According to the announcement, China Resources Sanjiu achieved a total revenue of approximately 27.617 billion yuan in 2024, a year-on-year increase of 11.63%; The net profit attributable to shareholders of the listed company is approximately 3.368 billion yuan, a year-on-year increase of 18.05. Specifically, in terms of quarterly performance, from the first quarter to the fourth quarter of 2024, China Resources Sanjiu achieved operating revenues of 7.294 billion yuan, 6.812 billion yuan, 5.634 billion yuan, and 7.876 billion yuan, respectively, with net profits of 1.364 billion yuan, 1.034 billion yuan, 561 million yuan, and 408 million yuan. In the fourth quarter, China Resources Sanjiu's revenue increased by about 28.5% year-on-year, while its net profit decreased by 10.3% year-on-year. Behind the numbers lies not only the growth trajectory of a company, but also the wave of the times in China's pharmaceutical industry driven by policy guidance, market changes, and innovation.

01. Being both a "trapped person" and a "breaker"
In recent years, national policies have paved a "highway" for the pharmaceutical industry. The "Six Measures for Mergers and Acquisitions" issued by the China Securities Regulatory Commission in 2024 explicitly encourage industrial integration and improve transaction efficiency, while the State owned Assets Supervision and Administration Commission also emphasizes enhancing the core competitiveness of state-owned enterprises through specialized integration.

The rise of China Resources 39 is a vivid interpretation of this policy orientation. Since 2012, it has built an industrial map covering chronic disease management, cardiovascular and cerebrovascular diseases, and other fields through more than ten mergers and acquisitions, from Aunuo Pharmaceutical to Kunyao Group, and then to its controlling stake in Tianshili in 2024. Especially the combination of Tianshili's gross profit margin of 67.14% and China Resources' 39 channel advantages is regarded by the industry as a key variable for its future profit growth. This series of actions is not only a response to the goal of "striving to become a leading enterprise in the industry" in the 14th Five Year Plan, but also a practice of promoting the inheritance, innovation and development of traditional Chinese medicine by the country.

Under the blueprint of "Healthy China 2030", China Resources Sanjiu is reshaping the industry logic with "brand+innovation" as the dual engine. Its 999 brand matrix forms pricing power in segmented markets such as cold medicine and skin medicine, while its nationwide retail terminal network becomes a "low-cost channel" for new product promotion.

It is worth noting that although the R&D expense ratio has decreased in recent years, China Resources Sanjiu is trying to make up for the shortcomings of independent research and development by acquiring innovative traditional Chinese medicine benchmark enterprises such as Tianshi Li through "external blood transfusion". This innovative strategy of "endogenous+exogenous" not only avoids the pain points of long research and development cycles and high risks, but also quickly enters the high-value treatment field, echoing the country's call for new quality productivity.

Under the shiny data, there are hidden currents surging. In the fourth quarter of 2024, the net profit of China Resources Sanjiu decreased by 10.3% year-on-year, exposing seasonal fluctuations and consolidation pains; The decrease in gross profit margin from 53.24% to 51.86% reflects the dual pressure of rising costs and intensified market competition.

More profoundly, the traditional Chinese medicine industry as a whole is facing challenges such as stricter policy regulation and differentiated consumer demand. Although China Resources Sanjiu has built a moat through mergers and acquisitions, the carrying amount of 5.618 billion yuan of goodwill is still like a "sharp sword on the head". Once the synergy effect falls short of expectations, impairment risk may erode profits.

How to find a balance between scale expansion and refined management has become the key to testing its strategic determination. Amidst the national "dual carbon" goals and ESG investment wave, China Resources Sanjiu's sustainable development practices are quietly unfolding. More than 30 standardized traditional Chinese medicine planting bases, projects for the recycling of traditional Chinese medicine residues, and carbon reduction measures are not only responses to policies, but also in line with the global trend of green transformation in the pharmaceutical industry chain.

The dividend plan of distributing 3.2 yuan for every 10 shares and converting them into 3 additional shares conveys confidence in the capital market and provides space for long-term strategy. These measures are not so much a corporate social responsibility as an inevitable choice for survival and development in the new era - deeply integrating commercial value with social value in order to overcome cycles.

02. Overseas Steps of Traditional Chinese Medicine under the "China Resources System"
Against the backdrop of accelerated restructuring of the global pharmaceutical industry, the performance growth of China Resources Sanjiu in 2024 is not only a victory for the local market, but also reflects the unique positioning and challenges of Chinese pharmaceutical companies in the wave of internationalization. From the competitive logic of multinational pharmaceutical companies to the global dissemination of traditional Chinese medicine culture, the growth trajectory of this enterprise implies a deep proposition of the integration of Eastern and Western pharmaceutical civilizations.

Although China Resources Sanjiu clearly stated in its financial report that "the proportion of overseas business is still relatively small", its strategic layout has revealed its global ambitions.
In recent years, the global demand for natural medicines and alternative therapies has surged. According to data from the World Health Organization, the global market size of traditional Chinese medicine will exceed $500 billion by 2024, with a growth rate of over 15% in the European and American markets.

With 999 brand as the core, through the strategy of "culture first+product follow-up", China Resources Sanjiu has established traditional Chinese medicine culture experience centers in countries along the "the Belt and Road", and embedded competitive products such as Ganmaoling granules into the local public health system.

This "soft power output" echoes Yunnan Baiyao's toothpaste internationalization path, but unlike the latter which focuses on the consumer goods field, CR Sanjiu focuses more on building trust in serious medical scenarios. This is not only an innovative attempt to combat international pharmaceutical standard barriers, but also in line with China's strategic layout of the "Health Silk Road".

In addition, facing the trend of multinational pharmaceutical companies seizing the commanding heights of biopharmaceuticals through large-scale mergers and acquisitions (such as Pfizer's acquisition of Seagen), China Resources Sanjiu has chosen a differentiated path.

Its controlling stake in Tianshili in 2024 appears to be a perfect pipeline layout in the field of cardiovascular and cerebrovascular diseases, but in reality, it hides deep considerations for supply chain security - by controlling the raw material base of traditional Chinese medicine formula granules and building a fully controllable system from planting to formulation.

This is similar to Novartis' "vertical integration" strategy of establishing anti malaria drug raw material planting bases in Africa, but rooted in the characteristics of traditional Chinese medicine: the regional dependence of Chinese medicinal materials determines the "origin is the core competitiveness". This' Chinese style M&A 'not only avoids direct confrontation with multinational giants in the field of innovative drugs, but also forms a difficult to replicate moat by controlling upstream resources.

In addition, when multinational pharmaceutical enterprises such as MSD and Roche invested heavily in building AI drug discovery platforms, the digital transformation of CR Sanjiu presented another picture: by building the "smart pharmacy+Internet hospital" ecosystem, more than 6000 retail terminals were transformed into chronic disease management portals.

This strategic choice of "channel digitization" rather than "R&D digitization" is not only limited by the AI modeling challenges brought by the complex components of traditional Chinese medicine, but also highlights the practical considerations of developing country pharmaceutical companies - in the case of temporarily lagging behind in core technology innovation, capturing user data assets through scenario innovation first.

But this model faces a dual challenge: on the one hand, international e-commerce giants such as Amazon Pharmacy are eroding the market with lower cost digital services; On the other hand, the strict restrictions on the use of medical data in the EU's Artificial Intelligence Act may become a legal obstacle for its future overseas expansion.

Driven by both global competition and local policy dividends, the pattern of the traditional Chinese medicine industry is undergoing profound changes. As the flagship enterprise of the "China Resources Group" traditional Chinese medicine sector, CR Sanjiu's strategic layout not only reflects the transformation and upgrading path of Chinese pharmaceutical companies, but also reveals the international trend of the integration of traditional Chinese medicine and modern biomedicine.

03. The dual challenge of "technical standards" and "cultural output"
The global market size of traditional Chinese medicine will exceed 500 billion US dollars in 2024, with a growth rate of over 15% in the European and American markets, reflecting the increasing recognition of natural medicines and alternative therapies.

Taking Germany as an example, acupuncture and moxibustion and traditional Chinese medicine preparations have been included in part of the medical insurance system. In recent years, the US FDA has accelerated the approval of new traditional Chinese medicine compounds (such as the Phase III clinical trial of Tianshili's compound Danshen dropping pills), opening a breakthrough for the internationalization of traditional Chinese medicine.

However, international competition barriers remain significant: the EU's "Directive on the Registration Procedure for Traditional Medicinal Plants" requires traditional Chinese medicine to prove a history of use of more than 30 years, while Japanese Hanfang medicine occupies 90% of the global market share through standardized production, highlighting the dual challenges of "technical standards" and "cultural export".

At present, Western pharmaceutical companies are entering the field of traditional Chinese medicine in two ways: one is technological cooperation, such as Novartis and Kangyuan Pharmaceutical jointly developing anti-cancer drugs based on traditional Chinese medicine ingredients; The second is capital mergers and acquisitions, such as Sanofi's acquisition of equity in Chinese herbal medicine companies to obtain exclusive formula resources.

The industry expects that by 2025, the traditional Chinese medicine sector will be divided into three main lines - state-owned enterprise reform, mergers and acquisitions integration, and crisis reversal. Specifically, state-owned enterprises such as China Resources Sanjiu and Yunnan Baiyao have rapidly expanded through "mixed ownership reform+mergers and acquisitions". Since 2024, China Resources has invested over 13 billion yuan to acquire companies such as Tasly and Kunyao, building a full industry chain of "traditional Chinese medicine chemical medicine biological medicine"; Yunnan Baiyao focuses on nuclear medicine and monoclonal antibodies as breakthrough points, laying out the integration of tumor diagnosis and treatment.

On the other hand, private pharmaceutical companies such as Step Pharmaceuticals have suffered losses due to the withdrawal of their core products from medical insurance, forcing them to turn to biopharmaceutical research and development, reflecting the intensification of the industry's "Matthew effect". The merger and acquisition of China Resources Sanjiu is not simply pursuing scale, but is centered around "industrial chain security" and "technological integration". For example, controlling Tianshili not only obtained biological drug pipelines such as thrombolytic drug "Puyouke", but also shortened the research and development cycle of traditional Chinese medicine by 30% and reduced costs by 20% through its "Smart Herbal" AI platform. At the same time, integrating Kunyao Group's Xuesaitong soft capsules with its own product line to avoid industry competition and increase market share, forming a synergistic effect of "1+1>2".

Although the R&D expense ratio of China Resources Sanjiu has dropped to 4.2% in 2024, it has quickly acquired innovative resources through mergers and acquisitions, such as Tianshi Li's drip pill technology and Kangyuan Pharmaceutical's R&D of Re Du Ning injection, forming a closed loop of "drug nourishing medicine". In addition, among the 24 projects under development by China Resources Biology, 6 have entered the clinical stage, covering recombinant proteins and antibody drugs, attempting to find a balance between biosimilars and innovative drugs.

Summary
Standing at the crossroads of global industrial transformation, the practice of China Resources Sanjiu reveals the deep contradictions of Chinese pharmaceutical companies' internationalization: they need to not only leverage the cultural uniqueness of traditional Chinese medicine to open up blue oceans, but also catch up with international giants in general fields such as innovative drug research and development and digital governance. This "dual track parallel" exploration may be the necessary path for emerging market enterprises to go global - to find their own path of globalization in the tension between tradition and modernity.

Source: https://pharm.jgvogel.cn/c1495330.shtml