Chindex announces joint venture deal with Fosun Pharma

Dec 28 2010

Chindex International, Inc. ("Chindex"), a leading independent American provider of Western healthcare products and services in the People's Republic of China, and Shanghai Fosun Pharmaceutical (Group) Co., Ltd. ("Fosun Pharma"), a leading manufacturer and distributor of western and Chinese medicine and devices in China, today announced the formation of the previously-proposed joint venture to independently operate certain combined medical device businesses, including Chindex's Medical Products division.  The formation of the joint venture represents a basis of the strategic alliance between the two companies, which aims to capitalize on the long-term opportunity presented by medical product sectors in China.

The joint venture entity, Chindex Medical Limited (the "Joint Venture"), a Hong Kong entity, will focus on marketing, distributing, selling and servicing medical devices in China, including in Hong Kong, as well as activities in R&D and manufacturing of medical devices for the Chinese and export markets. The Joint Venture is owned 51% by Fosun Pharma and 49% by Chindex.

As formed today, the Joint Venture owns the Chindex-contributed businesses (principally the Medical Products division) and is entitled to a pending and obligatory final investiture of the Fosun Pharma-contributed businesses. The Fosun Pharma-contributed businesses have been segregated and, until such investiture, will be operated and managed by the Joint Venture under an entrustment arrangement.  Such investiture will be finished once all requisite governmental and other approvals and other closing conditions have been satisfied.  

Fosun Pharma, upon such final investiture of the Joint Venture, will be entitled to purchase an additional 1,057,425 shares of Chindex common stock at a purchase price of $15.00 per share in cash, as previously disclosed.

Roberta Lipson, President and CEO of Chindex said, "We had explored various strategic options for our Medical Products division and believe that the Joint Venture with Fosun Pharma represents a superlative opportunity with a formidable partner and great upside potential.  Following our mutual cooperation during the course of this year, we are delighted to see the Joint Venture launch as we enter the New Year.  We believe that this integration of complementary businesses offers synergies, economies of scale and presence in China not available to either of the combined businesses on a stand-alone basis."

As the successor to Chindex's Medical Products division, the Joint Venture will market, sell and service medical products manufactured by various major multinational companies, including Siemens AG, Hologic, Candela, Cutera and Intuitive Surgical, for which the Joint Venture will be the distribution partner for the sale and servicing of color ultrasound systems, mammography, aesthetic lasers and surgical robotic systems, respectively. It also will arrange financing packages for the supply of medical products to hospitals in China utilizing the export loan and loan guarantee programs of both the U.S. Export-Import Bank and the German KfW Development Bank.  Upon investiture, Fosun Pharma will contribute its medical device business, excluding clinical diagnostic products and including dental products and consumables, surgical consumables including sutures and needles, and disposable transfusion supplies.

Chindex references its Current Report on Form 8-K filed today with the Securities and Exchange Commission that contains additional information regarding the Joint Venture and related agreements, terms and conditions.

Financial Impact of the Transaction

Chindex no longer will consolidate the operations of its Medical Products division in its financial statements.  Going forward, Chindex will report its 49% investment in the Joint Venture via the equity method, and will recognize income or loss from the Joint Venture as it is incurred.