Simcere Pharmaceutical Group Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese drug company Simcere Pharmaceutical Group (NYSE: SCR  ) jumped 13% today after the company announced a fine at a company where it has controlling interest.

So what: Normally, a fine would be thought of as bad news, but this time investors are just happy to have the issue resolved. Jiangsu Yanshen, where Simcere holds a controlling 52.5% stake, will be fined 4.6 million renminbi for selling inferior products in addition to the 25.6 million renminbi it was fined by the Changzhou food and drug administration in May.

Now what: The fines have already been recorded in financial statements, so investors had priced in worse news, which is causing the pop today. From a performance standpoint, it is still not known when operations may continue at the plant in question. I would be leery of buying a stock with this kind of track record, but hopefully management has learned its lesson after facing individual punishments (details of the individual punishments weren't disclosed).

Interested in more info on Simcere Pharma? Add it to your watchlist.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings, or follow his Motley Fool CAPS picks at TMFFlushDraw.

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  • Report this Comment On November 30, 2010, at 6:59 PM, jlanganki wrote:

    You didn't seem to do much research. The plant in question had the quality control problems before Simcere bought a controlling stake. You can't blame the new owners for something the prior owner did.

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