Source: Photo Network

Reporter | Zhao Yangge

A strong anti-corruption storm in the field of medicine has also shocked A- share medical and pharmaceutical listed companies.

on July 21, the website of the health and Health Commission quoted the news of the medical emergency department: "the national video conference on centralized rectification of corruption in the medical field was held in Beijing", which showed that the national health and Health Commission, together with the Ministry of education, the Ministry of public security, the audit office, the state owned assets supervision and Administration Commission of the State Council, the General Administration of market supervision, the State Administration of traditional Chinese medicine, the state CDC and the state drug administration, jointly held a video conference, deploy to carry out a one-year national centralized rectification of corruption in the field of medicine.

Source: Health Commission website

On July 28, the website of the Central Commission for Discipline Inspection disclosed that the State Supervision Commission of the Central Commission for Discipline Inspection held a mobilization meeting to deploy discipline inspection and supervision agencies to cooperate in the centralized rectification of corruption in the medical field across the country. The content mentioned "in-depth development of the pharmaceutical industry in the whole field, the whole chain, the whole coverage of the system governance".

Source: CCDI website

Under the continuous fermentation, the-share pharmaceutical sector was shocked. The closing price on August 7 showed that Mengke Pharmaceutical (688373.SH), Yuekang Pharmaceutical (688658.SH), Xiangyu Medical (688626.SH), Orin Biology (688319.SH) and others fell one after another. Health Yuan (6003800.SH), Zhixiang Jintai (688443.SH), Anjie Si (688581.SH), Baiji Shenzhou (68.SH) and Kexing Pharmaceutical also fell sharply.

In this context, the pressure comes to companies with high "cost of sales" indicators. They either have hidden anti-corruption risks or receive more attention from regulators.

87 "sales expenses" exceed 1 billion yuan

according to the statistics of wande data, in the health care sector, there were 87 listed companies whose absolute value of "sales expenses" increased by 1 billion yuan last year. Most of these companies are also head companies in the pharmaceutical sector.

Shanghai Pharmaceutical (601607.SH) has the highest amount, with "sales expenses" of 14.279 billion yuan last year. In addition, Fosun Pharmaceutical (600196.SH) has 9.171 billion yuan, Buchang Pharmaceutical (603858.SH) has 7.484 billion yuan, Hengrui Pharmaceutical (600276.SH) has 7.348 billion yuan, and Huadong Pharmaceutical (000963.SZ) has 6.335 billion yuan.

Source: WanDe

if you look at the increase list of "sales expenses" in 2022 compared with 2021, Shanghai yizhong (688091.SH) must be in the forefront. its "sales expenses" in 2021 will be 2.3179 million yuan, and in 2022 it will become 89.0309 million yuan, an increase of 3740.98. Anxu Bio (688075.SH)'s "sales expenses" were 30.8467 million yuan in 2021 and rose to 0.494 billion yuan in 2022, an increase of 1500.69 percent. Hao Wei Medical (002622.SZ) is 20.3673 million yuan in 2021 and 0.13 billion yuan in 2022, an increase of 538.05.

there are also companies such as Jiuan medical (002432.SZ), yahong medicine (688176.SH), maiwei biology (688062.SH), steli (603520.SH), oteli biology (688606.SH) and other companies whose "sales expenses" have increased significantly, with the increase of more than 200 in 2022 compared with 2021.

41 "sales expenses" accounted for more than half

Look at the proportion of "selling expenses" to total operating income. According to WAND data, there are 41 companies with "sales expenses" accounting for more than 50% of operating income in 2022.

the top one is Yahong medicine, with a proportion of 55894.61, because Yahong medicine's operating income in 2022 is only 26100 yuan, but the "sales cost" has reached 14.5859 million yuan. Maiwei Bio's operating income in 2022 is 27.7282 million yuan, "sales expenses" 78.5266 million yuan, accounting for 283.2. Mengke Pharmaceutical accounted for 171.18 percent, and its "sales expenses" were 82.5185 million yuan, far exceeding its operating income of 48.2067 million yuan in 2022. On August 7, the share price of Mengke Pharmaceuticals fell sharply.

guangyuyuan (600771.SH) and unnamed medicine (002581.SZ) are also on the list. Guangyuyuan's "sales expenses" reached 0.854 billion yuan, accounting for 85.82 of 0.995 billion yuan's revenue in 2022. In 2022, the proportion of "sales expenses" in the total operating income of unnamed medicine also reached 81.91, with "sales expenses" of 0.292 billion yuan and income of 0.357 billion yuan.

Source: WanDe

if you focus on the growth of "sales expenses" as a percentage of revenue, Maiwei Bio is still ahead, with its share in 2022 up 152.32 percentage points from 2021. Meanwhile, Longjin Pharmaceutical (002750.SZ) rose 41.82 percentage points, Nuocheng Jianhua (688428.SH) rose 41.52 percentage points, Rongchang Bio (688331.SH) rose 38.64 percentage points and Ganli Pharmaceutical (603087.SH) rose 35.69 percentage points.

In addition, there are at least 10 companies whose "sales expenses" as a percentage of total operating income in 2022 have increased by 20 percentage points compared with 2021.

90% of the "sales expenses" are "advertising promotion expenses" of at least 29 companies

In the column of "sales expenses", "advertising promotion expenses" is particularly eye-catching.

according to statistics, ranking companies with known data shows that Shanghai medicine, Fosun medicine, health yuan, kelun medicine (002422.SZ), China resources 39 (000999.SZ), tai chi group (600129.SH), Jichuan medicine (600566.SH), lizhu group (000513.SZ) and so on are ranked high, with absolute values exceeding 3 billion yuan. If the point range is relaxed, there will be at least 25 listed companies with a fee of more than 1 billion yuan in 2022.

subtract the "advertising promotion fee" in 2022 from the "advertising promotion fee" in 2021. Jichuan Pharmaceutical Co., Ltd. has increased more from 2.864 billion yuan to 3.624 billion yuan, an increase of 0.761 billion yuan. Shanghai Medicine is not far behind, increasing from 6.204 billion yuan in 2021 to 6.922 billion yuan in 2022. Tianjin Pharmaceutical (600488.SH) increased by 0.64 billion yuan, Yabao Pharmaceutical (600351.SH) increased by 0.59 billion yuan, and Jiangzhong Pharmaceutical (600750.SH) increased by 0.445 billion yuan.

when it comes to the increase in "advertising and promotion fees", Shanghai yizhong, jinyao pharmaceutical, haochen medical, tianyu shares (300702.SZ), kangshino (688185.SH) and so on rank high.

if we make statistics on the proportion of "advertising and promotion expenses" to "sales expenses", we can see that 99.09 percent of the "sales expenses" of Tibet pharmaceutical (600211.SH) are "advertising and promotion expenses", 98.92 percent of the "sales expenses" of lianhuan pharmaceutical (600513.SH) are "advertising and promotion expenses", 98.8 percent of Jincheng pharmaceutical (300233.SZ) and 97.85 percent of yue pharmaceutical, the proportion of Shuangcheng Pharmaceutical (002693.SZ) is 97.61, Lingkang Pharmaceutical (603669.SH) is 96.84, and so on. There are at least 29 companies that account for more than 90% alone.

Source: WanDe

Dynamic conjecture of listed companies

Although each company has its own sales strategy, it is undeniable that the high cost of sales is indeed the focus of the regulatory authorities.

Take the IPO. Recently, for example, Fujian Mindong Lijiexun Pharmaceutical Co., Ltd. (hereinafter referred to as Lijiexun), the company terminated its IPO trip in July 2023 due to the withdrawal of its initial application. From the inquiry, it can be seen that the regulatory authorities have raised doubts about the company's sales expenses accounting for a relatively high proportion of operating income (close to 50%) and promotion service fees accounting for a relatively high proportion of sales expenses (more than 90%). They have not explained the specific contents of the collection of conference services, research services, information collection and visit promotion fees during the reporting period. Some promotion service providers have raised doubts about the paid-in capital of 0 or residential buildings and villages, ask the company to elaborate. According to the data, Lijiexun is an innovative pharmaceutical manufacturing enterprise with R & D, production and sales of chemical preparations and proprietary Chinese medicines as its main business.

Source: Exchange

as far away as 2017, Chongqing shenghuaxi pharmaceutical co., ltd. (hereinafter referred to as shenghuaxi) was not approved.

Source: SFC

at the meeting, the development and examination Committee of the main board of the CSRC asked shenghuaxi about the specific reasons and rationality of the higher sales expense rate than the average level of listed companies in the same industry and the substantial increase in sales expenses and promotion expenses year by year. It even questioned whether the company had given rebates, off-account rebates and gifts to relevant doctors, medical personnel, medical representatives or customers in promotion and academic promotion activities, whether there is any disguised commercial bribery such as bearing the domestic and overseas travel expenses of the above-mentioned persons or their relatives. Thus, the regulatory level of this check.

Nanjing shenghe pharmaceutical co., ltd. (hereinafter referred to as shenghe pharmaceutical), which will also be rejected in 2017, is also similar. it has been asked why the market development fee in the reporting period is relatively large. Asked whether there have been any rebates, off-account rebates or gifts given to relevant doctors, medical personnel, medical representatives or customers in marketing activities, whether there is any disguised commercial bribery such as undertaking the travel expenses of the above-mentioned personnel or their relatives at home and abroad; Asked whether the relevant expenditures were directly remitted to natural persons or third-party accounts without commercial exchanges; Relevant organizations and expenditures of independent academic promotion conferences, including frequency, content, average number of participants, expense reimbursement, etc. Even, Shenghe Pharmaceutical was directly involved in the "Liu Yanduo embezzlement and unit bribery case.

Source: SFC

Source: SFC

In fact, the recent dynamics of some pharmaceutical listed companies have also triggered market speculation.

For example, it was announced on July 31 that Fan Zhihe, one of the actual controllers, chairman and legal representative of Sailun Bio (688163.SH), was detained and filed for investigation on suspicion of duty crimes. Salen Bio stated that Fan Zhihe was temporarily unable to perform the duties of the chairman and legal representative during the lien period. During the lien period, the director and general manager Fan Tiejiong will perform the duties of the company's chairman and legal representative, and perform the duties of the company's board of directors on behalf of the relevant committee members.

Weining Health (300253.SZ) also received the "Notice of Case Filing" and "Notice of Retention" from the Maoming Municipal Supervisory Committee on July 5. Zhou Wei, the actual controller and chairman of the board, was filed for investigation and detention on suspicion of bribery. Weining Health said that when Zhou Wei is unable to perform the duties of chairman and legal representative, vice chairman Liu Ning will perform the duties of chairman and legal representative of the company, as well as perform the duties of members of relevant committees of the company's board of directors, and authorize deputy directors at the same time.The chief signed the relevant documents on behalf of the company. In fact, Zhou Wei was detained on July 1, and the company received a telephone notification from Maoming Municipal Supervision Committee on July 2.

things were also reflected in the stock price. on July 31, salon biology jumped short and opened lower, eventually falling 11.53 percent. On July 3, Weining's health also opened with a low jump, down 19.96 percent that day and continuing to fall 10.74 percent on July 4.