1 Introduction to the Project

1.1 Project background

1.1.1 Product introduction

Medicine logistics refers to relaying on a certain logistics equipment, technology and logistics management information system to effectively integrate the upstream and downstream resources of the marketing channels, and by optimizing the acceptance, storage, sorting, and distribution processes, etc. in the drug supply and distribution process to improve the order processing capacity, reduce sorting errors, shorten inventory and distribution time, reduce logistics costs, improve the service leveland capital utilization efficiency, and achieve automation, informatization, and profitability. Medicine logistics is the spatial transfer of drugs and medical devices, etc., which runs through the entire medicine industrial chain and contributes an indelible force to the circulation and development of the medicine industry in China.

The project utilizes the existing idle Changbai Mountain Medicine Logistics Center Project to seek cooperation with external parties to construct a smart medicine logistics warehouse with efficient loading and unloading capacity, short-term storage capacity, low failure rate, and automatic temperature and humidity control.

1.1.2 Market prospect

(1) Current situation of medicine logistics industry

In the medicine logistics industrial chain, it mainly involves industry supply enterprises, medicine logistics enterprises, and drug consumption terminals. Among which, the upstream links mainly include the drug production and commercial enterprises; The midstream link is the circulation link of drugs, mainly including the drug logistics enterprises, which can be divided into internal subsidiaries affiliated with drug groups and third-party logistics enterprises; The medical consumption terminals refer to the users of drugs, mainly including hospitals at all levels, basic medical institutions, and retail pharmacies, etc. across the country.

Table 1 Medicine Logistics Industrial Chain

The medicine industry can be divided into the pharmaceutical industry and the medicine circulation industry, among which the medicine circulation industry has strict requirements for storage and transportation of products. For a long time, the medicine logistics industry in China has been monopolized by state-owned enterprises. But with the implementation of policies such as the “two invoices system” and “bulk buying”, etc., as well as policies such as disease based payment DRGs and price control of high-value medical consumables, etc., the organizational characteristics of the biomedicine industry and the medicine logistics industry are gradually changing.

At present, many medicine circulation enterprises provide the customers with comprehensive automated logistics solutions through logistics planning technology and system integration technology, and by applying logistics transportation technology and warehouse management systems. In addition, medicine logistics is stimulated by the development of new drugs, which are promoted to the market for sale after successful research and development. The logistics industry must pay attention to changes in market medication, and the service model of medicine logistics is also accelerating its evolution from offline wholesale services to online e-commerce services. Therefore, the logistics service enterprises need higher-frequency warehousing and distribution services to meet the customer demands.

Data showed that, in 2022, the total amount of medicine logistics in China reached 298.83 billion yuan, with a year-on-year growth of 6.91%. In the future, the medicine logistics in China will maintain a growth rate of at least 8%.

Table 2 Total Amount and Growth Rate of Medicine Logistics in China from 2016 to 2022

(2) Development trend of medicine logistics warehouse

In recent years, the Chinese government has gradually promoted the construction of medicine logistics. The national policy on medicine logistics has undergone changes from “accelerating the reform of the medicine circulation system” to “developing modern green medicine logistics” and then to “developing the Internet + medicine circulation model”. During the “11^th Five-year Plan” period, it was proposed to accelerate the reform of the medicine circulation system; During the “12^th Five-year Plan” period, it was proposed to standardize the order of drug circulation and improve the provincial-level online centralized drug procurement method led by the government; During the “13^th Five-year Plan” period, it was proposed to develop modern green medicine logistics and cultivate large-scale modern medicine circulation backbone enterprises; During the “14^th Five-year Plan” period, it was proposed to promote the wide application of mobile Internet, Internet of Things (IoT) and other information technologies in the field of drug circulation.

Compared with the high concentration in medical business field abroad, the concentration of medical business in China is still relatively low, and it is still in a white hot competition stage of competing for speed, territory, and development opportunities. From the perspective of market share, in 2021, the main business income of Top 100 medical wholesale enterprises in China accounted for 74.5% of the total size of the national medical market during the same period, with a year-on-year growth of 0.8%; and it accounted for 94.1% of the total size of the national drug wholesale market during the same period. The market share of CR3 (referring to the market share of top three companies in terms of business scale) of medicine circulation was as high as 96% in the United States, as high as 95% in France, 80% in Japan, but only 33.32% in China, which was a huge gap compared to advanced regions in the world.

On October 28, 2022, the Ministry of Commerce issued the Guiding Opinions on Promoting High-quality Development of the Drug Circulation Industry during the 14^th Five-year Plan Period, outlining the overall development goals for the “14^th Five-year Plan” period. It has become the main theme of the industry to focus on breaking down the obstacles in the drug circulation system and mechanism, and improve the ability of drug supply guarantee services, circulation efficiency, and quality safety.

Logistics is one of the most fundamental and critical links in the supply chain of the medical industry, and is characterized by “time sensitivity, temperature sensitivity, cost sensitivity, and safety sensitivity”. As of the end of 2021, there were a total of 412 enterprises included in direct reporting statistics of medicine logistics in China, with a delivery value of up to 1.8393 trillion yuan, a total of 1,253 logistics centers, and a warehouse area of approximately 12.61 million square meters; These enterprises had 16,454 professional transportation vehicles, of which refrigerated trucks accounted for 17.8% and special drug vehicles accounted for 1.1%. According to survey and statistics by external institutions, there are currently no less than 150 enterprises in China that have obtained project approval for the construction of large-scale modern medicine logistics centers.

Data showed that, by 2021, under the influence of factors such as the centralized and batch launch of COVID-19 vaccines and the growth of biological drug scale, etc., the total logistics cost of medicine cold chain in China has exceeded 20 billion yuan. Preliminary estimates suggest that, the total cost of medicine cold chain logistics will have exceeded 60 billion yuan by 2030, with an average annual growth rate of over 12%.

With the wide application of Internet, IoT, big data, cloud computing and other technologies, the medicine supply chain is deeply integrated with the Internet, the enterprise boundary is broken, and information technology forces the industrial chain to strengthen supply chain collaboration, which has realized that the whole process of drugs can be traced, monitored and scheduled, and improved the safety and quality of drugs. Modern facilities and equipment, represented by automated stereoscopic warehouses, high-speed sorting systems, electronic tag picking systems, WMS warehousing systems, and TMS transportation management systems, have achieved information sharing and resource integration between upstream and downstream enterprises, and improved the efficiency and effectiveness of the supply chain.

As an indispensable part of medicine industrial chain in China, the medicine logistics industry is of great significance to protecting the health and safety of our people. In recent years, the market size of medicine logistics in China has been continuously expanding, with significant growth rates. With the improvement of national health awareness and the increase in medical demand, the market demand for medicine logistics continues to grow. Especially with the aging population, increasing number of patients with chronic diseases, and sustained growth in medical demand, the medicine logistics market will usher in a broader development space.

1.1.3 Advantageous conditions of project construction

(1) Policy advantages

In August 2021, nine departments including the Ministry of Commerce and the National Development and Reform Commission issued the Special Action Plan for High-quality Development of Commercial Logistics (2021-2025), proposing to support the development of specialized logistics such as medicine logistics.

In October 2021, the Ministry of Commerce issued the Guiding Opinions on Promoting High-quality Development of the Drug Circulation Industry during the 14^th Five-year Plan Period, proposing to further optimize the industry structure and continuously enhance industry concentration; Encourage the development of third-party medicine logistics and promote the standardized development of drug cold chain logistics; Promote “Internet + drug circulation”; Promote digital transformation and upgrading of the industry.

In order to support the better undertaking of industrial transfer in the Northeast China, promote the adjustment and optimization of industrial structure, and help achieve new breakthroughs in the comprehensive revitalization of Northeast China, in February 2023, the National Development and Reform Commission replied and agreed to establish a Southwest Jilin Industrial Transfer Demonstration Zone, covering three cities of Siping, Liaoyuan, and Tonghua. The demonstration zone will undertake seven major industries including medicine and health, equipment manufacturing, agricultural products and food processing, green energy carrier, modern chemical engineering, modern textiles, and cultural tourism. The project is located in the Southwest Jilin Industrial Transfer Demonstration Zone, and belongs to the medicine and health project among the seven major undertaking industries.

(2) Resource advantages

Tonghua, located at the southwest foot of Changbai Mountain, is rich in medicinal resources, enjoying the reputation of “Three Natural Medicine Banks”, “Hometown of Ginseng in China” and the “Main Origin of Genuine Medicinal Materials in Changbai Mountain”.

The preserved area of ginseng in Tonghua City is 55,000 mu, and the under-forest ginseng has been optimized to 360,000 mu, with output of fresh ginseng at 13,000 tons/year. Tonghua City cultivates more than 20 genuine small and medium-sized medicinal herbs such as Schisandra chinensis, Fritillaria cirrhosa, Platycodon grandiflorus, Asarum heterotropoides, Gastrodia elata, and Gentiana cruciata all year round, with a planting area of 64,300 mu and an output of 25,000 tons/year.

(3) Industrial advantages

Medicine industry is one of the pillar industries in Tonghua City, with a relatively strong industrial foundation and good prospects for transformation. Tonghua City, as the famous “Medical City in China” and “Ginseng City in China”, currently has 104 medical enterprises, holding 3,582 approval numbers and 153 exclusive varieties. Among them, there are 2,274 TCM approval numbers, with 875 varieties produced all year round; 1,286 chemical drug approval numbers, with 108 varieties produced all year round; 19 biomedical approval numbers, with 12 varieties produced all year round; 2 auxiliary material approval numbers; There are 695 varieties included in basic drug catalog, including 391 TCM approval numbers, 8 biological drug approval numbers, and 296 chemical drug approval numbers; 10 approval numbers for protected TCM varieties; There are 1,321 varieties included in national medical insurance catalog, including 720 TCM approval numbers, 555 chemical drug approval numbers, and 16 biological drug approval numbers. The number of approved TCM ranks first in the country. There are 72 medicine industry enterprises above designated size, 6 listed medicine companies, and 42 high-tech enterprises. In 2022, the medicine industry enterprises above designated size throughout the city achieved an output value of 14.63 billion yuan, with a year-on-year growth of 1%. There are a total of 36 medical device manufacturers in the city, including 73 manufacturers of first-class medical device products and 46 manufacturers of second-class medical device products.

The medicine industry in Tonghua County, especially the biopharmaceutical industry, has become an important pillar for high-quality development in the county, forming a biomedicine cluster area represented by Dongbao Pharmaceuticalc, Anrate, Tonghua Kangyuan Yujin, Anyu Biological Products and other enterprises, a production base of cardiovascular and cerebrovascular series of traditional Chinese patent medicine represented by Huaxia Pharmaceutical, Baishan Pharmaceutical, Jitong Pharmaceutical, and Jinhui Pharmaceutical, and a production base of anti-cancer series of drugs represented by Zhenguo Pharmaceutical.

(4) Location advantages

Tonghua has a unique location and huge opening up space. Located in the center of the Northeast Asian Economic Circle and the core area of the Yalu River International Economic Cooperation Belt, the border line is 203.5 kilometers long. It is an important link belt in the easternmost part of China to promote the “Belt and Road” strategy and achieve land sea connectivity and interaction, an important hub of the East Corridor in Northeast China, an important window for Jilin Province to open up to the south, and has one national port for highways and railways, respectively; There are 7 highways passing by Tonghua; with 467 kilometers of railway operation; and flight access from Tonghua to Beijing, Shanghai, Guangzhou, Tianjin, Chongqing, Taizhou, Dalian and other cities. The construction of Shenyang-Baishan Transportation Line and Ji’an-Huanren Expressway, and preliminary work for expansion of Tonghua Airport are being accelerated.

(5) Talent advantages

At present, Tonghua City has 3 national key secondary vocational schools, 3 provincial key secondary vocational schools, and all its county-level vocational education centers have passed the provincial key school acceptance and entered the top 100 schools in the province. It is the first region in the province where all county-level vocational education centers have entered the provincial key school list. In recent years, by making scientific layout, continuous promotion of vocational education structure adjustment and resource integration, exploration of new paths for diversified education, and continuous improvement of modern vocational education network system construction, the local characteristics of vocational education have begun to form, and the ability to serve economic and social development has gradually improved.

Tonghua Municipal Government has signed science and technology strategic cooperation agreements with provincial universities and research institutions such as Northeast Normal University, Jilin Agricultural University, Changchun Institute of Applied Chemistry, Chinese Academy of Sciences, and Tonghua Normal University, etc., providing scientific and technological support for development of the enterprises. Tonghua City continues to provide assistance for enterprises in talent cultivation and other aspects, vigorously implements the “Plan for Revitalizing Enterprises with Ten Thousand Students” and “Plan for Homing of a Thousand Students”, and continuously attracts college graduates for enterprises.

1.2 Contents and scale of project construction

The project utilizes the existing idle Changbai Mountain Medicine Logistics Center project for renovation.

The project covers an area of 300 mu, with the warehouse center having a construction area of 230,000 square meters, the warehouse passing GSP standard as approved by the provincial drug regulatory department having a construction area of 20,000 square meters, and cold storage having a construction area of 5,000 square meters. The renovation includes the restoration of the hospitals, the repair and functional transformation of the warehouse centers, the procurement of cold chain transportation equipment, the repair and construction of cold storage facilities, the design and renovation of warehouses, and the construction of logistics data.

1.3 Total investment of the project and capital raising

1.3.1 Total investment of the project

The total investment of the project is 500 million yuan, including the construction investment of 450 million yuan and current funds of 50 million yuan.

1.3.2 Capital raising

Raised by the enterprise itself.

1.4 Financial analysis and social evaluation

1.4.1 Main financial indexes

After the project reaches the production capacity, its annual sales income will be 450 million yuan, its profit will be 120 million yuan, its investment payback period will be 7.0 years (after the tax, including the construction period of 2 years), and its investment profit rate will be 24.0%.

Note: “10 thousand yuan” in the table is in RMB

1.4.2 Social evaluation

The construction of medicine logistics warehouses is of great significance for ensuring quality and safety, improving circulation efficiency, reducing operating costs, and responding to emergencies of drugs. After the implementation of the project, it can assist the development of medical enterprises in Tonghua County, supplement the industrial chain gap, and provide supporting services for medicine development in the county, with good social benefits.

1.5 Cooperative way

Joint venture or cooperation, and other ways can be discussed in person.

1.6 What to be invested by the foreign party

Capital.

1.7 Construction site of the project

Tonghua County Economic Development Zone.

1.8 Progress of the project

The project proposal has been prepared.

2 Introduction to the Partner

2.1 Basic information

Name: Tonghua County Economic and Technological Cooperation Service Center

Address: No. 557 Tuanjie Road, Kuaidamao Town, Tonghua County

2.2 Overview

 Tonghua County is located at the southern foot of Changbai Mountain, covering an area of 3,577 square kilometers. It has jourisdiction over 15 townships, 2 sub-districts, and 1 provincial-level economic development zone, with a permanent population of 175,000, including 77,000 urban residents and 98,000 rural residents. It is known as the “Gateway to Changbai and Throat of Jilin and Liaoning”. It has successively won the honorary titles of National Civilized City, National Health County, National Garden County, National Advanced Cultural County, and Model County for Beautiful Rural Construction in China. It has successfully created the first national ecological county in the province and is among the first batch of national ecological civilization construction demonstration counties. It has been awarded the “National Top 100 Counties for Science and Technology Innovation” and “National Top 100 Counties for Green Development” for three times, and the county has won more than 80 national honors. In 2023, the regional gross domestic product reached 9.39 billion yuan, the comprehensive fiscal income was 970 million yuan, the local fiscal income was 420 million yuan, and the per capita disposable income of all permanent residents was 25,788 yuan.

 Tonghua County adheres to multi-point support, multi-industry development, and diversified development, forming two pillar industries of medicine and food, as well as three advantageous industries of mineral resources, new materials, and equipment manufacturing. There are 50 industrial enterprises above designated size, and the total output value of industrial enterprises above designated size reached 6.67 billion yuan in 2023, ranking first in the city (excluding Tonghua Iron and Steel), with a growth rate of 2.7%. Industrial enterprises represented by Dongbao Group, Anrate, Anyu, Qingshan Industrial, Sifangshan Iron Mine, Huaxia Group, Tonghua Petrochemical, Zhenguo Group, Hongxin Grinding Materials, Tontine, Daquanyuan Wine Industry, and Aohe Food, etc. have strong strength; famous and excellent products such as Dongbao’s recombinant human insulin, Anrate's recombinant human albumin injection, Zhenguo’s anti-cancer traditional Chinese medicine, Huaxia’s Kudiezi injection, Hongxin Grinding Materials’ green silicon carbide ultrafine powder, Ilyang’s WONBI-D, Tontine's wine, and Tonghua Petrochemical’s petroleum workover rig, etc. are well-known both at home and abroad; It is making every effort to construct the largest ginseng distribution center in China and create a leading brand in the Changbai Mountain ginseng industry.

2.3 Contact method

2.3.1 Contact method of cooperator

Contact unit: Tonghua County Economic and Technological Cooperation Service Center

Contact person: Han Min

Tel: +86-18626537770    

E-mail: 9375120@qq.com

2.3.2 Contact method of the city (prefecture) where the project is located

Contact unit: Tonghua Municipal Commerce Bureau

Contact person: Wang Liangchen

Tel: +86-435-3199017+86-18643036783

E-mail: thsswjtck@126.com