Simcere Shuts Down Production in Rabies Vaccine Subsidiary over Quality Control

| About: Simcere Pharmaceutical (SCR)

Simcere Pharmaceutical Group (NYSE: SCR) has stopped a production line at its recently acquired vaccine subsidiary while it reviews quality control systems in the company. Simcere bought a 37.5% stake in Jiangsu Yanshen Biological Technology Stock Co. in May, and then upped its ownership to just over 50% on October 24, 2009. It closed the production line on November 30.

Simcere said it soon discovered problems with quality control in the production of Yanshen's human-use rabies vaccine (vero cell). On November 23, 2009, Simcere asked Jiangsu Yanshen’s board to replace its general manager and head of quality assurance. It demanded a complete shutdown one week later.

Simcere did not disclose an expected timeline for bringing production of the rabies vaccine back on line.

In mid-September, Jiangsu Yanshen received SFDA approval for its swine flu (H1N1) vaccine. Subsequently, the company received orders for 6.3 million doses of the vaccine from China's Ministry of Industry and Information Technology. Simcere did not mention the H1N1 vaccine in regard to the shutdown, implying that the flu vaccine was not affected by the problems.

Simcere paid 195.5 million RMB ($28.8 million) for a 37.5% stake in Jiangsu Yanshen. It did not disclose a price for the additional 13% share of the company.

Disclosure: none.