Adaltis, Inc. (TSX: ADS), a Montreal maker of in-vitro diagnostic systems, is concentrating its focus – both operationally and in terms of revenue – on China. The company has been transferring its manufacturing to the Shanghai while it also looks to the China market to increase its revenues.

That will represent a change for the company, because Europe is traditionally its biggest market, while China has recently ranked second. Adaltis reported that in 2007, its revenues were 39% denominated in euros, 25% in Chinese renminbi, 23% in Hong Kong dollars, 11% in U.S. dollars and 2% in Canadian dollars and Mexican pesos combined. The US-denominated revenues, it notes, were from sales in countries around the world as well as the US. The company says will continue to focus on marketing to the developing markets in China, Brazil, Mexico, India and Turkey.

In an effort to cut costs and get closer to the China market, Adaltis has shuttered its operations in Canada and sold off a facility in Italy. The company hopes to be more responsive to the needs of its China customers by being based there. Some administrative and R&D functions will be maintained outside of China, however.

In 2007, Adaltis received approval for its Eclectica™ system in China. Eclectica is a compact and affordable benchtop analyzer that is aimed at small and medium-sized labs. It continues to await other registrations for some of the assays in China, which will make the product a more attractive competitor in its market. Adaltis expects those registrations in 2008 and early 2009.

Adaltis said that it halted its roll-out of the Eclectica system during the second half of 2007 because technical problems were cropping up. The company has worked to make the system more robust and to increase the education of clients who buy the analyzer. The company expects to re-start a full-scale promotion of the system again in the second half of 2008.

Slowing down the roll-out of Eclectica had a negative effect on Adaltis’ 2007 financial report. The company said its revenues moved up only slightly to $63.6 million (Canadian), but its loss was also higher at $39 million or 63 cents per share (Canadian).

The company has had its Shanghai facility operating for more than a year, and it has also recently moved production of its infectious disease products to Shanghai from Canada. Adaltis said it was very careful to assure the quality of raw materials sourced in China before it closed its Canadian facility.

In May 2007, Adaltis acquired Shanghai Hua Tai Biotechnology Co. Ltd., which gave the company additional manufacturing capability and more diagnostic products to sell. Sales of diagnostic products in China grew by 72% during 2007.

Adaltis also disposed its China distribution operation in 2007, an operation it characterized as a low-margin business that did not show as much promise as its other initiatives.


Disclosure: none.