Since its establishment in 2015, YSB has operated as a digital platform connecting upstream suppliers with retail pharmacies, witnessing a decade of significant transformation in China's pharmaceutical industry. During this period, the National Healthcare Security Administration was founded, volume-based procurement became routine, and regulatory oversight of pharmaceutical distribution channels intensified. Transitioning from pre-IPO losses to post-listing profitability, YSB delivered significantly improved annual results in 2025. Financial reports indicate its net profit reached 153 million yuan, a year-on-year increase of 409.7%, with proprietary brand operations emerging as a new profit driver. However, rapid policy shifts in the pharmaceutical market have undermined YSB's original valuation thesis. Prior to its IPO, YSB attracted strong investor interest, achieving a pre-IPO valuation of $1.435 billion and a post-listing market capitalization exceeding 40 billion yuan. Currently, its market value has contracted to approximately 3.5 billion yuan, and it was removed from the Hong Kong Stock Connect program in March 2026. The critical question is whether YSB's recent profitability represents a fleeting success at the end of a competitive era for pharmaceutical e-commerce or if it can sustainably support the digital future of this trillion-yuan sector.
YSB delivered its strongest performance to date in 2025, despite a challenging environment for China's out-of-hospital pharmaceutical retail market. Industry data shows annual retail drug sales reached 436.8 billion yuan, a slight decline of 0.3% marking the first negative growth in five years. Pressured by medical insurance account reforms, outpatient co-payment policies, and stricter compliance requirements, traditional retail demand contracted, with over-the-counter drug sales falling to 42.3% of the total. Against this near-zero growth backdrop, YSB achieved record results. Its 2025 financial report revealed annual revenue of 20.9 billion yuan, up 17.1% year-on-year, net profit of 153 million yuan, surging 409.7%, and an adjusted net profit of 237 million yuan, increasing 51.2%. This growth was primarily driven by further market share consolidation within the existing market. The company's self-operated business revenue grew 18.2% to 20.07 billion yuan, serving as the core growth engine. YSB now covers 85% of independent pharmacies, which account for approximately 30% of their procurement, translating to a nearly 25% market share. At the chain pharmacy level, it serves 4,000 chain headquarters. This growth essentially reflects the digital supply chain replacing traditional multi-level distribution channels. As retail pharmacies face operational pressures, YSB captures share from traditional small and medium-sized wholesalers through order consolidation and delivery efficiency. The company has also deepened its presence in the extensive lower-tier markets, covering 98.9% of China's counties and 91.2% of its townships. Profit improvement stemmed mainly from adjustments to the gross margin structure. The overall gross margin increased from 10.1% to 11% in 2025, with gross profit growing 27.2%, significantly outpacing revenue growth. This change was core to the scaling of its proprietary brand business. In 2025, YSB's proprietary brand transaction volume reached approximately 2 billion yuan, a surge of about 282% year-on-year, accounting for 80% of its manufacturer-first promoted business. The strategy leverages downstream aggregated demand to partner directly with pharmaceutical manufacturers possessing idle capacity for OEM production. This involves the platform selecting products with market potential, commissioning qualified upstream manufacturers for production under its own brands, thereby controlling pricing and distribution. This strategy accelerated in October 2024 when YSB acquired 100% of the pharmaceutical B2B supply chain service provider "Yikuai Yiyao" for 1.035 billion yuan. Yikuai Yiyao, founded in 2019, primarily distributes its OEM proprietary brand drugs to chain pharmacies via direct supply. YSB's proprietary brands are now managed primarily under its "Le Yaoshi" and "Yikuai Yiyao" banners, with "Le Yaoshi" focusing on product selection. Existing brands include Le Yaoshi, Yuandian, and Huitai. For instance, the "Le Yaoshi" portfolio covers 15 common medication scenarios, including cold remedies like Huoxiang Zhengqi Oral Liquid, pain relievers like Ibuprofen and Celecoxib. By eliminating the distribution markup of traditional branded drugs, YSB secures lower procurement costs upstream while maintaining price competitiveness downstream, boosting the self-operated business gross margin from 6.2% to 7.7%. However, the company's overall net profit margin remains low at 0.7%, indicating a business model reliant on high turnover for thin margins. YSB maintains over 60-day payment terms with upstream suppliers, while its inventory turnover is only about 30 days, with downstream pharmacies generally settling in cash. Concurrently, the company is highly dependent on sales investment, with sales and marketing expenses growing 19.3% to 1.743 billion yuan in 2025.
Following the 2025 earnings release, YSB's stock price rebounded 18.6% within a week, but this failed to reverse its long-term downtrend. The stock currently hovers around HK$5, having plummeted over 90% from its August 2023 peak of HK$64.5, with its total market capitalization shrinking from over 40 billion yuan to roughly 3.5 billion yuan. Massive capital withdrawal is the direct cause of this collapse. After its June 2023 IPO, YSB's stock crashed 46% on its December 13, 2023, lock-up expiration day. Over the following year and a half, core investors successively reduced their stakes. DCM opted for a complete exit, Fosun Pharma sold shares multiple times, and Shunwei Capital cleared its remaining stake in September 2025 at HK$3.1 per share. Baidu, which led the E2 round at $8.64 per share, also completed its exit in November 2024. These investors, who once propelled its pre-IPO valuation to $1.435 billion, have largely divested, reflecting capital market skepticism about YSB's medium to long-term valuation logic. The fundamental reason for this exodus is the disappearance of its sector premium. YSB's business model is primarily a dual-engine driven by "Platform + Self-operated" operations. The platform business facilitates transactions between sellers and buyers, charging commissions based on sales value, while the self-operated business involves YSB purchasing drugs and reselling them to downstream pharmacies and primary care institutions. Initially hailed as a benchmark for both industrial internet and pharmaceutical distribution, aligning with policies like the "Two-Invoice System" and "Prescription Drug Outflow," YSB's narrative portrayed it as a company using digital means to streamline distribution layers and markups, leveraging the internet's long-tail effect to enhance out-of-hospital efficiency. However, as volume-based procurement normalized and the prescription outflow红利 faded, the out-of-hospital market shifted from a capital hotspot back to a traditional sector. YSB's valuation logic consequently reverted from a high-growth "platform internet" story to a conventional "pharmaceutical distribution" valuation. Its push into OEM businesses further aligns its operations with traditional pharmaceutical retail. For reference, pharmacy chain LBX Pharmacy, also known for OEM drugs, has a proprietary brand portfolio covering six major brands like Weinnojian and Yaoshengtang with over 600 varieties; OEM drug sales accounted for 22.8% of its self-operated store sales in the first three quarters of 2025. This OEM model relies on offline terminals, offers slightly higher margins, but is fundamentally a traditional retail logic dependent on supply chain and operations, diverging sharply from YSB's initial light-asset narrative of disrupting pharmaceutical distribution. Liquidity concerns may have exacerbated market pessimism. On March 9, 2026, YSB was removed from the Hong Kong Stock Connect. Its stock fell over 15% that day, closing at HK$3.92. Losing southbound capital support implies reduced trading volume, further complicating any valuation recovery. In response to the stock slump, YSB conducted several share repurchases between May and November 2025, totaling over 7.4 million shares at prices between HK$6.98 and HK$11.21. The day after the 2025 report, management proposed a new buyback plan. On March 24, 2026, YSB granted a total of 32.55 million share options to Chairman and CEO Zhang Buzhen and Executive Director and CFO Chen Fei at an exercise price of HK$4.608 per share. Option vesting is tied to the company's total market capitalization, divided into three tiers for both executives: vesting occurs when the average market cap over 10 consecutive trading days first reaches or exceeds HK$12 billion, HK$20 billion, and HK$30 billion, for 4.11 million, 8.22 million, and 13.71 million options for Zhang, and 1.37 million, 2.06 million, and 3.08 million for Chen, respectively. These targets are far from the current market cap, making such symbolic confidence gestures difficult to convince investors in the short term without industry growth tailwinds and liquidity support.
Despite reporting its best-ever results, YSB faces significant challenges. In July 2025, mandatory drug traceability codes were implemented. Starting January 2026, all medical institutions must fully collect and upload traceability code data. The nationwide rollout of these codes provides upstream manufacturers with a tool for channel control, enabling real-time monitoring of drug flows and precise action against unauthorized distribution. As early as 2019, YSB faced supply cuts from over ten manufacturers, including Yangtze River Pharmaceutical Group and Harbin Pharmaceutical Group, which demanded distributors halt supplies to its platform, citing price disruption concerns. Now, enhanced technical oversight closes regulatory gaps, directly squeezing the space for non-standard channel drugs on YSB's open platform and undermining its price-arbitrage comparison model. Price regulation is also tightening. The "Internet Platform Price Behavior Rules," effective April 2026, explicitly prohibit platforms from enforcing across-the-board price comparisons and mandatory price reductions, encompassing pharmaceutical e-commerce. YSB's previous strategy of using traffic leverage to pressure upstream manufacturers and maintain low prices will be deemed non-compliant. As low-price distribution channels shrink, the foundation for platform growth is eroding. To counter these risks, YSB is aggressively developing proprietary brands. However, this shifts its role from a neutral intermediary to a competitive market participant, potentially undermining trust in its platform economy. By utilizing procurement data from 600,000 platform pharmacies to identify high-sale, high-margin products, then commissioning OEM production to sell back to the same customers at lower prices, YSB's model appears aggressive to suppliers, who view sharing data as feeding a competitor. With proprietary brands constituting 80% of its manufacturer-first promoted business, YSB has transformed from a neutral facilitator to a data-advantaged competitor, inevitably straining relations with major pharmaceutical companies. Rising compliance costs present another major challenge. The 2025 "Pharmaceutical E-commerce Compliance Details" require "penetrative supervision" of platform drug sales, prohibiting unqualified small distributors from operating under the licenses of compliant companies. YSB's early expansion relied heavily on such suppliers. Penetrative supervision mandates verifying actual invoice flows, fund flows, and ultimate controllers, banning any shell company operations. With the impending revision of the "Online Drug Transaction Management Measures" in 2026, this supervision will intensify. Meeting these requirements necessitates on-site verification,资质re-assessment, and pharmacist presence checks, incurring significant compliance costs. Meanwhile, competitors like JD Health and AliHealth are increasingly focusing on the lower-tier markets where YSB has long operated. By 2024, over 65% of JD Health's users were from tier-3 cities and below, while AliHealth accelerated its user acquisition in these areas during its 2025 fiscal year through primary healthcare SaaS services. These giants possess stronger cash flow and inherent advantages in supply chain and logistics. YSB's room for maneuver in the existing market is becoming increasingly limited. Following its best-performing year in 2025, YSB stands at a difficult crossroads, with its future direction uncertain.
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