Acquisitions Catapult China Biologic Into Leading Biopharma Outfit; Position It For Global Competition With U.S., EU Players

BEIJING - The chief executive officer of China Biologic Products Inc. said an aggressive acquisition strategy has helped transform the company into China's leading privately held provider of plasma-based biopharmaceuticals, and that the outfit is aiming to expand its geographical footprint across the globe.

China Biologic has only recently begun to compete with American and European counterparts in India's potentially huge market, and plans to gradually widen that competition worldwide, CEO Colin Zhao said in an interview.

China Biologic, which has a main base of operations in the eastern Chinese province of Shandong, has over the last eight weeks completed mergers with biopharmaceutical outfits in Southern and Northern China that have made the combined concern China's biggest non-state-owned player, he said.

"Ten days ago, China Biologic completed its acquisition of Chongqing Dalin Biologic Technologies," said Zhao, who holds an MBA from the Chinese University of Hong Kong.

China Biologic purchased a 90-percent equity stake in Dalin, which in turn is the majority shareholder in Qianfeng Biological Products. Qianfeng is the only producer of plasma-based biopharmaceuticals in the southern Chinese province of Guizhou.

And just weeks earlier, China Biologic acquired a 35-percent equity interest in Xi'an Huitian Blood Products, which is the sole supplier of plasma-based biopharmaceuticals in the northern province of Shaanxi.

With the completion of the twin mergers, Zhao said, China Biologic has captured about a 15-percent share of China's market for plasma-based medicines. And the U.S.-incorporated China Biologic, he added, had both mergers approved by China's Ministry of Commerce, with no conditions attached to future operations or acquisitions.

The commerce ministry has begun using its new power under the Anti-Monopoly Law to block or place restrictions on some mergers involving global companies in China since the new antitrust provisions became effective last summer (Also see "China's New Legal Power To Limit Or Block Mergers Could Signal Challenges Ahead For Global Pharmaceutical Alliances" - Scrip, 26 Apr, 2009.).

Zhao said, meanwhile, that China Biologic continued to expand last year in terms of revenues and net earnings despite the financial hurricanes that have lashed the Americas, Europe and Asia.

"The plasma-based industry [in China] has been immune from the impact of the ongoing global financial crisis as demand for these products has outpaced supply," he said. "As a result, the company's selling price, cost of revenues and operating expenses during 2008 were not impacted by the global financial turmoil."

The company's revenues for 2008 rose by 44 percent to $46.8 million, compared with $32.4 million the previous year. Net income for last year climbed by 46 percent to $12.0 million, compared with $8.2 million in 2007.

Zhao said the jump in revenues and in profits was partly due to an overall increase in prices China-wide for plasma-based products

He explained that last year, China's State FDA implemented a wide array of new measures aimed at strengthening controls on and safety standards for plasma production (Also see "China’s SFDA To Require Electronic Tags For All Domestic Drugs; Imported Pharmaceuticals Likely To Follow" - Scrip, 25 Aug, 2008.).

"Commencing in January of 2008, the SFDA implemented stricter pharmaceutical GMP inspection standards designed to intensify supervision of drug producers and ensure drug quality," he added.

"These new measures further tightened the availability of raw material for production, and adversely impacted the already short supply of plasma-based products," he said.

As a result of shrinking supplies of plasma-based biopharmaceuticals, the CEO explained, China Biologics was able to raise the price on many of its leading products.

China Biologic, strengthened by its twin acquisitions so far this year, expects to post revenues for 2009 in the range of $90 million to $100 million, along with net income between $18 million and $22 million, the CEO said.

And while expanding throughout China, the biopharmaceutical firm is also mapping out plans to supply export markets around the world, CEO Zhao said.

After establishing a foothold in Asia's other giant - India - earlier this year, China Biologic recently signed a new contract that will triple the size of biopharmaceutical sales there this year (Also see "China Biologic Starts Selling Human Immunoglobulin To Neighboring India, Scans Globe For New Markets" - Scrip, 22 Jan, 2009.).

Under the new agreement, China Biologic will provide a range of products that include human hepatitis B immunoglobulin and human immunoglobulin for IV injection, he explained.

- Kevin Holden ([email protected])