Is 3SBio the Chinese Amgen?

Most of my investments aim for steady, consistent gains- looking for walks, singles and doubles rather than home runs. But I do like to use a small portion of the portfolio to shoot for long term home runs. These investments are held for five years or more aiming for a ten bagger.

I recently purchased a small starter position in 3SBio (SSRX) that fits in this category. SSRX is one of the leading bio-technology firms in China. Their leading product is EPIAO which is the number one EPO product (anemia treatment) in China. It is a copycat version of Amgen's (AMGN) Epogen, and sells for a much lower price (about 25% of Epogen's cost). In 2007, EPIAO sales were up 22.6% in US$ terms, and year-to-year earnings were up 14.6%. EPIAO sales were 65% of SSRX total revenues in the fourth quarter.

Their second leading product is TPIAO which was developed in-house and is a cancer therapy drug. In 2007, sales were up 168.3% over 2006. TPIAO sales were 23.9% of total sales for full year 2007. SSRX has a patent on TPIAO, so its margins are higher than for EPIAO.

SSRX closed at $8.35 last week, so the company seems to have more than discounted the disappointing earnings report. There are certainly some risks here- some drug pipeline delays, higher expenses for salaries in 2007 etc, but if things go well over the next five to ten years, SSRX has a chance of becoming the "Amgen of China".

Full Disclosure: I am long a starter position in SSRX.

Comments

[Interesting:]

Can AMGN sue SSRX for patent infringement?

2008 Feb 26 06:13 PM