China pharma shares fall as western rivals lead in vaccine trials

Date: 18 November 2020

Author(s): Hudson Lockett in Hong Kong and Christian Shepherd in Beijing

Source: Financial Times

 

Earlier this week, news of Pfizer and Moderna’s coronavirus vaccines successful results positively impacted the market. However, these successful trials have also heavily impacted the Chinese pharmaceuticals industry, slicing more than $13bn off the market capitalisation and cutting off Beijing’s ambition to be the market leader in the fight against the virus.

Since the first news of the Pfizer’s effective phase-three trial results was announced earlier this month, 14 vaccine producers listed in Shanghai and Shenzhen have dropped 11 per cent, down by a third from its peak in August.

 

But analysts said support from Beijing and confidence that Chinese producers would be the first to tap demand in developing markets have helped stabilise the companies’ share prices. Their total market value was up almost 125 per cent this year at more than Rmb1tn ($159.7bn), according to data provider Wind.

 

However, these companies share prices have stabilised and analysts shares that contributing factors such as support from Beijing and confidence that Chinese producers would be the first to quench demand in developing markets were critical.

 

With the country’s swift success in containing the virus, this complicated the Chinese developers progress in their vaccine development, forcing them to perform final-stage clinical trials in other countries.

 

Sensitivities in reaching pricing and distribution deals with host countries have led to delays in phase-three trials, which test the effectiveness of a vaccine in the general population and are necessary for regulators to approve commercial sales.

 

Chinese officials however, are sticking to the ambitious timeline for manufacturing and distribution in attempts to ensure their position as market leader suppliers for their vaccine developers, and to bolster diplomatic ties.

 

A day after the Pfizer announcement, top officials in Beijing said China had “provided a great number of anti-epidemic resources to countries the world over through commercial channels”.

 

Brock Silvers, chief investment officer at Kaiyuan Capital, said state support for pharmaceutical and biotech listings had helped drive a number of initial public offerings in China that “mostly did well, and the ensuing gold rush attracted strong retail [investor] support”.

 

But while the sell-off of vaccine producer shares had slowed, Mr Silvers said the market remained unsettled. “Reduced support is likely to be highly correlated to continued positive announcements from foreign vaccine developers,” he said.

 

Bruce Pang, head of macro and strategy research at China Renaissance, said Beijing’s support had helped bolster investor confidence in domestic producers. He said vaccines from Pfizer and Moderna required refrigeration to remain viable, which could leave them at a disadvantage in developing markets.

“Those limitations are bad for use in developing countries but that’s not the case with Chinese vaccines [most of which are] relatively easier to produce, store and distribute,” Mr Pang said.

 

Zhang Tong, a pharmaceutical equities analyst at Kaifeng Investment, said there “definitely was a bubble in the vaccine sector before”. But he said there was room for growth once the market correction ended.

 

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