Fake medicine hits retail investors hard

Cynanchum wilfordii, a core ingredient of herbal medicine, is on display in vinyl bags at Kyungdong traditional herb medicine market in Dongdaemun,
Seoul, Thursday. / Yonhap

By Choi Kyong-ae

Individual investors took a severe beating from the fake herbal medicine produced by Naturalendo Tech, with their combined investment losses estimated at more than 600 billion won ($559 million).

"About 9,400 retail investors held a combined 54 percent stake in Naturalendo Tech as of the end of last year. They likely suffered hefty losses as the company's stock prices fell sharply Thursday after the authorities said the herbal medicine contained uncertified ingredients," an official at the tech-heavy KOSDAQ market said.

Shares in Naturalendo Tech, a KOSDAQ-listed healthcare product company, plunged by the daily limit of 15 percent to 34,100 won, Thursday. The market was closed Friday for Labor Day.

The plunge came immediately after the Ministry of Food and Drug Safety said the same day that it had found the unauthorized ingredient cynanchum auriculatum in EstroG-100, a herbal medicine taken for menopause, in the company's storehouse.

The medicine should contain cynanchum wilfordii and dong quai, not cynanchum auriculatum though it is edible.

The ministry's finding comes after the Korea Consumer Agency (KCA) stated a week earlier that EstroG-100 didn't contain extracts of cynanchum wilfordii, a medical herb proven to be helpful in reliving menopausal symptoms.

On Thursday, Naturalendo Tech said it will respect the ministry's conclusion. The KCA said it will take all possible measures, including legal action against the company, to help affected customers.

"We were so confident about the ingredients offered by our contracted farmers that we didn't have a ‘plan B' in case there was controversy over the ingredients. We may come up with measures to handle this issue as early as next week," Naturalendo Tech spokesman Kim Song-soo told The Korea Times, Friday.

Some contracted farmers provided cynanchum auriculatum instead of cynanchum wilfordii.

As a result, quality control of ingredients is expected to be the most important thing for the herb supplements maker.

In 2014, a total 94 billion won worth of EstroG-100 products were sold through home shopping channels. Unlike department stores and large discount stores which began to return the price customers paid for the products, home shopping companies are taking a wait-and-see attitude as they expect an impact on their bottom line if massive refunds are made, according to reports.

"Given the products are also sold in major markets such as the U.S. and Canada, the fact that the ministry found wrong ingredients in the company's storehouse could have a grave impact on overseas sales," the KOSDAQ official said.

Meanwhile, the Financial Services Commission is looking into a massive stock selling by Naturalendo executives ahead of the KCA disclosure and the ministry's announcement, according to the Financial Supervisory Service.

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