Chinese pharmaceutical manufacturer Hebei Changshan Biochemical Pharmaceutical is under investigation on suspicion of fabricating statistics related to the drug Viagra.
The China Securities Regulatory Commission (CSRC) is investigating the company over what started as an exciting announcement that quickly turned to deflation.
In a statement published on May 16, the A share-listed company claimed it had obtained approval to produce Sildenafil, a medication used in Viagra to treat erectile dysfunction, and added it would be able to tap into a market worth 10 billion yuan (US$1.57 billion) in China.
That market share was based on an estimation that 140 million Chinese men, or about 10% in the male population, suffer from erectile dysfunction.
The company’s share price quickly inflated and shot up a maximum of 10% for two consecutive days before it reached a one-month high of 8.7 yuan on May 17 – when investors learned the senior management were selling.
A total of four senior management, including chairman Gao Shuhua, sold more than 10 million of their own shares for about 80 million yuan.
Shares closed on Wednesday at 6.9 yuan. That means investors who bought the shares based on the positive news on May 16 lost money.
On May 22, Changshan Biochemical confirmed it was being investigated by the China Securities Regulation Commission on a possible violation that might cause the shares to be suspended in the next 15 days.
Apparently three directors announced last October that they would sell down their shares in six months, and the expiry date was May 17, 2018, the day after the company made the positive announcement.
This was not the first time a listed company has built up hopes on men’s weaknesses. About two and a half years ago, Regent Pacific bought out British company Plethora for £122.6 million (US$163.8 million).
The company developed a medicine to treat premature ejaculation that was said to address a common problem that affected almost one in four men on the planet. Thirty months passed and Regent Pacific shares fell three quarters after the takeover.
Many investors who thought their shares were going to rise must now feel very deflated.