SHENZHEN CITY, China, Sept. 3 /Xinhua-PRNewswire-FirstCall/ -- China Information Security Technology, Inc., (Nasdaq: CPBY) (“China Information Security,” “CIST” or the “Company”), a leading application software developer, systems integrator and full-service Geographic Information Systems (“GIS”) solutions provider to the public security and civil-use markets in China, today announced that the Company has signed a non-binding letter of intent to acquire a majority share of Shenzhen Zhongtian Technology Development Co., Ltd. (“Shenzhen Zhongtian”), a leading provider of hospital digital information systems in Guangdong Province, China. The acquisition is expected to close on the fourth quarter of 2008, and the terms of agreement will be disclosed at the closing of the acquisition. The acquisition is to be accretive toward 2009’s earnings.
The acquisition of Shenzhen Zhongtian and its patented Medical Case Statistics Software will enable CIST to leverage its existing Residence Card application platform and information sharing capabilities to serve the growing demand for digital hospital and electronic medical record (EMR) systems in China. Medical records, including health examinations, medical care, immunity or infectious diseases, will be integrated into one centralized system so that doctors within the network can review a patient’s complete medical history. Such digital hospital systems are expected to reduce medical errors and improve the efficiency of delivering healthcare services, so as to benefit patients, while helping to minimize medical claims fraud. Shenzhen Zhongtian’s Medical Case Statistics Software can also be used to provide public health authorities with an integrated command and decision system for public health and disease control.
“We are pleased to announce this transaction, as Shenzhen Zhongtian will allow us to leverage our technological capabilities and expand into an exciting new vertical space,” said Jiang Huai Lin, CEO of China Information Security. “We see a great opportunity for the Company, since we believe that date, no private entities in China have developed the capacity to digitize hospital networks and provide integrated solutions to address the needs of patients and healthcare providers.”
Market Opportunity
In 1995 the Chinese government launched the Golden Health Project, to promote the application of information and communication technology to healthcare, by providing sizable market opportunities for “Digital Hospital” solutions. Shenzhen Zhongtian expects that the demand for its digital hospital information technology will increase in light of this hospital information systems (“HIS”) initiative.
The total Hospital Information Systems (“HIS”) market size in China is estimated to be RMB 8 billion (about $1.17 billion) - RMB 16 billion (about $2.34 billion) per year as of 2007, assuming 2%-4% of total hospital revenues are spent on HIS.(1) In addition, the market demand for picture archiving and communications systems (“PACS”) and PACS related medical equipments used in hospitals is valued at approximately RMB 30 billion (about $4.39 billion).(2) There are a number of factors that are creating the dynamics of these markets:
-- As a result of medical reforms, the majority of China’s population
now participates in a co-pay health care system. According to
China’s Ministry of Health, as of 2008, 98% of cities provide a basic
co-pay health care system, and 93% of counties and towns have already
initiated such a system. Most residents of major cities are covered
under this health care system, as well as 82.83% of the population in
the countryside.(3)
-- Although hospitals in China have established some form of internal
information systems, according to the Ministry of Health, about 70-80%
of hospitals still need to upgrade their information systems, as well
as strengthen them in the area of digital medical records, PACS
systems, and clinical decision supporting systems.(4)
-- The Ministry of Health encourages hospitals to increase expenditures on
information systems in order to improve their competitiveness. Among
the 17,000 county level hospitals in China, only 31% have established
HIS. These hospitals also spent less than 0.5% of revenues on their
information infrastructure, significantly less than the 2%-4% of a
hospital’s revenues in more developed countries. According to a
Ministry of Health mandate, as of December 2004, 5% of hospital
revenues must be spent on information systems infrastructure.(5)
“By combining and leveraging the best in class software applications of Shenzhen Zhongtian, and CIST’s experience in large scale data management and national marketing reach, we believe that we have the potential to lead the rapidly developing market for digital hospital solutions in China,” said Mr. Lin.
(1) http://www.erpworld.net/article/2008-07-24/0H4221952008.shtml
“China’s Health Care Sector to Be Reformed by IT” July 24, 2008
(2) http://www.100md.com/html/DirDu/2005/01/18/63/27/34.htm “China’s
Hospitals Speed Up Information Systems Buildup” Jan 18, 2006
(3) http://news.sina.com.cn/c/2007-09-05/101813822150.shtml “China’s
82.83% of Rural Populations Participate in Co-pay Healthcare “ Sept 5,
2007
(4) China’s Hospital Association Information Management Committee 2005
survey
(5) http://finance.sina.com.cn/money/x/20041208/04591208933.shtml “The
Ministry of Health Care: 5% of Hospital Revenues to Use in Information
System Infrastructure” Dec 8, 2004
About Shenzhen Zhongtian Technology Development Co., Ltd.
Founded in 2004, Shenzhen Zhongtian is focused on the development and sale of Hospital Information Management Software in order to help build modern, scientific and digitized hospitals. Its products are widely used to efficiently manage hospital fiscal information, clinic information, medical technologies, equipment and inventory, as well as, other comprehensive hospital information. Through its strong research and development team, comprising IT engineers and experts in hospital management, Shenzhen Zhongtian has developed an outstanding software framework within the healthcare industry. Its software products have also proven to be easily duplicated to serve the needs of different hospitals. Shenzhen Zhongtian’s Medical Case Statistics Software is now promoted exclusively by the Department of Health in Guangdong Province and has been applied in more than 800 hospitals.
About China Information Security Technology, Inc.
Through its wholly-owned Chinese subsidiary, China Information Security Technology, Inc. (“CIST” or the “Company”) headquartered in Shenzhen, China (“PRC”), is a leading application software developer, systems integrator and full-service Geographic Information Systems (“GIS”) solutions provider to the public security and civil-use markets in China, aiming to use information technology to improve public safety and information management. Its main business lines range from digital public security, to intelligent border control, and residence card information management systems. Its commitment to leading-edge technology and quality assurance has won the Company numerous government and enterprise contracts throughout China. To learn more about the Company, please visit the corporate website at http://www.chinacpby.com .
Safe Harbor Statement
This press release may contain certain “forward-looking statements” relating to the business of China Information Security Technology, Inc., and its subsidiary companies. All statements, other than statements of historical fact included herein are “forward-looking statements” including statements regarding the significance of the acquisition of Shenzhen Zhongtian Technology Development Co., Ltd. and the ability of the Company to capitalize on other opportunities in the healthcare sector; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as “believes,” “expects” or similar expressions, involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company’s actual results could differ materially from those anticipated in these
forward-looking statements as a result of a variety of factors, including those discussed in the Company’s periodic reports that are filed with the Securities and Exchange Commission and available on its website ( http://www.sec.gov ). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For more information, please contact:
Company Contact:
Mr. Michael Lin
Vice President, Investor Relations
China Information Security Technology, Inc.
Tel: +1-949-743-0868
Email: mlin@chinacpby.com
Web: http://www.chinacpby.com
Investor Relations Contact:
Mr. Crocker Coulson
President
CCG Investor Relations
Tel: +1-646-213-1915 (NY office)
Email: crocker.coulson@ccgir.com
Web: http://www.ccgir.com
