Lbx Pharmacy Chain Joint Stock Company recently released its 2025 annual report, revealing a challenging performance for the leading national drug retail chain. For the first time since its 2015 listing, the company experienced a consecutive two-year decline in both revenue and net profit.
Simultaneously, the firm faces multiple pressures, including approximately 5.7 billion yuan in high goodwill on its books, a debt-to-asset ratio nearing 65%, and recent exposure of insurance violations at its Hunan stores. These issues pose significant tests for the pharmacy giant, which currently holds a market capitalization of 10.9 billion yuan.
Despite the consecutive performance decline, executive compensation remains substantial. According to the 2024 annual report, the total remuneration for the executive team reached 14.1 million yuan. By 2025, this figure climbed to 16.36 million yuan, a 16.03% year-on-year increase. Founder and Chairman Xie Zilong maintained his compensation at 2.16 million yuan for both years.
In recent years, Xie Zilong has been involved in several controversies. Media reports indicate that in July 2024, he was detained and investigated by the Hunan Provincial Supervision Commission. Two months later, Lbx Pharmacy Chain announced that Xie had been released from detention. In 2026, rumors of Xie having a child outside marriage sparked public discussion about corporate governance and ethical risks.
The annual report data shows that in 2025, the company achieved operating revenue of 22.237 billion yuan, a decrease of 0.54% year-on-year. Net profit attributable to shareholders dropped by 26.44% to 382 million yuan, while adjusted net profit fell by 30.15% to 347 million yuan.
The company attributed the significant profit decline primarily to impairment losses on goodwill and land, totaling 238 million yuan for the year. Shareholders' equity decreased by 0.69% compared to the previous year, remaining largely flat. Total assets declined by 5.70%, mainly due to impairment losses and right-of-use asset amortization.
This marks the second consecutive year of substantial net profit decline for Lbx Pharmacy Chain. In 2024, net profit attributable to shareholders plummeted by 44.13% to 519 million yuan. This represents a nearly 60% contraction from the 929 million yuan profit achieved in 2023.
On the revenue side, this is the first instance of consecutive annual revenue decline since the company's 2015 listing. Revenue growth had already slowed from 28.54% in 2022 to 11.21% in 2023 before turning negative in 2024.
Despite overall revenue and profit pressures, quarterly data shows marginal improvement signs. The first-quarter 2026 report released alongside the 2025 annual report indicates a performance recovery, with quarterly revenue reaching 5.481 billion yuan (up 0.85% year-on-year) and net profit attributable to shareholders growing 5.27% to 264 million yuan.
The recent performance decline is closely linked to the company's aggressive merger and acquisition strategy. The goodwill growth trajectory reveals long-standing risks.
Public data shows that between 2018 and 2023, through acquisitions of regional chains including Huatuo Pharmacy and Huren Health, Lbx Pharmacy Chain's goodwill doubled from 2.8 billion to 5.8 billion yuan.
By the end of 2025, after impairment provisions, the company's goodwill book value remained high at 5.613 billion yuan. As of the third quarter of 2025, goodwill accounted for approximately 80% of net assets, significantly exceeding the industry's common safety threshold of 30%. Throughout 2024-2025, goodwill maintained around 5.7 billion yuan, consistently representing nearly 80% of net assets.
Accompanying the high goodwill risk is the company's long-elevated debt-to-asset ratio. Audited financial data shows the ratio has remained high within the pharmaceutical retail industry, reaching 66.00% at the end of 2024. Throughout 2025, the ratio fluctuated narrowly at high levels: 64.74% at first-quarter end, 64.53% at mid-year, 64.57% at third-quarter end, and 64.75% at year-end, consistently exceeding industry averages.
This sustained high debt level stems primarily from the company's expansion-through-acquisition strategy since listing. To finance regional chain acquisitions, the company consistently used debt financing for merger considerations, simultaneously increasing debt scale and elevating the debt-to-asset ratio while accumulating substantial goodwill through acquisition premiums, creating deeply intertwined risk resonance.
On the evening of the 2025 annual report release, Lbx Pharmacy Chain faced exposure of insurance violations at its stores, with regulatory authorities simultaneously launching investigations.
Reports based on visits to over 30 chain pharmacies in Hunan and Henan provinces revealed insurance fund irregularities at more than 10 locations, involving multiple chains including Lbx Pharmacy Chain. Specific violations included cosmetics and health products being substituted as "medicines" for settlement, prescription drug promotions through "buy-medicine-get-medicine-free" schemes, staff skillfully avoiding surveillance while fabricating prescriptions and creating "drug substitution plans," and established patterns of assisting others with medical insurance card transactions.
The Medical Insurance Fund Use Supervision and Management Regulations effective May 1, 2021, prohibit drug substitution and诱导ing or assisting others in seeking medical care or purchasing drugs under false pretenses. Recent years have seen intensified warnings from local medical insurance departments against substituting non-insurance products for medicine settlements.
On April 22, the Hunan Medical Insurance Bureau urgently summoned Lbx Pharmacy Chain's headquarters, urging completion of onsite inspections at involved stores. Preliminary investigations revealed violations including product substitution and proxy card transactions at 10 stores, involving 3,267.14 yuan in personal medical insurance account funds, with no discovered misuse of pooled funds. Medical insurance bureaus in Huaihua and Hengyang cities have suspended insurance service agreements with some involved stores, while Hunan province launched province-wide special rectification and unannounced inspections.
In response, Lbx Pharmacy Chain stated: "We sincerely accept supervision from regulatory authorities and media, and deeply apologize for insurance irregularities at individual stores. The company高度重视s medical insurance compliance management, having immediately launched comprehensive self-inspection and closed-loop rectification while continuously strengthening medical insurance compliance system construction to ensure medical insurance fund safety and public medication security."
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