Securing Tasly, China Resources Group's start is a tough battle.

（Source: Investor Network - Thinking Finance）

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“Hard fights aren’t easy.”

Recently, Tasly (600535.SH, hereinafter referred to as “the company”) released its 2025 annual report.

This is the company’s first earnings report under the leadership of the CRH group. During the reporting period, the company’s main business was still under pressure. Meanwhile, a major reorganization took place internally from top to bottom. In simple terms, after the CRH group moved the transformation experiments from Dong’e Ejiao and Kunming Pharmaceutical Group to the company.

The transformation is gradually moving deeper into the deep waters. The hard fights are only just starting.

01

A major transformation reshaping the fundamentals

In 2024, CR Pharmaceutical announced an acquisition plan, becoming the company’s controlling shareholder with over RMB 6 billion. The following year, the company completed the share transfer, and the CRH group replaced the Yan Xijun family, officially becoming the new helm holder.

From then on, the CRH group built a clear “five-tiger division-of-labor” strategy. Multiple listed companies under its umbrella each play their assigned roles. Among them, CR Pharmaceutical, as the integration flagship, undertakes core functions including unified control, channel sharing, and management output. Dong’e Ejiao anchors the high-end tonifying supplement track, gradually becoming a cash cow for the segment. Kunming Pharmaceutical Group focuses on plant-based medicines and healthy aging, fortifying its base in the southwestern region. Tasly supplements the CRH group’s weaknesses in prescription drugs and high-end R&D by leveraging cardiovascular and cerebrovascular prescription drugs and innovative traditional Chinese medicines.

In other words, the essence of clearly defined division of labor is that the CRH group is leading a big chessboard. Therefore, not long after taking over, the company saw major personnel reshuffling at the executive level. On the one hand, the original core executives represented by the Yan Xijun family collectively resigned, and CRH group personnel collectively stepped in to the board. On the other hand, the vice presidents responsible for business areas were gradually replaced by CRH group personnel.

Overall, the core logic behind changes at the company’s top management is “de-familying + marketing blood refresh.” At the same time, the pace of major restructuring is transmitted from top to bottom to each of the company’s “capillaries,” especially the company’s marketing system.

In 2025, the company used its left hand to “downsize” the headquarters and its right hand to split and reorganize the business divisions. At the headquarters level, multiple departments were merged and layers compressed. At the division level, segments were set up such as cardiovascular and cerebrovascular, digestive, biologics, and innovative drugs. In the marketing system, hospitals, OTC, and e-commerce/new retail were integrated uniformly.

Fundamentally, the CRH group’s restructuring is driven by seeing the company’s existing “troubles”: an overcomplicated structure caused by multi-layer distributors and “human-wave tactics” promotion. After a few combinations of moves, the CRH group intends to reshape the company’s underlying structure.

In fact, this top-down reform approach by the CRH group has been reused multiple times across other listed companies. Previously, after Kunming Pharmaceutical Group was acquired, it abolished the multi-layer regional distributor system, merged sales regions, and directly connected the enterprise to end terminals. It is clear that the company’s reform and Kunming Pharmaceutical Group’s transformation both comprehensively benchmark CR Pharmaceutical’s flat, high-efficiency approach, respectively weakening academic promotion and distributors.

But the question is: will this playbook work like magic every time?

02

Hard fights aren’t easy

In any case, the Tasly that the CRH group is facing has not only abundant assets, but also all kinds of historical “baggage.”

In February this year, the company announced the termination of its cooperation agreement with U.S. Arbor Pharmaceuticals and reclaimed rights such as the exclusive sales of its core product, Compound Danshen Dripping Pills, in the U.S. market. The reason for termination was that, after the U.S. side conducted an evaluation of the project’s capital return rate, it chose to exit.

In other words, the company’s long-promoted internationalization of traditional Chinese medicines has been set back. Under the previously signed agreement for this deal, the company was expected to receive up to USD 23 million in R&D payments and up to USD 50 million in sales milestone payments. In the end, the company only reclaimed USD 7.5 million.

Actually, during the Yan family era, the company always regarded exporting Compound Danshen Dripping Pills as a core strategy and continued to invest funds. Before the CRH group took over, the company carried out a round of asset cleanup internally, involving R&D pipelines, commercial logistics assets, and so on. It is like the two sides of a coin: one side is the company clearing its “baggage,” while the other side is that the “baggage” has not been fully cleared.

In 2024, the company had 31 innovative drugs in development, with selling expense ratios exceeding 35%. At that time, the traditional Chinese medicine industry was undergoing multiple types of pressure. Therefore, what is visible is that the company has a rich pipeline and a high selling expense ratio; what is not visible is that R&D-to-commercialization is slow and market sales momentum is not smooth.

From this perspective, the series of changes after the CRH group took over can be seen as “doing subtraction.” In 2025, this hard fight has only just gotten started.

During the reporting period, the company’s revenue and non-recurring profit after tax (excluding non-recurring items) were RMB 8.24 billion and RMB 790 million, respectively, down 3.08% and 23.59% year over year. Meanwhile, attributable net profit to shareholders was RMB 1.11B, up 15.63%, driven by a rebound in the value of financial assets. It is clear that the company’s main business is still under pressure.

Most critical: selling expenses reached RMB 2.97 billion in 2025, down 0.55% year over year; the selling expense ratio was 36%, slightly lower than the same period in 2024.

It seems that this hard fight for the CRH group is not easy to win.

03

A shifting battle

The CRH group’s approach to transforming medical and pharmaceutical assets encounters a complicated situation.

In 2025, Kunming Pharmaceutical Group’s revenue and attributable net profit were RMB 6.58B and RMB 350 million, respectively, down 21.7% and 46% year over year. At the same time, Dong’e Ejiao’s revenue and attributable net profit were RMB 6.7 billion and RMB 1.74B, respectively, up 13.17% and 11.67% year over year.

It can be seen that the CRH group used one set of playbooks to reshape three listed companies, but the outcomes are vastly different: Tasly’s hard fight has just begun, Kunming Pharmaceutical Group stumbled, and Dong’e Ejiao is the most successful.

In short, they all belong to the CRH group and all follow an integration path, but due to different underlying roots, the results will naturally be very different.

Looking in detail, the company’s prior core strengths were TCM big single products and pipelines for high-end products. Kunming Pharmaceutical Group has dealer partners tightly bound with high gross margins and high rebate rates, while Dong’e Ejiao is the long-established foundation of health- and supplement-based consumer products. Therefore, when the same playbook is implemented, the results differ.

For example, for successful Dong’e Ejiao, after the CRH group took the lead, it upgraded the brand and made the products younger, changing the previous strategy of simply raising prices, thereby aligning with consumers’ minds. In contrast, Kunming Pharmaceutical Group’s technical barriers are not high, and it is extremely dependent on off-hospital distributors. So the move to weaken channels is clearly too big a step.

From this perspective, the company’s situation is more complex and changeable; the CRH group’s transformation considerations are more numerous. On the R&D side, the company needs a high-end product that can be transformed into a marketed offering as the grab handle. On the marketing side, academic promotion should not be simply cut across the board. To focus on future new drugs, streamlining or retaining strength is the way to break the deadlock.

At bottom, the CRH group’s transformation of its medical and pharmaceutical assets has entered deep waters. On the one hand, the CRH group’s transformation path follows the same set of combination punches. On the other hand, because the acquired targets differ in themselves, the results of the transformation are not identical. For the company, the previous controlling party left both the potential for the future and also concealed historical “baggage.” The CRH group’s hard fight has only just started.

How do you think the transformation prospects of the CRH group will turn out? Feel free to leave comments and discuss in the comment section. (Produced by Thinking Finance) ■

Image source｜VCG Photo

(This article is for reference only and does not constitute investment advice. The market is risky; investment requires caution.)