บท 1332: Chapter 1332: It is bound to take off
In terms of the global market, the share of traditional Chinese medicine is ultimately only a small part.
The existence of Taiji Pharmaceutical is more of a mission to strengthen traditional Chinese medicine.
If Jiuding Pharmaceutical Group is to become a top pharmaceutical company in the world, it will still have to be supported by Western medicine, which is currently the only medicine that can sell well worldwide.
After understanding the situation at Taiji Pharmaceutical, Xia Yu personally went to Aomei Pharmaceutical Factory.
Aomei Pharmaceutical is currently the largest western medicine pharmaceutical company in Xiangjiang, and after being acquired by Xia Yu, it has become even more dominant, leaving behind Xiangjiang pharmaceutical companies such as Wanhui Pharmaceutical, Jingshi Pharmaceutical, Liwanshan Pharmaceutical, and Yonghong Pharmaceutical.
In 1983, Aomei Pharmaceutical completely built Xiangjiang's first modern GMP pharmaceutical factory, with all the equipment being the most advanced of its kind.
The factory is located in the Yuen Long Science and Technology Industrial Park, so Aomei Pharmaceutical also moved its headquarters into the Yuen Long Science and Technology Industrial Park.
The current president of Aomei Pharmaceutical is Chen Zeyang, a Chinese-American and PhD in biochemistry, an elite executive recruited from Merck & Co. by Korn Ferry.
'Chairman, welcome!'
Chen Zeyang wears a pair of glasses, a 3:7 haircut, and most importantly, exudes an air of scholarly temperament.
'Well, first show me the company's financial report for the first half of the year, and then take a walk around the factory.'
Xia Yu nodded slightly, speaking concisely and clearly to clarify his intentions.
'Okay, Chairman, please follow me.'
After saying this, Chen Zeyang led Xia Yu to his office, handed Xia Yu the financial report for the first half of the year, and then began to make tea.
Xia Yu didn't waste any time and started browsing directly.
The financial report of Aomei Pharmaceutical Factory was very detailed, with tables showing the sales volume and sales amount of specific products.
The company's products are very diverse, including solid preparations such as tablets and capsules; liquid preparations such as solutions, dry suspensions and injections; and semi-solid preparations such as creams, ointments, ointments and soft capsules.
These drugs are also divided into patented drugs (originally researched drugs) and generic drugs.
Patent drugs include Oteirin, Otofen, Onen, Olo, Oufqing, Oting, Aoqing, etc., and generic drugs include penicillins, cephalosporins and other drugs.
In the first half of the year, the company's total revenue was 825 million Hong Kong dollars, and R&D investment was 255 million Hong Kong dollars, accounting for a high proportion of 30.9% of turnover. Net profit was 176 million Hong Kong dollars, and net profit margin was 21.3%.
Among these, the revenue of patented drugs was HK$537 million, and the R&D investment was HK$147 million, accounting for 27.4% of the revenue. The net profit was HK$137 million, and the net profit margin was 25.5%.
As for generic drugs, the revenue was HK$288 million, and the R&D investment was HK$108 million, accounting for 37.5% of the revenue. The net profit was HK$39 million, and the net profit margin was 13.5%.
These figures clearly show Xia Yu the current situation of Aomei Pharmaceutical.
R&D investment of HK$255 million accounts for 30.9% of the company's turnover. In fact, after deducting the net profit and taxes paid from the turnover, it accounts for 52.68% of the company's total operating costs!
This proportion is not low at all!
Aomei Pharmaceutical's ability to leave other pharmaceutical companies behind is inseparable from its generous investment in R&D.
It is also fortunate that the results of research and development have been achieved, and there are huge sales channels under the consortium, so there is a net profit of 176 million Hong Kong dollars.
However, a net profit of 21.3% is not considered too high in the global pharmaceutical sector, just at the upper-middle level.
Xia Yu knew full well that some of the pharmaceutical companies under his Polaris Capital had net profit margins of as high as 40–50% after they had produced results!
After reading the financial report, Xia Yu already had a good idea of the strengths and weaknesses of Aomei Pharmaceutical.
However, he did not point them out immediately. After putting the financial report down and having another sip of tea, he asked Chen Zeyang to show him around the factory and research department.
In particular, he listened patiently to the researchers in the research department, which was the most important department.
Fortunately, since Xia Yu took over Aomei Pharmaceutical Factory, he, the biggest real estate tycoon in Hong Kong, has not treated his company's talents badly in terms of housing. There is no shortage of staff quarters, and employees who have made outstanding contributions can obtain the best grade of quarters or even be directly rewarded with housing.
With no worries about clothing, food, housing or transportation, the researchers can devote themselves fully to research and development.
However, after visiting the research department, Xia Yu discovered another problem that seemed very serious to him.
That was the lack of talent and insufficient research projects!
Considering the R&D investment in the first half of the year, it was only equivalent to a little over 41 million US dollars.
With this level of investment, the company could indeed be proud among its peers in Xiangjiang, but on a global scale, it was indeed not impressive and was just a small player!
Those giants, however, had an annual R&D cost of 6 to 7 billion US dollars, and first-class pharmaceutical companies had an R&D investment of 2 to 3 billion US dollars.
According to the current trend, if Xia Yu does not intervene, Aomei Pharmaceutical will not even reach 100 million US dollars a year.
Without R&D investment, there will be no output. If R&D cannot keep up, and if there are no blockbuster drugs, the company will only be left further and further behind by the giants.
This is the current situation in the pharmaceutical industry, and the threshold is too high!
Not all pharmaceutical companies are like Genentech, a company under the Polar Star Capital, which can develop the little blue pill that sells well all over the world.
After some visits, Xia Yu asked Chen Zeyang to explain the development constraints faced by Aomei Pharmaceutical and his ideas.
Chen Zeyang was indeed well-informed.
'Chairman, as you can see, in terms of drug research and development, the research and development investment cost accounts for more than half of the company's total operating cost. In fact, if we break it down, the research and development investment in patented drugs is much lower than that in generic drugs. This is because I believe that increasing the proportion of revenue from generic drugs can enhance the company's ability to withstand risks.'
'Although 108 million Hong Kong dollars were invested in the first half of the year, these are investments that have not yet yielded results. In a few years' time, the revenue from the generic drug business will really explode. We are still in the early investment period.'
'The reason why the relative investment in patented drug research and development is not as high as that in generic drugs is mainly due to talent constraints.'
'Although there are a certain number of pharmaceutical research and development talents in Xiangjiang, the proportion of such talents is much lower than that in European and American countries. Although universities have increased their efforts in training talents in related majors, such talents have not yet been cultivated.'
'The lack of high-end talents has led to higher risks in the research and development of patented drugs, which is more difficult, than that of European and American pharmaceutical companies. This is also the key reason why I have increased research and development efforts in the generic drug business, which is less difficult.'
Xia Yu nodded slightly, agreeing with his approach.
In the future, generic drugs will occupy an increasingly large market share, while patented drugs will account for a smaller proportion. The situation of patented drugs will also worsen over time.
In the future, the market share of generic drugs in the United States will be 50-60%, and in the future mainland China, the market share of generic drugs will be as high as 80-90%, and at its peak, it will be as high as 95%!
The proportion of generic drugs in the island country will also account for more than 80%!
And now, in the first half of 1984, the revenue from generic drugs at Aomei Pharmaceutical accounted for 34.9% of the company's total revenue!
This proportion is low.
It can only be said that before Xia Yu's acquisition of Aomei Pharmaceutical, the operator was too aggressive in his gambling and had more motivation for scientific research, always fighting against patented drugs.
However, it was precisely because of this that Aomei Pharmaceutical's profits before the acquisition were relatively low, making Xia Yu's acquisition cost lower, and it also accumulated more pharmaceutical technology, which enabled it to produce results so quickly after taking over.
Otherwise, according to the research and development of a new drug, it generally takes about ten years, and it is only a minority of cases that it takes only a few years with good luck.
'Generics require greater investment. Do you think there is any way to give Xiangjiang's generic drug industry a competitive edge, so that it is not limited to our company alone?'
Xia Yu asked softly, wanting to hear the professional's opinion.
He already had an idea about the direction of reform for the entire Xiangjiang pharmaceutical industry, but he still needed to add a few words about generic drugs.
The more developed the generic drug industry, the lower the cost of drugs, and the cheaper the drugs will be for patients. This is a benefit to humanity.
And considering the situation of future generations on the mainland, a more developed generic drug industry is indeed needed to support it.
Aomei Pharmaceutical is taking the lead, and in the future, it will be able to get a bigger slice of the mainland's tens of billions of dollars-level generic drug market.
Chen Zeyang spoke with confidence, 'Chairman, I personally don't have a good idea in this regard, but at the end of last year, a landmark event occurred in the American pharmaceutical industry. It wasn't until the first half of this year that the United States proposed the Hatch-Waxman Act, also known as the Drug Price Competition and Patent Term Restoration Act, which gave me a big boost.'
'Oh?'
'Tell me more.'
Xia Yu looked at Chen Zeyang with interest.
Chen Zeyang paused for a moment, composed his thoughts, and then began to speak: 'This bill has three core points. One is to extend the patent period for patented drugs to 20 years, protect the interests of original research pharmaceutical companies, and stabilise the enthusiasm of original research pharmaceutical companies for research on new drugs.
'The second point is to allow generic drug companies to conduct generic drug research before the patent period of the drug expires, and at the same time give the first company to launch a generic drug an exclusive market period of 180 days. This allows generic drug companies to earn five to ten times the revenue during the exclusive period, so that generic drug companies can recover their costs.'
'Third, the abbreviated pre-market procedure for generic drugs does not require the same approval process as for original drugs. Instead, it only requires the provision of FDA data to prove that the generic drug is equivalent to the reference drug in terms of efficacy, and the provision of data to prove the bioequivalence between the generic drug and the reference drug.
'This bill balances the interests of patented drug and generic drug companies, providing incentives for both sectors, increasing market competition, and balancing the interests of patients and drug companies. In the long run, it will enable patients to enjoy low-priced generic drugs earlier, saving costs.'
'However, this bill has just been implemented in the United States, and other countries are still waiting to see the results. The UK is currently indifferent.'
'If Hong Kong can introduce a similar bill as soon as possible, the environment for the pharmaceutical industry in Hong Kong will be greatly improved, which will be of great benefit to our company. It can extend the patent period of our company's patented drugs and also save the time for generic drugs to be launched.'
'Okay, I got it.'
'It doesn't matter whether the UK implements it or not, Hong Kong also has the right to enact its own legislation,'
Xia Yu said with a light smile.
Chen Zeyang understood Xia Yu's subtext, and he couldn't help but light up with expectation.
'Okay, Zeyang, I'll give you the next order.'
'Starting today, until I order a halt, the company only needs to maintain normal operations without incurring losses. The company does not need extra profits, and all of this money will be invested in research and development and mergers and acquisitions.'
With a single, light sentence, Xia Yu took the 176 million Hong Kong dollars in profits from Aomei Pharmaceutical in the first half of the year, and almost the same amount in the second half, adding up to more than 350 million Hong Kong dollars, and invested it all in pharmaceutical research and development and mergers and acquisitions.
Chen Zeyang's spirits lifted, and his voice trembled as he responded loudly, 'Understood!'
Xia Yu then gave some further instructions:
'Also, there will be some changes in the pharmaceutical industry in Hong Kong in the near future, and you will need to provide some assistance. Someone will talk to you about the details.'
'In terms of drug research and development, you will be given a list of drugs that you should not intervene in research and development. I also have pharmaceutical companies in other places, so there should be no unnecessary competition.'
This refers to Genentech, Amgen, and Abbott in the United States, as well as Biogen in Geneva, which is invested by the Bright Foundation.
The global pharmaceutical market is so big and full of giants, there is no need for internal conflict. Instead, there should be a clear division of labour and unity to compete with other pharmaceutical companies.
'Chairman, I'll do whatever you say!'
...
After leaving Aomei Pharmaceuticals, Xia Yu was ready to take action in the pharmaceutical industry and the healthcare industry in Hong Kong.
The first step was internal restructuring.
His first big move was to rename Jiuding Pharmaceutical Group as Jiuding Healthcare Group, which was in line with the development strategy of Hong Kong.
The next big move was to spin off Jiuding Fitness, one of the pillars of Jiuding Retail Group, and make it a first-tier subsidiary of Jiuding Healthcare Group.
Jiuding Jianmei has two brands under its umbrella: Watsons and Mannings, which are ranked first and second in the Hong Kong and Southeast Asian markets respectively, with 525 and 481 stores respectively.
Jiuding Jianmei has more than 1,000 stores, and it is precisely because of its large overseas retail outlets that the sales of Aomei Pharmaceutical and Taiji Pharmaceutical are so high.
Now that Jiuding Jianmei has been incorporated into Jiuding Healthcare Group, these companies have become brothers from the same mother, and the partnership will naturally deepen, which is beneficial to all companies.
Then, Xia Yu ordered Jiuding Healthcare Group to establish Jiuding Medical Devices, which manufactures medical and healthcare equipment.
Nanshan Health Technology was established to manufacture sports equipment for leisure and fitness, including exercise bikes, treadmills, etc.
The Love Health Management Consulting Company was established as a third-party service provider to provide systematic and professional health management services to medical insurance institutions or individuals directly, as well as health consulting services.
The Joincare Health Company was established to engage in the production and operation of health care products and nutritious food.
Finally, the Ailv Products Company was established to produce and sell adult products.
With this set of actions, the JD Group will comprehensively cover all segments of the entire health industry.
Next, the JD Group will become the leader, leading the vigorous development of the health industry in Xiangjiang.
And in order to provide a good environment for the growth of the healthcare industry in Xiangjiang,
Xia Yu issued an order to Fok Kin-ning, asking the think tank to come up with a plan. The plan would include two aspects.
One aspect was the US Drug Price Competition and Patent Term Restoration Act mentioned by Chen Zeyang, and the other was to make a similar or identical bill.
The other aspect was a policy that no country in the world had implemented yet, which was the tax credit for pharmaceutical research and development. Pharmaceutical companies could deduct the research and development costs from their business tax, so as to encourage their enthusiasm for research and development.
Hong Kong cannot be like India, which does not recognise pharmaceutical patents, and does not care if it is blocked by the WTO, and did not intend to enter the international market in the first place.
But Hong Kong wants to become an international city, so it definitely cannot do that.
If Hong Kong passes these two bills for the medical industry, the costs of pharmaceutical companies in Hong Kong will be greatly reduced, operating profits will increase, and the competitiveness of the industry on a global scale will be greatly enhanced.
This environment will also attract major pharmaceutical companies from around the world to invest in factories in Hong Kong, and even relocate their headquarters here.
For industry veterans who are just starting out and preparing to set up pharmaceutical companies, Hong Kong will be their top consideration, which is very attractive to pharmaceutical talent.
But no matter what the future holds, Xia Yu's Jiuding Great Health Group will at least enjoy the most policy dividends at the beginning.
As long as the bill is passed and implemented, Hong Kong's great health industry will surely take off.
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