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

2010-08-10 16:49 991
    HAIKOU CITY, China, Aug. 10 /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 second quarter ended June 30, 2010.

    Second Quarter Highlights 

    -- Revenue increased 22% to $16.6 million from $13.6 million in the second 
       quarter of fiscal year 2009
    -- Gross profit grew 19% to $7.0 million from $5.9 million in the second 
       quarter of fiscal year 2009
    -- Net income climbed 23% to $5.3 million, or $0.12 per basic and diluted 
       share in the second quarter, from $4.3 million, or $0.10 per basic and 
       diluted share a year ago 

    "We are pleased to report another solid quarter with strong organic growth in both revenue and net income," said China Pharma's President and CEO, Ms. Zhilin Li. "We performed well across our key product categories, led by Digestive Diseases, which benefitted from very encouraging sales of our new generic GERD drug, Omeprazole.  Furthermore, we have started to see tangible evidence of rising demand in EDL related products, such as higher Vitamin B6 sales this quarter, which played a key factor in our Other Products category growth. Going forward, we expect to opportunistically pursue attractive new markets, such as EDL drugs, while carefully managing our product mix.  Finally, in addition to managing our current portfolio of products for growth and profitability, this quarter we continued to advance our pipeline, which includes several late-stage drug candidates which we believe could have significant market potential." 

    Second Quarter Results

    Second quarter 2010 total revenues grew 22% to $16.6 million from $13.6 million in second quarter 2009. Digestive Diseases product sales for the second quarter 2010 grew by 129% year-over-year to $2.3 million, primarily due to increased sales of Omeprazole, our generic gastroesophageal reflux disease (GERD) drug launched in fourth quarter 2009.  In second quarter 2010, our Other Products category rose 40% year-over-year to $3.2 million, reflecting higher sales of Vitamin B6, one of two China Pharma products included on the National EDL (Essential Drug List). The Company's Anti-viro/Infection and Respiratory product sales increased 21% to $6.3 million from $5.2 million in the same quarter last year, driven by growth of antibiotics products.  Sales of the Company's Central Nervous System (CNS) and Cardio Vascular products decreased 5% to $4.9 million from $5.1 million in the comparable 2009 period. 

    Gross profit for the three months ended June 30, 2010 increased to $7.0 million from $5.9 million in the comparable period last year. Gross margin for the second quarter was 42.4% as compared to 43.5% in the previous year quarter. The decrease in gross margin was largely due to higher volume of lower margin products sold compared to the same period a year ago.  

    Total operating expenses rose to $1.6 million (9.3% of revenue) for the three months ended June 30, 2010 from $1.1 million (8.2% of revenue) in the same period last year, primarily due to a share-based compensation cost and higher intangible amortization expenses for the Company's drug formulas during the quarter ending June 30, 2010 compared to the same quarter a year ago. 

    Net income for the three months ended June 30, 2010 increased 23% to $5.3 million, or $0.12 per basic and diluted share, compared to $4.3 million, or $0.10 per basic and diluted share, for the same period a year ago. Net Income margin in second quarter 2010 improved to 31.7% from 31.5% in the prior year period. 

    Six-month Results

    Revenues for the six months ended June 30, 2010 were $31.7 million, up 19% from revenues of $26.6 million for the six months ended June 30, 2009. Gross profit for the six months ended June 30, 2010 was $13.2 million, up 11% from gross profit of $11.8 million for the corresponding period of 2009. Gross margin was 41.5%, compared to 44.6% for the first six months of 2009. Operating income was $10.3 million, up 16.4% from $8.9 million for the first six months of 2009. Net income was $9.6 million, or $0.22 per basic and diluted share, compared to $8.0 million, or $0.19 per basic and diluted share, for the same period a year ago.

    Financial Condition

    As of June 30, 2010, the Company had cash and cash equivalents of $4.5 million compared to $3.6 million as of December 31, 2009. Year-over-year, working capital increased to $69 million from $61 million while the current ratio fell slightly to 6.5 times. 

    Accounts receivable balance rose to $57.7 million from $54.0 million at the end of 2009. The Company's management team continues to be sharply focused on improving accounts receivable collection and expects to make further progress in the quarters to come. 

    For the six months ended June 30, 2010, cash flow from operating activities rose to $3.3 million, from $3.1 million during the same period in 2009.  The Company's cash flow from operating activities benefited from a reduction in cash used by trade receivables to $3.4 million during the first six months of 2010 from $6.8 million during the first six months of 2009 even as revenue grew by 19%.  

    Financial Guidance

    China Pharma reiterates 2010 revenue growth guidance of 20% to 25% from the prior year, with the upside coming from new drug launches during this year. While the Company is very encouraged to see strong demand from EDL related products, managing the product mix to achieve profitability goals is still a focus for the management. With the first half of 2010 behind us, the Company anticipates stronger consumer demand for products included on the National EDL, which will benefit the Company with pricing flexibility and top-line growth due to seasonality of the product portfolio.

    "We are beginning to see early benefits of China's unprecedented $124 billion healthcare reform program and believe this initiative will be a significant volume driver in the country's pharmaceutical industry," said Ms. Li.  "In the second half of 2010 and beyond, our goal is to enhance shareholder value by not only continuing to successfully grow our current portfolio of products but also by brining to market important new drugs to help meet large unmet patient demand."    

    Pipeline Update

    As of June 30, 2010, China Pharma had 9 pipeline drugs in different stages of active SFDA registration progress.

    -- The Company completed the clinical trials earlier this year for 
       candesartan (generic form of Atacand), a front-line antihypertensive 
       therapy. The Company has completed all review testing procedures and is
       currently waiting for the final SFDA production approval.
    -- We continue to receive positive feedback from patients during our 
       clinical trial of Rosuvastatin, a generic form of Crestor. The majority 
       of the patients in the clinical trial have completed the treatment 
       cycle. 
    -- The Phase I clinical trial for the novel anti-resistant antibiotic 
       combination drug is also progressing on schedule and nearing its 
       completion.


    Conference Call

    The Company will hold a conference call at 8:00 am ET on August 10, 2010 to discuss second quarter 2010 results.  Listeners may access the call by dialing 1-800-599-9816 or 1-617-847-8705 for international callers, access code: 52278171.  A webcast will also be available through CPHI's website at http://www.chinapharmaholdings.com .  A replay of the call will be accessible through August 17, 2010 by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 49499602.

    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 all major cities and provinces in China. 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  

    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 except as required by applicable law or regulation.

    For more information, please contact:

    China Pharma Holdings, Inc.
     Phone: +86-898-6681-1730 (China)                
     Email: hps@chinapharmaholdings.com                

    CCG Investor Relations
     Kalle Ahl, CFA, Account Manager
     Phone: +1-646-833-3417 (New York)
     Email: kalle.ahl@ccgir.com

     Vivian Chen, Sr. Market Intelligence Exec.
     Phone: +1-646-701-7445(New York)
     Email: vivian.chen@ccgir.com

                          - FINANCIAL TABLES FOLLOW -



                           CHINA PHARMA HOLDINGS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
    
                                                   June 30,        December 31,
                                                     2010              2009
    ASSETS                                       (Unaudited)
    Current Assets:
      Cash and cash equivalents                   $4,528,115        $3,634,753
      Trade accounts receivable, less      
       allowance for doubtful
       accounts of $2,833,981 and           
       $2,718,358, respectively                   54,868,863        51,238,339
      Other receivables, less allowance for
       doubtful accounts of $8,304 and 
       $3,556, respectively                          104,763            78,525
      Advances to suppliers                        2,717,044         1,798,446
      Inventory                                   19,306,706        14,233,073
      Deferred tax assets                            467,274           319,820
    Total Current Assets                          81,992,765        71,302,956
    Advances for purchases of property   
     and equipment and intangible assets           4,072,982         3,599,949
    Property and equipment, net of       
     accumulated depreciation of
     $2,418,184 and $2,020,462, respectively       6,409,424         6,705,873
    Intangible assets, net of accumulated
     amortization of $1,820,516 and 
     $1,359,048, respectively                     23,389,595        19,332,284
    TOTAL ASSETS                                $115,864,766      $100,941,062
    
    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities:
      Trade accounts payable                      $6,343,401        $3,957,923
      Accrued expenses                                52,783            47,435
      Accrued taxes payable                        1,301,152         1,528,691
      Other payables                                  59,434            58,191
      Advances from customers                      1,024,755         1,037,693
      Other payables - related parties                75,741            75,741
      Short-term notes payable                     3,818,700         3,802,726
    Total Current Liabilities                     12,675,966        10,508,400
    Long-term research and development   
     commitments                                          --            36,565
    Total Liabilities                             12,675,966        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                  23,981,130        21,178,114
      Retained earnings                           72,843,772        63,272,868
      Accumulated foreign currency         
       translation adjustment                      6,320,505         5,902,807
    Total Stockholders' Equity                   103,188,800        90,396,097
    TOTAL LIABILITIES AND STOCKHOLDERS'  
     EQUITY                                     $115,864,766      $100,941,062



                           CHINA PHARMA HOLDINGS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE INCOME
                                   (Unaudited)

                          For the Three Months Ended  For the Six Months Ended
                                   June 30,                   June 30,
                               2010         2009         2010         2009

    Revenue                $16,631,354  $13,601,355  $31,733,864  $26,593,337
    Cost of revenue          9,587,417    7,681,845   18,555,719   14,745,072
    
    Gross profit             7,043,937    5,919,510   13,178,145   11,848,265
    
    Operating expenses:
      Selling expenses         621,580      603,924    1,204,468    1,206,684
      General and           
       administrative       
       expenses                894,507      553,607    1,547,255    1,041,654
      Bad debt expense, net 
       of recoveries            37,615      (40,147)     108,521      734,785
    Total operating       
     expenses                1,553,702    1,117,384    2,860,244    2,983,123
    
    Income from operations   5,490,235    4,802,126   10,317,901    8,865,142
    
    Other income          
     (expense):
      Interest income            5,401       10,720       12,158       21,309
      Interest expense         (51,631)     (40,471)    (102,121)     (78,707)
      Other income             465,663           --      465,663           --
    Net other income      
     (expense)                 419,433      (29,751)     375,700      (57,398)
    
    Income before income  
     taxes                   5,909,668    4,772,375   10,693,601    8,807,744
    Income tax expense        (633,419)    (486,231)  (1,122,698)    (843,953)
    Net income               5,276,249    4,286,144    9,570,903    7,963,791
    
    Other comprehensive   
     income - 
     foreign currency
     translation adjustment    403,253        5,698      417,698       93,189
    Comprehensive income    $5,679,502   $4,291,842   $9,988,601   $8,056,980
    
    Earnings per Share:
      Basic                      $0.12        $0.10        $0.22        $0.19
      Diluted                    $0.12        $0.10        $0.22        $0.19



                           CHINA PHARMA HOLDINGS, INC.
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
    
                                                    For the Six Months Ended
                                                            June 30,
                                                     2010              2009
    Cash Flows from Operating Activities:
      Net income                                  $9,570,903        $7,963,791
      Depreciation and amortization                  841,762           558,866
      Stock based compensation                       221,101                --
      Deferred income taxes                         (145,552)         (115,762)
      Changes in assets and liabilities:
        Trade accounts receivable                 (3,402,232)       (6,798,955)
        Other receivables                            (25,809)           74,139
        Advances to suppliers                       (907,559)          703,994
        Inventory                                 (4,994,669)       (1,716,958)
        Trade accounts payable                     2,404,264         2,426,525
        Accrued expenses                             (31,448)            3,133
        Accrued taxes payable                       (233,065)          (81,466)
        Other payables                                 1,014             7,819
        Advances from customers                      (17,231)           36,727
    Net Cash Provided by Operating Activities      3,281,479         3,061,853
    
    Cash Flows from Investing Activities:
      Advances for purchases of property   
       and equipment and intangible assets        (2,018,906)       (3,813,857)
      Purchase of property and equipment            (108,842)         (232,624)
      Purchase of intangible assets               (2,852,168)       (2,308,941)
    Net Cash Used in Investing Activities         (4,979,916)       (6,355,422)
    
    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            8,799             9,221
    Net Increase (Decrease) in Cash                  893,362        (3,284,348)
    Cash and Cash Equivalents at         
     Beginning of Period                           3,634,753         6,927,149
    Cash and Cash Equivalents at End of  
     Period                                       $4,528,115        $3,642,801
    
    Supplemental Cash Flow Information:
      Cash paid for interest                        $102,121           $85,429
      Cash paid for income taxes                   2,906,168         1,115,831
Source: China Pharma Holdings, Inc.
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