Intime Pharmaceutical Acquires Zhejiang Huatong Medicine Group for RMB 369 Million to Strengthen Regional Market Dominance

On May 20, Zhejiang Huatong Pharmaceutical Co., Ltd. announced its plan to transfer 100% equity interest in Huatong Pharmaceutical through a public listing. On May 28, Int'l Group announced that, to further deepen its business layout in Zhejiang Province and enhance market share and industry concentration, its wholly-owned subsidiary, ZHEJIANG INT'LMEDICINE CO., LTD., intends to participate in the auction for the 100% equity interest in Huatong Pharmaceutical via the platform designated by the Zhejiang Property Rights Exchange. The listed reserve price is RMB 369.1 million, with the final transaction price subject to the ultimate auction result at the Zhejiang Property Rights Exchange.

After nearly half a month, the auction of Huatong Pharmaceutical has reached its final outcome. On the evening of June 3, Int'l Group announced that its wholly-owned subsidiary, ZHEJIANG INT'LMEDICINE CO., LTD., had successfully acquired 100% equity interest in Huatong Pharmaceutical for RMB 369.1 million in recent days, and signed the "Equity Transfer Contract for 100% Equity Interest in Zhejiang Huatong Pharmaceutical Group Co., Ltd." with the transferor, Zhejiang Agricultural Resources Group Co., Ltd. ZHEJIANG INT'LMEDICINE CO., LTD. will make a one-time payment, transferring the funds to its escrow bank account at the Zhejiang Equity Exchange via the "Zhejiaohui" platform within five working days from the date of signing this contract, and complete the order payment on the "Zhejiaohui" platform.

Upon completion of this transaction, ZHEJIANG INT'LMEDICINE CO., LTD. will hold 100% equity interest in Zhejiang Huatong Pharmaceutical Co., Ltd., making the latter its wholly-owned subsidiary. Int'l Group stated that, on one hand, the Group will strengthen its research, analysis, and response to industry policies while enhancing operational management capabilities; on the other hand, it will fully integrate Zhejiang Huatong Pharmaceutical Co., Ltd. into the Int'l management system to promote managerial integration between the two parties. Meanwhile, leveraging the Int'l platform, the Company will accelerate the adjustment of its product portfolio, expand its network layout, and increase both business scale and profitability.

Huatong Pharmaceutical, originally established in 1982 as the Qianqing Supply and Marketing Cooperative Pharmacy in Shaoxing County, underwent a series of transformations including the establishment of a limited liability company, shareholding reform, public listing, and restructuring. In December 2020, it assumed the assets and operations of the former Zhejiang Huatong Pharmaceutical Co., Ltd. As a member enterprise of Zhejiang Agricultural Group (Zhenong Group) under the Zhejiang Provincial Supply and Marketing Cooperative following its reorganization and listing, Huatong Pharmaceutical is a comprehensive pharmaceutical company engaged in pharmaceutical wholesale and retail, R&D, production and sales of traditional Chinese medicine, pharmaceutical logistics, and traditional Chinese medicine diagnosis and treatment services.

With a registered capital of RMB 210 million, over 1,000 employees, and an annual sales volume of RMB 2 billion, Huatong Pharmaceutical has established a strong market presence. As previously reported by the official WeChat account of China Pharmacy, Huatong Pharmaceutical’s directly operated community pharmacies have achieved comprehensive coverage across Shaoxing’s urban districts, towns, and rural areas, making it the chain enterprise with the largest number of stores in Shaoxing’s rural market. As the leading local pharmaceutical company in Shaoxing, Huatong Pharmaceutical has developed an integrated urban-rural pharmaceutical distribution network for its wholesale business, spanning from village health clinics to Grade III Class A hospitals throughout Shaoxing. The distribution area for essential medicines covers all counties, county-level cities, and districts in Shaoxing, as well as Xiaoshan and Yuhang. Its chain operation outlets are widespread across urban and rural Shaoxing, exceeding 100 locations, and have pioneered a new retail landscape encompassing Guoyi Pharmacies, on-site TCM consultation services, in-hospital pharmacies, DTP (Direct-to-Patient) pharmacies, and online retail services.

Currently, the wholly-owned or holding subsidiaries (entities) under Huatong Pharmaceutical include Huatong Pharmaceutical Chain, Jingyuetang Pharmaceutical, Jingyuetang Medicine, Huayao Logistics, Keqiao Huatong Exhibition, Jingyuetang Medicinal Materials, Jingyuetang Biotechnology, Keqiao District Jingyuetang Traditional Chinese Medicine Outpatient Department, Keqiao Jingyuetang Medicine and Food Homology Experience Center, Jingyuetang Yue Medicine Culture Research Institute, and Yue Medicine Culture Research Association.

Among them, Jingyuetang Pharmaceutical inherits the traditional Chinese medicine (TCM) theories of Zhang Jingyue, a renowned physician of the Yue School of Medicine in the Ming Dynasty. The company actively develops the processing and production of traditional TCM decoction pieces, and innovatively conducts research and development on ancient classic prescriptions, modern TCM products, and health foods with dual purposes as both food and medicine. It is one of the first pilot enterprises in Zhejiang Province for the production of TCM formula granules.

Huatong Pharmaceutical’s rapid growth is also reflected in its financial data. In 2024, the company reported revenue of RMB 1.21 billion and net profit of RMB 23.48 million. As of the end of 2024, Huatong Pharmaceutical’s total assets amounted to RMB 673 million, with net assets of RMB 210 million. According to the appraisal conducted for this transaction, the book value of Huatong Pharmaceutical’s net assets was RMB 183 million, while the appraised value reached RMB 369 million, representing an increase of RMB 186 million and an appreciation rate of 102.03%.

Compared with most auction enterprises, Huatong Pharmaceutical has demonstrated strong financial performance and has not incurred any losses. Why did Zhejiang Agricultural Group choose to auction off such a profitable company?

Zhejiang Agricultural Group stated in its announcement that, to further optimize resource allocation, enhance operational efficiency, focus on its core business of comprehensive agricultural services, and respond to recent changes in the pharmaceutical distribution industry—including policy adjustments, increased market concentration, and accelerated industry consolidation—the Company has transferred 100% of the equity interest in Huatong Pharmaceutical through a public listing process. Following this equity transfer, the Company will retain its integrated traditional Chinese medicine (TCM) industry chain business, encompassing planting management, harvesting and processing, and product sales, thereby fully leveraging the advantages of its core comprehensive agricultural services business. This transaction is conducive to enhancing the Company’s profitability and core competitiveness, and serves the interests of the Company and all its shareholders.

In light of this, the pharmaceutical sector in which Huatong Pharmaceutical operates is not a core business segment of Zhejiang Agricultural Group. To optimize resource allocation, enhance operational efficiency, and focus on its primary agricultural comprehensive services, it was a natural step for Zhejiang Agricultural Group to auction off Huatong Pharmaceutical.

Int'l Group stated in its announcement that Huatong Pharmaceutical holds a distinct advantage in the wholesale business within the grassroots public healthcare market. Meanwhile, its retail subsidiary, Huatong Chain, is ranked among the top 100 pharmaceutical retailers in China, generating significant synergies with Int'l Group’s existing operations. This transaction aligns with Int'l Group’s strategic planning and business development needs, helping to increase its market share in pharmaceutical wholesale and retail in Zhejiang Province, strengthen its bargaining power with upstream suppliers and its influence over end consumers, and drive the company’s high-quality development.

Int'l Group is a listed company (stock code: SZ.000411) under Zhejiang Provincial International Trade Group, which is controlled by the State-owned Assets Supervision and Administration Commission of Zhejiang Province. Its predecessor was Zhejiang People's Pharmaceutical Company, established in 1950. The company achieved back-door listing in 2001. In 2008, Sinochem Group took controlling interest in Int'l Group. In 2017, the company returned to Zhejiang provincial ownership and is now held and managed by Zhejiang Provincial Medical and Health Industry Group.

As a key regional enterprise in pharmaceutical distribution, Int'l Group oversees five major business divisions—pharmaceuticals, medical devices, new retail, logistics, and traditional Chinese medicine—as well as Int'l Medical Trade Company. Its operations span multiple sectors, including pharmaceutical distribution, terminal retail, modern logistics, e-commerce, and brand promotion. With over fifty member companies under its umbrella, the group has established a sales network that covers Zhejiang Province, extends across East China, and reaches nationwide.Int'l Group is also listed among Fortune China 500, Zhejiang Top 100 Enterprises, Zhejiang Key Circulation Enterprises, and Zhejiang Provincial Key Pharmaceutical Reserve Units, accounting for 60% of the total provincial pharmaceutical circulation reserves in Zhejiang.

In 2024, Int'l Group achieved an operating revenue of RMB 33.35 billion, a year-on-year increase of 4.1%; net profit attributable to shareholders of the parent company amounted to RMB 526 million, representing a year-on-year growth of 7.5%. In the first quarter of this year, the company recorded an operating revenue of RMB 8.437 billion, a year-on-year decrease of 1.87%, while net profit attributable to shareholders of the parent company stood at RMB 101 million, down by 5.70% year on year.

As a pharmaceutical distribution giant in Zhejiang Province, Int'l Group generates tens of billions in revenue, yet its net profit amounts to only a few hundred million. This is because pharmaceutical logistics costs primarily encompass expenses incurred during domestic pharmaceutical commercial distribution, online medication delivery from retail pharmacies, and the domestic circulation of imported drugs. Consequently, this sector is characterized by high revenue but low profit margins.

This is also the primary reason why Int'l Group acquired Huatong Pharmaceutical. In the pharmaceutical distribution sector, characterized by high revenue but low profit margins, it is difficult for companies to achieve substantial net profits from revenues reaching tens or even hundreds of billions without reasonable transformation and innovation. By integrating the industrial chain layout, pharmaceutical distribution groups can minimize the “middleman markup,” thereby achieving cost control and improved efficiency.

In its annual report, Int'l Group also stated that it would accelerate M&A integration in its upcoming work plan to enhance investment returns.Focus on the Yangtze River Delta, economically developed coastal regions, and surrounding provinces, prioritizing the expansion among top-ranked pharmaceutical wholesalers with annual revenues exceeding billions. Centered on Int'l Baishan, integrate and acquire regional agents in Zhejiang for leading domestic and international IVD enterprises, while simultaneously pursuing M&A in other niche segments. Actively seek potential retail chain targets to strengthen the social retail network layout, achieving dual breakthroughs in scale effects and resource synergy.

In fact, in recent years, mergers and acquisitions and consolidation in the pharmaceutical distribution industry have become a trend.Pharmaceutical distribution giants such as the “China Resources Group” and “Sinopharm Group” have been actively pursuing mergers and acquisitions. In early 2024, China National Pharmaceutical Industry Corporation (CNPI) announced that the distribution businesses of Chongqing Pharmaceutical Holdings and CNPI might undergo asset integration. Following their merger, the combined entity, “Chongqing Pharmaceutical–China National Pharmaceutical Consortium,” would exceed RMB 100 billion in scale, reshaping the landscape of the pharmaceutical distribution industry. Meanwhile, in early 2025, China Resources Pharmaceutical announced the acquisition of Shaoxing Zhenyuan Pharmaceutical for RMB 120 million to expand its medical device and pharmaceutical distribution markets in Zhejiang Province and surrounding regions.