Under the pressure of generic drug centralized procurement, Huiyu Pharmaceutical (688553.SH) has pinned hopes on the aesthetic medicine sector to forge a second growth curve. Yet its aesthetic medicine platform, Huiyu Yueying, has long failed to achieve self-sustaining cash flow, relying continuously on financial assistance from the listed company, bank guarantees, and loans from the actual controller to remain operational. As the subsidiary sinks into insolvency, the listed company now carries substantial contingent liabilities, while issues including shareholder commitment fulfillment and cross-sector business execution have come to the fore.

Shareholder Commitment Flaws and Multi-Party Funding to Sustain Subsidiary

Established in 2019, Huiyu Yueying focuses on the R&D and sales of Class II/III medical devices for aesthetic medicine. To advance the project, the listed company approved financial assistance of up to RMB 60 million in January 2024, requiring all shareholders to contribute proportionally. At that time, Beijing Houhong, a related shareholder controlled by actual controller Ding Zhao, made a public commitment to provide proportional funding, but later failed to honor it, resulting in a warning letter from the Sichuan Securities Regulatory Bureau and a record in the integrity archives. By 2026, due to insufficient funds at the related entity, the obligation was shifted to be fulfilled jointly by Ding Zhao personally and Beijing Houhong. This time, Ding Zhao extended a RMB 30 million loan to Huiyu Yueying at an annual interest rate of 2.6% over five years. As a result, outstanding loans from the listed company and the actual controller's related party reached RMB 46.5 million and RMB 31 million, respectively.

Tracing the capital trajectory, financial assistance from the listed company to Huiyu Yueying climbed from RMB 13.2 million at the end of 2024 to RMB 31.2 million at the end of 2025. Beyond shareholder loans, Huiyu Yueying has repeatedly sought bank financing, with Huiyu Pharmaceutical providing cumulative joint liability guarantees totaling RMB 12.02 million. In June 2026, the listed company proposed additional bank credit guarantees of up to RMB 60 million, with no guarantee fees charged and no counter-guarantees required from the subsidiary, further widening the risk exposure. Notably, both related entities Beijing Houhong and Chengdu Houhan reported zero revenue and zero net profit at the time of disclosure, lacking operational cash flow themselves. Their earlier failure to honor proportional funding commitments, later patched by the actual controller's personal loans to cover shareholder capital gaps, underscores the project's heavy dependence on external funding.

Business Underperformance and Cross-Sector Risks Amid Main Business Strain

The establishment of Huiyu Yueying was originally a key strategic move by Huiyu Pharmaceutical to counter the impact of centralized drug procurement. Hit by procurement policies, the company saw both revenue and net profit decline in 2022, and by 2025, the listed company itself recorded a loss, with net profit down 107.67% year-on-year. The company sought to leverage the consumer healthcare sector to secure aesthetic medical devices with greater pricing autonomy, hedging against the downturn in its generic drug operations. However, operating data reveals that Huiyu Yueying has fallen into a trap of shrinking revenue, sustained losses, and insolvency.

From 2023 to 2025, its revenue dropped from RMB 18.804 million to RMB 1.076 million, with net losses of RMB 6.909 million, RMB 21.524 million, and RMB 12.895 million across the periods. As of the end of 2025, total assets stood at RMB 37.0903 million against total liabilities of RMB 61.7755 million, leaving the subsidiary balance-sheet insolvent. The annual interest of RMB 780,000 on the latest RMB 30 million loan alone exceeds 70% of its 2025 revenue, underscoring immense profitability pressure. Although the company holds multiple aesthetic medical devices under development, with 10 consumer healthcare projects as of the end of 2025 and an estimated total investment of RMB 271 million, the core lipolysis product HY-2003 remains in Phase I clinical trials, far from commercialization. Its marketed cross-linked hyaluronic acid product, touted for high gross margins, has yet to translate into actual sales revenue.

Aesthetic medical devices and pharmaceutical operations differ vastly in registration processes, distribution channels, and marketing models, and the company's cross-sector market conversion has fallen short of expectations. For the listed company, the risks are clear: first, with Huiyu Yueying already insolvent and large-scale credit guarantees lacking counter-guarantees, any debt default by the subsidiary would directly transmit risk to the listed company; second, the aesthetic medicine project's continuous cash burn, against the backdrop of the listed company's own losses, will further drain resources over time; third, the failure of shareholders to honor public commitments on schedule reveals governance deficiencies, warranting ongoing scrutiny of the actual controller's and related parties' financial strength and fulfillment capability.

The aesthetic medicine sector holds promising prospects, but R&D, registration, and channel development all require lengthy timelines. Huiyu Pharmaceutical's aesthetic medicine experiment also serves as a cautionary case for A-share pharmaceutical firms venturing into consumer healthcare: sector hype does not equal earnings delivery, and under heavy investment, funding risks, shareholder compliance, and commercialization execution are hurdles that cannot be bypassed.

This article was generated with the assistance of AI tools.