Chinese biotech 3SBio
Revenue looked great and was up 38% year over year. Sales of newer TPIAO, which stimulates platelet production after chemotherapy, clocked in a 67% year-over-year increase. That surpassed the 24% growth of its flagship product, EPIAO, a knockoff of Amgen's
Unfortunately, that's where the good news ends. 3SBio's operating expenses -- mostly sales, general, and administrative expenses -- grew much faster than revenue, resulting in operating income that was less than 11% higher than the year-ago quarter. Add to that additional categories headed in the wrong direction -- lower interest income and higher taxes -- and net profit was actually down 17% year over year.
As with any biotech company, 3SBio's value isn't based so much on what it's earning right now, but rather on what the future holds. 3SBio should be able to increase its revenue in the coming years, given the three filings with the Chinese State Food and Drug Administration expected this year. Two are expansions of its current products, TPIAO and EPIAO, and the third is a new product, NuLeusin, a treatment for a type of kidney cancer.
3SBio has also broadened its pipeline through a licensing deal. In May, the company licensed the rights to market AMAG Pharmaceuticals'
Investors willing to take the risk in China will likely do OK with 3SBio. Just as with China Medical Technologies
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is a selection of the Income Investor newsletter. The Fool has a disclosure policy.