In-Depth Analysis Report on R&D Investment of Buchang Pharmaceuticals

According to the latest financial data, Buchang Pharmaceuticals (603858.SS) recorded R&D expenses of

in the first three quarters of 2025, a year-on-year decrease of , with the R&D expense ratio to operating revenue being only [1][2]. This figure is than the average level in the traditional Chinese medicine sector, raising market concerns about whether the company’s innovation investment is sufficient.

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From the perspective of long-term data, Buchang Pharmaceuticals has long had the problem of imbalanced resource allocation characterized by “emphasizing marketing over R&D”:

Year	Selling Expenses (RMB 100 million)	R&D Expenses (RMB 100 million)	Multiple Gap
2017	82.87	approx. 4.5	18.4x
2018	80.36	approx. 5.0	16.1x
2019	80.81	approx. 5.5	14.7x
2020	83.73	approx. 4.8	17.4x
2021	83.00	approx. 4.2	19.8x
2022	74.84	approx. 3.8	19.7x
2023	63.69	approx. 4.0	15.9x
2024	43.23	approx. 4.0	10.8x
1Q-3Q 2025	33.41	1.54	21.7x

Data shows that from 2017 to 2024, Buchang Pharmaceuticals’ cumulative selling expenses were approximately

, while its cumulative R&D expenses during the same period were only approximately , with a gap of as high as [1][2].

Data for the first three quarters of 2025 shows further deterioration:

• Selling expenses increased by 2.14% year-on-year to RMB 3.341 billion, accounting for
  39.45%
  of operating revenue
• R&D expenses decreased by 14.75% year-on-year to RMB 154 million, accounting for only
  1.81%
  of operating revenue
• Selling expenses are
  21.7 times
  R&D expenses, a record high

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Compared with peer traditional Chinese medicine enterprises, Buchang Pharmaceuticals has an obvious gap in R&D investment intensity:

Enterprise	R&D Investment (RMB 100 million)	Ratio to Operating Revenue	Industry Ranking
Buchang Pharmaceuticals	1.54	1.81%	Significantly Lagging
Yiling Pharmaceutical	3.99	9.87%	Industry Leading
Tasly	3.98	9.29%	Industry Leading
China Resources Sanjiu	6.62	4.47%	Above Average
Jichuan Pharmaceutical	1.95	7.09%	Above Average
Baiyunshan	3.14	0.75%	Below Average

Yiling Pharmaceutical’s R&D expense ratio is

that of Buchang Pharmaceuticals, while Tasly’s is [3]. Even Baiyunshan, which has relatively low R&D investment, has an R&D expense ratio close to that of Buchang Pharmaceuticals.

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Buchang Pharmaceuticals’ cardiovascular and cerebrovascular business shrank from a peak of RMB 12.08 billion in 2020 to only

in 2024, a year-on-year decline of [1][2]. Its core products Naoxintong Capsules, Wenxin Granules, and Danhong Injection are facing pressure from volume-based procurement, with both sales volume and price declining.

The goodwill issues accumulated by the company through merger and acquisition expansion have erupted collectively:

• From 2012 to 2015, the company acquired Tonghua Guhong and Jilin Tiancheng, forming goodwill of
  RMB 4.996 billion
• From 2022 to 2024, the company accumulated goodwill impairment provisions of over
  RMB 4.5 billion
• As of the end of the third quarter of 2025, there is still
  RMB 620 million
  in goodwill[1][2]

Against the backdrop of the normalization of volume-based procurement in the pharmaceutical industry, innovation capability has become the key for enterprises to break through. WuXi AppTec’s R&D expenses in the first three quarters of 2025 were RMB 224 million, RMB 514 million, and RMB 826 million respectively, all significantly higher than those of Buchang Pharmaceuticals[1].

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1. Low absolute investment amount
   : The R&D investment of RMB 154 million in the first three quarters is at a low level in the industry
2. Severely insufficient R&D intensity
   : The R&D expense ratio of 1.81% is far lower than the industry average of about 5%
3. Continuous decline in investment
   : A year-on-year decrease of 14.75%, running counter to the industry trend of increasing R&D investment
4. Imbalanced resource allocation
   : Selling expenses are more than 21 times R&D expenses, squeezing innovation capabilities

• Long-term reliance on a sales-driven development model
• Over-reliance on merger and acquisition expansion rather than endogenous R&D
• Neglect of product competitiveness construction leading to increased pressure from volume-based procurement

If Buchang Pharmaceuticals fails to increase investment in R&D, it will face the dilemma of continuous decline in core product competitiveness and difficulty in cultivating new growth drivers. Against the backdrop of innovation-driven development in the pharmaceutical industry, it is imperative to increase R&D investment intensity.

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[1] OFweek - “Litigation Troubles, Investment Floating Losses: Buchang Pharmaceuticals’ Comeback Should Be Timely” (https://mp.ofweek.com/biotech/a756714730627)

[2] Eastmoney - “Litigation Troubles, Investment Floating Losses: Buchang Pharmaceuticals’ Comeback Should Be Timely” (https://caifuhao.eastmoney.com/news/20260115095330377387350)

[3] Sina Finance - “2025 Semi-Annual Report of Shijiazhuang Yiling Pharmaceutical Co., Ltd.” (http://file.finance.sina.com.cn/211.154.219.97:9494/MRGG/CNSESZ_STOCK/2025/2025-8/2025-08-28/11383694.PDF)