BEIJING, March 3 /PRNewswire-Asia/ -- China Medical Technologies, Inc. (the "Company") (Nasdaq: CMED), a leading China-based advanced in-vitro diagnostic ("IVD") company, today announced its unaudited financial results for the third fiscal quarter ended December 31, 2009 ("3Q FY2009"). The Company's 2009 fiscal year ends on March 31, 2010 ("FY2009").
3Q FY2009 Highlights
-- Revenues decreased by 23.5% year-over-year to RMB172.3 million (US$25.2
million) but increased by 3.8% on a quarter-over-quarter basis.
-- Loss from continuing operations was RMB22.0 million (US$3.2 million).
-- Non-GAAP income from continuing operations, as defined below, decreased
by 61.9% year-over-year to RMB45.6 million (US$6.7 million) but
increased by 158.2% on a quarter-over-quarter basis.
-- Diluted loss from continuing operations per ADS* was RMB0.84 (US$0.12).
-- Non-GAAP diluted earnings from continuing operations per ADS*, as
defined below, decreased by 61.8% year-over-year to RMB1.74 (US$0.25)
but increased by 159.7% on a quarter-over-quarter basis.
-- Net cash flows generated from operations was RMB80.4 million (US$11.8
million).
-- Approximately 390,000 ADSs* were repurchased under the Company's share
repurchase program.
4Q FY2009 Targets
-- Target revenues are expected to be more than RMB175.0 million (US$25.6
million).
-- Target non-GAAP income from continuing operations is expected to be
more than RMB47.0 million (US$6.9 million).
-- Target non-GAAP diluted earnings from continuing operations per ADS* is
expected to be more than RMB1.79 (US$0.26).
* 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.
"We achieved sequential growth in our business in the past quarter," commented Mr. Xiaodong Wu, Chairman and Chief Executive Officer of the Company. "Despite the challenges we encountered in the first 9 months of fiscal year 2009, our turnaround has started and will continue, which is demonstrated by robust growth in our molecular diagnostic business and stabilization in our immunodiagnostic business in the past quarter. We have witnessed stabilizing pricing environment for our ECLIA reagent kits and growth of end user demand for both of our FISH probes and ECLIA reagent kits. Meanwhile, we completed the trial launch of our SPR system in December 2009 and from January 2010, we began a formal full scale launch of our SPR system, targeting at least 30 top tier hospitals each quarter. Besides, we are waiting for SFDA approval for several new products in both molecular diagnostic business and immunodiagnostic business in 2010 which will expand our product offering and strengthen our product portfolio. We expect the Company to experience another phase of accelerated growth in later quarters."
3Q FY2009 Unaudited Financial Results
The Company reported revenues of RMB172.3 million (US$25.2 million) for 3Q FY2009, representing a 23.5% decrease from the corresponding period of FY2008 and a 3.8% increase from 2Q FY2009.
The Company's revenues are currently generated from two segments, molecular diagnostic systems and immunodiagnostic systems. The molecular diagnostic systems segment includes FISH products and is expected to include SPR products in 2010 while the immunodiagnostic systems segment consists of ECLIA products.
Molecular diagnostic system sales for 3Q FY2009 were RMB96.2 million (US$14.1 million), representing a 2.8% increase from the corresponding period of FY2008 and a 7.8% increase from 2Q FY2009.
Immunodiagnostic system sales for 3Q FY2009 were RMB76.2 million (US$11.2 million), representing a 42.2% decrease from the corresponding period of FY2008 and a 0.9% decrease from 2Q FY2009. The year-over-year decrease was primarily due to the price reduction for ECLIA reagent kits in September 2009.
Gross margin decreased to 63.4% for 3Q FY2009 as compared to 73.9% for the corresponding period of FY2008 and 65.4% for 2Q FY2009. The decrease in gross margin was primarily due to the impact of the price reduction on ECLIA reagent kits.
Research and development expenses were RMB10.7 million (US$1.6 million) for 3Q FY2009, representing a 29.3% year-over-year increase and a 13.0% sequential increase. The increase was primarily due to the development of new FISH probes, SPR-based chips and ECLIA reagent kits.
Sales and marketing expenses were RMB19.1 million (US$2.8 million) for 3Q FY2009, representing a 63.3% year-over-year increase and a 9.3% sequential increase. The increase was primarily due to the increase in direct sales efforts for molecular diagnostic systems.
General and administrative expenses were RMB25.8 million (US$3.8 million) for 3Q FY2009, representing a 12.6% year-over-year decrease and a 42.7% sequential decrease. The significant sequential decrease was primarily because no costs for the independent internal investigation were incurred and the provision for bad debts was substantially lower in 3Q FY2009.
Amortization of SPR intangible assets was RMB27.3 million (US$4.0 million) for 3Q FY2009. As the SPR acquisition was completed in December 2008, there was only one month amortization of SPR intangible assets in the corresponding period of FY2008.
Interest expense on convertible notes was RMB35.4 million (US$5.2 million) for 3Q FY2009. 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. Due to the adoption of new authoritative guidance governing the accounting for convertible instruments that can be settled in cash or partially in cash upon conversion effective on April 1, 2009, the Company recorded additional non-cash interest expense of RMB7.6 million (US$1.1 million) for the US$150.0 million convertible notes in 3Q FY2009. The Company also made an adjustment related to these convertible notes for the corresponding period of FY2008 by increasing non-cash interest expense by RMB7.2 million to adopt this guidance retrospectively. This new guidance is not applicable to the US$276.0 million convertible notes.
Interest expense on amortization of convertible notes issuance costs was RMB4.4 million (US$0.6 million) for 3Q FY2009.
Income tax expense was RMB13.1 million (US$1.9 million) for 3Q FY2009. The occurrence of income tax expense was primarily because certain expenses of the Company such as stock compensation expense, amortization of acquired intangible assets and interest expense on convertible notes were not deductible for income tax purpose as well as the accrual for withholding income tax on distributable earnings generated during the quarter in the PRC.
Loss from continuing operations was RMB22.0 million (US$3.2 million) for 3Q FY2009 and net loss was RMB22.0 million (US$3.2 million) for 3Q FY2009.
Non-GAAP income from continuing operations excluding stock compensation expense, amortization of acquired intangible assets and non-cash interest expense of convertible notes arising from the adoption of the new guidance related to convertible instruments that can be settled in cash or partially in cash upon conversion was RMB45.6 million (US$6.7 million) for 3Q FY2009, representing a 61.9% decrease from the corresponding period of FY2008 and a 158.2% increase from 2Q FY2009.
Stock compensation expense for 3Q FY2009 was RMB10.2 million (US$1.5 million), of which RMB1.6 million was allocated to research and development expenses and RMB8.6 million to general and administrative expenses.
Amortization of acquired intangible assets for 3Q FY2009 was RMB49.8 million (US$7.3 million), of which RMB22.4 million was allocated to cost of revenues and RMB27.4 million to operating expenses.
As of December 31, 2009, the Company's cash and cash equivalents was RMB829.9 million (US$121.6 million). The decrease in cash and cash equivalents from the balance at September 30, 2009 was primarily due to the final payment for the SPR acquisition, the payment of annual cash dividends and the repurchase of the Company's ADSs. Net cash generated from operating activities for 3Q FY2009 was RMB80.4 million (US$11.8 million).
As of December 31, 2009, the Company's net accounts receivable was RMB300.8 million (US$44.1 million), representing a decrease of 5.4% from the balance at September 30, 2009.
For the convenience of readers, certain RMB amounts have been translated into U.S. dollars at the rate of RMB6.8259 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 Thursday, December 31, 2009. No representation is made that the RMB amounts could have been or could be converted into U.S. dollars at that rate or at any other certain rate on December 31, 2009 or at any other dates.
Share Repurchase Program
In September 2009, the Company's board of directors authorized a share repurchase program, under which the Company may repurchase up to US$30 million worth of its outstanding ADSs from the open market or in block trades for a period of one year, commencing on October 1, 2009. As of December 31, 2009, the Company repurchased about 390,000 ADSs at a cost of approximately US$5.0 million (including transaction costs). The Company will continue to repurchase issued and outstanding ADSs depending on market conditions, the trading price of its ADSs and other factors.
Outlook for 4Q FY2009
Although the New Year holiday in January 2010 and the Chinese New Year holiday in February 2010 reduced about 10% of normal working days in 4Q FY2009, the Company still expects to achieve sequential growth in its business. In 1Q FY2010, without the holiday impact, the Company expects to achieve a higher sequential growth in its business.
The Company estimates the target revenues for 4Q FY2009 to be more than RMB175.0 million (US$25.6 million).
The Company estimates the target non-GAAP income from continuing operations for 4Q FY2009 to be more than RMB47.0 million (US$6.9 million).
The Company estimates the target non-GAAP diluted earnings from continuing operations per ADS for 4Q FY2009 to be more than RMB1.79 (US$0.26).
The above targets are based on the Company's current views on the operating and marketing conditions, which are subject to change.
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 gross profit, operating income, 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, acquired in-process research and development and non-cash interest expense of convertible notes arising from the adoption of the new guidance related to convertible instruments that can be settled in cash or partially in cash upon conversion. 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 measures, please see the financial information 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 March 3, 2010 (or 9:00p.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 1-866-713-8562
-- International dial-in number 1-617-597-5310
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 March 4, 2010.
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 33530003
About China Medical Technologies, Inc.
China Medical Technologies, Inc. is a leading China-based advanced IVD company using Fluorescent in situ Hybridization (FISH) technology, Surface Plasmon Resonance (SPR) technology and Enhanced Chemiluminescence Immunoassay (ECLIA) technology to develop, manufacture and distribute diagnostic products for detecting and monitoring various cancers, 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, the Company's strategic operational plans, as well as its outlook for 4Q FY2009 and 1Q FY2010, 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.
For more information, please contact:
Sam Tsang and Winnie Yam
Tel: +852-2511-9808
Email: IR@chinameditech.com
China Medical Technologies, Inc.
Unaudited Condensed Consolidated Balance Sheets
As of
March 31, 2009 December 31, 2009
RMB RMB US$
(in thousands)
Assets
Current assets
Cash and cash equivalents 1,456,410 829,887 121,579
Trade accounts receivable, net 343,037 300,838 44,073
Inventories 16,932 35,858 5,253
Prepayments and other receivables 20,425 9,394 1,377
Due from a related party 204,987 204,777 30,000
Total current assets 2,041,791 1,380,754 202,282
Property, plant and equipment,
net 169,422 160,805 23,558
Land use rights 7,239 7,097 1,039
Goodwill 8,654 8,654 1,268
Intangible assets, net 3,487,474 3,334,991 488,579
Convertible notes issuance costs 65,816 52,615 7,708
Total assets 5,780,396 4,944,916 724,434
Liabilities
Current liabilities
Trade accounts payable 27,863 23,561 3,452
Accrued liabilities and other
payables 892,905 202,941 29,731
Income taxes payable 77,112 70,318 10,302
Total current liabilities 997,880 296,820 43,485
Convertible notes 2,826,348 2,846,302 416,986
Deferred income taxes 29,898 43,757 6,410
Total liabilities 3,854,126 3,186,879 466,881
Shareholders' equity
Ordinary shares US$0.1 par value:
500,000,000 authorized; 321,066,661
issued and outstanding as of
March 31, 2009 and 322,680,001
issued and outstanding as of
December 31, 2009 257,738 258,840 37,920
Additional paid-in capital 709,949 740,862 108,537
Treasury stock -- (34,011) (4,983)
Accumulated other comprehensive
loss (69,957) (70,336) (10,304)
Retained earnings 1,028,540 862,682 126,383
Total shareholders' equity 1,926,270 1,758,037 257,553
Total liabilities and
shareholders' equity 5,780,396 4,944,916 724,434
China Medical Technologies, Inc.
Unaudited Condensed Consolidated Statements of Income
For the Three Months Ended
September
December 31, 2008 30, 2009 December 31, 2009
RMB RMB RMB RMB US$
As As
previously adjusted(3)
reported
(in thousands except for per ADS information)
Revenues (1) 225,296 225,296 166,066 172,320 25,245
Cost of
revenues (58,715) (58,715) (57,517) (62,996) (9,229)
Gross profit 166,581 166,581 108,549 109,324 16,016
Operating
expenses:
Research and
development (8,304) (8,304) (9,500) (10,738) (1,573)
Acquired
in-process
research and
development (244,872) (244,872) -- -- --
Sales and
marketing (11,668) (11,668) (17,432) (19,058) (2,793)
General and
administrative (29,561) (29,561) (45,130) (25,844) (3,786)
Amortization
of SPR
intangible
assets (9,132) (9,132) (27,357) (27,343) (4,006)
Total operating
expenses (303,537) (303,537) (99,419) (82,983) (12,158)
Operating
income/ (loss) (136,956) (136,956) 9,130 26,341 3,858
Interest income 12,448 12,448 2,196 4,332 635
Interest
expense -
convertible
notes(3) (27,856) (35,009) (35,439) (35,421) (5,189)
Interest
expense -
amortization
of convertible
notes issuance
costs(3) (4,652) (4,386) (4,381) (4,378) (641)
Interest expense -
other (1,165) (1,165) -- -- --
Other income/
(expense), net 578 578 (255) 225 33
Loss before
income tax (157,603) (164,490) (28,749) (8,901) (1,304)
Income tax
expense (13,915) (13,915) (18,343) (13,088) (1,917)
Loss from
continuing
operations (171,518) (178,405) (47,092) (21,989) (3,221)
Income from
discontinued
operation 279,600 279,600 -- -- --
Net income/
(loss) 108,082 101,195 (47,092) (21,989) (3,221)
Loss from
continuing
operations
per ADS
- basic (6.54) (6.80) (1.78) (0.84) (0.12)
- diluted(2) (6.54) (6.80) (1.78) (0.84) (0.12)
Earnings from
discontinued
operation
per ADS
- basic 10.65 10.65 N/A N/A N/A
- diluted(2) 10.65 10.65 N/A N/A N/A
Weighted average
number of ADS
- basic 26,242,974 26,242,974 26,432,974 26,262,471 26,262,471
- diluted(2) 26,242,974 26,242,974 26,432,974 26,262,471 26,262,471
Notes:
(1) Revenues RMB'000 RMB'000 RMB'000 RMB'000 US$'000
- Molecular
diagnostic
systems 93,514 93,514 89,233 96,166 14,088
- Immunodiagnostic
systems 131,782 131,782 76,833 76,154 11,157
225,296 225,296 166,066 172,320 25,245
(2) In computing diluted loss from continuing operations per ADS, interest
expense and amortization in connection with convertible notes were not
added back for the three months ended December 31, 2008 (as adjusted),
September 30, 2009 and December 31, 2009 because the ordinary shares
issued upon conversion of convertible notes (using the if-converted
method) were anti-dilutive.
(3) As a result of the adoption of new authoritative guidance changing the
accounting for convertible instruments that can be settled in cash or
partially in cash upon conversion, the Company adjusted relevant
numbers in the condensed consolidated statement of income for the
three months ended December 31, 2008 retrospectively in accordance
with GAAP.
China Medical Technologies, Inc.
Reconciliations of GAAP measures to Non-GAAP measures
For the Three Months Ended
December 31, September 30, December 31,
2008 2009 2009
RMB RMB RMB US$
As adjusted(2)
(in thousands except for per ADS information)
Gross profit 166,581 108,549 109,324 16,016
Adjustment:
Amortization of acquired
Intangible assets 22,453 22,430 22,412 3,283
Non-GAAP gross profit 189,034 130,979 131,736 19,299
Gross margin 73.9% 65.4% 63.4% 63.4%
Non-GAAP gross margin 83.9% 78.9% 76.4% 76.4%
Operating income/ (loss) (136,956) 9,130 26,341 3,858
Adjustments:
Stock compensation
expense 14,486 7,354 10,234 1,499
Amortization of acquired
intangible assets 31,586 49,787 49,755 7,289
Acquired in-process
research and
development 244,872 -- -- --
Non-GAAP operating income 153,988 66,271 86,330 12,646
Operating margin -- 5.5% 15.3% 15.3%
Non-GAAP operating margin 68.3% 39.9% 50.1% 50.1%
Loss from continuing
operations (178,405) (47,092) (21,989) (3,221)
Adjustments:
Stock compensation
expense 14,486 7,354 10,234 1,499
Amortization of acquired
intangible assets 31,586 49,787 49,755 7,289
Acquired in-process
research and
development 244,872 -- -- --
Non-cash interest expense
of convertible notes
arising from the
adoption of new
guidance 7,153 7,621 7,618 1,116
Non-GAAP income from
continuing operations 119,692 17,670 45,618 6,683
GAAP net margin -- -- -- --
Non-GAAP net margin 53.1% 10.6% 26.5% 26.5%
Loss from continuing
operations per ADS
- basic (6.80) (1.78) (0.84) (0.12)
- diluted (6.80) (1.78) (0.84) (0.12)
Non-GAAP earnings from
continuing operations
per ADS
- basic 4.56 0.67 1.74 0.25
- diluted(1) 4.56 0.67 1.74 0.25
Weighted average number
of ADS
- basic 26,242,974 26,432,974 26,262,471 26,262,471
- diluted(1) 26,242,974 26,432,974 26,262,471 26,262,471
Notes:
(1) Interest expense and amortization in connection with convertible notes
were not added back in computing non-GAAP diluted earnings from
continuing operations per ADS for the three months ended December 31,
2008 (as adjusted), September 30, 2009 and December 31, 2009 because
the ordinary shares issued upon conversion of convertible notes (using
the if-converted method) were anti-dilutive.
(2) As a result of the adoption of new authoritative guidance changing the
accounting for convertible instruments that can be settled in cash or
partially in cash upon conversion, the Company adjusted relevant
numbers for the three months ended December 31, 2008 retrospectively
in accordance with GAAP.
