Let's look at one of the largest acquisitions to date by foreign capital. On October 25, 2006, BHC and Topsun announced in Beijing that the healthcare division of BHC and Topsun Qidong Gaitianli Pharmaceutical Co. Ltd. had signed an agreement involving the former purchasing the latter's non-prescription anti-cold and anti-cough drugs, and related assets. These included "White Plus Black" cold tablets, "Xiaobao" cough syrup, and "Xinli" cough syrup. The acquisition cost was 1.072 billion yuan, plus an additional 192 million yuan. The acquisition enhanced the competitiveness of BHC's healthcare division and doubled its Chinese consumer health business. This enhancement lifted the company to be one of the top 10 OTC companies.

IPR protection paramount

Even though domestic firms are paying increased attention to intellectual property right (IPR) protection, it is still a serious problem. When an entrepreneur at a seminar for small and medium-sized enterprises was asked how he protected his own IPR, he responded, "I'm the boss. They have to follow my orders. It doesn't involve the disclosure of secrets." This is the kind of attitude that creates concern.

Many companies were unaware of IPR protection when they started business, and consequently suffered colossal losses down the track. Lessons should be learned from this. Biopharmaceutical companies should pay attention to IPR protection, especially when they own a patent. In fact, technologies with independent IPR enjoy a high level of exclusivity that protects them from other firms looking to infringe. Besides, the company that owns the technology possesses huge economic potential.

Mindray has been launching new products since its inception. The company has full IPR ownership and more than 180 patented technologies. Over the past three years, it has launched more than 25 new products via its three major product lines. Most of them gained recognition from the EU and eight of them from the U.S. Food and Drug Administration. It was this that opened up the international market and earned Mindray its reputation.

Targeting investment

People who lack a clear picture of biopharm go to great lengths and achieve little in the way of results. Instead, getting fully familiarized with the interests of investors improves your odds of convincing an investor to invest.

Biopharm can be divided into several subsets: pharmacy (such as Kexing Biotech, Star Drug and Kanion Pharmaceutical), medical facilities (Mindray), healthcare (Haoyingsheng, Ciji, Ikang.com, and Red Baby), and health gateway (39.net, and Yihuaming). According to David Zhang, Managing Director of the WI Harper Group, a hi-tech venture capital firm, biopharm comprises two main areas: medical devices and healthcare services. He doesn't place high expectations on drug research as it is costly and involves complicated approval procedures.

Companies such as IDG Technology Venture Investment, Walden International, Northern Light Venture Capital and Beijing Venture Capital Co. Ltd. are investing institutions that are particularly attracted to the biopharm industry.

Going public in the United States

For companies that plan to go public, China's mainland, Hong Kong, Singapore, the United States and Europe all have their own advantages and disadvantages. Wei Shaokun, Managing Director of the Asia Branch of Healthcare of UBS Investment Bank, argues that the United States is the best overseas capital market for Chinese pharmaceutical firms to raise funds. He pointed out that the United States has the largest healthcare market and a mature capital market.

Healthcare and pharmaceuticals constitute an important sector of the stock market. In the United States, listed healthcare companies make up 11.9 percent of the total market value. The proportion for Hong Kong is only 0.8 percent. Compared to just a few biopharmaceutical unit trust funds in China, investment in the healthcare sector accounts for one third of total private equity funds in the United States-paralleling the telecommunications, media and hi-tech industries. Meanwhile, the average price/earnings ratio of healthcare firms listed in the United States is 22.9, compared to 16.2 in Hong Kong.

(Xinhua Finance)

DISCLAIMER: The information contained herein is based on sources we believe to be reliable, but is provided for informational purposes only, and no representation is made that it is accurate or complete. This briefing should not be construed as legal, tax, investment, financial or other advice, and is not a recommendation, offer or solicitation to buy or sell any securities whatsoever.