Tianyin Pharma Forms JV to Expand Antibiotics Business

Tianyin Pharmaceutical, Co. (TPI) has formed a joint venture with Sichuan Mingxin Pharmaceutical Co. to produce macrolide antibiotics, such as azithromycin, clarithromycin and roxithromycin. Tianyin will own 77% of the JV, which will be known as Sichuan Jiangchuan Pharmaceutical Co., Ltd. Although Tianyin was historically focused on TCM products, it received its first SFDA approval for an antibiotic, Azithromycin Dispersible Tablets, in 2008.

The new JV, Sichuan Jiangchuan, will be tasked with managing research and development activities, while simultaneously manufacturing and selling macrolide antibiotic APIs.

Tianyin expects the JV will contribute $22.5 million in revenue and $1.4 million in net income for fiscal 2011 (the company operates on a June 30 fiscal year). It predicts revenue and net income contributions in 2012 from the JV of $47 million and $6.5 million, respectively. When both phases are operating near their full capacity, the facility has the potential to generate $12 million in net income annually, according to Tianyin.

In connection with its announcement, Tianyin said it was raising guidance for fiscal 2010. The company expects revenues and net income of $63.3 million and $11.3 million, respectively, which represent growth of more than 40% in both categories. Previous guidance was $59 million in revenue and $10.5 million in net income.

To help pay for the JV, Tianyin completed an equity financing, bringing in almost $5 million. The company issued 1,534,570 shares of common stock and 306,914 warrants with a strike price of $4.50.

Tianyin purchased SFDA product approvals for azithromycin and roxithromycin from its JV partner, Mingxin, paying $3 million. It will contribute the products to the JV.

The JV will build a new facility to manufacture the antibiotic APIs, which are produced through a two-stage process that combines fermentation followed by a synthesis process. Tianyin will purchase land rights in Sichuan for $4.5 million. The new plant will be built with full support of the Sichuan Xinjin County Government, though if that support includes financial incentives, Tianyin did not disclose them. The facility is expected to cost about $20 million.

Phase I of the facility will produce oral and injectable grade API for azithromycin, in addition to other macrolide antibiotic intermediaries. It is expected to be fully operational by July 2010. Phase II will allow high output production of roxithromycin, clarithromycin and other macrolide antibiotics. It is expected to be operational by second half of 2012.

The three antibiotics that will be produced by the JV, azithromycin, clarithromycin and roxithromycin, are prescribed for a wide range of bacteria-based respiratory tract, urinary tract and skin infections. Total revenues for macrolide antibiotics in China hospitals were $562 million in 2008, and the three antibiotics to be produced by the JV were responsible for 90% of those revenues.

Tianyin said that its Azithromycin Dispersible Tablets, which were launched in October 2008, are expected to generate $5.2 million in revenue during fiscal year 2010. Azithromycin was named to China's Essential Drug List in August.

Tianyin, which is headquartered in Chengdu, Sichuan Province, now has a portfolio of 39 products. It owns and operates three GMP manufacturing facilities and has a pipeline of 17 additional products pending approval. Its sales force numbers 720 salespeople. The company completed a reverse merger in early 2008.

Disclosure: none.

Comments

[Alphameister:]

TPI has been one of my favorite stocks, seemingly offering great value along with great growth. So why the registration with the SEC last month of some 21 million shares? Why would a TPI insider want to sell a huge amount of stock at current prices? Seems that news of this led to the stock's sharp sell-off last week, which may have then prompted management to issue reassuring comments about fundamentals. Any insights?

Nov 01 02:56 PM