Due to the safety of drug use, traditional Chinese medicine injections have become the target of public criticism in recent two years, and the performance of Longjin Pharmaceutical Industry, which is the main business, has been depressed. Earlier this year, the company made a comeback with industrial marijuana. However, just as the stock price soared, the company threw out a plan to reduce its holdings. As of July 4, the amount of reduction of controlling shareholders, actual controllers and two shareholders has been more than half.
Compared with the policy control of traditional Chinese medicine injections, the regulatory authorities have more restrictions on industrial cannabis. In response to the inquiry letter from Shenzhen Stock Exchange, Longjin Pharmaceutical Company said: The subsidiary company has not obtained the Yunnan Industrial Hemp Processing License, does not have the basic conditions for applying for the license, and has no plans to apply for the license or develop related processing business for the time being. Recently, the State Anti-Narcotics Commission ordered provinces to strengthen the examination and approval of industrial cannabis licensing and strictly regulate the industrial cannabis industry.
Important shareholders have reduced their holdings by more than half
After a surge, Longjin Pharmaceutical Industry has finally restored its former calm. Since July, Longjin Pharmaceuticals share price has stabilized at around 11 yuan. However, compared with the high of 23.52 yuan in April, it has dropped nearly 60% year on year.
According to the public data, Longjin Pharmaceutical Company is a biopharmaceutical enterprise that develops, produces and sells natural plant medicines and freeze-dried chemical powder injection. The companys main product is breviscapine, which is a high-purity freeze-dried powder injection of traditional Chinese medicine. The product has the effect of activating blood circulation and removing blood stasis, dredging collaterals and relieving pain. It is mainly used to treat apoplexy and its sequelae, coronary heart disease, angina pectoris and so on. As the main business is single and the performance is not surprising, Longjin Pharmaceutical Industry has always been unknown in the capital market until February 28, 2019, when an announcement related to industrial cannabis was issued.
Why is performance falling again and again?
All along, the sluggish performance has been a roadblock on the way forward for Longjin Pharmaceutical Industry. As early as the beginning of the listing in 2015, the company has experienced a double decline in revenue and net profit, which only improved in 2016. In 2017, the companys performance entered a downward trend, with net returns to the mother and non-net profits falling by more than 60%.
According to the annual report, the companys sales expenses reached 243 million yuan in 2018, an increase of 59.821 million yuan over the same period last year, an increase of 32.71%, accounting for 72.2% of the business income, which ranks first among the listed pharmaceutical enterprises. However, the substantial increase in sales costs has not brought about a growth in sales, but a decline. According to the results, its sales in 2018 were only 1998.42 million bottles, down 30% from the same period last year.
It is not difficult to see that behind the decline in sales is the harsh environment Longjin Pharmaceutical Industry is facing. Because of the safety of medication, traditional Chinese medicine injections have long been the target of public criticism. In the Catalogue of Pharmaceuticals for National Basic Medical Insurance, Industrial Injury Insurance and Birth Insurance (2017 edition), the state has imposed strict reimbursement limits on 39 traditional Chinese medicine injections. In the National Essential Medicines Catalogue (2018 edition), breviscapine for injection was not included.
The situation finally improved in 2019. Longjin Pharmaceutical Industry recently indicated at the investorsexchange meeting that breviscapine for injection has entered the National Medical Insurance Catalogue. But at the same time, health insurance policies such as supplementary medication, graded diagnosis and treatment, payment according to disease type, and drug bidding and purchasing price limit scheme implemented in some provinces or regions have been implemented, which may be popularized nationwide in 2019, and the company faces the same policy pressure.
However, Longjin Pharmaceutical Company seems not to be very confident about its future sales. In its annual report, Longjin Pharmaceutical Company said: At present, the companys business situation and internal and external business environment have not changed significantly. The impact of policy and market factors on the decline of the companys product sales is still ongoing. It is expected that the national version of the catalogue of supplementary medicines, payment by disease category, etc. The policy is about to be implemented, the payment restriction of medical insurance is more stringent, the decline of the companys product sales is difficult to improve in the short term, and the R&D budget continues to increase.
Industrial cannabis has become the greatest hope for Longjin Pharmaceutical Industry to improve its performance. Recent announcement of the company: Muya Agriculture planned to plant about 10,000 mu of industrial hemp in 2019. It is expected that the harvest period will be September-November, and it will be sold to enterprises that have obtained the qualification of industrial hemp mosaic processing in China. If the target company can fulfill its performance commitment of 5 million yuan net profit in 2019, its contribution to the companys performance will be about 18% (about 2.5 million yuan) of the net attribution profit in 2018.
It is worth mentioning that, when the companys share price soared, many market participants have warned about risks. Shi Deshan, a partner of Qianyuan Capital, did a survey. When the A-share industry was at its peak, the market value of the whole industry increased by 100 billion yuan, but many of the main industries had nothing to do with cultivation. Planting depends on the weather for food. It is volatile and inexperienced to build factories. He expects to invest no more than 1 billion dollars in the industry in the end.
In addition, the domestic ban on industrial marijuana has become increasingly stringent. The State Drug Control Commission recently issued the Notice on Strengthening the Control and Control of Industrial Cannabis, which requires provinces to strengthen the examination and approval of industrial cannabis licenses, and to re-examine the licenses previously approved, and strictly regulate the industrial cannabis industry.
However, Longjin Pharmaceutical Industry said in its reply to Shenzhen Stock Exchange: To develop industrial hemp processing, it is necessary to apply for a pre-administrative license and obtain aYunnan Industrial Hemp Processing License. The subsidiary company has not obtained the license, does not have the basic conditions for applying for the license, and has no plans to apply for the license or carry out related processing business for the time being.
Increasing research and development of chemical generic drugs