Glory No More: Kangyuan Pharmaceutical, from Chinese Medicine Star to a Crossroads

Question AI · What industry logic is revealed by the differing fates of local pharmaceutical companies?

Six years of R&D failures, a 35.63% plunge in net profit, and a market value of 8 billion yuan—Lianyungang’s three pharmaceutical companies have vastly different destinies.

Investor.com by Gu Yiming

On March 10, 2026, Kangyuan Pharmaceutical announced the latest drug approval update. The company’s six-year effort to develop Re Toxin Ning granules was not approved, and they immediately reapplied that same day. This news once again brought this former star in traditional Chinese medicine into the spotlight—this time, not for its glory, but for its struggles.

As of the close on March 13, Kangyuan’s market value was about 8 billion yuan, a significant drop from its historical peak. In the first three quarters of 2025, the company achieved revenue of 2.343 billion yuan, down 24.59% year-over-year; net profit attributable to shareholders was only 200 million yuan, a 35.63% decline year-over-year. With ongoing performance decline, core products facing obstacles, and transformation efforts stalled, Kangyuan stands at a critical crossroads.

Meanwhile, in Lianyungang, Jiangsu, a major hub for the pharmaceutical industry, Hengrui Medicine and Huasen Pharmaceutical have already become part of the top tier of innovative drugs nationwide, with market values in the hundreds of billions, global presence, and record-breaking performance. These three local pharmaceutical companies, once starting from similar points, now have very different fates.

1. Xiao Wei and Kangyuan: From Small Factory to Industry Leader, a Legend of Traditional Chinese Medicine Innovation

Kangyuan’s story began in 1975 at Lianyungang Traditional Chinese Medicine Factory. For a long time, this small factory could only produce simple Chinese patent medicines, with limited scale and weak competitiveness, remaining relatively unknown in the industry.

The turning point was Xiao Wei. In 1991, at age 28, Xiao Wei took over this nearly bankrupt enterprise, beginning Kangyuan’s rise. After taking charge, he decisively chose a R&D-driven strategy, investing all available funds into new drug development. He gained market recognition with a Gui Zhi Fu Ling capsules, establishing the company’s position in gynecological Chinese medicine.

In 1996, the company was restructured, and in 2002, Kangyuan Pharmaceutical successfully listed on the Shanghai Stock Exchange, officially entering the capital market. Under Xiao Wei’s leadership, Kangyuan focused on innovation in traditional Chinese medicine, securing hundreds of patents and dozens of proprietary products, becoming one of China’s strongest R&D Chinese medicine companies. In 2021, Xiao Wei was elected as an academician of the Chinese Academy of Engineering, reaching a peak in the company’s development.

During that period, Kangyuan was a darling of the capital market. Proprietary products, academic backing, stable growth—these made it a star stock favored by institutional investors and dubbed “the most innovative Chinese medicine enterprise.”

2. The Golden Decade and the Shift of the Era: Breakthroughs and Policy Changes

Kangyuan’s true highlight was during its golden decade in injectable Chinese medicine.

With core products like Re Toxin Ning injection and Ginkgo Terpene Lactone Glutamate injection, Kangyuan rapidly gained hospital market share. At its peak, Re Toxin Ning alone achieved annual sales exceeding 1.2 billion yuan, becoming a benchmark in flu treatment. These two injections contributed over half of the company’s revenue. Coupled with expanded medical insurance coverage and increased primary healthcare, Kangyuan’s performance soared year after year, with gross profit margins consistently above 65%.

At that time, Kangyuan was a proud representative of Chinese medicine and a darling of the capital market. But the tide was quietly turning.

As medical insurance cost control, centralized procurement, and regulatory tightening of Chinese medicine injections intensified, Kangyuan’s business model faced severe challenges. Hospital usage restrictions, sharp declines in sales, and channel inventory reductions turned its once “cash cow” products into performance draggers overnight.

In 2024, Kangyuan’s revenue and net profit both declined by double digits; in the first three quarters of 2025, the downward trend continued, with non-recurring net profit dropping over 40%. The company hurried to reform Re Toxin Ning into an oral granule to open up the off-hospital market and extend product life cycles, but approval delays added further uncertainty to its transformation.

3. The Two Different Fates of Local Companies: Why Are Kangyuan, Hengrui, and Huasen Diverging More and More?

All three companies originated in Lianyungang, Jiangsu—known as the “Three Brothers of Medicine”—but their current development patterns are worlds apart.

Hengrui Medicine in 2024 reported nearly 28 billion yuan in revenue, over 6.3 billion yuan in net profit, with dozens of innovative drugs, hundreds of millions of dollars in overseas licensing deals, and a market value consistently exceeding 100 billion yuan, making it a benchmark for China’s innovative drug industry. Huasen Pharmaceutical focuses on oncology and psychiatry, with a dense pipeline of innovative drugs and steady growth, firmly in the top tier.

In contrast, Kangyuan has long focused on Chinese medicine injections. Despite significant R&D investment, its market space, policy environment, and global competitiveness are not on the same level as Hengrui and Huasen. As the industry shifts from “insurance-driven” to “innovation-driven,” from “hospital volume” to “global competition,” Kangyuan’s strategic shortcomings have been fully exposed.

One city, three companies, three fates—reflecting the harsh reality of China’s pharmaceutical industry: choosing the right track often matters more than effort.

In 2025, Kangyuan underwent leadership changes, with Xiao Wei stepping back and a younger team taking over. The company began shifting toward a “Chinese medicine + chemical medicine + biopharmaceuticals” new strategy, promoting oral Chinese medicine and OTC channels while branching into hot targets like GLP-1, attempting to emulate the growth path of local giants.

But transformation is never instant. Old products decline rapidly, new products have yet to support growth, and R&D and channel investments continue to increase. Performance and valuation recovery remain distant. Capital markets are watching closely—funds are cautious, valuations remain low, and the once-star company is experiencing its most painful period.

From a small factory in Lianyungang to a listed leader, from a Chinese medicine innovation benchmark to a struggling enterprise, Kangyuan’s fifty years mirror the rise and fall of a generation of Chinese medicine companies. Its growth was driven by industry booms; its difficulties stem from changing times.

Whether Re Toxin Ning can be approved, whether new products can take over, and whether new strategies can be implemented will determine if Kangyuan can escape this crossroads and return to growth. This once-glorious company is also telling the market: there are no eternal dividends—only continuous innovation can navigate cycles and achieve steady, long-term success.