Aoxing Pharmaceutical Company Inc. today announced that Aoxing Pharma and Johnson Matthey Plc have entered into an agreement to establish a joint venture through affiliated companies focused on research, development, manufacturing and marketing of active pharmaceutical ingredients ("API\') for narcotics and neurological drugs for the China market. The joint venture represents a significant new opportunity for both companies to expand their business in the rapidly growing pharmaceutical market in China.
Under the terms of the agreement, Macfarlan Smith Ltd, a wholly owned subsidiary of Johnson Matthey Plc, headquartered in the United Kingdom, will contribute technology expertise and capital to the joint venture. Hebei Aoxing Pharmaceutical Group Company, Ltd ("Hebei Aoxing"), the operating subsidiary of Aoxing Pharma, will contribute capital, fixed assets and related API manufacturing licenses. The joint venture company will be called Hebei Aoxing API Pharmaceutical Company, Ltd. Hebei Aoxing will have a 51% stake in the Company, while Macfarlan Smith (Hong Kong) Ltd (a wholly owned subsidiary of Johnson Matthey Pacific Ltd) will hold 49%. Each company will have equal representation on a board of directors that will oversee a management team responsible for corporate strategies and operations.
The new joint venture will be located on the Hebei Aoxing campus in Xinle City, 200 kilometers southwest of Beijing. The total capital investment is projected to be approximately $15 million during the first five years. The joint venture will seek cGMP approval by the China SFDA for a dedicated manufacturing facility by the end of 2010 and plans to begin manufacturing in the first quarter of 2011. It will initially develop eight narcotic API products for the China market but its product range could potentially exceed 30 products.
"We take great pride in this joint venture with Macfarlan Smith Ltd, a world leader in narcotic and controlled active pharmaceutical ingredients," said Mr. Zhenjiang Yue, Chairman and CEO of Aoxing Pharma. "This collaboration represents a landmark to our business as well as the greater pharmaceutical narcotics and pain management industry in China. China is expected to emerge as the third largest pharmaceutical market in the world over the next two years, yet the medical use of narcotic pain relief and related products is far behind the rest of world. The business of finished dosage narcotics in China has been significantly hindered by the difficulty in accessing the appropriate quality and quantities of APIs. We believe the time is right for both companies to take this innovative step to embrace this significant market opportunity. Furthermore, this joint venture will strengthen our finished dosage product business and has the potential to more than double our current product pipeline while also adding to our bottom line in 2011 with the initial manufacturing of API in the dedicated facility, for which we intend to rapidly seek China SFDA approval. We intend to continue seeking international business collaborations to expand our pipeline and product opportunities with companies seeking to access the China markets."
Commenting on the joint venture, Roger Kilburn, Managing Director of Macfarlan Smith Ltd said: "We are very pleased to be entering into this joint venture with Hebei Aoxing Pharmaceutical Group Ltd. China presents significant growth opportunities for narcotic active pharmaceutical ingredients, a field in which Macfarlan Smith has world leading technology and has accumulated many years of manufacturing know how. We look forward to working in partnership with Hebei Aoxing to develop a range of high quality, high technology API products to serve the growing market for pain management and other narcotic based medicines in China."
Closing of the transaction is subject to various conditions, including approval of the Chinese regulators.