Henan Taloph Pharmaceutical Stock Co.,Ltd. (600222.SH), a traditional Chinese medicine manufacturer, saw its stock price swing wildly—hitting the daily limit up in morning trading before plunging near the limit down in the afternoon—following an announcement about a change in control. This marks the second ownership shift in four years for Henan’s first listed pharmaceutical company.
Jiangxi Pharmaceutical Holdings, backed by state-owned capital from Jiangxi province, invested over 1 billion yuan to take control through a combination of share transfers and a private placement. The company’s actual controller will shift from the Zhengzhou High-Tech Zone Management Committee to the Jiangxi Provincial State-Owned Assets Supervision and Administration Commission.
Taloph Pharma began its transformation in 2015 by acquiring Beijing Xinlingxian Pharmaceutical Development Co., Ltd. (referred to as "Xinlingxian"), a key strategic move to expand into drug R&D services and innovative pharmaceuticals. A company representative stated that Xinlingxian currently provides R&D services for major domestic pharmaceutical firms.
However, with Taloph Pharma struggling under centralized procurement pressures and Xinlingxian yet to become a significant profit driver, questions remain over whether this cross-regional state-backed takeover can help the company overcome its transformation challenges.
**Second Ownership Change in Four Years** Taloph Pharma recently disclosed a control change plan, with Jiangxi Pharmaceutical Holdings spending over 1 billion yuan to acquire an 8.73% stake (50.1 million shares) at 11.043 yuan per share in two tranches, totaling approximately 553 million yuan. During the transition period, Jiangxi Pharmaceutical Holdings will enter into a voting agreement with the current major shareholder, Zhengzhou Tairong Industrial Investment Co., Ltd. (Tairong Investment), securing control over 14.37% of shares.
Additionally, Taloph Pharma plans a private placement of up to 74.605 million shares to raise 454 million yuan for working capital and debt repayment. Upon completion, Jiangxi Pharmaceutical Holdings will hold a 19.23% stake, becoming the new controlling shareholder.
Jiangxi Pharmaceutical Holdings, established in May 2025, has no operational business but is backed by Jiangxi Pharmaceutical Group, a leading provincial pharmaceutical enterprise. Taloph Pharma stated that the partnership aims to advance its strategic development in traditional Chinese medicine, CXO (contract research and development services), and health industries, leveraging Jiangxi Pharmaceutical Holdings’ expertise in distribution and policy resources.
Notably, this marks the second control change in less than four years. In November 2021, Tairong Investment acquired an 82.4411 million-share stake from former controlling shareholder Zhengzhou Zhongsheng Industrial Group Co., Ltd. (Zhongsheng Industrial) at 9.7 yuan per share. The latest transaction could yield Tairong Investment a profit of about 67.13 million yuan.
However, financial pressures loom—50% of Tairong Investment’s shares are pledged, while Zhongsheng Industrial’s entire stake is frozen (including sequential freezes). Market reaction was mixed: on the first trading day after the announcement, Taloph Pharma’s stock surged to the daily limit up before plummeting, closing down 4.43% at 8.20 yuan. The next day, it neared the limit down again, closing at 7.4 yuan.
**Operational Struggles** Taloph Pharma, once known for its Shuanghuanglian Oral Solution, has faced declining performance. In the first three quarters of 2025, revenue fell 11.47% year-on-year to 1.187 billion yuan, while net profit attributable to shareholders dropped 12.36% to 25.3255 million yuan. Core drug formulation revenue plunged 37.73%, and traditional Chinese medicine revenue declined 8.75%.
The company attributed the slump to slow implementation of centralized procurement policies, retail pharmacy consolidation, and pricing pressures. Gross margins also contracted due to falling product prices and rising unit costs from uneven production.
Over the past three years, performance has been volatile—a 72.2 million yuan loss in 2022, followed by net profits of 43.56 million yuan and 50.53 million yuan in 2023 and 2024, respectively. As of Q3 2025, its debt-to-asset ratio stood at 55.88%, above the industry average.
Centralized procurement has hit hard, with flagship products like Shuanghuanglian Oral Solution and Danshen Oral Solution seeing prices nearly halved. Despite hopes for volume growth, sales have stagnated. Meanwhile, R&D spending has shrunk—2024 R&D expenses fell 21%, while H1 2025 R&D investment plummeted 56.93% to 25.9 million yuan.
Adding to the pressure, Taloph Pharma faces a three-year earnings guarantee tied to its 2021 deal with Tairong Investment. Adjusted after a 2022 loss, the company must achieve cumulative net profits of at least 148.5 million yuan from 2023 to 2025. By Q3 2025, it had only reached 119 million yuan, requiring a near-impossible 30 million yuan profit in Q4 to meet the target.
If the target is missed, Zhongsheng Industrial must compensate Taloph Pharma in cash. However, with its shares frozen and reported tax arrears of 1.1 million yuan, doubts persist over its ability to pay.
With its respiratory products struggling, traditional medicine facing fiercer competition, and new growth drivers still undeveloped, Henan’s pioneering pharmaceutical firm continues to grapple with the pains of transformation.
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