Planning capital increase, Watsons Biotech's control may change! Who will take over in the vaccine industry downturn?

On March 16, Watson Biotech (300142.SZ) announced that the company is planning to issue A-shares to specific investors, which may lead to a change in control of the company. The company’s stock will be suspended from trading starting from the opening of the market on Tuesday, March 17, 2026, with an estimated suspension period of no more than two trading days.

The announcement states that all parties are currently discussing and negotiating the specific plan, agreement, and related matters. The final details will be based on the agreements signed by all parties. There is still uncertainty regarding this planning.

Watson Biotech was listed on the Shenzhen Growth Enterprise Market in 2010. Its core products include the 13-valent pneumonia conjugate vaccine and the bivalent HPV vaccine. For a long time, Watson Biotech has had dispersed ownership, with no controlling shareholder or actual controller.

According to Watson Biotech’s Q3 2025 report, the top 10 shareholders include three investment funds, six domestic individual investors, and one domestic non-state-owned legal entity, with shareholding ratios ranging from 1.43% to 2.16%. The largest shareholder is Industrial and Commercial Bank of China Limited – E Fund’s ChiNext ETF, holding 2.16%. Other shareholders hold less than 2%.

The new controller of Watson Biotech has not yet been disclosed, but its close cooperation with local state-owned assets since last year has attracted industry attention. In July 2025, Watson Biotech signed a strategic agreement with Yuxi State-owned Capital Operation Co., Ltd. (hereinafter referred to as “Yuxi Operation Company”), which mentions that the latter may acquire shares through subscription or other means when appropriate.

Six months later, in February 2026, Watson Biotech further collaborated with Guotou Chuangyi Industry Fund Management Co., Ltd. (hereinafter “Guotou Chuangyi”), Yuxi Operation Company, and China Central Enterprise Rural Industry Investment Fund Co., Ltd. to establish the “Yunnan Chuangwo Biotech Industry Fund” with a target scale of 1 billion yuan, focusing on synthetic biology. Watson contributed 450 million yuan, accounting for 45%.

Regarding the new actual controller and competition in the vaccine industry, Times Weekly reporters contacted Watson Biotech by phone and email but had not received a response as of the publication deadline.

Image source: TuChong Creative

Dispersed Ownership

From the ownership structure, Watson Biotech currently has dispersed ownership. According to its Q3 2025 report, the top 10 shareholders include three investment funds, one domestic non-state-owned legal entity, and six domestic individuals. Among the six individuals, Chairman and legal representative Li Yunchun is the third-largest shareholder with 1.70%. The second-largest shareholder, Liu Junhui, and the sixth-largest, Huang Jing, are spouses.

Additionally, the fifth-largest shareholder, Chengdu Xiyun Enterprise Management Partnership (Limited Partnership), is controlled by Li Yunchun and acts as his appointed legal representative, indicating a concerted action relationship.

The details of Watson Biotech’s new controller are still to be disclosed. Based on recent external collaborations, the company has maintained close contact with local state-owned assets in Yunnan Province.

In July 2025, Watson Biotech announced a strategic cooperation framework agreement with Yuxi Operation Company. The agreement aims to establish a long-term, stable, comprehensive, and in-depth strategic partnership in the vaccine and bioproducts industry, leveraging both parties’ resources to promote business development in innovative vaccines and synthetic biology manufacturing. The cooperation will involve resource sharing, industry layout, and project implementation.

The initial cooperation period is set for three years, with possible extensions upon mutual agreement. During this period, Yuxi Operation Company will participate in capital operations such as subscribing to Watson’s shares, investing in funds led by Watson, and industry mergers and acquisitions, to support the company in optimizing its ownership structure and strengthening capital.

The agreement mentions seven ways of cooperation, including jointly establishing a private equity fund to invest in upstream and downstream enterprises with synergies to the company’s business, and, when appropriate, Yuxi Operation as a strategic investor participating in public or private share offerings and other legal investment methods.

On February 11, 2026, Watson Biotech announced the joint establishment of the Yunnan Chuangwo Biotech Industry Investment Fund with Guotou Chuangyi, Yuxi Operation, and China Central Enterprise Rural Industry Investment Fund, signing the “Partnership Agreement of Yunnan Chuangwo Biotech Industry Investment Fund (Limited Partnership).”

According to the partnership agreement, the fund aims to raise 1 billion yuan, with Watson contributing 450 million yuan as a limited partner, holding a 45% stake. Guotou Chuangyi is the general partner, and the other two are limited partners.

The partners will contribute in three phases: the first phase of 300 million yuan, the second phase of 300 million yuan, and the third phase of 400 million yuan. The fund’s core investment areas include synthetic biology, biomanufacturing, and related biotech industries.

Vaccine Industry Downturn and Price Wars

Regarding performance, Watson Biotech’s 2025 earnings forecast shows revenue of 2.4 to 2.43 billion yuan, a decrease from 2.821 billion yuan last year; net profit attributable to shareholders of 160 to 190 million yuan, a year-on-year increase of 13% to 34%; and non-recurring net profit of 85 to 99 million yuan, down 22% to 9% year-on-year.

The performance forecast attributes the decline to the overall downward cycle in the domestic and international vaccine markets, with total vaccine revenue decreasing by about 8% compared to last year. Domestic vaccine revenue narrowed its decline and stabilized, while exports grew by approximately 35%.

According to the mid-year report, Watson Biotech has eight self-developed vaccines on the market, including the 13-valent pneumonia conjugate vaccine, bivalent HPV vaccine, and 23-valent pneumococcal polysaccharide vaccine. These vaccines mainly prevent diseases caused by specific pathogens.

The company also noted that many domestic vaccine companies have long focused on traditional, lower-risk products with high maturity, resulting in a high proportion of “Me-too” pipelines, mainly in popular vaccines like cervical cancer, pneumococcal, and meningococcal vaccines. This has intensified competition and increased product homogenization in the domestic market.

Southwest Securities’ research reports that in the first three quarters of 2025, 11 selected vaccine companies achieved a combined revenue of 17.4 billion yuan, down 49.2% year-on-year; and a total net loss attributable to shareholders of 900 million yuan, a 121.6% decline.

According to Wind data, 11 A-share vaccine companies have issued 2025 performance forecasts, with seven expecting a decline in net profit attributable to shareholders.

Southwest Securities’ analysis indicates that vaccine demand remains weak in 2025, with a deteriorating competitive landscape. Core categories like HPV and flu vaccines face declining approval volumes and prices, putting short-term performance under significant pressure.

The HPV vaccine sector, in which Watson Biotech is heavily invested, is particularly affected by price wars. Since 2023, the expansion of nine-valent HPV vaccines and the entry of domestic two-valent HPV vaccines into the bidding market have intensified price competition. In 2024, prices continued to fall, with some two-valent vaccines priced below 100 yuan per dose. In 2025, with Wanta Biological’s nine-valent HPV vaccine approved, the fierce competition persists.

During these price wars, Watson Biotech has reduced the price of its two-valent HPV vaccine to “milk tea prices.” In August 2024, the Shandong Provincial Center for Disease Control and Prevention announced the procurement of bivalent HPV vaccines for school-aged girls, with Watson’s subsidiary winning the bid at 27.5 yuan per dose, setting a new low for the price.

Performance forecasts show that Wanta Biological and ZhiFei Biological, two major HPV vaccine producers, both reported losses in 2025.

In response to the industry’s price wars, in November 2025, the China Vaccine Industry Association issued a proposal titled “Against ‘Involution’ Competition to Promote High-Quality Development of the Vaccine and Related Biotech Industries,” emphasizing the need to resist disorderly low-price competition and strictly prohibit bidding below cost during procurement processes to ensure product and service quality standards.