It is now a commonplace that China is the land of the future. Yet it still remains the case the country is extremely hard to break into.
So it was interesting to see a recent spin-off from a small US company into China, in a corporate venturing-style arrangement. US-based Biomagnetics Diagnostics, which is working on an optical biosensor for HIV, hepatitis, tuberculosis and malaria detection in cooperation with Los Alamos National Security, spun off the rights to a plastics manufacturing process, to form a Chinese-based company. The deal was done in partnership with a Chinese region, Linyi County, Shandong Province, with Biomagnetics Diagnostics Corp retaining a minority stake.
How did the healthcare company have this plastics technology? It appears it took on the patent for the type of biodegradable plastics called PVA,when it acquired in 2010, a Chinese company, Lanzhou Sanhuan New Technology Development, which owned "a unique formulation of PVA film, equipment and patented manufacturing process rights, which the company’s partners, including the Chinese government, had spent more than ten years and approximately $40m developing", the company said at the time of acquisition.
The company’s chief executive, Clayton Hardman, now says he hopes the plastics company could be a $1bn opportunity in five years. Rich talk for a company which is a listed over the counter penny stock with venture backing in the form of a $10m option from Biotech Development Partners.
Yet the company does have a commitment from Linyi County to buy a minimum 600,000 tons per year, and Hardman says he is in talks with the governor of another province to sign a contract.
In fact it looks like in many other markets Hardman would have opted to retain a majority stake in the company developing the type of PVA film. He said: "This is an innovative financing arrangement, but one that is necessary due to the intricacies of financing ventures China."
It will be interesting to see if this attempt to ride the China bull will pay off, especially given the deal is not directly related to the company’s core healthcare focus. One thing is sure, we will see more and more similar attempts to break into China, given expectations of its huge promise.