Sinopharm Subsidiary Sells 25% Stake in Guoyao Herbs for RMB 23 Million Amid Strategic Asset Restructuring

Jul 17, 2025 17:04 CST Updated 17:04

On July 11, an announcement from the Beijing Equity Exchange revealed that China National of Traditional & Herbal MEDICINE Co., Ltd. has listed for transfer its 25.145 million shares (accounting for 25% of the total share capital) in Sinopharm Pharmaceutical Materials Co., Ltd., with a listing price of RMB 23.016 million. The information disclosure period ends on July 17.

Sinopharm Medicinal Materials, established in 2000, focuses on multiple business segments, including the R&D of Chinese herbal medicine breeding and the construction of breeding bases; the development and operation of planting and farming bases for Chinese herbal medicines; the development and operation of online and offline trading markets for Chinese herbal medicines; warehousing and logistics of Chinese herbal materials; processing and sales of traditional Chinese medicine (TCM) decoction pieces; R&D and manufacturing of TCM products; R&D and manufacturing of non-pharmaceutical functional foods; R&D and manufacturing of non-pharmaceutical natural daily chemical products; international trade of Chinese herbal materials and health products; the elderly care industry; and investment and operation of wellness tourism projects.

According to public information, Sinopharm Materials is a joint-stock company initiated and established by China National of Traditional & Herbal MEDICINE Co., Ltd. (abbreviated as “Sinopharm TCM”), a subsidiary of Sinopharm Group. Following equity reforms, it has evolved into a comprehensive traditional Chinese medicine industry group jointly invested in and operated by multiple central and state-owned enterprises. As of now, Sinopharm TCM holds a 25% stake in Sinopharm Materials, making it the largest shareholder.

Sinopharm Group “Distances Itself” from Sinopharm Medicinal Materials

Although Sinopharm Chinese Medicine is the largest shareholder of Sinopharm Materials, since 2020, Sinopharm Group and Sinopharm Chinese Medicine have repeatedly issued clarification statements declaring that they are not involved in the activities of Sinopharm Materials and its affiliated enterprises. For example, the most recent clarification announcement was issued by Sinopharm Group on January 10, 2025, which stated:

I. Since November 2016, Sinopharm Group’s subsidiary, China National of Traditional & Herbal MEDICINE Co., Ltd., has held a 25% equity interest in Medicinal Materials Shares. With respect to Medicinal Materials Shares, neither Sinopharm Group nor China National of Traditional & Herbal MEDICINE Co., Ltd. is the controlling shareholder or the actual controller.II. Sinopharm Group has never authorized Medicinal Materials Shares and its affiliated enterprises to engage in promotional, investment, or other activities under the names “China National Pharmaceutical Group Corporation,” “China National Pharmaceutical Group,” “Sinopharm Group,” or “Member Enterprise of Sinopharm Group,” nor has it authorized them to use the registered trademarks of Sinopharm Group.III. In response to Medicinal Materials Shares’ alleged infringement of Sinopharm Group’s trademark rights and acts of unfair competition, as well as unlawful acts including fabricating shareholders’ meeting proceedings, forging shareholders’ meeting resolutions, forging signatures of directors of China National of Traditional & Herbal MEDICINE Co., Ltd., and forging or altering the company’s articles of association, Sinopharm Group and China National of Traditional & Herbal MEDICINE Co., Ltd. have filed lawsuits in accordance with the law, which have been upheld by the courts. Regarding suspected criminal offenses such as the forgery of seals by Medicinal Materials Shares, reports have been filed with the public security authorities in accordance with the law.

Furthermore, the announcement regarding this equity transfer contains relevant provisions: Upon completion of the transfer transaction, Sinopharm Pharmaceutical Co., Ltd. and its affiliated companies shall no longer continue to use the trade names, operational qualifications, franchise rights, and other intangible assets of China National Pharmaceutical Group Corporation and its subsidiaries. The target enterprise and its affiliated companies shall no longer conduct business activities in the name of a subsidiary of a state-funded enterprise. Sinopharm Pharmaceutical Co., Ltd. and its affiliated companies are required to complete procedures with the administration for industry and commerce to change their company names, and shall not use any name containing the words “Sinopharm Group” or “Sinopharm,” nor make any other representations likely to cause confusion with the aforementioned enterprises.

Why is a traditional Chinese medicine (TCM) enterprise with a registered capital exceeding RMB 100 million and bearing the prestigious “Sinopharm” brand so “shunned” by Sinopharm Group and China National Traditional & Herbal Medicine? The underlying reasons may be related to the company’s involvement in disputes and outstanding debts.

According to China Business News, Sinopharm Medicinal Materials reported a net loss of RMB 6.7 million in the first half of 2023. Additionally, Huaren Pharmaceutical’s 2023 annual report showed that as of December 31, 2023, the balance of other receivables from Sinopharm Medicinal Materials amounted to RMB 1.41 billion, primarily consisting of advanced payments on behalf of the latter. In January 2024, Huaren Pharmaceutical signed a repayment agreement with Sinopharm Medicinal Materials. As of September 2024, the balance of Huaren Pharmaceutical’s other receivables stood at RMB 1.37 billion. Furthermore, information queried from the Qichacha platform indicates 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.

It is evident that, whether from the perspective of corporate revenue or corporate reputation, Sinopharm Chinese Medicine’s divestment of its equity stake in Sinopharm Medicinal Materials was an inevitable outcome.

Pharmaceutical Giants Intensify Divestiture of Non-Core Assets

In fact, since the beginning of this year, domestic pharmaceutical giants such as the “Sinopharm Group” and the “China Resources Group” have been frequently listing non-core assets for sale.For example: Sinopharm Modern listed for sale Hasen Pharmaceutical; Sinopharm Yibin Pharmaceutical sold Xinlibang Biotechnology; Sinopharm Holdings sold its Shijiazhuang subsidiary; Sinopharm Group sold seven subsidiaries in Xinjiang; China Resources Sanjiu transferred its equity stake in Anguo Traditional Chinese Medicine; China Resources Sanjiu transferred its equity stake in Jointown Pharmaceutical Technology; and China Resources Boya Bio-pharmaceutical repeatedly lowered prices to offload an 80% stake in Boya Xinhe...

Although the enterprises being transferred and the businesses being divested differ, the purpose behind the “Sinopharm Group” and “China Resources Group” divesting their non-core businesses is similar.

From the policy perspective,In 2023 and 2024, the State-owned Assets Supervision and Administration Commission (SASAC) of the State Council successively issued the *Notice on Doing a Good Job in the Operational Development of Central Enterprises in 2024* and the *Notice on Matters Concerning the Strengthening of Equity Participation Management 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 part of the first batch of pilot enterprises, China Resources and Sinopharm are required to complete the clearance of “two non-core” assets before 2025. Furthermore, guided by these policies, central and state-owned enterprises are shifting from “scale expansion” to focusing on “technological innovation, industrial control, and security support.” The pharmaceutical sector is mandated to concentrate on becoming “sources of original technology” and “leaders of modern industrial chains,” ensuring that non-core assets lacking technological leadership are inevitably phased out.

From the industry perspective,On the one hand, centralized volume-based procurement (VBP) combined with healthcare insurance payment reforms have squeezed corporate profit margins. For instance, in 2024, the national VBP program for 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 entities 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 also aligns with the Group’s development strategy.For example, after the “China Resources” conglomerate divested Boya Xinhe (chemical formulations) and Jointown Pharmaceutical Technology (distribution), it concentrated its resources on blood products (Boya Biopharma) and premium traditional Chinese medicine (Kunming Pharma’s Xuesaitong and Shenghuo Pharmaceutical), aligning with its dual-engine development strategy focused on “blood products + TCM OTC.”

Overall, the divestiture of non-core assets by the “China Resources” and “Sinopharm” conglomerates is not a passive effort to “unload burdens,” but rather a proactive strategy driven by multiple factors, including policy, industry dynamics, and corporate strategy. In the near future, competition among China’s pharmaceutical giants may no longer revolve around frantic “buying sprees” or contests over asset size and breadth of portfolio; instead, it will hinge on who achieves higher return on assets and whose pipeline demonstrates both innovation and value.