Drug research in China is costly and involves complicated approval procedures, but in many aspects, the biopharmacy industry is hotter than ever.

Last September, Hebei Ruisheng Pharmaceuticals received $50 million in financing from the American World Trade Fund. Meanwhile, Shanghai Ambrosia Pharmaceutical Co. Ltd. obtained $5 million in venture capital funding from Morningside Tech.

According to the China Venture Capital Q3 Report, produced by Zero2IPO, biopharm attracted a great deal of attention in the third quarter of 2006, with five projects gaining investment of over $50 million, an average of $10 million per project.

Internationally, biopharm is in its initial phase of mass production development. Experts predict that the industry will see a rapid development period after 2020, becoming a leading industry for the global economy. If things continue down the same path, China could be on the forefront of this hot industry, and investors should take heed.

Virtual and non-virtual

The profit model is one of the most carefully considered standards for investors, and the Internet is helping to propagate new ones in biopharm. Aiming at healthcare services, Ikang.com employs a membership model. The business is made up of four modules: individual health management, corporate health management, insurance institutions and medical institutions. The modules provide healthcare management services such as customized checkup and health consultation.

But non-virtual biopharm is also attracting attention.

Ciji Health Checkup and Jiamei Health Checkup provide individual and group checkups that are carried out by professional physicians, surgeons, gynecologists and pediatricians, via an extensive chain of establishments. In 2004, Dinghui International became a franchisee of Ciji with an investment of $35 million. Jiamei will exchange 15 percent of its shares for $10 million in its first round of financing.

Winning the brand war

A strong brand name means competitiveness in the pharmaceutical industry. A widely recognized brand leads to a larger market share and increased profits. According to an analyst from Pingan Securities, the pharmaceutical industry is now facing issues of fraud, resulting in market uncertainty.

Under such circumstances, a prestigious brand holds more value. Therefore, building a reputable brand name has become an important strategy for all medium-sized pharmaceutical firms.

Mindray, a Shenzhen medical equipment manufacturer, held its IPO in the United States last September, and in doing so earned itself a significant reputation in China's pharmaceutical industry and the rest of the world for its independent research and development. It manufactures leading industry products including vitality monitoring systems and gray scale ultrasonic imaging. Mindray's products have been used in more than 25,000 hospitals, clinics and other medical institutions since 1992.

The Recommendations on Further Managing the Prices of Medicine and Medical Services were promulgated in China in June 2006.

Experts believe that China's pharmaceutical industry will be reshuffled within the next few years, and the most competitive firms will be the pharmaceutical and traditional Chinese medicine businesses of well-recognized brands. Companies or brands that take a monopolistic position or are known for innovation are set to dominate the market.

The largest merger with foreign capital

In this day and age, the weak tend to be consumed by the strong. By allying with others, it is easier for companies to set up national or international production and sales networks. By doing so, they are able to not only minimize costs and consolidate their positions, but also gain a larger share of the market. This, in turn, makes bargaining with investors a lot easier.