A bold acquisition of 1.035 billion yuan—can Yaoshibang's 'extravagance' withstand the 'chill' in the pharmaceutical retail sector?

How is YSB Pharmacy Dispelling the 'Chill' in Its Development?

Source｜Pharmaceutical Research Society

YSB Pharmacy is more determined than ever to 'move upward.'

Recently, YSB Pharmacy announced that it has signed a transaction agreement to acquire 100% equity of YKY Pharmacy for a total consideration of RMB 1.035 billion, including a cash consideration of RMB 420 million and a share consideration of RMB 615 million. Upon completion of the transaction, YKY Pharmacy will become a wholly-owned subsidiary of YSB Pharmacy.

It is understood that YKY Pharmacy primarily provides pharmaceutical and health products and services to downstream chain pharmacies, multi-store pharmacies, and independent pharmacies. Its proprietary drug brands, such as Yuandian, Antaibang, and Xinglintai, cover categories including traditional Chinese medicine, chemical drugs, and tonics.

From a business model perspective, the acquisition of YKY Pharmacy is clearly a further step by YSB Pharmacy to strengthen its upstream supply chain. However, with downstream customers currently facing significant operational challenges, how much growth space can YSB Pharmacy unlock by firmly 'moving upward'?

1. YSB Pharmacy's 'Move Upward' Points to 'Scale Expansion'

"With the goal of achieving a GMV scale of RMB 100 billion in the next 2-3 years, we will continue to expand upstream, use digital technology to redefine drug production and distribution, and enhance our supply chain capabilities." "By actively expanding upstream, we will further strengthen strategic cooperation with upstream pharmaceutical companies and suppliers, innovate and upgrade collaboration models, and broaden cooperation areas."

YSB Pharmacy has repeatedly emphasized the importance of 'moving upward' in its financial reports, with the driving factors and strategic goals all pointing to the word 'scale.'

First, we need to recognize that the prospects for the off-hospital pharmaceutical distribution market where YSB Pharmacy is rooted are very broad. According to Frost & Sullivan data, the size of China's off-hospital digital pharmaceutical distribution service market is expected to increase from RMB 148.5 billion in 2021 to RMB 321.3 billion in 2026.

Additionally, Menet estimates that by 2029, the size of the off-hospital market will reach RMB 1.15 trillion for online and offline retail pharmacies and RMB 450 billion for private hospitals, clinics, and village health centers.

By positioning itself differently from many large pharmaceutical distribution companies, targeting the 下沉 market, and focusing on cost-effectiveness, YSB Pharmacy has captured a significant market share. According to Frost & Sullivan data, YSB Pharmacy ranks first in market share in the off-hospital digital pharmaceutical distribution service market.

In terms of performance, the 财报 shows that as of June 30, 2024, the YSB Pharmacy platform has attracted approximately 8,900 upstream sellers and over 741,000 downstream buyers, including about 426,000 pharmacies and over 310,000 primary medical institutions. Registered users cover 98.6% of counties and 90.7% of townships nationwide.

As the market continues to expand, YSB Pharmacy has finally emerged from the quagmire of losses. The 财报 shows that in the first half of this year, the company's revenue reached RMB 8.81 billion, a year-on-year increase of 10.6%; net profit exceeded RMB 13 million, turning positive for the first time; adjusted net profit exceeded RMB 91 million, a year-on-year increase of 30.3%.

Combined with the current acquisition of YKY Pharmacy, YSB Pharmacy clearly aims to further strengthen its upstream supply chain, enrich drug supply, and better meet the needs of its 庞大 customer base. At the same time, it will share resources with YKY Pharmacy to expand market coverage, enhance brand visibility, and 挖掘更多利润。

It can also be seen that in the off-hospital pharmaceutical distribution market, YKY Pharmacy has indeed secured a 'piece of the pie.' It is reported that YKY Pharmacy has established strategic partnerships with over 1,000 pharmaceutical manufacturers, providing about 700 proprietary brand SKUs to downstream 3,000 chain pharmacy headquarters and numerous multi-store and independent pharmacies.

Under the 构想 of a strong alliance and business synergy, YSB Pharmacy's 更大的增长 seems within reach. However, the 现实引力 remains heavy.

2. Behind the Acquisition: Target Pharmacy Customers Face Operational Pressure

Although the growth prospects of the off-hospital pharmaceutical distribution market are promising, retail pharmacies within it are struggling.

In fact, the 医药零售 market has entered a period of 存量竞争， with the number of pharmacies continuing to grow while overall 业绩规模 has 收缩. Previously, CCMH statistics showed that by the end of 2023, the number of retail pharmacies nationwide had exceeded 680,000, with an annual 复合增长率 of 7%; however, the national retail pharmacy market 规模 reached RMB 539.4 billion, a year-on-year decline of 0.7%.

At the same time, as 竞争持续加剧， the 生存空间 of some independent pharmacies and small and medium-sized pharmacies is being 挤压， and the speed of 行业洗牌 is accelerating.

According to CCMH Pharmacy 通监测， in the first two quarters of this year, the number of pharmacy closures increased quarter by quarter, reaching 6,778 and 8,792, respectively. This process has also been accompanied by 并购整合. For example，头部连锁药房 such as 老百姓 are extending their reach to the 下沉 market, attracting pharmacies in county and township markets to join through 加盟。

In this context, YSB Pharmacy, which focuses on serving 下沉市场独立药房 and 中小型药房， may be significantly affected.

On one hand, the 经营压力 of target customers is prominent, which may reduce their demand for upstream drug 采购. On the other hand, the 并购 initiated by 头部连锁药房 may also 压缩 YSB Pharmacy's 业务开拓空间， as these 药房 have the ability to negotiate directly with 上游厂商 and possess significant 供应链优势， leaving little room for 中间商 like YSB Pharmacy.

While downstream 市场需求 is 收缩， YSB Pharmacy continues to enrich product supply through acquisitions, which may increase its own 经营压力。

However, some industry insiders point out, "Even 超级连锁体 cannot guarantee that all SKUs can be obtained through direct procurement. For example，稍小需求 and 刚需品类 still need to be purchased through 批发 or 电商渠道， which presents a market opportunity for YSB Pharmacy."

It is worth mentioning that apart from 头部药房 customers, YSB Pharmacy has another '拓新' opportunity in 基层医疗卫生机构。

According to the National Health Commission's "2023 Statistical Bulletin on the Development of China's Health Undertakings," as of 2023, there were approximately 1.016 million primary 医疗卫生机构 nationwide. In 2023, YSB Pharmacy had 246,000 registered users among primary 医疗机构， with a market 渗透率 of only about 24%. This means there is still significant market 开拓空间 for YSB Pharmacy in the primary 医疗机构领域。

Therefore, through acquisitions and other actions, if YSB Pharmacy continues to strengthen its 开拓 of 头部连锁药房 and primary 医疗机构 customers, it may still dispel the 'chill' in its development and 突破成长的天花板。