Impressive growth

Shares of Viagra’s China alternative soar then plummet


Hard lesson for Changshan Bio

Pharmaceutical giant Pfizer discovered its solution to erectile dysfunction (ED) by accident. According to company legend, Pfizer was investigating the application of sildenafil citrate as a treatment for high blood pressure but discovered it actually increased pressure in a very localised way. Sildenafil citrate is now the key ingredient in Viagra.

In China, Pfizer held a patent on the recipe for Viagra for 14 years, meaning domestic pharma companies could not apply sildenafil citrate in the same way. But when the patent expired in 2014 local companies, such as Golden Spear, quickly entered the market (see WiC305).

Last week, a new challenger emerged. Hebei Changshan Biochemical Pharmaceutical reported that one of its subsidiaries had just obtained authorisation to produce sildenafil citrate. In its report, Changshan Bio also speculated on the market opportunity for its new Viagra-like product, claiming that 140 million Chinese men suffer from ED – i.e. around 20% of the male population.

Some stock market investors were excited by this figure, driving Changshan Bio’s share price up the maximum 10% allowed for two consecutive trading sessions.

But the surge wasn’t missed by officials at the Shenzhen Stock Exchange, which quickly sent a letter to Changshan Bio asking it to clarify a number of issues, including more details on its production plans. Most importantly, Changshan Bio was asked to explain how it determined that one in five Chinese men suffered from ED.

On May 17, the company conceded that its“new product’s market size and market share may be lower than expected” and revealed that its data had come from a 2014 report by Guosen Securities.

Questioned by local newspapers including the Global Times, the brokerage admitted that the data it used in its own report was older still. In fact, it was based on a remark made in 2010 by a urologist with Peking University People’s Hospital, who said that the morbidity rate of ED in China was roughly 26.1%.

There is still no detail on when Changshan Bio will start producing ED drugs. But its share price has plunged more than 20% since it released its clarification.

However, according to National Business Daily, four of the company’s top executives took advantage of the stock’s brief rally, selling their own shares and collectively cashing in about Rmb90 million ($14 million).

NBD explains that the executives had announced their intention to reduce their holdings last October but had not taken any action as they were waiting for approvals of their new drug to be given.

The company put out another stock exchange announcement this week. And it was a more bad news for its shareholders: the stock market watchdog is now investigating whether the Changshan Bio disclosed sensitive information improperly.

As for the potential size of the ED market in China, it remains anyone’s guess. The same would seem to apply in the US where an internet search reveals widely varying estimates. One assessment from Dr Michael Roizen on the Sharecare website was that “it’s about 6%”.

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