China Resources Completes $170 Million Acquisition to Expand Healthcare Footprint with Zhenyuan Pharma

On March 10, 2025, it was announced that China Resources Pharmaceutical Commercial had initiated a partnership with Zhejiang Zhenyuan and the Shaoxing Industrial Project, and China Resources Zhenyuan Pharmaceutical (Zhejiang) Co., Ltd. was officially unveiled.

On January 26, 2025, Zhenyuan Pharmaceutical issued a corporate announcement stating that, in accordance with the “Proposal on Implementing Capital Increase and Share Expansion through Public Listing to Introduce Strategic Investors by Its Wholly-Owned Subsidiary Zhenyuan Pharmaceutical,” which was reviewed and approved at an interim meeting of the Board of Directors, the Company decided to carry out capital increase and share expansion for its wholly-owned subsidiary, Shaoxing Zhenyuan Pharmaceutical Operation Co., Ltd. (hereinafter referred to as “Zhenyuan Pharmaceutical”), through public listing at the Shaoxing Property Rights Exchange Co., Ltd. (Shaoxing Branch of Zhejiang Property Rights Exchange, hereinafter referred to as the “Property Rights Exchange”). The aim is to introduce a leading pharmaceutical commercial enterprise as a strategic investor, thereby enhancing the Company’s future profitability and accelerating the transformation of its business structure through strengthened business integration and cooperation with leading industry players.

It is reported that following the completion of the capital increase, the registered capital of Zhenyuan Pharmaceutical will be adjusted to RMB 163.265306 million (over RMB 160 million). Strategic investors will hold a 51% equity interest in Zhenyuan Pharmaceutical, while the Company will retain a 49% equity interest. Consequently, Zhenyuan Pharmaceutical will no longer be included in the scope of the Company’s consolidated financial statements.

On November 19, 2024, Zhenyuan Pharmaceutical submitted its listing application to the Property Rights Exchange, which was accepted. The listing period ran from November 20, 2024, to December 17, 2024. China Resources Pharmaceutical Commercial Group Co., Ltd. (hereinafter referred to as “CR Pharma Commercial”) successfully acquired the listing at a price of RMB 119,861,823.5 (approximately RMB 120 million). Following review by the Property Rights Exchange and confirmation by the company, it was determined that CR Pharma Commercial would inject capital into Zhenyuan Pharmaceutical.

With this, Zhenyuan Pharmaceutical has officially become a member of the China Resources (CR) Group and is now known as China Resources Zhenyuan Pharmaceutical (Zhejiang) Co., Ltd. The shareholder structure has changed from a single shareholder to two shareholders: China Resources Pharmaceutical Commercial holds 51%, while Zhejiang Zhenyuan holds 49%. Consequently, Zhejiang Zhenyuan’s role has shifted from being the controlling shareholder of Zhenyuan Pharmaceutical to a minority stakeholder.

To understand this business consolidation, it is necessary to first clarify the close relationship between Zhejiang Zhenyuan and Zhenyuan Pharmaceutical. The two entities have integrated and developed synergistically throughout their history, forming a complete pharmaceutical industry chain.

Zhenyuan Pharmaceutical (China Resources Zhenyuan Pharmaceutical), formerly known as Shaoxing Pharmaceutical Supply and Marketing Co., Ltd., was established in 1999 and is primarily engaged in pharmaceutical wholesale and retail businesses. The business development of Zhenyuan Pharmaceutical is closely linked to the pharmaceutical industrial segment of Zhejiang Zhenyuan Share Co., Ltd.

It is worth noting that Zhejiang Zhenyuan’s predecessor, Zhenyuan Tang, boasts a history of over 200 years. It is the first large-scale pharmaceutical conglomerate in China’s traditional Chinese medicine (TCM) industry to be recommended by the National Administration of Traditional Chinese Medicine and publicly listed, integrating scientific research, manufacturing, and trade. Today, Zhejiang Zhenyuan has grown into one of the Top 100 Pharmaceutical Commercial Enterprises in China and one of the Top 10 Pharmaceutical Commercial Enterprises in Zhejiang Province.

Zhenyuan Tang dates back to the Qianlong reign of the Qing Dynasty (1744). As a traditional Chinese medicine pharmacy with “Zhen” in its name, it draws on the meaning of “thunder shaking all things, giving rise to primordial Qi,” symbolizing prosperous business and remarkable therapeutic efficacy. Since its establishment, Zhenyuan Tang has been renowned for its meticulous processing techniques and authentic medicinal materials. It gradually gained prominence in the Shaoxing area, opened multiple branch stores within the city, and became a well-known local medical clinic and TCM pharmacy, thereby laying the foundation for its own brand.

In 1956, Zhenyuantang completed its public-private partnership and became a state-owned enterprise. In 1972, it was officially renamed Shaoxing Traditional Chinese Medicine Factory, commencing large-scale production of proprietary Chinese medicines. In 1993, Shaoxing Traditional Chinese Medicine Factory was restructured into Zhejiang Zhenyuan Share Co., Ltd., becoming the first listed company in Shaoxing City, primarily engaged in pharmaceutical wholesale and retail businesses.

Entering the 21st century, Zhejiang Zhenyuan has gradually developed into a comprehensive pharmaceutical enterprise integrating pharmaceutical manufacturing, pharmaceutical distribution, and pharmaceutical retail through technological transformation and product innovation.

In 2023, Zhejiang Zhenyuan Share Co., Ltd. integrated its pharmaceutical wholesale business into Shaoxing Zhenyuan Pharmaceutical Operation Co., Ltd., which was subsequently renamed China Resources Zhenyuan Pharmaceutical (Zhejiang) Co., Ltd. In 2025, China Resources Pharmaceutical Commercial Group completed the acquisition of Zhenyuan Pharmaceutical, further driving its business expansion and resource integration.

As the parent company of Zhenyuan Pharmaceutical, Zhejiang Zhenyuan’s business spans three major segments: pharmaceutical manufacturing, pharmaceutical distribution, and pharmaceutical retail. Its core operations include the production of traditional Chinese medicine (TCM) proprietary medicines and Western pharmaceuticals (pharmaceutical manufacturing), as well as the operation of the Zhenyuantang chain pharmacies (pharmaceutical retail). The pharmaceutical manufacturing segment involves the production and sales of active pharmaceutical ingredients (APIs) and finished dosage forms; the pharmaceutical distribution segment covers the wholesale and retail of pharmaceuticals, TCM proprietary medicines, TCM decoction pieces, and medical devices.

Zhejiang Zhenyuan’s pharmaceutical manufacturing operations are primarily conducted by Zhejiang Zhenyuan Pharmaceutical Co., Ltd. The company boasts a portfolio of active pharmaceutical ingredients (APIs) and formulated products that lead the domestic market, and it is the sole domestic manufacturer of nystatin and sisomicin. Meanwhile, Zhejiang Zhenyuan is the world’s largest producer of roxithromycin. Furthermore, three key terminal products manufactured by Zhenyuan Pharmaceutical—lornoxicam for injection, cefetamet pivoxilate hydrochloride for dry suspension, and its capsules—demonstrate strong competitiveness and hold the number one market share in China. In the field of chemical drugs, Zhejiang Zhenyuan has also established a presence, mainly producing antibiotics, cardiovascular medications, and gastrointestinal drugs.

Supporting this extensive product chain is Zhenyuan Pharmaceutical, the pharmaceutical commerce segment under Zhejiang Zhenyuan Share Co., Ltd., which is primarily responsible for pharmaceutical wholesale and medical device sales. It undertakes the market promotion and distribution of Zhejiang Zhenyuan’s pharmaceutical products, serving as a vital link between pharmaceutical manufacturing and pharmaceutical retail.

As early as 2012, Zhejiang Zhenyuan Share Co., Ltd. acquired 100% equity of Zhejiang Xinguang Pharmaceutical Co., Ltd., enabling its commercial sales network to gradually extend to lower-tier markets. It established long-term cooperative relationships with hospitals and community health service centers in Shaoxing and surrounding areas, undertaking pharmaceutical distribution tasks. Furthermore, chain pharmacies, independent pharmacies, township health centers, clinics, and other primary healthcare institutions have been incorporated into Zhenyuan Pharmaceutical’s distribution network.

Zhenyuan Pharmaceutical was once the main entity implementing the pharmaceutical wholesale business of Zhejiang Zhenyuan's commercial sector. Starting from January 2024, Zhejiang Zhenyuan transferred its existing commercial wholesale business to its subsidiary, Zhenyuan Pharmaceutical. In May of the same year, it merged two subsidiaries related to this business type and supporting logistics services into Zhenyuan Pharmaceutical.

Currently, Zhejiang Zhenyuan Share Co., Ltd. has secured the qualification for unified drug distribution to 12 medical institutions in Shaoxing city. In the bidding processes for 307 national essential medicines, 150 Zhejiang-province supplementary essential medicines, and other major tendered varieties, the company obtained distribution rights for over 60% of these items. Furthermore, Zhejiang Zhenyuan holds the exclusive provincial distributorship for three pharmaceutical products (proprietary Chinese medicines), including Shandong Donkey-Hide Gelatin.

China Resources Pharmaceutical Commercial Group’s acquisition of equity in Zhenyuan Pharmaceutical for approximately RMB 120 million is regarded as the first acquisition by the China Resources group in the pharmaceutical commercial sector in 2025.

For Zhenyuan Pharmaceutical, the equity investment by China Resources Pharmaceutical Commercial will bring strong capital support and market resources. This is particularly significant given that Zhejiang Zhenyuan has faced pressure from declining performance in recent years, primarily driven by factors such as centralized drug procurement, medical insurance cost containment, and intensified industry competition. The cooperation between the two parties will help optimize Zhenyuan Pharmaceutical’s business structure and enhance its market competitiveness in Zhejiang Province and surrounding regions. Meanwhile, leveraging the platform advantages of China Resources Pharmaceutical, Zhenyuan Pharmaceutical is expected to achieve greater breakthroughs in supply chain integration and market expansion.

For Zhejiang Zhenyuan Share Co., Ltd. as the parent company, this transaction will instead help it focus more on the pharmaceutical industrial sector, with an emphasis on implementing synthetic biology projects and initiatives to consolidate and upgrade active pharmaceutical ingredient (API) production. The significance of this strategic adjustment lies in Zhejiang Zhenyuan’s avoidance of industry consolidation risks associated with the pharmaceutical wholesale business.

In addition, Zhejiang Zhenyuan Share Co.,Ltd. is accelerating its development across the entire traditional Chinese medicine (TCM) industry chain. Leveraging the capital and market operational capabilities of China Resources Pharmaceutical Commercial, Zhejiang Zhenyuan is poised to undergo restructuring, optimize resource allocation, and enhance profitability, with Zhenyuan Pharmaceutical expected to emerge as a platform enterprise in Zhejiang Province’s out-of-hospital pharmaceutical market.

In short, Zhejiang Zhenyuan Share Co.,Ltd. boasts an extensive business network with deep penetration into the grassroots level, making the company a true “hexagon warrior.”

China Resources Pharmaceutical Commercial can directly acquire Zhenyuan Pharmaceuticals’ customer base and sales channels in the Shaoxing region, while optimizing its own supply chain through Zhenyuan Pharmaceuticals. This move can be regarded as a significant step for the China Resources group to expand its commercial footprint. By acquiring Zhenyuan Pharmaceuticals, it aims to broaden its commercial layout, gain access to comprehensive market resources, and rapidly penetrate the markets in Zhejiang and surrounding areas.

According to incomplete statistics, the China Resources system has invested over RMB 13 billion in mergers and acquisitions within the pharmaceutical sector in 2024, covering multiple sub-sectors including traditional Chinese medicine, chemical drugs, and medical devices. For instance, China Resources Double-Crane acquired a 100% equity stake in China Resources Zizhu for RMB 3.115 billion, further enriching its product pipeline in the field of women’s health medications.

Meanwhile, in the pharmaceutical distribution sector, China Resources Pharmaceutical Commercial has previously clarified its strategy to deepen its presence in key national strategic regions. By seizing investment opportunities arising from changes in the market and policy environment, the company will focus on capital operations in the Yangtze River Delta, the Greater Bay Area, and the Beijing-Tianjin-Hebei region to enhance its local footprint.

With the unveiling of the new company, the China Resources group has achieved a controlling stake in Zhenyuan Pharmaceutical, taking another step toward diversified business expansion.