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Insufficient research and innovation render it challenging for large enterprises to mask their profit difficulties. When faced with the overseas trademark dispute involving JDB, Wanglaoji's response was simply “Go to the hospital for sickness, go to court for matters, thank you!” This succinct statement generated significant attention online.
Like many interested observers, I initially thought this headline was a joke. However, this unconventional approach turned out to be an official response, emphasizing a ‘tough but succinct’ attitude.
This response seems to encapsulate the current plight of Guangzhou Baiyunshan Pharmaceutical Holdings Company Limited (600332.SH), the parent company of Wanglaoji, as it grapples with performance pressures akin to ‘needing medical care.’
Facing Declining Profits In 2024, Baiyunshan faced a sharp decline in its primary business segments due to insufficient demand, policy adjustments, and intensified competition. Additionally, the company made a near 390 million yuan impairment provision against its subsidiary Yixin Tang (002727.SZ), resulting in a 35.2% year-on-year decline in net profit after deductions. In the first half of this year, the net profit after deductions stood at 2.21 billion yuan, a 5.8% decrease compared to last year.
Since 2024, both the traditional Chinese medicine (TCM) and healthcare segments of Baiyunshan's three main business drivers have shown weak performance. Only the low-margin commercial segment has seen revenue growth. However, this segment's modest growth and low profit margins are inadequate to resolve the company’s broader profitability issues. Within the TCM and healthcare sectors, the performance of the TCM segment has been particularly poor. In 2024, revenue from TCM fell by 10.4%, with a 1.9 percentage point decrease in gross margin; in the first half of 2025, revenues dropped by 15.2%, and gross margins remained largely unchanged.
So, what is the root cause of Baiyunshan's poor performance—its own shortcomings or a broader industry downturn? Currently, the pharmaceutical industry is in a period of accelerated transformation. National and local bulk purchasing policies continue to expand, compliance regulations for medical insurance are intensifying, and pricing control measures are more rigorously enforced, all of which add pressure to the industry's development. Data indicates that in 2024, the total profit of China's large-scale pharmaceutical manufacturing industry fell by 1.1% year-over-year, with a 2.8% decrease in the first half of this year. However, despite the tightening industry environment, Baiyunshan's decline in performance is notably steeper than the average for the industry. It seems the “cold wave” in the industry is real, but the company's persistent structural issues are the primary problem.
"Domestic Viagra" Trapped in a Sea of Generics Since 2024, traditional key business lines within the TCM segment, including patent medicines and chemical drugs, have seen significant revenue declines.
Among the chemical drugs, “Jinge” is Baiyunshan’s flagship product, now surrounded by an increasing number of generics competing rapidly. As of July 2025, more than 50 domestic companies have obtained approval for sildenafil, while nearly 80 firms have received approval for tadalafil, which has continued to expand in recent years. In 2024, revenues from "Jinge" exceeded 1 billion but fell by 19.8% year-on-year, with year-end inventories increasing by almost 50%. The company attributed this decline to heightened competition and an influx of rival products in the market.
In the first half of this year, revenues from “Jinge” have also declined due to intensified market competition, reduced customer visitation, and a decrease in retail pharmacy numbers.
One might wonder: has the essential need for these products diminished among consumers, or have competitors revitalized their statuses? The answer remains ambiguous. According to the “2024 White Paper on China's ED Drug Industry,” the compound annual growth rate (CAGR) for China's ED drug industry from 2019 to 2023 is approximately 16.5%, expected to grow from 9.31 billion yuan in 2024 to 15.7 billion yuan by 2028, heralding a new hundred-billion-yuan industry trajectory.
In recent years, policies promoting the consistent evaluation of generics, adjustments to the National Medical Insurance Catalog, and accelerated review processes for innovative drugs have propelled the transformation of the chemical drug sector towards innovation-driven growth. However, contrary to this industry trend, Baiyunshan has failed to amplify its research and development efforts; in the first half of this year, R&D expenditures amounted to 290 million yuan, accounting for only 0.7% of revenue. Consequently, more new entrants are encroaching upon the market share “Jinge” held through first-mover advantage, while there appears to be no emerging business to take its place and drive the segment into the next growth cycle.
Wanglaoji: A Brand Losing Relevance While Facing New Challenges Another key product of Baiyunshan, Wanglaoji, faces similarly bleak circumstances. Wanglaoji herbal tea serves as the main source of revenue and profit for the company’s healthcare segment. In 2024, the healthcare segment saw revenue decline by 12.7%, with a 1.3 percentage point decrease in gross margin; in the first half of 2025, there was a rebound with a revenue increase of 7.4% and a 1.7 percentage point jump in gross margin. On one hand, the herbal tea market is being disrupted by the diversification of the beverage market; on the other, Wanglaoji must contend with the persistent challenge posed by its rival, JDB. As the domestic herbal tea market growth slows, international markets have become a battleground for both companies.
The ongoing legal dispute over trademark rights in more than 60 countries and regions illustrates the rivalry between the two brands as they expand globally.
The primary challenge in developing international markets is securing the rights to international trademarks. The presence of ambiguities has sown the seeds for future disputes between the two brands. Throughout these years of competition, neither side has clearly dominated in public perception. To attribute the challenges facing the herbal tea industry solely to shifts in consumer preferences towards lower-sugar and healthier options would be an oversimplification. Wanglaoji has launched several new products like the original flavor herbal tea and the series of "Cinnanji," yet these efforts have not produced significant market impact. This suggests that the innovations Wanglaoji has introduced have yet to resonate with consumers or effectively meet their unmet core needs.
Beyond superficial performance declines, there are also deep-seated risks within Baiyunshan’s operations worth noting. In 2024, Li Chuyuan, the former chairman who led Baiyunshan for nearly 11 years, faced investigation, creating uncertainty around the company’s management and prospects for development. From the onslaught of generic drugs targeting “Jinge,” the contractions in the Wanglaoji herbal tea market, to the fierce competition in the international arena, Baiyunshan's path to overcoming its challenges is fraught with obstacles.
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