Aoxing's Sales Soar After "Capsule Fiasco" Almost Ruined Company

26-Aug-2013 - Last updated on 27-Aug-2013 at 12:47 GMT

Aoxing Pharmaceuticals reported increased sales and lower operating expenses for Q2 2013 one year on from the chromatin-tainted gelatin scandal that led to suspension of sales by China’s regulators.

Aoxing’s indirect holding company, Biostar, announced sales of $10.4m (€7.8m) for its pharmaceutical products, up 63% on the same period last year, and operating expenses of $7.7m, down from $16.8m.

The drop in expenses was due to the $7.9m compensation Aoxing was forced to pay its customers in Q2 2012 due to the clampdown by China’s Food and Drug Administration (CFDA, then known as SFDA) on capsules with excessive levels of the toxic metal chromium.

Ten gel capsule manufacturing facilities were closed down in April 2012, and Aoxing was affected by having sales of its major pharma lines suspended until August 2012. As part of a long term remediation plan, the company lowered the price of its capsules in order to encourage sales in the wake of the scandal.

“Although our net profit was impacted by a temporary decrease in sale price of Xin Aoxing Capsule as we were still in recovery from the gel capsule production setback during the first half of 2013,” - said Biostar’s CEO, Ronghua Wang - “we are optimistic about our long-term outlook as Chinese healthcare industry is still in rapid growth and we continue our expansion of product portfolio.”

On top of the lowered price of its top-seller (Xin Ao Xing Oleanolic Acid Capsule), the quarter’s increased growth was also attributed to the introduction of a new capsule product. However, in the filing the company said four products had been temporarily discontinued during the period due to expiration of their drug number approval.

Wang told stakeholders that “since the approval from Xianyang SFDA authorities to restart sales of gel capsule products” Aoxing has “seen improvements quarter-over-quarter in turn,” due to remediation efforts. These included an aggressive advertising campaign, establishing new sales incentives and engaging employees to work overtime.

However, Charles Ognar – an analyst from Ongar Trading – accused Aoxing of almost ruining “the company with this terrible capsule fiasco,” according to a transcript of last week’s conference call.