(Yicai Global) Aug. 20 -- Hengrui Medicine’s shares plummeted after the pharmaceutical company posted the slowest growth in first-half profit for almost 18 years, hit by the price cuts required by China’s centralized drug-buying program.

Hengrui [SHA:600276] fell by the exchange-imposed limit of 10 percent today to CNY48.46 (USD7.46), giving the Jiangsu province-based firm a market value of CNY310 billion (USD47.7 billion). The stock has almost halved in value this year.

Net profit rose just 0.21 percent to CNY2.7 billion (USD415.3 million) in the six months ended June 30 from a year ago, the slowest pace since 2004, according to the semi-annual report the company released last night. Revenue climbed 17.6 percent to CNY13.3 billion (USD2 billion). It did not provide guidance for the second half.

In the first half, revenue from Hengrui’s six drugs involved in the third round of centralized procurement fell 57 percent compared with the second half of last year. Moreover, Hengrui's main product, cancer drug Camrelizumab, was affected by the negotiated reimbursement price in March, with the price cut reaching 85 percent.

China’s centralized drug procurement program, launched in November 2018, aims to cut the price of generic and patented drugs by forcing companies to offer huge discounts in order to win the supply contracts.

As of June, China has completed five rounds of centralized drug-buying. According to Hengrui’s data, it has 28 products in the program, with an average price cut of 72.6 percent for products that are successful in the bidding.

In addition to slowing profit growth, it has been rumored on the internet that Hengrui has made large job cuts. A member of staff at Hengrui told Yicai Global that this issue was explained in the earnings report, and the company will pool resources to seek breakthroughs in innovation and internationalization. 

Editor: Tom Litting