Hisoar Pharmaceutical: Pinning Hopes on Special APIs     

Located in Taizhou city, Zhejiang province, Zhejiang Hisoar Pharmaceutical Co., Ltd. (Hisoar Pharmaceutical, SZ: 002099) was founded in 1966 and listed in Shenzhen Stock Exchange in 2006. It specializes in the production and distribution of special APIs (active pharmaceutical ingredient) and pharmaceutical intermediates.
    More than 70% of the company's products are exported overseas. APIs produced conclude human medicine and veterinary medicine, mainly including antibiotics, fine chemicals, antiviral drugs, cardiovascular drugs, anthelminthics, hypoglycemic agents, and the main products include clindamycin series, thiamphenicol series, nicotinic acid series and dimethyl dicarboxylate biphenyl and etc. The fine chemicals include medicine intermediate and other customize chemicals. Now the company is developing to cover the veterinary and human medicine preparation markets.

* Product advantages *     

At present, the two major special APIs production bases worldwide are India and China, and relatively famous domestic listed manufacturers of special APIs include Zhejiang Hisun Pharmaceutical Co., Ltd. and Huahai Pharmaceutical Co., Ltd. who, like Hisoar Pharmaceutical, are also located in Taizhou, Zhejiang province. Compared with enterprises producing generic APIs, special APIs enterprises usually earn more profits.
     Since 2006, Hisoar Pharmaceutical's sales revenue growth has slowed down continuously, mainly due to gross profit decline caused by outdated product portfolio, rising costs brought by the company's large-scale project investment in the new plant site in southern Sichuan province, and sharp export fall motivated by the global financial crisis. In 2008, the company realized RMB1.0 billion of main business return and RMB25.5973 million of net profit, up 1.47% and down 17.56% respectively over 2007.
    During the first half of 2009, Hisoar Pharmaceutical saw large decrease in both sales revenue and gross profit rate, and the Q1 revenue fell by 66% from the same period of 2008. However, the company is doing better now.
    In recent years, antibiotics and antiviral drugs have contributed most to the corporate revenue. For example, the sales revenue from clindamycin hydrochloride (antibiotics), florfenicol (antibiotics) and cyclopropyl acetylene (antiviral drugs) all grow quickly. Especially, in 2008, the florfenicol sales revenue increased by about 120%.
    The company says that its production of clindamycin series, thiamphenicol series and florfenicol all rank first nationwide with the first accounts for about 70% of the total national exports and over 60% of the latter was exported. Its 2-chloronicotinic acid exports account for over 50% of the national total, and its cyclopropyl acetylene, voglibose and buparvaquone hold the lead at home in both technology level and output.
    In addition, since 2004, the company has input RMB136.736 million to produce 60 t/a 4-AA (4-acetoxy azetidinone) in pilot scale with independently-developed technology in the new factory site in southern Sichuan. 4-AA is the common key intermediate for all carbapenem (the penems) antibiotics, and the company's 4-AA are all exported abroad, mainly South Korea and India.
    According to Hisoar Pharmaceutical, the penems have wide application and dramatic clinical response, so they enjoy huge demand. In the next 5 years, the international demand for 4-AA will reach more than 300 tons per year, and the annual global sales will hit over RMB1 billion. Capacity expansion will help the company to improve its product portfolio.
    Moreover, the company has also invested RMB89.297 million and RMB57.953 million separately to build the 300 t/a florfenicol project and the 100 kg/a voglibose project. After the two projects are put into operation, it is estimated that the company's annual sales revenue and annual profits will increase by about RMB427 million and RMB117.63 million respectively.
    Once the company's new projects using IPO money are put into production, the proportion of 4-AA and high-end florfenicol which have relatively high gross profit rate will increase, which will help the company to improve its product portfolio and raise gross profit rate.
    In addition to the 4-AA project, Hisoar Pharmaceutical also plans to build in its new site 1.0 t/a repaglinide, 10 t/a carprofen, 10 t/a atovaquone, 50 t/a dabigatran, 50 t/a T1620, 300 t/a calcium polycarbophil, 300 t/a 4,4'-difluorobenzophenone and 100 t/a nevirapine projects.

* Partner with powerful foreign-funded companies*     

In 2008, Hisoar Pharmaceutical entered into an agreement with German Boehringer Ingelheim International Limited (BII). According to the agreement, from September 2008 onwards, Hisoar Pharmaceutical should build special workshops for BII in its new factory site in southern Sichuan and honor the contract to manufacture products for BII in 2009. BII will provide special know-how and technical support for Hisoar Pharmaceutical.
    BII is a subordinate of the Boehringer Ingelheim Group which ranks among the world's top 20 pharmaceutical companies. The cooperation with BII will be conducive to promoting Hisoar Pharmaceutical's production technology and market visibility.