Benzinga | Jan 18, 2022 08:09AM EST

CN Energy Signs Operation & Management Agreement Entering Multi-Billion Dollar Pharmaceutical Excipients Market; Terms Not Disclosed

CN Energy Group. Inc. (the "Company") today announced that its subsidiary Hangzhou Forasen Technology Co., Ltd. signed an operation and management ("O&M") agreement (the "Agreement") with HuaiNan JiaHe New Materials Co., Ltd. ("JiaHe") and JiaHe's activated carbon subsidiary, NingGuo ZheWanZhenHua Activated Carbon Industry Co., LTD. ("ZhenHua"). Under the Agreement, the Company will be fully responsible for the operation, production, sales and management of ZhenHua and receive a quarterly management fee.

Founded in 1985, ZhenHua is focused on R&D and production, processing, marketing of activated carbon specially used as pharmaceutical excipients and food additives. The company has two very scarce qualifications in this industry to manufacture pharmaceutical excipients and food additives. The company currently employs more than 90 professionals on its 18,000 square meter campus.

The Agreement marks the Company's successful entrance into the pharmaceutical excipients and food additives activated carbon market, and is expected to bring higher revenues to the Company and greater benefits to its shareholders. This is the Company's first O&M agreement and represents the latest development in its ongoing business diversification and growth, following its announced entrance into the multi-billion-dollar water purification market in November 2021.

The pharmaceutical excipients market is projected to reach US$10.6 billion by 2026 from US$7.9 billion in 2021, at a CAGR of 5.8% during the forecast period. Growth in this market is majorly driven by the growing pharmaceutical industry coupled with the increasing R&D activities taking place in this field. Also, the growing generics market, the rapidly growing biopharmaceuticals sector and the rising adoption of orphan drugs are supporting the growth of the market (Source: MarketsanMarkets.com).

Mr. Kangbin Zheng, the Company's Chairman and CEO, said, "This is an excellent opportunity for us to leverage our expertise, while also establishing an entirely new revenue stream in the O&M business. The Agreement underscores ZhenHua's confidence in our team. ZhenHua is uniquely positioned in the industry because of its qualification to produce food additives and pharmaceutical excipients. This is an important and a rare qualification in China, and it will immediately broaden the range of activated carbon products in our group, while also enhancing our core competitiveness and accelerating our growth outlook."