Espicom View : This is another step to expand market presence in China, one of the fastest growing in vitro diagnostic markets. In addition to partnerships entered into over the past year and the establishment of a subsidiary in China, the move should ensure the company a strong foothold to promote its product in the region. To focus the company's efforts in Asia is a shrewd move, as the diagnostic it is selling has bigger potential here than in developed countries.
Biohit has agreed to set up a joint venture company in China with Anhui Wisdom-Win Investment. The official name of the joint venture is Biohit Biotech (Hefei) Co, located in the city of Hefei in Anhui province, China. The objective of the partners in forming Biohit Biotech (Hefei) is to manufacture and sell GastroPanel kits to the Chinese market area. GastroPanel is a non-invasive blood test that reliably identifies both healthy and unhealthy stomachs, as well as helps to prioritise patients for further examinations.
Mr Liu Feng, the owner of Anhui Wisdom-Win Investment, who is also General Manager of Hefei Medicine, has invested ¥20 million (EUR 2.5 million) in Biohit Biotech (Hefei). Immaterial investments made by Biohit are worth approximately ¥13 million and include know-how expertise, as well as production technologies and related patents to the joint venture.
Anhui Wisdom-Win Investment will own 60 per cent of Biohit Biotech (Hefei) and Biohit will own 40 per cent of the joint venture. Mr Liu Zhen has been appointed CEO of Biohit Biotech (Hefei). The regulatory approvals are pending and are expected to be finalised during 2014. Biohit Biotech (Hefei) shall aspire to meet recognised international quality standards by the end of 2014. Foundation of the joint venture will create a deferred income worth around EUR 1 million, thus the recognition of revenue is postponed until the new company has been authorised to start operations in the Chinese market. The deferred income is recognised to cover the licence application process and the start-up phase.
Recently, Biohit has been focusing its resources on expansion in China. In May 2013, Biohit entered a distribution agreement with Hefei Medicine for GastroPanel. It also made an agreement with the Chinese subsidiary CanAg diagnostics of the Japanese company, fujirebio, to launch the sales and marketing of GastroPanel in China in 2012. During 2012, Biohit established a subsidiary in China in order to support efforts to build a local distribution channel. In September 2012, Biohit gained a methods patent related to GastroPanel in China. These moves will secure growth for the company's GastroPanel by establishing a foothold in the country and creating partnerships with companies that already have a strong presence in China.
China has a rapidly growing in vitro diagnostics market, as the country is spending on improving healthcare. The in vitro diagnostic market in China is expected to grow at a CAGR of 21 per cent in the period between 2010 and 2015, to around US$5 billion. Business Monitor International's Burden of Disease Database estimates that the number of disability-adjusted life years (DALYs) lost to gastric cancer totalled 4,929,414 in 2012, this is expected to rise to 5,219,753 by 2017, a CAGR of 1.2 per cent over the five year period. Due to the increased incidence of H. pylori in developing countries compared with developed countries and its connection with gastric cancer, in addition to the market potential of China, Biohit is wise to concentrate on this region. With the company's increased presence in the country, Biohit should be able to increase its revenues for GastroPanel in the near-term.
GastroPanel, developed by Biohit, is a blood test for the diagnosis and screening of gastric disorders. GastroPanel test reliably detects H. pylori infection and damage or dysfunction of the stomach mucosa (atrophic gastritis), leading to an acid-free stomach, which is a risk factor for gastric cancer. Recent studies suggest that an acid-free stomach is also a risk factor for oesophageal cancer.