Twin Acquisitions, China-wide Plasma Shortage, Boost Earnings For China Biologic

BEIJING - The leadership of China Biologic Products, the country's biggest privately held provider of plasma-based biopharmaceuticals, said that the acquisition of two competitors earlier this year helped elevate profits in the second quarter, and that the emergence of the A/H1N1 pandemic could bolster sales throughout the year.

China Biologic, which had an initial base of operations in the eastern Chinese province of Shandong, posted higher revenues and income partly due to mergers with biopharmaceutical firms in Southern and Northern China, according to the company's chief executive officer. The acquisitions have also transformed China Biologic into a national player, and positioned it to potentially compete across Asia.

Revenues for the April-June period of 2009 increased 178 percent to $33.2 million, compared with $11.9 million in the corresponding period of 2008. Net income for the second quarter of this year advanced 151 percent to $8.3 million.

Colin Zhao, chief executive officer of China Biologic, told investors and analysts during a recent earnings call that: "As a result of these [recent] acquisitions, we are now strategically positioned as the leading non-state-owned plasma-based biopharmaceutical company in China."

Zhao, who holds an MBA from the Chinese University of Hong Kong, said in an interview earlier this year that China Biologic had purchased a 90-percent equity stake in Chongqing Dalin Biologic Technologies, which is the majority shareholder in Qianfeng Biological Products. Qianfeng is the only producer of plasma-based biopharmaceuticals in the southern Chinese province of Guizhou.

In the first half of this year, China Biologic also 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 these twin mergers, Zhao said, China Biologic has gained a 15-percent share of China's market for plasma-based medicines (Also see "Acquisitions Catapult China Biologic Into Leading Biopharma Outfit; Position It For Global Competition With U.S., EU Players" - Scrip, 30 Apr, 2009.).

Tristan Kuo, China Biologic's chief financial officer, said during this week's conference call that the emergence of the A/H1N1 pandemic had led to stronger demand for some of the company's biopharmaceuticals.

"The recent outbreak of the H1N1 flu, known as the swine flu, has further increased the demand for plasma-based products," explained Kuo. "The company expects that a pandemic outbreak of the flu could prompt an increase in demand for the company's human immunoglobulin for intravenous injection product, which is mainly used for acute infection, autoimmune diseases and other immune deficiencies caused by decreased or abolished antibody production capabilities."

Kuo also said that sales of some products had already started climbing in the second quarter, as the incidence of A/H1N1 cases slowly rose in different parts of China. "During the second quarter of 2009, the company experienced an unusual increase in demand for its IVIG [human immunoglobulin for intravenous injection] product," he revealed.

The CFO said that plasma supplies across China "are in a great shortage."

CEO Zhao said earlier that this ongoing shortage had led to an increase in prices China-wide for plasma-based products. Zhao also noted that the shortage had been triggered in part by moves by Chinese drug regulators to enforce an array of 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.).

During the quarterly earnings call, Zhao said: "We expect the tight supply/demand situation for plasma-based products to persist for some time, which bodes well for our fundamental outlook."

- Kevin Holden ([email protected])