Zhaoyan New Drug’s shares plunged after two related shareholders announced a “clean‑sweep” reduction of their holdings, knocking the A‑share line into a limit down and sending H‑shares down 11.73%. Gu Xiaolei and his consistent actor Gu Meifang — reported as relatives — said they would sell a combined 30.7425 million A‑shares, equal to roughly 4.10% of the company, through centralized bidding between March 20 and June 19. The sales come after an earlier round of insider disposals: one of the company’s actual controllers, Zhou Zhiwen, sold about 14.98 million shares in January, netting roughly RMB 568 million, and several directors and supervisors have also trimmed holdings.
The company’s preliminary results for 2025 reveal the tension beneath the headline numbers. Zhaoyan forecasts revenue of RMB 1.573–1.738 billion, a decline of 13.9–22.1% year‑on‑year, while net profit attributable to shareholders is expected to rise to RMB 233–349 million, a jump of 214–371%. That improvement is almost entirely driven by non‑cash fair‑value gains on biological assets — roughly RMB 452–499 million — while the lab services and core CRO business are projected to register aggregate losses between RMB 123–206 million.
Market participants and brokers distilled a simple message: insiders are cashing out at highs while underlying operations struggle. Zhaoyan has been colloquially dubbed the industry’s “monkey Maotai” because gains from appreciating biological assets — including research animals — have propped up earnings in recent reporting cycles. Those gains inflate accounting profits but do not equate to sustainable operating cash flow, analysts warn, and the sudden announcement of a full disposals by related parties amplified investor alarm.
The company’s predicament mirrors broader stress across China’s CRO/CXO sector. A slowdown in new drug projects, overcapacity and intense price competition have pushed margins lower and forced many providers into a low‑price treadmill. Zhaoyan’s core CRO unit is forecast to post negative net profit for 2025, a blunt indicator of the sector’s pricing pressures. At the same time the firm is diversifying into financial investments: its board has authorised up to RMB 2 billion in idle daily cash for wealth‑management products in 2026, and cash management already contributed more than RMB 45 million to net profit in the first three quarters.
Investors are left weighing two uncomfortable facts: reported profitability is increasingly supported by asset revaluations and financial income rather than rising demand for technical services, and company insiders have been actively monetising stakes. That combination has immediate market consequences — share‑price volatility and institutional selling — and raises larger questions about the firm’s long‑term competitive position unless it can restore pricing power and return CRO operations to positive cash generation. As China Enterprise Capital Alliance’s chief economist Bai Wenxi put it, temporary gains from biological assets kept the company afloat in the downturn, but a sustainable recovery will require lab services to reclaim pricing authority.