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Shanghai Pharmaceuticals Released 2016 Annual Results:Staying Proactive while Conforming to Reforms,

    (21 March 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, has released its 2016 annual results report today. According to the data, from January to December 2016, Shanghai Pharmaceuticals’ operating revenue was RMB120.765 billion, representing an increase of 14.45% on a YOY basis. Net profit attributable to the equity holders of the listed company was RMB3.196 billion, representing a YOY increase of 11.10%. Net profit attributable to the equity holders of the listed company after deduction of non-recurring profit or loss was RMB2.926 billion, representing a YOY increase of 15.62%, fulfilling earnings per share RMB1.1887, earnings per share after deduction of non-recurring profit or loss was RMB1.0880. In addition to achieving its operation objectives of 2016, the Company promoted endogenous growth and expansion of business in an orderly manner, strengthened intensive development, innovation and transformation, improved layout of strategic industry, made preliminary progress in internationalization, and accelerated integration of industry and finance to provide help in capital by issuing bonds and setting up industry funds.

    In respect of the pharmaceutical manufacturing business, Shanghai Pharmaceuticals achieved operating revenue of RMB12.416 billion in 2016, representing a YOY increase of 5.01%; a gross profit margin of 51.57%, representing an increase of 1.85 percentage points as compared with the corresponding period of last year. The operating profit margin after deducting the costs of sales and administration stood at 12.39%, levelling that of the same time last year. In particular, sales revenue generated from its 60 key products increased by 3.67% on a YOY basis to RMB6.920 billion, accounting for 55.73% of the manufacturing sales, and the gross profit margin for key products was at 68.69%, up by 1.15 percentage point on a YOY basis. 26 major products recorded sales revenue of more than RMB100 million over the year.Shanghai Pharmaceuticals had furthered its focus on key products and advantageous treatment areas, and continued its effort in upgrading production capabilities, lowering costs, increasing efficiency, and refining management. The Company seized the opportunities presented by the development of traditional Chinese medicine, and had pushed towards a full industry chain strategic layout.

    In pharmaceutical research and development costs, the total amount of research and development (the “R&D”) investment was RMB670.55 million, accounting for 5.40% of manufacturing sales income of the Company. Among them, 23.12% was invested in R&D of innovative drugs, 20.77% was invested in the R&D of generic drugs and 48.20% was invested in the secondary development of existing products, and 7.91% was invested in the evaluation of consistency in quality and efficacy for generic drugs. Sales revenue from the Company’s new products launched through the R&D amounted to RMB1.54 billion, representing 12.40% of the Company’s manufacturing sales revenue. Shanghai Pharmaceuticals continued to optimize its R&D system, founded R&D management centre, and achieved several phased R&D objectives. The Company persisted on open cooperation, integration of generic and innovation, healthy development of the production chain, development of the biological medicines, secondary development on existing drugs, evaluation of consistency in quality and efficacy for generic drugs, innovation in dosage types, internationalization, and much more.

    In respect of pharmaceutical services business, the scale of the Company’s pharmaceutical distribution business in 2016 has crossed a hundred billion, achieving a sales revenue amounted to RMB108.618 billion, representing an increase of 15.90% on a YOY basis, with a gross profit margin of 5.89%. The costs of sales and administration accounted for 3.42%. The operating profit margin after deducting the sales and administration expenses was 2.47%. The operating revenue from the pharmaceutical retail business amounted to RMB5.153 billion, representing a YOY increase of 7.47%, and a gross profit margin of 15.52%. The operating profit margin after deducting the costs of sales and administration was 1.45%. The Company further promoted its strategy of developing nationwide distribution business network layout, and continued to optimize its product structure. Innovative business represented by SPD was promoted across China and certain new modes such as comprehensive reform of community and quantized purchase were developed. The Company’s pharmaceutical retail business initiated internal integration and external expansion on retail resources, which has strengthened its retail network and competitive edge, and has greatly expanded pharmacies co-established with hospitals at the same time. In respect of pharmaceutical E-commerce, SPH Cloud Health has reached a new level by completing A+ round financing, constantly improving its self-established electronic prescription circulation system, as well as actively expanding and connecting medical institutions. The electronic prescription treatment volume was rapidly increased which laid good foundation for further undertaking separation of clinic from pharmacy.

    Regarding the new business in grand health, the Company established Shanghai Pharma Investment Management Company and promoted several cooperation projects. The first traditional Chinese medicine clinic was officially put into operation in Shanghai for seeking for new growth point with “good doctor +good medicine”. The Company completed the project of privatization of Australian listed company – Vitaco, and purchased 60% equity of Vitaco with contributions of appoximately RMB930 million, continued to improve layout in the field of Grand-Health health care products and achieved breakthroughs in international development.


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