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» 23/07/2009 [Company watch]
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»29/10/2009 [Company watch]
Tianyin Pharma Creates New Antibiotic JV

Tianyin Pharmaceutical, Co., Inc., (NYSE Alternext: TPI), a manufacturer and supplier of modernized traditional Chinese medicine (\"TCM\") based in Chengdu, China , today announced it has formed a joint venture with Sichuan Mingxin Pharmaceutical Co., Ltd (\"Mingxin\") named Sichuan Jiangchuan Pharmaceutical Co., Ltd. (\"Jiangchuan\"). Tianyin owns 77% of Jiangchuan and will utilize this as the foundation for a broader, longer term strategy to build a significant presence in the rapidly growing Chinese macrolide antibiotics market, while diversifying its revenue base of western pharmaceuticals

 

Tianyin Pharmaceutical, Co., Inc., (NYSE Alternext: TPI), a manufacturer and supplier of modernized traditional Chinese medicine ("TCM") based in Chengdu, China , today announced it has formed a joint venture with Sichuan Mingxin Pharmaceutical Co., Ltd ("Mingxin") named Sichuan Jiangchuan Pharmaceutical Co., Ltd. ("Jiangchuan"). Tianyin owns 77% of Jiangchuan and will utilize this as the foundation for a broader, longer term strategy to build a significant presence in the rapidly growing Chinese macrolide antibiotics market, while diversifying its revenue base of western pharmaceuticals.

 

Specifically, Jiangchuan will manage research and development activities, while also manufacturing and selling Active Pharmaceutical Ingredients ("APIs") that are used to produce macrolide antibiotics. This large and growing class of drugs in China includes Azithromycin, Clarithromycin and Roxithromycin, which treat a wide range of bacterial based respiratory tract, urinary tract and skin infections. According to Yiyao Jingji Newsletter, these three drugs accounted for 90% of macrolide antibiotics sales in China for 2008. Total macrolide antibiotics sale in hospitals alone in China were $562 million in 2008 according to Yiyao Jingji Newsletter, while ResearchInChina stated that China\'s output and production capacity of antibiotic raw materials ranks Number 1 in the world.

 

As part of the transaction, Tianyin purchased two SFDA product approvals from Mingxin for $3 million which cover the antibiotics Azithromycin and Roxithromycin and will be contributed to the joint venture. Since APIs are produced through a two-stage process that combines fermentation followed by a synthesis process to create the macrolide antibiotics, a new manufacturing facility will be constructed to meet these specifications. Tianyin will leverage its sales and marketing expertise, product rationalization capabilities, extensive distribution channels, and partnership with Kelun Pharmaceuticals to ensure that a broad based market penetration is achieved.

 

Tianyin will use the financing proceeds to complete the $4.5 million land purchase in Sichuan for the joint venture where the new production facility will be built with full support of the Sichuan Xinjin County Government. Phase I, which will produce Oral and Injectable grade API for Azithromycin, in addition to other macrolide antibiotic intermediaries, is expected to be fully operational by July 2010 . Phase II, which will include high output production of Roxithromycin, Clarithromycin and other macrolide antibiotics is anticipated to be operational by second half of 2012. Total capital expenditures for both phases are estimated to total approximately $20 million . Gross margins from these product lines are expected to range between 25-27% while the company can leverage its existing SG&A infrastructure to bolster net margins. The company anticipates this initiative will contribute approximately $22.5 million in revenue and $1.4 million in net income for fiscal 2011. The completion of the production facility for the JV alone will enable further growth and improvements in profitability for fiscal year 2012 with revenue and net income contributions expected to be $47 million and $6.5 million , respectively. Once both phases are operating close to full capacity, the facility will have the potential to generate $12 million in net income on an annual basis.


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