China-Biotics Delays Plant Construction on Regulatory Conflicts

China-Biotics, Inc. (CHBT), a probiotics company, reported that construction of its new manufacturing plant in Shanghai has been delayed. The company blamed the delay on regulatory conflicts. Two agencies have jurisdiction over the facility, the SFDA and the Shanghai Municipal Bureau of Quality and Technical Supervision, each of which requires a different certification standard. Until the differing requirements can be resolved, China-Biotics has slowed down the installation of equipment. Further installation will wait until after the Chinese New Year.

China-Biotics expects to begin trial production in April. The trial phase will last for about three months.

The new manufacturing plant, comprising 789,000 square feet, is located in Qing Pu Industrial Park in Shanghai. Phase 1 of the project will boost production capacity by 150 metric tons of probiotics per year. It includes three buildings: (1) a 130,000 square foot manufacturing building, (2) a research and development center, and (3) a multipurpose office and theater complex, which will be used as an education center. Originally, construction was expected to be completed in December 2008.

At the same time, China-Biotics announced it signed contracts with four food manufacturers to supply probiotics as bulk additives for yogurt and beverage products. Under the one-year agreements, China-Biotics will provide probiotics and related technical consulting.

Currently, China-Biotics has the ability to produce just 12 metric tons of probiotics. It has increased the number of shifts and will optimize the product mix of retail capsules and commercial bulk additives until product is available from the new facility. The company also noted that the Chinese New Year is the peak retail sales season for its products.

China-Biotics markets its live microbial nutritional supplements under the Shining brand. Its products are currently sold OTC through large distributors to pharmacies and supermarkets in Shanghai, Jiangsu, and Zhejiang. The company plans to launch 300 Shining brand retail outlets in major cities in China.

Disclosure: none.