Reeling From Lehman Bros-linked Loss, China’s 3SBio Aims To Bioengineer Its Own Recovery

BEIJING - Stung by a loss of nearly $3 million in late 2008 tied to the U.S. financial meltdown, leading Chinese biopharmaceutical outfit 3SBio is laying the drug development groundwork for a profit rebound this year and next.

3SBio stated in an earnings report for the third quarter of 2008 that it suffered a loss of RMB 19.1 million ($2.8 million) due to an investment in floating rate notes linked to the credit of Lehman Brothers. "When Lehman Brothers went bankrupt, 3SBio lost this investment; these notes are now worth nothing," said Lu Hongbo, a vice president at Piper Jaffray in East Palo Alto, California.

Lu added, though, that the loss would not significantly affect 3SBio's operations: "This is a very small amount, and only represents about three percent of 3SBio's total cash."

Yet 3SBio is in the process of engineering a recovery.

Over the last half-year, the company's management has filed applications with China's State FDA for the approval of three biologics in the therapeutic areas of oncology and nephrology.

"All three drugs probably will be approved by the State Food and Drug Administration," said Lu, who closely follows China's biotech sector and 3SBio.

In December, the company submitted an application for the use of TPIAO , a recombinant human thrombopoietin product, in the treatment of idiopathic thrombocytopenic purpura in China. ITP is a disorder in the immune system, which misperceives the body's platelets as foreign and destroys them, triggering low platelet counts.

TPIAO is aimed at stimulating the TPO receptor to speed up production faster than the immune system can destroy platelets. The company estimates that about 80,000 patients have been diagnosed with ITP in China, and that more than half are resistant to conventional steroid treatment. Three years ago, 3SBio received Chinese regulatory clearance for the use of TPIAO to counter chemotherapy-induced platelet deficiency.

In November of 2008, 3SBio, which is based in the northeastern Chinese city of Shenyang, filed for SFDA approval of NuLeusin in the treatment of late stage metastatic renal cell carcinoma. NuLeusin is the company's second-generation recombinant human interleukin-2, which stimulates the production of cytotoxic T cells and of interferon (Also see "3SBio Files For Approval For Interleukin-2 NuLeusin" - Scrip, 23 Nov, 2008.).

In September, 3SBio executives sought Chinese regulatory approval for a new high-dosage form of the biopharmaceutical EPIAO , or recombinant human erythropoietin. EPIAO stimulates the production of red blood cells, and is used to treat patients with anemia associated with hemodialysis or with chemotherapy. In outlining 3SBio's third-quarter earnings last year, CEO Jing Lou stated that the new 36,000 IU dosage of EPIAO undergoing SFDA review was aimed at providing "a convenient, once-a-week treatment option to anemic chemotherapy patients."

"The SFDA's drug review process usually takes 12 to 18 months, so the new high-dosage form of EPIAO could be approved later this year," said Piper Jaffray's Lu.

A launch of the drug could follow soon afterwards.

Despite its recent profits setback, "3SBio has a very complete set of capabilities in terms of drug research and development and business development," she said.

With its strong pipeline of biopharmaceutical products, Lu said, "3SBio is shaping up to the standards of a U.S. biotech company."

"3SBio is an innovation-driven group that represents a new generation of biopharmaceutical companies in China."

The company reported that its total net revenues for the first three quarters of 2008 increased 36.2 percent compared with the corresponding period of the previous year to RMB 183.2 million ($27 million).

But with the loss of RMB 19.1 million in the Lehman-linked investment, 3SBio's net income for the January-September period of last year declined 35.6 percent to RMB 41 million ($6 million) (Also see "New EPO Products Set To Boost Future Revenue For 3SBio" - Scrip, 18 Aug, 2008.).

- Kevin Holden ([email protected])