BUSINESS OVERVIEW
The Company is a distributor of human vaccines and other biopharmaceutical products. Currently, the Company distributes the products in China. The Company has established its distribution network in China through the acquisition of its interest in its subsidiary, Hainan CITIC Bio-pharmaceutical Development Co., Ltd. (“HCBD”) and, through its joint venture with Zhejiang Tianyuan Bio-pharmaceutical Co., Ltd. (“Zhejiang Tianyuan”)
The emphasis of the Company is on the introduction and the marketing and distribution of products rather than on manufacturing. Substantially all of the operations are in China.
Over the past year the vaccine business has become more competitive. In addition, in July 2007 the former head of China's State Food and Drug Administration (“SFDA”), was executed by shooting for taking bribes from various firms in exchange for state licenses. The SFDA is currently reviewing all licenses granted over the last 8 years and there is a large backlog over the issuance of new licenses. In order to improve our operating performance and cope with this changing environment, the Company has changed its business strategy and formulated a new business plan to conserve cash, lower expenses and increase profitability. Beginning in 2007 it started to distribute a few specialty drug products, such as Serrapeptase. The Company plans to take more control on the available cash in the subsidiaries and move into areas with higher market potential and higher margin specialty pharmaceutical products.
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Move Away from the Low Margin Vaccine Business
The Company has planned to move away from the low margin vaccine business and focus on higher margin vaccine and specialty drugs. Due to the recent changes in vaccine sectors, more and more vaccine manufacturers have entered the low margin vaccine business such as distribution of flu vaccine, which has created severe competition among, and squeezed the profit margin of the vaccine distributors. To avoid this direct competition, the Company started to negotiate with a few global vaccine manufacturers for carrying their higher margin products. The Company cannot assure you that it be successful in entering into an agreement.
Commence Distribution of Specialty Pharmaceutical Products
In February the Company began distributing on a trial basis certain specialty pharmaceutical products of Takeda Pharmaceutical Company, Ltd. (“Takeda”), the largest pharmaceutical company in Japan. Takeda specializes in the research and development of breakthrough drugs, and has marketing operations throughout U.S., Europe, and Asia. In Japan, Takeda has also built a strong presence in the over-the-counter (OTC) drugs market, and holds the second largest share of that domestic market.
After distributing its products for about ten months on a trial basis, both parties have agreed to continue this relationship and the Company intends to commit more resources and increase its ability to distribute Takeda’s products. Currently the Company has an agreement to distribute Serrapeptase tablets manufactured by Takeda.
Antiviral Products
In October 2007 the Company began working with Soonfast Pharmaceutical Science & Technology Co., Ltd. (“Soonfast”) to introduce a new antiviral medicine to the overseas market (including the United States and other overseas markets). This all-natural product has been approved in China for external use to treat human papillomavirus (“HPV”) and herpes simplex virus (“HSV”). The commercial product was released in November 2007, and the Company will begin to distribute this product in certain regions in China and has the right to distribute it in all overseas markets, including the United States.
Take Closer Control on Subsidiaries
The Company is working to take direct control of our subsidiaries’ operations and financial management instead of relying on its joint venture partner’s performance. Recently the Company reached agreement with its joint venture partner to increase shareholding in the joint venture in China, Zhejiang Tianyuan Biotech Co., Ltd., and eventually to have 100% control and ownership in this joint venture and its subsidiary, HCBD. The Company plans to change its name to Zhejiang Baicon Pharmaceutical Co., Ltd. The Company does not need to raise additional capital to complete this transaction. It is expected that this will help to preserve the available cash, increase operating stability, provide the Company with more operation flexibility, and improve its current performance
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