Lowdown about Development of the Daphne Pharmaceutical Co., Ltd. Yunnan
Guo Mingjin, Contributor

        In the Gaodeng Village, Panzhihua Town, approx. 3000 m from the capital of the Wenshan County, Hometown of Panax Pseudoginseng, is a pharmaceutical share-limited firm engaged in production with panax pseudoginseng as main materials. The firm is transformed from a private enterprise. Its founder, Chairman and President is Tang Xiuwen.
        Daphne was created in May 1994. They started the business with assets of RMB 600,000 yuan, and product limited to manually packaged "fever & pain relieving powder". At the very beginning, annual output value reported RMB 900,000 yuan, with sales income of 230,000 yuan. Through effort over a period of as short as 6 years, they have evolved into a middle-sized enterprise equipped with modern equipment and products covering panax pseudoginseng series high-tech products with various functions and medical actions, with assets up to more than RMB 70 million yuan. From 1998 to 2000, they reported combined sales of more than RMB 100 million yuan, tax payment of more than RMB 10 million yuan, and profit of more than RMB 8 million yuan. Among the local enterprises in the Wenshan County, they take the first spot in many aspects: technical level of products, per capita output value, tax payment, and contribution to human health. Now, they are arguably a leading enterprise in the Wenshan County.

Legend of Goddess of the Moon
        In the ancient Greek myth, there is a beautiful Goddess of Moon, whose mission is to moisten the ground, promote growth of the plants and maintenance of lives. She is also dedicated to delivery of all living creatures from torment, maintenance of the people and lightening the whole globe. Her name is "Daphne".
At the gate of the Daphne Co. are three flags flying over there, red, yellow and blue one each. The red flag is the national flag of China. The yellow flag is a symbol of performance enhancement and wealth build-up, while the blue flag is Daphne's own flag, with a design of a moon crest and a panax pseudoginseng flower in full blossom, which is also Daphne's trademark and logo.
Panax pseudoginseng is a precious TCM material. It is highly reputed in the TCM drug library. As a unique biological resource in Wenshan, it is well-known for its medical and tonifying functions. It was included in the Compendium of Materia Medica, a classic book by Li Shizhen, a famous pharmaceutical guru in the Ming Dynasty.  Panax pseudoginseng "mainly treats hemostasis, relieves blood stasis and pain, and cures trauma caused by weapons, fall and beating. Chew it thoroughly and apply the ruminate substance on bleeding area, or grind and mix it with other substance and apply the mixture on bleeding area, the bleeding will stop immediately," said Li in this book. Li Shizhen also compared panax pseudoginseng as something "more valuable than gold". Addendum to Compendium of Materia Medica by Zhao Jiamin in 1765, during the Qianlong regime of the Qing Dynasty, also mentions that "ginseng ranks the first in qi supplementation, while panax pseudoginseng ranks first in blood supplementation. They have same taste, but different functions and benefits. That's why ginseng and panax pseudoginseng are called valuable items in the TCM drugs." Panax pseudoginseng is the top ingredient of Yunnan Baiyao (white drug), which made name in early 20th century.
Planting of panax pseudoginseng may be traced back to more than 700 years ago in the Wenshan Zhuang & Miao Autonomous Prefecture. The local panax pseudoginseng ranks the first in the world in terms of production and quality. The Wenshan County contributes more than a half of prefectural panax pseudoginseng production. But, it was not until 1990s Wenshan people's perception, development and use of panax pseudoginseng started to be widened. In the past, most of the locals relied mostly on trading of raw panax pseudoginseng product to earn their bread. This precious TCM material's potential to generate the income and tax payment was thus limited or eaten sometimes. Some panax pseudoginseng growers invested much energy and money, but had only one harvest for 3 years. Their costs even lost, not to mention profit. With something "more valuable than gold", they were still have-nots.
"Goddess of the Moon" is after all a beautiful legend. To turn this legend into reality, Tang Xiuwen and his partners made careful investigation, analysis and research, on the basis of which findings, they decided to make full use of the local high quality panax pseudoginseng and started up a pharmaceutical enterprise with panax pseudoginseng as the main material, in the hope of making contribution by developing panax pseudoginseng series products, increasing the added value of panax pseudoginseng, helping the farmers out of poverty, developing the local economic and human health & long life.

Startup
        After defining the development direction, to achieve the targets without waste of vain effort, they had to carve out in a down-to-earth way.
Following example is an easy thing. But carving out a new path will be a tough job.
They started the business from scratch. At the very beginning, they lacked everything – capital, qualified persons and technology, except for Tang Xiuwen's firm willing and determination to endeavor. He tried to work various sides to raise capital, rent production premises, and recruit workers and skilled masters. At last, he got through the difficulties, and had his enterprise start production on April 15, 1994.
At the very beginning, Tang Xiuwen took the approach of "roundabout". At first, they were engaged in manual packaging and production of fever & pain relieving powder, which has nothing to do with panax pseudoginseng. Such commonly used folk drug was cheap, but gave good effect, selling well on the market. Shortly after startup, they shrugged off the problem of feeding themselves, and accumulated some capital. In the meantime, many workers were trained, and experience was gained, forming a good basis for development of panax pseudoginseng drugs later.
After the enterprise started to book profit, Tang Xiuwen immediately embarked on development of panax pseudoginseng drugs according to strategy in 3 steps: Step 1, processing the raw panax pseudoginseng into primary products like panax pseudoginseng powder, and panax pseudoginseng chips. Step 2: extracting tPNS (Total Saponins of Panax Notoginseng) from raw panax pseudoginseng to make tPNS tablets, thus to realize upgrading the products. Step 3: extracting monomer ingredients from tPNS to make new tablets and injection powder, thus to offer fine panax pseudoginseng products.
These ideas and contemplations were formed on the basis of deliberate thoughts, being feasible. But for a small private factory to develop a big project, the challenges were horrible. Purchase, maintenance and renovation of production premises, and addition of equipment all meant investment to be made. In 1996, they invested more than RMB 1 million yuan in construction of drug production building. The capital expenditures outstripped the income for 3 years running. By the end of 1997, the enterprise reported loss of more than RMB 930,000 yuan. The capital difficulty imposed a snag to Daphne's march forward.

Turn in 1998
        Courage and insight are precondition to success, and firm determination is guarantee of success. At the critical moment when many people thought that Daphne was up a gum-tree, Tang Xiuwen was full of confidence in his business. He believed that if they held on, they would win in the end, because he had a belief that victory would be won at cost. Knowing this rationale, he braced the challenges and continued his way. On the one hand, he braved all challenges and worked the friends and financial institutions to fund construction of the drug production building. On the other hand, he managed to find breakthrough for better sale.

        His effort paid at last. In 1998, he decided development of tPNS. Under the condition of no capital available to fund construction of the proposed tPNS extraction workshop, he made decision to take an approach of acquiring the local panax pseudoginseng and outsourcing the tPNS processing work. This move showed a big success the same year. Hence, Daphne started to receive revenues from Shanghai in a steady stream, and shrugged off the woe, on a track of stable and healthy development. The 1998 sales income booked RMB 24 million yuan.

Big Leap in 1999
        Daphne set its purpose: developing the panax pseudoginseng industry and serving public health". That means the targets they are pursuing will be indefinite. As they know, as a pharmaceutical enterprise to survive and win, continuous updating of the products will be the most important factor. Therefore, in 1998, they raised fund from various channels and invest more than RMB 6 million yuan in development of new products, and made a big success. In the meantime, they stepped up effort to widen sales of the existing products. As a result, the 1999 sales income hit RMB 40 million yuan, 66.7% up compared to the previous year. The tax payment reported RMB 3.77 million yuan, 79.98% up compared to the previous year, and profit RMB 2600,000 yuan, 114.92% up compared to the previous year. The enterprise was honored by the Wenshan County CPC Committee and county government as a top 10 private enterprise, and then by Wenshan Prefectural Party Committee and Prefectural government as a top 10 township enterprise. Their panax pseudoginseng-based Thrombosis Tablets (tPNS Tablets) won an award of excellence at the 7th China New Technology & Product Fair, and the title of a Certified Recommended Product honored by the Ministry of Public Health Medicine Science Promotion Association Creditability Investigation Committee, and were included in the list of projects of the provincial Torch Programme. In 1999, they launched Menses Protection Tablets and Heart Protection Capsules, which had unique effect and included in the list of the provincial top 18 projects.

Year of Harvests in 2000
        Daphne received rewards of their effort starting from the very first spring of the new millennia.
In January, two high-tech products brought out by their R&D force made breakthrough progress. Monomer saponin was separated from tPNS, which was further utilized to manufacture the new products - Qishengli tablets and Qishengjing tablets, which had unique effect in prevention and management of diseases and symptoms like tumors, senile dementia, women's involutional syndrome, hepatitis and rheumarthritis.
On April 7, Daphne took home the People's Republic of China GMP Certificate for Drug Products issued by China FDA, becoming the first pharmaceutical enterprise in Yunnan obtaining such official certificate since establishment of China FDA. It marked Daphne's production and management complying with the national standard and in line with the international practice.
May 17, Daphne was certified by the Yunnan Provincial Committee of Science & Technology as a high-tech enterprise. On June 8 morning, a press release conference was held in Kunming announcing that the Daphne Pharmaceutical Co., Ltd. passed China FDA's GMP certification. The news release conference was co-organized by the Yunnan Provincial People's Government News Office, Kunming Trade Fair Organization Committee Propagation Group, the Wenshan County CPC Committee, Wenshan County People's Government and the Daphne Pharmaceutical Company. Wang Tianxi, vice Party chief of the province attended the press release conference, and Gu Boping, vice chief at the provincial Party Committee Propagation Department and director at the Provincial Government News Office attended and chaired the press release conference. Zhang Tianxin, Wenshan Prefectural Party chief, Wang Yongkui, Prefectural governor, and Zeng Wenlong, sheriff of Wenshan County also attended the press release conference in the capacity of officials of the host. Close to 100 journalists from 69 media organizations like Xinhua News Agency, People's Daily, CCTV, Central People's Radio, Hong Kong Wen Wei Po, Hong Kong Phoenix Satellite TV turned out at the press release conference. Shortly after that, Daphne and Wenshan panax pseudoginseng got popular via much exposure, and Tang Xiuwen became a hot-spot figure.
August 15, Yunnan Provincial Economic Cooperation & Trade Commission published the 4th issue (1999) of the list of Yunnan name brand products, on which the Thrombosis Tablets (tPNS tablets) by the Daphne Co. had a spot.
December 2, Wenshan prefecture Prefectural Party Committee, Prefectural People's Government, State TCM Drug Administration and the Daphne Co. co-held Hometown of Panax Pseudoginseng Daphne Panax Pseudoginseng Press Release Conference at the Great Hall of the People, Beijing. Simayi •Aimaiti , vice chairman of the standing committee of national people's congress, Wang Wenyuan , vice chairman of CPPCC and 28 famous TCM drug experts, professors and scholars in Beijing attended the conference. Tang Xiuwen, Daphne's Chairman, was also present and sat together with state and provincial Officials. Many media like CCTV and People's Daily reported this event as highlighted news. By December, the Daphne Co. had 59 drugs officially approved for sale, including 17 panax pseudoginseng series products, which contributed more than 95% of the total sales of the company. The company netted annual sales income of RMB 65,900,000 yuan, tax payment of RMB 5.38 million yuan and profit of RMB 5,300,000 yuan, 4.75%, 42.71% and 103.85% respectively up compared to the previous year.

Summary of Valuable Experience
I. Personnel and training: top element essential to a company's development
Human beings are what counts at last. Tang Xiuwen believes it with both feet. Starting from the startup, he always puts talents and personal training first.
An enterprise needs talents in various levels and aspects.
Senior talents may be imported from the outside. For a private enterprise with short history in remote Wenshan, it's no easy to absorb talents from cities. But without senior talents, development of high-tech products will stay on words merely. Some talents were floored by Tang Xiuwen's sincerity. He called some of them 3 to 6 times in person, attracted them with the vision of the business and retained them with lucrative treatment. Currently, the company has 259 employees, including more than 90 with secondary specialized school or higher education. The senior talent team includes 1 professor, 2 senior engineers, 1 chief pharmacist, 1 vice chief pharmacist, 2 accountants and 3 economists. Such a team with expertise, extensive practice and devotion potentiates the company's development of new products in an approach of producing the current generation of products while researching and conceptually design newer generations of products", which provides guarantee for the company to advance its technology continuously.
Semi-senior or lower technical persons are mainly trained by the company. Throughout the years, the company has sent 160 persons to Beijing, Jiangsu, Chengdu and Kunming for learning there. At the same time, local training classes are provided, involving more than 4000 participations so far. As the company is tight to the internal requirements of assignment of work to certified persons only and priority given to whoever has better performance, the staff can work in daytime and participate in training in nighttime. Now, the employees are self-motivated to compete with peers in post skills and production quality. It has been a dominating atmosphere now in the organization. Additionally, the company encourages the staff to participate in self-improvement classes, which tuition fees will be completely reimbursed once they are certified.
II. Research and development of new products: basis for the enterprise to gain fast development
In 1998, the tPNS business brought good returns and got the company out of woe. Seeing outsourcing and few product varieties are snags to the business development, the company set up a product development research institute in Kunming, and employed experts to carry out R&D of new panax pseudoginseng products. Furthermore, they invested more than RMB 5 million yuan in construction of herbal extraction workshop. In early 1999, it took only half a year to complete the works from earthwork to equipment purchase, installation, production technology research and personnel training. The production started shortly after that, and gave the best tPNS extract in terms of extraction rate, color and quality. The 6-month production amounted to 4900.2 kg, generating high returns in the same year of investment.
The Menses Protection Tablets and Heart Protection Capsules by the company have been listed as one of the provincial 18 key bioengineering projects. In early 2000, they separated monomer saponin from tPNS and on this basis, developed Qishengli Tablets and Qishengjing Tablets, which fell into the category of high-tech products, and listed as national Class I new drugs. It marked another Daphne's milestone in research and development of panax pseudoginseng series drugs.
III. Market development and business invigoration: key to an enterprise's business prosperity.
It was not until 1997 Daphne started to produce panax pseudoginseng series products, and grab a market share outside the province. It was not until 1999 their product sale started to extend beyond east China. Seeing Daphne's awareness was enhanced, the company took action immediately and redivided the market according to the administrative division, according to which the guideline was defined "focusing on Beijing, Shanghai and Zhejiang markets, and developing with the national and international market in mind". Through effort over the years, the company has realized mostly its target of building a perfect market network and strong marketing force, and uniform and normalized management of the national market. By October 2000, sales outlets had been established in 22 provinces and municipalities across the countries. A sales company was established in Kunming, forming a good basis for further expansion of the sales.
Publicity of the products is an important means for increasing the market share. The company ever participated in large exhibitions like the Kunming World Expo and Shanghai Exhibition, with annual advertising expenses hitting close to RMB 2 million yuan. These activities enhanced Daphne's awareness. The sales income reported sharp increase for years running.
IV. Enhancement of internal management and motivation of the staff: guarantee for higher enterprise's vigor
The company carried out improving actions and received significant results.
1.  The organization was restructured to define the function and responsibility of each department. Each administrative person was assigned with cleared defined position, post, responsibility and compensation, so that everything is managed by the relevant department and persons, each employee fulfill own duty, and the staff works closely with each other to ensure the work is done.
2.  Perfect management systems were established to ensure that everything is clearly specified, everybody obeys the rules and does the things according to the system, and the whole organization runs systematically in a good order.
3.  The income distribution system was reformed to motivate the staff. Now, each function adopts the wage system of 3 classes and 9 levels for senior, semi-senior and common employees respectively. Each workshop adopts the collective piecework wage system as a whole according to disciplines. If possible, the work pieces are counted by each individual. If impossible, the job quantities and compensation are calculated by groups. Such arrangement embodies the rationale of paying the labors according to the job volume completed, and more pay for more work. Work with higher technical level is higher paid, while simple work is less paid. A Daphne's unique wage management system has been formed preliminarily. The company also encourages the staff to increase productivity with more income incentive. Employment of an employee whose monthly income is less than RMB 400 yuan will be terminated automatically. Manager of a drug workshop will face penalty if the monthly wage income of the staff is less than RMB 800 yuan per person. The staff income is closely linked with the production and quality. More income of the staff will sure lead to higher production and quality. Pay is now the virtual leverage motivating the staff. As the business performance is advancing, the company is also raising the piecework rate or treatment, so that the staff's income catches up with the business performance. "Taking factory as home, factory business linking my fortune" is now a slogan and action of the staff.
4.  The middle managers and persons on key technical posts are picked and used on the principle of giving priority to those with higher capability and eliminating those without capability recklessly, regardless their family background. For jobs requiring high skill, like operators of the drug workshop and extraction workshop, the candidates are selected in a combined way of self-recommendation, interview and test. 14 excellent graduates from specialized technical schools were recruited. These moves have ensured smooth running of the workshops.
5.  Self-motivation is developed among the staff. Seeing the perception of "employment relation" was strong among the staff, lacking initiative and creativity. That results in much waste. The company builds a work style of hardworking, thrift, solidity and innovation. Hardworking and thrift are basis of business development. Solidity means productivity and innovation is power behind development of the enterprise. Through effort, the staff' has been much inspired, enhancing vitality of the enterprise.
V. GMP certification and quality enhancement: vital to pharmaceutical enterprise
GMP certification is essential to a drug manufacturer, for it can reflect that the enterprise's drug quality is certified by the state regulator and recognized by the public. The company started to prepare for submission from 1997. Since the GMP group led by Tang Xiuwen was established, the company has invested more than RMB 13.3 million yuan in renovation, expansion and construction of comprehensive drug workshop and extraction workshop, addition of advanced pharmaceutical equipment, and improvement of plant environment. 462 documents were prepared according to GMP requirements, which promoted management of the whole organization.

Rosy Outlook in the New Century
        Daphne's fast development has been widely noticed. But Daphne's ambition is more than that. They notice that many enterprises engaged in R&D of panax pseudoginseng series products are emerging. In Yuxi, Yunnan alone, there are 4 enterprises engaged in intensive processing of panax pseudoginseng. There are over 20 enterprises in Kunming having business of tPNS extraction. There are now as many as 378 enterprises across the country mainly engaged in processing of panax pseudoginseng. The market competition is intense. Today, you lead the way. But tomorrow, you might be overtaken by someone else. Only by continuously surpassing yourself, you can gain progress and development continuously. For this purpose, Daphne has developed new development plan. On January 19, 2001, the Daphne Co. was restructured from a private enterprise into a share-limited company. The restructured Daphne joins forces with the Yunnan University Technology Industrial Co., Ltd., who is now a principal shareholder of Daphne. Now, Daphne has formed into a modern specialized enterprise integrating research, development, production and sales of panax pseudoginseng, with strong backup of technology powering the development in the future.
On February 2 – 3, 2001, an expert panel of 8 led by Professor Wang Yongyan, member at the Chinese Academy of Engineering, president at China TCM Research Institute, and doctorial tutor, made a site investigation of the local panax pseudoginseng industry and the Daphne Co. Prof. Wang Yongyan gifted a recipe to the Daphne Co. to show his affection to the locals. China TCM Research Institute also signed a letter of intent with the Daphne Co. on development of intensively processed panax pseudoginseng products.
        The restructured Daphne will capitalize on its own advantage and the capital and technical advantages of the shareholders to develop the panax pseudoginseng industry amid the wave of the state's implementation of Great West China Development strategy and Yunnan's vow to build a green economic power. With backup of the state's preferential polices for the pharmaceutical industry, Daphne will make it.
Daphne, Goddess of the Moon in the heart of the public, will carry the best wishes, and take off from Wenshan to spread its wings in the sky above the whole globe.

(Source: March 31, 2001 issue of Entrepreneurs, Page 3)