Restructuring among Central Government-owned Pharm Firms   

China National Pharmaceutical Group Corporation's (SINOPHARM) plan to acquire China National Biotech Group has been approved by the State-owned Assets Supervision and Administration Commission (SASAC) and is subject to approval by the State Council.
   China National Biotech Group will be a business unit of SINOPHARM upon completion of the restructuring. SINOPHARM is also likely to complete the acquisition of Shanghai Institute of Pharmaceutical Industry.
   SINOPHARM, with annual sales of more than RMB50 billion, is set to become a leading position representing the central government owned pharmaceutical companies. In the coming years, SINOPHARM, China Resources Medications Group Ltd. and Shanghai Industrial Investment (Holdings) Co., Ltd. will become the major trio in the domestic pharmaceutical industry, experts said.
   China National Biotech Group is China's leading biotech company, with 2008 sales of RMB4.9 billion, total assets exceeding RMB7.6 billion, and net assets at RMB3.8 billion.
   China National Biotech Group will become SINOPHARM's eighth business unit, and complement the industrial production business for SINOPHARM. Currently SINOPHARM is engaged in drug distribution, medical equipment, among others. Drug distribution is its main cash cow, generating more than 80% of the group's revenue.
   Shanghai Institute of Pharmaceutical Industry was founded in 1957 as the only medical research firm among all state-owned companies directly controlled by the central government. It focuses on the research and development of innovative drugs, medicine production and distribution. Representing the top-level research capability, it has six main research departments, and several national-level key labs, a holding company and a medicine institute.
   In 2008, Shanghai Institute of Pharmaceutical Industry posted sales of RMB910 million, and a profit of RMB147 million. It is set to be taken over by SINOPHARM by the end of the year, according to sources at SINOPHARM.
   On June 11th, 2009 the SASAC appointed Song Zhiping as SINOPHARM's chairman. Mr. Song is the dual chairman of China National Building Material Group Corp. Song is known for leading the consolidation effort in the cement industry. This is the first time the SASAC has appointed the duplicate chairman for the state-owned enterprise under the central government.
   SINOPHARM's role in future medicine industry
   The takeover of Shanghai Institute of Pharmaceutical Industry will help beef up SINOPHARM's research force, while the acquisition of China National Biotech Group will help strengthen its industrial production business, making the company an integrated company of research, manufacturing and trade, analysts said.
   "SINOPHARM will definitely strengthen its industrial production business by mergers and acquisitions," a veteran medical researcher in Beijing said.
   SINOPHARM has forecasted 2009 sales of RMB51.5 billion, and has set a sales target of RMB160 billion by 2015.
   SINOPHARM has already taken over the Xinjiang Pharmaceutical Corp. and Ningxia Pharmaceutical Group, and are planning to set up new logistics hubs in Zhengzhou, Hefei, Urumqi, Taiyuan, Chengdu, among other cities.
   SINOPHARM is planning a Hong Kong stock exchange listing to raise more than HK$7 billion, a move that could further strengthen the SINOPHARM's capability in consolidating the domestic drug distribution sector. The company was listed on the Hong Kong Exchanges and Clearing Limited on September 23rd, 2009.
   The reforming policies of medical and healthcare system, which could speed the consolidation of medicine distribution industry, also provides a fantastic opportunity for SINOPHARM to consolidate its leading position in medicine distribution sector.
   Upon completion of the acquisitions, SINOPHARM will have five listed companies in control. They are Shanghai Modern Pharmaceutical Co., Ltd. (SH: 600420), Beijing Tianan Biological Products Co., Ltd. (SH: 600161) under China National Biotech Group, China National Medicines Co., Ltd. (SH: 600511), Shenzhen Accord Pharmaceutical Co., Ltd. (SZ: 000028) and Sinopharm Group Co., Ltd. (HK: 01009).
   SINOPHARM, China Resources Medications Group Ltd. and Shanghai Industrial Investment (Holding) Co. are expected to dominate the domestic pharmaceutical industry in future, a SASAC official said the three companies will remain competitors to each other as SASAC will not further conduct restructuring among the three companies.