3SBio’s Q1: Revenues Rise, Net Income Lags

3SBio Inc. (NSDQ: SSRX) joined the parade of China biopharmas reporting sharply higher revenues. In the first quarter of 2008, 3SBio saw its sales jump 57% to 55.5 million RMB ($7.9 million). Gross profit climbed 56% to 50.6 million RMB ($7.2 million). However, net income did not keep pace, rising a much smaller 22% to 14.2 million RMB ($2 million).

Apparently, 3SBio spent a lot of money to create the increase in revenues, because the cause for the shortfall in net income was higher spending in the sales, marketing and distribution category. This item climbed 65% to 25.6 million RMB (US$3.7 million), a figure that represents 46% of the company’s revenues. In the battle between promoting revenues or profits, 3SBio came down heavily on the side of revenues, and net income suffered as a result.

3SBio has two products that produce the preponderance of its sales:

• injectable recombinant human erythropoietin [EPO] products, collectively branded as EPIAO, produced 35.5 million RMB ($5.1 million) in revenue, a rise of 42%; and
• protein-based therapeutic recombinant human thrombopoietin [TPO] products, marketed as TPIAO, produced 15.4 million RMB ($2.2 million) in sales, an increase of 104%.

Together, these two product lines sold $7.3 million of the total $7.9 million that 3SBio reported on its top line. Net income per ADS was recorded as 13 cents for Q1. Each ADS represents seven ordinary shares.

Looking toward the future, 3SBio reminded investors about the progress of its clinical programs. The company expects to file for SFDA approval of three new drugs in the second half of 2008:

• High-dose (36,000 IU) EPIAO, which completed its Phase III trial and is now conducting follow-up visits (they are not required for SFDA approval);
• TPIAO for idiopathic thrombocytopenic purpura [ITP], which saw a higher than expected drop-off rate in its Phase III trial as patients left the hospital before completing their observation time; the protocol has been amended and 3SBio expects to be able to file before the end of the year; and
• NuLeusin, a second generation IL-2, which completed its Phase III and reported positive data.

The shares of 3SBio have been on the rise since mid-March when the company announced it would spend $20 million to buy back its ADSs. At that time, 3SBio was trading for $7.60. It is now selling at $11.05, up 19 cents on the session. Its 52-week range is from $7.29 to $22.75.

Disclosure: none.