Pharmaceutical Markets and Drugs News
Research and Markets: China Pharmaceutical Chain Industry Report, 2010
Recent years have seen rapid growth of China’s pharmaceutical retail market, with expanding scale of chain enterprises and increasing number of drugstores, thanks to a fast-growing pharmaceutical industry and an aging population in China. In 2009, China’s pharmaceutical retail market scale reached RMB 153.1 billion, up 18.2% year-on-year. In particular, China’s top 100 pharmaceutical chain enterprises reaped RMB 58.1 billion in total, accounting for 37.9% of the total sales of the pharmaceutical retail industry. By the end of 2009, China had 2,099 pharmaceutical chain enterprises and 160,000 chain drugstores, up 5.7% and 24.0% year-on-year respectively.
This report not only highlights both the overall development and regional development of China’s pharmaceutical chain industry, but also elaborates on the operation of 14 pharmaceutical chain enterprises including Nepstar Drugstore, LBX Pharmacy, Guangdong Da Shen Lin and Hubei Ready Medicine Industry.
A case in point is Nepstar Drugstore, whose single-store profit decreased by 14.6% year on year to RMB 45,000 in 2009. Compared with the single-store profit of RMB 52,000 and year-on-year decline of 42.2% in 2008, the single-store profit in 2009 showed a downward trend, but at a slower rate, which can be attributable to three aspects: firstly, the proportion of self-owned brand drugs with higher gross profit margin has been increasing; secondly, the cost has been lowered through centralized procurement; thirdly, the profitability has been improved through increasing the sales revenue from non-drug products like nourishments.
Key Topics Covered:
Overview
Operating Environment
Development
Development in Key Regions
Key Pharmaceutical Chain Enterprises
Companies Mentioned:
Nepstar Drugstore
LBX Pharmacy
Guangdong Da Shen Lin
Hubei Ready Medicine Industry
Chongqing Tongjunge Pharmacy
Guoda Pharmacy
Yunnan Hongxiang Yixintang Pharmacy
Liaoning Chengda Fangyuan Pharmaceutical Chain
Guangdong Bencao Medicine Co., Ltd.
Chongqing Peace Drugstore
Shanghai Huashi Pharmacy Co. Ltd.
Tongrentang (TRT)
Beijing Golden Elephant Pharmacy
Cachet Pharmaceutical Stock Corporation Ltd (Cachet)
Drug Stores Need a Robust Holiday: WAG, PMC, RAD, CVS
Fitting in somewhere between Wal-Mart (WMT) and the corner convenience, drug stores have managed to take the middle ground in an ever-refining market. Expanding their ‘product mix’ in 2010 and relying on increasing sales of generic drugs has been a boon.
There are two clear leaders in the U.S. who have been setting the trends in merchandising and ‘atmosphere’ and one other major player is in a position to either follow their lead or be acquired.
The leaders of the pack are Walgreen (WAG) and CVS Caremark CVS with Rite-Aid RAD following. WAG shares today posted a new annual high of $40.20 on quarterly numbers for the period ending Nov 30. WAG had net income of $580 million, or 62 cents per share and revenue rose 6% to $17.34 billion. WAG ran 7,651 stores as of Nov 30 and expanded by nearly 500 stores over the last year.
What the long-term looks like for drug stores as a breed can be found in WAG’s management comments about how the Co posted such a strong quarter. WAG management said its store remodeling plans improved sales, the Co launched more and better promotions, WAG really controlled the pricing of products, and generic drug sales gave the pharmacy a boost.
The long-term also holds that pharmacies become something akin to ‘mini-clinics’ demonstrated by WAG administering (selling) 5.6 million flu shots during the quarter. Adding groceries into the products offered has also benefitted all of the pharmacies; mini Wal-Marts.
CVS is WAG’s closest competitor operating approximately 7,150 stores. CVS is trading in the $35.10 range and pays a 1.02% dividend ratio. CVS is taking on some of WAG’s growth initiatives by adding new products and remodeling interiors.
RAD has added groceries this year to its 4,780 retail drugstores in 31 states, but the stock, currently trading in the $0.92 range, has taken a beating this year on same-store-sales being down, weaker revenues, and management seemingly always lowering guidance (which affects investor confidence).
PharMerica PMC is part of the drug store industry, but it works in a highly specialized ‘niche’ operating 98 institutional pharmacies in 41 states and providing pharmacy management services to 86 hospitals. PMC is trading in the $11.44 range.