Performance halved, executive "reshuffle," heavy pressure from centralized procurement: Kunming Pharmaceutical Group is experiencing a "China Resources-style period of pain."

With top-tier products like Xue Tong (Xuetong) and artemisinin, Kunming Pharmaceutical Group used to be a shining star in the traditional Chinese medicine sector. However, two years after China Resources took control, this longtime pharmaceutical company is undergoing pains unprecedented in its history.

On March 21, 2026, Kunming Pharmaceutical Group turned in a performance report far from expectations: 2025 operating revenue was 6.575 billion yuan, down 21.74% year over year; attributable net profit was 350 million yuan, plunging 46.00% year over year. The company’s performance level has directly rolled back to seven years ago.

Even more concerning is that before the company’s performance “flipped,” management had already triggered an “earthquake.” In January this year, multiple core executives—including the chairman, vice chairman, and general manager—left their posts early; in March, another director stepped down. China Resources urgently redeployed personnel and took full control. Behind this “reshuffling of the deck” is China Resources’ implicit dissatisfaction with integration progress and operating results, and it also reveals the prelude to deeper risks and crises within Kunming Pharmaceutical Group.

1. The procurement program’s “two-edged sword”: winning bids but falling into a “produce more but not more profit” dilemma

Kunming Pharmaceutical Group attributes the main reasons for its revenue decline to traditional Chinese medicine centralized procurement and medical insurance cost controls. This is not an excuse—it hits the heart of the matter.

The third batch of traditional Chinese medicine centralized procurement carried out in 2025 was dubbed the “toughest ever”—the overall winning rate was only 54%, and the maximum price reduction reached 96%. Kunming Pharmaceutical Group’s core product, Tian Ma Su injection, did win the bid, but it ran into an awkward “quantity-price divergence”: sales volume fell 26.65% year over year, while production volume increased 24.03% against the trend, directly driving inventory to surge 119.20% year over year.

This dilemma—“the more you produce, the higher the inventory, and the slower the turnover”—exposes the company’s misjudgment of the pace at which the procurement program expands volume. Although another core product, Xue Tong injection for injection (freeze-dried), achieved inventory optimization, overall the centralized procurement did not deliver the expected “increase volume by trading price,” but instead worsened inventory accumulation and cash flow occupation.

2. “Island-like” product structure: overly dependent on Xue Tong, with weak momentum for new growth engines

Kunming Pharmaceutical Group’s business is highly dependent on the Xue Tong series. Data from Minet shows that in 2021, the sales scale of this series in China’s six major terminal markets had already exceeded 2 billion yuan. However, when the core product faced pressure from centralized procurement, the company’s overall performance quickly “collapsed.”

In 2025, revenue from cardiovascular and cerebrovascular treatment products decreased 21.15% year over year; digestion system products plunged 42.68%; and anti-malarial products fell 40%. With all three pillars simultaneously failing, it exposes the company’s shortcoming of a single product structure and weak resilience to risks.

Although the company has laid out a new business segment around “healthy aging,” that segment grew 11.95% in 2025. However, because it is mainly composed of nurturing products, the gross margin fell by a significant 28.67 percentage points, landing the company in the awkward situation of “increasing revenue but not increasing profit,” and it is unlikely to become near-term performance support.

3. Extending the “adjustment period” of integration: China Resources’ “four remakes” falls short of expectations

After China Resources Sanjiu took control of Kunming Pharmaceutical on the basis of China Resources Sanjiu’s acquisition in 2023, it designed the “four remakes” project tailored for Kunming Pharmaceutical. The plan proposed transforming from traditional sales-and-control methods to a more intensive and consolidated system under the “Kunming Pharmaceutical Way,” and clarified the strategic positioning of “high-quality national medicines” and the “silver hair industry.” However, based on financial data, the integration results were far below expectations.

Revenue kept declining consecutively, and the improvement in the sales expense ratio was limited. Channel reconstruction and brand building still remained in the investment stage. By the end of 2025, China Resources Sanjiu had even frankly said that for the “777” and “Kunzhong Medicine 1381” two major brands introduced by Kunming Pharmaceutical Group, as well as the construction of its three business divisions, “it still needs some time.”

This management reshuffle not only accelerates the change, but also suggests that the logic of integration may need adjustment. The complete handover by China Resources executives can strengthen execution, but it also indirectly confirms: the original management team failed to complete the transformation targets set by China Resources.

4. “Soft spots” in R&D: insufficient investment and weak transformation drive

Against the industry backdrop where centralized procurement forces innovation, Kunming Pharmaceutical Group’s R&D shortcomings are especially prominent.

In 2025, the company’s R&D expenses were only 103 million yuan, accounting for 1.57% of revenue, far below the average level in the pharmaceutical industry. Even more alarming is that before China Resources entered in 2021, the company had 220 R&D personnel, but by 2025 that number was only 236—nearly “zero growth” over three years.

Although the company’s R&D pipeline includes highlights such as new drugs in Traditional Chinese Medicine Category 1 and chemical drugs in Chemical Drug Category 1, whether measured by R&D investment intensity or the scale of talent reserves, it is still difficult to support the company’s rapid shift into an innovation-driven enterprise.

Conclusion: In 2026, is it still a “lifeline year”?

China Resources’ complete reshuffling of Kunming Pharmaceutical’s management at the beginning of 2026 sends a clear signal: the existing integration pace and results can no longer meet expectations, and it must “accelerate” and “correct course.”

2026 has been defined by Kunming Pharmaceutical Group itself as “the key year for strategic implementation.” However, facing the incoming successors is a series of urgent issues to be solved: balancing production and sales under centralized procurement, breaking through with a single-product structure, deep integration within the China Resources system, and a substantive improvement in R&D capabilities.

The halving of performance is only the surface. The deeper risks are that Kunming Pharmaceutical Group has not yet found a balance between “China-Resources-style” refined management and the inertia of its traditional business, nor has it truly established structural capabilities to withstand the dual pressures of policy and the market.

For China Resources, Kunming Pharmaceutical is not just an acquisition—it is also a major move in the traditional Chinese medicine and healthy aging economy track. Whether this longtime pharmaceutical company can achieve a “rebirth” in the traditional Chinese medicine market not only tests the execution strength of the new management team, but also tests China Resources’ patience and insight into the complexity of the pharmaceutical industry.

In 2026, whether Kunming Pharmaceutical Group will experience a turning point or continue to wander amid pain, the market will wait and see.

This article is generated with AI tools