Beijing / Bloomberg
China will halt the implementation of a drug-coding system that’s developed and operated by Alibaba Health Information Technology Ltd. to identify counterfeit medicines.
China Food & Drug Administration suspended the new electronic coding system as it made draft amendments to existing rules, allowing the use of other methods to build a system that tracks medicines back to their origin, the administration said in a statement.
“The company doesn’t currently have sufficient information to accurately estimate the impact on its financial results and operating performance,” Alibaba Health, which is controlled by billionaire Jack Ma’s Alibaba Group Holding Ltd., said in a statement to the Hong Kong stock exchange on Sunday. “There could be a material adverse impact on the company’s revenue, business and results of operations” if the China FDA announces other new regulatory policies, it said.
While the company, in which Alibaba Group bought a controlling stake in 2014, doesn’t earn any revenue from the Chinese authority at present, the coding system’s earnings potential has been an influential factor for its shares listed in Hong Kong. The stock plunged 20 percent on Jan. 28 after local media reported China’s drug regulator planned to withdraw the company’s operating rights for the coding system, and rebounded 16 percent a day later after Alibaba Health said it had not received any notification from the authority to cease operations.
Alibaba Health will continue to develop its other main businesses, such as the construction of a medical services network and pharmaceutical e-commerce business, it said in the statement.
Alibaba Health’s unit Citic 21CN provides technical-and- maintenance services to the network, including the identification, authentication and tracking of drugs, it said in a Weibo post on Feb. 5. The company said that although the system has always been owned by the government, the services it provides help to identify counterfeits and resold drugs and deter illegal companies.