Core operating metrics are under pressure—how can Kunming Pharmaceutical Group break the deadlock?

Ask AI · How will Sinopharm Sanjiu reshape Kunming Pharmaceutical’s strategic layout?

21st Century Business Herald reporter Yan Shuo

Recently, Kunming Pharmaceutical Group released its 2025 annual report, delivering a set of results marked by short-term pressure and long-term buildup.

According to the financial statements, in 2025 Kunming Pharmaceutical Group achieved operating revenue of CNY 6.58B, down 21.74% year over year; attributable net profit to the parent was CNY 350 million, down 46.00% year over year; and non-recurring attributable net profit was only CNY 107 million, down sharply 74.45%, with core operating indicators under pressure.

From Kunming Pharmaceutical Group’s explanation, this performance reflects not only industry-wide common pressures such as underwhelming execution of the centralized procurement of traditional Chinese medicine, deepening医保 spending controls, and a reshuffling of the retail channel landscape, but also the internal integration pains brought about by channel transformation, brand upgrades, and business model shifts after the company was incorporated into the Sinopharm Sanjiu system.

Despite the pressure on short-term performance, Kunming Pharmaceutical Group has not eased its strategic layout; instead, it continues to focus on the aging-health and chronic-disease management track. While optimizing existing businesses such as the Sanshi industry chain, it is also ramping up R&D for innovative drugs and its global layout. With resource enablement from the Sinopharm system, it is gradually building comprehensive competitive strengths across R&D, products, channels, and internationalization.

Multiple brokerage analysts, considering the dual impact of both external operating environment changes and internal model transformation on Kunming Pharmaceutical Group during this phase, have lowered their forecasts for attributable net profit for 2026–2027. At the same time, given that the company’s long-term plans are clear, with ongoing deepening of the silver-economy and premium traditional Chinese medicine strategy, and that long-term development prospects look positive, they maintain a “Buy” rating.

Performance Decline

Kunming Pharmaceutical’s 2025 performance decline is the result of resonance between industry adjustments and internal changes. Behind the data is the inevitable pain that traditional Chinese medicine companies face as they shift from traditional marketing-driven growth to competition based on overall strength.

From the perspective of financial fundamentals, the company’s main business shows clear signs of profit pressure. The company’s attributable net profit for the period is still maintained at the CNY 350 million scale, largely supported by non-recurring gains and losses. Equity investment in Weilizhibo’s listing on Hong Kong shares led to a total of CNY 119 million from fair-value changes and investment returns, becoming an important buffer on the profit side. If this portion of one-off gains is excluded, the profitability level of the company’s core business has already fallen to a near-low level in recent years. This also explains the key reason for the sharp decline in non-recurring net profit.

At the industry policy level, the delayed implementation of the centralized procurement of proprietary Chinese medicines and the deepening of医保 spending controls have become the key variables suppressing performance. As of the end of 2025, nationwide there had already been four rounds of centralized procurement of proprietary Chinese medicines, covering Kunming Pharmaceutical’s core areas in cardiovascular and cerebrovascular as well as digestion. This has directly hit flagship products such as Xuesaitong series and Shenling Jianpiwei granules.

Meanwhile,医保 policies are accelerating their extension beyond hospitals. “Same-Quality” and “Same-Price” measures are pushing for price parity between pharmacies inside and outside hospitals. Combined with restricted prescription outflow and the reform of individual medical accounts changing consumers’ medication purchasing behavior, fluctuations in foot traffic at traditional retail endpoints and a slowdown in product sales further drag down sales of related products.

By product segment, revenue in the company’s cardiovascular treatment field fell 21.15% year over year; revenue in digestive system products fell 42.68% year over year; and revenue in other products fell 50.91% year over year. At the same time, due to price adjustments for some products and changes in sales mix, this segment’s gross margin decreased by 19.48 percentage points year over year.

By industry segment, revenue from oral dosage forms fell 37.36% year over year. Around the “healthy aging” strategy, revenue from other products lines grew 11.95% year over year, but this segment is mainly培育性 products (cultivation-oriented products). Affected by changes in product structure, its gross margin fell by 28.67 percentage points year over year.

An imbalance in the production-sales-inventory structure at the product level further magnifies the company’s operating pressure. To meet centralized procurement demand, the production volume of Gastrodin injection increased 24.03% year over year, but due to the policy’s execution falling short of expectations, sales fell 26.65%. Ending inventory surged 119.20% year over year. Sales of Xuesaitong soft capsules fell in both production and sales due to prescription controls at pharmacies and restrictions on chronic-disease indications. Only Xuesaitong injection for injection (freeze-dried) achieved production and sales growth through winning tenders in the centralized procurement, becoming one of the few highlights among existing businesses.

How to Break Through?

Three years ago, Sinopharm Sanjiu formally took control of Kunming Pharmaceutical Group. Through professional and system-based integration, the two sides achieved efficient synergy. Recently, when Sinopharm Sanjiu responded to questions from research participants, it said Kunming Pharmaceutical has been in the group for three years and is deepening efforts to rebuild channels and strengthen brand building, by expanding into the retail end to eliminate reliance on prescription drugs. Kunming Pharmaceutical’s strategy is clear, with the launch of two major brands, “777” and “Kun Zhong Medicine 1381.” However, the brand system still needs some time to fully establish.

As integration deepens, Kunming Pharmaceutical Group has entered a period of frequent executive changes. Since December last year, several executives—including Chairman Wu Wen Duo, Vice Chairman Li Hongshun, President Yan Wei, Vice President He Ming, Vice President Li Lichun, Director Guo Ting, and others—have left their roles due to work adjustments, and some personnel no longer hold any positions at the company.

Meanwhile, multiple new executives—including Chairman Yu Xiang, Director Xing Jian, Director Wang Ke, President Zhong Jiang, Vice President Huang Yuanhong, and others—also come from Sinopharm Sanjiu. Industry insiders believe this move will further strengthen business coordination within the Sinopharm system and ensure strategic execution.

Sinopharm Sanjiu stated that in the future, it will mutually empower Kunming Pharmaceutical Group and Tasly. Each will focus on three major core businesses: Sinopharm Sanjiu will focus on CHC (self-medication) as its core business; Tasly will focus on prescription drugs as its core business; and Kunming Pharmaceutical Group will focus on Sanqi products and premium traditional Chinese medicines, striving to become a leader in the silver-haired health industry.

To achieve this goal, Kunming Pharmaceutical Group continues to increase R&D investment in innovation. On the one hand, around health needs driven by an aging population, it advances the R&D of plant-based drugs, innovative drugs, modified new drugs, and differentiated generic drug candidates. On the other hand, through multiple channels such as external cooperation, investment and acquisitions, and product introductions, it optimizes the allocation of short-, mid-, and long-term innovative drug development plans, and builds a robust product pipeline for the future—rich, tiered, and backed by competitive barriers.

In 2025, Kunming Pharmaceutical Group’s total R&D investment was CNY 149 million, accounting for 2.27% of operating revenue. Several innovative drug projects are progressing steadily in clinical research. Among them, a Class 1 natural medicine new drug 020 for ischemic stroke continues to move forward with Phase II clinical trials; Class 1 chemical drug new drug 111 for treating non-alcoholic steatohepatitis is currently conducting Phase I clinical trials; and Class 1 chemical drug new drug 079 for treating solid tumors is proceeding in an orderly manner with Phase I clinical trials.

In investor exchanges in August 2025, Kunming Pharmaceutical Group disclosed three major core directions in its “15th Five-Year Plan (2026–2030)” category planning: first, the major cardiovascular and cerebrovascular category centered on Xuesaitong, covering drugs, big health, and non-drug areas, forming a matrix-like product capability; second, the major emotional-track category centered on Shugan Granules, which is expected to become a pillar core category for the company; third, products in the field of mental-neurology and anti-pain, centered on related products, while also linking leading products in the non-drug space—especially forming differentiated advantages within chronic-disease management models.

At the same time, Kunming Pharmaceutical Group is accelerating its internationalization strategy, with overseas expansion of traditional Chinese medicine opening a second growth curve. The company has built an international sales network covering 60 countries, including Asia, Africa, Europe, the Americas, and Oceania. In 2025, overseas business progressed steadily; it submitted a cumulative 143 overseas registration applications and obtained approval for 22 product registration numbers. Its core product Xuesaitong formulations have been granted market access approvals in 15 countries. In December 2025, Xuesaitong soft capsules received Canadian dietary supplement approval paperwork, laying the groundwork for entering the North American market with Sanqi formulations.

In the above communications, Kunming Pharmaceutical Group said its overseas deployment will focus on artemisinin-based anti-malarial products as the core, and may evolve into exporting Sanqi plus premium traditional Chinese medicines, thereby building the capability for traditional Chinese medicine to go global.

However, based on the financial report data, the growth momentum of the anti-malarial product line has not yet been fully unleashed. Revenue from this category in 2025 decreased 32.13% year over year, mainly due to adjustments in the timing of international market demand. Affected by changes in product structure, gross margin increased 14.75 percentage points year over year.

In the short term, as centralized procurement execution takes hold, channel reforms show results, and sales of core products recover, the company’s performance is expected to gradually stabilize. In the long term, tiered R&D pipeline, a global market network, and synergy within the Sinopharm system will jointly build core competitiveness. Whether Kunming Pharmaceutical Group can successfully move beyond the pains of transformation still remains to be further validated by the market.