China's Fosun Pharma stock tumbles after regulator's spot check on subsidiary

SHANGHAI: Shanghai Fosun Pharmaceutical Group Co Ltd saw its shares tumble by as much as 10 percent on Friday after it said regulators had made an unannounced inspection of a subsidiary prompted by a letter detailing alleged violations.

The development comes a month after regulators said Changsheng Bio-Technology Co Ltd had sold over 250,000 doses of an ineffective vaccine to inoculate children against diphtheria, whooping cough, and tetanus.

The case shook trust in China's healthcare sector and led to the resignation or dismissal of dozens of public officials, just as the industry is striving to export more China-made drugs.

Fosun Pharma in a statement said the Chongqing Food and Drug Administration (FDA) visited Chongqing Research Institute on Aug. 23 in response to a letter posted on the regulator's website. It said the regulator has yet to reach any conclusions.

"The group places great emphasis on the quality and risk management throughout the life cycle of its products," Fosun Pharma said. "The group has adopted and implemented quality and safety control mechanisms and adverse drug reaction monitoring mechanisms at each stage of the production chain."

Screenshots of the letter and the regulator's response were reported by local media on Thursday, but appeared to have been removed from the regulator's website by Friday morning. The Chongqing FDA did not respond to Reuters requests for comment.

The letter's writers said they were employees of Chongqing Research Institute, driven to report what they called violations at the subsidiary after seeing coverage of the vaccine scandal.

They said not all manufacturing was in accordance with approved processes and that managers had "led" staff to fabricate a large number of production and inspection records.

Fosun Pharma said it manufactures all existing products using approved production processes. It did not address the alleged fabrication in its statement and did not immediately respond to a Reuters' request for further comment.

Linus Yip, a chief strategist at First Shanghai Securities, said the slide in Fosun Pharma stock showed confidence toward the sector since the vaccine scandal was still low.

"Instead of the company making an announcement, it will be more convincing and authoritative if the regulator can make a statement to update the situation," Yip said.

"Even though the overall (pharmaceutical) sector has undergone a correction ... investors are not ready to hunt for bargains when worry still lies."

(Reporting by Brenda Goh; Additional Reporting by Donny Kwok in HONG KONG and Shanghai Newsroom; Editing by Christopher Cushing)