TCM » Topics » Competition

This excerpt taken from the TCM 20-F filed Jun 30, 2008.


The traditional Chinese medicine sector in China is highly fragmented and intensely competitive. According to the 2006 China Pharmaceutical Market Research Report prepared by Compass International, a Beijing-based research company, in 2005 there were over 1,200 traditional Chinese medicine manufacturers in China (not including manufacturers of traditional sliced herbs). Of these manufacturers, in 2005, large-sized manufacturers contributed to 27.4% of the total sales of this sector, compared to 30.3% and 42.3% of sales by small- and medium-sized manufacturers, respectively, according to the same research report. According to the company size classification standards used by Compass International in the research report and which are set by the National Bureau of Statistics, a company with a headcount of over 2,000, sales of over RMB300 million and assets of over RMB400 million is classified as a large-sized company. On the other hand, for companies that do not meet all the three criteria of a large-sized company, if the company has an employee headcount of at least 300, sales of at least RMB30 million and assets of at least RMB40 million, it is designated as a medium-sized company. Otherwise, it is considered to be a small-sized company. Under these standards, we believe that we would be designated as a medium-sized company because our employee headcount is less than 2,000.

We believe that traditional Chinese medicine manufacturers primarily compete on the basis of:



brand name and reputation;






perceived efficacy;



side effects;



marketing ability;



economies of scale;



customer service and customer support capabilities; and



customer base and customer loyalty.

We face direct competition from other China-based manufacturers of traditional Chinese medicines. We believe that the primary traditional Chinese medicines competing with Xianling Gubao are:



Qiang Gu (Bone-Strengthening) Capsules, and



Gu Song Bao Capsules/Granules.



Table of Contents

Qiang Gu Capsules are manufactured by Beijing Qihuang Pharmaceutical Co., Ltd. and Gu Song Bao Capsules are manufactured by Guizhou Fuhua Pharmaceutical Co., Ltd. Both companies are PRC domestic pharmaceutical companies. In addition, we face competition from manufacturers of western medicine with similar curative effects, which therefore can be used as substitutes for our traditional Chinese medicine products. The major western medicines that compete with Xianling Gubao include (1) calcium supplements such as Osteoform, Caltrate and Gai Zhong Gai, (2) hormonal replacement therapies such as Livial, Premarin, Ipriflavone and Ranoxifene, (3) bisphosphonates such as Fosamax, and (4) calcitonin derivatives, such as elcatonin. Except for Gai Zhong Gai, these western medicines are manufactured by the PRC subsidiaries of U.S.- or European-based pharmaceutical companies. Many of these western medicines, including calcium supplements and bisphosphonates, are also included in the national and provincial medicine catalogs and therefore the purchases of these medicines are reimbursable to National Insurance Program participants.

The following chart sets forth the primary SFDA-approved medicines that compete with our other principal products:



Competing Medicines


Traditional Chinese Medicines


Western Medicines

Zaoren Anshen Capsules


Fufang Zaoren Capsules

Zaoren Anshen Granules

Anshen Bunao Liquid


Alprazolam (Xanax)

Zolpidem (Ambien)

Dianbaizhu Syrup

   Xuanyunning Granules    Flunarizine (Sibelium)

Moisturizing and Anti-Itching Capsules

   Shiduqing Capsules    —  
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