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SciClone Pharmaceuticals, Inc. Message Board

  • trees36 trees36 Jan 29, 2013 2:21 PM Flag

    The latest agreement’s follow-up

    During the 3rd qtr, particularly in September 2012 (one month), there was a significant increase in ZADAXIN channel inventory levels at the wholesaler level. The imminent price reduction for Zadaxin was dampening sales to the hospital pharmacies. This new agreement is the formal record of the negotiated and favorable outcome to SciClone for the importation of Zadaxin that results in less than a 5% revenue impact to SciClone.
    With this agreement Sinopharm, the importer and wholesaler, gets to receive the markup from the import and sale as wholesaler for Zadaxin. In return they absorb the bulk of the 2012 price reduction mandated for Zadaxin. Sinopharm has about 10% of the Chinese market for thymalfasin, that is the premium priced Zadaxin. This agreement gets their support for maintaining the sale of Zadaxin as a premium product.
    SciClone, by having this agreement, has to please Sanofi who license Zadaxin and also Depakine to SciClone. With this concluded expect to see an agreement for SciClone to continue to sell Depakine for Sanofi.
    SciClone can pursue the sale of its premium drug in greater collaboration with very large pharmaceuticals in 2013. It is in 2014 the company expects to finally grow its other drugs and operations in China and reduce the dependence on Zadaxin. Note: the wholesaler inventory increase was attributed to dampened sales in one month, September. This inventory issue is much less or non-existent by now. The market for pharmaceuticals is growing by 15% this year and so will Zadaxin.
    Here are customer shares from the last 10K:
    Customer Concentration
    The People’s Republic of China (“China”) uses a tiered method to import and distribute products. The distributors make the sales in the country, but the product is imported for them by licensed importers. Product sales revenues result from the sale of the Company’s proprietary or in-licensed products to importing agents and distributors. Promotion services revenues result from fees received for exclusively promoting products for certain partners. These importing agents, distributors and partners are the Company’s customers.
    For the three months ended September 30, 2012 and 2011, revenues to three and two customers in China accounted for 86% of the Company’s revenues. For the nine months ended September 30, 2012 and 2011, revenues from three customers in China accounted for 88% and 92%, respectively, of the Company’s revenues. No other customer accounted for more than 10% during the three or nine months ended September 30, 2012 or 2011. The Company’s two largest customers were the same for both periods. A third party holds a majority interest in the Company’s largest customer. As of September 30, 2012, approximately $35.6 million, or 96%, of the Company’s accounts receivable were attributable to five customers in China. The Company generally does not require collateral from its customers.

    Sentiment: Strong Buy

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    • "...our strategy of increasing demand for ZADAXIN through various measures, including the expansion of our ZADAXIN sales force, has not led to the increased demand for ZADAXIN in the hospital pharmacies we anticipated in 2012." That's from the Q3 10-Q. In the conference call, Blobel said essentially the same thing and didn't say anything about the exclusivity plans that were already mentioned in the November press release. SciClone was stuffing the channel throughout 2012. The 10-Q admits that the channel inventory grew "moderately" during the first six months and then in Q3, essentially in September after the long awaited news of price reduction, the channel inventory stuffing accounted for a whopping 45% of Q3 sales of Zadaxin of $31 million. Besides firing a bunch of people in the China operation, it's not clear what steps SciClone is taking to improve the Zadaxin franchise. The only way Zadaxin gets into more hospitals is if SciClone sends a productive sales force to those hospitals. So far, this hasn't produced results. Zadaxin has lost significant share of the very competitive thymosin market in China over the past few years and there is no easy solution. Zadaxin is a mature product and provides great per unit cash flow, but it is getting harder and harder to grow unit sales. Unfortunately, the Sinopharm exclusivity now means no importer or distributor (not even Sinopharm now that they have no competition) will hustle or make special efforts to help promote Zadaxin. It's all up to SciClone, now more than ever. As for the Sanofi contract and other NovaMed deals, they have been money losers. SciClone should bite the bullet (didn't Titus say that "we're not running a charity here"?) and cut loose all the NovaMed stuff. SciClone needs a new plan and new management.

      • 1 Reply to a65232389
      • Read the Q for the 3rd qtr. It says, "we believe that approximately $14 million of our revenue recognized in the three months ended September 30, 2012 related to the increase of ZADAXIN channel inventory". Now that is less than a month of sales so, the hospital pharmcies held off for one month but, get their inventories replenished at the new lower price (which didn't impact SciClone that much as stated). No stuffing of inventory here and sales don't even get a hiccup, except a 5% lower selling price.
        Then Titus said Zadaxin is not as high a performing drug in recent quarters, "The second element is that our lead product Zadaxin has not grown significantly in the last three or four quarters, it’s been more or less flat in terms of market performance".
        No lost share for the drug and still a big money maker. New actual sales results are to come but the the Companys' "anticipated" results for 2012 and 2013 indicate the franchise is very sound.

        Sentiment: Strong Buy

 
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