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Simcere Pharmaceutical Group recently announced that it has signed a share transfer agreement with Zhuhai Rongding Equity Investment Partnership L.P. on Jun 17, 2013.

As per the agreement, Simcere will sell its 99.99% stake in Jilin Boda Pharmaceutical Co., Ltd for RMB 400 million.

We remind investors that Simcere had acquired a 51.0% stake in Jilin Boda in Sep 2007. Thereafter, through a series of transactions in 2010 and 2011, Simcere acquired another 48.99% stake, resulting in an overall stake of 99.99%.

Jilin Boda manufactures Yidasheng, which is indicated for stroke management. We note that edaravone injection (Bicun and Yidasheng) generated sales of RMB 702.7 million of sales in 2012, down 8.9% due to the loss of tenders.

Earlier in the month, Simcere entered into a strategic agreement with Bristol-Myers Squibb Company (BMY - Analyst Report), whereby both companies will collaborate on the development and commercialization of the subcutaneous (SC) formulation of Bristol-Myers Squibb’s rheumatoid arthritis drug, Orencia.

Simcere will primarily focus on the development and regulatory activities, which are mandatory to obtain market approval for Orencia SC in China. Both companies will share profits and losses related to Orencia SC in China.

We wait for further updates from Simcere on how the cash generated from the sale of the stake will be used.

We expect Simcere to face challenging market conditions in the remainder of 2013 owing to pricing pressure from the government in China. Nevertheless, improvements in cost structure should lift the company’s overall performance.

Simcere currently carries a Zacks Rank #2 (Buy). Right now, stocks that look attractive include Salix Pharmaceuticals (SLXP - Analyst Report) and Santarus Inc. with a Zacks Rank #1 (Strong Buy).

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