Poly Pharm Faces Potential Delisting Amid Major Financial Fraud Investigation

On January 5, Poly Pharm announced that it is under investigation by the China Securities Regulatory Commission (CSRC) for suspected violations of information disclosure laws. The company received an administrative penalty notice on January 4, 2025, indicating that its 2021 and 2022 annual reports contained false representations. As a result, Poly Pharm will face a significant risk warning of potential delisting starting January 7.

In a separate announcement, Poly revealed that its stock would be suspended from trading for one day on January 6 and would resume trading on January 7 under the new designation "ST Poly," reflecting the delisting risk.

This situation follows a lengthy investigation that began in April of the previous year when the Hainan Securities Regulatory Bureau mandated the company to rectify discrepancies found in its financial disclosures.

The allegations of financial misconduct involve Poly overstating its revenue and profits through fictitious sales of finished and raw pharmaceutical products. The CSRC found that Poly incorrectly reported 0.78 billion yuan and 0.59 billion yuan in revenue for 2021 and 2022, respectively. This misrepresentation amounted to a total of 10.3 billion yuan over the two years, significantly impacting the company's reported revenue and profit figures.

Poly's financial issues were apparent as early as last year. Following the discovery of inaccurate financial data, the company struggled to release its 2023 annual report and 2024 quarterly report on time. After facing further scrutiny, Poly finally issued its financial reports along with significant corrections, which were not validated by its auditing firm.

The CSRC has since imposed a fine of 10 million yuan on Poly, with penalties levied against several executives, including the chairman, who faces a 10-year market ban due to the serious nature of the violations.

Poly Pharm, a leading player in the domestic pharmaceutical industry, has faced declining revenues in recent years. Despite previous successes, including a surge in stock price following announcements about a new weight-loss drug, the company has struggled with profitability, reporting a 70.87% decrease in net profit for 2023.

As Poly navigates this turbulent period, its future remains uncertain as it attempts to recover from a significant breach of trust with investors and regulatory bodies.