Pien Tze Huang , one of the top pharmaceutical firms in China, has recently announced its third-quarter results, with both revenue and net profit shrinking sharply.

According to The Paper, Zhangzhou Pien Tze Huang Pharmaceutical Co., Ltd. posted revenue of $305 million (2.2 billion yuan) in the quarter ending September, down 3.08% from a year ago.

In the first three quarters, the company’s revenue reached $915 million, an increase of 8.25% year-on-year. However, this revenue growth rate is lower than that of the same period last year.

As of October 10, its stock prices have plummeted nearly 40% and lost a total market value of around $19.4 billion since its peak in 2021.

Gross profit margin in the first three quarters of different business segments—pharmaceutical manufacturing, pharmaceutical distribution, and daily chemical—dropped by 1.87%, 0.21%, and 9.39% from last year, respectively. 

In addition, the company’s core product, liver disease medicines, also had a contraction of 1.58% in the first three-quarters year-on-year.

Chinese Entrepreneur explained that the drop in gross profit margin was mainly due to rising raw material prices.

The ingredients in Pien Tze Huang ’s medicines consist of 3% musk, 5% bezoar, 85% notoginseng, and 7% snake gall. Despite being the least amount, the cost of 3% musk already makes up more than half the total cost.

The musk, a significant raw material in the firm’s meds, comes from a fully protected animal, wild musk deer.

Due to overhunting since the 1980s, in 2005, China’s State Forestry Administration stepped in to take control and set a quota for natural musk resources of roughly 1,100 pounds (500 kg) per year.

Medicines containing natural musk have become scarce since then. Firms seeking to buy musk must obtain licenses and have the amounts approved by the forestry department.

The outlet, citing Southwest Securities, noted that 14 Chinese medicine companies are currently allowed to use natural musk as raw materials. Pien Tze Huang is among the first group to obtain the license and the only firm qualified for wild musk breeding.

Due to a significant shortage of natural musk, the company started raising musk deer in 2007. However, it still was not enough to meet its future growth.

The second most expensive ingredient is bezoar, with prices once jumping to around $12,700 per pound (200,000 yuan/kg).

Over the last six months, Pien Tze Huang’s midyear report shows that natural musk and bezoar prices increased significantly. 

Natural musk’s average prices range from $25,300 to $44,100 per pound. 

Meanwhile, natural bezoar reached more than $36,000 per pound.

From 2005 to 2017, the Chinese firms adjusted pricing three times. As a result, as of early 2020, retail prices increased from $39 to $82 per capsule.

The average price of a 3-gram tablet was about $27 per gram, which was even higher than that of a 500ml Feitian Moutai liquor bottle.

An industry insider told the Chinese Entrepreneur that Pien Tze Huang is no longer a medicine but has become an investment and a luxury product.

Li Zhong, a pharmaceutical marketing expert, said, “The efficacy of medicines can be exaggerated, but not the price.”

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