Sinopharm Subsidiary Loses First-Instance Patent Infringement Ruling Over Key Product Bailin Capsule

In the biomanufacturing industry, a patent war surrounding the fermentation of “Cordyceps gold” has entered a new phase of intense litigation with the delivery of a court judgment.

2025Year12Month15On [date], listed company Huadong Medicine issued an announcement stating that the first-instance judgment in a patent infringement dispute, in which its wholly-owned subsidiary Huadong Medicine acted as the plaintiff, revealed thatThe court dismissed all of Huadong Medicine's claims.. However, Huadong Medicine used firm language, statingAn appeal will be filed with the Supreme People's Court.

According to the announcement, the defendants in this case include Qinghai Zhufeng Cordyceps Sinensis Raw Material Co., Ltd. and Qinghai Zhufeng Cordyceps Sinensis Pharmaceutical Co., Ltd. (whose controlling shareholder is a listed companyZuoli Pharmaceutical) and Hangzhou Huadong Wulin Pharmacy Co., Ltd., with an involved amount of approximately1.11100 million yuan.

At the heart of this lawsuit lies Huadong Medicine’s exclusive flagship product—Annual sales once exceeded30The manufacturing foundation of Bailingshan Capsules, valued at hundreds of millions of yuan.

Although this product is classified as a proprietary Chinese medicine, it is essentially a biomanufactured product. Its key value lies not in natural Cordyceps sinensis, but in the unique production process of its core raw material, “fermented Cordyceps sinensis mycelium powder.” This technologyRaw materials are produced by large-scale cultivation of Cordyceps sinensis mycelium through modern bio-fermentation.Huadong Medicine emphasized in its announcement that the company has applied for multiple invention patents for this process,Moreover, no authorization has ever been granted to any entity in history.

Nowadays, this around30The Patent Offensive and Defensive Battle in the Billion-Yuan Biomanufacturing Market: Huadong Medicine Temporarily Loses in the First Instance, but the Game Is Far from Over. The Final Ownership of the Patent Will Directly Determine Who Controls the Core Production Lifeline and Market Landscape of the Product, with the Ultimate Answer Awaiting the Final Judgment.

The source of the dispute is a capsule named "Bailing."

As early as1993In [year], Huadong Medicine’s Bailing Capsules were approved for market launch. According to reports, approximately20Years ago, Li Bangliang, then Chairman of Huadong Medicine, demonstrated keen insight by selecting Bailing Capsules from “a pile of dormant drug production license numbers.”

Subsequently, a nationwide marketing campaign titled “Bailing Wanli Tour” was launched, with the promotion team visiting cities across China to invite physicians to attend academic conferences.Successfully turned this product into a market blockbuster。

Efforts Have Yielded Fruitful Results:1998In that year, the sales of Bailing Capsules exceeded 100 million yuan;2013Annual Breakthrough10100 million yuan;2016Annual Breakthrough20100 million yuan;to2019In [year], its sales exceeded30the 100 million yuan mark.

According to data from Menet,2022Bailing Capsules Were the Best-Selling Proprietary Chinese Medicine in Urban Public Hospitals' Medication MarketTOP 20Ranked 7th in the market for proprietary Chinese medicines for urinary system diseases in urban public hospitalsTOP 10Ranked No. 1 in variety.

This pharmaceutical product, indicated for tonifying the lungs and kidneys, replenishing essence and qi, modulating immunity, and improving renal function, once became Huadong Medicine’s veritable “cash cow” and flagship product.

What underpins this product’s market position is the manufacturing process of its core ingredient—fermented Cordyceps sinensis mycelial powder.Huadong Medicine stated that, through unique processes involving *Hirsutella sinensis*, hydrolysate culture media, and low-temperature fermentation, it has obtained mycelium whose active ingredients closely approximate those of natural *Cordyceps sinensis*.

Huadong Medicine has applied for and obtained45patents for inventions, and emphasized that Bailing Capsules are a Class I new traditional Chinese medicine drug and a nationally protected traditional Chinese medicine product.

A huge cake inevitably attracts those eager to take a share. Zhejiang Jolly Pharmaceutical Co., Ltd. set its sights on the field of fermented Cordyceps sinensis at an early stage.

2014In [year], Zuoli Pharmaceutical invested in Qinghai Zhufeng Cordyceps Sinensis Pharmaceutical Co., Ltd., incorporating its product Bailing Tablets (also primarily composed of fermented Cordyceps sinensis) into its portfolio.Bailing Tablets subsequently became a key single product for Zuoli Pharmaceutical, aside from the Wuling series, with gross profit margins once reaching as high as73.38%。

However, Zuoli Pharmaceutical’s ambitions extend beyond Bailing Tablets; it has long set its sights on the larger market for Bailing Capsules.

The turning point emerged at the policy level.2022Year12In [Month], the Center for Drug Evaluation of the National Medical Products Administration issued the “Technical Guidelines for the Study of Drugs with Same Name and Same Formula”(Trial Implementation)》, providing a clear pathway for "generic" traditional Chinese medicines.

Zuoli Pharmaceutical quickly followed suit, with the marketing application for its Bailing Capsules also being2022Year12Monthly submission,in just about one year, it is convenient to2024Year1Month7On that day, it successfully obtained the "Drug Registration Certificate," becoming the first approved "same-name, same-formula drug" for Bailing Capsules.

This means that the market for Bailing Capsules, which Huadong Medicine has exclusively operated for thirty years, is about to welcome a direct competitor whose strength cannot be underestimated.

Zuoli Pharmaceutical in2022It was proposed in the annual report,Strive to build the Bailing series into10billion-yuan blockbuster drugs,Bailing Tablets Sales in the Same Year2.56100 million yuan, and participated in centralized procurement bidding across various regions.

Faced with impending head-to-head competition, Huadong Medicine chose to strike first on the legal front.

Just days before Zuoli Pharmaceutical’s Bailing Capsules were approved for market launch,2024Year1Month2Huadong Medicine announced that its subsidiary, Huadong Medicine (Zhongmei Huadong), has filed a lawsuit with the Zhejiang Provincial Higher People's Court. The defendants include Zhufeng Raw Materials, which produces the raw materials; Zhufeng Pharmaceutical, which manufactures Bailing Tablets; and Huadong Medicine’s controlled subsidiary, Hangzhou Huadong Wulin Grand Pharmacy Co., Ltd. The announcement explained that the latter was listed as a defendant to “ensure the completeness of the chain of evidence in the litigation.”

Huadong Medicine’s claims strike at the core: it requests that the defendant cease the production and sale of fermented Cordyceps sinensis mycelial powder (the key ingredient in Bailing Capsules) and Bailing Tablets, which infringe upon its patents.and claiming compensation for economic losses and reasonable expenses, totaling approximately1.11100 million yuan.

From this perspective, Huadong Medicine’s objective is clear: it is targeting not only the already-listed Bailing Tablets but also the soon-to-be-approved Bailing Capsules, aiming to block competitors at the source of raw materials.

Huadong Medicine disclosed the basis for its litigation in subsequent investor communications: first, the company had never licensed the relevant production processes to Zhufeng; second, analysis of Zuoli Pharmaceutical’s products confirmed that they infringed upon the company’s patents.

Huadong Medicine specifically pointed out that during the approval process of Zuoli Pharmaceutical’s Bailing Capsules, it learned that the National Medical Products Administration had included special remarks on its active pharmaceutical ingredient (API) registration certificate.: “Its manufacturing process must be consistent with that of Huadong Medicine Co., Ltd.”. Huadong Medicine regards this as important evidence that the other party's process constitutes infringement.

After more than a year of trial by the Zhejiang Provincial Higher People's Court, including two public hearings (2024Year4Month8Day,6Month11day), the first-instance verdict was issued on2025Year-End Update: Huadong Medicine Subsidiary Loses Lawsuit.

In response to these results, Huadong Medicine expressed strong skepticism in its announcement:

• Inconsistency with Established Facts: It is contended that the facts ascertained by the court and the evidence admitted are not entirely consistent with the actual circumstances.

• Key Evidentiary Concerns: It is alleged that the key registration documents submitted by the defendant, Zhufeng Raw Materials, during the trial were inaccurate; however, the defendant refused to discuss this issue on the grounds that such documents were irrelevant to the determination of patent infringement.

• Reaffirmation of Ownership Rights: It is hereby reiterated that, with respect to the manufacturing process for fermented Cordyceps sinensis powder used by Huadong Medicine, neither the Company nor Huadong Medicine has ever granted authorization to any entity throughout history.

Based on the aforementioned reasons, Huadong Medicine announced that it will file an appeal with the Supreme People's Court and continue to take legal measures to safeguard its rights and interests.

In fact, the dispute between Huadong Medicine and Zuoli Pharmaceutical is not limited to this lawsuit.

As early as2019Year5In [Month], both parties issued announcements simultaneously,Huadong Medicine plans to at a price not higher than10.6Acquisition of Zuoli Pharmaceutical for Hundreds of Millions of Yuan18.6%shares, with a premium rate as high as68.95%。

However, the deal ultimately fell through due to potential horizontal competition (between Huadong Medicine’s Bailing series and Zuoli Pharmaceutical’s Bailing Tablets) and significant uncertainties surrounding business integration. This unfinished acquisition saga has added a touch of drama to today’s patent showdown.

Regarding the impact of the first-instance judgment, Huadong Medicine stated in its announcement that the case is still at the stage of first-instance judgment and will not have a significant impact on the company’s profits for the current period or subsequent periods.

Huadong Medicine also disclosed that, as of2025Year12Month12On [date], the total amount involved in small-claims litigation within its jurisdiction that did not meet the disclosure threshold was approximately3.7100 million yuan, overseas approximately0.25100 million yuan, all stating that there is no significant impact on production and operations.

In terms of the market, Huadong Medicine has recently demonstrated robust performance. Its2025The third-quarter report of the year shows that the operating revenue achieved in the first three quarters326.64100 million yuan, a year-on-year increase of3.77%, net profit attributable to shareholders of the parent company27.48100 million yuan, a year-on-year increase of7.24%。Pharmaceutical Industry R&D Investment Significantly Increased to21.86100 million yuan, year-on-year increase35.99%, demonstrating sustained innovation investment capabilities. This may provide the confidence needed to engage in what could be a protracted legal battle.

On the other hand, Zuoli Pharmaceutical, having successfully obtained approval for Bailing Capsules, appears to be positioning the Bailing series as a new growth driver.

2025Zuoli Pharmaceutical's Main Business Revenue in the First Three Quarters of the Year22.8RMB 100 million, a year-on-year increase11.48%; Net profit attributable to shareholders of the parent company5.1100 million yuan, a year-on-year increase21.0%; Net profit excluding non-recurring gains and losses5.09RMB 100 million, a year-on-year increase22.51%。Among them, the revenue growth of the Bailing series is particularly notable—year-on-year increase29.58%, in contrast, the Wuling series achieved year-on-year growth6.98%。

However, Zuoli Pharmaceutical’s strategic goal of building the Bailing series into a blockbuster product with annual sales exceeding RMB 1 billion remains closely tied to the outcome of its litigation with Huadong Medicine.

A legal dispute involving substantial market interests, core intellectual property rights, and the strategic futures of two publicly listed companies is poised to enter the highest judicial arena.

The second-instance trial at the Supreme People's Court will serve as the final adjudication in this “Bailing Dispute.” The judgment will not only determine1.11Ownership of the Compensation Amounting to Hundreds of Millions of Yuan,It may even have a far-reaching impact on the competitive landscape and innovation ecosystem of China’s fermented Cordyceps preparations, as well as the market for traditional Chinese medicines with identical names and formulations.

All market participants and investors are waiting for the final gavel to fall.