Source: Kingfisher Capital

Kingfisher Capital

Management scientist Peter Drucker once warned: "Businesses often die not of hunger, but of indigestion." ”

Bloomage Biotech (688363. SH) has been declining in performance, exposing the lesions on the face.

A few days ago, Bloomage Biotech disclosed its 2024 performance report: revenue of 5.371 billion yuan, a year-on-year decrease of 11.6%; the net profit attributable to the parent company was 164 million yuan, a year-on-year decrease of 72.27%; The net profit after deduction was 101 million yuan, a year-on-year decrease of 79.36%.

Shortly after the release of this embarrassing performance report, on the evening of March 3, Bloomage Biotech's official WeChat account released an article entitled "Strict Governance of the Organization, Return to the Front Line of Business, and Return to the State of Entrepreneurship - Full Text of Zhao Yan's Internal Speech".

It is mentioned that the decline in Bloomage Biotech's performance in the past two years is partly due to the market, and a larger part is due to the founder Zhao Yan's realization that the company's organization and talents have not kept up with the changes of the times.

As a hyaluronic acid giant, Bloomage Biotech made its internal speech public, which obviously deliberately leaked to the outside world, which is "shameless".

Of course, the problems of Bloomage Biotech are far from being solved by a public article, and its performance decline is not an accidental event, but a systemic crisis caused by strategic loss, organizational rigidity and industry changes. The overall weakness of Bloomage Biotech's core business segment reflects multiple foci from the collapse of technical beliefs to the failure of management efficiency.

Deterioration in financial indicators

The year-on-year decline in 2024's performance is already on the basis of Bloomage Biotech's 2023 performance plummeting.

In 2023, Bloomage Biotech's revenue and net profit will fall by 4.45% and 38.97% respectively. In the fourth quarter, the decline widened to 9.04% and 73.37%.

In the past, Bloomage Biotech had a very strong momentum of rapid growth in performance. In the five years from 2018 to 2022, its revenue soared from 818 million yuan to 6.359 billion yuan, an increase of 677%.

But looking back, at that time, Bloomage Biotech was taking advantage of e-commerce to a certain extent. When the dividend effect brought by e-commerce subsided, Bloomage Biotech fell into a strange circle of retreat.

Since 2023, the company's operating cash flow has decreased sharply, the gross profit margin of its core business has collapsed across the board, the gross profit margin of medical terminal products has declined significantly, and the gross profit margin of the skin care business is also difficult to support. Compared with the net profit margin of Aimeike in the same period, the former "king of hyaluronic acid" is being surpassed by latecomers in all aspects.

When the 2023 financial report showed that the net profit plummeted year-on-year, there was a crack in the myth of the "whole biotechnology industry chain" that Bloomage Biotech was proud of. The phenomenon of "PPT governance" in the mouth of former employees exposes the vanity of strategic decision-making.

Although it has a 47% market share of hyaluronic acid raw materials in the world, Bloomage Biotech's R&D expense ratio has hovered at 5%-6% for a long time, far lower than the industry benchmark of 10% for biotechnology companies. In contrast, the marketing expense rate is as high as 47.2%, falling into a vicious circle of "emphasizing marketing and ignoring R&D".

Some analysts believe that Bloomage Biotech is overly dependent on the traditional dealer model, resulting in a serious backlog of channel inventory.

In 2023, the number of inventory turnover days surged, the proportion of accounts receivable climbed, and the quality of cash flow continued to deteriorate. At the same time, in the field of skin care products, the "logic of large single products" on the raw material side is simply copied, and in the face of the digital user operation of companies such as Proya and Bethany, it exposes the lag in the construction of the data middle platform and the inefficient operation of private domain traffic.

In the context of the iron fist of regulation to reshape the medical aesthetic industry, Bloomage Biotech is still addicted to the game of "hyaluronic acid + concept". When Aimeike achieved technological generational transcendence with the "White Angel Needle", Bloomage's "Runbaiyan" was still fighting in the Red Sea market.

In addition, the company's $2 billion "bioactive substance platform" has been reduced to a concept game. The growth of the medical cosmetology business has stagnated due to the impact of centralized procurement, the cumulative loss of functional food in three years has exceeded 400 million, and the skin care business has fallen into multi-brand internal friction. This "big pie" expansion has run into trouble.

Strategic structural collapse?

The founder Zhao Yan's vision of "making hyaluronic acid into inclusive consumer goods" was gradually lost in the company's internal management practice.

According to sources, the "seal culture" circulating within the company, in which 12 departments need to countersign each decision, perfectly illustrates the "institutional paralysis" criticized by William White in "The Organizer". What's more fatal is that the strategic swing brought about by the frequent change of professional managers has gradually reduced this technology-based company to a marketing-driven "OEM factory".

Under this management model, the company is "disheartened". The turnover rate of the company's middle and senior management exceeds 30% per year, and since 2024, Ma Shouwei and Wang Yongzhi, the former core technical personnel of Bloomage Biotech, have resigned from the company for personal reasons; Liu Aihua, deputy general manager, and Luan Yihong, the former core technical personnel, are no longer directly responsible for R&D-related work.

Ironically, from 2020 to 2023, Bloomage Biotech's management expenses increased from 162 million yuan to 492 million yuan, an increase of 203.7%.

What's more serious is that Bloomage Biotech announced that its director, deputy general manager and core technical personnel Dr. Guo Xueping officially went through the retirement procedures because he reached the statutory retirement age, and will no longer serve as the company's deputy general manager from that date.

Guo Xueping's significance to Bloomage Biotech is not trivial, he and Zhao Yan met in the EMBA seminar of Peking University, and it was he who told Zhao Yan about the use of hyaluronic acid molecules. Subsequently, Zhao Yan and Guo Xueping formally established in-depth cooperation and began the commercialization transformation of medical aesthetics. The establishment of Bloomage Biotech is closely related to Guo Xueping, and his title has always been the "Chief Scientist" of Bloomage Biotech.

However, in Zhao Yan's view, the problems that have occurred in Bloomage Biotech in recent years have nothing to do with strategy, but because the management model is too "loose".

Zhao Yan said, "in view of the loose atmosphere before the management of the enterprise, there are a lot of internal problems, this year the company has begun" scraping bones to cure the poison ", we will not tolerate and indulge in historical problems, all corrupt personnel regardless of their positions, must explain the problem before March 31, submit their resignation."

Zhao Yan said, "In 2024, the company will enter a period of change and adjustment, and the company will focus on process adjustment in the first stage. "Process adjustment is just to correct the company's out-of-control actions, exposing a lot of problems that were not exposed before, the real change is the change of people, and now it has just begun!"

In Zhao Yan's view, many people in the team will only chase hot spots under the banner of the market, "Some people are full of market outlets, thinking that they are professional and professional, but they are not on the front line of the market, and they don't know anything about what is happening at the forefront of global life science and technology." They have become a group of pseudo-managers who have neither the background of a life sciences company nor the ability to fight hard in the market."

"Anyone can reorganize this company without it, and the only thing that can't do without it is me, the founder." Zhao Yan's sentence is also the epitome of Bloomage Biotech's transformation.

It cannot be ignored that when the will of the founder overrides the laws of the market, no matter how big the advantage is, it will eventually be exhausted. This dilemma is exactly as Christensen predicted in The Innovator's Dilemma: "The factors that made it successful will eventually become the reasons for its failure." ”