3SBio Soars 23% on Analyst Opinion of Anemia Drug

Thursday, 3SBio (SSRX) shot 23% higher after Elliot Wilbur, an analyst for CIBC World Markets, predicted earnings for 3SBio would quadruple by 2009. He called for a profit of $1.13 per share in 2009, up from 27 cents in 2006.

As reason for the growth, Wilbur cited great prospects for the company’s main revenue-producing drug, EPIAO. Wilbur also predicted that shares of 3SBio would climb to $17 per share. 3SBio responded by rising $2.70 to close at $14.35.

EPIAO is an erythropoiesis-stimulating agent, or ESA, which increases the production of red blood cells and is a biosimilar drug to Amgen’s (AMGN) EPO. It is given to patients to treat anemia caused by chemotherapy or kidney dialysis. Wilbur says the market in China for ESAs remains under-penetrated.

In the second quarter of 2007, 3SBio reported revenues of 30 million RMB ($3.9 million) for the drug. 3SBio has produced $19.9 million in revenue over the past 12 months, with a gross profit of $14.9 million. Profit was $7.5 million, which, strangely enough, was slightly ahead of the EBITDA figure of $6.5 million. 3SBio is off from Thurday’s close by 79 cents at $13.56. At that price, 3Sbio is trading at a P/E multiple of 31 over the trailing 12 months profit and a 22 multiple over the projected profit for 2008.

3SBio made its IPO on Nasdaq in February, a very successful offering. The company proposed a range of $12 to $14, but priced higher, at $16 per share. The stock climbed to $18 in subsequent open market trading. Investors have cooled to the company since then, sending the price as low as $8.18 in July. It has climbed more than 60% in the two months since hitting its low.

SSRX 6-mo chart:

Disclosure: none.