Pharma company posts higher revenue as reforms lift performance

Northeast Pharmaceutical (NEPHARM) said in its semiannual report that its revenue rose 9.65 percent year-on-year to 4.11 billion yuan ($582 million) while indicating that mixed-ownership reforms are contributing to the revival of the State-owned enterprise.

"In 2019, our goal was to achieve revenue of 15 billion yuan and a net profit growth of no less than 50 percent," said NEPHARM Chairman Wei Haijun. He added the company invested heavily in research and development.

NEPHARM was founded in 1946 and was a backbone pharmaceutical SOE in China for decades. Its main businesses include active pharmaceutical ingredients, chemical preparation and commerce. But the past 10 years saw it lag far behind due to its rigid mechanism.

The Shenyang municipal government introduced China Fangda Group as the controlling shareholder of NEPHARM to revive the company, and implemented market-oriented management reforms since last May.

"The local government giving up the controlling shareholder position was bold and also the most critical step for the success of mixed-ownership reform. This paves the way for complete reform and renewal," said Li Hongbiao, special senior researcher from the Revitalization Research Institute at Northeastern University.

To revive the firm, China Fangda Group built up a new mixed equity structure of private capital, State-owned capital and equities held by employees after it became the controlling shareholder.

China Fangda Group said that participating in NEPHARM's mixed-ownership reform is a major strategic investment for the company which aims to build its involvement in the health sector as a new growth pole over the next five years.

NEPHARM will be integrated into group's health industry to realize coordinated development in the future.

China Fangda Group is a large-scale private enterprise which has three major industrial sectors - carbon, steel and medicine. In 2018, its sales revenue and profits reached 80 billion yuan and 24 billion yuan, respectively.

In order to bind the interests of the company with its employees, NEPHARM issued 37.613 million restricted stocks as an incentive to 254 senior managers. The shares accounted for 6.60 percent of the company's total equity.

"This win-win policy is the golden handcuff for all employees, which provides the driving force for the rapid development of enterprises," Li explained.

Besides the stock incentive, outstanding employees may also get promoted.

"I would never dream to be the chief under the old system," said Liu Suna, the research center chief who was prompted from researcher to chief of the center in four months due to her achievements at work.

Data showed that the average salary of the employees is 61.81 percent higher than the start of the mixed-ownership reforms.

From January to June, the company rewarded more than 500 people with 34.46 million yuan.

"After reform, each post has clear responsibilities. The more you work, the more you earn. We are all happy to create more value," said Meng Xianwei, a fitter from the company.

Wei said the company is working hard to improve economic performance and is determined to build a world-class high-quality pharmaceutical enterprise.