A Single TCM Product Generates 1 Billion Yuan in Revenue, This TCM Company to Go Public in Hong Kong
In February 2026, Shandong Hanfang Pharmaceutical submitted its prospectus to the Hong Kong Stock Exchange, planning to list on the Main Board.
Time goes back twenty-two years ago, to 2004, when brothers Qin Wenji took over the formula and production qualification of Compound Huangbai Liquid from Hebei Bencao Pharmaceutical, which had ceased operations. At that time, Bencao Pharmaceutical had fallen into stagnation due to its failure to pass the GMP (Good Manufacturing Practice) compliance upgrade. In June of the same year, the two brothers jointly invested 9 million yuan to officially establish Shandong Hanfang Pharmaceutical Co., Ltd., thus embarking on the industrial development path of this traditional Chinese medicine. This also marked the starting point of Hanfang Pharmaceutical's twenty-two-year development journey.
2015 became a pivotal turning point for Hanfang Pharmaceutical's development. The company completed a comprehensive upgrade of its core products and officially launched Compound Huangbai Liquid Coating Agent. This product not only optimized the dosage form and improved user convenience but also won the first prize of the Science and Technology Award from the Chinese Association of Integrative Medicine. It was included in the 2015 and 2020 editions of the Chinese Pharmacopoeia. This ancient Chinese medicine formula, originating from the Qing Dynasty’s "Golden Mirror of Medicine," has gradually opened up the market. One year later, in 2016, Compound Huangbai Liquid Coating Agent received the designation as a National Level 2 Protected Traditional Chinese Medicine Variety, with exclusive production rights lasting until July 2030, establishing an insurmountable core competitive barrier for the company.
The story of Hanfang Pharmaceutical is a microcosm of the difficult breakthrough of traditional Chinese medicine in the modern medical system. Starting from "Compound Huangbai Liquid Coating Agent" which originated from the empirical formula of medical institutions, it has become a national second-class protected traditional Chinese medicine variety, and now has an annual income of nearly 1 billion yuan. It has witnessed the entire process of China's external-use proprietary Chinese medicine market from savage growth to standardized competition.
Facing the current situation of "one drug dominating" and the urgent need for diversified transformation, Hanfang Pharmaceutical decided to leverage the power of the capital market to break through the development bottleneck. On February 25, 2026, the company officially submitted its main board listing application to the Hong Kong Stock Exchange.
In June 2004, Qin Wenji and his younger brother Qin Yinji founded Hanfang Pharmaceutical. At that time, China's traditional Chinese medicine industry was in a critical cycle of GMP compliance upgrades, during which a large number of small and medium-sized pharmaceutical enterprises were eliminated due to their inability to meet standardized production requirements, leading to a restructuring of the market landscape. The Qin brothers entered the market this time by taking over the production qualifications, formula, and some technical personnel for Compound Huangbai Liquid, saving the cost and time of starting from scratch. The prospectus shows that the two founders lacked relevant experience in the biopharmaceutical field before establishing Hanfang Pharmaceutical: Qin Wenji had served for 11 years and after retiring, he focused on the trade and economic field for 15 years; Qin Yinji’s professional background was mainly in the papermaking and light machinery industries, with only about six months of work experience in the pharmaceutical industry.
Unlike the "multi-product layout, rapid expansion" strategy adopted by most pharmaceutical companies at the time, Hanfang Pharmaceutical chose a "single-point breakthrough" strategy. In 2005, the company launched the first generation of Compound Huangbai Liquid. Due to factors such as the dominance of Western medicines in the external-use traditional Chinese medicine market at the time, insufficient clinical recognition of the product, and a single dosage form, the product did not achieve rapid scaling after its launch. Since then, the company has continuously invested resources to optimize the product, forming a research and development team to improve the extraction process, addressing issues such as low utilization of active ingredients and poor stability in traditional formulations. Through multi-center clinical studies, the company verified the product's efficacy in treating diseases such as atopic dermatitis, diabetic foot ulcers, and perianal abscesses.
In 2015, Hanfang Pharmaceutical launched the upgraded Compound Huangbai Liquid Coating Agent, optimizing its formulation while successfully incorporating it into the Chinese Pharmacopoeia. In 2016, the product was granted the status of a National Level-II Protected Traditional Chinese Medicine Variety. In 2017 and 2018, it was successively included in the National Medical Insurance Catalog and the National Essential Drug List, rapidly penetrating medical institutions at all levels with the support of policy incentives. As of 2024, the Compound Huangbai Liquid Coating Agent holds a 1.1% market share in China’s external-use traditional Chinese medicine market, ranking fourth overall, and leads the dermatology sub-sector with a 5.5% share, becoming a commonly used drug in clinical practice, with revenue from this single product exceeding 1 billion yuan.
As its core products gained a solid foothold, Hanfang Pharmaceutical embarked on a path of scaled expansion. In 2018 and 2019, the company underwent two rounds of capital increases, raising its registered capital from 10 million yuan to 30 million yuan. The Qin brothers maintained absolute control of their shares— as of the date of the prospectus signing, Qin Wenji held 90% of the shares, while Qin Yinji held 10%. The two signed a unanimous action agreement, jointly controlling all voting rights of the company. This 100% family-controlled structure is quite rare among companies striving for a Hong Kong stock listing. More notably, the company’s management structure also bears a strong familial imprint: Qin Wenji serves as chairman and executive director, overseeing overall management, strategic planning, and major decision-making; Qin Yinji serves as executive director and general manager, supervising daily operations; Qin Wenji’s daughter, Qin Chengxue, acts as an executive director in charge of research and development; and company secretary Ye Weibin is Qin Chengxue's husband, forming a tightly-knit family governance structure.
In 2022, Hanfang Pharmaceutical launched the construction of Shandong Hanfang Traditional Chinese Medicine Industrial Park, which covers an area of over 166,000 square meters with a total investment exceeding 500 million yuan. This industrial park is scheduled to commence operations in 2025, forming a core production capacity of 70.2 million bottles of 100-milliliter Compound Huangbai Liquid Coating annually, providing solid support for product expansion. Meanwhile, the company’s sales channels continue to expand. As of the first nine months of 2025, it has covered more than 12,000 medical institutions across 31 provinces, autonomous regions, and municipalities in China, including over 2,000 tertiary hospitals and more than 4,000 secondary hospitals, establishing a comprehensive medical channel network.
The performance of financial data also confirms the strong profitability of core products. The prospectus shows that the company's revenue increased from 780 million yuan in 2021 to 1.053 billion yuan in 2023, with a growth of 35% over two years; net profit rose from 162 million yuan in 2021 to 237 million yuan in 2023, an increase of over 46%. However, in 2024, affected by price reductions at hospitals and an overall downturn in the traditional Chinese medicine (TCM) industry, the company’s revenue slightly dropped to 992 million yuan, with a net profit of 199 million yuan, representing year-on-year decreases of 5.8% and 16%, respectively. In the first nine months of 2025, revenue rebounded to 803 million yuan, with a net profit of 145 million yuan, showing signs of recovery but with slowed growth. Notably, the company's gross margin has consistently remained above 80%, reaching 84.3% in 2023, and even when revenue declined in 2024, the gross margin was still maintained at 82.5%, far exceeding the average level in the TCM industry. This is largely due to the exclusive barriers of Compound Huangbai Liquid Coating, which provides strong pricing power.
But behind the prosperity, hidden concerns are becoming increasingly prominent. The most notable issue is the "one-drug dominant" revenue structure—according to the prospectus, from 2023 to the first nine months of 2025, the revenue contribution of Compound Huangbai Liquid Coating accounted for a staggering 99.8%, 99.8%, and 99.7%, respectively. In response to the potential risks posed by reliance on a single product, Hanfang Pharmaceutical has attempted to diversify its portfolio, but with minimal success. The company launched the "Xicai Duo" brand of cosmetics, leveraging the advantages of traditional Chinese medicine formulations to enter the functional skincare market. Additionally, it acquired production licenses for classic formulas such as Angong Niuhuang Pills and Wuji Baifeng Pills to expand into a broader range of traditional Chinese medicine markets. However, the prospectus shows that during the reporting period, the combined sales of cosmetics and Angong Niuhuang Pills were only 1.75 million yuan, 1.72 million yuan, and 2.34 million yuan, accounting for just 0.2%, 0.2%, and 0.3% of total revenue, respectively—a negligible contribution. More alarmingly, the company's sales expenses have been high; in the first nine months of 2025, sales and marketing expenditures reached 420 million yuan, exceeding 52% of revenue, mainly used for academic promotion, channel maintenance, and terminal coverage. This "high investment for growth" model has tightly bound the company’s profitability to the intensity of its sales efforts.
In 2023, the company established an innovation center in Hengqin, with plans to launch a research and development laboratory by the first quarter of 2026. The focus will be on advancing the research and clinical translation of novel traditional Chinese medicine (TCM) formulations. Concurrently, the company is progressing five innovative topical TCM pipelines within its existing therapeutic areas. Among these, two candidates for treating pediatric atopic dermatitis have received clinical trial approval, while eight other hospital preparations are being developed into innovative, marketable drugs. Additionally, leveraging its expertise in topical TCM applications, the company is expanding into consumer health sectors such as skincare, launching related cosmetic products. Currently, all of the aforementioned new business initiatives are in the incubation phase and have yet to make a significant contribution to revenue.
Filing the prospectus in 2026 marks an important turning point in the development of Hanfang Pharmaceutical. From an industry perspective, supportive policies for traditional Chinese medicine (TCM) have been continuously implemented in recent years, leading to a revaluation of exclusive product portfolios and the growing release of demand from grassroots healthcare. TCM enterprises with clinical advantages and exclusive competitive barriers are now encountering significant development opportunities. Hanfang Pharmaceutical’s decision to push for a Hong Kong stock listing at this time serves two purposes: first, to secure financing through the capital market to support the advancement of its diversification strategy; second, to leverage Hong Kong's valuation system to achieve a revaluation of corporate value. The proceeds from this IPO will primarily be used for candidate product research and development, production facility expansion, market outreach, and operational funding supplementation. Notably, R&D investment will account for no less than 30%, aiming to accelerate ongoing product development and build momentum for long-term growth by increasing R&D efforts.
But the challenges faced by Hanfang Pharmaceutical are far more severe than imagined. On the industry competition level, although Compound Huangbai Liquid Coating enjoys exclusive protection status, it still faces dual competitive pressures: In the traditional Chinese medicine (TCM) sector, other products occupy a certain market share and are continuously increasing R&D investment in an attempt to seize the market; in the Western medicine sector, steroid creams and biologics, with their fast-acting and well-defined side effects, continue to divert the high-end market, especially in the top-tier hospitals of first-tier cities where Western pharmaceuticals still dominate. Additionally, the prices of raw materials for traditional Chinese medicine fluctuate dramatically. The cost of herbs required for producing Compound Huangbai Liquid Coating—such as Forsythia suspensa, centipedes, and Phellodendron bark—is significantly affected by factors like climate, planting area, and market supply and demand. In 2024 alone, the price of Forsythia suspensa increased by over 30%, directly impacting the company's profit margins.
Policy risks are the "Sword of Damocles" hanging over the company. The advancement of centralized procurement for traditional Chinese medicine (TCM) is accelerating. If this product is included in the future, it may face significant price-cutting pressure—referencing TCM products already included in centralized procurement, with an average price reduction of over 40%. For Hankfang Pharmaceutical, which heavily relies on this product, this would be a fatal blow. Additionally, the dynamic adjustments to the medical insurance catalog may also impact the product’s market access and sales scale. The tightening regulatory policies on TCM impose higher requirements on quality control and clinical data verification. The funds raised from the IPO will be used for the continuous R&D, clinical development, and commercialization of candidate products. Whether the company can leverage this opportunity to transition from "single-product dependency" to "diversified progress" is worth investors' attention.
The governance structure of family-controlled enterprises has also become a focal point of attention in the capital market. A highly concentrated equity structure can help improve decision-making efficiency during the early stages of enterprise development, but after entering the capital market, how to balance family interests with the rights of minority shareholders, establish a sound corporate governance structure, and prevent related-party transaction risks have become important issues that Hanfang Pharmaceutical needs to address.