Once widely recognized for its cataract eye drops, Zhejiang Shapuaisi Pharmaceutical Co.,Ltd. continues to grapple with mounting operational pressures. In its 2026 semi-annual report, the company posted revenue of RMB 197 million, a year-on-year decline of 16.77%, while its net profit excluding non-recurring items swung to a loss of RMB 31 million, plunging 244.60%. It was only through non-recurring gains totaling approximately RMB 41.11 million, stemming from fair value changes and investment income, that the company managed to eke out a net profit attributable to shareholders of RMB 20 million, masking the reality that its core operations have slipped into the red. This former eye drop champion is now besieged by falling revenue, soaring expenses, and a string of asset writedowns from its medical service acquisitions.

The Core Business Struggles Under Cost Pressure

Weak growth in its core business is the most immediate challenge confronting Zhejiang Shapuaisi Pharmaceutical Co.,Ltd. During the reporting period, the gross margin contracted to 50.80%, a drop of 9.5 percentage points year-on-year. To push new products into the market, marketing outlays have been ramped up, with selling expenses climbing nearly 20% to RMB 51 million, pushing the selling expense ratio above 26%. Combined with higher administrative costs, the company's total period expense ratio ballooned to 61.10%, the highest level since 2021. Against a backdrop of shrinking revenue, persistently rising costs have amplified the drag on profitability. The sharp collapse in operating cash flow serves as a further alarm. In the first half of 2026, net cash generated from operating activities stood at a mere RMB 910,000, plummeting 98.23% from the same period last year, underscoring a significant deterioration in the core business's ability to generate cash. As the company's flagship product, the bendazac lysine eye drops once formed the bedrock of Zhejiang Shapuaisi Pharmaceutical Co.,Ltd.'s fortunes, yet this segment has long shown signs of fatigue, with eye drop revenue declining consecutively in 2024 and 2025. The 2026 interim report omitted product-level breakdowns, leaving the true performance of the core eye drop business unverifiable for now. Despite holding a pipeline of ophthalmic products, including an approved vitamin B12 eye drop and candidates like atropine sulfate and pilocarpine hydrochloride eye drops at various R&D stages, the company's research efforts have contracted. R&D investment fell to RMB 14.28 million in the first half of the year, down 38% year-on-year, following a similarly steep decline in the prior-year period. This retrenchment in R&D casts a shadow over the prospects for launching new products and forging a fresh growth trajectory, leaving the question of whether the company can replicate the success of its former blockbuster unanswered.

Medical Service Acquisitions Stumble, Related-Party Deal Collapses Exposing Governance Gaps

Zhejiang Shapuaisi Pharmaceutical Co.,Ltd. operates two segments: pharmaceutical manufacturing and medical services, with the latter having been a persistent drag on earnings for years. Earlier acquisitions, namely Taizhou Women's Hospital and Qingdao Shikang Eye Hospital, have failed to deliver anticipated growth. In 2024 and 2025, both hospitals triggered substantial goodwill impairments, propelling the company into two consecutive years of hefty net losses attributable to shareholders, with the 2025 loss widening to RMB 239 million. By the first half of 2026, conditions at the two hospitals remain dire. Taizhou hospital saw revenue decline and swung to a net loss of RMB 1.76 million, while Qingdao Shikang recorded drops in both revenue and net profit, with net income falling roughly 72% year-on-year. The goodwill left over from these acquisitions continues to pose impairment risks, and any further writedowns could directly batter the income statement. Given the precedent of these two hospitals' deteriorating performance, in March of this year, Zhejiang Shapuaisi Pharmaceutical Co.,Ltd. proposed a RMB 528 million acquisition of a 100% stake in Shanghai Qinli Industrial, a company controlled by the brother of the actual controller, with the key asset being Shanghai Tianlun Hospital. The deal, featuring an asset valuation premium of more than 24 times, quickly drew market skepticism. The Shanghai Stock Exchange fired off an inquiry letter, zeroing in on the fairness of the valuation and funding sources, while also highlighting the historical pattern of post-commitment performance declines at prior acquired hospitals and demanding details on measures to prevent a repeat of asset deterioration. After multiple delays in responding, the company ultimately scrapped the deal in May. This failed related-party transaction lays bare vulnerabilities in the company's external investment and risk controls. The collective underperformance of past acquisitions signals insufficient vetting and post-acquisition integration capabilities on the medical services front. On one side, the core eye drop business faces growth headwinds, and new product launches are not imminent. On the other, the medical services segment continues to hemorrhage, weighed down by substantial goodwill and the ever-present specter of impairment charges. Overall, Zhejiang Shapuaisi Pharmaceutical Co.,Ltd. is currently leaning on investment income and other non-recurring gains to dress up its book profits, while its main business has descended into losses. Going forward, the company must contend with the twin challenges of a waning legacy product and scaled-back R&D, alongside the risk of further impairments from its existing hospital assets, leaving its future operations fraught with uncertainty.