China's FDA Shapes Up: Good News for China Pharma, Aida, Sinobiomed

2007 was a bad year for SFDA (State Food and Drug Administration), China's equivalent of FDA, and this has translated into an equally challenging year for many Chinese pharmaceutical companies. For as drugs awaited the green light for commercialization, a bribery scandal erupted among top SFDA officials, throwing approval time lines into disarray.

In December, the former Deputy Secretary General of the China Pharmaceutical Association was sentenced to 7 years in imprisonment after being found guilty of accepting bribes. This follows two death sentences meted out to SFDA administrators earlier in the year, which has already resulted in a summary execution.

It now appears things are back to normal at SFDA, and this should be a huge relief to many pharmaceutical firms, including several C.O.P. companies. Just Tuesday, China Pharma Holdings (CPHI.OB) announced that its generic Bumetanide injection product has received approval. Bumetanide is a diuretic used for the treatment of cardiovascular and kidney diseases, among others, and is expected to boost CPHI's 2008 revenues by $2 million. This may not be a big sum, but the company has three other products in the approval queue, including two that have already completed technical testing and are just awaiting administrative sign-off.

Not only is this good news for CPHI, it illuminates the company's excellent standing with SFDA as this appears to be the first drug to have received approval this year, not counting Calypte Biomedical Corp.'s (CBMC.OB) HIV test kit which received technical (but not final) approval earlier this month.

So what other companies can look forward to getting news from SFDA? Two spring to mind. First, Aida Pharmaceuticals (AIDA.OB) should be getting word on its anti-cancer gene therapy product in the near future. This drug, Rh-Apo2L, is slated to enter into its last phase of technical testing and is expected to receive final approval later this year. Another company is Sinobiomed (SOBM.OB), which has four drugs in various technical testing phases. The one furthest along appears to be anti-bleeding agent rBAT (Recombinant Batroxobin), which should obtain approval before the year is over.

This back-to-business mode at SFDA should also provide incentives for drug companies to step up submission of new drugs for testing, ultimately creating momentum for the industry as a whole. In short, 2008 should be a much better year for Chinese drug makers, and this alone is cause of cheer for us pharma investors.

My Position: Long CPHI.OB.