Thursday, April 15, 2021
Martin Hennecke
HKEx Stock Code : 00963 
Corporate Profile
Principally engaging in the manufacture and sale of bio-chemical products.

Business Review - For the year ended December 31, 2012

The Group is principally engaged in the production and sale of various Hyaluronic Acid (¡§HA¡¨) raw materials, and focuses on developing downstream HA end products. The Group has successfully developed new HA end products such as Hyaluronan Soft Tissue Filling Gel (product name ¡§BioHaylux¡¨) and Medical Sodium Hyaluronate Gel for ophthalmologic use (product name ¡u´¹µø¡v), of which BioHyalux has been launched in the market.

Global cosmetic treatment industry maintained a strong momentum of growth in recent years. According to ¡mThe Report of Analysis for PRC cosmetic industry, market analysis and HA injection filler products¡n issued by the PRC News International Information Center, in the year 2010, the total cost of cosmetic treatment was up to US$10.677 billion, of which the cost of injection cosmetic treatment was up to US$1.877 billion, representing more than 17% of the total cost. Such proportion was more than 20% in 2011 and it was expected to be steadily increased in 2012. In 2011, HA accounted for 68.9% under the non-surgical soft tissue filler products distribution in the United States of America. From the data of 2010 global cosmetic industry statistics released in 2011 by the International Association of Aesthetic Plastic Surgery, the PRC ranked the third for cosmetic treatment amongst the top 25 countries, and HA dermal filler ranked the second in use amongst non-surgical cosmetic treatment products. But in consideration of the national population, the PRC ranked the bottom two in terms of the number of people using HA dermal filler per every 10,000 people amongst the top 25 countries. In light of the above, there is good prospect of HA dermal filler products in the PRC market. Especially in recent years, under the favorable macroeconomic regulation and measures, the market for domestic demand gradually enlarged and the level of consumption for general public increased, therefore more customers call for safe and effective cosmetic treatment. With the demand from the market coupled with the lack of officially approved products in the market, the Group became the first corporation which has obtained the PRC Registration Certificate for Medical Device for Hyaluronan Soft Tissue Filling Gel (¡§BioHyalux¡¨) to seize market opportunities.

In 2012, the domestic pharmaceutical industry maintained a high growth rate and the PRC government encouraged the acceleration of the restructuring of the pharmaceutical industry and the integration of resources, which promoted a standard for the development of pharmaceutical corporations. The development of international economy was still restrained by the European financial crisis, together with the increasing competition within the industry, there was a price threat within the HA raw materials market. The Group timely used the favourable development environment in domestic market by strengthening the promotion on the applications of HA related products in domestic medical industry and formulating active marketing strategies in order to expand its sales network. By virtue of the consistently excellent product quality and brand image, together with effective marketing strategies implemented, the Group continued to record steady business growth and operating results in 2012.

The Group's annual turnover amounted to RMB274,966,000 in 2012, representing an increase of approximately 33.4% as compared to 2011. The Group's gross profits increased by approximately 26.3% from approximately RMB150,890,000 in 2011 to approximately RMB190,649,000 in 2012 and the profits attributable to equity shareholders of the Company increased by approximately 22.9% from approximately RMB72,628,000 in 2011 to approximately RMB89,272,000 in 2012. Subject to the approval by the shareholders of the Company (the ¡§Shareholders¡¨) at the forthcoming annual general meeting, the Directors recommended the payment of a final dividend of HKD2 cents per share for the year ended 31 December 2012 (2011: HKD1.1 cents per share) to the Shareholders whose names appear on the register of members of the Company on 27 May 2013, amounting to approximately HKD6,240,000 in total.

HA raw materials business ¡V Marketing reinforcement, expansion of brand influence and enhancing profitability

In 2012, the Group continued to increase the market awareness and promotion effect of HA raw materials by strengthening the level of promotion for both domestic and overseas market. The Group continued to enhance the relationship and cooperation with many domestic and overseas cosmetics branded customers so as to stimulate the sales volume through positive business demonstration effect.

For domestic sales strategy, the Group strengthened the region control through large region integration, and at the same time, set up a subsidiary in the United States of America and further expand the international market. Through the development of solid relationship with distributors and built-up of management and sales channel, the Group achieved progress in sales in domestic, North America and Asia Pacific markets. Besides, the Group promoted the product replacement for medical HA customers and enhanced the marketing for new products. The Group further developed both HA health and ordinary food customers in order to seek potential new source of profit growth. While maintaining continuous increase in the market share of cosmetic grade products and expanding the food grade HA international market, the Group focused on the sales of injection grade HA with higher value-added potential so as to strengthen the overall profit level.

HA end products business ¡V Brand image establishment, intensive marketing and sales promotion

With the advantage of continuous technological innovation for HA products and stable HA raw materials quality, the Group successfully launched the end product BioHyalux in the market in July 2012. Through the in-depth analysis of market research and competing products before and after the product launch, BioHylaux established the brand positioning and brand image in the market. For the marketing strategy in 2012, apart from the large scale marketing activities held in Beijing, the Group participated in various kinds of domestic and international exhibitions and product launch conference in regions. In 2012, the Group arranged to hold numerous professional symposium in many regions such as Beijing and Shanghai. Such series of activities would expand the market awareness and enhance the professional brand image and reputation of the Group which would promote the sales of the products.

For the sales strategy, the Group focused on the characteristics of customers in each region for reasonable allocation of resources and design of sales distribution. Besides, the Group actively set up the sales team to provide professional and personalized service to end customers. At the same time, the Group is cautious in the selection of quality dealers which are essential for the Group to strive for larger market share.

Up to the end of 2012, the Group achieved sales in 22 provinces and 48 cities in the PRC.

As the global professional research and development (¡§R&D¡¨) and production base for HA, the Group focused on training for products. With the formation of a wellknown expert team, the Group held seminars and meetings with counselors and injection doctors to introduce specific product knowledge and demonstrate the injection techniques. This helped injection doctors and medical institutions for a comprehensive understanding on the characteristics of our products and established a professional brand image in the industry.

R&D and qualifications ¡V Technical improvement, development of new products and enhancement of overall qualification

In 2012, the Group adhered to the development strategy of ¡§aiming our HA research and development techniques at world leading level, with the advantage of HA raw materials production, enriching the HA production line and developing end products so as to enhance the brand value and development¡¨. In view of the enhancement of the technical content and quality of HA products, the optimization of enzymatic product process of HA significantly reduced the production cycle and enhanced the product purity in comparison to the chemical degradation method. In view of the new products development, the improvement of HA production process greatly increased the production efficiency and improved the competitiveness of products.

The Group devoted its effort to develop future new markets and new profit sources, not only by studies on HA raw materials and related materials, but also the integrated system of end products. BioHaylux and ¡u´¹µø¡v obtained the PRC Medical Device Registration Certificate in July 2012 and September 2012 respectively. Products research projects on beauty filler products in relation to different injection parts and levels were in smooth progress.

The Group devoted to continue the process of products registration and qualifications and achieved satisfactory results. Eye drop grade HA raw materials obtained the PRC Good Manufacturing Practice (¡§GMP¡¨) certificate and passed the on-site inspection of the United States Food and Drug Administration (¡§FDA¡¨). Two more specifications of medical HA raw materials of the Group had obtained the United States DMF registration number.

Formation of a new company, expediting the construction of the new factory and enhancement of the capacity of development

To cope with the need for the Group's rapid development and enhancement of the development capacity, the Group had set up Bloomage Freda Biopharm USA Inc., a wholly-owned subsidiary of the Group, on 17 September 2012 in order to expand the overseas sales.

The land located in Jinan City, Shandong Province, the PRC was purchased by the Group for the development of a biological industrial park. The construction and equipment procurement of a new production plant on the land have started and it is expected that its production will commence by the end of 2013. Details of the acquisition of land use rights and construction of production base are set out in the announcements of the Company dated 28 June 2012 and 27 September 2012 respectively. The new production plant will further expand the production capacity and enhance production technique in order to strengthen the Group's competitive advantage and economies of scale as a whole.

Business Outlook - For the year ended December 31, 2012

The Group aims at becoming a leading international HA raw materials manufacturer and a domestic high quality HA end products leader by making full use of the advantages in R&D capabilities, product quality and volume.

Promoting comprehensive market strategy and maintaining steady growth on HA raw materials

Following on the development of competitive environment in HA industry, the Group will strengthen its leading position in HA raw materials industry and differentiate with competitors through high-end, professional and unified market promotion. The Group will actively enhance the marketing planning and leading capabilities and strengthen the research on HA related products. This will help to search for possible opportunities of upstream and downstream business cooperation and expand feasible synergistic development strategy in order to increase the Group's competitiveness.

The Group will strive to maintain steady sales growth for HA raw materials and continue the advantageous position of cosmetic grade HA in both domestic and overseas markets. Through the strengthening of formula guidance on suppliers, development of various HA applications on cosmetics and food products, and indepth promotion of exclusive technical products miniHA and HA oligosaccharide, the Group would enhance its market share. In terms of strategy, the Group continues to focus on developing branded customers with large consuming power, stable demand and large market influence. The Group will strengthen the research of different regions with proper supervision and guidance on dealers and strive to develop new customers. With the advantage of certification, the Group will vigorously promote medical HA raw materials. The Group will also continue to explore the development in potential emerging markets so as to seize the opportunity of new sales growth.

Taking advantage of favourable environment to expedite the sales of BioHaylux

In 2013, the Group will further promote the domestic sales of BioHaylux. By taking the timely advantage of fewer competitors in the market, the Group aims to seize domestic market share by cultivating branded loyal customers to consolidate the customer base and expanding international market at the same time. Apart from the BioHyalux that has been launched in the market, through the established sales channels and platforms, the Group will extend its end products to cosmetics and health food industries when appropriate time comes.

Focus on R&D and extension of new products series

In 2013, the Group's research centre will form a comprehensively structural system with raw material products, end products and registration process by project management. In terms of technical improvement on existing products, the Group will continuously improve the quality of products, improve the production techniques and maintain the advantage of production techniques. For the development of new products, the Group will expedite the research and registration of beauty filler products and enrich filler products varieties. At the same time, it will speed up the registration of HA injection (for orthopedics use) and continue the development of other HA related products, extend product lines and enhance the new products technical reserve.

Comprehensive team building for rapid development of human resources reserve

For team building, the Group continues to focus on the recruitment of experienced marketing and sales personnel in order to develop a comprehensive sales system. In view of the changes and development of the market, the Group will adjust and improve the sales strategy and maintain the competitive advantage of the products. In 2013, the Group will recruit more R&D high-end professionals to expand the R&D team and further increase the R&D effort so as to maintain a higher level of production technique in the industry. The Group will continue to train up experienced personnel for providing quality human resources support for future business expansion.

Source: Bloomage BioTech (00963) Annual Results Announcement
Chairman Zhao Yan Issued Capital (shares) 322M
Par Value HKD 0.01 Market Capitalisation (HKD) 3,503M
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