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The Week in Review: Consolidation in China Life Science Companies

publication date: Apr 19, 2008
 | 
author/source: Richard Daverman, PhD

When speaking of stock prices, “consolidation” is a euphemism for losing money. In the case of China biomedical companies, consolidation connotes something quite different. There, consolidation indicates a vibrant industry, currently in a state renown for its fragmentation, making deals to gain efficiencies of scale and gain market share. The goal is to formulate a deal where two plus two equals five. Every week we see some consolidation in the life sciences companies of China, and this week provided an additional four examples.

Leading this list of companies making alliances were two US-listed companies. American Oriental Bioengineering (NYSE: AOB), a large company with $160 million in annual revenues, took a 38% position in much smaller China Aoxing Pharmaceutical (OTCBB: CAXG), whose 2007 revenues did not quite total $4 million (see story). Besides getting very advantageous terms, American Oriental will be able to develop and market narcotic pain relievers in China, a highly regulated market that is difficult to enter. China Aoxing is one of only a few companies that have a license to develop narcotics. American Oriental paid $18 million for 30 million shares of China Aoxing, which works out to 60 cents per share. At the time of the transaction, China Aoxing was trading at $1.20, already a good deal, but the news sent the stock up to a Friday closing price of $1.85. The deal confers legitimacy on China Aoxing, but the newfound equity was also highly significant. China Aoxing was starving for cash: it reported reserves of less than $1 million in the bank at the end of the last quarter.

Two Taiwanese companies announced a China-based alliance. Bionet Corp, which derives revenues from cord blood storage and pre-natal genetic analysis, will invest in Shanghai Genecore Biotechnologies Co., the China subsidiary of Taiwan-based Vita Genomics (see story). Genecore provides genomic and proteomic services to other biomedical researchers. The two companies will list their JV on the planned NASDAQ-like board that Shenzhen expects to get off the ground later in 2008.

Bio-Bridge Science, Inc., an Illinois vaccine company with operations in Beijing, expects to start a joint venture with JR Scientific (see story). The JV is being funded by several China investors. JR Scientific, based in California, produces cell culture medium and sera products for making and developing vaccines. Bio-Bridge bought the worldwide rights to an HIV vaccine technology from Loyola University in Chicago. The company has completed animal testing on the vaccine, and is currently building a manufacturing facility to produce test samples. Once the facility is completed, Bio-Bridge will apply to the SFDA to begin human clinical tests.

Asian Clinical Trials, the CRO subsidiary of Indian biomedical company, Suven Life Sciences Ltd. (IN: SVLS), located in Hyderabad, will enter an alliance with VPSCRO, a CRO based in Beijing (see story). The alliance will be able to provide CRO services in both China and India, which together contain 50% of the world’s population. VPSCRO claims to have more clinical trials under management than any other China CRO.

Moving on to news about individual drug deals, AsiaPharm (SI: ASPH) in-licensed development-stage drugs from two Scottish biomedical companies (see story). AsiaPharma will seek SFDA approval for the cardiovascular disease drug candidates from GlycoMar of Oban, and the compounds for psychotic disorders from Scottish Biomedical of Glasgow. AsiaPharm, listed on the Singapore exchange, specializes in the development, production and sale of both natural and pharmaceutical drugs, with eight prescription and two OTC drugs currently on the market.

SciGen, Ltd. (ASX: SIE), a Singapore company that specializes in biosimilars, bought the China rights to an oral insulin spray product, under development by Generex (NSDQ: GNBT) (see story). The new product will use SciGen’s recombinant human insulin, which Generex will formulate and fill together with its spray delivery. SciGen will distribute the product in China and be responsible for gaining approval of the product. Oral-lyn™ is in Phase III trials in the US and elsewhere. Although SciGen does not currently market products in China, SciGen and Hefei Life Science & Technology Investments established a China joint venture in December 2005. The JV is building a $30 million manufacturing facility for Sci-B-Vac, SciGen’s hepatitis B vaccine.

Calypte Biomedical Corporation (OTCBB: CBMC) was granted SFDA approval for Aware™ HIV-1/2 OMT (oral fluid), the Portland, OR company’s oral HIV diagnostic test (see story). Using oral fluids, the test delivers results in 20 minutes with an accuracy comparable to lab tests. Aware is the only rapid oral fluid test approved for use in China. Calypte said that the China approval will allow Calypte to register and sell the product in many other countries around the world. The test allows diagnosis of HIV-1 and HIV-2 in places where labs are not readily available.

And as a final note, WuXi PharmaTech (NYSE: WX) endowed a professorship at Shanghai’s Tongji University in the Medical and Life Science School (see story). The goal of the position, according to the press release, is to bring “accomplished scholars and professors in medical, pharmaceutical and biological fields around the world” to Tongji.
Disclosure: none. 


 

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