The IPO myth has come to an end, and a wave of mergers and acquisitions is sweeping across listed pharmaceutical companies.

A new wave of ownership changes is sweeping through the A-share pharmaceutical sector.

In the past, acquiring the controlling stake of a listed company was often regarded as the "crown jewel" of the investment industry. It connects the exit channels of the primary market, drives the repricing of the secondary market, and rigorously tests the buyer's comprehensive capabilities in industry resources, capital operation and post-acquisition integration.

Yet for a long time, this jewel remained high and unattainable, with very few players able to claim it.

The turning point came in 2024. Following the release of the "Six M&A Policy Guidelines", the number of ownership change cases for A-share listed pharmaceutical companies increased significantly, and transaction sentiment warmed up rapidly. State-owned capital funds from Shanghai took control of Convac, China Merchants Group acquired Humanwell Healthcare, CSPC Pharmaceutical Group became the controlling shareholder of Jingfeng Pharmaceutical, Jointown Group took over Jiuzhou Meigu, and Jinhua state-owned capital stepped in at Baihua Pharmaceutical...

Behind this string of names lies the exit of old shareholders and the arrival of new buyers, as well as the repositioning of assets amid the industry's cyclical shifts.

This wave does not belong to any single type of buyer. State-owned players have strategic considerations to integrate high-quality industrial resources and revitalize the existing economic stock; private capital expands its industrial footprint by making low-position layouts; natural person investors enter with massive funds, aiming to carry out capital operations and asset injections through the listed company platform.

What appears to be a simple transfer of control is essentially a reshuffling of the pharmaceutical industry amid its cyclical trough.

01

The End of the IPO Myth:

After the Feast, Exit Channels Narrow Abruptly

To understand this wave of ownership changes, we must first look back at the previous round of market euphoria.

From 2019 to 2022, the biomedical primary market experienced its most heated four-year period. With the full implementation of the registration-based IPO system, the launch of the Fifth Set of Listing Standards on the Sci-Tech Innovation Board and the 18A rules on the Hong Kong Stock Exchange, portfolio companies backed by VC and PE funds rushed to file for IPOs in large numbers.

General Partners could present relatively decent IRR and DPI performance reports to their Limited Partners; compounded by the impact of the global health crisis, a total of 178 biomedical companies went public on the A-share market between 2019 and 2022.

That was the shared highlight moment for founders and investors. Easy exits led to easy financing, which in turn drove the growth of investment and fundraising activities.

Large numbers of GPs achieved exits through IPOs, and abundant liquidity further raised the expectations of founders and investors.

Many people believed that the dividend of the registration-based system would continue to support the valuation of their projects.

Yet the capital market never gives away free gifts — it marks a hidden price on every opportunity.

Starting from 2023, IPO policies became increasingly stringent. From 2023 to 2025, only 35 biomedical companies were listed on the A-share market in total, with a clear decline in the average annual number of new listings.

After IPO channels were blocked, the valuation adjustment and share repurchase clauses of many enterprises were triggered, and the bubbles accumulated during the high-liquidity period began to burst. The industry's keywords shifted from "easy exit, easy financing, easy fundraising" to "difficult exit, difficult financing, difficult fundraising".

Success came from IPOs, and failure also came from over-reliance on IPOs.

More importantly, the domestic biomedical industry was not a naturally M&A-friendly market in the past.

On one hand, many biotech companies aspired to grow into comprehensive biopharmaceutical enterprises, and independent listing was regarded as the most desirable end goal.

On the other hand, the innovation quality of some companies failed to support high-quality M&A transactions, and the proliferation of homogeneous generic pipelines weakened their value as integration targets.

Buyer capability was also a major threshold.

The frequent M&A activities of large overseas pharmaceutical companies are built on huge cash reserves, with leading players holding more than 300 billion US dollars in cash; in contrast, leading domestic pharmaceutical companies hold only about 20 billion US dollars on their balance sheets. In addition, the pipeline layouts of many domestic biotech companies rarely form real business synergies with large domestic pharmaceutical enterprises, resulting in long-term sluggish M&A activity.

Today, the underlying logic has changed.

In the past, the typical growth path for Chinese biomedical companies was "primary market equity financing — gradual development — BD transaction or core product commercialization — independent IPO".

Nowadays, more and more enterprises are shifting to the path of "primary market equity financing — gradual development — M&A and integration".

Policy encouragement, diversified capital instruments, and rising exit pressures are intertwining to push M&A onto the center stage of the industry.

02

Embracing a New Way of Survival:

From Independent Listing to Restructuring via M&A

Against the backdrop of tightened IPO regulations, M&A and integration are becoming the new mainstream solution.

Acquisitions of unlisted companies by listed companies represent a relatively moderate path: APM's acquisition of PharmLabs, China Biopharmaceuticals Holdings' takeovers of Livzon Pharma and Hegia, and Northeast Pharmaceutical's merger of Dacheng Peptide are all representative cases of this type of transaction.

A more radical and dramatic approach is the transfer of the controlling stake of listed companies.

No matter whether the buyer is state-owned capital, private capital or a natural person, after taking control of a listed company, they can leverage the capital market to achieve two key goals: first, inject high-quality assets into the listed platform and release the intrinsic value of assets through secondary market repricing; second, open up exit channels for original investors.

A typical case is that after Shanghai state-owned capital took control of Convac, it orchestrated Convac's acquisition of Nameixin Bio, a portfolio company of its state-owned fund.

The charm of M&A integration lies in that while the controlling shareholder can change, the listed company remains the carrier of industrial transformation.

After China Resources Sanjiu took control of Kunming Pharmaceutical Group and Tasly, the original shareholders — Huali Group and the Yan family — successfully realized their exits, while Kunming Pharmaceutical Group and Tasly, under the asset integration of China Resources Sanjiu, are better positioned to navigate industry cyclical fluctuations.

When Jingfeng Pharmaceutical and Humanwell Healthcare faced cash flow pressure and operational challenges, CSPC Pharmaceutical Group and China Merchants Group stepped in as new acquirers to lead the listed companies through difficult times.

As the IVD industry entered a phase of market clearing and reshuffling, the original controlling shareholders of companies like Hotgen Biotech, Rendu Biotech, and Amoy Diagnostics chose to cash out and transfer control to buyers with stronger industrial resources: China Biopharmaceuticals took over Hotgen, Haijing Pharmaceutical/Zhang Xiantao acquired Rendu Biotech, and Sinopharm Group became the controlling shareholder of Amoy Diagnostics.

Buyers and sellers each have their own strategic considerations, but together they drive the redistribution of industry resources.

Mature global markets have long provided a reference template.

For large overseas biomedical companies, M&A is one of the core approaches to create value.

Roche's acquisition of Genentech catalyzed the maturation of the collaborative ecosystem between pharmaceutical enterprises and biotech startups; Danaher, through hundreds of M&A transactions, transformed itself into a global giant in the life sciences sector.

M&A is not simply about purchasing assets — it is about acquiring capabilities, teams, time-to-market advantages, and critical positions in the industrial chain.

The transformation of Yatai Pharmaceutical vividly demonstrates the vitality that new controlling shareholders can bring to listed companies.

During the tenure of its former controlling shareholder, Ningbo Fubang Group, Yatai Pharmaceutical delivered mediocre overall performance. Faced with the centralized procurement of generic drugs and the industry downturn, the company failed to demonstrate sufficient counter-cyclical risk resistance, leading to unsatisfactory operating results. After Qiu Zhongxun took control, Yatai Pharmaceutical launched bold reforms, through asset injection and resource introduction, striving to build itself into a diversified industrial platform integrating "R&D — production — distribution — investment".

On March 4, 2026, Yatai Pharmaceutical announced that its wholly-owned subsidiary, Zhejiang Yatai Lichong Holding Co., Ltd., will establish a joint venture named Zhejiang Yatai Xinghao Pharmaceutical Co., Ltd. with Hainan Taizefeng Pharmaceutical Technology Co., Ltd., with planned capital contributions of 6 million RMB and 4 million RMB respectively. The proposed business scope of Yatai Xinghao includes pharmaceutical wholesale, pharmaceutical retail, and pharmaceutical import and export, indicating that Yatai Pharmaceutical is likely to enter the pharmaceutical distribution sector.

In terms of transforming to innovative drugs, Yatai Pharmaceutical is also gradually shifting its focus from traditional chemical generic drugs to improved new drugs and Class 1 innovative drugs. The company has built three internal R&D platforms for oncolytic virus drugs, long-acting preparations, and compound preparations, with a pipeline covering products such as dual-target Class I and Class III FIC anti-tumor biotech drugs, multiple myeloma therapies, risperidone microspheres, LRHR long-acting preparations, Parkinson's disease long-acting therapies, and dual-mechanism neuropathic pain drugs.

Another category of transactions serves more directly for the buyer's own industrial layout.

WuXi XDC's high-premium acquisition of Dongyao Biologics was not just about acquiring production capacity and equipment, but about capturing a time window that cannot be measured by time cost. As demand for ADC R&D and manufacturing services exploded, building production lines from scratch would take 3 to 5 years, which could not match the immediate market demand.

In the long run, the end-to-end integrated service capability of CROs will become the core competitive advantage. By acquiring Dongyao Biologics' mature ADC commercial production platform and professional team, WuXi XDC aims to strengthen its full-chain service capabilities from pre-clinical development to large-scale commercial production.

03

The Exam in the Deep Water Zone:

Who Can Turn Acquired Assets into Core Capabilities

If the past few years were the trial phase of M&A integration, 2025 is emerging as a pivotal turning point for M&A in China's healthcare industry.

This year, the market began to view valuation bubbles with a more mature attitude: no longer avoiding bubbles, but resolving them through differentiated pricing; evaluating transaction considerations with a long-term perspective: no longer focusing solely on current PE multiples, but recalculating the strategic value of industrial chain positioning; and designing transaction structures with more flexible instruments: no longer limited to cash or stock payments, but combining leverage, trusts, and equity separation of return rights and other diversified financial tools.

This means that the essence of pharmaceutical M&A is being redefined. It is never a mechanical superposition of assets, but a reconfiguration of capabilities, optimized integration of resources, and rediscovery of value.

As industrial players begin to lead transactions with a "big-picture accounting" mindset, as financial investors are willing to accept exit plans structured as "cash + performance commitment", and as state-owned capital platforms boldly deploy their second growth curve through leveraged acquisitions, the resource allocation model of China's healthcare industry will shift from "incremental expansion" to "stock restructuring".

In 2026, the M&A wave will not recede — it will evolve from "trial operations in shallow waters" to "normal operations in deep waters".

The final outcome will not be determined at the moment the transaction announcement is released, but will gradually emerge in the process of post-investment integration, resource introduction, and industrial synergy building.

Enterprises and institutions that can accurately identify high-quality targets, efficiently complete transaction design, and deeply implement post-investment integration will seize the leading position in this round of industrial reshaping.

For the entire industry, the prosperity of M&A integration is not a substitute for capital exit — it is an inevitable path for the industry to move toward maturity.

Only when more and more enterprises learn to fill their shortcomings, strengthen their strengths, and build closed-loop industrial chains through M&A, can China's healthcare industry truly evolve from "large scale but weak competitiveness" to "both large scale and strong competitiveness".

References

[1] Is the Great M&A Era for Chinese Pharmaceutical Enterprises Coming? Amino Insights

[2] After Ownership Change, Yatai Pharmaceutical Has Established Multiple New Companies in Succession. Saibailan

[3] Amid the CRO Market Clearing Wave, a High-Premium M&A Transaction. Deep Blue Observation

[4] Capital Never Sleeps: Embracing the Great Era of Healthcare Investment and M&A Integration. Yatai Capital

This article is from WeChat official account "Medical Insight", written by TAO Qiucheng, and published with authorization from 36Kr.