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Sino Biopharmaceutical Investigates Bribery Claim at Unit

Sept. 13 (Bloomberg) -- Sino Biopharmaceutical Ltd. said it’s investigating media reports claiming bribery at a unit of the Chinese drugmaker and said neither senior management nor board members of the group were involved.

Two groups of doctors attended 50-minute meetings organized by the company in China and then left on sponsored vacations, according to a report broadcast Sept. 11 by the state-run Chinese Central Television. The board is carrying out further investigation to determine whether there was any involvement by employees of an indirect subsidiary, the Hong Kong-based drugmaker said today.

Sino Biopharmaceutical rose 1.3 percent to HK$4.82 as of 11:57 a.m. in Hong Kong after resuming trading today. The stock plunged 16 percent yesterday before being halted.

The broadcast is the latest to claim doctors’ involvement in malfeasance amid China’s crackdown on corruption in its $350 billion health-care market. China extended the probe to multiple drug companies and hospitals after saying it was investigating GlaxoSmithKline Plc over claims employees used cash and sexual favors to bribe doctors and health officials.

“The group demands its staff to comply with all applicable laws and regulations when carrying out sales activities,” Sino Biopharmaceutical said in a statement. “The board is not aware of any member of the group being subject to investigation by the relevant governmental authorities.”

The CCTV program referred to Jiangsu Chia Tai-Tianqing, one of 23 “principal subsidiaries” listed by Sino Biopharmaceutical in its 2012 annual report.

Indirect Subsidiary

Sino Biopharmaceutical said in the statement that financial websites and local newspapers reported that employees of Chia Tai-Tianqing Pharmaceutical Holdings Co., an indirect subsidiary, were involved in the incident. The company is investigating further and will report the results when available, according to the statement, which didn’t identify the media.

The drugmaker said it isn’t aware of any other reasons for its share-price movement. Yesterday’s decline was the stock’s largest drop since October 2000. About 135 million shares changed hands, almost seven times the daily average in the six months before yesterday.

The TV broadcast showed an invitation printed on Chia Tai-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 in eastern China and then went to Taipei.

‘Policy Headwinds’

“Sino Biopharm is now mostly exposed to policy headwinds,” Iris Wang, a health-care analyst at Credit Suisse Group AG, wrote in a note yesterday. “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.

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. and Danone SA 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.

To contact the reporter on this story: Joshua Fellman in New York at jfellman@bloomberg.net

To contact the editor responsible for this story: Jason Gale at j.gale@bloomberg.net

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