Friday, March 29, 2024
 
Columnist
Martin Hennecke
 
SINOPHARM
HKEx Stock Code : 01099 
 
Corporate Profile
Principal business is pharmaceutical distribution. The Group provides distribution, logistics and other value-added services for domestic and international manufacturers and other suppliers of pharmaceutical and healthcare products. The Group is also engaged in the production and sale of pharmaceutical products, chemical reagents and laboratory supplies, and also the sale of medical equipment.

Business Review - For the year ended December 31, 2012

In 2012, the Group continued to tightly capture the dynamics in the development of the pharmaceutical market, and consistently accomplished the development missions of ¡§Maintaining Growth¡¨ and ¡§Improving Efficiency¡¨. Despite the ongoing increase of pressures in the market, the Group sought for development opportunities by integrating market elements, improving operations, enhancing business capabilities and innovations, so as to strengthen the capability of sustainable development, and achieved good results.

¡E Pharmaceutical distribution segment:

The Group provides pharmaceutical supply chain management services for the distribution of domestic and imported prescription drugs and over-the-counter medicines from manufacturers and suppliers to hospitals, other wholesalers, retail drug stores and other customers. During the Reporting Period, based on the distribution platform already established at the provincial level and closely adhering to the strategic deployment of ¡§One Province, One Region, One Subsidiary¡¨, the Group continued to expand its distribution network downstream. Such strategy deployment is in line with the direction of the new Healthcare Reform which is to give preference to the county-level hospitals in the government policies, as well as the objective of the reform which is to further enhance the capability of medical services at basic level, and has achieve desired effects. As at 31 December 2012, the Group enlarged its distribution network to 51 distribution centers (secondary distribution center) covering 30 provinces, municipalities and autonomous regions in China through acquisitions and establishments. In addition to continuously secure its leading position in first-tier cities, the Group had expanded its business in second and third-tier cities and achieved a total coverage of 180 cities. The distribution network of Sinopharm entirely covered all top 100 counties in China, which can provide products and services to customers throughout China in a timely and efficient manner.

The Group's direct customers included 10,351 hospitals (only referring to hospitals with ranking) (including 1,321 of the class-three hospitals which are the largest and most highlyranked hospitals) or approximately 76.66% of all hospitals (only referring to hospitals with ranking) in China (and approximately 94.42% of all the class-three hospitals). There were 78,238 primary health services institutions (small end-customers) and 54,452 retail pharmacies. There were also more than 6,581 other customers, such as pharmaceutical wholesale enterprises.

¡E Retail pharmacy segment:

The Group has a network of retail pharmacies that are either directly operated by the Group or through franchises in major cities throughout China. As at 31 December 2012, the number of retail pharmacies was 1,795 (only referring to those owned by Sinopharm Holding Guoda Drug Store Co., Ltd.), among which 1,554 were directly operated by the Group.

¡E Other business segment:

The Group's other business includes the production and sales of pharmaceuticals, chemical reagents and laboratory supplies.

¡E Strengthening the management of centralized procurement:

During the Reporting Period, the Group focused on the development of a global and centralized procurement platform, advanced the establishment of centralized procurement system at both State and provincial level. On the basis of consolidation of procurement experience of different regions, the process flow of centralized procurement was further upgraded, the reviewing and optimization of procurement catalogs and specifications was speed up, and the administration measures on the tendering procedures were also improved.

¡E Further amelioration of the logistics systems:

In 2012, the Group strengthened the construction of an integrated logistics platform, and achieved significant progresses in the construction of an integrated logistics delivery network covering the whole country. Official qualifications for logistics services by third party operator in pharmaceutical distribution had been obtained from the competent pharmaceutical regulatory authority. A chill chain network of Sinopharm logistics covering the country as a whole had been developed, which will capitalize on the resources of the chill chain and the unified operation standard.

¡EAccelerating the informatization construction and enhancing business management efficiency:

During the Reporting Period, the Group implemented the second phase of the ERP internally, which realized central management and control over the general ledger, fixed assets and cash; and continued to promote the integrated supply chain solution developed by the company itself to secondary and third-level subsidiaries, so as to increase operation efficiency and management capacities.

¡EInternational cooperation:

In 2012, the Group continued to actively participated in the communications with the elite companies in the pharmaceutical industry all over the world and had reached broad intentions of cooperation with a number of overseas enterprises. Meanwhile, the Group also accelerated the progress of various cooperation projects with those internationally well-known pharmaceutical companies.

Business Outlook - For the year ended December 31, 2012

The Group's objective is to consolidate its position as the leading distributor of, and supply chain services provider for, pharmaceutical and healthcare products in China. The Group shall assume the social responsibility of maintaining the healthy development of the pharmaceutical distribution market, ensure the accumulative and intensive effect after integration of the network, create harmonious and prosperous internal and external environment, raise the Group's competitiveness of scale through integration, create competitiveness of differentiation by changing business operation models, gain competiveness in bargaining through supply chain integration service, win competitiveness in cost from operation integrations, and fully explore the value-added development model created by the strategic synergy of logistics and distribution business. The Group will speed up the construction of the logistic hub and improve its centralized purchasing and multi-storage operation system, establish a multi-purpose logistic delivery network adapting to the full coverage of essential drugs as introduced by the Healthcare Reform, and accelerate the construction of the biological cold chain distribution network pattern.

Source: Sinopharm Group (01099) Annual Results Announcement
Chairman She Lulin Issued Capital (shares) 994M
Par Value RMB 1 Market Capitalisation (HKD) 21,073M
 
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