How to Start the Process of Technology Transfer to China

AP's mission is to provide our customers with direct and seamless access to the Chinese pharmaceutical and medical devicemarkets without having to invest in establishing an office, scientific resources, or a sales force in China. Access to the Chinese marketplace will extend the product life of their existing IP, genericdrugs or medical devices, increase sales revenues and because of the Chinese population's perception thatWestern products have a greater value - maintain higher profit margins.

The key focus of Advanced Pharmaceuticalsis toassist companies interested in increasing sales of theirexisting generic drugs or medical devicesor looking to extend the profitable lifecycle of their IP protected drugs or devices through either direct sales to China or licensing opportunities in China. After any patents expire,U.S. companies typically face stiff competition from generic pharmaceutical companies or competitive medical manufacturers that severely impactthe revenue stream for the proprietary product of the company. AP is in a unique position to help prolong the life cycle of pharmaceutical drugs ormedical devicesafter patent expiry for our U.S. company clients by providing access to an expanding market in China.

The State Food and Drug Administration (SFDA), however,has implemented new regulations that require foreign companies to go through a stringent approval process in China before they can market their drugs in the country. This has significantly raised the barrier for foreign companies entering the Chinese market. Advanced Pharmaceuticals can manage and navigate the product license approvals from the SFDA and obtain exclusive or "favored" distribution status for our client's products in China. AP offers a competitive advantage to U.S. based companies throughthe experience of ourShanghai officewith a proven track record of obtaining SFDA approvals for drugs and devices which isstrengthenedbythe experience of the U.S. based partnerswhom are all well seasoned in FDA regulations governingpharmaceutical and medical device companies in the United States.

Once approval is obtained from the SFDA, our client's drugsor devices are granted a "favored" status to distribute their products throughout China. This is usually accompanied with favorable pricing overChinese counterparts since there is a strong bias by the Chinese public for medical and pharma products manufactured in the West - which provides atremendous advantage tocompanies with FDA approvals. The favored status obtained by AP for our U.S. based companies offers guaranteed access to the growing Chinese market.The Chinese market serves over 1.3 Billion people and growing, with projected sales of western pharmaceuticalsof $41 Billion and medical devices of $15.5 Billionby 2012. Even thoughgrowth in the global pharmaceutical and medical device market, in the last few years,has not been overly exciting withsingle-digit growth rates,China's emerging market's share of growth in the pharmaceutical and device markets has been upwards of 30 percent. From 2004 to 2008, China's emerging market experienced a compounded annual growth rate above 20% and in 2007 alone, sales ofChinese and western drugs in Chinahit $50 billion.

Compared to other industries, the global economic crisis appears to have hada minimal effect on the pharmaceutical and medical device markets in China thanks to aggressive government spending on health care, a massive population of 1.3 billion people and an increasing demand for drugs to treat chronic diseases as well as a desire for advanced medical technologies.According to IMS, China's pharmaceutical market has the potential to double in size and climb to the fifth largest in the worldby 2012. The demand for prescription drugs (patented and non patented) will grow at staggering rates as will the demand forsuperior medical devices. This brings an exciting opportunity to the forefront forU.S. pharmaceutical and device companies' astuteenough to enter the Chinese marketplace.

The number of multinational corporations (MNCs) in China has increased more than 10% from 1999 to 2008 and manyhave strong beliefs that Chinawill become their leading overseas market. By the beginning of 21th century, MNCs branded products had gained major market position in large cities of China. Currently, twelve of the top 20 drug firms in the Chinese market are international MNCs and they are experiencing an average sales growth of 25% compared to 15% for the market as a whole. The high growth rate is primarily due tothe fact that the drugs being sold are distinguishable and innovative. In addition,policies from the PRC Government also favorgrowth of prescription drugs from MNCs.

Recently, the Chinese government has alsotaken action to improve intellectual property rightsto reward MNCs with unique products and theSFDA has even started refusing to approve generic products if there are similar patented moleculescurrently on the market. In addition, the SFDA is clamping down on domestic companies that don't respect patent rights.

With all that said, the market potential for unique drugs and medical devicesin China is massive and will continue to explode in the coming decade. This behemoth growth becomes clearly evident when you consider: the size of the population which exceeds 1.3 billion people; the fact that the PRC governments intends to provide health benefits for all residents by the end of 2010 and finally that as of late 2009, the People's Republic of China committed an additional ¥ $850,000,000,000 ($125 billion U.S.)to provide care, including prescription drug coverage, to part of the un-served population over the next three years.