It was a tumultuous week in the markets, with US indexes losing between 15% and 18%. Shanghai was also negative, after its week of vacation, dropping 15%. By comparison, the CBT Index, an index composed of 15 China biopharmas that are listed on US exchanges, was down a relatively mild 11%. That could be reason for some pride, albeit muted and only relative. But looking long term, the results really are not so positive. So far this year, the CBT Index has lost 46% of its value, while Nasdaq is down just 37%, wiping out any claims of relative outperformance for China biopharma companies.

Putting aside the question of bragging rights, the more significant upshot of the stock market meltdown is the damage done to IPOs, to reverse-merger transactions, and to share prices, which publicly traded companies would like to use for acquisitions,. Risk is currently out of fashion, and it probably will be for some time. Many of the US-listed China biopharmas have superior fundamentals, though their strong financial performance hasn’t been rewarded with high valuations. WuXi PharmaTech (NYSE: WX) closed the week at $6.67, down from its 52-week high of $45.65. That’s an 85% loss, even though WuXi continues to perform admirably and its prospects remain very positive. There was a fair amount of speculative premium in WuXi’s stock at $45, but now, at a P/E ratio of just 12, there is a considerable risk-avoidance discount in its share price – and much the same is true of other China biopharmas as well.

Another upshot of the financial implosion was felt yesterday, when China Medicine (OTCBB: CHME) became the first company in the sector to blame the worldwide economic crisis as a reason for lowering guidance (see story). The shortfall is not, apparently, severe: China Medicines said revenues would not reach its target of a 25% to 35% increase (it did not issue a new target), but net income will nevertheless beat the previously expected 20% to 22%. The economic crisis is causing cash flow problems among China Medicine’s customers, who are unable to get loans to fund operations. For itself, China Medicine said that its cash flow remains strong. Other problems outside of the company’s control are also slowing the approval process for recombinant aflatoxin-detoxifizyme (rADTZ), an animal food additive. China Medicine expects rADTZ to begin producing revenues in Q1 of 2009, with a potential market for the product of over $1 billion.

Despite the worldwide economic turmoil, one major deal was inked last week.