Taihua

China-based Taihua, a producer of clinical-grade anti-cancer compounds, plans to inflate its sales and margins by entering the European market.

The group, where co-Viagra inventor Dr Mike Wyllie is a director, has been producing anti-cancer agents paclitaxel and homoharringtonine for over a decade. Management claims the difference between Taihua and competitors is the high purity of its production – 99.7% – meaning little or no further refinement is required before clinical use.

These agents are both derived from yew trees, bought from local farmers, and a single tree is needed to gain enough ingredients for one dose. In 2005, Taihua bought land to grow its own seedlings and has 60,000 young trees ready to harvest in 2009, this will present even more competitive advantages.

Paclitaxel has passed all necessary regulatory hurdles around the world, but for Taihua to supply to pharma companies in the £1.25bn European market it will need to garner its own EU approval. Further on, it will go through the same process for homoharringtonine, which has anti-leukaemia properties, and even further on an own-brand injection is planned.

A second leg to the business is its traditional Chinese medicines division, which concentrates solely on the domestic Chinese market, and as yet provides only a small portion of sales.

Brought to AIM last December by WH Ireland, the cash-generative business grew pre-tax profits by 74% in 2006 to almost £2m on the equivalent of £3.4m turnover. Sales, currently focused on China, Russia and South America, will soar if EU approval for paclitaxel is granted.

The shares have already rocketed from their 10p issue price and look like providing an interesting speculative ride.