China Weight-Loss Drug Stocks Lose Shine on ‘Misleading’ Claims

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China Weight Loss Drug Stocks Lose Shine on ‘Misleading’ Claims

(Bloomberg) — One of the few bright spots in China’s battered equity market is evaporating, with weight-loss drugs plunging after a company apologized for earlier misleading investors on such treatments.

Shares of Xingjiang Bai Hua Cun Pharma Tech Co. plunged by the 10% limit after surging by the same magnitude over the past four sessions. The drug developer said the shares have “severely deviated from the fundamentals” as it backtracked from an earlier affirmation of its connection to weight-loss treatments.

Companies that were earlier seen as beneficiaries of the main ingredient behind the much-hyped Novo Nordisk A/S’s diabetes drug also dropped. Hebei Changshan Biochemical Pharmaceutical Co. slumped as much as 9.5% while Cheng Du Sheng Nuo Biotec Co. fell 7.2% and Shaanxi Kanghui Pharmaceutical Co. lost 10%.

Bai Hua Cun apologized for earlier telling investors that its fully-owned subsidiary was providing research and development services to clients on drugs semaglutide and liraglutide. That statement was misleading, it said, clarifying only preliminary research is being conducted, with significant uncertainties remaining. Its only weight-loss drug currently being developed is Orlistat Capsule, which is in the clinical-trial phase.

The warning does not put a grinding halt to the entire trade — Brightgene Bio-Medical Technology gained as much as 6.6%, with reports saying its chairman had lost 15 kilograms after trying out its homegrown weight-loss injection.

The global frenzy over weight-loss drugs helped ignite a recent rally in Chinese stocks that were expected to benefit from increased consumer demand for the products. Their gains had bucked an overall downdraft in the CSI 300 benchmark of mainland shares.

Cheng Du Sheng Nuo gained more than 9% last week, following global optimism in the sector as Novo Nordisk ended trials early, and raised sales outlook on heightened demand for its blockbuster obesity drug Wegovy and diabetes treatment Ozempic. The Danish pharmaceutical company has risen 10% this month.

Both Ozempic and Wegovy are injected and share the same active ingredient, semaglutide. They work by suppressing the appetite as well as slowing the movement of food through the digestive tract. They can have unpleasant side effects, including severe vomiting, but it has not damped demand.

Source: Bloomberg News