(Yicai Global) Nov. 2 -- Wang Li, the chief executive officer of LBX Pharmacy Chain Joint Stock Company, has refuted a report that the firm will merge with rival Yixintang Pharmaceutical Group to form China’s largest drugstore chain, the Beijing News reported.

The securities departments of both companies had also earlier denied any knowledge of such a move to online news outlet The Paper.

The firms, which are two of China’s largest pharmacy chain operators, are “in advanced talks to create the country’s biggest drugstore chain via a share swap,” Reuters reported today, citing three people familiar with the matter. The two parties have been in discussion for months and “a deal is likely to be announced in the coming days,” the report added.

The denial caused stocks to fall flat after an initial surge. Changsha, central Hunan province-based LBX Pharmacy [SHA:603883] closed up 1.5 percent at CNY72.60 (USD10.85) after rising as much as 3.7 percent during the day. Yixintang’s [SHE:002727] share price jumped 4.89 percent after lunch but ended the day up just 0.12 percent at CNY40.30.

LBX Pharmacy, also known as Laobaixing, runs a nationwide network of 5,128 stores while Kunming, southwestern Yunnan-province based Yixintang has around 5,500 outlets.

Both companies posted almost 25 percent jumps in net profit in the third quarter and close to 21 percent gains in revenue. LBX Pharmacy had net profit of CNY487 million (USD72.8 million) on revenue of CNY10.1 billion (USD1.5 billion) while Yixintang logged net profit of CNY604 million (USD90 million) on revenue of CNY9.2 billion, according to the two firms’ latest earnings reports.

Editor: Kim Taylor