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Last week, the world of China biopharma produced news items that gave broad insights into the state of the industry, while other stories marked the progress of individual companies, either in terms of their drug development or their financing.

The first item concerns a new drug scandal in China that surfaced last week. This one involved human immunoglobulin, causing six deaths in late May (see story). Although the incident was extremely unfortunate, the very alert regulatory response to the misfortune showed that China drug surveillance has now attained world-class standards. The first death took place on May 22; the SFDA was notified on May 27 after other deaths ensued; and all remaining tubes of the suspected immunoglobulin batch were off the shelf in less than a week. The offending batch, which was manufactured by Jiangxi Yabo Bio-pharmaceutical, consisted of 9,575 tubes. 3,192 tubes had already been administered to patients, but the 6,383 unused tubes were returned to the SFDA for testing. In a perfect world, the incident would never have taken place. Nevertheless, the incident points out that China can now mobilize an efficient response to a drug crisis.

A second story that sheds light on change in the world of China biopharma revolves around the very successful US-China firm Asymchem Labs, a privately held CMO/CRO. The company is expanding again. This is hardly news because expansion seems constant for the firm. But the company acknowledged that the recent heparin scandal in China has caused biopharmas from around the world to centralize their API sourcing in well-known, top-tier firms, such as Asymchem (see story). In order to minimize potential side-effect problems from APIs, companies are limiting the number of companies from which they source APIs. They are also pressuring API sourcing companies to carefully scrutinize their own supply chains. The API theme of biopharma is significant because, according to one source, three-fourths of all pharmaceutical ingredients consumed in the US come from China. 

In a segue from industry trends to the drug deal front, Access Pharmaceuticals, Inc. (OTCQB:ACCP) of Dallas, TX has out-licensed the China rights to its platinum cancer drug ProLindac (see story). In addition to the usual upfront-milestones-royalty terms, the deal contains an interesting provision: Jiangsu Aosaikang Pharmaceutical Co., Ltd. of Nanking (ASK) will conduct Phase II trials of ProLindac in China for colorectal cancer and one other indication, still to be determined. Access will use the data from these trials to proceed directly to Phase III trials of ProLindac for these indications in the West. The China trials will save Access about $20 million, the costs of doing the clinical trials in the West.

In a similarly-themed announcement, Singapore-based NewBiomed PIKA sold the China rights for its adjuvant vaccine technology to Yunnan Walvax Biotech Co. Ltd. (see story). Walvax will be responsible for obtaining SFDA approval for the technology in a nasal spray vaccine for influenza. NewBiomed thinks it will be able to use the China clinical results to advance its vaccine technology internationally and to secure additional licensing agreements world-wide. Also, NewBiomed projects that its royalties from the adjuvant will total at least $70 million over 11 years.

In an in-licensing story, Shanghai Biochip Corporation [SBC] announced that it would use Qiagen’s siRNA libraries to establish the first siRNA high-throughput screening center in China (see story). Because siRNAs (small interfering RNA) interfere with the expression of a specific gene, they are useful for functional gene analysis and drug development. ShanghaiBio, as it is also known, offers biochips and related technical services, proprietary drug targets and diagnostic products. Last year, ShanghaiBio said it was considering a US-based IPO in 2008, though no announcements have been made so far. 

Also from the individual drug news front, China Sky One Medical, Inc. (CSY) expanded its product list of externally applied medications when it received SFDA approval for five new patch products based on natural herbs (see story). They new offerings are an Anti-smoking patch, a Scar patch, a Migraine patch, an Eye patch and a Coronary heart disease patch. An additional ten products are in development.

In financing news, American Oriental Bioengineering (AOB) delivered three, highly confusing announcements during the week just past (see story). On Monday, the company said it would start a stock buyback that could total as much as $75 million of its shares. On Tuesday, switching directions, American Oriental announced plans to raise $125 million in a convertible preferred stock offering. On Thursday, it reversed the previous announcement, taking the convertible preferred stock offer off the market. American Oriental said the offering was not welcomed by investors. The company seems to be in excellent financial shape: revenues and profits are growing while cash in hand at the end of Q1 totaled $159 million. That was after the company prepaid $16 million for new acquisitions. Tony Liu, Chairman and CEO of American Oriental, is known to want to sell some of his shares, which he was not able to do in last year’s secondary offering. Perhaps, that fact partly explains the confusing series of events that took place this week.

However, another story from the world of China biotech financing last week reinforces the theme that investors remain somewhat reluctant to invest in the sector. Genesis Pharmaceuticals Enterprises, Inc. [GTEC.OB] placed $30 million in three-year convertible notes (see story). The notes carry an interest rate of 6%, which is reasonable enough. However, they are convertible into Genesis stock at $.20 per share, a very large 31% discount to the stock price at the time of the announcement. Like American Oriental, Genesis’ financial story seems fairly solid. The terms of the financing argue that investors remain skeptical.

Disclosure: none.

Source: China Biotech in Review: Broad Trends, Individual Companies