SOURCE: AXcess News

AXcess News

January 10, 2011 11:09 ET

AXcess News: Finding Gems in China's Consolidation of Pharmaceutical Firms

HOUSTON, TX--(Marketwire - January 10, 2011) - As regulation takes hold in China's 2,500 year-old traditional medicines marketplace, a few gems amongst that pharmaceutical sector are standing out. Independent research firm Murphy Analytics on Friday updated its price target on Bohai Pharmaceuticals Group (OTCBB: BOPH) and in looking closer at the company, I can see why.

Bohai's revenues have been on a double-digit climb for three years in a row with the first quarter report showing nearly as much in sales as in 2008, coming in at $17 million with earnings per share of $0.15. That would place BOPH's price-to-earnings ratio below 4 while Murphy Analytics put a price target of $7.50 per share on the Company.

A number of BOPH's pharmaceutical products hold protected status in China with exclusive, or near-exclusive, manufacturing and distribution rights, yet a video on the Company's website shows only 1-in-10 hospitals across China carry their products, giving way for growth.

The company completed at $10 million financing a year ago when it first listed to trade in the U.S. stock market. That capital infusion was used to expand its sales force to over 300 while launching an aggressive advertising campaign and by the looks of its first quarter results BOPH is well on its way.

The company has a stable of 15 traditional Chinese medicines that it offers, though a Dec 14, 2010 8-K filing shows Bohai purchased the rights to an additional 14 products, nearly doubling its stable of traditional Chinese medicines.

In May 2009, China's government pledged to expand national healthcare into rural communities. The State Council in Beijing ordered local governments to include traditional Chinese medicine hospitals in their healthcare networks. County hospitals were also encouraged to set up traditional medicine departments.

Prof. Ha Xiaoxian from Tianjin University of Traditional Chinese Medicine, said, "Traditional medicines have outstanding advantages. They cost much less than Western medicines. They will fit in with the health service in rural areas and communities."

Rodman & Renshaw forecast 15% growth in Traditional Chinese Medicine (TCM) sales in 2010 estimated at $46 billion, compared to $36 billion the prior year when TCMs where first mandated by the State Council to be included in the national healthcare system.

The Chinese government has pledged $125 million to expand healthcare coverage to rural areas, which has helped companies like Bohai Pharmaceuticals Group expand into those markets at the same time. Ninety-percent of that government budget will have been doled out by 2011, which is setting the pace for Bohai and others within its sector to grab market share.

Bohai's President, Mr. Hongwei Qu, was quoted in Friday's announcement of Murphy Analytics' updated report as saying, "This research update provides investors with an in-depth analysis of Bohai's particular strengths in the TCM market in China and delivers a comprehensive overview of our revenue and earnings potential as we seek to drive growth in 2011."

Qu went on to say that, "Through our recently expanded TCM portfolio and proactive sales initiatives, Bohai is addressing the demand of China's rising middle class and elderly populations for pharmaceuticals and healthcare products, including TCM."

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