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Shanghai Pharmaceuticals Realized Stable and Healthy Growth in Interim Results

(28 August 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, released its interim results for the first half of 2017 (the “Reporting Period”). According to the data, from January to June 2017, Shanghai Pharmaceuticals’ operating income was RMB65.779 billion (Unit: RMB, following the same), up by 10.19% on a YOY basis. Net profit attributable to the shareholders of the listed company was RMB1.925 billion, representing an increase of 11.12% on a YOY basis. Net profit attributable to the shareholders of the listed company after deduction of non-recurring profit or loss was RMB1.772 billion, representing an increase of 10.62% on a YOY. Earnings per share amounted to RMB0.7159; and basic earnings per share after deducting non-recurring profits and losses were RMB0.6589. During the Reporting Period, the Company’s net cash flows from operating activities amounted to RMB1.260 billion, up by 56.49% on a YOY basis. The budget target for the first half of 2017 was fulfilled.

In respect of pharmaceutical manufacturing business, Shanghai Pharmaceuticals achieved operating revenue of RMB7.503 billion in the first half of 2017, representing an increase of 17.03% on a YOY basis; its gross profit margin was 52.31%, an increase of 0.57 percentage point on a YOY basis. The operating profit margin after deducting sales and administration costs was 13.50%, representing an increase of 0.37 percentage point on a YOY basis. During the Reporting Period, the industrial sales income of the Company achieved a historical breakthrough and a number of products achieved an increase that higher than the industry average growth. The increase of industrial sales income was mainly benefit from the implement of key product focus strategy and the improvement of “one product one policy”. The sales revenue of 60 key species was RMB3.958 billion, representing an increase of 12.82% on a YOY basis, sales accounting for 52.76% of industrial proportion, the gross profit margin of key species was 70.16%, representing an increase of 1.13 percentage points on a YOY basis. Meanwhile, the Company constantly accelerated the innovation and optimization of R&D model, and actively promoted the operation and mechanism adjustment of R&D management center, and achieved a number of milestones for R&D projects. The Company’s seven major research and development projects are planned to advance, of which SPH3127 pre-clinical data is better than the same target drugs that has been marketed. Phase I clinical proceeded smoothly, and has completed single ascending dose (SAD) tolerance trial; Phase I of Lei Teng Shu have shown efficacy and safety in patients with rheumatoid arthritis, and clinical applications that are potentially used to suppress chronic immune activation in AIDS clinical trials have also been accepted by CFDA. Besides, the Company gathered the advantages of resources to push forward the work of quality and efficacy consistency evaluation for generic drugs and species involved in both the number or progress are at the forefront of the country. The Company set up a total of 99 species, 125 varieties and specifications (of which 36 species and 43 varieties and specifications are not included in catalog 289), and 15 products entered into the clinical stage.

In respect of pharmaceutical circulation, the sales revenue from pharmaceutical distribution business in the first half of 2017 was RMB58.521 billion, representing an increase of 9.64% on a YOY basis; its gross profit margin was 6.06%, representing an increase of 0.04 percentage point on a YOY basis. The operating profit margin after deducting the sales and administration expenses was 2.74%, representing a decrease of 0.05 percentage point on a YOY basis. During the Reporting Period, the Company’s sales revenue from the pharmaceutical retail business was RMB2.714 billion, representing an increase of 9.00% on a YOY basis; its gross profit margin was 16.00%, representing an increase of 0.36 percentage point on a YOY basis. The operating profit margin after deducting sales and administration costs was 1.11%, representing a decrease of 0.35 percentage point on a YOY basis. The implementation of “two-invoice” policy will benefice large pharmaceutical distribution enterprises in expanding market share in the next three to five years. The Company’s direct sales proportion in those provinces is thus expected to further enhance, which, in the long term, will strengthen the Company’s profitability in distribution business.

During the Reporting Period, the Group’s subsidiary, Shanghai Pharma Co., Ltd., acquired Xuzhou Pharmaceutical Co., Ltd. (徐州醫藥股份有限公司) and Xuzhou Huaihai Pharmaceutical Co., Ltd. (徐州淮海藥業有限公司), completing the Group’s basic layout in the Suzhou North area. The Group continued to manage its stock equity by acquiring 31.593% equity interest in Guangzhou Z. S. Y Pharmaceutical Co., Ltd (廣東中山醫醫藥有限公司) held by Guangzhou Zhongda Industry Group Co., Ltd. (廣州中大產業集團有限公司), which enhanced the Group’s competitiveness in the Guangdong area. Meanwhile, the Group also participated actively in the Shanghai’s reform project of “prescription extension” to propel the grading diagnosis and treatment, which has already covered 128 community hospitals and health services centers free of charge in Shanghai. As the Company’s prescription retail business development platform, Shanghai Pharma Health Commerce Co., Ltd. (上海醫藥大健康雲商股份有限公司) promotes the strategy cooperation of electronic prescription and health insurance online payment together with Tencent, so as to build a closed-loop ecological chain from WeChat registration and treatment to hospital online payment, and further to the supplying of drugs. “Yiyao-Electronic Prescription” has successfully docked more than 100 medical institutions and has handled over a million electronic prescriptions

Shanghai Pharmaceuticals says that in the second half of the year, 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 set up a Hong Kong investment management platform, and continue to focus on the opportunities of merger and acquisitions of overseas high-quality assets.

 

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