Qizheng Tibetan Medicine: Overcoming “Three Paradoxes” to Build a Long-Lasting Enterprise on the Plateau

　　Traditional Tibetan medicine from the plateau can also be modernized; even without leveraging in its core business, it can sustain steady performance growth; and after listing on the A-share market, it can achieve greater scale and strength without relying on capital maneuvers... For some listed companies, these seemingly paradoxical assertions might appear more like contradictions. Yet at Qizheng Tibetan Medicine, such statements have successfully built bridges of communication between initial conditions and ultimate outcomes.

　　The journey of Qizheng Tibetan Medicine began as a quest to pursue a dream. Yet throughout its development, the company has rarely displayed the hallmarks of idealistic leaps and bounds. Instead, steadiness and innovation have become deeply ingrained in its very DNA—much like the “two wings” soaring across the Tibetan medicine landscape, guiding Qizheng Tibetan Medicine forward on an unceasing path of progress. How has Qizheng Tibetan Medicine successfully navigated the “three major paradoxes”? And how has it managed to embed the genes of both steadiness and innovation into its daily operations, thereby building a resilient, evergreen enterprise on the plateau?

　　Traditional Tibetan medicine can also be modernized.

　　The Qinghai-Tibet Plateau, often referred to as the "Roof of the World," has an average elevation of 4,000 meters. Due to its harsh cold climate and low oxygen levels, it is commonly regarded as a forbidden zone for life. Nevertheless, Tibet is one of the Chinese provinces with the highest proportion of centenarians, and among its elderly population, cases of Alzheimer's disease are remarkably rare. It is also one of the regions in China with the highest happiness index. Born here as a medical system that integrates the core principles of Indian, Persian, and traditional Chinese medicine while developing its own distinct framework, Tibetan medicine remained largely hidden away in this high-altitude region for a considerable period. It wasn't until the reform and opening-up policy that this situation began to change.

　　Lei Jufang, a native of Lintao, Gansu Province, earned a bachelor’s degree in vacuum physics from Xi’an Jiaotong University. After graduation, she joined the Institute of Modern Physics in Lanzhou, Chinese Academy of Sciences, where she steadily rose through the ranks to become a senior engineer. In 1987, when the state encouraged scientific and technological personnel to “move into the economic frontline,” 34-year-old Lei Jufang resolutely resigned from her stable position at the Chinese Academy of Sciences and ventured into entrepreneurship. After several years of practical experience, Qizheng Group was officially established in 1993.

　　“In the early 1990s, I happened to come across one of the 80 illustrated charts of Tibetan medicine—the ‘Embryonic Development Chart.’ This chart revealed the mysteries of life in simple and clear language. I was utterly astonished to learn that the chart’s description had been made without the aid of any instruments, predating by over a thousand years the discoveries confirmed by microscopic technology regarding embryonic development. Later, when I visited a Tibetan hospital in Gannan, I was amazed to find that Tibetan medicine could actually tackle many challenges that have long baffled modern medicine. That’s when I first began to dream of dedicating myself to Tibetan pharmaceuticals,” recalled Lei Jufang. Lei Jufang describes this entrepreneurial venture as a “journey in search of a dream.” In the years that followed, she spent several years conducting in-depth field research in Tibetan regions, seeking guidance from master practitioners of Tibetan medicine, carefully studying and gaining a deep understanding of Tibetan medical history, and thoroughly researching traditional Tibetan medicine preparation methods and pharmacological principles. All these experiences became the solid foundation upon which Qizheng’s early development was built.

　　At the very beginning of Qizheng Tibetan Medicine’s establishment, Lei Jufang first encountered two major challenges: cultural barriers and the convenience of transporting, storing, and using Tibetan medicines. As for the latter challenge, Lei Jufang’s long-term research in vacuum technology proved invaluable—Qizheng Pain-Relieving Plaster, by leveraging vacuum freeze-drying technology and wet-application processes, successfully addressed two longstanding issues with traditional topical ointments: the inability to preserve active pharmaceutical ingredients for extended periods and the failure to fully unleash their therapeutic efficacy. This innovation brought about a revolutionary breakthrough in topical drug formulations. Upon its launch, this product immediately won widespread acclaim among patients for its rapid and reliable effects, becoming the preferred essential medicine for Chinese national team athletes. Thanks to this breakthrough, Qizheng Tibetan Medicine soared to become the only manufacturer of topical pain-relief medications at the time to rank among the top ten companies entering the mainstream Chinese patent medicine hospital market—and also the sole Tibetan medicine manufacturer to make the list—quickly establishing itself as a powerful and well-known brand.

　　Combining modern pharmaceutical technology with the development of Tibetan medicine has become the key to modernizing Tibetan medicinal practices. Since then, Qizheng Tibetan Medicine has steadily advanced further along this path. Over the past two decades, relying on technological innovation, Qizheng Tibetan Medicine has achieved numerous industry firsts within the Tibetan medicine sector, earning the Second Prize for National Scientific and Technological Progress, receiving the International Invention Gold Award, becoming a National High-Tech Enterprise and a National-Level Enterprise Technology Center, and being listed among the nation’s首批 innovative enterprises. The company has continuously broken new ground in the history of Tibetan medicine technology. In particular, in the national market for topical analgesics, Qizheng Tibetan Medicine held the top sales position for seven consecutive years, with its products having been used by hundreds of millions of people, thereby boosting Western medical experts’ and the Western pharmaceutical market’s awareness and appreciation of Tibetan medical culture.

　　Relatively speaking, overcoming cultural barriers is even more challenging. Tibet’s remote location often leads people to harbor concerns such as, “Can Tibetan medicines be used in Han areas?” In particular, most Tibetan oral medications come in the form of small black pellets, which create a very obvious cultural disconnect with Han Chinese traditions. To successfully promote Tibetan medicine, it’s essential to conduct rigorous safety testing and clearly explain the findings using modern medical terminology—so that both doctors and consumers can understand not only that these medicines are safe but also that they’re effective.

　　Qizheng Tibetan Medicine’s solution to this challenge lies in vigorously leveraging “two powerful tools” in its marketing and promotion efforts. The first is academic marketing. In promoting products such as Qizheng Pain-Relieving Plasters, the company invests significant effort each year in conducting evidence-based medical research. During this process, the company discovered that applying cutting-edge pain research methods to Tibetan medicine yields remarkably positive results. As a result, these academic findings are not only disseminated through domestic media but are also shared in collaboration with top hospital physicians and published on international platforms.

　　The second aspect is cultural marketing. Tibetan medicine draws upon the unique Tibetan cultural system. In Tibetan medicine, there’s a thangka known as “The Tree of Life,” which vividly and systematically illustrates the four primary therapeutic approaches used by Tibetan physicians—dietary therapy, lifestyle adjustments, internal medications, and external treatments—using the roots, trunk, branches, and leaves of a single tree as symbolic representations. Whether it’s pain or vascular blockage, these conditions can be addressed through adjustments in diet, emotional state, and the external environment. This implies that, beyond the efficacy of the medicine itself, healing also requires the individual to let go of the constraints imposed by illness and make corresponding changes in their diet and other aspects of daily life. “Although this painting was created over 400 years ago, the underlying system has been developed for thousands of years. It’s precisely this combination of cultural dissemination and marketing that sets Tibetan medicine apart from other medicinal practices, giving it a uniquely uplifting effect on the human spirit,” analyzed Lei Jufang.

　　Under innovative marketing efforts, Tibetan medicine has finally made its way down from the high-altitude plateau at an elevation of over 4,000 meters. As a branch of traditional medicine, Tibetan medicine now offers more effective and superior options for treating some diseases that have previously been difficult to cure. Whether it’s diminishing the mystique surrounding the potency of plateau medicines or enhancing public understanding of Tibetan medicine, significant progress has been made in both areas.

　　“Tibetan medicine has developed its own comprehensive system. From a theoretical perspective, it is based on the dynamic balance of three factors—Lung, Chikpa, and Peken—which closely resembles the yin-yang and five elements concepts in traditional Chinese medicine. It boasts its own unique diagnostic and therapeutic approaches as well as a distinct pharmacopoeia. In particular, thanks to its plant-based and natural origins, it has attracted increasing attention in today’s medical landscape,” Lei Jufang told reporters. “Whether it’s the firsthand experience I had when I was in Nagqu, Tibet Autonomous Region, witnessing Tibetan doctors successfully curing conditions that modern medicine deemed incurable using ancient methods, or the years of practical experience accumulated by Qizheng Tibetan Medicine, both have convinced me that the path our company is taking now is the right one—and we will undoubtedly continue down this road in the future.”

　　Sustainable development without leverage.

　　In August 2009, Qizheng Tibetan Medicine was listed on the A-share market. Since then, its revenue and net profit have steadily increased, rising from RMB 470 million and RMB 160 million at the time of its IPO to RMB 1.05 billion and RMB 300 million in 2017, respectively. Among the 292 biopharmaceutical companies currently listed on the A-share market, Qizheng Tibetan Medicine ranks in the middle tier in terms of size. However, unlike some pharmaceutical and manufacturing companies, Qizheng Tibetan Medicine’s annual performance growth is primarily driven by the consistent and stable expansion of its pharmaceutical business—always staying focused on its core Tibetan medicine business and achieving steady progress entirely through organic growth, which has become a defining characteristic of Qizheng Tibetan Medicine.

　　A key indicator of this characteristic is that, as Qizheng Tibetan Medicine’s performance continues to grow, the company’s asset-liability ratio has shown an overall downward trend. Around 2015, Qizheng Tibetan Medicine’s asset-liability ratio exceeded 20%; however, since then, it has steadily declined, reaching 15.6% in 2016 and 17.5% in 2017. Moreover, from the perspective of equity pledges, we can also see the company’s prudent and稳健 approach to low-leverage development. Currently, the controlling shareholder, Gansu Qizheng Industrial Group Co., Ltd., has 19.5 million shares still under pledge, accounting for only 4.8% of the total share capital and just 6.94% of the shares it holds. As a result, Qizheng Tibetan Medicine has become a prime example of a company achieving sustained and stable performance growth without resorting to leverage. So, what is the secret behind the company’s ability to achieve continuous development without leveraging?

　　Adherence, inheritance, and innovation are regarded as the core of our secret formula. In its 2018 semiannual report, the company explicitly stated: “Since its establishment, the company has focused on the pain-relief drug market and specialized in the Tibetan medicine industry; it strives to maximize profits with an adequate cash flow ratio, thereby strengthening the enterprise; and it ensures continuous and steady expansion of its sales volume, thus establishing its competitive edge.” The continuous upgrading of our strategy is one external manifestation of Qizheng Tibetan Medicine’s philosophy of keeping pace with the times—a process that closely follows the broader trends in the pharmaceutical industry. Take 2013 as an example: that year marked the beginning of a new government administration, and healthcare reform—crucial to the overall situation and directly affecting people’s livelihoods—became one of the top priorities for the new administration. Various national ministries and commissions subsequently introduced corresponding policies to ensure the comprehensive implementation of the “12th Five-Year Plan” for healthcare reform. Based on this assessment, Qizheng Tibetan Medicine recognized that the newly revised Drug GMP standards, the expansion of essential drug lists, medical insurance cost control, the NDRC’s survey of pharmaceutical companies’ costs, and the launch of a new round of bidding and procurement procedures were all imminent. Consequently, the company’s board of directors and management team centered their work around the guiding principle of “focusing on Tibetan medicine and pursuing innovation to achieve strength,” enabling the company to achieve a 3.77% year-on-year increase in operating revenue and a 6.14% rise in operating profit for the entire year.

　　In 2014, the pharmaceutical industry began to face new changes. On the one hand, driven by factors such as the overall slowdown in the nation’s macroeconomic growth, continued government price controls within the industry, the implementation of the new GMP and GSP standards, delayed bidding processes, efforts to rein in medical insurance costs, and stricter regulatory policies aimed at controlling the proportion of drug expenditures, the pharmaceutical sector as a whole saw a deceleration in growth. On the other hand, however, the accelerating aging of the population and the ongoing improvement of the medical insurance system have boosted demand for pharmaceutical products, creating opportunities for the continued expansion of the pharmaceutical market. Therefore, Qizheng Tibetan Medicine has once again introduced its “One Axis, Two Wings, One Support” strategy. The “One Axis” focuses on strengthening the Pain Relief Plaster, leveraging a three-pronged approach—large hospitals, essential drugs, and retail outlets—to ensure sustained growth of this product. The “Two Wings” involve, on the one hand, expanding the pain-management product line to provide patients with comprehensive, integrated pain solutions; and on the other hand, accelerating the development of new products in the fields of neurological rehabilitation and gynecological pain management, thereby cultivating new strategic blockbuster products and speeding up the transition from a single-product focus to a diversified portfolio with multiple product lines and tiers, thus achieving a more rational product structure. The “One Support” refers to building robust capabilities in data information, operations, talent development, and institutional mechanisms to enhance efficiency, improve competencies, and boost motivation, ultimately creating a highly collaborative, dynamic, and agile organizational model characterized by “continuous activation, steady momentum, and consistent performance.”

　　2017 marked the concluding year of the “One Axis, Two Wings, One Support” strategy. Guided by this strategy, Qizheng Tibetan Medicine accumulated a portfolio of 55 Tibetan medicine product names and 72 approved drug registration numbers in 2017, centered around 12 exclusive varieties or exclusive dosage forms—including the pain-relief plaster and Bai Mai Ointment. Among these, 9 were over-the-counter (OTC) products and 2 were nationally classified as confidential medicines, covering multiple specialty therapeutic areas in Tibetan medicine such as orthopedics, neurology, gynecology, and gastroenterology. In contrast to the situation when the company went public in 2009—when the sales revenue contribution from Qizheng’s pain-relief plaster over the three preceding years and the current year stood at 95.94%, 87.19%, 86.52%, and 88.82% respectively—by 2017, despite steady growth in the company’s overall revenue and net profit, the proportion of plaster products in the company’s core business revenue had dropped to 76.97%. Thus, the company’s long-standing product structure, which had been dominated by a single flagship product, underwent a significant transformation.

　　In addition to strategic upgrades, continuous R&D innovation has also become one of Qizheng Tibetan Medicine’s key strengths. The company’s flagship product, Qizheng Pain Relief Plaster, is an externally applied wet dressing with independent intellectual property rights, pioneering innovative dosage forms for topical preparations. Moreover, the company has successfully developed technologies such as automated pill-making and low-temperature pulverization. Currently, it is also researching technologies including instantaneous sterilization of herbal raw materials and non-radiation sterilization methods. Speaking to a reporter from the Securities Times, Lei Jufang said: “Based on the current state of research and development in Tibetan medicine, the demands of today’s pharmaceutical market, and the company’s inherent advantages, we will gradually focus our R&D efforts and direction on the field of topical pain-relief medications—areas where we already enjoy a broad consumer base and strong marketing capabilities. By establishing and continuously improving a transdermal drug delivery system platform, we have gradually built deep expertise in developing the primary dosage form for topical pain relief—plasters—as well as accumulating technological reserves for developing other topical dosage forms, such as ointments, oils, and aerosol (spray) formulations. These technological breakthroughs will fundamentally address several major production challenges that have long constrained the development of Tibetan medicine, thereby laying a solid foundation for further promoting our products.”

　　It is precisely on the basis of continuously advancing R&D and innovation that, over the nearly 10 years since its launch, Qizheng Tibetan Medicine has steadily enriched its product portfolio. “Currently, the company is vigorously expanding its pain-management product line, simultaneously pursuing both the development of new products and the secondary development of already-marketed ones, thereby further enhancing coverage of second-tier new products. For instance, in 2017 alone, the company had more than 10 clinical research projects under development and post-marketing clinical studies, as well as over 10 basic research projects. At present, Cuitang Granules have completed Phase II clinical trials for cold and influenza treatment and are now undergoing Phase III clinical trials; Zhengru Patch has completed Phase II clinical trials; and Xiaotong Aerosol, for the treatment of acute sprains and strains, is smoothly progressing through its Phase IIa clinical trial,” revealed Lei Jufang.

　　This gene of resilience and innovation not only permeates the company’s operational level but also extends its influence beyond business operations. Ecological sustainability is a key concern for Qizheng Tibetan Medicine. Qizheng Tibetan Medicine has consistently advocated for sustainable procurement, establishing a direct-to-farmer supply chain that reduces the ecological impact caused by overharvesting. In terms of development, to ensure the resource needs of the Tibetan medicine industry, the company is also committed to promoting sustainable research on Tibetan medicinal resources, conducting semi-wild cultivation studies in their natural habitats as well as research into artificial cultivation techniques. To date, the company has accumulated research on cultivation techniques for 46 different Tibetan medicinal herbs. “The Qinghai-Tibet Plateau is one of China’s regions with the richest biodiversity, yet it is also one of the most ecologically fragile areas,” pointed out Lei Jufang. “Over the past two decades, Qizheng Tibetan Medicine has placed great emphasis on the effective, rational, and sustainable utilization of Tibetan medicinal resources—from procurement and R&D to production—dedicating itself to building a commercial ecosystem that focuses on long-term benefits.”

　　The cultivation of local enterprises and local talent has also become an important dimension of Qizheng Tibetan Medicine’s commitment to sustainable development. In the process of establishing her company, Lei Jufang actively recruited Tibetan college and graduate students from well-known domestic institutions, fostering talent from various ethnic groups—including Tibetans, Han, Hui, and Monpa—and helping a group of local core employees grow and thrive. When Qizheng Tibetan Medicine first set up its factory in Linzhi, it hired four successive cohorts of local ethnic minority people with disabilities over several years. Moreover, the company designed and built employee apartments in Linzhi, Tibet, giving priority housing to employees with disabilities. Today, these formerly disabled employees have become the economic pillars of their families and have regained their dignity and sense of worth in life.

　　Lei Jufang stated: “The company aims to continuously enhance its marketing capabilities, technological level, quality standards, and management efficiency by being market-demand oriented, driven by marketing innovation, empowered by technological innovation and product R&D, and underpinned by management innovation. We will focus on the pain-relief drug market, concentrate on the Tibetan medicine industry, establish a leading position in the Tibetan medicine sector, and gradually achieve our vision of becoming a long-lived enterprise that is cherished by employees, trusted by customers, respected by society, and beneficial to investors.”

　　You can grow and become stronger without relying on capital operations.

　　The combination of strategic upgrades and an inherent gene for innovation has made Qizheng Tibetan Medicine a quintessential long-term champion among A-share companies. Its sustained, stable growth has also endowed Qizheng Tibetan Medicine with robust cash flow, leading many research institutions to frequently offer forecasts and assessments regarding potential external acquisitions and mergers. Take 2015 as an example: that year, institutional analysts predicted Qizheng Tibetan Medicine’s earnings per share would reach 0.71 yuan. Moreover, since the company had established a merger and acquisition fund in that year—primarily aimed at supporting industrial consolidation within Qizheng Tibetan Medicine—securities firms predicted that, as the company’s “pain management integration” strategy is implemented, future investment opportunities for external growth cannot be ruled out.

　　But in reality, since its IPO, Qizheng Tibetan Medicine has not undertaken any external mergers or acquisitions. The company’s steady performance growth over the past several years has been entirely driven by organic internal growth. This has made Qizheng Tibetan Medicine one of the very few A-share companies that have been listed for many years yet still haven’t issued additional shares to raise new capital. In 2009, Qizheng Tibetan Medicine’s IPO offered 41 million A-shares to the public, increasing the company’s total share count from 365 million to 406 million shares. Yet ten years later, in 2019, the company’s share capital remained unchanged at 406 million shares—suggesting that capital restructuring is simply not a strategy that Qizheng Tibetan Medicine favors.

　　Lei Jufang has her own unique perspective on this matter. “Previously, apart from the IPO, the company hadn’t pursued much additional financing or engaged in mergers and acquisitions. This reflects the company’s emphasis on real-world operations and its focus on its core business. On the other hand, the Tibetan medicine industry is highly overlapping, with relatively little complementarity and synergy among players. Nevertheless, the company has never stopped exploring external collaborations. Looking ahead, we’ll certainly place great emphasis on areas where our core business can mutually support and synergize with other partners. In this regard, Qizheng Tibetan Medicine has already established a robust team of evaluators and experts. We hope to achieve consistency between what we do and our goals through steady development—otherwise, a rush to join in could ultimately lead to significant trouble.”

　　In contrast, Qizheng Tibetan Medicine’s investor returns have all been in the form of cash. According to Wind data, since its IPO, Qizheng Tibetan Medicine has raised a total of 480 million yuan through direct financing, with 100% coming from its IPO. Yet the company’s cumulative cash dividends have already exceeded 1.27 billion yuan—2.6 times the amount raised through the IPO. “Cash dividends have long been incorporated into the company’s articles of association, ensuring that investors receive stable returns,” explained Lei Jufang. “At the same time, the company has also strengthened relevant systems to safeguard investors’ rights and interests.” She added, “In the future, as long as an investor-return approach is proven feasible and aligns with market and shareholder needs, the company will be open to exploring and implementing it as a way to reward its investors.”

　　Reporting media: Securities Times

　　Report link: http://company.stcn.com/2019/0109/14786635.shtml