Behind Shaoyan Pharmaceutical's A-Share Daily Limit Down and Hong Kong Stock Plunge of Over 10%

“Daily Economic News” reporters noted that as of the close on March 17, Zhaoyan New Drug (603127) (SH603127) A-shares hit the limit down, trading at 29.32 yuan per share; Hong Kong stocks fell 11.73%, closing at HKD 16.780 per share.

On the evening of March 16, Zhaoyan New Drug issued an announcement regarding a plan for shareholders to reduce their holdings of A-shares. The announcement shows that shareholders Gu Xiaolei and his concerted action partner Gu Meifang (uncle and niece) plan to, within three trading days after the announcement, reduce approximately 30.74 million shares through centralized bidding, accounting for 4.1026% of the company’s current total share capital.

It is noteworthy that this reduction involves all shares held by these two shareholders, of which 4.7218 million shares were acquired before the company’s IPO, and the rest came from capital reserve share conversions. The reason given for the reduction is “personal funding needs.”

The proposed reduction ratio sparks discussion

According to Zhaoyan New Drug’s Q3 2025 report, the top ten shareholders list shows Gu Xiaolei and Gu Meifang as the fourth and seventh largest shareholders, respectively. Both are concerted action partners, holding a combined 4.1026% of the company’s total shares.

Data indicates that both Gu Xiaolei and Gu Meifang have served as directors of the company and participated in board decision-making, but they resigned in April 2023 and January 2019, respectively. An article from the Taicang Youth Chamber of Commerce in 2022 states that Gu Xiaolei was then serving as Vice Chairman of Xiangtang Group. Other information shows that Gu Meifang was an accountant at Jiangsu Xiangtang Group Import and Export Co., Ltd., and is the daughter of Xiangtang Group founder Gu Jianping.

It is important to note that Xiangtang Group is a significant early investor and related shareholder of Zhaoyan New Drug, with deep ties and close cooperation. At the time of the company’s listing, the “Xiangtang faction” (Gu Xiaolei, Gu Meifang, Lhasa Xiangtang, Gu Zhenqi) held about 18.04% of shares, making them the third-largest shareholder camp, just behind the company’s actual controller Feng Yuxia and Zhou Zhiwen’s couple.

Currently, Xiangtang Group, through its subsidiary Xiangtang Heyu (Beijing) Technology Co., Ltd., jointly participates in industry fund investments with Zhaoyan New Drug, forming related legal entities. Based on this background, the full reduction plan by Gu Xiaolei and Gu Meifang has attracted widespread attention.

Another widely discussed point is the proposed reduction ratio of 4.1026%. According to the “Interim Measures for the Management of Shareholders’ Reduction of Listed Companies,” major shareholders reducing shares through centralized bidding on stock exchanges, or other shareholders doing so for shares issued before the company’s IPO, cannot reduce more than 1% of the company’s total shares within three months.

However, since Gu Xiaolei and Gu Meifang are not major shareholders holding over 5%, and only 4.7218 million shares were acquired before the IPO (less than 1%), this reduction plan does not violate regulations.

On March 17, an industry insider told reporters that this reduction plan caused a significant market reaction, mainly because it involves a full reduction and the proportion of shares being reduced is much higher than usual. In fact, their current combined shareholding is below 5%, so normally no pre-disclosure would be required, but they still issued an announcement because they had made a related commitment at the time of the company’s A-share listing: even if their shareholding drops below 5%, they must still disclose a pre-reduction announcement three working days in advance.

Experimental monkeys’ March purchase price exceeds 130,000 yuan

Aside from the shareholder reduction controversy, as a leading domestic CRO (Contract Research Organization) company, Zhaoyan New Drug also faces slowing performance: in 2023 and 2024, net profits attributable to the parent declined by 63.04% and 81.34%, respectively, with 2024 seeing the first revenue decline in ten years.

According to the company’s 2025 performance forecast, revenue is expected to be between 1.573 billion and 1.738 billion yuan, a decrease of about 13.9% to 22.1% year-on-year; net profit attributable to the parent is projected to be between 233 million and 349 million yuan, an increase of approximately 214.0% to 371.0%.

Among the expected profit growth, contributions from laboratory services and other businesses are estimated at -201 million to -130 million yuan. The previous intense industry competition and lagging effects have led to declines in revenue and gross margin of contractual fulfillment. However, due to rising market prices for biological assets and natural growth appreciation, changes in fair value of biological assets contributed a net profit of 452 million to 499 million yuan.

This biological asset is the experimental monkeys. Currently, Zhaoyan New Drug is one of the domestic CROs with the largest resources of monkeys, benefiting from the rising prices. According to a March research report from Kaiyuan Securities, based on bidding information from the China Government Procurement Network, the purchase price for experimental monkeys in March exceeded 130,000 yuan per monkey, up from about 90,000 yuan in mid-2025, a significant increase.

The report also suggests that as China’s innovative drug industry gradually improves, demand is expected to remain strong, coupled with rising prices for preclinical trial materials, leading to an increase in both volume and price of new orders, with order growth expected to accelerate.

Industry insiders share similar views. They note that the CRO industry previously experienced severe price competition, but the situation has improved significantly over the past year. The main reasons include some companies securing financing during the industry downturn two years ago, and others achieving profitability through business development collaborations, improving cash flow. Additionally, government policies supporting pharmaceutical companies have increased significantly before 2024.

However, they do not believe that the continuous rise in experimental monkey prices is entirely positive. “Rising monkey prices will generally increase the R&D costs for pharmaceutical companies, putting pressure on clients. Maintaining relatively stable and reasonable prices is actually more conducive to advancing R&D.”

Nevertheless, the trend of rising monkey prices may continue for some time. According to Charles River, a global CRO leader, the number of monkeys used for safety evaluation was 10,874 in 2023, 11,646 in 2024, and is projected to reach 12,850 in 2025, with an ongoing growth trend.

In January this year, Charles River announced plans to acquire a Cambodian non-human primate supplier for $510 million to strengthen supply chain control and reduce operational costs.

Cover image source: Meiri Media Library

(Edited by Zhao Yanping HF094)

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