Big pharma remains hungry for China-developed drug candidates, as last week’s news showed. Hutchison MediPharma Limited [AIM: HCM] sold an option on its inflammation/immunology program to Ortho-McNeil-Janssen Pharmaceuticals, Inc., a division of Johnson & Johnson (NYSE: JNJ) (see story). MediPharma will remain responsible for all discovery and development activities through clinical proof-of-concept, unless OMJPI exercises an option on a candidate. At that point, OMJPI will have exclusive rights to develop and commercialize the compounds. Specific financial details were not disclosed about the deal, but Hutchison MediPharma said it would receive an up-front payment plus milestone payments for achieving specific development and approval events. Hutchison MediPharma will also be entitled to royalties on worldwide sales of any products and an option to co-promote the products in China, including Hong Kong and Macau. The MediPharma-JNJ deal follows last week’s $550 million transaction between Singapore’s S*Bio and Onyx Pharma (NSDQ: ONXX), an active start for major deals in 2009.
In an effort to make healthcare more affordable, China’s new health reform plan will pilot a zero markup policy on drugs distributed from government hospitals and health centers (see story). The government will establish trial programs in several cities that – on certain drugs – will wipe out the 7% to 15% markup that is currently allowed by the central government. The initiative was announced in an address delivered to the 2009 National Health Working Conference by Chen Zhu, the Minister of the Ministry of Health. A formal unveiling of the entire healthcare reform package is expected early this year.
Meanwhile, China biopharma keeps expanding its offerings. China Pharma Holdings (NYSEMKT:CPHI) received SFDA approval of a new product, Tiopronin Enteric-Coated Capsules (see story). Tiopronin is widely given as a treatment for acute and chronic hepatitis B and to relieve drug-induced liver injury. Because Tipronin can cause stomach irritation, limiting its use, China Pharma has encased its Tiopronin capsules with an enteric coating to decrease stomach mucosal irritation. China has a notoriously high incidence of hepatitis B, so liver protection drugs such as Tiopronin, are projected to have revenues in China of 41 billion RMB ($6 billion) in 2008.
LDR, an Austin, TX medical device company, received approval to market its second generation Mobi-C® cervical artificial disc in China (see story). The product will be added to LDR’s portfolio of spine products, which includes spinal fixation systems, a pedicle screw system and the company’s first-generation artificial disk. LDR opened its first China office in Beijing in March 2007. Since then, it has also opened an office in Shanghai.
Mindray Medical International (NYSE: MR) continues to perform very well. The company reported preliminary 2008 results for its medical device business, showing high rates of growth despite the difficult economic environment (see story). Mindray expects 2008 revenues to be in the range of $540 million to $550 million, an 85% jump over last year. For net income, Mindray is predicting non-GAAP EPS will be at least $1.16, a 47% increase over the 2007 figure. Some of the growth results from its acquisition of the Datascope (NSDQ: DSCP) Patient Monitoring business, which produced average monthly revenues of about $8 million last year, or about $64 million for the eight months the division was part of Mindray in 2008. Taking into account the $64 million of “bought” revenues, the organic increase over 2007 is closer to 52%, which is still an admirable rate of growth.
Showcasing the technological energy that produced its growth, Mindray Medical released an overview of its recently introduced products, saying that it released ten new products in 2008, bringing its total number of currently offered products to 60 (see story). It expects to begin marketing an additional seven to nine products in 2009. The company now offers 28 products in the US, having received FDA 510(k) clearance for nine products in 2008. In 2009, Mindray expects to market its first surgical light, its first surgical bed, its third digital radiography machine, a more advanced color ultrasound system and a line of economical anesthesia machines. Mindray feels that its cost-effective products are a perfect fit for the current economic environment.
A number of disappointing news stories also appeared last week. Hutchison China MediTech put its radiation sensitizer, HMPL-002, on clinical hold because the drug did not provide a clear clinical advantage (see story). The data came from a Phase II proof-of-concept trial, conducted in China, in patients with stage III non-small cell lung cancer. HMPL-002 was administered in addition to standard chemo-radiotherapy and compared to the standard treatment, but results from the two treatment arms were virtually the same. HMPL-002 is also undergoing a Phase I trial in the US in patients with locally advanced head and neck cancer.
The shares of American Oriental Bioengineering (NYSE: AOB) slid lower after the company announced it had closed a $70 million purchase of buildings and land in Beijing (see story). Unfortunately for AOB, the release said the site and its facilities would be used as a “Convention and Training Center.” Critics jumped all over the wording, charging that AOB was abandoning its very profitable and growing drug business in order to begin holding conventions. The company was forced to defend itself, which seems to happen from time to time with American Oriental. Despite the recurrent controversies, American Oriental is profitable and growing. During the first nine months of 2008, AOB increased its revenues by 65% to $168 million. Net income (before a large currency gain) jumped 42% to $39.8 million. At the end of Q3, AOB reported $220 million in cash and $126 million in debt.
Simcere Pharmaceutical Group (NYSE: SCR) announced that, according to preliminary figures, the company’s full-year 2008 revenue of 1.72 billion RMB ($252 million) (see story). That is up 24% over 2007, but at the low end of its previously announced 1.7 billion to 1.8 billion RMB estimated range. A more negative note is that net income will be about 10% below the forecast, which was 390 million RMB to 400 million RMB. This indicates earnings of about 355 million RMB ($52 million), only an 18% improvement over 2007. Simcere blamed the shortfall on consumers, who are not as willing to buy self-pay drugs in the current economy, and a fall in the company’s foreign exchange gain.
And, finally, China-Biotics (OTC:CHBT), a probiotics company, reported that construction of its new manufacturing plant in Shanghai has been delayed (see story). 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. The new manufacturing plant, located in the Qing Pu Industrial Park in Shanghai, will boost production capacity by 150 metric tons of probiotics per year. Currently, China-Biotics has production capacity of just 12 metric tons annually. On a positive note, the company has already signed new contracts with four food manufacturers for its products.