——Zhejiang Cheng Yi Pharmaceutical Co., Ltd.'s Initial Public Offering of A-share Online Investor Exchange Conference Highlights
Mr. Yan Yiyi, Chairman of Zhejiang Cheng Yi Pharmaceutical Co., Ltd
Mr. Ren Bingjun, Director and General Manager of Zhejiang Cheng Yi Pharmaceutical Co., Ltd
Ms. Ke Zehui, Deputy General Manager and Board Secretary of Zhejiang Cheng Yi Pharmaceutical Co., Ltd
Mr. Lv Sunzhan, Financial Director of Zhejiang Cheng Yi Pharmaceutical Co., Ltd
Mr. Yang Zhi, General Manager and Sponsor Representative of Investment Banking Headquarters of Dongxing Securities Co., Ltd
Ms. Dorsa, Deputy General Manager of Quality Control Department of Dongxing Securities Co., Ltd. and sponsor representative
Q: Please introduce the company's market position advantages.
Ren Bingjun: Currently, the company's several major products rank first in various segmented markets. According to data from the CFDA Southern Institute, in 2015, the company ranked third in terms of domestic market share for Tolasemi, making it one of the few manufacturers that are self-sufficient in raw materials; Glucosamine hydrochloride preparation ranks first in China, and it is also one of the main manufacturers of Glucosamine hydrochloride API; The market share of Gastrodin API has remained around 50% in recent years, and it has an absolute say in downstream preparation manufacturers; The export volume of Azathioprine API ranks first in China. With the gradual transfer of international raw material drug manufacturing to developing countries, the company's main product exports are in short supply. Maintaining a long-term and stable cooperative relationship with well-known foreign pharmaceutical enterprises is conducive to further cooperation in the production of other raw material drugs.
Q: Please introduce the company's product price advantages.
Ren Bingjun: In recent years, the government has increased efforts to reform the drug circulation process and hospital management system to achieve the goal of reducing the terminal sales price of drugs. In the future, drug prices will be under pressure, and the price advantage in the bidding process of various provinces is undoubtedly a major competitive advantage. The company's main pharmaceutical products, raw materials, can be produced independently, which to some extent reduces product costs. Moreover, the company's products are mostly commonly used generic drugs with large usage, and enjoy price advantages under the same specifications and quality conditions. At the same time, the company is committed to developing different dosage forms and Route of administration, refining terminal medication methods, and increasing sales volume to maintain cost and price advantages.
Q: Please introduce the company's product positioning advantages.
Ren Bingjun: With a keen insight into the market, the company vigorously develops high-end small varieties of "marine green drugs" and "large disease drugs". Torasemi, one of the company's main products, is one of the fastest growing varieties of Diuretic in recent years. It has a wide range of indications. With the popularization of clinical application, the market is expected to expand in the future. One of the company's main products, Glucosamine hydrochloride, is safe and effective for the treatment of chronic arthritis without adding any chemical excipients and has good stability. The company is developing various new drugs and generic drugs such as anti-tumor, circulatory system, antibiotics, liver protection, depression treatment, etc., such as Sinacasse Hydrochloride, Duloxetine, Tibipenem Ester, Ornithine Aspartate, etc., which have undergone professional and comprehensive market research and have clear clinical efficacy. Once mass production, it can quickly move the hospital terminal market. The company exports raw materials and cooperates with high-end customers, with product quality higher than national pharmacopoeia standards and a higher premium compared to similar products. It has a high recognition among foreign customers, paving the way for the company to explore high-end markets.
Q: Please introduce the management advantages of the company.
Ren Bingjun: The company has an experienced, multidisciplinary, and highly cohesive expert management team. The management team not only has long-term rich industry accumulation and professional skills, but also has strong market sensitivity, advanced enterprise management and practical experience, clear strategic planning and development ideas. Over the years of production and operation, the company has established an effective management mechanism based on the requirements of modern enterprise systems and combined with the actual situation of the company, with clear division of labor and clear responsibilities, ensuring high decision-making efficiency and execution ability. We have established a series of management systems in procurement, production, sales, quality control, research and development, finance, and other aspects, and continuously optimized and improved them to achieve efficient cooperation among various departments and rapid response to market changes.
Q: Please introduce the company's main business.
Ke Zehui: The company is specialized in the R&D, production and sales of preparations and APIs. The therapeutic effects of its products cover arthritis, diuresis, sedation and brain tonic, anti-virus and anti-tumor, etc. The main products include Glucosamine hydrochloride APIs and preparations, tolasemide injection solutions and capsules, Gastrodin APIs, Ribavirin and Azathioprine APIs, etc. Among them, Glucosamine hydrochloride APIs and preparations, tolasemide preparations and Gastrodin APIs mainly focus on the domestic market, and Ribavirin and Azathioprine APIs are mainly used for export.
Q: Please introduce the proportion of the company's operating revenue.
Lv Sunzhan: The company's main business income is from the sales of raw materials, preparations, and intermediates, while other business income is from intermediate trade and waste sales. During the reporting period, the company's main business income accounted for a relatively high proportion of operating income, both of which were above 93%.
Q: Please introduce the technical level and industrial structure characteristics of the company's industry.
Ren Bingjun: The pharmaceutical industry has high requirements for technological level, and the production of drugs needs to comply with strict technical standards, with high requirements for production equipment and processes. At present, top pharmaceutical companies in North America, Western Europe, and other countries have advanced chemical synthesis processes and strong patent and technical advantages. The pharmaceutical industry in China has maintained a rapid development rate, but a large number of enterprises in the industry still face problems such as low quality control level, low added value of drugs, outdated process technology, and outdated production equipment. Chinese pharmaceutical companies are utilizing their own advantages to absorb and digest advanced process technologies, innovate process levels, and improve technical standards through independent research and development, cooperative production, joint venture factory construction, and imitation research.
However, due to the long-term dependence of pharmaceutical companies on imitation, insufficient innovation capabilities, non-standard research and development processes, and high financial pressure, the level of new drug research and development in China still lags behind that of developed countries. Most chemical synthetic drugs have weak innovation capabilities, with imitation being the main focus. At the same time, the traditional model of drug research and development still relies mainly on government directly affiliated scientific research institutions and higher education institutions. The research subjects are disconnected from the market, the basis for establishing problems is insufficient, and the transfer mechanism of achievements is not mature, which makes it difficult for new drug research and development to bring good economic benefits.
The problem of unreasonable structure in the pharmaceutical industry has existed for a long time, and the country has formulated various policies to accelerate industrial structure adjustment. From the perspective of product structure, promote the merger and reorganization of Essential medicines manufacturing enterprises, concentrate resources on advantageous enterprises, accelerate the industrialization of drugs with independent intellectual property rights, and cultivate new varieties of patent expired drugs with international competitive advantages; In terms of technical structure, improving industry standards and supporting the strong are beneficial to leading enterprises; From a regional structure perspective, form three comprehensive pharmaceutical production bases that meet international standards: the Yangtze River Delta, the Pearl River Delta, and the Bohai Rim. Develop professional production bases in the central and western regions to undertake industrial transfer; From the perspective of export structure, seize the opportunity of rapid growth in the global generic drug market, expand the export of formulations, and promote the internationalization and intensive development of the entire pharmaceutical industry.
Q: What impact does the downstream industry of the company have on this industry?
Ren Bingjun: For the raw material pharmaceutical industry, downstream pharmaceutical production enterprises directly affect the market demand for raw materials. For the pharmaceutical preparation industry, downstream are hospitals and pharmaceutical commercial terminals. In recent years, the country has issued a series of medical system reform measures, gradually improving the mechanism for forming drug prices, standardizing the order of drug circulation, reducing circulation links, actively and steadily promoting the reform of public hospitals, and actively exploring effective forms of separating medicine from profit and non-profit. These have effectively promoted the healthy and orderly development of the entire pharmaceutical market, and also promoted the steady growth of the size of the pharmaceutical product market.
Q: Please introduce the favorable factors that affect the development of the industry.
Ren Bingjun: The favorable factors include: (1) the overall growth of the pharmaceutical industry; (2) National policy support; (3) Strong support from national finance; (4) Opportunities brought by the expiration of patented drugs.
Q: Please introduce the unique business model of the pharmaceutical industry.
Ren Bingjun: The uniqueness of the business model in the pharmaceutical industry is mainly reflected in the admission conditions and sales models.
Pharmaceutical enterprises implement strict market access systems. Pharmaceutical production enterprises need to obtain drug production licenses, GMP certificates, drug registration approvals, and other licenses issued by the national food and drug regulatory department to carry out business activities. Pharmaceutical distribution enterprises need to obtain a GSP certificate issued by the National Food and Drug Administration.
According to the Opinions on Further Regulating the Centralized Procurement of Drugs in Medical Institutions (WGCF  No. 7), the drugs listed in the national Essential medicines list shall be subject to the national Essential medicines system. For drugs included in the centralized procurement catalog, open bidding, online bidding, centralized negotiation, and direct online procurement will be implemented. For other drugs, pharmaceutical manufacturers mainly sell them through a distribution model.
Q: Please introduce the company's development strategy.
Yan Yiyi: The company adheres to the policy of "quality first, user first", with innovation as the driving force, talent as the foundation, and market orientation. We adhere to both internal and external development, accelerate product upgrading and upgrading, promote the transformation of product structure from raw materials to formulations, and lead the transformation of products to marine products. We aim to build the company into a drug production base led by marine pharmaceuticals, biopharmaceuticals, and traditional Chinese medicine.
The company will take this issuance and listing as an opportunity to continuously improve its internal business management mechanism, accelerate the industrialization of innovative technological achievements by increasing investment and strengthening technological innovation capabilities, continuously improve the core competitiveness of the enterprise, and achieve the maximization of investor interests.
Q: What is your evaluation of the industry status and future development of Chengyi Pharmaceutical?
Dosa: As a recommendation institution, I fully recognize the industry position and market competitiveness of Chengyi Pharmaceutical. Through this public offering, Chengyi Pharmaceutical's leading position in the industry will be further consolidated, its core competitiveness will be further improved, its profitability will be further strengthened, and its future development will take it to a higher level.
Q: Please introduce the investment projects for this fundraising.
Yan Yiyi: The investment projects raised in this fundraising include: (1) the technical renovation project of the preparation building; (2) Marketing network construction project; (3) R&D center construction project.
Q: Please introduce the relationship between the raised funds investment project and the company's existing business.
Yan Yiyi: This fundraising investment project will greatly enhance the production capacity of the company's pharmaceutical products, improve the company's research and development and testing capabilities, and expand the coverage area of the company's marketing network.
Enhance the company's new drug research and development capabilities and experimental testing capabilities through the construction of research and development centers. Through the technical transformation project of the preparation building, the production capacity of the company's main products Glucosamine hydrochloride preparation and tolasemide preparation will be significantly improved. While expanding the production capacity of the original advantageous products, the company plans to produce some new preparation products with strong potential market demand, expand new dosage forms and specifications, which will help to further expand the market share of the existing products, and gradually form a multi-level and rich product structure of the company. Through marketing network construction projects, expand the company's existing marketing coverage area and deepen the marketing network layout in key areas. Through this fundraising investment project, the company's overall research and development, production, and sales capabilities will be improved, continuously promoting the company's sustained and stable development.
Q: Please introduce the construction content of the marketing network construction project.
Yan Yiyi: The construction content of the marketing network construction project includes: (1) establishing a new company Shanghai Marketing Center; (2) Build 2 new sales regions and 60 sales regional offices; (3) Building a marketing network information system; (4) Market and academic promotion; (5) Personnel training.
Q: Please introduce the background of the implementation of the marketing network construction project.
Yan Yiyi: The competition among pharmaceutical enterprises includes not only the quality of product efficacy and production processes, but also the construction of sales networks and the ability to control the end market. If pharmaceutical production enterprises do not have smooth sales channels and high control over the end market, it is difficult to have the ability to react quickly to market changes and deliver products to the end market. With the intensification of competition in the pharmaceutical market, domestic pharmaceutical companies must have the strength to compete with multinational pharmaceutical companies in terms of product quality and marketing.
The company has currently established a marketing network framework covering major provinces and cities across the country, but the depth and breadth of the company's marketing network coverage still need to be strengthened. It is necessary to improve marketing models, adjust marketing strategies, and further build a professional sales team to lay a solid foundation for the sustainable development of the company's sales capabilities.
Q: How does the company manage the raised funds?
Yan Yiyi: On September 15, 2014, the company held its first extraordinary shareholders' meeting in 2014 to review and approve the "Management System for Raised Funds", which stipulated the storage, use, and supervision of the raised funds. The company will strictly manage and use the raised funds in accordance with relevant regulations, and open a special account for the storage of the raised funds.
Q: Please introduce the construction plan for the R&D center construction project.
Yan Yiyi: The building area of the R&D center is 6200 square meters, with a total of six floors. Its functional distribution is as follows: the first floor: office center, conference center, product display center, and training technology exchange center; The second and third floors: Drug development Center; Fourth floor: Formulation Development Center; Layer 5: Microbial Testing Center; Sixth floor: Chemical Testing Center.
We plan to build facilities such as multi class drug development technology platforms, analysis and testing technology platforms, drug screening and safety evaluation technology platforms, formulation technology development platforms, new drug research and development information platforms, local area network management systems, office centers, product display centers, and academic exchange and training centers.
Text organization Ni Dan
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