China Biotech in Review: Deals and Healthcare Stimulus

 |  Includes: LLY, TCM
by: ChinaBio Today

In a quiet week that was constrained by the Thanksgiving Day holiday in the U.S., news flow from China biopharma slowed, but refused to disappear entirely. Last week’s articles show that, despite a worldwide economic crisis, deals continue to be done in the China biopharma sector. Meanwhile, the government of China stepped up to the stimulus plate, promising to spend 4.8 billion RMB ($702 million) on the infrastructure of rural healthcare (see story). "Eventually every village or township will have at least one clinic," said Ministry of Health spokesman Mao Qun'an. The money will be spent on new buildings and medical equipment in more than 13,000 clinics and hospitals throughout rural China. It comes as part of a 21.7 billion RMB ($3.2 billion) rural health initiative, which was announced in 2006. The goal of the plan is to fully overhaul China’s rural health care network by 2010. The spending was also part of the economic stimulus announced by China to counteract the current economic slowdown.

In an announcement that shows the continuing consolidation of the worldwide CRO industry, Tigermed Consulting Co., a China CRO that specializes in clinical trial management, announced new partnerships with two other CROs: OCT in Russia and LSK in Korea (see story). The new partnerships will help Tigermed establish a global clinical trial network, increasing the company’s offerings for multinational and China pharmas. OCT is headquartered in Saint Petersburg. It conducts clinical studies in Russia, Ukraine and other Eastern European countries. Tigermed reasons the OCT partnership will aid China biopharmas that wish to sell their products in Eastern European markets. LSK, based in Seoul, provides CRO services in Korea, Japan, Taiwan and Malaysia, another group of markets that are attractive to China biopharmas.

Big pharma also increased its collaborative relationships with China biopharma last week. Eli Lilly (NYSE:LLY) has expanded its drug discovery and development partnership with Hutchison China Meditech Ltd [LSE: HCM], adding another oncology target to the agenda (see story). When the two companies set up their partnership last year, the initial areas of concentration were specified targets in oncology and inflammation. For its work, Hutchison MediPharma, the drug discovery division of China Meditech, will receive an up-front payment, plus potential fees and royalties on worldwide sales of any products resulting from the collaboration. Further financial details were not disclosed.

Smiths Group of London [LSE: SMIN], an engineering conglomerate that includes Smiths Medical, a medical device division, expanded its presence in China by acquiring Zhejiang Zheda Medical Instrument (ZDMI) (see story). Based in Hangzhou, ZDMI makes syringe pumps and enteral feeding devices primarily for the Chinese market. Last year, ZDMI reported sales of 73 million RMB ($10.7 million). The purchase price was not disclosed. Smiths Medical management said the acquisition would provide Smiths Medical with greater access to China, and Smiths Medical will be able to sell ZDMI’s devices to the world, where its high quality products enjoy a significant cost advantage.

AnaSpec, a San Jose, CA company that supplies proteomics research products to drug researchers, has signed a distribution agreement with Shanghai Universal Biotech Company (see story). Shanghai Universal will have a non-exclusive right to distribute AnaSpec’s products in China. The agreement includes AnaSpec’s catalog and custom products. Shanghai Universal Biotech Company, which was founded in 2004, will add AnaSpec’s catalog of peptides, antibodies, dyes, assay kits, and synthesis reagents to its current portfolio of research tool offerings. Financial details of the agreement were not disclosed.

And finally, as the Q3 earnings reporting season winds down, we saw one earnings release last week. Tongjitang Chinese Medicines Company (NYSE:TCM) released another in a year-long series of disappointing earnings reports (see story). In its Q3, Tongjitang’s revenues dropped 13% to 110 million RMB ($16.3 million), and net income fell 86% to 7 million RMB ($1.1 million), which is equivalent to earnings per ADS of 3 cents. The company also lowered its official revenue guidance for 2008 to 450 million RMB, down from 596 million RMB last year. There was a small measure of good news in the earnings announcement. Income of the company’s mainstay product, the osteoporosis treatment Xianling Gubao (XLGB) slipped only 4% lower to $11.6 million. The company also said that, earlier this month, well after the end of Q3, the company was successful in winning a legal injunction against a counterfeit version of XLGB. Perhaps the end of counterfeiting problems will signal an upside reversal in Tongjitang’s financial fortunes.

Disclosure: none.