Major Shareholder Liquidation-Style Reduction Plan Triggers Stock Price Limit Down! 603127, Rapid Adjustment!

Major sell-offs triggered a stock price limit-down, but Zhaoyan New Drug quickly corrected its sell-off plan.

On March 17, leading biotech Zhaoyan New Drug (603127) opened sharply lower and hit the daily limit down in the afternoon, closing at 29.32 yuan per share, hitting a new low since the beginning of the year. The stock has fallen 36.19% from its peak earlier this year. The Hong Kong stock market also came under pressure, closing down 11.73% yesterday.

The main reason for the sharp volatility in Zhaoyan New Drug’s stock price was a “full liquidation” sell-off announcement released by the company on March 16. The announcement stated that shareholders Gu Xiaolei and his concerted action partner Gu Meifang plan to reduce their holdings by a total of 30.7425 million shares through centralized bidding transactions within the next three months, representing 4.1026% of the company’s total share capital. Gu Xiaolei and Gu Meifang are the fourth and seventh largest shareholders, respectively. The shares to be sold come from pre-IPO restricted shares and shares converted from capital reserve.

In response to the market panic caused by this “full liquidation” sell-off plan, Zhaoyan New Drug quickly adjusted its plan. On the evening of March 17, the company issued a correction announcement, significantly reducing the sell-off proportion. After the correction, Gu Xiaolei and Gu Meifang’s combined sell-off will not exceed 15.0618 million shares, and the sell-off ratio is lowered from no more than 4.1026% to 3%. Additionally, the method of sale was changed from solely centralized bidding to a combination of centralized bidding and block trades.

It is worth noting that this is not the first recent sell-off by major shareholders of Zhaoyan New Drug. From January 22 to January 28, one of the company’s actual controllers, Zhou Zhiwen, sold 14.979 million shares through block trades, accounting for 2% of the total share capital, successfully cashing out about 568 million yuan. After his sell-off, the company’s stock price continued to decline, with the latest closing price down 22.62% from his average selling price.

According to the earnings forecast, Zhaoyan New Drug expects to achieve operating revenue of 1.573 billion to 1.738 billion yuan in 2025, a year-on-year decrease of 13.9% to 22.1%. The company projects net profit attributable to shareholders of 233 million to 349 million yuan, a year-on-year increase of 214% to 371%. However, the company’s profit growth is mainly driven by the rising market prices of biological assets and fair value changes from natural growth, contributing net profits of 452 million to 499 million yuan. Meanwhile, the core laboratory services and other business segments are showing losses, with revenue and gross margin from contracted projects decreasing year-on-year.

Proofreader: Peng Qihua