SHANGHAI - Chinese biotech outfit 3SBio reported strong sales growth of its key products, recombinant human erythropoietin injection EPIAO and recombinant human thrombopoietin injection TPIAO , but like many companies in China, 3SBio's development plans are impacted by a regulatory slowdown caused by restructuring at China's State FDA.

EPIAO revenues increased 22.9 percent and that of TPIAO grew 44.6 percent over the second quarter in 2009.

EPIAO, approved for the treatment of peri-operative red blood cell mobilization and anemia associated with chemotherapy in cancer patients in China, controls 43.3 percent of the local EPO market. ESPO , from the Sino-Japan joint venture Kirin Kunpeng, comes at a distance second with 10 percent market share.

Slowdown In Regulatory Approval Process

3SBio's EPIAO and TPIAO both have pending applications - filed in 2008 - at SFDA for additional indications of idiopathic thrombocytopenic purpura. NuLeusin , 3SBio's second-generation recombinant human interleukin-2, has been under review since 2008 as well (Also see "3SBio Files For Approval For Interleukin-2 NuLeusin" - Scrip, 23 November, 2008.).

The company feels a "definite slowdown" in the regulatory agency.

"I think SFDA has been cautious for the last couple of months because of the restructuring inside, and there are more reforms going on," CEO Luo Jing told investors and analysts during the Aug. 19 earnings call.

"We can still get the formal letters response, but [we cannot ask] questions," Luo continued.

The company is also waiting for approvals from SFDA for two clinical programs, a Phase III trial for intravenous iron drug Feraheme (ferumoxytol), which it in-licensed from AMAG (Also see "3SBio And AMAG Ink Deal To Develop Ferumoxytol In China" - Scrip, 5 June, 2008.), and a Phase I trial for NuPIAO , a long-lasting, second-generation EPIAO product.

SFDA has replaced leaders in key positions such as the deputy director of the National Institute for the Control of Pharmaceutical and Biological Products and the director of drug safety and inspections following the arrest of five SFDA officials on bribery charges (Also see "China Arrests Five SFDA Officials On Bribery Charges" - Scrip, 30 April, 2010.).

In June, Chinese SFDA Deputy Director Zhang Jingli was reported to be under investigation for corruption (Also see "Chinese SFDA Deputy Director Under Investigation For Corruption" - Scrip, 16 June, 2010.).

"Since then, the regulatory agents have been changing a lot for oncology review. I think [the clinical trials application] is still somewhere in there, somewhere in the SFDA," Luo said.

"Nobody can communicate right now with...the national regulatory agents. So, we're still waiting for the response," Luo said.

Concerns About NDRC's Price Examination

The National Development and Reform Commission, China's economic regulatory body, released a new draft drug pricing policy that would set profit margins for manufacturers and markup rules for distributors (Also see "China's New Guideline For Drug Pricing Favors Innovation And First-to-market Generics" - Scrip, 14 June, 2010.).

Since then, NDRC has launched a price investigation on approximately 900 drugs to collect information on drug manufacturing cost and profit margins. 3SBio's TPIAO is on the list of 900.

The NDRC is currently collecting data from manufacturers, and then will establish an evaluation unit to review company information, Luo told investors.

According to Luo, the deadline for collecting the data is the end of August. NDRC will spend up to two months for the evaluation, and then the investigation unit will send the results to the NDRC administrative office.

"The administrative office will decide what kind of strategy they are going to have," Luo said, adding "and after that, is a pure political decision, and I don't think anybody knows."

After another good quarter, the company reiterated a full year sales guidance from $56 million to 60 million, "which we believe errs on the side of conservatism," Global Hunter Securities senior analyst Michael Tu said.

However, the conservative guidance might be linked to the company's concern about price reductions required by NDRC.

"The reason for the management not raising the low-end of its guidance is due to uncertainties associated with the recent NDRC price control act, which we believe will have limited impact on TPIAO (if any)," Hongbo Lu, senior research analyst at Piper Jaffray, said in a August 18 research note.

-Dai Jialing (j.dai@elsevier.com)

3SBIO Sees Slowdown In China Regulatory Approvals Following SFDA Restructure; Concerns Linger On Drug Pricing Examination

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