Lotus Readies for $59M Development

BEIJING-Lotus Pharmaceuticals Inc, a developer, manufacturer and distributor of pharmaceutical products in China, and its contractually controlled subsidiary Beijing Liang Fang Pharmaceutical Co. Ltd. recently completed a $26.3 million purchase of land use rights in the Chahaer Industrial Park in Inner Mongolia. This deal paves the way for the company’s $58.5 million development project, a part of the company’s long-term growth plan.

“As part of our long term plans for growth, we are pleased to have purchased the land use rights for property on which to develop a new facility and Pharmaceutical Park, and are excited by this opportunity to expand our business in Inner Mongolia,” says Zhongyi Liu, CEO and chairman of Lotus. “This important first step puts our plans for expansion during the next five years into action.”

The land deal gives Liang Fang 2,188 square feet on which it plans to construct a 109,416-square-foot pharmaceutical products production and logistics facility. The rest of the property will either be sold or rented to other companies in order to create a large Pharmaceutical Park.

The development of Liang Fang’s facility will take up to three years to complete. Liang Fang first entered the Inner Mongolia market in December, receiving a business registration certificate from the local government. The business deal struck between the government and Liang Fang gives the pharmaceutical company eight years of never being charged an income tax and additional eight years of an income tax reduction.

“We expect to realize significant cost savings by expanding. Once our new facility is completed and sales begin, we expect our new Inner Mongolia operations, like our wholesale distribution business, to be free from income taxes for eight years and pay income taxes at a reduced rate for the subsequent eight years,” Liu says.

The development of the Chahaer Industrial Park won State Council approval in 2003. At the time the project was seen as a way of helping the under-developed western region. The park is 34,154 square feet and is located just over two hours from Beijing. The Chinese government has passed several preferential tax and operating subsidy policies to aid companies interested in locating within the park. The park is only about 33% occupied.