Group rivalry unlikely to hit medicine firm listing

PUBLISHED : Thursday, 26 October, 2000, 12:00am
UPDATED : Thursday, 26 October, 2000, 12:00am

Competition between Chinese medicine maker Tong Ren Tang Technologies and its direct and indirect parents is limited, despite a warning of its impact in its listing prospectus, according to a source close to the underwriters.

The listing prospectus states the Growth Enterprise Market (GEM) candidate may be adversely affected by its parents selling products in different forms with similar curative effects.

Tong Ren Tang Technologies is 54.7 per cent owned by A-share Tongrentang, and indirectly controlled by Tongrentang's parent Tongrentang Holdings.

Tongrentang was spun-off on the Shanghai Stock Exchange from Tongrentang Holdings in 1997.

The three companies make traditional Chinese medicine under the 331-year-old brand name and focus on the China market.

The Tong Reng Tang listing document warns investors that the lack of clear business delineation with its parents could cause direct competition.

On listing, Tong Ren Tang will focus on production of Chinese medicine in the form of pills, granules, tablets and soft capsules.

Its direct parent will focus on producing medicine in the traditional forms of large pills, powders, ointments and medicinal wines, while its ultimate parent will make medicine mainly in the form of honeyed pills.

'This way the direct competition will be minimised,' the source said.

Another source said once listed, the company would mainly target the overseas market and consumers in China who preferred their medicine in 'handy and convenient' forms.

However, by conducting their businesses this way, there was still room for direct competition, the document said. This was because Chinese medicine generally had multiple curative effects and could treat implicit health problems which might have an influence on the explicit symptoms.

So the three companies might be competing for the same customers by providing products in different formats albeit with similar curative effects, it said.

To address the concern, and as part of the restructuring before Tong Ren Tang's listing in Hong Kong, the three companies have undertaken not to produce all but one common product under the same name.