omniture

China Medicine Announces Fourth Quarter and Full Year 2009 Results

2010-03-29 21:48 1705

GUANGZHOU, China, March 29 /PRNewswire-Asia/ -- China Medicine Corporation (OTC Bulletin Board: CHME) ("China Medicine" or "the Company"), primarily a manufacturer, leading distributor and developer of Western pharmaceuticals, traditional Chinese medicines ("TCM"), and other nutraceuticals, today announced its fourth quarter and full year 2009 results.

Full Year 2009 Highlights:

-- Revenues increased 20.7% to $64.8 million

-- Gross profit grew 21.9% to $19.0 million

-- Operating income rose 12.3% to $12.3 million

-- Adjusted net income, excluding a non-cash expense related to change in

fair value of warrants in 2009, was $9.0 million, or $0.58 per diluted

share

-- GAAP net income was $1.7 million, or $0.11 per diluted share

-- Completed acquisition of Guangzhou LifeTech Pharmaceuticals, Co. Ltd

("LifeTech"), a developer, manufacturer and marketer of a portfolio of

39 TCM and Western medicine products

-- Entered into a $69.6 million financing agreement with One Equity

Partners ("OEP"), the global private equity investment arm of JP Morgan

Chase & Co

Fourth Quarter 2009 Highlights:

-- Total revenues of $20.4 million

-- Gross profit of $6.8 million; gross margin rose to 33.5% from 23.9%

last year

-- Operating margins increased to 20.5% as compared to 17.2% in Q4 2008

-- Adjusted net income, excluding a non-cash expense related to change in

fair value of warrants in 2009, was $3.0 million, or $0.19 per diluted

share

-- GAAP net loss was $2.1 million, or $(0.13) per diluted share

"I am proud to report a very productive fiscal year 2009, including the achievement of record revenues, the closing of a transformational acquisition and a meaningful financing agreement with a world-class private equity firm," Mr. Senshan Yang, Chairman and CEO of China Medicine Corporation. "In the fourth quarter, we successfully introduced LifeTech's higher margin prescription product portfolio into our distribution network and, through the Guangdong Sunshine Bidding System, expanded the products' market penetration from locally in Guangdong province to all provinces throughout China. As a result, our gross margin increased to 33.5% in Q4 2009 from 23.9% in the same period last year. Looking ahead, we anticipate continued growth in our profitability level as we accelerated our transition from a pharmaceutical distributor into a vertically-integrated pharmaceutical company with a broad portfolio of self-owned products sold through our extensive distribution network."

Fourth Quarter 2009 Results

China Medicine's total revenues decreased 16.3% in the fourth quarter to $20.4 million compared to the corresponding period of 2008 as we mainly allocated our resources in the acquisition of LifeTech in the fourth quarter 2009.

Product sales in the fourth quarter totaled $20.2 million and accounted for 99% of total revenues. Sales of Western prescription and over-the-counter (OTC) products accounted for 46.5% of total revenues in the fourth quarter of 2009. Sales of TCM prescription and over-the-counter products accounted for 44.3% of total revenues. Sales of dietary supplements, medical formula, medical equipment and others accounted for the remaining 9.2% of revenues.

Gross profit in the quarter was $6.8 million, an increase of 17.1% over the fourth quarter of 2008. Gross margin increased to 33.5% from 23.9% in the fourth quarter of 2008, primarily reflecting sales contribution from LifeTech's higher margin pharmaceutical product for the first time.

Operating expenses were $2.7 million, up 61.7% from $1.6 million in the year ago quarter. The increase was primarily due to higher selling, general and administrative expenses related payroll and depreciation and amortization. Operating expenses represented 13.0% of total revenues in the fourth quarter of 2009, as compared to 6.7% in the fourth quarter of 2008.

Operating income was $4.2 million, essentially unchanged compared to that in fourth quarter of 2008. Operating margin rose to 20.5% from 17.2% in the same period a year ago, primarily reflecting the year-over-year gross margin improvement.

The Company's provision for income taxes was $1.2 million in the four quarter of 2009, as compared to $0.8 million for the comparable period in 2008. The increase was due to the change of income tax rate. The Company adopted the usual enterprise tax rate of 25% in 2009 following the expiration of a lower tax rate in 2008.

GAAP net loss for the fourth quarter of 2009 was $2.1 million, or $(0.13) per share, which included a $5.1 million non-cash expense related to the change in the fair value of warrants, compared to GAAP net income of $3.5 million or $0.23 per diluted share, in the fourth quarter of 2008. The non-cash charge reflected adoption of a new accounting policy that became effective January 1, 2009, requiring changes in the fair value of warrants to be recognized in earnings each quarter. Excluding this expense, adjusted net income for the fourth quarter of 2009 was $3.0 million, or $0.19 per fully diluted share.

Full Year 2009 Results

In 2009, total revenues increased to $64.8 million, up 20.7% from $53.6 million in 2008. Gross profit rose 21.9% to $19.0 million in 2009 from $15.6 million in 2008. Gross margin was 29.3%, as compared to 29.0% in 2008. Operating income increased 12.3% to $12.3 million from $10.9 million a year ago. GAAP net income in 2009 was $1.7 million or $0.11 per diluted share, as compared to $9.1 million, or $0.60 per diluted share in 2008. Adjusted net income, excluding non-cash expense of $7.2 million related to change in fair value of warrants, was $9.0 million in 2009, or $0.58 per diluted share. The slight decline in adjusted net income was primarily due to a tax rate of 25% in 2009 versus a lower tax rate in 2008.

Financial Condition

As of December 31, 2009, China Medicine had $0.5 million in cash and cash equivalents, with working capital of approximately $16.0 million. Accounts receivable stood at $22.3 million at year-end 2009, as compared to $19.3 million at the end of 2008. Stockholders' equity as of December 31, 2009 was $45.0 million, as compared to $42.8 million on December 31, 2008. In 2009, cash generated from operating activities was $17.0 million, an increase from $4.2 million in 2008, and primarily reflected decreases in inventories and advances to suppliers. Cash used in investing activities was $13.5 million in 2009, and reflected $3.4 million for purchase of equipment to expand rADTZ production capacity and $8.2 million for the LifeTech acquisition.

Subsequent to the end of 2009, the Company closed the equity private placement with OEP and raised net proceeds of $66.5 million. China Medicine received approximately $8.9 million of the net proceeds, which is available for working capital and general corporate purpose. The remaining $57.6 million of net proceeds was placed in escrow and will be released to fund additional capital expenditures and acquisitions upon approval by OEP and the Company's board of directors.

Business Outlook

"We will continue to focus the growth of Houerhuan Capsules and Shuangdan Tablets, both of which are very high margin products with limited competition. The Company plans to aggressively promote these two products through our extensive distribution network and expect to increase our overall profitability in 2010" commented Mr. Yang.

China Medicine's proprietary recombinant Aflatoxin Detoxifizyme (rADTZ), used for removing aflatoxins in food and animal feed, is pending Chinese Ministry of Agriculture (MOA) approval. The Company has been in communication with the MOA and is currently working on reformatting the statistical data, based on MOA request, for resubmission in the near term. "We are encouraged by our conversations with the MOA and remain confident in the quality of our data submission, despite the delay in receiving the production approval to commercial launch rADTZ," said Mr. Yang. "The Company anticipates rADTZ approval by the end of 2010, although we cannot predict the actual timing of MOA review. China Medicine completed trial production of rADTZ in 2009 and does not anticipate additional sales of the product until the full commercial launch.

"We would like to thank OEP for its confidence in our outlook and for the funding support that provides the Company with greater resources to execute our acquisition strategy and commercialization plans for rADTZ. We anticipate that 2010 will be a transformational year for China Medicine, focused on strengthening our pharmaceutical manufacturing capabilities, expanding our extensive product pipeline to include more of self-owned products that will support sustainable margin expansion, continuing our R&D effort on new product development and deepening our distribution network to cover more tier II and III cities and towns in China," concluded Mr. Yang.

Conference Call

China Medicine will hold its fourth quarter conference call for all interested persons at 9:00 a.m. Eastern Time on Monday, March 29, 2010, to discuss its results. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time 866-800-8648. International callers should dial 617-614-2702. When prompted by the operator, mention conference passcode 584 578 41. If you are unable to participate in the call at its scheduled time, a replay will be available for 14 days starting on Monday, March 29 at 11:00 p.m. Eastern Time. To access the replay, please dial 888-286-8010 or 617-801-6888, and enter the passcode 173 99 619.

About China Medicine Corporation

China Medicine Corporation, a comprehensive enterprise with a research and development centre, manufacturing facilities and well established sales network, engages in the production and distribution of prescription and over the counter ("OTC") drugs, traditional Chinese medicine products, herbs and dietary-supplements, medical devices, and medical formulations in China. The Company distributes its products to wholesale distributors, including more than 300 hospitals and 500 medicine companies that sell to over 2,000 drug stores in 28 provinces throughout China. The Company is developing a number of proprietary products for a variety of uses, including oncology, high blood pressure and the removal of toxins from food and animal feeds.

Use of Non-GAAP Financial Measures

GAAP results for three and twelve months ended December 31, 2009 include non cash expenses related to change in the fair value of the Company's warrants. The non-GAAP measure provides a consistent basis for investors to understand our financial performance in comparison to historical periods without variation of non-recurring items and non-operating related charges. In addition, it allows investors to evaluate our performance using the same methodology and information as that used by our management. Non-GAAP measures are subject to inherent limitations because they do not include all of the expenses included under GAAP and because they involve the exercise of judgment of which charges are excluded from the non-GAAP financial measure. However, we compensate for these limitations by providing the relevant disclosure of the items excluded.

Because these expenses are non-cash, and not related to the Company's operating results, the Company believes that the non-GAAP information is useful to supplement the Company's condensed consolidated financial statements. A reconciliation of the adjustments to GAAP results appears in the table accompanying this press release. This additional non-GAAP information is not meant to be considered as a substitute for GAAP financials. The non-GAAP financial information that the Company provides also may differ from the non-GAAP information provided by other companies.

Cautionary Statement

This press release contains forward-looking statements concerning the Company's business and products. The Company's actual results may differ materially depending on a number of risk factors including, but not limited to, the following: general economic and business conditions, obtaining regulatory approval for new products, the expected contribution of higher margin products, government support for rural health care, competition from existing and new competitors, changes in technology, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk factors detailed in the Company's reports filed with the Securities and Exchange Commission. China Medicine Corporation undertakes no duty to revise or update any forward-looking statement to reflect events or circumstances after the date of this release.

- FINANCIAL TABLES FOLLOW -

CHINA MEDICINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME (LOSS)

Three Months ended Twelve months ended

December 31, December 31,

2009 2008 2009 2008

REVENUES

Product sales $20,177,585 24,425,182 $64,120,538 $52,307,211

Medical formula sales 264,005 7,254 630,480 1,340,595

Total revenues 20,441,590 24,432,436 64,751,018 53,647,806

COST OF REVENUES 13,599,386 18,589,095 45,766,628 38,074,919

GROSS PROFIT 6,842,204 5,843,341 18,984,390 15,572,887

OPERATING EXPENSES

Research and

development 872,996 507,928 1,454,402 992,497

Selling, general and

administrative 1,786,006 1,137,016 5,263,697 3,652,525

Total operating

expenses 2,659,002 1,644,944 6,718,099 4,645,022

INCOME FROM OPERATIONS 4,183,202 4,198,397 12,266,291 10,927,865

OTHER (EXPENSE) INCOME:

Other (expense)

income, net (13,265) 40,167 (82,077) 85,622

Change in fair value

of warrant

liabilities (5,118,799) -- (7,232,388) --

INCOME BEFORE INCOME

TAXES AND NON-

CONTROLLING INTERESTS (948,862) 4,238,564 4,951,826 11,013,487

PROVISION FOR INCOME

TAXES 1,218,223 753,304 3,549,680 2,006,137

NET INCOME (CHINA

MEDICINE CORPORATION

AND NONCONTROLLING (2,167,085) 3,485,260 1,402,146 9,007,350

INTERESTS)

Add: Net loss

attributable to

noncontrolling

interests 72,578 33,180 315,531 118,266

NET INCOME ATTRIBUTABLE

TO CHINA

MEDICINE CORPORATION (2,094,507) 3,518,440 1,717,677 9,125,616

OTHER COMPREHENSIVE

INCOME (LOSS)

Foreign currency

translation

adjustment 6,074 135,806 9,800 2,305,499

Foreign currency

translation

attributable to

noncontrolling

interests (11) 2,434 (194) 60,461

COMPREHENSIVE INCOME $(2,088,444) 3,656,500 1,727,283 $11,491,576

EARNINGS PER SHARE

Basic $(0.14) 0.23 0.11 $0.60

Diluted $(0.13) 0.23 0.11 $0.60

WEIGHTED AVERAGE SHARES

OUTSTANDING

Basic 15,344,339 15,362,158 15,267,512 15,173,113

Diluted 16,044,787 15,226,742 15,411,144 15,308,529

CHINA MEDICINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

December 31, December 31,

2009 2008

CURRENT ASSETS

Cash $471,769 $2,791,814

Restricted Cash 1,760,400 --

Notes receivables 4,401 600,911

Accounts receivable, trade, net of

allowance for doubtful accounts of

$157,083 and $96,609 as of December

31, 2009 and 2008, respectively 22,314,660 19,225,091

Inventories 2,731,097 4,725,322

Advances to suppliers 2,518,396 6,121,974

Other current assets 461,006 192,080

Total current assets 30,261,729 33,657,192

Plant and Equipment, Net 12,000,687 3,761,637

OTHER ASSETS

Long term prepayments 7,900,212 6,014,920

Intangible assets, net 16,681,854 1,247,567

Total other assets 24,582,066 7,262,487

Total assets $66,844,482 $44,681,316

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Short term Loans $9,506,160 $--

Accounts payable, trade 1,324,269 61,243

Other payables and accrued

liabilities 939,887 50,559

Customer deposits 483,358 151,429

Taxes payable 2,119,745 772,289

Liquidated damages payable 44,003 44,003

Total current liabilities 14,417,422 1,079,523

Fair value of warrant liabilities 6,918,068 --

Total liabilities 21,335,490 1,079,523

Commitments and contingencies

SHAREHOLDERS' EQUITY

Preferred stock, $0.0001 par value;

10,000,000 shares authorized,

no shares issued and outstanding -- --

Common stock, $0.0001 par value;

90,000,000 shares authorized,

15,451,105 and 15,226,742 shares

issued and outstanding at

December 31, 2009 and 2008,

respectively 1,544 1,522

Paid-in capital 13,380,444 13,011,012

Statutory reserves 4,293,116 3,178,861

Retained earnings 22,875,987 22,146,572

Accumulated other comprehensive

income 4,438,094 4,428,294

Total shareholders' equity 44,989,185 42,766,261

NONCONTROLLING INTERESTS 519,807 835,532

Total equity 45,508,992 43,601,793

Total liabilities and equity $66,844,482 $44,681,316

CHINA MEDICINE CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31,

2009 2008

CASH FLOWS FROM OPERATING

ACTIVITIES:

Net income attributable to China

Medicine Corporation $1,717,677 $9,125,616

Net loss attributable to

noncontrolling interests (315,531) (118,266)

Net income 1,402,146 9,007,350

Adjustments to reconcile net income

to cash

provided by operating activities:

Depreciation and amortization 1,012,149 420,769

Bad debt expense 45,938 36,428

Loss on sale of assets 21,241 9,416

Stock-based compensation 131,127 88,463

Change in fair value of warrants

liabilities 7,232,388 --

Change in operating assets and

liabilities:

Notes receivables 596,143 (590,466)

Accounts receivable, trade (2,278,004) (4,786,654)

Inventories 3,369,333 (491,874)

Advances to suppliers 3,614,991 461,695

Other current assets (213,245) (105,081)

Accounts payable, trade 608,589 (20,683)

Other payables and accrued

liabilities 638,074 (21,947)

Customer deposits 331,850 (64,938)

Taxes payable 446,664 266,606

Net cash provided by operating

activities 16,959,384 4,209,084

CASH FLOWS FROM INVESTING

ACTIVITIES:

Purchase of intangible assets (234,576) --

Purchase of building improvement

and equipment (3,438,924) (2,666,014)

Cash proceeds from disposition of

fixed assets 21,992 --

Long term prepayments (1,884,135) (5,197,253)

Cash paid out for acquiring new

subsidiaries (8,176,871) --

Cash received from newly acquired

subsidiaries 176,421 --

Net cash used in investing

activities (13,536,093) (7,863,267)

CASH FLOWS FROM FINANCING

ACTIVITIES:

Proceeds from exercise of warrants

and options 50,000 362,500

Loan proceeds 6,597,450 --

Loan payments (10,637,419) --

Increase in restricted cash (1,759,320) --

Net cash (used in) provided by

financing activities (5,749,289) 362,500

EFFECT OF EXCHANGE RATE ON CASH 5,954 315,723

DECREASE IN CASH (2,320,045) (2,975,960)

CASH, beginning of year 2,791,814 5,767,774

CASH, end of year $471,769 $2,791,814

Supplemental disclosure of cash

flows:

Cash paid interest $75,765 $--

Cash paid income tax $3,219,733 $2,059,396

CHINA MEDICINE CORPORATION AND SUBSIDIARIES

RECONCILIATION OF NON-GAAP NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

AND DILUTED EPS

For the Three Months ended December 31,

2009 2008

Net Income Diluted EPS Net Income Diluted EPS

Amount per

consolidated

statement of

operations (2,094,507) (0.13) 3,518,440 0.23

Adjustment

Change in fair

value of warrants 5,118,799 0.32 -- --

Adjusted Amount of

Net Income

available to

Common

Shareholders 3,024,292 0.19 3,518,440 0.23

Weighted average

diluted shares,

16,044,787 for

three months

ended December

31,2009 and

15,362,158 for

three months ended

December 31, 2008

Weighted average

diluted shares,

15,411,144 for the

twelve months ended

December 31, 2009

and 15,308,529 for

the Twelve

months ended

December 31, 2009

For the Twelve months ended December 31

2009 2008

Diluted

Net Income EPS Net Income Diluted EPS

Amount per

consolidated

statement of

operations 1,717,677 0.11 9,125,616 0.60

Adjustment

Change in fair value

of warrants 7,232,388 0.47 -- --

Adjusted Amount of

Net Income

available to Common

Shareholders 8,950,065 0.58 9,125,616 0.60

Weighted average

diluted shares,

16,044,787 for

three months

ended December

31, 2009 and

15,226,742 for

three months ended

December 31, 2008

Weighted average

diluted shares,

15,411,144 for the

twelve months ended

December 31, 2009

and 15,308,529 for

the Twelve

months ended

December 31, 2009

For more information, please contact

Company Contact:

Mr. Robert Lu

Interim Chief Financial Officer

China Medicine Corporation

Phone: +86-20-8739-1718

Email: robert.lu@cmc621.com

Investor Relations Contact:

Mr. Crocker Coulson, President

CCG Investor Relations

Tel: +1-646-213-1915 (NY Office)

Email: crocker.coulson@ccgir.com

Web: http://www.ccgirasia.com

Source: China Medicine Corporation
Related Stocks:
OTC:CHME
collection