Chinese heparin maker in historic IPO for Goldman

Goldman Sachs, and the husband-and-wife duo of Li Li and Li Tan who launched the company in 1984, stand to gain handsomely from the float. Goldman in 2007 paid $4.9 million for a 12.5% stake. The gamble on Chinese pharma could make them a return of 200x, or $981 million.

Hepalink is in the business of producing heparin, an active pharmaceutical ingredient that works as a blood thinning agent and is derived from the intestines of pigs. Hepalink is the only Chinese heparin manufacturer approved by both the US FDA and EDQM, and has passed third-party German GMP inspection and Australia TGA inspection, said the company in an internal presentation. These approvals likely account for its high share price of 73x its 2009 earnings.

The share price is seen by some to be too high, particularly as retail speculation in China continues to fuel a public markets bubble. That said, Hepalink could be a diamond in the rough. Heparin, or more accurately the import of Chinese heparin into the US, has caused a scandal of late – though unrelated to Hepalink. In early 2008, hospitals began reporting deaths and severe allergic reactions among patients taking a branded anticoagulant containing heparin. Pharma major Baxter issued a recall, contaminants traced to Chongqing Imperial Bio-Chem scratched that supplier off the US-approved list, the truth about how heparin is made and the lack of regulation and oversight in China came under scrutiny.

To get heparin from a pig’s intestine to a bottle in the US or Europe is just as crude as it sounds. Workshops in small farming communities harvest intestines from slaughtered pigs, trading companies buy them, and the product can change hands several times before it makes its way to a consolidator who sells it to a drug company. As with the Chinese milk scandal, many heparin producers are often not terribly strict about quality control.

Hepalink, for its part, takes the issue very seriously, and has up to 300 pages of documentation on each batch of heparin it produces. In a rare interview with media in mid-2008, Hepalink co-founder Li Li explained just how careful the group has to be. “The products we make are directly injected into people’s bloodstreams; so we have great responsibilities.”

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• Topics
• Greater China
• Exits
• Healthcare
• Goldman Sachs