Shares of a traditional Chinese medicine (TCM) company jumped after receiving validation from the nation’s top respiratory expert on its drug’s effect against the coronavirus, joining two other peers that have enjoyed huge gains this year.
Guangzhou Baiyunshan Pharmaceutical Holdings soared 13 per cent to HK$21.75 in Hong Kong and by 10 per cent to 34.18 yuan in Shanghai on Friday, after Zhong Nanshan, the public face of China’s fight against the Covid-19 pandemic, said one of its products could potentially inhibit the coronavirus.
Researchers led by Zhong found that Banlangen granules, a herbal medicine popular in China for treating common cold and flu, was effective against the virus in a series of in-vitro studies, Chinese newspaper Nanfang Daily quoted him as saying during a conference on Tuesday in Guangzhou. The drug was also widely used in the country during the 2003 severe acute respiratory syndrome (Sars) outbreak.
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Investors latched on to the hype surrounding the company even though the studies were still at an early stage and Zhong did not disclose whether or when any research paper or preclinical data will be published. The stock’s advance in Hong Kong marked its biggest daily jump since October 2018, while turnover ballooned 24 times to HK$240 million (US$31 million) from Thursday, according to Refinitiv data.
Many pointed to the speculative nature of the surge on Friday. “In-vitro studies data is usually the weakest among preclinical data,” wrote Huang Jianping, general manager at asset management firm Shanghai Leader Capital, in a post published on online stocks forum Xueqiu.
Normally, pharmaceutical companies have to go through three phases of clinical trials on humans to establish the efficacy of the drugs, on top of evidence from animal experiments, he said. “If a Nasdaq-listed company said their drug was found to inhibit the virus in in-vitro studies, the company would be despised by the market.”
China relied heavily on traditional medicine to combat the virus earlier this year. Despite the government’s efforts to promote the use of such herbal remedies abroad, experts have warned that there is not enough evidence from clinical trials to establish their effectiveness.
Why it’s so hard for China to promote the use of traditional remedies abroad to treat Covid-19
And this is not the first time Zhong’s comments have contributed to a drug maker’s fortunes. Two Shenzhen-listed TCM companies, Shijiazhuang Yiling Pharmaceutical and Tianjin Chase Sun Pharmaceutical, reaped huge profits this year, after their drugs were included in the national standard therapy for Covid-19 patients and were recommended by Zhong.
Shares of Shijiazhuang Yiling have risen 94 per cent since a March low, while those of Tianjin Chase Sun have climbed nearly 50 per cent since mid-March.
Unlike the two firms, Guangzhou Baiyunshan’s products have not been officially endorsed, and the company reported lower profits for first half of the year. Net profit fell 31 per cent to 1.8 billion yuan (US$269 million) from the same period in 2019.
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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.
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