1、 The risks faced by the company
1. Risk of adjusting industry policies
The pharmaceutical industry is greatly affected by policies, and policy adjustments will have a fundamental impact on various aspects of enterprise research and development, production, and sales. Therefore, the uncertainty brought about by industry policy adjustments is an important risk factor for the future development of companies.
In order to strengthen the clinical application management of antibacterial drugs in medical institutions, standardize the clinical application behavior of antibacterial drugs, control bacterial resistance, ensure medical quality and safety, the Ministry of Health has issued the "Administrative Measures for the Clinical Application of Antibacterial Drugs (Draft for Comments)" multiple times since April 2011, and officially released the "Administrative Measures for the Clinical Application of Antibacterial Drugs" (Order No. 84 of the Ministry of Health) on April 24, 2012, which has been implemented since August 1, 2012.
The Measures classify antibacterial drugs into non restricted use level, restricted use level, and special use level based on factors such as safety, efficacy, bacterial resistance, and price. It is stipulated that each provincial health administrative department shall formulate a classification management catalog for antibacterial drugs and report it to the Ministry of Health for filing. Medical institutions shall develop their own antibacterial drug supply catalog in accordance with the catalog formulated by the provincial health administrative department, and report it to the health administrative department that issued their "Medical Institution Practice License" for filing.
Since the release of the "Draft for Soliciting Opinions" in April 2011, it has had a strong impact on the entire antibiotic industry. The classification of antibiotics has had a significant inhibitory effect on the growth of the market for most categories of antibiotics, bringing tremendous impact to antibiotic pharmaceutical companies. The main products produced by the company are all within the scope of policy adjustments, so the release and implementation of the Measures will have an adverse impact on the company's future business performance. However, based on the variability of the current antibiotic pharmaceutical market pattern, the specific impact on the company's business performance cannot be accurately predicted.
2. The risk of concentrated dominant products
The company is mainly engaged in the research and development, production, and sales of antibiotic raw materials and preparations. The company's leading product is the active pharmaceutical ingredient and preparation of Atractylodes macrocephala, which accounts for a relatively high proportion of the company's main business revenue and gross profit. Although the sales revenue and gross profit of the company's leading products have been decreasing year by year in recent years, their proportion is still relatively large. If the sales situation of the company's leading products is poor and the company fails to develop more solid pillar products in a timely manner, it will have an impact on the company's business performance. Therefore, there is a risk that the company's leading products will be concentrated.
3. Risk of intensified market competition
Although the market space for antibiotic raw materials and preparations is vast and the industry profit level is high, with the increasing number of manufacturers and the gradual release of their products into the market, as well as the promulgation and implementation of new antibiotic policies, the competition in the segmented antibiotic market will become more intense. The competition mode of manufacturers will shift towards price competition, and the intensification of market competition will have a certain negative impact on the overall profit level of the industry.
4. The risk of drug price adjustment
From the overall idea of drug price reform, in the future, the main measures to achieve a decrease in terminal drug prices will be to reduce the intermediate circulation links of drugs, control the markup rate of circulation links, and encourage production enterprises to sell directly; Secondly, with the continuous emergence of new drugs and the popularization of generic drugs in the primary healthcare market, drug prices will generally show a downward trend; Once again, there are numerous antibiotic production enterprises in China, and price competition remains one of the main means of competition. Therefore, the adjustment of drug prices will have a certain impact on the company's business performance.
5. Risks associated with the implementation of fundraising projects
The company's fundraising projects mainly aim to expand the company's main business scale and enhance its research and development capabilities. After the project is completed and put into operation, it will have a significant impact on the realization of our company's development strategy, the expansion of our business scale, and the improvement of our performance level. However, there is uncertainty regarding whether the construction plan of the fundraising investment project can be completed on time, as well as the implementation process and effectiveness of the project. In the process of project investment decision-making, the company has fully demonstrated and predicted factors such as market, process technology scheme, equipment selection, engineering scheme, environmental protection, and finance. However, it cannot be ruled out that investment risks may arise due to deviations in prediction analysis and some uncertain factors during project implementation. At the same time, factors such as the development of competitors, changes in drug prices, changes in market capacity, the emergence of new alternative products, changes in macroeconomic conditions and policies, as well as the effectiveness of supporting measures for sales channels and marketing forces, will also affect the investment return and expected returns of the project.
6. Risk of delayed acquisition of registration approval for fundraising project products
According to the Measures for the Administration of Drug Registration (Order No. 28 of the National Medical Products Administration), the production of new drugs or drugs with existing national standards must be approved by the drug regulatory department of the State Council and issued with a drug approval number. Drug manufacturers can only produce the drug after obtaining the drug approval number. If the company cannot obtain the production approval for the relevant products in a timely manner, and there are changes in macro policies and market environment, it will affect the continuous implementation of the fundraising project.
7. The risk of adding depreciation to fundraising projects affecting the company's profitability
With the increase and gradual completion of the company's fundraising projects, the company's fixed assets will increase significantly year by year, and the annual new depreciation will also increase significantly. The new depreciation will to some extent affect the company's net profit and return on equity. The company will face the risk of fixed asset depreciation affecting its profitability.
8. Internal management risks caused by the expansion of business scale
In recent years, the company has continued to develop rapidly. With the continuous expansion of the company's asset scale, business scale, and personnel scale, the personnel composition and management system will become increasingly complex. This requires the company to continuously improve its management capabilities and adjust its existing organizational model and management system in a timely manner according to business development needs. Otherwise, it will hinder the healthy development of the company's business and there is a risk that the organizational model and management system will lag behind the company's development.
9. New product development, pilot testing, and industrialization risks
The research and development investment of pharmaceutical products is relatively high, with the characteristics of high technology and high risk. New drugs have long development, clinical trials, application, production, market cultivation and development cycles, and multiple links, which are easily affected by unpredictable factors. Therefore, there are significant risks in the development, pilot testing and industrialization of new products.
10. Safety and environmental risks
Although the company has treated the pollutants generated during the production process in accordance with relevant environmental laws, regulations, and standards, and strictly implemented necessary measures for safety production, the adjustment of national environmental policies and the implementation of new projects will increase the company's safety and environmental risks to a certain extent.
2、 Response measures
The company will closely monitor the changing trends of national policies and industry dynamics, timely grasp the changes in the pharmaceutical market, and prepare relevant response plans. The company is currently undergoing a strategic adjustment of its product structure, and will strive to improve the single dominant product of the company from various aspects such as product research and development, production, and sales, continuously enrich the company's product categories, build a professional and excellent sales team, actively participate in market competition, continuously expand market share to reduce the risk of profit reduction caused by price drops due to national policies and market competition.
The company will strictly follow relevant regulations, actively and orderly carry out product research and development registration work, adopt scientific product research and development strategies to reduce product research and development risks, make every effort to shorten the cycle from product research and development to production, and promote registration and application work. While completing the company's product structure strategy adjustment, necessary registration approvals can be obtained within a reasonable time. At the same time, the company will focus on expanding its main business scale and enhancing its research and development capabilities to promote the implementation of fundraising projects. Effective adjustments will be made in response to market changes, closely monitoring the macroeconomic situation, and implementing supporting measures such as sales channels and marketing team building to ensure that relevant projects achieve the expected results.
The company will increase training for management and continuously improve their management capabilities to cope with internal management risks caused by the continuous expansion of the company's scale. The company will continuously optimize its management system, establish a sound information system, and adjust its existing organizational model and management system in a timely and reasonable manner to adapt to the company's development.
The company further implements the main responsibility system for enterprise safety production. Adhere to the policy of "safety first, prevention oriented, and comprehensive management", prioritize people-oriented approach, strengthen supervision and inspection, and implement responsibilities, enhance safety publicity and education, and strive to create a safety atmosphere of full participation and prevention by all staff. Continuously innovating safety management methods to achieve a transition from traditional experiential management to specialized and standardized management models. At the same time, the company will further increase its investment in safety, making it suitable for the scale of enterprise development, effectively preventing and resolutely curbing the occurrence of safety and environmental production accidents.