Increase in costs, profit growth, pharmaceutical companies said they are brewing a new wave of price increases

Business News Agency June 2nd News Yunnan Baiyao general manager told reporters that operating costs may increase by 100 million yuan this year

The soaring prices of bulk medicinal materials such as Panax pseudo-ginseng and heterophylla have caused drug companies to suffer. The drought in the middle and lower reaches of the Yangtze River this year has further increased the pressure of high production costs for pharmaceutical companies. Under the influence of various factors such as inflation and the reduction of medicinal herbs, an undercurrent of price increases for Chinese patent medicines is gradually taking shape.

Costs rise above profit growth

In 2010, price of Chinese herbal medicine “leader” Taizishen had almost doubled in price within a year, and it had soared to a staggering 300 yuan/kg. However, in the second quarter of this year, with the new production of Taizishen gradually approaching, the holders actively sold off and their prices finally fell back. According to Taizishen Information Network's data, on June 1st, the price per kilogram of Taizishen in the market of Mazhou is 240-260 yuan for Fujian EC, 250 yuan for Xuancheng, and 255-270 yuan for Guizhou. It is not difficult to see that, despite the inflection point of price, the price of heterophylla is still at a historically high level.

The increase in prices of medicinal herbs directly affected the gross profits of pharmaceutical companies. The Jiang medicine industry (600750.SH), which uses the raw materials of ginseng as the main raw material, repeatedly mentioned the increase in raw material costs in the 2010 annual report. The company stated that according to the Chinese Medicine Association According to statistics, 84% of the 537 species of Chinese herbal medicines in the national market went up in price in 2010, of which 28% of Chinese herbal medicines rose by more than 51%. The company’s main raw materials and accessories prices also increased significantly, making the Chinese medicine OTC business gross margin level Declined.

The annual report shows that Jiang's Chinese medicine industry's net profit in 2010 increased by 29.89% year-on-year, while operating costs increased by 731 million yuan year-on-year, an increase of 103.30%, of which the main reason is that raw materials rose.

The well-known Chinese medicine manufacturer Jiuzhitang (000989.SZ) also felt the pressure of medicinal herbs rising. Jiu Zhitang's secret secretary Guo Zhaohui told the “Securities Daily” reporter: “(price of herbal medicines) should be said to have some influence, and raw materials are all increasing prices. The effects of prices of angelica, astragalus and sugar powder are relatively large, resulting in a decline in gross profit. Now the company is also trying to reduce the cost of procurement."

Jiang Erguo, deputy director of the Chinese Medicine Information Center of the Chinese Medicine Association, told the reporter that under the influence of the drought in the middle and lower reaches of the Yangtze River, Jiangxi's wolfberry has already seen a decline in yields, while the drought-prone areas produced “Hedyotis diffusa, Scutellaria barbata, One or two hundred herbs, such as Scrophulariae and Atractylodes, will be affected more or less. As for the degree, further attention is needed."

The price increase on the 37th has greatly stimulated the enthusiasm for planting farmers. Industry insiders predict that the price of Sanqi will gradually fall due to the increase in the scale of production brought about by planting. However, if the dry conditions in the middle and lower reaches of the Yangtze River are not effectively alleviated, it is difficult to ensure that medicinal herbs such as gardenia and Scrophulariae do not become the next "37."

Pharmaceutical companies show significant power to deal with price increases

There are also some proprietary Chinese medicine companies that have survived or been less affected in this brutal price increase. The main raw material for the unique taste (002219.SZ) located in Gansu is the unique herb. The company's annual report shows that in 2010, the prices of monosodium odoratum not only did not increase, but decreased slightly by -2.87%.

Zeng Qingmei, the company’s securities representative, said: “One-touch grass has the biggest impact on the company, but it mainly grows in the alpine zone with four or five kilometers of altitude. It has strong adaptability and a growth cycle of 3-5 years.” She said The vitality of grass is very strong, but it is mainly in the wild. The growth time is not very good and it may pose a certain risk to the output. At present, prices for unique grasses have not risen much. Although the company has also purchased a small amount of astragalus and codonopsis, the impact is not obvious.

In spite of this, it has also taken precautions to improve the performance of the company's equipment, so as to increase the dissolution rate of Unicorn and increase the input-output ratio. "And the company's fund-raising projects have a unique planting base, and now it has begun to generate profits." Zeng Qingmei, a representative of Unique Securities, said.

Under the huge pressure of cost control, various drug companies have demonstrated their powers, and have responded to measures such as acquisition of production sites and improvement of utilization rate. For example, in 2010, Jiuzhitang will adopt measures to ensure direct supply of raw materials to stabilize price fluctuations and ensure the supply of raw materials. And to strengthen technological transformation, through the improvement of production efficiency and reduce the cost impact of power price increases.

Guanghua Pharmaceutical Group recently announced the establishment of the "Sanqi Kawaguchi Market Climate Monitoring and Integration Platform" to provide large-scale supply of essential drugs for the Group's two basic pharmaceutical products, Baiyunshan Compound Danshen Tablets and Pan Gaoshou Snake Shedan Chuanbei. On the preparation.

Cost pressures give rise to price increases

Companies that hold drug pricing power in their hands can be much easier before the aggressive price increase. Pizi Tsai (600436. SH), an insider, told this reporter yesterday that because Pien Tze Huang has its own pricing power, rising drug prices can reduce some of the pressure by appropriately increasing drug prices. The same price can be set independently Dongjia Ejiao (000423. SZ) 5 times the price increase in 2010, the cumulative increase of more than 50%.

The prices of Yunnan Baiyao cream belonging to the Medicare drug must be approved by the National Development and Reform Commission. Yin Pinyao, the general manager of Yunnan Baiyao (000538.SZ), frankly stated in an interview with this reporter that due to the price increase of medicinal materials in 2011, the company's operating costs may increase by 100 million yuan.

The rise in cost has led to an inevitable increase in drug prices. According to the "China Business News" quoted Wang Guihua, secretary-general of the Chinese Medicine Association, the National Development and Reform Commission will start the investigation of the supply of Chinese herbal medicines in the near future and formulate a scientific pricing mechanism for Chinese patent medicines. After completing the research, 102 kinds of essential medicines will be included. Chengyao is expected to usher in price adjustments.

According to Jiang Erguo, deputy director of the Chinese Medicine Information Center of the Chinese Medicine Association, it is necessary to take a rational view of the possible price increase of proprietary Chinese medicines. The price increase of medicinal materials will increase the cost and the price increase may appropriately reduce the pressure on the production enterprises.