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China's CSPC to appeal drug inclusion in provincial watch list; shares gain 4%


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China's CSPC to appeal drug inclusion in provincial watch list; shares gain 4%

CSPC Pharmaceutical Group Ltd. is expected to appeal a decision by a Chinese provincial regulator to place its stroke drug NBP in soft capsule form on a watch list, analysts said in reports published Oct. 11.

The reports were based on a conference call held by the Hebei, China-based company exclusively for investors on the same day. The call was not open to media.

The Zhejiang regulator's watch list dated Oct. 9 named 32 drugs in total. Being placed on the watch list means a drug comes under extra scrutiny over concerns it is being over-prescribed but it does not preclude hospitals from recommending the drug.

CSPC shares, which are listed in Hong Kong, closed 4.24% higher at HK$16.70 on Oct. 14, after tumbling 6.10% in the previous trading session, after a Bloomberg report said NBP's key ingredient could be placed on the watch list. The shares were trading at the same price at 11 a.m. on Oct. 15.

During the call, company executives said the inclusion of the drug on the watch list will have little impact on the drugmaker's overall growth prospects as Zhejiang accounted for less than 4% of the drug's sales in 2018, Hong Kong-based analysts said in a Jefferies report.

It is also unlikely that other provincial regulators will follow suit, the report said, citing CSPC executives.

CSPC manufactures NBP as soft capsules and injections. The drug treats acute ischemic strokes, a condition that causes the brain to not function properly and leads to loss of neurological function.

On the conference call, company executives also said Zhejiang province may be targeting neurological disease treatments as the top 11 neurological drugs sold in the province were included in the watch list.

NBP in soft capsules ranks first in terms of sales among neurological drugs in Zhejiang, according to a report by Huatai Securities dated Oct. 11.

Sales of NBP soft capsules and injections increased by 35.9% year-over-year in the first six months of 2019, according to the company's 2019 interim financial report released in August.

CSPC executives also said during the call that the company aims to win regulatory approval for more than 70 drugs by 2022. Eleven of these will be innovative drugs.

Jefferies analyst Cyrus Ng also confirmed CSPC's plans to diversify and reduce its reliance on NBP. In the analyst report, he said CSPC executives managed to address most investor concerns during the conference call.