Sinobiomed Wins Sorely Needed Grant for Malaria Vaccine

Sinobiomed (SOBM.OB) announced its China subsidiary received a government subsidy of 9 million RMB ($1.24 million) to continue development of its malaria vaccine. According to Sinobiomed, the grant is the largest ever bestowed on a China biopharma. Sinobiomed’s 82% owned subsidiary, Shanghai Wanxing Bio-pharmaceuticals Co. Ltd., is developing the vaccine in partnership with the Second Military Medical University.

The Ministry of Science and Technology awarded the grant to Shanghai Wanxing as part of its 863 Program, which aims to advance significant high-tech projects in China, a key goal of the current five-year plan. Two-thirds of the money will be used to fund a Phase II test of the PfCP2.9 malaria vaccine in Southeast Asia, where malaria is endemic. Shanghai Wanxing expects to submit its request for the trial to the SFDA before the end of 2008.

The other one-third of the grant will be used to support research on a multi-stage, multivalent vaccine based on PfCP2.9. The goal with this initiative is to improve immunogenicity and extend the immune period, with clinical trials beginning in 2009.

Shanghai Wanxing received a similar 3 million RMB ($360,000) grant in 2004 from the Ministry of Science and Technology to help with the costs of the Phase I clinical trial of PfCP2.9. Sinobiomed notes that PfCP2.9 has been patented in China, the US, EU and Australia.

Financial Background

Sinobiomed can certainly use the money. Since completing its reverse merger in early 2007, Sinobiomed has been holding a more or less constant private placement of units, consisting of a share and warrant for another one-half share of its public stock, at various prices and conditions. In 2007, it raised $14.55 million in this fashion, diminished by a 10% (plus shares) finder’s fee. At the end of the third quarter, the company had just $1.8 million in cash.

In August, Sinobiomed completed the acquisition of a distribution company, Suzhou Boai Medical Development Company. Shanghai Wanxing paid18 million RMB ($2.4 million) for a 90% ownership of Suzhou Boai. In just two months during Sinobiomed’s Q3, the distribution business added $3.9 million to revenues. Unfortunately, distribution does not have the same high margins as biopharma, so once the G&A expenses were added in, Sinobiomed suffered a $1.7 million loss in the third quarter. That loss is about equal to its cash at the end of the quarter.

The company has a negative current assets/liabilities ratio, with just $9.3 million in current assets and $22.8 million in current liabilities. The liabilities are built up by $10.3 million in short-terms loans from banks and another $1.9 million in loans from shareholders. Because of Sinobiomed’s financial problems, its financial reports contain heavy warnings about the company’s continuing survival.

Revenues outside of distribution were just $700,000, consisting of sales of Wanferon/Wanferin; formulations of recombinant human interferon for treating hepatitis and viral diseases; Leflunomide, a drug for the treatment of rheumatoid arthritis and acidic Fibroblast Growth Factor, which treats diabetic ulcer burns and aids recovery from plastic surgery.

Sinobiomed’s Pipeline

Sinobiomed does not talk much about its legacy products. It says the market for interferon, for example, is “difficult,” meaning that an abundance of supply has forced margins to unacceptably low rates. Instead, Sinobiomed prefers to concentrate on its development programs. The company has three drugs on the market, four in clinical trials and three more in R&D.

The PfCP2.9 malaria vaccine completed its Phase I trial in September, finding no significant safety problems with the vaccine. The trial tested the vaccine at various dosing levels with slightly different three-dose schedules. Although all recipients of the vaccine responded, the high dose cohort (50 mg) responded more quickly. At the 240 day mark, however, all recipients showed a near-identical response.

Although Sinobiomed expected to complete a Phase IIb trial of its recombinant batroxobin (rBAT) anti-bleeding agent, the first recombinant batroxobin to use a yeast expression system, results have not been reported as yet. They should be available early in 2008.

Sinobiomed also expects to report on the Phase III trial of Etheophaxzine, a treatment for malignant tumors, in 2008.

The company is waiting to hear if it will be permitted to begin human testing of recombinant human kallikrein (rhK1), a treatment for stroke. The drug is the first kallikrein developed by genetic engineering techniques. After completing preclinical testing in September, Sinobiomed submitted a request to begin a Phase I trial in October.

In October, Sinobiomed was granted a patent in China for its DNA recombinant technology that fabricates recombinant hepato regeneration factor and its mutants in yeast widely used for protein expression. Sinobiomed expects to use recombinant hepato regeneration factor (rhHRF) to stimulate the growth of human liver cells as a treatment of acute liver failure. Sinobiomed has completed the pre-clinical testing of the compound, and it expects to file a request to begin human testing soon.

Plainly, Sinobiomed is betting it can continue to sell stock to meet current financial needs while it completes development of its pipeline and brings new drugs to market. Revenue, after all, needs a boost. Buying a distribution company shows that the company thinks it can afford to expend capital to build a biopharma that will be a master of its own fate, making sure that customers hear about its drugs as soon as they are approved for use. Along the way, Sinobiomed will take advantage of China’s push towards technological innovation by securing grants to underwrite its R&D of new products.

Disclosure: none.