(Yicai Global) Aug. 23 -- Shares of North China Pharmaceutical Group slumped after the state-owned drugmaker became the first firm to lose its qualifications to participate in the centralized procurement program due to failed promises.

NCPC’s stock price [SHA: 600812] fell 10 percent to CNY9.11 (USD1.40) per share in the afternoon, the lowest since April.

The national procurement office has blacklisted NCPC so it cannot join the purchasing scheme till May 10, the Shijiazhuang-based firm said in a statement yesterday.

NCPC is the first firm in the program to be punished for its insufficient supply but it is not the only company that has broken its promise, a professional at another drugmaker told Yicai Global. The case should warn the whole industry as the firm is a state-owned enterprise, the person added.

The problem has been about increasing output, according to the company. NCPC is striving to gain approval to expand its production capacity of sustained-release ibuprofen to 100 million pills per year by Sept. 30, it said.

Last August, the company won a tender to supply the country with 79.8 million pills of the nonsteroidal anti-inflammatory drug over a year for CNY0.3 (4 US dollar cents) a pill. But it has only supplied less than 15.6 million pills as of Aug. 20, 2021. The contract was supposed to last for three years.

Whistleblower

Eastern China's Shandong province unveiled NCPC's failure to deliver, said the same medical professional. The province only got less than 15 percent of the agreed 25.1 million pills from NCPC.

Logically, a company will do everything in its power to supply the drugs after winning a centralized procurement bid, but some firms think they will get away with output issues by good luck, said the source at another firm.

NCPC sought to explain the setback. The head of its production unit hasn’t paid enough attention to the expansion plan so the project has been slow, it said. Moreover, the district in Shijiazhuang where the plant is located had Covid-19 outbreaks early this year so the factory was closed from Jan. 6 to March 8, it added.

Aftermath

The impact of the punishment is expected to be limited.

NCPC earned more than CNY2.9 million (USD446,807) by selling the extended-release ibuprofen in the first seven months of this year so the punishment won’t significantly impact its business performance of 2021, according to the statement. However, the effects on next year's performance are unknown, it added.

Last year, the firm sold CNY502,200 (USD77,375) worth of the drug, or less than 1 percent of its total revenue, it revealed.

Editor: Emmi Laine, Xiao Yi