Sino Biopharmaceutical Ltd. (1177) plunged the most in about 13 years before being suspended in Hong Kong trading, after a report by state-run Chinese Central Television alleged bribery at a unit of the medicine maker.
Sino Biopharmaceutical fell 16 percent to HK$4.76, headed for the largest drop since October 2000, before being halted at 11:49 a.m. The stock has been suspended pending an announcement to clarify certain information in recent press reports, the drugmaker said today. Two groups of doctors attended 50-minute meetings organized by the company in China and then left on sponsored trips, according to the broadcast yesterday evening.
The report is the latest claim of bribery involving physicians amid China’s crackdown on corruption in its $350 billion health-care market. The probe has extended to multiple drug companies and local hospitals after China said it was investigating GlaxoSmithKline Plc (GSK) over claims that company employees used cash and sexual favors to bribe doctors and health officials.
“Sino Biopharm is now mostly exposed to policy headwinds,” Iris Wang, a health-care analyst at Credit Suisse Group AG, wrote in a note today. “We believe this event will force Sino Biopharm to strengthen its compliance control and largely affect top-line growth.”
Wang cut her rating on the company to underperform from neutral.
The TV program referred to Jiangsu Chia Tai-Tianqing, one of 23 “principal subsidiaries” listed by Sino Biopharm in its 2012 annual report.
Sino Biopharmaceutical has sent a team to Jiangsu to investigate the allegations, Cao Xiwen, the company chairman’s secretary, said in a telephone interview. It will issue a statement after it gets more clarity on the matter, which could be as soon as today, he said.
The broadcast showed an invitation printed on Tianqing’s letterhead for a meeting on Aug. 21 at Airport Hotel Shanghai. The text said: “After the meeting, Chia Tai Tianqing’s Tiance products group has prepared an exciting and comfortable trip for you to Chiang Mai, Thailand. We believe this medical meeting will leave you with deep and beautiful memories.”
The report also said another group of doctors attended a meeting in Nanjing, eastern China, and then went to Taipei.
In July, China accused Glaxo of crimes involving 3 billion yuan ($490 million) of deceptive travel and meeting expenses as well as trade in sexual favors. Authorities detained four senior executives in China at Glaxo, the U.K.’s biggest drugmaker.
Sanofi and Eli Lilly & Co. were among drugmakers that subsequently said they had received visits from Chinese regulators. Separately, two units of Johnson & Johnson, the world’s biggest maker of health-care products, were fined by Chinese authorities for monopolistic practices.
China’s crackdown on possible misbehavior by companies has extended to industries ranging from formula milk to gold. In August, Mead Johnson Nutrition Co. (MJN:US) and Danone were among six dairy companies ordered to pay a combined 669 million yuan for fixing minimum resale prices of their products. Five gold retailers in Shanghai and a local trade association were fined in the same month for manipulating jewelry prices.
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