China Medicine Moves Deeper into Pharmaceuticals Production

| About: China Medicine (CHME)

China Medicine Corporation (OTCPK:CHME) has acquired Guangzhou LifeTech Pharmaceuticals Co. Ltd., a producer of pharmaceuticals products and TCMs, for 57 million RMB ($8.3 million) in cash plus the assumption of 89.8 million RMB ($13.2 million) in debt. China Medicine appraised LifeTech’s assets at 174 million RMB ($25.6 million), including manufacturing facilities and a portfolio of 39 TCM and Western medicine products.

The purchase moves China Medicine further away from its drug distribution roots and deeper into the business of producing pharmaceuticals and medical devices. Many of its offerings are manufactured by other companies. China Medicine is also developing an animal feed additive.

China Medicine expects LifeTech to add between $10.0 million and $12.0 million to its 2010 revenues. It also projects a net profit margin of at least 40% on the revenues.

LifeTech's best-selling drug is Houerhuan Xiaoyan Capsules, a treatment for throat infections and acute laryngitis. The product is expected to produce 66% of LifeTech's revenues in 2009 with a gross margin of 60-70%. China Medicine did not release specific revenue figures for LifeTech.

Upon closing, which is expected before the end of the year, China Medicine will pay $.549 million of the cash purchase price and pay off $7.3 million of LifeTech's debt. China Medicine will pay an additional $3.7 million when the transaction is approved by the foreign trade bureau. The final payment will be made on or before June 30, 2010.

Disclosure: none.

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Tagged: , Drugs Wholesale, China
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