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Pharmaceutical Inspection Industry

The Group’s wholly-owned subsidiary, Sino Harbour Bio Technology Limited (“SH BioTech HK”) entered into a joint venture agreement (the “JV Agreement”) on 15 December 2015 with Zhejiang University of Technology Assets Operation Limited (“Uni Assets Ltd”) and Irvine Pharmaceutical Services, Inc. (“IPS”) to incorporate a New Company in the PRC, named “Zhejiang IPS Pharmaceutical Technology Co., Ltd., to enter the pharmaceutical inspection industry.

The New Company shall have a registered capital of RMB64.00 million (equivalent to approximately HK$76.89 million). SH BioTech HK will be injecting a capital of RMB38.40 million (equivalent to approximately HK$46.13 million) in cash to subscribe for a 60% equity stake in the New Company (the “Subscription”) and upon the completion of the Subscription, the New Company will be a subsidiary of the Group. Uni Assets Ltd will be injecting a capital of RMB12.80 million to subscribe for a 20% equity stake in the New Company and IPS will be injecting its intangible assets in an aggregate fair value of RMB12.80 million in return for a 20% equity stake of the New Company.

The New Company will establish a service centre, for pharmaceutical services including third-party pharmaceutical quality research and standard inspection, customized synthesis, prescription technology, new drug research, drug safety evaluation and clinical trial in the PRC and the Asian-Pacific region (the “Pharmaceutical Centre”), and enable the Pharmaceutical Centre to pass the relevant FDA inspection and/or audit so that the Pharmaceutical Centre will be qualified to issue testing and analytical reports according to the regulations promulgated and enforced by the FDA. Subject to FDA’s satisfactory review, the Pharmaceutical Centre will be one of the first batch of approved qualified laboratories in the PRC.

he New Company shall develop a trading platform to assist pharmaceutical products from the PRC to enter into the markets in the USA, Canada and the European Union; involve in the drug quality standards and the third-party arbitration services; provide training on FDA related services and standards for Chinese drug manufacturing enterprises; provide services of FDA application and advices for Chinese drug manufacturing enterprises; and establish branch offices in major pharmaceutical regional centres in the PRC, to expand its market share.

Furthermore, the Collaborative Innovation Centre of Yangtze River Delta Region Green Pharmaceuticals (“YRD Innovation Centre”) and the Zhejiang University of Technology (“ZH Tech University”) shall cooperate with the New Company to expand its influence and market share as well as provide sufficient technology and human resources support to the New Company.

Following the Group’s subscription of Zhejiang Davi Pharmaceutical to diversify the Group’s business into the pharmaceutical industry in late November, the Group is further expanding the Group’s business scope to the pharmaceutical inspection industry to increase income sources by capturing the business opportunities arising from a huge market demand and potential in the medical treatment industry which is expected to grow rapidly. The demand for pharmaceutical services for high-end pharmaceutical products in the PRC and favourable government initiatives on third party’s inspection institutes are also facilitating growth of the industry. With the strong background and support of the Group’s JV partners, the Group is fully confident in the development of the new business.

Steme Cell Sector

The Group’s wholly-owned subsidiary, Sino Harbour Bio Technology Limited (“SH BioTech HK”) has entered into a strategic cooperation framework agreement (the “Framework Agreement”) on 22 February 2016 with The First Affiliated Hospital of Shantou University Medical College (“Shantou Uni Hospital”), the Zhejiang Gene Stem Cell Biotech Company Limited (“Zhejiang GSCB”) and Beijing Sanyouli Technology Development Company Limited (“BJ Sanyouli”). According to the Framework Agreement, all parties are to set up a new company (“New Company”) in the PRC and utilise their respective resources and experience to collaborate in the stem cells sector. SH BioTech HK will be the largest shareholder of the New Company.

The New Company is to be mainly engaged in a variety of aspects in the stem cells business, covering i) collection and storage of stem cells, including cord blood stem cells, umbilical cord mesenchymal stem cells and adipose-derived stem cells; ii) proliferation of stem cells, clinical study and applied investigation of stem cells and research and development of products utilising stem cells; and iii) transplantation of and medical treatments with stem cells. In addition, the New Company also intends to establish hospitals or cooperate with relevant local hospitals for health and anti-aging therapy, cancer therapy and dental services in Shantou City, Guangdong Province, the PRC. It is to also explore the stem cells business, especially in self-immune system storage technology, in other countries.

Shantou Uni Hospital is a provincial Class Three Grade A public hospital, with one of the highest current rankings in the PRC. Shantou Uni Hospital principally supports and manages the operation of the New Company. It will also offer the New Company preferential rights for handling the stem cells collection and storage business from its Obstetrics and Gynecology Department.

Zhejiang GSCB is engaged in the business of commercialization of stem cells technology. It is one of the implementation units of the National High-tech R&D Program of the PRC, with expertise in stem cells technology, including liquid separation, extraction, cultivation and enlargement of stem cells. The first dental cell resources storehouse in the PRC was established by BJ Sanyouli, which is involved in stem cells technology operations.

The notable increase in national income, growing health awareness of the greater public, introduction of the two-child policy and rapidly ageing population are driving the expansion of the high-end biomedical industry in the PRC market. We firmly believe that the stem cells sector will become one of pillar industries for the future economic progress in the PRC. The Group’s high-end medical businesses such as pharmaceutical inspection and stem cells are set to become its growth drivers.

In 2013, the Group’s parent company Pan Hong Holdings Group Limited acquired 10% equity interest in Zhejiang GSCB, becoming the third-largest shareholder of Zhejiang GSCB. The Group will continue to actively explore the opportunities in the medical and healthcare-related industries, fully realise the synergies between pharmaceutical products, pharmaceutical inspection and stem cells businesses and broaden the income stream. Bolstered by supportive national and provincial policies, riding on the enormous huge potential market demand for high-end medical services and backed by the strong professional capabilities and advanced technologies of our partners, the Group is confident in the prospects of the stem cells business of the new company.