American Oriental Still Intent on Expansion: Buys Stake in China Aoxing

American Oriental Bioengineering Inc. (NYSE: AOB) took a 38% position in China Aoxing Pharmaceutical Company Inc. (OTCBB: CAXG.OB) as part of a deal under which the two companies will jointly develop and market narcotics and pain relievers in China. American Oriental will pay $18 million for 30 million shares of China Aoxing, a price of 60 cents per share. China Aoxing last traded at $1.22 per share, and it moved up 22 cents to $1.54 following the announcement.

China Aoxing concentrates on highly regulated narcotic pain drugs. Only a few China biopharmas have permission to develop narcotic drugs. In March, China Aoxing agreed to acquire Shijiazhuang Lerentang Pharmaceutical Company, another company with pain drugs in its portfolio, for 8 million shares of stock and $10.8 million in cash, even though China Aoxing listed only $1 million in cash available. The investment by American Oriental allowed China Aoxing to close its purchase of Shijiazhuang Lerentang.

American Oriental had $166 million in cash at the end of 2007, and it has been very intent upon increasing its business by buying companies, though usually it has acquired 100% of privately held biopharmas. In 2007, it made at least four such transactions. The company reported its 2007 profits were $43.3 million on revenues of $160.5 million.

The companies noted that the narcotic and pain market in China is currently worth only $300 million annually, implying patients are vastly underserved.

China Aoxing and American Oriental Bioengineering will collaborate on increasing the sales of China Aoxing's current pain drugs, particularly Naloxone, and they will also work to further development of China Aoxing's narcotic drug pipeline, which includes Oxycodone and Tilidine.

Disclosure: none.

Comments

[Ikaris]

Just bought some (100) of these shares because it sounded like they had a lot of potential. It really seems to be a strange transaction they just entered into with Aoxing; they purchased the shares at a discount and it went up as a result (your math on the shares is wrong by the way)? Does that not sound a little weird? What would they do in the US if that kind of transaction happened?

[User 13658]

I like AOB also. Sold it awhile back for profit. % of short sellers to high. AOB has great
fundamentals. Cash Cow growing by acquisitions and now in "drug" biz with CAXG.OB and
Shijiazhuang. CAXG.OB needs to deliver and i'll be watching!! From Wealth Builder.


On Apr 17 06:32 PM Ikaris wrote:

> Just bought some (100) of these shares because it sounded like they
> had a lot of potential. It really seems to be a strange transaction
> they just entered into with Aoxing; they purchased the shares at
> a discount and it went up as a result (your math on the shares is
> wrong by the way)? Does that not sound a little weird? What would
> they do in the US if that kind of transaction happened?