Chinese chase Australian opiates in Hong Kong

Chinese investors are looking to back an Australian opiate producer following a series of meetings in Hong Kong - the territory ceded to Britain in 1841 after the first opium war.

TPI Enterprises this week completed its first investor trip to Hong Kong, aimed at sounding out potential appetite, including from mainland fund managers.

The company is the world's only standalone producer of the narcotic raw ingredients for painkillers, producing opiates such as morphine, codeine and thebaine from opium poppies.

"The irony [of coming to Hong Kong] isn't lost on us," said Jarrod Ritchie, chief executive and founder of the company. "But we're a global company with a global footprint and we'd like to have some global investors."

TPI is loss-making, falling A$14.5m into the red in 2014 as sales halved following a poor harvest in Tasmania. A recent funding round raised A$35m from Australian investors for expansion and paying down debt.

Mr Ritchie said potential backers had questioned him about the rising demand for painkillers and the opportunities to expand poppy growing in Australia. Last year legislative changes allowed the country's three producers to plant crops on the Australian mainland for the first time, having previously restricted the industry to Tasmania.

TPI is seeking a compliance listing on the Australian Stock Exchange by the end of June and will have a market capitalisation of A$240m. The listing will provide a platform for its shares to trade, but does not involve fresh capital.

Australia accounts for half the world's licensed production, split between Johnson & Johnson, TPI and Sun Pharmaceuticals, which last month bought GlaxoSmithKline's opiates unit.

There are only eight producers globally. The other five are state-owned units in Turkey and India, France's Sanofi, Spain's Alcaliber (part-owned by Sanofi) and the UK's Johnson Matthey.

Global demand for painkillers is expected to rise as increasing numbers of people gain access. Three quarters of the world's population do not have access to narcotics such as codeine and morphine - both derived from poppies - according to a report last month from the International Narcotics Control Board.

It costs TPI less than a cent to produce one therapeutic dose, the equivalent of the painkillers that might be administered to a post-surgery hospital patient, Mr Ritchie said.

But he conceded the industry needed to overcome deeply-ingrained fears about addiction.

China's 19th century battles with opium - supplied largely by the British to help balance the trade deficit caused by UK demand for Chinese tea, silk and porcelain - have had a deep impact on the national psyche that continues today. In an interview this month with the Financial Times, Li Keqiang, China's premier, referred to the "painful memory about the harm of opium".

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