2019.05.23 CoStone Capital Views:
As a startup established in 2016, Suzhou PharmPlus Pharmacy Chain Co., Ltd. 苏州全亿健康药房连锁有限公司 (hereinafter referred to as “PharmPlus”) has achieved an “atypical growth” of 6 billion yuan in turnover in just three years.
The Secret to a Startup’s Huge Success in 3 Years
As a startup established in 2016, Suzhou PharmPlus Pharmacy Chain Co., Ltd. 苏州全亿健康药房连锁有限公司 (hereinafter referred to as “PharmPlus”) has achieved an “atypical growth” of 6 billion yuan in turnover in just three years.
PharmPlus knows well the integration of China’s retail pharmacy market. In the opinion of Chairman Lin Ling, any industry will inevitably undergo integration and merger when developing to a certain stage so as to form the profit space and living space conducive to its development. In the industry of retail pharmacy, increased concentration will bring consumers comprehensive and multi-level health consumption demand.
There is a similar development path in developed countries such as the United States and Japan, that is, the obvious trend of concentration in the pharmacy chain industry. The United States implements a relatively thorough separation of health care and medicines. Retail pharmacies are the most important sales terminals of prescription drugs in the United States, which have experienced a development process from diversification to chaining to servicing, with the business model and service model being continuously upgraded and improved. In contrast, the products sold in Japanese drugstores are mainly OTC medicines, daily necessities, and cosmetics, whose business model is similar to that of convenience stores and has obvious scale advantages.
The business model and service model of developed countries/markets determine its scale effect. Therefore, retail pharmacy markets in the United States and Japan demonstrate high concentration. The US prescription drug industry has a scale of about 410 billion US dollars. While the sales of the top 15 retail pharmacies in 2017 were close to 300 billion US dollars, accounting for 70% of market share, the sales of the top 3 occupied 50%. In Japan, the sales of drugstores in 2017 exceeded RMB 400 billion, with the market share of the top 10 drugstores increasing from 45% in 2010 to 72% in 2017. In contrast, China’s current market concentration is far behind those of United States and Japan.
Lin Ling believes that the low market concentration in China brings more opportunities. The total sales of China’s top 10 retail pharmacy companies account for about 17% of market share, meaning that there are huge potentials for improvement. He pointed out that China’s retail pharmacy industry currently had the following characteristics.
Potential: The domestic retail pharmacy chains started around May 2000, with less than 20 years of development. Compared with the development history of advanced countries, we have great space to improve operation, management ability, talent quality and new technology application.
Integration: Compared with the top 10 chain companies in the United States and Japan whose sales accounted for more than 60% of market share, China’s top 10 were only 17% in 2016. After two years of rapid integration, it is estimated that they will not exceed 25%, meaning that there is still great room for integration.
Gemographic dividend: The elderly over 60 years old in China currently account for nearly 18% of the population. It is estimated that the proportion of the elderly will exceed 30% by 2050. With the aging trend is deepening, the demand for medication is also increasing.
Consumption upgrade: With the increase in Chinese people’s income level, consumer demand is gradually upgrading from “having difficulty in getting treatment” to a higher level of health care. The retail pharmacy industry will continue to benefit from the huge demand brought by consumption upgrades in the future.
Policies: Policies such as prescription outflow, new version of GSP, and pharmacy classification are obviously beneficial to the head industry.
PharmPlus has entered the top 10 of the industry in just two to three years through capital integration; in the next 2 to 3 decades, more entities will join the industry through capital investment, which will provide more development choices for this industry. However, this process is relatively long.
As the institution that has built PharmPlus, CoStone Capital has nearly 20 years of investment experience in the consumer and health fields. Its successful investment cases include Conba, Mindray, and Pagoda. Based on a full understanding of the retail pharmacy industry, CoStone Capital has built a “capital + management” PharmPlus model. After the operation was taken over, the turnover and profit margins of PharmPlus have been significantly improved, which proves the success of this model.
For complete Chinese text, please see http://stonevc.com/news_view.aspx?TypeId=5&Id=760&Fid=t2:5:2
Source: The speech of Lin Ling organized by China Drug Store
Rewritten by Yang Yang, Edited by Li Yunzhen, Du Zhixin
Over the past year, the bull market returned, with technology leading the way.
As I said back in October 2024, the rally that began on September 24 was not merely a rebound, but a reversal. Since then, China's capital markets have undergone a broad revaluation, moving from undervaluation toward fair value.
The Shanghai Composite Index reached its highest level in a decade. The "Yi-Zhong-Tian" trio—Eoptolink, Zhongji Innolight and TFC Communication, three prominent Chinese optical communications stocks—saw their share prices multiply severalfold in a single year. Cambricon's market capitalization briefly exceeded RMB 600 billion. Elsewhere in the technology sector, triple-digit price-to-earnings ratios and valuations exceeding RMB 10 billion became commonplace.
Some investors were greedy; others, fearful. Still others asked me: Are technology stocks in a valuation bubble?
My answer is that what we are witnessing is the hunger and anxiety of an era, reflected in the capital markets. Once you understand this, the current fervor for technology investing is no longer difficult to explain.
Investment has nothing to do with macroeconomics, but everything to do with geopolitics.
China-US relations will shape the investment landscape for decades to come. Geopolitics has played a major role in shaping the hunger and anxiety of our times, fundamentally reshaping the way we invest.
What, then, lies at the heart of China's hunger and anxiety?
The Fourth Industrial Revolution is already underway, yet China has not fully overcome the technological shortcomings left by the Third. There is no time to lose.
This is why some people wonder: Why do Chinese computing chip companies command such high valuations when their technologies still lag so far behind NVIDIA's? Why does NVIDIA trade at just 50 times earnings, while a company hailed as "China's answer to NVIDIA" commands a multiple of 300?
To me, this gets the logic exactly backward.
It is precisely because these companies cannot catch up with NVIDIA in the near term that they command a higher strategic premium. The wider the technological gap, the greater the strategic value.
The further something lies beyond our reach, the stronger our hunger. The harder it is to catch up, the deeper our anxiety. If China were to achieve a complete breakthrough in computing chips one day, valuations might actually come down.
Where can one find China's most spectacular natural landscapes?
Much of the answer, I believe, lies in and around the Hengduan Mountains: the Meili Snow Mountains, Jade Dragon Snow Mountain, Mount Gongga, Mount Siguniang, Jiuzhaigou, and many others. Vast differences in elevation and deep fault lines have given rise to landscapes of extraordinary grandeur.
Hard-tech investing follows a similar logic.
Technological gaps, discontinuities in capabilities, and missing links in industrial systems: a leap in difficulty brings a leap in valuation, and a successful breakthrough can, in turn, bring a leap in returns.
This logic extends well beyond computing chips. It is equally evident in memory semiconductors, commercial spaceflight, and other sectors where China still faces substantial technological gaps with other countries.
It was precisely this conviction that led CoStone Capital, starting in 2016, to decisively focus its investments on three areas: hard tech, emerging industries, and life sciences and healthcare. In this context, "hard tech" refers specifically to important industries in which China faces a technological gap with the United States.
Thanks to this forward-looking strategy, CoStone Capital established an early presence across the full value chains of key sectors, including semiconductors, artificial intelligence, and robotics.
Looking ahead, the frontiers of technological progress and industrial upgrading are boundless. Nor can the gaps in hard technology be closed overnight. The twin windows of opportunity presented by technological innovation and the development of homegrown alternatives to foreign technologies have only just begun to open.
The road ahead is long, but the future holds immense promise.
As an investment firm, CoStone Capital will continue to invest where the hunger and anxiety of each era run deepest, move forward with the tensions that shape our times, and extend our reach toward the most challenging—and most important—frontiers.
Spring 2026