After suffering a staggering loss of 20 billion yuan, the so-called "Japanese miracle drug" is up for sale.

Two and a half years after the health supplement scandal broke out, Kobayashi Pharmaceutical is up for sale.

According to foreign media reports, private equity firm CVC Capital Partners and the Japan Industrial Solutions Corporation (NSSK) are considering launching a privatization acquisition of Kobayashi Pharmaceutical Co., Ltd., with the potential offer amount exceeding 500 billion Japanese yen (equivalent to about 21.5 billion RMB), and the founding family of Kobayashi Pharmaceutical may also participate in the transaction.

Kobayashi Pharmaceutical confirmed the privatization acquisition proposal in a statement, but said no decision has been made yet. However, according to people familiar with the matter, the company and its founding family have hired banks and financial advisors to evaluate the proposal.

For Kobayashi Pharmaceutical, this proposal comes at a rather timely moment. Kobayashi Pharmaceutical was once known as a "Japanese miracle drug" relying on products such as analgesic and anti-inflammatory agents, antipyretic patches, and keratosis pilaris removal creams. Especially when Japanese convenience stores like 7-Eleven, FamilyMart and Lawson expanded rapidly in China, these small products of Kobayashi Pharmaceutical gradually became fast-moving consumer goods for Chinese people.

However, after its red yeast rice health supplements were exposed to cause health damage in March 2024, the company has been trapped in the vortex of declining performance, shareholder pressure and collapsed trust for more than two years.

As of the close of trading on September 29, driven by acquisition expectations, Kobayashi Pharmaceutical's stock price has risen by more than 16% in a week, with a market value of 534.6 billion yen (about 22.9 billion RMB), basically returning to the level before the scandal broke out. But compared with its peak period, this market value is still halved: in December 2020, Kobayashi Pharmaceutical's market value once reached 1.07 trillion yen (about 45.9 billion RMB).

No matter whether this privatization process goes smoothly or not, the golden age of established Japanese pharmaceutical companies represented by Kobayashi Pharmaceutical has passed.

Japanese local specialty, risk exposure

Although it is named a pharmaceutical company, Kobayashi Pharmaceutical's business scope is actually closer to daily necessities.

Kobayashi Pharmaceutical's product line is like a condensed version of a Japanese drugstore: medicines, oral care products, food, fragrances, deodorants, household goods and more. Among them, the medicines are mainly eye drops, rhinitis drugs, scar removal creams and other drugs for treating mild symptoms. What supports its market recognition are analgesic and anti-inflammatory agents, warm baby patches and antipyretic patches.

This business structure is related to the development path of Kobayashi Pharmaceutical.

In 1886, the merchant Chuhei Kobayashi founded "Kobayashi Seidou", the predecessor of Kobayashi Pharmaceutical. At first, Kobayashi Seidou was engaged in the distribution business of daily necessities, cosmetics and medicines. As distributors had thin profits, Kobayashi Pharmaceutical soon decided to transform into a manufacturer, and successively launched potions for treating athlete's foot and tinea pedis, as well as headache medicines, but these products did not make a splash in the market. This is very reasonable: the pharmaceutical business has high barriers, and developing a new drug often takes more than 10 years. As a latecomer, what can Kobayashi Pharmaceutical compete with large pharmaceutical companies for?

Therefore, Kobayashi Pharmaceutical turned back to the familiar field of daily necessities, and began to exert efforts in niche markets that large enterprises did not value.

In Kobayashi Pharmaceutical's official statement, this product strategy is called "catching big fish in a small pond":

A market with a volume of 1 billion yuan is a big pond with fierce competition, which is not the target market. In a small pond with a volume of 100 million yuan, there is less competition, so high market share can be obtained to ensure high profit margins.

Following this idea, Kobayashi Pharmaceutical launched products such as dental floss sticks, exfoliating creams, cooling patches for heatstroke prevention, and deodorants specially designed for peculiar smells in shoe cabinets, refrigerators and toilets. With its iconic eye-catching packaging, Kobayashi Pharmaceutical has gradually become a "Japanese specialty" that foreign consumers will almost certainly buy several pieces of.

Kobayashi Pharmaceutical's set of tactics worked effectively for a long time. In 2023, Kobayashi Pharmaceutical recorded a revenue of 173.4 billion yen (equivalent to about 7.4 billion RMB), of which the domestic business contributed 130.4 billion yen, and the recovery of consumption by tourists visiting Japan was a major boost. Overseas business accounted for about 24% of total revenue, and the Chinese mainland and Hong Kong markets contributed a total of about 13.5 billion yen (about 600 million RMB), accounting for about 8% of total revenue. As of 2023, Kobayashi Pharmaceutical has maintained its final profit growth for 26 consecutive fiscal years.

Avoiding giants, finding incremental opportunities in the details of life scenarios, and outsourcing part of the production links, Kobayashi Pharmaceutical's "light business" was supposed to move forward steadily, but it suffered a setback in 2024.

In March 2024, Kobayashi Pharmaceutical recalled related products after some consumers who took the company's health supplements containing red yeast rice ingredients developed kidney diseases and other symptoms. Red yeast rice is a raw material made by fermenting grains such as rice with Monascus, and some of its ingredients have the effect of lowering cholesterol, so it is also made into health supplements for sale.

After repeated investigations, as of early July 2024, the number of deaths counted by Japan's Ministry of Health, Labour and Welfare that were under investigation for causal relationship with red yeast rice products reached 81. In the same month, Kobayashi Kazumasu, Chairman of Kobayashi Pharmaceutical (equivalent to the Chairman of the Board), resigned. After that, Kobayashi Akihiro, the President (equivalent to the Chief Executive Officer) also resigned. Both of the above two executives came from the founding family of Kobayashi Pharmaceutical. Kobayashi Pharmaceutical also decided to withdraw from the red yeast rice business that year.

The red yeast rice incident brought real and tangible costs to Kobayashi Pharmaceutical. As of the end of 2025, Kobayashi Pharmaceutical's domestic business revenue was 118 billion yen, down about 9.5% from 2023. In 2024 and 2025, factors such as the recall of red yeast rice products and the suspension of advertising affected the sales of Kobayashi Pharmaceutical's existing products by a total of about 18.4 billion yen, and the company accrued about 16.3 billion yen of special losses related to red yeast rice in the same period.

Established pharmaceutical companies have delisted one after another

Two and a half years later, Kobayashi Pharmaceutical has not completely got rid of the shadow of the red yeast rice incident. According to Kobayashi Pharmaceutical's official website, as of August 31, 2026, about 520 consumers who suffered health damage due to the red yeast rice incident have been identified as compensation recipients.

In the first half of 2026, Kobayashi Pharmaceutical's revenue was 70.7 billion yen, a year-on-year increase of 2.5%, but its operating profit was only 2.1 billion yen, a sharp drop of 67.5% year-on-year. Among them, the significantly increased marketing expenses after the resumption of advertising placement have put obvious pressure on the operating profit of Kobayashi Pharmaceutical's domestic business.

Kobayashi Pharmaceutical's performance and market trust are in urgent need of repair. In the plan announced in February this year, the company listed rebuilding consumer trust as its top priority, and plans to invest 30 billion yen each in R&D and equipment investment in the next three years, taking the strengthening of quality and safety as an important task. At the same time, Kobayashi Pharmaceutical began to adjust its resource structure, planning to cut about 25% of SKUs in the local and overseas markets, and has successively sold overseas subsidiaries and its holdings of external listed company shares in recent months to optimize capital allocation.

The effect of internal reform takes time to show. As a century-old enterprise, Kobayashi Pharmaceutical also faces no small external challenges.

Affected by the situation in the Middle East, container packaging materials such as bottles and films, as well as petrochemical raw materials such as alcohols and surfactants have risen in price one after another. According to Kobayashi Pharmaceutical's forecast, the rise in raw material prices will reduce the company's full-year operating profit by 2 billion yen. With the integration of channels of local Japanese drugstores, consumers' habit of placing orders on third-party e-commerce platforms, and the increasingly prominent problem of declining birthrate and aging population, Kobayashi Pharmaceutical's product structure and sales system are also in urgent need of restructuring.

Under a series of challenges, the pressure from external shareholders may have become the last straw that pushed Kobayashi Pharmaceutical to move towards privatization.

According to data from Bloomberg, the current largest shareholder of Kobayashi Pharmaceutical is Oasis Management, a Hong Kong-based activist investor, which currently holds a 14.4% stake, while Kobayashi Pharmaceutical itself holds a 4.8% stake.

Since the outbreak of the red yeast rice incident, Oasis Management has frequently demanded that Kobayashi Pharmaceutical promote governance reform through shareholder proposals and lawsuits, pointing out that Kobayashi Pharmaceutical has failed to fully reduce the influence of its founding family.

Against this background, Kobayashi Pharmaceutical received a privatization proposal from NSSK and CVC. If this plan is finally finalized, Kobayashi Pharmaceutical will also join the wave of delisting of established Japanese pharmaceutical companies.

Since 2024, Taisho Pharmaceutical and Hisamitsu Pharmaceutical have successively completed privatization. Taisho Pharmaceutical owns the energy drink brand Lipovitan D and the cold medicine brand Pabron. Hisamitsu Pharmaceutical's best-known product is Salonpas, another famous "Japanese specialty". Similar to Kobayashi Pharmaceutical, both companies have a development history of more than 100 years and have been led by their founding families for a long time.

However, the delisting process of Taisho Pharmaceutical and Hisamitsu Pharmaceutical is relatively smooth: the privatization of both companies was actively initiated by their founding families. Before delisting, their revenue and net profit were both in double-digit growth. Moreover, the purpose of the companies to delist is to get rid of the short-term performance pressure under the listing status, and invest more resources in long-term strategies such as overseas business expansion and channel transformation.

In contrast, Kobayashi Pharmaceutical, which is being evaluated by potential buyers amid the intertwined situation of declining performance, shareholder pressure and trust crisis, is in a much more difficult situation. But no matter whether the privatization is finally implemented or not, Kobayashi Pharmaceutical must change its business mode in the new market environment, and the golden age of established Japanese pharmaceutical companies has passed.

This article is from the WeChat official account "ChinaVenture", written by Li Xinting, and published with authorization from 36Kr.