Although net income for the year is projected to increase 35% to $5.4 million, over 2008, a shift in sales strategy has led to a reduction in projected revenues. 2009 revenues are now projected to be $46.1 million, down 22% from $59.1 million in 2008. The company’s sales strategy is being shifted from wholesale to the retail and medical facilities sector due to the uncertain direction of the National Medical Policy. Revenues from the company’s retail drug stores increased by 30% over 2008, but this was not sufficient to overcome the impact of the decrease in wholesale operations. The increase in net income is due primarily to higher margin retail and medical facilities sales, the new area of focus.
Company chairman and CEO, Mr. Yongxin Liu, commented that wholesale business was impacted by customers waiting for specifics on the new healthcare reform plan. “However, on August 18th, the Chinese government issued China’s Essential Drug List (EDL) which included over 300 commonly used pharmaceuticals that will be subsidized by the government to provide easier access to all citizens. We are pleased that China Yongxin is a retailer or distributor of 295 of the products on that list. We are further encouraged by the increasing momentum toward healthcare reform and the government’s efforts to boost domestic spending. During 2009, we also added 12 high margin pharmaceutical products with exclusive distribution rights in Jilin province and we expect this to drive market share gains and growth during the coming year.”
China Yongxin Pharmaceuticals was founded in 1993, but didn’t begin retail operations until 2004. In 2005, it gained franchise rights from one of the world’s largest drug chains for China’s Jilin Province. By the end of 2007, it had become one of the fastest growing drug retailers in China through its chain of 93 drug outlets, as well as wholesale distribution and manufacturing operations in Northeastern China.