① Warner Pharmaceutical's Ginkgo Blade has been awarded the national Chinese Patent Medicine procurement alliance centralized procurement (first batch expansion continuation), with the proposed winning price at a high level for the same category; ② In addition to price, the final allocation of procurement quantities in centralized procurement is also affected by various factors such as recognition by Medical Institutions, enterprise supply capacity, and product quality and safety.
On January 6, The Star Daily reported (special correspondent Qiao Yilan) that on the evening of the 5th, Warner Pharmaceutical (688799.SH) released a proposed winning announcement for participating in Chinese Patent Medicine procurement, which involves three products: Ginkgo Blade, Fosfomycin Ambenonium Granules, and Diclofenac Sodium Sustained Release Tablets.
The proposed selection results show that Warner Pharmaceutical's Ginkgo Blade has won the national Chinese Patent Medicine procurement alliance centralized procurement (first batch expansion continuation), with the procurement period from the date of selection results execution to December 31, 2027; the company’s Fosfomycin Ambenonium Granules and Diclofenac Sodium Sustained Release Tablets are proposed to be awarded in the centralized quantity procurement led by Hebei in the JING-JIN-JI region, with a procurement period of two years.
▌After centralized procurement, "there should be no price reduction"
It is understood that Ginkgo Blade is mainly used to promote blood circulation and remove blood stasis. It is used for symptoms caused by blood stasis obstructing the channels, such as chest discomfort and heart pain, stroke, hemiplegia, stiffness of the tongue and slurred speech; stable angina pectoris in coronary heart disease and cerebral infarction with the above symptoms. A cardiologist told The Star Daily reporter that Ginkgo Blade is quite common in clinical practice, used by both cardiology and neurology departments.
The announcement shows that Warner Pharmaceutical's Ginkgo Blade was approved in 2004, achieving sales revenue of 6.4912 million yuan in 2023, accounting for 0.45% of the company's revenue in 2023, and achieving sales revenue of 5.5945 million yuan in the first three quarters of 2024, accounting for 0.53% of the company's revenue in the first three quarters of 2024.
"During the procurement period, Medical Institutions and designated pharmacies in the winning regions will prioritize using the awarded drugs and ensure the completion of the agreed procurement volume," Warner Pharmaceutical stated. If the company subsequently signs procurement contracts and executes them, it will be beneficial for the above products to improve drug accessibility, promote the development of the company's related products, and enhance the company's brand influence.
The proposed specifications for the Ginkgo Blade are that each tablet contains a total of flavonoids and glycosides of 19.2mg, terpenoids of 4.8mg, with 24 tablets per box, and the proposed winning price is 30.34 yuan per box. According to the "Proposed Selection Results for National Chinese Patent Medicine Alliance Centralized Quantity Procurement (First Batch Expansion Continuation)" published by the National Chinese Patent Medicine Joint Procurement Office, dozens of Ginkgo Blade products have a proposed winning price range of 3-20 yuan per box. The Star Daily reporter found that among the products proposed for selection with 24 tablets packaging, Warner Pharmaceutical's proposed winning price of 30.34 yuan is at a high level.
Additionally, from public information, it appears that Warner Pharmaceutical's Ginkgo Blade may not have decreased in price during this centralized procurement. In response, a reporter from the Star Daily contacted the company as an investor, and a related staff member stated, "The proposed winning bid price for the Ginkgo Blade should not have decreased compared to before."
Warner Pharmaceutical was established in 2001 and was listed on the Star board in 2021. The company has achieved integration of raw materials and formulations in the fields of digestion, respiration, anti-infection, and pediatric medicines, while also focusing on innovative Traditional Chinese Medicine. Its research and development of a Class 1 innovative Traditional Chinese Medicine, Qianqing Granules, is currently undergoing Phase II clinical trials.
The third-quarter report released by Warner Pharmaceutical for 2024 shows that the company's revenue for the first three quarters was 1.069 billion yuan, a year-on-year increase of 1.28%; net income attributable to the parent company was 0.158 billion yuan, a year-on-year increase of 0.09%; and the net income attributable to the parent company after deducting non-recurring items was 0.135 billion yuan, a year-on-year decrease of 9.92%. It is noteworthy that Warner Pharmaceutical’s investment in research and development and the number of R&D personnel have been increasing year by year. In the first three quarters of 2024, Warner Pharmaceutical’s research and development investment reached 0.101 billion yuan, a year-on-year increase of 32.94%.
▌The procurement volume is influenced by multiple factors.
Warner Pharmaceutical stated to reporters that if they ultimately win the bid, the procurement volume will be determined according to the rules, and it is currently impossible to predict the impact of winning the bid on future performance; the ability to scale up will depend on subsequent sales conditions.
So, does a high price for Warner’s Ginkgo Blade mean the procurement volume will be less than that of similar Other Products? Professor Deng Yong, head of the Research and Innovation Center for Health Law at Beijing University of Traditional Chinese Medicine, told the Star Daily reporter that this is not necessarily the case.
Although price is an important influencing factor in the centralized procurement of Chinese Patent Medicine, for instance, the product with the highest price reduction within the same competitive unit is allocated procurement demand at 100% to the corresponding Medical institutions, while other selected products are allocated at 90% to the corresponding Medical institutions, the allocation of procurement volume is also affected by other factors.
For example, the recognition of medical institutions, the supply capacity of enterprises, product quality and safety, and other technical evaluation-related aspects will also be considered. If Warner Pharmaceutical's Ginkgo Blade performs well in these other areas and receives a high comprehensive score, its procurement volume may not necessarily be lower than that of lower-priced products.
This participation by Warner Pharmaceutical in the centralized procurement is already the third round of centralized procurement in the field of Chinese Patent Medicine. According to the People's Daily Health Client, the third batch of centralized procurement for Chinese Patent Medicine involves 20 product groups with 175 varieties expected to be selected, with the highest bid price reduction exceeding 95%.
The National Medical Insurance Bureau stated that the centralized procurement for Chinese Patent Medicine can rationalize the price differences of Pharmaceuticals. This centralized procurement has added a three-fold "circuit breaker", which means that if a company's product wins in the comprehensive scoring competition, its price must also be compared with the lowest price of product groups with larger usage. If the price difference exceeds three times, further price reductions are necessary to be selected. By setting the "circuit breaker", the centralized procurement for Chinese Patent Medicine is expected to better squeeze out inflated price margins.
According to the review, at the end of September 2021, the first batch of centralized procurement led by Hubei Province opened bids, with 182 products from 157 companies participating in the bidding. Ultimately, 97 companies and 111 products were selected, achieving a selection rate of 62%. The average reduction in selected prices was 42.27%, with the maximum reduction reaching 82.63%.
In June 2023, the second batch of centralized procurement for Chinese Patent Medicine, led by Hubei Province, opened bids, resulting in the selection of 63 companies and 68 quoted representative products, achieving a selection rate of 71.6%. The average reduction in selected varieties was 49.36%, with the maximum reduction reaching 76.8%.
The first two batches of centralized procurement for Chinese Patent Medicine mainly focused on orally administered Chinese Patent Medicine, while the third batch also included Traditional Chinese Medicine injections, as well as several exclusive varieties and national protected varieties of Traditional Chinese Medicine. Based on the expected bid price reductions, industry statistics estimate that the average price reduction for this procurement exceeds 60%.