Management Comments of Jiuzhitang's 2020 Semi-annual Board of Directors

The business review of the board of directors of Jiuzhitang (000989) in the first half of 2020 is as follows:

I. Overview

In the first half of 2020, the COVID-19 epidemic swept the world, which brought unprecedented impact to countries and industries all over the world, and also had a positive impact on the development of the pharmaceutical industry. Chinese medicine has played an important role in the fight against the epidemic. A variety of traditional Chinese medicines have been formally included in diagnosis and treatment projects at all levels. Clinical observation shows that the total effective rate of Chinese medicine in epidemic prevention and control is over 90%. The remarkable role of Chinese medicine in fighting the epidemic situation is conducive to enhancing the strategic position and social recognition of Chinese medicine in China and promoting the internationalization of Chinese medicine. At the same time, the government's concept of "from treatment to disease-free prevention" will also lead the national health consumption to a more mature stage, and the big health industry will usher in a major development opportunity. On the other hand, the reform of the medical system continues to deepen, the consistency evaluation of injections is started, the centralized procurement of national drugs is normalized, and medical policies such as medical security system and drug management system are intensively introduced. The pharmaceutical industry will still be in the adjustment stage, industry competition will be further intensified, and industry concentration will continue to increase.

Facing the challenges and opportunities, while inheriting the theory, culture and medical technology of traditional Chinese medicine, the company adheres to the development concept of "combining inheritance with innovation", practices the mission of "serving great health for a hundred years", integrates traditional medicine with modern medicine, and lays out the stem cell medicine industry and the medicine and food homologous products business. At the same time, it is in line with the policy orientation of the country to vigorously develop Internet medical care. Relying on "Internet plus Chinese Medicine", we explored and promoted the Internet hospital project, and put it into trial operation one after another, aiming at providing accurate and effective services for human life-cycle health management in three areas: prevention, treatment and rehabilitation, and creating a healthy and beautiful life for mankind.

During the reporting period, the company "nurtured new opportunities in the crisis and opened new opportunities in the change", strengthened cultural confidence, strategic confidence and road confidence, deepened the group's management and control mode, continuously cultivated the core advantages of traditional businesses, rapidly promoted the steady development of innovative businesses, and actively carried out various tasks around the annual business work plan. The overall production and operation are in good condition.

In terms of production, the company adheres to the normal management of epidemic prevention and control, and its epidemic prevention and control capabilities and production management capabilities continue to improve. The company's overall production and epidemic prevention and control are safe and stable, and all employees are free from infection; In operation, the company gives full play to the locomotive role of the market, takes sales as the core, taps the potential of existing varieties, and ensures that traditional products are better and stronger; In terms of innovation, the company intensively laid out stem cell business, followed the trend to explore new Internet business models, accelerated the development direction of big health products with homology of medicine and food, actively promoted breakthroughs in innovative projects, and ensured the company's sustainable development in the future.

In the first half of 2020, the company achieved an operating income of 654.38+0.8329.7366 million yuan, up 8.55% year-on-year, and a net profit attributable to shareholders of listed companies of 654.38+0.765.438+0.500 million yuan, up 654.38+0.765.438 year-on-year.

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

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

1. 1 Evidence-based Medicine and Re-evaluation Project of Shuxuetong Injection of Youbo Pharmaceutical

During the reporting period, the national "Twelfth Five-Year Plan" major project "Shuxuetong Injection Evidence-based Medicine Clinical Research (SPACE)" held a symposium. The experimental results show that Shuxuetong injection has a clear antithrombotic effect on people with high risk factors of embolism, and the clinical trial scheme has published SCI articles. Shuxuetong injection was awarded the first place in the "Evidence-based Evaluation Index TOP 10" of Chinese patent medicine (stroke) by the Evidence-based Chinese Medicine Research Alliance at the 12th Healthy China Forum Parallel Forum hosted by People's Daily, People's Daily Health Client and Health Times. This is the first authoritative evaluation of the clinical value of Chinese patent medicine products from the perspective of evidence-based medicine. According to the analysis method of clinical evidence index of Chinese patent medicine, the quantity, quality and experts of clinical research were analyzed.

During the reporting period, the re-evaluation of Shuxuetong injection initiated by the company progressed steadily. Experiments related to safety re-evaluation of Shuxuetong injection continued, and the group standard of leech and earthworm passed the project evaluation of standardization office of Chinese Medicine Association. Relying on the project "Study on Material Basis and Mechanism of Shuxuetong Injection" carried out by Tianjin University of Traditional Chinese Medicine, 6 academic papers have been published and 8 patents have been applied. This work has laid a solid foundation for continuously improving the clinical value of Shuxuetong injection, the leading variety of the company, and effectively carrying out professional academic promotion.

1.2 Si Qi Biology-Si Qi Kang Standard Promotion Project

During the reporting period, the company carried out the standard improvement project of BCG polysaccharide nucleic acid injection (Siqikang), and completed the separation and purification of nucleic acid components, component analysis and sequencing, stimulation experiment of nucleic acid immune factor TNF-α, chemical structure analysis of polysaccharide, efficacy test and so on. It laid a foundation for reasonably explaining the material basis and action mechanism of Siqikang and establishing the quality standard with strong specificity.

2. Pay attention to drug research and development and accelerate innovative projects.

2. 1 new anticoagulant LFG project

During the reporting period, the LFG project completed the stability study of LFG preparations and APIs (pilot samples), followed by pre-clinical safety tests, and prepared to start the related work of IND declaration. In the first half of 2020, LFG added two invention patents, including American patent 1. By the end of the reporting period, the project has obtained 65,438+05 patent authorization certificates, distributed in 7 countries.

2.2 stem cell project

During the reporting period, Beijing Ke Mei was awarded the title of "the ninth batch of golden seed enterprises" by the Zhongguancun Science Park Management Committee, the financial support for promoting the development of medicine and health industry in Daxing District, and the qualification of supporting unit of Beijing Natural Science Fund project. While being recognized by government agencies and industries, the business of Beijing Ke Mei has also made many important progress.

2.2. 1 Construction of production R&D base and process quality system

During the reporting period, the production and R&D base of Beijing Ke Mei in Daxing District entered the stage of equipment verification, debugging and confirmation, and the related work has been basically completed. In terms of technology, Ke Mei has conducted many batches of practical training, mastered the production process, and produced stem cells that fully meet the quality standards. In terms of quality, Beijing Ke Mei has further improved the quality system and mastered the quality inspection technology according to GMP requirements of China.

During the reporting period, in order to promote the clinical research and transformation of stem cells in the field of heart disease, Ke Mei signed a cooperation agreement with the Second Affiliated Hospital of Harbin Medical University, and reached an agreement on their application to the National Health and Wellness Committee to carry out clinical research on stem cells. The signing of the agreement will further push the company into the field of stem cell research and enhance the company's business development space.

2.3 Project REMD-477, Glucagon Receptor Antibody Drug

Beijing Kexin Meide Biomedical Technology Co., Ltd., in which the company shares, is mainly engaged in the research of glucagon receptor antibody drug REMD-477. During the reporting period, REMD-477 continued to carry out 1 diabetes clinical phase II work and pre-clinical phase III preparation work in the United States. The first is to complete the long-term toxicological test of rhesus monkeys, and the formal test report is being reviewed and evaluated. The second is to complete the production and inspection of clinical samples and investigate the stability of clinical samples. The third is to prepare a test plan, which is currently being approved by the US Food and Drug Administration and NMPA.

2.4 Intellectual Property Work

During the reporting period, the company * * * applied for 8 invention patents and obtained 7 patents (including 6 invention patents), mainly involving products, preparation methods, quality control methods and new applications. In the projects of Callicarpa nudiflora and BCG polysaccharide nucleic acid.

3. Lean manufacturing ensures quality, and traditional business is better and stronger.

3. 1OTC product management

OTC products sales of the company rely on cultural marketing to achieve sustained and steady growth in performance. During the reporting period, the company improved and optimized the institutional system and organizational system of the OTC sector, and refined the management of channels and terminals to ensure effective and smooth channels and effective coverage of terminals. Adhere to people-oriented, cultural marketing, do a good job in strategic planning and layout of product echelon, manage by classification, enlarge and strengthen strategic main products, focus on strategic new products, explore and operate project products, and focus on incubating new products with characteristics and new regulations.

At the same time, we will comprehensively strengthen consumers' Chinese medicine prevention culture and health education, strengthen the cooperation between Internet digital economy and new O2O retail, and actively explore new modes such as new media and live broadcast sales.

3.2 Prescription drug management

Prescription drug sales section defines the marketing idea of "product+model+team". During the reporting period, we overcame the impact of business resource integration, medical policy changes and epidemic situation, focused on key varieties, key markets and key terminals, adjusted the business pattern of some provinces, added new major first-class businesses, expanded terminal coverage, comprehensively and deeply adjusted and optimized management processes, and realized the whole process of business sectors such as commerce, sales and market. At the same time, through the re-investigation and analysis of the existing market situation of key prescription drugs, the "product academic promotion roadmap" was completed, the key markets of products were defined, the promotion plan was highlighted, and academic activities were carried out. Develop new media promotion procedures and expand brand promotion and influence by building a professional academic platform. In addition, actively explore the new model of DRG promotion and commercial marketing, set up the DRG promotion department, convey the concept of rational drug use of DRG, eliminate the misunderstanding of terminal clinical use, and carry out the propaganda work of clinical pathway for indications; Set up a sales team, focus on business, consolidate channels, segment customers and ensure sales by integrating resources.

3.3 Pharmaceutical business

The main business of the pharmaceutical business sector has been further transformed, and the proportion of retail (including e-commerce) has gradually increased, with a certain increase in performance compared with the same period of last year. During the reporting period, in terms of chain operation, 38 stores (direct stores and franchise stores) were expanded, and standardized, streamlined and digital management methods such as mobile phone inventory, remote management of ten thousand stores and supplier management system were used to strengthen franchise management, standardize store management and improve store services. Carry out new retail methods such as live broadcast and community marketing to improve the per capita efficiency of stores.

At the same time, the store regularly carries out free clinics, social practice for primary and secondary school students, and promotes Huxiang Chinese medicine culture to actively fulfill its social responsibilities. In wholesale management, actively develop suppliers and end customers and seek new development measures to deal with the epidemic; In e-commerce business, we focused on developing O2O, achieving a substantial year-on-year growth.

3.4 Production Board

During the reporting period, the production center and production subsidiaries of the company headquarters overcame the difficulties caused by the COVID-19 epidemic, resumed production in an all-round way at the first time, implemented the "three guarantees" action of ensuring price, quality and supply, promoted energy conservation and consumption reduction, advocated synergy, and the production work was carried out steadily. The company became the first enterprise among 623 key enterprises in Changsha High-tech Zone to restore its production capacity 100%.

On the premise of ensuring normal production, the company steadily promotes project construction and helps the production department to upgrade and optimize. All the systems of the new integrated application mode project (intelligent manufacturing project) of the company's intelligent factory for solid preparations of traditional Chinese medicine have been completed. During the reporting period, it successfully passed the national project acceptance. By promoting the intelligentization of the production process of solid preparations of traditional Chinese medicine, the intelligent management of the group was effectively realized, and the intelligent management level of the enterprise was comprehensively improved. The first phase of the company's National Medicine Health Industrial Park gradually improved the construction tasks and planning and design. During the reporting period, a groundbreaking ceremony was held to exchange and revise construction drawings. Through the project construction, the category structure of Jiuzhitang fist products will be improved, and a product cluster with strong competitiveness will be formed. Youbo Pharmaceutical, a wholly-owned subsidiary, carried out the work related to EU certification, and submitted the materials to EU prosecutors during the reporting period, laying the foundation for the next formal certification.

4. Innovative resources strive for breakthroughs, and new business development continues to advance.

4. 1 Chinese medicine medical and health service business

The medical and health service business of traditional Chinese medicine is based on the Internet hospital platform, focusing on the construction of key specialties, gathering expert resources, building a product and service system, and striving to form the core competitiveness of "Internet plus products+services" with specialty characteristics. Combined with the offline country, the overall development idea of online and offline medical service sector operation was formulated.

During the reporting period, the company seized the opportunity of advocating Internet diagnosis and treatment during the COVID-19 epidemic and actively promoted the implementation of Internet hospitals. Relying on Jiuzhitang Internet Hospital established by Tianjin Old Traditional Chinese Medicine Hospital, we obtained the practice license of medical institutions in Internet hospitals, formulated the development plan of Internet hospitals in combination with the company's superior resources, and built an online service platform closely around the core business needs. At present, the official account of WeChat patients, doctor APP and background have been basically developed, and the internal and external tests and trial operation in Liaoning have met the business needs.

The company optimized the structure of China Yiguang, seized the opportunity of enhancing people's health awareness after the epidemic, and explored a new mode of operation and management of the Museum of Traditional Chinese Medicine. China Yiguang's new operation mode of "product+service" was launched in Zhanjiang and Beijing, and achieved certain results.

4.2 Medicine and Food Homologous Series Products Business

During the reporting period, according to the market demand and brand value, the company timely adjusted the development strategy of medicine and food homologous products and existing product specifications, increased product specifications to meet market demand, and focused on key products. At present, Ejiao cake, herbal tea (plant beverage), tea substitute, throat lozenge, collagen nourishing mask, essential oil soap and other products have been listed. At the same time, explore and think about new sales cooperation mode and self-supporting team construction path, lay the foundation for future sales increment of homologous series products of medicine and food, and enhance brand value and profit space.

5. Strengthen management, lay a solid foundation, and constantly improve the efficiency of collectivization.

During the reporting period, the company continued to promote the group management and control, and improved the company's strategic planning ability, policy analysis ability, scientific decision-making ability, investment and financing ability through the idea of "simplifying administration and decentralization, strengthening supervision and improving services", and promoted the coordination among various business segments; Through comprehensive budget management and performance management, the company has achieved management by objectives, enhanced the awareness of indicators and responsibilities, further focused on indicators and key tasks, and improved the company's management ability and work efficiency. In addition, according to the needs of the company's development, actively carry out policy research, study and application, establish and improve the system management system that meets the requirements of the company's development and internal control, optimize the corporate governance structure and management team personnel structure, build a professional, young, professional and international management team, and improve the scientific management level. At the same time, promote team building in various ways, enhance team cohesion and combat effectiveness, and ensure the steady implementation of the company's strategy.

6. Excavate and spread corporate culture and actively practice social responsibility.

2020 is the 370th anniversary of the establishment of Jiuzhitang. The company continuously explores the intrinsic value of the brand, pays attention to the research, construction and publicity of corporate culture, enhances the sense of honor and pride of employees internally, continuously enhances the cohesion and centripetal force of the team, maintains and enhances the corporate image externally, enhances the brand awareness, shows the elegant demeanor of Jiuzhitang's integration of traditional medicine and modern medicine in the new era, and is committed to providing the most valuable and effective service for human health. At the same time, the company actively practices social responsibility, transmits love and gives back to the society. After the outbreak of COVID-19 epidemic, on the one hand, the company quickly responded to the government's call for "Three Guarantees Action" and resumed work in time to ensure the production and supply of epidemic prevention drugs and materials during and after the Spring Festival; On the other hand, according to the requirements of local governments, implement epidemic prevention and control measures and continue to prevent and control employee epidemics; The company has donated epidemic prevention drugs and materials to Guangzhou, Changsha, Wuhan, Mudanjiang and other places, and actively disseminated scientific epidemic prevention knowledge and epidemic prevention guidelines issued by relevant state departments through the company's terminal chain stores and various media platforms, spreading positive energy, helping the general public to carry out epidemic prevention scientifically, and establishing confidence in defeating the epidemic.

7. Awards of the Company and its subsidiaries during the reporting period.

(1) Company was awarded "Brand Value of China-Brand List of Time-honored Brands in China (1031600 million yuan)" by Xinhua News Agency, Economic Daily, China Council for the Promotion of International Trade, China Brand Building Promotion Association and China Assets Appraisal Association, ranking first in brand value of time-honored brands in Hunan Province.

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

(3) The company's "New Integrated Application Mode of Intelligent Factory for Solid Preparations of Traditional Chinese Medicine" passed the special acceptance.

(4) The company was awarded the title of "20 19 China Pharmaceutical Marketing Bronze Award" and "Caring for China-Caring for Public Welfare Enterprises in China Pharmaceutical Industry in 2020" by 2 1 Century Pharmacy Newspaper and chinese pharmaceutical affairs Management College.

(5) Jiuzhitang Ke Mei (Beijing) Cell Technology Co., Ltd. won the honorary title of "Zhongguancun Golden Seed Enterprise".

(6) Hunan Jiuzhitang Retail Chain Co., Ltd. won the honor of "China Pharmacy Value List 100" issued by China Pharmacy magazine, "Pay tribute to the retrograde. "Model of National Pharmaceutical Enterprises in 2020" and "Love China" awarded by China Pharmaceutical Materials Association. China Medical Education Association awarded "2020 China Chain Pharmacy Charity Enterprise".

(7) Chengdu Jiuzhitang Jinding Pharmaceutical Co., Ltd. won the title of "National Science and Technology Small and Medium-sized Enterprise".

Three. Analysis of core competitiveness 1. Brand advantage: The company's predecessor "Old Jiuzhitang Drugstore Store" was founded in 1650, and now it has well-known trademarks of "Jiuzhitang" and "Youbo" in China; "Jiuzhitang" was recognized as "China Time-honored Brand" by the Ministry of Commerce; Jiuzhitang traditional Chinese medicine culture has been listed in the national intangible cultural heritage protection catalogue. It is a national innovative pilot enterprise, a key discipline construction unit of Chinese medicine engineering in 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 always ranks first among Chinese time-honored enterprises in Hunan Province. 2. Product advantages: 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 diseases, nourishing the heart and calming the nerves, gynecology, respiration, digestion, clearing heat, facial features, otolaryngology, orthopedics, skin and pediatrics. Cardiovascular and cerebrovascular drugs have strong product advantages in the field of prescription drugs. Shuxuetong injection, as a representative of traditional Chinese medicine injection, has many national invention patents. In the OTC field, two categories, namely, tonifying blood represented by Lvjiao Buxue Granule and tonifying kidney represented by Liuwei Dihuang Pill, have strong brand advantages in the same industry. 3. Marketing advantage: The company is based on industry, and develops commerce and chain stores at the same time, spanning OTC and prescription drugs. The marketing network is spread all over the country, covering all levels of medical institutions and terminal pharmacies. 4. Technical and technological advantages: the company has strong technical advantages, among which the processing of decoction pieces and pill production technology are in a leading position in China, which not only forms a unique production process, but also has first-class automatic production equipment in China. At the same time, Youbo Pharmaceutical, an important subsidiary of the company, adheres to the concept of "quality comes from design", considers the construction of quality system from the whole production process, and ensures product quality from the design process. The whole production process design of Shuxuetong injection is scientific and reasonable, and the effective components are purified by a unique production process without introducing any organic solvent harmful to human body. 5.R&D advantages: The company has many scientific and technological platforms, such as postdoctoral research center, academician expert workstation, key discipline construction unit of Chinese medicine engineering in state administration of traditional chinese medicine, and national enterprise technology center. The company entered the field of stem cell research by investing in the international advanced innovative research and development platform. The company undertakes national and provincial science and technology projects such as major national new drug creation and major provincial science and technology projects, conducts project research in an orderly manner, and steadily promotes the transformation of project achievements.