China Medical Acquires In-Vitro Diagnostic Company

China Medical (CMED) will spend $28.8 million to acquire Beijing Bio-Ekon Biotechnology Co. Ltd., which (like China Medical) develops and sells advanced in-vitro diagnostic [IVD] products. China Medical did not disclose revenue/profit figures for Beijing Bio-Ekon, but the company did say the acquisition would be accretive from the quarter ending March 31, 2008.

BBE has been in business since 1999. Its first products were Enzyme-Linked Immunosorbent Assay (“ELISA”) IVDs. However, in 2006, BBE launched the product that seems to be China Med’s chief reason for the acquisition: a semi-automatic Enhanced Chemiluminescence Immunoassay [ECLIA] analyzer and related reagents. China Med is also heavily involved in the ECLIA business. In the most recent quarter, China Med reported that 43% of its revenue ($12.4 million) derived from sales of its ECLIA tests and reagents.

Revenues for BBE’s ECLIA products are on the upswing. The company was selected as part of the 863 Program in China, an initiative that underwrites high-tech R&D using funds from the Ministry of Science and Technology to develop ECLIA reagents for HIV and hepatitis C tests. In total, BBE has 18 ECLIA reagents on the market with another 40 reagents in development.

The company’s fully automatic ECLIA analyzer uses Magnetic Antibody Immunoassay (“MAIA”) separation technology to accomplish its task. BBE was given a patent on the MAIA minute magnetic beads that it uses to manufacture the fully automatic ECLIA analyzer.

China Med considers some of BBE’s reagents to have significant market potential. It mentioned particularly the reagent for testing blood fluke parasitic infection, which is prevalent in people living alongside the Yangtze River. The SFDA is currently considering the approval application for this reagent. BBE has also developed reagents for testing toxic aflatoxin in cereal products and clenbuterol in pork, which will be important for proving that food products are safe.

China Med expects to use BBE’s customer base to expand sales of its own products, while cross-selling the new BBE products to its own clients. China Med will also take advantage of BBE’s direct sales force which distributes products to 800 hospitals in China.

China Med also makes in-vitro tests using Fluorescent in situ Hybridization [FISH] technology, though this line of products is less important to China Med, providing just 14% of its revenues. The remainder of China Med’s business comes from its use of High Intensity Focused Ultrasound [HIFU] to treat solid cancers and benign tumors. HIFU revenues were about equal to those of the ECLIA tests for China Med, coming in at $12.2 million or 43% of the total. The HIFU machine is currently seeking approval for use in the US against head and neck cancers. Other companies have won approval for use of HIFU technology to treat uterine fibroids, though no approvals have been given to the device as a cancer treatment.

Disclosure: none.