Research and Development Centre

Sihuan Pharmaceutical places great emphasis on research and development, as we believe that it is the cornerstone to our competitiveness, growth and development. The Group’s research and development activities focus on developing new chemical entities as novel therapeutic agents and first-to-market generic drugs, as well as improving the safety, efficacy and production technologies of existing pharmaceutical products. The Group performs thorough market analysis before commencing any research and development projects and focuses on pharmaceutical products that have the potential for gaining widespread market acceptance or becoming the best in the class of similar products on the market. As of the latest practicable date, the Group has submitted over 400 patent applications, of which over 190 have been granted. The Group has been able to successfully develop and bring to market 15 pharmaceutical products, and has over 70 new product candidates in various stages of development. Ten of these products are innovative drugs.

Sihuan Pharmaceutical has two leading research and development teams composed of over 340 personnel including 16 Ph.D. degree holders and over 150 master degree holders in medical, pharmaceutical and other related areas. They focus on conducting drug discovery, preclinical studies and design and managing clinical trials. In addition to research and development of new drugs, our research and development teams are also experienced in manufacturing process improvement activities. Our research facilities are equipped with advanced equipment and instruments.

Our research and development team based in Shandong primarily focuses on the discovery and development of new chemical entities as novel therapeutic agents. The team has 289 personnel. The key research scientists in the team have on average over 10 years of drug development experience from their tenures at multinational pharmaceutical companies. Our team leaders have expertise in areas encompassing both drug discovery and development, such as medicinal chemistry, biological assays, pharmacology, toxicology, chemical synthesis and clinical development. The team has 23 research programs, 5 of which are expected to enter the preclinical trial stage within the next three years.

Our research and development team based in Hainan and Beijing focuses on the development of first-to-market generic drugs based on the result for which we have intellectual property rights in relation to formulation, production process, improved chemical attributes or drug delivery system. The team has 44 personnel. In addition, their research also seeks to enhance our existing drugs by improving their convenience to use (such as the reduction in the frequency of administration) and their therapeutic benefits. In particular, this research and development team has successfully improved the safety and efficacy of cinepazide maleate and was granted three patents in relation to the synthesis process, the production method and the invention and production method of the crystal of cinepazide maleate. Since our establishment, this team successfully developed and brought to the market [13] pharmaceutical products, which attracted strong market response and enjoy leading positions in their respective areas. So far, this research and development team submitted 27 patent applications and as of the latest practicable date, one of which has been granted and 26 are pending approval.

The Group's commitment to research and development is demonstrated through our substantial research and development spending, which, including spending by KBP BioSciences and Hainan Sihuan CVD Research, amounted to on average approximately 10% of our total revenue from 2007 to 2009. The spending was for recruitment of R&D experts, purchasing advanced equipment and facilities, in order to enhance the R&D capability of the Group.

For protection of our interests, the Group enters into confidentiality agreements with our research employees that provide that all relevant intellectual property developed by our research staff during their employment with us shall be deemed our intellectual property.

R&D partners

The Group has entered into collaboration arrangements with external research institutions, universities and hospitals in the PRC to jointly carry out research and development of new pharmaceutical products as well as to enhance our own research and development capabilities. Our research partners include many prestigious research institutions in the PRC such as two prominent state sponsored research institutions and Beijing Hospital. Our joint research projects include the research and development of new pharmaceutical products that have not previously been developed internationally or domestically and new formulations of existing pharmaceutical products.

The terms of our collaboration arrangement for each research project vary, depending on the subject and nature of the research and our commercial arrangements with our research partners. In most cases, we are entitled to receive the full proceeds from the sales of these products as well as the intellectual property rights and other benefits resulting from the successful development and commercialization of the products.

The Group plans to increase our collaborations with external research partners to develop and market new pharmaceutical products in the PRC. Specifically, we focus on seeking strategic and commercial partners in the cardio-cerebral vascular and anti-infective fields. These collaborations will enable us to gain valuable know-how and experience, further strengthen our research and development capabilities, and expand our product portfolio and pipeline.

R&D performances

Currently we had a pipeline of over 30 new products being developed, including 10 innovative drugs that are in various stages of development through our in-house expertise and joint research and development efforts with various research institutions, universities and hospitals in the PRC. Ten of these products candidates are innovative drugs. The majority of these pharmaceutical products under development are new drugs, i.e. innovative or first-to-market generic drugs.

Details of selective product candidates that we believe will be commercially launched in the next few years are summarized below:

• Nalmefene Hydrochloride

  Nalmefene hydrochloride is an opioid (opium) receptor inhibitor. It can be used for recovery from the after-effects of anesthesia, the treatment of respiratory depression caused by opioid drugs overdose and the treatment of heart failure, shock and alcoholism. Nalmefene hydrochloride antagonizes the effects of opioids by competing for the opioid receptors in the central nervous system. This results in a reversal of the effects of the opioid, including reversal of respiratory depression, sedation, and hypotension. The properties of nalmefene hydrochloride are similar to our existing product, naloxone hydrochloride. However, nalmefene hydrochloride is expected to have better curative effects, because the effect of nalmefene hydrochloride has a longer duration of action than other opioid antagonists do. It is intended to be a replacement product for naloxone hydrochloride.

  The product development is currently at post-clinical trial stage. We have one patent application pending for the production method of nalmefene hydrochloride. We have submitted our new drug application to SFDA and expect to obtain SFDA approval for the manufacture and sales of nalmefene hydrochloride injection in 2012.

• Fasudil Hydrochloride Injection

  Fasudil hydrochloride injection is a circulatory system drug used in the treatment of cerebral vasospasm following aneurysmal subarachnoid hemorrhage. Among the top ten best selling molecules for cerebral peripheral vascular therapies, fasudil experienced the fastest sales growth with a CAGR of 182.5% from 2005 to 2009.

  The product development is currently at a stability-testing stage. We expect to obtain SFDA approval for the manufacture and sales of the product in 2012.

• Levetiracetam Injection

  Levetiracetam injection is an anti-epileptic drug that can be used in the treatment of partial onset seizures and myoclonic seizures in patients with juvenile myoclonic epilepsy. It can be used in patients after surgery for treatment of epilepsy caused or triggered by head surgery. It is expected to be a first-to-market generic drug and the first injection form anti-epileptic drug available in the PRC. We believe levetiracetam injection will complement Ren'Ao, our oral drug for epilepsy, and further strengthen our CNS product offering.

  The product development is currently at the preclinical stage. We expect to obtain SFDA approval for the manufacture and sales of the product in 2013.

• Levophencynonate Hydrochloride

  Levophencynonate hydrochloride is a new anti-cholinergic agent that can be used for the prevention and treatment of vertigo symptoms caused by vertebrobasilar ischemia and other diseases. The research and development of levophencynonate hydrochloride is jointly undertaken by a prominent state sponsored research institute and our research and development team. It was awarded the National Invention Second Prize, Military Science Advancement First Prize, “The Ninth Five Year” Army’s Logistics Major Scientific and Technological Achievements and World Intellectual Property Organization Gold Prize”. The product development is currently at phase 1 clinical trial stage. We have applied for and obtained three patents in relation to preparation and medical use of levophencynonate, preparation of a related compound, and the medical use of the metabolic derivative of levophencynonate, each for a patent protection period of 20 years, all expiring in 2024. We also have two pending patent applications in relation to the medical use of levophencynonate as a neuro protectant and as a selective anti-cholinergic agent. We expect to obtain SFDA approval for the manufacture and sale of levophencynonate hydrochloride in 2014.