Anti-graft probe hits shares of Chinese drug firm

PUBLISHED : Thursday, 12 September, 2013, 2:35pm
UPDATED : Friday, 13 September, 2013, 1:06am

Shares in Hong Kong-listed Sino Biopharmaceutical plunged nearly 17 per cent yesterday on news that it had become the first major listed Chinese drug company to be probed in the central government's anti-corruption investigation of the pharmaceutical industry.

In an announcement, Sino Biopharmaceutical said it was not aware of any of its executive being investigated by the Chinese authorities. Its management said the crackdown would hurt staff morale, sales and profits. The company is the first big Chinese name in an industrywide probe that has so far featured multinationals like GlaxoSmithKline (GSK).

Sino Biopharmaceutical said it expected the campaign against the drug sector to last longer than previously thought.

A Deutsche Bank report also said: "In the near term, we expect the impact [of the Chinese government investigation] could be larger than expected and the duration could last into 2014."

We expect the impact [of the investigation] could be larger than expected

An unlisted Beijing drug company, Gan & Lee Pharmaceutical, said on Wednesday that it was investigating allegations that it had spent about 800 million yuan (HK$1 billion) to bribe doctors.

Sino Biopharmaceutical's share price plunged 16.5 per cent to HK$4.76, before trading was halted at 11.49am yesterday. On Wednesday night, CCTV said Sino Biopharmaceuticals' subsidiary, Chia Tai Tianqing Pharmaceutical Group, had sponsored mainland doctors' trips to Thailand and Taiwan.

The company said its board and senior management were not involved with and did not authorise the sponsorship of the trips, but that the company is investigating whether some staff of its subsidiary were involved in sponsoring the trips.

CCTV's allegations against Sino Biopharmaceuticals are less serious than those against GSK, which include over 3 billion yuan in bribes to doctors and hospitals, said Johnson Sun of Guotai Junan International.

Yesterday Xinhua quoted an anonymous source as saying GSK's threat to withdraw from China was a bargaining ploy to lower the fine. On September 3, the Ministry of Public Security said huge fines should be imposed on GSK. On September 6, the Daily Telegraph reported GSK might exit the mainland because of the fine and the difficulty of doing business in China.