Economic Observer Online
Dec. 15, 2011
By Zhang Xiaohui (張曉暉), Zhao Juan (趙娟), Li Baohua (李保華)
Translated by Song Chunling
Original Article: [Chinese]
 
On Dec. 15, shares in the Shanghai listed Chongqing Brewery (600132) feel to their daily limit for the sixth day in a row, the companies stock price has now fallen by more than 40 percent over the past 5 days.

An EO investigation found that Chongqing Brewery (重慶啤酒) is suspiciously secretive with much of the key financial and legal data regarding research into a vaccine for Hepatitis B that it is involved with. It's likely that many details of its share transfer have been hidden on purpose. A transfer of shares undertaken by a subsidary of the brewery, Jiachen Biological Engineering (佳辰生物工程有限公司), which has been undertaking the research, is equally questionable.

In August 1998, Jiachen was founded with an initial investment of 14 million yuan from Chongqing Brewery, 3 million yuan from the Third Military Medical University, and 3 million yuan from Chongqing University. The company began trying to develop a new Hepatitis B vaccine in 2000.

Chongqing Brewery has raised funds of 87.1 million yuan for Jiachen since 2000. The research conducted by Jiachen Biological Engineering was approved for clinical research in 2003. Professor Wu Yuzhang (吳玉章) from the Third Military Medical University and Bian Jiang (邊疆) from Jiachen headed up the research project.

On Dec. 22, 2005, Chongqing Brewery decided to transfer a 5 percent (4.35 million shares) stake in Jiachen to Wu and a 3 percent stake (2.61 million shares) to Bian, the transfer was present as a gift to reward the two for their devotion to the research project.

The transfer was given with a restriction that the two professors couldn't transfer the shares within three years after the vaccine was produced and put into use.

However, neither Wu or Bian signed the 2005 transfer agreement to receive this combined 8 percent stake in Jiachen, which was valued at around 6.88 million yuan. The Third Military Hospital also did not sign the share transfer agreement either.

What is curious is that this 8 percent stake in the company was actually transferred without the signature of the two professors.

On Mar. 18, 2009, Chongqing Brewery sent a letter to the hospital, saying that the former transfer had not received a response and "Jiachen will award 5 percent of its shares to Wu Nan (吳楠) - the son of Wu Yuzhang -, and 3 percent to Bian. The letter also stated that if the brewery received no response in 30 days, the transfer will be carried out under the assumption that all parties have agreed."

Chongqing Brewery has been trying to transfer its shares to the two experts since 2005, however it's suspicious that these two professors had refused to sign over the transfer for such a long time and also that the previously cooperative hospital hadn't authorized the transfer either.

On April 27, 2009, Li Yuanlai (李遠(yuǎn)來), the general manager of Jiachen Biological Engineering Company, was authorized by Huang Minggui (黃明貴), head of Chongqing Brewery to sign the share transfer on his behalf, as no response was ever received by the hospital.

Announcements by Chongqing Brewery since 2005 have alleged that the transfer was made to Wu Yuzhang, while in reality the beneficiary was his son Wu Nan. Even after the transfer was completed, Chongqing Brewery still did not reveal this discrepancy.

Six years after the share transfer, the share price of Chongqing Brewery has soared to 80 yuan per share - that was until very recently, when the results of a clinical tria of the vaccine was revealed and shares in Chongqing Brewery collapsed.