01 Preparation + API: the helplessness to build the factory

 Why say that the tuyere of pharmaceutical enterprises to build API base has passed? Let's first talk about why pharmaceutical companies want to build API bases from the underlying logic.

 Today's collective procurement makes people feel that with the cost advantage of API base, pharmaceutical companies can survive. Some B certificate enterprises or agents are worried about raw materials being controlled, so they enter the bureau. The general first thought is to take the road of controlling raw materials first, and then raise the price.

 But in fact, except for a few of these companies have achieved results, most of these companies are on the red road.

 What are the success stories? Head drug enterprises have a high success rate. For example, Chengdu Beite Pharmaceutical, Puli Pharmaceutical and other companies have mature capital chains, which can support the expenditure of API base. Moreover, the products of these enterprises can be digested internally without having to worry about self-financing; or Qilu, Shiyao can provide foreign cooperation channels for API bases? How many failures in the industry?

 But small and medium-sized enterprises are different. At the beginning, there may not be so many varieties, and it takes more than three years to build a factory, and it also takes time to declare the varieties. At this time, the enterprise should be prepared for five or six years of loss. This poses challenges to the capital flow and financial planning of pharmaceutical companies.

Secondly, if the market demand forecast is not accurate and the product design is unreasonable, it may lead to overcapacity, thus increasing the inventory cost and reducing the efficiency of capital use.

 Take a previous alliance gathering, for example:

 The first year of rosuvastatin calcium collection base was converted to less than 5t, which was only 3.5t among the three bid-winning enterprises. In 2018, China exported rosuvastatin calcium API and advanced intermediates. Capacity is much higher than that demand. In addition, the world needs about 150t of rosuvastatin calcium API, which is basically produced by both China and India. Thus, API companies can hardly survive if they rely on their domestic market share. On the contrary, the supply of API exceeds the demand in terms of capacity. And preparation enterprises only see how to ensure the stability of the supply chain.

 As is known to all, the marginal cost decreases after the large-scale production of API, and the cost is effectively controlled. How feasible if a pharmaceutical company can build API manufacturers only for the 3.5-5t demand?

 In addition, some enterprises did not build in accordance with the standard, the plant may have been invested in reconstruction. With the reform of the supply-side, especially the strengthening of environmental protection and safety supervision, most small and medium-sized enterprises and even large enterprises have been shut down.

 Is the core team stable? API team needs systematic ability, including amplification and environmental protection, etc. Once no one does it or uses is wrong, it is easy to cause huge losses to the enterprise.

A general of Pharmaceutical said that the current window is a relatively better time for pharmaceutical companies to transfer API around COVID-19, and in addition, in the current situation that the world are building new production capacity and domestic volume, the self-built base is not suitable. Any raw material can be cooperated through the drug melting circle. In addition, API companies can also cooperate with foreign countries in another way, such as preparation sharing, so as to form a community of shared future.

02 Pharmaceutical Association

 Drug substance + preparation: making products should have the price space for operation

 What if it's the drug extending to the preparation? Are there still opportunities left?

 Some API factory owners have such a native thinking, API preparation, can reduce the overall cost, but also to earn money from the preparation. In the early stage, some enterprises caught up with the collective dividend, but now it is not so.

 But the preparation is the preparation, and the API is the API.

 API makes production, focusing on how to improve production efficiency, reduce production steps and reduce cost; however, it on product structure and marketing incentives.

 From another point of view, we think about a question, nearly 2 million agents in the country, the API is not their own, the variety is not their own, why can they make money? Do they rely on the cost? They also have to pay the agency fee. This shows that the product should have the price operation space.

This is the blind spot for API companies.

 Can we reduce the layout of the sales section through the collective collection? There are two scenarios:

 First of all, lucky to participate in the collection, but the amount of walking may not be large, the original may be exclusive bid, but now evolved into seven or eight, sales may be hundreds of millions, but this research and development investment can not earn back.

 Second, miss the collection, but re-establish the sales team, this is not simply to find a sales master can solve the problem. The hospital, the third terminal, pharmacies, and online channels should be considered. This requires the whole team to be patient, persistent, maybe build a new team, five years, and gradually understand sales.

Pharmaceutical companies rely on varieties, but the core competitiveness is still in business.

Content reference:

"The integration of API preparations as the core competitiveness is a false proposition"

"AB Change: A Not gorgeous gorgeous Attack"