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Last week in China biotech, the flood of quarterly earnings reports slowed from the previous week’s frenetic pace, and normal business news – financings, JV agreements, new products – moved to fill in the space. From our perhaps biased view here at ChinaBio Today, one of the most significant announcements last week came from our sister organization, ChinaBio Accelerator, which announced it will hold the ChinaBio Partnering Forum on June 3 and 4, 2009 in Shanghai (see story). The event, the first partnering forum focused on China life science technology to be held in China, will bring together more than 300 attendees seeking partnership deals. Universities, institutes and companies from throughout China, representing nearly 100 novel technologies, will have the opportunity to meet potential partners. The potential partners will include nearly all the major pharma companies, many of China’s own pharma, biotech and medical device companies, 50+ VCs, and many others interested in licensing or commercializing novel technologies. The two-day forum will feature one-on-one partnering meetings, technology presentations by China-based researchers and biotech companies, big pharma discussions of their “wish lists,” executive workshops and exhibits.

In funding news, Chiral Quest Corporation raised $13 million in a Series B financing from China-based venture capitalists, including KPCB China (Kleiner Perkins Caufield & Byers), China Spring Fund, JAIC (Japan Asia Investment Co.), and returning investor Infinity i-China (see story). Chiral Quest offers its chiral expertise to biopharmas, developing manufacturing processes for drug candidates. In December 2007, Chiral Quest was voted the “Most Promising Company” in the Services sector at the ChinaBio Investor Forum, held in Shanghai. With the new funds, Chiral Quest will build a cGMP pilot plant and process R&D center at BioBay in Suzhou Industrial Park.

GlaxoSmithKline (GSK) and Shenzhen Neptunus Interlong Bio-Technique Co. Ltd. (NIBT), an established vaccine manufacturer in China, will work together to develop flu vaccines for the China market (see story). The two companies have signed a formal Cooperation Agreement that will lead to the formation of a JV company with $78 million of assets, if certain undisclosed conditions are met. GSK contributes its vaccine adjuvant technology and expertise in vaccine development to the venture. NIBT adds local experience, both with China’s vaccine market and access to local flu antigens.

BMP Sunstone Corporation (BJGP) has agreed to acquire rights to the Runchang capsule, a liquid-filled hard capsule (LFHC), used to treat constipation (see story). BMP Sunstone purchased the product from Darentang Pharmaceutical, a subsidiary of Tianjin Zhongxin Pharmaceutical Group Corporation (SSE: 600329). The purchase, whose price was not disclosed, will include the LFHC filling and sealing production line and related LFHC technology. For BMP Sunstone, the LFHC technology is just as important an inducement as the constipation drug.

Syneron Medical Ltd. (ELOS), an Israeli medical device company, has established a JV to market the company’s elos combined-energy medical aesthetic devices in China (see story). Syneron China, as the JV is named, is a partnership between Syneron and EverCare Medical Group, which is the largest aesthetic hospital chain in China and which has been Syneron's China distributor for the past two years. The elos machines are used in a wide variety of medical-aesthetic applications.

China Medical Technologies (CMED) has developed two proprietary molecular diagnostic kits that detect abnormalities in epidermal growth factor receptor (EGFR) among patients with non-small cell lung cancer (NSCLC) (see story). EGFR abnormalities are important biomarkers for the biologic cancer drugs Iressa from AstraZeneca (AZN) and Tarceva from Genentech (DNA). China Medical expects to launch the new kits for its hospital customers in January 2009. Iressa and Tarceva inhibit the EGFR gene located at 7p12. Of the patients that respond to Iressa and Tarceva, approximately 85% also have EGFR abnormalities, rendering the test a good predictor of whether the biologic drugs will be helpful in patients with NSCLC.

Worldwide, big pharma may be retrenching, but it continues to invest in China (see story). Because China’s drug market is young and growing, the country represents opportunity for these industry veterans, an opportunity that is made more attractive by their difficulties elsewhere. It’s not surprising, therefore, that several big pharmas have expressed their intention to enlarge their presence in China. Novartis (NVS), Novo Nordisk (NVO), GlaxoSmithKline, Bayer Schering and Bristol-Myers Squibb (BMY) have each been in China biopharma news in recent days, with announcements giving evidence, which we detail, of their continuing commitment to China biopharma.

Moving on to financial disclosures, China Medical Technologies (CMED) released selected Q2 (ended September 30, 2008) results, though a full disclosure, complete with analysts’ call, will wait until December 18 (see story). The problem with a full release is reporting issues: China Medical is deciding how to account for its very large $345 million purchase of the HPV-DNA Chip and SPR-based Analysis System. In the meantime, China Medical has the good fortune of being able to report very positive results for its ongoing business. Revenues climbed 35% to $42.8 million, while net income increased even more, rising 47% to $22.7 million (non-GAAP).

Genesis Pharmaceuticals Enterprises, Inc. (GNPH.OB) reported that Q1 (ended September 30, 2008) revenues climbed an admirable 66% to $27.6 million, and gross profit rose an even more dramatic 81% to $21.8 million (see story). On a non-GAAP basis, Genesis reported net income of $4.8 million a 50% increase. That was lower than the rise in revenue, but still a big jump. It works out to earnings of 49 cents per fully diluted share. On a GAAP basis, however, the situation was not as positive. Using those standards, net income for Q1 dipped slightly from $3.2 million last year to $3.1 million this year.

Lotus Pharmaceuticals (LTUS.OB) announced that its Q3 net income climbed 45% to $3.2 million, even though revenues dropped slightly in the quarter to $16.6 million (see story). The company earned 7 cents per share, fully diluted, bringing its nine-month EPS total to 16 cents. Lotus reported that its revenue mix, when compared to the year-ago quarter, was the reason that earnings increased while revenue stayed flat.

Sinovac Biotech (SVA) had the unhappy task of telling investors that revenue and profits declined in Q3 (see story). In the quarter, its flagship hepatitis A vaccine, Healive, sold 28% fewer doses; AnFlu, the flu vaccine, sold almost one-third fewer doses. As a result, Q3 revenues for the company were off by 19% at $10.8 million. Net income was more negatively affected: it was down 22%, plunging from $2.2 million last year to $740,000 in the most recent quarter. Stressing the positive side of its story, Sinovac pointed out that nine-month year-to-date results are on track. The company is hitting its target of 40% year-over-year growth, with revenues of $34 million. Net income, however, is flat at $5.6 million. The company expects it will maintain its 40% growth rate for all of 2008.

China Shenghuo Pharmaceutical Holdings (KUN) released its Q3 financial report and also announced that it has completed restatement of financial results for 2007 and the first two quarters of 2008 (see story). Most notable was the restatement in 2007’s net income, which dropped by a very significant $2.3 million, taking it down to $1.7 million. In Q3, revenues climbed 73%, but net income dropped. Costs are rising faster than revenue, primarily because of increased spending in two line items: Sales & Marketing and General & Administrative.

Disclosure: none.

Source: China Biopharma News Back in the Spotlight