Jiuzhou Tong Announces Strategic Collaboration to Enter Pediatric Medication Market

On February 18, Jointown Pharmaceutical Group signed a strategic agreement with Dayin Pharmaceutical for the year 2022. The two parties will collaborate in multiple areas including terminal coverage, e-commerce cooperation, channel expansion, new product development, and brand co-building.

01 Official Announcement of Cooperation

Public information shows that Dain Pharmaceutical mainly focuses on the research and production of products in the field of children's health, with several star products under its umbrella, such as Yikexin, Gaidixin, and Yijiaxin. It currently has 40 pediatric-specific drugs in its pipeline, covering 15 categories, with 1-2 new products expected to be launched annually during the 14th Five-Year Plan period.

In 2021, Dain Pharmaceutical achieved a revenue of 1.484 billion yuan, representing a year-on-year increase of 32.02%; net profit reached 663 million yuan, marking a year-on-year growth of 32.61%. Dain is one of the 20 core suppliers of Jointown Pharmaceutical Group, with its products distributed by 28 provincial companies under Jointown, accounting for 40% of Dain's total sales.

This is not the first time that Jointown Pharmaceutical Group has cooperated with pharmaceutical companies in the field of pediatric medication.

On October 23, 2021, Jointown Pharmaceutical Group and Luoxin Pharmaceutical Group signed a strategic cooperation agreement. According to the agreement, Luoxin Pharmaceutical Group and Jointown will strengthen their cooperation in research and development, production, distribution, and services, and explore improvements in the compliance and accessibility of pediatric medications.

The scale of the pediatric drug market in China is not to be underestimated. Data from Menet shows that the compound annual growth rate of sales in China's pediatric drug market was over 10% from 2016 to 2019. Despite the impact of the pandemic in 2020, the market size still approached 70 billion yuan.

In recent years, the state has successively introduced a number of policies to encourage the research, development, and production of pediatric drugs. In the adjustment plans for the 2019 and 2020 editions of the National Reimbursement Drug List (NRDL), pediatric drugs have already been prioritized for inclusion.

Currently, the number of product categories resulting from the cooperation between Dayin Pharmaceutical and Jointown has reached 13. Dayin Pharmaceutical stated that with the product layout in the field of pediatric treatment and the multi-product development of the Yikexin brand, the company will expand its product lines to include pediatric therapeutic drugs, children's health foods, and nutritional foods.

02 "Industry + Commerce" Reunite

Since 2022, Jointown Pharmaceutical Group has been making significant moves, actively signing strategic cooperation agreements with multiple pharmaceutical companies, achieving another "industry + commerce" collaboration.

For example:

On January 28, Jointown Pharmaceutical Group signed a three-year strategic cooperation agreement with Johnson & Johnson's Consumer Health business in China. According to the needs of Johnson & Johnson's Consumer Health business in China, the collaboration will leverage Jointown’s digital retail capabilities, brand agency and promotion expertise, as well as its extensive presence in primary healthcare, to deepen cooperation in the Chinese market.

On February 20, Jointown Pharmaceutical Group and Chia Tai Tianqing held a strategic cooperation warehouse opening ceremony. The two parties established a forward warehouse for medicines at Henan Jointown, reaching a new annual consensus and goals on pharmaceutical warehousing and distribution.

To some extent, Jointown Pharmaceutical Group also needs to promote its own development through cooperation with other pharmaceutical companies.

The third-quarter 2021 earnings report shows that Jointown Pharmaceutical Group achieved revenue of 30.113 billion yuan, a year-on-year increase of 3.94%; net profit attributable to shareholders of the listed company was approximately 233 million yuan, a year-on-year decrease of 73.63%.

"The 'Industry + Commerce' cooperation model is not unprecedented in the industry. From past cooperation experiences, commercial companies have expanded their product markets by leveraging Jointown's mature distribution system and channel terminal layout. By providing development channels for commercial enterprises, Jointown has also secured new market opportunities for itself."

03 In the Post-Epidemic Era, the Pediatric Drug Market Welcomes New Opportunities

In recent years, the热度 of China's pediatric medication market has remained consistently high. With the relaxation of the two-child policy, the pediatric medication market has experienced explosive growth. According to analysis by the Qianzhan Industry Research Institute, under the influence of policy benefits such as drug evaluation and approval, medical insurance policies targeting pediatric drugs, it is estimated that the market size of this sector could exceed 200 billion yuan by 2020.

Statistics and Growth of the Pediatric Medication Market Scale in China from 2011 to 2018

(Source: Forward Industry Research Institute)

In terms of enterprises, some pharmaceutical companies have even achieved breakthrough development under the policy dividend.

Taking Jichuan Pharmaceutical as an example, its pediatric business successfully broke through the 1 billion yuan mark in 2018, mainly due to the revenue growth of Xiaor Douqiao Qingre Granules. In 2019, the performance reached 1.525 billion yuan.

Similarly, Jinzhen Oral Liquid from Kangyuan Pharmaceutical, which is used for pediatric patients with acute bronchitis exhibiting symptoms of phlegm-heat cough, achieved sales exceeding 500 million yuan in 2019, with a year-on-year growth of over 30%.

With the introduction of the "three-child policy," this market is set to welcome new benefits.

However, the R&D trend for pediatric drugs has long been characterized by long cycles and low profits. Nowadays, with 22 children's medications entering the essential drug list, more pharmaceutical companies are making strategic moves, and market penetration is gradually becoming a trend.

Back to the cooperation between Jointown Pharmaceutical Group and Dayin Pharmaceutical, according to the performance report of Jointown, as of 2020, its business has covered 159,200 grassroots medical institutions, 9,175 private hospitals, 5,337 chain pharmacies and other physical terminal customers. It can be seen that Dayin Pharmaceutical might leverage Jointown's multi-channel resources to access a broader下沉market.

Jointown once told CPhI China in an interview that it will be more inclined to cooperate with innovative pharmaceutical companies in the future. With increasingly diversified forms of cooperation, it is not difficult to find that pharmaceutical companies with innovative capabilities are becoming highly sought-after partners in the market.

Editor: Star Anise

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