Shenzhen Business Daily Reading Client Reporter Mu Yan
On June 30, the website of the Shenzhen Stock Exchange showed that Jiangsu Zhiyuan Pharmaceutical Co., Ltd. (hereinafter referred to as "Zhiyuan Pharmaceutical" or "the Company"), which intends to be listed on the Shenzhen Stock Exchange, updated its prospectus. The number of shares issued by Zhiyuan Pharmaceutical Co., Ltd. in this public offering does not exceed 43.3 million shares, and the funds to be raised are 701 million yuan, of which 250 million yuan will be used for the reconstruction and expansion project of the preparation production base, 290 million yuan will be used for the R&D center project, and 160 million yuan will be used to supplement working capital.
Screenshot of the Shenzhen Stock Exchange website
According to public information, Zhiyuan Pharmaceutical Co., Ltd., founded in 1999, is a high-tech enterprise engaged in the research and development, production, sales and promotion services of drugs in the field of skin, functional skin care products and drugs in the field of kidney disease, and is committed to providing patients with products with clinical value. In the field of skin, the company has been deeply engaged for many years, committed to building the core competitive advantage in the field of skin, focusing on common skin problems, namely fungal infectious skin diseases, acne and rosacea, immune inflammatory skin diseases, scalp hair problems, etc., to meet the diverse needs of patients, and develop a series of products from therapeutic drugs to functional skin care products, "from head to toe". This company is also known as the "first stock of skin diseases", and it is located in a large track market space, few entrants, large consumer stickiness, a gross profit margin of up to 70%, and at the same time backed by "Alibaba" major customers and channels, so it has attracted much attention from the market.
The company's net profit margin showed a continuous decline and decreasing trend
According to the prospectus, during the reporting period, the company's operating income was 511.1103 million yuan, 860.3181 million yuan and 1030.5596 million yuan respectively, and the net profit attributable to the owners of the parent company after deducting non-recurring gains and losses was 72.2357 million yuan, 126.3306 million yuan and 137.5616 million yuan respectively, and the compound growth rate of the company's operating income and net profit attributable to the owners of the parent company after deducting non-recurring gains and losses in the last three years was 42.00%, 38.00%。
In the latest full fiscal year, the company's operating income growth rate was 19.79%, and the growth rate in the previous period was 68.32%, showing a significant decline. Similarly, in the latest full fiscal year, the company's net profit growth rate was 9.69%, and the growth rate in the previous period was 53.21%, showing a significant decline. In terms of earnings quality, it should be noted that in the past three complete fiscal years, the company's net profit margin was 17.1%, 15.56% and 14.25%, showing a continuous decline and decreasing trend.
In terms of market share, according to the Minenet database, in 2023, the market size of chemical and dermatological drugs in mainland China will be 24.608 billion yuan, of which Zhejiang Sunshine Mandi Pharmaceutical Co., Ltd. (a subsidiary of 3SBio), Chongqing Huabang Pharmaceutical Co., Ltd. (a subsidiary of Huabang Health), and Zhiyuan Pharmaceutical will have market shares of 6.78%, 5.46%, and 2.74% respectively, and Zhiyuan Pharmaceutical will rank third among domestic enterprises in mainland China in the corresponding market.
It is highly dependent on e-commerce platforms such as Ali Health, and the company's asset-liability ratio is higher than the industry average
Zhiyuan Pharmaceutical specifically listed a "ranking in e-commerce activities" in the prospectus. It is mentioned that in the 2021 e-commerce "Double Eleven" event, the company's "Lifu" series of drugs ranked first in the OTC skin category of Ali Health Pharmacy; In the 2022 e-commerce "618" activity, the company ranked first in the overall ranking of OTC corporate brands in Ali Health Pharmacy; The company's "Love" and "Liv" series of drugs ranked second and third respectively in the skin topical drug brands; The company's "quality moisturizing" series of products ranks second among the efficacious skin care brands; In the 2022 e-commerce "Double Eleven" event, the company's "Liv" and "Love" series drugs ranked first and second respectively in the OTC skin category of Ali Health Pharmacy; In the 2023 e-commerce "618" activity, the company's "Liv" and "Love" series of drugs ranked first and third respectively in the skin topical drug brands; In the 2023 e-commerce "Double 11" event, the company's "Love" series of drugs ranked third in the OTC skin category of Ali Health Pharmacy; In the 2024 e-commerce "618" activity, the company ranked second in the overall ranking of OTC corporate brands in Ali Health Pharmacy, the company's "Love" series of drugs ranked second among skin drug brands, and the company's "Love" series of drugs ranked third in JD Health's OTC skin drug brands.
It is worth mentioning that Ali Health Pharmacy has been mentioned many times in the above ranking, and the company is backed by "Alibaba" major customers and channels. According to the prospectus, in 2021, 2022, and 2023, Ali Health will be the company's largest customer. Zhiyuan Pharmaceutical's cosmetics have also entered e-commerce platforms such as Ali Health Medicine, and at the same time laid out multiple channels such as Tmall and Douyin. The company's sales model is mainly to sign purchase and sales agreements with large-scale self-operated pharmaceutical e-commerce platforms, Ali Health and other pharmaceutical e-commerce platforms to issue purchase orders to the company according to the expected market demand, the company implements buyout sales to the pharmaceutical e-commerce platform, and consumers buy on their own in the pharmaceutical e-commerce platform according to their own needs. This also shows that the company is extremely dependent on platforms such as Ali Health. At the same time, Alibaba Health is also the largest debtor of the company's receivables. In 2022, the accounts receivable from Ali Health will be 29.5 million yuan, accounting for more than 40% of the total amount, and the company has made a provision for bad debts of nearly 1.5 million yuan.
According to the prospectus, at the end of the reporting period, the book value of the company's accounts receivable was 53.9939 million yuan, 67.8149 million yuan and 57.111 million yuan respectively, and the book value of accounts receivable accounted for 13.89%, 14.56% and 11.58% of current assets respectively. According to the prospectus, the company's customers are mainly well-known domestic enterprises, stable operation, good reputation, and maintain a good cooperative relationship with the company, the possibility of bad debts of accounts receivable is small, but if the customer's future business situation or the company's cooperative relationship with the adverse changes, resulting in the company's accounts receivable on time to recover the risk of increased or even unable to recover the corresponding amount, will have an adverse impact on the company's assets and operating performance.
During the reporting period, the company's current assets were 389 million yuan, 466 million yuan and 493 million yuan respectively, accounting for 58.37%, 54.64% and 48.98% of the total assets respectively; non-current assets were 277 million yuan, 387 million yuan and 514 million yuan respectively, accounting for 41.63%, 45.36% and 51.02% of total assets respectively; The total assets were 666 million yuan, 852 million yuan and 1.007 billion yuan respectively. During the reporting period, the company's asset-liability ratios were 32.51%, 34.28% and 35.30% respectively; The current ratios are 2.87, 2.10 and 3.10, respectively. Among them, in the latest full fiscal year, the ratio of accounts receivable to total assets was 5.67%, the ratio of inventory to total assets was 9.74%, the ratio of fixed assets to total assets was 22.21%, and the ratio of interest-bearing liabilities to total liabilities was 51.26%.
From the above data, it can be seen that the company's asset liability level is higher than that of its peers. In the latest full fiscal year, the company's asset-liability ratio was 35.23%, higher than the industry average of 32.85%.
The total academic promotion fee in three years exceeds 300 million yuan, and the frequency of holding conferences is unusually high
Looking through the prospectus, it is worth noting that the academic promotion fee, which is known as the "gray area" of pharmaceutical companies' sales expenses. During the reporting period, from 2021 to 2023, 84.98 million, 121 million yuan, and 104 million yuan were recorded respectively, with a total of more than 300 million yuan in three years. It even exceeded the cumulative net profit of tens of millions of yuan in the reporting period. Especially in 2021, when the revenue and net profit base are still relatively low, the academic promotion fee of nearly 100 million yuan is already 1.75 times the net profit.
Screenshot of Zhiyuan Pharmaceutical's prospectus
According to the prospectus, during the reporting period, academic promotion fees mainly include conference fees, information collection fees, and market research fees.
The conference fee is mainly due to the expenses incurred in organizing and carrying out academic visits, roundtable discussions, expert lectures, patient education meetings and other visits and academic conferences, the information collection fee is mainly the cost of collecting various information collection activities such as the flow and inventory information of the company's products and competing products, outpatient case information, side effects, adverse reactions, etc., and the market research fee is mainly the cost of market research of the company's products and competing products, issuing special research reports and other activities.
During the reporting period, the company's conference expenses were 59.6602 million yuan, 87.5459 million yuan and 63.002 million yuan respectively, the amount of information collection fees was 18.9145 million yuan, 25.6791 million yuan and 32.1785 million yuan respectively, and the amount of market research fees was 6.4098 million yuan, 8.0156 million yuan and 9.7225 million yuan respectively. The analysis of the trend of the amount of various academic promotion activities is as follows:
In 2022, the amount of various academic promotion activities increased, mainly due to: on the one hand, the company strengthened the offline promotion of online hot products; On the other hand, the company has optimized the offline promotion strategy, strengthened the cooperation with promoters in key regions, and continuously expanded the terminal coverage area and number to enhance the offline popularity of the company's products and ensure the continuous growth of offline sales.
In 2023, the company's overall academic promotion fee will show a downward trend, mainly due to the following reasons: on the one hand, the company's main products for academic promotion, such as clobetasol propionate ointment and Kunxian capsules, have been relatively mature in market promotion, and the investment in related academic promotion activities has decreased; On the other hand, the company adjusted its marketing strategy in a timely manner, focusing on brand communication and brand image establishment, and continuously developed e-commerce channel sales, which correspondingly reduced the expenditure on traditional academic promotion activities and increased the investment in e-commerce expenses and advertising expenses.
Marketing and academic promotion fees have always been a high-risk area for commercial bribery of pharmaceutical companies, and they are also the focus of regulatory listing review. Zhiyuan Pharmaceutical said in the prospectus that the company will involve the communication and interaction between distributors, marketing service providers and other partners and medical institutions, doctors and patients in the process of drug sales; The Company has established and improved the Code of Conduct for relevant partners, but there may still be violations of anti-commercial bribery and other relevant laws and regulations by the Company's partners in the course of business development. If the Company's partners engage in improper behavior that violates anti-commercial bribery laws and regulations, the Company is unable to effectively control them, which may damage the Company's reputation and even bear the corresponding liability risks, which in turn will adversely affect the Company's business operations, financial condition and development prospects.
Previously, some media reported that in 2022, Zhiyuan Pharmaceutical held 736 roundtable discussions, 2,061 academic conferences and 1,063 terminal training meetings, and held 3,860 meetings in one year. Although it is important to promote the brand, the company's cost is limited, and the frequency of such meetings has formed a huge contrast with R&D investment, which is obviously unreasonable. Are these meetings having a corresponding effect? Will it squeeze profits? These are all worthy of vigilance.
In addition, compared with the high sales expenses, Zhiyuan Pharmaceutical is slightly "stingy" in terms of investment in R&D expenses. In the past three years, the company's R&D investment was 36.631 million yuan, 42.4107 million yuan and 56.1045 million yuan respectively, the cumulative R&D investment in three years was 135.1462 million yuan, the cumulative operating income in three years was 2401.988 million yuan, the cumulative R&D investment in the last three years and the proportion of the cumulative operating income in the last three years was 5.63%, and the compound growth rate of R&D investment in the last three years was 23.76%. There is also a large amount of R&D expenses that are used for outsourced R&D. Zhiyuan Pharmaceutical said that the relatively high proportion of outsourced R&D expenses is in line with the practice of the pharmaceutical industry, but the company's outsourced R&D expenses are still higher than those of companies in the same industry. Moreover, outsourcing R&D means that R&D progress and results are relatively passive and uncontrollable.
Screenshot of Zhiyuan Pharmaceutical's prospectus
Review: Sun Shijian