Simcere Acquires New Cancer Drug; Misses on Q3 Revenue

Simcere Pharmaceutical (SCR) extended its cancer therapeutic offerings by paying 32.6 million RMB ($4.4 million) to buy 86% of Nanjing Tung Chit Pharmaceutical Co., Ltd. (Tung Chit). Tung Chit makes and markets Jiebaisu, a first-to-market platinum-based nedaplatin injection.

Jiebaisu is approved in China to treat many solid tumors, including head-and-neck cancer, small cell and non-small cell lung cancer and esophageal cancer. Specific sales figures for Jiebaisu were not released, though Simcere did say that Jiebaisu has an 80% share of the nedaplatin market in China. Because this class of drugs is new, Simcere expects sales to grow.

The acquisition includes Tung Chit’s GMP certified chemotherapy production facility.

At present, Simcere already markets Endu, an endostatin anti-cancer drug with an anti-angiogenesis mechanism. Endu is approved for use against non-small cell lung cancer in China, administered as part of a regimen that includes vinorelbine and cisplatin. Simcere hinted broadly that it will seek to prove that Jiebaisu can be substituted for cisplatin. Even if that does not pan out, Jiebaisu will give Simcere’s sales reps a second cancer drug to promote.

At an investor conference last summer, Jinsheng Ren, CEO of Simcere, told investors that Simcere was actively seeking partners for worldwide distribution of Endu. The problem is that Simcere holds only a 40% stake in the Hong Kong company that owns the worldwide patent. Simcere said it was trying to increase its ownership percentage.

Endostatins have not faired well in Western clinical tests, despite the ability of the drug to prevent blood vessel growth in laboratory tests.

In April 2007, when Simcere completed its IPO on the New York Stock Exchange, it billed itself as a maker of branded, high-end generic drugs with a novel cancer drug, Endu. Since then, Simcere has been using its IPO proceeds to branch out further into the world of prescription drugs, buying Boda Pharmaceuticals for $14.8 million to increase its presence in the market for stroke treatments – and now a platinum-class anti-cancer drug.

Q3 Financial Report

Separately, Simcere released its third quarter financials, reporting a 45% increase of revenue to 323.4 million RMB ($43.2 million). Earnings were up even more: they jumped 73% to 73.1 million RMB ($9.8 million), which is equivalent to 15 cents per share, fully diluted.

The results were a small miss for Simcere, as analysts were expecting $45 million in revenue. Shares of Simcere, accordingly, fell 51 cents (4%) to $12.15 in mid-session trading.

Simcere reiterated its existing projections for its full-year results.

SCR 6-mo chart:

Disclosure: none.

Comments

[rlirph]

I would be very careful about investing in any biotech companies in China because unless you are a health professional you do not know what they are selling.

At first glance there are many chemotherapeutics which would not be approved in western countries but can be marketed in China. That is not say that just because those products are marketed in China it would mean that they would be available in the U.S.

China is not a country that I would invest my money in any intellectual properties. After saying that I am a licensed US pharmacist who lives in China half of the time. The way I see it one can easily oses his shirt because he would not know what's going on.