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China Pharma Holdings, Inc. Reports First Quarter 2010 Financial Results

2010-05-11 16:47 829

HAIKOU CITY, China, May 11 /PRNewswire-Asia/ -- China Pharma Holdings, Inc. (NYSE AMEX: CPHI) ("China Pharma" or the "Company"), a leading fully-integrated specialty pharmaceuticals company in China, today announced financial results for the first quarter ended March 31, 2010.

First Quarter Highlights

-- Revenue increased 16% to $15.1 million from $13.0 million in the first

quarter of fiscal 2009

-- Gross profit grew 3% to $6.1 million from $5.9 million in the first

quarter of fiscal 2009

-- Income from operations rose 19% to $4.8 million from $4.1 million in

the 2009 period

-- Net income climbed 17% to $4.3 million, or $0.10 per diluted share,

from $3.7 million, or $0.09 per diluted share a year ago

"We are pleased to report a solid start to 2010 with healthy revenue and net income growth, in the first quarter," said China Pharma's President and CEO, Ms. Zhilin Li. "The strong revenue increase and healthy profit margins were partly driven by a continued increase in demand for our existing products and the successful launch of new products in the last twelve months. We look forward to accelerating this growth trajectory by increasing market penetration of key existing products and introducing new products to increase revenues and support a stable gross margin."

First Quarter Results

First quarter 2010 revenues grew 16% to $15.1 million from $13.0 million in the first quarter 2009. Key growth drivers included a 32% increase in the Company's anti-viral/infective and respiratory products to $5.4 million. Sales of digestive products rose by 291% to $1.7 million, mainly due to contribution from new products, Tiopronin and Omeprazole, launched in second quarter and fourth quarter of 2009, respectively. The two products generated sales of $1.1 million in the quarter and are expected to drive further sales growth in this category during 2010. Sales of the Company's central nervous system (CNS) and Cerebro & Vascular products were $5.3 million in the quarter, unchanged as compared to last year.

Gross profit for the three months ended March 31, 2010 increased to $6.1 million from $5.9 million in the comparable period last year. Gross profit margin for the first quarter was 40.6% as compared to 45.6% in the previous year quarter. The decrease in gross margin was largely a result of a product mix that included more antibiotic and mature products, which typically yield lower average margin. The Company expects stable gross margin in future quarters supported by an improving product mix and potential new product launches.

Total operating expenses decreased 30% to $1.3 million for the three months ended March 31, 2010 from $1.9 million in the same period last year, primarily due to a change in the Company's estimate for bad debt reserve in the third quarter of 2009. Bad debt expenses fell to $0.1 million in the first quarter of 2010 from $0.8 million in the same period last year. Excluding the bad debt expense, operating expenses rose 13% due higher year-over-year general and administrative expenses reflecting increased amortization expenses.

Operating income grew 19% to $4.8 million for the three months ended March 31, 2010 from $4.1 million in the comparable period a year ago. Operating margin improved by 69 basis points to 32.0% from a year ago, primarily due to the significant reduction in bad debt expenses.

Income tax expense was $0.5 million, up from $0.4 million in the previous year. The Company expects full year 2010 tax rate to be in the 11% range.

Net income for the three months ended March 31, 2010 increased 17% to $4.3 million from $3.7 million in the previous year. Net margin improved to 28.5% to 28.3% in the prior year period. Diluted earnings per share grew 15% year-over-year to $0.10.

Financial Condition

As of March 31, 2010, the Company had cash and cash equivalents of $4.8 million, which represented 4.4% of total assets, as compared to $3.6 million, or 3.6% of total assets, as of December 31, 2009. Year-over-year, working capital increased to $66 million from $61 million while the current ratio rose slightly to 7.1x, reflecting the Company's continued financial health.

Accounts receivable balance rose slightly to $52.5 million from $51.2 million at the end of 2009. China Pharma's management continues to be highly focused on improving accounts receivable collection to further strengthen operating cash flow.

For the three months ended March 31, 2010, cash flow from operating activities was $1.1 million, little changed as compared to the same period in 2009. The flattish operating cash flow trend reflected an improvement in cash collection from accounts receivables, offset by an increase in inventory level, in anticipation of sales demand growth, and advances to suppliers.

Financial Guidance

China Pharma is reiterating 2010 revenue growth guidance of 20% to 25%. Similar to prior years, the first quarter is typically one of the slowest sales periods and the Company anticipates stronger top-line growth during second half of the fiscal year due to seasonality of the product portfolio. The Company expects its central nervous system (CNS) and cardiovascular drugs, and the new Tiopronin and Omeprazole products to be among the key growth drivers in the next several quarters.

"We are confident in our 2010 outlook and plan to focus on increasing the market penetration of our new products while advancing our late-stage development pipeline to create new revenue opportunities," added Ms. Li. "We believe implementation of China's unprecedented $124 billion healthcare reform program will be a significant volume driver in the country's pharmaceutical industry. China Pharma is well positioned to be nimble and to proactively engage in market demand-based new product opportunities to drive sustainable long-term growth."

Pipeline Update

As of March 31, 2010, China Pharma had 9 products in active development in its pipeline.

-- During the first quarter, China Pharma completed the clinical trials

for candesartan (generic form of Atacand), a front-line

antihypertensive therapy. The Company's application for production of

candesartan is currently under SFDA review.

-- The clinical trial for lipid lowering drug rosuvastatn (a generic form

of Crestor) is on track to completion. Crestor is one of the largest

and fastest growing drugs in the world for lowering cholesterol.

-- The Phase I clinical trial for the novel anti-resistant antibiotic

combination drug is also progressing on schedule.

Conference Call

The Company will hold a conference call at 8:00 am ET on May 11, 2010 to discuss first quarter 2010 results. Listeners may access the call by dialing 1-866-700-7173 or 1-617-213-8838 for international callers, access code: 73484838. A webcast will also be available through the Company's website at http://www.chinapharmaholdings.com . A replay of the call will be accessible through May 18, 2010 by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 36235935.

About China Pharma Holdings, Inc.

China Pharma Holdings, Inc. is a rapidly growing specialty pharmaceutical company that develops, manufactures and markets a diversified portfolio of products focused on conditions with a high incidence and high mortality rates in China, including cardiovascular, CNS, infectious, and digestive diseases. The Company's cost-effective, high margin business model is driven by market demand and supported by eight scalable GMP-certified product lines covering the major dosage forms. In addition, the Company has a broad and expanding nationwide distribution network across 30 provinces, municipalities and autonomous regions. The Company's wholly owned subsidiary, Hainan Helpson Medical & Biotechnology Co., Ltd., is located in Haikou City, Hainan Province. For more information about China Pharma Holdings, Inc., please visit http://www.chinapharmaholdings.com .

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions 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 the achievability of financial guidance, success of new product development, unanticipated changes in product demand, increased competition, downturns in the Chinese economy, uncompetitive levels of research and development, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

- FINANCIAL TABLES FOLLOW -

CHINA PHARMA HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

March 31, December 31,

2010 2009

ASSETS

Current Assets:

Cash and cash equivalents $4,784,582 $3,634,753

Trade accounts receivable, less

allowance for doubtful accounts

of $2,783,291 and $2,718,358,

respectively 52,470,644 51,238,339

Other receivables, less allowance

for doubtful accounts of $9,965

and $3,556, respectively 84,747 78,525

Advances to suppliers 2,836,250 1,798,446

Inventory 15,839,393 14,233,073

Deferred tax assets 392,210 319,820

Total Current Assets 76,407,826 71,302,956

Advances for purchases of property

and equipment and intangible assets 4,259,792 3,599,949

Property and equipment, net of

accumulated depreciation of

$2,213,723 and $2,020,462, respectively 6,537,960 6,705,873

Intangible assets, net of accumulated

amortization of $1,586,229 and

$1,359,048, respectively 20,947,900 19,332,284

TOTAL ASSETS $108,153,478 $100,941,062

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities:

Trade accounts payable $4,243,181 $3,957,923

Accrued expenses 47,749 47,435

Accrued taxes payable 1,684,337 1,528,691

Other payables 60,242 58,191

Advances from customers 903,070 1,037,693

Other payables - related parties 75,741 75,741

Short-term notes payable 3,803,338 3,802,726

Total Current Liabilities 10,817,658 10,508,400

Long-term research and development

commitments -- 36,565

Total Liabilities 10,817,658 10,544,965

Stockholders' Equity:

Preferred stock, $0.001 par value;

5,000,000 shares authorized;

no shares issued or outstanding -- --

Common stock, $0.001 par value;

95,000,000 shares of

authorized; 43,393,644 shares and

42,308,350 shares of common stock

outstanding, respectively 43,393 42,308

Additional paid-in capital 23,807,653 21,178,114

Retained earnings 67,567,522 63,272,868

Accumulated foreign currency

translation adjustment 5,917,252 5,902,807

Total Stockholders' Equity 97,335,820 90,396,097

TOTAL LIABILITIES AND STOCKHOLDERS'

EQUITY $108,153,478 $100,941,062

CHINA PHARMA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

For the Three Months Ended

March 31,

2010 2009

Revenue $15,102,510 $12,991,982

Cost of revenue 8,968,302 7,063,227

Gross profit 6,134,208 5,928,755

Operating expenses:

Selling expenses 582,888 602,760

General and administrative expenses 652,748 488,047

Bad debt expense 70,906 774,932

Total operating expenses 1,306,542 1,865,739

Income from operations 4,827,666 4,063,016

Other income (expense):

Interest income 6,757 10,589

Interest expense (50,490) (38,236)

Net other expense (43,733) (27,647)

Income before income taxes 4,783,933 4,035,369

Income tax expense (489,279) (357,722)

Net income 4,294,654 3,677,647

Other comprehensive income - foreign

currency translation adjustment 14,445 87,491

Comprehensive income $4,309,099 $3,765,138

Earnings per Share:

Basic $0.10 $0.09

Diluted $0.10 $0.09

CHINA PHARMA HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

For the Three Months Ended

March 31,

2010 2009

Cash Flows from Operating Activities:

Net income $4,294,654 $3,677,648

Depreciation and amortization 419,903 258,021

Stock based compensation 47,624 --

Changes in assets and liabilities:

Trade accounts receivable (1,224,072) (4,992,389)

Other receivables (6,209) (46,549)

Advances to suppliers (1,037,525) 1,211,004

Inventory (1,604,046) (49,800)

Deferred tax assets (72,339) (122,965)

Trade accounts payable 318,952 1,174,251

Accrued expenses (36,265) (7,723)

Accrued taxes payable 155,402 (15,659)

Other payables 2,043 2,004

Advances from customers (134,791) 29,292

Net Cash Provided by Operating Activities 1,123,331 1,117,135

Cash Flows from Investing Activities:

Advances for purchases of property

and equipment and intangible assets (1,291,216) (2,376,453)

Purchase of property and equipment (58,272) (523,476)

Purchase of intangible assets (1,207,541) --

Net Cash Used in Investing Activities (2,557,029) (2,899,929)

Cash Flows from Financing Activity:

Proceeds from exercise of warrants 2,583,000 --

Net Cash Provided by Financing Activity 2,583,000 --

Effect of Exchange Rate Changes on Cash 527 7,527

Net Increase (Decrease) in Cash 1,149,829 (1,775,267)

Cash and Cash Equivalents at

Beginning of Period 3,634,753 6,927,149

Cash and Cash Equivalents at End of

Period $4,784,582 $5,151,882

Supplemental Cash Flow Information:

Cash paid for interest $50,490 $38,236

Cash paid for income taxes 376,727 560,935

Contact:

China Pharma Holdings, Inc.

Phone: +86-898-6681-1730 (China)

Email: hps@chinapharmaholdings.com

CCG Investor Relations

Lei Huang, Account Manager

Phone: +1-646-833-3417 (New York)

Email: lei.huang@ccgir.com

Vivian Chen, Sr. Market Intelligence Exec.

Phone: +1-646-701-7445 (New York)

Email: vivian.chen@ccgir.com

Source: China Pharma Holdings, Inc.
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