​​ABOUT SANAI HEALTH INDUSTRY
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Chairman's Statement
Directors and Senior Management
Awards and Achievements
主席報告
To all Shareholders:
On behalf of the board (the “Board”) of directors (the “Directors”) of Sanai Health Industry Group Company Limited (Formerly known as Wuyi International Pharmaceutical Company Limited) (“Sanai Health” or the “Company”), I am pleased to present to the shareholders the annual results of the Company and its subsidiaries (collectively, the “Group”) for the financial year ended 31 December 2016.

BUSINESS REVIEW
2016 was the start of “13th five years plan” and a year full of ups and downs. Since the implementation of policies such as “Healthy China 2030” and “Planning of Pharmaceutical Development” and various measures including “Urban-Rural Medical Insurance Integration”, “Medical Insurance Reimbursement Standard”, “Quality Consistency Evaluation” and “Two- invoice System”, the pharmaceutical market has undergone tremendous changes with keen competition. The industry was generally under pressure due to a continuous decrease in the price of pharmaceutical products and a surge in cost of raw materials. During the year, the Group’s two production lines in the plant located in Haixi Industrial and Trading Development Zone (the “Haixi plant”) were suspended due to the carrying out of upgrades and enhancement on the production lines in obtaining new Good Manufacturing Practice (“GMP”) Certification (the “Suspension”) and all production compartments in the Haixi plant have been temporarily suspended as a result of an accidental rupture in the main underground steam pipelines, which caused interruption in production. However, the Group actively responded and overcame the challenges so as to continuously enhance the production efficiency, enrich the product portfolio and identify developing opportunities in the future.

For the year ended 31 December 2016, the Group’s turnover was RMB263,025,000 (2015: RMB555,652,000), and the loss attributable to owners of the Company was RMB396,258,000 (2015: profit of RMB41,203,000). The Board do not recommend the payment of a final dividend for the year ended 31 December 2016 (2015: Nil).

Marketing: In addition to stocking up inventories, controlling cost and striving for orders after resuming production, the Group also launched 21 types of Western prescription injectables with different specifications during the year in order to turnaround the adverse situation caused by the Suspension and the supply shortage of products such as Perilla Oil Capsule. There was a huge demand in injectable market. As different doses and packaging are suitable for different specific conditions and customers may purchase other pharmaceutical products of the Group while purchasing such injectables, advertising promotion benefits had been achieved to a certain extent. The Group continued to plough and cultivate the target markets deeply and intensely and optimise its marketing resources by integrating new medicine promotion seminars, academic seminars as well as medicine fairs.

Manufacturing: As Haixi plant has been suspended due to the carrying out of upgrading process and all production compartments were temporarily suspended resulting from an accidental rupture of the main underground steam pipelines connecting all the production compartments, causing serious damages to water pipes, nitrogen pipes, fire pipes and sewage pipes, the production volume had a significant decease throughout the year. Currently, the repair on damaged pipelines has mostly completed and the upgrading process is nearly finished.

Management: The acquisition of Fujian Liumai Medical Services Co., Ltd. (“Fujian Liumai”) by the Group has been completed at the end of 2016. Fujian Liumai is currently an indirect wholly-owned subsidiary of the Group with sales of software and provision of consultancy services as its core business. Fujian Liumai achieved a satisfactory result during the year. Based on the audited financial statements of Fujian Liumai, its actual profits in 2016 exceeded the profit guarantee and it contributed revenue of approximately RMB283,000 to the Group after completion, which enabled the Group to lay a solid foundation to expand its profit sources, improve the overall management level of the Group, further explore the digital medical and healthcare service market.

Research and Development (R&D): The Group controlled R&D expenditure for new drugs cautiously, focused resources on promoting the research of new medical treatment results of Perilla Oil Capsule and conducted the research on the anti-hepatitis compound drug liver & gall bladder tablets in cooperation with the Department of Medicine of Peking University. Another new product, Pazufloxacin Mesilate Injectible, was still undergoing approval procedures during the period.

FUTURE PROSPECTS
Despite of the slowdown in the national macroeconomics growth, keen competition in pharmaceutical market, stricter expense control of medical insurance and the norm of lowered bidding prices, the rigid demand for pharmaceutical products is still increasing against the backdrop of rapidly aging population, implementation of the urbanization policy and increasing national income. The Group will adhere to its new innovative development strategy, strengthen its internal management, enhance its advantages in core pharmaceutical business and steadily proceed with various works in order to further increase its sustainable development capacity.

The Group also actively pushes forward the quality consistency evaluation on imitating drugs by selecting certain existing drugs with greater potential to apply for receiving such evaluation and strives to expand its market shares after being evaluated. The relevant works are being processed in an orderly manner.

The Group has formed an associate company with Antu County Huifeng Agricultural Trade Company Limited (“Huifeng”) to invest in the sales and plantation of Perillas and Perilla seeds and its processed products. Perilla Oil Capsule has been the key product of the Group and Perillas is the raw material for its production. Following the formation of the associate company, the Group will be able to utilise the technical expertise of Huifeng in respect of plantation and management of Chinese herbal medicine and invest in Perillas plantation base for a stable supply of Perillas and a better control on the quality of Perillas so as to reduce purchase cost and meet the future market demand for Perilla Oil Capsule. As at 31 December 2016, the associate company was still in the preparatory stage in sourcing suitable plantation base.

Following the completion of upgrading process in the Haixi plant, it is expected that production will be fully resumed with a higher production capacity. The Group will further leverage on the advantage of economies of scale and reduce cost to enhance efficiency.

In addition, Mr. Lin Min resigned as executive Director of the Group due to his personal commitments. The Group has appointed Mr. Chen Cheng Qing and Ms. Hung Hoi Lan as executive Directors with effect from 17 February 2017. Both of them have substantial management experience and they will work with the Group to strengthen its core pharmaceutical business and key products while expanding new business, increasing its profitability and grasping new market opportunities at the same time.

I would like to express my heart-felt gratitude on behalf of the Board to Wuyi Pharmaceutical’s management team and all the staff for their continuous effort and contribution. In the meantime, I have to thank shareholders for their ongoing support to the Group. In the past, we have overcome many challenges hand in hand; in the future, we will continually unite to further create handsome returns for the business partners and shareholders of the Group.


Lin Ou Wen
Chairman

Hong Kong, 13 April 2017

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