New China Biopharma Investments

Last week witnessed continuing investment in the world of China biopharma, much of which came from the West. In one initiative, QIAGEN (QGEN), the Dutch company that makes lab equipment to test and purify nucleic acids and proteins, has established an Asia-Pacific Service Solutions Center (see story). The latest center, located in Singapore, is the seventh Service Solutions Center worldwide. By the end of 2008, all the centers will be open 24 hours per day, seven days per week, making QIAGEN’s products always available. In December 2007, QIAGEN also opened a molecular diagnostics R&D center in Singapore, a joint venture with Bio*One Capital.

NovaSecta, a UK company that advises smaller and mid-sized European biopharmas on R&D matters, has formed an alliance with a China CRO consortium – the coalition formed by Sundia MediTech and HD BioSciences last year (see story). The business plan for NovaSecta is to provide its mid-sized clients with R&D alternatives, which can include managing their R&D efforts or establishing strategic outsourcing partnerships. NovaSecta makes the point that the growth in China CROs has, to date, been fueled largely by the big biopharmas headquartered in the US. Now, NovaSecta will make the same high quality-low cost services more easily accessible to mid-sized European biopharmas.

Omnicare Clinical Research, a division of Omnicare (OCR) opened two offices in China, one in Shanghai and the other in Beijing, which will offer Project Management, Clinical Trial Services, Regulatory Affairs and Business Development services (see story). Omnicare Clinical Research is a CRO specializing in Phase I to Phase IV trials for biopharma and medical device companies. Its parent company sells pharmaceuticals to long-term care facilities. Omnicare Clinical Research, which has offices in 30 countries, already has other Asia Pacific facilities in Australia, India, Japan, Singapore and Taiwan.

RHEI Pharmaceuticals, Inc., a venture-backed Connecticut enterprise that is in-licensing the China rights for proprietary medications, will have the exclusive marketing rights for Attental from MethaPharma (see story). Attental is a nutraceutical drug available in Europe to treat symptoms of ADHD in children. MethaPharma, a division of Vemedia Group, is headquartered in Belgium. Attental is the fourth product that RHEI has acquired to bring to China.

Two publicly traded Japanese drug wholesalers are also intent upon bringing drugs to China, though the drugs are Japanese in origin (see story). Mediceo Paltac Holdings Co. and Mitsubishi Corp., which formed a health care alliance in 2005, will offer their drug management services to hospitals. They will begin by targeting hospitals in the Beijing area and then extend their efforts throughout China. The two companies are also seeking to establish a JV with a China drug wholesaler to distribute drugs. Another Japanese drug distributor, Toho Pharmaceutical Co. and major China wholesaler Jointown Group Co. have established a JV to supply Japan-sourced drugs in China.

Beijing Med-Pharm (BJGP) has completed its acquisition of Sunstone Pharmaceutical Corporation and will change the name of the company to BMP Sunstone Corporation (see story). Sunstone brings a presence in the retail/OTC markets, which compliments the hospital pharmacy focus of Beijing Med-Pharm. Like other companies mentioned in the news this week, BMP Sunstone wants to partner with Western biopharmas to market their products in China. Because Sunstone makes its own drugs, its margins are significantly higher the Beijing Med-Pharm’s, which should make the combined entity a profitable enterprise.

However, one East-West deal fell apart last week. Shanghai Century Acquisition (SHA) , a special purpose acquisition corporation, ended its attempt to buy Sichuan Kelun Pharmaceutical Co., Ltd. (see story). Shanghai Century said regulators were moving too slowly, preventing it from securing government approval of the $231 million purchase in a timely fashion. By charter, Shanghai Acquisition had to close an acquisition by a certain date or return the money raised in the IPO. Shanghai Acquisition found a non-biopharma company to buy. Because the target is listed on the Hong Kong exchange, the company will not require regulatory approval.

3SBio Inc. (SSRX) reported higher revenues and earnings in its fourth quarter, but its results still fell short of estimates (see story). The company also lowered its forecast for 2008 revenues to a range of $30 million to $32 million range, while analysts expected an average of $35.5 million. This may not seem a story of East-West investment, but the year-end financial report contained one very interesting investment-related item. Because of its IPO in February 2007, 3SBio ended the year with $115 million in cash. The cash replaced earlier debt and earned income of $5 million. Supposedly, 3SBio will soon start buying other drugs to market in China, along with Gendicine®, its gene therapy for cancer, but it has not made any significant purchases in the year since the IPO.

Disclosure: none.

Comments

[jade_guanyin]

"Because the target is listed on the Hong Kong exchange, the company will not require regulatory approval. "

As for the above stated remarks made on SHA, just a minor correction, the targetted company is NOT a public company listed in HK Stock Exchange.

Jade @ Beijing