Social media scandal costs Chinese scientist Wu Yiling $2 billion

Wu Yiling is one of China’s top ranked scientists. With a fortune approaching $6 billion, he was also among the 500 richest people in the world.

That was until last week when the son of another Chinese billionaire sparked an online debate with a post doubting the effectiveness of Wu’s drug used to treat Covid-19. The herbal remedy, Lianhua Qingwen, is one of three traditional treatments recommended by the central government and was sent to households in Shanghai and Hong Kong during the latest omicron wave.

After Wu’s Shijiazhuang Yiling Pharmaceutical Co.’s meteoric rise, Wang Sicong’s warning sent shares plummeting by the upper limit of 10% for two consecutive days. The slide then continued, taking the stock to its worst weekly plunge ever and down 35% from the April 11 peak. Wu and his family’s wealth plummeted from $2 billion to less than $4 billion, according to the Bloomberg Billionaires Index.

“Now Yiling faces a test to restore its recognition in the market,” said Kenny Ng, strategist at Everbright Securities International in Hong Kong. “In the short term, demand for Lianhua Qingwen should still be strong as the pandemic in mainland China has not yet abated, but in the long term, investors need to rethink whether its earnings can maintain decent growth as Covid subsides. in the world.

The debate over the effectiveness of traditional Chinese medicine – or TCM – has intensified in recent weeks as the country battles its worst outbreak since the early days of the pandemic. Although the government has promoted the remedies, it has not been given the green light by regulators with global credibility, and the World Health Organization has not endorsed or recommended the use of Lianhua Qingwen to treat Covid-19.

Yiling’s stock plunge began on April 15, after Wang, the son of real estate billionaire Wang Jianlin, shared a video on Weibo wondering if the WHO had ever recommended Lianhua Qingwen as a coronavirus cure. It came after he called on the Twitter-like platform for China’s securities watchdog to investigate Yiling.

Both posts were later deleted, and on Tuesday Weibo banned Wang because his account “violated related laws and regulations,” according to a notice on his personal page. The next day, Yiling pledged to file a lawsuit against the defamatory statements and reiterated that her Lianhua Qingwen had “rare” side effects such as nausea, vomiting and abdominal pain.

A representative for Yiling declined to comment.

Wu, the son of a doctor from the northern province of Hebei, became interested in medicine when he was a teenager. The 72-year-old studied traditional Chinese practice and received his master’s degree from Nanjing University of Chinese Medicine in 1982. He then worked as a doctor before founding Yiling in 1992. The company, which produces treatments to help fight colds, cardiovascular disease, tumors and diabetes, listed on the Shenzhen Stock Exchange in 2011.

Lianhua Qingwen arrived shortly after the SARS outbreak, and in 2003 the national drug regulator approved her to fight the virus. That same year, Wu was elected a member of the Chinese People’s Political Consultative Conference, an advisory body to the national government. Then in 2009, he joined the Chinese Academy of Engineering, the highest rank a scientist can attain in China.

While some TCM treatments have multiple producers, Yiling is the sole manufacturer of Lianhua Qingwen. China has recognized the capsules – a blend of honeysuckle, rhubarb root, sweet wormwood herb and other natural ingredients – as an effective way to reduce mild symptoms of Covid-19 such as fever and sore throat. Singapore, which warned last year that the remedy was not approved to treat coronavirus, is now carrying out a trial.

The pandemic was a clear victory for Yiling. Sales jumped 51% in 2020 and reached 10.4 billion yuan ($1.6 billion) in the first three quarters of last year, already 32% more than for the whole of 2020. That year, Lianhua Qingwen accounted for one-third of traditional medicines. used to treat flu-like symptoms in Chinese public hospitals, while Yiling’s respiratory remedies accounted for nearly half of its revenue, according to the latest available annual report.

In an effort to elevate Chinese innovations, President Xi Jinping’s government has been promoting TCM as a Covid-19 treatment to allies around the world. It has sent specialists to Cambodia and supported clinical trials in Pakistan, while Russia has been selling Lianhua Qingwen since 2020. The remedy is now available in more than 20 countries.

Lianhua Qingwen’s rise has been a boon for Wu and her two children, who together own 55% of Yiling. Shares of the company, the only listed TCM maker with a recommended treatment for Covid-19, have nearly tripled in the past three years, compared to losses in Chinese stock indexes.

But questions and comments are now flooding Yiling’s investor relations platform page, urging the company to further clarify market concerns and provide compensation.

“We’re tired of your company’s empty talks,” wrote one investor who was not identified except with the auto-generated name cninfo943685. “Please show more robust clinical trial data and latest sales results to restore market confidence.”