Analysis of Buchang Pharmaceutical's Investment Losses and Goodwill Impairment Risks Related to POMDOCTOR LIMITED (PomDoctor)

Based on the collected data, I will conduct a systematic and comprehensive analysis for you.

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According to the announcement issued by Buchang Pharmaceutical on January 6, 2026, the company suffered significant losses from its investment in Guangzhou Qilekang Digital Health Medical Technology Co., Ltd. POMDOCTOR LIMITED (PomDoctor), the de facto holding company of this investment, was listed on the U.S. NASDAQ Stock Exchange via a VIE structure on October 8, 2025[1][2].

Time Node	Book Value/Share Price	Amount/Price
September 30, 2025 (Pre-IPO)	Book value of investment in Qilekang Digital Health	RMB 326 million
October 8, 2025	PomDoctor IPO offering price	US$4.00 per share
December 31, 2025	PomDoctor closing price	US$0.2949 per share
December 31, 2025	Market value of shares held by Buchang Pharmaceutical (considering lock-up discount)	RMB 33.0791 million
Expected Recognition	Fair value change gain/loss	-RMB 293 million

In just less than 3 months, the share price plummeted by

, resulting in an unrealized loss of nearly 90% for Buchang Pharmaceutical’s investment[1][2][3].

Buchang Pharmaceutical’s goodwill issue stems from its aggressive expansion strategy during 2012-2015:

Period	M&A Amount	Recognized Goodwill	Proportion of Total Assets at That Time
2012-2015	RMB 6.35 billion	RMB 5 billion	Approximately 1/3

However, with the tightening of policies in the pharmaceutical industry and the underperformance of acquired assets, the risk of goodwill impairment has erupted in a concentrated manner:

Year	Goodwill Impairment Provision	Proportion of Cumulative Impairment to Original Goodwill
2022-2024	Over RMB 4.5 billion	Approximately 90%

As of the end of the third quarter of 2025, Buchang Pharmaceutical still has

on its books[3][4].

1. Profit Pressure on Acquired Assets
   : Core subsidiaries such as Jilin Tiancheng and Tonghua Guhong are facing pressure from centralized drug procurement and product competition, with their performance continuing to fall short of expectations
2. Industry Policy Environment
   : The normalization of centralized volume-based drug procurement has compressed the profit margins of generic drugs and traditional Chinese medicines
3. Historical Impairment Inertia
   : The continuous large-scale impairments from 2022 to 2024 indicate that goodwill impairment has become a “normalized” financial risk point
4. Limitations of Valuation Methods
   : DCF valuation shows that the company’s intrinsic value is only US$10.26 under the conservative scenario, representing a 38.2% discount to the current share price, indicating that the market is cautious about the company’s future cash flows[0]

Financial Indicator	2024 Data	YoY Change
Operating Revenue	RMB 11.006 billion	-16.91%
Net Profit Attributable to Parent Company Shareholders	-RMB 554 million	-273.62%

Operating revenue in the first three quarters of 2025 was RMB 8.469 billion, down 0.54% year-on-year, indicating that the recovery of the main business is still weak[3][4].

As of the end of the third quarter of 2025, the company’s inventory has swelled to

, while the RMB 550 million orthopedic consumables involved in litigation account for only 12% of the total inventory, with nearly RMB 4 billion in hidden inventory risks beneath the surface[2][3][4].

Against the backdrop of normalized centralized procurement and reshaped price systems, inventory risks have escalated from “price decline risks” to “demand mismatch risks”. If the original pricing, channel, and turnover logic were based on high gross margins and stable volume growth, then once centralized procurement reduces prices and channels are adjusted, inventory will no longer be an asset but a liability that occupies cash[4].

Indicator	Industry Level	Buchang Pharmaceutical	Assessment
Sales Expense Ratio	Approximately 30%	39.45%	Relatively High
R&D Expense Ratio	Approximately 5-8%	1.81%	Severely Low

More notably, the company’s R&D capitalization rate rose from 26% in 2020 to 52% in 2024. Although this accounting technique can beautify profits in the short term, it cannot cover up the truth of insufficient substantive investment in innovation[3][4].

Risk Item	Impact Amount	Certainty
Fair value change of PomDoctor investment	-RMB 293 million	Confirmed
Inventory impairment provision (litigation-related portion)	Approximately RMB 550 million	Uncertain
Goodwill impairment (remaining balance of RMB 620 million)	To be provided for	Uncertain

1. Sluggish Main Business Growth
   : Operating revenue has declined for 4 consecutive years, and transformation has not yet formed effective support
2. Heavy Historical Burdens
   : Multiple risk factors such as goodwill, inventory, and litigation are intertwined
3. Bearish Valuation
   : DCF valuation shows that the current share price has a 2.4% discount to intrinsic value, and the discount reaches 38.2% under the conservative scenario[0]

1. PomDoctor Investment Losses Are Inevitable
   : The RMB 293 million fair value change loss will directly reduce the company’s 2025 net profit attributable to parent company shareholders. This is a non-recurring gain/loss and does not affect the net profit after deducting non-recurring items, but it reflects major errors in the company’s due diligence and risk control for external investments[1][2].
2. High Impairment Risk of RMB 620 Million Goodwill
   : Considering that the company has accumulated goodwill impairment provisions of over RMB 4.5 billion in history, and it still faces pressure from centralized procurement and declining performance of acquired assets, the remaining goodwill is highly likely to continue to be impaired.
3. The Company Faces Systematic Financial Pressure
   : RMB 4.5 billion in inventory, RMB 620 million in goodwill, and RMB 293 million in investment losses form the “Three Big Mountains”. Coupled with the continuous decline of the main business, the company’s financial risks cannot be ignored.

The case of Buchang Pharmaceutical reveals the deep-seated predicament of traditional pharmaceutical companies in conducting aggressive expansion and cross-border transformation under the “heavy marketing, light R&D” model. If the company cannot fundamentally reflect on its “heavy capital, light operation” development logic, the path to solving the problems will still be long.

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[1] Dahe Net - “Unrealized Loss of 90% in Just 3 Months! Buchang Pharmaceutical ‘Steps on a Mine’ with Nearly RMB 300 Million Loss in U.S. Stocks” (http://finance.ce.cn/stock/gsgdbd/202601/t20260108_2690168.shtml)
[2] Xinmin Weekly - “Transformation Pains of Buchang Pharmaceutical: RMB 600 Million Inventory Litigation on One Hand, RMB 300 Million Suspended Investment on the Other” (http://finance.ce.cn/stock/gsgdbd/202601/t20260112_2696053.shtml)
[3] China Business Journal - “Behind the RMB 650 Million Sky-High Litigation, Buchang Pharmaceutical’s Transformation ‘Scars’ Are Exposed” (https://finance.sina.com.cn/stock/wbstock/2026-01-05/doc-inhffwpt6584628.shtml)
[4] Sina Finance - “Buchang Pharmaceutical Burdened with RMB 4.5 Billion Inventory, Suffers RMB 293 Million Unrealized Loss in 3 Months from U.S. Stock Investment in PomDoctor” (https://finance.sina.com.cn/jjxw/2026-01-09/doc-inhfswxp2976688.shtml)
[0] Jinling API Financial Database