Health & Beauty

According to Huacheng Import and Export Data Observation, since September 2021, more than 30 pharmaceutical companies from around the world have announced layoff plans within half a year. Two thirds of the layoffs in pharmaceutical companies occurred in the latest quarter, with an average of 7.6 pharmaceutical companies experiencing layoffs each month. Moreover, the frequency of layoffs is accelerating, and since late March, at least four more pharmaceutical companies have announced layoff plans.

According to the annual reports of the financial years that have been successively released, the overall growth and profitability of the global pharmaceutical industry, as well as the reserve of new products, are still tolerable. What are the reasons for layoffs and self-protection in vibrant pharmaceutical companies?

Although every pharmaceutical company has its own reasons for layoffs, it cannot be ignored that there have been many "black swan" incidents around the world in the past five years, and there is still no sign of stopping. Looking at the changes that have taken place in the global geopolitical landscape over the past 100 years from World War I to the present, the risks accumulated over these years have made it impossible for the industry to determine what will happen in the future. Therefore, it is understandable to plan ahead and adjust the business layout or even lay off employees as soon as possible. Huacheng Import and Export Data Observation Report.

However, some pharmaceutical companies engage in reverse operations, instead of "covering their wallets" or "removing their burdens", they are enthusiastic about securities investment.

Spin off non core business

3、 April is the season for Chinese listed companies to issue annual reports. Yunnan Baiyao's 2021 annual report disclosed a loss of 1.929 billion yuan in securities investment, which attracted industry attention. Against the backdrop of uncertain changes in the global geopolitical pattern and the repeated COVID-19, all pharmaceutical enterprises are "covering their wallets" and "unloading their burdens" to protect themselves. This pharmaceutical enterprise's actions and results in the field of securities investment have surprised the industry. Looking at the annual reports of recent years, it is found that since the change of major shareholders in 2018, this pharmaceutical company has had 7.2 billion yuan of securities investment, which has gradually increased since then. From 2019 to the first half of 2021, there were 8.821 billion yuan, 11.23 billion yuan, and 10.488 billion yuan of transactional financial assets, respectively.

As a legal person investor in a legal and open capital market, both losses and surpluses are the result of investment, which is indeed normal. However, from the perspective of the timing of investment in pharmaceutical companies, 2019 to the next two or three years are periods of risk uncertainty. Entity enterprises need to be very cautious in investing in the securities market. Even if profits rather than losses are made, they only increase the return rate of shareholders in this year, and have little impact on the improvement of the core capabilities of pharmaceutical companies. According to Huacheng Import and Export Data Observation.

Currently, most pharmaceutical companies are divesting businesses that have little to do with their main businesses, such as health products, food, etc. Some pharmaceutical companies are divesting their pharmaceutical business from commercial businesses. Even in the pharmaceutical field, they are further focusing on core areas, and their advantageous businesses are divesting non advantageous businesses. The core purpose is to ensure the main business under the condition of limited resources, so as to survive in extraordinary times, and on the basis of surviving, focus on niche areas to enhance competitive advantage. From this perspective, the behavior and results of pharmaceutical companies that have lost nearly 2 billion yuan in stock trading are not very "professional".

George Merck, the founder of the global pharmaceutical giant MSD, once said, "We should always remember that drugs aim to save people, not profit, but profit will follow." Herbert Boyer, the founder of Genentech, has always emphasized that pharmaceutical companies must have a scientific driven culture, be patient centered, and drug oriented. The reason why these enterprises are able to break through the tight encirclement and enter the first echelon in the competitive world pharmaceutical market is directly related to the culture they adhere to, and also to exploring the development laws suitable for their own industries.

According to Huacheng Import and Export Data Observation, from a realm perspective, are things that comply with national laws and regulations and enterprise game rules conducive to the healthy development of enterprises? Can we avoid corporate risks? Can it improve competitiveness? Needless to say, the leaders of listed companies must ask themselves and answer these questions. As a leader, how are you responsible to the investors and employees?

Protect cash flow to avoid risks

In extraordinary times and periods of great uncertainty, it is obviously more important for pharmaceutical companies to avoid risks than to earn more money. If pharmaceutical companies are prepared in the following aspects, it will be greatly beneficial to bear and resolve future risks and overcome uncertain periods.

First, avoid risks as much as possible. This mainly refers to avoiding diversification, prudent industry diversification, and prudent foreign investment. Because it is difficult to predict where and in what areas the future risks will come from, using inertia thinking is likely to fall into a trap. The experience of companies that survived the two world wars, the Great Depression of the 1930s, and the global economic crisis of 2008 has proven that it is very important to narrow the front and focus on limited areas in extraordinary times, which can reduce complexity. It is necessary to reduce the risk level.

Second, maintain sufficient cash flow. Adequate cash flow can enable the company to survive in extremely difficult circumstances. As long as we survive, there will be opportunities after the crisis, and we can seize opportunities.

The third is to preserve, prepare, and create opportunities for the aftermath of the crisis. Maintain core business and core backbone as much as possible, leaving a spark for the future's resurgence. Putting limited resources into scientific and technological research and new drug development during extraordinary times will help to elevate competitiveness to a new level when the market recovers. "Even if it is very difficult, do not do anything that is detrimental to the brand, quality, and customer interests," Huacheng Import and Export Data Observation reported.