Watson Bio: Plans to raise 2 billion yuan through equity issuance, core business under pressure, combined with compliance issues awaiting resolution

Ask AI: Was Watson Biotech’s share placement transfer intended to ease cash flow pressure?

Recently, Watson Biotech disclosed its 2026 annual private placement plan. The company plans to raise no more than RMB 2.003 billion by issuing shares to Tengyun Xinwo, which will be used to replenish working capital. After the completion of this issuance, Tengyun Xinwo will become the controlling shareholder, and Huang Tao, the actual controller of Tengyun Xinwo, will become the company’s actual controller.

According to the 2025 performance pre-announcement, the company expects full-year revenue to decline by about 15% year over year, non-recurring profit to decrease by 9%-22% year over year, and profitability from its main business to face pressure. The company’s 2025 third-quarter report shows both revenue and profit declined, and operating cash flow shrank significantly. Credit impairment losses caused by accounts receivable have intensified.

An analysis found that Watson Biotech received administrative regulatory measures requiring it to make corrections from the Yunnan Securities Regulatory Commission in December 2025 due to违规 in procedures for deliberating the compensation of directors and senior executives.

Planned to raise financing of RMB 2.0 billion; the actual controller may change

According to the announcement, the issuance target in this round for Watson Biotech is Tengyun Xinwo. Tengyun Xinwo will subscribe for the shares issued by the company in this round in the form of cash in RMB.

.

Fig. 1: Watson Biotech’s private placement

The number of shares to be issued will not exceed 208 million shares (including this figure), and will be no more than 30% of the total company shares before this issuance. The issue price has been set at RMB 9.63 per share. The total amount of proceeds to be raised is expected to be no more than RMB 2.003 billion. After deducting issuance expenses, all proceeds will be used to supplement working capital.

Before this issuance, the company’s equity is relatively dispersed. No single shareholder can exercise actual control over the company through directly or indirectly holding the company’s shares or through investment relationships. Tengyun Xinwo has never directly or indirectly held the company’s shares. Based on the upper limit on the number of shares subscribed by this specific target, Tengyun Xinwo and one of its parties acting in concert with its actual controller will hold 14.46% of the company’s total share capital after the issuance. Tengyun Xinwo will become the company’s controlling shareholder, and Huang Tao, the actual controller of Tengyun Xinwo, will become the company’s actual controller.

Revenue and profits under pressure

Watson Biotech is a high-tech biotech pharmaceutical company specializing in the R&D, production, and sales of human vaccines.

On January 28, 2026, Watson Biotech disclosed its 2025 annual performance pre-announcement. The company expects full-year attributable net profit of RMB 160 million to RMB 190 million, representing growth of 13% to 34%; after non-recurring items, net profit of RMB 85 million to RMB 99 million, representing a decline of 9% to 22% year over year; and expected operating revenue of RMB 2.4 billion to RMB 2.43 billion, compared with RMB 2.821 billion in the same period last year.

For the reasons for the change in performance, the company stated that during the reporting period, both domestic and overseas vaccine markets were still generally in a downward cycle, and total revenue from its vaccine products decreased by about 8% compared with the same period last year.

In recent years, the company’s overall revenue and profit have shown a downward trend. In the first three quarters of 2025, the company achieved total operating revenue of RMB 1.719 billion, down 19.73% year over year; attributable net profit of RMB 163 million, down 36.24% year over year; and non-recurring net profit of RMB 70.54 million, down 68.5% year over year. In the first three quarters, gross margin was 71.69%, down nearly 8 percentage points year over year.

.

Fig. 2: Watson Biotech’s financial indicators

An analysis found that as of September 2025, Watson Biotech’s outstanding accounts receivable were RMB 2.284 billion. Accounts receivable accounted for 132.87% of operating revenue, further up compared with the same period in 2024. In the first three quarters, the company’s credit impairment losses were RMB 85.2268 million, of which bad debt provisions attributable to accounts receivable were RMB 81.5938 million.

On the cash flow side, in the first three quarters, net cash flow from operating activities was RMB 79.6921 million, down 85.75% year over year, mainly because sales collections for vaccine products and government subsidy funds received were reduced compared with the same period last year. At the end of the period, the company’s cash and cash equivalents balance was RMB 1.681 billion; total current assets were RMB 5.912 billion; and total current liabilities were RMB 1.678 billion.

Ordered to make corrections due to compensation approval violations

After reviewing materials, in December 2025, the Yunnan Securities Regulatory Commission took measures requiring Watson Biotech to make corrections.

.

Fig. 3: The Yunnan Securities Regulatory Commission’s decision to require Watson Biotech to make corrections

The announcement shows that Watson Biotech’s 2023 and 2024 matters relating to directors’ compensation were not submitted to the shareholders’ meeting for deliberation as required; and matters relating to senior management compensation for 2023 and 2024 were not submitted to the board of directors for deliberation as required. Therefore, the company was subject to administrative regulatory measures requiring it to make corrections, and the matter was recorded in the integrity file for the securities and futures market.

In addition, after the company conducted a self-check of its penalty situation over the past five years, besides the above-mentioned regulatory measures and regulatory letters in 2025, in July 2021 it received a decision from the Yunnan Securities Regulatory Commission on measures requiring corrections, which involved issues with inadequate investment decision-making and post-investment management procedures. The matter has been completed with rectification and a rectification report has been submitted.

【Read financial reports】 is a column jointly built by Xinhua Finance and Bun Finance, mainly featuring interpretations of financial reports of listed companies. Xinhua Finance is a national financial information platform constructed by Xinhua News Agency, covering financial markets such as global stock markets, FX markets, and bond markets comprehensively, and providing authoritative, professional, and comprehensive financial information services.

(Article sequence number: 2034882833880846336/PLH)

Disclaimer: This article does not constitute any investment advice to anyone.
Intellectual property statement: The intellectual property rights of Bun Finance’s works belong to Shanghai Miaotan Network Technology Co., Ltd.