(Yicai Global) Sept. 3 -- Shares in Kangmei Pharmaceutical hit the exchange-imposed limit up today on the news that its parent firm is to hand control to a company backed by the Guangdong provincial government in a bid to give the troubled drugmaker a new lease of life, Kangmei Pharma said yesterday.

The firm’s stocks [SHA:600518], which started trading again today after a month-long suspension as the company prepared for a major structural change, rose 5 percent to CNY3.10 (USD0.45). This gave it a market cap of CNY14.67 billion (USD2.1 billion), still far below the height of CNY139 billion it reached on May 29, 2018.

Kangmei Industry Investment Holdings will transfer its voting rights corresponding to the 29.9 percent stake it holds in Kangmei Pharma to Jieyang Yilin Pharmaceutical Investment, a new firm set up last month and controlled by the Guangdong government.

Yilin will then become the controlling shareholder of Kangmei Pharma and will help the firm get out of its difficulties, the statement said, without going into details on how Yilin will achieve this.

Yilin’s three shareholders are the State-owned Assets Supervision and Administration Commission of Jieyang Municipal People's Government, the SASAC of the People's Government of Guangdong Province and the People`s Government of Guangzhou Municipality, the statement said.

Kangmei Pharma was hit by scandal in late 2018 when the China Securities Regulatory Commission accused it of doctoring its books by as much as CNY30 billion (USD4.4 billion). The securities regulator later fined the firm’s chairman, vice chairwoman and director of the board CNY900,000 (USD131,664) each and banned them from participating in the stock market for life.

The Shenzhen-based firm posted losses of CNY1.4 billion (USD205 million) in the first half, compared with the profit of CNY85.5 million it made during the same period last year. Revenue was down 69 percent to CNY2.5 billion.

Editor: Kim Taylor