Original Title: Announcement of Centralized Shareholding Reduction “Bring Bad” Formation, Many Chinese Medicine Companies’ Stock Prices Dump
Our reporter Zhang Min
In the four trading days since 2022, Chinese medicine has become the most eye-catching sector: the Chinese medicine index has continued to rise, and many listed companies in the industry have issued announcements on stock price changes.
On January 7, market enthusiasm plummeted: 25 listed Chinese medicine companies fell more than 5%. Among them, Hongri Pharmaceutical, Xinguang Pharmaceutical, Zuoli Pharmaceutical, Shanghai Kaibao fell more than 10%, Jinghua Pharmaceutical, Dragon Tianjin Pharmaceuticals, Hansen Pharmaceuticals, etc. fell by the limit, Zixin Pharmaceuticals, Wohua Pharmaceuticals, etc. fell more than 9%.
Hu Qimu, the chief researcher of the China Steel Economic Research Institute, told the “Securities Daily” reporter that from the perspective of valuation, the Chinese medicine sector is at a historically low level, and the current profitability of pharmaceutical companies is improving, so the Chinese medicine sector has a need for valuation restoration. .
In an interview with a reporter from the Securities Daily, Shi Lichen, an expert on pharmaceutical strategic planning, said that the recent rise in the stock prices of listed companies in the Chinese medicine industry is affected by multiple factors. Increasing market demand for Chinese medicinal materials in winter, coupled with rising prices of Chinese medicinal materials, triggered this wave of quotations. But this round of market is not expected to last long.
Company shareholders take the opportunity to reduce their holdings
The collective price increase of Chinese medicinal materials has aroused continuous market attention and has also become the fuse of the stock price turbulence of listed companies in the pharmaceutical industry.
According to data from the Chinese Medicine World Net, among the 110 commonly used varieties with an increase of more than 10% in 2021, as many as 21 have an increase of more than 100%, and 25 and 30 have an increase of 50% to 100%. The prices of 33 items between 50% and 50%, 31 items between 10% and 30%, and more than 35 varieties hit a record high.
The price increase of Chinese medicinal materials has also triggered a collective price increase by downstream manufacturers. Many Chinese medicine companies including Tongrentang, China Resources Sanjiu, Taiji Group and other Chinese medicine companies have issued product price increase notices.
However, a relevant person in charge of a listed Chinese medicine company told this reporter that “the types of Chinese medicine materials involved are more diverse. Some plant Chinese medicinal materials have increased prices significantly, while some mineral Chinese medicines have no obvious intention to increase prices.”
Just as the prices of Chinese medicinal materials have risen and downstream manufacturers have raised their prices, the continued downturn in listed Chinese medicinal companies has ushered in the “spring” of the secondary market. Longjin Pharmaceutical, Longshen Rongfa, Jinghua Pharmaceutical, Jianmin Group, etc. The share price of a listed company doubled. As the stock price continues to heat up, shareholders of a number of listed companies, including Longjin Pharmaceutical, have thrown out plans to reduce their holdings, and this has also “pulled down” the stock price of the listed company.
Longjin Pharmaceutical issued an announcement on the evening of January 6, stating that the controlling shareholder Kunming Qunxing Investment Co., Ltd. (hereinafter referred to as “Qunxing Investment”) plans to conduct large-scale transactions and centralized bidding from January 28, 2022 to July 27, 2022. The total reduction of holdings shall not exceed 12.015 million shares (accounting for 3.00% of the company’s total share capital). The actual controller of the company Fan Xianru intends to reduce his holdings of shares acquired through centralized bidding transactions to no more than about 775,000 shares, accounting for 0.19% of the company’s total share capital.
The stock price of Longjin Pharmaceutical has continued to rise since December 21, 2021, from 7.53 yuan per share to the highest price of 21.2 yuan per share on January 6, 2022, with a cumulative increase of over 180%. The continued rise in the stock price means that the total market value of the shares of the listed company held by the controlling shareholder and actual controller of Longjin Pharmaceutical has continued to increase. The total number of shares that the controlling shareholder Qunxing Investment and the actual controller Fan Xianru intends to reduce has been less than one month. The total internal market value increased by more than 160 million yuan.
On January 7, when the shareholder reduction plan was announced, Longjin Pharmaceutical’s stock price fell to a limit and finally closed at 17.62 yuan per share.
On January 4, Jinghua Pharmaceutical issued an announcement stating that on December 31, 2021, the company received the “Reduction Plan” from the company’s director and general manager Zhou Yunzhong. Zhou Yunzhong currently holds approximately 3.865 million shares of the company, accounting for the company’s total share capital. 0.46%, it plans to reduce the company’s holdings by no more than 96.6 shares, accounting for 0.12% of the company’s total share capital, from 15 trading days from the date of disclosure of this announcement to July 25, 2022 through centralized auction trading on the stock exchange. From January 6th to January 7th, Jinghua Pharmaceutical has dropped its limit for 2 consecutive trading days.
In addition, China Traditional Chinese Medicine, a Hong Kong-listed company whose share price has continued to rise in recent days, has also fallen due to cash out by shareholders.
Innovation transformed into a new focus
The development of the pharmaceutical industry is greatly affected by policies. If the price increase of Chinese medicinal materials is driven by the supply side of the market, then changes from the policy level will affect the direction of the transformation of the Chinese medicine industry.
At the moment, one of the key words in the Chinese medicine industry is “centralized procurement”. On January 6, the news released by the Shandong Provincial Medical Security Bureau in the evening showed that the national inter-provincial Chinese medicine (material) procurement alliance was launched for the first time in Shandong. The alliance was initiated and formed by the Shandong Provincial Medical Insurance Bureau and 11 provinces (autonomous regions and municipalities) across the country. The first batch of participating regions covered more than 9,500 medical institutions in 86 cities. The amount exceeds 10 billion yuan.
Prior to this, the purchase of Chinese patent medicines in quantities has been implemented. On the evening of December 21, 2021, the Hubei Provincial Pharmaceutical Price and Bidding Purchasing Management Service Network released the results of the Central Procurement of Chinese Patent Medicine Interprovincial Alliance. A total of 193 enterprises in the centralized procurement of Chinese patent medicines passed the review and participated in the election. 111 products were selected, with a winning rate of 62%, an average drop of 42.27%, and a maximum drop of 82.63%.
“Bulk purchases will definitely have an impact on product prices, but with reference to bulk purchases of proprietary Chinese medicines, market expectations are more optimistic.” An analyst who declined to be named told reporters.
With reference to chemical medicines with volume purchases, while reducing unreasonable prices through centralized procurement, how traditional Chinese medicines are inherited and innovatively developed has become another focus of attention within the current market and the industry.
On December 30, 2021, the National Medical Security Administration and the State Administration of Traditional Chinese Medicine issued the “Guiding Opinions on Medical Insurance Supporting the Inheritance and Innovative Development of Traditional Chinese Medicine”, accelerating the implementation of policies to promote the innovative development of traditional Chinese medicine.
The “Opinions” pointed out that eligible TCM institutions should be included in the designated medical insurance; to strengthen the management of the price of TCM services; to include appropriate TCM and TCM medical service items into the scope of medical insurance payment; to improve the payment policy suitable for the characteristics of TCM, etc.; TCM Medical service items may not be paid according to the diagnosis-related group (DRG) for the time being; they are sold strictly according to the actual purchase price plus no more than 25%, and so on.
Industry insiders believe that, on the whole, the price cuts for centralized procurement of Chinese patent medicines are relatively mild, leaving room for imagination for the development of the industry. The continuous implementation of policies to support the innovation and development of traditional Chinese medicine is bound to promote the development of the industry. But it should be noted that traditional Chinese medicine must be innovative and transformed, otherwise the living space will be affected.