---
title: "99% of revenue relies on a single medicine! Used by everyone from infants to the elderly, but the exclusive protection period is less than five years remaining, Hanfang Pharmaceutical urgently seeks a \"second leg\""
type: "News"
locale: "zh-CN"
url: "https://longbridge.com/zh-CN/news/278098733.md"
description: "Shandong Hanfang Pharmaceutical's \"Compound Huangbai Liquid Ointment\" is its core product, with annual sales nearing 1 billion yuan, accounting for 99% of the company's revenue. The drug is used for various skin issues, with a protection period until 2030. The company has submitted a listing application to the Hong Kong Stock Exchange but faces challenges of declining sales and weak diversification attempts. The nearly 500 million yuan annual sales investment contrasts with less than one-tenth of that in research and development, raising doubts about future development"
datetime: "2026-03-06T09:58:12.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/278098733.md)
  - [en](https://longbridge.com/en/news/278098733.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/278098733.md)
---

> 支持的语言: [English](https://longbridge.com/en/news/278098733.md) | [繁體中文](https://longbridge.com/zh-HK/news/278098733.md)


# 99% of revenue relies on a single medicine! Used by everyone from infants to the elderly, but the exclusive protection period is less than five years remaining, Hanfang Pharmaceutical urgently seeks a "second leg"

Every reporter: Yan Yinchang Every editor: Zhang Yiming

A bottle of medicine, one person, a lifetime.

From infant eczema to acne during adolescence; from the ulcerative colitis that troubles middle-aged people to the diabetic foot that elderly people struggle to heal. Shandong Hanfang Pharmaceutical's "Compound Huangbai Liquid Ointment" attempts to cover all skin problems throughout a Chinese person's physiological cycle. This external medicine, derived from an ancient formula of the Qing Dynasty, sells nearly 1 billion yuan a year, supporting the entire profit statement of a company planning to go public.

Recently, Shandong Hanfang Pharmaceutical Co., Ltd. submitted a listing application to the Hong Kong Stock Exchange. The prospectus shows that Hanfang Pharmaceutical's core product is overwhelmingly dominant, but its growth is showing signs of fatigue; the company has made diversified attempts, but the results have been minimal, with monthly sales of cosmetics still hovering around 100,000 yuan; in addition, the company spends nearly 500 million yuan on sales each year, while its R&D investment is less than one-tenth of that.

How much longer can this bottle of medicine dance alone? Currently, its national traditional Chinese medicine protection period has less than 5 years left, and the traditional Chinese medicine industry is also facing downward pressure. Can this Shandong pharmaceutical company, which started by "picking up leaks," pass the Hong Kong Stock Exchange's review?

## A bottle of medicine supports 99% of revenue, sales are declining

Hanfang Pharmaceutical's core asset is the "Compound Huangbai Liquid Ointment," a prescription external traditional Chinese medicine used for treating skin and mucosal diseases. This product is currently the only approved prescription ointment in the field of traditional Chinese medicine in China, recognized as a "national secondary traditional Chinese medicine protected variety" in 2016, with a protection period until July 2030. This means that for a long period of 14 years, other companies are legally prohibited from producing the same medicine, creating a barrier.

The success of the Compound Huangbai Liquid Ointment is largely due to its "ancient formula." According to data, the Compound Huangbai Liquid Ointment originates from the Qing Dynasty's "Yizong Jinjian," and the medicine is composed of natural Chinese medicinal materials such as forsythia, phellodendron, honeysuckle, dandelion, and centipede. After 20 years of technological improvement, it has achieved modern industrialization, and can be used for heat-clearing, detoxifying, swelling reduction, and necrosis removal through wet compress or washing.

The prospectus shows that this medicine can almost cover the entire life cycle of patients, such as infant atopic dermatitis, adolescent acne, middle-aged ulcerative colitis, and elderly diabetic foot.

However, the process by which Hanfang Pharmaceutical obtained this "golden product" can be considered a kind of "picking up leaks."

The prospectus reveals that the original formula of Compound Huangbai Liquid was not initially owned by Hanfang Pharmaceutical. The original version of this prescription was developed by an independent medical institution and was later transferred multiple times, eventually being held by Hebei Bencao Pharmaceutical Co., Ltd.

The turning point occurred in June 2004. At that time, Bencao Pharmaceutical ceased operations due to its failure to complete GMP (Good Manufacturing Practice) compliance upgrades. After approval from relevant departments, the production site and original formula of Compound Huangbai Liquid were transferred to the newly established Hanfang Pharmaceutical.

After taking over, Hanfang Pharmaceutical continuously developed and improved the formula. The Compound Huangbai Liquid product was officially launched in 2005, and an upgraded version of the Compound Huangbai Liquid Ointment was further introduced in 2015. It is this bottle of medicine that supports Hanfang Pharmaceutical's entire profit statement.

The prospectus shows that in the first three quarters of 2023, 2024, and 2025, the product achieved revenues of 1.05 billion yuan, 990 million yuan, and 800 million yuan respectively, accounting for as much as 99.8%, 99.8%, and 99.7% of the company's total revenue The company's overall gross profit margin has thus remained high at 82% to 84%.

However, for Hanfang Pharmaceutical, it remains uncertain how long this "golden potion" will bring good days.

Risks have already begun to surface.

In 2024, Hanfang Pharmaceutical's total revenue is expected to decline by 5.8% from 1.053 billion yuan in 2023 to 992 million yuan, with net profit dropping from 237 million yuan to 199 million yuan, a decrease of 16.1%; in the first nine months of 2025, total revenue and net profit were 802 million yuan and 145 million yuan, respectively. According to the prospectus, the company attributes the revenue decline to the "decrease in the highest selling price of Compound Huangbai Liquid for hospitals."

In addition, there is a reduction in production. In 2023, the output of this product was 38.9 million bottles, which decreased to 35.9 million bottles in 2024, with the capacity utilization rate falling from 84.7% to 78.2%. In the first three quarters of 2025, with the commissioning of the newly built Hanfang Pharmaceutical Traditional Chinese Medicine Industrial Park, production capacity further increased to 70.2 million bottles, but the capacity utilization rate further dropped to 57%.

## Seeking a "Second Leg": Cosmetics Cooling, Classic Formulas Crowded

In fact, the sector in which Hanfang Pharmaceutical operates is also undergoing a deep industry adjustment.

Data from Minet shows that in urban physical pharmacies in China, the sales scale of traditional Chinese medicine has consecutively declined by 0.35% and 2.49% in 2023-2024, with the decline expanding to 8.81% in Q1-Q3 of 2025, marking the largest drop in nearly a decade. Data from Zhongkang Kaishi also confirms this trend: in Q3 of 2025, the sales scale of traditional Chinese medicine in grade hospitals decreased by 4.9% year-on-year, while the retail market sales scale dropped by 6.7% year-on-year.

"Due to the combined impact of factors such as the progress of centralized procurement execution, medical insurance cost control policies, and demand-side factors like channel inventory adjustments, the traditional Chinese medicine industry is overall in a phase of pressure," Zhongkang Kaishi pointed out in its report.

Against the backdrop of an overall industry downturn, although Hanfang Pharmaceutical's core product has not yet been included in centralized procurement due to its exclusive status, the competitive pressure it faces should not be underestimated. According to Frost & Sullivan data, based on 2024 sales revenue, Compound Huangbai Liquid ranks only fourth in China's external traditional Chinese medicine market, with a market share of 1.1%. In the dermatological external traditional Chinese medicine subfield, this product leads with a market share of 5.5%, but competing products are closely following.

More urgently, there are less than five years remaining until the expiration of its "national secondary traditional Chinese medicine protected variety" status, and before the "exclusive" barrier disappears, Hanfang Pharmaceutical urgently needs a "second leg."

Faced with sluggish growth of core products and a countdown to the protection period, the management of Hanfang Pharmaceutical has not been idle. In recent years, the company has established a "one core, multiple wings" strategy, attempting to diversify its revenue sources through cross-border cosmetics and acquisitions of classic formulas.

In 2021, the company launched the "Xilaido" brand of cosmetics, relying on the acne treatment technology of its core drug "Huangbai Liquid," with a product line that includes acne gel, single-use essence, facial foam, masks, and more However, pharmaceutical manufacturing and fast-moving consumer goods retail operate under completely different business logic. A reporter from the Daily Economic News reviewed third-party data platforms and found that since Xilaiduo launched on Douyin in July 2025, its cumulative sales over nearly 8 months until the end of February 2026 were only between 250,000 and 500,000 yuan. The official flagship store on Tmall has only 808 followers, and the best-selling Huangbai Liquid Acne Gel shows sales of over 1,000 pieces, while other products have sales ranging from 100 to 200 pieces. On the Xiaohongshu platform, despite having over 20,000 followers, the store has sold only 118 pieces. In 2023 and 2024, the comprehensive sales of its cosmetics accounted for only 0.2% and 0.2% of total revenue, with monthly sales hovering around over 100,000 yuan.

At the same time, in 2021 and 2022, the company obtained approvals for An Gong Niu Huang Wan and Wu Ji Bai Feng Wan. These two products have a large public recognition, but the market is already crowded with giants. For example, in the An Gong Niu Huang Wan market, Beijing Tong Ren Tang holds an absolute dominant position. According to a report by Chengtong Securities, "the An Gong Niu Huang series is a core representative product of Tong Ren Tang, with a market share of over 50% in the mainland retail market." Along with well-known brands like Guang Yu Yuan and Hong Ji Tang, the top three brands have a market concentration of up to 70.58%. The Wu Ji Bai Feng Wan market is similarly crowded with many well-known brands such as Beijing Tong Ren Tang, Jiu Zhi Tang, and Hui Ren. As a latecomer, Han Fang Pharmaceutical has a significant gap in brand recognition and channel networks compared to these giants.

In the third quarter of 2025, Han Fang Pharmaceutical began selling An Gong Niu Huang Wan, and in the first three quarters of 2025, "other" income totaled only 2.34 million yuan, accounting for just 0.3% of the 803 million yuan in revenue. Throughout all reporting periods, Wu Ji Bai Feng Wan has not yet been commercialized.

Han Fang Pharmaceutical candidly stated in its prospectus: "The commercialization operation time of the company's cosmetics and classic formula traditional Chinese medicine is relatively short, and the sales proportion is low, making it impossible to guarantee substantial and sustainable income and profits. If a sustainable profitable market for these products cannot be developed, the strategic goal of reducing reliance on the compound Huangbai Liquid ointment will be difficult to achieve."

According to the prospectus, the company is also advancing five innovative external Chinese medicine formulations, with two candidates for treating pediatric atopic dermatitis having obtained clinical trial approval; as well as eight formulations that will convert medical institution formulations into innovative and marketable drugs.

## Sales expenses account for over half of revenue, huge promotional fees once flowed to related parties

The prospectus shows that in 2023, 2024, and the first three quarters of 2025, Han Fang Pharmaceutical's sales and marketing expenses reached 510 million yuan, 480 million yuan, and 420 million yuan respectively, accounting for 48.7%, 48.6%, and 52.3% of total revenue during the same period. In stark contrast, the R&D expenses during the same period were only 56.95 million yuan, 59.62 million yuan, and 41.55 million yuan, with the R&D expense ratio maintained at a low level of 5% to 6%.

This "heavy marketing, light R&D" structure reflects that the market expansion of the compound Huangbai Liquid ointment largely relies on high-intensity channel push. The prospectus disclosed that over 90% of sales expenses are "marketing and promotional expenses," mainly used to hire third-party promoters responsible for collecting industry information, organizing professional academic conferences, and so on In the past practical operations of the pharmaceutical industry, outsourced academic promotion has often been a hotspot for compliance risks. In recent years, regulatory authorities have become increasingly strict in examining promotional expenses in pharmaceutical companies' IPOs (Initial Public Offerings), with penetrating inquiries becoming the norm.

Hanfang Pharmaceutical has also admitted in its risk factors: "If the company's employees or cooperating third-party distributors and promoters are found to have engaged in commercial bribery, the company will be placed on a blacklist, and its products will face a sales ban in all public medical institutions in specific provinces or even nationwide for up to two years."

Among the sales expenses, one transaction is particularly noteworthy.

The prospectus reveals that in 2023, Hanfang Pharmaceutical purchased promotional services worth 147 million yuan from its largest supplier, "Shandong Jiyuan Information Technology Co., Ltd.," which accounted for 24.4% of the total procurement for that year. This company was ultimately controlled by Wang Meng, the nephew of Hanfang Pharmaceutical's actual controllers, Qin Wenji and Qin Yinji, during the reporting period.

In other words, this is a typical related-party transaction.

In 2024, the company's procurement amount from Shandong Jiyuan was significantly reduced to 32.18 million yuan, accounting for 5.4% of the total procurement. In 2025, the prospectus disclosed that Wang Meng sold all his equity in Shandong Jiyuan, and the business relationship between the company and Shandong Jiyuan was completely terminated.

It is worth mentioning that in 2024 and the first nine months of 2025, the procurement amount from Hanfang Pharmaceutical's largest supplier saw a significant decline compared to 2023, amounting to 59.4 million yuan and 21 million yuan, respectively.

Is the pricing of Shandong Jiyuan's promotional fees fair? And was the severance of business relations intended to evade scrutiny of related transactions under IPO regulations? The prospectus states that the pricing of this promotional service "was determined through fair negotiation based on normal commercial terms."

In addition to related-party transactions, Hanfang Pharmaceutical also undertook a series of asset adjustments before the IPO. The prospectus shows that from September to November 2025, the company sold its subsidiaries Hanfang Chengji, Shandong Xike, and Jinan Xike to its controlling shareholder Qin Wenji and his controlled companies, with transaction prices of 13.7 million yuan, 10 million yuan, and zero, respectively. The company explained that this was to "streamline the company structure and focus on core business."

Regarding the aforementioned questions, a reporter from the Daily Economic News sent an interview outline email to Hanfang Pharmaceutical's disclosure email on March 5, and as of the time of publication, no response had been received.

Daily Economic News

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