Fang Tonghua Steps Down, Yan Jiujiang Takes the Helm: How Does Zhenbao Island Stabilize Its Foundation Amid Growing Pains?

Listing | China Visitor Network

Review | Li Xiaoyan

On March 13, Heilongjiang Zhenbaodao Pharmaceutical Co., Ltd. (hereafter “Zhenbaodao,” 603567.SH) issued a significant announcement. Founder Fang Tonghua officially resigned from the positions of Chairman, Director, and all committees of the Board of Directors due to health reasons. After resigning, he will no longer hold any positions within the company. On the same day, the company held a board meeting, unanimously electing General Manager Yan Jiujiang, who has grown internally, as the new Chairman and also as the convener of the Strategy and Investment Committee. The legal representative was also updated accordingly. This seemingly smooth leadership transition not only marks the company’s formal entry into a new management phase but also carries deep expectations for overcoming industry cycles and achieving a second rise.

As the “soul figure” of Zhenbaodao, Fang Tonghua’s career is deeply intertwined with the company’s development. Born in 1963, he has been dedicated to the traditional Chinese medicine industry for nearly forty years. He holds a master’s degree and has served as a graduate tutor at Heilongjiang University of Chinese Medicine, combining professional expertise with industry vision. In 1987, he entered the pharmaceutical distribution field in Harbin, engaging in medicinal material procurement, accumulating solid industry experience. In 1996, he founded Heilongjiang Zhenbaodao Pharmaceutical Co., Ltd., embarking on his entrepreneurial journey.

Over the past thirty-plus years, Fang Tonghua has led the company steadily with foresight and insight: in 2011, he promoted the company’s reform into a joint-stock system, laying the foundation for capitalization; in 2015, he helped Zhenbaodao successfully list on the main board of the Shanghai Stock Exchange, achieving a leap from a local pharmaceutical enterprise to a publicly traded company. During his tenure, he served as Chairman for a long time and also as General Manager for many years, overseeing the entire chain from product R&D and manufacturing to market expansion. He built a diversified industrial structure covering Chinese medicine preparations, chemical formulations, pharmaceutical commerce, and medicinal materials industry, establishing three major production bases in Harbin, Hulin, and Jixi, with 21 production workshops and 43 modern production lines, making Zhenbaodao one of the industry benchmarks.

Although he is stepping down from all management roles, Fang Tonghua has already laid a solid foundation for the company’s development. Through direct holdings of 20 companies and indirect holdings of 47 companies, he has formed an industrial network spanning pharmaceutical technology, medical investment, and medicinal planting. His long-term industry resources and strategic experience will continue to subtly empower the company’s growth. This “step down” appears more like a transitional arrangement for the founder to retreat behind the scenes, reflecting rational considerations about his health and long-term goals of promoting corporate governance standardization and sustainable development, paving the way for the new leadership.

Unlike many listed companies that appoint external executives, Yan Jiujiang’s succession exemplifies “internal succession.” Born in 1978, he joined Zhenbaodao in 2006, starting from the grassroots workshop director position, and has worked in core roles such as production, operations, deputy general manager, executive general manager, and assistant to the general manager. Since 2019, he has served as a director and general manager, participating fully in the company’s development and transformation.

This solid internal background sends a clear signal: Zhenbaodao chooses stability as its priority, ensuring strategic continuity and operational stability. Against the backdrop of industry reforms such as normalized centralized procurement, strengthened medical insurance cost control, and intensified competition in innovative drugs, an internally grown leader is more likely to continue the company’s existing strategy and quickly implement it. Yan Jiujiang’s deep familiarity with the company’s production system, market channels, and operational management will effectively prevent volatility caused by management changes, providing a strong guarantee for stable operations and responding to challenges.

In fact, Yan Jiujiang has already demonstrated excellent management ability. During his tenure as General Manager, he promoted deepening marketing reforms, emphasizing precise and thorough招商 (recruitment/expansion), establishing scientific agent selection mechanisms, and stressing “controllable channels and visible terminals.” He led the marketing team to work collaboratively, effectively stabilizing the market during industry pressure periods. With his promotion to Chairman, he will oversee the company’s strategic planning and investment layout, leveraging his industry insight and internal management advantages to promote breakthroughs in traditional Chinese medicine business consolidation, upgrading, and exploring new growth paths.

This personnel change reflects Zhenbaodao’s proactive response to industry cycles and the need to clear risks. In 2024, the company maintained steady operations, achieving revenue of 2.707 billion yuan and net profit attributable to shareholders of 438 million yuan, also announcing a cash dividend of 1.5 yuan per 10 shares, demonstrating responsibility to shareholders. However, entering 2025, due to industry policy adjustments, delayed centralized procurement of Chinese patent medicines, and other factors, the company’s operations face temporary pressure.

According to the company’s earnings forecast, net profit attributable to shareholders in 2025 is expected to be a loss of 1.012 to 1.173 billion yuan, shifting from profit to loss. The core reasons include: first, sales of key products did not meet expectations, with both prices and volumes declining, leading to approximately 53% decrease in revenue and a 93% drop in gross profit; second, rising accounts receivable risks, with some customers delaying payments, resulting in an estimated credit impairment loss of about 395 million yuan; third, inventory asset impairment, with the realizable value of inventory decreasing, leading to an impairment provision of about 266 million yuan.

Despite short-term performance pressures, Zhenbaodao’s fundamentals remain stable. As of Q3 2025, the company’s total assets reached 11.797 billion yuan, with shareholders’ equity of 7.287 billion yuan, providing solid support for future adjustments. More importantly, this performance fluctuation is a phase in the industry cycle, not a sign of declining core competitiveness. Facing the pressure, Zhenbaodao has proactively recognized impairments and fully released risks, adopting transparent governance to respond to market changes and clearing obstacles for future light-footed development.

Currently, China’s pharmaceutical industry is transitioning from rapid growth to high-quality development. Policies such as the “High-Quality Development Plan for the Chinese Medicine Industry (2026-2030)” have created new opportunities for enterprises. For Zhenbaodao, the key task for the new management is to consolidate the traditional main business while exploring new growth engines to achieve the dual goals of “steady growth and breakthrough.”

Traditional Chinese medicine remains the “pillar” of Zhenbaodao. The company has a complete production system and a rich product pipeline covering freeze-dried powder injections, oral solid preparations, Chinese medicine decoction pieces, and more, with scalable production capacity. Going forward, Yan Jiujiang will lead the team to focus on core varieties, strengthen brand scientific backing through evidence-based medicine research, optimize product structure, and increase the proportion of high-end products; simultaneously, deepen supply chain reforms, implement strategies of “opening markets in the off-season and supplying markets in the peak season,” to reduce costs through scale effects and improve market responsiveness.

Diversification will become a new growth engine. Relying on the industry network built during Fang Tonghua’s era, Zhenbaodao has already expanded into pharmaceutical technology and medical investment. Future plans include further promoting industry collaboration beyond “Pi Bai” (note: adjusted to pharmaceutical industry chain collaboration considering the context), strengthening channel connectivity and resource sharing, and exploring new scenarios in the health industry. Meanwhile, the company will continue increasing R&D investment in innovative drugs, introducing promising product pipelines, and building a diversified business pattern of “traditional Chinese medicine + innovative drugs + health industry” to enhance resilience through industry cycles.

Additionally, ongoing optimization of corporate governance will support development. With Yan Jiujiang taking full leadership, the company will further improve decision-making mechanisms, enhance strategic execution efficiency, focus on quality and efficiency in core businesses, and strictly control operational risks. Leveraging shareholder resources and platform advantages, the company will deepen digital transformation and improve operational management, injecting internal momentum for high-quality growth.

The smooth leadership transition from Fang Tonghua to Yan Jiujiang signifies the maturity of Zhenbaodao’s governance and marks the beginning of a new chapter for the company to navigate cycles and restart. Fang Tonghua’s over thirty years of dedication has laid a solid industrial foundation and brand base; Yan Jiujiang’s succession will bring steady management and clear strategy, guiding the company through challenges and seizing opportunities.

Short-term performance pain is an inevitable part of industry transformation and an opportunity for asset optimization and quality improvement. The impairment of goodwill will help Zhenbaodao shed historical burdens and embrace industry recovery with a lighter posture. As policies favoring traditional Chinese medicine continue to release and corporate integration yields results, a pattern of “solidifying core business and multiple new business breakthroughs” will gradually form.

As a key player in the Chinese medicine industry, Zhenbaodao’s transformation and upgrading reflect the development direction of China’s pharmaceutical industry. Under the wave of high-quality development, companies must adhere to their main businesses, innovate cautiously, respond to fluctuations with cyclical thinking, and traverse downturns with long-term vision to achieve sustainable, steady growth.