Recently, the mid-year report of the leading pharmaceutical company “Laobaixing” in mainland China revealed a drastic drop in net profit of over 20%, with major shareholders cashing out 1.4 billion RMB to exit. In recent times, there has been a wave of closures of retail pharmacies in China, with around 3,000 stores shutting down in just the first quarter of this year. Industry insiders predict that this trend of store closures will continue, forecasting that in the next three to five years, the total number of pharmacies nationwide will decrease from the current 680,000 to around 400,000, representing a reduction of one-third.
According to the mid-year report released by the mainland China-listed pharmaceutical giant “Laobaixing” in 2025, the operating income was 10.774 billion RMB, a year-on-year decrease of 1.51%; the net profit attributable to the parent company saw a year-on-year decline of 20.86%, and the adjusted net profit attributable to the parent company dropped by 20.89%. This marks the first simultaneous decline in both revenue and net profit for the company in the past decade.
“Laobaixing” has also signaled a suspension of expansion by reducing the number of directly operated stores and making the franchise model mainstream. Data shows that as of June 30 this year, there was a net decrease of 197 directly operated stores in the first half of the year while a net increase of 108 stores, with franchise stores showing a net increase of 305, making conversions of existing stores to franchises the primary focus.
Furthermore, shareholders have collectively reduced their holdings by 1.4 billion RMB, with institutional investors simultaneously reducing their positions. According to a report from Sina Finance, shareholders of the group cashed out 341 million RMB in the first half of 2025, bringing the total accumulated cash-out amount to 1.432 billion RMB since 2020. In the second quarter of 2025, important institutions such as the Mainland-Hong Kong Stock Connect and China Life Insurance have all decreased their shareholdings.
This serves as the latest example of the rise and fall of mainland Chinese pharmaceutical companies. A report from “Everyday Economic News” on the 4th pointed out that the pharmacy industry in China experienced rapid development over the past 15 years, with the number of retail pharmacies increasing from 381,400 in 2009 to 680,000 by the end of 2024, averaging 4.6 stores per 10,000 people, surpassing figures in Japan and the United States.
However, in 2024, approximately 39,000 retail pharmacies across the country closed down, marking the first time the total number experienced negative growth. Industry experts suggest that the era of rapid expansion has shifted towards survival mode, where closing down stores has become the most effective means of self-preservation.
A regional chain pharmacy owner shared his firsthand experience with news outlets. His business had become the largest local pharmacy enterprise, but his competitors have gone bankrupt. Over the past year, he has closed approximately 120 stores and laid off 500 employees. He plans to continue closing more stores in the latter half of this year. Reflecting on his challenges, he said, “Last year, I operated at a net loss of over 20 million RMB, and this year, I am barely breaking even, but only because I have shed some burdens.”
He attributes his losses to the impact of online platforms where online orders account for over 20% of sales but require offline profits to subsidize them. The owner explained, “For example, the cost of purchasing a box of ‘Huoxiang Zhengqi Liquid’ is around 14 RMB, but we sell it online at a promotional price of 2 RMB, resulting in a loss of 12 RMB per box. The same goes for ‘Sanjiu Cold Remedy,’ which we buy for about 13-14 RMB but frequently sell online for 4-5 RMB. These are high-demand products with large sales volumes, the more we sell, the larger the losses we need to cover.”
With platforms taking a 15% cut and delivery fees, the gross profit margin narrows to around 5%. During the mergers and acquisitions era when capital could offer up to 1.7 times the sales revenue, the current market value is only between 30% to 40%, making it difficult to sell stores. Closing down outlets has become the most viable option.
He projects that in the next three to five years, the total number of pharmacies in the country will return to around 400,000, following the closure of over 30,000 stores last year with an estimated 100,000 closures this year.
The chairman of a leading listed pharmaceutical chain in mainland China bluntly stated to news outlets that the “bubble” in the pharmacy industry is collapsing. He revealed that official data in 2024 indicated the closure of 39,000 pharmacies, but the actual number of closures far exceeded this figure, possibly even doubling it, as many pharmacies have closed their doors but kept their operating qualifications for future transfers.
Diverting the perspective to a broader analysis, a provincial industry organization leader stated that the reason the pharmacy industry is still afloat is primarily due to its decent cash flow. However, the net profit has plummeted to an unimaginable level. He noted that the profit margin in the pharmacy industry has dropped to 1% to 3%, where a business with an annual revenue of 100 million RMB would only yield a net profit of around 2 to 6 million RMB, even in successful cases.
He believes that this 1% to 3% profit level is unsustainable, leading to a wave of closures among many chain pharmacy operators. Using his province as an example, he mentioned that over 6,000 pharmacies closed down last year, with an even greater number expected this year.
Categorizing pharmacy operators into three groups, he explained that listed companies “must survive,” medium-sized enterprises are experimenting while gradually closing stores, and small-scale operators will continue until they can no longer sustain operations and eventually retreat from the industry.
Reflecting on the industry landscape over recent years, he discussed how the buzz around prescriptions flowing out in 2017 attracted capital, yet the anticipated benefits were not realized; the dividend period of the past few years led to misjudgments; and the persistent belief that “selling medicine makes money.”
He emphasized that the rapid development was 100% driven by dividends, not capability, warning against mistaking dividends for skill in the business.