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Shanghai Pharmaceuticals Realized Stable Results In the Third Quarter Industrial Income Sustained High and Stable Growth Research and Development Capabilities Reaffirmed

(30 October 2017, Hong Kong) Shanghai Pharmaceuticals Holding Co., Ltd. (“Shanghai Pharmaceuticals” or the “Company” and, together with its subsidiaries, the “Group”; stock code: 601607.SH; 2607.HK), the integrated pharmaceutical company in the PRC that has leading positions in both pharmaceutical products and service markets, today announced its results for the third quarter of 2017. During the period under review, the Company’s operating income was RMB99.031 billion, up by 9.41% on a YOY basis. The net profit attributable to the shareholders of the listed company was RMB2.689 billion, representing an increase of 9.42% on a YOY basis. The slowdown was mainly due to the impact of a decrease in profit contribution by associates and joint ventures. Disregarding its impact, net profit attributable to the shareholders of the listed company increased by 14.26% on a YOY basis. In the period under review, the Company maintained good operation quality. The net cash inflow from operating activities amounted to RMB1.846billion, representing a YOY increase of 40.93%.

In respect of pharmaceutical manufacturing business, Shanghai Pharmaceuticals achieved operating revenue of RMB11.153 billion in the third quarter of 2017, representing an increase of 18.70% on a YOY basis, and with the profit contributed by the industry and services sectors up by 15.51%. During the period under review, the Company’s manufacturing business maintained high growth. A number of products realized faster growth than the industry average, which is mainly due to good performance in the Company’s key product sales. The sales revenue of 60 key species was RMB5.864 billion, representing an increase of 12.16% on a YOY basis. Sales revenue from key species accounted for 56.32% of the industrial sales income. The average gross profit margin of key products was 70.60%, up by 1.62 percentage points as compared with the previous year. The Company achieved a number of milestones for R&D projects in the period under review. The application of class-1 innovative drugs –“SPH3348 active pharmaceutical ingredients and its tablet” for clinical trials was approved; class-1 new biological products for treatment purpose –“recombinant anti HER2 humanized monoclonal antibody composition” used for injection purpose obtained clinical approval. The Company received various R&D awards including the “Top 10 R&D Innovative Pharmaceutical Listed Companies in China in 2017” elected by the Chinese Pharmaceutical Enterprises Association, and once against being selected as the Best Industrial Enterprise with Drug R&D Product Pipeline in China in 2017 by the Ministry of Industry and Information Technology of the People’s Republic of China (“MIIT”).

For pharmaceutical services, Shanghai Pharmaceuticals recorded revenue of RMB87.878 billion in the first three quarters, representing 8.33% YOY growth. Profit contributed by the industry and services sectors grew 11.38%. The growth of revenue from this sector slowed down as the implementation of the two-invoice system had an impact on the sales to other distributors, but it had limited influence on profit. In the long term, the two-invoice system will help hasten integration of the industry and enhance the circulation efficiency, so as to boost the sustaining growth of large distribution enterprises.

Recently, world renowned investment bank, Goldman Sachs, identified 50 global stocks for “long-term growth” based on sales, profit growth, market value, evaluation level, and other criteria. Shanghai Pharma was named in the list. Shanghai Pharmaceuticals regard it as a confirmation from overseas capital market in its future development. As an integrated pharmaceutical company in the PRC that has leading positions in both pharmaceutical products and service markets, it will continue to adhere to intensive development, innovative development, international development and integration of financial development. It will further optimize the R&D model and mechanism, adhere to the strategy of focusing on key products, strengthen its academic marketing-oriented strategy, build a professional marketing team and channel management team, and enhance product sales and market share. The Company will also grasp the opportunities of industry consolidation, speed up the implementation of key merger and acquisition projects, continue to improve the national network layout, as well as continue to focus on the opportunities of merger and acquisitions of overseas high-quality assets.

 

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