1. Introduction to the Project

1.1 Project background

1.1.1 Product introduction

The “penem” antibiotics have three major characteristics: broad spectrum, high efficiency, and enzyme resistance. They have good bactericidal activity against both aerobic and anaerobic bacteria, especially against multidrug-resistant Gram-negative bacteria (e.g., enterobacteriaceae bacteria that produce extended spectrum beta lactase (ESBL)), and are widely used. At present, penem antibiotics play an important role in the clinical treatment of infections caused by multidrug-resistant bacteria, mixed infections of aerobic and anaerobic bacteria, severe infections, and infections in immunocompromised patients.

The main active ingredient of penem drugs is carbapenem, and the common drugs including imipenem, panipenem, meropenem, biapenem, ertapenem, and faropenem, etc. are all classified as special use antibiotics according to the national classification management system for antibiotics. Such antibacterial drugs have special penetrability, are easy to enter the outer membrane of cells, and have a strong affinity for penicillin-binding proteins (PBPs) in bacteria, especially being able to bind preferentially to PBP2. In addition, it has strong stability against β-lactamase and significant residual effects of antibacterial drugs, thus rapidly killing the bacteria.

4-AA is an important intermediate in the industrial chain of penem active pharmaceutical ingredients (APIs). 4-AA, also known as 4-acetoxyazetidin-2-one, is mainly used for the synthesis of carbapenem and penem β-lactam antibiotics. It is a key common intermediate for all carbapenem and penem antibiotic products.

The project relies on the abundant medicinal material resources and complete upstream and downstream industrial chain in Tonghua City to produce 4AA, and meropenem APIs and preparations, with a broad market prospect.

1.1.2 Market prospect

(1) Global API market

With the continuous development of the global medicine market, API, as an important link in the pharmaceutical industrial chain, can be regarded as the “chip” of the medicine industry, occupying an important position in the medicine industry. Its industrial development trend and competitive landscape have received widespread attention from the industry.

Globally, the API market has gradually recovered its growth after experiencing the impact of the COVID-19 in 2020. Affected by the COVID-19, the global API market size in 2020 has declined compared with 2019, from US$ 182.2 billion to US$ 175 billion, with a decrease of 3.95%; But soon, the market resumed growth from 2021, with the global API market size reaching US$ 204 billion in 2022 and US$ 214.72 billion in 2023, with a year-on-year growth of 5.25%.

In the current competitive landscape of the global API market, American enterprises have drug patent advantages, Western European enterprises have process advantages, while the API enterprises represented by developing countries such as India and China have relative cost advantages. Based on the gaps in research and development, production processes, and intellectual property protection, the API enterprises from developed countries in Europe and America dominate the high value-added API field; while the API enterprises from countries such as China and India have continuously elevated their position in the API market of generic drugs due to their cost and scale advantages, etc.

Seeing comprehensively from indicators such as the sales share and the number of export destinations of APIs, among the Top 5 API manufacturers (exporters) in the globe, there are 4 in India, with absolute advantages. Although there are hundreds of API export companies in China, only a few companies such as North China Pharmaceutical Group, Northeast General Pharmaceutical Factory, Harbin Pharmaceutical, Zhejiang Hisun Pharmaceutical Group and Zhuhai United Laboratories Company have relatively large export scales. The vast majority of domestic API exporters are generally small in scale, so Chinese enterprises rank lower in the international API manufacturer rankings.

(2) API market in China

Before the 1990s, Europe and the United States were the main global production areas of APIs. After the 1990s, due to environmental protection, labor costs, and other reasons, production capacity in Europe and the United States gradually shifted outward, and emerging markets represented by China and India rapidly emerged, gradually becoming the main production and export countries of APIs.

In recent years, China has successively introduced various industrial policies to guide the domestic API industry towards high-quality development, and the API industry has also ushered in new development opportunities. Meanwhile, the tightening of environmental policies, the improvement of industry standards, and changes in the international trade environment have also brought new challenges to the API industry.

According to data from to data from China Chamber of Commerce for Import and Export of Medicines and Health Products (CCCMHPIE), China has been the world’s largest API manufacturer and exporter for many years. The production capacity of multiple API varieties ranks first in the world or holds a significant market share. The overall production capacity of APIs in China ranks first in the world, accounting for nearly 30%.

The overall production capacity of APIs in China showed an increasing trend from 2013 to 2017; However, from 2018 to 2019, due to the tightening of environmental safety supervision and the constant deepening of supply reform, some API production capacities with high energy consumption, high pollution and outdated process technology, as well as excess API production capacity were eliminated, resulting in a significant decline in China’s API production capacity; In 2020, despite the impact of the global epidemic situation causing a slight slowdown in the growth of the API market, with the gradual stabilization of China’s epidemic prevention and control situation and the recovery of the global economy, the API industry quickly regained vitality and demonstrated a strong development momentum. By 2023, China’s API production capacity has jumped to 3.949 million tons, with a year-on-year growth of 8.91%. This Table not only demonstrates the new style of China’s API industry after experiencing trials and hardships, but also indicates its huge development potential in the future.

In recent years, China has vigorously promoted supply-side structural reform, mainly relying on supervision and guidance to gradually eliminate outdated production capacity, encouraging the API enterprises to make transformation and upgrading, and increasing efforts in standardization of the API market to crack down on illegal price increases and malicious sales control behaviors. On the one hand, by reasonably raising the environmental standards, it has guided the leading enterprises to improve their technological level and enhance their competitiveness, promoted high-polluting and non-compliant enterprises to exit the market, and reduced low-priced competitors in the API market; On the other hand, it has issued the Guidelines for Price Behavior of Shortage Drug and API Operators to punish malicious manipulation of API prices. The integration of production capacity, improvement of processes, and maintenance of reasonable profits will lay a more solid foundation for the sustainable and healthy development of China’s API industry in the future. It is predicted that by 2028, the market size of enterprises above designated size in China’s chemical API industry will have exceeded 680 billion yuan.

(3) Market analysis of the project

4-AA is an important medicine intermediate product, which is the main raw material for the production of all “carbapenem” antibiotics (i.e., “penem”) APIs. It is mainly used for the synthesis of carbapenem and β-lactam antibiotics.

Meropenem is a β-lactam antibiotic mainly used to treat various bacterial infections, including pneumonia, urinary tract infections, skin and soft tissue infections, etc. With the continuous progress of researches on antibiotics, meropenem has become one of the commonly used drugs in clinical practice.

The drug resistance problem caused by cephalosporin drugs that have been on the market for many years provides market space for penem antibiotics. In recent years, the proportion of penem antibiotics in the market has been rapidly increasing, accounting for 13.96% of the antibacterial drug market and playing a crucial role in clinical practice. In 2016, among the TOP 3 carbapenem antibiotics in domestic hospitals, meropenem accounted for half of the market share, followed by imipenem/cilastatin at 28.08%, and then followed by biapenem at 14.81%, while the others at 5.57%. Among them, meropenem systemic anti-infective drugs ranked first, and carbapenem antibiotics played an irreplaceable role in clinical practice in China. Compared with traditional antibiotics, it has relatively low drug resistance, but relatively high price, and it is mainly used in the treatment of severe cases of COVID-19.

According to market survey data, the global market size of meropenem is continuously expanding, and is expected to have reached US$ 350 million by 2025. Among them, China is one of the largest markets for meropenem, and the market size is also constantly expanding. The products produced in this project are 4AA, meropenem APIs and preparations. With the continuous expansion of the Chinese medical market and the people’s increasing demand for antibiotics, the market prospects of the project will be even broader.

1.1.3 Technical analysis

The project makes large-scale production by introducing patented technologies and complete sets of equipment from both domestic and international sources.

The preparation method of 4AA is catalytic oxidation method, which involves the use of metal catalysts and oxidants to prepare  4AA organic solvents. It has the characteristics of economic efficiency, low environmental pollution, and high yield.  

The preparation method of meropenem APIs involves synthesizing intermediate of β-lactam antibiotics through chemical synthesis, and then reacting the intermediate with specific side-chain groups to form the structure of meropenem.

1.1.4 Advantageous conditions of project construction

(1) Policy advantages

In November 2021, the Notice of the National Development and Reform Commission and the Ministry of Industry and Information Technology on The Implementation Plan for Promoting the High-quality Development of the API Industry was issued. This policy encouraged the API enterprises to strengthen innovation in API synthesis processes and development models, widely use green environmental protection technologies and equipment, promote industrial agglomeration and coordinated development of the industrial chain, participate in division of labor of international medicine industry, and make all-round opening up and development.

In January 2022, the 14^th Five-year Plan for the Development of the Medicine Industry was released, which required consolidating the advantages of API manufacturing, accelerating the development of a number of new varieties of characteristic APIs with high market potential and technical barriers, as well as new product types such as nucleic acids and peptides, vigorously developing the contract production business of APIs for patented drugs, and promoting the extension of the API industry to higher value chains.

The Outline of the 14th Five-Year Plan for National Economic and Social Development and Vision 2035 of Jilin Province proposed to strengthen TCM, and promote the secondary development and application of large varieties, new dosage forms, new administration routes, and new indications. Accelerate the development of biopharmaceuticals, restore the leading position of biological vaccines in China, break through the technology of genetic engineering drugs and cell pharmaceuticals, and consolidate and expand the leading advantage in the field of recombinant proteins. Cultivate and develop high-end chemical pharmaceutical preparations and establish chemical API export bases. Build medicine characteristic industrial parks in Liaoyuan, Tonghua, Baishan, Meihekou, and Dunhua, etc., and establish a national production base for small variety drugs in Northern China. By 2025, the market size will have reached 200 billion yuan.

In order to support the better undertaking of industrial transfer in the Northeast China, promote the adjustment and optimization of industrial structure, and help achieve new breakthroughs in the comprehensive revitalization of Northeast China, in February 2023, the National Development and Reform Commission replied and agreed to establish a Southwest Jilin Industrial Transfer Demonstration Zone, covering three cities of Siping, Liaoyuan, and Tonghua. The demonstration zone will undertake seven major industries including medicine and health, equipment manufacturing, agricultural products and food processing, green energy carrier, modern chemical engineering, modern textiles, and cultural tourism. The project is located in the Southwest Jilin Industrial Transfer Demonstration Zone, and belongs to the medicine and health project among the seven major undertaking industries.

(2) Resource advantages

Tonghua Chemical Industrial Park is a chemical industrial park characterized by medicines and chemicals, with a safety risk level of C. It was among the first batch to be recognized as a provincial chemical industrial park, and is an information-based and intelligent chemical industrial park. The safety, environmental protection, and industrial carrying capacities of the park are much greater than those of industrial concentration areas. There are complete supporting infrastructure of water supply plants, sewage treatment plants, fire stations, hazardous chemical parking lots, safety and environmental emergency command centers, employee operation skills training bases, dual power supply, and centralized heating centers (including industrial gas and steam), which are under closed management.

(3) Industrial advantages

The medicine and chemical industry zone in Tonghua Chemical Industrial Park has a planned area of 207 hectares. Through internal cultivation and external attraction, as well as “building nests and attracting phoenixes”, it will form a significant gathering and scale effect, becoming the main gathering and production area for medicines in Northeast China, thus stimulating more medicine and chemical projects to come into operation. It has great advantages in industrial layout, resource allocation, industrial chain, and radiation capability of opening up to the south.

(4) Location advantages

The highway and railway traffics in Tonghua City extend in all directions, forming a highway network connecting the three provinces in Northeast China, and for customs entry and exit, mainly including Ji’an-Xilingol League Abaga Banner Expressway (National Highway 303), Hegang-Dalian Expressway (National Highway 201), Heilongjiang-Dalian Highway (National Highway 202), and Yingchengzi-Fumin Expressway. The first-class highway from Tonghua to Meihekou has been opened to traffic. There are crisscross Shenyang-Jilin, Meihekou-Ji’an, and Yayuan-Dalizi Railways, as well as direct passenger trains to Beijing, Qingdao, Shenyang, Changchun, Dalian, Baihe and other places.

(5) Talent advantages

At present, Tonghua City has 3 national key secondary vocational schools, 3 provincial key secondary vocational schools, and all its county-level vocational education centers have passed the provincial key school acceptance and entered the top 100 schools in the province. It is the first region in the province where all county-level vocational education centers have entered the provincial key school list. In recent years, by making scientific layout, continuous promotion of vocational education structure adjustment and resource integration, exploration of new paths for diversified education, and continuous improvement of modern vocational education network system construction, the local characteristics of vocational education have begun to form, and the ability to serve economic and social development has gradually improved.

Tonghua Municipal Government has signed science and technology strategic cooperation agreements with provincial universities and research institutions such as Northeast Normal University, Jilin Agricultural University, Changchun Institute of Applied Chemistry, Chinese Academy of Sciences, and Tonghua Normal University, etc., providing scientific and technological support for development of the enterprises. Tonghua City continues to provide assistance for enterprises in talent cultivation and other aspects, vigorously implements the “Plan for Revitalizing Enterprises with Ten Thousand Students” and “Plan for Homing of a Thousand Students”, and continuously attracts college graduates for enterprises.

1.2 Contents and scale of project construction

1.2.1 Product scale

The project has a production capacity of 680 tons/year of 4AA, 150 tons/year of meropenem APIs, and 80 million vials/year of preparations.

1.2.2 Contents of project construction

The project covers an area of 100 mu and a construction area of 80,000 square meters. The project mainly involves the construction of factory buildings, production workshops, warehouses, laboratories, and supporting facilities, etc., and the purchase of a production line for APIs of penem antibiotics.

1.3 Total investment of the project and capital raising

1.3.1 Total investment of the project

The total investment of the project is 740 million yuan, including the construction investment of 700 million yuan and current funds of 40 million yuan.

1.3.2 Capital raising

Raised by the enterprise itself.

1.4 Financial analysis and social evaluation

1.4.1 Main financial indexes

After the project reaches the production capacity, its annual sales income will be 400 million yuan, its profit will be 160 million yuan, its investment payback period will be 7.6 years (after the tax, including the construction period of 3 years), and its investment profit rate will be 21.6%.

Note: “10 thousand yuan” in the table is in RMB

1.4.2 Social evaluation

The construction of the project will effectively integrate local and Jilin Province’s medicine resources, optimize the industrial structure, improve the quality and competitiveness of APIs and their products, and lay a solid foundation for the long-term development of the medicine industry. The project will further promote the development of the health industry, provide higher quality and richer raw materials and products for fields such as medicine and health products, meet the growing health demands of the people, drive the development of related industries, create more employment opportunities, and promote the prosperity and development of the local economy.

1.5 Cooperative way

Sole proprietorship, and cooperation.

1.6 What to be invested by the foreign party

Funds, equipment and technology.

1.7 Construction site of the project

The Medicine and Chemical Sector of Tonghua Chemical Industrial Park.

1.8 Progress of the project

The project cooperation plan has been prepared.

2. Introduction to the Partner

2.1 Basic information

Name: Management Bureau of Chemical Industrial Park in Land Port Economic Development Zone

Address: North of National Highway 303, Tonghua County, Jilin Province

2.2 Overview

Jilin Tonghua Land Port Economic Development Zone, formerly known as Jilin Tonghua International Land Port Zone, is located in the northern part of Tonghua City, with a regional area of 266.96 square kilometers and a planned control area of 79.65 square kilometers. Since its establishment with the approval of the provincial government in 2016, its regional driving capacity and radiation effect have been continuously enhanced. As an important carrier for Jilin Province to implement opening up to the south, the Land Port Zone undertakes and plays the functions and roles as highway container center station, railway container center station, bonded logistics center (type B), comprehensive logistics park, and industrial park platforms, etc., and it is struggling to be constructed into an open cooperation area integrating bonded processing, modern logistics, industrial cooperation, and technological innovation.

The Land Port Zone has obvious location advantages, prominent strategic advantages, and convenient transportation and logistics. Located along the border and near the sea, it is in the center of Northeast Asia, backed by the hinterland of the Northeast East Green Economic Belt; There are five highways and two railways and Tonghua Airport in the area, and modern logistics platforms such as highway container center stations, bonded logistics centers, and comprehensive logistics parks have been built. A commercial processing entrepreneurship park and a chemical industrial park have been built in the area, and the Northeast Asia International Agricultural and Forestry Products Trading Center is currently under construction. During the “14^th Five-year Plan” period, the Land Port Zone will focus on building “one port with two parks” as its layout, creating a new highland of opening up and cooperation as its main line, adhering to the integrated development of “port-industry-city”, solidly promoting key projects such as the Commercial Processing And Entrepreneurship Industrial Park, Tonghua Medicine and Chemical Industrial Park, Northeast Asia Agricultural and Forestry Products Trading Center, continuously optimizing basic supporting capabilities, improving the carrying functions of the park, enhancing platform service levels, and making every effort to build a commercial logistics and industrial agglomeration center in the eastern part of Northeast China.

2.3 Contact method

2.3.1 Contact method of cooperator

Contact unit: Management Bureau of Chemical Industrial Park in Land Port Economic Development Zone

Contact person: Sun Yanna

Tel: +86-18504353555

E-mail: gwqhgyqglj@163.com

2.3.2 Contact method of the city (prefecture) where the project is located

Contact unit: Tonghua Municipal Commerce Bureau

Contact person: Wang Liangchen

Tel: +86-435-3199017

   +86-18643036783

E-mail: thsswjtck@126.com