YaoShiBang's net profit soars by 409% behind the scenes: business crisis, shareholder liquidation, and removal from Hong Kong Stock Connect

By | Entrepreneurship Frontline Zhang Jue

Editor | Dan Zong

Since it was officially established in 2015, YaoshiBang has witnessed a decade of dramatic changes in China’s pharmaceutical industry as a digital platform connecting upstream suppliers with retail pharmacies at the terminal end. During this period, the National Healthcare Security Administration was established, volume-based procurement became normalized, and regulation of pharmaceutical distribution channels has also become increasingly strict.

From consecutive losses before going public to a financial turnaround after listing, YaoshiBang finally released an annual report in 2025 showing a significant improvement in profitability. The financial report shows that its net profit reached RMB 153 million, up 409.7% year over year. Among them, its in-house brand business has become a new profit driver.

However, with rapid policy changes in the pharmaceutical market, YaoshiBang’s valuation logic from the very beginning has been thrown into turmoil.

Before its IPO, YaoshiBang was heavily courted by capital, with a valuation as high as $1.44B and once exceeding RMB 40 billion after listing. Now, the company’s market value has shrunk to around RMB 3.5 billion, and in March 2026 it was removed from the Stock Connect program for Hong Kong listed shares.

Is YaoshiBang’s profitability this time merely a brief flash at the end of the lawless early era of pharmaceutical e-commerce? Or can it continue to support the digital future of this trillion-yuan track?

01 Turning in the Best Performance

In 2025, China’s off-hospital pharmaceutical retail market was not optimistic. According to CEC Index, the scale of retail pharmacy sales for drugs in the full year was RMB 436.8 billion, down 0.3% year over year—marking the first negative growth in the past five years.

Under multiple pressures such as the reform of the personal medical account system, the implementation of outpatient co-ordination policies, and tightening compliance regulation, demand at traditional retail terminals shrank. The share of OTC drug sales fell to 42.3%, with growth continuing to come under pressure.

However, against the backdrop of the industry overall nearing zero growth, YaoshiBang, an off-hospital digital pharmaceutical distribution platform, delivered what is arguably its best performance since its founding.

According to its 2025 financial report, YaoshiBang achieved full-year revenue of RMB 20.9 billion, up 17.1%; net profit of RMB 153 million, up 409.7%; and adjusted net profit of RMB 237 million, up 51.2%.

Figure / YaoshiBang 2025 performance report

YaoshiBang’s growth in 2025 mainly came from further concentration of market share in an existing market.

During the reporting period, the company’s self-operated business revenue grew 18.2% to RMB 20.07 billion, which is the core engine driving total revenue. Currently, YaoshiBang’s coverage of individual pharmacies has reached 85%, procurement share is about 30%, corresponding to a market share close to 25%.

At the chain pharmacy level, the chain headquarters it covers has reached 4,000. This kind of growth is essentially the replacement of traditional multi-tier distribution channels by a digital supply chain. When terminal pharmacies face operating pressure, YaoshiBang absorbs shares that originally belonged to traditional small and medium wholesalers through centralized orders and delivery efficiency.

In addition, the company continues to deepen its strong presence in broad tier-and-below markets. The financial report shows that YaoshiBang has covered 98.9% of counties and 91.2% of townships nationwide.

Meanwhile, the improvement on the profit side is mainly due to adjustments in its gross margin structure. In 2025, YaoshiBang’s overall gross margin rose from 10.1% to 11%. Gross profit increased 27.2% year over year, with a growth rate far exceeding that of revenue.

The core driver of this change is the expansion of its in-house brand business. In 2025, the trading scale of YaoshiBang’s in-house brands was about RMB 2.0 billion, up about 282%. The proportion of this business in its “manufacturer-first” portfolio reached 80%.

The logic of this business is to leverage the scale of downstream distribution and directly connect idle capacity manufacturers in order to produce customized OEM products (private-label production or contract manufacturing).

So-called drug private-labeling means that the platform selects product varieties with market potential, commissions upstream qualified pharmaceutical manufacturers to produce them, and affixes the platform’s in-house brand trademark. The platform controls pricing power and allocation power.

This strategy accelerated starting in October 2024, when YaoshiBang spent RMB 1.03B to acquire 100% equity of “Yikuai Pharma,” a pharmaceutical B2B supply-chain service provider. Founded in 2019, Yikuai Pharma mainly operates direct supply and specialized sales, distributing OEM drugs with in-house brands to chain pharmacies.

Currently, YaoshiBang’s in-house brands mainly are handled by Le Yaoshi and Yikuai Pharma. Le Yaoshi focuses on product selection. YaoshiBang already has in-house brands including Le Yaoshi, Yuandian, Huitai, and others.

Taking the “Le Yaoshi” matrix as an example, it has already covered 15 categories of medication scenarios for conditions such as cold medicines like Huoxiang Zhengqi Oral Liquid, pain-relief drugs like ibuprofen and celecoxib, and medication for common diseases among everyday consumers.

Figure / Le Yaoshi official website

By removing distribution premiums from traditional branded drugs, YaoshiBang lowers procurement prices at the upstream while maintaining price competitiveness at the downstream. As a result, the gross margin rate of its self-operated business increased from 6.2% to 7.7%.

However, the company’s overall net margin remains at a relatively low 0.7%. This means its business model is essentially still a low-profit model maintained by high turnover: YaoshiBang has receivables terms of more than 60 days with upstream suppliers, while its own inventory turnover days are only around 30 days. Downstream terminal pharmacies basically settle in cash.

At the same time, the company is highly dependent on sales investment. In 2025, YaoshiBang’s selling and marketing expenses grew 19.3% to RMB 1.74B.

02 Market Value Drops to RMB 3.5 Billion, Removed from Stock Connect

Within one week after YaoshiBang released its 2025 annual report, its share price rebounded 18.6%, but this did not change its long-term sluggish trend.

Currently, YaoshiBang’s share price stays around HK$5. Compared with its historical high of HK$64.5 in August 2023, it has shrunk by more than 90%, and its total market capitalization has also fallen from more than RMB 1.44B to about RMB 3.5 billion.

Capital’s large-scale withdrawal is the direct trigger for the market value collapse. YaoshiBang listed in June 2023. On December 13, 2023, the day shares were unlocked, YaoshiBang’s share price plunged 46% in a single day. After that, within a year and a half, core investors repeatedly reduced their holdings.

DCM chose to clear out and exit. Fosun Pharmaceutical repeatedly sold. In September 2025, Shunwei Capital cleared the remaining shares at a price of HK$3.1 per share. Baidu, which had led the investment at E2 Round with a price of $8.64 per share and backed YaoshiBang as it took the high ground, also completed its exit in November 2024.

These capitals once pushed YaoshiBang’s pre-IPO valuation to $600k; but now, many of them have cleared out via reductions, reflecting investors’ doubts in the capital market about YaoshiBang’s valuation logic over the medium and long term.

The fundamental reason capital is leaving YaoshiBang is the disappearance of the “industry-track premium.”

YaoshiBang’s business model is mainly driven by a “platform + self-operated” dual-wheel system. The platform business builds a digital platform for transactions between sellers and buyers, then charges commissions based on a certain percentage of the sales amount on the platform. The self-operated business is that YaoshiBang purchases medicines and resells them to downstream pharmacies and primary healthcare institutions.

In its early years, YaoshiBang was seen as a benchmark for both industrial internet and pharmaceutical distribution. It aligned with policies such as the “two-invoice system” and the “out-of-hospital prescription flow.” In the narrative of the primary market, YaoshiBang was viewed as a company that uses digital means to eliminate tiers and markups in pharmaceutical distribution, and leverages the internet’s long-tail effects to improve off-hospital distribution efficiency.

However, as normalization of centralized procurement under medical insurance took hold and the dividend of out-of-hospital prescriptions faded, the off-hospital market returned from a capital boom to a traditional track. YaoshiBang’s valuation logic also shifted from a “platform internet” that offered high-growth imagination back to a traditional “pharmaceutical distribution” valuation framework.

In particular, its push into private-labeling has made its business form increasingly resemble traditional pharmaceutical retail. For reference, Pimco Dollar (Lao Bai Xing) Pharmacy, another well-known retailer famous for private-label drugs: its in-house brand matrix already covers 6 brands such as Vinojian and Yaoshengtang, with more than 600 varieties. In the first three quarters of 2025, private-label drug sales already accounted for 22.8% of sales from self-operated stores.

This private-labeling business operates based on offline terminal operations. While the gross margin rate is somewhat higher, fundamentally it is a relatively traditional retail logic that depends on supply chains and operations, completely diverging from YaoshiBang’s early “asset-light disruption” narrative about overturning pharmaceutical distribution through the internet.

Liquidity issues may further intensify market pessimism. On March 9, 2026, YaoshiBang was removed from Stock Connect for Hong Kong-listed shares. On the same day, the share price dropped more than 15%. At close, the share price was only HK$3.92.

Losing support from southbound capital means trading volumes will shrink, further increasing the difficulty of repairing YaoshiBang’s valuation.

Facing the weak share price earlier, YaoshiBang had carried out several share repurchases between May and November 2025, totaling more than 7.4 million shares. The repurchase price range was HK$6.98 to HK$11.21.

Figure / YaoshiBang 2025 performance report

The day after the 2025 financial report was released, management proposed a new repurchase plan as well. On March 24, 2026, YaoshiBang granted a total of 32.55 million share options to its Chairman and CEO Zhang Buzhen and to its Executive Director and CFO Chen Fei. The exercise price was set at HK$4.608 per share.

The unlocking of options is tied to the company’s total market capitalization. The options granted to Zhang Buzhen and Chen Fei are divided into three levels of vesting: when YaoshiBang’s average market capitalization over its first 10 consecutive trading days first reaches or exceeds HK$12 billion, HK$20 billion, and HK$30 billion, respectively, 4.11 million, 8.22 million, and 13.71 million options will vest for Zhang Buzhen, and 1.37 million, 2.06 million, and 3.08 million options will vest for Chen Fei.

These targets are far from YaoshiBang’s current market capitalization. In a market lacking industry growth background and liquidity support, such symbolic statements of confidence are unlikely to convince investors in the short term.

03 The Difficult Crossroads

Even after turning in the best performance in its history, YaoshiBang has not escaped the situation of being surrounded on all sides.

In July 2025, a mandatory drug traceability code was rolled out for medical insurance. Starting January 2026, all medical and pharmaceutical institutions (including those not covered by medical insurance) achieve full collection and uploads of traceability codes. The nationwide rollout of traceability codes has become a tool for pharmaceutical companies to control channels. With the traceability code, upstream manufacturers can monitor drug flows in real time and precisely crack down on diversion.

As early as 2019, YaoshiBang had already been issued “blacklist” notices by more than a dozen companies including Yangtze River Pharmaceutical and Harbin Pharmaceutical Group. They required distributors to pause supplying to the YaoshiBang platform, as pharmaceutical companies believed YaoshiBang’s relatively low prices would disrupt the market.

Now that regulatory loopholes are being filled through technological measures, this directly compresses the space for irregular-channel drugs on YaoshiBang’s open platform. As a result, the “price comparison” model that originally depended on pricing arbitrage has lost its ground.

Regulation targeting prices themselves is also tightening in parallel. The “Internet Platform Price Behavior Rules,” implemented starting in April 2026, clearly prohibits platforms from forcing nationwide price comparisons and forcing price reductions. Pharmaceutical e-commerce is naturally within the scope of regulation.

The ways YaoshiBang previously used traffic advantages to constrain upstream pharmaceutical companies and maintain low-price strategies will be categorized as violations. As low-price distribution space is squeezed, the growth foundation of the platform model is being dismantled.

To offset risks, YaoshiBang has increased its development of in-house brands. But this causes the company to gradually shift from a neutral matchmaker to an operator participating in competition, shaking the foundation of trust for the platform economy.

YaoshiBang uses purchase data from 600k pharmacies on its platform to select high-sales, high-profit products. It then looks for contract manufacturers to produce private-label products and sells them at lower prices to the same customers.

From the perspective of suppliers, this model is aggressive. Because for pharmaceutical companies, contributing data is essentially “feeding” a competing rival.

As the share of in-house brands in the manufacturer-first business reaches 80%, YaoshiBang has transformed from a neutral matchmaker into an operator that uses data advantages to seize market share. Inevitably, this makes the company’s relationship with mainstream pharmaceutical companies somewhat delicate.

Rising compliance costs are another key challenge. In 2025, the “Compliance Guidelines for Pharmaceutical E-commerce” were issued, requiring that drug sales on platforms be subject to “penetration-based regulation,” and strictly prohibiting unqualified small distributors from “affiliating” and operating under the names of compliant pharmaceutical companies.

In YaoshiBang’s early expansion, it relied on a large number of such suppliers—unqualified small distributors affiliating under the names of compliant pharmaceutical companies to carry out business, while the platform only played the role of a matchmaker that did not assume quality responsibility.

“Penetration-based regulation” no longer focuses only on superficial operating permits. It requires penetration-based tracking of invoices and funds flow, and tracing the actual controller, while strictly prohibiting shell operations in any form. As revisions to the “Measures for the Administration of Internet Pharmaceutical Transactions” in 2026 approach, “penetration-based regulation” will be further implemented.

To meet compliance requirements, YaoshiBang must carry out on-site verification of the entities entering the platform, re-check their qualifications, and verify on-duty pharmacists. This will be a significant compliance cost for YaoshiBang.

Meanwhile, JD Health and Ali Health—both of which have long worked in the tier-and-below markets where YaoshiBang is strong—are gradually ramping up their efforts as well.

In 2024, JD Health’s share of users in tier-three cities and below had already exceeded 65%. Ali Health, meanwhile, used grassroots medical SaaS services to attract traffic and accelerated its acquisition of users in tier-and-below markets in fiscal year 2025. The giants not only have stronger cash flows, but also natural advantages in supply chains and logistics.

YaoshiBang’s room to maneuver in the stock market is already very limited. After the best-performing year of 2025, YaoshiBang in fact has reached a difficult crossroads. Where will the company go next? “Entrepreneurship Frontline” will continue to pay attention.

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