China Biotech in Review: Almost-Deals and Earnings

 |  Includes: CMEDQ, CSKI, DSCP, IMM, MR, NVS, SVA
by: ChinaBio Today

In China biopharma last week, a new art form emerged – the almost-deal. Not quite this and not quite that, but something in between; its most definitive characteristic is a magnificent ambiguity. What it means is that its form will become clear sometime in the future. There were two such almost-deals in China biopharma announced during the past seven days.

The first almost-deal was declared by China CRO Tigermed Consulting and MacroStat, a CRO offering clinical data management and statistical analysis (see story). They have not merged, and they did not form a collaboration. Instead, Tigermed said that it and Qiming Venture, the VC firm that put $5 million into Tigermed in July 2008, will “join hands to grant asset injection to MacroStat.” The value of that asset injection was not disclosed, but after the transaction, Tigermed boasts a “significantly improved” clinical data management capability while MacroStat has a broader business line. MacroStat was formed in 2002 and expanded to China in 2005. It will now focus its attention on biostatistics in China.

Another almost-deal was revealed between Immtech Pharmaceuticals (IMM) and Beijing Pharmaceutical Group (BPGC). The two companies signed a Memorandum of Understanding (MOU) committing them to seek a relationship (see story). The alliance would give BPGC rights to develop drugs from Immtech’s library of compounds, which primarily target hepatitis C and malaria. No financial disclosures were made at this exploratory stage. Immtech’s hepatitis C vaccine has shown promise in the lab, but it has not yet begun clinical trials. Immtech has been in financial trouble since late 2007 when its lead drug candidate, pafuramidine, a treatment for AIDS-related pneumonia and African sleeping sickness, was withdrawn from clinical trials following worries concerns about side effects.

In news of drug approvals, China Sky One Medical (NSDQ: CSKI) reported that it was granted production approval by the SFDA to market calcium folinate injection, an auxiliary therapy for sprue (a disease of the small intestine) and other digestive disorders (see story). At the same time, the company said the SFDA granted approval to begin clinical trials of two TCMs for skin disorders: Paeonol gel and Mei Lu gel. Because all three products are prescription drugs, they represent a departure from China Sky One’s traditional focus on OTC products.

SciGen Limited ((ASX: SIE)), a Singapore company that is listed in Australia, received SFDA approval to begin marketing its recombinant human insulin product, SciLin, in China (see story). The company will outsource distribution of the product to Shenzhen Meheco and Hefei Life Sciences Technology (HLST), which have committed themselves to selling $17 million of SciLin in its first three years on the market. SciGen will source its human insulin product from Bioton S.A of Poland, which owns 90% of SciGen’s shares. SciGen, with partners, is building a fill and finish facility in Hefei, Hanui Province to process the product.

Lee’s Pharmaceutical Holdings (HKGEM: 8221) of Hong Kong in-licensed exclusive China rights to the oral antibacterial drug Prulifloxacin from Nippon Shinyaku Co. of Japan (see story). Lee’s will make an upfront payment, milestone payments based on sales levels, and it will pay royalties, though specific amounts were not disclosed. Prulifloxacin, an oral quinolone antibacterial agent, has been launched in Japan and Europe. Lee’s currently markets six products in China with another 15 products in development.

Sinovac Biotech Ltd. (NASDAQ:SVA) received the Good Manufacturing Practice (GMP) certification for its recently completed filling and packaging production facility (see story). The GMP certification provides for an overall annual production capacity of 20 million doses, with the capability to produce up to 40 million doses. This level of production allows for increased sales of Sinovac’s marketed vaccines.

Earnings season is upon us with the first results now trickling out. China Medical Technologies (NSDQ: CMED) reported another quarter of strong numbers (see story). In its Q3 (ended December 31, 2008), China Medical’s revenues from continuing operations climbed 51% to 225 million RMB ($33.0 million) and non-GAAP net income was an amazing 95% higher at 119 million RMB ($17.5 million). That’s the snapshot, but the non-GAAP numbers exclude two significant one-time events: an extraordinary gain from its legacy HIFU (High Intensity Focused Ultrasound) business, and a one-time charge for acquired in-process research and development costs. For full-year 2008, China Medical expects revenues of around 830 million RMB ($122 million), an increase of about 52%.

Mindray Medical (NYSE: MR), the Shenzhen-based medical device maker, also reported positive results for its Q4 and full-year 2008 (see story). Revenues climbed to $547.4 million, which represented a 61% increase in China and a 110% improvement in international markets. Non-GAAP income rose 50% to $132.7 million. A major part of the improvement can be traced to Mindray’s $202 million acquisition of the patient monitoring division of Datascope (NSDQ: DSCP), which closed on May 1, 2008. Over the eight months the assets were part of Mindray, they added about $100 million to Mindray’s top line. Although Mindray’s numbers were healthy, investors seemed unhappy that the company’s overall business did not grow more rapidly. The stock dropped 11% after the earnings announcement.

And finally, Novartis (NYSE NVS) reported that its 2008 China revenues were up 29% to 3.3 billion RMB ($428 million) (see story). The company expects its China sales to rise another 30% in 2009. Globally, the company is hoping for only a 5% increase in its top line. Novartis also said it plans to introduce six new drugs to China during 2009 and to increase its employee count by 20%. The company is building a new R&D center in Shanghai, a project announced last year.

Disclosure: none.