RMB 300 Million at Approximately 400% Premium! Anhui-Based CRO CTS Pharmaceutical Acquired

On June 26, Wanbang Pharmaceutical, a listed contract research organization on the ChiNext board, issued an announcement stating that it will acquire a 75.52% controlling equity stake in Anhui CTS Pharmaceutical for a total cash consideration of RMB 302 million.

In this transaction, as of the valuation date of March 31, 2026, and under the assumptions and conditions set forth in the business valuation report for the enterprise as a going concern, the book value of equity attributable to shareholders of the parent company in CTS Pharmaceutical's consolidated financial statements was RMB 80.876 million. After valuation using the market approach, the total equity value of CTS Pharmaceutical's shareholders was determined to be RMB 407 million, representing an appreciation of RMB 326 million and an appreciation rate of 403.24%, making this a high-premium transaction among current contract research organization industry mergers and acquisitions.

Upon completion of the closing, CTS Pharmaceutical will be consolidated into Wanbang Pharmaceutical's financial reporting system, becoming a wholly-controlled clinical research business platform of the listed company.

Founded in 2010, CTS Pharmaceutical is a contract research organization that was among the early players in China to specialize in full-process clinical operations for innovative drugs. Unlike most service providers that focus primarily on domestic Phase I and Phase II trials, the company has built a comprehensive business system covering clinical strategy design, multi-center operations from Phase I to Phase III, regulatory submission, and post-marketing studies. At the same time, CTS Pharmaceutical has established a differentiated competitive advantage through its wholly-owned subsidiary 360CQA, which operates in the cross-border third-party Good Clinical Practice auditing sector.

After more than a decade of operational accumulation, CTS Pharmaceutical has served over 100 pharmaceutical clients and executed nearly 300 clinical research projects, with therapeutic areas covering oncology, autoimmune diseases, respiratory diseases, neurology, gynecology, and other clinically active fields. A number of innovative drugs developed through its collaborations have successfully completed domestic and international registration and obtained regulatory approval. In terms of qualifications, the company is recognized as a national high-tech enterprise and serves as a vice-chairman unit of the Contract Research Organization Branch of the China Quality Association for Pharmaceuticals.

It is worth noting that CTS Pharmaceutical's wholly-owned subsidiary, 360CQA, specializes in independent third-party auditing, having served nearly 300 clients and undertaken over 900 audit and training projects. Its coverage spans therapeutic areas including oncology, neurology, endocrinology, and nephrology, encompassing clinical site audits, supplier audits, Good Clinical Practice training, and quality management system development. The subsidiary also possesses inspection experience with regulatory authorities in multiple countries, including China, the United States, the European Union, Japan, and South Korea, providing comprehensive support for simultaneous domestic and international submission and regulatory inspection assurance for innovative drugs.

At the financial level, CTS Pharmaceutical faces relatively pronounced short-term operational pressures.

According to audited data, CTS Pharmaceutical generated revenue of RMB 108 million in 2025, with a net loss of RMB 2.6802 million for the full year. In the first quarter of 2026, revenue reached RMB 31.1907 million, with a quarterly net loss of RMB 912,500.

The core factors contributing to these interim losses are twofold: first, the extended cycle of innovative drug clinical projects results in upfront costs for manpower and site initiation, prolonging the cash collection period; second, the company carries significant outstanding related-party receivables including principal and interest, with such related-party loans totaling over RMB 115 million as of the end of March 2026, continuously tying up cash flow.

The acquisition proceeds will be specifically used to settle outstanding related-party debts of the founding team. Upon closing, the historical large-scale related-party loans of CTS Pharmaceutical will have been repaid through the transaction, substantially eliminating the impact of related-party financial assistance and significantly improving asset quality.

In addition, to hedge against acquisition risks, this transaction incorporates comprehensive performance-based constraints and team retention mechanisms.

The performance guarantor, CTS Pharmaceutical, has committed to cumulative net profit attributable to the parent company after non-recurring gains and losses of no less than RMB 109 million for the three years from 2026 to 2028, with annual targets of RMB 30 million, RMB 35.5 million, and RMB 43.5 million, respectively. Should cumulative performance fall below 90% of the committed amount, the guarantor is required to compensate the listed company through equity transfer at no cost. Additionally, the transaction includes provisions for performance compensation and excess performance rewards.

Furthermore, upon closing, core management personnel are required to sign labor contracts of no less than six years, along with confidentiality agreements and non-competition commitments, securing the core clinical operations and auditing talent team and ensuring stability in personnel and business operations.

The other party in this transaction, Wanbang Pharmaceutical, was established in 2006 and listed on the ChiNext board in 2023. It is the first contract research organization to go public in Anhui Province and holds a significant first-mover advantage and benchmark position within the provincial contract research organization industry. The company occupies a leading position in the domestic bioequivalence study subsector for generic drugs, accounting for nearly 10% of domestic bioequivalence registrations, and is a subsector leader among generic drug contract research organizations.

Consequently, Wanbang Pharmaceutical's client base primarily consists of domestic generic drug manufacturers and companies engaged in both generic and innovative drug development. However, under the influence of centralized bulk purchasing normalization, the demand for generic drug consistency evaluation has been continuously declining, and the operational pressures on Wanbang Pharmaceutical have become fully apparent since 2025.

In 2025, the company's annual revenue reached RMB 274 million, a year-on-year decline of 27.67%; net profit attributable to shareholders of the parent company was RMB 36.4345 million, a year-on-year decrease of 57.40%, while net profit after non-recurring gains and losses was only RMB 8.93 million, with profitability heavily dependent on non-recurring income such as financial assets and government subsidies.

Entering the first quarter of 2026, its revenue further declined to RMB 30.54 million, with an operating loss of RMB 261,800 for the period, indicating that the ceiling for its traditional business growth has become apparent.

From the perspective of business structure shortcomings, Wanbang Pharmaceutical's prospectus and annual reports have both acknowledged that, compared with top-tier integrated contract research organizations, the company has notable capability gaps in innovative drug clinical trial design, multi-center patient recruitment, and international multi-center trial operations, making it difficult to secure large-scale innovative drug clinical contracts from biotechnology companies and multinational pharmaceutical companies. Its narrow client base and limited business growth space have made external acquisitions to supplement its clinical capabilities an important transformation pathway.

Similar issues are not unique to Wanbang Pharmaceutical. In 2026, the domestic contract research organization and contract development and manufacturing organization industry has entered a phase of structural consolidation, with divergence continuing to widen: traditional generic drug bioequivalence and consistency evaluation contract research organization orders are contracting and profitability is declining, while service providers focused on innovative drug clinical trials, cell and gene therapy, antibody-drug conjugates, and cross-border compliance are seeing continued valuation increases. Leading enterprises and listed companies are making acquisitions to supplement subsector capabilities as a mainstream choice.

In the first half of the year, the industry has witnessed multiple representative mergers and acquisitions: OPM Biosciences acquired PharmaLegacy Laboratories to supplement its clinical capabilities; central state-owned enterprises such as China Meheco and local state-owned capital from Jinhua have taken controlling stakes in small and medium-sized clinical contract research organizations, reflecting a highly unified industry consolidation logic. The room for single-service-provider operations is narrowing, while the bargaining power of integrated platforms with full-chain service capabilities continues to increase.

From a valuation perspective, the disparity across subsectors is also evident. CTS Pharmaceutical's nearly fourfold appreciation is driven primarily by long-term growth expectations for its innovative clinical and global auditing businesses, standing in sharp contrast to the low valuations of generic drug contract research organizations.

Driven by both policy and market forces, pharmaceutical companies' outsourcing logic is shifting. The previous model of splitting multiple steps and collaborating with multiple contract research organizations in segmented cooperation is being phased out, with one-stop end-to-end research and development outsourcing becoming the mainstream. Enterprises with capabilities in both pharmaceutical sciences and clinical development can effectively reduce communication and time costs for pharmaceutical companies, resulting in significantly stronger client stickiness.

For a regional contract research organization like Wanbang Pharmaceutical, which originated in the generic drug space, the core of this acquisition lies in a strategic transformation action aligned with long-term industry trends, rapidly supplementing through capital means the clinical teams and compliance qualifications that would have taken years to build internally, thereby shortening the cycle for establishing a presence in the innovative drug sector.

Therefore, this acquisition carries significant reference value for the industry. Wanbang Pharmaceutical's high-premium acquisition of CTS Pharmaceutical represents a typical industrial case of a generic drug-focused contract research organization transitioning into the innovative clinical sector. On one side is a listed platform with sluggish growth in its traditional bioequivalence business and sustained profitability pressure; on the other side is an innovative clinical service provider with global clinical and auditing expertise but short-term losses. The integration of the two can achieve a full-chain service closed loop encompassing pharmaceutical sciences and clinical development, realizing multiple synergies across clients, resources, and business sectors.