UPDATE 2-Drug maker pulls share sale just days after China reopens IPO market

Fri Jan 10, 2014 5:43am EST

* Jiangsu Aosaikang delays listing at 67 times P/E vs 55 exchange average

* Decision pours cold water on China's newly restarted IPO market

* Securities regulator denies involvement in Jiangsu Aosaikang's postponement (Recasts, adds comment from securities regulator)

By Samuel Shen and Elzio Barreto

SHANGHAI/HONG KONG, Jan 10 (Reuters) - A small drug maker based in eastern China shelved its share sale plan less than two weeks after the country's IPO market reopened, sparking speculation of government intervention after regulators promised to take a more hands-off approach.

The drug maker postponed its share sale, saying it was "too big". The decision, a rarity in the advance stage of a listing process, pours cold water on a market which restarted after a 15-month hiatus with new rules to curb excessive pricing.

Consulting firm PwC has forecast the Chinese IPO market could be worth up to 250 billion yuan ($41.3 billion) in 2014. The drug maker's postponement could lead to more restrained pricing by issuers and underwriters.

The China Securities Regulatory Commission (CSRC), in comments on its official Sina Weibo microblog account on Friday, denied it had forced Jiangsu Aosaikang Pharmaceutical Co Ltd to halt its IPO, saying the decision was made by the company and the underwriter, China International Capital Corp.

Sources familiar with the matter had earlier told Thomson Reuters publication IFR that the CSRC had pressured the drug maker to postpone, signalling the regulator may not be loosening its control of IPOs despite pledging to allow issuers and underwriters decide timing and pricing.

"Market-based IPO reform does not mean unrestrained freedom. There must not be manipulation of new share prices," a CSRC spokesman said at a news conference in Beijing late Friday, without referring to any specific IPO.

Nanjing-based Jiangsu Aosaikang had aimed to raise 4.05 billion yuan ($668.87 million) by listing on the Shenzhen Stock Exchange's ChiNext board at a price state-run China Daily on Thursday said was too high.

The maker of digestive and anti-cancer agents on Thursday said it planned to sell 55.46 million shares at 72.99 yuan each, equivalent to 67 times its 2012 net profit.

But in an exchange filing on Friday morning, it said it would postpone the sale until an appropriate time because "the proposed issuance was too big."

The average price-to-earnings ratio of pharmaceutical companies listed on Shenzhen's Nasdaq-style ChiNext is 55.31, according to the state-run Shanghai Securities Journal.

China's regulator suspended listings in October 2012 to stamp out equity market fraud and restore confidence in domestic markets.

($1 = 6.0550 Chinese yuan) (Additional reporting by Kazunori Takada and Fayen Wong in SHANGHAI, Denny Thomas in HONG KONG, and Zhang Xiaochong and Ken Wang of IFR in BEIJING; Editing by Christopher Cushing)

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