Respond to "weapons" purchased in volume - API-plus preparations.

On September 21, Hepple announced that the FDA had approved its Sun Company Tiandao Pharmaceuticals to become a U.S. drug and API supplier to the licensed holders of sodium ininoparin preparations, marking a further improvement of Heppry's strategy for the integration of API preparations.
with the continuous progress of volume procurement, generic drug prices opened the "falling and falling" road, which has caused a huge impact on the revenue of traditional preparation companies.
face of falling revenues, companies are focusing on costs and taking open source savings, including pay cuts and cost cuts.
addition, as the cost of Raw Pharmaceuticals (API) has risen in recent years, some companies have begun to plan for the integration of "API plus preparations" to further reduce production costs.
this article focuses on the background of the integrated development of "API-preparations" and the risks that enterprises need to be alert to.
the essence of the "API-preparation" integrated development path is the extension of the industrial chain.
Industry chain extension usually includes upstream extension and downstream depth, upstream extension means that the main body of enterprises as preparation production enterprises, through mergers and acquisitions, investment and construction of factories and other ways to expand to the upstream api industry chain, thereby reducing upstream costs, on behalf of enterprises including Hengrui Pharmaceuticals, Colum Pharmaceuticals and so on.
to the downstream depth means that the main body of enterprises for API production enterprises, enterprises gradually to the field of preparation development, enhance core competitiveness, on behalf of enterprises including Pro Pharmaceuticals, Novarce, Huahai Pharmaceuticals and so on.
background of the integrated development of "API-preparation" enterprise "API-preparation" integration development strategy has a long history.
in the early years of the strategic transformation of pharmaceutical enterprises, a large number of API enterprises to the mid-range expansion, from the low-end API field to the field of preparations.
and the preparation enterprises to the upstream extension of fewer cases, the core reason is that the early low-end API prices are low, the enterprise upward extension power is insufficient.
2012, Haizheng Pharmaceuticals formed Haizheng Pfizer with Pfizer, which is responsible for supplying API and Pfizer is responsible for providing production technology.
in this mode, Hai is successfully transforming from an API export enterprise into a preparation-based enterprise, achieving the integration of "API-preparation" development.
since 2015, the state has frequently introduced new environmental protection policies.
January 2015, the Environmental Protection Act Amendment Act came into effect, which was hailed as the strictest environmental law in history, emphasizing "environmental protection, penalty bankruptcy" and "non-compliance, do not produce."
2016, the Ministry of Industry and Information Technology issued the Guidelines for the Development of the Pharmaceutical Industry Development Plan, which proposed that by 2020, energy consumption per unit of industrial value added of enterprises above the scale would be reduced by 18% and CO2 emissions by 22%.
, the state issued a number of heavy-weight documents to strengthen environmental regulations.
under the high pressure of environmental protection, the API industry as a traditional polluter is subject to key monitoring.
because of the high cost of pollution control of API enterprises, enterprises in the past would rather be fined than to carry out environmental protection management.
but under the new regulations, if the environmental protection of enterprises is not up to standard, then directly limit production or stop production.
with the tightening of environmental protection policies, the RAW drug industry frequently shuffle.
, in the face of high governance costs, a number of small-scale, weak profitability of API enterprises quickly cleared.
According to CITIC Securities Research, the number of API and preparation enterprises in China fell from more than 5,000 in 2015 to 4,441 in 2018, and the total production of API decreased from 3255,000 tons in 2015 to 2823,000 tons, a decrease of 18.8%.
, on the other hand, some API companies because of environmental problems, factories were ordered to close down for rectification.
2017, Northeast Pharmaceuticals reported a 1213 percent increase in net profit in the third quarter, which was supported by a surge in the price of vitamin C raw materials.
2017, the price of vitamin C API reached 69 yuan/kg, up 133% from 29.5 yuan/kg in 2016.
, another big vitamin C plant, north China Pharmaceuticals, stopped production because it failed environmental verification and ceded its current profits to Northeast Pharmaceuticals.
with the increase in the price of upstream API, the cost of preparation enterprises rose and profits were diluted.
in order to reduce the production cost of preparations, some enterprises will focus on the "API-preparation" integrated development model.
2016, Abao Pharmaceuticals acquired a 75% stake in Qingsong Pharmaceuticals for 610 million yuan, which mainly sells Entecave API and related intermediates.
industry analysis, considering Entikave as a fist product of Abao Pharmaceuticals, the acquisition is conducive to play upstream and downstream synergies to reduce production costs.
the past two years, in the face of volume procurement, more preparation enterprises began to think about the "API-preparation" integrated development model, get rid of the upstream constraints.
especially when generic drug prices continue to bottom out, upstream API prices continue to rise, preparation enterprises to the upstream extension of the power is further stimulated.
Yangzijiang and Hefei medical workers this is a cooperative relationship, Hefei medical workers to Yangzijiang to provide chloroelamine tate raw materials, Yangzijiang is responsible for the production of preparations.
because Hefei medical workers monopolized the raw materials of the yandi chlorethami, and there is a clear price increase behavior, Yangzijiang a paper lawsuit will be Hefei medical workers to court.
court ordered Hefei medical workers to stop abusing the monopoly of market dominance and fined him 70 million yuan in compensation.
interestingly, Hefei medical workers in court to Yangzijiang soul torture, "Why Yangzijiang since the beginning of 2019 did not purchase raw materials from Hefei medical workers?" "Yangzijiang's reply is also very sincere, "because of the self-built API production line, the realization of the 'API-preparation' integrated development model" ... Challenges of the development of "API-preparations" While the development model of "API-preparations" can be beneficial in reducing costs, there are risks that enterprises need to be alert to in the integrated development path of "API-preparations".
, companies need to be alert to the risk of falling API prices.
prices of RAW drugs are not static, but are always in the process of dynamic adjustment.
prices of API have risen significantly since 2016, thanks to environmental tightening and the clearance of low-end production capacity.
, but with the decline in the price of volume procurement preparations, some upstream API prices also fell.
in the "4 plus 7" volume procurement and collection expansion, Abao Pharmaceuticals Entecawe bid, the company's "API plus preparation" integration strategy fell through.
and because the price of Entecawe preparations in the "4 plus 7" fell by 90%, in the collection and expansion of another 70%, the collapse of the price of preparations to the introduction, resulting in a sharp drop in the price of RAW drugs, which led to a sharp decline in the performance of Entekave PHARMACEUTICALs - Qingsong Pharmaceuticals, 2019 revenue and net profit fell 43.37 percent and 84.92 percent, respectively.
therefore, in the face of volume procurement, although there are opportunities in the integration strategy of "API plus preparations", once the enterprise's products do not meet the bid, the opportunity may be translated into risk in the short term.
, on the other hand, the cost of acquisition is higher, enterprises can choose to embrace the group heating, strong joint.
mergers and acquisitions between enterprises are not only high in price, but also have long cycles and higher risks.
a relatively sound game is the formation of deep-seated strategic alliances or communities between enterprises.
As Hengrui and Steyri's in-depth cooperation, Steyr is responsible for iodine shadow agent RAW drugs and preparations research and development, registration, production, Hengrui is responsible for the commercial operation of products, the gross profit of both sides of the five-fifths.
both sides to take advantage of each other, and further help Staili's "intermediates and raw materials and preparations" of the entire industrial chain model landed.
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