From Loss to 200% Profit Surge: How Guangdong-Based Zhongsheng Pharma Carved a Path to Recovery Through 'Radical Restructuring'

Selling its flagship weight-loss drug for 1 billion yuan with one hand, and forecasting a twofold increase in performance with the other, the former traditional Chinese medicine giant is now completing its self-redemption in an unexpected way.

At the beginning of 2026, Guangdong Zhongsheng Pharmaceutical kicked off the year with two major announcements that took the pharmaceutical industry by storm.

On January 17, the company announced that it had licensed the China rights of its self-developed star weight-loss and diabetes drug RAY1225 injection to Qilu Pharmaceutical Co., Ltd., a pharmaceutical giant in China. This deal is remarkable, with an upfront payment as high as 200 million yuan, up to 800 million yuan in milestone payments upon subsequent market launch, plus double-digit royalties on future sales.

Just ten days later, Zhongsheng Pharmaceutical made another big move by releasing its 2025 earnings forecast, predicting a full-year net profit of 260 million to 310 million yuan. Compared to the loss in 2024, this marks an astonishing growth of over 200%!

Back in 2024, this veteran pharmaceutical company was still mired in a quagmire of losses, with the double whammy of asset impairment and drug procurement severely taking its toll. From massive losses to substantial profits, it took the company just one year to make the turnaround.

The market can't help but wonder: What exactly has Zhongsheng Pharmaceutical done?

Has its innovative drug transformation path really succeeded?

The business map of Zhongsheng Pharmaceutical mainly consists of two parts: traditional Chinese medicine, its long-standing strength, and increasingly important chemical pharmaceuticals.

Traditional Chinese medicine (TCM) is the company’s mainstay, consistently contributing over half of its revenue. In the first half of 2025, TCM generated 689 million yuan in revenue, accounting for 53.03%. The share of chemical pharmaceuticals has been steadily increasing, rising from 30.34% in 2021 to 38.12% in the first half of 2025.

When it comes to Zhongsheng Pharmaceutical, industry insiders first think of its several "flagship products": Compound Xueshuantong Capsules, Naoshuantong Capsules, and Zhongsheng Pills.

As the exclusive original drug, it is mainly used to treat fundus and cardiovascular and cerebrovascular diseases. It is an absolute leader in China's domestic ophthalmology oral Chinese patent medicine market, with a market share of over 70% in 2024, consistently ranking first in the industry for many years.

The capsule "Nao Shuan Tong" was developed based on the "Toxin Damage to Brain Collaterals" theory by Wang Yongyan, an academician of the Chinese Academy of Engineering, and is used for treating stroke. It is also an exclusive product. Meanwhile, the "Zhongsheng Pills," used for antibacterial and anti-inflammatory purposes, hold a leading position in the Guangdong and Guangxi regions.

Holding so many core products with leading market shares, and being positioned in major disease areas like cardiovascular and cerebrovascular conditions, one would expect that Zhongsheng Pharmaceutical should be doing very well. However, the reality is quite the opposite; this veteran pharmaceutical company’s performance has experienced roller-coaster-like fluctuations over the past few years.

Looking back at its five-year performance: In 2020, the company suddenly reported a net loss of 427 million yuan, marking its first significant loss since going public. Although it returned to profitability in the following two years, its net profit declined by approximately 20% in 2023. By 2024, it had completely "fallen off the rails," posting a net loss of 299 million yuan.

Not until 2025 did the company climb out of the deep pit again, with net profits in the first three quarters reaching 251 million yuan, a year-on-year surge of approximately 300%.

Why are the performance results so volatile?

The answer points to two key factors: asset impairment and the centralized procurement of core products.

Asset impairment, which sounds very financial, simply means that the things a company previously purchased (e.g., other companies, R&D projects) are not worth as much as they used to be. The overestimated value needs to be "written down" on the books, which directly reduces the current period's profit.

The impairment of Zhongsheng Pharmaceutical mainly stems from several past external mergers and acquisitions. To expand its business, the company acquired some projects in previous years, but some of these projects failed to meet the expected profitability targets, resulting in a whopping RMB 8.45 billion goodwill impairment charge in 2020.

A more severe impact occurred in 2024, with the company again reporting asset impairment losses of 5.47 billion yuan. Of this, goodwill impairment amounted to 2.02 billion yuan, and R&D project impairment reached 2.07 billion yuan.

This means that the company acknowledged that some of its early, heavily invested research and development projects might have unclear prospects, and made a clean break by clearing them all at once. As the saying goes, "Misfortunes never come singly." Just as the company was dealing with its historical burdens, the "big knife" of China's national drug procurement program also came down.

In June 2023, the company's "cash cow" product, Compound Xueshuantong Capsules, was selected in China's national traditional Chinese medicine procurement with its price dropping significantly from 0.73 yuan per 0.5 grams to 0.46 yuan, a reduction of nearly 40%. In the same year, another core product, Naoshuantong Capsules, also made it to the procurement lists of the Guangdong Consortium, Anhui, and other regions.

The core logic of centralized procurement is "exchanging volume for price," but a sharp plunge in prices in the short term will inevitably put pressure on sales revenue and gross profit. For Zhongsheng Pharmaceutical, which heavily relies on a single blockbuster product, this is nothing short of a direct hit.

The dual impact of price cuts for core products due to centralized procurement and asset impairment from historical burdens has jointly driven significant fluctuations in the company's performance over the past five years.

Fortunately, the worst seems to be over.

The large-scale impairment in 2024 was described by the company's management as "a one-time radical solution."

Although it makes the performance report look very bad in the short term, it essentially unloads a heavy burden for the future.

After this thorough clean-up, as of the end of the third quarter of 2025, the goodwill balance of Zhongsheng Pharmaceutical has dropped to less than 7 million yuan, and the risk of further large-scale impairment is extremely low. The income statement can finally reflect the company's actual current operations more accurately.

At the same time, the "adjustment period" of centralized procurement is also gradually coming to an end. Data shows that Compound Xueshuantong Capsules maintained stable sales in 2024 by "exchanging price for volume."

The sales revenue of Brain Thrombus Capsules in sample hospitals surged by 36.5% year-on-year, reaching 262 million yuan. This indicates that the company's core products remain highly competitive, rapidly capturing a larger market share after price reductions due to their efficacy and brand advantages.

A more positive signal is the change in the company's net profit margin. Against the industry backdrop of a general decline in product gross margins caused by centralized procurement, Zhongsheng Pharmaceutical has achieved a rise in net profit margin instead of a drop through strict cost control, increasing from 11.31% in 2021 to 13.00% in the first three quarters of 2025.

This shows that the company's internal management efficiency and cost control capabilities have been honed and improved during the crisis. Having shed its burdens, Zhongsheng Pharmaceutical is now operating on a more solid foundation.

When traditional Chinese medicine businesses encounter growth bottlenecks and the impact of centralized procurement, peers have chosen different paths to break through.

Pien Tze Huang has ventured into skincare and health products, Mayinglong has crossed over into the daily chemical industry, and Yunnan Baiyao has achieved a brilliant diversification with a single toothpaste product. While these cross-industry businesses can bring new profit points, they also face issues such as low technical barriers, susceptibility to homogenized competition, and the dispersion of focus from core businesses.

Zhongsheng Pharmaceutical has chosen a more difficult but imaginative path, sticking to its core pharmaceutical business and transitioning towards innovative drug research and development.

The company realized early on that relying solely on ancestral recipes and imitating others' drugs would make it difficult to sustain a long-term position in the future market. The true competitive edge must come from cutting-edge innovative technologies that we master ourselves.

To this end, the company has continuously "spent heavily" on R&D over the years. From 2021 to 2024, the company's annual R&D investment accounted for more than 10% of its revenue. This level of investment intensity stands out particularly in the traditional Chinese medicine industry, where R&D spending is generally low.

The company's innovative drug research and development focuses on two popular tracks: metabolic diseases and respiratory system diseases. After years of quiet dedication, the pipeline is finally beginning to bear fruit. Among them, the most notable are Ongladewei Tablets and RAY1225 Injection.

In the anti-influenza drug market, Oseltamivir has long been dominant, but it has disadvantages such as strong drug resistance and a tendency to cause nausea and vomiting. Angladivir Tablets, independently developed by Zhongsheng Pharmaceutical, are aimed at this iterative opportunity.

The drug was approved for marketing in May 2025. Clinical data shows that its antiviral effect is superior to oseltamivir, with fewer gastrointestinal side effects. In December 2025, it successfully entered the National Medical Insurance Catalogue, opening the door for significant growth.

What truly brought Zhongsheng Pharmaceutical into the spotlight in early 2026 was RAY1225 Injection. In the currently heated global GLP-1 weight-loss and hypoglycemic drug market, Eli Lilly's tirzepatide is the star product. However, it requires once-weekly injections, and gastrointestinal side effects remain relatively pronounced for some patients.

RAY1225, a dual-target drug of the same target class developed by Zhongsheng Pharmaceutical, showcases two major competitive advantages:

First, it is ultra-long-acting, requiring injection only once every two weeks, which greatly improves patient compliance. Second, it shows potential in terms of efficacy and safety. Phase II clinical trial data indicate that it has a significant weight loss effect and performs better than tirzepatide in terms of the incidence of gastrointestinal adverse reactions.

Currently, the weight loss and glucose-lowering indications of the drug have both entered the Phase III clinical stage. The collaboration with Qilu Pharmaceutical is a brilliant move.

For Qilu Pharmaceutical, it has rapidly strengthened its product line in the GLP-1 golden track; for Zhongsheng Pharmaceutical, it can leverage Qilu's powerful production and commercialization network to accelerate the future market penetration of the product. The cash return of up to 1 billion yuan has also greatly alleviated the financial pressure brought by the company's continuous high R&D investment.

This collaboration not only reflects the trend of professional division between "R&D and commercialization" in the innovative drug industry but also highlights the industry value of Zhongsheng Pharmaceutical's R&D achievements.

Yan Xi believes that the earnings turnaround of Sunsheng Pharmaceuticals in 2025 is the result of three overlapping factors: the complete clearance of historical burdens, the gradual subsiding of the impact from centralized procurement, and early signs of the harvest phase in innovative drug development.

This is not only a repair of financial data, but also a phased validation of strategic transformation.

The company has not become "internally competitive" in its traditional Chinese medicine roots, nor has it chased after seemingly popular cross-industry trends for short-term gains. Instead, it has chosen the most hardcore and patient-demanding path of innovative drug development. This road is fraught with thorns, requiring massive initial investment and carrying a high risk of failure, but once successful, the barriers created will also be the highest and most enduring.

The partnership with Qilu Pharmaceutical is not only a sound financial deal but also akin to an "industry-issued certificate of recognition," validating the value of its R&D pipeline.

Of course, it is still too early to say that Zhongsheng Pharmaceutical has completely succeeded in its transformation.

The development of innovative drugs, from Phase III clinical trials to successful market launch and subsequent commercial scale-up, still faces uncertainties at every stage. Although the GLP-1赛道 (GLP-1 sector) is vast, the competition has already become intense, with giants both domestically and internationally gathered. Whether the company can successfully secure a position in this battlefield filled with powerhouses remains to be seen.

Moreover, although the company's traditional Chinese patent medicine business has a solid foundation, how to further innovate and address the growth challenges under the normalization of centralized procurement remains a practical issue at hand.

Now, standing at the new starting point of 2026, this company holds a clean balance sheet, stabilized traditional business, and a pipeline full of potential innovative drugs.

The road to transformation remains long, challenges still exist, but the direction has become clear.

Note: (Disclaimer: The content and data in the article are for reference only and do not constitute investment advice. Investors operate at their own risk.)

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       Title: Turning a profit within a year, with a 200% surge in profits! Has this Guangdong pharmaceutical company carved out a path to success through "drastic self-reform"?