“Our tagline, “Western Management, Eastern Value,” speaks well to our customers. We are a U.S. company that owns assets in China, which constitutes a different business model and value than companies that are Chinese with a presence in the United States.”

Stephen Wang & Ryan Yoder

CHAIRMAN and CEO & VP BUSINESS DEVELOPMENT, KINGCHEM LIFE SCIENCE

April 24, 2019

Established in 1994, Kingchem has evolved from distributing chemicals to manufacturing pharmaceuticals. Could you provide an overview of Kingchem Life Science and your global operations?

SW: Kingchem began 25 years ago as a distributor of products from China to the United States and Europe. For the first 10 years, we focused on third-party representation and bringing products into the U.S. and European markets. We gradually realized that we could provide more value to our customers by combining our own R&D and manufacturing with our business model of third-party representation. While we continue certain traditional third-party agency business with our long-term business partners, our own R&D and manufacturing now dominates the majority of our business, and Kingchem will continue our investment in this direction.

RY: In 2002, we acquired a plant in Fuxin, China, that today manufactures chemicals for several industries, including pharmaceuticals, agrochemicals, electronic chemicals and specialty chemicals. Over the past 10 years, we have invested over US$40 million in this plant to grow its capacity and continuously improve the operating standards, with another US$15 million occurring over 2019-2021. The plant primarily supplies to our clients in key markets, such as the United States, Europe and Japan. Our chemical supply for pharmaceuticals has grown significantly as we have continued to improve our quality systems. Subsequently, we have become a major player for registered starting materials (RSMs). Moreover, our investments in quality and environment, health and safety (EHS) have made us a sustainable partner of choice, which has increased in importance given the stringent environmental regulations now in place in China.

Kingchem recently acquired a GMP facility in St. Francis, Wisconsin. How does this acquisition fit into the company’s overall strategy?

RY: The recent founding of our new company, Kingchem Laboratories Inc. in Wisconsin was an important milestone for Kingchem. We currently have over 60 employees working in R&D across Dalian and Fuxin in China, but this acquisition expands our R&D capabilities into the United States. Moreover, the acquisition gives us GMP-manufacturing capabilities based in the United States, which has been welcomed by many of our customers. This enables us to provide a full spectrum of products and services for our clients. Where China is producing RSMs, our facility in Wisconsin is focusing more downstream on GMP intermediates and APIs.

What is your value proposition for biotechs and large pharma companies, especially in light of recent trade tensions between China and the United States?

RY: Our tagline, “Western Management, Eastern Value,” speaks well to our customers. We are a U.S. company that owns assets in China, which constitutes a different business model and value than companies that are Chinese with a presence in the United States. We are not alone in facing the impacts of the tariffs and trade relations between the United States and China, and our customers understand this because their entire supply chain may be affected. We hope to increase confidence within the United States through our recent founding of Kingchem Laboratories in Wisconsin, which provides domestic manufacturing assets to compliment those in China.

Have you noticed an increase in demand for your services following the enforcement of stringent environmental regulations in China?

SW: Over the last few years, our plant in China has become increasingly full, as a result of some of the plants being shut down by the Chinese government due to raised environmental standards. For example, we had 30% revenue growth over the last year. Kingchem has also somewhat benefited from the environmental movement in China since we invested heavily in EHS, particularly in biological waste water treatment plant and an incineration plant.

What is Kingchem’s growth strategy moving forward and what is your longer-term vision?

RY: Our strategy is to continue growing our plant in China and to upgrade our Wisconsin plant: we recently invested over US$500,000 on the analytical equipment and software in Wisconsin, with another US$4.5 million in other facility investments to occur by the close of 2021. In addition, we are hiring new staff as we upgrade both of our plants in China and the United States. We strive to continuously raise the bar with respect to sustainability to ensure that we are prepared for the future. For example, a lot of companies are concerned about sharing IP with a company that is doing business in China, but Kingchem has a rigorous IP protection program in place, and we feel very confident that our customers can trust us. Kingchem is excited to be able to leverage our strengths in China as a key producer of RSMs where we have built a strong customer base over the past 25 years, as well as downstream products through our new facility in the United States.

SW: As a company, our growth is a non-stop process and we need to continuously improve our position and build a better foundation for future growth. We will continue to add more staff in R&D, quality control and marketing, as well as to add hard assets to our manufacturing capacity. Moreover, we will further strengthen our R&D and manufacturing position to enable us to better serve the life sciences industry. We will continue to develop our technology to better serve our clients across multiple sectors.

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