Bullish on Drugs Made in China: Revenues growth at Winner Medical Group Inc. (WMDG), American Oriental Bioengineering (AOB) bode well for Chinese pharma
Today's Financial News - Posted August 11, 2009
Revenues growth at Winner Medical Group Inc. (BBS:WMDG), American Oriental Bioengineering (NYSE:AOB) are boding well for Chinese drug manufacturers
by J. Christoph Amberger
Baltimore, MD — TFN: Last week, the U.S. Food and Drug Administration’s (FDA) new Commissioner, Margaret Hamburg, promised to crack down on safety violations by food and pharma companies.
Of particular concern — given the internationalized supply chain of the global market — was the agency’s responsibility to oversee health care and food products imported to the United States from countries like China and India.
(Last year, contaminated blood thinners made in China were linked to a number of American deaths.)
A more pro-active approach by the FDA (and funded by Uncle Sam) is actually welcomed by China. Beijing thinks long-term: Any number of local pharmaceutical manufacturers can be sacrificed to increased regulation. After all, the prize is large enough to make up for it: Attracting a growing segment of U.S. pharma manufacturing to China will be worth any pawn that falls by the wayside.
Already, Chinese pharma companies are awash in cash: Winner Medical Group Inc. (BBS:WMDG) today reported unaudited financial results for the quarter ended June 30, 2009. Total net sales increased by just 5.56% — while gross profit soared by 20.12% over the third quarter of fiscal 2008. Net income increased by 76.40% over the third quarter of fiscal 2008.
One of our favorite Chinese pharma stocks, American Oriental Bioengineering (NYSE:AOB) did even better: Last week, it announced that revenue in Q2 2009 increased 20.7% to $71.2 million. Revenue from pharmaceutical products increased 17.4%, with prescription pharmaceutical products increasing 23.2%.
I had recommended that HSC members take a position in this stock in early June. Last week, as I was schlepping a canoe through hip-deep mud in Quetico, our HSC team closed out NYSE:AOB for gains of 20% in less than 2 months.
It was a good move for this crazy market: Take profits when they materialize!
But AOB is just one company that will benefit greatly from the impending emigration of pharma capital from the United States. In a recent report, I selected four Chinese ADRs — none more expensive than $3 — that not only will profit handsomely from China’s own “healthcare stimulus”.
They’re set and ready to absorb American drug manufacturing capacity like a Shamwow!
One of these stocks is up 25% since I published my special report just 2 weeks ago. But I just upped my entry price range on it. Most of the others are moving on virtually no news at all — and while the Shanghai index is falling!
The key catalyst in this? Think quality control.
I’ve outlined my thinking in this special report… give it a quick read-over and see if you can agree with me!
Next Article: Utek: A small cap on a mission
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