Zhao Chao, President of Buchang Pharmaceuticals: Embracing DTP and Internet-Plus Healthcare with Confidence

Recently, the President of Buchang Pharmaceuticals participated in a group interview with multiple media outlets, including VCBeat (WeChat ID: vcbeat). He elaborated on the impact of Buchang Pharmaceuticals’ listing, as well as the company’s progress in new drug research and development and medicinal herb cultivation.

Zhao Chao believes that the modernization and internationalization of traditional Chinese medicine (TCM) is a systematic project. It should be led by benchmark enterprises to explore industry pathways, enabling TCM to adapt to modern medical evaluation systems and meet diverse health needs.

On November 18 last year, Buchang Pharmaceuticals listed on the Shanghai Stock Exchange, with an initial public offering of 69.8 million shares at an issue price of RMB 55.88 per share, making itThe Most Expensive New Stock in the A-Share Market in Four Years。

Following its initial public offering, Buchang Pharmaceuticals attracted significant investor attention due to its strong investment value, with its share price once reaching RMB 155.41 per share and its market capitalization exceeding RMB 100 billion.

How Buchang Pharmaceutical’s management views these achievements, and how their mindset has shifted since the company’s listing, have become the focal points of media attention at the event.

Zhao Chao, President of Buchang Pharmaceutical, stated in response to media inquiries that the company had undergone more than 20 years of development prior to its initial public offering (IPO), establishing a solid business foundation and attracting investor attention. For Buchang, the IPO was primarily a strategic move; the company will leverage this opportunity to continue its deep engagement in the traditional Chinese medicine industry, whileStrengthen the Primary Responsibility of Listed Companies to Safeguard Investors' Interests, and assume social public welfare responsibilities.

“After more than 20 years of accumulation and development, Buchang has effectively cultivated a ‘tiger’ within the industry. Its initial public offering (IPO) has given this tiger wings, truly embodying the idiom ‘like a tiger with added wings.’ As a publicly listed company, Buchang will assume greater social responsibilities and face heightened pressures, necessitating strategic considerations on how to become a benchmark enterprise in the industry,” summarized Zhao Chao. For Buchang, the IPO represents a “"Pain and Pleasure"” process will urge Buchang to continue growing.

Buchang’s business journey began with its founder, the late Mr. Zhao Buchang. Drawing on his early medical practice and through diligent research, Mr. Zhao pioneered the “Medicinal Qi Acupuncture” therapy. Building upon this foundation, he developed the theory of “concurrent treatment of brain and heart diseases” and created “Buchang Naoxintong,” a pure traditional Chinese medicine formulation.Buchang Naoxintong later became Buchang Pharmaceutical’s “golden single product”, Mr. Zhao Bulao himself became a medical expert entitled to special government allowances from the State Council in 1992.

In 1993, Buchang Pharmaceutical was established. In November, Buchang Naoxintong won the Eureka Gold Medal at the Brussels World Exhibition of Innovations, and King Albert II of Belgium personally awarded Zhao Buchang the Officer’s Cross of the Order of the Crown. Thereafter, Buchang Pharmaceutical began its rapid ascent, with sales revenue reaching RMB 53 million by 1995.

Today, Buchang Pharmaceuticals comprises25 Subsidiaries, with business operations spanning multiple sectors including medicinal herb cultivation, pharmaceutical R&D, manufacturing, sales, and pharmaceutical e-commerce, it is the undisputed "industry leader" in the field of traditional Chinese medicine (TCM) preparations.

The first annual report disclosed by Buchang Pharmaceuticals after its listing also showed that its revenue in 2016 reached RMB 12.32 billion, a year-on-year increase of 5.71%, with net profit amounting to RMB 1.769 billion. Three exclusive patented products—Naoxintong Capsules, Wenxin Granules, and Danhong Injection—held prominent market positions.The combined revenue of the three products reached RMB 9.006 billion in 2016.。

Meanwhile, as of the end of the reporting period, Buchang Pharmaceutical held more than 250 national patents and had nearly 180 products under development. Buchang Pharmaceutical stated that with further deepening of its R&D efforts, the company will acquire more patented and exclusive products.

The “most expensive” A-share listing on the capital market in four years has also delivered a satisfactory performance to the market.

Zhao Chao, President of Buchang Pharmaceutical, has repeatedly expressed to the media his strong confidence in the pharmaceutical and broader healthcare industry, as well as in the future of traditional Chinese medicine. Buchang Pharmaceutical will leverage its flagship products as a catalyst to gather greater momentum and drive the development of traditional Chinese medicine.

As a deputy to the National People's Congress, Zhao Chao also addressed issues related to ethnic medicine during this year's "Two Sessions." In a group interview with the media, he recounted his conversation with the Premier to the journalists present.

He said, “At this year’s Two Sessions, I had the honor of engaging in a dialogue with the Premier regarding our industry. It is fair to say that the state remains highly attentive to the development of traditional Chinese medicine.”"As soon as I mentioned that I was a representative of the traditional Chinese medicine industry, the Premier immediately took interest.""I also discussed that the prospects for (Traditional Chinese Medicine) are very bright, because from a national perspective, (the development of Traditional Chinese Medicine) has been elevated to the level of national strategy."

Zhao Chao stated to media outlets, including VCBeat, that traditional Chinese medicine (TCM) has a practical history spanning thousands of years and has accumulated a user base of billions. From the perspective of applied science, this demonstrates that TCM holds substantial practical value.

He also put forward a view that the vast number of practical cases in traditional Chinese medicine, along with the diagnostic and treatment systems formed by classic prescriptions, can be regarded as “Big Data”, and big data that has already been systematically applied should receive greater attention.

Zhao Chao noted that, from the perspective of national strategy, the development of Traditional Chinese Medicine (TCM) has indeed received significant attention in recent years. The introduction of policies such as “Healthy China 2030,” the “Plan for Prevention and Control of Chronic Diseases,” and the “13th Five-Year Plan for TCM Development” has provided clear and positive guidance for the advancement of TCM. However, it should not be overlooked that the development of TCM still faces numerous pressing issues that require urgent resolution.

For exampleThe Industry's Problems of Small Scale, Fragmentation, and Disorder, issues such as evidence-based modernization of traditional Chinese medicine (TCM), scientific evaluation, and quality controllability require support from top-level design and concerted industry efforts to resolve, thereby achieving sound and healthy development of the sector.

He stated that Buchang Pharma attaches great importance to the industrialization and standardization of traditional Chinese medicine (TCM). To ensure the quality of medicinal materials at the source, Buchang Pharma has begun implementing a strategy of establishing dedicated cultivation bases, and has newly built multiple planting bases for medicinal herbs such as Salvia miltiorrhiza (Danshen), safflower (Honghua), and Polygonatum sibiricum (Huangjing).

In addition, Zhao Chao stated that Buchang places great emphasis on scientific research. The post-marketing re-evaluation of pharmaceuticals involves interpreting traditional herbal formulas using modern mainstream scientific concepts and methodologies.Systematization of Traditional Chinese Medicine Theory, analyzing the active ingredients, targets, and mechanisms of action of drugs. He cited as examples that there are nearly 3,000 research papers on Buchang Wenxin Granules and over 2,700 papers on Danhong Injection, with nearly 100 papers on traditional Chinese medicine published in international journals.

“The goal is to engage more foreigners in and enhance their understanding of Traditional Chinese Medicine (TCM) culture. Many of our efforts are aimed at promoting industry development, as we recognize that without a thriving industry, enterprises cannot enjoy a favorable environment for growth.”

He also stated that Buchang’s research on the safety of traditional Chinese medicine (TCM) has preceded national standards. When national regulations required 10,000 clinical feedback cases for TCM injections, Buchang had already completed 30,000 cases.Product quality improvement and safety assurance have become voluntary initiatives for enterprises., (large enterprises) have the responsibility and obligation to conduct more advanced and in-depth research.

“Foreign countries also have herbal medicine treatments, but they have not formed a systematic framework. Traditional Chinese Medicine (TCM) is a valuable national asset and should be inherited in a modernized way to revitalize it,” said Zhao Chao. Buchang will continue to promote the modernization of TCM through clinical studies and medical research.

Buchang Pharmaceutical’s flagship products—Wenxin Granules, Danhong Injection, and Naoxintong Capsules—are all included in the National Essential Medicines List and the National Reimbursement Drug List; therefore, Buchang’s sales are primarily concentrated in the hospital-based channel.Under the influence of policies such as the “Two-Invoice System,” the separation of prescribing from dispensing, and controls on the proportion of drug costs, hospital-based channels have been impacted to a certain extent.

Retail channels are increasingly gaining prominence among pharmaceutical manufacturers, giving rise to the Direct-to-Patient (DTP) business model. Under this model, new specialty drugs and medications excluded from the National Reimbursement Drug List for various reasons reach consumers directly through retail pharmacies, accompanied by professional pharmaceutical services, patient adherence management, and membership management.

How does Buchang view this model? Zhao Chao also engaged in discussions with the media present. He stated that, in the past, retail may have simply involved the sale of pharmaceuticals, with product categories primarily consisting of over-the-counter (OTC) drugs and health supplements. However, with the advancement of a series of policies, retail will assume a more significant channel function by introducing pharmaceutical care services, membership management, chronic disease management, and preventive measures.Retail pharmacies will become a critical direct-to-consumer channel.。

He also stated that, with the application of technological means, pharmacies are now able to track purchasers’ behaviors, including medication consumption patterns and medical history, thereby generating systematic data. However, leveraging such data requires specific capabilities, and current efforts remain in their nascent stages.

“We attach great importance to this shift and have participated in several initiatives to transform retail channels, yielding highly positive results. For Buchang, which is industry-centric, its advantages are evident, and we will continue to collaborate with partners to create more possibilities,” Zhao Chao told media outlets, including VCBeat. He noted that changes in terminal channels present a positive opportunity for industrial enterprises with core competitive advantages.Buchang Expresses Positive Outlook on New Channels Such as DTP。

As a leading industrial enterprise in China, Buchang Pharmaceutical’s embrace of the internet has been evident to all. For instance, in October 2015, it injected RMB 186 million into Qilekang, a pharmaceutical e-commerce company, acquiring a 19.90% stake. When asked about this move, Zhao Chao stated that embracing the internet, “Internet Plus,” and internet thinking is a trend in the overall development of society.

“A new business model that every traditional enterprise should pay attention to and try out. Only by getting involved can you understand what kind of revolution new things can bring to you. Stay close to it, rather than keeping a distance.” Zhao Chao believes.In the short term, this investment behavior does not involve the Group’s optimization and transformation., but rather an active adaptation to, experimentation with, and engagement in emerging phenomena.

“Strengthen Professionalism, Enhance Services, Elevate Brand”, Zhao Chao concluded. “Strengthening professionalism” means that companies across the pharmaceutical industry chain should continuously enhance their professional capabilities, such as in drug R&D and advancements in medical technology. “Enhancing services” refers to strengthening service orientation, even transforming services into marketable offerings, to provide an increasingly comprehensive service system for pharmaceutical demand-side stakeholders. “Elevating brands” implies that enterprises should avoid overemphasizing commercial maneuvers and instead prioritize the interests of end-users, thereby fostering positive brand equity.