Net profit surged 39.53%, and after state-owned enterprises took over, Renfu Pharma’s performance turned around.

Ask AI · How does the entry of state-owned enterprises help Renfu Medicine achieve a turnaround in profitability?

Yan Shuo, a reporter from 21st Century Business Herald

2025 is a year of important change for Renfu Medicine. After this domestic leader in anesthetic and psychiatric drugs completed the shift in control from private capital to the century-old state-owned China Merchants Group, it has delivered an annual report showing revenue contraction but a significant rebound in profitability.

During the reporting period, the company’s revenue was 23.962 billion yuan, down 5.79% year-on-year, but net profit attributable to shareholders was 1.855 billion yuan, up 39.53% year-on-year. Non-recurring profit attributable to shareholders was even up 54.75% year-on-year, and the comprehensive gross margin rose to 48.21%. Operating cash flow reached 2.519 billion yuan.

On one side are the compliance pains stemming from historical disclosure violations that led to an ST warning, and the original actual controller being prohibited from the market. On the other side are positive changes after the entry of a state-owned enterprise, including governance restructuring and a “return to the core and focus” transformation. In 2025, historical burdens that have troubled the market for years—such as capital occupation, financial irregularities, and asset redundancy—were basically cleared out. Yichang Renfu’s anesthesia main business maintained steady growth, Gediancity Renfu’s API business is globally leading, and breakthroughs were achieved in the innovative drug pipeline. Domestic and overseas market expansion continues to be implemented, and operations of core businesses remain stable.

Industry views hold that the pharmaceutical sector’s diversification has continued to intensify, and innovation capability along with globalized layout have become core competitive factors in the industry. Renfu Medicine has pushed forward the improvement of internal governance and the rectification of its asset structure. With the high barriers of the anesthesia track and its global R&D-production-sales system, the company’s operating risks have been somewhat released, and its operating condition is gradually returning to stability. The effectiveness of its compliance rectification and changes in its valuation are worth continuous monitoring by the market.

Judging from the data, in 2025 Renfu Medicine shows the characteristics of “profit growth without revenue growth.” Revenue declined for the first time in nearly four years, but net profit attributable to shareholders reversed the trend of sharp declines in the previous two years. Behind the changes in key financial indicators are the combined effects of shifts in the industry environment, the company’s strategic adjustments, and the clearance of historical burdens.

The financial report shows that in 2025, the company’s operating revenue decreased 5.79% year-on-year, mainly due to structural reforms on the payment side of the pharmaceutical industry, as well as the company’s push to “return to the core and focus” and the continuous optimization of its business structure. Meanwhile, the strong rebound on the profitability side was achieved through refined management, optimization of its compensation system, controlling the scale of liabilities, and reducing financing costs. The comprehensive gross margin increased by 3.69 percentage points year-on-year to 48.21%. The main drivers include cost reduction and efficiency improvement from lean operations, upgrades to production intelligence, and the marked results of cost control for core products.

Analysts in the industry point out that a major groundwork for this performance turnaround lies in the company’s large-scale implementation of big impairment provisions in 2024. In the consolidated statements, the total of credit and asset impairment amounted to 677 million yuan. This one-off cleanup of “financial hidden risks” left by the former controlling shareholder—such as goodwill and asset irregularities—led to a significant drop in net profit for that year, but it also laid the foundation for Renfu Medicine to “start fresh” in 2025.

The core that supports the company’s profitability is the central nervous system track it has worked on for years. This area focuses on anesthesia, pain relief, and treatment of neurological diseases. It is a core sub-segment in global pharmaceuticals. According to the MorphoMed database, in 2024, the sales value of central nervous system drugs in domestic hospitals of secondary level and above reached 106.6 billion yuan, up 4.45% year-on-year. As global aging intensifies, the incidence of neurological and psychiatric diseases rises, and innovative therapies keep emerging, the central nervous system field has long-term development potential.

As a sub-sector leader, Renfu Medicine’s market share in domestic anesthesia drugs exceeds 60%. Several core products in anesthesia and psychiatric categories maintain leading positions. In 2025, the company’s anesthesia and psychiatric drugs achieved operating revenue of about 7.9 billion yuan, up about 6%, and the sales of products such as injection for remifentanil hydrochloride and injection for hydromorphone hydrochloride increased by more than 10% year-on-year.

Its featured business segments are also advancing in parallel. Gediancity Renfu focuses on steroid hormones and sexual health. Its progesterone raw material API holds the number-one global market share. The transfer of API production capacity and international certifications are progressing smoothly, and newly approved products continue to roll out in the formulation business, strengthening the advantage across the full industrial chain. Xinjiang Weiya, as the largest domestic Uyghur medicine R&D and manufacturing enterprise, leverages the scarcity barrier of ethnic medicine to become a business supplement for the company.

International expansion is an important support for the company’s long-term development. Currently, its business covers mature markets in Europe and the Americas and emerging markets such as Africa and Southeast Asia. In 2025, the U.S. generic drug business revenue was 1.940 billion yuan, and its operating scale remained stable. In Europe, multiple anesthesia products were approved for listing in Germany and France, and the commercialization of innovative drugs is accelerating. Its African subsidiaries cumulatively obtained nearly 190 drug registration numbers.

By the end of the reporting period, the company had accumulated more than 230 ANDA (Abbreviated New Drug Application) approval numbers granted by the U.S. Food and Drug Administration (FDA). Its overseas registration and sales network has continued to improve, and the competitiveness of its global business is steadily rising.

In 2025, the key change for Renfu Medicine is that China Merchants Group formally became the company’s actual controller. Last July, China Merchants, through its subsidiary China Merchants Shengke, obtained 23.70% of the voting rights of the former controlling shareholder, Contemporary Technology, with an investment total of 11.8 billion yuan. It also jointly controlled 26.62% of the voting rights together with Wuhan Gaoke, becoming the actual controller, and the management team was adjusted accordingly.

With the entry of the state-owned enterprise, most historical legacy burdens of the company were basically cleared, and compliance and financial risks were released. From the financial perspective, in 2025, the company’s ending goodwill balance decreased by 51.22% compared with the beginning of the period. After recording impairment of 373 million yuan, only 356 million yuan remained on the books. “The future impairment headroom is relatively limited. With subsidiaries turning profitable and impairment provisions made cautiously, the historical legacy issues on the financial front have been effectively addressed.” The above industry insider analysis noted.

On the compliance front, issues from 2021 to 2022—including non-operating capital occupation, disclosure violations, and flaws in financial records—were all historical matters from 2022 and earlier, and they have all been fully rectified. The administrative penalty by the Hubei Securities Regulatory Bureau and the disciplinary action by the Shanghai Stock Exchange have both been implemented. The former actual controller, Ai Luming, was given a 7-year prohibition from the market, and responsibility for the related violations has been fully pursued.

In December 2025, the company was issued an ST warning due to historical violations. This matter does not involve delisting risk. In the view of industry participants, with compliance rectification completed, the expectation of lifting the ST designation is becoming increasingly clear.

Innovation and R&D are the core driving forces for the company’s long-term growth. With empowerment from the central state-owned enterprise, the company’s R&D investment continues to increase, steadily shifting toward innovation. In 2025, the company’s R&D expenses were 1.501 billion yuan, up 2.05% year-on-year, and its R&D expense ratio reached 6.99%. The company also recently released an announcement stating that it plans to conduct a targeted share issuance to its controlling shareholder, China Merchants Shengke. The fund-raising size is set in the range of 3.0 billion yuan to 3.5 billion yuan. The proceeds will be used for key projects such as innovative drug R&D and digital intelligent construction.

At present, Renfu Medicine has established R&D centers in Wuhan and Yichang in Hubei Province, as well as in New York and Aachen, Germany. The company has more than 2,000 R&D personnel for pharmaceutical research, with deployments in small-molecule innovative drugs, large-molecule innovative drugs, traditional Chinese medicine (ethnic medicines), and innovative products in improved formulations.

The company currently has more than 60 Class 1 and Class 2 in-development innovative drugs. HW241045 tablets have become the first AT2R agonist in China to enter clinical trials. HW201877 capsules are the world’s first 15-PGDH inhibitor for inflammatory bowel disease treatment. Multiple Class 1 new drugs have entered the clinical phase, and the innovative pipeline is gradually entering the harvest period. Continued increases in R&D investment will provide important support for the company to break through the ceiling of its main business and open up room for long-term growth.

Renfu Medicine has proposed its 2026 targets: it plans to achieve operating revenue of at least 24.5 billion yuan and a comprehensive gross profit margin of at least 48%. The company will build a business layout with coordinated efforts and resource alignment across three major segments: “pillars,” “incremental growth,” and “special features.” It will consolidate its leading position in anesthesia-related pharmaceuticals, strengthen its global operating system, focus on R&D efficiency and innovation in cutting-edge technologies, and optimize its business structure to build a new growth engine.

With governance improvements implemented and its operating structure continuously optimized, the company is able to maintain stable operations amid industry segmentation by leveraging its main business moat and globalized layout, and its long-term growth value is expected to be promising.