Why did the pharmacy merger stop?

In the past few years, the four listed private chain pharmacies represented by the common people, Yixintang, Dashenlin and Yifeng pharmacies, as well as the capital represented by Ali, Gaochun and Cornerstone, are not opening pharmacies or rushing to fight. Mergers and pharmacies. However, this year, the tide of the capital of various capitals has shown signs of sudden cooling. Such as the common people, Dashen Lin, Yixintang, etc. are all in the same quarter in the first quarter of this year to slow down the pace of opening stores or mergers and acquisitions.
The strong presence of various capitals has promoted the development of the entire pharmacy towards concentration. But the mad mergers have also pushed up the valuation of pharmacies' M&A, but it should not be overlooked that the economic benefits created by individual pharmacies are moving down. According to the latest data released by Zhongkang CMH data, the pharmacy industry is currently expanding by scale. The average yield of the top 100 chain stores dropped from 1,936,300 yuan in 2017 to 1,180,600 yuan in 2018.
The more serious facts are still behind. The data shows that the overall size of the national pharmaceutical retail terminal market reached 384.2 billion yuan (based on retail price) in 2018, an increase of 4.85% from 366.4 billion yuan in 2017. This growth rate was 3.6 percentage points lower than the 8.15% in 2017. 20 years low.
Enclosure movement is now "brake"
“Why did the industry’s crazy mergers stop? First, the valuation is too high; second, there are too many uncertainties in the future. Our company has recently shown me several mergers and acquisitions cases, which have been denied by me. On the one hand, the target of mergers and acquisitions is still According to the valuation of 5300 points in the broader market, I can't do this. On the other hand, the industry now has too much uncertainty. If there are unfavorable policies, it may cause huge losses, plus the pharmaceutical retail industry. Another industry with very low gross profit margins, we dare not have a slight loss now." At the just-concluded 2019 Xipu meeting, the chairman of the people, Xie Zilong said.
Xie Zilong’s cautious attitude was also reflected in the reports of the people. In the first quarter of this year, the number of direct sales and M&A stores increased by 200, but in the same period last year, this figure reached 355.
Once upon a time, in the expansion of the store, the people of Hunan, the base camp coordinates, belonged to the “Bao Yong” in the industry. In 2015, the company was listed in the first year of listing on the Shanghai Stock Exchange. At that time, the company's revenue scale was in the middle of the four private chain pharmacies. After the listing, the company blew the expansion horn, attacking the city in all parts of the country, not opening a store, or buying a store. With the help of enclosure movements, in just a few years, the people jumped over Yixintang and Dashenlin won the “top spot” of the four listed private chain pharmacies.
In the past few years, in addition to the four privately-listed chain pharmacies represented by the common people, the capital outside the industry was once crazy. Since the second half of 2017, Gaoji Medical, a subsidiary of Gaochun Capital, has sprung up and entered the pharmacy M&A circle. By the end of 2018, it took only one and a half years to integrate the plates of about 30 billion yuan. Become the largest pharmacy chain in China. The crazy entry of various capitals has led to the emergence of chain pharmacies of different factions, such as the Ali system, the foundation stone system, the sorghum system, and the industrial enterprise system represented by Guangzhou Pharmaceutical. The crazy entry of various capitals has, in turn, pushed up the valuation of the industry's mergers and acquisitions. It is not uncommon in the industry that the pharmacy acquires the standard “Flour is more expensive than bread” and the primary market merger price is more expensive than the valuation of the secondary market.
Nowadays, it is not just a chain of pharmacies for ordinary people to slow down the pace of expansion. Before the people did not catch up, Dashen Linben was the boss of the four privately-listed chain pharmacies. In the first quarter of this year, the number of new stores in Dashenlin was 155 (including 105 new stores and 51 stores). In the same period last year, the number of new stores in the company was as high as 263.
A signal worthy of caution is that capital seems to be quietly retreating in recent days. For example, on the evening of July 23, the people also received a clearance-type reduction plan for the original shareholder Ze Xing Investment. Zexing Investment, which is backed by Swedish private equity giants, plans to reduce its holdings by nearly 30%. According to the current stock price estimation of the common people, the funds that can be cashed off can exceed RMB 5 billion.
Although the people said in the announcement that the reduction is "due to the shareholders' business development and capital needs", the huge reduction of the shareholding still triggers the imagination of the outside world.
Pharmacy industry under the hood
In the early stage, the chain pharmacies opened higher and high M&A, and the direct driving force was to meet the opportunity of prescription outflow in the hospital. With the comprehensive reform of “medical, medical insurance, and medicine”, it has entered the deep water area, and the policy of medical separation has continued to advance. The outflow of prescriptions in the hospital is regarded as a trend. The industry once estimated that the capacity of the retail market for prescription drugs outside the hospital may be as high as hundreds of billions of yuan. This is also why, since 2014, private chain pharmacies have been rushing to list, and the purpose is to seek funds for ammunition for expansion.
But the reality in the pharmacy industry is that the current performance of drugs in the retail industry is not satisfactory. According to Zhongkang CMH data, the total size of the retail terminal category in 2018 reached 384.2 billion yuan, up 4.9% from 366.4 billion in 2017; the growth rate dropped by 3.6 percentage points from 8.5% in 2017, a 20-year low. .
"The current competitive situation in the pharmaceutical retail industry is not optimistic. First, the low growth rate of pharmaceutical retail sales continues. Secondly, under the state of low growth rate, the number of pharmacies is still increasing, resulting in the average number of single-store service population continuing to decline. In addition, the top 100 chain The average single store turnover has declined; nationwide, the performance of small and medium-sized stores has fallen the most. Although the outflow of prescriptions in the hospital is a trend, the trend of outflow is not obvious.” Li Junguo, vice president of Zhongkang Information, told reporters.
At present, there are still many obstacles to the outflow of prescriptions in the hospital. “Prescription outflows must first solve the problem of prescription sources. The most basic rule in the drug law is that prescription drugs need to be purchased on prescription, but in fact almost all of our pharmacies now have no ability to tell whether the prescription is true or fake. Secondly, how to connect medical insurance to the development of professional pharmacies, the current challenges are heavy; in addition, the pharmacy's pharmacy service capacity can not keep up." At the Xipu meeting, Baiyang Group Chairman Fu Gang said.
A number of interviewees told reporters that behind the low growth rate of pharmaceutical retail industry growth in 2018, in addition to the obvious trend of prescription drug outflow, it also continued to ferment with the previous Shenji storm, the growth rate of tonic health products was severely frustrated, and retail pharmacies face medical insurance. Control fees and other factors are relevant.
A pharmacy in Guizhou told reporters that if the sales of the beneficial health products are good, they can account for more than 10% of the pharmacy income. The data monitored by Zhongkang CMH also showed that the growth rate of supplemental health products has dropped from 20.4% in 2017 to 5.8% in 2018.
Since the second half of 2018, the human resources and social security departments of various places have strengthened supervision over the designated retail pharmacies of medical insurance in the country, and launched a crackdown on fraud. It is worth noting that medical insurance control fees are also a violent shock to pharmacies. The data of Zhongkang also shows that the proportion of medical insurance card consumption in the retail market has reached 42.8%.
"In the long run, medical insurance control fees will become a trend, starting from the hospital and then spreading to pharmacies. The medical insurance supervision of pharmacies must be accepted. It will only begin now, and the follow-up will continue. From the perspective of the entire drug retail, short-term Will be affected." China Resources 391 high-level people also told reporters.
Wu Jing, president of Zhongkang Consulting, said in an interview with reporters that the national new medical reform and the National Health Construction Committee have established measures such as the medical association to make the customers return to the medical institutions to a certain extent. At present, the sales scale of pharmaceutical retail terminals is mainly due to the fact that the retail price of terminals is driving, but the passenger flow has a downward trend. Retail pharmacies face an upgrade, but in the long run, professional pharmacies have a lot of room for development.