Biostar Pharmaceuticals (NASDAQ:BSPM) of Xianyang has signed a letter of intent to acquire an unnamed Xi'an-based manufacturer of medical equipment and nutrients for $1.1 million in cash. Biostar expects the transaction will create an additional $3 million of revenue in 2010. The acquisition represents Biostar’s first foray into the medical device field.
The target company manufactures and distributes topical hernia treatment belts with two traditional Chinese medicine bags that apply the treatments to body points associated with hernia. It also manufactures a nutraceutical product that treats gynecological inflammation in young and middle-aged women. The company has been manufacturing and selling its products in Xi'an and an adjacent province since 2004.
Our potential acquisition of this company will add a unique medical device and other nutrients to our portfolio of medicines as well as open a medical equipment distribution opportunity for us," said Mr. Rongua Wang, Chairman and CEO of Biostar Pharmaceuticals. "We have been monitoring this target acquisition for the last couple of years and have always been impressed with the market potential of its product line. If the acquisition is successful, we anticipate a very smooth assimilation of their products into our distribution network and corporate culture," he concluded.
During the last year, Biostar has been busy creating in-house production of the herbs it uses in its TCM products. The company has begun cultivation from a dedicated plot of land and also started construction of a processing facility. It will sell excess production to outside firms.
During the first nine months of 2009, Biostar reported revenues of $36.2 million, a 53% increase, and net income of $8.8 million, a 106% jump. Earnings per share are 37 cents for the period. Sales of the company’s main product, Xin Aoxing Oleanolic Acid Capsules, an oral OTC traditional Chinese medicine treatment for hepatitis B, accounted for 77% of the company's Q3 revenues.
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