China Pharma Holdings, Inc. Announces Record Fourth Quarter and 2006 Year End Results

2007-03-29 19:50 1021

HAIKOU CITY, Hainan, China, March 29 /Xinhua-PRNewswire-FirstCall/ -- China Pharma Holdings, Inc. ("China Pharma") (OTC Bulletin Board: CPHI), a specialty bio-pharmaceutical company that develops, manufactures and markets Western and Chinese medicines, today announced its financial results for the fourth quarter and fiscal year ended December 31, 2006 ("FY06").

Fourth Quarter 2006 Highlights

-- Record revenue of $8.1 million up 62% sequentially and 46% year-over-


-- Sales of gastrodin injection increased 443% year-over-year,

representing 10% of total revenue

-- Record net income of $3.5 million increased 104% sequentially and 9%


Full Year 2006 Highlights

-- Revenue of $21.8 million, an increase of 152% over 2005

-- Net income of $8.6 million, an increase of 126% over 2005

Fourth Quarter 2006 Results

"This was a very successful quarter for China Pharma, both in terms of financial performance and the execution of our key business strategies. We achieved double-digit sequential growth in revenue, driven by strong demand for our products and successful launch of our new products in the market," commented Ms. Zhi-lin Li, President and CEO of China Pharma. "Our strong performance is the result of building an extensive and diversified portfolio of therapeutics so that we are not dependant on any one product for our revenue growth."

China Pharma’s revenue in the fourth quarter of 2006 was $8.1 million, an increase of 61.9% sequentially from $5.0 million and 46.0% year-over-year from $5.6 million. The strong revenue growth during the quarter is due to higher demand for therapeutics during the winter months. The top contributors to the year-over-year growth include gastrodin injection which increased 443%, cefaclor which increased 224%, and AFGF which increased 193%. Hepatocyte growth-promoting factor and ozagrel were launched during 2006 and contributed 8% and 7% of revenue during the quarter, respectively. No single therapeutic contributed more than 15% of total revenue.

Gross profit in the fourth quarter of 2006 was $3.5 million, an increase of 41.4% sequentially from $2.5 million in the third quarter of 2006, and 5.6% from gross profit of $3.3 million in the fourth quarter 2005. Gross margin was 43.4% in the fourth quarter of 2006, compared to 49.7% in the third quarter of 2006 and 60.0% in the fourth quarter 2005. The unusually high gross margin in the fourth quarter 2005 is the result of a one time sale of technology property. Gross margin during the quarter was also impacted by the product mix which was abnormally weighted toward the lower margin therapeutics.

Selling expense during the quarter was $46,800, or 0.6% of revenue, down slightly from $58,500, or 1.1% of revenue, in the fourth quarter 2005. General and administrative expense (G&A) was $784,000 or 9.7% of revenue, compared to ($126,000) in the comparable period a year ago.

Operating income in the fourth quarter of 2006 was $2.7 million, an increase of 30.1% sequentially from $2.1 million, and down 20.8% from $3.4 million in the fourth quarter 2005.

Net income was $3.5 million in the fourth quarter of 2006 for an increase of 103.8% from net income of $1.7 million in the third quarter 2006 and up 9.4% from net income of $3.2 million in the same period a year ago. Fully diluted earnings per share was $0.10 for the last quarter of 2006, compared to fully diluted earnings per share of $0.05 in the third quarter of 2006 and $0.10 in fourth quarter 2005.

Full Year 2006 Results

For the full year 2006, revenue was $21.8 million, up 152.3% from revenue of $8.7 million generated from the date of inception, or January 12, 2005, through December 31, 2005. Gross profit for the full year 2006 was $10.1 million, for an increase of 124.8% from gross profit of $4.5 million generated from January 12, 2005 through year-end 2005. Gross margin was 46.2% in 2006, compared to 51.9% in 2005. Operating income for the full year 2006 was $8.6 million, up 103.2% from operating income of $4.2 million generated from January 12, 2005 through year-end 2005. Operating margin was 39.5% in 2006 compared to 49.0% in 2005. Net income for the full year 2006 was $8.6 million, or $0.25 per fully diluted earnings per share, for an increase of 126.0% from net income of $3.8 million, or $0.34 per fully diluted earnings per share, during January 12, 2005 to December 31, 2005.

Financial Condition

On December 31, 2006, China Pharma had $656,000 in cash and cash equivalents and working capital of $18 million. Cash flow from operations for the fourth quarter 2006 was $487,000. Days sales outstanding (DSO) for the fourth quarter 2006 were 134, down from DSOs of 203 in the third quarter 2006. For the entire year, DSOs were 199. The significant decline in DSOs for the quarter is a result of increased year-end collections. China Pharma expects the quarterly pattern for DSOs to remain the same during 2007 as experienced in 2006. As of December 31, 2006, total liability, including short-term borrowings, stood at $7.7 million, while shareholders’ equity totaled $20.9 million, compared to total liability of $5.8 million and shareholders’ equity of $11.7 million on December 31, 2005.

Subsequent Event

In February, 2007, China Pharma completed a private placement of approximately 2.5 million shares of the Company’s common stock at the price of $1.70 per share and 2.5 million Class A 3-year warrants to purchase an aggregate of 1.25 million shares of the Company’s common stock at a strike price of $2.38 per share. The placement generated approximately $3.85 million in net proceeds for the Company, which will be used for development of new drugs and working capital.

Business Outlook

China Pharma has developed a diversified product portfolio with strong growth potential. In 2006, the Company received the Chinese State Food and Drug Administration (SFDA) approval to manufacture and market its granisetron hydrochloride injection which it intends to launch during the second quarter of 2007. China Pharma anticipates that the combination of growth from the current portfolio and the launch of granisetron hydrochloride injection, will enable the company to achieve growth in net income of approximately 30% in 2007.

"We have built a solid market position with our current portfolio of therapeutics which we can continue to expand into new regions of China. During 2007, we will continue to aggressively pursue participation in China’s efforts to provide health coverage to the rural areas. The government has pledged $1.3 billion to the New Rural Cooperative Medical-care System (CMS) program which offers us a market opportunity to reach a population of 900 million individuals. We have supported central and local governments in building up the distribution network for CMS by demonstrating the benefits of our therapeutics and promoting the benefits of CMS in the rural communities," concluded Ms. Li.

Conference Call

China Pharma will host a conference call on Thursday, March 29 at 9:00 am EST to discuss fourth quarter and 2006 year-end results. To participate in the conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (800) 688-0796. International callers should dial (617) 614-4070. The conference passcode is 79379763.

If you are unable to participate in the call at this time, a replay will be available on March 29th at 11:00 am EST, through April 12th. To access the replay, dial (888) 286-8010. International callers should dial (617) 801-6888. The conference passcode is 88698304.

The conference will be broadcast live over the Internet and can be accessed by all interested parties at China Pharma’s website at . To listen to the call please go to the website at least 15 minutes prior to the start of the call to register, download and install any necessary audio software.

Comparative Period Results

Onny Investment Limited ("Onny") was incorporated in the British Virgin Islands on January 12, 2005. On June 16, 2005, Onny acquired all of the outstanding shares of Hainan Helpson Medical & Biotechnology Co., Ltd ("Helpson"). On October 19, 2005, Onny was reorganized as a wholly-owned subsidiary of China Pharma. The reorganization was accomplished through a share exchange between Onny and China Pharma, plus China Pharma’s commitment to issue additional shares upon amending its articles of incorporation. The reorganization of Onny into China Pharma was recognized as a stock split of the common stock of Onny and the effective issuance by Onny of approximately 2.5 million shares of common stock to the China Pharma’s pre-reorganization shareholders and the assumption of certain liabilities. The reverse acquisition of the Company was recognized as a non-monetary exchange. China Pharma was formerly known as TS Electronics, Inc. On May 4, 2006, TS Electronics, Inc. filed an 8-K with the Securities and Exchange Commission, reporting its name change to "China Pharma Holdings, Inc." For more information, refer to the company’s filings with the Securities and Exchange Commission.

About China Pharma Holdings, Inc.

China Pharma Holdings, Inc. develops, manufactures, and markets generic and brand bio-pharmaceutical products in China that treat a wide range of conditions, including infections, hepatitis, vascular, CNS and other prevailing diseases. Helpson Bio-pharmaceutical Co., Ltd (Helpson), a specialty bio-pharmaceutical company headquartered in Haikou City, Hainan province in China, is a wholly owned subsidiary of China Pharma Holdings. For more information on the Company go to .

Safe Harbor Statement 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 unanticipated changes in product demand, increased competition, failure to obtain or maintain intellectual property protection, downturns in the Chinese economy, uncompetitive levels of research and development, failure to obtain regulatory approvals, and other information detailed from time to time in the Company’s filings and future filings with the United States Securities and Exchange Commission.

-- Financial Tables Follow --



For the period

For the from January 12,

For the three months ended year ended 2005 through

December 31, Dec 31, December 31,

2006 2005 2006 2005

(unaudited) (unaudited)

Revenue $ 8,121,675 $ 5,563,989 $ 21,843,262 $8,657,813

Cost of Revenue 4,593,917 2,224,572 11,745,815 4,166,965

Gross Profit 3,527,758 3,339,417 10,097,447 4,490,848




expenses 46,778 58,541 260,128 106,129

General and

administrative 783,808 (125,750) 1,213,828 140,903

Total Operating

Expenses 830,586 (67,209) 1,473,956 247,032

Income from

Operations 2,697,172 3,406,626 8,623,491 4,243,816




Interest income 403 503 991 769


expense (58,191) (32,823) (145,881) (186,452)

Other income

(expense) 108,485 (6,482) 108,485 (6,482)



Income (Expense) 50,697 (38,802) (36,405) (192,165)

Income Before

Taxes 2,747,869 3,367,824 8,587,086 4,051,651

Income tax


(expense) 730,560 (187,854) -- 252,101

Net Income $ 3,478,429 $ 3,179,970 $ 8,587,086 $ 3,799,550


income -




adjustments 425,981 99,926 563,945 99,926


Income $ 3,904,410 $ 3,279,896 $ 9,151,031 $ 3,899,476

Basic and Diluted

Earnings per

Common share $ 0.10 $ 0.10 $ 0.25 $ 0.34


Common Shares

Outstanding 34,723,056 32,669,867 34,723,056 11,289,480



December 31 December 31

2006 2005


Current Assets

Cash and cash equivalents $656,441 $461,220

Trade accounts receivable, less

allowance for doubtful accounts

of $1,562,494 and $1,412,353 12,101,979 5,709,762

Other receivable, less allowance for

doubtful accounts of $27,517

and $111,029 355,554 385,957

Deferred offering costs 59,390 --

Advances to suppliers 2,255,877 2,123,729

Inventory 10,277,887 5,785,196

Total Current Assets 25,707,128 14,465,864

Non-current Assets:

Property and equipments, net of

accumulated depreciation of $619,645

and $250,184, respectively 2,725,173 2,808,342

Intangible assets, net of accumulated

amortization of $184,175 and

$135,656, respectively 65,344 96,406

Deferred tax assets 16,736 130,458

Total Non-current Assets 2,807,253 3,035,206

TOTAL ASSETS $28,514,381 $17,501,070


Current Liabilities:

Trade accounts payable 477,291 679,104

Accrued expenses 104,216 15,625

Accrued taxes payable 167,419 565,236

Other payables 185,096 250,317

Advances from customers 141,871 50,755

Accounts payable- related parties 22,650 --

Short-term notes payable 6,533,649 --

Dividends payable -- 4,209,889

Total Current Liabilities 7,632,192 5,770,926

Research and development commitments 31,980 30,966

Total Liabilities 7,664,172 5,801,892

Stockholders’ Equity

Common stock, $0.001 par value,

60,000,000 shares authorized,

34,723,056 shares issued and outstanding 34,723 34,723

Additional paid-in capital 7,764,979 7,764,979

Foreign currency translation adjustment 663,871 99,926

Retained earnings 12,386,636 3,799,550

Total Stockholders’ Equity 20,850,209 11,699,178




For the period from

For the year January 12, 2005

ended Dec through

31, 2006 December 31, 2005

Cash Flows from Operating


Net income $ 8,587,086 $ 3,799,550

Depreciation and amortization 397,001 250,184

Accretion of discount on

notes payable -- 86,060

Changes in assets and


Trade accounts receivable (6,077,526) (1,198,199)

Other receivables 42,642 80,164

Advances to suppliers (61,345) (916,792)

Inventory (4,214,702) (2,395,393)

Deferred tax assets 115,564 (89,763)

Trade accounts payable (219,427) 383,188

Accrued expenses 86,265 11,330

Accrued taxes payable (407,744) 356,187

Other payables (71,759) (588,748)

Advances from customers 87,612 (226,863)

Net Cash Used in Operating

Activities (1,736,333) (449,095)

Cash Flows from Investing


Purchase of property and

equipment (182,346) (433,524)

Purchase of intangible assets (9,657) (50,611)

Notes receivable -- 11,277

Net cash received in purchase

of Helpson -- 131,336

Net Cash (Used) by Investing

Activities (192,003) (341,522)

Cash Flows from Financing


Payment of dividend payable -- (237,599)

Payment of note payable -- (6,317,849)

Proceeds from note payable 2,140,943 --

Proceeds from loan from

shareholder 22,650 --

Proceeds from issuance of

common stock -- 7,804,175

Payment of offering costs (58,167) --

Net Cash Proceeds from

Financing Activities 2,105,426 1,248,727

Effect of Exchange Rate Changes

on Cash 18,131 3,110

Net Change in Cash 195,221 461,220

Cash and Cash Equivalents at

Beginning of Period 461,220 --

Cash and Cash Equivalents at

End of Period $ 656,441 $ 461,220

For more information, please contact:

Crocker Coulson, President, or

Leslie Richardson, Financial Writer

CCG Elite

Tel: +1-310-231-8600 x103


Donald Xu

Vice President, Strategic Planning and Business Development

China Pharma Holdings, Inc.

Tel: +1-858-776-8880


Source: China Pharma Holdings, Inc.
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