Research On The Financial Performance Of CRO Industry Chain Integration

Under the background of population aging,the domestic demand for health care products and services is increasing.Combined with the outbreak of the COVID-19 epidemic,the pharmaceutical industry received wide public attention rapidly.As a segment of the industry,outsourced R&D service are playing an increasingly significant role in the research and development of innovative chemical drugs and medical devices,while local CRO enterprises are also facing new opportunities and challenges.Nowadays,the number of pharmaceutical CRO enterprises in our country is increasing rapidly,while most of which are small in scale and fragmented in layout.With the continuous increase of external policy support,capital market development and requirements of upstream pharmaceutical enterprises,industrial chain integration has become an important means of CRO enterprises to establish market position and capture market share.Some of the leading CRO enterprises have set up the strategic target of building up the whole industry chain with M&A and strategic alliances,so as to construct a one-stop CRO service system.This paper takes the Ashare listed Company Tigermed as the research object and makes an in-depth analysis on its industrial chain integration financial performance.First of all,this paper reviews the literature and theories related to the pharmaceutical industry chain integration behavior,and defined the key concepts,so as to construct an appropriate analytical framework.After that,this paper interprets the motivation,mode and economic consequences of pharmaceutical CRO’s implementation of industry chain integration.Secondly,by describing the development status of the local CRO industry and the current situation of industry chain integration in leading enterprises,this paper explains the background of case selection,and analyzes the motivation and mode of Tigermed’s integration through a detailed classification.Thirdly,the events of the direct M&A,M&A through buyout fund,contractmode strategic alliance and equity strategic alliance events announced by Tigermed in 2012-2019 have been used as study samples in this paper,and it adopts the event study and financial analysis method to make quantitative analysis and comprehensive evaluation of the long-term and short-term financial performance about CRO industrial chain integration.In the short term,Tigermed’s implementation of industrial chain integration strategy has received a positive response from the capital market,and its short-term financial performance has been improved.In the long run,this strategy has brought some operating and technical synergies for Tigermed,which helps to reduce transaction costs,but also increases the difficulty of asset,expense management and financial risk control within the enterprise.In general,in the process of industrial chain integration,the business layout and product structure of Tigermed have been optimized,and firm performance has been improved.At present,the company has grown into the leading company of the clinical CRO segmented industry in China,which reveals that the strategy of industrial chain integration has played a positive role in supporting the rapid development of Tigermed.Finally,by comparing the industry chain integration performance of Tigermed with other 4 leading CRO enterprises,this paper puts forward some suggestions for other enterprises in the pharmaceutical industry who are working out their business development strategies.Not all pharmaceutical CROs need to achieve their own growth and development goals through the implementation of industrial chain integration and other expanding strategies.Enterprises should make appropriate judgment according to their own situation and avoid blindly following the trend.For CRO enterprises that intend to implement integration,it is particularly important to choose appropriate integration methods and make long-term planning for their own industry chain layout.Enterprises can make rational use of financial leverage to broaden financing channels,and avoid policy and capital restrictions through contractual alliance at the same time.It is also a top priority for these enterprises to pay attention to risk prevention and optimal allocation of resources after industrial chain integration.