Affected by strict centralized procurement of Chinese patent medicines, Kunming Pharmaceuticals Group's performance reverts to 8 years ago

Question: Why are AI and Kunyu Group executives collectively resigning early, and what challenges does the integration plan face?

Despite holding leading Chinese medicine products, Kunyu Group is struggling.

On March 21, Kunyu Group announced that by 2025, the company’s operating revenue will reach 6.575 billion yuan, a year-on-year decrease of 21.74%; net profit attributable to the parent company will be 350 million yuan, down 46.00% year-on-year, only comparable to the company’s performance levels around 2017-2018.

Such performance is certainly far from Huaren’s expectations. In January this year, Kunyu Group Chairman Wu Wendu, Vice Chairman Li Hongshen, President Yan Wei, and Vice President Li Lichun all resigned early; in March, Director Guo Ting also left. These executives were originally serving terms until 2028, but now have left early. Huaren Group has brought in a new batch of executives from companies like Huaren Sanjiu to take over Kunyu Group.

Kunyu Group explained its poor performance by stating: The centralized procurement of Chinese patent medicines and medical insurance cost control are the main reasons.

After Huaren Sanjiu took control of Kunyu Group in 2023, it proposed a three-year “Four Reshaping” integration project, aiming to shift sales from traditional control and distribution to a more centralized “Kunyu Business Path” system. However, Kunyu Group’s revenue has declined year after year, with only slight improvements in sales expense ratios, and the “Four Reshaping” may not have been fully completed.

Core Products’ Revenue Plummets

In December 2022, Huaren Sanjiu acquired a stake in Kunyu Group, positioning it within Huaren’s “Premium National Medicine” segment, focusing on the “Silver Industry.” This is because Kunyu’s core products—Longtai Xuesaitong series, Artemether series, Xuesaitong soft capsules, and Shenling Jianpi Wei granules—are mainly traditional Chinese medicines targeting cardiovascular diseases in middle-aged and elderly populations, with the Xuesaitong series being flagship products.

Data from Minyi Network shows that in 2021, Kunyu’s Xuesaitong series products had a combined sales volume exceeding 2 billion yuan across China’s six major terminal markets. Moreover, Kunyu Group is also a major raw material supplier for Artemisinin products developed by Tu Youyou and others, forming a complete Artemisinin industry chain, with products dominating the anti-malarial field.

Everything changed in 2025. The company’s revenue from cardiovascular and cerebrovascular treatment products last year was 1.73 billion yuan, a decrease of 21.15% from the previous year; digestive system treatment products earned 3.145 billion yuan, down 42.68%; anti-malarial treatment products earned 945 million yuan, down 40%.

Kunyu Group attributes the revenue decline to centralized procurement of Chinese patent medicines. The first batch of centralized procurement for Chinese patent medicines started in 2022, and the third batch—considered the most aggressive—began in early 2025: overall bid success rate of 54%, with a maximum price reduction of 96%.

The bid-winning Tianma Su injection in 2025 sold 17.0788 million units, a decrease of 26.65% year-on-year. To meet procurement demands, production increased by 24.03%, reaching 19.6332 million units. Between these increases and decreases, Kunyu’s inventory increased by 119.20% compared to the same period last year.

Centralized procurement has changed market demand, making it difficult for companies to accurately forecast volume, leading to overproduction and resulting in “more production, higher inventory, slower turnover.” However, this backlog is expected to be resolved in future years. According to financial reports, inventory of another bid-winning product, injectable Xuesaitong (lyophilized) and Xuesaitong soft capsules, decreased by 61.24% and 31.86%, respectively. The company explained that increased sales from bid-winning products led to lower inventory levels compared to the previous year.

Financially, it appears that Huaren’s requirement for “refined management” at Kunyu has not been fully implemented. Currently, Kunyu’s main focus should be on continuing centralized procurement and tracking new product approvals, insurance negotiations, and online listing applications, while upgrading products toward more refined and specialized integration.

By the end of 2025, Huaren Sanjiu responded on investor platforms that: Kunyu Group is actively promoting channel restructuring and brand building, launching two major brands—“777” and “Kun Chinese Medicine 1381”—and establishing three business divisions. It still needs time to develop its brand system. Industry insiders generally believe that the integration of Kunyu Group and Huaren Sanjiu will take longer to show results and cannot reverse the trend in the short term.

The only product last year that achieved sales growth was related to “healthy aging.” This segment’s revenue in 2025 was 54.55 million yuan, an increase of 11.95%. However, since this segment mainly involves nurturing products, its gross profit margin dropped significantly by 28.67 percentage points due to product structure changes, exemplifying “increased revenue but not profit,” and failing to effectively support the company’s performance.

Kunyu Needs to Expand Sales Channels Urgently

The third batch of centralized procurement for Chinese patent medicines last year had a significant industry impact, and Kunyu’s performance decline is not an isolated case. Zhenbaodao, Tianshili, Jianmin Group, BioValley, China Chinese Medicine, and others have all reported impacts from procurement in their annual reports.

According to the National Healthcare Security Administration, by the end of 2025, four batches of Chinese patent medicine centralized procurement had been conducted nationwide, with an average bid reduction of over 40%, covering major fields like cardiovascular and digestive medicines. These are precisely Kunyu’s core products.

Moreover, Kunyu has no effective response strategies. Unlike chemical drugs, Chinese patent medicines’ volume does not increase quickly after procurement, and prices have fallen. Companies must also contend with potential market demand fluctuations. Kunyu is currently caught in a dilemma of external and internal pressures, forcing it to initiate channel integration plans to focus control from multiple levels to key customers.

Fundamentally, to meet Huaren’s requirements and rapidly improve performance, Kunyu must address its product structure issues, especially its heavy reliance on classic products like Xuesaitong.

To find new growth points, Kunyu is actively pursuing global industry layout and innovative drug R&D. By 2025, the Xuesaitong series will be promoted overseas in New York, Da Nang, and Ditzingen, Germany. Xuesaitong soft capsules have also officially entered the Indonesian market.

In R&D, Kunyu is pursuing two directions: in Chinese patent medicines, it plans to launch 27 new products across five categories—kidney tonics, spleen and stomach tonics, gynecological medicines, lung and cough remedies, and calming products—and has a new Class 1 drug for acute ischemic stroke in clinical Phase II; in chemical drugs, it is developing two Class 1 chemical new drugs for solid tumors and non-alcoholic fatty liver disease, currently in Phase I trials.

However, for Kunyu to truly achieve strategic transformation, it still has a long way to go. In 2021, before Huaren Sanjiu’s entry, Kunyu had 220 R&D staff. Three years after Huaren’s entry, in 2025, the R&D team size is 236, with no significant increase. R&D expenses in 2025 are only 1.03 billion yuan, accounting for just 1.57% of revenue, far below the industry average.

2026 will be a critical year for Kunyu’s strategy implementation, as Huaren Group has replaced leadership again, hoping Kunyu can revive in the Chinese patent medicine market.

Written by: Xiaomi

Edited by: Jiang Yun, Jia Ting

Operations: Twenty Thirteen

Illustration: Visual China

Note: Original content by Jian Shi Ju. Please do not reprint without permission.