Sinobiopharma (OTC: SNBP)

Sinobiopharma (OTC: SNBP)

Postby helios » Sat Nov 13, 2010 9:53 am

:arrow: We have this discussion previously. My initial response was to think of this Co. first.

Specialty Drugmaker Sinobiopharma Takes on Big Pharma in China

By Megan Shank - Nov 13, 2010 1:46 AM GMT+0800

In 2009, the Chinese government pledged $125 billion toward a three-year health-care reform effort to strengthen primary care services, broaden insurance coverage, and advance affordable drugs. With its aging population and increase in lifestyle-related diseases, China’s demand for pharmaceutical drugs will increase sales 25 percent next year, to more than $50 billion, locking in its status as the third- largest pharmaceutical market in the world, according to IMS Health, an international marketing research company. IMS forecasts that China will become the No. 2 pharmaceutical market by 2015.

Chinese-born Lequn Lee Huang saw potential long before the numbers dazzled. Huang, who holds a PhD in analytical chemistry from Iowa State University, dreamed of transforming innovative research into affordable medicine for the Chinese people. Encouraged by former Chinese President Jiang Zemin’s call for Chinese scientists abroad to contribute their talents toward modernizing the nation, Huang quit his job as principal research investigator at the Bayer Research center in New Haven, Conn., and returned to China in 2004. That year he founded Sinobiopharma, a specialty biopharmaceutical manufacturer in Nanjing that has since launched four drugs in China, including muscle relaxants and cardiovascular medicines, and has five more in the works.

Huang settled in Nanjing full time in 2005 and used management methods he learned at Bayer to expand Sinobiopharma, which he says had $5 million in revenue in 2009 and estimates will have $10 million in 2010 and $14 million in 2011. In 2008, the company listed on the Nasdaq OTCBB, a regulated quotation service separate from the Nasdaq market, and aims to list on the New York Stock Exchange or Nasdaq Capital Market within the next two years.

Huang, 55, spoke recently with Bloomberg.com contributor Megan Shank about his plans to sell beyond China, how Sinobiopharma competes with Big Pharma, and the importance of “guanxi.”

Megan Shank: Describe the pharmaceutical market in China.

Lequn Lee Huang: Right now, it’s mostly generic drug companies. Few pharmaceutical companies are doing novel research, and few innovative drugs are launched in China. Most importantly, there are no international Chinese pharmaceutical companies and no specialty pharmaceutical companies.

Q: Why aim for the worldwide market instead of just China?

A: The pharmaceutical research industry is different from other industries in that you have to spend a lot of money in the beginning. And in order to get a high return for investors and shareholders, you need a worldwide market. You can also put these returns toward more innovative research. Big Pharma companies, like Bayer and Merck, come to China not only for the Chinese market, but also to set up research centers here. These companies make bigger investments in China because they want a worldwide market. Generic pharmaceutical companies don’t do research and thus don’t have that expense, but, as a specialty pharmaceutical company, we do. We expect to start doing business outside of China in 2012.

Q: Define “specialty pharmaceutical company” and give some examples of successful businesses.

A: Big Pharma focuses on research into innovative, novel drugs - - patents. Generic drug companies copy. Specialty pharmaceutical companies create generic drugs, but they also innovate to improve existing formulas. No such company yet exists in China. I recently visited India, where the specialty pharmaceutical industry is 10 years ahead of China -- there are more than half a dozen companies that develop and make their products in India and then launch 50 percent of those products in the U.S. Lupin is one example. In China, we manufacture a lot of things for export, but not much medicine.

Q: Why not?

A: The hardware -- the machinery used to make drugs -- isn’t up to international standards. If you used the FDA’s standards to evaluate drugs made in China, half the companies in China would close. Next year, the State Food and Drug Administration will release regulations for good manufacturing processes that demand hardware upgrades.

Q: When that happens, the market will probably consolidate, correct?

A: Right. Expect a lot of mergers. Good Chinese manufacturers will acquire others. In China, there are too many pharmaceutical companies -- more than 6,000. But the Chinese government also believes a stable society is its No. 1 priority. They don’t want people to lose jobs, so if anything happens they’ll back up. They’ve already put off enacting this standard for a few years, and there will be a transition time once it goes into effect. Still, I think the Chinese government is committed to reaching those standards.

Q: What disparities are there right now between China and the West in terms of the accessibility and affordability of pharmaceutical drugs?

A: In Chinese hospitals you can find almost every medicine launched in the world, though sometimes it takes a little longer to arrive. So accessibility is decent. But affordability is an issue. Big Pharma drugs are often beyond the price range of the average Chinese consumer. In 2010, we became the first Chinese company to launch a first-to-marketplace hypertension drug, which Chinese health insurance covers. We enjoy market exclusivity and premium pricing.

Q: How does Sinobiopharma compete with Big Pharma companies?

A: For example, our drug Kutai, a skeletal muscle relaxant, is an improved version of Nimbex, first launched by GSK [GlaxoSmithKline] in 1997. Nimbex must be kept at [about] zero degrees Celsius. That worked well enough in Beijing, but when they tried to transport it to rural provinces, they couldn’t keep it at that temperature. China’s summers are extremely hot. These drugs became inaccessible because of the limit of GSK’s technology. We created a patented technology to improve the stability of the drug so that it can stay at room temperature. We can safely transport it to every corner of China. This increases its usability for doctors, and, of course, our price is lower. Even though we’re competing with GSK, we have over 70 percent of the market.

Q: Is a U.S. degree and American experience important for a returnee to succeed in China?

A: Great technology and education don’t guarantee you’ll be a success in China. Here, it’s largely about connections, or guanxi. All those years I was away, I kept in mind that guanxi was very importance to success in China -- whether one is doing business or science. I traveled back to China often and tended to my connections. Every year, more Chinese returnees come back to China, but not all of them succeed, because during their 10 or 20 years in the States they forgot Chinese culture and they lost their guanxi. I host many scientists who are working in the U.S. who ask me how they, too, can return. I tell them to cultivate their connections, to remember they are Chinese, and to adapt to the local culture when they return.

Q: Chief executives complain about talent scarcity in China. What is your experience?

A: Well-educated Chinese scientists are available. The problem is a lack of good leadership and management, as well as good business models for the Chinese market. Also, when I recruit, I emphasize teamwork. I’ll take a team player over a superior scientist.

Q: If Chinese scientists are so talented, why has China traditionally been weak at innovation? Is that a fair assessment?

A: Absolutely. I think it has to do with the government system and our history, though it’s getting better -- look at the achievements China has made in the past three decades. The Chinese government is encouraging innovation in a way it has never done before, and as a result more innovative products are emerging. I have great hopes for China. I’m not a political person, but I think the party leaders are talented -- they’re engineers, not like 30 years ago, when they weren’t educated -- and they’re interested in improving the country. Ten years ago I wouldn’t have come back to China, because I wouldn’t have felt safe to do innovative research and start a business. I would have been afraid the government might change its policy overnight. But now, even if they wanted to change the economic system, they couldn’t do it. The Chinese Communist Party cares less about socialism than they do about economic development, as do the Chinese people.

Source: http://www.bloomberg.com/news/2010-11-1 ... china.html
[Finance disclaimer: The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought regarding investing of any stocks/ funds and/or whatsoever. The author has no vested interest in the mentioned stock at the time of writing.
helios
Permanent Loafer
 
Posts: 3608
Joined: Wed May 07, 2008 8:30 am

Return to S to Z

Who is online

Users browsing this forum: No registered users and 3 guests