After more than 20 years on the market, the established traditional Chinese medicine company Tianshi Li (600535.SH) is on the verge of a transformation, shifting from a privately-owned enterprise to a state-controlled one.
On the evening of August 4, 2024, Tianshi Li disclosed a plan for the transfer of shares. Upon completion of this change, China Resources Sanjiu (000999.SZ) will directly hold 28% of Tianshi Li's shares and the corresponding voting rights. Consequently, Tianshi Li's controlling shareholder will change from Tianshi Li Bio-Pharmaceutical Industry Group Co., Ltd. (hereinafter referred to as "Tianshi Li Group") to China Resources Sanjiu, which will invest 6.212 billion yuan for this purpose.
Following the announcement, Tianshi Li also ended its two-day suspension due to the change in control rights and resumed trading. On the first day of trading, August 5, the share price closed up by 5.68%. China Resources Sanjiu's share price increased by 0.71% on the same day.
Tianshi Li was founded by Yan Xijun, and in 2014, his son Yan Kaijing took over as the chairman of Tianshi Li. Prior to this state takeover, the actual controllers of Tianshi Li were the couple Yan Xijun and his wife, as well as the couple Yan Kaijing and his wife. After the change, the actual controller will be the state-owned enterprise China Resources Group, which is also the actual controller of China Resources Sanjiu. The new controlling shareholder of Tianshi Li, China Resources Sanjiu, is already a traditional Chinese medicine company. In 2023, the company had 39 products with annual sales exceeding 100 million yuan, including medicines such as "999 Cold Granules," "999 Dermatitis Ointment," and "Sanjiu Stomach Tai." Tianshi Li also started with traditional Chinese medicine. An informed source told Caijing on August 5 that the logic of industrial investment is the strategic synergy between the two parties, "This time there is an industrial chain synergy between the two sides, and it is also based on strategic logic, just as the other party is willing to transfer medical assets."
Two companies become new shareholders
After the completion of this control right transfer, China Resources Sanjiu will hold 28% of Tianshi Li's shares; at the same time, Guoxin Investment will also invest 1.109 billion yuan to hold 5% of Tianshi Li's shares. Guoxin Investment is a wholly-owned subsidiary of China Guoxin Holding Co., Ltd., which was established in 2010 and is a state-owned capital operation company, also one of the state-owned enterprises under the supervision of the State-owned Assets Supervision and Administration Commission of the State Council. Originally, Tianshi Li Group and its concert parties held a total of 50.5008% of Tianshi Li's shares. After this change, the shareholding ratio will decrease to 17.5008%. At the same time, Tianshi Li Group agreed to provide a written commitment to give up the voting rights corresponding to 5% of Tianshi Li's shares held by it after the registration of the shares transferred to China Resources Sanjiu. Therefore, after the completion of the equity change, Tianshi Li Group and its concert parties will hold a total of 12.5008% of Tianshi Li's shares corresponding to the voting rights. Tianshi Li was listed on the Shanghai Stock Exchange in 2002 and has since covered traditional Chinese medicine, biomedicine, and chemical medicine, with the prevention, treatment, and rehabilitation of cardiovascular and cerebrovascular diseases as its core business areas, as well as digestive metabolism, oncology, etc. The incoming new controlling shareholder—China Resources Sanjiu—is in the same industry as Tianshi Li and is somewhat larger in scale. In 2023, China Resources Sanjiu achieved a business income of 24.738 billion yuan and a net profit of 2.853 billion yuan; Tianshi Li's figures were 8.674 billion yuan and 1.071 billion yuan, respectively. There is a same-industry competition between Tianshi Li's production of dexmedetomidine tablets and China Resources Sanjiu's production of zopiclone tablets, and there is a same-industry competition between Tianshi Li's medical retail chain business and the medical retail chain business of China Resources Group's subsidiary, China Resources Pharmaceutical Retail. To this end, after the completion of this transaction, China Resources Sanjiu and its controlling shareholder, China Resources Pharmaceutical Holdings, as well as the actual controller, China Resources Group, have issued a commitment letter to avoid same-industry competition. Within five years after the completion of this transaction, they will resolve the existing same-industry competition issues through legal procedures, including but not limited to trust management, asset (equity) transfer, business integration, and other methods.The Mission of the Successor
Entering 2024, the Yan family has accelerated its succession plan. In May, Yan Kaijing took over as the chairman of Guotai, a liquor enterprise acquired by Tianjin Tianshi Li Big Health Industry Investment Group in 1999. In June, Yan Kaijing also succeeded his father, Yan Xijun, as the legal representative of Tianjin Tianshi Li Big Health Industry Investment Group Co., Ltd. Currently, the Yan family has transferred the control rights of Tianshi Li to state-owned capital, but from the company level, Yan Kaijing still serves as the chairman of the listed company Tianshi Li. Whether there will be adjustments to Tianshi Li's internal structure and business focus, a person close to Tianshi Li told "Finance and Economics" that this is not known at present, and the company will definitely maintain stability. In 2014, at the age of 35, Yan Kaijing stepped forward to succeed his father Yan Xijun as the chairman of Tianshi Li, which has been exactly ten years. Yan Kaijing is a doctor of traditional Chinese medicine from Tianjin University of Traditional Chinese Medicine and a master of international securities, investment, and banking from the University of Reading in the UK. Under Yan Kaijing's governance, Tianshi Li began to transform into a technology-based enterprise and was also active in investment and mergers and acquisitions. On the evening of August 4, the official WeChat account of Tianshi Li Holding Group, "Tianshi Li Big Health," wrote that China Resources Pharmaceutical and Tianshi Li Group will carry out in-depth cooperation in the fields of digital Chinese medicine research and innovation, intelligent manufacturing technology and equipment, and drug research and innovation. At the same time, the two parties will use a joint venture as a carrier to carry out the iterative upgrade of the world's first multimodal big model of Chinese medicine research and development, "Digital Zhi Cao," combining Chinese medicine theory, clinical experience with digital technology, and building a new paradigm for digital Chinese medicine research and development. The development direction of the Chinese medicine big model is exactly what Yan Kaijing strongly promotes. In May, the "Digital Zhi Cao" Chinese medicine big model was released, jointly developed by Tianshi Li and Huawei Cloud based on Huawei's PanGu large language model and PanGu drug molecule big model. At that time, Yan Kaijing publicly stated that digitalization has become a new driving force for the development of modern Chinese medicine, and through means such as big models, the formulation and compatibility, material basis, and dosage and toxicity of Chinese medicine products can be digitalized in multiple aspects. In addition, China Resources Pharmaceutical and Tianshi Li Group will establish a joint innovation body for droplet pill technology innovation to promote the upgrade of droplet pill technology and build Tianshi Li into a high-tech, high-quality specialized production base for new droplet pill formulations, providing industrialization services for more enterprises. Compound Danshen Droplet Pills are the main product of Tianshi Li. According to data from the Mini Network, in 2022, the sales of Compound Danshen Droplet Pills in Chinese public medical institutions exceeded 3 billion yuan. Compound Danshen Droplet Pills, from Yan Kaijing's father Yan Xijun. Plus Yangxue Qingnao Granules (Pills), Qi Shen Yiqi Droplet Pills, etc., some of Tianshi Li's core products have been on the market for more than 20 years. "One generation has its own mission." A pharmaceutical company practitioner once told "Finance and Economics" that the first generation of entrepreneurs in family-style pharmaceutical companies are often strong in personality, and those with a gentle character cannot be the main leaders. The second generation that takes over will be under the halo of their parents, needing to continue to promote the enterprise, and the task is to inherit the foundation of their parents in this era.
Tianshi Li's performance is stable but declining
Over the past ten years, Tianshi Li's performance has gradually shrunk.
In 2014, Tianshi Li's total revenue was 12.578 billion yuan, and the net profit was 1.368 billion yuan, both exceeding the level of 2023. Tianshi Li's pharmaceutical industry sector achieved a business income of 7.421 billion yuan in 2023, accounting for 86% of the annual total revenue of 8.674 billion yuan, and is the main force contributing to the revenue. The growth rate of Tianshi Li's pharmaceutical industry has shown a trend of decline year by year. In 2023, the revenue of Tianshi Li's pharmaceutical industry increased by 3.22% compared to the previous year. In 2022, the income growth of this sector could reach 7.39%, and in the year before that, despite a 53% decrease in revenue from the implementation of the new price of the Tiding product in the centralized procurement, the pharmaceutical industry income could still grow by 4.25%. Ten years ago, in 2013, Tianshi Li's pharmaceutical industry sales revenue was 4.922 billion yuan, with a year-on-year growth rate of 25.12%. Looking at profitability, over the past ten years, Tianshi Li has been able to maintain stability in most years. Except for a sharp increase in net profit to 2.359 billion yuan in 2021 and a loss of 257 million yuan in 2022, in other years, Tianshi Li's net profit has been maintained at around 1 billion yuan. The two special years are like a roller coaster, which is related to Tianshi Li's stock trading. In 2021, Tianshi Li disposed of the I-MAB equity it held and changed the accounting method, resulting in a large investment income. I-MAB, that is, the biotech company Tianjing Biological, a Nasdaq-listed company. In 2022, Tianshi Li's holdings of Tianjing Biological, Keji Pharmaceutical, etc., due to significant adjustments in various capital markets and a decline in stock prices, led to a decrease in the fair value of related financial assets by 1.104 billion yuan. Since then, the scale of stock trading has been reduced. As for the dilution of Tianshi Li's revenue, it is related to the company's gradual divestment of the pharmaceutical commercial sector in recent years. In 2020, Tianshi Li's business income decreased by 28.54% compared to the same period of the previous year, among which, the pharmaceutical industry sector still maintained a small increase, but due to the disposal of the Tianshi Marketing equity in August, which was sold to Chongqing Pharmaceutical, the company's pharmaceutical commercial sector was reduced, and the revenue of this part decreased by 43.99%. In 2023, the revenue share of the pharmaceutical commercial business has been reduced to 14.01%. This has brought about an improvement in Tianshi Li's gross profit margin and accounts receivable. From 2019 to 2023, Tianshi Li's gross profit margin increased from 31.23% to 66.85%; the net value of accounts receivable at the end of the period decreased from 8.431 billion yuan to 688 million yuan. Yan Kaijing said in 2022, "Enterprises need to adjust their asset structure to adapt to the cycle, Tianshi Li was built by our parents brick by brick, and the decision to 'sell assets' is difficult." As of August 5, 2024, among the 72 traditional Chinese medicine listed companies in the A-share market, 18 are state-owned enterprises. These traditional Chinese medicine enterprises are generally listed earlier. The earliest listed is Hangzhou Tianmu Mountain Pharmaceutical Co., Ltd., which entered the capital market in 1993. The latest is Longshen Rongfa, in 2016. As of August 2, among these enterprises, one has a market value of more than 100 billion yuan, which is Pien Tze Huang; there are also nine companies with a market value of 10 billion yuan. The batch of state-owned enterprises with higher market value of traditional Chinese medicine, highlight a "stable" word, most have their own stable leading products. For example, the prescription and process of Pien Tze Huang are protected by the state secret; Baiyunshan has 12 Chinese time-honored pharmacies under its umbrella, known as "Southern Chinese medicine"; Tong Ren Tang is also a time-honored Chinese medicine enterprise, which can also achieve more than 1.2 billion yuan in annual income overseas, and the gross profit margin is higher than that in China. Tianshi Li has undoubtedly caught a good opportunity and caught up with this train.It seems like there was a request for translation, but no text was provided to translate. Please provide the text you would like translated into English, and I will be happy to assist you.
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