China Biotech in Review: Approvals, Deals and Company News

Last week, the backdrop for China biotech news was the continuing heparin scandal, a scandal that is serving to reinforce safety concerns about foreign-sourced drugs. It didn’t help that simple greed was the motive, as the culprit proved to be a heparin-like substance that was introduced into the supply chain to shave costs. China responded to the discovery by telling companies that gather heparin to deal only with licensed firms. It was not clear if the pronouncement was a new policy or a reiteration of an existing one.

China biotech, meanwhile, went about its business of making deals and getting products approved as it sought to expand its business. Tianyin Pharmaceutical (TYNP.OB), which has been active since completing its reverse merger in January, was happy to report an approval from the SFDA for a generic antibiotic, Azithromycin Dispersible Tablets (see story). The drug will help Tianyin move away from traditional Chinese medicines. It was the first approval for Tianyin from the SFDA, though the drug is the third non-TCM drug it offers. Another ten products await SFDA approval.

Taiwan-based Medigen Biotechnology signed a $199 million deal with Oncolys BioPharma of Japan that gives Medigen the Asian rights to a cancer drug (see story). The drug, OBP-301, is in Phase I trials in the US for solid tumor cancers. Medigen can develop Oncolys’ OBP-301 for liver cancer (or another, non-solid-tumor form of cancer), and the company may also acquire distribution rights covering all types for cancer for OBP-301 throughout Asia, including Japan and China.

Tongjitang Chinese Medicines Company (TCM) announced a small acquisition of a traditional Chinese medicines company (see story). Tongjitang entered an agreement to buy Qinghai Pulante Pharmaceutical for 25.5 million RMB ($3.5 million). That is less than one times sales, as Pulante was profitable in 2007 on revenues of 40 million RMB ($5.5 million). However, the deal also contains unspecified provisions for Pulante’s owners to receive additional payments, depending upon performance, for the next three years. Pulante’s flagship product is an OTC traditional Chinese medication for respiratory diseases.

To deal with its slumping stock price, 3SBio Inc. (SSRX) announced a $20 million stock buyback (see story). Its stock price has slipped from $16 at the time of its IPO a year ago, to $7.60 at the time of the announcement. During the last year, 3SBio has continued to show gains in revenue, but not the kind of dramatic gains that support a large PE multiple. The announcement pushed the stock 14% higher; it rose $1.05 to $8.65.

Shanghai GenePharma Co. bought a license for the Kreutzer-Limmer siRNA patents that belong to Alnylam Pharmaceuticals (ALNY) (see story). With the new rights, Shanghai can make its RNAi reagent products available for sale in the West. The GenePharma transaction is the first China agreement Alnylam has signed.

Hutchison China Meditech (AIM: HCM) reported higher 2007 revenues, but also said its net loss increased (see story). Revenues were up 29% to $65.1 million, while the loss jumped from $10 million to $17.2 million. Revenues for its line of TCM products were higher, and that division of its business was profitable. Chi-Med, as the company is popularly known, blamed the loss on higher research expenses and a one-time charge of $5.1 million for discontinuing its Nao Ling Tong product line.

AstraZeneca (AZN) reiterated the importance of China for the company (see story). John Ramsey, AstraZeneca’s Vice President for Global Development, detailed the initiatives that AstraZeneca has undertaken to find drugs that solve health problems in China and Asia as a whole. The Innovation Center China [ICC] in Shanghai, which opened last year, has hired 40 researchers, 40% of them with PhDs. And AstraZeneca has established relationships with universities and research centers.

Disclosure: none.