3-S Bio ( Nasdaq - SSRX ) -- Potential Price Reductions in China

3-S Bio (SSRX $9.75) appears on track to report excellent on target Q4 results.  The outlook for 2012 is a little uncertain, however, due to the likelihood of new price regulations by the Chinese government.  The last time that happened a modest cut was implemented but 3-S Bio benefited from a significant expansion in coverage.  Technically speaking, most of China's population now is covered by the national health insurance law.  But a large percentage still aren't taking full advantage of that for one reason or another.  Lack of awareness, bureaucratic inertia, and de facto quotas are primarily responsible.  Another round of price cuts is possible.  But those are likely to be paired with measures to achieve higher unit volume volume.  Margins may narrow a shade but overall profitably is unlikely to be affected.  3-S Bio has products that are capable of competing on the international stage without government support.  It's a high quality operation that promises to thrive over the long haul as China becomes a fully modernized society.  Trading at 11x our estimate of 2012 earnings these  shares offer substantial appreciation potential.

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