SHANGHAI (Reuters) - Changsheng Bio-technology Co Ltd, the Chinese vaccine maker accused of falsifying data, plunged deeper into crisis on Tuesday with police detaining its chairwoman and the country’s top graft watchdog launching investigations into the firm.
Eager to contain snowballing public outrage over the scandal and maintain confidence in China’s vaccine industry, authorities have responded with sharp condemnation and calls for swift punishment. President Xi Jinping has denounced the scandal as “vile and shocking”.
“Anything that touches on drug or food safety also involving children is just a huge hot button in China,” said Kent Kedl, Shanghai-based senior partner at consultancy Control Risks.
Chinese citizens are now openly asking why authorities hadn’t done more to prevent the issue, he said, adding that the government needed to show it was taking a tough stance to ensure this did not become a problem that threatened social stability.
“This is probably the highest level of code red that the government faces.”
Changsheng is already feeling the heat from the latest developments, expecting the case to have a big negative impact on its financial performance in the second half, it said in a filing to the Shenzhen stock exchange.
Changsheng’s overseas sales accounted for 2.34 percent of revenues last year, according to the firm’s 2017 report. Overseas markets included India, Cambodia, Nigeria and Egypt, it said.
China’s drug regulator has accused Changsheng of fabricating production and inspection records related to a rabies vaccine regularly given to infants. The firm also sold 252,600 doses of ineffective DPT vaccines to inoculate children against diphtheria, whooping cough and tetanus.
While there have been no known reports of people being harmed by the vaccines, Chinese regulators ordered Changsheng to halt their production and recall the rabies vaccine. Changsheng apologized publicly in a regulatory filing on Monday.
Changsheng’s Shenzhen-listed shares plunged by their daily limit of 10 percent on Tuesday, extending falls that have seen it lose $1.8 billion or more than half their value since mid-July.
Trading in its shares will be suspended on Wednesday and resume on Thursday.
In fresh signs that the scandal was having a wider impact, private medical clinics in Hong Kong said inquiries by mainland Chinese seeking vaccines for their children had increased since the scandal gathered steam.
The Hong Kong Department of Health told Reuters local supply of the vaccines remained stable and it would closely monitor the situation. Macau’s health bureau said current supply was sufficient for residents and there was no need for concern.
Chinese citizens have been quick to express their fury online with one discussion hashtag on the Sina Weibo microblog gathering over 600 million views. Censors initially appeared to block some posts about the case.
“The Changsheng vaccine case has created a tsunami on the internet,” the state-run Global Times newspaper said in an editorial late on Monday, adding it was unrealistic to try to control it completely, though it could not be left unchecked.
“If nothing is done to manage online public discourse, it could become a festering gateway leading the country toward chaos and creating serious unpredictability.”
Zeng Mei, chief physician at the Fudan University pediatric hospital, said there was little likelihood of harm to children from Changsheng’s vaccines but noted the social media attention had magnified the impact of the scandal.
“Parents are confused and lots are apprehensive,” she said.
The Changsheng case, which dates to November but first gained public attention on July 15, is the latest in a slew of scandals that has plagued China’s pharmaceutical industry.
Etched into public memory is the 2008 scandal in which several infants died after industrial chemical melamine was added to milk powder to raise protein levels artificially. In 2016, Chinese police busted a gang for selling around $90 million worth of illegal vaccines on the black market.
Last week, European regulators found that a common blood pressure and heart drug manufactured in bulk by Chinese firm Zhejiang Huahai Pharmaceutical may have contained an impurity linked to cancer since 2012.
Changsheng said on Tuesday that Chairwoman Gao Junfang, three senior executives and two mid-level employees had been taken in for questioning by local police, adding they would not be in a position to carry out their duties.
Later in the day, state media said Gao and 14 others had been detained by police.
Gao is also Changsheng’s largest shareholder. She has been involved with the company since it was hived off from state control between 2003 and 2006, Chinese media reports said.
Reuters was unable to contact a lawyer for Gao.
The country’s top graft watchdog, the Central Commission for Discipline Inspection (CCDI), also said it had begun an investigation into potential corruption at the firm.
Those probes are in addition to investigations by the drug watchdog as well as the securities regulator, which is looking at whether Changsheng violated information disclosure rules.
Changsheng is China’s second largest producer of rabies and chicken pox vaccines, according to its 2017 annual report.
China has the second highest number of rabies cases in the world, according to the World Health Organization while the DPT vaccine is on the country’s mandatory vaccine list.
Other Chinese vaccine makers have been hit by fears that the scandal will bring increased regulatory oversight, with Shenzhen Kangtai Biological Products also losing 10 percent while Chongqing Zhifei Biological Products fell 4 percent.
($1 = 6.8204 Chinese yuan)
Reporting by Adam Jourdan; Additional reporting by Farah Master, Anne Marie Roantree and Holly Chik in Hong Kong and Ben Blanchard in Beijing, plus Shanghai newsroom and Chyen Yee Lee in Singapore; Editing by Edwina Gibbs and Dale Hudson