[Heng·Index] (H·Index) is a series of capital market index products compiled and released by Heheng Consulting, which mainly includes three major product lines: specific group development index, industry group development index, and regional group development index.

[H·Index] (H·Index) is a series of capital market index products compiled and published by Heheng Consulting, which mainly includes three major product lines: specific group development index, industry group development index, and regional group development index.

Author | Heheng Consulting

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Pharmaceutical business is a sub-industry of the biomedical industry. It is located in the terminal link of the biopharmaceutical industry chain. It is mainly responsible for the circulation of drugs in the market. It specializes in pharmaceutical commodity business activities, including three sub-sectors of pharmaceutical circulation, offline pharmacies, and Internet pharmacies. As of October 8, 2022, there were 32 listed companies in the pharmaceutical commercial industry, mainly distributed in the pharmaceutical circulation (25) and offline pharmacies (7). Heheng Consulting uses 32 listed companies in the pharmaceutical business industry as a research sample to monitor the development quality of the pharmaceutical business industry from seven dimensions.

Figure 1: Pharmaceutical Commercial Industry Industry Chain

Data Source: Foresight Research Institute

The development index of pharmaceutical commercial listed companies in the second quarter of 2022 was 99.4, reflecting that the development level of pharmaceutical commercial listed companies is basically the same as that of A-share listed companies; the month-on-month decrease is 8.4, reflecting that the quality advantages of pharmaceutical commercial listed companies have been significantly reduced compared with A-share development.

Figure 2: Pharmaceutical Commercial Listed Companies Development Index

Data source: Heheng Consulting

Among the various capability dimension indexes in the second quarter of 2022, 2 capability dimension indexes are greater than 100, and 5 capability dimension indexes are less than 100. Among them:

1. The growth capacity index and operation capacity index are greater than 100, indicating that the group of pharmaceutical commercial listed companies has capability advantages over the group of A-share listed companies in these two dimensions;

2. The financial pressure index is less than 100, indicating that the group of pharmaceutical commercial listed companies has obvious financial pressure than the group of A-share listed companies;

3. The R&D capacity index, profitability index, investment capacity index, and upstream and downstream bargaining power index are all less than 100, reflecting that there is a gap in the group of pharmaceutical commercial listed companies in these four dimensions compared with A-share listed companies, among which the gap in R&D capacity and investment capacity is the most obvious.

Figure 3: Performance of various dimensions of pharmaceutical commercial listed companies in the second quarter of 2022

Data source: Heheng Consulting

In the second quarter of 2022, the index of various dimensions rose 2 month-on-month and 5 declined. Among them:

1. R&D capability index and upstream and downstream bargaining power index have slightly increased, reflecting that the R&D capability and upstream and downstream bargaining power of pharmaceutical commercial listed companies have slightly improved, and there is little change;

2. Growth capability index, profitability index, operation capability index, investment capability index, and financial pressure index have declined, among which growth capability and investment capability have declined significantly.

Figure 4: Pharmaceutical Commercial Listed Company Development Index Sub-item

Data source: Heheng Consulting

The development index of pharmaceutical commercial listed companies in the second quarter of 2022 reflects the following main characteristics of the operation of pharmaceutical commercial listed companies:

1. The R&D capacity index of pharmaceutical commercial listed companies is close to 0, reflecting that pharmaceutical commercial listed companies basically have no R&D capabilities. This is related to the industrial chain position where pharmaceutical commercial listed companies are located. The group of pharmaceutical commercial listed companies is the terminal sales and circulation link of the biopharmaceutical industry.

2. The growth capacity index of pharmaceutical commercial listed companies is 122.5, a month-on-month decrease of 24.6, a significant decline, reflecting that the growth capacity of pharmaceutical commercial listed companies has declined significantly, and its advantages compared with A-shares are significantly reduced. Further analysis found that the main reason for the decline was that in the second quarter of 2022, the growth rate of the hematopoietic capacity of listed pharmaceutical companies in the business activities declined sharply, 56% of the enterprises' business activities declined, and 47% of the enterprises' business activities did not have hematopoietic capacity.

3. The profitability of pharmaceutical commercial listed companies has obvious disadvantages compared with A-share listed companies, and the disadvantages are widening. The main reason is the decline in the core profit margins of pharmaceutical commercial listed companies.

4. The operational capabilities of pharmaceutical commercial listed companies have obvious advantages over A-shares. Further analysis found that the advantages of operating capabilities mainly come from the turnover rate of operating assets of pharmaceutical commercial listed companies and fixed asset turnover rate of and are significantly better than A-share performance, which is related to the business model of pharmaceutical commercial listed companies, mainly responsible for the circulation of pharmaceutical products, and low investment in operating assets and fixed assets.

5. The investment capacity of pharmaceutical commercial listed companies is significantly lower than that of A-shares, which is related to the low strategic investment intention of pharmaceutical commercial listed companies.

6. The financial pressure index of listed pharmaceutical commercial listed companies is stable, significantly lower than the critical value of 100, reflecting that the financial debt ratio of listed pharmaceutical commercial listed companies is stable, higher than the A-share average.

7. Pharmaceutical commercial listed companies have basically stable bargaining power for upstream and downstream, which is a significant gap compared with A-share listed companies. Through further split, it was found that the bargaining power of pharmaceutical commercial listed companies to upstream suppliers is basically the same as that of A-shares, and the bargaining power of downstream customers is lower than that of A-shares, which is related to the fact that pharmaceutical commercial listed companies are located at the terminal of the industrial chain.

Introduction to the development index of pharmaceutical commercial listed companies

Development index of pharmaceutical commercial listed companies is a comprehensive index that reflects the operating status of pharmaceutical commercial listed companies.

Pharmaceutical Commercial Listed Company Development Index Statistics are derived from the public data of regular reports of pharmaceutical commercial listed companies. By surveying 32 pharmaceutical commercial listed companies listed on the A-share market (data as of October 8, 2022), it is compiled based on the relative operating performance of pharmaceutical commercial listed companies on A-shares (excluding financial and financial listed companies). It is a comprehensive index reflecting the economic operation status of pharmaceutical commercial listed companies.

The value range of the development index of pharmaceutical commercial listed companies is between 0 and 200: (1) 100 is the critical value of the quality of the index; (2) 100~200 is the high-quality range, indicating that the quality of the pharmaceutical commercial listed companies is higher or healthier than that of A-share listed companies; the closer to 200, the higher the quality; (3) 0~100 is the questionable quality range, indicating that there is a gap in the quality of the pharmaceutical commercial listed companies or the risk of operating development compared to A-share listed companies, and the closer to 0, the lower the quality.

Pharmaceutical Commercial Listed Company Development Index Monitoring Scope: 32 listed companies in the pharmaceutical commercial industry.

Monitoring dimension: The development index of pharmaceutical commercial listed companies specifically includes seven dimensions: R&D capabilities, growth capabilities, profitability, operational capabilities, investment capabilities, financial pressure and upstream and downstream bargaining power, and different weights are given according to the importance of different dimensions.

Figure 5: Dimensional index explanation