ZBD's Resilient Growth in 2021: Strategic Innovation and Diversified Layout Drive Success Amid Industry Challenges

On the evening of April 30, 2022, ZBD Pharmaceutical (stock code: 603567), a listed traditional Chinese medicine enterprise, released its 2021 annual report and first-quarter report for 2022. The data showed that ZBD Pharmaceutical achieved an operating revenue of RMB 4.127 billion in 2021, representing a year-on-year increase of 21.24%. As of December 31, 2021, the company’s total assets reached RMB 11.506 billion, an increase of 12.43% compared to the beginning of the year.

In addition, we found that ZBD Pharmaceutical’s operating revenue maintained continuous growth throughout Q1–Q4 of 2021, reaching RMB 727 million, RMB 903 million, RMB 1.073 billion, and RMB 1.424 billion, respectively. In Q1 2022, ZBD Pharmaceutical achieved operating revenue of RMB 1.004 billion, a year-on-year increase of 38.07%; the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses amounted to RMB 132 million, representing a year-on-year increase of 14.79%.

Affected by the pandemic and relevant national policies, the operating revenues of many pharmaceutical companies have been less than optimistic, a trend reflected in their stock prices: the entire pharmaceutical sector in the secondary market experienced varying degrees of volatility in 2021, with the stock prices of some healthcare companies declining further in 2022.

Based on ZBD Pharmaceutical’s 2021 annual report and Q1 2022 quarterly report, the company has managed to maintain steady growth despite the prevailing downturn in the pharmaceutical sector—a rare achievement. What exactly has ZBD Pharmaceutical done right? What is the secret behind its counter-trend revenue growth?

By reviewing and analyzing ZBD Pharmaceutical’s 2021 annual report and Q1 2022 quarterly report, VCBeat believes that the company’s ability to achieve counter-trend revenue growth amid the broader economic environment is primarily attributable to the following three aspects:

As a pharmaceutical enterprise that originated from traditional Chinese medicine (TCM), ZBD Pharmaceutical has centered its operations on TCM in recent years while continuously expanding into the fields of chemical drugs and biologics. The company has established a comprehensive product portfolio covering active pharmaceutical ingredients (APIs), chemical formulations, TCM formulations, and biological preparations. It currently offers 45 medicinal products for conditions such as cardiovascular, cerebrovascular, respiratory, pediatric, and orthopedic diseases, among which 12 are listed as essential medicines and 25 are included in the national medical insurance catalog.

Against the backdrop of a growing total population and accelerating population aging,Cardiovascular and Cerebrovascular Medications and Respiratory Disease Medicationsprovides a substantial market base. As one of the common diseases among the elderly, the prevalence of cardiovascular and cerebrovascular diseases has been continuously increasing in recent years, driving sustained growth in demand for related medications; the prevalence, two-week consultation rate, and hospitalization rate for respiratory diseases are also on the rise.

Amidst continuously growing market demand, ZBD Pharmaceutical has established a product portfolio centered on Xuesaitong for Injection, Shuxuening Injection, Xueshuantong Capsules, Compound Qinlan Oral Liquid, and Xiao'er Resuqing Syrup, supplemented by other generic drug products.Covering the full product portfolio of traditional Chinese medicines, chemical drugs, biologics, generics, and innovative drugs. The 2021 annual report shows that ZBD Pharmaceutical's main products rank among the industry leaders in market share.

Among them,Xueshuantong Capsules for Oral UseAs ZBD PharmaceuticalExclusive Products, maintaining rapid growth in recent years.In 2021, Xueshuantong Capsules delivered impressive sales performance, with year-on-year revenue growth exceeding 36%.Become another potential product for the company in the cardiovascular disease medication market. The outstanding performance contributed by the exclusive product, Xueshuantong Capsules, directly drove the year-on-year revenue growth of ZBD Pharmaceutical’s nervous system drugs (cerebrovascular drugs) segment.101.24%。

As is well known, in the principles of medication administration, oral administration is often preferred over intramuscular injection, which in turn is preferred over intravenous infusion, and it also offers higher patient compliance. Against the backdrop of continuously growing market demand,Oral Xueshuantong capsules will undoubtedly continue to see sustained volume growth in the future.

VCBeat has learned that ZBD Pharmaceutical began planning to extend its layout into the upstream segment of the traditional Chinese medicine (TCM) supply chain in 2014. On August 15, 2017, ZBD Pharmaceutical issued an announcement stating its intention to investRMB 2.188 billionConstruction of the Bozhou Chinese Herbal Medicine Commodity Trading Center Project. In September 2019, ZBD Pharmaceutical officially launched the Bozhou Chinese Herbal Medicine Commodity Trading Center. “This is a crucial link in extending ZBD’s layout across the traditional Chinese medicine industry chain,” said Chen Hai, then Executive Vice President of ZBD Group (and current President of ZBD Pharmaceutical), in his address at the opening ceremony of the Bozhou Chinese Herbal Medicine Commodity Trading Center on September 8, 2019.

As the first spot trading platform for bulk traditional Chinese medicinal materials approved by the Anhui Provincial People's Government, Bozhou Traditional Chinese Medicinal Materials Commodity Trading Center utilizes“Chinese Herbal Medicines + Internet + Warehousing & Logistics + Quality Testing + Financial Services + Industrial Support”A novel business model has established a modern market circulation system for traditional Chinese medicinal materials in the internet era, driving the transformation and upgrading of the traditional Chinese medicine industry.

Today, the Bozhou Chinese Herbal Medicine Trading Center business segment, in which ZBD Pharmaceutical has invested significant effort and capital, has entered its harvest phase and is beginning to drive steady growth in the company’s traditional Chinese medicine (TCM) sector—In 2021, ZBD Pharmaceutical’s traditional Chinese medicine (TCM) trading business generated operating revenue of RMB 2.189 billion, accounting for 53.04% of the company’s total operating revenue.

Objectively speaking, ZBD Pharmaceutical’s ability to achieve steady growth and deliver impressive performance in its traditional Chinese medicine (TCM) materials trading business is primarily attributable to the policy dividends arising from the development of the TCM industry.

In recent years, national policies have continuously sent positive signals to the traditional Chinese medicine (TCM) industry: from the State Council’s issuance of the Outline of the Strategic Plan for the Development of Traditional Chinese Medicine (2016–2030) in 2016, to the Central Committee of the Communist Party of China and the State Council’s release of the Opinions on Promoting the Inheritance, Innovation, and Development of Traditional Chinese Medicine in 2019; followed by the National Healthcare Security Administration and the National Administration of Traditional Chinese Medicine jointly issuing the Guiding Opinions on Medical Insurance Support for the Inheritance, Innovation, and Development of Traditional Chinese Medicine at the end of 2021; and further to January 2022, when the National Administration of Traditional Chinese Medicine and the Office of the Leading Group for Promoting the Belt and Road Initiative jointly issued the Development Plan for Promoting the High-Quality Integration of Traditional Chinese Medicine into the Joint Construction of the Belt and Road Initiative (2021–2025). With successive policy reinforcements from various national ministries, the TCM industry is experiencing robust growth.

Amid significant industry development opportunities, those who can first address industry challenges and drive progress will be the ones to reap the policy benefits of the sector’s robust growth.ZBD Pharmaceutical has clearly seized the significant opportunities therein.

The booming traditional Chinese medicine (TCM) industry has led to a continuously growing market demand for TCM materials. According to data from the “iiMedia Report: Analysis of the Development Status and Industrial Chain of China’s TCM Materials Industry (2019–2021),”The market size of Chinese herbal medicines in China was RMB 101.8 billion in 2017, reached nearly RMB 124.6 billion in 2018, is projected to reach RMB 170.8 billion by 2022, and is expected to exceed RMB 200 billion by 2024, with a compound annual growth rate (CAGR) of nearly 10%.Driven by a series of national support policies, the strategic importance of traditional Chinese medicinal (TCM) materials has become increasingly prominent. The TCM materials industry continues to expand and strengthen, presenting significant prospects for market growth.

However, as the fragmented and disordered state of China’s traditional Chinese medicine (TCM) material industry persists, particularly with the further expansion of its scale, the traditional circulation methods have not undergone fundamental changes. The conventional trading models for TCM materials are no longer adequate to meet the demands of modern industrial production—ZBD Pharmaceutical’sBozhou Chinese Herbal Medicine Commodity Trading CenterSupported by offline exhibition markets and online trading platforms, it provides online bulk trading of traditional Chinese medicinal materials for herbal farmers, merchants, and pharmaceutical companies.It resolves information asymmetry between upstream and downstream industry clients, difficulties in trading, and lack of product quality assurance, aligning with industry development trends.

In the future, as this business segment continues to expand and the company establishes multiple Chinese herbal medicine bases, ZBD Pharmaceutical’s Chinese herbal medicine trading business will further grow, thereby becoming a new pillar of the company’s operations.

In February 2020, in accordance with its strategic development layout of “integrating industry and finance,” ZBD Pharmaceutical comprehensively strengthened its corporate brand building and launched a private placement of shares project. The project successfully passed the review at the end of January 2021 and officially obtained the issuance approval from the China Securities Regulatory Commission (CSRC) on February 5, 2021.

The company’s annual report shows that a total of 12 institutional investors (and individual investors) were ultimately allocated shares in this private placement project.ZBD Pharmaceutical successfully raised RMB 1.238 billion in funds.ZBD Pharmaceutical stated that the private share placement project provides strong financial support for the company to broaden its strategic business layout, expand production scale, and enrich its R&D product pipeline. The proceeds will be primarily used for the innovative and generic drug R&D platform project, the Phase III construction project of the Jixi Branch, the processing project for Chinese herbal medicines at their place of origin, and the informatization upgrade project.

ZBD Pharmaceutical’s 2021 revenue, which broke through the RMB 4 billion mark and achieved steady growth, does not yet fully reflect the company’s true “performance.” The fruitful results of several innovative initiatives implemented by the company in recent years will gradually enter a golden harvest period in the coming years.

Overall, in 2021, ZBD Pharmaceutical continued to deepen and advance its R&D philosophy centered on traditional Chinese medicine (TCM), with coordinated development and comprehensive innovation in chemical drugs and biologics, completing the establishment of its “One Core, Four Institutes” R&D system.

“One Center” refers to the Beijing R&D Management Center, while “Four Institutes” refer to the Beijing Institute of Pharmaceutical Research, Harbin Institute of Pharmaceutical Research, Bozhou Institute of Pharmaceutical Research, and Hangzhou Institute of Pharmaceutical Research. ZBD Pharmaceutical takes the “One Center” as its hub and link, and the “Four Institutes” as its bases. Through a rational layout of “developing one generation while planning for the next,” it engages in in-depth collaboration with renowned universities, research institutions, CRO companies, and others, focusing on innovative R&D across three major product systems: traditional Chinese medicine, chemical drugs, and biologics, fromThe R&D model is shifting from a focus on generic drug development to one centered on advanced formulations and innovative drug development.Continuously advancing toward the international stage.

ZBD Pharmaceutical is simultaneously pursuing multi-faceted layout innovations across its three major product portfolios: traditional Chinese medicine, chemical drugs, and biological drugs.

In the field of traditional Chinese medicine, ZBD Pharmaceutical continues to enrich its product pipeline, focusing onSecondary Development of Existing Major and Promising Traditional Chinese Medicine Products, while exerting force simultaneouslyFormula Granules, In-House Preparations...and other new traditional Chinese medicine (TCM) products, facilitate the filing and registration of in-house hospital preparations, and continuously advance the development of innovative TCM drug projects such as the Qingjiang Hewei Formula.

In terms of secondary development of existing products, ZBD Pharmaceutical collaborates with Tianjin University of Traditional Chinese Medicine to conduct research on classical formulas; it also partners with more than ten scientific research institutions, including Peking University, Zhejiang University, China Academy of Chinese Medical Sciences, Shanghai Institute of Pharmaceutical Industry, and Shanghai University of Traditional Chinese Medicine, to comprehensively and in-depth carry out research on the material basis of pharmacodynamic effects, quality control methods, evidence-based medicine, and the introduction of exclusive varieties.

In the research and development of formula granules, ZBD Pharmaceutical has actively participated in the formulation of national standards and established a platform for consistency evaluation between formula granules and decoctions. The company now possesses advanced capabilities in process optimization and quality standard research for traditional Chinese medicine (TCM) formula granule varieties.

In the area of in-house hospital preparations, ZBD Pharmaceutical has successfully developed 49 formulations based on the empirical prescriptions of National Medical Masters and renowned senior TCM practitioners. Among these, 39 varieties have been approved for inter-hospital dispensing use across all Grade II and above hospitals in Heilongjiang Province and have qualified for medical insurance reimbursement. Leveraging their advantages in efficacy, safety, and supportive policies, these in-house preparations are expected to progressively replace similar proprietary Chinese medicines currently available on the market.

In the field of chemical drugs, ZBD Pharmaceutical has established a specialized formulation R&D platform through technology introduction and technical cooperation, adhering toCombining imitation with innovation, collaborative introduction with independent R&D, and domestic registration with import/export registration, the focus is shifting from generic drug development to advanced formulation and innovative drug R&D.Its generic drugs cover 67 varieties across nine major therapeutic areas, while its innovative drugs focus on antiviral and antitumor fields.

Currently, ZBD Pharmaceutical’s new drug R&D efforts are progressing smoothly with significant achievements. A number of innovative Class 1 new drug projects have successively received regulatory approvals and secured patents in Europe and the United States, including the AKT kinase inhibitor HZB0071 for cancer treatment, the pan-FGFR inhibitor HZB1006 for liver cancer, the injectable HNC042 for influenza virus infection, and ZBD0276 tablets for idiopathic pulmonary fibrosis.

In the field of biologics, ZBD Pharmaceutical focuses on the global R&D frontiers in biologics,Guided by clinical needs, identify M&A opportunities aligned with the company’s development strategy, accelerate the introduction of overseas products and the acquisition of high-quality domestic targets,Accelerate the company's strategic transformation and alignment with international standards.

In June 2021, ZBD Pharmaceutical and Hulin Longpeng, a shareholder holding more than 5% of the shares, made joint investmentsTeres Pharmaceutical, to accelerate its layout in the biologics sector. Among them, ZBD PharmaceuticalInvestment of RMB 400 million, accounting for 16.67% of the total share capital of Teruisi after its capital increase and share expansion (later, due to the withdrawal of one shareholder, ZBD Pharmaceutical’s shareholding ratio, calculated based on the agreed investment amount of RMB 400 million under the Investment Agreement, was passively adjusted to 17.0211%). The investment funds were paid in two installments. As of December 31, 2021, ZBD Pharmaceutical had actually contributed RMB 200 million.

According to public information, Tris Biopharma was founded in 2011 by a team of overseas-returning elites led by Dr. Wu Youling, an expert who returned from abroad, in collaboration with private entrepreneurs from Zhejiang Province. As an innovative biopharmaceutical company integrating R&D, pilot-scale amplification, commercial manufacturing, and sales, Tris Biopharma is committed to developing and producing high-quality, affordable monoclonal antibody drugs for cancer treatment for the global market. The core team at Tris Biopharma boasts extensive experience spanning antibody R&D, process development, quality control, and large-scale commercial production, fully aligning with international standards. Notably, Tris Biopharma operates China’s first large-scale commercial biologics manufacturing facility compliant with international cGMP standards, with a commercial capacity of 20,000 liters (4 × 5,000 L). This significant cost advantage enables the company to provide CDMO services to partners both domestically and internationally.

Currently,Treis has nine innovative drugs and biosimilars under development, three of which have been approved for clinical trials. It is the first Chinese company to successfully file a biosimilar application in the United States.Its product portfolio spans the treatment of various malignant tumors (including lymphoma, lung cancer, colorectal cancer, renal cell carcinoma, pancreatic cancer, liver cancer, and breast cancer), while its technological expertise encompasses targeted therapy, antibody-drug conjugates (ADCs), cancer immunotherapy, bispecific antibodies, and nanobodies.

Investing in Trice signifies ZBD Pharmaceutical’s in-depth expansion into the biologics sector, accelerating its strategic transformation and alignment with international standards.In addition to Tais, ZBD Pharmaceutical has directly or indirectly invested in multiple ADC companies, including Duoxi Biotech and Aikeres, through its industrial funds. Tais’ established commercial-scale manufacturing capabilities can synergize with other biopharmaceutical companies invested by ZBD Pharmaceutical, thereby accelerating the efficiency of innovative products in industrial translation.

By investing in and taking equity stakes in biopharmaceutical innovators such as Teruisi, Duoxi Biologics, and Aikeruisi, ZBD Pharmaceutical has focused on multiple major oncology indications, with antibody-drug conjugates (ADCs) as its core products, while simultaneously developing monoclonal antibody and bispecific antibody portfolios.ZBD Pharmaceutical stated that the company will establish a pipeline of 15–20 biologic drug products with a tiered structure within three years, and strives to obtain marketing approval for 3–5 products within five years.

During the reporting period, ZBD Pharmaceutical had under research and developmentFour innovative chemical drug projects, 41 generic chemical drug projects, three innovative traditional Chinese medicine (TCM) drug projects, and 49 in-house hospital preparation projects.In 2021, ZBD Pharmaceutical submitted a total of10+ itemsPharmaceuticals (under review), with an expected annual submission rate of five new drug applications.

As time progresses, bolstered by national policies encouraging the traditional Chinese medicine industry, ZBD Pharmaceutical, with its commitment to innovation, will leverage a series of innovative achievements to further expand its profit margins and stride confidently forward amidst the wave of pharmaceutical transformation.