Integrated speed, "business" machine unlimited

The pharmaceutical distribution industry is an important link linking pharmaceutical production and retail terminals. The business model mainly includes distribution and retailing: 1. The distribution business is the main business, in which the gross profit of the net sales business is higher, the future proportion is expected to be further improved; 2. The reserve price agency system is At present, the mainstream mode of drug sales, but companies that have terminal brands and academic promotion capabilities have adopted a team-based approach. The introduction of drug price management measures has contributed to the transformation of industry competition models.

From the perspective of domestic policies, policy reforms provide guarantees for the development of the pharmaceutical circulation industry, and gradually guide the industry to become centralized and large-scale: 1. The theme of circulation reform: "open" - "strict investigation" - "exploration" - "integration"; Bidding policy changes: "Provincial big bid" and "Two-vote system" brought by Document No. 7; 3. Strengthening anti-commercial bribery: It conveys a determination of government reform.

Possible changes brought about by the policy reform: 1. Local monopolies and protections will be expected to be broken and market share concentration will rise sharply. In the future, it may form a national “three-tier” plus “second-tier” high-quality leading enterprises in line with national medicine, Shang Yao, and Jiuzhoutong. Situation; 2. The proportion of purely sales of medical terminals is expected to increase further. The scale of distribution will lead to a decrease in distribution costs and there will be room for improvement in the profitability of the industry.

With the steady growth of the pharmaceutical industry and the continued increase in government investment, the total volume of China's pharmaceutical business market has shown a steady growth: the compound annual growth rate of the industry from 2001 to 2009 reached 13.5%, of which the total market volume in 2009 reached RMB 500.5 billion. It is expected that the industry will maintain a 10% growth rate in the future. However, the industry concentration is low. There are only 11 companies out of the 13,000 distribution companies that exceed 5 billion. The total market share of the first three companies is about 20%.

Judging from overseas experience, the integration trend of the pharmaceutical distribution industry is that the United States currently has a market share of more than 90% in the top three; Japan's concentration in the past 10 years has increased from 19% to 73%.

Due to low barriers and fierce competition in the industry, the restriction of drug price policies has also made the industry's profitability space shrink. Apart from the cost of competition, it seems that no better survival method can be found. The trend of scale is common understanding, and the final market share is bound to Focused on several national or regional leading companies, this is a time-consuming process.

We believe that the policy-based combination boxing (12th Five-Year Plan + New Medical Reform +7 Document) is expected to become an accelerator for the industry consolidation process. We predict that by 2012, Shanghai Pharmaceuticals will have the fastest expansion rate (doubling its market share), the size of the national drug market may be close to one hundred billion (reaching the national plan for the Twelfth Five-Year Plan), and the top three market concentrations will be The current 20% increase to more than 30%.

Under the background of a large reshuffling of the entire pharmaceutical distribution industry, we will follow two logics to look for investment targets in the A-share market: Enjoy the nationwide integration process: Shanghai Pharmaceuticals, Sinopharm Co., Ltd., and Kyushu Link; direct benefits from provincial bidding policies : Accord Pharmaceutical, Internet Group, East China Medicine. Key recommendations: Shanghai Pharmaceuticals, Sinopharm Shares, Accord Medicine.