An Effort at Efficiency: SFDA to Become Part of Chinese Ministry of Health

by: ChinaBio Today

During the last week, reports surfaced that a new, larger Ministry of Health [MOH] would assume ultimate authority for the SFDA and SATCM (the agency that oversees traditional Chinese Medicines), while it continues to perform the tasks traditionally undertaken by the MOH. Presently, the SFDA reports directly to the State Council of the People’s Republic of China, the highest political entity in China’s system.

The SFDA was spun out of the MOH about five years ago, presumably to give it more independence and to emphasize its importance. Putting it back into the MOH would be done to increase organizational efficiency, a common theme running through the National People’s Congress meetings this week. The NPC is the national legislative body which is in session from March 5 to March 18. Our sources say the reorganziation may be finalized in the sessions next week, perhaps on Tuesday, March 11.

Meanwhile, Stateside, the China life sciences companies that trade in the US saw their shares move dramatically lower in price. Part of this was a general across-the-board weakness in stocks this year, but the China life science companies were especially hard hit. So far in 2008, the ChinaBio Stock index is off by 27.5%. Just about half of that came during the last week when the index was down 13.8%. By comparison, NASDAQ was 2.6% lower last week, and it is off by 16.6% in 2008.

Part of the problem is WuXi PharmaTech (NYSE:WX). The company was a wildly successful IPO last year, pricing its IPO at $14, opening at $19 and then climbing to over $40 per share. Since then, however, it has given up most of its gains. The company opened last week at almost $24 per share, but ended on Friday under $20, a 17% loss.

WuXi is scheduled to release its Q4 and year-end financial report after the close of trading on Wednesday, March 12. If it follows the pattern of other China-based life science companies, the report will show solid growth. However, whether the report provides the investment community with an upside surprise is another question. Investors seemed to be selling in advance of the news, as if they expected nothing especially positive. WuXi is expected to report Q4 earnings of $.13 per ADS and revenues of $37 million. Its price-earnings ratio, based on predicted 2008 results, is 30.

Two other China biopharmas announced their Q4 results last week. American Oriental Bioengineering (AOB), a company that makes OTC medications, traditional Chinese medications, prescription drugs and nutraceuticals, reported 46% higher revenues in 2007 (see story). The company made a profit of $43 million on revenues of $160.5 million. Earnings per ADS were 61 cents, fully diluted. Nevertheless, the stock ended the week at $9, down from $10.24 before the announcement, a 12% drop.

Simcere Pharma (NYSE:SCR) fared much better than AOB. It reported higher Q4 results ahead of the opening on Tuesday (see story). The company’s stock price moved up from $10.50 before the announcement to end the week at $11.02, an increase of 5%. The stock was helped when Simcere told investors it would increase revenue from 1.4 billion RMB ($197 million) this year to at least 2 billion RMB ($282 million) in 2008. Simcere manufactures branded generic drugs, the patented cancer statin drug, Endu, and a treatment for stroke, Bicun. Last year, Simcere made a profit of 301 million RMB ($41.3 million) on revenues of 1.39 billion RMB ($197 million).

In terms of deals last week, the Topsun-Bayer alliance received some new life when Topsun [SHA: 600771] gave Bayer AG [XE: 575200] another four months to close its 1.26 billion RMB ($177 million) purchase of Topsun’s portfolio of OTC cold drugs (see story). Bayer now has until June 30, 2008 to complete the purchase. The first deadline for closing had passed, making it seem as though the deal would not go through, but Topsun was apparently only putting pressure on Bayer to make a new commitment.

Hovione, a maker of active pharmaceutical ingredients based in Portugal, agreed to pay more than 13 million euros ($19.5 million) to purchase a 75% stake in Zhejiang Hisyn Pharmaceutical, another API manufacturer (see story). Hovion has plants in Macao and Portugal, with an Office of Technology Transfer in the US. The lower production costs of the Hisyn plant allow Hovion to supply APIs for drugs aimed at third-world markets.

Invida Pharmaceutical Holdings will buy the Asia Pacific operations of Valeant Pharmaceuticals (NYSE:VRX) for $37.8 million (see story). The purchase includes a portfolio of 230 products that are marketed to 12 Asian countries, including Singapore, the Philippines, Taiwan, Korea, and China. Invida, based in Singapore, is a holding company whose divisions include Pharmalink, a company providing commercialization services in Asia Pacific countries, and Inovail, a pharma focused on dermatology, complementary oncology and female healthcare.

The Australian biotech Pharmaxis (PXSL) is seeking to start a clinical trial in China of Bronchitol, a treatment for bronchiectasis (see story). An inhaled drug, Bronchitol is designed to help patients clear mucus from their lungs by promoting salt and water movement through airway cells. The drug has already completed a Phase III trial in Australia. Pharmaxis hinted that it might use the China trial to help secure marketing approval elsewhere in the world.

And finally, the issue of safety problems with China-sourced drugs was again a headline in the US last week. The FDA and Baxter International (NYSE:BAX) said a heparin-like molecule found in Baxter’s supplies of heparin may have caused the side effects of Baxter’s heparin drug (see story). Because the contaminant is so similar to heparin, it is not detected by all of the usual tests. Heparin is collected from pig’s intestines in small factories across China, collected by middle men, and then brought to companies that supply heparin API to drug manufacturers. Records are not kept of where the individual lots originate, making it difficult for regulators to identify the source of the side effect. The problem of safety in drugs had been receding from the headlines, while stories appeared about how administrative steps were being taken to deal with the problem. Now, the heparin scandal has re-established the fact that safety is difficult to achieve and that the FDA does not have the resources to do the job.

Disclosure: none.