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Public company info - New Ray Medicine International Holding Ltd. , 06108.HK
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New Ray Medicine International Holding Ltd., 06108.HK - Company Profile
Chairman Liu Yang
Share Issued (share) 1,672,000,000
Par Currency Hong Kong Dollar
Par Value 0.05
Industry Medicine
Corporate Profile Business Summary: The Group is principally engaged in the distribution and trading of pharmaceutical products and the provision of marketing and promotion services in the PRC. Performance for the year: The total revenue for the Year was approximately HK$118.6 million, representing a decrease of approximately 68.2% from approximately HK$372.4 million for the year ended 31 December 2018. Gross profit decreased by approximately HK$32.5 million, or approximately 68.6%, from approximately HK$47.4 million for the year ended 31 December 2018 to approximately HK$14.9 million for the Year. The Group’s gross profit margin for the Year was approximately 12.5%, which has decreased by 0.2 percentage points when compared to 2018. The Group recorded a change from a profit attributable to owners of the Company of approximately HK$33.2 million for the year ended 31 December 2018 to a loss attributable to owners of the Company of approximately HK$44.1 million for the Year. Business Review This segment generated a revenue of approximately 114.7 million for the Year (2018: approximately HK$364.5 million), representing a decrease of approximately 68.5% as compared to 2018. The significant decrease in revenue was primarily attributable to the sales decline of the Product as a result of the temporary suspension of production and sales of the Product during the Year. On 28 February 2019, the Group received a letter from 杭州市市場監督管理局 (Hangzhou Municipal Administration for Market Regulation) (the English name is for identification purposes only) (“Hangzhou Market Administration”) requesting the Group to stop selling the Product and to recall all batches of the Product in the market pursuant to the instruction of 浙江省藥品監督管理局 (Zhejiang Food and Drug Administration) (“ZFDA”) after the identification of defective batches of the Product during the course of an unannounced inspection. The Group had stopped selling the Product and had recalled all batches of the Product from customers accordingly. The Product distributed by the Group contains two packings i.e. 0.5g and 1.0g of a sealed glass container. In April 2019, the Group applied to Hangzhou Market Administration and ZFDA for the resumption of trading of the Product in the PRC. On 6 May 2019, Hangzhou Market Administration issued a notice to the Group (“Notice”) which specified that the Group had been discharged of the administrative measures for the suspension of the trading of the Product (1.0g) from the date of the Notice pursuant to the notice of ZFDA. Accordingly, the Group could start selling the Product (1.0g) again in the market. In June 2019, the manufacturer of the Product notified the Group that a thorough examination and review of the manufacturing process of the Product (“Improvement Project”) was being conducted in order to improve the Product’s quality and to avoid any similar incident of defective production of the Product in the future. During the course of the Improvement Project, production of the Product was suspended. The Improvement Project was completed and the production and sales of the Product (1.0g) has resumed since September 2019. As at 31 December 2019 and the date of this announcement, the production and sales of the Product (0.5g) remained suspended. The Group expects that the temporary suspension of production and sales of the Product (0.5g) will not cause a material negative impact on the Group’s revenue in 2020. Provision of marketing and promotion services This segment generated a revenue of approximately HK$4.0 million for the Year (2018: approximately HK$7.9 million), representing a decrease of approximately 49.4% as compared to 2018. The “Two-Invoice” System (兩票制), which only allows a single layer of distributors between the sale of drugs from the manufacturers to the end customers (e.g. hospitals) for the purpose of reducing the drug circulation chain and layers between drug manufacturers and end user medical institutions, has been implemented in most of the provinces in the PRC since 2017. It substantially increases industry concentration, and as a result, the Group is in the unfavoured situation to compete with the national leading pharmaceutical distribution companies. Under the implementation of the “TwoInvoice” System (兩票制) in the PRC, the Group has started to develop its business of the provision of marketing and promotion services in respect of pharmaceutical products in the PRC since 2017. The Group’s marketing and promotion model involves formulating marketing and promotion strategies and conducting academic promotion programs of the Group’s products in return for service income from the suppliers. The decrease in revenue from this segment was primarily because the market was highly competitive and the services contract entered into between a subsidiary of WinHealth International and the Group for the provision of marketing and promotion services of certain pharmaceutical products expired in late 2018. Prospects: Industry Outlook Under the implementation of the “4+7 centralised purchase policy” (4+7城市藥品集中採購文件) and the expansion of this centralised drug procurement regime as well as the tightened national health insurance budgets, the Group expects that the drug pricing pressure and loss of market share will continue, which may result in further loss of sales and drop in the average profit margin of the Group’s products. Although more stringent regulations may create short-term operating pressures, the Chinese government continues to commit resources to and invest in the healthcare sector as part of its long-term healthcare reform plan in the long run. Moreover, aging population, urbanisation, increase in chronic diseases and household income and wider coverage of medical insurance in the PRC will drive the demand for medical treatments and use of drugs. The Group believes that the pharmaceutical industry will be fueled with new opportunities and momentum for growth in the long term. Covid-19, a new coronavirus, has first been detected in Wuhan, the central Chinese city, in late 2019 and has widely spread across the country in early 2020. The Chinese government has stepped up its efforts to prevent the spread of Covid-19, which is highly contagious, by imposing quarantine on travel in and out of Wuhan and neighbouring cities. Flights, trains, public buses, metro system and long-distance coaches in some cities were also suspended. Some cities implemented measures including stricter controls on the movement of residents and vehicles and shut down of leisure and other non-essential community services. As the coronavirus outbreak discourages large-scale gatherings and functions and confines citizens to their homes, the Group’s business, in particular, the provision of marketing and promotion services, has been significantly impacted. However, the Group expects that the spread of coronavirus will be contained in foreseeable future. The Group’s business of the provision of marketing and promotion services will resume once the situation becomes stable. Growth Strategies (a)Continue to diversify the existing product portfolio During the Year, the Group acquired the exclusive national distribution rights of five prescription capsule and granule drugs in the PRC. The manufacturers are currently applying for approval to manufacture these capsule and granule drugs in the PRC. The Group will seek to acquire distribution rights of new products to enhance its product portfolio. Looking ahead to 2020, the Group will continue to enhance its product portfolio, distribution channels and marketing and promotion strategy in order to achieve a better and sustainable long-term development of the Group. (b)Continue to enhance and expand the sales and marketing capabilities In order to strengthen the competitive advantages over the Group’s competitors in the PRC, the Group will continue to enhance its local distribution network and sales and marketing capabilities in the future. In addition, the Group has been exploring different opportunities to enhance its distribution capabilities. (c)To focus on the Group’s core businesses As a long-term business strategy, the Group intends to focus on its core businesses of the distribution and trading of pharmaceutical products and the provision of marketing and promotion services in respect of pharmaceutical products in the PRC through reallocating its resources to the future development of the core businesses. The Group may consider the possibility of disposing of the business or assets in respect of its non-core business currently held by the Group in the coming future.

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