China Medical System Holdings Limited 2020 Interim Results Announcement

HONG KONG, Aug 13, 2020 – (ACN Newswire) – China Medical System Holdings Limited (“CMS”, or the “Company”, SEHK:867), together with its subsidiaries (the “Group”), a well-established, innovation-driven specialty pharma with a focus on sales and marketing in China, announced its unaudited results for the 6 months ended 30 June 2020 ( the “Reporting Period”).

In the first half of 2020, the Group recorded a turnover of RMB3,108.1 million (H1 2019: RMB2,964.4 million), an increase of 4.8% over the same period last year; excluding the effect of the “two-invoice system”, turnover was up 4.6% to RMB3,557.1 million (H1 2019: RMB3,401.5 million). Profit for the period recorded an increase of 11.4% to RMB1,300.5 million (H1 2019: RMB1,167.5 million). Declared interim dividend was up 11.8% compared with the same period last year to RMB0.2105 per share (H1 2019: RMB0.1883).

Mr. Lam Kong, Chairman and Chief Executive of CMS, said: “Sustainable product competence is the key competitive factor for future development of enterprises. Adhering to the development strategy with innovative products as the core, the Group constantly expanded the innovative pipeline, while accelerating the registration progress of innovative products in China, so as to fulfill the unmet medical needs in China pharmaceutical market. Meanwhile, the Group continued to optimize the professional promotion system as well as the compliant and refined management system. Empowered by the product competence, promotion capability and efficient management system, the Group achieved steady and good growth.”

Product Pipeline
The Group concentrates on the innovative products that are global first-in-class or with the best efficacy or best cost-effectiveness in the same class due to their innovative formulations or drug delivery systems. Capitalizing on its resources of global product development accumulated for more than two decades, as well as the market reputation earned, the Group has established strategic cooperation relationships with a number of leading pharmaceutical companies around the world and made equity investments in innovative R&D companies from the U.K., France, the U.S. and Switzerland. The Group’s product pipeline includes 20 innovative products with great market potential and competitive differentiation advantages at relatively high innovation level, covering therapeutic fields including nervous system, ophthalmology, dermatology, endocrine system, oncology, nephrology, immune system, digestive system, anti-infection, etc.

During the Reporting Period, the Group’s innovative pipeline continued to expand. The Group successively acquired exclusive licenses of the innovative product Desidustat (a patented new molecular entity for the treatment of anemia in patients with chronic kidney disease) and PLENITY (the U.S. FDA-cleared safe and effective orally-administered weight management product made from naturally derived materials) in Mainland China, HK SAR, Macau SAR, TWN and/or other countries in Asia. Meanwhile, the registration and clinical work of innovative products was accelerated. Two blockbuster innovative products (Diazepam Nasal Spray and Cyclosporine Eye Drops 0.09%) have been granted clinical trial notices issued by China NMPA for comparative PK study and confirmatory clinical trial respectively; the confirmatory clinical trial application of one blockbuster innovative product (Tildrakizumab) has been accepted by China NMPA; and the Phase II clinical trial of one innovative product (CF102) in Israel has yielded positive top line results.

Meanwhile, the Group deployed complex generics and competitive generics and actively worked on their registration in China, so as to capitalize on the opportunities brought by the National Volume-based Procurement to capture additional driving forces for the future development of the Group. As at 30 June 2020, two generics were under the review for marketing approval in China and one was granted clinical trial notice in China.

Existing Product Development
The Group’s existing products mainly involve products under cardio-cerebrovascular line (mainly include Plendil, XinHuoSu and Deanxit), digestion line (mainly include Ursofalk, Salofalk, Bioflor and Combizym), ophthalmology line (mainly include Augentropfen Stulln Mono Eye Drops) and dermatology line (mainly include Hirudoid). Through deeply exploring and enhancing the evidence-based medical evidence and reinforcing the expert network construction and academic platform integration, the Group constantly increased products’ academic influence and solidified the competitive advantages of the existing products. During the Reporting Period, the Group recorded solid growth across core product lines. The revenue of products under cardio-cerebrovascular line would increase by 4.4% to RMB2,026.6 million if excluding the effect of the “two-invoice system”; the revenue of products under digestion line increased by 12.7% to RMB1,157.9 million; the revenue of products under ophthalmology line decreased by 1.2% to RMB113.8 million; the revenue of products under dermatology line decreased by 0.9% to RMB85.2 million.

Promotion System
During the Reporting Period, the Group focused on the expansion of the promotion network and strengthened the market segmentation as well as the lower-tier market penetration. The Group actively explored the improvement and innovation of the promotion model while solidifying the existing promotion system, so as to accumulate experiences and make deployments in advance for the academic promotion of innovative products. In the meantime, aiming to building a more professional and compliant promotion team with higher execution capability, the Group further perfected the job qualification and employee training system, optimized the remuneration and incentive system, and intensified the compliance training and inspection. In addition, the Group capitalized on digital tools to hold online academic conferences with high frequency. Complying with the industry trend, the Group steadily promoted the construction of the retail network, expanded the coverage of retail chains and terminal stores, and further strengthened the cooperation with e-commerce platforms.

During the Reporting Period, the Group’s promotion network covered about 57,000 hospitals and medical institutions in China.

Manufacturing Facilities
As at 30 June 2020, the Group owned pharmaceutical manufacturing sites in Hunan, Hebei and Shenzhen, occupying a total area of more than 110,000 square meters. The Group has the Pharmaceutical Production License and the Pharmaceutical GMP Certificate for various dosage forms such as powder, oral solution, small-volume injections, tablets, hard capsules, etc. With more than two decades of pharmaceutical production experiences, the Group has instituted stringent quality management standards and regulations to guarantee the product quality, ensuring the localized preparation manufacturing of overseas innovative products in China.

Mr. Lam Kong concluded, “The Group focuses firmly on the two core values in the pharmaceutical industry chain: product competence and promotion capability. Capitalizing on our extensive global resources, the Group will continue to expand the innovative pipeline and facilitate the further development and commercialization of drugs in China, so as to enhance product competence. At the same time, the Group will continuously strengthen the professional, compliant and efficient promotion system to achieve sustainable and steady growth. Adhering to the mission of “Offering competitive products and services to meet China’s unmet medical needs”, CMS will benefit and provide Chinese patients with more effective, safer, and more cost-effective drugs.”

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