Sinovac: Chinese biotech bet
"One Chinese sector being relatively ignored by Wall Street is the biotech industry," notes Keith Fitz-Gerald. In The New China Trader, he looks to a biotech speculation -- Sinovac (ASE:SVA).
The government knows that the wheels could fall off the bike rather quickly if average Chinese citizens begin to see a dramatic reversal in their health and happiness.
"As a result the Chinese Central Government's is participating in a large-scale effort to improve public health.
"That leads us to our recommendation for Sinovac, a fully integrated, profitable China-based biopharmaceutical company that focuses on the research, development, manufacturing and commercialization of vaccines that protect against human infectious diseases.
"Their portfolio of regulatory-approved products consists of vaccines against the hepatitis A, hepatitis B and influenza viruses.
"In 2002, they launched their first product, Healive, which was the first inactivated hepatitis A vaccine developed, produced and marketed in China.
"In 2005, they received regulatory approvals in China for the production of Bilive, a combination hepatitis A and B vaccine, and Anflu, a split virus influenza vaccine.
"In April 2008, they received regulatory approvals in China for the production of their whole viron pandemic influenza vaccine.
"SVA is not a shot-in-the-dark biotech company that hasn't earned any money yet. The firm's recent filings indicate annual increase in sales on 38.62% which is in line with the type of increase that history suggests precede a very solid price gains.
"Looking at additional numbers reflects solid management as well, as is evidenced by a very healthy operating margin 33.51% and ROE of 20.1%.
"A quick glance at the amount of shares outstanding reflects that 14.02% of the shares are held by insiders, which is an indication that management has some skin in the game as well - and that's always good.
"SVA hasn't been sitting their hands with the existing products that are already profitable in the market. Their pipeline consists of vaccine candidates in the pre-clinical and clinical development phases in China, including human vaccines for the EV71, Japanese encephalitis and rabies currently in pre-clinical development.
"Sinovac also has a vaccine for the SARS virus that has completed a Phase I clinical trial and a split viron vaccine for the H5N1 influenza virus that has completed a Phase II clinical trial. Their pipeline also includes a vaccine for rabies in animals that is currently in field trials.
"We enphasize that investors should not chase this stock. Only buy it under $2.50 and plan to hold it for 12 months with no trailing stop. As recently as 18 months ago this stock was trading at $6.75.
"Even though the price was hammered during the global stock market sell-off, SVA has continued to increase sales and earnings. It might not be very long before SVA gets back on the radar of Wall Street - when it does, we could be off to the races."
