3SBio Rises After Hours on Earnings

3SBio (Nasdaq: SSRX) a leading China-based biotechnology company focused on researching, developing, manufacturing and marketing biopharmaceutical products, reported its unaudited results for the third quarter ended September 30, 2007. Investors in the after-hours market bid up shares on the report.

For the third quarter the company reports that revenues rose to US$7.5 million, a gain of 57.3% over the same period last year. Operating income grew 61.5% to US$2.3 million, with operating margins of 30.7%. Net income jumped 151.4% to US$3.2 million, with net margins of nearly 43%. Net income per American Depository Share [ADS] was US$0.15, up 65.7% over the same period in 2006.Revenue growth was driven by solid sales of the company's EPIAO (recombinant human erythropoietin or EPO). EPO sales were US$4.8 million or 64% of sales. This represents sales growth of 30.7% over the third quarter of 2006. Sales growth was also seen in TPIAO (recombinant human thrombopoetin), which gained 171.6% to US$1.9 million.

Sources of "other income" have become an issue with other Chinese companies reporting this season, particularly income derived from gains in publicly traded equities. The company reports US$1.27 million of interest income for the quarter, derived from interest income on cash gained from its IPO. As of Sept. 30 2007 3SBio reported over US$120 million in current assets, primarily cash. This represents 10 times the amount held at the end of 2006.Sales, general and administrative expenses increased 53% over the year, to US$4 million. Most of this rise in expenses was attributable to previously announced efforts to increase sales of its primary products in the oncology market. The company reports that it is expanding its hospital presence, targeting 121 addition hospitals in 14 provinces. Management also reports that it has received an exclusive access agreement to 19 hospitals run by the People's Liberation Army. Export sales remain small at US$382 thousand, but the company reports new cGMP certificates from Pakistan and Colombia for its China facility.

In addition, their EPIAO products are currently in the process of entering into Thailand's national insurance reimbursement list. "Our EPIAO products continued to maintain market leadership in the second quarter of 2007 in terms of revenues and sales volume in China, with market shares of approximately 36.8% and 30.8%, respectively," said 3SBio CEO Dr. Jing Lou. "In addition, sales of EPIAO have been bolstered by our newly created oncology sales force, which has been instrumental in allowing us to further penetrate the growing oncology market in China.

We also witnessed continued market acceptance of our newest proprietary TPO product, TPIAO, which increased 171.6% over the third quarter 2006, representing 25.3% of our total revenues for the third quarter 2007. Research expenses were US$515 thousand or roughly 7% of revenues. 3SBio's plans to complete Phase III clinical trials for Nuleusin, a high dosage (36,000 IU) EPIAO, and TPIAO for the treatment of idiopathic thrombocytopenic purpura at the end of this year are reported to be progressing in line with expectations.

The company also reported favorable research findings on the use of its intravenous iron sucrose solution in patients with kidney disease.

Investors were buoyed by the news from 3SBio. In the regular session shares closed at US$15.68, off over 30% from its recent high of US$22.75 in a tough market for stocks. Following the release in the after hours shares have rallied over 17% to a recent US$16.90.

Disclosure: none