Counterfeits take chunk out of TCM sales
Sales slumped by 15 per cent as the company struggles to combat the widespread counterfeiting of its flagship product and main money earner, osteoporosis treatment Xianling Gubao (XLGB).
This medicine accounted for 78 per cent of TCM’s sales in 2007 and this reliance upon one product has left the company’s fate tied to that of XLGB.
Xiaochun Wang, Tongjitang’s CEO and Chairman, stated, “We are pleased that we demonstrated sequential improvement versus our first quarter, although we continue to be impacted by the counterfeit sales of ‘XLGB granules’ and we have already begun to counter the situation by initiating litigation.”
TCM needs litigation to prove effective sooner rather than later to arrest the decline that saw revenues generated by XLGB tumble by 26 per cent in the second quarter of 2008, with the fall attributed to ready availability of counterfeit versions in China.
Revenues should pick up if XLGB is approved by the US Food and Drug Administration (FDA), which the company believed to be likely following a successful randomised, double-blind, multi-center study that was concluded in October 2007.
TCM is hoping fewer counterfeit versions of XLGB will be purchased in the US but its fate in China reveals the vulnerability of companies without a wide portfolio of successful products.
Counterfeiters could potentially cripple young companies that rely on one or two innovative products for a substantial proportion of their revenue and are based in countries with weak anti-counterfeiting measures.
Given that some counterfeits contain none of the active pharmaceutical ingredient (API) many medicines could potentially be counterfeited without great difficulty.
Nature proves disruptive
In addition to the damage done by counterfeits TCM has also seen its operations affected by nature, with its manufacturing facilities suffering due to extreme weather and the earthquake in China.
First quarter results were harmed by severe snow storms that caused power shortages and impacted on the distribution of medicines.
This was followed by the earthquake that hit China in May, which resulted in one of TCM’s manufacturing facilities briefly suspending production.
