In 2025, net profit plummeted by 38%. How is the veteran pharmaceutical company Xinhua Pharmaceutical transforming itself?

How AI · Medical Procurement Policies Affect Xinhua Pharmaceutical’s Profit Decline?

In 2025, Xinhua Pharmaceutical’s revenue increased but profits did not, with operating income up 3.41% year-on-year to 8.76B yuan, and net profit attributable to shareholders down 38.32% from the previous year to 290 million yuan.

Investment Times Network, Punctuation Finance Researcher Lü Gong

The veteran pharmaceutical company Shandong Xinhua Pharmaceutical Co., Ltd. (hereinafter referred to as Xinhua Pharmaceutical, 000756.SZ, 0719.HK) continues to face profit pressure. In 2025, the company delivered a year of increased revenue with no profit growth.

Data shows that in 2025, Xinhua Pharmaceutical’s operating income grew 3.41% year-on-year to 8.76B yuan, while net profit attributable to shareholders fell 38.32% from the previous year to 290 million yuan; after deducting non-recurring gains and losses, net profit declined 40.10% year-on-year to 268 million yuan. This marks the second consecutive year of decline in both net profit attributable to shareholders and net profit after non-recurring items.

Reviewing the performance, it is evident that in recent years, Xinhua Pharmaceutical’s revenue has maintained steady growth, but the growth rate has gradually weakened. According to financial reports, in 2023 and 2024, the company’s year-on-year growth rates were 7.97% and 4.51%, respectively; by 2025, the growth further slowed to 3.41%, compared to 14.37% in 2022—a slowdown of 10.96 percentage points.

Regarding profit decline, Xinhua Pharmaceutical explained that it was mainly due to the company’s efforts to respond to fierce international and domestic market competition, consolidate and enhance product market share, expand operational scale, and the decrease in prices of some products.

Other analyses suggest that centralized procurement policies in the pharmaceutical industry may also have some impact on the company’s operations. As of the end of the first half of 2025, Xinhua Pharmaceutical had won bids for 19 products in national procurement, covering 25 specifications. Additionally, in the results of the centralized volume-based procurement alliance for drugs across 26 provinces announced in September 2025, Xinhua Pharmaceutical’s external use capsule Miconazole was among the selected products, with a winning price of 6.5 yuan.

From a specific business perspective, in 2025, revenue from Xinhua Pharmaceutical’s chemical raw materials (such as antipyretic and analgesic drugs) and formulations (tablets, injections, capsules, etc.) declined by 3.30% and 2.13%, respectively, compared to the previous year. These two segments together generated 6.63B yuan, accounting for 75.74% of total revenue, with the gross profit margin of the formulation segment decreasing by 10.22 percentage points from the previous year. In contrast, revenue from pharmaceutical intermediates and other sources increased by 28.07% year-on-year, but this segment only accounted for 24.26% of total revenue, exerting a limited impact on overall revenue growth.

While core product performance remains weak, overseas market pressures may also be emerging. In 2025, over 70% of Xinhua Pharmaceutical’s revenue still came from the domestic market, with a steady increase of 7.15% year-on-year; however, revenue from the Americas and Europe declined, with double-digit decreases year-on-year, and these two overseas markets together accounted for less than 20% of total revenue, only 16.66%.

In terms of costs, as national centralized procurement becomes routine, Xinhua Pharmaceutical’s share of revenue from procurement-listed products increased, while market development and terminal sales expenses decreased year-on-year. In 2025, the company’s sales expenses decreased by 41.67% to 341 million yuan, a significant reduction of over 5.59B yuan from the previous year, but operating costs still rose to 7.11 billion yuan, with raw materials accounting for 78.58%, up 18.23% to 5.587 billion yuan. Additionally, due to exchange rate fluctuations, foreign exchange gains decreased, and the company’s financial expenses increased by 184.77% to 34.5728 million yuan.

2025 Xinhua Pharmaceutical Main Business Revenue by Industry, Product, and Region (Unit: RMB)

Data source: Company financial reports

Facing profitability pressure in traditional business, Xinhua Pharmaceutical’s innovation and transformation progress is highly watched.

As a pharmaceutical company, Xinhua Pharmaceutical has always emphasized R&D. In 2025, five of its products passed quality and efficacy consistency evaluations, and in generic drug development, 42 drug approvals were obtained, including 37 formulation approvals and 5 raw material approvals. The company also made breakthroughs in innovative drugs, with the anti-AD major innovative drug OAB-14 entering Phase II clinical trials, and the innovative drug LXH-1211 receiving Phase I clinical approval.

However, in financial data, R&D investment in the past two years has slightly declined. In 2024 and 2025, the company’s R&D expenditure decreased by 2.23% and 4.31%, respectively, reaching only 380 million yuan in 2025, down more than 20 million yuan from 2023, with R&D spending accounting for 4.34% of revenue in 2025, down from 5.01% in 2023.

Currently, Xinhua Pharmaceutical is advancing its layout in the health industry. In a December 2024 announcement, the company stated that its fish oil segment has been developed for over ten years, with three high-purity fish oil health products launched, forming a full industry chain strategy from high-purity EPA, high-purity DHA, mixed fish oil raw materials to related health products and medicines.

To promote high-quality development of the health sector, Xinhua Pharmaceutical also signed an “Equity Acquisition Intent Agreement” with NovoSana (Europe) B.V. (hereinafter referred to as NovoSana Europe) in December 2024, proposing to acquire up to 75% of NovoSana’s shares. If completed, through subsequent resource integration and empowerment, this could enhance the company’s overall operational efficiency and market competitiveness in the fish oil industry.

However, as of early February 2026, due to the failure to reach an agreement, the above intent agreement was terminated, and all related terms ceased to be effective. Will Xinhua Pharmaceutical adopt other new measures to deepen its layout in the health industry and find new growth points?

Recent Net Profit Attributable to Shareholders and Year-on-Year Changes of Xinhua Pharmaceutical

Data source: Company financial reports