[Market Analysis of China Pharmaceutical Network] Recently, among the A-share listed companies, 6 leading API companies announced their results for the first half of 2017, and their revenues are very positive. For the price increase of raw materials, many people in the industry first think of the issue of "environmental protection". In mid-to-late August, 10 ministries and commissions including the Ministry of Environmental Protection, Development and Reform Commission, Ministry of Industry and Information Technology, and Ministry of Public Security, and the governments of 6 provinces (cities) including Beijing, Hebei and Shandong, jointly issued the "Beijing-Tianjin-Hebei and surrounding areas 2017-2018 autumn and winter air pollution comprehensive control Action Plan", which mentioned that "pharmaceutical companies involved in the production of APIs involved in the VOCs emission process shall, in principle, stop production during the heating season. If production is required due to special circumstances such as people's livelihood needs, it should be reported to the provincial government for approval." The level of environmental protection is an iron fist. In this state, how should companies actively face it? How do these six leading companies do?

Recently, the Ministry of Industry and Information Technology announced the completion of the main economic indicators of the pharmaceutical industry in the first half of 2017. In the first half of this year, enterprises above designated size in the pharmaceutical industry achieved main business income of 1,531,440 million yuan, a year-on-year increase of 12.39%, and the growth rate increased by 2.25 percentage points from the same period last year. Among them, the main business income of chemical drug raw materials manufacturing reached 260.206 billion yuan, a year-on-year increase of 13.68%, and the growth rate was 4.13 percentage points higher than the same period last year.

In the A-share market, the operating income of the six leading API companies increased to varying degrees in the first half of 2017. Among them, Hisun Pharmaceutical, Northeast Pharmaceutical, Xinhua Pharmaceutical, and Huahai Pharmaceutical rose more than 10%. In terms of net profit, Northeast China Pharmaceutical growth even reached 1162.03%.

Hisun Pharmaceutical: All products entering the United States have been lifted

Hisun Pharmaceutical's 2016 operating income was 9.733 billion yuan, of which the sales revenue of raw materials was 1.288 billion yuan, accounting for 13%. Due to the 2015 FDA import warning and the 2016 European Medicines Agency (EMA) warning, some of the company's APIs cannot be sold in the two major pharmaceutical markets of the United States and Europe. In addition, it is affected by factors such as raw material price increases and cost reduction pressures. The company's overall revenue declined last year. In 2016, the net profit attributable to shareholders of listed companies was 94.43 million yuan, a year-on-year decrease of 796.03%.

In the first half of 2017, Hisun Pharmaceuticals achieved operating income of 5.505 billion yuan, a year-on-year increase of 16.40%; net profit attributable to shareholders of listed companies was 13.504 million yuan, a year-on-year decrease of 33.61%.

According to data from the mid-year report, Hisun’s Taizhou base successfully passed the FDA inspection. All products that were originally prohibited from entering the United States were lifted by the FDA, and product sales have resumed. In the first half of the year, the trial production and verification of 4 products including capecitabine, p-aminosalicylic acid, posaconazole and phenidamycin were completed. The Fuyang base has completed the verification of the new process of Orlistat, and the production level has been greatly improved. The UK products have been successfully sold in batches. Anidungin has completed the trial production stage, and the process verification will be completed in the second half of the year. The praziquantel production line at the Nantong base has been audited by the FDA and WHO, and many varieties have large production capacity.

Hisun Pharmaceutical stated that in the first half of the year, the company had no environmental pollution accidents and was not subject to environmental protection administrative penalties. Zhejiang Hisun Pharmaceutical Co., Ltd. (Taizhou area) was listed as a nationally controlled pollution source of wastewater during the reporting period. At present, it has carried out a wastewater station upgrading and transformation project and has built two sewage treatment systems.

North China Pharmaceutical: Amoxicillin prices have increased

North China Pharmaceuticals achieved an operating income of 8.082 billion yuan in 2016, of which chemical raw materials accounted for 21%. According to data from the interim report, North China Pharmaceuticals achieved operating income of 4.003 billion yuan in the first half of 2017, which was basically the same year-on-year.

Among them, North China Pharmaceutical Group Xiantai Pharmaceutical Co., Ltd., a subsidiary of North China Pharmaceutical Group, which is mainly engaged in the synthesis of antibiotic raw materials and intermediates, increased the price of its main product, amoxicillin, in the first half of 2017, and achieved annual revenue of 378.88 million yuan, a year-on-year increase of 0.37%.

In recent years, North China Pharmaceutical has actively carried out the treatment of volatile organic waste gas and odor. One is to supervise all fermentation enterprises to implement the collection and treatment of fermentation tail gas; the other is to collect exhaust gas from all posts that use organic solvents, and exhaust vacuum pumps and storage tanks. Exhaust gas and distillation condensed exhaust gas are collected and treated by adsorption and absorption measures to reduce VOCs emissions; the third is to actively promote the optimization of antibiotic production processes, and gradually use enzymatic technology to replace chemical production processes to reduce the use of organic solvents from the source .

In addition, the company is also actively carrying out the research and development of the technology for the harmless disposal and utilization of antibiotic bacteria residues. The company’s independent research and development of the "Antibiotic bacteria residue harmlessness, resource recycling technology integration" project has passed the acceptance organized by the Hebei Provincial Science and Technology Department, "Cephalosporin C The integration of complete sets of technologies for the harmlessness and resource utilization of bacteria residues has passed the identification of provincial scientific and technological achievements, and the overall level has reached the leading domestic level; the treatment method of penicillin bacteria residues has obtained national invention patent authorization; jointly with Hebei Academy of Environmental Sciences and Hebei University of Science and Technology The declared "Methods for the Detection of Penicillin and Cephalosporin in Pharmaceutical Bacteria Residues" Hebei Province local standard project was successfully established.

Tohoku Pharmaceutical: Pay attention to the three major pollution problems of water, air and solid waste

Northeast Pharmaceutical achieved operating income of 4.814 billion yuan in 2016, of which raw material sales accounted for more than 23%. According to data from the interim report, in the first half of 2017, Northeast Pharmaceutical achieved operating income of 2.766 billion yuan, an increase of 15.02% over the same period last year. Among them, the raw material medicine segment achieved operating income of 673 million yuan, an increase of 13.12% over the same period last year.

With the intensification of haze and pollution, the environmental protection situation is becoming more and more serious. Northeast Pharmaceutical said that the company and its subsidiaries are key pollutant discharge units announced by the environmental protection department. In terms of water pollution prevention and control, the company’s production plants are equipped with integrated sewage treatment facilities. The device is used to treat production and domestic wastewater, and the discharged wastewater meets the "Liaoning Comprehensive Sewage Discharge Standard", the factory wastewater discharge outlet identification specification, installs an online monitoring system and is connected to the monitoring center of the Municipal Environmental Protection Bureau, which can realize online water quality data upload in real time; In terms of pollution prevention and control, the boilers in the company's production plants are equipped with two sets of desulfurization and dust removal facilities. The desulfurization adopts the double-alkali method and the bag dust removal method for dust removal to ensure that the boiler flue gas is discharged up to the standard. The discharge outlet is equipped with automatic online monitoring equipment and networked with the Municipal Environmental Protection Bureau; in terms of solid waste pollution prevention, the company builds its own hazardous waste incinerator or has a qualified unit for compliance disposal.

Xinhua Pharmaceutical: Revenue from raw materials in the first half of the year exceeded 1 billion

Xinhua Pharmaceutical’s operating revenue in 2016 was 4.015 billion yuan, of which chemical raw materials accounted for 44%. According to data from the interim report, in the first half of 2017, Xinhua Pharmaceutical achieved operating income of 2.403 billion yuan, of which the raw material drug segment achieved revenue of 1.05 billion yuan, an increase of 14.46%.

Xinhua Pharmaceutical stated that one of the key tasks in the second half of the year is to further expand the advantages of APIs, continue to expand the market advantages of major varieties, actively seize market shares, implement new product sales incentive policies, accelerate the market promotion of APIs and new products, and strive to cultivate new products. Economic growth point.

On the issue of environmental protection, Xinhua Pharmaceutical stated that in the first half of 2017, it carried out comprehensive safety inspections in spring and summer. Many important positions on the production line have completed the transformation of safety measures, and carried out in-depth VOC air treatment and comprehensive environmental remediation. No general and above accidents occurred.

In terms of the construction of pollution prevention facilities, Xinhua Pharmaceutical has built three sets of sewage treatment facilities by itself, which can fully meet the requirements for stable discharge of wastewater. The company’s three main drainage outlets were installed with standardized online monitoring facilities and commissioned to operate by qualified units. The wastewater discharge online monitoring data were uploaded to the Shandong Province Environmental Automatic Monitoring and Monitoring System for release in real time, and the Shandong Provincial Environmental Protection Department implemented online real-time management. For the treatment of waste gas, point source treatment is mainly adopted. The company has also built three sets of incineration facilities to dispose of some hazardous wastes by itself. In addition, some hazardous wastes are handed over to qualified units for entrusted disposal.

Huahai Pharmaceutical: Environmental protection investment has reached 600 million

Huahai Pharmaceuticals achieved operating income of 4.093 billion yuan in 2016, of which raw materials and intermediates sales accounted for 46%. According to data from the interim report, in the first half of 2017, Huahai Pharmaceutical achieved operating income of 2.35 billion yuan, an increase of 18.53% over the same period last year.

In the first half of 2017, under the fierce market competition, Huahai Pharmaceutical's API business maintained steady growth. The company closely revolves around the strategic layout of global sales of APIs, further subdivides the market, and strives to achieve precise marketing. Through strategic negotiation and market operation, the company has mastered the initiative of multiple product prices and effectively maintained product prices.

On the issue of environmental protection, in the first half of 2017, Huahai Pharmaceutical and its subsidiaries had zero environmental accidents. Huahai Pharmaceuticals stated that each subsidiary company carried out cleaner production work in accordance with the relevant documents of the Zhejiang Provincial Environmental Protection Department, and started the third round of cleaner production at the end of 2016, and is currently preparing a cleaner production report by a third-party qualified company. The environmental protection facilities of each subsidiary company also carry out various tasks in accordance with the environmental protection "three simultaneous" management system. The project is designed by Zhejiang Meiyang International Engineering Co., Ltd., and the environmental impact report is prepared by Zhejiang Academy of Environmental Sciences and Zhejiang Taicheng Environmental Technology Co., Ltd. Carry out environmental protection trial production, environmental protection acceptance monitoring and on-site acceptance successively, and put into formal production operation after obtaining the approval document of the Environmental Protection Department. Each branch company has prepared the "Emergency Plan for Sudden Environmental Accidents" and has passed expert review.

Huahai Pharmaceutical attaches great importance to the introduction of advanced environmental protection technologies and equipment upgrades. Up to now, the company has invested more than 600 million yuan in environmental protection.

Yifan Pharmaceutical: The proportion of raw materials in the first half of the year rose to 41%

Yifan Pharmaceutical achieved operating income of 3.505 billion yuan in 2016, of which raw materials business accounted for more than 32%. According to data from the interim report, in the first half of 2017, Yifan Pharmaceutical achieved operating income of 1.857 billion yuan, an increase of 7.23% year-on-year, and the operating income of the bulk drug business was 770 million yuan, accounting for 41%.

Yifan Pharmaceutical stated that the company’s product vitamin B5 and the original B5 market are in a good market, and the product prices have increased compared with the same period of the previous year. The company adheres to the marketing strategy of “marketing as you go and producing according to sales” to consolidate the original market share. , Seize market opportunities, adjust production and business strategies in time, and achieve zero production accidents under the premise of ensuring product quality, and high environmental protection standards. At the same time, it actively expands new customers and achieves sales that are basically the same as the same period last year, making the report The bulk drug segment in the period has achieved good operating results.

Some of the raw materials used in the production of raw materials such as vitamin B5 and original B5 are flammable, explosive, and toxic gases or liquids, and a certain amount of waste water, waste gas and waste residues are generated. With the implementation of the new environmental protection law and the implementation of supply-side reforms by the country, the environmental protection requirements of manufacturers, especially those of API manufacturers, are getting higher and higher, and the test of safety production will become greater and greater. To this end, the company will further increase investment, implement the responsibility system, carry out safety training and education in a timely manner, and continuously reduce the company's environmental protection and safety risks through strict management and technological improvement. Subsidiaries Hangzhou Xinfu, Anqing Xinfu, and Chongqing Xinfu have all started the construction of related pollution prevention facilities, and the current operating conditions are stable.

Environmental protection pressure will continue in the second half of the year

As a relatively polluting industry, the pharmaceutical industry is facing increasingly stringent environmental protection pressure. At the turn of 2016 and 2017, due to pollution control and other factors, many companies were notified to stop production, involving 26 pharmaceutical companies in Beijing and 5 provinces and cities around Beijing (Hebei, Tianjin, Shanxi, Shandong, Liaoning). The suspension of production by enterprises will undoubtedly affect the supply and demand of APIs.

According to the Ministry of Environmental Protection, as of the end of June this year, the number of "scattered and polluting" enterprises discovered by the Beijing-Tianjin-Hebei environmental protection inspections reached 176,000. The Ministry of Environmental Protection requires that all enterprises that cannot upgrade and transform to meet emission standards will be closed by the end of September this year. The current national requirement for environmental protection is an iron fist, with unprecedented determination to tackle pollution.

The issue of "environmental protection" may be a double-edged sword. Yu Mingde, chairman of the China Pharmaceutical Enterprise Management Association, once said that environmental protection forces companies to eliminate outdated production capacity or carry out large-scale relocations. The relocation of companies is costly and long. This process will create opportunities for individual companies to turn around. Pan Guangcheng, executive chairman of the China Chemical Pharmaceutical Industry Association, also mentioned that environmental protection requirements have raised the technical barriers of the API industry, forcing companies to shape their core competitiveness through environmental protection technologies and processes, and the API industry is getting rid of disorder and low-price competition. In this process, the price of raw materials is rising. Once the company can cross the environmental protection threshold, it will also usher in a new round of development opportunities different from transformation.

This will be another industry reshuffle. Leading companies have strong capital. We will wait and see how to successfully cross the environmental protection hurdle and meet the new round of development opportunities.

Source of information: annual reports and interim reports of listed companies

(Weixi)

Original title: The performance of 6 API companies is rising, where is the "environmental protection" double-edged sword?

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