Sihuan Pharmaceutical Announces 2013 Interim Results

Net Profit Up 33.8% to Approximately RMB617.5 Million

Picks Up Growth Momentum with Successful Internal Integration

R&D Enters Harvest Period

Important Exclusive Innovative Drugs Slated to be Launched from 2015 Onwards

HONG KONG, Aug. 26, 2013 /PRNewswire/ -- Sihuan Pharmaceutical Holdings Group Ltd. (HKEx: 0460) ("Sihuan Pharmaceutical" or the "Company"), a leading pharmaceutical company with the largest cardio-cerebral vascular ("CCV") drug franchise in China's prescription drug market, today announced its interim results for the six months ended 30 June 2013 ("1H2013" or "review period").

Financial Highlights

With its successful internal adjustment in 2012 that strengthened its operational efficiency as a whole, coupled with the rebounds of its key products Kelinao and Oudimei and rapid growth of its fast-growing promising products such as Yuanzhijiu, Yeduojia and Danshen Chuangxiongqin, Sihuan Pharmarceutical recorded a revenue of RMB2,324.7 million, a significant increase of 67.3% year-on-year. The sales contribution from products launched after the Company's listing in 2010 continued to expand, reaching approximately 60% of total revenue. Gross profit surged by 72.4% to RMB1,847.1 million during the review period, while profit attributable to owners of the Company grew by 33.8% to RMB617.5million. The Board of Directors recommended an interim dividend of RMB 4.3 cents per share (2012: RMB3.1cents)

Dr. Che Fengsheng, Chairman and CEO of the Company,said, "In the first half of 2013, Sihuan Pharmaceutical further consolidated its well-established lead in the CCV drugs market and became the third largest pharmaceutical company in the Chinese prescription drug market. Momentum in growth in the Company's business picked up, which was the culmination of the ability of our extensive product portfolio to bring us a balanced contribution and sustainable growth. Together with our competitive edges developed over the previous years, we are well-positioned to weather the challenges arising from the external policy changes and market competition. More importantly, after the completion of our internal integration during the past 2 years, as well as having experienced various challenges in the past, Sihuan Pharmaceutical has become more mature and stable, with its overall competitive strengths significantly enhanced."

Rebounds of Key CCTV Products and Rapid Growth of Fast-growing Promising Products Boosted Strong Growth in Sales

CCV Products

Thanks to a young and diversified product portfolio, sales of CCV products grew 73.4% to RMB2,214.7 million during the review period, which accounted for 95.3% of total revenue, and again making CCV products the Company's largest revenue contributor. The Company achieved significant improvement in sales of Kelinao and Oudimei, its two major exclusive products. As the Company stepped up its support to its distributors for academic promotion and deepened its penetration into third to fourth tier cities, sales of Kelinao increased by 32.1% year-on-year. As for Oudimei, the Company was able to deepen penetration in existing markets and expand into new markets by winning tenders at stable price levels in more provinces, and supplementary tender submissions in provinces where tenders were delayed. As a result, sales of Oudimei jumped 140.1% year-on-year in the first half of 2013.

Moreover, sales of the Company's two other exclusive products, Yuanzhijiu and Yeduojia, maintained rapid sales growth during the period, with sales of the products up 120.8% and 560.9% to RMB202.0 million and RMB129.4 million, respectively. Sales of the Company's other promising products, namely Danshen Chuanxiongqin injection, Guhong injection and Yimaining, also grew significantly by 157.2%, 109.6% and 53.3% to RMB 57.1 million, RMB151.2 million and RMB92.7 million, respectively. Meanwhile, the Company's established products such as Chuanqing, Qu'Ao, Qingtong and GM1 recorded steady sales growth on the back of deepened market penetration, especially into low-end markets.

Non-CCV Products

The increasingly fierce price competition in the Chinese market of non-exclusive products led to relatively lower sales volume of the Company's non-CCV products, which are predominantly non-exclusive drugs. Nevertheless, sales of and Zhuo'Ao increased by 59.1% and 21.8% respectively.

Clear sales and marketing strategies achieved positive results

During the Period, the Company stepped up its academic promotion work as well as boosted incentives to distributors for Kelinao and Oudimei, thereby encouraging more frequent promotion of our products and increasing clinical use. In the meantime, the company speeded up market penetration of Oudimei by provincial tender wins and supplementary tender submissions in provinces where tenders were delayed. As a result, the Company successfully accelerated the sales rebound of Kelinao and Oudimei. On the other hand, the Company achieved satisfying results through appropriate tender strategies for each product, depending on competitiveness of their markets and their level of maturity in different markets. For products at earlier stages of development and are exclusive or have fewer competitors, the Company expanded market coverage by provincial tender wins and supplementary tender submissions in provinces where tenders were delayed. For non-exclusive products, the Company strategically expanded its access to low-end markets with EDL ("Essential Drug List") tender wins and participation in the rural cooperative medical scheme.

New products development enter into the harvest period

Since Xuanzhu Pharma Co., Ltd. becoming a wholly-owned subsidiary of the Company in 2012, the Company achieved a number of breakthroughs by leveraging its effective resources integration. To date, the Group has received Approval for Clinical Trials for a total of five Category 1 innovative drugs from the China State Food and Drug Administration ("CFDA"), including, Benapene, Imigliptin Dihydrochloride and Anaprazole Sodium. In addition, L-Phencynonate Hydrochloride, a Category 1 innovative drug, and Cinepazide Mesilate, a Category 4 exclusive new drug are progressing as planned. The collaborative development project with NeuroVive, innovative CCV drugs CicloMulsion and Neurostat, are in progress as planned towards clinical trials. CicloMulsion is filing application for Approval for Clinical Trials in China.

For the aspect of generic drugs, after gaining production licenses for Roxatidine, a first-to-market exclusive generic drug, and Nalmefene Hydrochloride Injection, a Category 3.1 generic drug, the products successfully passed final inspections and were officially launched. Development of other Category 3.1 generic drugs in the pipeline such as Levetiracetam injection, Lacosamide, and Aprepitant are also in progress as planned. Including these three drug development projects, the Group has a total of 17 Category 3.1 first-to-market generic drug projects under development. In addition, production license applications were filed for two other generic drugs during the Period and approvals from CFDA are expected to be issued by the end of 2013.

Production and Quality Management

In compliance with the new Good Manufacturing Practice ("GMP") standards, upgrades of the Company's production bases in Beijing, Jilin and Liaoning are approaching completion. The Group plans to apply for new GMP standard certification in September 2013. The Company's Active Pharmacentical Ingredients production facility, Langfang Gaobo Jingband established cooperation with the largest Canadian-owned pharmaceutical company Apotex Inc. during the Period. More importantly, the production facility passed on-site inspection by the Food and Drug Administration ("FDA") of United States in July 2013. EIR from FDA is expected to be issued in the third quarter of 2013 representing FDA's approval of its GMP operation system that its products can be exported to the US.

Future Prospects

Looking ahead, the development of the Chinese pharmaceutical market in the second half of 2013 will continue to be driven by the expansion of national medical insurance coverage, the rising per capita subsidy standard for medical insurance and the increasing maximum reimbursements ratio for medical treatment, in addition to the accelerated pace of urbanization and China's ageing population. The Company believes that the pharmaceutical industry will remain one of the fastest-growing industries in the country. Consolidation in the industry is intensifying due to medical reform, tightening control of hospital medical budget, spiralling price competition and the implementation of the new GMP standard. Nonetheless, these changes will benefit the Company comprising companies with strong R&D capabilities, a balanced product portfolio, distinguished sales and marketing capabilities, and an efficient production system, by being in a better position in grasping rising opportunities in the market.

Leveraging its outstanding product portfolio, with all six key products and potential blockbuster being exclusive products, coupled with over ten products with exclusive formulations or dosages which have been included in the recently expanded national EDL, and products such as Kelinao, Yuanzhijiu and Chuanqing recently added to the Guangdong EDL, the Company is expected to sustain business growth for the Company in the coming five years. In addition, the Company's long-term growth momentum will be supported by a variety of innovative patented drugs and first-to-market generic drugs under development. These products are expected to be launched starting from 2015.

In view of strong future growth, the Company will continue to enhance its nationwide distribution network and sales and marketing capabilities. Meanwhile, the Company will continue to exploring opportunities and enhancing its R&D capability by continuous investment in order to sustain healthy and sustainable growth.

Dr. Che concluded, "Despite increasingly rigid demand in the pharmaceutical industry, changes in policies and intense market competition continue to pose challenges to the industry's development. As an innovative pharmaceutical company which focuses on exclusive and proprietary products, Sihuan Pharmaceutical has sharpened its advantage in resources amidst the challenging market environment. Backed by its outstanding capabilities in sales and marketing, R&D and resource integration, Sihuan Pharmaceutical is poised to capitalize on the trend of industry consolidation and to achieve sustainable development going forward. I am highly confident in Sihuan's 2013 full year operating results and the Company's future development, and firmly believe that it will welcome a new era of development by entering into a steady growth trajectory. We are taking concrete steps towards our goal of becoming the most competitive Chinese pharmaceutical company."