On the evening of April 27, 2026, Panlong Pharmaceutical (002864.SZ) released its performance report for the fiscal year 2025.

Against the backdrop of deep transformation in the pharmaceutical industry, the company achieved total operating revenue of 1.141 billion yuan, a year-on-year increase of 17.15%, setting a historical record for revenue scale and ranking 4th in revenue growth among listed companies in the traditional Chinese medicine industry that have disclosed annual reports.

In 2025, the company's R&D investment surged by 41.49%, and the traditional Chinese medicine decoction pieces business reshaped the revenue structure with a growth rate of 157.46%. In the first quarter of 2026, operating cash flow saw a significant year-on-year increase of 258.20%.

Despite short-term pressure on profits, the proposed dividend plan for 2025 is "10 shares converted to 3 shares and a cash dividend of 2.5 yuan." Previously, the company had implemented two dividends for the fiscal year 2024, distributing 2.5 yuan for every 10 shares and 0.5 yuan for every 10 shares in the first three quarters, with the total annual distribution amount accounting for 26.42% of the net profit attributable to the parent company for 2024. This marks a new high for annual dividends since the company went public.

This approach of still returning "real cash" to shareholders in a year when the company actively increases R&D investment fully reflects the management's confidence in future development.

Strategic Resilience Behind Profit "Pressure"

For Panlong Pharmaceutical, the "profit pain" in 2025 is more a result of proactive choice.

During the reporting period, the traditional Chinese medicine decoction pieces business achieved operating revenue of 235 million yuan, a year-on-year increase of 157.46%, contributing the largest structural increment to the company. However, the gross profit margin of the traditional Chinese medicine decoction pieces business is relatively low, at approximately 3.65%. Coupled with a year-on-year decline of 0.13% in revenue from self-produced proprietary Chinese medicines, the increase in the proportion of low-margin businesses led to an overall gross profit margin decline of 8.95 percentage points to 51.87%, with the net profit margin dropping to 8.42%.

On the other hand, amidst profit pressure, the company not only did not reduce investment but instead significantly increased it.

The total R&D investment for the year reached 54.911 million yuan, a year-on-year increase of 46.28%, with the total R&D investment accounting for 4.81% of operating revenue, setting a new high since the company went public. Notably, among the companies in the traditional Chinese medicine industry that have disclosed annual reports, this level of R&D intensity is relatively high. Excluding horizontal comparisons within the industry, looking vertically, the company's R&D expenses for 2022, 2023, and 2024 were 33.8966 million yuan, 35.3135 million yuan, and 37.5421 million yuan, respectively, with a significant leap to 53.111 million yuan in 2025.

While ensuring the market expansion and marketing of core products, the company simultaneously achieved a year-on-year decrease in sales expenses and management expenses of 4.84% and 3.60%, respectively, with the overall expense ratio declining by 6.23 percentage points. This indicates an improvement in the output efficiency of unit expenses, providing strong support for the continued increase in R&D investment It is worth noting that, according to the company's Q1 2026 report, the net cash flow generated from operating activities reached 93.058 million yuan, which is equivalent to 147.62% of the total operating cash flow for the entire year of 2025; however, the corresponding net profit attributable to the parent company for the first quarter is only 21.7609 million yuan. The "scissors gap" between net cash flow from operating activities and net profit fully demonstrates the solid self-sustaining ability of the main business.

The significant improvement in cash flow data for the first quarter points to two deeper positive signals. First, the cash flow pressure caused by increased inventory purchases throughout 2025 is not due to a deterioration in quality, but rather a temporary cross-period allocation of funds. Second, the significant improvement in collection efficiency indicates that the company's "product + academia + terminal" marketing system is entering a positive cycle of healthy channel inventory and smooth terminal sales.

Product Matrix Harvest Period

2025 is the "Year of Innovation Achievement Transformation" for Panlong Pharmaceutical. The company adheres to the strategic determination of "true innovation, daring to invest," focusing on areas that are highly synergistic with its core advantages, achieving comprehensive milestone breakthroughs in its innovation pipeline with both traditional Chinese medicine and chemical drugs advancing simultaneously.

In the field of traditional Chinese medicine, the modified new drug PL-XP004 has obtained clinical trial approval and entered the Phase II clinical trial stage, which will form a synergistic effect with core oral products in the future through "oral + external use"; the Phase II clinical trial of the Class 1 new drug PL-XP013 is steadily progressing; the traditional Chinese medicine formula granule business has completed research filing for 439 varieties and officially trial-produced on the production line, achieving price limit listing in 9 provinces, with a significantly accelerated pace of advancement.

In the field of chemical drugs, the chemical generic drug PL-XP001 has completed the listing application and is in the review stage by the National Medical Products Administration; glucosamine sulfate capsules have successfully been approved for listing, further enriching the company's OTC matrix for orthopedic chronic diseases; Class 3 chemical generic drugs PL-XP002 and PL-XP003 have both successfully obtained clinical approval, with several other varieties entering different research stages.

From a synergistic logic perspective, the company's current R&D pipeline is not a "multi-faceted bloom" with scattered attacks, but is highly focused on sub-sectors such as osteoarthritis and chronic pain, where the company already possesses deep academic accumulation and terminal coverage capabilities, ensuring a high degree of synergy between new products and the existing marketing system. The company is steadily advancing its strategic goal of "at least 1 new product launched each year," building an innovative cycle of "short-term growth, mid-term breakthroughs, and long-term reserves."

While breakthroughs in the innovation pipeline are intensifying, the company's "ballast stone" business remains solid. The core product, Panlong Seven Tablets, as a nationally exclusive patent, Class A medical insurance variety, and a "Qin medicine" advantageous traditional Chinese medicine, continues to consolidate its market leadership.

In 2025, Panlong Seven Tablets were newly included in 3 national clinical diagnosis and treatment guidelines and 1 expert consensus, accumulating a total of 11 national guidelines and expert consensus recommendations. Multi-center clinical data further solidifies its clinical value in the field of musculoskeletal system rheumatic diseases. According to data from the China Pharmaceutical Industry Information Center, in 2025, the sales of Panlong Seven Tablets in the market for traditional Chinese medicine for musculoskeletal system rheumatic diseases in public hospitals at the national and county levels reached 462 million yuan, a year-on-year increase of 7.62% The market share reached 7.61%, an increase of 0.25 percentage points from the previous year, firmly maintaining its position in the industry's first tier.

From a more macro perspective, Panlong Pharmaceutical has built a "1+N" product matrix for rheumatic bone pain, centered around Panlong Qipian, covering subfields such as osteoarthritis and osteoporosis. This is not only a natural extension relying on the resource endowment advantages of Qinling "Qin Medicine" under the company's full industry chain layout but also the most solid foundation in the company's transformation process from a single product provider to an "innovative chronic pain management expert" ecosystem builder