October 2007

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TCM Hammered on Earnings, Downgrade	11/7/2007
by Life Science: China
Tongjitang Chinese Medicines Company (NYSE: TCM), a vertically integrated pharmaceutical company focusing on the development, manufacturing, marketing and selling of modernized traditional Chinese medicine in China, reported its unaudited financial results for the third quarter of 2007 today. Net revenues for the quarter were US$16.9 million, up 28.6% from the same quarter last year. Net income rose to US$6.7 million for net margins of 39.6%; the company reported earnings per American Depository share of US$0.20. Gross profits rose 34% to US$10.8 million, with gross margins of 64%. For the quarter the company spent US$548 thousand on R&D or 3.2% of revenues, a 151% increase from the 2006 quarter. Operating margins were 23% with operating income of US$3.9 million. The bulk of the the company’s revenues were derived from sales of its top osteoporosis product Xianling Gubao. Sales of Xianling Gubao rose 2% to US$10.9 million, with 60% of sales from hospitals. Sales of other products including the company’s Moisturizing and Anti-itching Capsules rose 723% to US$3.4 million. Accounts receivable as of Sept. 30 were US$31 million, an increase of over 37% from year end 2006. Inventories rose 87% in that period to US$10.3 million. Tongjitang confirmed its plan to acquire Guizhou Long-Life Pharmaceutical Co. Ltd. for US$5.63 million. Guizhou Long-Life produces and markets more than 10 over-the-counter and prescription traditional Chinese medicines as well as nutritional products in China. The company also made positive remarks regarding the progress of its Xianling Gubao Phase IV clinical trials, the results of which are expected by first quarter 2008. Looking forward the company reiterated revenue guidance for the full year in a range from RMB590 million to RMB620 million (US$78.7 to $82.7 million). Gross margins were forecast to remain in the mid 60% range. The company also reported a potential one time tax refund upcoming of up to RMB16.6 million (US$2.2 million). The company plans to pursue revenue growth through product line expansion, with a potential for 11 new products in the pipeline. The company also plans to expand its sales and marketing network, and to continue to pursue acquisition candidates. Analysts and investors were underwhelmed A particular concern was the anemic 2% YOY growth in Xianling Gubao. Management attributed this in part to late summer flooding and hot weather reducing patient visits to physicians in some regions. Concerns were also raised regarding the recurring nature of US$1.4 million in income reported from government grants and disposal gain on listed shares. This income accounted for 21.2% of reported net income or US$0.04 per ADS. Before the market open, Tongjitang was downgraded by CIBC World Markets from Sector Outperform to Sector Perform. Shares were hammered on the report and downgrade, falling over 18% to US$9.41 as of this report.
Position: None

Pfizer Wins China Viagra Patent Battle	11/3/2007
by Life Science: China
After a six year legal battle, pharma giant Pfizer Inc. (NYSE: PFE) has successfully defended its Chinese patent on the erectile dysfunction drug Viagra. As reported in Chinese in the 21^st Century Economic Report (21世纪经济报道) on Nov. 1, the Beijing High People’s Court has reached a final judgement on the patent challenge. Rejecting a patent challenge from 12 domestic drug manufacturers, the high court’s final judgement grants Pfizer patent protection on Viagra until 2014. Pfizer initially filed a patent application in May 1994 for the use of Sildenafil (Viagra) in erectile dysfunction treatment in China. After seven years of investigation, the China State Intellectual Property Office (SIPO) granted the patent in 2001. The patent was challenged by 12 domestic Chinese drug companies that claimed to have invested over US$12 million to produce generic versions of the drug. In July of 2004, the Patent Review Bureau of SIPO invalidated Pfizer’s patent. The basis for the rejection was a claimed lack of data in the application to support the specific therapeutic effect of Viagra. The ruling sparked international attention and became a high profile test case for China’s commitment to the protection of intellectual property rights. Pfizer immediately challenged the decision, and in June 2006 the Beijing Intermediate People's Court ruled in favor of Pfizer after one and half years of review. This ruling was appealed by the domestic drug manufacturers to the Beijing High People’s Court. The High Court on Thursday rejected the appeal and instructed SIPO to withdraw its opposition to the drug. The decision should reaffirm the strong position of Viagra in the Chinese market for erectile dysfunction drugs. It is estimated that the legitimate and underground market for ED drugs in China is a combined CNY 20 billion (US$2.7 billion). In 2005, Viagra accounted for approximately 30% of the ED market. With sufficient patent enforcement this market share is likely to improve. Pfizer still faces some challenges however. Earlier this year the company lost a trademark infringement case with a domestic maker of sildenafil over the usage of the brand "Wei Ge" (伟哥) or "Mighty Brother". “Wei Ge” is the trade name used by Pfizer to market the drug in China. Pfizer has filed an appeal.
Position: long PPH

Regenerx Biopharmaceuticals Granted Chinese Patent	11/2/2007
by Life Science: China
Regenerx Biopharmaceuticals (AMEX: RGN) announced today that the China State Intellectual Property Office (CSIPO) will be awarding the company a patent on its Tß4 wound healing compound. The patent is said to cover the use of Tß4, its analogues and derivatives, in the inhibition or reversal of eye degeneration associated with xeropthalmia (dry eye syndrome) certain surgical eye procedures, including LASIK and photorefractive keratectomy (PRK). Regenerx, based in Bethesda, Maryland, is a biopharmaceutical company focused on the discovery and development of novel molecules to accelerate tissue and organ repair. The company holds nearly sixty world-wide patents and patent applications related to dermal, ophthalmic, and internal wounds and tissue repair, cardiac and neurological injuries, and septic shock. The company is currently developing Thymosin beta 4 (“Tß4 ” ), a 43 amino acid peptide derived from the thymus gland, as the basis for their technology platform. Regenerx originally licensed Tß4 from the US National Institutes of Health (NIH) in 1997, and holds exclusive worldwide license to all claims to Tß4 within NIH’s original patent application. The company has received patents in Europe, Australia, Singapore, Hong Kong and China. The patents cover various indications including the treatment of alopecia (autoimmune hair loss), the genetic skin disorder epidermolysis bulla, septic shock, and wound treatment. With the exception of a US government grant of US$270 thousand in 2006, Regenerx has never reported revenues. Losses from operations in 2006, primarily research and development expenses, were nearly US$8.3 million. As of June 2007 the company reported operating expenses of US$5.9 million for a burn rate of approximately US$1 million per month. Current assets are US$12.2 million, sufficient for roughly 12 months if no additional funding is obtained. Regenerx is a classic development stage biotechnology company. Currently the company has 2 phase II dermal wound healing trials ongoing in the US, with an additional trial in Europe. The company plans additional phase IA and II trials for ophthalmic and cardiovascular indications. As the company is dependent on its Tß4 compound, it will stand or fall based on the success of its clinical trials. Its shares, currently trading at US$1.25, represent a call option on the success of its technology.
Position: None

Wyeth to Expand Presence in China	11/2/2007
by Life Science: China
Wyeth Pharmaceutical Co. (NYSE: WYE) announced this week that it will invest US$58.5 million in its Chinese subsidiary Wyeth Pharmaceutical Co.Ltd. As reported by Interfax, the investment will the largest made to date in the subsidiary. The purpose of the investment is to expand production at the subsidiary’s plant located in Suzhou, Jiangsu Province. The expansion is reported to include a new factory, improvements to existing facilities and new equipment. Scheduled for completion in 2009, the expansion is intended to double production capacity to 3.2 billion pills per year. This will reportedly make Suzhou Wyeth the largest drug manufacturer in China. Opened in 1994 in the Wu County Economic Development Zone, the Suzhou facility is GMP and ISO9002 certified. The plant produces 10 OTC and ethical compounds including antibiotics, women’s health products and nutritional supplements. The purpose of Wyeth’s investment is reportedly to expand production of its Centrum and Caltrate nutritional supplements. Wyeth is one of the world’s largest pharmaceutical companies, with revenues of over US$20 billion in 2006. It’s consumer healthcare division, which produces Centrum and Caltrate, had revenues of over US$2.5 billion with pre-tax margins in excess of 20%. A global company, Wyeth has US$6.7 billion in assets outside the US, and derived approximately 46% of revenues internationally.
Position: None

Mindray Medical Announces Strong Q3 2007 Results	11/1/2007
by Life Science: China
Mindray Medical International Limited (NYSE: MR), a developer, manufacturer and marketer of medical devices in China announced after the close today its selected unaudited financial results for the third quarter ended September 30, 2007. The company’s results were solid. Third quarter 2007 net revenues were US$76.5 million, up 58.9% over the same quarter last year. Net income (GAAP) rose 70% to US$20.7 million for a net margin of over 27%. International markets accounted for US$38.2 million or half of all revenues, with revenues up 52% over last year. China growth remained strong, with revenues increasing 66.3% to US$38.3 million. Management reported solid sales growth across all three product divisions: Patient Monitoring Devices revenues increased 48.5% to (US$27.6 million). Notable strength was seen in the company’s higher margin Beneview product line. Patient Monitoring Devices contributed 36.6% of total net revenues. Diagnostic Laboratory Instruments sales rose 64.5% to US$24.9 million. China growth was boosted by increase spending on rural health facilities by the Chinese government. Increased market penetration for the company’s BS-400 and BC-5500 product lines was seen internationally. Diagnostic Laboratory Instruments contributed 33.0% of total net revenues. Ultrasound Imaging Systems increased revenues to US$21.7 million, up 66.2%. Sales rose on strong demand for color ultrasound and strong government buying. contributed 28.7% as a percentage of total net revenues Li Xitang, Mindray’s President and Co-CEO said, “In our domestic market, we continue to benefit from rising private healthcare spending, as well as a steady increase in government tenders. These trends reflect the strong growth of China's economy and the government's commitment to investing in rural healthcare infrastructure. Internationally, product sales saw healthy growth across all of our geographies, most notably in our European and South American markets. During the quarter we remained focused on building out an extensive international distribution network and further expanded our presence abroad, opening offices in Canada, Brazil, Mexico and the Netherlands." Third quarter 2007 gross profit was US$42.2 million, a 57.1% increase from the third quarter 2006. The consolidated gross margin for the third quarter 2007 was 55.1% compared to 56.0% in the second quarter 2007. Non-GAAP gross margin was 56.0% in the third quarter 2007 compared to 57.0% in the second quarter 2007, and 56.7% in the first nine months of 2007. Non-GAAP operating profit in the third quarter 2007 was US$23.0 million, representing a 62.4% increase from the third quarter 2006. GAAP operating profit in the third quarter 2007 was US$20.6 million, representing a 59.5% increase. Non-GAAP operating margins were 30.1% in the third quarter 2007, compared to 29.4% in the third quarter 2006 and 32.5% in the second quarter 2007. GAAP operating margins were 27.0% in the third quarter 2007 compared to 26.9% in the third quarter 2006 and 29.1% in the second quarter 2007. Research and development expenses for the third quarter 2007 were US$7.6 million, compared to US$4.8 million in the third quarter 2006. Research and development expenses were 9.9% of total net revenues, compared to 10.1% in the third quarter 2006 and 8.8% in the second quarter 2007. The company maintained 2007 full year revenue guidance to be US$289 million to $293 million, with non-GAAP net income of US$80.4 million to $84.5 million. Non-GAAP net income per share is expected to be in the range of US$0.71 to $0.75 on a fully diluted basis, assuming an estimated diluted share count of 113 million. Management did not adjust guidance following the quarter, but on the conference call stated it was "very confident" in the estimate. Analyst consensus net earnings per share estimates for full year 2007 were US$0.68 prior to the report, indicating that Mindray Medical is on track to beat consensus estimates. This earnings report, another in a line of strong reports, is likely to lead to further upward revisions in earnings estimates. Investors like what Mindray has to say. After falling US$1.19 or 3% on the regular session, shares rose US$1.15 to US$39.72 in the after hours.
Position: None

Alpharma Turns to China for Margin Help

10/31/2007

by Life Science: China

Alpharma (NYSE: ALO) announced its Q3 2007 earnings after the close on Oct. 29, and investors were underwhelmed. The company announced earnings of US$0.34 per share, up over 9% from the same period last year and US$0.09 over analysts expectations. The initial response was positive, with shares jumping over 7% on Oct. 30^th. However, those gains have disappeared as shares fell 2.2% on Oct. 31, returning to their pre-release level below US$21.00. The reason? Falling margins.

Top line numbers for the company look good. For the nine months ending Sep. 30, revenues were US$523 million, up from US$484 million last year. Alpharma has three major divisions – Pharmaceuticals, Active Pharmaceutical Ingredients (API), and Animal Health. All three divisions showed revenue growth, but not all of that flowed to the bottom line:

	Nine Months Ended September 30,
	Revenues			Operating Income
	2007	2006	Change	2007	2006	Change
Pharmaceuticals	$119,499	$103,644	15.3%	$5,496	$27,339	-79.9%
API	138,702	127,660	8.6%	30,664	37,991	-19.3%
AH	265,098	252,201	5.1%	52,680	51,268	2.8%
Unallocated and eliminations		16		-35,132	-44,090
Totals	$523,299	$483,521	8.2%	$53,708	$72,508	-25.9%

There were 2 main causes for the margin erosion: increased R&D expenses and increased production costs. R&D spending more than doubled to US$ 56 million or roughly 10% of revenues. This reflected spending on clinical trials related to abuse-deterrent opioid product development. This includes phase 3 trials of its analgesic compound ALO-01, for which an application for FDA marketing approval is expected by mid 2008. This also includes a US$2 million licensing payment to Tris Pharma related to the development of a sustained release liquid drug delivery platform. The company’s Kadian (sustained release morphine sulfate) appears to be gaining acceptance in the chronic pain treatment arena, and these R&D investments have the potential to build on that success.

The problem area is production costs. With cost of goods rising faster than revenues, the company needs to bring costs under control if it hopes to boost margins. One key approach being taken by Alpharma is to increase its production capacity in China. In April the company acquired Shenzhou Tongde Pharmaceutical Co. Ltd, a primary supplier to Alpharma’s animal health division. This was followed by the June acquisition of Yantai JinHai Pharmaceutical Co. Ltd. The acquisitions totaled US$6.9 million.

In July the company inked an alliance with Zhejiang Hisun Pharmaceutical Co. (SHA: 600267), a primary supplier of the antibiotic Vancomycin to Alpharma’s API division. Under the agreement the company reports it has invested nearly US$7 million in expanding manufacturing capacity at Hisun’s plant in Taizhou, Zhejiang Province. With the cost of API production in China estimated at 1/3 that of Western plants, these China moves should help to control costs over time. However, margin pressures on API producers are likely to persist.

“In our Animal Health and API businesses, we are targeting strategic investments in China that we believe over time will improve our supply chain and establish a presence in this important global market,” said Alpharma President and Chief Executive Officer Dean Mitchell. “We are also building the core competencies in our organization that will enable us to be an active future participant in the growing Asian region.”

While Alpharma’s latest earnings release was clearly a mixed bag, the company is making some moves to try to set things right. In addition to its R&D and China investments, the company recently licensed the Flector analgesic patch from Swiss drug maker IBSA. The company has also licensed topical ketoprofen from IDEA AG. Flector and topical ketoprofen should augment the company’s pain management portfolio, but the company will need to control costs as it ramps up its sales effort for the new product.

Management currently estimates 2007 earnings at US$0.90 to $1.00. Analyst consensus is currently US$0.95. With current earnings at US$0.92 there remains the possibility of Q4 ending at breakeven or even with a loss. Investors will be watching closely over the next few months to see continued growth in its current product lines, revenue enhancement from Flector, and continued progress on cost reduction. Should margins remain under pressure, however, the share price is unlikely to see a lift.

Position: None

Investment in Chinese Hospitals to Reach US$60 Billion	10/30/2007
by Life Science: China
Speaking recently at a healthcare industry conference, Jiang Tao, Executive VP of Hua Xia Healthcare Holdings, Ltd. (HKG: 8143) stated that, based on a series of surveys and interviews performed byt the company, he anticipates a surge of investment in Chinese hospitals and hospital management companies. He stated that recent healthcare reform discussions underway in China’s central government will open the door to public and private investment from both foreign and domestic investors. He forecast that the total amount of investment could reach US$60 billion. Potential sources of this funding include the World Bank International Finance Corporation, which is said to have pledged US$700 million in financing forr China hospital development projects. Mr. Jiang also cited venture capital firm ePlanet Ventures. ePlanet, which backed firms such as Baidu.com, Skype, and Focus Media, is said to be forming a US$500 million fund to invest in medical ventures in China and India. Domestically, Shanghai Fosun Pharmaceutical Group (SHA: 600196), the US$ 410 million (revenues) healthcare conglomerate, is reported to be planning over US$110 million in healthcare investments. Founded in 2002 as Grandy Corp., Hua Xia was reorganized in July 2006 to focus on hospital acquisitions and healthcare services management. The company reported HK$77.4 million in revenues for 2007, an 89% increase over 2006. In May 2007 the company acquired a 55% interest in ChongqingEdwardHospital, a 150 bed facility that is reportedly the only private general hospital in the municipality of Chongqing. Hua Xia is also in the process of acquiring a stake in ZhejiangShughuangHospital near Hangzhou. The company has also acquired a 76% interest in Day View Group Ltd., a hospital management, training and consulting firm that provides services in the PRC. Mr. Jiang indicated that Hua Xia was evaluating an additional 10 hospitals in the PRC for possible acquisition. Difficulties encountered included obtaining financing on facilities that were publicly owned and thus not capable of used as security for financing, and of obtaining a sufficient ownership position to allow for an adequate return to the company. Despite this he finds opportunity. In China, said Mr. Jiang, “International and domestic capital will become the driving force of the next round of healthcare reform.”
Position: None

Benda Pharma to Develop Potential AIDS Vaccine	10/30/2007
by Life Science: China
Benda Pharmacecutical (OTC: BPMA) announced yesterday that its SiBiono subsidiary has made major progress in developing a gene therapy based treatment for HIV and AIDS. In May, SiBiono formed a joint venture with Japanese gene therapy research institute DNAVEC to develop DNAVEC’s SeV-Gag vaccine, an anti-AIDS gene therapy treatment patented iin both the United States and China. The joint venture agreement, signed in May 2007, calls for SiBiono to complete preclinical testing, clinical trials and manufacturing tests of the vaccine in China. SiBiono also assumed responsible for obtaining approvals from the Chinese State Food and Drug Administration (SFDA). In return, all findings will be copatented by SiBiono and DNAVEC. SiBiono expects the new drug approval process will be completed sometime between 2012 and 2018. SeV-Gag is based on the Sendai virus (SeV), a respiratory virus which causes pneumonia in mice but is not harmful to primates, including monkeys and humans. Gag is a gene responsible for producing a structural protein that is required by the HIV virus for making new virus particles. It is hoped that injection of the SeV-Gag virus into a person infected with HIV will enhance the immune response, leading to a reduction in the virus and preventing HIV infection from progressing to AIDs. SiBiono is the producer of the world's first commercialized gene therapy drug, Gendicine, which is approved in China for treatment squamous cell cancers of the head and neck. SiBiono’s success in developing Gendicine led to its partnership with DNAVEC. "We deliberately selected SiBiono as our partner from hundreds of other leading biopharmaceutical firms because of its unparalleled expertise and technological superiority in developing, manufacturing and commercializing gene therapy treatments," said Dr. Mamoru Hasegawa, DNAVEC CEO. "SiBiono's demonstrated clinical success with Gendicine(R) is a feat no one else in the world has yet matched, and we firmly believe that the joint venture with SiBiono provides us the best opportunity to realize our dream and bring the SeV-Gag vaccine to market." Based in Wuhan, China, Benda Pharmaceutical is a producer of traditional Chinese medicine, pharmaceuticals and gene therapy based agents. For fiscal year 2006 the company reported US$15.9 revenues, with net income of US$2.3 million. Year over year sales grew only 3% and net income declined by 33%. SiBiono had revenues of US$1.56 million and showed a loss of US$798 thousand, with R&D expenses at 44% of revenues. For the first six months of 2007 sales of Gendicine were US$1.48 million, on track to double over the previous year. According to 2006 study by TsinghuaUniversity, there will likely to be 10 million persons infected with HIV in China by 2010. At a current treatment cost of US$1400, this indicates the market for HIV treatments will exceed US$14 billion. The US National Institutes of Health (NIH) reports that to date there have been 47 clinical trials of HIV vaccines for treating HIV infection, with another 111 for prevention of HIV transmission. As of yet no vaccine for HIV has been approved in the US or China.
Position: None

Roche Opens Shanghai Drug Development Center	10/29/2007
by Life Science: China
Roche Pharmaceuticals (ADS OTC: RHHBY), the Swiss multinational drug company, opened its new pharmaceutical development center in Shanghai today. As reported in Shanghai Daily, the center is designed to carry out all the stages of drug development from discovery to clinical development, trials and approvals. The budget for the center is US$100 million and it will target cancer and metabolic diseases. Jean-Jacques Garaud, Global Head of Roche Pharmaceutical Development, said "Chinese patients have had to wait four to five years for medicines which had already been approved in the United States or Europe for the clinical tests needed in China. The center will reduce the waiting time and make the new medicines available for Chinese patients as soon as possible." Roche has been in China for decades, having established its first China office in Shanghai in 1926. The company operates 2 manufacturing facilities in near Shanghai. In addition, Roche has established a regional R&D center in Shanghai’s Zhangjiang Hi-Tech Park. With research efforts in genetics and medicinal chemistry, the center has collaborated with Chinese institutes including the China Human Genome Center and the Shanghai Institute of Organic Chemistry. The Chinese market is an increasingly important market for Roche. In July of 2006 the company reported that it expects China sales to grow 15-16% through 2010, led by sales of its cancer drugs.
Position: None

China Nepstar Files IPO Terms	10/28/2007
by Life Science: China
Late Friday, China Nepstar Chain Drugstore Ltd. (NYSE: NPD) filed the terms of its upcoming IPO with the Securities and Exchange Commission (SEC). According to the F-1A, Nepstar will be offering 20,625,000 American Depositary Shares (ADS) with an initial public offering price per ADS between US$11.50 and US$13.50. Each ADS will represent 2 ordinary shares of Nepstar. The offering is expected to bring as much as US$278 million. Goldman Sachs (Asia) LLC is lead underwriter on the offering. Nepstar has 1,791 directly operated drugstores located in 62 cities in China. The company reports that it is the largest retail drugstore chain in China based on the number of directly operated stores, and that it had the highest revenue among all directly operated retail drugstore chains in China in 2004, 2005 and 2006. With FY 2006 revenues of US$227.6 million, the company states its revenue CAGR from 2004 to 2006 was 43.4%. For the six months ending June 30, 2007 the company had revenues of US$124.3 million, an 18.4% increase over the same period last year. The company plans to use proceeds from the IPO to fuel its continuing growth and will spend: approximately US$52.0 million to open new stores; approximately US$11.0 million to upgrade our information management and inventory control system; approximately US$27.0 million to set up two new distribution centers; the remaining portion for other general corporate purposes and for potential acquisitions of retail drugstore chains or independently operated drugstores. Nepstar specifically plans to grow in cities such as Beijing and Shanghai through acquisitions. Goldman Sachs (NYSE: GS) has reportedly invested as much as US$40 million in Nepstar, and holds 50 million ordinary shares. The IPO offering range indicates that this position may be worth as much as US$338 million. The date of the offering has not been publically released. This IPO has the potential to be one of the most attractive offerings of 2007.
Position: long GS

Tongjitang Seeks FDA Approval for Osteoporosis Treatment	10/26/2007
by Life Science: China
Tongjitang Chinese Medicines Co. (NYSE: TCM) Chairman and CEO Wang Xiaochun announced Oct. 24^th that the company will seek FDA approval for its osteoporosis treatment Xianling Gubao. As reported in the Shanghai First Finance and Economics Daily, he stated that the company plans to invest over US$10 million in the effort, which is expected to take three to five years. Tongjitang has engaged Synarc, a US based clinical testing provider, to test the clinical effectiveness Xianling Gubao. The clinical studies, announced Oct. 2005 in Beijing, were reportedly designed to meet FDA requirements for clinical trials. The trials are being performed in Synarc’s clinical research center in Beijing. Obtaining FDA approval is part of a long term strategy for the company. Such approval is expected to increase acceptance of the company’s products by Western consumers. A traditional Chinese medicine, Xianling Gubao has been approved by China’s SFDA as treatment for osteoporosis, osteoarthritis, ischemic necrosis and bone fracture. Sales of Xianling Gubao were CNY374.6 (US$48 million) in 2006.
Position: None

Yanhuang Health Media – The Next Focus Media?	10/25/2007
by Life Science: China
Yanhuang Health Media reported yesterday receiving US$35 million in venture capital investments from four firms, including Orchid Asia, China Renaissance Capital Investment, investor AB, and HSBC. Yanhuang, a Beijing based operator of an in-hospital advertising network, reported that the investment would be used to expand its its nationwide in-hospital liquid crystal display (LCD) network. The company also announced plans for an overseas IPO in 2008. Founded by Beijing Yanhuang Times Advertising Corp. in 2005, Yanhuang Health Media is reported to own the largest in-hospital television network in China. With displays located in waiting areas and other public spaces within hospitals, the company generates its revenue from selling advertising air-time on its network. Yanhuang reports its present network coverage includes exclusive agreements with more than 2500 hospitals, with over 10,000 LCD screens throughout 35 provinces in China. With Chinese patients visiting the hospital approximately 10 times per year and hospital waiting times estimated at 1.5 hours, the company estimates an audience of 4.4 million people per day. The company’s earlier growth has been backed by an investment of US$5 million from Softbank’s SAIF in 2006. Although Yanhuang does not release financial reports publicly, CEO Zhao Songqing has estimated that the company has the potential to hit revenues of CNY2 billion (US$265 million). With the latest investment the company is planning to expand its network to 80,000 displays in 6,000 hospitals throughout 60 cities in China by 2008. Yanhuang has clearly taken a page from the Focus Media (Nasdaq: FMCN) playbook. Founded in 2003, Focus Media rose to prominence by building an extensive network of LCD displays placed in high traffic areas of commercial and public buildings. The company has branched out into other forms of outdoor and internet advertising, and its network now boasts nearly 90,000 displays in commercial locations and over 41,000 displays in retail stores. Revenues for 2006 were US$211.9 million, tripling from 2005 levels, with net margins of 39%. Focus Media’s shares have risen from a split-adjusted low of US$4.45 in July 2005 to a recent US$56. The rapid growth of Focus Media indicates that there is likely room for more competitors in this advertising space. Yanhuang’s initial emphasis on healthcare should provide it additional room to grow. China’s hospitals and pharmaceutical companies are under pressure from government efforts to cap drug prices and reduce hospital income from prescriptions. This should provide Yanhuang with a steady supply of hospitals eager to supplement their income, and healthcare suppliers looking to make a favorable impression on Chinese consumers. Yanhuang’s heritage is also a plus. Its parent, Beijing Yanhuang Times Advertising, is not only one of China’s largest outdoor advertising firms, it is also 50% owned by Tom Group (HK: 2383), a subsidiary of Li Ka Shing’s Hutchison Whampoa (HK: 0013). Yanhuang Health Media will be one IPO to watch for in 2008.
Position: None

Genzyme Partners with Sunway on Gene Therapy Program	10/25/2007
by Life Science: China
Genzyme Corp. (Nasdaq: GENZ) will partner with Sunway Biotech Co. Ltd. to manufacture, develop, and commercialize the experimental gene therapy Ad2/HIF-1a in China. The collaboration, announced today in Massachusetts and Shanghai, involves the transfer from Genzyme to Sunway of process for manufacturing Ad2/HIF-1a. Sunway will produce the product at its Shanghai facility for clinical trials and will design, fund and conduct Phase 1 and Phase 2 studies in China. The studies will focus on the use of Ad2/HIF in treatment of critical limb ischemia in severe peripheral arterial disease. "We are eager to begin working with Genzyme, one of the established leaders in the field of gene therapy,” said Hu Fang, M.D., Sunway's CEO. “This collaboration allows us to expand our focus beyond oncology to include cardiovascular disease, another area of serious unmet medical need where innovative therapies are urgently needed." Duke Collier, Genzyme Executive Vice President added, "We are pleased to establish this relationship with Sunway, one of the most innovative young biotechnology companies in China. Our work with Sunway represents one of many ways that we hope to participate in the dynamic Chinese biotechnology industry and to contribute to its growth." Genzyme has been a gene therapy pioneer, and the company's commitment to the field remains strong, with a broad clinical and pre-clinical research program in the areas of cardiovascular disease, Parkinson's disease and other neurodegenerative diseases, ocular disease, and lysosomal storage disorders. Additionally, Genzyme has a gene therapy manufacturing facility in San Diego, California. Sunway is a privately-held, Shanghai-based biotechnology company founded in 1995. It is one of only two companies in the world to have successfully developed and commercialized a gene therapy product. Sunway's H101, an adenovirus agent for the treatment of head and neck cancer, was approved in China in 2005. Sunway develops, manufactures and commercializes biotherapeutics primarily for the Chinese market.
Position: None

TCM to Benefit from China’s Osteoporosis Trend	10/24/2007
by Life Science: China
Osteoporosis is becoming a significant problem in China, according to a recent survey performed by Shanghai HuadongUniversity. The survey, the largest ever done in Asia on osteoporosis, found that over 11% of Chinese above the age of 20 have evidence of the bone disorder. The rate of incidence among females is 18.7%, among males it is 4.3%. The survey evaluated 7,000 ethnic Han Chinese in nine provinces. Zhu Hanmin, lead researcher on the project, stated that based on the survey, “ There are about 35 million to 40 million osteoporotic patients nationwide…Among the urban residents surveyed, only 60 percent are aware that they suffer from osteoporosis, and among those who know they have the disease, only 18 percent consult doctors." Osteoporosis is a disorder of bone mineralization that results in reduced bone density. It is most common in women after menopause, but may also occur in premenopausal women and men due to hormonal disorders, chronic diseases, and medications including corticosteroids. The major consequence of osteoporosis is an increased risk for fractures, particularly of the spine, hip and wrist. While prevention efforts including exercise and increased Vitamin D and calcium intake are important, medications play an important role in treating the disorder. Tongjitang Chinese Medicine Company (NYSE: TCM) is benefiting from the increased awareness of osteoporosis in China. The company’s main product, Xianling Gubao, has been approved by China’s State Food and Drug Agency (SFDA), in both prescription and over the counter versions for the treatment of osteoporosis. The company reports that a May 2006 market survey showed Xianling Gubao to be the leading traditional Chinese medicine treatment for osteoporosis in China by sales. TCM has shown rapid sales growth. The company reports sales from 2004 to 2006 grew at a CAGR of 43.8% to US$62.1 million with net margins of nearly 28%. For the quarter ending June 30, 2007 revenues were US$18.5 million, up 12% year over year. Xianling Gubao accounted for over 78% of sales. Margins remained high, with gross margins of 65.9%. Despite concerns over rising raw material costs for its products, in August the company reported continued stabilization in raw materials costs for Xianling Gubao. Company management plans for continued growth. In July, Chairman and CEO Wang Xiaochun stated “[The] Traditional Chinese Medicine (TCM) industry is a highly fragmented sector in China, with over 1,500 manufacturers but an average annual sales of less than RMB100 million each. We expect consolidation to occur in the coming three to five years, and we consider Tongjitang to be uniquely positioned to be a leading consolidator in this sector. Our publicly traded shares, traded on the NYSE, could be an effective M&A currency.” TCM is scheduled to report third quarter 2007 results on Nov. 6 after the market closes. Investors will be looking for continued sales growth in Xianling Gubao, and for expanded sales of the company’s other product lines. Given reports of continued price increases in the herbal raw materials of the Chinese medicine industry, profit margins will also be examined closely. There will also be attention paid to the company’s growth plans, including possibilities regarding acquisitions. As for other Chinese stocks, shorter term expectations for TCM are high. However, the company seems well positioned to benefit from favorable market trends over the long haul.
Position: None

TPG Invests in Shanghai Chempartner	10/24/2007
by Life Science: China
Shanghai Chempartner and its affiliate Chemexplorer are selling a minority stake to Texas private equity firm TPG. According to an article scheduled to appear in Thursday’s Wall Street Journal, TPG will invest over US$30 million although the exact size of the investment and percentage of the minority stake have not been disclosed. The private equity firm’s position will be in ShangPharma, a newly formed holding company that combines Shanghai Chempartner and Chemexplorer. Shanghai Chempartner, founded by entrepreneur Michael Xin Hui, is one of several China-based contract research organizations (CROs) that have been gaining increased attention. Located in Shanghai’s Zhangjiang Hi-Tech park, Chempartner has approximately 700 research scientist, roughly 20% of whom hold PhDs. The privately held company does not release financial results, but it has evidenced fast growth in terms of research employee base and facilities utilization. That growth has come from research agreements with large multinational pharmaceutical companies. Most prominent of these is Eli Lilly (NYSE: LLY) which has collaborated with Chemexplorer in the establishment of a research laboratory focused on neuropathy, diabetes, and cancer. Lilly reportedly plans to eventually source 20 to 30% of its research in China. TPG, formerly Texas Pacific Group, is the US$350 billion (assets) private investment firm. Further information about Shanghai Chempartners and its founder Michael Hui can be found in this interview.
Position: None

AIDA Announces Favorable Clinical Trial Findings	10/23/2007
by Life Science: China
Aida Pharmaceuticals, Inc. (OTCBB: AIDA) today announced an update on its testing of Rh-Apo2L, currently in Phase IIA of testing through China's State Food and Drug Administration (SFDA). On tests with over 100 human patients using only Rh-Apo2L, results thus far have shown strong efficacy in treating lung cancer (non-small cell), non-Hodgkins lymphoma, stomach cancer, pancreatic cancer and kidney cancer. Recombinant Human Apoptosis-Inducing Ligand (Rh-Apo2L) is a bioengineered human protein under investigation for use in treating a variety of solid tumors and blood cancers. Normal cells have a characteristic known as apoptosis, or programmed cell death. Cells with a deficient apoptosis process can have uncontrolled growth, as is seen in a number of cancers. Rh-Apo2L is designed to activate the apoptosis process in cancer cells. Preliminary trials of Rh-Apo2L have shown that it is capable of selectively inducing apoptosis in cancerous cells while sparing normal cells. Rh-Apo2L is under investigation in the US by biotech giants Amgen (Nasdaq: AMGN) and Genentech (NYSE: DNA). Results from Phase I studies in the US indicate that the drug is well-tolerated in patients with advanced cancers, including colorectal, melanoma, lung, and ovarian cancers. The drug, referred to in the US as AMG 951, has been approved for phase II trials by the US Food and Drug Administration (FDA) for the treatment of non-small cell lung cancer, both alone and in combination with the approved drug Avastin (bevacizumab). Aida was formed in March 2006 via a reverse merger. The company is based in Hangzhou, Zhejiang Province in the Yangtze River Delta region, a region that is rapidly becoming a major Asian center for drug production. Aida reported US$29.6 million in revenues in 2006, with all revenues derived from sales of the antibiotic Etimicin. The company has six subsidiaries including Shanghai Qiaer Bio-Technology Co., Ltd., which is responsible for the clinical trials of Rh-Apo2L. The company reports that in 2006 it spent US$324,835 on research and development including the clinical trials. Review of the company’s unaudited results for the six months ending in June 30, 2007 show revenues of US$11.7 million, a decline of 7% from the same period in 2006. Operating margins were stable at 7%, but the company reported a net loss before extraordinary items of US$177,652 due to a loss of government grants and higher interest expenses. The company reported US$9.6 million in cash and cash equivalents. Aida currently holds two patents in China on Rh-Apo2L, and has applied for one additional patent. The most recent patent was awarded in early October to Aida and the EastChinaUniversity of Science & Technology on the process of cultivation of Rh-Apo2L. Beside Rh-Apo2L the company has six other oncologic and immune system drugs in various stages of development. Aida is clearly in a difficult transitional phase. Like many pharmaceutical producers in China, it is dependent on a limited range of products, and subject to fierce competition and ongoing government efforts to cap the price of drugs. Attempting to develop higher margin biologic drugs has significant risks. While these early results appear favorable, there is no assurance that Rh-Apo2L can complete all three phases of clinical testing and win approval. Even if approval is won, the company may find itself contesting with Amgen and Genentech over patent rights, a fight that would require resources that Aida does not have. The risk is clearly displayed in Aida’s share price, which has been rangebound between US$0.86 and US$1.27. An investor would require a strong appetite for risk to invest in shares of Aida.
Position: long BBH

AstraZeneca Confirms China Outsourcing	10/22/2007
by Life Science: China
AstraZenenca (NYSE: AZN) is moving ahead on its previously announced plans to increase outsourcing efforts in China. As reported today in the London Times, AstraZeneca will begin purchasing the chemical compound Lactam from contract manufacturers in China. Lactam is a key chemical ingredient required in the production of the neuroleptic drug Seroquel (quetiapine). Seroquel, used in treatment of schizophrenia and bipolar affective disorder, had sales of US$3.4 billion in 2006. Outsourcing has become a key component of a global effort by AstraZeneca to reorganize its operations. The company has announced layoffs of 7,600 workers and plans several plant closures as it moves to outsource all of its manufacturing. David Smith, AstraZeneca’s executive vice-president of operations, said earlier that the company aimed to become a pure research, development and marketing organisation. “Manufacturing for AstraZeneca is not a core activity,” Mr Smith said. “AstraZeneca is about innovation and brand-building . . . There are lots of people and organisations that can manufacture better than we can…We are looking to access China and India in a much more meaningful way,” he said. Astra Zeneca has been active in its development efforts in China. In May of 2006 the company announced a three year, US$100 million plan to build the AstraZeneca Innovation Centre China (ICC). Located in the Shanghai Zhangjiang Hi-Tech Park, the center will focus on translational medicine in oncology through the development of knowledge about Chinese patients, biomarkers and genetics. The company will also utilize the center to help it to identify low-cost producers and to manage the transition from in-house to outsourced production. Outsourced manufacturing of active pharmaceutical ingredients (APIs) is a becoming a big business in China. Sales of APIs in China exceeded US$4 billion in 2005. Growing at over 17% annually, API sales are expected to reach US$10 billion by 2010. Currently Chinese contractors produce approximately $10 million worth of materials for AstraZeneca. The company says it expects that amount to climb to $100 million in the next three years. Marc Jones, AstraZeneca's vice president of global sourcing, expects the company’s China outsourcing effort will reduce manufacturing costs by as much as 30%. AstraZeneca is looking to China "not just because of cost, but also because of speed, innovation and access to a large number of highly qualified scientists," he said.
Position: None

China BioAg Firm Agria Corp. Files for IPO	10/21/2007
by Life Science: China
Agria Corp., a Beijing-based agricultural firm, filed Friday for an initial public offering on the NYSE. The offering, led by Credit Suisse Securities, is expected to bring in US$175 million. The company plans to trade under the symbol “GRO”. According to the company’s F-1 filing, Agria was formed in Jan. 2004 by acquiring control of mainland China based agricultural firm Primalights III Agriculture Development Co., Ltd. (P3A). The company reports that due to restrictions on foreign ownership of seed development and production businesses, Agria exercises effective control of P3A through contractual agreements between P3A, P3A’s primary shareholders, and Aero-Biotech Science & Technology Co., Ltd. (Agria China). Agria China is a wholly owned subsidiary of Agria based in the PRC. Agria three main products are corn seed, seedlings, and sheep breeding. The company’s corn seed products are grown in seven provinces in China through contractual arrangements with village collectives and seed production companies. The sheep breeding products including sheep semen, sheep embryos, and live sheep are developed in five breeding bases located in Shanxi province. The seedlings business consists of a variety of seedlings including raspberry, blackberry, date and white bark pine sold to various customers including municipal governments and commercial nurseries. The company reports that for the six months ending June 30, 2007, revenues were US$36.7 million, up less than 4% from the same period last year. Corn seeds accounted for 48% of revenues, sheep breeding 40% and seedlings 12%. Operating margins were 52%, and net profit margins were 51%. Agria spent less than 1% of revenues on research and development in 2006. On completion of the IPO, the company reports that the proceeds will be allocated as follows: approximately $50 million to fund expansion of production capacity through leasing of additional land and acquisitions of new facilities and equipment; approximately $15 million to fund establishment of a research and development center and expansion of research and development capability; pproximately $27 million to repay the shareholder’s loan; approximately $3.5 million to repay all of its bank loans; and the remainder for general corporate purposes, including funding potential strategic acquisitions. Agria’s risks include those typical for an agricultural firm, including disease, inclement weather and government regulation. Another area of concern is its “effective control” of P3A. As reported in the F-1, “P3A has four record shareholders, consisting of Ms. Juan Li who is the wife of Mr. Guanglin Lai, our chairman of the board of directors, our co-chief executive officer and a beneficial owner of our ordinary shares, Mr. Zhaohua Qian who is our director and a beneficial owner of our ordinary shares, Mr. Zhixin Xue who is our chief operating officer and director, and Mr. Mingshe Zhang who has been involved in the management of P3A.” P3A is the primary source of revenue for Agria Corp.. Due to the restrictions on foreign ownership of seed development and production businesses, the company is dependent on P3A to operate in the PRC. Should the contractual relationship between Agria and P3A sour, the revenue flows of the company could be impaired. In the event of a contract dispute, experience has shown that in Chinese courts the rights of domestic owners can take precedence over those of foreign investors. Demand in China for agricultural products is high and growing. China is becoming a food export powerhouse. According to the USDA, Chinese agricultural exports to the US reached US$2.6 billion in 2006, a 20-fold increase over the past quarter century. In addition, the rising middle class in China is demanding greater variety and quality in their food. The typical Chinese diet previously was dominated by pork, rice, wheat flour, and eggs. Growing incomes and a more varied “Westernized” diet is increasing demand for meat, poultry, seafood and alternate grains. Filling this demand will lead to success for many foreign and domestic Chinese firms. However, investing in Chinese companies requires due diligence and an understanding of operating conditions in the PRC, and this is certainly the case with Agria Corp.
Position: None

Taiwan: Biotech Investment on the Rise	10/19/2007
by Liu King-pong
Taiwan's biotechnology and pharmaceutical industry received a boost in September from MediVas LLC, a drug and biological delivery system developer based in San Diego, California. The U.S. firm announced Sept. 20 that it has selected Taiwan as the site for its Asian operations. "Taiwan has probably the most dynamic economy in Asia and its way of doing business is very similar to that in the United States," said Kenneth Carpenter, president and chief executive officer of MediVas. "But, most importantly, the Taiwan government has committed to making the biotech and pharmaceutical industry a trillion dollar business," he added, referring to the government's strong support for the development of biotechnology. The remarks came at the Sept. 20 grand opening ceremony of MediVas Asia Corp. Carpenter's optimistic statement is the result of the close cooperation between the government and the local biotechnology industry. This trend was recently highlighted with a statement made by Ho Mei-yueh, chairwoman of the Council for Economic Planning and Development. She announced Sept. 14 that the state-owned National Development Fund would invest US$20 million in TaiMed Biologics Co., a new biotech firm focusing on AIDS drugs. TaiMed Biologics' competitive advantage lies in that it has acquired the patent from the U.S.-based Genentech Inc. for its lead clinical product, TNX-355. The drug shows promise as an effective treatment for AIDS patients and those infected with HIV. The patent rights to a product with such potential no doubt prompted Ho to indicate that the establishment of TaiMed Biologics marked a breakthrough in Taiwan's biotech industry. MediVas' business, unlike most biotech and pharmaceutical firms, focuses mainly on changing the way pharmaceuticals are delivered. Its technology platform uses protein-like polymeric biomaterials to make drug and biological delivery more effective. What makes the new investment in Taiwan more significant is that MediVas Asia's facility on the island will focus on the development of so-called "super-generic" drugs, Huang Bor-fuei, director of the industry promotion and marketing department at the Development Center for Biotechnology, stated Sept. 22. Self-described as the matchmaker between MediVas and Taiwan, Huang pointed out that the firm defines super-generics as drugs whose original patents have expired but would be re-patented by MediVas Asia. "This re-patenting is a result of improving or modifying the delivery of the drug. Such modification has several advantages, including longer duration of drug effectiveness, less undesirable side effects and changes in the method of administration," he said. "For example, you might take the drug once a week instead of once a day, or you can stop taking a drug by injection and start to take it orally," he explained. MediVas Asia had talked to local pharmaceutical firms about joint development of super-generics. Local pharmaceutical companies typically focus on production of low-margin generic drugs, however, and did not embrace MediVas' plans. "Although local firms showed interest, they were slow to act, perhaps due to a risk-aversion mindset and an overly conservative culture of avoiding change," said Huang. According to Huang, China and India are usually seen as the only new emerging biotech markets in Asia. Taiwan is not associated with advances in biotechnology and is often overlooked. Huang took a different view, however. "I believe a sustainable technology is important in making biotech and pharmaceuticals our twin-star industries for our future economy," he stated. "A powerful platform technology can enable the improvement or even the creation of a variety of new products that can help the whole industry, and that is where our true niche lies." Using the analogy of a fishing pole and a fish, Huang explained the value of a powerful platform technology. "MediVas' drug-delivery system can deliver more than one successful product, in the same way a fishing pole can deliver a continuous supply of fish. In the long run, more than being a successful company, MediVas will have positive economic impact on Taiwan's biotech industry." MediVas Asia would set up its own research-and-development center in Taiwan and the company would establish its manufacturing facilities for super-generic production within a year, Huang revealed. Write to Liu King-pong at kpliu@mail.gio.gov.tw Originally published in Taiwan Journal
Position: None

Bruker BioSciences Expands Presence in China	10/19/2007
by Life Science: China
Bruker BioSciences Corp. (Nasdaq: BRKR) and its affiliate Bruker BioSpin have announced the official opening of their new Beijing applications, demonstration and customer training center. According to the company, the new demonstration and training facility includes sample preparation areas and laboratory space equipped with the very latest systems from each of the Bruker companies, and will showcase a wide selection of novel life science and materials research, as well as industrial analysis systems. Clive Seymour, Bruker Daltonics VP Asia-Pacific, commented: “Our new and expanded demonstration facility provides the opportunity for scientists to investigate a wide range of applications on our innovative systems, together with obtaining training, demonstrations and advice from Bruker’s highly qualified and experienced Beijing team of application scientists.” Bruker BioSciences Corp. designs, manufactures and markets analytical and life science systems and associated products. It operates through three segments: Bruker AXS, Bruker Daltonics and Bruker Optics. Bruker BioSpin Group, a privately held affiliate, designs, manufactures and distributes enabling life science and analytical research instruments and solutions based on magnetic resonance core technology. The Billerica, MA based Bruker Biosciences reported US$18.5 million in net income on US$434 million in revenues for 2006. Revenues grew 17% from 2005 based on solid growth in areas such as structural proteomics and advanced material research. The company’s Bruker Optics division reported particularly strong growth, with revenues increasing 34.1% to US$105.5 million. China’s quality control concerns are assisting Bruker’s growth. In 2006, Bruker Optics reached an agreement with the People’s Republic of China - State Food and Drug Administration (SFDA) for a large order of mobile near-infrared (NIR) instruments to be used in determination of counterfeit and substandard drugs in the Chinese market. Bruker Optics issupplying over 300 instruments that are being integrated into a large fleet of mobile laboratory vehicles deployed across China for the rapid screening of pharmaceutical products.
Position: None

American Oriental Bioengineering Completes Acquisition of Guangxi Boke Pharmaceutical Company	10/18/2007
by Life Science: China
American Oriental Bioengineering, Inc. (NYSE:AOB), a leading manufacturer and distributor of plant-based pharmaceutical and nutraceutical products, today announced that it has completed the acquisition of Guangxi Boke Pharmaceutical Company Limited. The all-cash acquisition, valued at US$36.5 million, was expected by the company to be immediately accretive to earnings. Based in Nanning, GuangxiProvince, Guangxi Boke is a US$12 million (revenues) manufacturer and distributor of plant-based pharmaceutical, nutraceutical and personal care products. With it’s primary market in China, the majority of Guangxi Boke’s products are sold over the counter. It’s product line includes nasal decongestants, medical shampoos and throat lozenges. The Company has a sales force of over 600 individuals and an distribution network of primarily pharmacies throughout China. Tony Liu, Chief Executive Officer of AOBO stated, "We are very pleased to close this transaction. Boke has an exciting portfolio of products, including its nasal congestion and sinus relief products, that can be used by a large segment of the population in China. This acquisition further diversifies our product offering, provides added consistency to our revenue stream and allows us the opportunity to strengthen our OTC distribution network in China." American Oriental Bioengineering is a US$110 million (revenues) manufacturer and distributer of plant based pharmaceutical and nutraceutical products. For 2006 the company reported a doubling of revenues, and net profit margins of 26.5%. Currently trading near US$12.45, the company is down over 12% from its recent 52 week high, but has nearly doubled over the past year.
Position: None

Gates’ Call for Eradication of Malaria

10/18/2007

by Life Science: China

Speaking in Seattle on Oct. 17^th, Bill and Melinda Gates called for a global commitment to eradicating malaria. “In the history of humanity, it's likely that no disease has ever caused more suffering, more sickness, and more death than malaria,” said Ms. Gates. “Advances in science and medicine, promising research, and the rising concern of people around the world represent an historic opportunity not just to treat malaria or to control it—but to chart a long-term course to eradicate it.”

The Gates’ challenge to the scientific community was made to an audience of 300 leading malaria experts and policy makers during the Bill & Melinda Gates Foundation Malaria Forum in Seattle. As previously noted on Life Science: China, the foundation has become a dominant force in healthcare, particularly in public health and emerging countries:

Global Health Grants/font>

Grants from inception to July 2007

Global Health

$7,955,334,069

HIV & TB

1,887,988,567

Infectious Diseases

1,873,802,301

Global Health Strategies

2,912,147,703

Global Health Technologies

466,812,520

Research, Advocacy, and Policy

804,546,978

Special Initiatives

10,036,000

Source: www.gatesfoundation.org

&

In support of their anti-malaria efforts, the foundation has pledged US$860 million, with an additional 650 million dollars to support the Global Fund to Fight AIDS, Tuberculosis and Malaria. The World Health Organization (WHO) reports that malaria is endemic in parts of China, with over 25,000 cases reported in 2002.

Position: None

China Water and Drinks Inc Applies for AMEX Listing	10/17/2007
by Life Science: China
China Water and Drinks Inc. (OTCBB: CWDK), a producer and distributor of bottled water based in southern China, announced today that it has applied for the listing of its common stock on the American Stock Exchange. China Water and Drinks Inc. is a leading producer and distributor of bottled water in China. Through its production facilities in Guangzhou, Zhangjiang, Fexian, Nanning, Shenyang and Changchun, the Company produces bottled waters and distribute to 11 provinces in China under its own brand "Darcunk". The Company also supplies water to local and international beverage brands including Coca-Cola and Uni-President. China Water and Drinks listed on the OTC market earlier this year via reverse merger with UGods Inc., a Nevada-based mining company. In late August the company acquired Hutton Holdings, Corp. for US$9 million and 2.13 million shares of common stock. Hutton’s major business includes the manufacturing of PET injection molding machinery and PET bottle blowing equipments, injection and bottle blowing molding production and the supply of plastic bottles to drinks companies, pharmaceutical companies and beverage packaging companies. Gouzhu Holdings, a wholly owned subsidiary of Hutton, is reported to hold 50% of the domestic PET packaging and bottle making market in China. For the six months ending June 30, 2007 China Water and Drink’s unaudited statements show revenues of US$18.7 million, up 16% from the June 2006 period. The company reported operating margins of nearly 30%, and net income rose 17.4% to US$5.6 million. The company has said that for 2008 it expects net income of approximately $30 million on revenues of about US$105million.
Position: None

China Nepstar Chain Drugstore files for $250 million IPO	10/17/2007
by Life Science: China
China Nepstar Chain Drugstore Ltd filed with the US SEC on Wednesday for an initial public offering of American depositary shares on the NYSE, confirming reports that appeared Sept. 29th on LifeScienceChina.com and other sites. The shares, which will be listed under the symbol “NPD” are expected to raise as much as $250 million based on today’s SEC filing. The Form F-1 indicates that as of Sept. 30, Nepstar had 1,791 directly operated drugstores located in 62 cities in China. The company reports that it is the largest retail drugstore chain in China based on the number of directly operated stores, and that it had the highest revenue among all directly operated retail drugstore chains in China in 2004, 2005 and 2006. With FY 2006 revenues of US$227.6 million, the company states its revenue CAGR from 2004 to 2006 was 43.4%. For the six months ending June 30, 2007 the company had revenues of US$124.3 million, an 18.4% increase over the same period last year. The company plans to use proceeds from the IPO to fuel its continuing growth and will spend: · approximately US$52.0 million to open new stores; · approximately US$11.0 million to upgrade their information management and inventory control system · approximately US$27.0 million to set up two new distribution centers; · the remaining portion for other general corporate purposes and for potential acquisitions of retail drugstore chains or independently operated drugstores. Nepstar specifically plans to grow in cities such as Beijing and Shanghai through acquisitions, where local regulations prohibit the opening of new drugstores within certain distances of an existing drugstore, and in cities that are close to their distribution centers. Goldman Sachs (Asia) LLC. and Merrill Lynch will be underwriting the IPO. Goldman, an early investor in Nepstar, holds 50 million shares with a basis of US$0.50 per share.
Position: long GS

Genome Institute of Singapore Secures US NIH Grants	10/16/2007
by Life Science: China
The Genome Institute of Singapore (GIS) has been awarded two grants, each worth approximately US$1 million, from the US National Institutes of Health (NIH), reported the Singapore Agency for Science, Technology and Research (ASTAR). The grants were awarded by the National Cancer Institute (NCI) and the National Human Genome Research Institute (NHGRI). The National Cancer Institute (NCI) awarded a grant to Prof Edison Liu, Executive Director of the GIS, for the project entitled "Pair-end-ditag technologies for the complete annotation of fusion genes". Worth over US$1 million, the three-year project will continue research on a new technology developed by GIS known as the Gene Identification Signature Pair-end-diTag (GIS-PET). The GIS-PET technology is used to identify fused genes that function as oncogenes or cancer-causing genes. The second grant was awarded to Dr. Ruan Yijun and his GIS team by the National Human Genome Research Institute (NHGRI), which was part of US$80 million that NHGRI is giving out over the next four years as it moves on to the next stage of the ENCyclopedia Of DNA Elements (ENCODE) project, following the success of it's pilot phase. The ENCODE project was set up by NHGRI in 2003 and aims to discover all functional elements in the human genome to gain a deeper understanding of human biology and develop new strategies for preventing and treating disease. The US National Institutes of Health is a component of the U.S. Department of Health and Human Services. It is the primary federal agency for conducting and supporting basic, clinical and translational medical research, and it investigates the causes, treatments and cures for both common and rare diseases. NHGRI is one of 27 institutes and centers at NIH. NHGRI's Division of Extramural Research supports grants for research and for training and career development at sites nationwide The Genome Institute of Singapore (GIS) is a member of the Agency for Science, Technology and Research (ASTAR). Established in 2001, the research institute's mission is to be a world-class genomics institute and a centre for genomic discovery. GIS pursues the integration of technology, genetics and biology towards the goal of individualized medicine. The genomics infrastructure at GIS is utilized to train new scientific talent, to act as a bridge between academic and industrial research, and explore scientific questions of high impact.
Position: None

WEX Pharmaceuticals Settles Legal Claims	10/16/2007
by Life Science: China
WEX Pharmaceuticals Inc. (TSX: WXI) announced today that it had reached settlements regarding claims of wrongful dismissal filed by founder and former CEO Frank Shum and former COO Donna Shum. The company also announced settlement of disputed contract claims by and against 3% shareholder Tianjin Fairwood Furniture Manufacturing Co. Ltd. regarding ownership of a WEX subsidiary. The Vancouver, BC based WEX is focused on the development and commercialization of tetrodotoxin-based drugs for use in pain management. The company is planning to conduct a phase III clinical trial of its drug TECTIN for the treatment of moderate to severe cancer-related pain. For its fiscal year ended March 2007 the company reported a loss of CD$4.76 million on revenues of CD$544,578. The company derived 66% of its revenues from generics sales of its Hong Kong and mainland subsidiaries. In September the company reported that its cash reserves had been expended. The announced settlements are subject to the closure of an announced CD$20 million investment in the company by CK Life Sciences Intl. Holdings Inc. Closing on the planned investment had been deferred to “achieve resolution of the outstanding issues and…to obtain a small increase in the bridge loan they extended to WEX.” WEX reports that it now anticipates closing of the investment as early as tomorrow CK Life Sciences is a US$284 million (revenues) manufacturer of agricultural and nutritional products with an increasing emphasis on pharmaceutical development. Incorporated in the Cayman Islands, the company trades on the Hong Kong GEM under the symbol 8222.
Position: None

Coca-Cola Launches Chinese Medicine Research Centre	10/15/2007
by Life Science: China
The Coca-Cola Co. (NYSE: KO) announced today in Beijing the official opening of The Coca-Cola Research Center for Chinese Medicine at the China Academy of Chinese Medical Sciences in Beijing. This research center is a part of the Company’s long-term collaboration agreement with the China Academy of Chinese Medical Sciences. “We see this center as an important step in strengthening our innovation pipeline for beverages that contribute to well-being,” said Dr. Rhona Applebaum, vice president, chief scientific and regulatory officer of The Coca-Cola Company. “This collaboration will ultimately help us bring the insights and benefits of Traditional Chinese Medicine to consumers all over the world. As the world’s largest beverage company, we can add global reach and world-class marketing skills to help promote Chinese wisdom in preventive holistic health through new and innovative beverages.” The company's China efforts are being advanced through the Beverage Institute For Health & Wellness. Founded in 2004, this Houston, TX-based organization supports nutrition research, education and outreach, with a primary focus on beverages. Founded in part to counter charges that sweetened beverages contribute to obesity, the institute has funded numerous projects devoted nutritional research including efforts to alleviate malnutrition. According to the institute's website, it is "responsible for evaluating emerging wellness trends and ingredients on behalf of The Coca-Cola Company, conducting clinical research in support of Company brands and establishing research programs that lay the foundation for the development of new beverages to meet the nutritional and wellness needs of consumers." The company's Chinese efforts reflect 2 important trends: The Chinese market is increasingly important to Coca-Cola. While its US market was flat in 2006, and unit volumes rose only 4% globally, volumes in its "North Asia, Eurasia and Middle East" markets grew 11 percent, led by double-digit growth in China. Sales in this region accounted for US$4.12 billion of the company's revenues. The increase in unit case volume in China was led by significant growth in both sparkling and still beverages. With 37 factories in the PRC, China is currently the companies fourth largest market, and the Beverage Institute's efforts should help Coke refine it's product offerings to meet Chinese consumer tastes. Company Chairman and CEO Neville Isdell recently stated that he expects China to be its largest market. "The 2008 Olympic Games would be a great opportunity for China, " he said. Growing market share is going to functional or enhanced beverages. Functional beverages are those which have added ingredients to produce a specific health benefit or promote wellness. Beverage Marketing Corporation reports that functional drinks' U.S. volume have more than tripled over the past five years, compared with just 5% growth for the total beverage category. The importance of this market to Coca-Cola has been seen this year in it's acquisition of US$100 million (revenues) Fuze Beverages February, followed by its May acquisition of Glaceau/Energy Brands Inc. for US$4.1 billion. Coca-Cola's research investment in Chinese medicine would be expected to support new product offerings globally. The China Academy of Chinese Medical Sciences is China’s national center for research, health care and education in Traditional Chinese Medicine. It is administered under the Ministry of Public Health through the State Administration of Traditional Chinese Medicine of the People's Republic of China. The Academy employs 3,100 professionals, including 800 doctors and professors working in 11 research institutions, five hospitals and clinics, and several educational and publishing branches. It is the most respected and trusted group engaged in research, education and practice in Traditional Chinese Medicine.
Position: None

FDA Approves Chinese AIDS Drug	10/13/2007
by Life Science: China
Amid the public uproar over the quality of Chinese products, the Wall Street Journal noted an achievement that has received somewhat less attention. In mid June, the US Food and Drug Administration (FDA) approved a Chinese-made anti-retroviral drug for distribution in the US. The drug, nevirapine, is made by Zhejiang Huahai Pharmaceutical Co. (SSE: 600521), a US$ 74 million (revenues) company located in eastern China. For Zhejiang Huahai the approval opens the door to the world market for anti-retrovirals. Nevirapine, classified as a non-nucleoside reverse transcriptase inhibitor, is used in combination with other anti-retrovirals in the treatment of HIV and AIDS and as a single dose to prevent maternal-fetal transmission of HIV. Invented by Boehringer Ingelheim Pharmaceuticals, the drug is marketed under the trade name Viramune and had net worldwide sales of US$ 390 million in 2006. If precedent holds, this approval is important for the Chinese pharmaceutical market as a whole. Indian pharmaceutical companies such as Ranbaxy Laboratories Ltd. (BOM: 500359) and Dr. Reddy’s Laboratories Ltd. (NYSE: RDY) have established firm footholds in the global drug marketplace. Ranbaxy has seen its revenues quadruple over the past 10 years, and now leads the Indian pharmaceutical industry. In 2005 that industry as a whole reported domestic revenues of US$ 5.3 billion, exports of US$ 3.7 billion, and was estimated to account for over 20% of all generic drugs worldwide. The growing success of Chinese companies has not gone unnoticed in India. Ranbaxy announced this week that it plans to make China its major source for active pharmaceutical ingredients. Company spokesman Malvinder Mohan Singh reported that Ranbaxy “saw China’s low-cost raw material manufacturing ability not as a threat, but as an opportunity for reducing its manufacturing expenses.” It is clear that global competition in the pharmaceutical industry will only increase in the coming years.
Position: None

Foreign Exchange is a Rough Game	10/11/2007
by Life Science: China
If one were to listen solely to members of US Congress, one would think that China is deliberately targeting the US via destructive exchange rates. According to Sen. Charles Schumer, the US needs to “get the Chinese to stop playing games with their currency in order to level the playing field for American companies trying to compete with goods and service coming from China." For Europeans, these “games” have gotten rough. As reported in this week’s Economist, political pressure is building in Europe to counter the growing prominence of China in the continent’s trade. In 2006 Europe’s trade deficit with China was approximately € 128 billion, an amount the the European Commission called “sizable and rising.” The European Union is now China’s largest market, and China has displaced the US as the EU’s greatest source of imports. The Chinese yuan plays a key role in the growing trade imbalance. In July 2005 the Chinese yuan was freed from its tight peg to the US dollar and began an upward revaluation within a range set by the People’s Bank of China. With the US dollar in decline versus both the yuan and the euro, the EU has found itself in very disadvantaged position. Since mid 2005 the dollar has fallen nearly 10% versus the yuan. The euro, on the other hand, has climbed significantly: Euro, US Dollar Change vs Yuan, 07/2005 to Present (source: Reuters) These currency effects have clear implication for Chinese life science companies. For service providers such as CROs there should be continued interest from European companies looking to outsource. Wuxi Pharmatech (NYSE:WX), Hutchison China Medi-Tech (LSE AIM:HCM) and others should continue to benefit from this effect. For medical device makers such as Mindray Medical (NYSE:MR), the cheap yuan will boost their competitiveness in both domestic and export markets versus their European counterparts. Political pressures in Europe regarding the Chinese currency are likely to mount. These pressures should be in line with similar political actions taken in the US. However, until the downward trend of the yuan against the euro reverses, European companies will be playing a game that is increasingly difficult to win.
Position: None

China Builds Healthcare Infrastructure	10/10/2007
by Life Science: China
China’s rapid economic development has had many beneficial effects, but rapid change has also created some problems. Explosive growth in the cities, ongoing migration of rural residents, and a focus on economic infrastructure have presented major challenges to the Chinese healthcare system. These challenges have been highlighted by the SARS and avian flu outbreaks, as well as the increasing incidence of “Western” diseases. In response, the Chinese government has pledged to invest in healthcare infrastructure in both the cities as well as rural areas. 2 stories in People's Daily over the past few days evidence this ongoing healthcare investment: China builds 2,448 disease prevention, control centers Bayer to train 10,000 doctors of county-level hospitals in China The US$1.4 billion invested by the Chinese government in rural clinics is but a small fraction of the total projected spending on healthcare. Currently at less than 6% of GDP it is expected to rise to 8% of GDP by 2010. This indicates a near doubling of expenditures to more than US$320 billion. The US International Trade Administration reports that spending on hospital construction could exceed US$10 billion. This ongoing investment in healthcare infrastructure will be extremely beneficial to domestic and foreign suppliers. As new hospitals are built and competition between hospitals increases there will be a continuing trend towards the purchase of new equipment and supplies. The success of medical devices IPOs such as that of Mindray Medical (NYSE: MR) is based on this trend. MR has been growing revenues nearly 50% annually in large part due to their leading market position selling patient monitoring devices to hospitals in China. This infrastructure investment trend is unlikely to slow anytime soon. The Chinese hospital system continues require investment in order to meet the needs of the country. For further perspective, this video “CCTV Presents: China Hospital Today” is worth a look.
Position: None

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