Tongjitang's Osteoperosis Drug Likely to Win FDA Approval

| About: Tongjitang Chinese (TCM)

Tongjitang Pharmaceuticals (NYSE:TCM) announced its mainstay traditional Chinese medicine for osteoporosis, Xianling Gubao, was effective in a two-year trial.

The randomized, double-blind, multi-center study demonstrated that Xianling Gubao prevented bone resorption and increased bone density. The trial was conducted in patients with post-menopausal osteoporosis.

Bone resorption is the process by which osteoclasts break down bone and release the minerals, causing a transfer of calcium from bone fluid to the blood.

After six months of use, Xianling Gubao was found to inhibit bone resorption by 25% and increase the bone density of the spine (the lumbar vertebrae L1) by up to 3.1%. Without Xianling Gubao, the density loss in bone can be as much as 2%. Bone density in the hip was also maintained.

A secondary finding of the study was that calcium and vitamin D supplements do not by themselves improve bone density.

Tongjitang will use the data from the test, which was gathered entirely in China, as a basis for its request for FDA approval of Xianling Gubao in the US. Tongjitang began the trial in late 2005. At the time, the company expected to be granted FDA approval in 2006. Now, Tongjitang is budgeting more than $10 million and a time period of three to five years before the FDA makes a ruling.

The trial was conducted by Synarc, which is headquartered in the US, but with operations spread throughout the world, including Beijing. Synarc specializes in clinical trials that involve radiology and biochemical biomarkers.

It is noteworthy that Synarc co-founder, Chairman Emeritus and osteoporosis authority, Harry K. Genant, serves on Tongjitang’s board as an independent director.

FDA approval would open a huge market for Xianling Gubao, as the west would welcome a TCM drug for osteoporosis. At present, the drug is marketed only in China. In August, Xianling Gubao was given “Trade Secret Status” by China, guaranteeing Tongjitang marketing exclusivity for five years.

As a company, Tongjitang remains heavily dependent upon Xianling Gubao, which is sold as both a prescription and OTC drug. In China, the modernized formulation of a TCM compound is approved by the SFDA for osteoporosis, osteoarthritis, ischemic necrosis and bone fracture. It produced sales of 375 million RMB ($48 million) in 2006, an amount that comprised 77% of Tongjitang’s total revenues.

Xianling Gubao holds a 70% share of the market in China for TCM osteoporosis treatments. Perhaps even more astonishing is that it produces 0.75% of all revenues for all TCM drugs that are administered by hospitals in China (there are several thousand TCM formulations in all).

Since Tongitang’s IPO in March of 2007 at a price of $10 per share, it has traded in range from $12.88 to $7.50. The news of the successful trial sent its shares toward the top of the range. In mid-session action on Monday, Tongjitang was priced at $11.84, up 44 cents.

See our other stories about Tongjitang Pharma.

Other information on the trial and on Tongjitang:

• The biochemical testing was carried out in the Biochemical Institution in Lyon, France. The statistical data was done by Epidemiology and Biostatistics Lab of the University of California.

• Tongjitang signed the agreement with Synarc on Oct.25, 2005 to conduct the test. The cost of the contract was less than 10 million RMB ($1.3 million), perhaps the lowest dollar amount of any contract signed by Synarc. However, because it was the first deal for Synarc in China, they were willing to accept the terms.

• The clinical studies were designed to meet FDA requirements for clinical trials. Obtaining FDA approval is part of the long-term strategy for the company. With this encouraging data, Tongjitang is beginning the FDA regulatory submission process.

• This is China’s first test on a traditional Chinese medicine’s clinical effectiveness and safety using the techniques of evidence-based medicine to meet FDA requirements.

• On September 29, Tongjitang has also started a more challenging research test – a Phase IV clinical trial of Xianling Gubao’s ability to prevent ischemic necrosis caused by taking steroids. As a prescription drug, Xianling Gubao was approved for four diagnoses -- osteoporosis, osteoarthritis, ischemic necrosis and bone fracture. In the past, Tongjitang focused mainly on promoting Xianling Gubao to the medical community for the treatment of osteoporosis. The Phase IV clinical trial is designed to expand the sales of Xianling Gubao to a new patient population in hospitals. Tongjitang expects to collect data of the trial in the second half of 2008. 600 patients at high risk of osteoporotic fracture will be chosen. They will be given inhibition treatment for six months under clinical observation to verify Xianling Gubao’s effectiveness. This research will be conducted in 9 major cities in China, with the participation of ten mostly three grade class A hospitals throughout China. This study will be a multicenter, randomized, double-blind, placebo-controlled clinical trial.

• Li Dalin, the director of State Administration of Traditional Chinese Medicine of PRC said that upshot of the test is that Chinese medicine has been proven to be as effective as Western evidence-based medicine. He encouraged researchers to submit other traditional Chinese medicines to clinical testing, so that they also can be recognized throughout the world.