Last week in China, it was time for the National Day Holiday, and most of China took the week off, a celebration that put considerable constraint on news flow. Nevertheless, there were a few deals announced (and one that fell apart), and several companies released their financial results from the previous quarter as the current one came to a close. At ChinaBio® Today, we interviewed Dr. Sofie Qiao, who delineated for us the business plan of the US-China biopharma she formed, LEAD Therapeutics.
Among the deals that made news, China Biologic Products (OTCBB: CBPO) said it had agreed to terms that will give it control of a competitor in the plasma-based pharmaceutical sector (see story). China Biologic will pay $28.5 million for a 90% stake in Chongqing Dalin Biologic Technologies Co. Dalin owns a 54% equity interest in Qianfeng Biological Products Co., Ltd., which has a 9.5% market share of China’s highly fragmented plasma-based biopharma space. China Biologic is responsible for 6.1% of the country’s plasma-based products. A 15.6% share would make the combined company the largest non-state owned business in the sector. The plasma business remains very fragmented: the six largest China companies in the sector (including Qianfeng) have a total market share of only about 50%. China Biologic projects synergies between the two entities, though it did not estimate a dollar value for them.
Three Rivers Pharmaceuticals, a privately held firm based in Pennsylvania, obtained the right to sell Infergen in China, beginning March 31, 2009 (see story). Infergen, also known as consensus interferon, is a bio-optimized, selective and potent type 1 interferon alpha indicated for patients with chronic hepatitis C. Financial details of the deal were not disclosed. However, in December 2007, Three Rivers paid $91.3 million to buy the US and Canadian rights to Infergen from Valeant (NYSE: VRX). Infergen was developed by Amgen (NSDQ: AMGN) and approved by the FDA in 1997. Three Rivers bought the Infergen rights as part of a package that gives the company a worldwide license to sell the product, with the exception of Japan. Three Rivers said it would contract with other firms to market the products outside the US.
WuXi PharmaTech (NYSE: WX) and Covance (NYSE: CVD) said they will not go ahead with their previously announced joint ownership of a preclinical laboratory, currently under construction. WuXi will now own 100% of the 323,450 square feet Suzhou facility, which had been the company’s original intention (see story). After announcing its plans to build the Suzhou facility one year ago, WuXi announced in June of this year a 50-50 joint partnership with Covance to own and operate the facility. Emphasizing the positive side of the dissolution of the JV, WuXi says 100% ownership will give shareholders “the full benefit” of the facility. No explanation was given for why the deal with Covance fell apart. WuXi’s shares ended the week at new low, $10.81. A year ago, the price was $45.65.
In our Company Profiles section, we took a look at LEAD Therapeutics of California last week. The company wants “to make drug discovery fundable in this environment by taking advantage of the best parts of US and China life science,” according to Sofie Qiao, PhD, founding president of LEAD and head of operations (see story). In an exclusive interview with ChinaBio® Today, Dr. Qiao discussed the business plan of the company, which focuses on discovery and early development. LEAD expects to out-license its candidates at the pre-clinical stage. Chemistry and biology studies will be done in China. As part of its plan, the company has signed an unusual deal with ChemPartner, under which the CRO will provide a dedicated space with staff that will perform studies exclusively for LEAD. Venture capitalists were originally skeptical about the company’s model, but with reassurance from a management team comprised of industry veterans, they provided LEAD with $17 million in an A round.
Three China-based biopharmas reported earnings last week, each of them with a fiscal 2008 that ended on June 30. Genesis Pharmaceuticals Enterprises (OTCBB: GNPH) had a very positive year (see story). Revenues for the company climbed 31% to $99.5 million, though net income did not keep pace with that growth: profits were up a much smaller 2% at $22.5 million. The cause for the profit disappointment was an increase in Selling, General & Administrative costs, which rose 63% or $16 million in the year to $41.6 million. As part of its earnings announcement, Genesis issued positive guidance for 2009. The company expects revenues to move up to somewhere between $122 and $130 million, while operating income will be in a range between $40 and $43 million. The company’s 2008 operating income was $32.2 million.
Shengtai Pharmaceutical (OTCBB: SGTI) reported that its revenues climbed 76% for the year to $91 million (see story). Net Income was up 46% to $10.4 million. Shengtai makes and distributes pharmaceutical grade glucose products in China, as well as glucose and other products for the food and beverage industry. Pharmaceutical glucose products are the company’s high margin offerings, but Shengtai’s glucose revenues were flat year-over-year. Production capacity limits of 60,000 to 90,000 tons per year kept a lid on sales. In 2008, glucose contributed 38% of the company’s revenues in 2008, down from 62% in 2007. A new glucose production plant, completed in July 2008, will add 120,000 tons of new glucose production capacity, allowing the company to increase its glucose-related revenues.
The third company to report revenues, Tianyin Pharmaceutical Co. (AMEX:TPI), also released very positive results (see story). A few weeks ago, Tianyin announced unaudited figures, and the official numbers were in line with the earlier report. The company’s revenues grew 64% to $33.5 million while net income rose 51% to $6 million. The company reiterated that it expects a further increase in 2009 to at least $46 million in revenue and profit of $7.5 million. During the week, Tianyin’s listing moved from the Bulletin Board to the American Exchange and began trading under the symbol TPI.