经销模式

As of December 31, 2025, our distribution network comprised over 330 distributors across 19 countries and regions.

We operate a seller-buyer model with our distributors, where they take ownership of the drug products upon delivery — assuming all associated risks, including unsold stock — and are not entitled to return the sold products unless in cases of product defects.

The additions and terminations of distributors during the Track Record Period were primarily due to (i) the adjustment of our distribution arrangements for oseltamivir phosphate capsules, where we consolidated our network into a smaller number of key distributors to better manage pricing and oversee our distribution channels, resulting in the termination of distributors, and (ii) the addition of new distributors in connection with newly launched products.

During the Track Record Period, a majority of our revenue was generated from distributorship.

We added 1,280, 1,513 and 1,654 new distributors in 2023, 2024 and 2025, respectively, primarily based on the ordinary needs arising from our sales operations.

To mitigate channel stuffing risks in our distributorship model, we have implemented a series of control measures designed to further align distributor purchases with actual market demand.

As of December 31, 2023, 2024 and 2025, we had six, six and eight distributors, respectively.

In each year during the Track Record Period, our revenue derived from these distributors was less than 2% of our total revenue in the relevant years.

We do not impose any mandatory sales target on our distributors.

As of the Latest Practicable Date, we had 12 distributors in China, including (i) five distributors that had entered into distribution agreements with us, (ii) four distributors that had recorded sales of AxiLona EL-100, and (iii) three distributors that had recorded sales of both AxiLona EL-100 and AxiLona AXP-100, and we currently do not have any sub-distributors.

We require the distributor to pay 100% payment before shipment.

Our Directors confirmed that there was no material breach of distribution agreements and sales and purchase agreements that caused the termination of such agreements during the Track Record Period.

In addition to the sales to Amazon under the Vendor Central program, we also sell our branded products through retailers who signed distribution agreements with us, with amounts of RMB4.6 million, RMB7.7 million and RMB11.2 million in FY2023, FY2024 and FY2025, respectively, accounting for 1.3%, 1.7% and 2.3% of our total revenue for the same periods, respectively.

They shall neither distribute our branded products outside of the designated channels nor further distribute our branded products to sub-distributors without our prior approval.

This strict policy precludes them from returning unsold inventory of our branded products.

In 2023, 2024 and 2025, such sales rebates amounted to RMB38.1 million, RMB14.6 million and RMB19.5 million, respectively.

To prevent channel stuffing, we stipulate in our distribution agreement that product returns are generally not accepted except for defective items.

In 2023, 2024 and 2025, we engaged 446, 540 and 620 distributors, respectively, comprising 217, 286 and 349 domestic distributors and 229, 254 and 271 overseas distributors, respectively.

In FY2024 and FY2025, our sales to the sales representatives amounted to RMB7.1 million and RMB24.0 million, accounting for 1.3% and 4.1% of our total revenue, respectively.

We entered into sales contract with the sales representative only after they have identified specific end-users, with such sales contract requiring delivery to the end-users.

Hence, all our revenue during the Track Record Period was attributable to our direct sales to customers and we consider there is minimal financial impact of partnering with sales representatives to the Group.

For the years ended December 31, 2023, 2024 and 2025, we conducted transactions with nil, 13 and three distributors, respectively.

Starting from January 1, 2026, we have changed our cooperation model with these distributors from distribution to direct sales after determining that the distributorship model was not cost-efficient for us.

We believe that our sales through distributorship reflect actual demand from our end customers, thereby minimizing the risk of channel stuffing and inventory backlog within the distribution network, because we generally do not allow product returns from distributors, except for limited circumstances such as product defects.

In 2023, 2024 and 2025, the revenue generated from our sales to distributors were RMB31,611.5 million, RMB32,965.4 million and RMB29,432.5 million, respectively, accounting for 90.5%, 89.8% and 88.4% of our total revenue for the same periods, respectively.

As of December 31, 2025, we had cooperated with a total of 7,502 distributors.

The significant increase in new distributors in 2024 was primarily attributed to the acquisitions of DiaSys Group and APT Medical Inc.

In 2023, 2024, 2025, our revenue from distributors amounted to nil, RMB5.2 million and RMB8.0 million, respectively, accounting for nil, 0.2% and 0.3% of our total revenue.

We have established a comprehensive management framework, supported by robust internal policies, to regulate distributor conduct and implement strategic measures to mitigate cannibalization and ensure orderly market competition.

In return, our distributors typically commit to a minimum annual sales target.

We mainly sell our Qingyuan Chicken, other native chickens and pigs through distributors.

As of December 31, 2025, we cooperated with 1,384 distributors.

We consider the risk of channel stuffing to be minimal, for the following reasons:

In 2023, 2024 and 2025, the revenue from sales through our distributors amounted to RMB100.5 million, RMB220.1 million and RMB263.4 million, respectively, representing 11.1%, 12.5% and 9.4% of our total revenue for the corresponding year.

In 2023, 2024 and 2025, the aggregate revenue generated from our five largest distributors (in terms of revenue contribution) in each year during the Track Record Period amounted to RMB42.9 million, RMB99.8 million and RMB161.3 million, respectively, representing approximately 4.8%, 5.7% and 5.8% of our total revenue, respectively.

We terminated our cooperation with 95, 225 and 61 distributors in 2023, 2024 and 2025, respectively, primarily as a result of our heightened selection criteria for distributors.

As of December 31, 2023, 2024 and 2025, there were 12, 34 and 74 distributors, respectively.

Our relationship with our distributors is a buyer and seller relationship, as our distributors acquire ownership of the products we deliver to them.

We have implemented internal control measures to prevent channel stuffing: (1) most distributors are not allowed to proactively stock our products; (2) we regularly track distributor inventory and sales progress through phone calls, emails, and on-site visits; and (3) if a distributor has unsold stock, we will immediately communicate with it to assist with promotions and simultaneously reduce or suspend subsequent replenishment quotas to ensure rapid inventory clearance.

In 2025, revenue generated through distributors amounted to RMB100.4 million, representing approximately 2.5% of our total revenue.

In 2025, we worked with 15 distributors in total and there were no material distributor terminations or replacements.

The agreements adopt a full-payment, buy-out model under which title to vehicles transfers upon payment and delivery.

Sales through distributors | 1,127,731 | 89.8 | 1,207,035 | 86.1 | 1,280,479 | 84.6

During the Track Record Period, the number of our distributors decreased, primarily attributable to our channel consolidation in response to the VBP schemes and the resulting industry trend toward more centralized and standardized distribution.

On the other hand, we have implemented various measures to mitigate the risk of channel stuffing.

In 2025, we engaged with 25 primary distributors and recorded revenue from sales of distributors of RMB20.2 million in the same year.

We also do not impose mandatory sales targets on our distributors, allowing purchases to reflect actual market demand rather than sales pressure.

We have implemented multiple measures to manage inventory levels held by distributors and avoid channel stuffing.

We do not rely on any individual or a few distribution partners and strictly forbid existing employees to work for or holding equity in our distribution partners.

Meanwhile, we conduct semi-annual quantitative assessment on our distribution partners, focusing on various criteria related to their sales, marketing, financial and after-sale services, and we are able to identify the operational issues of our distribution partners and provide guidance for their improvement and enhancement.

As such, our management are of the view that channel stuffing is unlikely to occur in our distribution channels and generally does not pose any material managerial concern.

Revenue generated from medical trading companies represented 33.6%, 35.5% and 35.3% of our revenue in 2023, 2024 and 2025, respectively.

In 2023, 2024 and 2025, we had 549, 606 and 654 medical trading companies that purchased our products, including 126 medical trading companies that purchased our products in each of 2023, 2024 and 2025.

This aggregation practice means that when these companies resell the products, they are sold as commodity TCM decoction-ready products without preservation of our brand identity, or quality certifications.

In 2023, 2024 and 2025, we terminated business relationships with 27, 26, and 7 online distributors, respectively, primarily due to our evaluation of their sales performance and the expiration of distribution agreements.

In 2023, 2024, and 2025, we terminated business relationships with 72, 91, and 44 distributors, respectively.

Under consignment agreements, we recognize revenue when products are sold to end-customers.

Less than 1.0% of our revenue was from distributors in 2023 and 2024, and 8.2% of our revenue was from distributors in 2025.

Our Directors are of the view that there was no material channel stuffing risks arising from our sales through distributors.

During the Track Record Period and up to the Latest Practicable Date, we did not experience any material sales returns or product exchanges from our distributors.