More on China Biotech Deals: M&A Numbers Misleading

Includes: ALNY, CMEDQ, SVA
by: ChinaBio Today

Last week, we concluded our series on the “State of China Life Science” with a look at 2008 activity in IPOs and M&A (see story). In 2008, the IPO market for China life science companies was virtually moribund, dropping 94% in dollar volume, though M&A remained surprisingly vibrant, rising almost 20%.

The M&A numbers are, however, misleading, because so much of the activity took place in 2008’s Q1 – before the full force of the economic crisis was felt. Q2 (also before the crisis) fell 77%, a kind of canary in the M&A mine. The second half was on track to post results almost 50% lower than the previous year.

In previous installments of the series, we published an overview of the sector, original research on life science patents, and 2008 venture capital investments in life science.

Continuing the theme of investment, BioVeda Capital, a venture capital firm based in Singapore, is talking about establishing a life sciences fund of between one and two billion RMB ($150-$300 million) for companies located in the Guangzhou Development Zone in the Pearl River Delta (see story). Yang Zhi, a BioVeda China Fund Founder and Managing Partner, met recently with Xue Xiaofeng, an official with Guangzhou Development Zone, to discuss the possibility of cooperation. Guangzhou reportedly initiated the discussion.

ChinaBio® LLC agreed to publish its proprietary list of over 260 China-based Contract Research Organizations (CROs) and Contract Manufacturing Organizations (CMOs) on (see story). goBalto is a recently launched online web-based partnering site for the pharmaceutical industry. ChinaBio's list of CROs and CMOs is divided into two categories: “Sourced by ChinaBio,” indicating that ChinaBio has identified these CROs and CMOs as actively operating in China, and “Reviewed by ChinaBio,” indicating that ChinaBio has visited the facility, met with senior management and reviewed the company’s specific capabilities.

Pacgen Biopharmaceuticals [TSXV: PGA] of Vancouver, Canada signed a letter of intent to negotiate the purchase of XPhase Pharmaceuticals of Toronto (see story). The leadership of XPhase will take over management of Pacgen. As its major asset, XPhase has a signed letter of intent for global rights (ex-China) to a new anti-anxiety chemical entity, named AF-5 and discovered by the Institute of Materia Medica, Chinese Academy of Medical Science in Beijing (IMM).

In China, IMM has obtained SFDA approval to begin clinical trials of AF-5 and is expected to initiate a Phase I test of the entity in early 2009. PacGen will undertake similar trials in North America.

Novozymes (NASDAQ OMX Copenhagen A/S ((NZYM B))), a Danish company that provides enzymes for industrial and consumer use, and also manufactures recombinant biopharma products and APIs, will spend $35-$50 million to build a new facility at its existing site in Tianjin, China (see story). The new factory will produce Bacillus-based Hyaluronic Acid (bHA), which is used in medical devices, topical eye care treatments and drug delivery.

China Medical Technologies (NSDQ: CMED) (中国医疗技术公司) was granted SFDA approval for a bladder cancer FISH probe, an advanced molecular diagnostic test kit that uses DNA probes for early detection and monitoring of bladder cancer (see story). The probe detects whether human bladder cells show aneuploidy (an unusual number of chromosomes) for chromosomes 3, 7, 17 and loss of the p16 locus. Several China hospitals use the probes for diagnosing patients with hematuria (red blood cells in the urine) and have diagnosed patients with early-stage bladder cancer as well as early-stage ureteral cancer, which caused hematuria in these patients.

Alnylam Pharmaceuticals (NSDQ: ALNY) was granted a China patent on a crucial short interfering RNAs (siRNAs) patent, the Tuschl II series (see story). This patent includes 44 claims covering compositions, methods, uses, and systems for siRNAs, the molecules that mediate RNAi. Previously, Alnylam was awarded a patent for the Tuschl II claims in the US, Europe, Japan and Australia. Alnylam licensed the patents from Max Planck Innovation GmbH.

Sinovac Biotech (NYSE Amex: SVA) (北京科兴生物制品有限公司) received an order for 87 million RMB ($12.8 million) of its inactivated hepatitis A vaccine, Healive® from China's Ministry of Public Health (MOH) (see story). In 2008, Sinovac recorded revenues of $46.5 million, 88% of which came from Healive. To improve public health, the MOH is undertaking a hepatitis A vaccination campaign that will cover young children from 18 months to 12 years old in 32 cities or counties in nine provinces.

Sinovac has also taken action to apply its vaccine technology to the currently threatening strain of influenza, H1N1, commonly referred to as Swine flu (see story). The company expects to receive a sample of the flu soon, which will enable Sinovac to begin manufacturing vaccine.

Although Sinovac did not supply a time line for the process, a release quoted Weidong Yin, Sinovac’s Chairman, President and CEO, as saying, “Once this vaccine strain is available from the global health authorities, we will be ready to produce vaccine as needed."

Disclosure: none.

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