Chinese drug companies slump as probe flagged following vaccine scandal

Shares in China’s major vaccine makers have tumbled after the country’s Premier called for an investigation into the sector.

A Food and Drug Administration officer checks on vaccines at a hospital in Rongan in China's southern Guangxi region. Picture: AFP

Chinese Premier Li Keqiang called for a government investigation into “the entire process chain of all vaccine production and sales,” after a drug company allegedly sold more than 250,000 doses that failed to meet safety standards.

Shares of major local vaccine makers, including a Merck & Co. partner, tumbled Monday after Mr Li’s statement was released a day earlier. He didn’t elaborate on what more his government would do to investigate.

Mr Li’s investigation was sparked by public outrage against Changsheng Biotechnology Co., a large vaccine maker based in Jilin, a province in northeast China. Earlier this month, the national drug regulator said Changsheng fabricated production records of a rabies vaccine. The company said it suspended production of the vaccine, pending the results of an investigation. It said none of the batches in question were shipped.

Then a week ago, Changsheng said a separate investigation conducted by Jilin’s food and drug authority showed that 253,338 doses of another vaccine — administered to protect against diphtheria, pertussis and tetanus — failed to meet safety standards. Most of the doses, the company said, were sold to the government of Shandong province. Authorities in Jilin province fined it $US380,610 and seized $US126,683 worth of assets from sales of the vaccine, the company said.

Authorities in Beijing have recently tried to clean up the world’s second-largest drug market by sales, after a series of safety scandals — involving drug ingredients, milk and infant formula — led to deaths and angered the public. The latest incident touched a nerve.

Anger on Tencent’s WeChat and Twitter-like microblogging site Weibo was largely directed at Beijing’s inability to restore public faith in domestic goods. That deals a blow to President Xi Jinping’s government, which is seeking to transform the drug industry into a producer of complex products.

There were eight times more searches and mentions of the term vaccine on Sunday compared with a day earlier, according to WeChat Index, an app for big data analysis. Searches and mentions involving the company, Changsheng, were 50 times higher over the same period.

Mr Li sought to soothe worries about safety as anger intensified over the weekend. “We will resolutely crack down on all illegal and criminal acts that endanger the safety of people’s lives, and resolutely punish those who violate the law,” his office said Sunday. It added that Beijing was committed to ensuring “a safe, secure and trustworthy living environment” for its citizens.

Trading in Chongqing Zhifei Biological Products Co., which sells Merck’s Gardasil vaccine in China, and Shenzhen Kangtai Biological Products Co. Ltd., which produces vaccines for hepatitis B among others, were temporarily suspended after both companies’ shares fell by the maximum 10 per cent daily limit on Monday.

Shenzhen-listed Changsheng was halted from trading after falling by more than 40 per cent since last Monday.

China’s drug regulator is overhauling regulation and cracking down on fraudulent research in a bid to clean up the pharmaceutical industry. In 2015, it allowed companies to voluntarily withdraw new drug applications, while warnings about harsher penalties for applicants whose research failed to meet its standards. By mid-2016, more than 80 per cent of the 1,429 pending applications had been withdrawn.

Fanfan Wang and Stella Yifan Xie contributed to this article.

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