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SciClone Pharmaceuticals, Inc. Message Board

  • vodka_voltage vodka_voltage Jan 27, 2013 10:05 AM Flag

    Takeover target

    900 sales reps in China.

    Sentiment: Strong Buy

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    • The agreement clarifies how SciClone can import and distribute Zadaxin into China through Sinopharm and not Sigma-Tau. This is how it appears to me. It appears it might be a model to import Zadaxin into China with other wholesalers. Previously Sigama-Tau had exclusivity for importing Zadaxin into China and it was a tough relationship.
      In order to sell Zadaxin to the licensed importers in China, the Italian manufacturers must 1) be approved by the Italian Ministry of Health ("AIFA") and 2) be accepted by the State Food and Drug Administration of China ("SFDA"), the Chinese equivalent to the FDA, and the Company must obtain an Imported Drug License from the SFDA permitting the importation of Zadaxin into China. Zadaxin has been distributed in Italy through a subsidiary of Sigma-Tau Finanziaria, S.p.A. ("Sigma-Tau"). SciClones agreement with Sigma-Tau expired in March 2012, and they were in discussions to continue distribution of Zadaxin through a subsidiary of Sigma-Tau.
      It appears to me the exclusivity of going through the middleman Sigma-Tau has been removed because Sinopharm can qualify to import into China. This is how it appears to me. Given Sinopharma gets a minimum amount of Zadaxin into China, most likely agreeable to SciClone, then the Company’s revenues and profitability are more assured with this agreement. It appears the Company now has a strong relationship with a large pharma that can get in China agreements for selling more Zadaxin and at a good price in China. It could also lead to their collaborating to sell more products in China and their products in other countries.
      It is a relief to not having Sigma-Tau own shares in the Company and worry if they were going to sell out. It appears they might have been behind the large selling of shares during January.
      This appears to be a relief to the company’s operations and share price.

      Sentiment: Strong Buy

      • 1 Reply to trees36
      • Sigma-Tau never had anything to do with SciClone's exporting Zadaxin to China or any importer/distributor in China dealing with Zadaxin. Check with SciClone.

        The strong relationship that SciClone now has with its old partner Sinopharm is that SciClone can't sell Zadaxin to any one else in China. This is at the expense of losing its relationships with its other long-term distributors in China who previously could be counted on to compete with Sinopharm by offering attractive prices to SciClone. That's a big loss. This is not a model to import Zadaxin into China with other wholesalers. It's the direct opposite. It STOPS SciClone from importing Zadaxin into China with other wholesalers.

        According to the 8-K, the minimum order has to be agreed to by both Sinopharm and SciClone, hardly a guarantee. Sinopharm is out to make a profit and will gladly purchase, at now most likely more favorable prices to Sinopharm, all the Zadaxin that SciClone's sales force can sell. Simply put, by losing the pricing advantage, SciClone will be making less profit on the productivity of its sales force than it otherwise would have with the old mix of distributors. Hey, if this were good news SciClone would have put out a press release announcing this material contract. SciClone clearly prefers not to mention this serious impairment of its freedom to operate in China.

    • I may be misundertsanding what the agreement means but doesn't this now make the sales force expendable and didn't they outsource selling Zadazain? Isn't the pop the stock is getting because of all the overhead that will go away from no longer needing the sales force? I know everyone sees the sales force as a huge boon but maybe that is not the case.

      • 1 Reply to melissalovesshearts
      • The SciClone sales force is absolutely necessary. SciClone 'sells' Zadaxin to the hospitals and doctors, the distributor (now just Sinopharm) fills the order and delivers the product to the hospital. SciClone's problem was that it stuffed more Zadaxin with Sinopharm (who has traditionally sold 50% or more of Zadaxin for years) and the other distributors than the hospitals and doctors had actually ordered. So Sinopharm flexed its muscle, told SciClone this would happen no more and took control (for no payment whatsoever) of Zadaxin order filling for all of China. The future growth of Zadaxin in China, as always, is totally dependent on the success of the SciClone sales team. Listen to Blobel's remarks during the last conference call and he says that this is getting tougher and tougher. The Sinopharm arrangement doesn't change that nor change Sinopharm's role of basically being the order filler. Over all, we can expect LESS Zadaxin sales as Sinopharm rationalizes distributor Zadaxin inventory levels to meet only what the SciClone sales force can sell. SciClone's job is to try to grow end patient use of Zadaxin.

        In this exclusivity agreement SciClone lost the distribution capabilities and efforts of other long-term Zadaxin distributors. They can't be happy seeing their entire Zadaxin profit margins simply transferred to Sinopharm. As I said on another post, with a mix of distributors SciClone could set the price the distributors had to pay for Zadaxin (nice thing about competition). Now SciClone has no pricing leverage with Sinopharm since SciClone is contractually not allowed to sell to any other distributor. Pretty #$%$ situation Blobel blundered into. Also, Sinopharm nor any other distributor, China or elsewhere, over the years has shown the least interest in distributing Zadaxin in other markets. Again, it all depends on who is selling Zadaxin to the doctors and hospitals and, outside of China, SciClone's efforts never showed much at all. In fact, I believe SciClone effectively discontinued those efforts. This Sinopharm deal doesn't change that.

 
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