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

Ask AI · How can the China Resources transformation model adapt to Tianshi Li’s unique challenges?

Tough battles are hard to fight.

《Investor Network》Cai Jun

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

This is the company’s first financial report led by the China Resources group. During the reporting period, the company’s core business was still under pressure. At the same time, a major top-down reorganization took place within the company. Simply put, the China Resources group’s transformation pilot was moved from Dong’e Ejiao and Kunming Pharmaceutical Group to the company.

Transformation is gradually moving deeper into the waters. Tough battles are only just beginning.

A major transformation reshaping the “tissue”

In 2024, China Resources 39 announced an acquisition plan, becoming the controlling shareholder of Tianshi Li with over RMB 6 billion. The following year, the company completed the share transfer, and the China Resources group replaced the Yan Xijun family, officially becoming the new helmsman.

By this point, the China Resources group had built a clear “five-tiger division of labor” strategy. Among its various listed companies, each plays its own role. In this arrangement, China Resources 39, as the integration flagship, assumes the core functions of unified management, channel sharing, and management output. Dong’e Ejiao anchors the high-end tonifying supplement segment and gradually becomes a cash cow for the segment. Kunming Pharmaceutical Group focuses on plant-based pharmaceuticals and healthy aging, building a base in the southwest region. Tianshi Li, meanwhile, fills the China Resources group’s gaps in prescription drugs and high-end R&D by leveraging cardiovascular and cerebrovascular prescription drugs and innovative traditional Chinese medicine.

In other words, the essence of the explicitly defined division of labor is that the China Resources group is leading a large chess game. Therefore, not long after taking control, the company saw a major management reshuffle. On one hand, the original core executives represented by the Yan Xijun family collectively resigned, and the China Resources group’s personnel collectively took over the board. On the other hand, the vice president in charge of the business was gradually replaced by the China Resources group’s people.

Overall, the core logic behind the company’s top-level changes is “de-familyization + marketing overhaul.” At the same time, the tempo of the major reorganization is transmitted top-down through all the “capillaries,” especially the company’s marketing system.

In 2025, the company used one hand to “streamline” its headquarters and the other to split and reorganize business divisions. At the headquarters level, multiple departments were merged and layers were compressed. At the business division level, segments were set up such as cardiovascular and cerebrovascular, digestion, biological medicines, and innovative drugs. In the marketing system, hospitals, OTC, and e-commerce / new retail were unified and integrated.

In essence, the China Resources group’s reconfiguration is driven by seeing the company’s existing “ailments”: a cumbersome structure caused by multi-layer distributors and “mass-manning” promotion. With several combinations of punches, the China Resources group wants to reshape the company’s “tissue.”

Actually, this top-down reform package by the China Resources group has been reused across multiple listed companies. Previously, after Kunming Pharmaceutical Group was acquired, it abolished the multi-tier regional distributor system, merged sales regions, and directly connected the enterprise to the terminals. Clearly, the company and Kunming Pharmaceutical Group both fully benchmarked China Resources 39’s flat, high-efficiency approach, respectively weakening academic promotion and distributors.

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

Tough battles are hard to fight

In any case, when the China Resources group is facing Tianshi Li, it not only has 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.-based Arbor Pharmaceuticals, reclaiming 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 the U.S. side chose to exit after evaluating the project’s capital return rate.

Put another way, the company’s ongoing push for the internationalization of traditional Chinese medicine has been frustrated. Under the previously agreed contract 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 recovered USD 7.5 million.

In fact, during the Yan family era, the company had long regarded taking compound danshen dripping pills overseas as a core strategy and continued to invest funds. Before the China Resources group took control, the company conducted an internal round of asset clean-up, involving R&D pipelines, commercial logistics assets, and more. Like the two sides of a coin, the “front side” is the company clearing out “baggage,” while the “back side” is that the “baggage” was not fully cleared.

In 2024, the company had 31 in-development innovative drugs, and its selling expense ratio exceeded 35%. At that time, the traditional Chinese medicine industry was undergoing multiple kinds of pressure. So what is visible is that the company’s pipelines are rich and its selling expense ratio is high; what is not visible is that R&D-to-commercialization conversion is slow and product sales momentum is not smooth.

From this standpoint, a series of changes after the China Resources group took over the company are “making cuts.” In 2025, this tough battle is only just getting started.

During the reporting period, revenue and non-recurring profit after deductions were RMB 8.24 billion and RMB 0.79 billion, respectively, down 3.08% and 23.59% year over year. Meanwhile, attributable net profit was RMB 1.11B, up 15.63%, driven by a rebound in the value of financial assets. Clearly, the company’s core business is still under pressure.

The most critical selling expenses, which in 2025 reached RMB 2.97 billion, fell 0.55% year over year; the selling expense ratio was 36%, slightly lower than in the same period of 2024.

It looks like this tough battle faced by the China Resources group may not be easy to fight.

A changing campaign

The China Resources group’s approach to reshaping 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. In the same period, 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 China Resources group used one set of playbooks to remodel three listed companies, but the outcomes varied greatly: Tianshi Li’s tough battle is just beginning; Kunming Pharmaceutical Group was hit; and Dong’e Ejiao was the most successful.

In short, although they both belong to the China Resources group and take the same integration route, because the underlying reasons differ, the results will be very different.

Looking in more detail, the company’s prior core advantages were TCM big single products and high-end product pipeline coverage. Kunming Pharmaceutical Group has distributors tied to high gross margins and high rebates, while Dong’e Ejiao has long-standing roots as a consumer tonifying product. Therefore, when one playbook is executed, the effectiveness will naturally be different.

For example, in the successful case of Dong’e Ejiao, after the China Resources group took the lead, it upgraded the brand and rejuvenated the products, changing the past strategy that relied purely on price increases, thereby aligning with consumers’ mindset. By contrast, Kunming Pharmaceutical Group’s technical barriers are not high and it relies extremely heavily on off-hospital distributors. Therefore, weakening channels is clearly a step that’s too big.

From this perspective, the company’s situation is more complex and changeable, and the China Resources group’s reform considerations are more numerous. On the R&D side, the company needs a high-end product that can be converted into a marketed one as a抓手. On the marketing side, academic promotion should not be simply cut across the board; to focus on future new drugs, streamlining or preserving strengths could be the way to break the deadlock.

In the final analysis, the China Resources group’s reshaping of its pharmaceutical assets has entered deep waters. On one hand, the China Resources group’s reform path follows a single combination of punches. On the other hand, due to differences in the acquired targets themselves, the reform results are not the same. For the company, the former controlling party leaves behind future potential, but also conceals historical baggage. The China Resources group’s tough battle is only just beginning.

What do you think about the prospects for the China Resources group’s transformation? Feel free to leave comments and discuss in the comment section. (Produced by Thinking Finance)