Health & Beauty

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

From the annual reports of the fiscal years that have been successively released, it can be seen that the overall growth and profitability of the global pharmaceutical industry, as well as the reserve of new products, are still passable. 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 many "black swan" incidents have occurred globally in the past five years, and there are no signs of stopping so far. Throughout the more than 100 years since World War I, the global geopolitical landscape has undergone changes, and the risks accumulated over these years have made it difficult for the industry to determine what will happen in the future. So it is understandable to plan ahead and adjust the business layout or even lay off employees as soon as possible, as reported by Huacheng Import and Export Data Observation.

However, some pharmaceutical companies engage in reverse operations and instead of "covering their wallets" or "unloading 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 revealed 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 was found that since the change in major shareholders in 2018, this pharmaceutical company has invested 7.2 billion yuan in securities, which has gradually increased. From 2019 to the first half of 2021, there were 8.821 billion yuan, 11.23 billion yuan, and 10.488 billion yuan of trading financial assets, respectively.

As a legal and public investor in the capital market, both losses and profits are the result of investment, which is normal. However, from the perspective of investment timing for pharmaceutical companies, 2019 to the next two to three years belong to a period of risk uncertainty. Physical enterprises need to be very cautious when investing in the securities market. Even if they make profits rather than losses, it only increases the return rate for shareholders in this year, and has little effect on improving the core capabilities of pharmaceutical companies. According to Huacheng Import and Export Data Observation Report.

At present, most pharmaceutical companies are divesting businesses that are not closely related to their main businesses, such as health products and food. Some pharmaceutical companies are divesting their pharmaceutical business from commercial business, and even in the pharmaceutical field, they are further focusing on core areas and divesting their advantageous business from non advantageous business. The core purpose is to ensure the main business under limited resources, so as to survive in extraordinary times and focus on niche areas to enhance competitive advantages on the basis of survival. From this perspective, the behavior and results of pharmaceutical companies with losses of nearly 2 billion yuan in stock trading seem not very "professional".

George Merck, the founder of global pharmaceutical giant Merck, once said, "We should always remember that drugs aim to save people, not profit, but profit will follow." Gene Tech founder Herbert Boyer 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 tier in the highly competitive world pharmaceutical market is directly related to their culture of adherence, and also to exploring development laws suitable for their respective industries.

According to Huacheng Import and Export Data Observation, from a realm perspective, is it beneficial for the healthy development of enterprises to comply with national laws, regulations, and enterprise game rules? Can we avoid corporate risks? Can we enhance our competitiveness? Undoubtedly, the leaders of listed companies must ask themselves and answer these questions. As a leader, how are you accountable to investors and employees?

Maintain cash flow to avoid risks

In times of great uncertainty and uncertainty, it is clearly 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 of great help to bear and resolve future risks and overcome uncertain periods.

One is to avoid risks as much as possible. This mainly refers to avoiding diversification, being cautious about industry diversification, and being cautious about 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 shrinking the front line and focusing on limited areas are crucial in reducing complexity during extraordinary times. It is necessary to reduce the risk level.

The second is to maintain sufficient cash flow. Adequate cash flow can enable the company to survive in extremely difficult situations. As long as we survive, after a crisis, there is an opportunity to seize it.

The third is to preserve, prepare, and create opportunities for post crisis situations. Try to maintain core business and core backbone as much as possible, leaving a spark for future resurgence. Placing limited resources in scientific, technological research, and new drug development during extraordinary times will be beneficial for the market to recover and elevate its competitiveness to a new level. Even if it is very difficult, do not do anything that harms the brand, quality, and customer interests. Huacheng Import and Export Data Observation Report.