Executive leadership changes and cost optimization—can Kunming Pharmaceutical Group usher in a turning point in its performance?

Ask AI · How do executives from the China Resources (CR) group help Kunming Pharmaceutical Group transform?

From the capital market perspective and operating cash flow, Kunming Pharmaceutical Group still has a solid foundation in its operations.

Produced by | China Interview Network

Reviewed by | Li Xiaoyan

Recently, Kunming Pharmaceutical Group released its 2025 annual performance report. Although this scorecard shows a trend of operating pressure in the short term, with phased declines in core indicators such as revenue and net profit, as well as issues including personnel changes among key executives and setbacks in sales of individual products, it is not difficult to see through the data surface that the company is in a dual transition period—driven by both industry policy changes and internal strategic adjustments. Behind the short-term pains are long-term efforts across multiple fronts, including centralized procurement (collective purchasing) layout, brand upgrades, R&D innovation, and resource integration. As a leading traditional Chinese patent medicine company, Kunming Pharmaceutical Group’s transformation confidence and development potential are still worth the market’s expectations.

In 2025, Kunming Pharmaceutical Group achieved operating revenue of 6.58B yuan, down 21.74% year over year, and attributable net profit of 350 million yuan, down 46.00% year over year. Its core performance indicators experienced phased fluctuations. This is not an isolated case, but rather a typical reflection of the entire traditional Chinese patent medicine industry under tightened medical insurance cost controls and the normalization of centralized procurement. At the industry level, ongoing tightening of medical insurance policies, full implementation of centralized procurement for traditional Chinese patent medicines, and shrinking passenger flow at retail terminals have squeezed the survival space of traditional Chinese medicine enterprises. As an established pharmaceutical company deeply rooted in cardiovascular and cerebrovascular fields, Kunming Pharmaceutical Group saw its core products’ sales decline due to policy and market environment changes. The year-on-year sales of key products such as Xuesaitong soft capsules and Tiansa su injection decreased by 25.61% and 26.65%, respectively, which in turn pulled down the revenue of related business segments. This is the short-term adjustment the company must go through to respond to industry changes, not a fundamental deterioration of its own operating capabilities.

What is worth affirming is that, facing industry changes, Kunming Pharmaceutical Group has already seized the initiative in its centralized procurement layout, and its core products have demonstrated strong market resilience. During the nationwide centralized procurement process for traditional Chinese patent medicines, the company’s main product—Zhuoying Xuesaitong injection (freeze-dried)—successfully won the bid, achieving a modest increase in volume of 5.65%, becoming a bright spot on the performance chart. Although the Tiansasu injection did not meet expectations in terms of terminal volume expansion, it successfully entered the centralized procurement list, laying the foundation for subsequent market expansion and a rebound in sales. While centralized procurement policies lead to product price adjustments and short-term inventory pressure—relevant product inventories surged 119.20% year over year—looking ahead, winning centralized procurement bids means the company’s products have successfully entered the national medical insurance procurement catalog, enabling rapid coverage of a broader range of medical institutions and patient groups, thereby opening up wider market space. This “increase volume by adjusting price” strategy is a key measure for traditional Chinese medicine enterprises to adapt to new industry rules and stabilize market share, and it also lays the groundwork for the company’s subsequent performance recovery.

Meanwhile, the brand heritage and product portfolio advantages Kunming Pharmaceutical Group has accumulated over many years remain at the core of its competitive strength. As a traditional Chinese medicine enterprise with 640 years of non-heritage inheritance, Kunming Pharmaceutical Group’s Kunzhong Pharmaceutical brand has been deeply engaged in the field of traditional Chinese medicine for many years. It has formed a comprehensive product layout in areas such as cardiovascular and cerebrovascular health, the digestive system, and anti-malaria. Core products such as Xuesaitong and Tiansa su have been tested by the market over many years. Backed by reliable therapeutic efficacy, they have built a large user base and strong market reputation, making brand awareness and patient loyalty difficult to replace. Although in 2025 the revenue of all sub-segments declined to varying degrees, demand in the product market has not disappeared. It has only seen a slowing in short-term sell-through due to factors such as medical insurance reimbursement policies and channel inventory reduction. As the retail terminal market gradually recovers and channel inventory is cleared, the market potential of core products is expected to be gradually released.

More importantly, the key executive adjustments from 2025 through early 2026 are not merely personnel upheaval, but a positive signal that the company is optimizing its governance structure and strengthening resource coordination. This management reshuffle clearly shows the characteristics of a “China Resources group” takeover. The newly appointed chairman Yu Xiang and president Zhong Jiang both come from China Resources Sanjiu and have deep experience in pharmaceutical industry operations, financial management, and channel integration. As a leading enterprise in China’s pharmaceutical industry, China Resources Sanjiu has mature experience in OTC channel operations, the layout of the healthy industry sector, and standardized enterprise management. This adjustment to the core team will further promote deep strategic synergy between Kunming Pharmaceutical Group and China Resources Sanjiu, fully leveraging China Resources’ channel resources, management system, and brand advantages. It will accelerate inventory reduction, optimize the sales model, and improve operating efficiency—effectively addressing the management challenges the company faced earlier and injecting strong momentum into its transformation and development. Industry experts also point out that optimizing management is beneficial in the long run for establishing more standardized corporate governance and ensuring the execution of strategy, which can effectively shorten the cycle of performance bottoming out and help the company quickly get through the adjustment period.

In terms of the cost structure and R&D innovation that the market is widely concerned about, Kunming Pharmaceutical Group is also gradually moving in a positive direction to improve. In 2025, the company’s selling expenses were 1.71B yuan, down 23.25% year over year, and the selling expense ratio shows a downward trend. The company is gradually getting rid of a development model that is overly dependent on marketing and is shifting toward R&D innovation and product quality upgrades. Although current R&D investment is 103 million yuan, representing only 2.27% of operating revenue—at a relatively low level in the industry—the company has made its innovation development direction clear. It has laid out multiple R&D projects, such as KYAZ01, a Class 1 new drug, covering multiple advantage areas including cardiovascular and cerebrovascular diseases and oncology. Some projects have already entered early clinical stages. At the same time, the company continues to promote the re-production of classic famous prescriptions and product secondary development. Classic time-honored formulas such as Angong Niuhuang Pills and Zaizao Pills have been approved for market launch, continuously enriching the product pipeline and cultivating new growth drivers. As the company’s strategic focus shifts toward R&D, innovation outcomes will be implemented step by step, effectively addressing the weakness of a single product structure and enhancing the company’s core ability to withstand risks and its long-term profitability.

From the perspective of the capital market and operating cash flow, Kunming Pharmaceutical Group still has a solid operating foundation. In 2025, the net amount of cash flow from operating activities reached 289 million yuan. Although it declined year over year to some extent, it still maintained a positive net inflow, indicating that the company’s main business retains continuous cash generation capability. While there is pressure on capital turnover, overall it remains controllable. The company’s stock price weakening in the short term is more of an emotional reaction in the market to short-term performance fluctuations, and it has not reflected the company’s true underlying value and transformation potential. With the new management team implementing practical reform measures, sales channels gradually being put in order, and R&D achievements gradually being realized, the company’s performance is expected to stabilize and recover. Confidence in the capital market is also expected to gradually be restored.

Admittedly, Kunming Pharmaceutical Group still faces challenges such as optimizing its product structure, increasing R&D investment, and clearing inventory while waiting to resolve difficulties, and the old model of “prioritizing marketing over R&D” also needs time to be fundamentally reversed. However, as a leading enterprise in the traditional Chinese patent medicine industry, it has brand value, product barriers, channel foundations, and strong enabling support from the China Resources Group—all of which are its core advantages in breaking through and finding a new path for transformation. Short-term performance fluctuations are an inevitable pain during an industry transition period, and also a necessary stage for the company to undergo changes, break away from the old, and build strength for the long term.

In the future, as medical insurance policies gradually stabilize, centralized procurement dividends continue to be released, and the effects of management integration become apparent, Kunming Pharmaceutical Group is expected to quickly get rid of its short-term operating difficulties, break through the constraints of traditional development, and take the high-quality development path of “brand + innovation + synergy,” regain trust from the capital market, and once again show the development vitality of a leading traditional Chinese patent medicine company.

Personal view, for reference only