HAIKOU CITY, China, August 11, 2011 /PRNewswire-Asia-FirstCall/ -- China Pharma Holdings, Inc. (NYSE AMEX: CPHI) ("China Pharma" or the "Company"), a specialty pharmaceuticals company in China, today announced financial results for the quarter ended June 30, 2011.
Second Quarter 2011 Highlights
"In the second quarter of 2011 we achieved solid sales growth primarily due to strong performances by our Anti-Viro Infection & Respiratory and our CNS Cerebral and Cardio Vascular product categories. We continue to face pricing pressures across several of our product categories during the quarter, but we expect gross margin and revenue to benefit from anticipated launches of Candesartan and Rosuvasatin in the months ahead," said Ms. Zhilin Li, China Pharma's Chairman and CEO. "In addition to the expected launch of these two higher margin products, we continue to advance our novel cephalosporin-based combination antibiotic through Phase II clinical trials. Commercializing exciting new drugs like this, along with first-to-market generic medicines, is an important part of our strategy to enhance China Pharma's growth and profitability."
Second Quarter 2011 Results
Revenues for the quarter ended June 30, 2011 were $19.6 million, up 18% from revenues of $16.6 million for the quarter ended June 30, 2010. Sales growth in the second quarter was led by the Anti-Viro Infection & Respiratory and also the CNS Cerebral & Cardio Vascular categories.
Sales in the Anti-Viro Infection & Respiratory category rose by 28% to $8.1 million from $6.3 million in the year ago period. Our performance in this category was impacted by outstanding sales growth of Cefaclor Dispersible Tablets and also Clarithromicyn. Both of these products are front-line antibiotics in hospitals. Our Cefaclor Dispersible Tablets are a typical example of our differentiation strategy, which is especially popular in children and patients with swallowing issues.
Sales of CNS Cerebral & Cardio Vascular products also experienced continued growth, with revenues in this category increasing to $6 million from $4.9 million, or an increase of 24% on a year over year basis.
The "Digestive" category experienced more stable growth of 16% mainly from our Tiopronin, a drug prescribed for treatments of acute Hepatitis B and drug-induced liver damage.
Sales of our "Other" category were lower by 11% compared to the same period one year ago. A couple of products from our "Other" category, including Vitamin B6, saw sales declines compared to the same quarter one year ago when these products had a surge in sales partly due to the implementation of the EDL.
Gross profit for the three months ended June 30, 2011 was $7.28 million, which was approximately 3% higher compared to $7.04 million in the second quarter of 2010. Our gross margin for the second quarter of 2011 was 37.2%, compared to 42.4% in the corresponding quarter of 2010. We are seeing pricing pressure on many of our products, particularly antibiotics, although the pressure is not uniform across product lines. Pricing pressure has become more evident over the past few quarters as the effect of the Chinese government healthcare reform is being felt across all pharmaceutical products, especially in EDL related products. We expect the current challenging pricing environment to persist for some time.
In terms of our gross margins by major categories, CNS Cerebral & Cardio Vascular category margins decreased to 42.9% from the second quarter 2010 gross margin of 47.8%. Gross margin for our Anti-Viro/Infection & Respiratory category decreased to 26.4% from 32.1%. Gross margin for our Digestive Diseases category decreased to 45.7% from 52.3%, and gross margin for our Other category fell to 42.5% from 47.1%.
Selling, general and administrative expenses in the second quarter of 2011 were $1.8 million, or 9.1% of sales, compared to $1.5 million, or 9.1% of sales, in the same period of 2010. For the quarter ended June 30, 2011, the Company's bad debt benefit was $118,704, compared to bad debt expense of $37,615 in the same period of 2010.
Operating income was $5.8 million in the second quarter of 2011, down 3% from $6.0 million in the second quarter of 2010. Operating income was lower mainly due to lower gross margins.
For the quarter ended June 30, 2011, the Company paid income tax at a rate of approximately 15%. Income tax expense for the second quarter of 2011 was $0.89 million, compared to $0.63 million for the same period last year. The Company obtained "National High-Tech Enterprise" status from the PRC government in the fourth quarter of 2010. With this designation, the Company is entitled to a preferential tax rate of 15% for the next three years (2011 to 2013), which is notably lower than the statutory income tax rate of 25%.
Net income for the second quarter of 2011 was $5.1 million, or $0.12 per basic and diluted share, compared to $6.1 million, or $0.14 per basic and diluted share, in the second quarter of 2010. Excluding the effect of change in fair value of derivative warrant liability, management estimates that adjusted non-GAAP net income in the second quarter of 2011 was $4.8 million, or $0.11 per diluted share, compared to $5.3 million, or $0.12 per diluted share, in the second quarter of 2010.
Six Months Results
Revenues for the six months ended June 30, 2011 were $37.7 million, up 19% from revenues of $31.7 million for the six months ended June 30, 2010. Gross profit for the six months ended June 30, 2011 was $14.2 million, up 7% from gross profit of $13.2 million for the corresponding period of 2010. Gross margin was 37.5%, compared to 41.5% for the first six months of 2010. Operating income was $11.1 million, up 2.9% from $10.8 million for the first six months of 2010. Net income was $10.2 million, or $0.23 per basic and diluted share, compared to $11.4 million, or $0.26 per basic and diluted share, for the same period a year ago.
Financial Condition
As of June 30, 2011, the Company had cash and cash equivalents of $4.7 million compared to $3.7 million as of December 31, 2010.
Working capital increased to $88.7 million at June 30, 2011 from $79 million at December 31, 2010. The current ratio rose to 8.2 times at June 30, 2011 from 7.2 times at December 31, 2010.
Accounts receivable balance rose to $66 million at the end of the second quarter of 2011 from $62 million at the end 2010. The Company's management team continues to be sharply focused on improving accounts receivable collection and expects to make further progress in the quarters to come.
For the six months ended June 20, 2011, cash flow from operating activities was $3.6 million, as compared to $3.3 million in the second quarter of 2010.
"In the second half of 2011, we expect to add new higher-margin revenue streams with our upcoming new products, which should help offset some of the margin pressure coming from the more competitive pricing due to government reform policies. Overall we are still very optimistic that we have the right mix of products and pipeline opportunities to position China Pharma to benefit from China's healthcare reform program," said Ms. Li. "We believe our success in 2011 and beyond will be defined by our differentiated product portfolio, high-quality manufacturing facilities and promising pipeline, strong distribution network, and commercialization expertise."
Pipeline Update
As of June 30, 2011, China Pharma had nine pipeline drugs in different stages of active development. The development of three of such products is highlighted below:
Conference Call
The Company will hold a conference call at 8:30 am ET on August 11, 2011 to discuss second quarter 2011 results. Listeners may access the call by dialing 1-866-831-6272 or 1-617-213-8859 for international callers, access code: 72860215. A webcast will also be available through CPHI's website at http://www.chinapharmaholdings.com. A replay of the call will be accessible through August 18, 2011 by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 99608603.
Use of Non-GAAP Financial Measures
GAAP results for the three months and six months ended June 30, 2011 and June 30, 2010 include the impact of gains from changes in value of derivative warrant liability. To supplement its consolidated financial statements presented on a GAAP basis, the Company has provided non-GAAP adjusted financial information, including adjusted net income and adjusted diluted earnings per share that excludes the impact of the changes in value of derivative warrant liability. The Company's management believes that this adjusted measure provides investors with a better understanding of how the results relate to the Company's historical performance. A reconciliation of adjustment to GAAP results appears in the tables accompanying this press release. This additional adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The adjusted financial information that the Company provides also may differ from the adjusted information provided by other companies.
About China Pharma Holdings, Inc.
China Pharma Holdings, Inc. is a rapidly growing specialty pharmaceutical company that develops, manufactures and markets a diversified portfolio of products focused on conditions with a high incidence and high mortality rates in China, including cardiovascular, CNS, infectious, and digestive diseases. The Company's cost-effective, high-margin business model is driven by market demand and supported by eight scalable GMP-certified product lines covering the major dosage forms. In addition, the Company has a broad and expanding nationwide distribution network across all major cities and provinces in China. The Company's wholly-owned subsidiary, Hainan Helpson Medical & Biotechnology Co., Ltd., is located in Haikou City, Hainan Province. For more information about China Pharma Holdings, Inc., please visit http://www.chinapharmaholdings.com.
Safe Harbor Statement
Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Any statements set forth above that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as the achievability of financial guidance, success of new product development, unanticipated changes in product demand, increased competition, downturns in the Chinese economy, uncompetitive levels of research and development, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations except as required by applicable law or regulation.
Contact: | |
China Pharma Holdings, Inc. | |
Phone: +86-898-6681-1730 (China) | |
Email: hps@chinapharmaholdings.com | |
- FINANCIAL TABLES FOLLOW -
China Pharma Holdings, Inc. | |||||||||||||
Reconciliation of Non-GAAP Adjusted Net Income and Diluted EPS | |||||||||||||
(Unaudited, $ in thousand except share and per share data) | |||||||||||||
For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||
Net income | EPS | Net income | EPS | Net income | EPS | Net income | EPS | ||||||
Adjusted net income, excluding approximate | $ 4,812 | $ 0.11 | $ 5,276 | $ 0.12 | $ 9,239 | $ 0.21 | $ 9,570 | $ 0.22 | |||||
Subtract: Derivate Gain | 257 | 0.01 | 807 | 0.02 | 934 | 0.02 | 1,366 | 0.03 | |||||
Net income as reported (GAAP) | $ 5,069 | $ 0.12 | $ 6,083 | $ 0.14 | $ 10,173 | $ 0.23 | $ 10,936 | $ 0.25 | |||||
Diluted weighted average shares outstanding | 43,454,008 | 43,497,639 | 43,429,419 | 43,550,300 | |||||||||
CHINA PHARMA HOLDINGS, INC. | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
(Unaudited) | |||||
June 30, | December 31, | ||||
2011 | 2010 | ||||
ASSETS | |||||
Current Assets: | |||||
Cash and cash equivalents | $ 4,687,657 | $ 3,692,086 | |||
Banker's acceptances | 237,415 | - | |||
Trade accounts receivable, less allowance for doubtful | |||||
accounts of $3,276,642 and $3,317,017, respectively | 66,144,994 | 61,947,737 | |||
Other receivables, less allowance for doubtful | |||||
accounts of $22,337 and $15,669, respectively | 82,240 | 65,019 | |||
Advances to suppliers | 5,322,135 | 5,311,896 | |||
Inventory | 23,977,442 | 20,388,935 | |||
Deferred tax assets | 524,290 | 528,684 | |||
Total Current Assets | 100,976,173 | 91,934,357 | |||
Advances for purchases of property and equipment and | |||||
intangible assets | 5,409,096 | 4,395,331 | |||
Property and equipment, net of accumulated depreciation of | |||||
$3,181,610 and $2,695,840, respectively | 6,265,741 | 6,372,487 | |||
Intangible assets, net of accumulated amortization of | |||||
$2,872,652 and $2,342,081, respectively | 30,788,187 | 29,048,766 | |||
TOTAL ASSETS | $ 143,439,197 | $ 131,750,941 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||
Current Liabilities: | |||||
Trade accounts payable | $ 2,767,403 | $ 4,937,781 | |||
Accrued expenses | 82,130 | 98,206 | |||
Accrued taxes payable | 3,355,674 | 2,386,019 | |||
Other payables | 368,412 | 92,077 | |||
Advances from customers | 1,392,699 | 1,208,988 | |||
Other payables - related parties | 491,563 | 303,644 | |||
Short-term notes payable | 3,868,173 | 3,781,119 | |||
Total Current Liabilities | 12,326,054 | 12,807,834 | |||
Long-term deferred tax liability | 73,323 | 71,673 | |||
Derivative warrant liability | - | 934,260 | |||
Total Liabilities | 12,399,377 | 13,813,767 | |||
Stockholders' Equity: | |||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized; | |||||
no shares issued or outstanding | - | - | |||
Common stock, $0.001 par value; 95,000,000 shares authorized; | |||||
43,529,557 shares and 43,404,557 shares outstanding, respectively | 43,530 | 43,405 | |||
Additional paid-in capital | 23,334,316 | 23,252,476 | |||
Retained earnings | 95,189,716 | 85,017,024 | |||
Accumulated other comprehensive income | 12,472,258 | 9,624,269 | |||
Total Stockholders' Equity | 131,039,820 | 117,937,174 | |||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ 143,439,197 | $ 131,750,941 | |||
CHINA PHARMA HOLDINGS, INC. | |||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
AND COMPREHENSIVE INCOME | |||||||||
(Unaudited) | |||||||||
For the Three Months | For the Six Months | ||||||||
Ended June 30, | Ended June 30, | ||||||||
2011 | 2010 | 2011 | 2010 | ||||||
Revenue | $ 19,600,852 | $ 16,631,354 | $ 37,720,409 | $ 31,733,864 | |||||
Cost of revenue | 12,318,868 | 9,587,417 | 23,568,814 | 18,555,719 | |||||
Gross profit | 7,281,984 | 7,043,937 | 14,151,595 | 13,178,145 | |||||
Operating expenses: | |||||||||
Selling expenses | 799,220 | 621,580 | 1,403,701 | 1,204,468 | |||||
General and administrative expenses | 986,949 | 894,507 | 1,903,894 | 1,547,255 | |||||
Bad debt expense (benefit) | (118,704) | 37,615 | (109,276) | 108,521 | |||||
Total operating expenses | 1,667,465 | 1,553,702 | 3,198,319 | 2,860,244 | |||||
Government subsidy income | 145,447 | 465,663 | 145,447 | 465,663 | |||||
Income from operations | 5,759,966 | 5,955,898 | 11,098,723 | 10,783,564 | |||||
Other income (expense): | |||||||||
Interest income | 2,454 | 5,401 | 4,415 | 12,158 | |||||
Interest expense | (61,222) | (51,631) | (122,436) | (102,121) | |||||
Derivative gain | 256,762 | 807,005 | 934,260 | 1,365,509 | |||||
Net other income | 197,994 | 760,775 | 816,239 | 1,275,546 | |||||
Income before income taxes | 5,957,960 | 6,716,673 | 11,914,962 | 12,059,110 | |||||
Income tax expense | (888,890) | (633,419) | (1,742,270) | (1,122,698) | |||||
Net income | 5,069,070 | 6,083,254 | 10,172,692 | 10,936,412 | |||||
Other comprehensive income - foreign currency | |||||||||
translation adjustment | 1,709,951 | 403,253 | 2,847,989 | 417,698 | |||||
Comprehensive income | $ 6,779,021 | $ 6,486,507 | $ 13,020,681 | $ 11,354,110 | |||||
Earnings per Share: | |||||||||
Basic | $ 0.12 | $ 0.14 | $ 0.23 | $ 0.25 | |||||
Diluted | $ 0.12 | $ 0.14 | $ 0.23 | $ 0.25 | |||||
CHINA PHARMA HOLDINGS, INC. | |||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
(Unaudited) | |||||
For the Six Months | |||||
Ended June 30, | |||||
2011 | 2010 | ||||
Cash Flows from Operating Activities: | |||||
Net income | $ 10,172,692 | $ 10,936,412 | |||
Depreciation and amortization | 890,895 | 841,762 | |||
Stock based compensation | 81,965 | 221,101 | |||
Derivative gain | (934,260) | (1,365,509) | |||
Changes in assets and liabilities: | |||||
Trade accounts receivable | (2,741,907) | (3,402,232) | |||
Other receivables | (15,559) | (25,809) | |||
Advances to suppliers | 110,882 | (907,559) | |||
Inventory | (3,086,326) | (4,994,669) | |||
Deferred tax assets | 16,391 | (145,552) | |||
Trade accounts payable | (2,204,755) | 2,404,264 | |||
Accrued expenses | 266,666 | (31,448) | |||
Accrued taxes payable | 905,113 | (233,065) | |||
Other payables | (8,947) | 1,014 | |||
Advances from customers | 154,239 | (17,231) | |||
Net Cash Provided by Operating Activities | 3,607,089 | 3,281,479 | |||
Cash Flows from Investing Activities: | |||||
Net investment in banker's acceptances | (234,921) | - | |||
Advances for purchases of property and equipment | |||||
and intangible assets | (902,986) | (2,018,906) | |||
Purchase of property and equipment | (223,769) | (108,842) | |||
Purchase of intangible assets | (1,531,018) | (2,852,168) | |||
Net Cash Used in Investing Activities | (2,892,694) | (4,979,916) | |||
Cash Flows from Financing Activities: | |||||
Proceeds from related party loan | 187,919 | - | |||
Proceeds from exercise of warrants | - | 2,583,000 | |||
Net Cash Provided by Financing Activities | 187,919 | 2,583,000 | |||
Effect of Exchange Rate Changes on Cash | 93,257 | 8,799 | |||
Net Increase in Cash and Cash Equivalents | 995,571 | 893,362 | |||
Cash and Cash Equivalents at Beginning of Period | 3,692,086 | 3,634,753 | |||
Cash and Cash Equivalents at End of Period | $ 4,687,657 | $ 4,528,115 | |||
Supplemental Cash Flow Information: | |||||
Cash paid for interest | $ 118,347 | $ 102,121 | |||
Cash paid for income taxes | 617,544 | 2,906,168 | |||
