On March 3, Bloomage Biotech (688363. Zhao Yan, chairman of SH), issued an internal speech, announcing the launch of the "scraping bones to cure drugs" type anti-corruption action, requiring employees involved in corruption to take the initiative to confess and resign before March 31, and will be handed over to justice after the deadline.

Behind this rectification is the performance of Bloomage Biotech's cliff-like decline. According to the performance report, in 2024, Bloomage Biotech's revenue will be 5.371 billion yuan, a year-on-year decrease of 11.6%, and its net profit will be 164 million yuan, a year-on-year decrease of 72.27%; deducted non-net profit of 101 million yuan, a year-on-year plunge of 79.36%.

On March 5, after Chairman Zhao Yan delivered a speech, Bloomage Biotech's share price fell 2.28% to close at 48.04 yuan per share, with a total market value of 23.1 billion yuan. The market value has evaporated by more than 80% from its peak.

The trough of performance, "scraping bones to cure poison".

Bloomage Biotech's anti-corruption storm this time is closely related to the company's dispute with former executive Zhi Fanfan (Cheng Fei) 9 months ago. As the founder and core trader of the Quadi brand, Zhi Fanfan once led the brand to the 1 billion domestic product camp. However, since 2023, Quadi's performance has continued to decline, with revenue in the first half of 2023 decreasing by 10.1% year-on-year, and Tmall + Douyin GMV plummeting by 55% during the "Double 11" period.

"Workplace bullying" and "cyber violence", and sued Bloomage Biotech for "reputation rights infringement", and the case was accepted by the People's Court of Jinan High-tech Industrial Development Zone.

After his resignation, he quickly founded the skincare brand "Fanfan", and the development of the brand has gained market attention. On June 23, 2024, the Tmall flagship store was launched, and only 5 months later, the products were suddenly removed from the entire network, and the content of his personal Douyin account was also emptied. It is rumored that Zhi Fanfan was taken legal measures on suspicion of violating the law, and until December 26, 2024, Fanfanhua Cosmetics Sales (Jinan) Co., Ltd. under his name was deregistered, and Jinan Lifan Network Technology, another subsidiary of the parent company Lanhua Biotechnology, was also deregistered.

Bloomage Biotech made a strong response to this, accusing Zhifanfan of three core issues: infringement of intellectual property rights, violation of non-compete agreements, and illegal arbitrage of economic benefits, and emphasized that "the company's brand development never depends on personal image". Although the company claimed to have evidence of the other party's violations, the incident also had a certain negative impact on the company's brand image and reputation.

It is worth noting that this dispute occurred at the trough of Bloomage Biotech's performance, the company's net profit in 2024 plummeted year-on-year, and the sales of core category products continued to be under pressure.

Combining a variety of factors, Zhao Yan decided to announce the "scraping bones to cure drugs" reform in March 2025, requiring all corrupt personnel to surrender within a time limit, otherwise they will be transferred to justice, and bluntly said: "Anyone can reorganize the company if it leaves, and the only thing that is inseparable is me, the founder." In this rectification, Zhao Yan directly pointed out the problem of "pseudo managers" caused by loose management, including over-outsourcing and budget abuse, and at the same time promoted reforms such as changing the name of the business department and tightening the approval of outsourcing.

Net profit plummeted, hitting a new low for listing

Behind this personnel change is the increasingly severe problem of declining performance of Bloomage Biotech. As the "first stock of hyaluronic acid", Bloomage Biotech owns a number of brands such as Runbaiyan, Quadi, BM Muscle Activation, and Mirepair, and its products cover sub-polishing essences, creams and lotions, facial masks and some makeup products.

After landing on the A-share market in November 2019, Bloomage Biotech has developed rapidly. From 2019 to 2022, revenue climbed from 1.886 billion yuan to 6.359 billion yuan, becoming a leader in the industry.

Source: Straight Flush

However, starting from 2023, there has been a turning point in the development of Bloomage Biotech. Due to factors such as the decline of functional skin care business, intensified market competition, fluctuations in the industrial cycle and strategic adjustment, the company's revenue fell by 4.45% to 6.076 billion yuan, and net profit decreased by 38.97% to 593 million yuan.

In 2024, the company's performance will accelerate its decline. On February 28, Bloomage Biotech disclosed its 2024 annual performance report. According to the announcement, the company achieved revenue of 5.371 billion yuan last year, a year-on-year decrease of 11.6%; net profit was 164 million yuan, down 72.27% year-on-year; The non-net profit was 101 million yuan, a year-on-year decrease of 79.36%, a new low since the company's listing.

Regarding this performance, Bloomage Biotech issued an announcement statement, saying that the company's functional skin care products business, which accounts for a high proportion of revenue, is affected by various factors such as intensified market competition, industrial cycle fluctuations and strategic adjustments, and the adjustment is still continuing. However, the organizational structure upgrade of management reform, salary system reform, consulting company fees and equity incentive expenses exceeded 70 million yuan, which brought a certain short-term cost increase to the company.

In addition, the company will make impairment provisions of 190 million yuan for accounts receivable and inventory in 2024, which further erodes the company's profits.

The combination of declining performance and anti-corruption has also triggered personnel turmoil. It is reported that since 2024, Bloomage Biotech has experienced 4 core personnel changes, the company's core technical personnel Ma Shouwei and Wang Yongzhi have resigned, and Liu Aihua, vice president of R&D, has been transferred; In January 2025, Guo Xueping, the "father of hyaluronic acid", will retire, and his leading microbial fermentation method has established Bloomage's global raw material hegemony. Coupled with the internal friction of the brand team, the former manager of Quadi complained about "workplace bullying", the former financial director Luan Yizheng resigned, and the financial accounts payable surged by 37.56% is still an unsolved mystery.

Therefore, Zhao Yan criticized some executives for "having neither scientific background nor market fighting ability" and becoming "pseudo managers". In addition, in the 2024 management change, the company withdrew the right to approve outsourcing, only to find that some projects have lost their competitiveness due to over-reliance on external teams.

However, Bloomage Biotech also emphasized that the operating results in 2024 are strategic and active adjustments after the company's long-term sustained growth and are phased. The company pointed out in the announcement that the cost of reform is large. Bloomage Biotech has continued to increase its investment in innovative business areas, laying out emerging businesses, such as regenerative medicine and functional food, with an investment of more than 100 million yuan in these strategic innovation businesses.

Expenses are high, and shareholders are reducing their holdings

At the same time as the poor performance, Bloomage Biotech's financial situation is not very optimistic. As of the third quarter of 2024, Bloomage Biotech's accounts payable reached 787 million yuan, and its operating cash flow was also under pressure, with a net cash flow from operating activities of 274 million yuan, a year-on-year decrease of 12.15%.

On the other hand, Bloomage Biotech is highly expensive. In the first three quarters of 2024, Bloomage Biotech's gross profit margin reached 73.93%, which was lower than the 81.41% at the highest gross profit margin, but it was still high; However, the company's net profit margin was only 9.27% during the same period, a significant decrease from the highest value of 33.56%. The sales period expense ratio soared from less than 40% in 2018 to 60.9% in the third quarter of 2024.

Source: wind

From the point of view of the three fees, Bloomage Biotech's sales expenses soared from 284 million yuan in 2018 to 3.049 billion yuan in 2022 and 2.842 billion yuan in 2023, management expenses increased from 170 million yuan in 2018 to 492 million yuan in 2023, R&D expenses increased from 53 million yuan in 2018 to 446 million yuan in 2023, and in the first three quarters of 2024, Bloomage Biotech's sales expenses were 1.631 billion yuan, management expenses were 423 million yuan, and R&D expenses were 313 million yuan.

Source: wind

In fact, in previous years, Bloomage Biotech's senior executives generally had high salaries, and some personnel will only have their salaries cut in 2023. Judging from Zhao Yan, chairman of the company, the annual salary in 2022 will be 4.0295 million yuan, and the annual salary in 2023 will be 2.0249 million yuan, a decrease of nearly half.

In addition, Bloomage Biotech has maintained a relatively stable dividend policy since its listing, with an average dividend rate of about 30% from 2019 to 2023. However, the 2024 interim dividend plan shows that the company will pay 3.8 yuan per 10 shares, which is significantly lower than the 6.1 yuan per 10 shares in the same period in 2023.

While dividends are shrinking, the original shareholders are accelerating their departure. In 2024, China Life Chengda will reduce its holdings and cash out by more than 300 million yuan, while Yingrui Wuyuan has previously reduced its holdings by 2.9 billion yuan, and the cumulative cash amount of the two major shareholders will be as high as 3.2 billion yuan. Institutional investor ownership also fell from 15.6% at the end of 2023 to 9.8% in the third quarter of 2024.

At present, the competition in the beauty and biotechnology industry in which Bloomage Biotech is located is also extremely fierce. In the field of functional skin care products, not only international well-known brands such as L'Oreal and Estee Lauder occupy the high-end market, but also many emerging brands have emerged in China, such as Winona and Proya. Although Bloomage Biotech is one of the world's largest hyaluronic acid raw material manufacturers in the hyaluronic acid raw material market, these competitors have squeezed Bloomage Biotech's profit margins. In addition, some doubts about the quality of the product continue to emerge.

Under the heavy pressure of performance, Zhao Yan decided to carry out a major reform of the company's internal team organization. Zhao Yan particularly emphasized the need to stay close to the front line of business and return to the front line of business. Can such "scraping bones and curing poison" work? (Produced by Money Weekly).