Chinese service provider files $80m IPO to fund expansion

Shanghai-based Newsummit hopes to raise up to $80m (€60m) in its IPO​ (initial public offering) to fund expansion efforts. The company formed in 2001 as a CRO (contract research organisation) but switched models in 2008 to become an intermediary linking clients to a network of vendors.

Newsummit has ‘strategic framework agreements’ with two-thirds of its vendors. These deals give the company “favourable service fees, priority in scheduling, and the availability of test resources”​. Even with these favourable terms Newsummit spent 69 per cent of total sales on outsourcing fees.

Some of the currently outsourced work could be insourced after the IPO. Newsummit leases five sites and plans to raise GMP (good manufacturing practice) standards, add pilot-scale production capacity, and build laboratory testing capabilities at its facilities using the expected influx of cash.

There are also plans to expand into life science parks in Guangzhou, Chengdu, and Xiamen. Adding sites in other areas of China is intended to expand service capacity and give Newsummit access to new potential clients.

IPO cash will also fund an expansion into Phase IV to benefit from the Chinese government’s five-year plan to improve drug safety through greater post-approval activity. To offer Phase IV services Newsummit expects to add a presence in Shanghai and Wuhan.

Opening these sites will add to headcount at Newsummit, which as of December 31 2011 was 415, up from 200 a year before. More than one-quarter of staff work on marketing and Newsummit plans to expand its sales team in the US and Europe soon.

International expansion​

By expanding overseas Newsummit hopes to add to the 80 foreign biopharma companies and research bodies with which it is collaborating, and in doing so “acquire advanced technologies and higher industrial standards”.​

However, expanding overseas creates new problems. Newsummit admits it has “limited experience”​ dealing with the US Food and Drug Administration (FDA) and European Medicines Agency (EMA). As such it “may face significant challenges in complying with the relevant regulations”​

Backlog at the end of 2011 totalled $377m, divided roughly equally between small molecules, biologics, medical devices and diagnostics, and traditional Chinese medicines. More than half of the 327 deals are for compounds in preclinical development.

Preclinical dominated sales last year too. Work on INDs (investigational new drug) generated four-fifths of total sales in the first six months of 2011, but Newsummit expects its NDA (new drug application) work to become more important in the future.