,, August 10, 2009, by Jim Nelson  —  At the Agora Financial conference in Vancouver, I participated in a panel that attempted to name “the trade of the decade.” Many of the recommendations involved commodity or resource plays.

I suspect that these defensive recommendations are worthwhile. They may, in fact, protect investors from the worst of this downturn. I don’t believe, however, that they are in any way trades “of the decade.”

First, we happen to be living through a radical acceleration of the medical sciences. This acceleration has not only left laypeople in the dust. Scientists are unable to keep up with research outside their own areas. As a result, the companies that own these breakthrough technologies are not widely understood or properly valued.

It is also true that health care stocks are traditionally countercyclical. This isn’t surprising since consumers tend to cut back on everything else before sacrificing medical care. It’s no accident that biotechs in our portfolio have done well., August 10, 2009, by Laurie Barclay MD  —  Dietary fiber is linked to a reduced risk for type 2 diabetes, which may be partly explained by inflammatory markers and hepatic fat deposition, according to the results of a prospective study reported ahead of print in the July 23 issue of Diabetes Care.

“Several prospective cohort studies have observed a protective effect of dietary fiber on risk of type 2 diabetes,” write S. Goya Wannamethee, PhD, from University College Medical School in London, United Kingdom, and colleagues. “However, this has not been observed in all studies and the biological mechanisms by which dietary fiber may be beneficial for diabetes are unclear. Several studies have shown inverse associations between dietary fiber and markers of inflammation, insulin sensitivity and hepatic function, factors which have been linked to the development of diabetes in other studies.”

The goal of this study was to evaluate the association between dietary fiber and the risk for type 2 diabetes in older men, as well as the role of hepatic and inflammatory markers. The study cohort consisted of 3428 nondiabetic men aged 60 to 79 years who were originally enrolled in the British Regional Heart Study (BRHS). During a 7-year follow-up, there were 162 incident cases of type 2 diabetes.

After adjustment for total energy intake and potential confounding variables, the lowest quartile of total dietary fiber (≤ 20 g/day) was associated with an increased risk for diabetes (relative risk [RR], 1.47; 95% confidence interval [CI], 1.03 – 2.11). Low cereal and low vegetable/fruit fiber intake were each separately associated with increased risk.

Dietary fiber was inversely associated with the inflammatory markers C-reactive protein (CRP) and interleukin-6 (IL-6), as well as with tissue plasminogen activator (t-PA) and gamma glutamyl transferase (GGT). After adjusting for these markers, the increased risk for diabetes seen with low dietary fiber was attenuated (RR, 1.28; 95% CI, 0.89 – 1.86).

“Dietary fiber is associated with reduced diabetes risk which may be partly explained by inflammatory markers and hepatic fat deposition,” the study authors write. “We can not establish the nature of the association between fiber intake and hepatic function and the inflammatory process.”

Limitations of this study include a predominantly white, European, male population, limiting generalizability of the findings. Further studies are required in women and in other ethnic groups.

The British Heart Foundation Research Group supported this study. The BRHS also received support from Diabetes UK. The study authors have disclosed no relevant financial relationships.

Diabetes Care. Published online July 23, 2009. Abstract, August 10, 2009  —  Add a good night’s sleep to your checklist of helpful weight-loss aids.

Sleep deprivation interferes with appetite-suppressing hormones, increases stress hormone levels, and decreases a person’s glucose tolerance, all of which may contribute to weight gain. Another way sleep loss may help pile on the pounds: late-night munching. Go to bed and get up at the same time each day to help achieve sounder sleep.

Although more research is needed to confirm the link between sleep and weight, getting 7 to 8 hours of sleep per night can make you look as much as 3 years younger and help improve your mood. Overweight and obese adults are more likely to report skimping on sleep compared to people with healthy body mass indexes. Expending more calories than you take in is the simple science behind any successful weight-loss program. The best way to do this is to eat a healthy, reduced-calorie diet and boost the amount of time you spend exercising.

Other habits may boost your weight loss efforts or hamper them. For example, skimping on sleep negatively alters levels of hormones involved in carbohydrate metabolism and appetite control, which may contribute to weight gain. And living a hectic, high-stress lifestyle may make it harder for you to focus on your health and may increase the likelihood that you’ll make poor food choices and skip your exercise routine. Set yourself up for success by living a balanced lifestyle, in addition to balancing calorie intake and expenditure., by Sarah Graham  —  Not getting enough shut-eye could be interfering with your ability to shed unwanted pounds. Previous research has shown that sleep could be a key regulator of body weight and metabolism. New findings link changes in two important appetite-regulating hormones to the amount of sleep people regularly get.

Shahrad Taheri, now at the University of Bristol, and colleagues analyzed data collected on 1,024 volunteers as part of the Wisconsin Sleep Cohort Study. Starting in 1989, the subjects filled out questionnaires and kept diaries that logged their sleep habits. In addition, once every four years they had their blood sampled and underwent tests that measured physiological variables while they slept. The researchers report today in the journal Public Library of Science: Medicine that people who consistently slept less than five fours a night had significant differences in the hormones leptin and ghrelin as compared with people who slept an average of eight hours a night.

Leptin is produced by fat cells. Low levels of it are a signal of starvation and a need for a bigger appetite. Ghrelin, meanwhile, is produced by the stomach and is an appetite stimulant–the more ghrelin you have, the more you want to eat. The study subjects suffering a lack of sleep had 16 percent less leptin and nearly 15 percent more ghrelin than those who were well rested did. “In Western societies, where chronic sleep restriction is common and food is widely available, changes in appetite regulatory hormones with sleep curtailment may contribute to obesity,” the team reports.

The results add to a growing body of evidence for a link between lack of sleep and increased weight and body mass index. “Good sleep, in combination with other lifestyle modifications, may be important in fighting obesity,” Taheri says. Study co-author Emmanuel Mignot of Stanford University cautions that there is not yet enough evidence to establish a causal link, however. In the future, he hopes to investigate whether altering sleep patterns can help people fight the battle of the bulge. In such an intervention study, a group of overweight people could be told to change how much they sleep each night to study whether a few hours of extra shut-eye is associated with losing weight.

The Vaccines Market Outlook To 2014: Competitive landscape, pipeline analysis, growth opportunities

Summary, August 2009  —  The $11.1bn global vaccines market demonstrated flat year on year growth in 2008 as per IMS Health. The combination of new biotechnology research techniques and manufacturing technologies have created a new vibrant vaccine business. It is now a business that targets larger markets amid increasing demand, and improved profitability. The World Health Organization estimates that there are currently more than 75 vaccines at various stages of development for a variety of diseases. AIDs, diarrhea, pneumococcal disease, cervical cancer, and even smoking are now being addressed by vaccine manufacturers. Although, predominantly indicated for prophylactic management of infectious diseases, lately novel therapeutic vaccines are developed for chronic infections such as cancer and hepatitis. Little progress has been made so far, but this remains a potential high-growth area and presents significant market opportunity.

20090811-2,, Summer 2009  —  As a business innovator, China has a wealth of advantages. These include a huge, adaptable population with an affinity for improvisation and reverse engineering; low-cost labor, operations and overhead; and mature industrial clusters ready to supply a variety of parts, components and subassemblies. These elements are creating a strong culture of innovation, one that companies from developed economies soon will either profit from, or compete against, as China moves beyond labor-intensive, low-value-added consumer goods.

Already, many large multinational corporations (MNCs) have set up R&D centers in China, and the government is encouraging the development of design capabilities among its workforce. But China is not an easy place for outsiders to be innovators. Companies from developed economies looking for R&D partners in China must learn to operate within an industrial structure quite different from their own, and take great care in selecting whom to work with and how, experts caution.

MNCs are likely to find that the best opportunities for harnessing Chinese-style innovation lie in two areas: discrete, targeted pieces of larger products and products for home-market consumption.

In this article, part of a special report on Chinese manufacturing, experts from The Boston Consulting Group (BCG) and Wharton look at how companies can profit from Chinese innovation, what drives this innovation, and what challenges they face in sourcing R&D in China.

Global Recession’s Role

Jim Andrew, a senior partner and managing director in BCG’s Chicago office and head of its global innovation practice, says that in the current recession, companies need to ensure that they are getting full benefit from every dollar they spend — including their investments in innovation. Andrew sees growing innovation in low-cost countries such as China and India as one way for companies to increase the cost-effectiveness of their innovation spending. “The crisis in the developed markets has accelerated the move to developing markets because they are lower-cost and now have a track record,” he says, noting that the changes afoot are redefining the innovation landscape.  “We will look back on this time and say it was an inflection point with regard to the speed at which certain innovation activities were scaled up in China and India in particular. There is really a step-function change in the rate at which some of these activities are growing.”

Innovation in China before its economy opened up was limited to design institutes that were part of government departments, says David Michael, a senior partner and director of BCG’s Beijing office. Some of institutes have since been repurposed for new commercial goals. Such is the case with the state-owned oil company PetroChina, which has a large network of design institutes within it, according to Michael.

MNCs now realize that China has tremendous development capabilities, including the ability to size up opportunities and rapidly bring products to shelves at low cost. The availability of well-educated talent is particularly attractive, Andrew says. “You can access that talent to do a lot more of the ‘R’ (research) that is increasingly relevant not just to China’s domestic markets but to developed markets.” For MNCs that set up R&D centers in China, “It is more about accessing talent rather than some unique source of innovation,” Michael notes. That makes innovation in China substantially different from that in other global hubs such as the Silicon Valley. “There is low-cost engineering talent in China, but that’s different from saying that there is a whole fountain of innovation we can tap into,” he adds.

This raw engineering talent is a valuable resource for companies from developed economies. The best way for MNCs to tap into Chinese design skills is by sourcing select pieces of their product, Michael says. As is true for contract manufacturing, much of the advantage of Chinese R&D is in low-cost labor — but for brains, not brawn. “When Western or world-class business practices line up with low Chinese costs, new types of companies develop to take advantage of this opportunity,” he notes.

In health sciences, for instance, some Chinese companies are already responding to Western research needs with low-cost services. Michael offers WuXi PharmaTech in Shanghai’s Waigaoqiao Free Trade Zone as an example. WuXi, a leading provider of contract research work for the global pharmaceutical industry, has become adept at setting its engineers to work on Western pharma projects. “It’s run by people who understand the needs of Western pharmaceutical companies and know how to leverage local engineering talent to do the work.”

This kind of division of labor is common in such East-West partnerships. Western companies typically tap into Chinese design for parts or modules, Michael says. One global energy company gets “a lot of its design for oil exploration and drilling facilities in China at the local oil companies’ design institutes,” he notes. Microsoft and other Western and Korean gaming and software development companies have a network of local software developers. Michael also points to Perfect World, a Chinese gaming software writer that “is booming in the 3-D world.” It may not be a household name in the United States or Europe yet, but Perfect World is a leader in the country’s online game market, according to Morgan Stanley Research.

Development Attitude and Disruption

Such industry specialization is common. Corporate R&D in China tends to focus on specific industries and on product development rather than basic research, says Marshall Meyer, a Wharton management professor whose research focuses on China. “You see successes in China in machine tools and lasers, but it has been a combination of development and marketing more than basic research.”

Chinese companies have been good at the “D” (development) part, Andrew says. “You could grow very large very quickly by playing in existing markets if you developed new products that were just a little better than everybody else’s. But with increased competition everywhere, it takes products and services that are more innovative and targeted to needs that are not already being met.” One recent example is a soybean blender that produces a popular soy milk drink. Joyoung Co. in Jinan, China’s Shandong province, manufactures the blender, which has become “a big hit product.” The blender has no fancy technology — just a plastic body with an electric motor, but its “fundamental concept is what local consumers want,” he says.

More dramatically, according to Michael, Taiwanese computer manufacturer Asus used its development capabilities to “single-handedly invent the netbook segment of the PC market.”  Producing computers stripped down in functionality and priced at $300 each, Asus “has completely disrupted the global PC market.”

As existing markets become saturated, however, China must invest more in the “R” part of R&D to compete differently or to expand into fundamentally new markets, Andrew says. And while piracy has eroded profit opportunities in China’s traditional gaming software industry, Michael points out that it has not similarly affected online games. “People are paying for the experience of playing games with each other, and that turns out to be profitable despite some piracy.”

Longer-term, the capacity to innovate seems likely to grow. “The culture is very, very good at devising quick and often effective solutions to problems,” Meyer explains. “I see a lot of improvisation.” An increasing demand for a Chinese language card in computers, for example, prompted Lenovo years ago to create one for its products. Chinese white-goods manufacturer Haier found that potato farmers in China were using their washing machines to clean produce, so it designed a heavy-duty, special-purpose machine that can be used outdoors and will “wash your clothes or your potatoes,” Meyer notes. Electronic and electrical manufacturers often design products that work with “very heavy-duty power supplies because of the poor quality of electricity” in the country.

Nor are Chinese innovators focused entirely on their domestic market. According to David Jin, managing director and head of BCG’s Shanghai office, some Chinese companies have already tried to out-innovate large MNCs — and succeeded. In one highly publicized case in 2006, Chinese electrical products maker Chint won a lawsuit over its patent for a circuit breaker against the Chinese unit of the French company Schneider Electric. “Usually, it is the other way around,” Jin says, alluding to Western companies accusing those in developing countries of patent infringements. Many high-tech operations are succeeding abroad as well. China Medical Technologies, a supplier of in-vitro diagnosis and treatment systems, competes with MNCs and commands a market share of more than 90% in at least one product segment and 70% in another, according to a July 2008 report from Citigroup Global Markets.

Choosing a Business Model

For companies in developed economies that want to harness Chinese innovation, Wharton and BCG experts say it’s important to select the right business model. These models range from plain-vanilla purchasing through a series of one-off orders, to joint technological collaborations through supplier development programs, to taking an equity position in Chinese suppliers, says David Lee, partner and managing director in BCG’s Beijing office and a supply chain and procurement specialist.

No one-size-fits-all formula exists for such partnerships, Lee adds. He has seen several MNCs invest in their suppliers, but “a lot of them don’t like the idea,” in part because of potential management disagreements. Some Chinese companies “are reluctant to change the way they have worked historically,” he says, adding that the handling of human resources and material waste, in particular, could be points of friction. However, many of them have begun reining in waste of materials in manufacturing processes and increasing wage levels have got them to focus on lean manufacturing and productivity enhancement, he adds.

Many MNCs have rolled out supplier development programs, transferring pieces of technology and attempting to transfer their best practices to Chinese partners. But this, too, is unfamiliar territory for some. Companies from developed economies typically haven’t had to worry much about quality control in their home markets “because suppliers themselves take the initiative to invest in quality-control processes,” Lee says.

Markets are so competitive and dynamic in China that innovation is likely to continue relentlessly. Companies are being pressured for ever more gains in productivity. And where Chinese manufacturing wages were relatively flat for many decades — allowing wage productivity to grow — labor markets have tightened and wages have started rising, Michael points out.

The challenge going forward will be to accelerate productivity growth ahead of any inflationary pressure on wages, he says. The available labor supply in the medium term will not be as large as it was in the past — although the global economic slowdown has idled millions of workers for the moment. But the release of large blocks of talent through the restructuring of state-owned enterprises is almost complete. At the same time, rising farm incomes — at least until very recently — had constrained the supply of migrant rural labor to the industrial centers, Michael explains. That gave labor more leverage.  Ultimately, as labor increasingly absorbs more manufacturing resources in the long run, companies will have to push even further for innovative solutions with “a focus on driving more productivity increases in Chinese operations.” The global economic downturn will likely slow the pace of these trends — and even reverse some — in the short term. But over the mid-term and beyond, expect China to build upon its already substantial innovative capabilities in manufacturing and services.

Innovation and Intellectual Property

Does porous intellectual property protection have a negative impact on r innovation? Not necessarily, says Harold Sirkin, senior partner at BCG in Chicago and global leader of the firm’s operations practice. When you innovate, “you’re creating a brand, and that’s a different kind of intellectual property (IP) than a patent.” IP protection is growing less important to innovation, even in the West, Sirkin notes. “The world has gotten so small that even if you invent the next iTunes, you can’t rely on patent protection,” he notes. “It’s readily copied now, everywhere. A lot of the [market appeal with] iTunes and the iPod is about [their] installed base.”

However, innovation and protection of IP have long been connected, and China has duly noted that linkage in its attempts to transform itself from a low value-added manufacturing center to recognized innovation leader, particularly as lower-cost countries compete for China’s core business. Mike Chao, a Principal at BCG in Beijing, notes that, “The IP laws have always been there, but what’s changed in the last 20 years is how they have been interpreted and enforced. There’s a big difference between policy and enforcement.” One notable example is the software industry, where Chao battled piracy with Microsoft China for over five years before joining BCG. After strong lobbying by Microsoft in partnership with the US government, China declared in 2003 that the government would only use legal software. That announcement was followed by two additional decrees requiring that PC manufacturers only preinstall genuine software and Chinese enterprises only use legal software. “While that’s absolutely a step in the right direction, there’s still work to do in terms of bringing up the levels of enforcement and awareness to comply with the policies,” Chao says.

On another front, however, he notes the Chinese government’s tendency to provide research grants to projects that have the same time frame as the tenure of bureaucrats, thus sacrificing long-term horizons for short-term gains. “Innovation requires a long-term approach, and companies need to know their hard work won’t just be stolen right away.” Therein lies the difference between betting the company on the “R” or the “D”: “Research is never a sure thing, but development can consistently result in realizable output,” Chao explains. “With the recently announced government stimulus programs, there is hope that more funding will go to the companies that can actually productize that research and bring it to market.” Academic institutions that have traditionally received such grants have “not had a great track record in commercialization,” Chao points out.

Evolving IP policies, however, will not necessarily be the savior to spurring a wave of innovation in China. “At the end of the day, the market will force you to innovate and differentiate, and if your company isn’t doing that, someone else will.” Chao points to the PC industry as an example. Prices of notebook computers dropped 13% on average in China last year, in large part due to pressure from netbooks, other low-cost offerings, and a general lack of differentiation. “Asus saw an opportunity to disrupt the industry with the netbook, and now PC companies are dropping prices and scrambling to catch up.” Innovation is and has always been the key to competition. China’s ability to do so effectively will undoubtedly determine its future in the global economy.

AMDL Inc. Executive Chairman & CEO Douglas MacLellan offers expert insight during exclusive interview with The Wall Street Transcript

TUSTIN, Calif.,, Summer 2009 /PRNewswire-FirstCall/ — AMDL Inc. (NYSE Alternext US: ADL), a US-based pharmaceutical company with major operations in China, announced today its Executive Chairman and CEO Mr. Douglas MacLellan has been interviewed and featured in The Wall Street Transcript – a New York weekly investment news publication focused on bringing market news and analysis through exclusive interviews with Wall Street professionals, industry experts and corporate executives.

In an exclusive interview, Mr. MacLellan discusses AMDL’s continued focus on becoming a premier pharmaceutical company in the growing $100B China market; the Company’s regional expansion and distribution strategy in China; current financing efforts and financial targets for fiscal year 2009; and AMDL’s worldwide commercialization strategy for its DR-70 (FDP) cancer test and Human Placenta Extract (HPE) skin care line.

Mr. MacLellan also provided opinion on China pharmaceutical industry saying, “Since the beginning of 2009 the stock market in China has gone up 30%, while the US, European, and other Asian markets have fallen. The Chinese market is going to be the force behind AMDL’s sales and marketing for the next few years … this is good because this market continues to grow and is expected to continue growing between 5-7% from a GDP perspective in 2009.”

For the past four consecutive years AMDL has achieved over 100% year-over-year gross revenue growth. Mr. MacLellan provided further insight on AMDL’s tremendous growth trajectory saying the Company’s FY2009 growth prospects remain strong and executive management is confident AMDL will achieve its FY09 financial guidance of US $62-74 million – which represents another year of 100% growth.

AMDL is featured as the “#1 Small-Cap Stock Pick for 2009” by Flaherty Financial News ( ), a New York-based investment newsletter, and named one of the Top 5 fastest growing publicly-traded companies in Orange County by international consulting group Deloitte.

The Wall Street Transcript executive interview of Mr. MacLellan has been published and is available on the WST website located at . For additional information on AMDL, its portfolio of international health and beauty products, and 2009 business strategy, visit the Company’s website at or contact AMDL Investor Relations at .

About AMDL:

Headquartered in Tustin, CA with operations in China, AMDL Inc., along with its subsidiary Jade Pharmaceutical Inc. (JPI), is a pharmaceutical company devoted to the research, development, manufacturing, and marketing of diagnostic, pharmaceutical, nutritional supplement, and cosmetic products. The Company employs over 500 people in the US and China.

Forward Looking Statements:

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this document include certain predictions and projections that may be considered forward-looking statements under securities law. These statements involve a number of important risks and uncertainties that could cause actual results to differ materially including, but not limited to, the performance of joint venture partners, as well as other economic, competitive and technological factors involving the Company’s operations, markets, services, products, and prices. With respect to AMDL Inc., except for the historical information contained herein, the matters discussed in this document are forward-looking statements involving risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements.


Pharma exports to US fall by 40 %; India is losing share to China, South Korea


India’s pharma exports to US is severely hit by increasing competition from other emerging markets like China, Israel and Korea, said a study conducted by Federation of Indian Chambers of Commerce and Industry -an umbrella association representing Indian businesses.

Pharmaceutical export business remains the worst hit among all the industries due to the economic down turn in US. Indian exports of pharmaceutical products to the US fell almost 40 per cent in the five months between October last year and the end of February.

Exports of pharmaceutical products from India have been facing steady competition in the US market from its Asian peers such as China and South Korea as well from Israel. In fact Indian pharma companies are increasingly losing their relative share to firms from these emerging economies.

“In pharmaceuticals, exports from China, Israel and South Korea [to the US] moved up by 27 to 41 per cent as compared with a significant decline of 37 per cent in India’s exports to the US,” FICCI research stated.

The fall in export of pharmaceutical products has cast an aspersion on the prospect of pharma industry growth and its resilience to withstand the rigours of downturn pressures. 

India’s pharmaceuticals industry was often touted as a sector that could weather the global financial crisis.

Among the other possible reasons for the sharp decline in pharma exports are the US import ban imposed on Ranbaxy last year. The US Food and Drug Administration had slapped a ban on imports Ranbaxy’s products made in one of its manufacturing facilities at Paonta Sahib after the the regulating agency found a number of violations in Good Manufacturing Practice. Ranbaxy is one of the leading exporters of pharmaceutical products to US from India.

Liquidity problems including the fluctuating dollar have also contributed to drop in export revenues, according to  Indian pharmaceuticals groups.

However, pharmaceutical industry is optmistical of the export prospects in the coming years as they see rising pressure to reduce health costs, worldwide. In that scenario, they hope that that producers of cheaper generic drugs would perform well.

The Indian Drug Manufacturers’ Association (IDMA) said overall exports fell 1 per cent over the past fiscal year. IDMA, which represents thousands of small and medium scale companies in India had forecast 16 per cent growth for the year. However, exports were Rs307bn (£4.1bn) in 2008-09, down from Rs311bn the previous year. Imports rose 21 per cent to Rs67bn in the past fiscal year.

The IDMA is sticking to a bullish forecast for 2009-10. “Even in such turbulent times, we are expecting a growth rate of 16 per cent,” said R.S. Joshi of the IDMA’s Gujarat chapter.

The gems and jewellery sector,which has been expanding smooth for the last 20 years is the the second-worst performer, according to FICCI study.

In an earlier industry survey, FICCI had forecast a drop in India’s exports in the first half of year 2009 due to aggressive pricing by Chinese exporters, coupled with lack of credit flow and cancellation of orders.

India is facing a tough challenge from all across the market to ‘meet the China price’. A number of Indian exporters have already cut down their prices to an extent of 10-15 percent on an average or perhaps more to maintain their hold over the market, FICCI said.

Over 360 companies participated representing sectors like automotive, consumer durables, food and food processing, leather, marine products, gems and jewelery, textiles, IT and pharmaceuticals, participate in the survey.


Moving To Shanghai So Beware

August 6, 2009  —  That’s the most popular piece of advice I’ve received from friends and family wishing me a farewell on my upcoming move to Shanghai. Sadly, they have good reason to offer it.

While China has come a long way since Mao Zedong’s rule, emerging into a more vibrant capitalistic economy, it’s still far from reaching a mature market status. The country is still immature in many aspects and with immaturity comes unreliability. 

This is why it’s not so easy to believe all that comes from China is the real deal — be it physical goods or governmental information. The country has been spotlighted by the media for its tendency to send the US substandard items, such as counterfeit pharmaceuticals, defective drywall, and tainted toys.

It’s no surprise, then, that a few analysts — including me — are beginning to question the recent growth of China’s economy. In what seemed like a stunning recovery, China announced second-quarter GDP growth of 7.9% earlier this month.

It’s not that I think China is simply making up a number close to its 8% target to please the global economy — though they very well could be. I’m more concerned with the strategy China’s using to achieve this growth, in a similar fashion to how I’m dubious about public companies that churn out exciting growth and meet earnings expectations using special accounting techniques.

There’s immense pressure on China to prove itself and save the rest of the world from a persistent recessionary state. This has created a huge incentive to China to deliver the numbers the world wants to hear.

Like management teams that sugarcoat financial statements, I suspect China may be finding ways to mask what’s really going on behind the scenes. It may be priding itself on its ability to report such dazzling GDP growth when the rest of the world is half dead. But like some of the products it exports, its growth may not be real. As if the Chinese are taking advice straight from the pages of Alan Greenspan’s The Age of Turbulence: Adventures in a New World, the government is throwing yuan into the system every which way in hopes of stimulating recovery.

In the first 6 months of 2009, M2 money rose 29% and the banking system reported that lending in June was 4 times as large as last year. China’s officials are draining liquidity into the Chinese economy, but the problem is that it’s not going where it should be: 20% of the new lending was invested in the stock market in the first 5 months of this year. And the minimum mortgage payments were cut from 30% to 20% to help drive up home sales.

This brings me to my next point of skepticism: the Chinese stock market. The Shanghai Index has risen over 75% since November 2008. The best performing country in the world can’t justify such drastic marketing upswings, let alone an economy that’s struggling to find the strength to get back on its own 2 feet without the help of US credit-compulsive consumers.

That kind of upward momentum screams equity bubble. Even worse, the Chinese housing market is starting to mirror the US housing market several years ago. Mortgage standards are being lowered — albeit not anywhere close to where US standards fell to — and banks are being told to raise coverage ratios for an expected rise in non-performing loans. In fact, I’ve read reports that an increase in vacancy of unfinished buildings is being spotted.

It’s deja vu. And we already know the outcome of this story. The US is experiencing its last chapter right now.

The Chinese government needs to step in and mop up the excess liquidity, or things are going to get messy. Monetary policy is too loose and both stock market and real estate bubbles are clearly in sight. As long as the government continues to flood the market with yuan, the bubbles will continue to balloon.

If both of these asset bubbles collapse — and they likely will — all of the capital the government lent will be wasted. Long term, that means no real economic growth will have been created.

In order to create real growth, China must alter its current recovery method. The government needs to find ways to drive personal consumption. The Chinese have a tendency to save for a rainy day. They prefer to invest in stocks or a home, rather than spend or borrow to purchase frivolous goods.

While the Chinese should never strive to emulate the spending habits of many Americans, the government needs to provide incentives for the Chinese to buy the goods they make — the goods that we Americans can no longer afford. Otherwise, real growth won’t be achieved.

As critical as I’ve been on China, I do have faith in the country. Heck, I’m moving there because of the great opportunities the country has to offer. However, I’m certainly concerned about the recovery strategies the country is taking, and fearful that I could end up being smack dab in the middle of the same crisis I just lived through here in the States over the past 2 years.

So we are all supposed to believe big pharma when they say that sending all their research to China and India is going to somehow magically stuff their pipelines with new potential products.

This of course is because all the world class scientists that they employed here in the US just cost too much.

We are supposed to believe that doing it with people who have third world educations willing to work for a subsistence living are going to somehow do better?

This is nothing more than a ploy to keep stock holders from bailing altogether.

Does anyone really buy this? Really!!??

“The lack of respect for IP

“The lack of respect for IP is one thing, but think of the consequences of having information about lead compounds in a project leaked to competitors, even before IP is established. At a local large pharma in Boston, they had to hold a meeting to inform everyone that is wasn’t OK to to be scribbling structures on a napkin at lunch with a friend from another company. The H1B’ers that were doing it didn’t see any issue.”

Good point! I can definitely see that as a problem. Wyeth was trying to outsource some of its R&D to India. Whose to say that their Indian R&D company won’t leak out the identity of the lead series they identify (to the highest bidder).

The short sightedness of the pharma industry is mind boggling.

Companies that sent

Companies that sent programming work over there are now starting to bring it back for these reasons. The caliber of the people was never able to rise to that of North Americans, and as you said the costs began to rise to the point where the loss in communication from being so far away made it not worth it any more.

There is a difference though, those companies were actually intent on developing products, Pharma is not.

It’s widely known that Pharma doesn’t really come up with anything on it’s own. Most of the products they have now, came from small startups. This current trend of outsourcing is nothing more than a ploy to convince investors from bailing all together on these stocks. When one takes into consideration that they spend far more on silly advertising campaigns of dubious value, than they do on R+D, it’s even more obvious that shipping the work to the third world will have little effect with regards to filling their pipelines. Money isn’t the problem.

The thing is that these third world countries lack infrastructure. Shipping things in/out of China (for example) is not easy. This slows down their ability to do large scale projects. The parts of China that have infrastructure (coastal cities for example) have real estate prices rising so fast, that the cost savings are starting to erode (but this is not necessarily stopping the outsourcing trend). In India, infrastructure is less of a problem, but there is a lack of experience in pharma R&D that will take time to resolve.

The worst problem with R&D outsourcing is lack of respect for intellectual property. Neither China nor India will honor patents.

Pharma is crazy for outsourcing to these countries. I can hardly believe that Pfizer is doing so much manufacturing in China (that is playing with fire). But, even outsourcing R&D to China/India, will, in the end, cost more than it saves.

1) Outsourcing is one of the 4 cornerstones of the 08 Crash.  2) the others being the loose money policy of the Federal Reserve Bank which created the housing bubble by its loan policy to member banks and similar debt bubbles with credit cards, federal government, and commercial loans.  3) the deregulation of the financial industry. 4) falling wages when measured by the real CPI which currently has risen 12%–not the bullshit feds listed 3%.   

Pharma’s new favorite outsourcing spot: China

By Tracy Staton,  —   Quality-control fears notwithstanding, China has knocked India off the catbird seat as pharma’s favorite spot for outsourcing. According to a new report from PriceWaterhouse Coopers, China beats every other Asian country as an investment and contracting destination, followed by India, Korea and Taiwan. The countries all were evaluated by cost, risk, and market opportunities. 

And it’s not just low-cost production that’s luring pharma to Asia, either. The report found that the region is growing in stature as a source for innovation and discovery. Plus, local markets are burgeoning, giving pharma the potential for lots of new emerging-market sales.

The various countries have different strengths, with China and India the primary drivers of pharma growth in the region. Singapore, on the other hand, is considered more of an R&D specialist, while Korea and Taiwan are emerging as competitors for pharma investment and business. What’s contributing the the region’s magnetism? Greater attention to intellectual property protections, for one. and cheaper clinical trials, of course. And an explosion of growth in certified contract manufacturers. In India, for example, there are more than 100 FDA-approved pharma plants, the largest number in any country outside the U.S.

 Sinovac for example is developing a new bird flu therapy.  R&D in China is growing at about 20% per year since 1999.  Hundreds of companies have opened research centers in Beijing and Shanghai.  China has now overtaken Japan’s research and development spending, and is projected to over take the U.S. in 2015.   Info from BBC 

More bull shit:  it isn’t falling profit (for their revenues were down only 2%), but rather outsourcing that caused Merck to terminate 12% of their work force.  The entire industry is moving as much as possible to China and India as quickly as possible 

They (the globalizers) promised us the good jobs, and the shitty manufacturing ones would be outsourced.  But now it is the good ones, from accounting to the pharmaceutical and computer industries that are taking flight.  Today there was more bull shit reporting.  Merck claims that earnings dropped for the 3rd quarter 28% and was the cause of their cutting their workforce an additional 12% (7,200 jobs).  But a reading of the release indicates that though sales fell for some key drugs, however, overall sales fell only 2%.  This is actually a growth given that there is a more than 2% drop in the overall market due to our current economic depression.  Earnings didn’t fall 28%, rather Merck unloaded some debt that they had carried on their books from restructuring.  By doing this their earnings went up, for their taxes went down. 

It seems odd that a company can get rid of so many U.S. employees and still maintains the same revenue.  Could it be that they are outsourcing clinical trials and manufacturing?  —  Merck said that it will cut 7,200 jobs–more than 12 percent of its workforce–following the announcement of a 28 percent drop in Q3 earnings. The job cuts, which will include 6,800 active employees and 400 vacancies, will be made in all areas of the company. Forty percent of the cuts will be in the U.S. and 25 percent will be senior and mid-level execs. Back in 2005, Merck cut 10,400 positions; these new cuts come in addition to that, and are expected to be completed by 2011.

In Q3, the company took a multimillion restructuring million charge (about 29 cents a share) and had unimpressive sales. As a result, net income dropped to $1.08 billion–just 51 cents a share–down from $1.53 billion and 70 cents a share a year ago. Third-quarter revenue was down 2 percent, partly due to sluggish sales for most of its vaccines, major generic competition for Fosamax, and a drop in its cholesterol drug sales of about 15 percent to $1.1 billion. Merck did see some positive movement with its blood pressure, asthma, HIV and diabetes drugs.

The restructuring includes more than just layoffs. In a release, the company said it would:

  • accelerate the roll-out of a new, more customer-centric selling model;
  • make greater use of outside technology resources, centralize common sales and marketing activities, as well as consolidate and streamline its operations; and
  • focus its manufacturing division on core products and outsource non-core manufacturing.

In addition, Merck said it will consolidate its R&D ops. Basic research operations will be organized to consolidate work in support of a given therapeutic area into one of four locations. As a result, Merck will close three research sites in Japan, Italy and Seattle by the end of 2009.

“Our focus remains on increasing revenue from our new and in-line products, fully funding innovative R&D, investing in growth opportunities, such as emerging markets, and becoming the most trusted partner in delivering value to our customers. With the right long-term strategy and our efforts to reshape Merck’s business, including today’s actions, I am confident we are building a solid foundation for achieving industry-leading performance in the future,” said CEO Richard Clark. Merck expects restructuring costs from $1.6 billion to $2 billion, but hopes to save between $3.8 billion and $4.2 billion by 2013.

Iran Bans Ramadan Umra Pilgrimage as Swine Flu Spreads,, TEHRAN (Reuters) Aug 06 – Iran has banned Iranians from performing the umra pilgrimage in Saudi Arabia during the holy month of Ramadan to slow spread of swine flu in the country, a health ministry official said Thursday.

The umra can be performed at any time but is popular during Ramadan, which this year starts in August.

“Iranians are banned from attending the holy places in Saudi Arabia during fasting month of Ramadan,” deputy Health Minister Hassan Emami-Razavi told state television.

The H1N1 virus, commonly known as swine flu, emerged in April in the United States and Mexico, and has spread internationally. The number of Iranians infected with the virus topped 144 since late June.

“Three persons per day on average are identified as infected by the disease,” another health ministry official was quoted by the Ebtekar newspaper as saying.

Iranian media reported Wednesday the first death from the H1N1 flu in the southern Island of Qeshm. The report was immediately denied by the authorities.

“The H1N1 has claimed no life in Iran yet,” Health Minister Kamran Baqeri-Lankarani told state television.

Around 3 million Muslim pilgrims from over 160 countries head for the holy city of Mecca in western Saudi Arabia each year in one of the world’s biggest religious gatherings.

The main hajj pilgrimage will this year take place in November. Saudi Arabia in June called on elderly, ill and other unfit Muslims to postpone pilgrimages to Mecca.

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