Jiuzhitang 2020 half-year board of directors operating commentary

Jiuzhitang's (000989) 2020 Half-Yearly Board of Directors' Operating Review is as follows:

I. Overview

In the first half of 2020, the new coronary pneumonia epidemic swept across the globe, which caused an unprecedented impact on the world's countries and industries, and at the same time, brought positive impact on the development of the pharmaceutical industry. In the process of fighting the epidemic, Chinese medicine played an important role, a variety of Chinese medicines were officially included in the diagnosis and treatment programs at all levels, clinical efficacy observation shows that the total effective rate of Chinese medicine in the process of prevention and control of the application of this epidemic reached more than 90%. The significant role of Chinese medicine in the fight against the epidemic is conducive to enhancing the strategic status and social recognition of Chinese medicine in China, as well as promoting the internationalization of Chinese medicine. At the same time, the government's advocacy of the concept of "from disease treatment to disease prevention" will also lead national health consumption to a more mature stage, and the health industry will usher in significant development opportunities. On the other hand, the medical system reform continues to deepen, the consistency evaluation of injections to start, the normalization of the national drug centralized purchasing, medical insurance system, drug management system and other pharmaceutical policies have been introduced intensively, the pharmaceutical industry will still be in the adjustment stage, the industry competition has further intensified, the industry concentration continues to improve.

In the face of challenges and opportunities, the company, while inheriting traditional Chinese medicine theory, culture and medical technology, is oriented to the people's health needs in the new era, adheres to the development concept of "combining inheritance and innovation", and practises the mission of "Hundred Years of Jiuzhitang, Serving Great Health". "Jiuzhitang integrates traditional medicine and modern medicine, lays out stem cell medicine industry and medicinal and food products series business, and at the same time, conforms to the policy guidance of the state to vigorously develop Internet medical care, and explores and promotes the project of Internet hospital based on "Internet+Chinese medicine", and goes online one after another for trial operation. We are committed to providing accurate and effective services in the three areas of prevention, treatment and rehabilitation for the management of human health throughout the life cycle, so as to create a healthy and better life for human beings.

During the reporting period, the Company "nurtured new opportunities in the midst of crisis and opened new horizons in the midst of change", firmly established its cultural, strategic and road confidence, deepened the Group's management and control model, continued to cultivate the core strengths of its traditional businesses, and rapidly pushed forward the steady development of its innovative businesses, and actively carried out its work in accordance with the annual business plan, resulting in good production and operation conditions. The overall production and operation situation is good.

In terms of production, the company adheres to the normalized management of epidemic prevention and control, and the ability of epidemic prevention and control and production management continues to improve, the company's overall production and epidemic prevention and control is safe and stable, and all staff are not infected; in terms of operation, the company gives full play to the role of the locomotive of the market, focusing on the sales work, and tapping into the potential of the existing varieties, to ensure that the traditional products do better and stronger; in terms of innovation, the company has made intensive and in-depth efforts to lay out stem cell business, which is in line with the trend of the stem cell business. In terms of innovation, the company has made intensive efforts to lay out the stem cell business, followed the trend of exploring the new business model of the Internet, accelerated the combing of medicine and food with the development of the direction of health products, and actively promoted the breakthroughs of innovative projects to ensure the company's sustainable development in the future.

In the first half of 2020, the Company realized an operating income of RMB1,832,973,600, representing a year-on-year growth of 8.55%, and a net profit attributable to shareholders of listed companies of RMB197,115,000, representing a year-on-year growth of 11.71%.

During the reporting period, the Company mainly carried out the following work:

1. Actively promote the re-evaluation of listed products to improve product competitiveness

1.1 Evidence-based medicine and re-evaluation project of Blood-Sparing Injection of Youbao Pharmaceuticals

During the reporting period, the "Twelfth Five-Year Plan" major special project, "Blood-Sparing Injection Evidence-Based Medicine and Re-evaluation Project," was completed. During the reporting period, the SPACE Clinical Research Group of the "Twelfth Five-Year Plan" project held a symposium, and the results of the trial showed that SPACE Injection had a definite anti-embolism effect on the people identified as having high-risk factors for embolism, and the clinical trial protocol had been published in an SCI article; in the 12th Health China Forum Parallel Forum on Evidence-based Traditional Chinese Medicine, directed by the People's Daily and sponsored by the People's Daily Health Client and the Health Times, Yobo Pharmaceuticals was honored with the honor of being invited as a member of the 12th Health China Forum. In the "12th Health China Forum Evidence-Based Chinese Medicine Parallel Forum" organized by People's Daily Health Client and Health Times under the guidance of People's Daily, Shuxuetong Injection was awarded the first place in the "Top 10 Evidence-Based Evaluation Index of Proprietary Chinese Medicines (Stroke)" by the Evidence-Based Traditional Chinese Medicine Research Alliance, which is the first authoritative evaluation of the clinical value of proprietary Chinese medicine products from the perspective of evidence-based medicine. This is the first authoritative evaluation of the clinical value of proprietary Chinese medicine products from the perspective of evidence-based medicine. According to the method of analyzing the evidence index of proprietary Chinese medicines, it is evaluated by the quantity, quality, and expert*** knowledge of clinical studies, and is able to fully reflect the comprehensive strength of the evidence of the clinical effectiveness of proprietary Chinese medicines.

During the reporting period, the re-evaluation of Shuxuetong Injection carried out by the Company on its own initiative progressed steadily. The experiments related to the safety re-evaluation of Blood-Sparing Injection have been carried out continuously, and the group standard of leech and Dilong has passed the standardization office of the Chinese Medicine Association for review; the project of "Research on the material basis and mechanism of Blood-Sparing Injection" carried out by Tianjin University of Traditional Chinese Medicine has published 6 academic articles and applied for 8 patents. This work has laid a solid foundation for the continuous enhancement of the clinical value of the company's leading variety of blood-sparing injection and the effective implementation of specialized academic promotion.

1.2 The standard improvement project of Ski Biology Skikang

During the reporting period, the standard improvement project of BCG Polysaccharide Ribonucleic Acid Injection (Skikang) carried out by the Company has completed the isolation, purification and analysis of ribonucleic acid components and sequencing, nucleic acid immune factor TNF-α stimulation experiments, analysis of the chemical structure of polysaccharides, and efficacy tests, which has contributed to the reasonable interpretation of the material basis and mechanism of Skikang, and the establishment of a proprietary and strong mechanism for the development and application of Skikang. This has laid the foundation for the rational interpretation of the material basis and mechanism of Skikon and the establishment of exclusive quality standards.

2. Focusing on drug R&D and accelerating innovative projects

2.1 Anticoagulant class I new drug LFG project

During the reporting period, LFG project has completed the stability study of LFG preparation and API (pilot sample), and then it will complete the preclinical safety test, and is ready to start the work related to the IND declaration. Two new invention patents were authorized in the half-year, including one U.S. patent authorization, and as of the end of the reporting period, the project has obtained 15 patent authorization certificates distributed in 7 countries.

2.2 Stem Cell Project

During the reporting period, Beijing Meike was awarded the title of "Ninth Batch of Golden Seed Enterprises" by the Management Committee of Zhongguancun Science and Technology Park, the financial support for the promotion of pharmaceutical and healthcare industry in Daxing District, and the qualification as a supporting unit of the project of the Beijing Municipal Natural Science Foundation, which was recognized by governmental agencies and the industry. In addition to being recognized by government agencies and the industry, the company has also made a number of important advances in its business.

2.2.1 Construction of production and R&D bases and process quality system

During the reporting period, Beijing Meike's production and R&D bases in Daxing District entered into the stage of equipment verification, debugging and validation, and the relevant work was basically completed. In terms of process, Beijing Meike has conducted several batches of hands-on training, mastered the production process, and produced stem cells in full compliance with quality standards. In terms of quality, Beijing Meike has further improved its quality system in accordance with China's GMP requirements and mastered the quality testing technology.

During the reporting period, in order to promote the clinical research and transformation of stem cells in the field of heart disease, Beijing Meike signed a Cooperation Agreement with The Second Hospital of Harbin Medical University, and reached an agreement on the application of the two parties for the filing program of clinical research on stem cells with the National Health and Wellness Commission. The signing of this agreement helps to further promote the Company's entry into the field of stem cell research and enhance the Company's business development space.

2.3 REMD-477, an antibody drug for glucagon receptor

Beijing KexinMed Biomedical Technology Co., Ltd, in which the Company has a stake, is mainly engaged in the research of REMD-477, an antibody drug for glucagon receptor, and during the reporting period, REMD-477 has continued to undergo clinical phase II and preclinical phase III preparatory work in the United States. Preparatory work. Firstly, the long-term toxicology trial in rhesus monkeys was completed and the formal trial report is being reviewed and evaluated, secondly, the production and testing of clinical samples was completed and the stability study of clinical samples was conducted, and thirdly, the trial protocols were prepared and are currently undergoing approval by the FDA and NMPA.

2.4 Intellectual Property Rights

During the reporting period, the company*** applied for 8 invention patents and obtained 7 authorizations (including 6 invention patents), which are mainly related to the products, preparation methods, quality control methods and new uses in the projects of Naked Flower Zizyphus, BCG polysaccharide nucleic acid and so on.

3. Lean manufacturing to ensure the quality of traditional business to do better and stronger

3.1 OTC products

The company's OTC product sales based on cultural marketing, to achieve sustained and stable growth in performance. During the reporting period, the Company improved and optimized the construction of institutional system and organizational system of OTC segment, and carried out the refined management of channels and terminals to ensure the effective smooth flow of channels and effective coverage of terminals. Adhere to the people-oriented, cultural marketing, make every effort to do a good job of product echelon strategic planning and layout, classification and hierarchical management, bigger and stronger strategic main products, focus on strategic new products, explore the operation of the project products, and strive to incubate new features new rules.

At the same time, the comprehensive strengthening of consumer Chinese medicine culture and health and wellness education in multiple forms, strengthen the Internet digital economy and O2O new retail cooperation, and actively explore new media, live sales and other new models.

3.2 Prescription Drug Operation

The prescription drug sales segment clearly defined the marketing idea of "product + model + team". During the reporting period, we overcame the impact of business resource integration, medical policy changes and epidemics, focused on key varieties, key markets and key terminals, adjusted the commercial pattern in some provinces, added new large-scale primary commercials, expanded terminal coverage, and carried out in-depth adjustments and optimization of the management process to realize the full-flow on-line of business, sales, marketing and other business sections. At the same time, we re-investigated and analyzed the market situation of the existing key products in sales of prescription drugs and completed the "Product Academic Promotion Roadmap", which clarified the key markets of the products, focused on the promotion plan, and implemented the implementation of academic activities. We developed a new media promotion program to expand brand promotion and influence by building a professional academic platform. In addition, we are actively exploring new modes of DRG promotion and commercial sales, setting up a DRG promotion department to deliver the concept of rational use of DRG, eliminating end-user clinical misconceptions, and carrying out clinical pathway publicity for indications; and setting up a commercial sales team to focus on business, solidifying channels, subdividing customers, and ensuring sales volume through the integration of resources.

3.3 Pharmaceutical commercial

The main business of the pharmaceutical commercial sector further transformation, retail (including e-commerce) accounted for a gradual increase in the proportion of performance over the same period last year. During the reporting period, chain management, expanding stores (directly-managed stores and franchised stores)***38, using cell phone inventory, 10,000 stores palm remote management, supplier management system and other standardized, process-oriented, digital management tools to strengthen the franchise management, standardize the management of stores, and improve store services. Carry out live broadcasting, social marketing and other new retail methods to improve the level of per capita income generation in stores.

At the same time, the store from time to time to carry out charity clinics, primary and secondary school students social practice and the promotion of Hunan Chinese medicine culture and other activities, and actively fulfill their social responsibilities. In terms of wholesale management, we are actively developing suppliers and end customers, and seeking new development initiatives to cope with the epidemic; in terms of e-commerce business, we are focusing on the development of O2O, which has achieved a large year-on-year growth.

3.4 Production Segment

During the reporting period, the production center of the Company's headquarter and its production subsidiaries overcame the difficulties brought by the Xin Guan Pneumonia epidemic, resumed work and production in full at the first time, implemented the Three Guarantees action of price guarantee, quality guarantee and supply guarantee, promoted energy conservation, advocated synergy, and steadily carried out production work. The company has become the first enterprise in Changsha Hi-Tech Zone to restore 100% of its production capacity among 623 key enterprises.

Under the premise of ensuring normal production work, the company steadily pushed forward the construction of projects to help upgrade and optimize the production plate. The company's traditional Chinese medicine solid preparation intelligent factory integrated application of new mode project (intelligent manufacturing project) each system has been completed, the reporting period successfully passed the national project acceptance, by promoting the production process of traditional Chinese medicine solid preparation intelligent, effectively realize the group intelligent control, comprehensively enhance the level of intelligent management of the enterprise. The first phase of the project of National Pharmaceutical Health Industrial Park of the Company gradually improved the construction tasks and planning design, and the groundbreaking ceremony was held during the reporting period to communicate and revise the construction drawings. Through the construction of the project, the category structure of Jiuzhitang's fist products will be perfected, and product clusters with strong competitiveness will be formed. The wholly-owned subsidiary Youbo Pharmaceuticals carried out the work related to the EU certification and submitted the inspected information to the EU prosecutor during the reporting period, laying the foundation for the next formal certification.

4. Strive for breakthroughs in innovative resources, and continue to promote the expansion of new businesses

4.1 TCM medical and health services business

TCM medical and health services business to the Internet hospital platform to carry the construction of specialty system as a working hand, around the construction of the key specialties to gather expert resources, products and services system, and strive to form a specialty features The core competitiveness of "Internet+Products+Services" is also combined with the offline Chinese medicine hall to formulate the overall development idea of the online and offline medical service segment.

During the reporting period, the company seized the opportunity of the national advocacy of Internet diagnosis and treatment during the new Crown pneumonia epidemic to actively promote the implementation of Internet hospitals. Relying on the Tianjin old Chinese medicine hospital set up Jiuzhitang Internet hospital to obtain the Internet hospital medical institution practice license, combined with the company's advantageous resources to develop Internet hospital development planning, while closely around the core business needs to build online service platform, has basically completed the patient side of the WeChat public number, the doctor side of the APP and the background of the development work, the internal and external testing and Liaoning on-line trial operation, to meet business The company has completed the development of WeChat public number for patients and APP and backstage for doctors.

The company optimized the structure of the national medical hall, grasp the opportunity of the people's health care consciousness after the epidemic continues to rise, explore the national medicine hall operation and management of new models, the national medical hall "product + service" new mode of operation in Zhanjiang and Beijing, and achieved certain results.

4.2 Operation of medicinal food and homogenous products

During the reporting period, the Company adjusted the development strategy of medicinal food and homogenous products and existing product specifications in a timely manner, increased the specifications to meet the needs of the market, and focused on key products based on the market demand and the value of the brand. At present, we have listed products such as Colla Corii Asini, herbal tea (plant beverage), tea substitute, throat lozenges, collagen nourishing mask, essential oil soap, etc. At the same time, we explored and thought about new sales cooperation. At the same time, we are exploring and thinking about the new cooperation mode of sales and the path of self-management team building, in order to lay the foundation for the realization of the future sales of medicinal and food products, and to enhance the value of the brand and profit margins.

5. Strengthening management and consolidating the foundation, and continuously improving the effectiveness of the Group's work

During the reporting period, the Company continued to promote the Group's management and control, and strengthened the Company's ability of strategic planning, policy analysis, scientific decision-making, investment and financing, and promoted synergy among business segments through the idea of "release, management, and service"; through the comprehensive budget management and performance management; and through the comprehensive budget management and performance management. Through comprehensive budget management and performance management, the Company has realized target-oriented management, enhanced the awareness of targets and responsibility, and further focused on the target tasks and various key tasks, which has improved the Company's management capability and work efficiency. In addition, according to the needs of the Company's development, we actively carry out research, study and application of policies, establish and improve the system management system that meets the requirements of the Company's development and internal control, optimize the Company's governance structure and the personnel structure of the management team, build a professional, youthful, specialized and internationalized management team, and improve the level of scientific management. At the same time, to promote team building in a variety of ways to enhance team cohesion and combat effectiveness, to ensure the steady implementation of the company's strategy to the ground.

6. Tap into the dissemination of corporate culture, and actively practice social responsibility

2020 is the 370th anniversary of the founding of Jiuzhitang, the company continues to tap into the internal value of the brand, focusing on the research, construction and propaganda of corporate culture, internally to enhance the sense of honor and pride of the staff, and continue to enhance team cohesion and centripetal force, externally to maintain and enhance the corporate image, increase brand awareness In addition, Jiuzhitang integrates traditional medicine and modern medicine in the new era, and is committed to providing the most valuable and effective services for human health. At the same time, the company actively practiced social responsibility, passing on love and giving back to the society. After the outbreak of Xin Guan Pneumonia epidemic, the company, on the one hand, quickly responded to the government's call of "Three Guarantees Action", resumed work and production in a timely manner, and guaranteed the production and supply of anti-epidemic medicines and materials during the Spring Festival period and the subsequent period, The company has donated anti-epidemic drugs and materials to Guangzhou, Changsha, Wuhan, Mudanjiang and other war "epidemic" front line, and through the company's terminal chain stores and all kinds of media platforms, and actively disseminate scientific knowledge of epidemic prevention and epidemic prevention guidelines issued by the relevant state departments, spreading positive energy, to help the general public to prevent epidemics scientifically, and to establish the confidence to overcome the epidemic.

7. Reporting period the company and subsidiaries awards

(1) the company won the Xinhua News Agency, the Economic Daily News Agency, the China Council for the Promotion of International Trade, the China Association for the Promotion of Branding, the China Asset Appraisal Association, "Chinese brand value - Chinese old brand list (10.316 billion yuan)", and is ranked in the Hunan Province, old brand value of the list of Hunan Pharmaceutical Brand Value The top of the list.

(2) The Company was awarded "My Favorite Chinese Brand in 2020" and "Classic Case of Global Anti-epidemic Brand Power" by China National Brand Network.

(3) The Company's "New Model of Intelligent Factory Integration and Application of Chinese Medicine Solid Dosage" passed the acceptance of the special project.

(4) The Company was honored with the "2019 China Pharmaceutical Marketing Bronze Award" and the "Love Warms China - 2020 China Pharmaceutical Industry Love and Public Welfare Enterprises" issued by the 21st Century Pharmacy Newspaper and the China Academy of Pharmacy Management.

(5) Jiuzhitang Meike (Beijing) Cell Technology Co., Ltd. was awarded the honorary title of "Zhongguancun Golden Seed Enterprise".

(6) Hunan Jiuzhitang Retail Chain Co., Ltd. won the honor of "China's Top 100 Pharmacy Value List" issued by China Pharmacy Magazine, "Tribute to the Retrograde. 2020 Role Model of National Pharmaceutical Enterprises" issued by China Pharmaceutical Materials Association, "China Pharmaceutical Education Association" issued by China Pharmaceutical Education Association, and "China's Top 100 Pharmacy Value List" issued by China Pharmaceutical Magazine. The company was also honored as "Top 100 Chinese Pharmacy Value List" by China Pharmaceutical Industry Association, "2020 National Pharmaceutical Enterprise Role Model" by China Pharmaceutical Materials Association, and "2020 Chinese Pharmacy Chain Love Public Welfare Enterprise" by China Pharmaceutical Education Association.

(7) Chengdu Jiuzhitang Jinding Pharmaceutical Co., Ltd. was honored as "National Science and Technology-based Small and Medium-sized Enterprises".

C. Core Competitiveness Analysis 1. Brand Advantage: The predecessor of the company, "Lao Jiuzhitang Pharmacy", was founded in 1650, and now owns the "Jiuzhitang" and "Youbo" trademarks; "Jiuzhitang" and "Youbo" are well-known trademarks in China. Jiuzhitang" is recognized as "Chinese Old Brand" by the Ministry of Commerce of the People's Republic of China; Jiuzhitang traditional Chinese medicine culture is listed in the national intangible cultural heritage protection catalog. Jiuzhitang is a national innovative pilot enterprise, a key discipline construction unit of Chinese medicine engineering of the State Administration of Traditional Chinese Medicine, a national enterprise technology center and a national intellectual property demonstration enterprise. Jiuzhitang has been selected as one of the Top 500 Most Valuable Brands in China for many years, and has always been ranked first among the Chinese Old Brand Enterprises in Hunan Province. 2. Product Advantage: The company is a leading brand in the field of traditional Chinese medicine in China, with a history of more than 300 years. The company has more than 300 approvals for cardiovascular and cerebrovascular, tonic and tranquilizing, gynecological, respiratory, digestive, heat-clearing, otorhinolaryngological, orthopedic, dermatological, and pediatrics medicines. In the field of prescription drugs, the cardiovascular and cerebrovascular drugs have strong product advantages, and the Chinese medicine injections represented by blood-sparing injection have many national invention patents, while in the field of OTC, the blood tonic represented by donkey gelatin blood tonic granules and the kidney tonic represented by liuweidihuangwan two categories have strong brand advantages in the industry. 3.Marketing Advantage: The company is based on industry, and at the same time develops commercial and chain, spanning the two major fields of OTC and prescription drugs, with a marketing network throughout the country, covering all levels of medical institutions and terminal pharmacies. 4. Technological and technological advantages: the company has strong technological advantages, including beverage concoctions and pills production technology is in the leading position in China, not only formed a unique production process, but also has the domestic first-class automated production equipment. Meanwhile, Youbo Pharmaceuticals, an important subsidiary of the company, adheres to the concept of "quality by design" and considers the construction of quality system in the whole production process, which guarantees the quality of the products from the design process. The whole production process of Blood-Sparing Injection is scientifically and reasonably designed, and the active ingredients are purified by adopting a unique production process without the introduction of any organic solvents that are harmful to human body. 5. R&D Advantage: The company owns a number of scientific and technological platforms, such as post-doctoral research station, academician expert workstation, key discipline construction unit of Chinese medicine engineering of the State Administration of Traditional Chinese Medicine, and national enterprise technology center. The company has entered the field of stem cell research by investing in international advanced innovative R&D platforms. The company undertakes national and provincial scientific and technological projects such as the creation of national major new drugs and provincial major scientific and technological projects, carries out project research in an orderly manner, and steadily promotes the transformation of project results.