Maintained Steady Growth Results, Confirmed 3-Year Development Plan, Shanghai Pharmaceuticals Achieved over 15% Growth in Operating Income in 1H2013

HONG KONG, Aug. 23, 2013 /PRNewswire/ -- Shanghai Pharmaceuticals Holding Co. Ltd., ("Shanghai Pharmaceuticals" or the "Company" and, together with its subsidiaries, the "Group"; stock code: 601607.SH; 02607.HK), today announced its interim results for the first half of 2013. In the first half of 2013, the Company's operating revenue was RMB38.718 billion, up by 15.16% on a YOY basis. Net profit attributable to the equity holders of the listed Company was RMB1.190 billion, representing an increase of 9.08% after deducting the impact of foreign exchange gains from the balance of funds raised in the corresponding period of last year.

During the first half of 2013, the re-election of the board of directors and the board of supervisors of the Company was also smoothly completed. The development plan for the following three years (years ending 2013 to 2015) was established, targeting a three-year development goal of "realizing an operational scale of over RMB100 billion, continuous improvement and enhancement of competitiveness, as well as mutual growth among the Company, shareholders and employees" with the core business development ideas of "Drive on Two Wheels; Win-win Situation; Guided by Technology; Gathering Talent".

Stable Growth in Principal Business

During the first half of 2013, the Company's sales revenue from the pharmaceutical manufacturing business was RMB5.507 billion, representing a growth of 10.93% as compared with the corresponding period of last year. Its gross profit margin was 47.16%, an increase of 0.61 percentage point as compared with the corresponding period of last year. The Company continued to implement its strategy to focus on key products, adjust the product portfolio and devote greater efforts to sales and marketing of its key products. Meanwhile, the Company reduced the production and sales of products with negative gross or low profit margin, therefore improving the gross profit margin and further optimizing its product portfolio. The realized sales revenue from the 64 key products was RMB3.221 billion, representing a YOY increase of 17.34% and accounting for 58.49% of the revenue from sales of pharmaceutical products. Among such key products, 19 products such as Shenmai Injection, Tanshinone IIA, Live combined bifidobacterium recorded sales revenue exceeding RMB50 million. Also, Shanghai Pharmaceuticals continued to strengthen R&D investment. The Company invested a total of RMB187,384,900 in R&D, representing 3.40% of the Company's manufacturing sales revenue. The Company was granted 5 manufacturing approvals for new drugs and 1 new drug certificate. The Company was the fourth manufacturer in China qualified to produce the new drug named Mitiglinide Calcium Hydrate Tablets as new drug under class 3.1 of chemical drugs. During the first half of the year, the Company actively launched new GMP certification in manufacturing subsidiaries. It is expected that substantially all the manufacturing subsidiaries adopting aseptic processing will pass the new GMP certification by the end of this year, except one which will finish by the first quarter of next year. To improve the quality of generic drugs, the Company started evaluations on the consistency of generic drug quality initiated by stage and by batch.

In pharmaceutical services, Shanghai Pharmaceuticals achieved the sales revenue of RMB33.436 billion from pharmaceutical distribution business, up 15.97% as compared with the corresponding period of last year, with a gross profit margin of 6.11%. The Company participated in the medical reform proactively, thus achieving a leading position in the pilot reform of the pharmacy supply chain outsourcing service of the newly-built "5+3+1" hospitals in Shanghai. The Company experimented with lean management represented by "Lean Six Sigma" to reduce operating costs and improve the efficiency. In innovative business, Shanghai Pharmaceuticals kept expanding rapidly new businesses such as high value medicines direct to patients (DTP), vaccines and high value consumables with a total business revenue of RMB1.961 billion. Sales revenue from DTP amounted to RMB729 million, representing a YOY growth of 48.54% as a leading standard nationwide. In pharmaceutical retail, Shanghai Pharmaceuticals had about 1,887 chain retail pharmacies under its brand family, including 1,082 directly operated pharmacies. The sales revenue from the Company's pharmaceutical retail was RMB1.481 billion, up 12.59% YOY.

Moreover, Shanghai Pharmaceuticals introduced internal and business integration such as acquiring Dongying (Jiangsu) Pharmaceuticals Co., Limited and investing in the acquisition of equity interest in Chiatai Qingchunbao Pharmaceutical Co., Ltd. Optimizing the establishment of cash pooling platform, implementing centralized procurement, promoting the synergy between manufacturing and distribution segments, pushing forward internal equity integration and more will deepen the operational integration.

Clear Three-Year Strategic Plan

Since the re-election of the board of directors and the board of supervisors of the Company was also smoothly completed in the first half of the year, the development plan for the following three years (years ending 2013 to 2015) was established. In these three years, Shanghai Pharmaceuticals will take strategic actions including building a highly effective system for drug R&D, enhancing sales capability, building a national commercial network, multi-breakthrough in new business in various aspects, resources sharing, timely establishment of capital operation, integration of IT management system, pushing forward lean management, optimizing the innovative personnel mechanism, and maintaining good investor relations. The Company adopts the core business development ideas of "Drive on Two Wheels; Win-win Situation; Guided by Technology; Gathering Talent". The Company strives for a three-year development goal of "realizing an operational scale of over RMB100 billion, continuous improvement and enhancement of competitiveness, as well as mutual growth among the Company, shareholders and employees". With the vision of becoming "a respected and reputable leading pharmaceutical manufacturer and healthcare services provider" and the core concepts of "innovation, integrity, cooperation, inclusiveness and sense of responsibility", the development plan is expected to lay a solid foundation for the sustainable long-term growth of the Company.

In the first year among the three, Shanghai Pharmaceuticals will continue the path of sustainable development with science and technology taking the lead, so as to build a highly effective system for drug R&D.

In the second half of 2013, in respect of pharmaceutical manufacturing business, Shanghai Pharmaceuticals will optimize its internal marketing resources in light of its actual conditions, enhance its marketing capabilities and put more emphasis on the control of sales and administration costs, so as to boost profitability. In addition, the Company will also carry out further industrial mergers and acquisitions that center on products, ensure timely fulfillment of the renovation plan for new GMP as scheduled, further integrate internal resources and consolidate subsequent integration of the existing merger projects, and strengthen the corporation on international business with a view to sharpening the competitive edge of affiliated industrial enterprises in the market.

In respect of pharmaceutical services business, the Company will step up the management of accounts receivable and sales and administration costs, reduce inventory level, formulate renovation and certification plans on new GSP, accelerate the construction of regional logistics centres and information systems, press ahead with new businesses such as DTP and vaccines in a faster clip, conduct more commercial mergers and acquisitions that are strategically oriented and explore the operational model of e-commerce in the pharmaceutical industry, so as to boost the competitive advantage in medical services business.

About Shanghai Pharmaceuticals Holding Co., Ltd.

Shanghai Pharmaceuticals is the only integrated pharmaceutical company in the PRC that has leading positions in both pharmaceutical product and distribution markets. It was China's second-largest pharmaceutical distributor and third-largest pharmaceutical producer. The Group adopts an integrated vertical business model and provides solutions in pharmaceutical manufacturing, distribution, logistics storage and retail. The Group currently offers more than 800 pharmaceutical products as well as pharmaceutical distribution and supply chain solutions to more than 8,000 hospitals and medical institutions in China. The Group also operates approximately 1,800 self-operated and franchise stores nationwide.

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