(Yicai Global) July 17 -- Changsheng Biotechnology, the Chinese vaccine maker that was forced to recall products after authorities found widespread production violations, squandered some CNY2 billion (307 million) on wealth management products last year.
China's second-biggest rabies vaccine maker listed CNY2 billion of undue bank-entrusted financial products in its financial report for last year, state-backed news outlet The Paper discovered. Research and development expenditure was also disproportionately low compared with its industry peers, which could be a factor in the Changchun-based firm's flawed products.
The State Drug Administration stepped in to halt production and enforce a product recall on July 15 after a surprise inspection unearthed forged data. Authorities have ordered the revocation of Changsheng Biotech's Good Manufacturing Practice for medical products certificate.
Shares in Changsheng Biotech [SHE:002680] hit the 10 percent daily limit down in trading today for the second consecutive day, closing at CNY19.89 (USD2.97).
Changsheng Biotech, which makes the widely used vero-cell rabies vaccine, only used 7.9 percent of operating revenue for R&D expenditure last year, a ratio dwarfed by industry counterpart Walvax Biotechnology which used around 50 percent of such income for product development. Another major peer Kangtai Biological posted R&D expenditure-to-operating revenue ratios of 11.5 percent and 10.3 percent in 2016 and 2017, respectively.
As of the end of last year, the company's undue bank-entrusted financial products consisted of CNY964 million in fund-raising and CNY1.08 billion of in-house capital and Changsheng Biotech has continued to invest in wealth management products this year. The firm's board approved a plan in early May to invest into financial products with up to CNY2.5 billion of self-owned laid-up capital and up to CNY1.2 billion in external laid-up capital.
Changsheng Biotech listed in Shenzhen in 2015 through a back-door deal with Huanghai Machinery. The vaccine maker accounted for 99 percent of the parent company's income last year at CNY1.6 billion while net profit was CNY566 million.
Editor: William Clegg