SZP, which sells traditional Chinese medicines, health foods, medical equipment and generic drugs, has been distributing AMDL's domperidone anti-emetic product since the fourth quarter last year, generating revenue of approximately $100,000 (€63,000) a month.
Prior to the announcement, AMDL terminated a previously announced letter of intent (LOI) to acquire Guangzhou-headquartered distributor Guangzhou Lazon Pharmacy Co. The firm said that the decision was "based on material uncovered through the due diligence process."
The new LOI that AMDL, Jade and SZP signed stipulates that an independent Chinese business valuation specialist will determine a fair value for SZP, providing a starting point for subsequent discussions.
The agreement also requires that Jade and SZP form a consolidated sales force to distribute numerous AMDL products locally, include the anti-aging skin treatment GoodNak, the antibiotic Levofloxacin and the anti-emetic Ondansetron.
A recent report by Pacific Bridge Medical revealed that the Chinese drug sector grew 20 per cent in 2007, and predicted that it will join the top ten largest pharmaceutical markets in the next few years. The increasing use of western medical treatments in China makes the country an attractive target for drugmakers around the world.
As a result, an increasing number of drugmakers are forging distribution agreements with local Chinese distributors in an attempt to secure a strong presence in the region and leverage local market knowledge.
International growth plan to drive 2nd-qtr profit
In June, AMDL hired consulting firm Strategic Growth International (SGI) to help it identify and establish additional investment opportunities both at home and abroad.
Commenting at the time company CEO Gary Dreher, said that: "SGI has a strong reputation with an exceptional team and we're excited to have them as a partner to communicate our corporate story [and] the great progress we're making with new products and technologies in the US, China and other global markets."
AMDL also forecast a positive set of second quarter results last month. The firm expects its net income after taxes for the period to be $1.1m, on revenues of $6.3m. For the similar period of the previous year, the company reported a loss of $1.9m on revenues of $2.4m.
The Tustin, California-headquartered company also predicted that its income in the third and fourth quarters will reach $4.9m and $6.7m, respectively.
For the full year, AMDL expects its earnings to be in the $9.5m to $12.2m range. The company reported a net loss of $1.26m in 2007. It also said that it hopes to achieve a 100 per cent increase in full year 2008 sales. Gross margins are expected to range between 48 per cent and 52 per cent.
