actual controller of Fangda group.

It is reported that Fang Wei, the real controller of Fangda group, is good at capital operation, takes over traditional assets at a low price, and then withdraws after reinvigorating the company's performance by streamlining costs. Among them, Fangda carbon, Fangda special steel and Northeast Pharmaceutical are all from the restructuring of state-owned enterprises, so Fangwei is called "state-owned enterprise Hunter".

According to public information, in 2002, Fang Wei, only 29 years old, reorganized the Fushun carbon plant, a state-owned enterprise. This was the first time that Fangwei "copied the bottom" of state-owned assets.

In 2003, Fang Wei reorganized Fushun Laihe Mining Co., Ltd., and the next year, it renamed Fushun Xinren Industrial Co., Ltd. to Liaoning Fangda Group Industrial Co., Ltd. From 2004 to 2005, Fangda Group acquired Shenyang Coking Gas Co., Ltd., Chengdu Rongguang Carbon Co., Ltd. and Hefei Carbon Co., Ltd. By the end of 2005, the total assets of Fangda group reached 1.395 billion yuan, and the net profit of that year was 27.69 million yuan.

In 2006, Fangda group held the shares of Hailong, a listed carbon company, and made the three carbon enterprises of Fangda realize backdoor listing, and renamed it Fangda carbon. After integration, Fangda carbon has become China's first and world's leading carbon production enterprise.

In the iron and steel industry, in 2009, Fangda Group acquired Nanchang Iron and steel and its listed company Changli shares, and later renamed as Fangda special steel. Three years later, Fangda group took Jiangxi Jiujiang Pinggang into account. At present, Fangda special steel and Jiangxi Pinggang are respectively the largest production bases of spring flat steel, automobile leaf spring and free cutting steel in China.

In 2018, after taking charge of Northeast Pharmaceutical, the big health industry has become the key industry of Fangda department. According to its official website, the pharmaceutical sector has become one of the three main industries of Fangda group.

In 2019, Fangda group also owned two Shenyang state-owned enterprises, ZTE commerce and North heavy industry, both of which are assets of Shenyang SASAC.

After acquiring the state-owned enterprises in trouble by means of negotiated transfer, Fangwei improved corporate governance, integrated and reorganized relevant resources in the way of market, and then pushed it to the capital market at a high price.

In terms of improving corporate governance, Fangda is good at motivating employees. It is reported that after taking over Northeast Pharmaceutical, Fangda group has successively launched a series of measures, such as the equity incentive plan for senior executives, the shareholding plan for key employees, and the implementation of a 50% increase in the salary of all employees. At the same time, the habit of high-profile distribution of cash red packets has also been brought to Northeast Pharmaceutical.

"Over the years, we have been carrying out mixed reform, and Fangda steel has become the largest shareholder after several tender offers." Northeast Pharmaceutical board secretary office staff said to the media.

At present, with the deep promotion of national centralized procurement, the comprehensive development of generic drug consistency evaluation, and the global new crown pneumonia epidemic situation is still complex and severe, the development of Northeast Pharmaceutical is facing great impact and challenge.

In 2020, the revenue of Northeast Pharmaceutical will be 7.384 billion, with a year-on-year decrease of 10.17%; The net profit attributable to the parent company was 12 million, a year-on-year decrease of 92.95%. According to public information, in 2020, Northeast Pharmaceutical donated 60 million yuan to the epidemic prevention and control headquarters of Liaoning Province through Liaoning Provincial Charity Federation. However, even if 60 million yuan is added, the net profit of Northeast Pharmaceutical will still decline by 58.62% in 2020, which is mainly due to its own operation problems.

In addition, according to the announcement of asset impairment provision in 2020, Northeast Pharmaceutical reversed the provision for asset impairment in inventory falling price reserves and assets held for sale, which increased the net profit attributable to the parent company by 16 million. Among them, the inventory falling price reserves were finally transferred back to 12 million, because of the sales of inventory goods.

In 2020, the book balance of inventory at the beginning and end of the period is 1.352 billion and 1.309 billion respectively, with little difference, but the inventory falling price reserves are 67.92 million and 55.76 million, with a difference of 12 million. In 2019, the net profit attributable to the parent company will be 174 million yuan, while in 2020, the net profit will be only 12 million yuan. If there is no inventory falling price reserve of 12 million yuan transferred back from the previous year, Northeast Pharmaceutical may lose money in 2020, so it may be suspected of manipulating the financial statements.

Although the gross profit rate of Northeast Pharmaceutical is about 40%, its net profit rate in 2020 is only 0.15%. The main reason is that the cost is too high. For example, in 2020, the sales cost is 1.745 billion, and the sales expense rate is 23.63%; The management cost is also too high. In 2020, the management cost will be 744 million, and the management cost rate will be 10.08%, which will lead to the net interest rate of Northeast Pharmaceutical.

It is worth mentioning that the short-term solvency of Northeast Pharmaceutical is also worrying. From 2017 to 2020, Northeast Pharmaceutical's short-term loans and non current liabilities due within one year are much higher than its monetary capital. In 2020, the net cash flow from operating activities is 571 million yuan, and the free cash flow is 171 million yuan. However, this is only enough to pay the interest of interest bearing liabilities, which is a drop in the bucket for the principal. The cash flow problem is very important to the enterprise, or directly leads to the bankruptcy of the enterprise.

Facing the crisis ridden Northeast Pharmaceutical, why did Fangda group take over? Can it be "saved alive"?

Shi lichen pointed out to the 21st century economic reporter that the reasons for the slow development of Northeast Pharmaceutical include: first, the product structure is aging, and the direct reason is insufficient investment in research and development; Second, the internal operation of state-owned enterprises is rigid and management thinking is aging. No matter in product research and development, operation, management mode and other aspects, it is not willing to break through the original development path.

Although Northeast Pharmaceutical is "broken," says Mr. Shi, it has many advantages. First, policy advantages. As the largest pharmaceutical enterprise in Liaoning Province, the local government supports, financial subsidies and policy advantages. In addition, there are corresponding policy support in tax, finance, research and development, and drug declaration, which are not available to private enterprises. Second, product advantages. Traditional pharmaceutical enterprises have accumulated a large number of products in the past. Some pharmaceutical enterprises even have thousands of product reserves and have a huge product resource group. Choosing some good products can stimulate them again. The third is channel advantage. As an enterprise with state-owned capital, it has paved a mature sales channel.

Shi lichen pointed out that on the one hand, Fang dazei can inject the business vitality of private enterprises into Northeast Pharmaceutical industry; On the other hand, as a major shareholder, Fangda has decision-making power, which can solve internal management problems and improve operational efficiency.

The comprehensive tender offer may improve the R & D investment of Northeast Pharmaceutical“ At present, the company's production and operation are normal, and the comprehensive tender offer may improve the company's R & D investment in the future. " Northeast Pharmaceutical securities department related people pointed out.

It is worth noting that Fang Wei once proposed that for the pharmaceutical sector, the group's future goal is to be the largest in the world, and Northeast Pharmaceutical will be benchmarked against Hengrui medicine in the future“ The group will give full support in terms of policies and funds. "

However, from the perspective of secondary market performance, the strength of Hengrui pharmaceutical, the leading stock of Northeast Pharmaceutical and medical sector, is far from the same.

Zhou Shu, a pharmaceutical strategic consultant, once said in an interview that private capital's participation in the restructuring of state-owned enterprises in the old industrial base is both an opportunity and a challenge, and it requires a high level of innovation and construction in follow-up management, products, R & D and marketing.

"After removing the label of state-owned enterprises, whether the development strategy of Northeast Pharmaceutical is clear, whether the internal management is smooth, whether the R & D investment is guaranteed or not depends to a large extent on the new owner Fangda, which is also the real challenge that Fangda will face in the future." Shi lichen also pointed out.

The reporter of 21st century economic report contacted the Board Office of Northeast Pharmaceutical Group Co., Ltd., hoping to further understand the significance of the tender offer to the enterprise's operation and strategy. The other party said that the relevant information needed to refer to the announcement, which was not convenient to disclose more information.

Centralized procurement and epidemic situation, pharmaceutical enterprises have been transformed

As one of the "four big families" of state-owned pharmaceutical enterprises in the early days of the founding of new China, Northeast Pharmaceutical was acquired, and the other three were not in a good situation.

For example, North China Pharmaceutical Co., Ltd. was blacklisted by the joint drug procurement office of the state organization because of the lack of production capacity, insufficient attention, relevant policy adjustments and the impact of the epidemic situation.

It is understood that Huabei pharmaceutical has started the history of large-scale production of antibiotics in China since its establishment in June 1958. After half a century's changes, Huabei pharmaceutical, which has the glory of API and antibiotic industry leader, has gradually become "weak" and entered a bottleneck period. After that, Jizhong energy entered the Huayao group with strong investment, and Huabei pharmaceutical announced the strategic transformation of "driving development by innovation and realizing the transformation from API to pharmaceutical preparation".

On August 18, the securities affairs representative of North China Pharmaceutical also pointed out to the reporter of the 21st century economic report: "the gross profit rate of antibiotic products is getting lower and lower due to the changes of environmental protection policies and market environment over the years. Therefore, we are now transforming from traditional antibiotic raw materials to professional high-end preparations, improving gross profit margin and profitability, and transforming from traditional pharmaceutical field to new pharmaceutical field, Make biopharmaceuticals bigger and stronger. "

Born in November 1943 during the Anti Japanese War, Xinhua Pharmaceutical Co., Ltd., which once created several number one in China, is now heavily in debt.

Data show that in 1954, Xinhua Pharmaceutical built the first modern workshop of phenacetin for chemical synthesis in China, which was the first production of chemical synthetic raw materials in China; In 1992, Xinhua Pharmaceutical established and put into operation the first GMP standard tablet production workshop in China with the loan from the world bank; After the joint-stock reform was completed in 1993, Xinhua Pharmaceutical H shares and a shares were listed in Hong Kong in 1996 and Shenzhen in 1997 respectively, becoming the first domestic and foreign pharmaceutical enterprise to be listed at the same time.

It is reported that Xinhua Pharmaceutical has formed a layout of chemical raw materials, pharmaceutical preparations, pharmaceutical chemical intermediates and pharmaceutical commerce. On July 30, the China Securities Regulatory Commission (CSRC) released its feedback on Xinhua Pharmaceutical, in which it inquired about issues such as "high deposit and loan" (on one hand, a large amount of cash is kept on the book, on the other hand, it is the financial expenses of high debt), the issuing object and other issues. At the same time, the CSRC noted that the short-term loan of Xinhua Pharmaceutical was 309 million yuan, the long-term loan was 721 million yuan, and the long-term payable amount was 642 million yuan. In March last year, Hualu Holding Group Co., Ltd., the controlling shareholder of Xinhua Pharmaceutical, once provided 600 million yuan of funds to it to repay the due debts and supplement the working capital. In this regard, China Securities Regulatory Commission asked Xinhua Pharmaceutical to explain the reasons and rationality, fairness of interest rate, and whether its financing depends on controlling shareholders.

According to the data, as of March 31, 2021, the asset liability ratio of Xinhua Pharmaceutical was 51.43%; The newly released interim debt ratio was also basically flat, at 51.53%.

Xinhua Pharmaceutical frankly said that compared with comparable listed companies in the same industry, its asset liability ratio has been in a high situation for a long time, and the expansion ability of business scale is also subject to the overall capital and debt situation to a certain extent.

In addition, Taiyuan pharmaceutical, one of the "four big families", declared bankruptcy at the end of 2009. In the 1980s, the peak output value reached more than 50 million yuan, which was one of the leading domestic pharmaceutical industries at that time. However, after 1993, the company has been in decline, losing money year after year. After changing six factory directors, it failed to reverse its declining performance. Finally, it became insolvent and declared bankruptcy in 2009.

In recent years, traditional large pharmaceutical enterprises in China have been seeking transformation. Why? The 21st century economic reporter has learned that the main reason is the influence of centralized collection and epidemic situation.

The semi annual report of Northeast Pharmaceutical in 2021 shows that, with the deep promotion of national centralized purchase, the comprehensive development of generic drug consistency evaluation, and the complex and severe situation of global new crown pneumonia epidemic prevention and control, the development of Northeast Pharmaceutical is facing great impact and challenge.

In addition, Huabei pharmaceutical also pointed out that in 2020, the income of its anti infective and chemical drug preparations will decrease. First, due to the impact of the new epidemic situation and the normalization of epidemic prevention and control in 2020, the hospital and outpatient clinic are under strict control. After the epidemic situation is relieved, the hospital and outpatient department still control the flow of patients, resulting in a relatively low market for penicillin and cephalosporin antibiotics, The clinical dosage decreased; Second, affected by the national policy of centralized purchase and government procurement with quantity, the bid winning price is low; Some regions lost or abandoned the bid, resulting in a decrease in sales.

A few days ago, North China Pharmaceutical also released its performance report for the first half of 2021. The report shows that in the first half of the year, Huabei pharmaceutical realized a net profit of 1.05100 yuan attributable to shareholders of listed companies, down 99.16% compared with the same period of last year; The net profit attributable to shareholders of the listed company after deducting non recurring profit and loss was - 30.75 million yuan, down 405.67% year on year.

On August 27, North China Pharmaceutical related personage pointed out to the reporter of 21st century economic report that "the main reason for the company's poor performance in the first half of 2021 is the sluggish performance in the first quarter." According to the first quarter report of 2021, the net profit attributable to the shareholders of the parent company decreased by 185.74% year-on-year, which was mainly due to the increase of comprehensive expenses due to the impact of the Xinguan epidemic in Shijiazhuang, and the receipt of 75.83 million yuan of assistance to stabilize posts in the same period of last year.

In fact, with the gradual normalization of procurement with volume, the types of centralized procurement drugs are increasing, and the scope of diseases covered is becoming wider and wider, and the price of drugs has become a trend.

Kaiyuan Securities believes that with the normalization of centralized purchase of generic drugs in China, the generic drug industry returns to the attribute of manufacturing industry, and the profit model has changed significantly. The cost control ability and capacity scale will become the core competitiveness, while the requirement for "sales capacity" is greatly weakened, which is conducive to the downstream extension of characteristic API enterprises with the integration advantage of "API + Preparation".

In addition, the bid winning rules of centralized purchasing are also continuously revised, from the first "4 + 7" city centralized procurement's lowest price exclusive bid winning policy to the current multiple bid winning policy, each winning enterprise can obtain a certain market share, and it is difficult for a single enterprise to monopolize the market.

"Therefore, we believe that for the characteristic API enterprises entering the pharmaceutical field, they need not only cost advantages, but also complete product echelons to carry out multi variety cluster operations to support the long-term and steady growth of preparation business." Open source Securities said.

Under the institutionalization of centralized purchasing, how should the old pharmaceutical enterprises cope with these challenges? Shi lichen said that there are two directions: one is to fundamentally solve the problem, that is, to increase investment in research and development. Traditional medicine R & D investment is low, and the competitiveness is gradually weakened. But the future of pharmaceutical racing track is mainly R & D innovation ability“ However, increasing R & D investment does not necessarily mean that they have to do R & D. pharmaceutical enterprises do everything means they are not competitive. Pharmaceutical enterprises should focus on their own product strategy, mainly including their own production, and improve their product lines through acquisition or cooperation. "

Second, economies of scale“ Some enterprises, such as northeast pharmaceutical, which produce their own raw materials, must have production cost advantages. Based on their own cost advantages, they can survive. Although the profit is very low, but the volume is large, they should firmly occupy the market. "

However, Shi lichen said that the key to the transformation of old pharmaceutical enterprises is to solve the problems of internal management confusion, rigid management thinking and lack of innovation“ To strengthen the internal governance and improve the competitiveness is the primary problem to be solved. After solving the problems that caused the internal management confusion before, it is useful to talk about increasing investment in product research and development and carrying out business model innovation. "

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