Industry Frontiers

In the capital market and pharmaceutical industry map of 2025, Yiling Pharmaceutical's performance is particularly remarkable. As a former star enterprise in the traditional Chinese medicine industry, Yiling Pharmaceutical has experienced its first loss since publicly disclosing its performance in 2008, and is expected to lose 600 million to 800 million yuan in attributable net profit in 2024. This news is like a giant rock thrown into a calm lake, causing ripples that not only raise investors' concerns about the future development of Yiling Pharmaceutical, but also prompt the entire industry to deeply reflect on the development path of traditional Chinese medicine enterprises in the new era.

The Rise and Fall of Lianhua Qingwen: The ups and downs of Yiling Pharmaceutical Industry

The rise of Yiling Pharmaceutical is closely related to the explosive popularity of Lianhua Qingwen. In the outbreak of SARS in 2003, the R&D team of Yiling Pharmaceutical completed the entire process from research and development to production of Lianhua Qingwen in just half a month, and was approved for market launch in May 2004. Since then, Lianhua Qingwen has performed well in many influenza outbreaks, with sales rising from the initial 60 million yuan to 4 billion yuan.

At the beginning of the COVID-19 in 2020, Lianhua Qingwen was included in the national diagnosis and treatment plan, ushering in a highlight moment. Yiling Pharmaceutical's performance has also made rapid progress. From 2020 to 2022, its revenue reached 8.782 billion yuan, 10.117 billion yuan, and 12.533 billion yuan respectively, with net profits of 1.219 billion yuan, 1.344 billion yuan, and 2.362 billion yuan. Its market value once reached as high as 90 billion yuan, ranking among the top three A-share traditional Chinese medicine enterprises.

However, it was only after the tide receded that we found out who was swimming naked. As the epidemic subsides, the demand for Lianhua Qingwen has plummeted sharply. The rapid expansion of production capacity to meet market demand has resulted in a large amount of products settling in end consumers and channels, forming a huge social inventory. To reduce inventory, the price of Lianhua Qingwen has been halved, starting from the end of 2022

The price of 10 boxes has dropped from 1020 yuan (102 yuan per box) to around 20 yuan per box on platforms such as Meituan Maiyao. The sharp decline in market demand and prices has caused Yiling Pharmaceutical's performance to fall from the cloud.

Industry Winter: The Collective Dilemma of Traditional Chinese Medicine Enterprises

The decline in performance of Yiling Pharmaceutical is not an isolated case, but a microcosm of the overall difficulties faced by the traditional Chinese medicine industry. According to data from iResearch, 30 out of 72 A-share Chinese medicine listed companies have released their 2024 annual report performance forecasts, with 21 experiencing a decline in net profit and only 9 expecting growth. The traditional Chinese medicine industry, which was once "unparalleled" in 2023 and maintained positive growth in both revenue and profit, encountered a Waterloo in 2024.

The fluctuation of raw material prices is one of the important reasons for the decline in profits of traditional Chinese medicine enterprises. In the first half of 2024, the prices of traditional Chinese medicinal materials rose significantly, with the price of Atractylodes macrocephala rising to 175 yuan/kg in April and May 2024, compared to only 40-42 yuan in the same period of 2023; White peony will increase in price to 80 yuan in April May 2024, compared to only 25-38 yuan in the same period of 2023.

Although prices have slightly declined in the second half of 2024, they are still higher than the high levels of 2022. The rise in raw material prices directly increases the production costs of enterprises and compresses profit margins. Some enterprises choose to increase the price to deal with it. For example, Beijing Tongrentang raised the price of Angong Niuhuang Pills by more than 20%, and Foci Pharmaceutical raised the price of its main traditional Chinese patent medicines and simple preparations by 9%.

However, the sales situation after the price increase was not satisfactory, and market demand did not increase due to the price increase, but instead led to lower sales than before. Enterprises that choose not to raise prices have their profit margins further compressed.

The policy of centralized procurement and the adjustment of the medical insurance catalog have also had a significant impact on traditional Chinese medicine enterprises. In 2024, the number of Chinese herbal pieces and traditional Chinese patent medicines and simple preparations varieties collected nationwide will increase significantly. The centralized procurement of traditional Chinese patent medicines and simple preparations led by Hubei has been carried out to the third batch, and the participating provinces have expanded from 19 provinces to 31 provinces, with increasing varieties involved.

In terms of price reduction, the decline of centralized purchase of traditional Chinese patent medicines and simple preparations is relatively mild compared with that of chemical medicine, but the highest decline of the third batch of national traditional Chinese patent medicines and simple preparations group A products is 96%, with an average decline of 68%, and the decline of exclusive varieties is more than 80%. Zhongsheng Pharmaceutical, Yibai Pharmaceutical* ST Longjin and other companies have pointed out that their revenue has been affected by the price reduction of centralized procurement. Companies such as Step Pharmaceuticals have experienced a significant decline in sales revenue due to their main products being removed from some provincial medical insurance catalogs, intensifying market competition.

The structural transformation of consumer demand is also one of the challenges faced by the traditional Chinese medicine industry. Under the pressure of economic downturn, consumers pay more attention to the cost-effectiveness of products and are more sensitive to prices. At the same time, consumers have increasingly high demands for drug efficacy, and are more inclined to choose drugs with clinical data support and definite efficacy. Traditional Chinese medicine is no longer favored by consumers solely based on historical inheritance and oral transmission. Chinese medicine companies need to provide more scientific evidence and clinical data to prove the effectiveness and safety of their products.

The Road to Breakthrough: Exploration of Innovation and Transformation

Faced with performance difficulties, Yiling Pharmaceutical actively seeks ways to save itself, with innovative research and development becoming a key breakthrough. In recent years, Yiling Pharmaceutical has continuously invested in research and development, becoming a "leader" in the field of traditional Chinese medicine. In 2022 and 2023, the R&D investment was 1.032 billion yuan and 853 million yuan respectively. In the first three quarters of 2024, the R&D investment reached 572 million yuan, ranking second among A-share traditional Chinese medicine enterprises in terms of R&D investment.

In terms of research and development strategy, Ling Pharmaceutical utilizes the synergistic development advantages of modern traditional Chinese medicine, biopharmaceuticals, and chemical drugs to strategically layout innovative drugs. In addition to the fields of respiration, cardio cerebrovascular, we also set foot in diabetes, genitourinary, anti-aging, tumor and other fields. Its independently developed innovative traditional Chinese medicines such as Chaihuang Lidan Capsules, Qifang Bitong Tablets, and Bazi Bushen Capsules have obtained market applications. Especially the Bazi Bushen Capsules, which are highly anticipated by industry insiders in the current booming anti-aging industry, have the potential to become a new popular star product.

In addition to Yiling Pharmaceutical, many traditional Chinese medicine companies have also increased their R&D investment and transformed towards innovation. As early as 2014, Pien Tze Huang proposed a "one core, two wings" development strategy, with traditional Chinese medicine production as the core and health food drugs, cosmetics, and daily chemical products as the two wings, to break away from dependence on a single product. The business layout of Yunnan Baiyao also involves multiple fields, and is transforming from a traditional Chinese medicine manufacturing enterprise to a modern large-scale health enterprise.

Opportunities and Challenges in Overseas Markets

In the process of transformation, traditional Chinese medicine enterprises have also turned their attention to overseas markets. Yiling Pharmaceutical's innovative drugs have obtained registration approvals and been launched for sale in over 50 countries and regions worldwide; In December 2024, 8 products under Jin Yao Da Ren Tang obtained product registration approval from the Singapore Health Sciences Board. However, the road to internationalization of traditional Chinese medicine is not smooth sailing.

Traditional Chinese medicine is exported in the form of drugs, and sufficient clinical evidence is needed to verify its effectiveness and safety. There are differences in drug regulatory standards among different countries and regions, and traditional Chinese medicine companies need to adapt to these standards, which undoubtedly increases the difficulty of going global. In addition, the protection of intellectual property rights is also one of the problems faced by Chinese medicine going to sea. The disclosure of traditional Chinese patent medicines and simple preparations formula may affect the core competitiveness of enterprises.

Although the decline in performance of Yiling Pharmaceutical is only a stage dilemma in the transformation of traditional Chinese medicine enterprises towards innovation driven development, the problems it reflects have profound industry representativeness and contemporary significance. In the future development of traditional Chinese medicine enterprises, it is necessary to conduct in-depth thinking and active actions in multiple key aspects.

In terms of research and innovation, traditional Chinese medicine enterprises should continue to increase investment, use modern technological means to deeply explore the scientific connotation of traditional Chinese medicine, and provide solid scientific basis and clinical data support for traditional prescriptions. This not only helps to improve the quality and efficacy of products, enhance market competitiveness, but also meets consumers' demands for drug science and safety. At the same time, enterprises should plan their research and development direction reasonably, avoid blindly following the trend, and combine their own advantages and market demand to accurately layout innovative drug research and development.

In response to market changes, enterprises should strengthen market research, closely monitor changes in consumer demand trends, and adjust product and marketing strategies in a timely manner. Under the influence of factors such as fluctuations in raw material prices, centralized procurement policies, and adjustments to medical insurance catalogs, enterprises need to optimize cost control, improve production efficiency, and seek new profit growth points.

In addition, enterprises should actively expand market channels, not only focusing on the sinking of the domestic market and the development of segmented fields, but also steadily promoting internationalization strategies and gradually overcoming many obstacles such as regulation, standards, and intellectual property rights faced in the internationalization process of traditional Chinese medicine.

In terms of brand building, traditional Chinese medicine enterprises should pay attention to the combination of inheritance and innovation. It is necessary to inherit the historical and cultural heritage of traditional Chinese medicine, maintain the traditional image and reputation of the brand, and give the brand new connotations and vitality through innovative products and services, attracting the younger generation of consumers. Utilize modern marketing methods and communication channels to strengthen brand promotion and advertising, enhance brand awareness and reputation, and strengthen consumer trust and recognition of traditional Chinese medicine brands.

The dilemma of Yiling Pharmaceutical is both a challenge and an opportunity. It has sounded the alarm for the entire traditional Chinese medicine industry, prompting Chinese medicine enterprises to accelerate their transformation pace and actively explore new development models. In the collision and integration of tradition and modernity, the traditional Chinese medicine industry needs to adhere to its original intention, constantly innovate, respond to the challenges of the times with practical actions, and write its own new chapter.

Only in this way can traditional Chinese medicine enterprises stand invincible in the fierce market competition, achieve sustainable development, and let ancient traditional Chinese medicine shine with new vitality and vigor in the new era.

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Source: Xianji.com

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