Nanjing Pharmaceutical Invests RMB 44.4 Million in 'Internet + Pharmacy Consortium' Smart Retail Project to Capitalize on Prescription Outsourcing Trend

VCBeat (WeChat ID: vcbeat) has learned that Nanjing Pharmaceutical announced on the 15th its intention to enter into a strategic cooperation with the People’s Government of Gulou District, Xuzhou City, and relevant technology companies. The company plans to invest RMB 44.4 million to cover venue leasing costs for smart retail operations and expenses related to self-service medication dispensing and collection terminals (including equipment operation, maintenance, and repair fees), thereby launching an “Internet + Pharmaceutical Consortium” smart retail project.

Nanjing Pharmaceutical’s wholly-owned second-tier subsidiary, Xuzhou Guangji Chain Pharmacy (hereinafter referred to as “Xuzhou Guangji”), will serve as the entity for the “Internet + Pharmaceutical Consortium” smart retail project and carry out pilot initiatives in Gulou District, Xuzhou City.

[Basic Information on Investment Projects]

1. Project Name: "Internet + Pharmaceutical Consortium" Smart Retail Project

2. Project Investment Content: Xuzhou City has designated the construction of the “Internet + Pharmaceutical Consortium” service platform as a public convenience and benefit initiative. The Gulou District of Xuzhou City has selected 97 responsible entities—including seven Grade A tertiary hospitals, nine community health service centers, 16 community health service stations, seven sub-district offices, and 65 residential communities—as pilot units for dispensing medications via smart medicine cabinets. Leveraging a prescription circulation software system, this initiative enables an “integrated” service model encompassing in-hospital prescribing, out-of-hospital medication pickup, online payment, and retrieval from smart medicine cabinets.

The Company has entered into a Xuzhou Smart Retail Business Cooperation Agreement with relevant technology companies (Xuzhou Red Cherry Medical Technology Co., Ltd. and Jiangsu Xiyuan Health Technology Co., Ltd.) to jointly conduct new retail business within the administrative area of Xuzhou City (including its districts and counties), leveraging the “Internet + Pharmaceutical Consortium” smart retail service platform.

The company’s total investment in Phase I of the project amounts to RMB 44.4 million, allocated as follows: In the setting of seven Grade IIIA hospitals, no fewer than 45 units of equipment will be deployed, with an operational period of five years and a capital outlay of RMB 30 million, covering venue leasing and equipment costs (including equipment operation, maintenance, and repair expenses). In community settings, 40 units of equipment will be configured, with an operational period of five years and a capital outlay of RMB 14.4 million, covering venue leasing and equipment costs for all community hospitals (including equipment operation, maintenance, and repair expenses).

3. Fund Payment Method: To mitigate risks, the investment funds for this project shall be disbursed in installments based on project milestone progress.

4. Project Benefit Forecast: Assuming the continuation of relevant policies and controllable risks during project implementation, evaluation and calculations indicate that over a five-year operational cycle, the “Internet + Pharmaceutical Consortium” smart retail project is expected to generate cumulative operating revenue of approximately RMB 1 billion and operating profit of RMB 26 million (referring to operating profit after deducting annually amortized related costs, excluding taxes). Furthermore, leveraging this project as an entry point, the company plans to establish a pharmaceutical wholesale subsidiary in the Xuzhou region at an appropriate time to engage in pharmaceutical distribution and wholesale business, thereby further improving its marketing network layout in the Xuzhou market.

Xuzhou Guangji is a wholly-owned subsidiary of Nanjing Pharmaceutical Guoyao Co., Ltd., which itself is a wholly-owned subsidiary of Nanjing Pharmaceutical. It currently operates approximately 40 stores, with annual sales exceeding RMB 200 million, ranking among the leaders in retail scale in the Xuzhou region.

Regarding project risks, the announcement pointed out that there is currently policy-level uncertainty at the national level concerning the online sale of prescription drugs, posing certain risks related to policy continuity. The project is currently being piloted in Gulou District, Xuzhou City. The implementing entity possesses the necessary operational qualifications and capabilities for drug quality management and guidance on rational drug use. Meanwhile, the project legally and compliantly accepts hospital prescriptions through information systems such as a telemedicine service platform (including prescription circulation information services), conducts remote prescription reviews, and interfaces with the government’s medical insurance payment system. This aligns with the healthcare reform objectives of having social pharmacies assume responsibilities for drug supply and pharmaceutical care services to meet patients’ medication needs.

Nanjing Pharmaceutical’s move is clearly aimed at the “outflow of prescriptions” market. The separation of medical services from pharmaceutical sales and the outflow of prescriptions are regarded as significant future growth opportunities for the retail pharmacy industry. Currently, companies such as Baiyang Yifuzhen, WeChat, AliHealth, Jointown Pharmaceutical Group, and Yaoshiquan are establishing prescription circulation platforms. Policies in cities like Xi’an, Chengdu, Chongqing, and Tianjin are also relatively supportive. However, a nationwide, large-scale system for the external circulation of hospital prescriptions has not yet taken shape. Prescription-sharing platforms will become a critical hub connecting hospitals and pharmacies. As the use of electronic prescriptions becomes commonplace, the smart pharmacy model will emerge as a key strategic approach for pharmacies to capture the outflow of prescriptions.