Potential IPO Shanghai Bio Boasts Strong Pedigree

ShanghaiBio Corp., a Shanghai-based biopharma contract research organization [CRO], will seek an initial public offering on the U.S. markets in 2008. As reported in Investor’s Business Daily, the public listing is “a key opportunity for us to link and bridge the two countries,” said Dr. Jason [Gang] Jin, President & CEO of ShanghaiBio’s U.S. subsidiary MaxyBio Corp. Founded in August 2001, ShanghaiBio (aka Shanghai Biochip Co. Ltd.) boasts a strong pedigree. The company serves as the National Engineering Center for Biochips, and is supported by prominent scientific institutes including the Shanghai Institutes for Biological Sciences [SIBS], Shanghai Institute of Microsystem and Information Technology, both affiliated with Chinese Academy of Sciences [CAS], and the Chinese NationalHuman Genome Center.

Along with CRO services, the company also designs and manufactures biochips, diagnostic test kits, reagents and pharmaceutical ingredients. Located in Shanghai’s Zhangjiang Hi-Tech Park, ShanghaiBio boasts over 200,000 square feet of research space. The company reports having received investments totaling US$45 million from government grants and shareholders including universities, research institutes, hospitals and venture capital groups. With a client list that includes several multinational drug companies, the company is doubling or tripling revenues annually, according to Dr. Jin. Reported CRO revenues for 2007 to date are US$3.5 million, with revenues expected to grow to US$10 million next year.

Chinese CROs have been riding a wave of strong demand driven by the need for big pharmas to boost their pipelines. With drug development costs estimated by some to exceed US$1 billion per approved drug, pharma companies have been lured to China by its growing pool of Western-trained researchers and costs that can be 10% to 20% of similar services elsewhere. Investors are paying attention to this growing trend, particularly since the successful IPO of Shanghai-based Wuxi Pharmatech (NYSE: WX). Priced at US$14, shares in Wuxi rose to over US$42 before pulling back in general market weakness.

With shares now at US$28.26, Wuxi carries a P/E ratio of 64 and a price to sales for 2007 of approximately 13. Other CROs have drawn attention including Hutchison China MediTech Ltd. (LSE: HCM) and privately held ShangPharma. ShangPharma recently became the center of increased IPO speculation after receiving an investment US$30 million from private equity firm, TPG. Looking forward, other CROs of interest include ShangPharma affiliate Shanghai Bioexplorer, Shanghai Medicilon, ChinaBio Therapeutics, and Beijing based Bioduro.