Last week, the news item that could have the most profound effect on the China biomedical world, did not – paradoxically – involve a China biomedical company. The third largest pharmaceutical company in Japan, Daiichi Sankyo (TSE: 4568.JP), announced its intention to buy a majority stake in Ranbaxy (NSE/BSE: Ranbaxy/500359), the generic drug maker that is the largest pharmaceutical company in India (see story). The purchase price could reach as much as $4.6 billion. 

A comparison between India and China drug markets turns up many differences – the Indian firms are more mature with larger retail presences outside their home market. Nevertheless, the ability to manufacture high quality drug products at a low price makes them both competitors and, in a way, very similar. Thus, an alliance between an established western-style pharma company and a major Asian generic company is a significant development for China biomedical enterprises.

The US, as ChinaBio® Today reported recently, sources approximately 75% of its drugs from China. Can further consolidation between China-India companies and western-style biopharmas be far away? China represents a special difficulty for acquisitions, because the government does not want to see profitable enterprises taken over by foreigners. But the financial impetus behind mergers remains strong. Ranbaxy is a case in point. It should also be pointed out that Ranbaxy already has a JV in China. Further, it has announced its intention of sourcing more of its API needs there.

For Japan-based Daiichi Sankyo, its consolidation with Ranbaxy will allow the company to reduce its manufacturing costs by moving production to India. Will some of its drug development also migrate there? The deal has one other interesting facet: so far only 5% of Japan’s drug spending is on generics. Daiichi Sankyo may very well seek to open up the Japanese market to generics.

Daiichi Sankyo is seeking to buy a majority of Ranbaxy by buying the 35% stake owned by the family of the founding Singh family and then offering to purchase up to 20% additional publicly held shares in a tender. Adding to the drama, at the end of the week, there were rumors that Pfizer (NYSE: PFE) might make a higher offer, even though both Daiichi Sankyo and Ranbaxy maintained the existing transaction was a done deal.

On a smaller scale, China Sky One Medical (AMEX: CSY) struck a deal to pay $7.1 million for Peng Lai Jin Chuang Company, a pharmaceutical enterprise with Good Manufacturing Practice certification and rights to a portfolio of 20 approved drugs (see story). However, Peng Lai Jin Chuang is a young company – its production and sales efforts have not yet begun. The sale, which will be paid in a combination of cash and stock, will add internally dosed drugs to China Sky One’s portfolio, which has focused to date on patch and ointment products. Also during the week, China Sky One’s stock price rallied when the company announced a small increase in its expected 2008 revenues (see story). The new target is $82 million, a $2 million increase from the earlier guidance. China Sky One ended the week at $15.36, an increase of $2.26 for the week. 

In a revenue-raising deal, WuXi PharmaTech (NYSE: WX) announced that AstraZeneca (NYSE: AZN) has elected to extend its collaboration with WuXi for an additional three years (see story). The initial collaboration, which was just completed, lasted two years and brought $14 million worth of business to WuXi. To complete the terms of the first assignment, WuXi delivered over 100,000 compounds to AstraZeneca. The new collaboration will continue along the same lines as the previous one. AstraZeneca was very complimentary to the quality of service provided by WuXi, saying that WuXi exceeded expectations in the first agreement, “delivering value … beyond the cost savings in labor and materials.”

Switching the focus to drug development, Hong Kong University researchers announced animal testing showed a new three-drug cocktail was effective in treating the H5N1 avian flu (see story). The regimen quadrupled the survival rate of mice. To get the results, the cocktail combines an antiviral drug, Relenza from GlaxoSmithKline (NYSE: GSK), with two inflammation suppression drugs. In fatal flu cases, the too-large immune response is the usual cause of death. The new regimen produced a survival rate of 53.3% and a survival time of 13.3 days, a four-fold improvement on using the antiviral by itself. Non-steroidal anti-inflammatories were added to the mix.

A large, western-style clinical trial showed that traditional Chinese medicine, red yeast rice, produced very positive results in patients who had recently suffered a heart attack (see story). The five-year study, which enrolled 5,000 patients in a randomized trial, showed that a purified form of the drug, taken orally, reduced the risk of repeat heart attacks by 45%, cardiovascular mortality by 33% and cancer mortality by 66%. Red yeast rice is fermented with a mold called Monascus purpureus. A report from the study appears in the June 15 issue of the peer-reviewed journal, The American Journal of Cardiology. Traditional Chinese medicine is often viewed skeptically in the West, a matter addressed by the western-style clinical trials. 

Moving on to products from individual China biopharmas, Mindray Medical International (NYSE: MR) received 510(k) clearance allowing the company to begin US marketing for two new medical products (see story). The AS3000, a next generation anesthesia delivery system, was developed by Datascope Patient Monitoring, a new acquisition for Mindray that closed last month. Mindray’s Ultrasound Imaging Division announced that a new lower priced color ultrasound product, the DC-3 which combines 2-D imaging and color Doppler, is also now approved for US use. 

Sinovac Biotech Ltd. (AMEX: SVA) received an 80,000 dose order for its combined hepatitis A and B vaccine, Bilive, from the Municipal Health Bureau and Municipal Center for Disease Control (see story). The order will meet the need caused by the May earthquake in China. The vaccine will be distributed cost-free to children in the Longnan, Gansu Province area, an area hard hit by the earthquake. The order was the second received by Sinovac for vaccines sent to treat earthquake victims. In addition, Sinovac donated 50,000 doses of its hepatitis A vaccine to the earthquake relief effort.

And finally, in individual company financial news, China Medical Technologies (NSDQ: CMED) reported a large 67% increase in its full-year 2007 financial results (ending March 31, 2008) (see story). Even though net income (non-GAAP) trailed the revenue increase with a slightly lower 39% jump ($61.6 million), the company’s profit margin was a remarkable 47%. China Medical modestly said that the results exceeded expectations. Approximately 60% of China Medical’s revenues derive from its in-vitro diagnostic products business, which comprises two systems, ECLIA and FISH, the latter inaugurated in 2007. The remainder of China Medical’s revenues are from sales of tumor-treating, high-intensity focused ultrasound systems.


Disclosure: none.