Anticipating lower growth rate from pharmaceuticals
The company reiterated the objectives in the incentive program as guidancefor 2016, suggesting 15-20% YoY growth on core earnings. On revenue breakdown,the company expects pharma/device/hospital will change from70%/20%/10% to 55%/25%/20% in next 3-5 years, due to slower growth fromdrug manufacturing. On pharma segment, management suggested that salesof new products such as Youdier and Youlitong almost doubled in 2015.Additionally, Aodejin is likely to maintain the slow growth rate due to theadverse event which was made public in June 2015, as well as inclusion insupportive drug list. On device segment, the company is actively looking foracquisitions of products and technologies from Israel, Europe and the US. Onhospital segment, the progress remains slow on public hospitals. Managementalso showed interest in acquiring overseas hospitals for their lower valuationand management expertise.
10% price cut for the overall portfolio in 2015
Management estimates a price cut of 10% for the company’s product portfolioin 2015. For matured products with proven efficacy, such as Wan Su Lin andWan Su Ping, the strategy is to gain market share in low-tier cities throughprice cuts. Additionally, management highlighted that the ex-manufacturingprice of Aodejin actually increased in 2015, vs. declining tender price. Webelieve the drug segment might be under pressure in 2016 as most of theproducts are legacy products with plenty of competitors, while Aodejin is likelyto face fast growth deceleration.
Biologicals as the next driver
Apart from a small portion of TCM drugs, the revenue breakdown betweenchemical/biological drugs is 50%/50% for the existing product portfolio. Fosunbelieves mAb will be the next driver for the company. The managementhighlighted that clinical application process had been accelerated. With theAvastin mimic being approved last week to start clinical trials, Fosun has 3biosimilar mAbs/4 indications in the clinical stage. In total, the company has 6mAbs/9 indications in the pipeline at present. Management expects the launchof the Rituxan mimic in 2018 and Herceptin mimic in 2019.