A Niantic post on its official website reveals that everything you can do with the Apple Watch application is now possible on the iPhone too, thanks to the Adventure Sync feature: "Because Adventure Sync allows trainers the option of tracking their steps, earning buddy candy and hatching eggs in one mobile device rather than two separate devices, we want to focus on building Adventure Sync so that trainers will no longer have to split their gameplay between two devices."
The Adventure Sync feature can track your distance travelled without needing to take your phone out of your pocket or even launch Pokemon Go itself. And, it can earn buddy candy automatically, while push notifications can be enabled to tell you when eggs are ready to be hatched.
It can also connect with other iOS fitness apps, so a Watch is not needed for tracking.
It is also our guess that the user base for the Pokemon Go app was already very small and it became too time consuming and expensive for Niantic to bug-test and upgrade its app as each new watchOS version is released.