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BIOHLDG (0179): BIOALPHA HOLDINGS BHD’s China move laudable

BIOALPHA Holdings Bhd’s big move into the China market amidst the ongoing Covid-19 pandemic is noteworthy.

Despite the worldwide lockdown restrictions led by the pandemic, the integrated health supplement company took bold steps in expanding its footprint in China’s health supplements market.

In its latest joint venture with Suzhou Medicalsystem Technology Co Ltd (MEDIC) for the commercialisation of Biolapha’s proprietary herbal formulations and products in China, the company will roll out five products in the country by mid-2022, says William Hon, the managing director of Bioalpha Holdings Bhd.

“This partnership will allow us to kick-start five of our products in the next six months across 32 provinces in China.

“We would be able to capitalise on MEDIC’s regional expertise in China as it is well-known across many hospitals within the country,” he adds.

The five products will comprise of two anti-ageing products, longevity supplement, a healthcare product for type two diabetes as well as a supplement for those undergoing hormone replacement therapy.

“Our partner, MEDIC is confident that our products are suitable for China’s market and will do well there.

“MEDIC’s access and network to all major hospitals would allow our products to be recognised and recommended by all professionals and will give us a space in major hospitals to promote our products,” he explains.

Listed on the Main Board of the Shanghai Stock Exchange in 2016 with a current market capitalistation of 3.5 billion yuan (RM2.27bil), MEDIC provides total solutions in clinical informatics and digitalisation of hospital processes.

Bioalpha plans to invest 4.05 million yuan (RM2.62mil) in its joint-venture company with MEDIC.

Hon notes that each of the product is estimated to have an eye-popping market size of up to 100 million yuan (RM64.78mil) per year not only driven by China’s massive population of 1.4 billion but also on the burgeoning spending power of its consumers.

Having said that, Hon says Bioalpha aims to achieve 50% market share for the products in three years.

He anticipates the group to roll out more products after a one-year period.

According to a survey done by Rakuten Insight last year, around 77% of respondents living in China took dietary supplements to improve and strengthen their immune system.

Without a doubt, the demand for drugs for chronic diseases such as diabetes would outweigh acute infectious diseases in China as the country’s life expectancy and affluence levels increase, says Xiang Xu, senior analyst of Eastspring Investments Shanghai in a report titled “Emerging opportunities in China’s healthcare sector.”

China’s government is also encouraging and supporting foreign and local companies to participate in the healthcare industry, points out Hon.

It is worth noting that China’s health supplement market size before the pandemic was estimated to be around 192.9 billion yuan (RM125bil) in 2019 and this figure could rise to a staggering 280 billion yuan (RM181.2bil), according to health and food supplement industry report by TMO Group, a digital commerce agency.

Indeed the health supplement market in China has huge potential and continues to expand rapidly, bolstered by an ageing population, economic growth and an expanding basic health insurance.

“There is an increasing number of leading global corporate organisations which have found significant long-term prospects in the healthcare market in China.

“Hence, a large number of overseas pharmaceutical corporations have already set up or expanded their presence in China,” notes market research and management consulting firm Daxue consulting.

No doubt China, the world’s second-largest healthcare market lured the local healthcare supplement company to pump in money in the country.

To-date, Bioalpha has forked out about 38 million yuan (RM24.6mil) to keep its foot firmly in China.

Recall that more than a year ago, Bioalpha, which already was exporting its supplement products in China, started to localise its operations in the Hainan province as part of its expansion plans.

It leased a 1000 square meter factory in Hainan province for warehousing purposes to ensure that order processes could be done in a swift and efficient manner, following the incorporation of an indirect subsidiary in China called Bioalpha (Hainan) Health Biotechnology Ltd.

Localising its operations in China was done to supply health food and nutritional meals to private and public sectors in the country after the group’s subsidiary Bioalpha (HK) partnered with China-based Guizhou Yuhexin Trading Ltd (Guizhou YHX) and Hainan Shifengfu Co Ltd.

Bioalpha bagged a supply contract with Guizhou YHX valued at 700 million yuan (RM453.5mil) annually for a duration of five years, translating into a potential contract value of up to 3.5 billion yuan (RM2.3bil).

Moving forward, Hon anticipates the group to gradually report better results in the coming quarters given its expansion in China’s healthcare market.

“We expect the turnover to continuously grow, and profits would increase as well on the back of a higher turnover but bear in mind that the cost of doing business during the Covid-19 pandemic has increased as well with higher shipment cost and raw materials.

“All in all, it will only get better for us with the ongoing rising vaccination rates and profitability will be on the upward trajectory. We are on track to fulfil our orders,” he says.

Bioalpha returned to the black in its latest second quarter ended June 30 financial results, posting a net profit of RM1.5mil on the back of higher revenue.


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