Sinobiomed's Good News Raises Suspicion

Sinobiomed (SOBM.OB) this week announced that it has received an injection of $500,000 in cash from Accelera Ventures, an Asia-based investment fund. According to the press release, this amount is to be set aside for "current strategic initiatives that will place the Company in a strong position for growth and accelerate product development". The company will in due course announce what these initiatives are.

While it is great that SOBM obtained funding (and this is the company's first press release since late November last year), there are just a few things that didn't sit well with me. First, this is a small amount, and I'm just wondering what the company can do with its "initiatives" with this sum. After all, $500K is very close to its G&A for Q1 2008, which was approx. $459K. In fact, SOBM's total expenses was $1.8M for the first three months of this year. So, in the grand scheme of things, it is a drop in the ocean. All right, several drops.

The company is in a cash crunch; it has been for a while. Sinobiomed loaned approx. $1.4M from its shareholders in Q1, and at the end of the period had only $64K in the bank. Remember that this is a company that has yet to be profitable, or for that matter, cash flow positive. Where is the next dime going to come from?

Second, while Accelera Ventures is not unfamiliar with Chinese investments (it owns approx. 6% of Artificial Life (ALIF.OB)), this is not a strategic investor in that it will not provide anything other than cash. No added value to R&D, technology, market intelligence, distribution, or even better relations with the authorities.

But it is the vagueness of the "initiatives" that worry me the most. What does this mean exactly? We know that the SFDA has had its fair share of problems in the recent past. Because the press release was so vague, and unnecessarily so, I can only imagine that this amount (or at least some of it) is going to be used to, well, accelerate (pun intended) the machinery that runs SFDA. Call me suspicious, but it is the only conclusion I've arrived at. Let us revisit the quote:

"The new funding strengthens Sinobiomed's ability to implement current strategic initiatives that will place the Company in a strong position for growth and accelerate product development."

The fact is, if true, it might not be a bad thing. What do you think?

My Position: None.

Comments

[David White:]

They have some good prospect drugs in their pipeline. I believe the nearest that is likely to make good money is slated for next April (2009). If they can get to this point, they should be able to get more funding more easily (assuming success in that drug). They need to keep the boat afloat until then. I am hoping they can show some decent results from their current drug products (released in the last year or so) for this period in between. They haven't really provided much guidance since the drug retailer deal fell through. I am still waiting to hear. They look like the real deal as far as their drug products and prospective products go. It looks like they just need to hang in there for a while. Perhaps investors do too. As with any small biotech company, there is always a fair amount of risk.

2008 Aug 01 05:05 AM

[Ixtlan:]

500k is indeed a relatively small amount....however, there could be warrants attached for a larger aggregate amount..

additionally, professional relationships that accelera has might very well extend into the life science field both in china and in the u.s....

further, it would be possible that this is the first step of several that could put the company in an 'interesting' position - there are a handful of larger, listed companies that trade in the u.s. that produce and distribute generic drugs and partnering with a company that has some novel drugs in the pipeline is a great way to expand future growth drivers....this could include strategic investment, strategic partnership and/or m&a...

you make a very good point about the SFDA and the myriad ways in which they work...let's hope that sinobiomed is in the know and able to successfully navigate thru the balance of the clinical trials.

2008 Aug 05 10:23 AM

[The Market ...:]

IS SINOBIOMED (SOBM) THE NEXT AMGEN?
BY: Truth In Markets
WITH 10 DRUGS, INCLUDING THE LEADING HEPATITIS DRUGS “APPROVED” IN CHINA WHICH HOUSES 1/3 OF THE WORLDS HEPATITIS PATIENTS, COMBINED WITH THE BACKING OF THE SINGLE LARGEST GRANT TO A BIOTECH FIRM FROM CHINA’S GOVERNMENT AND THE RECENT INFUSION OF NEW CAPITAL FROM VENTURE CAPITALISTS, SINOBIOMED IS POISED TO EXPLODE.

Current Price: $0.50
Target based on 2009 EPS (assuming P/E of 30): 11.00 per share

Why? Its successful development of the most sought after medicines in the World

Sinobiomed Inc. is a leading Chinese developer of genetically engineered recombinant protein drugs and vaccines. Based in Shanghai, Sinobiomed currently has 10 products approved or in development: three on the market, one awaiting approval, four in clinical trials and three in research and development. The Company’s products respond to a wide range of diseases and conditions.

1.Wanferon/Wanferin Treatment for Hepatitis B & C – already approved and on the commercial market.
Wanferon/Wanferin, recombinant human interferon for treating hepatitis B hepatitis C, viral infections and other conditions. Western health experts estimate some 60% of China's 1.3 billion people have been infected with hepatitis B alone at some time in their lives, and 10% are infected now. Chinese officials estimate the disease has infected more than 700 million Chinese. Every year, as many as 400,000 people in China die from liver cancer and other liver ailments caused by the disease.
With more than one third of hepatitis B patients and at least one quarter of hepatitis C patients globally, hepatitis is a major health problem in China. Not surprisingly, this market has received considerable attention from Western pharmaceutical companies aiming to capitalize on the country's recent economic boom. The Chinese hepatitis B and C markets have historically represented a significant growth opportunity, with a realistic current valuation of $1.0 billion and $0.9 billion for a combined total of $1.9 Billion in China alone.

Many Western pharmaceuticals have sought Chinese FDA approval and Chinese acceptance but have failed. This is due in part to the high price commanded by Western companies and poor efficacy. Moreover, many Chinese patients shun Western Company drugs in favor of Chinese developers. THERE WAS ONLY ON COMPANY, SINIBIOMED, THAT SUUCESSFULY evaluated the unmet needs in China's hepatitis market and capitalized on these opportunities to invest in other medicines including a vaccine for malaria.

2. A VACCINE for MALARIA.
Malaria threatens more than 2 billion people globally and kills more than a million people a year – most of them children. In Africa, malaria causes the death of a child every 30 seconds. Malaria is endemic in over 90 countries. There are 3 to 5 million clinical cases of malaria per year and well over a million deaths. Over 95 percent of those deaths are in impoverished countries, mainly children under 5. Those infected are disabled due to the severe form of the disease. And it's been calculated that malaria reduces Africa's GDP by about 1.3 percent per year. Sinobiomed’s recombinant malaria candidate vaccine (PfCP2.9) targets the world’s most deadly malaria parasite (Plasmodium falciparum) at its most destructive stage—its rapid replication in human red blood cells. Patented in China, U.S. A., E.U. and Australia, PFCP2.9’s current research schedule calls for the application to the Chinese Food and Drug Administration (SFDA) for the Phase II Clinical trial in malaria endemic areas to be submitted by end of 2008. Over 50 years, imagine the United States developing 1.3 percent less over 50 years, that would mean you'd be half as wealthy today as you are. Now, imagine if there was a vaccine – what that worth?

The Company’s progress has been widely recognized and was even granted Chinese government funding of (US$1.24 million) to continue the clinical trial of its recombinant malaria vaccine and advance its development with partner Second Military Medical University (SMMU). The funding is the largest the Chinese government has ever granted to a biopharmaceutical company.

3. ETHEOPHAZINE – Cancer Drug – Expected to be on the market in months!
Cancer is now the leading cause of death in China. An estimated 6.3 million people die from cancer each year and the figure may double by 2020. The total annual sale of anti-tumor drugs in China is currently $1 billion and the market capacity for anti-tumor drugs is to grow by 17% to 20% in the next few years. There are about 1.6 million new tumor patients every year in addition to the 1.4 million patients under treatment.
A Chinese patented anti-tumor drug, Etheophazine, entered Phase III Clinical Trial in fall 2006 and is expected to enter the market in April 2009. Etheophazine has wide-spectrum anti-tumor activity, high potency, low toxicity and chemical stability. In the Phase II clinical trial of Etheophazine, clinical indications have been expanded to lung cancer and malignant tumors of gastrointestinal tract besides malignant lymphoma. The incidence of malignant lymphoma ranks 9th to 11th among all tumors and is increasing each year. In China, there are 25,000 new cases of malignant lymphoma each year. There are about 480,000 lung cancer cases, i.e. 16% of all tumors cases in China, and the incidence of lung cancer is increasing each year.
4. Leflunomide, - a drug for the treatment of rheumatoid arthritis.- already approved and on the commercial market Leflunomide exhibits both immunomodulatory and anti-inflammatory effects. It not only alleviates symptoms but also prevents disease from progressing. If administered in the early stages, Leflunomide can prevent joint damage and reduce morbidity.
5. Recombinant Acidic Fibroplast Growth Factor (rh-aFGF) - already approved and on the commercial market is a Chinese patented treatment for ulceration, deep burns (greater than 2nd degree burns) and chronic ulcers caused by wounds, diabetes, vascular diseases and bedsores. rh-aFGF entered the Chinese market in August 2007 with a production volume of approximately 20 million boxes per year. The Chinese patent will protect rh-aFGF for 20 years from the date of issue in 2004. It will be also be protected as a new drug for seven years, which means that during that period the Chinese Food and Drug Administration (SFDA) will not accept any other company’s new drug application of aFGF in China.


Trading below $1.00, after a 19 month decline in the Chinese Markets, Sinobiomed has begun a strong rebound this week, up 50% in the early August 2008. With a P/E of 30 based on FY 2009 projected EPS, the shares are fairly valued at 11.00. Translation: purchasers of Sinobiomed at its current price of $.50 stand to reap a 2200% return.


But wait; there are 5 other drugs that will fuel this undervalued gem. If you’re not convinced SOMB is a “BUY” yet, read on or watch the shares now at $0.50 rebound to their 2007 level of $3.50 before you buy.

The Sinobiomed Story -

Sinobiomed is based in China which is undergoing an economic boom, generating 12% of global economic trade, and it is currently the leading recipient of foreign investment. On top of this underlying growth, the Company’s production facilities in China together with its patents provides for a material cost and market penetration advantage Sinobiomed has been and continues to be the recipient of both domestic and foreign investment from the most prestigious institutions including: The Bill and Melinda Gates Foundation, The Chinese Government whose grant to the company was the single largest grant to a biotech – ever, and in August 2008, the company announced additional funding from Asian Venture Capitalist together with The Malaria Vaccine Initiative of the Program for the Appropriate Technology In Health and even The World Health Organization.

By mid 2004, Chinese Health Officials conceded that Hepatitis was crippling its swelling population. China had become home to one third of hepatitis B patients and one quarter of hepatitis C patients globally. One company, Sinobiomed, recognized this crisis early and rushed to develop medicine to treat victims of this disease. In 2005 Hepatitis continued to explode as more than 1 million new cases were reported in China alone. With the assistance of Chinese Government, savvy venture capitalists and humanitarian donations, Sinobiomed’s team of scientists produced Wanferon/Wanferin, recombinant human interferon for treating hepatitis B hepatitis C, viral infections and other conditions.
Sinobiomed’s patented Wanferon/Wanferin together with increased semi-mandatory screening have helped to reduce the devastating effects of Hepatitis, Hepatitis continues to explode while the Company is expanding its production capacity to meet Chinas vital needs as the disease continues to flourish via transmission from mother to child and transmission via blood transfusions . For the foreseeable future, hepatitis B & C remain a pandemic in China but the company is not stopping there as it is reinvesting its success into 9 other drugs, vital to the world.
6. RECOMBINANT BATROXOBIN (RBAT)
The world’s first batroxobin synthesized through gene recombination in a yeast expression system, rBAT prevents and treats surgical bleeding. Native batroxobin, extracted from pit viper venom, is world’s most prescribed biological anti-bleeding agent. Since rBAT is produced through genetic engineering, it reduces the risk of biological contamination and neurotoxicity that have been associated with native batroxobin. Besides testing rBAT’s effectiveness in surgical applications, Sinobiomed is also researching and developing an anti-bleeding kit for use in emergency situations, such as traffic accidents and combat. Patented in China, rBAT is expected to enter Phase III in late 2008
7. RECOMBINANT HUMAN STEM CELL FACTOR (SCF)
A patent-applied-for bio-product in Phase 1 Clinical Trial, rh-SCF facilitates recovery of blood cell regeneration following radio-chemotherapy treatment in patients with malignant tumors. The estimated market launch date is December 2010.
Above are the company’s drugs already on the market or are in final development stages. Three others including a drug candidate to treat acute liver disease, a drug candidate to treat stroke and peripheral vascular disorders, and to prevent blood clots and thrombosis and a drug candidate to treat acute pancreatitis are in pre-clinical studies and briefly describe below.
8. Recombinant Human Hepato Regeneration Factor (rh-HRF) is a Chinese patented protein that is being developed as a potential drug candidate to treat acute liver disease. rh-HRF is a protein produced using biotechnology with biological activity in stimulating the growth of human liver cells.
9. Recombinant Human Kallikrein 1 (rh-K1) is a Chinese patent-pending enzyme produced using biotechnology that is being developed as a potential drug candidate to treat stroke and peripheral vascular disorders, and to prevent blood clots and thrombosis. rhK1 is the world’s first Recombinant Human Kallikrein. Kallikreins are human enzymes that participate in a wide range of functions in the body.
10. Recombinant Human Trypsin Inhibitor (rh-UTI) is a Chinese patent-pending enzyme produced using biotechnology that is being developed as a potential drug candidate to treat acute pancreatitis.
ONE LAST POINT
Lastly, since the company is trades and is listed on the US exchanges it must comply with GAAP. One of Sinobiomed’s buildings in China they paid approximately 1 million US, and under GAAP, the Co must list this building at the LOWER of COST or market value. Properties, especially commercial properties have exploded. One building, according to a Chinese real estate expert is worth $20 to $23 million in today’s market, so on a pure real-estate liquidation value, just one of these buildings is worth 20 million more than is listed on the co’s ledger. Compare that to its $60 million market cap and we are looking at a company after subtracting the value of a building, which we are really paying less than $40 million for. Again, with 10 products approved or in development: three on the market, one awaiting approval, four in clinical trials and three in research and development, that’s an average of $4 million for the exclusive rights for each life saving drug. Compare that to any other biotech company and it is clear this stock isn’t just a bargain, it’s a gift.

2008 Aug 18 09:24 PM

[Ixtlan:]

your comments are much appreciated although the wanferon/wanferin treatments for hepatitis have huge competition....the malaria drug and rBat are a ways off from approval, providing they make it thru phase IIb and onto phase III...

true that the land is worth significantly more than what its carried on the books at but in pudong, you still have to apply for a redevelopment license and then have to wait until the company finds another GMP approved site to relocate to in the event the land is sold.....that could take up to two years....

looks a bit 'promoterish' so you might consider tempering your enthusiasm with some reality checks - for one, 2009 will not be an earnings positive year even if the company merges with or acquires another company....not a big deal but saying its going to $11 is a bit far fetched....

lets watch the news flow and see how they are going to restructure the company and then evaluate potential.

2008 Aug 27 01:50 AM