Disappointing Pharmaceutical Enterprises and Products in 2017

Source: Yaozh.com

According to the list of the top 10 "disappointing drugs" selected by the Health Weekly of The Beijing News by the market performance of pharmaceutical enterprises in 2017, we can see the down side thereof to the development of the pharmaceutical industry, however, we hope that those painful lessons can lead pharmaceutical enterprises towards a brighter future in 2018.

Unpopular: Shapuaisi

Reason for listing: Dxy.com criticized Shapuaisi Eye Drops (Bendazac Lysine Eye Drops) in the article titled Please Leave the Chinese Old People alone, the Brainwashing Drug with Annual Sales of Crazy RMB 750 Million on December 2, 2017, directly pointing out that it was ineffective to cataract and suspected of false publicity. Then this "miracle cure" that was a TOP10 product on the chemical drug market of physical pharmacies in China and number one in OTC drug sales was collectively condemned by ophthalmologists, and the regulators rapidly intervened: China Food and Drug Administration and Zhejiang Food and Drug Administration successively issued notices urging the enterprise to start the clinical effectiveness test ASAP; on December 7, Shapuaisi made an application for urgent suspension of trading of its shares after "three consecutive slumps" in stock; on December 8, Shanghai Stock Exchange and Zhejiang Securities Regulatory Bureau gave the Letter of Inquiry and Letter of Attention to the enterprise.

In the evening of December 15, 2017, Shapuaisi made an announcement with 43 pages to respond, disclosing details of the Phase II and Phase III clinical trials separately conducted on Shapuaisi Eye Drops in 1995 and 1998. Shapuaisi’s shares fell by over 30% in one week after resuming trading on December 18, 2017 as affected by the event.

Disappointing degree: ★★★★★

Continual bribery: Squibb

Reason for listing: Shanghai Administration for Industry & Commerce punished Sino-American Shanghai Squibb Pharmaceuticals Ltd. for its bribery in 2015, confiscated the over RMB 770 thousand illegal gains, and fined it RMB 100 thousand at the end of 2017.

During the sales of pharmaceutical products, Squibb paid the round-trip business level fares of RMB 57,095 for the director of Cardiovascular Medicine Department of Xin Hua Hospital Affiliated to Shanghai Jiao Tong University School of Medicine to London, UK to attend the meeting of the European Society of Cardiology, and during the period, the said department purchased RMB 772,536.25 of 6 pharmaceutical products including Fosinopril Sodium Tablets/Monopril, etc. from Squibb. In fact, also in 2015, Squibb was accused by the U.S. Securities and Exchange Commission that its sales representatives bribed doctors in forms of cash, travel, and meeting sponsorship, etc., to obtain more than USD 11 million profits from sales of prescription drugs to the relevant hospitals. Squibb eventually agreed to pay more than USD 14 million to settle the accusation concerning the company’s suspicion of bribery in China.

Disappointing degree: ★★★★

In need of "tonifying kidney" most: Huiren Pharmaceutical

Reason for listing: The continual rise of its revenue could not save Jiangxi Huiren Pharmaceutical’s embarrassing situation of high gross margin but low net profit. The more than 80% gross margin of its Huiren Shenbao Tablets sparked much furor.

According to the prospectus, the cost of every tablet of Huiren Shenbao Tablets is RMB 0.18, and the gross profit amount reaches RMB 1.12, namely, the gross margin is 86.48%. However, the advertising and business publicity expenses account for half of the gross margin. The large amount of marketing input has sufficiently validated the "existence" of Huiren Shenbao Tablets.

However, one undisputed fact is that according to incomplete statistics, Huiren Pharmaceuticals has been punished by the food and drug administrations for more than 8 times due to production or sales of drugs not meeting provisions since 2013, and was also required to limit production and emission due to environment pollution, etc. Also, the slogans "Feeling like running on empty, I want to tonify the overused kidneys" and "Good for him, good for me" are also doubted. An expert pointed out that the "kidney deficiency" in the TCM was in fact irrelevant to the kidneys in the Western medicine, but usually used by people to indicate sub-health. If such development mode continued, the huge advertising and business publicity expenses would cause the already not high net profits of Huiren Pharmaceuticals to "run on empty".

Disappointing degree: ★★★★

Inadequate efforts in environment protection: North China Pharmaceutical

Reason for listing: Hebei Province started the third round of special law-enforcement inspection of atmospheric environment of the province on November 6, 2017. North China Pharmaceutical Co., Ltd. was found that during the production of its Phenoxymethylpenicillin Potassium Workshop, 10 fermentation tanks were fermenting, but the fermentation workshop was not tightly sealed, and some VOCs waste gas in the workshop was directly emitted to outdoors without central collection and treatment. The behavior of the general pharmaceutical factory in violation of the Law on the Prevention and Control of Atmospheric Pollution immediately led to the case filing and punishment procedure.

According to the scheme of Shijiazhuang City, North China Pharmaceutical planned to fully move out downtown Shijiazhuang by the end of 2017; in fact, North China Pharmaceutical had earlier paid the price for the environmental issues: it made two consecutive announcements in November 2016, mentioning that the company received the Shijiazhuang City Air Pollution Prevention Scheduling Order issued by Shijiazhuang Municipal People’s Government which required all pharmaceutical enterprises of the city to suspend production and not resume production without approval of the municipal government. North China Pharmaceutical claimed when resuming production in January 2017 that the production suspension would reduce RMB 54.93 million profit of the company in 2016.

Disappointing degree: ★★★★

Controversial: BGI

Reason for listing: As a new favorite on the capital market in 2017, BGI’s issue price rose from RMB 13.64 to RMB 261, and its market also exceeded RMB 100 billion after 19 raising limits, thus called "Tencent of the gene world". However, the thriving BGI thereafter encountered continual troubles: the scandal of data fraud of the IPO prospectus resulted in its market value to drop RMB 25 billion in 3 days. Then BGI claimed that the data differences were caused due to different statistical indicators.

Wang Jian, Chairman of BGI, said in a recent interview video that it was unnecessary for ordinary people to receive the cervical cancer vaccine, and the early gene detection was a more cost-effective choice. This was immediately opposed by the medical world, and doubted as commercial speculation. Some famous doctors expressed "outrage" regarding the act of BGI on Weibo, considering BGI as "disrespecting science". The event also affected the stock price of BGI, which fell below RMB 210 compared to the highest price period. BGI could have earned huge profits on the capital market, but it attracted attention due to remarks.

Disappointing degree: ★★★

Passive situation: HPGC

Reason for listing: Harbin Pharmaceutical Group Holding Co., Ltd. (HPGC), the first listed company in the pharmaceutical industry in China, has main business covering chemical APIs, chemical preparations, biologics, TCMs, and health products.

Both the operating income and net profits of the company in the first three quarters of 2017 declined compared to the same period of previous year, wherein, the net profits declined by nearly 60%. HPGC has gradually reduced R&D investment in recent years, with the proportion of R&D investment in the operating income significantly lower than peers. An expert analyzed that HPGC would be in a passive situation in the next round of competition in the pharmaceutical industry if it lost the driving force of R&D capacity.

More importantly, the antibiotic usage restriction policy is being further updated: the National Health and Family Planning Commission of the P.R.C. issued the National Action Plan to Contain Antimicrobial Resistance (2016-2020) in August 2016; it issued Notice on Further Strengthening the Administration of Antimicrobial Drug Clinical Applications to Contain Antimicrobial Resistance in March 2017. With the overall shrink of the antibiotic pharmaceutical product market, income of the anti-infectious drugs of HPGC will be bound to decline.

Disappointing degree: ★★★