5:15 PM
Dec 06, 2018
 |  BC Extra  |  Company News

Chinese biopharma stocks plummet after centralized tendering report

Chinese biopharma stocks tumbled Thursday in the wake of media and analyst reports suggesting that pricing discounts on generic drugs under China's centralized procurement program were greater than expected.

State-owned Shanghai Securities News reported significantly discounted prices for drugs in the program, including a 90% cut for antiviral entecavir and a 60% cut for hypertension drug irbesartan. In an analyst note, Morgan Stanley's Sean Wu called the overall price cut much steeper than the 30-40% expected by the market.

In a filing on the Hong Kong stock exchange, Sino Biopharmaceutical Ltd. (HKSE:1177) disclosed that the company was the successful bidder on entecavir for a tender price of RMB0.62 per tablet and NSAID flurbiprofen for a tender price RMB109.75 per box. According to a report from China Merchants Bank, which published estimated cuts for all 31 generic drugs covered under the program, the price of flurbiprofen is expected to drop 65% from the average price in China.

In addition to entecavir, the China Merchants report mentions four other drugs with reductions in pricing at greater than 80%.

When the procurement program was announced in September, price cuts were expected to range between 10% and 40%. Under the program, a single generic manufacturer would gain a 70% market share in 11 Chinese cities, according to a Chinese government news source (see "China Biopharma Stocks Fall After Centralized Tendering Talks").

Shanghai Securities News said other Chinese companies with successful bids include Zhejiang Huahai Pharmaceutical Co. Ltd. (Shanghai:600521) and Zhejiang Jingxin Pharmaceutical Co Ltd. (SZSE:002020).

Deutsche Bank's Jack Hu said in a statement that additional tendering rounds, with less steep discounts, are expected in 2019.

Multiple generic manufacturers saw a drop in share prices following the news including Sino, which traded down HK$1.11 (16%) to HK$5.84 on Thursday, and Jiangsu Hengrui Medicine Co. Ltd. (Shanghai:600276), which fell RMB4.26 to RMB62.65.

Shanghai Fosun Pharmaceutical Group Co. Ltd. (Shanghai:600196; HKSE:2196) shares lost RMB2.62 to RMB27.81 in Shanghai and HK$3.10 (10%) to HK$26.45 in Hong Kong. CSPC Pharmaceutical Group Ltd. (HKSE:1093) shares dropped HK$2.34 (14%) to HK$13.82.

Jingxin gained RMB0.11 to RMB10, and Huahai gained RMB0.44 to RMB14.93.

The news, coupled with tensions between the U.S. and China related to trade and the arrest of Huawei Technologies Co. Ltd. (Shenzhen, China) CFO Wanzhou Meng, have also weighed on Chinese stocks. The Hang Seng index fell 663.30 to 26,156.38 on Thursday.

Staff Writer Hongjiang Li contributed to this story.

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