The Chinese market will enjoy significant growth in the next 10 years, Shanghai Pharma's Lu said. It's essential for the company to make use of the first three years of that time frame to build up a nationwide network, he added.

Shanghai Pharma bought a 51 percent stake in drug company Guangzhou ZSY earlier this month for 140.9 million yuan. ZSY penetrates 70 percent of counties in the populous and prosperous Pearl River Delta region and has about a 15 percent market share, according to its General Manager Tan Lining.

ZSY sales could reach 8 billion yuan by 2015, compared with annual revenue of about 2 billion yuan in recent years, estimated Xu Guoxiong, president of Shanghai Pharma.

Shanghai Pharma said its target is 100 billion yuan in annual sales within the next five years. Last year, sales at its distribution outlets grew 23 percent year on year to 29.1 billion yuan, accounting for 78 percent of total income. Other income is generated by drug manufacturing as well as research and development gains.

Consolidation in the domestic pharmaceutical industry is expected to accelerate in the next 10 years, and Shanghai Pharma is likely to emerge as one of the winners as weaker players are thinned from the market, according to a recent research note by China Venture Investment Consulting Group.

As part of its 12th Five-Year Plan that began this year, the Chinese government has set forth targets to encourage more integration in the pharmaceutical industry and to prod domestic drug companies to look for overseas investment.

Shanghai Pharma also acquired a top five pharmaceutical distributor in Zhejiang Province last month to form Zhejiang Taizhou Shanghai Pharmaceutical Ltd through a company restructuring.

The outcome of Shanghai Pharma's strategy will be closely watched by investors.

Its major competitors include Hong Kong-listed Sinopharm Group Co.

"Whether Shanghai Pharma can successfully establish its dominant position on a nationwide level depends on how it merges its existing business with the acquired assets, and it could take quite a long time before the gains from these small units are reflected in its profits and income," Xiangcai Securities analyst Ye Kan said.