Beijing Med-Pharm Teams Up with Alliance Boots to Enlarge Chinese Network

Beijing Med-Pharm (BJGP), together with a British drug store chain and pharmaceutical distributor, Alliance Boots plc (AB), paid $69 million to buy 50% of Guangzhou Pharma, the third largest pharmaceutical wholesaler in China. Beijing Med-Pharm, located in Pennsylvania, is in the business of distributing western drugs to China.

Beijing Med-Pharm and Alliance Boots formed Alliance BMP to buy the stake in Guangzhou, with Alliance Boots taking 80% of the ownership and Beijing Med-Pharm buying the other 20%. David Gao, who is CEO of Beijing Med-Pharm, will become Chairman of Guangzhou Pharma. Beijing Med-Pharma and Alliance Boots will use Alliance BMP to make additional investments in China.

Beijing Med-Pharma already has a distribution network established in China, but it will augment its facilities with the network in southern China owned by Guangzhou.

Guangzhou Pharmaceutical Corp., the distribution company that is being bought, is a subsidiary of Guangzhou Pharmaceutical Company Ltd. The parent company is listed on the Hong Kong Exchange, and it ultimately belongs to the Municipality of Guangzhou. The parent company will continue to own 50% of Guangzhou Pharma.

Guangzhou Pharma Corp, which was formed in 1951, serves 12,000 hospitals, pharmacies and other wholesalers from eight distribution facilities in Guangdong Province and southeast China.

Alliance Boots was formed by the merger of Alliance UniChem and Boots Group in July 2006. The company is the largest drug store chain in Great Britain. It also distributes drugs to independent pharmacies in Britain and throughout Europe. With the Guangzhou Pharma investment, it will have 29 pharmacies in China, the most allowed by Chinese law.

Beijing Med-Pharm markets western drugs to China, with access to physicians, hospitals and other healthcare providers. It also offers pre-market entry analysis, clinical trial management, market research, and product registration services.

Earlier this month, Beijing Med-Pharm was the winning bidder in a sale that represents a majority stake in Shanghai Rongheng Pharmaceutical Co. The latter company is a regional drug distributor in China’s largest city, Shanghai.

Late in 2006, Beijing Med-Pharm reached an agreement with Cytokine PharmaSciences to develop, register and market Misopess in China. Misopess is a second-generation vaginal insert for cervical ripening and induction of labor. Beijing Med-Pharm also agreed with Cephalon (CEPH) to register and market products in China, starting with Fentora, a buccal tablet for breakthrough pain from cancer.

In the most recent 12 months, Beijing Med-Pharm had revenues of $21 million, but a negative EBITDA of $5.5 million. The company has a market capitalization of $219 million. It recently raised $15 million in new cash, selling 3,333,333 shares at $4.50.

Disclosure: none.

BJGP vs. AB 1-yr chart