Aida Pharmaceuticals, Inc. (AIDA.OB) yesterday announced an update on its testing of Rh-Apo2L, currently in Phase IIA of testing through China's State Food and Drug Administration [SFDA]. On clinical tests with over 100 human patients using only Rh-Apo2L, results thus far have shown strong efficacy in treating non small cell lung cancer, non-Hodgkins lymphoma, and cancers of the stomach, pancreas, and kidney. Rh-Apo2L is under investigation in the US by biotech giants Amgen (Nasdaq: AMGN) and Genentech (NYSE: DNA). Results from Phase I studies in the US indicate that the drug is well-tolerated in patients with advanced cancers, including colorectal, melanoma, lung, and ovarian cancers. The drug, referred to in the US as AMG 951, has been approved for phase II trials by the US Food and Drug Administration [FDA] for the treatment of non-small cell lung cancer, both alone and in combination with the approved drug Avastin (bevacizumab).

Recombinant Human Apoptosis-Inducing Ligand (Rh-Apo2L) is a bioengineered human protein under study for use in treating a variety of cancers, including solid tumors and blood cancers. Normal cells have a characteristic known as apoptosis, or programmed cell death. Cells with a deficient apoptosis process can have uncontrolled growth, as is seen in a number of cancers. Rh-Apo2L is designed to activate the apoptosis process in cancer cells. Preliminary trials of Rh-Apo2L have shown that it is capable of selectively inducing apoptosis in cancerous cells while sparing normal cells.

Formed by reverse merger in 2006, Aida is based in Hangzhou, Zhejiang Province. It is based in the Yangtze River Delta region, a region that is rapidly becoming a major Asian center for drug production. In 2006 Aida reported US$29.6 million in revenues, with all revenues coming from sales of the antibiotic Etimicin. The company has six subsidiaries including Shanghai Qiaer Bio-Technology Co., Ltd., which is managing the clinical trials of Rh-Apo2L. In 2006 the company reports that it spent US$324,835 on research and development including the clinical trials. Aida's unaudited results for the six months ending in June 30, 2007 show revenues of US$11.7 million, a decline of 7% from the same period in 2006. Operating margins were flat at 7%, but a net loss before extraordinary items of US$177,652 was reported due to a loss of government grant revenue and higher interest payments. The company reported US$9.6 million in cash and cash equivalents. Aida has six other oncologic and immune system drugs in various stages of development. The company currently holds two patents in China on Rh-Apo2L, and has applied for one additional patent. The most recent patent was awarded in early October to the East China University of Science & Technology and Aida on the process of cultivation of Rh-Apo2L. Aida is clearly in a difficult transitional phase. Like many pharmaceutical producers in China, it is dependent on a limited range of products, and subject to fierce competition and ongoing government efforts to cap the price of drugs.

Attempting to develop higher margin biologic drugs has significant risks. While these early results appear favorable, there is no assurance that Rh-Apo2L can complete all three phases of clinical testing and win approval. Even if approval is won, the company may find itself contesting with Amgen (AMGN) and Genentech over patent rights, a fight that would require resources that Aida does not have. The risk is clearly displayed in Aida's share price, which has been rangebound between US$0.86 and US$1.27. An investor would require a strong appetite for risk to invest in shares of Aida.