Sinopharm Subsidiary Sells Profitable TCM Unit for RMB 44.94 Million

On September 10, an announcement from the Beijing Equity Exchange revealed that Sinopharm Group Hunan Co., Ltd. (hereinafter referred to as “Sinopharm Hunan”) plans to transfer its 60% equity stake in Sinopharm Hunan Traditional Chinese Medicine Co., Ltd. (hereinafter referred to as “Sinopharm Hunan TCM”), with a minimum transfer price of RMB 44.94294 million. The information disclosure period is scheduled to end on October 14.

Currently, Sinopharm Hunan Traditional Chinese Medicine has two major shareholders: the largest shareholder, Sinopharm Group Hunan Co., Ltd., holds a 60% stake, while the remaining 40% is held by Changsha Puyi Consulting Service Partnership (Limited Partnership). Sinopharm Group Hunan Co., Ltd.’s sale of its entire 60% equity interest in Sinopharm Hunan Traditional Chinese Medicine signifies its complete exit from this traditional Chinese medicine company.

The announcement also stated that this transfer of property rights has resulted in Sinopharm Group Hunan Co., Ltd. losing actual control over Sinopharm Group Hunan Traditional Chinese Medicine Co., Ltd. Upon completion of the transaction, Sinopharm Group Hunan Traditional Chinese Medicine Co., Ltd. shall no longer be permitted to use intangible assets such as the trade names, operational qualifications, and franchise rights of state-funded enterprises and their subsidiaries, nor shall it continue to conduct business activities under the name of a subsidiary of a state-funded enterprise.

Sinopharm Group Hunan Co., Ltd. is a provincial-level pharmaceutical and medical device distribution platform established in Hunan Province by Sinopharm Group China National Pharmaceutical Group Corporation. Founded in June 2001, it joined Sinopharm Group China National Pharmaceutical Group Corporation in 2004. With a registered capital of RMB 520 million, the company serves as a designated storage enterprise for public health emergency supplies in Hunan Province, a core enterprise for pharmaceutical reserves in Hunan Province, an enterprise responsible for maintaining reserves of routinely scarce drugs in Hunan Province, and a base for ensuring the supply of emergency medical products for public health incidents in Hunan Province.

As the implementing entity and operational platform for the "Strategic Cooperation Agreement on Deepening Partnership" signed between the Hunan Provincial People's Government and China National Pharmaceutical Group Corporation (Sinopharm), Sinopharm Group Hunan Co., Ltd. is fully committed to building a robust supply guarantee system for pharmaceuticals and medical devices in Hunan Province. The company has established 20 subsidiaries across the province, including Sinopharm Hunan Traditional Chinese Medicine, Sinopharm Chenzhou, Sinopharm Yueyang, Sinopharm Xiangtan, Sinopharm Xiangxi, Sinopharm Changde, Sinopharm Yongzhou, Sinopharm Hunan Big Health Industry, and Sinopharm Hunan Wei'an Pharmacy. These subsidiaries cover diversified sectors such as pharmaceutical distribution, medical devices, pharmaceutical retail, logistics services, smart healthcare, traditional Chinese medicine, and the big health industry, thereby forming a comprehensive pharmaceutical and healthcare service system featuring full product categories, complete coverage, and diverse operational models.

Currently, Sinopharm Group Hunan Co., Ltd. has established strategic partnerships with more than 3,000 manufacturers worldwide, serving over 50,000 medical institutions and end customers. It is the leading distributor and retailer of pharmaceuticals and medical devices in Hunan Province, as well as a premier supply chain service provider.

Sinopharm Hunan Traditional Chinese Medicine, a subsidiary of Sinopharm Group Hunan Co., Ltd., was established in May 2021 and represents a key strategic initiative by Sinopharm Group Hunan in the traditional Chinese medicine sector.

In terms of technology and industrialization, Sinopharm Group Hunan Co., Ltd. has enhanced the level of industrialization and quality standards for traditional Chinese medicine (TCM) in Hunan Province by introducing modern production technologies and equipment for TCM, thereby driving technological innovation and transformation. Furthermore, by integrating upstream and downstream resources across TCM cultivation, trading, production, R&D, and terminal sales, the company has established a complete TCM industry chain. In terms of brand promotion, leveraging the “Xiang Jiu Wei” (Nine Hunan Herbs) brand strategy, the company fully exploits Hunan’s medicinal herb resources, continuously advancing the scale, standardization, and industrialization of medicinal herb cultivation.

Furthermore, leveraging the resources of its parent group, Sinopharm Hunan Traditional Chinese Medicine possesses China National Pharmaceutical Group’s unified CMS business operating system, WMS warehouse management system, and TMS transportation dispatch system. Its total warehouse area amounts to 4,320 square meters, including 1,034 square meters of ambient-temperature storage, 3,286 square meters of cool-temperature storage, and a cold storage volume of 117.1 cubic meters. The warehouses are equipped with modern logistics technologies and advanced information platforms.

Supported by multiple resources, Sinopharm Group Hunan TCM recorded operating revenue of approximately RMB 256 million in 2024 and approximately RMB 101 million as of August 31, 2025. However, its net profit for 2024 was only RMB 3.4686 million, with net profit reaching RMB 2.9201 million as of August 31, 2025.

Compared with China Traditional Chinese Medicine Co., Ltd. and Taiji Group, the main forces in traditional Chinese medicine under China National Pharmaceutical Group Corporation (Sinopharm), the net profit of Sinopharm Group Hunan Traditional Chinese Medicine is negligible. Therefore, against the backdrop of industry-wide cost reduction, efficiency improvement, and optimized resource allocation, it is a natural move for Sinopharm Group Hunan to divest Sinopharm Group Hunan Traditional Chinese Medicine, a non-core asset with poor profitability. Sinopharm Medicinal Materials, which met a similar fate, was completely divested by Sinopharm’s subsidiary Sinopharm Traditional Chinese Medicine in July this year. The company also suffered from poor performance; according to China Business Journal, it incurred a net loss of RMB 6.7 million in the first half of 2023. Furthermore, information from the Qichacha platform shows that as of May 7, 2025, Sinopharm Medicinal Materials was involved in 127 cases as a defendant and 18 cases as a person subject to enforcement.

Since the beginning of this year, domestic pharmaceutical giants such as the “Sinopharm Group” and “China Resources Pharmaceutical Group” have been frequently divesting non-core assets: Sinopharm Modern has listed Harson Pharmaceutical for sale; Sinopharm Yibin Pharmaceutical has sold Xinlibang Biotechnology; Sinopharm Holdings has disposed of its subsidiary in Shijiazhuang; China National Pharmaceutical Group Corporation has sold seven subsidiaries in Xinjiang; China Resources Sanjiu has transferred its equity stake in Anguo Traditional Chinese Medicine; China Resources Sanjiu has also transferred its equity stake in Jointown Pharmaceutical Technology; and China Resources Boya Bio-pharmaceutical has repeatedly lowered the price to offload an 80% stake in Boya Xinhe.

Despite the differences in the enterprises transferred and the businesses divested, the “Sinopharm Group” and “China Resources Group” share similar objectives in divesting their non-core businesses.

From a policy perspective, in 2023–2024, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) successively issued the “Notice on Doing a Good Job in the Business Development of Central Enterprises in 2024” and the “Notice on Matters Concerning Strengthening the Management of Equity Participations by Central Enterprises.” These documents incorporated the divestiture of “two non-core and two inefficient assets” (non-core and non-advantageous businesses, as well as low-efficiency and ineffective assets) into the annual operational performance assessment and established a baseline indicator requiring a return on equity (ROE) of no less than 5%. As pilot enterprises in the first batch, China Resources and China National Pharmaceutical Group Corporation will take the lead in eliminating all “two non-core” assets. Furthermore, under policy guidance, central and state-owned enterprises are shifting from “scale expansion” to focusing on “technological innovation, industrial control, and security support.” The pharmaceutical sector is required to concentrate on becoming “sources of original technology” and “leaders of modern industrial chains,” meaning that non-core assets lacking technological leadership are destined to exit.

From an industry perspective, on one hand, centralized procurement combined with reforms in medical insurance payment methods has compressed corporate profit margins. For instance, in 2024, the national centralized procurement of proprietary Chinese medicines included over-the-counter (OTC) products for the first time, subjecting billion-yuan brands such as CR Sanjiu’s “999 Ganmaoling” and Qiangli Pipa Lu to price cuts of up to 70%, directly impacting their profitability models. On the other hand, divested enterprises may face horizontal competition issues with their parent companies. For example, Kunming Pharmaceutical Group and CR Sanjiu had overlapping businesses in Xuesaitong soft capsules and pharmaceutical distribution. By spinning off the distribution segment and consolidating production approvals, internal bidding can be reduced, thereby enhancing bargaining power.

Furthermore, the divestiture of non-core assets aligns with the group’s development strategy. For instance, after the “China Resources” conglomerate divested Boya Xinhe (chemical preparations) and Jointown Pharmaceutical Technology (distribution), resources were concentrated on blood products (Boya Biopharm) and premium traditional Chinese medicine (Kunming Pharmaceutical’s Xuesaitong and Shenghuo Pharmaceutical), thereby supporting its dual-engine growth focus on “blood products + TCM OTC.”

Overall, the divestiture of non-core assets by the “China Resources Group” and “Sinopharm Group” is not a passive attempt to “dump burdens,” but rather a proactive move driven by multiple factors, including policy, industry dynamics, and strategic considerations. In the near future, competition among China’s pharmaceutical giants may no longer revolve around frantic “acquisition sprees” to see who can accumulate more assets or broaden their footprint; instead, it will hinge on who achieves higher return on assets and whose pipeline demonstrates both innovation and value.

References:

“23 Million: ‘Sinopharm Group’ Sells a Company!”