The Street.com recently sat down with Ming Yin, head of investor relations and vice president of finance for China Biologic Products ( CBPO). China Biologics is the leading public plasma-based products manufacturer in China. The company saw its sales grow from $4 million in 2002 to $119 million in 2009 and is planning to expand its products into the world plasma markets. Can you give me some background on your company? China Biologic entered the United States capital markets in 2006. Our decision was largely prompted by the Chinese government's decision to start privatizing plasma collection centers, and we needed immediate capital to pursue strategic acquisition opportunities Before 2008, China Biologic had one operating subsidiary, Shandong Taibang. By the end of 2008, we had completed two acquisitions with the purchase of a majority ownership in Guiyang Dalin and a 35% equity interest in Xi'an Huitian. With those two acquisitions, China Biologic became the largest non-state owned company in China's plasma industry. Where do you see the company in five years? 10 years? Until recently, we were a small plasma-based products manufacturer. In the next five years we will continue to execute a similar strategy through organic growth and pursuit of additional suitable strategic acquisitions to increase our market share in China. In the next five to 10 years, we want to have more global presence in the world plasma-based product markets. We view US-based Baxter ( BAX) and Australian company CSL as our models for expansion. What are the various segment lines of the company? We have a fully integrated plasma business with the main products of Human Albumin Human Immunoglobulin for Intravenous Injection, and various hyper-immune products. We have more products in the pipeline, including Human Prothrombin Complex Concentrate and Human Coagulation Factor VIII. Our current revenues are mainly from the plasma protein derivatives, which is our core business and our strength. Who are your main competitors? In China, our main competitors are Shanghai RAAS Blood Products, Hualan Biological Engineering and Beijing Tiantan Biological Products. Internationally, we face competition from CSL and Baxter because they all are selling their human albumin products in China. We believe international companies will have limited opportunities in China in the future as they only have permission to sell Human albumin products.
Can you explain the expansion of your network of plasma collection centers? It is extremely difficult to apply for launching new plasma collection centers because the approval process is handled at the provincial level. We must submit the application for new plasma center to the county government first, then the municipal government, then the provincial government. Each government authority has different opinions in supporting the growth of plasma industry. China Biologic will own seven of the eight plasma collection stations in Shandong province, and 18 total plasma collection stations nationwide. With up to 660 metric tons of plasma collection capacity at that time, we believe that we are well positioned to increase our market share in China. What is the maintenance capex required every year to keep the business running? Major maintenance is driven by the GMP standards revisions. The government just said GMP will be tightened again change in next few years, so we have to upgrade the new plant facilities. Other than those, the maintenance alone will cost approximately $4 to $5 million USD per year. We can have large capex spending because of government policy changes or building new stations. This year we expect $15 to $19 million in capex, including the construction of two new plasma station, which were recently approved by the government, and system and other facility upgrades. Why do your customers choose you over the competition? The key reason is that China Biologic has been on the market for a long time and has built a strong brand recognition. Our predecessor company of Shandong Taibang has been in the plasma business for 30 years and had built a reputation for manufacturing and distribution high quality products.
How is the growth in the overall industry in China? The blood plasma industry in China is still in the early development stages compared to western counterparts in the industry. The industry has a long way to grow before catching up to the international standards. According to industry analyst, the growth rate will be 15% to 20% in the industry in China. We hope to grow faster than the industry. Who is the Chinese businessman/businesswoman you admire most? Zhang Yin, the entrepreneur and owner of the paper recycling company called 9 dragons. She started the business from scratch. If you had to invest in a small cap U.S. listed publicly traded Chinese company other than your own, what would it be? Mindray Medical ( MR). Small-cap -- China Aoxing ( AXN).