Chinese Medicine Net

Everybody knows Chinaâ⿬⿢s pharmaceutical system is a mess. The countryâ⿬⿢s former top drug regulator was recently executed for corruption, and the governmentâ⿬⿢s promising an overhaul.

Naturally, the U.S.-traded stocks of a bunch of Chinese drug companies are way down. But there may be more upside than investors realize, according to a story from the WSJ.

â⿬ſThe perceived risk is actually higher than the actual risk,â⿬ Jinsong Du, a health-care analyst in Hong Kong with Credit Suisse, told the paper. â⿬ſThe government, yes, theyâ⿬⿢re going to do the reform, but theyâ⿬⿢re going to do it gradually. There isnâ⿬⿢t going to be huge disruption of the whole system. In the second half of the year, most of the pharmaceutical companies will surprise people on the upside.â⿬

Du says Simcere Pharmaceutical Group, which dropped 17% in the second half of July, is likely to rise in the coming months. He also likes Tongjitang Chinese Medicines, which listed on the New York Stock Exchange in March. The companyâ⿬⿢s lead product, Xianling Gubao (loose translation: Magical Bone Treasure) has about 70% of the traditional Chinese medicine segment of the osteoporosis market.

And coming later this year is a likely IPO for China Nepstar Chain Drugstore. That offering is likely to attract attention for a few reasons. A big one is that the government is working to wean hospitals from selling prescription drugs themselves, and that would help drugstores. Also, the company has garnered the backing of Goldman Sachs â⿬⿝ according to the Web site of the parent company, Neptunus Group, Neptunus signed a $40 million investment agreement with Goldman in 2004 to expand Nepstar.

source: http://blogs.wsj.com/health/2007/09/07/strong-stomach-chinese-pharma-could-be-a-buy/?mod=crnews