China Aoxing Pharmaceuticals Co. Inc (CAXG.OB) Readies for a New Health System from a Committed Chinese Central Government

  @ibtimes on January 25 2010 7:55 AM

Pharmaceuticals coming from China, or within China for that matter, may always lead to a bit of skepticism as it relates to safety. There are a few areas of the industry, however, where the central government does not tolerate any errors. Narcotics and pain killers is one such area.

China Aoxing Pharmaceuticals Co. Inc., a specialty developer and manufacturer of narcotic and pain relief medications, works to develop and market opiate type products for a variety of medical conditions. The company is based in New York, NY and has connections with American Oriental Bioengineering (NYSE: AOB) to develop its particular suite of products.

The company, although based in New York, NY, is largely a Chinese company licensed to manufacture and distribute pain oriented products in that country. Although other product manufacturing conditions have been seen as lacking within China, the development and distribution of opiate pain type products is very strictly monitored and regulated. In this regard, the company is also required to follow the rigid needs of the US testing system where it currently has one product in Phase II trials. From this perspective, one must also understand that China does not license just any company to research, develop and market pain type opiates (current estimates suggest just 13.) China Aoxing is one such company offering several products for a solid variety of end-needs. Given the vast population within China, profit does appear to be a solid option as incomes rise and people become able to afford these types of synthetic products.

In assessing the company, there are several main points to consider. While based in New York, NY, the company is still a Chinese company and should be viewed in that light. Next, one must consider the health care system in China, its government’s apparent commitment to improving care within the system, the rising level of income within coastal regions, the rural nature of much of the country, the aging population and most importantly the high savings rate of the population needed to finance healthcare. In each of these areas the government has committed to improve and the company is quickly taking advantage.

China Aoxing has recently installed a fairly aggressive and savvy business/science director and moved to new facilities to ramp production. Recent profits may have been down, as reported in its most current 10-Q, although this is largely as a result of new facility construction and compliance needs. One might point out in this same statement that operating costs have diminished during this same reporting cycle. From all directions China Aoxing Pharmaceuticals appears to be in a fairly advantageous position as the Chinese government revamps it health system with plenty of capital.

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