(Yicai Global) Dec. 7 -- Shares in Walvax Biotechnology plummeted by the exchange-imposed daily limit today as the Chinese drugmaker backed down on a controversial plan to sell half its stake in a promising subsidiary that develops vaccines for cervical cancer after provoking a heated reaction from investors and questioning from the Shenzhen stock exchange.

Walvax’s stock price [SHE:300142] plunged 20 percent to close at CNY36.53 (USD5.58).

Walvax is withdrawing the share sale proposal for further consideration, the Kunming, southwestern Yunnan province-based firm said today.

The drugmaker announced on Dec. 4 that it was planning to sell 32.6 percent equity in Shanghai Zerun Biotechnology for a price of CNY1.14 billion (USD174.4 million).

The sale would reduce Walvax’s holdings in Zerun to 32.4 percent, and it would no longer be the majority shareholder in the new recombinant vaccine maker.

The news caused an uproar among investors as, after many years in development, Zerun is on the cusp of taking its recombinant human papillomavirus vaccines to market. HPV causes cervical cancer in women and a number of sexually transmitted diseases in both men and women. Zerun’s bivalent HPV vaccine, which provides protection from two types of HPV, began certification in June, and its nine-valent HPV vaccine has started the final Phase III clinical trials.

“Do you have any respect for the interests of secondary market investors when it comes to selling Zerun’s equity?” an institutional investor demanded of Walvax Chairman Li Yunchun during a conference call on Dec. 5. “Do you people know that there will be karma for what you do?” he railed.

The Shenzhen stock exchange also stepped in yesterday to query the proposed transaction. The bourse has asked Walvax to clarify 17 points before tomorrow. These include the reasons behind the transaction, the basis for determining the proportion of shares to be sold and whether the sale will harm the interests of investors.

Walvax stands to make a tidy profit from the sale. It originally paid CNY591 million (USD90 million) for the 65 percent stake in 2012.

However, many investors still feel that the transaction price is too low. During the conference call, a number of investors complained that Walvax has little direction and some even called for management to be replaced.

The equity sale will introduce more strategic investors into Zerun, which will help the Shanghai-based vaccine maker get more resources for its HPV clinical trials, which in turn will help speed up the approvals for the vaccine, Walvax said yesterday to The Paper. Walvax will continue to support the long-term development of Zerun by helping it to gain wider recognition, it said.

Editor: Kim Taylor