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Government and Regulatory

GlaxoSmithKline (NYSE: GSK) officials in three China cities - Shanghai, Beijing and Changsha - were detained by authorities in what appears to be a bribery scandal (see story). Officials would say only that they were investigating economic crimes. Apparently, a whistleblower from inside the company alleged that GSK bribed doctors and hospital officials to prescribe the company's products. Officials closed GSK's Shanghai office for one day, and several people were "seized," including a high-ranking foreign-born senior finance executive. No charges have been filed, and few details are known for certain.

China's NDRC announced it is investigating whether 60 drugmakers have inflated their prices (see story). The agency is looking at the records of domestic pharmas and global companies such as GlaxoSmithKline, Novartis (NYSE: NVS), Baxter (NYSE: BAX), Merck (NYSE: MRK) and Boehringer Ingelheim. The scrutiny seems to be focused on drugs included on China's Essential Drug List, which was expanded this year to 520 products from 307. Products from notable China drugmakers such as Sinopharm and Hengrui Medicines are also part of the investigation.

Deals and Financings

Shanghai RAAS Blood Products (SHE: 002252) will issue a total of 93,652,444 shares, at a nominal price of RMB 19.22 per share, to acquire a 100% stake in Banghe Pharma. The shares value Banghe at 1.8 billion RMB ($290 million). Both companies make biologic plasma-derived products. In addition, RAAS will sell 26 million shares to RAAS China Limited, also at 19.22 RMB per share, to raise 500 million RMB ($80 million). The company will invest the proceeds into developing Banghe's business.

Shanghai Pharma (SHA: 601607; HK: 2607) paid 615 million RMB ($100 million) to purchase a 79% stake in Big Global Limited. Big Global is owned by Dong Ying (Jiangsu) Pharmaceuticals Co. The purchase gives Shanghai Pharma majority ownership of Dong Ying, which makes high-end generic drugs. Additional transactions will bring Shanghai Pharma's stake in Dong Ying up to 90%.

Pharming Group of the Netherlands announced a strategic collaboration with the Shanghai Institute of Pharmaceutical Industry (SIPI) to develop new products based on a Pharming platform. SIPI, a Sinopharm company, also obtained exclusive China rights to Ruconest, a recombinant treatment for acute angioedema attacks in patients with hereditary angioedema. SIPI will pay Pharming $1.6 million upfront for the collaboration and $1.1 million in technology transfer milestones for the first product, Ruconest.

Neusoft Medical, a Shenyang maker of imaging equipment, will purchase an additional 25% of its JV with Royal Phillips Electronics, bringing its stake in the company to 74%. Neusoft Medical is a division of Neusoft Corporation (SHA: 600718), a China IT company. It formed the JV with Phillips in 2004 with $30 million of capital. In February of this year, Neusoft announced it would purchase 100% of the JV, a plan that obviously changed. Neusoft did not explain why the terms of the deal were altered so radically.

Acebright Holdings signed a MOU with NasVax of Israel under which it will invest $1 million in NasVax for a 10% stake in the company. NasVax is developing two novel drugs, an immunotherapy and a treatment for Alzheimer's. AceBright, whose Shanghai Acebright Pharma subsidiary produces treatments for cancer and autoimmune diseases, may also participate in future NasVax offerings.

Disclosure: none.

Source: China Biotech In Review: Glaxo Officials In China Detained For 'Economic Crimes'