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Strengthening Innovation Capacity Propelling Internationalization Progress Fosun Pharma Revenue Increased 20.41% while R&D Expenses and Overseas Revenue Grew by More than 50%

08-30 2017

30 August 2017, Chinese leading healthcare group Shanghai Fosun Pharmaceutical (Group) Co., Ltd (“Fosun Pharma”, stock code: 600196.SH, 02196.HK) announced 2017 Interim Results.

As of the end of June 2017,the revenue of Fosun Pharma Group increased by 20.41% as compared to the corresponding period of 2016 to RMB8,353.02 million, of which, the revenue from pharmaceutical manufacturing and research and development (R&D) segment amounted to RMB5,775.78 million, representing an increase of 19.12% as compared to the corresponding period of 2016. The revenue from healthcare service segment amounted to RMB1,012.15 million, representing an increase of 34.39% as compared to the corresponding period of 2016. Fosun Pharma Group recorded a revenue of RMB6,884.16 million in Mainland China, representing an increase of 14.52% as compared to the corresponding period of 2016 and a revenue of RMB1,468.86 million in foreign countries or regions, representing an increase of 58.63% as compared to the corresponding period of 2016.

Mr. Chen Qiyu, Chairman of Fosun Pharma stated, during the first half of 2017, amidst the situation that was full of challenges and uncertainties in the economies of the world and of China, there were continuous reform of the medical system in China and limited growth of pharmaceutical manufacturing industry despite the slight recovery, while medical technology and medical services continued to benefit from policies for rapid development. During the Reporting Period, Fosun Pharma adhered to its business philosophy of “Innovation for Good Health”, focused on its core pharmaceutical and healthcare businesses, insisted on product innovation and management enhancement, actively promoted the strategy of organic growth, external expansion and integrated development, thereby maintaining the balanced growth of its principal businesses.


The R&D investment continuously increased

Fosun Pharma Group has been focusing on innovation and R&D, owning a national recognized enterprise technology center and developed internationalized R&D structure and strong R&D capabilities through the establishment of interactive and integrated R&D systems in China (Shanghai, Chongqing and Taipei), the U.S. (San Francisco and Boston), Israel and Sweden. As of the end of June 2017, there are over 1,000 staff members in the R&D team.

In terms of organic growth, Fosun Pharma Group continued to increase investment in R&D and perceived it as its core driving force. During the Reporting Period, the total R&D investment amounted to RMB626.04 million in total, representing an increase of 28.12% as compared to the corresponding period of 2016, of which, the R&D expenses amounted to RMB461.32 million, representing an increase of 50.15% as compared to the corresponding period of 2016.

The R&D investment in the pharmaceutical manufacturing and R&D segment amounted to RMB529.64 million, representing an increase of 24.93% as compared to 2016, of which, R&D expenses amounted to RMB364.92 million, an increase of 50.46% as compared to the corresponding period of 2016, accounting for 6.3% of the revenue of the pharmaceutical manufacturing and R&D segment.

As of the end of June 2017, Fosun Pharma Group had obtained approval for clinical trials of 6 products dedicated to 11 indications, of which two were in phase III of clinical trials. Four types of 1.1 small molecular innovative drugs were also approved for clinical trials. Besides, Fosun Pharma Group had 173 pipeline drugs, generic drugs, biosimilars and vaccine projects (including 11 small molecular innovative drugs, 9 biopharmaceutical innovative drugs, 12 biosimilars, 2 improved new drugs, 133 generic drugs with international standards,4 biological products for prevention and 2 traditional Chinese medicine drugs),of which 8 projects were under clinical trial applications, 25 projects were under clinical trials, and 33 projects were awaiting official approval for public sale. It is expected that those pipeline drugs would lay a solid foundation for Fosun Pharma Group’s sustainable development and contributed to its continuous sound financial performance.

Meanwhile, Fosun Pharma Group achieved the transformation and practice of global innovative advanced technology through a variety of forms of cooperation including establishing joint venture and setting up technology innovation incubation platform, and having access to the global innovative advanced technology through technology introduction and “deep incubation” models so as to facilitate the connection between Fosun Pharma Group and the leading technology innovation projects worldwide and further enhance the innovation ability and propel the internationalization progress of Fosun Pharma Group.


Principal businesses maintained balanced growth while marketing system continuously perfected

During the Reporting Period, the pharmaceutical manufacturing and R&D segment of Fosun Pharma continued to grow steadily and the development of its professional operational team was further strengthened. In the first half of 2017, febuxostat tablets (You Li Tong) maintained rapid growth, while certain other products including, among others, reduced glutathione (Atomolan series), antimalarial series such as artesunate, alprostadil dried emulsion (You Di Er), anti-tuberculosis series, compound aloe capsules and other products recorded fast growth.

Fosun Pharma Group has formed a relatively complete product portfolio in the six major therapeutic areas (being areas of cardiovascular system, metabolism and alimentary system, central nervous system, blood system, anti-infection and anti-tumor) which are areas with the greatest potential to grow in China’s pharmaceutical market.

Whilst enhancing the competitiveness of its products, Fosun Pharma Group also focuses on developing its marketing systems. With a marketing team consisting of over 3,500 employees and a sales network covering most of the major domestic markets, Fosun Pharma Group has been improving its capabilities in sales and marketing. Sinopharm, an investee of Fosun Pharma Group for over a decade, has developed into the largest pharmaceutical and healthcare distributor and a leading supply chain service provider in China possessing and operating China’s largest drug distribution and delivery network.

In the first half of 2017, Fosun Pharma continued to reinforce its substantially completed healthcare service layout by combining high-end medical services in developed coastal cities with specialty and general hospitals in second and third tier cities. It established regional medical centers and a supply chain spanning major health industries and explored models of cooperation with local large state-owned companies, public hospitals and university-affiliated hospitals to accelerate its internet medical development strategy and enhance operating capabilities and profitability.

By the end of June 2017, the total number of authorized beds available for the public in Chancheng Hospital, Jimin Cancer Hospital, Zhongwu Hospital and Wenzhou Geriatrics Hospitals, etc. controlled by Fosun Pharma was 3,018 in aggregate.

During the Reporting Period, Fosun Pharma continued to push the development of the medical devices and medical diagnosis segment forward. In the first half of 2017, businesses of HPV reagent, medical aesthetic devices and digital dental products maintained rapid growth. The number of surgeries by Da Vinci surgical robotic system sustained rapid growth and amounted to over 12,800 in the Mainland China and Hong Kong, representing year-on-year growth of approximately 60%.


Internationalization strategies steadily promoted

As one of the first enterprises in China’s pharmaceutical industry to develop international, Fosun Pharma Group has been equipped with international manufacturing capacity. Globally, the solid dosage formulation production line of Yao Pharma is recognized by the FDA in Canada and the U.S. The dietary supplement amino acid of Hubei Shine Star is recognized by the U.S. FDA. Fosun Pharma Group is the leading provider of anti-malaria medicines. Fosun Pharma Group also achieved preliminary results in the establishment of international marketing platform, especially in the African market, with marketing competence of medical devices in the European and U.S. markets.

Fosun Pharma Group will continue to leverage its strengths in expanding international operations, and with its existing overseas companies as platforms, vigorously explore cooperation with overseas companies on the basis of proactive integration and seek investment opportunities in outstanding domestic and foreign medical devices enterprises and introduction of high-end medical devices while targeting at precise medical care, so as to achieve growth in the scale of its medical devices business.

In 2017, Fosun Pharma set up a joint venture with Kite Pharma, a leading global provider of T cell-mediated immunity products, to create a cell-mediated immunity platform, continued to drive innovative products and technologies to China. In area of medical devices and medical diagnosis, Fosun Pharma Group made joint investment with Intuitive Surgical SARL, the owner of the technology and products of Da Vinci surgical robotic system, in establishing a joint venture, namely Intuitive Surgical-Fosun Medical Technology (Shanghai) Co., Ltd., and completed the relevant business registration so as to facilitate the development and popularization of high-end medical technology in China. Fosun Pharma Group completed its investment in the 80% equity interest of Breas, a leading brand of respiratory medical devices in Sweden, which further expanded the product portfolio of respiratory medical business and established a strategic platform covering the early diagnosis of lung cancer and asthma as well as the medical devices for treatment of common respiratory diseases so as to form a closed circuit for the respiratory segment of Fosun Pharma Group. From the traditional product introduction model, gradually to the new cooperation model of cooperative R&D, production and sales, Fosun Pharma Group continues to explore and innovate in new cooperation models.

In the second half of 2017, Fosun Pharma will continue to focus on innovation and internationalization, and strive to develop strategic products, further strengthen the core competitiveness in the pharmaceutical manufacturing industry. Meanwhile, Fosun Pharma will also step up its efforts to acquire and integrate with domestic and overseas quality pharmaceutical manufacturing companies. By strengthening production and manufacturing systems and product marketing systems, Fosun Pharma will proactively implement internationalization. At the same time, it will seize the development opportunities of healthcare services to strengthen its investment and management capability in the healthcare services segment, further enhance its core competence to improve operating results. In addition, Fosun Pharma will continue to actively explore the financing channels at home and abroad to create favorable conditions for the continuous development.