China Medical Technologies Reports FY2008 Fourth Fiscal Quarter and Full Year Unaudited Financial Results

BEIJING, Sept. 1 /PRNewswire-Asia/ -- China Medical Technologies, Inc. (the "Company") (Nasdaq: CMED), a leading China-based medical device company that develops, manufactures and markets advanced in-vitro diagnostic products, today announced its unaudited financial results for the fourth fiscal quarter ("4Q FY2008") and the full fiscal year ended March 31, 2009 ("FY2008").

4Q FY2008 Highlights

-- Revenues from continuing operations increased by 37.3% year-over-year

to RMB248.6 million (US$36.4 million).

-- Income from continuing operations increased by 8.6% year-over-year to

RMB56.3 million (US$8.2 million).

-- Net income decreased by 46.5% year-over-year to RMB56.3 million (US$8.2

million).

-- Non-GAAP income from continuing operations, as defined below, increased

by 48.5% year-over-year to RMB120.0 million (US$17.6 million).

-- Diluted earnings from continuing operations per ADS* was RMB2.14

(US$0.31).

-- Non-GAAP diluted earnings from continuing operations per ADS*, as

defined below, increased by 49.0% year-over-year to RMB4.56 (US$0.67).

FY2008 Highlights

-- Revenues from continuing operations increased by 51.6% year-over-year

to RMB830.0 million (US$121.5 million) which was within our targeted

range of RMB825.0 million to RMB838.0 million.

-- Loss from continuing operations was RMB2.1 million (US$0.3 million)

including a charge of RMB244.9 million (US$35.8 million) for acquired

in-process research and development ("IPR&D").

-- Net income decreased by 21.2% year-over-year to RMB256.2 million

(US$37.5 million).

-- Non-GAAP income from continuing operations, as defined below,

increased by 80.9% year-over-year to RMB419.6 million (US$61.4 million)

which was within our targeted range of RMB410.0 million to RMB420.0

million.

-- Diluted loss from continuing operations per ADS* was RMB0.08 (US$0.01).

-- Non-GAAP diluted earnings from continuing operations per ADS*, as

defined below, were RMB15.97 (US$2.34) which exceeded the high end of

our targeted range of RMB15.13.

-- Annual cash dividend of US$0.55 per ADS* for FY2008 was declared which

increased by 10.0% as compared to annual cash dividend of US$0.5 per

ADS last year.

* One American Depositary Share ("ADS") = 10 ordinary shares

See "Non-GAAP Measure Disclosures" below, where the impact of certain

items on reported results is discussed.

"In FY2008, we achieved significant operational milestones," commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. "We continue to believe that China IVD market is significantly under-developed and under-penetrated. We are confident in our positioning as an advanced in-vitro diagnostic company in China to capture the enormous growth potentials in this business segment over the next 10 years. We also maintain our steady dividend policy to reward our shareholders despite challenging circumstances."

4Q FY2008 Unaudited Financial Results

The Company reported revenues from continuing operations of RMB248.6 million (US$36.4 million) for 4Q FY2008, representing a 37.3% increase from the corresponding period of FY2007.

The Company's revenues from continuing operations are currently generated from two product lines, ECLIA diagnostic systems and FISH diagnostic systems.

ECLIA system sales for 4Q FY2008 were RMB139.0 million (US$20.3 million), representing a 23.9% increase from the corresponding period of FY2007. The year-over-year growth in the ECLIA system sales was primarily due to the increasing utilization of the Company's ECLIA analyzers by hospitals as well as the expanded installed base of the analyzers which resulted in increased sales of ECLIA reagent kits.

FISH system sales for 4Q FY2008 were RMB109.6 million (US$16.0 million), representing a 59.3% increase from the corresponding period of FY2007. The strong year-over-year growth in the FISH system sales was primarily due to significant increase in sales of FISH probes to hospitals as a result of increase in new hospital customers and the increased usage of the Company's FISH probes by existing hospital customers.

Gross margin increased to 75.8% for 4Q FY2008 from 58.6% for the corresponding period of FY2007. The increase in gross margin was primarily due to the change in revenue mix where almost all revenues were generated from recurring sales of higher margin ECLIA reagent kits and FISH probes in 4Q FY2008.

Research and development expenses were RMB10.7 million (US$1.6 million) for 4Q FY2008, representing a 70.4% year-over-year increase. The increase was primarily due to the development of new ECLIA reagent kits and FISH probes.

Sales and marketing expenses were RMB13.6 million (US$2.0 million) for 4Q FY2008, representing a 97.4% year-over-year increase. The increase was primarily due to the continued expansion of the direct sales force for FISH system sales, increased product promotional activities as well as cost of the ECLIA analyzers provided free of charge to customers.

General and administrative expenses were RMB48.1 million (US$7.0 million) for 4Q FY2008, representing a significant year-over-year increase. The increase was primarily due to the increased headcount associated with the expansion of the Company's operations, an increase in stock compensation expense arising from a restricted stock grant in June 2008 and amortization of acquired intangible assets in connection with the acquisition of the SPR technology in December 2008.

Interest expense of convertible notes was RMB27.8 million (US$4.1 million) for 4Q FY2008, representing a significant year-over-year increase. The increase was primarily due to the issuance of US$276.0 million convertible notes in August 2008. The Company's outstanding convertible notes of US$150.0 million and US$276.0 million bear interest at 3.5% and 4.0% per annum, respectively and will mature in November 2011 and August 2013, respectively.

Interest expense of amortization of convertible notes issuance costs of RMB4.6 million (US$0.7 million) for 4Q FY2008, representing a significant year-over-year increase. The increase was primarily due to the issuance of US$276.0 million convertible notes in August 2008.

Other interest expense of RMB0.8 million (US$0.1 million) for 4Q FY2008 was primarily due to the present value discounting of other payable of US$10 million for the final payment of the FISH acquisition in March 2009.

Income tax expense was RMB32.1 million (US$4.7 million) for 4Q FY2008. The high effective tax rate was primarily due to certain expenses of the Company such as amortization of acquired intangible assets, stock compensation expense and interest expense of convertible notes were not deductible for income tax computation in the PRC and the accrual for withholding income tax on distributable earnings in the PRC.

Income from continuing operations was RMB56.3 million (US$8.2 million) for 4Q FY2008, representing a 8.6% increase from the corresponding period of FY2007.

Net income was RMB56.3 million (US$8.2 million) for 4Q FY2008, representing a 46.5% decrease from the corresponding period of FY2007.

Non-GAAP income from continuing operations excluding stock compensation expense, amortization of acquired intangible assets and acquired IPR&D charge was RMB120.0 million (US$17.6 million) for 4Q FY2008, representing a 48.5% increase from the corresponding period of FY2007.

Stock compensation expense for 4Q FY2008 was RMB13.9 million (US$2.0 million), of which RMB2.3 million was allocated to research and development expenses and RMB11.6 million to general and administrative expenses.

Amortization of acquired intangible assets for 4Q FY2008 was RMB49.8 million (US$7.3 million), of which RMB22.4 million was allocated to cost of revenues and RMB27.4 million to general and administrative expenses.

As of March 31, 2009, the Company's cash balance was RMB1,456.4 million (US$213.1 million).

As of March 31, 2009, the Company's net accounts receivable was RMB343.0 million (US$50.2 million), representing an increase of 20.7% from the balance at December 31, 2008.

FY2008 Unaudited Financial Results

Revenues from continuing operations were RMB830.0 million (US$121.5 million) for FY2008, representing a 51.6% year-over-year increase. The targeted revenues from continuing operations for FY2008 ranged from RMB825.0 million to RMB838.0 million.

ECLIA system sales for FY2008 were RMB504.7 million (US$73.9 million), representing a 32.6% year-over-year increase. FISH system sales for FY2008 were RMB325.3 million (US$47.6 million), representing a 94.9% year-over-year increase.

Gross margin increased to 73.6% for FY2008 as compared to 55.2% for FY2007 primarily due to similar reasons for 4Q FY2008.

Research and development expenses were RMB31.5 million (US$4.6 million) for FY2008, representing a 55.5% year-over-year increase. The increase was primarily due to the development of new ECLIA reagent kits and FISH probes.

Acquired IPR&D charge was RMB244.9 million (US$35.8 million) which related to the acquisition of SPR technology in December 2008.

Sales and marketing expenses were RMB56.0 million (US$8.2 million) for FY2008, representing a significant year-over-year increase. This increase was primarily due to the continued expansion of the direct sales force for FISH system sales, increased product promotional activities as well as the cost of the ECLIA analyzers provided free of charge to customers.

General and administrative expenses were RMB137.8 million (US$20.2 million) for FY2008, representing a significant year-over-year increase. The increase was primarily due to an increase in headcount to meet the expansion of the Company's operations, an increase in stock compensation expense arising from a restricted stock grant in June 2008 and amortization of acquired intangible assets in connection with the acquisition of the SPR technology in December 2008.

Interest expense of convertible notes was RMB83.2 million (US$12.2 million) for FY2008, representing a significant year-over-year increase. The increase was primarily due to the issuance of US$276.0 million convertible notes in August 2008.

Interest expense of amortization of convertible notes issuance costs of RMB14.4 million (US$2.1 million) for FY2008, representing a significant

year-over-year increase. The increase was primarily due to the issuance of US$276.0 million convertible notes in August 2008.

Other interest expense of RMB4.2 million (US$0.6 million) for FY2008 was primarily due to the present value discounting of other payable of US$10.0 million for the final payment of the FISH acquisition which was paid in March 2009.

Income tax expense was RMB73.0 million (US$10.7 million) for FY2008. The high effective tax rate was primarily due to certain expenses of the Company such as the charge related to acquired IPR&D, amortization of acquired intangible assets, stock compensation expense and interest expense of convertible notes were not deductible for income tax computation in the PRC and the accrual for withholding income tax on distributable earnings in the PRC.

Loss from continuing operations was RMB2.1 million (US$0.3 million) for FY2008, including a charge of RMB244.9 million (US$35.8 million) for acquired IPR&D for the acquisition of the SPR technology in December 2008.

Income from discontinued operation was RMB258.2 million (US$37.8 million) for FY2008, representing a 28.6% year-over-year increase, primarily due to a one-time gain of RMB137.2 million (US$20.1 million) from the sale of the HIFU business in December 2008. A portion of this gain amounting to RMB106.2 million (US$15.5 million) has been deferred in accordance with GAAP because of the subsequent event described in the section headed, "Recent Development on the Sale of the HIFU Business" below.

Net income was RMB256.2 million (US$37.5 million) for FY2008, representing a 21.2% year-over-year decrease.

Non-GAAP income from continuing operations excluding stock compensation expense, amortization of acquired intangible assets and acquired IPR&D charge was RMB419.6 million (US$61.4 million) for FY2008, representing a 80.9% year-over-year increase. The targeted adjusted income from continuing operations for FY2008 ranged from RMB410.0 million to RMB420.0 million.

Stock compensation expense for FY2008 was RMB50.2 million (US$7.3 million), of which RMB8.2 million was allocated to research and development expenses and RMB42.0 million to general and administrative expenses.

Amortization of acquired intangible assets for FY2008 was RMB126.6 million (US18.5 million), of which RMB90.1 million was allocated to cost of revenues and RMB36.5 million to general and administrative expenses.

For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.8329 to US$1.00, the noon buying rate in New York City for cable transfers of RMB per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board, as of Tuesday, March 31, 2009.

Annual Cash Dividend

The Board of Directors has declared an annual cash dividend on its ordinary shares of US$0.055 per share, equivalent to US$0.55 per ADS based on the Company's unaudited net income for FY2008. The cash dividend will be paid on or around October 28, 2009 to shareholders of record as of September 30, 2009.

Outlook

Please refer to the section "Outlook for 2Q FY2009" in the earnings announcement for FY2009 First Fiscal Quarter.

Recent Development on the Sale of the HIFU Business

In June 2009, the Company received a letter from Chengxuan International Ltd. ("Chengxuan"), the buyer of the HIFU Business and a major shareholder of the Company in connection with a notice issued by the State Food and Drug Administration ("the SFDA") in April 2009. The notice from the SFDA required the submission of new clinical trial data for the renewal application of the registration certificate for the HIFU system for the further evaluation of the renewal application and did not permit the sale of the HIFU system starting from April 2009 until the approval of the renewal application. The Company recently received another letter from Chengxuan which updated their ongoing discussion with the SFDA about the requirements for the new clinical trial data for the HIFU system, Chengxuan's loss of revenues due to the unexpected prohibition on selling the HIFU system since April 2009 and their indication of seeking maximum compensation of approximately US$15.5 million. The Company has established a special committee comprising two independent directors to evaluate and handle the related matters with Chengxuan and the special committee has engaged legal counsel to advise on Chengxuan's request for compensation. Due to this subsequent event and the uncertainty of the outcome, the Company has reduced the gain on the sale of the HIFU Business recorded in December 2008 by deferring approximately US$15.5 million of the gain in accordance with GAAP. This accounting treatment does not indicate any agreement of the Company to Chengxuan's request for compensation. The Company seeks to come up with a fair and acceptable solution to both parties. As such, the outcome may be different from the current estimate, and accordingly the amounts that are recorded in our consolidated financial statements for the year ended March 31, 2009 to be included in our annual report on Form 20-F, might be lower than US$15.5 million.

Non-GAAP Measure Disclosures

To supplement its consolidated financial statements presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), the Company uses non-GAAP measures of income from continuing operations and earnings from continuing operations per ADS, which are adjusted from the results based on GAAP to exclude the impact of stock compensation expense, amortization of acquired intangible assets and acquired IPR&D charge. Non-GAAP financial measures are used by the Company in their financial and operating decision-making because management believes they reflect the Company's ongoing business in a manner that allows meaningful period-to-period comparison. The Company's management believes that these non-GAAP financial measures provide useful information to investors and others in understanding and evaluating the Company's current operating performance and future prospects in the same manner as management does, if they so choose. The Company's management also believes the non-GAAP financial measures are useful for itself and investors because it makes more meaningful comparisons of the Company's current results of operations to those of prior periods.

The presentation of this additional financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For a reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measure, please see the financial statements included with this earnings announcement.

Conference Call

The Company's management team will host a conference call at 8:00a.m. U.S. Eastern Time on September 1, 2009 (or 8:00p.m. Beijing/Hong Kong time on the same date) to discuss the results following this earnings announcement.

The dial-in details for the live conference call are as follows:

-- U.S. Toll Free Number 1-800-291-9234

-- International dial-in number 1-617-614-3923

Passcode CMEDCALL

A live webcast of the conference call will be available on http://ir.chinameditech.com .

A replay of this webcast will be available for one month on this website.

A telephone replay of the call will be available after the conclusion of the conference call through 10:00a.m. U.S. Eastern Time on September 2, 2009.

The dial-in details for the replay are as follows:

-- U.S. Toll Free Number 1-888-286-8010

-- International dial in numbers 1-617-801-6888

Passcode 92901366

About China Medical Technologies, Inc.

China Medical Technologies is a leading China-based medical device company that develops, manufactures and markets advanced in-vitro diagnostic products using Enhanced Chemiluminescence (ECLIA) technology, Fluorescent in situ Hybridization (FISH) technology and Surface Plasmon Resonance (SPR) technology to detect and monitor various diseases and disorders. For more information, please visit http://www.chinameditech.com .

Safe Harbor Statement

This press release contains forward-looking statements. These statements constitute "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the quotations from management in this press release contain forward-looking statements. Such statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission, including its annual report on Form 20-F. The Company does not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Balance Sheets

As of

March 31, December 31, March 31,

2008 2008 2009

RMB RMB RMB US$

As adjusted(2)

(in thousands)

Assets

Current assets

Cash and cash

equivalents 682,679 1,943,588 1,456,410 213,147

Trade accounts

receivable, net 289,751 284,262 343,037 50,204

Inventories 27,834 28,029 16,932 2,478

Prepayments and other

receivables 27,845 27,908 20,425 2,989

Due from a related

party -- 204,675 204,987 30,000

Total current assets 1,028,109 2,488,462 2,041,791 298,818

Property, plant and

equipment, net 164,499 161,801 169,422 24,795

Land use rights 7,430 7,287 7,239 1,059

Goodwill 8,654 8,654 8,654 1,267

Intangible assets,

net(1) 1,541,793 3,532,442 3,487,474 510,394

Prepayments and other

receivables 154,264 -- -- --

Convertible notes

issuance costs 27,055 73,131 68,596 10,039

Total assets 2,931,804 6,271,777 5,783,176 846,372

Liabilities

Current liabilities

Trade accounts payable 48,040 21,160 27,863 4,078

Accrued liabilities

and other payables(2) 238,580 1,572,275 999,083 146,217

Income taxes payable 69,499 82,908 77,112 11,285

Total current

liabilities 356,119 1,676,343 1,104,058 161,580

Convertible notes 1,051,800 2,906,385 2,910,815 426,000

Deferred income taxes 1,124 21,657 29,898 4,375

Total liabilities 1,409,043 4,604,385 4,044,771 591,955

Shareholders' equity

Ordinary shares US$0.1

par value: 500,000,000

authorized; 274,066,661

issued and outstanding

as of March 31, 2008,

321,066,661 issued and

outstanding as of

December 31, 2008

and March 31, 2009 225,473 257,738 257,738 37,720

Additional paid-in

capital 526,264 530,259 544,178 79,641

Accumulated other

comprehensive loss (48,046) (52,766) (51,946) (7,602)

Retained earnings(1)(2) 819,070 932,161 988,435 144,658

Total shareholders' 1,522,761 1,667,392 1,738,405 254,417

equity

Total liabilities and

shareholders' equity 2,931,804 6,271,777 5,783,176 846,372

Notes:

(1) The Company has performed a preliminary purchase price allocation

after the completion of the SPR acquisition in December 2008. The

Company will finalize the purchase price allocation as soon as

practicable.

(2) Due to the subsequent event described in the section "Recent

Development on the Sale of the HIFU Business" above, a portion of the

gain on disposal from HIFU business was deferred in accordance with

GAAP based on the Company's estimate of maximum compensation.

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Income

For the Three Months Ended

March 31, December 31, March 31,

2008 2008 2009

RMB RMB RMB US$

As adjusted(2)

(in thousands except for per ADS information)

Revenues, net(1) 181,048 225,296 248,635 36,388

Cost of revenues (74,886) (55,818) (60,206) (8,811)

Gross profit 106,162 169,478 188,429 27,577

Operating expenses:

Research and

development (6,262) (8,304) (10,670) (1,562)

Acquired in-process

research and

development(3) (672) (244,872) -- --

Sales and marketing (6,884) (14,565) (13,591) (1,989)

General and

administrative(3) (15,522) (38,115) (48,085) (7,037)

Total operating

expenses (29,340) (305,856) (72,346) (10,588)

Operating income

(loss) 76,822 (136,378) 116,083 16,989

Other income -- -- -- --

Interest income 5,034 12,448 5,608 821

Interest expense -

convertible notes (9,396) (27,856) (27,840) (4,075)

Interest expense -

amortization of

convertible notes

issuance costs (1,905) (4,652) (4,649) (680)

Interest expense -

other (1,299) (1,165) (785) (115)

Income (loss) before

income tax 69,256 (157,603) 88,417 12,940

Income tax expense (17,457) (13,915) (32,143) (4,704)

Income (loss) from

continuing

operations 51,799 (171,518) 56,274 8,236

Income from

discontinued

operation(2) 53,414 173,422 -- --

Net income 105,213 1,904 56,274 8,236

Earnings (loss) from

continuing operations

per ADS

- basic 1.97 (6.54) 2.14 0.31

- diluted(4) 1.96 (6.54) 2.14 0.31

Earnings from discontinued

operation per ADS

- basic 2.04 6.61 N/A N/A

- diluted(4) 2.02 6.61 N/A N/A

Weighted average number

of ADS

- basic 26,242,974 26,242,974 26,287,974 26,287,974

- diluted(4) 26,407,370 26,242,974 26,347,906 26,347,906

For the Years Ended

March 31, March 31,

2008 2009

RMB RMB US$

(in thousands except for per ADS information)

Revenues, net(1) 547,421 829,950 121,464

Cost of revenues (245,437) (219,337) (32,100)

Gross profit 301,984 610,613 89,364

Operating expenses:

Research and development (20,231) (31,450) (4,603)

Acquired in-process research

and development(3) (672) (244,872) (35,837)

Sales and marketing (22,012) (55,956) (8,189)

General and administrative(3) (70,939) (137,839) (20,173)

Total operating expenses (113,854) (470,117) (68,802)

Operating income (loss) 188,130 140,496 20,562

Other income 100 -- --

Interest income 28,650 32,354 4,735

Interest expense -

convertible notes (39,149) (83,238) (12,182)

Interest expense -

amortization of

convertible notes

issuance costs (7,937) (14,387) (2,105)

Interest expense - other (5,229) (4,240) (621)

Income (loss) before

income tax 164,565 70,985 10,389

Income tax expense (40,193) (73,042) (10,690)

Income (loss) from

continuing

operations 124,372 (2,057) (301)

Income from discontinued

operation(2) 200,850 258,231 37,792

Net income 325,222 256,174 37,491

Earnings (loss) from

continuing operations

per ADS

- basic 4.74 (0.08) (0.01)

- diluted(4) 4.72 (0.08) (0.01)

Earnings from

discontinued operation

per ADS

- basic 7.66 9.83 1.44

- diluted(4) 7.62 9.83 1.44

Weighted average number

of ADS

- basic 26,221,900 26,277,629 26,277,629

- diluted(4) 26,346,462 26,277,629 26,277,629

Notes:

(1) Revenues, net

For the Three Months Ended

March 31, December 31, March 31,

2008 2008 2009

RMB'000 RMB'000 RMB'000 US$'000

- ECLIA 112,221 131,782 138,995 20,342

- FISH 68,827 93,514 109,640 16,046

181,048 225,296 248,635 36,388

For the Years Ended

March 31, March 31,

2008 2009

RMB'000 RMB'000 US$'000

- ECLIA 380,520 504,655 73,857

- FISH 166,901 325,295 47,607

547,421 829,950 121,464

(2) Income from discontinued operation

For the Three Months Ended

March 31, December 31, March 31,

2008 2008 2009

RMB'000 RMB'000 RMB'000 US$'000

- Revenue from HIFU

business 103,171 85,364 -- --

- Income from HIFU

business 53,414 36,271 -- --

- Gain on disposal of

HIFU business -- 137,151 -- --

For the Years Ended

March 31, March 31,

2008 2009

RMB'000 RMB'000 US$'000

- Revenue from HIFU

business 368,317 246,588 36,088

- Income from HIFU

business 200,850 121,080 17,720

- Gain on disposal of

HIFU business -- 137,151 20,072

Due to the subsequent event described in the section "Recent

Development on the Sale of the HIFU Business" above, a portion of the

gain on disposal from HIFU business was deferred in accordance with

GAAP based on the Company's estimate of maximum compensation.

(3) The Company has performed a preliminary purchase price allocation

after the completion of the SPR acquisition in December 2008. The

Company will finalize the purchase price allocation as soon as

practicable.

(4) In computing diluted earnings from continuing operations per ADS,

interest expense and amortization in connection with convertible notes

were not added back in computing diluted earnings from continuing

operations per ADS because they were anti-dilutive.

China Medical Technologies, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

For the Years Ended

March 31, March 31,

2008 2009

RMB RMB US$

(in thousands)

Net cash provided by operating

activities 463,334 490,758 71,823

Net cash used in investing

activities (831,551) (1,467,195) (214,725)

Net cash (used in) provided by

financing activities (86,149) 1,751,297 256,303

Effect of foreign currency

exchange rate change on cash (36,595) (1,129) (165)

Net (decrease) increase in cash

and cash equivalents (490,961) 773,731 113,236

Cash and cash equivalents:

At beginning of year 1,173,640 682,679 99,911

At end of year 682,679 1,456,410 213,147

China Medical Technologies, Inc.

Reconciliations of Non-GAAP Income from Continuing Operations to GAAP Income from Continuing Operations

For the Three Months Ended

March 31, December 31, March 31,

2008 2008 2009

RMB RMB RMB US$

(in thousands except for per ADS information)

GAAP income (loss)

from continuing

operations 51,799 (171,518) 56,274 8,236

Adjustments:

Stock compensation

expense 4,669 14,486 13,919 2,037

Amortization of acquired

intangible assets(1) 23,700 31,586 49,823 7,292

Acquired in-process

research and

development(1) 672 244,872 -- --

Non-GAAP income from

continuing operations 80,840 119,426 120,016 17,565

GAAP earnings (loss)

from continuing

operations per ADS

- basic 1.97 (6.54) 2.14 0.31

- diluted 1.96 (6.54) 2.14 0.31

Non-GAAP earnings

from continuing

operations per ADS

- basic 3.08 4.55 4.57 0.67

- diluted(2) 3.06 4.55 4.56 0.67

Weighted average

number of ADS

- basic 26,242,974 26,242,974 26,287,974 26,287,974

- diluted(2) 26,407,370 26,242,974 26,347,906 26,347,906

For the Years Ended

March 31, March 31,

2008 2009

RMB RMB US$

(in thousands except for per ADS information)

GAAP income (loss) from

continuing operations 124,372 (2,057) (301)

Adjustments:

Stock compensation

expense 16,660 50,179 7,344

Amortization of acquired

intangible assets(1) 90,233 126,588 18,526

Acquired in-process

research and development(1) 672 244,872 35,837

Non-GAAP income from

continuing operations 231,937 419,582 61,406

GAAP earnings (loss) from

continuing operations

per ADS

- basic 4.74 (0.08) (0.01)

- diluted 4.72 (0.08) (0.01)

Non-GAAP earnings from

continuing operations

per ADS

- basic 8.85 15.97 2.34

- diluted(2) 8.80 15.97 2.34

Weighted average number

of ADS

- basic 26,221,900 26,277,629 26,277,629

- diluted(2) 26,346,462 26,277,629 26,277,629

Notes:

(1) The Company has performed a preliminary purchase price allocation

after the completion of the SPR acquisition in December 2008. The

Company will finalize the purchase price allocation as soon as

practicable.

(2) In computing diluted non-GAAP earnings from continuing operations per

ADS, interest expense and amortization in connection with convertible

notes were not added back in computing diluted non-GAAP earnings from

continuing operations per ADS because they were anti-dilutive.

For more information, please contact:

Sam Tsang and Winnie Yam

Tel: +852-2511-9808

Email: IR@chinameditech.com